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Post-election Calm equals Risk on

Global equities rejoiced over the French election results overnight as Macron takes a step closer to investiture with the market considering him a lock for securing the French Presidency. With the market pricing in an amiable scenario for risk assets in the second round, investors should continue to feed off this.

But there remains a dark shadow hanging over the market as traders contended with the plethora of current and anticipated Trump headlines. In what is expected to be a huge week for the President, investor focus remains on international tensions with North Korea; the tax reform plan slated for this Wednesday, and a possible government shutdown entering weeks' end.

On currency markets, after yesterday's early morning moves most G-10, markets were entangled in a middling range trade overnight while EM FX outperformed on the back of the French election relief rally.

Australian Dollar

With the French election results hitting expectations, most G-10 reactions have been pretty tame overnight. Risk sentiment responded favorably, and with Iron ore off its lows, support above 75 should hold in the near term in this environment. However as US interest rates are eventually expected to rise and with the RBA sounding oh so dovish in the latest minutes, it's hard to envision any serious attempt at the topside .77 resistance level anytime soon.

While keeping an eye on the most recent risk headlines, local traders are turning their attention to tomorrow's national CPI which is expected to nudge up on higher energy prices.However, the chronically tepid core reading all but guarantees a sidelined RBA for 2017.

After the RBA highlighted domestic concerns in the latest minutes, a downside miss on this data could cause the AUD to dive as the market immediately priced in the potential for an outright dovish Governor Lowe.

Euro

Traders are in the midst of hatching their medium term Euro trades, and we've seen real demand for EUR crosses overnight. And while the Euro certainly has room to move higher interim, for the most part, dealers are waiting for the Fed and ECB to make the airways before re-engaging the EURUSD trade.

One could argue that with the election risk fading, the ECB will be afforded more wiggle for a more advancing policy stance but with global risk still fragile and European political risk still smoldering, the ECB will in all likeliness, reiterate their continued robust accommodation policies.

As for the upcoming FOMC, with so much priced out of the Fed policy, the only real surprise in my view, can be a more hawkish lean the market expects.

While the long EURUSD trade looks clear sailing, there are still the Central Banks to juggle so the no brainer EURO higher trade is far from a sure thing.

Japanese Yen

Post-French election calm is manifesting itself into a global risk rally that has the USDJPY well supported above 109 near term after it appeared to be basing below that level last week. Apparently, global equities are reveling in the election relief rally and provided risk momentum remains intact; this should continue to provide a near-term boost for USDJPY. However, I suspect the recent run of soft US economic data, lessening expectations for a Fed hike in June and East Asian geopolitical risk will continue to keep the USDJPY bulls level headed.

Spot gold is unchanged in the Monday session. In North American trade, the price of one ounce gold is $1275.49. However, gold futures have lost ground as investors have dumped safe-haven assets following the first round of the French presidential election. On the release front, there are no economic indicators out of the US. On Tuesday, the US releases two key indicators - CB Consumer Confidence and New Home Sales.

Investors cheered the results of the French election on Sunday, which sent stock markets higher but weighed on gold futures. The first round featured 11 candidates, and the election whittled the field down to just 2 candidates - centrist Emmanuel Macron and far-right Marie Le Pen. Macron garnered 24% of the vote and Le Pen 22%, which was what most polls leading up to the election predicted. Investors breathed a sigh of relief, as the nightmarish scenario of a runoff between two extreme candidates, Marie Le Pen on the right and far-left candidate Jean-Luc Mélenchon, was averted. The runoff vote between Macron and Le Pen is slated for May 7, and French voters will have a clear choice between Macron, who served as an economic minister and is pro-business, and Le Pen, who is running on a populist, anti-EU platform.

With the US economy performing well, despite some recent hiccups, the markets are expecting interest rates to continue rising in 2017. The Fed has broadly hinted that it will gradually raise rates this year, but it's unclear how many times Janet Yellen will press the rate trigger. Most analysts are expecting two more moves this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The Fed is unlikely to make a move in May, but June is a strong possibility. However, the odds of a June move are showing a surprising amount of volatility, and the latest CME Group reading shows the likelihood a 1/4 point hike have jumped to 58%, up from 51% earlier this week.

We bought sterling against yen early last week at 139.10 and although the pair did rise again to 140.35, as the pair then retreated again, we exited the position with small profit at 139.55, however, the pound found renewed buying interest at 139.20 and rallied in line with our bullish expectations and jumped to as high as 142.10 today (exceeded our upside target).

We entered a long position in USD/CAD at 1.3430 and a short position in EUR/GBP at 0.8475 and both positions are still holding at the moment.

No position was entered among other currency pairs.

In short, 3 positions were entered with total profit of 45 points and the positions are listed below.

 20 Apr : GBP/JPY - Long at 139.10, exited at 139.55 (+ 45 points)
 24 Apr : USD/CAD - Long ar 1.3430,
 24 Apr : EUR/GBP - Short at 0.8475,

|                 AUD        EUR/JPY           EUR/GBP         CAD          GBP         GBPJPY
Jan             - 15             -275                - 35            -120
Feb           + 140            -17                  - 40             +11
Mar            - 20            +115                +132           - 19
Apr             + 30                                                    - 40                         + 45
May          
Jun           
Jul            
Aug          
Sep              
Oct           
Nov         
Dec                                                                                                                                               
Y-T-D        + 135           - 177               + 57             - 2                          +45

After seeing the rebound from 108.13 to 109.22 early last week, we took the view that a temporary low has been formed at 108.13 and bought the pair at 108.45, dollar did find renewed buying interest at 108.32 and has rallied in line with our bullish expectation, our upside target at 109.45 was met (with 100 points profit) as dollar rose to as high as 109.50 on Friday.

We sold dollar against Swiss franc last week after seeing the break of 1.0008 and a short position was entered at 1.0000, however, as dollar found support at 0.9941 and recovered, we exited the position at 0.9950 as we saw a possible risk of another rebound, price then bounced back to 1.0000 before dropping again earlier today to a low as 0.9893.

A long position was entered in EUR/USD at 1.0690 late Friday, the single currency found renewed buying interest at 1.0682 and rallied from there accordingly, the pair opened sharply higher today and largely exceeded our upside target at 1.0790 as price surged to as high as 1.0936.

In short, 3 positions were entered among all 4 currency pairs with total profit of 250 points and the positions are listed below:

19 Apr : USD/JPY - Long at 108.45, exited at 109.45 (+ 100 points)
19 Apr : USD/CHF - Short at 1.0000, exited at 0.9950 (+ 50 points)
21 Apr : EUR/USD - Long at 1.0690, exited at 1.0790 (+ 100 points)

|                 JPY             EUR             CHF            GBP

Jan          + 167             - 85              - 10            + 50
Feb          + 200            +150             +93            - 59
Mar              -23              -70               -23            - 35
Apr             + 65            + 90             + 50            - 40
May         
Jun          
Jul           
Aug         
Sep             
Oct         
Nov        
Dec                                                                                               
Y-T-D       + 408            + 80               +110           -84     

USD/CHF - 0.9957

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9948

Kijun-Sen level                    : 0.9944

Ichimoku cloud top                 : 0.9977

Ichimoku cloud bottom              : 0.9971

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The greenback met renewed selling interest at 1.0000 on Friday and dropped again to as low as 0.9893 earlier today, having said that, the subsequent rebound from there suggests consolidation above this level would be seen and another bounce to 0.9980-85 cannot be ruled out, however, reckon 1.0000 (said resistance and 50% Fibonacci retracement of 1.0108-0.9893) would limit upside and bring another decline later. Below said support at 0.9893 would extend the fall from 1.0108 top to 0.9865-70 (2 times extension of 1.0108-1.0008 measuring from 1.0067) but support at 0.9831 would hold, bring rebound later.

In view of this, would be prudent to stand aside in the meantime. Above previous support at 1.0008 would suggest low is formed instead, bring rebound to 1.0025-30 (61.8% Fibonacci retracement of 1.0108-0.9893) but price should falter below resistance at 1.0067.

GBP/USD - 1.2784

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2803

Kijun-Sen level                    : 1.2812

Ichimoku cloud top              : 1.2808

Ichimoku cloud bottom        : 1.2799

Original strategy :

Buy at 1.2710, Target: 1.2850, Stop: 1.2675

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2710, Target: 1.2850, Stop: 1.2675

Position : -

Target :  -

Stop : -

Although cable recovered initially to 1.2858, as price has retreated again again after faltering below resistance at 1.2859, suggesting further consolidation would be seen and another test of Friday’s low at 1.2757 cannot be ruled out, however, reckon downside should be limited to 1.2700-10 (50% Fibonacci retracement of 1.2515-1.2906) and bring another rally, break of 1.2759 would signal the pullback from 1.2906 has ended, bring retest of this level, break there would extend recent upmove to 1.2920-30 (2 times extension of 1.2365-1.2575 measuring from 1.2500), then 1.2950 but loss of near term upward momentum should prevent sharp move beyond 1.2990-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance). 

In view of this, would not chase this rise here and would be prudent to buy cable on subsequent pullback as downside should be limited to 1.2710 (50% Fibonacci retracement of 1.2515-1.2906), bring another rise. Below 1.2700 would defer and signal top has been formed, risk correction to 1.2660-65 (61.8% Fibonacci retracement of 1.2515-1.2906) and price should stay well above 1.2608-16 (previous resistance now support).

EUR/USD - 1.0863

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0855

Kijun-Sen level                  : 1.0809

Ichimoku cloud top             : 1.0732

Ichimoku cloud bottom      : 1.0722

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The single currency did find renewed buying interest at 1.0682 (we recommended to buy at 1.0690 and a long position was entered there) and the pair opened sharply higher today, indicated upside target at 1.0790 was met as price surged to as high as 1.0936 before retreating, suggesting consolidation below this level would be seen and pullback to the Kijun-Sen (now at 1.0809) cannot be ruled out, however, reckon previous resistance at 1.0778 would contain downside and bring another rise later. Above 1.0900-05 would bring retest of 1.0936 but break there is needed to extend recent rise to 1.0975-80 and possibly towards 1.1000.

In view of this, would not chase this rise here and would be prudent to stand aside in the meantime. Below previous resistance at 1.0778 (now support) would defer and risk weakness to the Ichimoku cloud (now at 1.0733-39) but support at 1.0682 should remain intact, bring rebound later.

USD/JPY - 109.78

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 110.06

Kijun-Sen level                  : 109.74

Ichimoku cloud top             : 109.21

Ichimoku cloud bottom      : 109.09

Original strategy  :

Buy at 109.50, Target: 110.50, Stop: 109.15

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 109.30, Target: 110.30, Stop: 108.95

Position :  -

Target :  -

Stop : -

Although the greenback opened higher today and rallied to as high as 110.60, the subsequent retreat suggests consolidation below this level would be seen and pullback to 109.60-65 (38.2% Fibonacci retracement of 108.13-110.60) cannot be ruled out, however, reckon 109.30-35 (approx. 50% Fibonacci retracement) would limit downside and bring another rise later, above 110.35 would signal the pullback from 110.60 has ended, bring retest of this level first. Looking ahead, above 110.60 would extend recent upmove to 111.00 but overbought condition should limit upside and price should falter well below resistance at 111.58.

In view of this, would not chase this rise here and would be prudent to buy dollar again on further pullback as 109.30-35 should limit downside. Below the upper Kumo (now at 109.20) would suggest an intra-day top is formed, bring weakness to the lower Kumo (now at 109.09) but break of support at 108.88 is needed to confirm.

EUR/GBP - 0.8495

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term down

Original strategy  :

Sold at 0.8475, Target: 0.8325, Stop: 0.8515

Position : - Short at 0.8475

Target :  - 0.8325

Stop : - 0.8515

New strategy  :

Hold short entered at 0.8475, Target: 0.8325, Stop: 0.8515

Position : - Short at 0.8475

Target :  - 0.8325

Stop : - 0.8515

 
The single currency opened higher today and has maintained a firm undertone, dampening our bearishness but as long as resistance at 0.8512 holds, prospect of another retreat remains, below 0.8450 would bring weakness to 0.8420, then 0.8400 but break of support at 0.8350-55 is needed to signal the rebound from 0.8312 (last week’s low has ended, bring retest of this level later.

In view of this, we are holding on to our short position entered at 0.8475. Only above indicated previous resistance at 0.8512 would abort and signal a temporary low is formed instead, risk a stronger rebound to 0.8545-50 but resistance at 0.8580 should remain intact.

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3493

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term up

 
Original strategy       :

Bought at 1.3430, Target: 1.3590, Stop: 1.3370

Position: - Long at 1.3430

Target:  - 1.3590

Stop: - 1.3370

 
New strategy             :

Hold long entered at 1.3430, Target: 1.3590, Stop: 1.3410

Position: - Long at 1.3430

Target:  - 1.3590

Stop:- 1.3410

Although the greenback retreated after rising to 1.3526 on Friday, as renewed buying interest emerged at 1.3411 and has rebounded again, retaining our bullishness for recent rise from 1.2969 to resume after consolidation, above said resistance at 1.3526 would bring retest of 1.3535, break there would extend the rise from 1.3223 towards previous chart resistance at 1.3599 later which is likely to hold from here.

In view of this, we are holding on to our long position entered at 1.3430. Below said support at 1.3411 would deepen our bullishness but only break of previous resistance at 1.3337 would abort and suggest top is possibly formed, risk weakness to 1.3300-10 but indicated support at 1.3262 should remain intact.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.