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The Brexit jitters were revived on Tuesday evening with Sterling stumbling into steep losses after British Prime Minister Theresa May signed a letter notifying the EU of Britain’s plan to depart from the European Union. With the game changing Brexit letter due to be delivered to Brussels on Wednesday afternoon marking a critical turning point and triggering one of the most intricate set of negotiations Britain and the EU have ever been presented, Sterling could be instore for a rocky rollercoaster ride. There is already an air of unease over potential complications in the negotiations with the EU’s demand for a £50 billion Brexit bill acting as the first test which may create serious headwinds. Sentiment remains firmly bearish towards the Pound moving forward and the potential resurgence of hard Brexit fears could ensure price weakness becomes a recurrent theme. The fact that Sterling found itself on the back foot on Wednesday morning as Article 50 is about to be officially triggered continues to highlight how the Brexit risk has not been fully priced in with further downside shocks expected. While it is certain that today will go down in history as the day the UK decided to start an irreversible Brexit process that will terminate its 44-year-old membership with the EU, the outcome remains an uncertainty that may leave investors on edge.

From a technical standpoint, the GBPUSD has found itself gripped by the Brexit woes with sellers exploiting the anxiety to install repeated rounds of selling. The technical breakdown below 1.2400 could encourage a further decline lower towards the next relevant level at 1.2300.

Currency spotlight – USDJPY

Uncertainty from the Brexit woes coupled with the rising Trump jitters could spark a wave of risk aversion which may ultimately bolster the Japanese Yen in the short to medium term as investors seek safe-haven safety. From a technical standpoint, the USDJPY fulfills the prerequisites of a bearish trend as there have been consistently lower lows and lower highs on the daily timeframe. Previous support around 111.600 could transform into a dynamic resistance that encourages a further decline back towards 110.00 and potentially lower.

Currency spotlight – USDJPY

Uncertainty from the Brexit woes coupled with the rising Trump jitters could spark a wave of risk aversion which may ultimately bolster the Japanese Yen in the short to medium term as investors seek safe-haven safety. From a technical standpoint, the USDJPY fulfills the prerequisites of a bearish trend as there have been consistently lower lows and lower highs on the daily timeframe. Previous support around 111.600 could transform into a dynamic resistance that encourages a further decline back towards 110.00 and potentially lower.

Daily Pivots: (S1) 137.81; (P) 138.60; (R1) 139.17; More...

GBP/JPY dips through 137.75 temporary low and intraday bias is turned back to the downside. Choppy decline from 144.77 would target 136.44 support and below. But we'd expect support from 50% retracement of 122.36 to 148.42 at 135.39 to contain downside and bring rebound. On the upside, break of 139.39 minor resistance will turn bias to the upside and send GBP/JPY through 142.79 resistance. Overall, price actions from 148.42 are forming a consolidation pattern.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern. Or, sustained break of 50% retracement of 122.36 to 148.42 at 135.39 will turn outlook bearish for a test on 122.36 low. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement of 195.86 to 122.36 at 167.78.

Weekly
    •    Last Candlesticks pattern: Morning star
    •    Time of formation: 2 Jan 2017
    •    Trend bias: Sideways

Daily
    •    Last Candlesticks pattern: Long white candlestick
    •    Time of formation: 15 Mar 2017
    •    Trend bias: Up



Although aussie has retreated after rising to 0.7750 last week and consolidation below this level would be seen initially, reckon downside would be limited to 0.7555 and bring another rise later, above said resistance at 0.7750 would bring test of previous chart resistance at 0.7778, however, break there is needed to retain bullishness and confirm early erratic upmove from 0.6827 (2016 low) has resumed for retest of 0.7835 (2016 high) first but near term overbought condition should prevent sharp move beyond 0.7900-10 and price should falter well below psychological resistance at 0.8000. 



On the downside, expect pullback to be limited to 0.7585-90 and 0.7555 should hold, bring another rise later to aforesaid upside targets. A daily close below 0.7555 would risk another test of indicated support at 0.7491 but only break there would abort and signal recent rise from 0.7158 has ended, risk weakness to the lower Kumo (now at 0.7445) and then towards 0.7400 which is likely to hold from here, bring another upmove later. 



Recommendation: Hold long entered at 0.7600 for 0.7800 with stop below 0.7500.



On the weekly chart, although aussie rose marginally to 0.7750 last week, as price has retreated after faltering below indicated previous resistance at 0.7778, suggesting initial consolidation below this level would be seen and pullback to the upper Kumo (now at 0.7545) cannot be ruled out before prospect of another rise later to 0.7750 and possibly test of 0.7778 resistance but as broad outlook remains consolidative, reckon upside would be limited and price should falter below 2016 high at 0.7835. Looking ahead, only above this level would suggest an upside break of recent established broad range has occurred, bring further subsequent rise to 0.7900 and later towards psychological level at 0.8000.

On the downside, whilst pullback to the upper Kumo (now at 0.7545) cannot be ruled out, price should stay well above support at 0.7491 and bring another rise later. A weekly close below said support at 0.7491 would suggest top is formed, bring test of the Kijun-Sen (now at 0.7468), a sustained breach below this level would signal the rise from 0.7158 has ended instead, risk further fall to 0.7400.

We are taking the more aggressive view in USDJPY and calling the rally to 115.48 on 3/10 as Intermediate wave (B). Decline from there is unfolding as a 5 waves impulse Elliott wave structure with an extension in wave 3. Down from 115.5, Minor wave 1 ended at 114.46 and Minor wave 2 ended at 115.2. Minor wave 3 is extended and further subdivided into 5 impulse waves where Minute wave ((i)) ended at 112.88, Minute wave ((ii)) ended at 113.56 and Minute wave ((iii)) ended at 110.59, Minute wave ((iv)) ended at 111.34, and Minute wave ((v)) of 3 is proposed complete at 110.077. Minor wave 4 bounce is currently in progress towards 111.27 – 112.02 area, which is 23.6 – 38.2 retracement of Minor wave 3, before further downside is seen to complete Minor wave 5 towards as low as 106.85 – 108.5 area. Bounce is expected to be limited and shallow.

If the current bounce gets too big, then as an alternate, the move lower in USDJPY from 115.5 high is unfolding as a zig zag Elliottwave structure where Minor wave A ended at 110.077 low with subdivision of 5 impulsive waves . In this alternative view, current bounce will then be bigger as it’s a Minor wave B bounce to correct decline from 3/10 high (115.52), but still as far as pivot at 115.2 stays intact, pair should resume lower again in Minor C. This alternate view is the less aggressive view but still calling for more downside in the pair as far as pair stays below 3/10 high. In both views (aggressive and less aggressive), we don’t like buying the pair.

1 Hour USDJPY Elliott Wave Chart

Daily Pivots: (S1) 119.79; (P) 120.08; (R1) 120.48; More...

EUR/JPY is staying in range above 119.31 temporary low and intraday bias remains neutral first. Below 119.31 will extend fall from 122.88 to 118.23 low. But we'd expect strong support from 118.45 key cluster support level (38.2% retracement of 109.20 to 124.08 at 118.39) to contain downside and bring rebound. On the upside, above 120.81 minor resistance will turn bias back to the upside for 124.08 high. Overall, price actions from 124.08 are developing into a consolidative pattern and upside breakout is expected later.

In the bigger picture, we're holding on to the view that medium term rise from 109.20 is still in progress. Focus is on 126.09 key resistance level. Sustained break will confirm completion of the whole decline from 149.76. And rise from 109.20 is of the same degree as the fall from 149.76. In such case, further rally would be seen to 104.04 resistance and possibly above before topping. Meanwhile, rejection from 126.09, or firm break of 118.45 cluster support, will likely extend the fall from 149.76 through 109.20 low.

USD/CHF - 0.9933

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9929

Kijun-Sen level                    : 0.9888

Ichimoku cloud top                 : 0.9886

Ichimoku cloud bottom              : 0.9951

Original strategy :

Sold at 0.9910, Target: 0.9800, Stop: 0.9945

Position : - Short at 0.9910

Target :  - 0.9800

Stop : - 0.9945

New strategy  :

Exit short entered at 0.9910,

Position : - Short at 0.9910

Target :  -

Stop : -

The greenback rallied after finding renewed buying interest at 0.9831 yesterday, dampening our bearishness and suggesting recent decline has ended at 0.9813, hence upside risk remains for this rise from 0.9813 to bring retracement of recent decline and further gain to resistance at 0.9960 would be seen but break there is needed to provide confirmation and retain bullishness for further rise towards another previous chart resistance at 1.0003 later.

In view of this, would be prudent to exit short entered at 0.9910 and stand aside in the meantime. below the Kijun-Sen (now at 0.9888) would suggest an intra-day top is formed instead, bring weakness to the lower Kumo (now at 0.9851) but break of said support at 0.9831 is needed to revive bearishness for retest of 0.9813 first.

Daily Pivots: (S1) 1.4186; (P) 1.4248; (R1) 1.4323; More...

EUR/AUD lost momentum ahead after hitting 1.4309 dropped sharply. Intraday bias is turned neutral first. At this point, we're still mildly favoring the case of trend reversal. And, another rise is expected as long as 1.3872 support holds. Above 1.4309 should send the cross through channel resistance (now at 1.4378) to 1.4721 key resistance. However, break of 1.3872 will dampen our bullish view and bring retest of 1.3642 low instead.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction could be completed after testing 1.3671 support. Break of 1.4721 cluster resistance (38.2% retracement of 1.6587 to 1.3624 at 1.4756) should confirm this case and target 61.8% retracement at 1.5455 and above. Overall, we'd expect the up trend from 1.1602 to resume later. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

GBP/USD - 1.2407

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2417

Kijun-Sen level                    : 1.2487

Ichimoku cloud top              : 1.2567

Ichimoku cloud bottom        : 1.2543

Original strategy :

Bought at 1.2470, stopped at 1.2435

Position : - Long at 1.2470

Target :  -

Stop : - 1.2435

New strategy  :

Sell at 1.2485, Target: 1.2365, Stop: 1.2520

Position : -

Target :  -

Stop : -

As cable has dropped sharply since yesterday, suggesting top has been formed at 1.2616 and the selloff from there is likely to bring retracement of recent upmove, hence further weakness to 1.2360-65 (50% Fibonacci retracement of 1.2109-1.2616) would be seen, however, loss of near term downward momentum should prevent sharp fall below 1.2335 support and reckon 1.2300-05 (61.8% Fibonacci retracement) would hold from here, bring rebound later.

In view of this, we are looking to turn short on recovery as the Kijun-Sen (now at 1.2486) should limit upside and bring decline. Above 1.2500-10 would defer but only break of previous support at 1.2539 would abort and signal the fall from 1.2616 has ended instead, bring rebound to 1.2560-65 first.

Stocks build on overnight gains as US consumer confidence rises

Asia Mid-Session Market Update: Stocks build on overnight gains as US consumer confidence rises; China banks rally on earnings; Japan retail sales miss estimates

US Session Highlights

(US) FEB ADVANCE GOODS TRADE BALANCE: -$64.8B V -$66.4BE (widest deficit in 22 months)

(US) FEB PRELIMINARY WHOLESALE INVENTORIES M/M: 0.4% V 0.2%E; RETAIL INVENTORIES M/M: 0.4% V 0.8% PRIOR

(US) JAN S&P / CASE-SHILLER 20-CITY M/M: 0.86% V 0.70%E; Y/Y: 5.73% V 5.60%E; HOUSE PRICE INDEX (HPI): 192.81 V 192.41 PRIOR

(US) House Republican lawmakers reportedly seeking ways to force vote on full repeal of Obamacare through a discharge petition (would require 218 signatories)

(US) MAR RICHMOND FED MANUFACTURING INDEX: 22 V 15E; Volume of new orders 26 v 24 prior

(US) MAR CONSUMER CONFIDENCE: 125.6 V 114.0E (highest since Dec 2000)

US markets on close: Dow +0.7%, S&P500 +0.7%, Nasdaq +0.6%

Best Sector in S&P500: Financials

Worst Sector in S&P500: Healthcare

Biggest gainers: DRI +9.3%, RHT +5.2%, CHK +4.5%, NBL +4.0%, MUR +3.9%

Biggest losers: MCK -2.9%, NEM -2.7%, FTR -2.0%, EW -1.5%, EVHC -1.4%

At the close: VIX 11.5 (-1.0 pts); Treasuries: 2-yr 1.30% (+3bps), 10-yr 2.41% (+4bps), 30-yr 3.01% (+3bps)

US movers afterhours

VRTX: Two Phase 3 Studies of the Tezacaftor/Ivacaftor Combination Treatment Met Primary Endpoints with Statistically SignificantImprovements in Lung Function (FEV1) in People with Cystic Fibrosis; +18.2% afterhours

RH: Reports Q4 $0.23 GAAP* v $0.05e, R$587M v $480Me; Guides Q1 $0.02-0.06 v +$0.56e, R$530-545M v $577Me; +15.8% afterhours

RTTR: Announces Lactose Intolerance Treatment, RP-G28, Demonstrated Efficacy and Clinically Meaningful Benefit in Phase 2b/3 Clinical Trial; +15.4% afterhours

VRNT: Reports Q4 $0.90 v $0.86e, R$299.5M v $294Me; Guides FY18: Rev $1.14B with a range of +/- 2%; +7.5% afterhours

OLLI: Reports Q4 $0.39 v $0.35e, R$283.4M v $281Me; +1.1% afterhours

SONC: Reports Q2 $0.15 v $0.15e, R$100.2M v $107Me; -1.8% afterhours

DEPO: Announces cooperation agreement with Starboard Value; names Arthur Higgins as CEO; Guides Q1 Rev $95-100M v $113Me (2 est); -3.0% afterhours

PLAY: Reports Q4 $0.63 v $0.58e, R$270.2M v $271Me; Q4 SSS 3.2% v 3.7%e; FY16 SSS 3.3% v 3.1-3.6% prior forecast; -4.4% afterhours

Politics

(FR) Wife of French presidential candidate formally charged in fake jobs probe - French press

Asia Key economic data:

(JP) JAPAN FEB RETAIL SALES M/M: 0.2% V 0.3%E; RETAIL TRADE Y/Y: 0.1% (4-month low) V 0.7%E

(KR) South Korea Apr Business Manufacturing Survey: 82 v 81 prior; Non-Manufacturing Survey: 80 v 77 prior

Asia Session Notable Observations, Speakers and Press

Asian equity markets are modestly higher, tracking more pronounced bullish sentiment that followed a swift turnaround from the initial losses of the prior session. Investors continue to shrug the political stumbles of the Trump administration and focusing on improving US economic data - particularly the 16-year high in Consumer Confidence. Financials did particularly well as interest rates rose across the curve, while Gold came in back below 1,250 after a recent run.

In FX, USD majors were in more narrow ranges, particularly in Asian hours. The most notable pair was GBP/USD, which fell some 80pips from the highs to 1.2380 as PM May signed the letter invoking Article 50 that will start Brexit process. German press report indicated that German govt wants the talks to be completed within the 2-year time limit. Separately, USD/JPY pair remained supported above ¥111 and NZD/USD found buyers below $0.70.

Economic calendar was once again light, limited to lower than expected growth in Japan retail sales for Feb. Recall Japan consumption was flat in Q4, and it remains to be seen whether Capex growth can sustain the economy.

In China, AgBank and BoCom released their FY16 results overnight. BoCom profits topped consensus at CNY67.2B v CNY65.4Be and NPL raio was marginally higher at 1.52% v 1.51% y/y, sending shares up 1%. AgBank was up just under 1% as FY16 results saw Net rise CNY184B v CNY181By/y, Rev fall to CNY510B v CNY541B y/y, and NPLs improve to 2.37% v 2.39% y/y. Both S&P and Moody's reports on China also warned about the risks of potential property market adjustment following recent runup in prices as interest rates rise and PBoC manages liquidity.

China

(CN) S&P: China debt overhand and property market adjustment, as well as US trade policies, among top Asia-Pacific risks

(CN) Moody's: China economy faces heightened risks from potential future property downturn

Japan

(JP) Japan LDP party panel proposes to develop long-range strike capability - press

(JP) BOJ's Sato: Reforms needed to raise inflation expectations; central bank does not impact inflation expectations as much as traditionally expected - speaking at Yale

Korea

(KR) South Korea Federation of Korean Industries (FKI): Business Survey Index (BSI) for Apr rises to 93.3 v 92.1 in Mar; 6-month high - Korean press

(KR) South Korea Fin Min Yoo said to seek meeting with India - Korean press

Asian Equity Indices/Futures (00:30ET)

Nikkei flat, Hang Seng +0.2%, Shanghai Composite +0.1%, ASX200 +0.9%, Kospi flat

Equity Futures: S&P500 +0.1%; Nasdaq +0.2%; Dax +0.1%; FTSE100 +0.2%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.0808-1.0826; JPY 111.03-111.33; AUD 0.7630-0.7660; NZD 0.6998-0.7018

Apr Gold -0.6% at $1,248/oz; May Crude Oil +0.5% at $48.59/brl; May Copper -0.2% at $2.67/lb

(US) Weekly API Oil Inventories: Crude: +1.9M v +4.5M prior (8th build in the past 10 weeks)

SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 833.5 tonnes

iShares Silver Trust ETF daily holdings fall to 10,377 tonnes from 10,342 tonnes prior

(CN) PBoC skips open market operations for 4th straight session; Said to drain CNY70B v CNY70B prior

(CN) PBOC SETS YUAN MID POINT AT 6.8915 V 6.8782 PRIOR; 2nd straight weaker setting; Weakest setting since Mar 21st

(JP) BOJ lowers amount of 3-5-yr JGB in its daily operations to ¥380B from ¥400B

(AU) Australia MoF (AOFM) sells A$800M in 2.75% 2027 Bonds; avg yield: 2.8096%; bid-to-cover: 3.55x

Asia equities / Notables / movers by sector

Consumer discretionary: 305.HK Wuling Motors Holdings +1.4% (FY16 results); 210.HK Daphne International Holdings -3.7% (FY16 results); 489.HK Dongfeng Motor -1.5% (FY16 results); FXJ.AU Fairfax Media +0.9% (TPG may buy stake)

Financials: 656.HK Fosun International +0.4% (FY16 results); 3333.HK Evergrande Real Estate Group +7.1% (FY16 results); 3328.HK BoCom +1.0%; 1288.HK AgBank +0.8% (FY16 results)

Industrials: 1211.HK BYD Company -2.3%, 1133.HK Harbin Electric Co +1.7%, 285.HK BYD Electronic International -1.9%, 3898.HK Zhuzhou CSR Times Electric +1.0%, 1800.HK China Communications Construction -0.5% (FY16 results); 7012.JP Kawasaki Heavy Industries +2.9% (CLSA raises rating)

Technology: 6502.JP Toshiba Corporation +0.7% (SK Hynix offers investment); 700.HK Tencent Holding +0.9% (investment in Tesla)

Materials: 3983.HK China BlueChemical -0.4% (FY16 results); 347.HK Angang Steel +2.2%, 1618.HK Metallurgical Corporation of China +0.3% (FY16 results); EVN.AU Evolution -0.7%, RSG.AU Resolute Mining -1.1%, SBM.AU St Barbara -1.2% (Gold miners track North American peers lower)

Energy: 1193.HK China Resources Gas Group -4.2% (FY16 results); 5019.JP Idemitsu Kosan Co +2.7% (founding family opposes merger)

Healthcare: 2196.HK Shanghai Fosun Pharmaceutical Group -4.0% (FY16 results)

Utilities: 1071.HK Huadian Power International Corp -0.9% (FY16 results)

For the 24 hours to 23:00 GMT, the AUD rose 0.17% against the USD and closed at 0.7633.

LME Copper prices declined 4.3% or $101.0/MT to $5774.5/MT. Aluminium prices rose 0.1% or $2.5/MT to $1918.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7643, with the AUD trading 0.13% higher against the USD from yesterday’s close.

The pair is expected to find support at 0.7599, and a fall through could take it to the next support level of 0.7555. The pair is expected to find its first resistance at 0.7672, and a rise through could take it to the next resistance level of 0.7701.

Moving ahead, traders will await the release of Australia’s HIA new home sales data for February, slated overnight.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.