Sample Category Title

Weekly

    •    Last Candlesticks pattern: Hanging man
    •    Time of formation: 22 May 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 15 Feb 2017
    •    Trend bias: Down

USD/JPY – 110.35

The greenback continued heading south after last week’s initial brief recovery to 112.90, adding credence to our bearish view that the erratic decline from 118.66 top is still in progress and may extend weakness to 109.90-95 (50% Fibonacci retracement of 101.19-118.66), then 109.50, however, reckon downside would be limited to 109.00 and previous support at 108.55 should hold from here, price should stay well above dynamic support at 107.85-90 (61.8% Fibonacci retracement of 101.19-118.66) and bring rebound later.

On the upside, whilst recovery to 110.90-00 cannot be ruled out, reckon resistance at 111.48 (Friday’s high) would limit upside and bring another decline later. Above 111.90-00 would defer but only break of resistance at 112.26 (previous support) would abort and suggest low is possibly formed, risk a stronger rebound to indicated resistance at 112.90 but a daily close above there is needed to add credence to this view, then subsequent rise to 113.54 resistance would follow.

Recommendation : Sell at 111.50 for 109.50 with stop above 112.50.

On the weekly chart, the greenback opened lower this week after last week’s selloff below previous support at 111.59, adding credence to our view that top has been formed at 118.66 earlier and the decline from there is still in progress for retracement of recent upmove to 109.90-95 (current level of the Kijun-Sen and 50% Fibonacci retracement of 101.19-118.66), then 109.00 but reckon support at 108.55 would limit downside and price should stay above 107.85-90 (61.8% Fibonacci retracement), risk from there is seen for a rebound later.

On the upside, although initial recovery to 110.90-00 is likely reckon resistance at 111.48 (Friday’s high) would attract renewed selling interest and bring another decline later. Above previous support at 112.26 (now resistance) would defer and suggest a temporary low is formed, bring test of the Tenkan-Sen (now at 112.82), a weekly close above there would add credence to this view, then further gain to 113.54 resistance would follow.

News and Events:

Is it time to run?

Over the last few weeks, Donald Trump was much quieter - especially compared to what we were used to - as its administration was gearing up for one of its key battle: repealing Obamacare. Well, it already had a bad start last week as the vote was delayed from Thursday to Friday as the Republican Party was facing division within its own rank. Investors were already suspicious as we were heading into the weekend: equities were trading sideways, the dollar and US treasury yields were going nowhere. This is now a fact, Trump has failed its very first test and forced investors to consider whether this is just a temporary setback or the start of a routine.

Looking at the equity markets this morning, investors have started to unwind Trump reflation trade on growing doubt about the government’s ability to deliver what has been promised. The Nikkei was off 1.44% and the Hang Seng slid 0.68%. US futures also dipped in negative territory with contracts on the S&P falling 0.85%. In Europe, the Euro Stoxx 600 fell 0.80% as the German DAX tumbled 0.82%.

In the coming weeks, the US political uncertainty will remain the primary driver and will weigh on the dollar and equities as investors lower their expectation for policy action. The failure to pass the healthcare reform has diminished Trump’s flexibility to pass other reform as it will be more difficult to reach a balanced budget, especially when all the other proposed reforms are project to increase expenditure.

French Elections: Uncertainties endure

It goes without saying that the French elections could have monumental repercussions for Europe, with a victory for Marine Le Pen paving the way for a Frexit Referendum. Over the weekend, the National Front President visited Vladimir Putin with many politicians, such as Jean-Luc Mélenchon strongly condemning the move. Rumours are now circulating that Russian banks are helping Le Pen to finance her campaign, a claim she vehemently rejects. Yet, in terms of international sanctions, the National Front leader continues to fight Russia’s corner.

Yes, a Le Pen election does bear all the potential of being the proverbial nail in the coffin for the single currency. However, if Brexit has taught us anything it’s that we cannot say for sure that a French exit from the EU would be a nightmare. There is a cost to exiting the union, but there is also a cost to remain.

However, for now, euro valuation and financial markets are pricing in a victory for Emmanuel Macron against Le Pen. We think it’s still too early to call a two-horse race, especially as François Fillon’s candidacy is far from over.

Article 50 this week

The wait might finally be over, with politics taking center stage in Europe. On Thursday, 29th March, Prime Minister May is likely to trigger Article 50. Once the Brexit clause is enacted, there is no way back - the UK and EU will have to begin what is likely to become a two-year (possible longer) dragged out negotiation. The immediate question is “how will the GBP react”? Outside of a natural GBP risk aversion pullback, we suspect that the GBP will continue to rally against the USD and EUR. The massive GBP devaluation on the Brexit vote and shortest G10 position in IMM data will protect the sterling from a deeper correction, while the resilient economic data and surprisingly hawkish MPC minutes will have markets increasingly pricing in a BoE rate hike. The unexpectedly hawkish tone will provide a solid backstop for selling and initiate a rebound in GBP. GBPUSD bullish recovery of 1.2110 support should continue targeting 200d MA at 1.2755.

Today's Key Issues (time in GMT):

• mars.24 Domestic Sight Deposits CHF, last 470.9b CHF / 08:00
• Mar IFO Business Climate, exp 111,1, last 111, rev 111,1 EUR / 08:00
• Mar IFO Expectations, exp 104,3, last 104, rev 104,2 EUR / 08:00
• Mar IFO Current Assessment, exp 118,3, last 118,4 EUR / 08:00
• ECB’s Single Supervisory Mechanism Holds Annual Conference EUR / 08:30
• Mar FGV Consumer Confidence, last 81,8 BRL / 11:00
• Central Bank Weekly Economists Survey (Table) BRL / 11:25
• Mar Real Sector Confidence SA, exp 104, last 106,5 TRY / 11:30
• Mar Real Sector Confidence NSA, exp 103, last 105,3 TRY / 11:30
• Mar Capacity Utilization, exp 75,30%, last 75,40% TRY / 11:30
• ECB's Peter Praet Speaks in Madrid EUR / 12:00
• mars.24 Bloomberg Nanos Confidence, last 59,2 CAD / 14:00
• Mar Dallas Fed Manf. Activity, exp 22, last 24,5 USD / 14:30
• Chicago Fed's Evans, ECB's Praet Speak in Madrid EUR / 16:45
• Fed's Evans Speaks on Economy and Policy in Madrid USD / 17:15
• ECB's Praet takes part in panel discussion in Madrid EUR / 17:15
• mars.26 Trade Balance Weekly, last $1437m BRL / 18:00
• Feb Tax Collections, exp 93000m, last 137392m BRL / 22:00

The Risk Today:

EUR/USD keeps on pushing higher towards key resistance given at a distance 1.0874 (08/12/2017 high). Strong support can be found at 1.0493 (22/02/2017 low). Expected to show continued increase. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD now lies in a short-term uptrend channel. There are rooms for further strength. Hourly resistance is located at 1.2570 (24/02/2017 high). Hourly support is given at 1.2324 (03/17/2017 low). Expected to show continued strength. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY continues its declined since the pair has failed to break key resistance given at 115.62 (19/01/2016 high). The pair is heading lower. Hourly resistance can be located at 113.57 (16/03/2017 high). We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF is declining. Hourly support is given at 0.9862 (31/01/2017 low). Key resistance can be found at a distance at 1.0344 (15/12/2016 high). Expected to show continued weakness. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

Short options against the Pound hit record levels following confirmation from Downing Street that Article 50 would be triggered March 29. Global award-winning forex broker, FXTM, has observed wide-spread negativity towards Sterling from its traders, with 95% of its clients trading short on the GBPUSD ahead of the historic event.

'The buying sentiment towards the British Sterling has been mostly negative since the outcome of the EU referendum, but the moves in the Pound over the past week have been unpredictable,' explains Jameel Ahmad, Vice-President of Corporate Development and Market Research at FXTM. 'While the main catalyst behind the rebounding Pound over the past week was attributed to Dollar weakness, most market participants still hold negative views on the GBP/USD and have been exploiting sell-on rally opportunities on the pair around the 1.25 region for some time.'

Opinions on the resilience of the Sterling are mixed, some analysts are justifying the recent highs as another corrective bounce, while others are charting the start of a sustained recovery. 'I personally still hold negative views on the British Pound. I will not be buying into the theory that this could be the start of a prolonged recovery until the GBPUSD manages to conclude trading on a weekly or monthly basis back above 1.32. This figure represents the historic low that was reached on the night of the EU referendum and will be used by traders as a psychological pivot to escape the overall bearish bias that has limited the GBPUSD to relief rallies since the second half of 2016.'Says Ahmad.

The current market confusionover the future direction of the Pound has been compounded by the lack of precedent and general uncertainty over Brexit itself. The UK is the first full member stateto leave the trading Bloc, and the provisions it will secure for key areas including trade, agriculture, and tourism remain largely unknown. The threat of a possible second Scottish Referendumfurther down the road, alongside any sudden turns towards a hard-Brexit, are likely to negatively influence the buying sentiment towards the Sterling.

Pending elections in France and Germany, and the wave of right-wing sentiment and Eurosceptism sweeping the continent, will also continue to influence the performance of the Sterling. Many analysts will be waiting until early May to release long-term predictions, which are likely to be decidedly more upbeat should the Nationalist Party triumph. Marine Le Pen will be forging a precedent for a future Frexit, which could increase the chances of a smoother deal for Theresa May as Le Pen pushes her own referendum agenda.

Given the current uncertainty, the Pound is unlikely to scale pre-July levels anytime soon. Brexit developments and the accompanying uncertainty will limit any serious upside, and the slightest sign of complications in negotiations will likely expose the currency to downside shocks. With the potential for future political uncertainty in Scotland, and Theresa May still needing to hold complex negotiations with her EU counterparts, it may continue to fall prey to the bears.

USD/CHF - 0.9858

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9860

Kijun-Sen level                    : 0.9881

Ichimoku cloud top                 : 0.9936

Ichimoku cloud bottom              : 0.9921

Original strategy :

Sell at 1.0000, Target: 0.9900, Stop: 1.0035

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.9910, Target: 0.9800, Stop: 0.9945

Position : -

Target :  -

Stop : -

The greenback only recovered to 0.9960 on Friday before meeting renewed selling interest and the subsequent selloff below previous support at 0.9861 adds credence to our bearish view that recent decline is still in progress and may extend weakness to 0.9820-25, then 0.9800, however, loss of downward momentum should prevent sharp fall below 0.9770-75 (100% projection of 1.0171-0.9942 measuring from 1.0003), bring rebound later.

In view of this, would not chase this fall here and we are looking to sell dollar on subsequent rebound as 0.9900-10 should limit upside. Only above said resistance at 0.9960 would abort and signal low is formed, bring retracement of recent decline towards indicated previous resistance at 1.0003.

GBP/USD - 1.2568

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2545

Kijun-Sen level                    : 1.2525

Ichimoku cloud top              : 1.2497

Ichimoku cloud bottom        : 1.2478

New strategy  :

Buy at 1.2490, Target: 1.2600, Stop: 1.2455

Position : -

Target :  -

Stop : -

As cable has surged again today, adding credence to our bullish view that recent upmove from 1.2109 is still in progress and upside bias remains for this move to extend further gain to 1.2600, then towards 1.2635-40, however, loss of upward momentum should prevent sharp move beyond 1.2670-80 and price should falter below previous resistance at 1.2706, risk from there is seen for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy cable on subsequent retreat. Only below support at 1.2469 (Friday’s low) would abort and signal top is formed, bring retracement of recent upmove towards previous support at 1.2424 which is likely to hold from here.

EUR/USD - 1.0866

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0856

Kijun-Sen level                  : 1.0823

Ichimoku cloud top             : 1.0793

Ichimoku cloud bottom      : 1.0778

Original strategy  :

Buy at 1.0720, Target: 1.0820, Stop: 1.0685

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0800, Target: 1.0900, Stop: 1.0765

Position : -

Target :  -

Stop : -

The single currency also opened higher today on dollar’s broad-based weakness and the the subsequent rally signals recent upmove is still in progress, hence bullishness remains for further gain to 1.0900 and possibly 1.0930-35 (61.8% Fibonacci retracement of 1.1300-1.0340), however, loss of near term upward momentum should prevent sharp move beyond 1.0955-60 and price should falter below 1.0990-00, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to buy euro on subsequent pullback as 1.0800-10 should limit downside. Only below support at 1.0760 would abort and signal top is formed, bring retracement of recent upmove to 1.0730 but 1.0719 support should remain intact. 

We see dollar index to hit new lows of the year as EUR/USD breaks above 1.0800, while stocks sold-off as Trump's health-care bill fails. E-mini S&P500 has extended its weakness from last week down to 2320 area which was our projected zone for a fifth wave of decline, highlighted last week. Question is, what is next. Well, if you are familiar with the Elliott Wave principle, then you know that market can be ready for a bounce this week if we consider that after every five waves trend will make a change in three legs minimum, no matter what is the structure on a higher time-frame charts. So from a technical perspective, and also from a psychological point of view, when others are turning aggressively bearish on stocks, we suspect that three wave of retracement may show up on stocks, but it may be just another temporary recovery. Divergence on the RSI also indicates a potential turn. We see first support zone here near 2320 while next one stands near 2310.

S&P, 1H

USD/JPY - 110.26

Most recent candlesticks pattern   : N/A

Trend                      : Down

Tenkan-Sen level              : 110.36

Kijun-Sen level                  : 110.74

Ichimoku cloud top             : 111.18

Ichimoku cloud bottom      : 111.11

Original strategy  :

Sell at 112.20, Target: 110.80, Stop: 112.55

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 111.00, Target: 110.00, Stop: 111.35

Position :  -

Target :  -

Stop : -

The greenback opened lower earlier today and has dropped again, adding credence to our bearish view that recent selloff is still in progress and may extend weakness to 110.00, however, loss of downward momentum should prevent sharp fall below 109.70-75 and reckon 109.50 would hold from here, risk from there has increased for a rebound to take place later.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as 111.00 should limit upside. Above 111.30-35 would risk test of resistance at 111.48 but break there is needed to signal low is formed instead, bring retracement of recent decline to 111.75-80 first.

The US dollar opened with a negative gap against its major counterparts today, after the House vote regarding Trump's healthcare bill was canceled on Friday. The Republican leaders decided to withdraw the bill altogether rather than suffer a defeat in the voting process, as they lacked the necessary votes to pass it. Even though President Trump and the Republican leadership quickly reassured investors that they will now concentrate on introducing big tax cuts, the inability of the new administration to deliver on health care may have raised concerns that tax reform is likely to encounter similar obstacles. What's more, reforming health care was one of the conditions for making the tax numbers Trump pledged feasible. As such, heightened doubts over Trump's ability to deliver on his tax promises could keep sentiment among investors somewhat subdued and thereby, weigh further on the greenback. Asian and European equity indices felt the heat as well, opening with bearish gaps. This negative sentiment may roll over into the US markets, where we expect stock indices to open in a similar fashion.

USD/JPY gapped down and continued to drift lower during the Asian morning Monday, falling below the support (now turned into resistance) barrier of 110.70 (R1). Following the dip below 111.60 (R2), the lower bound of the sideways range that contained the price action from the 11th of January until last Wednesday, we believe that the outlook has turned negative. Therefore, we expect the pair to continue trading south and perhaps challenge the round figure of 110.00 (S1) sometime soon. If the bears prove strong enough to overcome that psychological zone, then we may experience extensions towards our next support obstacle of 108.80 (S2), defined by the low of the 17th of November.

Eurozone's PMIs surge and lift the euro

Eurozone's economic growth hit a six-year high in March, according to the bloc's preliminary composite PMI survey that was released on Friday. The index beat its forecast for a marginal decline and instead rose further. The survey was upbeat on all economic fronts, indicating the best employment growth for almost a decade and perhaps even more importantly for ECB policymakers, that selling prices during the first quarter of 2017 rose at the steepest rates since 2011. The euro started strengthening ahead of the report, boosted by the German and French indices released a few minutes earlier, and continued drifting north in the aftermath of the bloc's prints. Considering the strength of these forward-looking data, we could see the common currency enjoy increased demand in the next days or weeks on speculation that the ECB could start to reduce its stimulus dose perhaps as early as next year. In our view, if incoming data continue to show mounting inflationary pressures combined with robust economic growth, then the ECB may begin to sound gradually more hawkish at its upcoming meetings, thereby preparing market participants for an eventual tightening. However, something like that is conditional upon the bloc's core CPI rate establishing an uptrend in coming months, as President Draghi made it clear that the Bank is unlikely to change its stimulus program without notable progress in underlying inflationary pressures.

EUR/USD opened with a positive gap on Monday, after the defeat of President Trump's healthcare package on Friday. After clearing the 1.0800 (S2) key resistance (now turned into support) territory, the pair broke above the 1.0825 (S1) barrier and during the early European morning Monday, it looks ready to challenge the longer-term downtrend line taken from the peak of the 3rd of May and the resistance hurdle of 1.0875 (R1), marked by the high of the 8th of December. A decisive break above that key crossroad could solidify the completion of an inverted head and shoulders, signaled upon the breach of the 1.0800 (S2) territory, and is possible to confirm a medium-term trend reversal.

Today's highlights: During the European day, we get Germany's Ifo survey for March. The forecast is for the expectations index to have risen somewhat, while the current conditions figure is expected to have ticked down. We see the risks surrounding the current conditions forecast as skewed to the upside, perhaps for an increase instead of a marginal fall. We base our view on the ZEW and PMI surveys for the month, both of which showed increased optimism in the German economy. In case of a positive surprise, the euro could extend its recent gains, as this would be another set of numbers entering the basket of data that support a gradual end to the ECB's stimulus program.

As for the rest of the week, on Tuesday, the economic calendar is light. The only event that is likely to attract some market attention is a speech by Fed Chair Yellen.

On Wednesday, the main event will be in the UK, where PM May is expected to trigger Article 50 of the Lisbon Treaty and commence the formal process for leaving the EU. We do not expect the actual triggering to be a particularly big market mover for sterling, as the move and timing have been signaled repeatedly over the past months and weeks.

On Thursday, we get Germany's preliminary CPI figures for March and from the US, the final estimate of Q4 GDP.

On Friday, during the Asian morning, Japan's CPI data for February are due to be released. In Eurozone, preliminary CPI data for March are coming out and in the UK, the final estimate of Q4 GDP will be in focus. From the US, we get personal income and spending data for February, as well as the core PCE price index for February.

USD/JPY

Support: 110.00 (S1), 108.80 (S2), 107.70 (S3)

Resistance: 110.70 (R1), 111.60 (R2), 111.90 (R3)

EUR/USD

Support: 1.0825 (S1), 1.0800 (S2), 1.0760 (S3)

Resistance: 1.0875 (R1), 1.0920 (R2), 1.0950 (R3)

'I think it's fair to say that many of my colleagues and I note a much more optimistic frame of mind among many, many businesses in recent months.' - Janet Yellen, Federal Reserve

Orders for US-manufactured long-lasting goods rose more than expected last month, official figures revealed on Friday. The US Department of Commerce reported that orders for durable goods advanced 1.7% in February, following the preceding month's upwardly revised gain of 2.3% and surpassing analysts' expectations for a 1.1% increase. Excluding transportation equipment, orders for US-manufactured durable goods climbed 0.4%, compared to the previous month's reading of 0.0%. In the meantime, market analysts anticipated a bigger gain of 0.5% during the reported period. However, the following rise marked the sixth straight monthly increase in orders for core durable goods. Analysts suggest that businesses will improve even more if US lawmakers succeed in lowering corporate taxes and reducing regulations. Non-defence capital goods orders excluding aircraft dropped 0.1%, following January's revised climb of 0.1% and falling behind expectations for a 0.5% increase. Shipments of non-defence capital goods excluding aircraft, used in calculating GDP, advanced 1.0% last month. Data also showed that orders for civilian aircraft rose 47.6%, compared to a 83.3% surge in the prior month. Boeing reported it received 43 orders for aircraft in February, up from the previous month's 26.