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EUR/JPY - 123.10




EUR/JPY: Wave v as well as larger degree wave (C) ended at 94.11 and first leg of larger degree wave C upmove has possibly ended at 149.79 and wave 2 correction has possibly ended at 109.49.




The single currency has surged again this week and broke above previous resistance at 123.31, adding credence to our bullish count that correction from 124.10 has ended at 114.85 last month and retest of said resistance is likely, however, break there is needed to confirm early erratic rise from 109.49 low has resumed and extend this move to 124.65, then 125.25-30 (50% Fibonacci retracement of 141.06-109.49) but resistance at 126.47 should hold on initial testing, price should falter below 127.50-60.

The daily chart is labeled as attached, early selloff from 169.97 (July 2008) to 112.08 is wave (A) of B instead of end of entire wave B and then the rebound from there to 139.26 is wave (B), hence, wave (C) has possibly ended at 94.12 with a diagonal triangle as labeled in the daily chart, hence upside bias is seen for further gain. Recent rally above indicated retracement level at 116.69 (50% Fibonacci retracement of the intermediate fall from 139.26-94.12) adds credence to this view and signal major reversal has commenced but first leg of this wave C has possibly ended at 149.79, hence wave 2 has commenced with wave A ended at 126.09, followed by wave B at 141.06, wave C commenced and could have ended at 109.49, above 125.00 would add credence to this view. 



On the downside, whilst initial pullback to 122.00-10 cannot be ruled out, reckon downside would be limited to 121.00-10 and bring another rise to aforesaid upside targets. Below support at 120.60 would defer and risk deeper pullback to 120.00 but downside should be limited to 119.40-50 and support at 118.90-95 should remain intact, bring another rise later. 



Recommendation: Buy at 121.00 for 124.00 with stop below 120.00.

To re-cap the corrective upmove from the record low of 88.93 (18 Oct 2000), the wave A from there is subdivided as: 1:88.93-113.72, 2:99.88 (1 Jun 2001), 3:140.91 (30 May 2003), 4:124.17 (10 Nov 2003) and 5 ended at record high of 169.97 (21 Jul 2008). The brief but sharp selloff to 112.08 is viewed as a-b-c x a-b-c wave (A) of B. The subsequent rebound to 139.26 is (B) of B and (C) of (B) has possibly ended at 94.12 and in any case price should stay well above previous chart support at 88.93, bring rally in larger degree wave C towards 150.00.

USD/CHF –  0.9891

 
USD/CHF – Wave IV ended at 1.1730 and wave V has possibly ended at 0.7068

 
Although the greenback has fallen again this week and marginal weakness from here cannot be ruled out, however, reckon downside would be limited to 0.9850 and as long as previous support at 0.9813 holds, prospect of another rebound remains and above 0.9965-70 would suggest low is possibly formed but a daily close above 1.0000-08 is needed to signal the fall from 1.0108 has ended, bring further gain to 1.0067 resistance. Looking ahead, once this level is penetrated, this would signal the retreat from 1.0108 has ended, bring retest of this level, having said that, price should falter below resistance at 1.0171, bring retreat later. In the event dollar breaks above said resistance at 1.0171, this would revive our bullish view for the erratic rise from 0.9861 to extend further gain to 1.0200 and possibly test of resistance at 1.0248, however, a daily close above there is needed to signal the retreat from 1.0344 has ended at 0.9861, bring eventual retest of 1.0344.

Our preferred count on the daily chart is that early selloff to 0.9630 is an end of the larger degree wave III and major correction is unfolding from there with a leg ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b ended at 0.9910 with (a): 1.0370, (b): 1.1967, (c): 0.9910. The rise from there to 1.1730 is the wave c which also marked the end of wave IV and wave V has possibly ended at 0.7068.


On the downside, whilst marginal weakness from here cannot be ruled out, reckon downside would be limited to 0.9850 and bring another rise later. Only below said support at 0.9813 would abort and confirm another leg of major fall from 1.0344 top is underway for further fall to 0.9735-40, however, oversold condition should prevent sharp fall below 0.9675-80 and price should stay well above 0.9600, bring rebound later.
 
Recommendation: Hold long entered at 0.9905 for 1.0105 with stop below 0.9805

Dollar's long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) with wave III ended at 0.9630 (Mar 2008). Under this count, correction in wave IV has possibly ended at 1.1730 and wave V already broke below support at 0.9630 and met indicated downside target at 0.7500 and 0.7400. The reversal from 0.7068 suggests the wave V has possibly ended and the breach of resistance at 0.9595 add credence to this view and indicated upside target at 1.0000 had been met, however, the sharp retreat from 1.0296 to 0.7401 suggests choppy trading would be seen but price should stay above said record low at 0.7068.

USD/CHF Medium-term bearish.

USD/CHF is weakening. The positive shortterm technical structure has been invalidated. Expected to target support given at 0.9814 (27/03/2017 high).

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.

USD/CAD Strong bullish pressures.

USD/CAD is pushing higher. Hourly support can be found at 1.3411 (24/04/2017 high) then 1.3353 (20/01/2017 high). Expected to show continued bullish pressures as long as the pair remains above 1.3530 (27/04/2017 low).

In the longer term, there is a golden cross with the 50 dma crossing the 200 dma indicating further upside pressures. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low).

AUD/USD Wide-open for further decline.

AUD/USD is trading below 0.7500. As long as prices remain below the resistance at 0.7608 (17/04/2017 high), the short-term technical structure is negative. Key resistance stands at 0.7681 (30/03/2017 high). Expected to show further weakness.

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

EUR/USD Bullish

EUR/USD is trading higher. Hourly support is given at 1.0852 (27/04/2017 low) then 1.0682 (21/04/2017 base). Stronger support can be found at 1.0494 (22/02/2017 low). Hourly resistance given at 1.0951 (26/04/2017 high) has been broken. Expected to show another leg higher towards 1.10.

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 Sideways price action.

GBP/USD is trading mixed. Hourly resistance can be found at 1.2966 (30/04/2017 high). Hourly support can be found at 1.2757 (21/04/2017 low). An unlikely break of this support would indicate further weakness.

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 Consolidating above former resistance.

USD/JPY is now slowing down since the pair reached resistance given at 112.20 (31/03/2017 high). Hourly support can be found at 110.88 (26/04/2017 low). Stronger support is located at 108.13 (17/04/2017 low). Other key supports lie at a distant 106.04 (11/11/2016 low). Expected to show continued bullish pressures.

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).

Spot Gold bounced from fresh lows at $1225 on Friday, taking a breather after steep fall this week that commenced from $1270. The move is seen as corrective on profit-taking after the price fell over 3% in past few sessions and positioning for fresh downside. The yellow metal maintains strong bearish sentiment on rising hopes for June US rate hike and may extend weakness through daily cloud base ($1222) and 100SMA support at $1220 towards $1209 (50% retracement of $1122/$1295 ascend). Recovery attempts were so far capped under daily cloud top (1236) which guards broken bull-trendline ($1240) and strong barrier at $1251 (200SMA / daily Tenkan-sen) where extended corrective upticks should be capped.

Res: 1236, 1240, 1247, 1251
Sup: 1225, 1222, 1220, 1209

EUR/JPY - 122.95

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Near term up

Original strategy:

Buy at 122.85, Target: 124.55, Stop: 122.25

Position: -
Target: -
Stop: -

New strategy :

Buy at 122.10, Target: 124.10, Stop: 121.50

Position: -
Target:  -
Stop:-

As the single currency has retreated after marginal rise to 123.68, suggesting minor consolidation below this level would be seen and pullback to 122.60 support is likely, however, reckon downside would be limited to 122.00-10 and bring another rise later, above said resistance at 123.68 would extend gain to previous chart resistance at 124.10 but break there is needed to retain upside bias for resumption of early upmove to 124.50-60, then towards 125.00 later. 

In view of this, we are looking to buy euro on further subsequent pullback as 122.00-10 should limit downside and bring another rise. Below previous resistance at 122.01 would defer and risk correction to 121.70 but break of 121.25-30 is needed to signal top is formed, bring retracement of recent rise to 120.85-90, however, support at 120.60 should remain intact.

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

AUD/USD – 0.7399

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term down

Original strategy :

Sell at 0.7455, Target: 0.7300, Stop: 0.7515

Position: -
Target:  -
Stop: -

New strategy :

Sell at 0.7470, Target: 0.7300, Stop: 0.7530

Position: -
Target:  -
Stop:-

As this week’s selloff has kept aussie under pressure, suggesting recent decline from 0.7750 top is still in progress for at least a retracement of early upmove, hence bearishness remains for further weakness to 0.7330-35 (100% projection of 0.7750-0.7473 measuring from 0.7611), then 0.7295-00 (76.4% retracement of 0.7158-0.7750),  however, near term oversold condition should prevent sharp fall below 0.7245-50, bring rebound later.

In view of this, we are looking to sell aussie on recovery as 0.7465-70 should limit upside, bring another decline. Above 0.7500-10 would defer and risk rebound to said resistance at 0.7556 but break there is needed to signal low is formed instead, bring further gain to 0.7580-85 but resistance at 0.7611 should hold from here.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

UK Local Elections: Stay Bullish on GBP

Noise around the UK local council elections highlights the fact that in today's lightning-fast media cycle not every election matters equally. Pundits are trying to make the case that a wide victory by PM Theresa May's Conservative Party suggests a sweeping victory in the General Election on June 8. But we suspect that this latest vote is more focused on local issues and less about Brexit. Making an extrapolation to broader voter sentiment is difficult, especially given a low turnout.

Yet in the short-term, why not trade in the sentiment. A solid showing by the Conservatives should equal a chance of a significant majority in the national vote next month. Should May receive such an electoral mandate, this should empower the UK's position heading into UK-EU Brexit negotiations. We would fade the hype and continue to believe the current harsh rhetoric (£100bn divorce bill) does not represent the probable end result.

UK fundamentals remain solid as composite PMI data suggests strong 2Q growth momentum (April rose to 56.2 from 54.8 above 54.5 expected) but we recognise that PMI did over predict 1Q growth performance. Predictions of a seizing up in consumption behavior by households and/or businesses have not occurred. Finally, devaluation of GBP continues to deliver dividends for exporters and manufacturing. We therefore remain bullish on GBP especially against the EU and JPY.

Crude oil hits 5-month low

After free falling to $43.76 during the Asian session, June West Texas Intermediate crude future contracts consolidated slightly below $45 a barrel, down 1.40% since Thursday close. The oil rout speeded up this week as cloud continued to gather on the horizon. Investors started to question the future of OPEC's output deal, while US inventories remain elevated (527.8mio barrels, excluding strategic reserve, as of April 28th). The market is currently looking for further weakness in crude oil prices and will almost surely find some. We actually see two main reasons for a lower oil. First, the OPEC strategy, which was aiming at squeezing out the US shale industry, was huge failure as US producers were able to lower their breakeven price and continue to pump. Secondly, the market is still positioned on the bullish side as net non-commercial positioning, reported by the CFTC, stands at around 19% of total open interest. This cannot be viewed as extreme positioning but it nevertheless indicates that the risk is biased to the downside.

The $42 support (low from mid-November last year) is the key level to monitor as break of the latter will accelerate the sell-off. In the short-term, we expect crude prices to stabilise but we remain positioned for further weakness.

French Elections: Almost a done deal!

While there was (small) uncertainties before the second round, the debate turned towards the advantage of Emmanuel Macron which remained very calm and detailed his program. Marine Le Pen was very expected to detail her economic plan as its feasibility is often questioned, and she failed to inspire confidence on that). The polls are still showing a strong Macron victory and after the debate, we don't really see how Marine Le Pen could win. The likelihood of a victory of the National Front candidate is very slight and the glass ceiling won't be broken.

The euro currency should not move much amid the French election. It is going to be the time to think about the third round the parliamentary election and there's one risk there. Under the “En Marche” banner will certainly be a lot of socialists for whom French people are now reluctant to vote. We remain suspicious that Macron will get a majority at the parliament.

We remain bullish on the single currency at least in the medium-term. A small relief rally may intervene on Monday. Attention will now shift back towards the ECB for the June Meeting.

The CAC has posted small gains in the Friday session. Currently, the index is trading at 5,368.00. On the release front, there is only one event in the eurozone. Retail PMI improved to 52.7, its highest level since July 2015. The stock markets will be keeping a close eye on US employment numbers, highlighted by nonfarm payrolls and wage growth. Nonfarm payrolls dropped to just 98 thousand in March, but is expected to rebound to 194 thousand in the April report.

All eyes are on the French presidential election, which will be held on Sunday. Despite a turbulent campaign with plenty of mud-slinging to go around, opinion polls continue to point to a decisive victory for centrist Emmanuel Macron over far-right candidate Marine Le Pen. The two squared off in a testy television debate on Wednesday, with Macron widely considered to have won the debate. Throughout the week, polls have shown Macron holding comfortable lead of 20 points over Le Pen, and the euro climbed to 6-month highs on Thursday, as the markets are clearly confident that the polls are on track and that Macron will win. Still, many voters don't like either candidate and remain undecided, which means that the polls may not be as accurate as they were in the first round. If Le Pen loses but does much better than predicted, we could see the euro lose ground.

French Election Timeline

May 3 – TV debate between the two remaining candidates

May 5 – [from midnight] Poll blackout

May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 – Official proclamation of the new President.

May 14 – [from midnight] End of Francois Hollande's mandate

June 11 – First round of legislative elections

June 18 – Second round of legislative elections.

There were no surprises from the Federal Reserve, which stayed on the sidelines on Wednesday and held the benchmark rate at 0.75 percent. The Fed rate statement was hawkish, as policymakers emphasized the positives and downplayed a soft first quarter. The statement noted that consumer spending remains strong and that inflation was 'running close' to the Fed's 2 percent target. The Fed's message is clearly one of optimism, as the central bank remains on track to raise interest rates twice more in 2017. The Fed's bullish statement immediately raised the likelihood of a rate hike at June meeting, which jumped to 74 percent after the statement, up from 63% before meeting. The Fed has two key goals which have been achieved, namely full employment and an inflation rate of 2%. One area of concern is the balance sheet, which stands at $4.5 trillion. The minutes of the March meeting stated that policymakers want to start reducing this figure before the end of 2017, and we could see another reference to the balance sheet in the April minutes.

The DAX has ticked higher in the Friday session, as the index trades at 12,610.50. On the release front, there was just one event out of the eurozone. Retail PMI improved to 52.7, its highest level since July 2015. In the US, the focus is on employment numbers, highlighted by nonfarm payrolls and wage growth. Nonfarm payrolls dropped to just 98 thousand in March, but is expected to rebound to 194 thousand in the April report.

All eyes are on the French presidential election, which will be held on Sunday. Despite a turbulent campaign with plenty of mud-slinging to go around, opinion polls continue to point to a decisive victory for centrist Emmanuel Macron over far-right candidate Marine Le Pen. The two squared off in a testy television debate on Wednesday, with Macron widely considered to have won the debate. Throughout the week, polls have shown Macron holding comfortable lead of 20 points over Le Pen, and the euro climbed to 6-month highs on Thursday, as the markets are clearly confident that the polls are on track and that Macron will win. Still, many voters don't like either candidate and remain undecided, which means that the polls may not be as accurate as they were in the first round. If Le Pen loses but does much better than predicted, we could see the euro lose ground.

The polling average line looks at the five most recent national polls and takes the median value, ie, the value between the two figures that are higher and two figures that are lower.

Source – BBC

French Election Timeline

May 3 – TV debate between the two remaining candidates

May 5 – [from midnight] Poll blackout

May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 – Official proclamation of the new President.

May 14 – [from midnight] End of Francois Hollande's mandate

June 11 – First round of legislative elections

June 18 – Second round of legislative elections.

As expected, the Federal Reserve stayed on the sidelines on Wednesday, holding the benchmark rate at 0.75 percent. The Fed rate statement was hawkish, as policymakers emphasized the positives and downplayed a soft first quarter. The statement noted that consumer spending remains strong and that inflation was 'running close' to the Fed's 2 percent target. The Fed's message is clearly one of optimism, as the central bank remains on track to raise interest rates twice more in 2017. The Fed's bullish statement immediately raised the likelihood of a rate hike at June meeting, which jumped to 74 percent after the statement, up from 63% before meeting. The Fed has two key goals which have been achieved, namely full employment and an inflation rate of 2%. One area of concern is the balance sheet, which stands at $4.5 trillion. The minutes of the March meeting stated that policymakers want to start reducing this figure before the end of 2017, and we could see another reference to the balance sheet in the April minutes.