Daily Pivots: (S1) 1.0449; (P) 1.0551 (R1) 1.0620; More.....

EUR/USD drops sharply today and focus is back on 1.0351 low. Break will resume the larger down trend and target parity next. In case of another recovery, we'd expect upside to be limited by 1.0669 resistance and bring down trend resumption. However, firm break of 1.0669 will argue that stronger recovery is underway back to 1.0872 resistance instead.

In the bigger picture, break of 1.0461 key support indicates that consolidation from there has completed as a triangle at 1.1298. And, the down trend from 1.6039 (2008 high) is resuming. Current downtrend is now expected to target 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

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Quick update: ISM manufacturing jumped to 54.7 in December, above expectation of 53.7 and hit the highest level since December 2014. Price paid surged to 65.5. Employment also improved to 53.1. Dollar index breaks recent high and hits 103.82 so far.

Dollar surges broadly today, except versus Aussie, as helped by the selloff in Euro. Dollar index reaches as high as 103.52 and is set to test recent high at 103.65. Nonetheless, Dollar bulls could stay cautious ahead of key economic data to be released this week, including Friday's non-farm payroll, as well as FOMC Minutes. Euro is weighed down by talk that Italy might eventually leave the Eurozone, and receives little help from better than expected German data. Oil price resumes rally as the agreement of OPEC and non-OPEC countries on production cut kicks start. WTI crude oil surges to 18-month high at 55.24. Gold is weighed down by the strength in dollar and dips below 1150 handle.

UK PMI manufacturing jumped to 56.1 in December, up from 53.6 and beat expectation of 56.1. That's the highest level in 30 months. Markit noted that "the UK manufacturing sector starts 2017 on a strong footing. The headline PMI hit a two-and-a-half year high in December, with rates of expansion in output and new orders among the fastest seen during the survey's 25-year history." And, "a plus point from the December survey was that the expansion was led by the investment and intermediate goods sectors, suggesting capital spending and corporate demand took the reins from the consumer in driving industrial growth forward."

Ifo head Clemens Fuest said to a German newspaper Tagesspiegel that "the standard of living in Italy is at the same level as in 2000. If that does not change, the Italians will at some stage say: 'We don't want this euro zone any more'." German unemployment dropped -17k in December, much better than expectation of -5k. Unemployment rate was unchanged at 6.0%, staying at the lowest level since the beginning of the data series back in 1992. German CPI rose 0.7% mom, 1.7% yoy in December, above expectation of 0.6% mom, 1.4% yoy. Also from Europe, Swiss SVME PMI dropped to 56.0 in December, down from 56.6, in line with consensus.

The Caixin PMI manufacturing for China rose to 51.9 in December, much better than expectation of being unchanged at 50.9. That's the best reading in three years since January 2013. Caixin noted that "a further rise in production at Chinese manufacturers supported the higher PMI reading in December. Notably, the rate of output growth accelerated to a 71-month high, with a number of panelists commenting on stronger underlying demand and new client wins." And, "data indicated that improved domestic demand was the key driver of new business growth, however, as new export sales were unchanged in December." Nonetheless, released earlier in the week, the official PMI manufacturing dropped to 51.4, down from 51.7 and below expectation of 51.6.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0449; (P) 1.0551 (R1) 1.0620; More.....

EUR/USD drops sharply today and focus is back on 1.0351 low. Break will resume the larger down trend and target parity next. In case of another recovery, we'd expect upside to be limited by 1.0669 resistance and bring down trend resumption. However, firm break of 1.0669 will argue that stronger recovery is underway back to 1.0872 resistance instead.

In the bigger picture, break of 1.0461 key support indicates that consolidation from there has completed as a triangle at 1.1298. And, the down trend from 1.6039 (2008 high) is resuming. Current downtrend is now expected to target 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update

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EUR/JPY - 122.88

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

Trend: Sideways

New strategy :

Position: -
Target: -
Stop:-

Although the single currency slipped to 121.58 last week, as euro found renewed buying interest there and staged a strong rebound to 123.86, suggesting the pullback from 124.10 top has possibly ended there and consolidation with upside bias is seen, break of 123.86 would add credence to this view, bring retest of 124.10 but above there is needed to confirm recent upmove has resumed in wave v of larger degree wave iii to 124.40-50, then towards 125.00.

In view of this, we are looking to reinstate long on dips. Below 122.00 would defer and risk another test of said support at 121.58 but break there is needed to signal temporary top has been formed, bring retracement of recent upmove to 121.10-20 and possibly test of support at 120.91.

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 – 0.7200

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: Sideways

Original strategy :

Sell at 0.7340, Target: 0.7140, Stop: 0.7400

Position: -
Target: -
Stop: -

New strategy :

Position: -
Target: -
Stop:-

As aussie recovered after holding above last week's low at 0.7158, suggesting further consolidation above this level would be seen and test of resistance at 0.7247 (last week's high) cannot be ruled out, however, reckon upside would be limited to 0.7295-00 (38.2% Fibonacci retracement of 0.7525-0.7158) and bring another decline. A break of said support at 0.7158 would extend recent decline in wave (C) to 0.7100-10, however, loss of downward momentum should prevent sharp fall below 0.7070 and reckon psychological support at 0.7000 would hold from here, bring rebound later.

In view of this, we are looking to sell aussie on recovery as 0.7295-00 should limit upside, bring another decline. Above 0.7340-45 (50% Fibonacci retracement of 0.7525-0.7158) would defer and risk a stronger rebound to 0.7385 (61.8% Fibonacci retracement) but still reckon price would falter below 0.7430-35 and bring another selloff.

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.

Weekly

• Last Candlesticks pattern: Shooting star
• Time of formation: 03 May 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 3 May 2016
• Trend bias: Sideways

EUR/USD – 1.0405

Although the single currency staged another strong rebound last week to 1.0654, renewed selling interest emerged there and euro has dropped again, suggesting the rebound from 1.0352 (last month's low) has ended there, hence bearishness remains for test of 1.0372 support but break there is needed to add credence to this view, bring retest of said recent low at 1.0352 but break there is needed to confirm recent downtrend has resumed for further fall to 1.0300 and later towards 1.0200 which is likely to hold from here.

On the upside, whilst initial recovery to 1.0490-00 cannot be ruled out, reckon upside would be limited to 1.0550-55 and bring another decline later. Above the Kijun-Sen (now at 1.0612) would defer and risk another test of said resistance at 1.0654 but only a daily close above there would defer and suggest a temporary low is formed, bring retracement of recent decline to 1.0710-15 (38.2% Fibonacci retracement of 1.1300-1.0352), then towards 1.0820-30 (50% Fibonacci retracement) but price should falter below resistance at 1.0873.

Recommendation: Sell again at 1.0550 for 1.0300 with stop above 1.0650.

On the weekly chart, although the single currency recovered to 1.0654 last week, euro met resistance there and has fallen again, retaining our bearishness for early downtrend to extend further weakness, break of 1.0352 support would bring subsequent fall to 1.0220-30 (1.618 times projection of 1.1616-1.0912 measuring from 1.1366) and later 1.0150 but near term oversold condition should prevent sharp fall below latter level and reckon psychological support at 1.000 would remain intact.

On the upside, expect recovery to be limited to 1.0470-80 and 1.0550-60 should limit upside, bring another decline. Above 1.0592 resistance would risk test of last week's high at 1.0654 but break there is needed to signal a temporary low is formed, bring retracement of recent decline to 1.0710-15 (38.2% Fibonacci retracement of 1.1300-1.0352), then towards 1.0820-30 (50% Fibonacci retracement) but upside should be limited to the Kijun-Sen (now at 1.0859) and price should falter below resistance at 1.0873.

Weekly

• Last Candlesticks pattern: Long white candlestick
• Time of formation: 14 Nov 2016
• Trend bias: Near term up

Daily

• Last Candlesticks pattern: Hammer
• Time of formation: 09 Nov 2016
• Trend bias: Down

USD/JPY – 118.06

Although the greenback slipped last week to as low as 116.04, dollar found renewed buying interest there and has staged a strong rebound, suggesting the pullback from last month's high of 118.66 has possibly ended there and consolidation with upside bias is seen for test of 117.82 resistance, however, a daily close above there is needed to retain bullishness and bring retest of 118.66. Looking ahead, once this level is penetrated, this would extend recent upmove from 99.01 low for further gain to 119.50-55 (76.4% retracement of 125.86-99.01) and then psychological level at 120.00.

On the downside, expect pullback to be limited to 117.40-50 and support at 117.20-21 should contain downside, bring another rise later. Only below 116.42 would risk test of said support at 116.04 but break there is needed to signal a temporary top is formed, bring retracement of recent upmove to the Kijun-Sen (now at 115.16) and then 114.75-80, however, 114.00-10 would remain intact.

Recommendation : Buy at 117.50 for 119.50 with stop below 116.50.

On the weekly chart, as the greenback has maintained a firm undertone after recent rally in Q4 2016, suggesting the upmove from 99.01 low is still in progress and above 118.66 (last month's high) may extend further gain to 119.50-55 (76.4% retracement of 125.86-99.01), then 120.00 psychological level but reckon previous chart resistance at 121.69 should hold from here, bring retreat later.

On the downside, although initial pullback to 117.40-50 cannot be ruled out, reckon downside would be limited to 117.00 and bring another rise. Only below support at 116.04 would defer and prolong consolidation below said recent high at 118.66, bring retracement to 114.70-75 and then 114.00 but reckon downside would be limited to 112.85-90, bring another upmove later.

USD/CHF - 1.0259

Most recent candlesticks pattern : N/A

Trend : Up

Tenkan-Sen level : 1.0235

Kijun-Sen level : 1.0225

Ichimoku cloud top : 1.0188

Ichimoku cloud bottom : 1.0160

New strategy :

Stop : -

The greenback has risen again after finding renewed buying interest at 1.0210, suggesting the rally from 1.0057 (last week's low) is still in progress and may extend further gain to 1.0290-00 but break of resistance at 1.0322 (last week's high) is needed to retain bullishness and extend recent upmove to 1.0344 resistance (last month's high), then towards 1.0390-00 which is likely to hold from here due to near term overbought condition.

In view of this, we are looking to buy dollar on pullback as support at 1.0210 should limit downside. Only below 1.0180-85 support would abort and signal an intra-day top is formed, risk weakness to 1.0160 but still reckon support at 1.0144 would contain weakness.

Daily Pivots: (S1) 0.8471; (P) 0.8568; (R1) 0.8620; More...

EUR/GBP failed to take out 38.2% retracement of 0.9304 to 0.8303 at 0.8685 and retreated. Intraday bias is turned neutral first. Break of 0.8488 minor support will argue that the recovery from 0.8303 is completed. And more importantly, bias will be turned back to the downside to extend the larger fall from 0.9304 through 0.8303 low. In that case, we'd look for bottoming around 0.8116.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support around 55 weeks EMA (now at 0.8230) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

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Daily Pivots: (S1) 1.4503; (P) 1.4609; (R1) 1.4703; More...

Break of 1.4453 minor support argues that's EUR/AUD's rebound is completed at 1.4721. And the development keeps the pair in range of 1.4072/4880. Intraday bias is turned neutral first. On the downside, break of 1.4072 will extend the correction from 1.6587 towards next key support level 1.3671. Meanwhile, decisive break of 1.4880 resistance will indicate that such correction from 1.6587 is completed and turn near term outlook bullish for 1.5094 resistance next.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. 50% retracement of 1.1602 to 1.6587 at 1.4095 was already met. While further fall cannot be ruled out, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.5094 will be the first sign of resumption of up trend from 1.1602 and target retesting 1.6587 resistance first.

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Daily Pivots: (S1) 143.19; (P) 143.89; (R1) 145.12; More...

Break of 144.69 minor resistance argues that pull back from 148.42 is finished at 142.16. Intraday bias in GBP/JPY is turned back to the upside for 148.42. Break there will extend the whole rise from 122.36. Still, such rally is seen as a corrective move. Hence, we'd expect strong resistance from 150.43 long term fibonacci level to limit upside. Break of 142.16 should confirm short term topping and bring decline to 55 day EMA (now at 140.03) and below.

In the bigger picture, the down trend from 195.86 top (2015 high) should have made a medium term bottom at 122.36 after hitting 100% projection of 195.86 to 154.70 from 163.87 at 122.71. Rise from there is now expected to develop into a medium term corrective pattern. Upside should be limited by 38.2% retracement of 195.86 to 122.36 at 150.4 for setting the medium term range.

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