Sample Category Title

• NZDJPY rising inside corrective wave ii
• Likely to rise to resistance level 91.65

NZDJPY currency pair continues to rise inside the minor corrective waves ii, which started earlier from the powerful support level 87.00, which has been reversing the price from the end of October.

The active wave ii belongs to the downward impulse sequence 3 from the end of August.

Given the strongly bearish yen sentiment that can be seen across the FX markets lately, NZDJPY currency pair can be expected to rise further to the next resistance level 91.65 (top of the previous minor correction 2).

Dollar finished last week on the back foot, reacting to Fed's decision to cut rates by 50 bps. While the greenback lost ground to most major rivals, its decline was relatively modest. Notably, Dollar managed to close higher against both Japanese Yen and Swiss Franc, and it continued to hold above key near term support level versus Euro. US stock market's rally to fresh record highs lacked its usual exuberance, with market sentiment appearing somewhat half-hearted. This tempered risk-on mood, coupled with rebound in US treasury yields, helped mitigate more substantial selling pressure on Dollar.

Weakness in Japanese Yen was much more pronounced, primarily due to the cautious tone struck by BoJ, which signaled that it's not in a rush to raise interest rates again in the near term. This stance weighed heavily on Yen, which had already been under pressure from surging bond yields in the US and Europe. Technically, Yen's short-term rebound seems to have well concluded, and the currency is now embarking on a fresh decline.

Sterling, on the other hand, stood out as one of the top performers, supported by a combination of strong UK economic data and more hawkish-than-expected outcome from BoE. The Pound broke key resistance levels against both Euro and Swiss Franc, solidifying its position as one of the top gainers, with more upside potential ahead.

For the week overall, Yen was the clear laggard, followed by Swiss Franc and Dollar. On the flip side, Australian Dollar emerged as the best performer, while Sterling was a close second. New Zealand Dollar also performed well, rounding out the top three. The Euro and Canadian Dollar ended the week more neutrally, positioning themselves in the middle of the pack.

DOW and S&P 500 Break Records after Fed, Yet Market Rally Lacks Usual Excitement

Following Fed's 50bps rate cut last week, US markets responded with measured gains as DOW and S&P 500 climbed to fresh record highs. However, the rally lacked the exuberance typically seen in the wake of major policy shifts. This tempered reaction can be attributed to the fact that much of the cut had already been priced in the prior week, fueled by growing speculation. Additionally attention has already shifted back to the uncertainty surrounding Fed's next move.

The updated dot plot revealed a nearly even split within the FOMC. Ten of the 19 Fed members have signaled the possibility of an additional 50bps cut by the end of the year, while nine are leaning towards a more cautious 25bps cut. Meanwhile, the futures market reflects a different sentiment, pricing in 51.4% probability of a 50bps cut in November and 74.2% likelihood of a total 75bps reduction by year's end. This divergence highlights the uncertainty in the market, making it difficult to predict how aggressive Fed will be in its upcoming meetings.

The path forward for Fed will surely depend on upcoming economic data, but how? While inflation has been moderating, the question remains whether this disinflationary trend will be enough to warrant another bold move. In all likelihood, only a significant drop in inflation or a marked deterioration in labor market conditions could prompt a more aggressive cut. However, a weakening job market could reignite fears of an economic slowdown, raising recession concerns, which would likely be viewed unfavorably by investors.

Complicating the outlook further is the looming US presidential election in November. With political uncertainty hanging over the markets, many investors may choose to hold off on making significant moves until there is more clarity regarding the election outcome. This added layer of uncertainty will likely keep markets cautious in the months ahead.

Technically, for DOW, 61.8% projection of 32327.20 to 39889.05 from 38000.96. at 42674.18 could present signficant resistance, at least for the first attempt. But in any case, outlook will stay bullish as long as 55 D EMA (now at 40554.65) holds. Decisive break of 42674.18 would pave the way to 100% projection at 45562.81.

For the bullish scenario to fully materialize, several factors must align. The markets would need to see meaningful improvements in inflation data, continued strength in the labor market, and a favorable outcome from the US election, or at least one that is perceived as market-friendly. Without these supportive conditions, the market's rally could stall, and the outlook could become increasingly fragile.

US 10-Year Yield Stabilizes into Range Trading, Dollar Index Lacks Strong Downward Momentum

US 10-year yield's rebound last week brought D MACD back above signal line. Considering bullish convergence condition too, a short term bottom might be in place at 3.603 already. While there is prospect of stronge recovery, upside will likely be limited by 3.923 resistance to set the range for sideway trading.

On the downside, in case of another fall through 3.603, strong support is now expected from 100% projection of 4.997 to 3.785 from 4.737 at 3.253 to bring rebound. For 10-year yield to break through 3.253, a significant policy shift by Fed towards continously aggressive rate cuts would likely be necessary.

While Dollar Index breached 100.51 to resume the fall from 106.13, there is a lack of clear downside momentum. EUR/USD's struggle to breakout from near term range is a major factor flooring Dollar Index's fall. At the same time, the rebound from USD/JPY is another support.

Still, near term outlook in Dollar Index will stay bearish as long as 101.91 resistance holds, for 99.57 (2023 low). But the speed of the decline would depends on overall development in risk sentiment as well as treasury yields.

BoJ's Cautious Tone Drags Yen Lower, Lifts Nikkei

The Japanese Yen ended last week as the weakest currency, partly driven by surging bond yields in the US and Europe, and coupled with a more cautious tone from BoJ. Although the decision to keep interest rates unchanged was anticipated, BoJ Governor Kazuo Ueda's remarks during the post-meeting press conference left markets somewhat disappointed, with some even interpreting his remarks as slightly dovish. This development not only weighed on the yen but also spurred a strong rebound in Japan's Nikkei index.

Governor Ueda reaffirmed that rate hikes are on the card if economic conditions and inflation align with BoJ's projections. However, he was quick to highlight the uncertainties in the global economy, especially regarding the US. Additionally, Ueda pointed out that inflationary pressures resulting from Yen's weakness were fading, giving the BoJ some leeway to mull over its next move. Overall, the messages suggested that BoJ isn't in any rush to raise interest rates again this year.

Nikkei's strong rally last week and the break of 55 D EMA suggests that pullback from 39080.64 has already completed at 35253.43. Rise from 31156.11, as the second leg of the corrective pattern from 42426.77 high, should still be in progress, and could extend to 61.8% projection of 31156.11 to 39080.64 from 35253.43 at 40150.78.

Nikkei's anticipated break of 39080.64 resistance, if realized, should be accompanied by break of corresponding resistance in Yen crosses.

In similar developments, NZD/JPY's strong rebound from 86.26 argues that pull back from 91.65 has already completed. On the upside, sustained break of 55 D EMA (now at 90.30) will solidify the case that rise from 83.02, as the second leg of the corrective pattern from 99.01 high), is ready to resume through 91.65. NZD/JPY would then target 61.8% retracement of 99.01 to 83.02 at 92.90, or even further to 100% projection of 83.02 to 91.65 from 86.26 at 94.89.

GBP Breaks Key Levels on Strong UK Data and Hawkish BoE

Sterling finished last week as one of the top performers, breaking through key resistance levels against both Euro and Swiss Franc. The Pound's momentum was largely driven by a combination of strong UK economic data and a more hawkish-than-anticipated outcome from BoE's meeting.

While the decision to hold rates at 5.00% was widely expected, the surprise came with an 8-1 vote, as Deputy Governor Dave Ramsden unexpectedly sided with the majority in holding rates. BoE's statement underlined that a "gradual approach" to easing would be taken, as services inflation remains "elevated." The market consensus still leans toward a rate cut in November, but after this week's developments, it's no longer a certainty.

Meanwhile, UK inflation data pointed to persistent price pressures. CPI remained steady at 2.2% in August, but core CPI rose more than expected to 3.6%. Services inflation also climbed from 5.2% to 5.6%. Another surprise came in retail sales, which jumped 1% in August, with annual growth reaching 2.5%, the highest since February 2022. These figures suggest that despite high interest rates, demand remains robust, keeping inflation risks elevated.

GBP/CHF's strong break of 1.1235 resistance confirmed resumption of whole rebound from 1.0741. Outlook will stay bullish as long as 55 D EMA (now at 1.1214) holds. Sustained trading above 61.8% projection of 1.0741 to 1.1235 from 1.1022 will pave the way to 161.8% projection at 1.1516.

From a medium-term perspective, the break of 55 W EMA is also a bullish sign, and there is prospect of resuming whole rebound from 1.1083 (2022 low). Even as a corrective move, GBP/CHF could target 61.8% retracement of 1.3070 to 1.0183 at 1.1967 in the medium term.

EUR/GBP's close below 0.8382 support indicates that down trend from 0.9267 (2022 high) is resuming. For the near term, next target will be 61.8% projection of 0.8624 to 0.8399 from 0.8463 at 0.8324.

The medium-term outlook remains bearish with recovery attempts capped by falling 55 W EMA. The key question now is whether EUR/GBP could break through lower trend line support (now at around 0.8345) decisively. That could prompt downside acceleration towards 0.8201 key support (2022 low).

AUD/USD Weekly Report

AUD/USD's rally from 0.6348 resumed by breaking through 0.6823 last week. Initial bias stays on the upside this week for 61.8% projection of 0.6348 to 0.6823 from 0.6621 at 0.6915 next. On the downside, below 0.6736 minor support will turn intraday bias neutral first. But outlook will remain cautiously bullish as long as 0.6621 support holds, in case of retreat.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with rise from 0.6269 as the third leg. Firm break of 6870 resistance zone will target 100% projection of 0.6269 to 0.6870 from 0.6340 at 0.6941. In case of another fall, strong support should be seen from 0.6169/6361 to bring rebound.

In the long term picture, the down trend from 1.1079 (2011 high) should have completed at 0.5506 (2020 low) already. It's unsure yet whether price actions from 0.5506 are developing into a corrective pattern, or trend reversal. But in either case, fall from 0.8006 is seen as the second leg of the pattern. Hence, in case of deeper decline, strong support should emerge above 0.5506 to bring reversal.

EUR/USD's strong rebound last week suggests that correction from 1.1200 has completed at 1.1001 already. Initial bias stays mildly on the upside this week. Decisive break of 1.1200 will resume whole rally fro 1.0665 to 1.1274 high. Firm break there will resume larger up trend. On the downside, however, break of 1.1072 will turn bias back to the downside for 1.1001 support instead.

In the bigger picture, prior break of 1.1138 resistance indicates that corrective pattern from 1.1274 might have completed at 1.0665 already. Decisive break of 1.1274 (2023 high) will confirm resumption of whole up trend from 0.9534 (2022 low). Next target will be 61.8% projection of 0.9534 to 1.1274 from 1.0665 at 1.1740. This will now be the favored case as long as 1.0947 resistance turned support holds.

In the long term picture, a long term bottom is in place at 0.9534 (2022 low). The strong break of 55 M EMA (now at 1.1018) is taken as the first sign of bullish trend reversal. But still, firm break of 1.2348 structural resistance is needed to confirm. Otherwise, price actions from 0.9534 could still develop into a consolidation pattern.

USD/JPY's rebound last week suggests short term bottoming at 139.57. just ahead of 139.26 key fibonacci level. Initial bias remains mildly on the upside this week. Further rise would be seen to 38.2% retracement of 161.94 to 139.57 at 148.11. On the downside, below 141.73 minor support will turn bias to the downside for retesting 139.57 instead.

In the bigger picture, fall from 161.94 medium term top is seen as correcting whole up trend from 102.58 (2021 low). Strong support could be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to contain downside, at least on first attempt. But in any case, risk will stay on the downside as long as 149.35 resistance holds. Sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

In the long term picture, it's still early to conclude that up trend from 75.56 (2011 low) has completed. However, a medium term corrective phase should have commenced, with risk of deep correction towards 55 M EMA (now at 133.19).

GBP/USD's up trend resumed last week by breaking through 1.3265. Initial bias stays on the upside this week for 61.8% projection of 1.2664 to 1.3265 from 1.3000 at 1.3371. Firm break there will pave the way to 100% projection at 1.3601 next. On the downside, below 1.3219 minor support will turn intraday bias neutral and bring consolidations first. But outlook will stay bullish as long as 1.3000 support holds.

In the bigger picture, up trend from 1.0351 (2022 low) is in progress. Next target is 38.2% projection of 1.0351 to 1.3141 from 1.2298 at 1.3364. Decisive break there will target 61.8% projection at 1.4022. For now, outlook will stay bullish as long as 1.2892 resistance turned support holds, even in case of deep pullback.

In the long term picture, as long as 1.2298 support holds, rise from 1.0351 long term bottom is expected to continue. The strong break of 55 M EMA (now at 1.2811) is a sign of bullish trend reversal. Yet, break of 1.4248 structural resistance is needed confirm. Otherwise, price actions from 1.0351 could just be part of a consolidation pattern.

USD/CHF stayed in range of 0.8374/8548 last week and outlook is unchanged. Initial bias remains neutral this week first. On the downside, break of 0.8374 will resume the fall from 0.9223 to retest 0.8332 low. Decisive break there will indicate larger down trend resumption. However, considering bullish convergence condition in 4H MACD, break of 0.8548 resistance will confirm short term bottoming, and turn bias back to the upside for 0.8747 resistance.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

In the long term picture, price action from 0.7065 (2011 low ) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high). Fall from 1.0342 (2016 high) is seen as the second leg. Rejection by 55 M EMA suggest that this fall is in progress. Break of 61.8% retracement of 0.7065 to 1.0342 at 0.8317 will pave the way back to 0.7065.

AUD/USD's rally from 0.6348 resumed by breaking through 0.6823 last week. Initial bias stays on the upside this week for 61.8% projection of 0.6348 to 0.6823 from 0.6621 at 0.6915 next. On the downside, below 0.6736 minor support will turn intraday bias neutral first. But outlook will remain cautiously bullish as long as 0.6621 support holds, in case of retreat.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with rise from 0.6269 as the third leg. Firm break of 6870 resistance zone will target 100% projection of 0.6269 to 0.6870 from 0.6340 at 0.6941. In case of another fall, strong support should be seen from 0.6169/6361 to bring rebound.

In the long term picture, the down trend from 1.1079 (2011 high) should have completed at 0.5506 (2020 low) already. It's unsure yet whether price actions from 0.5506 are developing into a corrective pattern, or trend reversal. But in either case, fall from 0.8006 is seen as the second leg of the pattern. Hence, in case of deeper decline, strong support should emerge above 0.5506 to bring reversal.

USD/CAD edged higher to 1.3646 last week but failed to sustain above 38.2% retracement of 1.3946 to 1.3439 at 1.3633. Yet, subsequent retreat was contained at 1.3532. Initial bias remains neutral this week first. On the downside, break of 1.3532 will argue that corrective recovery from 1.3439 has already completed, and bring retest of this low. Nevertheless, firm break of 1.3646 will bring stronger rebound to 61.8% retracement at 1.3752 and above.

In the bigger picture, corrective pattern from 1.3976 (2022 high) is extending with another falling leg. While deeper decline could be seen, strong support should emerge above 1.2947 resistance turned support to bring rebound. Rise from 1.2005 (2021 low) is still in favor to resume at a later stage.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as long as 1.2947 resistance turned support holds.

GBP/JPY's strong rebound last week suggests that fall from 193.45 has completed at 183.70 already. Rebound from there is seen as the third leg of the corrective pattern from 180.00. Initial bias stays on the upside this week for 193.45 resistance first. Firm break there will target 61.8% retracement of 208.09 to 180.00 at 197.35. On the downside, though, below 188.70 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

In the longer term picture, considering bearish divergence condition in W MACD, 208.09 is at least a medium term top. It's still early to conclude that the up trend from 122.75 (2016 low) has completed. But it's at least in a medium term corrective phase, with risk of correction to 55 M EMA (now at 170.18).