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Daily Pivots: (S1) 1.0811; (P) 1.0831; (R1) 1.0844; More....

No change in EUR/CHF's outlook as fall from 1.1149 is in progress. Intraday bias stays on the downside for 1.0737 cluster support next. On the upside, above 1.0866 minor resistance will turn intraday bias neutral first. But outlook will stay bearish as long as 1.0985 resistance holds, in case of recovery.

In the bigger picture, current development argues that rebound from 1.0505 (2020 low) might be completed with three waves up to 1.1149 already. Sustained trading below 55 week EMA (now at 1.0885) will affirm this bearish case. Further break of 1.0737 cluster support (61.8% retracement of 1.0505 to 1.1149 at 1.0751) will bring retest of 1.0505 low.

The New Zealand dollar soared after the RBNZ cut its QE program in anticipation of policy tightening.

The initial surge above 0.7010 reveals renewed buying interest after the kiwi spent weeks above the important daily support at 0.6920.

The psychological level of 0.7000 saw its role reversed into a support. A rally above 0.7060 brings the kiwi closer to the critical supply area at 0.7100. Its breach may trigger a bullish reversal.

In the meantime, an overbought RSI can lead to a limited pullback as buyers build their momentum.

The Canadian dollar softened after the BOC cut its bond-buying less aggressively than expected. The pair previously saw profit-takings near the recent top at 1.2550.

The RSI’s triple top in the overbought area was already a sign of overextension. The price has once again bounced off 1.2430, a former resistance turned into a support. A bullish breakout could extend the rally beyond 1.2600.

But if buyers struggle to hold the range, the greenback could be vulnerable to a sell- off. Then 1.2300 would be the next stop.

The better-than-expected UK CPI in June has lifted the sterling across the board.

Price action has seen strong support above 1.3730, a critical demand zone on the daily chart. After the initial rally, the pair has bounced off the 61.8% Fibonacci retracement level (1.3800) while the RSI recovered back to the neutral area.

Following a previous failed attempt, a bullish breakout above the supply zone around 1.3920 could boost confidence on the buy-side and trigger a reversal.

Then the psychological level of 1.4000 would be the next target.

The GBP/USD is preparing for longs. We might see a breakout to the upside.

W L3 pivot is holding the price. We can also see a series of higher highs and higher lows as the price looks bullish. 1.3850-60 is the zone where bounce might happen. Targets are 1.3897 followed by 1.3940 and 1.3980. However, the price needs to stay above 1.3795 in order to remain bullish.

In this technical blog, we’re going to take a quick look at the Elliott Wave charts of OIL Futures ( $CL_F), published in the member's area of the website. As our members know, we’ve been calling rally in the commodity due to impulsive bullish sequences. We recommended members avoid selling in any proposed pull back and keep buying the dips in 3,7,11 swings. Recently OIL made a pullback that has unfolded as Elliott Wave Zig Zag pattern. In the further text, we are going to explain the Elliott Wave Pattern and trading strategy.

Before we take a look at the real market example, let’s explain Elliott Wave Zigzag.

Elliott Wave Zigzag is the most popular corrective pattern in Elliott Wave theory. It’s made of 3 swings which have a 5-3-5 inner structures. Inner swings are labeled as A,B,C where A =5 waves, B=3 waves and C=5 waves. That means A and C can be either impulsive waves or diagonals. (Leading Diagonal in case of wave A or Ending in case of wave C) . Waves A and C must meet all conditions of being 5 wave structures, such as: having RSI divergence between wave subdivisions, ideal Fibonacci extensions, and ideal retracements.

Oil Elliott Wave 1 hour chart 7.8.2021

Current view suggests the commodity is doing 4 red correction that is unfolding as Elliott Wave Zig Zag Pattern. The first leg ((a)) was a very sharp decline, if we downgrade it we can see clear 5 waves.

Then we got clear 3 waves bounce in ((b)), after which we got 5 waves down in ((c)). The price has already reached extremes from the peak. Equal legs ((a))-((b)) is marked as the blue box on the chart: 70.81-68.3 which is entry area for the buyers. As the main trend is bullish we expect buyers to appear for 3 waves bounce at least. Once bounce reaches 50 Fibs against the ((b)) black high, we will make long position risk-free ( put SL at BE) As our members know, Blue Boxes are no enemy areas, giving us an 85% chance to get a bounce.

Oil Elliott Wave 1 hour chart 7.12.2021

Buyers appeared right at the equal legs area and we got a decent reaction. Members who took long trades should have made positions risk-free. Current view suggests 4 red pull back is done at the 70.79 low. Short-term cycle from the mentioned low, looks completed as 5 waves rally- ((i)) black. After 3 waves pullback in ((ii)) , we expect to see further strength in commodity toward new highs ideally. If the price breaks 70.79 deeper corrections would be in progress, as 7 swings pattern which should ideally provide us with new trading opportunities.

Markets

It was back to square one for US yields yesterday as a balanced statement by Fed Chair Powell lifted core bonds again to levels seen ahead of Wednesday's inflation & auction scare. The main message remains that the recovery has further to go to scale back extraordinary monetary policy support. He stands by the view that the inflation uptick will be transitory though added that the Fed will act should things spiral out of control. The US yield curve bull flattened with yields shedding 3 bps (2-yr) to 7.6 bps (30-yr). US Treasuries significantly outperformed German Bunds with German yields down 0.7 bps to 3.4 bps in a similar flattening move. The dollar reversed part of Wednesday’s gains with EUR/USD closing at 1.1837 from a 1.1776 open. EUR/GBP saw some return action higher after failing to breach the 0.85 barriers on the downside. Hawkish comments by BoE Ramsden couldn’t change the tide. He said that conditions for tightening policy could come sooner than expected in the forecasts of May. Sterling will probably keep the edge over the euro in the run-up to the August 5 Monetary Policy Report. BoE Saunders today also speaks on the UK (inflation) outlook and could echo Ramsden’s more hawkish views. Mixed UK labor market data this morning fail to inspire trading.

Chinese Q2 GDP numbers slightly beat consensus this morning, rising by 1.3% Q/Q vs 1% expected. Q1 growth dynamics faced a downward revision from 0.6% Q/Q to 0.4%. GDP is 7.9% higher on a yearly basis. The solid GDP release comes on the heels of the PBOC’s RRR cut and dovish guidance last week. The latter was seen as an omen for worrisome data today. Monthly data ranging from production (8.3% Y/Y) over-consumption (12.1% Y/Y) to investment (12.6% Y/Y) all confirmed the Chinese growth momentum. Yearly comparisons again start making some more sense since Chinese growth was mainly affected by pandemic-related lockdowns in Q1 2020. USD/CNY is fairly stable around 6.46. In other Asian news, the Bank of Korea signaled that it’s time to discuss policy adjustments from the next meeting (Aug 26) onwards. USD/KRW drops to the 1140 area after testing strong resistance around 1150 in the past days. Finally, June Australian labor market data printed close to consensus (+29.1k). Details were even slightly more upbeat with full-time job gains (+51.6k) compensating for part-time job losses (-22.5k). The unemployment rate declined from 5.1% to 4.9% with an unchanged participation rate (66.2%). The slightly tighter labor market supports the RBA’s recent call not to extend the benchmark for 3-y government bond purchases.AUD/USD is broadly unchanged near 0.7470.

News headlines

The Bank of Canada further scaled back bond purchases from CAD$ 3bn per week to CAD$ 2bn yesterday, citing an ongoing and strengthening economy that is to broaden in the months ahead. Employment should continue to rebound through the BoC warned recouping the still more than 500 000 job losses will take time. It remains upbeat in its growth forecasts, lowering the figure for this year to 6% (-0.5 ppt) but revising 2022 GDP growth to 4.6% (+0.9 ppt). It won’t be until the second half of 2022 before economic slack is absorbed. This should bring inflation sustainably to the 2% target (2.4% in 2022, 2.2% in 2023). The policy rate, now at 0.25%, won’t be raised until then.QE could be tapered further if the economy evolves according to forecasts. The loonie reversed earlier gains on the news as yesterday’s decision was already discounted by markets. This raised the bar for a hawkish surprise. USD/CAD eventually closed unchanged at 1.251.

Poland put a bomb under the primacy of EU law. Its constitutional court ruled that the country does not have to obey EU orders related to a judicial overhaul that the EU considers breaching the rule of law. One of the judicial changes introduced a new chamber for disciplining judges, which the EU ordered Poland to suspend. It is that very chamber that asked the Polish court to rule whether such demands were compatible with the constitution. The decision most certainly will escalate the feud. The Polish zloty came under selling pressure these last few days, partially the result of building tensions in the run-up to the court’s decision. EUR/PLN currently trades at 4.58.

Dollar turns notably weaker against Swiss Franc and Yen today but markets are relatively steady elsewhere. Sterling pays little attention to employment data which showed some positive signs. Canadian Dollar also shrugged off yesterday's BoC tapering. General focus will now turn to US job data, and the movements in stock markets for next moves in currencies.

Technically, immediate focus is now on 0.9129 support in USD/CHF and 109.52 support in USD/JPY. Break there will resume falls from 0.9273 and 111.65 respectively. More importantly, such development would affirm the case of near term bearish reversal. We might see spillover to other pairs. In particular, break of 1.1880 resistance in EUR/USD would align the outlook with USD/CHF and USD/JPY.

In Asia, Nikkei closed down -1.15%. Hong Kong HSI is up 1.07%. China Shanghai SSE is up 1.03%. Singapore Strait Times is down -0.38%. Japan 10-year JGB yield is down -0.0039 at 0.017. Overnight, DOW rose 0.13%. S&P 500 rose 0.12%. NASDAQ dropped -0.22%. 10-year yield dropped -0.049 to 1.356.

UK employment back above pre-pandemic levels in some regions

UK employment rose another 356k in June to 28.9m, but remains -206k below pre-pandemic levels. Nevertheless, employment in some regions, including North East, North West, East Midlands and Norther Ireland, were already back above pre-pandemic levels.

Employment rate was at 74.8%, -1.8% below pre-pandemic levels. unemployment rate edged up to 4.8% in May, above expectation of 4.7%. That's also still 0.9% higher than before the pandemic.

Average earnings including bonus rose 7.3% 3moy in May, above expectation of 7.2% 3moy. Average earnings excluding bonus rose 6.6% 3moy, matched expectations. Claimant count dropped -114.7k in June.

BoE Bailey won't be rushed into rate hike despite higher inflation

BoE Governor admitted in an interview that yesterday's inflation numbers were "higher than we thought it would be". But he added, "what we will have to do, again, is go through all the evidence and assess to what extent we think the sorts of things that underlie that are likely to be transitory."

"And to what extent is it going to cause second round effects - so it starts to get embedded in expectations and it gets into wage negotiations and it's difficult to get out (of an inflationary cycle)," he added.

In reaction to people who said that BoE is being "casual" about the surge in inflation, he emphasized, "we're not at all actually." "The committee has been very clear - if we think the case is made, then of course, we will respond and use the policy tools. We must do that."

Australia unemployment rate dropped to 4.9%, lowest since 2010

Australia employment grew 29.1k in June, or 0.2% mom, above expectation of 20.3k. Full time jobs grew 51.6k while part-time jobs dropped -22.5k. Over the year, employment grew 777.9k, or 6.3% yoy. Unemployment rate dropped -0.2% to 4.9%, better than expectation of 5.0%. Participation rate was unchanged at 66.2%.

Bjorn Jarvis, head of labour statistics at the ABS, said June saw the eighth consecutive monthly fall in the unemployment rate. "The unemployment rate fell to 4.9 per cent in June. This was 0.4 percentage points below March 2020 (5.3 per cent) and the lowest it has been since December 2010. The declining unemployment rate continues to coincide with employers reporting high levels of job vacancies and difficulties in finding suitable people for them," Jarvis said.

China recovery slowed in June, but momentum still strong

China GDP grew 1.3% qoq in Q2, matched expectations. Industrial production growth slowed to 8.3% yoy in June, but beat expectation of 7.9% yoy. Retail sales growth slowed to 12.1% yoy, above expectation of 11.0% yoy. Fixed asset investment growth slowed to 12.6% ytd yoy, above expectation of 12.5% yoy. While growth momentum appears to be slowing, recovery is still very strong.

Hong Kong HSI rises in response to the solid data from China, and it's trading up more than 1% at the time of writing. Notable support was seen from 26782.61 resistance turned support after last week's spike low. Focus is back on 55 day EMA (now at 28484.00). Sustained break there will argue that correction from 31183.35 has completed and would bring retest of this high.

Looking ahead

US will release jobless claims, import price index, Empire state manufacturing, Philly Fed manufacturing and industrial production. Canada will release ADP employment change.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3813; (P) 1.3852; (R1) 1.3903; More....

Range trading continues in GBP/USD and intraday bias remains neutral for the moment. On the downside, break of 1.3730 will resume the fall from 1.4248, as the third leg of the consolidation pattern from 1.4240, to 1.3668 support and possibly below. On the upside, break of 1.4000 will turn bias back to the upside for retesting 1.4240/8 resistance zone instead.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications and target 38.2% retracement of 2.1161 (2007 high) to 1.1409 (2020 low) at 1.5134. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed and bring deeper fall to 1.2675 support and below.

Economic Indicators Update

UK employment rose another 356k in June to 28.9m, but remains -206k below pre-pandemic levels. Nevertheless, employment in some regions, including North East, North West, East Midlands and Norther Ireland, were already back above pre-pandemic levels. Claimant count dropped -114.7k in June.

Employment rate was at 74.8%, -1.8% below pre-pandemic levels. unemployment rate edged up to 4.8% in May, above expectation of 4.7%. That's also still 0.9% higher than before the pandemic.

Average earnings including bonus rose 7.3% 3moy in May, above expectation of 7.2% 3moy. Average earnings excluding bonus rose 6.6% 3moy, matched expectations.

Full release here.

EUR/USD

Current level - 1.1832

During yesterday's trading session, the support level at 1.1770 was not breached and the single European currency appreciated against the U.S. dollar, reaching the resistance at 1.1840. If the resistance in question is not breached, the downtrend will most likely continue, leading to a move towards the support at 1.1770 and potentially 1.1700, if the sell-off gains steam. The main economic news during today's session that can have an impact on the market is the data on the initial jobless claims for the U.S. that will be announced at 12:30 GMT as well as Jerome Powell’s testimony in front of Congress regarding the current monetary policy of the Federal Reserve and the state of the economy (13:30 GMT).

USD/JPY

Current level - 109.95

After the support at 110.08 was breached, at the time of writing this analysis, the currency pair is trading below the mentioned level, signalling that a confirmation of the breach will follow. If the USD/JPY continues its downward movement and the support at 109.53 is successfully violated, we may expect a move towards the support at 109.20. However, it is possible that tradiging remains limited in the 109.53 - 110.08 range before the future direction of the pair can be confirmed.

GBP/USD

Current level - 1.3850

Yesterday’s test of the resistance zone at 1.3862 was unsuccessful and the sterling lost some ground against the greenback. If the pair stays below the mentioned level, the most likely scenario is for the Cable to head towards the next support at 1.3795, which is coming from the higher time frames. Only a violation of the next zone at 1.4000 could lead towards a change in the current sentiment.