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Market Update despite Low Volumes...

EUR/USD

Euro is still moving above the level of 1.3344 and may continue growing up towards the target at 1.3480. We think, today the price may test the level of 1.3344 again from above and then continue moving towards the above-mentioned target. Later, in our opinion, the pair may start a descending correction to reach the level of 1.3200.

GBP/USD

Pound continue moving downwards with the target at 1.5460. After reaching it, the price may return to the level of 1.5588 to test it from below. If the market rebounds from it, the pair may start a new descending movement to reach the target at 1.5400. However, if the market stays above the level, the pair may start forming a new ascending structure towards the level of 1.5890.

USD/CHF

Franc is still moving downwards with the target at 0.9110. We think, today the price may reach it and then return to the level of 0.9250. Later, in our opinion, the pair may grow up to reach the target at 0.9400 and then continues falling down.

USD/JPY

The USD/JPY currency pair reached the target of its first descending structure. We think, today the price may reach a new minimum at the level of 96.50 and then form a correction to return to the level of 98.00. Later, in our opinion, the pair may start a new descending movement towards the next target at 95.00.

AUD/USD

Australian Dollar continues moving downwards. We think, today the price may reach the level of 0.8860, form a slight correction, and then continue falling down towards the main target of this structure at 0.8800. Later, in our opinion, the pair may start forming an ascending correction.

GOLD

Gold is extending the fifth wave; the market has already reached a local target of this extension. We think, today the price may form a descending structure towards the level of 1365 to test it from above and then complete this extension by forming one more ascending structure towards the level of 1455. Later, in our opinion, the instrument may start a fast descending movement to reach the target at 1280.

Market Update

EURUSD

The Euro extended pullback from 1.3450 high and tested pivotal 1.3310/00 support, higher platform / Fibonacci 61.8% retracement of 1.3205/1.3450 upleg, where the price found footstep. Subsequent bounce to 1.3370 zone diminished immediate downside risk, with price action consolidating within 1.3330/70 range. However, near-term studies are losing momentum and keep the downside risk in play. Conversely, regain of 1.3400 handle, required to confirm base and re-focus 1.3450 target. Daily studies remain positive and keep the upside favored.

Res: 1.3373; 1.3400; 1.3427; 1.3450
Sup: 1.3330; 1.3300; 1.3263; 1.3232





GBPUSD

Cable enters near-term consolidative mode, after pullback from fresh high at 1.5716 found footstep at initial support at 1.5670 zone, where 55DMA contained dips. Prevailing negative tone on near-term technicals, sees the downside vulnerable, with slide below 1.5670/60 handles, seen as a trigger for stronger corrective action towards psychological 1.5500 support and 1.5481, Fibonacci 38.2% of 1.5100/1.5716 upleg. Alternatively, sustained break above 1.5600 barrier and regain of minimum 1.5650/60 handles, would signal an end of corrective phase and shift near-term focus higher.

Res: 1.5600; 1.5627; 1.5650; 1.5700
Sup: 1.5561; 1.5517; 1.5500; 1.5481




USDJPY

The pair remains well supported and extended recovery rally from 96.90 low, through key near-term barrier at 98.64, 15/08 high. This also confirms higher base at 97 zone, with positive near-term studies favoring eventual push through psychological / bear-channel resistance at 99.00 zone. Break here is required to give an initial signal of completion of weekly bullish pennant and expose another significant barrier at 100.00. Overbought near-term studies, however, suggest a pause in current rally, with immediate supports at 98.64 and 98.30, ahead of psychological 98.00 support, above which corrective dips should be ideally contained.

Res: 99.00; 99.50; 99.76; 99.93
Sup: 98.80; 98.64; 98.30; 98.00





AUDUSD

The Aussie remains under pressure, as fresh extension of downleg from 0.9332 peak, retraced 76.4% of 0.8846/0.9332 ascend. Brief corrective action sees not much upside potential, as near-term studies are weak. Initial barrier lies at 0.9045, Fibonacci 38.2% retracement of 0.9232/0.0.8930, ahead of 0.9081/0.9100, 50% retracement / lower platform, where stronger rallies should be capped, as larger picture bears remain fully in play.

Res: 0.9045; 0.9081; 0.9100; 0.9131
Sup: 0.8970; 0.8930; 0.8918; 0.8900

Eur/Usd NOw where?

On the 4h chart we are still tracking wave C), with sub-wave 5 in progress on the hourly chart. Divergence on MACD and Elliott Wave Count suggest that current rally is in low volume and momentum which is evidence of approaching turning point. Resistance zone is at 1.3400-1.3480.
EURUSD 4h - Elliott Wave Analysis Chart

EURUSD 1h- Elliott Wave Analysis Chart

Waves give us a clue

EUR/USD

If our assumption about a large descending zigzag (E) of [B] is correct, then wave B of (E) of [B] may be taking the form of a long horizontal correction. Later this correction may be followed by a descending movement inside the second part of zigzag, wave C of (E) of [B].

We can’t exclude a possibility that wave B of (E) of [B] is taking the form of horizontal triangle or a long horizontal correction. In this case, the price is expected to start forming a descending zigzag [d] of B.

We can’t exclude a possibility that Euro is finishing an ascending correction (b) of [d], which may be followed by the second “leg” of zigzag [d], wave (c) of [d].

GBP/USD

The price continues forming a possible descending zigzag Y of (D); its correction [b] of Y of (D) may take the form of horizontal triangle, which may be followed by a descending movement inside the second part of this zigzag, wave [c] of Y of (D).

We can’t exclude a possibility that wave [b] of Y of (D) is taking the form of horizontal triangle. It looks like right now the price is finishing an ascending zigzag (c) of [b] of Y of (D). If this assumption is correct, later the price is expected to form a descending zigzag (d) of [b] of Y of (D).

New wave structure at the H1 chart implies that Pound is completing an ascending zigzag (c) of [b], which may be followed by a descending zigzag (d) of [b].

USD/CHF

We can’t exclude a possibility that Franc is forming an ascending zigzag C of (4) and its correction [b] of C of (4) is taking the form of horizontal triangle.

If our assumption about horizontal triangle [b] of C of (4) is correct, then right now the price is forming an ascending zigzag (d) of [b] of C of (4) and completing a local descending correction b of (d) of [b] of C of (4).

We can’t exclude a possibility that the pair is completing a local descending correction b of (d) of [b], which may be followed by wave c of (d) of [b] of zigzag (d) of [b].

USD/JPY

We may assume that the price is completing an ascending wedge (A) of [4], which may be followed by a large descending correction (B) of [4].

We may assume that the price is forming an ascending zigzag (d) of [iv] of 5 of a long horizontal correction [iv] of 5.

We can’t exclude a possibility that the price is finishing a local descending correction b of (d) of [iv] of 5, which may be followed by an ascending wave с of (d) of [iv] of 5.

Eur/Usd testing.....

EUR/USD

A final swing higher is still anticipated.

• EUR/USD needs to break under 1.3266 (07/08/2013 intraday low) to begin to weaken the current bullish structure that is in place. In the meantime we continue to expect a retest of the key high at 1.3417 (19/06/2013).
• A push under 1.3190 (02/08/2013 low) is required to negate the medium-term bullish bias that we have in place.
• If a retest, or break over, 1.3417 can be achieved, the region between this key high and the annual high is expected to offer a fair degree of resistance and is likely to offer a reasonable short entry opportunity.

Await fresh signal, with a bias to sell higher.

GBP/USD

Further swing higher anticipated.

• GBP/USD continues to look bullish in the midterm time frame. The minor set back that we have witnesses since the recent peak last Thursday is seen as a correction in a rising trend. • With this in mind focus turns to the multimonth falling channel that has contained trade for the last two years. A return to the resistance of this technical structure is now favoured, currently near 1.6150.
• Back under 1.5102 (02/08/2013 low) is required to dampen the current bullish bias that is in place.

Look to buy lower.

USD/JPY

Near-term structure remains bearish.

• USD/JPY continues to exhibit a short-term structure that would be consistent with further weakness in the coming days, with the 200 day moving average still in focus. However, we do note that should this level be tested, we would expect strong support between the average and the key low at 90.88 (25/02/2013 low).
• The near-term is dominated by the push under the 61.8% retrace of the 93.79 - 101.53 rise which opens up a return to the low at 93.79 (13/06/2013), followed by a retest of the region close to the 200 day moving average, currently at 93.50.
• A break over the recent high at 99.95 (02/08/2013 high) is required to turn the bias bullish again, in favour of a return to 101.53 (08/07/2013 high).

Await fresh signal.

USD/CHF

Over 0.9390 is required to strengthen the outlook.

• USD/CHF continues with its minor recovery after finding initial support on long-term trend line support last week. This bounce is viewed as a correction in a mature mid-term falling trend. A push back over 0.9390 (02/08/2013 high) is required to negate the current bias.
• We also note that a full retrace to the annual low at 0.9022 (02/01/2013) is becoming more likely.
• Should the 0.9022 region be tested over coming weeks, then this is deemed to be a strong region of potential support, where long strategies can also be formulated.

Await fresh signal.

USD/CAD

The anticipated lower high may now be in place.

• USD/CAD appears to have posted a lower high at 1.0445 (07/08/2013). As mentioned in recent Daily Technical Reports, this is what we have been anticipating, for a swing back lower to test the area closer to the 200 day moving average and long term trend line support from 0.9633 (14/09/2012 low). This process is now likely underway, with a return to the 1.0150 region expected.
• In the longer term, the key resistance at 1.0870 (02/11/2009 high, see also the long-term declining trendline from the October 2002 peak) is expected to cap the medium-term upside potential. However, as long as the support at 1.0137 (14/06/2013 low, see also the rising trendline from 0.9633 (14/09/2012 low) in a daily chart) holds, we would still favour a mild medium-term bullish bias.

Sell limit 3 at 1.0400, Objs: 1.0300/1.0200/1.0150, Stop: 1.0500.

AUD/USD

Initial resistance seen near 0.9200.

• AUD/USD has seen initial resistance close to 0.9200 as anticipated last week, reaching 0.9221 so far today. We now look for a phase of weakness to re-assert, with scope for a move back down to the 0.8848 region.
• We are still of the view that we are in the midst of a lengthy consolidation phase in the 0.8848 - 0.9319 range. A break under 0.8848 is the favoured resolution.
• If the current recovery phase were to gain traction and break out of the above mentioned range, strong resistance would be anticipated in the 0.9500 - 0.9600 zone, where short strategies would be strongly favoured.

Await fresh signal.

GBP/JPY

Maintains foothold above 148.00.

• GBP/JPY is holding above the 148.00 region for now. The 148.00 level is now seen as key to further potential upside, thus if a break under this level can be achieved, a swift push towards the 200 day moving average, currently at 144.86, would be anticipated.
• While above 148.00 our bias remains bullish, with scope for a minimum return towards the 156.77 (13/05/2013) annual high.
• In the longer term, we favour a rise towards the strong resistance at 163.09 (07/08/2009) as long as the key support area between 146.46 (16/04/2013 low) and 145.88 (15/03/2013 high) holds. We do not expect a break of this resistance in the coming months though.

Look to buy again.

EUR/JPY

Eventual weakness seen last week near 129.34. More favoured to follow.

• EUR/JPY eventually met supply close to the old low at 129.34 (31/08/2013) which now appears to have reverted to resistance. Structure present since the recent high at 132.74 (24/07/2013) is suggestive of a further swing lower towards the June low at 124.97 (13/06/2013).
• In the longer term, we favour the formation of a higher low versus 118.73 for a further rise towards the strong resistance at 139.22 (05/06/2009 high).

Await fresh signal.

EUR/GBP

Near-term consolidation favoured to resolve lower.

• EUR/GBP is consolidating after the recent bout of sharp weakness. This narrow consolidation is favoured to resolve lower into what we see as an evolving correction to the downside. 0.8770 (01/08/2013 high) is likely the lower high that we had been anticipating, with scope for a mediumterm return to the 200 day moving average, currently at 0.8442 and then on towards 0.8398 (26/04/2013 low).
• Price action seen since the annual high at 0.8815 is deemed to be part and parcel of a larger corrective phase which may eventually retest under the 0.8398 (26/04/2013 low) region.

Look to sell.

EUR/CHF

Consolidates ahead of region of strong support.

• EUR/CHF remains in a region where support is anticipated. The ideal location for long strategy entry is deemed to be close to the 200 day moving average which currently rests at 1.2259.
• The recent price action off the 1.2466 high (09/07/2013) is deemed to be corrective in nature and we now look for a resumption of the larger rising trend which is shown in the daily chart by a bullish channel formation.
• In September 2011, the SNB put a floor at 1.2000 in EUR/CHF, which is expected to hold in the medium-term. We generally favour further longer term upside for EUR/CHF towards the psychological threshold at 1.30.

Long 3 at 1.2329, Objs: 1.2660/1.2985/1.3195, Stop: 1.1998 (Entered: 2013-01-23).

GOLD

Break out of daily falling channel suggests scope for a basing formation.

• Gold has managed to break the resistance of the daily falling channel formation that we noted in last weeks reports. This now reveals a clear vulnerability of the bear trend that has been in place for a number of months. A break over 1348.65 (24/07/2013 high) would likely trigger a substantial extension higher, as weak shorts get squeezed out.
• If a retest of the recent low can be achieved then this is likely to be associated with a lack of downside momentum and may thus also equate to a reasonable long entry zone.

Await fresh signal.

SILVER

Break over 20.63 strengthens outlook.

• Silver has now broken over the key 20.63 high (23/07/2013). This is a clear indication of strength and an early sign of an evolving basing formation. This move also constitutes a break higher out of the old trading range that we highlighted last week. A continuation of this recent strength is now anticipated.
• A rise back towards the old floor and close to the 200 day moving average is now possible over coming sessions.

Gold surges

After losing for six consecutive days, the gold futures rebounded 2.14 percent in the past two days to end at $1,310.10 on Thursday. The prices jumped a further 0.3 percent during Asia Friday morning. On the contrary, the Dollar Index has dropped five days in a row, falling 1.14 percent this week, helped by the 2.35 percent appreciation of Yen against the Dollar. In the past two days, the S&P 500 Index was flat while the Euro Stoxx 50 Index rose 0.94 percent.

Demand Rebound in China and Bullish U.S. Data

The July China exports jumped 5.1 percent year-on-year versus the expected two percent while the imports surged 10.9 percent versus the expected one percent. The trade balance declined to $17.82 billion from $27.12 billion in June. Bloomberg highlighted that the exports to the U.S. and the EU markets have increased the first time since February. The higher than expected import growth indicates a Chinese domestic demand recovery, which will bode well for gold demand. The stronger than expected PMI data from the U.S. and Europe will likely support Chinese trade data going forward. Bloomberg also reported that the July Consumer Comfort Index in the U.S. rose to a five-year high while the four-week moving average of the jobless claims reached 335,500, the lowest level since November 2007.

Dollar Weakness

After reaching a high of 84.58 on 9 July, the Dollar Index has lost 4.26 percent. Year-to-date, the Dollar Index has risen 1.5 percent. However, the 30-day historical volatility of the index has more than doubled from 4.14 percent at the end of 2012 to 9.20 percent currently, indicating that the market has been swayed by the mixed messages coming out of the FOMC meetings. The dollar weakness has led the traders to seek alternatives such as gold. Nevertheless, sentiment towards gold remains weak as the gold-backed ETP holdings fell to a new low since May 2010 on 7 August. However, ETP holdings in countries such as Japan and India have stayed constant when gold prices plunged this year, signifying that Asia and emerging markets will help shape the future gold demand.

What to Watch

This Friday, we will watch the July China inflation and industrial production data. We will also monitor the June E17 industrial production and the July U.S. retail sales on 13 August, the BOE bank rate vote and the preliminary Q2 GDP of E17 on 14 August, the July U.S. industrial production and the U.S. July CPI on 15 August as well as the U.S. July housing starts on 16 August.

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