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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Technicals in FX

Technical Analysis

EUR/USD

EUR/USD seems to be range bound

“Euro-area domestic demand later this year and in 2014 should be supported by the accommodative monetary-policy stance as well as the recent gains in real income owing to generally lower inflation.”
- ECB President (based on Bloomberg)

• Pair’s Outlook
  For the past 6 days pair is trading in rather tight range—between monthly R1 and weekly PP. Although short and long term technicals indicate strength of the pair it does not seems there is a strong enough catalyst in the market which could ignite a rally. Bounce for weekly PP and some short term rally could be expected, but it is unlikely advance above 1.339, at least for the time being. Dips should find support with 1.318.
• Traders’ Sentiment
  It seems that bears are pushing bulls back out of the market since share of bears in the market increased by 2% and at the moment they account for 63% of market participants. In addition to this, share of pending long orders decreased by 4% and is at 54% gauge today.

GBP/USD

GBP/USD dips to 20-day SMA
"There is now no doubt that consumer confidence has recovered strongly from the unparalleled trough of the last five years. It is the longer-term changes that mean far more than one single month's figures, and the current trend is definitely upwards."
- GfK (based on Reuters)

• Pair’s Outlook
  Pair received a bearish impetus from the Fibo 61.8% (mid June to beginning of July move) few days ago. It depreciated by 50 pips (on the open to close basis) then and almost 100 pips yesterday until it found support with the 20-day SAM where the pair is trading at the moment. In any case, pairs outlook remains bearish as 1.5191/119 seems wont be able to provide enough of a support.
• Traders’ Sentiment
  Open positions are changing hands rather often between the bears and the bulls lately. Bears now account for 59% of market participants. That is 4% less than yesterday. Bulls, however, cant manage to swing the distribution of pending orders in their advantage—it remains at 48% gauge.

USD/JPY

USD/JPY trading at monthly PP
“From here, traders, like the Fed, will be looking to the data to suggest the timing of the next move.”
CMC Markets (based on MarketWatch)

• Pair’s Outlook
  After a 200 pip dip in the end of the last week, pair found support with monthly PP and has been trading around it for the past 4 days. It seems that such neutrality is likely to persist further, although, judging from market sentiment dynamics, we might see some short term rallies which should be capped by 99.6/100.00 JPY. In case pair receives bearish impetus and 97.5 JPY fails to provide enough of a support, there is a chance it might trail down to 94 JPY.
• Traders’ Sentiment
  Bulls are maintaining a tight grip on the market—they account for 74% or market participants. However, for the first time in almost two weeks majority, even if slim, of pending orders (52%) are set to sell the greenback against the yen.

USD/CHF

USD/CHF remains at Fibo 23.6%

"It's another waiting day, we have a lot of important data points later in the week so people aren't going to change positions a lot today."
- J. Safra Sarasin (based on The Economic Times)

• Pair’s Outlook
  Similarly to some other pairs greenback-franc cross is trading in a rather narrow range for the past 5 days. However, short and medium term technicals point at weakness of the pair. In such case it could be sold off all the way to 5 month low at 91.3 cents. Short term rallies are rather unlikely, but, just in case, should be capped by the 94 cents.
• Traders’ Sentiment
  Situation in the market is remaining exactly the same for the third day in a row. Share of open long positions in the market holds at 72% level and pending long orders remain at 57% gauge.

What now for USD Dollar pairs?

EURUSD

The Euro remains well supported, as the price continues to channel higher and approaches next target at 1.3300, with weekly close just under the barrier. Friday’s Doji would signal further consolidation, before the price resumes larger rally that commenced from 1.2754, 09/07 low and targets 1.3414, 18/19 / 06 peaks. Positive technical s remains supportive for final push higher, with 1.3250/00 zone offering initial support and expected to protect the downside.

Res: 1.3300; 1.3325; 1.3400; 1.3414
Sup: 1.3250; 1.3220; 1.3200; 1.3164




GBPUSD

Cable ended Friday’s trade with Doji candle, as the price moved within 1.5350/80 consolidative range. However, positive tone dominates on lower timeframes studies and favors further upside. Clear break above 1.5400 barrier that was cracked on spike to 1.5433, is required to open 1.5476, 26/06 high and psychological 1.5500 barrier. Positively aligned daily studies are supportive, with Friday’s low at 1.5354, reinforced by 20DMA, offering initial support, ahead of psychological 1.5300 handle. Only loss of last week lows at 1.5262, would delay bulls.

Res: 1.5402; 1.5433; 1.5476; 1.5489
Sup: 1.5350; 1.5327; 1.5300; 1.5262




USDJPY

The Dollar/yen ended week in red, after repeated failure to hold gains above psychological 100 level, triggered fresh weakness. Friday’s extension lower that broke below 98.22, previous low, probed below 98.00 support. This completed daily failure swing and opens way for broader weakness. Break below important supports at 97.65/58, 50% retracement of 93.78/101.52 ascend / daily Ichimoku cloud base, is required to confirm bearish resumption from 101.52 and 100.85 highs and open 97.00, round-figure support and 96.74, Fibonacci 61.8% retracement, as daily indicators are attempting below their midlines. Negative tone prevails on lower timeframes, with the downside being favored, however, bears may be interrupted by corrective rally on oversold conditions.

Res: 98.33; 98.70; 99.00; 99.38
Sup: 97.62; 97.22; 96.95; 96.74




AUDUSD

The pair ended week during which the pair tested both, 0.9000/0.9300 near-term range borders, with positive tone prevailing on a bounce towards the upper boundary. Friday’s trading was seen as consolidation under the range top, as the price held above 0.9200 support. Positively aligned short-term studies keep the upside focused, with clearance of 0.9316/43 barriers, required to confirm bottom and commence recovery phase. Conversely, repeated upside rejection would signal further sideways trading and increase downside risk, if price falls below 0.9200/0.9150, Fibonacci 38.2% / 50% of 0.8997/0.9316 range.

Res: 0.9286; 0.9316; 0.9343; 0.9400
Sup: 0.9226; 0.9200; 0.9167; 0.9127