Mid-Day Report: Dollar Weakens as Consolidation Continues, FOMC Minutes Next
Dollar is sharply lower against European majors in early US session as consolidation continues. Technically speaking, as discussed in our technical outlook reports, more upside is still expected in EUR/USD and GBP/USD. Meanwhile, USD/CHF retreats sharply after edging higher to 1.2082 earlier today. Dollar index’s dip below 4 hours 55 EMA argues that some more pull back should be seen before resuming recent rally. Elsewhere, Crude oil, rides on dollar’s retreat and rebounds strongly from intraday low of 53.66 to above 55.6. Focus will now turn to FOMC minutes for inspirations on further volatility. Though, ,markets are pricing in 90% chance of another 50bps cut from Fed on Dec 16 and the minutes will likely have little impact to this view based on current economic and inflation outlook. Read the rest of this entry »

Daily Pivots: (S1) 1.1983; (P) 1.2014; (R1) 1.2062

USD/CHF’s rally is still in progress and climbs further to 1.2061 today so far. Intraday bias remains on the upside as long as 1.1965minor support holds. Current rise from 1.1208 is still expected to extend to next target of 100% projection of 1.0693 to 1.1746 from 1.1208 at 1.2261. On the downside, below 1.1965 will indicate that an intraday top is in place and bring retreat to 4 hours 55 EMA (now at 1.1875). Also, considering bearish divergence condition in 4 hours MACD, this will be an early alert that a short term top is formed and focus will then turn to 1.1549 support.

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Daily Pivots: (S1) 1.4609; (P) 1.4781; (R1) 1.4907

GBP/USD’s recovery from 1.4557 extends further today and with 4 hours MACD staying well above signal line, an intraday low should be in place. Some more consolidation is in favor. Above 1.4557 will encourage stronger recovery towards 4 hours 55 EMA (now at 1.5327). But upside should be limited below 1.5600 support turned resistance and bring fall resumption. On the downside, below 1.4557 will target mentioned 100% projection of 1.7630 to 1.5269 from 1.6671 at 1.4310.

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GBP/USD’s down trend resumed last week and dived to as low as 1.4557 before turning sideway. Initial bias remains on the downside this week as long as 1.5080 minor resistance holds and further fall is expected to 100% projection of 1.7630 to 1.5269 from 1.6671 at 1.4310. On the upside, above 1.5080 will turn intraday outlook neutral and bring recovery to 4 hours 55 EMA (now at 1.5428). But upside should be limited below 1.5600 support turned resistance and bring fall resumption.

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Daily Pivots: (S1) 1.5700; (P) 1.5949; (R1) 1.6147

GBP/USD’s rebound from 1.5603 was limited by 4 hours 55 EMA (now at 1.6144) and weakens again. Intraday outlook is turned neutral again. Short term outlook is mixed with consolidation that started at 1.5269 still in progress. Nevertheless, below 1.5603 will encourage a retest of 1.5269 low. On the upside, above 1.6198 will encourage a retest of 1.6671 resistance. But after all, note that the path of consolidation will remain un predictable as long as 1.5269 low remains intact.

In the bigger picture, while rebound from 1.5269 is strong, there is no confirmation of a medium term bottom yet. There are some different interpretations of the structure of the whole down trend from 2.1161, with different projection targets. The most bearish case is that fall from 2.0158 is the third wave in whole fall from 2.1161 while fall from 1.8668 is the third wave of the fall from 2.0158. In other words, GBP/USD is just in the middle of the whole down trend from 2.1161. The least bearish case is that the fall from 1.8668 is the fifth wave of the whole five wave decline from 2.1161 and is nearing an end. Nevertheless, in any case, the fall from 1.8668 needs to complete a five wave structure before considering that a medium term bottom is formed.

Having said that, medium term outlook will remain bearish as long as 1.6786 support turned resistance holds and a new low should be made before making a medium term bottom. However, above 1.6786 will indicate that fall from 1.8668 has possibly completed. It will also be the first alert that a medium term bottom is in place and break of 1.7630 will confirm. In such case, some large scale consolidations will follow.

Daily Pivots: (S1) 117.57; (P) 121.09; (R1) 127.8

EUR/JPY’s rebound from 113.63 extended further to as high as 127.29, touching mentioned 4 hours 55 EMA. At this point, intraday bias remains on the upside as long as 118.13 minor support holds and further rebound could not be ruled out. Though, upside is still expected to be limited below 132.18 resistance and bring down trend resumption again. On the downside, below 118.13 will flip intraday bias back to the downside for retesting 113.63 low. Break will indicate recent fall has resumed for 200% projection of 169.96 to 147.03 from 156.84 at 110.98 next.
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Daily Pivots: (S1) 1.3917; (P) 1.3959; (R1) 1.4037

EUR/USD recovers after being supported at 1.3881, slightly above key medium term support at 1.3851 (50% retracement of 1.1639 to 1.6038 at 1.3839). Touching of 1.4093, with 4 hours MACD staying above signal line indicates that an intraday low is in place. Outlook is turned neutral for the moment. More recovery could be seen towards 4 hours 55 EMA (now at 1.4244). But consolidation should be relatively brief as long as 1.4428 resistance holds. Break of 1.3851 will target 1.3360 support.

However, note bullish convergence condition in 4 hours MACD and RSI, further break of 1.4428 will indicate that a short term bottom is finally formed. In such case, much stronger rebound should be seen to correct the whole fall from 1.6038 and should send EUR/USD to 1.4908 resistance or above.

In the bigger picture, as mentioned before, the double top reversal pattern (1.6019, 1.6038) serves as an important signal of completion of medium term rise from 1.1639 (05 low). Last week’s break of key support level of 1.4309, (38.2% retracement of 1.1639 (05 low) to 1.6038 at 1.4358, 61.8% retracement of 1.3262 to 1.6038 at 1.4322) and medium term trend line support (1.1825, 1.2483, now at 1.4408) further support this view. Weekly MACD turned negative too. Much deeper medium term fall is now expected to support zone of 1.1639 and 1.3668. On the upside, while some rebound could be seen, sustained break of double top neckline resistance at 1.5284 is needed before considering that decline from 1.6038 has completely finished. Otherwise, another fall is still expected even in case of strong rebound.

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Cable’s down trend reaccelerated further to as low as 1.7537 last week. From a short term angle, initial bias remains on the downside this week as long as 1.7861 minor resistance holds this week. Further decline is expected to next target of 161.8% projection of 2.1161 to 1.9337 from 2.0158 at 1.7207. On the upside, above 1.7861 will indicate that an intraday low is in place and bring recovery to 4 hours 55 EMA (now at 1.8011) and above. But short term outlook will remain bearish as long as 1.8794 resistance holds.

In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress and should be targeting next key support at 1.7047 first. On the upside, break of 1.8794 resistance will indicate that a short term bottom is finally formed and bring stronger rebound and longer consolidation. But upside should be limited well below 1.9337 support turned resistance and bring another fall.

In the longer term picture, last week’s development further confirms that a long term reversal has happened at 2.1161 with monthly MACD turning negative and RSI diving into oversold region. The impulsive nature and the scale of the fall from 2.1161 also provides strong evidence to the case of the start of a long term down trend. Next downside target will be 61.8% retracement of 1.3680 to 2.1161 at 1.6538. Break of 2.0158 resistance is needed to invalidate this view.

Also, while it’s still a bit early to draw a conclusion, one must be aware of the possibility that whole multi decade advance from 1.0463 (85 low) has already completed with three waves up to 2.1161. If this is the case, the current fall from 2.1161 is just the start of a long term down trend that should eventually bring cable through 1.3681 (01 low). The development for the rest of the year will be interesting.

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