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We were once again reminded that this is the era of political-driven trading after a surprise coalition formed in New Zealand. The euro and Swiss franc led the way while the kiwi lagged badly. On the Fed, the latest report is that Trump is leaning towards Powell. The long EURUSD Premium trade was closed for 110 pips, while the other EUR trade remains in progress, currently 110 pips in the green.

The anniversary of Black Monday had a fitting end for 2017 with the S&P 500 finishing higher after earlier worries were wiped away. The early tone was risk aversion on China concerns and a 2% fall in Hong Kong stocks.

NZDUSD had its bigggest 1-day drop in over 2 years after the Labour Party was able to throw together a coalition with the help of the Greens and First Party. That means Bill English will and his National Party – which got 44.4% of the vote – will be in opposition. The kiwi fell more than 150 pips on the surprise turn. More broadly, it's a reminder of the discontent in the air and the sudden willingness almost everywhere to try new things.

We contrast that with China where Communist Party leadership and Xi in particular are strengthening their leadership. In the long-term, it's a signal about the rise of China and emerging markets and the frustration in the developed world.

Meanwhile in the US, hopes for many voters for a radical change in monetary policy may be dashed. A Politico report said Fed Governor Jerome Powell is the favourite to replace Yellen. He's done little to publicly separate himself in more than 5 years at the Fed with most of his focus on regulation. The thinking is that he will be a continuation of the Bernanke-Yellen era, sticking with the same policies and prescriptions. The stock market responded with a small flurry at the end of the day and the US dollar dipped.

Looking ahead, news from the Party Congress is likely to be the main driver but Kuroda also speaks at 0635 GMT and later in North American trade, Canadian retail sales and CPI numbers are due.

The currency pair increased sharply as the Yen was punished by the Nikkei's rally. Price resumed the yesterday's impressive bullish candle and stays above some important levels, a valid breakout will signal a further increase in the upcoming period.

The Yen dropped surprisingly today as the Nikkei stock index plunged in the last hours from the 21512 today's high. JP225 squeezed a little after the massive drop, I've said in the last days that we may see a minor correction on the short term.

The Yen increased in the morning, even if the Japanese trade surplus dropped unexpectedly, from 0.31T to 0.24T, much below the 0.31T estimate. The Japanese All Industries Activity increased only by 0.1% in August, less versus the 0.2% estimate. On the other hand, the Euro increased also versus the Cable and versus the greenback today.

The rate failed to reach and retest the upper median line (UML) of the major ascending pitchfork and now climbed above the outside sliding line (SL) of the ascending pitchfork and above the red uptrend line. The next target will be at the 50% Fibonacci line (ascending dotted line) and higher at the median line (ml) of the black ascending pitchfork.

Remains to see what will happen in the upcoming period because a Nikkei's correction will force the yen to increase. We may still have a Rising Wedge pattern if the rate will slip below the red uptrend line and below the SL.

The GBP/JPY moves sideways on the short term around the 148.46 static support (resistance turned into support). The Yen increased versus the Cable today also because the Nikkei stock index plunged after the impressive rally. Remains to see what will really happen on the JP225 because a further drop will send the Yen much higher versus its counterparts. GBP/JPY will increase further if will stabilize above the 148.46 level.

USD/CAD moves sideways on the short term and looks determined to challenge the median line (ml) of the blue ascending pitchfork again. Now is pressuring the 1.2460 level and only a rejection will signal another upside momentum. Price remains steady even if the USDX plunged today and reached new lows. The perspective is still bullish as long as is trading above the mentioned support levels, but a valid breakdown will confirm a larger drop.

Gold has rebounded on Thursday, after three straight losing sessions. In the North American session, the spot price for an ounce of gold is $1287.74, up 0.54% on the day. On the release front, unemployment claims fell to 222 thousand, well below the estimate of 240 thousand. Manufacturing data was also strong, as the Philly Fed Manufacturing Index jumped to 27.9, crushing the estimate of 21.9 points. On Friday, the US publishes Existing Home Sales and Fed Chair Janet Yellen speaks at an event in Washington.

The markets are keeping a close eye on who will replace Janet Yellen as head of the powerful Federal Reserve. Yellen is due to finish her 3-year term in February 2018. Yellen is apparently interested in serving a second term, but President Trump is looking at other options. Trump has not been complimentary towards Yellen, although it's hard to argue that Yellen has not done an admirable job. Yellen has ended quantitative easing, raised interest rates and started to unwind the Fed's balance sheet. Trump's shortlist includes Jerome Powell, Kevin Warsh and John Taylor. Trump may lean towards Taylor, an economist who is considered more hawkish on policy than Yellen. Under Taylor, interest rates would likely move substantially higher than the current 1.25%, and a rate hike early in 2018 could strengthen the US dollar.

The Federal Reserve is on track for a third and final rate hike in 2017. Fed Chair Janet Yellen has sounded positive about the economy and says that she expects inflation to move higher. The markets have picked up on this message, and the odds of a December hike have jumped to a sizzling 91 percent. Just one month ago, the odds were 50-50 that the Fed would raise rates at the December meeting. Low inflation levels have been a key reason that the Fed has been reluctant to raise rates, but policymakers insist that inflation will move closer towards the Fed's inflation target of 2 percent.

The British pound is showing slight losses in the Thursday session. In North American trade, GBP/USD is trading at 1.3175, down 0.22% on the day. On the release front, British retail sales declined 0.8%, well below the forecast of -0.1%. In the US, unemployment claims plunged to 222 thousand, well below the estimate of 240 thousand. Manufacturing data was also strong, as the Philly Fed Manufacturing Index jumped to 27.9, crushing the estimate of 21.9 points. On Friday, the UK releases Public Sector Net Borrowing, with the deficit expected to climb to GBP 5.7 billion. The US will release Existing Home Sales and Fed Chair Janet Yellen speaks at an event in Washington.

The British consumer is feeling squeezed, with inflation running above wage growth. Although Britain's labor market remains tight, strong employment picture has failed to translate into strong wage growth. This is even more perplexing in the case of the UK, where inflation is running at clip of 3 percent, well above the Bank of England's target. When inflation is taken into account, wages actually declined 0.4% compared to a year ago. Consumer are also facing more expensive imports, with the British pound losing 12 percent in value since the Brexit vote in June 2016. September retail sales reflected a downturn in consumer spending, with a sharp decline of 0.8 percent, the highest decline since May. The BoE is widely expected to raise rates at the November 2 meeting, but some BoE policymakers remained concerned that the economy is showing signs of weakness and a rate hike should be postponed.

Are the Brexit talks dead in the water? The two sides have little progress to show after several rounds of negotiations. Prime Minister Theresa May is keen to talk trade with the Europeans, but the latter have conditioned trade talks on progress being reached on a number of issues, such as Britain's payment when it leaves the European Union, the status of the border with Northern Ireland and the jurisdiction of the European Court of Justice on European citizens living in the UK. The two sides remain far apart on all of these issues, and each party has criticized the other for lack of flexibility The lack of progress means that the possibility of a 'hard Brexit', in which Britain would leave with no deal being reached, is growing. BoE Governor Mark Carney acknowledged on Tuesday that the Bank has made contingency plans in case there is no agreement. However, British businesses are lobbying hard for an agreement, and want a 2-year interim period, such as a temporary customs union with the EU, in order to soften the blow of leaving the EU.

The markets are keeping a close eye on who will replace Janet Yellen as head of the powerful Federal Reserve. Yellen is due to finish her 3-year term in February 2018. Yellen is apparently interested in serving a second term, but President Trump likely has other ideas. Trump has not been complimentary towards Yellen, although Yellen can point to an impressive resume. She has ended quantitative easing, raised interest rates and started to unwind the Fed's balance sheet. Trump's shortlist includes Jerome Powell, Kevin Warsh and John Taylor. Trump may lean towards Taylor, an economist who is considered more hawkish on policy than Yellen. Under Taylor, interest rates would likely move substantially higher than the current 1.25%, and a rate hike early in 2018 could strengthen the US dollar.

The common currency resumed positive dynamics following the Spanish Prime minister's comments on the possible limitation of Catalan autonomy due to the Spanish constitution. The decision about these limitations may be taken as early as this Saturday. Investors mostly ignored positive news from the US where the number of initial unemployment claims decreased to 222,000 against the 240,000 forecasted and the Philly Fed Manufacturing index which grew to 27.9 in October, compared to 23.8 in the previous period. The growth potential of the euro is likely to be limited by tensions around the events in Catalonia and also with the possibility of another round of monetary tightening in the US in December. Tomorrow traders are likely to pay attention to news on the current account balance in the Eurozone.

The bulls were not able to push the aussie quotes higher despite positive data from the labour market in Australia. The unemployment rate fell by 0.1% in September to 5.5% and the number of employed increased by 19,800 compared to the 14,100 forecasted. Data from Australia's major trading partner also cheered the aussie bulls. Industrial production growth in China accelerated to 6.6% in August which is 0.6% more than in July and 0.2% above the average prediction. There was a slight slowdown in Chinese economic growth to 6.8% in the third quarter which is 0.1% less than in the second quarter.

The USD/JPY showed a confident descending move on the background of rising tensions in Spain and due to the threat of a conflict between the US and North Korea. The trade balance in Japan reduced to 0.24 trillion yen in September compared to 0.31 trillion yen in August, but this result was not able to change the mood of the market as it sought out a safe haven in the yen.

EUR/USD

The EUR/USD price left the limits of the local descending channel and was able to break through the resistance at 1.1825. This is forming the stimulus for continued price growth with the closest targets at 1.1925 and 1.2000. The RSI on the 15-minute chart is growing but has not reached the overbought zone yet indicating that the upward impulse is not exhausted. In case of a fall resuming, the quotes may return to 1.1750.

AUD/USD

The AUD/USD keeps testing the resistance level at 0.7870. In case of its breaking and overcoming 0.7900, the bulls are likely to push the quotes higher up to 0.8000. On the other hand, in order to change the current positive trend to negative, the price has to leave the boundaries of the channel and break through the local low mark at 0.7820. The immediate goals in this scenario will be 0.7740 and 0.7700.

USD/JPY

The USD/JPY demonstrated a powerful descending impulse after some consolidation near the 113.00 mark. In case of maintaining the current movement, the next target will be 111.70 and breaking through this line is likely to force the bears to pull the quotes down to 111.00 and 110.30. After a strong fall, we are likely to see an upward rebound on the background of profit taking.

GBPUSD can be trading at the start of a three-wave recovery, which we see it as bigger degree wave two. Ideally a five-wave decline had fully unfolded within the previous blue wave one, and now a three-wave temporary rise may follow on the pair. Possible resistance for the upcoming wave ii can be around the Fibonacci ratio of 61.8 and near the former swing high of wave iv) at 1.3228 level.

GBPUSD, 1H

Inflation and retail sales numbers out of Canada on Friday will be scrutinized for clues to a possible year-end rate hike by the Bank of Canada, following recent remarks from BoC Governor Stephen Poloz that suggested a pause after two consecutive hikes.

The Canadian dollar has rallied by over 7% against its US counterpart this year as growth in the country has exceeded expectations, prompting the central bank to raise rates by a total of 50 basis points to 1.00%. However, inflation remains subdued despite the strengthening economy. Headline CPI stood at 1.4% year-on-year in August and is expected to rise to 1.6% in September. The Bank of Canada's core measure of inflation is even lower, standing at just 0.9% in August.

Retail sales on the other hand have been buoyant, reaching a 1½-year high of 7.8% y/y in August, helped by a steady decline in the number of people out of work. In July, retail sales grew by a bigger-than-expected 0.4% month-on-month and another solid month is forecast for August. Friday's figures are expected to show August retail sales rising by 0.5% m/m.

The loonie should gain some support from the CPI and retail sales data, as it would likely reinforce expectations that more rate hikes are on the way. The Canadian currency has come under pressure this week on fears that the United States would pull out of NAFTA after a contentious round of talks for renegotiating the trade agreement. Its losses were halted at the support level of C$1.26 per US dollar.

A stronger-than-forecast set of figures could push the loonie back towards September's two-year high of C$1.2060 per US dollar. A clearer picture on the probability of further rate hikes should emerge from next week's BoC policy meeting on October 25. No change in rates is forecast at the October meeting but the December 6 meeting remains very much in play, with the market implied odds of a rate hike hovering just below 50%.

USD/CHF - 0.9750

Most recent candlesticks pattern : N/A

Trend                                    : Up

Tenkan-Sen level                  : 0.9772

Kijun-Sen level                    : 0.9785

Ichimoku cloud top                 : 0.9808

Ichimoku cloud bottom              : 0.9764

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite rising to 0.9837, the greenback failed to penetrate this resistance and has retreated sharply, dampening our bullishness and signaling recent upmove is not ready to resume yet, hence near term downside risk remains for weakness to 0.9730 support, however, as broad outlook remains consolidative, reckon downside would be limited and support at 0.9705 should hold from here, bring rebound later.

On the upside, expect recovery to be limited to the Kijun-Sen (now at 0.9785) and reckon 0.9810 would hold and bring another decline later. Above 0.9810 would bring a retest of said strong resistance at 0.9837 but break there is needed to confirm recent rise from 0.9421 low has resumed for headway to 0.9870 and possibly towards 0.9900. As near term outlook is mixed, would be prudent to stand aside for now.