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USD stabilises despite faltering confidence

The US dollar experienced another broad-based sell-off last Friday amid disappointing inflation and retail sales data. Commodities currencies benefited the most of this renewed USD weakness as investors discounted an aggressive Fed rate path. The single currency rose 0.58% to 1.1875 before eroding gains and returning towards 1.1820 as market participants appeared reluctant to load long EUR position against the backdrop of political uncertainties across the European Union - mostly Catalan and Austrian situation.

Regarding the inflation in the US, the headline measure came in at 2.2%y/y versus 2.3% expected and 1.9% in August, while the core measure, which excludes the most volatile components, held stable at 1.7% versus an expected increase of 1.8%. The solid pick-up in the headline measure is mostly due to a surge in energy prices as motor fuel prices and fuel oil rose 13%m/m and 8.2%m/m, respectively. Food prices, on the other hand, remained roughly stable, increasing only 0.1%m/m. The increase in energy prices stemmed from the combination of two main factors. Firstly, oil prices have strengthened over the summer months amid shrinking oil inventories in US and efforts of OPEC producers to trim production in an attempt to boost oil prices. Secondly, the series of hurricanes that hit the Gulf Coast disrupted significantly oil production and also triggered widespread gas hoarding.

On Monday morning, however, the greenback got some colour back as fears eased. The US dollar erased almost completely Friday’s losses against the euro and the pounds, while the Aussie and the Kiwi consolidated previous gains. Investors don’t know where to stand against the backdrop of an uncertainty outlook on both side of the Atlantic. Indeed, the single currency has benefited extensively of the weakness in US inflation together with mounting speculations of the upcoming reduction of the ECB’s QE. Now that the EU is facing another political crisis, investors are reconsidering other alternatives.

Eurozone: Political worries increase

The single currency decreased after the market opening against the dollar. The Austrian Legislative Election brought new uncertainties. The young conservative leader Sebastian Kurz, an anti-immigration millennial, is about to become the new Austrian Chancellor next Sunday after his victory in the General Election. Yet he will likely open up to the far right in order to build its government. This reminds us of 2000 when Far-right entered the government. Yet it does not seem that the new government will be against the euro.

In Spain, tensions continue and Catalonia still has to declare unilaterally its independence. There are tensions within the independentists. Some believe that Catalonia is not ready yet for its independence. Madrid is now giving an ultimatum to Catalonians leaders. For the time being, companies are moving away from Catalonia, other entrepreneurs are opening account in bordering areas.

As a result, political tensions are strong in Europe. The Eurodollar pair lies below 1.18 and any news can trigger further political fears. We continue to believe that strongest uncertainties are not in centre stage at the moment but the Greek debt issue has definitely the potential to weigh on the single currency. The next ECB monetary policy is not at the moment the main driver even though markets have strong tightening expectations

EURUSD

The EURUSD had a bullish momentum last week topped at 1.1879 but closed a little bit lower at 1.1820. The bias is neutral in nearest term probably with a little bearish bias testing 1.1750 support area. A clear break and daily close below that area would expose 1.1670 support area which is the “neckline” of a “head and shoulders” formation as you can see on my daily chart below, which is a bearish reversal pattern. The major bullish trend remains valid but need a clear break and daily close above 1.1900 to potentially end the current bearish correction phase and resume the major bullish trend testing 1.2000 – 1.2090 area.

GBPUSD

The GBPUSD had a bullish momentum last week topped at 1.3337 after three consecutive bearish candle on weekly chart. The bias is neutral in nearest term probably with a little bearish bias as we have a bearish pin bar after rejection above 1.3330 key resistance as you can see on my daily chart below testing 1.3225 region. Overall I remain bullish but need a clear break above 1.3330 to reactivate my bullish mode retesting 1.3615 region.

USDJPY

The USDJPY had a bearish momentum last week bottomed at 111.68 following a false break above 113.20 key resistance and the appearance of a bearish pin bar as you can see on my daily chart below. The bias is bearish in nearest term testing 111.65. A clear break below that area would expose 111.00 – 110.65 support area. Immediate resistance is seen around 112.35. A clear break above that area could lead price to neutral zone in nearest term but only a clear break above 113.20 would stop the current short-term bearish bias. Overall I remain neutral.

USDCHF

The USDCHF was indecisive last week. The bias is neutral in nearest term. The bearish pin bar scenario remains valid but need a clear break below 0.9700 to continue the bearish scenario testing 0.9650 – 0.9590 region. Immediate resistance is seen around 0.9765. A clear break above that area could trigger further bullish pressure testing 0.9807/36 key resistance. Overall I remain neutral.

Copper future contract for December surged to three-year high at $3.2300 on Monday, boosted by strong Chinese data which signal robust growth of metal's world top user.

Copper price was up 2.3% from Monday's opening and strong bullish acceleration broke above previous high of 05 Sep at $3.1770. Today's close above here will be strong bullish signal for extension towards Fibonacci projections at $2.440 (123.6%) and $3.2855 (138.2%) en-route towards $3.2930 (July 2014 peak).

Meanwhile, bulls may take a breather on overbought daily RSI / slow stochastic. Corrective dips should be ideally contained above previous high at $3.1770, however, deeper dips cannot be ruled out.

Next support lies at $3.1505 (Fibo 23.6% of $2.8930/$3.2300 upleg) ahead of last Friday / today's lows at $3.1111 and Fibo 38.2% at $3.1013, which are expected to contain deeper dips.

Res: 3.2300, 3.2440, 3.2855, 3.2930
Sup: 3.2000, 3.1770, 3.1505, 3.1111

Crude oil is pushing higher within a range defined by the support at 50.43 and the strong resistance lies at 52.86 (28/09/2017). Expected to show continued increase within this range.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. For the time being the pair lies in an upside momentum. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).

Silver has further improved as can be seen by the new resistance at 17.43 (13/10/2017 high). The precious metal keeps on trading above $17. Hourly support can be found at 16.13 (06/10/2017 low). Expected to show further increase.

In the long-term, the trend is rater negative. Further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Gold is back to bullish. The precious metal is way into an uptrend channel. Hourly support is given at 1291 (13/10/2017 low). Strong support lies at a distance at 1204 (10/07/2017 high). Expected to show continued bullish pressures.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).

Bitcoin is definitely on a strong momentum. Strong support stands very far at 2975 (22/08/2017 low). Bitcoin si ready to set up new all-time high. The road is wide open for further increase. In the short-term, the digital currency should monitor $6000.

In the long-term, the digital currency has had an exponential growth. There are decent likelihood that the asset will reach $10'000.

EUR/CHF still lies in a bullish trend. Yet, downside pressures are likely to accelerate. Strong resistance lies at a distance at 1.1623 (22/09/2017 high). Support is given at 1.1388 (02/09/2017 low). Downside risk is very likely.

In the longer term, the technical structure has reversed. Strong resistance is given at 1.20 (level before the unpeg). Yet, the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

EUR/GBP's weakness is only a consolidation. The pair is back below former resistance at 0.8899 (19/09/2017 low). The very short-term technical structure is now biased to the upside. Hourly support is given at a distance at 0.8746 (27/09/2017 low).

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 (psychological level).

AUD/USD has surged and is now pausing below 0.7900. Hourly resistance is given at 0.7897 (13/10/2017 high). Support lies at at 0.7733 (06/10/2017 low). Expected to show continued increase.

In the long-term, the trend is turning positive. Key supports stands at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8164 (14/05/2015 high) is needed to invalidate our long-term bearish view.