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Daily Pivots: (S1) 1.3083; (P) 1.3134; (R1) 1.3192; More....

A temporary low is in place at 1.3026 in GBP/USD and intraday bias is turned neutral first. At this point, deeper fall is mildly in favor as long as 1.3291 minor resistance holds. Below 1.3026 will target 1.2773 key support level. Decisive break there will affirm the bearish case of medium term reversal. Nonetheless, break of 1.3291 will suggest that the pull back from 1.3651 is completed and turn bias back to the upside.

In the bigger picture, while the medium term rebound from 1.1946 was strong, GBP/USD hit strong resistance from the long term falling trend line. Outlook is turned a bit mixed and we'll turn neutral first. On the downside, decisive break of 1.2773 key support will argue that rebound from 1.1946 has completed. The corrective structure of rise from 1.1946 to 1.3651 will in turn suggest that long term down trend is now completed. Break of 1.1946 low should then be seen. On the upside, break of 1.3835 support turned resistance will revive the case of trend reversal and target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 .

Daily Pivots: (S1) 1.1721; (P) 1.1738 (R1) 1.1758; More...

EUR/USD's recovery from 1.1669 continues today. But for the moment, it's staying below 1.1832 resistance and intraday bias stays neutral. Another fall is still in favor as long as 1.1832 resistance holds. . Break of 1.1669 temporary low will extend the fall from 1.2091 to 38.2% retracement of 1.0569 to 1.2091 at 1.1510. As such decline is viewed as a correction to rise from 1.5069, we'd expect strong support from 1.1510 to bring rebound. Meanwhile, break of 1.1832 resistance will argue that the correction is already completed and turn bias back to the upside for retesting 1.2091 high.

In the bigger picture, rise from medium term bottom at 1.0339 is not finished yet. It's expected to continue after pull back from 1.2091 completes. And, next target will be 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall from 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside.

Euro trades broadly higher as lifted by comments from ECB officials that affirm the expectation of some sort of tapering in asset purchases next year. Catalonia remains a risk to the common currency but the case for independence seem to be fading. The risk is taking a back seat for the moment. Meanwhile, Sterling also recovers together with Euro as Prime Minister Theresa May seems to be safe from being ousted for now. Dollar, on the other hand, is trading generally lower together with the Japanese Yen.

ECB Lautenschlaeger: We should begin reducing bond purchases

ECB Executive Board Member Sabine Lautenschlaeger, a known hawk, urged that "we should begin reducing our bond purchases next year". And, "this should be done gradually, until we are no longer purchasing additional bonds". She emphasized that "it is important that we really move towards the exit - step by step, but steadily and in a clear direction". Meanwhile, she also noted that "it is clear which sequence the exit will follow". That is, "bond purchases will come to an end, while interest rates will remain low, well past the horizon of net asset purchases".

ECB Knot: The time has come to phase out stimulus

ECB Governing Council member Klaas Knot warned that the financial markets could be underpricing global risks. He noted that "markets seem resilient at the moment, but the low level of volatility and the overvaluation in a range of investments make me feel uneasy." And, to prevent further build-up of risks, the time has come to phase out monetary stimulus. And, "economic growth has been above potential for months and the threat of deflation is gone." He also echoed Lautenschlaeger's view that "interest rates will stay very low for a very long time, even if we decide to phase out our bond buying program at our next meeting. Nobody at the ECB is talking about raising interest rates yet."

51 banks needs intense discussions on interest rate risks

In a report released yesterday, ECB noted that "interest rate risk is well managed by most European banks." But 51 of them may need "intense discussions" to make sure they have enough capital if things go wrong. A hypothetical interest rate shock with 2% hike is put in a stress test. That would like to a rise in net interest income of 4.1% in 2017 and 10.5% by 2019 for the banks tested. Net value of assets and liabilities of banks will change with interest rate movements. ECB found that bank's equity would decrease on aggregate by 2.7%.

Catalan leader Puigdemont to address regional parliament

Catalan President Carles Puigdemont will address the regional Parliament today. It's unknown whether Puigdemont will declare independence considering that there was a mass pro-unity rally in Barcelona on Sunday. And Puigdemont clearly didn't get much support from European leaders. German Chancellor Angela Merkel talked to Spanish Prime Minister Mariano Rajoy over the weekend, and "affirmed her support for the unity of Spain", according to a German government spokesman. French European Affairs Minister Nathalie Loiseau said "if there was a declaration of independence, it would not be recognized." And Loiseau warned that "the first consequence would be its exit from the European Union."

UK May laid out steps to minimise disruption on Brexit day

In UK, Prime Minister Theresa May told the parliament that "real and tangible progress " had been made in Brexit negotiations with EU. However, she emphasized the need to prepare for "every eventuality". And May set out detailed "steps to minimise disruption" on Brexit day in 2019. May has been calling for a so called "implementation period" as transition. And she said that a transition deal "may mean we will start off with European court of justice still governing rules we're part of for that period". That drew heavy criticism from Tories MPs. Conservative Jacob Rees-Mogg argued that "if the ECJ still has jurisdiction, we will not have left the EU. It is perhaps the most important red line in ensuring the leave vote is honoured."

BoJ governor Kuroda repeated economy expanding moderately

BoJ Governor Haruhiko Kuroda reiterated that "Japan's economy is expected to continue expanding moderately in the future." And, after three years of massive quantitative easing, inflation is still struggling to come up. Kuroda noted that the central bank will maintain the stimulus program and he's optimistic that inflation will gradually pick up towards the 2% target, thanks to closure of output gap and improvements in inflation expectations.

Japanese Prime Minister Shinzo Abe begins his election campaign by attacking the opposition for creating new parties. He said that "what creates our future is not a boom or slogan. It is policy that creates our future." Based on recent polls, Abe's Liberal Democratic Party-led coalition is predicted to repeat the past landslide victories in this snap election on October 22.

Released from Japan, current account surplus widened to JPY 2.27T in August. Eco Watchers sentiment rose to 51.3 in September.

Business sector in Australia is doing very well

Australia NAB business confidence rose to 7 in September, up from 5. Business conditions remained at 14, close to triple of the historical average. NAB Chief Economist Alan Oster noted that "business conditions at these levels tell us that the business sector in Australia is doing very well." However, he pointed out that "the sustained weakness in retail conditions should justifiably be raising doubts around expectations for any imminent, and sustained rebound in consumer spending, although tough competition and other margin pressures are likely behind the result as well." Also, "elevated underemployment, an elevated Australian dollar, household debt and peaks in LNG exports and housing construction are all potential hurdles that will ensure that the Reserve Bank of Australia proceeds with caution."

On the data front

UK productions will be the main focus in European session, and trade balance will also be released. Germany will also release trade balance while Swiss will release unemployment rate. Later in the day, Canadian housing data will be featured.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.1721; (P) 1.1738 (R1) 1.1758; More...

EUR/USD's recovery from 1.1669 continues today. But for the moment, it's staying below 1.1832 resistance and intraday bias stays neutral. Another fall is still in favor as long as 1.1832 resistance holds. . Break of 1.1669 temporary low will extend the fall from 1.2091 to 38.2% retracement of 1.0569 to 1.2091 at 1.1510. As such decline is viewed as a correction to rise from 1.5069, we'd expect strong support from 1.1510 to bring rebound. Meanwhile, break of 1.1832 resistance will argue that the correction is already completed and turn bias back to the upside for retesting 1.2091 high.

In the bigger picture, rise from medium term bottom at 1.0339 is not finished yet. It's expected to continue after pull back from 1.2091 completes. And, next target will be 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall from 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the AUD declined 0.26% against the USD and closed at 0.7754.

LME Copper prices declined 0.5% or $32.0/MT to $6607.0/MT. Aluminium prices rose 0.6% or $13.5/MT to $2135.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7779, with the AUD trading 0.32% higher against the USD from yesterday's close.

Earlier in the session, data indicated that Australia's NAB business confidence index advanced to a level of 7.0 in September, compared to a reading of 5.0 in the previous month. Moreover, the nation's NAB business conditions index remained unchanged at a level of 14.0 in September.

The pair is expected to find support at 0.7755, and a fall through could take it to the next support level of 0.7730. The pair is expected to find its first resistance at 0.7797, and a rise through could take it to the next resistance level of 0.7814.

Going ahead, traders will keep a close watch on Australia's Westpac consumer confidence index for October, due to release overnight.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR marginally rose against the USD and closed at 1.1740.

In economic news, data showed that the Euro-zone's Sentix investor confidence index advanced more-than-expected to a level of 29.7 in October, notching a ten-year high level, suggesting that investors shrugged off worries of political instability across the common currency region. The index had recorded a level of 28.2 in the prior month, while markets had anticipated for an increase to a level of 28.5.

Separately, Germany's seasonally adjusted industrial production rebounded 2.6% MoM in August, growing at its quickest pace since July 2011 and hinting that industrial sector will remain one of the bright spots for the Euro-bloc's largest economy. Markets had expected industrial production to gain 0.9%, compared to a revised drop of 0.1% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.1770, with the EUR trading 0.24% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1733, and a fall through could take it to the next support level of 1.1695. The pair is expected to find its first resistance at 1.1795, and a rise through could take it to the next resistance level of 1.1819.

Moving ahead, investors will keep a close watch on Germany's trade balance figures for August, slated to release in a few hours. Moreover, the US NFIB small business optimism index for September, due to release later in the day, would be on investors' radar.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.44% against the USD and closed at 1.3137, amid news emerged that the British Prime Minister, Theresa May, could reshuffle her cabinet and leave out Foreign Secretary, Boris Johnson.

Meanwhile, the UK Prime Minister, Theresa May, warned the British public to prepare for crashing out of the European Union (EU) with no deal, outlining contingency plans to avoid border meltdown for businesses and travellers. Further, May noted that UK would publish two white papers on trade and customs after Brexit.

In the Asian session, at GMT0300, the pair is trading at 1.3155, with the GBP trading 0.14% higher against the USD from yesterday's close.

Overnight data indicated that UK's BRC retail sales across all sectors recorded a rise of 1.9% on an annual basis in September, rising by the most this year and following a gain of 1.3% in the prior month.

The pair is expected to find support at 1.3095, and a fall through could take it to the next support level of 1.3036. The pair is expected to find its first resistance at 1.3199, and a rise through could take it to the next resistance level of 1.3244.

Trading trend in the Pound today is expected to be determined by the release of UK's industrial and manufacturing production data along with construction output and total trade balance data, all for August, slated to release in a few hours. Also, traders would eye UK's NIESR GDP estimate for the three months to September, due to release later in the day.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD slightly rose against the JPY and closed at 112.66.

In the Asian session, at GMT0300, the pair is trading at 112.67, with the USD trading marginally higher against the JPY from yesterday's close.

Overnight data revealed that Japan's trade surplus (BOP basis) narrowed less-than-expected to ¥318.7 billion in August, compared to a revised surplus of ¥566.6 billion in the prior month. Market participants had anticipated the nation's trade surplus to narrow to ¥264.9 billion.

The pair is expected to find support at 112.51, and a fall through could take it to the next support level of 112.35. The pair is expected to find its first resistance at 112.83, and a rise through could take it to the next resistance level of 112.99.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average..

For the 24 hours to 23:00 GMT, the USD rose 0.18% against the CHF and closed at 0.9798.

In economic news, Switzerland’s total sight deposits fell to a level of CHF578.5 billion in the week ended 06 October, compared to a level of CHF579.0 billion reported in the previous week.

In the Asian session, at GMT0300, the pair is trading at 0.9782, with the USD trading 0.16% lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9767, and a fall through could take it to the next support level of 0.9753. The pair is expected to find its first resistance at 0.9802, and a rise through could take it to the next resistance level of 0.9823.

Moving ahead, investors will closely monitor Switzerland’s unemployment rate for September, due to release in a while.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.19% against the CAD and closed at 1.2555.

In the Asian session, at GMT0300, the pair is trading at 1.2528, with the USD trading 0.22% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.2510, and a fall through could take it to the next support level of 1.2493. The pair is expected to find its first resistance at 1.2552, and a rise through could take it to the next resistance level of 1.2577.

Ahead in the day, the release of Canada's housing starts for September and building permits for August, will garner significant market attention.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

Dollar Steadies After Edging Back from 10-Week Peak. The dollar steadied on Tuesday after edging away from a 10-week high overnight, taking support from underlying expectations that improved prospects for the U.S. economy would prompt the Federal Reserve to raise interest rates later this year. The dollar index was a shade higher at 93.720 after dipping about 0.15 percent overnight.

Kiwi Falls Against Other Majors after German Data. Signs of risk aversion were seen in the New York session as equities dipped and bitcoin surged, leaving the higher-yielding Kiwi to suffer the brunt of the losses. Political concerns ebbed in Spain and the UK and figures showed stronger-than-expected German production pushed the New Zealand dollar to a low of US$0.7055, to 1.6640 against the euro and to 1.8600 against the pound.

Sterling Maintains Lead as Worries of UK Political Turmoil Subside. U.K. Prime Minister May had a brief meeting with business leaders and assured them that they can count on a two-year transition period, and that the U.K. will retain access to the single market on current terms. Sterling had a stellar performance in the earlier session and was able to squeeze out a few more gains before pausing from its climb as profits were locked in. Pound rallied to a high of 1.3188 before retreating to 1.3129.

Gold Rises on Geopolitical Risks. Investors moved towards safer investments as the US dollar saw a mixed performance after Russian media reported that North Korea is planning in the upcoming period to test long-range missile attacks that can reach the west cost of the US. Gold prices rose for three consecutive days and last closed at $1,284.9 per ounce.

Oil Prices Climb After OPEC Signals Possible Deal Extension. Oil prices rose slightly on comments by OPEC’s secretary general that indicated further possible extension of a production agreement beyond March 2018 and possible cuts in crude production. Crude settled at $49.58, up 29 cents on the day, while Brent rose 17 cents to settle at $55.79 per barrel. Oil production platforms in the Gulf of Mexico also started returning to service after Hurricane Nate forced the shutdown of more than 90 percent of crude output in the area. The prospective restarts kept price gains in check.