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Daily Pivots: (S1) 111.27; (P) 111.90; (R1) 112.33; More...

Intraday bias in USD/JPY remains neutral for the moment. Further rise is in favor with 111.07 support intact. Sustained break of medium term channel resistance (now at 112.90) will argue that whole correction from 118.65 has completed. In that case, further rise should be seen to 114.49 resistance for confirmation. However, break of 111.07 minor support will raise the risk of rejection from channel resistance and turn bias back to the downside for 55 day EMA (now at 110.64) and below.

In the bigger picture, rise from 98.97 (2016 low) is seen as the second leg of the corrective pattern from 125.85 (2015 high). It's unclear whether this this second leg has completed at 118.65 or not. But medium term outlook will be mildly bearish as long as 114.49 resistance holds. And, there is prospect of breaking 98.97 ahead. Meanwhile, break of 114.49 will bring retest of 125.85 high. But even in that case, we don't expect a break there on first attempt.

Daily Pivots: (S1) 1.1377; (P) 1.1483; (R1) 1.1556; More... .

EUR/CHF's sharp fall suggests short term topping at 1.1622, on bearish divergence condition in daily MACD. Intraday bias is mildly on the downside for 1.1355 support and below. On the upside, break of 1.1511 minor resistance will suggest that the pull back is completed and bring retest of 1.1622.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1198 resistance turned support holds.

Daily Pivots: (S1) 1.4880; (P) 1.4943; (R1) 1.4992; More....

EUR/AUD is staying in consolidation pattern in range of 1.4791/5173. Intraday bias remains neutral first. On the upside, break of 1.5173/5226 resistance zone will finally resume larger rise from 1.3624. On the downside, break of 1.4791 support will turn bias to the downside and extend the fall from 1.5173 to retest 1.4421 support.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term top has completed at 1.3624. Rise from 1.3624 is expected to extend to retest 1.6587. The corrective structure of the price actions from 1.5226 is affirming this view. Above 1.5226 will target a test on 1.6587 key resistance. However, break of 1.4421 support will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.

EUR/USD

Current level - 1.1851

The intraday bias is bearish and the pair is currently testing the key support at 1.1830. A violation of the latter will provoke a slide towards 1.1660 area. Crucial on the upside is 1.2000 peak.

USD/JPY

Current level - 111.62

My outlook remains bearish, for a break through 111.10, en route to 109.30. Initial minor resistance lies at 111.90 and crucial on the upside is 112.50.

GBP/USD

Current level - 1.3489

My outlook is still positive above 1.3440, for a rise through 1.3570 peak, towards 1.3830. A violation of 1.3440 will challenge 1.3340.

Daily Pivots: (S1) 149.38; (P) 150.82; (R1) 151.92; More

GBP/JPY's pull back from 152.82 is still in progress and deeper fall could be seen. But downside of retreat should be contained above 146.57 support to bring another rally. Above 152.82 will extend the larger rise from 122.36 to 61.8% projection of 122.36 to 148.42 from 139.29 at 155.39 next.

In the bigger picture, medium term rebound from 122.36 is in progress. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. For now, the bullish scenario is preferred as long as 139.29 support holds.

Daily Pivots: (S1) 131.44; (P) 132.84; (R1) 133.76; More...

EUR/JPY's pull back from 134.39 is still in progress. But still, it's holding above 131.69 resistance turned support and outlook remains bullish. Above 133.02 minor resistance will turn bias back to the upside. Sustained break of 134.20 fibonacci level will extend larger up trend to 141.04 resistance next. However, break of 131.69 will be an early sigh of medium term reversal and will target 127.55 key support level instead.

In the bigger picture, current rise from 109.03 is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. On the downside, break of 127.55 support is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bullish.

The pair is standing at the back foot in early Tuesday's trading and holding just above fresh one-week lows at 109.47/49 (Mon/Tue lows), as strong rhetoric between the US and North Korea increased geopolitical tensions again.

The greenback holds in red for the third straight day against yen and probed again below strong support at 111.54 (top of thick daily cloud) as war of words between two countries escalated on Monday, triggering fresh safe-haven buying.

The risk of deeper pullback is building, with firm break below key support zone between 111.54/44 (daily cloud top/rising 10SMA) is needed to generate stronger bearish signal.

Plethora of supports that lay below (111.13/07, daily Tenkan-sen/100SMA and thick 4-hr cloud, spanned between 111.12/109.59), may limit yen's risk-off rally, as strong bullish setup of daily studies favors limited correction off 112.71 high before bulls resume.

Today's focus is on the speech of Fed Chair Janet Yellen (due at 16:45 GMT), as market participants are awaiting more clues on whether the Fed remains on track to raise interest rates in December, as signaled on last week's policy meeting.

Hawkish stance from Yellen would offer fresh support to the greenback and offset negative impact from the situation over North Korea. Bullish scenario requires sustained break above 200SMA (112.09) to generate fresh bullish signal and turn near-term bias higher.

Res: 111.80, 112.09, 112.52, 112.80
Sup: 111.54, 111.11, 110.65, 110.43

GBPUSD holds a neutral bias near the highest level since June 2016. The market became overbought after the recent rally from 1.2773 stalled at a high of 1.3656 on September 20. This was indicated by the daily RSI rising above 70. RSI has since eased back below this level and is flat, suggesting that upside momentum has faded.

GBPUSD has been trading sideways between 1.3430 and 1.3656 since mid-September following rapid gains from the end of August. A break below the range-low of 1.3430 would target the key 1.3400 level. Below this, the 1.3200 handle comes into view, with support expected at the September 14 low of 1.3148. Another extension lower would indicate that the recent bullish phase has ended.

The broader trend higher in the GBPUSD remains intact and is supported by the bullish alignment of the 50-day and 200-day moving averages. However, the 1.3656 peak seen earlier this month is acting as a solid resistance and it would be quite a challenge to break above it. The odds of a move above this peak in the near-term are low and GBPUSD is expected to remain neutral.

Key Highlights

• The British Pound remains well supported for more gains above 1.3500 against the US Dollar.
• There are two bullish trend lines forming with support at 1.3460 and 1.3240 on the 4-hours chart of GBP/USD.
• The Dallas Fed manufacturing Index in Sep 2017 rose from 17.8 to 21.3.
• The US New Home Sales figure will be released for August 2017, which is forecasted to increase 3.3% (MoM).

GBPUSD Technical Analysis

The British Pound started a nasty uptrend from the 1.3000 swing low against the US Dollar. The GBP/USD pair is now well above 1.3400 and eyeing further gains.

The pair moved above the 1.3500 level recently and traded as high as 1.3657 before starting a correction. It corrected towards 1.3440 where buyers emerged. On the downside, there are two bullish trend lines forming with support at 1.3460 and 1.3240 on the 4-hours chart.

Moreover, the pair is well above the 100 simple moving average (H4) and 1.3400. On the upside, there is a connecting bearish trend line with resistance at 1.3520.

Should there be a break of 1.3520, GBP/USD could retest the 1.3600 handle in the near term. An intermediate resistance is the 50% Fib retracement level of the last decline from the 1.3657 high to 1.3431 low at 1.3544.

Dallas Fed Manufacturing Index

Recently in the US, the Dallas Fed manufacturing for Sep 2017 (Prelim) was released by the Federal Reserve Bank of Dallas. The forecast was slated for a decline from the last reading of 17.0 to 11.5.

The actual result was better, as there was a rise in the business index from 17.0 to 21.3. On the other hand, the production index, measuring state manufacturing conditions decreased from 20.3 to 19.5.

The report added that:

Labor market measures suggested faster employment growth and longer workweeks this month. The employment index came in at 16.3, its highest level since April 2014. Twenty-eight percent of firms noted net hiring, compared with 11 percent noting net layoffs. The hours worked index rose four points to 18.4.

The overall result was positive, which caused minor downsides in GBP/USD. However, the pair is still above its uptrend support and eying gains above 1.3500.

Other Economic Releases to Watch Today

US New Home Sales for August 2017 – Forecast +3.3% (MoM) versus -9.4% previous.

S&P/Case-Shiller Home Price Indices for July 2017 (YoY) – Forecast +5.8%, versus +5.7% previous.

Fed’s Yellen’s Speech.

The rhetoric continues between North Korea and the United States with North Korea's Foreign Minister, Ri Yong Ho, describing President Trump's recent comments as 'tantamount to a declaration of war' and even stating that Pyongyang reserved the right to take countermeasures that could include shooting down US bombers that are not inside Korea's air space. The White House was quick to deny such claims and Trump's Security Advisor has commented that the US has 4 or 5 different scenarios as to a resolution, stating that 'some are uglier than others'. Meanwhile, China's Ambassador to the United Nations has stated that the situation is 'getting too dangerous'. As the 'war of words' continues the markets will be evaluating risk and will act accordingly.

ECB President Mario Draghi addressed the European Parliament's committee on economic affairs on Monday and commented that 'Overall, we are becoming more confident that inflation will eventually head to levels in line with our inflation aim, but we also know that a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialize'. The speech held no surprises as it remained consistent with the ECB's Policy Statement it made in September. EUR did suffer, falling 1% on Monday over fears of the German right wing political party's recent impressive showing in the German elections and the fact that Chancellor Merkel will need time to form a new coalition government.

In the United States, New York Fed President William Dudley commented to students and professors at a Community College in NY State that 'With a firmer import price trend and the fading of effects from a number of temporary, idiosyncratic factors, I expect inflation will rise and stabilize around the (Fed‘s) 2% objective over the medium term'. He also added 'In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually'. Dudley's comment mirrored the comments he made earlier in September and reinforced the expectation of a rate hike in December.

EURUSD, after dropping 1% on Monday to a 4-week low of 1.1831, recovered slightly in early trading to currently trade around 1.1860.

USDJPY dropped over 0.3% on Monday and appears to remain under pressure in early Tuesday trading. Currently, USDJPY is trading around 111.60.

GBPUSD has improved 0.2% overnight to currently trade around 1.3490.

Gold gained over 1% on Monday, as risk-off sentiment gathered pace with the latest 'exchange' of words between the US and North Korea. Currently, Gold is trading around $1,310.

WTI saw its most dramatic one-day gain for several months, as it improved by over 3% on Tuesday. With Turkey threatening to cut crude oil flows from Iraq's Kurdistan region to the outside world, London Brent hit a 26-month high of $58.40 overnight. Currently, Brent is trading around $58.40 with WTI trading around $59.20 in early Tuesday trading.

Major economic data releases for today:

At 13:00 BST, Chairing of Jean Monnet Lecture 'Good Pension Design' by ECB Praet at the Second ECB Annual Research Conference organized by the ECB in Frankfurt, Germany.

At 14:30 BST, FOMC Member, and President and CEO of the Federal Reserve Bank of Cleveland, Loretta Mester is scheduled to speak in Ohio, USA.

At 15:00 BST, the US Census Bureau will release New Home Sales and New Home Sales Change (MoM) for August. The forecast is for a slight increase in New Home Sales to 0.585M (prev. 0.571M) and New Home Sales Change to come in at 3.3% (prev. -9.4%)

At 15:30 BST, FOMC Member Lael Brainard is speaking in Washington D.C. at the Federal Reserve Board Conference: Disparities in the Labor Market: What are we missing?

At 17:45 BST, Fed Chair Janet Yellen is scheduled to speak at the 59th NABE Annual Meeting in Cleveland, Ohio on: Inflation, Uncertainty, and Monetary Policy.