Sample Category Title

EUR/USD - 1.1873

Original strategy  :

Sold at 1.1970, met target at 1.1870

Position : - Short at 1.1970

Target :  - 1.1870

Stop : -

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The single currency has fallen again after opening lower today, adding credence to our bearish view (our short position entered at 1.1970 met our target at 1.1870 with 100 points profit), although this anticipated decline suggests test of previous support at 1.1861 cannot be ruled out, a sustained breach below this support is needed to extend the fall from 1.2035 to previous support at 1.1838, then towards 1.1800 which is likely to hold on first testing.

As we have taken profit on our short position entered at 1.1970, would not chase this fall here and would be prudent to stand aside for now. Above the Tenkan-Sen (now at 1.1900) would bring recovery to the Kijun-Sen (now at 1.1922) but reckon upside would be limited to 1.1940-50 and 1.1980-85 should hold. 

USD/JPY - 112.27

Original strategy  :

Bought at 111.70, Target: 112.70, Stop: 111.70

Position :  - Long at 111.70

Target :  - 112.70

Stop : - 111.70

New strategy  :

Hold long entered at 111.70, Target: 112.70, Stop: 111.90

Position :  - Long at 111.70

Target :  - 112.70

Stop : - 111.90

Although the greenback has retreated after meeting resistance at 112.52 and further consolidation below last week’s high at 112.72 would be seen, reckon downside would be limited to 111.80-85 and bring another rise, above 112.52 would bring retest of said resistance at 112.72, break there would confirm recent upmove has resumed and extend further gain to 112.90-00, then towards 113.25-30 (1.236 times projection of 107.32-111.04 measuring from 109.55), having said that, previous chart resistance at 113.58 would hold from here, bring correction later.

In view of this, we are holding on to our long position entered at 111.70. Only below indicated support at 111.65 would abort and risk weakness to 111.40-45 but break there is needed to signal a temporary top has been formed at 112.72, bring retracement of recent rise towards support at 111.11 first.

The DAX index has posted small gains in the Monday session. Currently, the DAX is trading at 12,619.00, up 0.22% on the day. On the release front, Angela Merkel won the German election and will serve a fourth term as president. On the release front, German Ifo Business Climate slowed to 115.2, short of the estimate of 116.0 points. Later in the day, ECB President Mario Draghi testifies before the European Parliament Economic and Monetary Affairs Committee. On Tuesday, Germany releases Import Prices.

Angela Merkel's CDU won 33% of the vote in the German election, which means that Merkel will have to enter arduous negotiations with other parties in order to form a coalition government. The center-left SFD, which won 20% of the vote, has already said it will not join the CDU, so Merkel has her work cut out for her. The far-right AFD ran on a far-right, anti-immigrant platform, and the party's surge in support has sent shock waves in Germany and across Europe. The AFD cannot be considered as a coalition partner, which leaves the Greens and the pro-business FDP party as the most likely configuration. However, the FDP has insisted on the powerful finance portfolio and will likely try to reduce German transfer payments to the European Union. If negotiations become deadlocked, European stock markets could head lower. Meanwhile, there was some disappointing economic news out of Germany, as the Ifo Business Climate for September fell short of expectations. The indicator dropped to a 3-month low, but the reading of 115.2 still indicates strong economic growth in the eurozone's largest economy.

Angela Merkel was all smiles on Sunday night, as the election results were released and it became clear that she had been re-elected as president. However, support for her CDU party dropped from 41% in the last election to 33% on Sunday, creating a complicated post-election picture. It is not only Merkel's popularity that has suffered; her image as Europe's most powerful politician has been tarnished, and her most likely coalition partners, the Greens and the FDP will be sure to extract major concessions as the price for their parliamentary seats. Merkel will have to focus her energies on forming a workable coalition and will have to put other issues on the back burner, at a time when the European Union is locked in difficult negotiations with Britain over the terms of its departure from the EU.

GBPUSD - The pair remains weak and vulnerable to the downside as it took back its early intra day gains during Monday trading session. This leaves risk lower on more bear pressure. Support lies at the 1.3450 level where a break will turn attention to the 1.3400 level. Further down, support lies at the 1.3350 level. Below here will set the stage for more weakness towards the 1.3300 level. Conversely, resistance stands at the 1.3550 levels with a turn above here allowing more strength to build up towards the 1.3600 level. Further out, resistance resides at the 1.3650 level followed by the 1.3700 level. On the whole, GBPUSD continues to face further downside threats.

The USDJPY pair has pulled back to test intraday buying demand around the 112 level, after earlier reaching 112.53 in the Asian session and failing to push price-action above the former weekly price-high, located at 112.71.

On Friday, the USDJPY pair managed to close the weekly price-bar above its 200-week moving average, which marked the first bullish weekly close above the 200-week MA, since July 9th this year.

Going forward, the pair retains a bullish bias whilst trading above its monthly pivot point, at 111.65 and 200-week moving average, at 111.64. Traders should also watch the pairs 200-day moving average, currently located at 111.45.

Key intraday technical support is found at the pairs 100-hour moving average, at 111.98 and weekly pivot point, at 111.90.

To the upside, intraday USDJPY resistance is located at 112.19, 112.57 and 112.71. Above 112.71, further weekly resistance is found at 113.20 and 113.88.

The EURUSD pair is continuing to slip lower in early Monday trading, as German political woes weigh on the single currency. The euro was earlier rejected from the 1.1952 level, and is now testing critical support weekly, at 1.1885.

Going forward, the former weekly price low at 1.1861 may now come into focus. A move below the 1.1861 level would negate the series of bullish higher lows on the price-charts, and further dampen EURUSD trading sentiment.

Traders should now watch for a higher-time frame price close below the 1.1885 level, and also look for the key 1.1900 level to hold on any intraday upward price retracements.

Key technical support below 1.1885 is located at 1.1870, 1.1861 and 1.1838. Below 1.1838, the 1.1823 level acts as critical support protecting further declines to 1.1770 and 1.1716.

To the upside, intraday EURUSD resistance is found at 1.1900 and the former swing-high at 1.1920. Above 1.1920, further resistance is found from the daily and weekly pivot point, at 1.1928 and 1.1948.

Notes/Observations

German Chancellor Merkel faces tough coalition talks following German Election results

German Business moral drops slightly in Sep

PM Abe calls snap election, to seek ¥2T economic package

Overnight

Asia:

Election results in New Zealand saw ruling National Party with 46.6% and Labour with 35.5%. With neither party winning enough seats to have a majority in parliament.

Eight China cities, including Shijiazhuang, Chongqing, Nanchang, Nanning and Guiyang imposed curbs on home resales as part of campaign to cool home prices

(JP) PM Abe to dissolve lower house on Sept 28th (confirms will call snap election); confirms to seek ¥2.0T ($17.8B) economic package

Europe:

German Chancellor Angela Merkel re-elected for fourth term taking just shy of 33% of the vote, Her conservative CDU/CSU bloc and SPD results were lowest in almost 70 years.

Current coalition partner, the social democratic SPD, says it will go into opposition after historic losses.

Nationalist party took a notable part of the vote (13%) which will see the AFD Party enter parliament for first time

German IFO index edges downward, but remains well above its long term average

UK credit rating cut to Aa2 from Aa1 at Moody's

Americas

The US widens scope of Travel ban to include North Korea, Venezuela and Chad

Oil:

Iraqi Kurds vote in independence referendum from Iraq

Economic data

(DE) GERMANY SEPT IFO BUSINESS CLIMATE: 115.2 V 116.0E; CURRENT ASSESSMENT: 123.6 V 124.7E

Expectation Survey: 107.4 v 108e

(ES) Spain Aug PPI M/M: -0.1% v -0.1% prior; Y/Y: 3.2% v 3.0% prior

Fixed Income Issuance:

Non seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.1% at 3,546, FTSE -0.2% at 7,298, DAX +0.3% at 12,627, CAC-40 flat at 5,281, IBEX-35 -0.6% at 10,245, FTSE MIB +0.1% at 22,544, SMI +0.2% at 9,158, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European stocks opened lower, but drifted upwards as the session progressed; peripheral markets underperforming; political uncertainty following election results over weekend weighed on sentiment; UK stocks in focus after Moody's cut country's risk rating; Alstom and Siemens disclose entered discussions to merge train units; commodities weakened, weighing on energy and materials stocks; attention turning to ECB's Draghi speech later today and Fed Chair Yellen tomorrow

Equities

Consumer discretionary: Aryzta ARYN.CH +2.2% (results), Autogrill AGL.IT -2.3% (analyst action), Norwegian Air NAS.NO +3.2% (unit awarded flight permission in US), Sodexo SW.FR -0.3% (analyst action), Unilever UNA.NL +0.1% (acquisition)

Energy: Tullow Oil TLW.UK +5.9% (expected to resume drilling)

Industrials: Alstom ALO.FR +1.1% (talks with Siemens), Fincantieri FCT.IT +4.4% (contract award)

Materials: Essentra ESNT.UK +2.6% (hurricane update)

Technology: AMS AMS.CH -4.3% (bond issue), Imagination Technologies IMG.UK +32.1%(takeover), Nets NETS.DK 6.4% (takeover offer)

Speakers

(UK) BOE Financial Policy Committee: Reiterates plan to lift capital buffer in November - Statement

German IFO economists: The index in Manufacturing fell significantly, the industrial companies were at a high level significantly less satisfied with their current situation

Banks would suffer losses of £30B in stress test

(FR) ECB's Villeroy (France): Sees French GDP growth as fast as 1.7% in 2017

OPEC Sec Gen Barkindo: Outlook for Global Oil market is improving

(JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates to continue with powerful monetary easing to reach 2% inflation as soon as possible - speech in Osaka

Currencies

Politics dominated currency trading as both euro and kiwi fell against their major trading partners following the German and New Zealand elections

USD/KRW won led gains as tensions eased on the Korean peninsula

Fixed Income

Bund futures trade at 161.69 up 53 ticks following the German elections and disappointing IFO release. Continued downside targets 161.03 while upside resistance stands initially at 162.07, followed by 163.27.

Gilt futures trade at 124.07 up 26 ticks following Moody’s downgrade on late Friday. Continued downside eyeing 123.26. Upside targets 124.90 then 125.24.

Monday's liquidity report showed Friday’s excess liquidity rose to €1.743T from €1.734T and use of the marginal lending facility rose to €122M from €116M.

Corporate issuance saw $16.7B last week via 31 tranches, bringing YTD issuance to above $1.04T. For the week ahead analysts forecast around $15-20B to come to market.
In Euro denominated issuance ~€26.9B came to market via 40 issuers and 48 tranches

Looking Ahead

07:25 (BR) Brazil Central Bank Weekly Economists Survey

07:30 (TR) Turkey Sept Capacity Utilization: No est v 78.8% prior

07:30 (TR) Turkey Sept Real Sector Confidence (Seasonally Adj): No est v 110.2 prior; Real Sector Confidence (unadj): No est v 110.2 prior

08:05 (UK) Baltic Dry Bulk Index

08:30 (US) Aug Chicago Fed National Activity Index: -0.25e v -0.01 prior

09:00 (CN) China Aug Conference Board Leading Economic Index

09:00 (MX) Mexico July IGAE Economic Activity (Monthly GDP) Y/Y: No est v 2.4% prior

10:30 (US) Sept Dallas Fed Manufacturing Activity: 11.5e v 17 prior

16:00 (US) Weekly Crop Progress Report

The euro has started the week with losses, as EUR/USD has dropped below the 1.19 level. Currently, EUR/USD is trading at 1.1885, down 0.52% on the day. Germany went to the polls on Sunday, and Angela Merkel won a fourth term as president. On the release front, German Ifo Business Climate slowed to 115.2, short of the estimate of 116.0 points. Later in the day, ECB President Mario Draghi testifies before the European Parliament Economic and Monetary Affairs Committee. There are no US economic releases, but we’ll hear from three FOMC members – William Dudley, Charles Evans and Neel Kashkari. On Tuesday, the US releases CB Consumer Confidence and New Home Sales. Federal Chair Janet Yellen will speak at an event in Cleveland.

Angela Merkel easily won the German election on Sunday, but will have to cobble together a coalition in order to form a government. Merkel’s Christian Democratic Union (CDU) won 33% of the vote, the Social Democrats (SFD) won 20%, while the Alternative for Germany (AFD) took 13% of the vote. The AFD ran on a far-right, anti-immigrant platform, and the party’s surge in support has sent shock waves in Germany and across Europe. Merkel is taking her trademark “carrot” approach to the AFD and its voters, saying she hears their message to the mainstream establishment and will work to make sure that their concerns are heard. The euro lost ground after the election results, and has weakened further on Monday, after a disappointing reading from the German Ifo Business Climate for September. The indicator dropped to a 3-month low, but the reading of 115.2 still indicates strong economic growth in the eurozone’s largest economy.

The eurozone is enjoying solid growth, with much of the credit going to Germany, the largest and strongest economy in the bloc. The German economy continues to perform well, with low unemployment, strong consumer demand, and a robust export sector. Institutional investors and analysts like what they see, as last week’s German ZEW Economic Sentiment Sentiment rebounded in September and climbed to 17.3 points, following a disappointing reading in August of 10.0 points. The ZEW report was very positive, noting that German growth in the second quarter remained strong, and both the public and private sectors were marked by increased investment. The report added that the stronger euro had not had a negative impact on the German economy, and the upcoming German election had not caused any uncertainty in the markets.

Although initially markets were positively anticipating the upcoming Draghi speech at Trinity College, but the subsequent reaction led to quite rapid recovery of the Dollar on Friday.

To certain extent, such bearish movement could be related to anticipation of the German Parliamentary elections. However, as soon as it became clear that Merkel managed to retain her post, the Euro started restoring previously lost positions.

From technical perspective, this upside momentum is likely to be neutralized by a combined resistance formed by the 55-, 100- and 200-hour SMAs together with the weekly PP at 1.1947.

On the other hand, Draghi's testimony at the European Parliament might create a new short-term volatility in the markets, which could give the pair a necessary impulse to bypass those barriers. In the opposite case, the rate is likely to fall to the bottom edge of a dominant ascending channel.

The speech delivered by Theresa May about post-Brexit relationship with the EU on Friday, indeed affected value of the Pound.

Unfortunately, the effect was negative and the British currency just in one hour lost 79 points against the Dollar. Probably the best description of this situation was made by the German Foreign Minister who noted that the speech was vague and did not contain any concrete proposals.

Accordingly, the rectangle pattern that formed in the beginning of previous week sustained and is likely to sustain today as well. On the one hand, the rate feels pressure from the 55- and 100-hour SMAs together with the weekly PP at 1.3536 that pushes it to the top.

However, the expected target for today would be an area around 1.3585, but not the upper edge of the formation.