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EUR/GBP is trading mixed. The pair is having strong selling pressures. As long as prices remain below the resistance at 0.9176 (declining trendline), the short-term technical structure is biased to the downside. Hourly support is given at 0.8719 (16/06/2017). Strong resistance lies at 0.9306 (29/07/2017 high).

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).

US equity markets are on course to kick off the week slightly in the red, tracking similar moves across most of Europe and Asia overnight.

While the market impact has been negligible so far, the focus at the start of the week has been on politics after Germany and New Zealand went to the polls over the weekend and Japanese Prime Minister dissolved the lower house of parliament – effective 28 September – and called a snap election. The New Zealand election result has probably had the greatest impact, with the kiwi almost 1% lower against the greenback after neither of the main parties secured a majority, leaving the fate of the future government in the hands of the nationalist NZ First party.

The nationalists also performed strongly in Germany, where AfD become the first far right party to enter parliament since the second world war. While the EU will likely declare the result another victory for pro-EU parties, as it did after the French and Dutch election, the fact remains that nationalist parties are becoming increasingly popular and this result is another sign of this. The EU must work harder to reverse the trend if they want to avoid another exit in the years ahead.

As it is, Angela Merkel’s CDU party will likely go into coalition with the FDP and Green parties, forming what has become known as the Jamaica coalition due to the respective party colours, with another grand coalition with the SPD apparently off the cards. The SPD performed even worse than expected and appeared to suffer as a result of the party’s last partnership with its rival. Still, investors appear confident that coalition talks will go smoothly, although they could take anything from a few weeks to a few months to complete, leaving a small element of uncertainty in the meantime.

As was already widely reported, Japanese Prime Minister Shinzo Abe on Monday dissolved the lower house of parliament and called a snap election, claiming he was looking to seek a mandate to proceed with strong diplomacy. The reality is that Abe is looking to capitalise on his strong performance in recent polls on the back of his stance over North Korea and apparent disarray within the opposition parties. Abe proposed a two trillion yen stimulus package alongside the announcement, a clear sweetener for the electorate ahead of the vote.

Still to come today we’ll hear from ECB President Mario Draghi, the Fed’s Charles Evans and Neel Kashkari and RBA Assistance Governor Michele Bullock.

AUD/USD has broken support implied by the lower bound of the uptrend channel. Hourly resistance is given at 0.8125 (08/09/2017 high). Hourly support is given at 0.7908 (22/09/2017 low). Expected to further weaken.

In the long-term, the trend is largely negative since 2011. Key supports stands at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

USD/CAD is edging higher. Hourly support is located at 1.2062 (08/09/2017 low). Resistance is now given at a distance at 1.2239 (intraday high). Expected to show continued short-term bullish pressures.

In the longer term, the pair has broken longterm support that can be found at 1.2461 (16/03/2015 low). Strong resistance is given at 1.4690 (22/01/2016 high). The pair is likely to head further lower.

USD/CHF keeps on bouncing higher. Strong resistance is given at 0.9808 (30/05/2017 high). The technical structure shows that there decent downside risks. Strong support is given at 0.9421 (03/05/2017). Expected to show renewed bearish pressures.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USD/JPY is pushing higher above 112.00. Strong support is located at 111.12 (20/09/2017 low). Expected to show further bullish pressures. Yet, downside risks are now rising as markets may soon take some short-term profit.

We favor a long-term bearish bias. Support is now given at 99.02 (10/08/2013 low). A gradual rise towards the major resistance at 125.86 (05/06/2015 high) seems unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

GBP/USD is pushing higher after recent surge. Hourly resistance is given at 1.3657 (20/09/2017 high). Strong support is given at 1.2774 (24/08/2017 low). Expected to show continued bullish consolidation.

The long-term technical pattern is reversing. The Brexit vote had paved the way for further decline. Long-term support can be found at 1.1841 (07/10/2017 low). Long-term resistance given around 1.35 is at stake and indicates a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

EUR/USD lies in a bullish trend despite ongoing consolidation. Hourly resistance can be found at 1.2092 (08/09/2017 high) while hourly support lies at 1.1823 (31/08/2017 low). Stronger support is given at a distance at 1.1662 (17/08/2017 low). Expected to show continued bullish pressures.

In the longer term, the momentum is now turning largely positive. We favour a continued bullish bias. Key resistance is holding at 1.2252 (25/12/2014 high) while strong support lies at 1.0341 (03/01/2017 low).

Pro-EU view on Merkel Win

The primary headline of Angela Merkel winning a historic 4th term is the one that will likely drive market activity. Despite disappointment over lost votes from CDU/CSU and SPD, the rise of right wing populist AfD and questions over the exact government make-up, the outcome of yesterday Bundestag elections will be pro-Europe, centrist, coalition government. Yes, there are granular uncertainties which will delay Germany's role in great EU integration, but Merkel has indicated that a coalition agreement should be reached by Christmas. EURUSD reacting calmly, with marginal USD strength, but trading well within its recent ranges. EURCHF move higher indicates that the overall result of the German election is broadly pro-Euro.

Moving forward, given the decline of popularity in the SPD the most likely coalition under Merkel would be CDU/FDP/Greens. Already we are hearing a reversal of FDP language post-elections sounding pro-Europe. While the Greens in the past have call for Euro-bonds, which would solve many of the uncertainty around EU funding. If you take the results of yesterday German elections and combine with French President Macron EU reform vision positive political backdrop for European investors. For the first time in a long while, European politics is likely to drive the Euro higher. There are risk in the horizon with Macron falling popularity rating and weakness of party in Senate elections, Italy elections and Spain/Catalonia (significant risk escalation, in our view, as Madrid moved to take over local policing), but in the near term, we would manifest our strong Europe view through long EURCHF on any pullbacks.

Markets is showing a risk-on stance

The sentiment seems to be back to bullish. Gold keeps on declining and is now below $1300. North Korea tensions are still there but markets seems not to worry much on a possible escalation. The dollar has been recently strengthened after weakening since the start of the year.

At the moment, we consider that asset pricing are more sensitive to central banks than geopolitical risks. Markets are buying the Fed balance sheet reduction and this explains the current sell-off in Gold. Within the short-term, we should see the EURUSD pair consolidating below 1.20. It is going to be very difficult to put an end to the Quantitative Easing without provoking further turmoil on the market.

We believe that current levels are good to reload gold positions. Optimism is, according to us, way too strong regarding central bank especially knowing the number of times it has disappointed over the last few years. Central banks need to guarantee price stability and we assume it is going to be very difficult. Debts are way too important. Gold is definitely selling at a discount right now.

The EUR/CHF opened with a huge gap down in the morning, but now is trying to close it. Price is trading in the green and struggles to stay in the green territory. You can see that has failed to stay above the third warning line (WL3) of the blue ascending pitchfork. Has found temporary support at the first warning line (wl1) of the minor ascending pitchfork. A valid breakdown below the WL5 and below the wl1 will confirm a corrective phase.