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USD/CHF keeps on bouncing. Strong resistance is given at 0.9808 (30/05/2017 high). The technical structure shows that the the pair is likely to head further lower below 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 towards 112.00. Strong support is located at a distance at 107.32 (08/09/2017 high). 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 consolidating lower after recent surge. The pair has broken hourly resistance at 1.3329 (13/09/2017 high) and has set up a new hourly resistance at 1.3619 (18/09/2017 high). Strong support is given at 1.2774 (24/08/2017 low). Expected to show continued bearish 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. 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 renewed 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).

Price edges higher and jumped above the 1.1536 static resistance, a valid breakout will confirm a further increase in the upcoming period. The next upside target will be at the fifth warning line (WL5), could be attracted also by the WL3 on the short term. Only a failure to reach these lines will signal another drop on the short term.

Price has dropped sharply in the last two days and has managed to drop below the uptrend line and much below the warning line (WL1) of the major descending pitchfork. Remains to see if this will be a valid breakout, we still need a confirmation that will drop further. A retest of the WL1 followed by a minor drop will validate a further decrease.

The currency pair has rallied aggressively and has managed to escape from a minor ascending channel, signaling that the bulls are in full control and should drive it much higher. The Yen is demolished by the Nikkei’s impressive rally, the index is trading at 20282 level, much above the 20058 broken static resistance and below the 20320 highest high.

The JP225 seems unstoppable on the short term, has ignored important resistance levels and looks motivated to climb much higher in the upcoming period.

Personally, I’m waiting to see a minor decrease in the upcoming days after the impressive rally. A minor retreat will force the Yen to appreciate a little versus all its rivals.

The Euro could receive a helping hand from the Euro-zone data, the Current Account could increase from 21.2B to 22.3B in July, moreover the German ZEW Economic Sentiment is expected to climb from 10.0 points to 12.3 points. The ZEW Economic Sentiment could increase from 29.3 points to 32.4 points.

Price has managed to break above the confluence area formed at the intersection between the median line (ml) of the black ascending pitchfork with the warning line (short descending dotted line). The valid breakout has accelerated the current rally. EUR/JPY is trading right above the 150% Fibonacci line (ascending dotted line) and should approach and reach the sliding line (sl), where he may find a temporary resistance.

Dollar Eased Before Fed Decision. The dollar index, which measures the greenback against a basket of currencies was down 0.1 percent at 91.924 on Tuesday while investors await Fed policy decision.

BOC Policymaker Lane Highlights CAD Strength. The Loonie pulled back from its recent rally when BOC policymaker Lane gave his testimony during the start of what would likely be a monetary policy-focused week.

Yen Gave Up Ground on Improving Risk Sentiment. The Japanese Yen’s recent selloff came to a halt in ahead of the BOJ decision, as investors decide to wait and see if the central bank would follow through on what many analysts believe will be an aggressively loose monetary policy or if they will disappoint yet again. Dollar eased 0.1 percent versus the yen after marking its highest since July 27 overnight.

Pound Pulled Back After Carney’s Speech. Pound pairs were already jittery in the hours leading up to BOE head Carney’s testimony as market participants were probably expecting him to temper the currency’s strong rally. He didn’t really say anything downbeat but traders didn’t seem so impressed by his rationale for hiking rates.

Gold Higher Ahead of Fed Meeting. Gold on Tuesday inched up from its lowest in over two weeks as the dollar shed some of its gains from the previous session, with market focus on a two-day Federal Reserve meeting that kicks off later in the day.

Watch Out Today For:

02:30 am GMT: AUD RBA Meeting Minutes

US yields stabilise ahead of FOMC meeting

After soaring continuously for the last 10 days in anticipation of this week FOMC meeting, US rates are taking a breather. The monetary policy sensitive 2-year yield rose more than 12bps since September 8th and stabilised slightly below 1.40% on Tuesday morning. Similarly, 5-year and 10-year yields consolidated gains after a rally of 0.21bps and 0.22bps, respectively.

The recovery in US yields was of little help for the US dollar as this is part of a broader move as rates across the globe also increased in anticipation of tighter monetary policies from most central banks. Although the Federal Reserve should keep the federal funds rates unchanged tomorrow, market participants are looking for a starting date of the balance sheet runoff. It is hard to say when the Fed will start to unload its massive holding, most likely October or December this year, but it will act gradually and with extreme caution in order to avoid a sell-off in bonds and therefore an uncontrolled surged in yields that could be extremely damaging for the US economy.

The USD has been trading broadly lower today, falling more than 0.20% against the single currency and around 0.30% against the Aussie and the Kiwi. Investors will most likely avoid taking too much risk as the risk for disappointment should not be underestimated. Nevertheless, given the fact that the market is mostly short USD, we think the risk should be skewed to the upside.

Eurozone: capital inflows increase at a faster pace

Today has been released the current account of the balance of payments for July which is a good metric to measure any change in regards to the ECB monetary policy. It helps us to measure any potential capital inflow or outflow. The July data has seen an increase of the current account balance to €8.625billion from €5.257 billion. Inflows towards the Eurozone are increasing at a faster pace.

Those inflows are mostly due because of strong market expectations that the ECB will starts tightening its monetary policy by announcing a reduction of its asset purchase program at its next meeting. The ECB monetary policy has largely driven, over the past few years, money towards the global bonds market which has risen significantly. Any further tapering would likely push investors to unwind their foreign assets position and drive money back to the Eurozone.

As a result, we believe that upside pressures on the Eurodollar pair are very likely to continue despite the rate differential between the US and the EU is rising, in particular the front-end of the US yield curve. Anyway the rate differential is not a great metric for estimating future currency demand. We keep on considering that the state of the US economy is overestimated and that investors are keen to unwind their long dollar position. A Eurodollar at 1.23 represents a decent medium-term target.

Volatile Asia

Risk appetite started strong in Asia, but weaken as Europe walked through the door. Volatility in USDHKD continue to surges as HKMA withdrew excess liquidity from the banking system by offering additional $HK40bn of exchanges bills. The market was caught short HKD, which has been used as a funding currency in carry trades, causing USDHKD to fall sharply. However, the influence on rates and liquidity is questionable suggesting USDHKD will likely move back about 7.82. In Japan, Japan’s PM Shinzo Abe confirmed that snap elections were on the table (rumored that Oct 22nd could be the proposed date). PM Abe rating have recovered over public worries over North Korea and disarray in the opposition Democratic Party For the market the focus will be on the fate of Abenomics which is connect to the ruling party. USDJPY rally to 111.70 has been is support by expectation another Liberal Democratic Party (LDP) win will extend Abenomics. FX trader will be watching the Polls cautiously, should Abe popularity wane, watch for JPY to gain strength.

EUR/USD

Current level - 1.1982

The rise from 1.1830 is intact and there is still a risk of a further extension towards 1.2070. Crucial on the downside is 1.1915 low and a break through it will signal a slide to 1.1830, en route to 1.1660.

USD/JPY

Current level - 111.72

The bias is still positive, for a rise towards 112.80 mark. Crucial support lies at 110.50.

GBP/USD

Current level - 1.3530

Yesterday's slide has been reversed above 1.3440, but the rise is pretty corrective in nature, so I favor another downswing to the mentioned support. A break through 1.3440 will challenge 1.3340 area.