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STOCKS

Almost all indices look positive and bullish for the week except Shanghai which could possibly remain stable.

Dow (22331.35, +0.28%) could test 22400-22600 levels in the near term and Dax (12559.39, +0.32%) looks potentially bullish on the 3-day candle chart having a fair chance of moving up towards 12800 while above 12400. Thereafter a corrective fall from 12800 could be expected. Also note some rejection could come from levels near 12650 which is a decent resistance below 12800.

Nikkei (20197.56, +1.45%) also looks bullish just now and could test 20500-20800 before coming off from there. Note that for the long term 21000 is a crucial resistance and we do not expect a break above that in the coming weeks. Rejection from 20800-20700 looks more likely.

Shanghai (3357.05, -0.17%) is also potentially bullish to stable while above 3350. Only on a break below 3350, we may look at lower levels of 3325-3300. For now, while 3350 holds, the index could move up towards 3375-3390 again. has bounced back from levels near 3350 and while that holds, we may see a rise towards 3400 in the near term. A break below 3350, if seen could take the index lower towards 3325. Need to watch price action at current levels.

Nifty (10153.10, +0.67%) is all set to hit new highs near 10200-10300 levels in the coming sessions. But note on a longer term there could be a sharp fall on the index from levels below 10400-10300. For the near term, the index has some more room on the upside.

COMMODITIES

Commodities are all mixed. Precious metals look bearish over the next couple of sessions while Crude prices may remain stable. Copper looks bullish for the coming sessions.

Brent (55.39) has immediate resistance near 56-57 region and could come off from these levels in the near term, again targeting levels near 55-54 in the coming sessions. A break above 56 could take it higher towards 56.65 but chances seem less just now.

WTI (49.87) is likely to consolidate sideways within 50.50 and 49.10 for a few sessions. Support near 49 is holding well for now.

Gold (1308.29) and Silver (17.18) are down as expected. Gold could test 1296 over today and tomorrow before again attempting a bounce above 1300. Silver could come off towards 17.00 in the near term.

Copper (2.9680) has bounced a bit from support near 2.95 and while that holds, the price could rally towards 3.05 in the near term.

FOREX

Although the Euro (1.1965) and Aussie (0.7965) retain their uptrend, we need to watch their Supports. This is the inverse of the Dollar Index (91.96) which remains in a downtrend, but we need to watch the Resistance at 92.50.

Yesterday's reading remains valid on the Euro (1.1965) that "Two possibilities from here - either further sustained rise past 1.2035-50, or range trade between 1.2000 and 1.1850. The first three days may be quiet, waiting for the FOMC on Wednesday." Note though, that the overall uptrend remains in force while above 1.1850.

A bit of profit-taking in the Pound (1.3515) after a new high of 1.3619 was seen yesterday. Slightly greater chances now of a further dip towards 1.3450. Importantly, there are some chances of long-term Resistance at 1.38.

Increasing chances that Dollar-Yen (111.55) may rise further towards 113.50 over the next couple of weeks. The way to the upside is being cleared by the rise in Euro-Yen (133.45) well above 133.

Need to watch Support at 0.7960-50 on the Aussie (0.7965) which has not been able to build on its rise above 0.80 so far. Still, the uptrend remains valid while the Support holds. But needs to be watched carefully.

Dollar-Yuan (6.5917) has risen past 6.5750 and is within kissing distance of 6.60. Dollar-Rupee (64.13/14) might test 64.20 again. Need to see if that holds or not. Be careful there, the tide could just be turning.

INTEREST RATES

Minor uptick in German yields (10Yr 0.45%, up from 0.44% and 30Yr 1.25%, up from 1.23%). This is counterbalanced by the rise in the US 10Yr (2.22%, up from 2.20%), keeping the 10Yr German-US Spread (-1.77%) steady. This is the crucial variable to watch. A fall below -1.79% could weaken the Euro.

The US Yield Curve has been flattening over the last one week. However, we note a crucial Support near the current level (0.98%) on the 30-5 Yr Spread.. A bounce from here would lead to Curve steepening, suggesting chances of an interest rate hike ahead.

Resistance are holding on UK Gilts, at 1.30% on the 10Yr (1.30%) and 0.75% on the 5 Yr (0.73%). If the FOMC hints at a rate hike, the Pound could see profit-taking. A hint on the other side (delay in rate hike) could push the Pound up towards 1.38.

The Japanese 10Yr (0.03%) is dipping again within its overall downtrend, suggesting decent chances of further rise in the Dollar-Yen towards 113.50.

Over to the FOMC tomorrow and the BOJ on Thursday.

The Canadian dollar fell on Monday after the US dollar is trading near the 1.23 price level. The September Federal Open Market Committee (FOMC) meeting kicks off on Tuesday and the market expects that when it ends on Wednesday the US central bank will have officially launched its balance sheet reduction initiative. The fixed income market is also eyeing a higher than 50 percent chance of a US rate hike in December.

Bank of Canada (BoC) Deputy Governor Timothy Lane was the first official to speak after the surprise rate hike in September. The Canadian central bank pivoted from a slightly dovish rhetoric until another Deputy Governor, Carolyn Wilkins spoke about the need to remove some stimulus. The comments were followed by Governor Stephen Poloz and the market got onboard with the rate hike announced in July. Policy makers were quiet since then and while the decision to raise interest rates were not a shock, specially considering the rapid pace of growth of the Canadian economy, the lack of warning from the central bank was an issue with market analyst.

Deputy Governor Lane said that the BoC will monitor how the economy responds to a higher interest rate and a stronger loonie. NAFTA was also addressed by the policymaker on the same day that US Trade envoy Robert Lighthizer said negotiations were moving quickly. Both Mexico and the United States want a fast resolution to the trade deal renegotiation to avoid it creating a political quagmire with upcoming 2018 elections in both countries.

Mexico’s Economy Minister expects the future of the agreement to hinge on trade deficits and rules of origin which will be discussed on the third round of negotiations to take place in Canada at the end of September.

The USD/CAD rose 0.876 percent on Monday. The currency pair is trading at 1.2298 as the USD recovered ahead of the end of the September Federal Open Market Committee (FOMC) on Wednesday. The Fed funds rate futures trading prices are pointing to a rising probability of a rate hike in December, but the move will be dependant on economic indicators release between now and then. The September monetary policy meeting was earmarked by the market early on as the one where the Fed would announce the start of its balance sheet reduction. With so much room to operate given the massive amount of funds accumulated during its QE program, the Fed has wiggle room and both hawks and doves within the FOMC welcome the initiative.

A rate hike in the United States is not as clear cut. Minnesota Fed President Neil Kashkari has become the major dove talking against another rate hike citing weak inflation. GDP growth has surprised to the upside, but inflation and retail sales remain soft and could push the December rate hike into next year, and probably into the mandate of a yet to be named Fed Chair after Fed Chair Janet Yellen’s term expires in February.

The September rate hike in Canada leaves the interest rate back to 1.00 percent, the same level it had in 2015 before the BoC had to proactively cut its rate twice to shield the economy from falling oil prices. The central bank is convinced the economy is strong enough to remove that stimulus, but the strong growth and comments on the strong currency being a reflection of the economy could lead to another rate hike this year

US energy prices are flat at 0.024 percent in the last 24 hours. The price of West Texas Intermediate is trading at 49.81 as energy is trading at a tight range at the top of the week. Seasonal maintenance has reduced demand for crude and stopped the oil rally in its tracks following the impacts of Hurricane Harvey and Irma.

While the Organization of the Petroleum Exporting Countries (OPEC) production cut agreement has managed to stabilize the price of oil, it has failed to spark a sustained recovery of prices. The $50 price level has been a hard one to crack and trade above consistently. US crude inventory reports will continue to show the impact of natural storms, but those effects should be worked out sooner rather than later. Energy markets will continue to trade on the assumption of a larger supply despite disruptions still creating a glut as demand grows at a slower pace.

Market events to watch this week:

Monday, September 18
9:30pm AUD Monetary Policy Meeting Minutes

Tuesday, September 19
8:30am USD Building Permits

Wednesday, September 20
4:30am GBP Retail Sales m/m
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Economic Projections
2:00pm USD FOMC Statement
2:00pm USD Federal Funds Rate
2:30pm USD FOMC Press Conference
6:45pm NZD GDP q/q
11:50pm JPY Monetary Policy Statement

Thursday, September 21
Tentative JPY BOJ Policy Rate
2:30am JPY BOJ Press Conference
8:30am USD Unemployment Claims

Friday, September 22
8:30am CAD CPI m/m
8:30am CAD Core Retail Sales m/m
8:30am All Day NZD Parliamentary Elections

Mark Carney cast himself as a less-enthusiastic hawk on Monday while the BoC flexed its jaw muscle. The US dollar was the top performer while the Canadian dollar lagged. The RBA meeting minutes are due out later.

BoE Governor Carney had a chance to fine-tune his comments Monday, reiterateing that some tightening might be needed in the coming months. However, he also said that monetary policy may have to 'move in order to stand still' because rates are rising elsewhere.

In headline-driven markets, that's what stood out but a closer inspection showed that was just a small part of his overall justification for hiking. A bigger reason – and one that will last longer – is that he believes Brexit will be inflationary. Others may differ but the market voted for lower GBP on the overall message, perhaps more in a nod to the outsized recent gains than a genuine re-think on the path of rates. Cable fell a cent on the day.

In the bigger picture, a shakeout is emerging in markets trying to make sense of central bank policy. The BoC showed that the shift from dovish, to neutral to two rates hikes can take place in six months and we are all on the lookout for the next target. There are also signs the BOC is having second thoughts. Deputy Governor Lane said Monday that they will be “strongly” taking into account the CAD leap in upcoming decisions. That spooked loonie traders and sent USD/CAD nearly a full-cent higher.

Maybe the more-interesting comment in his speech was that rates are still relatively low compared to what they believe is the neutral level. It's another sign of how jumpy markets are right now. That means opportunities will abound in the weeks ahead.

Or even the day ahead. The RBA Minutes are up next as the market tries to sort out which way Lowe will tilt. The headlines are due at 0130 GMT.

The British pound has posted losses at the start of the week, after posting strong gains in Thursday and Friday sessions. In North American trade, GBP/USD is trading at 1.3485, down 0.72% on the day. On the release front, British Rightmove HPI declined 1.2%, its second decline in three months. Bank of England Governor Mark Carney will deliver a lecture at the International Monetary Fund in Washington, D.C. In the US, there are no major releases on the schedule.

The pound enjoyed an excellent week, as GBP/USD jumped 3.0% percent. The pound climbed on Thursday and Friday, following surprisingly hawkish minutes from the BoE's policy meeting. As expected, the BoE opted to hold interest rates at 0.25%, where they have been pegged since August 2016. There have been calls for the BoE to raise rates in order to fend off high inflation levels, but most policymakers are of the opinion that current economic conditions do not warrant a rate hike. However, the minutes were surprisingly hawkish, stating that if current economic conditions continue, then "withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target". The strong guidance from the BoE was unusual, and sets the stage for a likely rate hike in November, when the BoE holds its next policy meeting. Investors reacted positively to the hawkish message from the bank, sending the pound sharply higher, with the pound breaking the 1.36 level on Thursday, for the first time since June 2016.

US consumer spending has been a sore spot in a generally strong economy, and there was more disappointing news on Friday, as August retail sales reports missed expectations. Core Retail Sales slowed to 0.2%, missing the forecast of 0.5%. Retail Sales was even worse, posting a decline of 0.2%, compared to the estimate of +0.1%. Much of the slowdown in the August numbers are attributable to lower automobile sales, which have been slowing in recent months, and was likely made worse by Hurricane Harvey. These numbers underscore continuing weakness in consumer spending, despite a strong labor market. The Federal Reserve remains concerned about weak consumer spending, a key driver of economic growth, and could make reference to the lack of spending in its rate statement, which will be released later this week.

USD/JPY has posted gains in the Monday session, continuing the upward movement which marked Friday trade. In the North American session, the pair is trading at 111.50, up 0.58%. On the release front, it is a quiet start to the week, with Japanese banks closed for a holiday. In the US, there are no major events on the schedule. On Tuesday, the US releases Building Permits and Housing Starts.

US releases wrapped up the week on a sour note, as retail sales reports missed expectations. Core Retail Sales slowed to 0.2%, missing the forecast of 0.5%. Retail Sales was even worse, posting a decline of 0.2%, compared to the estimate of +0.1%. Much of the slowdown in the August numbers are attributable to lower automobile sales, which have been slowing in recent months, and was likely made worse by Hurricane Harvey. These numbers underscore continuing weakness in consumer spending, despite a strong labor market. The Federal Reserve remains concerned about weak consumer spending, a key driver of economic growth, and could make reference to the lack of spending in its rate statement, which will be released later this week.

It was a rough week for the Japanese yen, as USD/JPY surged 2.4 percent. The yen pushed above the 111 level on Thursday, for the first time since August. Recent tensions between North Korea and its neighbors had boosted the yen, traditionally a safe-haven currency. North Korea had alarmed South Korea and Japan by firing missiles over Japan and testing a hydrogen bomb. However, the crisis has eased in the past week, reviving risk appetite. North Korea sent another missile over Japan last week, but this failed to put a dent in investor confidence. It's becoming increasing doubtful that last week's uneasy calm will continue, and that could mean more volatility from the yen. On Sunday, the US ambassador to the United Nations, Nikki Haley, warned that the UN Security Council had exhausted its options, and the US might have to refer the matter to the Pentagon. This was followed by a US-South Korean air drill on Monday.

The NAHB/Wells Fargo Housing Market Index (HMI) fell 3 points to 64 in September, reversing August's gain. Both present and future sales fell by 4 points. The Midwest and South accounted for the bulk of the drop.

Homebuilder Confidence Declines Slightly

• Homebuilder confidence fell slightly in September, as Hurricanes Harvey and Irma impacted the two largest states for new single-family homebuilding. Damages from the hurricanes introduce an element of uncertainty into the housing outlook and will likely bolster labor and material costs.
• The drop in the HMI may signal some moderation in new home sales and homebuilding during the latter part of 2017.

Hurricane Damages May Have Dampened Confidence

• Harvey and Irma caused widespread damage in Texas and Florida, which may interrupt activity in states that combined to account for 25 percent of the nation's single-family permits.
• Prospective buyers' traffic fell just 1 point to 47, which is the lowest since November 2016. Buyer traffic continues to be limited by low levels of completed homes but remains close to its recent range and is consistent with continued sales growth.

3 positions were entered last week with total loss of 60 points and the positions are listed below.

11 Sep : EUR/JPY - Short at 130.20, exited at 130.80  (- 60 points)
14 Sep : EUR/JPY - Long at 131.35, exited at 131.35  ( 0 point)
14 Sep : USD/CAD - Short at 1.2240,

|                 AUD          EUR/JPY           EUR/GBP         CAD          GBP         GBPJPY
Jan             - 15             -275                - 35              -120
Feb           + 140            -17                  - 40              +11
Mar            - 20            +115                +132            - 19
Apr             + 30                                  - 40             +120                              + 45
May                             - 55                  +100             - 6               -65             -60         
Jun            + 81           +150                - 10             +185           -120           +205
Jul                                                       - 40                                                   - 60
Aug           +155          +200                 + 100           + 195           -45            - 50
Sep                               -50                                                                         +10   
Oct           
Nov         
Dec                                                                                                                                               
Y-T-D        + 371           + 68               +167            +658             -230            +90

7 positions were entered among all 4 currency pairs with total profit of 295 points and the positions are listed below:

8 Sep : USD/CHF - Long at 0.9450, exited at 0.9550 (+ 100 points)
11 Sep: EUR/USD - Long at 1.1985, exited at 1.1950 (- 35 points)
12 Sep: USD/JPY - Short at 109.35, exited at 109.70 (- 35 points)
14 Sep: EUR/USD - Long at 1.1855, exited at 1.1955 (+ 100 points)
14 Sep: GBP/USD - Short at 1.3285, exited at 1.3320 (- 35 points)
14 Sep: USD/CHF - Short at 0.9680, exited at 0.9580 (+ 100 points)
15 Sep: USD/JPY - Long at 109.65, exited at 110.65  (+ 100 points)

|                 JPY             EUR             CHF            GBP

Jan          + 167             - 85              - 10            + 50
Feb          + 200            +150             +93            - 59
Mar              -23              -70               -23            - 35
Apr             + 65            + 93             + 50            - 40
May            - 65             - 35             + 100          -175
Jun            -100               -10                - 10          +175
Jul             + 85             - 35                   - 8
Aug           + 35            +210                + 35          +65        
Sep           +109            +130              +200           - 35         
Oct         
Nov        
Dec                                                                                               
Y-T-D       + 472            +343               +427           - 44     

The yen remained under pressure during today's trading as market participants were more optimistic on the global outlook. The pound retreated after climbing to its post-Brexit high versus the dollar due to some profit-taking.

Safe haven plays such as the yen and gold remained under substantial pressure today as equity markets around the world marched on to fresh highs and concerns about a possible escalation of the North Korean situation were calmed by recent developments. A speech by US President Donald Trump before the UN General Assembly is eagerly awaited for further clues on what the US policy toward North Korea is going to be, but for now it seems preference will be given to diplomatic means.

Dollar/yen was trading near the day's highs near the end of the European session at 111.54. This also represented an 8-week high for the dollar against the Japanese currency. The euro and the pound also took advantage of the yen's weakness to clock significant gains as they traded at 133.20 and 151 yen per euro and pound respectively.

Euro/dollar stayed well within recent ranges at 1.1952, with traders possibly awaiting the outcome of the 2-day Fed meeting that ends on Wednesday before pushing the pair outside recent ranges. The Fed is almost certainly expected to begin paring down its balance sheet by no longer reinvesting all of the proceeds from the QE portfolio, but a December rate hike remains a 50-50 affair more or less.

The pound was still in focus after the previous week's reassessment of probabilities about Bank of England rate hikes. The pound gave back some of its gains to trade at 1.3556 against the dollar and at 0.8818 against the euro. Earlier in the session the euro fell below the 0.88 mark but managed to recover. Forex market participants were eagerly awaiting a speech by Mark Carney in Washington for perhaps some clarification of what the Bank of England was intending to do in its next few meetings.

The economic calendar was rather light today. Eurozone inflation for August was confirmed at 0.3% month-on-month and 1.5% year-on-year, which left the euro without particular guidance. In the US, the National Association of Home Builders (NAHB) index dropped to 64 in September from 67 in August, but the market did not pay much attention to the numbers. Looking ahead to Tuesday the market will focus on the minutes from the latest RBA meeting, the German ZEW confidence survey and housing starts and building permits out of the US.

Gold was down as said previously, to a 2 ½ week low of $1310 an ounce. Crude oil (US WTI futures) failed to hang on to the important $50 mark as it dropped to $49.69.

Dow Jones future contract for December delivery retested new record high posted earlier today on acceleration after Wall St opening.

Reduced tensions over North Korea and rally of financials and industrial stocks lifted Wall St on opening, with focus turning towards this week's two-day FOMC meeting which starts on Tuesday.

Markets are expecting signs of beginning of reduction of massive US balance sheet, but also focus on comments from Fed chief Janet Yellen regarding inflation, which was the biggest obstacle for the Fed to further raise interest rate.

The Dow index posted new all-time high at 22303 on Monday, in extension of steep ascend in past five days which resulted in eventual break above previous record high at 22131.

Strong bullish sentiment could drive the price further in the uncharted territory, with initial target laying at 22341(Fibo 138.2% projection) with stretch towards Fibo 161.8% projection at 22472, being in play.

The rally could be interrupted by corrective actions signaled by overbought conditions on daily chart, but so far lacking firmer correction signals.

Dips are expected to be limited, with former high at 22131, offering solid support, followed by rising Tenkan-sen at 22000, which is expected to contain extend dips.

Res: 22341; 22472; 22552; 22682
Sup: 22223; 22131; 22066; 22035