Sample Category Title

GBP/USD - 1.3423

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3416

Kijun-Sen level                    : 1.3302

Ichimoku cloud top              : 1.3250

Ichimoku cloud bottom        : 1.3232

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although cable has risen again after brief pullback and near term upside risk remains for recent upmove to extend gain to 1.3450-60, loss of near term upward momentum should prevent sharp move beyond 1.3475-80 and reckon 1.3500 would hold from here, risk from there has increased for a retreat later.

In view of this, would not chase this rise here and would be prudent to stand aside in the meantime. Below 1.3380-85 would defer and suggest top is possibly formed, bring correction to 1.3340-45, break there would confirm and further weakness to the Kijun-Sen (now at 1.3302) would follow.

Sunrise Market Commentary

• Rates: Markets show signs of habituation to North-Korean tensions
  The downside in US Treasuries was blocked yesterday by a new North-Korean threat despite a hawkish signal of the BoE and higher-than-expected US CPI data. The missile threat was put into practice overnight, but markets show signs of habituation. The past week's extreme safe haven flows didn't materialize, suggesting that US eco data will prime today!
• Currencies: Will US data be strong enough to lift the dollar beyond first resistance?
  A further rise in core yields and of the dollar was blocked by geopolitical tensions yesterday. The dollar failed to clear first important resistance against the euro and the yen. Will today's US data be strong enough to do the job? Sterling might remain well bid as the BoE signaled a rate hike yesterday

The Sunrise Headlines

• The market reaction to the latest missile test by North Korea was muted this morning, with investors largely shrugging off news that a missile launched by Pyongyang had once again overflown Japan. Asian stocks trade mixed.
• US secretary of state Rex Tillerson has called on China and Russia to take “direct actions of their own” against North Korea following Pyongyang's missile test on Friday that flew over northern Japan.
• Theresa May will attempt to break the Brexit impasse with a speech next week in Florence setting out her plans for a transition deal that is seen in London as the “key” to addressing Brussels' concerns about a €30B budget hole.
• While the Bank of Canada's inflation targeting regime has worked well, the central bank is open to alternatives and wants to communicate in a way that avoid unproductive volatility, deputy governor Wilkins said.
• Top congressional Republicans signaled that they wouldn't be pressured into enacting an immigration framework reached between President Trump and top Democrats.
• EU finance ministers discuss deepening of economic and monetary ties, developing a capital-markets union and tax matters today in Tallinn. EC Juncker will also push for the creation of a regional finance and economy minister post.
• Today's calendar heats up in the US with Empire Manufacturing, retail sales, industrial production and University of Michigan consumer confidence. ECB Nouy, ECB Lautenschläger and BoE Vlieghe are scheduled to speak

Currencies: Will US Data Be Strong Enough To Lift The Dollar Beyond First Resistance?

Will US data help USD to overcome first resistance?

The dollar couldn't extend gains yesterday even as the interest rate context and the data were initially supportive. Core yields rose after the BoE signalled a rising probability on a rate hike and a higher-than-expected US CPI. Headlines that North Korea was preparing a new missile test in the direction of Japan blocked further USD-gains. The dollar almost immediately reversed post-CPI gains and returned to the levels seen earlier in the session. EUR/USD finished the session at 1.1919 (from 1.1885 on Wednesday). USD/JPY closed at 110.24 (from 110.49).

Overnight, North Korea indeed launched a new missile over Japan's Northern Island Hokkaido. However, the multiple North Korean actions have a ‘diminishing impact' on markets. There were some jitters in regional equity indices and in USD/JPY as the headlines on the test flashed on the screens. However, any risk-off reaction was much more limited than at previous occasions. Asian equities currently mostly show limited losses. Japan even trades in positive territory. USD/JPY spiked briefly below 110 but trades again in the 110.40 area. The EUR/USD chart hardly shows any ripples. The pair trades just north of 1.19. That said, the geopolitical noise still prevents USD/JPY and EUR/USD to clear first key levels respectively at 110.95 and 1.1823.

Today's EMU calendar only contains the trade balance which is no market mover. The US calendar is again interesting with the Empire manufacturing survey, retail sales, industrial production and consumer confidence from the U of Michigan. The consensus expects a limited setback for the confidence data (NY manufacturing and Michigan,). Retail sales growth is expected to slow after a strong August figure. In general, we think that expectations on the US data are no that high. Positive surprises are especially possible in retail sales and production.

Of late, global factors were the main driver for the dollar. Regarding the data, the focus of FX markets was more on price data rather than on activity data. Even so, if yesterday's slightly higher than expected CPI would be followed by a set of decent activity data, it should solidify a ST floor for the dollar going into next week's Fed meeting. Yesterday, USD/JPY and EUR/USD tested/came closer to first technically significant resistance/support at respectively 110.67/95 and 1.1823. A break /real test was blocked by the North Korea headlines. Will today's US eco data be able to do the job? Clearing these levels in a sustainable way would call off the USD negative momentum short-term. However, if the break doesn't succeed today, it would be disappointing for USD bulls.

Global context. The euro remained strong last week even as the ECB delayed communication on APP tapering till October and as Draghi kept a soft tone. Markets apparently took the view that ECB normalisation will come anyway. At the same time, the dollar lost further interest rate support as global uncertainty kept US yields on a downward trajectory. Finally, the decline in US yields and of the dollar had gone far enough given recent US eco data, which remained fairly good. A technical correction occurred this week. The dollar in the first place needs an improvement in global sentiment and higher yields. US data might become noisy due to the impact of the hurricanes and can cloud the Fed's outlook and complicate a USD rebound. In this context, we want more confirmation that the recent bottoming out process in US yields and in the dollar might be the start of more sustained USD gains. We keep a close eye on how the test of first important technical levels turns out (cf supra). A break of EUR/USD below 1.1823 would open the way to the 1.1662 correction low. We remain cautious on a sustained upside break in USD/JPY .

EUR/USD consolidation off recent top. Will US data be strong enough for a downside test/break?

EUR/GBP

BoE rate hike signal propels sterling

Yesterday, the Bank of England voted 7-2 to leave its policy rate unchanged. However, the BoE clearly signalled that the recent up-tick in inflation can no longer be ignored if eco data continue to come in as expected. A rate hike in the coming months is very well possible. Sterling started a new upleg. EUR/GBP declined more than one big figure and fell below the 0.89 big figure. Cable also set a new ST top in the 1.34 area.

There are no important UK eco data today. However, BoE's Vlieghe will give a speech. He is a well-known dove. We don't expect that he will be able to change to market repositioning after yesterday's clear message from the BoE Minutes. After yesterday's jump of sterling, quite some good news should gradually be discounted. Even so, we don't row against the sterling positive tide yet. The EUR/GBP correction might still go a bit further.

From a technical point of view, EUR/GBP cleared 0.8854/80 resistance (top end June), opening the way for a protracted August rebound. The move was the result of euro strength. Simultaneously, UK price data were soft enough to keep the BoE side-lined. Recent price data amended this story and the ST-trend reversal of sterling was confirmed/reinforced by yesterday's BoE comments. Medium term, we maintain a EUR/GBP buy-on-dips approach as we expect the combination of relative euro strength and sterling softness to persist. However, the prospect of some withdrawal of policy stimulus probably has put a solid floor for sterling ST term. We let the current correction do its job, before selling sterling versus the euro.

EUR/GBP: BoE rate hike signal accelerates GBP-rebound

Download entire Sunrise Market Commentary

EUR/USD - 1.1925

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1916

Kijun-Sen level                  : 1.1884

Ichimoku cloud top             : 1.1931

Ichimoku cloud bottom      : 1.1905

Original strategy  :

Bought at 1.1855, Target:1.1955, Stop: 1.1835

Position : - Long at 1.1855

Target :  - 1.1955

Stop : - 1.1835

New strategy  :

Hold long entered at 1.1855, Target:1.1955, Stop: 1.1865

Position : - Long at 1.1855

Target :  - 1.1955

Stop : - 1.1865

As the single currency found support at 1.1838 yesterday and has staged a rebound, retaining our near term bullishness and consolidation with mild upside bias remains for another bounce to 1.1950, however, break of 1.1965-70 is needed to signal low is formed at 1.1838, bring further gain towards resistance at 1.1995 which is likely to hold from here.

In view of this, we are holding on to our long position entered at 1.1855. Below 1.1865-70 would risk retest of said support at 1.1838, break there would signal recent decline from 1.2093 top is still in progress and may extend weakness to 1.1823 support, however, still reckon downside would be limited to 1.1800 and bring rebound later.

USD/JPY - 110.67

Most recent candlesticks pattern   : N/A

Trend                      : Up

Tenkan-Sen level              : 110.14

Kijun-Sen level                  : 110.30

Ichimoku cloud top             : 110.44

Ichimoku cloud bottom      : 110.01

Original strategy  :

Bought at 109.65, met target at 110.65

Position :  - Long at 109.65

Target :  - 110.65

Stop : -

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Although the greenback retreated quite sharply after using to 111.04 yesterday, dollar found good support at 109.55 (we recommended to buy at 109.65 and a long position was entered) and has rebounded in line with our bullishness expectation (our long position reached target at 110.65 with 100 points profit), however, reckon said resistance at 111.04 would hold on first testing, bring further consolidation. Only a firm break above this level would signal recent upmove has resumed for headway to 111.40-50 but previous resistance at 111.71 should hold from here.

As we have taken profit on our long position entered at 109.65, would not chase this move here and would be prudent to stand aside for now. Below the Kijun-Sen (now at 110.30) would prolong consolidation, bring weakness to 110.00 but said support at 109.55 should remain intact, bring another rebound later. 

Currency pair EUR/USD

The EUR/USD made a bullish bounce at the 100% Fibonacci level of wave C (red). Price will need to break above the resistance trend line (red) before the completion of wave 4 (blue) could become more likely.

The EUR/USD completed 5 internal waves (brown) within wave 5 (purple) and price bounced at the previous bottom (green line) of wave A. A break of resistance (red) could indicate the start of a new uptrend.

Currency pair USD/JPY

The USD/JPY made a bearish bounce at the strong horizontal resistance level (red). This could indicate the start of a wave 2 (brown) or alternatively a wave B (green). The correction could unfold via an ABC (blue) and therefore the Fibonacci levels of wave B vs A could act as resistance.

The USD/JPY is in a wave B (blue) unless price manages to break above the 138.2% Fibonacci level. A break below support (green) could see price make a bearish breakout within wave 2 (brown).

Currency pair GBP/USD

The GBP/USD indeed bounced at the Fibonacci levels of wave 4 (purple) retracement and continue with the larger uptrend of wave 3 (blue).

The GBP/USD could push towards the Fibonacci targets of wave 5 (purple).

Daily Pivots: (S1) 0.9598; (P) 0.9651; (R1) 0.9686; More....

At this points, USD/CHF still cannot sustain above 0.9679 resistance. Intraday bias remains neutral first. Firm break of 0.9679 will indicate near term reversal and turn bias to the upside for 0.9772 resistance for confirmation. However, below 0.9582 minor support will maintain bearishness and turn bias to the downside for 0.9420 low first. Sustained break of 0.9420 will resume whole decline from 1.0342.

In the bigger picture, current development suggests that 0.9443 key support (2016 low) could be taken out firmly as down trend form 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.

Daily Pivots: (S1) 109.85; (P) 110.44; (R1) 110.82; More...

At this point, USD/JPY still cannot sustain above 110.66 resistance yet. Intraday bias remains neutral first. Decisive break of 110.66 will confirm short term bottoming and turn bias back to the upside for 114.49 resistance. However, break of 109.29 will retain bearishness and turn bias back to the downside for 107.31.

In the bigger picture, rise from 98.97 (2016 low) is now 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.

Asia Summary

Asian equity markets have initially had a muted reaction to North Korea’s most recent missile test. According to Japan’s Defense Minister Onodera the missile launched might be an intermediate range ballistic missile (IRBM), as opposed to an intercontinental ballistic missile (ICBM). The UN Security Council is expected to meet later during the US afternoon.

USD/JPY, Nikkei, US equity futures pare opening losses.

Key economic data

(NZ) NEW ZEALAND AUG BUSINESS NZ MANUFACTURING PMI: 57.9 V 55.5 PRIOR

(ID) Indonesia Aug Trade Balance: $1.72B v $0.6Be; Exports Y/Y: 19.2% v 8.3%e

Speakers and Press

China

(CN) China NDRC: Higher inflation in Aug mainly due to ‘short-term’ factors; CPI and PPI to continue to be a ‘reasonable’ range; Will further open up foreign investment in finance and new energy vehicles.

Other

(KR) North Korea fires a missile from Pyongyang towards the east, missile passes over Japan - South Korea press

(KR) US Military: Detected single North Korea missile launch of an intermediate range ballistic missile (IRBM); did not pose threat to Guam

(JP) Japan Def Min Onodera: North Korea missile may be intermediate range ballistic missile (IRBM) and possibly the same type that was launched on Aug 29th

(JP) Japan Chief Cabinet Sec: Missile situation similar to that on Aug 29; launch caused no damage to ships or aircraft

(KR) South Korea Military: Fired missile in a test into the sea, coinciding with North Korea's missile launch

(KR) UN Security Council to meet at 3 pm EDT on the most recent North Korea missile test

(KR) South Korea President Moon said to have been briefed yesterday about possible North Korea missile launch – South Korean Press

(KR) South Korea President Moon: South Korea has power to ‘pulverize’ should North Korea provoke; Will not sit idle on North Korea provocation.

(KR) White House: President Trump has been briefed on North Korea missile launch by his Chief of Staff Kelly

(KR) US Sec of State Tillerson: Calls for China, Russia to take actions of their own regarding North Korea, as they must indicate their ‘intolerance’

(KR) US President Trump to visit South Korea in Nov - South Korean Press

(KR) NAND Flash prices expected to rise by ~15% for Q4; cites demand related to electronic devices and shortage of supplies which could last through Dec - Taiwanese Press

(CA) Bank of Canada Wilkins: Not ideal to give markets full plan on rates, every rate decision is 'live'

(PE) PERU CENTRAL BANK (BCRP) CUTS REFERENCE RATE BY 25BPS TO 3.50%; NOT EXPECTED

Asian Equity Indices/Futures (00:30ET)

Nikkei +0.6%, Hang Seng +0.4%, Shanghai Composite -0.3%, ASX200 -0.6%, Kospi -0.15%

Equity Futures: S&P500 -0.1% ; Nasdaq flat , Dax flat , FTSE100 -0.2%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.1902-1.1924; JPY 109.56-110.44; AUD 0.7987-0.8005; NZD 0.7212-0.7240

Aug Gold +0.4% at 1,334/oz; Aug Crude Oil -0.3% at $49.74/brl; Sept Copper -0.2% at $2.956/lb

GLD SPDR Gold Trust ETF daily holdings unchanged at 838.6 metric tons

(CN) PBoC OMO: injects CNY200B vs injected combined CNY100B in 7,14 and 28 day reverse repos prior

(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.5423 V 6.5465 PRIOR

Equities notable movers

Australia

Fortescue Metals, FMG.AU CEO to resign in early 2018; -4%

Myer Holdings MYR.AU, Broker commentary; -4.5%

US markets on close: Dow +0.2%, S&P500 +0.5%, Nasdaq -0.5%, Russell -0.1%

Best Sector in S&P500: Utilities +0.8%

Worst Sector in S&P500: Consumer Discretionary -0.5%

At the close: VIX 10.44 (-0.06pts); Treasuries: 2-yr 1.359% (flat), 10-yr 2.18% (-1bp), 30-yr 2.761% (-3bps)

US Market Summary

US stocks opened lower after Aug CPI figures ran hotter than expected, raising investor rate hike expectations, and on some more reports of North Korea preparing for another missile test. However the S&P and Dow recouped most of their early losses, at another close near all-time highs. The Bank of England helped push global rates higher and boosted the pound sterling to a one year high after Governor Carney hinted a turn could be coming for rate policy in the UK. Copper prices have now fallen

~7% from recent highs, while global mining names underperformed in the wake of soft Chinese economic data. The dollar softened, while Treasury yields rose on the shorter end of the curve. Crude hit its highest levels since May, boosting energy names on the day, while telecom and consumer discretionary sectors are in the red.

US Afterhours Movers

ORCL Reports Q1 $0.62 v $0.61e, Rev $9.21B v $9.02Be; Total Cloud rev $1.47B v $969M, +51% y/y; +1.9% afterhours

Daily Pivots: (S1) 145.73; (P) 147.03; (R1) 148.98; More

GBP/JPY's rise continues today and breach of 148.42 resistance argues that whole medium term rebound from 122.36 is resuming. Intraday bias stays on the upside for 150.43 long term fibonacci level. Break there will target 61.8% projection of 122.36 to 148.42 from 139.29 at 155.39. On the downside, below 146. 57 minor support will turn bias neutral and bring retreat before staging another rally.

In the bigger picture, the consolidation from 148.42 should have completed and medium term rebound from 122.36 is resuming. 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.

Market movers today

Following the upward surprise in US CPI inflation yesterday, focus on the macro front today turns to US retail sales for August, which we estimate increased by 0.3%. Preliminary consumer confidence for September from the University of Michigan is also released. Like business confidence, consumer confidence is still very high, but Hurricane Harvey and an unstable political environment within the US may have weighed on it and we estimate a slight fall to 95.0. Also, keep an eye on the five- to 10-year inflation expectations in the survey. They trended lower during 2015 and 2016 but have moved sideways at around 2.5% for a year now.

The US Empire index (business confidence) is likely to retreat a bit in September after hitting the highest level in three years in August. The indicator is quite volatile and the August level was likely to be ‘too strong’ relative to the underlying development. US industrial production for August is also due and estimated to increase 0.1% m/m.

On the central bank front, we have speeches today by ECB members Nouy (8:00 CEST), Visco (09:00 CEST) and Lautenschläger (10:15 CEST).

With the German parliamentary election less than 10 days away, we have published another German election monitor No. 2, 14 September, looking at some of the most pressing issues that politicians will have to deal with in the future.

Selected market news

US stock futures and Asian shares dipped after North Korea fired another Intercontinental Ballistic Missile over Japan into the Pacific Ocean this morning, demonstrating its defiance to new UN sanctions agreed on 3 September. Save haven assets were consequently in demand this morning, with gold firmer and USD/JPY dipping back below 110. The launch is likely to weigh on risk sentiment today, but the market impact should be short-lived unless the conflict escalates, given that we have already seen similar launches from North Korea in past weeks and months.

As we expected, the Bank of England (BoE) left its policy unchanged at the meeting yesterday, but it surprised with a warning of a possible forthcoming rate hike ‘over coming months’ if underlying inflation moves higher and the unemployment rate moves lower. The comment fuelled a GBP rally (see FX section). We think a hike in November is a close call but given that one condition is ‘a gradual rise in underlying inflationary pressure’, which we interpret as higher wage growth, we still think the BoE will stay on hold this year. Our base case is now a hike in Q1 18, as the BoE is less worried about political uncertainty and more focused on economic data.

Japanese manufacturers' confidence worsened for the first time in four months in September from the previous month's decade high. Manufacturing PMIs have shown similar signs of a slowdown, but we still expect the recent growth momentum to continue in 2017, supported by a very strong labour market, the global economic recovery and extremely accommodative economic policies.