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Daily Pivots: (S1) 1.1333; (P) 1.1383; (R1) 1.1409; More...

Intraday bias in EUR/CHF remains neutral as consolidation from 1.1537 is still in progress. More sideway trading could be seen. On the upside, break of 1.1537 resistance will confirm resumption of larger rally from 1.0629. In that case, EUR/CHF should target 1.2 key resistance level next. On the downside, firm break of 38.2% retracement of 1.0830 to 1.1537 at 1.1267 will extend the correction to 61.8% retracement at 1.1100 before completion.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1087 resistance turned support holds.

USD/JPY - 108.45

Most recent candlesticks pattern   : N/A

Trend                      : Down

Tenkan-Sen level              : 108.40

Kijun-Sen level                  : 107.97

Ichimoku cloud top             : 108.51

Ichimoku cloud bottom      : 108.21

Original strategy  :

Sell at 108.65, Target: 107.65, Stop: 109.00

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 108.90, Target: 107.70, Stop: 109.25

Position :  -

Target :  -

Stop : -

As the greenback opened higher today and has edged higher, suggesting near term upside risk remains for the rebound from last week’s low of 107.32 to extend gain to 108.70-75, however, still reckon 108.90-95 (50% Fibonacci retracement 110.49-107.32) would limit upside and bring retreat later, below the Kijun-Sen (now at 107.97) would suggest the rebound from 107.32 has possibly ended but break of 107.60-65 is needed to confirm and bring retest of 107.32.

In view of this, we are still looking to sell dollar on further recovery as 108.90-95 should limit upside. Above 109.10-15 would defer and signal low has been formed, bring test of resistance at 109.40 but price should falter well below resistance at 109.93. 

EURUSD maintains its underlying bull trend. The pair has been rising steadily in an ascending channel since April and peaked at 1.2091 on Friday. This was the highest level since December 2014.

The key 1.2100 level will likely be a challenge to break. Prices retreated just ahead of this resistance as upside momentum faded and EURUSD subsequently pulled back. Based on the momentum oscillators, it can be seen that the market’s upward trajectory has slowed over the past couple of weeks.

Both RSI and MACD indicators are moving sideways, although they remain in their respective bullish territory. This suggests there is some risk in the near-term for a corrective move lower which should find support at 1.1900. From here a deeper pull-back is expected to find support at the August 17 low of 1.1661. A break below next support at the July 18 low of 1.1471 would likely increase selling pressure. Focus would shift to the downside for a reversal in the uptrend as a move below this level would result in a more than 50% retracement of the upleg from 1.0820 to 1.2091.

Alternatively, if immediate support holds, then a move higher through resistance at 1.2100 would see a resumption of the uptrend. This would strengthen the bullish outlook with scope for EURUSD to rise to the 1.2200 area before targeting the next major high in the upper-1.2500 zone.

The uptrend appears to be firmly established in both the short and medium-term charts which suggests limited risk for a reversal in the trend for now, especially if the market remains above the key 1.2000 level. The positively aligned 50 and 200-day moving averages are supporting a bullish outlook. Meanwhile, the RSI and MACD are still in bullish territory (above 50 and above zero, respectively).

On Monday, investors had a bit more appetite for risk in Asia, giving some support to the dollar, as North Korea celebrated the anniversary of its founding without any additional missile tests. In energy markets, oil prices showed some recovery after ministers from Saudi Arabia, Venezuela and Kazakhstan discussed the potential of extending the period of supply cuts ahead of the OPEC meeting in November.

The US was in a state of emergency during the weekend as thunderstorm Irma passed through Florida with powerful winds and turned roads into rivers, forcing the relocation of millions of people and causing serious destructive damage. However, the dollar managed to tick up during the Asian trading hours as fears over further North Korean nuclear tests eased. The isolated regime celebrated its founding day on Saturday by honoring the experts who fired the nuclear weapon last weekend. Yet, tensions remained high on Monday after North Korea threatened that the US will pay a “due price” if it continues pushing for fresh sanctions which are expected to be voted by the UN Security Council later today.

The dollar index, which gauges the dollar’s strength against a basket of trade-weighted major currencies edged up by 0.14% to 91.49, slightly up from the 32-month low reached on Friday.

The safe-haven yen and swiss franc retreated against the dollar as risk-off sentiment was reduced, giving the dollar some room for improvement. Dollar/yen rose by 0.69% to 108.56, while dollar/swissie increased by 0.70% to 0.9509.

The gold price, which tends to gain in times of political and economic uncertainties, moved 0.84% down to $1,334.60 per ounce.

Euro/dollar extended its losses made on Friday after an attempt to break above 1.21 failed, falling to 1.2015, while pound/dollar was hovering around 1.3190.

The kiwi managed to bounce up during Asian trading after New Zealand’s electronic retail sales’ growth more than doubled on a yearly basis in August. The figure rose by 4.4% y/y compared to 2.0% seen in July.

Looking at energy markets, oil prices settled higher after the Saudi Arabian Energy Minister, Khalid al-Falih met his Venezuelan and Kazakh counterparts separately on Sunday in an effort to extend the period of oil supply cuts by at least three months beyond March 2018, which was initially agreed among OPEC members and Russia. Non-OPEC Kazakhstan agreed to limit its output, aiming for a stand-alone deal with OPEC, while OPEC member Venezuela also positively considered the option of extension. Note that OPEC members are launching their next meeting on November 30 in Vienna.

WTI crude rose by 0.80% to $47.86 per barrel, while London-based Brent was up by 0.43% at $54.01 after a deep fall on Friday when Baker Hughes drilling counts showed a marginal increase in the number of US drilling rigs.

The commodity-linked loonie gained slightly against the greenback amid increasing oil prices with dollar/loonie falling by 0.14% to 1.2135.

Hurricane Irma has, reportedly, inflicted less damage on the US mainland than was originally predicted, thereby reducing the economic impact of the devastation it was expected to cause. The hurricane caused flooding and tidal surges that knocked out power to 4 million homes and businesses in Florida.

Meteorologists are now predicting that Irma will weaken to a tropical storm as it travels into northern Florida and Southern Georgia.

Markets had been concerned that another North Korean missile test would occur over the weekend, but such fears were allayed – such concern saw a flight to safe havens last week and a broad USD decline. There is still a concern, as the markets are now awaiting the UN Security Council's vote later this week regarding further sanctions being imposed on the regime and how North Korea will respond. North Korea's state run news agency stated on Monday that 'North Korea is closely following the moves of the US with vigilance'.

Markets are also awaiting next week's Federal Reserve policy meeting, which will likely focus on economic growth following Harvey and Irma. In an interview with CNBC last week, NY Fed President Dudley commented that he had 'marked down' his Q3 growth estimate 'a touch' and further commented that US interest rates 'are going to move gradually higher over time'. The markets will now focus on US inflation data later this week.

EURUSD is unchanged from Friday's close – currently trading around 1.2015.

USDJPY is 0.2% higher in early trading, to currently trade around 108.38.

GBPUSD is little changed over the weekend and currently trades around 1.3180.

Gold is virtually unchanged and currently trade around $1,338.

WTI edged higher, by 0.6%, in early Monday trading, following reports that the Saudi Oil Minister has discussed extending a pact to cut global oil supplies beyond March 2018 with Venezuela & Kazakhstan. WTI is currently trading around $48.35pb.

At 13:15 BST, the Canadian Mortgage and Housing Corporation will release Canadian Housing Starts (YoY) for August. A robust Canadian economy led to the recent hike in rates by the Bank of Canada, so markets will be looking to see if the housing market is keeping up with demand by improving on the previous release of 222.3K.

Asia Summary

Asian equity markets opened higher as North Korea's Founder's day passes without another missile launch. The PBOC set the yuan reference rate at 6.4997, the 11th consecutive stronger setting and the longest streak since 2005. The PBOC also again skipped open market operations (OMO) for the 3rd consecutive session and drained a net CNY40B. Offshore yuan 1-day interbank rate rose 78bp to 2.29433%. Over the weekend China August CPI and PPI came in hotter than expected rising 1.8% on the year and PPI 6.3%, Shanghai Composite remained one of the more modest movers in the day.

USD/KRW fell 0.4% as the market waits for fresh sanctions on North Korea by the UN. North Korea warned that there would be retaliation if the UNSC approves harsher sanctions. On Friday, the PBoC announced its plan to remove reserve conditions for yuan forwards trade; to reduce reserve requirements from 20% to zero; effective Monday, Sept 11th. As a result, the offshore yuan declined 0.3% in Hong Kong offshore market in the premarket. This was confirmed in today session.

NZD/USD weakened around 0.2% after August card spending retail fell m/m for the 4th consecutive month. The Kiwi continued to extend its decline falling as low as 0.7225 after NZ Institute of Economic Research (NZIER) lowered inflation forecast for 2017-18; Cuts 2017/18 inflation (CPI) forecast to 1.1% (vs. 1.5 in June), GDP growth forecast to 2.9% (vs 3.1% in June)

Key economic data

(CN) CHINA AUG CPI Y/Y: 1.8% V 1.6%E; PPI Y/Y: 6.3% V 5.7%E (over the weekend)

(NZ) NEW ZEALAND AUG CARD SPENDING RETAIL M/M: -0.2% V 0.5%E (4th consecutive decline); TOTAL M/M: +0.6% V -0.6% PRIOR

(JP) JAPAN JUL MACHINE ORDERS M/M: 8.0% V 4.1%E; Y/Y: -7.5% V -7.8%E

(CN) China Aug Fiscal Rev CNY1.07T, y/y: 7.2% v 11.1% prior; YTD y/y: 9.8%

Speakers and Press

China

(HK) Hong Kong SFC said to consider revising rules in order to monitor initial coin offerings (ICOs) - HK press

(CN) PBOC confirms have removed reserve requirement on FX forward trading due to market environment change

(CN) China PBOC Shenzhen branch said the city saw large increase in consumer loans for individuals recently and part of the loans may flow into the property market - Chinese press

(CN) According to UOB analyst, China's removal of 20% reserve requirement on fx forwards trading likely to be symbolic as there's little desire for Chinese companies to buy USD now

Korea

(KR) North Korea says closely following US' moves with 'vigilance'; ready and willing to use 'any form of ultimate means' - KCNA

(KR) Follow Up: UN to vote on US drafted sanction on North Korea over nuclear tests Monday afternoon

Japan

(JP) Japan Defense Min Onodera: Will seek to add AEGIS Ashore (missile defense) as soon as possible

Other

(SA) Saudi Arabia Energy Min: The oil min Al-Falih discussed with his Venezuelan and Kazakh counterparts the possible extension of the global oil supply cut pact beyond March 2018

Asian Equity Indices/Futures (00:00ET)

Nikkei +1.4%, Hang Seng +1.0%; Shanghai Composite +0.1%, ASX200 +0.8%, Kospi +0.8%

Equity Futures: S&P500 +0.5%; Nasdaq100 +0.6%, Dax +0.1%, FTSE100 +0.4%

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

EUR 1.2039-1.1999; JPY 108.56-107.86; AUD 0.8071-0.8033; NZD 0.7266-0.7225

Dec Gold -0.7% at $1,341/oz; Oct Crude Oil +0.8% at $47.88/brl; Sept Copper +0.4% at $3.05/lb

(AU) Australia buys back A$500M in 2018, 2019 bonds

(AU) Australia sells A$500M in 4.5% 2033 bonds; avg yield 2.9089%; bid-to-cover 2.52x

USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.4997 V 6.5032 PRIOR (11TH STRAIGHT STRONGER YUAN SETTING, longest streak since 2005)

(CN) PBOC SKIPS OPEN MARKET OPERATIONS (OMO) V SKIPPED PRIOR (3rd straight skip); DRAINS NET CNY40B

(KR) Bank of Korea (BOK) sells KRW670B in 1-yr monetary stabilization bonds at 1.5% v 1.53% prior

(KR) South Korea sells 10-yr Govt bond at 2.245%

Equities notable movers

Australia/New Zealand

SIQ.AU To acquire Aspire Benefits Management (FY18 EPS accretion of ~12%) and assets of RACV Salary Solutions for combined total of A$40.2M; +6%

TAH.AU Says Tatt's independent experts are positive on merger transaction, 2.5%

Hong Kong/China

(CN) China considering setting deadline to ban production and sales of fossil fuel vehicles – press (BYD +6%, SAIC 1%, Geely, +1.8%)

1913.HK Reports H1 Net €115.7M v €143Me, EBITA €279.6M, Rev €1.47B v €1.53Be; -11%

South Korea

023530.KR Exec: Considering options for China supermarkets, including sale; +1.8%

USDJPY (108.41): The USDJPY continued to slide as the price fell to session lows of 107.31. Further declines could be expected as the currency pair broke past the support level of 108.64 - 108.26. A minor pullback to this recently breached support level could establish resistance. A reversal off this level will set USDJPY on track to post further losses. In the unlikely event of a breakout above the support level, the bias could be shifting to the upside with 111.00 level of resistance coming into focus.

GBPUSD (1.3180): The British pound continued on Friday with strong gains to test the 1.32 handle. The currency gained strength despite the economic data over the week suggesting weakness, especially in the construction and services sector. The week ahead will be intense for the British pound as the inflation, jobs and the BoE meeting will see traders turning cautious on the British pound. Near-term momentum could keep the GBPUSD biased to the upside for a test towards the previously established resistance level of 1.3236. However, a pullback is likely as the support level at 1.2980 - 1.2961 remains in focus.

EURUSD (1.2014): The EURUSD posted strong gains last week with the rally being driven partly by the ECB's decision on Thursday and a weaker US dollar. By Friday's close price action was seen pulling back from the 1.20 handle marking a retest of this level for the second time. On the 4-hour chart, we notice that the pullback in the EURUSD will see a retest of the minor support that will be formed at 1.1962. This support could mark the cup and handle pattern that is still evolving. A reversal off 1.1962 will push EURUSD towards 1.2200. Alternately, if the support level at 1.1962 fails, the common currency could slip to the next downside target of 1.1882 which is another strong technical level of interest in the currency pair.

The US dollar continued to ease against most of its peers with Friday's session seeing the US dollar index falling 9.1% on a year to date basis. Besides geopolitics, a dovish Fed alongside the hurricanes in the US has kept the sentiment in the greenback in check.

On the economic front, following a rather busy Thursday, Friday saw the release of UK's manufacturing and construction output. With the exception of manufacturing production, construction output fell 0.9% while industrial production rose a modest 0.2% as expected. Canada's monthly employment report saw the unemployment rate falling to 6.2% while the economy added 22k jobs during the month.

Looking ahead, the economic calendar today is light with no major events to fall back upon. Italian industrial production numbers are due to come out at 0800 GMT followed by housing starts data from Canada later in the afternoon.