Sample Category Title

Pivot (invalidation): 59.90

Our preference Short positions below 59.90 with targets at 58.70 & 58.05 in extension.

Alternative scenario Above 59.90 look for further upside with 60.45 & 61.25 as targets.

Comment The RSI is mixed to bearish.

Pivot (invalidation): 14.1300

Our preference Short positions below 14.1300 with targets at 14.0000 & 13.9100 in extension.

Alternative scenario Above 14.1300 look for further upside with 14.2100 & 14.2800 as targets.

Comment Even though a continuation of the technical rebound cannot be ruled out, its extent should be limited.

Pivot (invalidation): 1207.00

Our preference Short positions below 1207.00 with targets at 1199.50 & 1195.00 in extension.

Alternative scenario Above 1207.00 look for further upside with 1211.50 & 1215.00 as targets.

Comment As Long as the resistance at 1207.00 is not surpassed, the risk of the break below 1199.50 remains high.

Here are the latest developments in global markets:

FOREX: The dollar is flat against a basket of six major currencies on Tuesday, holding on to the sizeable gains it recorded in the previous session, when it touched a fresh 17-month high. The yen was the second-best performer to start the week, behind the dollar, amid broad-based risk aversion in markets that fueled demand for defensive assets. Meanwhile, the euro underperformed even the pound, with euro/sterling increasingly becoming a function of which currency weakens faster, amid Italian and Brexit uncertainties respectively.

STOCKS: US markets closer much lower, with the decline being led by the tech sector. The S&P 500 (-1.97%), Dow Jones (-2.32%), and Nasdaq Composite (-2.74%) felt the heat of a report suggesting Trump is set to escalate the trade conflict with China further, beyond the realm of tariffs. Apple (-5.04%) was caught in the eye of the storm, after three of its suppliers issued warnings about weakness in iPhone sales. Sentiment seems to have turned around though, as futures tracking the S&P, Dow, and Nasdaq 100 are all flashing green, pointing to a higher open today of around +0.6%. Asia was mixed, with Japan’s Nikkei 225 (-2.06%) falling, but the Hang Seng in Hong Kong staging a rebound (+0.46%). European indices were set for a higher open, according to futures.

COMMODITIES: Oil fell alongside equities, as the risk aversion in markets combined with an IEA report that oil demand will be severely impacted from electric cars by 2040 added to concerns around oversupply, pushing WTI and Brent to fresh multi-month lows. Speculation that OPEC may cut its production was not enough to alter sentiment, with President Trump in fact tweeting that he hopes Saudi Arabia and OPEC won’t reduce their production. In precious metals, dollar-denominated gold fell for a 7th straight session yesterday despite the risk-off environment, as the surge in the US dollar apparently outweighed haven demand. It is currently trading just above the $1200 per ounce handle.

Major movers: Dollar, yen outperform amid risk aversion; Brexit saga rumbles on

Risk aversion was the underlying theme during the late US session on Monday, with major US stock indices such as the S&P 500 falling by around 2.0%, and defensive assets such as the yen and the dollar attracting haven inflows. In terms of catalysts, a media report suggested the Trump administration may broaden its conflict with China beyond tariffs, and instead use export controls as well as indictments to counter intellectual property theft. Markets appear to have taken the news as a signal Trump is preparing to escalate the dispute, instead of laying the groundwork for a solution ahead of his G20 meeting with Xi Jinping at the end of the month.

Elsewhere, the British pound went for a rollercoaster ride. It dropped initially on reports PM May’s Cabinet is unhappy with her Brexit plans, then rebounded on a report that the “main elements” of an exit treaty text are ready, only to fall back down after a spokesman for the PM said the latter report should be treated with “skepticism”. The moves underscore that sterling is currently a hostage to incoming headlines, and suggest price action may stay choppy until there is some clarity, particularly on the Irish border issue.

Interestingly, the pound managed to gain against the battered euro, which fell across the board as investors cut their long exposure in anticipation of Italy submitting its revised budget proposal to the EU today. Italian politicians remain adamant about sticking to their deficit targets, thus setting the stage for a showdown with the Commission. Hence, political uncertainty looks set to remain elevated for a while, and the ultimate question may be how far the Commission is willing to take this standoff, as taking it too far via imposing fines for instance risks nurturing anti-EU sentiment even further.

Day ahead: UK employment numbers and Brexit eyed; Italian budget deadline due; ZEW survey also out

UK employment figures are the data highlight during Tuesday’s European session. Elsewhere, Brexit and Italian politics are ranking high in terms of importance, having the capacity to lead to sharp movements in FX markets.

At 0930 GMT, UK numbers on September employment, as well as October’s number of individuals claiming unemployment benefits, will be made public. The focus will again be on wage growth, which can stoke inflation expectations. In this respect, the three-month average of average weekly earnings is anticipated to pick up to 3.0% annually, notably above August’s 2.7% and at its highest since September 2015. Excluding bonuses, average earnings are projected to expand by 3.1%, the same as in August and matching their highest since January 2009.

Meanwhile, the economy is predicted to have added 21k positions, which compares to a reduction by 5k in August’s print, while the unemployment rate is forecast to remain at the multi-decade low of 4.0% for the fourth straight month.

Better-than-anticipated data are likely to help sterling advance, and vice versa, though again the dominant force underlying the pound’s movements is likely to be any Brexit headlines – there are mixed signals on this front, with sentiment for a deal oscillating from positive to negative. For the record, important data on inflation and retail sales out of the nation will follow on Wednesday and Thursday respectively.

Euro-related, the ZEW institute’s surveys gauging investor sentiment in Germany, the eurozone’s largest economy, will be hitting the markets at 1000 GMT. Both the economic sentiment and current conditions indices are expected to deteriorate in November compared to October. In particular, the former is anticipated at its worse since August 2012, at -25.0, and the latter at its lowest since late 2016, at 65.0. Trade uncertainty emanating from the Sino-US dispute and the prospect for a disorderly Brexit have been factors weighing on German investor morale in the past.

Greater potential to move the euro on Tuesday will be news having to do with Italy’s budget. The country faces a deadline set by the EU today to provide revised spending plans that align with EU rules. Italian officials do not seem willing to give in to demands and theoretically they could face fines. The “fine-route” is unlikely to be taken though; a “kick the can down the road” approach will likely materialize, keeping the euro hostage to updates moving forward.

Trade developments will also be monitored. The latest news suggest that China’s Vice Premier will visit the US to prepare the ground for a meeting between Presidents Trump and Xi later in November; the two are either way expected to meet at the G20 meeting at the end of the month.

Fed policymakers Brainard (permanent FOMC voting member – 1500 GMT), Kashkari (non-voter in 2018 – 1500 GMT) and Harker (non-voter in 2018 – 1920 GMT) will be making public appearances today. Elsewhere, ECB Vice President de Guindos will be giving a speech at 1900 GMT.

It is of note that numerous key readings will be made public during Wednesday’s Asian session. Specifically, Japanese GDP figures (due on Tuesday at 2350 GMT) and Australian wage growth data (Wednesday – 0030 GMT), both for Q3. China will be on the receiving end of numbers on fixed asset investments, retail sales and industrial production, all for October (Wednesday – 0200 GMT).

Technical Analysis: GBPUSD momentum turns sour after fall from near 4-week high

GBPUSD lost roughly 300 pips after touching a near four-week high of 1.3174 last week. The RSI retreated to enter bearish territory below 50, indicating a shift in momentum to the downside.

Upbeat employment figures out of the UK or positive Brexit news are expected to boost the pair. Resistance to gains may take place around a previous bottom at 1.2921, before the attention turns to the zone around 1.3020, this being the current level of the 100-day moving average line – the area around this captures the 1.30 round figure, a previous top (1.3042) and bottom (1.3048), as well as the 50-day MA which has roughly converged with the 100-day one. Higher still, last week’s peak of 1.3174 would increasingly come within scope.

On the downside and in case of disappointing data or Brexit complications, support could emerge around a previous bottom at 1.2784. Further below, 1.2693, the lowest since mid-August would be eyed, with the more than one-year nadir of 1.2661 lying not far below.

Rates: Bad start for stock markets
Souring risk sentiment provided a safe haven bid into core bonds yesterday. US stock markets dived more than 2% lower with tech shares underperforming. Tensions seem to ease overnight, but we don't take it for granted. Italy faces its budget review deadline with markets positioned for an extension of the quarrel with the EC.

Currencies: Dollar remains in the driver's seat
The dollar held sway yesterday against a risk-off climate, setting new 2018 lows. A fragile risk environment continues to steer currency markets today, keeping the odds in favor of the dollar. Sterling is set for a wobbly ride as brexit negotiations enter, according to UK PM May, “the endgame”.

The Sunrise Headlines

• US stock markets closed 2% to 2.8% lower with Nasdaq underperforming on iPhone demand worries. Asian bourses limit losses apart from Japan (-2%) with China even outperforming (+1%) on trade optimism.
• AP declared Democrat Sinema winner in the Arizona Senate contest. Current mid-term election results shows Republicans can increase their Senate majority by max. 2 seats, while Democrats will control the House by 9 to 19 seats.
• Chinese VP Liu is reported to visit the US to pave the way for a Xi – Trump summit by the end of November. The WSJ said that Liu and Treasury Secretary Mnuchin resumed talks. US VP Pence added that progress can be made.
• UK PM May said yesterday evening that Brexit negotiations were “in the endgame”, while also warning that the issues remaining to be addressed were “extremely difficult”. Negotiators worked through the night.
• SF Fed governor Mary Daly says that both Fed's goals are essentially met, meriting a further normalization of monetary policy. She doesn't want to pledge her December vote yet though and wants to wait how the economy unfolds.
• The Japanese central bank has become the second central bank after the Swiss National Bank to own more assets than the economy (GDP) it wants to stimulate via easy monetary policy.
• Today's eco calendar contains the UK labour market report, German ZEW investor sentiment and US NFIB small business optimism. Italy and Germany tap the bond market. An avalanche of ECB and Fed members speaks

Currencies: Dollar Remains In The Driver's Seat

King dollar remains in the driver's seat

The dollar held sway yesterday, even as there were no obvious reasons for the greenback's outperformance. Last week's rather hawkish Fed despite recent volatility remains a USD positive. The fragile risk environment (tech led equity sell off in US bourses, trade war, Italy …) further supported the dollar. Some remaining dollar bears threw in the towel in yesterday's low(er) volume trading session, pushing EUR/USD below the bottom of the 1.13/1850 consolidation pattern during early trading hours. EUR/USD selling pressure eased somewhat afterwards, yet only temporarily. SF Fed Daly landed a final (minor) blow to EUR/USD saying it is only appropriate to get rates back to the neutral level. The currency pair eventually closed at 1.1218, a new 2018 low. USD/JPY couldn't maintain gains up to 114.2 as the risk-off supported the yen over the dollar, closing at 113.84. The trade weighted dollar (DXY) settled above the 97-handle.

Sentiment eased overnight following reports that China's Vice Premier Liu He will visit the US. He is to pave the way for a meeting between Trump and his Chinese counterpart Xi Jinping at the G20 later this month. Most Asian equity markets rebounded, reversing earlier losses to as much as 1.4% (China). Japan (-2%) fails to join party, however. The news also supported the Chinese Yuan and other trade sensitive currencies (Aussie and Kiwi dollar). US's small business optimism is expected to remain at an elevated 108.0 today. The German ZEW-indicator probably slips to -26, but a more outspoken fall is possible. Italy probably captures most attention as the deadline (tonight) for an adjusted budget proposal draws near. This might have implications for risk sentiment, which probably again acts as most important market driver today. The climate remains fragile, suggesting further support for the dollar. A continuation of yesterday's trend is very well possible. Next support is seen in the 1.1187/1.1119 area.

Sterling gains following Barnier's upbeat comments, proved premature yesterday. The pound eventually did gain some ground after PM May said negotiations are entering the final stage, while warning for the “immense difficulties” that remain to be solved. EUR/GBP closed at 0.873. Today's UK labour report is expected solid but might be in the shadows of the brexit negotiations. May's cabinet meets this morning while both the UK and the EU see Wednesday as the last day to secure a deal. Some more sterling volatility might be on the cards today.

EUR/USD sets new 2018 low but and is not out of the woods yet

Comments from UK officials regarding Brexit negotiation are rather confusing today. Cabinet Office Minister David Lidington said that "we're not quite there yet". But he emphasized "we are almost within touching distance now. " And, a deal in the next 24 or 48 hours is "possible but not at all definite". He was "cautiously optimistic".

On the other hand, Foreign Minister Jeremy Hunt said "we don't have a solution yet". He added "both sides draw encouragement form the fact that so much has been agreed". And the figure 95% used was "probably accurate". The 5% is a "difficult 5 percent though". Hence, "we don't know when it's going to be possible to conclude those negotiations."

ECB Chief Economist Peter Praet admitted in a speech that recent developments in the Eurozone "point to some slowdown in the pace of economic growth". The slowdown reflects "a loss of momentum in global activity". And, the retreat from strong growth of 2017 was "compounded by short term country-specific of sector-specific factors. Nevertheless, domestic demand "remained resilient" and sentiment indicators remained in "expansionary territory". He added that the underlying strength of the economy "continues to support our confidence that the sustained convergence of inflation to our aim will proceed." But "significant monetary policy stimulus is still needed".

On monetary policy, Praet emphasized that "winding-down of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation." The "rotation" from net asset purchase towards enhanced forward guidance has "preserved the ample degree of monetary policy accommodation". And looking ahead, the key policy rates and forward guidance will become an "anchor" for monetary policy as end of asset purchase is nearing. The communications and the rate path will be "calibrated to ensure that inflation remains on a sustained adjustment path."

Full speech "Preserving monetary accommodation in times of normalisation".

XAUUSD (1204.11): Gold prices were seen falling below 1204.08 level of support on Monday. However, the declines could see a short-term rebound in price. Gold prices will need to recover above 1204.08 to confirm the upside retest of 1223.50. A retest of this level for resistance is pending. Alternately, a continuation of the decline to the downside could push gold prices lower toward the next lower support at 1186.60.

GBPUSD (1.2874): The GBPUSD currency pair gapped lower on the day and price action is seen extending the declines lower. The downside target of 1.2808 remains within reach as the GBPUSD could be seen testing this level in the near term. Any rebound is likely to stall near the open gap at 1.2969 level which could be filled. The 20-period EMA on the 4-hour chart is also likely to act as dynamic resistance in this case.

EURUSD (1.1243): The EURUSD was seen extending the declines strongly on Monday as price action slipped to fresh one year lows of 1.1215. The next lower support is seen at 1.1130 which could be tested in the near term. This would mark a retest of the pending multi-year support region. On the 4-hour chart time frame, the common currency could be seen attempting to rebound to the upside. The previously breached support level at 1.1315 - 1.1300 could act as resistance keeping a lid on the gains.