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Daily Pivots: (S1) 1.5655; (P) 1.5742; (R1) 1.5791; More....

EUR/AUD's break of 1.5742 temporary low confirms fall resumption. Intraday bias is back on the downside. As noted before, prior break of 1.5984 support is taken as an early sign of medium term trend reversal. Fall from 1.6357 should now target 1.5601 key support first. Decisive break there will pave the way to 1.5271/5313 cluster support zone next. On the upside, break of 1.5853 minor resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, current development argues that up trend from 1.3624 (2017 low) is possibly completed at 1.6357, ahead of 1.6587 (2015 high). This is supported by bearish divergence condition in weekly MACD. Deeper decline is now in favor to 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313). Break will target 61.8% retracement at 1.4668. On the upside, break of 1.6357 is needed to confirm up trend resumption. Otherwise, risk will now stay on the downside even in case of strong rebound.

Daily Pivots: (S1) 1.1439; (P) 1.1454; (R1) 1.1472; More...

EUR/CHF's recovery from 1.1343 might extend further but after all it's still limited well below 1.1501 resistance. Intraday bias stays neutral at this point. On the upside, break of 1.1501 will revive the case of bullish reversal. Intraday bias will be turned back to the upside for 1.1713 resistance next. On the downside, break of 1.1343 will turn bias back to the downside for 1.1154/98 key support zone.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. This cluster level is in proximity to long term channel support (now at 1.1243) too. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.

RBNZ remained on hold at +1.75%, as was widely expected yesterday, however sounded a bit more hawkish in the accompanying statement. The bank moved the next possible rate hike a bit earlier in Q2 2020, as it forecasted the average official cash rate at +1.81% in that period. The statement also indicated that the CPI remains below the 2.00% yoy midpoint and necessitates continued supportive monetary policy. The bank noted that ongoing trade tensions are increasing risks to global growth and also stated that the GDP growth rate is expected to pick up over 2019. After the interest rate decision, the Kiwi could return to being influenced by the US-Sino trade war as well as data driven.

NZD/USD rose yesterday, breaking the 0.6780 (S1) resistance line (now turned to support). We could see the pair stabilising today and present some bearish tendencies as the USD side may start strengthening ahead of the FOMC interest rate decision. Please be advised that the RSI indicator remains above the reading of 70 in the 4 hour chart, insisting to point out the possibility of an overcrowded long position for the pair. Should the pair find fresh buying orders along its path we could see it breaking the 0.6825 (R1) resistance line, while if it comes under the selling interest of the market, we could see it breaking the 0.6780 (S1) support line and aim for the 0.6725 (S2) support barrier.

FOMC Interest rate decision

The FOMC is widely expected to remain on hold today (19:00 GMT), keeping Fed Funds Target rate at +2.25%. Currently, Fed's Funds Futures imply a probability of 94.2% for the bank to maintain rates at their current level. Should the bank remain on hold as expected, the market's attention could turn to the accompanying statement in the absence of any new forecasts and a following press conference. The recent acceleration of average earnings for October at +3.1% yoy, the unchanged record low unemployment rate of 3.7% and the increase of the non-farm payrolls figure to 250,000 from previous figure of 134,000, show a tight labour market, while the inflation rate still remains above the bank's target of +2.00% yoy. It should also be mentioned that the GDP growth's preliminary release for Q3 outperformed expectations, despite the slowdown if compared to Q2. Overall the US economy remains on a solid footing, which supports the bank's current rate hike path. The recent turmoil of the stock-markets could leave the FOMC unaffected and the same applies for any comments made by US president Trump. Based on the previous analysis, we see the case for the bank to have a more hawkish tone in the accompanying statement which could provide support for the USD. Please be advised that venue may have market moving effects and increased volatility could be present for USD pairs at the time of the announcement.

USD/JPY rose yesterday and during today's Asian session, clearly breaking the 113.25 (S1) resistance line (now turned to support).We could see the pair continuing to trade in a bullish market as the USD side could strengthen ahead of the release of the FOMC interest rate decision today. Should the pair's direction continue to be dictated by the bulls, we could see it breaking the 113.95 (R1) resistance line, while if the bears take over, we could see it breaking the 113.25 (S1) support line and aim for the 112.72 (S2) support zone.

In today's other economic highlights:

In a rather quite Thursday, in the European session, we get Germany's trade balance figure for September and from the Eurozone ECB's economic bulletin will be released. As for speakers please note that ECB's Benoit Coeure will be speaking today.

NZD/USD H4

Support: 0.6780 (S1), 0.6725 (S2), 0.6675 (S3)

Resistance: 0.6825 (R1), 0.6860 (R2), 0.6900 (R3)

USD/JPY 4H

Support: 113.25 (S1), 112.72 (S2), 112.15 (S3)

Resistance: 113.95 (R1), 114.55 (R2), 115.10 (R3)

British pound is consolidating under new three-week high at 1.3174 in early Thursday's trading, with bulls show initial signs of fatigue.

Strong upside rejection on Wednesday, overbought slow stochastic and south-turning momentum warn of consolidative/corrective action, however, strong bullish sentiment on Brexit optimism, weaker dollar and overall bullish daily techs, keep near-term bias with bulls.

This suggests that consolidation might be limited before attack at immediate barrier at 1.3187 (falling 30WMA), break of which would open way towards key barriers at 1.3257 (12 Oct high) and 1.3297 (20 Sep peak).

On the other side, extended corrective dips should be contained by daily cloud top (1.3055) to keep near-term bulls intact.

Focus turns to Fed rate decision due later today, which could affect pound's bulls if US central bank keeps hawkish stance.

The Federal Reserve has raised interest rates three times this year and signaled another hike in December, as strong growth, tight labor market and inflation picking up, support scenario. Traders also focus a batch of data from the UK on Friday, with highlight on Q3 GDP, industrial production and trade balance, which could provide fresh signals

Res: 1.3144, 1.3174, 1.3187, 1.3235
Sup: 1.3125, 1.3098, 1.3055, 1.3036

The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products stocks  gained +4.83 mmb to 1253.43 mmb in the week ended November 2. Crude oil inventory increased +5.78 mmb (consensus: +2.43 mmb) to 426 mmb. Inventories increased in 3 out of of 5 PADDs. Meanwhile, Cushing stock jumped +232 mmb to 34.3 mmb. Utilization rate gained +0.6% to 90% and crude production added +0.4M bpd to 11.6M bpd for the week.

Concerning refined oil product inventories, gasoline inventory added +1.85 mmb to 228.02 mmb as demand slipped -1.76% to 9.1M bpd. The market had anticipated a -2.28 decrease in stockpile. Production dropped -0.65% to 9.71M bpd while imports jumped +62.81% to 0.59M bpd during the week. Distillate inventory declined -3.47 mmb to 122.86 mmb as demand fell -2.44% to 4.32M bpd. The market had anticipated a -2.63 mmb drop in inventory. Production slipped -0.4% to 4.96M bpd while imports rose +17.73% to 0.17M bpd during the week.

Released after market close on Wednesday, the industry- sponsored API estimated that crude oil inventory jumped another significant amount of +7.83 mmb during the week. For refined oil products, gasoline stockpile dropped -1.2 mmb while distillate was down -3.64 mmb.

XAUUSD (1229.76): The volatility in the gold prices continue as price action is seen extending the declines. The breakout from the minor rising trend line suggests that price action could extend the declines back to the previously formed lows. The support level at 1207.00 remains untested which makes this exposed for a downside correction. To the upside, the resistance area of 1238 - 1242.25 remains a key level that will likely hold the gains in the near term.

GBPUSD (1.3124): The GBPUSD currency pair managed to clear the resistance area of 1.3058 - 1.3132. However, price action is seen to be consolidating strongly just above this level. This could potentially signal either a continuation to the upside in which case the GBPUSD will target 1.3234. Alternately, a break down below the support level could indicate a move back to the downside which could retrace some of the gains made recently.

EURUSD (1.1424): The EURUSD gave up the gains from earlier this week as price action retraced back to the breakout level of the falling trend line. Currently, the price is supported by the 20-period EMA and the horizontal support area. As long as this support holds, we expect the currency pair to be biased to the upside. However, if the EURUSD slips back lower, we expect the declines to push the common currency back to the lower support level of 1.1315 - 1.1300.

The U.S. dollar was seen trading volatile on the day as the results poured in through the early trading hours of the European session. With the Democrats claiming a majority in the U.S. House while the Republicans are retaining a majority in the Senate, speculation is rife on how the U.S. policies will be implemented going forward.

Economic data on the day covered the German industrial production which beat estimates of a flat print to rise 0.2% on the month. Previous month's data was revised higher to show a 0.1% increase.

The NY trading session saw Canada's Ivey PMI rising to 61.8 on the index. This beat estimates of 50.9 and advanced from 50.4 from the month before.

The overnight trading session saw the Reserve Bank of New Zealand holding its monetary policy meeting. The central bank kept interest rates unchanged at 1.75% and retained its forward guidance.

Looking ahead, the economic calendar for the day will see the release of the German and French trade balance numbers. The economic data from the Eurozone is relatively quiet for the most part today.

The NY trading session will see Canada's housing starts report coming out. Data is expected to show that housing starts rose 195k on the month following a print of 189k the month before. Later in the evening, the FOMC will be releasing its monetary policy statement. The Fed funds rate is forecast to remain unchanged at 2.0% - 2.25%

Rates: EC autumn forecasts and FOMC meeting are key trading themes
Italian media report on significantly lower growth and higher deficit forecasts in the EC’s autumn update. Italian BTP’s could underperform as the November 13 deadline to submit budget changes is nearing. The Fed is expected to give the “all clear” to continue tightening in coming months as US mid-terms didn’t surprise and the economy keeps firing on all cylinders.

Currencies: Post-election USD correction short-lived
Yesterday, the dollar lost temporarily ground after the results of the mid-term election. However, ongoing solid interest rate support prevent further USD losses. Today, the focus turns to the Fed policy statement. The Fed holding to its established rate hike path might put the dollar again in the driver’s seat. Sterling continues to profit from hopes on a Brexit deal

The Sunrise Headlines

• US stock markets rallied higher yesterday marking gains over 2% following the US midterm elections. Nasdaq (+2.64%) outperformed. Most Asian indices trade positive, but, except for Japan, can’t copy WS’s gains. China underperforms.
• US President Trump called for collaboration with the Democrats after they re-gained majority in the House of Representatives. Trump already said he’d consider a middle-class tax cut even if it means to re-raise corporate taxes.
• Chinese exports grew 15.6% (YoY) in October in USD terms and imports by 20.1% YoY, suggesting frontloading ahead of the implementation of additional US tariffs. The trade surplus rose from $31.28bn to $34.01bn.
• The central bank of New Zealand (RBNZ) left its official cash rate, as expected, on hold at a record-low 1.75%. Governor Orr added that rates would stay at this level through 2019 and into 2020. The kiwi dollar remains at $0.6775.
• The ECB has chosen Italy’s Andrea Enria to become the eurozone’s chief banking supervisor over Ireland’s Donnery. This paves the way for Irish Central Bank Governor Philip Lane to become chief economist of the ECB next summer.
• UK PM May has invited her senior ministers yesterday to examine the 95% of the withdrawal package that has been agreed so far. The remaining 5%, mainly the Irish border issue, is still being negotiated by officials of both parties.
• Today’s economic calendar is rather thin with the Initial Jobless Claims in the US, followed by the FOMC’s Rate Decision. The European Commission will update its economic forecasts and ECB president Draghi speaks in Dublin.

Currencies: Post-Election USD Correction Short-Lived

Post-election USD correction short-lived

Markets assessed the impact of the US elections yesterday. A divided Congress was seen as leading to less aggressive fiscal stimulus, initially resulting in a modest decline of US yields and of the dollar. EUR/USD tested the 1.15 level. However, the decline is US yields was blocked by a solid equity rally. Yields rose further after a poor US 30-y government bond auction. In the end, US-German 2-y and 10-y spreads stayed at/ close to cycle peaks and the dollar reversed earlier losses. EUR/USD closed the day unchanged at 1.1426. USD/JPY (113.52) even succeeded a modest gain. This morning, Asian equities are a trading in positive territory with Japan outperforming. However, gains are modest given the strong rally in the US. The dollar stabilizes near yesterday’s closing levels. USD/JPY gains a few more ticks. The RBNZ applied a slightly more neutral tone. The kiwi dollar rises only marginally after recent rebound. Today, the EC will publish its autumn economic forecasts. Aside from the overall E(M)U forecast, markets will take a close look at the Italian forecasts. Low Italian growth and/or a rising budget deficit might be a slightly negative for the euro. However, the focus for global FX trading will be on the FOMC policy decision/statement. We expect the statement to be close to the September text and don’t expect the Fed to give much weight to recent volatility. Rate hike expectations for December and for next year shouldn’t change. If so, this might be mildly supportive for US yields and the dollar. The reaction of (US) equity markets is a wildcard. Over the previous days, the USD rebound lost some momentum. A EUR/USD test of the 1.13 support area was rejected last week and the outcome of the mid-term elections weighed temporarily on the USD. Even so, yesterday’s price action suggests that the downside in the USD remains well protected. The topside of the EUR/USD 1.13/1.16 looks solid. The Fed holding to its rate hike intentions might already be enough for EUR/USD to turn back south.

Over the previous days sterling was supported by headlines that a UK-EU Brexit deal might be finalized anytime soon. EUR/GBP near the 0.87 barrier. The Brexit headlines will dominate sterling trading today. In a-day-to-day perspective, there is no reason to row against the positive sterling tide, but PM May still has to convince her Party to approve the deal. Any noise from that corner might still cause GBP corrections. EUR/GBP nears a first important support area (0.8723/0.8681/0.8621)

EUR/USD: dollar correction short-lived. Will Fed put USD again in the driver’s seat?