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The pair maintains positive tone at the beginning of the week and retested key barrier at 113.33 (Fibo 61.8% of 114.54/111.37) which repeatedly capped upside attempts last week.

Upbeat US jobs data on Friday boosted the dollar, but bulls are for now lacking momentum for eventual break above 113.33 pivot which would signal bullish continuation and expose barriers at 113.80/114.00.

Dip-buying remains favored scenario with initial support at 112.85 (30SMA) and extended duips to find ground above 112.65 (rising 10SMA).

Res: 113.33, 113.80, 114.10, 114.54
Sup: 113.10, 112.85, 112.65, 112.50

U.S. sanctions have not been able to push the Iranian oil production but the coming months could put pressure on the Saudi spare oil capacity

The United States was serious when it said it would target toughest sanctions ever placed on Iran. Trump administration is reimposing punitive measures on Iran by targeting the Iranian oil and financial sectors. These measures have taken effect today and this confirms the concrete determination of Trump administration to make the Iranian government bow to it’s will.

The consequence of this measures in Iran will affect companies which are indirect business with other foreign firms. Iran’s supreme leader Ayatollah Ali Khamenei, has denounced the measures as a disgrace to US prestige and he is confident that these measures have already made the U.S. relation with other countries worse. The Trump administration would make the U.S. position weaker and the country would be a loser in the longer term.

U.S. Secretary of States Mike Pompeo has said that the sanctions would be reimposed and Iran would need to change its stance of conducting things. Traders are on high alert and watching the oil market very closely. Under the reimposed sanctions, the mission is to bring the oil export near to zero. Currently, the country is producing nearly 3.4 million barrels per day. The October’s production is down only by 10,000 barrels per day. The spare capacity for the country stands at 4.0 million barrels per day.

Eight temporary waivers have been issued for countries which have made significant moves toward shunning import of Iranian oil. Japan, India and South Korea are getting the waiver and China is in talks for a waiver along with Turkey and Taiwan.

Some completely closed mind individuals think that the waiver which are granted are too generous and the U.S should stop all Iranian banks from using its SWIFT system. Unlucky for them, the counter-reaction is already in play.

The long-standing ally of the U.S., Germany, France and the U.K. have said in a joint statement that the U.S decision to reimpose the sanctions is “deeply regretful”. They are going to work together to carry on their legitimate work relation with the Republic of Iran and provide a system and protection for the European economic operators.

Only Saudi Arabia, the leading player of the OPEC committee, has the ability to fill in for the lost supply. Saudi oil production touched a level of 10.68 million barrel per day, an increase of 150K b/d. The spare capacity of Saudi Arabia stands at 11.5 million barrels per day. OPEC has increased its output by 430K barrels to 33.33 million barrels a day during October, this was the highest amount since 2016.

The oil market has been somewhat stable as traders are not overreacting. They think that the increase in the oil production by other oil members and most importantly the waiver for some nations would continue to support the Iranian oil supply. On top of this, we have demand curve shifting adversely and this has eaten up a lot of market’s strength.

Back in October, the oil price surged towards its four-year high, but ever since, the rout in the global equity market stoked concerns about the fuel demand. Looking at the prices now, one could easily see that the price is near the bear territory. It has dropped nearly 16.04% from its peak.

The OPEC committee needs to pay attention to the increase in the oil production levels because the Iranian oil production isn’t slowing dramatically. The fear of supply glut would surface again if there is no restraint in output by 2019.

Eurozone Sentix Investor Confidence dropped to 8.8 in November, down from 11.4 and missed expectation of 9.9. Sentix noted "The problem areas in Europe and the global economy remain largely the same, which does not make it any better. Germany's weakness is also weighing on the Euroland economy." Also, "the Eurozone economy passed its zenith in January. Since then, economic expectations have reversed and since April they have been negative."

Sentix noted factors such as "US President's trade policy", "discussion about the future of the car industry in Germany", the "weakness of the banking sector" and the "budget question in Italy" are contributing to the development. Additionally, there is an "increasing perception of inflation" as "investors expect inflation to continue to rise. Thus, "central banks can hardly deviate from their current course towards a more restrictive monetary policy, at least not only because of an economic slowdown."

Full release here.

UK PMI services dropped to 52.2 in October, down from 53.9 and missed expectation of 53.4.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:

"The disappointing service sector numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy. Combined with the manufacturing and construction surveys, the October services PMI points to the economy growing at a quarterly rate of just 0.2%, setting the scene for GDP growth to weaken sharply in the fourth quarter.

"However, while it is not surprising to see that Brexit uncertainties are increasingly undermining business activity at this stage of the negotiations, the survey responses also suggest that the economy is facing other headwinds, including a broader global slowdown, trade wars, heightened geopolitical uncertainty and tightening financial market conditions.

"It therefore remains unclear as to the extent to which Brexit worries are exacerbating or obfuscating a more broad-based slowing of the economy, which would have important implications for policymaking."

Full release here.

On Friday, the US dollar strengthened against a basket of major currencies after the publication of strong labor market data for October. Thus, the number of people employed in the nonfarm sector increased to 250K instead of the forecasted value of 193K. The growth of average hourly earnings met market expectations and counted to 0.2% (m/m). The unemployment rate was 3.7%, as investors expected. The US dollar index (#DX) closed in the positive zone (+0.27%).

Also, the news that the United States and China could resume negotiations on ending the trade war between the countries affected investors’ sentiment. The US President, Donald Trump, met with the President of the People's Republic of China, Xi Jinping, to discuss trade issues. The US President is positive and hopes that the conflict will soon be settled.

A number of events will take place this week that will affect the future alignment of forces on currency majors. So, tomorrow there will be elections of representatives to the US Congress. In addition, state and territory governors will be selected. Investors expect meetings of the central banks of Australia, New Zealand, and the US.

The 'black gold' prices are falling. At the moment, futures for the WTI crude oil are testing a mark of $62.80 per barrel.

Market Indicators

On Friday, the main US stock indices closed in the negative zone: #SPY (-0.59%), #DIA (-0.50%), #QQQ (-1.56%).

At the moment, the 10-year US government bonds yield is at the level of 3.19-3.20%.

The news feed on 05.11.2018:

The index of economic activity in the UK services sector at 11:30 (GMT+2:00);

ISM non-manufacturing PMI at 17:00 (GMT+2:00).

Gold is turning up in five-waves for a bigger wave C that is part of a bigger corrective wave E). We specifically see sub-wave v of C in play, up from 1211 level, which can extend its rally towards the 1250 region in upcoming sessions. There some resistance, and a bearish reversal can follow.

GOLD, 4h

On the chart below, we see AUDUSD and GOLD in postive correlation, which speaks for a continuation higher on both Gold and AUDUSD. Our members know that we are bullish on AUDUSD and that we are also looking higher into a three-wave recovery. Ideally a new continuation will follow on AUDUSD, which can take price towards the 0.7314 level this week.

Gold and AUDUSD, 1h

Cable is holding around 1.30 handle in early European trading on Monday, after starting the week with gap-higher and hitting session high at 1.3024.

The media report over the weekend about an all-UK customs deal, initially supported the pound but PM May’s office called it speculation and sterling lost traction.

Risk of pullback exists after repeated rejection under Fibo barrier at 1.3043 (Fibo 61.8% of 1.3257/1.2695, reinforced by 100SMA) and Friday’s close in red and below daily cloud base, adds to negative signals.

Daily MA’s are in mixed setup and momentum in sideways mode signal neutral near-term mode, but the downside remains vulnerable.

Return and repeated close below daily cloud base (1.2980) would be negative signal for further easing, with extension below double-Fibo support at 1.2909/10 (38.2% of 1.2695/1.3040 / broken Fibo 38.2% of 1.3257/1.2695) needed to generate stronger reversal signal.

Conversely, initial bullish signal could be expected on eventual close above 1.3043 Fibo barrier, with extension and close above daily cloud (cloud top lays at 1.3095) to signal bullish continuation.

Res: 1.3024, 1.3043, 1.3095, 1.3125
Sup: 1.2980, 1.2951, 1.2921, 1.2909

The Euro trades within narrow range in early Monday, capped by the base of thick 4-hr cloud, with near-term risk being shifted lower after strong upside rejection (recovery was capped by falling 20SMA), which left bearish daily candle with long upper shadow on Friday.

Bearishly aligned daily techs (bearish momentum/daily MA's in negative setup), keep the downside vulnerable, with today's repeated negative close to complete bull-trap pattern on daily chart and confirm recovery stall, which would risk retest of key 1.1300 support zone (weekly 200SMA/double downside rejection). Only close above 20SMA (1.1454) would provide relief and signal further recovery.

Res: 1.1400, 1.1423, 1.1454, 1.1499
Sup: 1.1366, 1.1335, 1.1312, 1.1300

Pivot (invalidation): 2736.00

Our preference Short positions below 2736.00 with targets at 2686.00 & 2650.00 in extension.

Alternative scenario Above 2736.00 look for further upside with 2757.00 & 2787.00 as targets.

Comment The RSI is mixed to bearish.

Pivot (invalidation): 11468.00

Our preference Long positions above 11468.00 with targets at 11693.00 & 11770.00 in extension.

Alternative scenario Below 11468.00 look for further downside with 11385.00 & 11288.00 as targets.

Comment The RSI is mixed.