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Yesterday, the US dollar strengthened against a basket of major currencies. Financial markets participants have started to buy actively the US currency after it was reported that Washington intended to introduce duties for all remaining China imports by early December if negotiations between the US President Donald Trump and China's President Xi Jinping lead to nothing. The US dollar index (#DX) closed in the positive zone (+0.23%). The potential for growth remains.

The euro weakened after it became known that German Chancellor Angela Merkel was not going to run again for the Christian Democratic Union of Germany leader. The Japanese yen also weakened significantly against the US dollar amid the rise in the Asian stock market.

The "black gold" prices decreased slightly. At the moment, futures for the WTI crude oil are testing a mark of $66.90 per barrel. At 22:30, a report on the API weekly crude oil stock will be published.

Market Indicators

Yesterday, the major US stock indices closed again in the negative zone: #SPY (-0.55%), #DIA (-0.84%), #QQQ (-2.06%).

The 10-year US government bonds yield continues to decline. At the moment, the indicator is at the level of 3.10-3.11%.

The news feed on 30.10.2018:

• Report on the labor market in Germany at 10:55 (GMT+2:00);
• Consumer confidence index in the US at 16:00 (GMT+2:00).

We also recommend paying attention to the speech by the Bank of Canada governor Poloz.

EUR/USD

Current level - 1.1377

The overall situation remains unchanged and the outlook is negative below 1.1430, for a dip to 1.1300 support zone.

USD/JPY

Current level - 112.74

The rise after 111.35 low has evolved in an impulsive way and there is a high chance of a more significant reversal at the mentioned local minimum. My outlook is bullish, for a break through 112.80, en route to 113.50. Initial support can be found at 112.20.

GBP/USD

Current level - 1.2801

The structure above 1.2776 is by all means a corrective one and the outlook is bearish, for a continuation towards 1.2660 zone. Key resistance lies at 1.2874.

Cable accelerated to new ten-week low at 1.2755 in late Asian / early European trading on Tuesday, ending brief consolidation of past two days and signaling continuation of larger downtrend.

Persisting fears of Brexit no-deal scenario keep pound under pressure for push towards target at 1.2661 (15 Aug low) after last two significant supports en-route (1.2811 – Fibo 76.4% and 1.2785 – 05 Sep trough) were broken.

After UK Fin-Min Hammond in budget report on Monday said that austerity is connected to Brexit talks and will end with Brexit deal, with some positive tone about slowdown in UK economy since Brexit vote, which slowed less than expected.

With BoE MPC expected to stay unchanged on Thursday’s meeting and no news about Brexit, in this case meaning bad news, sterling would likely keep its current direction.

Strong bearish setup of daily techs supports scenario, with corrective actions on oversold studies expected to provide better selling opportunities.

Broken Fibo support at 1.2811, reinforced by falling 5SMA marks initial resistance, with stronger upticks to be capped at 1.2920 zone (former higher base, reinforced by falling 10SMA) and keep bears intact.

Res: 1.2811, 1.2852, 1.2904, 1.2921
Sup: 1.2755, 1.2729, 1.2697, 1.2661

The greenback was firm yesterday after media reported that the US is preparing to impose tariffs on all remaining Chinese imports. The measure could be enacted by early December, should the meeting between US President Trump and Chinese President Xi not bear fruits, or fail to ease the tensions between the two countries. US President Trump, spoke of a great deal with China later on, helping ease concerns, though also considered China as not ready yet. The two leaders are to meet at the sidelines of the G20 meeting near the end of next month. For the time being, USD could continue to strengthen in its role as a safe haven, especially if US stocks continue to be on a selling mode.

AUD/USD went through some choppy trading yesterday as it broke the 0.7065 (S1) support line, however during the Asian session today corrected above it. We could see the pair dropping again, should there be headlines about further tensions in the US-Sino relationships today, as the USD side may strengthen. If the pair comes under the market’s selling interest we could see it breaking the 0.7065 (S1) support line and aim for the 0.7045 (S2) support barrier. If the market favours the pair’s long positions, we could see the pair rising, breaking the 0.7115 (R1) resistance line and aim for the 0.7160 (R2) resistance hurdle.

BoJ interest rate decision

BoJ is to announce its interest rate decision tomorrow, late in the Asian session and is widely expected to remain on hold at -0.10%. Currently, JPY OIS imply a probability of over 99% for such a scenario, with the decision per se being rendered an open and shut case. Analysts, state that the bank may revise down slightly its forecasts, given the continued downward risks for growth and inflation and that possible rate hikes are not in the horizon. It should be noted, that a recent Reuters article, mentioned the possibility of the bank eyeing a tweak in its bond buying program. Despite no interest rate hike being expected, volatility could occur for JPY pairs, as traders zoom in the bank’s meeting.

USD/JPY rose yesterday, breaking the 112.15 (S1) resistance line (now turned to support) and during today’s Asian session tested the 112.72 (R1) resistance level. We could see the pair trading in a bullish market today, should there be further headlines about tensions in the US-Sino relationships. If the pair finds fresh buying orders along its path, we could see it breaking the 112.72 (R1) resistance level and aim for the 113.25 (R2) resistance level. Should on the other hand, the bears rake over, we could see the pair breaking the 112.15 (S1) support line and aim for the 111.63 (S1) support area.

In today’s other economic highlights:

In the European session, we get Germany’s unemployment data and the preliminary HICP release, both for October as well as Eurozone’s preliminary release of the GDP growth rate for quarter 3. In the American session, we get the US CB consumer sentiment for October and the API weekly crude oil inventories figure. As for speakers, Bank of Canada governor Stefen Poloz speaks.

USD/JPY H4

Support: 112.15 (S1), 111.63 (S2), 111.15 (S3)

Resistance: 112.72 (R1), 113.25 (R2), 113.95 (R3)

AUD/USD 4H

Support: 0.7065 (S1), 0.7045 (S2), 0.7000 (S3)

Resistance: 0.7115 (R1), 0.7160 (R2), 0.7200 (R3)

Here are the latest developments in global markets:

FOREX: The dollar is higher by 0.17% against a basket of six major currencies on Tuesday, building on the gains it posted yesterday as risk appetite deteriorated and investors sought the safety of the world’s reserve currency. The defensive yen surprisingly underperformed despite the general risk-off mood on Monday. Meanwhile, the aussie and kiwi are both notably higher on Tuesday as risk sentiment seems to have reversed, following hints from President Trump that he is still seeking a trade deal with China.

STOCKS: Wall Street had a turbulent session, with the major indices wiping out early gains to close lower after reports that the US may announce tariffs on all remaining Chinese imports by next month. The tech-heavy Nasdaq Composite underperformed (-1.63%), as separate news that the UK is aiming to tax the sales of major technology firms weighed. The Dow Jones (-0.99%) and S&P 500 (-0.66%) followed in its tracks. That said, futures tracking the Dow, S&P, and Nasdaq 100 are pointing to a higher open today, aided by remarks by President Trump that he anticipates a 'great deal' with China. Indeed, the optimism carried over into Asia on Tuesday, with Japan’s Nikkei 225 (+1.45%) and Topix (+1.38%) advancing alongside South Korea’s Kospi 200 (+0.88%). In Europe, all the major indices are expected to open modestly higher today, futures suggest.

COMMODITIES: Oil prices were marginally higher on Tuesday, for the most part consolidating losses recorded on Monday, which came on the back of sustained weakness in risk sentiment. In precious metals, dollar-denominated gold is down by 0.34% today at $1,223 per ounce, extending losses from yesterday and suffering at the hands of a stronger greenback, despite the ongoing rout in equity markets. The inability of the yellow metal to attract safe-haven flows yesterday despite the market jitters is notable, though the fact that prices continue to trade above the 100-day simple moving average may provide some comfort to the bulls.

Major movers: Stocks whipsaw as risk sentiment remains fragile

US markets had a rather volatile session, with major indices like the S&P 500 erasing early gains to trade lower, after media reports suggested the US will announce tariffs on all remaining Chinese imports if the Trump-Xi talks fail next month. Tech stocks and the Nasdaq in particular were already under pressure, after UK Chancellor Hammond announced plans for tech giants to pay tax on the sales they generate in Britain.

Coming on top of concerns that earnings growth may have peaked already, and with markets still adjusting to the prospect of higher interest rates, the renewed focus on tariffs likely added one more dimension to the risks equity investors have to wrestle with. That said, the mood seems to have recovered as Asian markets closed mostly in the green on Tuesday and US equity futures are pointing to a higher open, likely buoyed by President Trump saying overnight he expects a 'great deal' with China. Hence, business as usual on the trade front, with his ‘carrot and stick’ approach remaining the weapon of choice for now.

Most noteworthy was the fact that the typical correlations between currencies and stocks decoupled. Namely, although stocks were on the back foot on Monday, the safe-haven Japanese yen also fell across the board alongside gold, instead of attracting defensive inflows. Moreover, risk-sensitive commodity currencies like the aussie curiously outperformed; one would have expected it to be hit the hardest in the midst of risk aversion.

In euro land, the single currency was caught between two narratives. On the one hand, Italy avoided a credit downgrade by the S&P and the nation’s politicians are showing signs they may be willing to compromise on their 2019 deficit. On the other, news that German Chancellor Merkel won’t run for re-election as leader of her CDU party kept a lid on the cheerfulness.

In the UK, Chancellor Philip Hammond delivered the Autumn Budget, which signaled a gradual move away from austerity, and importantly also contained a digital services tax aimed at companies like Amazon and Facebook. The caveat was that everything is liable to change depending on how the Brexit talks play out. Understandably, the pound was little changed on the news.

Day ahead: Eurozone GDP, German inflation, US consumer confidence on the agenda; trade developments closely watched

Tuesday’s a busy data day with eurozone GDP, German flash inflation figures and US consumer confidence being among the releases attracting interest. Any developments on global trade – the Sino-US standoff – also rank high on the agenda, having the potential to lead to heightened volatility in the markets.

At 1000 GMT, preliminary eurozone GDP numbers for Q3 will be made public. Economic activity is anticipated at 0.4% q/q for the third straight quarter, notably below the 0.7% between Q2-Q4 2017; hopes that the economy would pick up steam appear to have not materialized. Year-on-year, the euro area is anticipated to have expanded by 1.8% in Q3, below Q2’s 2.1%.

Numerous surveys gauging business sentiment in the eurozone during October are also due out at 1000 GMT. All are expected to show worsening morale relative to September; rising trade tensions and political uncertainty – Italian budget worries and a relatively fragile German government coalition – are factors that are negative for sentiment.

Elsewhere, eurozone consumer confidence data out at the same time as the readings on GDP are forecast to confirm the preliminary release’s -2.7, this being an improvement compared to September, though still constituting the fifth straight print within negative territory. For comparison, the US Conference Board’s consumer confidence index for October scheduled for release at 1400 GMT is expected to ease a bit, though still remain close to September’s near two-decade high.

Also having potential to drive euro pairs will be October flash inflation readings out of Germany at 1300 GMT. Month-on-month, CPI growth is expected at 0.1% (below September’s 0.4%), which would put the year-on-year pace of expansion at 2.4% (above the previous month’s 2.3%). The harmonised figures (HICP), that use a common methodology across EU countries, will also be monitored. The numbers come one day ahead of the eurozone’s corresponding inflation prints and traders may thus use today’s figures to speculate on tomorrow’s euro-wide release, positioning themselves accordingly. Also out of Germany, October’s unemployment data are due at 0855 GMT.

Besides some data from the Confederation of British Industry, which either way do not tend to be market moving, the UK calendar is empty; sterling will again be most sensitive to any news on Brexit. In the meantime, PM May will be talking at the opening session of the Nordic Council at 1315 GMT.

Other US releases are August’s CaseShiller indices that gauge house prices (1300 GMT).

Trade angst acted as the catalyst behind major Wall Street indices erasing earlier gains to finish Monday’s session lower; this also brought to the fore the greenback’s safe-haven allure. Any headlines building on yesterday’s reports that President Trump plans to ramp up tariff action against China if talks between him and Chinese President Xi at next month’s G20 summit fail to lead to a breakthrough will be closely watched.

ECB chief economist Praet and the Bank’s board member Lautenschlager will be making public appearances at 1330 GMT and 1410 GMT respectively. Bank of Canada Governor Poloz and Deputy Governor Wilkins will be speaking at 1930 GMT.

In equities, Facebook and Coca-Cola are among companies releasing quarterly results today; the latter will be reporting before Wall Street’s opening bell and Facebook after the market close. Meanwhile, Apple will be unveiling new product offerings at an event in New York today.

In energy markets, weekly API data on US crude stocks are due at 2030 GMT.

Technical Analysis: EURUSD negative bias may be easing

EURUSD is trading roughly 35 pips above Friday’s lowest since mid-August of 1.1335. The Tenkan- and Kijun-sen lines are negatively aligned in support of a negative short-term bias. The Kijun-sen though has halted its decline, a sign that bearish momentum may be easing. The RSI which is in bearish territory but is largely moving sideways also supports this view.

Upbeat eurozone releases could push the pair higher. Immediate resistance may take place around the Tenkan- and Kijun-sen lines at 1.1386 and 1.1405 respectively. Not far above lies the current level of the 50-period moving average at 1.1431; the zone around this captures the Ichimoku cloud bottom (around 1.1450), as well as numerous bottoms from the recent past. Higher still, the 100-period MA at 1.1484 would come into scope.

Conversely, disappointing numbers are likely to exert selling pressure on EURUSD. Support to losses could occur around Friday’s low of 1.1335. Lower, the 1.13 figure, which roughly coincides with the pair’s lowest since late June 2017 recorded during August, would come into focus. Even lower, the 1.12 handle would be eyed.

Trade developments and US releases can also move the pair.

Italy Q3 GDP stalled, grew 0.0% qoq, slowed from prior 0.2% qoq and missed expectation of 0.2% qoq. There were positive contribution from agriculture, forestry, fishing and services. But there was decrease in industry.

With respect to Q3 2017, GDP increased by 0.8% yoy. Carry-over annual GDP growth for 2018 stood at 1.0%.

Full release here.

Pivot (invalidation): 67.35

Our preference Short positions below 67.35 with targets at 66.70 & 66.30 in extension.

Alternative scenario Above 67.35 look for further upside with 67.60 & 67.95 as targets.

Comment As Long as 67.35 is resistance, look for choppy price action with a bearish bias.

Pivot (invalidation): 14.5700

Our preference Short positions below 14.5700 with targets at 14.4500 & 14.4000 in extension.

Alternative scenario Above 14.5700 look for further upside with 14.6500 & 14.7200 as targets.

Comment As Long as the resistance at 14.5700 is not surpassed, the risk of the break below 14.4500 remains high.

Pivot (invalidation): 1230.50

Our preference Short positions below 1230.50 with targets at 1226.00 & 1224.00 in extension.

Alternative scenario Above 1230.50 look for further upside with 1233.50 & 1235.50 as targets.

Comment The RSI advocates for further decline.

Pivot (invalidation): 2602.50

Our preference Long positions above 2602.50 with targets at 2723.00 & 2755.00 in extension.

Alternative scenario Below 2602.50 look for further downside with 2570.00 & 2540.00 as targets.

Comment The RSI is bullish and calls for further upside.