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The Euro consolidates above new nine-week low at 1.1378, posted after Wednesday's 0.7% fall, which generated strong bearish signal on break and close below 1.1432 base. The single currency remains biased lower and sees risk of further weakness, with consolidative / corrective action to precede fresh downside, as sideways-moving momentum and oversold slow stochastic support the notion. Broken base at 1.1432, previous strong support, now marks solid resistance, which should ideally cap consolidation, however, stronger upticks cannot be ruled out. Falling 10SMA (1.1491) and broken Fibo 61.8% of 1.1300/1.1815 (1.1497) are expected to limit extended recovery, before bears regain control and move towards key short-term supports at 1.1317 (weekly 200SMA) and 1.1300 (15 Aug low) ECB's policy meeting is the key event for Euro today and expected to further increase current high volatility. The central bank is expected to keep its ultra-low rates unchanged, with comments from the President Draghi about positive outlook for inflationary pressures and extended bond-buying program, as the ECB needs more evidence to start tightening, expected to be barely changed from its recent post-policy meetings press conferences. Markets will be closely watching for Draghi's possible remarks about recent fall in stock markets and signals that EU's economic momentum is slowing.

Res: 1.1420, 1.1432, 1.1476, 1.1497
Sup: 1.1378, 1.1366, 1.1317, 1.1300

XAUUSD (1236.94): Gold prices were seen attempting to rally back to the resistance level. However, price action is expected to see the end of the upside as the resistance level of 1238 holds for the moment. A close below 1225.35 support is, however, needed to confirm a decline. We expect gold prices to eventually test the lower support at 1207 which could mark a correction to the rally.

GBPUSD (1.2886): The British pound continued to fall with price action falling to a fresh one-month low. The declines could be expected as the currency pair will be seen testing the lower support level at 1.2808 region. Any short-term rebounds in decline to the support level could be limited. The resistance level at 1.3054 - 1.3028 will keep any gains in check.

EURUSD (1.1404): The EURUSD currency pair extended declines quite a bit on Wednesday. The common currency fell to a two month low at 1.1379 as it broke past the previously held support level. On the 4-hour chart, we see the Stochastics pointing to a bullish divergence. Against this backdrop, the Euro could be seen attempting to recover. A close above the recently breached support level of 1.1435 - 1.462 could potentially signal a turnaround in the short term.

The Bank of Canada hiked interest rates by a quarter point yesterday. This brought the interest rates to 1.75%, the highest in a decade. The central bank also took a more hawkish stance indicating that rates might have to rise faster than expected.

Data from the Eurozone showed that the flash manufacturing and services PMI came out slightly weaker than forecast. Flash manufacturing fell to 52.1 missing estimates of 53.3 while flash services PMI fell to 53.3 from 54.5 which was forecast.

In the U.S. flash, PMI's by Markit indicated an increase in activity on both manufacturing and services sectors. New home sales data, however, failed to match the forecasts, rising at a slower pace of just 553k during the month.

The economic calendar for the day will see the European session standing out with the ECB's monetary policy meeting. The central bank is forecast to keep interest rates unchanged at today's meeting. With the ECB now into the final stretch of its QE program, the ECB President Mario Draghi is expected to take a cautious stance in the statement.

The NY trading session will see the release of the durable goods orders report. Core durable goods are forecast to rise 0.5% on the month following a flat print the month before. The headline for durable goods orders is forecast to fall 1.3% after rising 4.4% the month before. Later in the evening, the U.S. pending home sales report is due.

Daily Pivots: (S1) 143.90; (P) 145.10; (R1) 145.78; More...

Intraday bias in GBP/JPY remains on the downside as fall from 149.70 is in progress. As noted before, whole rise from 139.88 should have completed at 149.70 already. Deeper fall would be seen to 142.59 support first. Break will pave the way to retest 139.88 low. On the upside, break of 146.40 resistance is needed to indicate completion of fall from 149.70. Otherwise, near term outlook will now stay mildly bearish even in case of recovery.

In the bigger picture, as long as 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) holds, up trend from 122.36 (2016 low) would still extend beyond 156.69 high. However, decisive break of 139.29/47 will suggest that such up trend is completed and turn outlook bearish. In that case, next target is 61.8% retracement at 135.43.

Rates: Carnage on US stock markets
The stock market sell-off remained the key trading theme with US indices this time leading the way lower, closing 2.4% to 4.4% lower. Core bonds profit, but the magnitude of the moves is smaller. We don't think that correction on bourses is already over. The ECB will keep policy unchanged, but Draghi might sound slightly more cautious on the outlook.

Currencies: Dollar profits only modestly from global risk-off
EUR/USD dropped on a disappointing EMU PMI's yesterday. However, later the dollar rally stalled as US markets were hard hit in the risk-off correction, preventing the dollar to further play its safe haven role. Today, the focus will be on the ECB press conference and on equities. It might not be evident for the dollar to really take the lead if global uncertainty persists

The Sunrise Headlines

• US equity markets lost substantial ground yesterday as all major indices lose more than 2%, with Nasdaq (-4.4%) underperforming. Asian markets opened in deep red as well with Japanese indices falling hardest
• Former US president's Barack Obama and the Clinton family were among the targets of suspected package bombs delivered to highly ranked Democrats and the news station CNN. The FBI said it was investigating it as an act of terrorism.
• South Korea's growth slowed more than expected, with a GDP growth of only 0.6% in Q3 (QoQ, 0.8% exp.) and 2.0% year-on-year (2.3% exp.). This growth slump could lead to the central bank refraining from tightening policy this year.
• The Bank of Canada raised its benchmark interest rate for a 3rd time this year by 0,25% to 1.75%. The BoC acknowledged for the first time in more than a decade it expects to completely remove monetary stimulus from the economy.
• The Saudi Crown Prince Mohammed bin Salman, widely expected to be behind the Khashoggi murder, has called the murder hideous and pledged to bring the killers to justice. He also struck a conciliatory tone with Turkey.
• Marek Mora, board member of the Czech National Bank, said he sees a 50/50 chance that he will support another interest rate hike at the next board meeting on November 1st. The CNB already hiked four times this year.
• Today's eco calendar contains US Jobless Claims and German IFO business sentiment. The ECB and Norges Bank meet. Fed's Vice Chairman Clarida speaks, the US taps the market and Amazon & Alphabet report earnings

Currencies: Dollar Profits Only Modestly From Global Risk-Off

Dollar profits only modestly from global risk-off

EMU PMI's rekindled fears for a meaningful slowdown in the region yesterday morning. EUR/USD tumbled from the 1.1475 area to fill bids near 1.1380 early in US dealings. Later, US events/data brought some balance to the bad news story. US new home sales disappointed again (-5.5% M/M). Headlines on bomb packages for several democrats didn't help to comfort markets. A genuine US equity sell-off accelerated throughout the session. The move suggests investor worries that also the US economy might near a cycle peak, despite solid earnings reported so far. As was the case earlier in this (US) equity correction, the dollar didn't profit any further. EUR/USD stabilised in the 1.14 area. USD/JPY drifted off the intraday peak to close the day at 112.26. This morning, the equity sell-off continues in Asia. Tech stocks are again hit hard with Japan underperforming. Losses on other markets are substantial (1.5% to 2.5%), but could have been even worse given the sell-off in the US. Other interesting observation, EM currencies like the INR, IDR and even CNY are holding up reasonably well given the global context. EUR/USD tries to regain the 1.14 barrier. USD/JPY dropped (temporarily?) below 112. Later today, the IFO German confidence and US durable orders are interesting. However, the market focus will be on equities and on the ECB press conference. We assume Draghi to stay neutral-to-positive in its guidance. Question is whether markets will believe him given recent data and tensions on Italy. Stocks remain a wildcard. As US markets are currently hit at least as hard as Asian/European markets. It is less evident for the dollar to take up its safe haven role. Recently, we saw some ‘by default' USD buying even as the move showed little conviction. EUR/USD drifted lower and cleared the last support ahead of the 1.1301 correction low. A test of this low is still possible. As markets apparently also question US future growth, we don't anticipate a EUR/USD break to a new 2018 low yet. The yen performance also wasn't convincing of late. A break below USD/JPY 111.63 could trigger further yen buying.

Yesterday, UK PM May again survived a meeting with conservative MP's. However for now there is no indication that a solution is coming closer. Sterling remained in the defensive. Today, there are no UK eco data. Sterling trading might be a bit more affected by global factors. We see risks for ongoing sterling underperformance against the dollar and, to a lesser extent, the euro in case of ongoing global market tensions

EUR/USD drops below 1.14 support, but sustained break of 1.1301 year low looks not that evident

Daily Pivots: (S1) 127.37; (P) 128.29; (R1) 128.81; More....

Intraday bias in EUR/JPY's fall from 133.12 extends. The break of 127.85 support confirms completion of whole rebound from 124.89 at 133.12. Deeper decline would now be seen back to 124.89 support next. On the upside, break of 130.20 resistance is needed to indicate completion of the fall from 133.12. Otherwise, near term outlook will now be mildly bearish even in case of recovery.

In the bigger picture, as long as 124.08 key resistance turn supported holds, larger up trend from 109.03 (2016 low) is still in progress. Firm break of 137.49 structural resistance will target 141.04/149.76 resistance zone next. However, decisive break of 124.08 will argue that such rise from 109.03 has completed and turn outlook bearish. In that case, deeper fall would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90.

Daily Pivots: (S1) 0.8824; (P) 0.8837; (R1) 0.8857; More...

With 0.8798 minor support intact, EUR/GBP's corrective rise from 0.8722 is still in progress for 38.2% retracement of 0.9097 to 0.8722 at 0.8865. Break will pave the way to 61.8% retracement at 0.8954 and above. On the downside, however, break of 0.8798 minor support will turn bias back to the downside for 0.8722 and possibly below.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Current development suggests that fall from 0.9303, as a down leg in the pattern, is still in progress. But in case of deeper fall, downside should be contained by 0.8116 cluster support, 50% retracement of 0.6935 (2015 low) to 0.9304 at 0.8120, to bring rebound. On the upside, break of 0.9097 will target 0.9304 resistance instead.

The British pound is under heavy downside pressure against the US dollar after sellers broke the neckline of a large head and shoulders pattern. The GBPUSD is strongly intraday bearish below the 1.2921 level with sterling now at risk of moving towards the 2018 trading low. Sellers will attempt to break below the 1.2880 level, while buyers need to move the price back above neckline resistance.

The GBPUSD pair is strongly bearish while trading below the 1.2921 level, key support is now found at the 1.2880 and 1.2780 levels.

If the GBPUSD pair moves above the 1.2921 level, buyers will likely test towards the 1.3000 and 1.3045 resistance levels.