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EURJPY is on course for a strong session after the rebound on the 128.30 support, in the 4-hour chart. This week, the pair has been on the backfoot and the technical indicators suggest that the market could ease a little bit in the short-term. The Relative Strength Index (RSI) is pointing to the downside in the negative zone, strengthening its momentum, while the %K line of the stochastic oscillator is ready to create a bearish cross with the %D line.

If prices are able to continue to move lower the next support for traders to watch is the 128.20 barrier. Even lower, the pair could meet the 127.90 barrier, taken from the low on September 10, while a drop below this level would open the way towards the 126.60 hurdle.

However, if the market manages to turn to the upside and breaks above the 23.6% Fibonacci retracement level of the downleg from 133.10 to 128.20, around 129.36, the price could jump until the 38.2% Fibonacci mark of 130.07. Slightly above this hurdle the price could hit 130.20 before challenging 130.50, identified by the high on October 12.

Looking at the near-term picture, at the 4-hour chart, EURJPY has been trading within a short-term downtrend over the last month after the price bounced off the 133.10 resistance level.

The US dollar has not changed a lot against a basket of major currencies. The US dollar index (#DX) fell slightly and closed in the negative zone (-0.06%). In general, demand for the US currency is still high. Investors took a wait-and-see attitude before the publication of important statistics from the United States and the Central Bank meetings.

Donald Trump again criticized the Fed Chairman Jerome Powell for interest rates raising. The US President believes that high interest rates significantly harm its economic policy. Not for the first time, Trump has criticized the Fed.

The European Commission rejected the budget project of Italy for 2019 and demanded to submit a new modified project as soon as possible. Let us recall that the Italian government recently submitted a project for the next year, according to which the budget deficit counted to 2.4% of GDP, which significantly exceeds the limits set by the EU (0.8% of GDP).

The "black gold" prices are recovering after a sharp fall the day before. At the moment, futures for the WTI crude oil are testing a mark of $66.35 per barrel. At 17:30 (GMT+3:00), a report on the US crude oil inventories will be published.

Market Indicators

Yesterday, the bearish sentiment prevailed on the US stock market: #SPY (-0.51%), #DIA (-0.54%), #QQQ (-0.37%).

The 10-year US government bonds yield has been declining. At the moment, the indicator is at the level of 3.15-3.16%.

The news feed 24.10.2018:

The index of economic activity in the manufacturing sector (PMI) of Germany at 10:30 (GMT+3:00);

New home sales in the US at 17:00 (GMT+3:00);

Bank of Canada interest rate decision at 17:00 (GMT+3:00);

Fed's "Beige Book" at 21:00 (GMT+3:00).

Bank of Canada is to release its interest rate decision today (14:00 GMT) and is expected to hike rates from +1.50% to +1.75%. Currently, CAD OIS imply a probability of 93.31%, for the bank to hike rates by 25 basis points. The recently accelerated GDP growth rate and the stable NAFTA view could be providing arguments for hawkish comments. On the other hand, the slowdown of the CPI rate in September, along with concerns about household consumption could be advising caution. Should the rate hike occur as expected and the accompanying statement have more dovish elements, we could see the Loonie weakening, while on the other hand if hawkish elements prevail the CAD may get some support. Be advised that volatility could also emerge during the following press conference.

USD/CAD maintained a rather sideways movement over the past few sessions between the 1.3115 (R1) resistance line and the 1.3065 (S1) support line testing the latter, during today’s Asian session. The pair’s direction could prove to be dependent to BoC’s interest rate decision later today and should there be a rate hike accompanied by some hawkish comments we could see the pair dropping as the CAD side could strengthen. Should the bears take over, we could see the pair breaking the 1.3065 (S1) support line and aim for the 1.3015 (S2) support barrier. Should on the other hand the bulls dictate the pair’s direction we could see it, breaking the 1.3115 (R1) resistance line and aim for the 1.3170 (R2) resistance hurdle.

Pound jumps on Brexit

The pound jumped yesterday after media reported that the EU may offer a UK wide customs union. Analysts point out that such an offer on behalf of the EU, could be indicative of the two sides moving closer in resolving their differences. In the inner political front, the UK cabinet seems divided and tensions are leading from crisis to crisis. On other news, Theresa May is expected to meet with Conservative lawmakers this evening about her Brexit plans. Should May fail to be convincing in the meeting about her Brexit strategy, more members may be pushed to call for a confidence vote. Further volatility is expected for the pound as more headlines are expected.

Cable spiked yesterday, breaking consecutively the 1.2965 (S1) resistance line (now turned to support) and the 1.3025 (R1) resistance level, however corrected later on lower, testing the 1.2965 (S1) support line. Technically, the pair’s price action remained below the downward trendline incepted since the 16th of October as it shifted to the right, hence we retain our bearish bias for the time being. Should the pair continue to be under selling interest we could see the pair, breaking the 1.2965 (S1) support line and aim for the 1.2920 (S2) support zone. Should on the other hand, the market favour the pair’s long positions, we could see cable breaking the prementioned downward trendline, the 1.3025 (R1) resistance line and aim for the 1.3080 (R2) resistance level.

In today’s other economic highlights:

In the European session we get Germany’s preliminary manufacturing PMI for October and from Sweden, Riksbank’s interest rate decision. In the American session, the preliminary US manufacturing PMI for October, the US new home sales figure and the EIA weekly crude oil inventories figure will be released. Please be advised that the API weekly crude oil inventories figure yesterday, came out to be a substantial injection of 9.88 million barrels, causing oil prices to drop, but for more fundamentals regarding the oil market, please refer to our weekly oil outlook, later today. As for speakers, Minneapolis Fed President Neel Kashkari and Cleveland Fed President Loretta Mester speak.

USD/CAD H4

Support: 1.3065 (S1), 1.3015 (S2), 1.2965 (S3)

Resistance: 1.3115 (R1), 1.3170 (R2), 1.3230 (R3)

GBP/USD 4H

Support: 1.2965 (S1), 1.2920 (S2), 1.2850 (S3)

Resistance: 1.3025 (R1), 1.3080 (R2), 1.3145 (R3)

The Euro stands at the back foot and probing below 1.1432 base, pressured by weaker than expected German / EU PMI data (German Manufacturing Oct 52.3 vs 53.5 f/c / Services Oct 53.6 vs 55.5 f/c) ( EU Manufacturing Oct 52.1 vs 53.0 f/c / Services 53.3 vs 54.5 f/c).

Signs that bloc's economic growth could be slowing, puts the single currency under increased pressure.

Bears are regaining control after Tuesday's long-legged Doji signaled indecision, as daily techs are negative and favor further downside on eventual break through key supports at 1.1432 (base) and 1.1422 (Fibo 76.4% of 1.1300/1.1815 ascend).

Close below 1.1432/22 pivots would open way towards key med-term support at 1.1300 (15 Aug low, the lowest since June 2017).

ECB's policy meeting on Thursday is in focus and could spark fresh volatility as weak data today could be an obstacle for hawks.

Res: 1.1476, 1.1497, 1.1513, 1.1525
Sup: 1.1394, 1.1366, 1.1335, 1.1300

Pivot Pivot (invalidation): 2721.25

Our preference Long positions above 2721.25 with targets at 2775.00 & 2817.25 in extension.

Alternative scenario Below 2721.25 look for further downside with 2690.00 & 2675.50 as targets.

Comment The RSI broke above a declining trend line.

Pivot (invalidation): 11350.00

Our preference Short positions below 11350.00 with targets at 11200.00 & 11070.00 in extension.

Alternative scenario Above 11350.00 look for further upside with 11520.00 & 11600.00 as targets.

Comment As Long as the resistance at 11350.00 is not surpassed, the risk of the break below 11200.00 remains high.

Pivot (invalidation): 5.7200

Our preference Long positions above 5.7200 with targets at 5.8000 & 5.8700 in extension.

Alternative scenario Below 5.7200 look for further downside with 5.6600 & 5.6150 as targets.

Comment The RSI advocates for further upside.

Pivot (invalidation): 0.7075

Our preference Long positions above 0.7075 with targets at 0.7100 & 0.7115 in extension.

Alternative scenario Below 0.7075 look for further downside with 0.7055 & 0.7040 as targets.

Comment The RSI is bullish and calls for further upside.

Pivot (invalidation): 1.3115

Our preference Short positions below 1.3115 with targets at 1.3055 & 1.3025 in extension.

Alternative scenario Above 1.3115 look for further upside with 1.3135 & 1.3150 as targets.

Comment The RSI calls for a new downleg.

EUR/USD breaks 1.1431 support after a Eurozone PMIs showed marked slow down in the economy. PMI composite hit 25-month low at 52.7 and suggested that GDP growth is waning to 0.3 in Q4. Additionally, decline in German yield is also weighing on Euro. 10 year bund yield is down -0.006 at 0.405. 0.4% is a key psychological level to defend.

Regarding EUR/USD, fall from 1.1814 has finally resumed and should now be target 1.1300 low next.