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European Economic Affairs Commissioner Pierre Moscovici talked about Italy again in Franc Inter radio today. He emphasized that the European Commission does not want any crisis with Italy over it's budget. However, questions are there and the Commission is awaiting Italy's answers.

Moscovici said that "the European Commission does not want a crisis between Brussels and Rome." And "my state of mind is that of constructive dialogue." Though, he also reiterated that "when you are an EU member and a member of the single currency, of the euro zone, you must respect a number of joint rules." Moscovici has been rather cautious in handling Italy. While last week's letter to Italy regarding the budget was strongly worded, Moscovici later said he wanted to reduce tensions, and solve the budget issue through "constructive dialogue".

On the other hand, Austria Chancellor Sebastian Kurz warned that "if it is not amended, the European Commission must reject the budget" of Italy. Kurz added that "Austria is not prepared to stand up for the debts of other states while these states knowingly contribute to uncertainty in financial markets". And he urged the EU to "prove that it has learned from the Greece crisis."

Daily Pivots: (S1) 1.1454; (P) 1.1494; (R1) 1.1556; More....

EUR/USD's rebound from 1.1432 extends higher today. While further rise could be seen, near term outlook will still remain mildly bearish as long as 1.1621 resistance holds. On the downside, break of 1.1431 will resume the fall form 1.1814 to retest 1.1300 low. Nonetheless, break of 1.1621 will turn focus back to 1.1814 instead.

In the bigger picture, corrective pattern from 1.1300 could have completed at 1.1814 after hitting 38.2% retracement of 1.2555 to 1.1300 at 1.1779. Decisive break of 1.1300 will resume the down trend from 1.2555 to 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1814 will delay the bearish case and extend the correction from 1.1300 with another rise before completion.

Daily Pivots: (S1) 1.3016; (P) 1.3060; (R1) 1.3109; More...

Intraday bias in GBP/USD remains neutral at this point. Price actions from 1.2661 are seen as a corrective move. In case of another rise, upside should be limited by 1.3316 key fibonacci level to bring down trend resumption eventually. On the downside, below 1.3011 will target 1.2921 support first. Break will target 1.2661/2784 support zone. However, sustained break of 1.3316 would pave the way to next fibonacci level at 1.3721.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.

Daily Pivots: (S1) 0.9948; (P) 0.9963; (R1) 0.9978; More...

USD/CHF lost upside momentum with 4 hour MACD crossed below signal line. Intraday bias is turned neutral for now. As long as 0.9848 support holds, further rise is expected. Above 0.9977 will extend the rally from 0.9541 to 1.0067 key resistance. However, considering bearish divergence condition in 4 hour MACD, break of 0.9848 will indicate reversal and turn outlook bearish.

In the bigger picture, the pullback from 1.0067 has completed at 0.9541 already. And rise from 0.9186 is likely resuming. Firm break of 1.0067 will pave the way to retest 1.0342 key resistance. We'd be cautious on strong resistance from there to limit upside to bring another medium term fall to extend long term range trading.

Daily Pivots: (S1) 112.23; (P) 112.44(R1) 112.74; More..

The breach of 112.72 temporary top suggests that rebound from 111.62 is resuming. Intraday bias is turned to the upside for retesting 114.54 high. On the downside, break of 111.94 minor support will resume the correction from 114.54 to 38.2% retracement of 104.62 to 114.54 at 110.75. We'll look for bottoming signal above 109.76 key support in that case.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

Daily Pivots: (S1) 1.3042; (P) 1.3088; (R1) 1.3148; More...

Intraday bias in USD/CAD remains on the upside at this point. The choppy decline from 1.3385 could have completed at 1.2781 already. Firm break of 1.3225 should confirm this bullish case and target 1.3385 high next. On the downside, below 1.3027 minor support will turn intraday bias neutral first. But as long as 1.2916 support holds, further rally will remain mildly in favor in case of retreat.

In the bigger picture, current development argues that choppy corrective fall from 1.3385 has completed at 1.2781 already. And that in turns suggests that the up trend from 1.2061 is still in progress. Decisive break of 1.3385 will pave the way to 61.8% retracement of 1.4689 to 1.2061 at 1.3685. On the downside, though, break of 1.2916 support will likely extend the fall from 1.3385 to 61.8% retracement of 1.2061 to 1.3385 at 1.2567 before completion.

General Trend:

• Regional equities weaker outside of China and Hong Kong
• China Shanghai Composite tests 2-yr high rising more than 4%
• UK PM May signals that 95% of Brexit negations are settled
• IEA Chief not worried about Saudi Arabia cutting oil exports on death of journalist pressure
• BOK Gov Lee signals at a future rate hike
• China President Xi reiterated his unwavering commitment to the private sector
• China publishes draft tax cut plan to boost domestic consumption
• China new home prices slowing m/m and a bit hotter y/y; Bank of East Asia cuts mortgage rates in Hong Kong
• Japan telecom names lower on Japan govt call to lower plan fees
• GE and Siemens secure deals in Iraq paving way to larger contracts in the future
• Next North Korea/US summit likely to be in January 2019
• AUD fell to 0.7088 before erasing nearly all losses

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.7%
• 3333.JP May report FY Net more than ¥200B for the first time - Nikkei
• (JP) Bank of Japan (BOJ): Company Loan Index 2 v 2 prior; Govt Loan Demand -2 v -2 prior; Household Loan Demand: 0 v -2 prior
• (JP) Japan Chief Cabinet Sec Suga: Reiterates calls to lower mobile phone fees as soon as possible
• (JP) Bank of Japan (BOJ) Financial System Report: Domestic financial system maintaining stability; No sign of overheating from financial activities

Korea

• Kospi opened -0.6%
• (KR) North Korea and US planning a second summit for January - Korean press
• (KR) US and South Korea call off joint military drills, South Korea to conduct alone in December - Korean press
• (KR) South Korea Oct 1-20 Trade Balance +$1.64B, Exports y/y: +26.0% v 21.6% prior; Imports y/y: +31.4% v 14.0% prior
• (KR) South Korea Treasury sells KRW600B in 20-yr bonds; avg yield 2.285%
• (KR) Bank of Korea (BOK) Gov Lee: Message on need for accommodation adjustment sent to markets; see potential GDP of 2.8-2.9% - parliament

China/Hong Kong

• Hang Seng opened +0.3%, Shanghai Composite +0.6%
• (CN) China releases draft of tax cuts including reduction to cost of housing, education and healthcare in order to boost domestic consumption, to take effect Jan 1, 2019 - SCMP
• (CN) China State Council commission on financial development and stability: To balance need for stable growth and preventing risks; reiterates to implement prudent and neutral monetary policy - meeting on fending off financial risks
• (CN) China Sept New Home Prices M/M: 1.0% v 1.5% prior; Y/Y: 9% v 8% prior; M/M home prices rise in 64 of 70 cities v 67 prior; Y/Y home prices rise in 67 of 70 cities v 68 prior
• (CN) China brokerages are considering relief funds with local SOEs - CSJ
• (US) White House Econ Adviser Kudlow: China is doing nothing to defuse trade tensions – FT
• (CN) US President Trump said to have no plans to ease tariffs on China, wants China leaders to suffer from tariffs and thinks that will give him more leverage - US press
• (CN) China PBOC Adviser Ma Jun: Expect policy measures to support the market; see China tax and fee cuts next year to be 1% of GDP or more
• (CN) US Treasury Sec Mnuchin said to be open to changing how US names currency manipulators, which could open the window to official name China as one, which could then become leverage for trade dispute talks - US financial press
• (CN) China PBoC Open Market Operation (OMO): To inject CNY120B in 7-day reverse repos v CNY30B prior: Net: CNY120B injection v CNY30B prior
• (CN) China PBOC sets Yuan Reference Rate: 6.9236 v 6.9387 prior

Australia/New Zealand

• ASX 200 opened -0.2%
• VAH.AU Reports prelim Q1 Rev +9.7% y/y v at least +7% guided
• (AU) Australia Independent Kerryn Phelps was on track for victory in the Wentworth by-election to replace former member and prime minister Malcolm Turnbull, a Phelps victory would take away 1 seat from the Govt taking away its majority – AFR
• (AU) CBA and IHS Markit to start new flash PMI index for Australia
• (AU) Australia sells A$500M v A$500M indicated in 2022 bonds; avg yield 2.1921%; bid to cover 6.45x
• WOR.AU Confirms deal with Jacobs Engineering for ECR assets, to add ~20% EPS accretion on an FY18 pro-forma basis, announces A$2.9B entitlement offering priced at A$15.56/shr
• CCV.AU Settles class action for A$10.6M in relation to cash advance lending in Queensland [+9%]
• FLT.AU Guides H1 underlying PBT A$140-150M; FY19 underlying PBT A$390-420M; Seeing overseas profit close to 50% of total earnings [+9.5%]
• (AU) RBA Assist Gov Debelle: RBA has an open mind on what constitutes full employment

North America

• FCAU Expected to announce the sale of its car part manufacturer, Magneti, to KKR in an expected €6B deal - FT
• GE Signed principles of co-operation with Iraq to add 14 GW of power generation capacity, with an immediate order for 1.5GW to come into service summer 2019
• JEC Sells Energy, Chemicals and Resources Business to WorleyParsons for $3.3B ($2.6B cash $700M in shares); FY18 results looking materially inline with prior guidance
• IEA chief Birol: Not worried about Saudi Arabia cutting oil exports in response to international pressure on journalist's death
• (SA) Saudi Oil Min Al-Falih: New OPEC+oil agreement might be signed on Dec 7th - financial press

Europe

• SIE.DE Signed agreement to supply Iraq with 11GW of power generation over 4-yrs
• (UK) PM May: 95% of Brexit withdrawal deal is "now settled"; dispute resolution arrangements agreed with EU
• (DE) Germany Sept Tax Rev +5.8% y/y; YTD +6.3% y/y; Trade uncertainty to continue crimping exports
• (IT) Moodys cuts Italy sovereign rating one notch to Baa3 from Baa2 (now lowest level of investment grade); Outlook Stable (Oct 20th)

Levels as of 01:15ET

• Hang Seng +2.5%; Shanghai Composite +4.8%; Kospi +0.1%; Nikkei225 +0.4%; ASX 200 -0.6%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.3%, Dax +0.2%; FTSE100 +0.3%
• EUR 1.1518-1.1498; JPY 112.65-112.35 ; AUD 0.7126-0.7088;NZD 0.6618-0.6581
• Dec Gold +0.1% at $1,230/oz; Dec Crude Oil +0.4% at $69.53/brl; Dec Copper +0.7% at $2.80/lb

The euro currency has started to recover above the 1.1500 resistance level against the US dollar after sellers failed to move price below the 1.1431 support level, creating a bullish double-bottom pattern. The EURUSD pair has an intraday bullish bias while trading above the 1.1500 level, although buyers need to quickly move price above the 1.1553 level to negate bearish pressures.

The EURUSD pair is intraday bullish while trading below the 1.1500 level, key resistance is now found at the 1.1530 and 1.1553 levels.

If the EURUSD pair trades below the 1.1500 level, key intraday support is found at the 1.1480 and 1.1431 levels.

The British pound remains under downside pressure against the US dollar, as Brexit uncertainty continues to support short-term sterling selling. The GBPUSD pair is intraday bearish while trading below the 1.3100 level, although caution is warranted as the MACD indicator on the four-hour time frame is starting to recover higher. Sellers need to break the former weekly-low, while buyers need to move price above the 1.3100 resistance level.

The GBPUSD pair is bearish while trading below the 1.3100 level, key support is now found at the 1.3050 and 1.3018 levels.

If the GBPUSD pair moves above the 1.3100 level, buyers are likely to test the 1.3155 and 1.3200 resistance levels.

The euro jumped and then pared gains at the open of the Asian session. This was as traders looked ahead to the upcoming interest rate decision by the ECB and the start of EU and US negotiations on trade. The ECB is expected to leave interest rates unchanged and issue forward guidance on the fate of the quantitative easing program and future interest rates. Previously, the bank said it would end QE in January and start raising rates after summer next year. Last week, US Commerce Secretary, Wilbur Ross warned his EU counterpart, Cecilia Malmstrom, that US President Donald Trump will not tolerate any kind of delay. In July, the US President made a deal with the President of the European Commission to ensure zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.

The USD/CAD declined sharply and then pared gains in early trading today. On Friday, Canada released inflation numbers that missed analysts’ forecasts. In September, CPI rose at an annualized rate of 2.2%. This was lower than the 2.7% that traders were expecting, and the previously-released 2.8%. The core CPI that excludes food and energy products was 1.5%, which was lower than the consensus of 1.8%. This week, the BOC is expected to raise interest rates for the second time this year. Traders will want to know the bank’s view on the slowed inflation rate.

The price of crude oil was little moved after pressure mounted on Donald Trump to react to the murder of journalist Jamal Khashoggi by Saudi authorities. Traders are also closely watching Iran sanctions that are due to start next month. US leaders from both sides of the political isle have asked the US President to impose sanctions on Saudi. Yesterday, Treasury Secretary, Steve Mnuchin said that while he will not attend the Future Investments Initiative, he will travel to Saudi to talk about terrorist financing. This will be a closely-watched trip because his post is responsible for sanctions.

EUR/USD

The EUR/USD pair jumped sharply at the start of the Asian session. It reached an intraday high of 1.1570, which was the highest level since Wednesday last week. These gains were short-lived and the pair fell to a low of 1.1497 and then started to move up. The biggest mover for the pair this week will be the ECB decision and the US GDP numbers. When the pair jumped today, the price moved above the upper band of the Bollinger Bands and is currently along the upper band. There is a likelihood that it will attempt to recover some of these gains today.

USD/CAD

The USD/CAD pair fell and then recovered suddenly in the Asian session. It reached an intraday low of 1.2980, which was the lowest level since Friday. It is now trading at 1.1.3095, which is closer to Friday’s high. This level is higher than the 28 and 14-day moving average. Today, the pair is likely to continue moving upwards as traders wait for the statement from the BOC.

XBR/USD

The XBR/USD was little moved today as traders paid attention to ongoing fundamental news from Saudi Arabia and Iran. This was after last week’s decline of the pair which fell from 86.6 to a low of 78.8. It is now trading at the 79.45 level. The RSI is currently at 50, which is a neutral level meaning that the pair could move in either direction.