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The GBP/USD has been unable to break below the major support trend line (blue), which is still a key decision zone for a bounce or break.

The GBP/USD needs to break below the support line (blue) for a bearish breakout whereas a bullish break above 1.3130 (pink line) could indicate a contracting triangle pattern or an increased chance of a bullish break.

The GBP/USD seems to be building a corrective pattern as part of a potential wave 4 (orange) as long as price stays below the Fibonacciretracement levels of wave 4 vs 3. A break above the 61.8% Fibonacci retracement level could indicate a different wave pattern.

Market movers today

With no big data in the calendar today, markets will continue to focus on Italy, Brexit and the coming ECB meeting on Thursday, see preview .

Today around noon, the Italian government is expected to respond to the EU letter last week in which the European Commission called the breach of the budgetary rules ' unprecedented in the history' of the European Union, see Reuters . We expect to see some relief in Italian markets today after the EU Commissioner Pierre Moscovici said ' that the EU wouldn't interfere in the new government ' economic policies '. Although Moody's downgraded Italian debt one notch on Friday to Baa3, it set the outlook assessment on 'stable', which eased the fears of Italy being downgraded to junk. For more on Italy, see also Harr's View , 21 October 2018.

On Brexit, today Prime Minister Theresa May is set to outline progress in the talks to the Parliament. According to remarks emailed by her office, she will say that '95% of the Withdrawal Agreement and its protocols are now settled'.

Later this week, focus turns to euro Flash PMI (Wednesday), the ECB meeting (Thursday) and the first US estimate for GDP in Q3 (Friday)

In the Nordics this week, the key events will be the Riksbank meeting (Wednesday), as well as projections from the Swedish Debt Office (Thursday) and the Norges bank meeting (Thursday).

For more details on the coming events, see Weekly Focus , 19 October 2018.

Selected market news

Chinese stock markets rallied sharply overnight with the composite CSI300 index up more than 4%. It comes after regulators and leading officials last week highlighted support to the market and speculation of intervention by the so-called 'National Team' of state-backed funds. China's President Xi Jinping over the weekend also highlighted the role of the private sector in an open letter published on state media Xinhua , see SCMP story. ' Any words or acts to negate or weaken private economy are wrong ,' Xi wrote. ' It is always a policy of the Central Committee of the Communist Party to support private business development, and this will be unwavering ,' he said further. The comments come on the back of concerns that the Chinese leadership is heading in the direction of 'more state and less market' as a response to the trade war.

US stock futures are slightly higher in Asian trading on the back of the positive sentiment in other markets.

Chinese rally provides little boost elsewhere

Surging stocks in China hasn’t provided much of a catalyst for similar moves elsewhere at the start of the week, with local investors seeing recent comments from various officials as evidence that the private sector will be protected, despite heightened risk from a trade war with the US.

President Xi added his name to the list of those vowing to support private firms over the weekend, giving investors reason to pile back in to battered Chinese stocks. The Shanghai Composite had fallen more than 30% from its peak this year prior to Friday’s comments, which has been the clearest sign so far that tariffs are biting.

The tariffs may not yet be taking their toll on the trade data but as long as the stock market continues to take a beating and growth stalls – as the data last week showed – Trump will be confident that the measures are effective and continue to threaten to double down until he wins concessions. There’s still a long way to go in this particular trade spat it would seem.

Italian budget and Brexit enough of a headache for EU

Europe has its own problems, without having to worry about hostile trade policies of the world’s two largest economies, as Italy prepares to defy the EU on its budget and risk sanctions and the UK pushes negotiations to the wire over the backstop for the Northern Irish border.

Reports over the weekend suggest Italy is not willing to budge on its 2.4% deficit target and will instead conduct regular monitoring to ensure it doesn’t exceed it. This is unlikely to satisfy the European Commission but at the same time, it will be extremely reluctant to impose financial sanctions and fuel the already growing populist movement in the country that has already delivered a Eurosceptic coalition government. We could hear from the EC as early as Tuesday, which will likely come as a request to amend and resubmit the 2019 budget at this stage.

Falih comments don’t provide much comfort for oil traders

Comments from Saudi Energy Minister Falih this morning don’t appear to have provided much comfort to oil traders, despite his insistence that a repeat of a 1973-style oil embargo is not their intention and that production will likely go up to 11 million barrels per day in the near future.

This comes as people become increasingly frustrated with the handling of the apparent Khashoggi murder, with Trump appearing very keen to accept any explanation that removes any link whatsoever to the Crown Prince. Trump has been desperate not to threaten the relationship the US has with Saudi Arabia or the arms deal that he signed with the Crown Prince not too long ago.

It would appear the route forward has already been laid and the explanation – no matter how unbelievable many find it – will be accepted by the White House and the whole saga will attempt to be brushed under the rug. This may prevent a series of sanctions and counter measures between the two countries that could disrupt oil supply and drive prices much higher and Trump may even believe he can use the situation to push the Saudi’s to increase output as sanctions against Iran kick in, or is that the cynic in me?

For the 24 hours to 23:00 GMT, the EUR rose 0.48% against the USD and closed at 1.1510 on Friday.

On the data front, the Euro-zone’s seasonally adjusted current account surplus widened to €23.9 billion in August, following a revised surplus of €19.5 billion in the previous month.

In the US, data showed that US existing home sales declined for the sixth consecutive month by 3.4%, on a monthly basis, to a level of 5.15 million in September, marking its lowest level since 2015. In the prior month, the existing home sales recorded a revised level of 5.33 million, while market participants had anticipated existing home sales to drop to a level of 5.29 million.

In the Asian session, at GMT0300, the pair is trading at 1.1508, with the EUR trading slightly lower against the USD from friday’s close.

The pair is expected to find support at 1.1449, and a fall through could take it to the next support level of 1.1390. The pair is expected to find its first resistance at 1.1551, and a rise through could take it to the next resistance level of 1.1594.

With no macroeconomic releases in the Euro-zone today, traders would focus on the US Chicago Fed national activity index for September, set to release later in the day.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.35% against the USD and closed at 1.3066 on Friday.

In economic news, UK's public sector net borrowing posted a deficit of £4.1 billion in September, notching its lowest level since 2007. In the preceding month, the nation registered a revised deficit of £5.6 billion. Market had expected for public sector net borrowing to record a deficit of £4.5 billion.

The Bank of England Governor, Mark Carney, indicated that the UK's financial system is making provisions to tackle the consequence of the “disorderly, cliff-edge” Brexit, however unlikely that may be. The Governor stated that the central bank is not hoping for the best but preparing to face the worst situation in the process.

In the Asian session, at GMT0300, the pair is trading at 1.3067, with the GBP trading a tad higher against the USD from friday's close.

The pair is expected to find support at 1.3018, and a fall through could take it to the next support level of 1.2969. The pair is expected to find its first resistance at 1.3110, and a rise through could take it to the next resistance level of 1.3153.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages

For the 24 hours to 23:00 GMT, the USD rose 0.27% against the JPY and closed at 112.50.

In the Asian session, at GMT0300, the pair is trading at 112.59, with the USD trading 0.08% higher against the JPY from yesterday’s close.

The pair is expected to find support at 112.38, and a fall through could take it to the next support level of 112.18. The pair is expected to find its first resistance at 112.72, and a rise through could take it to the next resistance level of 112.86.

In absence of key economic releases in Japan today, investor sentiment would be determined by global macroeconomic events.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.13% against the CHF and closed at 0.9971 on Friday.

In the Asian session, at GMT0300, the pair is trading at 0.9967, with the USD trading marginally lower against the CHF from Friday’s close.

The pair is expected to find support at 0.9952, and a fall through could take it to the next support level of 0.9937. The pair is expected to find its first resistance at 0.9980, and a rise through could take it to the next resistance level of 0.9993.

Trading trend in the Swiss Franc today is expected to be determined by Switzerland’s total sight deposits along with money supply M3 for September, slated to release in a while.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average

For the 24 hours to 23:00 GMT, the USD rose 0.21% against the CAD and closed at 1.3109 on Friday, amid weak economic data.

On the macro front, Canada's consumer price index (CPI) climbed 2.2% on an annual basis in September, undershooting market consensus for a rise of 2.7%. In the previous month, the CPI had registered a gain of 2.8%.

Additionally, the nation's retail sales unexpectedly eased by 0.1% on a monthly basis in August, defying market expectation for an advance of 0.3%. In the preceding month, the retail sales recorded a revised increase of 0.2%.

In the Asian session, at GMT0300, the pair is trading at 1.3102, with the USD trading 0.05% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.3043, and a fall through could take it to the next support level of 1.2983. The pair is expected to find its first resistance at 1.3147, and a rise through could take it to the next resistance level of 1.3191.

Amid lack of economic releases in Canada today, traders would focus on global macroeconomic events for further direction.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the AUD rose 0.3% against the USD and closed at 0.7119 on Friday.

LME Copper prices rose 0.7% or 44.5/MT to $6191.5/MT. Aluminium prices rose 0.7% or $15.0/MT to $2022.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7109, with the AUD trading 0.14% lower against the USD from Friday’s close.

The pair is expected to find support at 0.7081, and a fall through could take it to the next support level of 0.7054. The pair is expected to find its first resistance at 0.7143, and a rise through could take it to the next resistance level of 0.7178.

The currency pair is trading below its 20 Hr and 50 Hr moving averages

For the 24 hours to 23:00 GMT, Gold remained flat against the USD and closed at USD1229.00 per ounce on Friday.

In the Asian session, at GMT0300, the pair is trading at 1230.80, with gold trading 0.15% higher against the USD from Friday’s close.

The pair is expected to find support at 1226.63, and a fall through could take it to the next support level of 1222.47. The pair is expected to find its first resistance at 1234.53, and a rise through could take it to the next resistance level of 1238.27.

The yellow metal is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.