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The New Zealand Dollar depreciated about 53 base points against the US Dollar on Thursday. The exchange rate almost tested the 200-hour simple moving average at 0.6524 during yesterday's session.

However, today's session begins with a bullish momentum, and by the middle of the European trading session on Friday, the currency pair has gained about 0.92% of its lost values.

If this rally continues, the NZD/USD currency exchange rate could target the monthly pivot point at 0.6598 during the following trading session. Meanwhile, the three SMAs have fallen below the price level.

Downside momentum dominated the EUR/JPY currency pair on Thursday. The single European currency ended yesterday's session with about 130 base points declined against the Yen.

The exchange rate tested a resistance cluster at 128.89 during the first part of Friday's session.

If this resistance cluster holds, the currency exchange rate will target a support level formed by the combination of the weekly and the monthly PPs near the 128.00 mark during the following trading session.

The Australian Dollar has continued to trade in an ascending channel against the US Dollar. The currency pair tested the lower boundary of the channel at 0.7098 during the end of the previous session.

Everything being equal, it is likely that the upside momentum will continue within this session. The potential target for the exchange rate will be at the upper boundary of a descending channel at 0.7140.

However, technical indicator both on the 4(H) and the daily time frames suggest that bearish traders could push the rate south towards the weekly S1 at 0.7056 during the following trading session.

The US Dollar depreciated 0.08% against the Japanese Yen since Thursday's session. During the previous trading session, the currency pair passed through the SMAs resistances to stop the trade at 112.15. During Friday's morning hours, the US Dollar was broke the SMAs resistances to trade at 112.43 mark.

In regards to the near-term future, most likely, the US dollar will be supported by the 55-hour and the 200-hour SMAs to push the rate to trade on the higher level to break the resistance of the monthly PP at the 112.60 mark.

On the other side, the monthly PP at 112.60 may resist the currency exchange pair to push the rate to trade backwards at 112.40 level.

The British pound depreciated 0.40% against the US Dollar since Thursday's session. During the previous session, the rate passed through the monthly PP at 1.3038 and the weekly S1 at 1.3036 to stop the trade at the 1.3017 mark. On Friday morning, the rate was resisted by the monthly PP to keep the rate to trade at 1.3032 mark.

In regards to the near-term future, most likely, the British pound will trade sideways in the pattern channel to stay at 1.2980 level during the trading day.

In addition, the simple moving averages will try to catch up the rate to give an additional resistance for the British pound to trade downwards to the bottom boundary of the medium ascending pattern.

The European Single Currency depreciated 0.54% against the US Dollar since Thursday's session. During the last trading session, the currency pair passed through the monthly S1 at 1.1482 and was stopped by the medium pattern line at the 1.1453 mark. On Friday, the rate passed the support of the medium channel to trade at the 1.1443 mark.

In regards to the near-term future, most likely, the rate will trade sideways to stay at the 1.1420 level. The SMAs will try to catch up the rate during the trading day.

However, the rate might bounce off the bottom boundary of the pattern line to push the rate to decline to the 1.1400 level on Friday

The Canadian Dollar began to depreciate against the Japanese Yen after hitting a resistance level formed by the weekly R2 at 88.94. This decline started on October 2 and had since fallen by 3.87%.

Currently, the currency pair is trading near the upper boundary of a two-week descending channel pattern at 86.11 and could be set for a breakout.

However, given that the three SMAs is above the price level, the currency exchange rate could continue trending south during the following trading sessions. The potential target for the CAD/JPY exchange rate will be at a support cluster formed by the combination of the weekly and the monthly PPs near the 85.21 regions.

The Swiss Franc has been trading in a narrow descending channel against the Japanese Yen. This decline began after the currency pair hit a resistance level formed by the weekly R1 at 117.96.

The exchange rate was trading near a support line set by the weekly S1 at 112.44 during the morning hours of Friday's trading session.

If the support level holds, the currency exchange rate could aim at the 50-hour simple moving average at 113.40 within this session.

On the other hand, if the CHF/JPY pair passes the support line as mentioned above, the next target will be at a cluster near the 111.77 regions during the following trading sessions.

Notes/Observations

• Picture of slowing growth momentum in various parts of the world
• Italian BTP yields higher as budget showdown with EU looms; other periphery yields follow

Asia:

• China Q3 GDP registers its slowest growth since Q1 2009 (Q/Q: % v 1.6%e; Y/Y: 6.5% v 6.6%e; GDP YTD: 6.7% v 6.7%e
• China Sept Retail Sales Y/Y: 9.2% v 9.0%e
• China Sept Industrial Production registers its slowest growth since 2016 (YoY: 5.8% v 6.0%e)
• China Sept Surveyed Jobless Rate: 4.9% v 5.0% prior
• China PBoC Gov Yi Gang: China equity market valuation at historically low level with valuations not in line with economic fundamentals.
• Japan Sept National CPI Y/Y: 1.2% v 1.3%e; CPI Ex Fresh Food (core) Y/Y: 1.0% v 1.0%e; CPI (Ex-Fresh Food/energy) (core-core) Y/Y: 0.4% v 0.4%e v 0.4% prior

Europe:

• EU Commission responded to Italy draft budget plan: points to "particularly serious" non-compliance; says Italy planned "unprecedented" deviation from budget rules. Asked for clarifications and sought to continue constructive dialogue with Italy. Budget would not ensure debt reduction envisaged by EU rules. Italy govt spending growth planned for next year is 2.7% while max allowed under EU rules is 0.1%
• EU Commission to decide on Italy's budget at a meeting Tuesday, Oct 23rd
• Italy PM Conte believed that the country’s deviation from fiscal targets was not large
• PM May: we're committed to resolve Brexit issues as quickly as possible; there will be more difficult moments in the final stages of talks
• Northern Ireland DUP party: extending the Brexit transition would not solve the Irish backstop problem

Americas:

• Fed's Quarles (hawk, FOMC voter): it's appropriate to maintain strategy of gradual rate hikes
• Chile Central Bank (BCCH) raised its Overnight Rate Target by 25bps to 2.75% (as expected) for its 1st hike since Dec 2015

Macro

• (IT) Italy: ECB's Draghi warned yesterday against questioning EU rules. Draghi told EU leaders at this week's summit that while the growth outlook remains positive and the expansion strong and broad based, the horizon has turned a little bit darker, amid trade concerns and risks associated with Brexit . He also warned that a questioning of the rules inside the EU can lead to a worsening of the conditions in the financial sector and therefore damage growth. In what looked to be a thinly veiled threat towards Italy, Draghi reportedly said that while there is no evidence that undermining rules will lead to prosperity, it will carry a high price tag for all actors.
• (CN) China: Q3 GDP slowed to 6.5% y/y from 6.7% in Q2. The separate retail sales and industrial production reports were mixed relative to expectations. Shortly before the data was released, People’s Bank of China Gov. Yi Gang, banking and insurance regulatory chief Guo Shuqing and Securities Regulator Liu Shiyu all issued statements urging investors to remain calm. Mr. Guo said recent “abnormal fluctuations” in Chinese stock markets don’t reflect the country’s economic fundamentals and “stable financial system.” China looks then set to continue to stimulate to defer the inevitable protracted slower growth.
• (EU) Eurozone: The current account surplus widened to €23.9B in August from €19.5B in the prior month. This was due in large part to a wider trade surplus, which will give Trump additional ammunition in his criticism of Europe, or Germany's exports especially. In fact the current account surplus widened to a massive €379B in the 12 months to August 2018 from €330B y/y.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.4% at 11533, FTSE -0.1% at 7019, DAX -0.5% at 11531, CAC-40 -0.8% at 5077, IBEX-35 -0.7% at 8833, FTSE MIB -1.3% at 18846, SMI +0.2% at 8798, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes:

Equities

• European Indices trade slightly higher rebounding from losses tracking stronger US futures and gains in Asia. Spanish IBEX continues to underperform with Bank stock weighing. Italy remains in focus after the EU Commission sent a letter to FinMin Tria regarding budget violations.
• On the corporate front, Michelin trades sharply lower after warning on Q4, with related names Pirelli and Continental also falling. Elsewhere Bouygues trades sharply lower after cutting their full year outlook with Pendragon, Casino, Bayer among other notable decliners. Software AG rises after a beat on the top and bottom line; FNAC Darty trades higher on Q3 results and a share buyback, with AkerBp also higher on earnings.
  In the US DowDupont trades lower, weighing on Bayer and BASF after reducing their long term sales and profitability forecasts.
• Looking ahead notable earners include Honeywell, P&G and Schlumberger.
• Consumer discretionary: Groupe FNAC [FNAC.FR] +12% (earnings; share buyback program), Pendragon Plc [PDG.UK] -10% (profit warning), Casino Guichard-Perrachon SA [CO.FR] -3.1% (earnings; analysts actions), Wessanen [WES.NL] -3.7% (profit warning)
• Energy: Aker BP [AKERBP.NO] +1.7% (earnings)
• Materials: Acacia Mining [ACA.UK] -3% (earnings, concerned outlook)
• Industrials: Michelin [MI.FR] -7.3%, Continental [CON.DE] -4% (Michelin earnings; outlook cut), Volvo [VOLVA.SE] -2.5% (earnings), Bouygues [EN.FR] -9%, Ashtead [AHT.UK] -4.5% (Bouygues outlook cut; sees difficulties in construction businesses), Skanska [SKAB.CH] -7.6% (preliminary earnings), Kloeckner & Co SE [KCO.DE] -6% (analyst action)
• Technology: Software AG [SOW.DE] +1.8% (preliminary earnings), London Stock Exchange plc [LSE.UK] +1% (earnings; acquisition)
• Real Estate: Intu Properties plc [INTU.UK] +12% (confirms superior offer)

Speakers

• EU Brexit Negotiator Barnier: Brexit agreement was possible but difficult; problems over Ireland could lead to failure in talks
• Italy Cabinet Undersecretary Giorgetti: Speculators could weaken the Italian govt
• Italy Dep PM Salvini: To skip cabinet meeting tomorrow (Sat, Oct 20th); Stressed that there was no row inside govt over tax amnesty; no government crisis. Objections showed that Italy was right on the budget. Reiterated prediction that bond spread will narrow; All of Italy economic data is positive
• Ireland PM Varadkar: Longer transition period was not an alternative to a legally binding backstop
• South Africa Central Bank Dep Gov Groepe saw a domestic economic rebound in 2019 aided by exports and fixed investments. CPI forecast seen less benign than current levels but tightening would be needed if forecasts played out (**Note: Sept SARB decision to keep policy steady was 4-3 with dissenters looking for a hike)
• China Vice Premier Liu stated that the domestic economy was stable with improvement. Reiterated China to keep proactive fiscal policy, prudent monetary policy
• BOJ Gov Kuroda reiterated domestic economy was expanding moderately, must maintain 'powerful' monetary easing. To guide policy appropriately while scrutinizing risks that warrant attention. Reiterated that inflation likely to gradually accelerate towards 2%

Currencies

• The EUR/USD stayed around the 1.1450 in the session as focused remained on the Italian budget which raised EU political risks. EU Commission to issue its formal response next week but indications that it wanted Italy to revised the 2019 budget plan to be more in-line with EU rules. EU’s Oettinger did state that the EU would likely to reject Italy’s draft budget plan. Italian officials have previously stated that they would not back down. Concerns over a slowing global economy saw Euro Zone money market participants push back their expectations of the 1st ECB rate hike by a month into Oct 2019 . The Italian 10-year BTP higher by approx 10bps to test above the 3.75% area (4-year highs)
• Looking ahead into next week the Italian budget situation to key on the upcoming rating agency actions with S&P and Moody’s likely to act with possible downgrades on Italy (budget situation would likely receive little sympathy by the ECB).

Fixed Income

• Bund Futures trades at 158.69 down 14 ticks as German 10-year bond yield hovers 0.42%. A downside break of 157.25 sees 155.69 initially. To the upside 158.50 remains initial resistance.
• Gilt futures trades at 121.25 up 38 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.
• Friday's liquidity report showed Thursday's excess liquidity fell from €1.881T to €1.8T. Use of the marginal lending facility stayed fell from €56M to €20M.
• Corporate issuance saw 4 issuers raise $2.6B in the primary market

Economic Data:

• (NL) Netherlands Aug Consumer Spending Y/Y: 2.2% v 2.6% prior
• (NL) Netherlands Oct Consumer Confidence: 15 v 19 prior
• (NO) Norway Q3 Industrial Confidence: 8.9 v 8.5e
• (HU) Hungary Aug Average Gross Wages Y/Y: 10.1% v 12.3%e
• (CN) Weekly Shanghai copper inventories (SHFE): 140.8K v 125.7K tons prior
• (EU) Euro Zone Aug Current Account: 24.0B v €19.5B prior
• (IT) Italy Aug Current Account: €5.0B v €7.5B prior
• (RU) Russia Narrow Money Supply w/e Oct 12th: 10.42T v 10.32T prior
• (PL) Poland Sept Retail Sales M/M: -3.4 v -1.3%e; Y/Y: 5.6% v 8.1%e, Real Retail Sales Y/Y: 3.6% v 6.2%e
• (UK) Sept Public Finances (PSNCR): £15.8B v £3.1B prior; Net Borrowing: £3.3B v £4.6Be, Central Government NCR: £14.7B v £5.2B prior, PSNB (ex Banking): £4.1B v £4.5Be
• (HK) Hong Kong Sept Unemployment Rate: 2.8% v 2.8% prior (matches lowest level since Jan 1998)
• (GR) Greece Aug Current Account: €1.6B v €1.6B prior

Fixed Income Issuance

• None seen

Looking Ahead

• (UK) PM May to brief 150 CEOs on Brexit
• (NO) Norway Finance Ministry to present new central bank law proposals
• (AR) Argentina Sept Budget Balance (ARS): No est v -10.4B prior
• 05:30 (IN) India to sell combined INR110B in 2020, 2026, 2028, 2034 and 2055 bonds
• 05:30 (ZA) South Africa to sell ZAR600M in I/ L 2025, 2033 and 2050 bonds
• 06:00 (UK) DMO to sell €5.0B in 1-month, 3-month and 6-month bills (£0.5, £3.0B and £1.5B respectively)
• 06:30 (IS) Iceland Switch auction
• 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Oct IGP-M Inflation (2nd Preview): 1.0%e v 1.3% prior
• 07:30 (IN) India Weekly Forex Reserves
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:15 (UK) Baltic Dry Bulk Index
• 08:30 (CA) Canada Sept CPI M/M: +0.1%e v -0.1% prior; Y/Y: 2.7%e v 2.8% prior, CPI Core- Common Y/Y: 2.0%e v 2.0% prior, CPI Core- Median Y/Y: No est v 2.1% prior,
  CPI Core- Trim Y/Y: No est v 2.2% prior, Consumer Price Index: No est v 134.2 prior
• 08:30 (CA) Canada Aug Retail Sales M/M: 0.3%e v 0.3% prior; Retail Sales (Ex Auto) M/M: 0.1%e v 0.9% prior
• 09:00 (BE) Belgium Oct Consumer Confidence: No est v 0 prior
• 09:00 (BR) Brazil Oct CNI Industrial Confidence: No est v 52.8 prior
• 09:00 (IT) Bank of Italy (BOI) Quarterly Economic Bulletin
• 09:00 (US) Fed's Kaplan (dove, non-voter) speaks in New York
• 09:00 (IT) Bank of Italy Quarterly Economic Bulletin
• 09:30 (US) Fed's Evans participates in Moderated Discussion on Economy
• 10:00 (US) Sept Existing Home Sales: 5.29Me v 5.34M prior
• 11:00 (EU) Potential Sovereign ratings after European close (Ukraine Sovereign Debt to be rated by S&P; Belgium and Finland Sovereign Debt to be rated by Moody's
• 12:00 (US) Fed's Bostic (dove, voter)speaks on Economic Outlook
• 12:10 (UK) BOE Gov Carney in NY
• 12:45 (US) Fed’s Kaplan (dove, non-voter)
• 13:00 (US) Weekly Baker Hughes Rig Count data

The euro has continued to move lower against the US dollar during the European trading session, as Italian bond yields trade higher over concerns about Italy’s 2019 budget plan. Buyers have so far been able to defend the current monthly trading low, at 1.1431, creating a possible bullish double-bottom pattern formation. However, a clear break below the 1.1431 support level exposes the EURUSD pair to further downside towards the 1.1400 level.

The EURUSD pair is strongly bearish while trading below the 1.1431 level, key support is found at the 1.1400 and 1.1350 levels.

If the EURUSD pair continues to hold above the 1.1431 level, key resistance is found at the 1.1468 and 1.1500 levels.