Sample Category Title

Pivot (invalidation): 68.50

Our preference Long positions above 68.50 with targets at 69.20 & 69.60 in extension.

Alternative scenario Below 68.50 look for further downside with 68.20 & 67.80 as targets.

Comment The RSI is mixed with a bullish bias

Pivot (invalidation): 14.5100

Our preference Long positions above 14.5100 with targets at 14.6600 & 14.7200 in extension.

Alternative scenario Below 14.5100 look for further downside with 14.4300 & 14.3300 as targets.

Comment The RSI is mixed to bullish.

Pivot (invalidation): 1223.50

Our preference Long positions above 1223.50 with targets at 1230.00 & 1233.00 in extension.

Alternative scenario Below 1223.50 look for further downside with 1221.00 & 1218.50 as targets.

Comment The RSI is mixed to bullish.

Demand for the US currency is still high. Yesterday, the US dollar strengthened against a basket of major currencies. The dollar index (#DX) again updated the weekly high and closed in the positive zone (+0.44%). Positive economic reports and the prospects for the Fed interest rates raising support the US currency. In October, Philadelphia Fed manufacturing index counted to 22.2 and was better than the expected value of 19.7. Today, we expect important statistics from Canada and the United States.

The British pound weakened significantly against the US dollar due to weak economic statistics from the UK. The volume of retail sales in the UK fell by 0.8% in September. Experts expected a decline of 0.4%. Yesterday, the Brexit summit of EU leaders was held, during which no agreement was reached on the exit of the United Kingdom from the Union. However, British Prime Minister, Theresa May, is ready to consider the possibility of extending the transition period during which to adhere to the current EU rules.

Today, during the Asian trading session, weak data on the economy of China have been published. Thus, the GDP indicator (y/y) slowed down to 6.5%, while experts expected 6.6%. Industrial output increased by 5.8% in September, which is below market expectations at the level of 6.0%.

Oil quotes have become stable. At the moment, futures for the WTI crude oil are testing a mark of $68.80 per barrel.

Market Indicators

Major US stock indices show negative dynamics: #SPY (-1.44%), #DIA (-1.28%), #QQQ (-2.32%).

At the moment, the 10-year US government bonds yield is at the level of 3.17-3.18%.

Important economic reports on 19.10.2018:

Reports on inflation and retail sales in Canada at 15:30 (GMT+3:00);

Existing home sales in the US at 17:00 (GMT+3:00).

We also recommend paying attention to the speech by the Bank of England governor Carney.

The Aussie moved higher on Friday, supported by higher China’s stocks, in attempts to stabilize after losses in past two days.

Dips found support at 0.71 zone, however, the downside remains vulnerable as repeated failures to close above pivotal 0.7145 barrier (Fibo 38.2% of 0.7314/0.7041) continue to weigh, along with falling 20SMA (currently at 0.7143) which capped upside attempts.

Weak momentum and MA’s in bearish configuration on daily chart, add to downside risk.

Close below 0.71 handle would increase risk of retesting 0.7040 base and possible extension towards psychological 0.70 support.

Alternative scenario requires close above 20SMA / Fibo barrier to signal continuation of recovery from 0.7040 base.

Res: 0.7120, 0.7145, 0.7159, 0.7177
Sup: 0.7088, 0.7040, 0.7000, 0.6977

EUR/USD

Current level - 1.1443

The downtrend is still stable and while 1.1520 crucial high remains intact, the outlook will be bearish, for a slide towards 1.1300 lows.

USD/JPY

Current level - 112.46

The sharp dip to 111.90 has neutralized the positive bias and the outlook here is neutral.

GBP/USD

Current level - 1.3016

The downtrend remains intact and there is no sign of a reversal yet, so the intraday outlook is bearish below 1.3080, for a dip to 1.2920.

The pair regained traction and bounced to 112.50 zone on Friday after bulls were repeatedly capped by pivotal Fibo barrier at 112.74 (38.2% of 114.54/111.62) on Wed/Thu, which resulted is bearish acceleration on Thursday. Fresh upside attempts emerged from 112 support zone but struggle to break above falling 10SMA / base of thick 4-hr cloud (112.40). Strong bearish momentum on daily chart warn that bulls may run out of steam again. Extended congestion could be expected while Fibo barrier at 112.74 caps, which would also keep the downside vulnerable. Loss of 112.00 handle would risk test of key supports at 111.62 (15 Oct low) and 111.47 (daily cloud top). Narrowing daily cloud twists next week and could be magnetic. Alternatively, weekly close above 112.74 pivot would be bullish signal for extension of recovery from 111.62.

Res: 112.54, 112.74, 113.08, 113.42
Sup: 112.14, 112.00, 111.62, 111.47

The pound hit a 10 day low against the USD, as UK’s PM said that EU’s proposal for the border is unacceptable. The EU summit in Brussels was unable to produce a deal or a breakthrough with the UK, about Brexit. Theresa May, stated that there were still considerable unresolved issues with the EU relating the backstop Irish border arrangement. One idea would be to prolong the period in which the UK remains under the EU’s full membership rules after December 2020, in order to provide more time for the deadlock to be broken. It should be noted though, that such a development could provoke anger among hard Brexiteers in the UK parliament. The mood seems to be quite pessimistic, as EU leaders seem to be less willing to repeat such a meeting, unless there is a breakthrough. Should there be more negative headlines about Brexit, we could see the pound weakening even further.

Cable dropped yesterday, breaking consecutively the 1.3060 (R2) and the 1.3025 (R1) support lines (now turned to resistance). We see the case for the pair to continue to trade in a bearish market, as the downward trendline incepted since the 16th of October, not only remains intact but also shows signs of steepening. It should be noted though, that the RSI indicator in the 4 hour chart remains at the reading of 30, implying an overcrowded short position. Should the bears continue to dictate the pairs direction, we could see the pair breaking the 1.2965 (S1) support line and aim for the 1.2920 (S2) support barrier. Should on the other hand the bulls take over, we could see the pair breaking the 1.3025 (R1) resistance line and aim if not break the 1.3060 (R2) resistance level aiming for the 1.3150 (R3) hurdle.

Euro loses ground on Italian budget

The common currency lost ground against the USD yesterday, as the Italian Budget issue made headlines. The European Commission's criticism of Italy’s budget, renewed concerns about further political instability for the Eurozone. Criticism seems to consist of remarks about planned government spending being too high, structural deficit expected to rise instead of falling and that Italian public debt would not drop. Despite the Italian PM, Conte defending Italy’s spending plan, the EU seems to consider it as a “particularly serious non-compliance” and its deviation from targets as “unprecedented”, according to media. At this point we would like to underscore the word “unprecedented”, as in the past Brussels had tolerated deviations, hence implying that this time action could be taken. It should also be noted, that within the Italian political scene frictions seem to escalate, between the 5 Star Movement and the League, destabilizing further the situation. As Brussels and Italy seem to dig into their positions, analysts point out, that the Euro decline reflects the political tension in the Eurozone. Should there be further negative headlines about the issue or an escalation, we could see the Euro weakening.

EUR/USD dropped yesterday, breaking the 1.1480 (R1) support line (now turned to resistance), aiming for the 1.1430 (S1) support level. We see the case for the pair to continue to trade in bearish market, as the downward trendline incepted since the 16th of October remains intact. It should also be noted that the RSI indicator in the 4 hour chart, remains near the reading of 30, underscoring the possibility of a correction. Should the pair continue to be under the market’s selling interest, we could see it breaking the 1.1430 (S1) support line, aiming for the 1.1360 (S2) support area. Should the pair find extensive buying orders along its path we could see it breaking the prementioned upward trendline, the 1.1480 (R1) resistance line and aim for the 1.1525 (R2) resistance zone.

In today’s other economic highlights:

In the American session, from the Canada we get the inflation rates for September and the retail sales growth rate for August. From the US we get the number of existing home sales for September as well as the number of active oil rigs in the US as counted by Baker Hughes.

Support: 1.1430 (S1), 1.1360 (S2), 1.1300 (S3)

Resistance: 1.1480 (R1), 1.1525 (R2), 1.1577 (R3)

GBP/USD 4H

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

Resistance: 1.3025 (R1), 1.3060 (R2), 1.3150 (R3)

USDCHF faces bull pressure threats with eyes on the 1.0000, its big psycho level. On the downside, support lies at the 0.9900 level. A turn below here will open the door for more weakness towards the 0.9850 level and then the 0.9800 level. On the upside, resistance resides at the 1.0000 level where a break will clear the way for more strength to occur towards the 1.0050 level. Further out, resistance comes in at the 1.0100 level. Above here if seen will turn attention to 1.0150. All in all, USDCHF faces further price strength

It has been a turbulent trading week for stock markets as trade worries, global growth fears, Italian budget concerns and geopolitical tensions led to a deterioration in risk sentiment.

Although global equity bulls made an appearance mid-week thanks to upbeat US corporate earnings, this was short-lived after hawkish Federal Reserve minutes reinforced expectations of higher US interest rates. With geopolitical risks likely to promote risk aversion, investors should fasten their seat belts as global stocks may have more instore for a rough and rocky ride downhill.

Asian shares were mostly mixed this morning after China's GDP growth for the third quarter of 2018 printed below market expectations. The risk-off vibe from Asian markets could infect European shares this morning and trickle back down into Wall Street later in the afternoon.

China's GDP slows to 6.5% in Q3

Sentiment towards the world's second largest economy was dealt a blow this morning following reports that growth slowed to its weakest pace since the global financial crisis during the third quarter.

China's GDP growth came in at 6.5% in Q3, slower than the 6.7% recorded in Q2 as trade tensions with the United States weighed on the economy. With the growth outlook for China looking discouraging as US tariffs take effect, this is certainly bad news for emerging markets – especially those with a strong economic reliance on the nation. When China sneezes, it is not only emerging markets that will catch a cold but the rest of the world. Further signs of a slowdown in economic momentum is likely to compound risk aversion, ultimately impacting global sentiment.

Turkish Lira star of the show in EM currency space

It has been a positive trading week for the Turkish Lira which has gained 2.88% against the Dollar since Monday. Easing tensions between the United States and Turkey following the release of American pastor Andrew Brunson could be a likely factor behind the Lira's appreciation. While optimism over the US lifting some sanctions on Tukey is good news for the Lira, the upside remains capped by external factors in the form of Dollar strength and trade tensions. In regards to the technical picture, the USDTYR has the potential to trade towards 5.45 if a weekly close under 5.60 is achieved.

Currency spotlight – EURUSD

The uncertainty revolving around Italy's controversial budget plans coupled with Brexit developments have weighed heavily on the Euro this week. An appreciating Dollar rubbed salt on the wound with the EURUSD sinking towards 1.1440 on Friday morning. The EURUSD has been on the back foot for the most part of this trading week and is likely to sink lower in the near term if a weekly close below 1.1480 is achieved. Repeated weakness under 1.1480 may open a path towards 1.1420 and 1.1380.