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Cable holds within tight consolidation just above daily cloud top (1.3012) following steep fall in past two days, when the pair registered 1.24% fall, with yesterday's fall marking the biggest one-day loss in Oct. Bears are taking a breather ahead of strong support zone between 1.3012 and 1.2990 (daily cloud top/Fibo 76.4% of 1.2921/1.3257/55SMA), before continuing lower. Daily 5/10/20SMA's are turning south and momentum entering negative territory, supporting bearish scenario, which needs confirmation on close below psychological/Fibo 1.30 support. Negative sentiment firmed after EU/UK summit over stalled Brexit talks failed to reach a deal, as Irish border remains main obstacle. Recent weak UK economic data add to negative outlook. Eventual break below pivotal 1.30 zone would open way towards key support at 1.2922 (03/04 Oct higher base). Meanwhile, the pair may hold in extended consolidation, with stronger upticks on profit-taking to be capped by a cluster of converged daily MA's at 1.3090 zone.

Res: 1.3038, 1.3050, 1.3090, 1.3129
Sup: 1.3012, 1.3000, 1.2990, 1.2933

Here are the latest developments in global markets:

FOREX: The dollar index is a touch higher on Friday (+0.08%), adding to the gains it recorded in the prior session and looking set to end the week meaningfully higher. The pound was the worst performer on Thursday amid a lack of progress on Brexit and downbeat UK data, while the euro also took a hit as Italian budget concerns came back to the forefront. The yen outperformed as risk aversion dominated, but has already surrendered some of those gains today as sentiment appears to have turned around.

STOCKS: Wall Street closed firmly in the red on Thursday, as geopolitical woes and disappointing earnings from industrial firms curbed risk appetite. Lockheed Martin (-1.62%) fell on worries Congress may block arms sales to Saudi Arabia, while Textron (-11.18%) and United Rentals (-14.93%) plunged in the wake of lackluster earnings, citing the impact of tariffs. Accordingly, the S&P 500 (-1.44%) and Dow Jones (-1.27%) tumbled, while the tech sector – where valuations are most stretched – underperformed, with the Nasdaq Composite dropping by 2.06%. Sentiment seems to have reversed though, with futures tracking the Dow, S&P, and Nasdaq 100 pointing to a higher open today. Asia was mixed on Friday, with Japan’s Nikkei 225 (-0.56%) and Topix (-0.69%) declining, but Hong Kong’s Hang Seng (+0.50%) advancing, taking its cue from China’s CSI 300 (+2.97%). Europe was set for a higher open today as well, futures suggest.

COMMODITIES: Oil prices edged lower for a second straight session on Thursday, with both WTI and Brent touching one-month lows, still reeling from a major disappointment in the EIA inventory data earlier in the week. The broader risk aversion in markets likely contributed to the decline. Accordingly, both WTI and Brent rebounded somewhat today, alongside risk sentiment. In precious metals, gold is up by 0.3% on Friday at $1,228 an ounce. The dollar-denominated metal climbed somewhat yesterday too despite another surge in the greenback, as investors turned their sights towards defensive assets.

Major movers: Havens advance as risk appetite sours; Italian worries weigh on euro

Risk aversion was the name of the (trading) game once again on Thursday, with major US stock markets falling considerably, and haven assets – most notably the Japanese yen –advancing across the board. While there was no clear trigger behind this shift, renewed concerns around Italy’s budget, disappointing earnings from industrial firms, still-elevated US bond yields, and the prospect of a fallout in US-Saudi relations may have all contributed. On the Saudi front, US Treasury Secretary Mnuchin withdrew from an investment conference taking place in the Kingdom, amid mounting pressure to hold its leaders accountable for the disappearance of a journalist.

The dollar was the second-best performer among the major currencies, behind the mighty yen, evidently benefiting from the risk-off tones given the absence of tier-one US data. Euro/dollar fell from an intraday high of 1.1525 to settle near 1.1450, not least due to euro weakness as the Italian budget saga came back in focus. The EU Commission sent a letter to Italy outlining its concerns around the budget deficit, and although both sides tried to downplay the significance of the gesture in related comments, Italian bond markets didn’t buy it. Italy’s 10-year bond yield soared above 3.70%, its highest level in 4½ years as investors cut their exposure to Italian assets in anticipation of a potential escalation, thereby sending the euro lower.

The biggest underperformer was the British pound, which suffered at the hands of disappointing UK retail sales data, and the lack of any concrete signs that the Brexit talks are moving forward. Most striking, was the fact that sterling continued to tumble even after EU Commission President Juncker said he is“convinced we will be able to strike a Brexit deal”. The market reaction suggests investors aren’t taking such signals at face value anymore, considering the recent barrage of similarly optimistic, yet void of substance remarks from the various officials. As the adage goes, “talk is cheap”, and actions are seemingly what matters most for markets right now.

Sentiment seems to have turned around on Friday again, as commodity-linked currencies such as the aussie, kiwi, and loonie are all on the front foot, while the safe-haven Japanese yen is surrendering some of the ground it claimed yesterday. Although Chinese GDP data were a touch softer than expected overnight, some extraordinarily optimistic remarks from the nation’s authorities supported sentiment.

Day ahead: Canadian data on inflation and retail sales coming up; politics remain in focus

Key Canadian data on inflation and retail sales will be hitting the markets on Friday. Apart from economic releases, political developments will be eyed as they may act as the primary driver of movements during today’s trading.

September’s Canadian inflation as gauged by the consumer price index (CPI) is projected to stand at 2.7% y/y, slightly below August’s 2.8%. This would allow the reading to exceed the Bank of Canada’s (BoC) target for annual inflation of 2.0% for the eighth straight month, and at the same time keep it within the upper bound of the 1-3% target band. Given that higher energy prices largely accounted for the rise in headline CPI, core inflation that excludes energy from its calculations is perhaps attracting additional interest. The same holds true for the measures of core inflation monitored by the Canadian central bank, namely the CPI median, trim and common.

In terms of retail sales out of the nation, they’re anticipated to expand by 0.3% m/m in August, the same pace as in July. Meanwhile, core retail sales that exclude automobiles, are predicted to grow by 0.2% m/m, much lower than July’s 0.9%. Both sets of data (inflation & retail sales) are due at 1230 GMT.

Canadian OIS currently assign a 97% chance for a 25bps rate increase by the BoC when it completes its meeting on monetary policy on October 24; it is practically seen as a done deal. Barring a dramatic weakness in today’s numbers, the figures are unlikely to deter the central bank from proceeding with a rate increase next week.

Out of the US, existing home sales for September are due at 1400 GMT. Generally, these are not market moving for FX markets, though they have their own interest, especially in light of the rising rate environment which is typically negative for the real estate market.

Beyond releases, concerns over an EU-Italy clash over the latter’s budget plans remain firmly on the table, weighing on the common currency. Elsewhere, any Brexit headlines will be closely watched as well. This week’s summit failed to bring the two parties closer to a deal, thus acting as a drag on the pound. In light of the impasse, EU leaders called off the November Brexit summit, with a gathering aiming to complete the deal now expected to take place in December.

Policymakers making public appearances include Bank of England Governor Carney who will be giving a speech at 1530 GMT. Kaplan, a non-voting FOMC member in 2018, is on the agenda at 1445 GMT.

In equities, Procter & Gamble and Honeywell are among companies releasing quarterly results on Friday; both will be reporting before the opening bell on Wall Street.

In energy markets, Baker Hughes data on active oil rigs in the US are scheduled for release at 1700 GMT.

Technical Analysis: USDCAD loses steam after hitting more than one-month high; bearish signal by stochastics in very short-term

USDCAD retreated a bit though it still remains close to Thursday’s more than one-month high of 1.3087. The Tenkan-sen is above the Kijun-sen in support of a bullish short-term bias. Notice though that the latter has flatlined, suggesting that positive momentum may be easing. Moreover, the stochastics are giving a bearish signal in the very short-term: the %K and %D lines have recorded a bearish cross and are both heading lower.

Upbeat Canadian data are expected to boost the loonie, pushing the pair lower. Immediate support seems to be taking place around the Tenkan-sen at 1.3051. A move below would eye the zone around the current level of the 50-period moving average line at 1.3003, which also encapsulates the Ichimoku cloud top (1.3017) and the Kijun-sen (1.3001). Not far below lies the 100-period MA at 1.2959.

Conversely, a miss in the numbers is likely to push USDCAD higher. A barrier to gains could come around yesterday’s high of 1.3087; the region around this captures numerous other tops from the recent past as well as the 1.31 round figure. Higher still, additional resistance may occur around 1.3175, a congested area in early September.

Canada is a major oil exporter and the direction in the previous liquid can also affect the currency’s movement.

The Euro moves lower in early European trading after holding within tight consolidation in Asia on Friday and looking for eventual attack at key supports at 1.1432/22 (09 Oct spike low / Fibo 76.4% of 1.1300/1.1815 ascend).

The pair was down over 1% in strong bearish acceleration in past two days and is on track for strong bearish weekly close, which reinforces strong bearish stance.

Negative sentiment on stronger dollar, driven by strong expectations of Fed’s further rate hikes, as well as better than expected US data, was additionally boosted by rising concerns about political tensions in the Eurozone over Italian budget crisis.

Bearish daily/weekly techs support scenario, but bears may take a breather before breaking lower as deeply oversold slow stochastic on daily chart warns.

Upticks are expected to offer better selling opportunities with barriers at 1.1504/18 broken Fibo support / falling 10SMA , expected to ideally cap correction and keep intact daily cloud base (1.1545).

Res: 1.1470, 1.1504, 1.1508, 1.1526
Sup: 1.1422, 1.1387, 1.1360, 1.1315

XAUUSD (1227.54): Gold prices turned higher towards the closing session on Thursday as price action was seen attempting to recover most of the losses from the previous day. Following the rally to 1225.35, gold prices are somewhat trading in a range. To the upside, the next main resistance is seen at 1238.00 - 1242.25 level. We expect the momentum to keep the prices biased to the upside for a retest of this level as resistance which previously served as support.

GBPUSD (1.3022): The British pound extended declines sharply yesterday as price action fell to test the lower support at 1.3054 - 1.3028. If the support fails to hold the declines, we anticipate further falls in GBPUSD to push price lower to 1.2808. To the upside, the GBPUSD could be seen attempting to bounce off the current support level. The gains could be limited to 1.3132 level where resistance could be established.

EURUSD (1.1459): The euro continued to extend the declines. Price action was seen trading near the lower support at 1.1435 - 1.1462 level. We expect to see some consolidation taking place at this level. As long as this support holds, the common currency could be seen trading within a range. In the event that the EURUSD breaks below this support, we expect a retest of 1.1400.

Economic data on Thursday was relatively quiet. The U.S. dollar attempted to maintain some gains but was flat on the day. Gold prices advanced strongly on Thursday recovering the losses from the day before.

The UK's retail sales report showed a larger than expected declines. Retail spending fell 0.8% on the month which was more than the forecasts of a 0.4% decline. However, data for the previous month was revised higher to show a 0.4% increase.

China released its quarterly GDP report earlier in the day. Data showed that GDP advanced 6.5% in the third quarter of the year. This was slightly below the forecasts of a 6.6% increase and slower than the 6.7% increase seen in the second quarter.

The economic calendar is somewhat light during the European trading session. However, the NY trading session will see the release of Canada's inflation data and retail sales.

Headline CPI is forecast to remain flat. Retail sales are expected to rise 0.3% on the month while core retail sales are expected to rise just 0.1% after rising 0.9% in the month before.

Data from the U.S. will see the release of the existing home sales report. The BoE Governor Carney is scheduled to speak later during the evening.

USDCAD posted two strong green days this week to touch one-month highs at 1.3087 and is set for its third weekly gain today. Technically the pair could face further upside in the short-term as the RSI moves positively above its 50 neutral mark and the MACD strengthens above its red signal line and marginally above zero.

In case the price heads north to beat yesterday’s peak of 1.3087, where the 50% Fibonacci of the downleg from 1.3385 to 1.2781 is placed, resistance is expected to come between 1.3152-1.3225, formed by the 61.8% Fibonacci and the September 6 peak. Slightly higher, the 78.2% Fibonacci of 1.3255 which offered some support in June could attract some interest ahead of the 1.3385 top.

On the downside, the pair may potentially test the 38.2% Fibonacci of 1.3010 first before reaching the 23.6% Fibonacci of 1.2923. But beforehand, the 1.2960 level, which stood as support in early August might appear in the radar as well. Breaking below the 1.2781 bottom, the bearish sentiment would come back into play, probably triggering additional negative corrections towards 1.2660, a robust support and resistance during 2017.

In the medium-term, the negative picture has somewhat softened after the rebound on 1.2781, traders might still want to see the market closing decisively above the 50% Fibonacci before confirming that the recent bounce is sustainable

The British pound has broken sharply to the downside against the US dollar, after Brexit negotiations between the UK and EU once again ended in uncertainty. The GBPUSD pair has now moved below the neckline of a bearish head and shoulders pattern, with a downside projection of over two hundred points. Buyers now need to defend the 1.3000 support level or risk further intraday losses towards the 1.2940 level.

The GBPUSD pair is strongly intraday bearish while trading below the 1.3080 level, key support is found at the 1.3000 and 1.2940 levels.

If the GBPUSD pair moves above the 1.3080 level, key intraday resistance is then found at the 1.3100 and 1.3130 levels.

The euro remains under heavy selling pressure against the greenback in early Friday trade, as the US dollar index climbs back towards the 96.00 resistance level. The EURUSD pair is fast approaching the current monthly low, with a break below the 1.1431 level likely to expose further downside towards the 1.1410 support level. Buyers will likely attempt to defend the 1.1431 support level and force price back above the 1.1480 level.

The EURUSD pair is strongly bearish while trading below the 1.1480 level, key support is now found at the 1.1431 and 1.1410 levels.

If the EURUSD pair trades above the 1.1480 level, key intraday resistance is found at the 1.1500 and 1.1518 levels.