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Market movers today

Focus today will remain on Italy after yesterday's official response to Italy's 2019 budget (see below). While it is still early days to see another blink from Italy (after Tria's comment on spread widening last week), markets will not take this letter well and it will weigh on market sentiment. It is a quiet day on the economic data front.

In Scandinavia, today's key release is the Norwegian Q3 business tendency survey, where we will look especially look at how manufacturing orders are faring (see next page).

Selected market news

Yesterday evening, EU Commissioner Moscovici and EC Vice President Dombrovskis sent a letter to Italian Finance Minister Tria for clarification of the 'obvious significant deviation' of the stability and growth pact in the 2019 budget that they submitted on Monday. This is the first official response from the EU to the worrying Italian budget. Italy has until Monday at noon to reply to the letter, but given the letter and the proposed budget, there is no reason to turn positive on Italy just yet, which will weigh on the BTPs. Further to this, ECB President Draghi is said to have expressed that there is no leeway towards Italy on the European rules during the EU summit yesterday.

Risk-off dominated on global markets, while there was no clear major driver behind it. Chinese stocks fell significantly, while the USD/CNY climbed closer to 7.00, its highest level since late 2016. European and US credit spreads widened as stock markets slid, accompanied by declining yields in Germany and the US. In light of escalating discussions around the Italian budget, periphery spreads widened notably. The EM FX universe was also under pressure on the strengthened USD.

For the 24 hours to 23:00 GMT, the EUR declined 0.39% against the USD and closed at 1.1455.

In the US, data indicated that US seasonally adjusted initial jobless claims eased to a level of 210.0K in the week ended 13 October 2018, following a revised level of 215.0K in the preceding week. Market had expected the initial jobless claims to fall to a level of 211.0K. Moreover, the leading indicator climbed 0.5% on a monthly basis in September, in line with market consensus. In the previous month, leading indicator had advanced 0.4%.

On the contrary, the nation’s Philadelphia Fed manufacturing index dropped to a level of 22.2 in October, less than market consensus for a decline to a level of 20.0. In the prior month, the index had registered a reading of 22.9.

In the Asian session, at GMT0300, the pair is trading at 1.1460, with the EUR trading slightly higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1430, and a fall through could take it to the next support level of 1.1401. The pair is expected to find its first resistance at 1.1508, and a rise through could take it to the next resistance level of 1.1557.

With no macroeconomic release in the Euro-zone today, investor sentiment will be determined by the US existing home sales data for September, set to release later in the day.

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

For the 24 hours to 23:00 GMT, the GBP declined 0.61% against the USD and closed at 1.3020, after UK's retail sales retreated 0.8% on a monthly basis in September, higher than market anticipation for a fall of 0.4%. Retail sales had recorded a revised rise of 0.4% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.3024, with the GBP trading a tad higher against the USD from yesterday's close.

The pair is expected to find support at 1.2983, and a fall through could take it to the next support level of 1.2942. The pair is expected to find its first resistance at 1.3098, and a rise through could take it to the next resistance level of 1.3172.

Moving ahead, investors await UK's public sector net borrowing for September, set to release in a few hours, along with Bank of England's Governor Mark Carney speech, due later in the day.

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

For the 24 hours to 23:00 GMT, the USD declined 0.38% against the JPY and closed at 112.20.

In the Asian session, at GMT0300, the pair is trading at 112.40, with the USD trading 0.18% higher against the JPY from yesterday's close.

Overnight data showed that Japan's national consumer price index (CPI) advanced 1.2% on a yearly basis in September, undershooting market consensus for a gain of 1.3%. The CPI had climbed 1.3% in the previous month.

The pair is expected to find support at 112.02, and a fall through could take it to the next support level of 111.63. 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 113.03.

Looking forward, traders would keep an eye on Japan's machine tool orders and Nikkei manufacturing PMI, both scheduled to release next week.

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 0.05% against the CHF and closed at 0.9958.

In economic news, Switzerland’s trade surplus expanded to a level of CHF 1.45 billion in September, following a surplus of CHF 1.41 billion in the previous month.

In the Asian session, at GMT0300, the pair is trading at 0.9968, with the USD trading 0.10% higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9934, and a fall through could take it to the next support level of 0.9899. The pair is expected to find its first resistance at 0.9989, and a rise through could take it to the next resistance level of 1.0009.

In absence of key economic releases in Switzerland 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 0.44% against the CAD and closed at 1.3081.

In the Asian session, at GMT0300, the pair is trading at 1.3065, with the USD trading 0.12% lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3027, and a fall through could take it to the next support level of 1.2988. The pair is expected to find its first resistance at 1.3096, and a rise through could take it to the next resistance level of 1.3126.

Trading trend in the Loonie today is expected to be determined by Canada’s retail sales for August and the consumer price index figures for September, both slated to release later in the day.

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 AUD declined 0.15% against the USD and closed at 0.7098.

LME Copper prices declined 1.6% or $102.0/MT to $6147.0/MT. Aluminium prices rose 0.5% or $10.5/MT to $2007.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7109, with the AUD trading 0.15% higher against the USD from yesterday’s close.

Elsewhere in China, Australia’s largest trading partner, the nation’s gross domestic product (GDP) advanced 6.5% in 3Q 2018, lower than market expectations for a rise of 6.6%. The GDP had registered a gain of 6.7% in the prior quarter. Moreover, China’s industrial production climbed 5.8% on an annual basis, falling short of market anticipation for an advance of 6.0%. In the previous month, industrial production had risen by 6.1%. Also, the nation’s retail sales (YTD) surged 9.3% on a yearly basis in September, at par with market consensus. In the preceding month, retail sales (YTD) had registered a similar rise.

The pair is expected to find support at 0.7082, 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 0.7144, 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 rose 0.20% against the USD and closed at USD1228.40 per ounce, as a decline in US equities boosted the demand appeal of the safe haven asset.

In the Asian session, at GMT0300, the pair is trading at 1230.60, with gold trading 0.18% higher against the USD from yesterday’s close.

The pair is expected to find support at 1223.67, and a fall through could take it to the next support level of 1216.73. The pair is expected to find its first resistance at 1235.57, and a rise through could take it to the next resistance level of 1240.53.

The yellow metal is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Silver declined 0.24% against the USD and closed at USD14.60 per ounce.

In the Asian session, at GMT0300, the pair is trading at 14.63, with silver trading 0.21% higher against the USD from yesterday’s close.

The pair is expected to find support at 14.51, and a fall through could take it to the next support level of 14.38. The pair is expected to find its first resistance at 14.72, and a rise through could take it to the next resistance level of 14.80.

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

Daily Pivots: (S1) 1.1424; (P) 1.1476; (R1) 1.1502; More.....

EUR/USD's fall from 1.1621 continues today and intraday bias remains on the downside for 1.1431. Break there will resume whole decline from 1.1814 and target 1.1300 low. On the upside, above 1.1527 minor resistance will turn intraday bias neutral first. But near term outlook will remain mildly bearish as long as 1.1621 resistance holds.

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.