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Daily Pivots: (S1) 111.86; (P) 112.10; (R1) 112.48; More..

USD/JPY is staying in range above 111.62 and intraday bias remains neutral first. Near term outlook stays cautiously bearish with 112.52 minor resistance intact and further fall is expected. Break of 111.62 will target 38.2% retracement of 104.62 to 114.54 at 110.75. We'll look for bottoming signal above 109.76 key support. On the upside, above 112.52 minor resistance will indicate completion of the pull back and bring retest of 114.54 high.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

Daily Pivots: (S1) 0.9874; (P) 0.9892; (R1) 0.9924; More...

USD/CHF rebounds further today but it's still staying in range below 0.9954. Intraday bias stays neutral. Consolidation from 0.9954 might still extend with another decline. But in that case, downside should be contained by 38.2% retracement of 0.9541 to 0.9954 at 0.9796 to bring rise resumption. On the upside, break of 0.9954 will resume the rise from 0.9541 and target 1.0067 resistance next.

In the bigger picture, the pullback from 1.0067 has completed at 0.9541 already. And rise from 0.9186 is likely resuming. Firm break of 1.0067 will pave the way to retest 1.0342 key resistance. We'd be cautious on strong resistance from there to limit upside to bring another medium term fall to extend long term range trading.

Daily Pivots: (S1) 1.3139; (P) 1.3188; (R1) 1.3234; More...

GBP/USD is staying in range of 1.3081/3257 and intraday bias remains neutral first. Above 1.3257 will bring another rise. But upside should be limited by 1.3316 key fibonacci level to bring down trend resumption eventually. On the downside, below 1.3081 minor support will turn bias to the downside for 1.2921 support first. However, sustained break of 1.3316 would pave the way to next fibonacci level at 1.3721.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.

GBPUSD upside momentum was halted during Wednesday trading session. It now eyes its support located at 1.3082 level. Further down, support comes in at the 1.3050 level where a break will turn focus to the 1.3000 level. Further down, support lies at the 1.2950 level. Below here will set the stage for more decline towards the 1.2900 level. Its daily RSI is bearish and pointing lower suggesting further weakness. Resistance stands at the 1.3150 with a turn above here allowing for more strength towards the 1.3200 level. Further out, resistance stands at the 1.3250 level followed by the 1.3300 level. On the whole, GBPUSD faces downside pressure with more weakness likely.

Cable stands at the back foot in early American trading on Wednesday and holding near session low at 1.3099. Weaker than expected UK inflation numbers in Sep brought pound under pressure in Europe, with fresh weakness of Euro pulling sterling lower and adding to negative near-term sentiment. Probe below 1.3100 handle pressures 1.3093 (converged 100/30SMA's) and exposes pivotal support at 1.3083 (Monday's low) violation of which would further weaken near-term structure. Brexit talks remain the key event for sterling, with two-day EU summit, which started today, expected to provide more clues whether talks stalled or two sides would break the deadlock. Release of FOMC minutes would also provide stronger direction signals.

Res: 1.3129; 1.3178; 1.3192; 1.3235
Sup: 1.3093; 1.3050; 1.3000; 1.2990

The Euro Stoxx 50 (EU50) index hit a 22-month low of 3167.70 on October 12, falling further below its moving averages (MA), before reversing higher. However, the rebound was cut short today after the index met resistance at the 38.2% Fibonacci retracement level of the downleg from 3453.70 to 3167.70.

The easing of the positive momentum is supported by the RSI, which appears to be flatlining before even reaching the 50-neutral level. However, the stochastics suggest there is more upside to come as the %K and %D lines are still rising.

If the index breaks above the 38.2% Fibonacci at 3277, the next key resistance could arrive at the 50% Fibonacci at 3310. Further up, the 61.8% Fibonacci at 3344 is another important level to beat as this would open the way for the 50-day MA, currently around 3365. Climbing above the 50-day MA would help shift the near-term bias to a bullish one.

However, failure to overcome the 38.2% Fibonacci would put the focus back to the downside, with immediate support likely coming from the 23.6% Fibonacci at 3235. A more significant support is the 22-month low of 3167.70. A drop below this trough would deepen the bearish phase for the index and underscore the negative outlook in the medium term.

The DAX index has posted considerable losses in the Wednesday session. Currently, the index is at 11,713, down 0.54% on the day. In economic news, Eurozone Final CPI edged up to 2.1%, matching the forecast. Eurozone Final Core CPI edged lower to 0.9%, also matching the estimate. As well, EU leaders will hold a 2-day summit in Brussels. On Thursday, Germany releases WPI.

A decline in car sales in September has dragged the DAX lower on Wednesday. BMW has dropped 1.14%, while Daimler has declined 1.28% and Volkswagen has dropped 0.83%. European car sales plunged by 23% last month, primarily due to tough new emission tests, which the car companies have complained will hurt their bottom line.

EU leaders hold a summit later today, but Brexit will not be on the menu due to a lack of progress in the negotiations. On Tuesday, Michel Barnier, chief Brexit negotiator for the EU, offered to extend the transition phase by 12 months, which would leave it in place until December 2021. This would give the sides more time to work on the proposed customs union as well as the thorny issue of the Irish border. The EU is insisting that it will not sign a withdrawal agreement with Britain, unless there is a backstop which allows Northern Ireland to remain in a customs union with the EU after Brexit. However, the British government is unlikely to agree to such a move, since it would require regulatory barriers within the United Kingdom. With plans for a Brexit statement at Wednesday’s meeting on hold, a Brexit statement with have to wait until EU leaders meet in November or even December, which is uncomfortably close to the Brexit deadline in March 2019.

After plunging over 4 percent last week, the DAX has reversed directions and posted modest gains so far this week. Two key factors in the downward spiral of global markets are the recent spike in U.S bond yields and growing fears about the impact of the U.S-China trade war. The Italian budget has triggered a crisis between Italy and the EU, has also weighed on European markets in recent weeks. However, market sentiment is more positive this week, with Italian stock markets showing gains on Tuesday. Will these gains be short-lived? The budget proposed by Rome increases the deficit to 2.4% of GDP, which breaches EU rules that require lower deficits. The budget will be sent later this week to the Italian parliament for approval. If it is approved, Rome and Brussels appear headed for a collision which could hurt European stock markets as well as the euro.

The Euro fell to one-week low at 1.1526 on Wednesday, driven by rise in Italian bonds. Fresh bearish acceleration returned below daily cloud, adding to negative outlook as Tuesday's candle with long upper shadow, which signaled strong upside rejection, weighs. Probe below 10SMA (1.1536) reinforces negative near-term structure and shifts risk towards 1.1504 pivot (Fibo 61.8% of 1.1432/1.1621 upleg). Significantly weaker than expected US housing data ( Sep building permits -0.6% vs 2.1% f/c / Sep housing starts -5.3% vs -4.5% f/c and 7.1% in Aug) did not show stronger impact on dollar, with focus turning on FOMC minutes, due later today. The single currency could accelerate further down on hawkish Fed which would boost the dollar on expectations on Fed's rate hike in Dec. Daily close below cloud is needed to confirm bearish stance and reversal after multiple upside rejection.

Res: 1.1536; 1.1583; 1.1599; 1.1624
Sup: 1.1504; 1.1476; 1.1463; 1.1432

Daily Pivots: (S1) 1.1552; (P) 1.1587; (R1) 1.1609; More.....

EUR/USD's break of 1.1534 minor support argues that corrective rebound from 1.1431 has completed at 1.1621 already. Intraday bias is turned back to the downside. Break of 1.1431 will resume whole decline from 1.1814 and target a test on 1.1300 low. On the upside, above 1.1621 will delay the bearish case and bring another rebound. But then, upside should be limited by 1.1779/1814 resistance zone to bring down trend resumption eventually.

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.

Dollar and Yen trade broadly higher in early US session as investors turn cautious again. Minutes of September FOMC meeting where there was another 25bps hike would catch much attention. But we're not expecting anything dramatic from there. All the markets need to know should have been delivered in the economic projections and press conference already.

Sterling is trading as the weakest one for today after weaker than expected consumer inflation data. Also, UK Prime Minister Theresa May will face the "moment of truth" in the EU summit in Brussels today. For now, it's uncertain whether there would be enough progress even to go on with the unscheduled November Brexit summit. The Pound could suffers some more volatility as Brexit headlines hit the wire. Euro is trading as the second weakest one for now.

Technically, EUR/USD's break of 1.1534 minor support is taken as a sign that recent consolidation is finally over. Deeper fall is now in favor to retest 1.1431 low. But for now, Dollar's strength is far from being certain. We'd have to see break of 0.9954 resistance in USD/CHF, 1.3081 minor support in GBP/USD and 0.7098 minor support in AUD/USD to give us more confidence.

In other markets, European indices are trading in red after reversing initial gains. At the time of writing, DAX is down -0.60%, CAC down -0.37%, FTSE up 0.14%. German 10 year yield is down -0.037 at 0.457. Italian 10 year yield is up 0.071 at 3.531. That is German-Italian spread is back above 300 alarming level. Earlier in Asia, China Shanghai SSE staged a late rebound to close up 0.60% at 2561.61. Nikkei gained 1.29%, Hong Kong HSI rose 0.07% and Singapore Strait Times added 1.21%.

Released in US session, Canada manufacturing sales dropped -0.4% mom in August. US housing starts dropped to 1.20m annualized rate in September. Building permits dropped to 1.24m.

Sterling weakens after September CPI miss

Sterling drops notably after September consumer inflation data came in lower than expected. Headline CPI slowed to 2.4% yoy, down from 2.7% yoy and missed expectation of 2.8% yoy. Core CPI slowed to 1.9% yoy, down from 2.1% yoy and missed expectation of 2.1% yoy.

The ONS noted that "The largest downward contribution to the change in the CPIH 12-month rate came from food and non-alcoholic beverages, where prices fell by 0.1% between August and September 2018 compared with a rise of 0.8% between the same two months a year ago. The main effects came from meat where prices fell, between August and September, this year but rose a year ago and from chocolate."

Also released, RPI slowed to 3.3% yoy versus prior 3.5% yoy and expectation of 3.5% yoy. PPI input rose to 10.3% yoy from 9.4% yoy. PPI output rose to 3.1% yoy from 2.9% yoy. PPI output core rose to 2.4% yoy from 2.2% yoy.

USTR Lighthizer singles out automobiles, agriculture and services for trade talk with Japan

The US Trade Representative Robert Lighthizer issued a statement notifying the Congress on the intentions of negotiation three separate trade agreements with Japan, the EU and the UK. Three separate letters were also sent to the Congress covering the relationships. He repeated in the letters that the aim aim in negotiations is to "address both tariff and non-tariff barriers to achieve fairer and more balanced trade". And the USTR are "committed to concluding these negotiations with timely and substantive results for US consumers, businesses, farmers, ranchers and workers".

On Japan, Lighthizer criticized that exporters in automobiles, agriculture and services have been "challenged by multiple tariff and non-tariff barriers for decades". And that lead to "chronic US trade imbalances with Japan", at USD 68.9B in 2017. Also, Japan "is an important but still too often underperforming market for U.S. exporters of goods,"

On EU, Lighthizer said the economic relationship is the "largest and most complex" in the world. He also said exporters faced "multiple tariff and non-tariff barriers for decade" without naming the sectors like with Japan.

With the UK, Lighthizer said there is "broad and deep trade and investment relationship". UK cannot negotiate the trade agreements yet until after Brexit, a Trade and Investment Working Group was already launched to provide the ground work for an FTA.

USTR statement here. Letters to Congress on Japan, EU and UK.

Japan Chief Cabinet Secretary Yoshihide Suga said "It will not be an easy negotiation … But we would like to proceed with talks in line with our stance that we will push where necessary and defend our position where necessary, in a way that protects our national interests."

EU Malmstrom: US not shown any big interest in trade negotiation yet

EU Trade Commissioner Cecilia Malmstrom responded to questions on US Trade Representative's statement on starting negotiation with Japan, EU and UK. Malmstrom said the EU "see this merely as preparations being made by the U.S. to negotiate with them and others." And she added "we have not started negotiating yet".

Also, Malmstrom said "we are prepared to start the scoping exercise on a limited agreement focus on industrial goods … so far the U.S. has not shown any big interest."

Regarding UK, she said "the U.K. cannot negotiate any trade agreement as long as they are a member of the European Union."

Released from Eurozone, CPI was finalized at 2.1% yoy in September, core CPI at 0.9% yoy.

RBA Debelle: Unemployment rate might drop further before material rise in wages growth

RBA Deputy Governor Guy Debelle welcomed the developments in the Australian labor market in a speech. He noted that "employment has grown strongly, the participation rate is close to its highest level on record and the unemployment rate has declined to be at a six-year low." And, that is "consistent with the above-trend GDP growth in the economy."

However, he also noted again there was "little" change in long term unemployment rate and "wages growth remains low". Above averaged demand for labor and growth in economy should "gradually reduce the spare capacity in the labour market." And that will lead to "gradual increase in wages growth and, in turn, inflation." But the extend and timing are uncertain. Unemployment rate could drop further than historical experience before material increases in wages growth.

Debelle also noted that the drag on the economy from lower house prices is still unclear and RBA is paying close attention.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1552; (P) 1.1587; (R1) 1.1609; More.....

EUR/USD's break of 1.1534 minor support argues that corrective rebound from 1.1431 has completed at 1.1621 already. Intraday bias is turned back to the downside. Break of 1.1431 will resume whole decline from 1.1814 and target a test on 1.1300 low. On the upside, above 1.1621 will delay the bearish case and bring another rebound. But then, upside should be limited by 1.1779/1814 resistance zone to bring down trend resumption eventually.

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.

Economic Indicators Update