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Daily Pivots: (S1) 129.39; (P) 129.85; (R1) 130.37; More....

Intraday bias in EUR/JPY remains neutral for consolidation above 129.11. Further decline remains in favor as long as 130.70 resistance holds. Below 129.11 will target 127.85 support first. Break there will confirm completion of rebound from 124.89 at 133.12 and bring retest of this low. On the upside, though, above 130.70 minor resistance will turn bias back to the upside for 133.12 instead.

In the bigger picture, current development suggests that EUR/JPY could have defended key support level of 124.08 key resistance turned support. And, the larger up trend from 109.03 (2016 low) is still in progress. Firm break of 137.49 structural resistance will target 141.04/149.76 resistance zone next. This will be the preferred case as long as 127.85 near term support holds. However, break of 127.895 will turn focus back to 124.08 key support level.

Daily Pivots: (S1) 0.8750; (P) 0.8781; (R1) 0.8809; More...

EUR/GBP is staying in consolidation above 0.8722 and intraday bias remains neutral. Also, with 0.8847 support turned resistance intact, deeper fall is expected. On the downside, break of 0.8772 will target 0.8620 low first. Decisive break there will resume whole down trend from 0.9304. In that case, next target will be 100% projection of 0.9305 to 0.8620 from 0.9097 at 0.8412.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Current development suggests that fall from 0.9303, as a down leg in the pattern, is still in progress. But in case of deeper fall, downside should be contained by 0.8116 cluster support, 50% retracement of 0.6935 (2015 low) to 0.9304 at 0.8120, to bring rebound.

Daily Pivots: (S1) 1.6178; (P) 1.6232; (R1) 1.6261; More....

EUR/AUD is staying in range of 1.6145/6351 and intraday bias remains neutral. Further rise remains mildly in favor. On the upside, sustained break of 1.6353 will resume larger up trend and target 1.6587 key resistance next. On the downside, however, break of 1.6145 support will likely extend the corrective pattern from 1.6353 with another leg back to 1.5984.

In the bigger picture, up trend from 1.3624 (2017 low) is still in progress. Further rise should be seen to retest 1.6587 (2015 high). Decisive break there will resume the long term rally and target 1.7488 fibonacci level. On the downside, break of 1.5984 support is need to be the first sign of medium term reversal. Otherwise, outlook will remain bullish in case of deep pull back.

Daily Pivots: (S1) 1.1435; (P) 1.1457; (R1) 1.1487; More...

EUR/CHF is staying in consolidation below 1.1491 temporary top and intraday bias remains neutral. We're holding on to the view on bullish trend reversal after EUR/CHF drew support from 1.1154/98 zone. On the upside above 1.1491 will target 1.1713 resistance for confirmation. Break there will target a test on 1.2004 high next. Meanwhile, note that upside momentum is not to convincing so far. Break of 1.1368 minor support will argue that the rebound has completed and turn bias back to the downside for 1.1154/98 zone again.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. This cluster level is in proximity to long term channel support (now at 1.1234) too. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.

Daily Pivots: (S1) 1.2899; (P) 1.2949; (R1) 1.2984; More...

USD/CAD breached 1.2926 as fall from 1.3070 extends but it recovers quickly. Intraday bias is turned neutral first. On the downside, firm break of 1.2926 will turn bias to the downside for 1.2781 instead. That would also argue that fall from 1.3385 is still in progress for another low. On the upside, break of 1.3081 resistance will be the first sign of completion of whole choppy fall from 1.3385. In that case, near term outlook will be turned bullish for 1.3225 resistance for confirmation.

In the bigger picture, corrective rebound from 1.2061 could have completed at 1.3385 already. Deeper fall is mildly in favor to 61.8% retracement of 1.2061 to 1.3385 at 1.2567, which is close to 1.2526 support. For now, we're not seeing fall from 1.3385 as resuming larger down trend from 1.4689 (2015 high) yet. Thus, we'll look for bottoming signal again below 1.2567 . On the upside, though, break of 1.3081 resistance will argue that the pull back from 1.3385 is completed and rise from 1.2061 is resuming for another high above 1.3385.

Daily Pivots: (S1) 0.7118; (P) 0.7135; (R1) 0.7158; More...

AUD/USD's corrective rise from 0.7040 is still in progress and further rise cannot be ruled out. But upside should be limited well below 0.7314 resistance to bring fall resumption. On the downside, below 0.7098 minor support will turn bias to the downside for 0.7040 low first. Break there will resume recent down trend to 61.8% projection of 0.7676 to 0.7084 from 0.7314 at 0.6948 next.

In the bigger picture, fall from 0.8135 is tentatively treated as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 will target 0.6008 key support next (2008 low). However, break of 0.7500 support turned resistance will argue that the corrective pattern from 0.6826 is going to extend with another rising leg before completion.

• Rates: Core bonds remain stoic given stock market volatility
  US equities rallied more than 2%, but core bonds remained as stoic as during last week's sell-off. Eco data explains US Treasuries' slight underperformance vs German Bunds. The US 10-yr and German 10-yr yields retested previous resistance levels. We expect them to stay above, adding significance to the breaks and suggesting more upward potential MT.
• Currencies: Forceful equity rally fails to give clear guidance for USD trading
  Equities rebounded sharply. The moves had little directional impact on the dollar. EUR/USD basically hovered sideways. The yen lost modest ground. USD trading might still mostly be driven by technical considerations even as several pending economic and political issues could return to the forefront.

The Sunrise Headlines

• US equity markets rocketed higher yesterday with all indices gaining major (+2%) ground. Asian markets continue the improvement in risk sentiment and open with gains as well. Japan outperforms the region.
• EU's top negotiator Michel Barnier has said he is open to extend the Brexit transition period with one year if Therese May would be willing to accept his two-tier backstop to avoid a hard border in Northern Ireland.
• New SF Fed President Mary Daly said she favours continued gradual interest-rate increases as full employment is near and inflation is close to targets. She positions her as a centre-oriented policy maker, as Fed chairman Powell.
• US labour market remains in excellent shape. Job openings rose to 7.14 million (highest since first readings in '01), the hiring rate rose 3.9% (highest since 2007) while the quitting rate remained unchanged at 2.4%.
• Saudi Arabia's leadership denied knowing what happened to Washington Post journalist Jamal Khashoggi in the Saudi consulate in Istanbul. US President Trump is giving Saudi Arabia the benefit of the doubt.
• Belgium is set to miss the EU's structural-deficit target as it will only lower its structural deficit with 0.4%, instead of the 0.6% imposed by EU rules. The government asks for flexibility as it is introducing important reforms.
• Today's eco calendar contains the Minutes of the September Fed FOMC meeting. UK inflation data are scheduled for release. ECB's chief economist Praet will speak in Madrid, Bundesbank President Weidmann speaks in Berlin. EU leaders join for a summit in Brussels

Currencies: Forceful Equity Rally Fails To Give Clear Guidance For USD Trading

Equity rally fails to give direction for USD trading

Yesterday, the focus of global trading was on equities. Pending sources of political and economic uncertainty (US-China trade dispute, discord with Saudi Arabia on the disappearance of writer Khashoggi, uncertainty on the impact of higher rates on growth, Italian budget) were not solved. Even so, global equities staged a solid (technical) rebound after last week's steep losses. Eco data were mixed with US production close to expectations, US JOLTS job openings strong, but ZEW sentiment declining further. However, the equity rally nor data had a big impact on core bonds or on the major USD cross rates. EUR/USD hovered sideways around the 1.16 big figure. The pair closed the day at 1.1574. USD/JPY succeeded a gradual intraday uptrend as the yen weakened with the risk-on sentiment. Even so, there was no really tight link between the global USD performance and the global equity rebound. Other themes also failed to give guidance. This morning, Asian equities markets join the risk-rebound from the US. China still underperforms. The dollar gains a few ticks this morning, but there is no clear trend. The yuan (USD/CNY 6.9225 area) stabilizes near recent lows. Today, the eco calendar is again thin with the Final EMU CPI and US housing data. CB speeched and the Fed meeting minutes are a wildcard. Plenty of pending isssues are still at work in the background (cf supra), but global equity sentiment remains the most obvious driver for trading on other markets, including FX trading. Next question is whether yesterday's equity gains can be sustained. Of late, we advocated a neutral approach on EUR/USD as we saw no clear trigger for the pair to break out of the 1.1432/1.1815 ST range. In a day-today perspective, the topside of EUR/USD looks a bit tough in the 1.16/1.1620 area, suggesting some downside risks. Even so, sentiment can easily change if one of the above mentioned topics returns to the forefront.

Yesterday sterling regained modest ground after Monday's setback on the back of a failure of high profile Brexit negotiations this weekend. Markets apparently still take into account the scenario of a last minute Brexit deal, in one way or another. Sterling also profited from strong UK wage growth. Today's UK CPI data are interesting, but all eyes will be on the EU summit in Brussels. A Brexit deal is unlikely, but comments from stakeholders might set the tone for intraday sterling trading. We assume more technical, wait-and-see trading in the 0.87/0.88 range

EUR/USD: equity rally fails to give clear guidance for USD trading

General Trend:

• Asian equities trade generally higher after rise on Wall St; Shanghai pares gain
• Local governments in China continue to announce liquidity support measures
• Japan equity markets supported by technology and financial firms
• Japanese shipping companies trade lower
• Financials help push the S&P ASX 200 higher
• BHP declines after quarterly production update
• Australia-listed Berkeley Energy drops over 25% amid concerns about uranium project in Spain
• Chipmaker Nanya Technologies rises after earnings report, cut FY Capex forecast
• China Premier Li is currently in the Netherlands
• China cuts is holdings of US Treasuries for the 3rd consecutive month according to US Treasury data
• RBA’s Debelle discussed labor market ahead of Thursday’s employment figures
• Singapore exports to China decline for the 2nd straight month
• President Trump: My "biggest threat" is the Fed because its "raising rates too fast, and it’s too independent" - Fox interview
• Wednesday’s EU/UK summit in Brussels in focus
• US companies expected to report earnings on Wednesday (including afterhours) include Alcoa, SL Green and Abbott Labs
• Traders still on the lookout for US Treasury’s FX report
• Bank of Korea (BoK) due to hold policy decision on Thursday, some traders are looking for hawkish signal (press)

Headlines/Economic Data

• Japan
• Nikkei 225 opened +1.1%
• 4523.JP With Purdue Pharma Announce Positive Topline Results of SUNRISE 2, the Second Phase 3 Pivotal Study of Lemborexant
• (JP) Reportedly Japan is going to extend subsidies for LNG shipments – Nikkei
• (JP) BOJ Gov Kuroda: Globalization effects on prices differ depending on economy - BIS speech (after the close yesterday)
• 4901.JP Confirms Appellate Court in New York decided to end lawsuit against the company related to Xerox; The court ruling will enable Fujifilm to discuss with Xerox cooperation to fulfill the original agreement between the two companies
• REITs including Orix JREIT and Daiwa House are expected to report earnings results later today

Korea

• Kospi opened +1.1%
• (KR) Bank of Korea (BOK) sells KRW2.5T in 2-yr bonds at 2.035%
• (KR) Some traders said to be looking for ‘hawkish’ signal at Thursday’s Bank of Korea policy decision, BoK expected to raise rates by the end of 2018 – financial press
• Reminder: Bank of Korea (BOK) meetings tomorrow on interest rate decision

China/Hong Kong

• Hang Seng opened closed, Shanghai Composite +1.1%
• (CN) China Premier Li: Confident to reach economic goals this year; Q3 GDP will be at reasonable range
• (CN) China local govt Guangdong said to be considering offering support to local listed companies - Chinese press
• (CN) Beijing Hadian said to establish fund aimed at supporting listed technology companies in China - US financial press
• (CN) Certain homeowners in China stage protests over declining prices - FT
• (CN) China PBoC Open Market Operation (OMO): Skips OMO v skipped prior: Net: nil v nil prior
• (CN) China PBoC set yuan reference rate: 6.9103 v 6.9119 prior
• (CN) China MoF sells 2-yr bonds at 3.00% v 3.11%e, bid to cover 2.11x and 5-yr bonds at 3.29% v 3.38%e, bid to cover 2.42
• (HK) Hong Kong Chief Exec Lam: HK land cannot be bought cheaply, govt is not deliberately pushing up property prices - SCMP

Australia/New Zealand

• ASX 200 opened +0.6%
• (AU) RBA Assist Gov Debelle: Unemployment could fall further than in past before wages increase, see employment growing a bit above trend over next 6-months; overall labor market in pretty good shape
• BHP.AU Reports Q1 Waio iron ore production 69Mt v 71Mte; attributable iron ore production 61Mt v 62Mte v 64Mt y/y
• ORG.AU Chairman: Affirms FY19 guidance; medium term outlook supports recommencement of dividends in FY19 – AGM
• (AU) On Saturday (Oct 20th) Australia is due to hold a by-election in Wentworth (Sydney), ruling parties' 1 seat majority in parliament in focus - financial press
• (AU) Australia Sept Westpac Leading Index M/M: -0.1% v +0.1% prior
• (AU) Australia sells A$1.0B v A$1.0B indicated in Nov 21 2029 bonds, avg yield 2.7298%, bid to cover: 3.1x
• TRS.AU Cuts H1 Net A$10-11M (prior A$17.7M) [-40.5%]
• (NZ) New Zealand swap curve is implying an ~18% probability of an RBNZ rate cut by Aug 2019 vs 24% prior amid higher than expected Q3 CPI data – US financial press

Other Asia

• (SG) Singapore Sept Non-oil Domestic Exports M/M: -4.3% v -6.4%e; Y/Y: 8.3% v 11.1%e; Exports to Europe +21.6% y/y; China -17.8% y/y; US +41.5% y/y

North America

• (MX) Mexico Finance Min said to be traveling to Washington DC for Treasury joint statement - US financial press
• (US) Fed's Daly (voter): inflation is effectively at Fed's 2% target; labor market is beyond full employment and growth is robust
• (US) President Trump: My "biggest threat" is the Fed because its "raising rates too fast, and it’s too independent" - Fox interview
• XOM China Zhoushan City Government: In talks with Exxon for $7.0B ethylene plant, annual production capacity seen at 1.5-1.8M tons; also in talks with Honeywell to build a 10K ton/year catalyst production project

Europe

• (UK) Trump administration announces intent to negotiate a trade agreement with the UK - press
• (UK) Fin Min Hammond reportedly warns MPs that Britain would face £36B bill if it doesn't agree to trade deal with EU - UK press
• -(UK) EU Brexit Negotiator Barnier reportedly is open to possibly extending Brexit transition by one year in exchange for two-tier backtop to avoid Ireland border - FT
• IMF: Managing Director Lagarde to 'defer' trip to the Middle East

Levels as of 01:15ET

• Hang Seng +0.1%; Shanghai Composite -0.4%; Kospi +0.8%; Nikkei225 +1.2%; ASX 200 +1.2%
• Equity Futures: S&P500 -0.0%; Nasdaq100 -0.2%, Dax -0.1%; FTSE100 -0.1%
• EUR 1.1580-1.1548; JPY 112.42-112.22 ; AUD 0.7144-0.7129;NZD 0.6594-0.6579
• Dec Gold -0.6% at $1,224/oz; Nov Crude Oil +0.2% at $72.08/brl; Dec Copper -0.7% at $2.76/lb

EURUSD short-term Elliott wave view suggests that the decline to 1.1427 low ended cycle degree wave II pullback. The internals of that pullback unfolded as a Flat structure which ended the correction against 8/15/2018 low. Up from 1.1427 low, the pair is expected to resume the next leg higher in cycle degree wave III. The internals of wave III is expected to nest higher as impulse structure for further upside. Up from there, the initial rally to 1.1610 high intermediate wave (1) in 5 waves structure.

Where lesser degree Minor wave 1 ended at 1.1515, Minor wave 2 ended at 1.1479 low. A rally to 1.1572 high ended Minor wave 3. A pullback to 1.1540 low ended Minor wave 4. Then finally a rally to 1.1610 high ended Minor wave 5 & also completed intermediate wave (1). Currently, the correction against 1.1427 low remains in progress as a Flat structure where Minor wave A ended at 1.1534 low. Then a rally to 1.1621 high ended Minor wave B bounce and Minor wave C looking to end 5 waves structure somewhere between 100%-161.8% Fibonacci extension area of Minor A-B at 1.1545-1.1497 area. Afterwards, pair is expected to resume the next leg higher in intermediate wave (3) higher. We don’t like selling it.

EURUSD 1 Hour Elliott Wave Chart

Market movers today

Today, market focus will be on Brexit negotiations ahead of a working dinner kicking off the EU summit over the next two days. In our view, the likelihood of a deal on the withdrawal agreement at the summit remains low, see 1Selected Market News . In the UK, CPI inflation will probably slow in September, but given accelerating wage growth and a weaker currency, upside risks to the inflation outlook remain.

In the euro area , the final September HICP figures are due out. We do not expect any revisions, but it will be interesting to see whether the downside surprise in core inflation at 0.9% was again due to one-off factors or more permanent headwinds.

In the US, the FOMC meeting minutes are on the calendar. The Fed remains on autopilot in terms of hikes, but we will look out for comments on balance sheet reduction plans and what the future monetary policy framework is going to look like.

Selected market news

Global risk appetite has rebounded strongly over the past 24 hours, with most notably the three big US equity indices, S&P500, Nasdaq Composite and Dow Jones, posting the largest single day gains since March. Key to the moves have been the US earnings season start where Monday delivered encouraging news and gains for financials, healthcare and the recent heavily hit technology sector. This morning, most Asian indices are following suit in green territory. The US 10Y Treasury yield is little changed, highlighting how it was primarily the pace of the fixed income sell-off last week that triggered the equity rout.

In commodity markets, the oil price has edged higher on a drop in US inventories and renewed diplomatic tensions between Saudi Arabia and the US in the Khashoggi case. Notable US politicians such as Republican Senator Lindsey Graham have been increasingly vocal in their criticism of not least Crown Prince Mohammed bin Salman's involvement in the likely killing and the need for US punitive measures. The comments follow a Saudi press release that any US punishment would be followed by 'stronger ones', triggering speculation on the oil market that the Saudis could use the oil price as a means. So far, Trump has backed the Saudi regime's alleged innocence, see tweet , and drawn accusation parallels to the Brett Kavanaugh case, see FT

In an interview yesterday, Donald Trump repeated his latest critique of the Fed's tightening of monetary policy by stating, ' my biggest threat is the Fed' . Trump added he is not speaking to the Fed governors because of their independence but reiterated that he was unhappy with the recent pace of interest rate hikes.

On the recent Brexit headlines, our UK economist Mikael Milhøj thinks that while a deal seems increasingly likely, the probability of a UK withdrawal agreement with the EU today or tomorrow is low. This is not surprising given that we are too far away from the deadline for the politicians to make compromises and it is not unlikely we will have to wait until December or maybe even January before we get a deal. Indeed, a delay may make it easier for May to get the Brexit agreement through Parliament. Also, we probably need to get passed the UK budget on 29 October, as May's supporting party, the DUP, has threatened to vote against the budget, as they are opposed to what is on the table with regard to the backstop agreement right now.