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The Euro rose to two-week high at 1.1621 in early US trading, as dollar fell across the board on upbeat US earnings reports which inflated stocks. Stronger than expected US industrial production in Sep (0.3% m/m vs 0.2% f/c) did little to help greenback, which stands at the back foot. Choppy trading in European session managed to stay above daily cloud and keep bullish stance in extension of Monday's rally, as fresh bullish acceleration cracks a cluster of daily MA's at1.1608/27 zone. Daily momentum turns up but overbought slow stochastic warns, with close above 1.1627 (100SMA) to generate bullish signal for continuation of recovery leg from 1.1432. Today's close above cloud top is minimum requirement to keep bullish bias, with consolidation between cloud top and 100 SMA expected if bulls fail to clear 1.1627 pivot.

Res: 1.1627; 1.1668; 1.1724; 1.1757
Sup: 1.1587; 1.1569; 1.1545; 1.1534

The Canadian dollar has posted gains in the Tuesday session. Currently, USD/CAD is trading at 1.2950, down 0.31% on the day. On the release front, Canadian Foreign Securities was dismal, with a gain of just C$2.82 billion. This was much smaller than the estimate of C$10.05 billion. In the U.S, there are on major events on the schedule. JOLTS Job Openings is expected to dip to 6.90 million. The markets are still waiting for the U.S Treasury to release its semi-annual currency report, which may occur later on Tuesday. On Wednesday, Canada releases Manufacturing Sales. The U.S will release Building Permits and Housing Starts, and the Federal Reserve will publish its minutes from the September policy meeting.

USD/CAD has lost ground this week, as the Canadian dollar has recovered most of last week’s losses. The currency received a boost from an optimistic Bank of Canada business survey on Monday. The poll found that businesses expect higher sales for both domestic and foreign customers. Companies are reporting increased investment and hiring, and the mood is optimistic in the business sector. Investors are keeping an eye on the BoC, which set the benchmark rate next week. The markets are widely expecting the BoC to raise rates by a quarter-point, which would match the Fed rate hike in September.

U.S data were a mixed bag on Monday, as retail sales were soft but manufacturing data was solid. Retail Sales posted a meager gain of 0.1%, shy of the estimate of 0.4%. Core Retail Sales surprised with a decline of 0.1%, compared to an estimate of 0.4%. This marked the first decline since June 2017. There was better news from the manufacturing front, as Empire State Manufacturing Index strengthened to 21.1, above the estimate of 20.4 points.

Daily Pivots: (S1) 111.51; (P) 111.88; (R1) 112.13; More..

Intraday bias in USD/JPY stays neutral for consolidation above 111.62 temporary low. As long as 112.52 minor resistance holds, deeper fall is expected. Decline from 114.54 is viewed as correcting whole rise from 104.62. 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, considering mild bullish convergence condition in 4 hour MACD, 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) 0.9837; (P) 0.9879; (R1) 0.9911; More...

No change in USD/CHF's outlook. The correction from 0.9954 is still in progress and deeper fall could be seen. But 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) 1.1546; (P) 1.1576; (R1) 1.1609; More.....

EUR/USD's break of 1.1610 suggests that rebound from 1.1431 has resumed. Intraday bias is turned back to the upside towards 1.1814 resistance. For now, we'd expect upside to be limited by 1.1779/1814 resistance zone to bring down trend resumption eventually. On the downside, break of 1.1534 will indicate completion of rebound from 1.1431. Intraday bias will be turned back to the downside for 1.1431 and then 1.1300 low.

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.

Daily Pivots: (S1) 1.3097; (P) 1.3140; (R1) 1.3193; More...

GBP/USD rebounds further to as high as 1.3229 so far. The development argues that further rise is in progress for 1.3257 and above. But for now, we'd continue to expect strong resistance from 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.

Sterling trades broadly higher today as boosted by stronger than expected wage growth data. While the gains are impressive, upside is limited against Dollar, Euro and Yen so far. UK Prime Minister Theresa May's fortunate in the EU summit tomorrow is a factor capping the Pound. Also, there will be inflation and retail sales data upcoming on Wednesday and Thursday. It's natural for Sterling bulls to say cautious.

New Zealand Dollar is trading taking turn to be the strongest with the Pound, as lifted by CPI. Meanwhile, as stock markets stabilized and turned mixed, Yen and Swiss Franc are the weakest ones, followed by Dollar.

Technically, the forex markets is rather mixed elsewhere. Dollar continues to engage in consolidative trading against everyone, possibly just except Sterling. EUR/USD is bounded in tight range of 1.1534 and 1.1610. A break out from this range could be the guide for other pairs.

In other markets, DAX is up 0.71% at the time of writing, CAC up 0.78%. FTSE is nearly flat and up 0.04%. German 10 year bund yield is down -0.0112 at 0.494. Italian 10 year yield is down -0.068 at 3.486. Earlier today, Nikkei closed up 1.25%, Hong Kong HSI rose 0.07%. But Singapore Strait Times lost -0.38%. China Shanghai SSE dropped -0.85% to close at 2546.33. SSE has indeed breached last week's low at 2536.66 to 2536.44.

Sterling jumps after stronger than expected wage growth, upside limited

UK unemployment rate was unchanged at 4.0% in August, matched expectations. Wage growth, on the other hand, is an upside surprise. Average weekly earnings including bonus rose 3.7% 3moy in August, above expectation of 2.4% 3moy. Average weekly earnings excluding bonus rose 3.1% 3moy, above expectation of 2.8% 3moy. In September, claimant counts rose 18.5k, above expectation of 4.5k.

UK PM May to hold cabinet meeting on Brexit today, meet EU leaders tomorrow

UK Prime Minister Theresa May is going to meet her cabinet today to unify a stance on Brexit negotiation, in particular the Irish backstop. Ahead of the cabinet meeting, Housing Minister James Brokenshire urged other fellow ministers to support May in "making further progress this week". And he emphasized that "whilst making sure that it is our entire United Kingdom that leaves the European Union, the single market and the customs union because it is our UK that is just so important."

Speaking to the parliament yesterday, May urged EU for not letting the stand-off over backstop to derail Brexit negotiation. However, an unnamed official was quoted by Reuters complaining that May's messages "demonstrate that finding an agreement will be even more difficult than one could have expected."

French minister for European Affairs Nathalie Loiseau said that "we want a good deal and we think it is possible." But she also said that France was preparing for a no-deal Brexit and have already made legislative proposals on the scenario. An unnamed official was quoted by Reuters saying that the government "need to prepare faster" for no-deal. And " it is in the interests of citizens and businesses to wrap up the exit agreement as swiftly as possible."

May is expected to tell EU leaders her views at the summit dinner tomorrow in Brussels. EU Chief negotiator Michel Barnier said today that withdrawal agreement with Britain had to be "orderly for everyone and all the subjects, including Ireland." And he pledged to "take this time, calmly and seriously, to reach this overall accord in the next weeks." Though, "we need more time to find this deal ... and to reach this decisive progress."

German ZEW declined significantly on trade war and Brexit

German ZEW economic sentiment dropped to -23.7 in October, down from -10.6 and missed expectation of -12.3. That's also the lowest level since 2012. Current situation index also dropped to 70.1, down from 76 and missed expectation of 72. Eurozone ZEW economic sentiment dropped to -19.4, down form -7.2 and missed expectation of -9.2. Current situation index rose 0.3 to 32.0.

ZEW President Achim Wambach said in the release: "Expectations for the German economy are dampening above all due to the intensifying trade dispute between the USA and China. The resulting negative expectations on German exports are now beginning to show in the actual development of exports. A further negative influence on economic and export expectations is the danger of a 'hard Brexit', which is becoming ever more likely. Last but not least, the situation of the governing coalition in Berlin is perceived to have become more unstable, which also weighs on economic sentiment."

Also released from Eurozone, trade surplus widened to EUR 16.6B in August versus expectation of EUR 15.0B.

New Zealand Dollar surges after CPI beat expectations

New Zealand CPI rose 0.9% qoq in Q3, and beat expectation of 0.7% qoq. Annual rate accelerated to 1.9% yoy, up from 1.5% yoy in Q2, and beat expectation of 1.7% yoy. StatsNZ noted that the 1.9% annual increase in CPI was mainly due to the housing and household utilities group (3.1% yoy). The group was influenced by higher prices for construction, rents, local authority rates, electricity, and property maintenance services. though for the quarter, increases in fuel prices edged out housing. Transport prices rose 2.4% qoq, driven by petrol prices which is up 5.5% qoq.

Trimmed-mean CPI, which exclude extreme price movements – ranged from 1.8 to 1.9 percent for the year, which is roughly equivalent to the 1.9 percent overall rise in the CPI. CPI ex-petrol rose 1.2% yoy, CPI ex-food rose 2.3% yoy, CPI ex-household energy and vehicle fuels rose 0.9% yoy.

RBA minutes: USD appreciation raised risks for emerging economies, but helpful to Australia

In the minutes of October 2 meeting, RBA noted that global economic conditions had continued to be positive for Australia, despite risks including trade policies. Also, elevated energy and bulk commodity prices supported its terms of trade. Broad based appreciation of the US dollar "had raised risks for some economies, particularly the more fragile emerging market economies". But the "resultant modest depreciation of the Australian dollar was likely to have been helpful for domestic economic growth.

Domestically, RBA maintained that GDP growth would be "above potential over the following two years". Forward-looking indicators of labour demand continued to point to above-average growth". And wage growth is expected increase "gradually". However, subdued household income growth remained an "important source of uncertainty for the outlook for consumption and inflation."

Overall, RBA also maintained that " the next move in the cash rate was more likely to be an increase than a decrease." However, "since progress on unemployment and inflation was likely to be gradual, they also agreed there was no strong case for a near-term adjustment in monetary policy."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3097; (P) 1.3140; (R1) 1.3193; More...

GBP/USD rebounds further to as high as 1.3229 so far. The development argues that further rise is in progress for 1.3257 and above. But for now, we'd continue to expect strong resistance from 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.

Economic Indicators Update

Cable holds firm tone ahead of US session on Monday and hit new high at 1.3230. Extension of two-day recovery from Monday’s low at 1.3083 (posted after Brexit talks stalled over the weekend) showed 147-pips advance and is establishing above 1.32 barrier. Sterling was inflated by better than expected UK earnings data (Aug 2.7% vs 2.6% f/c / prev) while earnings excluding volatile bonuses rose by 3.1% in three months to Aug, overshooting forecast for 2.9% rise, in the highest increase since 2009. Strong earnings data support hawks advocating for BoE rate hike in Feb. Positive tones about Brexit were heard on Tuesday, as France expressed its confidence that Brexit deal could be reached in the near future. Break above 1.32 handle eyes 1.3257 (12 Oct high) violation of which would expose key barriers at 1.3297 (20Sep high) and 1.3316 (Fibo 61.8% of 1.4376/1.2661 fall).

Res: 1.3230; 1.3257; 1.3297; 1.3316
Sup: 1.3216; 1.3191; 1.3170; 1.3139

Investor sentiment towards the British Pound brightened on Tuesday following news that wage growth in the UK accelerated at the fastest pace in almost a decade.

According to official reports published by the Office of National Statistics, average earnings jumped by 3.1% in the three months to August while total pay including bonuses rose by 2.7% during the quarter. Attraction towards the Pound was also boosted by the unemployment rate, which remained steady at 4% - the lowest level in 43 years. Although today’s labour figures point to signs of inflationary pressures and reinforce expectations over the BoE raising interest rates gradually over the coming years, the main focus revolves around Brexit.

Uncertainty over Brexit negotiations remains the biggest drag on the British Pound and is likely to cap any meaningful upside gains created by positive economic fundamentals. Sterling could be instore for a world of pain if no real progress is made on Brexit at Wednesday’s EU summit in Brussels.

In regards to the technical perspective, the GBPUSD hit the ground running today with prices pushing above 1.3200 following the UK labour report. The solid breakout above the 1.3200 is a bullish signal that opens a path towards 1.3240 and 1.3290, respectively.

Dollar Index gearing to break below 95.00?

Dollar bulls were missing in action today after disappointing U.S retail sales data overnight discouraged investors from buying the Greenback.

With the economic calendar relatively light in terms of tier-1 data from the United States, the Dollar is likely to be driven by price action today. Focusing on the technical picture, the Dollar Index remains extremely shaky above the 95.00 support level. A solid breakdown and daily close below this support may open a clean path towards 94.60 and possibly 94.35.

Commodity spotlight – Gold

A combination of factors ranging from depressed equity markets, trade disputes, global growth fears and geopolitical tensions have brought Gold back into fashion.

The yellow metal found comfort near three-month highs on Tuesday as risk-averse investors sought safety in the metal amid market uncertainty. With a weakening US Dollar adding to the factors boosting appetite for the yellow metal, further appreciation is in the cards for the near term. The technical picture turned bullish on the daily charts after bulls secured a weekly close above $1,213. Technical traders will keep a close eye on how prices behave around the $1,233.50 level. A solid breakout above this point opens the gates to $1,240.

Here are the latest developments in global markets:

• FOREX: Growth in British average earnings (excluding bonuses) in August came in stronger than expected at 3.1% y/y versus forecasts of 2.9%, helping pound/dollar to rally as high as 1.3227 early in the European session before slipping back to 1.3219 (+0.51%). Employment declined, though, by 5k missing forecasts of a 11k rise and the unemployment rate matched expectations, remaining unchanged at 4.0%. Optimistic comments by a German government official who said that a Brexit deal could be achieved by November added to the positive sentiment. Yet, another EU speaker claimed that December’s EU summit could work better for Brexit. Pound/yen surged by 0.62%, while euro/pound retreated by 0.44%. Euro/dollar eased marginally by 0.04% on Tuesday as the ZEW Indicator of Economic Sentiment for Germany dropped to a level of -24.7 in October from -10.6 previously and the Eurozone trade balance ticked lower to 11.7 billion euros in August from 17.6 billion in July. Dollar/yen was trading slightly above the 112.00 round number, paring yesterday’s losses and adding 0.30% to its performance today. In the antipodean sphere, kiwi/dollar was standing higher at 0.6579 (+0.45%), slowly approaching the two-week high of 0.6595 it marked earlier today in the wake of upbeat CPI figures. On the other hand, aussie/dollar was consolidating around 0.7128. Meanwhile, dollar/loonie continued to lose ground, slipping below 1.3000 (-0.24%) after a quarterly business survey by the Bank of Canada raised stakes for a rate hike as soon as next week.
• STOCKS: European stocks were moving higher at 1115 GMT except for the British FTSE 100 which was losing 0.33% on the back of a rising pound.  The pan-European STOXX 600 was up by 0.62%, while the blue-chip Euro STOXX 50 increased by 0.19%. The German DAX 30 rose by 0.39% and the Spanish IBEX 35 ticked significantly higher by 1.0% led by utilities and industrials. Also, the French CAC 40 rose by 0.30% and the Italian FTSE MIB advanced by 0.96%. US stocks are poised to open higher according to US mini futures after a strong negative session on Monday.
• COMMODITIES: Oil prices declined during the early European session on Tuesday on expectations of an increase in US crude inventories. Furthermore, Iran’s oil minister said earlier that Trump cannot bring oil prices down with threats. WTI crude slipped by 0.88% to $71.15 per barrel and Brent moved down by 0.82% near $80.12. Gold extended north to $1229.34, near yesterday’s 2 ½-month highs.

Day Ahead: Brexit closely watched; US industrial production & JOLTS Job openings pending

Brexit developments are likely to keep investors busy in the next couple of days, while US-Saudi Arabia geopolitical tensions will remain under the spotlight as the disappearance of the Saudi Washington Post columnist remains a puzzle. The latter, however, could have a smaller weight on the sentiment following headlines stating that Saudi Arabia is set to admit that the death of the missing journalist is a result of interrogation that went wrong. Meanwhile the US Secretary of State Mike Pompeo will be visiting the Saudi King Salman to discuss the case, which created frictions between the nations.

In Brussels, Eurozone leaders prepare for a two-day summit starting on Wednesday, with Brexit being ranked high in the agenda. While the pound has been recovering swiftly after Monday’s downside opening, the British currency could easily give up gains in the coming days if the EU summit produces no breakthrough, putting November’s 17-18 gathering into question. If talks fail this week, governments may judge that November’s meeting should be abandoned and talks should resume in December when another scheduled summit will take place. Yet any delay to secure an agreement and the lack of progress would raise the prospect of a no-deal exit.

Comments regarding the Italian budget will be closely monitored. The Italian government approved and submitted to the European Commission a budget plan which aims for a deficit of 2.4% of GDP in 2019 and promises to reduce public debt from the current 131% to 126.7% by 2021. Yet remarks from the President of the European Commission, Jean-Claude Junker today indicate that Italy’s fiscal demands are not so welcome; Junker argued that some countries in the union would use a disrespectful stance against the EU if the budget overshoot gets a green light.

Turning to economic releases due later today, at 1315 GMT industrial production out of the US is anticipated to slow down in September, posting a monthly growth of 0.2% compared to 0.4% in August. A few minutes later at 1400 GMT, the JOLTS Job openings are projected to show that new positions increased by 6,945 in August from 6,939 in the preceding month, while the housing market index surveyed by the National Association of Home Builders is expected to steady in October.

In New Zealand, the outcome of milk auctions will likely add further volatility to the kiwi which found substantial support from upbeat CPI readings early in the Asian session. The time of delivery is tentative.

In energy markets, the API weekly report on US crude inventories will be awaited at 2030 GMT.

In equities, the earnings season continues, with Netflix reporting its Q3 results after the US Open.

As of today’s, public appearances, San Francisco Fed President Mary Daly (voting FOMC member in 2018), will be giving a lecture at 2015 GMT at Wellesley College, while RBA Deputy Governor Guy Debelle will be speaking at the 2018 Citi Conference at 2120 GMT. Elsewhere, Asia-Pacific Economic Cooperation (APEC) finance ministers will be meeting in Papua New Guinea.