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The DAX index has posted considerable gains in the Tuesday session. Currently, the index is at 11,689, up 0.66% on the day. In economic news, German ZEW Economic Sentiment plunged to a level of -24.7, well below the estimate of -12.3 points. Eurozone ZEW Economic Sentiment followed a similar trend, falling to -19.4, compared to a forecast of -9.2 points. On Wednesday, the eurozone releases Final CPI and EU leaders will hold a summit in Brussels.

After sustaining losses of over 4 percent last week, the DAX has reversed directions and posted modest gains so far this week. Global equity markets nosedived last week due to two key factors – 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 requires 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.

EU leaders are meeting on Wednesday in Brussels, but hopes that the summit would include a draft statement on Brexit have been dashed due to a deadlock over 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 extremely close to the Brexit deadline in March 2019.

Inflation data is the dominant market drivers today. Entering into US session, Sterling is trading as the strongest one today on faster than expected wage growth data. The Pound also reversed all the earlier losses due to Brexit jitters and is now the second strongest for the week. New Zealand Dollar is the second strongest one after Q3 CPI beat market expectations.

On the hand other, Yen is the weakest one for today as markets sentiments generally stabilized. Asian stocks ended the day mixed while DAX and CAC are trading higher. Swiss Franc is trading as the second weakest one.

A snapshot of the European markets:

• FTSE is down -0.19%
• DAX is up 0.63%
• CAC is up 0.50%
• German 10 year bund yield is down -0.0058 at 0.499
• Italian 10 year yield is also down -0.071 at 3.483.
• That is, German-Italian spread is back below 300

Earlier in Asia:

• Nikkei rose 1.25%
• Hong Kong HSI rose 0.07%
• China Shanghai SSE dropped -0.85% to 2546.33. It actually breached last week's low of 2536.66 to 2536.44
• Singapore Strait Times dropped -0.38%.
• 10 year JGB yield rose 0.005 to 0.149

The US dollar has moved above the 112.00 resistance level against the Japanese yen currency, as global equity markets recover higher on Tuesday. The USDJPY pair retains a bullish intraday bias while trading above the 111.80 level, while the MACD indicator continues to recover from oversold trading conditions. A potential inverted head and shoulders pattern may also be forming across the lower time frames.

The USDJPY pair is intraday bullish while trading above the 111.80 level, key resistance found at the 112.55 and 113.00 levels.

If the USDJPY pair trades below the 111.80 level, key intraday support is found at the 111.60 and 111.10 levels.

The British pound trade has risen above the 1.3200 level against the US dollar, after better than expected wage data from the United Kingdom economy. A clear break above the 1.3260 level will trigger the bullish inverted head and shoulders pattern which holds a large upside projection. The intraday outlook for the GBPUSD pair is strongly bullish while price continues to hold above the 1.3200 level.

The GBPUSD pair is intraday bullish while trading above the 1.3155 level, key resistance is now found at the 1.3260 and 1.3350 levels.

If the GBPUSD pair moves below the 1.3200 level, key support is found at the 1.3155 and 1.3100 levels.

The US Dollar depreciated about 95 base points against the Canadian Dollar on Monday. The currency pair breached both the 50– and 100-hour SMAs at 1.3015 and 1.3006 during the end of yesterday's session.

Everything being equal, it is likely that the USD/CAD currency pair continues moving south towards the weekly S1 at 1.2944 during the following trading session.

However, a support line formed by the 200-hour SMA and the lower boundary of an ascending channel at 1.2978 could prevent bearish traders from pushing the currency exchange rate toward its target today.

Upside risks prevailed in the market on Monday, thus allowing the New Zealand Dollar to surged by 98 base points against the US Dollar. As a result, the exchange rate broke a one-week ascending channel.

Given that the currency pair is trading above the one-week ascending channel pattern, it is expected that the rate re-tests the weekly R2 at 0.6598 within this session.

On the other hand, the NZD/USD currency pair could reverse from current price level and aim south towards the 50-hour simple moving average at 0.6531 during the following trading session.

The Australian Dollar appreciated about 47 base points against the US Dollar on Monday. The exchange rate tested the upper boundary of a one-week ascending channel at 0.7149 during the end of the previous session.

However, after hitting the upper border of the channel, the currency pair made a U-turn south.

By and large, it is likely that the currency exchange rate will continue its downside movement and potentially target the 200-hour simple moving average at 0.7093 within this session.

Although, a support cluster formed by the weekly and the monthly PPs near 0.7105 could hinder the pair from reaching the target today

A long-term descending channel has guided the AUD/CAD pair for the last four months. The given downside momentum has allowed the Australian Dollar to reach a new low level at 0.9105.

However, the currency pair bounced off its historically low level a few days ago, and presently trading above the 50-hour simple moving average at 0.9272.

Everything being equal, it is likely that the exchange rate continues its bullish momentum within this session. The potential target for the Aussie could be the next swing high at 0.9476 during the following trading sessions.

Although, it is important to note that a resistance cluster formed by the 200-hour SMA and the weekly R1 at 0.9333 could hinder the rate from hitting the target.

A one-month ascending channel has guided the Australian Dollar higher against the Swiss Franc. This upside wave started after the currency pair reversed from the lower boundary of the channel at 0.6874 on September 10.

Currently, a support cluster formed by the weekly, the monthly PPs and the combination of the 50– and 100-hour SMAs near the 0.7034 region was providing a significant support for the pair.

If this support cluster holds, the AUD/CHF currency exchange rate could target the next swing high at 0.7124 during the following trading sessions.

However, if the price breaches the cluster as mentioned earlier, the rate will aim at the bottom border of the channel pattern at 0.6993 within this session.

The single European currency appreciated about 67 base points against the Japanese Yen on Monday. The surge was briefly stopped by the 50– and 100-hour SMAs at 129.80.

Today's session begins with a bullish momentum, as a result, the currency pair dashed through the SMAs as mentioned above. Currently, the rate is trading near a resistance level formed by the weekly PP at 130.07.

As for the near future, it is likely that the EUR/JPY currency exchange rate makes a temporary retracement south towards the 129.50 regions during the following trading session.