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Data from the Eurozone was quiet during the day. The NY session saw the release of the retail sales report. Headline retail sales rose just 0.1% on the month. This was below the estimates of 0.7% and marked the same pace of increase in August.

Core retail sales, on the other hand, fell 0.1% and missed estimates of 0.4%. Core retail sales for August was also revised lower to 0.2%. The NY Fed's Empire State manufacturing index increased to 21.1 and was higher than the estimates of 20.4.

In the overnight trading session, New Zealand's third-quarter inflation showed a 0.9% increase. This beat expectations of a 0.7% increase and consumer prices advanced from 0.4% in the second quarter. On a year over year basis, New Zealand's inflation rate stands at 1.9%.

The day ahead will see China's inflation figures will kick off the economic calendar today. Headline inflation is forecast to rise 2.5%, gaining momentum from the 2.3% registered in August. Producer prices are expected to rise at a slower pace of 3.7%.

The European trading session starts with the German import prices coming out. Economists forecast that import prices rose 0.1% on the month, partly reversing some of the declines posted from the month before.

In the UK, the labor market data is scheduled. The unemployment rate is expected to remain unchanged at 4.0%. Wage growth is tipped to rise modestly. The data comes ahead of tomorrow's inflation report.

The ZEW institute will be releasing the economic sentiment indicators for Germany and the Eurozone.

The NY trading session will be marked with the release of the industrial production figures. Economists estimate a 0.2% increase which is slower than the month before. The industrial capacity utilization rate is expected to rise slightly to 78.2%.

OIL ticker symbol $CL_F short-term Elliott wave view suggests that a rally to 76.89 high ended the cycle from 8/15/2018 low in intermediate wave (1). The internals of that rally higher unfolded in a corrective structure thus suggests the instrument can be doing ending diagonal structure in primary wave ((5)) higher. Down from there, intermediate wave (2) pullback remain in progress in 3, 7 or 11 swings to correct 8/15 cycle before upside renew.

Below from 76.89 high, the OIL declined lower in 3 swings & ended Minor wave W at 70.50 low, after reaching the blue box area at 71.49-69.18 area. The internals of that decline unfolded as a zigzag structure where Minute wave ((a)) ended in 5 waves at 73.08. A bounce to 75.25 high ended Minute wave ((b)) and Minute wave ((c)) completed at 70.50 low. Up from there, Minor wave X remain in progress to correct the cycle from 76.89 high as double three before another leg lower in Minor wave Y of (2) is seen. We don’t like selling the instrument and expect buyers to appear later on when it reaches the 100%-123.6% Fibonacci extension area of Minor wave W-X.

OIL 1 Hour Elliott Wave Chart

Here are the latest developments in global markets:

FOREX: The dollar index was fractionally higher early on Tuesday (+0.06%), attempting to recover some of the losses it posted in the previous session. Meanwhile, the yen is losing ground across the board, as a rebound in risk appetite seems to be diverting funds out of the safe-haven currency. Elsewhere, the loonie advanced despite lower oil prices, after an upbeat survey by the BoC sealed the deal for a rate hike next week in the eyes of investors.

STOCKS: Wall Street closed lower on Monday amid lingering concerns regarding elevated bond yields, with the tumble being led by the technology sector. Accordingly, the tech-heavy Nasdaq Composite (-0.88%) was the worst performer, while the S&P 500 (-0.59%) and Dow Jones (-0.35%) followed in its footsteps. Risk appetite seems to have recovered somewhat on Tuesday, as futures tracking the S&P, Dow, and Nasdaq 100 are all pointing to a positive open today. Asia was mixed on Tuesday, with Japan’s Nikkei 225 (+1.25%) and Topix (+0.74%) advancing, but the Hang Seng in Hong Kong surrendering ground (-0.46%). In Europe, all indices were set to open lower today according to futures, albeit only modestly so.

COMMODITIES: Oil gave back early gains to close the session lower on Monday, and is trading on the back foot today as well. The reversal seems owed to traders wagering that the rift between the US and Saudi Arabia over the disappearance of a journalist won’t grow much further. Indeed, President Trump implicitly said the US won’t damage its relationships with the Kingdom over such a matter, likely calming some nerves. In precious metals, gold is practically flat on Tuesday at $1,228 per ounce, holding on to the gains it recorded yesterday as the US dollar retreated. The yellow metal briefly probed the $1,233 territory, and seems to be regaining some of its haven luster in the midst of market turmoil.

Major movers: Dollar drifts lower; kiwi and loonie jump on upbeat releases

The dollar started the week on a soft note, underperforming all its major peers on Monday besides the British pound, which was on shaky legs itself amid Brexit uncertainties. There was no single fresh catalyst for the greenback’s weakness, though disappointing US retail sales data likely added some fuel to the drop.

Of note, is the fact that while the dollar had been acting as a haven asset in recent months, gaining on escalations in the trade conflict for instance, this pattern seems to have reversed in recent sessions. The US currency now appears to be positively correlated to risk sentiment, moving in the same direction as major equity indices over the past week, much like the dollar/yen pair typically does. Indeed, the dollar is a little higher today, alongside US equity futures.

Elsewhere, the pound mostly held onto its early losses , though it managed to recover against the weak dollar. While there are several UK data releases this week, including employment data today, political developments may eclipse economic ones in driving the pound, given the critical juncture the Brexit process is at. Sterling’s fortunes will likely be tied to how the EU summit plays out, and whether investors are left with the impression that a deal may be finalized in November, or not.

In euro land, Italy submitted its controversial budget proposal to the EU Commission. The ball is now in the EU’s court, which has two weeks to review it. A rejection seems almost inevitable. The most crucial variable for the euro may be whether this will morph into a full-fledged standoff, or whether both sides opt for a compromise. Separately, ratings agencies like Moody’s and S&P will be reviewing Italy’s credit position in the final week of October, with any potential downgrade likely to spell more pain for Italian assets.

Elsewhere, kiwi/dollar jumped overnight after New Zealand’s inflation data for Q3 were stronger than anticipated. In Canada, the loonie advanced despite a pullback in oil prices, after the BoC’s quarterly business outlook survey was surprisingly upbeat, adding the finishing touches to market expectations regarding a rate hike next week, now priced in with a 91% probability (Canada OIS).

Day ahead: UK employment & Brexit in focus; German ZEW surveys, US industrial production and job openings figures also due

Key UK data on employment will be on tap on Tuesday. Meanwhile, surveys on German investor morale and US industrial output will be among releases attracting attention as well.

At 0830 GMT, UK jobs data for August, as well as September’s claimant count will be made public. Overall, projections point to a relatively strong labor report. More specifically, the unemployment rate is forecast to have remained at the multidecade low of 4.0% in August. Meanwhile, average weekly earnings in the three-months to August, both including and excluding bonuses, are anticipated to have expanded at July’s pace of 2.6% and 2.9% respectively in annual terms. The prints on wages tend to gather additional attention as they have the capacity to stoke inflation expectations.

Last month’s wage growth beat projections and employment levelled off, with the addition of just 3.0k positions in the three months to July; August’s respective number is expected to stand at 11.0k. For the record, important UK data on inflation and retail sales will follow on Wednesday and Thursday correspondingly. The figures can definitely provide near-term direction to sterling pairs. Of more significance through, are likely to prove any Brexit developments, with a crucial EU summit commencing tomorrow being eyed.

The ZEW institute’s surveys gauging investor sentiment in Germany are due at 0900 GMT. Both the economic sentiment and current conditions indices are expected to deteriorate a bit in October relative to September. Trade and political uncertainty are factors that may weigh on the readings.

Out of the US, September’s industrial production numbers are due at 1315 GMT, with a 0.2% m/m growth being expected after August’s 0.4%. Manufacturing production, a subset of industrial output, will also be monitored, especially in light of Trump’s tariff action that could affect the sector. The figures on September’s capacity utilization are slated for release at the same time.

Also out of the US, at 1400 GMT, JOLTS job openings are anticipated to come in at 6.945 million, slightly above July’s figure and at a fresh record high. October’s NAHB housing market index is also due at 1400 GMT.

New Zealand related, the outcome of today’s bi-weekly milk auction may move the local dollar, in light of the fact that dairy products are the nation’s largest goods export earner; higher prices are generally seen as kiwi-positive. The data lack a specific time of release.

San Francisco Fed President Daly, a voting FOMC member in 2018, will be giving a lecture at 2015 GMT. Elsewhere, Asia-Pacific Economic Cooperation (APEC) finance ministers will be meeting in Papua New Guinea.

In equities, BlackRock, Goldman Sachs, Morgan Stanley, Johnson & Johnson will be reporting quarterly earnings before Wall Street’s opening bell, with Netflix’s respective report hitting the markets after the market close.

In energy markets, weekly API data on US crude stocks are due at 2030 GMT. The US-Saudi dispute over the disappearance of prominent Saudi journalist Khashoggi can also prove instrumental for oil price movements.

Technical Analysis: GBPUSD looking mostly neutral in the short-term

GBPUSD has retreated a bit after hitting a near four-week high of 1.3257 last week. The Tenkan- and Kijun-sen lines are negatively aligned at the moment, though they have both levelled off, overall projecting a predominantly neutral picture in the near-term.

Encouraging data releases out of the UK are likely to lift the pair. The area around Friday’s high of 1.3257 could act as resistance. Not far above lies another peak at 1.3297, while the next hurdle in the event of more bullish movement may be 1.3362, the pair’s highest since mid-June.

On the downside and in the event of weaker-than-projected readings, support could come around 1.3095. This is the current level of 100-day moving average line, with the Tenkan- and Kijun-sen lines roughly coinciding with this point. Lower still, support could come around 1.3042 – a previous top – and then from the 50-day MA at 1.2987; the zone around the latter includes the Ichimoku cloud top at 1.3011 and consequently the 1.30 round figure.

US prints and of course any Brexit updates can also move GBPUSD.

The US Dollar was on the defensive yesterday, as the US retail sales growth rate slowed down and an escalation occurred in a dispute with Saudi Arabia. Tensions in the US-Saudi relationships escalated, when a self exiled Saudi journalist disappeared and the US president vowed to take action if Saudi Arabia was involved in the disappearance. The Saudis responded by implying for the first time in more than 40 years, that oil could be used as a weapon for pressure. Tensions de-escalated partly yesterday, as the US president stated that “rogue killers” may be responsible, lifting blame from Saudi Arabia. Should there be further headlines we could see volatility rising for the USD.

EUR/USD rose yesterday breaking the 1.1577 (R1) resistance level, however corrected later on by testing it. The pair could have some bearish tendencies today as the financial releases could weaken the EUR, but could also prove sensitive to any further USD weakness. Should the pair come under the market’s selling interest we could see it aiming if not breaking the 1.1525 (S1) support line. Should on the other hand the market favor the pair’s long positions we could see it breaking the 1.1577 (R1) resistance line and aim for the 1.1630 (R2) resistance barrier.

Brexit tones drop, ahead of EU Summit

UK’s PM Theresa May had a more pacifying tone regarding Brexit yesterday, after negotiations broke down a day before. Theresa May stated that she does not believe that the UK and the EU are far apart. The EU side followed, as French president Macron stated that “collective intelligence” could prevail. As per media, EU diplomatic sources characterized the recent stalemate as “more of a pause than a breakdown”. Further volatility could be expected for the pound, as the EU summit draws near and the two sides have not excluded further progress during the summit.

Cable rose, as the positive climate for Brexit started to form once again and broke the 1.3150 (R1) resistance line, however corrected later on, below it. We could see the pair having some bullish tendencies as the financial releases later in the day could favour the pound while at the same time weaken the USD somewhat and the pair could also get some support from any possible positive headlines regarding Brexit. Should the bulls dictate the pair’s direction once again, we could see the pair breaking the 1.3150 (R1) and aiming if not breaking the 1.3215 (R2) resistance line. Should the bears take over, the pair could aim if not break the 1.3080 (S1) support line.

In today’s other economic highlights:

During the European session, we get the UK employment data for August and Germany’s ZEW economic sentiment indicator for October. Later on, we get New Zealand’s milk auction figures and in the American session, from the US we get the industrial production growth rate for September. Last but not least, we get the API weekly crude oil figure for last week. As for speakers, San Francisco Fed president Mary Daly speaks.

EUR/USD 4H

Support: 1.1525 (S1), 1.1480 (S2), 1.1430 (S3)

Resistance: 1.1577 (R1), 1.1630 (R2), 1.1673 (R3

GBP/USD 4H

Support: 1.3080 (S1), 1.3025 (S2), 1.2965 (S3)

Resistance: 1.3150 (R1), 1.3215 (R2), 1.3285 (R3)

Rates: Fragile “recovery” on stock markets
Asian stock markets gain up to 1% despite a late downleg on Wall Street. Risk sentiment is improving following last week's sudden correction, but the balance remains very fragile. Core bond's performance was/is rather disappointing, suggesting the upside might be exhausted. The rising US budget deficit warrants a higher US credit risk premium going forward.

Currencies: Dollar to profit if global tensions were to ease?
Yesterday, the dollar lost slightly ground as sentiment on risk remained fragile. This morning, global equities are looking for a bottom after the recent correction and so does the dollar. Sentiment on the dollar might improve in a day-to-day perspective, but for now we don't see a trigger to break out of the established ranges.

The Sunrise Headlines

• US equity markets lost ground again on Monday with tech shares underperforming. Asian markets opened this morning with gains, with China excluded. All Chinese equity indices are currently losing ground.
• Italy's populist coalition government has approved the 2019 budget that will widen the budget deficit to 2.4% of GDP. It will lower the retirement age and introduce payments to poor Italians. The EU is reviewing it this week.
• The US budget deficit hits $779bn during US President Trump's first full fiscal year, a 6-yr high. That's $113bn higher than last year, reaching 3.9% of US GDP. The deficit is expected to swell further, passing $1tn by 2020.
• Boris Johnson, former UK foreign minister, warned for a Brexit in name only. He said the UK must be able to vary tariffs and strike trade deals after Brexit, otherwise it would “betray the British people”.
• German Chancellor Angela Merkel has vowed to restore trust in her government after her CDU's sister party CSU tumbled down to its worst election result in almost 70 years.
• China's CPI rose 2.5% in September from a year earlier, meeting market expectations and faster than the 2.3% inflation of August. The PPI rose 3.6%, higher than the 3.5% expectation but lower than the 4.1% in August.
• Today's eco calendar contains the UK labour market report, US industrial production and German ZEW investor sentiment. SF Fed Daly speaks, Germany taps the bond market and more Q3 earnings will be released

Currencies: Dollar To Profit If Global Tensions Were To Ease?

Dollar apparently needs easing of tensions

On Monday, FX traders still had to navigate a series of uncertainties, both economic and political in nature. Even so, the moves in the major dollar cross rates were confined to established ranges. The focus stayed on the US-China trade tensions and on the rift between the US and Saudi-Arabia on the disappearance of journalist Kashoggi. The USD proved again vulnerable to these topics. On the eco side of the story, US retail sales weren't really convincing. EUR/USD retested the 1.16 area and the trade-weighed dollar slipped to the 95 area. US equities held in negative territory for most of the session, but there was no obvious link with the dollar. EUR/USD finished the session at 1.1570 (from 1.1560). USD/JPY lost some further ground on global risk off to finish at 111.77. This morning, Asian equities mostly show modest gains with China underperforming. The jury is still out but rumours/headlines suggests that the US and Saudi Arabia are looking to avoid and escalation of the tensions. The dollar is trading marginally stronger. USD/CNY (6.9250 area) is holding near the recent top. EUR/USD trades around 1.1570. The kiwi dollar (NZD/USD) profits from higher than expected Q3 CPI data. Later today, ZEW economic confidence will be published in Germany. In the US, the production data and the NAHB housing indictor will be published. The data will probably only be of intraday significance for USD trading. Global sentiment will remain key for FX trading. Of late, we adopted a neutral bias on the dollar (EUR/USD). We still see no clear trigger for EUR/USD to break out of the 1.1432/1.1815 ST range. If geopolitical tensions were to ease and if equities would finally show some tentative signs of bottoming, higher US yields might also provide some support to the dollar in a day-to-day perspective.

Yesterday morning, sterling declined as EM-UK Brexit talks this weekend ended in a stalemate. However, the reaction was modest. EUR/USD settled in the low 0.88 area as FX traders awaited the next political developments. Today, UK labour data will be published. Wage data always have market moving potential. However, the focus remains on Brexit ahead of the EU Summit later this week. EU policy makers are likely to repeat that a deal is possible. However, of late, sterling traders reacted modestly to 'brexit noise'. Sterling probably needs 'hard news'/concrete steps for a real direactional move. Unless that happens, more technical driven wait-and-see action might be on the cards

USD (Trade-weighted- DXY): holwing within established range. Dollar to rebound of global sentiment improves?

The start of this trading week can best be characterized as a confused and cautious one for investors. Asian equity markets fell on Monday and continued to be dragged lower on Tuesday, despite at a slowerpace. European stocks recovered slightly but appetite to risk remained limited as a cautious mood continued to dominate U.S. markets flipping between gains and losses throughout most of Monday’s session to end the day in red as Technology selloffs dominated the overnight trading session.

There still seems to be lot of uncertainty in global financial markets after last week’s steep selling. The S&P 500 closed below its 200-days moving average on Monday, a signal that won’t be liked by trend-following investors. A failure to return above this average today may encourage further bears to join the crowd.

Big U.S. banks have delivered better than expected results for Q3. Bank of America, Citi Group, and JP Morgan Chase all managed to rallyon EPS. However, all three banks are in negative territory year-to-date,not even the higher and steeper yield curve is helping them, andthis should be considered a warning sign. Despite the risk off mode, U.S. Treasury yields remained close to their seven-years high.

Treasuries’ next move from here will be very important, as it’s becoming more evident that valuations are becoming a major concern. Higher interest rates mean higher required return on equity, so valuations either need to drop further from current levels or earnings should be robust enough to encourage investors to keep taking risk.

Investors are also struggling with the ongoing U.S.-China trade war, Brexit talks, Italy’s budget clash with Brussels, EM slow down, and the most recent geopolitical tensions between Saudi Arabia and the U.S. However, given the limited reaction in oil prices and the Saudi bond market, investors seem to believe the Saudi-U.S. political conflict will be sorted without incurring further damage to an already struggling global economy.

The euro is trading back towards Monday’s breakout region against the US dollar, after being technically rejected from the 1.1600 level. The EURUSD pair is only intraday bullish while trading above the 1.1570 level, buyers are also at risk of losing bullish momentum if they cannot break the 1.1600 level today. Sellers will likely target the 1.1553 level if the 1.1570 support level is breached.

The EURUSD pair is only bullish while trading above the 1.1570 level, key resistance is found at the 1.1600 and 1.1650 levels.

If the EURUSD pair trades below the 1.1570 level, key intraday support is found at the 1.1553 and 1.1500 levels.

The British pound trades close to key intraday resistance against the US dollar, ahead of a raft of important economic data from the United Kingdom economy this morning. Buyers need to hold price above the 1.3155 resistance level to regain short-term control of the GBPUSD pair, while sellers will look to breach the 1.3100 support level to accelerate earlier losses.

The GBPUSD pair is only intraday bearish while trading below the 1.3155 level, key support is found at the 1.3100 and 1.3050 levels.

If the GBPUSD pair moves above the 1.3155 level, key resistance is found at the 1.3179 and 1.3200 levels.

During the second quarter, BlackRock announced its interest in cryptocurrencies. This was major news for the digital asset sector considering the role played by the company across the world. BlackRock has assets of more than $6.4 trillion making it the biggest asset manager in the world. It’s closely followed by Vanguard, State Street, and Fidelity Investments. Therefore, an entry into the crypto industry would have been a game changer for the industry.

Since then, BlackRock has not made a follow up to the statement. Today, this could change as the company releases its third quarter earnings. It will release the results before the US market opens and later address issues regarding cryptocurrency involvement during an awaited conference call. If the company announces that it has already entered into the industry, it will lead to a sharp increase in price.

However, there is a likelihood that the company will disappoint. Shortly after BlackRock expressed crypto interest, Goldman Sachs announced that it was giving up on its cryptocurrencies efforts. This was big news because if BlackRock was to venture into cryptocurrencies, Goldman would likely to have wanted to be part of the deal. In addition, the SEC has already rejected proposed ETFs. This makes it difficult for a large investment manager like BlackRock to invest in cryptocurrencies.

Yesterday, the BTC/USD pair jumped to a high of 6720. Today, the pair is trading at 6397. The key drivers for the pair will be the statement from BlackRock.

The New Zealand dollar rose against the USD in the Asian session. This was after the New Zealand Bureau of Statistics released CPI numbers for the third quarter. During the quarter, the CPI rose at a QoQ rate of 0.9%, which was higher than the 0.7% that traders were expecting. On an annualized basis, the CPI rose by 1.9%. This was higher than the expected 1.7%. In the first and second quarter, the CPI rose by 1.1% and 1.5% respectively.

The Aussie was little moved against the USD after the RBA released minutes from an important meeting. The minutes showed that the RBA was upbeat about the economy but warned that the loan condition was tightening. This was a response to the country’s biggest banks that have moved to increase interest rates. The bank left interest rates unchanged at 1.5% implying that rates would remain unchanged for longer.

Yesterday, the sterling declined sharply against the USD in the Asian session. It then recovered from these losses. Today, it remained at yesterday’s closing levels as traders await important employment numbers from the UK. Traders expect the average earnings index plus bonus to remain flat at 2.6%. The ex-bonus numbers are also expected to remain flat at 2.9%. The unemployment rate is expected to remain unchanged at 4.0%. The headline employment change number is expected to show an improvement of 11K while the claimant count change is expected to decline to 4.5K.

EUR/USD

The EUR/USD was little moved in the Asian session. It is now trading at 1.1575. This price is above the month-to-date low of 1.1575, which the pair traded at on Tuesday last week. It is also along the 14 and 28-day EMA and the 38.2% Fibonacci Retracement level. Today, the pair will likely see some major movements as traders wait for Germany’s economic sentiment number. Upward movements will see it test the 1.1623 resistance level, which is the 50% Fibonacci Retracement level.

GBP/USD

The GBP/USD pair is trading at 1.3145. This is slightly lower than yesterday’s high of 1.3180. This is along the 14 and 28-day EMA. It is also along the 61.8% Fibonacci Retracement level and part of the handle of the cup and handle pattern. There is a possibility that the pair will continue moving up as traders wait for the employment numbers and the progress of Brexit talks. If it does, it will likely reach the 1.3180 resistance.

AUD/USD

The AUD/USD pair is trading at 0.7127. In the past week, the pair has made some huge swings and traded between 0.7040 and 0.7150. The current price is along the lower line of the Bollinger Band and along the important support shown below. With the RBA minutes out, traders will now shift focus to the USD. Today, the Labor department will release the JOLTS jobs openings numbers which will potentially lead to major movements of the pair.