Sample Category Title

Pivot (invalidation): 1.3150

Our preference Short positions below 1.3150 with targets at 1.3065 & 1.3030 in extension.

Alternative scenario Above 1.3150 look for further upside with 1.3185 & 1.3225 as targets.

Comment The RSI has broken down its 30 level.

Pivot (invalidation): 1.1570

Our preference Short positions below 1.1570 with targets at 1.1535 & 1.1515 in extension.

Alternative scenario Above 1.1570 look for further upside with 1.1590 & 1.1610 as targets.

Comment The RSI is bearish and calls for further downside.

Cable opened with gap-lower at the beginning of the week, holding negative tone following last Friday's bearish close with 0.57% daily loss.

Sterling came under increased pressure as British efforts to secure Brexit deal failed on talks over Britain's border with Ireland.

The pair dipped to 1.3083 after opening with gap of 65 pips, probing below 1.3110/1.3088 support zone (converging 20/100/10 SMA's / 50% retracement of 1.2921/1.3257 upleg), but without clear break so far.

Daily techs show strengthening bearish momentum and slow stochastic heading south after reversal from overbought territory, supporting fresh bears which need confirmation on close below 50% retracement at 1.3089 as well as 30SMA (1.3074).

Daily cloud twists next week and could also attract bears.

Brexit talks are expected to remain pair's key driver, with risk dips below psychological 1.30 support seen on negative news.

Recovery attempts were so far capped by broken Fibo 38.2% support at 1.3129, with stronger bounce and filling today's gap needed to sideline downside risk.

Res: 1.3129, 1.3146, 1.3178, 1.3217
Sup: 1.3083, 1.3050, 1.3012, 1.3000

EURUSD found resistance at 1.1600 on Friday, turning back inside the Ichimoku cloud and under its 20 and 50-day (simple) moving averages (MA) early on Monday. The short-term bias looks neutral to bearish as the RSI moves sideways around its 50-neutral mark and the MACD is fluctuating in negative territory but close to its red signal line. The stochastics, though, are near overbought levels and are set to reverse south, suggesting that negative corrections are possible.

Should the price weaken, the 1.1500 round level could offer nearby support as it did in May and in June. Below that, the 3-week low of 1.1431 registered last week should come into view before eyes turn to the 1.1400 psychological level. If the latter fails to halt downside movements, traders would be interested to see whether bears are able to crash the wall around the one-year low of 1.1300, resuming the long term downleg from 1.2554 (February 2018).

Alternatively, if the market manages to jump above the 23.6% Fibonacci of the downleg from 1.2412 to 1.1300, immediate resistance could appear at 1.1600. Even higher, the area between the 38.2% Fibonacci of 1.1724 and 1.1800 where the price reached a peak several times from the end of May onwards could restrict bullish actions once again. If bulls successfully violate that zone too and more importantly pierce September’s top at 1.1814, the door should open for the 50% Fibonacci of 1.1854.

In the medium-term picture, EURUSD maintains a neutral outlook within the 1.1854-1.1300 range over the past three months. Any violation at the upper bound of the range would shift the picture to bullish, while any close below the lower boundary would switch the market’s profile into a bearish one.

Here are the latest developments in global markets:

FOREX: The dollar is marginally higher on Monday against a basket of six major currencies (+0.07%), extending the gains it recorded in the previous session. The safe-haven Japanese yen is the best performer among the G10 currencies, as a diplomatic rift between the US and Saudi Arabia is seemingly keeping investors on the defensive. Elsewhere, the British pound opened with a gap to the downside, after the EU and UK were reported to have paused the Brexit talks until later this week, after failing to reach common ground over the weekend.

STOCKS: US indices bounced back on Friday, in the absence of any developments in the trade conflict or major movements in the US bond market to speak of. A potential catalyst for the rebound may have been a solid start to the earnings season fueling hopes for yet another blockbuster quarter. Tech stocks outperformed, with the tech-heavy Nasdaq Composite rallying by 2.29%. The S&P 500 (+1.42%) and Dow Jones (+1.15%) followed in its tracks. However, the positive sentiment did not spill over into Asia, which was a sea of red on Monday. In Japan, the Nikkei 225 (-1.87%) and Topix (-1.59%) felt the pain, as a stronger yen clouded the outlook for exporting firms. In Hong Kong, the Hang Seng dropped by 1.34%. Europe was mixed, with futures pointing to a relatively flat open today for most indices.

COMMODITIES: Oil opened with a gap to the upside, after Saudi Arabia threatened to curtail its crude production in case the US decided to proceed with sanctions over the disappearance of a Saudi journalist (see below). Considering that the Kingdom was expected to raise its production in the face of Iranian sanctions, not rein it in, the news likely caught the oil market by surprise. WTI is up by almost 0.90% at $71.84 per barrel, while Brent gained 0.97% to settle near $81.21. In precious metals, gold is higher by nearly 0.50% on Monday, at $1,227 per ounce. Following the break above the upper bound of the range it had been trading in recently on Thursday, the metal’s short-term technical outlook has shifted to positive.

Major movers: Sterling gaps lower as Brexit talks 'paused', stocks get a reprieve

The British pound opened with a gap lower this week, in the wake of news that the Brexit talks have been 'paused' until Wednesday’s EU summit. The reports suggest intense negotiations through the weekend failed to bear fruit, and were called off on Sunday amid a lack of progress on the Irish border issue. This likely poured cold water on any expectations that a deal may be wrapped up as early as this week. It also implies the proverbial can has now been kicked down the road to November, when the EU may call a special summit to discuss Brexit, provided enough headway has been made until then. As for the pound, it will probably remain hostage to incoming headlines, with price action potentially staying choppy and directionless until there is some further clarity on the issue.

In the broader market, US stocks rebounded on Friday in the absence of any major fresh catalyst, as the earnings season kicked off. Encouraging results from banking heavyweights such as JP Morgan and Citigroup may have helped support risk appetite a little, on speculation for another blockbuster earnings season. That said though, it appears this was merely a brief reprieve, as the optimism failed to spill over into Asia on Monday, and futures tracking the major US indices are pointing to a lower open today as well.

The fact that risk sentiment is not out of the woods yet may be (at least partly) owed to an escalating diplomatic rift between the US and Saudi Arabia over the weekend. Tensions flared up after the disappearance of a Washington Post journalist from Saudi Arabia’s consulate in Turkey, with President Trump threatening 'very powerful' sanctions. The Kingdom replied it would hit back with countermeasures, which may include lowering its oil production to push prices higher, stop buying weapons from the US, and curtailing investments in the US. Oil prices opened higher on the news, while the safe-haven Japanese yen is the best performer among the major currencies, with investors evidently curtailing their risk-taking.

Elsewhere, after flying under the radar over the past few days, market attention could turn back to the Italian budget crisis this week, as today marks the deadline for the highly-controversial budget to be presented to the EU Commission for approval. The EU is nearly certain to reject the budget in its current form, and the tone of the accompanying remarks may be seen as a gauge of whether this will morph into a full-fledged political standoff. The euro will likely move accordingly, lower on signs of further conflict, or higher on anything pointing to a middle-of-the-road compromise.

Day ahead: US retail sales in focus, Brexit updates eyed

US retail sales due at 1230 GMT are the highlight on Monday’s economic calendar.

US retail sales for September are anticipated to have grown by 0.6% m/m, faster than August’s 0.1%. Additionally, core retail sales, this being the measure of sales that excludes automobiles and which more closely aligns with the consumer spending component of GDP, is projected to grow by 0.4% m/m, above August’s 0.3%. A beat in the numbers has the capacity to stoke expectations for a December 25bps hike by the US central bank (78% probability at the moment according to Fed fund futures), something which is theoretically dollar-positive. The opposite holds true as well.

Meanwhile, the New York Fed manufacturing index for October and numbers on September’s retail control are also due at 1230 GMT, while data on business inventories will follow out of the world’s largest economy at 1400 GMT.

Elsewhere, Brexit developments are anticipated to remain the main sterling driver. Weekend talks failed to provide a breakthrough, weighing on the pound. The EU heads of government summit on October 17-18 is expected to touch on pending issues, most notably the Irish border one, with Brexit headlines possibly hitting the markets even before that.

In equities, Bank of America will be releasing quarterly results before the US market open. The fact Friday’s rebound in stock markets received no traction in Asia today, is an indication that investors remain wary on factors such as trade and rising yields.

Technical Analysis: USDJPY bearish at 4-week low

USDJPY is extending its move lower after it hit an 11-month peak of 114.54 on October 4. Earlier on Monday, it touched a four-week low of 111.74. The Tenkan- and Kijun-sen lines are negatively aligned in support of a negative bias in the short-term. The Chikou Span though may be signaling a market that is close to oversold.

Upbeat US retail sales may allow the pair to rebound. Immediate resistance to gains could come around the Tenkan-sen at 112.12, with the Kijun-sen lying not far above at 112.56. Higher still, the focus would turn to 113.14, where the 50- and 100-period moving average lines have converged, notice that the two look set to post a bearish cross.

Conversely, USDJPY is likely to extend its move lower on the back of disappointing US figures. A first line of support may take place around 111.66, this being a previous low. Further below, the 111 round figure could provide additional support, with the focus turning to early September’s near two-month low of 110.37 in the event of steeper losses.

US equity market losses triggering a flight to safety will also probably benefit the yen.

The US dollar continues to trade towards the 112.00 level against the Japanese yen currency, as financial markets start the new trading week in risk-off mode. The USDJPY pair is currently consolidating inside a symmetrical triangle pattern, with a clear break below the 111.80 support level likely to signal further losses. Buyers need to move price above the 112.55 resistance level to regain intraday bullish momentum.

The USDJPY pair is strongly bearish while trading below the 112.55 level, key support found at the 111.80 and 111.10 levels.

If the USDJPY pair trades above the 112.55 level, buyers are likely to test towards 112.80 and 113.40 resistance levels.

The British pound has opened the new trading week gap-down against the US dollar, as Brexit uncertainty once again drives sterling lower. The GBPUSD pair is bearish while trading below the 1.3155 level, with the 1.3100 level the key support area to watch for further intraday losses. Overall, the bullish inverted head and shoulders pattern is still valid while price trades above the 1.2930 level.

The GBPUSD pair is 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 1.3200 and 1.3258 levels.

The price of crude oil jumped during the Asian session after tensions between the US and Saudi Arabia emerged. Tensions started when a Saudi Arabian journalist entered the Saudi consulate in Turkey. Reports have since emerged that he may have been killed. During the weekend, the US president said that Saudi will have a price to pay if it is determined that they ended the journalist’s life. Soon afterwards, Saudi said that it will retaliate against the US. This was a major development because Saudi and the United States are close allies and Saudi is one of the biggest exporters of crude oil.

The USD strengthened even as the US president continued to criticize the Federal Reserve. In an interview with ’60 Minutes’, the president said that he was disappointed with the ongoing pace of interest rates. Since he became president, the Fed has raised interest rates seven times. It is expected to raise rates in December and a further three times during 2019. In recent weeks, traders have developed a fear of interest rates which led to the sharp market declines experienced a week ago. Today, traders will receive the US core retail sales.

Asian markets fell today as traders continued to worry about global growth and the impacts of the trade war. The Japanese Nikkei dropped by 1.30% while the Hang Seng and Shanghai dropped by 0.66% and 0.32% respectively. US futures too point to a lower open as traders expect for more corporate earnings. Bank of America, Rio Tinto, and Total will release their third-quarter earnings. They will follow JP Morgan, Citi, and Wells Fargo which released better-than-expected results on Friday.

XBR/USD

Last week, the price of Brent crude oil reached a high of $86.59. It then started a sharp decline after increasing inventories and the price reached a weekly low of $78.98. In the Asian session today, the price jumped as traders started to worry about US-Saudi relations. It reached a high of $81.58. The RSI moved from a low of 22.73 to a high of 45 while the current price is along the middle band of the Bollinger Bands. It is likely that the XBR/USD pair will resume the downward trend.

EUR/USD

The EUR/USD pair dropped sharply during the Asian session. It reached an intraday low of 1.1534, which was the lowest level since Thursday last week. Last week, the pair moved up in a near equidistance channel as the euro strengthened against the USD. The double EMA show that the pair could continue the downward trend on the 30-minute chart. If it does, the price will likely test the 38.2% Fibonacci Retracement level of 1.1500.

GBP/USD

Last week, the weakness of the dollar led to a sharp rise in the GBP/USD pair. Today, the pair dropped sharply as the USD strengthened. It reached a low of 1.3080, which was the lowest level since Tuesday last week. On the thirty-minute chart below, the price is at the middle line of the Bollinger Band while the ADX is at 21. Today’s low was along the 50% Fibonacci Retracement level. It is likely that the pair will be slightly volatile today as traders pay close attention to the new developments on Brexit.

The ETH/USD currency pair has formed a head and shoulders pattern. It was an emerging pattern that has now broken to the downside. The breakout occurred below the Pivot Point. The International Monetary Fund has issued its World Economic Outlook for October 2018. Within the report, the IMF makes a notable, but limited warning, regarding cryptocurrencies. That could have been one of the reasons for a continued drop vs fiat currencies, such as the USD. As for the USD - retail sales should be the main news on Monday. This is the earliest and broadest look at vital consumer spending data, and it measures a change in the total value of sales at the retail level. Don't forget to follow our Forex calendar for all regular updates on the news,economic announcements, forecasts and much more.

Technically, the ETH/USD cryptocurrency has dropped below the neckline of the Head and Shoulders pattern. The price is also below the Pivot Point, so we might see S1 as the first target. If the price retraces to the POC zone (202-211), we could see 'now moment' sellers waiting for the next bearish wave move, and the price could drop again. Targets are 176.43, 157.47, and 131.24. Any spike or close above R1 - 221.62 and the bulls might regain control.

Pivot Lines - Weekly Support and Resistance

POC - POC - Point Of Confluence (The zone where we expect the price to react - aka the entry zone)

The USD/JPY currency pair made a bearish bounce at the 23.6% Fibonacci retracement level, which could be part of a wave 4 (red) pattern and the start of the wave 5 (red). A bullish break however, indicates that the price is still in a bullish wave 4-5 (blue) pattern.

The USD/JPY currency pair is testing key support trend lines (blue), and the price is expected to make a bounce or break, which will depend on the candlestick patterns that appear.

The USD/JPY currency pair has completed the wave Y (pink) of wave D (purple), if the price manages to break below support. A bounce at the support indicates a potential bullish continuation.