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Irish Foreign Minister Simon Coveney the Brexit withdrawal treaty is "already about 90% agreed in terms of text". And, "the issues that haven't been signed off on yet relate predominantly to Ireland and what's needed now is the two negotiating teams to lock themselves in a room for the next 10 days."

European Commission President Jean-Claude Juncker said earlier in the weekend that "the rapprochement potential between both sides has increased in recent days". He added, it's unsure whether the work will be finished in October, but "If not, we'll do it in November." And he emphasized EU's "will is unbroken to reach agreement"

European Council President Donald Tusk also said "We will try for it in October... and I think there is a chance to have an accord by the end of the year."

Key Highlights

• The Euro started a downside move and traded below the 1.1550 support against the US Dollar.
• There is a key bearish trend line in place with resistance at 1.1530 on the 4-hours chart of EUR/USD.
• The US NFP figure in Sep 2018 came in at 134K, less than the forecast of 185K.
• Today, the Euro Zone Sentix Investor Confidence for Oct 2018 will be released, which is forecasted to increase to 12.5.

EURUSD Technical Analysis

The Euro started a short-term recovery after trading as low as 1.1460 against the US Dollar. The EUR/USD pair tested the 1.1550 level, which acted as a resistance for buyers.

Looking at the 4-hours chart, the pair is clearly under a lot of pressure and is trading well below the 1.1600 and 1.1550 pivot levels. The pair recovered recently from the 1.1463 low and traded above the 1.1500 level.

However, the upside move was capped by the 1.1550 level, which was a support earlier and now it is acting as a resistance. Moreover, there is a key bearish trend line in place with resistance at 1.1530 on the same chart.

The pair is currently trading below the 1.1520 level and it could continue to move down towards the 50% Fib retracement level of the last wave from the 1.1463 low to 1.1549 high.

There could be a short-term upside correction, but gains are likely to be limited unless EUR/USD settles above the 1.1550 resistance level. On the downside, supports are visible near 1.1500 and 1.1460.

Fundamentally, the US NFP figure for Sep 2018 was released recently. The market was looking for an increase in jobs by around 185K from August to Sep 2018.

However, the result was below than the market forecast as the Nonfarm Payrolls increased 134K, less than the forecast of 185K. On the positive side, the last reading was revised up from 201K to 2017K. Moreover, the unemployment rate declined from 3.9% to 3.7%.

The US Dollar was down a bit after the release, but later it recovered and it seems like major pairs like EUR/USD and GBP/USD may continue to move down in the near term.

Economic Releases to Watch Today

• Germany’s Industrial Production for August 2018 (MoM) – Forecast -0.5%, versus -1.1% previous.
• Euro Zone Sentix Investor Confidence for Oct 2018 – Forecast 12.2, versus 12.0 previous.

Japan Prime Minister Shinzo Abe said in a Financial Times interview that he would welcome UK to join the Trans-Pacific Partnership "with open arms". Abe's words could be used by Brexiteers to reaffirm their stance that there are more opportunities outside of the EU. On the other hand, it's also a clear signal that Japan is sticking with the trade pact despite US withdrawal under Trump. And the preserving the TPP could be at a very high priority during the trade negotiation with the US.

On Brexit, Abe urged "that both sides can contribute their wisdom and at least avoid a so-called disorderly Brexit." Also, he hoped that "the negative impact of Brexit to the global economy, including Japanese businesses, will be minimized."

CRUDE OIL eyes downside momentum towards its key support residing at 72.93/71 zone. This is coming on the back of a loss of upside momentum the past week. On the downside, support resides at the 73.00 level where a break will expose the 72.71 level. A cut through here will set the stage for a run at the 72.50 level. Further down, support resides at the 72.00 level. Its daily RSI is bearish and pointing lower suggesting further weakness. On the upside, resistance resides at the 74.00 level. Further out, resistance comes in at the 74.50 level. A break above here will aim at the 75.00 level and then the 75.50 level followed by the 76.00 level. All in all, CRUDE OIL remains biased to the downside on pullbacks.

STOCKS

Dow (26447.05, -0.68%) could get some support near 26250-26200 levels from where a bounce back towards 26750 is possible. Weekly resistance near 27000 is holding for now. But this resistance will have to break on the upside to bring in more bullish momentum to push the index higher in the longer run. Else while 27000 holds, there could be a corrective dip towards 26200-26000 in the near term.

Dax (12111.90, -1.08%) closed stable in the last session. 12000-12100 levels could produce a bounce back towards 12300-12400 levels. On a larger picture, the weekly chart suggests some narrowing trade within 12000-12600 region in the coming weeks.

Nikkei (23783.72, -0.80%) is trading lower for now. A fall towards 23400 looks possible in the near term before a bounce back is seen towards 24000-24200 levels again.

The People’s Bank of China announced yesterday that it would cut its RRR by 1% point for commercial banks, joint stock commercial banks, city commercial banks, overseas invested banks as well as non-country rural commercial banks starting 15th October. Shanghai (2751.22, -2.52%) which was trading above 2800 before the holiday week has now fallen below 2800 and is trading at 2751 also as an impact of the overall fall in the global equities while China was on holiday last week. While above 2700, there is some chance that the index could bounce back towards 2800-2850 in the medium term, else a break below 2700, if seen could be bearish for the week.

Nifty (10316.45, -2.67%) could see some recovery today. But overall the index looks bearish towards 10000 while below 10500.

COMMODITIES

Brent (83.28) and WTI (73.71) have come down a bit as expected.

WTI faces immediate near term support at current levels and if that holds, it could rise towards 75 again in the next few sessions. Crucial resistance is seen near $77 and $80 on the upside.

Brent could also be limited to $90 on the upside but is currently in a short term correction from levels near 86. While the fall sustains, there is room towards 82 which is a short term support and could produce a decent bounce back towards 85-86 levels.

While there is a possibility of seeing one last leg of a rise towards respective resistances on Brent and WTI near $90 and $80, if the crude prices see a sharp fall below 80 and 70 (Brent and WTI), we could consider a top already in place and revisit our view of an upmove in the medium term.

Gold (1199.80) is ranged near 1200 and is likely to remain ranged in the 1190-1220 region for the near term. The sideways consolidation could continue for another 1-2 weeks before a sharp break on either side is seen.

Copper (2.7535) looks bearish just now. Although there is support at 2.75, there could be chances of testing 2.70 on the downside from where a bounce could be expected.

FOREX

News of liquidity injection in the Chinese economy has weakened the Yuan. This could further lead to a rise in Dollar Rupee - watch if resistance near 74.50 holds or not.

Dollar Index (95.70) still looks bullish towards crucial resistance near 96.5 which it could test in this week / by next week. Expect a quiet day of trading today since its a holiday in USA.

Euro (1.1514) came off after testing a high near 1.155 on Friday. While below 1.155, it still looks bearish towards support near 1.14. Lower down, it could even target the 200 weeks MA near 1.132 after that in the weeks ahead.

Dollar Yen (113.87) tested support near 113.5 on daily candles on Friday and again moved up from there. While above 113.5, it could go on to test 115 in the next 1-2 weeks. A break below 113.5 on the other hand could be bearish. Japanese markets are closed today - expect a quiet day for the Yen today.

Euro-Yen (131.18) is almost breaking below support on daily candles. While below 131.20-25, it can move lower towards 130.0-129.5 in this week.

Pound (1.3118) has immediate resistance near 1.3125-1.3150 which should hold and lead to a downmove towards 1.29 in this week.

Aussie (0.7052) could move lower towards channel support on daily candles near 0.70 in this week.

Dollar Yuan (6.8987): News that the Chinese government has injected massive new liquidity into the economy has weakened the Yuan. It now has resistance in the 6.92-6.94 zone, which if broken, could be very bearish for the Yuan.

Dollar Rupee (73.77): A correction from 74.225-74.50 is likely. However, weakness in the Chinese Yuan and bearishness in Indian equities could weaken the Rupee even beyond 74.5.

INTEREST RATES

On Friday, data on US NFP and average hourly wages both showed lesser growth as compared to the previous month . However, against expectations, the unemployment rate fell to a 48 years low of 3.7% - this figure might have kept US yields elevated.

The US 10 Year (3.23%) and 30 year (3.40%) have important resistances at 3.25% and 3.40% respectively, which could make these yields come off in the near term.

The 10 Year German-US spread (-2.66%) might have some support on medium term chart near current levels - however, on long term chart, a downmove towards -2.80% still looks possible over the next few weeks.

The German 10 year yield (0.57%) is testing resistance on medium term chart near current levels - it could come off towards 0.50%-0.40% again from here. However, if it breaks above this resistance, the next target could be 0.75% (as seen on long term chart).

Japan 10 year yield (0.15%) rose above 0.14% last week and could now target levels near 0.20%-0.25% in the next 2-3 weeks.

China Caixin PMI services rose to 53.1 in September, up from 51.5 and beat expectation of 51.5. Caixin PMI composite rose 0.1 to 52.1, showing that overall business activity expanded modestly at the end of Q3. Still, the rate of activity growth remains lackluster compares to earlier in 2018.

Commenting on the China General Services PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

"The Caixin China General Services Business Activity Index rebounded to 53.1 in September from 51.5 in August. New business increased at a faster rate last month than in August, pointing to some improvement in demand. However, employment in the service industry contracted abruptly and that sub-index fell to its lowest level since March 2016. Prices charged by service providers declined for the first time in 13 months, while input costs rose at their quickest pace since January, which could squeeze company profit margins. Reflecting that, the sub-index of business expectations, which gauges service companies' confidence toward the prospects of their operations over the next 12 months, edged down in September from the previous month.

"The Caixin China Composite Output Index inched up to 52.1 last month from 52.0 in August, indicating the performance of the Chinese economy was stable for the month. However, demand remained subdued as the growth rate for new orders, although marginally higher than the previous month, lingered at a low level. The increase in output prices slowed while the gain in input prices accelerated slightly. That meant companies were still under relatively large cost pressures, which contributed to a fall in the sub-index of future output.

"What we should be wary of is that overall employment contracted in September, with the sub-index hitting its lowest level since August 2016. The deterioration in employment will test policymakers' determination in pressing ahead with reforms."

Full release here.

USD bulls lost ground as the greenback corrected from its peak. As suggested in the CFTC Commitments of Traders report in the week ended October 2, NET LENGTH of USD index climbed mildly higher, by +27 contracts to 37 036 contracts. Both speculative long and short positions increased only marginally. During the week, the DXY index climbed +1.47%. The greenback rose against major currencies with the exception of Canadian dollar (CAD). The latter appreciated as Canada and the US  made a preliminary deal on new trade relations.EUR futures drifted to NET SHORT of 7 101 contracts as speculative short positions rose while longs plummeted. Meanwhile, NET SHORT for GBP futures decreased -7 738 contracts to 59 340. Both speculative longs and shorts dropped, with that of the latter overwhelmed. Hopes that the Brexit deadlock would be resolved on signs that the UK and the EU might compromise on the Withdrawal Agreement.

On safe-haven currencies, Net SHORT for CHF futures dropped -2 681 contracts to 13 402 while that for JPY futures deepened, by +29 327 contracts, to 114 046 during the week. Swiss franc has remained under pressure as USD strengthened on rising yields.

All commodity currencies stayed in NET SHORT positions. NET SHORT for AUD futures slipped -343 contracts to 71 718 as traders trimmed bets on both sides. NET SHORT for NZD futures dropped -1 239 contracts to 30 596 while that for CAD futures declined -1 048 contracts to 18 484.

According to the CFTC Commitments of Traders report for the week ended October 2, NET LENGTH for crude oil futures dropped as prices were peaking. Meanwhile, NET LENGTH heating oil and gasoline futures increased further, and NET SHORT for natural gas futures declined. Speculative long positions of crude oil futures added +6 685 contracts, but was more than offset by the bigger increase in shorts (up +17 861 contracts). This resulted in a decrease in NET LENGTH, by -11 176 contracts, to 548 909 contracts. During the week, the front-month WTI crude oil contract jumped +4.08% while the corresponding Brent contract was up +3.58%. For refined oil products, Net LENGTH for heating oil futures added +4 150 contracts to 48 513, while that for gasoline added +481 contracts to 112 641. During the week, the front-month Nymex heating oil contract soared +4.44% while the RBOB gasoline contract was up +2.86%. Net SHORT for natural gas fell -12 617 contracts, to 26 023 contracts for the week. The Nymex natural gas contract gained +2.73%. The market continued to anticipate higher demand amidst cold weather.

On the precious metal complex, gold and silver futures stayed in NET SHORTS for another week. The phenomenon will likely persist as global yields soar, raising the opportunity cost for holding precious metals. Speculative long positions for the former slipped -450 contracts, while shorts rose +3 724, raising the number of NET SHORT, by +4 174 contracts, to 21 822. For silver, speculative long positions were trimmed by -3 261 while shorts plunged -9 018, trimming the number of NET SHORT, by -5 757 contracts, to 17 498 contracts. For PGMs, NET LENGTH of Nymex platinum futures added +4 359 contracts to 7 049 while that for palladium gained +422 contracts to 10 112.

EURUSD - remains vulnerable short term to the downside on further weakness. But, a corrective recovery could occur in the new week. On the upside, resistance comes in at 1.1550 level. A break through there opening the door for more upside towards the 1.1600 level. Further up, resistance lies at the 1.1650 level where a break will expose the 1.1700 level. On the downside, support lies at the 1.1500 level where a violation will aim at the 1.1450 level. A break of here will aim at the 1.1400 level. Below here will open the door for more weakness towards the 1.1350. All in all, EURUSD still faces further downside pressure but with caution of a recovery higher.

GBPUSD - eyes key resistance zone located at the 1.3200/16 zone. This is coming on the back of its two-day strength on Thursday and Friday. Resistance stands at the 1.3150 level. A turn above here will allow for more strength to build up towards the 1.3050 level. Further out, resistance stand at the 1.3100 level followed by the 1.3150 level. Its daily RSI is bullish and pointing higher suggesting further strength. On the downside, support comes in at the 1.2900 level where a break will turn focus to the 1.2850 level. Further down, support lies at the 1.2800 level. Below here will set the stage for more decline towards the 1.2750 level. On the whole, GBPUSD remains biased to the upside in the short term.