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GBPUSD (1.3010): The GBPUSD currency pair posted a modest rebound pushing price action to test the previous resistance level of 1.3054 - 1.3028. The rebound has resulted in price action forming a hidden bearish divergence. As long as this resistance level holds, we expect GBPUSD to push lower. The next downside target is seen at 1.2808. However, for this level to be tested, the cable will need to break down below the previously formed lows of 1.2925.

EURUSD (1.1511): The euro currency was seen posting modest gains on Thursday. Price action, however, is settled below the resistance level of 1.1547 - 1.1525 level. Some consolidation is expected below this level, but we expect the common currency to extend the gains down to the next lower support at 1.1435. The bias remains to the downside for the moment. If the EURUSD fails to hold on to the support at 1.1435, we expect the declines to push the currency pair further down to 1.1315.

The U.S. Dollar was seen giving up some of the gains on Thursday. Price action retreated after a strong rally during the previous days. Economic data on the day was mostly limited. Australia’s trade balance figures were released. Data showed that the trade surplus rose to 1.60 billion. This beat estimates of a 1.43 billion increase.

Data from the Eurozone was relatively quiet. The NY trading session saw the release of Canada’s Ivey PMI. The index fell to 54.0 missing estimates of an increase to 62.3. However, with a reading above 50, the report indicated expansion. In the U.S. the factory orders showed a 2.3% increase on a month over month basis, beating estimates of a 2.2% increase.

Looking ahead, the economic calendar today will see the German factory orders and PPI reports. Switzerland will be releasing the inflation report for the month. Economists polled expect consumer prices to rise 0.2% on the month.

The NY trading session is expected to be busy with the release of both Canada and the U.S. jobs report. Canada is expected to post an employment change of 25k with the unemployment rate expected to fall from 6.0% to 5.9%.

In the U.S., the official payrolls data is forecast to show 185k jobs being added while the unemployment rate is expected to fall to 3.8%. Wages are forecast to rise 0.3% on the month.

The British pound has performed a much needed technical correction higher against the US dollar, as the pair moves away from oversold trading conditions in the short-term. The GBPUSD pair remains vulnerable to further losses, although a potential bullish head and shoulders pattern may be forming if the current monthly trading low holds.

The GBPUSD pair retains an intraday bullish bias while trading above the 1.3000 level, key resistance is found at the 1.3046 and 1.3117 levels.

If the GBPUSD pair trades below the 1.3000 level, key technical support is found at the 1.2939 and 1.2919 levels.

The euro is trading close to the 1.1500 level against the US dollar, as price consolidates ahead of the US Nonfarm payrolls job report for the month of September. The EURUSD pair had started to correct above the 1.1500 level, although the move higher was quickly sold as buyers lost momentum around the 1.1540 region. Sellers need to break the 1.1463 support level while buyers need to move price above the 1.1553 resistance level.

The EURUSD pair remains bearish while trading below the 1.1500 level, key technical support is now found at the 1.1463 and 1.1405 levels.

If the EURUSD buyers move price above the 1.1553 level, key resistance is then found at the 1.1600 and 1.1650 levels.

The US markets ended the day sharply lower yesterday as traders continued to worry about the bond markets. The ADP released jobs number for September which jumped to 230K – sharply higher than the expected 187K. Today, traders will receive official numbers from the government. These will mostly focus on headline numbers and wages. A rise in wages will increase the chances of tightening by the Fed, which will lead to higher rates.

The dollar index continued to rise as traders waited for today’s jobs numbers. It also rose after a series of positive economic data. The factory order numbers released yesterday were better than expected estimates. In August, factory orders rose by 2.3%, which was higher than the 2.1% traders were expecting. The durable goods data rose by 4.4%, which was lower than the 4.5% traders were expecting.

The Canadian Dollar fell against the USD after a sharp increase on Monday following the breakthrough in NAFTA negotiations. These declines were mostly because of the strong USD. Today, traders will receive the employment numbers from Canada. The unemployment rate is expected to drop to 5.9% from the previous 6.0%. The participation rate is expected to increase to 65.4% from the previous 65.3% while the net employment change is expected to be at 30K.

The Swiss franc has lost significantly against the USD. This follows the SNB’s promise to leave rates unchanged in the negative territory. Today, Switzerland will release important data. The consumer inflation is expected to have risen by 1.1% in September, which will be lower than August’s 1.2%. On a monthly basis, it is expected to rise by 0.2%. The core CPI, which excludes major products is expected to rise to an annualized rate of 0.6%, which will be higher than last month’s 1.5%.

EUR/USD

The EUR/USD pair gained slightly in the Asian session. It reached an intraday high of 1.1540 as traders waited for the US employment data. On the four-hour chart below, the technical indicators show that the pair’s path of least resistance is down. The current price is at the 38.2% Fibonacci Retracement level where it is finding a resistance. If it moves lower, it will find another resistance at the 1.1420 level.

USD/CHF

The USD/CHF pair continued the upward momentum started in September. Today, it reached an intraday high of 0.9925. As shown in the chart below, the momentum is currently with the dollar, which will likely continue. However, as the pair inches closer to parity, traders should expect it to find resistance. This means that the sharp rally will likely be halted when the parity is reached as traders ponder what will happen next.

USD/CAD

The USD/CAD recovered all of the losses from Monday’s sharp decrease. It reached an intraday high of 1.2936. This happened as the pair moved past the important consolidation level of 1.2840. Today’s jobs numbers will make it one of the most volatile pairs. Strong US jobs numbers will take the pair higher. Strong numbers from the US and Canada will have mixed reactions from the market. This means that the pair will likely test the 1.2940 or the 1.2840 levels.

Rates: Another strong payrolls report?

The August payrolls report marked the start of an impressive rally higher in US yields which culminated in technical breaks of the cycle highs at the long end of the curve earlier this week. We think the September labour market will deliver again today, confirming the breaks in the weekly close and breathing more life in the upleg.

Currencies: Will payrolls convince USD bulls?

Yesterday, the performance of the dollar was a bit disappointing given recent jump in US yields ad considering the global risk-off sentiment. Today, the focus will be on the US payrolls, especially on wages. We assume the report to be strong enough to keep the US currency well supported.

The Sunrise Headlines

• US equity markets moved south yesterday as rising bond yields ruffled investor confidence. NASDAQ (-1.81%) underperformed. Asian markets are continuing the US downwardly trend. Chinese markets remain closed today.
• Italy’s Finance Minister Tria has written a letter to the European Commission calling for “open and constructive” dialogue ahead of the budget discussions. Italy already cut its budget deficits for the next three years, though marginally.
• Mexico’s central bank has left its key lending rate unchanged at 7.75%, a nine-year high, this morning. The country’s inflation (4.9% in August) remains higher than the Bank of Mexico’s target range of 2-4%.
• US Vice-president Mike Pence has accused China of meddling in the US midterm elections, this November. He said China is using propaganda and influence operations to hurt voter’s perception of US President Donald Trump.
• In Brazil, the first-round presidential elections are held this Sunday. According to the official polls, far-right candidate Bolsonaro is taking a commanding lead with 35% support. Leftist Workers Party’s Haddad is second with 22% support.
• Household spending in Japan rose at the fastest annual pace in three years in August. Year on year spending rose 2.8%, from 0.1% in July. Analysts feared a slowdown but brisk summer bonuses and rising wages outweighed bad weather.
• Today’s eco calendar is rather empty but interesting nevertheless. In the US strong Payrolls and Hourly Earnings can support recent bond yield rally. For the EMU we have no important eco data, but ECB’s VP de Guindos speaks in Madrid

Currencies: Will Payrolls Convince USD Bulls?

Will US payrolls (wages) convince USD bulls?

Yesterday, key question was what Wedneday’s US Treasuries’ sell-off would mean for global markets and for the dollar. The dollar stayed in pole position, but early gains dwindled despite a negative risk climate (EM stress, equity selling). EUR/USD traded calm given the swings in other markets. There was no outright safe haven rush to the dollar. At the same time, the euro proved resilient, probably as Italy moved a bit to the background as a driver for (FX) trading. Data were second tier. The correction of US equities didn’t help the dollar much. EUR/USD closed the session at 1.1514 (From 1.1478). USD/JPY reversed Friday’s, interest rate driven spike and finished the day at 113.91. Overnight, Asian equities are mostly trading in the red, but losses are modest given yesterday’s correction in the US. Currencies like the INR, IDR and the KRW are holding near recent lows but there are no additional losses. Markets are looking out whether the Reserve Bank of India will step up the defense of the rupee and raise rates later today. EUR/USD hovers in the 1.15 area. USD/JPY is holding close to, slightly below 114. Today’s US payrolls will be the key driver from global (FX) trading in a daily perspective and might even be a MT-trendsetter. Payrolls growth is expected solid at at 185 000. We have no reason to take a softer view. The market focus will be even more on wage growth (AHE). Consensus expects 0.3% M/M and 2.8% Y/Y (from 0.4% M/M and 2.9% in August). A positive surprise (especially a print of the symbolic 3.0% level) could reinforce the rise in US yields. USD gains were moderate this week given the developments on other markets. Even so, we assume the payrolls to be strong enough to give the dollar downside protection. The EUR/USD break below 1.15 didn’t accelerate USD buying yet. This is slightly disappointing for USD bulls. Still, we give the USD the benefit of the doubt. A technical setback to the 1.13 area is still possible.

Yesterday, there were few important UK eco data and we didn’t see high profile Brexit news. Markets drew some comfort from headlines/rumours that the EU offials saw some positive elements in a new UK proposal on the Irish border. In technical trade EUR/GBP drifted lower in the 0.88 big figure. Today, there are only second tier UK data. We keep a neutral bias on sterling in a day-to-day perspective.

EUR/USD: holding near 1.15, awaiting guidance from the US payrolls

Daily Pivots: (S1) 147.83; (P) 148.24; (R1) 148.77; More...

Intraday bias in GBP/JPY remains neutral as consolidation from 149.70 is extending. With 145.67 support intact, outlook stays bullish and further rally is expected. On the upside, above 149.70 will target 153.84/156.69 resistance zone next. However, break of 145.67 will suggest that the rebound from 139.88 has completed and turn near term outlook bearish again.

In the bigger picture, current development suggests that GBP/JPY has successfully defended 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47). And, the rally from 122.36 (2016 low) is still intact. Such medium to long term rise would extend through 156.96 high. This will now be the preferred case as long as 145.67 near term support holds. However, break of 145.67 will turn focus back to 139.29/47 key support zone.

Apple ticker symbol: $AAPL short-term Elliott wave view suggests that the decline to $215.31 low ended intermediate wave (4) pullback. Above from there, the stock is nesting higher within wave intermediate wave (5) looking for more upside extension. The internals of intermediate wave (5) is unfolding as impulse structure with the sub-division of 5 waves rally in each leg higher. When Minor wave 1, 3 & 5 are expected to unfold in 5 waves structure in lesser degree cycles.

Up from $215.31 low, the initial rally to $222.28 high ended Minor wave 1 in 5 waves. A pullback to $216.51 low ended Minor wave 2. Above from there, a rally to $233.47 high ended Minor wave 3 higher with another 5 waves structure in lesser degree cycles. Where Minute wave ((i)) of 3 ended at $221.59 high. Minute wave ((ii)) of 3 ended at $219.25 low. Minute wave ((iii)) of 3 ended at $229.42 high. Then Minute wave ((iv)) of 3 ended at $225.67 low. Finally a rally to $233.47 high ended Minute wave ((v)) of 3.

Down from there, Minor wave 4 pullback is proposed complete at $226.73 low as double three, after reaching the blue box area at $228.63-$226.34 100%-161.8% Fibonacci extension area of a Minute wave ((w))-((x). Near-term, while dips remain above $226.73 low and more importantly the pivot from $215.31 low stays intact expect Apple to resume the next leg higher in Minor wave 5 of (5). We don’t like selling it and prefer more upside against $215.31 low.

Apple 1 Hour Elliott Wave Chart

General Trend:

• Samsung reported prelim record Operating Profit for Q3, results overall in line
• Shares of Lenovo Group decline over 15% amid report about alleged hacking related to China
• ZTE declines over 12%
• Japanese financials continue to benefit from higher US Treasury yields
• Japan Aug household spending beats ests, government raises assessment
• Japan Aug real wages decline, special one-off payments drop
• Australia Sept Construction PMI contracts for the first time in 20 months
• South Korea CPI nears target of 2.0%, highest since Sept 2017
• Philippines Sept CPI below ests, hits 9-year high
• Japan markets to be closed on Monday (Oct 8th) for holiday

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.3%
• (AU) AUSTRALIA AUG RETAIL SALES M/M: 0.3% V 0.2%E
• (AU) AUSTRALIA SEPT AIG PERFORMANCE OF CONSTRUCTION INDEX: 49.3 V 51.8 PRIOR (below 50 level for the first time in 20 months)
• (AU) In next week’s release of the RBA’s Financial Stability Review some are expected to pay attention to the assessment of the housing-market; The report is due to be released on Friday (Oct 12th) – US financial press
• (AU) Reserve Bank of Australia (RBA) Head of Economic Analysis Heath: Unemployment rate is still the main measure of spare capacity
• (AU) Australia AOFM: Next issuance program update expected at the time of MYEFO
• (AU Australia sells A$500M v A$500M indicated in Nov 2022 bonds, avg yield 2.1725%, bid to cover 5.9x

China/Hong Kong

• Shanghai closed (resumes on Monday), Hang Seng opened -0.5%
• (US) US President Trump: Reiterates China wants to make a deal, but thinks China is not ready; China seeks deal and US/China will talk later.
• (CN) China Foreign Ministry: US Vice President Pence in speech 'slandered China' by claiming it meddles in the US' internal affairs and elections

Japan

• Nikkei 225 opened -0.8%
• (JP) BOJ said to be seen tolerating higher yields; BOJ could trim super-long bond buying further - financial press
• (JP) BoJ announcement related to daily bond buying operation: unchanged
• (JP) Bank of Japan (BOJ) Quarterly Public Opinion of Household Sentiment: Households see 3% inflation in 1-year, see 2% inflation in 5-years (unchanged q/q)
• (JP) JAPAN AUG HOUSEHOLD SPENDING Y/Y: 2.8% V 0.1%E (largest rise since 2015)
• (JP) Japan Aug Labor Cash Earnings Y/Y: 0.9% v 1.3%e; Real Cash Earnings Y/Y: -0.6% v 0.0%e (first decline in 4 months)
• (JP) Japan Sept Official Reserve Assets: $1.26T v $1.26T prior
• (JP) Japan government officials said the US and Japan to hold third round of bilateral economic dialogue in mid-Nov – financial press
• (JP) Japan Fin Min Aso: Reiterates trade talks with the US are not free trade agreement (FTA) talks
• (JP) Japan PM Abe: Confirms the government will consider revising law to enable 'cashless' society

Korea

• Kospi opened -0.2%
• Samsung Electronics: Reports prelim Q3 (KRW) Op 17.5T (record) v 17.2Te, Rev 65.0T v 65.0Te
• (KR) South Korea Sept CPI M/M: 0.7% v 0.3%e; Y/Y: 1.9% v 1.6%e (highest since Sept 2017)

Other

• (MY) Malaysia Aug Trade Balance (MYR): 1.6B v 9.0Be; Exports to the US -2% y/y
• (MY) In Sept, foreign holdings of Malaysia debt securities declined to the lowest level since March 2017- US financial press
• (ID) Indonesia Fin Min: Authorities are assessing global dynamics in regards to the Rupiah (IDR) currency to determine whether to take further measures
• (IN) India Nifty Energy index declines over 4%, government price cut cited
• (IN) IL&FS says it is unable to service INR339M credit obligation for Sept 30 to Oct 4th
• (SG) Singapore to release Advance Q3 GDP data and Semi-annual Monetary Policy Statement on Friday, Oct 12th

North America

• US equity markets ended lower: Dow -0.8%, S&P500 -0.8%, Nasdaq -1.8%, Russell 2000 -1.5%
• (US) Fed's Senior Credit Officer Opinion Survey: terms of financing unchanged for all counterparty classes; inverse yield curve could cause financing terms to tighten

Europe

• (IT) Italy said to target privatizations worth ~0.3% of GDP in 2019 and 2020 - US financial press
• (EU) ECB's Coeure (France): ECB seeing a gradual buildup in price pressures
• (FR) France stats agency INSEE: France 2018 GDP growth outlook cut to 1.6% (prior 1.7%)
• (UK) The Recruitment and Employment Confederation (REC) Sept gauge of permanent job starting salaries: 64.5 v 62.4 prior (highest level since April 2015)

Levels as of 01:30ET

• Nikkei 225, -0.4%, ASX 200 +0.3%, Hang Seng -0.3%; Shanghai Composite closed; Kospi -0.3%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax flat; FTSE100 +0.1%
• EUR 1.1520-1.1504; JPY 114.12-113.84 ; AUD 0.7086-0.7061 ;NZD 0.6486-0.6463
• Dec Gold flat at $1,202/oz; Oct Crude Oil +0.7% at $74.81/brl; Dec Copper -0.4% at $2,773/lb