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Sterling is pressured on report that while UK Prime Minister Theresa May is trying to unite her party at the Conservatives annual conference, Brexit rebels are gathering a few streets away on an "alternative Brexit Advance Coalition Conference". May's Chequer's plan was brutally criticized by the Brexiteers as "failing to deliver the referendum mandate". And the rebels threatened to vote down the deal even if May could agree to one with the EU. In the meeting, it's reported that 96% of those attended opposed to the Chequer's plan.

Perhaps words from Andrea Jenkyns, a former parliamentary private secretary, best described the situation. "Our party members don't want it, the public doesn't want it, the opposition aren't going to vote for it, the EU doesn't want it, so we must chuck Chequers," she said.

The New Zealand Dollar has depreciated about 52 base points against the US Dollar since yesterday session. The currency pair was guided south by the 50-hour simple moving average.

The exchange rate breached a support level set by the weekly S1 at 0.6583 during the European trading session on Tuesday.

Given that the currency exchange rate has tested the support level, the next target for the pair will be at the monthly S2 at 0.6545.

On the other hand, the price could reverse from the current level and aim at a resistance line formed by the 50-hour SMA at 0.6612 within this session.

Euro's selloff slowed a little bit after Italian Prime Minister Giuseppe Conte tried to calm the markets with his facebook post. He said there that "Italy is a founding country of the European Union and monetary union". And, "the euro is our currency and it is for us indispensable. " He emphasized that "any other declaration that makes a different assessment is to be regarded as a free and arbitrary opinion that has nothing to do with the government policy I chair".

Also, he defended the budget plan and said "the package of measures that we are developing aims to combine fairness and efficiency". Also, he added large investment plan is set up to "give the country modern and secure infrastructure, making it a permanent laboratory for innovation and development."

Conte also added "We respect our sovereign prerogatives and we also respect the institutions of the European Union that we have helped to establish and remain our common home." And, "We are going to talk to the European institutions with serenity and respect for roles, confident that we can prove, hand cards, the goodness of work so far.

https://www.facebook.com/GiuseppeConte64/posts/488040788344558?__xts__[0]=68.ARDqZic2rGAMCkw3CZQbdAPxHaHWJq73tCy0DDAbFOjipRgmQgOgyY0WeJ-jnmyHDGpK8V2e4MZQl74rM9KYsH2FQ2PW4vjf8Dh_1dRr65d_PQKEjIF2a2NOio8cvPhc0eHnDs0qYb8SZr4WmtZmg05sMVf5B8BBhq9p40LDcfNEGFrCH4FV&__tn__=-R

The US dollar has started to correct lower against the Japanese yen currency, after numerous technical failures around the 114.00 resistance level. The USDJPY pair is now trading towards the 113.60 support zone, as the lower time frame, bearish MACD divergence starts to unwind. Sellers will aim for the 113.30 support level, while buyers will look to reclaim the 113.80 level.

The USDJPY pair is only bullish while trading above the 113.80 level, key resistance is now found at the 114.06 and 114.43 levels.

If the USDJPY pair moves below the 113.60 level, key support is found at the 113.30 and 112.92 levels.

The euro has fallen towards the 1.1500 level against the US dollar, as the greenback continues to strengthen towards the 95.75 level. Sellers will likely target the 1.1470 level if the 1.1500 support level breaks, while bulls need to stabilize price above the 1.1553 resistance level. Rising Italian bond-yields are also pressuring the single currency lower, as the Italian budget issues spooks investors.

The EURUSD pair is strongly bearish while trading below the 1.1553 level, key support is now found at the 1.1500 and 1.1470 levels.

If the EURUSD pair moves above the 1.1600 level, key technical resistance is located at the 1.1624 and 1.1665.

West Texas Intermediate (WTI) futures advanced to a fresh four-year high earlier today, reaching the 75.88 resistance level. However, price action is at the moment taking place below this peak, losing its strong positive momentum. The MACD oscillator is flattening in the bullish area, while the RSI indicator is sloping downwards in the overbought zone, suggesting an overstretched bias.

If prices continue to head lower and slip below 75.28, support should come from 73.70, taken from the high on September 28 before touching the 20-simple moving average (SMA) in the 4-hour chart. A drop below this level would turn the focus to the downside in the short-term and open the way towards the 23.6% Fibonacci retracement level of the upleg from 64.40 to 75.88, around 73.17.

On the upside, if the price posts a significant leg above the aforementioned four-year high, the next level for investors to have in mind is the 77.13 barrier, identified by the lows on June 2012.

To summarize, WTI crude looks bullish in the short-term again despite the latest bearish movement, while in the long-term picture, it has been strongly positive since January 2016.

Oil

After registering a four year high on the back of a slow down in U.S. drilling that compounded supply losses from Iran and Venezuela. Oil prices consolidated gains throughout most the Asia session, but with the USD looking poised to move through Asia currencies like a wrecking ball, oil prices have come off the boil on waning risk sentiment.

Rupee and Oil

There is some concern a weaker INR could weigh on India’s oil demand. But as we move towards the USDINR 74, it could be catastrophically destabilising for India capital markets as India would have increased problems servicing their US dollar-denominated debt. While the direct currency impact of a weaker INR to Oil demand remains debatable, what’s not, is a possible capital market meltdown in India that will undoubtedly hurt oil demand.

Gold

After trading a bit higher on waning risk sentiment, with the dollar reasserting itself as king of the hill, gold ran into a wave of sellers at $1194, and the yellow metal is heading south again

Asia equities

A word of caution as liquidity, due to Golden Week is running extremely thin which could be contributing to some outsized moves

Wow, that was a quick turnaround as Asia equities bled a sea of red (HSI -1.850%, TWSE -1.25%, KOSPI -1.10%) as a toxic elixir of weaker China PMI, stronger USD and escalating geopolitical tension in the South China Sea when a Chinese destroyer came within meters of ramming USS Decatur. So much for the USMCA euphoria, indeed that fizzled quickly.

EM Asia currencies in focus

Indonesian Rupiah

USD Asia traded higher across the board, but there was an outsized focus on the IDR which breached the psychological USDIDR 15,000 level, and now vols are getting paid aggressively across the weaker links of the ASEAN currency chain. (IDR-PHP-INR) Those that fell for the intervention and higher interest rate “dangling the carrot” are running for the exits en masse

Korean Won

Korean won weakened as the services and investments sectors data remained tepid and triggered a reported 200 million in equity outflows

Singapore Dollar

The SGD weekend following its Asian peers and we could expect more weakness as short dollar positions get pared ahead of MAS

G-10 currencies in focus

Euro

The USD the dollar is back in the driver’s seat after Claudio Borghi suggested: “Italy would have solved fiscal problems with its currency.” The market was not short near enough Euro, and traders have relentlessly hammered the single unit to the psychologically significant 1.1500 level

Australian Dollar

RBA seemed to be a non-event in the first, but the AUD has traded lower as ASEAN risk has evaporated. But perhaps there were more misguided positions heading into today’s rate announcement possibly hoping for a hawkish flash in the statement, that may be unwinding and contributing to a more significant sell-off than one would have expected.

Spot Gold ticked higher on Monday as risk appetite on new trade agreement between the US and Canada started to fade and lifted yellow metal's price.

Gains were so far limited as bulls face strong headwinds from thick daily cloud which continues to weigh heavily on near-term action.

Cloud base (currently at $1191) repeatedly capped upside attempts in past three days and limits today's recovery attempts for now.

In addition, a cluster of converged daily MA's (10/20/30) in $1195/98 zone reinforces resistance and guards psychological $1200 barrier, which marks upper pivot.

Negatively aligned daily techs (MA's in bearish setup and growing bearish momentum warn that recovery attempts may run out of steak at daily cloud base and shift near-term focus lower.

Key near-term support lays at $1181 (Fibo 61.8% of $1160/$1214 / 28 Sep low), loss of which would open way towards key short-term support at $1160 (16 Aug spike low, the lowest since early Jan 2016).

Bullish scenario requires close above $1200 pivot to revive bulls and expose barriers at $1211/14 (21 Sep / 28 Aug highs).

Res: 1191, 1195, 1198, 1200
Sup: 1188, 1184, 1181, 1172

Notes/Observations

• WTI Crude rises to the highest since Nov 2014 ahead of sanction against Iran
• Italy BTP futures reach 4.5 year high, FTSE MIB touches 1.5 year low on Budget woes
• UK construction PMI hits 6 month low; Cable dips below 1.30

Asia:

• RBA leaves rates unchanged as expected
• Asian Indices mainly lower; Hang Seng drops over 2% on trade concerns
• New Zealand Dollar declines as NZ business confidence hits a 9.5 year low

Europe:

• Italian BTP futures hit 4.5 year high having fallen below 121 on potential clashes over next year budget with the European Union
• Italy Dep PM vowed to not change 2.4% deficit target, notes Gov will not exit the Euro, neither leave the EU
• Italy League's Borghi suggests Italy would solve most of its problems if it had it's own currency
• UK Construction PMI reaches 6 month low with all three sub-sectors record a loss of momentum since August Americas
• Mexico reportedly plans to lobby U.S. to scrap steel, aluminum tariffs before signing new NAFTA agreement
• President Trump noted new USMCA trade deal protects high wage jobs and and will lead to more autos being built in the US; Japan and India want to agree new trade deals, while China wants to talk very badly but its too early

Energy

• Iran Sept crude production fell 140K bpd to 3.36M (ahead of sanctions)

Macro

• (US) USMCA: Markets now appear to be adopting a more circumspect view of the "biggest ever" trade deal between the U.S. and Canada for any one of a number of reasons, such as the length of time it will take to be approved (full implementation may not occur until 2020) and the fact that, on aggregate, the new deal may not make much difference than the deal it replaces.
• (AU) Australia: RBA held rates at a record low 1.50% as expected. The global expansion and recent domestic growth are positives, but the uncertain consumer, falling house prices and credit “now tighter than it has been for some time”, all means that progress in reducing unemployment and increasing inflation will likely be gradual.
• (ES) Spain: Tourist arrivals to Spain fell -1.9% y/y in August after a -4.9% drop in July according to the Stats office. July and August are important months for summer tourism to Spain. It accounts for around 11% of the economy and employs more people than any other sector. Tourism played a vital role in Spain’s economic recovery, accounting for 26% of the 1.4 million new jobs created since 2013. Without those jobs, the total number of unemployed in Spain would still be well over the 20% mark.
• (UK) UK: Nationwide house prices over Q3 were up 0.8 % Q/Q. However, the quarterly rate remains well above the -0.2 %low set in May and close to the 1.0% upper end of the range seen so far in 2018. There was another annual fall in prices in London contrasting with relatively solid gains elsewhere in the country. The housing market remains stable for the most part and the recent pick-up in mortgage approvals bodes well. Supply remains tight but demand has softened slightly in the face of squeezed household budgets and all of the political uncertainty.
• (IT) Italy: Officials reportedly warned Italy of the possibility of a Greek style debt crisis yesterday and League's Borghi suggested Italy would have set a 3.1% deficit limit if it had wanted to confront Brussels, but the mention of the number alone did little to soothe risk markets.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 -1.2% at 3,374, FTSE -1.1% at 7,447, DAX -1.0% at 12,220, CAC-40 -1.1% at 5,449, IBEX-35 -1.2% at 9,297, FTSE MIB -1.4% at 20,324, SMI -0.7% at 9,060, S&P 500 Futures -0.4%]
• Market Focal Points/Key Themes: European indices open down across the board with Italy at the fore, moving lower as the session progressed; concern over Italy finances keeps risk sentiment depressed; macro-heavy news flow keeps focus of the day; brent price manages to shield energy stocks from general downward move; financial sector the worst performer focus on Tory party conference in the UK, followed by speech from PM May tomorrow; earnings expected in the upcoming US session include Pepsico and Paychex

Equities

• Consumer discretionary: Ferguson FERG.UK -5.4% (results), Ubisoft UBI.FR +1.8% (streaming agreement), Wizz Air WIZZ.UK -0.6% (load factor)
• Energy: Electricite de France EDF.FR +1.6% (analyst action)
• Financials: Burford Capital BUR.UK -7.1% (placing), Credit Agricole ACA.FR -0.8% (analyst action)
• Healthcare: Akzo Nobel AKZA.NL +0.3% (capital repayment plan), Almirall ALM.ES -2.3% (FDA approval), Epigenomics ECX.DE +29.2% (US Congress pushes CMS coverage of FDA approved blood tests)
• Industrials: DX Group DX.UK +6.7% (results), Meggitt MGGT.UK -0.5% (contract), Metso MESTO.FI +2.8% (contract), Royal Mail RMG.UK -8.4% (guidance, analyst action), Subsea 7 Inc SUBC.NO +0.3% (contract)

Speakers

• (IT) Italy Deputy PM Di Maio: gov't will not change 2.4% 2019 deficit target - RTL radio
• (IT) Italy would solve most of its problems if it had it's own currency; would set 3.1% budget deficit if aimed at EU confrontation - League economic head Borghi
• (UK) UK PM May: we have been listening to business on Brexit
• (UK) DUP's Jeffrey Donaldson: Leader Arlene Foster not endorsing Boris Johnson; prepared to work with the current PM
• (SE) Sweden Central Bank (Riksbank) Dep Gov Ohlsson (dissenter): global economic backdrop is benign currently
• (UK) UK Foreign Min Hun: Punishing UK for Brexit is not in line with EU values
• (EU) ECB's de Guindos: Urges higher harmonization of EU rules to combat money laundering - comments from ECOFIN meeting
• (TR) Turkey President Erdogan: budget will be passed to govt 2 weeks later; Turkish people to be patient on economy
• (JP) Japan PM Abe: want Fin Min Aso to do his utmost so Japan can make full exit from deflation

Currencies

• Euro continues to decline falling over 0.4% against the dollar and 0.6% against the Yen on Italian Budget uncertainty.
• Italian/German 10-year bond yield gap at 302bps (widest in over 5-years)
• GBP/USD drops below 1.30 as fears of No Brexit deal rise, with a weaker Construction PMI pushing the pair to a 3 week low
• Australian dollar retraced earlier gains after the RBA left rates on hold.
• NZD/USD declined after Business confidence fell to the lowest since March 2009.

Fixed Income

• Bund Futures trades at 159.65 up 85 ticks as as the focus remains on BTPs . A downside break of 158.25 sees 157.69 initially.
• Gilt futures trades at 121.37 up 55 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.
• Tuesday's liquidity report showed Monday's excess liquidity rose from €1.824T to €1.867T. Use of the marginal lending facility stayed fell from €130M to €71M.
• Corporate issuance saw 5 high grade issuers raise $4.6B in the primary market

Economic Data:

• (UK) SEP CONSTRUCTION PMI: 52.1 V 52.9E (6th month of expansion)
• (UK) SEPT NATIONWIDE HOUSE PRICE INDEX M/M: 0.3% V 0.2%E; Y/Y: 2.0% V 1.9%E
• (EU) Euro Zone Aug PPI M/M: 0.3% v 0.2%e; Y/Y: 4.2% v 3.8%e
• (ES) Spain Sept Unemployment M/M: 20.4K v 28.1Ke
• (CZ) Czech Q2 Final GDP Q/Q: 0.7% v 0.7%e; Y/Y: 2.4% v 2.4%e

Issuance

• (AT) AUSTRIA DEBT AGENCY (AFFA) SELLS TOTAL €1.15B VS. €1.15B INDICATED IN 2023 AND 2028 RAGB BONDS
• (CH) Switzerland sells CHF282.9M in 3-month Bills; Yield: -0.839% v -0.841% prior

Looking Ahead

• 05.30 (UK) Weekly John Lewis LFL sales data
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 08:00 (BR) Brazil Aug Industrial Production M/M: 0.4%e v -0.2% prior; Y/Y: 3.2%e v 4.0% prior
• 08:00 (CL) Chile Aug Retail Sales Y/Y: No est v 0.1% prior
• 08:05 (UK) Baltic Dry Bulk Index
• 08:55 (US) Weekly Redbook Sales
• 09:00 (EU) Weekly ECB Forex Reserves: € v € prior
• 09:00 (MX) Mexico Aug Leading Indicators (M/M: No est v 0.07% prior
• 09:00 (SG) Singapore Sept Purchasing Managers Index (PMI): No est v 52.6 prior
• 10:00 (DK) Denmark Foreign Reserves(DKK): 467.0Be v 467.9B prior
• 12:00 (NZ) New Zealand Sept QV House Prices Y/Y: No est v 4.8% prior

EUR/USD

Current level - 1.1539

The pair is currently testing 1.1530 support area and my outlook is counter-trend, for a reversal and bounce towards 1.1730. An eventual break through the mentioned support will target bids around 1.1440.

USD/JPY

Current level - 113.73

As the uptrend is approaching 114.40 hurdle, there is a growing risk of a reversal and slide back towards 112.40. There is still no clear sign and my outlook is neutral.

GBP/USD

Current level - 1.3009

The bias is bearish, for a tight test of 1.2970 and the latter should be able to provoke a rebound towards 1.3210 area. Crucial is 1.3100.