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Daily Pivots: (S1) 148.13; (P) 148.66; (R1) 149.18; More...

At this point, GBP/JPY is staying in consolidation from 149.70 and intraday bias stays neutral. 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.

Hong Kong

HSI is trading with a negative bias playing catch up from yesterday holiday in reaction to the weaker China PMI data. But at least for today, it’s more than apparent HK investors are in no mood to join the revamped NAFTA festivities.

Oil

Oil markets are holding onto the astonishing overnight gains ahead tomorrows API inventory data. But, oil traders are biding time and waiting for another cause and effect to buy more barrels.

Gold

Gold has been nudging higher as risk has been trading a bit unsettled in Asia as expressed by the HSI mini melt, and Italian EU risk. The USD is consolidating recent gains vs the Yen but looking to bully the EURO lower on early London flow.

G-10 currencies

Japanese Yen

While the USDJPY is following the more hawkish FOMC playbook, but the lack of follow-through above 114.00 suggesting positions are getting a bit crowded and USD bulls are in need of some absolute “risk on” to breakout topside

The Euro.

The EURUSD is getting squashed by a toxic combination of higher US interest rates and Italy risk, look for more downside momentum on this trade

The Canadian Dollar

The USDCAD is merely biding time, but eventually, 1.2800 give way. Perhaps Asia CAD traders are waiting for Bay Street to run with the baton given RM chatter around 1.2800. Short EURCAD continues to be the favourable expression on a bullish CAD view

The Pound

The Pound, on the other hand, should continue trading like an old beach roller coaster, getting moved by the latest BREXIT iteration

RBA

In the battle for the most dovish G-10 central banker award, as expected the RBA held rates in check. With nothing explicitly standing out in the statement, I think the Aussie trade is on hold till Fridays NFP

Daily Pivots: (S1) 131.66; (P) 132.06; (R1) 132.39; More....

EUR/JPY drops sharply today but stays above 130.86 resistance turned support so far. Intraday bias remains neutral and another rise is still in favor. Break of 133.12 will target 137.49 high. However, break of 130.86 will argue that whole rise from 124.89 has completed. Deeper fall should then be seen back towards 127.85 support.

In the bigger picture, current development suggests that EUR/JPY has defended key support level of 124.08 key resistance turned support. And, the larger up trend from 109.03 (2016 low) is still in progress. Firm break of 137.49 will target 141.04/149.76 resistance zone next. This will now be the preferred case as long as 127.85 near term support holds.

Here are the latest developments in global markets:

FOREX: The dollar is up by 0.23% against a basket of six major currencies on Tuesday, looking set to post gains for the fifth session in a row. The loonie was an outperformer, with news that the US and Canada reached a new NAFTA accord lifting the risk premium on the currency. Meanwhile, the euro remains on the back foot, as Italy's government appears adamant about sticking to its deficit target, setting the stage for a showdown with the EU.

STOCKS: Wall Street closed in the green on Monday, for the most part, with the updated NAFTA deal supporting sentiment. The Dow Jones outperformed (+0.73%), while the benchmark S&P 500 (+0.36%) lagged. The tech-heavy Nasdaq Composite though, ticked lower (-0.11%). Sentiment seems to have soured in general, as futures tracking the Dow, S&P, and Nasdaq 100 are all pointing to a lower open today. Asia was a mixed bag on Tuesday, with Japan's Nikkei 225 (+0.10%) and Topix (+0.33%) posting some gains, but the Hang Seng in Hong Kong plunging (-2.48%) on its first day back from a public holiday. In Europe, all major indices are poised for a negative open, futures suggest, as uncertainties relating to the Italian budget and the potential for a clash with the EU continue to weigh.

COMMODITIES: Oil skyrocketed on Monday, with both WTI and Brent gaining more than two dollars on the day as optimism around the NAFTA resolution supported risk sentiment in general. WTI is also up by 0.54% on Tuesday at $75.68 per barrel, while Brent is higher by a modest 0.13% at $85.09 a barrel, both of these being highs last seen in 2014. In precious metals, dollar-denominated gold is up by almost 0.50% today at $1,193 per ounce. This is quite strange, considering that the greenback is also higher on the day, and suggests that gold demand may be picking up again after a long pause, perhaps on the back of worries around Italy.

Major movers: Loonie soars after deal; euro extends losses on Italian budget drama

The loonie continued to march higher on Monday, touching a fresh four-month high against its US counterpart after news that the US and Canada reached an “eleventh hour” trade deal to replace NAFTA on Sunday, ending months of impasse. The new accord – now called USMCA – will maintain NAFTA's trilateral nature and will also retain the Chapter 19 dispute settlement mechanism that Canada had been fighting to preserve. The news likely lifted a cloud of uncertainty that was hanging over the Canadian economy, by extent clearing the way for the BoC to raise rates with one less worry moving forward. The market-implied probability for a rate increase at the upcoming October 24 meeting is currently 76% according to Canada's OIS, and to the extent that it approaches 100% as we draw closer to that date, the loonie could extend its recent gains.

In Europe, all eyes remained on the drama surrounding the Italian budget, following media reports that the EU will reject Italy's budget proposal. Separately, the Italian government seems adamant about not changing its 2.4% deficit target, which suggests the long-feared showdown with the EU may well play out in the coming weeks. The euro remains on the back foot in the midst of this, surrendering ground across the board amid an exodus of capital from Italian bond markets recently. From the euro's perspective, in the near term a lot will likely be decided by whether the 1.1500 level in euro/dollar holds as a defensive “line in the sand”, or not.

In the UK, the pound spiked higher after reports that PM May plans to make concessions to break the deadlock in the Brexit negotiations. Reportedly, the UK is prepared to allow new checks on goods moving between the British mainland and Ireland, but in exchange wants the EU to compromise and keep the entire UK in the bloc's customs union, temporarily. In essence, this would effectively curb the UK's ability to strike free trade deals with other nations moving forward, which was ironically a cornerstone of the Brexit campaign. Overall, both sides seem increasingly keen to strike a compromise, and any further signs of concessions over the coming weeks will be well-received by the pound.

In Australia, the RBA kept its policy unchanged earlier today, providing almost no new signals on policy. Policymakers reiterated their two main concerns, high household debt levels and low wage growth, but simultaneously noted the broader economy remains strong. The reaction in the aussie was muted.

Day ahead: UK construction PMI, eurozone producer prices and US total vehicle sales due; Italian budget worries and Brexit eyed

Tuesday's calendar is relatively light, with UK construction PMI, eurozone producer prices and US total vehicle sales being on the agenda. Elsewhere, the situation relating to Italy's budget which could lead to a clash with the European Commission over the country's spending plans will be monitored, while updates on Brexit may emerge as well.

UK construction PMI data for September will be made public at 0830 GMT. The measure is anticipated to fall to 52.5, matching a low last experienced in May and April of the current year; a reading above 50 denotes sectoral expansion. The PMI print for the all-important services sector will follow on Wednesday.

But of most importance for sterling will likely prove any Brexit developments. In this respect, Bloomberg reported yesterday that PM Theresa May will outline new Brexit plans to help the negotiations to move forward. On Wednesday, she will be talking at the Conservative Party Conference in Birmingham.

Eurozone producer prices for August are due at 0900 GMT. The monthly pace of growth in prices is projected to ease to 0.2% from July's 0.4%, which would put the annual rate of growth at 3.9%, from July's 4.0%. However, instrumental for the euro's direction, at least in the short-term, will be developments having to do with the Italian budget. Italian Deputy Prime Minister Luigi Di Maio accused EU officials of spreading negative comments about the nation's spending plans and in doing so causing financial market unrest. The higher the odds for an Italy-EU clash, the greater the drag is likely to be on the euro.

September's total vehicle sales out of the US are forecast to have slightly increased compared to August, when they stood at their lowest in a year. The figures are scheduled to hit the markets at 1930 GMT.

The outcome of today's bi-weekly milk auction may move the New Zealand dollar, given 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.

Meanwhile, the Chinese navy dispelling an American missile destroyer from waters near South China Sea islands is another sign that Sino-US tensions may be moving in directions other than trade; the situation will be closely watched.

In terms of policymakers' appearances, Fed chief Powell will be speaking today at 1645 GMT. Also on the agenda are the Bank of England's Haskel (1035 GMT) and Haldane, the ECB's Villeroy (1430 GMT), and permanent FOMC voting member Quarles (1400 GMT), as well as non-voting FOMC member in 2018 Kaplan (1800 GMT).

Technical Analysis: GBPUSD negative momentum as it records 3-week low

GBPUSD fell to three-week low of 1.2987 earlier on Tuesday, while it is currently trading in proximity to this trough. The RSI continues to head lower, projecting a negative short-term picture.

A Brexit plan by PM May that removes the deadlock in negotiations is expected to lead to a rising GBPUSD. Resistance to advances may first take place around the middle Bollinger line – a 20-day moving average line – at 1.3068 and the 100-day MA at 1.3121. Further above, the zone around the upper Bollinger band at 1.3248 and the near three-month high of 1.3297 from late September would be increasingly eyed.

On the downside and in case a no-deal Brexit receives steam, immediate support could occur around the 50-day MA 1.2976. Further below, the focus would turn to the lower Bollinger band at 1.2888. In case of steeper declines, the attention would shift to 1.2784, this being a previous low.

The US currency strengthened against the basket of major currencies. The US dollar index (#DX) has reached a maximum in 2 weeks and closed in the positive zone (+0.20%). The US dollar is supported by improved US trade relations with international partners. So, last week a “friendly conversation” between the US President Donald Trump and the President of Turkey Recep Tayyip Erdogan, who participated in the annual meeting of the United Nations General Assembly, took place. It seems that relations between countries are getting better. Also, Donald Trump assesses the new agreement with Mexico and Canada as the best and most beneficial in the US history.

The British pound strengthened after it became known that the UK was ready to compromise in solving the problem with the Irish border. British Prime Minister Theresa May plans to sign an agreement on Brexit with the European Union. Britain intends to fully participate in the customs union with the EU. At the moment, the US dollar has recovered all the losses.

Today, during the Asian trading session, the decision on the interest rate of the Reserve Bank of Australia has been published. The indicator remained at the same level of 1.50%, as investors expected.

The "black gold" prices show positive dynamics. At the moment, futures for the WTI crude oil are testing a mark of $75.75 per barrel. At 23:30 (GMT+3:00) API weekly crude oil stock will be published.

Market Indicators

Yesterday, the bullish sentiment was observed in the US stock market: #SPY (+0.35%), #DIA (+0.88%), #QQQ (+0.20%).

At the moment, the 10-year US government bonds yield is at the level of 3.06-3.07%.

The news feed on 2018.10.02:

The index of economic activity in the UK construction sector at 11:30 (GMT+3:00).

We also recommend paying attention to the speech by the Fed Chairman Powell.

Daily Pivots: (S1) 0.8856; (P) 0.8887; (R1) 0.8911; More...

Outlook in EUR/GBP remains unchanged and intraday bias stays neutral. While the pull back fro 0.8994 is deep, the structure still suggests that it's a correction. Thus we're holding on to the view that fall from 0.9097 has completed at 0.8847 already. On the upside, break of 0.8994 will target a test on 0.9097 high. Firm break there will resume the rise from 0.8620 towards 0.9305 high. Though, break of 0.8847 will bring deeper fall to 61.8% retracement of 0.8620 to 0.9097 at 0.8802.

In the bigger picture, EUR/GBP is staying in long term range pattern from 0.9304 (2016 high). At this point, there is no clear sign of range break out yet. And more corrective trading would continue. On the upside, in case of another rise, we'd stay cautious on strong resistance from 0.9304/5 to limit upside in case of further rally. Meanwhile, if there is another medium term decline, strong support will likely be seen from 0.8303 to contain downside.

The USD/CAD currency pair has dropped from the S1 pivot point support after OPEC (The Organization of the Petroleum Exporting Countries) output has rose by 90K bpd in September. Iran's production might fall further after the Nov 4 US sanctions hit. Bloomberg also reported that India has no plans to purchase Iran's oil starting in November with South Korea and Japan pledging the same. The only scheduled news that might affect oil is on Wednesday, for Crude Oil inventories. They represent a change in the number of barrels of crude oil held in inventory by commercial firms during the past week. Don't forget to follow our Forex calendar for all regular updates on the news, economic announcements, forecasts and much more.

Technically, the USD/CAD currency pair has formed a runaway gap .The runaway gaps are usually accompanied by strong volatile candles such as the marubozu candle which support the market's price sentiment in the direction of the trend. The emerging pattern which we can spot here is the 'Failed Ascending Scallop' pattern. The price might possibly drop from the S2 or S1 pivot point resistance on a retest- 1.2863 or 1.2939. If that happens, be prepared for a volatile ride towards the S3 support at 1.2726. If the runaway gap is closed, then another push straight towards the S3 pivot might be expected even without a retest of S2 or S1 pivot. As always, be prepared to react using price action tools as usual.

Pivot Lines - Weekly Support and Resistance

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

Daily Pivots: (S1) 1.5992; (P) 1.6045; (R1) 1.6079; More....

EUR/AUD recovers strongly today but for now there is no confirmation of short term reversal yet. Correction from 1.6353 could still extend lower to 100% projection of 1.6353 to 1.6051 from 1.6252 at 1.5950. But downside should be contained above 1.5886 cluster support (61.8% retracement of 1.5601 to 1.6353 at 1.5888) to bring rebound and then rise resumption. On the upside, break of 1.6252 resistance will target a retest on 1.6353 first.

In the bigger picture, up trend from 1.3624 (2017 low) is still in progress. Further rise should be seen to retest 1.6587 (2015 high). Decisive break there will resume the long term rally and target 1.7488 fibonacci level. On the downside, break of 1.5886 resistance turned support is need to be the first sign of medium term reversal. Otherwise, outlook will remain bullish in case of deep pull back.

Daily Pivots: (S1) 1.1360; (P) 1.1395; (R1) 1.1424; More...

EUR/CHF retreat sharply again after hitting 1.1427 and intraday bias is turned neutral. On the upside, decisive break of 1.1452 resistance should confirm bullish reversal, after drawing strong support from 1.1154/98 zone. In that case, outlook will be turned bullish for 1.1713 resistance next. However, break of 1.1280 will argue that choppy recovery from 1.1178 has completed and bring retest of 1.1154/98 support zone again.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. This cluster level is in proximity to long term channel support (now at 1.1234) too. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.

The pair holds firmly in red for the fifth straight day and broke through strong supports at 1.1558/45 (50% of 1.1300/1.1815 rally/daily cloud top on fresh bearish acceleration in early Monday's trading.

The dollar strengthened across the board after US, Canada and Mexico reached trade deal over the weekend and remains supported by concerns about US/China trade conflict, as well as hawkish stance of the Fed, which signals steady rate increases next year.

On the other side, the single currency was additionally pressured on concerns about Italy's budget deficit.

Fresh bears on Monday cracked key support at 1.1526 (10 Sep trough), with strong bearish signal expected on daily close below here. Firm break lower would open next pivots at 1.1511/1.1497 (daily cloud base/Fibo 61.8% of 1.1300/1.1815), break of which is needed to confirm reversal.

Euro's negative sentiments is boosted by bearish techs, as growing bearish momentum and daily MA's in full bearish setup, favor further weakness. Also, fresh weakness returned below thick weekly cloud, which now weighs and maintains negative tone.

Deeply oversold slow stochastic suggests bears may take a breather, but so far lacking firmer signals.

Corrective upticks should stay under broken 55SMA (1.1612) to keep bearish bias intact.

Res: 1.1558, 1.1580, 1.1612, 1.1624
Sup: 1.1511, 1.1497, 1.1480, 1.1422