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Italy's budget in back in the spot light again today and trigger rather steep decline in European stocks, Euro and German bund yield. The center of the storm is that Economy Minister Giovanni Tria, who belongs to neither party of the coalition, insists on capping 2019 budget deficit at 2.0% of GDP. It's believed the the Treasury already forecasts that deficit above 1.9% of GDP would risk debt containment.

On the other hand, Luigi Di Maio of the Five Star Movement is pushing for 2.4% deficit for fulfilling the party's election promise. And that is being supported by coalition partner League leader Matteo Salvini. A cabinet meeting will be help today on the issue while Di Maio will also meet Prime Minister Giuseppe Conte

The development is still very fluid. There has been rumors that Tria threatened to resign if he's forced to raise deficit above 2% but there's no confirmation. Riccardo Molinari, head of League lawmakers in the lower house of parliament warned "if Tria is no longer part of the project, we'll find another finance minister." So 2% or 2.4%, or anything in between? Tria to stay, to be forced out or to quite voluntarily? These are all the questions that cannot be answered right now.

German 10 year bund yield hit as low 0.484 earlier today and is now back at 0.515.

Fed chairman may have to balance his statement once again. As for oil, there was a time when investors were worried about the supply glut but this is no longer the case.

The precious metal is down today for the most obvious which is the strength in the dollar index. Thanks to the bullish statement by the Fed and the press conference further confirmed their stance. However, we think that bulls are still safe and this is because we have not seen the kind of sell-off which could have taken place. This is because a rate hike was a done deal yesterday but the Fed has created some sort of ambiguity in the market yesterday about their future monetary policy. This saved the massive sell-off in the gold price. The Fed balanced their hawkish statement by mentioning that the committee is a little less optimistic about the long-term future outlook and this part alone was enough to keep the dollar index in check.

The next major event which will also be sensitive for the gold traders will be when the Fed Chairman speak (which is later in the day). His speech after the US final GDP q/q data will be an interesting one. We also have the U.S. core Durable good order number coming at 13.30 U.K time and an uptick in this number presents a threat for the gold price. If the GDP shows that the number is higher than the 4.2% (which is the forecast and also the previous reading) it is likely that the Fed chairman may have to balance his statement once again. Hence, we think that gold traders will be staying very much on their toes today.

In terms of technical analysis, we do not any exciting sign, because the price is very much consolidating in a range. The gold price needs to break above the 50-day moving average to convince bulls otherwise the trend will remain skewed to the downside.

Crude

There was a time when investors were worried about the supply glut but this is no longer the case because the only concern among market participant is that there is not enough supply and this is pushing the price higher. Crude is still trading near its 4-year high and given that the U.S has ruled out using the emergency crude reserves, it will continue to support the bull rally for the oil price. Having said this we have seen the crude inventory data (released yesterday) surging for the first time in nearly six weeks but the surge is still not enough to bring the demand in check.

As for Trump, he is still determined to blame the cartel about the increase in the oil price. The speculations are that Trump may use the emergency oil reserve before the mid-term election in November to bring the prices down but remember as we said before that lower oil prices aren’t going to help the U.S shale oil industry which still has significantly higher breakeven relative to the OPEC cartel.

In terms of technical analysis, the relative strength index is confirming that there is enough momentum behind the price and it is likely that the price may break the previous high $75.27. If the 50-day moving average ends crossing the 100-day moving to the upside, this would be a strong bullish signal for the price.

Daily Pivots: (S1) 148.11; (P) 148.61; (R1) 148.93; More...

No change in GBP/JPY's outlook as consolidation from 149.70 is extending. Deeper fall could be seen but further rise is still expected as long as 145.67 resistance turned support holds. Break of 149.70 will target 153.84/156.69 resistance zone. However, break of 145.67 will suggests 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.

Daily Pivots: (S1) 132.03; (P) 132.56; (R1) 132.91; More....

EUR/JPY's consolidation from 133.12 extends with another sharp decline today. While deeper pull back could be seen, as long as 130.86 resistance turned support holds, further rally is expected. On the upside, above 133.12 will target 100% projection of 124.89 to 130.86 from 127.85 at 133.82 first. Break will target 137.49 high. However, firm break of 130.86 will dampen this bullish view and turn focus back to 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.

The Aussie dollar accelerated lower on Thursday after spiking to new one month high at 0.7314 immediately after Fed on Wednesday. Probe above kay barrier at 0.7304 (falling 55SMA) was short-lived, with Wednesday's action ending in daily candle with long upper shadow and subsequent extension lower was driven by stronger dollar after Fed. Fresh bears broke below 10SMA, generating negative signal for extension towards next pivot at 0.7202 (20SMA), however, close below 10SMA is needed to confirm scenario. Strong bullish momentum on daily chart conflicts MA's in bearish setup and south-heading slow stochastic. The pair might be looking for further signals after Fed, with US/China trade conflict being in focus.

Res: 0.7241, 0.7268, 0.7300, 0.7314
Sup: 0.7221, 0.7202, 0.7172, 0.7144

The pair eases further on Thursday, following previous day’s close in red after bulls stalled ticks ahead of key barrier at 113.17 (19 July high).

Formation of bearish outside day was negative signal for deeper pullback, despite positive impact on dollar from hawkish Fed on Wednesday.

Overall bulls are expected to remain intact for renewed attack at key 113.17/30 barriers if rising 10SMA (112.45) contains pullback.

Sustained break above 113.17/30 pivots (19 July high / Fibo 61.8% of 118.66/104.63) would generate strong bullish signal for extension of recovery phase from 104.63 (2018 low).

Conversely, close below 10SMA would risk deeper pullback and expose supports at 112.08 (Fibo 38.2% of 110.38/113.13) and 111.86 (rising 20SMA).

After Fed announced its decision, focus turns again towards US/China trade conflict which is one of key market drivers.

Res: 112.90, 113.17, 113.30, 113.75
Sup: 112.56, 112.46, 112.08, 111.86

Daily Pivots: (S1) 0.8896; (P) 0.8922; (R1) 0.8943; More...

Intraday bias in EUR/GBP remains neutral for the moment. For now, we're holding on to the view that pull back from 0.9097 has completed at 0.8847 already. Further rise remains in favor. On the upside, above 0.8994 will target 0.9097 resistance first. Firm break there will resume the rise from 0.8620 towards 0.9305 high.

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.

Cable accelerated lower in early Thursday's trading as hawkish Fed inflated dollar and put its major counterparts under pressure. Near-term structure weakened after recovery of last Friday's strong fall stalled at 1.3217 on Wednesday, and subsequent fall risks extension towards key support at 1.3054 (daily cloud top / Fibo 38.2% of 1.2661/1.3297 / 21 Sep trough). Firm break here would generate bearish signal for deeper correction of 1.2661/1.3297 ascend. Weakening momentum studies on daily chart support scenario.

Res: 1.3145, 1.3180, 1.3217, 1.3276
Sup: 1.3107, 1.3094, 1.3054, 1.3000

Daily Pivots: (S1) 1.6113; (P) 1.6185; (R1) 1.6249; More....

Intraday bias in EUR/AUD remains neutral at this point. On the downside, break of 1.6051 will extend the correction from 1.6353. But downside should be contained well above 1.5886 cluster support (61.8% retracement of 1.5601 to 1.6353 at 1.5888) to bring rise resumption. On the upside, above 1.6252 will target a retest on 1.6353. Break there will resume larger up trend and should target 1.6587 key resistance next.

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.

The British pound is starting come back under selling pressure against the greenback on Thursday, after briefly moving above the 1.3200 level following the FOMC rate decision. The GBPUSD pair may now start to trade back towards the 1.3113 level, after hitting its upside bullish target above the 1.3200 level. Sellers now need to break the 1.3096 level, while buyers need to stabilize price above the 1.3170 level.

The GBPUSD pair is only bullish while trading below the 1.3113 level, key resistance is now found at the 1.3170 and 1.3220 levels.

If the GBPUSD pair moves below the 1.3113 level sellers are likely to test towards the 1.3096 and 1.3053 levels.