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Daily Pivots: (S1) 1.1325; (P) 1.1354; (R1) 1.1384; More...

With 1.1317 minor resistance intact, intraday bias in EUR/CHF remains on the upside for 1.1452 resistance. Decisive break there should confirm near term reversal. That is, whole correction from 1.2004 has completed at 1.1178 after hitting 1.1154/98 key support zone. In that case, further rise should be seen to 1.1713 resistance next. On the downside, below 1.1317 minor support will dampen this bullish view and turn intraday bias neutral again first.

In the bigger picture, for now, the 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 1.1207) 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.

Its been one of those predictably quiet Asia sessions ahead of the FOMC but a few highlights none the less

MSCI

With Asia markets back in full swing today after the local holiday, finally some good news for China equities as MSCI is considering increasing the weighting of China A shares in its global index from next year and allowing a group of smaller tech stocks in the index.

While there will be no immediate pass-through impact on the markets as the proposal is still on the table, but its a definite win for the local sentiment which has been battered mercilessly by the incessant bluster around trade war.

New Zealand

New Zealand September ANZ business confidence for September has come at -38.3 versus -50.3 prior. This is after earlier today the country posted the worst trade deficit on record at NZD1.5bn versus -925mn expected. After last weeks positive GDP print and when combined with Headline business confidence that bounced 12 points to -38 in September, it’s the highest level since May. Traders are even more confident now for a subtle hawkish shift in the RBNZ language. But I think traders remain guarded about long KIWI positioning and a move above .67 NZDUSD unlikely ahead of the FOMC which comes out 3 hours before the RBNZ.

Oil Markets

Oil markets remain well supported in Asia despite the unexpected 2.9 million barrels build in the API report. While US inventory data counts Oil prices stay in the Bulls domain amid concern that US sanctions on Iranian crude oil exports will result in much tighter physical market conditions once they take effect in November. But with worries circulating the markets could still be underestimating the supply crunch from US sanctions, oil investors remain firmly in buy the dip mode.

AUDUSD has edged aggressively higher over the previous couple of weeks following the rebound on the 31-month low of 0.7084. The price reached the 0.7300 strong psychological level and hit the long-term descending trend line, which has been holding since January 26. The technical picture supports that the upside momentum is likely to continue in the short-term.

From the technical point of view, in the daily timeframe, the MACD oscillator is strengthening its movement above its trigger line and below the zero line, while the RSI indicator is sloping slightly to the upside near the threshold of 50.

If there are further positive pressures, a penetration of the diagonal line to the upside would shift the longer-term bearish view to more neutral one, driving the price until the 0.7380 resistance level. More advances could open the way towards the 0.7475 barrier, taken from the high on July 10.

However, should a downside tendency take form again, immediate resistance will likely come from the 20-day simple moving average (SMA) around the 0.7200 round number at the time of writing. A drop below this level would reinforce the downside risk and send prices until the 31-month trough of 0.7084. The next key support to watch is the 0.7000 handle, creating a lower low in the downward trend.

To summarize, the short-term bias is skewed to the upside, while in the long-term, AUDUSD maintains a clear bearish outlook.

Rates: Will the Fed's 2021 dot signal the end of the cycle?

The German 10-yr yield cleared the 0.5% mark. A sustained break in the weekly close opens a new trading band (0.5%-0.8%). US yields remain at/near cycle highs ahead of tonight's FOMC meeting. A rate hike and confirmation of 2018-2020 dots are discounted, but what about the forecast for 2021? We don't expect the Fed to signal the end of the eco/tightening cycle.

Currencies: will Fed convince USD bulls?

Today, USD traders will also keep a close eye at the Fed dots/communication. Of late, the performance of the dollar was not really convincing. If the Fed doesn't signal an end to the tightening cycle yet, this should at least provide a solid floor for the US currency.

The Sunrise Headlines

• All US equity markets closed yesterday's trading session with losses but NASDAQ (+0.18%). Most Asian exchanges opened with gains. China is outperforming (CSI 300 +1.58%) and Japan is having a small setback.
• US President Trump addressed the UN yesterday, attacking Iran's 'corrupt dictatorship'. He vowed to take more actions. Trump added that OPEC is 'ripping off' the world in its unwillingness to compensate for Iran's oil exports.
• Iranian president Rouhani criticized the US for its hostile policy towards Teheran, but praised the EU, China and Russia for backing a plan to sidestep American sanctions and allowing international trade to continue with Iran.
• Volker Kauder, Merkel's right hand for over a decade, lost elections for head of the bloc's parliamentary group to Ralph Brinkhaus, a deputy leader of the conservatives. The defeat reflects rising discontent with Merkel's leadership.
• UK PM May has signalled that she would prefer a 'no-deal' Brexit over the offer currently put forward by the EU. French FM, Bruno Le Maire, countered by saying it would be 'suicidal' for the EU to accept May's Chequers proposal.
• Italy's Five Star Movement leader Di Maio warned his fellow ministers that if the 2019 budget doesn't keep his key demands in mind, including a minimum income, the budget would not enjoy the support of his group in Parliament.
• Today's focus turns to central bank meetings in the US, Czech Republic and New Zealand. The former two are expected to hike rates further. Fed Powell's press conference and the new dot plot will draw a lot of attention.

Currencies: Will Fed Convince USD Bulls?

Will Fed convince USD bulls?

Yesterday, there was little high profile news to guide USD trading. Investors were counting down to today's FOMC decision. ECB's Praet downplayed Monday's hawkish inflation comments from Draghi. EUR/USD traded off Monday's ST correction top, but the pair remained well supported. After a soft start, EUR/USD mostly hovered in the upper half of the 1.17 figure. The 1.1815/1.1850 resistance stayed within reach. US consumer confidence was very strong but provided only limited support to the dollar. EUR/USD closed at 1.1767. USD/JPY continued its gradual uptrend to close the session at 112.97. Overnight, Asian equities are trading mixed to slightly stronger with China outperforming. The (trade weighted) dollar is still struggling to avoid further losses even as the Fed is expected to raise rates. EUR/USD is trading in the 1.1765 area. USD/JPY is testing the 113 level, nearing the highest level in 2 months. Today, eco data are second tier and will probably be ignored as markets will look forward to this evening's Fed policy decision. A 25 bp rate hike is largely discounted. The market focus will be on the Fed guidance as mirrored in the dots. We expect the Fed to confirm the scenario of a protracted US eco cycle and maintaining the June rate path for 2018/2020. We also assume the 2021 median forecast to remain unchanged from 2020. This scenario of the Fed not yet signalling a material roll-over/setback in the US economy should in theory support a further rise in US yields and in the USD. Admittedly, interest rate markets and, even more, the dollar were reluctant to embrace this scenario of late. Even so, if our expectations for the Fed dots materialize, it should at least be enough to prevent a sustained break of EUR/USD beyond the 1.1851 range top. USD/JPY might extend its uptrend. On the other hand, if the Fed signals a substantial slowdown in the US economy toward the end of the policy horizon, the dollar will probably suffer. This is not our preferred scenario. Yesterday, sterling extended Monday's rebound, reversing part of the losses suffered after last week's EU summit. There were no eco data and we didn't see any real Brexit progress. Today, the CBI retail data will be published. However, Brexit and technical considerations will probably remain the drivers for sterling trading. For now, the UK currency looks quite resilient to the Brexit turmoil. That said, we expect any sterling rebound to be limited as long as visibility on Brexit remains blurred.

EUR/USD holding within reach of 1.1850 range to ahead of the Fed meeting

Daily Pivots: (S1) 1.1734; (P) 1.1763; (R1) 1.1796; More.....

EUR/USD is bounded in tight range of 1.1723/1814 and intraday bias remains neutral. On the downside, break of 1.1723 minor support will suggest rejection by 38.2% retracement of 1.2555 to 1.1300 at 1.1779. In such case, intraday bias will be turned back to the downside for 1.1525 support. However, sustained break of 1.1779 will pave the way to 100% projection of 1.1300 to 1.1733 from 1.1525 at 1.1958.

In the bigger picture, a medium term bottom should be in place at 1.1300, on bullish convergence condition in daily MACD and some consolidations would be seen. But still, note that EUR/USD was rejected by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. That carries some long term bearish implications. Thus, we'd expect fall from 1.2555 high to resume after consolidation completes. Below 1.1300 should send EUR/USD through 61.8% retracement of 1.0339 to 1.2555 at 1.1186. And, in that case, EUR/USD would head to retest 1.0339 (2017 low).

Daily Pivots: (S1) 1.3119; (P) 1.3157; (R1) 1.3219; More...

Intraday bias in GBP/USD remains neutral for the moment and risk stays on the downside with 1.3297 resistance intact. The corrective rise from 1.2661 could have completed at 1.3297, ahead of 1.3316 key fibonacci level. On the downside, break of 1.3042 resistance turned support will bring deeper fall to 1.2784. Break there will argue that larger down trend from 1.4376 is resuming for a new low below 1.2661.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA (now at 1.4062). The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.

General Trend:

• Asian equities trade generally higher; Shanghai and Hong Kong rise over 1% in early trade
• Japanese automakers and steel companies trade lower amid comments from BMW
• Today's Abe/Trump meeting in focus
• Asia Development Bank (ADB) trims China's 2019 growth forecast
• There is speculation that China might soon ease liquidity conditions (US financial press)
• Japan sells 40-yr JGBs at higher yield and lower bid to cover (first 40-yr auction since BoJ announced forward guidance in late July)
• Later today's US Fed decision and forecasts in focus
• China PBoC is expected to continue to not follow the US Fed FOMC rate hikes, according to analysts (US financial press)
• FTSE Russell said to soon make decision on China A-shares

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• (AU) Australia sells A$1.5B v A$1.5B indicated in May 2030 bonds, avg yield 2.8035%, bid to cover 2.5x
• (NZ) NEW ZEALAND AUG TRADE BALANCE (NZ$): -1.5B V -925ME (widest monthly deficit on record)
• (NZ) NEW ZEALAND SEPT ANZ BUSINESS CONFIDENCE: -38.3 V -50.3 PRIOR (highest since May)

China/Hong Kong

• Shanghai Composite opened +0.2%, Hang Seng +0.4%
• (US) Pres Trump: US was harmed economically after China joined the WTO; China market distortions and "the way they deal cannot be tolerated"
• (CN) China Senior Diplomat Wang Yi: China and the US should avoid falling into a zero-sum game trap; hopes the US meets China halfway to prevent the spread of negative momentum
• (CN) China PBoC set yuan reference rate: 6.8571 v 6.8440 prior (weakest yuan fix since Aug 24th)
• (CN) China PBoC Open Market Operation (OMO): Skips OMO v CNY60B injected in 14-day reverse repos prior; Net: CNY40B drain v CNY90B drain prior
• (CN) According to analysts, China banking liquidity to be 'loose' at the end of September - PBoC backed Financial News
• (CN) China should unclog monetary policy transmission - China Securities Journal
• (CN) Analyst at Founder Securities speculates that China PBoC might soon announce another cut in the banks' reserve ratio requirement (RRR) - US financial press
• (CN) China NDRC: Issues guidelines to develop the digital economy, expand employment
• (CN) Asia Development Bank (ADB): Trims China 2019 GDP growth forecast to 6.3% vs 6.4% July forecast
• (CN) MSCI: To consult on increasing the weight of China A-shares in its indexes; considering whether to raise the weighting of A-shares to 20% of the free float-adjusted market cap of its global indices
• (HK) Hong Kong money market rates remain at 2008 highs ahead of Wed's US FOMC decision

Japan

• Nikkei 225 opened -0.4%
• (JP) Japan and US said to reach ‘basic agreement' on ways to promote trade – Japanese Press
• (JP) Japan FSA said to probe regional banks investment in property loans - Japanese Press
• (JP) Japan MoF sells ¥400B v ¥400B indicated in 0.80% 40-yr JGBs, highest accepted yield 1.0250% v 0.880% prior, bid to cover: 3.24x v 3.30x prior
• (JP) Bank of Japan (BoJ) Aug Core CPI Y/Y: 0.5% v 0.5% prior

Korea

• Kospi closed for holiday
• (KR) General Robert Abrams: planning continues for joint US-South Korea military exercises in Spring 2019; decision whether to go ahead with the exercises will be up to political leaders

North America

• US equity markets ended mixed: Dow -0.3%, S&P500 -0.1%, Nasdaq +0.2%, Russell 2000 +0.2%
• CBS: Board member Richard Parsons named as interim Chairman; Board members Bruce Gordon and William Cohen to resign
• (US) Weekly API Oil Inventories: Crude: +2.9M v +1.2M prior
• (IA) US Special Envoy for Iran Hook: US will ensure prior to the imposition of Iran sanctions that we have a well-supplied oil market
• (CA) Ontario expected to announce retail cannabis laws later this week - US financial press
• (US) White House: US President Trump to meet with UK PM May on Wed in NYC; confirms Trump and Japan PM Abe to meet on Wed

Europe

• (UK) Prime Min May reportedly to lay out in speech tomorrow plans to cut UK corporate tax rates to lowest in the G20 - The Telegraph
• (IT) Italy Deputy PM Di Maio: 5-Star Party will not support 2019 budget targets without its demands for 'citizens income' provision and pension reform
• (TR) EU Commissioner Hahn rejects financial aid to Turkey - German Press
• Deutsche Bank [DBK.DE]: Reportedly studied possible UBS, Commerzbank merger scenarios - Handelsblatt
• Banco Santander [SAN.ES]: Names Andrea Orcel as new CEO; names Jose Antonio Alvarez as Executive Chairman of Santander Spain; effective as early as Jan 1st

Levels as of 01:30ET

• Nikkei 225, +0.4%, ASX 200 flat, Hang Seng +1.9%; Shanghai Composite +1.6%; Kospi closed
• Equity Futures: S&P500 +0.3%; Nasdaq100 +0.4%, Dax +0.3%; FTSE100 +0.4%
• EUR 1.1771-1.1756; JPY 113.04-112.88 ; AUD 0.7285-0.7244 ;NZD 0.6688-0.6634
• Dec Gold +0.1% at $1,206/oz; Oct Crude Oil -0.2% at $72.16/brl; Dec Copper +0.4% at $2.832/lb

Daily Pivots: (S1) 0.9629; (P) 0.9651; (R1) 0.9672; More...

USD/CHF's rebound from 0.9541 short term bottom is still in progress and intraday bias remains on the upside for 0.9757 resistance first. Firm break there will target 0.9866 key resistance level, 61.8% retracement of 1.0067 to 0.9541 at 0.9866. On the downside, below 0.9604 will turn bias back to the downside for 0.9541 low instead.

In the bigger picture, rise from 0.9186 low has completed at 1.0067, after failing to sustain above 1.0037 resistance. Fall from 1.0067 could extend to 61.8% retracement of 0.9816 to 1.0067 at 0.9523 and possibly below. But for now, we don't expect a break of 0.9186 low. On the upside, firm break of 0.9866 support turned resistance will suggest that fall from 1.0067 has completed and rise from 0.9186 is resuming.

Daily Pivots: (S1) 112.81; (P) 112.89; (R1) 113.06; More...

Intraday bias in USD/JPY stays on the upside for 113.17 resistance first. Decisive break there will resume whole rally from 104.62 and target 114.73 resistance next. On the downside, below 112.39 minor support will turn intraday bias neutral again. But near term outlook will remain cautiously bullish as long as 111.82 resistance turned support holds.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.36 support holds. However, decisive break of 109.36 will mix up the outlook again. And deeper fall should be seen back to 61.8% retracement of 104.62 to 113.17 at 107.88 and below.

Daily Pivots: (S1) 1.2935; (P) 1.2954; (R1) 1.2973; More...

Intraday bias in USD/CAD remains neutral as it's staying in range of 1.2883/2975. At this point, we're staying bullish in USD/CAD and expect whole rise from 1.2061 to continue. On the upside, above 1.2975 support turned resistance will turn bias back to the upside for 1.3063 first. Break will target 1.3225 key near term resistance. However, sustained break of 38.2% retracement of 1.2061 to 1.3385 at 1.2879 will dampen our view and target 50% retracement at 1.2723 next.

In the bigger picture, focus is back on 38.2% retracement of 1.2061 to 1.3385 at 1.2879 key fibonacci level. As long as it holds, rise from 2017 low at 1.2061 is still in progress. Break of 1.3384 should target 61.8% retracement of 1.4689 (2015 high) to 1.2061 (2017 low) at 1.3685. However, sustained break of 1.2879 will dampen his bullish view and turn focus back to 61.8% retracement at 1.2567, which is close to 1.2526 support.