Sample Category Title

• Rates: Risk environment and data could weigh further on core bonds
  Consensus expects a stabilization of EMU September PMI's. Against the backdrop of yesterday's positive risk sentiment that probably will continue today, we expect the Bund to remain under pressure and the German 10-yr yield to further test the 0.5% upper bound of the 0.3%-0.5% sideways range.
• Currencies: EUR/USD, USD/JPY and EUR/JPY succeed a 'classical' risk rally
  Yesterday, global FX markets traded in line with a global risk rally. The euro was squeezed higher and the yen declined against the dollar and the euro. Today, the eco calendar is thin. Risk sentiment will prevail as a driver for FX trading. EUR/USD is nearing next resistance (1.1850). Sterling rally eased as EU Summit shows no material progress on Brexit

The Sunrise Headlines

• US stocks (+0.8 - 1%) performed excellent in yesterday's outright risk-on session, as the Dow Jones and S&P 500 hit new all-time highs. Asian exchanges currently also thrive, with China outperforming (+1.3%).
• The EU-summit in Salzburg ended with little to no brexitprogress as EU-leaders rejected Theresa May's blueprint, stumbling on the future EU-UK relationship and the Irish border matter. May promised to bring up own proposals “shortly”.
• The Hong Kong dollar rallied more than 0.5% this morning as prospects of higher rates and upcoming holidays force speculators betting on the dismantling of the USD peg to frontload the covering of short positions.
• Rating agency S&P revised Australia's rating, keeping it at AAA but upgrading the outlook from negative to stable as the agency expects a fiscal surplus again by early 2020.
• The NAFTA stalemate remains as the US and Canada made little progress in the latest round of talks on Thursday, threatening the (unofficial) deadline by the end of September.
• In its new economic programme, Turkey revised growth prospects to 3.8% this year and 2.3% in 2019, down from 5.5% in a (failed) attempt to convince markets from a break of the massive credit-fuelled growth over the last decade.
• Today's eco calendar is thin yet interesting as EMU (and US) PMI's are published this morning. Canada releases August inflation data.

Currencies: EUR/USD, USD/JPY And EUR/JPY Succeed A 'Classical' Risk Rally

EUR/USD jumps higher, testing first resistance

Yesterday, tentative FX trends from earlier this week continued and even accelerated. Risk sentiment improved as trade tensions moved to the background. The USD bid ebbed further even as US interest rates kept near the cycle peak. At the same time, the euro showed already resilient of late. A resumption of the equity rally finally triggered a euro short squeeze with the EUR/USD clearing the 1.1720/33 resistance. US data were OK but didn't help the dollar. EUR/USD closed the session at 1.1777. USD/JPY initially hardly profited from the rise in core yields and the positive risk sentiment. However, both EUR/JPY and USD/JPY finally joined the risk-on trade. USD/JPY finished the session at 112.49. Overnight, risk rally continues with most Asian indices recording gains of 1% or more. The BOJ trimmed its (regular) purchases LT JGB's. LT yields spiked higher this morning as markets ponder whether the BOJ also intends some kind of implicit tapering. However, the BOJ action didn't support the yen. USD/JPY even extended gains in line with the global risk rally. USD/JPY trades in the 112.75 area. EUR/USD maintains yesterday's gain. The Hong Kong dollar also succeded a remarkable rebound. Today, there are only second tier data in the US. In EMU, the composite PMI is expected little changed at 54.4. We don't expect a substantial positive surprise. Trading in the major euro and USD cross rates will probably again be driven by global sentiment. Political event risk isn't out of the way yet (trade, Italy, Brexit). However, markets apparently assume that a substantial part of the 'bad news' has passed, at least for now. So, there is no obvious reason to row against the risk trade and against the associated FX move. So, if no new event risk pops up, the combined EUR/USD, EUR/JPY and USD/JPY rally maybe has some further to go in a day-to-day perspective. EUR/USD 1.1791/1.1850 is the next EUR/USD technical resistance on the charts. Despite the current setback, we stay more positive on the USD in a LT perspective.

Yesterday, EUR/GBP initially declined. Sterling profited from strong UK retail sales and markets hoped that the EU summit would yield positive headlines on Brexit. However, the last hypothesis wasn't really confirmed. The Brexit stalemate persists. EUR/GBP returned to the 0.8880 area. Today, the UK public finance data won't change the global picture. We assume that the recent GBP rebound has run its course for now. More trading around EUR/GBP 0.89 might be expected.

EUR/USD jumps as sentiment on risk improves sharply

On intra-day chart of USDMXN we see price trading within a bearish price movement, down from 19.6863 level which looks to be a clean impulse in progress.

An impulse is structured by five sub-waves with a 5-3-5-3-5 form and moves in the direction of a stronger trend. An impulse is also the most common motive wave in Elliott wave terminology, and the other one less common is the diagonal triangle which we won't be discussing today.

We are specifically observing a recently completed leg 3) which is also known as the strongest leg within an impulse, which is now being followed by a temporary turn up from the lows labelled as a temporary correction. This correction is wave 4), usully a complex pullback that can look for resistance and a bearish turn into wave 5) near the 18.920-19.100 level. That said, a strong drop in five minor legs and a break below the 18.60 level will confirm an ongoing wave 5) that can aim for the 18.50 region.

USDMXN, 1h

Daily Pivots: (S1) 147.99; (P) 148.64; (R1) 149.94; More...

GBP/JPY's rally is still in progress and intraday bias stays. Break of 149.30 resistance now indicates completion of whole corrective fall from 156.59 at 139.88. Further rally should be see back to 153.84/156.69 resistance zone. On the downside, below 148.51 minor support will turn intraday bias neutral and bring consolidation first. But retreat should be contained above 145.67 resistance turned support to bring rise resumption.

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 neat term support holds.

General Trend:

• Asian equities generally track advance in US stocks
• Micron declines over 6% post earnings/guidance
• "Quadruple witching" in focus
• Trade uncertainty weighs on business sentiment in Japan (PMI data)
• Japan CPI picks up in Aug
• Longer dated JGB yields rise after BoJ trims daily purchases
• Copper options begin trading in Shanghai
• Japan Economy Min Motegi and USTR Lighthizer to hold trade talks on Sept 24th; Trump and Abe expected to meet on Sept 23rd
• The US Fed's FOMC is due to hold its policy meeting next week (Sept 25-26)

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.2%
• (AU) S&P affirms Australia sovereign rating at AAA; raises outlook to Stable from Negative [Note: Now all of the 3 major rating agencies have Australia at AAA (outlook stable)]
• (NZ) New Zealand Aug Net Migration: 5.0K v 4.7K prior
• (NZ) New Zealand Aug Credit Card Spending M/M: +2.6% v -1.1% prior; Y/Y: +7.7% v 3.2% prior

China/Hong Kong

• Shanghai Composite opened +0.2%, Hang Seng +0.9%
• Hong Kong Exchanges [388.HK]: Said to have held meeting with banks to discuss M&A targets in the tech space (US financial press)
• Health and Happiness [1112.HK]: Cancels previously planned exchange offer and new issuance
• (CN) China PBoC set yuan reference rate: 6.8357 v 6.8530 prior
• (CN) China PBoC Open Market Operation (OMO): Skips OMO v CNY70B injected in 7 and 14-day reverse repos prior: Net: CNY110B drain v CNY30B drain prior
• (CN) China End-Aug Local Government Debt Outstanding (CNY): 17.7T v 17.2T m/m
• (CN) Head of China National Energy Administration (NEA) Nur Bekri said to face probe – Xinhua
• (CN) China said to require efforts to ensure gas supplies during the winter - Chinese Press
• (CN) Over 840 lots of Shanghai Futures Exchange (SHFE) copper put and call options said to have traded minutes after being launched - financial press
• Hong Kong Dollar (HKD) rises over 0.2% amid equity gains, stronger Yuan (CNY) fix; HKD trades at 6-month high
• (HK) Hong Kong Monetary Authority (HKMA): Sees domestic banks considering raising their rates if the US Fed raises rate - Local Media (comments ahead of next week's Fed meeting)

Japan

• Nikkei 225 opened +0.7%
• (JP) JAPAN AUG NATIONAL CPI Y/Y: 1.3% V 1.1%E; CPI EX FRESH FOOD (CORE): 0.9% V 0.9%E (highest since March)
• (JP) JAPAN SEPT PRELIM MANUFACTURING PMI: 52.9 V 52.5 PRIOR (3-month high)
• (JP) BoJ announcement related to daily bond buying operation: Trims offer to buy over 25-yr JGBs to ¥50B from ¥60B prior
• (JP) Japan 30-yr yield rises after BoJ trims daily purchases of over 25-year JGBs, hits highest since Oct 2017; 40-yr JGB yield trades above 1.01% (highest since Jan)
• (JP) Japan Econ Min Motegi: To hold 2nd round of bilateral trade talks with the USTR Lighthizer on Sept 24th in New York; stance regarding opening up Japan's agricultural market is unchanged
• (JP) Japan Chief Cabinet Sec Suga: PM Abe and Trump to hold summit on Sept 26th; the two officials to meet for dinner on Sept 23rd
• (JP) Japan Fin Min Aso: Want to create conditions so sales tax can go up, need to make sure we can raise sales tax in 2019 as scheduled; May meet US Vice President Pence for economic dialogue (timing uncertain)
• (JP) Japan Investors Weekly Net Buying of Foreign Bonds: +¥2.31T v +¥297.6B prior; Foreign Buying of Japan Stocks: -¥1.48T v -¥1.1T prior
• (JP) Japan Chief Cabinet Suga and Fin Min Aso to retain positions in Abe cabinet reshuffle in October - Japan press
• (JP) Cabinet members Kono, Motegi and Seko are expected to remain in Japan PM Abe's cabinet - Japanese Press
• (CN) China announces meeting with Japan on 3rd country cooperation on Tuesday, Sept 25th

Korea

• Kospi opened +0.4%
• Samsung Electronics: Reportedly looking at cutting memory chip growth next year to keep supply tight (press)
• (KR) South Korea Sept 1-20 Trade Balance: $6.4B - Customs Agency
• (KR) South Korea Aug PPI Y/Y: 3.0% v 3.0% prior
• (KR) South Korea President Moon's approval rating rises to 61% v 50% prior - Gallup Poll
• (KR) South Korea Fin Min: FX, bond and equity markets are relatively stable

Other

• Largan Precision [3008.TW]: Said to note demand from customers has weakened (Taiwanese press)
• (TH) Thailand Aug Customs Trade Balance ($): -0.59B v +1.2Be; Imports Y/Y: 22.8% v 11.1%e
• (VN) Vietnam President Tran Dai Quang said to have died, ‘serious illness’ cited (financial press)

North America

• US equities ended higher: Dow +1%, S&P500 +0.8%, Nasdaq +1%, Russell 2000 +1%
• McDonald’s [MCD]: Raises Quarterly Cash Dividend By 15% to $1.16/share (implied yield ~2.9%); affirms long-term annual system wide sales growth 3-5%, EPS growth in the high-single digits

Europe

• (UK) Prime Min May: we had a productive summit; EU's Tusk confirmed commitment to reach a deal; EU has provided no counter-proposal - post Salzburg meeting comments
• (UK) Former Brexit Min Davis: PM May's Brexit proposal is opposed by 40 MPs in her party – press
• (EU) ECB's Praet (Belgium, chief economist): Euro area economy continues to expand at a rate that is above potential

Levels as of 01:30ET

• Nikkei 225, +1.1%, ASX 200 +0.3%, Hang Seng +1.3%; Shanghai Composite +1.7%; Kospi +0.5%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.2%, Dax +0.1%; FTSE100 flat
• EUR 1.1787-1.1772 ; JPY 112.78-112.42 ; AUD 0.7292-0.7280 ;NZD 0.6695-0.6680
• Dec Gold +0.2% at $1,214/oz; Oct Crude Oil -0.1% at $70.28/brl; Dec Copper +0.3% at $2.774/lb

Daily Pivots: (S1) 131.45; (P) 131.98; (R1) 133.04; More....

EUR/JPY's rally extends to as high as 133.05 so far today and intraday bias stays on the upside. Break of key fibonacci resistance at 132.56 should confirmed that correction from 137.49 has completed. Further rally should be seen to retest this high. On the downside, below 132.22 minor support will turn intraday bias neutral to bring consolidation. But downside should be contained by 130.86 resistance turned support to bring another rally.

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.

Daily Pivots: (S1) 0.8850; (P) 0.8871; (R1) 0.8897; More...

EUR/GBP continues to lose downside momentum as seen in 4 hour MACD. But with 0.8935 minor resistance intact, deeper decline is still expected. However, downside should be contained by 61.8% retracement of 0.8620 to 0.9097 at 0.8802 to form a short term bottom and bring rebound. On the upside, break of 0.8935 resistance will indicate short term bottoming and bring stronger rebound back towards 0.9051 resistance.

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.

Daily Pivots: (S1) 1.6079; (P) 1.6126; (R1) 1.6198; More....

EUR/AUD drew support from 38.2% retracement of 1.5601 to 1.6353 at 1.6066 and formed a temporary low at 1.6051. Intraday bias is turned neutral first. On the upside, above 1.6172 minor resistance will indicate completion of the corrective fall from 1.6353. Intraday bias would be turned back to the upside for retesting this high. On the downside, below 1.6051 will extend the corrective decline. But downside should be contained well above 1.5886 cluster support (61.8% retracement at 1.5888) to bring rise resumption.

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 1.5601 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) 1.1271; (P) 1.1297; (R1) 1.1320; More...

Intraday bias in EUR/CHF remains neutral at this point. On the upside, break of 1.1342 will reaffirm the case of trend reversal after hitting key support zone of 1.1154/98. Intraday bias will be turned to the upside for 1.1452 resistance. Break should confirm that whole decline from 1.2004 has completed and target 1.1713 resistance next. In case of another fall, we'd still expect strong support from 1.1154/98 to bring rebound.

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.

Daily Pivots: (S1) 1.2882; (P) 1.2908; (R1) 1.2931; More...

USD/CAD dropped to as low as 1.2883 so far and breached 1.2886 key support. The decline is deeper than we expected. Intraday bias stays on the downside. Break of 38.2% retracement of 1.2061 to 1.3385 at 1.2879 will target 50% retracement at 1.2723 next. On the upside, however, break of 1.3063 minor resistance will indicate complete of the fall from 1.3225. Intraday bias should then be turned back to the upside for this resistance again.

In the bigger picture, strong rebound ahead of 38.2% retracement of 1.2061 to 1.3385 at 1.2879 key fibonacci level retains medium term bullishness. That is, 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.

Daily Pivots: (S1) 0.7264; (P) 0.7279; (R1) 0.7305; More...

AUD/USD's rally from 0.7084 is still in progress and intraday bias stays on the upside. Current rise could target 0.7361 resistance. But we'd expect upside to be limited limited below there to bring down trend resumption. On the downside, below 0.7228 resistance turned support will turn bias back to the downside for 0.7143 first. Break there will likely resume larger fall from 0.8135 through 0.7084 low. However, sustained break of 0.7361 will carry larger bullish implication.

In the bigger picture, rebound from 0.6826 (2016 low) is seen as a corrective move that should be completed at 0.8135. Fall from there would extend to have a test on 0.6826. There is prospect of resuming long term down trend from 1.1079 (2011 high). Current downside momentum as seen in daily and weekly MACD support this bearish case. Firm break of 0.6826 will target 0.6008 key support next (2008 low). On the upside, break of 0.7361 resistance, however, argues that a medium term bottom is possibly in place, and stronger rebound could follow. We'll assess the medium term outlook later if this happens.