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Japanese Prime Minister Shinzo Abe was re-elected as the leader of the ruling Liberal Democratic Party. That was a landslide victory as Abe won 553 votes out of 807. He is now set to become the longer serving PM in Japan. Abe said in a victory speech that "it's time to tackle a constitutional revision," and "let's work together to make a new Japan."

On the political side, Abe would seek to amend the constitution to confirm the legality of the country's self-defence forces. The current article 9 of the constitution was written by the US after the second world war, forbidding Japan to use forces to settle international disputes. But under regional pressure, Abe would likely retain passages that forbid Japan from war of aggression. But one way or the other, such change would be a huge test in relationship with its neighbor South Korea and China.

On the economic front, Abe would continue with the three arrows of his Abenomics, ultra loose monetary policy, fiscal spending and structural reform. The next for Abe is social security reforms including raising retirement age above 65 and defer pension payouts beyond 70. The planned sales tax high from 8% to 10% will be carried out in October 2019.

On monetary policy Abe hailed that "the biggest goal of our macroeconomic policy has been fulfilled as a result of measures taken by the government and the BOJ to achieve 2 percent inflation".

Daily Pivots: (S1) 147.10; (P) 147.83; (R1) 148.33; More...

Despite losing upside momentum, further is still in favor in GBP/JPY with 146.24 minor support intact. Current rally should target 149.50 resistance. Decisive break there will confirm our bullish view that decline from 156.59 has completed at 139.88. On the downside, below 146.24 minor support will bring deeper pull back. But outlook will remain cautiously bullish as long as 142.58 support holds.

In the bigger picture, as long as 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) holds, the decline from 156.69 is seen as corrective move. That is, rise from 122.36 (2016 low), is still expected to extend higher through 156.69. However, sustained break of 139.29/47 should confirm medium term reversal and turn outlook bearish.

Daily Pivots: (S1) 130.69; (P) 131.19; (R1) 131.58; More....

EUR/JPY is losing some upside momentum as seen in 4 hour MACD. But with 130.09 minor support intact, further rise is expected to 131.97 resistance and then key fibonacci resistance at 132.56. On the downside, break of 130.09 minor support will bring deeper pull back. But outlook stays cautiously bullish as long as 127.85 support holds.

In the bigger picture, as long as 124.08 key resistance turned support, larger up trend from 109.03 (2016 low) remains in favor to continue. Decisive break of 61.8% retracement of 137.49 to 124.61 at 132.56 will pave the way to retest 137.49 high. However, firm break of 124.08 will argue that whole rise from 109.03 (2016 low) has completed at 137.49. Deeper decline would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90 next.

Daily Pivots: (S1) 0.8859; (P) 0.8882; (R1) 0.8903; More...

With 0.8935 minor resistance intact, deeper decline is expected in EUR/GBP for 61.8% retracement of 0.8620 to 0.9097 at 0.8802. But downside could be contained there 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) 1.6022; (P) 1.6104; (R1) 1.6148; More....

EUR/AUD's consolidation pattern from 1.6353 extends lower and hit 38.2% retracement of 1.5601 to 1.6353 at 1.6066. At this point, deeper decline could still be seen. But downside should be contained well above 1.5886 cluster support (61.8% retracement at 1.5888) to bring rise resumption. On the upside, above 1.6172 minor resistance will bring retest of 1.6353 first. Break will resume larger up trend to 1.6587 key resistance level.

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) 0.7223; (P) 0.7250; (R1) 0.7291; More...

Intraday bias in AUD/USD remains on the upside as the corrective rebound from 0.7084 extends. While further rally might be seen, upside should be limited well below 0.7361 resistance to bring down trend resumption. On the downside, break of 0.7143 minor support will bring retest of 0.7084 low first. Break ill resume whole decline from 0.8135. 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.

General Trend:

• Asian equity markets trade mixed
• Meituan Dianping rises in first day of trading in Hong Kong
• China said to plan to cut tariff rates on imports from majority of its trading partners
• Japan PM Abe wins the LDP leadership election (as expected)
• Abe is seeking a 3rd straight term, which would make him Japan’s longest serving PM
• The winner of the LDP party's leadership election is expected to comment to the press at 6pm (local time)
• HSBC again raises deposit rates in Hong Kong
• North Korea/South Korea summit is due to conclude today
• Norway Central Bank (Norges) expected to raise rates at meeting later today
• US Treasury Futures trade flat in Asia after recent declines

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• Rio Tinto [RIO.AU]: Announced details of A$3.2B buyback
• (AU) Australia sells A$500M v A$500M indicated in Dec 2018 notes, avg yield 1.91%, bid to cover 4.5x
• (NZ) NEW ZEALAND Q2 GDP Q/Q: 1.0% V 0.8%E (fastest growth in 2 years); Y/Y: 2.8% V 2.5%E
• (NZ) New Zealand sells NZ$150M v NZ$150M indicated in April 2037 bonds, avg yield 3.000%, bid to cover 2.87x

China/Hong Kong

• Shanghai Composite opened +0.1%, Hang Seng +0.7%
• Leshi Internet [300104.CN]: Said some shares pledged by Founder Jia Yueting have triggered a margin call, holder will be forced to sell shares
• Haier [1169.HK]: Said to suspend plan to sell US-made and GE-branded products in China (FT)
• Maoye International [848.HK]: Issued $150M in 13.25% senior guaranteed notes due 2020
• (CN) China said to plan a 'broad' import tax cut as soon as October - press
• (CN) China Premier Li Keqiang: Bilateral and multilateral trade talks supplement each other; reiterates multilateral trade regime should be upheld; Multilateral trade regime could be improved via talks
• (CN) China PBOC: Banks should increase financing support to private companies
• (CN) Former PBoC Gov Zhou: Chinese exporters may rapidly quit the US market over a trade war
• (CN) China PBoC Open Market Operation (OMO): Injects CNY70B in 7 and 14-day reverse repos v CNY60B injected in 7 and 14-day reverse repos prior: Net: CNY30B drain v nil prior
• (CN) China PBoC set yuan reference rate :6.8530 v 6.8569 prior

Japan

• Nikkei 225 opened +0.3%
• (JP) Japan's Financial Regulator reportedly to check banks' readiness for sharp movements in emerging markets - press
• (JP) Japan auto group (JAMA) said to seek large reduction in the car tax as part of the FY2019 reforms - Japanese press
• Japan PM Abe said to consider cabinet reshuffle on Oct 1st - Japanese Press
• (JP) Japan End-June Household Assets: ¥1,848T, +2.2% y/y - BoJ Q2 Flow of Funds Report
• (JP) Tech Bureau: Says ¥6.7B (~$60M) in cryptocurrency was lost in hack
• (JP) Japan FSA says it is conducting emergency inspections on cryptocurrency exchange operators’ management of customer assets
• (JP) Japan Finance Ministry (MOF) sells ¥1.0T v ¥1.0T indicated in 0.50% 20-year bonds, avg yield 0.6180% v 0.6070% prior, bid to cover 4.03x v 4.66x prior

Korea

• Kospi opened +0.3%
• (KR) South Korea Envoy Lee comments on Sept 18-20 summit in North Korea: Says the summit paved the way for further denuclearization talks between the US and North Korea
• (KR) Bank of Korea (BOK): Q2 household debt/disposable income ratio: 161.1% v 159.8% at the end of 2017

North America

• US equity markets ended mixed: Dow +0.6%, S&P500 +0.1%, Nasdaq -0.1%, Russell 2000 -0.5%
• (US) US said to seek alternatives to Iran oil for allies – FT
• (US) DOE CRUDE: -2.1M V -2ME;
• (US) Pres Trump to nominate former Fed economist Nellie Liang for Board of Governors seat

Europe

• British American Tobacco [BATS.UK]: Confirms CEO Durante to retire, effective April 1 2019; Board to make further announcement regarding successor in due course
• (UK) Prime Min May reportedly told EU leaders that extending Brexit talks is not an option; there will not be a second referendum; Northern Ireland cannot have a separate customs regime
• (UK) Brexit Minister Raab: need to see EU move in our direction in Brexit talks, if we don't get that it will be a lose-lose situation
• (UK) MP Mike Penning (ally of PM May) reportedly says the Chequers Brexit plan is dead - UK press

Levels as of 01:30ET

• Nikkei 225, +0.3%, ASX 200 -0.3%, Hang Seng -0.2%; Shanghai Composite -0.1%; Kospi +0.9%
• Equity Futures: S&P500 flat; Nasdaq100 -0.1%, Dax -0.1%; FTSE100 -0.1%
• EUR 1.1687-1.1669 ; JPY 112.35-112.08 ; AUD 0.7272-0.7253 ;NZD 0.6654-0.6601
• Dec Gold +0.1% at $1,210/oz; Oct Crude Oil +0.6% at $71.19/brl; Dec Copper +0.4% at $2.738/lb

Daily Pivots: (S1) 1.2880; (P) 1.2940; (R1) 1.2980; More...

At this point, we'd still expect strong support from 1.2886 to contain downside to complete the decline from 1.3225. On the upside, break of 1.3063 minor resistance will turn bias back to the upside for 1.3225 first. However, break of 1.2886 will resume whole choppy fall from 1.3385 and could target 1.2526 support next.

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. On the downside, as long as 1.2886 support holds, outlook will now remain bullish.

Daily Pivots: (S1) 1.1643; (P) 1.1680; (R1) 1.1709; More.....

EUR/USD is still staying in range below 1.1733 and intraday bias remains neutral. Rebound from 1.1300 is seen as a corrective move. In case of another rise, upside should be limited by 38.2% retracement of 1.2555 to 1.1300 at 1.1779 to bring near term reversal. On the downside, break of 1.1617 minor support will turn bias back to the downside. Further break of 1.1525 support will indicate completion of this corrective rebound from 1.1300. However, firm break of 1.1779 will extend the rise 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) 1.3101; (P) 1.3157; (R1) 1.3202; More...

Intraday bias in GBP./USD is turned neutral with a temporary top in place at 1.3214. Rise from 1.2661 could still extend higher. But as it's seen as a corrective move, upside should be limited by 1.3316 to bring near term reversal. On the downside, break of 1.3042 resistance turn support will argue that rebound from 1.2661 might be completed. In such case, intraday bias will be turned back to the downside for 1.2784 support to confirm.

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.