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USDJPY has been developing around the 23.6% Fibonacci retracement level of the upleg from 104.60 to 113.16, around the 111.13 barrier over the last three weeks. Moreover, the price holds above the 20- and 40-simple moving averages (SMAs) in the daily timeframe, as well as the technical indicators stand near their neutral levels.

The RSI indicator is sloping slightly to the upside above the threshold of 50, while the MACD oscillator is flattening above the trigger and zero lines. Both are moving with weak momentum in the near term.

A clear attempt below the 23.6% Fibonacci (111.13) and the moving averages could drive the pair until the 110.35 support, taken from the low on September 7. Should traders continue to sell the pair below this level, immediate support could come from the 38.2% Fibonacci of 109.90 before touching the trough of 109.75 achieved on August 21.

On the flip side, a strong bullish movement above the 111.75 key resistance level, could push the pair until the next immediate barrier of 112.10. If the latter fails to halt bullish movements, the next target could be the 113.16 obstacle, where it topped on July 19.

Briefly, the outlook is neutral over the past two months and only a significant close above the 113.16 hurdle could resume the bullish picture. On the other side, a decline below May’s trough of 108.10 could shift the outlook to bearish.

The GBP/USD has broken above the resistance trend line (dotted orange), but the breakout has been slow and choppy. The price will need to break above the resistance zone (red) before a new breakout is possible. The target could be the 38.2% Fibonacci level of wave 4 vs 3 near 1.33. A break below the support trend line could indicate a bearish breakout.

The GBP/USD seems to have completed an ABC (orange) correction which probably completed a wave B (green). The price could now be in a wave 1-2 (orange) pattern as long as it stays above the bottom of wave 1. The price needs to break above the resistance before an uptrend continuation is possible.

The EUR/USD broke above the resistance trend line (dotted red line) but was unable to show much momentum. Is price showing false breakout or is it preparing for a continuation?

The EUR/USD needs to break above the previous top (orange box) before an uptrend continuation seems likely and probable. The breakout targets are the Fibonacci retracement levels of wave B vs A which are at 1.1775 and 1.20. A bearish breakout below the support trend line (blue) makes it likely that the wave B will see a deeper retracement.

The EUR/USD seems to have completed an ABC (green) correction within wave 2 (blue) but price needs to the bull flag pattern before a wave 3 (blue) become more probable.

Daily Pivots: (S1) 144.73; (P) 145.11; (R1) 145.55;  More...

For now, further rise is mildly in favor to 38.2% retracement of 156.59 to 139.88 at 146.26. Decisive break there will be a strong signal that fall from 156.59 has completed at 139.88, ahead of 139.29/47 key support zone. Further rally should then be seen to 149.30 resistance for confirmation. On the downside, though, break of 142.58 will turn bias back to the downside for retesting 139.88 low instead.

In the bigger picture, at this point decline from 156.59 is still seen as a corrective move. Focus remains on 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47). Strong rebound from there will re-affirm the bullish case that rise from 122.36 is still to extend through 156.59 high. However, sustained break of 139.29/47 should confirm medium term reversal. GBP/JPY would then target a retest on 122.26 (2016 low).

Market movers today

A key event today is the ECB meeting. Albeit we do not expect big communication changes, the ECB will present new staff projections. We expect a marginal downward revision of the 2019 and 2020 projections, but no new policy signals as the central bank has been content with the current economic path and the market reaction to the recent increased forward guidance in June. See ECB Preview - For the feinschmeckeres .

In addition, we have the Bank of England (BoE) meeting . This is unlikely to be a major market mover, as it is one of the interim meetings without updated projections and no press conference. After the August hike, we believe the BoE is on hold until next year. We do not think it is necessary for the BoE to send any new signals now.

The Turkish central bank meeting is also set to be interesting as this is keenly awaited by the financial markets after the central bank signalled a rate hike last week: The key question is whether the central bank will satisfy market expectation? We believe the answer is no if the hike is less than 600bp. We have been expecting a 300bp hike in September. Last week's statement indicates that a larger hike could be delivered, which is TRY positive. Erdogan has no other 'politically neutral' tool to help the TRY than a significant hike, especially ahead of a possible rate hike by the Fed.

In the US, the CPI data for August is due for release, which we expect to show that the core index continues to rise around 0.2% m/m. Even if inflation surprises on the upside, the Fed has said it will tolerate inflation moving above the 2% target as inflation has been too low for a long time. Furthermore, retail sales data for August are due.

Selected market news

Risk sentiment is the rise as trade talks between the US and China might be brewing. US Treasury Secretary Steven Mnuchin is reportedly looking to meet China's key economic official, Liu He, to resume talks. This comes as the trade dispute is set to intensify this week with the Trump administration imposing tariffs on another USD200bn of imports from China. Equities assumed an upbeat tone in both the US and Asian session.

US Treasury yields fell yesterday as the US PPI figures came out on the weak side of expectations ahead of today's CPI release, and the US 10Y faded its rise to now trade around 2.97%. USD also softened a bit on the news of US-China talks and EUR/USD is back above 1.16. Meanwhile crude oil prices continued to edge higher, with Brent briefly above USD80/bbl yesterday, led by a combination of worries over hurricane Florence amid US sanctions against Iran and low US inventories.

Furthermore, an ECB sources story yesterday hinted that Draghi and co today will present slightly lower GDP forecasts and stress downside risks to growth due to the weaker external demand (likely trade war driven) whereas the ECB is likely to keep its inflation outlook unchanged. The market reaction was limited and we expect today's meeting to be one for the 'feinschmeckers' as no major announcements should be due.

Daily Pivots: (S1) 128.92; (P) 129.36; (R1) 129.80; More....

Intraday bias in EUR/JPY remains neutral for the moment. On the upside break of 129.97 minor resistance will affirm the case that rise from 124.89 is still in progress. Retest of 130.86 should then be seen first. Break will target key fibonacci resistance at 132.56. On the downside, though, break of 127.85 will extend the fall from 130.86 instead.

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.

General Trend:

• Markets later pare opening gains
• Australia S&P ASX200 index lags on declines in financials and utilities
• Taiwan Semi declines in the aftermath of Apple’s product announcements
• US reportedly planning new round of trade talks with China led by Treasury Sec Mnuchin to get economic negotiations back on track (press)
• China Soybean Futures decline, while Shanghai Copper rises amid the trade optimism
• NZD declines as milk company Fonterra reports first ever annual loss; Next week’s GDP data in focus (Sept 20th)
• South Korea bond yields rise after PM was said to comment on interest rates; curve flattens
• ECB and BoE due to hold policy meetings later today

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%
• ASX 200 Utilities index -1.5%, Financials -1%, Consumer Discretionary -0.3%, Telecom -0.3%; Resources +1.1%, REIT +0.6%
• (AU) AUSTRALIA AUG EMPLOYMENT CHANGE: +44K V 18.0KE; UNEMPLOYMENT RATE: 5.3% V 5.3%E
• (AU) Australia 3-year bond yield rises after better than expected employment change; up over 3bps on session
• (AU) Australia Sept Consumer Inflation Expectation: 4.0% v 4.0% prior
• (AU) Australia Trade Min Ciobo: The policies of the India and Pakistan government have contributed to the glut in the global sugar market
• (NZ) New Zealand Aug REINZ House Sales Y/Y: +3.1% v +0.7% prior
• (NZ) New Zealand Aug Food Prices M/M: -0.5% v 0.7% prior (first decline since Feb)
• (NZ) New Zealand sells NZ$250M v NZ$250M indicated in April 2029 bonds, avg yield 2.5711%, bid to cover: 3.1x
• Fonterra [FCG.NZ]: Reports FY18 (NZ$) Net loss 196M; Normalized EBIT 902M, -22% y/y; Rev 20.4B, +6% y/y

China/Hong Kong

• Shanghai Composite opened +0.9%, Hang Seng +1.7%
• Hang Seng Info Tech index +2.7%, Energy +2.7%, Materials +2.6%, Services +2.5%, Industrial Goods +2.2%, Financials +1.3%, Property/Construction +1.3%, Consumer Goods +0.2%
• (CN) China PBoC Open Market Operation (OMO): Injects CNY120B in 7 and 14-day reverse repos v CNY60B injected in 7-day reverse repos prior: Net: CNY120B injection v CNY60B injection prior
• (CN) China PBoC comments on earlier injection in open market operation (OMO): Says the fund injection aimed at countering factors related to tax payments and government bond issuance
• (CN) China PBoC set yuan reference rate: 6.8488 v 6.8546 prior
• (CN) China said to end output cuts for steel companies with low emissions - Chinese Press
• *(CN) CHINA AUG M2 MONEY SUPPLY Y/Y: 8.2% V 8.6%E (released on Sept 12th)
• (CN) CHINA AUG NEW YUAN LOANS (CNY): 1.280T V 1.350TE (released on Sept 12th)

Japan

• Nikkei 225 opened +0.2%
• TOPIX Marine Transportation index +2%, Info & Communications +1.7%, Iron & Steel +1.5%, Retail Trade +1.5%, Real Estate +1.1%, Electric Appliances +0.4%
• Automakers generally outperform
• Toyota: Said to have received a technology sharing request from China related to hybrid car technology, in talks to license hybrid system to Geely - US financial press
• (JP) Japan Jul Core Machine Orders M/M: 11.0% v 5.5%e (fastest rise since Jan 2016); Y/Y: 13.9% v 4.3%e
• (JP) According to the Japan Center for Economic Research, July GDP declined by 0.5% m/m; cited narrowing trade balance and flat domestic demand – Japanese Press
• (JP) Japan MoF sells ¥2.0T v ¥2.0T indicated in 0.10% 5-year JGBs, avg yield -0.0710% v -0.0760% prior, bid to cover: 5.53x v 3.95x prior

Korea

• Kospi opened +0.1%
• (KR) South Korea PM Lee Nak-yon said it is time to 'seriously' discuss raising policy interest rate - SK Press
• (KR) South Korea reportedly to raises taxes on property ownership for multiple homeowners to curb speculative buying - press
• (KR) South Korea Finance Ministry: Plans to issue 10 and 30-year US dollar denominated bonds; details to be decided at a later date
• (KR) South Korea President said to have asked Samsung and Hyundai to visit North Korea - South Korean Press
• (KR) North Korea may name new UN Ambassador next week - South Korean Press

Other

• (ID) Moody's: Indonesia credit is resilient to Rupiah (IDR) weakness, but further currency declines would be broadly credit negative
• (SG) Singapore Monetary Authority (MAS) Managing Dir Menon: Global economy is currently remarkably resilient; tariffs thus far are not yet in the data; Global growth 'bound' for slowdown into 2019

North America

• US equity markets ended mixed: Dow +0.1%, S&P500 flat, Nasdaq -0.2%, Russell 2000 -0.2%
• S&P500 Financials -0.9%; Consumer Staples +1.2%
• (US) National Hurricane Center (NHC): Hurricane Florence downgraded to a Category 2 storm (vs. Category 3 prior), maximum sustained winds 110 mph v 115 prior
• (US) DOE CRUDE: -5.3M V -1.5ME;
• (CA) Canada Foreign Min: Will not be at the Thursday talks related to NAFTA, officials to work on NAFTA in Washington on Thursday; talks are not at a 'stalemate’

Europe

• (IT) Italy Fin Min Tria reportedly threatening to quit over budget - press
• (UK) EU reportedly has started redrafting an Irish Brexit protocol as a conciliatory gesture toward UK – press
• (UK) Group of Tory Party rebels reportedly sets three-week deadline for PM May to ditch current 'Chequers' plan for Brexit deal – press
• (UK) Brexit Min Raab: Warns that UK will not pay EU divorce bill without a Brexit agreement
• (UK) UK Government: To publish 'no deal' Brexit papers on mobile roaming charges and vehicle standards on Thursday
• (UK) UK PM May expected to discuss immigration rules at a meeting on Sept 24th - UK Press
• RBS: Chairman said to consider up to £4.0B special dividend - UK Press
• (TR) Turkey has decided that property sales and rental agreements cannot be made in foreign currency - Local Press
• (PT) IMF: Portugal outlook is 'positive', sees external risks - Article IV Consultation

Levels as of 01:30ET

• Nikkei 225, +1%, ASX 200 -0.7%, Hang Seng +1.2%; Shanghai Composite +0.2%; Kospi +0.1%
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.2%, Dax flat; FTSE100 +0.2%
• EUR 1.1643-1.1622 ; JPY 111.47-111.15 ; AUD 0.7201-0.7165 ;NZD 0.6567-0.6549
• Dec Gold -0.1% at $1,210/oz; Oct Crude Oil -0.7% at $69.86/brl; Dec Copper -0.2% at $2.680/lb

Daily Pivots: (S1) 0.8885; (P) 0.8913; (R1) 0.8937; More...

Intraday bias in EUR/GBP is turned neutral as the consolidation from 0.8875 temporary might extend further. But upside of recovery should be limited well below 0.9051 resistance to bring another decline. As noted before, whole corrective rise from 0.8620 could have finished at 0.9097 already. Below 0.8875 will target 61.8% retracement of 0.8620 to 0.9097 at 0.8802 and below.

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.

For the 24 hours to 23:00 GMT, the EUR rose 0.22% against the USD and closed at 1.1629.

On the data front, Euro-zone's industrial production unexpectedly slid 0.1% on an annual basis in July, defying market consensus for an advance of 1.0%. In the prior month, industrial production had registered a revised rise of 2.3%.

Separately, the dollar fell against a basket of other currencies, following reports that the US and China would resume trade talks.

In the US, data showed that the producer price advanced 2.8% on a yearly basis in August, undershooting market expectations for a rise of 3.2%. In the previous month, the index had registered a gain of 3.3%. On the contrary, the nation's mortgage applications dipped 1.8% on a weekly basis in the week ended 07 September 2018, registering its lowest level in 18 years. In the preceding week, mortgage applications had fallen 0.1%.

Separately, according to the Federal Reserve's (Fed) Beige Book report, the overall US economy expanded at a “moderate” pace in August, except for three districts, which exhibited comparatively weaker growth. Moreover, it revealed that Trump administration's tariff policies led to a slowdown in businesses and a tight job market created labour shortages across the country. However, the Fed remains optimistic about the near-term outlook for businesses.

In the Asian session, at GMT0300, the pair is trading at 1.1635, with the EUR trading 0.05% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1587, and a fall through could take it to the next support level of 1.1538. The pair is expected to find its first resistance at 1.1667, and a rise through could take it to the next resistance level of 1.1698.

Going forward, investors would keep an eye on the European Central Bank's (ECB) interest rate decision followed by the ECB President, Mario Draghi's speech, due in a few hours. Also, Germany's consumer price index for August, due to be released in a while, will keep traders on their toes. Later in the day, the US consumer price index and monthly budget statement, both for August along with initial jobless claims, will pique significant amount of investors' attention.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.18% against the USD and closed at 1.3047.

In the Asian session, at GMT0300, the pair is trading at 1.3044, with the GBP trading a tad lower against the USD from yesterday’s close.

The pair is expected to find support at 1.2990, and a fall through could take it to the next support level of 1.2935. The pair is expected to find its first resistance at 1.3089, and a rise through could take it to the next resistance level of 1.3133.

Going forward, investors would closely monitor the Bank of England’s crucial interest rate decision, scheduled to release in a few hours

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.