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Sterling surges broadly in early US session and it's now the strongest one for today. It's EU chief negotiator Michel Barnier again. Bloomberg reports that Barnier said a Brexit deal with the UK is "realistic" within six to eight weeks.

According to an excerpt by Sky News, Barnier said “I think that if we are realistic we are able to reach an agreement on the first stage of the negotiation, which is the Brexit treaty, within 6 or 8 weeks." And, “taking into account the time necessary for the ratification process, the House of Commons on one side, the European Parliament and the Council on the other side ... we must reach an agreement before the beginning of November. I think it is possible.”

Separately, it's reported that EU is preparing to give Barnier new instructions to help closing a deal with UK. And that's seen as a act to support UK Prime Minister Theresa May as she's suffering attacks from Brexiteers at home. The decision could be made at the September 20 summit, paving the way to be adopted in October. And the Brexit deal could then be concluded at a special summit in November.

Riding on Swiss Franc's weakness too, GBP/CHF has taken out 1.2665 near term support, confirming short term bottoming. It's a bit early to tell if the whole down trend from 1.3854 has completed. But in short term, further rise should be see to 55 day EMA (now at 1.2827).

Daily Pivots: (S1) 0.9655; (P) 0.9678; (R1) 0.9714; More.....

USD/CHF rebounds strongly today but it's held below 0.9766 resistance. Intraday bias stays neutral first. On the upside, break firm break of 0.9766 will argue that the fall from 1.0067 might be completed. And intraday bias will be turned back to the upside for 0.9866 support turned resistance for confirmation. On the downside, however, break of 0.9640 will resume the decline from 1.0067 to 200% projection of 1.0067 to 0.9866 from 0.9981 at 0.8579 next.

In the bigger picture, current development suggests that 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 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 suggests that fall from 1.0067 has completed and rise from 0.9186 is resuming.

Daily Pivots: (S1) 1.1519; (P) 1.1584; (R1) 1.1619; More.....

EUR/USD breached 1.1529 support but quickly recovered. Intraday bias remains neutral first. Outlook is unchanged that rebound from 1.1300 is viewed as a correction. In case of further rise, strong resistance should be seen at 38.2% retracement of 1.2555 to 1.1300 at 1.1779 to limit upside, at least on first attempt. On the downside, firm break of 1.1529 will indicate completion of the rebound and turn bias to the downside for retesting 1.1300 low. Overall, price actions from 1.1300 are forming a corrective pattern, that could extend for a while before completion.

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) 1.2874; (P) 1.2951; (R1) 1.2995; More...

Intraday bias in GBP/USD remains neutral for the moment. Further rise in favor as long as 1.2784 minor support holds. On the upside, break of 1.3042 will resume the rebound from 1.2661 and target 100% projection of 1.2661 to 1.3042 from 1.2784 at 1.3165. However, as such rebound is seen as a correction, upside should be limited by 1.3316 key fibonacci level to complete the corrective rise and bring near term reversal. On the downside, break of 1.2784 will bring retest of 1.2661 low.

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 1.4099). 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.

Daily Pivots: (S1) 110.56; (P) 110.90; (R1) 111.43; More...

USD/JPY is staying in range of 110.37/111.82 and intraday bias remains neutral for the moment. On the upside, break of 111.73 minor resistance will resume the rebound from 109.76 to retest 113.17 high. Break there will resume larger rise from 104.62. On the downside, below 110.37 will bring deeper fall. But still, we'd expect strong support from 38.2% retracement of 104.62 to 113.17 at 109.90 to contain downside and bring rebound.

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.

Investors across the globe entered the trading week adopting a cautious approach after U.S. President Donald Trump doubled down his China tariff threats on Friday.

In a move that has eroded U.S.-China relations even further, Trump threatened tariffs on another $267 billion worth of Chinese goods. With the United States already poised to slap tariffs on $200 billion worth of Chinese goods and Beijing reiterating threats to fight back, the U.S.-China trade war could reach dangerous heights. The growing fears of an all-out tit-for-tat trade war between the world’s two largest economies are likely to fuel risk aversion, ultimately punishing global stocks and emerging markets.

Focussing on emerging markets, weakness is set to remain a recurring theme amid global trade tensions, a broadly stronger Dollar and prospects of higher U.S. interest rates. With turmoil in Turkey and Argentina triggering contagion fears, appetite for emerging market assets and currencies is likely to continue diminishing. In the EM currency space, the outlook remains tilted to the downside in the near term, especially for those currencies with high current account deficits.

In the commodity markets, Gold has -again struggled to find any support despite escalating U.S.-China trade tensions denting investor confidence and promoting risk aversion.

The bearish price action witnessed in recent weeks continues to highlight how Gold’s trajectory remains heavily influenced by the Dollar’s performance. With King Dollar spoiled by expectations of higher U.S. interest rates and safe-haven demand, this could mean nothing but pain and misery for zero-yielding Gold. It is worth noting that the Dollar has snatched away a fair chunk of Gold’s safe-haven allure with investors turning to the Dollar in times of uncertainty. Focusing on the technical picture, bears wrested back control after prices secured a weekly close below the $1,200 psychological level. Sustained weakness below this level could encourage a decline towards $1,180.

Daily Pivots: (S1) 1.1174; (P) 1.1209; (R1) 1.1236; More...

EUR/CHF rebounds strongly today but it's kept below 1.1319 minor resistance. Intraday bias is turned neutral first. Outlook is unchanged that strong support is expected from 1.1154/98 to bring rebound. On the upside, break of 1.1319 resistance will indicate short term bottoming. In such case, intraday bias will be turned back to the upside for 1.1452 resistance next. Break of 1.1452 will add to the case that whole correction from 1.2004 is completed. On the downside, however, sustained break of 1.1154/98 will carry larger bearish implications.

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 1.1196) too. A break of 1.2 key resistance is still expected in the medium to 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.

Swiss Franc tumbles broadly today as easing concerns over Italy's budget narrows Italian-German yield spread notably. Italy Economy Minister Giovanni Tria's comments over the weekend were well received by the markets. Euro also strengthens broadly, except versus Australian Dollar and Sterling. Aussie is merely in consolidation, digesting recent steep, trade war triggered losses. Sterling is mildly firmer as 3-month GDP growth hit the highest rate in nearly a year. Canadian Dollar is the second weakest and there is no end in sight on NAFTA negotiation.

At the time of writing, 10 year Italian yield is down -0.0972 at 2.947, back below 3.000 handle. German 10 year bund yield is up 0.014 at 0.405, back above 0.400. Spread at 300 now looks rather distant. European stocks are trading generally up, paring last week's deep losses. FTSE is up 0.35%, DAX up 0.61% and CAC up 0.67%. Asian markets clearly under performed with China SSE lost -1.21% to 2669.48, Hong Kong HSI dropped -1.33% to 26613.42, Singapore Strait Times fell -0.43% to 3120.92. Raising trade tension between US and the rest of the world is weighing down sentiments. But Japanese Nikkei buck the trend and gained 0.30% even though Japan is clearly Trump's next target.

Technically, now there is realistic chance of bottoming in USD/CHF, EUR/CHF and even GBP/CHF. 0.9766 in USD/CHF, 1.1319 in EUR/CHF and 1.2665 in GBP/CHF are the levels to watch. Break of these levels will be strong signal of near term reversal. It should be noted that while EUR/USD recovers ahead after breaching 1.1529, the recovery is very weak so far. 1.1529 remains rather vulnerable and bring will confirm completion of rebound from 1.1300. Dollar is consolidating against both Australian and Canadian Dollar for now. But its rally could resume any time.

UK 3-month GDP grew 0.6% in July, highest in nearly a year, but production drags

UK GDP grew 0.3% mom in July, above expectation of 0.2% mom. For the three months to July, GDP grew 0.6%, met expectations. The three month growth rate was the highest since August 2017. Growth was driven by services (0.45%) and construction (0.20%), with small drag from production (-0.07%).

Rob Kent-Smith , the head of GDP at the Office for National Statistics said: "Growth in the economy picked up in the three months to July However, production fell back, with manufacturing again slipping a little while energy generation and supply fell due to reduced demand. The dominant service sector again led economic growth in the month of July with engineers, accountants and lawyers all enjoying a busy period, backed up by growth in construction, which hit another record high level."

Also from UK, visible trade deficit narrowed slightly to GBP -10.0B in July. Industrial production dropped -0.2% mom, rose 0.9% yoy versus expectation of 0.4% mom, 1.0% yoy. Manufacturing production rose 0.1% mom, 1.1% yoy versus expectation of 0.3% mom, 1.5% yoy. construction output rose 0.5% mom in July versus expectation of -0.4% mom fall.

Former junior minister Baker warns catastrophic Conservative party split on Chequers Brexit plan

Steve Baker, a former junior Minister at the Department for Exiting the European Union, warned that there will be 80 or more MPs voting against Prime Minister Theresa May's Chequers Brexit plan at the party conference. And, the part will suffer from "catastrophic split". Instead, he urged May to go for the route of a free trade agreement with the terms laid down by European Council president Donald Tusk.

And he added, "if we come out of conference with her hoping to get Chequers through on the back of Labour votes, I think the EU negotiators would probably understand that if that were done, the Tory party would suffer the catastrophic split which thus far we have managed to avoid." Baker resigned earlier this year in opposition to the Chequers' plan. The party conference will be held on September 30 to October 3.

In response to Baker's comment, May's spokesman said that "Chequers is the only plan on the table which will deliver on the will of the British people while avoiding a hard border in Northern Ireland. The prime minister is working hard to secure a deal and hopes all MPs (members of parliament) will be able to support it." And, May will hold a cabinet meeting on Thursday to discuss preparation on "no-deal" Brexit

Eurozone Sentix Investor Confidence dropped to 12.0, emerging markets and US trade disputes weigh

Eurozone Sentix Investor Confidence overall index dropped to 12 in September, down from 14.7, below expectation of 13.8. Current situation index dropped to 35.0, down from 37.3. Expectations index also dropped to -8.8, down from -5.8. Sentix noted that "the weakness of the emerging markets, especially in Asia and Latin America, is weighing on economic assessments. But also homemade European problems."

Sentix also noted that two developments are "particularly noticeable in the search for the causes" for the deteriorations. One is "weakness in the international arena", in particular in Asia and Latin America. And, "due to the solid US dollar and political crises, the emerging markets are in the crossfire."

For Europe itself, there are problems "especially at the political level". Also, "external, international catalyst, which is also intensified by the trade dispute between the USA and almost the rest of the world, is now having a noticeable negative impact."

Italian EM Tria: Makes no sense to borrow more on higher yields

Italian Economy Minister Giovanni Tria pledged on Sunday that the coalition will respect EU fiscal rules. And, more progressive budget plans would only be introduced gradually. The programs include both a new welfare tool advocated by the Five Star Movement and tax cuts promoted by the League. But he emphasized that "almost all reforms will start to be implemented gradually." And, "we are looking into Italy's big state balance sheet to find financial resources to be shifted toward these measures."

Also, he acknowledge the need to bring down the 130% debt to output ratio, which is the second highest in Eurozone. And such reduction "may bring about a strengthening and consolidation of Italy's presence on financial markets, which will free up resources and attract investments."He added "it makes no sense to seek two or three billion euros of extra deficit if we then have to pay three or four billion more due to higher yields". Further, "as the government puts words into actions, the (bond yield) spread will return to more normal levels."

Japan PM Abe: Trade fights no benefit anyone, will proceed with sale tax hike

Facing trade threats from the US, Japanese Prime Minister Shinzo Abe kept his cool today and note that trade fights do not benefit any country. Japan is clearly the next trade target of Trump, who pull out of the Trans Pacific Partnership as the first "achievement" after taking office. Japan has been clear in insisting on promoting multilateral frameworks despite requests from the US on bilateral trade deals. Trump warned on Friday that "if we don't make a deal with Japan, Japan knows it's a big problem."

Additionally, Abe would proceed with the planned sales tax hike in October 2019 and carry out fiscal reforms. He said that "we will carry out fiscal consolidation and want to raise the sales tax as planned" to 10 percent, in a kick off news conference for his LDP leadership campaign. Abe added that he's learned a lesson from the 2014 sales tax hike and pledge with measures to ease consumptions.

Released from Japan today, Q2 GDP was finalized at 0.7% qoq, revised up from 0.5% qoq. GDP deflator rose 0.1% yoy, unrevised. Current account surplus narrowed to JPY 1.48T in July.

China pledges retaliation again if US imposes new tariffs

China Foreign Ministry spokesman Geng Shuang said in a regular press briefing that "If the U.S. side obstinately clings to its course and takes any new tariff measures against China, then the Chinese side will inevitably take countermeasures to resolutely protect our legitimate rights." That came after public hearing on 25% tariffs on USD 200B in Chinese goods ended last week. Trump is ready to start imposing the tariffs any time. Meanwhile, he raised the stakes further and threatened to put tariffs on additional USD 267B in Chinese imports.

No further elaboration or comments were given by Chinese officials yet. But it's believed that China is also ready for retaliation to the tariffs on the USD 200B goods. China has already unveiled a list of 5207 product lines, in USD 60B of value, with tariffs from 5% to 25%.

EUR/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1174; (P) 1.1209; (R1) 1.1236; More...

EUR/CHF rebounds strongly today but it's kept below 1.1319 minor resistance. Intraday bias is turned neutral first. Outlook is unchanged that strong support is expected from 1.1154/98 to bring rebound. On the upside, break of 1.1319 resistance will indicate short term bottoming. In such case, intraday bias will be turned back to the upside for 1.1452 resistance next. Break of 1.1452 will add to the case that whole correction from 1.2004 is completed. On the downside, however, sustained break of 1.1154/98 will carry larger bearish implications.

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 1.1196) too. A break of 1.2 key resistance is still expected in the medium to 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.

Economic Indicators Update

Here are the latest developments in global markets:

• FOREX: Sterling crossed marginally below 1.2900 per dollar before better than expected GDP growth figures out of the UK drove the pair up to an intra-day high of 1.2954 amid speculation that British economy could have a good start in the third quarter despite Brexit uncertainties looming in the background. GDP growth clocked in at 0.3% in monthly terms, driving the yearly gauge up to 1.6%. Expectations were for an expansion of 0.2% month-on-month and 1.4% year-on-year. A miss in industrial production data, however, limited further upside in sterling, sending the pair down to 1.2924 (+0.04%). In the Eurozone, the Sentix Investor Confidence Index also disappointed, retreating by 1.3 points to 12.0 in September after rising for the past two consecutive months. Euro/dollar, shrugged off the data, bouncing towards 1.1575 (+0.15%) after slipping to an almost 3-week low of 1.1525 earlier today. The pair probably received a helpful hand from the Italian bond market, which jumped to its highest in six weeks after the Italian Deputy Prime Minister said that the government will do everything to meet external regulations – a message that the government will work to deliver a budget within the EU fiscal limits. Dollar/yen was in a quiet trade last seen at 111.11 (+0.05%) and the dollar index stood at 95.32 (-0.04%) after an upbeat US Jobs report revealed on Friday that in August job positions picked up and wages hit the strongest growth in more than nine years. Still, Trump’s intention to target a bigger list of Chinese products during the weekend maintained a degree of risk aversion in the market. Dollar/loonie was up at 1.3184 (+0.22%), while the antipodean currencies were also enjoying some upside, with aussie/dollar and kiwi/dollar recovering to 0.7121 (+0.23%) and 0.6538 (+0.08%) respectively. Following an inconclusive election outcome in Sweden, the Swedish krona advanced near to a 1-month high versus the euro as analysts believe that no changes in monetary and fiscal stance are expected given that all parties back the country’s strict fiscal framework. Recall that Riksbank (Sweden’s central bank) is planning to deliver a 25bps rate hike in December or February. In Norway, an upward surprise in inflation numbers triggered bullish movements in the Norwegian krona, with euro/krona tumbling by 0.63% and dollar/krona diving by 0.88%.
• STOCKS: European stocks were in the green at 1100 GMT despite inflamed trade tensions weighing on market sentiment. The pan-European STOXX 600 which closed at the lowest since early April on Friday, managed to rise by 0.40% led by financials and utilities, while the blue-chip Euro STOXX improved by 0.42%. The export-oriented German DAX 30 advanced by 0.33%, the French CAC 40 rose by 0.45%, whilst the Italian FTSE MIB was the best performer surging by 2.23%. The British FTSE 100 increased by 0.28%, and the Spanish IBEX 35 was up by 1.13%. In the US, indices tracking futures such as Nasdaq 100, S&P 500 and Dow Jones were poised to open higher but modestly.
• COMMODITIES: WTI crude and the London-based Brent were in the positive territory, trading at $68.1/barrel (0.65%) and $77.39/barrel (0.73%) respectively. On Friday, Baker Hughes reported a smaller number of active US rigs for oil drilling, providing some support to the market, while investors were also concerned about renewed US sanctions against Iranian oil exports taking effect on November 4, two days before US congressional elections. Meanwhile in Washington, the US Energy Secretary, Rick Perry, will be meeting his Saudi Arabian counterpart on Monday, while on Thursday he will be flying to Moscow for discussions with the Russian Energy Minister. Note that this month OPEC and non-OPEC members will be also gathering to talk about the sharing of an output increase agreed in June. In precious metals, dollar-denominated gold recouped earlier losses to edge up to $1,194/ounce (-0.11%) after dropping to a session low of $1,191. However, with the dollar holding onto gains, gold is likely to remain constrained.

Day Ahead: Quiet day in terms of data; US consumer credit and trade tensions eyed

On Monday, the calendar will be light ahead of a busy week with two major central banks deciding on interest rates, the BOE, and the ECB. Both are predicted to keep their rates steady with no major changes in their policy.

In terms of trade tensions, traders still have their attention on the US-China trade war. The US President Donald Trump warned on Friday of applying tariffs on virtually all Chinese imports into the US, that is, another $267 billion of goods in addition to the $200 billion that are already facing the risk of duties. NAFTA discussions will be also eyed as the US and Canada struggle to resolve sticking points to form an agreement that would include Mexico as well.

The US, the world’s largest economy, will see the release of March consumer credit data at 1900 GMT. Credit is predicted to tick higher by $14.50 billion in July from $10.21 billion the preceding month.

Later, at 2245 GMT New Zealand will see the release of the electronic card retail sales for August.

In the Brexit-related news, the UK Prime Minister, Theresa May, is expected to hold a Cabinet meeting this week to discuss the scenario of a no-deal exit from the EU.

In public appearances, Federal Reserve of Atlanta President Raphael Bostic will give a speech at 1600 GMT on the US economic outlook, while Russia’s President Vladimir Putin will meet Japanese Prime Minister Shinzo Abe.

The British Pound appreciated against the US Dollar, following UK GDP release on Monday at 08:30 GMT. The GBP/USD exchange currency rate gained 13 pips or 0.10% during a minute, right after the release.

The Office for National Statistics released GDP m/m data better-than-expected of 0.3% compared with forecasted 0.2% The data set is relatively new, which monitors the change in the total value of all goods and services produced by the economy.

Rob Kent-Smith , the head of GDP at the Office for National Statistics said: "Growth in the economy picked up in the three months to July However, production fell back, with manufacturing again slipping a little while energy generation and supply fell due to reduced demand. The dominant service sector again led economic growth in the month of July with engineers, accountants and lawyers all enjoying a busy period, backed up by growth in construction, which hit another record high level."