Sample Category Title

The global financial markets could end the week on a whimper, as a slow stream of economic data keeps investors on the sidelines. Monetary policy will be the main focus, with investors zeroing in on an important speech from a top European Central Bank (ECB) official.

ECB President Mario Draghi is scheduled to deliver a speech at 08:30 GMT. Draghi's comments will be scrutinized for clues about the pace and timing of future monetary policy changes within the ECB. The central bank has already announced plans to wind down its stimulus program but has also said it will likely extend the duration of bond buying.

On the economic calendar, the European Commission's statistical agency will report on the current account deficit at 09:00 GMT.

Shifting gears to North America, the US Department of Commerce will report on building permits and housing starts at 13:30 GMT. Permits are forecast to rise 2% to a seasonally adjusted 1.247 million-unit pace in October. Housing starts are expected to gain 5.6% to a 1.185 million-unit pace.

Later in the day, the Kansas City Fed will release its monthly manufacturing activity survey for November. Separately, Baker Hughes Inc. will release its weekly rig count numbers.

North of the border, the Canadian government will report on consumer inflation data at 13:30 GMT. The consumer price index (CPI) is forecast to climb 1.4% annually in October, following a 1.6% year-over-year gain the month before.

In currencies, the US dollar index declined 0.3% on Friday to reach 93.61. That was DXY's third consecutive drop.

EUR/USD

The euro was back in the driver's seat on Friday, as the dollar lost ground against a basket of world peers. The EUR/USD exchange rate climbed 0.3% to 1.1810, just one day after visiting the 1.1850 region. Looking at the longer-term horizon, the EUR/USD continues to trade in the 1.1479-1.1880 range. An analysis of the short term reveals initial resistance at 1.1850

GBP/USD

Cable took advantage of broad dollar weakness to push higher on Friday. The GBP/USD exchange rate added 0.3% to 1.3235, its highest in two weeks. The pair pushed higher on Thursday following the release of better than expected UK retail sales data. However, Brexit rumours are expected to dictate cable's long-term investment appeal. Immediate support levels are located at 1.3140, 1.3100 and 1.3060. On the opposite side of the ledger, resistance is likely found at 1.3270, followed by 1.3310.

USD/CAD

The greenback also fell against its Canadian counterpart Friday, with the USD/CAD slipping 0.2% to 1.2726. The decline marks the continuation of a sharp down move that pulled the pair below 1.2800. The 1.2800 region provides a good short-term bellwether of the pair's bullish potential.

The dollar opened weaker on Friday in Asia on news that several officials from Trump's campaign were subpoenaed for Russia-linked documents despite markets relief on the US tax story after lawmakers approved the tax plan in the House of Representatives. Consequently, investors turned risk-averse during the session, pushing the safe-haven assets higher.

According to the Wall Street Journal on Thursday, the Special Counsel, Robert Muller, who has been appointed to investigate possible Russian meddling in Trump's 2016 campaign, issued subpoenas to more than a dozen campaign officials in mid-October in an effort to collect any missing information from documents and emails. A source familiar with the matter admitted that this was Muller's first official order for information from the campaign.

Earlier, lawmakers in the House of Representatives passed the tax package aiming to cut taxes on businesses and individuals, marking the most significant achievement so far in the tax-reform effort for Republicans. Tax challenges now remain on the Senate side where Republicans hold a narrow majority, while disagreements on the tax code still exist. The Senate decision, though, is expected to be announced only after next week's Thanksgiving holiday.

In other news, the Dallas Fed President Robert Kaplan and the San Francisco Fed President John Williams expressed on Thursday their optimism on a rate hike at the next policy meeting in December. Particularly, Williams said that' a perfectly reasonable path for policy would be one more increase this year, and three next year', while Kaplan reiterated that he is 'actively considering' a rate hike in December.

The dollar index fell by 0.26% on the day to 93.69 as investors sought safer investments. Dollar/yen declined by 0.42%. Dollar/swissie retreated by 0.24% to 0.9916 while gold jumped by 0.26% to $1,282.10 per ounce. Housing figures out of the US due later in the day might bring some volatility to the currency.

The euro gained 0.20%, rising to $1.1792 on the back of a weaker dollar despite increasing political risks in Germany. The German Chancellor, Angela Merkel, missed Thursday's informal deadline to achieve an agreement on a three-way coalition, as the parties (CDU, FDP, Green party) disagreed on migration and financial issues. The negotiations will resume later on Friday and might stretch into the weekend. The markets will also keep a close eye on comments made by the ECB chief, Mario Draghi on Friday for any clues on the path of the monetary policy.

Pound/dollar went up by 0.30% to a two-week high of $1.3255 as the Brexit Secretary David Davis, speaking in Berlin, signaled some clarity on the Withdrawal bill in 'a few more weeks' and therefore raised hopes that Brexit negotiations might unblock.

Dollar/loonie was trading flat around 1.2755 ahead of CPI readings to be released during the late European session.

XAUUSD (1282.90): Gold prices continued to trade flat within the 1285 and 1274 levels. Price action is showing a steady ascending triangle pattern that is being formed. This puts the upside breakout that could push gold prices towards 1295 level. Resistance is seen at 1300 which could be tested upon a successful upside breakout. Alternately, in the event that gold prices slip below 1274, the ascending triangle could be invalidated pushing gold prices lower towards 1262 handle.

USDJPY (112.54): The USDJPY continued to extend the declines in early trading session today. This comes amid a brief period of consolidation near the 113.00 support level. It is likely that in the near term, USDJPY could be seen retracing back to 113.00 where resistance could be established. Support to the downside is seen at 112.00 level. On the daily chart, USDJPY is seen breaking out from the rising wedge pattern. The downside target is seen at 110.50 region which could see further declines in store.

EURUSD (1.1807): After retreating from the 1.1800 handle, the EURUSD posted a decline yesterday. However, price action soon reversed the losses in early Asian trading session rallying back to the 1.1800 level. The retracement saw EURUSD briefly attempting to test the resistance level of 1.1843 - 1.1822. With the resistance level holding out, we expect the EURUSD to remain range bound supported above 1.1710 - 1.1688 region. However, with the falling trend line being breached, we expect that an upside breakout in prices.

The US house plan passed the much anticipated tax reforms plans on Thursday. The tax reforms are expected to see corporate tax being cut to 20% from the current 35% including other tweaks in an attempt to make businesses more competitive and attractive in the United States. The bill was passed with 227 votes in favor and 205 votes against.

The tax reforms bill did not garner much attention in the currency markets. On the economic front data, yesterday showed that the Eurozone final CPI was confirmed at 1.4% while core CPI was seen at 0.9%, unchanged from the flash estimates.

Looking ahead, the data today includes a speech by ECB President Mario Draghi. The economic calendar is quiet with the exception of Canada's inflation data due later in the day.

EUR/USD

Current level - 1.1806

My outlook is bearish below 1.1870 hurdle, for another dip lower, towards 1.1730 support area.

USD/JPY

Current level - 112.52

Yesterday's failure at 113.25 resistance led to a renewal of the downtrend, currently heading towards 111.60 area. The 113.25 peak is already crucial about the development of the slide from 114.70.

GBP/USD

Current level - 1.3231

The intraday bias is positive, for a test of 1.3340 major hurdle. Crucial on the downside is 1.3130.

Sunrise Market Commentary

• Rates: Cautiousness ahead of the weekend?
  US Treasuries outperform this morning as US political risk showed another dimension. Risk sentiment will to continue to play a key role today. The proof of yesterday's risk rebound is in today's eating. We remain suspicious about the sustainability of the move (bull trap?) and have an upward bias for bond trading going into the weekend.
• Currencies: Dollar fails to extend rebound
  The dollar regained slightly further ground yesterday, but the move was unconvincing given the moves on other markets. The potential positive impact from the progress in Congress on a tax bill is counterbalanced by political uncertainty on the investigation versus the Trump campaign team regarding the Russia links. Dollar sentiment remains fragile

The Sunrise Headlines

• US stock markets followed the general risk rebound and closed around 0.8% higher with Nasdaq outperforming (+1.2%). Asian bourses rally further overnight with China underperforming.
• The US House passed a bill that would usher in the most far-reaching overhaul of the US tax system in 31 years. After the House's passage of tax legislation, the Senate finance committee approved its own bill, enabling Senate majority leader McConnell to bring it to the floor for debate the week after next.
• Special counsel Robert Mueller's team in mid-October issued a subpoena to President Trump's campaign requesting Russia-related documents from more than a dozen top officials, according to a person familiar with the matter.
• Corporate bonds may make up a larger share of the ECB's asset purchase programme from January when it will halve the size of the scheme to €30 bn per month, ECB governing council member Nowotny said.
• China's central bank injected $47bn into its financial system yesterday, its largest intervention in nearly a year, in an effort to calm investor fears that the crackdown on debt-fuelled growth would put a break on expansion.
• Investors retreated from high-yield bond funds last week as a sell-off rippled across the $1.3tn asset class, pulling money from the vehicles at the fastest pace in more than three years.
• Today's eco calendar contains US housing starts and building permits. ECB Draghi and ECB Weidmann are scheduled to speak.

Currencies: Dollar Fails To Extend Rebound

Dollar fails to extend rebound

An improvement in global risk sentiment and a rise in US yields supported a modest USD rebound yesterday. (US) data were mixed and had no significant impact on trading. EUR/USD finished the session at 1.1770 (from 1.1791). USD/JPY finished at 113.06 (from 112.88). So, the dollar traded off Wednesday's lows, but the rebound was far from impressive.

Asian markets show somewhat of a diffuse picture overnight. Most indices opened with good gains in the wake of yesterday's strong WS close. However sentiment dwindled throughout the session. Mainland China indices even trade in the red as the PBOC added liquidity to the system. The dollar came under pressure early in Asia on headlines that President Trump's election campaign received a subpoena of special Counsel Robert Mueller on the links between the campaign leaders and Russia. USD/JPY dropped from the 113+ area and set a minor new low for the week in the 112.40 area (currently 112.55). EUR/USD returned north of 1.18.

The eco calendar is thin today. The EMU current account is no market mover. US housing starts and permits are expected to rebound after a mediocre performance of late. These data will only be of second tier importance for USD trading. There were quite some conflicting headlines overnight from the US. Congress made some progress on a tax reform bill, but there was negative political noise from Special council Mueller's subpoena. Asian equity markets modestly trade in positive territory, but the intraday swings suggest some underlying uncertainty. It's far from sure that the risk rally will continue in Europe and/or in the US. It looked that the dollar could enter calm waters yesterday after a potential ST trend reversal sign on Wednesday. The dollar indeed regained slightly further ground, but the gains were unconvincing. The overnight price action also suggests that underlying sentiment on the US currency remains fragile. The dollar at least doesn't receive much support from a rise in ST US yields/interest rate differentials. We keep a close eye at the 1.1861/80 top. This level can again come under pressure if risk sentiment turns negative again. The overnight price action in USD/JPY doesn't give much comfort for USD bulls

From a technical point of view, EUR/USD set a new post-ECB low on Tuesday last week, but the move petered out. EUR/USD this week regained intermediate resistance at 1.1690/1.1837, but the 1.1880 MT correction top was left intact. A break above the latter would suggest a full retracement to the 1.2092 correction top. We don't preposition for such a scenario yet unless there comes real negative news from the US. Wednesday's intraday price action suggested that a ST EUR/USD top could be in place , but this isn't confirmed yet. We look out whether 1.1861/1.1880 resistance can do the job. USD/JPY's momentum was positive in past months. The pair regained 110.67/95 resistance and tested the 114.49 MT range top. The attempt failed. A sustained break would improve the technical picture. However, last week's price action was unconvincing despite a solid interest rate support. The pair dropped temporary below the 112.96 support early this week and struggles to prevent further losses. We see no sign yet of a sustained USD/JPY rebound.

EUR/USD fails to extend Wednesday's correction

EUR/GBP

EUR/GBP declines off 0.9033 range top

EUR/GBP traded in the mid 0.89 area yesterday morning, off Wednesday's top. Sterling profited from the better risk sentiment. Wednesday's potential trend reversal signal in EUR/GBP (and in EUR/USD) also weighed on the euro cross rates. UK retail sales were marginally stronger than expected at 0.3% M/M, but printed the first negative Y/Y reading since 2013 (-0.3%). Sterling finally gained slightly further ground, especially against the euro. Press headlines indicating that UK and EU politicians acknowledge the need for an orderly, well-organised Brexit may have been slightly supportive for sterling. EUR/GBP closed the session at 0.8921. Cable finished the day at 1.3195.

There are no important UK data today. The focus for sterling trading will on politics/Brexit. UK PM May will meet several EU leaders, including EU president Tusk, at a summit on Labour and social reform in Gothenburg. It is unlikely that there will be an outright agreement e.g. on the amount of the divorce bill. However, politicians from both sides might hold a positive tone after informal meetings, indicating further progress in the run-up to the EU summit. We expect sterling to hold a waitand see modus. Investors probably don't want to be positioned aggressively short sterling as more constructive Brexit news remains a potential positive event risk for sterling. In technical trade, sterling might regain some further ground. We changed our ST bias on EUR/GBP from positive to neutral yesterday. We maintain this assessment. Further overall euro gains remain a risk to this approach.

MT technical: Sterling rebounded in September as the BoE prepared markets for a rate hike. This rebound ran into resistance and sterling declined again as markets anticipated that any rate hikes would be very gradual and limited. EUR/GBP trades in a 0.8733/0.9033 consolidation range. Earlier this week, the EUR/GBP rebound ran into resistance just ahead of the 0.9033 range top. The 0.9015/33 area might be tough to break short-term.

EUR/GBP: topside test rejected. Room for a further technical rebound of sterling?

Download entire Sunrise Market Commentary

Daily Pivots: (S1) 148.04; (P) 148.69; (R1) 149.29; More...

With 149.98 minor resistance intact, deeper fall is still expected in GBP/JPY for 146.92 support and below. Fall from 151.92 is seen as the third leg of the corrective pattern from 152.82. We'd expect strong support from 61.8% retracement of 139.29 to 152.82 at 144.45 to contain downside and bring rebound. On the upside, break of 149.98 resistance will turn bias back to the upside for 151.92/152.82 resistance zone instead.

In the bigger picture, medium term rebound from 122.36 is still expected to resume after corrective pull back from 152.82 completes. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. However, break of 139.29 will indicate rejection from 150.43 key fibonacci level. And the three wave corrective structure of rebound from 122.36 will argue that larger down trend is resuming for a new low below 122.26.

Daily Pivots: (S1) 132.71; (P) 133.08; (R1) 133.40; More....

Intraday bias in EUR/JPY remains neutral as range trading continues. On the upside, decisive break of 134.39/48 resistance zone will confirm medium term up trend resumption. In that case, 141.04 resistance will be the next time. On the downside, though, decisive break of 131.65 will confirm rejection from 134.20 fibonacci level and confirm near term reversal. And, in such case, intraday bias will be turned to the downside for 127.55 key support level.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will argue that the medium term trend has reversed and will turn outlook bearish for deeper fall back to 114.84/124.08 support zone at least.