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USDJPY (113.03): The USDJPY extended the declines yesterday as price action fell to the 113.00 support level. We expect the consolidation to continue near this support as USDJPY could potentially be seen posting further declines if there is a failure to rally above 113.00. The next main support is seen at 112.04 level which could be tested if the price level of 113.00 turns to resistance. The decline to the 112.04 followed by a move lower towards 111.74 could signal the correction to the downside. However, in order for USDJPY to post a new leg in the rally, price action will need to be supported firmly near 112.04 or near 111.74.

EURUSD (1.1778): The EURUSD rallied to a 4-week high yesterday as price tested the resistance level area of 1.1841 - 1.1822. However, price closed on a bearish note near this resistance level indicating a short term move to the downside. Support is seen near 1.1710 - 1.1688 which could be tested in the near term. The bias in EURUSD is now shifted to the upside, and we expect the currency pair to maintain its sideways range within these levels in the near term. Further gains can be anticipated only on a breakout above the resistance level. To the downside, the confluence of the trend line and the support level is expected to keep prices supported in the near term.

The euro currency maintained the bullish momentum from the previous day as price action briefly rallied above 1.1800 handle marking a 4-week high. However, the common currency gave up the gains by the day's close. Data from the US showed that consumer prices increased in October on both the headline and the core CPI. Based on the inflation data, the Fed is expected to confidently hike rates in December.

In the UK, the labor market data showed that the employment levels fell for the first time since the Brexit vote stoking fears of a slowdown in the labor markets. The unemployment rate was steady at 4.3% while wages managed to post a modest increase but still lags inflation.

Earlier today, the Australia jobs report showed that the unemployment rate fell to 5.4% while the monthly employment change showed 3.7k jobs being added, which was lower than forecast.

Looking ahead, the UK retail sales report will be coming out followed by the weekly unemployment claims from the US. The BoE Governor Carney will be speaking today including a number of Fed members.

The Aussie dollar showed little reaction on Australian jobs data which came mixed in October. Employment fell significantly, showing only 3.7K new jobs created in Oct, falling well below 17.5K forecast and upwards-revised Sep figure at 26.6K.

On the other side, unemployment fell to 5.4% in Oct, undershooting 5.5% forecast / Sep figure.

The pair bounced from new 4 ½ month low at 0.7567 but upside action was limited at 0.7600 zone and capped by falling hourly cloud.

Overall structure is bearish and shows scope for further weakness as weekly cloud’s twist (0.7470) attracts, with bears being reinforced by formation of 20/200SMA death-cross.

Fresh bears could travel to initial targets at 0.7535/16 (21 June trough / Fibo 76.4% of 0.7328/0.8124).

Meanwhile, extended consolidation with stronger upticks cannot be ruled out as slow stochastic is reversing from oversold zone on daily chart.

Rallies face hourly cloud (spanned between 0.7608/20) and should be ideally capped by falling 10SMA (0.7643).

Extended upticks should not exceed 0.7700 barrier (200SMA).

Batch of data from the US is due later today and watched for fresh signals.

Res: 0.7608, 0.7620, 0.7643, 0.7680
Sup: 0.7567, 0.7535, 0.7516, 0.7420

The Euro stands in red in early Thursday's trading and extends lower after previous day's strong upside rejection in the middle of daily cloud. Failure to sustain break in the cloud and subsequent quick pullback formed Shooting Star pattern which suggests pullback.

Today's easing confirms the scenario with dips expected to find solid support at 1.1740 zone (broken 100SMA/Fibo 38.2% of 1.1553/1.1859 upleg) which should ideally contain, as underlying bull-trend favors dip-buying before fresh attempts higher.

Extended pullback should hold above 1.1716/06 zone (converged daily Kijun-sen/Tenkan-sen) to keep bulls in play.

Near-term bias remains at the upside for final break above daily cloud (1.1877), reinforced by Fibo 61.8% of 1.2092/1.1553 descend, break of which is needed for strong bullish signal.

Traders are awaiting release of EU CPI data, which is key event for the Euro today and forecasted to stay within last month's levels.

Res: 1.1800; 1.1836; 1.1859; 1.1877
Sup: 1.1768; 1.1740; 1.1716; 1.1706

Sunrise Market Commentary

• Rates: Risk sentiment key for trading
  European stock markets remain fragile with the German Dax extensively testing first support yesterday. Asian sentiment suggests a risk rebound after a 7-day sell-off, but we are suspicious about the sustainability of such move (bull trap?). With normal correlations back in place, a risk rally could be slightly negative for core bonds today.
• Currencies: Euro finally running into resistance?
  The EUR/USD rally made an intraday U-turn yesterday. The jury is still out, but the technical picture of EUR/USD and EUR/GBP show tentative signs of a ST topping out process. The dollar (and sterling) might get some additional support if risk sentiment improves.

The Sunrise Headlines

• US stock markets closed around 0.5% lower, failing to really recover from opening weakness. Overnight, Asian risk sentiment improved with most indices gaining ground and Japan outperforming (+1%).
• Australia's jobless rate unexpectedly fell to 5.4% in October as fewer people sought work. Employment grew less than expected (+3.7K), but was driven by full-time positions (+24.3k) which boosted hiring this year.
• China's financial sector faces bubble risks, a government official warned and said a property tax may be on the cards in the near future as authorities extended their efforts to reduce a worrisome build-up of debt in the economy.
• The Republican effort to revamp the US tax code hit turbulence as two senators expressed misgivings over a bill hastily rewritten by leaders trying to placate rebellious moderates and conservatives.
• Merkel's running out of time to form a government. With her self-imposed end-of-week deadline to unlock coalition talks approaching, she'll meet heads of her potential “Jamaica” coalition to decide if a deal is possible
• Slovakia's government needs to take additional consolidation measures to meet its balanced budget goal in 2020 and risks overshooting goals in future years, the country's fiscal watchdog said.
• Today's eco calendar contains US weekly jobless claims, Philly Fed business outlook, industrial production and EMU CPI (final). More central bankers are scheduled to speak and Spain & France tap the bond market

Currencies: Euro Finally Running Into Resistance?

EUR/USD rally stalls ahead of key 1.1880 resistance

USD trading showed two faces yesterday. The euro rally/USD sell-off continued in Europe and early in US dealings. EUR/USD (temporary) cleared the 1.1837 post-ECB top. US retail sales and CPI were marginally better than expected. Initially it didn't help the dollar, but the USD sell-off gradually slowed. US equities bottoming out after an initial dip maybe helped to slow USD selling. EUR/USD reversed the earlier gains and closed the session at 1.1791 (from 1.1789). USD/JPY finished the day at 112.88 (from 113.46).

Asian risk sentiment improved this morning as the correction of the previous days lost momentum. Most regional indices show moderate gains with Japan outperforming. USD/JPY tries to regain the 113 mark. EUR/USD (1.1790 area) is little changed from yesterday's close. Australian labour market data were mixed. The unemployment rate declined further to 5.4% from 5.5%, but job growth disappointed. Still, AUD/USD rebounded to the 0.76 area, despite the overall comeback of the dollar.

The European and US eco calendars are modestly interesting today. In Europe, the final EMU October CPI is expected to be confirmed at 0.1% M/M and 1.4% Y/Y. (core unchanged at 0.9% Y/Y). The report probably won't be a market mover, but in theory it is no support for the euro. In the US, the jobless claims, the Philly Fed business outlook and the October production data will be published. Claims are expected to decline slightly to 235K. The Philly Fed outlook is expected to decline from 27.9 to 24.6, but remains at a healthy level. Production is expect to rise a decent 0.5% M/M. Today's US eco data are not the most important ones, but the intraday price swings to the data might be an indication whether dollar sentiment improves after the recent setback. We also look out whether the equity correction slows down. Of late, the dollar was often more sensitive to risk-off sentiment than the euro. The debate on the US tax bill remains a source of uncertainty. Earlier this week we had a cautious bias on the dollar. We considered the decline exaggerated given the data and the developments on other markets, but we didn't fight the ST negative USD momentum. The jury is still out, but yesterday's intraday price action suggests that the USD decline (EUR/USD rally) might be losing momentum. If confirmed, cautious EUR/USD sell-on-upticks can be reconsidered

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. Yesterday's intraday price action suggests that a ST trend reversal might develop. We look out whether the 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 yesterday dropped temporary below the 112.96 support, but the test is ongoing. We see no sign yet of a sustained USD/JPY rebound

EUR/USD: rebound stalls ahead of 1.1880 resistance. Tentative signs of a ST trend reversal

EUR/GBP

EUR/GBP running into resistance?

The UK labour market data showed a mixed picture yesterday. Wage growth (2.2% Y/Y) was marginally higher than expected, but remains low. The unemployment rate was stable as expected at 4.3%. Employment growth unexpectedly declined. Sterling lost some further ground after the publication of the data. EUR/GBP jumped temporary north of 0.90, but the gain could not be sustained. Later in the session, the EUR/USD correction also dragged EUR/GBP back south. The pair even closed the session at 0.8952 (from 0.8961). Cable maintained the recent consolidation pattern and finished at 1.3171.

October UK retail sales are expected little changed (0.2% M/M and -0.5% Y/Y) after a substantial setback in September. Monthly swings were quite big recently. The bar of the consensus estimate isn't too high. In addition, we have the impression that eco data have to be really weak for sustained further sterling losses at this stage. Sterling is in some kind of wait-and-see modus awaiting more clear signs from UK politics and from the progress in the Brexit negotiations. Markets will also continue to keep an eye at the debate on the 'EU Withdrawal Bill' in the UK Parliament. We had a EUR/GBP positive bias short-term. We have the impression that the upside momentum is easing. A break above the 0.9015/33 area might not be that easy shortterm. This would especially be the case if the EUR/USD rally slows. We take a more neutral approach short-term.

MT technical: Sterling rebounded in September as the BoE prepared markets for a rate hike. This rebound ran into resistance as markets anticipated that any rate hikes would be very gradual and limited. This view was confirmed at this month's BoE policy meeting. EUR/GBP currently trades in a 0.8733/0.9033 consolidation range. A downside test of this range was rejected. We assume that the 0.8733-0.8652 support will be tough to break. We change our short-term bias from buy-on-dips to neutral as the pair came close to the 0.9033 ST range top and as this test was rejected yesterday.

EUR/GBP nears MT range top. Time for the rebound to take a breather?

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

With 149.98 minor resistance intact, deeper fall is 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) 132.74; (P) 133.30; (R1) 133.65; More....

EUR/JPY ist still bounded in n range of 131.65/134.48 and intraday bias remains neutral at this point. 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.

USDJPY is in a broad neutral trend as the market remains trapped in a range between 108–114 during the past 8 months. In the short-term, the pair rose towards the upper end of the range but has found strong resistance and reversed back down from a high of 114.73.

The bullish phase from 107.31 has turned neutral with prices currently consolidating mostly in the 113-handle. Yesterday’s dip below 113 has found support at the 50-day moving average resulting in a bounce back to test this key level.

Prices need to move further above the key 113 level in order to ease immediate downside pressure. This level is important since it is the 23.6% Fibonacci retracement of the upleg from 107.31 to 114.73. Failure to rise above it could result in prices threatening to break below the 50-day MA. A drop below the 200-day MA would bring further losses towards 111 (the 50% Fibonacci) and 110.15 (61.8% Fibonacci), moving towards the lower end of the range.

A rise above 114 would help USDJPY gain upside momentum for a re-test of the 114.73 high and then from here the overall trend would turn bullish to target the next high at 118.66.

In the big picture, USDJPY remains range-bound on the daily chart but short-term price moves have been bullish and trend indicators are bullish after the crossover of the 50-day MA above the 200-day MA.

Daily Pivots: (S1) 0.8792; (P) 0.8840; (R1) 0.8889; More...

Intraday bias in EUR/GBP remains neutral as it's staying in range of 0.8732/9032. With 0.9032 resistance intact, deeper decline is mildly in favor in the cross. Break of 0.8732 will resume the decline from 0.9305 and target 0.8303 key support level. However, on the upside, decisive break of 0.9032 will confirm completion of the decline from 0.9305. In such case, intraday bias will be turned back to the upside for retesting 0.9305 key resistance.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.