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Currency pair USD/JPY

The USD/JPY failed again to break above the 114.50-115 resistance zone, which is a major break or bounce spot. A rising wedge reversal chart pattern is still present (blue/orange lines) and includes a divergence pattern between the tops (purple line). A break below support could indicate a larger bearish move whereas an uptrend continuation seems most likely above resistance (red)

The USD/JPY is building a triangle pattern which is marked by support and resistance trend lines. A bullish break could see price retesting the previous top whereas a bearish break could see a wave 3 (pink) emerge.

Currency pair EUR/USD

EUR/USD broke below the bottom (dotted green) but is now building a new retracement. A bullish break above the resistance trend lines could indicate a larger retracement. If price stays below it, then a bearish continuation towards the 38.2% Fibonacci level at 1.15 is still possible.

The EUR/USD seems to be building a wave 1-2 (orange) correction and a break below support (green) could see price continue with the downtrend.

Currency pair GBP/USD

The GBP/USD is in a small and large wedge. A break below the support trend line (green) of the smaller triangle could see bearish breakout towards support (blue).

The wave 3 (brown) could occur if price shows bearish momentum and breaks the trend line.

Sunrise Market Commentary

• Rates: Watch out for stock markets
  We expect trading to be sentiment-driven and technical in nature. Stock markets could influence core bond markets if yesterday's bearish engulfing pattern in eg the German Dax results in more profit taking today. Safe haven flows are positive for bonds in this scenario and could trigger a new test of 163.43 resistance in the Bund.
• Currencies: EUR/USD keeps cautious downside bias
  Trading in the major dollar cross rates will again be technical in nature today as there are no important eco data. EUR/USD set a minor correction low yesterday. The move was not spectacular, but we see room for some by default EUR/USD selling if there is no high profile negative news from the US

The Sunrise Headlines

• A rally just before the bell resulted in an unchanged close for the S&P and Dow. Nasdaq (-0.27%) underperformed. Most Asian stock markets trade near opening levels overnight with China outperforming (+0.5%).
• China's exports rose at a slower pace in October as expected, but import growth beat forecasts in a sign domestic demand remained robust despite Beijing's crackdown on pollution that analysts say will reduce factory output and crimp overall economic growth.
• President Trump opened a door to negotiations with North Korea, shifting his tone while the US Navy prepared for a rare display of strength nearby, in a carrot-and-stick approach to the nuclear stand-off.
• Senate Republicans are considering a different approach to overhauling the tax code than their House colleagues, weighing a delay in the implementation of a corporate tax cut and other measures to alter the cost and impact of the plan.
• Philly Fed governor Harker suggested he'll likely support a third 2017 interest-rate increase next month, but said he wants to see signs of inflation moving higher before backing tightening next year.
• Catalan secessionist parties failed to agree on a united ticket to contest a December snap regional election, making it more difficult to rule the region after the vote and press ahead with their collective bid to split from Spain.
• Today's eco calendar is very thin with only a policy meeting by the RBNZ. Germany, Portugal and the US tap the market

Currencies: EUR/USD Keeps Cautious Downside Bias

EUR/USD maintains cautious downward bias

EUR/USD and USD/JPY trading was technical in nature yesterday. There were no important data in EMU or in the US. Interest rate differentials or equities were also unable to give guidance. EUR/USD touched a minor post-ECB correction low, but there were hardly any follow-through losses. The US equity rally ran into resistance and so did the dollar. EUR/USD closed the session at 1.1587 (from 1.1610). USD/JPY finished the session at 114.01 (from 113.71).

Asian equities trade mixed to slightly higher overnight. Several regional indices are still holding at/near multi-year record levels. Chinese trade data were mixed. Exports missed consensus and imports were close to expectations. The politically sensitive surplus with the US declined, at least on a monthly basis. The last up-leg in the global risk rally had only a limited impact on core bond yields. USD/JPY struggles to hold above the 114 level (currently 113.85). A retest/break of the 114.49/73 resistance remains a high hurdle. EUR/USD (1.1590 area) also trades off yesterday's correction low. Uncertainty on the progress of the US tax reform might weigh on the dollar.

The eco calendar is again very thin today. There are only second tier eco data in Europe and the US. Political developments, global risk sentiment and technical considerations will have to guide USD trading. The US currency showed a mixed picture over the previous days. USD/JPY failed to break above the MT range top (114.49/114.73). EUR/USD held a tight range close to the post-ECB low. A high absolute interest rate differential apparently forced some EUR/USD longs to scale back exposure, keeping EUR/USD under (modest) downside pressure There is no obvious driver for trading today. Similar mechanisms that were at work yesterday might continue to do their job. The wide positive interest rate differential should give the dollar downside protection unless there is high profile US negative news. A less positive risk sentiment and/or further doubts on the implementation of the US tax bill will probably be more negative for USD/JPY than for performance of the dollar against the euro. (Risk of a EUR/JPY correction?).We maintain a EUR/USD sell-on-upticks bias.

From a technical point of view, EUR/USD dropped below 1.1670/62 support, but no convincing follow-through dollar gains occurred. The pair dropped temporary to a new post-ECB low yesterday. A sustained break would confirm that the recent EUR/USD uptrend is broken. EUR/USD 1.1423 (38% retracement of 2017 rise) is the next downside target on the charts. USD/JPY's momentum was positive in past months. The pair regained 110.67/95 resistance. The pair tested the 114.49 MT range top, but the attempt failed. A sustained break would improve the technicals. We remain cautious to preposition for further USD/JPY gains.

EUR/USD maintains very gradual downside bias

EUR/GBP

Sterling rebound slows

Sterling showed a diffuse trading pattern yesterday. The UK currency initially ceded ground against the dollar, but gained a few ticks against an overall soft euro. The UK eco data were in line (Halifax house prices) to weaker than expected (very poor BRC retail sales). The impact of the data was limited, but the poor BRC sales probably helped to stop the GBP-comeback from the end of last week and earlier this week. EUR/GBP dropped temporary below 0.8800, but finished the session at the big figure. Cable initially dropped to the 1.3110 area, but the decline was reversed as the dollar declined later in the session. The pair closed the session little changed at 1.3166. In the end, the intraday swings in cable and in EUR/GBP were primarily USD and euro moves rather than sterling inspired price action.

There are no important eco data in the UK today. The focus will be on UK politics and on the restart of the Brexit negotiations. Sterling performed rather well on Friday and early this week. Investors apparently hope on some progress in the next round of Brexit negotiations. We don't preposition for such a scenario yet. We expect EUR/GBP to stabilize/look for a bottom. A further decline of EUR/USD might hamper a EUR/GBP rebound 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 last week's BoE policy meeting. EUR/GBP currently trades in a 0.8733/0.9033 consolidation range. A downside test of this range was rejected last week. We maintain the view that the 0.8733 -0.8652 support area will be tough to break in a sustainable way. A EUR/GBP buy-on-dips approach is favoured. EUR/GBP 0.9023/33 is the first important resistance for the EUR/GBP cross rate

EUR/GBP reverses most of post-BoE sterling decline, but no important technical levels are hit

Download entire Sunrise Market Commentary

The U.S dollar has moved lower against the Japanese yen, following reports that Senate Republican leaders in the United States are considering a one-year delay in the implementation of the U.S corporate tax cut. The USDJPY pair currently trades around the 113.80 level, after finding interim support at the 113.64 level. Traders now look to President Trump's response to possible delays in his administration's tax reform plan, and next directional move in the U.S dollar index.

The USDJPY pair is intraday bearish while trading below the 114.24 level, further declines towards the 113.68 and 113.33 levels are likely while price-action trades below this key level.

Should price-action on the USDJPY pair start to trade back above the 114.24 level, further upside towards the 114.50 and 114.75 seems likely.

The euro has recovered upside momentum against the U.S dollar, amidst speculation that the proposed U.S corporate tax cut may be delayed. The EURUSD pair currently trades just below the 1.1600 handle, after falling to a 4-month trading low on Tuesday, hitting 1.1553. The European and United States economic calendars remain fairly light this week, however the EURUSD pair is likely to be driven by the U.S political events, and the next large directional move in the U.S dollar index.

The EURUSD pair remains bearish on an intraday basis while trading below the 1.1598 technical level. Further declines towards the 1.1572 and 1.1553 levels would seem most likely.

Should price-action start to trade back above the 1.1598 level, further EURUSD buying towards the 1.1610 and 1.1640 levels is likely to occur.

A stream of economic data will make its way through the financial markets on Wednesday, but it likely won't be enough to generate significant volatility on its own. Instead, investors will be considering the latest battle on Capitol Hill over President Trump's proposed tax reforms.

The Trump regime is aiming to revamp the nation's tax code before year's end, a feat that will prove exceedingly difficult as Democrats and even members of his own party oppose key provisions. Chief among them are stipulations over state and local tax deductions.

On Tuesday, the Joint Committee on Taxation concluded that tax cuts for lower and middle-income earners would gradually fade over the next decade.

On the economic calendar, France will release its latest trade figures at 07:45 GMT. About 15 minutes later, Spain will report on industrial output for the month of September.

Portugal is also slated to release its latest unemployment data sometime during the day.

Meanwhile, the European Central Bank (ECB) will be holding its non-monetary policy meeting on Wednesday. The ECB's last policy meeting concluded with a reduction in the size of its monthly bond-buying program, but a likely extension of its duration. The euro declined sharply following the news.

Shifting gears to North America, Canada will issue its latest housing starts and building permits data at 13:15 and 13:30 GMT. Both reports are expected to show a decline in the monthly rate.

No major US reports are scheduled for Wednesday. The US Energy Information Administration (EIA) is expected to report on weekly crude inventories at 14:30 GMT. The weekly report is expected to show a drawdown of 2.8 million barrels in the latest period ended 3 November.

Earlier in the day, China reported its trade balance for the month of October. Beijing's trade surplus rose to $38.2 billion in October from $28.61 billion the month before. Exports rose 6.9% annually during the month, while imports climbed by 15.9%.

EUR/USD

The euro fell back below 1.1600 on Wednesday, although losses were relatively contained as the US dollar failed to generate significant momentum. The EUR/USD exchange rate was last seen hovering just below 1.1600. The pair faces immediate support at 1.1575, followed by 1.1510. On the opposite side of the ledger, resistance is likely seen at 1.1630 and 1.1670.

USD/CAD

The Canadian dollar lost momentum on Tuesday following sizable gains at the start of the week. The USD/CAD was back to trading well below 1.2800 as markets anticipated upcoming Canadian data. Near-term support is located at 1.2714, which is the low from 6 November.

US OIL

After three consecutive gains, oil prices softened slightly on Tuesday. However, the uptrend remains firmly intact, with US crude now approaching $60 a barrel. Investors should pay close attention to the fundamental indicators for fresh trading catalysts.

Key Highlights

• The Euro faced a lot of offers near 133.00 against the Japanese Yen, and started a downside move.
• There is a major bearish trend line forming with resistance at 132.40 on the 4-hours chart of EUR/JPY.
• Euro Area's Retail Sales in Sep 2017 increased 0.7% (MoM), more than the forecast of +0.6%.
• Spain's Industrial Output Cal Adjusted for Sep 2017 will be released today, which is forecasted to increase by 3.2% (YoY).

EURJPY Technical Analysis

The Euro failed to move above the 133.00 resistance zone against the Japanese Yen. The EUR/JPY is under pressure and eyeing further declines toward 131.50.

Looking at the 4-hours chart, the pair recently failed to break a major bearish trend line with current resistance at 132.40. Both the 100 (red) and 200 (green) simple moving averages (H4) acted as a key resistance near 132.85.

The pair also failed to settle above the 50% Fib retracement level of the last drop from the 134.49 high to 131.45 low.

Therefore, it seems like the pair has completed a correction near 133.00 and it will most likely head back towards 131.50 or even test 130.00.

Euro Area Retail Sales

Recently in the Euro Area, the Retail Sales report for Sep 2017 was released by the Eurostat. The market was looking for an increase of 0.6% in sales compared with the previous month.

The actual result was better than the forecast, as there was a rise of 0.7% in sales. Looking at the yearly change in Sep 2017, there was a rise of 3.7% in sales, more than the forecast of 2.7%.

The report added:

The 0.7% increase in the volume of retail trade in the euro area in September 2017, compared with August 2017, is due to rises of 1.3% for “Food, drinks and tobacco” and of 0.5% for non-food products, while automotive fuel fell by 0.4%.

The Euro and EUR/JPY pair remains in the bearish zone, and the latter one can even trade towards 131.50 in the near term.

Economic Releases to Watch Today

France Trade Balance for Sep 2017 – Forecast €-4.8B, versus €-4.5B previous.

Spain’s Industrial Output Cal Adjusted for Sep 2017 (YoY) – Forecast +3.2%, versus +1.8% previous.

Canada’s Housing Starts s.a. for Oct 2017 (YoY) – Forecast 210.0K, versus 217.1K previous.

Market movers today

There are very few potential market movers on the global front today. The Reserve Bank of New Zealand is widely expected to keep the official cash target rate unchanged at 1.75% at today's meeting.

Oil prices are on the rise on supply concerns and this afternoon we will get oil inventory data from the EIA, which may get more at tention than usual due to the recent price increase.

US President Trump's 12-day tour of Asia continues wi th Beijing/China next on the list. This visit should see both trade tensions and geopolitical issues on top of the agenda. In the US, Republican work on sketching a tax reform continues here on the one -year anniversary of Trump's election.

In the Scandi sphere, focus will be on Swedish releases for Prospera inflation expectations and household consumption (see next page).

Selected market news

Markets consolidated after a decent run in risk appetite in recent days with little data releases to rock the boat. US equity markets were mixed whereas Asia looks set to end the session slightly higher after the Hang Seng Index was lifted by the IPO of e-book maker China Literature. Momentum in oil prices eased a bit with Brent now trading a tad off the USD64/bbl mark. Recent USD gains eased a bit with EUR/USD just off 1.16 this morning. The US Treasury curve continued to flat ten yesterday with the 30Y down close to 3bp and the 10Y yield closing at 2.32%.

During his visit in South Korea, US President Trump has kept a reasonably nonconfrontational tone, taking the opportunity to encourage the rest of the Asian region to join the US in distancing itself from the North Korean regime. While warning the Kim Jong-un regime it may be making a ‘fat al miscalculation' with its stance, Trump also stressed that he is ready to offer North Korea ‘a much better future' provided it ends it s nuclear scheme. Trump is set to continue his trip of Asia, heading for China today.

Chinese trade data released overnight showed both exports and imports falling on an annual basis in the month of October. This suggests that Chinese growth momentum has worn off recently as the latest manufacturing PMI readings have been pointing to. CNY appreciation earlier in the year may be starting to act as a drag on exports.

Yesterday in a media interview, the Riksbank's Cecilia Skingsley noted that the decent Swedish growth environment al lows the Swedish central bank to deviate from the ECB as Riksbank policy should not continue to be ‘a caravan' to ECB policy. This sent EUR/SEK lower and SEK markets will most likely remain very sensitive to such comments given that the Riksbank has largely proved a shadow of the ECB in recent years,with a view to not least keeping the krona in check.

Daily Pivots: (S1) 149.70; (P) 150.01; (R1) 150.37; More

Intraday bias in GBP/JPY remains neutral first. At this point, we're still favoring the case that recovery from 146.92 has completed at 151.92. Another fall is expected and below 148.65 should send GBP/JPY through 146.92. 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, above 151.92 will retest 152.82 high 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) 131.79; (P) 132.10; (R1) 132.37; More....

EUR/JPY is staying in range trading below 134.48 and intraday bias remains neutral. Overall, decisive break of 134.39/48 resistance zone is needed to confirm up trend resumption. Otherwise, even in case of rebound, near term outlook is neutral at best. On the downside, 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.

Weekly
    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 7 Mar 2017
    •    Trend bias: Sideways

Daily
    •    Last Candlesticks pattern: Morning star
    •    Time of formation: 9 May 2017
    •    Trend bias: Near term up

USD/CHF – 0.9992

As the greenback has maintained a firm undertone after surging to 1.0039 late last month, adding credence to our bullish view that recent rise from 0.9421 low would resume after consolidation, although pullback to 0.9900-10 cannot be ruled out, reckon the Kijun-Sen (now at 0.9872) would limit downside and 0.9820-30 should hold, bring another rise later, above said resistance at 1.0039 would extend the rise from 0.9421 low for retracement of early decline from 1.0344 to resistance at 1.0100, then 1.0150 but reckon 1.0200-10 would hold from here.

On the downside, whilst initial pullback to 0.9935-40 and possibly 0.9900 cannot be ruled out, reckon the Kijun-Sen (now at 0.9872) would limit downside and renewed buying interest should emerge around 0.9820-30, bring another upmove later. Below support at 0.9737 would defer and signal top has been formed instead, bring at least a retracement of recent rise to 0.9700, then test of minor support at 0.9670. A drop below this level would suggest the rise from 0.9421 has ended, risk further fall to 0.9642 support but reckon downside would be limited to 0.9590-00 and support at 0.9565 should remain intact.

Recommendation: Buy at 0.9830 for 1.0030 with stop below 0.9730.

On the weekly chart, the greenback has traded narrowly after meeting resistance at 1.0039, suggesting initial minor consolidation would be seen, however, our near term bullish view remains for the rebound from 0.9421 low to extend further gain towards resistance at 1.0100-08, having said that, near term overbought condition should prevent sharp move beyond previous resistance at 1.0171 and 1.0200-10 should hold from here, risk from there is seen for a retreat to take place later.

On the downside, although initial pullback to 0.9935-40 and then 0.9900 is likely, reckon 0.9820-30 would limit downside and bring another rise later. Below the Tenkan-Sen (now at 0.9749) would bring test of 0.9730-37 (current level of the Kijun-Sen and previous support) but break there is needed to signal top is formed and suggest first leg of rebound from 0.9737 has ended and bring weakness to 0.9690-00, however, reckon support at 0.9642 would limit downside and price should stay above support at 0.9565 and the greenback shall stage another strong rebound next month.