Sample Category Title

Daily Pivots: (S1) 0.8793; (P) 0.8820; (R1) 0.8849; More...

Intraday bias in EUR/GBP remains mildly on the downside for 0.8745 support. Break will resume whole fall from 0.9305 and target 0.8303 key support level. On the upside, above 0.8900 minor resistance will extend the corrective pattern from 0.8745 with another rise. But upside should be limited by 61.8% retracement of 0.9305 to 0.8745 at 0.9091 to bring fall resumption eventually.

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 another 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.

Sunrise Market Commentary

• Rates: Corrective upward bias remains in place
  Last week's failed test of key US yield resistance levels (10y & 30y) induced technical-inspired buying. We hold our corrective upward bias today even if US activity data are expected strong. The German Bund could profit from disappointing core inflation though we fear that the ECB's 9-month APP extension removed market relevance of EMU data.
• Currencies: Dollar rally against euro stopped for now
  The euro regained some ground yesterday, but couldn't take out key resistance. Today, the eco calendar is busy and pressure mounts on president Trump after the prosecutor indicted former campaign chief Manafort. With some key events in the next days, traders will be cautious to put on aggressive positions

The Sunrise Headlines

• US stock markets eventually closed up to 0.35% lower as the Tech rally lost steam. Asian stock markets recover from initial weakness (Chinese PMI's) and are currently mixed.
• The Bank of Japan kept its massive monetary stimulus program unchanged even as it trimmed its inflation forecasts, signalling further divergence ahead from its global peers.
• Growth in China's manufacturing sector cooled more than expected in October (PMI dropped to 51.6 from 52.4) in the face of tighter pollution rules that are forcing many steel mills, smelters and factories to curtail production over the winter. The non-manufacturing PMI declined to 54.3 from 55.4.
• Court documents show that interactions between Trump's campaign and Russia occurred earlier and were deeper than previously documented. Former campaign chair Manafort and his partner are under house arrest after pleading not guilty to tax crimes, money laundering, conspiracy and lying to the FBI. Former advisor Papadopoulos cut a plea deal weeks ago and is cooperating.
• Spain's state prosecutor accused sacked Catalan leader Puigdemont of rebellion and sedition as the former regional president travelled to Belgium with other members of his ousted administration and hired a lawyer there.
• The IMF has warned that the increasing use of exotic financial products tied to equity volatility by investors such as pension funds is creating unknown risks that could result in a severe shock to financial markets.
• Today's eco calendar contains EMU CPI inflation, unemployment rate and Q3 GDP. In the US, S&P CS housing data, Chicago PMI and consumer confidence are on the agenda.

Currencies: Dollar Rally Against Euro Stopped For Now

EUR/USD fights back, but gains inconclusive

EUR/USD managed to eke out modest gains yesterday, but key resistance played its role, meaning the advance isn't significant. A euro rally attempt in the morning didn't go far (1.1644) and gains were undone when German inflation was weak and surprised on the downside. Special prosecutor Mueller's unsealed indictment against former Trump campaign director Manafort and revelations former foreign policy advisor Papadopoulos had lied against the FBI and is now cooperating with the FBI should have been a dollar negative, but its precise impact is difficult to measure. Anyway, the dollar lost ground across the board in the US afternoon session. US equities dropped lower and the US-German yield spread narrowed further, common drivers of the pair. EUR/USD moved back higher to 1.1660 and closed at 1.1652, a 45 ticks daily gain. The key resistance (1.1662) was untested. USD/JPY traded sideways until in the US session when lower yields and equities favoured the yen. USD/JPY closed at 113.20 versus 113.67 on Friday.

Overnight, Asian equities trade narrowly mixed, not too far from WS modest closing losses. US Treasuries are insignificantly higher. That's not enough to move USD/JPY , which is trading flat at 113.20, ahead of BOJ Kuroda's press conference. The BOJ, as expected, kept its policy unchanged, but revised down its inflation forecasts. The euro is weaker against dollar (1.1625 from 1.1650) and sterling (0.8805 versus 0.8821). EUR/USD failed yesterday to recapture the 1.1662 neckline head and shoulder formation, teasing Asian traders to sell the euro, but dollar gains are evaporating as the European opening nears. Eco calendar busy (see fixed income part: details)

We see some upside risk to Q3 GDP (0.6% Q/Q instead of 0.5% Q/Q?) that will remain strong anyway, while euro area HICP inflation should surprise on the downside after yesterday's weak German HICP. The key for market reaction will be the core inflation. Has it declined too? If so the euro might weaken. In the US, consumer confidence will be strong, maybe stronger than expected, and Chicago PMI should be strong too, but off last month peak value. The Cost Employment Index is expected to have rebounded. It is no strong market mover, but an upward surprise combined with strong activity data may be dollar positive

Dollar to make more corrective gains versus euro?

The technical picture points to more corrective gains of the dollar versus euro, but some hurdles may avoid these gains to crystallise today or in the next days. The FOMC meeting on Wednesday, while likely a non-event will keep traders cautious, as does the imminent choice on Thursday (?) of the next Fed chairman and the US payrolls on Friday. The judicial action in the Trump-Russian election campaign affaire is a wildcard. Regarding the eco data, activity data will be strong in the US and EMU, but a downward surprise in EMU core inflation could give the dollar an advantage today.

Longer term, the dollar failed to gain against the euro despite widening interest rate differentials since early September. This trading dynamic was broken after the ECB decision and extended on Friday. Policy divergence between the ECB and the Fed is again on the radar. A EUR/USD sell-on upticks bias remains favoured with 1.1662 an interesting level. Any additional rate support for the dollar will probably be modest near term, especially if Powell is nominated to succeed Yellen. So, further EUR/USD decline might develop gradually.

EUR/USD broke below 1.1662 support. Return action yesterday failed, but test may not be over.

EUR/GBP

Technicals: EUR/USD uptrend broken

From a technical point of view, EUR/USD dropped below 1.1670/62 support, which was re-approached yesterday. If the break is confirmed, it would signal that the uptrend in place since the turn of the year is broken, as the higher highs, higher lows pattern is shattered. EUR/USD 1.1423 (38% retracement of 2017 rise) is the next downside target on the charts. USD/JPY's momentum was positive in September. The pair regained 110.67/95 resistance, a positive. The 114.49 correction top is the next resistance. Sentiment improved last week, but the first test on Friday failed. We don't preposition for a sustained break higher.

Sterling in ST positive flow

Sterling was already for some days in a positive flow and that continued yesterday. The UK eco calendar is empty today. Earlier this morning, consumer confidence was slightly weaker in October (but as expected), while Lloyds business barometer increased to 26 from 23. These are no market movers. Nevertheless sterling traded overnight again with a minor positive bias against the euro. For today, impetus should come from euro trading. If weak inflation hits the euro overall, sterling may make some more gains. However after a four day winning streak, the going will get tougher. The upcoming BOE meeting on Thursday should protect sterling against a significant countermove. Ahead of the BOE we expect sideways trading in the 0.8743 to 0.9033 range maybe with slight sterling gains on the basis of the technical elements. We maintain a EUR/GBP buy-on-dip bias but are in no hurry to add exposure.

EUR/GBP staged a strong uptrend from April till late August with a top at 0.9307. Rising UK inflation and the BoE preparing markets for a rate hike caused a sterling rebound, but it has run its course. EUR/GBP recently tried to regain the 0.90 area, but there were no follow-through gains. The drop below the 0.8855 area (neckline minor double top) on Friday may open the way for a return to 0.8743 or even 0.8652 supports. This area will be tough to break.

EUR/GBP: minor double top may push sterling correction a bit further. Still sell sterling on up-ticks.

Download entire Sunrise Market Commentary

Daily Pivots: (S1) 1.5115; (P) 1.5146; (R1) 1.5185; More....

The corrective pull back from 1.5392 is still in progress and could extend lower. But after all, with 1.4949 support intact, outlook remains bullish and medium term rally is still in favor to resume. On the upside, break of 1.5392 will resume medium term rise from 1.3624 and target 61.8% projection of 1.3624 to 1.5226 from 1.4949 at 1.5939 first. However, decisive break of 1.4949 will carry larger bearish implication and turn bias to the downside.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term top has completed at 1.3624. Rise from 1.3624 is expected to extend to retest 1.6587. However, break of 1.4949 support will dampen our view and argue that rise from 1.3624 has completed. In that case, EUR/AUD would turn southward for retesting 1.3624 low.

Daily Pivots: (S1) 1.1562; (P) 1.1590; (R1) 1.1613; More...

EUR/CHF's corrective pull back from 1.1709 is still in progress and could extend. But after all, as long as 1.1483 minor support holds, outlook remains bullish and we'd expect further rally ahead. Break of 1.1709 will target 1.2 key level. However, break of 1.1483 will be an early sign of reversal. In that case, deeper decline should be seen back to 1.1355 support.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1355 support holds. However, break of 1.1355 will indicate medium term topping. In that case, EUR/CHF should head back to 55 week EMA (now at 1.1067) and possibly below.

GBPUSD maintains a neutral bias in the short term and has been trading sideways in the 1.31 to 1.33 range during the past 3 weeks.

Technical indicators on the daily chart are neutral, suggesting that broader range trading will continue for now. RSI and MACD are both moving sideways and are slightly in bearish territory.

Based on Fibonacci analysis, the current range is between the 32.8% and 61.8% Fibonacci retracement levels of the upleg from 1.2773 and 1.3656.

The pair has managed to trade above the key 1.3000 level since declining from the September 20 high. This looks like a strong support level, which if broken to the downside would bring weakness in the market and put the focus on the 1.2773 low.

To the upside, prices need to clear 1.3319 (38.2% Fibonacci) and make a firm break of 1.3448 (23.6% Fibonacci) in order to see a re-test of the 1.3656 high. At this stage, GBPUSD would resume the uptrend that started from 1.2773.

The neutral bias is expected to continue in the short-term. The market needs a catalyst to break out of either side of the current range in order to see a significant move either above 1.33 or below 1.30 in the near term.

The U.S dollar continues to move lower against the Japanese Yen, as the U.S dollar index remains under selling pressure, following the Russian collusion story surrounding the Trump administration. The USDJPY pair currently trades around the 113.20 level, after the Bank of Japan announced no change in monetary policy in today's policy meeting. Investors now await the release of Consumer Confidence data from the U.S economy.

The USDJPY pair remains intraday bearish while trading below the key 113.33 level. Further declines towards 112.90 and 112.27 should be expected while trading below the 113.33 level. Extended intraday support is found at the 111.79 level.

Should the USDJPY trade back above the 113.33 level, further buying should be expected towards the 113.57 and 113.89 levels.

The euro continues to remain under selling pressure against the U.S dollar, despite rallying to 1.1658 during late Monday trading. The EURUSD pair currently trades around the 1.1630 level, as traders await a raft of high-impact economic data coming out from the eurozone today. During the European trading session, we see the release of key Eurozone Inflation, Gross Domestic Product and Unemployment figures for the month of October.

The EURUSD sellers retain intraday control of the pair while price-action trades below the 1.1644 technical level. Further declines while below this key level can be expected towards the 1.1610 and 1.1580 support zones.

Should intraday EURUSD move price-action above the 1.1644 level for a sustained period, further bullish advancement can be expected towards the 1.1680 and 1.1713 resistance points.

Eurozone data will dominate headlines on Tuesday, culminating in a quarterly GDP report that is expected to reaffirm the region's healthy recovery.

The European Commission's statistical agency will release preliminary third-quarter GDP figures at 10:00 GMT. The report is expected to show quarterly growth of 0.5%, following a gain of 0.6% in April-June. In annualized terms, this should translate into a 2.4% growth pace.

At the same time, the European government will report on unemployment and consumer inflation. Joblessness in the 19-nation euro is forecast to fall to 9% in September from 9.1% the previous month.

Meanwhile, the consumer price index (CPI) is projected to fall to 1.4% annually in October, down from 1.5% the previous month.

Italy will also release its latest batch of inflation data on Tuesday, while Greece will report on retail sales for the month of August.

Earlier in the day, the Bank of Japan (BOJ) voted to keep monetary policy on hold in a decision that was widely expected by market participants. The BOJ has held its main interest rate at -0.1% since early 2016 in support of its growth and inflation targets. With Prime Minister Shinzo Abe winning re-election in convincing fashion, investors can expect Abenomics to continue well into the future.

USD/JPY

The USD/JPY touched a session low of 112.95 on Tuesday, but quickly recovered to settle around 113.14. The pair has enjoyed a solid uptrend over the past two weeks as the US dollar asserted its confidence on the global currency market. However, the pair has declined since Friday's three-month high above 114.00. The immediate support for the USD/JPY is likely situated around 112.90. On the opposite side of the ledger, immediate resistance is likely to be found around 114.00.

EUR/USD

The euro has been under pressure since the European Central Bank (ECB) announced it would likely extend its record bond-buying program beyond September 2018. The decision triggered a 200-pip decline for the EUR/USD. As of Tuesday, the pair still hadn't recovered and was trading around 1.1636. The outlook remains tilted to the downside, as the euro bulls contend with a brewing crisis in Spain over Catalan independence. Levels to watch for the EUR/USD include 1.1685 on the upside and 1.1595 on the downside.

GOLD

Precious metals have suffered a series of sharp declines over the past two weeks, with gold prices falling to their lowest level since July. Prices were little changed around $1,275 on Tuesday. The bulls are eyeing a close above $1,285 for a signal of upside momentum. On the flipside, the bears are keeping a close eye on $1,265. A dip below that level could expose bullion to heavier losses over the short term.

Daily Pivots: (S1) 0.7664; (P) 0.7678; (R1) 0.7700; More...

AUD/USD is staying in consolidation above 0.7624 temporary low. Intraday bias remains neutral for the moment. Upside of recovery should be limited well below 0.7896 resistance to bring decline resumption. Firm break of 0.7624 will resume whole decline from 0.8124 and target next key cluster level at 0.7322/8.

In the bigger picture, corrective rise from 0.6826 medium term bottom is likely completed at 0.8124, after hitting 55 month EMA (now at 0.8067). Decisive break of 0.7328 key cluster support (61.8% retracement 0.6826 to 0.8124 at 0.7322) will confirm. And in that case, long term down trend from 1.1079 (2011 high) will likely be resuming. Break of 0.6826 will target 61.8% projection of 1.1079 to 0.6826 from 0.8124 at 0.5496. This will now be the favored case as long as 0.7896 near term resistance holds.

Key Highlights

• The Euro is in a solid uptrend from the 115.00 swing low against the Japanese Yen, but facing hurdles near 134.50.
• There was a break above a monster bearish trend line at 120.00 on the weekly chart of EUR/JPY.
• Recently, the Germany's consumer price index preliminary reading for Oct 2017 came in at 1.6% (YoY), less than the forecast of +1.7%.
• Today, the Euro Zone's Gross Domestic Product for Q3 2017 (Prelim) will be released, which is forecasted to increase 0.5% (QoQ).

EURJPY Technical Analysis

The Euro started a solid uptrend from the 115.00 swing low against the Japanese Yen. The EUR/JPY pair traded as high as 134.44 where it is faced a monster resistance.

Looking at the weekly chart, there was a break above a monster bearish trend line at 120.00. The pair followed a crucial bullish path and settled above the 130.00 handle, the 100-week simple moving average (red) and the 200-week simple moving average (green).

However, the pair seems to be struggling near 134.50. The last weekly candle is a bearish candle, overlapping the last bullish candle. This is a strong bearish signal and suggesting a short-term top.

On the downside, an initial support is near 130.00 and the 23.6% Fib retracement level of the last wave from the 114.85 low to 134.44 high. The mentioned 130.00 support is important since it is near the 200-week SMA.

A weekly below 130.00 would ignite a larger correction towards 123.00, the 100-week SMA and the 50% Fib retracement level of the last wave from the 114.85 low to 134.44 high. On the upside, a break of the 134.50 level is required to negate the current bearish sentiment.

Germany's Consumer Price Index

Recently in the Euro Zone, the Germany consumer price index for Oct 2017 (Prelim) was released by the Statistisches Bundesamt Deutschland. The forecast was slated for a rise of 0.1% in Oct 2017 compared with the previous month.

The actual result was lower than the forecast, as there was no change in the CPI in Oct 2017. Looking at the yearly change, there was an increase of 1.6%, which was less than the forecast of +1.7% and also less than the last +1.8%.

The report added that:

In October 2017, the harmonised index of consumer prices for Germany, which is calculated for European purposes, is expected to increase by 1.5% year on year. Compared with September 2017, it is expected to be down by 0.1%.

The Euro pairs came under pressure after the release, and the EUR/JPY pair traded towards 131.50.

Economic Releases to Watch Today

Euro Zone CPI for Oct 2017 (Prelim) (YoY) – Forecast +1.4%, versus +1.5% previous.

Euro Zone Core CPI for Oct 2017 (Prelim) (YoY) – Forecast +1.2%, versus +1.3% previous.

Euro Zone Gross Domestic Product Q3 2017 (Prelim) (QoQ) – Forecast 0.5%, versus 0.6% previous.

Euro Zone Gross Domestic Product Q3 2017 (Prelim) (YoY) – Forecast 2.4%, versus 2.3% previous.