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STOCKS

Dow (23400.86, +0.31%) could remain stable above 23250, eventually trying to attempt a rise towards 23750. On the longer term, 23750-24000 levels could be an immediate top for the index.

Dax (13133.28, +1.39%) surged higher breaking above the 13100 levels possibly inviting the bulls to take the index up in the near term. While it trades above 13100, we may look for a 100-300points upward rally in the coming sessions with some corrective dips. View remains bullish.

Nikkei (21952.35, +0.98%) is maintaining its upward rally and could test 22250 in the coming sessions. Target for the longer term (say 2-3 weeks) would be 22666. Some interim rejection is possible from 22250 levels. Near to medium term looks bullish.

Shanghai (3419.67, +0.36%) has tested our 3420 target and could continue to move up in the near term. A small dip is possible from 3425 before resuming the rally towards 3450 in the medium term.

Nifty (10343.80, +0.47%) tested decent resistance at 10355, which if holds could bring the index down towards 10250-10200 in the next couple of sessions. But in case the index rises further today, it could test 10400 on the upside.

COMMODITIES

Gold (1267.40) is trading below 1275 and could possibly test 1260/50 in the coming sessions. While the US Dollar Index (94.77) moves above 95, there is scope for weakness in Gold in the near to medium term. Silver (16.74) could test 16.50-16.25 levels in the near term. View likely to be bearish.

Brent (59.34) is rising as expected, heading towards 60-61 levels in the near term. Near term looks bullish with the target of 60-61 levels intact. WTI (52.64) has some scope of rising towards 55 in the near to medium term while it manages to break above 53. Immediate resistance on the weekly charts seem to be breaking on the upside, opening up further upside of 54-55 levels for the medium term.

Copper (3.1465) could come off towards 3.10 or lower in the medium term. A stable consolidation in the 3.25-3.10 region is possible for some time.

FOREX

All round Dollar strength today.

Quite a bearish turn for the Euro (1.1638) with Draghi being seen as dovish yesterday despite halving the AAP (asset purchase programme) from EUR 60 bln p.m. to EUR 30 bln p.m. See Interest Rates section below. With the Euro now firmly below 1.1700-1670, the focus will now be on 1.1510 on the downside, maybe even 1.1415.

The Euro's weakness has pushed Dollar Index (94.76) well past the earlier resistance at 94.00 and brings 96 onto the radar, although immediate Channel Resistance is seen at 95.00.

The fresh Dollar strength is also reflected in the rise in Dollar-Yen (114.15). Although the Resistance at 114.50 holds as of now, there are increased chances of further rise to 115.00 as well. Tempering the rise in Dollar-Yen would be Euro-Yen (132.83) which has been pulled down rudely by the decline in the Euro and is trading just below important trendline at 133 which might act as Resistance now. Need to watch this.

All of Pound's (1.3127) gains on Wednesday were erased by weak UK Retail Sales data yesterday, which again reversed the sentiment on a possible rate hike next week. With both Bulls and Bears having been trapped in the last two days, the Pound may now trade sideways between 1.31-33 for some days.

As feared, the Aussie (0.7649) has fallen further to and below 0.7655. This is quite a letdown for the Aussie as most of the gains from July have been erased, making the Aussie vulnerable to further decline towards 0.7520.

Dollar-Yuan (USDCNY = 6.6521) has also risen and should see 6.67+ soon. Dollar-Rupee (64.82/83) could well rise past 65.00 today.

INTEREST RATES

Draghi's statement that the APP (asset purchase programme) is "open ended" and is well likely to continue even after Sep '18, has been seen as pushing an interest rate hike out into mid 2019. Thus, the interest rate advantage is given over to the Dollar. This works well enough for Draghi as the ECB had started becoming concerned about Euro strength and he would like Europe to continue to benefit from export growth also.

The German-US 10 Yr Yield Spread (-2.03%) has fallen well below -1.95%, leading to the weakness in the Euro. This is largely due to dip in the German 10Yr yield from 0.486% on Wednesday to 0.418% now. But, Support is possible near 0.40% as well.

Eyes on the BOJ meeting next week (Tuesday, 31st Oct), FOMC meeting (Wednesday, 1st Nov) and BOE meeeting (Thursday, 2nd Nov).

On US yields, there is Resistance at 3.00% on the 30Yr (currently 2.96%), at 2.50% on the 10Yr (currently 2.45%) and near 2.15-20% on the 5Yr (currently 2.07%). The market clearly does not anticipate a rate hike next week, Wednesday. But, a lot of volatility will take place if the Fed surprises the market and raises rates. Chances are less, of course, but let us see.

• ECB opts for a 'lower-for-longer' QE extension in 2018 and leaves forward guidance unchanged as we expected.
• ECB will publish details on reinvestment from November 2017 onwards.
• EUR/USD range bound for now, but the 'smell of exit' could bring cross back to the 1.20s in 2018.
• Continued support for peripheral-core EU spreads and Scandi covered bonds.

In line with our expectation, the ECB today announced an extension of its QE programme until September 2018, but also scaled down its asset purchases to EUR30bn from January 2018 onwards (see Chart 1). Importantly, the ECB also left its forward guidance unchanged and retained the possibility to extend the QE programme in size and/or duration, leaving it open-ended. The ECB reiterated that policy rates will remain at their current levels for an extended period of time and well past the horizon of asset purchases. During the press conference Draghi clarified that no changes in the QE parameters and the sequencing on interest rates were discussed at today's meeting.

The ECB's QE scale down decision reflected growing confidence by the Governing Council that inflation will eventually converge to target based on an increasingly robust and broad-based economic expansion in the eurozone, an uptick in measures of underlying inflation and continued favourable financing conditions due to accommodative monetary policy measures. Nevertheless, inflation pressures remain muted and hence the ECB stressed the continued need for monetary support through the net QE purchases, forward guidance on interest rates and forthcoming reinvestments.

The introductory statement now also excluded any reference to the risks from exchange rate volatility, which is, however, not so surprising given that the effective euro appreciation pace has abated significantly since September, which we think matters more for the ECB than the exchange rate level as such

ECB releases more details on QE reinvestments in 2018

The ECB also released further details on the reinvestments of maturing bonds which are made alongside new QE purchases and which will become increasingly sizable over the course of 2018.

1. Time horizon: Reinvestments will be made 'for an extended period of time' after the end of the net QE purchases and 'for as long as necessary'.

2. Composition: From 6 November 2017 the ECB will also now publish the expected monthly redemption amounts for the QE programme over a rolling 12-month horizon as well as historical redemption figures since the start of QE. The data will provide redemptions information for each of the four components (PSPP, CSPP, CBPP3 and ABSPP), but not reveal the individual country breakdown.

3. Timing: Reinvestments will be flexible and made in the month they fall due or otherwise in the subsequent two months, if warranted by liquidity conditions.

4. No change in country composition for now: Reinvestments will be made in the jurisdiction in which the maturing bonds were issued, during the period of net asset purchases.

Overall, we think the ECB's communication will increasingly focus on the reinvestments and the stock rather than the flow of QE purchases in the future, as it gradually scales back monetary stimulus over the coming years.

FX: EUR/USD range bound now – 'smell of exit' to bring back 1.20s 2018

With the ECB's QE scheme extended as widely expected and the forward guidance essentially unchanged, little has materially changed for the single currency. But the drop in EUR/USD on the initial policy statement clearly suggests that some expectations in the FX markets had been building ahead of the meeting that the ECB could go with a more hawkish taper as price action earlier in the week is indeed testament to.

In our view, while today's policy message underpins that the ECB is taking tapering to the next level, the continued commitment to stay accommodative on a still data-dependent basis suggests a firm move in EUR/USD above 1.20 is not on the cards until 2018, as the ECB seems very wary of taking exit talk too far at the current stage.

The longer period of QE purchases notably ensures that rate hike expectations will be kept at bay, meaning that relative rates are unlikely to provide significant support to the euro in the near term. As such, e.g. the 2Y swap spread is unlikely to drag EUR/USD higher on, say, a 3M horizon. However, we still argue that the potential for notably debt outflows to fade should support the single currency more broadly as a continued taper cements the sense that has grabbed notably the FX market that ECB normalisation is ongoing. Thus, we continue to see risks to EUR/USD being to the upside in 2018 and still target 1.25 in 12M.

Overall, the dovish tapering message from the ECB today cements our sense that EUR/USD is range bound (1.19-1.16) on a 1-3M horizon with risks tilted a tad to the downside near term. Notably, if Trump goes with Taylor as Fed chair, this opens for a move below the 1.1700 mark; we still see good support at the 1.1670 level (6 Oct low) though. In the coming days, we would expect EUR/USD to settle around the 1.1750 level with the risk of next week's FOMC meeting fuelling a move towards 1.1700 as focus returns to Fed's determinedness to 'normalise'. On the upside, we think resistance at 1.1910 (2-Aug high) will hold, but in order to revisit the 1.20s we would likely need to see better prospects of eurozone core inflation edging higher on a sustained basis (a mid-2018 story) and/or markets to speculate (again) that the ECB is running into toolbox constraints

Fixed income: very supportive for the periphery and Bund spread

The statement from the ECB is very supportive for the European government bond markets both outright and relative to swaps. The combination of the extending of QE into 2018 as well as reinvesting the redemptions for an extended period of time after the QE ends is very supportive for the periphery. Finally, the MRO and the 3mth TLRO are set to continue with full allotment and a fixed rate until at least 2019. The combination of a dovish ECB, less supply in 2018 and a positive rating cycle for the EU countries is very supportive for the peripheral-core EU spreads. If we look at the combination of issuance, redemptions/reinvestments and QE, then there will still be a negative supply of European government bonds in 2018, as shown in the table below. However, the negative net supply is set to be substantially lower than the negative net supply from 2017 as shown below.

Germany still stands out with a very negative net supply in 2018. This is partly due to the surplus on the public finances as well as the QE. We have assumed a reduction in the QE amount in Germany in 2018 as the ECB/Bundesbank is close to the 33% issuer limit. Hence, the ECB/Bundesbank is set to buy well below the capital key in Germany. In total, we expect that the ECB will buy EUR186bn in the PSPP programme or 70% of the total QE in 2018. This is a substantial reduction in the PSPP programme, which as currently 85% of the total QE programme. This leaves 30% to the covered bond, ABS and corporate bond programme. We still consider it likely that the ECB will buy a higher share of corporate bonds due to the more direct economic impact, although this will probably only be revealed by the QE details in coming months.

Investment conclusions for EU government bonds

There is negative supply in Germany, while the political uncertainty/problems in Spain seem to be fading. The reduction in the QE programme for e.g. Portugal, Ireland and Finland is likely to have a modest impact, as the ECB is already buying well below the capital key Hence, we see the following trades/targets for some of the trades we have or had on in 2017 and going into 2018:

1. Bund spread widener: target 55bp 2. Long 10Y PGB versus 10Y BTPS. Target 0bp 3. Long 10Y Ireland versus 10Y France. Target 0bp 4. Long 10Y Spain versus 10Y Germany. Target 100bp

If we look at the slope of the curve, then the action today from the ECB should give room for flattening of the curves as it confirms the “low for long” policy. Furthermore, if the economic outlook becomes “less favourable”, then the ECB is ready to scale on the QE etc. Hence, we could see a flattening of the 10-30Y curve, partly because of the ECB and partly because of a substantial reduction in the funding need of the EFSF/ESM in 2018. The funding need for EFSF is reduced from EUR49bn to EUR22bn.

In Fixed Income Strategy: Buy 2W10Y ATMF EUR payer ahead of next week's ECB meeting, 26 October 2017, we recommended to buy a 2W10Y ATMF EUR payer swaption. In our view, the low implied volatility offered an attractive short-term hedge against any hawkish 'twist' from ECB. Although, the option maturity still covers the eurozone October CPI data releases, we take a 2bp profit on the back of yesterday's dovish stance from the ECB.

Impact on the Scandinavian markets – Buy Scandi covered bonds

The 'dovish' ECB and the extension of the QE has an impact on the Scandinavian markets as the ECB continues to limit volatility in the market. Furthermore, the extension of the QE in the covered bond market will still be a drag on liquidity even though the QE is scaled down to EUR30bn. However, as the PSPP programme is scaled down more than the CBPP3, ABSPP and CSPP programmes, then the ECB will still be in the market.

Low volatility, plenty of excess liquidity and 'low for long' monetary policy is very positive for the Danish covered bond market, especially the Danish callable mortgage bonds. Given that the Riksbank is on hold, then given the steepness of the Swedish yield curves (govt, covered bond and swap curves) relative to Euroland, combined with the yield pick-up from an FX-hedge into euros, then both 30Y Danish callable mortgage bonds as well as 5Y Swedish covered bonds are attractive alternatives to EU peers. But although today's ECB decision should be supportive for SEK covered bonds in isolation, uncertainty about the housing market might pose some risk since the knee-jerk reaction to a deteriorating situation in the housing market would not be in favour of the bonds (at least not relative to swaps or SGBs).

USD Basking in the afterglow

The US dollar is basking in the afterglow of the ECB dovish turn. And while there remains an immense risk in global markets, the latest G-10 central banks dovish turn suggests there are fewer reasons for the USD to underperform this morning.

But when you factor in the new Fed chair is soon to be announced, robust USD economic data and the US House’s budget resolution vote passing, we could be on the verge of an extended US dollar rally

ECB president Draghi completely underwhelmed market expectations as the ECB erred on the side of caution. But the trap door was sprung when Draghi said QE is 'not going to stop suddenly.' The EURO plummeted as traders scurried to re-price the first ECB rate hike expectations well into 2019. And while the weaker euro should not be a means nor a goal of the ECB policy, it’s hard to overlook their recent concerns about the strengthening Euro weighing on exports, and we can only conclude this fear was significant factor in their policy decision

The US dollar then kicked into overdrive thanks to the US House’s budget resolution vote. The bill has passed 216-212, lifting USD and US 10y yields close to 2.45%.But given the slim margin of victory, it is still a footslog to Tax Reform passage due to the non-partisan Senate faction. Put extremely dollar positive turn of events none the less.

The Euro

Asia Traders are wasting no time this morning jumping on the bandwagon.But with the ECB rolling out Praet, Nowotny, and Weidmann for their policy views later today, 1.1600-25 could prove to be a stable interday support level until the airwaves clear.

The 'pain in Spain' is looking more tenuous and with Art155 likely to be triggered, near-term prospects for the EUR should continue to sour

Japanese Yen

Trader finds themselves in unfamiliar territory this morning now looking to ride the dollar wave rather than to fade it. This psyche is likely holding back a further extension of USDJPY move.With the USD dollar stars aligning and the BoJ seemingly committed to the relaxed monetary policy stance with Abe’s set to engage a whole new level of fiscal reform, this should undoubtedly prove detrimental for the JPY

The Australian Dollar

The Aussie dollar fell after an overly cautious RBA Deputy governer Debelle warned about weak wage growth.The lack of wage growth is one of the principal tenants in the lower Aussie dollar narrative as lack of any wage inflation to mollify the household debt burden will continue to weigh dovish on RBA policy.

AUD was then hammered mercilessly after the US House’s budget resolution vote passed as the Aussie the currency with the most to lose from the stronger US dollar and higher US interest rate storyline given the overtly dovish RBA outlook

Canadian Dollar

Adding to the Canadain Dollar swoon, Governor Poloz told the CBC 'a lot of things' need to come together before the bank is confident enough for a hike. Like so many other countries Canada is suffering from skyrocketing household debt, and without wage inflation to soften the burden, the BoC will likely be on hold for some time to come.

A rampant U.S. has gold longs watching long-term support nervously while silver, although still shakey, continues to outperform relatively.

Gold

Gold's incipient recovery came to an abrupt end overnight as the rally stopped dead at 1282.00 before gold plunged to close at 1267.00 in New York. It wilted in the face of a rampant U.S. dollar as the dollar index climbed by 1.20% overnight. In the process the 100-day moving average finally gave way on a closing basis, having held gold sell-offs for the week to leave gold poised dangerously near longer-term support.

How gold finishes the week will now be entirely at the whim of the U.S. dollar and U.S. yields with little to no geopolitical safe haven premium left in the price. The futures market is still constructively long the yellow metal, and this will continue to weigh on prices as fresh buyers appear to be few and far between.

Gold is unchanged at 1266.25 this morning with trendline resistance at 1272.50 followed by the 100-day moving average at 1275.50 and a triple daily top at 1284.00. The overnight low at 1265.80 is nearby support with a break opening up a possible test of 1260.00. This level is now crucial technical support being the October low and also the 200-day moving average. A daily close below this level may well see a lot of the long futures positioning deciding to hoist the white flag and head for the exit door.

Silver

Silver tells much the same story as it to, fell through its 100-day moving average which had supported the price for the last seven days. Unlike gold though, silver has more technical support, and its selloff has been much less dramatic than golds. It may be because the level of speculative long positioning in the futures markets is substantially lower than golds.

Silver fell from 17.0475 to 16.7900 overnight and has continued to drift slightly lower in Asia to 16.7630. The 100-day moving average is now resistance at 16.8620, and it has formed a double top above at 17.04750 with the 200-day moving average behind this at 17.1925.

Support can be found initially at the overnight low of 16.7500. This is followed by a series of daily lows at 16.5375 as well as the 50% retracement at 16.5700. This should form substantial support, at least initially. Below this is the October low at 16.3270 and then the 61.80% retracement at 16.1900.

The Canadian dollar fell against the US dollar on Thursday. There was no economic data on the Canadian calendar, with the market mostly focused on the European Central Bank (ECB) rate statement. The central bank delivered a compromised taper as expected. The ECB will halve the existing bond purchases down to 30 billion euros a month starting in January. The duration of the program was extended by 9 months to September 2018, although the door was open for extending even further if needed. The press conference with President Mario Draghi was even more dovish with the possibility of increasing bond buying if inflation conditions become less favourable and that there would be no sudden end to bond buying.

The lack of a hawkish ECB drove the USD higher as monetary policy divergence will continue to expand with the Fed expected to raise rates once again in December. The Bank of Canada (BoC) kept rates unchanged on Wednesday and also delivered a dovish statement which contrasted heavily with the hawkish comments that tipped the market about the July Canadian benchmark rate hike and the surprise September lift. After the October BoC meeting the probability of a rate hike in the remainder of 2017 are near 20 percent given the increasing headwinds and the unknown fate of the NAFTA agreement.

The Canada Mortgage and Housing Corp said today that the housing market boom is set to slow down in the next two years. Rising rates and a slowdown in the pace of growth of the economy will impact housing starts, with existing home sales to be affected as well. Prices will increase at a more moderate pace. The CMHC sees a 0.16 percent increase in 2018 and 2.4 percent in 2019.

The USD/CAD rose 0.41 percent on Thursday. The currency pair is trading at 1.2849 after the USD rose significantly on the back of a more dovish than expected ECB QE tapering announcement. The European Central Bank wanted to avoid a taper tantrum, and so far mission accomplished. European bond yields are lower after Mario Draghi did not set a specific timeline for the end of European QE. The US tax reform is closer to a reality with the house of representatives passing a budget resolution. US yields rose to 2.45 percent as Republicans are aiming to pass a tax bill before Thanksgiving.

The week will end with the release of the first estimate of the US gross domestic product (GDP) for the third quarter. Bureau of Economic Analysis will release the Advanced GDP at 8:30 am EDT with a forecast of 2.5 percent gain but a slowdown from the previous quarter at 3.1 percent. Much of the slowdown can be attributed to the negative effects of tropical storms that hit the US during the third quarter, but with overall temporary effects. Other US economic indicators have been positive despite the storm, so there is the possibility of the GDP performing better than expected on Friday.

There were no surprises from the Bank of Canada, which maintained the benchmark rate at 1.00 percent. In its rate statement, the Bank noted that wage growth levels remain weak, as there is slack in the labor market. Inflation pressure from wage growth remains muted, but the Bank did not provide a reason why inflation levels are so low. This problem is apparent south of the border as well, where a robust US economy and red-hot labor market has not translated into higher inflation. The cautious tone of the BoC did not impress investors, and the Canadian dollar shed close to 1.0 percent on Wednesday after the rate announcement.
Who will win the race to take over at the Federal Reserve? Janet Yellen’s 3-year term concludes in February 2018, and President Trump has said he will nominate a new Fed in the next few days. The front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen’s monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump’s choice for the new Fed chair could have a significant effect on monetary policy and the strength of the US dollar. If Taylor gets the nod, the US dollar could respond with gains of 3 percent or more.

Oil prices rose on Thursday. West Texas Intermediate is trading at $52.40 finding some stability in the comments by Saudi Crown Prince Mohammed bin Salman who backed the extension of Organization of the Petroleum Exporting Countries (OPEC) production cut beyond its current March 2018 deadline. The group will meet in Vienna with Russia and other major producers on November 30 with the extension of the deal to be discussed.

Weekly crude inventories in the US rose 856,000, the first rise after four weeks when the forecast called for another big drawdown. Gasoline stocks dropped by 5.5 million barrels with a forecast that called for a mostly flat inventory statistic. Distillate stockpiles also had a massive drawdown of 5.2 million barrels. Heating oil demand drove the higher than expected demand.

Market events to watch this week:

Friday, October 27
8:30 am USD Advance GDP q/q

Gold has posted losses on Thursday, erasing the gains which marked Wednesday trade. In North American trade, the spot price for an ounce of gold is $1272.78, down 0.37% on the day. On the release front, unemployment claims climbed to 233 thousand, just below the forecast of 235 thousand. As well, Pending Home Sales rebounded, coming in at 0.0%. The indicator has struggled, recording five declines in the past 6 months.

It’s report card day for the US economy on Friday, with the release of Advance GDP. The markets are forecasting a gain of 2.5%, after Preliminary GDP posted a sharp gain of 3.0%. US economic numbers remain strong, and the labor market is close to capacity. At the same time, inflation has not moved higher, and wage growth has been weaker than expected. Despite the lack of inflation, the odds of a December rate hike have soared in recent weeks, with the odds of a rate raise at 96%, according to CME FedWatch.

The White House has yet to make a decision on the new Federal Reserve chair, but the latest media reports are that John Taylor or Jerome Powell will get the nod, replacing Janet Yellen. The choice of the new chair could have significant ramifications for interest rate policy as well as the US dollar. Powell is expected to follow Yellen’s stance of incremental rate increases, while Taylor is a proponent of much higher rate levels, which could propel the dollar upwards. President Trump is expected to make his choice before embarking on a tour of Asia on November 3, so traders should be prepared for an announcement next week.

Draghi gave himself the flexibility to keep QE going beyond Sept 2018 and the market sent EUR/USD to the lowest since July. The US dollar was the top performer Thursday while the euro lagged. Japanese CPI is due up next. One EURUSD Premium trade was closed at gain, while a new one was opened, currently at a loss.

We warned ahead of the ECB decision that Draghi would want to preserve the option of continuing QE beyond September. “The market could interpret the flexibility as dovish and send the euro lower,' we wrote. “In addition, the large net-long EUR position could be waiting to 'sell the fact' on a taper announcement.'

That's what happened as EUR/USD broke the October and August lows to break the neckline of a well-defined head-and-shoulders pattern. It would be wrong to give all the credit to the euro, the US dollar was broadly stronger and finished at the highs of the day. Commodity currencies weakened substantially and cable reversed virtually all of Wednesday's climb.

Pefect USD Storm?

A driver of USD strength is the bond market as 10-year yields consolidate above 2.40%. A soft 7-year auction added to the bond move, along with the House passing a budget motion that brings a tax cut closer. A report from Politico also said Yellen is out of the running for the Fed chair and that it's now between Taylor and Powell.

The yen will be in focus in the hours ahead with September CPI numbers due at 2330 GMT. The consensus is for a 0.7% y/y rise on the headline and +0.2% y/y on ex-fresh food and energy. Abe is rumored to have asked for a extra budget as he restarts efforts to get the economy moving and inflation higher.

The EUR/USD quotes fell sharply following the ECB's decision to maintain the asset purchasing program until September 2018 but will halve it to 30 billion euro of monthly purchases from January. At the same time Mario Draghi noted that interest rates will not be changed for a long time and will be increased only after the end of the asset purchasing program. These announcements along with the possibility of an interest rate hike in the US this year may see the price of the euro-dollar fall to 1.1500 or lower. Investors' activity today is restrained as they wait for tomorrow's release of GDP data in the US which is likely to lead to significant moves.

The single currency experienced some pressure at the beginning of the trading session from the news on the decline of the German Gfk Consumer climate index to 10.7 in November which is 0.1 below the forecasted figure. On a positive note for the euro, the unemployment rate in Spain fell to 16.4 in the second quarter which is 0.2% better than forecasted and 0.8% less than in the previous period.

The NZD/USD price continued to move within the descending channel after disappointing news on the trade balance in New Zealand. The trade deficit for September grew to $1143 million against the $900 million forecasted.

The USD/JPY resumed positive dynamics on the background of the US dollar strengthening. Volatility levels are likely to remain high due to the expected releases of Japan's consumer price index at 23:30 GMT and the US Gross Domestic Product tomorrow at 12:30 GMT.

EUR/USD

The EUR/USD quotes demonstrated a sharp descending move after ECB President Mario Draghi's statement. As a result, the quotes approached a strong support line at 1.1730, and breaking through it may become a trigger for the bears to pull the price down to 1.1620 or even to 1.1550. The RSI on the 15-minute chart is in the oversold zone, which points to a possible price rebound within the correction.

USD/JPY

The USD/JPY price rebounded from the inclined support line and continued to move along it. Gaining a foothold above the 1.1400 mark may become a firm basis for further price growth to 114.70 and 115.00. On the other hand, breaking through the angled support may result in a further fall to 113.00. Volatility is likely to remain high until the end of the week.

NZD/USD

The NZD/USD was able to fix below the 0.6890 and continued the descending movement within the limits of the channel. The immediate target in case of maintaining the current impulse will be at 0.6825. It's less likely that the trend will change to positive and the basis for it doing so may come from fixing above the upper limit of the descending channel and 0.7000 mark.

The British pound has posted considerable losses in the Thursday session. In North American trade, GBP/USD is trading at 1.3176, down 0.66% on the day. On the release front, British CBI Realized Sales plunged in October, with a reading of -36 points. This surprised the markets, which expected a gain of 14 points. In the US, unemployment claims climbed to 233 thousand, just below the forecast of 235 thousand. As well, Pending Home Sales rebounded, coming in at 0.0%. The indicator has struggled, recording five declines in the past 6 months.

The pound recorded strong gains on Wednesday after British Preliminary GDP beat expectations in the third quarter. However, the rally proved to be short-lived, as the currency has given up much of these gains on Thursday. GBP/USD responded with losses after a dismal British CBI Realized Sales report. The soft reading, which was the sharpest drop since March 2009, was all the more surprising because the September reading showed a strong gain of 42 points. High inflation is likely having a chilling effect on consumer spending, a key driver of economic growth. The BoE will be taking note of the sharp drop in retail sales, as the Bank must decide at the November 2 meeting whether to raise rates for the first time in a decade. Policymakers remain divided over a rate hike, which would be the first in a decade. Proponents of a rate increase point to inflation running at 3.0%, above the Bank's target of 2.0%, but opponents argue that the economy is showing signs of weakness and a rate hike could hamper economic growth.

It's report card day for the US economy on Friday, with the release of Advance GDP. The markets are forecasting a gain of 2.5%, after Preliminary GDP posted a sharp gain of 3.0%. US economic numbers remain strong, and the labor market is close to capacity. At the same time, inflation has not moved higher, and wage growth has been weaker than expected. Despite the lack of inflation, the odds of a December rate hike have soared in recent weeks, with the odds of a rate raise at 96%, according to CME FedWatch.

The CAC index has posted gains in the Thursday session. Currently, the CAC is trading at 5,404.75, up 0.58% on the day. On the release front, the ECB will release its rate statement, followed by a press conference with ECB President Mario Draghi. On Friday, the US releases Advance GDP.

The CAC remains at high levels, and on Wednesday, the index hit its highest level since mid-May. Will the upward movement continue after the ECB policy meeting? No change is expected in interest rates, which are currently at 0.00%. However, Mario & Co. could significantly trim the ECB's asset purchase program (QE). Currently, the ECB is purchasing EUR 60 billion/mth, and there is a strong likelihood that this amount will drop to EUR 30 billion/mth. The stronger eurozone economy is the catalyst behind a taper, but with inflation persistently at low levels, the ECB is expected to announce to extend the program well into 2018 or even later. Eurozone members remain divided as to whether the ECB should signal a clear commitment that it plans to wind up QE. Germany and the Netherlands are in favor of a quick exit, but other members want the scheme to remain open-ended, so that the ECB can continue with extensions, if needed. ECB policymakers will need to perform a balancing act between these views as it shifts its monetary policy.

The French economy has rebounded this year, and service and manufacturing reports on Wednesday suggest that fourth quarter growth will be strong. Manufacturing and Services PMIs came in at 56.7 and 57.4 points respectively, both which beat expectations. The French government is determined to overhaul the economy and has targeted public spending, with plans to cut 120,000 civil servants. The government also expects that the deficit will drop below 3 percent of GDP in 2017, in keeping with EU guidelines. Last year, the deficit stood at 3.4 percent of GDP.