Sample Category Title

The cross rallies strongly on Tuesday and is on track to fully reverse Monday's pullback.

Weaker yen helps the fresh Euro bulls, inflated by strong Manufacturing PMI data today, which offset negative Services PMI reading.

Focus turns towards Thursday's ECB meeting and hopes of QE tapering (expectations for 25-30 billion Euros a month reduction) which would further boost the single currency. Bulls eye 22 Sep peak at 134.40 (the highest since Nov 2015) for retest, with break here to trigger fresh extension of wave C from 114.84 (16 Apr trough) which is part of broader five-wave sequence from 109.38 (24 June 2016 low), towards its Fibonacci 138.2% expansion at 135.19.

Ascending 10SMA marks solid support at 133.02, followed by 20 SMA at 132.73, loss of which will be bearish.

Res: 134.12; 134.40; 134.57; 135.19
Sup: 133.79; 133.52; 133.02; 132.73

USD/CAD - 1.2657

Trend:  Down

 
Original strategy       :

Buy at 1.2570, Target: 1.2770, Stop: 1.2510

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.2570, Target: 1.2770, Stop: 1.2510

Position: -

Target:  -

Stop:-

As the greenback has maintained a firm undertone after last week’s late rally, confirming the rise from 1.2061 low has resumed and mild upside bias remains for this move from there (wave iii trough) to extend further gain towards previous resistance at 1.2691 but price should falter well below another previous resistance at 1.2778. We are keeping our count that wave v as well as wave (C) ended at 1.3794 and impulsive wave (i ii, i ii) is now unfolding with minor wave iii ended at 1.2414, followed by wave iv correction ended at 1.2778, wave v has reached our indicated downside target at 1.2100 and may extend to 1.2000.

In view of this, we are looking to reinstate long on pullback as 1.2570-75 should limit downside and bring another rise. Below 1.2520 (previous minor resistance) would abort and suggest top is possibly formed, risk test of 1.2475-80, break there would confirm and then further fall to 1.2450 would follow. Only a break of support at 1.2433 would turn outlook bearish, bring retracement of recent rise to 1.2400, then towards 1.2350-55 but support at 1.2313 should remain intact.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

• WS opened higher supported by the run of strong earnings amongst others from Caterpillar and 3M. Also McDonald and GM beat expectations. However, opening gains are fading fast after a few minutes of trading.
• Italy's Banca Monte dei Paschi di Siena has said mooted European Central Bank rules that would demand higher provisioning against soured loans risk it failing to meet planned targets for its turnaround
• British chancellor Philip Hammond has said the benefits of the internal market are "absolutely clear to us" and "we won't allow it to be compromised" in relation to the union between Scotland and the rest of the UK.
• PMI business conditions in the euro zone fell slightly more than expected this month, with the services sector reporting a slowdown in activity growth. The composite PMI index slipped to 55.9 in October from 56.7 in September. That was well under the consensus estimate of 56.5. Overall, the PMI's suggest ongoing strong growth.
• EC president, Mr. Juncker, has insisted that Brussels wants to reach a "fair deal" with Britain, in a bid to dampen down the furore over media reports allegedly containing details of his dinner last week with UK PM May

Rates

Core bonds sell off as fears of a hawkish ECB mount.

Core bonds were under pressure throughout the whole session. The EMU PMI business confidence was a mixed bag with manufacturing stronger and services weaker-than-expected. Overall though, they suggest ongoing strong growth. However, the PMI's weren't behind the bond selling. We suggest that jittery investors positioned for a more hawkish than expected ECB and maybe also for a more hawkish composition of the FOMC after US president Trump nominates a new chair and other new governors. At least investors don't want to be long bonds ahead of these events. There was little fresh news on these items, but today's sell-off might have been a resumption of selling that occurred after the US Senate adopted the 2018 budget and was interrupted yesterday by a dull Monday session. Interestingly, the US 10-yr yield tests the key 2.40% resistance area, which if broken, opens the way for an extension towards 2.64%. The T-Note future set a new correction low at 124-23 and is now close to the key 124-14 July low. Other markets didn't show a similar straight directional move. Caution is warranted, as there wasn't an obvious driver behind the bond moves and as volumes traded were rather modest.

At the time of writing, the German yield curve bear steepened with yields up between 2.2 bps (2-yr) to 4.9 bps (10-yr). The US curve also steepened with yields up between 1.3 bp and 4.3 bps (30-yr). In the intra-EMU bond market, Peripheral 10-yr yield spreads narrowed by 4 bps (Greece/Portugal & Spain), while Italy lagged (-1 bp), maybe due to upcoming supply.

Currencies

Dollar still shows diffuse trading pattern

Trading in the major USD cross rates showed again no consistent trading pattern. An initial decline of EUR/USD was blocked after mixed, but still strong EMU PMI's. A further rise in US and EMU yields supported the likes of USD/JPY and EUR/JPY as investors continue to look forward to the ECB policy decision later this week.

Overnight, Asian equity indices mostly traded slightly stronger despite yesterday's correction on WS. The dollar eased marginally as the rise in core yields halted (temporary ). USD/JPY hovered in the 113.25/50 area, near yesterday's intraday low. The euro remained resilient despite ongoing uncertainty on Spain. EUR/USD rebounded slightly to 1.1760/70 area.

Early in Europe a rise of core yields initially favoured the dollar. EUR/USD dropped to the 1.1745 area. The EMU PMI's were mixed French data were stronger than expected. The German manufacturing PMI was also stronger than expected, but services and the composite PMI missed the consensus. This pattern was also visible in the EMU PMI. Even so, the PMI's confirmed that the EMU growth remained solid at the start of the final quarter of the year. EUR/USD rebounded to the 1.1765/70 area. Changes in interest rate differentials were limited. If anything, they narrowed marginally in favour of the euro. The rise in EMU and US yields also supported the likes of USD/JPY and EUR/JPY (and e.g. EUR/CHF). Sentiment on risk also improved throughout the morning session.

US equity futures indicated stronger US cash stocks. This positive sentiment on risk prevented further USD losses. USD/JPY jumped close to the 114 area, but the move stalled just ahead of the big figure. The pair trades currently in the 113.85/90 area. EUR/USD is little changed compared to the start in Europe and trades in the 1.1760 area. Trading in core bonds and in the major USD cross rates is driven by conflicting factors going into Thursday's ECB meeting. Investors apparently don't want to be wrong-footed if the ECB would reduce policy stimulation in a more aggressive way. This attitude currently prevents a further decline of EUR/USD and supports USD/JPY and EUR/JPY.

Sterling returns part of recent rebound

Today, sterling erased part of last week's post EU summit gains. The exchange of words between EU and UK officials turned more constructive of late, even without any concrete progress in the negotiations. UK officials also feel that an agreement on a transition period is unlikely until there is sufficient progress on the nature of the future EU-UK trade relationship. This scenario leaves UK businesses in uncertainty as the Brexit negotiations drag on. EUR/GBP rebounded off the sub-0.89 recent lows and trades again in the 0.8940 area. Cable dropped modestly and trades in the 1.3150 area.

Copper future contract for December delivery extended recovery on Tuesday and spiked to one-week high at $3.2355, signaling higher low formation. Pullback from fresh over three-year high at $3.2580, posted last week, was contained by ascending Tenkan-sen at $3.1375, with formation of reversal pattern and subsequent bounce, signaling that corrective phase might be over. Today's recovery extension spiked above Fibo 76.4% of $3.2580/$3.1375 pullback, but was so far unable to hold gains. Fresh near-term bulls off 3.1375 low need close above $3.2120 (Fibo 61.8%) for bullish signal and to re-focus $3.2580 peak. Conversely, failure to hold today's gains and return below rising Tenkan-sen (currently at $3.1703) would increase downside risk on revisiting correction low at $3.1375. Overall picture remains bullish as investors are optimistic about prospects for global economic growth, although remain cautious on existing risk of slowdown, especially in China, metal's top consumer.

Res: 3.2000; 3.2120; 3.2355; 3.2415
Sup: 3.1810; 3.1703; 3.1510; 3.1375

The CAC index has posted gains in the Tuesday session. Currently, the CAC is trading at 5,397.00, up 0.19% on the day. Earlier on Tuesday, the index punched above the 5400 level for the first time since mid-May. On the release front, French Manufacturing PMI improved to 56.7, beating the estimate of 56.2 points. French Services PMI also accelerated to 57.4, above the forecast of 57.0 points. This marked a 5-month high. There was more positive news, as Eurozone Services and Manufacturing PMIs both beat their estimates and pointed to expansion.

Investors are in a positive mood on Tuesday, ahead of the ECB policy meeting on Thursday. ECB President Mario Draghi will have to maneuver carefully, as the ECB decides whether to start unwinding its asset purchases program, which is currently pegged at EUR 60 billion/month. Back in the summer, the ECB said it would trim the program in the "autumn", but didn't make any moves at the September meeting. A reduction in stimulus could have a significant effect on the euro. With the French economy enjoying the economic rebound in the eurozone, French stock markets have responded with gains, and the CAC has gained an impressive 5.3% since September 1. President Macron's plans to reform the economy have been well-received by investors, and the government seems intent on overhauling labor laws and making France much more competitive, which should continue to boost French stock markets.

The crisis in Catalonia has entered its third week, and with the central and Catalan governments entrenched in their positions, the worst may be yet to come. On Saturday, the central government said it was imposing direct rule, invoking Article 155 of the Spanish Constitution. However, there is plenty of uncertainty, as this clause has never been used. Madrid has said it will remove Catalan President Carles Puigemont from power, take over the media and hold new elections for the region. Unsurprisingly, the Catalan government has condemned this latest salvo and has called for "massive civil disobdience". Developments are unfolding daily, and investors are nervously watching the trouble in Spain, the eurozone's fourth largest economy. The European Union has refused to intervene, calling the crisis an internal matter. So far, the woes in Catalonia has not affected the euro.

USD/CHF - 0.9880

Original strategy :

Buy at 0.9795, Target: 0.9895, Stop: 0.9760

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9795, Target: 0.9895, Stop: 0.9760

Position : -

Target :  -

Stop : -

As the greenback has retreated after rising to 0.9882 yesterday, suggesting consolidation below this level would be seen and pullback to 0.9815-20 cannot be ruled out, however, reckon support at 0.9796 would limit downside and bring another rise later, above said resistance at 0.9882 would add credence to our view that recent upmove from 0.9421 has resumed and bullishness remains for this move to extend headway to 0.9870 and possibly towards 0.9900, having said that, overbought condition should limit upside and price should falter below 0.9940-50, bring retreat later.

In view of this, we are looking to buy dollar again on pullback as support at 0.9796 should limit downside and bring another rise. Below 0.9765-70 would defer and suggest top is possibly formed, risk test of indicated support at 0.9730-37, however, break there is needed to provide confirmation, then further fall to previous support at 0.9705 would follow.

GBP/USD - 1.3166

Original strategy :

Sell at 1.3285, Target: 1.3155, Stop: 1.3320

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.3285, Target: 1.3155, Stop: 1.3320

Position : -

Target :  -

Stop : -

As cable found renewed buying interest at 1.3158 yesterday and has risen again, adding credence to our view that a temporary low was formed at 1.3088 late last week, hence near term upside risk remains for this move to extend gain to 1.3240-45 (61.8% Fibonacci retracement of 1.3338-1.3088), however, price should falter below indicated resistance at 1.3287 and bring retreat later, below said support at 1.3158 would signal the rebound from 1.3088 has ended, bring weakness to 1.3125-30, break there would bring retest of said support at 1.3088, a drop below there would extend the fall from 1.3338 to 1.3050, then towards recent low at 1.3027.

In view of this, wee are looking to sell cable on further subsequent recovery as resistance at 1.3287 should limit upside and bring another decline later. Only above 1.3312 resistance would abort and extend further gain to said recent high at 1.3338 which is likely to hold from here.

EUR/USD - 1.1761

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although the single currency broke below previous support at 1.1730, lac of follow through selling and the subsequent rebound from 1.1725 suggest further consolidation would take place and recovery to 1.1780-90 cannot be ruled out, however, still reckon upside would be limited to 1.1820-25 and price should falter well below resistance at 1.1858, bring further choppy trading later.

On the downside, below said support at 1.1725 would extend the fall from 1.1880 top to 1.1700 and possibly towards indicated previous support at 1.1669 but break of latter level is needed to retain bearishness and extend further subsequent decline to 1.1640-45 first. As near term outlook is still mixed, would be prudent to stand aside in the meantime.

USD/JPY - 113.88

Original strategy  :

Buy at 113.00, Target: 114.00, Stop: 112.65

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 113.00, Target: 114.00, Stop: 112.65

Position :  -

Target :  -

Stop : -

Although rose to 114.10 after opening higher yesterday, the subsequent retreat suggests consolidation below this level would be seen and pullback to 113.20 (50% Fibonacci retracement of 112.30-114.10) cannot be ruled out, however, reckon 112.95-00 (61.8% Fibonacci retracement) would hold and bring another rise later, above 113.80 would suggest the pullback from 114.10 has ended, bring retest of this resistance but break there is needed to confirm recent rise from 111.65 has resumed for headway to 114.40-50 but reckon 114.75-80 would hold from here.

In view of this, we are looking to buy dollar again on further pullback as 112.95-00 should limit downside and bring another rise. Below 112.65-70 would abort and signal top is formed instead, risk test of indicated support at 112.30 which is likely to hold from here.

Financial markets appeared relatively quiet on Tuesday, as investors positioned themselves ahead of a multitude of key risk events later in the week.

In Asia, stocks concluded mostly higher, while European shares struggled for direction amid the heightened political drama in Spain. With Mario Draghi in the spotlight on Thursday, and a vote in Spain's national Senate on Catalonia's takeover this Friday, we could see some serious fireworks. Attention should also be directed towards U.S President Donald Trump, who may be announcing his nominee for the Fed chair this week. Any surprises from Trump on selecting the new Fed chair, could create shockwaves across the board.

Currency spotlight - GBPUSD

Sterling was weak and wobbly against the Dollar on Tuesday, amid uncertainty over whether the Bank of England will raise U.K. interest rates at November's policy meeting. The myriad of hurdles facing Brexit negotiations are also playing a leading role in Sterling's woes, with prices currently trading around 1.3160 as of writing. Investors will direct their attention towards the preliminary U.K. GDP data on Wednesday, which is expected to show that the economy grew by 0.3% in the third quarter of 2017. A reading below market estimates is likely to punish Sterling further. From a technical standpoint, the GBPUSD remains under pressure on the daily charts. A breakdown and daily close below 1.3150, should encourage a further depreciation towards 1.3050.

Bitcoin dips below $5600

Bitcoin bulls were nowhere to be found on Tuesday, as the cryptocurrency dipped below $5600 during early trading.

With yet another alternative version of Bitcoin, branded as Bitcoin Gold, jumping into the arena, the bulls could be feeling threatened. It should be kept in mind that this is the second time Bitcoin is forking and as such, if it becomes a frequent occurrence, it could start to test the patience of investors. Taking a look at the technical picture, Bitcoin still fulfills the prerequisites of a bullish trend on the daily charts, as there have been consistently higher and higher lows. Bulls need to break back above $6000 for prices to trade towards $6200. In an alternative scenario, sustained weakness under $5400 may encourage a decline towards $5200.