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WTI Oil regained traction on Tuesday and retested key near-term barrier at $52.35 (top of near-term congestion / recent multiple upside rejections).

Near-term structure remains overall bullish and tracked by ascending 10SMA (currently at $51.66).

Bulls are also underpinned by 10/20 and 55/200 SMA bull-crosses, favoring eventual break above $52.35 pivot and attack at key s/t barrier at $52.84 (28 Sep high), break of which would signal resumption of larger uptrend from $42.04 (2017 low, posted on 21 June).

Fundamentals remain supportive as strong signs of global oil market rebalancing and comments from Saudi Energy Minister about possibilities of reaching agreement between oil producers on extending current output reduction deal, seen as positive signals.

Markets are focusing crude inventories reports (API report is due late today and EIA crude stocks report tomorrow), expecting another draw in crude stocks to further boost oil prices.

Res: 52.35; 52.84; 53.73; 54.27
Sup: 51.96; 51.66; 51.14; 50.86

Daily Pivots: (S1) 1.1722; (P) 1.1750 (R1) 1.1775; More...

Intraday bias in EUR/USD remains neutral for the moment. On the downside, break of 1.1669 will resume the corrective fall from 1.2091 to 38.2% retracement of 1.0569 to 1.2091 at 1.1510. We'd expect strong support from there to complete the correction. On the upside, break of 1.1879 will revive the case that pull back from 1.2091 has already completed at 1.1669. In such case, intraday bias will be turned back to the upside for retesting 1.2091 high.

In the bigger picture, rise from medium term bottom at 1.0339 is not finished yet. It's expected to continue after pull back from 1.2091 completes. And, next target will be 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall from 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside.

Daily Pivots: (S1) 1.3160; (P) 1.3193; (R1) 1.3229; More....

GBP/USD is still bounded in range of 1.3026/3337 and intraday bias remains neutral at this point. On the downside, break of 1.3026 will resume the decline from 1.3651 and target 1.2773 key support level. This will also revive the case of medium term reversal. Meanwhile, on the upside, break of 1.3337 will resume the rebound from 1.3026 to 61.8% retracement of 1.3651 to 1.3026 at 1.3412 and above.

In the bigger picture, while the medium term rebound from 1.1946 was strong, GBP/USD hit strong resistance from the long term falling trend line. Outlook is turned a bit mixed and we'll stay neutral first. On the downside, decisive break of 1.2773 key support will argue that rebound from 1.1946 has completed. The corrective structure of rise from 1.1946 to 1.3651 will in turn suggest that long term down trend is now completed. Break of 1.1946 low should then be seen. On the upside, break of 1.3835 support turned resistance will revive the case of trend reversal and target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466.

Daily Pivots: (S1) 0.9826; (P) 0.9854; (R1) 0.9876; More....

Breach of 0.9880 suggests that USD/CHF's rally is resuming. Intraday bias is back on the upside. As noted before, medium term fall from 1.0342 should have completed at 0.9420 already. Current rally should target 61.8% retracement of 1.0342 to 0.9420 at 0.9990. Sustained break there will pave the way to retest 1.0342 high. In any case, outlook will remain bullish as long as 0.9736 support holds.

In the bigger picture, current development suggests that USD/CHF has defended 0.9443 (2016 low) key support level again. Rise from 0.9420 could develop into a medium term move and target a test on 1.0342 high. This represents the upper end of a long term range that started back in 2015. On the downside, break of 0.9587 support is now needed to indicate completion of the rise from 0.9420. Otherwise, further rally will remain in favor in medium term.

Daily Pivots: (S1) 113.08; (P) 113.59; (R1) 113.93; More...

Intraday bias in USD/JPY remains neutral for the moment. Some more consolidation could be seen below 114.09 temporary top. But in any case, will remain mildly bullish as long as 111.64 support holds. Above 114.09 will target 114.49 resistance next. Decisive break there will confirm that correction pattern from 118.65 has completed at 107.31 already. And USD/JPY should then target a test on 118.65.

In the bigger picture, medium term rise from 98.97 (2016 low) is not completed yet. It should resume after corrective fall from 118.65 completed. Break of 114.49 resistance will likely resume the rise to 61.8% projection of 98.97 to 118.65 from 107.31 at 119.47 first. Firm break there will pave the way to 100% projection at 126.99. This will be the key level to decide whether long term up trend is resuming.

Dollar and Euro are both trading firm today. The greenback is supported by hope of passing Republican's tax plan by the end of the year. US President Donald Trump will visit Senate Republicans for lunch today for talks on tax cut. Meanwhile, Solid PMI data fro Eurozone supports that case for ECB to announce tapering later this week. New Zealand Dollar trades broadly lower as markets react negatively to the labor led coalition's policies. Yen and Aussie follows closely and as the second and third weakest.

Eurozone PMIs solid, support ECB tapering

Eurozone PMI manufacturing rose to 58.4 in October, up from 58.1, beat expectation of 57.8. Eurozone PMI services, however, dropped to 54.9, down from 55.8, below expectation of 55.6. Germany PMI manufacturing dropped to 60.5, down from 60.6, but beat expectation of 60.0. Germany PMI services dropped to 55.2, down from 55.6, below expectation of 55.5. France PMI manufacturing rose to 56.7, up from 56.1, beat expectation of 56.0. France PMI services rose to 57.4, up from 57.0, beat expectation of 56.9.

Markit noted that "firms don't appear to have been unduly affected by recent euro strength, with growth of new export orders accelerating in October." And, "healthy demand in export markets appears to be outweighing any negative currency impacts." The solid set of PMI data shouldn't alter ECB's plan to announce tapering of asset purchases later in the week.

BoE Deputy Cunliffe: Economy has "clearly slowed"

BoE Deputy Governor Jon Cunliffe warned that the economy has "clearly slowed" this year. That's due to "the squeeze we have seen on real incomes and imported inflation from the depreciation [sterling] that has come in. And pay has remained relatively subdued." He pointed out that interest rates "will not need to go up by as far and as fast as they did before the crisis". Still, "over the forecast period of three years rates will need to rise". However, he emphasized that the exact timing of rate hike is "a more open question".

Japan PMI manufacturing dropped

In Japan, Nikkei continues to push higher today, riding on Prime Minister Shinzo Abe's landslide victory in Sunday's snap election. At the time of writing, Nikkei is trading up 57pts, or 0.25%. Japan PMI manufacturing dropped to 52.5 in October, down from 52.9, and missed expectation of 53.1. Nonetheless, that's still the 14th straight months of expansionary reading. Markit noted that "although still improving solidly, the Japanese manufacturing sector appeared to lose some momentum in October, as growth eased from September's four-month high." And, "softer expansions were seen for both output and new orders." The output component dropped to 52.6, down from 53.2. New orders dropped to 52.4, down from 53.4. Expectation on output also dropped to 57.5, down from 61.2.

BoJ to lower inflation forecasts again

Bloomberg reports today, quoting unnamed source, that BoJ is considering to lower its inflation projection again in the quarterly report to be released next week. From latest forecast, BoJ estimate core CPI to rise 1.1% for the fiscal year ending in March 2018. Downgrading the inflation forecast will reinforce the view that BoJ would continue with the ultra-loose monetary policy. That will also come just after Prime Minister Shinzo Abe got fresh mandate for his Abenomics.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 113.08; (P) 113.59; (R1) 113.93; More...

Intraday bias in USD/JPY remains neutral for the moment. Some more consolidation could be seen below 114.09 temporary top. But in any case, will remain mildly bullish as long as 111.64 support holds. Above 114.09 will target 114.49 resistance next. Decisive break there will confirm that correction pattern from 118.65 has completed at 107.31 already. And USD/JPY should then target a test on 118.65.

In the bigger picture, medium term rise from 98.97 (2016 low) is not completed yet. It should resume after corrective fall from 118.65 completed. Break of 114.49 resistance will likely resume the rise to 61.8% projection of 98.97 to 118.65 from 107.31 at 119.47 first. Firm break there will pave the way to 100% projection at 126.99. This will be the key level to decide whether long term up trend is resuming.

Economic Indicators Update

The U.S dollar has moved higher against the Japanese Yen during the European trading session, hitting 113.77, as intraday sellers failed to contain price below the key 113.40 level. The pair currently sits around the price-highs of the day, as traders await the release of United States Manufacturing and Service PMI data for the month of October.

The USDJPY pair is increasingly bullish while trading above the key 113.40 technical level. Further bullish advancement towards 113.89 and 114.10 remains likely. Extended weekly resistance is found at the 114.43 and 115.00 levels.

Should intraday sellers push price-action below the key 113.40 level for a sustained basis, a deeper decline towards the 113.23 and 112.89 should follow.

The euro continues to consolidate at lower levels against the U.S dollar, as traders remain cautious ahead of a number of key risk events this week. The EURUSD pair currently trades around the 1.1750 level, despite the Eurozone manufacturing PMI earlier beating expectations, with a solid 58.6 reading. Traders now await the release of U.S PMI Manufacturing and Services data, during the upcoming U.S session.

The EURUSD pair remains intraday bearish while trading below the key 1.1770 technical level. Further intraday declines remain likely towards the 1.1742 and 1.1724 levels. Extended intraday support for the euro is found at 1.1713 and 1.1685.

Should price-action move above the 1.1770 level, EURUSD buyers will likely target towards the 1.1780 and 1.1800 levels.

The Canadian dollar is unchanged in the Tuesday session. Currently, USD/CAD is trading at 1.2655, up 0.06% on the day. On the release front, there are no Canadian events. The US will release the Richmond Manufacturing Index, which is expected to edge lower to 17 points. On Wednesday, the Bank of Canada will set the benchmark rate. The US will release Core Durable Goods Orders and New Home Sales.

The Canadian dollar continues to struggle. The currency lost 1.3% last week against the greenback, and is currently at its lowest level since mid-August. There was no relief from Canadian data on Monday, as Wholesale Sales slowed to 0.5% in August, well off the forecast of 1.1%. Investors are keeping a close eye on the BoC, which will release a rate statement and its quarterly monetary policy report.

Canadian numbers disappointed on Friday, weighing on the Canadian dollar. Core Retail Sales slumped with a decline of 0.7% in August. This marked the indicator's steepest decline since June 2016. Inflation remains weak, as CPI inched up to 0.2%, shy of the estimate of 0.3%. These numbers have bolstered the likelihood that the Bank of Canada will keep interest rates steady at 1.00%. The Bank surprised the markets with a 25-basis point hike in September, in response to a Canadian economy that performed will in the first half of the year. This helped push the Canadian dollar higher, but the currency has since given up these gains.

Will Janet Yellen bid adieu to the Federal Reserve? 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.

A trio of pairs are waiting near key levels in anticipation of big news this week. The yen was the top performer Monday while the euro lagged. In mid-day EU trading, the euro is the best performer and the NZD at the opposite end. We trun to today's PMI figures from the US after a series of neutral to better than expected PMI reports from the Eurozone. A Premium trade that has long been awaited was finally opened yesterday, bringing the number of open trades to 6.

The election excitement in USD/JPY faded Monday and the opening gap closed. The pair touched as high as 114.10 but sagged back to 113.43 late in the day as risk aversion picked up. The reversal highlights resistance near 114.50. In the bigger picture it highlights a market that's waiting for clarity on the Fed choice before making a move. For confirmation, watch 2.40% in 10-year yields, which is a level we are hearing about frequently.

Elsewhere, it's a similar story. The euro remains stuck in the 1.17 to 1.19 range as the hours tick towards Thursday's ECB decision. As we highlighted earlier, the market is holding a large net-long euro position that's vulnerable to a dovish surprise. Expectations for ECB tapering range from € 20 bn to € 40 bn, with an extension in the program ranging from 6 to 12 months.

A position that's most uneasy may be CAD because of Poloz's recent unpredictability. USD/CAD touched 1.2660 Monday but couldn't break the Aug 31 high or the 100-day moving average. The market is divided on whether or not the Bank of Canada will hike again this year and the pair could easily swing 5 cents in either direction once there is more clarity. Wednesday's outlook announcement from the BoC will be key.

Expect the market to tip-toe until some of those questions are answered.