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The markets are turning their attention to who will become the next Chairperson of the Federal Reserve. President Trump recently commented that he is “very, very close” to deciding who will take the position after interviewing 5 candidates. The 5 shortlisted candidates are current Fed Chair Janet Yellen, who has held the position for the past 4 years, she holds a PhD in economics from Yale and has held numerous “Fed” roles, Kevin Warsh a Harvard Law graduate, financier and former governor of the Federal Reserve System, Fed Governor (since 2012) Jerome Powell, a lawyer and former investment banker, John Taylor, a Stanford University economist & Gary Cohn who is Trump’s chief economic advisor. The White House has stated that Trump will make his decision before he leaves for a trip to Asia in November.

With Japanese Prime Minister Shinzo Abe securing a decisive victory for his coalition party in the recent Japanese elections, the markets are looking for confirmation that his economic reforms will continue. With such ultra-easy monetary policy adopted by the Bank of Japan, the Yen has suffered from a degree of risk-off sentiment of late.

On Thursday, the ECB meets and President Mario Draghi is expected to announce the long-awaited start of tapering. The question the markets are posing is how the central bank will pare back a bond-buying program that started over 2 years ago? Currently, monthly bond purchases by the central bank totals some EUR60 Billion, with many analysts predicting that this will drop to between EUR20 to 30 Billion per month. At such a pace, it would make an increase in Eurozone interest rates highly unlikely until 2019. We can expect to see some extended volatility in EUR once the scale of tapering is announced.

EURUSD is slightly higher in early Tuesday trading. Currently, EURUSD is trading around 1.1765.

USDJPY is unchanged in early trading. Currently, USDJPY is trading around 113.35.

GBPUSD is 0.2% higher to currently trade around 1.3220.

Gold is unchanged overnight to currently trade around $1,282.75.

WTI is 0.2% higher in early trading. Currently, WTI is trading around $52.02.

Major data releases for today:

At 08:30 BST, Markit Economics will release German PMI (Composite, Services & Manufacturing) for October. Composite is forecast at 57.6 (from 57.7), Services is forecast to be unchanged at 55.6 and Manufacturing is forecast at 60.0 (from 60.6).

At 09:00 BST, Markit Economics will release Eurozone PMI (Composite, Services & Manufacturing) for October. Composite is forecast at 56.5 (from 56.7), Services is forecast at 55.7 (from 55.8) and Manufacturing is forecast at 57.8 (from 58.1).

At 14:45 BST, Markit Economics will release US PMI (Composite, Services & Manufacturing) for October. Composite previous was 54.8, Services is forecast at 55.2 (from 55.3) and Manufacturing is forecast at 53.5 (from 53.1).

XAUUSD (1282.75): Gold prices maintained the gains yesterday following the decline to the support level at 1275 - 1274 level. In the short term, gold prices might remain supported above this level as price attempts to test the upper resistance near the 1296.50 level. Further gains in gold can be expected on a convincing close above 1296.50 level. In this case, gold prices could be aiming for the 1320 - 1324 level where the next main resistance level resides. To the downside, a breakdown below 1275 - 1274 support will send gold prices lower towards the 1262 handle.

USDJPY (113.31): The USDJPY gapped higher yesterday, but price action was seen pushing lower. The bearish close yesterday suggests some downside momentum. Support in USDJPY is seen at 113.00 level which previously served as resistance. Establishing support at 113.00 level will suggest a near term bounce to the upside. However, USDJPY will need to breakout above the previous highs established near 114.00 to extend further gains. The risk of a close below 113.00 is possible. This could push USDJPY back into the range of 113.00 and 111.74.

EURUSD (1.1766): The EURUSD price action was subdued yesterday with the market confined to a small range. The currency pair is seen posting a modest recovery in the early trading session today. We could expect the upside momentum to continue towards filling the Friday's close at 1.1776. The bias is likely to remain sideways into this Thursday's ECB meeting although we expect EURUSD to touch down towards the 1.1710 level of support. This would mark a strong retest of this support although price action will need to break to the downside to extend further declines. To the upside, the common currency will be facing the test of resistance at 1.1822

Daily Pivots: (S1) 149.27; (P) 149.87; (R1) 150.28; More

Intraday bias in GBP/JPY remains mildly on the upside for retesting 152.82 high. Decisive break there will resume whole medium term rise from 122.36. On the downside, break of 148.13 minor support will turn bias to the downside and extend the correction from 152.82. In that case, we'd expect strong support from 61.8% retracement of 139.29 to 152.82 at 144.45 to bring rebound.

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.

The common currency which opened Monday on a weaker note was seen attempting to pare losses. The declines in the currency pair came as investors remained hopeful that Trump will push through with his proposed tax reforms. Rumors that the President will be nominating a new Fed Chair also sent investors optimistic on the US dollar.

On the economic front, data was quiet yesterday. Politics remained at the forefront with investors digesting the weekend victory of Abe and the ongoing political turmoil from Spain. The Kiwi dollar was seen coming under pressure yet again as the coalition details between the Labor party and the NZ First Party was released.

Looking ahead, the economic calendar today will be dominated by data from the Eurozone. Flash manufacturing and services PMI numbers are expected to be released. In the US the Markit's flash manufacturing and services PMI numbers for October will also be coming out.

Sunrise Market Commentary

• Rates: Bearish engulfing pattern in S&P 500
  Today's eco calendar is interesting with EMU PMI's. We expect them to remain strong. Investors might remain in wait-and-see mode ahead of Thursday's ECB meeting. Risk sentiment on stock markets is a wildcard for trading. The US S&P 500 showed a bearish engulfing pattern. More prolonged equity losses could support bonds via safe haven flows.
• Currencies: dollar and euro locked show no clear trend on multiple event risk
  Yesterday, the dollar gained a few ticks against the euro, but USD/JPY failed to hold above 114. Investors are cautious to place directional bets in EUR/USD and USD/JPY as there is plenty of event risk in EMU (ECB, Catalonia) and the US (replacement of Yellen, tax reform). EUR/GBP dropped to the 0.89 area awaiting further progress in the Brexit negotiations.

The Sunrise Headlines

• US equities corrected lower yesterday with main indices recording losses between -0.25% and -0.65%. Risk sentiment on Asian stock markets is more positive overnight with gains of around 0.5%.
• Japanese manufacturing activity expanded in October at a slower pace than the previous month as output and new orders growth eased in a sign final demand is moderating, the preliminary PMI showed (52.5 from 52.9).
• The Chinese Communist party was set to confirm Xi Jinping's status as its most powerful ruler since Mao Zedong by formally writing his name into the party constitution. The close of a party congress in Beijing formally marks the beginning of Mr Xi's second five-year term as party general secretary.
• New Zealand's new government will raise the minimum wage, prioritize regional economic development and reform the central bank's legislation, Prime Minister-elect Ardern said. NZD/USD drops back to 0.6950.
• Merkel's CDU have raised the alarm over €100bn-worth of spending promises made by the three parties in talks to form the next German government, warning they could blow apart the country's treasured balanced budget.
• Republicans will decide in coming days whether to embrace or set aside a bipartisan health bill that has gained traction in Congress, a decision potentially made harder by Trump who praises the effort but opposes the bill itself.
• Today's eco calendar contains EMU PMI's and US Richmond Fed manufacturing index. The US starts its end-of-month refinancing operation and the ECB publishes its Bank Lending Survey

Currencies: Dollar And Euro Locked Show No Clear Trend On Multiple Event Risk

Dollar trading mixed, holding recent ranges

Trading on global FX markets showed no clear dynamics at the start of the new week. The dollar gained a few ticks against the euro. Investors are reluctant to add euro longs ahead of the ECB meeting and given the uncertainty on Spain. The initial weakening of the yen after the Abe election victory petered out very soon. Equity weakness during the US session pushed the pair further south. EUR/USD finished the session at 1.1749 (from 1.1784). USD/JPY closed at 113.43 (from 113.52).

Overnight, Asian equity indices are trading marginally stronger despite yesterday's correction on WS. The dollar trades slightly softer as the rise in core/US yields halted. USD/JPY hovers in the 113.25/50 area, near yesterday's intraday low. The euro remains resilient despite ongoing uncertainty on Spain. EUR/USD rebounds slightly and trades in the 1.1760 area. The kiwi dollar traded again volatile. NZD/USD returned temporary to the 0.70 area as the government wants to raise minimum wages. However, the gains evaporated as the New PM again referred to reforming the Reserve bank objective. NZD/USD trades near 0.6940.

Today, EMU and US October PMI business surveys will be released. For the EMU, a slight decline is expected. However, the report still should signal above trend growth. As the ECB meeting nears, we suspect that even in case of a deviation from consensus, the market reaction will be modest. The US manufacturing PMI is expected to have increased in to 53.5 from 53.1 (weak dollar effect?). The services PMI is expected virtually unchanged at 55.2. The US PMI's recently underperformed similar US ISM surveys. We put the risks on the upside of consensus, but don't expect a lasting impact on the dollar.

At the end of last week, the USD momentum improved as investors saw rising chances for a US tax reform, but the USD gains remained modest. Trading in the USD and the euro is paralysed as invent risk (ECB meeting, Spain in EMU; replacement Yellen, Tax reform in the US) makes investors cautious to place directional bets. EUR/USD trades below the 1.18 barrier, but the euro remains resilient given the uncertainty on Spain. For now, the dollar doesn't receive any meaningful additional interest rate support. We started the week with a cautious EUR/USD negative bias. We maintain that call going into the ECB policy decision on Thursday. However, there is no sign that the dollar (EUR/USD and even USD/JPY ) is ready for a technically significant move.

From a technical point of view, EUR/USD dropped below the 1.1823/ 1.2070 consolidation pattern, but there was no sustained follow-through price action, which was disappointing for EUR/USD bears. We maintain a cautious sell-on upticks bias. The pair needs to drop below 1.1670/62 to give comfort to EUR/USD bears. The USD/JPY momentum was positive in September. The pair regained 110.67/95 resistance, a short-term positive. The 114.49 correction top is the next resistance. Sentiment improved further last week, but we still assume that a break beyond 114.49 will be difficult. Yesterday's failed return above 114 confirms this view

EUR/USD: holding within established ranges going into ECB meeting

EUR/GBP

GBP off recent lows, but no clear trend

Yesterday, EUR/GBP was locked in an tight sideways range. The CBI business optimism and orders survey was weaker than expected, but triggered no additional sterling selling. There was also no ‘new news' on Brexit either. EUR/GBP hovered in a tight range marginally north of 0.89, but dipped temporary lower with EUR/USD late in US dealings. The pair finished the day at 0.89. Cable showed no clear intraday trend and finished the session marginally stronger at 1.3198.

Today, there are no important UK eco data. The UK cabinet will meet to discuss the next steps in the Brexit negotiations. However, we don't expect any high profile news. Sterling trade with a slightly positive bias against the dollar and the euro this morning. We don't expect it to go far, unless the euro suffers from political uncertainty (Spain). The BoE probably won't have much room to raise rates beyond the expected November rate hike.

EUR/GBP staged a strong uptrend from April till late August and set a top at 0.9307. Rising UK inflation data and hawkish BoE comments triggered a sterling rebound, but it has run its course. EUR/GBP supports at 0.8743 and 0.8652 proved too difficult to break. The recent rebound above 0.89 improved the ST technical picture of EUR/GBP, but for now there were no convincing followthrough gains. EUR/GBP 0.9026 is 50% retracement of the recent countermove

EUR/GBP: test of 0.9000 barrier rejected.

Download entire Sunrise Market Commentary

Daily Pivots: (S1) 132.87; (P) 133.49; (R1) 133.89; More...

At this point, EUR/JPY is staying in range of 131.69/134.39 and intraday bias remains neutral first. on the upside, decisive break of 134.39 high will confirm up trend resumption. In such case, EUR/JPY should target 141.04 long term resistance. However, firm break of 131.69 will be an early sign of medium term reversal and will target 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.

Daily Pivots: (S1) 0.8883; (P) 0.8905; (R1) 0.8924; More...

Intraday bias in EUR/GBP remains neutral at this point. Price actions from 0.8745 are viewed as a corrective pattern. As long as 61.8% retracement of 0.9305 to 0.8745 at 0.9091 holds, deeper fall is in favor. Below 0.8857 minor support will turn bias to the downside. Further break of 0.8745 will resume whole decline form 0.9305 and target 0.8303 key support level. Nonetheless, sustained break of 0.9091 will bring retest of 0.9305 instead.

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.

Daily Pivots: (S1) 1.5020; (P) 1.5045; (R1) 1.5075; More....

Intraday bias in EUR/AUD remains neutral as range trading continues. With 1.5101 minor resistance intact, deeper decline is in favor. Fall from 1.5241 is seen as the third leg of the consolidation pattern from 1.5226. Break of 1.4945 will target 1.4791 support and possibly further to 1.4421. On the upside, though above 1.5101 will turn focus back to 1.5241 resistance instead.

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. The corrective structure of the price actions from 1.5226 is affirming this view. Sustained trading above 1.5226 will target a test on 1.6587 key resistance. However, break of 1.4421 support will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.