Sample Category Title

USD/JPY - 113.22

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 112.92

Kijun-Sen level                  : 112.81

Ichimoku cloud top             : 112.81

Ichimoku cloud bottom      : 112.56

New strategy  :

Buy at 112.80, Target: 113.80, Stop: 112.45

Position :  -

Target :  -

Stop : -

Although the greenback retreated to as low as 112.30 yesterday, dollar found renewed buying interest there and has rallied again, suggesting the rise from 111.65 is still in progress, hence bullishness remains for this move to extend further gain to 113.44 resistance, break of this recent high would provide confirmation and encourage for headway to 113.75-80 but reckon 114.00-10 would hold from here due to oversold condition. 

In view of this, we are looking to buy dollar again on pullback as 112.81 (current level of the Kijun-Sen and upper Kumo) should limit downside. Below the lower Kumo (now at 112.56) would defer and risk test of said support at 112.30 but break there is needed to signal top is formed instead, bring test of indicated strong support area at 112.03-13. 

Sunrise Market Commentary

• Rates: US reflationary spirits in the driving seat?
  US Treasuries lost significant ground after the US Senate adopted a budget for the next fiscal year, clearing a crucial hurdle for tax reforms. Reflationary spirits could inflict more losses on US Treasuries given today's eco calendar. European investors might decide to take a wait-and-see attitude with next week's ECB meeting looming on the horizon.
• Currencies: US senate vote 'saved' the dollar
  The dollar stayed in the defensive yesterday. Interest rate differentials moved against the US currency despite the crisis in Catalonia. A budget vote in the US senate changed fortunes again in favour of the dollar. However, the gain of the dollar against the euro remains modest. EUR/GBP returned to the 0.90 barrier on poor UK eco data and little Brexit progress

The Sunrise Headlines

• US stock markets recovered from opening losses to the tune of 0.5% to end flat. Nasdaq underperformed (-0.25%). Overnight risk sentiment is positive with Japan underperforming .
• The US Senate's passage of the budget blueprint for the next fiscal year, in a 51-49 vote primarily along party lines, helps unlock a procedure that Republicans plan to use to rewrite the tax code with just GOP votes.
• European leaders rebuffed British PM May's pitch to revive stalled Brexit talks, but German Chancellorl Merkel said she was confident negotiations would advance by December.
• CIA director Pompeo warned that North Korea could be just 'months away' from developing the ability to strike America with a nuclear-armed ballistic missile.
• Separatist campaign group the Catalan National Assembly is calling on its supporters to pull cash from lenders including CaixaBank SA and Banco Sabadell SA between 8 am and 9 am today.
• President Trump will support a bipartisan bill of health care only if it includes a series of conservative measures that Republicans sought in their failed effort to repeal the Affordable Care Act.
• Today's eco calendar is extremely thin with only US existing home sales. The Q3 earnings season continues with GE, P&G,…

Currencies: US Senate Vote 'Saved' The Dollar

Dollar saved by US Senate vote

All eyes were on Spain yesterday. EUR/USD spiked lower as the Spanish government initiated the process of suspending the regional powers of the Catalan government. However, the euro decline was almost immediately reversed. EUR/USD even moved in positive territory. A tentative global risk-off sentiment caused US Treasuries to outperform German bunds, reducing the interest rate differential in favour of the euro. EUR/USD finished the session at 1.1852 (from 1.1787). USD/JPY closed the day at 112.54.

Overnight, the US Senate adopted a fiscal 2018 resolution which is an important step for a tax overhaul further down the road. The approval triggered a rebound in US bond yields and supported the dollar. USD/JPY jumped north of 113. EUR/USD returned to the 1.18 area. The hope on a US tax reform also propelled US equity futures. The impact on Asian equity markets is diffuse and modest. The Hong Kong market reverses part of yesterday's late session decline. Japanese indices are little changed despite the rise of USD/JPY. Investors look forward to the outcome of the Japanese parliamentary elections to be held this weekend. The Kiwi dollar declined further below 0.70 after the formation of a government with Labour and the New Zealand first party.

The eco calendar is extremely thin today. There are no important data in EMU. US the existing homes sales (September) will only be of intraday significance for USD trading, at best. Fed's Yellen will give a lecture on 'Monetary policy since the Financial crisis' after the US close. We don't expect the Fed chair to change her view on the Fed's policy action in the near future.

A global risk off context, partially inspired by tensions in Catalonia weighed more on the dollar than on the euro yesterday as interest rates in the US declined more than in EMU. Overnight fortunes changed again in favour of the dollar as US yields jumped higher on the approval of a 2018 budget resolution in the US Senate. The rise in US yields and a constructive risk sentiment support the dollar overnight. The gains of the dollar against the euro remain modest. EUR/USD still trades north of 1.18. We see room for some further USD gains today. However, the price action earlier this week indicated that it wasn't that easy for the dollar to gain ground against the euro even if the move was supported by a favourable interest rate differential. The day-to-day picture of USD/JPY is improving and the pair is nearing the recent highs. Investors will look out for the outcome of the Japanese elections. The prospect of the continuation of Abenomics (including an easy monetary policy) might be a slightly negative for the yen.

From a technical point of view, EUR/USD dropped below the 1.1823/ 1.2070 consolidation pattern, but no real test of the 1.1662 support occurred. Last week, the pair even returned (temporary?) above the 1.1823 previous range bottom, which was disappointing for EUR/USD bears. We maintain a cautious sell-on upticks bias. However, the pair needs to drop below 1.1670/62 support to really give comfort to EUR/USD bears. The USD/JPY momentum was constructive in September. The pair regained 110.67/95 (previous resistance), a short-term positive. The 114.49 correction top is the next important resistance. Sentiment improved again this week, but we still assume that a break beyond 114.49 will be difficult.

EUR/USD: Holding tight ranges, despite plenty of 'event risk

EUR/GBP

EUR/GBP returns to 0.90 barrier

UK retail sales fell by 0.8% M/M in September, reversing a rise of 0.9% the previous month. The report suggested that there is little room for the BoE to raise its policy rate beyond a sole rate hike in November. This prospect of little additional interest rate support weighed further on sterling yesterday. EUR/GBP spiked to the 0.8990 area and held close to that level for the remainder of the session. At the EU summit, German Chancellor Merkel indicated that both parties in the EU-Brexit talks should move so that a deal on the divorce can be reached by the end of the year. However, there were no concrete steps. The statement didn't help sterling much. EUR/GBP even closed the session north of 0.90 (0.9006). Cable finished the day at 1.3159.

Monthly UK budget data will be published today. However, we don't expect this data series to have a lasting impact on sterling trading. The UK currency remains in the defensive this morning, both against the euro and the dollar. Recent eco data reinforced investors' feeling that any interest rate support for sterling in the near future will be very limited. At the same time, there is no noticeable progress in the Brexit talks. We hold on to the view that any upside of sterling will be difficult. We look to buy EUR/GBP on dips.

EUR/GBP staged a strong uptrend from April till late August to set a top at 0.9307. Rising UK inflation data and hawkish BoE comments reinforced a sterling rebound, but this rebound has run its course. EUR/GBP supports at 0.8743 and 0.8652 proved 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: Poor UK eco data and little progress in Brexit talks propel EUR/GBP back to 0.90

Download entire Sunrise Market Commentary

Daily Pivots: (S1) 1.2458; (P) 1.2476; (R1) 1.2502; More....

At this point, USD/CAD is staying in consolidation from 1.2598 and intraday bias remains neutral for the moment. In case of deeper fall, downside should be contained by 38.2% retracement of 1.2061 to 1.2598 at 1.2393 to bring rally resumption. On the upside, break of 1.2598 will extend the rebound from 1.2061 to 1.2777 resistance next.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4869 (2016 high) at 1.2048. And with 1.2048 intact, we'd favor the case that fall from 1.4689 is a correction. Break of 1.2777 will further affirm this bullish case. That is, larger up trend from 0.9406 is not completed. And in that case, USD/CAD should target 1.3793 resistance next. However, on the other hand, firm break of 1.2048 will indicate that fall from 1.4689 is at least a medium term down trend and should target 61.8% retracement at 1.1424 and below.

Dollar regains much ground overnight as boosted by revived hopes on tax reform in the US. A critical hurdle was cleared after the Senate approved a budget blueprint for fiscal 2018. That was narrowly passed by 51-49 after marathon debate. Nonetheless, the passing of the blueprint includes instruction that would help Republicans avoid a Democrat filibuster. Senate Majority Leader Mitch McConnell said that "passing this budget is critical to getting tax reform done, so we can strengthen our economy after years of stagnation under the previous administration." Senator Bob Corker, who's in feud with President Donald Trump, voted the for the budget. Meanwhile, Senator John McCain also voted yes.

Trump concluded Fed chair interviews, leans towards Powell

Separately, it's reported that Trump has concluded all interviews on the five candidates for next Fed chair. A decision could be announced as soon as next week. The interview with current Fed chair Janet Yellen "went well" according to unnamed source. But it's also reported that Trump is leaning towards current Fed Governor Jerome Powell for the job. And important factor is that Powell is known to be heavily favored by Treasury secretary Steven Mnuchin. The other three candidates include former Fed Governor Kevin Warsh, Stanford economist John Taylor and National Economic Council Director Gary Cohn. The formal response on the issue from White House spokeswoman Natalie Storm is that "they're all at the same level of consideration at this time. The president said himself on Tuesday, he likes all of the candidates and has great respect for them all."

Euro resilient despite Catalonia turmoil

Euro is trading as the second strongest one for the week so far, just next to Dollar. The turmoil regarding Catalonia doesn't have much lasting impact on the common currency so far. Spain has called for a special cabinet meeting on Saturday. It's believed that officials would trigger the so call Article 155 process to suspend Catalonia autonomy and take away lower powers. At the EU summit, German Chancellor Angela Merkel said they will watch the developments closely. But she leaned towards the Spanish government and said that "we hope that there will be solutions that can be found on the basis of the Spanish constitution." French President Emmanuel Macron also called for "unity".

UK PM May seeks dynamic in Brexit negotiations

UK Prime minister Theresa May also attended the working dinner of EU official sin Brussels. She urged EU leaders to create a "dynamic" in Brexit negotiations" that "enables us to move forward together". And she acknowledged that the process was progressing "step by step" and "from my side there are no indications at all that we won't succeed." Meanwhile, Merkel said there were "encouraging" signs but progress was "no sufficient" to start trade talks.

On the data front

German PPI rose 0.3% mom, 3.1% in September, above expectation of 0.1% mom, 2.9% yoy. Eurozone current account and UK public sector net borrowing will be featured in European session. But main focus of the day will be Canadian Dollar, including CPI and retail sales. US will release existing home sales.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2458; (P) 1.2476; (R1) 1.2502; More....

At this point, USD/CAD is staying in consolidation from 1.2598 and intraday bias remains neutral for the moment. In case of deeper fall, downside should be contained by 38.2% retracement of 1.2061 to 1.2598 at 1.2393 to bring rally resumption. On the upside, break of 1.2598 will extend the rebound from 1.2061 to 1.2777 resistance next.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4869 (2016 high) at 1.2048. And with 1.2048 intact, we'd favor the case that fall from 1.4689 is a correction. Break of 1.2777 will further affirm this bullish case. That is, larger up trend from 0.9406 is not completed. And in that case, USD/CAD should target 1.3793 resistance next. However, on the other hand, firm break of 1.2048 will indicate that fall from 1.4689 is at least a medium term down trend and should target 61.8% retracement at 1.1424 and below.

Economic Indicators Update

Currency pair GBP/USD

The GBP/USD is building lower lows and lower highs which makes a bearish ABC (grey) a bit less likely and a wave 123 (green) more probable, although a bearish breakout below support (blue) is still needed to confirm. The wave 4 (orange) correction is less likely if price breaks above the resistance trend line (yellow). A break below the support trend line (blue) increases the chance of a bearish break within wave 5 (orange).

The GBP/USD broke the support trend lines (dotted blue) of the triangle chart pattern. Price will need to show bearish momentum and bear flag chart patterns to confirm a potential wave 3 impulse. Price would also need to break below the bottom of the bearish channel (blue).

Currency pair EUR/USD

The EUR/USD bounced at resistance trend lines (orange) of the larger triangle chart pattern. A break above resistance would confirm a bullish breakout within wave C of wave X (pink). A break below the support trend line (blue) will probably indicate a larger correction within wave 4 (light purple).

The EUR/USD could be building a wave 1-2 (green) if price stays above the 100% Fibonacci level of wave 2 vs 1.

Currency pair USD/JPY

The USD/JPY stopped at the 78.6% Fibonacci resistance level but then failed to break below the support trend line which could either indicate a larger wave X (pink) or an uptrend continuation and an invalidation of the current wave patterns.

The USD/JPY is approaching the resistance from the previous top (red).

Key Highlights

• The US Dollar is trading higher and approaching a major resistance at 113.40 against the Japanese Yen.
• There are two bullish trend lines formed with support at 112.70 and 111.80 on the 4-hours chart of USD/JPY.
• The US Initial Jobless Claims for the week ending Oct 14, 2017 posted a decline from the last revised reading of 244K to 222K.
• Today in Canada, the Consumer Price Index (CPI) for Sep 2017 will be released, which is forecasted to increase by 1.6% (YoY).

USDJPY Technical Analysis

The US Dollar bounced sharply from 111.65 against the Japanese Yen. The USD/JPY pair is now approaching a crucial resistance near 113.40, which is a breakout point.

The pair is currently well above the 76.4% Fib retracement level of the last decline from the 113.44 high to 111.63 low. Therefore, there are chances of an upside break above 113.40. However, a break won’t be easy since the 113.30-40 region prevented gains on many occasions.

On the downside, there are two bullish trend lines formed with support at 112.70 and 111.80 on the 4-hours chart. As long as the pair is above the 112.50 level, there is a chance of an upside break towards 113.85 in the near term.

US Initial Jobless Claims

Recently in the US, the Initial Jobless Claims report for the week ending Oct 14, 2017 was released by the US Department of Labor. The forecast was slated for a decline from the last reading of 243K to 240K.

The actual result was way above the forecast, as there was a decline to 222K. On the other hand, the last reading was revised up from 243K to 244K. The 4-week moving average was down by 9,500 from the previous week’s revised average of 257,750 to 248,250.

The report stated:

The advance number for seasonally adjusted insured unemployment during the week ending October 7 was 1,888,000, a decrease of 16,000 from the previous week’s revised level. This is the lowest level for insured unemployment since December 29, 1973 when it was 1,805,000.

Overall, the USD/JPY pair is gaining pace, and a break above 113.40 would open the doors for more gains, probably towards 113.85.

AUDUSD Short Term Elliott Wave view suggests that Primary wave ((W)) ended at 0.7731 on October 6th low. Up from there, Primary wave ((X)) is currently unfolding as a double three Elliott Wave structure. Intermediate Wave (W) of ((X)) ended at 0.7807 and Intermediate wave (X) of ((X)) ended at 0.7815. Near term, while pullbacks stay above 0.7815, but more importantly above 10/6 low at 0.7731, expect pair to extend higher. At this stage, pair still needs to break above Intermediate wave (W) at 0.7815 to give more validity to this view. Until then, we can’t rule out a double correction in Intermediate wave ((X)).

AUDUSD 1 Hour Elliott Wave Chart

Double three ( 7 swings) is one of the most common corrective patterns in Elliott wave’s theory. We often refer to double three structure as a 7-swing structure. It is a great pattern that allows traders to trade with a well-defined level of risk and target areas. Below is the image of a Double Three structure. It has labels of (W), (X), (Y) and an internal structure of 3-3-3. This means that all 3 legs has corrective sequences. Each (W) and (Y) is formed by 3 wave oscillations and has a structure of A, B, C or W, X, Y of smaller degrees.

Asia Summary

Asian equity markets opened the session mixed. S&P 500 and Nasdaq futures have risen after the US Senate gained enough votes to pass the budget, which may help pave the way for tax reforms. The Nikkei 225 opened lower following 13 straight sessions of gains, but has since pared losses.

Nissan has declined by over 1.5%. Following yesterday's close, the company's CEO said it decided to temporarily suspend the production of certain vehicles, as the company continues to grapple with the issue of unauthorized vehicle inspections in Japan. The company is also said to have found improper inspections going as far back as 20 years, according to Japanese media. Coupled with the declines in Nissan, shares of Honda have also traded lower.

In Hong Kong, insurer AIA Group has declined by over 2% on weaker than expected growth in quarterly new business value.

Following yesterday's weakness seen in the technology sector, Taiwan Semi has traded flat after reporting Q3 results and issuing guidance. South Korean chip makers are also trading higher. Hynix has gained over 2%.

South Korean utility services firms, including KEPCO Engineering & Construction, have moved sharply higher following the release of a local public opinion poll, which showed public support for building two new nuclear reactors.

South Korean 3-year bond yields have continued to move higher on today's session. Following the hawkish dissenter at yesterday's BoK meeting, some of the tier 1 brokerage firms have started to move forward their views for rate hikes from 2018. US Treasury yields have moved higher in the Asian session following the Senate's budget vote.

At the same time, USD/JPY has gained over 0.4%, amid broad strength in the US dollar. The Kiwi has traded below 70 cents for the first time since May, as the currency has continued to decline following the move by the NZ First Party to form a coalition with the opposition Labour Party.

Looking ahead, US companies due to report earnings later today include General Electric (GE), Honeywell, Manpower, P&G and Schlumberger. On Sunday (Oct 22nd), Japan is due to hold its general elections. On Thursday (Oct 26th), the ECB is due to hold its monetary policy meeting.

Speakers and Press

China

(CN) China mandates 10 banks for planned US dollar bond denominated issuance (first dollar issuance since 2004); to hold investor meeting in Hong Kong on Oct 25th

(CN) Shanghai said to plan Free-Trade Port – Chinese Press

(CN) China NDRC Head: China 2017 GDP to exceed CNY80T, (vs CNY74T y/y) and the GDP growth rate may exceed the official forecast of around 6.5% - Chinese Press

(CN) China gives sector breakdown for Q3 GDP: Tech +29% y/y, Finance +5.6%, Property +3.9%

Other

(US) Senate has the votes to adopt budget, which is a step toward tax overhaul

(JP) Japan Finance Min Aso: Japan companies' piling up of internal reserves has gone too far; wants corporate reserves to be used for investments and wages

(GE) Germany Chancellor Merkel: UK PM May's Brexit stance insufficient at this point; May offered 'significantly' more on Brexit than before, but presentation did not change stance

(KR) Analysts bring forward Bank of Korea rate hike calls to Nov from 2018 following hawkish dissenter at yesterday's policy meeting

(KR) According to a South Korea public opinion survey, 59% support the building of two new nuclear reactors – financial press

(MY) Malaysia Think Tank MIER said to raise 2017 GDP growth forecast to 5.4% vs. 4.7% July forecast - Malaysian Press; Cites stronger domestic demand and exports.

(US) Follow Up: Fed Chair announcement unlikely to come this week as President Trump has yet to make up his mind; Advisers said to favor Taylor or Powell – US financial press

(US) SEMI: North America Sept Billings $2.03B (3-month avg basis), +36% y/y

(NZ) New Zealand Incoming PM Ardern: Will be ‘very pro-active' government

(TW) Zhen Ding Technology: The Apple supplier is said to run factories at full capacity – Taiwan Press

Asian Equity Indices/Futures (00:30ET)

Nikkei flat, Hang Seng +1%, Shanghai Composite flat, ASX200 +0.2%, Kospi +0.5%

Equity Futures: S&P500 +0.3%; Nasdaq +0.3% , Dax +0.3% , FTSE100 +0.3%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.1808-1.1858; JPY 112.52-113.31; AUD 0.7829-0.7882; NZD 0.6972-0.7037

Aug Gold -0.3% at 1,286/oz; Aug Crude Oil +0.2% at $51.38/brl; Sept Copper +0.8% at $3.196/lb

GLD SPDR Gold Trust ETF daily holdings flat at 853.1 metric tons

(CN) PBOC SETS YUAN REFERENCE RATE AT 6.6092 V 6.6093 PRIOR

PBoC OMO: Injects CNY80B in 7 and 14-day reverse repos v CNY140B injected prior in 7 and 14-day reverse repos; Net daily injection CNY60B, net weekly injection CNY560B v CNY240B drain w/w

(CN) China MOF sells 30-year bonds at 4.28%, bid to cover 2.66x

US markets on close: Dow flat, S&P500 flat, Nasdaq -0.3, Russell -0.2%

Best Sector in S&P500: Utilities +1%

Worst Sector in S&P500: Consumer Staples -0.5%

At the close: VIX 10.05 (-0.02pts); Treasuries: 2-yr 1.535% (-3bps), 10-yr 2.320% (-2.5bps), 30-yr 2.838% (-1bp)

US Market Summary

Stocks moved lower on the open after a wave of risk-off sentiment engulfed markets during the European session, but stock prices along with risk assets recouped most losses into the afternoon. The S&P500 and Dow closed near the day's highs, stretching into positive territory at the end of the session. Before the opening bell in NY, the VIX popped 15% back above 11, but volatility edged off as the day wore on. The Sept Philly business outlook blew through expectations, just as the Empire index did on Monday, while signaling acceleration for the manufacturing jobs market. Treasuries rallied on the risk-off sentiment led by the long end, but ended off their best levels, and gold futures gained for the first time in four sessions. Apple iPhone worries weighed on the tech sector. Consumer staples and energy were also in the red, while healthcare and materials outperformed.

US Afterhours Movers

PYPL Reports Q3 $0.46 v $0.44e, Rev $3.24B v $3.17Be; +3.0% afterhours

SKX Reports Q3 $0.59 v $0.43e, Rev $1.10B v $1.06Be; +18.6% afterhours

For the 24 hours to 23:00 GMT, the AUD rose 0.37% against the USD and closed at 0.7877.

LME Copper prices declined 0.7% or $51.5/MT to $6920.0/MT. Aluminium prices rose 1.0% or $22.0/MT to $2128.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7838, with the AUD trading 0.5% lower against the USD from yesterday’s close.

The pair is expected to find support at 0.7817, and a fall through could take it to the next support level of 0.7795. The pair is expected to find its first resistance at 0.7872, and a rise through could take it to the next resistance level of 0.7905.

Going ahead, market participants would keep a close watch on Australia’s consumer price inflation data, the sole important release next week.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR rose 0.43% against the USD and closed at 1.1847, despite political upheaval in Spain after the Spanish government threatened to suspend Catalonia’s autonomy and take control as the region’s leader, Carles Puigdemont, refused to abandon a push for independence.

Macroeconomic data released in the US showed that first time claims for the US unemployment benefits dropped to a level of 222.0K in the week ended 14 October, hitting its lowest level since March 1973, thus pointing to a strong labour market growth that would allow the Federal Reserve to hike interest rate again in December. Markets had expected initial jobless claims to fall to a level of 240.0K, after recording a revised level of 244.0K in the previous week. Further, the nation’s Philadelphia Fed manufacturing index unexpectedly climbed to a five-month high level of 27.9 in October, compared to a level of 23.8 in the prior month, while markets were expecting the index to ease to a level of 22.0.

On the other hand, the nation’s leading indicators unexpectedly retreated 0.2% in September, defying market consensus for a gain of 0.1% and following an advance of 0.4% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.1809, with the EUR trading 0.32% lower against the USD from yesterday’s close, as the greenback strengthened after the US Senate voted to approve a budget blueprint that will allow the Republicans to pursue a tax-cut package without Democratic support.

The pair is expected to find support at 1.1765, and a fall through could take it to the next support level of 1.1722. The pair is expected to find its first resistance at 1.1855, and a rise through could take it to the next resistance level of 1.1902.

Going ahead, investors would eye the Euro-zone’s current account balance data for August, slated to release in a few hours. Moreover, the US existing home sales data for September, slated to release later in the day, would keep investors on their toes.

The currency pair is trading between its 20 Hr and 50 Hr moving averages.