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USDJPY (113.57): USDJPY managed to rally back to the resistance level on Friday but closed on a bearish note. Price action remains consolidating within the rising wedge pattern on the daily chart. This suggests a potential breakdown to the downside. Initial support is found at 110.70 followed by a test towards 108.26 eventually. On the 4-hour chart, initial support is seen near the price level of 113.00 that could offer some short-term support. However, following this bounce, we expect further declines to be extended towards 110.70.

EURUSD (1.1613): The EURUSD breached the support level at 1.1710 - 1.1672 on Friday. The breakdown of this support level suggests further downside in price with a test towards the 1.1440 support level. On the 4-hour chart, the validation of the descending triangle pattern could see price attempting to retrace the losses back to the breached support level. If price action moves back to 1.1710 - 1.1672, then we can expect the resistance level to be established here. A reversal at this level is likely to keep prices poised to the downside. In the event of a move above 1.1710 - 1.1672, then EURUSD could be seen trading within the new range above this support level.

The euro was seen trading weaker after developments since Friday saw the region of Catalonia declaring independence. This comes amid Spanish government seeking a resolution to impose direct authority over the region.

On the economic front, data on Friday showed that the preliminary GDP in the US for the third quarter beat estimates, rising 3.0% in the three months ending September. The report briefly sent the US dollar higher on the day before the greenback settled back to close at the open.

Looking ahead, the economic calendar is relatively quiet today ahead of what could be a busy week. The US core PCE price index data is forecast to rise 0.1% on the month, but personal income and spending are both expected to risestrongly.

The British pound has started to recover losses against the U.S dollar in Monday trading, with the GBPUSD pair hitting 1.3150 during the Asian session. The pair currently trades around the 1.3140 level, as the U.S dollar index continues to come under early selling pressure. GBPUSD traders will remain focused on the U.S dollar index and CORE PCE inflation data coming out from the United States on Monday.

The GBPUSD pair remains intraday bullish while trading above the key 1.3116 technical level. Further upside advancement can be expected towards the 1.3157 and 1.3201 levels.

Should the GBPUSD pair decline below the 1.3116 level, a further decline towards the 1.3086 and 1.3065 levels remains likely.

The euro has made modest gains against the U.S dollar as the new trading week gets underway, as the greenback comes under early selling pressure. The EURUSD pair has so far risen towards the 1.1620 level, ahead of a possible indictment in the investigation of the Trump campaign’s links to Russia, and speculation that Federal Reserve Governor Jerome Powell will be appointed to FED Chair. Governor Powell is seen by financial markets to be more dovish towards U.S fiscal policy.

The EURUSD pair is expected to continue to recover upside momentum while clearly trading above the 1.1610 level. Further advances towards 1.1644 and 1.1670 remain likely, with extended intraday resistance found at the 1.1713 level.

A sustained loss of the 1.1610 level for the EURUSD should lead to a further decline towards the 1.1580 and 1.1560 technical levels.

The bulls regained control of the cryptocurrency market this weekend, sending bitcoin prices to new all-time highs as concerns over regulatory risks faded.

The BTC/USD exchange rate briefly touched above $6,300 over the weekend, according to CoinDesk BPI. The Bitfinex exchange last had prices at around $6,128, reflecting a gain of more than 7%. At present values, bitcoin’s market cap is a staggering $102 billion on supplies of roughly 16.65 million.

Bitcoin’s technical outlook is strongly bullish, as investors continue to buy the dips in pursuit of higher prices. The world’s no. 1 cryptocurrency by market cap has surged more than 500% this year. That makes the Dow Jones’ 19% gain look paltry.

The relentless surge in bitcoin prices has driven the crypto market’s total cap to nearly $180 billion. Bitcoin Cash (BCH), which recently forked from the Bitcoin network, was up more than 7% on Monday to trade at more than one-month highs. Though unclear how long the latest uptrend will last, the bitcoin market is in a firm uptrend that has only strengthened over the past month.

Eurozone data are back in the spotlight on Monday ahead of an active week in the market that features central bank meetings and US nonfarm payrolls. Although Monday won’t be nearly as exciting, it does feature some important tidbits on the currency region.

The newswire begins at 07:00 GMT with a report on German retail sales. Receipts at retail stores are forecast to climb 0.5% in September, following a 0.4% drop the month before. Compared to a year earlier, sales are expected to rise 3.5%.

Spain will dominate the headlines at 08:00 GMT with preliminary reports on inflation and gross domestic product (GDP). The Spanish economy is projected to grow at a healthy 0.8% in the third quarter, following a 0.9% advance in Q2.

British consumer credit and mortgage approval data will make their way through the financial markets at 09:30 GMT.

A half-hour later, the European Commission’s statistics agency will release a deluge of sentiment indicators including industrial confidence, economic sentiment and consumer confidence.

Meanwhile, Germany will issue its preliminary CPI data at 13:00 GMT.

In US data, the Commerce Department will report on personal spending and outlays for the month of September. The monthly release is expected to show a 0.7% increase in personal spending. Income growth is forecast at 0.2%.

EUR/USD

The euro has been in freefall since the European Central Bank (ECB) announced it would likely extend its bond-buying program beyond September 2018. The announcement confused the bulls, who had just cheered the ECB’s decision to cut its monthly bond purchases in half from €60 billion to €30 billion. The EUR/USD exchange rate was last seen trading at 1.1600. The pair fell roughly 200 pips on Friday. The technical picture is bearish following a breakdown of support near 1.1660. The pair’s next support level is located at 1.1585. On the opposite side of the ledger, the initial resistance target is located at 1.1720.

GBP/USD

Cable was trading steady on Monday, as markets stabilized following a sharp breakdown on Friday that drove prices to three-week lows. The GBP/USD is currently trading around 1.3140, where it was up slightly from the previous close. The pair is expected to rally later this week as the Bank of England (BOE) signals for higher interest rates. With inflation at 3%, the central bank is widely expected to hike rates. The bulls are eyeing the 1.3160 resistance for signs of upward momentum. That level represents the high from Friday. ON the opposite side of the ledger, immediate support is located at 1.3187, which represents the 50-DMA.

US OIL

Oil prices are riding a wave of optimism now that OPEC appears to be committed to extending its supply cut well into next year. US crude is trading near six-month highs, with prices briefly surpassing $54.00 a barrel. The market looks poised for further gains as investors rally behind supply-side optimism. Optimism is also being supported by expectations of higher crude demand.

Key Highlights

• The Euro moved down sharply this past week and traded below 1.1700 against the US Dollar.
• There was a break below a crucial triangle support at 1.1735 on the 4-hours chart of EUR/USD.
• The US Gross Domestic Product (Q3 2017) (Annualized) (Prelim) posted a growth of 3%, more than the forecast of 2.5%.
• Today, the Euro Zone Economic Confidence for Oct 2017 will be released, which is forecasted to increase from 113.0 to 113.4.

EURUSD Technical Analysis

The Euro started a new downside wave from 1.1835 against the US Dollar. The EUR/USD pair is now below 1.1700 and eyeing further declines in the near term.

Looking at the 4-hours chart, there was a break below a crucial triangle support at 1.1735. The pair is now placed well below 1.1700, the 100 simple moving average (4-hour, red) and the 200 simple moving average (4-hour, green).

These are bearish signs and might put a lot of pressure on EUR/USD for a move towards 1.1500. Any major corrections in the short term towards 1.1640 and 1.1700 might be considered as selling opportunities for bears.

US Gross Domestic Product

This past Friday, the Gross Domestic Product Annualized figure for Q3 2017 (prelim) was released by the US Bureau of Economic Analysis. The forecast was slated for a rise of 2.5% compared with the last increase of 3.1%.

The actual result was better than the forecast, as there was a rise in the GDP by 3%. Looking at the GDP Price Index, there was an increase of 2.1%, which was more than the forecast of +1.8%.

The report stated:

Current-dollar GDP increased 5.2 percent, or $245.5 billion, in the third quarter to a level of $19,495.5 billion. In the second quarter, current-dollar GDP increased 4.1 percent, or $192.3 billion.

Overall, the EUR/USD pair remains in a downtrend and might extend its declines towards 1.1500 in the near term.

Economic Releases to Watch Today

Euro Zone Consumer Confidence Oct 2017 – Forecast -1, versus -1 previous.

Euro Zone Services Sentiment Oct 2017 – Forecast 15.0, versus 15.3 previous.

Euro Zone Industrial Confidence Oct 2017 – Forecast 7.0, versus 6.6 previous.

Euro Zone Economic Sentiment Indicator Oct 2017 – Forecast 113.4, versus 113.0 previous.

US Personal Income for Sep 2017 (MoM) – Forecast +0.4%, versus +0.2% previous.

US Core Personal Consumption Expenditure for Sep 2017 (MoM) – Forecast +0.2%, versus +0.1% previous.

The US Commerce Department released Q3 GDP data on Friday, showing the US economy expanded at an annual pace of 3%. With the back-to-back Hurricanes during the quarter many had expected Q3 GDP to be lower than the previous, robust, release of 3.1% – consensus forecasts had called for a release of 2.5%. The effects of the Hurricanes appear to have been smaller and less impactful on economic growth than had been previously expected. However, much can be attributed to the disruptions caused by Harvey & Irma, as consumer spending declined to 2.4% from the strong 3.3% rate seen in Q2. The Commerce Department cautioned that the data did not capture all the losses caused by the storms, which caused shutdowns of many businesses in Florida and Texas. The back-to-back growth of >3% is the first time since 2014 and is likely to keep the Federal Reserve on track to hike interest rates one more time in 2017. The data helped push USD higher against its peers.

In Spain on Friday, Catalonia's parliament defiantly declared independence in a vote boycotted by three parties, claiming an Oct. 1 referendum, that was ruled illegal under Spanish law, had given them a mandate. Following the vote, Spain's central government fired Catalonia's President Puigdemont, dissolved the region's parliament and dismissed the local government after the Spanish Senate approved the use of article 155 of the constitution. At the same time, Spanish Prime Minister Rajoy called for an election on December 21st. On Sunday, in Catalonia's capital Barcelona, hundreds of thousands of demonstrators rallied to show that not everyone is in favor of independence. The United States and the European Union also rejected the results of the referendum and support a united Spain. Without Catalonia, Spain would continue to be the fourth largest economy in the eurozone, after Germany, France and Italy, but it would be much weakened. An independent Catalonia becomes a threat not just to Spain but to the EU as a whole, in some ways a greater threat than Brexit. EUR had been under downward pressure following the slow and gradual reduction of QE and the Catalan issue is not helping the single currency.

EURUSD is little changed in early trading at around 1.1615.

USDJPY is trading close to Friday's close at around 113.62.

GBPUSD is 0.15% higher in early Monday trading at around 1.3145.

Gold is slightly lower, due to USD strength, currently trading around $1,271.

WTI is 0.5% lower in early trading at around $54pb.

Major data releases for today:

At 09:30 GMT, the Bank of England will release Consumer Credit for September. The forecast is expected to come in at GBP 1.5 billion compared to the previous months GBP 1.583 billion. We can expect to see volatility in GBP if the release is wildly different from expectations.

At 10:00 GMT, the European Commission will release Industrial Confidence, Economic Sentiment Indicator, Business Climate, Consumer Confidence and Services Sentiment for the month of October. Industrial Confidence is forecast at 7.0 (prev. 6.6), Economic Sentiment at 113.4 (prev. 113), Consumer Confidence unchanged at -1 and Services Sentiment at 15.0 (prev. 15.3). Whilst all of these data releases should indicate relatively good sentiment, any release that is significantly different from forecast will likely see EUR volatility.

At 12:30 GMT, the US Bureau of Economic Analysis will release Core Personal Consumption Expenditure – Price Index (YoY & MoM) for September. The previous year-on-year reading of 1.3% is expected to be beaten, as upward inflationary pressure should start to be evident in the US economy. The month-on-month releases is expected to come in at 0.2%, beating the previous release of 0.1% – again pointing to upward inflationary pressure.

Sunrise Market Commentary

• Rates: Upward bias core bonds to start new trading week
  The US, 10-yr and 30-yr yields failed to close above key resistance levels last week, suggesting some downward correction this week with event risk looming and a likely positive impact on core bonds (next Fed chair, main US eco data, Russian probe, tax reforms, Catalunya,…). The US Note future could outperform the German Bund.
• Currencies: Euro remains weak and loses support versus dollar and sterling
  The post-ECB euro selling continued on Friday but its intensity eased. Some technical supports were broken, suggesting that the market may still a bit too long euro. We think the correction might have somewhat further to go. However, sterling and the dollar have issues too. Therefore, we prefer a euro sell-on-upticks ST and a euro buy at lower, key euro supports

The Sunrise Headlines

• US stock markets ended last week on a positive note with a huge outperformance of Nasdaq (+2%) on strong earnings from bellwether tech companies. Asian stock markets are mixed overnight.
• Spain faces a crucial test of its authority over Catalonia today when regional government ministries open under the direct control of Madrid for the first time since the country's return to democracy 40 years ago.
• President Trump is likely to announce Federal Reserve governor Powell as his nominee to be the next chairman of the US central bank next week, according to a person familiar with the matter.
• The man in charge of the ECB's €2.5 tn stimulus programme, Benoit Coeure, hopes it will not be extended again when it expires in September, he told a French weekly newspaper.
• Some of the world's most powerful oil producers including Saudi Arabia are rallying behind an extension of a global supply cuts agreement, providing support to crude prices that have rebounded to $60/barrel.
• S&P unexpectedly upgraded the Italian rating from BBB- to BBB (stable outlook). The upgrade reflects Italy's firming economic recovery, driven by investment activity and improving labour market trends.
• Today's eco calendar is busy with German (CPI) and US (PCE) inflation readings. EC EMU confidence indicators are also on the agenda. Italy taps the markets and ECB Costa and Hansson are scheduled to speak

Currencies: Euro Remains Weak And Loses Support Versus Dollar And Sterling

EUR/USD extends decline. Dollar picture improves

EUR/USD extended its post-ECB decline on Friday, but the pace slowed. The move was mostly due to euro softness. The prospect of the dovish Mr. Powell eventually succeeding Ms. Yellen pushed US yields lower in mid US trading and narrowed the interest rate differential, but an attempt of the euro to rally was rapidly aborted and reversed. It suggests that the market is still too long euro. Mr. Draghi's dovish comments look to shed euro long exposure. EUR/USD eventually sluggishly moved higher on pre-weekend positioning to close at 1.1610 from 1.1650. USD/JPY traded north of opening levels, but could never really make headway. It briefly tested the key 114.50 resistance, but a break didn't occur despite broad-based equity gains. After the Powell rumours, USD/JPY slid even into negative territory, closing at 113.68 versus a 114 opening.

Overnight, FX markets traded subdued with EUR/USD and USD/JPY little changed from openings levels around 106.09 and 113.73 respectively. The Kiwi dollar remains under pressure as the government wants to change the RBNZ remit, which might mean including employment objective.

Eco calendar uneventful

Today in EMU, the attention will focus on the EC business indicators and the German HICP inflation (October). In the US, the personal income and spending for September is released. For details see the fixed income section. Summarizing: the data shouldn't be of importance for FX

Events plentiful this week

Five events may affect FX markets. First, President Trump is due to announce his nominee for Fed Chair. Fed governor Powell is the frontrunner and markets have at least partly already discounted his win. A surprise nomination of (hawk) John Taylor would likely hit US Treasuries and favour the dollar. Second, the November FOMC meeting concludes on Wednesday, but no surprises are expected and thus it should be neutral FX-wise. Third, the Republicans will unveil details of the tax reform bill. If the details show bigger tax cuts than recently suggested, it would be negative for US Treasuries and dollar positive. Fourth, the standoff between Spain and Catalonia. Until now, it didn't play a big role in EUR/USD trading, but as long as the impasse stays, it would be slightly dollar positive. Finally, the payrolls with too high? expectations

Dollar to make more corrective gains versus euro?

The euro traded strong in the run-up to the ECB decision. The dollar failed to gain against the euro despite widening interest rate differentials since early September. This trading dynamic was broken after the ECB decision and extended on Friday. Policy divergence between the ECB and the Fed is again on the radar of (FX) markets. A EUR/USD sell-on upticks bias remains favoured. Any additional interest rate support for the dollar will probably be modest near term, especially if Powell is nominated to succeed Yellen. So, any further EUR/USD decline might develop gradually. For today, we have a neutral bias.

Technicals: EUR/USD uptrend brokenFrom a technical point of view, EUR/USD dropped below 1.1670/62 support. If confirmed, it would signal that the uptrend in place since the turn of the year is broken, as the higher highs, higher lows pattern is shattered. EUR/USD 1.1423 (38% retracement of 2017 rise) is the next downside target on the charts. USD/JPY's momentum was positive in September. The pair regained 110.67/95 resistance, a positive. The 114.49 correction top is the next resistance. Sentiment improved last week, but the first test on Friday failed. We don't preposition for a sustained break higher.

EUR/USD broke below 1.1662 support. If confirmed, the year-long euro uptrend would be finished

EUR/GBP

EUR/GBP returns below 0.89 on euro weakness

On Friday, EUR/GBP initially returned to the 0.89 area, despite EUR/USD staying near the post-ECB lows. Ongoing diffuse comments on the Brexit process from inside and outside the UK weighed on sterling. However, the sterling fought back and gained even some more ground versus the euro (and dollar) after 16 CET when the rumour that Trump leans towards the nomination of dovish Powell couldn't push EUR/USD sustainably higher. EUR/GBP closed around 0.8840.

The UK eco calendar contains the money supply and lending data, but these are unlikely to make the difference, while EMU data won't affect the overall euro trading either. The key for sterling might be on Thursday when the market expects a BoE rate hike to 0.50%. There is a strong majority of economists expecting a rate hike and markets price a 88.4% chance of a rate hike. This means asymmetrical risks for sterling. Slight gain in case of rate increase, but heavy losses in case of an unchanged decision. We don't expect that the rate hike will be the start of a genuine rate cycle and neither does the market. Ahead of the BOE we expect sideways trading in the 0.8743 to 0.9033 range maybe with slight sterling gains on the basis of the technicals. We maintain a EUR/GBP buy-on-dip bias, but are in no hurry to add exposure until we see signs that euro correction is over.

EUR/GBP staged a strong uptrend from April till late August with a top at 0.9307. Rising UK inflation and the BoE preparing markets for a rate hike caused a sterling rebound, but it has run its course. EUR/GBP recently tried to regain the 0.90 area, but there were no follow-through gains. The drop below the 0.8855 area (neckline minor double top) on Friday may, if confirmed, open the way for a return to the 0.8743 or even 0.8652 supports. This area will be tough to break.

EUR/GBP: minor double top, if confirmed, may push sterling correction a bit further. Still sell sterling on up-ticks.

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