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Turkish lira fell sharply against the dollar on Monday's opening on fresh tensions between the USA and Turkey. The USDTRY pair spiked towards 3.80 zone in thin market in early Asian trading. Strong bullish acceleration on Monday comes in extension of Friday's rally which signaled continuation of an uptrend from 3.3883 (11 Sep low) which paused for 3.5954/3.5400 consolidation, with several Dojis last week signaling strong indecision and awaiting for fresh direction signal. US jobs data that boosted the greenback were initial signal with fresh political tensions between two countries, sparking further upside. Today's spike broke well above Fibo 61.8% of pullback from record high at 3.9414 to 3.3883 at 3.7301 and close above the latter would generate another bullish signal. The pair may extend rally to fully retrace 3.9414/3.3883 pullback if tensions intensify. Corrective easing may extend further as daily studies are strongly overextended but overall bullish picture sees dips as buying opportunities. Session low at 3.6500 marks strong support with extended dips to be contained above weekly cloud top/rising 10SMA (3.5835).

Res: 3.7301; 3.7853; 3.8109; 3.8800
Sup: 3.6650; 3.6500; 3.6000; 3.5835

USD/CHF - 0.9800

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite surging to 0.9837 on Friday, the subsequent retreat in NY suggests top has possibly been formed there and consolidation with mild downside bias is seen for weakness to 0.9750-55 (50% Fibonacci retracement of 0.9670-0.9837), however, break of 0.9730-35 (61.8% Fibonacci retracement) is needed to add credence to this view, bring further fall towards support at 0.9710 which is likely to hold on first testing.

On the upside, whilst recovery to 0.9805-10 cannot be ruled out, reckon said resistance at 0.9837 would hold and bring another retreat later. Above said resistance at 0.9837 would shift risk back to upside and signal the rise from 0.9421 low is still in progress, then gain to 0.9875-80 would follow but reckon 0.9900 would hold from here. As near term outlook is mixed, would be prudent to stand aside for now.

The CAC index is unchanged in the Monday session. Currently, the CAC is trading at 5,360.30, down 0.03% on the day. On the release front, Eurozone Sentix Investor Confidence improved to 29.7, above the estimate of 28.6 points. On Tuesday, France releases Industrial Production, which is expected to remain unchanged at 0.5%.

French President Emmanuel Macron faces a serious challenge on Tuesday, as France braces for a nationwide strike by public service workers, which will affect bus, rail and air transport, hospitals and government offices. The strike has been endorsed by all nine public sector unions, who represent 5.4 million workers. The unions are protesting the government's plan to dismiss 120,000 public sector workers and reduce sick leave benefits. Macron ran on a campaign of reform, but his plan to trim the bloated public sector has predictably run into strong opposition. The government has already pushed through labor reforms, and says more measures are needed in order to boost the French economy.

What's next for Catalonia? The region's parliament meets on Tuesday, and Catalan leader Carles Puigdemont has said that it is up to the Catalan parliament to approve independence, but it's unclear what path lawmakers will take. Puigdemont has not had any talks with Spanish Prime Minister Mariano Rajoy, as the constitutional crisis continues this week. On Sunday, a demonstration against the referendum attracted some 350,000 people, in a strong show of support for Catalonia remaining in Spain. Under Spain's constitution, the Spanish government could literally shut down the Catalan parliament, but has hesitated to take such drastic action so far. However, if the Catalan parliament declares independence, Rajoy could respond forcefully. Investors are nervously monitoring the crisis, which could take a toll on the Spanish economy. Last week, two major banks, Caixabank and Sabadell, said they would relocate their corporate headquarters out of Catalonia, and other large companies could follow suit.

GBP/USD - 1.3158

Original strategy :

Sold at 1.3170, Target: 1.3070, Stop: 1.3205

Position : - Short at 1.3170

Target :  - 1.3070

Stop : - 1.3205

New strategy  :

Hold short entered at 1.3170, Target: 1.3070, Stop: 1.3195

Position : - Short at 1.3170

Target :  - 1.3070

Stop : - 1.3195

Although cable surged again today and marginal gain cannot be ruled out, reckon 1.3190-95 (61.8% Fibonacci retracement of 1.3292-1.3027 as well as 38.2% Fibonacci retracement of 1.3455-1.3027) would cap upside and bring retreat later, below 1.3100 would suggest an intra-day top is formed, bring test of 1.3065-75, break there would suggest the rebound from 1.3027 has ended, bring retest of this level, break there would extend recent decline to psychological support at 1.3000 next.

In view of this, we are holding on to our short position entered at 1.3170. Above 1.3190-95 would risk test of previous support at 1.3222-29 (now resistance), break there would abort and signal low has been formed at 1.3027 instead, bring further gain to 1.3250 but price should falter below resistance at 1.3292.

EUR/USD - 1.1741

Original strategy  :

Buy at 1.1690, Target: 1.1790, Stop: 1.1655

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1690, Target: 1.1790, Stop: 1.1655

Position : -

Target :  -

Stop : -

Although the single currency extended recent fall to 1.1669, the subsequent rebound late Friday suggests a temporary low has possibly been formed there, hence consolidation with upside bias is seen for gain to 1.1750 and then towards resistance at 1.1788, however, break there is needed to add credence to this view, bring retracement of recent decline to 1.1800 and later towards resistance at 1.1832 which is likely to hold from here.

In view of this, we are looking to turn long on dips as 1.1690-00 should limit downside and bring another rebound. Only break of strong support at 1.1662-69 would signal recent decline is still in progress and may extend weakness towards 1.1625-30 but reckon 1.1600 would hold.

USD/JPY - 112.71

Original strategy  :

Sell at 113.10, Target: 112.10, Stop: 113.45

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 113.10, Target: 112.10, Stop: 113.45

Position :  -

Target :  -

Stop : -

Although the greenback jumped to 113.44 on Friday, the subsequent reversal from there to 112.32 suggests top has possibly been formed there and consolidation with downside bias is seen for test of support at 112.21, however, break there is needed to add credence to this view, bring retracement of early upmove to 112.00, then 111.75-80 but previous support at 111.47 should remain intact.

In view of this, we are looking to sell dollar on recovery as resistance area at 113.20-26 should cap upside and bring another decline to aforesaid downside targets. Only break of said resistance at 113.44 would abort and signal recent upmove is still in progress for further gain to 113.75-80 and possibly towards 114.00-10 which is likely to hold from here, bring correction later. 

The DAX is showing little movement in the Monday session. Currently, the index is at 12,965.50, up 0.07% since Friday's close. On the release front, German Industrial Production jumped 3.6%, crushing the estimate of 0.7%. Eurozone Sentix Investor Confidence improved to 29.7, above the estimate of 28.6 points. On Tuesday, Germany releases Trade Balance, with the trade surplus expected to climb to EUR 20.1 billion.

Germany's industrial data for August continues to impress. Industrial Production surged 2.7%, the second-highest gain in 2017. Last week, Factory Orders gained 3.6%, its best performance since December 2016. Strong global demand for German goods, in particular automobiles, has been a boon for German industrial and manufacturing orders. September PMIs were also solid, as the services and manufacturing sectors continue to show expansion. These figures could point to stronger third quarter for the German economy, which has led the way for a strong rebound for the eurozone economy.

All eyes are on Spain, as the Catalan Crisis over the independence could go down to the wire. Catalan's parliament meets on Tuesday, and Catalan leader Carles Puigdemont has said that it is up to the Catalan parliament to approve independence, but it's unclear what path lawmakers will take. Puigdemont has not had any talks with Spanish Prime Minister Mariano Rajoy, as the constitutional crisis continues this week. On Sunday, a demonstration against the referendum attracted some 350,000 people, in a show of support for Catalonia remaining in Spain. Which side will blink first? Madrid could literally shut down the Catalan parliament under Spain's constitution, but has hesitated to take such drastic action. However, if the Catalan parliament declares independence, Rajoy could respond forcefully. The euro was down only marginally last week, but the crisis could hurt the Spanish economy. Last week, two major banks, Caixabank and Sabadell, said they would relocate their corporate headquarters out of Catalonia, and other large companies could follow suit.

The USDJPY pair is currently consolidating around the key 112.60 level, as the U.S dollar index pulls back and investors remain cautious that Pyongyang may launch another missile test this week.

Going forward, the intraday trading sentiment surrounding the USDJPY pair is neutral, with a lack of market-moving data on the U.S economic docket and Japanese financial markets away for Health-Sports Day bank holiday.

The USDJPY pair rose to 113.44 on Friday, as the United States unemployment rate hit a sixteen-year low, while annual and monthly U.S wages grew strongly.

Going forward, the U.S dollar is likely to drive the pair this week, with the U.S economy releasing key inflation data and the Meeting Minutes from the Federal Reserve's September meeting.

Key intraday technical resistance is found at the USDJPY daily pivot point, at 112.70 and the former swing high, at 112.90. Once above 112.90, further resistance is found at 113.25 and 113.44.

To the downside, key USDJPY intraday technical support is found at the pairs weekly pivot point, at 112.40 and the Friday swing low, at 112.33. Once below 112.33, further support is seen at 112.02 and 111.86.

The British pound has moved sharply higher against the U.S dollar during the European trading session, hitting 1.3185, after the ONS upwardly revised UK Second Quarter Labor Costs to 2.4 percent from 1.6 percent, furthering expectations of a November 2nd UK rate hike from the BOE.

Intraday trading sentiment surrounding the British pound has improved after the ONS revision, while British Prime Minister Theresa May appears to have survived a leadership challenge from within the Conservative party.

The GBPUSD pair has now broken above its key 50-day moving average, at 1.3150, with price-action finding interim resistance from the 1.3185 level.

Going forward, sterling faces strong resistance from the 1.3222 level, which is last week's break-out support, now turned resistance.

Key intraday support is currently located at the GBPUSD pairs weekly pivot point at 1.3166, and key 50-day moving average, at 1.3150. Support below 1.3150 is found at 1.3123 and the key 1.3090 level.

To the upside, intraday GBPUSD resistance is found at 1.3200, 1.3222 and 1.3257. The pairs key 200-hour moving average is currently located at 1.3271.

Turkey's currency takes a hit after US suspends visa services

Tensions are growing between the United States and Turkey. Last night, both countries have suspended part of their visa services. Indeed, an employee of the US embassy has been arrested on charges of espionage at Istanbul. As a result, US and Turkey have decided stop issuing non-immigrant visas for Turkish travellers.

The USDTRY pair strongly surged (more than 6%) out of those decisions probably on escalation fears and has reached its highest level since April (3.80 TRY for one single dollar note). The Turkey-US relations are turning to a worse situation. Geopolitical tensions are strongly growing. Actually in the background, tensions are escalating because of the US support to Syrian Kurdish rebels which Turkey considers as a terrorist group.

We definitely believe this can reveal more underlying tensions as Turkey is getting closer and closer of Russia and Iran. In the short-term, the USDTRY may nonetheless bounce back lower as the situation unravels. Yet, we believe that global tensions are overall on the rise and should weigh on the TRY.

AUD's stabilisation may be temporary

The Australian dollar held steady on Monday morning after tumbling more than 1% against the US dollar last week. The release of disappointing local economic data together with improving US ones, encouraged investors to unwind long AUD position.

Firstly, the Reserve Bank of Australia send mixed last week. Although Governor Lowe reiterated that economic growth continued to gradually pick up, he also mentioned that the recent strength of the Aussie could dampen economic growth as well as inflation. This was the first blow for the Aussie. Secondly, September's retail sales came in well under median forecast, contracting 0.6%m/m compared to +0.3% expected. This was the second blow.

Last Thursday, AUD/USD broke its monthly range to the downside as it moves below 0.7787 (low from July 18th) and is currently trading at around 0.7760. Traders will most likely continue to trim long AUD position as the Fed is expected finally resumed its tightening cycle and start balance sheet reduction. However, with the US closed for Columbus Day, today will be slow and volume are expected to be thin.