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For the 24 hours to 23:00 GMT, the EUR declined 0.42% against the USD and closed at 1.1711, after minutes of the European Central Bank (ECB) highlighted concerns over the rapid appreciation of the Euro.

Minutes of the ECB’s latest meeting showed discussion among members on various options to extending its asset buying, including the choice between the pace and the intended duration. Further, it showed that policymakers admitted the need of a substantial monetary policy for a little longer period of time to ensure that inflation’s returns to the central bank’s target and “broadly agreed” that October’s meeting would be the right time for “the bulk of the decisions”. Minutes also showed that officials fretted over Euro’s strength and its impact on the nascent economic recovery.

Other economic data showed that Germany’s Markit construction PMI dropped to a level of 53.4 in September, compared to a reading of 54.9 in the prior month.

The greenback gained ground against its major peers, after the latest string of economic reports painted a bright picture of the US economy.

Data revealed that initial jobless claims in the US eased more-than-expected to a level of 260.0K in the week ended 30 September, compared to a level of 272.0K in the previous week, while markets were anticipating for a fall to a level of 265.0K. Further, the nation’s trade deficit narrowed to an eleven-month low of $42.4 billion in August, as exports of goods and services rose to a nearly three-year high. The nation had posted a revised trade deficit of $43.6 billion in the previous month, while investors had expected the country’s trade deficit to narrow to $42.7 billion.

Another set of data revealed that the final durable goods orders in the US climbed more than initially estimated by 2.0% on a monthly basis in August, while the preliminary print had indicated a rise of 1.7%. Durable goods orders had registered a decline of 6.8% in the prior month. Moreover, the nation’s factory orders rebounded 1.2% on a monthly basis in August, more than market consensus for a rise of 1.0%. Factory orders had dropped 3.3% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.1706, with the EUR trading marginally lower against the USD from yesterday’s close.

The pair is expected to find support at 1.1677, and a fall through could take it to the next support level of 1.1648. The pair is expected to find its first resistance at 1.1757, and a rise through could take it to the next resistance level of 1.1808.

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

For the 24 hours to 23:00 GMT, the GBP declined 0.95% against the USD and closed at 1.3116, amid mounting rumours that the British Prime Minister, Theresa May, could be ousted in the coming months.

In the Asian session, at GMT0300, the pair is trading at 1.3101, with the GBP trading 0.11% lower against the USD from yesterday’s close.

The pair is expected to find support at 1.3043, and a fall through could take it to the next support level of 1.2984. The pair is expected to find its first resistance at 1.3205, and a rise through could take it to the next resistance level of 1.3308.

Moving ahead, investors will look forward to UK’s Halifax house price index for September, slated to release in a few hours.

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

For the 24 hours to 23:00 GMT, the USD slightly rose against the JPY and closed at 112.82.

In the Asian session, at GMT0300, the pair is trading at 112.85, with the USD trading marginally higher against the JPY from yesterday’s close.

On the data front, Japan’s labour cash earnings rebounded 0.9% on an annual basis in August, compared to a fall of 0.3% in the prior month. Markets had anticipated for a gain of 0.5%.

The pair is expected to find support at 112.54, and a fall through could take it to the next support level of 112.24. The pair is expected to find its first resistance at 113.02, and a rise through could take it to the next resistance level of 113.20.

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

For the 24 hours to 23:00 GMT, the USD rose 0.33% against the CHF and closed at 0.9784.

In economic news, Switzerland's consumer price index (CPI) registered a rise of 0.2% on MoM in September, at par with market expectations. The CPI had registered a flat reading in the previous month.

In the Asian session, at GMT0300, the pair is trading at 0.9791, with the USD trading 0.07% higher against the CHF from yesterday's close.

The pair is expected to find support at 0.9757, and a fall through could take it to the next support level of 0.9724. The pair is expected to find its first resistance at 0.9810, and a rise through could take it to the next resistance level of 0.9830.

Amid a lack of macroeconomic releases in Switzerland today, investors will focus on Switzerland's unemployment rate for September, the sole important release next week.

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

For the 24 hours to 23:00 GMT, the USD rose 0.74% against the CAD and closed at 1.2569.

On the macro front, Canada's international merchandise trade deficit surprisingly widened to C$3.41 billion in August, defying investor consensus for the nation's trade deficit to narrow to C$2.60 billion and following a revised deficit of C$2.98 billion in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.2574, with the USD trading a tad higher against the CAD from yesterday's close.

The pair is expected to find support at 1.2496, and a fall through could take it to the next support level of 1.2417. The pair is expected to find its first resistance at 1.2619, and a rise through could take it to the next resistance level of 1.2663.

Trading trend in the pair today is expected to be determined by the release of Canada's crucial unemployment rate data for September, due to release later in the day.

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

EURUSD

The EURUSD had a bearish momentum yesterday bottomed at 1.1699. The bias remains bearish in nearest term testing 1.1600 region. Immediate resistance is seen around 1.1780. A clear break above that area could lead price to neutral zone in nearest term but only a clear break above 1.1900/35 key resistance could potentially end the current bearish correction phase. On the downside, a clear break and daily/weekly close below 1.1600 would expose 1.1450 region next week.

GBPUSD

The GBPUSD continued to trade lower yesterday, broke below 1.3150 support area, bottomed at 1.3107. The bias remains bearish in nearest term testing 1.3030. A clear break and daily/weekly close below that area could trigger further bearish pressure testing the daily EMA 200 and the trend line support as you can see on my daily chart below, located around 1.2980/50 area. Immediate resistance is seen around 1.3150. A clear break above that area could lead price to neutral zone in nearest term but as long as stay below 1.3400 price is still in a bearish correction phase.

USDJPY

The USDJPY had another indecisive movement yesterday. There are no changes in my technical outlook. The bias remains neutral in nearest term. My H1 chart bias remains bullish, but we need a clear break above 113.20 key resistance to continue the bullish phase targeting 114.50 region. Immediate support is seen around 112.32. A clear break below that area could trigger further bearish pressure testing 111.65 key support. Overall I remain neutral.

USDCHF

The USDCHF had a bullish momentum yesterday topped at 0.9795. The bias is bullish in nearest term but note that price is inside my key resistance zone as you can see on my daily chart below which is a good place to sell with a tight stop loss above 0.9807. Immediate support is seen around 0.9765. A clear break below that area could lead price to neutral zone in nearest term testing 0.9700 area. On the upside, a clear break and daily/weekly close above 0.9807 would activate my bullish mode targeting 0.9950 region next week.

EURUSD Intra-Day Elliott Wave view suggests the decline from 9/8 peak remains in progress as an expanded Flat Elliott Wave structure. Down from 9/8 high (1.2094), pair ended Intermediate wave (A) at 1.837. Bounce to 1.2034 ended Intermediate wave (B). Intermediate wave (C) remains in progress and unfolding as 5 waves impulse where Minor wave 1 of (C) ended at 1.186, and Minor wave 2 of (C) ended at 1.2. Down from there, Minor wave 3 of (C) ended at 1.1716 and bounce to 1.1832 ended Minor wave 4 of (C).

While EURUSD stays below 1.1789, it has scope to extend lower in Minor wave 5 of (C) and reach 1.1586 – 1.1633 area. The move lower will also end cycle from 9/8 peak and complete Primary wave ((W)). Afterwards, Pair should bounce in Primary wave ((X)) to correct cycle from 9/8 peak in 3, 7, or 11 swing at least. If pair breaks above 1.17899 from here without making a new low, pair may have ended Primary wave ((W)) already.

EURUSD 1 Hour Elliott Wave Chart

Expanded Flat is a 3 waves corrective pattern, and the inner subdivision is labeled as A,B,C with 3,3,5 structure. That means waves A and B are always corrective structures i.e. could be WXY, WXYXZ, Zigzag or any 3 waves corrective pattern. Wave C is either 5 waves impulse or ending diagonal pattern. In the graphic below, we can see what Expanded Flat structure looks like. Inner structure has ABC labeling, where wave B can complete below or above the starting point of wave A. Wave C should complete below the end point of wave A (usually at 1.236-1.618 fibonacci extension A related to B).

STOCKS

Dow (22775.39, +0.50%) has broken above all immediate resistances and looks strongly under the control of the bulls now. While the upward momentum stays intact, we could see a rise towards 23000-23250 levels soon.

Dax (12968.05, -0.02%) is almost stable today but is poised for another upside shot targeting the crucial resistance near 13000-13050 levels from where a sharp corrective dip is likely. The index could close the week on a positive note. By the end of next week, we could possibly get to see some initial signs of correction while below 13050.

Nikkei (20679.18, +0.25%) is trading just below important resistance zone of 20700-20745 and while that holds, scope of further upside looks limited. The index could remain stable and possibly enter into a sideways consolidation if not see a sharp fall towards 20600-20500 levels in the near term.

Resistance near 9970-9950 continues to hold for now. Nifty (9888.70, -0.26%) could trade within 9950-9850 for a few sessions before coming down towards 9800.

Shanghai is closed this week. Fresh movement expected on Monday after the weeklong holiday.

COMMODITIES

Gold (1268.45) is stuck within the 1285-1260 region and could trade sideways for some sessions. Silver (16.61) is also sideways but could possibly come off towards 16.50-16.25 levels in the near term.

Gold-Silver ratio (76.298) could test support near 75.80 and while that holds, we could see a bounce back to 77 in the next 2-3 sessions.

Brent (56.91) has bounced from above support levels of 54.80-55.00 as seen on the 3-day candles. While the immediate support holds, the price could move up to levels near 57-58 soon.

WTI (50.73) seems to have enough room on the downside just now and has potential to move down towards 49.00-48.50 before attempting to rise again in the longer run.

Copper (3.0475) rose sharply and is trading above 3.00 just now. While above 3, the price could start moving up again towards 3.10 in the near term. View is bullish for the coming sessions.

FOREX

We may be wrong, but it appears that with Dollar Index at 93.94 and Euro at 1.1710, the market is going in Long Dollars into the US NFP tonight. Caution is advised as we see Resistance at 94.50 on the Dollar Index and Support in the 1.1665-00 region on the Euro.

Note that the German-US 2Yr Spread (-2.19%) may have Support at -2.23% while the German-US 10Yr Spread (-1.90%) may have Support near -1.94%, limiting the downside in the Euro.

Dollar-Yen (112.85) has been consolidating below 113.00-50 for the last few days but might attempt to rise to 113.50-114.00 in the short term as the US-Japan 10Yr Spread continues to rise.

Not covering the Pound, Aussie today. Apologies.

Dollar-Rupee (65.14) might move up to 65.25-30 today.

INTEREST RATES

There may be some more room on the upside for US yields, but limited to 3.00% on the 30Yr (2.89%), 2.50% on the 10Yr (2.35%) and 2.20% on the 5Yr (1.95%). If all these levels are tested, the US Yield Curve will flatten.

Market expectation is a low 88K from the US NFP tonight. A higher number can well be a trigger for a rise in US yields.

See Forex section above for views on German-US and US-Japan yield spreads.

10Yr GOI (6.7286%) is breaking above 6.70%, the level that we expected to hold as resistance earlier. Needs to be watched carefully.

The Running of the Dollar Bulls?

Not quite the running of the bulls as yet but indeed unambiguous signals are building to support the firm USD view. While the markets remain cemented within recent trading ranges, the pendulum is soundly swinging in favour of the dollar as the stars continue to align in support of this view.

Heading into NFP, market forecasts are stunted given the likelihood of the hurricanes distorting the data. None the less, it has been difficult to overlook this week’s stellar US economic data as both ADP data, and weekly initial jobless claims have been surprisingly buoyant. But perhaps the most astounding signals are generating from this week’s ISM PMI’s that clocked in at 12-year highs. One can only assume that more positive economic data surprises are just around the corner.

Fed Williams took to the wires overnight and was unquestionably hawkish in his view not only supporting the 2017 December rate hike but lobbying for three more nudges in 2018. But it was his mention that the risk for asset price bubbles that was especially hawkish as it supports the view that the Feds are no longer single-mindedly focused on inflation for policy guidance.

With the markets woefully underpriced the Fed dot plots, a more aggressive lean from the FOMC would offer up a smorgasbord of opportunities for the dollar bulls who would most certainly have sights set on AUD, EUR and GBP, the current weak links.

Inter-party GOP squabbling has subsided as the US House has taken essential steps setting the stage to roll out a determined tax-overhaul bill which should pass without Democratic backing. Of course with this greater confidence comes a more significant fall but the level of GOP impudence this time around suggests a done deal.

Non-Farm Payroll

Since some hurricane impact is anticipated on the data any blemish on payrolls will most certainly be sidestepped. The tail risk, however, may come from a better than expected wages reading. Make no mistake AHE tends to give FX traders the clearest signal on NFP and this pattern should hold true even more so today. Since the wages reading has been exceptionally soft, any upside surprise will likely generate an outsized move on the USD.

Balance of Risks

Euro

The single currency remains weighted down by the “Pain in Spain” driven by Catalan consternations. But let’s not overlook the above-trend amplification of the US economy which has contrarians coming out of the woodwork now thinking FED -ECB policy divergence as opposed to convergence. US Treasury yields continue firming, and the inflationary expectations from the US tax reform are expected to provoke a further rise. While EURUSD should remain under pressure given this scenario, the EURO bulls are unlikely to give up the plot preferring to hold on for the October ECB

Australian Dollar

The buoyant US dollar along with the acutest declines in domestic retail sales in the past four years has the Aussie trading below the fundamental .7800 level in early APAC trade. On the US side of the equation Fed repricing, supportive US economic outlook and a budget resolution paving the way for tax reform has US dollar bulls champing at the bit.

Japanese Yen

Despite election jitters, the rise in US yields and the firming USD should remain the aggressive driver for this trade. While a top side breakout appears imminent its hard to overlook the election poll risk as we near election day.

The Canadian dollar is lower on Thursday after trade data in Canada showed a larger deficit. Exports continue a downward trend and as many economists have predicted the Canadian economy is losing momentum. The story was different for the US trade balance, that showed a rise in exports and boosted the USD to multi week highs.

The USD/CAD gained 0.74 percent in the last 24 hours. The currency pair is trading at 1.25688 after trade data in the US surprised to the upside with rising exports while a different story played out in Canadian figures. The Canadian trade deficit widened in August with exports falling for a third month in a row.

Economists have warned that the Canadian economy is cooling down after an impressive first half of 2017. Two rate hikes and impressive growth took the loonie to appreciate versus a struggling USD. A third rate hike is losing ground in the eyes of the market. The Bank of Canada (BoC) cut rates by 50 basis points in 2015 and it wasn’t until their assessment of the economy improved in 2017 that they have hiked twice to leave the benchmark rate at 1.00 percent.

Tomorrow’s job releases in Canada and the US will be telling on how the two economies are acting in tandem or breaking apart. The tropical storms in the US could obfuscate the jobs situation in the US while in Canada there are growing concerns about the rate of full time job losses. The headline number in Canada has been steady, but thanks to part time positions. Jobs in Canada are expected to have gained 13,900 positions in September.

The US dollar is trading near seven week highs as economic data has been solid, the central bank is still pushing for a third rate hike and the tax reform proposal is moving forward. Leading manufacturing and non manufacturing indicators have improved and rising exports have shrunk the trade deficit to a yearly low but questions remain on the effect the tropical storms will have on the biggest economic indicator in the market.

The U.S. Bureau of Labor Statistics will release the non farm payrolls (NFP) report on Friday, October 6 at 8:30 am EDT. The economy is forecasted to have added 82,000 positions in September. The impact of hurricanes Harvey and Irma is to blame for the underperformance but given the resilience of the economy the possibility of the final figure beating expectations is not far fetched.

The ADP private payrolls report came in close to the forecast with 135,000 jobs and unemployment claims rose by 260,000 when a 266,000 gain was anticipated. Fed FOMC voting members were in full force this week and today’s comments from Philadelphia Fed chief Patrick Harker that while the 2 percent inflation target will remain untouched he still believes there should be another rate hike. The CME FedWatch tool shows a 86.7 percent probability of the interest rate moving higher to a 125 to 150 basis points range.

Oil rose 2 percent on Thursday. West Texas Intermediate is trading at $50.55 after Russia and Saudi Arabia sent signals to the market about a potential extension to the production cut agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers. The two nations have acted as representatives of the two groups and limiting output could force prices higher with the biggest question mark being how are the non-pact producers going to react and if their production increases can offset the output curbs.

Uncertainty about the Iran nuclear deal is also pushing prices higher. President Trump could introduce another embargo to Iranian exports, energy included, reducing global supply.

Market events to watch this week:

Friday, October 6
8:30 am CAD Employment Change
8:30 am CAD Unemployment Rate
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change
8:30 am USD Unemployment Rate