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Daily Pivots: (S1) 112.40; (P) 112.67; (R1) 113.01; More....

USD/JPY is still bounded tight range below 113.25 and intraday bias remains neutral for the moment. On the upside, sustained break of medium term channel resistance will argue that correction from 118.65 is already completed with three waves down to 107.31. Break of 114.49 will confirm this bullish case and target a test on 118.65 next. On the downside, considering bearish divergence condition in 4 hour MACD, break of 111.46 will suggest rejection from the channel resistance and turn bias back to the downside.

In the bigger picture, rise from 98.97 (2016 low) is seen as the second leg of the corrective pattern from 125.85 (2015 high). It's unclear whether this this second leg has completed at 118.65 or not. But medium term outlook will be mildly bearish as long as 114.49 resistance holds. And, there is prospect of breaking 98.97 ahead. Meanwhile, break of 114.49 will bring retest of 125.85 high. But even in that case, we don't expect a break there on first attempt.

NZDUSD has maintained a bearish phase in the short term since September 20. Risk is clearly tilted to the downside and further weakness in the market could see prices drop another leg lower to extend the bearish phase from the 0.7434 high.

For now, downward momentum has weakened as RSI and MACD are flat on the 4-hour chart. Both indicators in bearish territory which keep the possibility for NZDUSD moving lower again.

Prices declined steadily from the 0.7434 high before steadying around the key psychological level at 0.7200. Then there was a sharp decline from 0.7205 earlier this month. A daily close below 0.7131 (August 31 low) would indicate that the market has moved into a bearish phase with the next target at 0.7055. Breaking below the key 0.7000 area would increase downside pressure and the focus would turn to the next major low at 0.6817.

A rise above 0.7200 would help the market challenge the September 29 high at 0.7243. NZDUSD would need to rise above the 50-period moving average at 0.7290 to see a more sustained reversal in the current trend and give scope to target the September 20 peak at 0.7434.

The September 26 bearish crossover of the 20-period MA with the 50-period MA on the 4-hour chart puts near-term risk squarely on the downside. Only a move back above 0.7200 would ease immediate pressure.

The U.S. international trade deficit narrowed by $1.2bn to $42.4bn, or a touch lower than market consensus of $42.7bn. The trade deficit for July was little revised, measuring $43.6bn versus $43.5bn previously.

Exports rose 0.4% on a month-on-month (m/m) basis in August. Consumer (+6.4%), capital (+0.9%), and automotive (+0.5%) goods helped to offset declines in food and beverage and industrial supplies exports in the month. Services exports also rose 0.4% in August.

Imports declined for the fourth consecutive month in August, falling 0.1% m/m. Declines in industrial supplies (-1.3%), capital goods (-0.9%), and food and beverages (-0.7%) offset strong rebound in automotive imports (+2.3%). Service imports were largely unchanged in the month.

Excluding the impact of price changes, export volumes fell 0.8% in August, marking two consecutive monthly declines with recent moves implying almost a full reversal of the 1.8% m/m advance from June. Similarly, import volumes declined 0.6% m/m in August.

Key Implications

There are few if any surprises in today's trade report for August. Although the Census Bureau is unable to identify specific Hurricane Harvey related impacts, the contraction in export volumes includes a decline in the volume of petroleum exports of more than 18% m/m, but curiously shows an increase of about 2% in the volume of petroleum imports. This story is consistent with a narrative whereby inbound oil tankers destined for Southeast Texas were diverted to unaffected ports in the U.S. and Mexico.

Next month's trade report will likely help decide how much net trade adds or detracts from third-quarter economic activity. Today's trade report on balance suggests a very small positive impact on third quarter economic growth, particularly as refineries were slowly getting back to pre-Hurricane capacity. Still, a strong uptick in imports in September could easily swing the impact to a small drag. Looking beyond short-term volatility, strong global demand and a weaker U.S. dollar in trade-weighted terms should continue to provide some modest support for exports in the coming months.

Canada's trade deficit widened to $3.4B in August (from $3.0B in July), as exports fell 1% while imports held steady. In real terms, export volumes were down by an even larger 1.9%, while import volumes eked out a slight 0.2% gain.

Exports were down in 5 of 11 industries, led by metal ores and non-metallic minerals (-9.7%), chemical, plastic and rubber products (-5.9%) and consumer goods (-3.8%). Meanwhile, aircraft and other transportation equipment (+3.1%) and electronic equipment (+2.5%) were the top performers during the month.

Imports were unchanged, as declines in aircraft and other transportation equipment (-10.2%) were offset by increases in metal ores and non-metallic minerals (+9.9%) and motor vehicles (+2.5%).

Canada's trade surplus with the U.S. narrowed to $2.3B in August (previously $3.2B), as exports slipped 1.8% while imports were up 0.9%. Canada's trade deficit with the rest of the world narrowed to $5.7B (previously $6.2B), with exports up 1.5% and imports down 1.6% during the month.

Key Implications

August marks the third consecutive month of declines in export volumes, which now sit 6% lower than the peak reached in May. This weak handoff for the third quarter suggests that net trade is likely to detract from overall growth during the quarter. Even with this disappointing report, economic activity remains on track to expand by a solid 2.2% in Q3.

Going forward, a healthy U.S. economy should help to prop up demand for Canadian-made goods, supporting export volumes. However, the appreciation of the loonie since early-September has somewhat reduced the competitiveness of Canadian exporters and could provide some offset. The outcome of the NAFTA re-negotiations also poses some risk, but with negotiations moving slowly, it is unlikely to impact trade this year.

Overall, the Canadian economy is on solid footing, and the Bank of Canada is likely to maintain a tightening bias. Future hikes will be heavily data dependent with recent export performance a weak spot. However, there are a number of key data releases between now and the next Fixed Announcement Date later this month that will influence the Bank's decision.

The EUR/JPY drops and erases the last day's minor gains. Is trading in the red as the Yen is supported by the Nikkei's minor drop. The pair has developed a Rising Wedge pattern in the last weeks, I've said in the last articles that we may have a broader drop if the pattern will be confirmed. The Euro is losing ground versus the Yen as the bulls weren't strong enough to keep the rate above very important resistance levels. However, we still need a confirmation that will drop further because this could be only temporary.

The European currency drops further even if the Euro-zone Retail PMI increased from 50.8 to 52.3 points, reaching the highest level of the last 3-months. Price is driven lower by the technical factors, a further Nikkei's drop will force the Yen to appreciate versus all its rivals.

Price drops and approaches the downside line of the potential Rising Wedge pattern. It should drop much deeper after the failure to retest the median line (ml) of the black ascending pitchfork and after the failure to stabilize above the sliding line (SL). The Rising Wedge pattern could be confirmed if the Nikkei will slip lower in the upcoming days. Support can be found at the upper median line (UML) of the major ascending pitchfork, but a valid breakdown from the chart pattern will force the rate to take out this support.

Price drops after the retest of the median line (ml) of the ascending pitchfork. The next downside target will be at the 38.2% retracement level, it could reach it if the US data will disappoint later. USD/JPY dropped below the 112.50 psychological level as the Nikkie is going down after the impressive rally. Only a USDX's rally will send the rate much higher again.

Price increased and resumed the yesterday's bullish candle. Is pressuring the upper median line (UML) of the major descending pitchfork, a valid breakout will bring us a good buying opportunity. USD/CHF has managed to stay above the WL2, signaling that the bulls are strong on the short term. Price needs support from the US data, otherwise, we may have another false breakout.

The British pound has fallen below the 1.3200 handle against the U.S dollar, hitting a new weekly price-low of 1.3174, as fears over Theresa May's tenure as British Prime Minister grow.

Bearish trading sentiment surrounding the GBPUSD pair is growing, as data out today showed a sharp decline in new UK car registrations for the month of September. Furthermore, an apparent stalemate in Brexit negotiations between Brussels and the Conservative party are also weighing on the pound.

Today's bearish range-break beneath the 1.3218 level has opened a new leg of GBPUSD downside, with the pair increasingly likely to test towards its key 50-day moving average, at 1.3144.

Only a series higher time frame price close back above the 1.3218 technical level, can negate further selling in the GBPUSD pair.

Key intraday GBPUSD support below the 1.3174 level is found at 1.3144 and 1.3115. Below the 1.3115 level, the pairs 100-day moving average is found at 1.3040.

To the upside, the pairs H4 time-frame 200 period moving average, is found at 1.3202. Once clearly above the 1.3202 level, the 1.3218 and 1.3239 levels become former support turned resistance.

The USDJPY pair continues to trade in an increasingly tight trading-range between 112.33 and 112.93, as investors await the release of the United States September Non-farm payrolls job report.

Today's USDJPY intraday trading sentiment is increasingly neutral, as investors lack a natural catalyst to push price-action beyond the current 30-pip daily trading range.

Going forward, the announcement of the new U.S Federal Reserve Chair and the result of the upcoming Japanese elections will affect the USDJPY pairs medium term directional bias.

Moving to the short term, a number of FOMC members are speaking this afternoon, we also have the release of key U.S Factory Orders data.

Key intraday USDJPY technical support is found at 112.32 and 112.20. Once below the 112.20 level, a deeper decline towards 111.90 and 111.68 should be expected.

To the upside, once clearly trading above the 112.93 level, a further advancement towards 113.10, 113.25 and 113.57 remains likely.

The USDCAD pair surged on better than expected US data )jobless claims fell to 260K vs forecast at 265K while trade gap in August narrowed to $42.4B, compared to forecasted $42.7B and $43.6B gap in July). At the same time weaker than expected Canadian trade balance data for August (trade gap widened to C$3.4B compared to forecasted C$2.6B gap) pressured loonie.

Fresh bullish acceleration cracked Tuesday's recovery peak at 1.2538 and looks for extension of larger bull-leg from 1.2061 (08 Sep low) on sustained break.

Shallow correction from 1.2638 was contained by 55SMA which is turning into sideways mode, with rising 10SMA approaching and on track to form bull-cross.

Fresh rally today broke again above 1.2504 (Fibo 61.8% of 1.2778/1.2061), looking for bullish signal on eventual close above after four failures in past few days.

Bulls are now looking for test of 1.2580 (base of falling daily cloud) which marks strong barrier.

Res: 1.2580; 1.2608; 1.2662; 1.2690
Sup: 1.2504; 1.2461; 1.2443; 1.2419