Sample Category Title

For the 24 hours to 23:00 GMT, the USD rose 1.08% against the CAD and closed at 1.2620 on Friday.

The Canadian Dollar lost ground against the USD, after Canadian retail sales surprised with an unexpected drop in August and inflation growth missed expectations in September.

Data showed that Canada's retail sales unexpectedly eased 0.3% on a monthly basis in August, pointing to a slowdown in the nation's retail sector growth and confounding market consensus for a rise of 0.5%. In the prior month, retail sales had climbed 0.4%.

Meanwhile, the nation's consumer price index (CPI) rose 1.6% on an annual basis in September, falling short of market expectations for an advance of 1.7%. However, it was the highest reading since April 2017. The CPI had advanced 1.4% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.2628, with the USD trading 0.06% higher against the CAD from Friday's close.

The pair is expected to find support at 1.2525, and a fall through could take it to the next support level of 1.2422. The pair is expected to find its first resistance at 1.2686, and a rise through could take it to the next resistance level of 1.2744.

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 0.9% against the CHF and closed at 0.9850 on Friday.

In the Asian session, at GMT0300, the pair is trading at 0.9847, with the USD trading slightly lower against the CHF from Friday’s close.

The pair is expected to find support at 0.9807, and a fall through could take it to the next support level of 0.9768. The pair is expected to find its first resistance at 0.9875, and a rise through could take it to the next resistance level of 0.9904.

Amid a lack of major macroeconomic release in Switzerland today, investors will look forward to global macroeconomic events for further direction.

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

Daily Pivots: (S1) 148.45; (P) 149.14; (R1) 150.32; More

GBP/JPY's rebound from 146.92 extends higher today. Break of 149.73 support turned resistance suggests that pull back from 152.82 has completed at 146.92 already. Intraday bias is turned back to the upside for retesting 152.82 first. Firm break there will resume whole medium term rise from 122.36. On the downside, break of 148.13 minor support will turn bias to the downside and extend the correction from 152.82. In that, we'd expect strong support from 61.8% retracement of 139.29 to 152.82 at 144.45 to bring rebound.

In the bigger picture, medium term rebound from 122.36 is still expected to resume after corrective pull back from 152.82 completes. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. However, break of 139.29 will indicate rejection from 150.43 key fibonacci level. And the three wave corrective structure of rebound from 122.36 will argue that larger down trend is resuming for a new low below 122.26.

Nikkei surges today while Yen tumbles on landslide victory of Prime Minister Shinzo Abe's Liberal Democratic Party (LDP) at the snap election on Sunday. At the time of writing, Nikkei is gaining over 1% and more than 220 pts. On the other hand, Yen is trading broadly lower. Removing political uncertainty is a key factor in lifting Japanese stocks. Meanwhile, continuation of ultra-loose monetary policies under Abenomics is a factor pressuring Yen. The forex markets are a bit mixed in initial trading, with Sterling leading the way up. Euro and Swiss Franc are slightly lower, following Yen.

Preliminary results project that the Abe's LDP/Komeito ruling coalition had won 312 seats in the 465-seat parliament, exceeding a two-thirds majority at 310. This is compared with 322 seats the coalition had secured in the 475-seat parliament previously. Maintaining the status quo signals that Abe would like to remain as the prime minister as he would continue to push his three arrows in the Abenomics.

One of which is aggressive monetary easing. There are talks that BoJ governor Haruhiko Kuroda will have a high chance to have his term renewed if Abe has a landslide victory. But after all, whether Kuroda would stay should not alter the ultra-accommodative policy stance.

Consumption tax increase in 2019 would be pushed ahead under Abe's leadership. As he promised, the revenue gain would be used on educational and social welfare spending. Meanwhile, Abe's robust fiscal spending stance indicates that the government would increase spending to stimulate the economy. Removal of political uncertainty and continuation of a dovish BOJ should keep Japanese yen under pressure in the near- to medium- term, assuming geopolitical tensions are not much a headache.

Euro await ECB, little reaction to politics

On Saturday, Spanish Prime Minister Mariano Rajoy announced the plan to dissolve the Catalan regional government, triggering the now infamous Article 155 of the Constitution. The measures will be sent to Senate within days and that would allow the Spanish government to suspend Catalonia's autonomy. Nearly half a million people protested in Barcelona against Rajoy's move as Catalan leader Carles Puigdemont denounced Rajoy's decision and said, "the Catalan institutions and the people of Catalonia cannot accept this attack." Puigdemont will meet other separatists on their response and they could declare independence this week.

Separately, Lombardy and Veneto, two wealthy region in Italy, voted overwhelming on Sunday for larger autonomy. 90% of voters voted for "yes" with turn out rate at above 40% in Lombardy and 57% in Veneto. Unlike Catalonia referendum, the ones in Lombardy and Veneto were held in line with the constitution even though they're not binding.

Overall, Euro shows little reactions to the political news. Traders's mind are mainly on ECB rate decision later this week. The market has already fully priced in an announcement of tapering of the asset purchase program from the current pace of EUR 60B per month until December 2017 "or beyond, if necessary". To what extend the ECB would taper is the question. Some suggest a reduction of monthly purchases to EUR 40B beginning in January 2018 for 6 months, while others expect a cut to EUR 30B for 9 months.

Trump to decide who's the next Fed chair in coming days

US President Donald Trump is in the final stage of choosing the next Fed chair. It's reported that current Fed Governor Jerome Powell and Stanford University economist John Taylor are now the front runners. And, one of the speculation scenario is that one will take the chair and other as vice. White House spokesman Sarah Sanders said that "that is something that is under consideration, but he hasn't ruled out a number of options. He'll have an announcement on that soon, in the coming days." 

Looking ahead

ECB's announcement of tapering will be the main focus of the week. A number of key indicates will also be released including PMIs and German Ifo. BoC will also meet but there is practically no chance for change in interest rates. In addition, eyes will also be on US and UK GDP as well as CPI from Australia and Japan. Here are some highlights for the week ahead:

• Monday: UK CBI trends orders; Canada wholesales sales; Eurozone consumer confidence
• Tuesday: Eurozone PMIs; US PMIs
• Wednesday: Australia CPI; Swiss UBS consumption; German Ifo; UK GDP; US durables, house price index, new home sales; BoC rate decision
• Thursday: New Zealand trade balance; Australia import price; German Gfk consumer sentiment; Eurozone M3, ECB rate decision; UK CBI realized sales; US jobless claims, trade balance, pending home sales
• Friday: Japan CPI; Australia PPI; German import price; US GDP

GBP/JPY Daily Outlook

Daily Pivots: (S1) 148.45; (P) 149.14; (R1) 150.32; More

GBP/JPY's rebound from 146.92 extends higher today. Break of 149.73 support turned resistance suggests that pull back from 152.82 has completed at 146.92 already. Intraday bias is turned back to the upside for retesting 152.82 first. Firm break there will resume whole medium term rise from 122.36. On the downside, break of 148.13 minor support will turn bias to the downside and extend the correction from 152.82. In that, we'd expect strong support from 61.8% retracement of 139.29 to 152.82 at 144.45 to bring rebound.

In the bigger picture, medium term rebound from 122.36 is still expected to resume after corrective pull back from 152.82 completes. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. However, break of 139.29 will indicate rejection from 150.43 key fibonacci level. And the three wave corrective structure of rebound from 122.36 will argue that larger down trend is resuming for a new low below 122.26.

Economic Indicators Update

STOCKS

Sky seems to be the limit for Dow (22328.63, +0.71%) as all immediate resistances have been broken on the upside and the index has been sharply rallying to make fresh highs every other session. While the momentum remains intact, 23400-23500 is on the cards in the next few sessions.

Near term corrective dip seems to be at play for Dax (12991.28, +0.01%). Consolidation within 13100-12900 is likely to continue for a few more sessions. Near term likely to remain range-bound.

Nikkei (21658.25, +0.93%) is just coming off from levels below 21800 and if that holds, the price could come off towards 21400 or even lower in the coming sessions. Dollar Yen (113.77) also has resistance near 114.40/50 and while that holds, the pair could also come off towards 113.30 or lower in the near term.

Shanghai (3378.12, -0.02%) could head towards 3400-3410 in the near term. Overall sideways consolidation within 3350-3410 region is likely to continue in the near term.

Nifty (10146.55, -0.86%) saw a sharp decline to 10146 from levels near 10210 in the 1-hour Muhurat trading on Diwali. This could possibly indicate an upcoming correction this week towards 10050 or lower from where a bounce is again possible later on. A few sessions could be spent below 10250.

COMMODITIES

Gold (1275.88) is trading lower today breaking below 1275. There could be some chances of testing 1265-1260 levels in the coming sessions before again bouncing back towards 1280/90 levels.

Silver (16.97) could get some interim support near 16.85/80 levels and could possibly bounce back in the near term to levels near 17.10/20.

Brent (57.91) looks bullish in the near term while above 56.65 and has a fair possibility of testing 58.50/60 levels on the upside. For the next 2-3 sessions the crude price could be stuck in the 56.65-58.60 region with no major movement.

WTI (52.06) could re-test 52.50 before coming off towards 51.20-51.00 levels in the near term.

The Brent-WTI spread (5.83) has risen sharply over the last few weeks and could possibly pause near 6.50-7.00 from where either the spread may start falling towards 5 or remain range-bound within 5-7 region.

Copper (3.1675) has been trading with narrow movements after the recent correction from levels near 3.25. Immediate support on the downside is visible near 3.10 and while that holds, there could be some range-bound movement within 3.12-3.20 before the price again starts to move up.

FOREX

Week of the ECB (on 26th, Thursday). The Euro (1.1768) hovers just above crucial Support in the 1.1730-00 region. Will the potential Bear SHS prove true? If so, we would start looking for 1.15 instead of 1.22.

If the Support at -1.95% on the German-US 10Yr yield spread (currently -1.93%) breaks, it could pull Euro below 1.1730-00. Need to watch this.

Dollar-Yen (113.75) has moved up sharply, well past 113.00. Long-term Resistance seen near 114.50 now. The fresh rise in the Euro-Yen (133.87) after last week's bearish scare reduces the bearishness on the Euro.

The Pound (1.3194) has immediate Resistance at current levels and medium term Support at 1.30.

Dollar-Rupee (65.03) may find Resistance in the 65.15-35 region in the early part of the week.

INTEREST RATES

In the last ECB meeting (7th Sept), Draghi said they will be deciding about the future course of QE and will let the market know about it in the meeting on 26th Oct, this Thursday.

There may be room for German Yields to move up by 7bp to 20bp across the Curve in the coming weeks.

The US Yield Curve has steepened a bit with the 10Yr (2.38%) and 30Yr (2.89%) moving up a bit more than the 2Yr (1.58%) and 5yr (2.02%) last week. Note that the Curve had seen dramatic flattening earlier. The 10-5 (0.36%) and the 30-10 (0.51%) and 30-5 (0.87%) have bounced from Supports cited last week.

Remember when USD/JPY broke support, but was immediately bought back up with vigour?

The run up had some quality momentum behind it and as you can see from today’s Monday open, price has gapped up again higher:

USD/JPY Daily:

But with price now rapidly approaching the top of the range that we bought in the blog that I’ve linked to above, the question now becomes how much more has the pair got in it until resistance holds?

EURUSD

The EURUSD was indecisive last week. The major bullish trend remains valid but we have a potential “head and shoulders” bearish reversal formation as you can see on my daily chart below. The bias is bearish in nearest term testing 1.1670 support area which is the “neckline” of the “head and shoulders” formation. A clear break below that area would confirm the bearish reversal scenario with nearest target seen at 1.1450. Immediate resistance is seen around 1.1800. A clear break above that area could lead price to neutral zone in nearest term testing 1.1850 but key resistance remains at 1.1900 which need to be clearly broken to the upside to potentially nullify the “head and shoulders” bearish scenario and continue the major bullish trend testing 1.2000 – 1.2090.

GBPUSD

The GBPUSD failed to continue its bullish momentum last week bottomed at 1.3087 but closed a little bit higher at 1.3189. The bias is neutral in nearest term probably with a little bullish bias testing 1.3225 – 1.3285 area but key resistance remains at 1.3330 which need to be clearly broken to the upside to reactivate my bullish mode. Immediate support is seen around 1.3150. A clear break below that area could trigger further bearish pressure retesting 1.3087 but key support is seen at 1.3000 – 1.2950 region. Overall I remain bullish.

USDJPY

The USDJPY had a bullish momentum last week, broke above 113.20 key resistance and gapped higher earlier today in Asian session opened at 113.86. The bias is bullish in nearest term testing 114.50 area. Immediate support is seen around 113.50/20 region. A clear break back below that area could lead price to neutral zone in nearest term as direction would become unclear. On the upside, a clear break and daily close above 114.50 would expose 115.20/50 region. Overall I remain neutral.

USDCHF

The USDCHF had a bullish momentum last week topped at 0.9852 and hit 0.9858 earlier today in Asian session. The bias is bullish in nearest term testing 0.9950. Immediate support is seen around 0.9836/07. A clear break below that area could lead price to neutral zone in nearest term as direction would become unclear. On the upside, a clear break and daily close above 0.9950 would expose 1.0100 region. I am bullish on this pair.

EURUSD - With the pair seen closing lower the past week, more weakness is envisaged. Resistance comes in at 1.1850 levels with a cut through here opening the door for more upside towards the 1.1900 level. Further up, resistance lies at the 1.1950 level where a break will expose the 1.2000 level. Conversely, support lies at the 1.1750 level where a violation will aim at the 1.1700 level. A break of here will aim at the 1.1650 level. Below here will open the door for more weakness towards the 1.1600. Its weekly RSI is bearish and pointing lower suggesting further weakness. All in all, EURUSD continues to face downside threats.

GOLD - The commodity reversed its previous week losses to close lower on Friday. On the downside, support comes in at the 1,270.00 level where a break will turn attention to the 1,260.00 level. Further down, a cut through here will open the door for a move lower towards the 1,250.00 level. Below here if seen could trigger further downside pressure targeting the 1,240.00 level. Conversely, resistance resides at the 1,290.00 level where a break will aim at the 1,300.00 level. A turn above there will expose the 1,310.00 level. Further out, resistance stands at the 1,320.00 level. All in all, GOLD looks to weaken further lower.

And how was your weekend??

The markets opened right on expectations, and so far in early APAC trade the headline risk from this weekends Catalonian perplexity is not posing a significant threat to risk or the Euro which is only trading marginally lower with investors single-mindedly focused on the critical ECB meeting Oct 26

USDJPY has bounced higher on Abe's resounding election victory. Traders remain bulled up on USDJPY as Abe policies should remain accommodative and point to a weaker Yen over time. And while the JPY is expected to weaken medium-term, uncertainty over the Fed chair nomination could weigh on crowded near-term positions. None the less, Abe's landslide victory should pave the way for an extension of Japan's stock market rally, which could underpin USDJPY sentiment

So far risk sentiment remains buoyant after a strong US equity futures open on an extension of last weeks US tax reform euphoria.But its early days and with a deluge of headline risk expected this week, I surmise upside follow-through will remain tentative, but indeed, USDJPY bulls are smiling this morning.

The House Republican's return from recess this week so we should expect the usual bipartisan banter to hit the wires as the House will take up debate on the budget resolution. The discourse should provide the street with a decent heat map to gauge overall US political sentiment. Currently, the market is buying into Trump's comments that the GOP has enough seats to pass the administrations economic aspirations.

Let's not overlook the Feds Chair game of thrones.Currently, the markets are giving the nod to either Powell or Taylor; however, a Yellen appointment should present some significant headwinds for the USD but good for US equities on the assumption of a very very gradual pace of policy normalisation. Not to mention continuity is always a good thing for equity markets.

The Euro

Very much cemented in current ranges but eyes will be on US treasuries as the EURO will take its cues from USD momentum early in the week. However, dealers will keep a close eye on the current EURUSD dip to gauge market lean going into the critical ECB meeting.

After the summer run up on the EURUSD, the ECB veered dovish with timely leaks designed to temper the markets bullish view. Given the ECB sensitivity to Euro strength, it may be wise to ascribe to the ECB source leaks that that monthly purchases will be extended for nine months at a pace of 25-40bn per month which should imply currency neutrality.

The Japanese Yen

Indeed, an excellent opener for the USDJPY bulls on Abe's resounding victory.But from here the next significant extension will likely be triggered by House resolution headlines so all eyes will be on the headline heat map. The Nikkie futures look happy in early trade, so this alone could push the USDJPY above the phycological 114.00 for a test of the key 114.30-50 region.

The Australian Dollar

With no deviation from Friday's view, the Australian Dollar is one of the G-10 currencies with most to lose from a stronger dollar and a more hawkish Fed. The US dollar appears to be on solid footings into the weekend., but next weeks focus will be the US bond curve. Any aggressive move higher in US yields, especially if President Trump gives Taylor the nod, will put the Aussie at exceptional risk.

So far it appears the Typhoon Lan, which hit Tokyo this morning, is not dampening investor spirits.