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Daily Pivots: (S1) 1.3212; (P) 1.3249; (R1) 1.3277; More....

With 1.3454 minor resistance intact, GBP/USD's correction from 1.3651 could extend lower to 61.8% retracement of 1.2773 to 1.3651 at 1.3108. However, break of 1.3454 will indicate completion of the pull back. In that case, intraday bias will be turned back to the upside for retesting 1.3651 high.

In the bigger picture, current development argues that the long term trend in GBP/USD has reversed. That is, a key bottom was formed back in 1.1946 on bullish convergence condition in monthly MACD. Current rise from 1.1946 will target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 next. In any case, medium term outlook will now stay bullish as long as 1.2773 support holds.

Daily Pivots: (S1) 112.56; (P) 112.87; (R1) 113.15; More...

Intraday bias in USD/JPY 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.

Daily Pivots: (S1) 0.9714; (P) 0.9749; (R1) 0.9771; More....

Intraday bias in USD/CHF remains neutral as it struggled to take out 0.9772 firmly. And outlook remains unchanged. On the upside, decisive break of 0.9772 key resistance will suggest that whole down trend form 1.0342 has completed. In that case, near term outlook will be turned bullish for 0.9860/1.0099 resistance zone. However, break of 09669 minor support will suggest rejection from 09772 and turn bias back to the downside for 0.9587 support. Break will target retesting 0.9420 low.

In the bigger picture, focus remains on whether 0.9443 key support (2016 low) could be taken out firmly as down trend from 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.

While major US indices extended their record run overnight, Dollar is lagging behind and is turning soft today. DOW closed up 0.37% at 22641.67, S&P 500 up 0.22% at 2534.58, NASDAQ up 0.23% at 6531.71. 10 year yield jumped to 2.361 but pared gain to close down -0.003 at 2.334. Technically, there are a few points to noted. USD/CHF struggled to stand above 0.9772 key near term resistance. USD/JPY also struggles to take out a medium term channel resistance. Meanwhile, AUD/USD also cannot sustain below 0.7807 key support. It's early to tell if Dollar is completing it's near term rebound, but risk is increasing.

It's reported that US President Donald Trumps' advisers have finalized a shortlist of candidate to lead Fed after Janet Yellen's term expires next year. While Yellen stays in the shortlist naturally, it's very doubtful if she's still be considered. Meanwhile, Trump's chief economic advisor Gary Cohn, Fed Governor Jerome Powell and former Fed Governor Kevin Warsh are part of the shortlist. Yellen, Cohn, Powell and Warsh are believed to be interviewed by Trump last week already. Trump also indicated that he could make a decision in two or three weeks.

MEP voted to delay trade negotiations with UK

Members of the European Parliament voted to delay trade discussions with UK until there is a "major breakthrough" in the negotiation. The motion was backed by 557 MEPs, with 92 against and 29 abstained. While the vote was not binding, it did show the united stance among EU officials on the issue. And, some EU officials are clearly dissatisfied with the way UK is taking the negotiations. The Parliament's chief Brexit spokesman Guy Verhofstadt blamed the open splits among UK officials for the of progress. He pointed out that "there are differences between Hammond and Fox... and Johnson and May."

UK Brexit Secretary David Davis said that they're "ready for the alternative" should outcome of Brexit negotiation falls short of "the deal that Britain needs". And, "there is a determined exercise under way in Whitehall devoted to contingency arrangements so that we are ready for any outcome."

More than 15000 people protested in Barcelona yesterday, against the Spanish government's violence on the disputed Catalonia independence referendum. 50 roads were blocked while most schools and small businesses were closed. The official result of Sunday's referendum will presented to Catalonian parliament today or tomorrow. And a formal declaration of independence could be declared shortly after. European Parliament will discuss the situation today. Meanwhile, Spain's King Felipe VI criticized that Catalan leaders have broken the law of the stat and showed and "inadmissable lack of loyalty."

BoJ Nakaso: Could incur red ink during stimulus exit

Bank of Japan Deputy Governor Hiroshi Nakaso said that during the exit of monetary stimulus, the BoJ could incur "red ink". But he expressed his confidence that "short-term fluctuations in the BOJ's revenues won't disrupt our policy-making." And, the central bank could learn from Fed's experience on tapering of quantitative easing. Meanwhile, Nakaso also urged the government to take a "balanced" approach on fiscal policies and emphasized that "it's important to create a sustainable fiscal framework in Japan." This was seen as a response to Prime Minister Shinzo Abe's plan to delay the target of reaching primary budget surplus by a few years.

On the data front

UK BRC shop price dropped -0.1% yoy in September. UK services PMI will be a main focus in European session. Eurozone will release retial sales and services PMI final. From US, ADP employment and ISM services will be released.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9714; (P) 0.9749; (R1) 0.9771; More....

Intraday bias in USD/CHF remains neutral as it struggled to take out 0.9772 firmly. And outlook remains unchanged. On the upside, decisive break of 0.9772 key resistance will suggest that whole down trend form 1.0342 has completed. In that case, near term outlook will be turned bullish for 0.9860/1.0099 resistance zone. However, break of 09669 minor support will suggest rejection from 09772 and turn bias back to the downside for 0.9587 support. Break will target retesting 0.9420 low.

In the bigger picture, focus remains on whether 0.9443 key support (2016 low) could be taken out firmly as down trend from 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.

Economic Indicators Update

STOCKS

Dow (22641.67, +0.37%) has been moving up in the last few sessions brushing aside all political and economical factors. New highs this week could enable extension of the current rally towards 22750 or even higher towards 23000 in the near term. Bullishness for the coming sessions remains intact. Rejection from 22750 mentioned yesterday may be negated if the upward momentum remains strong.

Does weakness in Euro support Dax? Well that's how the current scenario is. The fall of euro from levels near 1.2090 and the rise in Dax from 11868 has been in tandem as negative correlation between the two seems to be in play. Dax (12902.65, +0.58%) is not far from the 13000 high seen in June’17 and if a rejection fails from 13000, we could possibly see fresh highs in the coming weeks. Near to medium term looks bullish in case 13000 fails to hold on the upside.

Shanghai (3348.94, +0.28%) has been stable for quite a few sessions now and is possibly in a sideways consolidation acting as a base building for a sharp upmove soon. While above 3330, Shanghai could be poised for a rise towards 3375-3400 in the medium term. Downside could be limited to 3325 for now.

Nikkei (20659.12, +0.22%) could test immediate resistance just above current levels and if that holds, we could see some correction from here; else a test of the major resistance near 21000 is on the cards in the coming sessions.

Nifty (9859.50, +0.72%) has some chances of testing 9900-9950 levels in the coming sessions before again coming off towards 9800 or lower in the medium term.

COMMODITIES

Gold (1275.43) has inched up slightly from levels near 1268. A sustained break above 1280 is necessary to take it back towards 1290 or even higher in the near term. Till then the fears of a fall below 1268 will remain on the cards. Note that 1265 is a decent support for the near term and is likely to hold.

Silver (16.73) could move up towards 17 while above 16.50.

Brent (55.63) is in a downtrend and could come off towards 55.00-54.80 in the coming sessions. Near term looks weak just now.

WTI (50.03) is also looking bearish just now and could come off towards 49.50-49.00 in the coming sessions.

Copper (2.9665) is stuck in the 2.90-3.00 region and is possibly towards the end of the sideways consolidation. We could see a rise past 3.00 in the near term. View remains bullish.

FOREX

A bit of slowdown in the Collar's upmove, with the Dollar Index (93.40) down a bit compared to 93.87 yesterday, and the Euro (1.1775) up from yesterday's 1.1707.

While some more Dollar strength is possible in the coming days, note Resistance at 94.50 (21-week MA) on the Dollar Index and Support at 1.16 (21-week MA) on the Euro, which are likely to hold.

Dollar-Yen (112.65) was unable to rise past 113.20 and thus stayed short of our target of 113.50-60. It has been finding sellers above 113.00 consistently over the last 4-5 days, so we need to watch now whether 113.50-60 will be tested at all or not. The chances of it (113.50-60) holding increase.

The Euro-Yen (132.59) looks bullish on the 3-Day Candles, with good trend Support at 132.00-131.50 now.

Relative weakness persists in the Pound (1.3265) while below 1.33-34. Medium-term target 1.30, with immediate Supports at 1.3200-3150.

Decent uptick in the Aussie (0.7860) suggesting that 0.7781, near the 21-week MA, could be providing a decent Support. A test of 0.79 is possible in the near term.

Dollar-Yuan (6.6532) is stable near yesterday's level, with chances of being ranged sideways between 6.62-70 for some days.

Perhaps the dip in the Dollar Index will help Dollar-Rupee to dip towards 65.40-35 today.

INTEREST RATES

The US yields have paused after the recent rise in the last couple of weeks. The yields may now see some sessions of weakness. The 10YR (2.33%) could come off towards 2.30% or a little lower in the near term while the 30YR (2.87%) may test 2.80% before again rising up sharply.

Sharp break above immediate resistances for the US-Japan 10Yr (2.27%). This could be indicative of a sharp upmove in the near term towards 2.35% or even higher. Note that while the differential surges higher, it could pull up both Dollar Yen and Nikkei to higher levels. Also to keep in mind the crucial resistance coming up near 21000 on Nikkei.

The German-US 10Yr (-1.87%) looks strongly bearish for the coming sessions and could be vulnerable to a fall towards -1.90% or lower in the near term. In that case, Euro could see some weakness going forward.

Dollar Rally Fizzles as Market Speculates Over Trump's Fed Choice. The dollar stepped back from a 1 1/2-month high against a basket of currencies on Wednesday, as the rally triggered by strong U.S. data fizzled on speculation U.S. President Donald Trump's choice for the next Fed Chair may be a less hawkish candidate than previously thought. The dollar had rallied earlier this week on speculation Warsh may be the leading candidate to replace Yellen, but was capped after Politico reported that U.S. Treasury Secretary Steven Mnuchin favours Fed governor Jerome Powell. The dollar index stood at 93.57, off a 1 1/2-month high 93.92.

Sterling Dragged Further Down by FPC Minutes. Sterling carried on with its slide from the previous trading session, when it dropped to $1.3222, its lowest in almost three weeks after data showing a surprise contraction in the construction sector stoked worries about economic uncertainty surrounding Britain's exit from the European Union. Also adding to a sense of uncertainty, Brexit minister David Davis said on Tuesday that Britain is ready to walk away with no deal, and that officials were “contingency planning” to make sure all scenarios were covered. The currency stood at $1.3259, down 1.0 percent so far this week.

Aussie Rallied on Dollar Weakness. The Australian dollar bounced back a tad after hitting a three-month low on Tuesday after the central bank cautioned that a higher currency would drag on the economy and inflation. The Aussie fetched $0.7850, up 0.2 percent on the day and off Tuesday's low of $0.7785.

Gold Prices Recover from Seven Week Lows. Gold prices have risen above a seven-week low as the US dollar came off its highs. Bullion was pressured earlier by strong US economic data that reinforced expectations of another US interest rate hike this year and pushed the dollar and US bond yields higher.

Oil Prices Dip on Profit-Taking and U.S. Production Fears. Oil prices dipped on Tuesday as speculators took profits for a second day after big third-quarter gains and on concerns that higher prices might spur increased U.S. shale production. Brent crude futures closed down 0.2 percent to $56.00 a barrel, having lost almost 2.5 percent on Monday. U.S. crude fell 0.3 percent to $50.42.

Watch Out Today for:

07:00 am GMT: EUR Non-monetary policy's ECB meeting

17:15 pm GMT: EUR ECB President Draghi's Speech

19:15 pm GMT: USD Fed's Yellen Speech

EUR/GBP increased further and is almost to hit the third warning line (wl3), where he could find resistance again. I’ve drawn a minor ascending pitchfork to catch a potential upside movement. You can see that was attracted by the confluence area formed between the wl3 with the median line of the minor ascending pitchfork. It could increase even if will stay below the median line of the minor pitchfork, but only if will take out the wl3 resistance.

Price dropped further and is almost to hit the fifth warning line (wl5) of the ascending pitchfork. Technically, it should take out this dynamic support after the retest of the sliding line (SL), but only if the USDX will climb higher after the Tuesday’s indecision. A valid breakdown will signal a further drop towards the second warning line (WL2) of the descending pitchfork.

The USD/JPY increased on Tuesday, but failed to reach the 113.25 last week’s high. Continues to pressure the median line (ml) of the blue ascending pitchfork. Technically, has shown some exhaustion signs in the last days after the failure to take out a major dynamic resistance.

Price increased in the last three days as the Yen was punished by the Nikkei’s impressive rally, it should have climbed much higher today as the index has jumped above the 20498 previous high and reached the 20636 level. The USD/JPY upside momentum was paused by the USDX’s decrease, the index has found strong resistance right above the 93.81 horizontal resistance and now is trading much below this major upside obstacle. USDX maintains a bullish perspective on the short term, but only a valid breakout above the 93.81 will confirm a further increase in the upcoming weeks.

Price is pressuring the median line (ml) of the ascending pitchfork, another false breakout will send the price towards fresh new lows in the upcoming days. Only a valid breakout above this obstacle could confirm a further increase towards the 23.6% retracement level.

A USDX’s drop could signal a Nikkei’s minor decrease as well, we’ll see what will happen because tomorrow we have a crucial day for the USD. The US is to release high-impact data, while the FED Chair Yellen will deliver a speech at the Federal Reserve Bank of St. Louis.

Musical Chairs as the Fed helm?

Currency markets have come to a byroad as debate rages on concerning the formation of the next FOMC board but more specifically who will be captaining the ship. Betting odds remain skewed for Kevin Warsh, but Fed Governor Jerome Powell is emerging as a potential dark horse and along with it a far more significant dovish inference. If one is wondering why the Dollar was playing a game of ” pass the orange” overnight the Fed Chair debate is what likely sent US bonds bid which basically quashed the markets dollar appetite. At the heart of the Fed Chair discussion, Kevin Warsh favours a more aggressive path on interest rate normalising whereas Governor Powell is more aligned with Janet Yellen’s preference for maintaining the Goldilocks policy of more gradual interest rate hikes. Expect the debate to crescendo as the Fed Chair appointment will be one of if not the primary driver in dollar sentiment as we near years end.

Q4 has gotten off to a whimper as currency markets have more or less turned into a crap shoot with EU political risk simmering, Brexit negotiations ongoing, and of course the markets remain on the “qui vive” for the Fed Chair line of succession. But with the Tump administration burdened by the Las Vegas tragedy and Fiscal reform while readying a request for 29 billion in hurricane disaster relief, the decision process will likely be delayed

With G -10 trade turning into a game a chance, balance of risks are not too favourable on any side of the dollar coin at this stage.Small fractures are developing on most traders’ crystal ball which explains why currency markets have turned timid to start the week.

Japanese Yen

USDJPY gave back yesterday’s LDP poll inspired gains as the Fed Chair Debate rages on. Markets remain confined to tight ranges with 112.50 support and 113.30 being the critical topside level in most traders near term master plan. But there remain sizable Japanese export offers in and around this level and we should expect 113.20-50 to be a formidable barrier until the next dollar catalyst.

Euro

When you can make good arguments to go both long and short near term, it’s likely best to head for the sidelines. With that said, overnight price action and volumes suggest speculators are doing just that as ranges remain tucked up.

Case in point, yesterday the market threw the kitchen sink at EURUSD 1.1700 when 500 mil selling appeared on the EBS net aggressor between 8:45 and 9 AM Singapore time, but with tepid follow through. Similarly, the test of overnight highs around 1.1750 came and went with little fanfare. Clearly, the ongoing political risks in Europe have taken the steam out of the Euro. Looking ahead this week, the single currency remains very susceptible to any pushback from the ECB

Australian Dollar

RBA is firmly on hold and guidance unchanged but revived concerns over housing saw the Aussie trade below .7800.And despite the chorus of acknowledgement that the RBA is lower for longer, shorts were quick to cover sensing this week’s primary AUD downside risk event is behind us.

The AUDUSD remains a USD story as the big picture US policy narrative continues to distract traders from selling the Aussie even with commodity prices weakening.

FX Asia

This picture is nowhere near as dangerous as some would have you believe. With global PMI’s in the green, US ISM surging to the highest level since May 2004, robust China data and Korean exports rising, whats not to like?

The Global growth narrative is alive and well and likely to better by the month which should play favourably into global risk appetite

Despite the likelihood of a Fed hike in December and the plentitude of uncertainties currently facing the G-10 landscape, the ASIA EM background portends favourably for local exporting countries.

The undeposited and undervalued Malaysian Riggit could find significant support in this scenario.