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EURUSD (1.1857): The EURUSD turned bearish, but the price action continues to remain range bound within 1.2080 and 1.1822 levels of support and resistance. This sideways price action could potentially signal to a breakout in the near to medium term. On the 4-hour chart, however, there are some bearish signs with the descending triangle formation. Support is seen at 1.1843 - 1.1822 level. A breakout below this level could signal further declines that could send the common currency towards the support level at 1.1688 which is pending retest.

Despite attempting to fill the gap at the open, the euro currency was seen turning bearish. Investors digested the German elections outcome which turned out as expected. However, with the AfD making inroads into the Bundestag, the markets were a bit cautious. The rise of the populist and right leaning political parties this year has been a major concern among the leaders in the EU.

Politics was the main theme on Monday with the New Zealand election results expected to be announced over the week. In Japan, PM Abe called for snap elections in a bid to consolidate his position amid threats from North Korea. Speaking in a televised speech on Monday, Abe said the elections would be a verdict of his performance in handling the spending plans and also his handling of the North Korea crisis. Abe also said that he would resign as the prime minister if his party failed to win a majority.

Looking ahead, the economic calendar is light today which makes the Fed Chair Janet Yellen's speech the main event of the day. Ms. Yellen will be speaking at an event in Cleveland.

A steady stream of market-moving events is expected Tuesday, with North America seeing the bulk of the releases. However, several European reports will also make headlines ahead of the New York session.

The European data wire begins at 06:00 GMT with German import prices, which are a key inflation metric. Forty-five minutes later, France's INSEE will release its monthly business climate survey for September.

Action continues at 08:00 GMT with the Italian trade balance, followed by the British Bankers Association (BBA) monthly report on mortgage approvals at 08:30 GMT.

European Central Bank (ECB) official Peter Praet will deliver a speech at 12:00 GMT. Praet has been a member of the Executive Board since 2011.

Shifting gears to the United States, the S&P/Case-Shiller Home Price Index is scheduled for release at 13:00 GMT.

The Commerce Department's new home sales report is due one hour later. The sale of new homes is forecast to rise 3.3% to a seasonally adjusted annual rate of 585,000 in August.

Later in the session, the Federal Reserve Bank of Richmond will unveil its September manufacturing index.

On the policy circuit, a parade of Fed speakers will deliver speeches on Tuesday, including Chairwoman Janet Yellen. Her speech follows public remarks by Federal Open Market Committee (FOMC) members Loretta Mester and Lael Brainard.

The FOMC voted last week to hold interest rates at 1.25%, but signaled that one more upward adjustment is likely this year. The Fed also penciled in October as the start of its balance sheet reduction program.

The US dollar will be highly sensitive to monetary policy on Tuesday. The greenback shot up half a percent at the start of the week after New York Fed President William Dudley said interest rates are on track to rise gradually.

EUR/USD

The euro nosedived on Monday alongside other dollar rivals. The EUR/USD touched a session low of 1.1841 on Monday, which would have been enough for a more than one-month low. The pair was last up 0.1% at 1.1860. The pair faces a key trend channel support around 1.1825.

GBP/USD

Cable has declined roughly 100 pips from Friday's close as part of a broad retracement following fresh multiyear highs. The GBP/USD rebounded in early Tuesday trading to reach 1.3482. From a technical perspective, the 1.3443 region remains a strong support level for cable. On the opposite side of the ledger, strong resistance is seen at 1.3580.

GOLD

Gold prices rebounded sharply on Monday, rising in lockstep with the US dollar. Spot prices are back above $1,300.00 a troy ounce after a multi-week retracement sent the bulls packing. Bullion faces a major support zone at around $1,287.00. Below that level, the metal is likely supported until $1,267.00. Traders should carefully monitor risk sentiment in the financial markets for a directional play on gold.

Weekly
    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 31 Jul 2017
    •    Trend bias: Down

Daily
    •    Last Candlesticks pattern: Morning star
    •    Time of formation: 25 Aug 2017
    •    Trend bias: Near term up

GBP/USD – 1.3475

Although cable edged higher to 1.3659 last week, the subsequent retreat suggest consolidation below this level would be seen and pullback to the Tenkan-Sen (now at 1.3406) cannot be ruled out, however, reckon 1.3380-82 would limit downside and bring another rise later. A daily close below 1.3325-30 would suggest top is possibly formed, bring weakness to the Kijun-Sen (now at 1.3217) but a sustained breach below there is needed to add credence to this view, bring further fall to support at 1.3153 which is likely to hold from here.

On the upside, expect recovery to be limited to 1.3590-00 and bring another retreat. Above 1.3600 would bring retest of 1.3659 but break there is needed to extend recent rise to 1.3700-10, however, near term overbought condition should limit upside to 1.3800 and reckon 1.3860 (61.8% Fibonacci retracement of 1.5018-1.1986) would remain intact, risk from there is seen for a strong retreat to take place later.

Recommendation: Buy again at 1.3250 for 1.3550 with stop below 1.3150.  




On the weekly chart, despite rising to 1.3659 last week, lack of follow through buying and the subsequent retreat suggest consolidation would take place and pullback to 1.3400-05 is likely, however, reckon downside would be limited to 1.3300-10 and renewed buying interest should emerge around the upper Kumo (now at 1.3247) and bring another rise later. Above said resistance at 1.3659 would extend recent erratic rise form 1.1986 low to 1.3750-60 and 1.3800 but near term overbought condition should prevent sharp move beyond 1.3860 (61.8% Fibonacci retracement of 1.5018-1.1986) and 1.3900-10 should hold, bring retreat later.

On the downside, although initial pullback to 1.3400-05, then 1.3350 cannot be ruled out, reckon downside would be limited to the upper Kumo (now at 1.3247) and bring another rise later. Below the Tenkan-Sen (now at 1.3217) would defer and suggest a temporary top is formed, bring retracement of recent rise to 1.3140-50, then towards 1.3100, however, still reckon downside would be limited to the Kijun-Sen (now at 1.3012) and support at 1.2909 should remain intact, bring another rally later.
 


Weekly
    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 7 Mar 2017
    •    Trend bias: Sideways

Daily
    •    Last Candlesticks pattern: Morning star
    •    Time of formation: 9 May 2017
    •    Trend bias: Near term up

USD/CHF – 0.9690

Although the greenback found support at 0.9565 and surged again last week, lack of follow through buying and the subsequent retreat from 0.9748 (last week’s high) suggest consolidation below this level would be seen and pullback to the Tenkan-Sen (now at 0.9657), then 0.9600-10 is likely, however, break of said support at 0.9565 is needed to revive our bearishness and signal top is formed, bring weakness to 0.9520-25 and 0.9500. Looking ahead, dollar needs to penetrate 0.9455-60 to signal the rebound from 0.9421 has ended, bring retest of this level, break there would confirm recent decline from 1.0344 (2016 top) has resumed and extend weakness to 0.9390-00, then towards 0.9330-35.

On the upside, expect recovery to be limited to 0.9715-20 and said resistance at 0.9748 should hold. Only a break of this last week’s high would signal the rise from 0.9421 low is still in progress for at least a retracement of early decline to 0.9765-73 (50% Fibonacci retracement of 1.0108-0.9421 and previous resistance), having said that, dollar needs to penetrate this level to signal the decline from 1.0344 has ended, bring further subsequent gain to 0.9845-50 (61.8% Fibonacci retracement of 1.0108-0.9421), however, reckon upside would be limited to 0.9900-10 and price should falter well below psychological resistance at 1.0000.

Recommendation: Stand aside for this week.

On the weekly chart, although the greenback edged higher last week, dollar continued meeting resistance just below the Kijun-Sen (now at 0.9765), price needs to penetrate previous resistance at 0.9773 to retain near term bullishness and add credence to our view that low has been formed at 0.9421, bring retracement of recent decline to 0.9845-50 (61.8% Fibonacci retracement of 1.0108-0.9421), then test of the lower Kumo (now at 0.9894) but upside should be limited to the upper Kumo (now at 0.9970), price should falter well below resistance at 1.0100-08.

On the downside, whilst initial pullback to the Tenkan-Sen (now at 0.9597) cannot be ruled out, reckon last week’s low at 0.9580 would hold and bring another rebound. Only below 0.9565 support would signal the rebound from 0.9421 has ended, bring further fall to 0.9500 but break of 0.9455-60 is needed to retain bearishness and bring retest of this level, break there would extend recent decline from 1.0344 top to 0.9350, then towards previous support at 0.9259, however, oversold condition should prevent sharp fall below 0.9220 (38.2% Fibonacci retracement of 0.7401-1.0344) and reckon 0.9150 would hold from here, risk from there is seen for a rebound later.

USD/CHF - 0.9690

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9673

Kijun-Sen level                    : 0.97694

Ichimoku cloud top                 : 0.9708

Ichimoku cloud bottom              : 0.9701

New strategy  :

Buy at 0.9675, Target: 0.9775, Stop: 0.9640

Position : -

Target :  -

Stop : -

Although the greenback dropped to as low as 0.9642 yesterday, lack of follow through selling on break of previous resistance at 0.9649 and the subsequent rebound suggest consolidation with mild upside bias would be seen, hence gain to 0.9720 cannot be ruled out, however, break of last week’s high at 0.9748 is needed to retain bullishness and extend recent rise from 0.9421 low to 0.9761-66 (50% Fibonacci retracement of 1.0100-0.9421 and previous resistance), then test of another previous resistance at 0.9773.

In view of this, we are looking to buy dollar on dips. Below said support at 0.9642 would abort and signal the fall from 0.9748 is still in progress, then further weakness to 0.9620-25 would follow but oversold condition should limit downside to indicated support at 0.9589, bring rebound later.

GBP/USD - 1.3490

Most recent candlesticks pattern   : N/A

Trend                                 : Up

Tenkan-Sen level                 : 1.3477

Kijun-Sen level                    : 1.3501

Ichimoku cloud top              : 1.3523

Ichimoku cloud bottom        : 1.3515

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has recovered after falling to 1.3432 yesterday, suggesting consolidation above this level would be seen and corrective bounce to 1.3515-20 and 1.3530-35 cannot be ruled out, however, break of resistance at 1.3571 is needed to signal low has been formed there, bring test of 1.3596, once this level is penetrated, this would signal the correction from 1.3658 top has ended, bring subsequent gain to 1.3620-25 first. 

On the downside, below 1.3450 would signal the erratic fall from 1.3658 is still in progress for another test of said support at 1.3432, below there would bring retracement of recent rise towards 1.3400-05 (50% Fibonacci retracement of 1.3153-1.3658). As near term outlook is still mixed, would be prudent to stand aside for now.

Asia Summary

Asian equity markets opened mostly to the downside as tension on the Korean peninsula brought back risk aversion and a flow to safe haven assets after North Korea foreign minister declared that the N. Korea can shoot down US warplanes flying in international airspace and described Trump’s recent comments as a declaration of war. Commodities continue to rise being led by copper. Korean banks remain under pressure as South Korea FSC announced financial reforms for retail customers, including changes to interest rates on overdue loan payments. Chinese real estate names came off yesterday’s lows on fresh curbs announce over the weekend.

The yuan declined to the lowest level against its currency basket in nearly 4-weeks as the PBOC weakens the daily fix. In an SCMP piece it is noted that China could be heading towards a free-floating currency after a group of economists, including officials from PBoC suggested the time was ripe for such a move.

As expected late yesterday Japan PM Abe called for a snap election. Japan Fin Min Aso said that should call for election if planning big changes to taxes. He also warned that it will be difficult to meet the FY20 primary surplus goal. NZD/USD continued to be weaker after its rapid decent yesterday on election results.

Key economic data

(NZ) NEW ZEALAND AUG TRADE BALANCE (NZD): -1.24B V -0.83BE; YTD: -3.2B V -2.91BE

(KR) South Korea Sept Consumer Confidence: 107.7 v 109.9 prior (5-month low)

(JP) JAPAN AUG PPI SERVICES Y/Y: 0.8% V 0.6%E

(NZ) New Zealand Aug RBNZ New Residential Mortgage Lending y/y: -16% v -24% prior

Speakers and Press

China/Hong Kong

(CN) China could be heading towards a free-floating currency after a group of economistds, including officials from PBoC suggested the time was ripe for such a move - SCMP

Korea

(KR) South Korea Financial Services Commission (FSC) Chairman Jong-Ku announces financial reforms for retail customers, including changes to interest rates on overdue loan payments

Japan

(JP) Bank of Japan (BOJ) Jul Meeting Minutes: Most: Vital for Japan that BOJ achieves 2% target

(JP) Japan Economic Revitalization Min Motegi: Japan not at the point to consider sales tax above 10%, most important issue it to raise Japan potential growth

(JP) Moody's: Japan elections unlikely to have implications for sovereign rating; refreshed mandate for reform would be credit positive

New Zealand/Australia

(NZ) New Zealand Shadow Board: See little urgency for RBNZ to raise rates

(AU) ASX will likely suspend most of Australian listed gold sector if WA government budget with new gold royalty increase is passed –

Australian

(AU) Australia Treasurer Morrison: Final budget outcome A$4.4B better than forecasted, final budget A$33.2B

US

(US) Fed's Kashkari (dove, voter): Do not see signs of economy overheating; do not see inflation taking off no need to tap breaks; Fed should not be under any pressure to raise rates

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.4%, Hang Seng -0.1%; Shanghai Composite +0.1%, ASX200 -0.1%, Kospi -0.2%

Equity Futures: S&P500 -0.1%; Nasdaq100 -0.0%, Dax -0.2%, FTSE100 +0.0%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.1862-1.1846; JPY 111.80-111.50; AUD 0.7948-0.7922;NZD 0.7277-0.7236

Dec Gold +0.4% at $1,316/oz; Nov Crude Oil +0.2% at $52.34/brl; Dec Copper +0.9% at $2.96/lb

(AU) Australia sells A$150M in 2030 indexed bonds; avg yield 1.0024%; bid-to-cover 3.34x

(CN) PBOC OMO: To inject CNY50B in 14 and 28-day reverse repos v injected CNY200B in 14 and 28-day reverse repo prior; drains net CNY80B

USD/CNY (CN) China PBOC sets yuan reference rate at 6.6076 v 6.5945 prior

(JP) Japan MoF sells ¥499.4B v ¥500B in 0.90% 40-yr bonds; avg yield 1.015%; bid to cover: 3.24x (highest bid-to-cover since 2015)

Equities notable movers

Australia/New Zealand

KMD.NZ Reports FY17 (NZ$) Net 38.0M v 33.5M y/y; EBIT 57.0M v 56Me; Rev 445.3M v 425.6M y/y; +7.5%

Japan

8303.JP Anbang ends talks to acquire stake in Shinsei - FT

South Korea

023530.KR Trading to be halted effective Sept 28th before being relisted as Lotte Holdings; +8%

010140.KR Awarded KRW1.12T contract for containership for Europe; +7%

EUR/USD - 1.1854

Most recent candlesticks pattern   : N/A

Trend                      : Sideways

Tenkan-Sen level              : 1.1849

Kijun-Sen level                  : 1.1884

Ichimoku cloud top             : 1.1938

Ichimoku cloud bottom      : 1.1934

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The single currency has remained under pressure after yesterday’s anticipated decline, suggesting another leg of corrective decline from 1.2093 top is underway and mild downside bias remains for one more fall towards 1.1800-10, however, loss of near term downward momentum should prevent sharp fall below 1.1770-75 and reckon 1.1750 would hold, bring rebound later. 

In view of this, would not chase this fall here and would be prudent to stand aside for now. Above the Kijun-Sen (now at 1.1884) would bring recovery to 1.1910-20 but reckon upside would be limited to the Ichimoku cloud (now at 1.1934-38) and 1.1980-85 should hold. 

USD/JPY - 111.55

Most recent candlesticks pattern   : N/A

Trend                      : Up

Tenkan-Sen level              : 111.65

Kijun-Sen level                  : 111.90

Ichimoku cloud top             : 112.19

Ichimoku cloud bottom      : 112.18

Original strategy  :

Bought at 111.70, stopped profit at 111.90

Position :  - Long at 111.70

Target :  -

Stop : - 111.90

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

The greenback met renewed selling interest at 112.53 yesterday and has slipped again, suggesting a temporary top has possibly been formed at 112.72 and downside risk remains for weakness towards 111.11-13 (previous support and 50% Fibonacci retracement of 109.55-112.72), however, break there is needed to add credence to this view, bring retracement of recent rise towards 110.75-80 (61.8% Fibonacci retracement) but reckon 110.60-65 would hold on first testing.

On the upside, whilst recovery to the Kijun-Sen (now at 111.90) cannot be ruled out, reckon the upper Kumo (now at 112.23) would limit upside and said resistance at 112.53 should hold, bring another decline later. Only a break of 112.53 resistance would revive bullishness and bring retest of 112.72 (last week’s high), break there would extend recent upmove to 112.90-00, then towards 113.25-30 (1.236 times projection of 107.32-111.04 measuring from 109.55), having said that, previous chart resistance at 113.58 would remain intact.