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Financial markets offered a fairly muted response towards North Korea's latest ballistic missile launch over Japan during Friday's trading session, with stocks in Asia concluding on a mixed note and investors strolling towards the sidelines. This cautious tone from Asia has already pressured European equities, with Wall Street potentially coming under pressure this afternoon if geopolitical tensions encourage market players to avoid riskier assets.

Sterling bulls are back in town

Sterling has stolen the spotlight in the foreign exchange arena today. It rose to its highest level since the results of the Brexit vote, following hawkish comments from BoE policymaker Gertjan Vlieghe. Vlieghe, a notorious dove, has backed the central bank's hawkish rhetoric, ultimately reinforcing expectations of a UK interest rate hike before the end of 2017. With the markets now pricing in a very high possibility of a rate hike before year end, Sterling is likely to regain its attitude and remain supported moving forward.

Sterling/Dollar is undeniably bullish on the daily charts, and this upside momentum is likely to roll over into the new trading week. A weekly close above the 1.3400 region should offer enough encouragement for bulls to target 1.3700.

Dollar lower ahead of retail sales

The Dollar extended declines against a basket of major currencies on Friday, despite consumer price inflation for August exceeding market expectations by rising 0.4%.

It is becoming increasingly clear that the growing disappointment over Trump's failure to enact tax reforms and move forward with the proposed fiscal spending has damaged buying sentiment towards the Greenback. With concerns over low inflation in the U.S still clouding the prospects of higher interest rates and adding to the Dollar's woes, further downside is on the cards. Investors will direct their attention towards the pending Retail Sales Report, which could offer investors a rough idea on consumption and GDP in the US economy.

Dollar bulls are in desperate need of inspiration, and this may come in the form of a positive retail sales figure. In an alternative scenario, the Greenback may be in store for further punishment, if the economic report fails to meet market expectations. From a technical standpoint, the Dollar Index still remains bearish on the daily charts. A breakdown below 91.50 should encourage a further deprecation towards 91.00 and 90.00, respectively.

Commodity spotlight - Gold

Gold has been a battleground for bulls and bears this week, and this is reflected in the metal's chaotic price action. Bulls found support in the form of geopolitical tensions, Dollar weakness and fading rate hike expectations, which kept prices above $1315. Sellers were inspired by reports of Republicans releasing their tax reform framework later this month, which boosted the Dollar. Thursday's positive US CPI report compounded the initial downside, as expectations over higher US rates increased.

This tough tug of war is reaching a climax, and the victor is likely to be determined by where prices conclude this week. A weekly close below $1315, signals the end of the bullish trend on the daily charts, with the next target being $1300. In an alternative scenario, a weekly close above $1340 should open the gates towards $1350 and higher.

Daily Pivots: (S1) 1.3224; (P) 1.3315; (R1) 1.3485; More...

GBP/USD's rally accelerates to as high as 1.3615 so far and intraday bias remains on the upside. Current rally should now target 1.3835 medium support turned resistance next. On the downside, below 1.3522 minor support will turn intraday bias neutral and bring consolidations, before staging another rally.

In the bigger picture, the strong break of 1.3444 key resistance now 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 to 1.1946 at 1.5466 next. In any case, medium term outlook will now stay bullish as long as 1.2773 support holds.

Sterling continues to shine today as firmly boosted by BoE rate hike in near term, possibly in November. The Pound also takes other European majors higher with it, including the Swiss Franc. On the other hand, Yen is sold off deeply against others and it seems market's theme is back on global monetary stimulus exit. Dollar initially yawned at news of North Korea firing another missiles over Japan. But the greenback gives way to European majors and pares back much of its gain. Mixed economic data released in US session also provide little support to the greenback.

US headline retail sales dropped -0.2% in August, below expectation of 0.1%. Ex-auto sales rose 0.2% in August, below expectation of 0.5%. Empire state manufacturing index to 24.4 in September, but beat expectation of 18.0. Released earlier today, Eurozone trade surplus narrowed to EUR 18.6b in July. New Zealand business manufacturing index rose to 57.9 in August.

ECB hawks push for scaling back stimulus

ECB Executive Board member Sabine Lautenschlaeger, a known hawk, said that "it is time to take a decision now on scaling back our bond purchases at the beginning of next year." She noted that "the buoyant growth coupled with the monetary accommodation will take us back to an inflation rate which is in line with our goal." And, "there's little doubt about that". She still believe that inflation was "taking a bit longer than usual to pick up". But in her view, the EUR 2b worth of bonds bought by ECB and the "standard monetary policy measures" are already enough accommodation. Bundesbank head Jens Weidmann also said that ECB should "ease up on the accelerator" even though accommodation is still needed.

However, chief economist Peter Praet sounded cautious and said that the central bank needs to be persistent in keep up the massive monetary stimulus. He noted that "we are undoubtedly experiencing a solid, broad-based and resilient economic recovery that is contributing to a narrowing of the output and unemployment gaps, but a seeming disconnect between growth and inflation remains." And he emphasized that "the baseline scenario for inflation going forward remains crucially contingent on very easy financing conditions which, to a large extent, depend on the current accommodative monetary policy stance."

Ex-BoJ economists said rates could rise in fiscal 2019

In Japan, a former BoJ economist, Hideo Hayakawa said that the core-core consumer inflation could accelerate to 1% in the fiscal year ending March 2019. And by that time, BoJ could adjust the long term rate target and let it rise. Nonetheless, it would still take several more years before hitting the 2% inflation target. Meanwhile, Hayakawa criticized the Yield Curve Control framework and said it "doesn't have the power to dramatically boost inflation." And he warned that "if the BOJ fails to hit its price target during the current economic expansion, it's left with a pretty bad situation."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3224; (P) 1.3315; (R1) 1.3485; More...

GBP/USD's rally accelerates to as high as 1.3615 so far and intraday bias remains on the upside. Current rally should now target 1.3835 medium support turned resistance next. On the downside, below 1.3522 minor support will turn intraday bias neutral and bring consolidations, before staging another rally.

In the bigger picture, the strong break of 1.3444 key resistance now 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 to 1.1946 at 1.5466 next. In any case, medium term outlook will now stay bullish as long as 1.2773 support holds.

Economic Indicators Update

The USDJPY pair has risen to a seven-week trading high, hitting 111.33, as traders sell the Japanese Yen, and move into British pounds. Speculation is building that the Bank of England will soon raise interest rates, while the Bank of Japan will continue to keep rates at ultra-low levels.

So far, the USDJPY pair has moved to above its 100-week moving average, at 111.23, with price-action further rejected by its 50-week moving average, at 111.33.

The USDJPY pair is trading at a critical point, with price-action now moving through a key confluence of technical resistance, with the pairs 200-week moving average and monthly pivot point nearing.

Key technical resistance above 111.33 is located at the pairs 200-week moving average, at 111.54 and the USDJPY monthly pivot point, situated at 111.65.

To the downside, key USDJPY intraday technical support is found at the former daily price high, at 111.04, and the key 110.80 level. Below 110.80, further support is found at 110.68 and 110.33.

The British pound has moved to a new 2017 trading high against the U.S dollar for the fourth consecutive day, hitting 1.3600, following comments from BOE member Gertjan Vlieghe.

Active MPC voting member Vlieghe spoke of the need for the BOE to raise interest rates in the coming months, causing the GBPUSD pair to move to its highest trading level, since June 2016.

Going forward, the GBPUSD pair remains strongly bullish in the medium-term after a key technical break through above the pairs 100-week moving average, found at the 1.3401 level.

Key technical resistance above the 1.3600 level is located at 1.3620, 1.3652 and 1.3680.

Key GBPUSD technical support is found at the recent swing price lows, located at 1.3567 and 1.3536.

The January 2009 price low, offers further historical support, at 1.3503, as does the pairs 100-week moving average, at 1.3401.

EURUSD - With the pair halting its weakness to close higher on Thursday, a move further higher is envisaged. Resistance comes in at 1.2000 level with a cut through here opening the door for more upside towards the 1.2050 level. Further up, resistance lies at the 1.2100 level where a break will expose the 1.2150 level. Conversely, support lies at the 1.1900 level where a violation will aim at the 1.1850 level. A break of here will aim at the 1.1800 level. Below here will open the door for more weakness towards the 1.1750. All in all, EURUSD faces further upside on corrective recovery.

The pair blasted through psychological 150 barrier on Thursday and broke above strong barrier at 151.11 (Fibo 38.2% of larger 195.24/123.83 (Aug 2015 / Sep 2016 descend), boosted by fresh hawkish comments from BoE MPC member about interest rate hike in coming months.

Weekly close above this pivotal point would generate another strong bullish signal for further advance.

The pair is currently riding on the third wave of five-wave cycle from 139.30 and eyes its FE 300% at 152.08.

There are no firmer signals of fatigue so far, as the pair gained over 3.5% in less than two days and strongly overbought daily studies, however, corrective action could be anticipated in coming sessions.

Former tops at 148.45, 148.10 and 147.77 (posted on 11 Dec 2016, 07 May and 09 July 2017 respectively) now act as solid supports.

Res: 151.54, 152.08, 153.01, 154.24
Sup: 151.00, 150.00, 149.31, 148.45

Crude oil has strongly declined after the commodity monitored the $50 level. Key support is given at 45.40 (17/08/2017 high). Strong resistance can be found at 50.43 (31/07/2017). Expected to show further monitoring of the 50- level short-term bearish move.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).

Silver has failed to reach strong resistance at 18.65 (17/04/2017 high) while support can be found at 16.58 (15/08/2017 high). The commodity lies in an uptrend channel. Expected to show further consolidation.

In the long-term, the trend is rater negative. Further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Gold is trading mixed within uptrend channel. Hourly support is given at a distance 1319 (intradayy low). Hourly resistance is located at 1357 (08/09/2016). Stronger support lies at 1204 (10/07/2017 high). Expected to show continued increase within uptrend channel.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low)