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Yen trades broadly higher today on resurgence of geopolitical risks. North Korea threatens to launch hydrogen bomb in Pacific Ocean, in response to US President Donald Trump's "total destruction" provocation, and new sanctions. But overall, Yen is the weakest one for the week so far with risk appetite and global monetary stimulus exit in the background. This is also reflected in Swiss Franc, which is the second weakest for the week. On the other hand, Euro reversed the post FOMC selloff and is occupying the top spot among major currencies. The common currency is also getting support from solid data. Dollar is firm too but the uncertainty over the tension with North Korea is limiting its strength.

Eurozone PMIs indicates broad-based upswing

PMI data from Eurozone are generally better than market expectation. Eurozone PMI manufacturing rose to 58.2 in September, up from 57.4 and beat expectation of 57.2. Eurozone PMI services rose to 55.6, up from 54.7 and above expectation of 54.8. Germany PMI manufacturing rose to 60.6 in September, up from 59.3, and beat expectation of 59.0. Germany PMI services rose to 55.6, up from 53.5, beat expectation of 53.8. France PMI manufacturing rose to 56.0, up from 55.8, beat expectation of 55.5. France PMI services rose to 57.1, up from 54.9, beat expectation of 54.8. IHS Markit chief business economist Chris Williamson noted that "it was a super manufacturing performance. We are well-placed for a strong fourth quarter as well ... in this broad-based upswing."

Japan PM Abe to announce snap election next Monday

In Japan, rumors continue to heat up, on Prime Minister Shinzo Abe to dissolve the parliament this month and call for a snap election on October 22. Abe would be holding a news conference on Monday afternoon Japan time to announce it. It's reported that Abe would also make use the opportunity to delay the timing to achieve primary budget surplus, for a few years from fiscal 2020. IMF mission chief for Japan said that BOJ will likely lag behind Fed and ECB in normalization of monetary policy. But he noted that "his is appropriate, as monetary policy is focused on domestic conditions and domestic conditions are different among countries and regions." And, a gradual increase in sales tax, together with control social security spending would help the government to achieve medium term fiscal reform.

Loonie softer after mixed data

Canadian Dollar trades softer after mixed data. Headline CPI rose 0.1% mom, 1.4% yoy in August, below expectation of 0.2% mom, 1.5% yoy. But that was an uptick from July's 0.0% mom, 1.2% yoy. CPI core common rose to 1.5% yoy, CPI core trim rose to 1.4% yoy, CPI core mean was unchanged at 1.7% yoy. Retail sales rose 0.4% mom in July, above expectation of 0.3% mom. But ex-auto sales rose 0.2%, well below expectation of 0.4% mom.

In the weekend - New Zealand and Germany elections

The upcoming New Zealand election would be a tight race between the incumbent National Party and Labor Party. Opinion polls suggest that supports for both parties are at around 40%. As such none of them would be able to a form government without entering coalition with smaller parties. This is such uncertainty that has increased the volatility of New Zealand dollar of late. Maintaining the status quo – a minority government led by Nationals- would be the most NZD-favorable while a Labor + Green+ NZ First trio would lead to an immediate, but short-term selloff in the currency. More in New Zealand Election: Change in Government is NZD-Negative in Near-Term

Although Chancellor Angela Merkel's Christian Democratic Union (CDU) and its sister party, the Christian Socialist Union (CSU), have been comfortably leading in polls. There still are a number of uncertainties in the upcoming German election. While Merkel is on the way to be the Chancellor for a fourth, and the last, term, her party is unlikely to form a government without forming coalition with other party(ies). While the Grand Coalition (CDU/CSU+SPD as the junior partner), just like the one we have had since 2013 and between 2005-2009, is the most favorable to the economy and the financial markets, it cannot be seen as a done deal. Meanwhile, rising supports for the populist Alternative for Germany (AfD) signal that a far-right party would enter the parliament for the first time since WWII. AfD has pledged to promote its anti-EU and anti-immigrants rhetoric in the parliament as it might probably become the biggest opposition party in case of a Grand Coalition. Moreover, the parliament is prone to be more fragmented with six parties in 2017-term, compared with four previously. More in German Election: Not as Boring as You Think

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1886; (P) 1.1919 (R1) 1.1974; More...

EUR/USD is bounded in range of 1.1822/2091 so far and intraday bias stays neutral. Considering bearish divergence condition in 4 hour and daily MACD, break of 1.1822 should confirm near term reversal. In the case, intraday bias will be turned back to the downside through 1.1661 support. EUR/USD should then correct whole rise from 1.0569 and target 38.2% retracement of 1.0569 to 1.2091 at 1.1510. However, rebound from 1.1822/1837 and break of 1.2029 will resume the larger up trend to next key fibonacci level at 1.2516.

In the bigger picture, rise from medium term bottom at 1.0339 is still in progress for 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall fro 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside. But after all, break of 1.1661 is needed to indicate medium term topping. Otherwise, outlook will remain bullish in case of pull back.

Economic Indicators Update

USD/CHF - 0.9693

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The greenback retreated after rising to 0.9748 earlier this week and consolidation below this level would be seen and pullback towards the lower Kumo (now at 0.9654) cannot be ruled out, however, reckon previous minor resistance at 0.9630 would limit downside and price should stay well above indicated support at 0.9589, bring rebound later.

On the upside, whilst recovery to the Kijun-Sen (now at 0.9708) cannot be ruled out, reckon upside would be limited to 0.9720-25 and said resistance at 0.9748 should hold, bring retreat later. In the event dollar is able to penetrate said resistance at 0.9748, this would revive 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 another previous resistance at 0.9773. As near term outlook is still mixed, would be prudent to stand aside for now.

GBP/USD - 1.3572

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although cable retreated after edging higher to 1.3596 and consolidation with mild downside bias is seen for weakness towards the Kijun-Sen (now at 1.3534), below 1.3500 is needed to revive near term bearishness and signal the rebound from 1.3452 has ended, bring further fall to 1.3470, then test of said support. Looking ahead, only a drop below 1.3452 would add credence to our view that top has been formed at 1.3658 earlier this week, bring retracement of recent rise to 1.3400-05 (50% Fibonacci retracement of 1.3153-1.3658).

On the upside, above 1.3600 would extend gain to 1.3620-25, however, still reckon said this week’s high at 1.3658 would hold from here, bring retreat later. Only a break above said resistance at 1.3658 would signal recent upmove has resumed and extend gain to 1.3690-00 later. As near term outlook is still mixed, would be prudent to stand aside for now.

EUR/USD - 1.1969

Original strategy  :

Sold at 1.1970, Target: 1.1870, Stop: 1.2005

Position : - Short at 1.1970

Target :  - 1.1870

Stop : - 1.2005

New strategy  :

Hold short entered at 1.1970, Target: 1.1870, Stop: 1.2005

Position : - Short at 1.1970

Target :  - 1.1870

Stop : - 1.2005

As the single currency found good support at 1.1861 and has staged a strong rebound, suggesting consolidation above this level would be seen, however, as long as 1.2005 holds, mild downside bias remains for another decline, below 1.1915-20 would bring test of 1.1885-90 but break of latter level is needed to signal the rebound from 1.1861 has ended, bring another fall to this level, then retest of previous support at 1.1838 which is likely to hold on first testing.

In view of this, we are holding on to our short position entered at 1.1970. Above 1.2000 would dampen our bearishness and risk test of this week’s high at 1.2035 but only break there would shift risk back to upside and extend the rebound from 1.1838 to 1.2060-70 first.

USD/JPY - 112.13

Original strategy  :

Bought at 111.70, Target: 112.70, Stop: 111.60

Position :  - Long at 111.70

Target :  - 112.70

Stop : - 111.60

New strategy  :

Hold long entered at 111.70, Target: 112.70, Stop: 111.60

Position :  - Long at 111.70

Target :  - 112.70

Stop : - 111.60

Although the greenback retreated after rising to 112.72 yesterday and consolidation below said resistance would be seen initially, reckon 111.65 would contained downside and bring another rise later towards said resistance but only break there would confirm recent upmove has resumed and extend further gain 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 hold from here, bring retreat later.

In view of this, we are holding on to our long position entered at 111.70. Below said support at 111.65 would risk weakness to 111.40-45 but break there is needed to signal a temporary top has been formed at 112.72, bring retracement of recent rise towards support at 111.11 first.

The British pound continues to push higher against the U.S dollar, ahead of a key speech by British Prime Minister Theresa May on the terms of Brexit deal with European Union in Florence, Italy.

Yesterday, the GBPUSD pair reversed Wednesday's losses, after breaking back above the key 1.3515 technical level, creating a surge in buying interest back towards the 1.3600 region.

The GBPUSD pair remains strongly bullish in intraday trading while price-action is above the 1.3553 level, which represents the pairs weekly pivot point.

Key upside resistance is currently located at 1.3618, 1.3633 and the currently yearly high, at 1.3657. Above the yearly price-high, further resistance is found at 1.3680 and 1.3710.

To the downside, key intraday technical support is found at the 61.8 Fibonacci retracement of Wednesday daily range, at 1.3569 and the weekly pivot at 1.3553.

Below 1.3553, further support is seen at 1.3538 and 1.3515, with critical weekly support, at 1.3480.

The euro continues to push higher against the U.S dollar in Friday trading, with the EURUSD pair further supported by solid European economic data. The highlight of the eurozone's PMI'S came from the German economy, which came in at 60.6 for the month of September.

Going forward, the EURUSD pair has yet to close price-action above the key 1.2038 technical level on a higher-time frame basis, the pair may remain confined to the 1.2030 to 1.1884 range, until a break-out happens.

The euro has set a daily price high of 1.2004 and a daily low of 1.1938, indicating traders are bullish, but cautious to add long positions over the weekend.

Key EURUSD intraday technical support is found at the 1.1957 whilst the current daily price-low and daily pivot point are both found at 1.1938.

Below 1.1938, the 1.1915 and 1.1984 levels offer critical support.

To the upside, key intraday resistance above 1.2004 is found at 1.2031, 1.2069 and 1.2089. Once above 1.2089, the euro will likely target 1.2140 and 1.2260.

Good day traders! Today we are goiong to take a look at German DAX and its 4h look.

German dax is trading bullish since end of August, when bigger correction was completed. We now see a five-wave bullish impulse in the making, with price currently trading in one of its sub-waves, wave 4). We know that wave 4) is a correction, which means it represent a pullback within an impulse and can go choppy, slow and overlapping. Ideally current wave 4) will search for a potential base near the 1.2450 region and later make a bounce higher, into final wave 5).

German DAX, 1H

Notes/Observations

• Euro rallies on strong PMI data out of Germany, France and the Eurozone
• European Indices trade mixed on continuing Geopolitical tensions in regards to North Korea
• ECB Chief Draghi notes that they are not there on inflation yet

Overnight

Asia:

• Geopolitical tensions rose again in the far east with North Korea responding to President Trumps executive order for additional US sanctions by considering the 'highest level of countermeasures'
• It was later reported that North Korea could conduct a Hydrogen-bomb test which has weighed on markets.
• S&P downgrades Hong Kong sovereign rating to AA+ from AAA (follows recent downgrade of China); Outlook revised to Stable from Negative; cites potential for spillover risks
• China's metals, including iron ore, have traded lower by over 2%, following reports that the Shanghai Metals Exchange raised trading fees

Europe:

• German, French and Eurozone prelim PMI readings handily beat estimates, French and German Composite PMI readings highest in over 6 years.
• UK PM May to give Speech in Florence, it is speculated that she will propose payments of €20B over a two year transitional period, in which she will emphasis it is a shared responsibility to make Brexit work 'Smoothly'.

Oil:

• OPEC panel to discuss export monitoring and and oil pact extension

Economic data

(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 60.6 V 59.0E (34TH MONTH OF EXPANSION)

• Services PMI: 55.6 v 53.7e (50th month of expansion)
• Composite PMI: 57.8 v 55.7e

*(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 56.0 V 55.5E (11TH MONTH OF EXPANSION)

• Services PMI: 57.1 v 54.8e (15th month of expansion)
• Composite PMI: 57.2 v 55.0e (15th month of expansion)

(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 58.2 V 57.2E (50TH MONTH OF EXPANSION)

• Services PMI: 55.6 v 54.8e
• Composite PMI: 56.7 v 55.6e
• (FR) FRANCE Q2 FINAL GDP Q/Q: 0.5% V 0.5%E; Y/Y 1.8% V 1.7%E
• (NL) NETHERLANDS Q2 FINAL GDP Q/Q: 1.5% V 1.5%E; Y/Y: 3.3% V 3.3%E

Fixed Income Issuance:

• Non seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.1% at 3,544, FTSE -0.1% at 7,256, DAX +0.1% at 12,613, CAC-40 +0.2% at 5,280, IBEX-35 -0.1% at 10,284, FTSE MIB +0.2% at 22,531, SMI +0.1% at 9,137, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European stocks open lower but pair losses as session progressed; geopolitical concerns weighed on indices, supported safe haven flows; materials stocks impacted by drop in metal prices; L'Oreal heiress Bettencourt died, leading to moves in L'Oreal, Nestle and Sanofi; Israel closed for Jewish New year; attention turning to UK PM May's Brexit speech later in the day, and German elections over the weekend; upcoming earnings in the US session include Carmax

Equities

• Consumer discretionary: Adecco ADEN.CH -1.3% (strategy update)
• Energy: Lamprell LAM.UK -9.8% (outlook)
• Financials: Unicredit UCG.IT +0.9% (meeting to remove voting cap)
• Healthcare: Roche ROG.CH -0.2% (drug approvals)
• Industrials: Fincantieri FCT.IT +3.1% (press speculation STX deal near)
• Materials: Rio Tinto RIO.UK -0.8% (share buyback)
• Technology: Smiths Gorup SMIN.UK -5.2% (earnings)

Speakers

• (EU) ECB Chief Draghi: We aren't there on inflation yet; We see some local bubbles not systemtic
• (NO) Norway Central Bank (Norges) Gov Olsen: Flexible inflation target is more and more important
• (CH) SNB Gov Board member Moser: An end to Libor will challenge the private sector but will not hinder the SNB's ability to conduct monetary policy
• (VE) Venezuela Oil Min: Opec, Non-Opec evaluating all parameters when asked about export monitoring
• (EU) ECB Supervisory Board member Angeloni: Far from neutralising the transmission of risks between banks and public sector finances at the national level

Currencies

EUR/USD trades higher after stronger PMI readings out of Europe briefly topping 1.20. A clear break would see a move to 1.2027.

GBP/USD trades at the lower end of today's range after trading just below 1.36 earlier ahead of UK PM May's Brexit speech. Resistance seen just above $1.36.

Fixed Income

• Friday's liquidity report showed Thursday's excess liquidity rose to €1.734T from €1.729T, and use of the marginal lending facility fell to €116M from €137M.
• Corporate issuance saw $3.7B come to market via 3 deals led by 3M Co 3 part $2B offering, which brings weekly issuance to $16.7B.
• For the week ending Sep 20th Lipper US fund flows reported IG Funds net inflows of $2.86B bringing YTD inflows to $91.3B, High Yield funds reported net inflows of $865.8M bringing YTD outflows to $8.41B.

Looking Ahead

• 06:00 (UK) Sept CBI Industrial Trends Total Orders: 13e v 13 prior; Selling Prices: No est v 19 prior
• 06:00 (IE) Ireland Aug PPI M/M: No est v -1.1% prior; Y/Y: No est v -1.9% prior
• 07:00 (BR) Brazil Sept FGV Consumer Confidence: No est v 101.6 prior
• 07:30 (IN) India Weekly Forex Reserves
• 08:05 (UK) Baltic Dry Bulk Index
• 08:00 (PL) Poland Aug M3 Money Supply M/M: 0.3%e v 0.3% prior; Y/Y: 5.2%e v 5.0% prior
• 08:00 (CL) Chile Aug PPI M/M: No est v 1.7% prior
• 08:30 (CA) Canada Aug CPI M/M: 0.2%e v 0.0% prior; Y/Y: 1.5%e v 1.2% prior
• 08:30 (CA) Canada Aug CPI Core- Common YoY: No est v 1.4% prior; CPI Core- Trim YoY: No est v 1.3% prior; CPI Core- Median YoY: No est v 1.7% prior; Consumer Price Index: e v 130.4 prior
• 08:30 (CA) Canada Retail Sales M/M: 0.2%e v 0.1% prior; Retail Sales Ex Auto M/M: 0.4%e v 0.7% prior
• 09:00 (BE) Belgium Sept Business Confidence: -2.0e v -2.1 prior
• 09:00 (MX) Mexico Q2 Aggregate Supply and Demand Y/Y: 2.6%e v 4.0% prior
• 09:45 (US) Sept Preliminary Markit Manufacturing PMI: 53.0e v 56.0 prior; Composite PMI: No est v 55.3 prior
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 15:00 (CO) Colombia July Economic Activity Index (Monthly GDP) Y/Y: No est v 1.4% prior

Currently we see a de-risking prior to the German Election on Sunday. The GBP/USD is trapped withing the engulfing master candle (candle that traps subsequent candles within it's range) which acts as important support and resistance. The price is dropping possibly targeting the POC 1.3520-35 (38.2, D L4, ATR pivot) and possibly the POC2 1.3465-75 (D L5, W L3, 38.2, historical buyers). The price could bounce from POC zones but have in mind that POC2 has a stronger confluence that the POC1. The drop below 1.3460 could put the pair in another bearish retracement wave towards 1.3345 zone.

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)