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The markets were trading fairly subdued although the US dollar was seen easing back. Economic data over the day included the German ZEW economic sentiment rising to 17.0, beating estimates of 12.3. The Eurozone ZEW economic sentiment was however soft, rising just 31.7 falling below estimates of 32.4. Data from the US saw the building permits which increased 1.30 million, but housing starts remained sluggish at 1.18 million.

Looking ahead, the main event for the day will be the FOMC meeting. The Fed is expected to announce it balance sheet normalization at today's meeting while keeping interest rates steady. The Fed will also be releasing its dot plot giving fresh forecasts on GDP, inflation and interest rates. Later in the day, New Zealand GDP is expected to show a quarterly GDP growth rate of 0.8%.

AUD/USD – 0.8040

Original strategy:

Sell at 0.8080, Target: 0.7900, Stop: 0.8140

Position: -
Target:  -
Stop:-

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Despite falling to 0.7940, as aussie found good support there and has staged a strong rebound, suggesting near term upside risk remains for gain to 0.8080-90, however, reckon upside would be limited and resistance at 0.8125 (this month’s high) would hold, bring further consolidation. Only break of this level would revive bullishness and extend recent upmove to 0.8150-60, then towards 0.8190-00 later this week.

In view of this, would not chase this rise here and would be prudent to stand aside in the meantime. Below 0.7985-90 would bring another test of said support at 0.7940 but only break there would signal top has been formed at 0.8125, bring retracement of recent rise to 0.7920-25 and later 0.7890-00 but support at 0.7867-71 should remain intact.

On the 4-hour chart, recent upmove from 0.7329 is unfolding as an impulsive rise with wave 3 as well as smaller degree wave (iii) extending, only minor wave v of (iii) has ended at 0.8125, hence bullishness remains for this move to extend headway to 0.8200, then towards 0.8300, however, reckon upside would be limited to 0.8400 and the final wave 5 should falter below 0.8500, bring correction probably next week.

Dollar Edged Up Ahead of Federal Reserve's Meeting. The dollar index added 0.1 percent to 91.855, holding well above its more than 2-1/2 year low of 91.011 plumbed on Sept. 8. Analysts expect U.S. central bank policymakers to announce at the end of their two-day meeting later on Wednesday that they will trim its $4.2 trillion in bond holdings starting in October, and also leave the door open for an interest rate hike at their Dec. 12-13 meeting.

Strong Euro Driving a Rift Between ECB Policymakers. European Central Bank policymakers disagree on whether to set a definitive end-date for their money-printing program when they meet in October, raising the chance that they will keep open at least the option of prolonging it again. The euro was steady on the day, at $1.1990.

Yen Unmoved by Trump's Fiery North Korea Rhetoric at the U.N. The yen tends to benefit during times of economic and political uncertainty, but it had a muted reaction to U.S. President Donald Trump's speech to the U.N. General Assembly on Tuesday. This week the main factor for the yen is Japanese Prime Minister Shinzo Abe, who is considering calling an election for as early as next month. The U.S. currency was steady on the day against its Japanese counterpart at 111.56 yen, moving back toward an eight-week peak of 111.88 yen scaled overnight.

Precious Metals Retained Their Lead. Gold and silver remained supported as several market watchers are still wary of geopolitical risks stemming from Trump's latest batch of threats on North Korea. In his speech to the UN General Assembly, the U.S. President declared: “The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea.”

Crude Oil Rises on Possible OPEC Cut Extension. Oil prices rose on Wednesday after Iraq's oil minister said OPEC and other crude producers were considering extending or even deepening a supply cut to curb a global glut, while a report showed a smaller-than-expected increase in U.S. inventories. US West Texas Intermediate (WTI) crude futures were up 34 cents at USD 49.82, Brent crude futures were 24 cents higher at USD 55.38. OPEC and producers including Russia have agreed to reduce output by about 1.8 million barrels per day until March 2018, when the agreement expires, in a bid to reduce global oil inventories and support prices.

Watch Out Today For:

08:00 am GMT: EUR Non-monetary policy's ECB meeting

19:00 pm GMT: USD Fed Interest Rate Decision

19:30 pm GMT: USD FOMC Press conference

Gold has come back to retest the broken uptrend line and the first warning line (WL1) of the major red descending pitchfork. Is traded above the $1312 per ounce and could climb much higher if the USD will drop further after the FOMC. A minor consolidation above the WL2 and above the $1303 per ounce will signal another rally towards the 250% Fibonacci line, despite the breakdown below the uptrend line.

USD/JPY decreased a little in the Asian session after another failure to close above the 38.2% retracement level. It could come down to retest the WL3 before will climb much higher. Technically, it is expected to approach and reach the median line (ml) of the minor blue ascending pitchfork. However, a failure to reach the mentioned dynamic resistance will send the rate down very fast. Is trading near the 111.50 level, we have a major upside target somewhere at 114.28 level, will reach it only if the USDX will start an impressive rally.

The currency pair has increased in the morning, but failed to reach the 0.7343 previous high and an important dynamic resistance. The sellers have stepped in again and have forced the rate to erase the morning gains.

NZD/USD dropped even if the USDX slides further, the index slipped below the 91.92 static support and below a dynamic support, so it could hit new lows. You should be careful today because the FOMC will shake the markets, a dovish speech will punish the USD again.

There are some rumors that said that the FED will still hike the rate in December despite the poor US data, we could have a neutral speech which could help the dollar.

The Kiwi rallied in the morning as the New Zealand Current Account has come in better than expected, was reported at -0.62B, higher versus the -0.82B estimate. The US Existing Home Sales will come out in the afternoon and are expected to increase from 5.44M to 5.46M.

Price increased and resumed the yesterday’s bullish momentum, but failed to reach and retest the third warning line (WL3) of the former descending pitchfork. A failure to reach it will signal a minor decrease, but will be better to stay away from trading today because anything could happen. The FOMC Press Conference should bring a high volatility, while the direction is uncertain. Technically, a valid breakout above the WL3 will confirm a further increase in the upcoming weeks.

Asia Summary

Asian equity markets opened moderately weaker, as markets and currencies shore up ahead of Fed meeting. Internationally US President Trump’s comments to UN vowing to destroy North Korea if necessary; large earthquake in Mexico and hurricane Maria made landfall in Puerto Rico (Jose decelerates to a tropical storm) dominated the headlines. Currencies overall were muted with the USD weaker. Markets strongly anticipate that the Fed will get more specific about balance sheet unwinding. PBOC OMO had a significantly smaller injection after two consecutive large injections. The onshore yuan climbed the most in nearly two weeks as the USD gave up an early advance and the euro extended a rally to the fifth day in a row. Onshore yuan rose 0.25%, the most since Sept. 7th , halting a 2- day decline.

Japan August trade balance had some notable components; exports to the US +21.8% y/y was the fastest rate since Dec 2014. Headline exports had their fastest rise since Nov 2013 and the 9th consecutive rise. Japan MoF said exports were supported by semiconductors and autos. Australia and New Zealand banks were under pressure after RBNZ announced new regulations in order to ensure that a bank can continue to operate in a situation where a key service provider fails.

Key economic data

(NZ) NEW ZEALAND Q2 CURRENT ACCOUNT BALANCE (NZ$): -0.62B V -0.9BE

(JP) JAPAN AUG TRADE BALANCE: ¥113.6B V ¥108.7BE; ADJ ¥367.3B V ¥404.5BE

(AU) AUSTRALIA AUG SKILLED VACANCIES M/M: 0.3% V 0.7% PRIOR

Speakers and Press

China/Hong Kong

USD/CNY (CN) China Securities Journal: Yuan's one way depreciation trend has ended

(CN) PBoC supports a move by some banks to increase lending rates on mortgage loans in the Beijing market – CCTV

(CN) China corn farmers expected to hoard their crops, waiting for prices to rise - Chinese press

(CN) China considering a plan to allow foreign electric-car business in free-trade zones – press

(CN) According to John McAfee: China has banned bitcoin exchange heads from travelling overseas - speaking in HK

Korea

(KR) US President Trump: If US is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea – UN speech

(KR) South Korea President Moon: Trump's comments to "totally destroy North Korea" were in line with previous remarks for pressure and sanctions

Japan

(JP) Japan PM Abe said to delay FY20 primary balance target – Nikkei

(JP) Japan Chief Cabinet Sec Suga: Trump speech was important due to its mention of abduction; nothing decided on primary balance surplus target year

Australia

(AU) RBA Assistant Gov Ellis: Household debt an exacerbating factor is shock occurred

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.0%, Hang Seng +0.2%; Shanghai Composite +0.2%, ASX200 -0.1%, Kospi -0.0%

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

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

EUR 1.2019-1.1987; JPY 111.65-111.45; AUD 0.8022-0.7999;NZD 0.7342-0.7311

Dec Gold +0.4% at $1,315/oz; Nov Crude Oil +0.7% at $50.25/brl; Dec Copper +0.1% at $2.98/lb

GLD SPDR Gold Trust ETF daily holdings +2.07 tonnes at 846.0 metric tonnes

(AU) Australia sells A$600M in 2% 2021 bonds; avg yield 2.3225%; bid-to-cover 7.48x (went to 1 bidder)

(CN) PBoC OMO: injects CNY30B in 7 and 28-day reverse repos v injected combined CNY150B in 7 and 28 day reverse repos prior

USD/CNY (CN) China PBOC sets yuan reference rate at 6.5670 v 6.5530 prior (weakest setting since Sept 12th)

(KR) Bank of Korea (BOK) Sells KRW2.1T v KRW2.1T indicated in 2-yr bonds; avg yield 1.73% v 1.69% prior

Equities notable movers

Australia/New Zealand

SVW.AU Acquires remaining 53.3% stake in Cotes Hire for A$517M; +7.5%

WLD.AU Reports 1st shipment of beef cattle to China; +10.3% (reported yesterday)

STO.AU Australia ACCC: moves to boost local gas supply not enough to help market; -1%

Japan

6502.JP Said to have chosen to sell chip unit to Innovation INCJ group (Japan/South Korea alliance); +2%

Korea

023530.KR , Lotte Shopping, (KR) South Korea govt considering law that would raise required closed days of hypermarkets to four per month from two; -3%

Hong Kong/China

175.HK Expects to reach sales target of 2.0M units by 2019 - HK press; +3.5%

1211.HK BYD, China considering a plan to allow foreign electric-car business in free-trade zones – press; +10%

Weekly 


  





•    Last Candlesticks pattern: Shooting star 
   





•    Time of formation: 13 Mar 2017 
   
  




•    Trend bias: Down


 

 


Daily






•    Last Candlesticks pattern: Bearish engulfing pattern 
   





•    Time of formation: 16 Feb 2017 
   
  




•    Trend bias: Near term down
 






AUD/JPY - 89.05



 

As aussie has maintained a firm undertone after recent rally, suggesting a test of this year’s high at 89.40 would be seen, however, break there is needed to confirm medium term erratic upmove from 72.50 low (formed back in 2016) has resumed and extend gain to psychological resistance at 90.00, then test of previous resistance at 90.70 but near term overbought condition should limit upside to 91.00 and reckon 91.50-60 would hold, price should falter below 92.00, bring correction later.

On the downside, whilst pullback to 88.50-55 cannot be ruled out, reckon the Tenkan-Sen (now at 88.00) would limit downside and bring another rise later. A drop below the Kijun-Sen (now at 87.52) would defer and suggest a temporary top is possibly formed, bring weakness to 87.00 and possibly test of previous support at 86.60, however, a daily close below latter level is needed to add credence to this view, bring retracement of recent rise to 86.30-35 and possibly towards 86.00, having said that, support at 85.70 should remain intact, bring rebound later. 


Recommendation: Buy again at 88.10 for 90.10 with stop below 87.10



On the weekly chart, aussie has staged a strong rebound after holding above support at 85.45, suggesting the erratic rise from 72.50 has possibly resumed and retest of 89.40 (this year’s high) would be seen, however, break there is needed to add credence to this view and extend gain to psychological resistance at 90.00, then test of previous resistance at 90.70 but overbought condition should limit upside to 91.50-60 and price should falter below another previous chart resistance at 92.70, bring correction later.

On the downside, expect pullback to be limited to 88.00-10 and bring further rise to aforesaid upside targets. A drop below the Tenkan-Sen (now at 87.44) would defer and risk weakness to 87.00, then towards 86.60 support, however, downside should be limited to 86.00 and said support at 85.45 should remain intact, bring another rise later. Only a drop below 85.45 support (this would also penetrate the Kijun-Sen) would signal upmove is not ready to resume yet and risk correction o recenter rise to 84.95-00, then test of the upper Kumo (now at 84.23) but reckon previous support at 83.75 would limit downside and price should stay above support at 82.55-60, bring rebound later.

Market movers today

The key event today will be the FOMC meeting, with the announcement at 20:00 CET, and Janet Yellen's press conference at 20:30 CET. We expect no change to the fed funds target range, but instead expect the Fed to announce it will begin reducing its balance sheet (‘quantitative tightening') in October. We have got most details about how the Fed wants to do this and hence we do not expect the announcement itself to have a major impact on markets, although we are still missing details about what level of the balance sheet the Fed targets in the long term. With respect to the ‘dots', we expect the signal to remain unchanged at one more hike this year and three next year. We do not expect any major changes to the statement despite low inflation, as the statement already says the Fed is monitoring inflation ‘closely'. For more information, see FOMC preview: Fed to announce QT and still signal one more hike this year, 15 September 2017.

In the UK, retail sales for August are due out. Retail sales are very volatile on a monthly basis, but we will look for signs of whether private consumption growth remains weak due to the negative real wage growth and lower consumer confidence.

The Bank of Japan (BOJ) starts its two-day monetary policy meeting and is expected to announce its decision tomorrow around 05:00 CET. We expect it to keep its ‘QQE with yield curve control' policy unchanged. It is widely expected that the BoJ stands pat this time and the announcement should not have any significant impact on price action.

Selected market news

Although US President Donald Trump's speech to the United Nations General Assembly yesterday was hard on the rhetoric – in particular against North Korea – financial markets remained relatively calm. US equities ended the day slightly higher and in Asia this morning, Chinese and Japanese equity indices are also trading higher while most other regional indices trade lower. With little in the data calendar today, we are probably in for another quiet session as investors await the FOMC meeting and Janet Yellen's speech tonight.

In an interview with the Guardian, UK Foreign Secretary, Boris Johnson, last night rejected yesterday's reports saying that he could resign from the cabinet if in her speech in Florence on Friday Prime Minister Theresa May lays out a version of Brexit in which the UK pays to have access to the single market on a permanent basis – something similar to Switzerland's agreement with the EU. It remains uncertain what Theresa May will signal in her ‘update on Brexit negotiations so far' on Friday, and the event will attract a lot of attention in the financial markets, as this speech was the main reason why this week's Brexit negotiations were cancelled.

Japan recorded a higher-than-expected trade surplus in August, data released overnight showed. Both imports and exports are expanding by double-digit growth rates (15.2% y/y and 18.2% y/y, respectively) indicating that the momentum in the Japanese economy is strong and still driven by net exports.

For the 24 hours to 23:00 GMT, the AUD rose 0.54% against the USD and closed at 0.8007.

LME Copper prices rose 0.1% or $5.0/MT to $6492.0/MT. Aluminium prices rose 2.0% or $41.0/MT to $2107.5/MT.

In the Asian session, at GMT0300, the pair is trading at 0.8016, with the AUD trading 0.11% higher against the USD from yesterday's close.

Overnight data indicated that that Australia's Westpac leading index retreated 0.08% in August on a monthly basis in August, after recording a revised gain of 0.09% in the previous month.

The pair is expected to find support at 0.7978, and a fall through could take it to the next support level of 0.7940. The pair is expected to find its first resistance at 0.8038, and a rise through could take it to the next resistance level of 0.8060.

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