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The euro ended the week quietly, and the lack of activity continues in the Monday session. Currently, the pair is trading at 1.1941, up 0.27% on the day. On the release front, Eurozone Final CPI improved to 1.5%, matching the forecast. There are no major US events on the schedule. On Tuesday, Germany releases ZEW Economic Sentiment and the US publishes Building Permits and Housing Starts.

Eurozone economic conditions have been solid in 2017, but inflation levels have been stubbornly low. This has complicated the ECB’s plans to reduce its quantitative easing scheme (QE), although ECB President Mario Draghi has said that the ECB will announce its plans to reduce QE at the October policy meeting. QE is scheduled to end in December, and policymakers will have to balance opposing interests as to what happens next. Germany, with its robust economy, would like to remove stimulus entirely, while less affluent eurozone members want to retain an accommodative monetary policy. We’re likely to see some compromise, in which stimulus is extended into 2018, but will be tapered from its current level of EUR 60 billion/month.

Germany head for the polls on September 24, and Angela Merkel is widely expected to win her fourth term as prime minister. French President Emmanuel Macron, a staunch supporter of a unified Europe, is hoping to work with Merkel and reform the eurozone. Macron’s proposal includes a eurozone finance minister who would be in charge of a eurozone budget. Macron’s call for greater cooperation is linked to Britain’s exit from the EU, which could lead to divisions among the remaining 27 members in the bloc. However, the French ambitious plan will need Germany’s support before it can become a reality. Will Germany embrace the idea? Angela Merkel’s has indicated that she is open to the idea, but Jean-Claude Juckner, head of the European Commission, came out against the plan last week. Juckner said he favored a finance minister for the EU but was against a separate eurozone budget and finance minister. Even if the plan is not adopted, we can expect a Macron-Merkel alliance to take steps which will strengthen Franco-German ties and further unify the eurozone.

EUR/USD

Current level - 1.1933

The recent rise has been capped at 1.2000 interim resistance, but the pullback is corrective in nature, so my intraday outlook is positive, for a spike towards 1.2070 area. Crucial on the downside is 1.1830 and only a break through that area will challenge 1.1660 and 1.1480.

USD/JPY

Current level - 111.31

The uptrend has been renewed, heading towards 112.80 hurdle. Initial support lies at 110.50. 

GBP/USD

Current level - 1.3550

The acceleration of the uptrend led to test of 1.3635 resistance area and current pullback should be considered corrective, preceding another leg towards 1.3830 area. Key support is projected at 1.3440. 

Spot Gold remains in red at the beginning of the week with extended weakness probing below strong supports at $1317 (bull-channel support line / Fibo 38.2% of $1251/$1357 upleg.

Fresh bears hit session low at $1312 (daily Kijun-sen) which may act as temporary footstep for near-term consolidation, signaled by oversold slow stochastic on daily chart.

Upside attempts are expected to be limited (broken 20SMA at $1319 to ideally cap) before bears resume.

Close below bull-channel support line will initial bearish signal, while close below daily Kijun-sen is needed to confirm bearish continuation, which could extend to $1300 (Fibo 38.2% of $1204/$1357 ascend).

Alternative scenario requires firm break above last week's tops at $1334, reinforced by south-turning daily Tenkan-sen, to turn near-term bias higher.

Res: 1319, 1327, 1331, 1340
Sup: 1312, 1304, 1300, 1292

Rift in hard and soft economy data
Sterling Bullish Due to Three Main Reasons
ECB Ready

Rift in hard and soft economy data

• Retail sales below forecast and downward revision
• Industrial production underwhelming
• Empire state and Michigan guiding you towards a ditch

The rift continues between the soft data and hard data over in the US. Last week, we have seen more evidence of this in the economic numbers and it is about time for the Fed to start paying attention to this. They are going to embark on the process of unwinding their balance sheet and at the same time continue their glide path to normalise the interest rate.

The hard economic numbers have been coming in underwhelming since April. Last week's industrial and retail sales number reminded the markets of the same message. If you look at the Empire State Manufacturing and the university of Michigan Consumer Sentiment numbers, it tells you that the soft data is navigating investors towards a ditch. What is important to keep in mind is that your hard data is something which is the engine that drives the economic growth.

Fed's Plan For Four More Interest Rate Hikes To Face Serious Headwinds

• The economic growth is going to remain sluggish
• Catastrophes caused from the hurricanes are becoming prominent in the economic data; the US factory output declined in August due to the curtailing of the refinery operations and chemical production
• The US consumer sentiment dipped as investors have shown their anxieties growing due to the hurricane
• The Atlanta Fed's GDPNow index has reduced its economic growth target for the third quarter from 2.29% to s.s25%
• The New York Fed's GDP forecast has taken the same route, and he expect the GDP to grow at 1.34% a much lower number from the previous reading of 0.3%

Sterling Bullish Due to Three Main Reasons

• The BoE may increase interest rate; the dovish voters are turning hawkish- November meeting could be a live meeting
• The Dollar weakness is a factor
• The Sterling weakness improved trade balance and has hence an effect on the economy

The critical aspect due to which we do not support the strength in the sterling is that the Brexit negotiations are heavily ignored. We have literally no progress and the negotiations process is chocking itself.

The weakness in the consumer spending is largely being ignored. The wage growth is abate and rising inflation is making consumers to tighten their belt even further which is a recipe for a disaster.

ECB Ready

The ECB is expected to make an announcement this week about reinvesting an average of 15 billion euros a month from maturing debt holdings. This would have a twofold impact; firstly, it would soften the blow on the Eurozone's economic growth when the ECB will start its monetary policy tapering process. And finally, it would send a clear signal for the euro traders that the tapering process is going to become reality now and that could see more upward movement for the euro-dollar pair.

The Euro ticked higher on Monday after inflation in the Eurozone hit the highest in four month.

Annualized CPI came at 1.5% in Aug, meeting the forecast while m/m release came at 0.3%, along with forecast but well above previous month's -0.5% release.

The pair remains entrenched between daily Kijun-sen (1.1877) and daily Tenkan-sen line (1.1964) which was dented on Friday but without clear break higher.

Today's price action is so far holding between 20SMA (1.1914) and 10SMA (1.1949), looking for initial signal on break of either boundary.

However, break of either wider range boundaries (Tenkan-sen / Kijun-sen) would provide clearer direction signals.

Studies on daily chart remain bullishly aligned but reversal signal is generating on weekly chart as overbought RSI is turning.

Violation of daily Kijun-sen (1.1877) and rising weekly 10SMA (1.1850) would be seen as firmer signal of deeper correction.

Alternatively, lift above daily Tenkan-sen (1.1964) and psychological 1.2000 barrier would generate stronger bullish signal.

Res: 1.1949, 1.1964, 1.2000, 1.2029
Sup: 1.1914, 1.1877, 1.1850, 1.1837

EUR/USD

Despite advancing for a second consecutive day on Friday, the EUR/USD pair closed the week in the red at 1.1946. Friday's advance was backed by soft US data, as August Retail Sales fell by 0.2% from a month earlier, which additionally suffered downside revisions. In the same month, Industrial Production fell by 0.9% while Capacity Utilization edged lower, to 76.1%. The pair eased from Friday's high at the end of the day, as the Michigan consumer sentiment index for September beat expectations, coming in at 95.3, still below August reading of 96.8.

All through the week, attempts to regain the 1.2000 level failed, rather on upward exhaustion than on self dollar's strength. The greenback can't find its way higher, although some light have appeared at the end of the tunnel, as mid-week, the Trump administration hinted it will start working on the tax reform before the month end. Wall Street rallied to record highs on the news, but the dollar remained subdued. Anyway, the market is now focused on the upcoming Fed's monetary policy decision this Wednesday. The Central Bank is expected to keep rates unchanged, but also to announce details on their plan to reduce the balance sheet. Additionally, the dot-plot will give some hints on how policymakers are positioned towards next rate hikes.

The pair consolidated near 2017 highs for a second consecutive week, settling above a bullish 20 DMA in the daily chart, and with technical indicators having regained the upside, limiting the risk of a deeper correction ahead that anyway will depend on market's reaction to Fed's decision. A long term ascendant trend line coming from April this year stands for this Monday around 1.1825, whilst August 31st low comes at 1.1822, making of the region a key support for the upcoming days, as below it, the pair could extend its slide down to 1.1667, the low set on August 17th. Short term, the 4 hours chart shows that the price has managed to recover above its 20 and 100 SMAs that anyway converge within a tight range, around 1.1910, whilst technical indicators have reentered positive territory by the end of the week, but lack enough momentum to support a new leg north.

Support levels: 1.1920 1.1860 1.1825

Resistance levels: 1.1965 1.2000 1.2045

USD/JPY

The USD/JPY pair had a rough week, but closed at its highest since late July, at 110.82, quickly reverting a slide down to 109.54 late Thursday, the result of another missile test from North Korea which spurred demand for safe-haven assets. However, the market is paying less attention to this kind of events lately, and the pair quickly recovered its previous upward strength. Also, the negative sentiment was offset by US Treasury yields which traded steady around their previous daily closes. The yield on the benchmark 10-year Treasury note stood at 2.20%, while the yield on the 30-year Treasury bond ticked lower to 2.77% from previous 2.78%. The pair posted a 7-week high on Friday of 111.33, but the daily chart shows that it was unable to sustain gains beyond the 100 DMA, settling around it. Furthermore, the same chart shows that the 200 DMA comes at 111.50, the level to break for a following bullish extension. The daily Momentum heads nowhere around its 100 level, but the RSI aims higher around 57, leaning the scale towards the upside. In the 4 hours chart, technical indicators present clear bearish divergences form price action, posting lower lows as the price advances since mid week, but still above their mid-lines, which limits the case for a steeper downward move. The 100 SMA in this last time frame aims modestly higher, still below the 200 SMA, both over 100 pips below the current level.

Support levels: 110.25 109.70 109.35

Resistance levels: 111. 05 111.50 111.90

GBP/USD

The GBP/USD pair surged to its highest since the Brexit vote back in June last year, hitting 1.3615 and settling not far below it, as hawkish surprises kept coming from MPC members. Following BOE monetary policy announcements on Thursday, in which most policymakers agreed that some withdrawal of monetary stimulus is likely to be appropriate over the coming months, MPC Vlieghe, a well-known dove said on Friday that a rate hike is possible for the coming months, and that more than one hike could be needed. The pair soared with the news, accumulating roughly 470 pips in the last two days of the week, and remained bid after disappointing US macroeconomic figures. Further gains seem likely now that the market is pricing in a rate hike for November, but a downward correction, or at least some consolidation could be expected at the beginning of the week. Technically, daily indicators maintain their strong bullish momentum, despite being in overbought territory, whilst the 20 DMA turned sharply north far below the current level, all of which supports an expected continuation. In the 4 hours chart, technical indicators also head higher within extreme overbought territory as the price develops well above a bullish 20 SMA, this last some 250 pips below the current level.

Support levels: 1.3560 1.3525 1.3480

Resistance levels: 1.3615 1.3650 1.3690

GOLD

Spot gold posted its lowest settlement for this September on Friday, closing at $1,320.81 a troy ounce, sharply down for the week, undermined by increasing demand for riskier assets, as Wall Street rallied to record highs. Gold prices spiked late Thursday on news North Korea performed another missile test that landed in the Japanese sea, but changed course after London's opening. One reason of gold's decline is the upcoming Fed meeting, as despite chances of a rate hike are pretty much null, market expects a hawkish bias through definitions on the reduction of the balance sheet. Technically, the daily chart shows that the price settled slightly below a bullish 20 SMA, whilst technical indicators head sharply lower, dangerously close to their mid-lines, suggesting a bearish extension could be seen on a break below 1.1315,72, the weekly low and the immediate support. In the 4 hours chart, the price settled below its 20 and 100 SMAs, whilst technical indicators hold within bearish territory, also favoring a new leg lower ahead.

Support levels: 1,315.70 1,308.10 1,298.90

Resistance levels: 1,323.95 1,330.40 1,337.80

WTI CRUDE OIL

West Texas Intermediate crude futures ended Friday at $49.79 a barrel marginally higher on the day, but sharply up for the week, on a series of positive market news. Mid week, the International Energy Agency said that oil's glut was shrinking amid strong demand from Europe and the US, coupled with production declines from OPEC. Additionally, the OPEC's forecast indicated an expected increase in demand for 2018. On Friday, the US Baker Hughes report added to the bullish case, after reporting that active rigs drilling for oil fell by 7 the past week, down to 749 from previous 756. The commodity failed to regain the 50.00 mark earlier on the week, but seems poised to rally beyond it, given that in the daily chart, the price held firmly above its 100 and 200 SMAs, whilst technical indicators maintain their upward strength within positive territory. Shorter term, and according to the 4 hours chart, oil may correct lower, as technical indicators are retreating from overbought levels, whilst despite far below the current level, moving averages remain horizontal. In the case of further gains, WTI has a critical resistance around 52.00, and advances up to this last could trigger some strong profit taking, pushing prices down towards the 45.00 price zone.

Support levels: 49.40 48.80 48.25

Resistance levels: 49.90 50.50 51.20

DJIA

US major indexes closed with gains and at record highs on Friday, backed by solid earnings reports and hopes that the so-long promised US tax reform stands around the corner. The tech sector was the best performer on Friday, with the three major indexes ending the week up over 1.0%. On Friday, the DJIA added 64 points to 22,268.34, the Nasdaq Composite gained 0.30% to 6,448.47, while the S&P advanced 4 points, to 2,500.23. Boeing was the best performer within the DJIA, up 1.54%, while General Electric led decliners with a 1.36% loss. The daily chart shows that technical indicators resumed their advances after a short-lived period of consolidation, entering overbought territory as the index moves further above all of its moving averages, supporting further gains ahead. In the 4 hours chart, technical indicators present modest bearish divergences, with the RSI consolidating around 79 and the Momentum within positive territory, despite the index keeps posting higher highs, a first sign of warning over a possible downward corrective movement, whilst the benchmark remains far above all of its moving averages, with the 20 SMA providing an immediate support at 22,172.

Support levels: 22,236 22,196 22,162

Resistance levels: 22,300 22,345 22,390

FTSE100

FTSE 100's decline continued on Friday, with the index finishing the week at levels last seen in April, down on Friday 79 points or 1.10%, to 7,215.47. Strength in the Pound, which rallied to its highest since the Brexit referendum outcome late June 2016, weighed on the index, as most companies listed make the most of their gains abroad. Only 17 members managed to gain ground, led by Imperial Brands that added 2.05%, and followed by ITV which gained 1.41%. Carnival, on the other hand, was the worst performer, down 6.22%, followed by Provident Financial that shed 4.28%. The index heads into the next weekly opening with a strong bearish momentum according to technical readings in the daily chart, as technical indicators maintain their sharp bearish slopes, nearing oversold territory, whilst the 20 DMA is finally detaching from the 100 DMA, both anyway far above the current level. In the 4 hours chart, technical readings also favor a new leg lower ahead, as technical indicators resumed their declines within oversold territory, and after a limited upward corrective movement, whilst the index has settled far below all of its moving averages.

Support levels: 7,197 7,158 7,120

Resistance levels: 7,225 7,264 7,301

DAX

The German DAX lost 21 points to 12,518.81 on Friday, as European indexes were dragged lower by a plummeting FTSE which suffered from a wild Pound's appreciation. Nevertheless, the index ended the week with strong gains, as risk sentiment receded at the beginning of the week, whilst hopes the US government will finally focus on the growth agenda sent Wall Street to record highs. Within the DAX, Continental was the best performer, up 1.43%, followed by Daimler that added 0.72%. Bayer led decliners, shedding 1.51%, followed by Deutsche Bank that lost 1.04%. The index achieved most of its gains at the beginning of the week, spending the second half of it consolidating, maintaining its bullish stance daily basis, as it settled above all of its moving averages, whilst technical indicators held well above their mid-lines, although with limited upward strength. In the 4 hours chart, the index hovers around a bullish 20 SMA, whilst the Momentum indicator is aiming to recover around neutral territory, and the RSI indicator turns marginally higher around 66, all of which favors a new leg higher on a break above 12,567 the weekly high.

Support levels: 12,489 12,443 12,401

Resistance levels: 12,567 12,603 12,646

WTI oil price regained traction on Monday after Friday's trading was shaped in Doji candle and returned above $50 barrier. Fresh bulls are establishing above weekly cloud top ($49.87) which was dented last week but failed to close above the cloud and eye last week's high at $50.48 (the highest since 25 May). Long weekly bullish candle (oil price rallied near 5% last week) underpins, along with firmly bullish daily techs. Eventual close above cracked Fibo 61.8% retracement of $55.01/$42.04 ($50.06) former top of 01 Aug at $50.41, would generate stronger bullish signal for resumption of recovery leg from $42.04 (1 June low) towards next barrier at $51.98 (25 May peak). Psychological $50 level now acts as initial support, followed by broken 200SMA ($49.57) which is expected to keep the downside protected.

Res: 50.41, 50.48, 50.77, 51.00
Sup: 50.00, 49.57, 49.00, 48.73

The Aussie's directionless near-term mode extends into second day after Friday's action was shaped in Doji. Monday's upside attempts stalled at 0.8035 (Friday's high) after the second attempt to break daily Tenkan-sen barrier failed The price is holding around 0.8000 handle and may extend consolidation, as bullish daily studies so far did provide enough thrust for further upside. Strong supports at 0.7977/66 zone (main bull-trendline off 0.7370/20SMA/daily Kijun-sen) stay intact for now and keep alive hopes of fresh upside action, however, increased risk of deeper correction from 0.8124 high could be expected on sustained break lower.

Res: 0.8040, 0.8065, 0.8100, 0.8124
Sup: 0.7992, 0.7977, 0.7966, 0.7929

The US dollar holds firm tone against yen at the beginning of the week and breaks above important barriers at 111.12/21 (100SMA / weekly cloud top), in extension of last week’s strong rally (the pair was up 2.5% for the week.

Dollar’s positive sentiment was boosted by rise in US Treasury yields and growing expectations that the Fed may rise interest rates once more this year, most likely in December.

Japanese yen was further pressured on Monday by reports that Japanese Prime Minister Abe may call for an early election in October.

This week’s focus turns on FOMC policy meeting on Wednesday, with US policy makers expected to signal the start of the normalization of massive balance sheet, which would help the economy to get back to normal mode, as well as boost long-term interest rates.

Technical studies remain firmly bullish and support further advance which eyes next strong resistances at 111.61 (daily cloud top) and 111.75 (Fibo 61.8% of 114.49/107.31 descend).

Broken 100 SMA (111.12) and session low at 111.00 (reinforced by 55SMA) mark initial supports, with daily cloud base (110.75) expected to contain extended dips.

Res: 111.61, 111.75, 112.19, 112.80
Sup: 111.21, 111.12, 111.00, 110.75

Cable is consolidating under fresh highs at 1.3616/18, posted on Fri/today, following last week's 3.1% advance, as cable was strongly boosted by talks from BoE about possible rate hike in coming months.

Last week's rally broke and closed above strong resistance at 1.3473 (weekly cloud top) which generated strong bullish signal.

Bulls eye next target at 1.3837 (Fibo 61.8% of 1.5016/1.1930 (June/October 2016 descend) as strong bullish sentiment continues to drive pound higher, with two long bullish daily candles underpinning.

However, bulls might be interrupted by deeper correction, signaled by overbought daily studies, but no firmer reversal signal being generated yet.

Solid supports 1.3473/40 (broken weekly cloud top/Fibo 38.2% of 1.3148/1.3618 upleg) are expected to ideally contain extended pullback.

Res: 1.3618, 1.3646, 1.3700, 1.3763
Sup: 1.3537, 1.3507, 1.3473, 1.3440