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The Euro is holding within narrow range above 1.1900 handle in early Friday's trading after falling to 1.1837 on Thursday on better than expected US inflation data.

Subsequent bounce formed Hammer candlestick and repeated close above daily Kijun-sen (1.1877) sidelined immediate downside risk.

However, negatively aligned daily tech suggests further weakness, with upticks seen as selling opportunities.

Immediate resistance lies at 1.1942 (10SMA), guarding daily Tenkan- sen (1.1964) which should ideally cap upticks before fresh attempts lower.

Firm break below 1.1837/26 pivots (Thursday's low / Fibo 61.8% of 1.1662/1.2092 upleg) is needed to confirm bearish resumption and expose next target at 1.1763 (Fibo 76.4%) which lies ahead of more significant daily cloud top (1.1720).

Conversely, sustained break above Tenkan-sen barrier (1.1964) and Thursday's high (1.1995), which also marks Fibo 61.8% retracement of 1.2092/1.1837 downleg would neutralize bearish threats and shift near-term focus higher.

From the fundamental side, release of Eurozone's Trade balance (21.4B f/c for July vs 26.6B in June) for July is the highlight of the European session, while US Retail Sales data (0.1% f/c for

Aug vs 0.6% in July and Core Retail Sales expected to stay unchanged at 0.5%), due at the beginning of the US session would have stronger impact on the EURUSD pair.

Res: 1.1942, 1.1964, 1.1995, 1.2029
Sup: 1.1900, 1.1877, 1.1826, 1.1800

The EUR/USD dropped initially after the US consumer inflation reports showed better-than-expected figures. The Euro depreciated against the US Dollar by 0.39% or 46 base points to the 1.1849 mark, though the European single currency managed to return to pre-data levels.

According to the Labour Department's report, the consumer inflation in the US showed a monthly rise of 0.4% in the month of August, with an annual gain of 1.7% in the same period. An increase in the CPI figures boosted expectations for the Fed rate hike in December, which supported bullish sentiment in EUR/USD additionally fuelled by the NK latest missile launch. The next direction of the pair will be determined by Friday’s US retail sales data.

The Sterling managed to offset all Wednesday's losses after the Bank of England announced its decision to leave interest rates unchanged. Following the report, the GBP/USD jumped 118 base points or 0.89% to reach the yearly high and continue consolidation in the 1.3394 area given additional boost from the BoE governor's comments.

Apart from keeping the key interest rate at 0.25%, the Bank of England warned about higher possibility of changing rates policy in coming months for the first time in ten years. The main concerns remained surrounding weaker wage growth, slower overall expansion and uncertainty about Brexit impact on the UK economy. Though, the Central Bank expected the yearly growth to pick up more than estimated.

The EUR/CHF currency rose by 26 base points or 0.23% to continue the trading session nearing the 1.1480 area, after the Swiss National Bank announced its interest rate decision. The weakening against the Euro was a positive sign for the Central Bank, indicating that the Franc slightly diminished its over-valuation.

The Swiss National Bank reported that its key interest rate remained unchanged at -0.75%, and, in the meantime, softened its stance concerning the Franc’s strong performance. However, the SNB is likely to continue focusing on the EU, as it will be seeking the European Central Bank to take action of removing some of the monetary stimulus before considering any changes in its own policy.

In line with expectations, yesterday the exchange rate did not manage to make any significant moves. From the top it was constrained by the 200-hour SMA, while from the bottom by the lower trend-line of a dominant ascending channel. From a general perspective, the rate is expected to continue to try to pave the path to the north, trying to reach by the end of the day at least the monthly R1 at 1,348.36.

A release of information on the US Core Retail Sales, similarly to the yesterday's update on inflation, most likely will cause notable volatility in the markets. However, even in case of a positive result the buck is not expected to drag the pair out of the above formation.

As it was forecasted, in the middle of the day the currency pair indeed tried to soar to the weekly S2, which is located at the 110.98 level, but failed. Accordingly, the rest of the day the rate spent in a red zone. Fortunately for the buck, a combined support formed by the 100-hour SMA and the monthly PP at 109.76 forced the pair to make a turn around. For this reason, the first half of this trading day the currency rate is expected to spend in an upward movement with a preliminary target located near the 110.80 mark. The further movement of the pair will depend on release of information on the US Core Retail Sales as well as on remarks that will be made after the latest ballistic missile test made by North Korea.

A decision of the BoE not to change the Official Bank Rate was expected to lead to sharp depreciation of the Pound. This assumption was based not only on historical market reaction on similar fundamental event but also technical analysis. Namely, on a daily chart prior to release the currency pair hit the upper edge of a long-term rising wedge and, in essence, had to make a rebound. Contrary to expectations, bulls pushed the pair in the opposite direction. As a result, the Pound has appreciated against the Greenback by 1.40% just in couple of hours, in the process leaving the dominant formation. Now the pair faces only two barriers on its way, i.e. the weekly and monthly R2 at 1.3425 and 1.3485. Thus, a short-term rebound might follow. But, generally, the pair is expected to continue to move to the top.

As it was expected, first half of the previous trading session the currency pair spent near the monthly PP at 1.1881. Unfortunately, a release of better than expected data on the US inflation did not cause any notable volatility in the markets even though initially traders tried to push the pair through the bottom trend-line of a medium-term ascending channel. A fully-fledged rebound did not happen as well, as the surge was quickly neutralized by the 55-hour SMAs. Taking into account that the northern side is secured by the 100- and 200-hour SMAs, while the southern side by the above monthly PP, the pair is expected to continue to more relatively horizontally at least until a release of information on the US Core Retail Sales.

USDCAD maintains a bearish trend but its downward trajectory has slowed after touching a more than 2-year low of 1.2061 on September 8. The market became overextended as indicated by the RSI oscillator which reached oversold conditions below 30 last week. This suggested that prices were due for a pullback or a consolidation phase in the near term.

The underlying downtrend remains intact as trend indicators are bearish. The 50-day and 200-day moving averages are negatively aligned after a bearish crossover on July 13. MACD – a momentum indicator – is bearish as it is below zero and falling. The odds for another leg lower are high.

Immediate support is expected at 1.2061 (September 8 low). This level was last seen in May 2015 and a break below this would trigger another move down to the next low at 1.1919.

The spike to 1.2238 yesterday was very brief and prices are heading lower again today, possibly indicating that the corrective move has ended. To confirm a lower top is in place USDCAD has to move below 1.2061 to see a resumption of the longer-term downtrend.

Only a move above 1.3000 would shift focus to the upside. For now, there are no signs of a reversal in the bearish trend. The risk is strongly to the downside based on trend and momentum signals. The small correction off 1.2061 suggests USDCAD is likely pausing ahead of another push lower.

North Korea carried a second missile test in less than a month early on Friday, lifting risk-off sentiment and pushing the dollar lower against its safe-haven counterparts. However, the currency managed to reverse its losses immediately, with investors turning their focus on US retail sales after CPI readings came in higher than expected on Thursday.

During early Asian trading hours, officials from South Korea and Japan reported that North Korea fired a ballistic missile that crossed over Japan's northern island of Hokkaido and launched into the Pacific Ocean. This came after a day the regime threatened to “sink” Japan and turn the US into “ashes and darkness” over their supporting stance on additional sanctions imposed by the UN Security Council on Monday. In response to the latest nuclear test, which could easily reach the US Pacific territory of Guam, the Secretary of State Rex Tillerson said that “new measures” should be taken against Pyongyang.

The dollar index ticked down by 0.17%, from a high of 92.10 to a low of 91.92, but it immediately rose to 92.03 as investors were getting used to North Korea's actions with the regime having already fired more than a dozen nuclear weapons this year.

The safe-haven yen and swiss franc posted short-lived gains versus the dollar. Dollar/yen touched a session-low of 109.54 but managed to climb to 110.48 afterwards, while dollar/swissie retreated to 0.9612 before it jumped to 0.9637.

Gold, which is positively correlated with rising geopolitical tensions, moved up by 0.36% to $1,334.16 per ounce but fell immediately to $1,329.67.

Throughout the day, markets will be focused to see whether August US retail sales and industrial production released later today would come lower relative to the previous month, as forecasts suggest, after consumer prices, published on Thursday, showed a surprising upward movement and increased the odds for a third rate hike this year. Note that inflation rose from 1.7% to 1.9% on a yearly basis, in August, while analysts anticipated price growth to touch 1.8%

The pound continued its uptrend breaking above the $1.34 key-level for the first time this year after the BOE meeting minutes published yesterday hinted a potential rate hike in the “coming months”. The MPC members, with the majority voting for rates to remain steady at the moment, supported that if economic conditions evolve in line with the central bank's projections, a tighter monetary policy might be needed to drive inflation, which currently stands at 2.9%, back to the BOE's target of 2%.

The euro posted little gains, edging up to $1.1924. The German Finance Minister Wolfgang Schaeuble supported in a newspaper interview early today that the ECB should approach its exit from ultra-easy monetary policy in caution in order to avoid any potential noise in financial markets.

The aussie was weaker versus the greenback as investors were forming their bets for rate increases in the US, slipping by 0.11% to $0.7996.

The kiwi surged by 0.30% on the day to $0.7242 after manufacturing PMI readings for the month of August increased by 2.5 points to 55.4 following two consecutive months of declines. Moreover, the currency found support on the latest election polls which showed that the leading National Party moved to the front position.

Dollar/loonie was slightly up at $1.2171. Oil prices headed lower during the Asian session, negatively affecting the oil-linked loonie. WTI crude was down by 0.66% at $49.56 per barrel and Brent fell by 0.50% to $55.20.