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For the 24 hours to 23:00 GMT, the EUR declined 0.37% against the USD and closed at 1.1964.

On the macro front, Italy’s seasonally adjusted industrial production unexpectedly climbed 0.1% on a monthly basis in July, advancing for the third straight month and confounding market expectations for a drop of 0.3%. In the previous month, industrial production had risen 1.1%.

The US Dollar advanced against its major peers, as downgrading of Hurricane Irma from a Category 5 storm to a tropical storm helped mitigate investors’ concerns over its impact on the US economy.

In the Asian session, at GMT0300, the pair is trading at 1.1962, with the EUR trading a tad lower against the USD from yesterday’s close.

The pair is expected to find support at 1.1929, and a fall through could take it to the next support level of 1.1895. The pair is expected to find its first resistance at 1.2013, and a rise through could take it to the next resistance level of 1.2063.

Amid a lack of macroeconomic releases in the Euro-zone today, investors will look forward to the release of the US NFIB small business optimism index for August, slated in a few hours along with the nation’s JOLTs job openings for July, due later today.

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

For the 24 hours to 23:00 GMT, the GBP slightly declined against the USD and closed at 1.3177.

In the Asian session, at GMT0300, the pair is trading at 1.3178, with the GBP trading marginally higher against the USD from yesterday's close.

Meanwhile, UK's lawmakers voted in favour of Brexit bill in Parliament to end the nation's membership with the EU.

The pair is expected to find support at 1.3152, and a fall through could take it to the next support level of 1.3126. The pair is expected to find its first resistance at 1.3213, and a rise through could take it to the next resistance level of 1.3248.

Moving ahead, investors will keep a close watch on UK's consumer price inflation data for August, slated to release in a few hours.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.77% against the JPY and closed at 109.28, as demand for safe-haven currency diminished after Hurricane Irma caused less damage than initially anticipated and as North Korea celebrated its founding day without new provocations.

On the macro front, Japan’s preliminary machine tool orders rose 36.3% on a yearly basis in August, after advancing 28.0% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 109.30, with the USD trading a tad higher against the JPY from yesterday’s close.

The pair is expected to find support at 108.55, and a fall through could take it to the next support level of 107.81. The pair is expected to find its first resistance at 109.81, and a rise through could take it to the next resistance level of 110.33.

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

For the 24 hours to 23:00 GMT, the USD rose 0.61% against the CHF and closed at 0.9555.

In economic news, Switzerland’s total sight deposits stood at CHF579.0 billion in the week ended 08 September, down from CHF579.2 billion reported in the previous week.

In the Asian session, at GMT0300, the pair is trading at 0.9560, with the USD trading slightly higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9506, and a fall through could take it to the next support level of 0.9451. The pair is expected to find its first resistance at 0.9594, and a rise through could take it to the next resistance level of 0.9627.

With no macroeconomic releases in the Switzerland today, investor sentiment would be governed by global macroeconomic events.

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

For the 24 hours to 23:00 GMT, the USD declined 0.44% against the CAD and closed at 1.2101.

The Canadian Dollar gained ground against the USD, after Canada’s seasonally adjusted housing starts surprisingly rose to a level of 223.2K in August, defying market consensus for a fall to a level of 216.0K and following a revised level of 222.0K in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.2110, with the USD trading 0.07% higher against the CAD from yesterday’s close.

The pair is expected to find support at 1.2082, and a fall through could take it to the next support level of 1.2054. The pair is expected to find its first resistance at 1.2154, and a rise through could take it to the next resistance level of 1.2198.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 142.90; (P) 143.53; (R1) 144.60; More

Intraday bias in GBP/JPY remains on the upside for as rebound from 139.29 continues. As noted before, fall from 147.76 has completed at 139.29 already, on bullish convergence condition in 4 hour MACD. Further rise should be seen for 147.76/148.42 resistance zone. Overall, price actions from 148.42 are seen as a sideway consolidation pattern. Break of 141.17 support will turn bias to the downside and bring another fall. But downside should be contained by 135.58 cluster support to bring rebound.

In the bigger picture, the sideway pattern from 148.42 is still unfolding. In case of deeper fall, we'd expect strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Medium term rise from 122.36 is expected to resume later. And break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. However, firm break of 135.58/39 will dampen the bullish view and turn focus back to 122.36 low.

Risk appetite staged a strong strong return as DOW closed up 259.58 pts, or 1.19%, to close at 22057.37 overnight. S&P 500 also gained 26.68 pts, or 1.08%, to 2488.11, a record close. 10 year yield also responded positively, gaining 0.064 to 2.125. Gold, on the other hand, extended this week's sharp pull back and is back below 1330. Asian markets followed with MSCI Asian Pacific ex Japan hitting the highest level since 2007. Sentiments were given a boost after United Nation Security Council passed fresh sanctions against North Korea. It may be a slap in the face to the US as it can only get a much watered down version of the sanctions approved. But the fact that there is no outright ban on oil supplies to North Korea means the threat of an immediate military confrontation should have eased. And that was cheered by investors. IN the currency markets, Canadian Dollar and US Dollar remain the strongest ones for the week while Yen and Swiss Franc are the weakest.

UNSC passed fresh sanctions on North Korea, without oil embargo

The United Nations Security Council passed tougher sanctions on North Korea yesterday. All 15 council members backed the resolution unanimously, including Russia and China. This came after the US compromised and tabled a much watered down version of the original draft of sanctions. The resolution imposes a ban on the pariah regime's textile exports, such as fabrics and apparel products, and a ban its import of natural gas liquids. Textile is North Korea's second-biggest export after coal and other minerals in 2016, totaling USD 752m.

On imports, the UNSC decided that all member states would "prohibit the direct or indirect supply, sale or transfer" to North Korea "of all refined petroleum products beyond 500K barrels during an initial period of three months (Oct 1 2107 to Dec 31, 2017) and exceeding 2M bpd per year during a period of 12 months beginning on Jan 1, 2018 and annually thereafter. Meanwhile, the members would "not supply, sell or transfer crude oil" to North Korea "in excess of the amount supplied, sold or transferred by that State in the 12-month period prior to the adoption of today's resolution".

The US initially proposed to include an oil embargo, but this was objected by Russia and China, the two permanent UNSC members possessing veto power to reject the entire resolution.

Brexit Repeal Bill won first Commons vote

In UK, the House of Commons approved the European Union (Withdrawal) Bill by a vote of 326 to 290, passing the first hurdle in Parliament. The bill is now approved in principle, but there will be challenges from lawmakers on the details and requests for amendments before a final vote later this year. There will be 64 hours of debate over eight days as lawmakers scrutinize the bill line-by-line. In short, the so called Repeal Bill aims at converting EU laws and regulations into UK legislations on the day on Brexit in March 2019.

Prime Minster Theresa May hailed that "Parliament took a historic decision to back the will of the British people and vote for a bill which gives certainty and clarity ahead of our withdrawal from the European Union" And, "this decision means we can move on with negotiations with solid foundations and we continue to encourage MPs from all parts of the UK to work together in support of this vital piece of legislation."

ECB officials pave the way for gradual stimulus removal

A number of ECB officials spoke yesterday. The general tone is that while remaining cautious, it's about time to make the decision to scale back stimulus in gradual manner. Executive Board member Sabine Lautenschlaeger said that "the economy in the euro area is doing better and the conditions are in place for inflation to pick up and move steadily toward our goal." And, "we have to be prepared to take tough decisions in good time. We also have to adapt our communications accordingly." Another Executive Board member Yves Mersch said that "over the course of autumn we will see how far our instruments should or have to be adapted on the basis of new insights and how confident we are that we can withdraw the support to the economy through our monetary policy."

Also an Executive Board member, Benoit Coeure, sounded more cautious and said that "compared with past demand shocks, policy will remain more accommodative for longer, thereby likely muting further the pass-through of any growth-driven exchange rate appreciation."

Governing Council member Ardo Hansson wrote in an article that "too much emphasis has been put on the fears of policy normalization." And he emphasized that "the process of normalization of policy stance is very gradual, and in fact it has been already started." Another Governing Council member Ewald Nowotny also said that the plan to scale back stimulus must be "well designed, it has to be gradual, clear and consistent with our reaction function and our forward guidance."

ECB President Mario Draghi said last week that the "bulk" of decisions on recalibration of the stimulus will be made at the October meeting.

Australia business confidence dropped below long term average

Australia NAB business condition rose to 15 in August up from 14, and hit the highest level since 2008. However, business confidence tumbled notably to 5, down from 12. It's also the first time it dropped below its long-term average since mid-2016. NAB chief economist Alan Oster noted that "for those indicating deterioration in confidence, the biggest concerns appear to be customer demand, government policy, as well as cost pressures - both energy and wages." But, it's "it is probably too early to read much into the drop in confidence this month." And, "household consumption is a notable point of difference between our relatively subdued growth outlook and the RBA's more sanguine forecasts, and will be key to the economy's sustained return to trend growth."

Looking ahead

UK inflation data will be the main focus of the day. In particular, headline CPI is expected to climb back to 2.8% yoy in August. RPI and PPI will also be released.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 142.90; (P) 143.53; (R1) 144.60; More

Intraday bias in GBP/JPY remains on the upside for as rebound from 139.29 continues. As noted before, fall from 147.76 has completed at 139.29 already, on bullish convergence condition in 4 hour MACD. Further rise should be seen for 147.76/148.42 resistance zone. Overall, price actions from 148.42 are seen as a sideway consolidation pattern. Break of 141.17 support will turn bias to the downside and bring another fall. But downside should be contained by 135.58 cluster support to bring rebound.

In the bigger picture, the sideway pattern from 148.42 is still unfolding. In case of deeper fall, we'd expect strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Medium term rise from 122.36 is expected to resume later. And break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. However, firm break of 135.58/39 will dampen the bullish view and turn focus back to 122.36 low.

Economic Indicators Update

DXY Dollar Index Short Term Elliott Wave view suggests that the decline from 8/16 peak is unfolding as an Ending Diagonal Elliott Wave structure. Down from 8/16 high, Minor wave 1 ended at 91.62 and Minor wave 2 ended at 93.347. Minor wave 3 is unfolding as a double three Elliottwave structure. Minute wave ((w)) of 3 ended at 91.01 and Minute wave ((x)) of 3 is in progress. The internal subdivision of Minute wave ((x)) shows a zigzag Elliottwave structure. Minutte wave (a) of ((x)) ended at 91.62 and Minutte wave (b) of ((x)) ended at 91.41.

The Index has reached an inflection area where Minutte wave (c) = Minutte wave (a) and thus cycle from 9/8 low is mature. Expect Minute wave ((x)) of 3 to end at 92.02 – 92.4. While bounces stay below 93.36, Index should resume lower or at least pullback in 3 waves. We don’t like buying the Dollar Index.

DXY 1 Hour Elliott Wave Chart

Ending Diagonal typically happens inside wave 5 of an impulse Elliottwave structure or inside wave C of a zigzag. Ending Diagonal has 5 waves subdivision and each wave is further subdivided into 3 waves. Thus Ending Diagonal has the structure of 3-3-3-3-3.

Gold continues to drop on the short term and could close the gap up. Is trading right above the $1325 per ounce and could drop much deeper if the USD will resume the yesterday’s rebound. The next major downside target will be at the first warning line (WL1) of the major descending pitchfork. The retreat is natural after the false breakout above the lower median line (LML) and after the failure to close near it.

Price resumes the yesterday's bullish candle and is approaching the 1.1450 psychological level. Is trading in the green after the rejection from the upper median line (uml) of the minor ascending pitchfork. I've said in the previous reports that a valid breakout above the WL4 will confirm a further increase.

The failure to stay near the upper median line is signaling that the bulls are very strong on the short term.