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Daily Pivots: (S1) 155.51; (P) 156.59; (R1) 157.25; More...

Intraday bias in GBP/JPY is still mildly on the downside as pull back from 158.19 could extend towards 55 day EMA (now at 153.04). On the upside, break of 158.19 will resume larger up trend from 123.94. Next target will be 61.8% projection of 136.96 to 156.05 from 148.93 at 160.72.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). The stay above 55 week EMA affirms medium term bullishness. Current rise should now target 61.8% retracement 195.86 (2015 high) to 122.75 at 167.93 next. In any case, outlook will remain bullish as long as 148.93 structural support hold, even in case of deep pull back.

The sterling hit the brakes after the UK’s retail sales fell for the fifth month in a row in September.

The pair has been inching up towards the hurdle on the daily chart (1.3900). The RSI’s bearish divergence, however, shows less enthusiasm from buyers as the price approaches the major resistance.

Sentiment remains bullish but we can expect profit-taking. 1.3710 would be the first support to monitor in case of retracement. On the upside, a bullish breakout may trigger an extended rally to 1.4000 and signal a potential reversal.

EURUSD has hardly gained ground above the 15-month low of 1.1523, although the recent weak bullish effort could see further extension above the 1.1665 strong resistance level. The RSI indicator is trying to improve above the neutral threshold of 50 and the MACD oscillator is moving above its trigger and zero lines.

If the favorable scenario comes to fruition, the 1.1665 barrier may be the first to attract interest. This is also close to the 40-day simple moving average (SMA), which is at 1.1690, and the 23.6% Fibonacci retracement level of the down leg from 1.2348 to 1.1523 at 1.1715. A break of this level might send the price up to the 38.2% Fibonacci level of 1.1835, while a break of the 200-day simple moving average (SMA) at 1.1910 could spark some further buying interest.

If the bulls lose the battle and the price falls below the 1.1523 trough, immediate support could form around the barrier of 1.1450, which was last active in June 2020. Below that point, traders may look for support for 1.1365.

In the long-term, only a sustained move above the critical resistance level of 1.1665 and more specifically, a daily close above the 200-day SMA would break the negative trend.

Daily Pivots: (S1) 131.79; (P) 132.29; (R1) 132.66; More....

Intraday bias in EUR/JPY remains mildly on the downside as retreat from 133.44 could extend towards 55 day EMA (now at 130.45). On the upside, above 133.44 will target 134.11 high first. Firm break there will resume larger up trend from 114.42. Next target is 61.8% projection of 121.63 to 134.11 from 127.91 at 135.62.

In the bigger picture, rise from 114.42 (2020 low) is still in progress and the strong support support from 55 week EMA affirms medium term bullishness. Further rise would be seen to retest 137.49 (2018 high). Decisive break there will resume the whole long term rise from 109.03 (2016 low). Next target will be 100% projection of 109.03 to 137.49 from 114.42 at 142.88. This will now remain the favored case as long as 127.91 support holds.

Daily Pivots: (S1) 0.8433; (P) 0.8451; (R1) 0.8479; More...

Intraday bias in EUR/GBP remains neutral for consolidation above 0.8420 temporary low. On the downside, break of 0.8420 will resume the larger down trend from 0.9499 to 0.8276 key long term support next. On the upside, though, sustained break of 55 day EMA (now at 0.8520) will bring stronger rebound back to 0.8656 resistance.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8656 resistance holds, towards long term support at 0.8276. However, firm break of 0.8656 resistance would argue that a medium term bottom was already formed. Stronger rise would be seen to 0.8861 support turned resistance to confirm completion of the corrective pattern.

Daily Pivots: (S1) 1.5526; (P) 1.5563; (R1) 1.5629; More...

Intraday bias in EUR/AUD remains neutral for consolidation above 1.5456 temporary low. . On the downside, break of 1.5456 will resume the fall from 1.6434 to 161.8% projection of 1.6434 to 1.5907 from 1.6232 at 1.5379 next. Break there will target 1.5250 low. Nevertheless, break of 1.5716 will turn bias to the upside for stronger rebound to 55 day EMA (now at 1.5880).

In the bigger picture, with 38.2% retracement of 1.9799 to 1.5250 at 1.6988 intact, the down trend from 1.9799 (2020 high) is expected to resume at a later stage. Firm break of 1.5250 will target 61.8% retracement of 1.1602 (2012 low) to 1.9799 at 1.4733. In any case, sustained break of 1.6988 fibonacci level is needed to indicate long term reversal.

Daily Pivots: (S1) 1.0657; (P) 1.0670; (R1) 1.0681; More....

Intraday bias in EUR/CHF is turned neutral with today's recovery, and some consolidations could be see. But break of 1.0764 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish. On the downside, break of 1.0656 will resume larger fall from 1.1149 to 100% projection of 1.1149 to 1.0694 from 1.0936 at 1.0481.

In the bigger picture, the rejection by 55 week EMA maintains medium term bearishness. Fall from 1.1149 (2021 high) is currently seen as the second leg of the patter from 1.0505 (2020 low) first. Hence, in case of deeper fall, we'd look for strong support from 1.0505 to bring rebound. However, sustained break of 1.0505 will resume the long term down trend from 1.2004 (2018 high). Also, medium term outlook will now be neutral at best as long as 1.0936 resistance holds.

EUR/USD

Current level - 1.1644

During most of last week, the currency pair was trading in the relatively narrow range between 1.1623 and 1.1668, and neither the bulls, nor the bears were able to take control and get the pair out of this channel. However, a breach of the resistance of 1.1668 would confirm that the corrective phase is continuing and the bulls would probably attack the next resistance of 1.1747. In the negative direction, a violation of 1.1623 would bring back the negative sentiment, leading the pair towards the support zone of 1.1582. This week, investors will focus on the European Central Bank rate decision (Thursday; 11:45 GMT) and on the U.S. initial jobless claims data (Thursday; 12:30 GMT).

USD/JPY

Current level - 113.67

Following a couple of unsuccessful attempts to violate the key resistance level of 114.42, the Ninja entered a corrective phase, which should remain limited above the support level of 112.98 and where investors should also be able to find better levels for market entry. In case the bulls return to the market, the expectations are for the pair to re-test the resistance of 114.42 and rise towards the resistance zone of 115.50 that is coming from the higher time frames. Increased volatility is expected around the announcement of the Bank of Japan’s interest rate decision (Thursday; 03:00 GMT).

GBP/USD

Current level - 1.3767

During last week, the Cable was trading in the range between 1.3762 and 1.3829, and neither the bulls, nor the bears were able to take control and get the pair out of this channel. However, the expectations are for the pair to re-test and violate the upper border and a key resistance level of 1.3829, which would take the pair towards the 1.3900-1.4000 zone.

Markets

Last week ended with a sharp reversal of the heavy bond sell-off that originated from the UK earlier in the week. A well-filled economic calendar with PMIs from the eurozone (mixed) over the UK (solid) to the US (strong) came and went without a material market impact. The bond flattening move going into the weekend was instead again inspired by the UK. BoE chief economist Pill said the economy no longer requires the current exceptional monetary settings but pushed back against too aggressive market positioning. UK yields stumbled 4.8 bps (2y) to 8.1 bps (30y). UK markets still discount a 15 bps rate hike in November though. Fed chair Powell later voiced his standing views, saying it’s time to taper but not to raise rates. The US curve bull flattened with yields falling 2.5 bps at the short end (3y) to 6.9-7.9 bps at the long end (10-30y). Real yields were again the driver with the 10y real yield in the US closing at -1%. German yields with the exception of the 30y (-3.3 bps) closed virtually unchanged after erasing an earlier rise that brought eg. the 10y to the highest level since May 2019. Inflation expectations in all three areas soared to multiyear levels. Action on currency markets -" much as we’re used to these days -" was less enticing. EUR/USD whipsawed yet finished the day marginally higher at 1.1643. The yen excelled as (real) core bond yields slipped. USD/JPY eased further sub 114. The UK’s front-end outperformance vis-à-vis the EU and US hurt sterling. EUR/GBP jumped from support around 0.842 to 0.8465. Cable forfeited 1.38.

Asian equities trade mixed this morning. News headlines are centered around Turkish president Erdogan’s actions over the weekend (see below) that brings about a new all-time low for the lira. The yuan strengthens slightly vs. the USD even as the PBOC boosted its daily liquidity injection. USD/CNY stays below 6.40. The dollar in general is trading heavy though, beating only the Japanese yen. EUR/USD touched resistance around 1.1664 again. US yields edge up slightly. We assume that after Friday’s outsized move, some yield recovery might be on the table. That said it’s tricky to predict what investors are more focused at on a daily basis: growth or inflation? That’s even more so when you have a mainly backloaded eco calendar like this week with the ECB meeting and US growth & inflation numbers due on Thursday. Eurozone GDP & inflation is scheduled for release on Friday. It might be difficult for the euro in such circumstances to push through the above-mentioned first technical resistance. We do keep an eye at BoE’s Tenreyro speech on monetary policy this afternoon though. At the current stage, it’s not clear whether Bailey and Pill have the numbers for an actual rate liftoff as soon as November.

News headlines

Turkish President Erdogan said that he ordered the foreign minister to declare ten western ambassadors persona non grata at once. The move marks a new low in international relations with Turkey. Erdogan wants to expel ambassadors from Germany, France, the Netherlands, Sweden, Norway, Denmark, Finland, Canada, the US and New Zealand following their joint statement last week calling for the release of jailed businessman and philanthropist Kavala. The latter has been behind bars for four years on accusations of wanting the overthrow the government. The European Court of Human Rights already ordered for Kavala’s release in 2019, blaming the Turkish government to silence its critics. The stand-out loser of Erdogan’s policy decisions is the Turkish lira. The currency sets a new all-time low near EUR/TRY 11.50 this morning.

Rating agency S&P raised the outlook on the Italian BBB rating to positive. With 80% of its adult population fully vaccinated, and the first tranche of an expected 10.8% of GDP in Recovery and Resilience Funds already disbursed, Italy is set to post a resounding economic recovery in 2021 and 2022, putting GDP above 2019 levels one year earlier than S&P had expected. For 2021, real GDP growth is set to recover by 6%, followed by 4.4% in 2022. Drivers of Italy's buoyant growth include high vaccination rates, elevated private savings, improving business and household confidence, generous EU funds, and rebounding tourism. S&P could lift the BBB rating in case of an economic outperformance which puts the debt-to-GDP ratio on a steeper downward path.

US futures tilted higher in early trading as investors reflected on the ongoing earnings season. Data compiled by FactSet shows that 23% of companies in the S&P 500 index have already published their results. Of these, 84% of them have reported better earnings per share than expected while 76% of them have reported better revenue forecast. The earnings season will continue this week, with top technology firms expected to publish their results. Some of the key firms to watch will be Facebook, S&P Global, Archer-Daniels Midlands, and Microsoft.

The euro was in a tight range on Monday morning as investors waited for the upcoming Eurozone sentiment data. The numbers are expected to show that the country’s business climate declined from 98.8 in September to 97.9 in October. At the same time, the current assessment of the economy is expected to have declined from 100.4 to 99.4 while business expectations are expected to move from 97.3 to 96.4. These numbers will likely decline because of rising inflation, which is affecting the cost of living. They will also be weak because of the ongoing supply chain challenges.

The price of crude oil is hovering near the highest level in years as investors remain optimistic about demand as the global economy reopens. Recent data by OPEC showed that oil demand will rise to more than 100 million barrels per day. The conclusion of the report was similar to that of the International Energy Agency (IEA). While demand is rising, oil supply remains under intense pressure since American shale producers are not pumping as much oil as they should. Similarly, OPEC+ members agreed to boost production at a slower pace than expected.

EURUSD

The EURUSD pair is trading at 1.1642, which is slightly above last week’s low of 1.1620. On the hourly chart, the price has moved slightly above the 25-day moving average. It is also a few points below the October high of 1.1670. The pair has also found significant support at 1.1620 while the Relative Strength Index (RSI) has kept rising. Therefore, the pair will likely keep rising as bulls target the important resistance at 1.1660.

USDCHF

The USDCHF pair declined sharply last week. It moved to a low of 0.9150, which was the lowest level since September 13. On the four-hour chart, the pair has dropped below the 25-day and 50-day moving averages. It has also moved to the lower side of the Bollinger Bands while the Relative Strength Index (RSI) has moved to the oversold level. Therefore, the pair’s path of least resistance is lower, with the next key support being at 0.900.

GBPUSD

The GBPUSD pair declined to a low of 1.3735 as investors continued to worry about the reported new Covid wave in the UK. They are also focused on the upcoming budget by Rishi Sunak. The pair is along the lower line of the ascending channel that is shown in green. It has also moved slightly below the 25-day moving average and the 61.8% Fibonacci retracement level. Therefore, the pair will likely maintain the bearish trend as bears attempt to push it below the key support at 1.3700.