eFXplus DATA

• Loss consolidation the likely theme for Monday after significant Brexit drop

• Our 0.8775 offer met: target 0.8475 and stop set abv 200DMA at 0.8835

• 14-day momentum remains negative and stochs confirming Thurs/Frid slide

• Little in the way of major support until the 0.8546 May 6 low

• Frid 0.8696 low might draw short covering: sticky below 0.8745 30DMA bolli

• Weekly failed to cls below cloud, base at 0.8692: 200WMA below at 0.8642

  
  

• Backing away from a significant 1.2708 3 1/2 month Brexit driven high

• Our 1.2685 short in the money: below 1.2512 and our stop lowered to entry

• 200DMA shut the door on sterling's rally Friday, today at 1.2713

• Minor 38.2-50.0% fibos off the 1.2196-1.2708 climb are at 1.2512 and 1.2452

• Note, daily cloud twist 1.2268-73 Oct 21: could pull price lower

• Close today below 1.2582 should keep the pullback alive

  
  

• Options expire at 10-am New York cut Monday Oct. 14

• EUR/USD: 1.0940-50 (1.8BLN), 1.0995-1.1000 (1.1BLN), 1.1035 (400M),

• 1.1050-55 (550M), 1.1090-1.1100 (1.5BLN)

• EUR/CHF: 1.0960 (275M). USD/JPY: 108.50 (430M)

• GBP/USD: 1.2450 (375M), 1.2545 (500M)

• AUD/USD: 0.6735 (450M), 0.6770 (200M), 0.6800 (907M), 0.6825-35 (500M)

• EUR/GBP collapsed through EBS 200 DMA with Brexit news nL5N26Y0KO

• Also entered daily Bollinger downtrend channel - cap at 0.8802

• Inability to rally past that line will protect 200 DMA at 0.8830

• Swift turnaround on Brexit optimism has changed chart outlook

• Chikou span below Ichimoku Cloud indicates strong momentum

• If downtrend channel validated, 0.8500 psych barrier is next

• USD/JPY holding steady after slipping a tad early Mon, last 108.29

• Confirmation of EBS Bollinger uptrend channel on Fri is bullish

• Floor of channel at 108.16 ought to hold, with risk-on in Asia stocks

• SSEC +1.5%, Kospi +1.3% as US suspends China tariff hike nL2N26W15C

• Positive developments in US-China trade talks still lack details

• Possible release of details may spike USD/JPY past 200 DMA 109.07

• Off 0.1% with a firmer USD, DXY +0.15%, E-mini S&P futures +0.2%

• Local stocks buoyant on partial US/China trade deal nL2N26W15C

• 0.6735 450M, 0.6770 200M, and 0.6800 907M strikes likely contain

• Friday's strong close validated Thursday's bullish outside day

• 0.6809. 61.8% Sep fall capped Friday - now significant resistance

• Close above 0.6810 would target 0.6841, 76.4% of the Sep fall

• 0.6768 21 DMA and earlier 0.6801 high initial support/resistance

  
  

  
  

• Trades off 0.25% as Asia fully opens - Brexit optimism losing lustre

• Remains a lot of work to be done before a viable Brexit deal nL5N26Y0KO

• Uncertainty leaves UK firms cutting costs & hiring in next year nL5N26X0E0

• Opposition Labour's renationalization plans costed at $249BLN nL5N26W5DX

• Charts - daily momentum studies, 5, 10 & 21 DMAs move higher; positive setup

• Targets 1.2784 June high, then 1.2837, 61.8% of 2019 Mar/Sep fall

• Earlier 1.2645 high and 1.2582 prior Sep top initial support/resistance

• Touch softer with Tokyo on holiday - low key start to the FX week

• Terrible deadly typhoon flooded towns, threatens more damage nL3N26Y033

• 108.50 multiple range resistance in September broken Friday - closed below

• Close above 108.50 to open the door to 109.07 200 DMA - capped since April

• Horizontal cloud top, Tenkan & Kijun lines do not suggest a trending move

• Earlier 108.30 low and 108.63 NY high initial support/resistance

 MUFG Research discusses USD/JPY tactical outlook and adopts a neutral bias, expecting the 109 level to cap further upside in the near-term.

"Retail sales data due out on the 16th will be important to watch, given the sudden slump in the non-manufacturing ISM index and weak wage growth. Retail sales undershooting market expectations could push down on USD/JPY temporarily. But widening USD/JPY basis shows that demand for the USD will be strong through year’s end," MUFG notes. 

"Outward investing unhedged for currency risk is likely to continue, so JPY selling by Japanese will likely support a lower bound for USD/JPY," MUFG adds. 

• GBP/USD ending NY +0.78% at 1.2660, NorAm range 1.2708-1.2409

• Shorts lightening on intense Brexit deal talk nL5N26W1AA

• Pair +2.95% MTD, -0.75% YTD; cls abv 1.2670 50% of 2019 range aids bull run

• Sterling runs into offers near Fibo resistance by 1.2670 nL2N26W0JU

• EUR/GBP -1.31% to 0.8726, pair -1.39% MTD, -2.9% YTD nL2N26W0JA

• USD/JPY drifts away from 108.63 high as word on talks awaited

• Chinese team leaves USTR building, 2:45 Trump-Liu meeting nL2N26W0XH

• Above Sep. 19 high at 108.48 on optimistic Trump tweets re deal

• Risk-on flows ebbing on U.S. military buildup in Saudi Arabia

• Also pushback from DUP and others re possible Brexit deal nS8N25X01C

• If Trump-Liu announce trade truce, expect Aug. 1 high, 61.8% Fibo @109.32/36

• If trade talks less constructive than hoped, drop to 107.50 likely first

Bank of America Merrill Lynch Global Research discusses USD/JPY outlook and maintains a bearish bias in the medium-term, expressing that via a short exposure* in its portfolio.

"The purchase of US sovereign bonds by Japanese investors stood out in August at ¥1.8tn, registering the second month of strong buying, following the ¥2.5tn purchase in July. The purchase may have been unhedged to a certain degree considering the hedge cost and USD/JPY's price action.  USD/JPY's downtrend during Tokyo trading hour has reversed since 5 August when USD/JPY broke 106. This is similar to March 2018 when USD/JPY's downtrend reversed after USD/JPY had sold off through 105," BofAML notes. 

"The price action in August suggests dip buying of USD/JPY would emerge around 105 from Japanese institutions, possibly pension funds. On the other hand, speculative JPY long position has been cut back, according to the CFTC's IMM statistics and our flow analysis. Convergence of policy between the Fed and the BoJ would be pronounced on any softening in the US economic data. USD/JPY is trading 106-108 near-term but we maintain our bearish USD/JPY view medium-term with dip buying by Japanese institutions possibly slowing the pace of decline," BofAML adds. 

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*Recorded in eFXplus Orders

Cable made a mad dash to a new 3-month high at 1.2685 after comments from Europe that EU Brexit negotiator Barnier received the green light to go into intense negotiations with Britain nL5N26W1AA.
The softer Brexit vibe opens the way for Europe to grant an extension to the UK based on credible negotiations on the backstop.
Recent rhetoric is GBP/USD, and to a lesser degree EUR, positive as the EU had been unwavering in its resolve to not renegotiate the existing Brexit deal.
The rapid rise to 1.2685 has elicited offers near the 50% Fib of 2019's 1.3380-1.1959 range and ahead of the 200-DMA at 1.2713.
GBP/USD bullish sentiment may fade as intense negotiations may not ultimately lead to a new Brexit deal, and even if an agreement is struck there remains significant uncertainty with regard to the UK parliament's ability to ratify a deal with the Europeans.
Despite the feel-good vibe and nascent GBP/USD strength, UK political, growth and Brexit risks remain and the recent GBP/USD short-covering may not lead to a pickup in bullish sentiment needed for a rise above 1.3000 nL2N26W0A2.

CIBC Research discusses its reaction to today's Canadian labor data for the month of September.

"Canada's labour market seems to have been vaccinated against the global economic flu going around. Another 54K jobs were piled on to the prior month's 81K gain, and while the composition wasn't ideal, wages looked quite firm on a year on year basis. The job gains were in full time work, but private sector paid employment fell 21K (but is till up 2.3% year-on-year). The job gains were in public sector work (particularly health care) and self employment. Still, with resources a key exception, the 12-month trends are generally healthy, and average wages for permanent workers were up 4.3% from a year ago, a figure that does look suspiciously high but does signal a firming in pay scales,' CIBC notes. 

"A jobless rate of only 5.5% will cement the case for the Bank of Canada to remain on hold in October, but we continue to look ahead towards the global slowdown impacting Canadian data over the balance of the year," CIBC adds. 

Danske Research discusses EUR/GBP outlook and prefers to fade the move lower.

"Today we expect FX markets to be driven by trade news and Brexit deadlines. On the latter EUR/GBP went down by nearly 2 percent yesterday on news that Ireland PM Leo Varadkar might support a Brexit compromise, after talks with Boris Johnson. The move comes after weeks of increased pessimism on possible progress. Further, the UK monthly GDP tracker came out decently, alleviating the need to add near-term pressure on Sterling by moving forward pricing of a possible cut by Bank of England," Danske notes. 

"Details on what such a compromise would entail remains sparse, as does the reality of such a compromise in getting through parliament. For now, we prefer to fade the move in Sterling as yet another sentiment-driven shift but without being rooted in a check of political reality," Danske adds.  

• USD/JPY bulls beware recent vulnerable shorts have been squared nL2N26W085

• Though good buyers of both USD/JPY and EUR/JPY persist in London

• Optimism on Brexit and U.S.-China talks aid flows out of the safe-haven yen

• USD/JPY bulls target beyond Sept. 108.48 peak is the 200-DMA, now at 109.07

• USD/JPY has seen a 107.84-108.26 range, according to prices on the EBS

• EUR/JPY range has been 118.75-119.35. Tech USD/JPY update nL2N26W068

• Cable soars to 1.2544 after sliding from 1.2506 to a low of 1.2409

• A fairly pessimistic steer from EU's Tusk was catalyst for drop to 1.2409

• Tusk: Brexit deal may be possible but no guarantee of success nL5N26W21R

• 1.2544 is a three-week high. 1.2506 was high before Tusk spoke

• Skittish price action shows how sensitive GBP is to the Brexit vibe

• Cable rose 2% to 1.2469 Thursday on Brexit deal hope nL2N26W06A

• Sharp Thursday drop from 55DMA at 0.9020 to 200DMA at 0.8830

• Our 0.8984 short play ran to target at 0.8850

• Bears now taking stock just ahead of the 200DMA, still 0.8830

• The average is flat lining and loses some significance as a result

• However, merit in buying close to 200DMA and stop below 0.8788 Sept 20 low

• We have an offer set in the high 0.89s but might switch to a bull play

  
  

• Significant break higher Thursday as Brexit optimism impacts

• Our 1.2285 short play stopped at 1.2305 trailing stop

• 100DMA gave way at 1.2410 and now provides support

• Impressive gains to 1.2469: failure to beat 1.2469 could trigger a pullback

• Note the 1.2268-73 Oct 21 cloud twist, could drag on price

• Tempted to short the market again with a tight stop

• Fading 1.2504 Sept 24 high with a stop above key 1.2582 Sept 20 considered

  
  

• +0.3% with steady flows in Asia, at the top of a 0.6755/0.6782 range

• AUD/NZD +0.1%, AUD/JPY +0.3% - cup half full - E-mini S&P +0.3%

• Hopes for a limited deal at US-China trade talks nL3N26V3F2

• Bullish outside day yesterday needs a close above 0.6774 NY high to validate

• 0.6772/74 is also the 21 DMA and Friday's high - so a pivotal level

• Close above 0.6782, 50% of September/October would be positive for next week

• 0.6710 61.8% of the October bounce a base remains initial major support