MNI ASia Morning FX Analysis: Sterling Awaits UK-EU Talks After Summit Disappointment(Update)

Most FX pairs have remained stable this afternoon, beside of course the old British Pound as the street awaited the EU Summit and the state of play on Brexit.

• Cable plummeted 90 pips to 1.2865, when UK Johnson said that UK should be ready for
  an Australian style deal.
• But GBP recovered, now at 1.2922 at the time of typing, after Boris confirmed that the UK
  is not Walking Away, But There Must Be Change Of EU Approach.
• The EU are now ready to engage in further trade talks in London next week.
• US Data were mixed this afternoon, with US Retail sales beating expectation, while
  US IP missed the survey.
• Finally US Michigan came above expectations, but most of the price action was mainly
  seen in US Bonds and Equities,
• Equities are trending higher this afternoon, keeping the USD heavy, but yet mixed
  against the majors.
• The Rand is the best performing currency, up 0.66% versus the Greenback.
  
  
  AFTER THE CLOSE:
• Late Friday Moody's downgraded UK sovereign debt rating one notch to Aa3 from
  Aa2, based on weakening economic and fiscal strength stemming from Brexit woes and
  COVID-19-induced shocks.
• NZ PM Jacinda Ardern wins landslide election victory.
• Chinese Govt officials issue warning they may detain US nationals in China in response
  to the Justice Dept.'s prosecution of Chinese military affiliated scholars.
• Italy considering a nationwide curfew and closing schools after country reported
  highest ever daily toll of COVID infections.
• More than 70 British business groups representing more than 7mn workers have
  made a last ditch attempt to persuade politicians to return to the table next week to
  strike trade deal between the UK and the EU.
• Senior Federal Reserve officials call for tougher financial regulation to prevent low
  interest rate policies giving rise to excessive risk taking and asset bubbles in the
  market.
• UK Sunday Times reported NHS preparing to introduce a corona virus vaccine soon
  after Christmas.

TECHNICALS:

EURUSD: Remains Vulnerable

• RES 4: 1.1917 High Sep 10 and 76.4% of the Sep 1 - 25 sell-off
• RES 3: 1.1859 61.8% retracement of the Sep 1 - 25 sell-off
• RES 2: 1.1817/31 High Oct 13 / High Oct 9 and the bull trigger
• RES 1: 1.1771 High Oct 14
• PRICE: 1.1716 @ 17:00 BST Oct 16
• SUP 1: 1.1685 Low Sep 30
• SUP 2: 1.1612/1581 Low Sep 25 and the bear trigger / Low Jul 24
• SUP 3: 1.1597 100-dma
• SUP 4: 1.1541 Low Jul 23

EURUSD is largely unchanged. The move lower this week follows the recent rejection off the 1.1831 high on Oct 9. Attention is on the next important support handle at 1.1685, Sep 30 low. A break of would set the scene for a deeper decline and expose the key 1.1612 level, Sep 25 low. 1.1612 also represents the trigger for a resumption of the downtrend that started on Sep 1. Resistance is at 1.1771 Wednesday's high.

GBPUSD: Bearish Risk Still Present

• RES 4: 1.2280 High Sep 7
• RES 3: 1.3186 Former trendline support drawn off the Mar 20 low
• RES 2: 1.3174 61.8% retracement of the Sep 1 - 23 sell-off
• RES 1: 1.3083 High Oct 12
• PRICE: 1.2937 @ 17:05 BST Oct 16
• SUP 1: 1.2863 Low Oct 14
• SUP 2: 1.2846 Low Oct 7 and key near-term support
• SUP 3: 1.2806 Low Sep 30
• SUP 4: 1.2745 Low Sep 28

EURGBP: Support Still Exposed

• RES 4: 0.9190 61.8% retracement of the Sep 11 - 28 sell-off
• RES 3: 0.9162 High Oct 7 and the bull trigger
• RES 2: 0.9132 High Oct 10
• RES 1: 0.9122 Oct 14 high
• PRICE: 0.9055 @ 17:07 BST Oct 16
• SUP 1: 0.9007 Low Oct 14
• SUP 2: 0.9000 Round number support
• SUP 3: 0.8967 76.4% retracement of the Sep 3 - 11 rally
• SUP 4: 0.8808 Low May 13

EURGBP maintains a bearish outlook despite recovering off recent lows. The move lower
on Oct 14 followed another failed attempt to convincingly clear trendline resistance drawn
off the Sep 11 high. Weakness that day also confirmed a resumption of the current
downtrend setting the scene for a move to 0.9000 and below towards 0.8967, a
retracement level. Resistance is at 0.9122, the Oct 14 high.

USDJPY: Focus Is On The Key Short-Term Support

• RES 4: 106.95 High Sep 28
• RES 3: 106.55 High Sep 3 / Channel resistance drawn off Mar 24 high
• RES 2: 106.11/38 High Oct 7 and the bull trigger / High Sep 8
• RES 1: 105.63 High Oct 13
• PRICE: 105.38 @ 17:10 BST Oct 16
• SUP 1: 105.04 Low Oct 14
• SUP 2: 104.94 Low Oct 2 and key near-term support
• SUP 3: 104.41 Low Sep 22
• SUP 4: 104.00 Low Sep 21 and the bear trigger

USDJPY traded lower on Oct 14 extending this week's slide and continues to display a weaker tone. Intraday momentum studies still point south however, to strengthen a bearish theme price needs to trade below 104.94, Oct 2 low. This would open 104.00, Sep 21 low. While 104.94 remains intact, the recent sell-off is considered a correction. The bull trigger is at 106.11, Oct 7 high. Initial resistance is at 105.63.

EURJPY: Support Has Remained Intact

• RES 4: 125.77 High Sep 15
• RES 3: 125.09/28 High Oct 9 / 61.8% of the Sep 1 - 28 sell-off
• RES 2: 124.48 High Oct 13
• RES 1: 123.94 High Oct 14
• PRICE: 123.47 @ 17:12 BST Oct 16
• SUP 1: 123.03/02 Low Sep 29 and Oct 2 / Low Oct 15
• SUP 2: 122.38/28 Low Sep 28 / 61.8% of the Jun 22 - Sep 1 rally
• SUP 3: 122.25 38.2% retracement of the May - Sep rally
• SUP 4: 121.82 Low Jul 15 and 16

EURJPY maintains a softer tone having traded lower again Thursday. While recent
weakness is considered a correction, attention turns to support at 123.03, Oct 6 low. This
level was probed briefly Thursday. A clear breach of 123.03 would highlight scope for a
deeper pullback and open the key support at 122.38, Sep 28 low and the bear trigger. On
the upside, key resistance is at 125.09, Oct 9 high. Initial resistance is at 123.94.

AUDUSD: Failure At Trendline Resistance Weighs

• RES 4: 0.7258 61.8% retracement September Sell-Off
• RES 3: 0.7243 High Oct 10 and the intraday bull trigger
• RES 2: 0.7201 Trendline resistance drawn off the Sep 1 high
• RES 1: 0.7170 High Oct 15
• PRICE: 0.7084 @ 17:14 BST Oct 16
• SUP 1: 0.7056 Low Oct 15
• SUP 2: 0.7029 Low Sep 28
• SUP 3: 0.7006 Low Sep 25 and the bear trigger
• SUP 4: 0.6965 23.6% retracement of the Mar - Sep rally

AUDUSD remains vulnerable. On Oct 9, the pair cleared resistance at 0.7209, Oct 1
and 6 high resulting in a test of trendline resistance drawn off the Sep 1 high. The line
intersects at 0.7201 today. A failure to clear the trendline is weighing on the Aussie and,
with support at 0.7096, Oct 7 breached, the scene is set for a deeper pullback. Attention
turns to the primary support and bear trigger at 0.7006, Sep 25 low. 0.7170 is resistance.

USDCAD: Needle Pointing North

• RES 4: 1.3421 High Sep 30 and primary resistance
• RES 3: 1.3341 High Oct 7 and a reversal trigger
• RES 2: 1.3266/68 50-day EMA / High Oct 7
• RES 1: 1.3259 High Oct 15
• PRICE: 1.3183 @ 17:17 BST Oct 16
• SUP 1: 1.3143 Low Oct 15
• SUP 2: 1.3099 Low Oct 13 and the bear trigger
• SUP 3: 1.3095 76.4% retracement of the Sep 1 - 30 rally
• SUP 4: 1.3038 Low Sep 2

USDCAD pulled back Friday following strong gains Thursday. The recent recovery signals scope for a stronger corrective bounce. The pair has breached the 20-day EMA paving the way for move towards the 50-day EMA that intersects at 1.3266. A breach of this average would strengthen a bullish case. On the downside, initial support lies at 1.3143, Thursday's intraday low. A move through this level would undermine the recent bounce.

OPTIONS: Expiries for Oct19 NY cut 1000ET (Source DTCC)

EUR/USD: $1.1540-50(E1.1bln), $1.1600(E767mln), $1.1615-20(E720mln-EUR puts), $1.1650(E1.1bln), $1.1700-15(E1.0bln), $1.1730-35(E601mln),
$1.1770-75(E1.1bln), $1.1800(E1.0bln), $1.1850(E659mln), $1.1900(E751mln), $1.1950(E981mln)
USD/JPY: Y105.00($557mln), Y106.00($1.1bln), Y107.00-10($886mln)
EUR/JPY: Y125.00(E514mln)
AUD/USD: $0.7280-85(A$718mln)
USD/CNY: Cny6.7735($1.0bln), Cny6.80($829mln), Cny7.00($750mln)
-----------------------------------
Larger Option Pipeline
EUR/USD: Oct20 $1.1745(E1.4bln); Oct22 $1.1600(E1.2bln), $1.1645-50(E1.8bln); Oct23 $1.2000(E1.3bln); Oct26 $1.1500(E1.8bln), $1.1650-60(E1.7bln);
Oct28 $1.1800-05(E1.4bln), $1.2000-05(E2.1bln); Oct30 $1.1800(E1.1bln)
USD/JPY: Oct20 Y106.35-44($2.3bln-USD calls); Oct21 Y105.00-10($1.9bln), Y105.50($1.1bln), Y105.90-106.00($2.2bln), Y106.65($1.0bln);
Oct22 Y104.00-10($1.6bln), Y104.50-55($2.1bln), Y104.95-105.00($1.1bln), Y105.95-106.00($1.2bln); Oct26 Y103.95-104.00($1.5bln-USD puts),
Y106.95-107.00($1.6bln); Oct27 Y105.00($1.2bln); Oct28 Y105.00($1.1bln); Oct29 Y106.00($1.2bln); Oct30 Y104.50($1.9bln), Y106.00-05($1.9bln)
EUR/GBP: Oct26 Gbp0.8900(E990mln), Gbp0.9000(E1.8bln-EUR puts)
AUD/JPY: Oct22 Y76.44(A$2.1bln); Oct29 Y73.20(A$1.0bln-AUD puts), Y76.35-40(A$2.4bln-AUD calls)
AUD/NZD: Oct27 N$1.0809-20(A$2.5bln); Oct30 N$1.0750(A$1.2bln)