MNI Europe Morning FX Analysis: GBP on the Defensive Ahead of BOE Mon Pol Announcement

 FOREX: GBP on the Defensive Ahead of BOE Mon Pol Announcement

Election dynamics remained front and centre in Asian trading. Early business saw a degree of risk aversion, as the lack of a "Blue Wave" was coupled with mounting legal challenges to election results filed by the Trump campaign. Risk breathed with relief as the perceived chance of Biden winning the White House continued to firm up, e-minis staged another tech-driven uptick, while the potential of Trump's legal action to move the needle in his favour was widely played down.

Early focus into Europe seen on the BOE Monetary Policy announcement(brought forward to 0700GMT due to possible clash with Chancellor Sunak's COVID funding scheme announcements).

• Speculation surrounding potential easing measures to be deployed at today's BoE meeting dealt a blow to GBP early into the Asia-Pac session. The Telegraph reported that policymakers are considering negative interest rates, while the Sun cited unnamed sources suggesting that the Bank will boost its QE programme by GBP150bn and potentially as much as GBP200bn, i.e. more than expected by most analysts.
• Aforementioned factors were assessed and G10 crosses partially retraced initial risk-off moves, with a round of unwinding seen coinciding with an uptick in e-minis. This leaves us with a somewhat mixed picture across the space, as JPY & NOK outperform and AUD, USD & GBP lag behind. The yen managed to cling onto gains, even as it is a Gotobi day in Japan.
• USD/CNH peeked under its 28-month low early on, before bouncing off there and recouping half of the losses registered yesterday, when it charted its widest range in five years. A marginally weaker than exp. PBoC fix provoked little to no immediate reaction.
• Central bank activity picks up today, with monetary policy decisions from the FOMC, BoE & Norges Bank & speeches from a number of ECB members due. Today's data highlights include U.S. initial jobless claims, German factory orders & EZ retail sales.

MNI FX TECHNICALS: 

EURUSD: Firm Support Defined At 1.1603

• RES 4: 1.1881 High Oct 21 and the bull trigger
• RES 3: 1.1861 Oct 26 high
• RES 2: 1.1798 High Oct 28
• RES 1: 1.1770 High Nov 4
• PRICE: 1.1741 @ 05:40 GMT Nov 5
• SUP 1: 1.1603 Low Nov 4 and the bear trigger
• SUP 2: 1.1576 0.764 proj of Sep 1 - 25 sell-off from Oct 21 high
• SUP 3: 1.1541 Low Jul 23
• SUP 4: 1.1482 1.000 proj of Sep 1 - 25 sell-off from Oct 21 high

EURUSD remains volatile as markets track the outcome of the US election. Technical signals continue to highlight a bearish backdrop however a firm short-term support has been defined at yesterday's low print of 1.1603. A clear breach of this level would strengthen a bearish argument and open 1.1576 next, a Fibonacci projection. On the upside, initial resistance is at yesterday's 1.1770 high. A break would signal scope for gains above 1.1800.

GBPUSD: Bearish Focus

• RES 4: 1.3357 High Sep 3
• RES 3: 1.3261 2.0% 10-dma envelope
• RES 2: 1.3177 High Oct 21 and the bull trigger
• RES 1: 1.3140 High Nov 4
• PRICE: 1.2973 @ 05:45 GMT Nov 5
• SUP 1: 1.2911/2855 Low Nov 3 / Low Nov 2
• SUP 2: 1.2863 Low Oct 14 and key near-term support
• SUP 3: 1.2806 Low Sep 30
• SUP 4: 1.2794 76.4% retracement of the Sep 23 - Oct 21 rally

GBPUSD remains volatile, finding resistance at 1.3140 Wednesday. The outlook remains bearish following last week's extension lower. However a move below key near-term support at 1.2855, Nov 2 low is required to reinforce bearish conditions. This would pave the way for a move towards 1.2676, Sep 23 low. On the upside, clearance of key resistance at 1.3177, Oct 21 high would reinstate a bullish theme.

EURGBP: Bullish Engulfing Reversal

• RES 4: 0.9149 Oct 20 high
• RES 3: 0.9107 High Oct 23
• RES 2: 0.9085 Trendline resistance drawn off the Sep 11 high
• RES 1: 0.9066 Intraday high
• PRICE: 0.9054 @ 05:54 GMT Nov 5
• SUP 1: 0.9024 Intraday low
• SUP 2: 0.8946 Low Nov 4 and the key near-term support
• SUP 3: 0.8924 Low Sep 7
• SUP 4: 0.8900 Low Sep 4

EURGBP yesterday traded lower in Asia-Pac hours confirming an extension of the current downtrend, before the price action gave way to a decent bounce into the close. This activity is potentially significant, in pattern terms yesterday's candle line is a bullish engulfing reversal. If correct, it signals a floor at 0.8946, yesterday's low. Further gains would open 0.9107, Oct 23 low. A break of 0.8946 would negate the pattern and resume the downtrend.

USDJPY: Bearish Focus With Sights On 104.00

• RES 4: 106.11 High Oct 7 and the reversal trigger
• RES 3: 105.85 High Oct 12
• RES 2: 105.75 High Oct 20
• RES 1: 105.34 High Nov 4, 50-day EMA and key S/T resistance
• PRICE: 104.32 @ 06:01 GMT Nov 5
• SUP 1: 104.03 Low Oct 29
• SUP 2: 104.00 Low Sep 21 and the bear trigger
• SUP 3: 103.67 76.4% retracement of the Mar 9 - 24 rally
• SUP 4: 103.09 Low Mar 12

USDJPY traded in a volatile manner yesterday, selling off sharply from the day high of 105.34. The outlook is bearish with attention on 104.00, Sep 21 low. Clearance of this support would suggest scope for a deeper USD sell-off within the bear channel drawn off the Mar 24 high. Price is still trading above recent lows. A break above 105.34 is required to undermine the bearish theme and would expose 105.75 instead, Oct 20 high.

EURJPY: Bearish Focus

• RES 4: 124.00 High Oct 27
• RES 3: 123.65 50-day EMA
• RES 2: 123.20 20-day EMA
• RES 1: 123.07 High Nov 4
• PRICE: 122.46 @ 06:05 GMT Nov 5
• SUP 1: 121.62 Low Oct 30
• SUP 2: 121.50 0.764 proj of Sep 1 - 28 decline from Oct 9 high
• SUP 3: 120.56 Bear channel base drawn off the Sep 1 high
• SUP 4: 120.39 1.000 proj of Sep 1 - 28 decline from Oct 9 high

EURJPY is trading above recent lows but despite this maintains a bearish tone following last week's sell-off. The cross has recently cleared support at 123.03/02 and 122.38, Sep 28 low. This move lower confirmed a resumption of the downleg that started Sep 1. Scope is seen for weakness towards 121.50 next, a Fibonacci projection. Further out, 120.39 is on the radar, also a Fibonacci projection. Initial resistance is at 123.07, Wednesday's high.

AUDUSD: Clears Key Trendline Resistance

• RES 4: 0.7314 76.4% retracement of the Sep 1 - Nov 2 downleg
• RES 3: 0.7252 61.8% retracement of the Sep 1 - Nov 2 downleg
• RES 2: 0.7243 High Oct 10 and a key resistance
• RES 1: 0.7222 High Nov 4
• PRICE: 0.7172 @ 06:12 GMT Nov 5
• SUP 1: 0.7049 Low Nov 4
• SUP 2: 0.6991 Low Nov 2 and the bear trigger
• SUP 3: 0.6965 23.6% retracement of the Mar - Sep rally
• SUP 4: 0.6931 0.764 proj of Sep 1 - 25 sell-off from Oct 9 high

AUDUSD traded firmer Tuesday before a volatile session Wednesday. The result has been a break of the pairs key short-term trendline resistance drawn off the Sep 1 high. This signals a potential reversal, exposing resistance at 0.7243, Oct 9 high. Clearance of this hurdle would strengthen bullish conditions. On the downside, key support lies at 0.6991, Nov 2 low. This is also the bear trigger, a break would resume recent bearish pressure.

USD/CAD: All Eyes On Support

• RES 4: 1.3477 2.0% 10-dma envelope
• RES 3: 1.3421 High Sep 30 and primary resistance
• RES 2: 1.3390 High Oct 29
• RES 1: 1.3300 High Nov 4
• PRICE: 1.3138 @ 06:18 GMT Nov 5
• SUP 1: 1.3096 Low Nov 4
• SUP 2: 1.3081 Low Oct 21 and the bear trigger
• SUP 3: 1.3047 Low Sep 7
• SUP 4: 1.2949 2.0% 10-dma envelope

USDCAD sold off sharply Monday and that trend extended into Tuesday's close. Price was also understandably choppy Wednesday, but the pair settled lower into the close. Although a bullish outlook remains intact, attention is on support at 1.3081 Oct 21. A break would negate near-term bullish prospects and instead signal scope for weakness towards 1.2994, the Sep 1 low and a major support handle. The initial key hurdle for bulls is 1.3390, Oct 29 high.

MNI KEY LEVELS

EUR/USD: MNI Key Levels

• $1.1900 Sep15 high
• $1.1881/82/90 Oct21 high/Sep16 high/Upper Boll Band (2%)
• $1.1861/67 Oct26 high/Oct22 high
• $1.1839/50/53 Oct27 high/100-mma/Upper 1.0% 10-dma env
• $1.1777/80 50-dma, Cloud top/55-dma
• $1.1759/70 21-dma/Nov04 high
• $1.1742/46 Intraday high/NY high Nov04
• $1.1737 ***CURRENT MARKET PRICE 05:17BST THURSDAY***
• $1.1722 200-hma
• $1.1717/11 Cloud base/Intraday low
• $1.1676/72 100-hma/100-dma
• $1.1628/18 Lower Boll Band (2%)/Lower 1.0% 10-dma env
• $1.1603 Nov04 low
• $1.1581 Jul24 low
• $1.1562 Lower Bollinger Band (3%)

GBP/USD: MNI Key Levels

• $1.3177 Oct21 high
• $1.3153 Oct22 high
• $1.3140 Nov04 high
• $1.3119/27 Upper 1.0% 10-dma env/Upper Boll Band (2%)
• $1.3050/63 NY high Nov04/Cloud top
• $1.2992/94/98 21-dma/Intraday high/55-dma
• $1.2980/84 200-hma/50-dma
• $1.2965 ***CURRENT MARKET PRICE 05:28BST THURSDAY***
• $1.2960/59 100-hma/Cloud base
• $1.2950 50-mma, 200-wma
• $1.2933 Intraday low
• $1.2915/11 Nov04 low/Nov03 low
• $1.2893 100-dma
• $1.2863/60 Lower Boll Band (2%)/Lower 1.0% 10-dma env
• $1.2855/46 Nov02 low/Oct07 low

EUR/GBP: MNI Key Levels

• Gbp0.9181 Sep24 high
• Gbp0.9157/60/62 Sep30 high/Upper Boll Band (3%)/Oct07 high
• Gbp0.9137/49 Oct21 high/Oct20 high
• Gbp0.9123/25 Upper Boll Band (2%)/Upper 1.0% 10-dma env
• Gbp0.9101/06/07 Cloud top/Oct26 high/Oct23 high
• Gbp0.9076/79/85 Oct28 high/Cloud base/Oct27 high
• Gbp0.9064/65/71 55-dma/Intraday high/50-dma
• Gbp0.9056 ***CURRENT MARKET PRICE 05:36BST THURSDAY***
• Gbp0.9053/51 100-dma/21-dma
• Gbp0.9035/31/24 10-dma/200-hma/Intraday low
• Gbp0.9009 100-hma
• Gbp0.8975 Lower Bollinger Band (2%)
• Gbp0.8946/44/38 Nov04 low/Lower 1.0% 10-dma env/Lower Boll Band (3%)
• Gbp0.8925/17 Sep07 low/200-dma
• Gbp0.8900 Sep04 low

USD/JPY: MNI Key Levels

• Y105.35 50-dma
• Y105.34 Nov04 high
• Y105.19 Cloud base
• Y105.07 Cloud Kijun Sen
• Y104.97 21-dma
• Y104.69 Cloud Tenkan Sen
• Y104.54/59/62 Intraday high/200-hma/100-hma
• Y104.32 ***CURRENT MARKET PRICE 05:44BST THURSDAY***
• Y104.22/15/13 Intraday low/Nov04 low/Oct30 low
• Y104.03 Oct29 low
• Y104.02 Lower Bollinger Band (2%)
• Y104.00 Sep21 low
• Y103.94 200-mma
• Y103.58 Lower Bollinger Band (3%)
• Y103.52 Lower 1.0% 10-dma envelope

EUR/JPY: MNI Key Levels

• Y123.44 21-dma
• Y123.41 Oct23 low
• Y123.36 Cloud Kijun Sen
• Y123.19 Oct28 high
• Y123.07 Nov04 high
• Y122.93 Cloud Tenkan Sen
• Y122.60/62 200-hma/Intraday high
• Y122.47 ***CURRENT MARKET PRICE 05:49BST THURSDAY***
• Y122.21/16 Intraday low/100-hma
• Y121.96 Nov04 low
• Y121.81 Nov03 low
• Y121.78 100-wma
• Y121.70 Nov02 low
• Y121.62 Oct30 low
• Y121.51 Lower Bollinger Band (2%)

AUD/USD: MNI Key Levels

• $0.7301 Upper Bollinger Band (3%)
• $0.7251/54 50-mma/Sep17 low
• $0.7243/48 200-wma, Oct09 high/Upper 2.0% 10-dma env
• $0.7235/40 Sep22 high, Oct12 high/Upper Boll Band (2%)
• $0.7210/22 Cloud top/Nov04 high
• $0.7189/90 Intraday high/Cloud base
• $0.7177/81/83 Upper 1.0% 10-dma env/50-dma/55-dma
• $0.7169 ***CURRENT MARKET PRICE 05:55BST THURSDAY***
• $0.7145 Intraday low
• $0.7124/21 100-dma/21-dma
• $0.7089/86 200-hma/100-hma
• $0.7049/35 Nov04 low/Lower 1.0% 10-dma env
• $0.7028 Nov03 low
• $0.6997/91 Lower Boll Band (2%)/Nov02 low
• $0.6973/64/63 Jul20 low/Lower 2.0% 10-dma env/Jul16 low

USD/CAD: MNI Key Levels

• C$1.3321 Upper Bollinger Band (2%)
• C$1.3300/14 Nov04 high/100-dma
• C$1.3266 Cloud top
• C$1.3232/36/43 100-hma/200-hma/Cloud base
• C$1.3200/03/06 NY high Nov04/55-dma/50-dma
• C$1.3178/83 Intraday high, 50-mma/21-dma
• C$1.3160 200-wma
• C$1.3130 ***CURRENT MARKET PRICE 05:59BST THURSDAY***
• C$1.3118 Intraday low
• C$1.3096 Nov04 low
• C$1.3081/80 Oct21 low/Lower 1.0% 10-dma env
• C$1.3044/38 Lower Boll Band (2%)/Sep02 low
• C$1.2994 Sep01 low
• C$1.2976/75 Jan08 low/Lower Boll Band (3%)
• C$1.2957/52/48 YTD Jan07 low/Dec31-2019 low/Lower 2.0% 10-dma env

OPTIONS: Expiries for Nov5 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1500(E558mln), $1.1540-50(E588mln), $1.1750(E886mln-EUR calls)
• USD/JPY: Y102.00($700mln), Y105.00($964mln), Y106.06-09($1.6bln), Y106.40-50($754mln)
• EUR/JPY: Y124.50(E1.1bln)
• EUR/GBP: Gbp0.8980-00(E570mln)
• AUD/USD: $0.7125-33(A$775mln)
• USD/CAD: C$1.3140-50($674mln), C$1.3240-50($610mln)
• USD/CNY: Cny6.60($885mln-USD puts), Cny6.75($1.25bln), Cny6.80($2.0bln), Cny6.85($1.26bln)

Larger Option Pipeline

• EUR/USD: Nov06 $1.1600(E1.8bln), $1.1795-05(E1.5bln); Nov09 $1.1900(E1.9bln-EUR calls); Nov10 $1.1800(E1.2bln); Nov11 $1.1650-55(E1.1bln)
• USD/JPY: Nov06 Y105.00($1.0bln); Nov10 Y103.00($1.1bln), Y104.50($2.3bln), Y105.00-05($1.1bln);
  Nov12 Y103.00($1.4bln), Y105.40-50($1.1bln)
• EUR/AUD: Nov12 A$1.6520(E973mln)
• USD/CNY: Nov06 Cny6.70($1.2bln)