MNI Europe Morning FX Analysis: Defensive Feel Supports JPY, Sino-Aussie Trade Tensions Weigh On AUD

Defensive Feel Supports JPY, Sino-Aussie Trade Tensions Weigh On AUD

A sense of caution continued to linger in Asia, as the timezone digested a mix of familiar risks. The rapid resurgence of coronavirus across Europe, Brexit uncertainty and U.S. fiscal stalemate buoyed JPY, the best G10 performer, with a round of purchases seen into the Tokyo fix.

• AUD faltered amid reports noting that Chinese mills have been instructed to stop buying Australian cotton, as Beijing may slap 40% tariffs on the commodity, making shipments unviable.
• A downtick in oil prices applied pressure to NOK & CAD, while preventing any recovery attempts in AUD.
• GBP edged lower as participants awaited UK PM Johnson's decision, whether the UK will abandon Brexit talks with the EU. The announcement is expected today, after the European Council called upon the UK to make concessions, drawing the ire of London's chief negotiator.
• USD/KRW crept higher as South Korean unemployment rose more than expected, which offset potential impact of an optimistic signal sent by local health data. Daily coronavirus case count dipped below 50 for the first time in nearly three weeks.
• Focus turns to EZ trade balance & final CPI, U.S. retail sales, industrial output & flash U. of Mich. Survey as well as comments from Fed's Bullard & Williams and from Riksbank's Ingves.

TECHNICALS

EUR/USD: Still 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: 1.1705 @ 05:47 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 traded lower yesterday in line with general USD strength. The move lower follows the recent rejection off the 1.1831 high on Oct 9. Attention turns to 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.

GBP/USD: Choppy And Still Below Monday's High

• RES 4: 1.2280 High Sep 7
• RES 3: 1.3175 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: 1.2893 @ 05:49 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

GBPUSD maintains a choppy tone. The pair recovered Wednesday bouncing sharply off the day low of 1.2863 but traded lower Thursday. Price remains below Monday's high of 1.3083. A break of this level is needed to resume the recent uptrend that would open 1.3000 and 1.3175. The latter is the former trendline support drawn off the Mar 20 low. The trendline was breached on Sep 9. A break of 1.3175 is required to strengthen a bullish theme. Initial support is at 1.2863.

EUR/GBP: Corrective Recovery

• 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: 0.9079 @ 05:54 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 Wednesday followed another failed attempt to convincingly clear trendline resistance drawn off the Sep 11 high. The move lower that day also confirmed a resumption of the current downtrend and sets 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.

USD/JPY: 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: 105.25 @ 06:03 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 Wednesday extending this week's slide and is again showing signs of weakness today. 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.

EUR/JPY: Probes 123.03 Support

• 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: 123.19 @ 06:05 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 maintained a softer tone Thursday trading lower once again. 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.

AUD/USD: 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: 0.7207 Trendline resistance drawn off the Sep 1 high
• RES 1: 0.7170 High Oct 15
• PRICE: 0.7073 @ 06:07 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 traded sharply lower Thursday. 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 0.7207 today. A failure to clear the trendline is weighing 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.

USD/CAD: Corrective Bounce Extends

• 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: 1.3233 @ 06:17 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 traded sharply higher Thursday. The recovery highlights scope for a stronger corrective bounce. The pair has cleared 1.3222, 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 below this level would undermine the recent bounce.

MNI KEY LEVELS:

EUR/USD: MNI Key Levels

• *$1.1881/82 Upper Boll Band (3%)/Sep16 high
• *$1.1856/72/76 100-mma/Sep21 high/Upper 1.0% 10-dma env
• *$1.1817/27/31 Oct13 high/Oct12 high/Upper Boll Band (2%), Oct09 high
• *$1.1771/94/96 Oct14 high/50-dma/55-dma
• *$1.1757/58/66 100-hma/Oct15 high/200-hma
• *$1.1736 21-dma, 38.2% 1.3993-1.0341
• *$1.1716/20 Intraday high/Oct14 low
• *$1.1703 ***CURRENT MARKET PRICE 05:16BST FRIDAY***
• *$1.1701/89 Intraday low/Oct15 low
• *$1.1685 Sep30 low, Sep25 high
• *$1.1664/61 76.4% 1.1612-1.1831/Sep29 low
• *$1.1641/31 Lower 1.0% 10-dma env/Lower Boll Band (2%)
• *$1.1612/03/98 Sep25 low/100-dma/Cloud base
• *$1.1581 Jul24 low, Lower Boll Band (3%)
• *$1.1541/23 Jul23 low/Lower 2.0% 10-dma env

GBP/USD: MNI Key Levels

• *$1.3083/87 Oct12 high/Upper Boll Band (2%), Upper 1.0% 10-dma env
• *$1.3064/72 Oct14 high/Oct13 high
• *$1.3023/30 55-dma/Oct15 high
• *$1.3007/16 Oct06 high, Sep16 high/50-dma
• *$1.2966/87 200-hma/100-hma
• *$1.2943/49 200-wma/50-mma
• *$1.2921/22 Cloud base/Intraday high
• *$1.2895 ***CURRENT MARKET PRICE 05:18BST FRIDAY***
• *$1.2890/87 21-dma/Intraday low
• *$1.2863 Oct14 low
• *$1.2846/38/36 Oct07 low/Oct02 low/100-dma
• *$1.2831/27/20 61.8% 1.2676-1.3083/Lower 1.0% 10-dma env/Oct01 low
• *$1.2806 Sep30 low
• *$1.2781 Sep24 high
• *$1.2763/51/45 Sep11 low/100-wma/Sep28 low

EUR/GBP: MNI Key Levels

• *Gbp0.9220 Sep22 high
• *Gbp0.9181/94 Sep24 high/Upper Boll Band (2%)
• *Gbp0.9166 Upper 1.0% 10-dma envelope
• *Gbp0.9156/57/62 Oct01 high/Sep30 high/Oct07 high
• *Gbp0.9122/23/32 Oct14 high/Oct08 high/Oct09 high
• *Gbp0.9105 21-dma
• *Gbp0.9083 Intraday high
• *Gbp0.9076 ***CURRENT MARKET PRICE 05:27BST FRIDAY***
• *Gbp0.9075/68/61 200-hma, 10-dma/Cloud top, Cloud base/50-dma
• *Gbp0.9059/54 Intraday low, 55-dma/100-hma
• *Gbp0.9039 100-dma
• *Gbp0.9017/10/07 Oct15 low/Lower Boll Band (2%)/Oct14 low
• *Gbp0.8984 Lower 1.0% 10-dma envelope
• *Gbp0.8967/63 Sep08 low/Lower Boll Band (3%)
• *Gbp0.8925 Sep07 low

USD/JPY: MNI Key Levels

• *Y105.76 50-dma, 55-dma
• *Y105.63 Oct13 high
• *Y105.60 200-hma
• *Y105.58 Cloud Tenkan Sen
• *Y105.52 Oct14 high
• *Y105.49 Oct15 high
• *Y105.36/41/45 100-hma/21-dma/Intraday high
• *Y105.23 ***CURRENT MARKET PRICE 05:34BST FRIDAY***
• *Y105.19/13/09 Intraday low/Cloud Kijun Sen/Oct15 low
• *Y105.04 Oct14 low(Expiries 105.00-04 $2.9bln USD puts)
• *Y104.94 Oct02 low
• *Y104.88 Sep23 low
• *Y104.82 Lower Bollinger Band (2%)
• *Y104.51 Lower 1.0% 10-dma envelope
• *Y104.50 Lower Bollinger Band (3%)

EUR/JPY: MNI Key Levels

• *Y124.06 Cloud Tenkan Sen
• *Y123.94 Oct14 high
• *Y123.88 100-hma
• *Y123.77 Oct15 high
• *Y123.72 21-dma
• *Y123.67 Cloud base
• *Y123.43/47 100-dma/Intraday high, Oct14 low
• *Y123.17 ***CURRENT MARKET PRICE 05:40BST FRIDAY***
• *Y123.12/03 Intraday low/Oct02 low, Sep29 low
• *Y123.02 Oct15 low
• *Y122.88 Lower 1.0% 10-dma envelope
• *Y122.38 Sep28 low
• *Y122.37 Lower Bollinger Band (2%)
• *Y122.06 Jul20 low
• *Y121.89 100-wma

AUD/USD: MNI Key Levels

• *$0.7218/24 Oct13 high/Upper 1.0% 10-dma env
• *$0.7191/02/04 Oct14 high/55-dma/50-dma
• *$0.7170 Oct15 high
• *$0.7146/57/61 21-dma, Cloud base/100-hma/200-hma
• *$0.7123 Oct08 low
• *$0.7097/98 100-dma/Intraday high
• *$0.7081 Lower 1.0% 10-dma envelope
• *$0.7073 ***CURRENT MARKET PRICE 05:45BST FRIDAY***
• *$0.7073 Intraday low
• *$0.7056 Oct15 low
• *$0.7029/20 Sep28 low/Lower Boll Band (2%)
• *$0.7010/06 Lower 2.0% 10-dma env/Sep25 low
• *$0.6973/63/61 Jul20 low/Jul16 low/Lower Boll Band (3%)
• *$0.6938 Lower 3.0% 10-dma envelope
• *$0.6921 Jul14 low

USD/CAD: MNI Key Levels

• *C$1.3419/21 Sep29 high/Aug04 high, Sep30 high
• *C$1.3360/78 100-dma/100-wma
• *C$1.3341/45/52 Oct07 high/76.4% 1.3421-1.3099/Sep29 low
• *C$1.3320/32 Cloud top/Upper 1.0% 10-dma env
• *C$1.3298 61.8% 1.3421-1.3099
• *C$1.3259/68/73 Oct15 high/21-dma/Oct08 high
• *C$1.3238 Intraday high
• *C$1.3236 ***CURRENT MARKET PRICE 05:50BST FRIDAY***
• *C$1.3224/16/13 55-dma/Intraday low/50-dma
• *C$1.3202/93 Oct09 high/200-hma
• *C$1.3177 50-mma
• *C$1.3162/53 Cloud base, 200-wma/100-hma
• *C$1.3143 Oct15 low
• *C$1.3117 Oct14 low
• *C$1.3099/90/87 Oct13 low/Lower Boll Band (2%)/Sep08 low

OPTIONS: Expiries for Oct16 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1525(E651mln), $1.1650(E888mln), $1.1700(E680mln), $1.1715-25(E687mln), $1.1745-50(E643mln), $1.1800(E2.51bln-E2.32bln of EUR calls), $1.1845-50(E1.1bln), $1.1900(E832mln-EUR calls)
• USD/JPY: Y104.50($1.6bln), Y105.00-04($3.0bln-$2.9bln of USD puts), Y105.35-40($1.2bln), Y105.50-60($626mln)
• GBP/USD: $1.2945-50(Gbp483mln)
• EUR/NOK: Nok10.30(E840mln), Nok10.55(E800mln), Nok10.65(E571mln)
• AUD/USD: $0.6700(A$753mln), $0.7050-60(A$566mln), $0.7175(A$794mln)
• AUD/JPY: Y74.30(A$555mln)
• USD/CAD: C$1.3000($745mln), C$1.3220($670mln)
• USD/CNY: Cny6.72($570mln)

Larger Option Pipeline

• EUR/USD: Oct19 $1.1650(E1.1bln), $1.1800(E1.0bln); Oct20 $1.1745(E1.1bln); Oct22 $1.1600(E1.2bln), $1.1645-50(E1.7bln); Oct23 $1.2000(E1.3bln); Oct26 $1.1500(E1.8bln), $1.1650-60(E1.4bln); Oct28 $1.1800-05(E1.4bln), $1.2000-05(E2.1bln)
• USD/JPY: Oct19 Y106.00($1.1bln); Oct20 Y106.35-44($2.3bln-USD calls); Oct21 Y105.00-10($1.9bln), Y105.90-106.00($2.2bln), Y106.65($1.0bln); Oct22 Y104.50-55($1.8bln), 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)
• EUR/GBP: Oct26 Gbp0.9000(E1.3bln-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)
• USD/CNY: Oct19 Cny6.7735($1.0bln)