MNI NY Morning FX Analysis: USD Fades Early Gains Ahead of NY

FOREX SUMMARY

USD started the European session better bid, a continuation of the Asia session, but gains have been unwound.

• Investors and market participants are mostly sitting on the sideline ahead of the EU Summit and potential Brexit deal or no deal, extension or no extension outcomes.
• GBP took couple of legs higher, and remain sensitive on any Brexit/Trade headline.
• USD unwinding also helped Cable.
• Earlier, Raab: "We Are Close To Brexit Deal,", and later following Ireland Martin, noting constructive talks.
• ALL EYES are on potential timing for Boris, but NO set time yet.
• More likely that we will hear from him after the EU summit outcome, but these summits are notoriously known for not sticking at timings.
• EMFX are generally better bid against the USD, as Risk trade in green territory, following overnight news that US Trump would be willing to put forward any Stimulus that would be agreed between Pelosi and Mnuchin.
• Rand is the best performer in EM against the Greenback up 0.53%, but local desk report fairly subdued turnovers, as the Global awaits on the EU Summit.
• Looking ahead, US Retail sales, industrial production & the Uni of Michigan confidence. Fed William and Bullard.
• Earning season continues with State Street reporting today.
• All attention of course on the EU Summit conclusion.

TECHNICALS:

EUR/USD: 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: 1.1712 @ 10:28 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 consolidating following yesterday's weakness. 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: Still Trading 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: 1.2934 @ 10:31 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: Bearish Risk Still Present

• 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 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.

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: 105.20 @ 10:35 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: Trading Just Ahead Of 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: 123.22 @ 10:40 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 yesterday. 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: 0.7077 @ 10:42 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: Needle Points 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: 1.3218 @ 10:44 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: