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• EUR/USD bears want to re-establish the main bear trend of the last months but they need a break below 1.1530 key support level.
• EUR/USD found support near 1.1570 and the bulls are currently challenging the 1.1630 resistance level and the 200-period simple moving average. The RSI and Stochastics are gaining bullish traction while the MACD is slightly decelerating.
• A break above 1.1630 should open the door to 1.1700 figure. 

EUR/USD 4-hour chart 

Spot rate:             1.1623
Relative change:  -0.14%  
High:                    1.1652
Low:                     1.1569

Main trend:                    Bullish

Resistance 1:   1.1600 figure
Resistance 2:   1.1630 August 8 high key level
Resistance 3:   1.1654 August 27 high
Resistance 4:   1.1723 September 24 low
Resistance 5:   1.1750 key level (July)
Resistance 6:   1.1800 figure
Resistance 7:   1.1853 June 14 high
Resistance 5:   1.1900 figure

Support 1:   1.1600 figure
Support 2:   1.1572 July 19 low
Support 3:   1.1542 supply/demand level
Support 4:   1.1530 August 23 swing low
Support 5:   1.1508 June 8 low

Speaking at a conference in Riga, Latvia, Valdis Dombrovskis, the vice-president of the European Commission, said that what emerged so far from the discussions in Italy does not seem to be in line with the European Union’s fiscal rules. “For Italy, it is important to stick to responsible fiscal policy to keep interest rates low,” Dombrovskis added, as reported by Reuters.

• USD/JPY main bull trend is intact as the bulls have surpassed the 200-weekly simple moving average. 
• USD/JPY is trading above its 50, 100 and 200-period simple moving averages which are rising and widening suggesting strong bullish momentum. The next target to the upside are likely located near 114.00 figure and 114.80 (November 2017 high). 
• A bear breakout below 112.50 would likely invalidate the current bullish bias.  

USD/JPY 4-hour chart

Spot rate:                 113.58
Relative change:       0.19%     
High:                        113.68
Low:                         113.31

Main trend:               Bullish

Resistance 1:    114.00 figure
Resistance 2:    114.80 November 2017 high
Resistance 3:    115.50 March 10, 2017 

Support 1:    113.18, July high 
Support 2:    112.50 figure
Support 3:    112.00-112.17 zone, figure and August 1 swing high
Support 4:    111.84 August 29 swing high
 

“PM May is facing the risk of a leadership challenge and the Conservative Party Congress from 30 September to 3 October is an important milestone for that,” Rabobank analysts note.

Key quotes

“The turn of events in Salzburg has weakened any support she enjoyed for her ‘Chequers’ plans. This, however, may shield her from a leadership challenge. Past events illustrate that her weakness has at times been her strength, as her political rivals might find it more costly to attack her when she is weak. Particularly as her stance in Salzburg might be perceived as her standing up for the UK in front of the EU.”

“Labour’s official support for a second referendum in case a deal is rejected by parliament and general elections cannot be triggered further complicated domestic politics. After Salzburg PM May said the UK would come with an alternative solution for preventing a hard Irish border, but this is only expected after the Conservative Party congress, leaving roughly two weeks for booking sufficient progress in the talks with the EU before the October summit.” 

• GBP/USD is switching to a bull trend. The market is consolidating the recent gains in a bull flag.
• GBP/USD is finding support at the 1.3000 figure, at the bearish trendline (blue dotted line) and above the 200-period simple moving average. 
• Bulls objective is to re-conquer the 1.3100 and 1.3200 levels. A breakout below 1.3000 would negate the bearish scenario.

GBP/USD 4-hour chart

Spot rate:                         1.3049
Relative change:             -0.22%     
High:                                1.3091
Low:                                 1.3000

Main trend:                      Bullish

Resistance 1:                  1.3050 August 30 swing high, key level
Resistance 2:                  1.3100 figure
Resistance 3:                  1.3144 key level
Resistance 3:                  1.3200 figure (key support/resistance)
Resistance 4:                  1.3300 figure
Resistance 5:                  1.3363 July high
Resistance 6:                  1.3472 June 7 high

Support 1:                      1.3000 figure    
Support 2:                      1.2957 July 19 swing low
Support 3:                      1.2900 figure 

• Inflation in the U.S. continues to grow within the Fed’s target.
• US Dollar Index steadies near 95.
• BoE’s Ramsden says a disorderly Brexit is the unlikely scenario.

The GBP/USD pair extended its losses in the early NA session and touched the 1.30 mark for the first time in 16 days. After finding a support at this level, the pair retraced the majority of its daily losses and was last seen trading at 1.3056, still down 0.15% on the day. Despite that modest recovery, however, the pair remains on track to record weekly losses.

Earlier today, the data released by the UK’s Office for National Statistics revealed that the GDP expanded by 0.4% on a quarterly basis in the second quarter to meet analysts’ estimates. On a negative note, total business investment declined 0.7% in the same period following the first quarter’s 0.5% contraction and fell short of the market expectation for a 0.5% growth. 

In the second half of the day, the U.S. Bureau of Economic Analysis announced that the annual core Personal Consumption Expenditures price index, the Fed’s favourite measure of inflation, came in at 2% in August to match July’s reading. Underlying details of the publication showed that personal spending and personal income both increased by 0.3% on a monthly basis in August.

The US Dollar Index, which rose sharply in the second half of the week on the back of hawkish FOMC remarks and upbeat GDP data, extended its gains to a new 18-day high 95.37. With investors booking their profits in the last day of the third quarter, the index erased its gains and was last seen virtually unchanged on the day at 95.02. 

Meanwhile, speaking at the Society of Professional Economists Annual Conference, London, Dave Ramsden, Deputy Governor for Markets and Banking of the Bank of England, stated that a disorderly Brexit was the unlikely scenario and added: “If the economy continues to evolve, as it has done so far, broadly in line with our August forecast, then further limited and gradual rises in Bank Rate will be appropriate to return inflation sustainably to the target.”

Technical levels to consider

The pair could face the first resistance at 1.3100 (100-WMA) ahead of 1.3175 (Sep. 27 high) and  1.3275 (Sep. 21 high). On the downside, supports could be seen at 1.3000 (psychological level/daily low), 1.2950 (50-DMA), and 1.2895 (Sep. 10 low).

According to analysts from Wells Fargo,  today’s Consumer Confidence reading from the University of Michigan Survey of 100.1 reflects a slight downward revision from the September estimate and is a somewhat less euphoric take than another key measure.

Key Quotes: 

“Today’s read on sentiment from the University of Michigan survey reflects a downward estimate from the initial read and a level that does not surpass highs hit earlier this year or even earlier in the prior expansion.”

“Consumer sentiment is still historically quite high and is consistent with steady consumer spending growth.”

“A greater share of consumers feel that it is currently a better time to sell a house than it is to buy one. That has been the prevailing sentiment for the past nine months. This happened late in the prior cycle too, about a year and a half before the housing bubble burst and “good time to sell” measure plummeted.”
 

• CAD among top performers on the back of data and oil’s rally.
• USD/CAD approaching key strong support near 1.2880.

The USD/CAD pair is falling sharply on Friday, losing more than a hundred pips and the Loonie is among the top performers of the day. In a few hours, it erased weekly gains.

USD/CAD was already trading lower and accelerated the decline following Canadian GDP data. The slide continued during the American session on the back of a rally in crude oil prices. The pair opened the day around 1.3030 and it just bottomed at 1.2909, the lowest level since last Friday.

Crude oil is gaining more than 1.5% with the WTI trading at $73.50 a barrel, at the highest level in two months. The greenback weakened across the board during the last hours and trimmed gains.

The other key driver of CAD’s strength was GDP data. In July, the economy expanded at a 0.2% rate above the 0.1% expected. “With the increase in July, Q3 GDP growth is tracking almost a percentage point above the Bank of Canada’s call in July for a 1.5% increase (and our own call for a 1.6% gain) in large part, though, because of a smaller-than-expected transitory decline in oil production. Less of a drag from that factor in Q3 also means less of a rebound in Q4 to leave underlying trends running about as expected — and still looking quite solid. Fears of significant trade disruptions with the U.S. have not gone away but, in the mean-time, the economic backdrop still looks clearly strong enough to warrant further Bank of Canada interest rate hikes.”, said Nathan Janzen, Senior Economist at RBC Capital Markets.

Levels to watch

Despite the dramatic decline, USD/CAD is not showing signals of a consolidation. To the downside, the immediate support is seen around 1.2900, a break lower would expose September and August lows at 1.2880/85, a key barrier that if broken would open the doors to more losses. On the upside, resistance levels could be located at 1.2945, 1.2970 (Sep 25 high) and 1.3005.

• USD/CAD main bull trend is on hold as the bears are driving the market towards 1.2900 figure. 
• USD/CAD is trading below its 50, 100 and 200-period simple moving average while the RSI, MACD and Stochastics are in negative territories.
• However, bears will need a convincing breakout below 1.2882 (September 20 low) in order to shift the bias to strong bearish.   

USD/CAD 4-hour chart

Spot rate:                   1.2923
Relative change:        0.92% 
High:                          1.3051
Low:                           1.2909

Main trend:                Bullish 

Resistance 1:            1.2959 August 7 low
Resistance 2:            1.3000 figure
Resistance 3:            1.3048 August 14 low
Resistance 4:            1.3108, September 7 low
Resistance 5:            13200 figure
 
Support 1:                 1.2882 September 20 low
Support 2:                 1.2855-65 June 6 low – 200-day SMA
Support 3:                 1.2800 figure

• The index stays bid above the 95.00 handle on Friday.
• Yields of the US 10-year note rebounds to the 3.05% region.
• US final Consumer Sentiment came in at 100.1, below estimates.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main rivals, is now extending the upbeat tone to the 95.20/30 band.

US Dollar Index in 2-week tops

The index manages to reclaim the critical 95.00 handle and above following quite a sharp sell of in the risk-associated assets, particularly the single currency and the British Pound.

In fact, rising jitters on the Italian fiscal scenario triggered a strong selling sentiment among traders, pushing up Italian yields and forcing EUR/USD and stocks to intensify the downside.

The upside momentum in the buck also appears propped up by the hawkish stance from the FOMC’s statement and subsequent press conference by Chief J.Powell, while solid prints from Q2 GDP also lent extra oxygen to the up move.

Today, mixed results saw Personal Spending and Personal Income expanding at a monthly 0.3% in August, while inflation figures gauged by the Core PCE rose at an annualized 2.0% during the same period and came in flat on a monthly basis.

In addition, the final print from the U-Mich index came in at 100.1, a tad below consensus for the current month.

US Dollar Index relevant levels

As of writing the index is gaining 0.20% at 95.18 facing the next hurdle at 95.37 (high Sep.28) seconded by 95.74 (monthly high Sep.4) and finally 96.04 (50% Fibo of the 2017-2018 drop). On the downside, a breach of 93.81 (low Sep.21) would aim for 93.71 (monthly low Jul.9) and then 93.19 (monthly low Jun.14).

Today’s data showed that personal income rose 0.3% in August. Wages and salaries posted the largest increase since January, but increasingly higher gas prices and other energy costs are commanding a larger share of consumer spending, explained analysts at Wells Fargo. 

Key Quotes: 

“Personal income increased 0.3% in August, which was a bit shy of the 0.4% that had been expected by the consensus. More than two thirds of the increase was due to the fact wages and salaries notched a solid 0.5% gain. That was the best monthly increase since January and the latest indication that the hot job market is at last translating into meaningful improvement in
wages.”

“Personal interest income, which comprises less than a tenth of overall income, was down for the second straight month and was in fact the only category of personal income that declined during the period.”

“Despite the slightly softer print on the income side, spending did not disappoint with the 0.3% pick-up in outlays, matching the consensus expectation. The fact that wages and salaries drove much of the increase explains why the saving rate was able to remain unchanged at 6.6%.”

“The takeaway is that higher energy prices in August might have been holding back spending in other categories. Excluding food and energy, spending was flat in August.”

After surging above the 41 handle for the first time in a month and inching closer to the 42.25 all-time high, the USD/ARS pair retreated to 40.90 area after the Argentina central bank announced that it hiked its 7-day Leliq rate by 500 basis points to 65% from 60%, as reported by Reuters.