eFXplus DATA

The EUR/USD upside has been limited despite the September U.S. retail sales miss nLNSFLEEM8, as lingering concerns over Italy and the CDU/CSU election losses in Bavaria nL8N1WU02P weigh on spot.
Despite the latest euro holdup, the next big move in the EUR/USD will is likely to be up.
EUR/USD's build-up of short positions since early October remain stubbornly intact , according to EBS flow data, despite the month's strong recovery from 1.1433 to 1.1611.
That means some of the buy stops associated with the outstanding shorts remain vulnerable.
EUR/USD continues to consolidate after October's recovery, as the market gears up for the next leg higher through the 1.1624 Fibo, a 50 percent retrace of the 1.1815 to 1.1433 fall.
Daily cloud, which now spans the 1.1546-1.1569 region, continues prop up the market.
Friday and Monday 1.1535 matching lows provide another line of support for bulls.
Traders now eye September U.S. industrial production for clues on the next dollar move.
Related comment .

• GBP on the front-foot before UK earnings/jobs data, with cable up to 1.3197
• 1.3197 is high since Monday's drop to 1.3080 on weekend Brexit deadlock
• Asia range was 1.3142-1.3163, before GBP caught early Ldn bid
• EUR/GBP down to eye 0.8786, 38.2 pct of 0.8723 to 0.8825 (Monday's high)
• 0.8723 = 16-week low last week on hope Brexit deal might be agreed this week
• UK minister says colleagues must rally behind PM May on Brexit nL8N1WW1I7

• Bears need to take out the key 111.60 Fibonacci level to force a big drop
• 111.60 Fibo is a 61.8% retrace of the 109.78-114.55 (August to October) rise
• A break and daily close below 111.60 Fibo would lead to a big collapse
• Daily momentum remains reinforcing the overall bearish market structure
• We are looking to get short at 112.30 as this is ahead of Mon's 112.38 high
• Bearish USD/JPY , biggest one-week drop since Feb

• EUR/USD continues to consolidate after strong recovery from Oct's 1.1433 low
• Market gears up for the next leg higher through the 1.1624 Fibo
• 1.1624 Fibo is a 50 percent retrace of the 1.1815 to 1.1433 fall
• Daily cloud, which now spans the 1.1546-1.1569 region, continues prop
• Friday, Monday 1.1535 matching low provides is a further line of support
• Previous bullet . USD bulls could lose the war

• AUD/USD trades a range of 0.7129/50 in Asia, last at 0.7130
• RBA minutes very similar to Sept and had no impact
• Risk in Asia slightly better bid as stocks rebound despite Wall St fall
• Market makes 2 attempts to break strong resistance @ 0.7142/46, fails so far
• Likely break will target 61.8 Fibo at 0.7211, 55 DMA at 0.7235
• Support comes in at 10 DMA and Monday low at 0.7097/99

A slightly more positive risk tone in Asia points to a squeeze of the large short positions in the Australian dollar, which stood at three-and-a-half-year highs last week according to the latest CFTC data.
Asian equities are trading in positive territory despite Monday's drop on Wall Street, and Asian currencies ex-Japan are also having a reasonable day.
The mood has been encouraged by the People's Bank of China setting the USD/CNY midpoint slightly lower than yesterday's fix and well below expectations.
One caveat to the positive risk mood would be a drop in China stocks later in the session, but for now Shanghai is up 0.2 percent.
The AUD/USD is pressuring very clear resistance around 0.7142/46 - that area includes a major low from September 17 and also the 38.2 Fibo of the September to October decline.
A convincing break of 0.7150 will target the 61.8 Fibo at 0.7211 and the 55-day moving average at 0.7235.
Given the overwhelmingly bearish view of the AUD/USD, a squeeze of that magnitude looks likely in the coming sessions.

• AUD/USD unchanged as RBA minutes confirm continued policy stability
• RBA seems unconcerned by 'modest' rise in banks' funding costs nRUAFLEE3U
• Comments on A$ consistent with previous meetings
• Strong resistance at 0.7142/46 looks vulnerable to a short squeeze
• Support seen at recent lows around 0.7100, 10 DMA at 0.7097
• S/t MAs and momentum studies turning higher, supporting a topside break

• Shade firmer early after closing +0.2%, fuelled by a softer USD - inside day
• EU's response to the Italian budget will be the next hurdle nL8N1WV1L6
• Momentum studies flat line, 5, 10 & 21 DMAs conflict - neutral setup
• 1.1550 1.3BLN & 1.1600 900M strikes likely contain in Asia if it's quiet
• Close above 1.1610/24, 21 DMA & 50% Sep/Oct fall would be positive
• 1.1558 London low & 1.1606 NY high initial support/resistance

• +0.5% in response to strong NZ inflation, rising to 1.9% Y/Y nL8N1WV068
• This was after a bullish outside day and rise of 0.7% yesterday
• NZD has been in a falling trend channel since May - 0.6634 channel top
• AUD/NZD weekly charts show a strong 1.0856/60 support since August is broken
• While a surprise, the data is not strong enough to change the RBNZ outlook
• Devil in the CPI detail - mostly oil & NZD - expect trend channel to hold

Danske Research discusses EUR/CHF outlook and warns that the cross's recent resistance to risk-off bouts might be on the cusp of changing in the near-term.

"While CHF has proved surprisingly resistant to Italian risks and the equity sell-off recently, we stress that the risk of further Italy-EU confrontation as well as Brexit negotiations setbacks remain likely. This should weigh on EUR/CHF short term.

The SNB will remain reluctant to change its communication in light of the stubbornly subdued inflationary pressure and a still-distant first hike from the ECB. In the absence of new political risks, this should allow EUR/CHF to re-invoke on a gradual move back towards 1.20 in 12M. It is likely to require a clear dip below 1.10 for the SNB to start intervening on a larger scale.

Danske still looks for EUR/CHF to trade around 1.13 in 1M-month, 1.13 in 3-months, 1.16 in 6-months. 

• USD/JPY derisking & broad USD-led downtrend presses key 111.60 props
• Uptrend line from Aug low & 61.8% of the Aug-Sept rise are at 111.60
• Break of 111.60, close below 100-DMA would eye Aug low
• IMM specs went into last week's USD/JPY tumble heavily long
• U.S. sales & inventory data have little influence; IP & CU Tuesday
• USD/JPY straddling 55-DMA at 111.84 into close, near-term pivot pt
• Fallout from trade war and Fed tightening main drivers for now

The halt in Brexit progress has left GBP/USD on the verge of breaking a slew of moving average support that could signal steepening losses. Among them is the 30-DMA by 1.3077.
A close below there would weaken cable's bullish structure and put daily cloud top support at 1.3013 in danger.
Failure to invigorate Brexit negotiations could also bring the Oct 2 and 3 lows by 1.2920 back in play, giving bears renewed confidence for an assault on the Aug 15 low of 1.2662.
Though the pound rallied today off early Asia's 1.3080 low, and hovers near flat on the session at 1.3150, recent upbeat rhetoric has turned more pessimistic, keeping sterling away from its recent high ahead of 1.3300.
The most significant Brexit issue remains the Irish border nL8N1WV31L and has significant ramifications for PM May's government.
She has tried to assuage Irish fears of a hard border by suggesting the UK remain in the customs union past Brexit's March 2019 start date.
But Germany's Merkel made clear today non-EU members can't be members of the single market and that the bloc needed to prepare for all possible Brexit scenarios nS8N1WO01N.

Barclays Research discusses the EUR outlook in light of the ongoing Italian fiscal slippage and corresponded tension between the EC and the Italian government.

"We think medium-term concerns about Italian fiscal slippage will likely continue to exert downward pressure on the EUR in the coming months, restricting the single currency’s ability to post meaningful gains.

At current levels, we think a lot of negativity is already in the price; however, the near-term trajectory will crucially depend on: 1) the outcome of the budget discussions between the EC and the Italian government, and 2) rating agency reviews of the sovereign by both S&P (26 October) and Moody’s (no confirmed date but likely on the same day too).

As a base case, we expect tensions between Italy and the EC to mount in the coming weeks, bringing a lot of headline volatility and choppy EURUSD price action, leaving the pair to oscillate around our year-end 2018 forecast of 1.15.

Any meaningful concessions between Italy and the EC, although unlikely in our view, will make EURUSD retrace recent losses towards the top-end of its 1.13-1.18 range," Barclays argues. 

EUR/USD held above its 10-DMA for a second day, suggesting more gains from October's lows are possible, though a host of European-specific concerns should temper bulls' enthusiasm. Today's rally, which also pushed above the daily cloud, also benefited from ongoing stocks weakness, given EUR/USD's inverse correlation to equities.
If EUR/USD extends its gains, it is still likely to have difficult breaking through key 1.1650/60 resistance.
Sunday's election in Germany's Bavaria region dealt a blow to Chancellor Merkel's ruling coalition that could call her leadership into question and make traders reluctant to get long euro as long as the uncertainty lasts. Italy risk also remains a prominent feature on the European landscape, with the government scheduled to present its budget to the EU today.
Brussels is unlikely to react warmly to the fiscal plan, which could drive traders away from EUR/USD as markets also await ratings reviews of Italy debt toward the end of October. Markets fear a downgrade is possible.
The pair seems set to trade in a broad 1.1425/1.1650 range until those risks pass.

CIBC Research discusses its reaction to today's US retail sales report for the month of September.

"US retail sales were a mixed bag in September, with the headline figures disappointing expectations but some of the detail a little stronger than anticipated. Headline retail sales were up only 0.1% on the month (consensus 0.6%), with ex-autos showing a decline of 0.1%. While auto sales were a positive for the headline result, they weren't as strong as had been signaled by the previously released industry data...

The weak headline figure will likely be slightly negative for the US$ and positive for fixed income, although the reaction could be limited by the more encouraging detail within the release," CIBC argues. 

• USD/JPY remains heavy, EBS range Monday has been 111.63-112.38 so far
• Large cluster of 111.40-55 NY cut 1.0 bln strikes likely to draw near-term
• Biggest one-week drop since Feb unmasks major Fibo, 30-WMA
• Likely there are decent bids ahead of daily cloud top at 111.48 and key Fibo
• Key Fibo is 61.8% retrace of the 109.78-114.55 rise
• Spot was heavy on Gotobi Tokyo fix sales, Mnuchin

• AUD/USD rise to test 0.7140 fuelled by across-the-board selling of the USD
• 0.7099-0.7114 was Asia range. 0.7140 was Friday's high (peak since Oct 3)
• Greenback supply includes position adjustments (reduction of longs)
• IMM speculators are very long USD -- and very short AUD too
• AFR-BAML sees AUD/USD rallying to 0.84 by the end of next year
• AUD/USD was last at 0.84 in Dec 2014. 0.8136 was 32-month high in January

• Biggest one-week fall since Feb to register a close under the 200-WMA
• The 200-WMA is currently now at the 113.14 level, the close below is bearish
• Ultimately failed to register a close above daily kijun last wk
• Scope grows for further losses down to 110.73 Fibo and 30-WMA now at 110.45
• 110.73 Fibo level is a 38.2 retrace of the 104.56 to 114.55 2018 (EBS) rise
• Looking to fade recovery attempts to 113.30

• Solid support seems to have formed at 1.1535 below daily cloud base
• Closes above daily cloud base, at 1.1546, keeps the overall bias on upside
• Only a daily close below cloud base will increase odds of a deeper relapse
• We remain long at 1.1576 for a break above 1.1624 Fibonacci level
• 1.1624 Fibo is a 50% retrace of 1.1815 to 1.1433 (Sept to Oct) EBS fall
• Thursday saw biggest gain since Sept 20, bulls eyed 30-DMA

• DXY up 0.14% in Asia, trades a 95.30/37 range only
• Opened higher as GBP sold-off on stalemate in Brexit talks
• Mixed signals as s/t MAs cross lower, momentum studies try to base
• Range between 21 DMA at 94.99 and 10 DMA at 95.52 likely to persist
• US retail sales and US Tsy currency report main factors later
• China stocks volatile around par as PBOC promises easy monetary policy