eFXplus DATA

• USD/JPY pull backs remain fleeting, trade and Brexit optimism buoy risk mood

• China implementing new rules to make business easier nL3N278275

• China following through "in good faith" on assurances- US's RossnL2N27803K

• Markets cheered by chances of "no-deal Brexit" being all but eliminated

• But need far more positive news for substantial move higher

• Resistance 108.90-95, 109.07 (200-DMA); support 108.45-50, 108.25-30,

Barclays Research discusses its expectations for tomorrow's ECB October policy meeting.

"We do not anticipate meaningful changes to the current monetary policy framework when the ECB meets on 24 October. A few weeks after announcing a comprehensive, but highly controversial, easing package and with Christine Lagarde about to succeed to Mario Draghi in December, we think the Governing Council will refrain from taking any actions," Barclays notes.

"However, data released since the September meeting are not particularly encouraging and geo-politics is mixed bag, suggesting more accommodation is to be expected, in line with our baseline," Barclays adds. 

• Slide from daily cloud top extends as AU yields trade lower nL2N2780FB

• Pair lingers above 0.6820/30 support zone, bears are not being aggressive

• US$ bounce from its recent slide is likely only a correction

• Hopes for progress on trade issues & stock gains help limit AUD/USD losses

• Monthly techs remain very bullish, suggest the rally should resume soon

• AUD/USD longs need a break of 0.6895/0.6920 zone to take full control

• USD/JPY's break of prior 10-DMA support was quickly bought into

• Back above that MA (108.53) as derisking on Brexit delay reversed

• Rebound aided by hints US-China trade deal is more likely nL2N2780GI

• Day's 108.25 lows barely breached Monday's, now up by week's highs

• USD/JPY's cheap if L-T bottom in Treasury yields confirmed nL2N2780UJ

• Pair still facing offers into 109 and 200-DMA at 109.08

• Aug. 1 high and 61.8% of 2019's range at 109.32/36 are key daily hurdles

• October PMI releases Thursday eyed ahead of BOJ, Fed meets Oct. 30/31

NAB Reserach discusses EUR/USD outlook and adopts a constructive view, expecting a test of the top range around 1.12 in the near-term.

"While it not always the case, EUR/USD can on occasions act as a low-beta GBP. For this to be so, FX investors need to think not only that GBP’s rise has further to run, but that the stars are aligning in areas such as economic growth and interest rates versus the US. All of this is a positive backdrop for the EUR, where short positioning appears to be aiding a rise in risk reversals into positive territory and now approaching multi-year highs," NAB notes. 

"EUR/USD looks set to test our 1.12 range high, but at this stage 1.13 should provide resistance. This week sees the release of flash EZ PMIs which will be important for sentiment. The ECB meeting this Thursday will be Mr. Draghi’s last. There will be no new forecasts and we expect him to remind all and sundry on the risks and how the ECB can help. However, his hands are tied on pledging more action," NAB adds. 

As the UK inches, ever so slowly, toward its Brexit conclusion, GBP/USD traders remain skeptical.
The pound is up slightly at 1.2876, near the top of Wednesday's 1.2897-1.2842 range, but remains below its recent trend high just above 1.3000 nL2N2780F8.
Though parliament has ratified PM Johnson's deal, the delay beyond Oct.
31, with theEU expected to grant a delay until January, injects some political uncertainty back into the equation, weighing on GBP/USD.
Not one to go quietly, PM Johnson, reacting to the timetable delay, has said he would abandon attempts to ratify the deal and seek an election before Christmas.
With a hard Brexit off the table, downward pressure on GBP/USD has been greatly reduced and despite some GBP/USD weakness related to general election uncertainties, a hard floor has likely been put in near recent lows by 1.2000.
For now resistance at 1.3012 the Oct. 21 high, near the weekly cloud twist, and the 200-DMA by 1.3149 should cap GBP/USD, with the rising 10-DMA at 1.2791 providing support, assuming the Brexit delay nL2N2780E2 is granted by the European Union.

UOB Research discusses AUD/USD technical outlook and flags a scope for further upside in the near-term.

"AUD didn’t do much yesterday as it eked out a fresh high of 0.6883 before slipping to close slightly lower at 0.6856 (-0.16%). For now, there is no change to our view from last Friday (18 Oct, spot at 0.6825) wherein the risk is for a higher AUD towards 0.6895," UOB notes. 

"Only a break of 0.6815 (‘strong support’ level was previously at 0.6800) would indicate that our view for a stronger AUD is wrong. Looking ahead, if AUD were to break clearly above 0.6895, the next level to focus on is at 0.6930," UOB adds. 

TD Research discusses the USD outlook and thinks that the USD index 'DXY' may have a tactical turn higher soon.

"The ECB will remind markets this week why the EUR remains the funder of choice. Meanwhile, the Fed is likely to cut next week but the outlook for more cuts is less assured. On a HFFV basis, the index is running nearly 1.5% cheap, right at the 200dma. EURUSD is likely to bear the brunt of the adjustment," TD notes. 

"The market is also priced for a Fed cut next week (which we agree with). Less obvious is the optionality presented by Powell for future policy shifts however. While we do not think that Powell will be quick to completely close the door to support the economy with more cuts, we think it is far more likely they he (and the Committee) opt to wait and see how the data unfolds after delivering 75bps of cuts and trade talks have pivoted towards a more positive footing. This could serve as the basis for a tactical turnaround in the USD," TD adds. 

The recent increase in the price of options that protect against EUR/USD gains has peaked.
The implied vol premium for EUR calls over puts on the one-month 25 delta risk reversal is back from highs since July at 0.4 to 0.275 EUR calls.
Even when EUR/USD was looking to test 1.1200 and option market makers raised the price to protect against gains above that, uptake was minimal.
Implied vols remain at the low end of long-term ranges, which is consistent with a lack of realised and expected spot volatility.
The benchmark one-month contract at 5.25 is now less that 1.0 vol above its record low from April, and one-year just 0.15 above its own record low at 5.6 from 2007.
Implied vols have been low all year, which is no surprise given the lack of spot volatility within limited ranges.
Current option price action reinforces the perception that this scenario will continue for now.
Expect some support at 1.1100 near term nL2N27805B and limited reaction to Draghi's last ECB nL2N278048.
Related nL2N278055

• Constructive daily chart with a double day low in place at 0.8577-78

• Steeply falling 10DMA might offer only token resistance at 0.8671

• Significant doji candle highs at 0.8700-0.8716 might put up more of a fight

• Stochs are confirming price gain and negative momentum fading

• Bearish continuation pattern damaged but not negated, 0.8716 key here

• Weeklies unable to break away from the 200WMA at 0.8648

Like Brexit, the pound has seen a lot of dramatic swings recently but ended up pretty much where it began.
It's now close to the centre of the long-term range that so many have forecast over the past two years.
A 1.20-1.40 GBP/USD range is a widespread assumption, making this month's high a return to middle ground.
No one knows what to do.
Brexit seems to be going nowhere; neither does sterling.
If the spilt ever happens, GBP/USD bulls hope for an explosive rise to clear shorts.
Afterwards, though, the UK must deal with the costs of the split.
Without shorts to chase, sustainable sterling gains seem unlikely.
Today an election seems slightly more likely than Brexit, and election risk is a negative.
But it's more likely no election will occur and the stalemate will endure.
Whatever happens next, a break of the boundaries is not likely, far less so with cable in the middle.

• Came off its 1.3012 Mon high through Tues but not aggressively so

• Adjustment within a larger adjustment leaves GBP treading water early Wed

• Strong bull signal from 10DMA crossing clear above the 200DMA line

• 200DMA seen key and could attract bids if pullback deepens

• Price back inside its 30DMA Bolli envelope

• We await stronger signals

  
  

• Options expire at 10-am New York cut Wednesday Oct 23

• EUR/USD: 1.1050-70 (1BLN), 1.1100 (1.1BLN), 1.1120-30 (750M), 1.1150 (630M)

• 1.1185-1.1200 (1.3BLN), 1.1230-35 (600M)

• USD/CHF: 0.9880 (300M), 0.9950 (450M), 0.9975 (350M)

• AUD/USD: 0.6775-90 (1BLN). GBP/USD 1.2900 (265M)

• NZD/USD: 0.6280 (371M), 0.6375 (250M), 0.6430 (250M)

• USD/CAD: 1.3100 (430M), 1.3250 (1.2BLN)

• USD/JPY: 108.30-40 (640M), 108.50 (370M), 108.65-70 (550M), 109.00 (430M)

• -0.3%, in a 0.6834/62 range, as the soured offshore risk appetite extended

• Light AUD volumes - AUD/JPY off 0.45% and AUD/NZD flat, likely Tokyo selling

• E-mini S&P -0.3%, led the way, Nikkei flat after the holiday, AsiaxJP -0.7%

• Charts - momentum studies, 5, 10 & 21 DMAs remain positive

• Major 0.6875/80 resistance - cloud top & 50% July/October fall cap

• 0.6821 cloud base is pivotal support - close below ends topside bias

  
  

  
  

• AUD/USD fumbled on the latest twist in Brexit saga, but stable now

• Longs were trimmed but price action reveals reluctance to turn short

• Bollinger uptrend channel will remain in effect if 0.6824 holds Wed

• Another stab at Ichimoku Cloud top 0.6880 possible if Asia stocks bounce

• Early equity weakness follows Wall St retreat, but drop has been mild

• Another Brexit delay not entirely seen as GBP-negative nL5N2772C9

• +0.1%, bargain hunting into yesterdays 0.7% fall, as the Brexit saga extends

• EU likely to approve Brexit extension, avoiding no deal Brexit nL5N27784B

• An election looks the likely outcome, which will extend uncertainty

• Struggles above 1.3000 - yesterday dip was an inside day - no game changer

• Charts show daily and weekly MAs heading higher, which is a positive setup

• 1.3045, 76.4% of 2019 fall and 1.3168 50% 2018/2019 fall strong resistance

• 1.2791 10 DMA, then 1.2700, 38.2% of the October bounce initial supports

• Flat early after closing -0.15%, as the GBP led the USD higher

• There is no data, but Tokyo return from holiday, which may generate flow

• With little fundamental or event lead, the focus swings to the charts

• Momentum studies, 5, 10 & 21 DMAs head higher - positive setup

• Major 0.6875/80 resistance, cloud top & 50% Jul/Oct fall cap

• Above this is the 0.6895 September high - news needed to break 0.6900

• NY 0.6851/0.6869 range is initial support/resistance

NAB Research discusses AUD/USD technical outlook and flags a scope for further upside over the coming weeks on a confirmation with a break above 0.6895 in the next week or two.

"The triple bottom at 0.6670/90 is typical of a MT bottom. The October low was the lowest of the 3 and coincided with bullish MT momentum failures. When the weekly RSI breaks above its 2018/2019 downtrend a MT uptrend bias will be confirmed. A break of the previous high at 0.6895 will renew a MT uptrend structure (higher low / higher high) and confirm a sustainable MT uptrend," NAB notes. 

"We anticipate price breaking above 0.6895 in the coming one to two weeks. When confirmed by an RSI breakout we will have comprehensive confirmation of a MT uptrend and initially target a 38.2% retracement of the 2018/2019 downtrend to 0.7230," NAB adds. 

Adds headline

• Daily cloud top caps the rally, pull back ahead of WBA ensues nL2N2770HR

• AUD/USD slide extends near 0.6850 before US$ gets sold & buyers emerge

• Stock gains, Brexit & US-Sino trade optimism help lift near 0.6865 late

• Daily doji forms near cloud top, could be a warning to AUD/USD longs

• AU yields & AUD/USD could rally big on possible double bottoms nL2N2770OC

AUD/JPY has run into resistance by Aug.
1's 74.85 pre-breakdown high, but it could still rise to test July's 76.27 peak if Brexit and U.S.-China trade deals make orderly progress, especially if overbought conditions are reduced before then. The July high is also the ABC objective off August's low.
The move up in October received support from the rebound in two-year AUD-JPY yields spreads from a double-bottom and all-time lows, though AUD/JPY's rise has far outpaced yield spreads.
Optimism that the U.S.-China trade war is cooling and the need for further RBA rate cuts is falling nL2N2770OC underpins AUD/JPY gains.
But, as with USD/JPY, and most JPY pairings, the key macro factor driving the haven yen lower is hopes for brighter global trade prospects dimmed by the U.S.-China trade conflict, now in remission, and a soft Brexit nL2N2770JW.
If a no-deal Brexit is averted and the U.S. and China agree on a deal by the Nov.
16 and 17 APEC meeting nL2N27314W that removes the Dec.
15 tariff escalation threat and provides a plausible path to protectionist de-escalation, AUD/JPY could easily reach its July highs.
In the interim, key support is by last week's 73.00 low and the flat 73.07 cloud top.