GBP Tests 1.30 in Brexit Drama; ECB Looms

EUR/USD reached multi-week highs of 1.1179 yesterday and has since orbited the 1.1145 area, a key technical level that represents the 50% retracement of the 1.1412 – 1.0879 range.  Strong upward momentum propelled the pair higher from the 1.0991 level last week, and traders are now eyeing the 1.1185 area as the next upside target with some possible selling pressure ahead of the 1.1208 area. The big news this week will be the monetary policy decision from ECB’s Governing Council on Thursday followed by remarks from ECB President Draghi. Eurozone consumer confidence numbers are due Wednesday with some eurozone October PMI data due Thursday. German GfK and IFO consumer and business confidence data are expected on Friday. US data to watch this week include housing numbers, October PMI, and University of Michigan consumer sentiment. The FOMC has a rate decision at the end of this month.

USD/JPY was lifted higher from the 108.29 level during yesterday’s trading activity after traders tested a level that represents the 38.2% retracement of the move from 114.58 to 104.46.  USD/JPY has recovered from month-to-date losses that saw the pair trade as low as the 104.48 area. The pair’s next upside challenge could be the 109.21 level. Traders are closely watching any possible economic impact of deadly storms on Japan. October PMI data are due on Thursday. Bank of Japan has a rate decision at the end of this month.

GBP/USD continues its dramatic surge higher that saw it test the 1.3012 level yesterday, the first time it has traded above the psychologically-important 1.3000 figure this year. Bids emerged yesterday around the 1.2889 area, representing the 76.4% retracement of the 1.3177 – 1.1958 area.  Traders anticipate some selling pressure between the 1.3025 – 1.3057 range. Traders are closely monitoring events in the UK Parliament to see if PM Johnson will be able to bring a vote to the floor to exit the European Union on 31 October, or if he will again be rebuffed and seek to extend the exit to 31 January 2020.  Public sector finances and October CBI optimism numbers are due today.

USD/CHF paused from its recent selling pressure yesterday after the pair traded as low as the 0.9841 area, right around the 50% retracement of the 0.9659 – 1.0028 range.  The pair recently traded above parity at 1.0028 but could not sustain the move above the psychologically-important parity level. Selling pressure was intense last week but was not strong enough to test bids around the 0.9853 area.

USD/CAD extended its recent gains as the pair traded as low as the 1.3071 level, its weakest print since 22 July.  The pair has largely been a one-way trade since 10 October when it peaked around the 1.3345 area. Stops were elected below the 1.3103 area during the move lower, representing the 76.4% retracement of the 1.3017 – 1.3383 range. Exit polls in Canada are showing incumbent PM Trudeau’s Liberal Party may have won the parliamentary election and will retain power as a minority government.  August retail sales numbers are due today. Bank of Canada has a rate decision at the end of this month.

AUD/USD has rallied significantly over the past several days and traded as high as the 0.6883 area, right around the 50% retracement of the 0.7082 – 0.6670 range.  Bids emerged last week around the 0.6723 area and upward momentum has been strong since then. Traders anticipate some selling pressure in the 0.6908 – 0.6947 range. Traders await possible remarks from RBA member Kent in Sydney today. October CBA PMI data are due Wednesday.

NZD/USD extended recent gains in today’s session, trading as high as the 0.6435 level after buying pressure emerged last week around the 0.6240 level.  Some stops were triggered above the 0.6428 level during the pair’s climb, representing the 38.2% retracement of the 0.6790 – 0.6204 range. Some technical resistance is expected around the 0.6441 level, and the 0.6496 is an upside price target. September trade balance numbers are due tomorrow.

USD/CNY has orbited some key technical levels in recent days as the pair has not strayed too far away from the 7.0718 area, representing the 23.6% retracement of the 6.6705 – 7.1957 range. Some additional key levels related to this range include the 7.0686 and 7.0699 levels. The pair last week tested a key technical level in 7.0512 and any perception by the markets that the trade spat between the US and China is improving could see downward price pressure. Last week’s Chinese economic data saw Q3 GDP growth decelerate to +6.0% y/y from +6.2% y/y and talk is now focused on future Chinese economic output with a 5% handle.