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Daily FX View: U.S. Congress, Italy May Trump U.S. Data

Political uncertainties may leave FX markets without clear directional bias today; key risks include
Congressional developments regarding budget, likely govt confidence vote in Italy, ECB meeting, U.S. ADP report.

• U.S. Sept. ADP 08:15, est. 180k, while most important data risk today, likely to be trumped by political risk out of Congress, Italy
• ADP estimates range 160k-235k, with top 5 forecasters range 170k-200k

• JPY boosted by general risk aversion, JPY5t stimulus package; outperforms 18 major currencies
• USD/JPY downtrend continues; next support ~97 late-Aug lows; no oversold warnings from technicals

• AUD underperforms on disappointing trade, bldg approvals data
• Trade deficit -815m AUD vs est -400m, prior revised to -1375m from -765m; bldg approvals -4.7% M/m vs est. -0.5%, prior revised to 10.2% from 10.8%
• AUD/USD consolidating yesterday's significant rally
• Support 0.9281 Sept. 30 low, ~0.9225 Aug. 19 high, Sept. 13 low
• Resistance 0.9435 Oct. 1 high, 0.9529 Sept. 18 high

• GBP outperforming most major peers, shrugged off disappointing construction PMI, 58.9 vs est. 59.5
• GBP/USD continues higher along top of uptrending channel that began in July; remains overbought on technicals, options
• Resistance 1.6247 top of channel ~1.63 general resistance since 2012

• EUR outperforming most major peers, little changed vs USD ahead of ECB; no change to policy, rates expected; Draghi likely to say LTRO still on table
• Berlusconi party says to vote unanimously against Letta coalition govt; confidence vote later today
• EUR/USD remains range-bound 1.3450-1.36; daily technicals overbought, suggest eventual break lower

• Brazil reports industrial production for Aug. at 08:00, est. +0.2% M/m
• USD/BRL retreating toward 2.1821 Sept. 19 low; subsequent support 2.1761 June 27 low
• Resistance ~2.26 Aug. 12, Sept. 10 lows, Sept. 27 high

• USD/CAD higher, breaching recent consolidating range on negative impact of U.S. govt shutdown on U.S. economy
• Uptrend resuming; no overbought technical signals
• Resistance ~1.044 July 16, Aug. 7 highs, 1.0472 Aug. 27, 28 lows
• Support 1.0271 Sept. 24 low

• USD/MXN pressing higher, continuing uptrend; no sign rally overbought
• Resistance 13.2337 Sept. 30 high, 13.4383 Aug. 30, 2012 high, 13.46-47 June 20, Sept. highs

• NOTE: TJ Marta is an FX strategist who writes for First Word. The observations he makes are his own.