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(BFW) Daily FX View: Risk On Weighs On JPY, EUR/USD Nearing Top

Partial reversal of yday's moves as China returns from holiday, with JPY underperforming, risk FX gaining.

• Overall tone shifted overnight from risk-positive in Asia, as China returned from holiday, to cautious in Europe as focus returned to U.S. budget/debt impasse

• USD/JPY higher in Asia before partially retracing in Europe; JPY underperforms 24 major peers
• Daily chart shows downtrend intact, with new low since Aug.
• Support 95.81 Aug. 8 low, 93.79 June 13 low
• Resistance 97.76 Sept. 18 low, 99.67 Sept. 20 high
• Daily momentum indicators suggest FX oversold: MACD differential, RSI rising from lows since Aug. as cross bottomed below 96; stochastics lower than June, Aug. troughs

• EUR/USD fell in Asia before partially rebounding, stabilizing in Europe
• Daily charts show potential for uptrend to reverse:
• FX within uptrending intra-day lows since early-Sept., consolidating below 1.3646 Oct. 3 high, subsequent resistance 1.3711 Feb. 1 high
• Support 1.3462 Sept. 25 low, 1.3452 Aug. 20 high
• Technicals: MACD, stochastics remain overbought; stochastics crossing lower; RSI already trending lower from overbought
• Options: 25D, 1M R/R -0.43 new high since Feb., suggesting EUR overbought, while 1M imp. vol. heading lower from overbought
• German data today miss est., factory orders signal uptrend
• German Aug. import growth 0.4% M/m vs est. 0.7%, prior revised to 0.3% from 0.5%; 12-MMA 0.0%, below 0.5% avg. since 1998
• German Aug. factory orders -0.3%M/m vs est. 1.1%M/m, outweighing July revision to -1.9% from -2.7%; 12-MMA trending slightly higher to 0.3%

• USD/CAD little changed, retracing overnight gains coming into Americas' open
• Daily chart: Uptrend intact, even as USD consolidating in ~1.0275-1.0350 range since late-Sept.
• Support 1.0271 Sept. 24 low, 1.0182 Sept. 19 low
• Resistance 1.0356 Oct. 2 high, ~1.044 July 16, Aug. 7 highs
• Momentum indicators remain in uptrends, not overbought
• Options suggest upside potential with 25D, 1M R/R, 1M imp. vol. both off lows consistent with troughs in Jan., May, July
• Risk today: Housing starts, Sept., est. 185k, 08:15; Trade bal, Aug., est. -0.7b, 08:30

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