Sterling weakens as the week starts as the markets receive more rhetoric from BoE members regarding quantitative easing. MPC member Adam Posen was quoted in Sunday Times saying that he's not worried about overshooting inflation right now and hinted he may back an extension of the GBP 175b asset purchase program. The pound rebounded strongly last week on comments from Paul Fisher that he's opt to pause the QE program as results are what he'd hoped for. Whether Sterling would extend the rebound will depend on tough test of BoE minutes and Q3 GDP later this week.

Looking at sterling's outlook, while last week's rebound was strong, there is no change in the bearish outlook. GBP/USD and GBP/JPY are still held below key near term level of 1.6740 and 153.22 so far. GBP/AUD is also staying below 1.8467 resistance. Further decline is expected in GBP/AUD to channel support at 1.6774 and possibly to double projection target of 1.60/61 level (100% projection of 2.2877 to 1.9684 from 2.0979 at 1.6104 and 100% projection of 2.7092 to 2.0231 from 2.2877 at 1.6016) before bottoming

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Elsewhere, dollar weakens mildly as the week starts, continue to feel the pressure of higher crude oil. Oil extends recent rally and breaches 79 level briefly. Gold continues to consolidate around 1050 level. Asia stocks are mixed, providing little guidance to risk appetite trading in FX. Nevertheless, markets will have a close watch of earning results from Apple today which could have a great impact on equities markets.

Economic calendar is light today. Rightmove house price in UK rose strongly by 2.8% mom in October. Japan Tertiary industry index rose 0.3% mom in August. Canadian international securities transactions and US NAHB housing market index will be featured later today. Also, markets will look into speeches by Fed chairman Bernanke.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 147.43; (P) 148.37; (R1) 149.57; More

With 4 hours MACD crossed below signal line, an intraday top should be in place in GBP/JPY at 149.28 and outlook is turned neutral for the moment. Not that rebound from 139.69 is treated as a correction to fall from 163.05 only. Below 144.51 resistance turned support will suggest that such correction has completed and will turn bias back to the downside for retesting 139.69 low first. On the upside, while another rise cannot be ruled out, we'd continue to expect GBP/JPY to be limited by 149.01/153.22 resistance zone to conclude the rebound and bring fall resumption.

In the bigger picture, the bearish outlook remains unchanged. medium term rebound from 118.18, which is treated as correction to the larger down trend from 07 high of 251.90, has completed with a double top reversal pattern (162.56, 163.05). Fall from 163.05 is tentatively treated as resumption of the long term down trend and should now target a new low below 118.81.

However, note that decisive break of 153.22 resistance will argue that fall from 163.05 has completed at 139.72 already. This will in turn argue that it's probably just a correction to the medium term rise only. Another high above 163.05 might be seen in such case before rise from 118.81 concludes.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
23:01GBPRightmove House Prices M/M Oct2.80% 0.60% 
23:50JPYBoJ Meeting Minutes    
23:50JPYTertiary Industry Index M/M Aug0.30%0.10%0.60% 
1:00USDBernanke; Yellen speak    
2:00AUDRBA Assistant Governor Lowe Speaks    
12:30CADInternational Securities Transactions (CAD) Aug 2.97B0.35B 
15:00USDBernanke Speaks    
17:00USDNAHB Housing Market Index Oct 2019