Key points for the day - Lloyds Bank

"After an initial surge post US employment data on Friday, the USD and yields reversed their gains to finish the day back near their lows," note Lloyds Bank analysts.

Key quotes:

"While one-day reversals are to be taken with a 'pinch of salt', we have reached USD levels which should provide at least more two-way action in the USD. One market where this hasn't been the case is the Turkish Lira which plummeted overnight, as relations with the US deteriorated. We have very little on the calendar today, with parts of the US celebrating Columbus Day, therefore technical levels will likely play a greater part in price action this week."

"The fifth round of Brexit talks starts this week, with fading hopes that there will be “sufficient progress” in separation issues in time for the EU leaders’ meeting later this month. As such, the next stage of negotiations on the future relationship seems unlikely to start until December at the earliest. Domestic political uncertainties have raised concerns about the outcome of complex and time-limited Brexit negotiations."

"Political risks remain elevated in Spain, with events potentially coming to a head today. The Catalan Parliament may convene to evaluate the independence vote, despite the special session being suspended by the Spanish courts. Political analysts believe PM Rajoy will have to use constitutional powers to suspend the region’s autonomy if it declares independence. Meanwhile, economic pressure has risen, with some large companies considering moving their headquarters to other parts of Spain."

"GBP/USD: Short-term studies are more positive suggesting a rebound from the 1.30 psychological region can be seen. However, we still view rebounds as corrective, with 1.3160 and 1.3240 the main resistance levels we are focusing on. A move through there would risk a broader rebound towards 1.3360. Ultimately though we see a move down through 1.30 and 1.2950 channel support to open more levels in the 1.28-1.25 region. That area should define the bottom of a medium-term range."

"Long term, our studies suggest the bear trend that started back in 2007 at 2.1160 is in its last phase. Recent price action increases the chance that 1.1490 was a major long-term low. Even so, there remains a risk of a return to the low 1.20s and possibly a re-test of said spike lows in the next two years." 

"EUR/USD: Friday’s reversal into the close, alongside divergence in the momentum studies increases the risks of a corrective rebound developing. A move through 1.1770 resistance would add conviction, with 1.1825-1.1865 more important resistance above. Overall though, rebounds are still seen as corrective ahead of a deeper retracement towards our 1.1500 targets."

"Long term, we believe 1.0350 was a major low, which completed the cycle from the 1.60 2008 highs. This should see an eventual move back towards 1.30-1.35, but for now, we look for medium-term consolidation under 1.21-1.23 resistance. 1.15-1.11 is important support on pullbacks in this regard."