Sample Category Title

• EURUSD rising inside impulse wave 1
•  Likely to reach resistance level 1.1000

EURUSD currency pair continues to rise inside the sharp impulse wave 1 which started earlier from the support zone between the key support level 1.07865 (former strong support from the start of August) intersecting with the support trendline from April.

The active impulse wave 1 belongs to the higher order upward impulse wave (C) from the end of October.

Given the strongly bearish US dollar sentiment seen today, EURUSD currency pair can be expected to rise to the next resistance level 1.1000 (target price for the completion of the active impulse wave 1).

S&P 500 reversed from support area
• Likely to rise to resistance level 5850.00

S&P 500 index earlier reversed up from the support area located between the key support level 5695.00 (which reversed the index for 7 consecutive days at the start of October) and the lower daily Bollinger Band.

This support area was further strengthened by the 38.2% Fibonacci correction of the sharp upward impulse from the start of September.

Given the clear daily uptrend, S&P 500 index can be expected to rise further to the next resistance level 5850.00 (former minor resistance from the end of October).

The ISM Services index rose 1.1 points to 56.0 in October, far better than the consensus forecast calling for a pullback to 53.8 and reaching the highest level since July 2022.

The employment sub-index shot higher by 4.9 points to 53, more than undoing recent months' weaker readings. Meanwhile, both the new orders (-2.0 points to 57.4) and business activity (-2.7 points to 57.2) indexes were lower on the month, though each remain well above their respective prior twelve-month averages.

The prices paid sub-component edged lower (-1.3 points to 58.1), while supplier deliveries times were further elongated, reaching a 27-month high of 56.4.

Fourteen services industries reported growth in October — listed in order — are: Retail Trade; Information; Transportation & Warehousing; Accommodation & Food Services; Finance & Insurance; Construction; Mining; Public Administration; Utilities; Real Estate, Rental & Leasing; Educational Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Wholesale Trade. The two industries reporting a contraction in the month of October are: Other Services; and Management of Companies & Support Services.

Key Implications

The ISM Services index defied expectations and rose to the highest level in over two-years in October. While both new-orders and business activity were a tad lower on the month, they both remain well in expansionary territory. Conversely, the sharp increase in the employment sub-index – reaching the highest level since February 2023 – provides further support that last week's soft job numbers were likely heavily influenced by Hurricane's Helene and Milton. Based on survey responses, recent weather events as well as last month's short-lived port-strike also seem largely to blame for the further uptick in supplier delivery times.

Taking a step back, service spending has remained remarkably stable through most of this year, with the three-and-six-month annualized rates of change holding steady at 2.5% as of September. With measures of new-orders and business activity still at healthy levels, the backbone of consumer spending is likely to remain a sturdy contributor to growth in the fourth quarter and into next year.

• Fed expected to cut rates for second time, overlook political risks
• But will it be the last cut for 2024?
• Dovish tone and election results pose a risk for dollar bulls
• FOMC Decision is due at 19:00 GMT Thursday, Powell conference at 19:30 GMT

After much back-and-forth, a 25-bps cut is a done deal

The Federal Reserve is almost certain to deliver its second rate cut of this easing cycle on Thursday, with the size of the reduction no longer in question following a string of upbeat economic indicators out of the US. A 25-basis-point cut is more than 98% priced, as investors have shifted their expectations away from large 50-bps reductions to the possibility of a pause at one of the upcoming meetings.

The receding expectations of aggressive easing have spurred a more than 4% rally in the US dollar, as measured by its index against a basket of six major currencies. However, Fed rate cut bets have not been the only factor pushing up the dollar.

Trump energizes dollar bulls

Increasing odds of Donald Trump winning the presidential race on November 5 have also contributed to the greenback’s incredible bullish run during October as his policies are seen to be inflationary. The clash with the timing of the elections is why the Fed meeting is a day later than usual. However, even if the outcome of the election is known by the time FOMC members cast their own votes, it’s unlikely to influence the decision, at least not before the next president has taken office.

Hence, policymakers will be focusing on how the labour market and inflation picture have evolved since the last meeting. All indications are that the American economy remains in good shape with few signs of a severe downturn or even a slowdown. GDP grew by an annualized rate of 2.8% in Q3 and growth in the current quarter is running at 2.3% according to the Atlanta Fed’s latest GDPNow estimate.

Striking a balance

For the Fed, its primary concern has been the signs of cracks in the jobs market. July’s soft payrolls numbers that swayed the Fed towards cutting rates by 50 bps in September appeared to be a temporary weakness until the October report came along. However, the October readings were heavily affected by the impact of the hurricanes as well as the strike at aerospace giant, Boeing. More importantly, the unemployment rate held steady at 4.1%, having jumped to 4.3% in July.

Overall, though, jobs growth definitely appears to be slowing, and the Fed may need to move faster over the course of next year. But for now, policymakers have to strike a balance with still persistent price pressures. The Fed’s favourite inflation metric – the core PCE price index – was unchanged at 2.7% y/y in September, defying forecasts for a small drop. Other price gauges also support the case for caution; the ISM manufacturing prices paid index jumped from 48.3 to 54.8 in October.

Powell’s tone and election results will be crucial

All this suggests the Fed will stick to its latest messaging of gradual rate cuts going forward but Chair Jerome Powell will probably keep the door open to 50-bps moves. With no updated dot plot or economic projections at the November meeting, investors will be scrutinizing Powell’s every word in his press briefing, hoping to get some fresh hints from his views on the latest data and the state of the economy.

Unless there are any surprises, dovish or hawkish, the US dollar will possibly be driven more by the election headlines. If the early results out on Wednesday point to a Trump victory, both the dollar and Wall Street are likely to gain. But if Kamala Harris gets an early lead, the dollar would be susceptible to a selloff, while US equities will be choppy at the very least even if there is no clear reaction.

Is the dollar set for a roller-coaster ride?

For the dollar index, another wave upwards would likely face friction at the psychological 105.00 and 106.00 levels. But in the most bearish scenario, the October upleg could be entirely reversed, with supports probably seen at 103.00 and the 50-day moving average around 102.28.

However, if it appears that it could be days or weeks before a decisive winner can be declared, market volatility is sure to spike.

• BTCUSD capped by its 20-period SMA at 68,625.
• Price trapped in short-term bearish channel
• A surge above 70,000 could shift the bias to positive

BTCUSD (Bitcoin) has been sailing in choppy waters since the peak at a seven-month high of 73,609 recently finding a footing at the lower boundary of a bearish channel in the four-hour chart.

As Election Day unfolds in the US, there’s growing speculation that a potential Trump victory might provide a tailwind for cryptocurrencies. However, Bitcoin’s price action is far from being a clear-cut bullish signal just yet, and from a technical perspective caution remains among investors. Specifically, although the RSI has bounced off its 30 oversold level, it has yet to pierce through its 50 neutral mark, suggesting that buying sentiment is not strong enough to flip the bearish trajectory.

Bitcoin has already encountered resistance around the 20-period simple moving average (SMA) multiple times over the past week and traders will be watching closely to see if the price can finally push through this barrier seen around 68,600.

If the bulls manage to successfully conquer the 20-SMA, they could next target the upper boundary of the bearish channel at 70,000, where the 50-period SMA is also looming. A breakthrough here would set the stage for a move towards 71,550.

If the price fails to break above 20-SMA, the price could retreat toward the channel’s lower boundary at 66,300, which coincides with the 200-period SMA. If there is no support there this time, selling appetite could accelerate toward the 65,150 barrier and then down to 63,780.

While Bitcoin’s recent rally has sparked some optimism, it’s clear that the market remains in a precarious position. A decisive move above 70,000 would be needed to brighten the outlook and give the bulls a chance to roar back.

US ISM Services PMI rose to 56.0 in October, up from 54.9 in September and surpassing the forecast of 53.3. This is the index’s highest reading since July 2022, reflecting robust growth in the services sector and a resilient economy despite broader global uncertainties.

Breaking down the components, business activity eased slightly to 57.2 from 59.9, while new orders also dipped to 57.4 from 59.4. Employment, however, saw a significant increase, jumping from 48.1 to 53.0, indicating solid hiring activity within the services sector. On the pricing front, prices fell to 58.1 from 59.4, suggesting a slight moderation in input costs.

According to historical correlations, the October reading of 56.0 in Services PMI aligns with 2.3% annualized increase in real GDP.

Full US ISM services release here.

Markets

In the run-up to tonight’s US elections there’s little appetite for markets to make additional big directional moves. If anything, US Treasuries and the dollar underperform. Positioning over the recent month, the Trump-trade, unveils a final market skew towards a Republican victory despite basically every prediction model showing it’s an extremely close call. Below you’ll find a brief overview of some of the market-relevant themes (based on BBC analysis). The composition of Congress will heavily influence either president’s ability to push through their agenda. Harris has the odds against with a blue sweep less probable than a red one (due to the Senate).

News & Views

The Swedish services PMI jumped more than expected in October, from 48.9 to 52.9 (vs 50 consensus). It copied the manufacturing PMI’s last Friday (53.1 from 51.3 vs 51.6 expected), resulting a significant bounce of the composite gauge (53 from 49.7; matching best level since October 2022). Details showed business volumes spiking from 47.2 to 56.1 with accelerating new orders (56.4 from 50.2) boding well for the future and being somewhat at odds with layoffs suggested by the employment gauge (43.4 from 46). Especially as the order backlog increased (55.6 from 52.1) and with planned business volumes also rising (59.3 from 56.8). Strong PMI’s are at odds with the Swedish Riksbank’s normalization cycle which will see a step-up from 25 bps to 50 bps rate cuts at Thursday’s meeting. Sub-par inflation (core 1.1% Y/Y in September; 1.3% expected for October on Thursday as well) is the key concern. The Riksbank’s aggressive approach hurts the Swedish krona. EUR/SEK (11.66) is being lured by YTD tops around 11.75.

The ECB today published a system-wide analysis of commercial real estate exposures and risks as part of its macroprudential bulletin. The article is part of a broader study which started in the wake of some US financial institutions’ CRE-related failure in a rising interest rate environment. EMU banks have approximately €1.3tn in outstanding loans to CRE investors, making them a crucial source of financing for CRE markets. These bank loans, concentrated in a tail of smaller, specialized, banks are highly exposed to potential losses arising from the current market downturn. Credit quality is already visibly deteriorating, with the NPL ratio doubling since the start of the most recent monetary tightening cycle. However, this loan portfolio accounts for only 6% of total euro area bank assets and is unlikely to threaten the solvency of the banking system.

Daily Pivots: (S1) 1.0860; (P) 1.0887; (R1) 1.0905; More...

Intraday bias in EUR/USD remains mildly on the upside as rebound from 1.0760 short term bottom continues. But strong resistance should be seen from 55 D EMA (now at 1.0937) to limit upside. On the downside, below 1.0831 minor support will bring retest of 1.0760 first, and then 61.8% retracement of 1.0447 to 1.1213 at 1.0740.

In the bigger picture, price actions from 1.1274 (2023 high) are seen as a consolidation pattern to up trend from 0.9534 (2022 low), with fall from 1.1213 as the third leg. Downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404, to bring up trend resumption at a later stage.

Daily Pivots: (S1) 1.2928; (P) 1.2964; (R1) 1.2992; More...

Range trading continues in GBP/USD and intraday bias remains neutral for the moment. Further decline is expected as long as 1.3042 resistance holds. Below 1.2842 will resume the fall from 1.3433 to 61.8% retracement of 1.2298 to 1.3433 at 1.2732. However, considering bullish convergence condition in 4H MACD, firm break of 1.3042 will indicate short term bottoming, and turn bias back to the upside.

In the bigger picture, considering mildly bearish divergence condition in D MACD, a medium term top is likely in place at 1.3433 already. Price actions from there are seen as correction to whole up trend from 1.0351 (2022 low). Deeper decline would be seen to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.