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In focus today

In the US, focus will be on US October Jobs Report. We think non-farm payrolls growth slowed down to 130k (Sep: 254k) both due to weather-related distortions and less favourable seasonal adjustment. Average monthly earnings growth likely slowed down to 0.2% m/m s.a. and unemployment rate remained steady at 4.1%. Later, markets will also closely follow the ISM Manufacturing index for October, the flash PMIs pointed towards still stagnating growth in the manufacturing sector.

In Sweden, PMI for the manufacturing sector is due at 08:30 CET. The overall index has hovered above the 50 level for most of the year and at 51.3 in September. However, the very weak NIER survey alongside declining new orders and rising delivery times suggest that there could be a setback in PMI as well, possibly below the 50-threshold. If PMI drops, it will add another 'soft activity' argument for the Riksbank to cut by 50bp next week.

In Norway, we receive the unemployment rate for October. The Norwegian labour market remains relatively tight, with continued growth in employment and only a moderate rise in unemployment, even though growth has been weak for more than a year. This is resulting in productivity growth being weak, and partly negative. We expect that unemployment will continue to rise moderately beyond 2025 even if growth picks up as productivity picks up. We also believe that this tendency was visible in the October figures, but the unemployment rate was most likely unchanged at 2.1% s.a.

In Switzerland, inflation figures for October will be released at 08:30 CET. Consensus expects headline to remain unchanged at 0.8% in October (vs the SNB Q4 forecast at 1.0% y/y) and similarly for core to stay put at 1.0%.

Economic and market news

What happened overnight

In China, Caixin PMI rose to 50.3 in October (cons: 49.7, prior: 49.3) largely helped by stimulus measures helping pick up the economy. The manufacturing activity expanded for the first time since April, indicating signs of economic stabilization. This supports the picture painted by the official PMIs for October, which also suggested economic recovery.

What happened yesterday

In euro area, HICP inflation in October came in at 2.0% in October (cons: 1.9%, prior: 1.74%). The increase was driven by energy inflation and food prices while core inflation was unchanged at 2.68% y/y (cons: 2.6%, prior: 2.66%). The increase in core inflation of 0.20% m/m s.a. was mainly driven by service prices rising 0.3% m/m with goods prices unchanged at 0.0% m/m. The October release mimics the picture we saw in the recent months (except September) of underlying inflation slowly moving lower amid a still elevated services price pressure but clearly absent goods price inflation. It shows that the very soft data in September was only a "blip". As momentum in inflation is still heading in the right direction, but not as fast as the September data suggested, today's inflation data supports the case for a 25bp cut by the ECB in December against a "jumbo" cut.

The unemployment rate declined to an all-time low of 6.3% in September (cons: 6.4%, prior: 6.4%). However, the number of unemployed persons rose slightly by 13k indicating an overall stagnant labour market but at a historically strong level. The small increase in the number of unemployed persons was due to France while the number in Germany surprisingly fell in Eurostat's measure. The hard data on labour market remains strong also supporting the case for gradual cuts by the ECB.

In the US, the September PCE data came out close to expectations, with core PCE price index increasing by 0.3% m/m (cons: 0.3, prior: 0.1%). Core services PCE inflation picked up slightly from the previous month with 0.3% m/m s.a. (prior: 0.2%) but nothing dramatic. We also got the latest weekly jobless claims surprising to the strong side with 216k (prior: 227k) and the Q3 Employment Cost Index surprising to the downside (wages and salaries up +0.8% q/q, from +0.9%). Even if the decline in jobless claims could reflect fading weather-effects, the data overall supports the soft-landing story. Cost pressures are fading but broader labour market conditions remain solid.

In the UK, in response to UK budget concerns GBP was one of the big losers yesterday, with EUR/GBP breaking through the 0.84 mark, and UK yields continued climbing. We think that ultimately concerns will fade, and markets will calm with BoE meeting coming up on Thursday. However, we acknowledge that the expansionary budget, primarily funded through increased borrowing coupled with recent rise in borrowing costs makes the case for fiscal sustainability increasingly difficult. This may lead to a pull-back on certain measures from the Labour government.

In the Middle East, while there seems to be some optimism around a 60-day pause in fighting for Lebanon, Hamas announced yesterday that they will reject any offer that would not bring a permanent end to the war in Gaza. Meanwhile, in Iran, two top officials said that the country plans to respond to Israel's missile attack. Whether and how Iran would respond, remains unclear. Israel's recent attack severely damaged Iran's defence capabilities, and hence, it is now more vulnerable to any attacks coming from Israel. Anonymous government sources in Iran said that they are preparing a list of military targets in Israel but that the attack would very likely happen only after US election.

Equities: Global equities declined yesterday, marking the first significant drop in a while, with pronounced sector disparities and again not driven by macroeconomic factors. Although realized earnings data remains solid, this have not sufficed to meet the elevated outlook expectations, particularly for technology companies. The global technology sector experienced a 3% decrease yesterday, with the US suffering the most significant losses in the regional comparison. It is also noteworthy that the VIX index escalated to 23 and the MOVE index reached a new year-to-date high, despite yields being relatively flat yesterday. Given the massive influx of macro and micro news we are currently receiving, investors are evidently anxious, particularly with the impending 5 November US election, leading to derisking and event hedging. In the US yesterday, the Dow fell by 0.9%, the S&P 500 by 1.9%, Nasdaq by 2.8%, and the Russell 2000 by 1.6%. Asian markets are in the red this morning, led by Japan, which is down approximately 2.5%, while Chinese markets are bucking the trend. US and European futures are trading higher this morning, ahead of another eventful day.

FI: Yesterday's session was a bit volatile with 10Y US Treasuries rising 5bp early in the day, before falling back to the starting point yesterday at 4.30%. We saw almost the same picture in the European market, where government bond yields initially rose before declining in the afternoon. The Bund ASW-spread continues to grind tighter and as discussed in our weekly, a test of the 0bp-level seems reasonable.

FX: EUR/USD drifted to the upper end of the 1.08-1.09 range. USD/JPY declined following a BoJ hold with a slightly hawkish tone. EUR/GBP rose above 0.84, as GBP was among the big losers in yesterday's session, with UK budget concerns continuing to weigh on the currency. EUR/SEK remains around 11.60. October was an abysmal month for SEK, with losses close to 3% vs. EUR and over 5% vs. USD. EUR/NOK is approaching the 12.00 mark, trading just below.

Short Term Elliott Wave View in Silver (XAGUSD) suggests cycle from 8.8.2024 low is in progress as a 5 waves impulse. Up from 8.8.2024 low, wave 1 ended at 30.18 and dips in wave 2 ended at 27.69. Wave 3 higher ended at 32.95 and pullback in wave 4 ended at 30.12. The metal extends higher in wave 5. Up from wave 4, wave (i) ended at 32.17 and wave (ii) pullback ended at 31.29. Wave (iii) higher ended at 34.26 and pullback in wave (iv) ended at 33.44. Final leg wave (v) ended at 34.86 which completed wave ((i)) of 5 in higher degree.

Wave ((ii)) pullback is in progress with internal subdivision as a zigzag Elliott Wave structure. Down from wave ((i)), wave i ended at 34.43 and wave ii ended at 34.83. Wave iii lower ended at 33.41 and wave iv ended at 34.29. Final wave v lower ended at 33.07 which completed wave (a). Bounce in wave (b) completed at 34.54 as a zigzag structure. Down from wave (b), wave i ended at 33.39 and wave ii ended at 33.97. Wave iii lower ended at 32.48. Expect wave iv rally and another marginal wave v lower to complete wave (c) of ((ii)) before the metal resumes higher. Near term, as far as pivot at 30.1 low stays intact, expect pullback to find support in 3, 7, 11 swing for more upside.

Silver (XAGUSD) 60Minutes Elliott Wave Chart

XAGUSD Elliott Wave Video

https://www.youtube.com/watch?v=hebx4dsAq0M

Equity selloff in Europe and US extended on Thursday. Technology stocks suffered the biggest losses after Microsoft and Meta – which represent nearly 10% of the S&P500 index – were hit by a 6% and a 4% decline respectively. The S&P500 closed 1.86% down – a touch above its 50-DMA - and Nasdaq 100 dived almost 2.50%. As such, the major US indices closed the month having scaled back all of their gains. And yesterday’s selloff was amplified by a higher-than-expected spending and core PCE number from the US. The Federal Reserve’s (Fed) favourite gauge of inflation showed yesterday that core inflation remained steady at 2.7% instead of a decline to 2.6%. The headline PCE index – that includes more volatile items like food and energy – eased to 2.1% - a spitting distance from the Fed’s 2% policy goal. But the fact that the core PCE rose the most on a monthly basis since April – along with strong spending and robust growth data released earlier this week – trimmed the Fed cut bets. The US 2-year yield rose to the highest levels since early August while the 10-year yield re-tested the 4.30% level to the upside.

The US futures are slightly in the positive this morning, as Amazon and Intel rallied in the afterhours trading after releasing better-than-expected Q3 results. Amazon posted a nearly 20% increase in both advertising and cloud computing revenue compared to the same time last year and the CEO sounded optimistic regarding the upcoming holidays season. (You bet he did, have you seen the US spending figures?). The stock price jumped 6% in the afterhours trading. While Intel jumped up to 15% after the results as the company surprised with a 17 cents earnings per share, while the expectation was a 2 cents loss. Last but not least, Apple also announced a better-than-expected revenue and a jump in iPhone sales – before the arrival of the AI tools on them. The earnings were hit by an EU fine of $10bn dollars – which is a one-off charge. But what really hurt investors’ feelings is the fact that they missed the Chinese sales estimates – its 3rd biggest market. The shares lost 1.86% in the afterhours trading.

Today, US’ Big Oil companies will go to the earnings confessional and will certainly post weak numbers due to weak oil and gas prices as did their European peers throughout this week. But, given that the expectations are quite low, beating them is easier. Shell announced yesterday a smaller than expected drop in its profit and said that it will buy another $3.5bn of shares in the next three months. Its shares rebounded more than 2% yesterday, also supported by an almost 2% rally in crude oil prices on suspicion that the Middle East tensions could be coming back.

Oil rebounds on renewed tensions

The latest news on the wire suggests that Iran is preparing a response to Israel’s latest attack. As such, US crude cleared the $70pb offers yesterday and could consolidate and extend gains above that level into the weekend. This being said, the geopolitical tensions have proved to be a temporary boost to oil bulls. The global economic outlook and supply / demand dynamics remain comfortably bearish for oil. As such, price rallies are seen as good opportunities for the bears to strengthen their short positions. The latter not only triggers important selloffs as soon as tensions ease, but also limits the oil’s upside potential. Minor resistance is seen at the 50-DMA, near $71.50 level, and the key resistance to the broader bearish trend sits at the $72.85 mark, which is the major 38.2% Fibonacci retracement on July to September selloff.

The Dollar will say the last word

Gilts and sterling gave a delayed reaction to Wednesday’s budget while the US dollar index eased and tested the 200-DMA to the downside despite the stronger-than-expected core PCE figures, the weakening dovish Fed expectations and the rising yields.

The yen strengthened after relatively hawkish comments from the Bank of Japan (BoJ) yesterday – which maintained its policy unchanged but warned that it could continue to increase the interest rates if the economic data aligns with their forecasts.

The EURUSD rallied past the 200-DMA and minor 23.6% resistance with the sight of a stronger than expected CPI update – that showed that the euro area’s CPI rebounded to the 2% in October and core CPI didn’t ease as anticipated. That, combined with encouraging growth data released earlier this week, gave the euro bulls the energy to test the 200-DMA offers. 7

However, US jobs data and the dollar will ultimately determine whether EURUSD closes the week above or below this level. The US economy is expected to have added around 100K new nonfarm jobs in October with a steady wages growth of around 4% on a yearly basis and a steady unemployment rate near 4.1%. The NFP expectations are weakened by the Boeing strike and the hurricanes, but Wednesday’s ADP report defied the weak expectations and printed a strong 233K private job additions. The game isn’t over yet for Fed doves, today’s report is the last major release before next week’s election and the FOMC decision – expected to bring a 25bp cut.

Daily Pivots: (S1) 194.75; (P) 196.83; (R1) 198.22; More...

Intraday bias in GBP/JPY remains neutral for the moment. While pullback from 199.79 might extend lower, further rally would remain in favor as long as 55 D EMA (now at 194.22) holds. Above 199.79 will resume the rebound from 180.00 to retest 208.09 high. However, sustained break of 55 D EMA will argue that the corrective rise has completed already, and turn near term outlook bearish for 180.00/183.70 support zone.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 164.72; (P) 165.71; (R1) 166.47; More....

Intraday bias in EUR/JPY stays neutral for consolidations below 166.67 temporary top. Further rally is in favor as long as 55 D EMA (now at 162.92) holds. Sustained break of 61.8% retracement of 175.41 to 154.40 at 167.38 will pave the way to retest 175.41 high. However, firm break of 55 D EMA will argue that corrective rise from 154.40 has completed, and turn outlook bearish for this support again.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 0.8378; (P) 0.8413; (R1) 0.8472; More...

Immediate focus stays on 0.8433 resistance in EUR/GBP. Sustained break there will confirm short term bottoming at 0.8294. Further rally should be seen towards 0.8624 resistance next. On the downside, below 0.8381 minor support will bring retest o f0.8294 low instead.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Next target is 0.8201 (2022 low), but strong support should be seen there to bring rebound. However, outlook will remain bearish as long as 0.8624 resistance holds even in case of strong rebound. Decisive break of 0.8201 will indicate long term bearish reversal.

Daily Pivots: (S1) 1.6459; (P) 1.6501; (R1) 1.6561; More...

EUR/AUD's rally from 1.6002 resumed after brief consolidations. Intraday bias is back on the upside for 61.8% retracement of 1.7180 to 1.6002 at 1.6730 next. Sustained trading above there will pave the way to retest 1.7180 high. On the downside, below 1.6439 minor support will turn intraday bias neutral again first.

In the bigger picture, as long as 1.5996 cluster support holds (38.2% retracement of 1.4281 to 1.7062 (2023 high) at 1.6000), up trend from 1.4281 (2022 low) is still expected to resume at a later stage. However, decisive break of 1.5996 will argue that the medium term trend has reversed and turn outlook bearish.

Daily Pivots: (S1) 0.9380; (P) 0.9399; (R1) 0.9417; More....

No change in EUR/CHF's outlook as range trading continues. Intraday bias stays neutral for the moment. On the downside, break of 0.9332 will resume the fall from 0.9579 towards 0.9209 low. On the upside, break of 0.9506 will turn intraday bias to the upside for 0.9579 resistance and above.

In the bigger picture, fall from 0.9928 is seen as part of the long term down trend. Repeated rejection by 55 D EMA (now at 0.9427) keeps outlook bearish for breaking through 0.9209 low at a later stage. Nevertheless, sustained trading above 55 D EMA will confirm medium term bottoming and bring stronger rebound back towards 0.9928 key resistance.

Daily Pivots: (S1) 1.3902; (P) 1.3923; (R1) 1.3956; More...

Intraday bias in USD/CAD remains on the upside and further rise would be seen to retest 1.3946/76 resistance zone. Decisive break there will confirm larger up trend resumption. On the downside, below 1.3875 minor support will turn intraday bias and bring consolidations first.

In the bigger picture, sideway consolidation pattern from 1.3976 (2022 high) might still extend further. While another decline cannot be ruled out, strong support should emerge above 1.2947 resistance turned support to bring rebound. Rise from 1.2005 (2021 low) is still in favor to resume at a later stage. Decisive break of 1.3976 will target 61.8% projection of 1.2401 to 1.3976 from 1.3418 at 1.4391.

Daily Pivots: (S1) 0.6553; (P) 0.6568; (R1) 0.6597; More...

Intraday bias in AUD/USD remains neutral and more consolidations could be seen above 0.6536 temporary low. Further decline is expected as long as 55 D EMA (now at 0.6695) holds. On the downside, sustained break of 61.8% retracement of 0.6269 to 0.6941 at 0.6526 will target 0.6348 support next.

In the bigger picture, rise from 0.6269 (2023 low) should have completed with three waves up to 0.6941. Corrective pattern from 0.6169 (2022 low) is now extending with another falling leg. Deeper decline would be seen back to 0.6269 as sideway trading extends.