Sample Category Title

In focus today

In the US, ADP's October private sector employment report and flash Q3 GDP will be released in the afternoon. ADP's figures could provide some early hints of what to expect from Friday's key non-farm payrolls release. We expect that GDP expanded 2.5% on annualized q/q basis (Q2: 3.0%) largely driven by still solid private consumption.

In the euro area, we receive the preliminary estimate of GDP growth in Q3 of 2024. The German economy likely stagnated or contracted slightly in the third quarter while strong growth in Southern Europe combined with the Olympic Games in France should leave overall euro area growth in positive territory. Hence, we forecast GDP growth of 0.2% q/q like in the first quarter, driven by service providers while the manufacturing sector likely was a drag on activity.

In the UK, Chancellor Rachel Reeves is set to announce the Labour government's first budget in the afternoon. We will likely see a budget more expansionary than previously. The budget is set to be "all about investments". So, expect increase in public investments, and particularly the NHS. The shortfall is likely to be covered by a large increase in taxes with estimates indicating up to GBP 40bn. The BoE will judge the measures at its upcoming meeting on 7 November and to what extent it might alter the inflation outlook.

In Japan, we expect no changes from the BoJ early Thursday. Governor Ueda will probably try to find a less dovish tone at the meeting to avoid adding to the recent yen slide. After all, inflation is on target and consumers' purchasing power is heading in the right direction now.

Economic and market news

What happened overnight

In Australia, CPI was released for Q3 deviating only slightly from consensus with 2.8% y/y (cons: 2.9%, prior: 3.8%).

What happened yesterday

In the US, the JOLTs report for September showed a sharp decline in US job openings with 7.44M (cons: 8.00M, prior: 7.86M). The Fed uses the figure as a proxy for overall labour demand, and thus the decline suggests that labour markets remain on a cooling trend. The overall level of layoffs has been rising gradually, but in a historical context it remains low. The ratio of job openings to unemployed job seekers declined slightly to 1.09. This should allow the Fed to continue cutting rates at the coming meetings.

The Conference Board's October consumer survey showed a notable uptick in optimism both with regards to current economic conditions as well as the future outlook. These somewhat mixed signals released at the same time led to a very muted market reaction.

In Sweden, Q3 GDP growth dropped 0.1% in both q/q (cons: 0.4) and y/y (cons: 0.7). The indicator however should be treated with caution, but the Riksbank's own company survey paints a gloomy picture as well. The survey showed more negative sentiment compared to the latest one in May. Combining these two the overall picture seems a bit more negative than the Riksbank's base scenario, which is that a growth recovery next year will keep inflation close to the 2% target.

In Japan, the head of the opposition Democratic Party for the People (DPP), which would be critical to form a government in Japan, stated on BoJ: "Once there is certainty that real wages will exceed 4% at next year's spring wage negotiations, that's when the BoJ can review monetary policy". This reflects the risk of political resistance to tightening policies that BoJ will meet.

Equities: Global equities were marginally higher yesterday, but notably, most sectors were lower. The overall lift was facilitated by higher tech stocks in the US. In the US, the group of cyclicals was higher, while defensives were lower. In Europe, 21 out of 25 industry groups were lower, but cyclicals still outperformed, and banks were higher. This type of odd rotation is very much linked to reporting, but it is also worth noting that it does not result in higher indices overall despite the cyclical outperformance. For the record, with tech outperformance yesterday, Nasdaq achieved its first record closing since 10-July. In the US yesterday: Dow -0.4%, S&P 500 +0.2%, Nasdaq +0.8%, and Russell 2000 -0.3%. Asian markets are broadly lower this morning, with Japan running its own course, being higher despite only a marginal weakening of the yen this morning. European futures are lower this morning, while US futures are again mixed.

FI: Markets recorded a 3bp Bund-ASW spread tightening to hit a low of 11bp. The German swaps spreads against €STR are all negative now. Front end (ECB pricing) was 4bp higher in the 2025 segment and points to 103bp of cuts next year.

FX: A relatively calm start to the week without any major G10 FX moves. EUR/USD remains just above the 1.08 mark, while USD/JPY has stabilized above 153 - only four figures below the level where Japanese authorities last intervened in FX markets in early May this year. EUR/GBP faced renewed pressure during yesterday's session, with the cross briefly dipping below the 0.83 mark. NOK saw a slight rebound yesterday, bringing EUR/NOK below 11.85, while EUR/SEK is still hovering just above 11.50.

Daily Pivots: (S1) 1.0783; (P) 1.0804; (R1) 1.0840; More...

Intraday bias in EUR/USD remains neutral as consolidations continues above 1.0760. Further decline is expected as long as 1.0871 resistance holds. Below 1.0760 will target 61.8% retracement of 1.0447 to 1.1213 at 1.0740. Firm break there will target 1.0601 support next. However, considering bullish convergence condition in 4H MACD, break of 1.0871 will indicate short term bottoming, and turn bias back to the upside for 55 D EMA (now at 1.0946).

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) 152.80; (P) 153.33; (R1) 153.92; More...

No change in USD/JPY's outlook and intraday bias stays on the upside. Sustained trading above 61.8% retracement of 161.94 to 139.57 at 153.39 will pave the way to retest 161.94 high. On the downside, below 151.44 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.2976; (P) 1.2996; (R1) 1.3033; More...

Intraday bias in GBP/USD remains neutral as GBP/USD is still extending consolidations above 1.2906. Further decline is expected as long as 1.3070 minor resistance holds. Below 1.2906 will target 61.8% retracement of 1.2298 to 1.3433 at 1.2732. However, considering bearish divergence condition in 4H MACD, firm break 1.3070 resistance will indicate short term bottoming, and turn bias back to the upside for stronger rebound.

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.

Daily Pivots: (S1) 0.8646; (P) 0.8672; (R1) 0.8700; More…

Intraday bias in USD/CHF remains neutral and more consolidations could be seen below 0.8699 temporary top. But further rally remains in favor as long as 55 D EMA (now at 0.8608) holds. On the upside, decisive break of 38.2% retracement of 0.9223 to 0.8374 at 0.8698 will argue that fall from 0.9223 has completed after defending 0.8332 low. Further rally should then be seen to 61.8% retracement at 0.8899 next.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 0.6539; (P) 0.6567; (R1) 0.6589; More...

Intraday bias in AUD/USD remains on the downside, as decline from 0.6941 is in progress for 61.8% retracement of 0.6269 to 0.6941 at 0.6526. Sustained break there will target 0.6348 support next. On the upside, above 0.6609 minor resistance will turn intraday bias neutral and bring consolidations first.

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.

Daily Pivots: (S1) 1.3885; (P) 1.3908; (R1) 1.3938; More...

Intraday bias in USD/CAD remains on the upside as rally from 1.3418 is in progress for retesting 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) 198.52; (P) 199.12; (R1) 200.20; More...

GBP/JPY's rally from 180.00 is in progress and intraday bias stays on the upside. Next target is a retest on 208.09 high. On the downside, below 196.37 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

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) 165.34; (P) 165.75; (R1) 166.35; More....

EUR/JPY's rally from 155.14 is in progress and intraday bias stays on the upside for 61.8% retracement of 175.41 to 154.40 at 167.38. Sustained break there will pave the way to retest 175.41 high. On the downside, below 163.79 minor support will turn intraday bias neutral again first.

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) 0.9359; (P) 0.9373; (R1) 0.9398; More....

No change in EUR/CHF's outlook as range trading continues. Intraday bias remains neutral at this point. 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 0.9421) 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.