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Daily Pivots: (S1) 149.19; (P) 149.74; (R1) 150.10; More...

Intraday bias in USD/JPY is turned neutral with current retreat and some consolidations would be seen first. Further rally is expected as long as 146.47 resistance turned support holds. Above 150.31 will resume the rebound from 139.57 to 61.8% retracement of 161.94 to 139.57 at 153.39. However, break of 146.48 resistance turned support will indicate that rebound from 139.57 has already completed.

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 now 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) 0.8639; (P) 0.8654; (R1) 0.8663; More…

Intraday bias in USD/CHF is turned neutral first with current retreat. Further rally is expected as long as 0.8548 resistance turned support holds. Above 0.8668 will target 38.2% retracement of 0.9223 to 0.8374 at 0.8698. Sustained break there will argue that fall from 0.9223 has completed at 0.8374, 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) 0.6691; (P) 0.6706; (R1) 0.6720; More...

AUD/USD is staying in range above 0.6657 temporary low and intraday bias remains neutral. More consolidations could be seen, but further decline is expected as long as 0.6758 resistance holds. Below 06657 will target 0.6621 first. Firm break there will confirm bearish reversal. However, break of 0.6758 will suggest that pullback from 0.6941 has completed and turn bias back to the upside.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with rise from 0.6269 as the third leg. Firm break of 100% projection of 0.6269 to 0.6870 from 0.6340 at 0.6941 will target 138.2% projection at 0.7179. However, break of 0.6621 support will argue that rise from 0.6269 has completed and bring deeper fall back to 0.6269/6348 support zone.

Markets

European yields Friday continued a gradual bull steepening in the aftermath of the ECB policy decision. In first post-meeting comments, policymakers evidently held to a data dependent approach. However, the analysis on inflation is turning softer. Several members including Bank de France governor Villeroy showed growing confidence that inflation, after a technical uptick in the coming months, might return target maybe already early next year. Markets consider a next back-to-back ECB rate cut in December as a done deal. Money markets even see a growing change of a 50 bps step (40%). German yields declined further between 3.8 bps (2-y) and 2.3 bps (30-y). In a session with only second tier eco data, US yields changed between -2.4 bps (2-y) and +0.4 bps. Contrary to a clear downtrend for European yields, US yields for now found a new short-term equilibrium holding a very tight sideways range at all tenors. Equity investors show confidence going in the key phase of the earnings season (Dow at record close). Despite a favourable economic and interest background, the dollar on Friday fell prey to profit taking on an almost uninterrupted ascent since end September. DXY closed near 103.5 (from 103.8). EUR/USD rebounded from 1.0831 to 1.0867. As such the 1.0835 support (62% retracement April-Sept rise) survived. Sterling initially was well bid after the release of better than expected UK retail sales even as this probably won’t prevent the BoE from scaling back policy restriction at the November meeting. EUR/GBP tested the 0.83 big figure, but rebounded later to close almost unchanged at 0.8327. Even so, the downside in this cross rate still looks vulnerable.

This morning, Asian equities are trading mixed to slightly higher. Chinese banks reduced lending rates after the PBOC recently took several measures to support growth. Today’s calendar in the US and EMU is thin. This week, the IMF and World Bank will hold its annual meeting in Washington. Regarding data, the October preliminary PMI’s (on Thursday) will be key to shape market expectations on the pace of further ECB easing. Tomorrow, the Hungarian central bank (MNB) will decide on its policy. Financial uncertainty (weak forint) recently caused vice governor Virag to call for a sustained period of interest rate stability. At Wednesday’s Bank of Canada meeting the odds are quite different. Analysts see a growing change of the BoC stepping up the pace of rate cuts from 25 bps to 50 bps.

News & Views

ESMA chair Verena Ross in an interview with the Financial Times called for more expanded powers to oversee major stock exchanges, clearing houses and settlement systems. Launched in 2011 in a bid to harmonize scattered national rules, ESMA currently supervises only relatively few entities while leaving most of the oversight to national authorities. Former ECB president Draghi in his report on European competitiveness said such a single common regulator (rather than the coordinator it is today) for all EU security markets is a “key pillar” for the integration of capital markets. Ross said there is a clear political appetite in the newly appointed European Commission. To allay concerns of mostly smaller countries wary of transferring some of their sovereignty, Ross proposed a step-by-step approach in areas “where it makes most sense at this point”. The idea of closer EU financial integration gained momentum in recent months but an attempt by France, backed by the Netherlands, Italy, Poland and Spain met with fierce opposition from a majority of the 27 member states. The latter country earlier this month proposed to move ahead with smaller coalitions of the willing where three or more EU countries could test ideas for co-operation.

Rating agency Fitch affirmed Italy’s rating at BBB – the lowest within the investment grade spectrum - but raised the outlook from stable to positive in its review last Friday. The decision reflects a stronger fiscal performance and commitment to EU fiscal rules, reducing risks stemming from Italy's exceptionally high debt levels. A credible fiscal plan should narrow fiscal deficits from 3.7% this year to 3.2% and 2.7% in 2025 and 2026. The Superbonus tax credit legacy will push debt levels to 136.3% of GDP in 2026 before it starts to decline. Being more than twice the BBB-median (55%), debt remains Italy’s Achilles heel. But the country’s ongoing fiscal consolidation effort is being supported by a more stable political context and growth being above the Eurozone average (0.7% in 2024, 1.1% in 2025) and signs of increased potential. Fitch forecasts a widening of the current account surplus to 2.0% of GDP in 2025, on an improved energy balance and further strengthening demand for exports.

In focus this week

Today will be quiet on the data front, with no major releases scheduled.

This week is expected to be calm before the storm of US elections, nonfarm payrolls and FOMC meeting all within the first week of November. On Tuesday, the Hungarian Central Bank will announce its rate decision, while investors direct focus on the Bank of Canada and their key policy rate on Wednesday. This week's main data focus is on the October flash PMIs on Thursday, which will likely signal continuing contraction in manufacturing activity and modest growth in services on both sides of the Atlantic. Tokyo CPI for October is scheduled for release on Friday morning.

Economic and market news

What happened overnight

In China, the one-year and five-year loan prime rates (LPR) were both lowered from 3.35% and 3.85% to 3.10% and 3.6%, respectively, in line with market expectations for additional easing. This comes as China seeks to support growth and stabilize the faltering property sector. The one-year LPR primarily affects corporate loans and most household loans, whereas the five-year LPR serves as a benchmark for mortgage rates.

In the Middle East, hundreds flee as blasts hit Beirut. This occurs as Isreal is preparing to attack infrastructure associated with the financial operations of Lebanon's Hezbollah group, as warned by an Israeli military spokesperson on the social media platform X.

What happened since Friday

In the US, Nasdaq, S&P 500 and Dow reached their sixth consecutive week of gains, as investors rallied behind tech stocks, with both the S&P 500 and the Dow reaching record closing highs. The rally was in part due to Netflix soaring 11.1% after better-than-expected third-quarter sales, profits, and subscriber numbers.

Moreover, Atlanta Fed President Bostic (hawk and voting-member) was on the wire on Friday, highlighting that he sees no rush bringing the policy rate down to its neutral level and will be patient on rate cuts.

In the UK, retail sales ex auto fuels for September increased 4.0% y/y (cons: 3.1%, prior: 2.2%) with monthly increases also holding up. The reading caused the EUR/GBP to break below 0.8300 for the first time since 2022.

In Japan, on Friday the largest labour union group emphasized that it would seek wage hikes of at least 5% in 2025, as wage gains are yet to "take root". Going forward, wage negotiations will be imperative to follow to assess the scope for further rate hikes from the Bank of Japan. Inflation has come lower this year, with Bank of Japan's favourite measure, CPI excl. fresh food declining to 2.4% in September, according to data Friday morning. Hence, the 5.1% wage increase Rengo negotiated in the spring will probably be hard to repeat, but wage growth above 4% will keep the door open for further Bank of Japan hikes.

In the Middle East, tensions are rising following Israel's reported killing of Yahya Sinwar on Thursday. Following a reported drone attack on Israeli Prime Minister Benjamin Netanyahu's residence in Caesarea launched by Hezbollah, the Prime Minister said he is undeterred from his war aims. This comes as Israel prepares to respond to Iran's large-scale ballistic missile attack on 1 October - with Israel's defence minister saying its response would be "deadly, precise and surprising". The situation in the Middle East remains a market concern as investors continue to evaluate the size of the Israeli retaliatory attack.

In metals space, gold surpassed the USD 2,700/oz milestone, driven by ongoing global uncertainty, namely the situation in the Middle East, the US election and relaxed monetary policy expectations.

In Oil markets, oil futures declined by more than 7% over the past week, as China's economic growth slowed. Brent settled more than 7% lower last week and WTI lost around 8%, marking the biggest weekly declines since 2 September, when OPEC and the International Energy Agency cut their forecasts for global oil demand in 2024 and 2025.

Equities: Global equities continued higher Friday and last week. We are not talking about massive increases, but there were still enough gains to secure new all-time highs, with the US increasingly taking the lead. The S&P 500 closed at a fresh all-time high on Friday and logged its sixth consecutive week of gains. The slight optimism was also visible within sectors where cyclicals steadily outperformed defensives last week, again primarily driven by the US. Underneath, there was an interesting sector mix with Utilities and Financials outperforming together, despite yields not being a massive factor last week. Financials were obviously boosted by very solid US bank reporting. It was a tough week for the energy sector as the oil price was down almost 10%. In the US on Friday, Dow +0.1%, S&P 500 +0.4%, Nasdaq +0.6%, and Russell 2000 -0.2%. Asian markets are mixed this morning, as are futures in Europe and the US.

FI: EUR rates edged lower through Friday's session as markets added to expectations of ECB easing until 2025. EUR swap rates fell 4bp in the 2Y-5Y segment, while the long end was down a couple of basis points in sync with the move in the Bund yield. The next big market mover ahead is the euro area PMI figures out on Thursday. As the balance of risk assessment has clearly changed towards the risk of undershooting, renewed signs of growth weakening could trigger even stronger expectations of near-term policy easing. German ASW-spreads continued tightening across the curve on Friday, and the Schatz-ESTR spread has now broken through 0. Peripheral spreads tightened with the BTP-Bund spread closing 4bp narrower.

FX: As expected, overnight China cut its benchmark lending rates, which supports Asian assets. USD/JPY is trading closer to 149, and EUR/USD above 1.0850 as the USD rally takes a breather. Strong UK data pushed EUR/GBP briefly below 0.83 for the first time since 2022. Scandies remain on the back foot, although Norges Bank has opened the door for FX interventions - a tactical boon for NOK.

Daily Pivots: (S1) 1.3787; (P) 1.3801; (R1) 1.3816; More...

USD/CAD is extending the consolidation pattern from 1.3837 and intraday bias stays neutral. Another retreat cannot be ruled out, but downside should be contained above 1.3646 resistance turned support. On the upside, break of 1.3837 will resume the rally from 1.3418 and target 1.3946/76 key resistance zone.

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.

In the Asian trading session today, the forex markets remained largely in consolidative state, with most major currency pairs moving within familiar ranges. Japanese Yen showed slight firmness, trading in a tight range alongside the Dollar and Kiwi. Conversely, British Pound Sterling softened, accompanied by Loonie and Aussie. The widely anticipated rate cut by PBoC did not elicit significant reactions in Asian markets, indicating that the move was already priced in by investors.

Market activity is expected to remain subdued today due to a near-empty economic calendar. Although several Fed officials are scheduled to speak, they are unlikely to provide substantial new insights that could influence market dynamics. Fed remains on track for two additional 25 basis point rate cuts this year. Some policymakers might indicate the possibility of only one more cut, depending on upcoming economic data.

The main events for the week will take place midweek, with BoC’s widely anticipated rate cut on Wednesday, followed by the release of PMI data from Australia, Japan, the Eurozone, the UK, and the US on Thursday.

Technically, Bitcoin is starting to feel heavy around 70k handle. There is still no decisive momentum to push it through 73812 high. Indeed, break of 66627 support will suggest short term topping, and extend the consolidation pattern from 73812 with another falling leg.

In Asia, at the time of writing, Nikkei is up 0.11%. Hong Kong HSI is down -1.44%. China Shanghai SSE is up 0.36%. Singapore Strait Times is down -0.58%. Japan 10-year JGB yield is down -0.0087 at 0.962.

RBA's Hauser signals no early rate cuts as inflation remains too high

RBA Deputy Governor Andrew Hauser emphasized today that inflation remains "too high" for the central bank to consider immediate rate cuts.

Recent strong employment data led markets to push back the expected timing for the first rate cut from February to April. Hauser refrained from commenting on the market’s pricing, but noted, "the response of rates to the data does seem to be quite encouraging.”

While acknowledging the importance of data, Hauser stressed that RBA is “data-dependent but not data-obsessed,” noting that broader economic conditions also factor into policy decisions.

“Activity has been weak, very weak, and we haven’t seen the inflation number for the third quarter yet,” he added.

The RBA’s cautious approach contrasts with other central banks that have already begun easing, highlighting Australia’s persistent inflationary pressures. The market will be closely watching the third-quarter inflation data to gauge the timing and magnitude of future policy changes.

Gold continues record rally amid rising world war fears

Gold prices edged higher in Asian session today, extending their recent record-breaking run. While some market observers attribute the precious metal's rally to uncertainty surrounding the upcoming US presidential election—with no clear frontrunner between Democrat Kamala Harris and Republican Donald Trump—the persistent climb in U.S. stock markets to new record highs suggests that domestic political factors may not be the primary driver. Instead, escalating geopolitical risks appear to be fueling increased demand for Gold as a safe-haven asset.

In the Middle East, Israel has intensified its military operations in both Gaza and Lebanon following recent developments, including the death of a prominent Hamas leader. Reports indicate that Iran-backed Hezbollah has conducted drone attacks targeting areas near Israeli Prime Minister Benjamin Netanyahu's residence. The prospects for a near-term ceasefire seem increasingly remote, raising concerns about broader regional instability.

Even more concerning,, tensions are escalating in Eastern Europe. Thousands of North Korean troops are reportedly preparing to support Russia in its ongoing conflict in Ukraine, with some North Korean military officers already deployed. Ukrainian President Zelenskyy warned this could be the "first step to world war," raising global alarm.

Technically, further rally is expected in Gold as long as 2685.34. Next target is 61.8% projection of 2471.76 to 2685.34 from 2604.53 at 2736.62.

But the a bigger test lies in 100% projection of 1984.05 to 2449.82 from 2239.45 at 2759.23. Strong resistance could be seen there to limit upside initially. However, decisive break above there would prompt upside acceleration. Next medium term target would then be 161.8% projection at 3047.08, which is slightly above 3000 psychological level.

PBoC slashes loan prime rates, HSI unmoved

People's Bank of China lowered its one-year loan prime rate to 3.1% and trimmed the five-year LPR to 3.6%, as anticipated by market watchers. This move, at the upper end of the 20-25 basis point range suggested by Governor Pan Gongsheng during a Beijing forum last Friday, impacts a broad spectrum of loans in China. The one-year LPR directly influences corporate and household loans, while the five-year LPR serves as a benchmark for mortgage rates.

While this rate cut signifies some level of monetary stimulus, analysts continue to stress that China's core issue is not the supply of credit, but rather a lack of demand. Many argue that without substantial fiscal stimulus, the impact of these rate adjustments will remain muted.

Hong Kong market barely reacted to the rate cut news. HSI continues to trade in a narrow range between 20k and 21k. However, technically, HSI's up trend from 14794.16 would remain intact as long as 38.2% retracement of 14794.16 to 23241.74 at 20014.76 holds. Break of 21622.65 resistance will indicate that the correction is over, and bring retest of 23241.74 high.

BoC to Cut Rates by 50bps as Markets Eye PMIs Too

BoC is the focal point in an otherwise light economic calendar this week, with widespread expectations of a 50bps rate cut that would bring the policy rate down to 3.75%. This anticipated move would mark the fourth consecutive rate reduction.

Accompanying the rate decision, BoC will release its quarterly Monetary Policy Report, which is likely to feature downward revisions to its forecasts for economic growth and inflation. The central bank's aggressive easing stance reflects growing concerns over the need to bolster the economy in the face of persistent headwinds.

A recent Reuters poll highlights market sentiment, with 19 out of 29 economists predicting a 50bps cut, while the remaining 10 expect a smaller 25bps reduction.

Beyond BoC's decision, the markets will closely monitor PMI readings from major economies, with particular attention on the Eurozone. ECB has expressed clear concern over recent weak economic indicators, and if the upcoming data fails to show significant improvement, it could set the stage for another rate cut in December.

Additional key data releases include US durable goods orders, Germany's Ifo Business Climate Index, Japan's Tokyo CPI, and Canada's retail sales figures.

Here are some highlights for the week:

• Monday: Germany PPI; US leading index.
• Tuesday: New Zealand trade balance; UK public sector net borrowing; Canada IPPI and RMPI.
• Wednesday: BoC rate decision; Eurozone consumer confidence; US existing home sales, Fed's Beige Book.
• Thursday: Australia PMIs; Japan PMIs; Eurozone PMIs; UK PMIs; US jobless claims, PMIs, new home sales.
• Friday: UK Gfk consumer sentiment; Japan Tokyo CPI, SPPI; Germany Ifo business climate; Eurozone M3 money supply; Canada retail sales, new housing price index; US durable foods orders.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3787; (P) 1.3801; (R1) 1.3816; More...

USD/CAD is extending the consolidation pattern from 1.3837 and intraday bias stays neutral. Another retreat cannot be ruled out, but downside should be contained above 1.3646 resistance turned support. On the upside, break of 1.3837 will resume the rally from 1.3418 and target 1.3946/76 key resistance zone.

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.

RBA Deputy Governor Andrew Hauser emphasized today that inflation remains "too high" for the central bank to consider immediate rate cuts.

Recent strong employment data led markets to push back the expected timing for the first rate cut from February to April. Hauser refrained from commenting on the market’s pricing, but noted, "the response of rates to the data does seem to be quite encouraging.”

While acknowledging the importance of data, Hauser stressed that RBA is “data-dependent but not data-obsessed,” noting that broader economic conditions also factor into policy decisions.

“Activity has been weak, very weak, and we haven’t seen the inflation number for the third quarter yet,” he added.

The RBA’s cautious approach contrasts with other central banks that have already begun easing, highlighting Australia’s persistent inflationary pressures. The market will be closely watching the third-quarter inflation data to gauge the timing and magnitude of future policy changes.

Key Highlights

• EUR/USD started a major decline below the 1.1000 support.
• A short-term bearish trend line is forming with resistance at 1.0865 on the 4-hour chart.
• GBP/USD extended losses and tested the 1.2965 support zone.
• Bitcoin surged above the $67,500 and $68,000 resistance levels.

EUR/USD Technical Analysis

The Euro started a fresh decline below the 1.1050 level against the US Dollar. EUR/USD traded below 1.1000 to move into a bearish zone.

Looking at the 4-hour chart, the pair settled below the 1.0980 pivot level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even tested the 1.0810 level and currently consolidating losses.

There was a minor increase above the 1.0840 level. On the upside, the bears might be active near the 1.0865 level. There is also a short-term bearish trend line forming with resistance at 1.0865 on the same chart.

The first major resistance might be near the 1.0900 level. A close above the 1.0900 level could set the tone for another increase. The next major resistance could be 1.0980.

On the downside, immediate support sits near the 1.0820 level. The next key support sits near the 1.0800 level. Any more losses could send the pair toward the 1.0750 level.

Looking at Bitcoin, the bulls remained in action and pushed the price above the $68,000 resistance zone.

Upcoming Economic Events:

• Fed's Kashkari speech.

People's Bank of China lowered its one-year loan prime rate to 3.1% and trimmed the five-year LPR to 3.6%, as anticipated by market watchers. This move, at the upper end of the 20-25 basis point range suggested by Governor Pan Gongsheng during a Beijing forum last Friday, impacts a broad spectrum of loans in China. The one-year LPR directly influences corporate and household loans, while the five-year LPR serves as a benchmark for mortgage rates.

While this rate cut signifies some level of monetary stimulus, analysts continue to stress that China's core issue is not the supply of credit, but rather a lack of demand. Many argue that without substantial fiscal stimulus, the impact of these rate adjustments will remain muted.

Hong Kong market barely reacted to the rate cut news. HSI continues to trade in a narrow range between 20k and 21k. However, technically, HSI's up trend from 14794.16 would remain intact as long as 38.2% retracement of 14794.16 to 23241.74 at 20014.76 holds. Break of 21622.65 resistance will indicate that the correction is over, and bring retest of 23241.74 high.