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Daily Pivots: (S1) 0.8333; (P) 0.8356; (R1) 0.8386; More...

Intraday bias in EUR/GBP remains neutral for the moment as range trading continues. Further decline is still in favor. On the downside, firm break of 0.8309 will resume larger down trend to 0.8201 key support next. However, decisive break of 38.2% retracement of 0.8624 to 0.8309 at 0.8429 will pave the way to 61.8% retracement at 0.8504 and possibly above.

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.

Daily Pivots: (S1) 1.6239; (P) 1.6284; (R1) 1.6338; More...

Intraday bias in EUR/AUD stays neutral for the moment. On the downside, below 1.6185 will bring deeper fall to retest 1.6002 low. On the upside, however, above 1.6351 will resume the rebound from 1.6002 to 38.2% of 1.7180 to 1.6002 at 1.6452.

In the bigger picture, as long as 1.5996 support holds, 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) 0.9382; (P) 0.9397; (R1) 0.9416; More....

No change in EUR/CHF's outlook as it's still bounded in converging range. On the upside, break of 0.9506 resistance should resume whole rebound from 0.9209 through 0.9579 resistance. On the downside, break of 0.9332 will resume the fall from 0.9579 towards 0.9209 low.

In the bigger picture, medium term corrective pattern from 0.9407 (2022 low) might have completed with three waves to 0.9928. Decisive break of 0.9252 (2023 low) will confirm long term down trend resumption. Next target will be 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. For now, outlook will stay bearish as long as 0.9928 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 1.0843; (P) 1.0872; (R1) 1.0891; More....

Intraday bias in EUR/USD stays on the downside as fall from 1.1213 is in progress. This decline is seen as the third leg of the corrective pattern from 1.1274. Deeper fall would be seen to 61.8% retracement of 1.0447 to 1.1213 at 1.0740 next. On the upside, above 1.0915 minor resistance will turn intraday bias neutral and bring consolidations first, before staging another decline.

In the bigger picture, rejection by 1.1274 resistance suggests that corrective pattern from 1.1274 (2023 high) is not completed yet. Instead, decline from 1.1213 might be another falling leg. Sustained break of 55 W EMA (now at 1.0877) will validate this case, and bring deeper fall towards 1.0447 support again. But downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404.

Daily Pivots: (S1) 1.2950; (P) 1.3018; (R1) 1.3060; More...

Intraday bias in GBP/USD remains on the downside at this point. Sustained trading below 1.3000 cluster support (38.2% retracement of 1.2298 to 1.3433 at 1.2999) will argue that whole rise from 1.2298 has completed and bring deeper fall to 61.8% retracement at 1.2732. Nevertheless, strong bounce from current level, followed by break of 1.3102 minor resistance, will turn bias back to the upside for stronger rebound towards 1.3433.

In the bigger picture, as long as 1.3000 support holds, the up trend from 1.0351 (2022 low) is still in progress. Next target is 61.8% projection of 1.0351 to 1.3141 from 1.2298 at 1.4022. However, considering mild bearish divergence condition in D MACD, decisive break of 1.3000 will argue that a medium term top is already in place, and bring deeper fall back to 1.2664 support next.

Daily Pivots: (S1) 0.8625; (P) 0.8641; (R1) 0.8672; More…

Intraday bias in USD/CHF remains on the upside as rise from 0.8374 is in progress. Sustained 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. On the downside, below 0.8605 minor support will turn intraday bias neutral again first.

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) 149.08; (P) 149.44; (R1) 150.02; More...

Intraday bias in USD/JPY remains neutral for consolidations below 149.97 temporary top. Further rally is expected with 146.48 resistance turned support intact. Above 149.97 will resume the rise from 139.57 to 61.8% retracement of 161.94 to 139.57 at 153.39 next. However, firm break of 146.48 will argue that such rebound has completed, and turn bias back to the downside for retesting 139.57 low.

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) 1.3736; (P) 1.3764; (R1) 1.3779; More...

Intraday bias in USD/CAD stays neutral for consolidation below 1.3837 temporary top. Downside of retreat should be contained above 1.3646 resistance turned support. On the upside, above 1.3837 will resume the rally from 1.3418 to 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.

It’s yet another day of stimulus announcements in China, and another round of letdowns for investors. Chinese authorities today announced to almost double the amount it deployed to support what’s called ‘white list’ projects – we are talking about a 4 trillion yuan initiative to facilitate funding thousands of public and private projects in 170 cities of China. But in vain, the announcement was again seen as too small to match the People’s Bank of China’s (PBoC) massive monetary easing, and failed to give the Chinese equities a sustainable boost. The CSI 300 was initially up but gains melted like snow under the sun: the index is flat at the time of writing, the CSI mainland real estate index is down by 4% and the Hang Seng index also gave back earlier gains. There is severe a disconnect between the Chinese authorities and investor expectations. The only way to bring the two groups to an agreement is the announcement of a massive fiscal spending figure that Xi’s government hasn’t been willing to do so far.

Copper and iron ore futures are down this morning, and the AUDUSD – though better bid after yesterday’s selloff below the 100-DMA, sees resistance near this level. Crude oil, on the other hand, remains under pressure a touch above the $70pb despite a surprise decline in US oil inventories last week, according to the latest API release. China’s inability to cheer investors up and the fading worries that Israel will attack the Iranian oil facilities, combined with a deteriorating global demand outlook suggest that it’s not a matter of if, but a matter of when and by how much US crude will sink below the $70pb level. The bearish oil outlook remains supportive of a softer Loonie against the greenback, along with the softening price pressures in Canada. Released yesterday, the latest CPI report revealed that inflation in Canada eased faster than expected in September and the headline figure now stands near 1.6% - backing further rate cuts from the Bank of Canada (BoC) to support the economy.

In the US, the unexpected fall in NY Empire manufacturing index gathered little attention yesterday. The US dollar index extended gains above the 100-DMA, as Cable slipped below the 1.30 level after inflation report in Britain came in softer than expected and boosted the Bank of England (BoE) doves’ expectation of rate cuts in Britain. The sterling bears are now testing the major 38.2% Fibonacci retracement, a few pips below the 1.30 mark, to reverse the April to September positive trend and send the pair into a medium-term bearish consolidation zone.

Across the Channel, the EURUSD took out the 200-DMA support yesterday and extended losses to 1.0850 level ahead of today’s European Central Bank (ECB) decision. The ECB is expected to lower its rates by another 25bp as the headline Eurozone inflation eased below the bank’s 2% target in September and the Eurozone economies are struggling to keep their head above water. Germany, once the zone’s growth engine, is thought to be in mild recession, its car factories are suffering the Chinese EV competition – and will likely be heavily hit by the European tariffs on Chinese EVs that will fire back on the European carmakers. Its iconic VW already announced factory closures, and even ASML, which was the proxy of the AI trade in Europe, is not doing well after it confessed that orders are looking weak into 2025 due to a delayed recovery in chip industry – concerning other than AI chips, and the European luxury brands – which are among the biggest European companies – are heavily hit by the fading Chinese/Asian spending. LVMH erased all gains triggered by the Chinese stimulus optimism of late September and is back to the down-trending trend building since March this year. Under these circumstances, the ECB could safely deliver another 25bp cut today and hint at more rate cuts to come. The only thing that could held the ECB officials back from sounding overly dovish is persistent core and services inflation in the region. The ECB members will likely remain cautious regarding that metric to make sure that the rate cuts don’t happen faster than the music. But in fine, the Eurozone needs financial relief and inflation’s trajectory, both in the Eurozone and away, are supportive of further monetary policy easing.

The market’s reaction to ECB decision and the post-decision presser could be mixed. A rate cut today, a dovish message from the ECB and another 25bp cut in December are already widely priced in. Lagarde's tone at the post-decision press conference will play a crucial role in determining whether the euro will further weaken against the dollar. We could see a buy-the-rumour-sell-the-fact reaction to today’s decision if Lagarde highlights risks regarding the softening inflation. If the ECB does not convey strong confidence that today’s rate cut is merely a midpoint in a series of reductions, the EURUSD may experience a rebound from its near-overbought conditions. But any potential price rallies will likely see a solid resistance near the 1.0980 level, the major 38.2% Fibonacci retracement on April to September to rebound, and keep the pair within the medium-term bearish consolidation zone for further depreciation in the medium run. Paradoxically, the Stoxx 600 index is trading near an ATH level as the cyclical nature of the European stocks fuelled by lower global rate prospects have been boosting appetite for European companies since a year now. Whether the European stock bulls will survive to what could be a gloomy earnings season is yet to be seen.

In the US, however, the earnings season is going quite well, as Morgan Stanley also announced better-than-expected earnings and closed the march for big banks on a positive note. The S&P500 consolidates near record.

In focus today

Focus today is on the ECB meeting, where we expect the ECB to deliver yet another rate cut of 25bp, bringing the deposit rate to 3.25%. Our expectations are supported by the recent weaker-than-anticipated growth indicators, as well as a decline in inflation. We expect that the ECB sticks to the 'meeting-by-meeting' and 'data dependent' approach that it has been following in the past few quarters. Ahead of the meeting, we receive the final HICP inflation data, which will allow us to see how the LIMI measure of domestic inflation fared in September, which is an important input for the ECB.

US September retail sales and industrial production data as well as the weekly jobless claims are due for release in the afternoon. Retail sales will provide the markets with the latest hard evidence of the strength of the US consumer. Initial jobless claims from the week ending 12 October will for the first time include the impact of Hurricane Milton, which likely distorted the data upwards especially in Florida.

The Central Bank of Turkey will announce their rate decision after their monetary policy meeting. Markets consensus is an unchanged decision of 50%.

Overnight we get, the September inflation in Japan. The figure likely declined sharply from 2.8% in August as an early Tokyo release also indicated. BoJ's preferred measure of inflation (CPI excl. fresh food) stood at 2.8% in August and should remain above the 2%-target. Core price pressures have largely aligned with 2% inflation recently and with the October yen slide in mind, we still see an opening for another BoJ hike in either December or January after the dust has settled upon the general election on 27 October.

Tomorrow morning at 4:00 CET, China releases its monthly data on home sales, house prices, retail sales, industrial production etc. as well as Q3 GDP data. We expect it to still paint a weak picture of China highlighting the need for the increased stimulus we are now seeing.

Economic and market news

What happened overnight

In Japan, trade figures for September came in lower than expected with exports at -1.7% y/y (cons: 0.5%), and imports at a small rise of +2.1% y/y (cons: 3.2%).

In China, it was announced that they are expanding their "white list" of housing projects eligible for financing, and increasing bank lending for these developments to USD 562bn from USD 313bn, according to Housing Minister Ni Hong. These initiatives are part of efforts to stabilize a sector that has faced a crisis since 2021, impacting the broader economy.

What happened yesterday

In the UK, inflation surprised sharply to the downside with headline at 1.7% (cons: 1.9%, prior: 2.2%), core at 3.2% (cons: 3.4%, prior: 3.6%) and services at 4.9% (cons: 5.2%, prior: 5.5%). This means that Q3 service inflation stands at 5.2%, which is notably lower than the BoE forecast at 5.6% from the August MPR. The decline was broad-based across categories with core services easing. The downside surprise should give the BoE more confidence that underlying inflationary pressures are easing and by extension, make a November cut a done deal. Going forward, we forecast the BoE will maintain its gradual approach delivering quarterly cuts until next year, where we expect a cut at every meeting for the first half of the year, leaving the Bank Rate at 3.25% at year-end 2025.

FI: Yesterday's decline in rates with very limited volatility was mostly a waiting game ahead of this week's big event, namely today's ECB meeting. The initial rally was supported by a benign UK inflation report. The 10y German point drifted 3bp lower to 2.18%.

FX: The Scandies had a poor session yesterday amid USD strength and US asset markets outperforming European equivalents. EUR/NOK rose close to 11.89 before trimming gains while the initial SEK losses kept EUR/SEK above 11.40 also during the US hours. EUR/USD continues to grind lower while GBP only partly erased losses following lower-than-expected UK CPI figures. USD/JPY continues to trade just below the 150-mark.