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Daily Pivots: (S1) 0.8362; (P) 0.8372; (R1) 0.8380; More...

Intraday bias in EUR/GBP remains neutral and outlook is unchanged. Further decline is in favor, and 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) 1.6172; (P) 1.6214; (R1) 1.6242; More...

Intraday bias in EUR/AUD Is mildly on the downside at this point. Rebound from 1.6002 could have completed at 1.6351. Deeper fall would be seen back to retest 1.6002 low. On the upside, though, 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) 0.9357; (P) 0.9373; (R1) 0.9391; More....

Intraday bias in EUR/CHF 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, 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.

In focus this week

Today is set to be a quiet start of the week, without major market movers on the data front.

We continue to await Israel's response to the Iranian missile attack on 1 October, which will determine whether we will see a further escalation of the conflict in the region. According to the American news channel NBC, unidentified US officials believe that Israel will be targeting Iranian military and energy infrastructure. Tensions continue as Hezbollah stroke Israel with a drone bombing south of Haifa where four IDF soldiers were killed and about 67 people injured. Israel made attacks in Gaza near a school which is housing internally displaced persons. Minimum 15 people were confirmed dead.

On the data front we receive final inflation data from Sweden on Tuesday and the ZEW index from Germany. On Wednesday UK CPI is due for release. On Thursday, focus will be on the ECB meeting where we expect the ECB to deliver yet another rate cut of 25bp, bringing the deposit rate to 3.25%. Also on Thursday, we will receive the final September inflation data from the euro area, and the Central Bank of Turkey will announce their rate decision. To round off the week, we get Japanese inflation data and GDP data out of China on Friday.

Economic and market news

What happened overnight

China began large-scale military exercises around Taiwan. This comes after Taiwanese President Lai Ching-te's National Day speech last week, where he asserted his country's sovereignty. China calls the exercises a "stern warning". Officials from the US government condemned the drills and said that there was no justification for them.
What happened over the weekend

Fitch downgraded the outlook of France from 'stable' to 'negative' on the back of the fiscal risks and the more negative view on the fiscal situation in France made by the new French government, where the budget deficit for 2024 is expected to be 6.1% and the budget deficit for 2025 is expected to be 5% resulting in rising debt to GDP, which Fitch expects to be more than 118% of GDP by 2028. However, they have not downgraded France from AA- yet, but has affirmed the rating although their model rating suggests an A+ rating. The 10Y spread between France and Germany is testing the 80bp level and the risk is that it would go towards 90bp even though this is a very wide level seen in a historical context.

In China, September CPI inflation came in lower than expected at 0.0%|0.4% m/m|y/y (consensus: 0.4%|0.6%, prior: 0.4%|0.6%). Core inflation came in at 0.1%, down from 0.3% in August. The print suggests that deflationary pressures increased further in September, which comes from weak domestic demand. The Chinese finance minister Lan Fo'An spoke about fiscal stimulus at an awaited press conference Saturday, saying that the government is looking at additional ways to boost the economy, but failed to speak about size or timing of the measures, which investors and analysts were hoping for. The market reaction in Chinese equities were mixed as CSI 300 increased by 0.3%, however the Hang Seng index declined 1.7% in early trading Monday. Brent Crude oil fell 1.8% in Early trading Monday, which could be a reaction to deflation fears in China.

What happened on Friday

In the US, September PPI came out slightly below expectations, but core PPI (which excludes the decline that we saw in energy prices during September) was close to consensus expectations. There was some moderation across both goods and services producer price inflation. Overall, this week's CPI and PPI data was, at the very least, not alarming for the Fed and the disinflationary process remains well underway.

The University of Michigan consumer sentiment survey fell to 68.9 in October from 70.1 in September, in contrast to expectations of a rise to 70.8. The one-year inflation expectations ticked slightly higher to 2.9% from 2.7%, which could likely be driven by the latest up-tick in oil/gasoline prices.

In Germany, we got the final inflation data from September, which showed still elevated underlying inflation. The 'LIMI' measure of domestic inflation fell to 4.82% y/y from 4.95% in August, which is another move in the right direction, but the level remains high.

FI: 10Y US Treasury yields continued to rise last week and are once again trading above 4% as the market has been repricing monetary policy expectations in the US. This has had a spillover effect on Europe, where there has also been a solid repricing and a rise in yields, where the 10Y German government bond yield has risen almost 25bp since early October. Furthermore, the Bund ASW-spread ended below 25bp on Friday. The 10Y spread between France and Germany is testing the 80bp level and given the negative rating action last week there is risk for a further widening.

FX: Last week in FX markets was characterised by USD strength and underperformance in the cluster of commodity and cyclically sensitive currencies with CAD and NZD leading the losses. In the Scandies, both SEK and NOK staged a late-week comeback although EUR/NOK and EUR/SEK still entered the weekend around 11.70 and 11.35, respectively. Finally, the JPY has come under renewed pressure amid the rise in global yields and USD/JPY is now back close to the 150-mark.

Daily Pivots: (S1) 0.6731; (P) 0.6745; (R1) 0.6766; More...

Intraday bias in AUD/USD remains neutral for consolidations above 0.6701 temporary low. Further decline is expected as long as 0.6809 minor resistance holds. On the downside, break of 0.6701 and sustained trading below 55 D EMA (now at 0.6743) should confirm rejection by 0.6941 fibonacci level. Intraday bias will be back on the downside for 0.6621 support next. On the upside, however, break of 0.6809 minor resistance will bring retest of 0.6941 high instead.

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.

Daily Pivots: (S1) 1.3731; (P) 1.3758; (R1) 1.3790; More...

Intraday bias in USD/CAD stays mildly on the upside despite some loss of momentum. As noted before, corrective fall from 1.3946 should have completed at 1.3418 already. Further rally should be seen towards this resistance. On the downside, below 1.3702 minor support will turn intraday bias neutral 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.

Daily Pivots: (S1) 1.0923; (P) 1.0938; (R1) 1.0954; More....

Intraday bias in EUR/USD remains neutral for the moment. Further decline is expected as long as 1.0996 resistance holds. On the downside, sustained break of 38.2% retracement of 1.0447 to 1.1213 at 1.0920 will argue that fall from 1.1213 is the third leg of the corrective pattern from 1.1274. In this case, deeper decline would be seen to 61.8% retracement at 1.0740 next.

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.

Daily Pivots: (S1) 1.3045; (P) 1.3064; (R1) 1.3089; More...

Intraday bias in GBP/USD remains neutral for the moment. Fall from 1.3433 short term top could extend lower. But strong support should be seen from 1.3000 cluster support (38.2% retracement of 1.2298 to 1.3433 at 1.2999) to contained downside. Above 1.3174 minor resistance will turn bias back to the upside for stronger rebound. However, decisive break of 1.3000 will carry larger bearish implications.

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) 148.58; (P) 148.94; (R1) 149.46; More...

Intraday bias in USD/JPY remains neutral for consolidations below 149.58 temporary top. Further rally is expected as long as 145.91 support holds. Above 149.58 will resume the rise from 139.57 short term bottom to 61.8% retracement of 161.94 to 139.57 at 153.39.

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) 0.8557; (P) 0.8573; (R1) 0.8590; More…

USD/CHF trades mildly higher in Asian session but stays below 0.8611 temporary top. Intraday bias remains neutral First. further rally is expected as long as 0.8529 minor support holds. Above 0.8611 will resume the rebound from 0.8374 short term bottom to 38.2% retracement of 0.9223 to 0.8374 at 0.8698. However, firm break of 0.8529 will turn bias back to the downside for retesting 0.8374 low instead.

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).