Sample Category Title

Daily Pivots: (S1) 0.8646; (P) 0.8662; (R1) 0.8674; More…

Intraday bias in USD/CHF remains neutral for consolidation below 0.8685 temporary low. Further rally is still in favor as long as 0.8629 minor support holds. Sustained break of 38.2% retracement of 0.9223 to 0.8374 at 0.8698 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. However, considering bearish divergence condition in 4H MACD, firm break of 0.8629 support will indicate short term topping, and turn bias back to the downside for 55 D EMA (now at 0.8601).

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) 1.2928; (P) 1.2958; (R1) 1.3007; More...

Intraday bias in GBP/USD remains neutral for consolidations above 1.2906 temporary low. Below 1.2906 will resume the fall from 1.3433 to 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) 1.0789; (P) 1.0810; (R1) 1.0848; More...

Intraday bias in EUR/USD stays neutral for consolidation above 1.0760 temporary low. Further decline is expected as long as 1.0871 resistance holds. Below 1.0760 will resume the fall from 1.1213 to 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 1.0963).

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.

The forex markets have shifted into consolidation mode today, with Dollar’s rally slowing as profit-taking sets in. Traders are showing caution ahead of two critical events that could reshape the near-term outlook: the upcoming non-farm payroll report next Friday, and the US presidential election the following week. NFP data is expected to set the stage for November and December FOMC rate decisions. Meanwhile, the presidential election carries broad economic implications, as shifts in administration priorities could impact both US and global markets.

Despite some pullback, Dollar remains the strongest performer this week. Swiss Franc and Euro follow behind. Japanese Yen remains the weakest currency this week. Both New Zealand Dollar and Australian Dollar also lag. Pound and Canadian Dollar are holding in middle ground.

In Europe, at the time of writing, FTSE is down -0.03%. DAX is up 0.07%. CAC is down -0.19%. UK 10-year yield is down -0.0324 at 4.213. Germany 10-year yield is up 0.007 at 2.279. Earlier in Asia, Nikkei fell -0.60%. Hong Kong HSI rose 0.49%. China Shanghai SSE rose 0.59%. Singapore Strait Times fell -0.32%. Japan 10-year JGB yield fell -0.006 to 0.952.

US durable goods orders down -0.8% mom in Sep, ex-transport orders up 0.4% mom

US durable goods orders fell -0.8% mom to USD 284.8B in September, better than expectation of -0.9% mom. Transportation equipment, drove the decrease, -3.1% mom to USD 95.4B Both were down three of the last four months.

Ex-transport orders rose 0.4% mom to USD 189.3B, much better than expectation of -0.1% mom decline. Ex-defense orders fell -1.1% mom to USD 264.9B.

Canada's retail sales rises 0.4% mom in Aug, vs exp 0.6% mom

Canada's retail sales grew 0.4% mom to CAD 66.6B in August, worse than expectation of 0.6% mom. Sales were up in four of nine subsectors and were led by increases at motor vehicle and parts dealers. Core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—were down -0.4% mom.

Advance estimate suggests that sales increased 0.4% mom in September.

German Ifo rises to 86.5, stops declining for the time being

Germany's Ifo Business Climate index improved in October, rising from 85.4 to 86.5 and exceeding expectations of 85.4. Current Assessment index also showed an uptick from 84.4 to 85.7, surpassing the forecasted 84.1, while Expectations index rose from 86.4 to 87.3, above the anticipated 86.6.

Sectoral data further underscores this cautious optimism, with manufacturing inching up from -21.4 to -20.6, services edging into positive territory from -3.5 to 0.1, and trade posting an improvement from -29.8 to -29.3. Construction sector, however, slipped from -25.3 to -25.7.

This data signals a stabilization in Germany's economic outlook, with Ifo commenting, "The German economy stopped the decline for the time being."

Tokyo CPI core dips to 1.8% in Oct on lower energy prices

Japan's Tokyo CPI core (excluding food) dropped from 2.0% yoy to 1.8% yoy in October, slightly above market expectations of 1.7%. This marks the first time in five months that inflation has dipped below BoJ's 2% target. Headline CPI also slowed from 2.1% yoy to 1.8% yoy.

The deceleration was largely driven by a slowdown in energy prices, with government subsidies for energy costs contributing to a 0.51 percentage point reduction in the overall index.

Despite this, underlying inflationary momentum ticked up, as core-core CPI (excluding food and energy) rose from 1.6% yoy to 1.8% yoy. Services prices also saw an uptick, increasing by 0.8% yoy compared to 0.6% yoy in the prior month.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0789; (P) 1.0810; (R1) 1.0848; More...

Intraday bias in EUR/USD stays neutral for consolidation above 1.0760 temporary low. Further decline is expected as long as 1.0871 resistance holds. Below 1.0760 will resume the fall from 1.1213 to 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 1.0963).

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.

US durable goods orders fell -0.8% mom to USD 284.8B in September, better than expectation of -0.9% mom. Transportation equipment, drove the decrease, -3.1% mom to USD 95.4B Both were down three of the last four months.

Ex-transport orders rose 0.4% mom to USD 189.3B, much better than expectation of -0.1% mom decline. Ex-defense orders fell -1.1% mom to USD 264.9B.

Full US durable goods orders release here.

Canada's retail sales grew 0.4% mom to CAD 66.6B in August, worse than expectation of 0.6% mom. Sales were up in four of nine subsectors and were led by increases at motor vehicle and parts dealers. Core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—were down -0.4% mom.

Advance estimate suggests that sales increased 0.4% mom in September.

Full Canada retail sales release here.

Fundamental Analysis

U.S.:

• September CPI: Headline inflation eased to 2.4% y/y, aligning closer to the Fed’s target, though core CPI rose by 3.3% y/y, driven by housing and insurance.
• September Jobs: The U.S. added 254,000 jobs, surpassing expectations, which may prompt the Fed to maintain high rates short-term.
• Treasuries: 10-year yields rose to 4.24% this week, reflecting growth optimism and potential for sustained high rates.

Australia:

• September CPI: Inflation slowed to 5.4% y/y, which could support the RBA's wait-and-see approach.
• September Employment: Only 6,700 jobs were added, indicating a cooling economy and reinforcing expectations that the RBA will hold rates steady.

The AUDUSD has faced downward pressure largely due to divergent fundamentals between the U.S. and Australia. As the Fed considers sustained high rates, driven by core inflation and job growth, the RBA adopts a more cautious approach amidst slowing inflation and weaker job gains. Additionally, rising U.S. Treasury yields have made the dollar more attractive than the AUD, intensifying the pair's bearish trend.

In the short term, should U.S. rates remain elevated with Treasury yields climbing, AUDUSD is likely to stay under pressure. However, any shifts in RBA policy or signs of a U.S. economic slowdown could provide support for the Australian dollar.

Technical Analysis

AUDUSD, H2

• Supply Zones (Sells): 0.6666 and 0.6677
• Demand Zones (Buys): 0.6621

The pair has been trending lower throughout October, forming a one-week accelerated bearish channel. The last validated resistance level at H4 is 0.6695.

In this context, further selling is expected as long as prices stay below the daily open (D1) at 0.6636, with intraday targets at supports 0.6614, 0.66, and the average bearish range at 0.659. A sustained break would allow for a broader downward move toward August 15 support at 0.6557.

However, intraday exhaustion of bears could drive a break above the initial supply zone around 0.6635 and local resistance at 0.6644, potentially extending toward 0.6661 intraday and the high-volume node around 0.6677 next week. This correction would still maintain the bearish structure as long as it remains below the key resistance at 0.6661.

Technical Summary

• Corrective Bearish Scenario: Intraday sells below 0.6635 (upon confirmed PAR* pattern), targeting 0.6614, 0.66, 0.6590, and extension to 0.6557. Use a 1% SL.
• Bullish Continuation Scenario: Buys above 0.6644, targeting 0.6661, 0.6677, or extended to 0.6690. Employ a 1% SL with low lot size to accommodate volatility.

Always await the formation and confirmation of a *Reversal Exhaustion Pattern (PER) on M5 as outlined here before entering key zones.

Naked POC
POC = Point of Control: A zone of highest volume concentration.

USDJPY made big, sharp and impulsive sell-off through summer. That was wave (A) that caused a bounce in last two months, for a rally in (B) which is now at important 153-155 resistance, but there’s no evidence of a reversal yet, unless we see a bearish intraday impulse, below 146.50, where overlap will likely confirm end of subwave C on 4h time frame.

However, due to strong rise, keep in mind that current rally could also be a five-wave impulse into first leg A of a bigger and larger A-B-C corrective rally in wave (B) according to the secondary count, especially if we respect what yields/notes are doing, but even in this case, we can expect a reversal down within wave B soon.

The Canadian dollar is showing little movement on Friday. In the European session, USD/CAD is trading at 1.3845 at the time of writing, down 0.07%.

It has been a relatively quiet week for the Canadian dollar, and even an oversized 50-basis point rate cut from the Bank of Canada failed to shake up the Canadian currency. The jumbo cut was priced in by the markets, as inflation has fallen below the BoC’s 2% target and the economy remains week despite the central bank’s gradual rate cuts. This week’s cut was the fourth in as many meetings and the BoC is hoping that the large rate cut will boost economic activity.

BoC Governor Tiff said after the rate meeting that “monetary policy has worked” and that both headline and core inflation have come down. Does Tiff’s pat on the back mean that the BoC will revert back to modest cuts of 25-bp increments? Not necessarily – Tiff said that the rate move should “contribute to a pickup in demand”, and if the economy remains sluggish and consumer spending doesn’t improve, the BoC could repeat a 50-bps move in December.

The US will release durable goods orders and UoM consumer sentiment later today. The manufacturing sector has contracted for four straight months and core durable goods orders are expected to fall 1% in September, after no change in August. The UoM consumer sentiment index is expected to fall to 68.9 in October, compared to 70.1 in September. Consumers are unhappy about high inflation and there is uncertainty over the US election, which is a dead heat with just 10 days to the election.

USD/CAD Technical

• USD/CAD is testing support at 1.3846. Below, there is support at 1.3823
• There is resistance at 1.3879 and 1.3902

• The recent movement of the USD/JPY has been influenced primarily by political factors.
• The JPY has weakened significantly due to the growing risk that the current LDP-led coalition may lose its majority seats after this Sunday, 27 October snap election.
• Watch the 151.10 key short-term support on the USD/JPY.

Since our last publication, the bears have continued to gain a foothold in the Japanese yen as it weakened further against the US dollar and burst above the 151.95 key long-term pivotal resistance of the USD/JPY and its 200-day moving average.

Growing internal political risk is inflicting damage on the JPY outlook in the near term

There is now a growing risk that Japan may end up with a minority coalition government after this Sunday, 27 October snap general election for the lower house.

Recent polls have indicated the possibility of the ruling Liberal Democratic Party (LDP)-Komeito coalition losing its majority in parliament and may also cause the newly appointed Prime Minister Ishiba to lose his premiership or force the LDP to look for additional coalition partner to stay in power.

All in all, such political risk is likely to hamper the Bank of Japan (BoJ) current monetary policy normalisation plan to hike interest rates gradually after it ended its decades-long of negative interest rate in March and increased the overnight short-term interest rate to 0.25% in July.

At this juncture, the main opposition party, the Constitutional Democratic Party of Japan has ruled out the prospect of forming a coalition with the LDP.

Thus, smaller opposition parties, Japan Innovation Party and Democratic Party for the People are the only choices that LDP has as potential coalition partners to secure its power base.

Both opposition parties favour expansionary fiscal and monetary policies to achieve sustained economic and wage growth. Hence, BoJ is likely to face a hurdle in enacting additional interest rate hikes next year if such economic proposals are taken into consideration by a newly formed LDP-led coalition.

Fundamentals are still supporting further interest rate hikes in Japan

Fig 1: Monthly Japan PPI, CPI & Tokyo CPI trends (y/y) as of Sep & Oct 2024 (Source: TradingView, click to enlarge chart)

Even though the latest headline inflation in Tokyo slowed to 1.8% y/y in October, down from 2.2% a month earlier, the Tokyo core-core inflation rate (excluding food and energy) came in strong-than-expected as it rose to 1.8% y/y from 1.2% printed in September (see Fig 1).

The Tokyo inflation data are considered a leading inflationary trend for the nationwide Japan CPI which BoJ will take into consideration at next week’s monetary policy meeting on 31 October when it also releases its latest quarterly growth and inflation trend forecasts.

The market consensus is looking for BoJ to keep its short-term interest rate unchanged at 0.25% due to uncertainties surrounding the upcoming US presidential election on 5 November.

Watch the 151.10 key short-term support on USD/JPY

Fig 2: USD/JPY minor trend as of 25 Oct 2024 (Source: TradingView, click to enlarge chart)

The pull-back of the USD/JPY that took form on Thursday, 24 October from a three-month high of 153.19 printed on Wednesday, 23 October has managed to stall at its 200-day moving average and slightly above the lower boundary of its minor ascending channel from 30 September 2024 low of 141.65 (see Fig 2).

Watch the 151.10 key short-term pivotal support to maintain its current streak of impulsive upmove sequence for the next intermediate resistances to come in at 153.80 and 154.70/80 next.

However, failure to hold at 151.10 invalidates the bullish tone to kickstart a potential mean reversion decline to expose the intermediate supports of 150.30 and 148.95 (also the 20-day moving average).