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Daily Pivots: (S1) 0.8741; (P) 0.8752; (R1) 0.8768; More....

Intraday bias in EUR/GBP remains mildly on the upside at this point. Current rally should target 61.8% projection of 0.8491 to 0.8752 from 0.8648 at 0.8809. On the downside, break of 0.8687 support is needed to indicate short term topping. Otherwise, further rally remains in favor in case of retreat.

In the bigger picture, down trend from 0.9267 (2022 high) should have completed completed with three down to to 0.8491. Rise from 0.8491 is seen as another leg inside that pattern from 0.9499 (2020 high). Further rally should be seen to 0.8977 resistance and above. This will remain the favored case as long as 0.8648 support holds.

Daily Pivots: (S1) 1.6692; (P) 1.6747; (R1) 1.6806; More...

Intraday bias in EUR/AUD remains neutral for the moment, and some more consolidations could be seen. On the upside, sustained break of 1.6843/4 will resume the rebound from 1.6319 for retesting 1.7062 high next. On the downside, however, below 1.6631 minor support will turn bias back to the downside for 1.6449 support instead.

In the bigger picture, while 1.7062 is a medium term top, there is no clear sign of trend reversal as EUR/AUD continues to draw strong support from the medium term trend line. Break of 1.7062 will resume the larger up trend from 1.4281 (2022 low) to 1.7691 fibonacci level. Nevertheless, break of 1.6449 support will argue that deeper correction is underway to 38.2% retracement of 1.4281 to 1.7062 at 1.6000.

Daily Pivots: (S1) 0.9637; (P) 0.9652; (R1) 0.9680; More...

Range trading continues in EUR/CHF below 0.9678 and intraday bias stays neutral. Further rally is expected as long as 0.9595 support holds. Firm break of 0.9678/91 resistance zone will carry larger bullish implication. Nevertheless, break of 0.9595 support will indicate short term topping, and turn bias back to the downside for deeper pull back.

In the bigger picture, fall from 1.0095 (2023 high) might have completed at 0.9416, just ahead of 0.9407 support (2022 low). Sustained break of 0.9691 cluster resistance (38.2% retracement of 1.0095 to 0.9416 at 0.9675) will pave the way to 61.8% retracement at 0.9836 and above. However, rejection by 0.9691 will maintain medium term bearishness for another test on 0.9407 at least.

Markets

The Fed’s hold at its November policy meeting ignited a corrective rally in US Treasuries (and core bonds in general). A minor positive US CPI print encouraged investors last Tuesday to add to pivot bets, circling the March 2024 policy meeting as earliest starting point of a rate cutting campaign. Last Friday’s intraday action – failing to close the week above the post-CPI highs with traders throwing the towel on better-than-expected, but second tier housing starts and building permits – suggests consolidation ahead in this holiday-shortened trading week. US markets are closed on Thursday for Thanksgiving with volumes traditionally low on (black) Friday as well. Daily changes on the US yield curve ranged between +4.8 bps (2-yr) and -2.6 bps (30-yr) with the German curve moving in parallel fashion (+1.4 bps at front end and -2.8 bps at the very long end). The (trade-weighted) dollar remains in dire straits even as the core bond rally seems to be losing some steam. DXY extends its drop this morning, falling to 103.70 which represents the lowest level since early September. Key support levels are 103.46 and 102.55 which are respectively 50% and 62% retracement on the greenback’s rally from mid-July to early October. EUR/USD is already past the 50% bar (1.0862) with the 62%-level (1.0960) nearby. Positive EU rating action (see News & Views), bullish risk sentiment on stock markets (China & South Korea doing well this morning) and still some underlying USD-weakness could force a test later on. In line with our consolidation view for core bonds, the 1.0960-level could nevertheless become a tough nut to crack. Today’s eco calendar is extremely thin. We eye tonight’s $16bn 20-yr US bond auction. During this month’s mid-month refinancing operation, the 30-yr Bond auction showed signs of weakness and also triggered an (intraday) market move (lower US Treasuries). Speeches by some ECB members and by BoE governor Bailey (after European close) are wildcards for trading. Bailey’s speech arrives as sterling is gently drifting lower and about to pop back in the broad EUR/GBP 0.8750-0.90 trading range after an extensive stay in the 0.85-0.8750 area.

News & Views

Rating agency Moody’s affirmed Italy’s rating at Baa3 and raised the outlook from negative to stable. The latter reflects a stabilization of prospects for the country's economic strength, supported by the implementation of the post-pandemic recovery plan (NRRP), the health of its banking sector and the government's debt dynamics. Growth in the next few years lowers the risk of a material and rapid deterioration in the fiscal situation. That said, fiscal strength remains constrained with the debt ratio expected at a high level in coming years of 140%. And this is highly sensitive to assumptions on growth, interest rates and the fiscal balance. Even a small deviation from the baseline could place the debt burden on more pronounced upward trajectory. Debt has an average maturity of around 7 years but because of high annual borrowing needs its affordability will still weaken relatively quickly. Moody’s does take into account the ECB’s TPI, which limits sovereign exposure to liquidity stress. Underpinning the lowest possible investment grade is the country’s large, diversified and competitive manufacturing sector, high household wealth and low private sector indebtedness. Institutional gaps however will probably prevent the country from fully profiting (through increased potential growth) from the what it calls a once-in-a-generation NRRP opportunity.

Portugal’s rating was bumped higher two notches by Moody’s from Baa2 to A3 with a stable outlook. The decision “reflects the sustained positive credit effects over the medium term of a series of economic and fiscal reforms, private sector deleveraging and ongoing strengthening of the banking sector.” Over the next few years and unlike in other ageing countries, Moody's expects the negative impact of demographic trends on potential growth to be mitigated by sustained net migration, higher participation rates and an increase in labor productivity growth. Solid growth and broadly balanced budgets mean that the - although elevated - debt burden will continue to fall (to +/-100% in 2024, lowest since 2010) at one of the fastest paces among advanced economies. More positive trends in economic and fiscal strength than currently expected are balanced against recent evidence of political risks. With the latter, the agency refers to the recent resignation of PM over corruption investigations.

The previous week marked a significant shift in market sentiment regarding Federal Reserve (Fed) rate hike expectations. The latest Consumer Price Index (CPI) update revealed a slower-than-anticipated inflation rate in the US, coupled with politicians averting a government shutdown. Despite these factors, the US 2-year yield tested 4.80% for the fourth time, while the 10-year yield briefly dipped below 4.40%. The term premium on the US 10-year paper, which surged to 50 basis points the previous month due to hawkish Fed expectations, political risks, and increased government bond supply, has nearly vanished amid the recent rally. This suggests that, at current levels, investors may require renewed conviction to sustain buying momentum.

Attention is now focused on the closely watched US 20-year bond auction, considering the recent weakness in the 10 and 30-year bond auctions. The outcome may influence a potential rebound or continuation of the rally in US bond yields. The minutes from the latest Federal Reserve (Fed) policy meeting, set for release tomorrow, will likely emphasize that the Fed's decision to pause rate hikes was influenced by the rise in US long-term yields in October. With the subsequent decrease in yields, interpretations may vary, either signaling Fed caution due to falling yields or a belief that inflationary pressures have subsided, leading to a halt in rate hikes.

All eyes on Nvidia

The S&P500 closed above the psychological level of 4500, and the Nasdaq 100 approached its summer peak ahead of Nvidia's earnings announcement. Nvidia has experienced substantial gains with expectations of a significant revenue increase in Q3. The stock price has been up 240+% since the beginning of the year, and 350+% since October 2022. The company predicted that its sales would soar to $16bn last quarter. A wide gap between demand and supply should keep Nvidia on track for extended growth. But any deviation from optimistic projections could trigger heavy profit-taking.

Elsewhere, US stock optimism extends globally, with the European Stoxx testing the 200-DMA resistance and the Japanese Nikkei reaching a 33-year high. Japan's supportive central bank, a cheap yen, and strong company earnings contribute to investor interest.

FX and energy

The USDJPY fell below the 50-DMA and the EURJPY retreated from a record high. There is one reasonable direction for the yen at the current levels: a positive correction. But no one knows when the Bank of Japan’s (BoJ) astonishing push back against normalizing policy will end. Japan is expected to announce a rise in inflation to 3% this Friday.

The EURUSD extends gains above 1.09 this morning on the back of a broad-based USD selloff. The next target for euro bulls is 1.10, contingent on sustained USD weakness. However, the US dollar index flirts with oversold conditions and tests critical 200-DMA support, indicating a potential pause in the ongoing dollar selloff absent fresh news.

In energy, US crude recovers as speculation that OPEC could extend production cuts throws a floor under the recent selloff. The next OPEC meeting is scheduled for November 26th and Saudi considers doubling its 1mbpd supply cut. It’s a risky move and it could go both ways. Oil prices are trending lower today because of a weakening global outlook. Therefore, whether this move – in hurry -attracts buyers or exacerbates the current global economic concerns remains to be seen. Monitoring this week's price action will provide insights into whether to sell a potential post-OPEC rally or seize opportunities on a bullish trend. If the excitement regarding Saudi doubling its supply cuts can’t push the price of a barrel above $80-81pb range, it’s probably better to sell the tops.

Market movers today

The main focus this week will be on FOMC minutes Tuesday, Riksbank meeting and Euro PMIs on Thursday and US PMIs, German ifo and Japan CPI on Friday.

Today we start out quiet with no big movers on the agenda.

The 60 second overview

Cautionary tone by Fed speakers. On Friday, some FOMC participants cautioned against declaring victory over inflation despite the recent positive signals. Collins (non-voter) noted that she has seen less progress on non-shelter services inflation and that additional rate hikes cannot yet be taken off the table. Goolsbee (voter) underscored that taming inflation remains the Fed's key focus over growth or the labour market. Daly (non-voter) emphasized that the Fed 'needs patience' as the path to 2% inflation still remains unclear. This week markets will keep an eye out for the FOMC minutes tomorrow evening, although the post-meeting easing in financial conditions could mean that some of the comments are already somewhat outdated. On the data front, November Flash PMIs on Friday will be the most important release; we generally expect to see further signs of cooling economic activity especially on the services sector towards winter.

China keeps lending rates unchanged. China's Loan Prime Rates were held unchanged in line with expectations. They are based on reference rates reported by banks and generally follow the policy rate, Medium Lending Facility rate, which were kept unchanged last week. China seems to prefer quantitative credit measures currently over rate reductions in their monetary tool box in order to protect bank margins and not widen the rate spread further to the US.

Argentina moves to the right. Right-wing libertarian Javier Milei came out as the winner of the Presidency in Argentinian elections on Sunday. Milei won on a campaign against the political elite and high inflation close to 150% and has pledged economic shock therapy.

Equities. Global equities booked a small gain Friday and thereby ended a very solid week on a high note. Focus on yields still overarching, with cyclical growth massively outperforming. The renewed appetite for small caps continued Friday sending US regional banks up almost 10% for the week. The energy sector also flying on Friday as the oil price increase 4% (and continuing higher this morning). VIX has made it all the way down from 22 to just below 14 the last month, telling the story about fear of inflation and central banks fading faster than even we would have expected. US equities Friday: Dow +0.01%, S&P 500 +0.1%, Nasdaq +0.1% and Russell 2000 +1.4%. Asian markets are mostly higher this morning led by some optimism around China. US and European futures close to unchanged.

FI. Global bond yields were mainly moving sideways on Friday. Initially, there was a decent decline in global bond yields, where the yield on a 10Y German government bond had declined some 5-6bp and 10Y Treasuries had declined 3-4bp, but by the afternoon yields had erased most of the gains.

FX. During Friday's session EUR/USD rose firmly above the 1.09 mark followed by a squeeze in US yields. Focus turns to the FOMC minutes out tomorrow evening and November flash PMIs on Friday. Oil prices surged by 4% with Brent trading back above 80 USD/bbl. For SEK, the main event this week is the Riksbank rate decision on Thursday.

Credit. Friday marked another positive day for credit markets as the soft-landing narrative continued to take hold in risk assets. Itrax Main tightened 1.7bp to close at 69.9bp, while Itrax Xover tightened 7.1bp to close at 387.4bp (another post September low for both indices). Primary markets were a bit slower, as is common for Friday, but did exhibit some activity with deals announced earlier in the week being executed.

Daily Pivots: (S1) 0.6473; (P) 0.6495; (R1) 0.6536; More...

AUD/USD's rise from 0.6269 resumes today by breaking through 0.6541 resistance. Intraday bias is back on the upside. Current development argues that whole decline from 0.7156 has completed with three waves down to 0.6269. Further rally should be seen to falling channel resistance (now at 0.6676) next. Nevertheless, below 0.6451 support will dampen this bullish view and turn intraday bias neutral first.

In the bigger picture, there is no confirmation that down trend from 0.8006 (2021 high) has completed. While current rebound from 0.6269 might extend higher, it could be the third leg of the corrective pattern from 0.6169 (2022 low) only. For now, medium term bearishness will remain as long as 0.6894 resistance holds.

Daily Pivots: (S1) 1.3698; (P) 1.3734; (R1) 1.3761; More...

Intraday bias in USD/CAD stays neutral and outlook is unchanged. While another fall cannot be ruled out, downside should be contained by 38.2% retracement of 1.3091 to 1.3897 at 1.3589 to bring rebound. Break of 1.3897 is expected at a later stage to resume larger rally.

In the bigger picture, corrective pattern from 1.3976 (2022 high) should have completed with three waves down to 1.3091. Decisive break of 1.3976 high will confirm resumption of up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3091 at 1.4064. This will remain the favored case as long as 1.3378 support holds.

Daily Pivots: (S1) 1.0855; (P) 1.0884; (R1) 1.0944; More...

EUR/USD's rally continues today and intraday bias stays on the upside. Current rally from 1.0447 is in progress for 61.8% retracement of 1.1274 to 1.0447 at 1.0958. Sustained break there will pave the way to retest 1.1274 high. On the downside, below 1.0823 minor support will turn intraday bias neutral and bring consolidations first.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern to rise from 0.9534 (2022 low). Rise from 1.0447 is tentatively seen as the second leg. Hence while further rally could be seen, upside should be limited by 1.1274 to bring the third leg of the pattern.

Daily Pivots: (S1) 1.2403; (P) 1.2434; (R1) 1.2494; More...

GBP/USD is staying below 1.2504 temporary top despite today's rebound. Intraday bias remains neutral first. In case of another retreat, downside should be contained by 55 4H EMA (now at 1.2359) to bring rebound. On the upside, break of 1.2504 will resume the whole rebound from 1.2036. Sustained trading above 38.2% retracement of 1.3141 to 1.2036 at 1.2458 will pave the way to 61.8% retracement at 1.2716.

In the bigger picture, price actions from 1.3141 are seen as a corrective pattern to rise from 1.0351 (2022 low). Strong rebound from 38.2% retracement of 1.0351 (2022 low) to 1.3141 at 1.2075 will argue that current rise from 1.2036 is already the second leg. However, while further rally could be seen, upside should be limited by 1.3141 to bring the third leg of the pattern.