Sample Category Title

Daily Pivots: (S1) 156.28; (P) 157.33; (R1) 158.02; More....

Intraday bias in EUR/JPY stays neutral at this point. Corrective fall from 159.75 could extend lower as long as 158.64 resistance holds. Break of 156.57, and sustained trading below 55 D EMA (now at 156.72) will argue that fall from 159.75 is a larger scale correction. Deeper fall would be seen back towards 151.39 support.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 100% projection of 124.37 to 148.38 from 139.05 at 163.06. Sustained break there will pave the way to retest long term resistance at 169.96. This will remain the favored case as long as 151.39 support holds, even in case of deep pull back.

Daily Pivots: (S1) 182.31; (P) 183.23; (R1) 183.93; More...

GBP/JPY's fall from 186.75 is extending and further decline is expected as long as 184.39 resistance holds. Sustained trading below 55 D EMA (now at 182.44) will argue that it's already in a larger scale correction and target 176.29 support next. On the upside, break of 184.39 resistance will suggest that the pull back from 186.75 has completed. Intraday bias will be turned back to the upside for 185.76 resistance next.

In the bigger picture, up trend from 123.94 (2020 low) is in progress. Next target is 195.86 (2015 high). This will remain the favored case as long as 176.29 support holds, even in case of deeper pull back.

Daily Pivots: (S1) 0.9509; (P) 0.9555; (R1) 0.9580; More...

EUR/CHF fell notably but stays in range above 0.9513. Intraday bias remains neutral for the moment. Outlook stays bearish with 0.9600 resistance intact. On the downside, decisive break of 0.9513 will resume the decline from 1.0095, towards 0.9407 low. However, break of 0.9600 resistance will turn bias back to the upside for stronger rebound to 0.9646 resistance and above.

In the bigger picture, medium term outlook is staying bearish as the cross is capped well below falling 55 W EMA (now at 0.9818). Down trend from 1.2004 (2018 high) is in favor to continue. Sustained break of 0.9407 will target 61.8% projection of 1.1149 to 0.9407 from 1.0095 at 0.9018. For now, this will remain the favored case as long as 0.9670 support turned resistance holds, in case of strong rebound.

Market movers today

An eventful week comes to a close with some inflation expectations data. In Sweden, Prospera's quarterly survey should generally show declining inflation expectations, while in the US, rising gasoline prices could have lifted consumers' inflation expectations in the University of Michigan's flash September survey.

US August industrial production data as well as NY Fed's Empire Manufacturing index for September are also due for release.

Markets will naturally pay close attention to any upcoming ECB speeches following the yesterday's meeting, and Lagarde is scheduled to take part in a press conference after Eurogroup meeting today.

The 60 second overview

The ECB meeting was the main event yesterday. We see the 25bp hike as a compromise in the Governing Council - a balancing act in a stagflationary environment. We were quite surprised by the limited optionality for further hikes in the statement, although Lagarde naturally refused to write off the possibility. We see the ECB's monetary policy-setting approach now focusing much more on the time horizon for rates being in restrictive territory. As the new staff projections kept the forecast for headline and core inflation in 2025 above 2%, the road to neutral rates could end up being a long one. Our baseline is for the ECB not to hike further, and we see the next move being gradual cuts starting in the summer 2024. Read our review of the meeting outcome here: Flash ECB Review Confirmed: A final rate hike, but restrictive policies are not over, September 14.

As expected, Danmarks Nationalbank (DN) hiked its key policy rate 25bp to 3.6% following the ECB decision. We expect EUR/DKK to continue trading close to the central rate and that DN will continue follow future ECB rate changes 1-to-1: Flash Comment Denmark - End of the hiking cycle, September 14.

Yesterday's US August Retail sales figures were a mixed bag for the markets, as headline sales grew stronger than expected (0.6% m/m; consensus 0.2%), but the growth was largely attributable to higher gasoline prices and it came with hefty negative revisions to June and July data. Control group sales, which strip away the most volatile categories, grew by a more modest 0.1% m/m, which together with 0.3% core inflation would suggest that real consumption volume took a turn lower in August. While recent macro data releases have generally been stronger than anticipated, we expect to see further signs of cooling consumption towards the fall. And while the Fed is priced to stay on hold next week, we do not anticipate hikes later in the year either, especially when taking into account that US financial conditions have already tightened over the summer. Read our full preview for the next week's meeting at Research US - Fed preview: Plotting the way forward, 15 September.

This morning, United Auto Workers (UAW) started a strike against the three large Detroit car makers, Ford, GM and Stellantis. UAW, representing some 146.000 workers, has pushed for 40% wage increases over the next four and a half years, as well as improved benefits including shorter work weeks and better job protection. The companies have reportedly offered around 20% wage increases, and dismissed improved benefits. 12.700 workers are part of the initial strike, but new strike locations could be added depending on the negotiations. If the issue is resolved over the span of days or few weeks, the negative impact on growth as well as the potential uptick in car prices should remain limited, but a strike lasting several months could meaningfully weaken US economic growth.

Chinese growth data out this morning show some signs of growth stabilization. Industrial production rose 4.5% y/y (consensus: 3.9% y/y) after 3.7% y/y in July, while retail sales was up 4.6% y/y (consensus: 3% y/y) after 2.5% y/y in July. Property investment was in line with consensus down by 8.8% y/y in the first 8 months of 2023. The People's Bank of China (PBoC) decided yesterday to cut the reserve requirement ratio by 25bp for most banks. Overnight, the central bank has additionally injected a net CNY191bn into the financial system through 1-year policy loans. We see room for much further policy support if needed, to counter uncertainty relating to the real estate sector or the financial system.

Equities: Global equities were higher yesterday as investors celebrated a stagflation message from the ECB. It sounds odd and it is odd in our opinion based on what we learned from ECB yesterday. Not so much the interest rate hike but the combination of high headline inflation expectations and lowering of GDP growth expectations for 23, 24, and 25. However, equities markedly higher driven by cyclical value. That being said, it was not an overwhelming risk-on when glancing through the sector and style rotations. VIX ticked lower to 13 and implicitly signalling the world economy being in good shape. In US yesterday, +0.96%, S&P 500 +0.8%, Nasdaq +0.8% and Russell 2000 +1.4%. Stocks in Asia are higher this morning from what could be called a three-way tailwind. In addition, a 25bp cut too RRR in China and a better-than-expected outcome of retail sales and industrial production numbers in China. European and US futures higher this morning.

FI: European bond yields drifted lower following yesterday's ECB decision to hike the key interest rates by 25bp, while also signaling that the peak is likely to have been reached. 10Y Bund yields were down 6bp throughout the day, while the 2s10s curve flattened 3bp. Markets are now pricing in further policy tightening of just 4bp until the turn of the year. The absence of news on the PEPP portfolio roll-down was supportive to peripheral bonds, causing a spread tightening to core peers. The 5y5y EUR inflation swap rate was down 3bp to 2.60% following the ECB meeting.

FX: EUR/USD resumed its downtrend, breaking below 1.0650 on dovish ECB hike and strong US data. USD/JPY remains around 147.5. EUR/GBP declined well below 0.86. EUR/NOK moved to the low 11.40s on the back of the broad-based setback to the EUR, while EUR/SEK edged slightly lower to around 11.90.

Credit: Yesterday, credit spreads were supported towards the end of the trading day by improving risk sentiment following the ECB rate decision and briefing, sending iTraxx Main 1.6bp tighter to close at 68.7bp, while Xover was tighter by 7bp to close at 386.7bp.

Nordic macro

In Sweden, Prospera's quarterly inflation expectations survey is released at 08:00. Inflation expectations should retreat in the 1-2Y segment, whereas 5Y will probably remain close to 2.2%. The long-term expectations is most important for the Riksbank, who likes to take credit for the fact that they have remained relatively anchored throughout the high-inflation/tightening period.

Daily Pivots: (S1) 1.3481; (P) 1.3519; (R1) 1.3544; More....

Intraday bias in USD/CAD stays neutral for the moment. Overall, further rally is expected as long as 1.3488 support holds. Above 1.3693 will resume the rally from 1.3091 to 1.3860 resistance, and then 1.3976 high. However, firm break of 1.3488 will turn bias to the downside for deeper decline.

In the bigger picture, price actions from 1.3976 are viewed as a corrective pattern. Strong support from 55 D EMA (now at 1.3465) will solidify the case that it has completed with three waves down to 1.3091 already. Break of 1.3976 will target 61.8% projection of 1.2005 to 1.3976 from 1.3091 at 1.4309. However, sustained break of 55 D EMA will indicate that the pattern is extending with another falling leg before completion.

Daily Pivots: (S1) 0.6419; (P) 0.6439; (R1) 0.6462; More...

AUD/USD's rebound from 0.6356 extends higher today but upside is capped below 0.6520 resistance. Intraday bias stays neutral and further decline is still expected. On the downside, break of 0.6356 will resume larger fall to 100% projection of 0.7156 to 0.6457 from 0.6894 at 0.6195.

In the bigger picture, current development argues that the down trend from 0.8006 (2021 high) is still in progress. Decisive break of 0.6169 will target 61.8% projection of 0.8006 to 0.6169 to 0.7156 at 0.6021. This will now remain the favored case as long as 0.6894, in case of strong rebound.

Daily Pivots: (S1) 147.14; (P) 147.35; (R1) 147.69; More...

Range trading continues in USD/JPY below 147.88 and intraday bias remains neutral. In case of another pull back, near term outlook will remain bullish as long as 144.43 support holds. On the upside, firm break of 147.88 will resume larger rise from 127.20, to retest 151.93 high.

In the bigger picture, while rise from 127.20 is strong, it could still be seen as the second leg of the corrective pattern from 151.93 (2022 high). Rejection by 151.93, followed by break of 137.22 support will indicate that the third leg of the pattern has started. However, sustained break of 151.93 will confirm resumption of long term up trend.

Daily Pivots: (S1) 0.8924; (P) 0.8948; (R1) 0.8980; More....

Intraday bias in USD/CHF stays on the upside as rise from 0.8551 is in progress. Further rally would be seen to 0.9146 cluster resistance. On the downside, though, break of 0.8893 support will indicate short term topping, and turn bias to the downside for deeper pullback.

In the bigger picture, rebound from 0.8551 medium term bottom is currently seen as a correction to the downtrend from 1.0146 (2022 high). Further rally would be seen to 0.9146 cluster resistance (38.2% retracement of 1.0146 to 0.8551 at 0.9160). Strong resistance could be seen there to limit upside, at least on first attempt.

Daily Pivots: (S1) 1.2369; (P) 1.2438; (R1) 1.2478; More...

GBP/USD's fall from 1.3141 is in progress and intraday bias stays on the downside. Next target is 100% projection of 1.3141 to 1.2618 from 1.2799 at 1.2276. On the upside, however, firm break of 1.2547 resistance will now indicate short term bottoming, and bring stronger rebound.

In the bigger picture, fall from 1.3141 medium term top is seen as a correction to up trend from 1.0351 (2022 low). Deeper decline would be seen to 38.2% retracement of 1.0351 to 1.3141 at 1.2075. Strong support would be seen there to bring rebound on first attempt. But outlook will be neutral at best as long as 1.3141 resistance holds, and consolidation from there is set to extend, until further development.

Investors didn’t buy the rumour of a European Central Bank (ECB) rate hike but heavily sold the ECB’s intention to stop hiking the rates in the close future. The ECB raised the rates by 25bp yesterday and said that it ‘now considers that the key ECB rates reached levels that, maintained for sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target’. And that was it for the euro bears. ECB Chief Christine Lagarde tried to convince investors that the ECB rates are not necessarily at their peak and that the future decisions will depend on the incoming data. But in vain. The EURUSD sank below 1.07 after the decision and the EZ yields melted as many were rubbing their eyes to understand why a 25bp hike didn’t even spark a minor rebound given that the decision was not warranted, on the contrary, the expectations were mixed into the meeting!

In fact, many euro bears also jumped on a trade yesterday as Lagarde announced that the ECB significantly pulled its economic projections to the downside. BUT, in the meantime, the ECB revised its inflation expectations higher as well. Therefore, it’s naïve to think that the ECB can’t continue hiking rates with such a sour economic outlook. They can. They can, because they have a single mandate – price stability. As such, the market certainly remains too enthusiastically, and unrealistically dovish about the ECB. When I hear ‘data dependency’, I immediately look at energy prices and you know what I see there: further inflation pressures and a real possibility for further rate hikes.

Oil extends gains

The barrel of US crude traded past $91 yesterday, and Brent is getting ready to test the $95pb level. The better-than-expected industrial production, retail sales data from China this morning and news that the People’s Bank of China (PBoC) cut the required reserves for banks for the second time this year to boost market liquidity are giving a further support to the oil bulls looking for reasons to ignore the overbought market conditions.

But the rising oil prices are not benign, and the hawkish ECB is not necessarily positive for the euro, and here is why: the data released in the US yesterday showed that both retail sales and PPI got a decent boost because of higher gasoline prices in August. But it also showed that spending more on gasoline didn’t get Americans to spend less elsewhere. And that’s inflationary. Consequently, the latest developments will, at some point, awaken the Federal Reserve (Fed) hawks, and increase the risk of a further selloff for the EURUSD. There is no chance that Jerome Powell will announce the end of the rate hikes next week. He will only say that the trajectory of core inflation is soothing, but rising energy prices is a risk that they must manage. The dollar index could soon take out a major Fibonacci resistance, the 38.2% retracement on last year’s meltdown (near 105.40), and step into the medium-term bullish consolidation zone. Hence the EURUSD could well be forced below a critical Fibonacci retracement, its own 38.2% level, near 1.0615.

PS: US government drama and shutdown risk could eventually soften US outlook and temporarily prevent the Fed hawks from forcefully coming back.

ARM gains 25%

In the equity markets, ARM went public yesterday, and nailed its first day on Nasdaq. The share price rose 25% and closed above $63. It wasn’t as impressive as Rivian, for example which had jumped more than 50% during its first hours of trading, But hopefully, ARM will have a more stable cruise. Arm currently estimates that ‘70% of the world’s population uses Arm-based products’, in their PCs, cars, smartphones and so. And growth is the only possible direction for the chip designer with AI’s sudden arrival to our lives.