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Daily Pivots: (S1) 0.9913; (P) 0.9972; (R1) 1.0005; More...

USD/CHF's fall from 1.0146 extends lower today but stays above 0.9779 support. Intraday bias remains neutral first. On the upside, break of 1.0146 will resume larger up trend to 1.0283 projection level. However, firm break of 0.9779 will be a sign of reversal, and bring deeper decline back to 0.9478 support instead.

In the bigger picture, current development suggests that up trend from 0.8756 (2021 low) is still in progress. Sustained break of 1.0063 will target 100% projection of 0.9149 to 1.0063 from 0.9369 at 1.0283, and then 1.0342 (2016 high). For now, this will remain the favored case as long as 0.9779 support holds, even in case of deep pull back.

Daily Pivots: (S1) 1.1328; (P) 1.1413; (R1) 1.1558; More...

GBP/USD's rise from 1.0351 resumed by breaking through 1.1494 resistance. Intraday bias is now on the upside for 61.8% projection of 1.0351 to 1.1494 from 1.0922 at 1.1628. Further break there will pave the way to 100% projection at 1.2065. On the downside, below 1.1256 minor support will turn intraday bias neutral first. But further rally will remain in favor as long as 1.0922 support holds, in case of retreat.

In the bigger picture, fall from 1.4248 (2018 high) is part of the long term down trend from 2.1161 (2007 high). Outlook will stay bearish as long as 1.1759 support turned resistance holds. Parity would be the next target on resumption. Nevertheless, firm break of 1.1759 will confirm medium term bottoming, and open up stronger rise back to 55 week EMA (now at 1.2392).

The pound has extended its gains and has gained 2.3% this week. In the European session, GBP/USD is trading at 1.1581, up 0.75% on the day.

Sunak delays budget

Incoming UK Prime Minister Rashi Sunak faces profound challenges on the economic front. Sunak will be looking to settle things down after a dizzying pace of developments. He is the third prime minister in just two months, after Liz Truss lasted just 44 days in office. Truss’ mini-budget, which included sharp tax cuts was savagely criticised and almost triggered a financial crisis. Sunak will undoubtedly be more cautious and has postponed the government’s annual budget from October 31^st to November 17th.

The delay gives Chancellor Jeremy Hunt some time to figure out how to address a budget deficit of around 40 billion pounds. Hunt will want to ensure that the budget does not trigger a negative reaction from nervous markets after Truss’s ill-fated mini-budget shook the UK’s credibility in the financial markets and sent GBP/USD to a record low. The pound wasn’t fazed by the budget delay, as investors appear willing to give Sunak a bit of breathing room as he takes over as Prime Minister.

For the BoE, which meets next week, the budget delay complicates matters. The Bank will now have to publish economic forecasts without the benefit of knowing the details of the government’s fiscal plan. The delay has raised the likelihood of a full-point hike to 37%, with a 63% likelihood of a 75 bp increase. The BOE remains committed to taming inflation, which has hit 10% in a weak economy that may already have tipped into recession.

GBP/USD Technical

• GBP/USD is testing resistance at 1.1558. The next resistance line is 1.1644
• There is support at 1.1471 and 1.1328

Daily Pivots: (S1) 0.9886; (P) 0.9932; (R1) 1.0013; More...

EUR/USD's rebound from 0.9534 resumed by breaking through 0.9988 resistance. The development also came with strong break of the medium term falling channel resistance, as well ass 55 day EMA. A medium term bottom could be in place already, on bullish convergence condition in daily MACD. Intraday bias is now on the upside for 38.2% retracement of 1.1494 to 0.9534 at 1.0283. On the downside, break of 0.9847 minor support will turn intraday bias neutral first.

In the bigger picture, the case of medium term bottoming at 0.9534 building up. While it is too early to call for trend reversal, firm break of 0.9998 will open up stronger rebound back to 55 week EMA (now at 1.0630) even as a corrective rise. Meanwhile, firm break of 0.9534 will resume larger down trend to 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694.

Dollar's decline takes off today on talks that poor economic data would prompt Fed to slow down the tightening pace sooner than earlier expected. Treasury yields also tumbled, adding some more weight to the greenback. Yet, it should be noted that inflation remains Fed's biggest worry. There is little room for a pause if inflation plateaus at a high level. As for today, Australian Dollar is the strongest one, followed by Sterling, and Kiwi. Euro is back above pairty against the greenback. Swiss Franc is second worst, following Dollar, followed by Loonie. Canadian Dollar will look to BoC rate hike for some support.

Technically, current decline in 10-year yield is seen as a near term retreat for now. As long as 3.992 resistance turned support holds, things are disastrous. Another rally through 4.333 is expected and that would give the greenback a lift when happens. Nevertheless, considering bearish divergence condition in daily MACD, firm break of 3.992 would indicate that a larger correction is underway towards 55 day EMA (now at 3.614). But that might not happen before rate hike and statement next week.

In Europe, at the time of writing, FTSE is down -0.67%. DAX is up 0.06%. CAC is down -0.32%. Germany 10-year yield is up 0.006 at 2.181. Earlier in Asia, Nikkei rose 0.67%. Hong Kong HSI rose 1.00%. China Shanghai SSE rose 0.78%. Singapore Strait Times rose 0.81%. Japan 10-year JGB yield dropped -0.001 to 0.258.

IMF Georgieva urges patience as benefit of rates hikes not instantaneous

IMF Managing Director Kristalina Georgieva said that central banks should keep raising interest rates until they reach "neutral level". "At this point we look for getting to a neutral mode, and in most places we are not quite yet there," she added.

She explained that rates has to go up since "when inflation runs high, that undermines growth, it hits the poorest parts of the population the hardest."

Georgieva also said "the benefits (of rate hikes) would come but they are not instantaneous, this requires some patience in society." IMF projected that tightening will continue until 2024 when central banks are "seeing the impact of their actions".

US goods trade deficit widened to USD 92.2B in Sep

US goods exports dropped USD -2.8B to USD 177.6B in September. Goods imports rose USD 2.2B to USD 269.8B. Trade deficit came in at USD -92.2B, larger than expectation of USD -87.8B.

Wholesale inventories rose 0.8% mom to USD 921.7B, below expectation of 1.3% mom. Retail inventories rose 0.4% mom to USD 744.0B.

Australia CPI jumped to 7.3% yoy in Q3, highest since 1990

Australia CPI rose 1.8% qoq in Q3, above expectation of 1.5% qoq. Annual rate accelerated from 6.1% yoy to 7.3% yoy, above expectation of 6.9% yoy. That's the highest annual rise since 1990. Trimmed mean CPI, which excludes large price rises and falls, accelerated from 4.9% yoy to 6.1% yoy, highest since the data first published in 2003.

For the quarter, the most significant contributors to the rise were new dwellings (+3.7%), gas (+10.9%) and furniture (+6.6%). Annually, new dwellings (+20.7%) and automotive fuel (+18.0%) were the most significant contributors.

NZ ANZ business confidence fell to -42.7, murky outlook but resilient

New Zealand ANZ Business Confidence fell from -36.7 to -42.7 in October. Looking at some details, Own Activity Outlook dropped from -1.8 to -2.5. Cost expectations dropped from 89.8 to 88.6. Employment intentions dropped from 5.9 to 5.0. Price intentions dropped from 68.0 to 64.5. Inflation expectations rebounded from 5.98 to 6.13.

ANZ said: "The economic outlook is certainly murky, but the New Zealand economy has a lot going for it. Debt is higher, but nowhere near the worrying levels other economies are struggling under. We're relatively insulated from the energy cost implications of Russia's invasion of Ukraine. Our primary export base is food, and when it comes down to it, people gotta eat. Housing affordability has improved in a meaningful but so far remarkably painless fashion. Indeed, overall the economy is still surprising economists with its resilience. It's a rougher path ahead, but the country is still moving forward."

Bitcoin rises with Dollar selloff, heading to 22-23k?

Bitcoin rises notably today, following intensified selloff in Dollar in general. The break of 55 day EMA is a positive development for the near term. For now further rise expected as long as 19678 resistance turned support holds. Next target is 22764 resistance.

As for the larger outlook, current rise from 18144 could either be the third leg of the consolidation pattern from 17575, or the start of an up trend. It's too early to tell. Yet, a take on 25198 resistance is possible on break of 22764. The key resistance level is in 38.2% retracement of 48226 to 17575 at 29283. As long as this fibonacci level holds, medium term outlook will be neutral at best.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 0.9886; (P) 0.9932; (R1) 1.0013; More...

EUR/USD's rebound from 0.9534 resumed by breaking through 0.9988 resistance. The development also came with strong break of the medium term falling channel resistance, as well ass 55 day EMA. A medium term bottom could be in place already, on bullish convergence condition in daily MACD. Intraday bias is now on the upside for 38.2% retracement of 1.1494 to 0.9534 at 1.0283. On the downside, break of 0.9847 minor support will turn intraday bias neutral first.

In the bigger picture, the case of medium term bottoming at 0.9534 building up. While it is too early to call for trend reversal, firm break of 0.9998 will open up stronger rebound back to 55 week EMA (now at 1.0630) even as a corrective rise. Meanwhile, firm break of 0.9534 will resume larger down trend to 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694.

Economic Indicators Update

US goods exports dropped USD -2.8B to USD 177.6B in September. Goods imports rose USD 2.2B to USD 269.8B. Trade deficit came in at USD -92.2B, larger than expectation of USD -87.8B.

Wholesale inventories rose 0.8% mom to USD 921.7B, below expectation of 1.3% mom. Retail inventories rose 0.4% mom to USD 744.0B.

Full release here.

EURGBP traded lower yesterday, after it hit resistance slightly below the 0.8780 zone. Today, the rate is flirting with the 0.8655 barrier, but a break lower may be needed before the bears claim full control of the pair. Most of the price action has been contained between that barrier and 0.8780 since the beginning of the month, which suggests a neutral short-term picture.

The RSI is lying below 50 and the MACD is running below both its zero and trigger lines, both pointing to negative momentum. However, looking at the plotted exponential moving averages, they all point sideways, enhancing the neutral outlook for now.

A decisive dip below 0.8655 could allow declines towards the 0.8600 or 0.8565 zones, the break of which could carry larger bearish implications. The next stop may be at 0.8500, and if the bears are not willing to stop there either, the slide may extend toward the 0.8400 area, which acted as a floor during the whole month of August.

On the upside, a break above 0.8700 could add brightness to the picture and may encourage advances towards the peak of October 12 at 0.8865. If that zone is breached as well, the pair may add to gains and aim for the 0.8980 territory, defined as a resistance by the high of September 29.

To sum up, EURGBP slid yesterday, extending its fall today, but stayed within the sideways range that’s been containing most of the price action since the beginning of the month. For the slide to extend, a break below 0.8655 is needed.

IMF Managing Director Kristalina Georgieva said that central banks should keep raising interest rates until they reach "neutral level". "At this point we look for getting to a neutral mode, and in most places we are not quite yet there," she added.

She explained that rates has to go up since "when inflation runs high, that undermines growth, it hits the poorest parts of the population the hardest."

Georgieva also said "the benefits (of rate hikes) would come but they are not instantaneous, this requires some patience in society." IMF projected that tightening will continue until 2024 when central banks are "seeing the impact of their actions".

The Euro rose above parity on Tuesday, in extension of a steep upleg from 0.9631 trough (Oct 13), trading at these levels for the first time since Sep 21.

Talks that Fed may pause continue to deflate dollar in past few sessions, despite no change in rate outlook ahead of central bank’s Nov 2 policy meeting.

Break through parity zone (also Oct 4/5 double top) is strong bullish signal, which would require confirmation on close above here, as bulls already cracked next pivotal barriers at 1.0041/47 (Fibo 76.4% of 1.0197/0.9535 / base of falling daily cloud) and eye descending 100 DMA (1.0093).

Daily techs maintain strong bullish momentum and MA’s are mostly in positive setup, but bulls may face headwinds as stochastic is strongly overbought and reversing.

Dips should find firm ground above broken 55DMA to keep bulls in play and offer better buying opportunities, as failure swing pattern is forming on daily chart and the pair is on track for the first bullish monthly close in five months, with potential formation of bullish engulfing pattern on monthly chart that adds to reversal signals.

However, caution is required as larger bears are still fully in play, warning that current correction would be just a breather and price adjustment before medium-term downtrend resumes.

Res: 1.0050; 1.0093; 1.0116; 10140.
Sup: 1.0000; 0.9944; 0.9921; 0.9876.

The Canadian dollar has extended its gains today, as the US dollar has retreated against all the major currencies. In the European session, USD/CAD is trading at 1.3547, down 0.44%. Earlier, USD/CAD dropped as low as 1.3512, its lowest level in three weeks.

Bank of Canada likely to remain hawkish

All eyes are on the Bank of Canada, which will meet later today. The markets have priced in a 75 basis point hike, which would be a repeat of the September rate increase. The Bank has embarked on a steep rate tightening cycle, having hiked 300 points since March. A 75 bp move today will bring the benchmark rate to 4 per cent, its highest level since the 2008 global financial crisis. Of course, the economic picture is not nearly as grim as it was then, but inflation has been more stickier than expected, and the BoC has declared that its first priority is to curb inflation.

In September, headline inflation ticked lower to 6.9%, down from 7.0%, but core inflation rose to 6.0%, up from 5.8%. Until this report, the markets had been expecting the BoC to deliver a 50 bp hike at tomorrow’s meeting, but the September inflation data has raised the likelihood that policy makers will come out with guns blazing and increase rates by 75 bp.

At the same time, there is an outside chance that the Bank will opt for a 50 bp hike, mindful that higher rates are weighing heavily on consumers and businesses and a recession could be lurking just around the corner. With inflation driving the Bank of Canada’s rate policy, I would not be surprised to see some volatility from the Canadian dollar in the North American session.

USD/CAD Technical

• USD/CAD is testing support at 1.3656. Below, there is support at 1.3467
• 1.3718 and 1.3807 are resistance lines