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Daily Pivots: (S1) 0.9713; (P) 0.9752; (R1) 0.9828; More....

EUR/CHF rebounded notably but stays below 0.9798 resistance. Intraday bias remains neutral first. On the upside, above 0.9798 will resume the rebound to 0.9864 resistance. Firm break there will solidify the case of medium term bottoming at 0.9407, and target 38.2% retracement of 1.1149 to 0.9407 at 1.0072. On the downside, below 0.9641 minor support will turn bias back to the downside for retesting 0.9407 low instead.

In the bigger picture, as long as 0.9864 resistance holds, long term down trend from 1.2004 (2008 high) is expected to continue. Next target is 138.2% projection of 1.2004 to 1.0505 to 1.1149 at 0.9033. However, firm break of 0.9864 will confirm medium term bottoming, on bullish convergence condition in daily MACD. Stronger rally would then be seen back to 55 week EMA (now at 1.0152), even as a corrective rebound.

Market picture

Bitcoin added a modest 1.2% on Thursday, but this subtle result hides the real roller coaster. Bitcoin was losing 5% intraday, coming close to $18K, but following the stock market, it not only recouped its initial losses but also showed impressive gains. At the time of writing, the price is stomping around $19.8K.

This way, the bulls managed to defend the lower boundary of the trading range. Moreover, this intraday reversal pattern is often the harbinger of a global reversal in the trend. In our case, it could change from a bear market to a sideways market or a moderate rise. Talking about the start of FOMO does not make sense yet.

The closest confirmation of a downtrend reversal would be a fixation above the $20K level – above the psychologically crucial round level and the 50-day moving average.

News background

Devere Group CEO Nigel Green expects bitcoin to decline for the rest of the year amid rising inflation in the global economy. However, long-term investors can benefit by buying crypto assets “on the cheap” from panicked traders.

The head of cryptocurrency investment firm Galaxy Digital, Mike Novogratz, said the bearish trend could last another two to six months. He said sellers are highly depleted, and most investors who needed fiat have already sold their assets. But to reverse the trend, a change in the Fed’s monetary policy is required.

Tim Rice, CEO of analyst firm CoinMetrics, said that more companies from traditional finance have started to emerge in the cryptocurrency industry. However, big banks are still waiting for more transparent crypto industry regulation to reduce their risks.

According to the People’s Bank of China, the volume of transactions using the digital yuan has exceeded 100 billion yuan (about $13.9 billion) due to its full-scale deployment in China.

GBPJPY posted a bullish rally over the last couple of days, rebounding off the 159.70 barrier and surpassing the SMAs as well. The pair is flirting with the 167.00 round number with the technical oscillators confirming the recent bullish bias. The RSI is ticking slightly higher in the positive region, while the MACD is extending its movement above its trigger and zero lines.

More upside pressures could open the way for the next immediate resistance at 167.50 before resting near the more-than-six-year high of 168.65. If the market manages to jump higher, the April 2015 peak of 175.00 may halt the bullish actions.

On the other hand, a dive beneath the 165.70 support could take the market towards the 50- and 20-day simple moving averages (SMAs) at 162.30 and 161.30 respectively ahead of the 200-day SMA at 160.70. Steeper losses could meet the 159.70 obstacle and the 152.60 hurdle.

To sum up, GBPJPY is bullish in the very short-term and any advances beyond the more-than-six-year high could endorse a long-term positive outlook.  

The S&P 500 shot up as a hot CPI reading had previously been priced in. The index has given up all previous gains after it came to a halt at 3800. The supply area may have been the last chance to get out for those who bought the dips last summer. This also means that there could be more room on the downside. In the meantime, 3500 at the base of a bullish breakout in November 2020 saw an inflow of buying interests. A pop above 3630 may prompt more intraday sellers to cover and 3730 is the next resistance.

Silver steadies as the greenback consolidates across the board. The price has been struggling to consolidate its latest gains after meeting strong selling interest in the supply zone around 21.00. The precious metal is at a crossroads as it falls back to the origin of the rally at 18.50. The bulls may find relief in a bounce above 19.60. That would bring back the fading optimism and pave the way for recovery to 20.50. A bearish breakout, however, would invalidate the rally and extend losses below the daily support at 18.00.

The US dollar whipsawed as high inflation persisted in September. On the daily chart, the pair has taken a breather after the RSI went deeply into the oversold area. Sellers’ profit-taking would not be enough to lift the kiwi in a meaningful manner. Stiff pressure could be expected near the support-turned-resistance at 0.5700 which sits on the 20-day moving average, making it a congestion area. Sentiment would turn around only if 0.5810 is out of the way. On the downside, March 2020’s low at 0.5500 is a critical floor.

Markets

This week’s long-drawn countdown to the US September CPI finally resulted in a few hours of extremely volatile trading annex a historic intra-day market reversal, in particular in US equities. Hoped for signals of inflation topping out again didn’t materialize. Headline inflation hardly eased (0.4% M/M and 8.2% Y/Y, from 8.3%). US core inflation (6.6% Y/Y) even jumped to the highest level since 1982 as the monthly pace (0.6%) stays uncomfortably elevated. In a first logical Pavlov reaction, the US yield curve inverted with the 2-y jumping north of 4.50% while 10 & 30y yields tried to take out the 4.0% barrier. Money markets embraced the idea of two additional 75 bps Fed rate hikes in November and December. The S&P opened about 2.50% lower. However, technical factors came into play. Amongst others, the S&P touching the 50% retracement of the post-corona rally triggered a squeeze on recent bearish positioning. In an impressive comeback, US indices closed up to 2.60% (S&P) and 2.83% (Dow) higher. US yields also eased back below above mentioned high profile levels. In the end US yields rose ‘modestly’ between 8.3 bps (5-y) and 4.2 bps (30-y). In a flattening move, German yields closed 9.4 bps higher for the 2-y but eased 5.5 bps for the 30-Y. USD gains already stayed relatively modest immediately after the CPI release and the US currency even fell prey to profit taking as the risk rally unfolded. The DXY index eased back to close at 112.36. EUR/USD also easily stayed away from the cycle low to close at 0.9776 (open 0.9703). USD/JPY spiked to test the 147.66 1998 top, but no sustained break occurred. For now there is no communication on interventions. UK markets also had a good run yesterday. Persistent BOE presence in the bond market and headlines on the UK government downscaling fiscal spending pushed UK yields more than 20 bps lower across the curve. Sterling outperformed (EUR/GBP close 0.8632).

This morning, Asian markets joined the risk rebound from WS yesterday. The Nikkei and the Hang Seng are outperforming with gains of 3.0%+. US Treasuries gain marginally. The dollar eases against the likes of the Kiwi and the Aussie dollar. USD/CNY trades modestly lower at 7.166. EUR/USD also gains modestly (0.978). The yen stays in the defensive. At USD/JPY 147.45, the pair is holding near the multi-year peak. Later today, the market focus stays on the US with the US September retail sales and the U. of Michigan consumer confidence (including inflation expectations measures). Control group retail sales are expected at 0.3% M/M. Yesterday’s post CPI market reaction suggests that data probably will have to be extremely strong to push US yields sustainably beyond the 4.50% (2-y)/4.0% (10/30-y) barriers. That said, there is evidently also no reason of the Fed to backtrack on its anti-inflationary rhetoric. In this context, US yields might consolidate near recent highs. Aside from further technical repositioning, equities from now on will have to cope with the Q3 earnings (major US banks today) and probably even more with enterprises’ guidance. Here we are not convinced on sustained reversal in sentiment for the better yet. The dollar recently could have gained more given the overall risk sentiment and developments on interest rate markets. Here some consolidation might be on the cards, with EUR/USD looking for a short-term equilibrium in the 0.95/1.00 trading range.

News Headlines

ECB sources are in full swing. After yesterday’s leaked details on final options to change TLTRO modalities, Bloomberg now reports on growing consensus on the process of shrinking the balance sheet. Discussions started at last week’s meeting in Cyprus. Officials favor letting bonds mature rather than resorting to debt sales, though that option shouldn’t be entirely excluded. They could also envisage keeping up some reinvestments to moderate the pace of unwinding. ECB members want to wait until policy rates hit neutral (December) before starting the portfolio roll-off. This implies that the second pillar of normalization/tightening will most likely come into effect early 2023.

Chinese inflation accelerated less than forecast in September, rising from 2.5% Y/Y to 2.8% Y/Y. Underlying core inflation even slowed from 0.8% Y/Y to 0.6% Y/Y. Underlying Chinese demand remains weak as shown for example by consumer discretionary prices or services inflation (0.5% Y/Y). The strict zero Covid-policies are one of the main culprits. Chinese producer price inflation slowed from 2.3% Y/Y to 0.9% Y/Y.

Daily Pivots: (S1) 0.9671; (P) 0.9739; (R1) 0.9845; More...

Intraday bias in EUR/USD is turned neutral first with break of 0.9773 minor resistance. For now, outlook will remain bearish as long as 0.9998 resistance holds. Below 0.9630 will bring retest of 0.9534 low first. Firm break there will resume larger down trend.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, break of 0.9998 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish even with strong rebound.

Daily Pivots: (S1) 1.1133; (P) 1.1257; (R1) 1.1455; More...

Intraday bias in GBP/USD remains on the upside for 1.1494 resistance. Firm break there will confirm resumption of whole rebound from 1.0351. Next target is 61.8% projection of 1.0351 to 1.1494 from 1.0922 at 1.1628. On the downside, below 1.0922 will turn bias back to the downside for 1.0351 low instead.

In the bigger picture, fall from 1.4248 (2018 high) is resuming long term down trend from 2.1161 (2007 high). Next target is 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532. There is no scope of a medium term rebound as long as 1.1759 support turned resistance holds.

Daily Pivots: (S1) 0.9958; (P) 1.0016; (R1) 1.0072; More...

USD/CHF retreated again after hitting 1.0072 and intraday bias is turned neutral first. on the upside, break of 1.0072, and sustained trading above 1.0063, will confirm larger up trend resumption. Next target is 1.0283 projection level. However, break of 0.9914 support will indicate rejection by 1.0063, and turn bias back to the downside for 0.9779 support first.

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 0.9369 support holds, even in case of deep pull back.