Sample Category Title

The pound tumbles as the UK’s August retail data disappoint. The buying pressure has been building up under June’s peak at 0.8720. The breakout prompted the last sellers to cover. As the euro’s rally gains momentum, this could open the door for a sustained climb towards 0.8900, which is a supply area from January 2021’s sell-off. 0.8800 is the intermediate resistance ahead. The RSI’s overbought situation could temporarily trim the buying and 0.8700 would be the first support in case the euro takes a breather.

Markets

Last week, a strong flattening/inversion move illustrated investors’ believe in a further frontloading strategy as global central banks are trying to regain control on inflation. Despite mostly hawkish ECB speak of late and the Fed keeping silent ahead of this week’s policy decision, the US yield curve still took the lead. In a weekly perspective, US yields rose between 31 bps (2-y) and 6.6 bps (30-y). The 10-y yield rose 14 bps and this move was fully due to a higher real yield (+19 bps to 1.072%). European swap yields in a weekly perspective gained between 23.1 bps (2-y) to stay unchanged from the 10-y. The tightening of financial conditions via higher (real) yields kept equities in a tailspin (S&P -5.0% for the week). The dollar remained in pole position in this pre-Fed repositioning, but gains could have been more outspoken (DXY up about 0.8% in a weekly perspective). On Friday, especially the trends on interest rate markets gradually shifted into a lower gear. US yields closed mixed (30-y +4.7 bps, 5-y -3.5 bps). EMU yields even corrected 2.5/3.5 bps lower. Friday’s Uni. of Michigan consumer confidence survey this time failed to give any additional directional guidance. Sentiment as such was close to expectations (59.5 from 58.2). Inflation expectations even eased slightly from 4.8% to 4.6% for the 1-y measure and from 2.9% to 2.8% for the 5/10-y measure. US equities lost less than 1.0%. The dollar finished off the intraday highs with DXY at 109.76. EUR/USD closed just north of parity (1.0016). The threat of interventions kept USD/JPY away from the 145 resistance (close 142.92). Sterling stayed in the defensive after awful August retails sales. EUR/GBP (close EUR/GBP 0.8768) closed well above the key 0.8721/31 resistance area. Cable intraday touched the weakest level since 1985 to close at 1.1420.

This morning, Asian markets mostly trade with a moderate risk-off bias. However Japanese markets are closed this morning and this will also be the case for London markets. On Chinese FX, the PBOC still tries to cope with the fall-out from the strong dollar. Still USD/CNY (7.011) extended gains north of 7.00 even as the PBOC put the daily fix at the strongest deviation versus expectations on record. The dollar gains modestly overall (DXY 109.95, USD/JPY 143.26). Today, there are hardly any eco data with market moving potential. Markets will look forward to a long series of central bank policy decisions including the Riksbank (Tuesday), the Fed (Wednesday) and the Norges bank, The Bank of England, the Bank of Japan and the Swiss national bank all scheduled to announce decisions on Thursday. The Fed evidently is the key reference. A 75 bps hike is fully discounted. Markets see about a 1 in 5 chance on a 1.0% step. We err for the Fed to keep a 75 bps pace. Maybe the dots might cement market expectations for a similar step also for the November meeting. We anticipate both interest rate markets and the dollar to take a breather ahead of Wednesday’s Fed decision. Equities remain wildcard, especially for the USD performance.

News Headlines

The European Commission recommended member states to vote to suspend €7.5bn in cohesion funding over rule of law violations. That’s around a third of the total €22bn EU-funds Hungary is due to receive from the 2021-27 EU budget. Commissioner Hahn referred to Hungary’s lack of transparency in awarding public contracts, shortcomings when it comes to tackling corruption and weaknesses in prosecuting those who misused EU funds. Budapest in August published 17 proposals to address the EU concerns, but Hahn concludes that they are insufficient to put an end to risks to the EU budget and the EU’s financial interests. Hungary is given until November 19 to come up law changes or risk missing out on the funds. The latter could trigger rating downgrades and has proven to be a weakness for the forint. The Hungarian currency is still trading near record lows at EUR/HUF 405.

A South Korean finance ministry official said that authorities will meet with major export and import firms to discuss ways to stabilize dollar supply and demand. They aim to increase market oversight after the Korean won dropped to its weakest level since March 2009 (USD/KRW 1400) despite likely interventions. Measures to be discussed include encouraging imports needing dollar funds to tap the offshore bond market. Banks will be asked to report their dollar transactions and currency positions every hour instead of three times a day.

Daily Pivots: (S1) 162.51; (P) 163.56; (R1) 164.38; More...

Intraday bias in GBP/JPY remains on the downside for 159.42 support. But downside should be contained there to bring rebound. Overall, it's staying in consolidation pattern from 168.40. Firm break of 169.91 will resume larger up trend. However, break of 159.42 support will now be a sign of bearish reversal and target 155.57 support next.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will remain the favored case as long as 155.57 support holds, even in case of deep pull back.

Daily Pivots: (S1) 142.61; (P) 143.07; (R1)143.63; More....

EUR/JPY is staying in consolidation from 145.62 and intraday bias remains neutral. Deeper pull back cannot be ruled out. But downside should be contained above 138.38 resistance turned support bring another rally. On the upside, decisive break of 145.62 will pave the way to 149.76 long term resistance, and then 100% projection of 124.37 to 144.26 from 133.38 at 153.27.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 133.38 support holds. Next target is 149.76 (2015 high). However, sustained break of 133.38 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Daily Pivots: (S1) 0.8727; (P) 0.8755; (R1) 0.8795; More...

Intraday bias in EUR/GBP remains on the upside at this point. Current rise from 0.8201 should target 100% projection of 0.8201 to 0.8720 from 0.8338 at 0.8857. On the downside, break of 0.8624 support is needed to indicate short term topping. Otherwise, outlook will stay bullish in case of retreat.

In the bigger picture, current development suggests that the down trend from 0.9499 has (2020 high) has completed at 0.8201. Rise from there is developing into a medium term up trend. Further rally would be seen to 61.8% retracement of 0.9499 to 0.8201 at 0.9003 next. This will now remain the favored case as long as 55 day EMA (now at 0.8545) holds.

Daily Pivots: (S1) 1.4861; (P) 1.4915; (R1) 1.4957; More...

Intraday bias in EUR/AUD remains on the upside. Rebound from 1.4281 is in progress for 1.5396 resistance. On the downside, however, break of 1.4663 minor support will turn bias back to the downside for retesting 1.4281 low.

In the bigger picture, down trend from 1.9799 is still in progress. Break of 1.4318 low will target 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). This will remain the favored case now as long as 1.5396 resistance holds.

Daily Pivots: (S1) 0.9602; (P) 0.9634; (R1) 0.9688; More....

Intraday bias in EUR/CHF remains neutral for the moment, and outlook stays bearish as long as 0.9864 resistance holds. On the downside, break of 0.9530 will extend larger down trend to 61.8% projection of 1.0512 to 0.9550 from 0.9864 at 0.9269.

In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 138.2% projection of 1.2004 to 1.0505 to 1.1149 at 0.9033. On the upside, break of 0.9864 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of strong rebound.

Daily Pivots: (S1) 1.3214; (P) 1.3261; (R1) 1.3311; More...

Intraday bias in USD/CAD remains on the upside for the moment. Current up trend should target 100% projection of 1.2005 to 1.2947 from 1.2401 at 1.3343. Break there will target medium term fibonacci level at 1.3650. On the downside, below 1.3238 minor support will turn intraday bias neutral first. But retreat should be contained well above 1.2952 support to bring another rally.

In the bigger picture, down trend from 1.4667 (2020 high) should have completed at 1.2005, after defending 1.2061 long term cluster support. Rise from there should target 61.8% retracement of 1.4667 to 1.2005 (2021 low) at 1.3650. This will remain the favored case now as long as 1.2716 support holds.

Daily Pivots: (S1) 0.6687; (P) 0.6705; (R1) 0.6741; More...

Intraday bias in AUD/USD remains neutral first and outlook stays bearish. On the downside, decisive break of 0.6680 will resume larger down trend. Next target will be 0.6461 long term fibonacci level. On the upside, above 0.6769 minor resistance will turn bias back to the upside for 0.6915 resistance instead.

In the bigger picture, price actions from 0.8006 (2021 high) is seen more as a corrective pattern to rise from 0.5506 (2020 low). Or it could also be a bearish impulsive move. In either case, outlook will remain bearish as long as 0.7135 resistance holds. Next target is 61.8% retracement of 0.5506 to 0.8006 at 0.6461.

Daily Pivots: (S1) 142.62; (P) 143.16; (R1) 143.47; More...

Intraday bias in USD/JPY remains neutral as consolidation from 144.98 is extending. While deeper retreat cannot be ruled out, downside should be contained by 139.37 resistance turned support. On the upside, break of 144.98 will resume larger up trend to 147.68 long term resistance. Break there will target 161.8% projection of 126.35 to 139.37 from 130.38 at 151.44 next.

In the bigger picture, up trend from 101.18 is still in progress, as part of the whole up trend from 75.56 (2011 low). Further rise should be seen to 147.68 (1998 high). For now, break of 130.38 support is needed to be the first indication of medium term topping. Otherwise, outlook will stay bullish even in case of deep pull back.