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Market movers today

Markets will digest yesterday's ECB meeting and look out for 'ECB sources' stories today.

Otherwise, focus will be on the EU energy minister meeting (press conference scheduled for 14:30 CET), where price caps, windfall profit taxes and emergency credit lines will be discussed, as possible measures to tackle Europe's mounting energy crisis.

We expect that Norwegian core inflation fell by 0.3% m/m in August, meaning that the annual rate continues to climb to 4.8%. This would again be well above Norges Bank's forecast in the June monetary policy report (4.2%), but the gap would be much smaller than in July. Inflation is clearly trending higher, but as some of the acceleration in July probably were one-offs, the uncertainty is high. Of course, the outcome will have significant impact on the rate decision on September 22.

The 60 second overview

ECB. Yesterday, ECB hiked policy rates by 75bp. The sizeable interest hike was made to dampen demand and address inflation expectations. President Lagarde stressed that we are not to assume that 75bp is the new norm, but they will remain data dependent and make the decision on the hike size on a meeting-by-meeting basis, but also that further hikes were to be expected at the coming meetings. ECB's focus is clearly on hiking rates now and discussions on APP reinvestments have been left for later, without specific guidance. Sources stories say that such discussions are expected to take place in October. In terms of technical details, the ECB decided that the tiering system is no longer needed and that government deposits are no longer capped at 0%. In our base case, we expect the ECB to hike policy rates by another 50bp in October and 25bp in December but risks are currently skewed towards more tightening. See more in Flash ECB review: 75bp, but 75bp is not the new norm.

Danmarks Nationalbank. The Danish central bank mirrored the ECB's decision and also hiked policy rates by 75bp in yesterday's session thereby ending 10 years of negative interest rate policy. It marked the second rate hike this year and the key policy rate now stands at 0.65%.We look for DN to mirror future ECB rate hikes 1:1 and hence in our base case we pencil in a DN key policy rate of 1.40% by year-end, see more in Flash Comment Denmark, 8 September. Importantly, EUR/DKK trades close to the 7.4360 floor set by DN last year. Should DN resume selling of DKK in FX intervention, it could opt to make a unilateral interest rate cut, e.g. by 10bp; increase interest by less than ECB. It is not our base case, but something to watch.

Bank of Japan. Yesterday the Japanese ministry of finance, Bank of Japan and the FSA met to discuss the JPY slide. The news of the meeting took USD/JPY somewhat lower but when markets were assured of no intention to intervene, the cross traded back above 144. This morning USD/JPY has traded back sharply lower on USD weakness and verbal intervention from Japan. We continue to expect politicians have a strong preference to refrain from intervening to support JPY and that ultimately leaves USD/JPY in the hands of the global pressure for higher yields.

UK. Queen Elizabeth II has passed away peacefully at the age of 96 according to a statement from Buckingham Palace. The queen had been the longest reigning UK monarch. King Charles III will succeed her as the new king of the UK.

Equities: Global equities were higher yesterday, lifted by the relatively rare combination of banks, health care and materials outperforming while communication service and consumer staples underperforming. It was a bit of roller-coaster day on both sides of the Atlantic with indices flipping between gains and losses before ending close to day high. VIX ticked lower and helping the gain in equities as the ECB decision was more or less as expected. In US Dow +0.6%, S&P500 +0.7%, Nasdaq +0.6% and Russell 2000 +0.8%. Asian markets mostly higher driven by a strong lift in Hong Kong stocks. European and US futures higher as well.

FI: While the 75bp rate hike took media headlines, markets reacted strongly to the announcement of the suspension of the government deposits cap of 0%. European curves bear flattened with 2y Germany up by 22bp on the day, while the 10y point was 'just' 14bp higher. The well telegraphed ECB hike of 75bp did not move markets as such, and now markets are pricing in 107bp by year end. Reinvestments were not discussed at this meeting. Slightly surprising the decision to hike 75bp was unanimous.

FX: Given that ECB's decision was largely as anticipated, there was only a small reaction in EUR/USD - thus, spot remains fixed just below parity. We also continue to target 0.95 in 12m and note that it is quite common these days to see substantial rate hikes having little or even negative effect on the domestic currency. Danmarks Nationalbank followed the ECB and also hiked interest rates. Speculation in the market as to BoJ intervening in the JPY weakness has faded.

Credit: All focus on the ECB and credit markets saw a slight tightening following the 0.75% rate hike. We saw relatively good performance from recent new issues in Scandinavia with the new Statkraft bond tightening some 10bp while the new Orsted bond was around 8bp tighter. Overall on market level iTraxx Main was 3bp tighter at 111bp while Xover was 13bp tighter at 545bp.

USD/JPY:

On the H4 chart, price has confirmed a bullish momentum breaking the previous high. We are bullish bias- Price has tested the first resistance and pulled back slightly. If bullish momentum continues, it should bring price to 144.906 where the 161.8% extension sits. Alternatively, if price reverses, it might pull back to test the first support at 141.652 where the 23.6% retracement sits then the second support at 139.349 where the 38.2% retracement and overlapping support sits

Areas of consideration:

• H4 time frame, 1st resistance at 144.906
• H4 time frame, 1st support at 141.652

DXY:

On the H4, prices have broken the ascending trend, we are bearish bias. Price has pulled back to test the first support at 109.258 where the 23.6% retracement and previous swing high sits. If bearish momentum continues, it should bring price to the second support at 108.106 where the 61.8% projection sits. Alternatively, if price reverses from the first support, it should test 110.582 where the 100% projection sits and subsequently the second resistance at 111.045 where the 138.2% fibonacci extension sits.

Areas of consideration:

• H4 time frame, 1st resistance at 110.582
• H4 time frame, 1st support at 109.258

EUR/USD:

On the H4, price is moving in an ascending manner signalling bullish momentum – we are bullish bias. Price seems like it’s moving toward the first resistance at 1.0118 where the 50% retracement and 61.8% projection sits. If bullish momentum continues, it should bring price to the second resistance at 1.02745 where the 78.6% retracement and 100% projection sits. Alternatively, if price pulls back, it should test the intermediate support at 0.9868 then the first support at 0.9802 where the 61.8% projection sits.

Areas of consideration :

• H4 1st resistance at 1.0118
• H4 1st support at 0.9802

GBP/USD:

On the H4, prices seem to still be in a bearish momentum and respecting the ichimoku cloud. Prices have rebounded slightly but if bearish momentum continues it should move toward the first support at 1.1437 levels where the 161.8% extension sits. Alternatively, if it fails to break this level, it might look to test the first resistance at 1.1613 where the previous swing high sits subsequently the second resistance at 1.1760 level where the 61.8% projection and 38.2% retracement sits

Areas of consideration:

• H4 1st resistance at 1.163
• H4 1st support at 1.1437

USD/CHF:

On the H4, prices have rejected the 0.9859 levels and we are currently bearish bias. Price seem like its moving toward the first support around the 0.9626 levels where the 50% retracement, 78.6% projection and overlapping support sits. Alternatively, price could pull back to test the first resistance at 0.9740 where the 23.6% retracement sits then the second resistance at 0.9859

Areas of consideration

• H4 1st support at 0.9626
• H4 1st resistance at 0.9740

XAU/USD (GOLD):

On the H4, with prices testing the descending trendline, if the price can break the descending trendline successfully, the price may rise to the 1st resistance at 1730.482 area, which is in line with the overlap resistance, 50 % and 38% fibonacci retracement, as well as 100% fibonacci projection. After testing the 1st resistance, the price may drop to the 1st support at 1692.684, which is in line with the previous swing lows and 100% fibonacci projection. If the price breaks this support level, the next support level could be at 1680.546, where the swing low is.

Areas of consideration:

• H4 time frame, 1st resistance at 1730.482
• H4 time frame, 1st support at 1692.684

AUD/USD:

On the H4, with the price pulling back from the 1st support, we have a short term bullish bias that the price may test the 1st resistance at 0.68223, which is in line with the previous swing high and 38.2% fibonacci retracement. After testing the 1st resistance, as the price is moving within the descending channel and ichimoku cloud, the price may drop to the 1st support at 0.67316, where the previous swing lows are. If the price breaks this support level, the 2nd support level could be at 0.66809, where the significant swing low and 61.8% fibonacci projection are.

Areas of consideration

• H4 1st resistance at 0.68223
• H4 1st support at 0.67316

NZD/USD:

On the H4, with price breaking the descending trendline and pulling back from the 1st support, we have a bullish bias that the price may rise to the 1st resistance at 0.61264, which is in line with the overlap resistance and 50% fibonacci retracement. Alternatively, the price may drop to the 1st support at 0.60031, where the 61.8% and 78.6% fibonacci projection and swing low are. If the price breaks this support level, the 2nd support level could be at 0.59472, where the 127.2% fibonacci extension and 100% fibonacci projection are.

Areas of consideration:

• H4 time frame, 1st resistance at 0.61264
• H4 time frame, 1st support at 0.60031

USD/CAD:

On the H4, with the price breaking the ascending channel, crossing the ichimoku cloud, and there’s a possible “double top” pattern, we have a bearish bias that the price may drop to the 1st support at 1.29651, which is in line with the overlap support and 50% fibonacci retracement. Alternatively, the price may rise to the 1st resistance at 1.30926, where the “neckline” of the “double top” pattern is. If the price can break the 1st resistance, the 2nd resistance could be at 1.31922, where the “double top” is.

Areas of consideration:

• H4 time frame, 1st resistance at 1.30926
• H4 time frame, 1st support at 1.29651

OIL:

On the H4, with price below ichimoku cloud and below the descending trendline, we have a bearish bias that the price may drop to the 1st support at 88.332, where the 78.6% fibonacci projection is. If the price could break the 1st support, the 2nd support could be at 85.715, where the 100% fibonacci projection is. Alternatively, the price may continue the pullback trend and rise to the 1st resistance at 93.159, where the 50% fibonacci retracement and previous swing support are.

Areas of consideration:

• H4 time frame, 1st support at 88.332
• H4 time frame, 2nd support at 85.715

Dow Jones Industrial Average:

On the H4, with price expected to reverse off the stochastic resistance, we have a bearish bias that price will drop from 1st resistance at 31904 where the pullback resistance is to the 1st support at 31025 where the swing low support is. Alternatively, price could break 1st resistance and rise to 2nd resistance at 32632 where the pullback resistance, 50% fibonacci retracement and 78.6% fibonacci projection are.

Areas of consideration:

• H4 time frame, 1st resistance of 31904
• H4 time frame, 1st support at 31025

DAX:

On the H4, with price moving within a descending channel and below the ichimoku indicator, we have a bearish bias that price will drop from 1st resistance at 13017.19 where the pullback resistance is to the 1st support at 12601.62 where the swing low support and 78.6% fibonacci projection are. Alternatively, price could break 1st resistance structure and rise to 2nd resistance at 13361.47 where the overlap resistance, 61.8% fibonacci retracement and 78.6% fibonacci projection are.

Areas of consideration:

• H4 time frame, 1st resistance of 13017.19
• H4 time frame, 1st support at 12601.62

ETHUSD:

On the H4, with price moving within an ascending channel and above the ichimoku indicator, we have a bullish bias that price will rise to 1st resistance at 1651.19 where the pullback resistance is. Once there is upside confirmation that price has broken 1st resistance structure, we would expect bullish momentum to carry price to 2nd resistance at 1723.42 where the swing high resistance and 78.6% fibonacci projection are. Alternatively, price could drop to the 1st support at 1562.81 where the overlap support is.

Areas of consideration:

• H4 time frame, 1st resistance of 1651.19
• H4 time frame, 1st support at 1562.81

BTCUSD:

On the H4, with price moving within a descending channel and below an ichimoku indicator, we have a bearish bias that price will drop from the 1st resistance at 19498.02 where the pullback resistance and 23.6% fibonacci retracement are to the 1st support at 18588.89 where the swing low support and 78.6% fibonacci projection are. Alternatively, price could break 1st resistance and rise to 2nd resistance at 20711.10 where the pullback resistance and 61.8% fibonacci retracement are.

Areas of consideration:

• H4 time frame, 1st resistance of 19498.02
• H4 time frame, 1st support at 18588.89

S&P 500:

On the H4, with prices breaking out of the ascending trendline and moving below the ichimoku indicator, we have a bearish bias that the price will drop to the 1st support at 3945.01 where the pullback support is. Once there is downside confirmation that price has broken 1st support structure, we would expect bearish momentum to carry price to 2nd support at 3722.42 where the swing low support is. Alternatively, price could rise to 1st resistance at 4089.97 where the pullback resistance, 50% fibonacci retracement and 100% fibonacci projection are.

Areas of consideration:

• H4 time frame, 1st resistance of 4089.97
• H4 time frame, 1st support at 3945.01

Daily Pivots: (S1) 1.3058; (P) 1.3109; (R1) 1.3140; More...

Intraday bias in USD/CAD remains neutral first, and further rally is in favor with 1.2971 minor support intact. On the upside, decisive break of 1.3222 will resume larger up trend from 1.2005. Next target is 100% projection of 1.2005 to 1.2947 from 1.2401 at 1.3343. On the downside, however, break of 1.2971 will extend the corrective pattern from 1.3222 with another falling leg, back towards 1.2726 support instead.

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 1.2516 support holds.

Daily Pivots: (S1) 0.6718; (P) 0.6746; (R1) 0.6779; More...

Intraday bias in AUD/USD is turned neutral with current recovery. On the upside, decisive break of 0.6680 low will resume larger down trend. Next target is long term fibonacci level at 0.6461. On the upside, break of 0.6855 support turned resistance will turn bias back to the upside for 0.7008 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 0.7282 resistance holds. Next target is 61.8% retracement of 0.5506 to 0.8006 at 0.6461.

Daily Pivots: (S1) 143.43; (P) 144.00; (R1) 144.67; More...

Intraday bias in USD/JPY remains neutral for consolidation below 144.98 temporary top. Downside of retreat should be contained by 139.37 resistance turned support to bring another rally. 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.

Daily Pivots: (S1) 0.9677; (P) 0.9730; (R1) 0.9758; More...

USD/CHF's break of 0.9691 support suggests that rebound from 0.9369 has completed at 0.9869, ahead of 0.9884 resistance. The development also indicates that corrective pattern from 1.0063 is extending with another falling leg. Intraday bias is back on the downside for 0.9369 support. On the upside, above 0.9757 minor resistance will turn intraday bias neutral again.

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.

Daily Pivots: (S1) 1.1456; (P) 1.1508; (R1) 1.1556; More...

Intraday bias in GBP/USD stays neutral at this point. Considering bullish convergence condition in 4 hour MACD, break of 1.1608 resistance will confirm short term bottoming at 1.1404, after defending 1.1409 low. Intraday bias will back on the upside for 55 day EMA (now at 1.1942). ON the downside, decisive break of 1.1409 will resume larger down trend to 61.8% projection of 1.3748 to 1.1759 from 1.2292 at 1.1063 next.

In the bigger picture, based on current momentum, fall from 1.4248 (2018 high) is probably resuming long term down trend from 2.1161 (2007 high). Sustained break of 1.1409 will target 61.8% projection of 1.7190 (2014 high) to 1.1409 (2020 low) from 1.4248 (2021 high) at 1.0675. This will remain the favored case for now as long as 1.2292 resistance holds.

Daily Pivots: (S1) 0.9944; (P) 0.9986; (R1) 1.0042; More...

EUR/USD's break of 1.0078 resistance suggests short term bottoming at 0.9863, on bullish convergence condition in 4 hour MACD. Intraday bias is back on the upside 55 day EMA (now at 1.0170). Sustained break there will raise the chance of larger reversal, and target 1.0368 resistance. On the downside, firm break of 0.9863 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, outlook will stay bearish as long as 1.0368 resistance holds, even in case of strong rebound.

Dollar is starting to reverse recent gains, probably in a more persistent way. Australian Dollar is leading the way higher today, as supported by extended improvement in risk sentiment. But for the week, Swiss Franc and Euro are the strongest ones, followed by Canadian. Yen is still the worst performer, even though it's in recovery against the greenback.

Technically, much focus is now on 1.0078 minor resistance in EUR/USD, and 1.1608 minor resistance in GBP/USD. Firm break of these levels will indicate short term bottoming at 0.9863 and 1.1404 respectively. In this case, EUR/USD should be considered regaining parity for now while GBP/USD should have defended 2020 low. Both would have more upside potential for the near term then.

In Asia, at the time of writing, Nikkei is up 0.46%. Hong Kong HSI is up 2.59%. China Shanghai SSE is up 0.70%. Singapore Strait Times is up 0.84%. Japan 10-year JGB yield is down -0.0128 at 0.239. Overnight, DOW rose 0.61%. S&P 500 rose 0.66%. NASDAQ rose 0.60%. 10-year yield rose 0.027 to 3.292.

Fed Evans: We need to be increasing interest rates up to a substantially higher level

Chicago Fed President Charles Evans said yesterday, "I think that we've got a good plan in place. We could very well do 75 in September. My mind is not made up. I do know that we need to be increasing interest rates up to a substantially higher level than where they are now."

"I think the precise path is less important than just constantly telling people, we're on this path, this is what we're going to do, inflation is job one, we're going to handle this," Evans said.

"Unemployment is 3.7% right now. I'm optimistic that we're going to be able to navigate this and keep unemployment to about 4.5% by the time we're done," he said. "That would still be a pretty good outcome, although it will be costly for some."

"I would prefer to find an appropriate spot to pause and monitor how things are going, rather than go much higher -- potentially overshoot," he said. "I wouldn't say that I'm advocating sort of pausing at 3.5%, because I think 4 is more likely."

SNB Jordan: At the moment, franc appreciation tends to help rather than hurt

SNB Chairman Thomas Jordan said yesterday, "you cannot say we have passed the zenith and now it is certainly heading lower. If it comes to a power shortage situation, to a complete gas shortage in Europe, then it cannot be excluded that inflation pressure rises again. You have to be very cautious."

Jordan declined to comment on currency interventions. But he added, "at the moment it is rather so that given the inflationary pressure an appreciation of the franc tends to help rather than hurt."

BoC Rogers: We need a period of lower growth to balance things out

BoC Senior Deputy Governor Carolyn Rogers said yesterday, "our primary focus will be to judge how monetary policy is working to slow demand, how fast supply challenges are resolved, and most importantly, how both inflation and inflation expectations respond."

"Because we are in a period of excess demand, we need a period of lower growth to balance things out and bring demand back in line with supply," Rogers said.

"By front-loading interest rates now, we're trying to avoid the need for even higher rates down the road and a more pronounced slowing of the economy," she said.

BoJ Kuroda: We will watch exchange rate moves carefully

BoJ Governor Haruhiko Kuroda said, "When the yen is moving 2 to 3 yen per day, that's a rapid move. We will watch exchange rate moves carefully." The comment came after Kuroda met Prime Minister Fumio Kishida, where currency matters were discussed.

Separately, Finance Minister Shunichi Suzuki said the the government would not rule out any options on foreign exchange moves.

On the data front

Japan M2 rose 3.4% yoy in August, matched expectations. China CPI slowed from 2.7% yoy to 2.5% yoy, below expectation of 2.8% yoy. PPI slowed from 4.2% yoy to 2.3% yoy, below expectation of 3.1% yoy.

Looking ahead, France industrial output will be released in European session. Later in the day, Canada employment data will take center stage.

EUR/USD Daily Outlook

Daily Pivots: (S1) 0.9944; (P) 0.9986; (R1) 1.0042; More...

EUR/USD's break of 1.0078 resistance suggests short term bottoming at 0.9863, on bullish convergence condition in 4 hour MACD. Intraday bias is back on the upside 55 day EMA (now at 1.0170). Sustained break there will raise the chance of larger reversal, and target 1.0368 resistance. On the downside, firm break of 0.9863 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, outlook will stay bearish as long as 1.0368 resistance holds, even in case of strong rebound.

Economic Indicators Update

GMT	Ccy	Events	Actual	Forecast	Previous	Revised
23:50	JPY	Money Supply M2+CD Y/Y Aug	3.40%	3.40%	3.40%
01:30	CNY	CPI Y/Y Aug	2.50%	2.80%	2.70%
01:30	CNY	PPI Y/Y Aug	2.30%	3.10%	4.20%
06:45	EUR	France Industrial Output M/M Jul		-0.40%	1.40%
08:30	GBP	Consumer Inflation Expectations			4.60%
12:30	CAD	Net Change in Employment Aug		15.0K	-30.6K
12:30	CAD	Unemployment Rate Aug		5.00%	4.90%
12:30	CAD	Capacity Utilization Q2		82.10%	82.00%
14:00	USD	Wholesale Inventories Jul F		0.80%	0.80%

BoJ Governor Haruhiko Kuroda said, "When the yen is moving 2 to 3 yen per day, that's a rapid move. We will watch exchange rate moves carefully." The comment came after Kuroda met Prime Minister Fumio Kishida, where currency matters were discussed.

Separately, Finance Minister Shunichi Suzuki said the the government would not rule out any options on foreign exchange moves.