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Asia Summary

Asian equity markets opened mixed, China electric vehicle names were higher on expected policy guidelines in October. Japan markets were notably weaker with more than 120 stocks on Nikkei225 and 1,100 on the Topix trading ex-dividend. Regional currencies weakened against the dollar, which extended gains to a 3rd day after Fed Chair Yellen boosted expectations for an interest rate increase in December. US financial press leaked what is said to be Trump’s tax framework, which will cap corporate tax rate at 20% (from 35%) and have a 35% individual tax rate that has option to go higher based on what Senate wants. PBOC skipped OMO with the onshore yuan strengthening for the first time in three sessions after PBOC set reference rate higher.

Key economic data

(NZ) New Zealand Q3 Employment Confidence Index: 113.8 v 113.4 prior (highest since 2008)

(CN) CHINA AUG INDUSTRIAL PROFITS Y/Y: 24.0% V 16.5% PRIOR

Speakers and Press

China/Hong Kong

(US) Commerce Sec Ross: US wants better physical access to China, China needs to respect IP rights

(CN) China NDRC fines 18 PVC companies for monopoly

(CN) Beijing city to release guidelines in Oct. on new-energy vehicle components, batteries and supporting facilities to boost development of the industry - Chinese press

(CN) China Beige Book International (CBB): economy may be faring well this year but 2018 is shaping up to be less positive, with progress on reducing debt and industrial capacity proving elusive

Korea

(US) Pres Trump: we are totally prepared for North Korea military option if we have to resort to that; the North Korean Leader is acting very badly - joint press conf with Spain PM Rajoy (US session)

(KR) US Treasury Dept announces new sanctions on North Korean banks and individuals

Japan

(JP) Nikkei225 more than 120 stocks will trad ex-dividend today and over 1,000 in Topix

New Zealand/Australia

(NZ) New Zealand First Party Leader Peters: Will wait until special votes are in on Oct 7th before deciding on what party to support, possible will talk to Labour Party or National Party before the 7th

(AU) Australia PM Turnbull: Gas industry executives have agreed to 2-yr supply deal for enough gas for Australia’s domestic market, govt won’t have to impose LNG export curbs for 2018 - Sky

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.4%, Hang Seng +0.5%; Shanghai Composite +0.0%, ASX200 -0.3%, Kospi -0.0%

Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax +0.0%, FTSE100 -0.1%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.1795-1.1776; JPY 112.54-112.23; AUD 0.7888-0.7871;NZD 0.7216-0.7187

Dec Gold -0.3% at $1,297/oz; Nov Crude Oil +0.5% at $52.13/brl; Dec Copper +0.4% at $2.93/lb

GLD SPDR Gold Trust ETF daily holdings +0.8% t0 862.6 metric tonnes

(AU) Australia buys back A$700M in March and Oct 2019 bonds; March weighted avg yield 1.8099%; Oct weighted avg yield 1.9464%

(AU) Australia sells A$700M in 2027 bonds, avg yield 2.7834%, bid to cover 4.34x

(CN) PBOC OMO: skips v injected CNY50B in 14 and 28-day reverse repo prior; drains net CNY40B v CNY80B prior

USD/CNY (CN) China PBOC sets yuan reference rate at 6.6192 v 6.6076 prior (2nd consecutive weaker setting, weakest since Aug 29th)

Equities notable movers

Australia/New Zealand

CDU.AU Enters into copper concentrate sales agreement with Mitsui; +7.4%

YAL.AU Exercises option to acquire Mitsubishi's 28.9% stake in Warkworth for $230M; -4.5%

MYR.AU Said that major holder Solomon Lew hopes to either buy the company at an opportunistic price or that someone else will. – Australian; +2.8%

Singapore

MAND.SG Bids for Excelsior did not meet expectations, continues to review all options; -31.7%

Hong Kong/China

317.HK Strength attributed to parent China State Shipbuilding Corporation (600150.CN) suspended due to significant transaction/possible restructuring; +13.4%

US

BBD.CA US Commerce Dept applies duties of 220% as it says the company's C-Series jets are subsidized

Daily Pivots: (S1) 150.32; (P) 150.69; (R1) 151.42; More

GBP/JPY's correction from 152.82 is still in progress and deeper fall could be seen. But downside should be contained by 38.2% retracement of 141.17 to 152.82 at 148.36 to bring rally resumption. Break of 152.82 will extend the larger rise from 122.36 to 61.8% projection of 122.36 to 148.42 from 139.29 at 155.39 next.

In the bigger picture, medium term rebound from 122.36 is in progress. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. For now, the bullish scenario is preferred as long as 139.29 support holds.

AUDJPY Short Term Elliott Wave view suggests that the rally to 90.31 ended Intermediate wave (W). Intermediate wave (X) pullback remains in progress as a double three Elliott Wave structure. Down from 90.31, Minor wave (W) ended at 88.44 and Minor wave (X) ended at 89.68. Near term, while bounces stay below 90.31, expect pair to extend lower towards 87.36 – 87.8 area to complete Intermediate wave (X). Afterwards, pair should resume the rally to a new high or at least bounce in 3 waves. We don’t like selling the proposed pullback.

AUDJPY 1 Hour Elliottwave Chart

Double three ( 7 swings) is the most important pattern in Elliott wave’s new theory. It is also probably the most common pattern in the market these days. Double three is also known as a 7-swing structure. It is a very reliable pattern that gives traders a good opportunity to trade with a well-defined level of risk and target areas. The image below shows what Elliott Wave Double Three looks like. It has labels (W), (X), (Y) and an internal structure of 3-3-3. This means that all 3 legs has corrective sequences. Each (W) and (Y) is formed by 3 wave oscillations and has a structure of A, B, C or W, X, Y of smaller degrees.

Daily Pivots: (S1) 1.1390; (P) 1.1439; (R1) 1.1471; More...

Intraday bias in EUR/CHF remains on the downside for the moment. Correction from 1.1622 short term top is in progress and would target 1.1355 support first. Strong support is expected from 1.1257 (38.2% retracement of 1.0652 to 1.1622 at 1.1251) to bring rebound. On the upside, break of 1.1511 minor resistance will suggest that the pull back is completed and bring retest of 1.1622.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1198 resistance turned support holds.

Daily Pivots: (S1) 1.1745; (P) 1.1803 (R1) 1.1850; More...

The correction from 1.2091 is still in progress and intraday bias remains on the downside for 1.1661 support. Such decline is correcting whole rise from 1.0569. Break of 1.1661 will target 38.2% retracement of 1.0569 to 1.2091 at 1.1510, where we're expecting support to bring rebound. On the upside, above 1.1861 minor resistance will turn intraday bias neutral first. But break of 1.2029 resistance is needed to confirm completion of the pull back. Otherwise, deeper fall will remain in favor as the correction develops.

In the bigger picture, rise from medium term bottom at 1.0339 is still in progress for 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. However, it should be noted that there is no confirmation of trend reversal yet. That is, such rebound from 1.0399 could be a correction. And the long term fall from 1.6039 (2008 high) could resume. Hence, we'd be cautious on strong resistance from 1.2516 to limit upside. But after all, break of 1.1661 is needed to indicate medium term topping. Otherwise, outlook will remain bullish in case of pull back.

Daily Pivots: (S1) 1.3406; (P) 1.3460; (R1) 1.3511; More....

GBP/USD continues to gyrate lower as correction from 1.3651 extends. Intraday bias remains neutral for the moment. We'd continue to expect strong support from 38.2% retracement of 1.2773 to 1.3651 at 1.3316 to contain downside and bring rally resumption. Break of 1.3651 will turn bias back to the upside for 1.3835 support turned resistance next. Break there will target 55 month EMA (now at 1.4405).

In the bigger picture, current development argues that the long term trend in GBP/USD has reversed. That is, a key bottom was formed back in 1.1946 on bullish convergence condition in monthly MACD. Current rise from 1.1946 will target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 next. In any case, medium term outlook will now stay bullish as long as 1.2773 support holds.

Daily Pivots: (S1) 0.9649; (P) 0.9688; (R1) 0.9723; More....

USD/CHF continues to engage in consolidative trading and intraday bias remains neutral at this point. On the upside decisive break of 0.9772 resistance will suggest that whole down trend form 1.0342 has completed. In that case, near term outlook will be turned bullish for 0.9860/1.0099 resistance zone. Nonetheless, with 0.9772 resistance intact, outlook remains bearish. Below 0.9587 minor support will turn bias back to the downside for retesting 0.9420 low.

In the bigger picture, current development suggests that 0.9443 key support (2016 low) could be taken out firmly as down trend form 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.

Daily Pivots: (S1) 111.65; (P) 112.06; (R1) 112.63; More...

USD/JPY is still staying in range below 112.71 and intraday bias remains neutral first. Outlook is unchanged that further rise is expected as long as 111.07 support holds. Sustained break of medium term channel resistance (now at 112.90) will argue that whole correction from 118.65 has completed. In that case, further rise should be seen to 114.49 resistance for confirmation. However, break of 111.07 minor support will raise the risk of rejection from channel resistance and turn bias back to the downside for 55 day EMA (now at 110.72) and below.

In the bigger picture, rise from 98.97 (2016 low) is seen as the second leg of the corrective pattern from 125.85 (2015 high). It's unclear whether this this second leg has completed at 118.65 or not. But medium term outlook will be mildly bearish as long as 114.49 resistance holds. And, there is prospect of breaking 98.97 ahead. Meanwhile, break of 114.49 will bring retest of 125.85 high. But even in that case, we don't expect a break there on first attempt.

Daily Pivots: (S1) 1.2311; (P) 1.2362; (R1) 1.2394; More....

At this point, USD/CAD is still holding on to 1.2412 support turned resistance. Intraday bias remains neutral first. We'd remain cautious on strong support from 1.2048 to bring sustainable rebound. But still, break of 1.2412 support turned resistance is needed to be the first sign of trend reversal. Otherwise, outlook will remain bearish. Firm break of 1.2048 will pave the way to next fibonacci level at 1.1424. Break of 1.2412 will bring stronger rise back to 55 day EMA (now at 1.2520) and above.

In the bigger picture, focus remains on 50% retracement of 0.9406 to 1.4869 at 1.2048. As long as this level holds, we'd still favor that case that fall from 1.4689 is a correction. Rebound from 1.2048 could extend the larger up trend from 0.9406. However, firm break of 1.2048 will indicate that fall from 1.4689 is at least a medium term down trend and should target 61.8% retracement at 1.1424 and below.

Daily Pivots: (S1) 0.7848; (P) 0.7898; (R1) 0.7937; More...

AUD/USD drops to as low as 0.7856 so far and correction from 0.8124 extends. Overall, with 0.7807 support intact, larger rally is still expected to resume later. Above 0.7985 minor resistance will turn bias to the upside for retesting 0.8124 high first. Break will target 00% projection of 0.6826 to 0.7833 from 0.7328 at 0.8335 next. However, considering bearish divergence condition in daily MACD, firm break of 0.7807 will indicate near term reversal and turn bias back to the downside for 55 week EMA (now at 0.7670).

In the bigger picture, rise from 0.6826 medium term bottom is still in progress. At this point, there is no confirmation of trend reversal yet and we'll continue to treat such rebound as a corrective pattern. But in any case, break of 55 month EMA (now at 0.8090) will target 38.2% retracement of 1.1079 to 0.6826 at 0.8451. Break of 0.7807 support is needed to to be the first sign of completion of the rebound. Otherwise, further rise is now in favor.