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Daily Pivots: (S1) 149.20; (P) 149.59; (R1) 150.15; More...

Intraday bias in USD/JPY stays on the upside as rise from 139.57 is in progress. This rally is seen as the second leg of the corrective pattern from 161.94, and should target 61.8% retracement of 161.94 to 139.57 at 153.39 next. On the downside, below 148.25 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should now be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8583; (P) 0.8612; (R1) 0.8655; More…

Intraday bias in USD/CHF remains on the upside for the moment. Rise from 0.8374 short term bottom is in progress for 38.2% retracement of 0.9223 to 0.8374 at 0.8698. Sustained break there will argue that fall from 0.9223 has completed after defending 0.8332 low. Further rally should be seen to 61.8% retracement at 0.8899 next. On the downside, below 0.8557 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 1.0886; (P) 1.0911; (R1) 1.0935; More....

EUR/USD's fall from 1.1213 resumed after brief consolidations and intraday bias is back on the downside. Sustained trading below 38.2% retracement of 1.0447 to 1.1213 at 1.0920 will argue that fall from 1.1213 is the third leg of the corrective pattern from 1.1274. In this case, deeper decline would be seen to 61.8% retracement at 1.0740 next. On the upside, above 1.0953 minor resistance will turn intraday bias neutral again first.

In the bigger picture, rejection by 1.1274 resistance suggests that corrective pattern from 1.1274 (2023 high) is not completed yet. Instead, decline from 1.1213 might be another falling leg. Sustained break of 55 W EMA (now at 1.0877) will validate this case, and bring deeper fall towards 1.0447 support again.

Daily Pivots: (S1) 1.3035; (P) 1.3054; (R1) 1.3077; More...

Outlook in GBP/USD remains unchanged and intraday bias stays neutral first. Strong support should be seen from 1.3000 cluster support (38.2% retracement of 1.2298 to 1.3433 at 1.2999) to complete the correction from 1.3433. On the upside, break of 1.3174 minor resistance will turn bias back to the upside for retesting 1.3433. However, sustained break of 1.3000 will carry larger bearish implications and target 61.8% retracement at 1.2732.

In the bigger picture, as long as 1.3000 support holds, the up trend from 1.0351 (2022 low) is still in progress. Next target is 61.8% projection of 1.0351 to 1.3141 from 1.2298 at 1.4022. However, considering mild bearish divergence condition in D MACD, decisive break of 1.3000 will argue that a medium term top is already in place, and bring deeper fall back to 1.2664 support next.

Risk sentiment in Asia was mixed today. Japan's Nikkei 225 index extended its rally and broke above the 40k mark for the first time in three months. This momentum firstly follows another record close on Wall Street overnight. Secondly, contributing to the optimism are growing expectations that BoJ may hold off on implementing another rate hike by the end of the year. The latest Reuters poll indicates that a slim majority—25 out of 49 economists surveyed—expect BoJ to maintain its current policy rate at 0.25% through December. Nevertheless, tightening is going to continue, with 87% of respondents, or 39 out of 45, anticipate a rate increase to 0.50% by the end of Q1 next year.

In contrast, equities in Hong Kong and mainland China are struggling. Unconfirmed media reports suggest that China might raise an additional CNY 6 trillion (approximately USD 820 billion) through treasury bonds over the next three years to bolster its slowing economy with fiscal stimulus. The proposed funds are intended to assist local governments in resolving off-the-books debts. However, the absence of official confirmation has left investors uneasy. Investors are clearly dissatisfied with the lack of concrete information, causing hesitation in committing to positions in Chinese assets.

In the currency markets, Dollar remains the strongest performer so far this week, although its momentum is moderate. Notably, USD/JPY pair is grappling with the psychological barrier at the 150 level. Traders are cautious that breaching this threshold could trigger intensified verbal intervention from Japanese authorities, aiming to prevent excessive Yen depreciation. British Pound is currently the second strongest, with market attention focused on this week's key UK economic data releases, starting with today's employment and wage growth figures. Canadian Dollar ranks third in strength, ahead of Canada's CPI release today. On the weaker side, Swiss Franc leads the decline, followed by Australian Dollar and New Zealand Dollar. Euro and Japanese Yen are occupying middle positions.

Technically, as USD/CHF's rebound from 0.8374 short term bottom extends, focus is now on 38.2% retracement of 0.9223 to 0.8374 at 0.8698. Sustained break there will argue that fall from 0.9223 has completed after defending 0.8332 low. The term trend should have reversed in this case, targeting 61.8% retracement at 0.8899 and above.

In Asia, at the time of writing, Nikkei is up 1.26%. Hong Kong HSI is down -1.55%. China Shanghai SSE is down -0.84%. Singapore Strait Times is up 0.30%. Japan 10-year JGB yield is up 0.0167 at 0.969.

Overnight, DOW rose 0.47%. S&P 500 rose 0.77%. NASDAQ rose 0.87%. 10-year yield rose 0.0250 to 4.098.

Fed’s Waller advocates for caution in policy easing amid solid economic conditions

In a speech overnight, Fed Governor Christopher Waller provided noted that recent economic data has been "uneven," with both positive signals and areas of concern, but emphasized that the US economy remains on "solid footing." Employment is near the Fed’s maximum objective, and inflation is approaching the target, despite some disappointing recent inflation figures.

In light of this, Waller expressed caution about the pace of monetary easing, noting that while the September 50bps cut was necessary, the Fed should now proceed with "more caution on the pace of rate cuts." He reaffirmed his view that the Fed would reduce the policy rate "gradually over the next year."

Looking ahead, Waller's baseline forecast still calls for a gradual reduction in the policy rate over the next year. However, he acknowledged uncertainty about the "final destination" for interest rates, with projections for the long-run federal funds rate varying significantly among Fed officials. The range extends from 2.4% to 3.8%, with the median estimate sitting at 2.9%.

While much of the market focus is on the size of rate cuts in the near term, Waller pointed out that the "larger message" from Fed’s economic projections is the extent of policy tightening that still needs to be reversed. If the economy continues its current stable performance, Waller expects that easing will occur gradually over time.

Cryptocurrencies surge amid optimism over US regulatory outlook post-election

Cryptocurrencies rallied overnight on growing optimism that regulatory environment for digital assets in the US may improve following the upcoming presidential election in November. This boost in sentiment was initially driven by a rise in Donald Trump's standing in prediction markets and some polls, as he is perceived to be more pro-crypto compared. Later, the market received another push after Kamala Harris’ campaign made supportive comments, pledging to support a regulatory framework for cryptocurrencies.

Technically, however, Bitcoin is still stuck in medium term consolidation pattern from 73012 (March high). The range is pretty much set between 50% retracement of 24896 to 37812 at 49354, i.e. between 49k and 74k in short.

Further near term rise is in favor as long as 58846 support holds. Break of 66854 will target a test on 73812 high. However, there is so far no indication of sustainable momentum through to new record.

Ethereum's outlook is worse. Current bounce might be just a leg of the consolidation pattern from 2084.52 low. Further decline will remain in favor as long as 2797.60 resistance holds. Break of 20845.71 will resume the larger down trend from 4092.55 (March high).

Looking ahead

UK employment data is the main focus in European session. Germany will publish ZEW economic sentiment while Eurozone will release industrial production.

Later in the day, Canada CPI will take center stage while US Empire State manufacturing index will also be featured.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3035; (P) 1.3054; (R1) 1.3077; More...

Outlook in GBP/USD remains unchanged and intraday bias stays neutral first. Strong support should be seen from 1.3000 cluster support (38.2% retracement of 1.2298 to 1.3433 at 1.2999) to complete the correction from 1.3433. On the upside, break of 1.3174 minor resistance will turn bias back to the upside for retesting 1.3433. However, sustained break of 1.3000 will carry larger bearish implications and target 61.8% retracement at 1.2732.

In the bigger picture, as long as 1.3000 support holds, the up trend from 1.0351 (2022 low) is still in progress. Next target is 61.8% projection of 1.0351 to 1.3141 from 1.2298 at 1.4022. However, considering mild bearish divergence condition in D MACD, decisive break of 1.3000 will argue that a medium term top is already in place, and bring deeper fall back to 1.2664 support next.

Key Highlights

• GBP/USD started a fresh decline below the 1.3120 support zone.
• A connecting bearish trend line is forming with resistance at 1.3070 on the 4-hour chart.
• EUR/USD extended losses and traded below the 1.0920 support.
• Bitcoin rallied above the $63,500 and $64,000 levels.

GBP/USD Technical Analysis

The British Pound started a fresh decline from the 1.3440 resistance against the US Dollar. GBP/USD traded below the 1.3250 and 1.3120 support levels to enter a bearish zone.

Looking at the 4-hour chart, the pair settled below the 1.3100 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even tested the 1.3015 zone. A low was formed at 1.3014 and the pair is now consolidating losses.

On the downside, immediate support sits near the 1.3020 level. The next key support sits near the 1.3000 level. Any more losses could send the pair toward the 1.2880 level.

On the upside, the bears might be active near the 1.3070 level. There is also a connecting bearish trend line forming with resistance at 1.3070 on the same chart. The first major resistance might be near the 1.3120 level. It is close to the 23.6% Fib retracement level of the downward move from the 1.3434 swing high to the 1.3014 low.

A close above the 1.3120 level could set the tone for another increase. The next major resistance could be 1.3175. A clear move above the 1.3175 level might send GBP/USD toward 1.3220. Any more gains might call for a test of the 1.3320 zone.

Looking at EUR/USD, the bears remained active and were able to push the pair below the 1.0940 and 1.0920 support levels.

Upcoming Economic Events:

• UK Claimant Count Change for Sep 2024 – Forecast 20.2K, versus 23.7K previous.
• UK ILO Unemployment Rate for August 2024 (3M) – Forecast 4.1%, versus 4.1% previous.

Cryptocurrencies rallied overnight on growing optimism that regulatory environment for digital assets in the US may improve following the upcoming presidential election in November. This boost in sentiment was initially driven by a rise in Donald Trump's standing in prediction markets and some polls, as he is perceived to be more pro-crypto compared. Later, the market received another push after Kamala Harris’ campaign made supportive comments, pledging to support a regulatory framework for cryptocurrencies.

Technically, however, Bitcoin is still stuck in medium term consolidation pattern from 73012 (March high). The range is pretty much set between 50% retracement of 24896 to 37812 at 49354, i.e. between 49k and 74k in short.

Further near term rise is in favor as long as 58846 support holds. Break of 66854 will target a test on 73812 high. However, there is so far no indication of sustainable momentum through to new record.

Ethereum's outlook is worse. Current bounce might be just a leg of the consolidation pattern from 2084.52 low. Further decline will remain in favor as long as 2797.60 resistance holds. Break of 20845.71 will resume the larger down trend from 4092.55 (March high).

In a speech overnight, Fed Governor Christopher Waller provided noted that recent economic data has been "uneven," with both positive signals and areas of concern, but emphasized that the US economy remains on "solid footing." Employment is near the Fed’s maximum objective, and inflation is approaching the target, despite some disappointing recent inflation figures.

In light of this, Waller expressed caution about the pace of monetary easing, noting that while the September 50bps cut was necessary, the Fed should now proceed with "more caution on the pace of rate cuts." He reaffirmed his view that the Fed would reduce the policy rate "gradually over the next year."

Looking ahead, Waller's baseline forecast still calls for a gradual reduction in the policy rate over the next year. However, he acknowledged uncertainty about the "final destination" for interest rates, with projections for the long-run federal funds rate varying significantly among Fed officials. The range extends from 2.4% to 3.8%, with the median estimate sitting at 2.9%.

While much of the market focus is on the size of rate cuts in the near term, Waller pointed out that the "larger message" from Fed’s economic projections is the extent of policy tightening that still needs to be reversed. If the economy continues its current stable performance, Waller expects that easing will occur gradually over time.

Full speech of Fed's Waller here.

• S&P 500 index broke resistance level 5785.00
• Likely to rise to resistance level 5985.00

S&P 500 index under the bullish pressure after the price broke resistance zone located between the pivotal resistance level 5785.00 (which stopped wave 1 last month) and the resistance trendline of the daily up channel from last year.

The breakout of this resistance zone accelerated the active short-term impulse wave 3 of the higher extended impulse wave (3) from the start of September.

Given the clear daily uptrend, S&P 500 index can be expected to rise further to the next resistance level 5985.00 (target for the completion of the active impulse wave (3)).

• USDJPY broke resistance zone
• Likely to rise to resistance level 152.00

USDJPY currency pair recently broke through resistance zone located between the key resistance level 149.30 (former top of wave b from the middle of August) and the 61.8% Fibonacci correction of the downward impulse wave from July.

The breakout of this resistance zone continues the active short-term impulse sequence (c) of the B-wave from the middle of September.

Given the rising bullish US dollar sentiment, USDJPY currency pair be expected to rise further to the next resistance level 152.00 (which is the former minor support from July).