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Daily Pivots: (S1) 0.8313; (P) 0.8329; (R1) 0.8347; More...

Intraday bias in EUR/GBP stays on the downside for the moment. Fall from 0.8624 would target 100% projection of 0.8624 to 0.8399 from 0.8463 at 0.8237 next. On the upside, though, above 0.8370 minor resistance will turn bias back to the upside for stronger recovery.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Next target is 0.8201 (2022 low), but strong support should be seen there to bring rebound. However, outlook will remain bearish as long as 0.8624 resistance holds even in case of strong rebound.

Daily Pivots: (S1) 1.6027; (P) 1.6072; (R1) 1.6126; More...

Intraday bias in EUR/AUD is turned neutral first with 4H MACD crossed above signal line. Strong rebound from 1.5996 support, followed by 1.6184 minor resistance, will indicate short term bottoming. Intraday bias will be turned back to the upside for stronger rebound. However, decisive break of 1.5996 will carry larger bearish implications. Next target will be 100% projection of 1.7180 to 1.6256 from 1.6629 at 1.5705.

In the bigger picture, outlook is mixed up by the deeper than expected fall from 1.7180. Yet as long as 1.5996 support holds, up trend from 1.4281 (2022 low) is still in favor to resume at a later stage. However, decisive break of 1.5996 will argue that the medium term trend has reversed.

Daily Pivots: (S1) 0.9324; (P) 0.9379; (R1) 0.9424; More....

Intraday bias in EUR/CHF remains neutral for the moment. On the downside, break of 0.9305 will resume the fall from 0.9579 to retest 0.9209 low. On the upside, above 0.9506 will resume the rebound from 0.9305 to 0.9579 resistance.

In the bigger picture, medium term corrective pattern from 0.9407 (2022 low) might have completed with three waves to 0.9928. Decisive break of 0.9252 (2023 low) will confirm long term down trend resumption. Next target will be 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. For now, outlook will stay bearish as long as 0.9928 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 1.1028; (P) 1.1086; (R1) 1.1127; More....

Intraday bias in EUR/USD remains neutral first and more consolidations would be seen below 1.1213 short term top. Nevertheless, further rally is still expected 1.1001 cluster support holds (38.2% retracement of 1.0665 to 1.1213 at 1.1004). Break of 1.1213 will target 1.1274 high. However, decisive break of 1.1001/4 will confirm near term bearish reversal.

In the bigger picture, corrective pattern from 1.1274 should have completed at 1.0665 already. Decisive break of 1.1274 (2023 high) will confirm resumption of whole up trend from 0.9534 (2022 low). Next target will be 61.8% projection of 0.9534 to 1.1274 from 1.0665 at 1.1740. This will now be the favored case as long as 1.1001 support holds.

Daily Pivots: (S1) 142.85; (P) 143.69; (R1) 144.41; More...

Intraday bias in USD/JPY stays neutral and outlook is unchanged. On the downside, below 141.63 will target 139.57 low. But strong support could be seen again from 139.26 fibonacci level to bring rebound. On the upside, above 146.48 will resume the rebound from 139.57 to 38.2% retracement of 161.94 to 139.57 at 148.11. However, firm break of 139.26 will carry larger bearish implications.

In the bigger picture, fall from 161.94 medium term top is seen as correcting whole up trend from 102.58 (2021 low). Strong support could be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to contain downside, at least on first attempt. But in any case, risk will stay on the downside as long as 149.35 resistance holds. Sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.3218; (P) 1.3304; (R1) 1.3370; More...

Intraday bias in GBP/USD remains neutral for the moment. Another rally is still in favor as long as 1.3265 resistance turned support holds. Above 1.3433 will resume the rise from 1.2298. However, firm break of 1.3265 will confirm short term topping, and turn bias back to the downside for 1.3000 support instead.

In the bigger picture, up trend from 1.0351 (2022 low) is in progress. Next target is 61.8% projection of 1.0351 to 1.3141 from 1.2298 at 1.4022. For now, outlook will stay bullish as long as 1.3000 support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8438; (P) 0.8460; (R1) 0.8488; More…

No change in USD/CHF's outlook as range trading continues and intraday bias remains neutral. On the downside, break of 0.8374 will resume the fall from 0.9223 to retest 0.8332 low. Decisive break there will indicate larger down trend resumption. Nevertheless, firm break of 0.8548 will turn bias back to the upside for stronger rebound to 0.8747 resistance instead.

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) 0.6848; (P) 0.6892; (R1) 0.6926; More...

A temporary top was formed at 0.6941 with current retreat and intraday bias in AUD/USD is turned neutral first. Further rally is expected as long as 0.6823 resistance turned support holds. Above 0.6941 will resume the rally from 0.6348 to 100% projection of 0.6348 to 0.6823 from 0.6621 at 0.7096. However, firm break of 0.6823 will turn bias to the downside for deeper pullback to 0.6621 support.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with rise from 0.6269 as the third leg. Firm break of 0.6870 resistance will target 100% projection of 0.6269 to 0.6870 from 0.6340 at 0.6941, and then 138.2% projection at 0.7179. This will now remain the favored case as long as 0.6621 support holds.

Short Term Elliott Wave View in Dollar Index (DXY) suggests that decline to 100.2 ended wave 1. Rally in wave 2 is in progress as an expanded flat Elliott Wave structure. Up from wave 1, wave (a) ended at 101.14 and pullback in wave (b) ended at 100.91. Wave (c) higher ended at 101.47 which completed wave ((a)) in higher degree. Wave ((b)) dips takes the form of a double three Elliott Wave structure. Down from wave ((a)), wave (w) ended at 100.4 and wave (x) ended at 101.23. Wave (y) lower ended at 100.15 which completed wave ((b)) in higher degree.

The Index has turned higher in wave ((c)). Up from wave ((b)), wave (i) ended at 100.54, and pullback in wave (ii) ended at 100.18. Wave (iii) higher ended at 101.39 and pullback in wave (iv) ended at 101.15. Expect the Index to extend higher 1 more leg in wave (v) to finish wave ((v)) of 2 in higher degree. Afterwards, expect the Index to resume lower. Possible target for wave (v) of ((v)) of 2 is 100% – 161.8% Fibonacci extension of wave ((a)). This comes at 101.4 – 102.1 area.

Dollar Index (DXY) 60 Minutes Elliott Wave Chart

DXY Elliott Wave Video

https://www.youtube.com/watch?v=LzZxXNGIfi4

Markets

German Bunds outperformed US Treasuries yesterday. German yields closed 4.8 bps (2-yr) to 9.8 bps (30-yr) lower. The curve move was at least partly inspired by technical reasons (acceleration after losing support from August & September lows at long tenors) and by intraday deteriorating risk sentiment (around the start of US trading) as tensions in the Middle East culminated in an Iranian missile attack against Israel. European (-1%) and US stock markets (-0.5% to -1.5%) switched gains for losses. The resulting increase in oil prices (Brent from $71/b to $75/b) didn’t offer any counterweight at the long end of the curve. Earlier in European trading, ECB easing bets were unaltered by September EMU inflation which showed core CPI (2.7% Y/Y) and services CPI (4% Y/Y) remaining sticky. US yields ended 3.6 bps to 5.1 bps lower with the belly of the curve outperforming the wings. Eco data were mixed with JOLTS job openings unexpectedly increasing from 7.67mn to 8.04mn, but details of the manufacturing ISM (steady at 47.2; mired in contraction territory) painting a bleak picture. Markets especially paid attention to the latter with the pace of job shedding increasing again (43.9 from 46; 2nd worse since mid-2020), new orders still under pressure (46.1 from 44.6) and prices paid falling (48.3 from 54) for the first time this year. The figures brought the odds for the November Fed meeting again more in balance: 60/40 in favour of a 25 bps rate cut over a 50 bps move. Today’s US ADP employment report and a speech by Richmond Fed Barkin will undoubtedly create some more volatility. We fear that this week’s data, nor mid-October CPI numbers or early November US eco data will eventually completely settle the debate. We continue to err on the side of another 50 bps rate cut. Other things to watch out for today are a flurry of ECB speakers and obviously risk sentiment as Israel plans a significant retaliation to the Iran attack within days. Safe haven currencies like JPY and CHF already show some outperformance this morning with the dollar also trying to build on yesterday’s gains. The trade-weighted greenback left this year’s lows just above 100 behind this week, extending the comeback to 101.30. First resistance stands around 102. EUR/USD mirrored the move, ending the test of 1.12 resistance to currently changed hands at 1.1060. First support stands at 1.1002.

News & Views

Martin Schlegel told Bloomberg yesterday that the Swiss National Bank stands ready to intervene in currency markets if needed but added that the policy rate remains the central bank’s main instrument. The fresh SNB president said in the wake of last Thursday’s 25 bps rate cut to 1% that more reductions are likely. Swiss inflation eased to just 1.1% in August and risks are tilted to the downside. For Swiss (export) companies the currency is increasingly weighing on business. But given the limited easing room from the current policy rate levels, there’s only so much the central bank can do before turning to actual FX interventions … unless it brings rates back into sub-zero territory. Schlegel in the interview said it couldn’t be excluded. The SNB pushed the policy rate as deep as -0.75% before kicking of a tightening cycle in response to the post-pandemic inflation upswing. The Swiss franc was not at all impressed by the potential return of negative rates though. EUR/CHF ended the day lower (0.936) as geopolitical developments spurred safe haven flows.

Rating agency Moody’s raised Brazil’s sovereign rating to Ba1 from Ba2 yesterday and maintained a positive outlook. That’s just one notch below investment grade, a status it lost almost a decade ago. The upgrade reflects material credit improvements which Moody’s expect to continue, amongst others due to a more robust growth performance (now seen at 2.5% for 2024 and over the medium term) than previously expected. Moody’s hailed the growing track record of economic reforms, although the credibility of the country’s fiscal framework is still only moderate, as reflected by the relatively high cost of debt. But steady growth and compliance with the fiscal framework should help enhance institutional credibility and reduce borrowing costs markedly and more than Moody’s earlier assumed. This lead the agency to retain Brazil’s positive outlook. Fitch and S&P Global, the two other major rating agencies, upgraded Brazil to BB last year, two notches below investment grade. The Brazilian real erased earlier losses in the wake of Moody’s decision yesterday. USD/BRL closed around 5.44.

Graphs

GE 10y yield

The ECB cut policy rates by 25 bps in June and in September. Stubborn inflation (core, services) makes a follow-up move less evident in October, but very weak PMI’s and soft Lagarde comments hang in the balance. Disappointing US and unconvincing-to-outright-weak EMU activity data dragged the long end of the curve down with the 2023 low at 1.89% as key support.

US 10y yield

The Fed kicked off its easing cycle with a 50 bps move. It is headed towards a neutral stance now that inflation and employment risks are in balance. Conservative SEP unemployment forecasts risk being caught up by reality and with it the dot plot (50 bps more cuts in 2024). We hold our call for two more 50 bps cuts this year. Pressure on the front of the curve and weakening eco data keeps the long end in the defensive for now as well.

EUR/USD

EUR/USD moved above the 1.09 resistance area as the dollar lost interest rate support at stealth pace. US recession risks and bets on fast and large rate cuts trumped traditional safe haven flows into USD. An ailing euro(pean economy) only briefly offset some of the general USD weakness. EUR/USD’s dollar-driven bumped into 1.12 resistance.

EUR/GBP

The BoE delivered a hawkish cut in August. Policy restrictiveness will be further unwound gradually on a pace determined by a broad range of data. The strategy similar to the ECB’s balances out EUR/GBP in a monetary perspective. But the economic picture is increasingly diverging to the benefit of sterling. EUR/GBP succumbed to horrible European September PMI’s. Support at 0.84 broke and brings the 2022 low (0.8203) on the radar.