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Daily Pivots: (S1) 143.49; (P) 144.17; (R1) 145.42; More...

Intraday bias in USD/JPY remains on the upside at this point. Rebound from 139.57 is in progress for 38.2% retracement of 161.94 to 139.57 at 148.11. On the downside, below 142.89 minor support will turn bias to the downside for retesting 139.57 instead.

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) 0.8444; (P) 0.8475; (R1) 0.8536; More…

USD/CHF is still bounded in range of 0.8374/8548 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. However, break of 0.8548 resistance will turn bias back to the upside for 0.8747 resistance.

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).

Swiss Franc remained relatively stable today following SNB's decision to cut its policy rate by 25bps, bringing it down to 1.00%. This move defied some market speculations that anticipated a larger 50bps reduction. Despite opting for a smaller cut, SNB issued a decidedly dovish statement, sharply downgrading its inflation forecasts. The central bank signaled a clear easing bias, suggesting that further monetary accommodation is on the horizon. Incoming Chair Martin Schlegel reinforced this sentiment by indicating in an interview that another rate cut in December is "not unlikely."

In the broader foreign exchange market, currencies traded within familiar ranges. Dollar softened despite better-than-expected durable goods orders and jobless claims data. Canadian Dollar emerged as the second weakest of the day, while Japanese Yen followed as the third. Australian Dollar led the gains, buoyed by strong risk-on sentiment s in both China and Hong Kong. New Zealand Dollar was the second-best performer, with British Pound also showing strength. Euro and Swiss Franc are mixed, positioned in the middle of the currency spectrum.

Attention now shifts to the upcoming Asian session, where Tokyo's CPI data is set to be released. Core CPI is expected to slow notably from 2.4% to 2.0% in September. BoJ has already communicated its cautious stance on implementing further rate hikes. Cooling inflationary pressures would provide BoJ with additional room to maintain its wait-and-see approach, delaying any further monetary tightening.

Technically, USD/JPY's rebound from 139.57 is still expected to continue, despite weak upside momentum, to 38.2% retracement of 161.94 to 139.57 at 148.11. However, break of 142.89 minor support will suggest that the rebound is over and bring retest of 139.57 low.

In Europe, at the time of writing, FTSE is up 0.29%. DAX is up 1.35%. CAC is up 1.94%. UK 10-year yield rose 0.008 to 4.004. Germany 10-year yield is down -0.031 at 2.150. Earlier in Asia, Nikkei rose 2.79%. Hong Kong HSI rose 4.16%. China Shanghai SSE rose 3.61%. Singapore Strait Times fell -0.03%. Japan 10-year JGB yield rose 0.0182 to 0.831.

US durable goods orders flat in Aug ex-transport rises 0.5% mom

US durable goods orders rose 0.0% mom to USD 289.7B in August, much better than expectation of -2.8% mom decline. Ex-transport orders rose 0.5% mom to USD 188.5B, above expectation of 0.1% mom. Ex-defense orders fell -0.2% mom to USD 271.0B. Electrical equipment, appliances, and components, up two of the last three months, drove the increase, USD 0.3 billion or 1.9% mom to USD 14.4B.

US initial jobless claims fall to 218k, vs exp 226k

US initial jobless claims fell -4k to 218k in the week ending September 21, below expectation of 226k. Four-week moving average of initial claims fell -3.5k to 225k.

Continuing claims rose 13k to 1834k in the week ending September 14. Four-week moving average of continuing claims fell -6.5k to 1836k.

German economy set for 2nd year of contraction amid structural challenges

Germany's economic prospects have deteriorated further as the Joint Economic Forecast Project Group revised its GDP forecasts downward. The group now expects the German economy to contract by -0.1% in 2024, a downgrade from the previously anticipated 0.1% growth.

This adjustment implies that Germany will face two consecutive years of economic contraction, following a projected decline of -0.3% in 2023.

The forecast for 2025 has also been lowered, with GDP growth now expected at 0.8%, down from the earlier estimate of 1.4%. However, a modest recovery is anticipated in 2026, with growth projected to pick up to 1.3%.

Inflation is expected to decline, offering some relief to the economy. After reaching 5.9% last year, inflation is projected to slow to 2.2% this year and stabilize at 2% in both 2025 and 2026.

Geraldine Dany-Knedlik, head of forecasting and economic policy at DIW Berlin, highlighted the challenges facing Germany. She noted that "structural change" is compounding the economic downturn.

Key factors such as decarbonization, digitalization, and demographic shifts, along with intensified competition from Chinese companies, are initiating "structural adjustment processes." These developments are "dampening the long-term growth prospects" of the German economy, noted Dany-Knedlik.

SNB cuts 25bps, slashes inflation forecasts

SNB lowered its policy rate by 25 basis points to 1.00%, citing that inflationary pressure "has again decreased significantly", largely driven by the recent appreciation of Swiss Franc. SNB's statement also indicated that further rate cuts "may become necessary" in the coming quarters to maintain price stability in the medium term.

The revised inflation forecast shows significant downward adjustment compared to June, reflecting factors such as the stronger Swiss franc, lower oil prices, and upcoming electricity price cuts scheduled for January 2025.

The new conditional forecast sees inflation averaging 1.2% in 2024, 0.6% in 2025, and 0.7% in 2026, down from previous estimates of 1.3%, 1.1%, and 1.0%, respectively.

The SNB's forecast is based on maintaining the policy rate at 1.0% throughout the projection period. The central bank also noted that without today's rate cut, inflation forecasts would have been even lower.

On the economic growth front, SNB expects "rather modest" performance in the coming quarters due to the recent strengthening of Swiss franc and slower global economic development. It forecasts GDP growth of around 1% for 2024 and 1.5% for 2025.

BoJ minutes show divided views on rate hike timing

Minutes from BoJ's July meeting reveal a split among policymakers on the pace of future rate hikes. While BOJ raised its short-term interest rate to 0.25% by a 7-2 vote, differing opinions emerged on how quickly further increases should occur.

One member argued that if price trends follow the bank's outlook, it would be "necessary" to proceed with further tightening. Another suggested that with inflation projected to reach its target by H2 of fiscal 2025, the policy rate should gradually rise toward the neutral rate, estimated at around 1%. This member cautioned against rapid rate increases and favored a "timely and gradual" approach to avoid shocks to the economy.

However, some members expressed concerns about the risks of moving too quickly. One warned that monetary policy normalization should not be an end in itself and urged caution in monitoring the risks tied to policy shifts. Another highlighted that inflation expectations were "not being anchored at 2 percent", suggesting the need to avoid excessive market speculation about future rate hikes.

The minutes also reflect "high uncertainties regarding the level of the neutral interest rate" about Japan's neutral interest rate, given the long period without rate hikes. One member noted the difficulty of setting policy based on estimates of the neutral rate, calling for flexibility in adjusting policy based on evolving economic conditions.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8444; (P) 0.8475; (R1) 0.8536; More…

USD/CHF is still bounded in range of 0.8374/8548 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. However, break of 0.8548 resistance will turn bias back to the upside for 0.8747 resistance.

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).

Economic Indicators Update

US initial jobless claims fell -4k to 218k in the week ending September 21, below expectation of 226k. Four-week moving average of initial claims fell -3.5k to 225k.

Continuing claims rose 13k to 1834k in the week ending September 14. Four-week moving average of continuing claims fell -6.5k to 1836k.

Full US jobless claims release here.

US durable goods orders rose 0.0% mom to USD 289.7B in August, much better than expectation of -2.8% mom decline. Ex-transport orders rose 0.5% mom to USD 188.5B, above expectation of 0.1% mom. Ex-defense orders fell -0.2% mom to USD 271.0B. Electrical equipment, appliances, and components, up two of the last three months, drove the increase, USD 0.3 billion or 1.9% mom to USD 14.4B.

Full US durable goods orders release here.

• Silver bulls roar back; make efforts to resume long-term uptrend above 32.49
• Price hovers near overbought zone; trend signals remain encouraging above 31.50

Silver made a comeback on Thursday after a temporary pause, with scope to challenge May’s eleven-year high of 32.49, which it didn’t reach in July.

The rebound near the broken resistance line at 30.60 indicated a bullish trend reversal recently, and although the RSI and stochastic oscillator are near overbought levels, they haven’t peaked yet, reflecting persisting buying interest. Note that the MACD is also on the rise above its red signal line and beneath its April-May peak area.

A breakthrough above 32.49 could propel the bulls towards the psychological level of 34.00 and the critical resistance line from December 2022 at 34.50. Crawling above 35.00, the price may next target the 61.8% Fibonacci level of the 2011-2016 downtrend at 35.80.

A pullback below 31.50 may stall instantly near the former resistance trendline at 30.60. The 20- and 50-day simple moving averages (SMAs) could next come to the rescue at 29.90 and 29.00 respectively. If not, the decline could continue towards the tentative 2024 support trendline at 27.90. and the 200-day SMA at 27.12.

To recap, silver is making a push towards its May peak of 32.49, having already eliminated half of the downtrend it experienced between 2011 and 2016. A successful penetration higher could unleash a new bullish wave to 34.00-34.50.

• USDJPY tries to surpass the 23.6% Fibonacci
• MACD and RSI gain momentum

USDJPY is challenging the 23.6% Fibonacci retracement level of the down leg from 161.94 to 139.56 at 144.80, as well as the very short-term downtrend line, creating a bullish correction from the 14-month low of 139.56.

The technical oscillators are currently mirroring the market's latest upside movement. The MACD is rising above its trigger line beneath the zero level, while the RSI crossed above the neutral threshold of 50.

More upside pressure could open the door for a test of the 50-day simple moving average (SMA) at 146.50, ahead of the 147.15 barrier. If the bulls overcome these lines, they could meet the 38.2% Fibonacci of 148.10.

Alternatively, if the pair dives below the 20-day SMA of 143.20, it could return to the 14-month low of 139.56 before touching the July 2023 high at 137.20.

Since July, the USDJPY has been trending bearish, and only a rally above the 200-day SMA could shift the bias to neutral.

The Swiss franc is showing limited movement on Thursday. USD/CHF is trading at 0.8483, down 0.24% on the day. In the US, it’s a busy day with US GDP, unemployment claims and durable goods orders. As well, Federal Reserve Chair Powell and several FOMC members will deliver remarks.

Swiss National Bank lowers rates to 1%

The Swiss National Bank lowered its cash rate by 25 basis points to 1%, its third straight reduction. The cash rate is now at its lowest level since early 2023. The move was not a surprise and the Swiss franc has showed a limited reaction to the rate announcement.

The SNB statement noted that inflation has “decreased significantly”, in part due to the appreciation of the Swiss franc and that inflation, which has fallen to 1.1%, was lower than expected. The statement added that further rate cuts “may become necessary” to ensure price stability.

The stronger Swiss franc has raised the possibility of a currency intervention by the SNB and investors were on the look-out for any hints from the SNB at today’s meeting. The statement didn’t point to any intervention plans, noting that the central bank “remains willing to be active in the foreign exchange market as necessary.” The Swiss franc’s safe haven status has made it an attractive asset at a time of market volatility but this is hurting the critical export sector. The SNB could step in if the Swiss franc continues to appreciate.

The SNB has become a frontrunner among central banks in cutting interest rates, a result of its success in taming inflation. Other major banks have also lowered rates but are still concerned about the upside risk of inflation and have not chopped rates as aggressively as the SNB.

USD/CHF Technical

• USD/CHF is testing support at 0.8475. Below, there is support at 0.8444
• 0.8536 and 0.8567 are the next resistance lines

The Swiss National Bank met expectations by cutting its key interest rate by 0.25 percentage points to 1.0%, slowing the pace of the move to normalisation after two cuts of 0.50 percentage points each in March and June. The central bank warned of further rate cuts in the coming quarters. In a commentary, the SNB noted a further marked slowdown in inflation and lowered its end-2024 forecast from 1.4% to 1.0%.

The bank cited the expensive franc as an important reason for the rate cut and inflation, which signals to FX market participants that the current situation is not comfortable. Previously, watchmakers had indicated that the strong franc was hurting sales. On Wednesday, the UBS economic expectations index fell to its lowest level since January at -8.8 from -3.4, against expectations for an increase to 2.7. The trade surplus has also been shrinking for two months. It remains high by historical standards but has been flat for more than a year and has failed to meet expectations against a multi-year rising trend.

It seems that some market participants were prepared for a sharper contraction, as the current decision caused the franc to strengthen by more than 0.6% across the market. The USDCHF pair has been trading in a range of less than 1.5% for the past month, following a 7% decline since the beginning of July. If this was an attempt by the SNB to reverse the trend and begin to weaken the franc, it was rather weak and unimpressive.

Although the Swiss central bank started before the Fed, its 25-point policy easing a week after the FOMC’s 50-point cut looks rather faded. This means that a period of currency market stabilisation could be followed by a new wave of Swiss franc appreciation if the SNB does not act as decisively as the Fed, or even more so.

According to today's XNG/USD chart, the price of natural gas:

→ has risen by approximately 30% since the beginning of September;

→ is currently around the 2.95 level – the last time the price was at this level was at the end of June this year.

Bullish sentiment is supported by:

→ forecasts of a warmer autumn, which is increasing demand for natural gas to power air conditioning systems;

→ concerns related to Hurricane Helen in the US Gulf of Mexico. According to the EIA, 5% of total US dry natural gas production comes from the Gulf of Mexico, and 51% of the total capacity of US natural gas processing plants is located along the US Gulf Coast.

Technical analysis of the XNG/USD chart shows that in September, the price has been moving within an ascending channel (marked in blue).

It is noticeable that from the 20th onwards, demand forces have intensified, leading to the following:

→ the price broke through the 2.64 resistance level;

→ the price moved to the upper half of the ascending channel, after which its median line began to show signs of support;

→ the RSI indicator reached overbought territory.

Currently, there are no signs on the XNG/USD chart of bears attempting to seize control, while the bulls may be "gathering strength" for a possible attempt to break through the psychological level of 3.00. If this happens and is successful, it could pave the way towards the yearly high in the 3.20 region

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