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Daily Pivots: (S1) 1.1128; (P) 1.1155; (R1) 1.1206; More....

EUR/USD's rise from 1.0665 resumed by breaking 1.1200. Intraday bias is now on the upside to retest 1.1274 high. Firm break there will resume larger up trend. Next near term target will be 100% projection of 1.0776 to 1.1200 from 1.1001 at 1.1425. On the downside, below 1.1020 minor support will turn intraday bias neutral first.

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.

Euro is gaining broadly today, even though there is no major fundamental news driving its ascent. Market expectations are mounting that ECB may cut interest rates as early as October, with HSBC projecting 25bps cuts at every meeting from October through April 2025. This would bring the deposit rate to 2.25%, which is considered close to neutral. These predictions are arising even amid cautious remarks from ECB officials.

One factor behind Euro's rise could be the market's growing anticipation of aggressive rate cuts by Fed, , with futures markets pricing in nearly 60% chance of another 50bps cut in November. This suggests that, despite potential rate cuts by ECB in October, Fed's moves could outpace those of ECB for 2024. Additionally, Euro is gaining against Swiss Franc, as speculation mounts that the SNB might deliver a 50bps rate cut in its upcoming meeting tomorrow. Meanwhile, Euro's recovery appears to be driven more by technical factors, as it found support at a near-term fibonacci projection level.

In the broader forex market, the Yen so far is the worst performer this week, followed by Dollar and Swiss Franc, while Kiwi leads gains, followed by Aussie and Loonie. Sterling and Euro sit in the middle, reflecting a typical risk-on sentiment in the market.

Technically, while EUR/GBP recovered after hitting 61.8% projection of 0.8624 to 0.8399 from 0.8463 at 0.8324, outlook will stay bearish as long as 0.8399 support turned resistance holds. Break of 0.8316 will extend the larger down trend to 100% projection at 0.8237 next.

In Europe, at the time of writing, FTSE is up 0.08%. DAX is down -0.24%. CAC is down -0.23%. UK 10-year yield is up 0.0201 at 3.962. Germany 10-year yield is up 0.029 at 2.177. Earlier in Asia, Nikkei fell -0.19%. Hong Kong HSI rose 0.68%. China Shanghai SSE rose 1.16%. Singapore Strait Times fell -1.09%. Japan 10-year JGB yield rose 0.0018 to 0.813.

OECD sees 3.2% global growth in 2024 and 2025

In the Economic Outlook Interim Report, OECD raised its global GDP growth forecast for 2024 by 0.1% to 3.2%, while keeping the 2025 projection steady at 3.2%.

In the US, growth forecasts remain unchanged at 2.6% for 2024 but have been downgraded by 0.2% to 1.6% for 2025. Eurozone's GDP growth forecast is unchanged at 0.7% for 2024 and revised down by 0.2% to 1.3% for 2025. Japan faces a significant downgrade for 2024, with growth reduced by -0.6% to -0.1%, but 2025 forecast is upgraded by 0.3% to 1.4%.

The UK sees a notable upward revision, with growth forecasts increased by 0.7% to 1.1% in 2024 and by 0.2% to 1.2% in 2025. Canada's GDP growth is slightly upgraded by 0.1% to 1.1% in 2024, remaining unchanged at 1.8% in 2025. Australia faces a sharp downgrade, with 2024 growth reduced by -0.4% to 1.1% and 2025 growth also cut by -0.4% to 1.8%.

As inflation trends toward central bank targets, OECD projects that Fed's main interest rate could ease to 3.5% by the end of 2025 from the current range of 4.75%-5%. Similarly, ECB is expected to reduce its rate to 2.25% from 3.5% now. In contrast, Japan may see "further mild increases in policy interest rates," with gradual withdrawal of policy accommodation, provided inflation stabilizes at the 2%.

BoE's Greene warns of higher neutral Rate, supports measured easing approach

BoE MPC member Megan Greene emphasized the need for a "gradual approach" to easing monetary policy in her speech today. She highlighted that her recent vote to hold the Bank Rate at 5% in September, following a 25bpps cut in August, aligns with this stance.

Greene outlined three key economic scenarios influencing inflation and policy decisions.

In the first scenario, global shocks fade, allowing inflation pressures to ease with "less restrictive" policy. In the second, some "economic slack" is needed to bring inflation back to the target sustainably. In the third, structural changes affecting wage and price-setting could require monetary policy to remain "tighter for longer".

Greene sees the second scenario as the most likely, where slack in the economy will be needed to tame inflation. However, she warned that there is a "higher risk" of the third scenario playing out, suggesting that the neutral interest rate could be higher than previously thought, meaning that current policy may not be as restrictive as anticipated. Greene noted, "I believe the risks to activity are to the upside," which could require maintaining higher rates for longer.

She will monitor data to confirm whether the third scenario risk is decreasing and the second is becoming more likely. Until then, "steady-as-she goes approach to monetary policy easing is appropriate," she added.

Australia's monthly CPI falls to 2.7%, lowest since 2021

Australia's monthly CPI slowed from 3.5% yoy to 2.7% yoy in August, marking the lowest reading since August 2021. Core inflation measures also eased, with CPI excluding volatile items and holiday travel declining to 3.0% yoy from 3.7% yoy, and the annual trimmed mean falling to 3.4% yoy from 3.8% yoy. Both underlying inflation indicators are now at their lowest levels in two and a half years.

Significant price increases were observed in Housing (+2.6%), Food and non-alcoholic beverages (+3.4%), and Alcohol and tobacco (+6.6%). These gains were "partly offset" by a -1.1% decrease in Transport costs.

Notably, electricity prices plummeted by -17.9% over the 12 months to August—the largest annual fall since the early 1980s—driven by Commonwealth and State Government rebates that led to a -14.6% drop in August following a -6.4% decline in July. Excluding these rebates, electricity prices would have risen 0.1% in August and 0.9% in July.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1128; (P) 1.1155; (R1) 1.1206; More....

EUR/USD's rise from 1.0665 resumed by breaking 1.1200. Intraday bias is now on the upside to retest 1.1274 high. Firm break there will resume larger up trend. Next near term target will be 100% projection of 1.0776 to 1.1200 from 1.1001 at 1.1425. On the downside, below 1.1020 minor support will turn intraday bias neutral first.

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.

Economic Indicators Update

• Swiss National Bank (SNB) decision anticipated, markets split on 25 or 50 basis point rate cut.
• Strong Swiss Franc pressures exporters, raising expectations of FX intervention.
• SNB’s comments on Franc and intervention will be key to future price movements.

SNB Preview: FX Intervention Ahead?

Market participants are awaiting the next major Central Bank decision which comes from the SNB tomorrow. The Swiss Franc has been enjoying an excellent run since the May 1st high around the 0.92246 handle.

Looking at the Swiss economy, inflation has been consistently lower than expected, but the strong Swiss franc is putting pressure on exporting companies. Looking at refinitiv data and markets are split between a 25 and 50 basis point rate cut on Thursday. Market participants will keep a close eye on any guidance from the Swiss National Bank about intervening in the currency markets.

Source: LSEG 

The SNB is also expected to downgrade its outlook on inflation moving forward following the most recent inflation data. Inflation is currently averaging 1.2% in Q3 versus the 1.5% expected with concern now resting more on the effect of a strong Swiss Franc on companies amid weakening demand in Europe.

The stronger Franc has become a major issue for Swiss exporters with watch manufacturers last week urging the SNB to ensure the Swiss Franc weakens. This has raised the question of FX intervention once more, with growing expectation that the Central Bank will intervene and step up its intervention in the coming weeks. Growing uncertainty around the globe has also made the Swiss Franc more appealing thanks to its safe haven status and this is another reason why FX intervention may be necessary.

Potential Impact and USD/CHF Technical Analysis

Despite the split consensus heading into tomorrow’s meeting, I am leaning more to the 25bps camp. This is the least risky option at present for the SNB as they do have FX intervention available to ensure weakness in the Franc.

A 25 bps cut may see some short term appreciation in the Franc but with intervention chatter prevalent, any gains could prove short-lived. Market participants should pay attention to comments from the SNB Chairman regarding the Franc and the potential for intervention as this may play a key role in how price develops once the SNB decision is over.

USD/CHF

From a technical perspective, USD/CHF has been in a period of consolidation since August 22. The range between 0.85288 and 0.84099 has held firm with the pair appearing to form a base here for potential longs.

The Fed decision of a 50 bps cut was not enough to inspire a breakout to the downside and thus my take is such a breakout remains unlikely. A short-term retest of the range low may occur but I expect the daily candle to remain inside the range barring any unexpected surprises.

Looking at the RSI, it has crossed above the neutral 50 level which is a sign that bullish momentum is present. This could prove beneficial for USD/CHF bulls eyeing a move higher.

A move higher and daily candle above the range high at 0.8528 will then face the inner trendline which rests around the 0.8580 to 0.8600 handle. A break higher brings resistance at 0.8700 ad 0.8750 into focus.

USD/CHF Daily Chart, September 25, 2024

Support

• 0.8400
• 0.8334

Resistance

• 0.8528
• 0.8600

The USD/JPY pair has found a stable footing around 143.22 as investors carefully analyse the recent comments from Bank of Japan Governor Kazuo Ueda. His remarks suggest that the BoJ is taking a measured approach to monetary policy adjustments, signalling a possible delay in interest rate hikes.

Governor Ueda emphasised the need to thoroughly analyse market and economic conditions before making policy decisions, indicating that immediate rate hikes are unlikely. He also highlighted external risks, including financial market volatility and uncertainties surrounding the US economy, which are critical considerations for Japan's monetary policy.

At its September meeting, the BoJ maintained the interest rate at 0.25% per annum, aligning with market expectations. Speculation suggests that the October meeting may not change the Monetary Policy Committee's structure. Still, by December, the BoJ might gather sufficient evidence to justify a rate increase.

The recent dip in the US dollar, spurred by weak consumer confidence figures in the US, has incidentally strengthened the yen. This shift has heightened expectations for further rate cuts by the Federal Reserve.

Technical Analysis of USD/JPY

The USD/JPY is currently in a broad consolidation range centred around 143.43, extending to 144.66. The market has initiated a downward movement towards 142.55, testing this level from above. Subsequently, we anticipate a rebound to the upper boundary of this range. A breach above 144.70 could pave the way for a rise to 145.77, potentially extending to 146.66. Conversely, a decline to 142.00 and a subsequent breakdown could signal a trend continuation towards 137.77. The MACD indicator supports this bullish scenario, with its signal line positioned above zero and pointing upwards.

On the H1 chart, USD/JPY has crafted a consolidation range around 143.60, achieving the 142.90 local downside target. The pair is now moving upward towards 143.60, testing this level from below. The current setup suggests a retest of 143.60 could be followed by a new decline towards 142.55. The Stochastic oscillator, with its signal line above 50 and pointing upwards, corroborates this potential for a brief uptick followed by a continued downward trajectory.

In the Economic Outlook Interim Report, OECD raised its global GDP growth forecast for 2024 by 0.1% to 3.2%, while keeping the 2025 projection steady at 3.2%.

In the US, growth forecasts remain unchanged at 2.6% for 2024 but have been downgraded by 0.2% to 1.6% for 2025. Eurozone's GDP growth forecast is unchanged at 0.7% for 2024 and revised down by 0.2% to 1.3% for 2025. Japan faces a significant downgrade for 2024, with growth reduced by -0.6% to -0.1%, but 2025 forecast is upgraded by 0.3% to 1.4%.

The UK sees a notable upward revision, with growth forecasts increased by 0.7% to 1.1% in 2024 and by 0.2% to 1.2% in 2025. Canada's GDP growth is slightly upgraded by 0.1% to 1.1% in 2024, remaining unchanged at 1.8% in 2025. Australia faces a sharp downgrade, with 2024 growth reduced by -0.4% to 1.1% and 2025 growth also cut by -0.4% to 1.8%.

As inflation trends toward central bank targets, OECD projects that Fed's main interest rate could ease to 3.5% by the end of 2025 from the current range of 4.75%-5%. Similarly, ECB is expected to reduce its rate to 2.25% from 3.5% now. In contrast, Japan may see "further mild increases in policy interest rates," with gradual withdrawal of policy accommodation, provided inflation stabilizes at the 2%.

Full OECD report here.

• GBPAUD in the red again today
• Both BoE and RBA have refrained from cutting rates
• Momentum indicators are inconclusive at this stage

 GBPAUD is trading slightly lower today, within the busy 1.9440-1.9521 area, and close to the recent peak of 1.9699. GBPAUD has managed to break below both the July 10, 2024 trendline and the 50-day simple moving average (SMA), but a stronger correction is needed to validate this move. Interestingly, these two currencies are among the strongest ones in the FX space in September, as their respective central banks have refrained from following the Fed into cutting rates.

 In the meantime, momentum indicators are mostly mixed. More specifically, the Average Directional Movement Index (ADX) is tentatively trying to climb to its midpoint and signal the presence of a weak bearish trend in GBPAUD. Similarly, the RSI continues to aimlessly hover around its midpoint. Additionally, the stochastic oscillator is edging lower, a tad below its midpoint, but appears unable to stage a protracted correction.

 Should the bulls remain confident, they could try to lead GBPAUD above the busy 1.9440-1.9521 area that is populated by the December 16, 2019 high, the 50-day SMA and the 61.8% Fibonacci retracement of the August 17, 2023-December 27, 2023 downtrend. If successful, they could then have a go at overcoming the 78.6% Fibonacci retracement at 1.9672 and record a higher high.

 On the flip side, the bears would welcome a series of red candles and a successful break below the 1.9440-1.9521 area. They could then come up against the busy 1.9267-1.9300 area, which is defined by the 50% Fibonacci retracement and the 100- and 200-day SMAs. A move below this region could reverse the recent bullish momentum and allow the bears to test the support set by the 1.9114-1.9183 area.

 To conclude, GBPAUD is edging lower but some key support levels have to be broken for the bears to regain the upper hand.

• US 500 stock index hits another all-time high
• Technical signals mixed; more buying awaited above 5,750

The US 500 stock index restarted its positive trend on Tuesday, inching up to a record high of 5,736 after keeping its foot on the rising almost one-year-old constraining line at 5,674.

Mixed technical signals are observed, with the RSI slightly below its 70 overbought level and the stochastic oscillator returning to the overbought region with a positive slope, indicating the possibility of additional momentum.

In the four-hour chart, the index seems to be forming an ascending triangle at the top of the uptrend, which is usually considered a signal of bullish continuation. Once the price crosses above its all-time high of 5,736 and the resistance line from August at 5,755,  the next destination could be the 5,800 psychological mark, where the crucial resistance line that connects the highs from July 2023 is placed. Should the 5,900 mark give way too, the door will open for the 6,000 round level.

In the opposite case that the price closes below 5,700, there is potential for a sharp decline towards the falling constraining line near 5,620 and 20-day simple moving average (SMA) at 5,600. Falling lower, the price could seek shelter around the tentative support trendline and the 50-day SMA at 5,535 or near the 100-day SMA at 5,470.

Summing up, the US 500 index could further stretch its upward pattern in uncharted territory, with the confirmation signal likely coming above 5,755.

Gold edged lower from new record high ($2670) early Wednesday, taking a breather after advancing 1.10% on Tuesday, lifted by weaker dollar on expectations that the Fed may continue with stronger rate cuts.

People’s Bank of China decision to cut rates, prompted Chinese investors into safe haven, adding support to metal’s price.

Strongly overbought daily studies and fading bullish momentum, generate initial signal of pullback, with similar picture seen on 4-hr chart however, overall strong bullish structure and supportive fundamentals point to mild correction before bulls regain traction for attack at initial target at $2675 (Fibo 238.2% projection of the upleg from $2286) and psychological $2700 barrier.

Dips were so far contained above initial supports at $2650/45, guarding $2637 (55HMA) and $2623 (hourly higher base).

Potential deeper pullback should find ground above key near-term support at $2600 (psychological / 10DMA) to keep larger bulls in play.

Res: 2670; 2675; 2700; 2714.
Sup: 2650; 2645; 2637; 2623.

Market Picture

The crypto market rose 1.2% in 24 hours to $2.25 trillion, approaching the highs set exactly one month ago. New highs could attract more buyers and signal a break in the multi-month downtrend. The sentiment index rose to 59, the highest since late July, which looks like the optimal range for further gains. It is far from extreme greed, which signals overbought conditions, and fear-selling is behind us.

Bitcoin hit a new monthly high of $64.7K early on Wednesday but has since pulled back around $1000 – a common pattern of late. The first cryptocurrency has been struggling to find equilibrium near the highs of late last month and near the 200-day moving average. It will take new data and momentum to tip the price out of equilibrium. There is a risk that short-term gains in risk appetite on policy easing in the US and China will fade.

Tron is giving up positions for the second day in what so far looks like new bearish momentum after a corrective bounce. The focus will be on how the coin behaves on the decline from the current $0.15 to $0.1450. An update of the local lows will take the main scenario down to $0.132. The ability to stay above it will potentially open the way for an update of the highs at $0.168.

News Background

According to 10x Research, Bitcoin could hit new all-time highs in October thanks to Fed rate cuts and upcoming payments to creditors of bankrupt crypto exchange FTX.

Ethereum has grown almost twice as fast as Bitcoin since the Fed’s rate cut on 18 September. Following the monetary easing in the US, funding rates for ETH-based perpetual futures turned positive, according to CoinGlass data, reflecting increased demand for leveraged long positions.

According to QCP Capital, interest in the Ethereum options market has shifted from puts to calls. The implied volatility of ETH contracts exceeds that of Bitcoin by 9%, suggesting improved sentiment and potentially greater price movement.

Play Solana has opened pre-orders for the PSG1 blockchain-enabled handheld gaming console. The PSG1 supports Solana blockchain-based games and has a built-in hardware wallet.

The Australian dollar has edged lower on Wednesday, after surging 1.1% since the start of the week. In the European session, AUD/USD is trading at 0.6879, down 0.18%. Earlier, the Australian dollar rose above the 0.69 level for the first time since February 2023.

Australia’s CPI drops to 2.7%

Australia released August CPI on Wednesday, a day after the Reserve Bank of Australia held the cash rate at 4.35%. Headline CPI rose 2.7% y/y, down sharply from 3.5% in July. This was very close to the market estimate of 2.8% and the Australian dollar’s reaction to the release was muted. The decline was driven by a sharp drop in electricity and fuel prices.

The markets may not have been impressed but the inflation reading was the lowest since August 2021 and the first time since then that inflation has fallen to the RBA’s target range of 2%-3%. Significantly, core CPI also fell within the target range, easing from 3.7% to 3.0%.

In an odd twist, the inflation report came a day after the RBA meeting, with the rate statement noting that inflation remains too high. Governor Bullock reiterated in her press conference that there would be no rate cuts in the “near term”, but if inflation continues on its downward path, the central bank will be under strong pressure to reconsider.

The US Conference Board consumer confidence index is usually not a market-mover but a very soft reading on Tuesday sent the US dollar sharply lower against most of the major currencies. The index slipped to 98.7 in September, down sharply from a revised 105.6 in August and below the market estimate of 103.8.The Australian dollar, which showed little movement after the RBA decision, climbed after the consumer confidence release and closed on Tuesday up 0.86%.

AUD/USD Technical

• AUD/USD is putting pressure on support at 0.6866. Close by, there is support at 0.6840
• There is resistance at 0.6919 and 0.6945