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In focus today

Today, focus is on the euro area PMIs for September. The service PMIs got a 'golden boost' from the Olympics in France in August, which likely reversed in September. While we expect overall momentum in services activity remained broadly unchanged compared to August, we expect the PMIs to decline due to the French data. In the manufacturing sector, activity likely remained subdued as also indicated by the German ZEW.

We will also get preliminary US PMIs for September where we similarly expect the weakness in manufacturing to continue and for services to hold up activity. Also in the US, the Fed's Kahskari and Bostic are on the wire.

As for the rest of the week, on Tuesday we expect the RBA to keep their policy rate unchanged while we see a 50/50 chance that the PBOC will ease policy on Wednesday. On Friday, the ruling party in Japan will pick a new leader and thus a new PM.

Economic and market news

What happened over the weekend

In the Middle East, Lebanon's Hizbollah and Israel continued to exchange fire after a week of intensified hostilities that has seen several high-level Hizbollah members killed and missile attacks in both countries. Fears have risen that the conflict could escalate to a full-blown war which has contributed to higher oil prices during the week, though other factors including the Fed's rate cut also supported oil.

In France, PM Barnier presented a new government to President Macron, consisting of politicians from Macron's centrist party and Barnier's more conservative party. Uncertainty is still high as the French Parliament is highly fragmented and the government would need broad support to pass bills, but a new government would solve some of the political paralysis.

What happened on Friday

The yen continued to weaken after bucking its September rally at the beginning of the week, with USDJPY up 0.9%, after the BoJ left policy rates unchanged and indicated they were not in a large hurry to tighten further. Recent data has seen a pick-up in growth and the yen has recovered from its very weak levels in the middle of the summer (USDJPY -9.6% since late June) which has made hiking rates less acute.

Equities: Global equities were lower on Friday, with European stocks experiencing the most significant declines. Despite this, many indices are not far from all-time highs, and futures are pointing upward this morning in both Europe and the US. Additionally, there has been stimulus from China this morning in the form of an interest rate cut by the People's Bank of China. Japan is leading advances in Asia today, and the yen is continuing to weaken. On Friday, market performance was a mixed bag between cyclicals and defensives, yet utilities stood out by outperforming and being one of the few sectors in the green. In the US on Friday, the indices reported mixed results: Dow +0.1%, S&P 500 -0.2%, Nasdaq -0.4%, and Russell 2000 -1.1%.

FI: Friday's trading session was somewhat volatile with a slight direction for higher rates, with 10y German Bunds ending at 2.21%. France was clearly weak on Friday due to Les Echos reporting that the French budget was likely higher than previously forecasted, to around 6% of GDP. French-German yield spread is trading around 75bp.

FX: BoJ's decision to keep rates unchanged and signal no hurry to hike prompted broad JPY weakness on Friday. USD/JPY was up two big figures on the day. The Fed's first cut caused some volatility in the USD crosses, though USD losses were generally quite modest: at the end of the week, DXY had lost only 0.2% from pre-Fed levels. EUR/SEK kept within a tight range of 11.30-11.40 throughout the week, close to our fair value. EUR/NOK dropped from 11.80 to 11.70, which helped to push NOK/SEK towards 0.97.

Daily Pivots: (S1) 1.1139; (P) 1.1161; (R1) 1.1185; More....

Intraday bias is EUR/USD is turned neutral with 4H MACD crossed below signal line. Some more consolidations could be seen below 1.1200. But further rally is expected as long as 1.1001 support holds. Break of 1.1200 will target 1.1274 high. Firm break there will resume larger up trend.

In the bigger picture, prior break of 1.1138 resistance indicates that corrective pattern from 1.1274 might 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 1.0947 resistance turned support holds.

Daily Pivots: (S1) 142.28; (P) 143.39; (R1) 145.03; More...

Intraday bias in USD/JPY remains mildly on the upside for the moment. Rebound from 139.57 short term bottom should extend to 38.2% retracement of 161.94 to 139.57 at 148.11. On the downside, below 141.73 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) 1.3278; (P) 1.3309; (R1) 1.3354; More...

Intraday bias in GBP/USD remains on the upside for the moment. Current rally is in progress for 1.2664 to 1.3265 from 1.3000 at 1.3371. Firm break there will pave the way to 100% projection at 1.3601 next. On the downside, below 1.3219 minor support will turn intraday bias neutral and bring consolidations first. But outlook will stay bullish as long as 1.3000 support holds.

In the bigger picture, up trend from 1.0351 (2022 low) is in progress. Next target is 38.2% projection of 1.0351 to 1.3141 from 1.2298 at 1.3364. Decisive break there will target 61.8% projection at 1.4022. For now, outlook will stay bullish as long as 1.2892 resistance turned support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8465; (P) 0.8491; (R1) 0.8530; More…

Intraday bias in USD/CHF remains neutral as range trading continues. 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, considering bullish convergence condition in 4H MACD, break of 0.8548 resistance will confirm short term bottoming, and 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).

Daily Pivots: (S1) 0.6784; (P) 0.6806; (R1) 0.6830; More...

Intraday bias in AUD/USD remains on the upside for the moment. Current rally from 0.6348 is in progress for 61.8% projection of 0.6348 to 0.6823 from 0.6621 at 0.6915 next. On the downside, below 0.6736 minor support will turn intraday bias neutral first. But outlook will remain cautiously bullish as long as 0.6621 support holds, in case of retreat.

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 6870 resistance will target 100% projection of 0.6269 to 0.6870 from 0.6340 at 0.6941. In case of another fall, strong support should be seen from 0.6169/6348 to bring rebound.

Daily Pivots: (S1) 1.3545; (P) 1.3567; (R1) 1.3593; More...

Intraday bias in USD/CAD remains neutral as range trading continues. On the downside, break of 1.3532 will argue that corrective recovery from 1.3439 has already completed, and bring retest of this low. Nevertheless, firm break of 1.3646 will bring stronger rebound to 61.8% retracement of 1.3946 to 1.3439 at 1.3752 and above.

In the bigger picture, corrective pattern from 1.3976 (2022 high) is extending with another falling leg. While deeper decline could be seen, strong support should emerge above 1.2947 resistance turned support to bring rebound. Rise from 1.2005 (2021 low) is still in favor to resume at a later stage.

Daily Pivots: (S1) 0.9457; (P) 0.9481; (R1) 0.9515; More....

Intraday bias in EUR/CHF remains on the upside at this point. Rise from 0.9305, as the third leg of the pattern from 0.9209 ,is in progress for 0.9579 resistance. Firm break there will target 100% projection of 0.9209 to 0.9579 from 0.9305 at 0.9675. On the downside, below 0.9432 minor support will turn intraday bias neutral first.

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) 189.70; (P) 190.85; (R1) 192.91; More...

Intraday bias in GBP/JPY remains on the upside at this point. Rise from 183.70, as the third leg of the corrective pattern from 180.00, is in progress for 193.45 resistance. Firm break there will target 61.8% retracement of 208.09 to 180.00 at 197.35. On the downside, though, below 188.70 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 159.00; (P) 160.08; (R1) 161.73; More....

Intraday bias in EUR/JPY stays on the upside at this point. Rise from 155.14, ,as the third leg of the corrective pattern from 154.40, is in progress for 163.86 resistance. Break there will target 61.8% retracement of 175.41 to 154.40 at 167.38. On the downside, though, below 158.41 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.