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Daily Pivots: (S1) 0.8699; (P) 0.8713; (R1) 0.8730; More....

Intraday bias in EUR/GBP remains neutral as sideway trading continues. In case of deeper retreat, downside should be contained by 55 D EMA (now at 0.8648).Firm break of 0.8739 will resume the whole rise from 0.8491, and target 100% projection of 0.8491 to 0.8704 from 0.8614 at 0.8827 next.

In the bigger picture, current development suggests that whole down trend from 0.9267 (2022 high) has completed with three down to to 0.8491. Rise from 0.8491 is seen as another leg inside that pattern from 0.9499 (2020 high). Further rally should be seen to 0.8977 resistance and above. This will now remain the favored case as long as 0.8614 support holds.

Daily Pivots: (S1) 1.6614; (P) 1.6663; (R1) 1.6727; More...

Intraday bias in EUR/AUD remains neutral at this point, as sideway trading continues. Further rally is expected as long as 1.6550 support holds. Above 1.6843 will target a test on 1.7062 high. Firm break there will resume larger up trend. However, break of 1.6550 support will bring deeper fall back to 1.6319 support instead.

In the bigger picture, the strong support from medium term rising trend line indicates that rise from 1.4281 (2022 low) is still in progress. Sustained break of 1.7062 will pave the way to 61.8% retracement of 1.9799 (2020 high) to 1.4281 at 1.7691. In any case, outlook will stay bullish as long as 1.6319 support holds.

Daily Pivots: (S1) 0.9493; (P) 0.9529; (R1) 0.9574; More...

Intraday bias in EUR/CHF stays on the upside at this point. Rebound from 0.9416 short term bottom is in progress. Sustained break of 55 D EMA (now at 0.9570) will bring further rise to 0.9691 key structural resistance. On the downside, though, below 0.9457 support will bring retest of 0.9407/16 zone.

In the bigger picture, down trend from 1.2004 (2018 high) is still in progress. Decisive break of 0.9407 will confirm resumption, and target 61.8% projection of 1.1149 to 0.9407 from 1.0095 at 0.9018. On the upside, break of 0.9691 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish.

Daily Pivots: (S1) 1.0534; (P) 1.0566; (R1) 1.0596; More...

Intraday bias in EUR/USD remains neutral for the moment. On the downside, break of 1.0522 support will turn bias back to the downside for retesting 1.0447 low. Break there will resume larger fall from 1.1274. On the other hand, strong bounce from current level, followed by break above 1.0693, rebound from 1.0447 to 1.0764 cluster resistance (38.2% retracement of 1.1274 to 1.0447 at 1.0763).

In the bigger picture, fall from 1.1274 medium term top could still be a correction to rise from 0.9534 (2022 low). But chance of a complete trend reversal is rising. In either case, current fall should target 61.8% retracement of 0.9534 to 1.1274 at 1.0199 next. For now, risk will stay on the downside as long as 55 D EMA (now at 1.0665) holds, in case of rebound.

Daily Pivots: (S1) 1.2098; (P) 1.2130; (R1) 1.2155; More

Intraday bias in GBP/USD remains neutral as range trading continues. Outlook also stays bearish with 1.2336 resistance intact. On the downside, firm break of 1.2036 will resume whole decline from 1.3141 for 1.1801 support next. However, break of 1.2336 will turn bias back to the upside for 38.2% retracement of 1.3141 to 1.2036 at 1.2458.

In the bigger picture, fall from 1.3141 medium term top could still be a correction to up trend from 1.0351 (2022 low) only. But risk of complete trend reversal is rising. Sustained break of 38.2% retracement of 1.0351 to 1.3141 at 1.2075 will pave the way to 61.8% retracement at 1.1417. For now, risk will stay on the downside as long as 55 D EMA (now at 1.2346) holds, in case of rebound.

Daily Pivots: (S1) 149.26; (P) 149.84; (R1) 150.22; More...

Intraday bias in USD/JPY remains neutral for the moment. On the downside, below 149.30 minor support will turn bias to the downside for deeper pull back. But outlook will stay bullish as long as 147.28 support holds, even in case of deep retreat. On the upside, above 150.76 will resume larger rally to retest 151.93 high.

In the bigger picture, while rise from 127.20 is strong, it could still be seen as the second leg of the corrective pattern from 151.93 (2022 high). Rejection by 151.93, followed by sustained break of 145.06 resistance turned support will be the first sign that the third leg of the pattern has started. However, sustained break of 151.93 will confirm resumption of long term up trend.

Daily Pivots: (S1) 0.8991; (P) 0.9014; (R1) 0.9048; More....

Intraday bias in USD/CHF remains mildly on the upside at this point. Rebound from 0.8886 short term bottom would target 0.9086 resistance first. Sustained break there will pave the way back to 0.9342 resistance next. On the downside, however, below 0.8962 minor support will turn bias back to the downside for 0.8886 and possibly below.

In the bigger picture, outlook is mixed up by the deeper than expected pull back from 0.9243. Yet there was no follow through selling after hitting 0.8886. On the upside, break of 0.9243 resistance will revive the case of medium term bottoming at 0.8851, and turn outlook bullish. However, sustained break of 61.8% retracement of 0.8551 to 0.9243 at 0.8815 will argue that larger decline from 1.0146 is ready to resume through 0.8551 low.

Daily Pivots: (S1) 0.6313; (P) 0.6341; (R1) 0.6362; More...

Intraday bias in AUD/USD remains neutral at this point, and outlook stays bearish with 0.6398 resistance intact. On the downside, break of 0.6269 will resume larger fall from 0.7156 to 100% projection of 0.7156 to 0.6457 from 0.6894 at 0.6195, which is close to 0.6169 medium term support.

In the bigger picture, down trend from 0.8006 (2021 high) is possibly still in progress. Decisive break of 0.6169 will target 61.8% projection of 0.8006 to 0.6169 to 0.7156 at 0.6021. This will now remain the favored case as long as 0.6894, in case of strong rebound.

• Recent decline in the Nikkei 225 has managed to stall again at the key 200-day moving average with positive momentum seen in the hourly RSI indicator.
• Bank of Japan’s (BoJ) latest quarterly outlook report will be closely watched; upbeat inflationary forecasts for FY 2023/2024 may signal a faster pace of monetary policy normalization.
• The TOPIX Banks and Financials sectors have started to price in such a “quickened pace” of policy normalization scenario in the past week.
• Watch the 30,490/30,320 key short-term pivotal support on the Nikkei 225

Since the start of Q3 2023, the Nikkei 225, Japan’s benchmark stock index has wobbled and recorded a 2nd half-year-to-date return of -7.83% as of 30 October 2023 at this time of the writing, in stark contrast to a positive performance of +27.19% seen in the 1st half of 2023.

The primary driver that caused the ongoing weakness in the Nikkei 225 has been external rather than internal (see Figure 1). The movement of the Nikkei 225 has moved in direct lockstep with the medium-term bearish trend of the US S&P 500 benchmark index since the start of Q3 with a high 20-day rolling correlation coefficient of +0.76 while almost zero correlation with the USD/JPY (see Figure 1).

Fig 1: Nikkei 225’s 20-day rolling correlation with USD/JPY & S&P 500 as of 30 Oct 2023 (Source: TradingView, click to enlarge chart)

The upcoming Bank of Japan (BoJ) monetary policy meeting outcome together with the release of its latest quarterly outlook on Tuesday, 31 October may shift the dial back to more “localized” factors that are likely to have more influence on the Nikkei 225’s price movements at least in the short to medium-term.

The expectations have risen for BoJ to make changes to its forward guidance with the possibility of increasing the 1% upper limit of the flexible yield curve control programme on the 10-year Japanese government bond (JGB) yield due to the persistent upward movement of the US 10-year Treasury yield in the past month.

Also, all eyes will be on the latest inflation and growth forecast figures in the quarterly outlook report. Given that the latest leading Tokyo area’s CPI data for October that was released last Friday, 27 October has indicated the resurgence of sticky inflationary pressures as growth in the core-core inflation rate (excluding food and energy) came in at 2.7% y/y that surged above August and September’s prints as well as above expectations of 2.3% y/y.

Hence, BoJ may upgrade its forecast for FY 2023 core CPI (excluding fresh food) to around 2.7% to 2.9% versus 2.5% in the July report) as well as FY 2024 core CPI forecast to around 2% to 2.1% from 1.9% in July.

On the growth side, BoJ has upgraded its economic assessment for six of Japan’s nine regional economies in the latest regional economic report released on 19 October. Therefore, it is likely that the FY 2023 real GDP growth outlook may be upgraded as well to 1.8% annualized from 1.3% in the July report while FY 2024/2025’s GDP forecasts are likely to be unchanged at 1.2% and 1% due to the rising risk of a global stagflation environment.

If the upbeat inflationary forecasts turn out as expected, it is likely to give a clearer signal to market participants that BoJ is moving towards monetary policy normalization at a faster pace away from sticky short-term negative interest rates. Such guidance may trigger a short to medium-term positive feedback loop into the Japanese stock market as market participants view that BoJ is formulating imminent policy changes in the pipeline to address the negative effects of the weakening JPY that put upside pressure on imported inflation which in turn will eventually dampen internal demand.

Japanese banks and financials equities have started to price in a more hawkish BoJ

Interestingly, two internal demand-sensitive TOPIX sectors have started to price in such a “faster pace of monetary policy normalization expectations”in the past week. The Banks and Financials sectors have recorded rolling three-month returns of +17.44% and 8.85% respectively as of last Friday, 27 October that outperformed the broader TOPIX stock index over the same period (see Figure 2)

Fig 2: 3-month rolling performances of TOPIX sectors as of 27 Oct 2023 (Source: TradingView, click to enlarge chart)

Watch the key 200-day moving average support on the Nikkei 225

Fig 3: Japan 225 minor short-term trend as of 30 Oct 2023 (Source: TradingView, click to enlarge chart)

The recent decline of -6.75% seen in the Japan 225 Index (a proxy for the Nikkei 225 futures) from its 12 October 2023 minor high of 32,662 has managed to stall at the key 200-day moving average (price actions have traded above it since 24 March 2023) which also confluences with the key short-term pivotal support zone of 30,490/30,320.

In addition, short-term momentum has also turned positive as indicated by the hourly RSI indicator which flashed a prior bullish divergence condition last Thursday, 26 October, and continued to shape a series of higher lows thereafter.

A break above the 31,040 near-term resistance sees a further potential push-up towards the next intermediate resistance zone of 31,430/31,630 (also the 20-day moving average) in the first step.

On the other hand, a failure to hold at the 30,320 key support invalidates the recovery scenario to expose the next intermediate support at 29,900 (a major ascending trendline from the January 2023 low).

Daily Pivots: (S1) 1.3820; (P) 1.3850; (R1) 1.3905; More...

Intraday bias in USD/CAD remains on the upside at this point. Further rally should be seen to retest 1.3976. Decisive break there will resume larger up trend to 1.4064 projection level. On the downside, below 1.3794 minor support will turn intraday bias neutral and bring consolidations, before staging another rally.

In the bigger picture, corrective pattern from 1.3976 (2022 high) should have completed with three waves down to 1.3091. Decisive break of 1.3976 high will confirm resumption of up trend from 1.2005 (2021 low). Next target will be 61.8% projection of 1.2401 to 1.3976 from 1.3091 at 1.4064. This will now remain the favored case as long as 1.3568 support holds.