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Markets continue to tread water today, having basically no reaction to economic data and comments from central bankers. For now, European majors are the slightly stronger ones, as led by Sterling. Commodity currencies are the weaker ones, with the Loonie being the softest. Dollar and Yen are mixed for now. But still, most pair and crosses are stuck inside ranges of yesterday and last week.

Technically, the more interesting developments are find in cryptocurrencies. Bitcoin's break of 20023 suggests that corrective recovery from 18144 might have completed at 21460 already. Deeper fall is now in favor back to retest 18144 support, and break will target this year's low at 17575.

In Europe, at the time of writing, FTSE is down -0.02%. DAX is up 0.37%. CAC is up 0.02%. Germany 10-year yield is up 0.001 at 2.345. Earlier in Asia, Nikkei rose 1.25%. Hong Kong HSI dropped -0.23%. China Shanghai SSE dropped -0.43%. Singapore Strait Times rose 0.14%. Japan 10-year JGB yield dropped -0.0063 to 0.252.

ECB de Guindos: We will start QT sooner or later, for sure in 2023

ECB Vice President Luis de Guindos said in an interview, "we will continue raising rates to a level that ensures inflation will come back into line with our definition of price stability". The level will depend on " data that we receive, the evolution of inflation, economic conditions, demand, and energy prices."

He expected inflation to hover around its present level of 10.7% "hover the next few months". Inflation will then "start to decline in the first half of next year". Quarterly GDP growth in Q4 will be "negative", and to continue in Q1. This "technical recession" is not expected to be "very profound".

On the topic of quantitative tightening, de Guindos said ECB will start it "sooner or later, for sure in 2023". It must be implemented with "a lot prudence". He expects to start with a "passive QT by not fully reinvesting the maturing securities in our portfolio.". The "characteristics and the timing" of QT will be discussed in December. QT may overlap or not with normalization of interest rates.

Eurozone retail sales rose 0.4% mom in Sep, EU up 0.4% mom

Eurozone retail sales rose 0.4% mom in September, better than expectation of 0.0% mom. Volume of retail trade increased by 1.0% for non-food products and by 0.4% for food, drinks and tobacco, while it decreased by -0.6% for automotive fuels.

EU retail sales rose 0.4% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in Austria (+3.9%), Malta (+1.7%) and Poland (+1.4%). The largest decreases were observed in Slovenia (-3.7%), Ireland and Portugal (both -2.0%) and Slovakia (-1.3%).

BoE Pill: We have done some, still more to do

BoE Chief Economist Huw Pill said at a conference that recent market turmoil in the UK led to some "de-anchoring" of inflation expectations. "What we're most concerned about is whether this self-sustaining inflation will persist," he said.

He added that officials at BoE have "more to digest" about how the government's plan will impact the economy. They will look carefully at the budget due November 17.

Regarding interest rates, "we have done some, and I think there is still more to do," Pill said. "At some point you have to think what level of rate is appropriate."

SNB Jordan: Determined action is necessary

Chairman Thomas Jordan, said in a conference, "In an environment such as the one we face today, mixed signals on the persistence of inflation might tempt policymakers to postpone further reaction to inflationary pressures until uncertainty about future inflation has receded".

"Yet uncertainty must not mean indecision. A risk management approach to policy-making sometimes calls for decisive action," he added

"When faced with large shocks that increase the risk of persistent movements of inflation away from the range, determined action is necessary, irrespective of whether these movements are below or above the range," Jordan said.

BoJ opinions: Undesirable to make premature changes to monetary policy

In the Summary of Opinions at BoJ's October 27-28 meeting, it's noted that it's wages increase in a "sustainable and stable manner" to achieve the inflation target. Inflation could "deviate upward" form the baseline scenario but it's still "uncertain" whether the rises in prices will be "sustainable". It is "undesirable" to "make premature changes" to monetary policy for the "risk of disrupting the formation of a virtuous cycle between prices and wages."

Nevertheless, on member noted, "it is necessary to examine the impact of high prices on household behavior and wages humbly and without any preconceptions while paying attention to the side effects of monetary easing.

Another member noted, "it is also important to continue to examine how future exit strategies will affect the market and whether market participants will be well prepared for them."

Australia NAB business confidence dropped to 0, conditions dropped to 22

Australia NAB Business Confidence dropped from 5 to 0 in October. Business Conditions dropped slightly from 23 to 22. Trading conditions dropped from 37 to 31. Profitability conditions rose from 21 to 22. Employment conditions dropped from 17 to 14.

NAB Chief Economist Alan Oster said, "Conditions remained strong in October with demand still very elevated and profitability holding up... Despite the strength in conditions, confidence has been falling for several months as headwinds have weighed on the outlook for the global economy and Australia."

Australia Westpac consumer sentiment dropped to 78, just slightly above pandemic low

Australia Westpac Consumer Sentiment dropped -6.9% to 78.0 in November. The reading was below the low point of the Global Financial Crisis in 2008, and was just slightly higher than pandemic low at 75.6.

Westpac said that inflation and interest rates are weighing heavily on family finances. Nearly 40% of consumers, a record high, look to cut Christmas spending. Confidence in house prices is heading towards 2018.19 lows.

Regarding RBA policy, Westpac expects it to hike by a further 25bps on December 6. Westpac also expects RBA to hike by an additional 0.75% out to May next year.

Australia AiG services dropped to 47.7, second month of contraction

Australia AiG Performance of Services Index dropped slightly from 48.0 to 47.7 in October, staying in contraction for a second month. Looking at some details, sales dropped -0.5 to 41.3. Employment rose 1.3 to 53.9. New orders rose 4.3 to 54.5. Input prices rose 4.2 to 77.6. Selling prices rose 3.9 to 62.2. Average wages dropped -1.1 to 64.8.

Innes Willox, Chief Executive of Ai Group, said: "Australia's service sector faces weakening conditions. Chronic labour shortages have dragged on the supply-side of the sector for most of this year. And now the effects of cumulative interest rate rises are weakening demand conditions as well. Conditions particularly deteriorated for retail & hospitality and business & property, which are most exposed to consumer sentiment."

RBNZ 2-yr inflation expectations rose to 3.62%

In RBNZ's Survey of Expectations, businesses expect interest rate to rise 65bps to 4.15% a quarter ahead. In a year's time, they saw interest rates rose further to 4.67%.

Mean one-year ahead GDP growth decreased from prior survey's 1.49% to 1.27%. One year ahead inflation expectations rose from 4.86% in last quarter to 5.08%. Two year ahead inflation expectations rose sharply from 3.07% to 3.62%.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 0.9939; (P) 0.9987; (R1) 1.0068; More...

EUR/USD's rebound lose momentum ahead of 1.0092 resistance and intraday bias remains neutral. On the upside, firm break of 1.0092 will resume the rebound from 0.9534. Next target is 1.0368 resistance. On the downside, break of 0.9729 will reaffirm the case the corrective rise from 0.9534 has completed at 1.0092. Deeper fall would then be seen to retest 0.9534 low next.

In the bigger picture, medium term outlook stays bearish with trading inside the falling channel. That is larger down trend from 1.2348 (2021 high) is still in progress. Firm break of 0.9534 low will confirm this bearish case. However, break of 1.0092 will add to the case of medium term bottoming, on bullish convergence condition in daily MACD, and bring further rally towards 55 week EMA (now at 1.0583).

Economic Indicators Update

Market picture

The crypto market has lost over 5% in the last 24 hours, pushing capitalisation back below $1 trillion. The steep fall in FTT affected Bitcoin and Ether and has pulled a significant market spectrum.

Bitcoin is now trading at $19.8K, with the most substantial losses coming in the Asian session, filled with algorithmic traders, pushing the price back to $19.4K at one point. It is noteworthy that a sell-off did not follow the sell-off in the first and second cryptocurrencies in the markets. Once again, we are forced to guess whether crypto reflects the internal risk attitude of the financial markets or whether we have seen a short-term technical sell-off. In the former case, market sentiment will worsen during the day. In the second, BTCUSD will redeem during the day and further confirm the market’s reversal to growth.

According to CoinShares, investments in crypto funds declined last week after a slight increase the previous week. Outflows amounted to $16m compared to inflows of $6m a week earlier. Bitcoin investments fell by $13 million, and Ethereum rose by $3 million. Investments in funds that allow shorts on bitcoin fell by $7 million. Investors have shown a lack of enthusiasm over the past eight weeks, CoinShares noted.

News background

Former MicroStrategy head Michael Saylor called bitcoin a “hope” for Lebanon, whose national currency has fallen 96% against the dollar, and inflation has reached triple digits. The Middle Eastern country has been in a deep financial crisis since 2019.

Twitter’s new owner, Elon Musk, plans to postpone temporarily or entirely shut down the development of some of the projects announced by the previous administration, including, reportedly, work on a cryptocurrency wallet. The news has hurt Dogecoin, which has been growing in hopes of becoming the social network’s digital currency.

According to Reuters, UK bank Santander will block transactions on cryptocurrency exchanges in 2023 to protect consumers from fraud.

Mining companies are being forced to sell off cryptocurrency mining equipment at a massive discount to cover losses from a falling market, The Wall Street Journal reported.

The pair holds in red for the third straight day, with risk of further weakening seen on confirmation of initial bearish signal on Monday’s repeated close below Fibo support at 146.85 (23.6% of 130.39/151.94 upleg).

Rising negative momentum on daily chart and Tenkan-sen / Kijun-se turning to bearish configuration, pressure dollar and add to downside risk.

Bears look for attack at first pivot at 145.10 (Oct 27 trough), break of which would generate fresh bearish signal on formation of daily failure swing, though bears would look for confirmation on extension and break through key Fibo level at 143.71 (38.2% of 130.39/151.94) to signal reversal and open way for extension towards daily cloud top (142.55) and 141.16 (50% retracement).

Near-term action should stay below daily Tenkan-sen (146.97) to keep bears in play.

Res: 146.97; 147.73; 148.36; 148.90
Sup: 145.67; 145.10; 143.71; 142.55

The Japanese yen continues to have a quiet week. In the European session, USD/JPY is trading at 146.34, down 0.18%.

Household spending rebounds

Japan’s household spending bounced back in September, with its first gain in three months. Household spending rose 1.8% MoM, despite higher inflation. This reading follows a strong retail sales report for September, with a gain of 1.1%. The sharp drop in Covid cases in September contributed to the strong numbers.

The question is whether the uptick in household and consumer spending will last. Inflation hit 3% in September for the first time in over 30 years, and inflation above the 3% level starts to squeeze spending in real terms. The government is hoping that the finance package that was announced today will reduce inflation and boost growth. The Japanese yen has improved lately and joined the bandwagon on Friday, as the US dollar retreated after a mixed nonfarm payrolls report.

Still, the outlook for the yen, which has plummeted about 20% this year against the dollar, does not look good. The Bank of Japan hasn’t budged from its ultra-loose policy, despite the declining yen and rising inflation. The Federal Reserve is far from winding up its aggressive rate policy, with inflation still running high. With the BoJ maintaining a cap on JGB yields, the US/Japan rate differential continues to widen, which is pushing the yen lower.

At the BoJ’s meeting in late October, the BOJ maintained all policy settings as well as its dovish guidance. Essentially, it was more of the same from the BoJ, with a strong likelihood that the BoJ will not make any changes before Governor Kuroda ends his term in April 2023.

USD/JPY Technical

• There is resistance at 147.07 and 148.45
• 145.28 and 144.20 are providing support

BoE Chief Economist Huw Pill said at a conference that recent market turmoil in the UK led to some "de-anchoring" of inflation expectations. "What we're most concerned about is whether this self-sustaining inflation will persist," he said.

He added that officials at BoE have "more to digest" about how the government's plan will impact the economy. They will look carefully at the budget due November 17.

Regarding interest rates, "we have done some, and I think there is still more to do," Pill said. "At some point you have to think what level of rate is appropriate."

Daily Pivots: (S1) 166.87; (P) 167.98; (R1) 169.95; More...

GBP/JPY is staying in consolidation from 172.11 and intraday bias remains neutral. Further rally is mildly in favor with 164.95 support intact. On the upside, break of 172.11 will resume larger up trend. However, break of 164.95 will bring deeper pull back to 159.71 support and below.

In the bigger picture, up trend from 123.94 (2020 low), as part of the trend from 122.75 (2016 low) is still in progress. Further rise would be seen to 161.8% projection of 122.75 to 156.59 (2018 high) from 123.94 at 178.69. This will now remain the favored case as long as 148.93 support holds.

Daily Pivots: (S1) 145.99; (P) 146.50; (R1) 147.45; More....

EUR/JPY is staying in consolidation from 148.38 and intraday bias remains neutral. In case of deeper fall, downside should be contained by 55 day EMA (now at 143.39) to bring rise resumption. On the upside, break of 148.38 will resume larger up trend to 149.76 long term resistance next.

In the bigger picture, the up trend from 114.42 (2020 low) is still in progress for 149.76 (2014 high). Decisive break there will pave the way to 161.8% projection of 114.42 to 134.11 from 124.37 at 156.22. This will now remain the favored case as long as 137.32 support holds.

Daily Pivots: (S1) 0.8665; (P) 0.8728; (R1) 0.8766; More...

EUR/GBP failed to sustain above 0.8779 resistance and retreated. Intraday bias stays neutral first. On the upside, firm break of 0.8779 will argue that corrective fall from 0.9267 has completed at 0.8570. Intraday bias will be back on the upside for 0.8869 first. Break there will bring retest of 0.9267 high. On the downside, break of 0.8570 will resume the fall from 0.9267 and target 0.8201/8388 support zone.

In the bigger picture, current development suggests that fall from 0.9267 is a down leg inside long term range pattern. Deeper fall could be seen towards 0.8201/8338 support zone. But strong support should be seen there to bring reversal.

Daily Pivots: (S1) 1.5416; (P) 1.5456; (R1) 1.5506; More...

EUR/AUD is sill extending the correction from 1.5704 and intraday bias remains neutral. Deeper fall could be seen but downside should contained by 55 day EMA (now at 1.5216) to bring rebound. On the upside, break of 1.5704 will resume the rally from 1.4281.

In the bigger picture, a medium term bottom should be in place at 1.4281, on bullish convergence condition in daily MACD. Further rise would be seen back to 1.6434 key resistance next. Break of 1.4965 resistance turned support is needed to indicate reversal. Otherwise, further rally will remain in favor.

Daily Pivots: (S1) 0.9874; (P) 0.9896; (R1) 0.9929; More....

EUR/CHF's consolidation from 0.9953 is extending and intraday bias remains neutral. Downside of retreat should be contained by 0.9798 resistance turned support to bring rebound. On the upside, break of 0.9953 will resume the rise from 0.9407 to 1.0072 fibonacci level.

In the bigger picture, a medium term bottom should be in place at 0.9407. Further rally is expected as long as 0.9641 support holds, even as a corrective rebound. Next target 38.2% retracement of 1.1149 to 0.9407 at 1.0072. Reaction from there, as well as 55 week EMA (now at 1.0121) will reveal whether the trend is reversing.