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Daily Pivots: (S1) 1.5509; (P) 1.5598; (R1) 1.5763; More...

Intraday bias in EUR/AUD stays on the upside at this point. Current rally should target 161.8% projection of 1.4281 to 1.4965 from 1.4716 at 1.5823. On the downside, break of 1.5429 minor support will turn intraday bias neutral and bring consolidation first, before staging another rally.

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) 0.9749; (P) 0.9771; (R1) 0.9801; More....

Intraday bias in EUR/CHF remains neutral for the moment. On the upside, break of 0.9798 will target 61.8% projection of 0.9407 to 0.9798 from 0.9641 at 0.9883. Decisive break there will solidify the case of medium term bottoming and target 100% projection at 1.0032. This will remain the favored case as long as 0.9641 support holds.

In the bigger picture, considering bullish condition in daily MACD, firm break of 0.9864 resistance will confirm medium term bottoming at 0.9407. Stronger rally should then be seen to 55 week EMA (now at 1.0138), even as a corrective rebound. Nevertheless, rejection by 0.9864 will bring down trend resumption through 0.9407 next.

Market movers today

We kick off the week with a thin key figures calendar. In the US, we get the Empire manufacturing PMIs.

In Sweden, Moderate leader Ulf Kristersson will face the PM vote today at 11.00 CET.

Markets' focus will circle on politics this week with the EU council meeting on Thursday, where an EU gas price cap will be on the agenda.

China's 20th National Congress of the Communist Party kicked off yesterday and lasts for about a week. With no changes to "zero-Covid policies" in the pipeline, focus will not least be on the revelation of China's new Standing Committee.

The unfolding of UK politics and the effects on the Gilts market have been key market movers over the last couple of weeks and will likely draw more attention.

Markets will also stay alert to any news of actual FX intervention from Bank of Japan after USD/JPY has reached the highest levels since 1990.

The 60 second overview

China CPC Congress: Chinese President Xi Jinping yesterday opened China's 20th National Congress of the CPC with the read-out of the Work Report, which is a report always prepared for the Congresses that outlines results over the past five years and outlines policies and goals for the coming years and decades. The report had few surprises as policies were pretty much the same as outlined on previous occasions such as in the Five Year Plan released last year. Challenges, risks and security had an even more prominent role this time, though, as China faces severe challenges both from the US tech war as well as domestic challenges with property crisis and the pandemic still affecting the economy. As expected, there was no indication of change to the zero-Covid policy. Over the coming week, meetings will mostly be held behind closed doors and the next action will be on Sunday when the new Standing Committee, China's top leadership is revealed. Xi will probably also be elevated to 'People's leader', a title that will cement his power. See also Research China - Security and risks highlighted in Xi's opening of Congress, 17 October.

UK: During Friday, there was a large focus on both the political situation and the Bank of England's (BoE) last day of the re-introduced temporary QE-program. Headlines of a potential U-turn on the tax package initially resulted in a rally in gilts markets. Liz Truss sacked her Chancellor Kwarteng, named Jeremy Hunt as her new Chancellor and held a press conference which gave more questions than answers. She backtracked on the corporate tax cut, which accounts for GBP 18bn of the announced GBP 43bn fiscal plan set out with the mini-budget on 23 September. In the end, markets were not really impressed and there was a sell-off in gilts with the 30Y ending the day 40bps higher, as the cancellation of the 18bn tax cut will probably not be enough to put the UK back on track on a sustainable fiscal path. As the BoE's emergency bond buying program has now come to an end, there is a large risk of further volatility during the week. Bond auctions on both Tuesday and Wednesday will be important to follow.

PBoC: The People's Bank of China (PBoC) rolled over 500 billion yuan maturing medium-term policy loans while keeping the interest rate unchanged at 2.75% this morning. According to PBoC, this was to "keep banking system liquidity reasonably ample" and to "fully meet financial institutional demand".

Equities: If there is something this year has highlighted, equity rallies are not long lasting when fundamentals do not allow it. This message was echoed on Friday, where the Thursday rally quickly erased in the US cash session. S&P 500 dropped -2.3%, Nasdaq -3.1%, Russell 2000 -2.7% and Dow -1.3%. Guess what - defensives outperformed cyclicals and value outperformed growth. Recognize it? Probably, as markets have played the same note since summer. Two things differing from the classic risk-off trading is small caps and quality stocks holding up - despite US yields being 60bp higher over the month and real rates 150bp since August. To us, this illustrates the balancing act of short-term inflation and longer-term recession. Asia opened in red this morning, with MSCI's broadest index of Asia-Pacific shares outside Japan down 1.1% and Nikkei down 1.4%.

FI: A bit of sideways trading on Friday until Vasle called for two 75bp rate hikes this year, which caused a bear steepening in the euro curves with underperformance of the periphery (6bp to BTPs-Bund widening). Bunds rose 7bp to 2.36%.

FX: Higher yields, a decline in commodity prices, high equity volatility and UK politics set the tone for FX markets towards the end of last week. The USD generally stood out as a top-performer only surpassed by the HUF following the National Bank of Hungary's (NBH) surprise hike of its overnight rate from 15.5% to 25%. In the other end of the spectrum, GBP came under renewed pressure while commodity currencies in the likes of AUD, NZD and NOK also suffered. USD/JPY has notably reached new highs above the 148 mark.

Credit: The credit markets ended last week on a slightly negative note. During Friday, iTraxx main widened marginally to 131bp while Xover widened 7bp to 625bp. The weakness in the CDS market was also visible in the cash bond market, where secondary bond trading and primary markets remained very inactive.

Nordic macro

In Sweden, we have a PM vote to look forward to. Following Friday's announcement of the "Tidö-deal" by the majority parties Moderates, Christian Democrats, Liberals and Sweden Democrats, Moderate leader Ulf Kristersson will face the PM vote today at 11.00. As he is backed by a (slim) majority of mandates, any dissenters would make it a close call, but best guess is that he wins the vote.

Daily Pivots: (S1) 0.9688; (P) 0.9748; (R1) 0.9789; More...

Intraday bias in EUR/USD remains neutral for the moment. Deeper decline is expected with 0.9998 resistance intact. Below 0.9630 will bring retest of 0.9534 low first. Firm break there will resume larger down trend. However, break of 0.9998 will confirm short term bottoming and turn bias back the upside for stronger rebound.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, break of 0.9998 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish even with strong rebound.

Daily Pivots: (S1) 1.1100; (P) 1.1233; (R1) 1.1314; More...

Intraday bias in GBP/USD remains neutral for the moment. On the upside, break of 1.1494 will resume the rise from 1.0351 to 61.8% projection of 1.0351 to 1.1494 from 1.0922 at 1.1628. On the downside, below 1.0922 will turn bias back to the downside for 1.0351 low instead.

In the bigger picture, fall from 1.4248 (2018 high) is resuming long term down trend from 2.1161 (2007 high). Next target is 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532. There is no scope of a medium term rebound as long as 1.1759 support turned resistance holds.

Daily Pivots: (S1) 0.9993; (P) 1.0029; (R1) 1.0094; More...

Intraday bias in USD/CHF remains neutral for the moment. On the upside, break of 1.0072, and sustained trading above 1.0063, will confirm larger up trend resumption. Next target is 1.0283 projection level. However, break of 0.9914 support will indicate rejection by 1.0063, and turn bias back to the downside for 0.9779 support first.

In the bigger picture, current development suggests that up trend from 0.8756 (2021 low) is still in progress. Sustained break of 1.0063 will target 100% projection of 0.9149 to 1.0063 from 0.9369 at 1.0283, and then 1.0342 (2016 high). For now, this will remain the favored case as long as 0.9369 support holds, even in case of deep pull back.

Daily Pivots: (S1) 147.59; (P) 148.23; (R1) 149.39; More...

Intraday bias in USD/JPY stays on the upside for the moment. Current up trend would target 61.8% projection of 130.38 to 140.33 from 145.89 at 149.91. Beware that Japan might intervene again there close to 150 psychological level. Nevertheless, break of 145.89 resistance turned support is needed to confirm short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, up trend from 101.18 is still in progress, as part of the whole up trend from 75.56 (2011 low). 147.68 (1998 high) was already met and there is not clearly sign of topping yet. In any case, break of 139.37 resistance turned support is needed to be the first sign of medium term topping. Otherwise, further rise is in favor to next target at 160.16 (1990 high).

Daily Pivots: (S1) 1.3758; (P) 1.3828; (R1) 1.3952; More...

Intraday bias in USD/CAD stays neutral for consolidation below 1.3976. Outlook will stay bullish as long as 1.3501 support holds. Firm break of 1.3976 will resume larger up trend, and target 200% projection of 1.2005 to 1.2947 from 1.2401 at 1.4285.

In the bigger picture, up trend from 1.2005 (2021 low) is still in progress. Based on current impulsive momentum, it could be resuming long term up trend from 0.9056 (2007 low). Whether it is or it isn't, retest of 1.4689 (2016 high) should be seen next. This will now remain the favored case as long as 1.3222 resistance turned support holds.

Daily Pivots: (S1) 0.6206; (P) 0.6261; (R1) 0.6352; More...

Intraday bias in AUD/USD remains neutral for the moment. Further decline is expected as long as 0.6362 support turned resistance holds. Firm break of 100% projection of 0.7660 to 0.6680 from 0.7135 at 0.6155 will target 138.2% projection at 0.5781. Nevertheless, break of 0.6362 will indicate short term bottoming, on bullish convergence condition in 4 hour MACD, and bring stronger rebound back to 0.6539 resistance.

In the bigger picture, down trend form 0.8006 (2021 high) is expected to continue as long as 0.6680 support turned resistance holds. Next target is 0.5506 low. Medium term momentum will now be closely monitored to gauge the chance of break of 0.5506.

The forex markets are rather steady in quiet Asian session today. Dollar is paring some gains while Euro and Yen are soft too. Sterling is leading the way higher, followed by commodity currencies. But overall, almost all major pairs and crosses are bounded inside Friday's range. The economic calendar is also rather light today. Traders might hold their bets for now, until the released of a batch of consumer inflation data from some major global economies.

Technically, AUD/USD and USD/CAD appear to have stabilized well ahead of 0.6169 and 1.3976 respectively. It's a sign that Dollar is losing momentum again, despite persistent strength against Yen. Some attention is now on whether the greenback's pull back will return, in particular against Sterling. Break of 1.1494 resistance will resume GBP/USD's rebound from 1.0351, and lead EUR/USD higher too.

In Asia, at the time of writing, Nikkei is down -1.37%. Hong Kong HSI is down -1.13%. China Shanghai SSE is down -0.10%. Singapore Strait Times is down -1.15%. Japan 10-year JGB yield is down -0.0035 at 0.250.

BoE Bailey: Inflationary pressures will require a stronger response

BoE Governor Andrew Bailey indicated over the weekend that a larger rate hike could be delivered at the upcoming meeting in November. He said, "we will not hesitate to raise interest rates to meet the inflation target... And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August."

Regarding new Finance Minister Jeremy Hunt, he said, "I can tell you that there was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that."

Japan Suzuki: Will take decisive action on excessive volatility

There is no clear sign of intervention by Japan so far, as USD/JPY is trading in tight range close to 32-yr high. Finance Minister Shunichi Suzuki just said, "if we see excessive volatility caused by speculative moves, we will take decisive action. There is no change in this view at all."

Separately, BoJ Governor Haruhiko Kuroda said in a parliamentary session, Japan's economy is in the midst of recovery from COVID-19. Higher commodity prices, on the back of the situation in Ukraine, have been leading to an outflow of income from Japan to overseas, adding downward pressure on the economy."

"For now, we think it appropriate to continue with monetary easing because it's necessary to support the economy and achieve our inflation target in a sustainable and stable fashion accompanied by wage growth," he added.

NZ BNZ services dropped to 55.8 in Sep

New Zealand BusinessNZ Performance of Services Index dropped from 58.6 to 55.8 in September. Looking at some details, activity/sales dropped from 67.5 to 59.2. Employment ticked down from 50.7 to 50.5. New orders/business dropped from 66.6 to 62.9. Stocks/inventories dropped from 59.6 to 54.9. Supplier deliveries was unchanged at 49.7.

BNZ Senior Economist Craig Ebert said that "the composite PCI held together at 54.4 in free-weighted terms, while the GDP weighted composite came in at 55.4, from 58.2 in August. These marry with our view that Q3 GDP increased about 1.0%".

CPI, retail sales, and consumer confidence for the week

Consumers are the focuses this week with CPI from UK, Canada, Japan and New Zealand. Retail sales from the UK and Canada will be released, while UK will also publish Gfk consumer confidence. Additionally, Germany ZEW, Australia employment will be closely watched, together with GDP from China.

Here are some highlights for the week:

• Monday: New Zealand BusinessNZ Services, Japan tertiary industry index; US Empire state manufacturing, BoC business outlook survey.
• Tuesday: New Zealand CPI; RBA minutes; China GDP, retail sales, industrial production, fixed asset investment; Germany ZEW; Canada housing starts; US industrial production, NAHB housing index.
• Wednesday: UK CPI, PPI; Eurozone CPI final; Canada CPI, IPPI, RMPI; US housing starts and building permits, Fed's Beige Book report.
• Thursday: Japan trade balance; Australia employment, NAB quarter business confidence; Swiss trade balance; Germany PPI, Eurozone current account; US Philly Fed manufacturing, jobless claims, existing home sales.
• Friday: New Zealand trade balance; Japan CPI; UK Gfk consumer confidence, retail sales, public sector net borrowing; Canada retail sales, new housing price index, Eurozone consumer confidence.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6206; (P) 0.6261; (R1) 0.6352; More...

Intraday bias in AUD/USD remains neutral for the moment. Further decline is expected as long as 0.6362 support turned resistance holds. Firm break of 100% projection of 0.7660 to 0.6680 from 0.7135 at 0.6155 will target 138.2% projection at 0.5781. Nevertheless, break of 0.6362 will indicate short term bottoming, on bullish convergence condition in 4 hour MACD, and bring stronger rebound back to 0.6539 resistance.

In the bigger picture, down trend form 0.8006 (2021 high) is expected to continue as long as 0.6680 support turned resistance holds. Next target is 0.5506 low. Medium term momentum will now be closely monitored to gauge the chance of break of 0.5506.

Economic Indicators Update