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Wednesday’s ‘hawkish’ 75 bps Fed rate hike only reinforced markets’ belief that tightening of global financial conditions still has some way to go. Other central banks including the Norges Bank (+ 50 bps), the Swiss national bank (+75%) or the Bank of England (+0.50%) mostly delivered as expected. Some in the market expected bolder BoE and/or SNB action. However, it for sure wasn’t enough to change the global interest rate dynamic. If they do less now, they probably have to do more next time… This might especially be the case for the Bank of England. The BoE in its statement indicated that at the November meeting, it will evaluate the combined fiscal measures of the new government. BoE member Haskel said that the BoE is in a difficult position with the government supporting demand in the context of a tight labour market and other supply-side constraints. UK interest rate jumped between 13.8 bps (2-y) and 18.6 bps (30-y).

Globally, it initially looked that the overall uptrend in yields could slow post-Fed, but instead it vigorously resumed as soon as US traders joined the fray. Persistent low US jobless claims weren’t the trigger, but confirmed the Fed’s view that the labour market remains tight and that it will take quite a prolonged effort to bring supply and demand in balance. US yields closed between 7.4 bps (2-y) and 18.4 bps!! (10-y) higher. The 10-y yield (3.715%) now decisively broke beyond the 3.50% area opening the way to 4.0%. The move was again driven by an impressive jump in the real yield (10-y + 14.7 bps, to 1.30%). German yields gained between 3.2 bps (30-y) and 9.7 bps (5-y). The 10-y German yield (1.96%) nears the 2.0% barrier. The sharp rise in real yields continues to hurt risk assets. The Eurostoxx lost 1.82%. The Nasdaq declined 1.37%. Both US and European indices are headed for a retest of the June correction low. On the FX market”z, the dollar took a flying start yesterday morning with the DXY setting a minor new cycle high and EUR/USD breaking below the YTD low of 0.9864. However, the USD rally was temporary blocked as the Japanese MOF stepped in to halt the free-fall of the yen. USD/JPY closed at 142 39 compared to an intraday peak of 145.9 before the intervention. USD/JPY sales temporary weighed on the USD overall, but the correction was mostly reversed later (DXY close 111.35 ; EUR/USD 0.9836). EUR/GBP closed marginally higher at 0.874.

Sentiment in Asian stays outright risk-off this morning. Japanese markets are closed. The dollar is again within striking distance of recent cycle peak levels (DXY, EUR/USD). UK GFK consumer confidence this morning was reported at new record low (-49). Later today, the EMU August preliminary PMI’s probably will drop further into contraction territory (composite expected at 48.2). Activity data, especially in Europe, recently had only limited impact on interest rate markets. Inflation prevails. We still don’t fight the trends, both in yields and in the dollar until there is a clear technical sign. EUR/USD dropping below the 0.98 handle might open the way to the 0.96 area.

News Headlines

Belgian consumer confidence plummeted from -11 to -27 in September, dropping below the Covid-lows of -26, to the weakest level since August 1985. Households expressed very serious concerns. The persistent rise in energy prices as winter approaches, galloping inflation and the geopolitical context brought about by the war in Ukraine are weighing heavily on consumer sentiment. The greatest pessimism prevails this month about how the Belgian economy as a whole will evolve over the next twelve months (-49 from -32). Expectations regarding the unemployment rate have also clearly deteriorated (36 from 16; a rise is a deterioration). On a personal front, households' expectations about their financial situation have never been so negative (-18 from -8).

Daily Pivots: (S1) 158.13; (P) 161.29; (R1) 163.44; More...

GBP/JPY's break of 159.42 support is taken as a early sign of bearish trend reversal. Intraday bias stays on the downside for 155.57 support first. Decisive break there should confirm this bearish case. On the upside, above 162.28 minor resistance will turn intraday bias neutral first.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. However, firm break of 155.57 will confirm medium term topping, after rejection by 167.93. Outlook will be turned bearish for deeper decline.

Daily Pivots: (S1) 137.93; (P) 140.82; (R1) 142.91; More....

Focus stays on 138.38 resistance turned support in EUR/JPY. Decisive break there will be an early indication of larger bearish reversal. Deeper fall would be seen to 133.38 support next. On the upside, above 142.28 minor resistance will turn bias back to the upside for retesting 145.62 high.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 133.38 support holds. Next target is 149.76 (2015 high). However, sustained break of 133.38 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Daily Pivots: (S1) 0.8699; (P) 0.8729; (R1) 0.8767; More...

Intraday bias in EUR/GBP remains neural as consolidation from 0.8786 is still extending. Downside should be contained by 0.8624 support to bring another rally. On the upside, break of 0.8786 will resume larger rise from 0.8201 to 100% projection of 0.8201 to 0.8720 from 0.8338 at 0.8857.

In the bigger picture, current development suggests that the down trend from 0.9499 has (2020 high) has completed at 0.8201. Rise from there is developing into a medium term up trend. Further rally would be seen to 61.8% retracement of 0.9499 to 0.8201 at 0.9003 next. This will now remain the favored case as long as 55 day EMA (now at 0.8545) holds.

Daily Pivots: (S1) 1.4750; (P) 1.4846; (R1) 1.4901; More...

EUR/AUD is staying in consolidation from 1.4965 and intraday bias remains neutral first. Further rise is in favor as long as 1.4663 minor support holds. On the upside, break of 1.4965 will resume the rise from 1.4281 towards 1.5396 resistance. On the downside, however, break of 1.4663 minor support will turn bias back to the downside for retesting 1.4281 low.

In the bigger picture, down trend from 1.9799 is still in progress. Break of 1.4318 low will target 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). This will remain the favored case now as long as 1.5396 resistance holds.

Daily Pivots: (S1) 0.9479; (P) 0.9597; (R1) 0.9727; More....

Despite edging higher to 0.9712, EUR/CHF quickly retreated. Intraday bias remains neutral first. On the upside, break of 0.94680 will bring stronger rise back to 0.9864 resistance. But overall, outlook will stays bearish as long as 0.9864 resistance holds. On the downside, below 0.9464 will resume larger down trend.

In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 138.2% projection of 1.2004 to 1.0505 to 1.1149 at 0.9033. On the upside, break of 0.9864 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of strong rebound.

Daily Pivots: (S1) 0.9793; (P) 0.9850; (R1) 0.9891; More...

EUR/USD's decline is still in progress and intraday bias remains on the downside for 100% projection of 1.0368 to 0.9863 from 1.0197 at 0.9692. Firm break there could prompt downside acceleration and target 161.8% projection at 0.9380. On the upside, above 0.9906 minor resistance will turn intraday bias neutral first. But outlook will stay bearish as long as 1.0197 resistance holds, in case of recovery.

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 1.0197 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish even with strong rebound.

Daily Pivots: (S1) 1.1190; (P) 1.1277; (R1) 1.1342; More...

GBP/USD's decline resumed after brief recovery and intraday bias is back on the downside. Current down trend should target 61.8% projection of 1.3748 to 1.1759 from 1.2292 at 1.1063 next. On the upside, above 1.1363 minor resistance will turn intraday bias neutral again. But upside of recovery should be limited below 1.1737 resistance.

In the bigger picture, based on current momentum, fall from 1.4248 (2018 high) is probably resuming long term down trend from 2.1161 (2007 high). Sustained break of 1.1409 will target 61.8% projection of 1.7190 (2014 high) to 1.1409 (2020 low) from 1.4248 (2021 high) at 1.0675. This will remain the favored case for now as long as 1.2292 resistance holds.

Daily Pivots: (S1) 0.9646; (P) 0.9748; (R1) 0.9875; More

Intraday bias in USD/CHF remains on the upside at this point. Firm break of 0.9868 resistance will argue that larger up trend is ready to resume through 1.0063. Overall, the corrective pattern from 1.0063 high could still extend. Below 0.9619 minor support will turn bias back to the downside for 0.9478 and below.

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) 139.85; (P) 142.87; (R1) 145.40; More...

Intraday bias in USD/JPY remains neutral for consolidation below 145.89. Further rally will remain in favor as long as 139.37 resistance turned support holds. Break of 145.89 will resume larger rally to 147.68 long term resistance. However, decisive break of 139.37 will confirm short term topping, on bearish divergence condition in 4 hour MACD. Deeper decline would be seen back towards 130.38 support.

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). Further rise should be seen to 147.68 (1998 high). For now, break of 130.38 support is needed to be the first indication of medium term topping. Otherwise, outlook will stay bullish even in case of deep pull back.