Sample Category Title

Daily Pivots: (S1) 113.75; (P) 113.99; (R1) 114.25; More...

Intraday bias in USD/JPY remains neutral as consolidation from 114.69 is still extending. On the upside, firm break of 114.69 will resume the larger up trend to 100% projection of 102.58 to 111.65 from 109.11 at 118.18 next. Break of 113.24 will bring deeper pull back, but downside should be contained above 112.07 resistance turned support to bring rebound.

In the bigger picture, corrective decline from 118.65 (2016 high) should have completed at 101.18 already. Rise from the 102.58 is seen as the third leg of the up trend from 101.18. Next target is 114.54 resistance and then 118.65 high. This will now be the preferred case as long as 109.11 support hold, even in case of deep pull back.

Daily Pivots: (S1) 0.9098; (P) 0.9125; (R1) 0.9144; More....

With 0.9174 resistance intact, further decline is expected in USD/CHF. Current fall from 0.9367 Decline from 0.9367 should target 0.9017 support first and then 0.8925. On the upside, however, break of 0.9174 resistance will indicate short term bottoming and turn bias back to the upside for stronger rebound instead.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not complete yet. It could either be the second leg of pattern from 0.8756 (2021 low), or resuming larger down trend from 1.0237 (2018 high). We'd pay attention to the downside momentum and assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Daily Pivots: (S1) 1.1577; (P) 1.1597; (R1) 1.1630; More...

Intraday bias in EUR/USD remains neutral as range trading continues. Further decline is expected as long as 1.1691 resistance holds. On the downside, break of 1.1523 will resume the fall from 1.2265, and that from 1.2348 too, for long term fibonacci level at 1.1289 next. However, firm break of 1.1691 will indicate short term bottoming and turn bias back to the upside for stronger rebound, towards 1.1908 resistance.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

Market movers today

• Central banks continue to set the tone with the BOE and Norges Bank due to meet today.
• On BOE, the markets are pricing in a 50-60% probability of a rate hike this year. Economists are divided, but we expect them to hold back from rate hikes until next year.
• For Norges Bank, it is an interim meeting so we expect them to leave the policy rate unchanged and repeat the message from September that another hike can be expected in December.
• It's a fairly quiet day on the data front, only German factory orders and US weekly jobless claims are due.

The 60 second overview

Fed starts tapering: In line with our base case, the Fed announced it will reduce the monthly QE buying pace by USD15bn per month starting from mid-November. This means that QE is concluded in June. As expected, the Fed introduced some flexibility by saying the tapering pace could be adjusted if needed. We think balance of risk is tilted towards a higher tapering pace, although it is not our base case. Fed Chair Powell linked future rate hikes to labour market outcomes unless the Fed fundamentally changes its view on high inflation being transitory. We believe yesterday's announcement marks the beginning of a tightening cycle still expecting two rate hikes next year (25bp both in September and December 2022). For more details see Fed Research - Review: Tapering marks the beginning of a tightening cycle, 3 November.

Strong US data: October ISM non-manufacturing surged to the highest level on record at 66.7 up from 61.9 in the previous month. As another sign the service sector is booming, private employment increased by 571,000 jobs in October according to the ADP report, both beating expectations significantly.

Poland: The National Bank of Poland hiked rates by 75bp yesterday as markets had also priced in. Poland is currently facing the highest inflation rates in 20 years and after the meeting, the governor committed to bringing inflation back to the 2.5% target but not to further hikes.

Equities: Equity markets were higher in Wednesday trading, finishing near best levels as investors bought into the message from Fed. No clear direction among sectors or styles though, with cyclical vs defensives and value vs growth tightly bunched. S&P 500 closed up 0.7%, Nasdaq 1%, Dow 0.3% and Russell 2000 1.8% in another small-cap rally. What is more, VIX ticked even lower, down to 15 which is a year-low. Asian markets are joining the sigh of relief this morning, with most markets up around 0.5-1%. US futures are broadly unchanged.

FI: This week is indeed in hands of central banks with FED (and Lagarde speach) yesterday and BoE today. First, yesterday, the 30Y EUR yields dropped 2-3bp with 10Y mainly unchanged to 1bp lower in Italy/Spain.

FX: We doubt the market will be fooled twice by OPEC+. For EUR/USD, the Fed announcement was appropriately smacked in the middle of market and analyst's expectations. We expect EUR/GBP to move higher on dovish BoE. There will likely be the limited effect of the 75bp hike in Poland for PLN FX. Today's interim Norges Bank meeting is unlikely to do much for NOK.

Credit: Credit markets barely moved yesterday. iTraxx Xover tightened 1.5bp (closing in 258.4bp) and Main widened 0.1bp (in 50.6bp). HY bonds tightened 0.5bp and IG was unchanged.

Nordic macro

At today's interim meeting Norges Bank is widely expected to leave policy rates unchanged, reiterate the prospects for a December rate hike and otherwise deliver little news to markets.

General trend

• Nikkei rises following holiday.
• Japanese cos. due to report earnings include Nintendo, Mitsubishi Motors, Sharp, SUMCO, Softbank Corp, Nikon, Tokai Carbon, Pigeon Corp.
• Hang Seng has remained slightly higher; Property index lags [Kaisa Group sees sharp declines in stock and bond prices; China Aoyuan was downgraded]; Lenovo beat ests and raised dividend.
• Shanghai Composite remained higher during morning trading [Property index resumed decline].
• Hong Kong retail names higher on the report that quarantine free travel may resume with China.
• S&P ASX 200 traded slightly higher.
• WTI Crude tested below $80/bbl.
• South Korea 10-year yield declines ahead of tomorrow’s buyback operation.
• Quiet Asian session seen for USTs.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.
• Companies due to report during the NY morning include AmerisourceBergen, Air Products, Aptiv, Arrow Electronics, BCE, Becton Dickinson, Builders Firstsource, Cars.com, Colfax, CIGNA, Citrix Systems, CyberArk, DISH Network, Dun & Bradstreet, Liberty Media, Geo Group, Gildan Activewear, GOGO, Barrick Gold, Acushnet Holdings, Green Plains, Hanesbrands, Huntington Ingalls, Howmet Aerospace, Installed Building Products, Iron Mountain, Kellogg, Lazydays, Cheniere Energy, Malibu Boats, Moderna, Nikola, Nomad Foods, NRG Energy, NetScout, Penn National Gaming, Parker Hannifin, Planet Fitness, Quanta Services, Papa Johns, Regeneron, Stratasys, TEGNA, Domtar Corp, ViacomCBS, Vulcan Materials, Wafair DENTSPLY, Zoetis.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%.
• DOW.AU Notes first 3 months of FY22 show the resilience of core operations; core EBITA in line with prior year - AGM statement.
• (AU) Australia Q3 Retail Sales ex-inflation M/M: -4.4% v -5.0%e.
• (AU) Australia Sept Trade Balance (A$): 12.2B v 12.4Be; Exports M/M: -6.0% v -3%e; Imports M/M: -2.0% v +1%e.

Japan

• Nikkei 225 opened +1.1%.
• (JP) Bank of Japan (BOJ) Gov Kuroda: Have reaffirmed joint statement between the Govt and BOJ, BOJ will continue YCC even after COVID dies down, no talks on stimulus package - comments after meeting with PM Kishida.
• (JP) Japan Govt planning to provide a subsidy to support firms building new advanced plants for electric vehicle (EV) batteries - Japan press.
• 7203.JP Reports H1 Net ¥1.52T v ¥629.4B y/y; Op ¥1.75T v ¥520.0B y/y; Rev ¥15.5T v ¥11.4B y/y; Announces ¥0.9% Share buyback for ¥150B (0.86% of shares); adjusts guidance.
  7203.JP Exec: Still faces many challenges in supplying enough cars to customers. difficult to pass on higher material costs to customers.
• 4901.JP Reports H1 Net ¥96.3B v ¥67.6B y/y; Op ¥107.9B v ¥56.5B y/y; Rev ¥1.21T v ¥997.4B y/y (co noted was released earlier than planned).
• (JP) Japan Oct Final PMI Services: 50.7 v 50.7 prelim (confirms 1st expansion in 21 months).
• (JP) Japan Trade Min said to have asked the US to eliminate the extra tariff on imports of Japan Steel and Aluminium imports - press.
• (JP) Japan MoF sells ¥200B v ¥200B indicated in 10-year 0.005% inflation-indexed bonds; highest yield -0.357% v -0.174% prior; bid to cover 3.31x v 2.88x prior.

Korea

• Kospi opened +0.9%.
• (KR) South Korea Vice Fin Min: To repurchase KRW2.0T in 5-10 year bonds on Nov 5th; Will preemptively act to stabilize local bond markets.
• (KR) Bank of Korea (BOK): Reiterates to buy bonds if needed.

China/Hong Kong

• Hang Seng opened +0.5%; Shanghai Composite opened %.
• (HK) Hong Kong Monetary Authority (HKMA): Money Markets in Hong Kon continue to operate smoothly with ample liquidity; USD/HKD and interest rates remain steady.
• 992.HK Reports Q2 Net $512M v $310M y/y, Op $817M v $565M y/y Rev $17.9B v $14.5B y/y.
• (CN) China and Hong Kong said to be in talks to resume quarantine free cross border travel, but will be limited to Guangdong province with Shenzhen as the only entry point – SCMP.
• (CN) China President XI: Will deepen international cooperation on shipping; China to ensure smooth global industry and supply chains - speaking to International Import Expo in Shanghai.
• (CN) China State Planner (NDRC): Instructs newspapers to not fabricate stories related to coal.
• (CN) China PBOC sets Yuan reference rate: 6.3943 v 6.4079 prior.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY50B in 7-day reverse repos v CNY50B prior; Net Drain CNY150B v Net drain CNY150B prior.
• (CN) Shanghai Sec News: China PBOC Reverse Repo increase (on weds) show stabilization effort.
• (CN) China Premier Li: Preemptive steps needed to address economic challenges and slowing growth - speaking at State Council meeting Wednesday.
• (CN) China PBOC Digital Currency chief Mu Changchun: 140M people have opened up a digital Yuan account (e-CNY) (late session yesterday).

Other

• (ID) Indonesia Govt to inject an additional IDR60T into the Sovereign Wealth Fund.

North America

• (US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); TAPER TO START IN NOVEMBER WITH MONTHLY REDUCTIONS OF $15B.
• (US) Fed Chair Powell: Fed focus is on controlling what we can control; Focus at this meeting is on tapering asset purchases and not rates; Now is not the time to raise rates - post rate decision Q&A.
• COST Reports Oct total SSS +11.8% (ex-gas and FX) y/y.
• (US) New Jersey re-elects Murphy (D) as Gov (1st time a Democrat Gov has been re-elected since 1977).
• CAKE Reports Q3 $0.65 adj v $0.70e, Rev $754.5M v $760Me.
• ROKU Reports Q3 $0.48 v $0.06e, Rev $680M v $683Me; Sees global supply chain disruptions will likely continue into 2022.
• EA Reports Q2 $1.02 v $1.17e, Rev $1.83B v $1.76Be.
• (US) Law that would target and ban anonymous shell companies said to be delayed at the US Treasury - FT.

Europe

• (EU) ECB chief Lagarde: 2022 is 'off the chart' with respect to interest rates - TV interview.
• (FR) ECB's Villeroy (France): Reiterates that inflation in France should go back down to below 2% next year, no need for ECB to raise rates next year.

Levels as of 01:15ET

• Hang Seng +0.1%; Shanghai Composite +0.6%; Kospi +0.1%; Nikkei225 +0.7%; ASX 200 +0.5%.
• Equity Futures: S&P500 +0.0%; Nasdaq100 +0.2%, Dax -0.0%; FTSE100 +0.4%.
• EUR 1.1617-1.1589; JPY 114.25-113.96; AUD 0.7470-0.7440; NZD 0.7179-0.7144.
• Commodity Futures: Gold +0.7% at $1,775/oz; Crude Oil -1.0% at $80.06/brl; Copper +0.9% at $4.39/lb.

Daily Pivots: (S1) 1.3632; (P) 1.3662; (R1) 1.3717; More...

Intraday bias in GBP/USD is turned neutral with current recovery, but further decline is in favor with 1.3708 minor resistance intact. Below 1.3604 will target a test on 1.3410 low. Break there will resume larger decline from 1.4280. On the upside, though, break of 1.3708 minor resistance will turn bias back to the upside for 1.3833 resistance again. Decisive break of 1.3833 will re-affirm the case that corrective fall from 1.4248 has completed at 1.3410 already.

In the bigger picture, the structure of the fall from 1.4248 suggests that it's a correction to the up trend from 1.1409 (2020 low) only. While deeper fall cannot be ruled out yet, downside should be contained by 38.2% retracement of 1.1409 to 1.4248 at 1.3164, at least on first attempt, to bring rebound. On the upside, firm break of 1.4376 key resistance (2018 high) will add to the case of long term bullish reversal. However, sustained trading below 1.3164 will revive some medium term bearishness and target 61.8% retracement at 1.2493.

US stocks surged to new records overnight despite Fed's tapering announcement. Positive sentiments also continued in general in Asia. Dollar remains mixed for now and traders are probably awaiting tomorrow's non-farm payroll report before taking a commitment. Focus will now turn to BoE rate decision, as Sterling is trading with an undertone.

Technically, The general pull back in major global benchmark yield is capping Yen crosses's rally attempts. But judging from the structure of the price actions, the crosses are clearly in consolations and upside breakouts are in favor, just when. We'd pay close attention to 133.44 resistance in EUR/JPY, 158.19 resistance in GBP/JPY and 93.00 resistance in CADP/JPY to gauge the timing of the breakouts.

In Asia, at the time of writing, Nikkei is up 0.75%. Hong Kong HSI is up 0.27%. China Shanghai SSE is up 0.59%. Japan 10-year JGB yield is down -0.009 at 0.075. Overnight, DOW rose 0.29%. S&P 500 rose 0.65%. NASDAQ rose 1.04%. 10-year yield rose 0.030 to 1.579.

US stocks surged after Fed tapering, NASDAQ broke projection level

As widely anticipated, the Fed announced to taper its QE program. The Fed funds rate was kept unchanged at 0-0.25%. Fed continued to view inflation as "transitory" and did not appear to think that a rate hike was imminent.

Suggested readings on FOMC:

• Fed Will Start Reducing Asset Purchases in Coming Weeks. Not in a Rush to Raise Rate
• Fed Recap: Taper time
• Fed Announces QE Taper
• It's Taper Time
• Fed chair Powell press conference live stream
• Fed reduces net monthly treasury purchases by 10B, MBS by 5B, to lower at same pace ahead
• (FED) Federal Reserve Issues FOMC Statement

US stocks surged to new record highs overnight despite Fed's tapering announcement. NASDAQ's break of 61.8% projection of 13002.52 to 15403.43 from 14181.69 at 15665.44 is a sign that it's in another acceleration phase. For now near term outlook will stay bullish as long as this week's low at 15470.74 holds. Next target will be 100% projection at 16582.59.

Australia retail sales rose 1.3% mom in Sep, down a record -4.4% qoq in Q3

Australia retail sales rose 1.3% mom, 1.7% yoy in September. For the quarter, sales dropped a record -4.4% qoq.

Ben James, Director of Quarterly Economy Wide Statistics said: "The Delta outbreak from late June led to protracted lockdowns in many mainland jurisdictions, with the restrictions causing many retailers to close their physical stores throughout the September quarter. This resulted in the largest quarterly fall in national sales volumes ever recorded."

Also released, goods and services exports dropped -6% mom to AUD 44.97B in September. Goods and services imports dropped -2% mom to AUD 32.73B. Trade surplus came in at AUD 12.24B, versus expectation of AUD 12.22B.

BoJ Kuroda: YCC to continue even after the pandemic

BoJ Governor Haruhiko Kuroda said his met with new Japanese Prime Minister Fumio Kishida today, and discussed Japan, global economies and financial markets.

Kuroda said he explained BoJ's monetary policy to Kishida, and reiterated the aim to achieve 2% inflation target. When asked about Fed's tapering, he explained that BoJ is in different situation from western central banks.

Also, Kuroda said that yield curve control will continue even after the pandemic is contained.

GBP/CHF extending near term fall as BoE awaited

Today's BoE meeting is, as new BoE Chief Economist Huw Pill described, "live" and "finely balanced". There is a thin majority of economists expecting no change. But market pricing suggests that a hike is not really a surprise. But in either case, the new economic projections, as well as voting would more likely be the things that move markets.

Here are some previews:

• BOE Preview – Rate Hike Cycle to Begin?
• BoE To Hike Rates, Pave Way For Big Central Banks, But Will Pound Follow?
• BoE Preview: Rate Hike Imminent?

Sterling is generally soft ahead of BoE' rate decision. GBP/CHF broke through 1.2467 support this week and resumed the whole decline from 1.3070. For now the structure of the fall suggests that it's corrective in nature. Hence, even in case of deeper decline, we'd expect strong support from 1.2259 to contain downside and bring rebound.

Nevertheless, while break of 1.2541 minor resistance will bring recovery, break of 1.2759 resistance is needed to signal a near term bullish reversal. Otherwise, outlook will be neutral at best.

Elsewhere

Germany factor orders, Eurozone PMI services final and PPI, Swiss SECO consumer climate and UK PMI construction will be released in European session. Later in the day, Canada will release trade balance. US will release jobless claims, trade balance and non-farm productivity.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3632; (P) 1.3662; (R1) 1.3717; More...

Intraday bias in GBP/USD is turned neutral with current recovery, but further decline is in favor with 1.3708 minor resistance intact. Below 1.3604 will target a test on 1.3410 low. Break there will resume larger decline from 1.4280. On the upside, though, break of 1.3708 minor resistance will turn bias back to the upside for 1.3833 resistance again. Decisive break of 1.3833 will re-affirm the case that corrective fall from 1.4248 has completed at 1.3410 already.

In the bigger picture, the structure of the fall from 1.4248 suggests that it's a correction to the up trend from 1.1409 (2020 low) only. While deeper fall cannot be ruled out yet, downside should be contained by 38.2% retracement of 1.1409 to 1.4248 at 1.3164, at least on first attempt, to bring rebound. On the upside, firm break of 1.4376 key resistance (2018 high) will add to the case of long term bullish reversal. However, sustained trading below 1.3164 will revive some medium term bearishness and target 61.8% retracement at 1.2493.

Economic Indicators Update

Today's BoE meeting is, as new BoE Chief Economist Huw Pill described, "live" and "finely balanced". There is a thin majority of economists expecting no change. But market pricing suggests that a hike is not really a surprise. But in either case, the new economic projections, as well as voting would more likely be the things that move markets.

Here are some previews:

• BOE Preview – Rate Hike Cycle to Begin?
• BoE To Hike Rates, Pave Way For Big Central Banks, But Will Pound Follow?
• BoE Preview: Rate Hike Imminent?

Sterling is generally soft ahead of BoE' rate decision. GBP/CHF broke through 1.2467 support this week and resumed the whole decline from 1.3070. For now the structure of the fall suggests that it's corrective in nature. Hence, even in case of deeper decline, we'd expect strong support from 1.2259 to contain downside and bring rebound.

Nevertheless, while break of 1.2541 minor resistance will bring recovery, break of 1.2759 resistance is needed to signal a near term bullish reversal. Otherwise, outlook will be neutral at best.

BoJ Governor Haruhiko Kuroda said his met with new Japanese Prime Minister Fumio Kishida today, and discussed Japan, global economies and financial markets .

Kuroda said he explained BoJ's monetary policy to Kishida, and reiterated the aim to achieve 2% inflation target. When asked about Fed's tapering, he explained that BoJ is in different situation from western central banks.

Also, Kuroda said that yield curve control will continue even after the pandemic is contained.

Australia retail sales rose 1.3% mom, 1.7% yoy in September. For the quarter, sales dropped a record -4.4% qoq.

Ben James, Director of Quarterly Economy Wide Statistics said: "The Delta outbreak from late June led to protracted lockdowns in many mainland jurisdictions, with the restrictions causing many retailers to close their physical stores throughout the September quarter. This resulted in the largest quarterly fall in national sales volumes ever recorded."

Full release here.

Also released, goods and services exports dropped -6% mom to AUD 44.97B in September. Goods and services imports dropped -2% mom to AUD 32.73B. Trade surplus came in at AUD 12.24B, versus expectation of AUD 12.22B.