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On Friday, the AUD/USD currency exchange rate failed to pass the resistance of the 0.7540/0.7555 zone. The event resulted in a decline, which passed the support of the lower trend line of the October channel up pattern and the 55-hour simple moving average.

Moreover, on Monday morning, the rate passed the support of the 200-hour SMA, which kept the rate up during the second part of Friday's trading.

If the AUD/USD continues to decline, the rate would look for support in the 0.7430/0.7440 zone. This zone provided the pair with resistance during the middle of October.

Meanwhile, a potential recovery would face the resistance of the 200-hour SMA near 0.7500, the 55-hour SMA at 0.7525. Above the SMAs, the 0.7540/0.7555 zone might once again provide resistance.

The EUR/JPY currency exchange rate found support in the zone that surrounds the 131.60 mark, on Friday. Since then, the currency pair has been recovering. On Monday morning, the pair reached the resistance of the 200-hour simple moving average near 132.40.

In the case that the rate surges above the 200-hour SMA and the 132.40 mark, the pair might find resistance in the previous week's high level zone near 132.75.

On the other hand, a potential decline might look for support in the 55-hour SMA near 132.20 before reaching the 131.60 level.

Gold is struggling to remain above the 1,800 handle and has been still hovering within a consolidation area of 1,723-1,834 since June 16. The simple moving averages (SMAs) are generally flat and converging, implying a more neutral price behavior.

Technically, the RSI is flattening around the neutral threshold of 50, while the stochastic is heading south towards the oversold region.

If the price closes above the 200-day SMA and the 1,800 level, nearby upside resistance could come from 1,814. By breaching this level, buyers may attempt to challenge the channel's upper boundary at 1,834, just ahead of the 1,855 barrier. By overcoming this reinforced border, the price could then hit the 1,918 barrier.

On the downside, sellers may find immediate support between the 20- and 40-day simple moving averages (SMAs) around 1,775 before dropping below the 1,760 support level. The support level of 1,676 may come into focus if the price falls below this strengthened buffer zone before the bears make an attempt to test the support level of 1,723 again.

To sum up, the short-term outlook for gold remains neutral and within a broad range of 1,723-1,834. Only a jump above 1,834 may shift the outlook to bullish or a decline beneath 1,723 may open the door for more decreases.

Market movers today

• ISM Today: Markets continue to be driven by expectations of broad-based monetary policy tightening. Thus far, investors have pretty much ignored signals of the global recovery losing steam. Hence, we are curious to see how the markets react to US ISM Manufacturing release today (consensus 60.3 vs. prev. 61.1). We will also get October final manufacturing PMIs on individual countries in the euro area.
• US non-farm: This week's most interesting data point will be the US non-farm payrolls on Friday, where all eyes will be on wage and jobs growth.
• Central bank activities continues: The week is loaded with central bank meetings with the RBA kicking it off on Tuesday, the NBP and the FOMC meetings on Wednesday, and the BOE and Norges Bank meetings on Thursday.

The 60 second overview

Japan: The ruling Liberal Democratic Party (LDP) held on to a majority in a surprisingly comfortable win at Sunday's parliamentary election in Japan. The Nikkei index rose 2.25% this morning with the outlook for stable government over the next four years and more fiscal stimulus. USD/JPY is trading above 114 this morning amid a stronger USD.

FOMC meeting: This week's main event will be the FOMC later this week. We expect the Fed will announce QE tapering and that the Fed will start tapering immediately with a tapering pace of USD15bn per month (completed in June). Risk is tilted towards a higher tapering pace of USD20bn per month. We expect Powell to repeat that the tapering decision is not related to a future decision on rate hikes. Still, we expect the rhetoric to be more hawkish than in September. Please note that the Fed policy announcement is 19:00 CET (as the EU has switched to winter time this Saturday). The press conference starts 19:30 CET.

G20 meeting: The G20 meeting agreed on a climate deal this weekend. However, it fell short of expectations especially in respect of phasing out the use of coals. The agreed to end financing of coal power, but fell short to phase it out it their own countries. G20 did commit to limit global warning to 1.5% as agreed in the Paris agreement.

COP26: The 26th Conference of the Parties, will kicked off yesterday in Glasgow. The expectation is for both more ambitious country-specific climate targets as well as global agreements on joint action, for instance, to phase-out fossil fuels, finance climate investments in developing countries and protect, restore and defend our ecosystems. Boris Johnson, the prime minister of UK, the host of COP26, has summarized the goals with the phrase "Coal, cars, cash and trees". The G20 decision on coal will also be in focus and pressure for phasing out coal completely will be intense.

FI: The price action on Friday as markets digested the ECB meeting was similar to the expected reaction upon end of net asset purchases announcement. Inflation swaps (5y5y eur) had essentially its worst day since 2011 (similar reacting was recorded once in June 2018), front end repriced higher with now a 10bp ECB rate ECB in July next year and 20bp in October 2022, and spreads widened significantly. The sub 2y has been very vulnerable in the past days with 18m1m €STR up by 17bp since Wednesday. With ECB not wanting to push back, notably on the 2022 pricing, we see the front end near term left with global developments. We do not expect ECB GC members to push back just yet, due to their collective decision not to push back.

FX: NOK proved one of last week's underperformers returning EUR/NOK to the mid- to high 9.70s. EUR/USD will likely head lower as we go through the coming quarters. For Sterling, focus turns to the BoE meeting.

Credit: Performance was mixed on Friday where iTraxx Xover widened almost 4bp and Main 0.7bp. HY bonds closed unchanged and IG ended 0.5bp tighter.

Equities: Equities finished October on a strong as US stocks once again led market higher. Nasdaq posted fresh record closes and capped their fourth-straight week of gains. Growth outperformed value for the fifth consecutive day, bringing the outperformance last week close to 2%.

In US, Dow +0.3%, S&P 500 +0.2%, Nasdaq +0.3% and Russell 2000 -0.03%.

Positive sentiment continuing in Asia this morning led by Japanese stocks rising on back of the LDP win. European and US futures broadly higher this morning.

EUR/USD

Current level - 1.1553

The euro failed to hold onto its gains for the week and, on Friday, the bears sank the pair towards the support of 1.1535. Last week's decline showed that the downtrend is not over yet and it is possible that the sell-offs will continue, with their ultimate target being 1.1410. At the moment, sentiment is negative and a recovery towards 1.1690 seems unlikely. The first support for the buyers is the key level of 1.1535, and first resistances are 1.1589 and 1.1622. The zones have been violated several times on both ends and are thus not very reliable. This week is shaping up to be extremely busy in terms of news and events and volatility is likely to remain high, with some of the events having the potential to reverse market trends. Data on the U.S. manufacturing PMI is expected today (14:00 GMT), the Fed will decide on its interest rate (18:00 GMT) on Wednesday, and the data on the U.S. non-farm payrolls will be released on Friday (12:30 GMT).

USD/JPY

Current level - 114.15

The currency pair successfully tested the support of 113.21, and the rally then managed to breach the resistance of 113.70 and 114.10. The bulls are likely to try and test the level of 114.42 next. In case of a breach of this zone, the rally can continue further towards the targets of 115.25 and 117.00. If the bulls fail, a possible scenario is for the trading to continue in the range between the support of 113.20 and the resistance of 114.42.

GBP/USD

Current level - 1.3679

The Sterling also took losses in the past week, with the decline being limited by the support of 1.3665. The key support remains 1.3575, and the first resistances are 1.3715 and 1.3760. There may be a change in the current sentiment if the resistance of 1.3715 is violated, and if prices rise above 1.3800, a continuation of the uptrend can be expected. The interest rates decision of the Bank of England this Thursday at 13:00 GMT will be decisive for the movement of the pair. A potential interest rate hike would shoot the sterling towards 1.3950.

The Aussie Dollar failed to clear the 0.7550 resistance and started a fresh decline against the US Dollar. The AUD/USD pair broke the 0.7525 support zone to move into a short-term bearish zone.

The pair even traded below the 0.7510 level and the 50 hourly simple moving average. Besides, the pair traded below a key bullish trend line with support near 0.7508 on the hourly chart.

An immediate support on the downside is near the 0.7500 level. The next key support is near the 0.7480 level. A clear break below the 0.7480 support could lead the pair towards the 0.7450 support. Any more losses may possibly open the doors for a move towards the 0.7400 level.

On the upside, the pair is facing hurdles near 0.7520 on FXOpen. The next major resistance is near the 0.7550 level, above which the pair could rise steadily towards the 0.7585 level in the near term.

Daily Pivots: (S1) 155.53; (P) 156.32; (R1) 156.84; More...

Intraday bias in GBP/JPY remains neutral for the moment. Correction from 158.19 could extend lower. But downside should be contained above 153.66 support to bring rebound. On the upside, above 158.19 will resume larger up trend from 123.94. Next target will be 61.8% projection of 136.96 to 156.05 from 148.93 at 160.72.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). The stay above 55 week EMA affirms medium term bullishness. Current rise should now target 61.8% retracement 195.86 (2015 high) to 122.75 at 167.93 next. In any case, outlook will remain bullish as long as 148.93 structural support hold, even in case of deep pull back.

The week starts on quite a mixed sentiment in Asia. Japanese stocks rebound as reaction to the LDP victory in keeping an outright majority in lower house. The Nikkei rallied 2.5%, while Chinese equities remained under pressure as the official manufacturing PMI revealed a read below the 50 mark for the second month, pointing at an unpleasant slowdown in activity due to power shortages and rising commodity prices.

Elsewhere, the US equities had quite a flattish session on Friday, but all three major indices posted gains to the weekly closing bell. Nasdaq even posted a fresh record despite the disappointment on Apple and Amazon earnings, which saw their stock prices gap significantly lower at the open, but then recover to the close. Exxon and Chevron had a strong quarter as well.

Earnings continue flowing in this week, but a major part of the game is already played. 80% of the S&P500 companies that reported earnings so far, beat expectations.

Now the focus could shift to the macroeconomic calendar. We have important meetings this week: Reserve Bank of Australia (RBA), Federal Reserve (Fed), Bank of England (BoE) and OPEC meet.

Will OPEC increase output?

OPEC will meet on November 4th. The expectation is that the oil producer companies should restore some more of the production they halted during the pandemic months as the deepening energy crisis and the rising demand should put even Saudi’s mind at ease that the supply could be increased without too much harm on the price levels. The barrel of US crude remains on a steep rising path, and the rally is broadly expected to extend toward the $90 per barrel mark.

And that sustained upside pressure in energy prices should continue keeping the inflation expectations high and the central bank hawks alert.

Fed to start taper, but focus on the timing of the first rate hike

The Fed is expected to announce tapering its massive bond purchases this week. The tapering should be gradual, and that expectation is already priced in. Unless we see an aggressive pullback from the Fed, which I doubt, the market reaction should not be too aggressive, as the hawkish expectations have been already being priced in quite aggressively over the past couple of weeks.

Small parentheses: And that hawkish pricing is especially true for the European yield spread which is completely going against Christine Lagarde’s, seriously unjustified, dovishness on the policy.

What really matters for the Fed is the timing if the first rate hike. At this point, it looks pretty much unrealistic keeping the rates unchanged until 2023 and the market is already pricing in two 25bp rate hikes by the end of 2022. According to the activity in Fed funds futures, the first rate hike could come as soon as in June next year. Let’s see whether Jerome Powell will do the same comedy than Christine Lagarde and try to convince the market that everything is fine – whereas it is not, or will he be a bit smarter and accept the fact that we have a rising inflation problem which may not go away as fast, and the policy will need to adopt. In both cases, I believe the risks are tilted to the hawkish side, but for the equity markets, the strong earnings should continue keeping the mood sweet enough to avoid a Fed-induced selloff.

BoE could act as soon as this week

Finally, the BoE could raise interest rates as soon as this week, this is what the activity on MPC Sonia futures tell us. And if it’s not this month, well it should be the next. In Cable, there is a certain will to reverse the weakness that we see building since June. I am still positive that the pound has potential to advance toward the 1.40 mark. But of course, the dollar will say the last word

Daily Pivots: (S1) 131.29; (P) 132.10; (R1) 132.60; More....

Intraday bias in EUR/JPY remains neutral first. Correction from 133.44 could extend lower. But downside downside should be contained above 130.45 resistance turned support to bring rebound. On the upside, above 133.44 will target 134.11 high first. Firm break there will resume larger up trend from 114.42. Next target is 61.8% projection of 121.63 to 134.11 from 127.91 at 135.62.

In the bigger picture, rise from 114.42 (2020 low) is still in progress and the strong support support from 55 week EMA affirms medium term bullishness. Further rise would be seen to retest 137.49 (2018 high). Decisive break there will resume the whole long term rise from 109.03 (2016 low). Next target will be 100% projection of 109.03 to 137.49 from 114.42 at 142.88. This will now remain the favored case as long as 127.91 support holds.

Daily Pivots: (S1) 0.8427; (P) 0.8450; (R1) 0.8467; More...

Intraday bias in EUR/GBP remains neutral for consolidation from 0.8401. On the downside, break of 0.8401 will resume larger down trend from 0.9499 to 0.8276 key long term support next. On the upside, though, break of 0.8474 will bring stronger rebound back to 55 day EAM (now at 0.8509) instead.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8656 resistance holds, towards long term support at 0.8276. However, firm break of 0.8656 resistance would argue that a medium term bottom was already formed. Stronger rise would be seen to 0.8861 support turned resistance to confirm completion of the corrective pattern.