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The AUD/USD currency pair bounced off the lower boundary of an ascending channel pattern at 0.7490 during the first half of Wednesday's trading session. However, the exchange rate breached the channel pattern at the end of the day.

Everything being equal, the exchange rate could continue to trend lower during the following trading session. The potential target for bearish traders will be near the 0.7450 area.

Nevertheless, the 200– hour simple moving average at 0.7479 could still provide support for the currency exchange rate within this session.

On Wednesday, the common European currency declined by 74 pips or 0.56% against the Japanese Yen. The currency pair breached the 50– hour simple moving average during yesterday's trading session.

Technical indicators suggest selling signals on the 4H time-frame chart. Most likely, the EUR/JPY exchange rate could continue to trend lower in a descending channel pattern within this session.

However, sellers may encounter support at 131.59 during Thursday's trading session.

General trend

• RBA official commented after recently released CPI data; Next week’s RBA meeting (Nov 2nd) in focus as 3-year yields remain above the target.
• Will the RBA conduct another unscheduled bond buying operation on Fri (Oct 29th)?
• 2-yr UST yield rose amid jump in AU yields.
• Australia Q3 export prices weighed down by drop in iron ore demand from China.
• China Coal prices extend drop on moves by the NDRC; Chinese base metals also trade generally lower.
• Shanghai Composite has extended decline [Energy and Coal cos. drop; Property index continues to drop].
• Hang Seng has reversed the opening gain; Property sector contagion moves to Kaisa Group.
• Nikkei 225 has remained lower; Fanuc and Hitachi drop after cutting forecasts.
• Japanese companies due to report earnings include Panasonic, Sony, Renesas, Komatsu, Takeda Pharmaceuticals.
• S&P ASX 200 has seen a modest drop [Resources index lags amid lower metals prices].
• Samsung Electronics rises after final Q3 results, outlook comments.
• ECB decision due later today.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.
• China bonds and WGBI [bond index] in focus [FTSE Russell previously stated that China bonds to be included in the WGBI over a period of 36 months, effective from Oct 29th 2021 (Fri)].
• Companies due to report during the NY morning include AllianceBernstein, AGCO, American Tower, Allegheny Technologies, Baxter International, Bombardier, Peabody Energy, Carrier, Caterpillar, CBRE, Carlyle Group, Check Point Software, Comcast, Daqo New Energy, Hershey, HTZZ, Intercontinental Exchange, Imax, Illinois Tool Works, KBR, Keurig DR Pepper, Laboratory Corp, MasterCard, Moody’s, Altria, Merck, Newmont, Oshkosh, Overstock, Reliance Steel, Sonic Automotive, Shopify, Sirius Xm, SolarWinds, Stanley Black & Decker, Molson Coors, Tempur Sealy, Textron, Visteon, Willis Towers Watson, YUM! Brands.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%.
• (AU) Reserve Bank of Australia (RBA) Deputy Gov Debelle: Monetary policy is looking to drive higher inflation; A little more inflation is welcome, but not a lot more.
• NCM.AU Reports Q1 gold production 396.2K oz v 503K y/y at AISC $1,270/oz v $980/oz y/y; Copper production 24.5Kt v 34.7Kt y/y.
• ANZ.AU Reports FY21 (A$) adj Cash profit 6.19B v 3.76B y/y; NII 14.16B v 14.05B y/y.
• COL.AU Reports Q1 (A$) Rev 9.76B v 9.61B y/y; early Q2 tracking in line with Q1.
• JBH.AU Gives Q1 update: In Oct seeing sales momentum continue and have benefited from re-opening of stores in NSW; JB HI-FI Australia total sales -7.5% v 27.3% y/y; SSS -7.9% v 27.6% y/y.
• (AU) Reserve Bank of Australia (RBA) Offers to buy A$1.60B in Govt bonds v A$1.60B prior; does not offer to buy April 2024 bonds.
• (AU) AUSTRALIA Q3 EXPORTS PRICE INDEX Q/Q: 6.2% V 6.5%E; IMPORTS PRICE INDEX Q/Q: 5.4% V 3.4%E.
• (AU) Nomura: Reserve Bank of Australia (RBA) Likely to weaken its YCC policy at next week's policy meeting.

Japan

• Nikkei 225 opened -0.8%.
• (JP) Bank of Japan (BOJ) Quarterly Outlook for Economic Activity and Prices: Cuts GDP and CPI outlook for 2021.
• (JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED.
• 4507.JP Expected to start production of COVID vaccine early 2022 – Nikkei.
• (JP) JAPAN SEPT RETAIL SALES M/M: 2.7% V 1.5%E; Y/Y: -0.6% V -2.4%E.
• (JP) Japan PM Kishida: Will take oil price support measures - Japan press.

Korea

• Kospi opened -0.1%.
• 005930.KR Reports final Q3 (KRW) Net 12.3T v 9.36T y/y; Op 15.8T v 12.4T y/y, Rev 74.0T v 67.0T y/y.
• (KR) Bank of Korea (BOK) To cut size of Monetary Stabilization bond issuance in Nov to KRW6.6T down from 9.0T in Oct.

China/Hong Kong

• Hang Seng opened +0.1%; Shanghai Composite opened -0.4%.
• 3333.HK Reportedly takes steps to enter talks with bondholders' advertisers over debt - press.
• (CN) China Securities Times: Vegetable price increase unlikely to increase overall CPI.
• 1876.HK Reports Q3 Net $358M v $326M y/y, Adj EBIT $450M v $443M y/y, Rev $1.88B v $1.82B y/y.
• (CN) China Premier Li: Countries need to follow basic principles in international cooperation to resolve maritime disputes.
• (CN) China State Planner (NDRC): Studying definition of coal companies' definition of excessive profits.
• (CN) China PBOC sets Yuan reference rate: 6.3957 v 6.3856 prior.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY200B in 7-day reverse repos v CNY200B prior; Net inject CNY100B v Net inject CNY100B prior.
• (CN) China Foreign Ministry spokesman Zhao Lijian: Recent comments by Sec of State Blinken on Taiwan violates “one China “understanding between two sides; recent US actions could bring huge risks (yesterday late session).
• North America
• F Reports Q3 $0.51 v $0.29e, Rev $35.7B v $34.2Be; Raises FY21 outlook; Says Ford has momentum from and expects to build on its strong performance in 2021.
• (US) 21 house Democrats come out against IRS bank reporting measure.
• YUMC Reports Q3 $0.22 adj v $0.66 y/y, Rev $2.55B v $2.35B y/y.

Europe

• TIT.IT Reports Q3 organic EBITDA €1.67B v €1.72B y/y, Rev €3.84B v €3.9B y/y.
• (FR) French Govt: 2 UK fishing boats given warning Wednesday night by France maritime vessel off the coast of Le Havre.
• AIR.FR Reports Q3 adj Net €404M v -€767M y/y, Adj EBIT €666M v €820M y/y, Rev €10.5B v €11.2B y/y.

Levels as of 01:15ET

• Hang Seng -0.3%; Shanghai Composite -0.9%; Kospi +0.2%; Nikkei225 -0.9%; ASX 200 -0.4%.
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.1%; FTSE100 +0.1%.
• EUR 1.1610-1.1589; JPY 113.86-113.50; AUD 0.7523-0.7480; NZD 0.7179-0.7152.
• Commodity Futures: Gold +0.2% at $1,802/oz; Crude Oil -1.7% at $81.27/brl; Copper +0.4% at $4.41/lb

Daily Pivots: (S1) 1.1583; (P) 1.1605; (R1) 1.1624; More...

Intraday bias in EUR/USD remains neutral at this point. On the upside, break of 1.1668 will target 55 day EMA (now at 1.1688). Sustained break there will be a sign that larger correction from 1.2348 has completed. Stronger rally would be seen to 1.1908 resistance for confirmation. On the downside, though, break of 1.1571 minor support will turn bias back to the downside for 1.1523 support instead. Break there will resume larger fall from 1.2348.

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.

Daily Pivots: (S1) 1.3707; (P) 1.3744; (R1) 1.3778; More...

Intraday bias in GBP/USD remains neutral as consolidation from 1.3833 is still extending. Further rise is expected with 1.3646 support intact. On the upside, above 1.3833 will target 1.3912 key structural resistance. Firm break there will indicate that the correction from 1.4248 is complete with three waves down to 1.3410. Further rally would then be seen to retest 1.4248 high. However, break of 1.3646 will turn bias to the downside for retesting 1.3410 low.

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.

Daily Pivots: (S1) 0.9163; (P) 0.9183; (R1) 0.9202; More....

USD/CHF is staying in consolidation from 0.9148 and intraday bias remains neutral first. Further decline is still in favor with 0.9251 minor resistance intact. Corrective rise from 0.8927 should be complete with three waves up to 0.9367, on bearish divergence condition in daily MACD. Below 0.9148 will target 0.9017 support first, and then 0.8925 support next. On the upside, however, break of 0.9251 minor resistance will turn bias back to the upside for retesting 0.9367 instead.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not completed 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) 113.41; (P) 113.81; (R1) 114.24; More...

Intraday bias in USD/JPY remains neutral as consolidation from 114.69 is extending. On the downside, break of 113.40 minor support will bring deeper pull back. But downside should be contained above 112.07 resistance turned support to bring rebound. 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.

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) 0.7493; (P) 0.7514; (R1) 0.7541; More...

AUD/USD is staying in consolidation below 0.7545 temporary top and intraday bias remains neutral at this point. In case of another retreat, downside should be contained by 0.7377 support to bring another rally. On the upside, break of 0.7454 will resume the rise from 0.7105 to 161.8% projection of 0.7105 to 0.7477 from 0.7169 at 0.7771.

In the bigger picture, with 0.6991 cluster support (38.2% retracement of 0.5506 to 0.8006 at 0.7051) intact, we're seeing price action from 0.8006 as a correction only. That is, up trend from 0.5506 low would resume after the correction completes. In that case, main focus will be 0.8135 key resistance (2018 high). Sustained break there will carry larger bullish implications. However, sustained break of 0.6991 will argue that the whole medium term trend has indeed reversed.

Daily Pivots: (S1) 1.2299; (P) 1.2365; (R1) 1.2429; More...

USD/CAD is still staying in consolidation above 1.2286 temporary low despite some jitters. Intraday bias remains neutral first. Upside of recovery should be limited by 1.2497 resistance to bring fall resumption. On the downside, break of 1.2286 will resume the fall from 1.2947 to 161.8% projection of 1.2947 to 1.2492 from 1.2894 at 1.2158 next.

In the bigger picture, the rejection by 38.2% retracement of 1.4667 to 1.2005 at 1.3022 argues that rebound from 1.2005 is merely a corrective rise, which is complete. More importantly, the down trend from 1.4667 (2020 high) is not over yet. Sustained break of 1.2005 will extend the down trend to next long term fibonacci level at 61.8% retracement of 0.9406 to 1.4689 at 1.1424. In any case, outlook will not turn bullish as long as 1.2947 resistance holds.

Consolidative trading continues in the forex markets in general. Canadian Dollar spiked higher after more hawkish than expected BoC overnight, but there was no follow through buying. BoJ's decision to stand pat triggered little reactions. Expectation of an earlier RBA rate hike intensified after the central bank let target yield surges sharp today. Yet, Aussie basically shrugs off the news. Focus will now turn to ECB meeting today.

Technically, broadly speaking, near term outlook in Yen and, to a lesser extent, Dollar remain bearish. Focus is mainly on the timing of breakout. For that, we'll pay more attention to related commodity currency pairs. In particular 0.7545 temporary top in AUD/USD, 1.2286 temporary low in USD/CAD, 86.24 temporary top in AUD/JPY and 93.00 temporary top in CAD/JPY. Break of these level could lead the return of selling in Yen and Dollar.

In Asia, at the time of writing, Nikkei is down -0.95%. Hong Kong HSI is down -0.09%. China Shanghai SSE is down -0.93%. Singapore Strait Times is down -0.39%. Japan 10-year JGB yield is down -0.0058 at 0.092. Overnight, DOW dropped -0.74%. S&P 500 dropped -0.51%. NASDAQ closed flat. 10-year yield dropped notably by -0.090 to 1.529.

Hawkish BoC ended QE, indicates earlier rate hike

The BoC surprised to the hawkish side at the October meeting overnight. Policymakers announced to end the QE program and begin the reinvestment process, compared with consensus of a reduction to the weekly purchase of CAD1B. While leaving the overnight rate unchanged at the effective lower bound of 0.25%, the timing for the first rate hike was pushed forward. While downgrading GDP growth forecasts for this year and 2022, inflation projections were revised higher through to 2023.

Suggested readings on BoC

• Hawkish BOC Ends QE. May Hike Interest Rate in 2Q22 the Earliest
• Bank of Canada Ends Quantitative Easing Program
• BoC Ends QE, Advances Rate Hike Timing
• Bank of Canada Adjusts Forward Guidance, Now Sees Excess Slack Absorbed in the Middle Quarters of 2022
• BoC ends QE, could lift rates in middle quarters next year
• BoC press conference live stream

BoJ stands pat, downgrades 2021 GDP and CPI forecasts

BoJ kept monetary policy unchanged today as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.1%. 10-year yield target is maintained at around 0%, with JGB purchases without upper limit. It also reiterated that BoJ will continue with QQE with YCC "as long as it is necessary" for maintaining inflation at 2% target in a stable manner. It will also continue expanding the monetary base core CPI exceeds 2% and stays above in a stable manner.

Economic projections comparing to July forecast:

• Fiscal 2021 GDP growth downgraded from 3.8% to 3.4%.
• Fiscal 2022 GDP growth upgraded from 2.7% to 2.9%.
• Fiscal 2023 GDP growth unchanged at 1.3%.
• Fiscal 2021 CPI core downgraded from 0.6% to 0.0%.
• Fiscal 2022 CPI core unchanged at 0.9%.
• Fiscal 2023 CPI core unchanged at 1.0%.

Also from Japan, retail sales dropped -0.6% yoy in August, versus expectation of -2.3% yoy.

Markets expect earlier RBA rate hike as it let yield surge

Australian bond yields surge sharply today after RBA skipped the asset purchases to defend the 0.10% April 2024 yield target. Yield on April 2024 AGS more than doubled to above 0.5%. Meanwhile, 3-year AGS yield extended recent rally and accelerated to as high as 1.19%.

The development prompted speculations that RBA would change its forward guidance to indicate that conditions for rate hike could come earlier than 2024. Westpac said it now confirm its expectation that RBA hike would come in February 2023. CBA is expecting a November 2022 hike while ANZ is forecasting a hike in H2 of 2023.

Separately, RBA Deputy Governor Guy DeBelle told the Senate today, "the monetary policy settings we have in place, as do other central banks around the world, are looking to generate a little higher inflation than we have seen over the last five, six years, as well generate more jobs." Nevertheless, he added, "a little bit more inflation is welcome, a lot more inflation isn't."

ECB to stand pat, some previews

ECB is widely expected to keep monetary policy unchanged today. The central bank might shed some light on asset purchases after the end of the emergency program PEPP next March. But the details on what to follow will only be revealed at the December meeting, together with new economic projections. There are some expectations that the flexibility of the original APP would be increased, but this is far from being certain.

There are also speculations of an earlier rate hike, with market pricing it to happen by 2022 year end. But President Christine Lagarde would likely talk down such expectations. Instead, ECB would just reiterate that the policy rates would "remain at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon and judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term".

Some previews on ECB:

• ECB Preview – ECB to Convince Market Low Interest Rate Still Necessary Despite Rising Inflation
• ECB Meeting Preview: What To Expect?
• ECB Could Play Some Defense
• ECB Preview – The Prelude to December

Elsewhere

Germany unemployment and CPI, and Eurozone economic sentiment will be released in European session. Later in the day, US will release GDP, jobless claims and pending home sales.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2299; (P) 1.2365; (R1) 1.2429; More...

USD/CAD is still staying in consolidation above 1.2286 temporary low despite some jitters. Intraday bias remains neutral first. Upside of recovery should be limited by 1.2497 resistance to bring fall resumption. On the downside, break of 1.2286 will resume the fall from 1.2947 to 161.8% projection of 1.2947 to 1.2492 from 1.2894 at 1.2158 next.

In the bigger picture, the rejection by 38.2% retracement of 1.4667 to 1.2005 at 1.3022 argues that rebound from 1.2005 is merely a corrective rise, which is complete. More importantly, the down trend from 1.4667 (2020 high) is not over yet. Sustained break of 1.2005 will extend the down trend to next long term fibonacci level at 61.8% retracement of 0.9406 to 1.4689 at 1.1424. In any case, outlook will not turn bullish as long as 1.2947 resistance holds.

Economic Indicators Update