Sample Category Title

Notes/Observations

• Focus on upcoming central bank meetings and debate policy in the face of higher yields.
• Companies earnings season heating up. Companies due to report during the NY morning include Asbury Automotive, Archer-Daniels Midland, Arch Resources, Armstrong World Industries, Centene, Dana, Ecolab, GE, Corning, Hasbro, JetBlue, Eli Lilly, Lockheed Martin, 3M, Paccar, PulteGroup, Polaris, Pentair, Raytheon, Sherwin-Williams, S&P Global, UPS, Waste Management, Xerox.

Asia

• South Korea Q3 Preliminary GDP Q/Q: 0.3% v 0.6%e; Y/Y: 4.0% v 4.3%e.
• Chinese Developer Modern Land [11107.HK] missed payment on USD-denominated bond.
• China PBOC Open Market Operation (OMO) injected CNY200B in 7-day reverse repos v CNY200B prior; Net injection remained at CNY190B.
• China Securities Journal (CSJ): PBOC liquidity injections showed less prospects for RRR cut [in line].
• China State Planner (NDRC) was said to be considering floating coal prices based off of benchmark pricing; Studying mechanism to stabilize coal prices over long term.
• China Vice Premier Liu He and US Treasury Sec Yellen spoke on Tuesday (Oct 26th) on economy, and bilateral and global cooperation.
• Recent poll PM Kishida’s ruling Liberal Democratic Party said to likely to keep substantially more than half the seats in parliament in this weekend’s general election.

Coronavirus

• Biden administration to allow international travelers to enter the US as long as they had received any vaccine authorized by the WHO from November 8th.
• New Zealand PM Ardern reiterated stance that country to continue to lockdowns until vaccination targets (90% of population) was met.

Europe

• France to use "go slow" strategy for customs checks for UK lorries heading into Christmas season in retaliation over fishing dispute.
• UK Chancellor of the Exchequer Sunak (Fin Min) expected to announce a salary rise next year for public sector workers, will also raise National Living Wage from £8.91 to £9.50/hr.

Americas

• Sen Manchin (D-WV) saw reaching a 'framework deal' for the economic agenda this week; Still working on topline figure for spending with his topline remaining at $1.5T.
• SEC said to have convinced other regulators and would get the go ahead to make moves to crack down on stablecoin market.

Energy

• Russia Energy Min Novak stated that he expected OPEC+ to increase oil output by 400K bpd in November (as previously agreed.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.64% at 475.24, FTSE +0.79% at 7,279.91, DAX +1.10% at 15,770.40, CAC-40 +0.83% at 6,768.27, IBEX-35 +0.91% at 9,002.50, FTSE MIB +0.77% at 27,021.00, SMI +0.54% at 12,128.22, S&P 500 Futures +0.42%].
• Market Focal Points/Key Themes: European indices open marginally higher across the board and advanced in the green as the session progressed; sectors leading to the upside include consumer discretionary and industrials; sectors dragging their feet include financials and telecom; DAX index supported by outperformance in the automotive subsector; oil and gas subsector under pressure following lower crude price and Novak stating OPEC+ likely to maintain production increase at next meeting; Austria closed for holiday; River & Mercantile to divest its Solutions buisness; earnings expected during upcoming US session include Alphabet, Twitter, ASM International and SEB.

Equities

• Consumer discretionary: Michelin [ML.FR] -1% (earnings).
• Energy: Norsk Hydro [NHY.NO] -1.5% (earnings).
• Financials: UBS [UBSG.CH] +1.5% (earnings).
• Healthcare: Novartis [NOVN.CH] +1% (earnings), Reckitt [RKT.UK] +5.5% (earnings).
• Industrials: Thales [HO.FR] +1% (earnings), Faurecia [EO.FR] -2.5% (earnings).
• Telecom: Orange [ORA.FR] -3% (earnings).

Speakers

• ECB's de Cos (Spain) noted that policies aimed at promoting transition to a carbon-neutral economy likely to affect the volatility of headline inflation.
• ECB Q3 Lending Survey noted that credit standards remained broadly unchanged for firms and tightened for housing loans. Loan demand by firms and households continued to increase.
• German Econ Ministry said to cut 2021 GDP forecast while raising the 2022 outlook. To cut 2021 GDP growth forecasts from 3.5% to 2.6%. To raise 2022 GDP growth forecast from 3.6% to 4.1%.
• EU Commissioner Breton stated that he was in favor of Nord Stream 2 pipeline. Believed Poland would never leave the EU.
• France Fin Min Le Maire noted that nuclear energy would be seen as green in EU taxonomy.
• Turkey President Erdogan said to have made a U-turn on his threat to expel Western ambassadors.

Currencies/Fixed Income

• Quiet trading as markets await various central bank decisions this week (Canada, BOJ and ECB are the main ones). Dealers noted that the greenback could resume its recent rally into next week, as the FOMC meeting approached and the reality of the beginning of Fed tapering.
• Dealers note that ECB likely to keep a close eye on the current high rates of inflation. Lagarde would likely deflect questions on asset purchases in the face of higher yields until the December meeting. EUR/USD hovering around the 1.16 level in the session.
• TRY currency (Lira) rebounded from record lows after President Erdogan dropped his demand for 10 Western ambassadors to be expelled from the country.

Economic data

• (FI) Finland Sept Unemployment Rate: 7.0% v 6.5% prior.
• (FI) Finland Sept Preliminary Retail Sales Volume Y/Y: 0.6% v 3.4% prior.
• (ES) Spain Sept PPI M/M: 5.2% v 1.8% prior; Y/Y: 23.6% v 17.9% prior (largest annual rise since Dec 1977).
• (ZA) South Africa Aug Leading Indicator: 127.9 v 127.0 prior.
• (SE) Sweden Sept PPI M/M: 1.5% v 2.0% prior; Y/Y: 17.2% v 15.8% prior.
• (HK) Hong Kong Sept Trade Balance (HKD): -42.4B v -27.0Be; Exports Y/Y: 16.5% v 20.6%e; Imports Y/Y: 23.5% v 21.9%e.

Fixed income Issuance

• (ID) Indonesia sold total IDR8.0T vs. IDR8.0T target in bills and bonds.
• (NL) Netherlands Debt Agency (DSTA) sold €2.49B vs. €1.5-2.5B indicated range in 0% July 2031 Bonds; Avg Yield: +0.14% v -0.53% prior.
• (UK) DMO sold £2.75B in 0.375% Oct 2026 Gilts; Avg Yield: 0.789% v 0.429% prior; bid-to-cover: 2.16x v 2.67x prior; Tail: 1.0bps v 0.2bps prior.
• (IT) Italy Debt Agency (Tesoro) sold €2.25B vs. €1.75-2.25B indicated range in 0.00% Jan 2024 BTP Bonds; Avg Yield: -0.23% v -0.19% prior; bid-to-cover: 1.65x v 1.45x prior.
• (IT) Italy Debt Agency (Tesoro) sold €750M vs. €500-750M indicated range in 0.15% May 2051 Inflation-linked Bonds (BTPei); Real Yield: -0.16% v +0.47% prior; bid-to-cover: 1.34x v 1.30x prior.

Looking Ahead

• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (DE) Germany to sell €3.0B in 0.25% Nov 2028 Bunds.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2044 and 2048 bonds.
• 06:00 (UK) Oct CBI Retailing Reported Sales: 13e v 11 prior; Total Distribution Reported Sales: 20e v 21 prior.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (BR) Brazil Oct FGV Construction Costs M/M: 0.4%e v 0.6% prior.
• 08:00 (BR) Brazil mid-Oct IBGE Inflation IPCA-15 M/M: 1.0%e v 1.1% prior; Y/Y: 10.1%e v 10.1% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (US) Aug FHFA House Price Index M/M: 1.5%e v 1.4% prior.
• 09:00 (US) Aug S&P Case-shiller House Price Index (20-City) M/M: 1.50%e v 1.55% prior; Y/Y: 20.00%e v 19.95% prior.
• 09:00 (US) Aug S&P Case-shiller House Price Index (overall) Y/Y: No est v 19.70% prior.
• 09:00 (BR) Brazil Sept Total Formal Job Creation: +355.0Ke v 372.3K prior.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (EU) ECB weekly QE bond buying update.
• 09:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (20+ years).
• 10:00 (US) Sept New Home Sales: 759Ke v 740K prior.
• 10:00 (US) Oct Consumer Confidence: 108.3e v 109.3 prior.
• 10:00 (US) Oct Richmond Fed Manufacturing Index: +5e v -3 prior.
• 10:00 (MX) Mexico Weekly International Reserve data.
• 11:45 (FR) ECB’s Villeroy (France).
• 13:00 (US) Treasury to sell 2-Year Notes.
• 14:30 (BR) Brazil Sept Tax Collections (BRL): 147.6Be v 146.5B prior.
• 15:00 (AR) Argentina Aug Supermarket Sales Y/Y: No est v 4.2% prior; Shop Center Sales Y/Y: No est v 285.7% prior.
• 16:30 (US) Weekly API Oil Inventories.
• 17:00 (KR) South Korea Oct Consumer Confidence: No est v 103.8 prior.
• 17:45 (NZ) New Zealand Sept Trade Balance (NZD): No est v -2.1B prior.
• 19:01 (UK) Oct BRC Shop Price Index Y/Y: No est v -0.5% prior.
• 20:00 (NZ) New Zealand Oct Final Business Confidence: No est v -8.6 prelim; Activity Outlook: No est v 26.2 prelim.
• 20:30 (AU) Australia Q3 CPI Q/Q: 0.8%e v 0.8% prior; Y/Y: 3.1%e v 3.8% prior.
• 21:30 (CN) China Sept Industrial Profits Y/Y: No est v 10.1% prior.
• 23:00 (CN) China to sell 1-year and 10-year upsized bonds.
• 23:35 (JP) Japan to sell 2-Year JGB Bonds.

Dollar gains against euro and pound

Despite US yields easing overnight, the dollar index staged a sharp rebound, rising 0.23% to 93.82, before climbing to 93.90 in Asian trading. A look under the bonnet though, reveals the US dollar rally was very much tilted to the lower interest rates forever currencies, namely, the euro, Swiss franc and Japanese yen. Sterling and the Australasians held steady overnight. The dollar index is likely to struggle above 94.00 this week, especially if big-tech earnings outperform. For now, it looks like the index will trade in a 93.50 to 94.20 range ahead of next week’s FOMC.

The EUR/USD has sunk back to 1.1600 today, but its exile in the broader 1.1550 to 1.1560 range will continue into the ECB on Thursday. An ECB that maintains its dovish longer-term inflation projections on Thursday will likely be the catalyst for another sell-off. Sterling is trading at 1.3765 today and has run into some serious headwinds ahead of 1.3850. The BoE hike trade becoming very crowded and perhaps overdone Nevertheless, only a close below 1.3700 changes the bullish outlook.

AUD/USD and NZD/USD shrugged off US dollar strength elsewhere to remain steady at 0.7695 and 0.7165 overnight, before gaining 15 points each this morning. China’s property nerves have had zero impact on the Australasians whose fate is very much tied to a global sentiment that is Wall Street-centric. If US earnings continue to provide good news, their downside is limited, although data releases tomorrow could see some intra-day volatility.

Asian currencies remain quiet with the PBOC anchoring volatility with another neutral US/CNY fixing today. Like the Australasians, Asia FX is riding the US earnings sentiment wave and that is unlikely to change ahead of next week’s FOMC.

With over 1000 companies announcing earnings this week in the US, we should be past peak earnings by Friday. I expect to see that sentiment ease into next week and for the US dollar rally to resume with vigour, as the FOMC meeting approaches mid-week and the reality of the start of the Fed taper bites once again.

The USD tended to gain against a number of its counterparts yesterday, yet market attention is expected to be turned towards today’s financial releases as we get the US consumer confidence for October as well as the new home sales figure for September. US stockmarkets gained yesterday with market focus remaining on the earnings reports by various companies and it should be noted that all three main US Stockmarkets indexes were in the greens with Dow Jones and S&P 500 reaching new record highs. Today we note the earnings reports of Microsoft (#MSFT), Alphabet (#GOOG), 3M (#MMM), General Electric (#GE) and Twitter (#TWTR) among others thus providing ample of opportunities for traders. Oil traders may be more interested on the release of the weekly API crude oil inventories figure, due out just before Wednesday’s Asian session starts and should another considerable buildup of inventories be reported we may see oil bulls being tamed somewhat, as it would imply a slack in the US oil market.

The USD index jumped yesterday breaking the 93.70 (S1) resistance line, now turned to support. As the index in its upward movement also broke the downward trendline guiding it since the 13th of October, we switch our bearish outlook in favor of a bias for a sideways movement initially, albeit we must note the index’s bullish tendencies. The RSI indicator below our 4-hour chart is above the reading of 50, which could also imply a slight advantage for buyers. Should the bulls actually take charge, we may see it breaking the 94.10 (R1) resistance line thus paving the way for the 94.60 (R2) level. Should the bears take over, we may see the index reversing course, breaking the 93.70 (S1) support line and aim for the 93.20 (S2) level.

Facebook to be more than a social media company

On other news Facebook’s share price rose yesterday while the company has reported better than expected earnings for Q3, despite its revenue being lower than expected by analysts. It seems that its classic revenue stemming from ads may be facing “significant uncertainty” as Apple Inc’s new privacy changes could weigh.

It should be noted that Facebook has been under the scrutiny of media and has received considerable bad press lately due to a leak made by a former employee and the documents seem to show that the company has prioritised profits over the safety of its users. Also, the company is reported to be aiming towards a fundamental shift as it invests billions in advancing its transformation from a social media company to something larger with its augmented reality program being on the front line. We intend to keep a close eye over the share’s price leaning currently more on the optimistic side yet should the negative headlines continue to emerge we may see it retreating once again.

Facebook’s share price rose yesterday testing the 329.15 (R1) resistance line. For our bias for a sideways motion to change in favor of a bullish outlook we would require a clear breaking of the prementioned level. Please note that the RSI indicator below our 4-hour chart is below the reading of 50 which could imply a bearish sentiment, yet the indicator seems to be slowly rising. If a buying interest be displayed for the share, its price may break the 329.15 (R1) resistance line which capped yesterday’s upward movement and aim for the 338.00 (R2) resistance level. To the downside should the markets prefer to sell the company’s share, we note the 322.50 (S1) support line, while lower than that we note the 315.70 (S2) level.

Today’s events and expectations

Today we note the release of UK’s CBI distributive trades for October and in the American session, the US consumer confidence for October as well as the New Home sales figure for September, while just before the Asian session starts, we get the API weekly crude oil inventories figure. During tomorrow’s Asian session we get New Zealand’s trade data for September and Australia’s CPI rates for Q3.

US Index H4 Chart

Support: 93.20 (S1), 92.75 (S2), 92.30 (S3)

Resistance: 93.70 (R1), 94.10 (R2), 94.60 (R3)

Facebook H4 Chart

Support: 322.50 (S1), 315.70 (S2), 308.50 (S3)

Resistance: 329.15 (R1), 338.00 (R2), 345.00 (R3)

• US stock markets set new records as Tesla goes into overdrive
• Euro falters ahead of ECB meeting, sterling comes back online
• Iran talks keep a lid on oil prices, gold cruises higher

Tesla goes ballistic

Wall Street started the week in good spirits. The heavy lifting was done by Tesla, which rose 12.6% to become a trillion-dollar company after it received a large order, propelling the S&P 500 to new records. The news sent the stock into an unreal ‘gamma squeeze’ as shorts were forced to cover and retail traders piled into short-dated options, forcing dealers to hedge their exposure by loading up the truck in Tesla shares.

But while Tesla was at the tip of the spear, it wasn’t alone. The earnings season continues to spread joy as the cataclysm in supply chains and energy markets doesn’t seem to have impacted corporate bottom lines for now. Investors are also pricing out the risk of higher corporate taxes, with the Biden administration instead favoring taxes on unrealized capital gains for billionaires to pay for its spending plans.

Still, this is probably a good time to take some chips off the table. The market could get another shot in the arm if the Democrats finalize a deal this week, but most of the good news seems priced in while the risks haven’t gone away. Inflation expectations continue to march higher, rate hikes are being brought forward, China is slowing, and the dual logistical/energy crises haven’t faded. The risk-to-reward profile isn’t very attractive here.

FX market feeling good

The earnings-powered optimism spilled over into the FX market as well, reenergizing the Australian and New Zealand. Another winner was sterling, which briefly reached new post-pandemic highs against the euro today, capitalizing on the cheerful mood in the equity arena and the blitz of positive headlines around new investment initiatives in tomorrow’s UK budget.

Speaking of the euro, the recent relief bounce seems to be over. Traders are looking ahead to Thursday’s ECB meeting, where the central bank could push back against market pricing for a minor rate increase next year. Eurozone inflation expectations have moved higher thanks to the energy spiral but the growth landscape remains fragile as the latest PMIs stressed. The ECB learned its lesson in 2011 when it raised rates prematurely to fight the ghost of inflation, only to pour fuel on the debt crisis.

The dollar was somewhere in the middle, outperforming the euro and yen but falling behind the commodity dollars and the pound.

Gold advances, oil takes a breather

In the commodity complex, gold continued its under-the-radar rally yesterday, defying the firmer dollar. Instead, bullion drew strength from the unstoppable rally in inflation expectations and a pullback in real Treasury yields.

The outlook for bullion is tricky here. On the bright side, inflation worries are running rampant and traders are looking for hedges. That’s mainly why inflation swaps are going higher. However, if inflation does stick around, the Fed and other central banks will try to hammer it back down. On balance, the risks still seem tilted to the downside as the Fed-powered dollar may be what tips the scales.

Meanwhile, some news that Iran and the European Union will continue top-level talks on reviving the nuclear agreement took the wind out of oil prices yesterday. But for now, the burning question is whether OPEC will stabilize the market at next week’s meeting by opening the supply taps wider, something it has resisted so far.

As for today, the spotlight will fall on consumer confidence numbers from America as well as earnings results from Google and Microsoft.

Asian equities mixed after a big night on Wall Street

The Dow Jones and S&P 500 closed at record highs overnight, with the Nasdaq pretty close to it. The huge order from Hertz lifted Tesla stock 12.60% higher into the USD 1 trillion club and Facebook’s earnings and outlook weren’t as gloomy as had been expected. Supply chain and privacy issues may impact Apple, Alphabet and Twitter tonight, but you wouldn’t bet against the first two anyway delivering impressive results. That left the S&P 500 0.47% higher overnight, with the Nasdaq jumping by 0.90% and the Dow Jones climbing 0.18% as tech-dominated proceedings. The music continues playing in Asia, with Nasdaq futures rallying by 0.43%, while S&P 500 minis have risen 0.25% and Dow futures are up 0.13%.

All of this was music to the ears of Japan and South Korean markets, which are showing a much higher correlation to Wall Street, rather than China of late. Strong polling results in Japan, and the SK Hynix results, and a temporary fuel price cut in South Korea are also lifting sentiment. The Nikkei 225 has leapt 1.80% higher, while the Kospi is up 0.65% today.

In China, property developer Modern Land missed a debt payment and that has seen property sector nerves return to China markets. That cloud is tempering optimism across ASEAN today as well. The Shanghai Composite is unchanged with the narrower top 50 down 0.50%. The CSI 300 is also unchanged while the Hang Seng has edged 0.35% lower. China’s national team will probably ensure China equity markets are relatively steady ahead of the central committee meeting, but market nerves will be on edge until Evergrande makes, or doesn’t make, another due payment on October 29th.

Singapore is down 0.25% along with Kuala Lumpur, while Bangkok is unchanged, and Manila is down 0.30%. Jakarta has edged 0.50% higher as coal and natural gas prices soared yesterday. Taipei has bucked the trend and moved 1.0% higher, riding the semiconductor wave. Australian markets are also struggling to shake off the China nerves, with the ASX 200 and All Ordinaries both struggling to a modest 0.10% gain.

EURJPY’s minor pullback is finding its feet at the 132.00 handle, that being the 23.6% Fibonacci retracement of the up leg from 125.08 until 134.12, after its latest rally that began at 128.32 lost steam just shy of the 133.47-134.12 resistance zone. A definitive trend is not being endorsed by the 50- and 100-day simple moving averages (SMAs), which are converging with the 200-day SMA.

The short-term oscillators are conveying mixed signals in directional impetus. The MACD and the stochastic oscillator are reflecting the price retreat in the pair and have yet to confirm any pickup in positive pressures, while the minor improvement in the RSI is signalling a growing buying interest.

If the positive forces intensify, initial upside limitations could stem from the resistance section shaped between the 133.47 fresh high and the near 40-month peak of 134.12. Conquering this and extending above the upper Bollinger band, the pair could hit the 134.82 border before buyers aim for the 135.83 high, achieved around the early part of February 2018.

Otherwise, if bearish powers return and drive the price beneath the 23.6% Fibo at 132.00, sellers could encounter a reinforced support area amongst the 131.08 inside swing high and the 38.2% Fibo of 130.66. If the price slips further, a nearby buffer zone from the 100-day SMA at 130.37 until the 50-day SMA at 130.01, and the looming 50.0% Fibo at 129.61 slightly lower could deter the decline from powering on. However, should the bears secure an advantage, they could then challenge the support base from the 61.8% Fibo of 128.54 until the near 7-month low of 127.92.

Summarizing, EURJPY appears to be regaining some buoyancy as it lifts off the 23.6% Fibo of 132.00. Should the price persist above the 130.66-131.08 barricade and the SMAs, the short-term picture may continue to exhibit a modest upside preference.

Evergrande payment due later this week

China property developer, Modern Land (China) Co Ltd, become the fourth China property developer to default on an overseas debt obligation yesterday. Although the amount is small, relatively, ongoing concerns about the property sector in China appear to be weighing on sentiment in Asia today. Evergrande, the centre of the China property storm, has another grace period payment due this week on 29 October, and nerves will be taut until it does, or does not, make payment.

That has rather subsumed the noise from Wall Street overnight where Tesla hit a USD 1 trillion valuation after its shares closed 12.60% higher after announcing a 100,000 vehicle sale to Hertz. The USD 4.4 billion sale added over a USD 100 billion in market cap to Tesla as investors voted with their wallets over who will win the EV race. The embattled Facebook also rose, despite Q3 revenue missing slightly at USD 29 billion and a slight downgrade to Q4 projections. Money talks despite its travails elsewhere in the public domain and it seems a lot of bad news was priced into its stock. Fellow tech heavyweights, Apple, Alphabet and Twitter all announce this afternoon, in what is peak earnings week for the US.

South Korean GDP missed slightly this morning at 0.30% Adv Q3, with weakness showing up in domestic consumption thanks to Covid-19 restrictions. However, strong results from semiconductor supplier SK Hynix, and a 6-month cut in fuel taxes by the government, seem to have limited the fallout with the Kospi in positive territory. Like the Nikkei, also on fire today, both have a lesser correlation to China’s property sector nerves than ASEAN markets. A new poll released today, suggesting the ruling LDP will maintain a majority in the Lower House at this Sunday’s elections, has also boosted Japanese markets, although the Nikkei 225 seems to be joined at the hip with the US Nasdaq’s directional movements at the moment.

Singapore Industrial Production, a volatile data series at the best of times, is expected to retreat to just 0.30% MoM for September from 5.70% in August. As long as the positive trend stays in place, any fallout should be limited. Europe’s calendar is also quiet with just 7-year Bund and 5-year Gilt auctions to grab investors’ interest. Most interest will be on the bid-to-cover ratios for the German and UK bonds with the ECB to meet on Thursday and the BoE rate hike trade still in full swing in the UK.

US New Home Sales, the Case-Shiller House Price Index and the Richmond Fed Manufacturing Index will be of passing interest to markets, especially if they further highlight inflationary pressures (US CPI calculations do include housing costs), and supply chain challenges. In all likelihood though, it will be the Q3 results from Apple, Alphabet and Twitter that will drive directional volatility on Wall Street this afternoon.

In China, the PBOC added another big chunk of liquidity today, injecting CNY 190 billion via the reverse-repo market. Although I still expect a RRR cut in November, it probably won’t happen until after the Central Committee meeting, held between 8-11 November. The PBOC seems content to calm markets this way, for now, claiming it is helping to cover local government debt issuance and quarterly tax payments. Who am I to disagree? Meanwhile, its top economic planning organ, the NDRC, has said it is studying ways to “guide” coal prices which rose powerfully yesterday once again. It was also studying “index providers” in the same space. Unless it raises production incredibly quickly, China’s role as a price-taker in the global energy market leaves it limited room to manoeuvre.

As a final note, readers should keep an eye on the Covid-19 situation there which is rapidly evolving. The arrival of delta in Covid-zero countries in other parts of the world suggests challenges ahead, even for China. If it spreads rapidly, some severe lockdowns could follow. That would complicate an already nightmarish scenario for global supply chains under stress from China’s energy consumption cuts and the other usual suspects.

The Nasdaq 100 bounced higher as investors hope to see solid earnings from the Big Tech companies.

The index has consolidated its recent gains after it broke above the daily resistance at 15400. The bulls have pushed above the major step at 15550 which was the origin of the September sell-off. This would take out the selling interest and put the uptrend back on track.

The all-time high at 15700 is the next resistance. An overbought RSI may cause a temporary pullback to 15280 where the bulls may look to accumulate.

The US dollar recovers across the board thanks to rising Treasury yields. The Kiwi’s breakout above the daily resistance at 0.7150 may have put it back on a bullish trajectory.

However, a repeatedly overbought RSI and its bearish divergence indicate that the bulls have struggled to follow up.

Buyers are likely to be waiting on the sidelines and a pullback towards 0.7080 could be an opportunity. 0.7020 would be the second line of defense in case of a deeper correction.

A rebound above 0.7185 may resume the rally.

The US dollar inched higher after Fed Chairman Jerome Powell commented that it was time to taper. A bearish MA cross on the daily chart weighs on overall sentiment.

Nonetheless, the pair has found some buying interest in the short-term over the daily support at 0.9150. A bullish RSI divergence was the first sign that the downward pressure might have eased for now.

A break above 0.9200 would prompt sellers to cover, opening up the path to the key resistance at 0.9250. A bearish breakout would send the price to 0.9100.