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Daily Pivots: (S1) 1.5489; (P) 1.5539; (R1) 1.5618; More...

A temporary low is in place at 1.5456 in EUR/AUD with current recovery. Intraday bias is turned neutral for consolidations. On the downside, break of 1.5456 will resume the fall from 1.6434 to 161.8% projection of 1.6434 to 1.5907 from 1.6232 at 1.5379 next. Break there will target 1.5250 low. Nevertheless, break of 1.5716 will turn bias to the upside for stronger rebound to 55 day EMA (now at 1.5904).

In the bigger picture, rise from 1.5250 medium term bottom is seen as a correction to the down trend from 1.9799 (2020 high) only. With 38.2% retracement of 1.9799 to 1.5250 at 1.6988 intact, such down trend is expected to resume at a later stage. Firm break of 1.5250 will target 61.8% retracement of 1.1602 (2012 low) to 1.9799 at 1.4733. In any case, sustained break of 1.6988 fibonacci level is needed to indicate long term reversal.

Daily Pivots: (S1) 1.0657; (P) 1.0689; (R1) 1.0705; More....

EUR/CHF's break of 1.0678 support indicates resumption of larger down trend from 1.1149. Intraday bias is back on the downside for 61.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0655. Firm break there will pave the way to 100% projection at 1.0481, which is close to 1.5050 key long term support. On the upside, break of 1.0764 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, the rejection by 55 week EMA maintains medium term bearishness. Fall from 1.1149 (2021 high) is currently seen as the second leg of the patter from 1.0505 (2020 low) first. Hence, in case of deeper fall, we'd look for strong support from 1.0505 to bring rebound. However, sustained break of 1.0505 will resume the long term down trend from 1.2004 (2018 high). Also, medium term outlook will now be neutral at best as long as 1.0936 resistance holds.

The forex markets are staying in mostly consolidation in Asian session. Recovery in Dollar and Yen is so far rather weak, capped by resilient market sentiment. S&P 500 closed at new record high while DOW was not far behind. Major Asian indexes are also trading higher after China's Evergrande averted default for now after remitting funds for a key interest payment ahead of a 30-day grace period that ends tomorrow. As for the week, Kiwi and Aussie are so far the strongest, followed by Swiss Franc. Dollar, Yen and Loonie are the weakest. Euro is mixed but has the potential to weaken further in crosses.

Technically, we'd continue to monitor 132.13 and 156.58 minor support levels in EUR/JPY and GBP/JPY. Break of these levels could signal more sustainable rebound in Yen. Also, as EUR/CHF has resumed recent fall through 1.0678 temporary low already, break of 0.8420 temporary low in EUR/GBP could signal more broad-based weakness in Euro.

In Asia, at the time of writing, Nikkei is up 0.83%. Hong Kong HSI is up 0.51%. China Shanghai SSE is up 0.09%. Singapore Strait Times is up 0.29%. Japan 10-year JGB yield is up 0.0041 at 0.094. Overnight, DOW dropped -0.02%. S&P 500 rose 0.30% to new record at 4549.78. NASDAQ rose 0.62%. 10-year yield jumped 0.040 to 1.676.

Japan PMI manufacturing rose to 53.0, returned to growth

Japan PMI Manufacturing rose to 53.0 in October, up from September's 51.5, above expectation of 51.6. PMI Services rose to 50.7, up from 47.8. PMI Composite rose to 50.7, up from 47.9.

Usamah Bhatti, Economist at IHS Markit, said: "Activity at Japanese private sector businesses returned to expansion territory at the start of the fourth quarter of 2021... Panel members commonly associated the slight recovery to a reduction in COVID-19 cases and looser pandemic restrictions.

"Private sector businesses also noted an increase in aggregate new business for the first time since April, assisted by a quicker rise in export orders. That said, firms continued to highlight sustained supply chain pressures and material shortages. As a result, input prices rose at the fastest rate in over 13 years. This contributed to the sharpest rise in output charges since July 2018."

Also release, Japan all item CPI rose to 0.2% yoy in September, up from -0.4% yoy. CPI core (ex-food), rose to 0.1% yoy, up from 0.0% yoy. However, CPI core-core (ex-food, energy) was unchanged at -0.5% yoy.

Australia PMI composite rose sharply to 52.2, back in expansion

Australia PMI Manufacturing rose to 57.3 in October, up from September's 56.8. PMI Services jumped sharply to 52.0, up from 45.5. PMI Composite rose to 52.2, up from 46.0. All are four-month highs.

Jingyi Pan, Economics Associate Director at IHS Markit, said: "Composite PMI indicated that the Australian economy is back in expansion in October as the easing of COVID-19 restrictions and plans for further opening up of the Australian economy restored confidence and rejuvenated economic activity...

"Higher demand however translated to greater strains on the supply chain... Meanwhile employment levels rose at a slower rate with reports of constraints when trying to hire staff. These are issues that may persist in the short- to medium- term for firms as they take their time to clear."

RBA Lowe: Inflation not to sustain unless feeding through to wages

RBA Governor Philip Lowe at Universidad de Chile's Conference that he didn't expect the current rise in inflation to sustain, unless it led to higher wages growth.

"Is it going to reset expectations about what type of wage growth people should get, or will the spike dissipate and we will go back to the type of labour market outcomes we've seen before the pandemic?" Lowe said. "So there is quite a lot of uncertainty around that issue, but we are watching very carefully."

BoE Pill: Nov MPC meeting is finely balanced, live

BoE's new Chief Economist Huw Pill said UK inflation is likely to rise "close to or even slightly above 5 per cent" early next year. And, "that's a very uncomfortable place for a central bank with an inflation target of 2 per cent to be."

As for market expectation of a November rate hike, Pill declined to disclose his stance, and just said it's "finely balanced", "November is live". And he added, "maybe there's a bit too much excitement in the focus on rates right now".

"The big picture is, I think, there are reasons that we don't need the emergency settings of policy that we saw after the intensification of the pandemic," said Pill. "The settings that we now have are supportive settings. The need for support has diminished, as this bridge has been built and largely traversed."

Fed Bostic penciled in a rate hike in Q3, maybe early Q4 of 2022

Atlanta Fed Raphael Bostic told CNBC he has "penciled in" a rate increase in "late third, maybe early fourth" quarter of 2022. "Our experience from the pandemic has really frankly surprised to the upside," he added "I've really adjusted my expectations moving forward."

Bostic expected the supply chain disruptions to "last longer than we expected". He said, "the labor markets are not going to get to equilibrium as quick as we hoped, but demand was also going to stay high and that combination was going to mean we're going to have inflationary pressures." It's becoming "clearer and clearer" inflation pressure "is going to last into 2022."

Looking ahead

UK will release retail sales and PMIs. Eurozone will release PMIs too. Later in the day, Canada will release retail sales while US will release PMIs.

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.0657; (P) 1.0689; (R1) 1.0705; More....

EUR/CHF's break of 1.0678 support indicates resumption of larger down trend from 1.1149. Intraday bias is back on the downside for 61.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0655. Firm break there will pave the way to 100% projection at 1.0481, which is close to 1.5050 key long term support. On the upside, break of 1.0764 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, the rejection by 55 week EMA maintains medium term bearishness. Fall from 1.1149 (2021 high) is currently seen as the second leg of the patter from 1.0505 (2020 low) first. Hence, in case of deeper fall, we'd look for strong support from 1.0505 to bring rebound. However, sustained break of 1.0505 will resume the long term down trend from 1.2004 (2018 high). Also, medium term outlook will now be neutral at best as long as 1.0936 resistance holds.

Economic Indicators Update

Short Term view in Copper suggests the rally from September 21 low is unfolding as a 5 waves impulse Elliott Wave structure. Up from September 21 low, wave ((i)) ended at 4.3175 and pullback in wave ((ii)) ended at 4.0545. The metal then extends higher in wave ((iii)) as another 5 waves in lesser degree. Up from wave ((ii)), wave (i) ended at 4.3955 and pullback in wave (ii) ended at 4.3050. The metal extends higher in wave (iii) towards 4.781, wave (iv) ended at 4.7025, and wave (v) of ((iii)) ended at 4.823.

Pullback in wave ((iv)) is proposed complete at 4.537 as a double three structure. However, the metal still needs to break above wave ((iii)) at 4.823 to rule out a double correction. Down from wave ((iii)), wave (w) ended at 4.5935, wave (x) ended at 4.7575, and wave (y) ended at 4.5370. This completed wave ((iv)) in higher degree. Up from there, the metal should end wave (i) of ((v)) soon with 1 more push higher. It should then pullback in wave (ii) before the rally resumes. Near term, while pullback stays above 4.537, and more importantly above 4.309, expect the metal to extend higher within wave ((v)).

Copper 30 Minutes Elliott Wave Chart

Key Highlights

• USD/JPY traded above 114.00 before starting a downside correction.
• A major bullish trend line is forming with support near 113.25 on the 4-hours chart.
• EUR/USD is still struggling to settle above 1.1650 and 1.1665.
• The US Manufacturing PMI could remain strong at 60.3 in Oct 2021 (Preliminary).

USD/JPY Technical Analysis

The US Dollar started a major increase above the 113.00 zone against the Japanese Yen. USD/JPY climbed above 113.50 to move into a positive zone.

Looking at the 4-hours chart, the pair even traded above the 114.00 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours). The pair traded as high as 114.67 before it started a downside correction.

There was a drop below the 114.20 and 114.00 levels. The pair tested the 23.6% Fib retracement level of the upward move from the 110.82 swing low to 114.67 high.

An immediate support is near the 113.40 level. The next major support is near 113.20, below which there is a risk of a larger decline. There is also a major bullish trend line forming with support near 113.25 on the same chart.

On the upside, the pair is facing resistance near 114.20. A close above 114.20 could open the doors for a larger increase. The next key resistance is near the 114.65 level, above which the pair could rise towards 115.50.

Looking at EUR/USD, the pair must settle above the 1.1650 and 1.1660 resistance levels to continue higher. Besides, GBP/USD is showing positive signs above 1.3780.

Economic Releases

• Germany's Manufacturing PMI for Oct 2021 (Preliminary) - Forecast 56.5, versus 58.4 previous.
• Germany's Services PMI for Oct 2021 (Preliminary) - Forecast 55.0, versus 56.2 previous.
• Euro Zone Manufacturing PMI for Oct 2021 (Preliminary) – Forecast 57.0, versus 58.6 previous.
• Euro Zone Services PMI for Oct 2021 (Preliminary) – Forecast 55.5, versus 56.4 previous.
• UK Manufacturing PMI for Oct 2021 (Preliminary) – Forecast 55.8, versus 57.1 previous.
• UK Services PMI for Oct 2021 (Preliminary) – Forecast 54.5, versus 55.4 previous.
• US Manufacturing PMI for Oct 2021 (Preliminary) – Forecast 60.3, versus 60.7 previous.
• US Services PMI for Oct 2021 (Preliminary) – Forecast 55.1, versus 54.9 previous.

STOCKS

Correction in most equities seems to have ended and the indices can now rally to the upside soon while above respective supports. Dow and Dax are bullish towards 36000 and 15800/900 while Nikkei and shanghai can rise to 29000/500 and 3600+ while above 28000 and 3550 respectively. Nifty and Sensex have also tested supports yesterday and now look bullish for a rise to 18400/600-18800 and 61000-62000 respectively.

Dow (35603.08, -6.26, -0.018%) tested 35442 before bouncing back to close higher. Narrow movement seen overall over the last 2-days. We continue to look at a possible rise to crucial resistance at 36000 before any reversal is seen.

DAX (15472.56, -50.36, -0.32%) tested 15406, falling to support at 15400 that we have been mentioning for the past few days. While above 15400, a rise back to 15800/900 is possible in the coming sessions. View is bullish while above 15400.

Nikkei (28892.11, +183.53, +064%) has risen well today but while below 29500, we do not negate a fall towards 28000 before a bounce is seen. We need a strong break above 29500 to again resume bullishness. A range of 28000-29500 can hold for the near term within which a test of lower support is possible initially.

Shanghai (3581.36, -13.42, -0.39%) has fallen again below 3600. While above support at 3550, view is bullish.

Nifty (18178.10, -88.50, -0.48%) tested 18048 yesterday, coming down to our expected 18000 while below 18200. Now a bounce back to 18400/600 and even 18800 looks possible while the index sustains above 18000. View is bullish for the medium term.

Sensex (60923.50, -336.46, -0.55%) fell to test 60485 before bouncing back to close higher. View is bullish towards 61000-62000 in the medium term.

COMMODITIES

Most commodities see a corrective fall which may sustain for the next couple of sessions before reversing by the end of next week possibly. Crude prices have fallen but we need to keep a close watch to see if it can continue to decline further. Gold and Silver have dipped too but has scope to rise after a brief sideways range. Copper can rise from support near 4.55 and head back to test 4.90.

Brent (84.06) and WTI (82.05) have both fallen sharply. We need to see if the pull off sustains over the next few sessions. Brent needs to fall below 83 to negate further upside again.

Gold (1786.80) fell from 1790 and trades lower just now. A possible test of 1770/65 is possible before again attempting to bounce higher. Unless a sustained break above 1790 is seen Gold could remain within the sideways consolidation range with limited downside to 1740 just now.

Silver (24.29) has dipped slightly today from levels seen yesterday. But while above 24, view is bullish towards 25. Any break below 24, if seen will bring in a possible pull back on the precious metals including Silver.

Copper (4.5770) has support near 4.55 which if holds can produce a bounce back towards 4.90 soon.

FOREX

Dollar Index has risen slightly to test 93.75 but still has scope to fall to 93 which could hold on first testing. Euro has fallen but while above 1.16, we keep intact chances of seeing a rise to 1.17-1.1710 in the near term. EURJPY is bearish towards 132-131.50 while below resistance at 134. Aussie and Pound are in a corrective fall and could soon rise higher. USDCNY can re-test 6.3750-6.36 while below 6.44/41. Dollar-Yen has bounced well from expected support at 113.65 and the pair can now rise sharply towards 115 or higher towards 117-118 in the medium term. USDINR can range within 74.50/60-75.00/25 for the near term. A bounce from 74.50/60 can take it to the upper end of the mentioned range.

Dollar Index (93.74) is stable near 93.75. The index still has scope to fall to 93 before a bounce is seen from there. Only a break above 94, if seen will negate a fall and indicate bullishness for the near term which looks less likely just now.

Euro (1.1626) declined from 1.1667 seen yesterday. Failure to sustain above 1.1650 has brought down Euro but while above 1.16, we keep possibility of rising towards 1.17-1.1710 intact for the near term. Break below 1.16 if seen and sustains would again indicate bearishness but we would wait for confirmation on that.

EURJPY (132.59) faced stiff rejection from 133.50 and while below that a slow fall to 132-131.50 is possible before bouncing back again. Overall trend is bullish towards crucial resistance at 134. Downside could be limited to 131.50 for now.

Aussie (0.7475) has dipped from 0.7550 and while that holds, a decline to 0.74 is possible before seeing a bounce. Watch price action near current levels.

Pound (1.3794) has dipped a bit and while below immediate resistance at 1.3850, Pound could fall in a corrective dip towards 1.3750 or 1.37 before attempting a bounce back to higher levels.

Dollar-Yen (114) tested 113.65 before bouncing from there. The pair can now rise sharper towards 115 and then towards 117-118 while above 113.65. Trend is bullish.

USDCNY (6.3984) has been bouncing well this week from low of 6.3784 and while that holds, the pair seems to be in a corrective rise and can extend to 6.41 before again falling back to re-test 6.37/36. Watch price action near 6.40/41 in the near term. In the longer run, a break below 6.3750/36 looks possible while below 6.44. We watch narrow range of 6.41-6.3750/36 and broad range of 6.44-6.3750/36 with possible break on the downside eventually.

USDINR (74.8650) bounced sharply from 74.70 yesterday to close higher at 74.8650. We expect support at 74.60/50 to be tested from where a rise back towards 75-75.25 can be possible in the near term. Broad range of 74.60/50-75.0/25 can hold for now.

INTEREST RATES

The US Treasury Yields continue to move up. It will have to be seen if the expected reversal from 2.2% on the 30Yr can drag the 10Yr also lower or a further rise in the 10Yr above 1.75% towards 2% can take the 30Yr also higher breaking above 2.2%. The German yields have limited room on the upside and are likely to see a fresh fall in the coming days. The 10Yr and 5Yr have come-off sharply yesterday. The 5Yr can fall towards the lower end of its 5.66%-5.76% range and the 10Yr can see a deeper fall on a break below 6.3% which in turn will negate the chances of a rise mentioned yesterday.

The US 2Yr (0.45%), 5Yr (1.22%) and the 10Yr (1.69%) Treasury yields have risen further sharply while the 30Yr (2.14%) remains stable. The 10Yr can test 1.75% as expected and the 30Yr has room to test 2.2% - an important resistance on the charts. Will the 30Yr turn down from 2.2% and drag the 10Yr also down along with it? Or will the 10Yr continue to rise breaking above 1.75% towards 2% and take the 30Yr also up above 2.2%? We will have to wait and watch.

The German 2Yr (-0.65), 5Yr (-0.44%) and the 10Yr (-0.10%) yields have risen back while the 30Yr (0.27%) has dipped slightly. The -0.1%/-0.05% resistance region on the 10Yr is likely to hold and trigger a reversal towards -0.2% initially and then even eventually. On the 30Yr, the resistance at the 0.35%-0.45% region is holding well as of now. A dip to 0.2% and then to 0.1%-0% subsequently over the medium-term is possible.

The Indian 10Yr GoI (6.3384%) has come-off sharply below 6.35%. A further fall below 6.3% from here will bring back our earlier bearish view of seeing 6.2% and lower levels into the picture. In turn that will negate the chances of seeing 6.45%-6.5% on the upside.

The 5Yr GoI (5.7141%) has declined sharply and keeps the 5.66%-5.76% range intact. A break below 5.7% can drag it to the lower end of this range in the coming days.

Japan PMI Manufacturing rose to 53.0 in October, up from September's 51.5, above expectation of 51.6. PMI Services rose to 50.7, up from 47.8. PMI Composite rose to 50.7, up from 47.9.

Usamah Bhatti, Economist at IHS Markit, said: "Activity at Japanese private sector businesses returned to expansion territory at the start of the fourth quarter of 2021... Panel members commonly associated the slight recovery to a reduction in COVID-19 cases and looser pandemic restrictions.

"Private sector businesses also noted an increase in aggregate new business for the first time since April, assisted by a quicker rise in export orders. That said, firms continued to highlight sustained supply chain pressures and material shortages. As a result, input prices rose at the fastest rate in over 13 years. This contributed to the sharpest rise in output charges since July 2018."

Full release here.

Australia PMI Manufacturing rose to 57.3 in October, up from September's 56.8. PMI Services jumped sharply to 52.0, up from 45.5. PMI Composite rose to 52.2, up from 46.0. All are four-month highs.

Jingyi Pan, Economics Associate Director at IHS Markit, said: "Composite PMI indicated that the Australian economy is back in expansion in October as the easing of COVID-19 restrictions and plans for further opening up of the Australian economy restored confidence and rejuvenated economic activity...

"Higher demand however translated to greater strains on the supply chain... Meanwhile employment levels rose at a slower rate with reports of constraints when trying to hire staff. These are issues that may persist in the short- to medium- term for firms as they take their time to clear."

Full release here.

RBA Governor Philip Lowe at Universidad de Chile's Conference that he didn't expect the current rise in inflation to sustain, unless it led to higher wages growth.

"Is it going to reset expectations about what type of wage growth people should get, or will the spike dissipate and we will go back to the type of labour market outcomes we've seen before the pandemic?" Lowe said. "So there is quite a lot of uncertainty around that issue, but we are watching very carefully."

BoE's new Chief Economist Huw Pill said UK inflation is likely to rise "close to or even slightly above 5 per cent" early next year. And, "that's a very uncomfortable place for a central bank with an inflation target of 2 per cent to be."

As for market expectation of a November rate hike, Pill declined to disclose his stance, and just said it's "finely balanced", "November is live". And he added, "maybe there's a bit too much excitement in the focus on rates right now".

"The big picture is, I think, there are reasons that we don't need the emergency settings of policy that we saw after the intensification of the pandemic," said Pill. "The settings that we now have are supportive settings. The need for support has diminished, as this bridge has been built and largely traversed."