Sample Category Title

Daily Pivots: (S1) 0.9167; (P) 0.9209; (R1) 0.9232; More....

USD/CHF's fall from 0.9367 resumes by breaking 0.9183 temporary low. Intraday bias is back on the downside for 0.9162 support. Considering bearish divergence condition in daily MACD, firm break of 0.9162 support will argue that whole rise from 0.8925 has completed Deeper decline would be seen to 0.9017 support next. On the upside, 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 of assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Markets are generally in consolidative mode today. Dollar turns weaker against Swiss Franc and Yen despite better than expected jobless claims data. But the greenback is just range bound against other major currencies. Commodity currencies are digesting near term gains but losses are so far very limited. Euro is trading sideway against Sterling but weakens notably against Swiss Franc.

Technically, firstly, we'd continue to monitor if USD/JPY would break through 113.87 minor support firmly to start a near term pull back. That could be followed by break of 132.13 minor support in EUR/JPY and 156.58 minor support in GBP/JPY to confirm Yen's general rebound. Secondly, we'd also see if EUR/CHF is breaking through 1.0678 temporary low to resume recent fall, and, whether EUR/GBP would follow through 0.8420 temporary low too.

In Europe, at the time of writing, FTSE is down -0.39%. DAX is up 0.06%. CAC is down -0.27%. Germany 10-year yield is up 0.017 at 0.107. Earlier in Asia, Nikkei dropped -1.87%. Hong Kong HSI dropped -0.45%. China Shanghai SSE rose 0.22%. Singapore Strait Times dropped -0.30%. Japan 10-year JGB yield dropped -0.0053 to 0.090.

US initial jobless claims dropped to 290k, continued to trend down

US initial jobless claims dropped -6k to 290k in the week ending October 16, better than expectation of 298k. It's also the lowest level since March 14, 2020. Four-week moving average of initial claims dropped -15k to 320k, lowest since March 14, 2020 too.

Continuing claims dropped -122k to 2481k in the week ending October 9, lowest since march 14, 2020. Four-week moving average of continuing claims dropped -85k to 2656k, lowest since March 21, 2020.

US Philly Fed manufacturing dropped to 23.8, price indicators remained elevated

In the October Philadelphia Fed Manufacturing Business Outlook Survey, the diffusion index for current general activity dropped to 23.8, down from 30.7, below expectation of 26.0.

Looking at some details, current shipments index was essentially unchanged at 30.0. New orders rose 15 pts to 30.8. Employment index rose from 26.3 to 30.7. The index for prices paid rose 3 pts to 70.3. Current prices received index dropped -2 to 51.1. Price indicators remained elevated.

Australia NAB business confidence dropped to -1 in Q3

Australia NAB business confidence dropped from Q2's 18 to -1 in Q3. Current business conditions dropped from 30 to 13. Conditions for the next 3 months dropped from 35 to 8. Conditions for the next 12 months also dropped from 33 to 19. Capex plans for the next 12 months dropped from 37 to 26. Trading conditions dropped from 36 to 16. Profitability dropped from 30 to 11. Employment dropped from 23 to 11.

Alan Oster, NAB Group Chief Economist, "With lockdowns in place for most of Q3, it's unsurprising to see both business conditions and confidence take a fairly large hit for the quarter... While conditions deteriorated sharply, they didn't fall to the depths seen during the first lockdowns in 2020."

"While these survey results confirm the large hit to activity that took place in Q3, we are optimistic for a strong rebound in activity in Q4 and into 2022 and reopening progresses."

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9167; (P) 0.9209; (R1) 0.9232; More....

USD/CHF's fall from 0.9367 resumes by breaking 0.9183 temporary low. Intraday bias is back on the downside for 0.9162 support. Considering bearish divergence condition in daily MACD, firm break of 0.9162 support will argue that whole rise from 0.8925 has completed Deeper decline would be seen to 0.9017 support next. On the upside, 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 of assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Economic Indicators Update

In the October Philadelphia Fed Manufacturing Business Outlook Survey, the diffusion index for current general activity dropped to 23.8, down from 30.7, below expectation of 26.0.

Looking at some details, current shipments index was essentially unchanged at 30.0. New orders rose 15 pts to 30.8. Employment index rose from 26.3 to 30.7. The index for prices paid rose 3 pts to 70.3. Current prices received index dropped -2 to 51.1. Price indicators remained elevated.

Full release here.

US initial jobless claims dropped -6k to 290k in the week ending October 16, better than expectation of 298k. It's also the lowest level since March 14, 2020. Four-week moving average of initial claims dropped -15k to 320k, lowest since March 14, 2020 too.

Continuing claims dropped -122k to 2481k in the week ending October 9, lowest since march 14, 2020. Four-week moving average of continuing claims dropped -85k to 2656k, lowest since March 21, 2020.

Full release here.

The Australian dollar has reversed directions in the Thursday session. AUD/USD is trading at 0.7487, down 0.39% on the day. In Asia, the pair rose to 0.7564, its highest level since July 6th. It has been a strong week for the Australian currency, as the US dollar remains under pressure. Even with today’s decline, AUD/USD is still up 0.88% this week.

Australian confidence takes a tumble in Q3

The NAB Quarterly Business Confidence index fell sharply in the third quarter, due to the lockdowns which were in effect for most of the quarter. The index dropped from 19 in Q2 to -1 in Q3, as confidence was down across all industries and states. The NAB report noted that although businesses are pessimistic about the short term, there is stronger optimism looking ahead to 2o22. The survey was taken before health restrictions were eased in Melbourne and Sydney, the country’s largest cities, which should translate into a stronger release for the fourth quarter.

The RBA minutes reiterated that the central bank does plan to raise interest rates before 2024. However, the markets are much more hawkish and have priced in a hike for mid-2022. The market optimism is based on expectations that the economy will improve as lockdowns have been eased and vaccination rates are rising higher. As well, central banks are going through a tightening cycle – the RBNZ raised rates earlier in October and the BoE is widely expected to hike next month, and the RBA may not want to be left behind.

Investors are watching closely to see if the RBA steps in and changes its guidance on the rate outlook. If it does, the Australian dollar could be the big winner. The currency has gained an impressive 3.64% in October, and barring a major collapse, is headed for its best month in 2021.

AUD/USD Technical

• The pair tested resistance at 0.7532 in the Asian session. Above, there is resistance at 0.7624
• 0.7476 is under pressure in support and could break later in the day. This is followed by 0.7328

USD/ZAR technical analysis

• USD/ZAR is in downtrend.
• The price is bouncing off support.
• Selling the rallies is possible if the price stays below M L3/Q L3 PP.
• Breakout lower below M L4 pivot will make a continuation move.

Daily chart USD/ZAR

1. Left Shoulder.
2. Head.
3. Right Shoulder.
4. Breakout Entry.
5. Target for a move up/retrace.

The price is in a downtrend. Based on the price action, we should see a move down after either a rally or a breakout. Breakout should happen below M L4 14.37812. However, as we can see the dollar is getting stronger vs ZAR so the breakout to the upside might also happen. Target would be Q L3/M L3 of resistance 14.66668-14.70656. Watch for selling the rally if the price gets there. If point 4 on the chart happens, the breakout target would be 13.7572-13.6021.

• EU leaders begin 2-day meeting; likely to discuss energy.
• UK public-sector net borrowing data for Sept showed improvement ahead of next week’s budget speech from Sunak.
• Bond yields stabilizing after recent volatility.
• Focus remains on Chinese property sector (Evergrande [3333.HK] resumed trading after a multi-week halt).
• Companies due to report during the NY morning include American Airlines, AutoNation, Blackstone, Crocs, Quest Diagnostics, Dow, Freeport McMoran, Interpublic, Southwest Airlines, Nucor, Pool Corp, AT&T, Valero.

Asia

• New Zealand reached 15 year free trade agreement (FTA) with the UK. FTA to remove all tariffs on exports to the UK over time.
• China PBOC stated to continue to monitor financial risks in key sectors; sought to provide more financial support in green and innovative sectors.
• China’s Evergrande planned HK$20B transaction for the Property Services unit did not take place; No guarantee the group could meet some obligation. Additionally, the company said to have secured an extension on its Jumbo Fortune bond.

Coronavirus

• UK Health Min Javid urged people to get a Covid-19 booster shot in order to avoid restrictions over Christmas. Warned cases might reached 100K per day.

Europe

• ECB said to be asking banks to up capital and staff to their post Brexit ops in the EU.

Americas

• President Biden advisers said to discussed new minimum tax on corporations and tax on stock buybacks; Democratic Senator Sinema (D-AZ) said to be opposed to raising the corporate tax rate to 28% [vs 21% currently].
• White House said to have told Democratic lawmakers that a plan to raise the corp tax rate was unlikely to make it into the reconciliation Bill.
• Federal Reserve Beige Book: Employment increased at a modest to moderate pace in recent weeks as demand for workers was high. Labor growth dampened by low supply of workers.
• Fed's Mester (non-voter, hawk): Rate hikes are not coming any time soon.
• Port of Los Angeles processed 903,865 containers in September, the busiest September ever in the Port’s 114-year history.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.19% at 469.20, FTSE -0.36% at 7,197.40, DAX -0.18% at 15,495.65, CAC-40 -0.44% at 6,676.38, IBEX-35 -0.83% at 8,943.50, FTSE MIB -0.30% at 26,502.00, SMI +0.11% at 12,026.85 , S&P 500 Futures -0.26%].
• Market Focal Points/Key Themes: European indices trade modestly lower; better performing sectors include materials and consumer staples; underperformers include financials and industrials; Skanska to sell logistics portfolio; Tag Immobilien plans to delist; earnings expected during the upcoming US session include Atlas Copco, Danaher, KeyCorp and Quest Diagnostics.

Equities

• Consumer discretionary: Unilever [UNA.NL] +2.5% (earnings), Just Eat Takeaway [JET.UK] -3.5% (CMD).
• Financials: Barclays [BARC.UK] -1% (earnings).
• Healthcare: bioMerieux [BIM.FR] +3% (earnings).
• Industrials:Volvo [VOLVA.SE] +1% (earnings), ABB [ABBN.CH] -5.5% (earnings; outlook cut).
• Technology: ATOS [ATO.FR] +2% (earnings), SAP SE [SAP.DE] +1% (final results).
• Real Estate: TLG Immobilien [TLG.DE] +15% (plans delisting).

Speakers

• ECB's Visco (Italy) reiterated Council view that EU monetary policy should go hand in hand with fiscal policy; growth is the only true way to reduce the debt burden.
• Czech Central Bank's Holub (chief economist): Favor a Nov rate hike of more than 25bps (**Reminder: Czech Central Bank hiked by 75bps at the Sept policy meeting).
• Hungary Central Bank Dep Gov Virag stated that needed to tighten more than what was done in Sept.
• Philippines Central Bank (BSP) Gov Diokno stated that c Continued monetary policy support remained crucial.
• China Commerce Ministry (MOFCOM) reiterated that China and US should work together to create conditions for implementation of the phase-1 trade agreement.
• China Banking and Insurance Regulatory Commission (CBIRC) reiterated to keep stability and consistency of property finance rules. Evergrande would not cause industry-wide impact.

Currencies/Fixed Income

• GBP/USD was back above the 1.38 level after Wed’s decline. Markets remain convinced that the BoE would raise interest rates as soon as next month to curb inflation.
• Commodity currencies stood near multi-month highs on Thursday on strong raw material prices.
• Focus on TRY currency (Lira) as the Turkey Central Bank was expected to again cut interest rates despite elevated inflation.
• Bitcoin tested above $67K after EFT launch.

Economic data

• (NL) Netherlands Oct Consumer Confidence Index: -10 v -5 prior.
• (NL) Netherlands Sept Unemployment Rate: 3.1 v 3.2% prior.
• (NL) Netherlands Aug Consumer Spending Y/Y: 5.8% v 4.7% prior.
• (UK) Sept Public Finances (PSNCR): £4.7B v £5.8B prior; Net Borrowing: £21.0B v £23.2Be; PSNB (ex-banking groups): £21.8B v £22.6Be; Central Government NCR: £14.6B v £8.5B prior.
• (DK) Denmark Oct Consumer Confidence Indicator: 3.3 v 8.2 prior.
• (JP) Japan Sept Final Machine Tool Orders Y/Y: 71.9% v 71.9% prelim.
• (FR) France Oct Business Confidence: 113 v 110e; Manufacturing Confidence: 107 v 105e; Production Outlook Indicator: 21 v 17e; Own-Company Production Outlook: 17 v 15e.
• (FR) France Oct Overall Business Demand Survey: 20 v 22 prior.
• (CH) Swiss Sept M3 Money Supply Y/Y: 3.2% v 3.2% prior.
• (TR) Turkey Oct Consumer Confidence: 76.8 v 79.7 prior.
• (SE) Sweden Sept Unemployment Rate: 8.2% v 8.5% prior; Unemployment Rate (seasonally adj): 8.8% v 8.6%e; Trend Unemployment Rate: 8.8% v 8.9% prior.
• (IT) Italy Aug Industrial Sales M/M: 0.8% v 0.8% prior; Y/Y: 13.8% v 19.0% prior.
• (PL) Poland Sept Real Retail Sales M/M: -2.4% v -2.5%e; Y/Y: 5.1% v 5.2%e; Retail Sales Y/Y: 11.1% v 10.4%e.
• (PL) Poland Sept Construction Output Y/Y: 4.3% v 8.0%e.
• (HK) Hong Kong Sept Unemployment Rate: 4.5% v 4.6%e.
• (EU) Euro Zone 2020 Govt Debt to GDP Ratio: 97.3% v 98.0% prior.
• (BE) Belgium Oct Consumer Confidence Index: 4 v 8 prior.

Fixed income Issuance

• (UK) DMO opened its book to sell 1.50% July 2053 green Gilt; guidance seen -1 bp to UK Treasuries (2052 Gilt); order book over £59B.
• (ES) Spain Debt Agency (Tesoro) sold total €5.053B vs.€4.5-5.5B indicated range in 2027 and 2037 bonds.
• Sold €3.37B in new 0.00% Jan 2027 SPGB; Avg yield: -0.089% v -0.371% prior; Bid-to-cover: 1.35x v 2.55x prior.
• Sold €1.68B in 0.85% July 2037 SPGB bonds; Avg Yield: 0.942% v 0.972% prior; bid-to-cover: 1.42x v 1.55x prior.
• (FR) France Debt Agency (AFT) sold total €7.487B vs. €6.5-7.5B indicated range in 2025 and 2026 bonds.
• Sold €3.196B in 0.00% Mar 2025 Oat; Avg Yield: -0.50% v -0.57% prior; Bid-to-cover: 2.83x v 1.79x prior.
• Sold €2.611B in 1.00% Nov 2025 Oat; Avg Yield: -0.44% v -0.33% prior; Bid-to-cover: 2.88x v 3.06x prior.
• Sold €1.685B in 0.50% May 2026 Oat; Avg Yield: -0.36% v -0.62% prior; Bid-to-cover: 3.86x v 2.70x prior.
• (IE) Ireland Debt Agency (NTMA) sold €750M vs. €750M indicated in 6-month bills; Avg Yield: -0.641% v -0.640% prior; Bid-to-cover: 2.45x v 2.40x prior.

Looking ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds.
• 05:50 (FR) France Debt Agency (AFT) to sell €1.25-1.75B in inflation-linked 2026, 2032 and 2047 Bonds (Oatei).
• 06:00 (UK) Oct CBI Industrial Trends Total Orders: 17e v 22 prior; Selling Prices: 40e v 41 prior; Business Optimism: 20e v 27 prior.
• 06:00 (CZ) Czech Republic to sell CZK5.0B in 1-month Bills.
• 06:00 (RO) Romania to sell 3.25% 2026 Bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to cut One-Week Repo Rate by 100bps to 17.00%.
• 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to leave Key Rate unchanged at 8.50%.
• 07:00 (MX) Mexico Aug Retail Sales M/M: -0.5%e v -0.4% prior; Y/Y: 6.6%e v 9.9% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Oct Philadelphia Fed Business Outlook: 25.0e v 30.7 prior.
• 08:30 (US) Initial Jobless Claims: 297Ke v 291K prior; Continuing Claims: 2.55Me v 2.593M prior.
• 08:30 (US) Weekly USDA Net Export Sales.
• 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 15th: No est v $615.4B prior.
• 09:00 (US) Fed’s Waller.
• 10:00 (US) Sept Existing Home Sales: 6.09Me v 5.88M prior.
• 10:00 (US) Sept Leading Index: 0.4%e v 0.9% prior.
• 10:00 (EU) Euro Zone Oct Advance Consumer Confidence: -5.0e v -4.0 prior.
• 10:30 (US) Weekly EIA Natural Gas Inventories.
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.
• 12:00 (CA) Canada to sell 10-year notes.
• 13:00 (US) Treasury to sell 5-Year TIPS.
• 15:00 (AR) Argentina Sept Trade Balance: No est v $2.3B prior.
• 15:00 (AR) Argentina Aug Economic Activity Index (Monthly GDP) M/M: No est v 0.8% prior; Y/Y: No est v 11.7% prior.
• 15:00 (AU) RBA Gov Lowe participates in online panel.
• 18:01 (NL) Netherlands Sept House Price Index M/M: No est v 2.1% prior; Y/Y: No est v 17.8% prior.
• 19:00 (AU) Australia Oct Preliminary PMI Manufacturing: No est v 56.8 prior; PMI Services: No est v 45.5 prior; PMI Composite: No est v 46.0 prior.
• 19:01 (UK) Oct GfK Consumer Confidence: -16e v -13 prior.
• 19:30 (JP) Japan Sept National CPI Y/Y: +0.2%e v -0.4% prior; CPI ex-fresh food (core) Y/Y: 0.1%e v 0.0% prior; CPI ex-fresh food/energy (core-core) Y/Y: -0.4%e v -0.5% prior.
• 20:30 (JP) Japan Oct Preliminary PMI Manufacturing: No est v 51.5 prior; PMI Services: No est v 47.8 prior; PMI Composite: No est v 47.9 prior.
• 22:30 (KR) South Korea to sell KRW100B in 10-Year Bonds.
• 22:30 (JP) Japan to sell 3-Month Bills.
• 23:30 (TH) Thailand Sept Customs Trade Balance: -$0.9Be v -$1.2B prior; Exports Y/Y: 11.6%e v 8.9% prior; Imports Y/Y: 33.3%e v 47.9% prior.

Gold and silver have been steadily finding buyers since late September, pushing back from multi-month lows. Interestingly, at the same time, long-term interest rates continue to move upwards. Previously, rising bond yields acted as a factor for selling precious metals, paying no dividends or coupons.

In our view, investors have viewed inflation differently since the end of September. They see inflation as less transitionary than before: neverending supply chain problems, high energy prices, and accelerating wage growth amplify pro-inflationary factors.

Under these conditions, hedges against long-term inflation in cryptocurrencies and precious metals are regaining their shine. In addition, the latter have sagged substantially in more than a year of corrective trend.

On the 29th of September, we saw the final chord of the sell-off, which simultaneously affected bitcoin, gold, silver, and gold mining stocks. The next day, there was buying interest, sustaining until today. Admittedly, on a very different scale for different instruments.

Bitcoin has rallied over 60% from the bottom in late September, taking the price to an all-time high of $67,000 on Wednesday. Shares of the biggest gold miners are up around 10-15%. Silver jumped 12.5% during the same time: three times as much as gold with its 3.6%.

In terms of tech analysis, investors should pay attention to the fact that the bulls have managed to push metals and mining companies above their 50-day moving averages. This is the first sign of a break in the downtrend.

Potential buyers should pay attention to the lines of the 200-day moving averages for gold, silver, and related mining stocks. A sustained overcoming of $1800 per ounce of gold still acts as an important point to watch. A strong move above the indicators would signal that we do not see a rebound developing but a new cycle of rising gold prices.

Amongst the fundamental factors, a divergence between inflation expectations and the actions of the key central banks could provide support to the commodity markets. Signs that central bankers are not keeping pace will support a recovery rally in gold and help mining companies to increase their revenues and profits.

Oil weakens in Asia

Oil prices have eased in Asia after China’s threat to cap coal prices saw the mainland coal futures slump limit down once again today. That has unwound some of oil’s gains overnight after Saudi Arabia poured cold water on more OPEC+ production, oil or gas, and US official Crude Inventories, Gasoline and Distillates fell sharply, including crude stocks at the Cushing hub. Brent crude finished 0.85% higher at USD 85.85 overnight, testing USD 86.00 intraday. It has retreated by 0.70% to USD 85.25 a barrel in Asia. WTI jumped 1.33% to USD 83.50 overnight, testing USD 84.00 a barrel intraday. In Asia though, it has fallen 0.50% to USD 83.10 a barrel.

With coal and gas prices easing and with the relative strength index (RSI) technical indicators still in overbought territory, the odds of a sharp, but material fall in oil prices are rising. Brent crude could fall to USD 82.00 and WTI to USD 78.50 a barrel, and still comfortably remain in a strong bull market. A culling of speculative longs would be no bad thing for the overall uptrend. China’s ability to control energy and commodity prices as a price taker in international markets is limited. Thus, any China-induced sell-off is a buy-the-dip opportunity as a China buyers strike is never likely to happen.

Brent crude has resistance at USD 86.00 still, with support at USD 83.80 a barrel, followed by USD 82.00 a barrel. WTI has failed three times at USD 84.00 a barrel, forming strong initial resistance now. Support is at USD 80.80 followed by USD 79.50 a barrel.

Gold defies higher US yields

Gold defied higher long-dated US yields overnight by rising an impressive 0.70% to USD 1781.50 an ounce, climbing another 0.20% to USD 1785.50 in Asia. Gold probably owes its strength to a weaker US dollar and some Evergrande-derived haven buying in Asia today with the move overnight inevitably attracting the fast-money momentum gnomes out of their caves. Once again though, if the tides turn and the US dollar rises, I expect gold to rapidly unwind all of these gains.

That said, gold is slowly but surely forming what appears to be the second shoulder of an inverse head and shoulders pattern through a series of higher daily lows. In the bigger picture, a rise through USD 1835.00 an ounce, would trigger the multi-month inverse head-and-shoulders technical pattern and swing gold’s outlook back to positive, targeting a move back above USD 2000.00 an ounce. In the shorter term, a rising support line, today at USD 1768.50 an ounce, is continuing to support gold’s rally very nicely. The risks remain firmly to the downside unless US yields have a sustained move lower which sinks the US dollar, but I can no longer rule out entirely a move back above USD 1800.00 an ounce.

Gold has support at USD 1768.50, USD 1765.00, and USD 1760.00 an ounce, which is followed by USD 1745.00; failure signalling a retest of USD 1720.00 an ounce. Undeniably, gold is forming some decent short-term technical support. Gold has resistance at USD 1790.00, followed by the 100 and 200-day moving averages (DMAs), today at USD 1793.00 and USD 1794.00 ahead of USD 1800.00 an ounce.

The US dollar weakens on earnings sentiment

The US dollar has found the going tough this week and fell once again overnight, despite rising bond yields after a weak 20-year auction. With US earnings season outperforming and knocking the Fed taper story from investors’ minds, progress on the much slimmed down Biden fiscal packages, and commodity-centric currencies outperforming, the US dollar remains under pressure. Another driver appears to be rising rate expectations among some trading partners, offsetting the boost from the Fed taper trade. The US dollar looks set to endure more weakness ahead of the weekend and if Evergrande has secured a debt extension, that will probably be another headwind. The dollar index is floating just above support at 93.50, and a further drop to 93.00 cannot be ruled out.

EUR/USD continued to trade sideways around the 1.1650 mark, but the technical picture suggests a move above 1.1670 could extend gains to 1.1800. GBP/USD remains on fire as markets continue to pour into the Bank of England hike trade. Although there is probably a lot of that priced in now GBP/USD continues to rise and momentum remains. GBP/USD is trading at 1.3820 and a close above the nearby triple top at 1.3830 should allow a test of 1.3900 this week. AUD/USD gained 0.50% overnight to 0.7505, boosted by firm prices in the commodity and energy space and expectations the RBA may wind back some of its dovish rhetoric as NSW and Victoria reopen. It continues to target further gains to 0.7600. NZD/USD has been the star of the show with the RBNZ rate hike frenzy in full swing. Kiwi has risen 0.66% to 0.7195 overnight. Kiwi should continue to outperform if global risk sentiment remains firm. NZD/USD could test 0.7300 in the next few days in that scenario.

In Asia, USD/KRW is holding steady at 1177.00 today. Meanwhile, the PBOC remains unconcerned about a strengthening yuan with yet another firm fixing for the CNY at 6.3890. USD/CNY is trading a 6.3940 in Asia having traced out support at 6.3800 yesterday. That continues to support the broader Asia FX space although I expect Evergrande nerves to weigh on regional currencies into the weekend depending on the full implications of the REDD story. Evergrande has another offshore coupon payment grace period deadline next week. I would also note that ever-higher oil prices and China’s moves to cap commodity prices could take the wind out of the Asia FX sails ahead of the weekend but should not be enough to see large-scale exits.

The Japanese yen is seeing haven buying which has accelerated as the Nikkei 225 slumps today. USD/JPY sliding back to 114.00 in Asian trading. It appears that nerves about Japan’s imported energy bill, election uncertainty, and the Mt Aso eruption are temporarily eroding the rate differential bid in USD/JPY. The series of multi-year highs on each side of 115.00 may also be prompting some export selling of USD/JPY. The yield differential play between the US and Japan remains the main driver though, and USD/JPY remains a medium-term buy on dips play.