Sample Category Title

Daily Pivots: (S1) 114.05; (P) 114.37; (R1) 114.66; More...

Intraday bias in USD/JPY is turned neutral first as it retreated just ahead of 61.8% projection of 102.58 to 111.65 from 109.11 at 114.71. On the downside, break of 113.87 minor support will confirm short term topping, and turn intraday bias to the downside for deeper pull back. But downside should be contained above 112.07 resistance turned support to bring rise resumption. On the upside, sustained break of 114.71 will resume larger up trend from 102.58 to 100% projection 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.

General trend

• AUD extends gain; NZD also continued to rise; Commodity currencies later reversed gains.
• RBA Gov Lowe is due to speak tomorrow amid focus on YCC (Oct 22nd at 7 pm GMT).
• Modest equity moves have been seen thus far.
• Hang Seng has traded cautiously amid trading resumption by Evergrande; China Huarong Asset Mgmt is due to hold AGM today.
• Shanghai Composite ended morning trading modestly higher [Property and Banks indices outperform]; Ping An Bank rises after earnings report.
• Nikkei has remained lower [Airlines and Electric Appliances firms decline].
• S&P ASX 200 has moved higher after opening flat [Financials and Resources indices rise].
• 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.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened +0.2%.
• BSL.AU Raises H1 guidance (A$) underlying EBIT 2.1-2.3B (1.8-2.0B).
• ILU.AU Reports Q3 Production 200.1Kt v 175.3Kt q/q, Mineral Sands Rev A$392.0M v 210.2M y/y.
• CIM.AU Reports 9M (A$) Net 303.1M v 306.6M y/y; EBITDA 676M v 664M y/y; Rev 10.9B v 10.0B y/y.
• STO.AU Reports Q3 Production 21.9 MMBOE v 25.1 y/y; Rev $1.14B v $797M y/y.
• (NZ) New Zealand reaches 15 year free trade agreement (FTA) with the UK, FTA will remove all tariffs on exports to the UK over time.
• (AU) Australia Q3 NAB Business Confidence: -1 v +18 prior.
• (AU) Australia Total Weekly Payroll Jobs change from Sept 11-25th: +0.2% v -0.7% prior.
• (NZ) New Zealand sells total NZ$500M v NZ$500M indicated in 2024, 2032, and 2041 nominal bonds.
• (AU) Reserve Bank of Australia (RBA) releases 2021 annual report: Underlying earnings A$4.2B v A$1.40B y/y; To pay dividend of A$2.67B v A$2.57B y/y to the Australia government.

Japan

• Nikkei 225 opened -0.4%.
• (JP) Early polling ahead of Oct 31st election shows PM Kishida should retain majority - Nikkei and Kyodo polls.
• (JP) Japan Industry Ministry: LNG inventory held by major utilities as of Oct 15th 2.3Mt, +0.7Mt y/y.
• (JP) Japan Deputy Chief Cabinet Sec Isozaki: Rise in energy prices can lead to decline in corporate profits.

Korea

• Kospi opened 0.0%.
• (KR) South Korea Sept PPI M/M: 0.2% v 0.5% prior; Y/Y: 7.5% v 7.4% prior.
• (KR) South Korea Oct 1-20 Exports y/y: 36.1% v 22.9% prior; Imports y/y: 48.0% v 38.8% prior.

China/Hong Kong

• Hang Seng opened 0.0%; Shanghai Composite opened +0.1%.
• Shares of Evergrande resume trading today.
• 3333.HK Said to have secured an extension on its Jumbo Fortune bond - press.
• (CN) China PBOC: To continue to monitor financial risks in key sectors; seeks to provide more financial support in green and innovative sectors.
• (CN) China PBOC sets Yuan reference rate: 6.3890 v 6.4069 prior (strongest since June 11th).
• (CN) China Sept Swift Global Payments (CNY): 2.19% v 2.15% prior.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY100B in 7-day reverse repos v CNY100B prior; Net inject CNY90B v Net inject CNY90B prior.
• 941.HK Reports 9M (CNY) Net 87.2B v 81.6B y/y, EBITDA 237.5B v 216.9B y/y, Rev 648.6B v 574.4B y/y (yesterday after the close).

North America

• (US) Pres Biden advisers reportedly discussed new minimum tax on corporations and tax on stock buybacks – WaPo.
• TSLA Reports Q3 $1.86 v $1.35e, Rev $13.8B v $13.2Be; Continues to ramp up Gigafactory Shanghai; Still expect final permit approval for Gigafactory Berlin by end-2021.
• (US) White house: There are a 'menu' of option to finance infrastructure spending bill.
• (US) Fed's Daly (non-voter, dove): Pandemic to push long term treasury market reform to ensure there’s sufficient liquidity in a future crisis and that people are aware of it - Asian banking event.
• (US) Port of Los Angeles processed 903.9K containers in Sept, record high in 114 year history - press.
• IBM Reports Q3 $2.52 v $2.49e, Rev $17.6B v $17.8Be; Guides FY22-24: Will exit 2021 in position to deliver: mid-single-digit revenue growth and $35B FCF.

Europe

• (UK) According to a recent poll more than 80% of private companies are planning to increase pay, with avg raise of 2.5% in year ended Aug 2022 - FT.
• (UK) UK in talks to sell missiles to Ukraine for the first time - UK press.

Levels as of 01:15ET

• Hang Seng -0.8%; Shanghai Composite +0.3%; Kospi -0.1%; Nikkei225 -1.6%; ASX 200 +0.0%.
• Equity Futures: S&P500 -0.2%; Nasdaq100 -0.3%, Dax -0.2%; FTSE100 -0.4%.
• EUR 1.1667-1.1647; JPY 114.42-113.96; AUD 0.7547-0.7502; NZD 0.7219-0.7186.
• Commodity Futures: Gold +0.1% at $1,785/oz; Crude Oil +0.1% at $88.47/brl; Copper +0.2% at $4.74/lb.

Daily Pivots: (S1) 1.2294; (P) 1.2332; (R1) 1.2355; More...

Intraday bias in USD/CAD remains on the downside at this point. Current decline from 1.2947 is in progress for 161.8% projection of 1.2947 to 1.2492 from 1.2894 at 1.2158 next. On the upside, above 1.2408 minor resistance will turn bias back to the upside for stronger rebound first.

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.

Daily Pivots: (S1) 0.7480; (P) 0.7501; (R1) 0.7538; More...

AUD/USD rises to as high as 0.7545 so far today and met 100% projection of 0.7105 to 0.7477 from 0.7169 at 0.7541. Intraday bias remains on the upside for the moment. Sustained break of 0.7541 will pave the way to 161.8% projection at 0.7771. On the downside, though, break of 0.7479 minor support will turn bias neutral for consolidation first, before staging another rally.

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.

While DOW hit new intraday record high overnight, positive sentiment was not carried forward to Asia. Instead, stocks tumbled as the troubled China's property giant Evergrande failed to close the sale of the controlling stake in its property management business. The company could official go into default next Monday. Yen and Dollar are both recovering mildly while commodity currencies retreat. But overall, there is no change in the near term trend yet. Dollar and Yen remain the worst performing ones for the week while Kiwi and Aussie are the strongest.

Technically, we'd continue to focus on 113.87 minor support in USD/JPY. Break there will indicate short term topping, after just missing 114.71 fibonacci projection level. USD/JPY would then turn into a near term corrective fall. At the same time, break of 156.58 minor support in GBP/JPY and 132.13 support in EUR/JPY would confirm that the selloff in Yen is over for the near term, and some consolidations would be in Yen crosses in general.

In Asia, at the time of writing, Nikkei is down -1.48%. Hong Kong HSI is down -0.29%. China Shanghai SSE is up 0.46%. Singapore Strait Times is down -0.01%. Japan 10-year JGB yield is down -0.001 at 0.094. Overnight, DOW rose 0.43%. S&P 500 rose 0.37%. NASDAQ dropped -0.05%. 10-year yield rose 0.001 to 1.636.

Fed Quarles quite wary of further increases in inflation expectations

Fed Governor Randal Quarles said in a speech, "we have met the test of substantial further progress toward both our employment and our inflation mandates". He would "support a decision at our November meeting to start reducing these purchases and complete that process by the middle of next year".

He said Fed is not behind the curve on inflation, for three reasons: "Most of the biggest drivers of the very high current inflation rates will ease in coming quarters, some measures of underlying inflation pressures are less worrisome, and longer-term inflation expectations are anchored, at least for now".

But, "forecast for growth and uncertainty about the resolution of supply constraints mean that there are upside risks to inflation next year.. Hence, his focus is "beginning to turn more fully from the rapidly improving labor market to whether inflation begins its descent toward levels that are more consistent with our price-stability mandate."

"I would also be quite wary of further increases in inflation expectations in this environment," Quarles said, "if inflation does remain more than moderately above 2 percent, be assured that the FOMC has the framework and the tools to address it.

Fed Mester: Rate hikes are not coming any time soon

Cleveland Fed President Loretta Mester told CNBC "the thought about raising interest rates is not a near-term consideration at all." Instead, "we're going to think about the decision coming up, which is about the asset purchases, and then as those wind down we'll have time to assess where the economy is."

"I don't think that interest rate hikes are coming any time soon because I don't think we'll reach our goals which are maximum employment and inflation at and above 2% for some time," Mester said.

"So far the medium-run inflation expectations and longer-run inflation expectations are still at levels consistent with our 2% inflation goal," she said. "We don't want to get into a situation where they continue to move up because that would be a signal that we may have to do an adjustment."

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."

Looking ahead

UK will release public sector net borrowing. Canada will release ADP employment and new housing price index. US will release jobless claims, Philly Fed survey and existing home sales.

AUD/USD Daily Report

Daily Pivots: (S1) 0.7480; (P) 0.7501; (R1) 0.7538; More...

AUD/USD rises to as high as 0.7545 so far today and met 100% projection of 0.7105 to 0.7477 from 0.7169 at 0.7541. Intraday bias remains on the upside for the moment. Sustained break of 0.7541 will pave the way to 161.8% projection at 0.7771. On the downside, though, break of 0.7479 minor support will turn bias neutral for consolidation first, before staging another rally.

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.

Economic Indicators Update

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."

Full release here.

Cleveland Fed President Loretta Mester told CNBC "the thought about raising interest rates is not a near-term consideration at all." Instead, "we're going to think about the decision coming up, which is about the asset purchases, and then as those wind down we'll have time to assess where the economy is."

"I don't think that interest rate hikes are coming any time soon because I don't think we'll reach our goals which are maximum employment and inflation at and above 2% for some time," Mester said.

"So far the medium-run inflation expectations and longer-run inflation expectations are still at levels consistent with our 2% inflation goal," she said. "We don't want to get into a situation where they continue to move up because that would be a signal that we may have to do an adjustment."

Fed Governor Randal Quarles said in a speech, "we have met the test of substantial further progress toward both our employment and our inflation mandates". He would "support a decision at our November meeting to start reducing these purchases and complete that process by the middle of next year".

He said Fed is not behind the curve on inflation, for three reasons: "Most of the biggest drivers of the very high current inflation rates will ease in coming quarters, some measures of underlying inflation pressures are less worrisome, and longer-term inflation expectations are anchored, at least for now".

But, "forecast for growth and uncertainty about the resolution of supply constraints mean that there are upside risks to inflation next year.. Hence, his focus is "beginning to turn more fully from the rapidly improving labor market to whether inflation begins its descent toward levels that are more consistent with our price-stability mandate."

"I would also be quite wary of further increases in inflation expectations in this environment," Quarles said, "if inflation does remain more than moderately above 2 percent, be assured that the FOMC has the framework and the tools to address it.

Full speech here.

Key Highlights

• USD/CHF started a fresh decline from well above 0.9300.
• A key bearish trend line is forming with resistance near 0.9280 on the 4-hours chart.
• EUR/USD could gain pace if there is a close above 1.1650.
• GBP/USD is showing positive signs above 1.3750 and 1.3780.

USD/CHF Technical Analysis

The US Dollar started a major decline from well above 0.9300 against the Swiss France. USD/CHF declined below 0.9250 to move into a bearish zone.

Looking at the 4-hours chart, the pair even traded below 0.9220, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

It even tested 0.9185 and is currently consolidating losses. An immediate support is near the 0.9180 zone. The next major support is near 0.9165, below which there is a risk of a larger decline. In the stated case, the pair could test 0.9120.

On the upside, the pair is facing resistance near 0.9250. There is also a key bearish trend line forming with resistance near 0.9280 on the same chart.

A close above 0.9280 could open the doors for a larger increase. The next key resistance is near the 0.9300 level. The next key resistance sits near the 0.9350 level.

Looking at EUR/USD, the pair is eyeing a decent recovery, but the bears are likely to remain active near the 1.1650 and 1.1660 levels.

Economic Releases

• US Initial Jobless Claims - Forecast 300K, versus 293K previous.
• US Existing Home Sales for Sep 2021 (MoM) - Forecast +1.1%, versus +2.0% previous.

STOCKS

Mixed movements seen on global equities. Dow and Dax can rise towards 36000 and 15800/900 while above 35500 and 15400 respectively. Nikkei can fall while below 29500 towards 28000 and needs to eventually break above 29500 to move higher in the coming weeks. Shanghai is bullish towards 3700-3800. Nifty and Sensex are also bullish for the near term towards 18400/600 and 62000 while above respective supports.

Dow (35609.34, +152.03, +0.43%) tested 35670 yesterday before falling off from there. A test of resistance at 36000 is possible before reversing from there.

DAX (15522.92, +7.09, +0.046%) has risen slightly but while above support at 15400 there is scope to rise to 15800/900 before declining. A range of 15800/900-15400 looks possible for the near term.

Nikkei (29161.71, -93.84, -0.32%) has come off slightly today; the view is bearish to see a fall towards 28000 while below 29500. A strong break above 29500 would be needed for the view to be bullish towards 30000/31000. Watch price action while below 29500 for the next few sessions to see if the index manages to break on the upside.

Shanghai (3602.34, +15.90, +0.44%) has risen above 3600 and if the rise sustains, we can be bullish towards 3700-3800 in the near term.

Nifty (18266.60, -152.15, -0.83%) opened higher yesterday and made a low of 18209.35 in line with our expectations of seeing a corrective fall towards 18200.While above 18200, view is bullish to see a test of 18600 again. However, if a fall below 18200 is seen the corrective fall can extend to 18000 before reversing higher.

Sensex (61259.96, -456.09, -0.74%) has support at current levels, a bounce towards 62000 and eventually 63000 is possible.

COMMODITIES

Crude prices have risen today as Weekly US inventories continue to fall and on news that Russia won’t go out of its way to offer extra gas to European consumers to ease supply tightness unless it gets approval for a controversial pipeline. View is bullish for crude in the near term but could be limited to 87/86 on Brent and 85 on WTI. Gold can remain within 1790-1760 unless a break on the upside is seen soon. Silver has risen well and can rise towards 25. Copper can bounce from support near 4.55/60 to 4.90 soon.

Brent (85.71) and WTI (83.47) have both risen well. A rise in Brent towards 86-87 and towards 85 on WTI cannot be negated in the near term before falling off from there.

Gold (1787.70) has risen above the 1780 as mentioned. A strong break above 1790 is needed for the view to be bullish towards 1800-1820. While below 1790,a sideways range between 1760-1790 can be seen before we see a decisive break on either side.

Silver (24.50) has risen well as expected and has room to test 24.50\25 on the upside.

Copper (4.6305) has support near 4.55/60 which if holds can eventually produce a rise towards 4.90on the upside.

FOREX

Dollar Index trades below 93.75 and could fall towards 93, pulling up Aussie, Pound, Euro and other currencies higher. Euro can rise to 1.17/1710 while Aussie and Pound can rise to 0.76 and 1.39 respectively in the coming sessions. EURJPY can face stiff rejection from crucial resistance near 134 before falling towards 132. Dollar-Yen can fall while below 114.75 to test 113.50. USDCNY is bearish while below 6.40. USDINR has come down sharply and can bounce from support zone of 74.60/50-74.80 in the very near term.

Dollar Index (93.513) may be bearish towards 93 while below 93.75 and can pull up Euro and some other currencies higher in the near term.

Euro (1.1666) trades higher and while above 1.1625/50, there is possibility to see a rise towards 1.17/1.1710 in the near term. No immediate signs of breaking below 1.16 for now.

EURJPY (133.36) trades higher and could test crucial resistance at 134 before facing stiff rejection. While Dollar Yen trades higher and Euro moves up, EURJPY can come down slowly.

Aussie (0.7541) continues to rally and can test 0.76 or higher on the upside in the near term.

Pound (1.3829) continues to trade above 1.38 and while the rally continues, we may expect a test of 1.39 before any decline is seen from there.

Dollar-Yen (114.28) trades above 114 just now but has immediate resistance at 114.75 which if holds can have scope to push the pair lower towards 113.75/50 before a bounce is seen. Else a sharp rise above 114.75 if seen and sustained can take it towards 115-115.50. Watch price action while below 114.75 for now.

USDCNY (6.3890) is bearish while below 6.40 and has scope to fall towards 6.37.50 or even to 6.36 on the downside.

USDINR (75.8750) indeed broke below 75.10 initially yesterday and then declined towards 74.80 as expected. The 74.80-74.60/50 support zone comes into the picture and a break below 74.80 would drag the pair further down to 74.60/50 before a bounce is seen from there.

INTEREST RATES

The US Treasury Yields remain higher. The 30Yr has moved up further and can test 2.2%. The 10Yr can rise to 1.75% and even 2% if it sustains above 1.65% which will then negate our view of seeing a reversal. The German yields are likely to see a fresh fall in the coming days as the key long-term resistances seem to hold well for now as expected. The 10Yr GoI is bullish to rise further in the coming days while above 6.35%. The 5Yr on the other hand is mixed and has equal chances of moving on either side from current levels.

The US 2Yr (0.39%), 5Yr (1.17%) and the 10Yr (1.67%) Treasury yields remain higher and stable. The 30Yr (2.15%) has risen further and is heading up towards 2.2% in line with our expectation. It is important to see if it can rise past 2.2% or not which will be key in deciding the subsequent move. The 10Yr can rise to 1.75% and even 2% if it sustains well above 1.65%. That in turn will negate our view of seeing a reversal.

The German 2Yr (-0.67), 5Yr (-0.48%) and the 10Yr (-0.13%) yields have reversed lower while the 30Yr (0.29%) remains stable. Our view remains the same. We expect the yields to reverse lower and see a fall to 0.2% (10Yr) and 0.2% (30Yr) initially and then further deeper eventually over the medium-term. -0.1%/-0.05% (10Yr) and 0.35%/0.45% (30Yr) will be the cap on the upside.

The Indian 10Yr GoI (6.3732%) tested 6.4% and has come-off from there. While above 6.35%, the outlook is bullish to test.45%-6.5% in the coming days.

The 5Yr GoI (5.7424%) failed to sustain the upside breakout of the 5.66%-5.76% range. It rose to 5.7785% and has come-off from there. The immediate outlook is mixed. There are equal chances of seeing either 5.8% on the upside or 5.7% on the downside from here. We will have to wait and watch.