Sample Category Title

Notes/Observations

• Inflation fears continue to weigh on market sentiment.
• UK Sept CPI slowed slightly to 3.1% (still the 2nd month above BOE 2% target).
• German Bundesbank President Weidmann to resign citing personal reasons.

Asia

• China PBoC Monthly Loan Prime Rate (LPR) Operation left both 1-year and 5-year Loan Prime Rate unchanged at 3.85% and l4.65% respectively.
• China PBOC Backed Newspaper (Financial News) noted that expectations for a Q4 RRR cut had eased due to high factory gate inflation (PPI).
• China Vice Commerce Min Wang Bingnan: Will roll out measures to boost consumption as the rebound has been uneven.
• China State Planner (NDRC) Official noted that Govt needed to closely monitor operation issues for property developers.
• China PBOC Open Market Operation (OMO) injected CNY100B in 7-day reverse repos v CNY10B prior; Net inject CNY90B .The increased injections said to be due to tax and govt bond issuance payments.
• Japan Sept Trade Balance: -¥622.8B v -¥520.7Be v; Exports Y/Y: 13.0% v 10.3%e; Imports Y/Y: 38.6% v 34.5%e.

Europe

• UK govt reportedly plans to cut tax surcharge on bank profits by over 60% from 8% to 3% in upcoming budget; measures would begin in April 2023. Aimed to keep banking activity in the UK.
• UK govt reportedly reiterated it aims to end sale of new petrol cars in 2030. UK Treasury said to warn that new taxes will be needed to make Britain “ net zero” in carbon emissions by 2050 as taxes currently linked to the driving of polluting vehicles will disappear over that time.

Americas

• Fed's Waller (hawk, voter) stated that did support Fed beginning taper in Nov; Substantial progress had been made on both inflation and employment. If inflation expectations become unanchored, we would likely need to take action.
• Fed's Barkin (FOMC voter, hawk) noted that labor shortages might outlast the pandemic; Seen strong wage increases for entry level positions.
• White House and Democrats said to be getting close to a deal on framework for major package of legislation on social programs/climate that could be announced in the coming days (Note: package was originally $3.5T but the number could be reduced to between $1.9-2.2T). Sen Manchin (D-VW) reiterated that he remains at $1.5 trillion topline.

Energy

• Weekly API Crude Oil Inventories: +3.3M v +5.2M prior r (4th straight weekly build).

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.13% at 469.20, FTSE -0.09% at 7,211.07, DAX +0.15% at 15,538.70, CAC-40 -0.16% at 6,659.26, IBEX-35 +0.02% at 8,998.50, FTSE MIB +0.34% at 26,422.00, SMI +0.98% at 12,060.28, S&P 500 Futures 0.00%].
• Market Focal Points/Key Themes: European indices open generally lower but later turned around to trade slightly in the green; better performing sectors include materials and healthcare; while sectors among those leading to the downside are consumer discretionary and technology; oil and gas subsector under pressure after China announced intervention to bring down the price of energy; debut of AutoStore on the market; Prodware receives takeover offer from Phast Invest; earnings expected during the upcoming US session include Nasdaq, Abbott Laboratories, Verizon and Deutsche Boerse.

Equities

• Consumer discretionary: Nestle [NESN.CH] +3.5% (earnings; raises outlook), Deliveroo [ROO.UK] +3% (trading update; raises outlook).
• Healthcare: Roche [ROG.CH] -1% (earnings; raises outlook).
• Industrials: Vinci SA [DG.FR] +1.5% (earnings), Antofagasta [ANTO.UK] -4.5% (production).
• Technology: ASML [ASML.NL] -1.5% (earnings), AutoStore [AUTO.NO] +6% (1st day of IPO trading).
• Materials: Akzo Nobel [AKZA.NL] -3% (earnings).

Speakers

• German Bundesbank President Weidmann to resign at year-end citing personal reasons.
• ECB’s Villeroy (France) reiterated stance that pick-up in inflation was seen as transitory. Policy to be vigilant but patient.
• Norway Central Bank (Norges) Gov Olsen stated that the current high inflation seen as likely transitory. Added that inflation targeting regime had been robust over the past two decades.
• China Vice Premier Liu He noted that China was able to achieve annual economic targets; property market risks were controllable. Reiterated govt view of “individual problems” in the property market. Reasonable capital demand for property sector was being met.
• China State Asset Regulator SASAC spokesperson: Urges power plants to purchase more coal and maintain stockpile.
• China FX Regulator SAFE noted that 2-way CNY currency (Yuan) fluctuations have increased and able to better absorb short-term disturbances.
• Iraq Oil Min Jabbar state that he expect oil prices to hit $100/barrel in Q1/Q2 of 2022; global oil inventories are at their lowest level (**Note: On Oct 13th Jabbar stated then that oil prices were unlikely to rise further. Oil price between $75-80 seen fair to both producers and consumers).

Currencies/Fixed Income

• USD was slightly stronger in the session as various inflation data came out.
• GBP/USD moved back below the 1.38 level after Sept CPI data eased a touch to 3.1%. Overall dealers noted that the data miss would not likely alter the likelihood that interest rates would rise soon. The pause in inflation readings not likely to last as energy price surge continued.
• EUR/USD drifted from highs of 1.1652.
• USD/JPY continued to registered fresh 4-year highs as the pair approached the 114.70 area. Rate divergence between Fed and BOJ opening the door for a retest of 120 level in coming months.

Economic data

• (UK) Sept CPI M/M: 0.3% v 0.4%e; Y/Y: 3.1% v 3.2%e (2nd month above target); CPI Core Y/Y: %2.9 v 3.0%e; CPIH Y/Y: 2.9% v 3.0%e.
• (UK) Sept RPI M/M: 0.4% v 0.2%e; Y/Y: 4.9% v 4.7%e; RPI-X (ex-mortgage interest payments) Y/Y: 5.0% v 4.8%e; Retail Price Index: 308.6 v 308.1e.
• (UK) Sept PPI Input M/M: 0.4% v 1.0%e; Y/Y: 11.4% v 11.8%e.
• (UK) Sept PPI Output M/M: 0.5% v 0.5%e; Y/Y: 6.7% v 6.8%e.
• (DE) Germany Sept PPI M/M: 2.3% v 1.1%e; Y/Y: 14.2% v 12.8%e.
• (AT) Austria Sept Final CPI M/M: 0.5% v 0.4% prelim; Y/Y: 3.3% v 3.2% prelim.
• (TW) Taiwan Sept Export Orders Y/Y: 25.7% v 17.0%e (19th month of increases).
• (EU) Euro Zone Aug Current Account Balance: €13.4B v €22.6B prior.
• (ZA) South Africa Sept CPI M/M: 0.2% v 0.3%e; Y/Y: 5.0% v 5.0%e (7th straight reading within target band).
• (ZA) South Africa Sept CPI Core M/M: 0.3% v 0.2%e; Y/Y: 3.2% v 3.1%e.
• (PL) Poland Sept Sold Industrial Output M/M: 11.0% v 10.2%e; Y/Y: 8.8% v 8.0%e.
• (PL) Poland Sept PPI M/M: 0.7% v 0.6%e; Y/Y: 10.2% v 10.0%e.
• (PL) Poland Oct Consumer Confidence: -17.8 v -14.5e.
• (UK) Aug ONS House Price Index Y/Y: 10.6% v 8.5% prior.
• (IT) Italy Aug Current Account Balance: €5.0B v €8.0B prior.
• (GR) Greece Aug Current Account Balance: €1.4B v €0.6B prior..
• (PT) Portugal Aug Current Account Balance: +€0.5B v -€0.2B prior.
• (EU) Euro Zone Sept Final CPI Y/Y: 3.4% v 3.4%e (3rd month above target); CPI Core Y/Y: 1.9% v 1.9%e.

Fixed income Issuance

• (IT) Italy Debt Agency (Tesoro) opened its book to sell EUR-denominated Apr 2045 green BTP bond via syndicate; guidance seen +12bps to mid-swaps.
• (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills.
• (DK) Denmark sold total DKK3.04B in 2024 and 2031 DGB bonds.
• (UK) DMO sold £2.25B in 0.25% July 2031 Gilts; Avg Yield: 1.144% v 0.740% prior; bid-to-cover: 2.65x v 2.52x prior; Tail: 0.2bps v 0.2bps prior.
• (SE) Sweden sold total SEK3.5B vs. SEK3.5B indicated in 2028 and 2045 bonds.

Looking Ahead

• (AR) Argentina Sept Budget Balance (ARS): No est v -124.8B prior.
• (AR) Argentina Sept Leading Indicator: No est v -0.7% prior.
• (MX) Citibanamex Survey of Economists.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (DE) Germany to sell €3.0B in 0.0% Aug 2031 Bunds.
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
• 06:00 (EU) EU Commission to sell combined €3.0B in 3-month and 6-month Bills (prior Oct 6th 2021).
• 06:45 (US) Daily Libor Fixing.
• 07:00 (RU) Russia to sell RUB20B in 2031 OFZ Bond.
• 07:00 (US) MBA Mortgage Applications w/e Oct 15th: No est v 0.2% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (CA) Canada Sept CPI M/M: 0.1%e v 0.2% prior; Y/Y: 4.3%e v 4.1% prior; Consumer Price Index: 142.7e v 142.6 prior.
• 08:30 (CA) Canada Sept Teranet House Price Index (HPI) M/M: No est v 1.0% prior; Y/Y: No est v 18.4% prior; HPI Index: No est v 284.59 prior.
• 09:40 (AT) ECB’s Holzmann (Austria) at financial regulation conference.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).
• 10:30 (US) Weekly DOE Oil Inventories.
• 11:00 (FR) ECB’s Villeroy (France).
• 11:20 (IT) ECB’s Visco (Italy).
• 12:00 (RU) Russia Sept PPI M/M: 0.8%e v 1.5% prior; Y/Y: 29.7%e v 28.6% prior.
• 12:00 (US) Fed’s Bostic with Kashkari, Evans and Bullard.
• 12:00 (SE) Sweden Central Bank (Riksbank) Jansson participates on panel.
• 13:00 (US) Fed’s Quarles.
• 13:00 (US) Treasury to sell 20-Year Notes.
• 14:00 (US) Federal Reserve Beige Book.
• 17:00 (KR) South Korea Sept PPI Y/Y: No est v 7.3% prior.
• 20:00 (KR) South Korea Oct 1-20th Exports Y/Y: No est v 22.9% prior; Imports Y/Y: No est v 38.8% prior.
• 20:30 (AU) Australia Q3 Business Confidence: No est v 17 prior.
• 21:00 (CN) China Sept Swift Global Payments (CNY): No est v 2.2% prior.
• 22:00 (NZ) New Zealand Sept Credit Card Spending M/M: No est v -14.3% prior; Y/Y: No est v -6.3% prior.
• 23:00 (TH) Thailand Central Bank to sell THB25B in 2023 Bonds.
• 23:30 (JP) Japan to sell 6-Month Bills.

Bundesbank President Jens Weidmann warned, "it will be crucial not to look one-sidedly at deflationary risks, but not to lose sight of prospective inflationary dangers either." The comment came as Weidmann announced he's stepping down from the post on December 31, as "more than 10 years is a good measure of time to turn over a new leaf – for the Bundesbank, but also for me personally."

ECB President Christine Lagarde said in statement, "I respect Jens Weidmann`s decision to step down from his position as President of Deutsche Bundesbank at the end of this year after more than 10 years of service, but I also immensely regret it."

All eyes will be on Bitcoin after it continued to buck the trend and rose further on Tuesday to close in on its old record high at $64,900 that was hit back in April, while other cryptos either held in consolidation or fell. Bitcoin has been surging higher in recent days due, mainly, to the hype surrounding the launch of the first ever Bitcoin-linked ETF, which made its debut on Tuesday.

BITO, the ProShares ETF, became the second-most heavily traded fund on record as more than 24 million shares changed hands on the first day of trading. BITO finished almost 5% higher on its first day and will be in focus again later as the market gauges investor appetite for exposure to Bitcoin.

They key question for Bitcoin and crypto traders is what does BITO’s successful debut mean for the underlying Bitcoin prices. The way BITO is structured, there won’t be any direct investing in the popular cryptocurrency itself. Instead, the ETF is backed by Bitcoin futures contracts, those that are traded on the CME.

Therefore, BITO by itself won’t introduce any new demand for bitcoin directly. But indirectly, it will do so via the futures, as the seller must sell the underlying Bitcoin to the buyer at the set price and date. Some traders’ strategies may also require them to buy more bitcoins to hedge against the futures price, while arbitragers will be busy buying and selling to take advantage of any short-term pricing disparities.

With Bitcoin going up in the days leading up to BITO’s debut, there is a possibility that the impact of the ETF’s launch might already be priced in, and we could see some “buy-the-rumour, sell-the-fact” type of reaction in the days ahead.

That being said, the current trend for Bitcoin appears very strong and the fact that so many ETF shares exchanged hands to finish well in the black on the first day points to strong interest for Bitcoin exposure. So, sentiment towards Bitcoin should remain positive even if we may see some short-term weakness. As a result, Bitcoin could easily break the old record high, before potentially climbing towards $70K next, which is the next psychological hurdle.

However, in the event of a potential false break out above the old record high, investors would need to proceed with extra care, especially if Bitcoin then goes on to make a lower low.

Oil weakens on China coal slump

Mainland coal futures slumped limit-down yesterday after the government threatened to intervene in the coal market to control prices. Hong Kong futures have fallen by 8.55% this morning and combined with another easing in natural gas prices, oil has modestly retreated in Asia. That has seen Brent crude give back half of its 1.0% overnight gains, falling by 0.55% to USD 84.65 a barrel this morning. WTI, closed nearly unchanged overnight after US API crude inventories recorded a sharp increase. WTI in Asia is 0.55% lower as well, at USD 82.00 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, and more headlines on price controls from China, or a higher than expected official US Crude Inventories number this evening could be the nudge markets require.

Even if oil was to stage a USD 5.00 pullback, I continue to believe that it will be short in duration. With OPEC+ at 115% compliance and unable to rapidly increase production, US shale increasing only slowly, and energy shortages all over the northern hemisphere, any material fall in prices will see buyers flood in to buy the dip.

Brent crude has resistance at USD 86.00 and support at USD 83.80 a barrel, followed by USD 82.00 a barrel. WTI has failed twice ahead of USD 84.00 a barrel, forming initial resistance. Support nearby at USD 81.80 is in danger of being tested. A loss of USD 81.80 leaves an empty hole until USD 79.50 a barrel.

Gold rally capped by US yields

Widespread US dollar weakness earlier in yesterday’s session saw gold rallying impressively, climbing 20.00 dollars to USD 1785.00 at one stage. However, a renewed rise in US long-dated yields torpedoed the rally, with the resulting US dollar strength pushing gold back to a close at USD 1767.50 an ounce, a modest 0.27% gain for the day. In Asia, a slight fall in the greenback has lifted gold 0.25% to USD 1774.00 an ounce in a quiet session. Gold’s fate remains inextricably linked to the direction of the US dollar with US yields roving once again, to be a headwind to sustained price 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. Still, the risks remain firmly to the downside unless US yields have a sustained move lower which sinks the US dollar.

Gold has nearby support at 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. Gold has resistance at USD 1785.00, followed by the 100 and 200-day moving averages (DMAs), today at USD 1793.85 and USD 1794.50, which remain formidable resistance.

USD/CAD technical analysis

• USD/CAD is in strong downtrend.
• The price is at support.
• Selling the rallies is possible.
• Breakout lower below W L3 pivot.

H4 chart EUR/CAD

• Highest Point of the Swing.
• Order Block Breakout.
• W L3 Support.
• Breakout Target.

The price is in a downtrend. We should see a move down after either a rally or a breakout. Breakout should happen below W L3 1.2315 while a rally might come to 1.2355. Selling should continue towards blue level zones 1.2266-1.2182. Shorts at the M L3 level were spot on and they are playing good as the sellers pushed the price below the important monthly pivot. You can see the sell position in the chart. Have in mind that CAD correlates to OIL too so manage your positions wisely.

The US dollar gets a bond boost

The US dollar found support overnight, after trading lower early in yesterday’s session, as long-dated US bond yields resumed their upward climb, notably in the 30-year tenor. The dollar index tumbled to test support at 93.50 overnight, but the rise in US yields reversed the sell-off, leaving the index 0.17% lower at 93.78, before moving slightly lower to 93.72 in Asia.

EUR/USD continued to trade sideways just below 1.1650 overnight but it was the reflation trade favourites that outperformed. GBP/USD rose 0.50% to 1.3800 and remains on track to retest 1.3900 this week. AUD/USD has risen 1.0% in the last 24 hours to 0.7485 and continues to target further gains to 0.7600. NZD/USD has been the star of the show, kiwi gaining 1.20% in the last 24 hours to 0.7170 this morning. With the frenzy around a potential 0.50% RBNZ rate hike rising to deafening levels, 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, the South Korean won rallied 0.85% overnight for much the same reasons, USD/KRW falling to 1174.50 this morning. The Singapore dollar also gained 0.30% while the Indonesian rupiah consolidated this week’s 1.30% gain after the Bank of Indonesia left policy rates unchanged yesterday. USD/MYR could test support at 4.1500 today after being on holiday yesterday as oil and commodity prices remain in space. The entire Asia FX space continues to receive support from the Chinese yuan, with USD/CNY falling to multi-month lows near 6.3800 earlier and hitting multi-year highs on a TWI basis.

The Japanese yen is seeing haven buying today after falling earlier, USD/JPY sliding back to 114.50 in Asian trading. The yen has surged after Mt Aso erupted in Japan. The gains are modest though, and USD/JPY rose as high as 114.70 intra-day reflecting the strong rise in long-dated US yields overnight. That highlights once again the US/Japan rate differential is the key driver of USD/JPY direction, with occasional bouts of haven buying bringing some two-way price action. USD/JPY is approaching a series of highs on each side of 115.00 which date back to 2017. It will likely encounter more offers into this area from options and exporters but remains a steadfast buy on dips.

Except for the reflation GBP, AUD and NZD darlings, another moves higher in US yields as we saw overnight, is unlikely to be ignored this time around. With speculative long US dollar positioning now reduced, and with US yields on the move higher once again in the long-dated tenors, the greenback could be approaching its nadir for now. It will take a combination of strong US earnings and a material retreat by US yields to cause a downside breakout through 93.50 in the dollar index now.

JPY retreated further against the USD reaching a four-year low level during today’s Asian session, yet also weakened against GBP and EUR in a sign of the safe haven’s weakness for the past days. It should be noted that market sentiment seems to be improved as US and Asian stockmarkets gained yesterday, which could imply some safe haven outflows for JPY. At the same time US yields continued to rise which could have pushed USD/JPY even higher, while the monetary outlook differentials of BoJ and the Fed seem to continue to favor the USD given BoJ’s extensive dovishness. Overall, we tend to maintain a bearish outlook for JPY and given the lack of high impact financial releases from US and Japan, we expect market sentiment to be the main guide for the Japanese currency today.

USD/JPY continued to rise yesterday reaching a four year high by testing the 114.55 (R1) resistance line during today’s Asian session. We tend to maintain a bullish bias for the pair as long as it remains above the upward trendline characterizing its movement since the 11th of October. Also, it should be noted that the RSI indicator below our 4-hour chart is nearing the reading of 70 implying a bullish sentiment for the pair. Should the bulls actually maintain control over the pair’s direction, we may see it breaking the 114.55 (R1) resistance line and aim for the 115.20 (R2) level. Should the bears say enough is enough and take charge of USD/JPY’s direction, we may see the pair reversing course, breaking the prementioned upward trendline and aim if not breach the 113.70 (S1) support line.

Pound traders eye CPI rates

The pound’s strengthening against the USD continued yesterday in the aftermath of BoE Governor Bailey’s comments, however the pound also strengthened against the EUR and CHF yesterday. Also, fiscally the UK Government seems to be in a tight spot as there are headlines of the UK Treasury being reluctant to increase spending as it could intensify inflationary pressures in the UK. Given that inflation was stressed by BoE Governor on Sunday, we expect pound traders to keep a close eye over the release of UK inflation data for September today and a possible acceleration of the headline rate could add more pressure on the BoE to tighten its monetary policy. On a fundamental level the UK economy is still facing shortages in supplies while tensions with the EU are still high given the UK’s intention to alter the Northern Ireland protocol regarding Brexit.

USD/CAD edged hesitantly lower yesterday testing the 1.2330 (S1) support line, which seems to repel the downward movement of the pair for now. We tend to maintain a bearish outlook for the pair as long as it remains below the downward trendline incepted since the 29th of September. It should be noted that the RSI indicator below our 4-hour chart is between the readings of 50 and 30, implying an advantage for the bears currently. Should the selling interest be extended, we may see the pair finally breaking the 1.2330 (S1) support line and aim for the 1.2250 (S2) level. Should the pair fail to break the 1.2330 (S1) level and buyers take the initiative over the pair’s direction, we may see it breaking the prementioned downward trendline and aim if not breach 1.2425 (R1) resistance line.

Today’s events and expectations

Today in the European session we get from the UK the CPI rates and at the same time Germany’s producer prices growth rate while later we note the release of Eurozone’s final HICP rate, all releases being for September. In the American session we get from Canada the CPI rate for September, while later we get from the US the US EIA weekly crude oil inventories figure. Also note that during the American session a high number of Fed policymakers are scheduled to speak.

USD/JPY H4 Chart

Support: 113.70 (S1), 112.90 (S2), 112.25 (S3)

Resistance: 114.55 (R1), 115.20 (R2), 116.20 (R3)

GBP/USD H4 Chart

Support: 1.3750 (S1), 1.3600 (S2), 1.3430 (S3)

Resistance: 1.3875 (R1), 1.4000 (R2), 1.4125 (R3)

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.1609
Prev Close: 1.1632
% chg. over the last day: +0.20%

Another Fed member, Waller, believes that the US Central Bank no longer needs to stimulate the economy. This means that it is very likely that the Fed will officially announce the beginning of the QE program reduction in early November. This will positively affect the dollar index and negatively affect euro quotes, as the ECB will keep the amount of stimulus until the end of the year.

Trading recommendations

Support levels: 1.1615, 1.1548, 1.1502, 1.1453
Resistance levels: 1.1671, 1.1717, 1.1772, 1.1802, 1.1835

From the technical point of view, the EUR/USD trend on the hour timeframe has changed to bullish. The MACD indicator has become inactive. Under such market conditions, traders should consider buying positions from the support levels near the moving average or the buyer's initiative areas. It is best to look for sell trades from the resistance levels of the higher timeframe.

Alternative scenario: if the price breaks down through the 1.1548 support level and fixes below, the mid-term uptrend will likely be broken.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.3725
Prev Close: 1.3790
% chg. over the last day: +0.47%

The UK is looking to provide cheaper energy by changing its electricity and gas cost policy. According to the Financial Times, the UK supply chain crisis will continue at least until 2023. Governor of the Bank of England Bailey said that the bank is ready to act decisively to contain inflation, which strengthens the expectations of increasing interest rates in the current year.

Trading recommendations

Support levels: 1.3739, 1.3685, 1.3648, 1.3617, 1.3532, 1.3457, 1.3360, 1.3282
Resistance levels: 1.3812, 1.3886

On the hourly time frame, the GBP/USD trend is bullish. The British pound is strengthening due to its direct correlation with oil prices and the weakness of the dollar index. The MACD indicator is in the positive zone, but there are the first signs of buyers' weakness. Buy trades should be considered only within the day and only from the initiative zone of the buyers. It is better to look for sell deals from the resistance levels of the higher timeframe, but after an additional confirmation in the form of a sellers' initiative because the buyers' pressure is higher now.

Alternative scenario: if the price breaks down through the 1.3648 support level and consolidates below, the bullish scenario will likely be broken.

News feed for 2021.10.20:

• UK Consumer Price Index (m/m) at 09:00 (GMT+3).

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 114.28
Prev Close: 114.37
% chg. over the last day: +0.08%

The Japanese yen hit a 4-year low against the US dollar. Traders are selling the yen in exchange for the dollar amid rising long-term US interest rates and rising oil prices which is heating inflation fears.

Trading recommendations

Support levels: 114.48, 114.08, 113.66, 112.19, 111.53, 110.99, 110.65
Resistance levels: 115.15

The main trend of the USD/JPY currency pair is bullish. Yesterday, the price tried to move below the triangle pattern, but the buyers sharply returned the price back, forming a false breakdown zone below. The MACD indicator has become positive again. However, on higher time frames, there is still a divergence, which means that growth is limited and correction is expected shortly. Under such market conditions, it's better to look for buy positions from the support levels near the moving average since the price has deviated greatly from the average line. Sell positions should be considered from the resistance levels of a higher timeframe, given there is sellers' initiative.

Alternative scenario: if the price falls below 112.19, the uptrend is likely to be broken.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2376
Prev Close: 1.2364
% chg. over the last day: -0.10%

The Canadian dollar is a commodity currency, so USD/CAD is highly dependent on the dynamics of the dollar index and oil prices. The dollar index decreased yesterday, while oil prices increased. As a result, the USD/CAD currency pair continued its downtrend due to the strengthening of the Canadian dollar.

Trading recommendations

Support levels: 1.2260
Resistance levels: 1.2425 1.2518, 1.2565, 1.2628, 1.2729, 1.2774

From the technical point of view, the trend of the USD/CAD currency pair is bearish. The price has already failed to reach the lower line of the descending channel, indicating the weakness of the sellers. The MACD indicator has become inactive, but there are still signs of divergence on higher time frames. Under such market conditions, it is better to search for sell deals from the resistance levels near the moving average. Buy trades should be considered only on lower time frames from the support levels if there is the buyer’s initiative.

Alternative scenario: if the price breaks out through the 1.2518 resistance level and fixes above, the uptrend will likely resume.

News feed for 2021.10.20:

• Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
• US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

The US stock market closed yesterday in the green zone. At the close of the New York Stock Exchange, the Dow Jones index increased by 0.56% to a one-month high, the S&P 500 index added 0.74%, and the NASDAQ index increased by 0.71%. The market growth came mostly from strength in the health care, utilities, and oil and gas sectors.

Fed member Waller said yesterday that the US economy is on the way for healthy job growth in the 4th quarter of 2021. The economy returned 85% of the jobs lost during the pandemic recession, not counting the 2 million retirees. Waller also believes that the US Central Bank no longer needs to stimulate the economy. This means that it is very likely that the Fed will officially announce the beginning of the QE program reduction in early November.

The USA President Joe Biden assures that he will not raise taxes for people who earn less than $400 thousand a year.

According to preliminary information, Enanta's antiviral drug against COVID-19 is more effective than Merck's.

British scientists have announced the spread of a more infectious variant of the coronavirus than the delta strain. The new variant AY.4.2 could be 10-15% more virulent than the delta strain. This variant could be the most contagious since the virus began to spread. In Israel, the first cases of the new sub-variant have already been confirmed.

European stock indexes were on the rise yesterday. German DAX increased by 0.27%, British FTSE 100 added 0.19%, Italian FTSE MIB and Spanish IBEX 35 added 0.25% and 0.67%, respectively. The only exception was the French CAC 40, which decreased by 0.05%. The UK consumer price index was 3.1% (previous 3.2%), indicating that inflation in the UK has stopped rising. Core inflation, which excludes food and energy prices, also declined from 3.1% to 2.9%. But in Germany, the producer price index, which shows the inflation rate among businesses, continued to rise.

According to the American Petroleum Institute (API), the weekly stocks of crude oil amounted to 3.294 MIL (from 5.213 MIL the previous week). India wants OPEC+ to increase production to contain the rise in oil prices.

Physical copper traders are firmly bullish on the fundamental outlook for the metal despite the impending macroeconomic headwinds. Copper prices are growing rapidly.

Gold prices are under selling pressure ahead of the start of the Fed's reduction of monetary policy stimulus (MP). As QE cuts, government bond yields rise sharply, which has an inverse correlation with gold, so there is no fundamental reason for gold to rise at the moment. Analysts expect gold to fall below $1700 an ounce.

Asian stock markets continued yesterday's gains. Japan's Nikkei 225 index gained 0.8%, Australia's ASX 200 added 0.9%, but China's China A50 slightly decreased on negative macro data from China. The volume of production in China in real estate fell by 1.6% compared with last year, and the volume of production in the construction industry decreased by 1.8%.

Today's most anticipated earnings releases are Tesla, Verizon, IBM, Abbott, Nextera Energy, ASML, Biogen.

Main market quotes:

• S&P 500 (F) 4,519.63 +33.17 (+0.74%)
• Dow Jones 35,457.31 +198.70 (+0.56%)
• DAX 15,515.83 +41.36 (+0.27%)
• FTSE 100 7,217.53 +13.70 (+0.19%)
• USD Index 93.77 −0.18 (−0.19%)

Important events for today:

• China Loan Prime Rate at 04:30 (GMT+3);
• UK Consumer Price Index (m/m) at 09:00 (GMT+3);
• Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
• US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

• Dollar off lows as 10-year yield hits 5-month high but Fed rate hike still seen lagging others
• Yields likely to stay in spotlight as raft of Fed speakers coming up
• Strong earnings drive S&P 500 to fifth day of gains, but futures slip

Rate repricing underway

Expectations that high inflation is here to stay continued to firm in the bond markets, sending global bond yields to fresh highs in the last 24 hours. With energy and metal prices still soaring, supply chains crumbling and wage pressures building up, investors appear to be more attuned than policymakers to the prospect that this inflationary episode may not be transitory.

Australian and New Zealand sovereign bond yields have seen the sharpest gains in recent days following the much stronger-than-expected CPI numbers out of New Zealand on Monday.

UK yields are also having a solid week and slightly disappointing British inflation data do not seem to have dented expectations that the Bank of England will hike rates at its next meeting in November. Inflation in the UK dipped slightly to 3.1% year-on-year in September but there is little doubt that it will climb further in the coming months.

The BoE will likely follow in the RBNZ’s footsteps, while the RBNZ itself might opt for a more aggressive 50 basis points increase in the cash rate next month. The Bank of Canada could also turn more hawkish as Canadian inflation figures due later today are expected to show annual CPI accelerating to 4.3%.

However, investors are at odds as to how soon the US Federal Reserve will take the plunge. Fed Governor Christopher Waller hinted on Tuesday that a rate hike in 2022 might be warranted “if monthly prints of inflation continue to run high”. Anxiety about persistently high inflation will likely be echoed by other Fed officials as a number of them are due to speak later today, including Evans, Bostic, Quarles and Bullard.

Nevertheless, markets think the Fed is in a better position to stall before hiking rates than other central banks as the risk of permanently high inflation is greater in countries in Europe and Asia that rely hugely on energy imports.

The yield on 2-year Treasury notes retreated further today from Monday’s peak of 0.448%. However, the 10-year yield scaled a five-month high of 1.673%.

Dollar surges against yen but can’t keep down commodity currencies

In the currency markets, yield differentials were in the driving seat as the bump up in US 10-year yields propelled the US dollar to a fresh four-year high 114.69 against the Japanese yen. The euro came under slight pressure too as Eurozone yields, while also on the rise, couldn’t keep up with US yields.

The single currency eased to around $1.1625, having hit a high of $1.1669 yesterday. Sterling lost some steam too, falling back below $1.38 after cracking above the level for the first time in a month on Tuesday.

However, the commodity-linked currencies extended their gains versus the greenback, with the kiwi once again outperforming its peers to hit a four-month top of $0.7179. The ongoing rally in the price of key commodities is underscoring the somewhat more positive outlook for the economies of Australia, Canada and New Zealand compared to the UK and Eurozone where supply disruptions and the energy surge are proving to be more detrimental, thus, any policy tightening in Europe is likely to be less aggressive in the medium term.

Stock rally might be taking a breather

There was a similarly mixed picture in equity markets on Wednesday as stocks in Asia and Europe drifted in both directions. Wall Street enjoyed its fifth straight positive day on Tuesday, with the leading indices closing in on their all-time highs, as all the indications are that it will be another stellar season for earnings.

Netflix reported better-than-expected subscriber numbers and Tesla is the next big tech firm to reveal its Q3 earnings after today’s market close.

However, e-mini futures for the S&P 500 were struggling in European trading, slipping in and out of positive territory. Barring any major earnings misses or negative guidance by the companies that will report before Wall Street’s closing bell, some modest profit taking is possible following the latest bullish run.

But equity traders should also keep an eye on any volatility in bond markets over the next few days as well as on the happenings on Capitol Hill. Democrats are reportedly inching closer to agreeing on the size and details of President Biden’s spending agenda. Although the final size of the bill looks set to be reduced from $3.5 trillion to just under $2 trillion, a deal should nonetheless provide a decent boost to old economy stocks.