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Daily Pivots: (S1) 1.2323; (P) 1.2353; (R1) 1.2394; More...

USD/CAD's fall resumed after brief consolidation and intraday bias back on the downside. Fall from 1.2947 should target 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.

On Tuesday, the common European currency edged higher by 55 pips or 0.41% against the Japanese Yen. The 50– hour simple moving average continued to pressure the currency pair higher.

Technical indicators suggest buying signals on the 4H, daily and weekly time-frame charts. Buyers are likely to target the 134.00 level during the following trading session.

On the other hand, the currency exchange rate might make a retracement towards the 132.81 area within this session.

On Tuesday, the Australian Dollar rose by 77 pips or 1.04% against the US Dollar. The AUD/USD currency pair breached the resistance level at 0.7432 during yesterday's trading session.

All things being equal, the exchange rate could continue to edge higher during the following trading session. The potential target for bullish traders will be near the 0.7540 level.

However, the upper line of an ascending channel pattern could provide resistance for the currency exchange rate within this session.

The GBP/JPY currency pair bounced off the support level formed by the 50– hour simple moving average at 157.00 on Tuesday. As a result, the British Pound rose by 109 pips or 0.70% against the Japanese Yen.

The exchange rate is currently trading near the upper line of an ascending channel pattern and could be set for a breakout.

If the breakout occurs, a surge towards the psychological resistance level at 160.00 could be expected within this session.

However, if the channel pattern holds, the currency exchange rate might make a brief retracement during Wednesday's trading session.

Daily Pivots: (S1) 1.1605; (P) 1.1637; (R1) 1.1665; More...

Intraday bias in EUR/USD remains on the upside as rebound from 1.1523 short term bottoming is in progress. Sustained break of 55 day EMA (now at 1.1707) will be a sign that larger correction from 1.2348 has completed. Stronger rally would be seen to 1.1908 resistance for confirmation. On the downside, though, break of 1.1571 minor support will turn bias back to the downside for 1.1523 support instead.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

The US Dollar edged higher by 49 pips or 0.40% against the Canadian Dollar on Tuesday. The surge was stopped by the 50– hour simple moving average at 1.2364 during yesterday's trading session.

If the resistance level formed by the 50– hour SMA holds, bears are likely to continue to pressure the USD/CAD exchange rate lower during the following trading session.

However, if the currency exchange rate breaks the resistance line, bullish traders might target the upper boundary of the channel pattern within this session.

Daily Pivots: (S1) 1.3733; (P) 1.3783; (R1) 1.3842; More...

Intraday bias in GBP/USD remains on the upside for 1.3912 key structural resistance. Firm break there will indicate that the correction from 1.4248 is complete with three waves down to 1.3410. Further rally would then be seen to retest 1.4248 high. On the downside, however, break of 1.3708 minor support will dampen the bullish case and turn intraday bias neutral first.

In the bigger picture, the structure of the fall from 1.4248 suggests that it's a correction to the up trend from 1.1409 (2020 low) only. While deeper fall cannot be ruled out yet, downside should be contained by 38.2% retracement of 1.1409 to 1.4248 at 1.3164, at least on first attempt, to bring rebound. On the upside, firm break of 1.4376 key resistance (2018 high) will add to the case of long term bullish reversal. However, sustained trading below 1.3164 will revive some medium term bearishness and target 61.8% retracement at 1.2493.

Daily Pivots: (S1) 0.9197; (P) 0.9218; (R1) 0.9252; More....

USD/CHF recovered quickly after dipping to 0.9183. But further fall is still in favor with 0.9272 resistance holds. Considering bearish divergence condition in daily MACD, firm break of 0.9162 will argue that whole rise from 0.8925 has completed and target this support. On the upside, break of 0.9272 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.

General trend

• AUD and NZD extend gains; CNH declines after prior rise.
• USD/JPY hit the highest since late 2017 amid Gotobi day, rise in UST yields.
• China priced USD bonds at tighter spreads than the initial pricing guidance, orders exceeded $23.0B.
• HKMA to withdraw additional liquidity.
• China coal FUTs drop after NDRC comments.
• Nikkei has pared gain.
• Hang Seng has remained higher [TECH index rises].
• Shanghai Composite ended morning trading flat [Property index continues to lag].
• S&P ASX 200 has extended gain [Resources index has outperformed].
• Companies due to report during the NY morning include Abbott Labs, Anthem, Biogen, Baker Hughes, Canadian Pacific, Knight-Swift Transportation, Lithia Motors, Nasdaq, Verizon, Winnebago.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.3%.
• BPT.AU Reports Q1 Production 5.7 MMBOE v 6.8 y/y; Rev A$388M v 361M y/y.
• (AU) Australia Sept Westpac Leading Index: -0.0% v -0.3% prior (5th straight decline).
• RHC.AU Changes to Surgical Restrictions in NSW and Victoria will have a material impact on FY22 earnings and will depend on their geographic coverage, extent and duration.
• (AU) Australia sells A$1.5B v A$1.5B indicated in 4.50% Apr 2033 bonds, avg yield 1.8291%, bid to cover 3.03x.

Japan

• Nikkei 225 opened +0.6%.
• (JP) Bank of Japan (BOJ) Said to be inquiring banks on legacy LIBOR as the BOJ and FSA are looking into any remaining LIBOR Linked contracts.
• (JP) Japan Sept Trade Balance: -¥622.8B v -¥530.4Be; Adj Trade Balance: -¥624.8B v -¥586.4Be.
• (JP) Japan METI expected to announce transition finance plans for the steel industry, which is Japan's largest carbon emitter – press.
• (JP) Japan PM Office: Mount Aso has erupted at 11:44 AM JST, flow has reached 1km away.

Korea

• Kospi opened +0.5%.
• (KR) North Korea confirms firing of short-range missile from submarine (SLBM).
• (KR) South Korea Fin Min Hong: Govt considering cut to fuel tax due to high oil prices.

China/Hong Kong

• Hang Seng opened +1.1%; Shanghai Composite opened -0.3%.
• (CN) China PBOC Backed Newspaper, Financial News: Expectation for a RRR Cut in Q4 has eased due to high factory gate inflation.
• (CN) CHINA SEPT NEW HOMES PRICES M/M: -0.1% V +0.2% PRIOR; Y/Y: 3.8% V 4.2% PRIOR (first decline since 2015).
• (CN) China Sept Foreign Direct Investment (FDI) YTD Y/Y: 19.6% v 22.3% prior.
• (HK) Hong Kong Monetary Authority (HKMA) raises issues size of 91 day exchange fund bills by up to HK$40.0B, HK$5.0B each in 8 regular tenders.
• (CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: LEAVES BOTH 1-YEAR AND 5-YEAR RATES UNCHANGED (18th straight month of steady rates).
• (CN) China PBOC Open Market Operation (OMO): Injects CNY100B in 7-day reverse repos v CNY10B prior; Net inject CNY90B v Net CNY0B prior, increased injections due to tax and govt bond issuance payments.
• (CN) Some China exporters said to be raising prices by 20% - financial press.
• (CN) China PBOC sets Yuan reference rate: 6.4069 v 6.4307 prior (strongest fix since June 11th).
• (CN) China State Planner (NDRC) Officia: Govt needs to closely monitor operation issues for property developers.
• (CN) Reportedly China to scale down test of property tax plan after Pres Xi saw largely negative feedback and resistance from within the Party – press.
• (CN) China Ministry of Finance (MOF) prices $4.0B in 3-year, 5-year, 10-year and 30-year bonds [as indicated, smallest USD bond offering by China since 2018]; orders totaled $15.0B.
• (CN) China Vice Commerce Min: Will roll out measures to boost consumption.
• (CN) China's govt advisor Yao Jingyuan: PBoC should cut RRR in order to boost liquidity and support economic growth (yesterday later in session).

North America

• (US) Weekly API Crude Oil Inventories: +3.3M v +5.2M prior.
• (US) US govt likely to recommend COVID booster shots for people as young as 40 who received Moderna or Pfizer vaccine – CNN.
• NFLX Exec: Customer churn is down from past years; Viewing per member down from distorted COVID figures of 2020, no one is sure we can get back to past growth levels - post earnings call.
• (US) President Biden said to tell democrats that they can secure new deal of $1.75-1.90T for spending proposal.
• (PR) Puerto Rico House of representatives approves bill to restructure debt, Senate to vote on measure Thursday.

Europe

• (UK) UK govt reportedly plans to cut tax surcharge on bank profits by over 60% from 8% to 3%; Would begin in April 2023 - FT.

Levels as of 01:15ET

• Hang Seng +1.1%; Shanghai Composite +0.0%; Kospi -0.3%; Nikkei225 +0.2%; ASX 200 +0.5%.
• Equity Futures: S&P500 -0.0%; Nasdaq100 -0.1%, Dax -0.0%; FTSE100 +0.0%.
• EUR 1.1652-1.1628; JPY 114.71-114.33; AUD 0.7503-0.7465; NZD 0.7179-0.7147.
• Commodity Futures: Gold +0.2% at $1,774/oz; Crude Oil -0.6% at $81.97/brl; Copper -1.2% at $4.63/lb.

Market movers today

• Rising inflation expectations have been driving the market lately, and Wednesday could provide some interesting insights into that story. Today, we get the details from September HICP release in the euro area, giving more clues what drove the surge in core inflation to 1.9%.
• Also in the UK, the CPI inflation for September will attract attention given Bank of England hawkishness.
• In the US, the Fed Beige Book will shed some light on current economic conditions across states, while governors Kashkari and Quarles are due to speak.

The 60 second overview

Risk sentiment remains positive: Risky assets continued to perform yesterday, while government bond yields rose despite weakening global growth outlook, rising inflation fears and rate hike bets across most central banks. With fading fiscal support, ongoing supply shortages and downside risks to Chinese growth, we could see further downward revisions to global growth projections from here, which could end up being a challenging environment especially for manufacturing currencies such as SEK or EUR. Read more in FX Strategy - Time to cut global growth forecasts, 19 October.

China: The People's Bank of China left the Loan Prime Rate unchanged overnight as broadly expected. While the PBOC has not yet given much signal about further easing since the Reserve Requirement Ratio was cut back in July, we still think further cuts to RRR are likely amid the fading growth outlook. New Home price growth for September, also released overnight, stalled for the first time since the beginning of the pandemic (from +0.2% m/m in August). While slowing credit growth is the key driver explaining slower housing price growth, rising uncertainty towards property developers also weighs on home sales.

Energy: Oil prices have moved slightly lower overnight after the Chinese government noted it is looking for ways to limit the recent rise seen in coal prices. China could set price limits for important goods such as coal, and separately the authorities noted that they look to crack down on possible speculation on commodity prices and ensure full capacity at Chinese coal mines. China is heavily reliant on thermal coal, which accounted for 57% of the country's energy production in 2020.

Equities: Equities continued to edge higher on Tuesday, marking a fifth straight day of gains in the US. Quality, growth and defensives were the preferred styles as investors picked up last month's losers. Among sectors, health care, consumer staples and tech were in the lead. Dow 0.6%, S&P500 and Nasdaq 0.7% and Russell 2000 0.4%. Asian markets are mixed this morning and US futures have dipped to negative.

FI: Global bond yields once again rose on the back of the risk that the rise in inflation is more permanent than transitory. Hence, both the 5y5y EUR and USD forward inflation rates are close to 5-year highs, and the 5y5y EUR inflation rate is close to 2 %. Furthermore, it was a traditional bearish steepener with 30Y German government bond yield rising some 6bp, while 10Y was rising 4bp.

FX: Reflation sensitive currencies in the likes of NOK, AUD and NZD remains the big outperformers in G10 space at the expense of not least USD and JPY. EUR/USD remains above 1.16 while EUR/GBP is approaching new lows. EUR/NOK has tested the low 9.70s while EUR/SEK seems to have found near-term support around the 10.00 figure.

Credit: Credit remained in good demand yesterday. iTraxx Xover tightened 4bp (taking it to 254bp) and Main 0.7bp (to 50bp). HY bonds tightened 1.5bp while IG closed widened 0.5bp.

Nordic macro

In the afternoon, Riksbank vice governor Per Jansson attends a panel discussion on inflation. The Riksbank narrative is that the surge in inflation will be temporary and yesterday Stefan Ingves said in the Riksdag Finance Committee that they see no signs of second round effects. This view will probably be echoed by Jansson. This morning, and related to inflation discussion, we have the release of NIER's yearly Wage Formation Report.