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Daily Pivots: (S1) 114.05; (P) 114.23; (R1) 114.56; More...

USD/JPY's rally continued and hit as high as 114.69 so far. Intraday bias stays on the upside at this point. Firm break of 61.8% projection of 102.58 to 111.65 from 109.11 at 114.71 will pave the way to 100% projection at 118.18 next. However considering bearish divergence condition in 4 hour MACD, break of 113.87 minor support should indicate short term topping, and turn bias to the downside for deeper pull back, to 4 hour 55 EMA (now at 113.42) and below.

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.

Yen continues to be under selling pressure, following the strong rally in US stocks overnight. Yen is additionally weighed down by rally in treasury yields. New Zealand Dollar is leading commodity currencies higher, while Australian and Canadian Dollars are also strong. Euro and Sterling are mixed for the moment, with Sterling having a slight upper hand. Inflation data are the focuses today and could prompt further rally in the Pound as well as Loonie.

Technically, we'd expect the selloff in Yen ahead. In particular, the decline could accelerate if US stock indexes could breakout to new record highs in the coming days. DOW is now close to 35631.19 high and firm break there will resume the medium term up trend from 18213.65. Nevertheless, break of 35023.63 support will indicate rejection by 35631.19 and bring pull back. Yen crosses could also follow in this case too.

In Asia, at the time of writing, Nikkei is up 0.39%. Hong Kong HSI is up 1.31%. China Shanghai SSE is up 0.03%. Singapore Strait Times is up 0.01%. Japan 10-year JGB yield is up 0.0045 at 0.095. Overnight, DOW rose 0.56%. S&P 500 rose 0.74%. NASDAQ rose 0.71%. 10-year yield rose 0.051 to 1.635.

Fed Waller: More Aggressive policy response warranted if inflation continues to run high

Fed Governor Governor Christopher Waller warned in a speech that "the next several months are critical for assessing whether the high inflation numbers we have seen are transitory." And, "if monthly prints of inflation continue to run high through the remainder of this year, a more aggressive policy response than just tapering may well be warranted in 2022.

He noted, "substantial further progress" towards employment and inflation was already made. He supports " the FOMC beginning to reduce asset purchases following our meeting in November." He emphasized that "this action should not tighten financial conditions" since a later 2021 tapering has already been priced in by most market participants. Also, he favored the tapering pace "that would result in the end of asset purchases by the middle of 2022".

Waller didn't expect rate hike to occur soon after completing tapering, as "the two policy actions are distinct". But, if inflation staying "considerably above 2 percent well into 2022", then he'd "favor liftoff sooner than I now anticipate."

Australia Westpac leading index turned negative, but rebound expected ahead

Australia Westpac-MI Leading Index dropped from 0.5% to -0.5% in September. That's the first negative reading since September 2020, which was the followed by strong surge after the economy moved out of lockdown. Westpac expects another strong rebound in the economy ahead as both Sydney and Melbourne are reopening this time too. It also expects the Australia economy to growth by 1.6% in Q4, building towards a 5.6% growth in H2 of 2022.

Westpac expects RBA to maintain current policy setting at the November 2 meeting, followed by tapering in February. The most important aspect of the November meeting will be whether RBA has lifted its inflation forecasts.

Japan exports rose 13% yoy in Sep, imports rose 38.6% yoy

Japan's exports rose 13.0% yoy to JPY 6481B in September, above expectation of 11.0% yoy. Imports rose 38.6% yoy to JPY 7464B, above expectation of 34.4% yoy. Trade balance reported JPY -623B deficit, versus expectation of JPY -519B.

The weakening in exports could be partly attributed to the -40.3% yoy decline in car shipments, first in seven months. But the situation is expected to improve as supply bottlenecks are solved. Shipment to China grew 10.3% yoy, led by semiconductors and plastic materials. Shipment to the US dropped -3.3% yoy, on cars and airplanes.

In seasonally adjusted terms, exports dropped -3.9% mom to JPY 6750B. Imports rose 0.2% mom to JPY 7375B. Trade deficit came in at JPY -625B.

AUD/JPY pressing 85.78 high, ready for up trend resumption

AUD/JPY rises further today, following the strong close in US stocks overnight, as well as rally in treasury yields. It's now pressing 85.78 high and decisive break there will resume whole up trend from 59.85 (2020 low). Such development would align the outlook with CAD/JPY and NSD/JPY, which complete the upside breakout last week already.

The up trend would then extend to 61.8% projection of 59.85 to 85.78 from 77.88 at 93.90 in the medium term. This bullish case will now be favored as long as 84.25 minor support holds.

Looking ahead

Inflation data will be the major focuses today. UK will release CPI, PI and PPI. Germany will release PPI. Eurozone will release CPI final. Canada will also release CPI. US will release Fed's Beige Book report.

USD/JPY Daily Outlook

Daily Pivots: (S1) 114.05; (P) 114.23; (R1) 114.56; More...

USD/JPY's rally continued and hit as high as 114.69 so far. Intraday bias stays on the upside at this point. Firm break of 61.8% projection of 102.58 to 111.65 from 109.11 at 114.71 will pave the way to 100% projection at 118.18 next. However considering bearish divergence condition in 4 hour MACD, break of 113.87 minor support should indicate short term topping, and turn bias to the downside for deeper pull back, to 4 hour 55 EMA (now at 113.42) and below.

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.

Economic Indicators Update

AUD/JPY rises further today, following the strong close in US stocks overnight, as well as rally in treasury yields. It's now pressing 85.78 high and decisive break there will resume whole up trend from 59.85 (2020 low). Such development would align the outlook with CAD/JPY and NSD/JPY, which complete the upside breakout last week already.

The up trend would then extend to 61.8% projection of 59.85 to 85.78 from 77.88 at 93.90 in the medium term. This bullish case will now be favored as long as 84.25 minor support holds.

STOCKS

Dow and Dax are up slightly while Nikkei and shangahi have dipped. Nifty and Sensex are in a corrective fall and could fall some more before resuming the uptrend. Sensex can test 61000-60000 while Nifty can fall to 18200/18000. Nikkei and Shanghai needs to trade above 29500 and 3600 respectively to turn bullish for the near term. Dow needs to sustain above 35000 and Dax above 15500. Almost all indices have important levels above which the bullish view will continue to hold. Watch for a possible corrective dip in the near term across all equity indices.

Dow (35457.31, +198.70, +0.56%) has risen slightly. While above 35000,a test of 36000 looks possible in the coming sessions. Only if, it breaks below 35000, a fall towards 34000/33750 can be seen. Watch price action near current levels.

DAX (15515.83, +41.36, +0.27%) has risen slightly. While above 15500, a rise to 15800/900 can be possible.

Nikkei (29261.51, +45.99, +0.16%) has fallen after testing the resistance at 29500.While below 29500,a fall back towards 28000-27500 is possible. Any bounce back above 29500 can take it higher towards 30000/31000. We wait to see price action near 29500 just now.

Shanghai (3592.03, -1.12, -0.034%) continues to trade within 350-3600 mentioned earlier. A strong break above 3600 is needed to see a rise to 3700. However, if we see a break below 3500, we may bring back 3400/3375 into the picture.

Nifty (18418.75, -58.30, -0.32%) faced profit taking below 18600 and while that holds, a fall to 18200/18000 can be seen in the near term.

Sensex (61716.05, -49.54, -0.08%) too tested 62000+ but could not sustain higher. A fall to 61000-60000 can be possible for now.

COMMODITIES

Precious metals look sideways ranged for the near term with some upside possible on Silver. Gold is sideways within 1790-1740. Copper has dipped a bit and could test support near 4.60/55 before bouncing back again to higher levels. Crude prices have dipped a bit but need to sustain below 85 (brent) and 83 (WTI) to fall further else a rise again to make fresh highs cannot be negated in the near term.

Brent (84.57) and WTI (81.97) have both dipped. If Brent remains below 85, it can fall towards 82/80 else a re-attempt to rise above 85 will bring in possibility of 87 on the upside. WTI too needs to sustain below 82/83 to fall lower else a rise to 85 cannot be negated.

Gold (1770.50) could not sustain a rise above 1770 yesterday and has come down a bit instead. Will it again trade in the 1740-1790 sideways range? We need a decisive break on either side to see which way the price moves in the medium term. Till then we look for the mentioned range to hold.

Silver (23.72) can rise to 24.50/25 in the near term while above 23.50.

Copper (4.6305) has fallen sharply. There is room to test support near 6.55/60 before resumption of uptrend is seen. Overall view of targeting 4.90 remains intact for the medium term.

FOREX

Dollar Index has fallen below 93.75 raising concern of a possible fall to 93 which can pull up Euro towards 1.17 or higher. Watch price action near current levels EURJPY has risen well and could be headed towards resistance at 134 before coming off from there. Aussie and Pound can test 0.75 and 1.39 respectively. USDCNY saw a sharp decline yesterday as expected. While below 6.40, view is bearish. Dollar-Rupee may fall today towards 75.20/10 or lower. Need to see if it is allowed to fall below 75.

Dollar Index (93.75) fell to test 93.504 and if it manages to trade below 94 for a few more sessions, a test of lower support at 93 can be seen before any bounce sets in. Break below 93.75 is bearish.

Euro (1.1638) tested 1.1669 yesterday before falling off. If the currency falls back below 1.16, it will reinforce bearishness else a rise above 1.17 needs to be looked at for the coming sessions. Watch price action to see if Euro falls below 1.16 or manages to sustain higher.

EURJPY (133.29) continues to rally and is headed towards crucial resistance at 134 from where a rejection looks possible. Any break above 134, if seen will open up chances of a further rise to 138 on the upside in the medium term. Watch price action near 134.

Aussie (0.7483) has risen above 0.7450 and has interim resistance near 0.75 which needs to break to rally further towards 0.76. Else a fall back to 0.74 can be seen from 0.75. Watch price action near 0.75.

Pound (1.3805) has broken above 1.38 and if the rise sustains it can rally further up towards 1.39 in the coming sessions before facing a rejection from there.

Dollar-Yen (114.51) tested 114.70 before slightly coming off from there. A test of 114.75/115 looks possible in the near term which can eventually break on the upside and lead to a rise towards 117/118. Overall view is bullish while above 114.

USDCNY (6.3927) indeed tested 6.3784 in a sharper fall than expected, before bouncing back from there. The corrective bounce from mentioned support near 6.3750 may be short lived and the pair can again fall towards 6.36 which is the next lower support below 6.3750. Watch if 6.3750 holds strong enough to take the pair back to levels above 6.41 or comes down again in the next few sessions.

USDINR (75.3450) was closed yesterday for Eid-e-Milad but saw a fall to 74.92 on the NDF markets. Currently trading at 75.09 on the NDF, there is scope for a fall in the pair today on the onshore market towards 75.20/10. But whether the pair will be allowed to fall needs to be seen. Any break below 75.10 can drag the pair lower towards 74.90/80 on the downside before again bouncing back towards 75.30/50. Else the 75.75/50-75.20/10 range may continue to hold.

INTEREST RATES

The US Treasury Yields have risen sharply at the far-end. The 10Yr will need a close watch to see if it sustains above 1.65% which can take it further higher and negate our view of seeing a reversal. We will have to wait and watch closely. The German yields have bounced back again but the resistances ahead are likely to cap the upside and trigger a reversal going forward. The Indian market was closed yesterday. The 10Yr can negate our view of seeing a pull-back and rise further if it sustains above 6.36%. The 5Yr needs to be seen if it can break the 5.66%-5.76% range on the upside.

The US 2Yr (0.40%), 5Yr (1.17%), 10Yr (1.66%) and the 30Yr (2.11%) have risen sharply at the far-end especially. The 30Yr has room to test 2.2%. The 10Yr can rise to 1.75% and even 2% if it manages to sustain above 1.65% in the coming days. Such a rise will negate our earlier view of seeing a pull-back to 1.5%-1.4%. The movement in the 10Yr yield in the coming days will need a close watch.

The German 2Yr (-0.64), 5Yr (-0.44%), 10Yr (-0.11%) and 30Yr (0.29%) have risen back sharply at the far-end. However, we reiterate that the resistance at -0.1%/-0.05% (10Yr) and 0.35%/0.45% (30Yr) can continue to hold and cap the upside. We expect the yields to see a reversal and a fresh fall to -0.2% (10Yr) and 0.2% (30Yr) initially and then further deeper eventually over the medium-term.

The Indian 10Yr GoI (6.3873%) can rise to 6.45%-6.5% if the break above 6.36% sustains. That will negate our view of seeing a reversal to 6.2% and lower levels mentioned earlier.

The 5Yr GoI (5.7501%) is poised just below the upper end of its 5.66%-5.76% range. A break above 5.76% will negate our bearish view of seeing a fall below 5.66%. In turn it can take the yield up to 5.78%-5.80% and 5.82% in the coming days.

Japan's exports rose 13.0% yoy to JPY 6481B in September, above expectation of 11.0% yoy. Imports rose 38.6% yoy to JPY 7464B, above expectation of 34.4% yoy. Trade balance reported JPY -623B deficit, versus expectation of JPY -519B.

The weakening in exports could be partly attributed to the -40.3% yoy decline in car shipments, first in seven months. But the situation is expected to improve as supply bottlenecks are solved. Shipment to China grew 10.3% yoy, led by semiconductors and plastic materials. Shipment to the US dropped -3.3% yoy, on cars and airplanes.

In seasonally adjusted terms, exports dropped -3.9% mom to JPY 6750B. Imports rose 0.2% mom to JPY 7375B. Trade deficit came in at JPY -625B.

Australia Westpac-MI Leading Index dropped from 0.5% to -0.5% in September. That's the first negative reading since September 2020, which was the followed by strong surge after the economy moved out of lockdown. Westpac expects another strong rebound in the economy ahead as both Sydney and Melbourne are reopening this time too. It also expects the Australia economy to growth by 1.6% in Q4, building towards a 5.6% growth in H2 of 2022.

Westpac expects RBA to maintain current policy setting at the November 2 meeting, followed by tapering in February. The most important aspect of the November meeting will be whether RBA has lifted its inflation forecasts.

Full release here.

Fed Governor Governor Christopher Waller warned in a speech that "the next several months are critical for assessing whether the high inflation numbers we have seen are transitory." And, "if monthly prints of inflation continue to run high through the remainder of this year, a more aggressive policy response than just tapering may well be warranted in 2022.

He noted, "substantial further progress" towards employment and inflation was already made. He supports " the FOMC beginning to reduce asset purchases following our meeting in November." He emphasized that "this action should not tighten financial conditions" since a later 2021 tapering has already been priced in by most market participants. Also, he favored the tapering pace "that would result in the end of asset purchases by the middle of 2022".

Waller didn't expect rate hike to occur soon after completing tapering, as "the two policy actions are distinct". But, if inflation staying "considerably above 2 percent well into 2022", then he'd "favor liftoff sooner than I now anticipate."

Full speech here

Key Highlights

• Gold price stayed above the $1,750 support zone.
• A key bearish trend line is forming with resistance near $1,785 on the 4-hours chart.
• EUR/USD could gain pace if it settles above 1.1650.
• GBP/USD spiked above 1.3800 and it is trading above key supports.

Gold Price Technical Analysis

This past week, gold saw a bearish reaction from the $1,800 zone against the US Dollar. The price traded below the $1,780 support level, but downsides were limited.

The 4-hours chart of XAU/USD indicates that the price tested the $1,760 support zone. A low was formed near $1,760 before there was a fresh increase. The price was able to climb above the $1,775 resistance and the 200 simple moving average (green, 4-hours).

There was a break above the 50% Fib retracement level of the downward move from the $1,800 swing high to $1,760 low.

On the upside, the price is facing resistance near $1,785. A clear break above $1,785 could send the price toward the $1,800 resistance zone in the near term. The next key resistance is near the $1,820 level.

On the downside, the price might remain supported near $1,770 and the 200 SMA (H4). The main support is near $1,760, below which there is a risk of a break below $1,750.

Looking at EUR/USD, the pair attempted a decent recovery above 1.1620. A clear close above 1.1650 could set the pace for a steady increase.

Economic Releases to Watch Today

• UK Consumer Price Index for Sep 2021 (YoY) – Forecast +3.2%, versus +3.2% previous.
• UK Core Consumer Price Index for Sep 2021 (YoY) – Forecast +3.0%, versus +3.1% previous.
• Euro Zone CPI for Sep 2021 (YoY) - Forecast +3.4%, versus +3.4% previous.
• Euro Zone CPI for Sep 2021 (MoM) - Forecast +0.5%, versus +0.4% previous.
• Canadian Consumer Price Index for Sep 2021 (MoM) – Forecast +0.1%, versus +0.2% previous.
• Canadian Consumer Price Index for Sep 2021 (YoY) – Forecast +4.3%, versus +4.1% previous.

Continuing to push

Bitcoin has been heavily in focus on Tuesday following the launch of the first-ever ETF, a landmark momentum for the cryptocurrency industry.

The fact that the first day of trading of the ProShares ETF on the NYSE came at a time when bitcoin was pushing record highs is probably no coincidence, traders perhaps hopeful that the day would bring extra enthusiasm.

The question then became whether this would become a standard buy the rumour, sell the fact moment with a sizeable correction to follow and that debate is probably still being had.

Bitcoin bulls will probably look at today’s price action with confidence. Price came within a whisker of record highs and remains there at the time of writing, but we haven’t yet seen any significant profit-taking.

And we’ve seen what can happen when the hype around bitcoin builds, the moves to the upside can be explosive. Perhaps that’s still building.

Momentum on the daily chart doesn’t offer much insight, with it flat-lining at best, but the 4-hour chart appears to show clear divergence which could be a red flag. That said, it could quickly change if we move into record territory.

If we do see record highs, where next? It’s anyone’s guess really. We’re in uncharted territory. The next test will come around $70,000 but you know the talk will be about whether we’ll see six figures.

On the downside, $60,000 offers a psychological test, $58,000 more of a technical one. It should be interesting, either way.

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