Sample Category Title

Inflation fears persisted overnight with the US dollar continuing to march higher, despite long-dated US yields falling. New York markets seemed more preoccupied with the yield curve flattening as short-dated yield firmed once again. That weighed on equities once again which are also pre-occupied with the kick-off of the US Q3 earnings season, led out of the gates by JP Morgan today. Critical this time around will be the Q4 and 2022 outlooks by corporate heavyweights. Most especially is whether their outlooks are pared back as supply chain woes, higher inflation and funding costs, higher energy, etc, take their toll. With equities so heavily priced towards a linear post-pandemic recovery, and with the Fed looking increasingly likely to withdraw the easy money punch bowl, we can expect a lot more two-way volatility in equity markets in Q4. Indeed, Fed officials Clarida and Bostic both alluded to as much overnight.

IMF cuts global, US growth forecasts

The IMF slightly reduced their global growth forecast overnight but slashed a full percentage point of US 2021 GDP to 6.0%. It also warned central banks that they may need to move quickly to tighten monetary policy if inflation spikes, despite reiterating that it felt inflation was transitory. The dovishly hawkish, or is that hawkishly dovish, IMF taking a leaf out of the options open playbook of many a central bank these days. One part of the world that isn’t so concerned about inflation is Europe. ECB member Villeroy yesterday expressing concern at the short-term inflationary pressures but stating the ECB risks falling short of its 2023 inflation target, which is 2.0%. His comments kept on the pressure on the European yen, I mean the euro, overnight.

The US JOLTS Job Openings for August slumped to 10.439 million overnight but had little impact on markets as data showed a record 4.3 million Americans quit their jobs in August, presumably because they could get more money and better conditions elsewhere. Once again, I will say that a US Non-Farm Payroll number of 194,000, is inconsistent with a JOLTS of 10.4 million. Something has to give. Either a lot of Americans are suddenly going to go back to work, or wage-price inflation is going up.

In Asia today, New Zealand and Australian Consumer Confidence remained subdued thanks to their respective Covid-19 situations. South Korean Unemployment ticked slightly higher to 3.0%, while the Reuters Japan Tankan Index for October eased to 14% and Machinery Orders MoM for August slumped by 2.40%. With markets focused on the start of the Q3 US earnings season, reaction has been muted, and in Australia’s case, tomorrow’s employment data carries a much higher weight in investors’ minds.

Today’s data highlight in Asia is the China September trade data at 1100 SGT. Exports and Imports are expected to hold just above 20% YoY. Both numbers need to perform though, or else the China slowdown gremlins will win the day, and that is likely to weigh further on China equities this morning. Conversely, steady to higher import and export numbers will soothe China nerves, against a background of energy woes and supply chain challenges and the never-ending series of government clampdowns of economic sectors, which appears to have moved to the financial sector now. The government’s “shared prosperity” drive I believe, will continue to be a headwind for China equities going forward.

German inflation will be of passing interest this afternoon along with the UK’s trade, GDP, and industrial production data dump. But all eyes are likely to be focused on US inflation data released this evening with Core Inflation in September expected to hold at 4.0% YoY, and headline inflation remaining at 5.30%. There is likely to be a binary outcome to the data with high prints jarring Fed taper nerves with higher US yields, a higher US dollar and lower equities. Lower prints should see the opposite occurring although I believe this will be a temporary aberration lasting only a day or so.

Daily Pivots: (S1) 130.74; (P) 131.01; (R1) 131.27; More....

Intraday bias in EUR/JPY stays on the upside for the moment. As noted before, corrective pattern from 134.11 could have already completed at 127.91. Further rise should be seen to retest 134.11 high. On the downside, below 130.29 minor support will dampen the bullish case and turn intraday bias neutral first.

In the bigger picture, rise from 114.42 is seen as a medium term rising leg inside a long term sideway pattern. As long as 127.07 resistance turned support holds, further rise is still expected to retest 137.49 (2018 high). However, firm break of 127.07 will argue that the medium term trend has reversed, deeper fall would be seen to 61.8% retracement of 114.42 to 134.11 at 121.94.

Daily Pivots: (S1) 0.8467; (P) 0.8492; (R1) 0.8511; More...

Intraday bias in EUR/GBP remains neutral for consolidation above 0.8471 temporary low. Further decline is expected as long as 55 day EMA (now at 0.8545) holds. On the downside, below 0.8471 will resume the fall from 0.8656 to retest 0.8448 low. Firm break there resume larger down trend from 0.9499, towards 0.8276 key support.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8668 resistance holds, towards long term support at 0.8276. However, firm break of 0.8668 resistance would argue that a medium term bottom was already formed. Stronger rise would be seen to 0.8861 support turned resistance to confirm completion of the corrective pattern.

Daily Pivots: (S1) 1.5634; (P) 1.5695; (R1) 1.5745; More...

Intraday bias in EUR/AUD is turned neutral with current recovery, and some consolidations could be seen. But upside should be limited below 1.5907 support turned resistance to bring another decline. On the downside, break of 1.5643 will resume the fall from 1.6434 to 161.8% projection of 1.6434 to 1.5907 from 1.6232 at 1.5379 next.

In the bigger picture, rise from 1.5250 medium term bottom is seen as a correction to the down trend from 1.9799 (2020 high) only. With 38.2% retracement of 1.9799 to 1.5250 at 1.6988 intact, such down trend is expected to resume at a later stage. Firm break of 1.5250 will target 61.8% retracement of 1.1602 (2012 low) to 1.9799 at 1.4733. In any case, sustained break of 1.6988 fibonacci level is needed to indicate long term reversal.

Daily Pivots: (S1) 1.0713; (P) 1.0727; (R1) 1.0745; More....

Intraday bias in EUR/CHF remains neutral and outlook is unchanged. Further decline is expected as long as 1.0770 resistance holds. Decisive break of 1.0694 support will resume whole decline from 1.1149. Next target is 61.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0655. On the upside, though, break of 1.0770 minor resistance will turn bias back to the upside for rebound towards 1.0811 support turned resistance first.

In the bigger picture, the rejection by 55 week EMA maintains medium term bearishness. Fall from 1.1149 (2021 high) is currently seen as the second leg of the patter from 1.0505 (2020 low) first. Hence, in case of deeper fall, we'd look for strong support from 1.0505 to bring rebound. However, sustained break of 1.0505 will resume the long term down trend from 1.2004 (2018 high). Also, medium term outlook will now be neutral at best as long as 1.0936 resistance holds.

The 50– hour simple moving average pressured the USD/CAD currency pair lower on Tuesday. As a result, the US Dollar declined by 55 pips or 0.44% against the Canadian Dollar.

Everything being equal, the 50– hour SMA could continue to squeeze the currency pair lower during the following trading session. The potential target for bearish traders will be near the 1.2400 level.

However, the support level at 1.2442 could still provide a barrier for sellers within Wednesday's trading session.

On Tuesday, the British Pound surged by 90 pips or 0.60% against the Japanese Yen. The currency pair tested the resistance level at 154.75 during yesterday's trading session.

Technical indicators suggest buying signals on the 4H and daily time-frame charts. Most likely, the exchange rate could continue to trend higher through the following trading session.

However, if the GBP/JPY currency exchange rate fails to break the resistance level at 154.75, sellers could target the 153.50 support line within this session.

Daily Pivots: (S1) 1.2434; (P) 1.2466; (R1) 1.2498; More...

Intraday bias in USD/CAD remains neutral for the moment. Focus stays on 1.2421 key structural support. Larger rise from 1.2005 should still be intact as long as 1.2421 holds. On the upside, break of 1.2592 support resistance will turn bias back to the upside for 1.2773 resistance first. On the downside, however, sustained break of 1.2421 will argue that whole choppy rise from 1.2005 has completed. Deeper fall could then be seen back to retest 1.2005 low.

In the bigger picture, the failure to sustain above 55 week EMA (now at 1.2684) revives some medium term bearishness in USD/CAD. Still as long as 1.2005 support holds, we'd expect another rise ahead, to 38.2% retracement of 1.4667 to 1.2005 at 1.3022. Sustained break there will indicate larger bullish reversal. However, firm break of 1.2005 will resume the down trend from 1.4667 (2020 high).

The common European currency consolidated below the 131.21 level against the Japanese Yen on Tuesday. The currency pair traded between the 130.50/131.21 area during Tuesday's trading session.

Technical indicators suggest buying signals on the daily time-frame chart. Most likely, the EUR/JPY exchange rate could edge higher within this session.

However, the resistance level at 131.21 might still provide resistance for the currency exchange rate during the following trading session.

Daily Pivots: (S1) 0.7328; (P) 0.7357; (R1) 0.7380; More...

Intraday bias in AUD/USD is turned neutral with current retreat. On the upside, above 0.7383 will extend the rise from 0.7169 to 0.7477 resistance first. Sustained break there will argue that larger decline from 0.8006 has completed and turn near term outlook bullish. On the downside, below 0.7287 minor support will turn bias back to the downside for 0.7169 instead.

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.