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Technical analysis

The price rebounded from the Fibonacci fan support line and broke the crucial level of 1,760.

The ССI indicator displays a possible switch to a bullish sentiment.

Most likely scenario - BUY

Target prices: 1,763.29 1,766.84

Alternative scenario - SELL

Target prices: 1,756.62 1,753.65

Key levels

Support 1,756.62 1,753.65

Resistance 1,763.29 1,766.84

Market movers today

• We have a couple of interesting data points today. First, the German ZEW for October is released. It has dropped quite a bit in recent months and it does tend to lead PMI by 1-2 months. In the US, the NFIB small business optimism is interesting because it has some important subindices on labour shortage and wage plans.
• IMF will also release its World Economic Outlook with new forecasts for the global economy. The forecasts can be a bit lagging, as they are some time under way but the press briefing at 15.00CET could add some colour on how IMF sees inflation and growth risks.
• Speeches by three Fed members (Clarida, Evans and Bostic) may shed more light on the tapering outlook after the recent soft employment number. Especially Clarida is interesting, as we know Evans is dovish and Bostic is hawkish. We expect the Fed to move on with the tapering decision in November.
• The Norwegian government unveils its budget for 2022 today (see more below in the Nordic macro section).

The 60 second overview

China: China is examining whether 25 financial institutions have too close ties with private companies, leading to worse credit quality. China did a similar exercise back in 2015. Besides that Evergrande missed another payment yesterday. Moody's downgraded Modern Land, another sign that the problems are spreading to other parts of the property market. There are downside risks to global growth because of the development in China, see Research Global: Five reasons we see rising downside risks to growth.

Commodity prices: Oil prices remain high with WTI oil still above USD80/barrel, the highest since 2014. The skyrocketing energy prices overall are putting upward pressure on some metals such as aluminium, which require a lot of energy to produce. Aluminium prices are the highest since 2008.

Equities: Equities fell yesterday, dragged down by US and Latin America while Europe and Asia were higher. The inflation/stagflation trade dominating once again as yields, oil and metals all rose. Value outperforming growth with cheap energy stocks outperforming long duration tech stocks. Since the ECB meeting a month ago the German 10Y yields are 25bp higher and energy sectors have outperformed semiconductors with more than 30% in the Stoxx 600. In US yesterday, Dow -0.7%, S&P 500 -0.7%, Nasdaq -0.6% and Russell 2000 -0.6%. Asian markets are mostly lower this morning. European and US sentiment negative as well with futures being 0.5-1% lower.

FI: European yields continued to rise yesterday on the back of hawkish comments from ECB's Knot regarding that the investors should take inflation more seriously. Later, ECB's Lane struck a more dovish tone, but these comments did not have much impact on the negative sentiment.

FX: JPY was the big loser yesterday and AUD and USD among the winners in G10 currency space as rising commodity prices and continued upwards pressure on US rates set the tone. USD/JPY rose above 113 - the highest level since 2018.

Credit: Credit markets suffered yet another risk-off session yesterday with iTraxx Xover widening 4.5bp (to 269bp) and Main 1bp (to 53bp). HY bonds widened 5bp while IG bonds closed the day marginally wider.

Nordic macro

The Norwegian government unveils its budget for 2022 today, and we naturally expect much tighter fiscal policy than this year as the various support packages are phased out. We expect the structural, oil-adjusted deficit to be just below 3% of the value of the oil fund, which is in line with the fiscal rule. Even if we do see a change of government later in the week, and big changes in the final approved budget, we would still expect this to be the upper bound for transfers from the fund.

General trend

• US equity FUTS extend declines.
• Nikkei has remained lower.
• Hang Seng is also lower following the negative open; TECH index drops after prior rise.
• Still no public comments out of Evergrande.
• Shanghai Composite extended decline during morning trading.
• China Thermal Coal FUTS continue to rise.
• S&P ASX 200 has traded modestly lower after opening flat [Financial and Energy indices decline].
• China Sept Money Supply and Bank Lending data may be released today.
• LG Electronics may issue prelim results today.
• Companies due to report during the NY morning include Fastenal.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened flat.
• (AU) Australia Sept NAB Business Confidence: +13 v -6 prior; Conditions: 5 v 14 prior.
• (AU) Australia Sept Port Hedland Iron Ore Exports 47.0Mt v 44.4Mt prior; Exports to China 38.6Mt v 35.9Mt prior.
• (NZ) New Zealand Fin Min Robertson: To publish half-year fiscal update on Dec 15th (Wed): FY21 final budget deficit at NZ$4.56B [deficit is NZ$10.6B smaller than forecast].
• (NZ) New Zealand Sept ANZ Truckometer Heavy M/M: +13.4% v -18.1% prior.
• (NZ) New Zealand Sept Total Card Spending M/M: +1.6% v -21.8% prior; Retail Card Spending M/M: +0.9% v -19.8% prior.

China/Hong Kong

• Hang Seng opened -1.3%, Shanghai Composite -0.3%.
• Evergrande [3333.HK] Certain Evergrande bondholders said they had not received bond interest payments as of end of Oct 11th - Press.
• (CN) China Pres Xi reportedly to target Chinese financial firms' connections to private companies, part of his govt's most extensive probe since he took power – press.
• (CN) China Sept y/y rise in PPI might exceed 10% (prior 9.5%), notes rise in energy prices; CPI is expected to slow on lower pork prices - Chinese Press.
• (CN) China PBOC seen cutting the RRR rate during Q4 [in line], may also conduct 'large' MLF and reverse repo operations - China press.
• (CN) China NDRC: China will push all Industrial companies to enter power trading market; Industrial and Commercial users to enter power markets in an orderly way; Power price reform impact on consumer prices is limited.
• (CN) Said that most coal mines in Shanxi that were shut by flooding have resumed operations - Press.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B prior; Net drain CN90B v Net drain CNY190B prior.
• (CN) China PBOC sets Yuan reference rate: 6.4447 v 6.4479 prior.

Japan

• Nikkei 225 opened -0.1%.
• (JP) Japan Sept Bank Lending Y/Y: 0.6% v 0.6% prior; Bank Lending (ex-trusts) Y/Y: 0.4% v 0.3% prior.
• (JP) Japan Sept PPI (CGPI) M/M: 0.3% v 0.2%e; Y/Y: 6.3% v 5.8%e (largest annualized rise since Sept 2008).
• (JP) Japan MoF sells ¥900B v ¥900B indicated in 0.7% 30-year JGBs, avg yield 0.7020% v 0.6530% prior, bid to cover: 2.90x v 3.00x prior.
• (JP) Japan Fin Min Suzuki: Does not know when capital gains will be reassessed.

Korea

• Kospi opened -0.2%.
• (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 0.75%; AS EXPECTED.
• (KR) BOK Gov Lee post rate decision press conference: Will decide whether to hike rates at Nov meeting; can consider Nov rate hike if recovery trends continue; Majority favor rate hike if situation remains unchanged.
• (KR) South Korea Oct 1-10th Imports Y/Y: 63.5% v 60.6% prior; Exports Y/Y: 58.6% v 30.7% prior; Chip Exports y/y: +22.0% v -2.1% prior.
• (KR) North Korea Leader Kim: To continue strengthening military power; Main enemy is war, not a specific country like US or South Korea - KCNA.

Europe

• (FR) France Central Bank cuts Q3 growth estimate from 2.5% to 2.3%.
• (UK) Sept BRC Sales LFL Y/Y: -0.6% v +1.5% prior.
• (PT) Portugal issues 2022 draft budget: estimates 2022 budget deficit at 3.2% of GDP, down from 4.3% in 2021.

Levels as of 01:20 ET

• Nikkei 225, -0.9%, ASX 200 -0.3% , Hang Seng -1%; Shanghai Composite -1.5% ; Kospi -1.3%.
• Equity S&P500 Futures: -0.4%; Nasdaq100 -0.4%, Dax -0.6%; FTSE100 -0.5%.
• EUR 1.1561-1.1547; JPY 113.48-113.20 ; AUD 0.7356-0.7331 ;NZD 0.6950-0.6923.
• Gold +0.1% at $1,757/oz; Crude Oil -0.1% at $80.42/brl; Copper -1.1% at $4.2930/lb.

Key Highlights

• GBP/USD is struggling to climb above the 1.3650 resistance zone.
• It surpassed a bearish trend line at 1.3590 on the 4-hours chart.
• EUR/USD is trading in a bearish zone below 1.1650.
• The UK ILO Unemployment Rate could decline from 4.6% to 4.5% in August 2021 (3M).

GBP/USD Technical Analysis

The British Pound started a steady recovery wave from the 1.3410 zone against the US Dollar. GBP/USD recovered above the 1.3500 and 1.3550 resistance levels.

Looking at the 4-hours chart, the pair surpassed a bearish trend line at 1.3590. There was also a break above the 50% Fib retracement level of the downward move from the 1.3747 swing high to 1.3411 low.

However, the pair seems to be facing resistance near 1.3650 and the 100 simple moving average (red, 4-hours). It is now slowly moving lower and trading below 1.3600.

An initial support on the downside is near the 1.3560 level. The next key support is near 1.3540, below which the pair may possibly continue lower towards the 1.3440 level.

An immediate resistance on the upside is near the 1.3630 level. The first major resistance is near the 1.3650 level. It is close to the 76.4% Fib retracement level of the downward move from the 1.3747 swing high to 1.3411 low.

The next major resistance is near 1.3700 and the 200 simple moving average (green, 4-hours). Any more gains could lift the pair towards the 1.3770 and 1.3800 levels.

Looking at EUR/USD, the pair is still trading well below 1.1650 and it remains at a risk of more downsides below 1.1550.

Economic Releases

• UK Claimant Count Change for Sep 2021 – Forecast -28K, versus -58.6K previous.
• UK ILO Unemployment Rate for August 2021 (3M) – Forecast 4.5%, versus 4.6% previous.

German ZEW Business Economic Sentiment Index for Oct 2021 – Forecast 24, versus 26.5 previous.

STOCKS

Equities are mixed. Indian equities continue to show hope of further rise from current levels while Nikkei and shanghai have dipped a bit and could see corrective decline for a couple of sessions before bouncing back from there again. Dow has fallen too as mentioned resistances have held well and could fall to lower supports in the near term. Dax too has dipped and can fall before attempting to rise towards 15300/400.

Dow (34496.06, -250.19, -0.72%) has fallen again. The resistance zone at 34750-35000 mentioned yesterday has held very well. While below 35000 we can see a fall towards 34000\33750 again.

DAX (15199.14, -6.99, -0.046%) has dipped slightly and is hovering near the level of 15200. Immediate view is bearish to see a dip towards 14800 while below 15200\300 level. A strong rise above 15300 is needed for the index to turn bullish towards 15400\500.

Nikkei (28232.32, -265.88, -0.93%) has opened lower today after rising for three consecutive days. The view is still bullish while above 28000 to test 29500. However, if we see a dip below 28000 then a test of 27000 is possible, delaying our expected rise.

Shanghai (3562.84, -28.86, -0.80%) has come down slightly today. View remains to see a test of 3600 and 3700 eventually while above 3550. Any break below 3550 would take it down to 3500 delaying our expected rise.

Nifty (17945.95, +50.75, +0.28%) made an all-time high of 18041.95 yesterday then fell back to close at 17945.95. View remains bullish to see a test of 18250 while above 17800 levels.

Sensex (60135.78, +76.72, +0.13%) has managed to sustain above the 60000 level which means we can see a test of 61000/62000 in the coming 1-2 weeks.

COMMODITIES

Crude prices may fall from immediate resistance levels but could continue to trade higher for the next couple of weeks. Upside is likely to be limited and we would be cautious on going longs just now. Unless a signal of a proper reversal is seen, we may continue to see crude prices trading higher. Gold and silver are stable while Copper has scope to rise to 4.35/40 before falling off from there.

Brent (83.38) and WTI (80.18) have dipped after rising sharply yesterday. Brent could come off towards 80-78 while below 85-86 while WTI has scope to fall towards 77-75 while below 82. That said, we do not negate a further upside in crude. However, the upside is likely to be limited in the next 2-3 weeks followed by a sharp decline. We would be cautious to go long at current levels.

Gold (1757.10) and Silver (22.63) have dipped slightly but remain stuck at same levels since almost a week. Gold is likely to remain within 1740-1780 unless a break on either side is seen while Silver may trade within 22-23 region. No trade seen in precious metals just now.

Copper (4.3190) has broken above very near term support at 4.30 and may be headed towards upper resistance at 4.35/40 from where a possible rejection looks likely back towards 4.20.

FOREX

Dollar Index looks bullish towards 95 which could drag down Euro towards 1.1525-1.1500. EURJPY has moved up sharply breaking above 130.50/75 on sharp rise in USDJPY above 112. Dollar-Yen is now headed towards 114-115 resistance zone. Immediate view is bullish. Aussie and Pound look ranged for now. USDCNY has surprised by rising to 6.44+ and can test 6.4650 before pausing. USDINR may rise to 75.50/75 while above 75.3250. Correlation of USDINR with Brent crude is very high at the moment and both could move together in the near term.

Dollar Index (94.35) has risen up further above 94 and is headed towards 95 soon. View is bullish while above 94.

Euro (1.1555) has risen slightly but continues to remain bearish towards 1.1525-1.1500 for the near term.

EURJPY (130.91) has risen well, breaking above 130.50/75, pulled up by the rise in USDJPY. We need to see if the cross can manage to rise above 131 to test 132 on the upside or falls back from 131 towards 130-129 in the medium term. While Euro trades below 1.16 and Dollar Yen keeps moving up, EURJPY can rise too in the near term.

Dollar-Yen (113.31) has surged and is headed towards the upper resistance zone of 114-115 from where a decline looks possible over the next week. Immediate view is bullish.

Aussie (0.7340) finds difficulty to rise above 0.74 just now and could trade within 0.74-0.7250 for the near term.

Pound (1.3599) is unable to rise above 1.37 just now and while below 1.37, we may expect trade within 1.35-1.37 to hold.

USDCNY (6.4523) has surprisingly bounced back again above 6.44, negating our view of a fall towards 6.41. While above 6.44, we may again look for a test of immediate resistance at 6.4650.

USDINR (75.3550) broke above 75.20 and our expected 75.3250 and now could be headed towards 75.50/75 before facing any short term corrective dip. For Oct’21 we allow for a possible rise to 76.25/50 before reversing from there. In the near term, interim resistance at 75.50/75 may hold. Note that the correlation with Brent crude is at around 92+ and while Brent rises, USDINR may rise too and vice versa indicating that the movement in USDINR could be greatly influenced by Brent just now.

INTEREST RATES

The US Treasury Yields have key resistances ahead (1.65% on the 10Yr and 2.2% on the 30Yr) which will need a close watch. A strong break above them will prove our view of seeing a reversal wrong. Will the CPI inflation data release tomorrow keep the yields their resistances or trigger a break of it? We will have to wait and watch. German yields continue to move up but have limited room on the upside from here as key resistances are coming up. We expect the yield to reverse lower from their respective resistances. The 10Yr GOI has an important resistance ahead which has to hold to avoid a further rise from here and trigger a reversal that we have been expecting. The 5Yr GoI continues to look mixed and can oscillate in a range.

The US 2Yr (0.35%) and 5Yr (1.08%) Treasury yields have risen in early Asian trades today while the 10Yr (1.61%) and the 30Yr (2.16%) %) remain stable. Our view remains the same 1.65% (10Yr) and 2.2% (30Yr) are crucial resistances which if broken will pave way for a further rise to 2%-2.2% (10Yr) and 2.4% (30Yr). That in turn will prove our view of seeing a reversal wrong. The price action in the coming days will need a close watch.

The German 2Yr (-0.69), 5Yr (-0.51%), 10Yr (-0.12%) and 30Yr (0.35%) yields have come up close to their crucial resistances as expected. -0.1%/-0.05% (10Yr) and 0.35%/0.45% (30Yr) are the strong resistances from where we expect a reversal and a fresh fall going forward.

The Indian 10Yr GoI (6.3407%) has come up to an important resistance. 6.35%-6.36% is a crucial resistance. While that holds our view of seeing a pull-back to 6.25%-6.2% and even lower will remain intact. In case of a break above 6.36%, the rise can extend up to 6.4%. We will have to wait and watch.

The 5Yr GoI (5.7347%) can oscillate between 5.66% and 5.76% as mentioned yesterday. A breakout on either side of 5.66%-5.76% will then determine whether the yield can go up to 5.8%-5.85% or fall to 5.62%-5.6% going forward.

Daily Pivots: (S1) 1.2455; (P) 1.2473; (R1) 1.2500; More...

Intraday bias in USD/CAD is turned neutral with 4 hour MACD crossed above signal line. 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).

Daily Pivots: (S1) 0.7285; (P) 0.7312; (R1) 0.7335; More...

AUD/USD's rise from 0.7169 is still in progress and intraday bias remains on the upside. Further rally would be seen 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 0.7224 minor support should resume the fall from 0.7477 through 0.7169 to retest 0.7105 low.

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.

Daily Pivots: (S1) 112.52; (P) 112.96; (R1) 113.78; More...

Intraday bias in USD/JPY remains on the upside at this point. Up trend from 102.58 is in progress and should target 61.8% projection of 102.58 to 111.65 from 109.11 at 114.71. Firm break there will target 100% projection at 118.18 next. On the downside, below 112.63 minor support will turn intraday bias neutral and bring consolidation first. But retreat should be contained by 110.81/112.07 support zone to bring rise resumption.

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 108.71 support hold, even in case of pull back.

Daily Pivots: (S1) 0.9255; (P) 0.9272; (R1) 0.9293; More....

Intraday bias in USD/CHF remains neutral as consolidation from 0.9367 is extending. On the upside, break of 0.9367 will resume the rise from 0.8925 to 0.9471 key resistance next. On the downside, however, break of 0.9214 will turn bias back to the downside for 0.9017 support again.

In the bigger picture, the strong rally above 55 week EMA (now at 0.9188) now tilts favor to the case of bullish trend reversal. That is, decline from 1.3042 (2016 high) is probably completed at 0.8756 already. Sustained break of 0.9471 resistance should confirm this case and pave the way to retest 1.0342 ahead. However, rejection by 0.9471 will mix up the outlook again and retain some medium term bearishness.

Daily Pivots: (S1) 1.1540; (P) 1.1564; (R1) 1.1578; More...

Intraday bias in EUR/USD remains neutral at this point. Further fall is still in favor as long as 1.1639 minor resistance holds. Break of 1.1528 will resume larger decline towards 1.1289 medium term fibonacci level. On the upside, break of 1.1639 resistance, however, will indicate short term bottoming. intraday bias will be turned back to the upside for stronger rebound.

In the bigger picture, sustained break of 1.1602 will argue that rise from 1.0635 (2020 low) has completed at 1.2348. Deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Note also that rejection by 55 week EMA (1.1830) also carries medium term bearish implication. Firm break of 1.1289 will pave the way to retest 1.0635 low. On the upside, though, break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.