Sample Category Title

Daily Pivots: (S1) 0.7280; (P) 0.7302; (R1) 0.7334; More...

Focus stays on 0.7315 resistance. Firm break there will argue that pull back from 0.7477 has completed at 0.7169. Intraday bias will be turned back to the upside for 0.7477 resistance. On the downside, below 0.7169 will target a test on 0.7105 low. Firm break there will resume whole decline from 0.8006 for 0.6991 support next.

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) 1.1543; (P) 1.1558; (R1) 1.1567; More...

Intraday bias in EUR/USD stays on the downside at this point. The decline from 1.2348 high is in progress and should target 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.

Daily Pivots: (S1) 1.3578; (P) 1.3608; (R1) 1.3645; More...

Intraday bias in GBP/USD remains neutral at this point. On the upside, above 1.3646 will resume the rebound from 1.3410 short term bottom for 1.3749 resistance first, which is close to 55 day EMA (now at 1.3730). On the downside, though, below 1.3530 minor support will retain near term bearishness, and turn bias back to the downside for 1.3410 low. Firm break there will extend the fall from 1.4248 and target 1.3164 medium term fibonacci level next.

In the bigger picture, fall from 1.4248 is at least a correction to the up trend from 1.1409 (2020 low). Such correction could extend to 38.2% retracement of 1.1409 to 1.4248 at 1.3164 before completion. However, considering the rejection by 1.4376 key resistance (2018 high), sustained trading below 1.3164 will argue that it's indeed a bearish trend reversal and would target 61.8% retracement at 1.2493. Nevertheless, break of 1.3912 resistance will revive medium term bullishness and target 1.4248/4376 resistance zone again.

Daily Pivots: (S1) 0.9264; (P) 0.9279; (R1) 0.9304; More....

Intraday bias in USD/CHF remains neutral as it's still bounded in range below 0.9367. As long as 0.9214 support holds, further rally is in favor. 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.

Major US indices continued their rebound yesterday as US politicians found a midway to raise the debt ceiling to fund the government until the beginning of December. It’s only half-good news, as the deal only kicks the can down the road, without solving the problem. The headache will return in a couple of months, but the latest news help soothing investor nerves, for now.

The mood in Asia was mostly positive, as well. Chinese CSI 300 gained more than 1% as China returned from bank holiday. Caixin services PMI printed a surprise expansion in activity in September; both new orders and employment bounced back. Encouraging data helped soothing investor angst after the second property company Fantasia failed to service its debt at the beginning of the week.

All eyes are on today’s US jobs data. Released on Wednesday, the US ADP report revealed that the US economy added 568’000 new private jobs versus 430’000 pencilled in by analysts, giving investors hope that we may see a strong NFP figure today, as well. The consensus of analyst expectations on Bloomberg points that the US economy may have added 500’000 new nonfarm jobs in September. But there is no meaningful correlation between the monthly ADP and NFP figures, and we can’t rule out the possibility of seeing a negative surprise at today’s release.

The data is important, because it will help shaping expectations on what the Federal Reserve (Fed) could do next. We all know that the Fed is about to announce a start date for tapering its bond purchases, and a reasonably soft data won’t get the Fed to change its mind. Only a shockingly low figure could do that – a figure below 100’000 for example, which would warn of an alarming slowdown in US labour market recovery. But even then, the Fed can’t do much, given that the latest spike in energy prices continues boosting inflation expectations, and the high inflation needs to be addressed quickly, perhaps more quickly than the depressed jobs market.

Speaking of energy prices, the decline in US crude following the Russian promise to increase gas supply to Europe boosted dip-buying. The price of a barrel rebounded as quickly as it fell. US crude continues flirting with the $80 per barrel, and it’s just a matter of time before we see the $80 resistance won over. The persistent rise in oil prices can only continue boosting inflation fears and the central bank hawks, hence limit the upside potential in case of a further recovery in stock markets.

The US 10-year yield approaches 1.60%, a level which could trigger a fresh wave of convexity selling, with Americans rushing to the exit on their bond positions to compensate for the lost interest in refinancing their old mortgages as a result of higher yields. As such, breaking above the 1.60% level could accelerate the rise in US yields, and further weigh on equity indices. A sharp rise in yields would hurt the growth stocks more than the value names.

All in all, now that we see a certain relief on the debt ceiling front, we also need to see a strong jobs print today to avoid all that from happening.

General trend

• Hang Seng and Shanghai Composite have pared gains; Property indices drop; Profit warning weighs on AAC Technologies [Apple supplier].
• CN/HK Property: Evergrande’s silence persists; Fantasia bonds halted amid price declines.
• Nikkei has extended rise; Heavyweights gain (Softbank Group and Fast Retailing); Automakers rise amid move up in USD/JPY; Topix Shipping index declines.
• S&P ASX 200 has also extended gain; Resources index supported by higher CN ore prices.
• WTI Crude FUTs extend rise.
• Taiwan Semi may release Sept/Q3 sales later today S&P ASX 200 has extended gain.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened flat.
• (AU) Reserve Bank of Australia Financial Stability Report: Risk of excessive borrowing due to low interest rate environment; vulnerabilities in China financial system remain elevated.
• (AU) Australia sells A$1.0B v A$1.0B indicated in 4.75% Apr 2027 bonds, avg yield 0.9920%, bid to cover 5.78x.

China/Hong Kong

• Hang Seng opened +1.5%, Shanghai Composite +1.2% (CN markets were closed for holiday from Oct 1-7).
• (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY0B prior; Net drain CNY330B v Net inject CNY40B prior.
• (CN) China PBOC sets Yuan reference rate: 6.4604 v 6.4854 prior.
• (CN) CHINA SEPT FOREIGN RESERVES: $3.201T V $3.220TE [Oct 7th].
• (CN) CHINA SEPT CAIXIN PMI SERVICES: 53.4 V 46.7 PRIOR (Moves back into expansion); PMI Composite: 51.4 v 47.2 prior.
• (CN) Follow Up: China Inner Mongolia Province: Ordered 72 Coal mines to immediately increase production; the mines will increase total annual capacity by ~100Mt.
• (CN) China to increase coal supply amid power shortage; Large Chinese coal-producing provinces have pledged to increase long-term coal supply to power plants by a combined 145Mts during Q4; the coal will be sold at discounted prices – Caixin.
• (CN) Shanghai Securities News: China property developers' sales have 'plunged' in Sept.
• (HK) Hong Kong Govt: To provide 100K private homes over next 10 years; to also provide 366K public homes.
• (CN) PBOC Vice Gov: China will improve interest rate corridor mechanism and market based interest rate formation and transmission mechanism.

Japan

• Nikkei 225 opened +1.3%.
• (JP) Japan PM Kishida Election Platform: Does not mention financial income tax.
• (JP) Japan Fin Min Suzuki: Will use FX Reserves to invest in ESG related investment products; Confirms PM Kishida has Instructed cabinet to compile economic stimulus (as expected); Will submit extra budget after election.
• (JP) Ally of Japan PM Kishida said to have called for capital gains tax increase to 25% [vs 20% currently] – Press.
• Japan PM Kishida is due to outline his policy program later today (Oct 8th).
• (JP) Japan Aug Current Account: ¥1.67T v ¥1.54Te; Adj Current Account: ¥1.04T v ¥1.43T prior; Trade Balance (BoP): -¥372.4B v +¥622.3B prior.
• (JP) Japan Aug Household Spending M/M: -3.9% v -2.0%e (4th straight decline); Y/Y: -3.0% v -1.2%e.
• (JP) Japan Aug Labor Cash Earnings Y/Y: 0.7% v 1.0% prior; Real Cash Earnings Y/Y: 0.2% v 0.7% prior.
• (JP) Japan Sept Eco Watchers Current Survey: 42.1 v 43.0e; Outlook Survey: 56.6 v 48.5e [first rise in 3 months].

Korea

• Kospi opened +0.6%.
• Samsung Electronics [005930.KR]: Reports prelim Q3 (KRW) Op 15.8T v 12.4T y/y (16.1Te), Rev 73.0T v 67.0T y/y (73.5Te).

Other Asia

• (IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 4.00%; AS EXPECTED; Not hesitant to take unconventional steps; Further government bond buying not needed.

North America

• (US) Senate votes 50-48 to increase debt ceiling until early Dec 2021; the measure will now move to the US House; White House has said that President Biden would sign the bill; The US House will convene on Oct 12th (Tues) to pass the stopgap debt measure.
• (US) Treasury Sec Yellen: Debt limit uncertainty is damaging to confidence; there is more work to do to get well past Dec 3rd on debt limit - CNN Interview.
• (US) Energy Dept spokesperson: We are not planning to tap the Strategic Petroleum Reserve or to pursue a ban on crude exports - press.

Europe

• (IE) Ireland govt reportedly plans to sign on to the OECD global corporate tax agreement - Virgin Media reporter.

Levels as of 01:20 ET

• Nikkei 225, +1.7%, ASX 200 +0.9% , Hang Seng -0.2%; Shanghai Composite +0.3% ; Kospi -0.4%.
• Equity S&P500 Futures: flat; Nasdaq100 -0.1%, Dax flat; FTSE100 -0.1%.
• EUR 1.1560-1.1547 ; JPY 111.92-111.60 ; AUD 0.7325-0.7294 ;NZD 0.6950-0.6920.
• Gold -0.1% at $1,757/oz; Crude Oil +1.4% at $79.40/brl; Copper +0.3% at $4.2610/lb.

Market movers today

• Today's key release will be the US labour market report, which will be important with respect to whether the Fed starts tapering in November as planned. After the weak August report, focus will be on whether employment growth accelerated after higher benefits expired or whether more deeper running issues (i.e. supply problems or slowing demand?) are holding back jobs growth. In our view, new jobs around 300k or above will be enough for Fed to go ahead with tapering.
• In Norway, we expect mainland GDP figures to have climbed 0.8% m/m in August, driven by higher activity in business services.
• Chinese stock exchanges reopen after the Golden Week holidays, with focus still on property developers (see Research China - No 'Lehman moment' but financial stress is not over, 29 September).

The 60 second overview

US: Republicans joined Democrats in the Senate and voted to extend the debt ceiling by USD 480bn until 3 December, averting a possible default in mid-October. The bill now goes to the House, where it is expected to pass before Joe Biden signs it. Read more in Research US - Government shutdowns are usually short-lived and no one is interested in a default by the end of the day, 29 September. However, as the reprieve will only be short-lived, US treasury yields edged higher, while USD was little changed. Oil prices rose back above USD 82/bbl after the US Energy Department said it has no plans at this time to tap into the nation's oil reserves to help quell rising gasoline prices.

Equities: Risk appetite returned to markets yesterday. Risk on was evident, with equities bouncing, most sectors higher and cyclicals beating defensives. Europe outperformed the US after lagging in the prior session. Still, S&P500 up 0.8%, led by consumer discretionary and materials, Nasdaq 1.1%, Dow 1% and Russell even 1.6%. Positive sentiment continuing in Asia this morning, with

Chinese markets reopening 0.5% higher after the long holiday. Likewise, US futures point slightly higher.

FI: The positive risk sentiment tightened the intra-euro area spreads as core rates were broadly unchanged on the day. The peripheral spreads performed led by Italy and Greece, while Spain was also subject to significant supply yesterday. The Bloomberg sources story from Wednesday evening on future ECB bond buying (even if it lacked substance) supported peripheral spreads from the morning. ECB minutes did not impact markets, as it mostly contained a repetition of the 'transitory inflation regime' that was previously conveyed - those views were also shared by Schnabel and Lane in their speeches yesterday. Bank of Greece Governor Stournaras said that the current market pricing did not reflect the ECB's forward guidance, yet markets did not react to his comments.

FX: In Poland, the central bank governor yesterday held a press conference after the surprise rate hike on Wednesday. If the market had expected a hawkish governor, it was left disappointed. EUR/USD will likely weaken as payrolls confirm Fed can go ahead with tapering. EUR/NOK price action has been peculiarly similar in recent sessions.

Credit: Credit markets staged a strong comeback yesterday where iTraxx Xover tightened 7bp (to 259bp) and Main 1bp (to 51bp). HY bonds tightened 10bp and IG 1bp.

Nordic macro

In Norway, mainland GDP growth slowed somewhat in June and July after the strong rebound in May. August will probably have been affected to some extent by rising infections, which may well have held back growth even in the absence of new government restrictions. On the other hand, the results of Norges Bank's regional network survey show that uncertainty in the business sector is now much lower. We therefore expect mainland GDP to climb 0.8% m/m in August, driven by higher activity in business services.

Daily Pivots: (S1) 111.36; (P) 111.51; (R1) 111.78; More...

USD/JPY rebounds strongly but stays below 112.07 resistance. Intraday bias remains neutral first. Consolidation form 112.07 could still extend. But in case of another retreat, downside should be contained by 110.44 support. On the upside, above 112.07 will extend larger rise to 61.8% projection of 102.58 to 111.65 from 109.11 at 114.71 next. However, break of 110.44 will dampen the bullish case and turn focus back to 109.11 support.

In the bigger picture, break of 111.71 resistance suggests that the whole corrective decline from 118.65 (2016 high) has completed at 101.18 (2020 low) already. Medium term bullishness is also affirmed as USD/JPY stays well above 55 week EMA (now at 108.60). Sustained trading above 111.71 will affirm this bullish case. Rise from 101.18 could then be resuming whole rally from 98.97 (2016 low) through 118.65. This will now be the preferred case as long as 108.71 support holds.

Following strong rally in US stocks and treasury yield overnight, Yen is trading broadly lower today, together with Swiss Franc. Yen is also the worst performing one for the week, followed by Euro. On the other hand, Canadian Dollar is the winner for the week, followed by Aussie. Focus will turn to US job data today. Upside surprise there could prompt further rally in treasury yield and thus, pressure Yen further. But the reaction in other currencies would depend on the reactions in overall stock market movements.

Technically, AUD/JPY is now eyeing 82.01 resistance with this week's rally. Firm break there will firstly resume the rebound from 77.88. Secondly, it will affirm the case that correction from 85.78 has completed. Further rise would be seen to 100% projection of 77.88 to 82.01 from 78.82 at 82.95. Decisive break of 82.95 would probably bring upside acceleration towards 161.8% projection at 85.50, which is close to 85.78 high. Such development could happen if both stocks and yields surge after NFP today.

In Asia, at the time of writing, Nikkei is up 1.69%. Hong Kong HSI is down -0.26%. China Shanghai SSE is up 0.33%. Singapore Strait Times is up 0.11%. Japan 10-year JGB yield is up 0.0043 at 0.082. Overnight, DOW rose 0.98%. S&P 500 rose 0.83%. NASDAQ rose 1.05%. 10-year yield rose 0.0047 to 1.571.

Fed Mester sees employment mandate met by end of next year

Cleveland Fed Bank President Loretta Mester said in a panel discussion yesterday that inflation in the US is "pandemic related" only. "Fundamentally, if it's supply-side driven, that's not something monetary policy should be responding to," Mester added.

On monetary policy, she said, "our new strategy says, look, we're not going to be moving until we have average inflation being 2% and we're now going to be making up for past misses. I think we've basically met that part of the mandate."

"My forecast is that we'll meet that [employment] mandate by the end of next year, if things play out as I expect," Mester said.

"My baseline is we'll see inflation rates move back down as pent-up demand eases and supply-side challenges ease. But, as you know, that is taking longer than people thought and, in some cases supply chain issues are getting worse," Mester said.

BoC Macklem: Goods reasons to believe inflation is temporary

BoC Governor Tiff Macklem said yesterday that there's "a bit more persistence" in inflation than policy makers previously thought. But he added, " I think there are good reasons to believe that they are temporary,"

"Our job as a central bank is to make sure that one-off increase in prices doesn't become ongoing inflation... What we're really looking for is to see any signs of spreading," he added, noting that medium- to longer-term measures of expected inflation had not risen.

He also pointed to the "frictions" in the labor market, which took longer to work through. "We've never reopened an economy before. And I think what we're seeing is reopening an economy is a lot more complicated than closing one," he said.

ECB Lane: Eurozone far distance from inflation red zone

ECB Chief Economist Philip Lane said, "the red zone for everyone is if inflation became persistent at a number that's immoderately above the inflation target. That's a very far distance from where the euro area is." He added, "we have to be the counterweight, honestly, in this debate."

On inflation, he also said, "there's solid reasons to believe that a lot of this is to do with the reopening of the economy and there's very solid reasons to believe there's a significant transitory component."

China Caixin PMI services rose to 53.4, PMI composite rose to 51.4

China Caixin PMI Services rose to 53.4 in September, up from August's 46.7, above expectation of 49.3. PMI Composite rose to 51.4, up from 47.2 in August.

Wang Zhe, Senior Economist at Caixin Insight Group said: "Both market supply and demand recovered, and improvement in the services sector was stronger than in the manufacturing sector. Impacted by the pandemic, overseas demand was weak. Employment was stable overall. Prices gauges remained high, indicating strong inflationary pressure."

10-year yield rises as focus turns to NFP

US non-farm payrolls report is the major focus for today. Markets are expecting 500k job growth in September. Unemployment rate is expected to tick down from 5.2% to 5.1%. Average hourly earnings are expected to have risen 0.4% mom.

Looking at related job data, ADP report showed 568k growth in private sector jobs in the month. ISM manufacturing employment ticked up from 49.0 to 50.2. ISM services employment dipped slightly from 53.6 to 53.0. Four-week moving average of initial jobless claims dropped from 355k to 344k. Overall, the data support solid, but not spectacular, job growth in September.

• Roaring Dollar Turns To Nonfarm Payrolls
• NFP Preview: Fed Locked in to Tapering Starting Next Month Unless NFP Bombs?
• NFP Early Insight: COVID Waning, Employees' Negotiating Power Waxing?

Bond market reactions to NFP today would be worth a watch. 10-year yield closed up 0.047 at 1.571 overnight, close to day high at 1.573. The development also indicates resumption of whole rise from 1.128. Positive reaction in yield to NFP would extend the rally, probably with upside acceleration, towards 1.1765 high. Such development could also lift USD/JPY through 112.07 near term resistance.

Elsewhere

Japan labor cash earnings rose 0.7% yoy in August, versus expectation of 0.3% yoy. Household spending dropped -3.0% yoy, versus expectation of -1.5% yoy. Current account surplus narrowed to JPY 1.04T.

Eurozone will release trade balance in European session. While US non-farm payroll report, Canada job data is also a focus.

USD/JPY Daily Outlook

Daily Pivots: (S1) 111.36; (P) 111.51; (R1) 111.78; More...

USD/JPY rebounds strongly but stays below 112.07 resistance. Intraday bias remains neutral first. Consolidation form 112.07 could still extend. But in case of another retreat, downside should be contained by 110.44 support. On the upside, above 112.07 will extend larger rise to 61.8% projection of 102.58 to 111.65 from 109.11 at 114.71 next. However, break of 110.44 will dampen the bullish case and turn focus back to 109.11 support.

In the bigger picture, break of 111.71 resistance suggests that the whole corrective decline from 118.65 (2016 high) has completed at 101.18 (2020 low) already. Medium term bullishness is also affirmed as USD/JPY stays well above 55 week EMA (now at 108.60). Sustained trading above 111.71 will affirm this bullish case. Rise from 101.18 could then be resuming whole rally from 98.97 (2016 low) through 118.65. This will now be the preferred case as long as 108.71 support holds.

Economic Indicators Update

US non-farm payrolls report is the major focus for today. Markets are expecting 500k job growth in September. Unemployment rate is expected to tick down from 5.2% to 5.1%. Average hourly earnings are expected to have risen 0.4% mom.

Looking at related job data, ADP report showed 568k growth in private sector jobs in the month. ISM manufacturing employment ticked up from 49.0 to 50.2. ISM services employment dipped slightly from 53.6 to 53.0. Four-week moving average of initial jobless claims dropped from 355k to 344k. Overall, the data support solid, but not spectacular, job growth in September.

• Roaring Dollar Turns To Nonfarm Payrolls
• NFP Preview: Fed Locked in to Tapering Starting Next Month Unless NFP Bombs?
• NFP Early Insight: COVID Waning, Employees' Negotiating Power Waxing?

Bond market reactions to NFP today would be worth a watch. 10-year yield closed up 0.047 at 1.571 overnight, close to day high at 1.573. The development also indicates resumption of whole rise from 1.128. Positive reaction in yield to NFP would extend the rally, probably with upside acceleration, towards 1.1765 high. Such development could also lift USD/JPY through 112.07 near term resistance.