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Market movers today

• In Sweden, a range of growth indicators for August are on the agenda
• The US ADP employment report will give some insights for non-farm payrolls released on Friday.
• In the euro area, retail sales for August and German factory orders are released.
• At today's Polish central bank meeting, we expect unchanged rates along with consensus as many members have clearly communicated a preference for awaiting the updated November inflation projections before making changes to the policy stance

The 60 second overview

Energy crunch and ECB: The global surge in energy prices continued unabated yesterday as European gas prices jumped by another 23% to a new all-time high amid supply fears as the heating season is approaching on the Northern hemisphere. Oil prices also remained elevated above USD82/bbl after OPEC+ refrained from increasing production and high gas prices triggered even more "fuel switching". The energy price surge added fuel to global bond yields, with US 10Y yields climbing back above 1.55% and 10Y German Bund yields breaking above the -20bp level. ECB President Lagarde yesterday reiterated that ECB should not overreact to supply shortages or rising energy prices, as monetary policy cannot directly affect these phenomena. But hawks in the ECB's Governing Council are less sanguine, with Austria's Holzmann warning that ECB is 'clinging to the hope that the current inflation spike will be transitory'. Discussions about the persistence of inflation will likely gather pace ahead of the next meeting later this month, while markets are now pricing the first ECB rate hike for Q3 2023 - prematurely in our view (read more in Euro Area Macro Monitor - The tide is turning.

Central banks: Reserve Bank of New Zealand (RBNZ) joined the growing camp of central banks shifting away from their accommodative monetary policy stances and hiked interest rates by 25bp this morning. RBNZ also signalled that further rate hikes will likely be needed to tame inflation, but the planned tightening cycle could be interrupted by continued delta-strain outbreaks in Auckland, which is hurting business confidence and damping the growth outlook. Markets reacted muted to the decision as a rate hike was largely priced in, with NZD/USD initially spiking, but later reversing course.

Equities: Equities rebounded on Tuesday, following Monday's tech-driven sell-off. Cyclicals beat defensives and growth generally beat value as tech rebounded. Somewhat peculiar sector composition though, as both banks and tech took the leadership. Defensives in the bottom, with real estate and utilities the only sectors lower. In the US, Dow Jones closed up 0.9%, S&P 500 1.1%, Nasdaq 1.3% and Russell 2000 0.5%. Implied volatility inched slightly lower. Opposite moves in Asia this morning though, with markets down another -1% and Mainland China is still closed for holiday. Similarly, US futures dipped into red again this morning.

FI: Global yields rose again after better than expected US PMI data and ahead of the US labour market report that is released on Friday. The data is expected to support the Federal Reserve in its QE tapering plans. However, there is plenty of uncertainty in the market given rising inflation, the escalating energy crisis, the uncertainty on US fiscal policy while at the same time the recovery seems to be fading. The best alternative to "hedge" this uncertain environment are still inflation-linked bonds and inflation swaps in our view, despite the significant rise in the break-even rate (or very low real yields).

FX: In a market characterised by reflation, it is no surprise to see NOK as the top-performer. Meanwhile, fundamentally we are very sceptic that this market environment can persist for long.

Credit: Credit markets saw some stabilization yesterday, with Xover tightening 1bp and Main 0.4bp. HY bonds tightened 3bp and IG 0.5bp.

Nordic macro

In Sweden three out of four important growth indicators are released today. So far, hours worked has been released for August, showing a steep decline and putting the average July/August level a mere 0.2% above Q2 level (seasonally adjusted). The production (PVI), consumption and GDP indicators now stand in line. All of these showed very strong prints for July (2-3 % above Q2) and the question is now whether these will show a similar dip as hours worked. A slight increase in August retail sales is a positive sign for the consumption indicator, but car sales are down and it probably boils down to whether covid-dented 'stay away', services-related consumption rose or not.

Daily Pivots: (S1) 151.08; (P) 151.56; (R1) 152.38; More...

Intraday bias in GBP/JPY stays mildly on the upside for 152.54 resistance first. Firm break there will suggest that whole correction from 156.05 has completed, and turn near term outlook bullish for retesting this high. On the downside, however, sustained break of 149.03 key support will carry larger bearish implication and target 143.78 fibonacci level.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). As long as 149.03 support holds, such rise would still resume at a later stage. However, sustained break of 149.03 support will indicate rejection by 156.59 (2018 high). Fall from 156.05 would at least be correcting the whole rise from 123.94 (2020 low). Deeper fall would be seen back 38.2% retracement of 123.94 to 156.05 at 143.78 first.

Daily Pivots: (S1) 128.89; (P) 129.14; (R1) 129.52; More....

Intraday in EUR/JPY is turned neutral with current recovery. On the downside, firm break of 127.91 support there will resume the whole decline from 134.11 to 127.07 resistance turned support next. On the upside, though, break of 130.45 resistance will now argue that whole correction from 134.11 has completed and turn near term outlook bullish for retesting this high.

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) 0.8494; (P) 0.8520; (R1) 0.8536; More...

Focus is now on 0.8499 support in EUR/GBP. Sustained break there will argue that corrective rebound from 0.8488 has completed with three waves up to 0.8656. Also, near term bearishness is kept by rejection from 0.8668 resistance. Deeper fall would be seen back to retest 0.8488 in this case. Break will resume larger down trend from 0.9499.

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) 1.5869; (P) 1.5931; (R1) 1.5971; More...

EUR/AUD recovers after touching 1.5898 support and intraday bias remains neutral first. As long as 1.5898 holds, larger rise from 1.5250 is still in favor to continue. Break of 1.6232 will turn bias to the upside for retesting 1.6434 high first. However, sustained break of 1.5898 will argue that rise from 1.5250 has completed, and turn near term outlook bearish for 1.5614 support first.

In the bigger picture, rise from 1.5250 medium term bottom is currently seen as a correction to the down trend from 1.9799 first. Stronger rise could be seen to 38.2% retracement of 1.9799 to 1.5250 at 1.6988 next. We'd tentatively expect strong resistance from there to limit upside, at least on first attempt. Meanwhile, break of 1.5898 support will indicate that the rebound has completed. Larger down trend from 1.9799 might be ready to resume through 1.5250 low.

Daily Pivots: (S1) 1.0746; (P) 1.0758; (R1) 1.0777; More....

EUR/CHF is losing some downside momentum as seen in hour MACD. But further decline is expected as long as 1.0811 support turned resistance holds. Fall from 1.0936 should target 1.0694 low. Firm break there will resume whole decline from 1.1149. ON the upside, however, sustained break of 1.0811 will turn bias back to the upside for stronger rebound.

In the bigger picture, medium term outlook remains mixed as EUR/CHF is still failing to get rid of 55 week EMA cleanly. On the upside, break of 1.1149 will resume the whole rise from 1.0505 (2020 low). On the downside, break of 1.0694 will revive some medium term bearishness for 1.0505 and below.

Daily Pivots: (S1) 1.2539; (P) 1.2585; (R1) 1.2623; More...

No change in USD/CAD's outlook as fall from 1.2891 is in progress. Such decline is seen as the third leg of the pattern from 1.2947, and should target 1.2492 support and possibly below. But overall, with 1.2421 support intact, rise from 1.2005 should still be in progress for another rise through 1.2947 at a later stage. Break of 1.2773 resistance will turn bias back to the upside for retesting 1.2947 high.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Daily Pivots: (S1) 0.7260; (P) 0.7280; (R1) 0.7312; More...

Intraday bias in AUD/USD stays neutral for the moment. With 0.7315 minor resistance intact, further fall is in favor. 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. On the upside, above 0.7315 minor resistance will turn bias back to the upside for 0.7477 resistance 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.

Daily Pivots: (S1) 1.1579; (P) 1.1600; (R1) 1.1620; More...

Intraday bias in EUR/USD remains neutral as consolidation from 1.1561 is in progress. Upside of recovery should be limited by 1.1682 resistance to bring fall resumption. On the downside, break of 1.1561 will target 1.1289 medium term fibonacci level. Nevertheless, sustained break of 1.1682 will bring stronger rebound back towards 1.1908 resistance.

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) 1.3591; (P) 1.3620; (R1) 1.3654; More...

Intraday bias in GBP/USD stays mildly on the upside and outlook is unchanged. Rebound from 1.3410 short term bottom would target 1.3749 resistance first, which is close to 55 day EMA (now at 1.3741). 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.