Sample Category Title

Daily Pivots: (S1) 0.9252; (P) 0.9270; (R1) 0.9300; More....

Intraday bias in USD/CHF remains neutral as range trading continues 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.

Short-term Elliott wave view in Oil (CL_F) suggests cycle from September 9, 2021 low is unfolding as a 5 waves impulse Elliott Wave structure. Up from September 9 low, wave ((i)) ended at 73.14 and pullback in wave ((ii)) ended at 69.67. It then resumed higher in wave ((iii)) towards 76.67 and pullback in wave ((iv)) ended at 73.14. The 45 minutes chart below shows the subdivision of wave ((iv)) in zigzag structure. Down from wave ((iii)), wave (a) ended at 73.74, rally in wave (b) ended at 75.79, and wave (c) ended at 73.16. This completed wave ((iv)) in higher degree.

Wave ((v)) remains in progress as 5 waves impulse in lesser degree. Up from wave ((iv)), wave (i) ended at 76.07 and dips in wave (ii) ended at 74.23. Oil then rallied to 79.48 and ended wave (iii). Expect a pullback in wave (iv) to be followed by one more push higher in wave (v). This should also complete wave ((v)) and end cycle from September 9, 2021 low as wave 1. The commodity should then pullback in larger degree wave 2 to correct cycle from September 9 low before the rally resumes. Near term, expect cycle from September 9, 2021 low to end soon, and larger pullback to happen in 3, 7, or 11 swing before the rally resumes. Chasing the upside in the shorter cycle therefore is risky and it’s best to wait at the sidelines for larger pullback before looking for buying opportunity.

Oil (CL_F) 45 Minutes Elliott Wave Chart

Key Highlights

• Crude oil price started a fresh rally above $75.00 and $78.00.
• It broke a key contracting triangle at $76.25 on the 4-hours chart of XTI/USD.
• The US ISM Services PMI increased from 61.7 to 61.9 in Sep 2021.
• The US ADP employment could change 428K in Sep 2021, up from the last 374K.

Crude Oil Price Technical Analysis

After trading close to $76.50, crude oil price corrected lower against the US Dollar. However, the price found support near $73.25 and started a fresh increase.

Looking at the 4-hours chart of XTI/USD, the price broke many hurdles near $75.00 to start a fresh increase. There was also a break above a key contracting triangle at $76.25 on the same chart.

The price settled above the $78.00 level, the 100 simple moving average (4-hours, red) and the 200 simple moving average (4-hours, green). It even traded to a new 7-year high above $79.50.

On the upside, an initial resistance is near the $80.50 level. The next major resistance is near the $82.50 level, above which the price could rise towards the $85.00 level.

An immediate support on the downside is near the $77.80 level. The first major support is near $76.20. Any more losses could open the doors for a move towards the $75.00 support.

Fundamentally, the US ISM Services Index was released yesterday by the Institute for Supply Management (ISM). The market was looking for a drop from 61.7 to 60 in Sep 2021.

However, the actual result was positive, as the US ISM Services PMI increased from 61.7 to 61.9 in Sep 2021. Besides, the US ISM Services New Orders Index increased from 63.2 to 62.3.

Looking at EUR/USD, the pair failed to recover above 1.1650 and it remains at a risk of more downsides. Besides, GBP/USD is showing positive signs above 1.3550.

Economic Releases to Watch Today

• Euro Zone Retail Sales for August 2021 (YoY) - Forecast +0.4%, versus +3.1% previous.
• Euro Zone Retail Sales for August 2021 (MoM) - Forecast +0.8%, versus -2.3% previous.
• US ADP Employment Change for Sep 2021 - Forecast 428K, versus 374K previous.

STOCKS

Dow is likely to remain within 34750-33750 range while Dax is fluctuating within a narrow range above 15000. There is scope for an eventual rise to 15400/500. Nikkei has support at 27000 which may hold to produce a bounce in the near term. Shanghai markets are closed but we may see a possible higher opening on Friday when the index opens after a long holiday. Nifty and Sensex can continue to rise steadily in the near term towards 18000-18250 and 60/61000 respectively.

Dow (34314.67, +311.75, +0.92%) has risen but continues to hold within the 34750-33750 range which could continue for the next few sessions. Unless a break on either side is seen, it is difficult to say which direction it would break just now.

DAX (15194.49, +157.94, +1.05%) rose a bit while above 15000. The index seems to be fluctuating above 15000 just now and needs a sharp bounce to test 15400/500 on the upside. A narrow 15300-15000 range is possible just now.

Nikkei (27544.06, -278.06, -1%) has fallen further today. It has strong support at 27000 mentioned yesterday, which can hold and produce a bounce towards 28000 or higher in the coming sessions. Watch [rice action near 27000 if a fall is seen.

Shanghai (3568.17, +31.87, +0.90%) markets are closed till 7th Oct. While above 3550, view is bullish. We need to wait and watch to see where it opens after the long break.

Nifty (17822.30, +131.05, +0.74%) opened lower at 17661.35 and rose steadily to close above 17800 yesterday. The index needs to sustain above 17800 for it to rise further towards 18000-18250. Any break below 17800 can take it down towards 17600 on the downside. While above 17800,a steady rise towards 18000/250 is possible in the coming sessions. Broad range of 18000/250-17800/600 may hold for the near term.

Sensex (59744.88, +445.56, +0.75%) has risen in line with our expectations. 59000 is a crucial level as mentioned previously. While the index is above 59000, view remains bullish to see a rise towards 60000.

COMMODITIES

Crude prices have moved up and have scope to see some more upside while above earlier broken resistance levels. Brent has room to test 85/86 while WTI may test 80 before a decline is seen. Gold and Silver are likely to be ranged within 1720/40-1760/80 and 21.50-23 region while Copper may head towards 4.0-3.80 before bouncing from there eventually.

Brent (82.43) has immediate resistance near 82.65 which if holds can pull the price down to 81-82 just now. A break above 82.65 can take it higher towards 85.65-86 levels or even higher towards 92 on the upside. Watch price action near current levels.

WTI (78.77) has risen as expected and may continue to rise to test 80 before a dip is seen from there.

Gold (1755.10) is ranged within 1780/60-1740/20 region and may continue so for a few more sessions.

Silver (22.49) is also ranged within 21.50-23 region and may continue so for some more time.

Copper (4.1340) has fallen sharply and could test crucial support at 4 before bouncing back towards 4.25/35 on the upside. Failure to bounce from 4 can drag it lower towards 3.80. Watch price action near 4.

FOREX

Dollar Index has risen above 94 and can slowly head towards 94.75-95 pushing down Euro towards 1.1550/45-1.1495 in the medium term. EURJPY is likely to be ranged within 128-130.50. Aussie and Pound too look ranged for the near term within 0.7320-0.7220 and 1.3750-1.34 region respectively. USDJPY can rise towards 112 or even 112.50 on the upside. USDINR can re-test 74.65, a break above which will open up chances of testing 74.75/80-75.20 on the upside.

Dollar Index (94.048) has risen back again to above 94 and has scope to rise towards 94.75-95 on the upside. Can rise while above 93.75.

Euro (1.1592) can slowly head towards 1.1550/45-1.1495 while below 1.1640/50. Overall view is bearish below 1.1650.

EURJPY (129.41) had risen well within the range of 130.50-128 . The range may continue to hold for the near term.

Dollar-Yen (111.59) has risen back to 111.60 as expected and if the rise continues, we may expect a further rise to 112. Any break above 112 can extend the rise to 112.50 n the upside.

Aussie (0.7266) can hold below 0.7320 and fall to 0.7220-0.72 on the downside. Broad range of 0.72-0.7320 may hold for now.

Pound (1.3616) has risen well but can face resistance near 1.3650-1.3750 region to fall back towards 1.35 or lower.

USDCNY (6.4466) will open on Friday after a long break. Support is seen at 6.44 which may hold to produce a bounce towards 6.47/48.

USDINR (74.45) came down from immediate trend resistance at 74.65 yesterday to fall towards 74.45 as expected but the pair can rise back today to re-test 74.65. Note that 74.65 would be a make or break level, a break on the upside would open up 74.75/80-75.20 else a fall to 74.40/20-74.00 would come into the picture.

INTEREST RATES

The US Treasury Yields have risen sharply and are heading up to test their crucial long-term resistances. While we expect the resistance to hold and trigger a pull-back in the coming days, a strong break above these resistances will be bullish to see further rise. The German yields are moving up as expected and are coming closer to their crucial resistances from where we expect a reversal. The 10Yr and 5Yr GoI spiked up yesterday and have come-off from the day’s high. We see limited room on the upside from here and a reversal is on the cards.

The US 2Yr (0.29%), 5Yr (0.99%), 10Yr (1.54%) and the 30Yr (2.11%) %) have risen sharply across tenors yesterday. The 10Yr has risen past 1.5% and can now test the crucial resistance level of 1.6%. The 30Yr has room to test 2.2% in the coming days. 1.6% on the 10Yr and 2.2% on the 30Yr are crucial resistances to watch. Whether the yields break above these resistances or not will be deciding the move going forward. We will have to wait and watch.

The German 2Yr (-0.71), 5Yr (-0.56%), 10Yr (-0.19%) and 30Yr (0.29%) yields are moving up in line with our expectation and are keeping our near-term bullish view intact. The 10Yr has risen above -0.2% and can now move up to -0.2%. The 30Yr is heading up towards 0.30%-0.35% as expected. We expect the yields to reverse lower from -0.2% (10Yr) and 0.35% (30Yr) and resume the long-term downtrend.

The Indian 10Yr GoI (6.2610%) spiked to 6.2826 and has come-off from there. 6.3%-6.32% can be tested but a break above it could be difficult. We expect the upside to be capped at 6.32% and the yield to reverse lower towards 6.2% going forward.

The 5Yr GoI (5.6920%) tested 5.72% as expected and has come-off from there. 5.68%-5.66% is an immediate support which has to be broken to see a deeper fall and turn the view bearish. While above this support zone, the chances of seeing 5.75%-5.76% on the upside cannot be ruled out.

Daily Pivots: (S1) 111.04; (P) 111.30; (R1) 111.73; More...

USD/JPY rebounds after drawing support from 4 hour 55 EMA, but stays below 112.07 resistance. Intraday bias remains neutral first. Another retreat cannot be ruled out, but downside should be contained by 110.44 support to bring another rally. 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.

New Zealand Dollar trades mildly lower together with commodity currencies in quiet Asian session. Overall markets are mixed as Japan and Hong Kong stocks head lower, decoupling from the strong rebound in the US overnight. Dollar appears to be supported by the rise in treasury yields, with 10-year yield back above 1.5 handle. Yen is also turning softer on the development. But the moves are so far indecisive. Focus will now turn to ADP employment from the US for some inspirations.

Technically, EUR/CAD's breached 1.4580 support argues that it's resuming the down trend from 1.5978. Focus will firstly be on whether it could sustain below the support level and set the stage for deeper fall towards 1.4263. Secondly, we'd also keep an eye on whether USD/CAD would accelerate down through 1.2492 support (which is not happening yet). Or EUR/USD would break through 1.1561 temporary low to resume larger fall from 1.2265.

In Asia, at the time of writing, Nikkei is down -1.0)%. Hong Kong HSI is down -0.71%. Singapore Strait Times is up 0.11%. Japan 10-year JGB yield is up 0.0265 at 0.084. China is still on holiday. Overnight, DOW rose 0.92%. S&P 500 rose 1.05%. NASDAQ rose 1.25%. 10-year yield rose 0.048 to 1.529.

RBNZ hikes OCR to 0.50%, maintains hawkish bias

RBNZ raised the Official Cash Rate by 25bps to 0.50% as widely expected, as "it is appropriate to continue reducing the level of monetary stimulus so as to maintain low inflation and support maximum sustainable employment." It maintains a hawkish bias and said, "further removal of monetary policy stimulus is expected over time, with future moves contingent on the medium-term outlook for inflation and employment."

In the accompany statement, it's noted that current COVID-19-related restrictions "have not materially changed the medium-term outlook" for inflation and employment. Capacity pressures "remain evident" and economic data highlighted that the economy "has been performing strongly in aggregate". Headline CPI is expected to rise above 4% in the near term before returning towards 2% target midpoint over the medium term.

NZD/USD dips mildly after RBNZ hike

NZD/USD dips mildly after RBNZ rate hike but is bounded in very tight range. Rebound from 0.6858 is limited by 0.6981 minor resistance so far. Hence, fall from 0.7169 is still mildly in favor to extend lower. Break of 0.6858 will target 0.6804 low first.

Also, NZD/USD is still staying in the corrective pattern from 0.7463 high. Break of 0.6804 will target 38.2% retracement of 0.5467 to 0.7463 at 0.6701. This will remain the favored case as long as 0.7169 resistance holds, even in case of stronger rebound.

BoJ Kuroda: No pressing need for firms to raise wages and selling prices

BoJ Governor Haruhiko Kuroda said in a speech, Japan's economy has "picked up", led by exports and the manufacturing sector. "If Japan can simultaneously protect public health and improve consumption activities through the use of vaccination certificates, for example, the economic recovery trend is very likely to become more pronounced, even in the services sector, also supported by the materialization of pent-up demand," he added.

On the contrasting development in CPI compared with the US, Kuroda said demand in Japan "has not recovered as rapidly as that in the U.S". Also, "many Japanese firms have essentially maintained their labor, supply-side constraints in Japan have not been as severe as in the U.S., and there has been no pressing need for firms to raise wages and selling prices."

Looking ahead

Germany factory orders, UK construction PMI and Eurozone retail sales will be released in European session. US will release ADP employment later in the day.

USD/JPY Daily Outlook

Daily Pivots: (S1) 111.04; (P) 111.30; (R1) 111.73; More...

USD/JPY rebounds after drawing support from 4 hour 55 EMA, but stays below 112.07 resistance. Intraday bias remains neutral first. Another retreat cannot be ruled out, but downside should be contained by 110.44 support to bring another rally. 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

BoJ Governor Haruhiko Kuroda said in a speech, Japan's economy has "picked up", led by exports and the manufacturing sector. "If Japan can simultaneously protect public health and improve consumption activities through the use of vaccination certificates, for example, the economic recovery trend is very likely to become more pronounced, even in the services sector, also supported by the materialization of pent-up demand," he added.

On the contrasting development in CPI compared with the US, Kuroda said demand in Japan "has not recovered as rapidly as that in the U.S". Also, "many Japanese firms have essentially maintained their labor, supply-side constraints in Japan have not been as severe as in the U.S., and there has been no pressing need for firms to raise wages and selling prices."

Full speech here.

NZD/USD dips mildly after RBNZ rate hike but is bounded in very tight range. Rebound from 0.6858 is limited by 0.6981 minor resistance so far. Hence, fall from 0.7169 is still mildly in favor to extend lower. Break of 0.6858 will target 0.6804 low first.

Also, NZD/USD is still staying in the corrective pattern from 0.7463 high. Break of 0.6804 will target 38.2% retracement of 0.5467 to 0.7463 at 0.6701. This will remain the favored case as long as 0.7169 resistance holds, even in case of stronger rebound.

First impressions of the RBNZ's October 2021 Monetary Policy Review.

RBNZ Monetary Policy Review, October 2021

• The Reserve Bank increased the OCR by 25 basis points to 0.50%, as was widely expected.
• It also signalled that it would continue to remove monetary stimulus over time.
• The statement acknowledged that the current Covid restrictions have suppressed activity and are placing a strain on some businesses.
• However, it concluded that these restrictions have not materially changed the medium-term outlook for inflation and employment since the August review.
• Inflation is expected to spike above 4% in the near term before settling at around the 2% target midpoint in the medium term – this forecast is unchanged from August.
• Rising costs and capacity constraints are a significant driver of inflation in the short term. But in an environment of strong demand, there is a risk that this could translate into broader, more persistent price pressures.

Implications

The RBNZ statement was very much in line with what we expected, and with our own thinking. There is substantial evidence that demand in the New Zealand economy was running hot before the latest Covid lockdown. And the evidence so far suggests that, as in previous lockdowns, activity is capable of bouncing back quickly as restrictions are eased.

Our view remains that we will see further rate hikes at the reviews in November, February and May, taking the cash rate to 1.25%. Beyond that, we expect the pace of further hikes to be gradual, as the RBNZ starts to converge on what it would consider to be a ‘neutral’ level of the cash rate.

Financial markets were largely priced for a 25 basis point hike today. As such, there was little change in interest rates or the New Zealand dollar.

RBNZ raised the Official Cash Rate by 25bps to 0.50% as widely expected, as "it is appropriate to continue reducing the level of monetary stimulus so as to maintain low inflation and support maximum sustainable employment." It maintains a hawkish bias and said, "further removal of monetary policy stimulus is expected over time, with future moves contingent on the medium-term outlook for inflation and employment."

In the accompany statement, it's noted that current COVID-19-related restrictions "have not materially changed the medium-term outlook" for inflation and employment. Capacity pressures "remain evident" and economic data highlighted that the economy "has been performing strongly in aggregate". Headline CPI is expected to rise above 4% in the near term before returning towards 2% target midpoint over the medium term.

Full statement here.