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Technical analysis

The RSI is below 50, pointing down

The Stochastics line is at 50.

Most likely scenario - SELL

Target prices: 1,757.95 1,744.99

Alternative scenario - BUY

Target prices: 1,767.13 1,779.63

Key levels

Support 1,757.95 1,744.99

Resistance 1,767.13 1,779.63

The Swiss franc held steady against the US dollar as traders waited for the upcoming Swiss National Bank (SNB) interest rate decision. The central bank is expected to leave interest rates at a record low of -0.75%, which makes it the most accommodative central bank in the world. It will also address the ongoing housing bubble in the country and the relatively strong Swiss franc. Some analysts believe that the bank will insist that it has tools to manage the ongoing housing market without hiking interest rates. Sounding hawkish will likely lead to a strong franc, which will disadvantage the country’s exporters.

The British pound was relatively unchanged against other currencies as traders waited for the Bank of England (BOE) decision. Like the Bank of Japan and Federal Reserve, the bank is expected to leave interest rates unchanged at 0.10%. However, the sterling will move because of the overall guidance on when it will hike interest rates. Its program for tapering asset purchases will also move the currency. Analysts expect the bank to hint about tapering later this year.

The US dollar declined against key currencies after the September interest rate decision. As was widely expected, the bank decided to leave interest rates intact between 0% and 0.25%. It also decided to continue with its asset purchases. Still, with the economy recovering well, the bank hinted that it would start tapering its asset purchases later this year. The dot plot showed that many officials expect the bank to do about 7 rate hikes by 2024. Later today, the Norwegian, South African and Turkish central banks will deliver their interest rate decisions.

EURCHF

The EURCHF pair is hovering close to its lowest level since September 1 as traders wait for the SNB decision. The pair is trading at 1.0830, which is slightly above this week’s low of 1.0825. On the four-hour chart, the pair has formed a bearish flag pattern and moved below the 25-day and 15-day moving averages. It is also hovering slightly above the 50% Fibonacci retracement level. Therefore, the pair will likely break out lower after the SNB decision.

EURGBP

The EURGBP pair declined to a low of 0.8590 as traders waited for the BOE decision. On the four-hour chart, the price is slightly above the 61.8% retracement level. It has also formed what looks like a cup and handle pattern. The pair is between the upper and middle lines of the Bollinger Bands while the Relative Strength Index (RSI) is slightly below the overbought level. Therefore, because of the cup and handle pattern, there is a possibility that it will break out higher.

EURUSD

The EURUSD pair rose to a high of 1.1750 after the latest Fed decision. This price is slightly above this week’s low of 1.1700. It is also along the upper line of the Bollinger Bands and slightly above the 25-day moving average. It has also formed a double-bottom pattern and moved above the dots of the Parabolic SAR. Therefore, the pair will likely keep rising ahead of the flash manufacturing and services PMIs.

On Wednesday, the US Dollar declined by 96 pips or 0.75% against the Canadian Dollar. The decline was stopped by the 200– hour simple moving average during yesterday's trading session.

By and large, the exchange rate could continue to trade in an ascending channel pattern within this session. The potential target for the currency pair would be near the 1.2900 level.

However, the 50– hour SMA at 1.2782 could provide resistance for the USD/CAD currency exchange rate during Thursday's trading session.

On Wednesday, the British Pound edged higher by 74 pips or 0.49% against the Japanese Yen. The currency pair breached the 50– hour simple moving average during Wednesday's trading session.

All things being equal, the exchange rate could continue to trend higher during the following trading session. The potential target for buyers would be near the 150.50 level.

However, technical indicators suggest that the currency exchange rate might continue to trade in a descending channel pattern within this session.

During Wednesday's trading session, the AUD/USD currency pair continued to trend lower in a descending channel pattern. The currency pair traded above the support level at 0.7227 on Wednesday.

If the support line at 0.7727 holds, bullish traders might pressure the Australian Dollar higher against the US Dollar within this session. The potential price target for buyers would be near the 0.7280 level.

However, if the currency exchange rate breaks the support level, a decline towards the 0.7180 regions could be expected during the following trading session.

The EUR/JPY currency pair bounced off the lower boundary of a descending channel pattern at 127.94 on Wednesday. As a result, the Eurozone single currency edged higher by 68 pips or 0.53% against the Japanese Yen.

Everything being equal, the exchange rate could edge higher within Thursday's trading sessions. The potential target for bullish traders would be near the 200– hour simple moving average at 129.04.

However, buyers may resistance level formed by the daily pivot point at 128.80 within this session.

Daily Pivots: (S1) 0.7209; (P) 0.7253; (R1) 0.7282; More...

Downside momentum in AUD/USD remains unconvincing. But with 0.7320 minor resistance intact, fall from 0.7277 is still in progress for 0.7105 low first. Firm break there will resume whole decline from 0.8006 for 0.6991 support next. On the upside, above 0.7320 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.

General trend

• Chinese markets and Evergrande have pared gains.
• Shanghai Composite ended morning trading off of the best levels [China Merchants Bank lagged; Property index trimmed gain].
• Hang Seng has pared gain after rising >2% [Property index opened higher by more than 5%].
• Evergrande’s debt remains in focus; Scheduled debt payments for today [Sept 23rd] include $83.5M of interest on 8.25%, 5-year USD bond and $36M on an onshore bond.
• Chinese property developers downgraded ahead of Oct debt repayment deadlines [Sinic Holdings, Xinyuan Real Estate].
• S&P ASX 200 has risen after the flat open [Energy and Financial indices gain].
• Global officials continue to comment on Evergrande.
• BOE rate decision due later today.
• China Ministry of Finance (MOF) to sell CNY5.0B in 2-year bonds and CNY2.0B in 5-year bonds in Hong Kong on Sept 23rd.
• China PBOC to sell CNY5B in 6-month bills in Hong Kong on Sept 24th (Friday).

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat.
• (AU) AUSTRALIA SEPT PRELIMINARY PMI MANUFACTURING: 57.3 V 52.0 PRIOR; PMI Services: 44.9 v 42.9 prior.
• (AU) Australia ASIC: Warns of social media led pump and dump campaigns; Working with Market operators to identify and disrupt campaigns.
• (AU) Australia total weekly payroll jobs change from Aug 15th to Aug 28th: -0.4% v -0.7% prior.
• (NZ) Reserve Bank of New Zealand (RBNZ): To proceed with proposal on Loan to Value Ratio (LVR) restrictions on owner occupied mortgages to reduce risky lending (as expected), effective Nov 1st.
• (NZ) New Zealand sells NZ$500M v NZ$500M indicated in 2024, 2031 and 2037 bonds.

China/Hong Kong

• Hang Seng opened +1.6% , Shanghai Composite +0.6%.
• (CN) China Cabinet: Reiterates view that economy is challenged by pandemic and rising commodity costs continuity; Looks to strengthen macroeconomic policy; to stabilize market expectations; Reiterates call for cross-cyclical adjustment; Looking at measures to further increase consumption; Approves 5-year plan to increase its new infrastructure (seeks both private and overseas capital).
• (CN) China President Xi: Reiterates China to give priority to agriculture and accelerate the modernization of the sector.
• (CN) China Aug Smartphone Shipments Y/Y: -9.9% v +30.6% prior – CAICT.
• (HK) Hong Kong Monetary Authority (HKMA) comments after US Fed meeting: HKD exchange rate and interest rates remain steady; HK money markets continue to operate smoothly.
• (CN) China Sec Daily: China Loan Prime rates are more likely to decline in Q4.
• (CN) Fitch cuts China 2021 GDP forecast to 8.1% from 8.4%, cites property slowdown.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY60B in 7-day reverse repos v CNY60B in 7-day reverse repos prior; injects CNY60B in 14-day reverse repos v CNY60B prior; Net inject CNY110B v Net inject CNY90B prior.
• (CN) China PBOC sets Yuan reference rate: 6.4749 v 6.4693 prior.
• (CN) PBOC to auction CNY70B in Ministry of Finance Deposits on Sept 26th (Sunday).
• (CN) China MOF to sell CNY12.0B of bonds in Hong Kong in Oct and Nov - Chinese press.

Japan

• (JP) Nikkei 225 closed for holiday.

Korea

• Kospi opened -0.5%.
• (KR) Bank of Korea (BOK): Will strengthen monitoring of risks including Evergrande; Ready to respond to stabilize markets if needed.
• (KR) South Korea Finance Ministry: Financial Market volatility could rise in the future; US FOMC results in line with expectations; To closely monitor US Fed tapering speed and risks from Evergrande.
• (KR) South Korea Finance Minister to meet with Bank of Korea (BOK) Gov Lee on Sept 30th (Thurs).
• (KR) South Korea Sept 1-20 Exports y/y: 22.9% v 40.9% prior; Imports y/y: 38.8% v 52.1% prior.
• (KR) Said that South Korea will increase power prices in Q4 - Yonhap.

Other Asia

• (SG) Singapore Aug CPI M/M: 0.5% v 0.5%e; Y/Y: 2.4% v 2.4%e; CPI Core Y/Y: 1.1% v 1.0%e.

North America

• (US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); POLICYMAKERS EXPECT FIRST RATE HIKE IN 2022; BOND TAPER MAY SOON BE WARRANTED.
• (US) Fed Chief Powell: We could reach conclusion that both tests have been met for tapering as soon as the next meeting; Taper test is 'all but met'; There is very broad support on timing and pace of taper; Would take reasonably good jobs report in next month to feel taper test has been met; Would not need a 'knock out' report; Evergrande situation seems 'very particular to China'; China has very high debt for an emerging market economy - rate decision Q&A.
• (US) 'Centrist'' Democrats said to have discussed cutting the size of the Social-Welfare bill to below $3.0T - US financial press.
• (US) President Biden: Committed to delivering on infrastructure and spending plans.
• (BR) BRAZIL CENTRAL BANK (BCB) RAISES SELIC TARGET RATE BY 100BPS TO 6.25%; AS EXPECTED; Sees a rate hike of the same magnitude at the next meeting.

Levels as of 01:20 ET

• Nikkei 225, closed, ASX 200 +1% , Hang Seng +0.7%; Shanghai Composite +0.4% ; Kospi -0.3%.
• Equity S&P500 Futures: +0.3%; Nasdaq100 +0.3%, Dax +0.4%; FTSE100 +0.5%.
• EUR 1.1709-1.1683 ; JPY 109.92-109.76 ; AUD 0.7251-0.7222 ;NZD 0.7013-0.6981.
• Gold -0.8% at $1,764/oz; Crude Oil +0.2% at $72.38/brl; Copper -0.3% at $4.2095/lb.

Daily Pivots: (S1) 1.2709; (P) 1.2768; (R1) 1.2838; More...

USD/CAD staying in consolidation from 1.2891 and intraday bias remains neutral first. On the upside, above 1.2891 will target a test on 1.2947 high. On the downside, however, break of 1.2635 minor support will turn bias back to the downside for 1.2492 support. Overall, rise from 1.2005 is still in progress with 1.2421 support intact. Firm break of 1.2947 will target 1.3022 fibonacci level next.

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) 109.32; (P) 109.61; (R1) 110.10; More...

Range trading continues in USD/JPY and intraday bias remains neutral at this point. On the downside, break of 109.10 will argue that larger fall from 111.65 is resuming. Deeper decline should then be seen to 108.71 support first, and then 38.2% retracement of 102.58 to 111.65 at 108.18 next. On the upside, above 110.44 will turn bias back to the upside for 110.79, and then 111.65 high.

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. The pattern from 101.18 could still extend with another falling leg. Sustained trading below 55 day EMA will bring deeper fall to 107.47 support and below. Nevertheless, strong break of 111.71 resistance will confirm completion of the corrective decline from 118.65 (2016 high). Further rise should then be seen to 114.54 and then 118.65 resistance.