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Market movers today

• Today's key event is tonight's policy announcement from the Fed. While we do not expect the Fed to provide any details on tapering after the weak jobs report and lower-than-anticipated CPI inflation print, we do believe the Fed will raise its 'dots' signalling one rate hike next year (up from zero in June), as inflation overall has been higher than anticipated. We still think the tapering pace is more important from a market perspective than the exact start date of tapering, as the Fed has made it pretty clear that it expects to start tapering before the end of the year. For more details see also Fed Research - Preview: what to do in a bad trade-off?, 17 September. The policy announcement is at 20:00 CET and the press conference starts at 20:30 CET.
• Still a lot of focus on Evergrande and Chinese financial markets.
• Besides that preliminary euro area consumer confidence in September is due out at 16:30.

The 60 second overview

Evergrande situation remains unclear: This morning the company issued a press release stating in vague terms that it intends to pay interest on its bonds in Chinese currencies following "negotations off the clearing house". However, the statement did not specify how much interest would be paid or when. The People's Bank of China increased its injection of short-term cash into the financial system, helping to soothe sentiment, which may help prevent broader contagion in the Chinese credit market. The Chinese equity markets fell slightly but not as much as feared after they re-opened after two days of holiday closing.

Our expection on Evergrande: Overall, we expect the turmoil related to Evergrande to get worse before it gets better. But we believe the Chinese government will eventually intervene as the alternative could be a financial crisis with very severe effects on the Chinese economy and the Chinese people, for more details see our piece from yesterday: Research China - The Evergrande situation and what we expect, 21 September.

Bank of Japan sticks to its policy stance: As widely expected, The Bank of Japan (BoJ) kept its QQE with yield curve control unchanged at a meeting ending this morning. Japan still has a growth rebound ahead with parts of the country in lockdown at least through September. The BoJ acknowledges the supply constraints currently affecting production but kept its assessment of the economy unchanged, which is "picking up as a trend, although it remained in a severe state due to the impact of the pandemic." USD/JPY has increased somewhat this morning after closing in on the 109 threshold overnight.

Equities: Global equities were in a choppy session on Tuesday. Europe went for the rebound, but the US session was unable to find any real momentum. Instead, S&P closed slightly lower -0.1%, Dow -0.2% but Russell 2000 and Nasdaq 0.2% higher. Sector performance was more aligned between regions, as investors picked up defensives and quality (tech and health care) that was sold in Monday's risk-off session. Worst hit industrials and materials however continued lower. VIX ticked down slightly but still in the 25 range. Asian markets very mixed as Chinese markets reopen after a long holiday. Slightly optimistic undertone though as Shenzhen and Shanghai are only moderately lower and Hong Kong is continuing its rebound. US futures point to a positive opening.

FI: The uncertainty surrounding the Chinese developer Evergrande continues to dominate the market sentiment. Overnight, Evergrande stated that it's onshore company will make an interest payment on Thursday on its 5.8% 2025 bond, but whether this is enough to stabilise markets is uncertain. However, the Chinese Central Bank (PBOC) has been out adding liquidity to the Chinese market as the market opens after a 2-day holiday.

FX: EUR/SEK moved only marginally higher after the Riksbank policy announcement yesterday. EUR/SEK ended the day above 10.19. Today everything in the FX market is about the Fed's policy announcement in the evening. We continue to see downside risk to EUR/USD in the medium-term, even if EUR/USD moves higher on the back of a Fed today that is more dovish than anticipated.

Credit: CDS indices outperformed cash yesterday, with iTraxx Xover and Main tightening 5bp and 0.8bp, respectively (to close in 248bp and 50.7bp). HY bonds widened around 1.5bp and IG tightened marginally.

Nordic macro

The Riksbank decisions yesterday were in line with our expectations: repo rate path left at zero throughout the forecast horizon and a repeat message on QE - even as they raised GDP and inflation forecasts.

General trend

• Shanghai Composite has pared the opening loss [CSI 300 Real Estate Index rises over 5%; Banks index declines over 2%, Ping An Insurance and China Merchants Bank decline].
• Evergrade unit confirms it will make onshore bond payment Thursday.
• Various Chinese cos. comment on the power limits in Jiangsu Province.
• Japan markets to close on Thurs for holiday [Auto and Steel companies decline; Big component Softbank Group rises after prior drop].
• S&P ASX 200 has moved higher after the flat open [Energy and Resources indices have outperformed].
• HK markets to return on Thurs.
• FedEx declined after reporting earnings.
• 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.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened 0.0%.
• TWR.NZ Cuts FY21 (NZ$) Net 19-21M (prior 22-24M); Large house claims in FY21 above long term average esp prior quarter; Challenges raised at interim results may continue to impact H2 performance.
• (AU) Australia sells A$1.0B v A$1.0B indicated in 4.25% Apr 2026 bonds, avg yield 0.525%, bid to cover 6.15x.
• (AU) Reserve Bank of Australia (RBA) Assistant Gov Bullock: Banks have maintained lending standards on mortgages, house prices are outside fundamentals; macro prudential rules should be targeted at risks arising from highly indebted borrowers - The Housing Market and Financial Stability.
• (AU) Australia, Melbourne and regional Victoria experienced a 5.8 magnitude earthquake this morning, no tsunami threat (largest in history.
• (AU) Reserve Bank of Australia (RBA) Deputy Gov Debelle: RBA is keeping a watchful eye on the Evergrande Group crisis - press).

Japan

• Nikkei 225 opened -0.3%.
• (JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED, introduces details on green lending program.
• (JP) Japan Ag Ministry: US FDA lifted restriction on Japan Food Imports that was imposed after Fukushima meltdown.
• 8306.JP Confirms MUFG Union Bank to be acquired by US Bancorp for ~$8.0B in cash and stock; UBS adds 280 California branches (yesterday after the close).

Korea

• Kospi closed for holiday.
• 005380.KR Hyundai Kia Aug US environment friendly vehicle sales 8.3K units, +124.4% y/y.

China/Hong Kong

• Hang Seng closed for holiday; Shanghai Composite opened -1.4%.
• 3333.HK Unit Hengda Real Estate to make interest payment for onshore bond due on Sept 23; To make the coupon payment on Shenzhen traded 5.8% September 2025 bond.
• 3333.HK Negotiated interest payment with creditholders.
• (CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: LEAVES BOTH 1-YEAR AND 5-YEAR RATES UNCHANGED (17th consecutive hold).
• (CN) China has encouraged banks to use the Yuan (CNY) in loans to cos. overseas, cites FX regulator SAFE - press.
• (CN) China Pres Xi: To target reaching carbon neutrality by 2060; China will not build new coal-fired power projects abroad.
• (CN) Asia Development Bank (ADB) maintains China 2021 GDP outlook at 8.1%, 2022 5.5%; Evergrande debt problem, warrants careful monitoring.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY60B in 7-day reverse repos v CNY50B in 7-day reverse repos prior; injects CNY60B in 14-day reverse repos v CNY50B prior; Net inject CNY90B v Net CNY100B prior.
• (CN) China PBOC sets Yuan reference rate: 6.4693 v 6.4527 prior.
• (CN) China PBOC Gov Yi: Vowed to increase Fintech supervision and risk prevention - Statement from Sept 18th.
• 3333.HK IMF Chief Economist: Following company very closely; China has tools and policy space to prevent situation from becoming system crisis.

North America

• (US) Weekly API Crude Oil Inventories: -6.1M v -5.4M prior.
• ADBE Reports Q3 $3.18 v $3.00e, Rev $3.94B v $3.88Be.
• SFIX Reports Q4 +$0.19 v -$0.14e, Rev $571M v $548Me.
• (US) White House: Strongly support suspending debt limit to Dec 2022. stopgap bill will avoid a catastrophic default.
• (US) Record 65 container ships waiting outside ports of Los Angeles and Long Beach.

Europe

• (UK) Reported that UK PM Johnson and US President Biden discussed both China and Russia during meeting, US and UK to continue trade deal talks.
• (UK) UK could join US, Mexico, Canada trade pact if its is unable to secure a direct FTA - UK press.

Levels as of 01:00ET

• Hang Seng closed for holiday; Shanghai Composite -0.3%; Kospi closed for holiday; Nikkei225 -0.6%; ASX 200 +0.5%.
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax +0.4%; FTSE100 +0.3%.
• EUR 1.1731-1.1717; JPY 109.50-109.12; AUD 0.7268-0.7224; NZD 0.7032-0.6994.
• Commodity Futures: Gold -0.1% at $1,776/oz; Crude Oil +1.2% at $71.31/brl; Copper +2.4% at $4.21/lb.

Daily Pivots: (S1) 109.04; (P) 109.37; (R1) 109.56; More...

Once again, USD/JPY drew support from 109.10 and recovered. Intraday bias remains neutral first as range trading could continue. 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.

Markets have turned quiet today as focus is shifted to FOMC policy decisions. While a tapering announcement is highly unlikely, there are still prospects of hawkish surprises in the dot plot and the economic projections. In the currency markets, Sterling is currently the worst performing one for the week, followed by Kiwi and then Aussie. Swiss Franc is the strongest, followed by Yen and Dollar. The picture could solidify itself if overall risk sentiments turn sour again after FOMC.

Technically, we'd continue to look at the development in US stocks to gauge overall market direction. DOW breached 33741.16 structural support briefly earlier in the week. Subsequent recovery has been rather weak so far. Another take on the support level and a firm break there would confirm that DOW is already in correction to whole medium term up trend from 26143.77 at least. In this case, 38.2% retracement at 32006.99 will be the next target. Such development, if happens, would likely be accompanied by buying in Yen, Swiss Franc and Dollar, and upside breakouts in respective pairs.

In Asia, at the time of writing, Nikkei is down -0.74%. China Shanghai SSE is down -0.29%. Singapore Strait Times is down -0.66%. Japan 10-year JGB yield is down -0.0048 at 0.035. Hong Kong is on holiday. Overnight, DOW dropped -0.15%. S&P 500 dropped -0.08%. NASDAQ rose 0.22%. 10-year year rose 0.015 to 1.324.

BoJ stands pat, notes supply side constraints

BoJ left monetary policy unchanged today. Under the yield curve control framework, short term policy interest rate is held at -0.10%. 10-year JGB yield target is kept at around 0%, without upper limit on bond purchases. The decision was made by 8-1 vote, with Goushi Kataoka dissenting as usual, pushing for strengthening easing. It also pledged to closely monitor the pandemic impact and "will not hesitate to take additional easing measures if necessary".

Overall assessment on the economy was maintained as its has "picked up as a trend" but "remained in a severe situation" due to the pandemic home and abroad. But it noted that some exports and production have been "affected by supply-side constraints". Weakness has been seen in some industries on business fixed investment. Employment and income "remained weak" while private consumption remained "stagnant". Core CPI has been at around 0% and inflation expectations have been "more or less unchanged".

Australia leading index dropped to -0.5% in Aug, more weakness on the way

Australia Westpac-MI leading index dropped from 1.4% to -0.5% in August. Westpac said "the Leading Index has held up surprisingly well during this downturn but it seems likely that there is more weakness on the way." For example, commodity prices and equities are likely to drag the index down further based on the developments in September.

Westpac doesn't expect RBA to make any change to policy settings until February next year. It expects asset purchases to be fully wound back by May/August next year.

Fed not ready for tapering yet, some previews

No change in policy is expected from FOMC today and Fed is likely not ready to announce tapering yet. Chair Jerome Powell would just reiterate that "substantial further progress" has been "met for inflation", and there has also been "clear progress toward maximum employment". Also, it's appropriate to start tapering "if the economy evolved broadly as anticipated

A major focus in the median dot plot, where two rate hikes were penciled in by 20223. For 2022, there were 7 out of 18 participants anticipating one or two hikes. The overall picture could tilt towards the hawkish side if just one or two members bring forward their rate forecasts to 2022. Meanwhile, the new staff economic projections will catch some attention too.

Here are some suggested readings on Fed:

• FOMC Preview: Fed to Affirm Tapering Could Come This Year. Focus Turns to Dot Plot
• Fed Meeting: Forget the Slow Crawl to Tapering, it's the Dot Plot that Matters
• FOMC Meeting Preview: Will We Get A Taper Hint?
• Fed Research – Preview: What to Do in a Bad Trade-Off?
• Musical Chairs at the Fed: Powell or Brainard?

On the data front

Eurozone consumer confidence and existing home sales will also be released.

USD/JPY Daily Outlook

Daily Pivots: (S1) 109.04; (P) 109.37; (R1) 109.56; More...

Once again, USD/JPY drew support from 109.10 and recovered. Intraday bias remains neutral first as range trading could continue. 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.

Economic Indicators Update

No change in policy is expected from FOMC today and Fed is likely not ready to announce tapering yet. Chair Jerome Powell would just reiterate that "substantial further progress" has been "met for inflation", and there has also been "clear progress toward maximum employment". Also, it's appropriate to start tapering "if the economy evolved broadly as anticipated

A major focus in the median dot plot, where two rate hikes were penciled in by 20223. For 2022, there were 7 out of 18 participants anticipating one or two hikes. The overall picture could tilt towards the hawkish side if just one or two members bring forward their rate forecasts to 2022. Meanwhile, the new staff economic projections will catch some attention too.

Here are some suggested readings on Fed:

• FOMC Preview: Fed to Affirm Tapering Could Come This Year. Focus Turns to Dot Plot
• Fed Meeting: Forget the Slow Crawl to Tapering, it's the Dot Plot that Matters
• FOMC Meeting Preview: Will We Get A Taper Hint?
• Fed Research – Preview: What to Do in a Bad Trade-Off?
• Musical Chairs at the Fed: Powell or Brainard?

Australia Westpac-MI leading index dropped from 1.4% to -0.5% in August. Westpac said "the Leading Index has held up surprisingly well during this downturn but it seems likely that there is more weakness on the way." For example, commodity prices and equities are likely to drag the index down further based on the developments in September.

Westpac doesn't expect RBA to make any change to policy settings until February next year. It expects asset purchases to be fully wound back by May/August next year.

Full release here.

BoJ left monetary policy unchanged today. Under the yield curve control framework, short term policy interest rate is held at -0.10%. 10-year JGB yield target is kept at around 0%, without upper limit on bond purchases. The decision was made by 8-1 vote, with Goushi Kataoka dissenting as usual, pushing for strengthening easing. It also pledged to closely monitor the pandemic impact and "will not hesitate to take additional easing measures if necessary".

Overall assessment on the economy was maintained as its has "picked up as a trend" but "remained in a severe situation" due to the pandemic home and abroad. But it noted that some exports and production have been "affected by supply-side constraints". Weakness has been seen in some industries on business fixed investment. Employment and income "remained weak" while private consumption remained "stagnant". Core CPI has been at around 0% and inflation expectations have been "more or less unchanged".

Full statement here.

STOCKS

Dow pauses ahead of the FOMC meeting today while the other indices globally have bounced back well from levels seen over the last 2-sessions. Dax may rise slowly towards 15400 which needs to break on the upside to rise further towards 15600 else we may see rejection from 15400 in the next few sessions. Nikkei, Shanghai, Nifty and Sensex look bullish for the near term.

Dow (33919.84, -50.63, -0.15%) broke below 34000 to close lower. As mentioned yesterday, a fall towards 33500-33250 looks possible before a bounce or reversal is seen.

DAX (15348.53, +216.47, +1.43%) has seen a sharp bounce. Watch if the index holds below the earlier support turned resistance near 15400.

Nikkei (29665.42, -174.29, -0.58%) is stable but could test 29500-29250 or even 29000 on the downside before bouncing back from there. View is likely to be bearish for another couple of sessions.

Shanghai (3595.11, -18.20, -0.50%) has fallen again and can test support at 3570 mentioned earlier. Failure to hold above mentioned support can drag the index down to 3500.

Nifty (17562.00, +165.10, +0.95%) rose well from 17326 and while above 17500 a slow rise back to 17600/800 is possible. Broad range of 17800-17200 may hold for the next 2-weeks.

Sensex (59005.27, +514.34, +0.88%) has scope to test support at 58000 today which is an interim support. A bounce from there is then possible for the medium term.

COMMODITIES

Corrective bounce is seen in most commodity prices. Crude prices have risen well over the last 2-sessions and may rise further to test resistance region before coming off from there. Upside is likely to be limited while above 75 (Brent) and 70 (WTI). Gold and Silver have risen from levels seen yesterday. Gold can test 1780/90 while Silver can rise to 23-23.50. Copper is holding well above support at 4.10 and can rise to 4.30/40 soon.

Brent (74.92) dipped to test 73.26 overnight before bouncing back from there. Currently trading near 75, it may test the resistance zone of 75-77 we have been mentioning in the last few editions. Thereafter, whether the price will fall back sharply or continue to rise will have to be seen.

WTI (71.09) too has been rising from levels near 70 and while the corrective bounce holds, a rise towards 73-74 is expected in the next few sessions.

Gold (1777.40) has risen a bit from 1760 seen yesterday. A rise to 1780-1790 looks possible before again falling back to 1740. Any break below 1740 if seen would be bearish towards 1725-1700.

Silver (22.73) has held above our mentioned support near 22 preventing a further fall towards 21. While above 22, a slow rise to 23-23.50 is possible.

Copper (4.2040) held above 4.10 and bounced well from there. A test of 4.30/40 can be on the cards in the near term. If the current bounce is short lived, we may expect a fall from 4.30 itself.

FOREX

Dollar Index and Euro look stable within a fixed range and need to break on either side to give more directional clarity. EURJPY is trading near crucial support at 128 which if fails to produce a bounce could indicate fresh bearishness towards 127-126. Watch price action near current levels. Aussie and Pound have risen a bit but need to see if it is sign of fresh reversal or a short lived corrective bounce within an overall downtrend. USDINR may hold below strong resistance at 73.80-74.00. Trade within 73.40/60-73.80-74 may hold for now.

Dollar Index (93.229) has immediate resistance near 93.40/45 which if holds can keep the index within 93-93.45 for the next few sessions. Thereafter we need to wait and watch which side the index breaks.

Euro (1.1723) is trading within the 1.17-1.1750 region for the last 3-sessions. We look at 1.1660/65 as important support on the downside (August low) and while that holds the broad range of 1.1660-1.1750 may hold for some more sessions.

EURJPY (128.25) fell below our expected support at 128 to test 127.93 before bouncing back from there. If the cross manages to hold above 128, it can bounce back towards 129.50-130.50 in the medium term else a couple of more attempts to test levels below 128 can eventually drag the cross lower towards 127-126 on the downside. Watch price action near current levels.

Dollar-Yen (109.42) can be ranged within 109-110/110.50 for the neat term but any break below 109, if seen will bring in fresh bearishness in the medium term.

Aussie (0.7246) is stable and ranged above 0.7220. We need to see if it continues to hold above immediate support and rise back or whether the bounce is corrective within an overall downtrend.

Pound (1.3660) looks stable just now and as mentioned yesterday, we would wait to see if it rises towards 1.37-1.3750 or there is some more downside left in the coming sessions.

USDCNY (6.4655) has resistance near 6.47/48 which can hold after the Chinese markets return from its holiday.

USDINR (73.6150) fell yesterday but may attempt to rise back to test resistance zone of 73.80-74.00. While the resistance holds strong, we may expect trade between 73.40/60-73.80/74 in the near to medium term.

INTEREST RATES

The US Treasury yields remain stable ahead of the US Federal Reserve meeting outcome tonight. On the charts, there is room for rise for the yields before reversing lower again. Will the Fed provide the trigger for this rise tonight? We will have to wait and see. The German yields remain lower and are likely to see a fresh fall from here as the resistances have held well in line with our expectation. The 10Yr GoI remains lower while the 5Yr GoI has bounced-back yesterday. The broader view is bearish to see a further fall from here while the yields remain below their near-term resistances.

The US 2Yr (0.22%), 5Yr (0.83%), 10Yr (1.33%) and the 30Yr (1.86%) Treasury yields remain stable. View remains the same. The 10Yr has to sustain above 1.3% to move up to 1.4%-1.45% and then reverse lower. Else a dip to 1.2%-1.18% can be seen from here itself. The 30Yr has to break above 1.9% to see a rise to 2% and higher levels. While below 1.9%, a dip to 1.8% cannot be ruled out. The outcome of the US Federeal Reserve meeting tonight might set the direction for the yields.

The German 2Yr (-0.72), 5Yr (-0.64%), 10Yr (-0.32%) and 30Yr (0.17%) yields remain stable after turning down earlier this week. The corrective rally seems to have ended. While below the resistances at -0.25% (10Yr) and 0.2% (30Yr), the chances of a fresh fall to -0.5% (10Yr) and 0% (30Yr) in the coming weeks cannot be ruled out.

The Indian 10Yr GoI (6.1218%)has dipped further and keeps our view of testing 6.1% on the downside intact. A break below 6.1% can see an extended fall to 6.05%-6% from here itself.

The 5Yr GoI (5.5863%) bounced back yesterday but has resistance at 5.6%. While this resistance holds, a test of 5.55%-5.5% on the downside will remain intact.

Key Highlights

• AUD/USD started a fresh decline from the 0.7480 region.
• A major bearish trend line is forming with resistance near 0.7270 on the 4-hours chart.
• EUR/USD is struggling to recover above 1.1750, GBP/USD settled below 1.3700.
• The Fed will announce interest rates today (forecast 0.25%, versus 0.25% previous).

AUD/USD Technical Analysis

The Aussie Dollar struggled to clear the 0.7500 zone against the US Dollar. As a result, AUD/USD started a major decline from the 0.7477 high and moved into a negative zone.

Looking at the 4-hours chart, the pair traded below the 0.7400 and 0.7350 support levels. There was a break below the 50% Fib retracement level of the key upward move from the 0.7106 swing low to 0.7477 high.

It is now trading well below 0.730, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

An immediate support is near the 0.7200 and 0.7195 levels. The 76.4% Fib retracement level of the key upward move from the 0.7106 swing low to 0.7477 high is also near the 0.7193 level. Any more losses might call for a move towards the 0.7120 level.

On the upside, an immediate resistance is near the 0.7265 level. There is also a major bearish trend line forming with resistance near 0.7270 on the same chart.

The next major resistance is near the 0.7330 region and the 100 simple moving average (red, 4-hours). A successful close above 0.7300 and 0.7330 might start a fresh increase in the near term.

Looking at EUR/USD, the pair is struggling to recover above 1.1750 and it might resume its decline. Similarly, GBP/USD remains at a risk of more downsides below 1.3650.

Economic Releases

• US Existing Home Sales for August 2021 (MoM) - Forecast +0.5%, versus +2.0% previous.
• Fed Interest Rate Decision - Forecast 0.25%, versus 0.25% previous.

Canadian Prime Minister Justin Trudeau called an early election in the hope of securing a majority government, but voters didn't give it to him and instead sent back nearly an identical parliament. The Canadian dollar clawed back ground after the results but the main market driver remains: China. CHF and CAD are the strongest of the day, with AUD and NZD at the bottom. Fed and PBOC speculation will intensify as we count down to the decisions. Gold is posting its 3rd daily gain, the longest uninterrupted run in over 4 weeks. Indices are most likely to retest Monday's lows in the next 36 hrs, especially if the Evergrande situation remains unsolved and FOMC statement clears further path towards the taper.

Trudeau will remain Prime Minister with a third term but won't have a strengthened mandate. Still, he will have some latitude to reshape the post-pandemic era. Any major pushes towards tax or capital gains reforms remain opaque, but the left-wing NDP said taxing the wealthy more heavily is their top priority if Liberals want their support.

Overall, it will go down as a needless election where Trudeau spent hard-won political capital gained in the vaccine rollout and NAFTA negotiations while getting nothing in return.

History has shown Canadian elections are hardly a factor for the loonie and this was no different as it's outperformed AUD and NZD by 30 pips in the aftermath; most of which is likely due to a bounce in oil prices.

The broader scenario for CAD and markets in general is the uncertainty around China and Evergrande. China's opaque system is ripe for rumors and we've entered a period where markets are especially prone to speculation/volatility. That's a dangerous mix that will keep volatility elevated.

Looking ahead, the strong finish in US equities has stabilized global markets with Hong Kong trading only slightly lower and yields edging up. Some of that is undoubtedly predicated on a more-cautious Fed.