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On Friday, the British Pound edged lower by 98 pips or 0.64% against the Japanese Yen. The currency pair was pressured lower by the 200– hour simple moving average during Friday's trading session.

Technical indicators suggest selling signals on the 4H and daily time-frame charts. Most likely, sellers could continue to pressure the exchange rate lower during the following trading session.

However, the currency exchange rate could bounce off a support level at 150.50 within this session.

On Friday, the Australian Dollar declined by 55 pips or 0.75% against the US Dollar. The currency pair was pressured lower by the 50– hour simple moving average during Friday's trading session.

Currently, the exchange rate is trading near the lower boundary of a descending channel pattern and could be set for a breakout.

If the breakout occurs, a decline towards the 0.7180 level could be expected within this session.

However, if the channel pattern holds, buyers could pressure the currency exchange rate higher today.

On Friday, the common European currency declined by 78 pips or 0.68% against the Japanese Yen. The currency pair breached the 50– hour simple moving average during Friday's trading session.

All things being equal, the exchange rate could continue to edge lower during the following trading session. The potential target for bearish traders will be near the 128.20 area.

However, the support level at 128.65 could provide support for the EUR/JPY currency exchange rate within this session.

Market movers today

• Market focus this morning will be on the fallout from the turmoil related to the Chinese developer Evergrande. Key loan payments are coming up on which the company seems likely to default on (see below).
• Today is a very quiet day in terms of economic data releases but the week overall is extremely interesting with several important central bank meetings.
• The most important central bank meeting is the Fed meeting on Wednesday. After the weak jobs report for August and lower-than-anticipated CPI inflation print for August, we do not expect the Fed to provide any more details on tapering but still we expect the Fed to signal one rate hike in 2022 (up from zero currently). Read our preview here Fed Research: Preview - what to do in a bad trade-off?, 16 September.
• Besides the Fed meeting, we have policy announcements from the Riksbank tomorrow, the Bank of Japan Tuesday night, and Norges Bank and the Bank of England on Thursday. Especially the Norges Bank meeting on Thursday is interesting, as we expect Norges Bank to hike the policy rate to 0.25% from 0.00%.

The 60 second overview

Evergrande turmoil hits global risk sentiment: Hong Kong shares sold off sharply overnight as anxiety over a likely default by Evergrande this week escalated. The Hong Kong China Enterprise Index has plunged more than 4% this morning and the S&P future has dropped close to 1% adding to the 0.9% decline on Friday. An index of Chinese high yield bonds rose to 14%, the highest in nearly a decade. Evergrande loan payments on bank loans are due today and on Thursday interest payments on two bond notes are due. The contagion from Evergrande may spread to other developers and now the whole Chinese credit market shows a dangerous deterioration in investor confidence and it seems likely that only government intervention can halt the snowball from rolling.

No doubt Beijing is watching the situation closely but it is unclear when authorities will step in. To some extent the developer's woes have been engineered by the government with tighter rules on debt implemented last year and they want to show that uncontrolled debt has a price. But they also do not want to see a deep financial crisis sending Chinese housing and the economy into a deep recession. The question is how bad it needs to get before they step in. With spill-over to global markets, the world will increasingly be watching how Beijing handles the situation. Chinese markets are closed on Monday and Tuesday due to national holiday but Hong Kong markets are open. They close on Wednesday when Chinese markets re-open.

Equities: Risk appetite faded on Friday, with equities mostly lower and defensives leading. US closed near worst levels, with S&P and Nasdaq -0.9%, Dow -0.5% but Russell up 0.2%. Implied volatility ticked up with VIX north of 20 as investors hedged their downside. Materials the worst performer globally on metal weakness, but industrials and tech also lower. Health care was the only sector in green. Most Asian markets are closed for holiday today, but Hong Kong is open and tumbling -4% (of which Evergrande -17%). Monday sentiment muted in DM as well with US futures roughly -1% lower.

FI: There is room for plenty of action in the financial markets given the high inflation, but also rising infections due to the delta variant of Covid-19 and the risk of a slowdown in growth in coming quarters. Hence, the probability of the central bank doing nothing (apart from Norges Bank) is significant and we continue to muddle through.

FX: It is a heavy central bank week but the most important meeting is the Fed meeting on Wednesday - also for scandies. EUR/USD ended the week below 1.18 and closer to 1.17 on negative risk sentiment. CNH has so far not been affected by the Evergrande turmoil.

Credit: CDS indices were under pressure on Friday while cash bonds were steady. iTraxx Xover widened 3bp and Main c.0.5bp. HY bonds were unchanged, but IG tightened 0.5bp. Today, trading commences in iTraxx Series 36. We estimate changes in index composition and extension should add approximately 5bp to Main and 20bp to Xover, with the largest share due to index extension.

Nordic macro

Markets awaiting Riksbank meeting tomorrow and Norges Bank meeting on Thursday.

In Sweden, the government's budget proposal for 2022 is presented to the Riksdag today. We already know the full amount (SEK75bn, approx. 1.5% of GDP) and some bits and pieces of its content, but today we will see the full picture. It should, however, be rather uneventful in itself. Our focus will instead lie on whether the support parties (Left and Centre) will signal their approval, as their combined support (somewhat of an unholy alliance) is likely to be pivotal for the budget to pass when it comes to voting in early November.

General trend

• US equity FUTs have extended declines.
• Hang Seng declines by over 4% [Financials drop, Evergrande declines over 14%].
• HK casino names trade generally lower ahead of meeting with Macau officials.
• PBOC conducted OMO on Sat. [Note: Some analysts see PBoC injection as sign the authorities were seeking to soothe market nerves frayed by concern over quarter-end funding needs and China Evergrande Group’s debt crisis].
• Shanghai markets are closed for holiday on Mon-Tues (Sept 20-21).
• S&P ASX 200 Resources index again declines by over 4% [Iron Ore miners extend drop].
• Japan markets are closed for holiday.
• AUD lags amid weaker equities and iron ore FUTs; RBA Minutes due tomorrow.
• CNH drops amid Evergrande concerns; Evergrande’s debt repayment dates in focus.
• Copper and Iron Ore FUTS extend declines, focal points include Fed meeting and China property market.
• Iron ore continues to decline with main headwinds China targeting cuts to steel output, rising global supply and property developer contagion fears amid Evergrande's debt crisis.
• Indonesia is mulling nickel tax?.
• Natural Gas FUTS continue to move lower.
• Japan LDP's Kishida is now the favorite to be the next party leader (poll).
• Sept 22nd Fed decision in focus (Wed).
• The next North American SEMI Billings report is September 20, 2021 at 3:00pm Pacific.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.2%.
• TCL.AU New South Wales Govt confirms WestConnex sale of A$11B to Sydney Transport Partners consortium.
• (NZ) New Zealand Aug Performance Service Index: 35.6 v 55.9 prior.
• AST.AU Announces indicative, non-binding proposal of A$2.50/shr from Brookfield Asset Management, to be reduced by any dividends that are proposed prior to the implementation of the proposed transaction; board in favor.
• (AU) Reserve Bank of Australia (RBA) Offers to buy A$1.60B in Govt bonds v A$1.60B prior.

Japan

• Nikkei 225 closed for holiday.
• 7267.JP Notes that for Aug and Sept, Japan production is running 60% lower than planned due to part shortages, expected to last into Oct.
• (JP) Said that Japan is considering lifting coronavirus state of emergency at end of Sept – press.
• (JP) Japan LDP's Kishida favorite to be next party leader according to Mainchi poll.
• (JP) Japan LDP Leadership candidate Takaichi said to want the BOJ Focus to be on jobs - Nikkei.

Korea

• Kospi closed for holiday.
• (KR) South Korea ruling DP party chief Song: United States must not return to the so-called strategic patience when dealing with North Korea, current administration policy on the North may be too "vague".

China/Hong Kong

• Hang Seng opened -1.1%; Shanghai Composite closed for holiday.
• (HK) Hong Kong held its first "patriots only" election, final results show on 1 pro-democracy candidate won a seat out of 1.5K seats.
• 3333.HK Next interest payments due Thursday, to be closely watched for possible default and spillover.
• (CN) New Universal Studios theme park in Beijing, to open today (Monday), saw tickets for its grand opening sell out in 30 minutes at CNY638/each ($99).
• (CN) China PBOC conducted extra Open Market Operation (OMO) Saturday Sept 18th: Injects CNY50B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Sells CNY50B in 14-day reverse repos v CNY0B prior; Net inject CNY100B v Net CNY90B prior.
• (CN) China railways expected to transport 10.5M passengers Sunday (1st day of the Mid-Autumn Festival).
• (HK) Macau officials will meet gaming industry names this afternoon to consult the operators on a proposed casino law revision announced last week.
• (CN) China Premier Li Keqiang: China will continue to stabilize commodity prices - financial press.

Other

• (ID) Nickel Mines [NIC.AU] notes rumors related to Indonesia nickel tax; understands that the reported comments were made without prior consultation with other Indonesian Government Ministries, including the ministry which would be responsible for the introduction of such a tax, the Ministry of Energy and Natural Resources (MEMR).

North America

• (US) US investigating 30M vehicles over possible airbag defects – press.
• (US) NIH's Fauci: FDA's final decision on allowing booster shots is expected during upcoming week.
• AMZN Said that UK PM Johnson will tell company it must pay fair share of taxes.
• AAPL Reportedly more than 2M iPhones 13 were reordered on Chinese website JD.com v ~1.5M iPhones 12 y/y – press.
• (US) Senate parliamentarian found that the social policy bill will not be able to create a path to citizenship for an ~8.0M undocumented workers; “policy changes of this proposal far outweigh the budgetary impact scored to it and it is not appropriate for inclusion in reconciliation".

Europe

• (SE) Sweden PM Lofven: Sweden debt to GDP ratio will fall to 35% (currently 40%), the economy can withstand surging energy prices.
• (UK) Sept Rightmove House Prices M/M: +0.3% v -0.3% prior; Y/Y: 5.8% v 5.6% prior.

Levels as of 01:15ET

• Hang Seng -3.8%; Shanghai Composite closed for holiday; Kospi closed for holiday; Nikkei225 closed for holiday; ASX 200 -2.1%.
• Equity Futures: S&P500 -0.8%; Nasdaq100 -0.6%, Dax -0.9%; FTSE100 -0.9%.
• EUR 1.1732-1.1710; JPY 110.04-109.86; AUD 0.7268-0.7227; NZD 0.7045-0.7017.
• Commodity Futures: Gold -0.2% at $1,748/oz; Crude Oil -0.9% at $71.20/brl; Copper -2.0% at $4.16/lb.

Daily Pivots: (S1) 1.1704; (P) 1.1746; (R1) 1.1768; More...

Intraday bias in EUR/USD remains on the downside as fall from 1.1908 is extending, for retesting 1.1663 low. Firm break there will resume the fall from 1.2265, and the pattern from 1.2348 to 1.1602 key support next. On the upside, above 1.1788 minor resistance will turn bias back to the upside for 1.1908 again.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally remains in favors long as 1.1602 support holds, to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again. Deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289 and below.

Daily Pivots: (S1) 1.3700; (P) 1.3756; (R1) 1.3785; More...

GBP/USD's break of 1.3725 support today suggests that rebound from 1.3601 has completed at 1.3912 already. Intraday bias is back on the downside. After rejection by 55 day EMA, fall form 1.4248 is likely ready to resume for 1.33842 key support level next. For now, risk still stay mildly on the downside as long as 1.3912 resistance holds, in case of recovery.

In the bigger picture, as long as 1.3482 resistance turned support holds, we'd still treat price actions from 1.4248 as a corrective move. That is, up trend from 1.1409 (2020 low) is in favor to resume. Decisive break of 1.4376 key resistance (2018 high) would indeed carry long term bullish implications. However, sustained break of 1.3482 will at least bring deeper fall to 38.2% retracement of 1.1409 to 1.4248 at 1.3164, or even further to 61.8% retracement at 1.2493.

Daily Pivots: (S1) 0.9280; (P) 0.9303; (R1) 0.9345; More....

Intraday bias in USD/CHF remains on the upside at this point. Rise from 0.8925 is in progress for retesting 0.9471 key resistance. Sustained break there will carry larger bullish implications. On the downside, though, below 0.9258 minor support will turn intraday bias neutral and bring some consolidations first.

In the bigger picture, the strong rally above 55 week EMA (now at 0.9182) 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.

Daily Pivots: (S1) 109.74; (P) 109.91; (R1) 110.15; More...

Intraday bias in USD/JPY remains neutral for the moment as range trading continues. On the upside, above 110.44 will turn bias back to the upside for 110.79, and then 111.65 high. 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.

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.

Daily Pivots: (S1) 0.7244; (P) 0.7283; (R1) 0.7304; More...

Intraday bias in AUD/USD remains on the downside as fall from 0.7477 is extending. Deeper fall would be seen to retest 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.