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Daily Pivots: (S1) 1.6003; (P) 1.6048; (R1) 1.6088; More...

Intraday bias in EUR/AUD remains on the downside as fall from 1.6434 is in progress for 1.5898 support. Sustained break there will argue that choppy rise from 1.5250 has completed already. Outlook will be turned bearish for retesting 1.5250 low. On the upside, however, above 1.6171 resistance will revive near term bullishness, and turn bias back to the upside for retesting 1.6434 high instead.

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 would 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 and bring retest of 1.5250 low.

Daily Pivots: (S1) 1.0840; (P) 1.0852; (R1) 1.0871; More....

Current development suggests that fall from 1.1149 has completed at 1.0694 already. Intraday bias stays on the upside for 1.0985 resistance next. Firm break there will bring further rise to retest 1.1149 high. On the downside, however, break of 1.0780 minor support will turn bias back to the downside for retesting 1.0694 low instead.

In the bigger picture, rebound from 1.0505 (2020 low) should have completed at 1.1149 already. The three-wave corrective structure argues that the downtrend from 1.2004 (2018 high) is not over yet. Medium term outlook will now stay bearish as long as 55 week EMA (now at 1.0859) holds. Break of 1.0505 low would be seen at a later stage.

Another day another record. The S&P500 hit a fresh high as the cyclical stocks and industrials led yesterday’s gains, while technology stocks paused and took a breath. We saw some profit taking in Google, Amazon and Facebook, but Apple and Netflix eked out gains, and Netflix even hit a fresh record as it traded close to $600 per share for the first time.

Energy stocks did well: BP gained close to 2% in London, while Exxon rallied near 2.50% as US crude made an attempt above the $70bp with Hurricane Ida weighing on US oil supply. According to the latest news, Exxon is now tapping US strategic oil reserve, getting 1.5 million barrels per day from the DOE supplies to meet immediate demand as most production in Gulf of Mexico remains halted. In the short run, the Ida-triggered tragedy should continue pressuring oil prices higher, but the hurricane-led gains will likely remain short-lived and won’t sustainably reverse the course of oil prices, which were, until yesterday on a downtrending channel. Therefore, I still believe that for longer term players, price rallies could be interesting top-selling for a retreat toward levels as low as $63/65pb, which is where the 200-dma is headed for the next weeks.

Is yesterday’s trading reflation backed? No, it is not. Even though we saw cyclicals outperforming the tech stocks, we’ve just seen the opposite the day before. Therefore, it’s too early to call for a significant rotation from growth to value, as the 10-year yield is still below the 1.30% mark.

Of course, the major risk to the equity rally is the Fed tapering. And today’s US jobs data could shake the Fed expectations to the hawkish or to the dovish side depending on the strength of the data, of course.

Wednesday’s ADP report was a big miss, as the report revealed that the US economy added only 374K private jobs in August versus more than 600K expected. But as there is no significant correlation between the ADP and the NFP reads on monthly basis, we can’t rule out the possibility of seeing a strong NFP print today.

The consensus on Bloomberg survey is 750000 new nonfarm jobs added in August, though we could see a number well above or well below the consensus. A significant deviation from the consensus could tint the Fed expectations before the weekly closing bell.

A strong figure, close to a million for the second straight month, would boost the idea that the Fed could start tapering its bond purchases as soon as November. While a soft figure, ideally below 500K, could revive the Fed doves and push the expectations of Fed tapering to the end of this year, or the beginning of the next.

In both cases, we shall see equities claiming new records. Good jobs data is a sign of strong economic recovery and that’s good news for businesses and company earnings. While bad news is a reason for the Fed to maintain a soft policy stance for longer, which is even better as cheap liquidity does a better job in pushing equities higher than strong fundamentals.

Therefore, in both cases, there will be a silver lining.

But be careful to thin trading volumes as today’s jobs data is out at a time when New York is dealing with severe floods and Monday is closed for the US Labor Day. Thin trading volumes could lead to sharp price moves across equities if there is any positive or negative surprise on the data front.

Gold, on the other hand, steadies a touch above the $1800 per ounce, as traders have their heart bouncing between low US yields that make holding the non-interest-bearing gold relatively interesting, and the strong momentum in equities, which makes the yellow metal uninteresting. I believe we don’t have much upside potential in gold unless there is a decent selloff across the equity space.

Market movers today

• The most important market mover today will be US non-farm payrolls. The weak ADP report on Wednesday has probably lowered market expectations a bit. We still expect a strong print but most likely still below 1 million.
• In Norway we get august unemployment figures. We expect a drop in the unemployment rate to 2.8%, confirming that we are headed for a rate hike later this month.

The 60 second overview

Japan: Japanese Prime Minister Yoshihide Suga announced this morning that he plans to resign, a surprise decision just ahead of a vote for party leader as a general election looms. After seeing his approval ratings plummeting as virus cases surged across Japan in the weeks after the Olympic Games, Suga said he will not run for leader of the ruling Liberal Democratic Party (LDP) later this month. That means, whoever becomes the next LDP leader is virtually assured of becoming prime minister due to the party's dominance in parliament. The Nikkei 225 Stock Index rose almost 2%, while the yen fluctuated.

Covid-19: South East Asia continues to be hit hard by Covid-19 at the moment and vaccination rates are in general lower than in Europe and in the US. This is increasingly also visible in economic data. While manufacturing PMIs remained high in the US and in Europe during August, South East Asian PMIs are now below 50, partly due to restrictions amid big outbreaks. In many countries, COVID-19 will remain a theme also next year in our view.

Danish FX interventions: For the first time since January, Danmarks Nationalbank (DN) refrained from FX intervention in August where EUR/DKK traded slightly higher than the 7.4360 FX intervention level from previous months. However, EUR/DKK dropped to 7.4360 at the end of August and remains there, meaning that DN will likely have to resume FX interventions in September. In our view, the trend of low EUR/DKK and the need for FX intervention will continue until DN eventually cuts interest rates. We maintain our call for a 10bp cut to -0.60% in 3M. Read more in Flash Comment Denmark - Pause in August, but FX intervention looks to resume in September, 2 September.

Equities: Global equities rose to a new all-time high yesterday as most regions, sectors and styles did well. Regionally Latin America continued its underperformance despite oil and industrial metal prices doing fine. The best performing sector was energy while tech for once underperformed. In the US, Dow +0.4%, S&P 500 +0.3%, Nasdaq +0.1%, and Russell 2000 +0.7%. Asian markets are very mixed this morning, with Japan rising almost 2% after the surprisingly resignation from PM Suga. European and US futures are signalling small increases ahead of the US non-farm payrolls later today.

FI: There was a modest rebound in European yields yesterday combined with spread tightening between the periphery and core-EU, despite the significant supply from both France and Spain selling EUR 10bn and EUR 4bn, respectively. Yesterday, we published our ECB Preview: Recalibrating, not tapering - but hawks will squawk, 2 September.

FX: Industrial- and commodity sensitive currencies have had a good week so far and in yesterday's session NOK joined the group of winners amid the rise in oil. EUR/USD has moved above 1.1850 for the first time since early August while EUR/GBP hovers below 0.86. EUR/SEK is back below 10.20 after temporarily trading above this threshold earlier in the week.

Credit: Credit markets did not move much yesterday, with iTraxx Xover widening 0.7bp (to 226.6bp) and Main 0.2bp (to 44.6bp). HY bonds were unchanged and IG tightened ½bp.

Nordic macro

In Norway, unemployment has continued to come down as restrictions have been lifted and the economy has recovered. At the same time, though, the number of job vacancies has risen sharply since summer last year, indicating that activity and so demand for labour have been very solid in the sectors not directly impacted by coronavirus effects. Based on the weekly jobless data, we expect the unemployment rate to drop to 2.8% in August, which would be marginally below Norges Bank's projection in the June monetary policy report and so confirm that we are headed for a rate increase in September.

General trend

• Nikkei has extended gain amid the Suga news.
• S&P ASX 200 has risen following drop during prior session [Energy, Financial and Resources indices rise].
• Shanghai Composite ended morning trading slightly lower (-0.2%); Brokerage firms rise amid news related to Beijing Stock Exchange.
• Hang Seng has remained modestly lower; Property developer bonds in focus [Evergrande, Oceanwide Holdings, Central China Real Estate].

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat.
• (AU) Australia sells A$1.0B v A$1.0B indicated in 2.75% Nov 2027 bonds, avg yield: 0.7875%, bid to cover 5.67x.
• (AU) Australia Aug Final PMI Services: 42.9 v 43.3 prelim (lowest since June 2020).
• (AU) Australia Aug AIG Construction Index: 38.4 v 48.7 prior.
• (NZ) Reserve Bank of New Zealand (RBNZ): Seeking comments on proposal to reduce risky mortgage lending via additional reduction of high loan to value (LVR) ratio lending to owner occupied properties.

China/Hong Kong

• Hang Seng opened -0.3%, Shanghai Composite +0.2%.
• (CN) CHINA AUG CAIXIN PMI SERVICES: 46.7 V 52.0E (First contraction in 16 months).
• (HK) Hong Kong Aug PMI (Whole Economy): 53.3 v 51.3 prior (7th consecutive expansion, highest since Feb 2014).
• (CN) China President Xi: To set up Beijing Stock Exchange to support innovative SMEs - Trade summit comments.
• (CN) China Cabinet: To establish International CNY Denominated Commodity futures market and shipping futures contracts.
• Alibaba: To invest CNY100B to support common prosperity initiatives - Chinese press.
• (CN) China Sec Journal: China Banks have cut property loan exposures due to new caps.
• (CN) China said to strengthen review of game content, following play time limits last week – press.
• (CN) Follow Up: Publicity Dept of Communist Party of China Central Committee issued a circular noting plans to take comprehensive and targeted measures to rectify irregularities related to the entertainment industry – Xinhua.
• (CN) China Fiscal Balance faces pressure due to slowing income growth - China Press.
• (CN) China PBOC sets Yuan reference rate: 6.4577 v 6.4594 prior.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Net drain CNY40B v Net drain CNY40B prior.

Japan

• Nikkei 225 opened +0.3%.
• (JP) Said that Japan PM Suga will not stand for election in leadership election; Has indicated intent to resign; will not conduct cabinet reshuffle next week - Press [Note: Attention may now shift to LDP Leader candidate Kishida (former Foreign Min); Kishida came in 2nd place in the Sept 2020 LDP leadership election (after Suga)].
• (JP) Japan LDP Official Nikai: Confirms Suga has said he will not run for LDP leadership, Will no longer reshuffle cabinet.
• (JP) Japan Aug Final PMI Services: 42.9 v 43.5 prelim (confirms 19th month of contraction, lowest since May 2020).
• (JP) Japan Fin Min Aso: PM Suga has not yet directed to compile extra budget; Declines to comment on supporting Suga in LDP elections.
• (JP) Japan said to be drafting roadmap to easing coronavirus restrictions in the country - Press.

Korea

• Kospi opened +0.4%.
• (KR) South Korea to extend social distancing measures through Oct 3rd – Yonhap.
• (KR) South Korea Health Min Kwon: Coronavirus cases expected to peak at 2.0-2.3K cases during Sept 5th-20th, then to decline.
• (KR) South Korea Aug Foreign Reserves: $463.9B v $458.7B prior (new record high).

Other Asia

• (ID) Indonesia imposes 10% tax on bond earnings for domestic investors.
• (SG) Singapore Aug PMI (whole economy): 52.1 v 56.7 prior (9th consecutive expansion).

North America

• Amazon [AMZN] Said to be close to launching own label TV in the US as soon as Oct; TCL is expected to be one of the manufacturers of the TVs – Press.
• Apple [AAPL]: Said that US National Labor Relations board is investigating company on 2 complaints - Press.

Europe

• (UK) Prime Minister Johnson expected to announce manifesto-breaking tax increase to fund largest overhaul in social care - Telegraph.

Levels as of 01:20 ET

• Nikkei 225, +1.9%, ASX 200 +0.4% , Hang Seng -0.8%; Shanghai Composite -0.2%% ; Kospi +0.7%.
• Equity S&P500 Futures: +0.2%; Nasdaq100 +0.1%, Dax +0.1%; FTSE100 flat.
• EUR 1.1884-1.1871 ; JPY 110.07-109.79 ; AUD 0.7410-0.7394 ;NZD 0.7120-0.7103.
• Gold +0.2% at $1,813/oz; Crude Oil -0.2% at $69.84/brl; Copper +0.3% at $4.3195/lb.

Daily Pivots: (S1) 1.2519; (P) 1.2579; (R1) 1.2609; More...

Intraday bias in USD/CAD stays on the downside at this point. Fall from 1.2947 is in progress for 1.2421 support. Sustained break there will suggest rejection by 1.3022 fibonacci level. Rise from 1.2005 could have completed in this case and deeper fall would be seen to retest this low. On the upside, break of 1.2701 minor resistance will retain near term bullishness, and 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) 0.7369; (P) 0.7390; (R1) 0.7423; More...

AUD/USD's rise form 0.7105 short term bottom is still in progress and intraday bias remains on the upside. Sustained break of 0.7425 resistance will argue that whole correction from 0.8006 has completed at 0.7105 already, just above 0.6991/7051 support zone. Stronger rise would be seen to 0.7530 support turned resistance for confirmation. On the downside, below 0.7283 minor support will turn bias back to the downside for retesting 0.7105 low instead.

In the bigger picture, rise from 0.5506 medium term bottom could have completed at 0.8006, after failing 0.8135 key resistance. Correction from there could target 0.6991 cluster support (38.2% retracement of 0.5506 to 0.8006 at 0.7051). We'd look for strong support from there to bring rebound. However, sustained break of this level would argue that the whole medium term trend has indeed reversed. Deeper decline would be seen to 61.8% retracement at 0.6461.

Daily Pivots: (S1) 109.87; (P) 109.99; (R1) 110.07; More...

Intraday bias in USD/JPY remains neutral as sideway trading continues. On the downside, break of 109.10 will target 108.71 support first. Firm break there will resume the decline from 111.65 and target 38.2% retracement of 102.58 to 111.65 at 108.18 next. On the upside, break of 110.79 will resume the rebound from 108.71 to retest 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.

Daily Pivots: (S1) 0.9133; (P) 0.9150; (R1) 0.9161; More....

Intraday bias in USD/CHF remains neutral as sideway trading continues. On the downside, break of 0.9098 will target 0.9017 support first. Further break there will likely resume the decline from 0.9471 through 0.8925 low. On the upside, break of 0.9241 resistance should resume the rise from 0.8925 through 0.927.

In the bigger picture, the failure to sustain above 55 week EMA (now at 0.9176) retains medium term bearishness in USD/CHF. Break of 0.8925 support should resume the whole decline form 1.0342 (2016 high) through 0.8756 low. However, break of 0.9273 resistance and sustained trading above 55 week EMA will be an early sign of bullish trend reversal. Focus will then turn to 0.9471 resistance for confirmation.

Daily Pivots: (S1) 1.1849; (P) 1.1862; (R1) 1.1890; More...

Intraday bias in EUR/USD remains on the upside, as rise from 1.1663 short term bottom is in progress for 1.1907 resistance. Decisive break there will indicate that fall from 1.2265, as well as the consolidation pattern from 1.2348, have completed. Near term outlook will be turned bullish for 1.2265/2348 resistance. On the downside, break of 1.1792 minor support will turn bias back to the downside for 1.1602/63 support zone instead.

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.