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Daily Pivots: (S1) 147.44; (P) 147.68; (R1) 147.91; More...

Intraday bias in USD/JPY stays neutral at for the moment. Current development suggests that rise from 139.87 might still be in progress. On the upside, break of 149.12 will bring stronger rally to retest 150.90 high. However, break of 145.47 will resume the fall from 150.90 instead.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Daily Pivots: (S1) 0.7897; (P) 0.7925; (R1) 0.7940; More…

Intraday bias in USD/CHF stays neutral and outlook is unchanged. On the upside, above 0.7971 will resume the rebound from 0.7828 short term bottom to 0.8006 resistance. Firm break there will bring stronger rise back to 0.8170. On the downside though, below 0.7904 minor support will bring retest of 0.7828 low instead.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).

Daily Pivots: (S1) 1.1789; (P) 1.1805; (R1) 1.1829; More...

Intraday bias in EUR/USD remains neutral for the moment. On the downside, break of 1.1724 will resume the fall from 1.1917 to 55 D EMA (now at 1.1668). Considering bearish divergence condition in D EMA, sustained break of 55 D EMA will argue that 1.1917 is already a medium term top. Deeper fall should then be seen to 1.1390 support next. However, sustained break of 1.1917 will resume larger up trend to 1.2 psychological level.

In the bigger picture, rise from 1.0176 (2025 low) is seen as the third leg of the pattern from 0.9534 (2022 low). 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916 was already met. For now, further rally will remain in favor as long as 1.1390 support holds, and firm break of 1.2000 psychological level will carry larger bullish implications. However, firm break of 1.1390 will suggest that rise from 1.0176 has already completed and bring deeper fall to 55 W EMA (now at 1.1214).

Markets

Yesterday’s European September PMIs were not bad on a headline level but details were unconvincing. More than anything else, they argue for a prolonged pause in the ECB’s normalization cycle to check how previous easing, coupled with the fiscal initiatives, will be filtering through. The market reaction was testament: no changes in German/European yields and EUR/USD holding steady just north of 1.18. US PMIs are consistent with the economy expanding at a 2.2% annualized rate in Q3 and inflation holding above 2% in the coming months, the survey taker said. But US Treasuries swapped the minor kneejerk losses for gains during Fed chair Powell’s speech, even though it was broadly a repeat of the message from last week’s FOMC policy meeting presser. US yields fell 1.7 to 4.6 bps in a bull flattening move. Other Fed policymakers hit the wires as well. Governor Bowman, for one, said the central bank risks falling behind the curve and said it’s time for the Fed to act decisively (with rate cuts). Others (eg. Bostic) are more worried about inflation. Some (from all sides of the spectrum) said they see benefit in adopting an inflation range rather than a specific target. The Fed, however, just concluded its roughly 5-year strategic review cycle and the 2% inflation target was off limits. Sterling whipsawed on PMIs that were “a litany of worrying news” and closed just shy of the intraday lows around EUR/GBP 0.874. Gilts outperformed vs USTs and Bunds and at the long end of the curve. Stocks ran a bit out of steam near the record highs in the US and near the recent ones in Europe. We’re keen to find out underlying momentum on days like today with little on the economic agenda. That goes for equities but also core bond yields and FX markets. European yields appear stuck near their current levels. Those in the US are trying to find a balance still in the wake of the unusually divisive Fed dot plot of last week. The dollar’s comeback since has stalled again but it doesn’t seem easy for the euro to force a topside break beyond the recent multiyear highs either.

News & Views

The Hungarian central bank (MNB) kept its policy rate unchanged at 6.5% yesterday. Hungarian growth was subdued in the first half of the year and a slow economic recovery is expected for the rest of the year. The MNB downwardly revised its 2025 growth forecast to 0.6% while keeping the pace for 2026 and 2027 steady at respectively 2.8% and 3.2%. Hungarian inflation is expected to stay above the central bank’s tolerance band (4%) for the rest of the year before declining persistently in it by early 2026. Compared to the June forecast, on an annual average, inflation may be slightly lower at 4.6% this year and slightly higher at 3.8% in 2026. Inflation is expected to be at 3% target in 2027. The MNB adds that price stability can be achieved in a sustainable manner by ensuring tight monetary conditions. The latter also helps in preserving financial stability. Upside inflation risks and downside growth risks prevail in coming months, but the MNB sticks with guidance that maintaining a tight policy is warranted. The Hungarian forint sticks to its best levels since mid-2024 at around EUR/HUF 390.

Japanese PMI’s showed private sector output increasing at the softest rate since May this morning. The composite PMI slowed from 52 to 51.1. Trends diverged by sector, with a further strong rise in service sector activity (53 from 53.1) contrasting with a steeper reduction in manufacturing production (48.4 from 49.7). At the composite level, overall new work increased at a slower and only marginal rate, and new export business continued to decline. Employment meanwhile expanded at the weakest rate in two years amid relatively subdued business confidence and historically strong cost pressures. Firms looked to ease pressures on their margins with a further solid increase in selling prices. The latter is a concern for the BoJ who might be in the position to raise its policy rate at the end of October to raise its policy rate from 0.5% to 0.75%

In focus today

Today is light on the data front, with no immediate market movers due.

Economic and market news

What happened overnight

In Japan, PMIs showed a mixed picture in September. The manufacturing PMI dropped to 48.4 from 49.7 in August, marking the lowest level since March, with new orders hitting a five-month low. In contrast, services PMI remained resilient at 53.0, only slightly down from 53.1 in August, supported by strong domestic demand. Cost pressures eased for manufacturers, with input price inflation falling to early 2021 levels, though output price inflation ticked up. The composite PMI declined to 51.1 from 52.0 in August, indicating slower overall growth.

In geopolitics, Trump met with Zelenskiy at the U.N. General Assembly and later declared that Ukraine could retake all its occupied territory, citing Russia's economic struggles. Kyiv welcomed the remarks as a "big shift," though no new US policy measures, such as additional sanctions, were announced. In his hour-long speech earlier in the day, Trump dismissed global efforts to recognise a Palestinian state, aligning with Israel, and criticised the U.N., European nations, and global policies on climate change and migration, advocating stricter immigration controls and stronger measures against Russia.
What happened yesterday

In Sweden, the Riksbank decided to cut rates to 1.75%, against market pricing, consensus, and our call for an unchanged policy rate. It signalled in the rate path that this marks the end of the easing cycle with no probability of further cuts. As we had expected the rate cut to come in November, we now anticipate the Riksbank will stay on hold from here.

In the US, PMIs came in slightly softer than expected. Manufacturing declined from 53.0 to 52.0 (cons: 52.2), while services dropped from 54.5 to 53.9 (cons: 54.0). Despite the decline, the data still suggests decent growth overall. Manufacturing output prices fell notably from 60.1 to 56.5, while services output prices declined from 59.1 to 56.0, indicating easing inflationary pressures.

Federal Reserve Chair Jerome Powell emphasised the Fed's need to balance inflation risks with slowing job growth, noting that current rates of 4-4.25% are high enough to curb price pressures. He reiterated that policy remains flexible, cautioning against both cutting rates too quickly and keeping them restrictive for too long. Powell also noted slowing job growth and persistent inflation pressures.

In the euro area, September PMIs came in largely as expected, with a positive surprise in the services sector offsetting weaker manufacturing data. The composite PMI edged up to 51.2 (from 51.0), driven by stronger services activity at 51.4 (up from 50.5), while manufacturing contracted to 49.5 (down from 50.7). The rebound in services highlights resilient domestic demand, suggesting stronger-than-expected growth in Q3. Price pressures remained subdued, with euro area price indices easing slightly in September. We maintain our forecast for the ECB to keep the deposit rate unchanged at 2.0% through 2025 and 2026, a view increasingly reflected in market pricing.

In the UK, PMIs came in weaker than expected, with the composite index falling to 51.0 in September from 53.5 in August. Both services and manufacturing declined, though services remained in expansionary territory at 51.9. Price indices eased marginally, and the employment index stayed weak at 46.6. The weaker data supports the BoE's signal last week that a November rate cut remains a possibility, and September CPI and labour market data will be key in shaping the outlook.

In tech, Nvidia's planned USD 100bn investment in OpenAI raises questions about funding gaps and market competition. The deal includes an initial USD 10bn for AI infrastructure but leaves OpenAI requiring additional capital for its ambitions. The partnership could reshape competition, with Nvidia potentially prioritising OpenAI over rivals like Anthropic or AMD, while also strengthening OpenAI's position in its Oracle cloud contracts.

In New Zealand, Anna Breman, currently First Deputy Governor of Sweden's Riksbank, was appointed the first woman to serve as Governor of the Reserve Bank of New Zealand. Breman, starting her five-year term on 1 December, said the Reserve Bank would remain "laser-focused" on low and stable inflation under her leadership, and that she will strive for transparency, accountability and clear communication.

Equities: US equities struggled with the US growth outlook following the PMI report yesterday. This, coupled with Powell's lack of clear guidance on whether he would support an October rate cut as he described the current stance as 'modestly restrictive', drove the VIX higher as well. It was a textbook growth scare in markets, with equities lower, yields lower and the VIX moving higher, while the USD remained virtually unchanged. Overall, US equities faced a challenging day, with the S&P500 down 0.6% and Nasdaq down 1%. Powell's comments came after the European close, explaining the positive numbers in Europe (Eurostoxx +0.3%) by the end of the day. Expect a carry-over weak opening this morning. Nikkei was marginally lower at the time of writing.

FI and FX: EUR/USD continues to hover around the 1.18 mark in what appears to be a post-FOMC consolidation phase for the USD. Following a series of sessions with higher bond yields in the US, Treasuries firmed somewhat yesterday - US10y at 4.10%. Fed's Powell balanced the upside risks from inflation and downside dittos from the labour market. The Riksbank's 25bp rate cut announcement from yesterday, bringing the policy rate to 1.75%, was interpreted as hawkish by markets. Despite only 8bp being priced ahead of the announcement, the short-end of the curve hardly budged. EUR/SEK was more or less unchanged on the day and we recommend to go long USD/SEK.

Daily Pivots: (S1) 1.3496; (P) 1.3517; (R1) 1.3546; More...

Intraday bias in GBP/USD remains neutral and more sideway trading could be seen above 1.3451. On the downside, below 1.3451 will resume the fall from 1.3725, as the third leg of the pattern from 1.3787, and target 1.3332 support first. Nevertheless, decisive break of 1.3561 will turn bias back to the upside for retesting 1.3725 instead.

In the bigger picture, rise from 1.3051 (2022 low) is in progress, and would target 61.8% projection of 1.0351 to 1.3433 (2024 high) from 1.2099 (2025 low) at 1.4004. However, with 1.4248 resistance (2021 high) intact, this rally is more likely a corrective move. Sustained break of 55 W EMA (now at 1.3157) will argue that a medium term top has already formed and bring deeper fall back to 1.2099.

Aussie is leading the performance board today, supported by stronger-than-expected CPI data and t risk-on tone across the region. Headline inflation ticked up to 3.0%, reinforcing the view that the RBA will remain on hold at 3.60% next week. Next week’s statement and press conference could emphasize vigilance on inflation, while deferring major decisions until the more comprehensive quarterly CPI report is released in October.

Risk sentiment in Asia added to AUD’s bid. Hong Kong equities jumped despite the city being under a No. 10 typhoon signal, the highest warning level. Investor confidence was boosted by news that American fund manager Cathie Wood had increased her stake in Alibaba, helping the Hang Seng shrug off storm-related disruption and fueling broader regional risk appetite.

Dollar, meanwhile, remains in consolidation. Fed Chair Jerome Powell’s remarks were read as slightly dovish, highlighting that job creation is now likely below the breakeven rate for unemployment rate, while characterizing tariff-driven inflation as a one-off effect. His comments reinforced the case for gradual easing, though not an aggressive path.

Still, Fed officials remain divided. While some emphasize preemptive support for the labor market, others stress the need to guard against entrenched inflation. This debate is unlikely to be settled before the next set of employment and inflation data, leaving the Dollar without a clear driver in the near term.

For the week so far, Euro is currently the top performer, followed by Aussie and Swiss Franc. Loonie is the weakest, ahead of Dollar and Kiwi, while Sterling and Yen sit in the middle.

In Asia, at the time of writing, Nikkei is up 0.27%. Hong Kong HSI is up 1.29%. China Shanghai SSE is up 0.78%. Singapore Strait Times is down -0.31%. Japan 10-year JGB yield is down -0.014 at 1.646. Overnight, DOW fell -0.19%. S&P 500 fell -0.55%. NASDAQ fell -0.95%. 10-year yield fell -0.023 to 4.120.

Fed’s Powell: Job creation below breakeven, tariff effect a one-time shock

Fed Chair Jerome Powell said in a speech overnight that the U.S. labor market is showing a “marked slowing” in both supply and demand, calling it an unusual and challenging development. He noted that job creation now appears to be running below the "breakeven" rate needed to keep unemployment rate stable, though other indicators such as job openings and claims remain broadly steady.

On inflation, Powell stressed that recent price pressures are largely tariff-driven rather than evidence of broad-based overheating. Disinflation in services, including housing, continues, and most longer-term inflation expectations remain anchored around the Fed’s 2% goal. Near-term expectations have edged higher on tariff headlines, but Powell argued these effects are likely to be transitory.

He described the tariff shock as a “one-time shift in the price level” that will be "spread over several quarters" as supply chains absorb higher costs.

Powell reaffirmed that Fed policy is "not on a preset course". Decisions will continue to depend on incoming data and the balance of risks, with the FOMC seeking to manage both slowing job growth and temporary tariff-related inflation without overreacting.

Japan's PMI composite falls to 51.1, services resilient as factories struggle

Japan’s private sector lost momentum in September, with the flash PMI Composite slipping from 52.0 to 51.1, the weakest in four months. Manufacturing was the clear drag, with the headline index down from 49.7 to 48.4 and output falling from 49.8 to 47.3. Services held broadly steady at 53.0, down from 53.1.

S&P Global’s Annabel Fiddes said services remain the “key growth engine,” offsetting a “deepening downturn” in manufacturing. Demand trends diverged sharply, with services seeing another solid rise in sales, but factories reporting the fastest drop in new orders since April.

Cost pressures also remain high. Input price inflation has eased from earlier in the year but is still consistent with a sharp rate overall, prompting firms to raise selling prices to protect margins. Companies were more cautious on hiring, with employment growth slowing to the weakest pace in two years.

Australia CPI surprises at 3.0% in August, RBA caution ahead

Australia’s monthly CPI accelerated from 2.8% yoy to 3.0% yoy in August, above expectations of 2.8% yoy and the highest reading since July 2024. The rise was driven by housing (+4.5%), food and non-alcoholic beverages (+3.0%), and alcohol and tobacco (+6.0%).

Core inflation showed stickier trends. CPI excluding volatile items and holiday travel rose from 3.2% yoy to 3.4% yoy. Trimmed mean edged down slightly to 2.6% from 2.7%, but remain well above June’s 2.1% yoy.

RBA is widely expected to hold interest rate unchanged next week. But the stronger core reading will keep November’s meeting live, with rate cut expectations now tempered by concerns that inflation may not be easing as quickly as hoped.

Aussie jumps on strong CPI; AUD/NZD extends rally, AUD/CAD to follow

Aussie strengthened broadly in Asian session after inflation came in hotter than expected. Headline CPI rose to 3.0%, putting price growth back at the top of the RBA’s 2–3% target band.

For next week's RBA meeting, the outcome makes little difference — a hold at 3.60% was already priced in. But for November, markets will have to reassess. With headline and core measures still sticky, the RBA may decide that it is premature to deliver another rate cut.

Governor Michele Bullock’s comments earlier this month resonate more strongly after today’s release. She highlighted that households are beginning to spend again after a period of restraint, warning that momentum could limit how far and fast the RBA can ease. The CPI data reinforces her message. And, even if a November cut is delivered, the broader policy path is unlikely to accelerate.

Technically, AUD/CAD's strong rebound today suggests that corrective pullback from 0.9225 could have completed at 0.9075 already. Break of 0.9225 will resume the whole rally from 0.8440 to 61.8% projection of 0.8440 to 0.9041 from 0.8902 at 0.8273. Firm break there will pave the way to 100% projection at 0.9503.

Nevertheless, below 0.9119 minor support will delay the bullish case, and bring more consolidations in the near term.

AUD/NZD is also extending its advance, aided by speculation of a 50bps RBNZ cut at the next meeting. Sustained trading above 200% projection of 1.0649 to 1.0920 from 1.0744 at 1.1286 will pave the way to 261.8% projection at 1.1453.

However, below 1.1229 minor support will bring consolidations first.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3496; (P) 1.3517; (R1) 1.3546; More...

Intraday bias in GBP/USD remains neutral and more sideway trading could be seen above 1.3451. On the downside, below 1.3451 will resume the fall from 1.3725, as the third leg of the pattern from 1.3787, and target 1.3332 support first. Nevertheless, decisive break of 1.3561 will turn bias back to the upside for retesting 1.3725 instead.

In the bigger picture, rise from 1.3051 (2022 low) is in progress, and would target 61.8% projection of 1.0351 to 1.3433 (2024 high) from 1.2099 (2025 low) at 1.4004. However, with 1.4248 resistance (2021 high) intact, this rally is more likely a corrective move. Sustained break of 55 W EMA (now at 1.3157) will argue that a medium term top has already formed and bring deeper fall back to 1.2099.

Federal Reserve (Fed) doves and risk-taking investors didn’t necessarily welcome Jerome Powell’s cautious tone in his speech yesterday, as the Fed Chair avoided committing to a rate cut at next month’s meeting. He repeated that the risks to the labour market are tilted to the downside, while inflation risks remain to the upside – a mixed picture that requires careful policy adjustment.

Even so, the US 2-year yield fell yesterday and is lower again this morning in Asia. Market pricing now puts the probability of an October cut at 94%. In that sense, the Fed could hardly be sweeter for doves – considering that US growth is still resilient, corporate earnings strong and inflation sticking around 3%. In other words, the Fed has no pressing reason to rush cuts beyond supporting the labour market. Powell’s remarks were arguably more reassuring than discouraging.

Other Fed officials are also speaking this week: some highlight the weakening jobs market, while others emphasise tariff-related inflation risks.

On the data front, the latest PMIs showed US business activity slowing to a three-month low in September, while prices paid for materials jumped to a four-month high. The good news: soft data supports the case for further cuts. The bad news: if inflation re-accelerates, the Fed won’t be able to move as quickly as markets might hope. For now, nothing alarming. The S&P 500 and Nasdaq retreated from all-time highs as Big Tech led a correction, but the broader narrative hasn’t changed. The Fed is easing into a resilient economy with inflation still above target, and two more cuts are expected this year. That’s fundamentally supportive for equity valuations: growth stocks benefit most from lower discount rates. Yesterday’s pullback looked more like a technical correction in a quiet session than a shift in sentiment. Interestingly, CFTC data still shows heavy net shorts in the S&P 500. Fed easing could help trigger position unwinds, adding fuel to the rally.

In Europe, PMI data was mixed but overall pointed to the euro area’s fastest private-sector expansion in 16 months. German services stood out, while French readings were softer amid political uncertainty. The stronger-than-expected outcome supports the view that the European Central Bank (ECB) won’t need to deliver another rate cut this year. The EURUSD tested resistance but failed to break higher. European equities were modestly higher, with ASML extending gains on global AI optimism.

Across the Channel, UK PMI figures came in weaker, with manufacturing contracting at a faster pace. Sterling faced selling pressure above 1.35, while the EURGBP held firm as eurozone growth prospects look relatively stronger. The FTSE 100 remains attractive to investors seeking commodity and energy exposure, with a weaker pound adding to the appeal of its energy majors – though currency risk hedging remains prudent.

Globally, the OECD revised growth forecasts higher for many major economies this year – except Germany – but warned that Trump’s trade war still poses a significant global risk. Growth forecasts for 2026 were revised lower, particularly for the euro area and India. Elsewhere, Japanese manufacturing shrank at the fastest pace in six months, while Australian inflation hit a 13-month high – both reflecting the impact of global trade frictions. The USDJPY is hovering near its 50-day moving average, while the AUDUSD benefits from dollar softness, stronger iron ore prices, and sticky domestic inflation that tempers dovish Reserve Bank of Australia (RBA) expectations.

In China, Alibaba jumped more than 6% after announcing new AI investments, reinforcing optimism around China’s tech sector. Reports that Cathie Wood is revisiting Alibaba after a four-year absence added to momentum. Even after a 120% rally this year, shares remain about 40% below their 2020 peak.

In commodities, gold extended gains to fresh record highs, with $3,800 per ounce now the next psychological target. Geopolitical tensions, a softer dollar and strong momentum continue to support demand despite overbought conditions. Meanwhile, US crude rebounded on heightened geopolitical risks and another draw in US weekly crude inventories. Still, solid resistance is seen near the $65pb level and the short-term outlook remains rangebound within the $62/65pb range.

The short-term Elliott Wave analysis for the S&P 500 (SPX) indicates that the cycle starting from the August 2, 2025 low is unfolding as a five-wave structure. From that low, wave ((i)) concluded at 6481.34. The subsequent pullback in wave ((ii)) developed as a running flat Elliott Wave pattern. In this structure, wave (a) declined to 6343.86, wave (b) rallied to 6508.23, and wave (c) fell to 6360.3, completing wave ((ii)) at a higher degree.

The Index then advanced in wave ((iii)). From the wave ((ii)) low, wave (i) reached 6532.65, followed by a dip in wave (ii) to 6443.98. The Index climbed higher in wave (iii) to 6626.99, with a pullback in wave (iv) ending at 6551.15. Wave (v) then pushed to 6699.52, finalizing wave ((iii)). Currently, wave ((iv)) is correcting the cycle from the September 2, 2025 low, expected to unfold in a 3, 7, or 11 swing pattern before the Index resumes its upward trajectory. In the near term, as long as the pivot low at 6360.3 holds, dips should attract buyers in a 3, 7, or 11 swing structure, supporting further upside.

S&P 500 (SPX) – 60 Minute Elliott Wave Technical Chart:

SPX – Elliott Wave Technical Video:

https://www.youtube.com/watch?v=KLqrDxlwwrY

Aussie strengthened broadly in Asian session after inflation came in hotter than expected. Headline CPI rose to 3.0%, putting price growth back at the top of the RBA’s 2–3% target band.

For next week's RBA meeting, the outcome makes little difference — a hold at 3.60% was already priced in. But for November, markets will have to reassess. With headline and core measures still sticky, the RBA may decide that it is premature to deliver another rate cut.

Governor Michele Bullock’s comments earlier this month resonate more strongly after today’s release. She highlighted that households are beginning to spend again after a period of restraint, warning that momentum could limit how far and fast the RBA can ease. The CPI data reinforces her message. And, even if a November cut is delivered, the broader policy path is unlikely to accelerate.

Technically, AUD/CAD's strong rebound today suggests that corrective pullback from 0.9225 could have completed at 0.9075 already. Break of 0.9225 will resume the whole rally from 0.8440 to 61.8% projection of 0.8440 to 0.9041 from 0.8902 at 0.8273. Firm break there will pave the way to 100% projection at 0.9503.

Nevertheless, below 0.9119 minor support will delay the bullish case, and bring more consolidations in the near term.

AUD/NZD is also extending its advance, aided by speculation of a 50bps RBNZ cut at the next meeting. Sustained trading above 200% projection of 1.0649 to 1.0920 from 1.0744 at 1.1286 will pave the way to 261.8% projection at 1.1453.

However, below 1.1229 minor support will bring consolidations first.