• Treasury yields ticking higher again as market fears abate
• Dollar remains in a good spot so far this week
• A bit of a whipsaw in the Japanese yen on old news
• BOJ reportedly mulls raising price outlook for the current fiscal year
• China reportedly tells banks to roll over local government debt at lower rates
• Japan’s trade union plans to ask for more than 5% wage hike next spring – report
• Germany October ZEW survey current conditions -79.9 vs -80.8 expected
• UK September payrolls change -11k vs 0k prior

Markets:

• AUD leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.3%
• US 10-year yields up 5.5 bps to 4.765%
• Gold up 0.3% to $1,924.37
• WTI crude up 0.1% to $86.79
• Bitcoin up 0.2% to $28,470

With US president Biden only arriving in Israel on Wednesday, there weren’t much further developments in the Israel-Hamas conflict for markets to really work with. As such, there is still uncertainty but bonds got back to their usual pattern and were sold. 10-year Treasury yields climbed during the session and that is giving broader markets some food for thought.

Equities were steadier earlier on but are now pinned down while the dollar is trading mixed across the board with some headlines keeping things interesting in European morning trade.

A softer set of partial UK jobs data is pinning the pound lower while there was a whipsaw in the yen amid a rehash of old news detailing that the BOJ is set to revise higher its inflation outlook later this month.

GBP/USD dropped from 1.2190 to 1.2150 before recovering most of that drop but is still down 0.2% to 1.2185 currently. Meanwhile, USD/JPY saw a plunge from 149.60 to 148.72 before recovering back some ground to 149.35 at the moment.

Elsewhere, the euro and aussie are holding slight gains while the kiwi is reversing course after the gap higher from the NZ elections yesterday.

In the commodities space, gold is up slightly alongside oil as safety bets are not yet completely abandoned on the week. It’s now over to US retail sales to provide the next point of action for markets, in particular Treasuries (in turn, the spillover to stocks and FX).

This article was written by Justin Low at www.forexlive.com.

As yields are holding higher so far on the day, we are seeing equities slip a little further as the focus turns towards US trading later. S&P 500 futures are down 0.3% while European indices are down by 0.2% to 0.4% mostly at the moment. The gains from yesterday were very much a relief rally after the Friday flight to safety but we’re now slowly reverting back to the bigger picture view in markets again.

10-year Treasury yields are up nearly 6 bps to 4.768% and that is one to watch out for especially since we also have key US data on the agenda later. US retail sales will give traders more to think about later in the day and that could drag around bonds even more before the end of the day.

In turn, that could lead to spillover movements in broader markets with stocks getting caught in the crossfire.

This article was written by Justin Low at www.forexlive.com.

• The Fed left interest rates unchanged as expected at the last meeting.
• The macroeconomic projections were revised higher,
  and the Dot Plot showed that the FOMC still expects another rate hike by the
  end of the year with less rate cuts projected in 2024.
• Fed Chair Powell reaffirmed their data dependency but added that
  they will proceed carefully.
• The US CPI last week beat expectations on the
  headline figures, but the core measures came in line with forecasts and the
  market’s pricing barely changed.
• The labour market remains fairly solid as seen once again last week
  with the beat in Jobless Claims, although continuing claims surprisingly missed.
• The US PMIs
  recently showed that the US economy remains pretty resilient.
• The University of Michigan Consumer Sentiment report last Friday missed across the
  board with the inflation expectations figures spiking back up.
• The Fed members continue to cite elevated long-term
  yields as a reason to proceed carefully and will likely pause in November as
  well.
• The market doesn’t expect the Fed to hike anymore.

New Zealand:

• The RBNZ kept its official cash rate
  unchanged while
  stating that demand growth continues to ease and it’s expected to decline
  further with monetary conditions remaining restrictive.
• Today, the New Zealand inflation data missed expectations supporting the
  RBNZ’s stance.
• The employment data surprised to the upside
  recently.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely.
• The recent New Zealand Retail Sales beat expectations although the data
  remains deeply negative.
• The Manufacturing PMI continues to slide further into
  contraction, but the Services PMI jumped back into expansion.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting as well.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the NZDUSD pair
is still stuck in the range between the 0.5860 support and the
0.6000 resistance. Today, the pair dropped following the miss in the New
Zealand inflation data and we can expect the bearish momentum to take the pair
into the support level where the buyers will likely step in with a defined risk
below the level to target another rally into the 0.60 resistance.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the sellers
piled in around the previous swing level at 0.5925 with the red 21 moving average acting
as dynamic resistance. There’s no clear level to lean on at the moment, but the
sellers are likely to keep the momentum going into the 0.5960 support targeting
a break into new lows. The buyers, on the other hand, will want to see the
price breaking above the 0.5925 resistance to position for another rally into
the 0.60 level.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the minor resistance around the 0.5925 level and the support zone at
0.5860. These are the only levels to watch at the moment until we get some more
clarity in the next days with the release of new economic data.

Upcoming Events

Today we will get the US Retail Sales data and it
will be interesting to see if consumer spending has weakened or it’s still
holding on. On Thursday, we will get the US Jobless Claims report and we will
also hear from Fed Chair Powell with the market focused on any hint about the
near term policy outlook.

This article was written by FL Contributors at www.forexlive.com.

From my broker, USD/JPY caught a whipsaw lower to 148.72 before reversing that move to steady around 149.40 levels again now. The reaction is to the headlines here. It’s a bit of a sensitive one but it just confirms what we already should know heading into the BOJ policy meeting later this month. From last week:

• BOJ mulls raising FY 2023/24 core CPI target to ~3% from 2.5% forecast in July – report
• Japan media ICYMI – Bank of Japan considering raising its inflation outlook to nearly 3%
• BOJ’s Noguchi: We have no choice but to raise inflation forecast for fiscal year 2023

It looks like this is more to do with the algos being sensitive near the 150.00 mark more than anything else.

This article was written by Justin Low at www.forexlive.com.