One of Japan’s top lenders, MUFG Bank (the banking arm of Mitsubishi UFJ) has said that it will lift the interest rate of its 5-year and 10-year yen deposits for the first time since 2011. The former will see a bump from 0.002% to 0.07% while the latter will see a jump from 0.002% to 0.20%.

They are the first large bank to announce such a move and that is a big bet on the likely fact that the BOJ is going to start normalising policy soon. But there’s also the other side of the story as the announcement comes amid a further rise in Japanese government bond yields.

For the longest of time, these rates have been near zero and now with a push towards 1% for 10-year yields, that’s a welcome development for lenders. And with the BOJ stating that the 1% mark is now more of a reference rate, higher yields look set to stay – for now at least – in Japan.

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

• Prior -1.0%
• Market index 161.8 vs 165.2 prior
• Purchase index 125.2 vs 127.0 prior
• Refinance index 341.7 vs 354.0 prior
• 30-year mortgage rate 7.86% vs 7.90% prior

Once again, mortgage activity in the US fell declined in the past week with both purchases and refinancing also falling. This comes as the average rate of the most popular US home loan cools slightly by 4 bps to 7.86%, from its highest since September 2000 in the week before.

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

UK

• The BoE kept interest rates unchanged at the last meeting.
• The central bank is leaning towards
  keeping interest rates “higher for longer”, although it kept a door open for
  further tightening if inflationary pressures were to be more persistent.
• The latest employment report showed a slowdown in wage growth
  and some job losses in September which could point to a softening labour
  market.
• The recent UK CPI slightly beat expectations but given the
  softening in the labour market it’s unlikely to change the BoE’s stance.
• The UK PMIs showed further contraction in the services
  sector, which accounts for 80% of UK’s economic activity.
• The market doesn’t expect the BoE to
  hike anymore.

Japan

• The BoJ kept its monetary policy basically unchanged but formally widened the YCC to 1%
  on the 10-year JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again that they won’t
  hesitate to take easing measures if needed and that they are not foreseeing
  sustainable price increases.
• The recent Japanese CPIshowed that inflationary pressures
  remain high with the core-core reading hovering at the cycle highs.
• The Unemployment Rate last month
  remained unchanged near cycle lows.
• The Japanese Manufacturing PMI matched the prior reading remaining
  in contraction with the Services PMI falling but holding on in expansion.
• The BoJ officials continue to repeat
  that the central bank should keep the current monetary policy.
• The latest Japanese wage data missed expectations again which is
  unlikely to lead to a more hawkish BoJ in the near future.
• The Tokyo CPI, which is seen as a leading
  indicator for National CPI, beat expectations last week.
• The market expects the BoJ to keep
  interest rates unchanged at the next meeting as well.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the GBPJPY pair
has been consolidating for a month below the 183.50 resistance. The
price yesterday surged into the resistance zone as the BoJ disappointed. The
buyers will now try to break out and target the cycle high around the 186.74
level. The sellers, on the other hand, are likely to step in here with a
defined risk above the resistance to position for another drop into the lows.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
support at 181.00 and the resistance around the 183.50 level. The first try out
of the range failed, but the buyers are coming back again. After such a strong
and quick rally there’s also a risk that we see a fakeout as the momentum might
weaken right after the breakout, so the buyers will need to be careful.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action around the resistance zone. If the price stays
above the resistance, the bias will remain bullish, and we can expect the
buyers to pile in to target the cycle high. The sellers, on the other hand,
will want to see the price falling back below the resistance and break the
recent swing low around the 183.14 level to confirm a fakeout and position for
a drop into the 181.00 support.

Upcoming Events

This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Today we will get the US
ADP, the ISM Manufacturing PMI, the Job Openings data and the FOMC rate
decision. Tomorrow, we will have the BoE rate decision and the US Jobless
Claims data, while on Friday we conclude the week with the US NFP report and
the ISM Services PMI. Weak US data is likely to lead to a fall in global yields
which should favour the JPY. Conversely, strong data should support global
yields and weigh on the JPY, especially after the recent BoJ disappointment.

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

At the turn of the month, it’s not looking too optimistic for stocks ahead of the main events later today. US futures are still pointing lower after a brief recovery at the start of European trading. In turn, European indices are also now trading little changed as investors sense caution more than anything else.

The Fed is one to watch but I reckon the US Treasury refunding announcement will be the more important event for broader market sentiment today. If bonds come under further pressure with 10-year yields looking to 5%, that could yet pile on the hurt for stocks as we get things going in November.

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

US

• 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 Core PCE last
  week came in line with expectations, so the market’s pricing barely changed.
• The labour market remains
  pretty resilient but we are starting to see some weakness as Continuing Claims missed
  expectations once again last week pointing to an upward trend.
• The US Retail Sales recently
  beat expectations by a big margin with positive revisions to the prior figures,
  suggesting the consumers’ spending remains solid.
• The recent US PMIs showed
  that the economy now looks more balanced.
• Fed Chair Powelland other FOMC members continue
  to highlight
  the rise in long term yields as doing the job for the Fed and therefore they
  are expected to keep rates steady this week.
• The market doesn’t expect the Fed to hike anymore.

EU

• The ECB left interest rates unchanged as
  expected as the central bank has ended its tightening cycle.
• President Lagarde highlighted
  the weakness in the Eurozone economy and reaffirmed that rates will make a
  substantial contribution to curbing inflation.
• The Eurozone CPI today missed
  expectations on the headline figures but the Core measure remained unchanged.
  This won’t change the ECB’s stance anyway.
• The labour market remains
  very tight with the unemployment rate hovering at record low levels.
• The recent Eurozone PMIs missed
  across the board as the economy continues to struggle.
• Overall, the economic data has been showing signs
  of fast deterioration, which gives the ECB a good reason to keep rates steady.
• The market doesn’t expect the ECB to hike anymore.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the EURUSD pair
bounced around the key 1.05 support and
avoided a breakout of the bear flag. This
might have been also a “break and retest” pattern following the breakout of the
major downward trendline, so the
buyers might have more conviction to target new highs. The moving averages are now
crossed to the upside and the price continues to print higher highs and higher
lows. These are early bullish signs.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price broke
through the resistance zone around the 1.0620 level with the buyers now eyeing
the upper bound of the channel. That’s where we can expect the sellers to step
in again with a defined risk above the trendline to position for another drop
into the lower bound of the channel and aiming for a breakout. The buyers, on
the other hand, will want to see the price breaking above the upper bound of
the channel to extend the rally into the 1.08 handle.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
had a divergence with
the MACD right
when the price was approaching the lower bound of the flag pattern, the broken
downward trendline and the key 1.05 support zone. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, we
got a reversal, and the odds are now in favour of a rally into the upper bound
of the channel.

From a risk management perspective, the
buyers would be better off to lean on the resistance turned support around the
1.0620 level where we can also find the confluence with
the trendline, the red 21 moving average and the Fibonacci
retracement levels. If the price breaks below the
trendline, the bullish setup would be invalidated, and the sellers will pile in
to target a breakout of the bear flag.

Upcoming Events

This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Today, we have the US
Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be
the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and
the FOMC rate decision. On Thursday we will get the US Jobless Claims data,
while on Friday we conclude the week with the Eurozone Unemployment Rate, the
US NFP report and the ISM Services PMI.

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

• The BOJ underdelivers once again
• BOJ governor Ueda: Will patiently continue monetary easing with decided new measures
• Ueda: Don’t think long-term rates will come under pressure to exceed 1%
• Ueda: Next spring’s wage negotiations will be an important factor
• Japan did not spend on FX intervention in the four weeks to 27 October
• EUR/JPY on the move, climbs to highest level since 2008
• Japanese yen falls further as Tokyo seen on the sidelines

Other headlines:

• Treasury yields fall further ahead of the main event tomorrow
• Eurozone October preliminary CPI +2.9% vs +3.1% y/y expected
• France October preliminary CPI +4.0% vs +4.0% y/y expected
• Eurozone Q3 preliminary GDP -0.1% vs 0.0% q/q expected
• France Q3 preliminary GDP +0.1% vs +0.1% q/q expected
• Italy Q3 preliminary GDP 0.0% vs +0.1% q/q expected
• Germany September retail sales -0.8% vs +0.5% m/m expected
• Germany September import price index +1.6% vs +0.7% m/m expected

Markets:

• EUR leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields down 4.4 bps to 4.832%
• Gold up 0.1% to $1,998.93
• WTI crude up 0.6% to $82.85
• Bitcoin up 0.3% to $34,525

The spotlight today is on the Japanese yen as it capitulated following a less hawkish than expected BOJ earlier in the day.

The central bank made a minor tweak on its yield curve control policy but markets were expecting more, as BOJ governor Ueda then delivered rather dovish remarks in the aftermath. USD/JPY nudged up to 150.00 at the end of Asia trading before extending higher to 150.40 at the start of European trading.

Then, we got confirmation by Tokyo that they didn’t spend a dime in intervening in the FX market during the month. That is a sort of green light and took the yen even lower on the session, with USD/JPY moving up to 150.75.

The dollar isn’t the best gauge of the yen’s plight though, as the greenback itself is slightly softer amid a push lower in Treasury yields. The bond market is a focus point ahead of the Treasury refunding tomorrow, which I would argue is the main event in the day ahead – not the Fed.

Instead, it was the euro that is shining the brightest as we saw softer inflation figures and a sluggish picture in the economy in Q3. The single currency gained traction as equities also reversed losses on the day. EUR/USD moved up from around 1.0600 to 1.0670 before holding just under that for now.

EUR/JPY is the standout as it breaks above the 160.00 mark to 160.50 levels currently – its highest since August 2008.

Other than that, the rest of the major currencies bloc remain more muted although commodity currencies have recovered a bit of ground against the dollar after a slower start.

That comes as stocks also rebounded with S&P 500 futures now up 0.3%, after having been down 0.3% earlier in the day. Month-end flows will be a consideration, so just be wary of that in the session ahead.

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

US

• 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 Core PCE last
  week came in line with expectations, so the market’s pricing barely changed.
• The labour market remains
  pretty resilient but we are starting to see some weakness as Continuing Claims missed
  expectations once again last week pointing to an upward trend.
• The US Retail Sales
  recently beat expectations by a big margin with positive revisions to the prior
  figures, suggesting the consumers’ spending remains solid.
• The recent US PMIs showed
  that the economy now looks more balanced.
• Fed Chair Powelland other FOMC members continue
  to highlight
  the rise in long term yields as doing the job for the Fed and therefore they
  are expected to keep rates steady this week.
• The market doesn’t expect the Fed to hike anymore.

Australia

• The
  RBA kept interest rates unchanged as expected as they are seeing inflation
  returning to target with the current level of interest rates.
• The
  CPI report last week surprised to the upside
  prompting the market to price in a higher chance of another rate hike from the
  RBA in November.
• The
  labour market continues to weaken as seen also
  recently with the miss in the employment change and the losses in full-time
  employment.
• The
  RBA Governor Bullock downplayed the beat in the CPI data
  and made the market to pare back the rate hike bets.
• The
  Australian Manufacturing PMI fell further into contraction with
  the Services PMI plummeting back into contraction as well.
• The
  recent RBA Minutes were surprisingly hawkish but as we
  have seen last week, the RBA needs more data before deciding on another rate
  hike.
• The
  market expects the RBA to hold rates steady at the next meeting.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the AUDUSD pair
has been diverging with the
MACD for a
long time as the bearish momentum continues to weaken amid a prolonged
consolidation. Yesterday, the price broke above the upper bound of the triangle pattern, and
it’s now testing the key resistance zone
around the 0.6380 level. This is where the sellers are likely to step in and
defend the level as a further extension to the upside might trigger a rally
back to the 0.65 handle.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
recent breakout with the price retesting the broken trendline and
continuing higher. Here’s where the battle is going to be more tough, but the
odds are now skewed towards the upside unless we see the AUDUSD pair falling
back below the trendline leaving behind a fakeout.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
are starting to see a divergence with the MACD right around the resistance
zone. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, we might see another push to the upside
into the 0.64 handle where the price will complete the rising expanding wedge
pattern. This is a reversal pattern, so the sellers will want to wait around
the highs to position for another drop with a great risk to reward setup. If
the price were to break to the upside anyway though, the bearish setup would be
invalidated and the buyers will have a free road to target the 0.65 handle.

Upcoming Events

This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Today, we have the US
Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be
the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and
the FOMC rate decision. On Thursday we will have the US Jobless Claims data,
while on Friday we conclude the week with the US NFP report and the ISM Services PMI.

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

• Need to be cautious in coming months after the many rate hikes
• Demand seen further contained due to delayed impact of rate hikes
• Need to avoid excessive tightening of monetary, credit conditions
• Fears of a wage-price spiral have sharply diminished

It’s pretty much just acknowledging the trend and I’m sure for some countries, they’d be glad that the rate hikes have stopped. But in the overall fight against inflation, it’s still too early to declare victory just yet. The trend is encouraging but price pressures could still end up being stickier than anticipated next year.

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

10-year yields are now down 6 bps to 4.818% as lower yields are also pinning the dollar down in European morning trade thus far. It’s a mix of moods in markets, with the Japanese yen also sliding amid a less hawkish than anticipated BOJ and then the announcement that there was no Tokyo intervention this month. Meanwhile, equities are able to claw its way back into positive territory with S&P 500 futures now up 0.2% on the day.

It’s still all to play for this week and in the case of the bond market, it’s all about the main event tomorrow. And no, it’s not the Fed.

Instead, the focus will be on the quarterly refunding announcement by the US Treasury in which they will unveil the details of their planning in terms of funding a widening budget deficit. In other words, bond traders will be looking to if they are going to step up sales of longer-term debt in relation to that. It’s all about the supply game.

This will then impact the upcoming auctions in November where we will see ones for 3-year notes (7 November), 10-year notes (8 November), and 30-year notes (9 November).

Watch this space. This is where the reverberations to broader markets will start from.

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

• Gold and oil fall back as safety flows unwind again after the weekend
• Bond yields nudge a little higher on the day
• ECB’s Kazimir: Additional tightening could come if incoming data forces us to
• ECB’s Simkus: Unless there are data surprises, current level of restriction is sufficient
• Spain October preliminary CPI +3.5% vs +3.5% y/y prior
• Germany Q3 preliminary GDP -0.1% vs -0.3% q/q expected
• Saxony October CPI +4.5% vs +5.4% y/y prior
• Bavaria October CPI +3.7% vs +4.1% y/y prior
• Eurozone October final consumer confidence -17.9 vs -17.9 prelim
• UK September mortgage approvals 43.33k vs 45.00k expected
• Switzerland October KOF leading indicator index 95.8 vs 95.0 expected
• SNB announces changes to remuneration of sight deposits
• Reminder: The clocks went back in Europe on Sunday

Markets:

• AUD leads, CHF lags on the day
• European equities higher; S&P 500 futures up 0.7%
• US 10-year yields up 4.7 bps to 4.892%
• Gold down 0.7% to $1,992.40
• WTI crude down 1.3% to $84.41
• Bitcoin up 2.1% to $34,576

It is shaping up to be a bit of a mixed start to the new week but it seems like the most dominant theme is the easing of safety bets from the end of last week. The Israel-Hamas conflict continues to rage on in the background but mostly centered around the Gaza Strip. While doleful, it isn’t really impacting global markets all too much for now at least.

And for the third Monday in a row, both gold and oil look set for a drop to start the week. Meanwhile, equities are catching a relief bid but could still face struggles later when Wall Street enters the fray. In the bond market, yields are higher but that hasn’t been of much help to the dollar today.

EUR/USD moved up slightly from 1.0550 to 1.0590 levels now, helped out by a slight better German Q3 GDP reading. USD/JPY while now little changed at 149.70 did see a drop earlier to 149.30, before finding some near-term support at the level.

The greenback is trading marginally lower as it trails against the commodity currencies on the back of a better risk mood overall. AUD/USD is up 0.7% to 0.6377 but the pair is still largely caught in a downwards channel as pointed out here.

As we look to the day ahead and to tomorrow, month-end flows will also be a consideration and that could keep the waters a little murkier before we get a better picture of things come November.

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