Fundamental
Overview

The USD remains under
pressure amid the aggressive market pricing for rate cuts and better global
growth expectations following the recent huge Chinese easing measures. It’s now
a battle between global growth supporting the risk sentiment and weighing on
the greenback and the aggressive rates pricing which could be scaled back if
the US data starts to pick up.

On the CAD side, the latest
soft Canadian CPI raised the probabilities for a 50
bps cut at the upcoming meeting as BoC’s Macklem hinted to a possibility of
delivering larger cuts in case growth and inflation were to weaken more than
expected. The market sees a 47% probability for such a move.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD dropped all the way back to the recent lows around the 1.3420
level. This is where the buyers stepped in to position for a rally back into
the 1.36 resistance.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into the 1.32 handle next.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price broke above the downward trendline today and stalled at the resistance
zone around the 1.35 handle. The buyers will want to see the price breaking higher
to increase the bullish bets into the 1.36 resistance, while the sellers will
likely step in around these levels to target a break below the 1.3420 level.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else to add but a drop below the most recent higher low at 1.3455
would likely see the bearish momentum increasing. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the Canadian GDP and the US PCE.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

They are the next one to shift towards this call, following from HSBC before this. Both had previously expected the ECB to cut rates in December instead.

Meanwhile, Deutsche Bank was also out in saying that the ECB needs to step up their pace of rate cuts here. But their call came right before this report from Reuters, which sparked further bets by market players in pricing in a rate cut next month.

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

The headline reading is the highest since May, so that’s a welcome rebound in retail sales balance. At the same time, expected retail sales for October also moved higher to 5 and that is up from -17 in September. It is the highest reading for the expectations balance since April 2023. That’s a positive signal for UK retail sales activity as we look towards the year-end holiday period.

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

Headlines:

• China’s Politburo reaffirms will lower RRR and implement forceful interest rate cuts
• Aussie bounces back today on upbeat China sentiment
• Is this the real turning point for Chinese equities?
• SNB cuts key policy rate by 25 bps to 1.00% from 1.25% previously
• SNB chairman Jordan: Swiss franc rise a major factor of inflation decline
• ECB October policy decision reportedly to be „wide open“
• Germany October GfK consumer sentiment -21.2 vs -22.5 expected
• Germany’s leading economic institutes sees GDP contracting again this year

Markets:

• AUD leads, USD lags on the day
• European equities higher; S&P 500 futures up 0.8%
• US 10-year yields down 0.9 bps to 3.771%
• Gold up 0.8% to $2,678.03
• WTI crude down 2.8% to $67.77
• Bitcoin up 1.3% to $64,330

China continues to hog the spotlight so far this week. The Politburo came out today to amplify their commitment towards all of the measures taken up this week and that spurred a surging rally in Chinese assets. The Shanghai Composite closed above the 3,000 mark for the first time since June, closing up by 3.6%. Meanwhile, the CSI 300 index ended up by 4.2% and is holding over 10% gains already this week.

That helped to push the likes of the aussie higher, with a more positive risk mood also flowing through broader markets.

AUD/USD moved up from 0.6840 to 0.6880 levels now, up 0.9% on the day. And as the session progressed, a softer dollar is also starting to permeate across other major currencies.

EUR/USD was weighed down by a report that the ECB is considering October to be a live meeting, with the pair falling to 1.1127 before trading back up by 0.2% now to 1.1155. GBP/USD held steadfast and is up 0.4% to 1.3380. USD/JPY tested the 145.00 mark in early Asia trading but is now dragged down by 0.4% to 144.23 on the day.

There was also the SNB policy decision and the Swiss central bank decided to cut its policy rate by 25 bps. It was a coin flip in terms of market pricing and the decision helped to cement slight gains in the franc, with traders still looking for roughly two more 25 bps rate cuts by the SNB by June next year. In that sense, the pricing outlook hasn’t changed that much.

Still, both USD/CHF and EUR/CHF fell with the latter down 0.2% to 0.9455 currently as the SNB getting outdone by the ECB even on their decision day.

In the equities space, it’s a more straightforward one as investors are buoyed by the vote of confidence in Chinese markets.

S&P 500 futures raced higher to be up 0.8% now while European indices are all holding over 1% gains on the day.

In the commodities space, gold is continuing to scale higher and is trading to fresh record highs now near $2,680. The train marches on there.

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

The gains picked up during the handover from Asia to Europe, following comments from China’s Politburo here. That amplified Beijing’s commitment from all of the measures announced this week and also drove Chinese equities to surging gains on the day. S&P 500 futures were already up 0.3% at the time but extended that to 0.8% and have been consolidating a fair bit since.

Tech shares are staying buoyed overall with Nasdaq futures marked up by 1.4%. Adam highlighted Nvidia as being a standout here yesterday.

But so far, the main takeaway since last week is that investors are feeling confident about a soft landing in most major economies. And put together with a vote of confidence/faith in China this week, it is making for a more positive mood towards the end of September.

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

Fundamental
Overview

The US Dollar came under
renewed pressure recently following the surprisingly weak US
consumer confidence report on Tuesday. The labour market data in the report
softened a lot and it generally leads the unemployment rate.

The market responded by
raising the probabilities for the Fed to cut by 50 bps in November to roughly
60%. The question now is whether this is just about the low hiring rate or
something worse. We will have to wait for the NFP report next Friday.

The focus is now on the
economic data. If we start to see an improvement, then Treasury yields will likely
rise and drive USDCHF higher. Conversely, if the data weakens significantly,
the market will start to worry about a recession and take USDCHF lower.

For the CHF, the SNB
today cut rates by 25 bps bringing the policy rate to 1.00%. The central
bank mentioned that it’s prepared to intervene in currency markets as necessary
and the new inflation forecasts were revised significantly lower signalling
more rate cuts to follow.

That was not enough for the
market to lead to a weaker CHF as the currency is now positive on the day.

USDCHF
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCHF remains stuck in the range between the 0.8555 resistance
and the 0.8400 support. The market participants will likely keep on playing the
range by buying at support and selling at resistance until we get a breakout.

USDCHF Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action. There’s not much to add here as
we will need to wait for a major catalyst or a breakout to see a more sustained
trend.

USDCHF Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the pair bounced strongly from the lows yesterday. If the price breaks
below the most recent higher low at 0.8465, we might see the bearish momentum
increasing as the sellers will look for a drop back into the support. The red
lines define the average daily range for today.

Upcoming
Catalysts

Today we get the latest US Jobless Claims figures, while tomorrow we conclude
the week with the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Russell 2000
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Russell 2000 got rejected from the cycle highs and pulled back.
The buyers will want to see the price breaking higher to increase the bullish
bets into a new all-time high, while the sellers will likely step back in
around the highs if the price gets there.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline
defining the current pullback. The sellers will likely keep on leaning on it to
position for new lows, while the buyers will look for a break higher to pile in
for a rally into a new cycle high.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action. There’s not much else we can add here
as the sellers will likely lean on the trendline, while the buyers will look
for break higher. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the latest US Jobless Claims figures, while tomorrow we conclude
the week with the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

They are sticking with the view that the ECB will begin delivering back-to-back rate cuts, but starting from December. A further weakening in the economic outlook is the main cause for the shift in their call, after having previously forecasting the ECB to deliver on 25 bps rate cuts every quarter until a terminal rate of 2.00% to 2.50% around the end of next year.

„We are moving to a faster normalization call, with the ECB to reach the same terminal rate of 2.00 to 2.50% six months earlier in mid-2025. We expect this more rapid easing cycle to be achieved with back-to-back 25 bp cuts from December, but we do not rule out a 50bp cut in December.“

But given the latest report that surfaced just a little over an hour ago here, they might just have to consider revising their call again.

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

A day after the USD was the weakest of the major currencies, the greenback is one of the strongest of the major currencies. The EURUSD is the only currency that the USD is weaker against in the morning snapshot. The USD is unchanged vs. the CAD as well. The JPY and the CHF are the weakest of the major currencies.

The USD moved lower yesterday after weaker data from consumer confidence and the Richmond Fed surveys. US yields which were higher at this time yesterday, started to move lower with the 2-year down -3.8 bps at the close and the 10 year -0.4 bps. Today, yields are back higher.

In a sign of labor weakness, the WSJ Timiraos dropped a tweet from the details of the Conference Board consumer confidence showing the net share of respondents who say jobs are plentiful less those who say jobs are hard to get. The levels are at 2017 levels and has tumbled over the last 6 months. We do see the latest in the initial jobless and continuing claims tomorrow. Last week, the initial jobless claims dip to 219K which is still low historically.

The Fed cut rates last week as they recalibrate rates to the current environment with inflation lower and the threat to higher unemployment rising (although they see the end of 2025 Unemployment rate at 4.4%, but that may be because they see their actions working). The expectations of a 50 bp cut has tilted higher over the last 24 hours to 58% from 50% at this time yesterday.

In the UK, Bank of England (BOE) policymaker Megan Greene emphasized the importance of taking a cautious and gradual approach to easing monetary policy, stressing the need for data to confirm that the risk of persistent inflation is subsiding. While wage growth has decreased, it remains higher than BOE models can fully explain. Greene also noted that risks to economic activity lean to the upside, which could imply a higher long-term neutral rate. Her remarks reaffirm the BOE’s stance from the previous week. Despite the current pause, traders anticipate a rate cut in November, with a roughly 86% chance of a 25 basis point reduction priced in by the OIS market

The economic calendar was light in Europe today, and is light in the US and Canada as well. At 10 AM, the New Home sales in August will be released with the expectations at 0.700M vs 0.739M last month. The weekly EIA oil inventories will be released:

• Crude oil, -1.354M est
• Gasoline, -0.021M est
• Distillates, -1.637M est.

The private API data late yesterday showed larger than expected drawdowns:

A snapshot of the other markets as the North American session begins shows:

• Crude oil is trading down -$0.91 and $70.66. At this time yesterday, the price was at $71.97
• Gold is trading down -$1.50 or -0.06% at $2655.39. At this time yesterday, the price was $2625.90
• Silver is trading down -$0.23 or -0.75% and $31.84. At this time yesterday, the price is at $30.86
• Bitcoin is trading at $63,713. At this time yesterday, the price was at $63,522
• Ethereum is trading at $2619.30. At this time yesterday, the price was at $2639.40

In the premarket, the snapshot of the major indices trading marginally higher after the S&P and Dow industrial average closed at record levels again yesterday:

• Dow Industrial Average futures are implying a gain of 16.78 point. Yesterday, the index rose 83.57 points or +0.20% at 42208.22
• S&P futures are implying a decline of -2.18 points. Yesterday, the price rose 14.36 points or 0.25% at 5732.93
• Nasdaq futures are implying a decline of-42.59 points. Yesterday, the index rose 100.25 points or 0.56% at 18074.52

Yesterday, the small-cap Russell 2000 rose 3.712 points or 0.17% and 2223.99

European stock indices are trading mixed

• German DAX, -0.39%
• France CAC, -0.2%
• UK FTSE 100, +0.31%
• Spain’s Ibex, +0.02%
• Italy’s FTSE MIB, +0.16% (delayed 10 minutes).

Shares in the Asian Pacific markets China and Hong Kong intended to move higher after yesterday’s over 4% gains China stimulus initiatives:

• Japan’s Nikkei 225, -00.19%
• China’s Shanghai Composite Index, +1.16%
• Hong Kong’s Hang Seng index, +0.68%
• Australia S&P/ASX index, -0.19%

Looking at the US debt market, yields are higher

• 2-year yield 3.540%, +2.1 basis points. at this time yesterday, the yield was at 3.603%
• 5-year yield 3.402%, +2.4 basis points. At this time yesterday, the yield was at 3.539%
• 10-year yield 3.762%, +2.6 basis points. At this time yesterday, the yield is at 3.790%
• 30-year yield 4.111%, +2 point basis points..2 At this time yesterday, the yield is at 4.139%

Looking at the treasury yield curve, is similar to yesterday’s levels at this time

• The 2-10 year spread is at + 21.9 basis points. At this time yesterday, the yield spread was +18.8 basis points.
• The 2-30 year spread is at + 57.0 basis points. At this time yesterday, the yield spread was +53.4 basis points.

In the European debt market, the 10 year yields are mostly higher:

This article was written by Greg Michalowski at www.forexlive.com.

Headlines:

• Swiss franc eases in European trading, SNB eyed tomorrow
• Post-Fed struggles see the dollar as the laggard in September trading
• BOE’s Greene: Appropriate to take a gradual approach to removing policy restrictiveness
• France September consumer confidence 95 vs 92 expected
• Switzerland September UBS investor sentiment -8.8 vs -3.4 prior
• US MBA mortgage applications w.e. 20 September +11.0% vs +14.2% prior
• OECD raises global growth outlook for 2024, sees more Fed rate cuts next year
• China call on US to stop its „unreasonable suppression“ of Chinese firms

Markets:

• EUR leads, JPY lags on the day
• European equities mixed; S&P 500 futures flat
• US 10-year yields up 2.4 bps to 3.760%
• Gold flat at $2,655.73
• WTI crude down 0.7% to $71.05
• Bitcoin down 1.0% to $63,603

It was a quieter session but there were some decent markets moves to be had.

The dollar is keeping steadier after its fall in trading yesterday, with the yen and franc being the main laggards. It doesn’t owe to a further run in risk optimism or anything though, as equities remained more tepid during the session.

US futures and European indices kept lower mostly since the open but are now starting to see more two-sided action ahead of US trading. S&P 500 futures are flat after having been down by 0.3% while European stocks are now more mixed after a sluggish start to the day.

Going back to FX, USD/JPY nudged higher with the pair climbing from 143.30 to 144.30 levels now. There wasn’t much of a catalyst but US yields are keeping a little higher on the day at least. 2-year Treasury yields fell to its lowest in over two years yesterday but are now up slightly by 2 bps to 3.54%.

The Swiss franc was the other notable mover, falling across the board with eyes on the SNB meeting decision tomorrow. EUR/CHF is seen up 0.8% to test the 0.9500 level while USD/CHF is seen up 0.7% to just under 0.8500 currently.

As things stand, traders are pricing in ~51% odds of a 50 bps rate cut tomorrow even though the „expectation“ is for 25 bps move.

Besides that, the higher beta currencies are taking a bit of a breather after having stormed ahead against the dollar since the Fed last week. GBP/USD is off highs above 1.3400 to 1.3370 while AUD/USD is down 0.2% after having clipped 0.6900 earlier to 0.6880 now.

And we also have EUR/USD holding steadier at around 1.1190, keeping close to large option expiries at 1.1200-10 on the day.

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