Fundamental
Overview

Tonight, the PBoC announced lots of easing measures ranging from short to long term interest rates. This
was the catalyst for the copper rally. Things are looking better and better for
the market as we’ve also got a 50 bps cut from the Fed last week.

Central bank easing
generally leads the manufacturing cycle, so we can expect global growth to pick
up. All these reasons should be bullish for the market and support prices in
the next months.

Moreover, as a reminder, the
positioning in crude oil is at record lows and the sentiment is very bearish. These
factors can generally offer great contrarian opportunities.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil is struggling to break above the key 71.67 resistance. The buyers will need the price to
break above the resistance to start targeting the major trendline around the 76 handle. The sellers,
on the other hand, will likely step in again with a defined risk above the
resistance to position for a drop into the 65 handle.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we created a range between the 68.50 support and the 71.67 resistance.
The bias remains skewed to the upside but until we get a breakout, the market participants
will likely keep on playing the range.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see the choppy price action as the market continues to test the resistance.
There’s not much else to add here as traders will wait for a breakout on either
side to get things going. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Consumer Confidence report. On Thursday, we get the
latest US Jobless Claims figures. On Friday, we conclude the week with the US
PCE.

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

Headlines:

• Euro pressured lower as traders step up ECB rate cut odds for October
• France September flash services PMI 48.3 vs 52.5 expected
• Germany September flash manufacturing PMI 40.3 vs 42.4 expected
• Eurozone September flash services PMI 50.5 vs 52.1 expected
• UK September flash services PMI 52.8 vs 53.5 expected
• UK September CBI trends total orders -35 vs -21 expected
• Weekly update on interest rate expectations
• Fed’s Kashkari: 50 bps rate cut was the right decision

Markets:

• AUD leads, EUR lags on the day
• European equities mixed; S&P 500 futures up 0.1%
• US 10-year yields up 2.3 bps to 3.750%
• Gold flat at $2,622.69
• WTI crude up 0.4% to $71.31
• Bitcoin down 0.1% to $63,489

The focus of the session was on PMI releases in Europe and it did trigger a modest reaction in markets.

Coming into today, traders were pricing in ~61% odds of an ECB rate cut for October but stepped that up to ~80% now. That of course coming after poor PMI prints in both France and Germany, which also highlighted a softening of price pressures.

EUR/USD fell from 1.1145 to a low of 1.1083 before recovering some ground back to 1.1120 now, still down 0.4% on the day.

That comes as euro area bond yields fall with market players stepping up calls for the ECB to cut rates next month.

US futures also briefly slid into negative territory from the data releases but are now holding marginally higher on the day. European equities remain more mixed in general.

Looking to other major currencies, GBP/USD did fall alongside the euro to 1.3250 before recovering back some ground to 1.3315 now – near flat on the day. Meanwhile, USD/JPY is seeing an up and down day with the pair trading up to 144.45 in early Asia trading before being down by 0.3% now to 143.50.

The dollar is trading more mixed but only marginally lower at the balance, if not for the euro’s plunge. This comes as Treasuries are not offering all too much to start the new week. 2-year yields are still pressured near the 2023 low near 3.55%, seen currently at 3.57%. Then, we have 10-year yields sitting higher closer to 3.75% on the day.

It’s now over to the US session where we will also be getting the US PMI data. So, let’s see how that plays into the post-Fed picture.

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

• It reflects progress on inflation, softening of labour market
• Sees year-end rate at 4.4% and end of 2025 rate at 3.4%; same as median of Fed policymakers
• Balance of risks have shifted towards risk of further labour market softening
• Too soon to declare victory on inflation but disinflation process is on track
• Policy remains tight, though uncertain on how tight that may be
• Fed rate path will depend on totality of incoming data
• Signals on economic strength has been ‚confusing‘, with consumer spending surprisingly resilient
• Little evidence that recessionary forces are building or that inflation could surprise to the upside

As you would expect, they will be out to vindicate themselves in moving by 50 bps last week. Traders are now seeing ~51% odds of another 50 bps rate cut in November. But after having caved to market pricing last week, it will be a bit hypocritical for the Fed to suddenly try and talk that down – for now at least.

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

This is just a bit of a heads up as the economic calendar on Thursday will be highlighted by a speech from Fed chair Powell. He will be delivering the opening remarks at the 10th annual US Treasury Market Conference. However, his remarks will be ones that are pre-recorded. And based on the agenda, is only scheduled for 5 minutes.

There will be a host of other Fed policymakers involved with the conference though, so there’s that. But as for Powell, it is more than likely that we won’t be getting any significant policy comments given the above backdrop.

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

• Prior -22

UK factory order book balance fell to the lowest since November 2023 as export demand is also seen falling at the fastest pace since December 2020, according to CBI. The export order book balance plunged to a reading of -44, down from -22 in August, highlighting continued woes in the manufacturing sector.

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

Fundamental
Overview

Last week, the Fed finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.

The larger cut was framed
as kind of a risk management move with the dot plot showing two more 25 bps
cuts by the end of the year and less than the market expected in 2025.

The US Dollar weakened
initially but eventually shot higher as Treasury yields rallied on a less
dovish than expected Powell with the market pricing out the aggressive rate
cuts expected in 2025.

Now that the decision is
behind us, the focus will be on the economic data. If we start to see an
improvement, then Treasury yields will likely continue to 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, this week the
SNB is expected to cut rates by 25 bps and bring the policy rate to 1.00%. The
market is assigning a 46% probability of a larger 50 bps cut. The reason for
this is because inflation has been surprising to the downside with the last release showing a drop to 1.1%, which is
much lower than the SNB’s 1.5% projection for Q3.

Moreover, SNB’s Jordan said in late
August that the
continued strength of the Swiss Franc has been hurting the Swiss industry.
Therefore, there’s a high chance that the central bank either delivers a 50 bps
cut (especially after the recent Fed’s move) or jawbones the currency by
threatening intervention.

USDCHF
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCHF is approaching the key 0.8555 resistance. That0s where we can expect the
sellers to step in with a defined risk above the level to position for a drop
back into the 0.84 handle. The buyers, on the other hand, will want to see the
price breaking higher to increase the bullish bets into the 0.87 handle.

USDCHF Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price recently broke above the major downward trendline with the buyers piling in to target
a rally into the 0.8555 resistance. Overall, we remain in the range between the
0.8555 resistance and the 0.8400 support. The market participants will likely
keep on playing the range until we get a breakout.

USDCHF Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor resistance zone around the 0.8515 level where the price
got rejected from several times in the past days. The buyers will want to see
the price breaking higher to increase the bullish bets into the 0.8555
resistance targeting a breakout.

The sellers, on the other
hand, will likely keep on defending the level to position for a drop back into
the support. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Flash PMIs. Tomorrow, we get the US Consumer Confidence
report. On Thursday, we have the SNB Rate Decision and the US Jobless Claims. On
Friday, we conclude the week with the US PCE.

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

UPCOMING
EVENTS:

• Monday: Japan on Holiday, Australia/Eurozone/UK/US Flash
  PMIs.
• Tuesday: Japan Flash PMI, RBA Policy Decision, German IFO,
  US Consumer Confidence.
• Wednesday: Australia Monthly CPI.
• Thursday: SNB Policy Decision, US Durable Goods Orders,
  US Q2 Final GDP, US Jobless Claims.
• Friday: Tokyo CPI, Canada GDP, US PCE.

Monday

Monday will be the
Flash PMIs Day for many major economies with the Eurozone, UK and US PMIs being
the main highlights:

• Eurozone Manufacturing PMI: 45.6 expected vs. 45.8
  prior.
• Eurozone Services PMI: 52.1 expected vs. 52.9
  prior.
• UK Manufacturing PMI: 52.5 expected vs. 52.5
  prior.
• UK Services PMI: 53.5 expected vs. 53.7 prior.
• US Manufacturing PMI: 48.5 expected vs. 47.9
  prior.
• US Services PMI: 55.3 expected vs. 55.7 prior.

Tuesday

The RBA is
expected to keep the Cash Rate unchanged at 4.35%. There shouldn’t be
anything new as the central bank continues to maintain its hawkish stance amid
persistently high inflation. The market sees the first rate cut in February
2025 with a total of 101 bps of easing by the end of next year.

The US Consumer
Confidence is expected at 103.8 vs. 103.3 prior. The last report surprised to the upside. Dana M. Peterson, Chief
Economist at The Conference Board said: “Overall consumer confidence rose in
August but remained within the narrow range that has prevailed over the past
two years.”

“Consumers
continued to express mixed feelings in August. Compared to July, they were more
positive about business conditions, both current and future, but also more
concerned about the labour market.”

“Consumers’
assessments of the current labour situation, while still positive, continued to
weaken, and assessments of the labour market going forward were more
pessimistic. This likely reflects the recent increase in unemployment.
Consumers were also a bit less positive about future income.”

Wednesday

The Australian
Monthly CPI Y/Y is expected at 3.1% vs. 3.5% prior. RBA’s Governor Bullock
stated that one inflation report won’t change their mind as they will
wait for more data to increase their confidence that inflation is coming back
to target. Therefore, unless we get big deviations, this release is unlikely to
change anything.

Thursday

The SNB is
expected to cut rates by 25 bps and bring the policy rate to 1.00%. The market
is assigning a 45% probability of a larger 50 bps cut. The reason for this is
because inflation has been surprising to the downside with the last release showing a drop to 1.1%, which is much lower than the
SNB’s 1.5% projection for Q3.

Moreover, SNB’s
Jordan said in late August that the continued strength of the Swiss Franc has
been hurting the Swiss industry. Therefore, there’s a high chance that the
central bank either delivers a 50 bps cut (especially after the recent
Fed’s move) or jawbones the currency by threatening intervention.

The US Jobless
Claims continues to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims after
rising sustainably during the summer started to improve considerably in the
last weeks.

This week Initial
Claims are expected at 225K vs. 219K prior, while there’s no consensus for
Continuing Claims at the time of writing although the prior release showed a
drop to 1829K.

Friday

The Tokyo Core CPI
Y/Y is expected at 2.0% vs. 2.4% prior. The Tokyo CPI is seen as a leading
indicator for National CPI, so it’s generally more important for the market
than the National figure.

The BoJ at the
last policy decision kept everything unchanged as expected but Governor Ueda
made a surprising dovish turn by saying that “there is some time to make a
decision on monetary policy because upside price risks have decreased given the
recent FX moves”.

He also mentioned
that it’s important for them to check overseas economic trends including US
when making policy decisions. This suggests that the Fed’s 50 bps cut is
making them fear more Yen appreciation and decreases the need to act with more
tightening. USD/JPY shot higher after his comments…

The US PCE Y/Y is
expected at 2.3% vs. 2.5% prior, while the M/M figure is seen at 0.1% vs. 0.2%
prior. The Core PCE Y/Y is expected at 2.7% vs. 2.6% prior, while the M/M
reading is seen at 0.2% vs. 0.2% prior.

Forecasters can
reliably estimate the PCE once the CPI and PPI are out, so the market already
knows what to expect. Fed’s Waller last Friday mentioned that they
expect 0.14% on the Core M/M measure.

The main focus for
the Fed in the last months has been the labour market, so inflation data lost a
bit of its importance in terms of market reaction.

Interestingly
tough, Fed’s Waller mentioned that the inflation data during the
blackout period pushed him in favour of the larger cut. He added that
what’s got him more worried was that inflation was running softer than he
thought.

Finally, he said
that he was in favour of two more 25 bps cuts by the end of the year if the
economy evolved as he expected, but if the labour market data worsened, or
if the inflation data continued to come in softer than everybody expected, then
he would support going at a faster pace before adding that a fresh
pickup in inflation could also cause the Fed to pause its cutting.

This week’s release
shouldn’t be important overall given that it’s August data and it was already incorporated
into the Fed’s decision.

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

• Mixed end to the day for the major indices
• Qualcomm has approached Intel about a takeover in recent days
• Fed Harker: There is a risk that inflation decline could stall
• Crude oil futures settled up $0.16 at $71 a barrel
• Fed’s Harker: The Fed has done a good job in navigating the economy
• Baker Hughes US oil rig count: Unchanged at 488
• Fed’s Bowman explains dissent. Says she would have preferred a smaller rate cut
• Morgan Stanley: We expect a string Fed cuts through mid-2025; staying short USD/JPY
• Fed’s Waller: We’re at a point where the economy is strong and we want to keep it that way
• European equity close: The shine comes off
• Goldman Sachs: BOE rate outlook post-September meeting
• Credit Agricole: GBP emerges as a high-yielder post-BOE meeting
• Eurozone September flash consumer confidence -12.9 vs -13.0 expected
• Fed’s Waller set to appear on CNBC today
• Canada industrial product prices for August -0.8% versus -0.3% expected
• Canada July retail sales +0.9% vs +0.6% expected
• BOC’s Macklem: Adoption of AI could add to inflationary pressures in short-term
• The GBP is the strongest and the JPY is the weakest as the NA session begins.
• ForexLive European FX news wrap: Japanese yen falls on Ueda presser

The economic data today was focusing Canada where retail sales rose by a higher-than-expected 0.9% but you should prices were lower than expectations.

In the US, two-days after the FOMC rate decision to cut rates by 50 basis points, Feds Waller – normally a more hawkish member – spoke on CNBC. His comments were thought to be more dovish as the Fed recalibrates policy with inflation lower and potential for unemployment to move higher.

Fed Governor Chris Waller stated that the economy remains strong, and inflation is coming down. He expressed openness to front-loading rate cuts based on inflation data, especially during a recent blackout period. Waller noted that the core PCE inflation has been running at 1.8% over the past four months but would be closer to 1% if housing services are excluded. He outlined multiple potential scenarios for rate cuts, which could be gradual, faster, or even paused, depending on the incoming data. While inflation is softer than he initially expected, Waller indicated that he might be more aggressive in cutting rates if the data supports it. He also cautioned that inflation could reverse, though he believes it is currently on the right path.

A quotable from the Fed Governor:

„The committee sees a lot of room to move down over the next 6-12 months. That’s really what we should be focusing on.“

Philadelphia Fed Pres. Harker also gave a speech and commented that the Federal Reserve has done a good job navigating the economy. He compared monetary policy to driving a bus, where it’s important to balance speed. Harker emphasized that maximum employment involves job quality, not just quantity, and highlighted the importance of both „hard“ and „soft“ data in the Fed’s decision-making. He also noted the Fed’s role in bank supervision, financial stability, and its exploration of emerging technologies like AI and quantum computing in finance. Later, Harker warned that there is a risk that the decline in inflation could stall and that the labor market could soften. His comments were ho-hom.

Finally, Fed Governor Michelle Bowman commented after being the first dissenter on the Fed Board since 2005, when she preferred a 25 basis point cut to a 50 basis point cut. Bowman expressed her support for recalibrating the Fed funds rate but preferred a smaller initial move. She sees a risk that the FOMC’s larger policy action could be interpreted as prematurely declaring victory over inflation, noting that the inflation target has not yet been met. Bowman advocates for a measured pace toward a neutral policy stance to continue progress in bringing inflation back to the 2% goal without unnecessarily increasing demand. She emphasized that the economy remains strong, with the labor market near full employment, and expressed her respect for colleagues who supported a larger rate reduction, remaining committed to working with them to achieve the Fed’s dual mandate goals.

I’m sure next week we will get a slew of commentary from various Fed officials. The Fed does not meet again until November 7-8 immediately after the US election.

Looking at the forex market today, the GBP is ending the day as the strongest of the major currencies, while the JPY is the weakest. THe USD ends the week with gains versus the JPY, CHF, and AUD. The greenback was near unchanged versus the EUR, CAD and NZD and was mostly lower verse the GBP.

The BOE kept rates unchanged on Thursday and had higher retail sales released today.

The BOJ also kept rates unchanged when they announced their decision today, but it was more of a dovish policy view. The JPY fell by -0.93% vs the USD and the NZD, and by -1.17% vs the GBP. The JPY fell by -0.58% to- 0.89% vs the other currencies.

Below is a view of the strongest to the weakest of the major currencies today.

US stocks closed the session mixed:

• Dow industrial average rose 38.17 points or 0.09% at 42063.36
• S&P index fell -11.09 points or -0.19% at 5702.55
• NASDAQ index fell -65.66 points or -0.36% at 17948.32

The small-cap Russell 2000 fell -24.81 points or -1.10% at 2227.88

For the week:

• Dow industrial average rose 1.62%
• S&P index rose 1.36%
• Nasdaq index rose 1.49%
• Russell 2000 rose 2.08% despite the 1% decline today

In the Europe, the closes were lower:

• German DAX -1.4%
• France’s CAC -1.5%
• UK’s FTSE 100 -1.2%
• Spain’s IBEX -0.1%
• Italy’s FTSE MIB -0.8%

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

The major US stock indices are closing the day with mixed results. It was triple witching hour so there was some end-of-day volatility, that could have impacted the price action.

At the ending bell, the Dow industrial average is closing higher. The broader S&P and NASDAQ indices are closing lower. They small-cap Russell 2000 was the worst performer today with a decline of -1.10%.

Below is a snapshot of the closing levels:

• Dow industrial average rose 38.17 points or 0.09% at 42063.36
• S&P index fell -11.09 points or -0.19% at 5702.55
• NASDAQ index fell -65.66 points or -0.36% at 17948.32

The small-cap Russell 2000 fell -24.81 points or -1.10% at 2227.88

For the week:

• Dow industrial average rose 1.62%
• S&P index rose 1.36%
• Nasdaq index rose 1.49%
• Russell 2000 rose 2.08% despite the 1% decline today

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

Shares of Intel are trading up 5.82% after reports from the WSJ that Qualcomm approached the company about a takeover in recent days.

The shares of Intel are down in 2024 from an end of year closing level of $50.25. The current price is up $1.23 or 5.82% at $22.37 in volatile trading . The low for the year reached $18.51 on September 10.

With Berkshire ridding itself of some of the Apple position and Bank of America and raising cash, would that be an idea too?

I am just thinking out loud. That is not substantiated but it might be interested in if they like the management and the plan.

Technically, the price is back above what was a ceiling at $22.00 again. Earlier this week the price moved higher on the back of Intel’s plans for the foundry (separate from the Intel proprietary chips), plans for infrastructure spending outside the US (put on hold over the near term), and expecations for a slashing of jobs. The stock reached a high of $22.58.

There is room to roam but it has to hold support as this stock has been sold consistently on bounces and there is so much work to do, to give the buyers some confidence.

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