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.

Light Crude Oil Futures Technical Analysis – Key Junction at $70.3

Hello, this is Itai Levitan at ForexLive.com, bringing you a technical analysis on Light Crude Oil Futures (Ticker: CL). As expected and communicated in my last oil technical analysis, the current touchpoint at the top pane of this channel is playing out as anticipated. Sometimes, you need to set your channels at the close of the candle rather than the low, as in this case, to gain more agreement. This approach helps align better with where price is reacting, as different lows can draw varied lines. The key is to identify where the market is showing the best response.

Confirming the Channel

In this scenario, we see clear validation of the channel due to the perfect touchpoints we’ve identified. We’ve had three significant touchpoints, and now we’re observing a fourth, only a few ticks away. This is a legitimate interaction, reinforcing the channel’s validity.

Focus on the $70.3 Level

Today, I’m watching the $70.3 level closely, which may not appear on this chart but is evident on others I’ve analyzed. Around this level, we could see bulls trying to defend the price, particularly at $70.28 to $70.3, to prevent further declines. This could lead to a potential handle formation, followed by a breakout. While the bullish case remains alive, it’s more of a short-term scenario. In the medium term, I’m inclined to think we’ll head towards $70.3, as this level aligns with key market movements.

The Contract Rollover Gap

Another element to consider is the contract rollover gap, which is situated around $70.1 (where the blue line is). Typically, contract rollover gaps tend to fill eventually, although the timing is uncertain. This gap presents another level of interest, reinforcing the $70.1-$70.3 zone as an area to watch closely.

Current Trend and Potential Mid-Channel Support

Right now, we’re trending down, and any potential bullish case will only become actionable if we create another touchpoint on the top band of the channel. Otherwise, the trend remains downward. We might even see a move towards the mid-channel area, indicated by the dotted line, which could bring the price to around $67. While it’s too early to predict, this could be a potential area of support if we continue to trend lower.

Key Levels for Swing Trades

If we revisit the low from September 23, 2024, at $69.49, this could be a swing long opportunity, even if temporary. Profitable shorts are likely to cover part of their positions around this level, making it an interesting point to consider for a counter-trend long trade.

Adapting to Market Conditions

For now, I’m primarily looking at the contract rollover gap to fill, and I’m keeping a close eye on the $70.3 level later today to see how price reacts. The longer-term trend is still downward, but I’ll quickly adapt if we see a breakout, retest, and subsequent upward move. Until then, my bias remains bearish.

Final Thoughts

Remember, trade at your own risk, and be sure to follow additional perspectives on ForexLive.com. There are always multiple views, and it’s valuable to consider them when formulating your strategy. Thanks for tuning in!

This article was written by Itai Levitan at www.forexlive.com.

• Prior +14.2%
• Market index 296.1 vs 266.8 prior
• Purchase index 148.2 vs 146.1 prior
• Refinance index 1,132.9 vs 941.4 prior
• 30-year mortgage rate 6.13% vs 6.15% prior

Mortgage applications continue to see a solid rebound in the past few weeks with yet another jump in the past week. That comes as rates continue to ease further, stirring another surge in refinancing activity mostly. But at the same time, purchase activity is also picking up. Is the turnaround finally here?

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

Fundamental
Overview

Yesterday, the US Consumer Confidence report surprised to the downside
with one of the largest drops since 2021. 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.

On the GBP side, the UK
PMIs on Monday were a touch softer than expected but still solid compared
to its peers. The market expected the BoE to deliver at very least another 25
bps cut in November.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD extended the gains above the 1.34 handle before giving back
some today. If we were to get a bigger pullback, the buyers will likely step in
around the support
zone around the 1.3265 level where we can also find the 38.2% Fibonacci
retracement level for confluence.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into new lows.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a trendline defining the current bullish
momentum. If we get a pullback, the buyers will likely lean on the trendline
with a defined risk below it to position for the continuation of the uptrend.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into new lows.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we
have another minor trendline defining the bullish momentum on this timeframe. Again,
the buyers will likely lean on it to position for new highs, while the sellers
will look for a break lower to target a fall into the next trendline. The red
lines define the average daily range for today.

Upcoming
Catalysts

Tomorrow, we get the latest US Jobless Claims figures, while on Friday, we
conclude the week with the US PCE.

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

• ECB’s Muller: An October cut isn’t totally excluded
• The central bank bonanza wraps up with the SNB later this week
• Germany September Ifo business climate index 85.4 vs 86.0 expected
• BOJ governor Ueda says unwinding of speculative yen positions has likely run its course
• European equities open higher as the positive mood keeps up
• What are the main events for today?
• BOE’s Bailey: Inflation has come down a long way
• BOJ governor Ueda: Global markets remain somewhat unstable
• RBA’s Bullock: We are prepared to respond in either direction depending on the data
• Eurostoxx futures +0.6% in early European trading
• RBA’s Bullock: Rates are to remain on hold for the time being
• BOJ governor Ueda says must conduct monetary policy in timely, appropriate fashion
• AUD/USD continues to set its sight on the December high as RBA reiterates hawkish stance
• RBA leaves cash rate unchanged at 4.35%, as expected
• Heads up: RBA monetary policy decision set for the bottom of the hour
• Chinese yuan gains alongside more positive mood in domestic markets

Markets:

• NZD leads, JPY lags on the day
• European equities higher;
  S&P 500 futures up 0.03%
• US 10-year yields up 4 bps to
  3.791%
• Gold
  up 0.08% to $2,630
• WTI
  crude up 2.49% to $72.13
• Bitcoin
  up 0.28% to $63,517

It’s been a
quiet session in terms of data releases with just the German IFO on the agenda.
The data was a touch softer than expected but no big deal. We got ECB’s Muller opening
the door for a cut in October with the market now pricing in a 95% probability
of a 25 bps move.

In the
markets, the surprising announcement of a big stimulus from Chinese officials
is still reverberating with commodities like copper and crude oil up notably on
the day. Treasury yields are also up as the market is now focusing on global
growth.

The focus
will now switch to the US consumer confidence and the labour market details in
the report. Looking forward, a pick-up in the US data in the next weeks and months
could see long term Treasury yields rising further.

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

• An October cut isn’t totally excluded.
• Too early to have strong view on October meeting.
• It will be easier to decide on cut in December.
• Services inflation needs to slow further.

This article was written by Giuseppe Dellamotta 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 didn’t get a
boost despite the rise in Treasury yields as the market might be focusing more
on global growth expectations. Now that the decision is behind us though, the
focus will be on the economic data.

If we start to see an
improvement, then Treasury yields will likely continue to rise and lead to a
reprising in the dovish expectations potentially supporting the greenback in
the short-term.

Conversely, if the data
weakens, the market will likely go ahead with expecting more 50 bps cuts by
year-end and weighing on the US Dollar.

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 58% probability for such a move.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD probed above the key resistance around the 1.36 handle but
eventually got smacked back down. The sellers increase the bearish bets yesterday
as we got a breakout on the lower timeframes from a two-week long range.

The target should now be
the 1.34 handle. The buyers, on the other hand, will likely step in around the
1.34 handle to position for a rally back into the 1.36 resistance.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see the breakout of the two-week long range yesterday and the increase in the
bearish momentum. If we get a pullback, the sellers will likely lean on the trendline
to position for the continuation of the downtrend. The buyers, on the other
hand, will want to see the price breaking higher to pile in for a rally into
the 1.36 resistance.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a strong resistance zone around the 1.3550 level where we can
find the confluence
of the previous swing low level, the 61.8% Fibonacci
retracement level and the trendline.

The sellers will likely pile
in there to position for more downside, while the buyers will look for a break
to the upside to target a rally into the 1.36 handle. 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 Canadian
GDP and the US PCE.

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

Here’s a recap on the month of major central bank policy decisions so far:

• Bank of Canada interest rate decision: Rates lowered by 25 basis points
• ECB cuts deposit rate by 25 bps in September monetary policy decision, as expected
• Federal Reserve September interest rate decision: 50 basis point cut
• BOE leaves bank rate unchanged at 5.00%, as expected
• Bank of Japan leaves rates unchanged, as widely expected
• RBA leaves cash rate unchanged at 4.35%, as expected

That leaves us with the SNB left later in the week. And I would say it will be one of the more interesting decisions besides the Fed in September.

The „expectation“ is for the Swiss central bank to cut rates by 25 bps, bringing the key policy rate to 1.00%. This was their previous decision in June.

However, since then, they have made a bit of a pivot to comment on their dislike towards a stronger franc. In terms of USD/CHF, the pair is keeping near the lows for the year and just off key daily support around 0.8400 recently. But sure, it’s the dollar equation playing a role as well. But what about the more watched EUR/CHF?

The pair briefly touched its lowest point in August under 0.9250 before bouncing back up to 0.9450 levels currently. But still, the danger is not over and if the SNB really wants to prevent another return to deflation, this is a key risk to be mindful of. There is no time to be complacent.

In that lieu, they might just spring a surprise on market players this week as such. After all, the SNB does have the propensity to do that as seen in the past.

If so, how much will that catch markets off guard?

Well, the OIS pricing shows traders attaching ~51% odds of a 25 bps rate cut this week. The remaining ~49% odds are with a 50 bps rate cut. So, it wouldn’t be the most surprising decision if the SNB does go big this week.

That said, there’s only so much more that traders are seeing the SNB will do. Looking out to June next year, traders are pricing in just ~71 bps of rate cuts and that includes what’s priced in for this week.

In any case, the SNB has a bit of a balancing act to do as things stand. They want a weaker franc and traders are already pricing in the potential for them to surprise. But at the same time, going big this week leaves less buffer room for them to cushion further blows to the economy moving forward.

And that certainly sets us up for one of the more interesting decisions we have in wrapping up the month.

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