Although markets reacted positively to initial selling pressure yesterday, there is still a risk that the recovery in sentiment may be starting to wane. Rising yields and mild gains on USD are again appearing today, in another warning signal.
- Main drivers: Slight move towards risk aversion today; PBoC holds rates, Tesla misses, one Fed speaker; Weekly Jobless Claims, US Existing Home Sales and Japanese inflation later.
- Positive sentiment stalling: Just a stalling of the risk recovery this morning. Asian markets were mixed after the tech sector acted as a drag on Wall Street.
- Yields holding higher, USD rebounds: The higher US bond yields may just be starting to pull USD back higher once more. If this continues it will play into a correction lower for risk appetite. [Marginally risk negative]
- Tesla falls after-hours Despite reporting earnings and revenues beating estimates, the shares have fallen in after-hours trading. Global supply chain problems remain an issue [Marginally risk negative]
- Bitcoin rises to a record high above $66,000: Comes as investors cheer the first day of trading for the newly launched Bitcoin futures ETF “ProShares Bitcoin Strategy ETF”
- Fed speakers talk taper and interest rates – FOMC’s Quarles (permanent voter, centrist) supports a November taper and is to end by mid-2022. FOMC’s Mester (2022 voter, hawk) said that they have met the conditions for the taper, but rate hikes will not be coming any time soon [Broadly all risk neutral]
- Central bank speakers due today: One more from the Fed before the FOMC goes into its “Blackout Period” on Friday
FOMC’s Waller (permanent voter, mild hawk) at 1200GM
- Economic Data
US Weekly Jobless Claims at 1230GMT are expected to rise slightly to 298,000 (from 293,000 last week
Existing Home Sales at 1400GMT are forecast to improve to 6.09m in September (from 5.88m last month).
Eurozone Consumer Confidence at 1400GMT for October is expected to slip to -5 (from -4 in September)
Japan Core CPI at 2330GMT for September is forecast to move to +0.1% (from zero) which would be the highest since March 2020.
- Broad outlook: With yields remaining higher, we are watching USD moves. An initial tick higher on USD is impacting across major forex, weighing on commodities and seeing profit-taking on indices.
- Forex: A slight unwind on recent USD weakening this morning. Dollar Index has rebounded from 93.50/55 again today (the third day in a row).
EUR/USD again faltering at a test of 1.1665/70. The recovery trend remains intact. Support at 1.1615 needs to hold to continue the recovery.
GBP/USD higher lows and higher highs in recovery with the latest rebound off 1.3440. We remain positive for the near term recovery whilst 1.3710 support holds. Above 1.3835 opens 1.39/1.40.
AUD/USD slight near term technical correction back towards 0.7440/0.7475 would be a chance to buy. Below 0.7380 aborts the recovery.
- Commodities: A rebound on the USD is pulling back on the rally in commodities
Gold remains uncertain near term. Holding above $1780 is a marginal improvement, but a close above $1800 is needed to turn positive again for a test of the range highs at $1834. Support at $1745/$1760 is key near term.
Silver rally is just stalling slightly today, but move above $24.00 was bullish. We look to buy into weakness, with good support $23.55/$24.10.
Brent Crude oil yesterday’s rally failed to overcome resistance at $86.35. Another early slip, but with the uptrend so strong there is little reason not to expect a test of the 2018 high of $86.95.
- Indices: Wall Street mixed into the close. NASDAQ lower, with S&P 500 marginally higher. The threat of a potential unwinds on recent gains.
S&P 500 futures just consolidating early today. Watching initial support at 4504, but 4470 is bigger support now. We look to buy into weakness. The all-time high is 4548, with initial resistance of 4531.
DAX Choppy consolidation is forming, however, buyers are still using weakness as an opportunity. Support between 15,395/15,415. A break back above 15,600 would be bullish for 15,780.
FTSE 100 still consolidating under resistance at 7246. Support is developing around 7150/7200 which will strengthen the outlook. The bulls are still looking for a breakout above 7246.