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MongiIG

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  1. MongiIG
    In this article we take a technical analysis view of how events are currently shaping movements in major Asian indices, the Hang Seng and China A50.
    Source: Bloomberg  Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Monday 11 October 2021  A Chinese regulatory clampdown across multiple sectors, ongoing trade disputes, energy shortages and fears of contagion into the financial system from a heavily indebted Evergrande, have been among the factors weighing on Asian markets, the Hang Seng Index and China A50, as of late. However from a charting standpoint we are starting to see some signs of a bullish trend reversal, at least in the very near term.
    The Hang Seng Index (Hong Kong 50)
    Source: IG Charts The Hang Seng Index is currently breaking above the downward trend line which has been in place since July this year. The move higher follows a short term consolidation between levels 23925 and 24845.
    The upside breakout suggests a short term trend reversal from down to up. 26500 becomes the initial upside target from the move. A close below the 24615 might suggest the short term reversal to have failed.
    China A50
    Source: IG Charts The China A50 index also looks to be breaking above the long term downward trend line on the chart above after a more prolonged consolidation between levels 14560 (support) and 15680 ( resistance).
    The upside breakout now sees 16795 as the next upside resistance target from the move. A close below the midpoint of the range at 15120 would instead suggest the failure of the short term bullish trend reversal.
    In summary:
    Power shortages, regulatory uncertainty, Evergrande and trade disputes have been negative catalysts for Asian financial markets
    In the near term we are seeing signs of bullish trend reversals on the Hang Seng Index and Chinas A50 index
    These indices are breaking up out of short term consolidations and above trend line resistance
    16795 provides the next upside resistance target for the China A50 index, while a close below 15120 would suggest the bullish reversal to have failed
    26500 provides the next upside resistance target for the Hang Seng Index, while a close below 24615 could suggest the bullish reversal to have failed
  2. MongiIG
    EUR/GBP Price, Chart, and Analysis
    Interest rate hike bets increase after central bank comments. EUR/GBP nearing a fresh 18-month low.
     
    The Bank of England may need to hike interest rates earlier than previously expected as UK inflation runs hot, according to two members of the central bank’s rate-setting committee. Speaking to the Yorkshire Post, BoE governor Andrew Bailey said that he is concerned about the current level of inflation.
    ‘Unfortunately, if you look at our last forecast, it (inflation) is going to go higher I am afraid. As Bank of England governor I would prefer it not to be there’. Acknowledging that the country is going through ‘very unusual times’ governor Bailey added that they have a challenging job on their hands and that ‘ we have got to in a sense prevent the thing becoming permanently embed because that would obviously be very damaging’.
    Governor Bailey was not the only MPC member to warn of higher rates over the weekend with known hawk Michael Saunders suggesting that ‘it is appropriate that the market moved to a significantly earlier path of tightening than they did previously’. Speaking to the Daily Telegraph, Saunders warned that interest rates may be raised before the end of the year to head off soaring inflation.
    Keep up to date with all market-moving data releases and events by using the DailyFX Calendar
    The next Bank of England meeting, with the latest Monetary Policy Report, is set for November 4 and this meeting will now take on added significance if the central bank is to pull the trigger on rate hikes this year. The market is already implying a 0.15bp rate hike in December with further hikes seen next year.

    Data by Refinitiv
    Sterling is pushing higher across the board, aided by ongoing weakness in various other currencies. GBP/JPY has jumped above 154.00 to print a new multi-week high, while Sterling is also up nearly 1/3 of a cent higher against the USD and the Euro. Looking at EUR/GBP, the pair look set to test resistance just under 0.8450. Below here EUR/GBP will be back to lows seen in February 2020. The daily chart remains bearish but oversold. This current mixed bias is confirmed by current retail positioning (see below).
    EUR/GBP DAILY PRICE CHART – OCTOBER 11, 2021

    Retail trader data shows 78.59% of traders are net-long with the ratio of traders long to short at 3.67 to 1.The number of traders net-long is 0.50% lower than yesterday and 56.86% higher from last week, while the number of traders net-short is 1.90% higher than yesterday and 21.82% lower from last week.
    We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/GBP trading bias.
    What is your view on Sterling – bullish or bearish?
     
    By Nick Cawley, Strategist, 11th October 2021. DailyFX
  3. MongiIG

    The Week Ahead On The Markets

    By MongiIG,


    Market News
    The Week Ahead
    Read about upcoming market-moving events and plan your trading week
                                                               Week commencing 11 October
    Chris Beauchamp’s insight
    The week begins quietly with a US market holiday, but it rapidly heats up with US earnings season upon us once more. US banks and a host of UK trading statements dominate the week. Along with this, we have UK employment data, Chinese and US inflation data and the latest set of Fed minutes.
      Economic reports
    Weekly view Monday
    US market holiday
    Tuesday
    1.30am – Australia NAB business confidence (September): index to fall to -8. Markets to watch: AUD crosses
    7am – UK employment data: claimant count to fall by 46,000 in September, while the unemployment rate holds at 4.6% for August. Markets to watch: GBP crosses
    10am – German ZEW index (October): index to fall to 17.6. Markets to watch: EUR crosses
    Wednesday
    4am – China trade balance (September): exports to rise by 21%. Markets to watch: CNH crosses
    7am – UK trade balance (August), GDP (August 3-month average): trade deficit to fall to £2.4 billion while GDP rises 2.5% from 3.6% in July. Markets to watch: GBP crosses
    1.30pm – US CPI (September): prices to rise 5.3% YoY and 0.3% MoM, while core CPI rises 4% YoY and 0.2% MoM. Markets to watch: US indices, USD crosses
    7pm – FOMC minutes: these will look at the discussions around the latest Fed decision. Markets to watch: US indices, USD crosses
    Thursday
    1.30am – Australia employment rate (September): expected to rise to 5.2%. Markets to watch: AUD crosses
    2.30am – China CPI & PPI (September): CPI to be 0.8% YoY and 0.1%, while PPI rises to 9.8% YoY. Markets to watch: China indices, CNH crosses
    1.30pm – US initial jobless claims (w/e 9 October): claims to fall to 315K. Markets to watch: USD crosses
    4pm – US EIA crude oil inventories (w/e 8 October): stockpiles rose by 3.2 million barrels in the previous week. Markets to watch: Brent, WTI
    Friday
    1.30pm – US retail sales (September), Empire State mfg index (October): sales to fall 0.1% MoM and mfg index to fall to 27. Markets to watch: USD crosses
    3pm – US Michigan consumer confidence (October, preliminary): index to rise to 74 from 72.5. Markets to watch: USD crosses
      Company announcements
     
     
    Monday
    11 October
    Tuesday
    12 October
    Wednesday
    13 October
    Thursday
    14 October
    Friday
    15 October
    Full-year earnings
      DX Group   ASOS   Half/ Quarterly earnings
      French Connection JPMorgan Chase,
    Blackrock,
    Goldman Sachs,
    Delta Airlines Domino’s Pizza,
    Bank of America,
    Wells Fargo,
    Citigroup,
    Morgan Stanley   Trading update
    888 Holdings Stagecoach,
    Just Eat Takeaway.com Man Group,
    PageGroup,
    Bunzl,
    Pearson,
    Stock Spirits Dunelm,
    Hays,
    Rathbones Jupiter  
      Dividends
    FTSE 100: WPP, Spirax-Sarco Engineering, Tesco
    FTSE 250: Howden Joinery, NCC, Close Brothers, Primary Health PRoperties
     
    Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
     
    Index adjustments
      Monday
    11 October Tuesday
    12 October Wednesday
    13 October Thursday
    14 October Friday
    15 October Monday
    18 October FTSE 100    
    1.54       Australia 200 0.1     0.3     Wall Street             US 500   0.13 0.49 0.01   0.07 Nasdaq             Netherlands 25             EU Stocks 50             China H-Shares             Singapore Blue Chip     0.09       Hong Kong HS50           1.7 South Africa 40   65.5         Italy 40         64.9   Japan 225            
  4. MongiIG
    Lumber spike highlights potential for a bullish resurgence, with seasonality pointing towards a strong Q4.
    Source: Bloomberg    Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 08 October 2021  Lumber finally starts to turn a corner
    Lumber has seen huge volatility over the course of the pandemic, with an initial 45% decline, followed up by a whopping 564% bull run that ended in May.
    The past few months have been less welcome for bulls, with the price of lumber losing 73% in little more than three months. However, as highlighted a month ago, this pullback does look likely to represent a potential buying opportunity before long.
    The long-term picture remains bullish despite this recent collapse, with the trend of higher lows firmly intact. A break below $257 would be required for that to occur.
    With that in mind, we are looking for a bullish reversal signal to come into play between here and $257. As such, the recent spike from $460 looks like a particularly interesting possible reversal point.
    Source: ProRealTime 10% rise signals potential return of the bulls
    The daily chart highlights how lumber has broken from its recent downtrend, with price pushing up through trendline resistance. However, hurdles do lie up ahead as the trend of lower highs remains unbroken.
    A rise through the $732 level would bring that bullish break, yet short-term upside still looks likely as we push towards near-term resistance of $667.
    Source: ProRealTime Seasonality highlights potential for Q4 rebound
    Once again, it is worthwhile to note the seasonality chart for lumber, with the fourth quarter (Q4) typically representing the source of a final end of year push higher.
    The chart below highlights that we often see major volatility in the second half of the year when looking at the past 20-years. That typically takes the form of Q3 weakness and a Q4 recovery, signalling the potential for us to start building a base over the course of September for an ultimate push higher later in the year.
    The ability to break $732 will be key in determining whether such a move will happen sooner or later.
    Source: EquityClock  
    The statistical breakdown does provide some clues as to how that chart is constructed.
    Despite the strong start this month, September is statistically the weakest month over the past 20-years. An average return of -7.8% comes with a win rate of just 25%. If we were to maintain this recovery from here on, it would smash the record 11% September gain seen in 2010.
    It is worthwhile noting that the particularly damaging -34% move seen last year will have heavily influenced the average. Nonetheless, what we are seeing is a move towards a particularly strong three-month period to close out the year, with November seeing the most reliable month given the 75% gain frequency rate.
    November has also seen the least downside, with the 2017 decline of -6.7% representing the worst November over the course of two decades.
     
    With this in mind, there are still some question marks over whether the recovery comes into play here or whether this is simply the opening salvo in a bullish turnaround that could gather momentum towards the back end of the year. I
    n any case, this latest period of weakness does look like something that will ultimately resolve with another push higher, yet key hurdles remain up ahead before we can gain strong confidence that we have bottomed out.
  5. MongiIG
    USD, NFP Price Analysis & News:
    US NFP 194k vs 500k, Prior Reading Revised Higher. Unemployment Rate Drop Overstated by Labour Force Dip. Fed Tapering a Done Deal.
    NFP MIXED AS HEADLINE MISSES, REVISION UPGRADED, WHILE UNEMPLOYMENT RATE BEATS
    A much weaker than expected NFP headline at 194k vs 500k, while the prior reading had been revised higher to 366k from 235k. The unemployment rate fell 0.4ppts to 4.8% dropping below expectations of 5.1%. Now while the unemployment rates looks better than expectations, keep in mind the labour force participation rate fell 0.1ppt to 61.6% and thus overstates the drop in the unemployment rate, subsequently this slightly discounts what would appear to be a big positive.
    Elsewhere, average hourly earnings beat expectations on the monthly reading, while the yearly rate matched estimates. However, the prior readings saw a downside revision. Once again, the ADP report proves it is not a good indicator for NFP.
    USD DROPS AND GOLD POPS
    In reaction to the headline, the USD came under immediate pressure briefly dipping below the 94.00 handle alongside yields, while the gold rose to its best levels of the day to hit a high of 1776. However, as I mentioned before, a November taper is a done deal, so this report will have not have moved the needle, particularly after Fed Chair Powell said the report needs to be reasonably good. Instead, the report has slightly cooled off rate hike bets, which in turn keeps equities on the bid.
    Find Out More About Non-Farm Payrolls and How to Trade it
    DATA OVERVIEW: DailyFX Economic Calendar

    Source: DailyFX
     
    USD, GOLD, RATES REACTION TO NFP: INTRA-DAY TIME FRAME

    Source: Refinitiv
     
    By Justin McQueen, Strategist, 8th October 2021. DailyFX
  6. MongiIG
    US DOLLAR PRICE, CHART, AND ANALYSIS
    US 10-year bond yields print a fresh four-month high. US Jobs Report a make-or-break for further US dollar strength.
    The yield on the benchmark US Treasury 10-year is popping higher, aided by news overnight that the US Senate voted to extend the debt ceiling until December, pushing back market fears of a government default. The Senate agreed by a vote of 50-48 to increase the debt limit by $480 billion to enable the government to pay its bills until early December.
    With fears of a US government default now pushed down the road, all eyes will be focused on this month’s US Jobs Report (NFP) released at 13:30 BST today. This month’s report will be watched more keenly than usual as a print in line with expectations, or even mildly below, is likely to trigger the Fed to start tapering its $120 billion a month bond-buying program, a program that has left the central bank holding in excess of USD 8 trillion of assets.

    With the central bank likely slowing down and then finishing bond purchases by mid-next year, US bond yields continue to creep higher as one guaranteed buyer exits the market. While the eventual pullback in bond purchases has been known for some time, US Treasury yields may have further to rise as price pressures in the US economy remain at elevated levels.
    10-YEAR US TREASURY YIELD – OCTOBER 8, 2021

    The latest US jobs report is released later in the session with expectations that 500k new jobs were created in September, compared to 235k jobs in August. The unemployment rate is seen nudging lower to 5.1% from a prior reading of 5.2%.
    Keep up to date with all market-moving data releases and events by using the DailyFX Calendar
    The US dollar basket (DXY) remains within touching distance of highs last seen in September 2020 and continues to cling to a trend resistance line started in mid-June. As always with NFP reports, price action is likely to get volatile post-release, but an inline number should cement tapering from November and continue to boost the value of the greenback. The next level of resistance is an old lower high around 94.79 before 95 comes into view.
    US DOLLAR DAILY PRICE CHART OCTOBER 8, 2021

    What is your view on the US Dollar – bullish or bearish?
    By Nick Cawley, Strategist, 8th October 2021. DailyFX
  7. MongiIG
    GOLD, XAU/USD, TREASURY YIELDS, NON-FARM PAYROLLS, US DOLLAR, TECHNICAL ANALYSIS - TALKING POINTS:
    Gold prices fall, Treasury yields rise on interim US debt ceiling solution. An upbeat non-farm payrolls report risks accelerating XAU/USD losses. Falling Wedge breakout losing momentum, retail traders reduce short bets.
     
    Gold prices aimed cautiously lower over the past 24 hours. The anti-fiat yellow metal was left vulnerable as the ongoing rise in Treasury yields dampened the appeal of the non-interest-bearing asset. Still, it could have been worse. A slightly softer US Dollar worked to cushion the XAU/USD’s downside potential. The haven-linked currency was likely pressured by improving risk appetite as the S&P 500 climbed.
    Markets likely welcomed the near-term solution to the US debt ceiling. During Friday’s Asia-Pacific trading session, the Senate extended the cap to December 3rd. That reduced the risk of default, lifted uncertainty and boosted market sentiment. Meanwhile, a pullback in natural gas prices may have also played a role in bolstering risk appetite. Russia seemingly hinted at increasing supplies to Europe.
    All eyes turn to the US non-farm payrolls report as traders head into the weekend. The Citi Economic Surprise Index is up to -15.50 from a low of -61.60 in September. In other words, while economists are still underestimating the health and vigor of the economy, this has been by an increasingly smaller margin. A relatively rosier outcome compared to the August print may keep bond yields elevated, pressuring gold.
    Check out the DailyFX Economic Calendar for more key events!
    GOLD TECHNICAL ANALYSIS
    On the 4-hour chart, gold prices have been consolidating between the 1769 – 1766 and 1740 – 1747 inflection zones since late September. XAU/USD appeared to break above a bullish Falling Wedge chart formation, but follow-through has been lacking. That is undermining the breakout. A push lower exposes the September low. Otherwise, a climb places the focus on the 200-period Simple Moving Average.
    XAU/USD 4-HOUR CHART

    Chart Created Using TradingView
    GOLD SENTIMENT ANALYSIS
    According to IG Client Sentiment (IGCS), about 74% of retail traders are net-long gold. Downside exposure has decreased by 5.68% and 20.23% over a daily and weekly basis respectively. We typically take a contrarian view to crowd sentiment. Since most traders are net-long, this suggests gold may continue falling. Recent shifts in positioning are further underscoring a bearish contrarian trading bias.

    *IGCS chart used from October 7th report
    Written by Daniel Dubrovsky, Strategist for DailyFX.com. 8th October 2021
  8. MongiIG
    S&P 500, Dow Jones, Nasdaq 100 Outlook. China’s So-Called Lehman Moment. Global Tapering Underway.
     
    Throughout the third quarter, there had been somewhat of a reversal in the reflation trade as concerns over the peak in the global growth lingered, alongside the continued spread of the Delta variant. However, despite this, life after lockdown continues as vaccination rates across the globe pick up and while the latest concerns stemming from China have catalysed major US equities experiencing a 5% drop from ATHs for the first time since last October, the outlook for equity markets remain encouraging.
    China’s So-Called Lehman Moment: At the back-end of Q3, market focus on the indebted property developer, Evergrande, had increased dramatically, with some naming it China’s Lehman moment. However, judging by the underperformance in Chinese high yield bonds vs investment-grade debt, this does not appear to be the case and instead looks more like a domestic credit event. Nonetheless, sentiment will of course play its part and you can expect spillover effects to weigh across global equity markets, but a widespread systemic risk event appears to be somewhat exaggerated. Needless to say that Q4 is shaping up to be a more volatile quarter.
    Global Tapering Underway: Central Banks are turning hawkish, the Fed has announced that it is likely to taper asset purchases from November, which will see its balance sheet hovering around $8.5trillion before asset purchases come to an end by the middle of next year. Meanwhile, the Norges Bank has become the first G10 central bank to raise interest rates, with the RBNZ to follow shortly after, while the BoE has stoked up expectations that it will tighten policy sooner than what markets had previously anticipated. As such, with global central bank liquidity on the slowdown, global bond yields will be closely watched for a mini-tantrum, which in the event of one, does pose a marginal risk to equity markets to kick-off Q4.
    Despite this, however, equities would only be following their typical path (Figure 1).
    That being said, the path of least resistance remains higher for equity markets in the longer term. In the US, the Democrats look to pass another fiscal stimulus package and thus keeping the outlook bright. What’s more, supply chain constraints that have weighed on momentum in economic activity will moderate and therefore allow economic data to establish a firm footing once again.

    Source: Refinitiv
     
    By Justin McQueen, Strategist, 7th October 2021. DailyFX
  9. MongiIG
    FTSE 100 PRICE, NEWS AND ANALYSIS:
    Several factors are lifting stock markets near term, including hopes that an agreement on the US debt ceiling is close, Putin’s offer to stabilize the world energy markets and a potential meeting of Xi and Biden. However, worries about China persist, and this rally may just reflect some short-covering and dip-buying before stock markets head lower again.
     
    FTSE 100 RALLY MAY NOT LAST LONG
    World stock markets, including London’s, are benefiting from a more helpful news flow. First up, US Democrats have signaled that they will take up Senate Republican leader Mitch McConnell’s offer to raise the US debt ceiling, reducing the admittedly highly unlikely risk of a US default on its debts.
    Second, Russian President Vladimir Putin has offered to stabilize global energy markets, hinting that the State-backed Gazprom could increase supplies to help Europe. Third, US President Joe Biden and Chinese President Xi Jinping have reportedly agreed to hold a virtual summit that could reduce the tensions between the two countries. And fourth, the European Central Bank is reported to be considering a new bond-buying program to stabilize markets after its pandemic emergency purchase program (PEPP) ends in March.
    That has all combined to weaken the oil and natural gas markets but strengthened global stock market indexes, including London’s FTSE 100.
    FTSE 100 PRICE CHART, ONE-HOUR TIMEFRAME (SEPTEMBER 30 – OCTOBER 7, 2021)

    Source: IG (You can click on it for a larger image)
    MARKET WORRIES PERSIST
    Note, though, that the small advance that began mid-Wednesday could easily reverse. China’s troubled power and property sectors remain a background concern, and the latest rally may just represent some dip-buying and short-covering that will soon be over.
    Friday’s US labor-market report is another potential hurdle. Economists polled by the news agencies expect non-farm payrolls to have risen by a hefty 500,000 in September, up from 235,000, and a good figure could prompt the Federal Reserve to taper monetary stimulus as early as next month… a move that would likely damage market confidence.
    BEARISH FTSE SIGNAL FROM SENTIMENT DATA
    As for retail trader positioning, IG client sentiment data show 69.10% of traders are net-long the FTSE 100, with the ratio of traders long to short at 2.24 to 1. The number of traders net-long is 12.58% higher than yesterday and 13.64% higher than last week, while the number of traders net-short is 14.30% lower than yesterday and 27.11% lower than last week.
    Here at DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests FTSE 100 prices may weaken. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger FTSE 100-bearish contrarian trading bias.
    Written by Martin Essex, Analyst, 7th October 2021. DailyFX
  10. MongiIG
    U.S. DOLLAR ANALYSIS
    568K ADP print favors further dollar gains. Higher yields giving impetus to further dollar upside. Focus shifts to Friday’s NFP data.
     
    DOLLAR FUNDAMENTAL BACKDROP
    ADP SURPASSES EXPECTATIONS
    The ADP employment change data for September hit 568K, significantly exceeding forecasts. Leading up to the ADP announcement, the U.S. dollar index lessened slightly as markets awaited the data print but quickly regained its upside momentum. Although the historical correlation between ADP and NFP figures are uninspiring at best, the positive nature of the reading may hint at better than expected NFP data later this week.

    Source: DailyFX economic calendar
     
    DOLLAR BOLSTERED BY RISING U.S. TREASURY YIELDS
    U.S. 10 and 30-year government bond yields continue their rally heading up to the ADP employment data which has kept a supportive environment for the greenback.
    LONG-END U.S. TREASURIES VS DXY

    Source: Refinitiv
    Upcoming jobless claims and Non-Farm Payroll (NFP) data (see calendar below) will give further guidance to markets moving forward. That being said, I believe only a significant underperformance could halt Fed tapering.
    Inflationary pressure is lingering and is only being exacerbated by the current energy crisis and supply disruptions. QE tapering is required to help stem these headwinds despite disappointing recent labour prints.

    Source: DailyFX economic calendar
    SAFE-HAVEN PLAY
    The dollar is being given additional support as a safe-haven particularly regarding Emerging Market (EM) currencies which has roots in increasing U.S./China tensions as well as the ongoing potential Evergrande debt default.
    Contrary to the above, there is growing concern over a default by the U.S. government should the Democrats proposal to raise the current debt ceiling be rejected by Republicans once more. This will put negative pressure on the dollar should a credit downgrade ensue. According to Treasury Secretary Janet Yellen, October 18 2021 has been reserved as the deadline date.
    TECHNICAL ANALYSIS
    U.S. DOLLAR INDEX DAILY CHART

    Chart prepared by Warren Venketas, IG
    The daily DXY chart above represents a strong up-trending market despite being in overbought territory. Dollar bulls now eye the 38.2% Fibonacci level at 94.79 (Fibonacci taken from March 2020 high to January 2021 low) last seen in September 2020. There is still room to the upside despite the overbought Relative Strength Index (RSI) reading. With a hawkish Fed, this is likely to buoy dollar prices towards 94.79 short-term.
    Resistance levels:
    95.00 94.79 Support levels:
    94.00 20-day EMA (purple) Written by Warren Venketas for DailyFX.com. 6th October 2021
  11. MongiIG
    NZD, GBP ANALYSIS AND NEWS
    RBNZ Hikes Rates for the First Time in 7yrs, NZD Underperforms The Pound is Likely to be Another Victim of Aggressive Tightening Bets
    RBNZ HIKES RATES FOR THE FIRST TIME IN 7YRS
    Overnight, the RBNZ raised interest rates by 25bps to 0.75%, marking the first hike in 7-years. The Bank also signalled that further withdrawal of stimulus will be needed. However, the initial move higher in the Kiwi had been quickly pared with the currency subsequently the worst performer across the G10.
    Daily FX Performance

    BUT WHY IS THE KIWI THE WORST PERFORMER?
    Despite what the traditional textbooks will tell you, a rate hike does not simply mean the currency should always appreciate. It's important to know what the market currently expects, what is priced in already. A term you may or may not have heard is “buy the rumour, sell the fact”, which highlights a typical market behaviour where traders will anticipate actions from a central bank or a significant market event and thus front-run the move before selling after the event. I have touched on this previously regarding Bitcoin and discussed the possibility of such behaviour occurring for the RBNZ decision. What’s more, this was also one of the factors behind my top trade for Q4to be long AUD/NZD.
    That said, given that the decision to hike had been completely expected by the market as money markets priced this in, there was little in the way of a surprise for Kiwi bulls to get excited. Additionally, tighter policy has been priced into NZ rates market going forward, meaning that the ability to surprise on the hawkish side is limited and thus the room to disappoint is higher. I must also point out that the current pullback in risk appetite has also played its part in Kiwi weakness.
    NZD Reaction to Expected RBNZ Hike

    Source: Refinitiv
    THE POUND IS LIKELY TO BE ANOTHER VICTIM OF AGGRESSIVE TIGHTENING BETS
    Much like the Kiwi, my view is that the Pound could also be another victim of money markets pricing in aggressive monetary policy tightening. As it stands, overnight index swaps are pricing in over an 85% chance that the BoE will raise rates this year (on the basis the Bank’s first hike will be 15bps) and given the period of uncertainty we are heading into, with UK data set to get weaker amid the current energy crisis, alongside the expiration of the furlough scheme the rates market may be getting ahead of itself. In turn, my preference is to fade rallies in the currency against the USD. It is also worth keeping a close eye on EUR/GBP and and GBP/JPY as we test 0.8500 and 151.00 respectively.
    GBP/USD Forecast: GBP Breakdown Risks Heightened on US Dollar Charge By Justin McQueen, Strategist, 6 October 2021. DailyFX
  12. MongiIG
    CANADIAN DOLLAR, USD/CAD, US DOLLAR, INFLATION, US YIELDS - TALKING POINTS:
    The Canadian Dollar was overwhelmed by US yields despite sky-high crude oil. APAC equities lost ground as inflationary fears from energy markets grow. USD stronger, including against commodity currencies. Where to for USD/CAD?
     
    The Canadian Dollar retreated today as the US Dollar found support, with yields moving aggressively higher on inflationary fears. The energy surge continues, with Brent crude oil approaching US$ 80 a barrel and US natural gas at levels last seen in 2008. The main APAC equity bourses went lower despite a positive lead from Wall Street.
    The spike in inflation earlier in the year was dismissed as a ‘base effect’. As the low numbers of 2020 rolled out of the annual number. The high inflation then became a ‘transitory’ phenomenon.
    Energy prices are a significant component of inflation indicators the world over. Some inflation indicators exclude volatile items, such as oil and gas. However, the energy market surge may have flow-on effects for other components in the inflation basket.
    As oil, coal and liquefied natural gas continue to rocket higher, markets are asking “how long does ‘transitory’ last?” This question drove long end yields higher today. The US 30-year is at 2.14% (+0.045%) and 10-year is at 1.566% (+0.04%). This supported the US Dollar and drove USD/CAD higher.
    If inflation remains higher for longer, long duration bets deteriorate from a risk-return perspective. In this environment, investors prefer to sell long bonds and move further down the yield curve toward cash.
    US Democratic Senator Elizabeth Warren continued to express dismay about the performance of Federal Reserve Chairman Jerome Powell. His current term is due to expire in February and up until now it had been widely expected that he would be stamped with another one.
    While Ms Warren’s focus was on the integrity of fellow Fed members, market participants might start to ask questions around what prolonged transitory inflation means for US economic prosperity.
    The RBNZ raised the official cash rate (OCR) rates by 25 basis points to 0.50% today as domestic pressures forced their hand despite an uptick in Covid-19 cases. As USD moved higher on safe-haven buying, NZD went lower with AUD and to a lesser extent CAD and NOK, as the latter have significant oil exports.
     
    USD/CAD TECHNICAL ANALYSIS
    USD/CAD has consolidated today after several session of making lower lows. A short-term Death Cross was made on the move lower when the 10-day simple moving average (SMA) crossed below the 21-day SMA.
    Yesterday’s price action created a bullish Spinning Top. Resistance might be found at the previous highs of 1.27746, 1.28963 and 1.29492. On the downside, support could be provided at the previous lows of 1.24936 and 1.24225.

    Chart created in TradingView
    Written by Daniel McCarthy, Strategist for DailyFX.com. 6th October 2021
  13. MongiIG
    BRITISH POUND, GBP/USD, GBP/JPY, TECHNICAL ANALYSIS, RETAIL TRADER POSITIONING - TALKING POINTS:
    Retail traders increasingly bet that the British Pound may weaken. Contrarian signals hint that GBP/USD and GBP/JPY could rise. Sterling rectangle breakout struggles, GBP/JPY facing triangle.
     
    According to IG Client Sentiment (IGCS), retail investors are increasingly betting that the British Pound may weaken against the US Dollar and Japanese Yen. IGCS can at times be a contrarian indicator. If this trend in positioning continues, then Sterling could appreciate instead. To learn more about how you can use IGCS in your own trading strategy, check out the latest recording of my biweekly webinar series.
    GBP/USD SENTIMENT OUTLOOK - BULLISH
    The IGCS gauge implies that roughly 56.1% of retail traders are net-long GBP/USD. Short positioning is on the rise, gaining by 9.55% and 71.92% over a daily and weekly basis respectively. We typically take a contrarian view to crowed sentiment. Since most investors are net-long, GBP/USD may fall. However, recent changes in positioning hint that price action may favor the upside instead.

    TECHNICAL ANALYSIS
    GBP/USD has been struggling to hold a breakout under a Rectangle chart formation. Prices bounced off the 50% Fibonacci retracement at 1.3464. Now, the pair finds itself retesting the former floor of the rectangle between 1.3572 and 1.3671. This range may be establishing itself as new resistance. A fall back under 1.3572 could open the door to extending losses since May. On the other hand, rising back into the body of the rectangle places the focus on the 50- and 100-day Simple Moving Averages (SMAs).
    GBP/USD DAILY CHART

    Chart Created in Trading View
    GBP/JPY SENTIMENT OUTLOOK - BULLISH
    The IGCS gauge implies that about 35% of retail traders are net-long GBP/JPY. Downside exposure has increased by 29.70% and 4.39% over a daily and weekly basis respectively. Since the majority of traders are net-short, prices may continue rising. Recent changes in positioning are further underscoring the outlook to the upside.

    TECHNICAL ANALYSIS
    GBP/JPY appears to be consolidating within the boundaries of a Descending Triangle chart formation. In fact, the pair finds itself around similar levels seen back in late February. Price action is testing a combination of the ceiling of the triangle, as well as the 100-day SMA. A breakout higher could increasingly shift the technical outlook bullish, placing the focus on 153.444. Clearing this price exposes the May high at 156.08. Otherwise, prices may fall to the floor of the triangle, making for key support between 148.533 and 149.387. Breaking under this range exposes the 78.6% Fibonacci extension at 147.461.
    GBP/JPY DAILY CHART

    Chart Created in Trading View
    *IG Client Sentiment Charts and Positioning Data Used from October 6th Report
    Written by Daniel Dubrovsky, Strategist for DailyFX.com. 6th October 2021
  14. MongiIG
    Manufacturing under pressure, with the DAX and EUR/GBP looking likely to underperform going forward.
    Source: Bloomberg  Joshua Mahony | Senior Market Analyst, London | Publication date: Tuesday 05 October 2021. IG Euro at risk as manufacturing squeeze centres on the West
    Manufacturers managed to traverse much of the pandemic in relative health, with elevated demand coupled with a ramp-up in online shopping.
    Predictably, the Chinese have been at the forefront of that boom, although their current energy struggles have sparked outages across much of the country.
    Chinese economic difficulties are just one of many issues hitting the manufacturing sector of late, with fears growing of how businesses will manage to keep up as demand grows in the months ahead.
    The chart below highlights the numerous fronts of this growing crisis, with weakening demand growth, longer delivery times, and surging input prices.
     
    Source: IHS Markit; JPMorgan  
    While there will be plenty of nations impacted by these factors, the bulk of it appears to be felt in the Western world.
    Regarding input prices, the German economy has been hit the hardest according to the latest data. Out of the top ten affected nations, eight of those are part of the eurozone.
     
     
    Meanwhile, the growing issues surrounding lengthening delivery times appears to be more of an international affair, with Canada and Australia squeezing into the top 10 alongside the UK and US.
    Nonetheless, it is largely similar names being affected.
     
     
    With the potential for an extended period of difficulty in the manufacturing sector, we are looking at a potential driver of weakening growth for some businesses and economies.
    Looking at the world’s largest producers, we can see that China, the US and Germany stand out from the pack.
     
    UK stocks look attractive thanks to lower reliance on manufacturing
    The German economy looks particularly at risk here, with 26% of the country’s GDP coming from industry. That compares with 17% in the UK. As a result, we could see weakness for German and eurozone assets relative to the UK.
    Looking at the relationship between the FTSE 100 and the DAX, we can see a divergence growing. The ratio between the two stands at the lowest level since early March, after finally breaking below the 2.2 mark for the first time in four months.
    With fears of a manufacturing slowdown, there is a good chance people avoid German stocks in favour of undervalued UK-listed businesses.
     
    Source: TradingView EUR/GBP breaks support, but can it exit long-term range?
    EUR/GBP has similarly seen weakness for the eurozone asset, with the pair falling back below 0.8525 support today.
    Coming in the midst of a seven-month consolidation phase for the pair, there is a distinct chance we see the pair finally break out before long. For that to happen, we would need to see 0.8500 and 0.8450 taken out.
    Source: ProRealTime  
    With price having slipped back below the 0.8525 support level, we can see that further downside looks likely before long.
    A break up through the 0.8573 level would be required to bring about a more positive short-term outlook.
    Source: ProRealTime
  15. MongiIG
    GBP PRICE, NEWS AND ANALYSIS:
    After its decent rally since the end of last month, GBP/USD now looks likely to fall back, although it could remain around the 1.36 level for a while first. Talk in the UK media of stagflation persists, and a dire set of new car registration figures will do nothing to counter that narrative.
     
    GBP/USD COULD HOLD STEADY, THEN DROP
    GBP/USD is in an interesting position, having rallied from the September 29 low at 1.3412 to around 1.36. Near-term it could well stay close to that level but further losses afterwards cannot be ruled out.
    GBP/USD PRICE CHART, DAILY TIMEFRAME (APRIL 22 – OCTOBER 5, 2021)

    Source: IG (You can click on it for a larger image)
    UK NEW CAR REGISTRATIONS TUMBLE
    A key talking point in the UK media – although less so in the markets – is the threat of stagflation in the UK caused by weak growth and strong inflation. That narrative was fed Tuesday by news that British new car registrations fell last month by 35% year/year to 214,000 units, according to preliminary data from the Society of Motor Manufacturers and Traders that marked the weakest September for at least 23 years.
    The SMMT added that the vehicle industry continued to be plagued by a global shortage of semiconductors used in car production.
    The strong crude oil price is also fuelling inflation expectations at a time when supply-chain disruptions continue to plague the supply of fuel to petrol stations in London and the south-east of England.
     
    Written by Martin Essex, Analyst, 5th October 2021. DailyFX
  16. MongiIG
    US DOLLAR, CRUDE OIL, AUD/USD, RBA, PBOC, RBNZ - TALKING POINTS:
    USD rallied as equities came under pressure amid a tech rout. RBA delivered as expected, RBNZ ahead may not be clear cut. Energy in hot demand. What does it mean for USD from here?
     
    The US Dollar gained ground against all the majors on safe-haven buying. The commodity currencies – AUD, CAD, NOK and NZD – lost more ground than others as risk-off sentiment permeated markets.
    Crude oil maintained levels close to 7-year highs in Asia as further energy concerns emerge. India is the latest country to report rolling blackouts on coal shortages. OPEC+ stuck to the plan of adding 400,000 barrels per day of production at a meeting yesterday. Markets were hoping for more, leading to a squeeze higher.
    The US session saw Nasdaq 2.1% lower, giving Asian markets a soft lead. APAC equities were mostly lower, with Japan’s Nikkei 225 and South Korea’s Kosdaq both down over 3.5% at one stage.
    Mainland China remains on holiday and Hong Kong markets that were open were mostly steady, except for the tech sector. This is despite another property company, Fantasia, making an announcement that they have been unable to pay back a bond due this week.
    Liquidity issues appear to be growing for the Chinese property sector amid concerns about securing energy supply. As a result, there has been speculation of a possible cut in the reserve ratio requirement (RRR) by the PBOC when they return from holidays next week.
    AUD/USD was slightly lower after the monthly RBA meeting. Monetary policy was unchanged, with the cash rate and 3-year bond rate targets left at 0.10%. The central bank also kept the amount of government asset purchases to a rate of AUD 4 billion a week at least until mid-February 2022. Earlier, Australia’s trade surplus for August came in at AUD 15.1 billion, well above the AUD 10 billion the market had anticipated.
    Looking ahead, the US will see trade, PMI and ISM numbers released. Tomorrow, the RBNZ will deliberate on a rate hike that was previously widely anticipated but recently questioned as Covid-19 numbers ticked up.
     
    US DOLLAR (DXY) TECHNICAL ANALYSIS
    The US Dollar index (DXY) is within an ascending trend channel since making a low in May. The recent high of 94.503 and a high from September last year at 94.742 could offer resistance.
    A previous resistance level at 93.729 is now a pivot point and may provide support. The ascending trend line, currently intersecting at 92.75, and the previous low at 91.947 are also potential support levels.

    Chart created in TradingView
    Written by Daniel McCarthy, Strategist for DailyFX.com. 5th October 2021
  17. MongiIG
    CANADIAN DOLLAR, USD/CAD, OPEC+, EVERGRANDE - TALKING POINTS
    The Canadian Dollar has been supported by higher commodity prices APAC equities, except ASX 200, went lower as Evergrande risks swirl High energy prices boost commodity currencies. Will USD/CAD go lower?
     
    Asian equities were mostly softer today, despite a strong lead from the US on Friday. Uncertainties around Evergrande, OPEC+ and high energy price impacts appeared to weigh on investors’ minds. Mainland China are on holidays for Golden Week.
    The US session was buoyed by upbeat data. Personal spending, PCE core deflator, University of Michigan consumer sentiment, as well as manufacturing PMI and ISM numbers were all slightly better than expected.
    Evergrande shares went into a trading halt in Hong Kong as a major transaction announcement is expected. The perception is that the company will be selling an asset in order to raise desperately needed funds. The US$260 Jumbo Fortune Enterprise debt note guaranteed by Evergrande that matured on Sunday, has not been repaid. Unlike the coupons on Evergrande’s debt, there is only a five-day window for non-payment of the principal amount, due to administrative or technical problems.
    The Australian and Canadian Dollars had a positive start to the week with commodity gains continuing to support them. Natural gas prices remain near 7-year highs and crude oil holds onto Friday’s gains ahead of the OPEC+ meeting today. The focus will be on the expected increase of 400,000 barrels per day of production.
    Coffee rallied toward multi-year highs on bad weather in Brazil and Columbia.
    The New Zealand Dollar softened as lockdowns were extended and the RBNZ meeting on Wednesday may not be as hawkish as the market had been expecting.
    Looking ahead, there is US factory orders and the RBA meet tomorrow.
    USD/CAD TECHNICAL ANALYSIS
    USD/CAD has broken below an ascending trend line and is near the recent low of 1.2594. That level might provide support initially but a move below there could see bearish momentum.
    The 55-day simple moving average (SMA) is currently 1.26197 and the 260-day SMA is at 1.26338, just below the spot price. A decisive move below those SMAs might be bearish.
    The previous lows of 1.24936 and 1.24225, as well as a pivot point at 1.22518 may provide support. On the topside, possible resistance could be at the previous highs of 1.27746, 1.28963 and 1.29492.
    Chart created in TradingView
    Written by Daniel McCarthy, Strategist for DailyFX.com. 4th October 2021
  18. MongiIG
    In this article we break down the OPEC+ decision to limit output increases and look at how crude prices are reacting to the news.

     
     Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Tuesday 05 October 2021. IG Oil prices trading at multi-year highs on OPEC-plus news
    Oil prices have continued to gain, trading to multi-year highs following a meeting between the Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC+).
    The move higher sees the respective prices of Brent crude and West Texas Intermediate up around 60% year-to-date.
    What was decided at the OPEC+ meeting?
    During the meeting, members committed to only increase oil output by 400 000 barrels per day. The increase, which will take effect in November this year, equates to less than half a percent of global supply.
    The production increase adheres to levels agreed upon at the group's July meeting.
    Why is OPEC+ oil production only marginal?
    The suggestion from OPEC members has been that despite improving demand, cyclicality and a possible fourth wave of the pandemic (in the fourth quarter) could create demand-side disruptions.
    Will oil prices disrupt economic recovery?
    Increasing demand amidst the continued throttling of supply is drawing concern from high export destinations such as the US, India and China.
    Rising prices as are evident in the commodity right now, can contribute to a sustained period of high inflation questioning the transitory nature thereof suggested by the Federal Reserve.
    Fossil fuels which include petroleum, coal and natural gas (among others) still account for the bulk of energy demand globally (at least 75%) and have seen prices soaring this year.
    Higher inflation creates higher input costs to many businesses and threatens earlier adoption of tighter monetary policy which could impact the economic recovery.
    Brent crude oil – technical analysis
    Source: IG charts  
    In the short-term we see the price of Brent crude breaking above a historic high at 80.60. The short-term move is in line with the longer term uptrend.
    The upside break does move the oil price back into overbought territory, however this is considered of less consequence than the primary uptrend firmly in place.
    The breakout now targets a move to the next level of historical resistance considered at the 86.50 level. For now, pullbacks from overbought territory are considered buyable at this stage.
    In summary
    Oil prices are trading at multi-year highs following outcomes from the OPEC+ meeting OPEC+ members committed to increase output by 400 000 barrels per day in November The November output increase adheres to output levels agreed upon in July this year Another wave of the pandemic and cyclicality are cited as reasons for the limited production increase announced Higher energy prices threaten to help sustain levels of inflation suggested to be ‘transitory’ by central banks High levels of sustained inflation beckon tighter monetary policy and could threaten the economic recovery Oil prices are breaking out in the short-term to continue their longer term uptrends  
  19. MongiIG
    Markets Q4 Outlook

    As investors head into the fourth quarter, the VIX Volatility Index - often referred to as the market’s ‘fear gauge’ - is in an uptrend. In September, US benchmark stock indices saw some of the worst monthly performance since March 2020. In fact, the S&P 500 and Nasdaq 100 finished the third quarter little changed. More importantly, they trimmed most of their gains. The Dow Jones declined.
    Most of the market jitters unfolded into the tail end of the third quarter. That is also in line with historical standards. September tends to be dismal month for sentiment as traders come back online from the summer lull. A lot of attention was on the Federal Reserve, where Chair Jerome Powell signaled that policy tapering could be completed by the middle of next year.
    This pushed the 10-year Treasury yield, and front-end government bond rates, higher. A combination of this and volatility aided the haven-linked US Dollar. The Greenback outperformed most of its peers in Q3, especially against the sentiment-linked Australian Dollar. Fears of a Chinese economic slowdown, especially amid the fluid environment around Evergrande, weighed against growth-linked assets.
    Gold prices weakened in September, trimming gains from earlier in the third quarter. A rising US Dollar and bond yields could make it a difficult environment for XAU/USD. Meanwhile, crude oil prices trimmed losses in the third quarter. Robust demand estimates, coupled with supply constraints, are bolstering energy prices. OPEC doesn’t seem poised to increase output into the end of the year.
    All eyes are on the US government as the fourth quarter gets underway. While a shutdown has been avoided for now, the debt ceiling has not yet been raised as Democrats and Republicans struggle to come to terms. September’s non-farm payrolls report will also be closely watched. A materially lower outcome risks derailing the central bank’s lose policy unwinding.
    Meanwhile in Europe, the European Central Bank could remain relatively dovish compared to the Federal Reserve. That could leave EUR/USD biased lower as policymakers stick to the script that inflation could be transitory. In the coming months, this narrative will be increasingly tested. What else is in store for financial markets in the fourth quarter?
     
    US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD

    FUNDAMENTAL FORECASTS:
    Euro Q4 Fundamental Forecast: More Euro Weakness Likely Lies Ahead
    The ECB, and by extension the Euro, faces the unenviable combination in Q4 of weakening economic growth and above-target inflation.
    Japanese Yen Q4 Fundamental Forecast: USD/JPY Likely Remains Skewed Higher
    The Japanese Yen wrapped up a fairly steady third quarter, but likely remains vulnerable against the US Dollar heading into the end of 2021. Will a less-dovish Fed push USD/JPY higher?
    US Dollar Q4 Fundamental Forecast: Dollar Outlook Firms as Global Risk Trends Cool and Yields Rise
    The Dollar has attempted a serious bullish break in the transition from the third to fourth quarter of 2021. With Fed rate forecasts charged and risk trends wavering, what is in store for the Greenback?
    Australian Dollar Q4 Fundamental Forecast: AUD/USD Has Hurdles that Could be Overcome
    The Australian Dollar made a new low for the year in the third quarter as external factors hampered the outlook. Will the risk environment continue to weigh the AUD/USD down?
    British Pound Q4 Forecast: Preparing the Ground for Interest Rate Hikes
    The fourth quarter of 2021 will likely see the Bank of England start talking about interest rate hikes as early as the beginning of next year, boosting the attraction of Sterling.
    Equities Q4 Fundamental Forecast: Short-Term Uncertainties But Longer-Term Fortunes
    Throughout the third quarter, there had been somewhat of a reversal in the reflation trade as concerns over the peak in the global growth lingered, alongside the continued spread of the Delta variant.
    Oil Q4 Fundamental Forecast: Stronger Demand to Be Met with Limited Supply
    The price of oil trades back above the $70 handle going into the fourth quarter of 2021 as signs of stronger demand are met with limited supply.
    TECHNICAL FORECASTS:
    US Dollar Q4 Technical Forecast: Building for Breakout
    The US Dollar just could not wait for the start of Q4 to begin its breakout, but what do the techs say for the rest of the quarter?
    British Pound Q4 Technical Forecast: Have GBP Bulls Run Out of Steam?
    Q4 may be a quarter of challenges for GBP bulls. Get the Q4 Technical Forecast for the British Pound, recently released from DailyFX.
    Euro Q4 Technical Forecast: Balance of Risk Tilts to the Downside
    EUR/USD price action was unimpressive for much of Q3, but a gloomy outlook may lie ahead given how Q4 has started.
    Gold Q4 Technical Forecast: Long-term Price Pattern Remains in Focus
    Gold may struggle to offer good directional cues during the final frame of the year, but there are still important signposts to watch for.
    Australian Dollar Q4 Technical Forecast: AUD/USD Recovery Vulnerable into Close of 2021
    Heading into the third quarter, our forecast highlighted that the Australian Dollar was threatening a break, “below the yearly opening-range into the close of June and we’re on the lookout for an exhaustion low heading into the third quarter.”
    Equities Q4 Technical Forecast: S&P 500 Bounces Back, DAX 40 and Nikkei 225 Faced With Indecision
    Global equities are struggling to get back on the bullish trendline as Q3 ends with bearish corrections
    Oil Q4 Technical Forecast: Downturn in the Works?
    Crude oil prices may be setting up for a downturn in Q4, and our recently released forecasts highlight where this might take place.
    Yen 4Q Forecast: USD/JPY Likely Remains Skewed Higher
    USD/JPY looks set to move higher in Q4 after prices broke higher from a Symmetrical Triangle pattern.
     
    By Daniel Dubrovsky, Strategist, 4th October 2021. DailyFX
  20. MongiIG
    TALKING POINTS:
    GBP/USD faces strong resistance just below 1.36 With a light economic calendar this week, focus will be on NF data out on Friday.
    GBP/USD is struggling to break above a key Fibonacci level despite continued support from buyers. The pair has managed to stage a good comeback since last Thursday as the US Dollar has come off slightly from its impressive rally last week but there isn’t a clear path higher as resistance looms close by.
    The area between the 23.6% Fibonacci retracement (1.3577) from the February 2021 highs and the 1.36 mark is the key challenge up ahead and with a lack of data on the calendar for today’s session and a pretty quiet start to the week in markets we could expect GBP/USD to remain around current levels throughout the day, with possible sideways consolidation in the coming sessions. Last week’s bounce does seem to have gotten a bit ahead of itself and with the pair trading below its key moving averages, the short-term buying momentum seems to be pressured.
    GBP/USD Daily Chart

    The calendar is pretty weak for the UK this week with only some PMI data coming out over the next few days. The focus will be on the jobs data for the US on Friday, which has had a lot of emphases put on it as the Fed has signaled that a strong reading would likely lead to the start of monetary tightening in its November FOMC meeting. The data will also draw a lot of attention as fears of stagflation have started to mount, with a strong jobs reading likely pushing back those fears about growth stagnating anytime soon.
    On the Dollar side, the DXY has been rejected within the resistance area (94.27 – 94.79) I mentioned last week. These are the September and October 2020 highs, and both of them were followed by strong pullbacks so an increase in bearish pressure was expected. The question now is whether Dollar bulls are going to be able to hold the DXY above 94 over the coming days as the last two daily candlesticks show attempted bearish reversals but strong support so far around 93.90 with Sunday’s opening candlestick showing a hammer pattern, which may be the indicating a short-term bottom.
    DXY Daily Chart

     
    Written by Daniela Sabin Hathorn, Market Analyst, 4th October 2021. DailyFX
  21. MongiIG

    The Week Ahead On The Markets

    By MongiIG,


    Market News
    The Week Ahead
    Read about upcoming market-moving events and plan your trading week
                                                               Week commencing 4 October
    Joshua Mahony’s insight
    The week ahead brings a continued focus on energy markets, with OPEC kick starting proceedings on Monday. Central banks come back into focus, with the RBA rate decision on Tuesday. The focus then shifts towards the US, with employment data starting on Wednesday and culminating with Friday’s jobs report release. On the corporate front, Tesco and Levi Strauss provide two particular areas of focus given the potential for commentary around logistics and rising input prices. Video.
     
    Economic reports
    Weekly view Monday
    3pm – US factory orders (August): expected to rise 0.5% MoM. Markets to watch: USD crosses
    All day – OPEC meeting: expected to add another 400,000 bpd to output for November despite $80 crude. Markets to watch: USD crosses
    Tuesday
    5.30am – RBA rate decision: no change in rates expected. Markets to watch: AUD crosses
    8.50am – 9.30am – French, German, eurozone, UK PMIs (September, final). Markets to watch: eurozone indices, EUR crosses, GBP crosses
    1.30pm – US trade balance (August): deficit to narrow to $69.6 billion. Markets to watch: USD crosses
    3pm – US ISM non-mfg PMI (September): expected to fall to 61.3. Markets to watch: USD crosses
    Wednesday
    9.30am – UK construction PMI (September): forecast to fall to 54.9 from 55.2. Markets to watch: GBP crosses
    1.15pm -US ADP employment report (September): 475K jobs expected to have been created, from 374K last month. Markets to watch: US indices, USD crosses
    3.30pm – US crude oil inventories (w/e 1 October) – previous week saw stockpiles rise by 4.58 million barrels. Markets to watch: Brent, WTI
    Thursday
    1.30pm – US initial jobless claims (w/e 2 October): claims to fall to 348K from 362K. Markets to watch: USD crosses
    3pm – Canada Ivey PMI (September): August reading 66. Markets to watch: CAD crosses
    Friday
    2.45am – China Caixin services PMI (September): index to rise to 49, remaining in contraction territory. Markets to watch: China indices, CNH crosses
    1.30pm – US non-farm payrolls (September): payrolls to rebound to 500K from 235K, while the unemployment rate falls to 5.1% from 5.2%. Markets to watch: US indices, USD crosses
    1.30pm – Canada employment report (September): unemployment rate to fall to 7%. Markets to watch: CAD crosses
      Company announcements
     
     
    Monday
    4 October
    Tuesday
    5 October
    Wednesday
    6 October
    Thursday
    7 October
    Friday
    8 October
    Full-year earnings
    James Halstead Hotel Chocolat       Half/ Quarterly earnings
      Pepsico Tesco,
    Allied Minds,
    Constellation Brands,
    Levi Strauss Conagra Brands Electrocomponents,
    Tiscali Trading update
      Greggs Topps Tiles,
    Imperial Brands easyJet,
    CMC Markets  
     
      Dividends
    FTSE 100: DS Smith, Taylor Wimpey, Kingfisher
    FTSE 250: Weir, Spectris, Bodycote, Morgan Sindall, Murray Int’l Trust, Synthomer, Vistry
     
    Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
     
    Index adjustments
      Monday
    4 October Tuesday
    5 October Wednesday
    6 October Thursday
    7 October Friday
    8 October Monday
    11 October FTSE 100    
    1.23       Australia 200 0.2   0.1     0.1 Wall Street 6.6   7.0       US 500 0.50 0.02 1.02 0.07     Nasdaq 1.21   0.25       Netherlands 25             EU Stocks 50       0.7     China H-Shares             Singapore Blue Chip             Hong Kong HS50             South Africa 40             Italy 40             Japan 225            
  22. MongiIG
    KEY TALKING POINTS:
    PCE, consumer confidence, and ISM data may give insight into USD positioning ahead of NFP next week. GBP/USD, NZD/USD and EUR/USD looking vulnerable despite small bounce.
     
    The Dollar Basket (DXY) is at yearly highs after having its best weekly performance since June. The Dollar has been on a tear this week as currency traders position themselves for an earlier than expected rate rise after last week’s FOMC meeting left a hawkish feeling in markets. The Daily chart shows how the DXY has pierced through this year’s high (93.73) but is starting to face resistance between the September (94.79) and October 2020 (94.30) highs.
    DXY Daily Chart

    The reaction wasn’t immediate, bond yields were picking up straight after the meeting last week as higher rates and inflation expectations were being priced in, but it wasn’t until Monday that USD traders picked up on the move. Despite that, the Dollar has continued to gather bullish momentum whilst yields have come off slightly from their recent highs. As long as markets remains confident that the Fed will start tightening monetary policy within the next few months then the Dollar should remain supported at current levels.
    And a good test of that confidence may come as soon as this afternoon. The August PCE Price Index is due to be released at 1.30pm and whilst the data in itself may not be the most enlightening given how the Fed has already agreed that the inflation component has met the requirements to start tapering, investors are likely to be keeping an eye out on the data anyway to make sure things are moving in the right way. Later today we also have the Michigan consumer sentiment and ISM manufacturing PMI, two sentiment-driven data points that are likely to give an insight into the current state of play of confidence within the economy.
    A recently resurfaced theme within markets is the fear of stagflation, whereby inflationary pressures remain high but growth stagnates. Whilst the threat isn’t immediate given the amount of stimulus in the economy, today’s data points could breathe more air into this line of thought if the divergence between growth and inflation widens, something that Powell has already warned about, citing it will be one of the biggest challenges over the coming years if price pressures turn out to be less transitory than originally expected. The FOMC meeting has also put a lot of pressure on the NFP data next Friday as a return to full employment is the missing link for tapering to begin.
     
    So far the gains in the Dollar have been most evident against those currencies that were excessively pricing in hawkishness from their Central Banks, like the Pound and the Kiwi. GBP/USD remains below 1.35 this morning despite an attempted breakout in yesterday’s session, whilst NZD/USD has jumped back in a recent support area which may see fresh buying efforts above 0.69.
    .
    GBP/USD and NZD/USD Daily Chart

    EUR/USD, on the other hand, has been more resilient to the Dollar move as markets are also starting to price in a little more hawkishness from the ECB, which is commonly thought of as one of the most dovish central banks. That said, the pair is having its worst week since June and has fallen below recent support at 1.1613which leaves the door open for a move towards 1.14.
    EUR/USD Weekly Chart

     
    Written by Daniela Sabin Hathorn, Market Analyst, 1 October 2021. DailyFX
  23. MongiIG
    US Dollar, USD/JPY, S&P 500 Analysis and News:
    USD/JPY Slides Post Rebalancing. Sentiment in Equity Space Deteriorates.
    Equity markets are kicking off Q4 much how they closed off Q3, on the backfoot and continuing to follow its typical pattern (Figure 1). In turn, risk currencies are out of favour relative to safe-haven currencies and in particular the Japanese Yen. As I mentioned yesterday, I was tactically bearish USD/JPY, not only due to stretched topside momentum, but also the typical pattern that has emerged this year post-quarter-end rebalancing. Additionally, with US yields a touch softer, upside pressure in the pair has been reduced.

    Source: Refinitiv, DailyFX
    USD/JPY Ramp and Reversal Around Quarter End

    Source: Refinitiv
    However, I suspect the dollar will continue to perform well against several major counterparts, given the factors that have been underpinning the greenback, from safe-haven flows to a hawkish Federal Reserve. Alongside this, technical damage has been done to a host of currency pairs, namely EUR/USD, which is below the 2020 election low and GBP/USD.
    IG Client Sentiment: EUR/USD
    Data shows 68.93% of traders are net-long with the ratio of traders long to short at 2.22 to 1. The number of traders net-long is 3.04% lower than yesterday and 23.36% higher from last week, while the number of traders net-short is 8.46% higher than yesterday and 24.90% lower from last week.
    We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall.
    Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.
    As I mentioned above, sentiment in the equity space has deteriorated and perhaps more importantly for the S&P 500, we have seen a close below its 100DMA, something that hasn’t happened since last November. Support now resides at 4233 and 4200 below.
    S&P 500 Chart: Daily Time Frame

    Source: Refinitiv
     
    By Justin McQueen, Strategist, 1 October 2021. DailyFX
  24. MongiIG
    AUSTRALIAN DOLLAR, AUD/USD, COAL, CHINA, OPEC+ - TALKING POINTS
    The Australian Dollar had some yield support early, but not enough. China cracks the whip on their energy producers, adding to demand. High commodity prices, positive yields, what will break AUD/USD?
     
    Overnight, US data was mostly in line with expectations. US GDP printed at 6.7% q/q growth for the second quarter against forecasts of 6.6% while initial jobless claims were a slight miss, coming in at 362k instead of the anticipated 330k for the week prior.
    US stocks went lower in the North American session as the debt ceiling continues to cause uncertainty. There has been commentary in the Asian session that an agreement is most likely going to be made.
    Asian equities took the US lead and markets that were open headed into the red. Japan’s Nikkei 224 and Australia’s ASX 200 indices were down over 2%. China and Hong Kong markets were closed for holidays today.
    There are reports circulating that earlier in the week, the Chinese government had instructed energy firms to secure supply at all costs and that blackouts will not be tolerated. Coal mines were also told to produce, even if they are over quotas. China currently has a ban on importing coal from Australia which is generally of higher quality than the local variety.
    Natural gas is holding levels near 7-year highs while crude oil consolidated lofty levels. OPEC+ will be meeting on Monday and telegraphed that boosting output by an extra 400,000 barrels per day might come under review.
    AUD, CAD, NZD and NOK were all weaker through APAC trade despite roaring commodity prices as negative risk sentiment outweighed increased cash flows for these currencies.
    US yields softened while Australian yields rose slightly, bringing the 10-year government bond spread to parity. This may have initially been supportive for AUD/USD, but a large option expiry today at 0.7200 and a broadly stronger USD weighed the Aussie Dollar down.
    Looking ahead, Canadian GDP and manufacturing PMI is due for release, while in the US, manufacturing PMI and University of Michigan Sentiment data is anticipated.
     
    AUD/USD TECHNICAL ANALYSIS
    The Australian Dollar threatened to make a new low for the year two days ago as it touched the lower bound of the 21-day based Bollinger Band.
    The AUD/USD spot is below the 21-day simple moving average (SMA). which is in turn below the 55-day SMA, and both have a negative slope. That might be bearish.
    There could be support at the previous low of 0.71061. Resistance is potentially at previous highs of 0.73165, 0.74782 and 0.76167.

    Chart created in TradingView
    Written by Daniel McCarthy, Strategist for DailyFX.com. 1 October 2021.
  25. MongiIG
    Hello IG Community
     
    Delve inside your mind
    How does psychology impact trading? Discover the factors that can influence financial decisions – personality, emotions and moods, biases and social pressures – and hear from experts and traders about the challenges psychology can create.

     
    Webinar
    We are glad to inform you that we will be hosting a webinar on the importance of psychology in trading with Christopher Beauchamp, IG's Chief Market Analyst, he will introduce to you the most important psychological aspects that every trader needs to be aware of when trading.
    We would love to see you there, please feel free to attend and register for the importance of psychology in trading taking place on the 7th October 2021 at 11:30 AM BST. To sign up please use the following link: https://attendee.gotowebinar.com/register/4609420343009686800
    After registering, you will receive a confirmation email containing information about joining the webinar.
    Sincere apologies to those who attended the previous webinar, as we were faced with technical issues.
     
    All the best,   IG community team

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