Bitcoin rises 5.2% to $43,717

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Dollar to End Month Near One-Year Highs as Yields Flourish in September

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New money: Central banks lay out operating manual for digital cash

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US GDP, Weekly Claims & US Open – LIVE

It’s been a week, month and even Quarter dominated by the rally in Yields and the spectre of inflation, onto the Central Banks tilting more towards hawks as tapering time frames and even rate rises were on the agenda.

Click here to access our Economic Calendar

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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What is the US “debt ceiling” and what happens if it is not raised?

Somewhat unusually, the US government has a self-imposed legal limit on the amount of money it can borrow to fund itself. This is called the “debt ceiling”. If it looks like the government needs to spend more than this limit, then that must be authorised in Congress. If Congress fails to authorise a new limit, the government must stop spending money. All activity funded by the federal government comes to a sudden halt. 

In less polarised times, a rise would usually be approved with little fuss. But for the last decade or so, the debt ceiling has been used as a political weapon, with opposition politicians happy to use the threat of a government shutdown to further their own aims, score political points, or just cause trouble. 

The House of Representatives – the lower chamber of the US government – has already passed a bill to raise the debt ceiling. But it must now pass a vote in the Senate, where the Democratic Party has 50 of the 100 seats, plus the vice president’s vote. To pass, however, the bill needs 60 votes.

An attempt to pass the bill on Monday failed to get enough votes in the Senate. A second attempt on Tuesday also failed. And Republicans have also blocked a way for the Democrats to raise the ceiling alone. Senate minority leader Mitch McConnell blocked a motion by Chuck Schumer, the majority leader, that would have allowed an increase with a simple majority vote. 

Why is the debt ceiling so important?

The federal government is heavily reliant on debt. More often than not, it spends more than it earns from taxation. To cover the shortfall, the government borrows. Sounds simple. But the US breached that limit on 1 August, prompting the Treasury to take some “extraordinary measures.”

But even those extraordinary measures are not permanent, and at some point the government will run out of money. The Treasury estimates that date to be 18 October because “at that point, we expect the Treasury would be left with very limited resources that would be depleted quickly,” US Treasury secretary Janet Yellen told congressional leaders this week. 

Raising the debt ceiling is important, as it makes it less likely the US will plunge into recession or default on its debt. The world’s largest economy defaulting on its debt would be a terrifying concept that would hit global financial markets hard. Such a default would probably send the dollar tumbling. Spending on many critical programmes would come to a halt. 

What is the latest position?

Senate minority leader Mitch McConnell insists that Republicans will not support raising the limit. This is similar to what happened in 2011 between Republicans and the Obama administration. The spat back then eventually prompted the US’ credit rating to be downgraded for the first time. 

While arguments over debt ceilings are common, it’s a bit more surprising that it is happening this year as the pandemic has meant the US government pouring billions more dollars into the economy than it normally would. US Federal debt is currently at about $28.43trn, higher than the current debt ceiling of $28.4trn.

The Republicans are opposed to raising the ceiling as they believe it will pave the way for Democrats to pass their $3.5trn Build Back Better spending package. 

Can the Democrats still raise the debt ceiling alone? 

Biden can technically still raise the ceiling alone, albeit through drastic means. Democrats could use the budget reconciliation process to foster a majority vote in the Senate. Biden’s $1.9trn stimulus package was passed in this manner earlier this year. 

And according to David Super, Georgetown University’s law professor, the best solution may be to just eliminate the debt ceiling entirely. “The Congressional Budget Act gives Democrats the chance to do a stand-alone reconciliation bill on the debt limit if they want,” he told the Washington Post. 

So, the Democrats could form a reconciliation bill and create another bill that cancels the debt limit. But these options are a last resort for the Biden administration. 

Has the US defaulted before?

The US government has defaulted on its debt before. As Forbes points out, the US defaulted on some Treasury bills in 1979.

The default was temporary though, as the Treasury did eventually pay the investors after a short delay. A default by the US government in current times is almost certainly going to leave much longer lasting damage. 

What effect will a further delay or default have on the markets?

A default by the US government would send shockwaves across the world. 

As Beth Ann Bovino, chief US economist at S&P Global Ratings, points out: “The impact of a default by the US government on its debts would be worse than the collapse of Lehman Brothers in 2008, devastating markets and the economy.”

Such a collapse would also hit the US bond market which until now has been seen as the ultimate safe haven. 

And not even the US Federal Reserve, the world’s most powerful central bank, thinks the economy can weather such a scenario. John Williams, president of the Federal Reserve Bank of New York, said it could lead to an “extreme kind of reaction in markets”. 

And according to Moody’s Analytics, gridlocked discussions regarding the debt ceiling could take six million jobs out of the economy, cause the unemployment rate to climb from 5% to 9% and cause the stockmarket to lose a third of its value. 

If you are an investor, the best thing you can do is to not panic. It is likely that the US government will come to some sort of agreement, albeit with a delay. After all, nobody actually wants the world’s largest economy to default.

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Rising bond yields are unnerving markets and it could get worse before it gets better

A quick reminder before we get started this morning –don’t miss our webinar on Wednesday 20 October with BlackRock Smaller Companies trust.

I’ll be talking to manager Roland Arnold about his views on the outlook for the UK’s smaller companies against the current turbulent backdrop. Don’t miss it – register free here, and you’ll be able to watch it later even if you can’t tune in on the day.

Markets have been jittery over the past month. We haven’t seen a crash – or anything like a crash – but the relentless rise of the S&P 500, for example, has taken a bit of a knock. It last hit a new high on 6 September, and it’s been drifting lower since.

The best word for asset markets as a whole is probably “unsettled”. So what’s going on?

What’s rattling markets?

The pound has tanked in recent days. Energy prices are rocketing – oil hitting new eight-year highs, natural gas going through the roof. Gold is having a dreary time of it.

Equity markets are mixed – the FTSE 100 likes weak sterling and strong oil, so it’s doing better than most, but both the Nasdaq and the S&P 500 are struggling to regain their momentum, while Japan’s Nikkei is also wobbling around the 30,000 mark.

And then of course, there’s the big boss market of them all – the US Treasury market. US government bonds have been falling in price, which means yields have been going up.

As Dominic noted yesterday, this is not an easy environment for an investor to navigate. But what lies at the heart of this present discombobulation? I want to try to pick it apart a bit today.

Unless you’re a short-term trader, you really don’t need to worry about the odd bit of market quicksand. But it is helpful to wrap your head around the long-term trends so that you can work out if you need to make more significant adjustments to your asset allocation.

The big picture issue is straightforward: investors have grown used to trading in markets which are underpinned by the presence of central bankers who are willing and able to buy government bonds – the foundation assets on which all else rests – at whatever price is on offer.

This has suppressed volatility, and it has helped to keep interest rates low.

The one big risk to this comfy world is, and always has been, the return of inflation. If the outside world is disinflationary or even deflationary, then central banks can print what they like. You’ll create lots of distortions – rampant wealth inequality for one – and what Austrian-School economists would describe as “malinvestment”, but you won’t breach your inflation target. And that matters, because it means you can keep going with the money printing and the volatility suppression.

The problem now is that inflation is returning, and it’s returning fast. It’s already gone beyond the early definitions of “transitory”. Transitory no longer defines a specific time period so much as a specific type of inflation.

As long as soaring costs don’t get passed into the wider economy (mainly via ingrained wage rises), central bankers hope that supply chains will eventually fix themselves and that, in the meantime, they can wait it out.

But it’s clear that they are nervous about all this. The word “transitory” remains, but the more they say it, the greater the sense that they are just whistling past the economic graveyard.

This is why you are seeing central bankers still saying “transitory” even as they’re becoming steadily more hawkish at the edges. And the market doesn’t like that.

Bond yields could spike higher

One of the most obvious reflections of this is the rise in bond yields. The US ten-year bond has gone up from 1.3% to 1.5% in the last two weeks. That doesn’t sound like much, but it’s been quite a fast move, and when you have as much debt to roll over as the US does, every basis point (that is, 0.01%) counts.

This in turn is driving the US dollar higher (which, incidentally, is the more significant reason for the pound’s weakness – there are two sides to every forex trade, remember?)

It’s a very clear response to the fear that the Federal Reserve is going to start cutting back on the amount of quantitative easing (QE) it does (“tapering”).

Mohammed El-Erian, a man who presumably understands his bond markets, given that he was high up at bond fund giant Pimco for a long time, wrote about this in the FT yesterday.

The danger, he says, is that we might see “yields suddenly ‘gapping’ upwards given that we are starting with a combination of very low yields and extremely one-sided market positioning.”

Unfortunately, El-Erian doesn’t really have much to offer (in this piece at least) beyond diagnosing the problem. In effect, markets might have another taper tantrum.

So what would that mean? Central banks – the Fed specifically – will want any transition to go smoothly. This is why Jerome Powell, the Fed chair, has been at pains to emphasise that the taper is entirely separate to interest rate rises. He’s pitching it more as a way to unwind emergency support, rather than as a runway towards higher rates.

You can see why Powell might think this. Ironically enough, past doses of quantitative easing (QE) have in fact pushed bond yields higher, and they’ve fallen as QE has ended. However, I wonder if that environment has now changed. Back then, markets feared deflation. So when QE ended, they acted as though the economy was going to collapse and piled into the perceived safety of Treasuries.

However, if markets are getting worried about inflation – and they seem to be – then the risk is that QE is now suppressing rather than underpinning yields. In other words, the only thing stopping markets from pricing more inflation into the bond markets is the Fed’s presence.

What does it all mean? Well, I still suspect that when push comes to shove, financial repression will be the order of the day. Regardless of what happens with inflation, global bond markets simply cannot be allowed to reprice to more “normal” levels because that would literally bankrupt most nations.

There’s an interesting quote from Powell, speaking at a virtual conference of central bankers yesterday hosted by the European Central Bank. Powell was asked at one point whether the US had “overdone” it with public spending and monetary policy during the covid pandemic.

Here’s how he replied: “I think the historical record is thick with examples of undergoing it, and pretty much in every cycle, we just tend to underestimate the damage and underestimate the need for a response. I think we’ve avoided that this time.”

That’s very telling. I think it demonstrates where the central bank mindset is these days. We might be going through a wobble right now, but when push comes to shove, the instinct will be to step in.

We’ll probably need another market spasm before that. Maybe we’ll get one in October, as is traditional.

Anyway – if you haven’t already subscribed to MoneyWeek magazine, now’s probably a good time to do so.

from Moneyweek RSS Feed https://moneyweek.com/investments/bonds/government-bonds/603925/rising-bond-yields-are-unnerving-markets
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Market Spotlight: Trading US Unemployment Claims

Unemployment Claims Up Next Today’s US data will take on greater importance in the wake of the recent slew of Fed comments we’ve heard over the last week. With a notable hawkish shift in sentiment, USD has been on the front foot as traders continue to anticipate forthcoming tapering. Chairman Powell this week noted that although inflation has become much more of an issue recently, employment is still far from maximal levels (created an obstacle to tightening). With this in mind, today’s weekly unemployment claims will be closely watched. If the data beats expectations, expect the USD rally to continue. If we see a miss (mostly a significant one), USD is likely to be blunted into the end of the week.Where to Trade US Unemployment Claims?EURUSDEURUSD has been under heavy selling pressure this week with price breaking down below the 1.1703 and 1.1612 levels. With both MACD and RSI giving bearish signals here, there is room for a continuation of the bearish channel on any USD upside today, with the 1.1495 level (and bear channel low) the next target for bears.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-trading-us-unemployment-claims"
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GBP Falls As BOE Pushes Back Growth Forecasts

GBP Sentiment WeakeningThe British Pound remains under heavy selling pressure as we head into the back end of the week. The pound has been the firm underperformer among the G10 pack this week as concerns over the energy crisis and supply chain issues there continue to dog the outlook. Despite a hawkish shift at last week’s BOE meeting, sentiment towards the pound has Deteriorated sharply over the recent intensification of these issues. The BOE noted that there was residual uncertainty within its outlook, linked to the pandemic, and events of the last fortnight in the UK are a stark reminder of the wide-reaching disruption caused by the pandemic, as well as regulatory changes post-Brexit.Furlough Scheme Ending Amidst Energy CrisisAdding to the issues facing the UK economy this week is the fact that today marks the end of the government’s furlough employment scheme. The initiative, which saw the government paying as much as 80% of the wages of workers who would otherwise have lost their jobs from struggling companies, has been in place since the beginning of the pandemic and has helped support almost 12 million workers. Industry leaders are now warning of massive jobs losses over coming months as a result of the scheme ending, which could seriously damage the UK economic recovery. Even more worrying is the proposed cut in universal credit which is due to come into effect next week with UK charity “Crisis” warning that around 100k private tenants risk eviction as a result of the move. Given the current backdrop of the energy crisis hitting Britain, the near term economic prospects appear to have dwindled rapidly, reducing the purchasing powerSpeaking for the second time this week, BOE governor Bailey had a more tempered message for the markets. The BOE chief warned that the UK economy is now forecast to return to pre-pandemic levels slightly later than expected, with the BOE now pegging early 2022 as the likely time for a return to pre-pandemic growth.Downside Risks GrowingGiven the risks to the near term outlook posed by Brexit complications and COVID complications, as well as the risk of jobs losses this winter, there are clear downside risks for the BOE meaning that this forecast might be delayed further still. For now, the market is still pricing a rate hike by February. However, this pricing could easily shift if the situation deteriorates further in the coming months.Technical ViewsGBPUSDThe sell off from the triangle break has really gathered pace this week with rice clearing several key levels. The latest to break was the 1.3461 level. While price holds below 1.3570 (key level) the focus is on a continuation lower, supported by bearish indicators readings, with 1.32 the larger target for bears.

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Sterling remains pressured even as GDP bounces

GBPUSD, H1

UK GDP revised sharply higher in the final reading. The quarterly growth rate was boosted to 5.5% from 4.8% previously, which left the annual rate at 23.6% y/y. The annual comparison is of course distorted by virus developments, but nevertheless the numbers look positive, and while the breakdown showed that government consumption accounted for a part of the revision, the external balance also looked more healthy, with exports rising 6.2% q/q and imports a mere 2.4% q/q.

The picture will likely be different in the third quarter and in particular the fourth, as national delivery problems and the phasing out of the furlough scheme and temporary benefit payments today will weigh on consumption going forward. Against that background, the Q2 GDP reading looks pretty much outdated and won’t change the BoE outlook. Governor Bailey may have signalled that rate could rise even as asset purchases continue, he is likely to wait until next year before actually moving even if inflation looks high.

Cable, after two consecutive significant daily falls and with the pair printing new 2021 lows and testing 1.3400, the recovery continues to be capped by the 21-hour EMA, and trades at 1.3436. The MACD signal line is showing signs of life, but it did that yesterday too, RSI remains weak at 39.40. EURGBP holds for a third day over 0.8600 and trades at 0.8635, even GBPJPY, with a Yen under pressure – trades at 150.25, over 230 pips below Tuesday’s high.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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The Crude Chronicles - Episode 108

Oil Traders Increase LongsThe latest CFTC COT institutional positioning report shows that oil traders added to their net long positions last week by 1k contracts. This recent increase in upside exposure brings the total long position back up off multi-year lows to 355,978 contracts. The upgrade in positioning comes amidst a strong rally in oil prices. The surge in prices in the broader energy complex is lifting oil prices here as supply chain issues around the globe drive higher prices. The increase in prices comes at a time when demand is increasing as countries continue to recover from the pandemic, deepening the supply chain issues which then feed back into higher prices.In the UK, the supply chain issues have resulted in chaos with the government confirming that the Army will be brought in to distribute oil due to a shortage in lorry drivers. There have been similar supply chain issues throughout Europe with COVID disruptions, as well as regulatory changes since Brexit, causing the issues.Oil Hits Multi-Year HighsThis week the price of crude oil surged above $80 per barrel for the first time in over three years. Many key players are now upgrading their end of year price forecasts for oil as a result of the energy crisis in Europe and the rising global demand. Despite the move higher, oil prices ran into selling pressure as they passed the big psychological, retreating somewhat yesterday. The resurgence in the US Dollar is also helping cap the oil rally here though, looking ahead, the focus is on continued upside in the near term with the energy crisis in Europe set to persist over the coming months.EIA Reports Unexpected Inventories BuildOil prices were also hit yesterday by the latest report from the Energy Information Administration. The EIA reported that US commercial inventories rose by 4.6 million barrels last week, the largest weekly increase in months. The move was in stark contrast to the 1.7 million barrel drop the market was looking for and reflects the uptick in supply as producers look to capitalise on surging demand and higher prices.Technical ViewsCrude OilThe rally in crude oil this week has seen price trading back up to test the big resistance level at $76.78 and the underside of the broken bull channel low. The area is holding as resistance for now. However, with both MACD and RSI firmly bullish here and the 74.46 level holding as support, the focus is on a break out higher in the near term.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/the-crude-chronicles-episode-108"
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Myanmar military blames economic situation on COVID-19 waves

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USDJPY is close to a pivot, potential for bounce

Type:Bearish ReversalResistance: 113.207Support: 110.765Pivot: 112.226Preference:Price is approaching a pivot at 112.226 in line with 127.2% Fibonacci retracement and bullish channel. Price has the potential to dip towards our 1st support at 110.765 in line with 61.8% Fibonacci retracement.Alternative Scenario:Alternatively, price could climb higher towards our 1st resistance 113.207 in line with 161.8% Fibonacci retracement.

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Investment Bank Outlook 30-09-2021

CitiEuropean OpenMixed CNH PMI data took the headlines on a quiet Asian morning. Chinese Manufacturing PMI missed, coming in at 49.6 for September, (vs consensus 50.0 and 50.1 prior) while PMI for the non-manufacturing sector was positive at 53.2, (vs consensus 49.8). AUD gained during the Asian session, as iron ore prices increased prior to China’s week long holiday (October 1 – October 7).Month end will guarantee the usual distortions, with Citi FX Quant's final estimate for FX hedge rebalancing strengthening, and calling for USD buying especially against JPY. Looking ahead today – central bank decisions will feature prominently with hikes widely expected in CZK (13:30 BST), MXN (19:00 BST), COP (19:00 BST), and UYU (time unknown). Therefore we'll be more interested in signals about the future rate path for many of these. Also look out for Riksbank meeting minutes in SEK (08:30 BST) and quarterly inflation report in BRL (12:00 BST). The data front sees unemployment rate (10:00 BST) and Germany CPI for EUR (13:00 BST) where we see downside risks to the latter. Fedspeak is also on the table today, starting from 15:00 BST. However, we do not expect these to pose much headline risk.Month End FlowsThe final estimate of month-end FX hedge rebalancing needs points to USD buying, particularly against JPY. The signal has strengthened since the preliminary update and now exceeds the historical norm in most crosses.Following seven months of uninterrupted gains, US equities have declined in September. The MSCI US equity index is down -3.79% month-to-date. US government bonds, as measured by the FTSE Russell GBI, have also weakened by -1.18%. This has left foreign investors with US assets over-hedged, leading to a net USD buying need. Equity hedge rebalancing needs explain 87% of the signal.The signal to buy USD and sell JPY is the most significant at 1.85 standard deviations. This is because of strong gains in Japanese equities which mean that foreigners will likely need to sell JPY to hedge their asset gains, adding to domestic JPY selling needs to reduce foreign asset hedges. This month’s out-performance of Japanese equities over US is largest since April 2013.Weak performance of Euro-Zone equities and bonds somewhat reduces the signal to sell EURUSD, making it the only signal to fall short of one standard deviation.Credit AgricoleAsia overnight Despite mixed China PMI data, it was a stable day for sentiment in Asia. WhileChina’s manufacturing PMI data slipped below 50 and into contraction territory onthe back of power cuts, the services PMI increased further above 50 and showeda rebound in activity post-Covid lockdowns, according to our China economist.There was good news from the US, with Democrat Senate Majority Leader ChuckSchumer announcing that a deal had been made to avert a US governmentshutdown at the end of this week, with government spending being extended to3 December. Admittedly, this amounts to just kicking the can down the road. Astatement by the PBoC said that it had told financial institutions to help localgovernments stabilise the housing market. Most Asian bourses and S&P 500futures were trading higher at the time of writing. A rebound in iron ore prices asChinese buyers build stocks ahead of a week-long holiday as well as a dip inUST yields helped the AUD outperform the rest of G10 FX in the Asian session.The USD and JPY were the weakest performers during the session

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-30-09-2021"
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Market Update – September 30 – Inflation remains a major issue!

Market News

• Global central bank officials stuck to cautious optimism at the ECB conference on central banking and data releases overnight were mixed.  – Lagarde stressed the “reopening of the economy”.
• Traders are still cautious, while keeping a weary eye on US budget talks, as a deadline to keep running is approaching amid last minute political wrangling in Washington.
• China PMI readings mixed – manufacturing PMI unexpected signalled contraction, while the Caixin PMI came in stronger. Japan production as well as retail sales disappointed, while Australia building permits jumped.  UK GDP revised sharply higher in the final reading. 
• Yields steadied (US 10-year rate stymied the drop in rates at 1.51%).
• Equities supported by the drop in Treasury yields which enticed buyers back into equities, especially with beliefs the recent declines were overdone. JPN225 down -0.1%, USA500 outperforming at 4398, USA100 slipped -0.24%.
• USOil steadied at the mid of $74 mark.
• “A combination of higher U.S. yields, impending Fed tapering and skittish markets around the debt ceiling have fuelled this move (in the dollar),”  as Westpac analysts wrote.
• FX markets – Strong USD, while GBP and EUR selling off sharply yesterday – USDJPY – 112.00, Cable 1.3409, EURUSD 1.1588.

Today – Today’s data calendar is pretty busy and includes German labour market data and the preliminary inflation report for Germany, but key will be the  US GDP and PCE number.

Biggest mover as of 07:45 GMT – USDJPY (+0.48%) Reached 112 for the first time since January 2020. Eventhough the overall outlook turned positive, intraday consolidation prevails as fast MAs flattened along with RSI and a bearish crossed formed by Stochastic. MACD lines however sustains positive bias. ATR (H1) at 0.085 and ATR (D) at 0.583.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Daily Market Outlook, September 30th, 2021

Daily Market Outlook, September 30th, 2021 Overnight Headlines China Factory Activity Contracts First Time Since Feb. 2020 China Tells Bankers To Shore Up Property Market, Help Homebuyers Some Evergrande Bondholders Not Paid Coupon By Wed Deadline Japan's Factory Output Extends Declines On Car Production Cuts Partying For Football Final Triggers Australia Covid-19 Rise New Zealand Home-Building Approvals Rose A Third Month In August South Korea To Prepare Measures Against Household Debt In Oct US, Chinese Military Officials Hold 'Frank, In-Depth' Talks-Pentagon U.S., EU Vow Cooperation On Trade, Technology In Diplomatic First US Dollar Near One-Year High As Fed Tightening In Focus Oil Falls After U.S. Inventories Post Surprise Gain, Gold Inches Up Cotton Has Best Quarter in 10 Years as China Snaps Up US Fiber Asian Shares Mostly Gain After Mixed Session On Wall Street APAC M&A Deal Value Hits $1.25Tln In Nine Months Of 2021, A Record IPOs Slow Down Globally In Q3 After Frenetic 2021 Start Utility Stocks Halt Record-Long Rout With Market Bouncing BackThe Day Ahead This morning’s Lloyds Business Barometer showed a 10 point increase in business confidence as the reading reached its highest since April 2017. Employment prospects rose to a four and a half year high, while expectations of higher wage growth broadened. The survey also asked some special questions about the current supply challenges facing businesses. These identified the biggest impediments as supply chain disruptions and shortages of raw materials or goods, followed by staffing issues. The readings were taken in the first half of September ahead of the most recent pressures on fuel supplies and prices. With inflation concerns to the fore this week’s Eurozone inflation reports seem bound to command market attention. The September CPI data for the region is out early tomorrow but ahead of that updates for France, Germany and Italy will provide indications as to the likely outturn. All are expected to post further rises in annual inflation, which suggests that the Eurozone aggregate will rise further from last month’s decade high. The rise is primarily to do with higher energy prices and as is the case elsewhere is expected to be temporary. However, the increase will likely serve to intensify the debate at the European Central Bank at the appropriateness of its currently very loose policy stance. Eurozone unemployment data will also be released. US Q2 GDP is a third reading which is not expected to be revised. More timely will be weekly US initial jobless claims. Despite backing up modestly over the last two weeks they remain close to the pandemic low recorded earlier this month suggesting that the labour market is continuing to improve. Today sees more testimony to US Congress by Fed Chair Powell & Treasury Secretary Yellen. In Tuesday’s session testimony Powell once again suggested that asset purchase tapering was close but that the economic improvements required for an interest rate hike were much more stringent. Much of Tuesday’s discussion revolved around imminent fiscal deadlines with both Yellen and Powell urging Senators to act. However, it appears that a government shutdown has been avoided for now. Several other Fed policymakers are also scheduled to speak today. G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) USDJPY - 112.00 530m. 111.00 785m. 110.30/50 1.68bn (1.17bn C). 109.90/110.00 1.67bn (1.26bn C). EURUSD - 1.1810/20 602m. 1.1790/1.1800 423m. 1.1760/70 655m. 1.1740/50 484m. 1.1690/1.1700 2.09bn (1.44bn P). 1.1650 794m. 1.1600/10 716m. GBPUSD - 1.3640/50 1.16bn (1.11bn P). 1.3620 599m. AUDUSD - 0.7340/50 814m. 0.7300/10 516m. 0.7200/10 746m. USDCAD - 1.2850 435m. 1.2820 401m. 1.2790/1.2800 606m. 1.2740/50 2.26bn (1.54bn C). 1.2720 450m. 1.2700 585m. 1.2670 520m. 1.2550 972m. USDCHF - 0.9150 890m. EURCHF - 1.1000 425m. 1.0900 923m. 1.0850 614m. 1.0750 400m. EURJPY - 130.40 483m. 126.50 420m. EURSEK - 10.25 610m. EURNOK - 10.26 640m. USDMXN - 20.51 596m. USDCNH - 6.44 691m.Technical & Trade ViewsEURUSD Bias: Bearish below 1.19 Bullish above Edges higher as risk appetite improves in Asia EUR/USD opened -0.73% at 1.1598 after USD rallied across the board It edged higher in Asia, as E-minis gained around 0.50% EUR/USD is trading at the session high at 1.1605/10 into the afternoon Resistance is at former support at 1.1660/65 where sellers are tipped The 10-day MA is at 1.1690 and break would ease downward pressure There isn't any significant support until the 50% of 1.0636/1.2349 at 1.1492 EUR/USD will likely remain pressured while markets remain volatileGBPUSD Bias: Bearish below 1.39 Bullish above. Bid with a softer USD and risk bid at month end +0.2% - USD softer as risk appetite bounces - E-mini S&P +0.5% - month end Trades towards the top of a 1.3425-1.3453 range with plenty of interest Britons turn more pessimistic about outlook for economy UK financial sector calls for six-month specialist staff visa Charts; momentum studies, 5, 10 & 21 daily and weekly moving averages slide 21 day Bollinger bands expand - strong bearish trending setup 1.3419 38.2% May-Jun rise proves resilient, 1.3166 38.2% 2020-21 rise below Close above 1.3617 falling 10 DMA needed to end downside biasUSDJPY Bias: Bullish above 109 Bearish below USD/JPY off some from 112.05 EBS high overnight, Asia 111.80-98 Market heavy 112.00+ still, concerns incl US debt ceiling, Biden agenda Market eyeing fresh moves higher alongside US yields into October 112.23 pre-pandemic Feb 2020 high, 114.55 Oct 2018 high targeted by specs Japanese exporters likely to return in October 112.00+ however Bidding interest eyed from @111.70, 111.63 flat hourly Ichi kijun Option expiries - today 110.00-50 $3 bln+, 111.00 $785 mln, 112.00 $530 mln Tomorrow to see $1.9 bln+ between 110.00-70, $1 bln at 111.00 strike Yield on US Treasuries off highs but consolidating, 10s above 1.50% @1.512% Nikkei -0.4% @29,430 on month-end position adjustments JPY crosses steady, EUR/JPY 129.74-88, GBP/JPY 150.21-53 AUD/JPY 80.27-59, NZD/JPY 76.78-77.01, CAD/JPY 86.69-87.85, best of lot Option expiries - EUR/JPY 128.90-129.00 E365 mln, 129.90 238, 130.40-50 514 Also GBP/JPY 149.50 GBP230 mln, AUD/JPY 80.00-25 A$335 mln todayAUDUSD Bias: Bearish below 0.75 Bullish above Sharp rebound in iron ore underpins AUD/USD rally AUD/USD opened -0.91% at 0.7174 after USD soared and key commodities wilted It was gently bid from the open, as E-minis rallied around 0.50% AUD/USD traded up to 0.7190/95 with sellers tipped around 0.7200 China PMI was mixed and there wasn't an immediate reaction... Dalian iron ore rallied 8.5% at one stage and AUD/USD moved up to 0.7205 Heading into the afternoon the AUD/USD is trading just below the 0.7205 high More selling orders tipped at former support at 0.7220/25 Resistance is at the 10-day MA at 0.7244 and break eases downward pressure The next level of support is at the 2021 low at 0.7106 Key will be whether equities can stage a sustainable rebound

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-september-30th-2021"
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Dollar Remains Near One-Year High; Debt Ceiling Debate Eyed

from Forex News https://www.investing.com/news/forex-news/dollar-remains-near-oneyear-high-debt-ceiling-debate-eyed-2630607
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Dollar at Highest Since November as Rally Extends to Four Days

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Whatever Happens to Evergrande, Nobody Wants to Short the Yuan

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Dollar Down, but Near One-Year High as Fed Preps for Asset Tapering

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Inflation

Inflation is the rise in the general level of prices in an economy (or a sector of an economy) over a given period of time. Alternatively, it is sometimes defined as the decline in the purchasing power of each unit of money, which amounts to the same thing.

Inflation is usually measured by looking at the change in a price index that is based on the average prices of a basket of goods and services. Typically we look at the year-on-year inflation rate (eg, the change in the price index between May this year and May last year), or the annualised rate over longer periods (eg, if the price index is up by 9.3% over three years, that’s an annualised inflation rate of 3%).

When we talk about inflation in general, we are usually referring to inflation in the consumer price index (CPI). This index is a representative sample of the items a typical consumer spends their money on, such as food, fuel, clothing and entertainment. However, we might also want to know about changes in the prices that manufacturers receive for what they sell. This is measured using a producer price index (PPI), based on a basket of products ranging from raw materials to finished goods. Changes in the PPI generally precede changes in the CPI since rising or falling costs for producers (such as materials or labour costs) will ripple down the supply chain until they affect the prices that consumers pay in shops.

Calculating inflation is surprisingly complicated. The selection of items in the index, the mathematical method used to average them and adjustments to reflect changes in the quality of items over time all affect the result. Two indices may produce different rates, as is often the case with the UK’s CPI and its older retail price index (RPI). Important items such as food and fuel have volatile prices, so we may need to look at an index that excludes these to get a sense of underlying trends (known as core inflation).

from Moneyweek RSS Feed https://moneyweek.com/glossary/603923/inflation
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Boston Fed's first look at digital U.S. dollar nearly done, official says

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Revenue reserve

Many high-profile investment trusts have managed to raise their dividend every year for decades regardless of dividend cuts by companies. The main reason for this is that trusts, unlike open-ended investment funds, don’t have to distribute all the dividends they get each year. They can hold back up to 15% to build up a revenue reserve, which they can then draw on to maintain their own dividends in years when company payouts fall.

This can be useful for investors who prefer a steady income from their funds. You could do a similar thing with your own portfolio, by putting aside 10% or 15% of your dividend income to be drawn on only during market crises. However, avoiding dipping into that requires discipline, while having it out of reach inside an investment trust doesn’t present the same temptation. 

That said, it is important to understand that a revenue reserve is not a sum of money separate from the trust’s portfolio, sitting in a bank account for emergencies. It is an accounting entry: the money will be invested alongside the trust’s other assets – in stocks, bonds or something else – on which the trust will hopefully be earning income and/or capital gains. Drawing on the reserve means selling assets. Typically the amount needed would be small, but if the trust had a large revenue reserve and had to draw on it for quite a while, the portfolio would shrink by a meaningful amount, which would cut future dividend income.

Following a change to tax laws in 2012, investment trusts are also allowed to pay dividends out of realised capital gains, known as the capital reserve. A few trusts now aim to pay out a flexible proportion of their value each year, regardless of whether that comes from capital or income. Drawing on capital to maintain a fixed dividend could make sense as a one-off in a crisis, but if a trust is forced to draw on revenue or capital repeatedly, the dividend is not sustainable.

from Moneyweek RSS Feed https://moneyweek.com/glossary/603922/revenue-reserve
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BoE's Bailey sees UK economy regaining pre-pandemic level in early 2022

from Forex News https://www.investing.com/news/forex-news/boes-bailey-sees-uk-economy-regaining-prepandemic-level-in-early-2022-2629997
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Midweek Market Podcast – September 29

It was all about Yields this week as Treasuries, Equities and EM currencies tanked as the USD continued its bid on the back of the rapidly rising 5, 10 and 30-year US Treasury Bond rates.

HotForex · Midweek Market Podcast – September 29

The Market Week – September – Week 4 

If Equities took centre stage last week, then this week the entire theatre was taken over by the rally in Yields.  Stocks tanked and once again tested September lows. USD rallied to 3-mth highs and the Evergrande saga hung over Asian markets as the threat of contagion persists.  The US government could run out of cash by October 18, as Mrs. Yellen & Mr. Powell try to reassure markets.

Germany and Japan have new leaders, as Germany narrowly leaned to the left with Mr. Scholz and Japan tipped back to the right and Mr. Kishida. Still to come this week, Month and Quarter End, much more Central bank “speak” and various GDP, PMI & CPI data to add to the mix.

The number and quality of the US jobs recovery grinds on and will be central to the FED’s taper timeframe for later in the year. The weekly US unemployment claims ticked higher again last week, to 351,000, from 335,000. This week they are expected to return to 335,000 but still above pandemic lows of 312,000.

The vaccine rollouts continue to drive sentiment, and the Delta variant remains a significant concern, as the winter season in the northern hemisphere looms.  In Asia lockdowns remain in place and the vaccination rates continue to improve. However, as booster jabs start in Europe, and double vaccination levels approach 80%, low-income country vaccination rates remain very low.  

Volatility was back in the FX markets this week, with a stronger Dollar weighing on all the Majors and EM currencies, in particular. The USDIndex rallied to 10-mth highs at 93.85 from last week’s 20-day high at 93.42. EURUSD sank to 1.1655, USDJPY pushed 111.00 to July highs at 111.65. Cable was the worst of the majors as food and fuel supplies ran low on lorry driver shortages, testing 1.3500, a level not seen since January.

The US stock markets tanked on persistent Evergrande, the September effect and the fall in Treasuries. All three indices remained well below their 50-day moving averages. This week the USA500 has posted 9 days under the 50 MA and tested 4330 once again. Technology stocks were the worst performers with the USA100 at a new 21-day low as the USA30 recovered from a 65-day low.

Gold continued to decline as the USD and Yields rallied – posting new September lows at $1728 and testing the end of day lows from August. The August 9 intra-day spike lower to $1690 remains a key support area, with the 20-day moving average at $1765, a key resistance area.

USOil prices continued to soar, touching 3-year highs as demand outstrips supply and inventories continue to be drawn down. This week price peaked over $76.00 at $76.25, before a rapid re-trace on the stock market tumble tested down to $73.30 before recovering to $74.00.

The yield on the US 10-Year Treasury Note remains very much in focus and a key market mover. A very significant rally to 1.55% from 1.30% last Friday had repercussions for the Dollar, Stock markets and Commodity prices.  A more hawkish FED, and rising inflation, suggests the taper timeframe will commence in November and certainly before year-end.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /274333/
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Capitol Hill chaos keeps the markets jittery!

Capitol Hill chaos and a big game of chicken will keep the markets jittery. The government is on the verge of another shutdown, or at least a partial one on October 1 if there is no action imminently, while Treasury Secretary Yellen has indicated October 18 as the drop dead date on the debt limit and a default.

Equity futures are higher ahead of the open, though off their best levels. Contracts on the major indices are up 0.25% to 0.5%. The modest bounce from Tuesday’s rout comes as the yield on the 10-year Treasury note eased slightly from the multi-month highs seen yesterday. Rate-sensitive big tech shares were hammered lower in the Tuesday session, though appear to be the beneficiaries of dip buying ahead of the open. Issues remain for the market however, aside from the usual suspects of growth and Covid concerns, inflation, and high valuations, investors are now grappling with the odds of a government shutdown, and the potential for a default.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /274433/
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Market Spotlight: Watching GBPAUD Channel Break

GBPAUD Downside OpportunitiesWith GBP selling off across the board this week, there is plenty of interesting price action to note. One chart catching my eye in particular is GBPAUD. Price has recently broken down below the 1.8739 level and is now probing below the rising channel support, suggesting that the recent peak might be a lower high against the YTD highs. With indicators both bearish now and with the retail community around 60% long there is room for the move to develop further. While below 1.8739 bears will target 1.8461 next.Key Data to WatchWith little in the way of key data for either currency this week the focus will instead be on broader themes within the backdrop. For the UK, the rising risks around the ongoing energy crisis and supply chain issues affecting the economy will likely keep GBP pressured in the near term. For AUD, the key focus is on COVID update around lockdowns.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-watching-gbpaud-channel-break"
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EURUSD H4 is at pivot, potential for bounce | 29 Sept 2021

Type: Bullish BouncePivot: 1.16634Support: 1.15974Resistance: 1.17368Preference: Price is approaching the pivot where we may potentially see a bounce towards 1st resistance, in-line with 23.6% Fibonacci retracement and 100% Fibonacci extensionAlternative Scenario: If price drops from the pivot, we may see it swing towards 1st support, in-line with 127.2% Fibonacci retracement and 200% Fibonacci extension

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/eurusd-h4-is-at-pivot-potential-for-bounce-or-29-sept-2021"
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DAX testing pivot, potential for a bounce | 29 Sept 2021

Type: Bullish UpsidePivot: 15,678Support: 15,459Resistance: 16,007Preference: DAX H4 is testing the pivot where we may potentially see a drop towards 1st support, in-line with 38.2% Fibonacci retracement and horizontal overlap support.Alternative Scenario: If price bounces above the pivot, we may see it swing towards towards 1st resistance, in-line with 100% Fibonacci retracement and 61.8% Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/dax-testing-pivot-potential-for-a-bounce-or-29-sept-2021"
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GBP Collapses Despite Hawkish BOE Message

GBP Under PressureGBPUSD is now very close to testing the yearly lows following the sell off this week. The rise in USD has accompanied investor uncertainty over the current energy crisis and supply chain issues hitting the UK. Indeed, the sell of this week comes despite a hawkish shift at last week’s Bank of England meeting and hot on the heels of further hawkish comments from BOE governor Bailey this week.Hawkish Shift At BOE MeetingAt the September BOE meeting, the bank noted that the case for hiking rates has strengthened on the back of the recent surge in inflation (3.2% in August). While the majority of members viewed the spike as temporary, with inflation set to peak around 4% this year, the bank noted clear upside risks given the current backdrop. Indeed, two members voted for immediate tapering of the bank’s asset purchase program. While the BOE noted that uncertainties remain in the outlook, the uptick in inflation presents a clear issue which needs to be addressed.Rate Hike Pricing RisesOn the back of the BOE meeting, the UK rates market saw a sizeable shift, pricing a rate hike by February as a 90% probability, up from around 60% ahead of the meeting. Following that meeting, we then heard from BOE governor Bailey on Monday. Bailey told the audience at an event in London that "All of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainably over the medium term." The reference here to a unanimous view on tightening is a clear hawkish signal.Uncertainty RemainsDespite the clear hawkish signal from the BOE, however, GBP remains under pressure heading into the middle of the week. The ongoing supply chain issues and energy crisis currently hitting the country are heavily detracting from the BOE’s message creating wide-spread uncertainty as to the near-term outlook for the UK heading into the winter months. However, the current crisis, if anything, appears likely to drive inflation even higher, sharpening the focus on BOE tightening by year end.Technical ViewsGBPUSDThe breakdown below the contracting triangle pattern and the 1.3570 level support is a strong, bearish technical development for the pair. With both RSI and MACD giving bearish signals here, there is room for the move to extend. Price is fast approaching the 1.3461 level support, a break of which will open the way for a test of 1.32 next.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/gbp-collapses-despite-hawkish-boe-message"
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The investment landscape is getting messy – what should you own now?

(John here – don’t forget to grab your ticket for our virtual Wealth Summit in November. Things are rather heating up in markets, as Dominic discusses below, so you couldn’t pick a better time to be in a room with a group of the world’s smartest financial experts covering all the topics that matter most – find out more here.)

It feels like the 1970s all over again: energy shortages, inflation – and I mean visible inflation in everyday goods, not just in house prices – supply chain issues, rising bond yields, volatile markets, social discontent...

We lowly investors peek out from our bunkers and observe that pretty much every problem is the making of some short-sighted policy up top, from money printing to a failure to process HGV licences.

But we also note that there is little we can do, beyond ranting at the neighbours. All we have is the ability to put our own houses in order.

So we go back under cover and take stock.

What can you own when everything is expensive?

How to navigate what is becoming an increasingly difficult investment landscape?

Gold. You’ve got to own some, but it’s gone down again. It was supposed to protect against money printing, but it hasn’t. Not for ten years, apart from a brief surge in 2020.

It’s the ultimate analogue asset in a world where all the value is digital. But you never know. You’ve got to have some.

Bitcoin. You’ve got to own some; its potential is too great not to. But it’s going down. And at current prices it’s hardly the value proposition it once was.

Tech. That’s where the growth is; the scalability of digital is something to behold. You’ve got to have some tech in your portfolio. But we say it again: at current prices?

In the correction of the last week, tech stocks sold off by a lot more than other sectors. It looks relatively weak. And what about the semiconductor shortage? That’s not going to help. Is it?

Bonds? Don’t understand them. It looks like a racket to me. Yields are too low. Only invest in rackets you understand.

The base rate is 0.1%. Inflation is 4.8%. They say it’s only transitory. But how do they know? I can even hear the “brrr” of the money printer from inside my bunker, and it’s insulated. Doesn’t a shortage of HGV drivers and panic fuel buying signal higher prices? I think they’re just saying it’s transitory so they don’t have to put rates up.

But the negative real yield is closing in on 5%. That’s quite something. As Charlie Morris of Fleet Street Letter fame observes, inflation expectations are currently at 4.5% over the next two years. I’m not sure it’s as transitory as they say it is.

No wonder bond yields, even in this racket of a market, are spiking.

Base metals. It strikes me that base metal prices are largely driven by Chinese demand. The real estate company Evergrande is bust. People are posting videos on social media of the Chinese knocking down buildings they recently built that nobody’s using.

There are 30 million unused homes, I read. Can you ship some of them over here? The under-40s sure could use them.

I’m not so sure about Chinese construction demand for the moment. There’s definitely a structural deficit in base metals – too many years of underinvestment in mining. But the sector’s not in what you’d call a bull market.

Energy? It looks good, you have to say it. A bull market is a bull market and oil is in a bull market. It’s up 55% this year. Oil had a great decade in the 1970s. It beat pretty much everything. We are oil bulls. Have been for a long time.

Brent touched $80 this week. It has pulled back a little. But there is still room for it to go a lot higher. Ten years ago $100 was kind of normal – it will be again.

But there is a lot of noise about the oil price. We don’t like it when things get noisy; it worries us. It means the bull market’s nearer the end than the beginning.

Uranium too has been good. Many of the miners have just had a 25% correction this past fortnight. Time to jump in? Not sure. Still feels too noisy. Long term yes, but short term it worries me. Maybe that’s the proverbial bull market wall of worry.

Maybe boring old UK value stocks are the place to be. Could do a lot worse. Though they are not exactly sexy.

Which leaves cash. At least you know where you are with cash. You know it’s going to lose 5%-10% of its purchasing power over the next year.

It’s no longer a safe-haven; it has become like a time-dated option. But when everything else feels so shaky, a mere 5%-10% loss seems like a relative win.

Too much money is sloshing about looking for stuff that’s cheap. And nothing is cheap, because there’s too much money sloshing about.

I was a wee nipper in the 1970s. I don’t really remember it, but my old man used to say how hard it was. You knew you had to put your money somewhere, but it was impossible to know where.

Sounds like today.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

from Moneyweek RSS Feed https://moneyweek.com/investments/investment-strategy/603911/the-investment-landscape-is-getting-messy-what-should-you
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USDJPY is approaching a pivot, potential for bounce | 29 Sept 2021

Type: Bullish BounceResistance: 112.418Support: 110.384Pivot: 110.975Preference:Price has been consolidating in a upwards channel. We foresee a potential target at our pivot at 110.975 in line with 88% Fibonacci extension towards our 1st resistance placed at 112.418 in line with 161.8% Fibonacci extension and parallel channel.Alternative Scenario:Alternatively, price may dip towards our 1st support at 110.394 in line with 61.8% Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/usdjpy-is-approaching-a-pivot-potential-for-bounce-or-29-sept-2021"
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USD Soaring Following Powell Inflation Warning

Inflation More of An Issue NowThe US Dollar traded up to its highest level since November 2020 today, despite a mixed set of comments from Fed chairman Powell overnight. Testifying at the Senate Banking Committee hearing, the Fed chairman told senators that inflation has now become a more pressing issue than it was earlier in the year. However, Powell added the caveat that while inflation is soaring, the labour market remains far off maximal levels. With this in mind, Powell warned that the test for lifting rates is higher than it as previously and sought to reassure that the Fed will continue with its bond purchases until the middle of next year, albeit with tapering along the way.Fed Turning More HawkishWhile the comments were not as decisively hawkish as USD bulls would have liked, the Fed’s message on inflation represents an important shift. With rising global concerns around the soaring energy prices and supply chain issues, inflationary fears have taken hold again over the last month. With this in mind, an increasing number of Fed policymakers have been voicing their support for tapering in the near term.Tapering Coming SoonAt the last FOMC meeting, the Fed chairman held off from giving a clear timing signal, instead saying that tapering would likely soon be warranted. However, the market has clearly set its sights on November as the likely date for a tapering announcement. This is a view shared by some within the Fed itself with Fed’s Bullard noting overnight that he believes the central bank will begin tapering in November. This comes just a day after Fed’s Williams noted that he believes “substantial further progress” has been made and view tapering as likely in the coming months.Keep An Eye on DataLooking ahead this week, the focus will now shift to the rest of Powell’s testimony as well incoming US data. Tomorrow sees the finalised quarterly GDP print, weekly unemployment claims as well as the Chicago PMI, while on Friday, we see the headline ISM manufacturing reading for the month. Given the lifting USD sentiment here, any data upside over the remainder of the week likely to fuel a further rally in USD.Technical ViewsDXYThe rally in the USD Index has seen price breaking out above the 93.44 level and the previous YTD highs. While above here, the current bull channel looks set to extend to the next target of 94.63. supported by bullish signals on both the MACD and RSI. To the downside, any break below the rising channel will see 91.83 as first support.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/usd-soaring-following-powell-inflation-warning"
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What do higher oil prices mean for investors?

Yesterday, oil prices (as measured by Brent crude) raced past $80 barrel for the first time in three years. It’s the latest commodity of many to surge in value. West Texas Intermediate – WTI, the US benchmark – also hit a two-month high, at just above $76 a barrel.

So what’s going on and what do oil’s gains mean for you?

Why are oil prices rising?

As Reed Blakemore, deputy director of the Atlantic Council’s Global Energy Centre, tells Al Jazeera, the current “drama” in the market is due to a “collision of three massive forces: the impact of prolonged demand uncertainty due to Covid-19 on supply-side management over the past year; the structural changes of a policy-driven transition to a net-zero world; and the reality that sufficient investment and development of oil and gas supplies is still crucial to market stability even amidst a global energy transition”.

In other words, producers have struggled to match supply and demand in the short term due to lockdowns; while in the longer run, politicians are trying to swap us all to non-fossil fuels without really considering that we might need the old, mucky ones for a bit longer.

Most obviously, oil demand has rebounded sharply after its total collapse last year. In April 2020, Brent fell as low around $20 a barrel (hardly surprising when the whole world was locked up), while WTI (on some contracts) even turned negative briefly.

But positive news on vaccines and recovering higher economic activity following the easing of restrictions has seen the oil market to roar back to life. Brent is now up around 70% since the start of the year alone, while WTI is up more than 50%.

Another short-term factor is that the oil market is still reeling from the impact of Hurricane Ida which badly affected US supply last month. The fact that natural gas has gone through the roof is also having something of a knock-on effect to oil.

On top of all that, China specifically is enduring an energy shortage which is helping to underpin oil prices as it looks to cut down on pollution from coal in particular ahead of February, when it is due to host the Winter Olympics. As a result, many factories are switching to using diesel as an energy substitute.

Will oil prices remain this high?

In terms of supply, oil cartel Opec (plus Russia – known as Opec+) has just increased production. But oil prices have so far shrugged this off simply because it only matched increased demand – and as Goldman Sachs analysts point out, the impact of Hurricane Ida, which shuttered production capacity, offset the rise in oil production.

That’s likely to continue, even if supply is boosted further, reckons Barclays. "Opec+ tapering would not plug the oil supply gap through at least Q1 2022 as demand recovery is likely to continue to outpace this, due partly to limited capacity of some producers in the group to ramp up output".

Goldman Sachs now expects oil prices to level out around $90 a barrel by the end of the year, up from a previous estimate of $80. "While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts'.

Of course, investment banks are constantly making forecasts about the oil price, and these are often wrong – notably, eye-catching calls that predict a price well in advance of current prices have tended to signal tops in the past. But a forecast for $90 isn’t so exuberant as to fit into that category. And even if prices don’t rise much further, there is no obvious reason to expect oil to crash either.

What does it mean for markets and the economy?

Higher oil spells higher petrol prices for consumers. And oil is of course a huge cost for companies too. So this could both spur inflation (which is already at a nine-year high) and hit disposable incomes (unless wages rise faster than prices – in which case corporate margins may well take a hit). In other words, this adds to the stagflation risks.

As far as investing goes, the winners are pretty obvious. Oil and gas companies should do well if prices stay high. One way to play this is via the iShares Oil & Gas Exploration & Production UCITS ETF (LSE: SPOG). which has risen sharply from its pandemic low, but is still trading below its pre-pandemic levels.

from Moneyweek RSS Feed https://moneyweek.com/investments/commodities/energy/oil/603908/what-do-higher-oil-prices-mean-for-investors
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Investment Bank Outlook 29-09-2021

CitiEuropean OpenAsian equities traded in the red, with USD retaining its strength from the NY session. Quarter-end and month-end distortions are playing a part, as well as the broader backdrop of the approaching US Fiscal deadlines. Closely watched Fedtalk yesterday did not yield any surprises, with speakers sticking to the script. Oil continued to fall in the Asian session following a report by the American Petroleum Institute pointing to a build in stockpilesLooking ahead, we look forward to the JPY LDP elections, which we do not expect to move markets. The first vote results have been released, with Kishida and Kono to have final battle. The results of the subsequent runoff is likely to be released around 08:40 BST. We also see a THB rate decision (08:05 BST) in which Citi Economics expects a close call, but predicts no rate cut with a 60% probability. Major data prints are light outside of a EUR economic confidence release (10:00 BST), which is not expected to move markets. Later in the day, we flag a host of central bank speakers from the G10 set to debut in the ECB’s forum (13:00-16:45 BST).Credit AgricoleAsia overnight Further rises in UST yields and concerns about inflation and even stagflation weighed on investor sentiment in the Asian session. The approach of another interest payment on Evergrande’s debt is also weighing on sentiment. Fed Chair Jerome Powell indicated that only decent jobs growth is needed next week to trigger the Fed’s tapering of its asset purchases in November. Scenes of queues for basic necessities in the UK and newswire reports of electricity rationing in some provinces in China, have raised concerns about stagflation. Evergrande is selling a stake in a regional bank to free up cash flow.While most Asian bourses were trading in the red at the time of writing, S&P 500 futures were trading in the green. G10 FX was trading in tight ranges. Rising Covid infections in NZ led to a short squeeze in AUD/NZD. So, the AUD was the outperformer during the Asian session and the NZD the underperformer. In Japan, the LDP Presidential election will go to a second round of voting between the two lead candidates, Taro Kono and Fumio Kishida. Both candidates failed to garner a majority of votes in the first round. The JPY has been steady during the vote.CIBCFX FlowsIn terms of currencies, risk sentiment was somehow dictated by the e-minis. Initial move up and AUDUSD rose to 0.7250, USDCAD slipped to 1.2670. All reversed when equity futures pared gains. For rest of the morning, it was all the same pattern. One thing we realised this morning was the strange demand for AUDNZD during the risk-on part. The cross was bought, heard on long-term strategic account bought a round this morning. But yield spreads of the 2-year AU-NZ bonds remained wide. Our trader Jon said expectations of RBNZ waned and this is causing bit of profit taking from across.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/investment-bank-outlook-29-09-2021"
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Myanmar's junta powerless as currency drops 60% in four weeks, economy tanks

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Dollar Edges Lower; Remains Elevated on Higher Yields

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Exclusive: China's regulators tighten scrutiny of FX dealers - sources

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Daily Market Outlook, September 29th, 2021

Daily Market Outlook, September 29th, 2021 Overnight Headlines Key House Panel To Advance Debt Limit Extension Bill On Wed. Japan's GPIF To Avoid Yuan-Denominated Chinese Sovereign Bonds Australia To End Emergency Support Payments As Vaccinations Rise N. Korea Says It Tested New Type Of Hypersonic Glide Vehicle US Dollar Stands Tall As Trade Price In Tapering And Rate Hikes Global Bond Market Set For Worst Month Since Early 2021 Oil Sinks As Climb In U.S. Stockpiles, Risk-Off Mood Check Rally Japan Leads Fall In Asian Equities As Inflation Fears Rattle Markets Evergrande Losing Control Of Bank Unit In $1.5 Billion Deal Samsung Elec Close To Finalising $17Bln Chip Plant In Texas iPhone Delivery Times Lengthen As Covid Hits Suppliers In Vietnam Micron Slides After Memory-Chip Maker Delivers Weak Forecast The Day Ahead Today’s highlight is probably the appearance of the US, Eurozone, Japanese and UK central bank heads at an ECB event from 4.45pm. While the predominant view remains that price pressures will ease back next year as economies adjust to current supply-side issues such as raw material and staff shortages, they will be mindful of risks that inflation stays elevated for longer. That latter concern may be greater in the US where CPI inflation remains above 5% and in the UK which the BoE predicts could have an extended period of inflation above 4% (into Q2 2022). In contrast, both the ECB and the Bank of Japan appear more confident about the transitory inflation narrative, perhaps because their economies had struggled to get inflation sufficiently high before the pandemic. Data wise, there will be some focus on the BoE August lending data, including the number of mortgage approvals. Tomorrow 7am sees an update of UK Q2 GDP which is expected to be unrevised at 4.8%q/q. Latest PMIs, however, reaffirm the likelihood of softer growth heading into H2, partly reflecting the impact of supply constraints. The Lloyds Business Barometer for September will be released overnight, and it will be interesting to see if sentiment tracks the PMIs lower. Global investors will pay attention to the Chinese September PMIs, also due overnight. Economic activity has been weighed down by measures to tackle the delta variant. The crisis in China Evergrande Group continues to be a focus for markets, as authorities move to limit financial market and wider economic contagion.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) USDJPY - 111.00 558m. 110.40/50 436m. 109.90/110.00 1.38bn (820m C). EURUSD - 1.1930 1.86bn (1.59bn C). 1.1860 532m. 1.1810/20 499m. 1.1790/1.1800 539m. 1.1740/50 1.36bn (787m C). 1.1700 1.06bn (899m P). 1.1650/70 512m. 1.1600/10 537m. 1.1490 660m. GBPUSD - 1.3670/80 1.10bn (868m C). USDCAD - 1.2950 630m. 1.2900 2.18bn (2.15bn C). 1.2800 480m. 1.2740/50 635m. 1.2630/40 539m. 1.2610/20 1.61bn (1.28bn P). USDCHF - 0.9320 800m. 0.9120 800m. USDTRY - 10.00 404m. USDMXN - 20.45 750m. 20.25 670m. USDCNH - 6.56 601m. 6.49 761m. 6.47 1.46bn (923m C). 6.45 559m. 6.44 1.21bn (1.16bn P)Technical & Trade ViewsEURUSD Bias: Bearish below 1.19 Bullish above Consolidates above key support in quiet Asia EUR/USD opened -0.1% at 1.1683 after falling as low as 1.1668 on higher US yields... In a very quiet Asian session the EUR/USD traded in a 1.1678/89 range Heading into the afternoon it was unchanged at 1.1680/85 Key support is at the 2021 low at 1.1664 after it held again yesterday A break below 1.1660 initially targets 1.1600/15 window Resistance is at the 10-day MA at 1.1715 and break eases pressure EUR/USD at risk while US yields firm and Fed expectations remain hawkishGBPUSD Bias: Bearish below 1.39 Bullish above. GBP options send warning signals GBP/USD option premiums shot higher as GBP/USD fell through major levels Erasing big 1.3550 barriers fuelled the rise, more so if 1.35 barriers go Benchmark 1-month implied volatility 5.9 to 7.0 since last week, holds firm 7.25 is July 20 peak and has held on multiple occasions since April 1-month 25D risk reversals demand 0.6 premium for GBP puts over calls That's their highest downside premium since March More premium gains would signal more worries of volatility and GBP lossesUSDJPY Bias: Bullish above 109 Bearish below USD/JPY to 111.68 before easing back, crosses mostly soft USD/JPY up to fresh high of year of 111.68 EBS into Tokyo fix, eases later Low limited to 111.35 however, ease alongside with US yields Yield on US Treasury 10s off from 1.560% early to 1.525%, now @1.532% Triple, maybe quadruple top between 111.65-70 now - today, o/n, July 1-2 Specs seen locking in profits on longs up early uptick, exporters quieter Japanese players in general hunkering down for H1 end tom, LDP vote today JPY crosses mostly soft with risk off, Nikkei -2.5% @29,442 today pre-H1 end EUR/JPY 130.46 to 130.15 EBS, GBP/JPY 150.77-151.19 after plunge o/n AUD/JPY 80.58-89, NZD/JPY 77.30-65, CAD/JPY more buoyant, 87.70-88.10AUDUSD Bias: Bearish below 0.75 Bullish above Steady around 0.7245 as bounce in E – minis underpins AUD/USD opened -0.63% at 0.7240 after USD strengthened and Wall Street fell It moved up to 0.7250 early Asia before coming under pressure again The low was 0.7227 before a 0.5% move up in E-minis steadied risk assets Heading into the afternoon the AUD/USD is steady around 0.7245 Support is at 0.7220/25 where it has bottomed over past 2 weeks More support is at the 76.4 of the 0.7106/0.7477 move at 0.7194 Rise in risk aversion and increased downside risks weighing on AUD Bias is for lower while resistance at 0.7320/25 caps rallies

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-september-29th-2021"
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BTCUSD bearish momentum | 29th Sep 2021

Support: 39505.75Resistance: 44133. 89Pivot: 42138.05TypeBearish DropPreference:Price is reacting in a descending channel, we can expect price to drop further from pivot in line with 61.8% Fibonacci retracement towards the 1st Support in line with 100% Fibonacci projection and -27.2% Fibonacci extension.Alternative Scenario:Alternatively, price can reverse back up to 1st Resistance in line with 78.6% Fibonacci retracement and 61.8% Fibonacci projection.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/btcusd-bearish-momentum-or-29th-sep-2021"
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Market Update – September 29 – Asias shares set their Worst Quarter

Market News

• The surge in Treasury rates was a major catalyst behind the steep drop on Wall Street, though the looming debt limit and potential potential government shutdown on October 1, and more importantly the threat of default, weighed heavily on US assets.
• China’s power crunch worsens. 
• Yields stabilised (30-year closed to 2.10% and the 10-year hitting 1.565% before dipping late in the session as some dip buyers stepped forward).
• MSCI’s gauge of Asian stocks saw the biggest drop in almost six weeks and is set for the first quarterly slide in six. –  Evergrande concerns resurfaced as China stepped in to buy a stake in a regional bank from the developer.  Hong Kong’s central bank has reportedly asked lenders to report their exposure to the Group and Fitch Ratings downgraded the developer’s rating to C from CC.
• Testimony from Fed Chair Powell and Treasury Secretary Yellen did not do the markets any favors either but added to the overall uncertainties emanating from Capitol Hill.
• Equities extended losses in Japan, JPN225 down -2.6%. USA500 was off -2.0% at 4355, USA100  paced the plunge in the indexes, tumbling -2.8%, below 15,000. USA30  was -1.6% lower.
• USOil dropped back below the $74 mark, after reaching a high of 74.87.
• FX markets – GBP selling off sharply yesterday but steadied so far today– USD corrected – USDJPY – 110.33, Cable 1.3527, EURUSD 1.1677.

European Open – Some stabilisation then for the beleaguered bond market and stocks are also showing signs of life, with GER30 and UK100 futures posting gains of 0.4% and 0.2% respectively, while US futures are up around 0.6%.

After the sharp sell off in equity markets in recent days, dip buyers would emerge eventually – Will calm in bond markets last for long?  even if central bank officials will do their best to calm nerves this week.

Unless China risk escalates and spills over monetary policy support is set to be phased out gradually over the next years and stocks will have to adjust to the changed outlook.

Today – Data releases today include UK lending data and Eurozone ESI economic confidence and there are also a number of speakers at the ECB’s conference on central bankers. Pending Home Sales from US also on tap.

Asset of Interest Cotton (+6.53%) Broke 101 barrier, posting fresh record high, extending rally  for 8 day’s in a row breaking the upper daily BB line. Daily RSI at 73 while MACD line extended above 0 suggesting the increase of positive bias.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /274013/
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GBPUSD – Will it rebound from yesterday’s heavy fall?

GBPUSD, H4

Yesterday, the GBPUSD pair fell throughout the European and US trading sessions, falling more than 160 pips from the 1.3696 opening price to close at 1.3529, marking a new low of the last 12 months. After bond yields continued to rise from the week before, the 10-yr hit a multi-month high of 1.55% (now 1.52%), causing the stock market to collapse, with the USA100 the worst performer losing -2.83% for its worst day since March 2020. The US Dollar was at its highest in 10 months, with the USDIndex hitting a new high of 93.80.

Fed Chair Powell reiterated in a statement to the Senate that as the economy continues to reopen and spending begins to recover, price pressure is expected to increase. The impact of supply chain bottlenecks in some sectors will be larger and longer than expected and Inflation is expected to fall back to the 2 percent target over the long term. However, the Fed will do whatever it takes to sustain an economic recovery.

On the British side, yesterday the FTSE 100 fell -0.5% on concerns about Chinese property developers and interest rate hikes. On Monday, BoE Governor Bailey said the fastest rate hike could happen this year, although the bond purchase plan has not yet ended.

Yesterday’s heavy drop resulted in GBPUSD retracing above 1.3500, which is now trading at 1.3544, testing the lower band of the Channel. It has key support at 1.3500, while the RSI’s overbought rebound target, including bullish divergence, will be at 1.3600.

Today’s economic calendar includes keynote speeches by both Fed Chairman Powell and BoE Governor Bailey, as well as the weekly report on US home sales figures.

Click here to access our Economic Calendar

Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /274228/
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