Daily Market Outlook, October 5th, 2021

Daily Market Outlook, October 5th, 2021 Overnight Headlines Biden Tells Progressives Spending Package Needs To Be Between USD 1.9-2.2T US Senator Schumer Forces Debt Limit Vote To Squeeze Republican Resistance GOP Warns Biden Not To Replace Trump Fed Chair With Liberal Brainard Japanese PM Kishida, US President Biden Commit To Defending Senkaku Islands Australia's Trade Surplus Surprises With Record High On Commodity Demand RBA Leaves Cash Rate On Hold As Expected, Maintains Plan For Asset Purchases France And Spain Urge Pan-European Response To Surge In Energy Prices US Dollar Drifts Below One-Year High As Payrolls Test Friday Looms Large Oil Prices Edge Lower In Wake Of Jump On OPEC+ Producers Supply Restraint Chinese Technology Index Heads For New Low As The Global Selloff Continues The Day Ahead Today’s data calendar is dominated by reports on September service sector activity. In the Eurozone and the UK these are second estimates and not expected to be much revised from initial outturns, although new data will be released on individual Eurozone economies. In both cases, first estimates were down from August with the accompanying commentary suggesting that supply issues more than offset any boost from the relaxation of restrictions over the summer. In the case of the UK, where the activity index fell to its lowest since February, recruitment challenges were cited frequently as an issue for firms. In the US, the September ISM survey for services is published. The index slipped back in August but that followed an unexpectedly strong July print and so remains at a level that has historically been consistent with strong growth in GDP. The already published US PMI Services report for September pointed to a further slowing in activity. Supply issues were again cited as an important factor behind the deceleration, but it also noted that a summer pickup in Covid cases may have led demand growth for some consumer services to slow. The PMI and ISM have not always moved together on a month-to-month basis but with other measures also pointing to a near term softening expect the ISM to have fallen to 60.7 from 61.7. Today’s speaker schedule is relatively light. In the US, Fed Vice Chair Quarles will talk about Libor transition, while ECB President Lagarde will address a conference this afternoon. Early Wednesday morning the New Zealand central bank will issue its latest monetary policy update. It is widely expected to raise policy interest rates by 25 basis points to 0.50%. Concerns over building inflationary pressures and an overheating housing market are likely to be cited. The policy move was originally expected in August but delayed by a pickup in Covid infections.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) USDJPY - 112.50 600m. 112.00 845m. 110.80/111.00 1.18bn (762m P). EURUSD - 1.1790/1.1800 745m. 1.1750 415m. 1.1730 716m. 1.1620/30 514m. 1.1600 505m. AUDUSD - 0.7440/50 1.12bn (697m C). AUDNZD - 1.0410 2.09bn (1.41bn P). USDCAD - 1.2800/10 1.13bn (1.07bn C). 1.2670/80 570m. 1.2610/20 2.01bn (1.41bn P). 1.2410/20 476m. AUDJPY - 80.00 525m. GBPJPY - 151.90 400m. USDZAR - 14.10 450m. USDMXN - 20.00 460m. 19.95 460m. USDCNH - 6.46 577m. Technical & Trade ViewsEURUSD Bias: Bearish below 1.17 Bullish above Gives back some of Monday's gain as USD bid in Asia EUR/USD opened +0.22% at 1.1622 after USD broadly eased on Monday Risk assets slipped lower in Asia and USD struck a bid tone EUR/USD traded down to 1.1602 and was 1.1605/10 into the afternoon EUR/USD trending lower with 5, 10 & 21-day MAs in bearish alignment Resistance is at the 10-day MA at 1,1652 and break eases downward pressure Support at yesterday's 1.1588 low and double-bottom at 1.1560/65 EUR/USD likely to remain range-bound ahead of Friday's US non-farm payrollsGBPUSD Bias: Bearish below 1.36 Bullish above. GBP/USD pivots 1.36 after two cent rise Friday – Monday Cable pivots 1.3600 after retreating from Monday's six-day peak of 1.3640 Profit-taking on shorts aided the rise to 1.3640, from Friday's 1.3434 low Friday's low was 22 pips shy of Wednesday's nine-month low (Sept 29) 1.3575 (Friday's high) is now a support point. 1.3532 was Monday's low Resistance levels beyond 1.3640 include 1.3659 (Sept 24 low) and 1.37 Brexit cold turkey: UK tries to kick imported labour habitUSDJPY Bias: Bullish above 109 Bearish below USD/JPY better bid in Asia, bouncing from 110.82 EBS low overnight Asia 110.88 early to 111.13, good bids from 110.80-90 Mix of Japanese retail specs, institutional investors below Talk bids trail down, investors active again at start of fiscal half 110.80-111.00 $1.2 bln in option expiries now supportive Steady to higher US yields too, Treasury 10s 1.472-1.491% range Nikkei off large on surge in crude oil prices, -2.3% @27,796 JPY crosses mostly steady despite fall in stocksAUDUSD Bias: Bearish below 0.75 Bullish above Moves lower in Asia – muted impact from RBA decision AUD/USD opened +0.28% at 0.7288 after USD broadly eased Monday After trading to 0.7293, it came under pressure as equity markets swooned... AUD/USD traded down to 0.7262 before basing and bouncing to 0.7278 It was around 0.7275 when the RBA decided to keep policy unchanged as expected RBA was optimistic economy would bounce back, but said wage growth was retrained AUD/USD eased to 0.7265 and remains offered into the afternoon Support is at the 10-day MA at 0.7254 and break eases upward pressure Resistance is at 0.7310/20 where daily highs and 55-day MA converge

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