Two reasons to hold dollar longs and retain bearish view on stocks

Volatility across asset classes is hitting new highs this year, credit spreads are rising, and the market is trying to calm down after the threat of a financial crisis that has been brewing in the UK pension fund industry has tipped. As a result, demand for defensive assets in FX remains high and is unlikely to turn into a steady decline soon. Among such assets, the key is cash dollar, as well as Japanese yen in cross pairs. The market is waiting for data on inflation, as well as for Putin's address to the nation.Volatility in the foreign exchange market has reached its highest level this year and may rise even higher. There are two factors that contribute to this. The first is the policy of central banks, which are trying to prevent high inflation bygaining a foothold in the minds of economic agents and therefore urgently raise interest rates. The Fed is leading this race. Whether the Fed will be able to maintain its leadership will depend on incoming data, and the August Core PCE which is due today will help to gauge the likelihood of even more aggressive policy tightening. The Fed prefers to measure inflation using this index, so it is of great importance. Core PCE is expected to increase from 4.6% to 4.7% in August, with a monthly change of 0.5%. The Fed predicts a slowdown in inflation to 4.5% at the end of the year and at the same time intends to bring the range of interest rate to 4.25-4.5%. It is clear that in the event of a positive surprise, there will be a higher risk that year-end inflation won’t meet expectations of the Fed, and therefore the regulator may be forced to signal that there will be two 75 bp increases in November and December. In short, a surprise on the upside in the report could trigger a dollar rally today.A strong dollar is also due to higher real interest rates in the US. If at the beginning of August, the real interest rate (yield on 10-year inflation-protected bonds) was 0%, now it has risen to 1.4%:The real interest rate is calculated as the nominal rate minus inflation expectations, and for its increase it is necessary that inflation expectations decrease, and nominal rate rises, and this is precisely what is happening now. Typically, such a process is accompanied by a bearish trend in risky assets (as an alternative to bonds) and strong dollar (due to investment demand from abroad). One should not expect a reversal of this trend soon, surely not until the Fed gives the appropriate signal.The second volatility factor are geopolitical tensions. President Putin will make an address to the nation today, in which he will probably announce that four regions of Ukraine have become part of the Russian Federation and will also comment on the sabotage on two Nord Stream pipelines. The market will most likely interpret the speech as a signal of escalation in the confrontation with the West and will price in retaliatory measures.Inflation in Germany rose to double digits (10%), while core inflation in the Eurozone accelerated to 4.8% against the forecast of 4.7%. Accelerating inflation in the EU above the forecast hurts the Euro, as the ECB is constrained in maneuvering as any rate hike will hurt the EU economy. After release of the report, EURUSD resistance formed at 0.99 (the upper limit of the bearish channel), downward movement is likely to resume after the speech of the President of the Russian Federation, as market participants will tend to factor in further escalation, which will have negative consequences for inflation.

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Market Spotlight: EURJPY Longs Triggered

EURJPY Breaking OutThe recent EURJPY long idea has triggered on a break of the 140.82 level, following the reversal off the 137.74 level and bullish trend line. The retail market has turned more aggressively short the pair, supporting the view that we have further to run to the topside here. Price is fast approaching initial target at 143.80 where traders should monitor price action given the resistance we’ve seen here previously. Look to stay along above 140.82 targeting 149.83 in the longer-term. MACD is close to switching positive here, suggesting further bullishness to come.Keep An Eye OnThe drop in USD and GBP this week has been highly beneficial for EUR. Additionally, EUR is benefiting more hawkish ECB expectations. With eurozone inflation still at record levels, many players are now projecting more aggressive action from the ECB over the remainder of the year. The BOJ, meanwhile, remains committed to maintaining negative rates. Traders should, however, be wary of any signs suggesting further BOJ intervention given the wild moves we saw the week before last.

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FOMO Fridays: EUR On The Rebound

EUR Turns Higher Amidst Market TurmoilIt’s becoming a redundant sentence, I know, but what a week. FX volatility is back up at levels not seen since the outbreak of COVID and this has made for plenty of opportunity. We’ve seen many wild swings this week with the boomerang action in GBP clearly the winner in terms of shock factor. However, chatting with traders ahead of the weekend, it seems the move that has captured traders’ attention in a more meaningful way is the rally in EUR. The single currency has made broad based gains this week and is starting to look like a fuller move higher might be on the cards in the near-term. Looking at EURUSD in particular, we’ve seen a more than 3% move higher this week, bringing price back up firmly off the year’s lows. So, let’s take a look at what caused the move and, as ever, if you caught it? Well done! If you missed it? There’s always next week.What Caused The Move?GBP Volatility Favours EURPart of the move higher in EUR this week has been the weakness we’ve seen in its major trading partners. Both USD and GBP have been sharply lower, allowing EUR plenty of room to recover. The UK government’s mini-budget has seemingly gone down like a lead balloon, sending GBP sinking to its lowest levels since the 80s. This seismic shift in market pricing has seen funds diverted into EUR this week as traders look to avoid the UK meltdown many are now forecasting in the coming months.Hawkish ECB ForecastsHowever, the story has not just been a by-product of action elsewhere. EUR is also benefiting from a more hawkish ECB outlook. Goldman Sachs upgraded their ECB forecasts this week, now pegging tow further .75% hikes over the coming months as the ECB battles to tame soaring inflation. The change in outlook is being digested by traders as markets adjust to the sharp shift in EU rates this year which has seen the ECB reversing the negative rates put in place in response to the GFC.Technical ViewsEURUSDThe rally off the bear channel lows has seen EURUSD reversing sharply higher. Price has broken above tow key levels and is now fast approaching a retest of the broken .9885 level. This is a major level for EURUSD, with the bear channel top just above. A break here will be firmly bullish, putting the longer run focus on a move up to the 1.0364 level thereafter.

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Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?

The government has launched the biggest dash for growth in 50 years, relaunching an approach known as supply-side economics. What is the plan – and will it work?

from Moneyweek RSS Feed https://moneyweek.com/economy/uk-economy/budget/605384/kwasi-kwartengs-gamble-on-growth
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Daily Market Outlook, September 30, 2022

Daily Market Outlook, September 30, 2022 Overnight Headlines Fed Officials Reinforce Rate Hike Calls, Say Markets Got Message Oil Set For First Quarterly Drop Since 2020 As Macro Mood Sours Europe Gas Falls As Traders Weigh Fallout Of Pipeline Eruptions Gold Edges Up On Softer Dollar, To Fall For Sixth Straight Month Aluminium Extends Gains, Record Spike On Russia Supply Fears Pres Biden: US Will Never Recognise Russian Claims On Ukraine Senate Pass Bill To Stop Government Shutdown, Sent To House Biden Administration Sets Sanctions Targeting Iran's Oil Exports PBoC Makes Biggest Weekly Net Cash Injection Since Jan 2020 China’s Economy Struggles On Covid-19 Curbs, Property Woes BoJ Boosts Amounts At Regular Bond Buy, Yields Stay Elevated Japan To Confirm Yen Intervention Size, Eyes On War-Chest Size Japan PM Kishida Orders Specific Stimulus Steps By End-October ECB Eye Jumbo Hike To Fight Inflation Even Amid Debtors Suffer Truss Holds Emergency Talks With OBR Failing To Calm Markets UK Job Vacancies Decrease To Post-Pandemic Levels, REC SaysThe Day Ahead Equity markets remained under broad pressures in the Asia-Pacific region, falling for a seventh straight week, following another negative end to trading on Wall Street. Investors continued to assess prospects of further policy tightening by the Fed and other major central banks across the world. In UK news, there are reports that PM Truss and Chancellor Kwarteng will meet with the head of the independent Office for Budget Responsibility (OBR) which had not been asked to produce a forecast to accompany last week’s mini-budget. Revised GDP figures released earlier this morning showed the UK economy grew by 0.2%q/q in Q2 compared with the prior estimate of a 0.1%q/q contraction. It implies that the economy is probably not currently in a technical recession defined as two consecutive quarters of negative growth. Lloyds Bank Business Barometer survey released overnight showed business confidence remaining steady at 16% in September following three months of declines. The survey also showed some renewed upward pressure on output prices and wages. As responses were taken in the first half of the month, they will not have accounted for the government’s Growth Plan announcements which aim to increase the economy’s trend rate of growth recent, nor the recent volatility in financial markets. UK money supply and bank lending data for August will be released later today but may look dated given recent developments. In particular, the numbers on mortgage activity will not reflect the impact of last week’s move on stamp duty, the most recent fluctuations in interest rate expectations or this week’s announcements by some lenders about changes to the availability of products. Consequently, it may have little impact on markets. Inflation data updates for the Eurozone and the US will be closely watched. In the Eurozone, upside risks to CPI inflation after yesterday’s German data, which could see the headline rate rising near to 10% in September. That would maintain pressure on the ECB to hike rates further in the coming meetings even as economic activity is slowing. In the US, the PCE deflator is the Fed’s preferred inflation gauge. Echoing the already released CPI figures, we look for the headline PCE deflator to rise by 0.2%m/m in August, bringing the year-on-year rate down to 6.1% from 6.3%. However, look for the annual core rate, which excludes food and energy, moving up to 4.9% from 4.6%. The fall in the headline rate is likely to be partly driven by lower gasoline prices. That should support real personal spending during the month.FX Options Expiring 10am New York Cut EUR/USD: 0.9690-00 (1.3BLN), 0.9750 (650M) 0.9795-00 (1.65BLN), 0.9850 (644M), 0.9900 (1.1BLN) 0.9930-35 (403M), 0.9950 (256M), 1.0020 (418M) USD/JPY: 143.00 (509M), 144.00 (675M), 144.95-00 (1.13BLN) 146.00 (361M). EUR/JPY: 141.00 (300M) USD/CHF: 0.9780 (214M). EUR/CHF: 0.9500 (306M) 0.9600 (931M), 0.9650 (450M), 0.9700 (361M) GBP/USD: 1.1050 (518M), 1.1200 (521M), 1.1350 (210M) EUR/GBP: 0.8800 (530M), 0.8850 (303M), 0.8875 (411M) AUD/USD: 0.6500 (310M), 0.6575 (325M). USD/CAD: 1.3500 (515M) 1.3550 (270M), 1.3700 (270M), 1.3725 (250M), 1.3850 (250M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.00 Choppy month end, though strikes contained Off 0.2%, towards the base of a 0.9795-0.9844 range, dragged around by GBP Choppy trading amid light liquidity at quarter end, after volatile September European inflation data today key event risk CPI flash poll 9.7%, core +4.7% Close above 0.9849, 38.2% Aug-Sept fall would be bullish for next week 0.9683 NY low and 0.9844 Asian high are initial support and resistance 0.9800 1.556 BLN and 98.45/50 718 MLM are Friday's close strikes 20 Day VWAP bearish, 5 Day bullishGBPUSD Bias: Bearish below 1.10 Volatile sterling cries out for credible policy A choppy session to end an extremely volatile month for sterling in Asia Trades near the base of a 1.1071-1.1222 range with solid volumes on D3 Bid on optimism into today's Truss-OBR meeting, which faded Markets need a credible budget statement next week not Nov 23rd 1.0764 low Thursday and today's 1.1222 high initial support resistance 20 Day VWAP is bearish, 5 Day bullishUSDJPY Bias: Bullish above 140 Positive data – bid but intervention fears cap +0.2% near top of a 144.33-144.77 range, capped by 145+ intervention fears Modest risk off at quarter end, Nikkei -1.8% - down 7.6% in September Strong Japan factory, retail sales... and jobs ... Japan to announce size of yen-buying intervention today Psychological 145.00 first resistance, then pre intervention 145.90 high Wednesday's 143.91 NY low, then 143.10 are initial supports 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .6750 Consolidates, RBI hike looms next week AUD/USD trades in a narrow 0.6518-0.6479 range ahead of a Sydney holiday Mon Fed tough talk, risk aversion continue to cap rallies China, Japan FX threats, BOE bond buys limit downside... Higher iron ore prices support; Dalian iron sees best month in six Focus turns to Tuesday's RBA rate decision, 50 bps hike expected... support 0.6435-45, resistance 0.6530-40 20 Day VWAP is bearish, 5 Day bullishBTCUSD Bias: Bearish below 25.3K BTC rotates around 19.5k Circle Announces Acquisition of Elements to Accelerate Crypto Payments UK watchdog dismisses criticisms over crypto authorisations Encouraging words for crypto from Stanley Druckenmiller BTC is still down ~58.5% so far this year First resistance sited at 21k support now see at 18k 20 Day VWAP is bullish, 5 Day bullish

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Investment Bank Outlook 30-09-2022

BNY MellonBrazilian Elections: Expect The UnexpectedThe first round of Brazil's presidential election takes place this Sunday, Oct. 2. Contrary to what is priced, we believe the likelihood of incumbent President Jair Bolsonaro winning the second round against ex-president Luis Inacio Lula da Silva on Oct. 30 is close to 50-50. Our three working scenarios for a second-round vote: Bolsonaro wins with just over 50%; Lula wins with less than 55%; and Lula wins with more than 55%.In Brazil, a president is elected if a candidate wins more than 50% of the valid votes outright in the first or second round. If a candidate fails to reach 50% in the first round, a second round takes place within four weeks between the two leading candidates in the first round. The most recent poll published by aggregator XP/Locomotiva has Lula at 49%, Bolsonaro at 38%, Ciro Gomes at 6%, Simone Tebet at 5%, and others at 1%.For context, each of the presidential result scenarios proposed above has materialized in the past. Back in 1994 and 1998, President Fernando Henrique Cardoso (FHC) won in a first round twice, with 54% and 53% outright. Since then, however, no candidate has managed to win in a first round. Nevertheless, Lula won in the second round in both 2002 and 2006 with more than 60% support. Dilma Rousseff comfortably won in 2010 with 56% of the vote in the second round of 2010, but just barely in 2014, with 51.6%.In the 2018 elections, while it was clear that Bolsonaro would win in a second round, he only received 55% of the vote. That was a wide margin, but still resulted in a fragmented congress that has proved quite challenging for the president and his cabinet to navigate.In terms of market reaction, we think a Bolsonaro win will likely drive the BRL stronger, back below 5.00 per dollar, and begin to have more easing priced into the curve through 2023. The curve is priced for 300bp of easing over 2023, with -100bp priced for H1 that year.A Lula win will likely also induce the market to price easing, but that will likely differ between the two scenarios. A 'weak win' will likely have Lula opt for a pragmatic cabinet earlier, potentially bringing ex-Finance Minister and ex-central bank (BCB) President Henrique Meirelles into the newly formed government. We believe this would, in turn, reinforce the commitment to the spending ceiling introduced by President Michel Temer, which was strongly supported by Meirelles two weeks ago. While the BRL may not rally as much on a Bolsonaro win, CDI futures could price even more aggressive easing than were Lula to win.A strong win – 55%+ margin – for Lula will likely drive the BRL weaker, while also have additional rate cuts priced for next year. Market turmoil could escalate, however, were the president to announce intent to eliminate the spending ceiling, as frequently mentioned in public speeches over the past few months. Lula’s campaign economist, Guilherme Mello, discussed this yesterday, though didn't give details on a replacement mechanism.

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Market Update – September 30 – Quarter End

• USDIndex – has dropped back to 112.00, as bonds and stocks remained very jittery into quarter-end, month end and week end. -The US Q2 chain price indexes accelerated to 9.0% for the headline, and 4.7% for the core. Credibility issues also are keeping buyers sidelined as the central banks are seen having waited too long to address rising price pressures, with worries now that they are overdoing rate hikes and will push the globe into recession.
• Yields: The German 10-year rate is down -3.2 bp in early trade, the US rate -4.1 bp.
• PM Liz Truss – she will stick to her plan to reignite economic growth, breaking her silence after nearly a week of financial market chaos.
• German Chancellor Olaf Scholz – set out $196 billion “defensive shield”, including a gas price brake and a cut in sales tax for the fuel, to protect companies and households from the impact of soaring energy prices. That came after the 10.9% German Inflation figure for September.
• 
• Stocks  were headed for their worst month! Nikkei still closed with a loss of -1.8%, the ASX was down -1.2% by end of trade while CSI 300 and Hang Seng are down -0.3% and up 0.1% respectively. However, markets seem to be finding a footing and European and US futures are mostly managing slight gains.
• Japan’s factories ramped up output in August and China’s factory activity returned to growth this month, data showed.
• GBP has lifted above 1.10
• EUR – is at 0.98,  at
• JPY traded at 144.57.
• USOil steady at $81
• Gold – rebounded to $1670.
• BTC – steady at 19410
• VIX index has been on the rise and hit 33.46 earlier, just shy the 34.75 May high, though has yet to really test the 40 area last seen in late 2020.

Biggest FX Mover @ (06:30 GMT) USA100 back to 11333. Intraday fast MAs aligning higher, MACD histogram & signal line are turning higher but still in negative area, RSI at 54.76, H1 ATR 58.36, Daily ATR 354.98.

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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3 top value stocks to buy now

Professional investor Adam Rackley of Cape Wrath Capital highlights three overlooked value stocks to buy.

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Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King

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AUDNZD overbought for the first time since 2008

Australia’s monthly consumer price measure on Thursday (29/09) showed the annual inflation rate eased slightly in August from July thanks to a sharp drop in petrol prices, which may hint cost-of-living pressures may be nearing their peak.

In its first monthly release, Australia’s CPI rose 6.8% y/y in June, accelerated to 7.0% y/y in July and slowed to 6.8% y/y in August. The monthly CPI excluding fruit, vegetables and fuel rose 5.5% y/y in June, increased to 6.1% y/y in July, then 6.2% y/y in August. However, the monthly readings can differ considerably from the quarter CPI figures. The monthly CPI only has about two-thirds of the price observations of the quarterly series and is more volatile, thus somewhat limiting its usefulness. After all, it has not been seasonally adjusted and does not include the core inflation measure favoured by the RBA.

https://www.abs.gov.au/media-centre/media-statements/monthly-cpi-indicator-rose-68-year-august

This data comes ahead of next week’s RBA Policy Board meeting, where markets are expecting a 50bp rate hike to a 9-year high of 2.85%.

Meanwhile, ANZ New Zealand Business Confidence rose from -47.8 to -36.7 in September. Own Activity Outlook rose from -4.0 to -1.8. Investment intentions rose from -2.0 to 1.8. Work intentions rose from 3.4 to 5.9. Price intentions rose from 68.0 to 70.1. Cost expectations fell from 90.9 to 89.8. Inflation expectations decreased from 6.13% to 5.98%.

ANZ said that demand has not rolled over as feared as the Central Bank has raised interest rates. But to the extent that the RBNZ can keep going until they see the drop in demand they need to tame inflation, it will likely be a temporary reprieve, if not a double-edged sword for companies that have considerable debt.

Technical Review

Meanwhile in the FX market, AUDNZD has rallied since December 2021 and reached an 8-year high below the 1.1500 range. RSI (70.62) entered the overbought area for the first time since July 2008. However, poor market sentiment and fear over China’s economic outlook will be a test for AUDNZD. The PBOC has recently intervened several times in the market and is likely to do so again to defend the Yuan amid fears of an economic slowdown, caused by the lockdown.

AUDNZD, H2

AUDNZD,H2 – Intraday bias looks neutral for now, and a move to the upside could test the recent peak at 1.1488 or the multi-year peak of 1.1528 (2015). However, 1.1500 will make the bulls rethink their positions. In today’s Asian session trading, it was seen that the bears attempted to surpass the minor support of 1.1369, but this attempt has not been maximised.

Moving to the downside, it is likely to test the 1.1315 support before moving further to break the ascending trendline and resistance which is the support at 1.1255. The oscillation is now on the downside after the divergence created by the pair’s long liquidation attempt. Broadly speaking, it is likely that the pair will enter a consolidation phase before deciding on the next trend.

Click here to access our Economic Calendar

Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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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Bank of England spends £65bn to “restore orderly market conditions”

The Bank of England has said it will spend £65bn buying bonds to stabilise the financial markets after the government’s mini-Budget. Saloni Sardana explains what’s happening.

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Investment Bank Outlook 29-09-2022

BNY MellonBOE: Avoiding UK Mortgage MayhemThe Bank of England went to great lengths Wednesday to stress that its intervention in Gilt markets is purely a financial-stability-related operation. The time-limited and targeted nature of the purchases is clearly different from the operational parameters of quantitative easing or yield curve control. Coupled with the fact that it was the Financial Policy Committee (FPC) which initiated the process that led to the purchase programme, the BoE will likely attempt to reassure markets that this is not a reversal of its willingness to tighten policy. For now, markets are unlikely to see things that way – a reversal of quantitative tightening and short-term expansion of the BoE's balance sheet may weigh on sterling. We think there is every chance that the Gilt purchase programme will be extended if fixed income volatility remains high. Market participants have long since abandoned efforts to push back against largescale asset purchases in government bond markets. The divergence in UK financial conditions against those in the US in particular means that the collapse in the relationship between front-end rate spreads and GBPUSD appears set to continue.Media reports Wednesday suggested that the Bank of England acted due to concerns that the recent selloff in Gilts would leave many liability-driven investment (LDI) managers facing margin calls and lead to more forced sales of UK government paper; we expect the FPC to address the reasoning behind its decision in due course. We concur with the view that further volatility in the Gilt market would have led to sustained dysfunction in sterling fixed income markets, leading to material damage to the real economy.Sterling weakness is one tangible manifestation of the uncertainty, but we believe the FPC and MPC would have been equally concerned about the state of the mortgage market. By Tuesday morning, the number of mortgage products available had shrunk by a third from the previous Friday before the budget was announced; originators were simply unable to adequately price their products. At the pace products were being withdrawn, the UK real estate market was staring at a sudden stop that would have devastating consequences for the economy.As of Tuesday afternoon, products were still being withdrawn so this risk has not gone away. In the UK, an agreed mortgage offer is normally valid for between three to six months. However, with the prospect of very aggressive BoE rate hikes well within that time frame hanging over markets, providers simply had no visibility over their pricing or valuation accuracy and decided to pause offerings altogether.We doubt that the BoE’s actions Wednesday will be enough to calm the market. We also expect market pressure to force the Treasury to bring forward the full fiscal plan for the budget and associated independent forecasts by the Office for Budget Responsibility (OBR). Once clarity is established and the BoE's interest-rate curve has adequately repriced, mortgage products should be brought back online. Until then, the BoE will need to engage in quantitative operations to limit interest-rate volatility. We would also not rule out specific funding measures to support the mortgage market.

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Daily Market Outlook, September 29, 2022

Daily Market Outlook, September 29, 2022 Overnight Headlines Fed's Evans: Fed Must Press On Despite Global Market Volatility Biden Tells Econ Team To Stay In Touch With Allies On Markets US Treasury Alarmed At UK Economic Chaos Unleashed By PM BoE Response Highlights ‘Impossible Trinity’ Of Liquidity Issues Pressure Builds On Kwarteng As UK Tories Slam Economic Plans China's Covid Worries To Take Shine Off Golden Week Holidays PBoC Speculation Warning Sparks First Yuan Gain In Nine Days Citadel's Founder Griffin Warns Economy Has Powerful Tailwind World Bank Sees Risk Of Stagflation, Likely Recession In Europe EU Plans Russia Import Bans, Tech Curbs Over Putin Land Grab Pressure Builds On Kwarteng As UK Tories Slam Economic Plans Sterling Slips Back Alongside Euro On Persistent UK Fiscal Angst Turkey’s Erdogan Aims For Interest Rate In Single Digits This Year Amazon Raises Hourly Wages At Cost Of Almost $1 Billion A Year Gold Drops After BoE Move Spurs Biggest Jump In Over Six MonthsThe Day Ahead Asian equity markets are mostly up this morning following rises in Europe and the US yesterday. That may be a sign that the announcement by the Bank of England that it is delaying the start of active sales of gilts and instead would buy gilts in an attempt to calm UK markets had an initial wider impact. Indeed, some market participants have speculated that central banks may now feel the need to slow the pace of monetary policy tightening because of concerns about the impact on markets. However, there was little sign of that in comments by central bank officials yesterday as both US Federal Reserve and European Central Bank officials pointed to the likelihood of further interest rate hikes. Today’s UK money supply and bank lending data for August may look dated given recent developments. In particular the numbers on mortgage activity will not reflect the impact of last week’s move on stamp duty, the most recent fluctuations in interest rate expectations or this week’s announcements by some lenders about changes to the availability of products. Consequently, it may have little impact on markets. German September CPI data may provide some clues on tomorrow’s outturn for the Eurozone as a whole. Annual headline inflation is expected to have risen sharply from its August rate. Meanwhile, September business confidence readings for the Eurozone are forecast to have weakened in line with recent evidence from business surveys. Early tomorrow the September Lloyds Business Barometer will provide an update on UK business confidence. The headline reading has declined in recent months as companies have become more nervous about both the general economic situation and their own prospects. Meanwhile there have been some signs of wage and price pressures easing. The data was collected before last week’s moves on fiscal and monetary policy but should capture the initial impact of the announcement on the cap on energy prices. There are a lot of scheduled speeches from central bank policymakers today including some from Bank of England officials. BoE Deputy Governor Ramsden is supposed to be talking about ‘real time’ data and so may not touch on recent economic developments, but external Monetary Policy Committee member Tenreyro will discuss inflation developments.FX Options Expiring 10am New York Cut EUR/USD: 0.9700 (201M), 0.9720-25 (1.4BN), 0.9750 (1.45BN), 0.9780 (275M), 0.9810 (435M) USD/JPY: 144.25-28 (310M), 144.90-00 (1.07BN), 146.00 (301M) USD/CHF: 0.9700 (365M), 0.9900 (1.1BN) EUR/CHF: 0.9380 (649M) EUR/GBP: 0.8825 (679M) AUD/USD: 0.6610 (1.02BN), 0.6640-50 (496M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.00 EUR/USD – Bullish outside day, as yield spreads tightened -0.15% after closing up 1.5%, supported by the lower USD, as risk recovered BoE calmed markets, pledging to restore order by buying gilts ECB policymakers are becoming hawkish - 75pt Oct hike viable Yield spreads supported EUR - bund 10yr -10bp 2.155%, 10yr UST -23bp 3.737% 20 day VWAP bands fall - bearish setup, as over sold signals unwind Early EZ 0.9535 low and NY 0.9751 high are initial support, resistance 0.9720/25 795mln are the only close strikes for Thursday 20 Day VWAP bearish, 5 Day bullishGBPUSD Bias: Bearish below 1.10 Soft after a bullish outside day, as BoE buys time Off 0.5% early after closing up 1.4%, as BoE bought bonds BoE acted and markets have recovered, but the moves will only buy time Credible UK government policy needed to reverse the sterling downtrend PM Truss is facing growing pressure from Conservative MPs to sack Kwarteng August UK car output climbed, soaring costs to fuel inflation Bullish outside day unwinds oversold signals seen earlier this week 1.0706 lower 20 day VWAP band and 1.10 initial support, resistance 20 Day VWAP is bearish, 5 Day bullishUSDJPY Bias: Bullish above 140 Bid after Wednesday's fall as UST yields open higher +0.2% early after closing down 0.5% with the U.S. dollar broadly lower Yield spreads narrowed as UST yields slumped, 10yr -23bp - opens +3bp 3.737% Foreign investors net sellers of Japanese shares last week... Positive Asian markets - Nikkei +0.7%, AsiaxJP +0.7%, E-mini S&P flat BoJ intervention - now pivotal 141.04 support Psychological 145.00 first resistance, then pre intervention 145.90 high NY 143.91 low, then 143.10 are initial supports 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .6750 Pares gains as bearish sentiment remains entrenched AUD/USD down 0.6% in Asia as risk recovery runs out of steam Bearish sentiment remains entrenched as Fed hawkish talk continues Sellers rush to take advantage of 1.3% rally from 29-month low of 0.63635 BOE steps to stem risk rout, China verbal warnings taken in stride UST yields drift higher after sharp pullback, GBP drops 0.9%, undermine AUD Australia monthly CPI measure slows slightly to 6.8% y/y in Aug Asia range 0.6522-0.6471; support 0.640, 0.6445-50, resistance 0.6540-50 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 25.3K BTC continues to rotate around 19k Bank of England bond intervention... helps sink global yields US rate drop leads to broad based USD selling, risk rally Encouraging words for crypto from Stanley Druckenmiller Daily bull hammer forms BTC is still down ~58.5% so far this year First resistance sited at 21k support now see at 18k 20 Day VWAP is bullish, 5 Day bullish

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-september-29-2022"
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Market Update – September 29 – Sterling & Stocks drift as BoE boost fades

• USDIndex – tumbled at 112.43 after the BoE’s actions ( worst session in 2.5 years). Today it found some ground edging towards 113.35, buoyed by renewed pressure on the pound.
• Yields: UBoE’s announcement that it will buy up to GBP 5 bln a day for 13 days in a bid to stabilise markets bruised by the government’s mini-budget may have helped Gilts and wider bond markets to recover somewhat yesterday, but while Australia and New Zealand bonds rallied in catch up trade, yields are already rising again in Europe and the US. Record surge in Gilts where the 30-year rate plunged an historic 105 bps to 3.913%, unwinding the better than 130 bp selloff to a 5.135% high. The 10-year Gilt crashed 50 bps, the most since 1992, to 3.999%.

While intervention supported Gilts, Treasuries rallied on haven demand amid global investor jitters, bargain hunting, a solid 7-year auction, and a month-end bid. 

• GBP remains volatile as BoE presses panic button. Sterling rallied on the BoE’s initial announcement of bond purchases, but Cable has since settled at 1.08 area as the rapid switch from scheduled asset sales to “temporary” bond purchases has not really helped to instill confidence in the currency. 
• EUR – returned to 0.9665.
• JPY traded at 144.70.
• Stocks:  The 1.96% bounce to 3718 in the US500 snapped a six-day string of losses, the worst since February 2020, as the index climbed off of Tuesday’s 3647, a new 2022 low. Strength was broadbased with energy climbing over 4%. The US100 jumped 2.05% to 11,051, and the US30 rose 1.88% to 29,683.
• USOil up to $81. Goldman Sachs cut its 2023 oil price forecast, citing expectations of weaker demand and a stronger USD. China’s travel during the upcoming week-long national holiday is set to hit the lowest level in years as Beijing’s persistent zero-COVID rules prompt people to stay at home and economic woes dampen spending. Citi economists have lowered their China GDP forecast from 5% year-on-year growth to 4.6% for the fourth quarter of 2022.
• Gold – after some buying retreats to $1647.
• BTC – at 19375.
• Today: German Inflation, ECB’s Panetta, de Guindos, Elderson and Lane speech, US GDP and Jobless claims.

Biggest FX Mover @ (06:30 GMT) NZDUSD (-1.05%) back to 0.5655. Intraday fast MAs aligning lower, MACD histogram & signal line are turnign to 0, RSI at 2342, H1 ATR 0.00173, Daily ATR 0.00953.

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Andria Pichidi

Market Analyst

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from HF Analysis /520471/
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