Euro Weakness Continues in Flip-Flopping Markets

Market overviews

Overall markets continue to be rather mixed for now. Commodity currencies rally in Asian session, as led by Aussie, following rebound in the stock markets. On the other hand, Dollar is turning softer again, together with Yen. Euro’s weakness is the more persistent development this week, in particular against other European majors. Trading today might remain non-committal, as the markets are looking forward to tomorrow’s non-farm payroll report.

Technically, EUR/AUD’s break of 1.5898 support now suggests that choppy rebound from 1.5250 has completed at 1.6434. Near term outlook is turned bearish for retesting 1.5250 low. EUR/GBP’s breach of 0.8499 support is a bearish signal and sustained trading below there will pave the way back to 0.8448 low. EUR/CHF would be a focus in the next few days and break of 1.0694 support will resume the whole down trend from 1.1149. If that happens, Euro’s decline could accelerate elsewhere.

In Asia, at the time of writing, Nikkei is up 0.81%. Hong Kong HSI is up 2.41%. Singapore Strait Times is up 0.92%. Japan 10-year JGB yield is down -0.0058 at 0.079. China is still on holiday. Overnight, DOW rose 0.30%. S&P 500 rose 0.41%. NASDAQ rose 0.47%.10-year yield dropped -0.005 to 1.524.

Australia AiG services ticked up to 45.7 in Sep, mild upturn expected in Oct

Australia AiG Performance of Services Index rose slightly by 0.1 pts to 45.7 in September, marking a second month in contraction. Looking at some details, sales rose 1.4 to 41.4. Employment dropped -1.4 to 52.0. New orders dropped -7.6 to 39.8. Supplier deliveries rose 3.0 to 47.0. Finished stocks rose 15.8 to 53.5. Input prices dropped -.7.0 to 64.5. Selling prices dropped -1.4 to 53.9.

Ai Group Chief Executive, Innes Willox, said: “Restrictions associated with the delta outbreaks in south eastern Australia were the major contributor to the continued contraction of the Australian services sector in September… While predictions are highly conditional, we are expecting a mild upturn in October followed by further gains as restrictions are eased in line with higher levels of vaccination.”

BoJ Kuroda expects economy to recover as pandemic impact subsides

BoJ Governor Haruhiko Kuroda said Japan’s economy is expected to recover ahead as the impact of the pandemic gradually subsides. BoJ is closely watching the coronavirus impact. He pledged again that it “won’t hesitate to ease policy further if necessary”.

Kuroda also said that core CPI is expected to linger around 0% for the near term, but it would “pick up pace gradually”. Also, the financial system remains stable and financial conditions are accommodative overall.

Looking ahead

Swiss unemployment and foreign currency reserves, Germany industrial production, France trade balance will be released in European session. ECB will also release monetary policy meeting accounts. Later in the day, US will release jobless claims while Canada will release Ivey PMI.

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.0693; (P) 1.0733; (R1) 1.0757; More….

Intraday bias in EUR/CHF stays on the downside as fall from 1.0936 is in progress for retesting 1.0694 low. Sustained break there will resume whole down trend from 1.1149. Next target is 61.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0655. On the upside, above 1.0770 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 1.0811 support turned resistance holds.

In the bigger picture, the rejection by 55 week EMA maintains medium term bearishness. Fall from 1.1149 (2021 high) is currently seen as the second leg of the patter from 1.0505 (2020 low) first. Hence, in case of deeper fall, we’d look for strong support from 1.0505 to bring rebound. However, sustained break of 1.0505 will resume the long term down trend from 1.2004 (2018 high). Also, medium term outlook will now be neutral at best as long as 1.0936 resistance holds.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:30 AUD AiG Performance of Services Index Sep 45.7 45.6
5:00 JPY Leading Economic Index Aug P 104.3 104.1
5:45 CHF Unemployment Rate Sep 2.80% 2.90%
6:00 EUR Germany Industrial Production M/M Aug -0.50% 1.00%
6:45 EUR France Trade Balance (EUR) Aug -6.8B -7.0B
7:00 CHF Foreign Currency Reserves (CHF) Sep 929B
8:00 EUR Italy Retail Sales M/M Aug 0.20% -0.40%
11:30 EUR ECB Monetary Policy Accounts
11:30 USD Challenger Job Cuts Y/Y Sep -86.40%
12:30 USD Initial Jobless Claims (Oct 1) 349K 362K
14:00 CAD Ivey PMI Sep 60.7 66
14:30 USD Natural Gas Storage 88B