Daily Market Outlook, October 1st, 2021

Overnight Headlines

  • Asian Factories Stagnate As China's Slowdown, Supply Constraints Hit
  • Japan Business Mood Improves As Firms Raise Investment Plans
  • BoJ Debated Risks From Supply Constraints, China Slowdown - Sep Mins
  • Japan’s Kishida Plans To Dissolve Parliament Oct. 14 - Jiji
  • Japan's Kishida To Name Yamagiwa As Economy Minister - Kyodo
  • Growth Accelerates For The Australia Manufacturing Sector In Sep
  • European Union Postpones FTA Negotiations With Australia
  • China Orders Top Energy Firms To Secure Supplies At All Costs
  • China Boosts Rare-Earth Quota 20% To Shield Supply Chain From US
  • North Korea Says It Has Test-Fired An Anti-Aircraft Missile
  • Dollar Heads For Best Week In Months As Fed Tightening Looms
  • Oil Slips As OPEC+ Weighs Output Boost For Tight Market
  • OPEC+ Considers Options For Releasing More Oil To The Market
  • Asia Stocks Fall On Concern Over U.S. Bill Vote, China Energy
  • Wall Street Posts Monthly Loss, Worst Quarter Since Covid Outbreak
  • BMW Lifts Guidance as Higher Car Prices Counter Chip Woes
  • GM, Ford Extend Some Production Cuts Due To Chip Shortage

The Day Ahead

  • Economic Data (GMT) • 06:00 DE Aug Retail Sales MM 1.5% f'cast, -5.1% prev; YY 1.9% f'cast, -0.3% prev • 07:50 FR Sep Mfg PMI 55.2 f’cast, 55.2 prev • 07:55 DE Sep Mfg PMI 58.5 f'cast, 58.5 prev • 08:00 EZ Sep Mfg PMI 58.7 f'cast, 58.7 prev • 08:00 EZ Sep HICP Flash YY 3.3% f'cast, 3.0% prev • 08:30 GB Sep Mfg PML 56.3 f'cast, 56.3 prev
  • Looking Ahead – Events, Other Releases (GMT) • 15:00 ECB Schnabel speaks at an NY Fed even

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

  • EUR/USD: 1.1570-75 (443M), 1.1600 (440M), 1.1700 (390M) 1.1710-20 (500M), 1.1800-10 (443M), 1.1850-60 (900M) 1.1880-95 (660M)
  • USD/JPY: 109.50 (450M), 110.00 (400M), 110.50 (425M), 110.65-70 (1.1BLN), 111.00 (1BLN)
  • GBP/USD: 1.3550 (340M), 1.3800 (203M)
  • AUD/USD: 0.7200 (1.7BLN), 0.7250 (505M), 0.7300 (285M)
  • USD/CAD: 1.2575-80 (932M), 1.2600 (1.83BLN), 1.2700 (900M) 1.2715-25 (1.2BLN), 1.2750 (907M), 1.2775 (503M) 1.2800 (1.43BLN), 1.2850 (2.04BLN), 1.2900 (650M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.17 Bullish above

  • EUR/USD in stasis at lows, same for EUR crosses
  • EUR/USD, EUR crosses in stasis at recent lows, heavy with risk off
  • Trading very light given China/Hong Kong holidays, Australia off Monday
  • EUR/USD 1.1564-83 EBS, above 1.1563 low o/n, presumed 1.1550 option KOs
  • Defense of these barriers and more below at 1.1500 strike supportive
  • Stops eyed below both levels though, breaks extremely bearish
  • Option expiries today - 1.1560-75 E614 mln, anchor of sorts
  • E549 mln more above between 1.1590-1.1600 strikes
  • EUR/GBP 0.8598-0.8605, steady after o/n fall, EUR/CHF 1.0783-98, heavy

GBPUSD Bias: Bearish below 1.36 Bullish above.

  • Soft as risk soured – safe haven USD weighs
  • -0.15% - risk off, on U.S. failure to pass infrastructure plan...
  • Asian bourses fell, E-mini S&P -0.5%, cable traded in a busy 1.3445-80 range
  • UK supply chain issues weigh..., but weakness today on strong USD
  • 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 2020 to 2021 top is initial resilient support
  • 1.3593 10 DMA capped the recent fall - now pivotal resistance

USDJPY Bias: Bullish above 109 Bearish below

  • JPY crosses heavy, risk off at October start
  • USD/JPY on hold in low-111 area after sell-off yesterday on term-end flows
  • Asia 111.24-48 EBS, offers eyed from @111.50, bids from ahead of 111.00
  • Option expiries supportive, $2.6 bln 110.50-111.00, $1 bln alone at 111.00
  • Monday to also see $620 mln in expiries between 111.25-30 strikes
  • Talk Japanese investors eyeing timing, levels to buy more US bonds
  • Risk off in Asia and US bonds bid, yields soggy, Treasury 10s @1.480%
  • Despite push back in US yields, bias still up, debt ceiling issue resolved
  • Nikkei -2% @28,861, talk in some quarters tax on stock gains to be upped

AUDUSD Bias: Bearish below 0.73 Bullish above

  • Mixed markets, but the primary trend remains lower
  • Touch firmer, after closing up 0.75% on month end demand and profit taking
  • Mixed markets early - E-mini S&P +0.2%, Brent oil +0.4%, but ASX 200 -1.7%
  • EU postpones Australian trade talks amid submarine deal fallout...
  • Poll forecasts no RBA hike at least till 2024 on soft wages...
  • Charts; 5, 10 & 21 daily and weekly moving averages head south
  • 21 day Bollinger bands head lower - bearish trending setup
  • Initial target is a test of the 0.7106 August and 2021 base
  • Close above 0.7304 21 DMA needed to end downside bias