MAJORS FX: The euro index was last month hanging on the ropes but was saved by the bell from being downed below an important “B-wave low” at 103.54 against its index. Below would have (and still will) target levels below the 2010 low. The dollar index had a bit of a rough period last month but did NOT CLOSE under the Sep bullish benchmark mid-body point, thus retains a bullish outlook. Short-term developments indicate lower EUR/USD again – then with a short-term target below 1.3145. Also below 1.2860 would have long-term bearish implications. EUR/JPY added a bullish print last month, adding one more argument that a more lasting low is drawing closer (in both time and price), but is so far still trending lower. USD/JPY is possibly still lacking at least one more low (73.65/70.28) but also shows signs that yen strength is losing the edge. A bearish print in the yen index was added last with “a little help” form MOF employing an estimated JPY 8trn to do the trick (the Aug intervention was in the size of JPY 4.5trn). EUR/GBP is trapped in a complex medium-term bullish wave count (possibly a “double-zigzag” arguing for a sub-0.8067 low before up).
COMMODITY FX: A “wave-5 top” is possibly in place in AUD/USD but recent price action moderates this standpoint and the trend outlook is back to neutral following last month’s bullish looking print. USD/CAD added a bearish looking print last month, but holds above the yearly average so this print freshly added does not alter a bullish outlook for the trend.
NORDIC FX: The bullish Sep EUR/NOK “Spring-bottom” has not delivered – yet, but sellers’ response last month is not reversing the trend because there is simply no trend yet to reverse. EUR/SEK still looks less directionally convincing (must break outside a wide 8.86\9.43 range to show real demand or supply overhang). USD/SEK & USD/NOK both look northbound still with focus on 7.00\7.08 and 6.00 & 6.23\6.24 respectively – in spite of last month’s less upside productive prints. NOK/SEK trades with a downside risk and below 1.16 would target 1.15 or even 1.13.
EMERGING FX: In general the emerging market FXers are still prone to weaken further – more so against the dollar than versus the euro. This is most evident in the potential diverging outlooks for USD/TRY (bullish) & EUR/TRY (potentially bearish). EUR/HUF is clearly in focus with the ongoing parabolic move higher holding the 2009 high of 317.45 in sight. EUR/PLN is resting below a recent peak, but looks ripe to extend the move to & beyond 4.60 and turn focus to earlier peaks at 4.93. USD/PLN is targeting an important long-term ref near 3.53 (over which the 2009 high would deserve renewed attention). EUR/CZK & EUR/RON also looks vulnerable to the upside. The bullish breakaway move in USD/ZAR has been retained = expect additional gains. Both USD/LatAm (USD/MXN still more so than USD/BRL) look bid and ready to add further gains. In Asia USD/SGD & USD/KRW look less bullish than was the case a month ago. USD/INR however looks set to move higher after a short consolidation/correction.
COMMODITIES: Gold continues to trend smartly higher (small consolidation may however be needed before scoring again). Silver has possibly passed a correctional low point but that has yet to be confirmed. Oil did not deliver much of a downside move last month and the outlook is back in neutral gear. All Industrial Metals look offered still while grains look more neutral (Soybeans look offered after breaking and staying below prior support).
BONDS: Correctional highs in yield are likely passed and fresh lows look increasingly likely. Both US & German 10year yields hold targets at/near 1.50%. The ITA/GER 10y spread continues to widen with no other targets that the early 1990’s wides at +650bps or even +775bps. The iTraxx X-over 2009 high of 1160 remains exposed as the index could add substantial gains after having retested the earlier breakaway area now acting as a floor.
EQUITIES: The decline in the MSCI Global index is temporary halted – not reversed. Below 1055 would again target the more important 1028 ref. S&P500 added a bullish “Key-month reversal” & OMX added a bullish “Engulfing line” last month thus those are now less exposed to immediate downside risks while EuroStoxx, Australian all ordinaries & Shanghai C look to be “worst in class”. The Nikkei225 could possibly develop something more bullish but isn’t there yet.
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