MEXICO: Analysts Maintain 7.0% Year-end Interest Rate Forecast – Citi Survey
- Analysts expect Banxico to deliver another 25bp rate cut to 7.25% at tomorrow’s MPC meeting, according to the latest Citi survey which has just been released. Further ahead, the policy rate is still expected to end this year at 7.00% and next year at 6.50%.
- This year’s GDP forecast was unchanged at 0.50%, while the 2026 GDP estimate rose by 10bp to 1.40%.
- On the inflation front, the 2025 headline CPI forecast was reduced to 3.80%, from 3.90% previously. However, the end-2026 estimate rose to 3.90%, from 3.80%.
- Core inflation forecasts were unchanged, with the end-2025 estimate holding at 4.20% and the end-2026 forecast at 3.80%.
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AUDUSD TECHS: Bullish Outlook
- RES 4: 0.6763 1.382 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 3: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 2: 0.6660/6707 High Sep 18 / 17 and key resistance
- RES 1: 0.6629 High Sep 30 & Oct 01
- PRICE: 0.6617 @ 16:31 BST Oct 6
- SUP 1: 0.6527/21 61.8% of the Aug 21 - Sep 17 bull leg / Low Sep 26
- SUP 2: 0.6484 76.4% retracement of the Aug 21 - Sep 17 bull leg
- SUP 3: 0.6463/6415 Low Aug 27 / Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
The AUDUSD uptrend remains intact and the pair is trading closer to its recent highs. Support to watch lies at the 50-day EMA, at 0.6560. A clear break of this average would signal scope for a deeper retracement and expose 0.6527 once again, a Fibonacci retracement. For bulls, a stronger reversal higher would refocus attention on 0.6707, the Sep 17 high. Initial resistance to watch is 0.6629, the Sep 30 and Oct 1 high.
US TSYS: Bear Steepening In Line With Peers
The Treasury curve bear steepened Monday, aligning with global developments.
- Most of the uptick in yields was on the open, triggered by pressure in long-end JGBs following the surprise win in the LDP leadership election of Sanae Takaichi, who has been a proponent of fiscal expansion to support growth.
- Indeed, political intrigue was a pervasive theme on the day, with the French Prime Minister unexpectedly resigning, trigging a brief risk-off rally in core instruments including Treasuries.
- But apart from another move lower in mid-morning, yields were content to drift higher through most of the rest of the session, set to close near the highs.
- TY futures remain between near-term support/resistance levels - Dec 10-Yr futures (TY) down 9.5/32 at 112-12 (L: 112-11.5 / H: 112-19.5), remaining poised around support at 112-12+/01 50-day EMA / 50.0% of Jul 15 - Sep 11 upleg).
- Latest cash levels: The 2-Yr yield is up 2.1bps at 3.5966%, 5-Yr is up 3.1bps at 3.7462%, 10-Yr is up 4.5bps at 4.1637%, and 30-Yr is up 4.9bps at 4.7605%.
- There was no major data scheduled for publication Monday but the federal government shutdown (which seems not to be close to being resolved) ensures there will be limited releases the rest of the week: Tuesday brings Redbook retail sales, the NY Fed consumer expectations survey, and the Federal Reserve's consumer credit release.
- Additionally, nominal Treasury auction supply resumes with the first sale of the month ($58B in 3Y Note).
- We hear from KC Fed's Schmid on the economic outlook and monetary policy after the cash close today, with Tuesday bringing Bostic, Bowman, Kashkari, and Miran.
EURJPY TECHS: Primary Uptrend Accelerates
- RES 4: 178.94 1.236 proj of the Jul 31 - Sep 29 - Oct 2 price swing
- RES 3: 177.67 1.000 proj of the Jul 31 - Sep 29 - Oct 2 price swing
- RES 2: 177.00 Round number resistance
- RES 1: 176.25 Intraday high
- PRICE: 175.73 @ 16:30 BST Oct 6
- SUP 1: 173.92 Intraday low
- SUP 2: 172.27 Low Oct 2 and key support
- SUP 3: 171.12 Low Aug 28
- SUP 4: 170.62 Low Aug 6
The trend in EURJPY is unchanged, it remains bullish. Today’s strong start to this week’s session reinforces current conditions. The cross has cleared resistance at 175.13, the Sep 29 high, to confirm a resumption of the primary uptrend. This maintains the bullish sequence of higher highs and higher lows and opens the 177.00 handle next. On the downside, key short-term support has been defined at 172.27, the Oct 2 low.
