AUDUSD TECHS: Building on Recent Strength
- RES 4: 0.6656 High Sep 23
- RES 3: 0.6563 50-day EMA
- RES 2: 0.6547 High Oct 4 and key resistance
- RES 1: 0.6484 High Oct 26
- PRICE: 0.6473 @ 09:03 BST Oct 26
- SUP 1: 0.6210/6170 Low Oct 21 / 13 and the bear trigger
- SUP 2: 0.6133 1.382 proj of the Apr 5 - May 12 - Jun 3 price swing
- SUP 3: 0.6099 76.4% retracement of the 2020 - 2021 bull cycle
- SUP 4: 0.6035 1.50 proj of the Apr 5 - May 12 - Jun 3 price swing
AUDUSD now trades a point above the 20-day EMA early Wednesday, cementing a break above yesterday to confirm a bullish shift to the technical backdrop. This opens gains toward key resistance at the Oct 4 highs at 0.6547. Despite the recent gains, however, moving average studies continue to highlight a downtrend. This keeps support at 0.6133 in view, a Fibonacci projection.
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GERMAN DATA: Ifo Sees Outlook Worsen
GERMANY SEP IFO BUSINESS CLIMATE 84.3 (FCST 87.0); AUG 88.6r
GERMANY SEP IFO CURRENT ASSESSMENT 94.5 (FCST 96.0); AUG 97.5
GERMANY SEP IFO EXPECTATIONS 75.2 (FCST 79.0); AUG 80.5r
- The German Ifo business survey slumped to the lowest since May 2020 as outlooks across manufacturing, services, trade and construction all fell further into pessimistic territory. Ifo continues to expect a Q3 contraction.
- The headline index, current assessment and expectations indexes again fell further than expected.
- Acute concerns regarding inflation and gas/energy supply shortages remain key issues headed into year-end. Although Friday's PMIs saw supply chain issues easing, this effect has clearly been overshadowed by gloomy economic growth outlooks.
- On Wednesday the GfK consumer confidence index will be released, likely to slide to a fresh low and generate further concern for the ECB as they hike into a recession.
GBP: What Happened in GBP Markets Overnight?
- GBP remains comfortably the poorest performer in G10, with GBP/USD spiralling lower to touch 1.0350 overnight, as markets continue the downdraft after last week’s BoE/Mini-budget. But what actually happened in currency markets?
- At 0159BST, GBP futures saw a considerable spike in volumes. 5,175 contracts traded inside 60 seconds, amounting to a cash equivalent of ~$345mln – some serious volumes for a normally sleepy overnight market. Bloomberg’s quote recap shows relatively few single, large trades crossing at that time, suggesting instead a flurry of smaller orders, rather than one single order driving this particular market at that time.
- As such, headed into the NY open, GBP futures volumes have traded over four times the average for this time of day, meaning today’s action already has topped a full day of average volumes.
UK: Markets stabilizing a little - but huge moves on the day so far
After hugely volatile opens, UK markets are showing some signs of settling a little, but FI still hugely lower than Friday's close and GBP a long way off its intraday lows, but still around 1.5% weaker on the day vs both USD and EUR.
- SONIA Sep-22 down 46.3 ticks today at 96.67 - up from a low of 96.59.
- SONIA June-23 down 44.0 ticks today at 94.18 - up from a low of 94.11.
- 2y yields up 44.2bp today at 4.369% - but down 10.8bp from their peak of 4.476%
- 10y yields up 24.5bp today at 4.069% - down 12.1bp from peak of 4.191%
- 30y yields up 17.0bp today at 4.206% - from 15.8bp from peak of 4.364%
- 2s10s down -19.6bp today at -29.9bp, 10s30s down -7.5bp today at 13.7bp
- GBPUSD at 1.0695 at writing - down 1.6% from Friday's close of 1.0859 but up from the intraday low of 1.0350.
- EURGBP at 0.9060 at writing - up 1.5% from Friday's close of 0.89293 but down from the peak of 0.9266.
