OUTLOOK: Price Signal Summary - S&P E-Minis Bear Cycle Still In Play
- In the equity space, S&P E-Minis remain in a short-term bear-mode condition and a steep sell-off yesterday reinforces current conditions. The breach of 6655.70, the Nov 7 low cancels recent bullish signals and signals scope for an extension of the corrective cycle. Sights are on 6540.25 (pierced), the Oct 10 low and a key support. A clear break would open 6476.62, the 23.6% retracement of the Apr 7 - Oct 30 uptrend. Initial firm resistance to watch is 6747.78, the 20-day EMA.
- A medium-term bull trend in EUROSTOXX 50 futures remains intact, however, the past week’s sell-off highlights a stronger corrective cycle. The contract has breached two key support points; 5600.89, the 50-day EMA, and 5621.00, the base of a bull channel drawn from the Aug 1 low. The breach signals scope for a deeper pullback and opens 5427.01, the 61.8% retracement of the Aug 1 - Nov 13 bull cycle. Initial firm resistance to watch is 5645.61, the 20-day EMA.
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OPTIONS: Larger FX Option Pipeline
- EUR/USD: Oct23 $1.1515-25(E1.1bln), $1.1555-65(E1.3bln), $1.1575(E1.2bln), $1.1650(E1.1bln), $1.1670-80(E1.0bln), $1.1750-70(E2.8bln); Oct24 $1.1500-20(E1.2bln), $1.1635-50(E1.1bln); Oct27 $1.1520-35(E1.2bln), $1.1670-80(E1.1bln), $1.1700-10(E1.1bln)
- USD/JPY: Oct24 Y150.00($2.0bln), Y151.00-20($1.4bln)
- AUD/USD: Oct23 $0.6585-00(A$1.1bln); Oct24 $0.6450(A$1.6bln); Oct27 $0.6490(A$1.8bln)
RIKSBANK: Jansson Notes MonPol Will Look Through Temporary Tax Changes
Jansson speech summary here
- "There are strong reasons to believe that the currently elevated inflation is transitory. In September it was therefore possible to provide some additional interest rate support to economic activity without taking too much risk in terms of inflation."
- On the upcoming temporary reduction in food VAT, Jansson notes that "It is reasonable that in monetary policy we ‘look through’ this type of temporary tax change, in the same way as I believe the social partners will do in wage formation. But for us at the Riksbank it will be important to monitor how households' and companies' expectations and behaviour are affected, so that fluctuations in inflation that are temporary to begin with do not become more permanent."
CHINA: SAFE Data Shows FX Settlement-Sales Spread at New High
Data on FX settlements from China's SAFE show the FX settlement ratio (a proxy for client willingness to settle FX) posting a sharp rise in September, to 71.2% from 61.2% in August. This is the highest level since August 2023 and is consistent with a sharp rise in exporters settling FX transactions in the month that covered USDCNY printing a new YTD low (Aug-Sept peak to trough was over 1.5%).
In contrast, the FX sales ratio (a proxy for client willingness to buy FX) was relatively stable at 63.3% (vs. August 67.7%), leading to a wider gap between settlement and sales in September. As a result, the FX settlement-sales spread has risen to a new 2025 high, and would be consistent with the weaker USD helping trigger the fastest pace of corporates closing out of FX positions relative to new FX exposure over the period.
Figure 1: FX Settlement/Sales Spread Highest of the Year
Source: MNI / SAFE / Bloomberg Finance L.P.
In addition, the SAFE data also shows an FX surplus totalling $51.1bln as a result of the rise of total FX purchases (up to $265bln from $212bln) outpacing the rise in FX sales (up to $214bln from $197bln).
