CHILE: Pro-Market Shift In Congress Could Prompt Further Peso / Equity Gains
Nov-14 17:27
- Ahead of Sunday’s election, USDCLP has unwound earlier session gains to trade unchanged on the day and keep the pair near 2% lower on the week, just above recent four-month lows. Looking ahead, although fiscal challenges cast a cloud on the longer-term outlook, a market-friendly election outcome, with a shift to the right in Congress as well as the presidency, is likely to be seen as supportive for local assets, including the peso, over the medium-term.
- The trend condition in USDCLP remains bearish, with this week’s move down exposing 922.67, the Jul 2 low and a key support. A break would open 914.00, the Mar 18 low. On the upside, key short-term resistance is seen at 949.12, the 50-day EMA. Gains are considered corrective.
- BBVA have kept their short USDCLP position on heading into the election, with a target of 875 and a stop-loss at 981. They would still have a bias to be buyers of the peso on USDCLP spikes, if there are any.
- In contrast, Natixis are bullish on USDCLP, forecasting an average of 930 for Q4. However, they don’t rule out the possibility of the pair dipping below 900 in the coming weeks. For the scenario of a durable sub-900 USDCLP to be realised, however, there would need to be more clarity on consecutive Fed rate cuts, as well as higher copper prices.
- In terms of the equity market, JP Morgan believes that that a significant part of the electoral optimism is already embedded in current MSCI Chile valuations. Nonetheless, additional upside could come from a pro-market majority in Congress, which may enable the passage of market-friendly policies, and would be consistent with another 15%-20% of multiple expansion, to the 10-year historical average.
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US TSYS: Climbing Off Session Lows
Oct-15 17:17
- Treasuries are climbing off recent session lows following comments by Fed Gov Miran (voter) at a at Nomura Research Forum stated that US-China trade tensions tied to rare-earth curbs "pose significant downside risks". Ironically, this comes after after Treasury Sec Bessent suggested the possibility of a "longer tariff truce with China tied to rare-earth imports" helped risk sentiment earlier.
- Currently, Tsy Dec'25 10Y contract trades 113-09.5 (-3.5) vs. 113-07 low, yld tapped 4.0417% high; curves flatter/off lows: 2s10s -1.874 at 53.061, 5s30s -1.692 at 10.603.
- Initial technical support at 112-26 (20-day EMA) followed by the 50-day EMA at 112-16. A clear break of the average would expose 111-13+, the Aug 18 low and a key support.
- Cross asset: Bbg US$ index off lows, -2.77 at 1211.67, stocks claw extending lows: DJIA down 196.59 points (-0.42%) at 46030.72, S&P E-Minis down 27.25 points (-0.41%) at 6653.25, Nasdaq down 69.1 points (-0.3%) at 22429.75.
CHINA: Reflationary Process Expected to Remain Slow
Oct-15 17:01
- The marginally softer-than-expected headline CPI inflation data for September primarily reflected a drag from the food component, as well as a dip in transportation prices. Excluding food and energy, core consumer prices rose 0.1% on the month, with the annual rate rising to a fresh 19-month high (+1.0% y/y). Producer prices were flat on the month, with the pace of deflation narrowing as deflationary pressures in the metals and energy goods sectors lessened.
- Goldman Sachs writes that food deflation could be stronger than they previously expected for this year and next. Along with the further declines in crude oil prices that they anticipate ahead, they have revised down their full-year 2026 headline CPI forecast to 0.8% y/y (from 1.0% y/y previously). Reflecting the stronger-than-expected PPI prints, meanwhile, they slightly raise their full-year 2025/26 forecasts for headline PPI inflation to -2.6%/-0.7% y/y (from -2.8%/-1.0% y/y previously).
- Meanwhile, JP Morgan expects the reflationary process to be slow, with a likely scale-back of the government’s anti-involution (anti-excess capacity) policies, weak consumer demand, and renewed external demand pressures amid US-China tension re-escalation. Overall, they expect CPI inflation to gradually turn positive by year-end and PPI deflation to narrow further, with headline CPI averaging -0.1% y/y and PPI at -2.6% for the full year.
EURUSD TECHS: Remains Below The 50-Day EMA
Oct-15 17:00
- RES 4: 1.1919 High Sep 17 and a bull trigger
- RES 3: 1.1820 High Sep 23
- RES 2: 1.1779 High Oct 1 and a key short-term resistance
- RES 1: 1.1672 50-day EMA
- PRICE: 1.1621 @ 15:42 BST Oct 15
- SUP 1: 1.1542 Low Oct 9
- SUP 2: 1.1516 76.4% retracement of the Aug 1 - Sep 17 bull leg
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1313 Low May 30
EURUSD is in consolidation mode. A bear theme remains in place following the recent breach of the 50-day EMA and a support at 1.1646, the Sep 25 low. This signals scope for a test of 1.1516, a Fibonacci retracement. Note that moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend and suggests the move down is likely a correction - for now. Initial firm resistance is 1.1672, the 50-day EMA.
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