EURJPY TECHS: Tests Initial Resistance
- RES 4: 160.36 2.382 proj of the May 11 - 29 - 31 price swing
- RES 3: 160.00 Psychological handle
- RES 2: 159.76 High Aug 30 and the bull trigger
- RES 1: 158.93 High Oct 19
- PRICE: 158.47 @ 16:30 BST Oct 20
- SUP 1: 156.46/154.46 Low Oct 6 / Oct 3 and the bear trigger
- SUP 2: 153.39 76.4% of the Jul 28 - Aug 30 bull run
- SUP 3: 151.42 Late July Low and Bear Trigger
- SUP 4: 150.00 Round number support
EURJPY remains inside a range but did trade higher Thursday. Resistance to watch is 158.65, the Sep 13 high. This hurdle was pierced yesterday, a clear breach of it would highlight a range breakout and expose the key resistance and bull trigger at 159.76, the Aug 30 high. On the downside, key support is unchanged at 154.46, the Oct 3 low. Clearance of this level would instead strengthen a bearish case and open 153.39, a Fibonacci retracement.
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US OUTLOOK/OPINION: Quantifying The Impact Of Student Loan Repayment Restart
- The more than three-year moratorium on federal student loans comes to an end at the end of next week, with payments resuming on Oct 1.
- It will impact the 29 million recipients of student loans currently in forbearance, amounting to $1.1tn as of June 30, 2023 (https://studentaid.gov/data-center/student/portfolio)
- The Fed notes that the average interest payment in 2019 was between $200-$299 per month (covering about 70% of adults with student loans). If all borrowers in forbearance were to restart payments in line with these past ranges, it would be the equivalent of $5.9B to $8.8B per month ($71-106B per year). That scales to an annualized 0.35-0.5% of disposable income or 0.4-0.55% of nominal spending as of the July personal income report.
- On the subject, MS have previously written that the new income-driven payment plan, SAVE, can lower the average federal loan payment closer to $200/month in July 2024. The impact to consumer spending in 4Q23 is mitigated somewhat by the 12-month grace period implemented by the Biden Administration. Assuming 50% of borrowers will begin making some payment in 4Q23, a 70% pass-through to consumer spending would result in a 0.8pp drag to real PCE growth in 4Q23, followed by a 0.3pp drag to 1Q24 consumption.
- Some of this Q4 impact might however have been brought forward into Q3, with a surprise jump higher in the daily deposits seen at the Department of Education marking a likely indicator of early repayments. They started to build in earnest in August before peaking with a historically high increase of $1.04B on Sep 1.
- It has meant
daily deposits summing to $13.9B in Q3 to date, up from $3.4B through Q2.
GBPUSD TECHS: Downtrend Remains Intact
- RES 4: 1.2746 High Aug 30 and key resistance
- RES 3: 1.2618 50-day EMA
- RES 2: 1.2548 High Sep 11 and Low Aug 25
- RES 1: 1.2446 Low Sep 7
- PRICE: 1.2367 @ 19:56 BST Sep 20
- SUP 1: 1.2334 Low Sep 20
- SUP 2: 1.2308 Low May 25 and a key support
- SUP 3: 1.2227 2.236 projection of the Jul 14 - 24 - 27 price swing
- SUP 4: 1.2120 76.4% retracement of the Mar 8 - Jul 14 bull leg
GBPUSD traded lower Wednesday to a fresh cycle low and maintains a softer tone. The move down once again, confirms a resumption of the bear trend and maintains the price sequence of lower lows and lower highs. The focus is 1.2308, the May 25 low and a key support. On the upside, initial firm resistance is seen at 1.2548, the Sep 11 high. Short-term gains would be considered corrective.
MNI: POWELL-SOFT LANDING NOT BASELINE CASE, STILL POSSIBLE
- MNI: POWELL-SOFT LANDING NOT BASELINE CASE, STILL POSSIBLE
