The USD is coming under pressure to kick off a blockbuster week full of big risk events.

Headlines

* Dollar ends eight-day win streak, yen jumps on BoJ Ueda’s comments

* Tech giants power stock gains as Tesla surges 10% on broker upgrade

* US households less optimistic about their financial situations

* Bitcoin drops below $25k with altcoins bracing for deeper crash from FTX sale

FX: USD came under pressure to kick off a blockbuster week full of big risk events. The yen and yuan initially jumped versus the buck as the BoJ Governor hinted at a potential end to the negative interest rate policy by the end of the year. The PBoC set a significantly stronger CNY fixing and issued a statement warning speculators against destabilising the currency. Resistance remains around a longer-term Fib retracement level at 105.37. support sits at the 21-day SMA at 103.97.

EUR bounced after making a cycle low last Thursday at 1.0685. A major swing low is the late May bottom at 1.0635. The key event this week will be the ECB meeting which is a very close call. There’s currently around 10bps priced in so roughly a 40% chance. Can policymakers afford to skip a meeting given the rapidly worsening outlook? We note there are upside risks to the US CPI data which is released on Wednesday which may impact the major.

GBP found support at the midway point of the 2022 rally at 1.2472 and bounced yesterday on the softer USD tone. The 200-day SMA sits just below at 1.2430. The BoE’s Mann, a well-known hawk, signalled support for further rate hikes. All eyes are on today’s UK jobs data. This should provide more insight into the BoE rate decision next week. (See below for more detail.)

USD/JPY fell below 146 initially as yen strength was fuelled by BoJ’s Ueda hinting at an exit from negative rates. The 21-day SMA sits around current prices just above 146. The timing of the comments could suggest an attempt to support JPY without undertaking intervention. FX conditions have been relatively orderly so wouldn’t necessarily warrant this.

AUD outperformed due to the CNY strengthening on the PBoC warning. A base of support around 0.64 appears to be building. Buyers needs to get above 0.65 and the late August highs to confirm this.

Stocks: US equities rose as Tesla led a rally in the tech titans. The benchmark S&P 500 settled 0.7% higher at 4487. The tech-heavy Nasdaq finished 1.19% higher at 15,461. The Dow underperformed, adding 0.25% to close at 34,663. Tesla surged over 10% after a significant upgrade by Morgan Stanley. The broker moved the EV maker to overweight and raised its price target to $400 from $250. It made it the top stock pick saying the company could add $500bn in value as its supercomputer Dojo opened new markets to the company. The July top is at $299.

Asian futures are set to open in the green led by buoyant Wall Street sentiment.

Gold continues to trade around its 200-day SMA at $1919. The 50-day SMA is above at $1932. US CPI is a major risk event on Wednesday. A stronger report would push the 10-year yield up to recent highs again and hurt bullion.

Day Ahead – UK Jobs and Apple Launch in focus

The Australian September consumer sentiment survey kicks off a busy Tuesday. These figures have yet to show a material response to the potential end of rate hikes. The cost of living pressure and rising fuel prices may weigh. The main data point will be the UK employment report and especially wage growth which is a key concern for the BoE. This remains sticky with July’s data forecast to remain elevated and unchanged at 8.2%. Note that the ex-bonus average weekly earnings rose at a record 7.8%. A 25bp rate hike is priced in (80%) for next week’s BoE meeting.

Investors will keep watch on Apple’s launch of its highly anticipated iPhone 15. However, recent challenges have cast a shadow over the event. The company lost over 6% or $180 billion in market cap over two days last week. This came after media reports suggested that China is tightening its restrictions on iPhones for government officials and may extend these restrictions to state-owned enterprise employees. While the news is not officially confirmed, it raised fears that Apple and its suppliers could take a hit from rising competition from China's Huawei.

Chart of the Day – GBP/JPY in the crosshairs

GBP/JPY has gradually edged lower over the past few weeks off the recent top above 186. These highs were last seen in late 2015. Some consolidation seems inevitable after a sharp rise this year from the low at the start of January at 155.35. The 50-day SMA should offer initial support at 183.05 with a Fib level at 182.76. The halfway point of the July uptrend is at 181.53. An upside surprise in the wage data may push the peak rate higher beyond the current 5.75% level. It would also see the bullish trend reassert itself with a move back towards 186.