Italy’s ticking debt issue is threatening Europe’s banking sector

  • Non-Italian European banks are holding more than EUR 425bn of sovereign and private Italian debt
  • While markets are still comfortable with Italy slipping into recession in 4th quarter 2018, a potential sell-off could not only threat Italian banks, but also lead to contagious effects in France and other European countries

Bank of Japan buys a record amount of ETFs

  • The BoJ bought 867.6 billion JPY (7.7 billion USD) of ETFs through the month of October, the highest amount of monthly purchases since policy inception
  • Nevertheless, the Topix Index is headed for its worst month since the global financial crisis, and thus, it can be assumed that the BoJ is trying to soften the sell-off by actively intervening through ETF purchases

To keep up with spending, Americans reduce their savings rate

  • Americans kept opening their wallets to spend in September while less cash flowed in, pushing down the personal savings rate to the lowest level in 2018.
  • At 6.2 percent, the rate also matched the lowest since 2013. The Commerce Department’s report on personal income and spending, released Monday, showed that wages and salaries increased 0.2 percent from the prior month, the weakest gain in almost a year (Source: Bloomberg).

Has WTI Oil found a short-term bottom?

  • WTI crude oil had its recent peak on October 3 and is down 11% since then.
  • Current price is hovering around its 200 DMA and oscillator turns supportive
  • Trade idea: Short-term long position with target around USD 70, SL below USD 65

Negative divergence and inverted hammer signaling downside risks for USDCHF

  • USDCHF has formed an inverted hammer supported with a negative divergence pattern, suggesting that further upside is limited and risks or skewed toward the downside
  • Furthermore, USDCHF is hovering around parity and is facing significant upside resistance among a rising risk-off sentiment
  • Trade idea: Outright short position in USDCHF with TP: 0.9870 and SL: above trend resistance

U.S. Dollar Index is breaking, higher suggesting further USD strength lies ahead

  • The U.S. Dollar Index broke through its trend resistance from 2016 and starts to gain momentum amid the global risk-off sentiment
  • A weekly close above 96 would suggest further USD strength for the coming days and weeks, primarily due to its safe haven character
  • Trade idea: overweight USD, primarily against EUR and KRW

Nikkei just broke its 2-year uptrend – further equity weakness ahead

  • After breaking its uptrend from 2016, Nikkei is facing further downside risks and follows the global equity weakness
  • This negative trend could gain momentum in a risk-off environment as JPY should strengthen as well which would add further downside pressure