Sample Category Title

Daily Pivots: (S1) 0.9128; (P) 0.9175; (R1) 0.9201; More

With 0.9236 minor resistance intact, decline from 0.9305 short term top is expected to extend to 55 day EMA (now at 0.8998). Sustained trading below there will likely start the third leg of the consolidation from 0.9304 and target 0.8303 key support again. On the upside, above 0.9236 minor resistance will turn bias back to the upside for 0.9305 instead.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's uncertain whether it is finished yet. But in case of another fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes. Firm break of 0.9799 high will target 61.8% projection of 0.5680 to 0.9799 from 0.6935 at 1.1054.

Daily Pivots: (S1) 1.1403; (P) 1.1430; (R1) 1.1465; More...

Intraday bias in EUR/CHF remains neutral as it's staying in consolidation from 1.1537. On the upside, break of 1.1537 resistance will confirm resumption of larger rally from 1.0629. In that case, EUR/CHF should target 1.2 key resistance level next. On the downside, firm break of 38.2% retracement of 1.0830 to 1.1537 at 1.1267 will extend the correction to 61.8% retracement at 1.1100 before completion.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1087 resistance turned support holds.

Daily Pivots: (S1) 130.49; (P) 130.92; (R1) 131.17; More...

EUR/JPY drops sharply today but it's staying above 129.65 minor support for the moment. Intraday bias remains neutral and another rise is still mildly in favor. Break of 131.69 will extend the larger up trend to 61.8% projection of 122.39 to 131.39 from 127.55 at 133.11 next. However, break of 129.65 will dampen the bullish case and turn bias back to the downside for 127.55 support instead.

In the bigger picture, the down trend from 149.76 (2014 high) is completed at 109.03 (2016 low). Current rally from 109.03 should be at the same degree as the fall from 149.76 to 109.03. Further rise is expected to 61.8% retracement of 149.76 to 109.03 at 134.20. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. Medium term outlook will remain bullish as long as 124.08 resistance turned support holds. However, firm break of 124.08 will argue that rise from 109.03 is completed and turn outlook bearish.

Currency pair EUR/USD

The EUR/USD could be building an ABC (red) correction within a larger wave 4 (blue) pattern. A break below the support trend line (blue) would increase the likelihood of such an ABC. The ABC correction (red) is invalidated if price breaks above the 138.2% Fib at 1.2165. A break above the resistance trend line (red) could indicate that there is bullish pressure to test the Fib levels of wave B vs A.

The EUR/USD is building a triangle chart pattern which is indicated by the trend lines (red/blue).

Currency pair USD/JPY

The USD/JPY continues with its sideways correction between the support zone and the resistance levels (red line and red box). For the moment a larger bullish wave C (orange) still seems more likely.

The USD/JPY has completed a bearish ABC (green) correction which could indicate a potential bullish bounce. But the overall market structure remains choopy.

Currency pair GBP/USD

The GBP/USD is building a corrective bullish channel (red/blue). The bullish price action is probably part of a wave 2 (red).

The GBP/USD seems to have completed an ABC (green) correction within wave B (grey), which could indicate that a new bearish correction could take place within an expanded wave B (purple).

Global Markets:

• Asian stock markets: Nikkei down 0.97 %, Shanghai Composite rose 0.18 %, Hang Seng lost 0.39 %, ASX 200 fell 0.28 %
• Commodities: Gold at $1339.26 (+0.67 %), Silver at $17.92 (+0.59 %), WTI Oil at $47.44 +(0.32 %), Brent Oil at $52.52 (-0.44 %)
• Rates: US 10-year yield at 2.16, UK 10-year yield at 1.06, German 10-year yield at 0.38

News & Data:

• AUD Company Operating Profits q/q -4.5 % vs -3.9 % expected
• CNY Caixin Manufacturing PMI 51.6 vs 50.9 expected
• EUR Spanish Manufacturing PMI 52.4 vs 54.4 expected
• GBP Manufacturing PMI 56.9 vs 55.0 expected
• USD Average Hourly Earnings m/m 0.1 % vs 0.2 % expected
• USD Non-Farm Employment Change 156 K vs 180 K expected
• USD Unemployment Rate 4.4 % vs 4.3 % expected
• USD ISM Manufacturing PMI 58.8 vs 56.5 expected
• USD Revised UoM Consumer Sentiment 96.8 vs 97.4 expected
• Japan PM Abe Says Aim to Increase Missile Defence Capabilities – RTRS
• Oil markets volatile in wake of Hurricane Harvey, North Korea nuclear test – RTRS

CFTC Positioning Data:

• EUR long 87K vs 88K long last week. Longs decreased by 1K
• GBP short 52K vs 46K short last week. Shorts increased 6K
• JPY short 69K vs 74K short last week. Shorts trimmed by 5K
• CHF short 2K vs 2K short last week. Unchanged from prior week.
• CAD long 53K vs 51K long. Longs increased by 2K.
• AUD long 67k vs 60k last week. Longs increased by 7K
• NZD long 19K vs 22K long last week. Longs trimmed by 3K

Markets Update:

Asian equities fell early on Monday as market participants turned to haven assets after North Korea's latest nuclear test on Sunday sending the yen, gold and Sovereign bonds higher. Following this, U.S. President Trump threatened to increase economic sanctions and halt trade with any nation doing business with Kim Jong Un's regime

USD/JPY dropped around a big figure from late Friday levels falling as deep as 109.22 early on Monday, currently the pair is seen trading around 109.80 as there were no follow through selling after the inirial drop. Overall the yen has climbed 0.4 percent against the US dollar. Japan is the world's largest creditor nation and traders tend to assume Japanese investors would repatriate funds at times of crisis, thus pushing up the yen

EURUSD opened a few points net higher for the session and is currently seen trading at 1.8820, overall the Euro has climbed 0.2 percent against the US Dollar. The investors are wary ahead of a European Central Bank meeting on Thursday as there have been reports some at the ECB are unhappy with the euro's strength. The Dollar Index slipped 0.1 percent and currently trading at 92.68.

AUDUSD has recovered from its early losses and is currently seen trading back around 0.7962. Earlier on Monday, the Australian dollar had lost 0.2 percent against the US Dollar dropping to lows of 0.7946. On the other side, the kiwi has strengthened against the US Dollar following a minor drop earlier in the session, Currently the NZDUSD is seen trading at 0.7175 gaining 30+ pips from today's opening.

Upcoming Events:

• USD Bank Holiday
• CAD Bank Holiday
• 07:00 GMT – (EUR) Spanish Unemployment Change
• 08:30 GMT – (GBP) Construction PMI
• 11:30 GMT – (GBP) BRC Retail Sales Monitor y/y​

The Week Ahead:

Tuesday, September 5th

• 01:30 GMT – (AUD) Current Account
• 04:30 GMT – (AUD) Cash Rate
• 04:30 GMT – (AUD) RBA Rate Statement
• 07:15 GMT – (CHF) CPI m/m
• 08:30 GMT – (GBP) Services PMI
• 09:10 GMT – (AUD) RBA Gov Lowe Speaks
• 12:00 GMT – (USD) FOMC Member Brainard Speaks
• 14:00 GMT – (USD) Factory Orders m/m
• 17:10 GMT – (USD) FOMC Member Kashkari Speaks
• 22:05 GMT – (USD) FOMC Member Kaplan Speaks

Wednesday, September 5th

• 01:30 GMT – (AUD) GDF q/q
• 12:30 GMT – (CAD) Trade Balance
• 12:30 GMT – (CAD) Labor Productivity q/q
• 12:30 GMT – (USD) Trade Balance
• 14:00 GMT – (CAD) BOC Rate Statement
• 14:00 GMT – (CAD) Overnight Rate
• 14:00 GMT – (USD) ISM Non-Manufacturing PMI

Thursday, September 6th

• 01:30 GMT – (AUD) Retail Sales m/m
• 01:30 GMT – (AUD) Trade Balance
• 07:30 GMT – (GBP) Halifax HPI m/m
• 11:45 GMT – (EUR) Minimum Bid Rate
• 12:30 GMT – (CAD) Building Permits m/m
• 12:30 GMT – (EUR) ECB Press Conference
• 12:30 GMT – (USD) Unemployment Claims
• 14:00 GMT – (CAD) Ivey PMI
• 15:00 GMT – (USD) Crude Oil Inventories
• 23:00 GMT – (USD) FOMC Member Dudley Speaks
• 23:50 GMT – (JPY) Final GDP q/q

Friday, September 7th

• Tentative– (CNY) Trade Balance
• 03:00 GMT – (AUD) RBA Assist Gov Debelle Speaks
• 08:30 GMT – (AUD) RBA Gov Lowe Speaks
• 08:30 GMT – (GBP) Manufacturing Production m/m
• 08:30 GMT – (GBP) Goods Trade Balance
• 12:30 GMT – (CAD) Employment Change
• 12:30 GMT – (CAD) Unemployment Rate
• 12:45 GMT – (USD) FOMC Member Harker Speaks

Asia Summary

Asian equity markets opened mostly to the downside with North Korea conducting its sixth-ever nuclear test on Sunday, which according to Japanese officials resulted in seismic readings that were 10 times more powerful than the country's previous test a year ago. North Korean state media claimed the country has developed a hydrogen bomb that could attach to an intercontinental ballistic missile. The test was met with widespread condemnation across the globe. US Defense Secretary Mattis said the US has many military options to deal with the latest provocations, but that it was not seeking total annihilation of the country. President Trump scheduled a meeting with military leaders to discuss the situation, while also tweeting the US is 'considering, in addition to other options, stopping all trade with any country doing business with North Korea.' Analysts in general think that the market impact this time around will linger longer than previous as provocations have become more frequent and more successful. Though lacking a major event should return to normal in the near term.

On the whole markets traded off N. Korea with earnings season mostly over and no major economic data. In China metals continue to rally and gasoline prices in the US continue to climb on supply concerns after Hurricane Harvey. US markets will be closed Monday for a holiday, on Friday US nonfarm payrolls increased 156K in August after a downwardly revised 189K gain (was 209K) in July, below the 180K consensus.

Key economic data

(JP) JAPAN AUG MONETARY BASE Y/Y: 16.3% V 15.6%E; MONETARY BASE END OF PERIOD: ¥469.2T V ¥468.3T PRIOR

(AU) AUSTRALIA Q2 BUSINESS INVENTORIES Q/Q: -0.4% V 0.3%E; CORPORATE OP PROFIT Q/Q: -4.5% V -4.0%E

(AU) AUSTRALIA AUG ANZ JOB ADVERTISEMENTS M/M: 2.0% V 1.6% PRIOR

Speakers and Press

China/Hong Kong

(CN) China Securities Regulatory Commission (CSRC) announces draft rules designed to give stock exchanges more power in regulating the market - Shanghai Securities News and Securities Time

(CN) Former PBoC Adviser Yu Yongding urges achieving free float of yuan currency rate as soon as possible - Chinese Press

(CN) China shadow banking sector grew by an annualized 36% between 2010 and the end of 2016, to reach a total CNY122.8T - Nomura

Korea

(KR) Follow Up: USGS: Magnitude 5.1 ‘mining explosion’ detected East-Northeast of Sungjibaegam, North Korea – US financial press

(KR) South Korea Fin Min Kim: facing increased geopolitical risks; market impact from North Korea wont be short term

(KR) South Korea Environment Ministry conditionally approves THAAD environment report

(KR) South Korea President Moon: To seek maximum sanctions and pressure on North Korea; agree with Japan PM Abe to a stronger response against North Korea

Japan

(JP) Japan Chief Cabinet Sec Suga: On the call Abe and Putin agreed North Korea situation is grave; Japan and China to increase North Korea pressure on various levels

Asian Equity Indices/Futures (00:00ET)

Nikkei -1.0%, Hang Seng -0.5%; Shanghai Composite +0.1%, ASX200 -0.5%, Kospi -0.8%

Equity Futures: S&P500 -0.4%; Nasdaq100 -0.5%, Dax -0.4%, FTSE100 -0.2%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.1890-1.1857; JPY 109.93-109.26; AUD 0.7973-0.7930; NZD 0.7145-0.7144

Dec Gold +0.6% at $1,338/oz; Oct Crude Oil +0.3% at $47.42/brl; Sept Copper +0.6% at $3.14/lb

(US) According to AAA, on Sunday average retail gasoline price rise 1% to $2.621/gallon from $2.59 on Saturday; +10.9% w/w

(CN) PBoC skips OMO v skipped 7 and 14-day prior; Drains net CNY140B v CNY50B prior (3rd consecutive skip)

USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT: 6.5668 V 6.5909 PRIOR (6th consecutive stronger setting)

(KR) Bank of Korea (BOK) sells KRW430B in 6-month bonds at 1.34%

(KR) South Korea sells KRW1.56T vs. KRW1.55T target in 5-year Govt bonds; Yield: 2.005% v 1.970% prior

(TH) Thailand sells combined THB20.7B in 3-month and 1-yr bills

Equities notable movers

Australia/New Zealand

RAP.AU Reaffirms commitment for a follow-up SMARTCOUGH-C Study; +23.9%

ADO.AU Signed agreement to sell 100% stake in Diasource unit for €15.9M; CEO Jef Vangenechten to resign; +22.2%

88E.AU Flow testing on ICEWine number 2 resumed on Aug 31st; -20.9%

• Gold touches new high on safe haven flows;
• US and Canada bank holiday's likely weigh on volumes;
• ECB stages another mini intervention ahead of Thursday's decision.

Financial markets are back in risk aversion mode on Monday after the latest nuclear test from North Korea on Sunday triggered the usual safe haven rush.

Gold touched new 10-month highs earlier in the session before finding resistance around last November's peak. The yellow metal is currently around 0.7% higher on the day and continues to hold around the day's high which suggests safe haven appetite has not waned as the Asian session has progressed.

Often these knee jerk reactions to such provocation don't last too long but with these tests happening more frequently and the US responding with threats of aggression, these “risk off” periods may last a little longer. Gold has benefited greatly from this heightened geopolitical risk over the last month or two, breaking out of the $1,200-$1,300 range it had spent most of the year trading within in the process. It last traded around these highs throughout the second half of last year and found a lot of technical resistance between here and $1,375, which we may well see again.

With markets in risk off mode, equities are expected to struggle at the open, with futures pointing to losses between a quarter and a half of one percent. The yen and the Swiss franc are also getting their usual safe haven boost to complete the set.

The bank holiday's in the US and Canada today will likely result in a much quieter session on Monday, particularly given the lack of economic events that typically accompanies them. There are a few pieces of data from around Europe being released this morning including the UK construction PMI, Spanish unemployment and eurozone investor confidence but after that it goes very quiet.

The rest of the week will be anything but quiet though, with numerous central banks scheduled to meet. The most notable of these will be the ECB, which meets on Thursday. This week's meeting was widely believed to be the one at which the central bank will announce further tapering of its QE program but with policy makers becoming increasingly uncomfortable with the euro exchange rate, they may now hold off on the announcement until later in the year.

The timing of Friday's comments from an ECB “source” alluding to a delay in a tapering decision seems far more than a coincidence, coming minutes after the jobs report release which weighed on the dollar and appeared on course to push EURUSD through 1.20 once again. With these mini interventions from the ECB becoming a bit of a habit, it will be interesting to see if traders start to become nervous around these levels or decide to test the central bank's resolve.

Korean peninsula tensions have escalated further as North Korea confirmed the sixth nuclear test on Sunday, following a missile launch over Japan on August 29. In response to the growing threat of its closest neighbor (and ethnic brother), South Korea has earlier today conducted a missile drill and pledged to implement contingency measures to stabilize the economy in case of drastic deterioration. In the US, Defense Secretary James Mattis warned of "massive military response" to North Korea's intimidation, echoing President Donald Trump's comment 'all options are on the table' following the rogue regime missile launch last week. While US' warnings imply that a military strike against North Korea cannot be ruled out, we believe the chance is low as it is the least preferred option for all major stakeholders.

North and South Korea

As one of the world's poorest countries without the ability to be self-sufficient, North Korea has been adopting brinkmanship diplomacy over the past 28 years (suspected to have begun nuclear developments in 1989) to sustain its international position and acquire international aids on food and money. Guardian (https://www.theguardian.com/world/2015/may/29/north-korea-nuclear-brinkmanship) has made a good summary of its routine:

Step 1: North Korea wants or needs something, most often food or petroleum.

Step 2: North Korea generates tension and gains international attention.

Step 3: Countries initially ignore the activity and attribute it to North Korea merely 'acting up'.

Step 4: North Korea increases tension through increasingly violent acts or extreme rhetoric.

Step 5: The world finally pays attention and agrees to discuss a resolution.

Step 6: North Korea agrees to stop its nuclear and missile programs in exchange for what it needs or wants: food, petroleum or other aid.

Step 7: Once the aid is received, North Korea soon finds – or invents – a way to justify breaking its commitment.

Step 8: Repeat

Therefore, the ultimate intention of North Korea's nuclear development is not to engage in military conflicts but to survive. South Korea is not ready for war either, casualty and economic crisis to be brought by war would be massive

China:

As the biggest trading partner of North Korea, it is estimated that 90% of North Korea's imports

(mainly machinery, food, oil and refined petroleum products) are from China. China and Russia are allegedly supporting the rogue regime's nuclear developments. China is also the biggest destination of North Korea's exports. China has been reluctant to impose sanctions on North Korea and is believed to continue trading with its neighbor under secret channels despite the sanctions.

Besides being ideological comrades, China's support of North Korea has more important strategic reasons - both on facilitating its rise as the leader in Asia Pacific and counterbalancing the US in the world arena. Trump's pressure on China to act more on the denuclearization of North Korea has evidenced China's major role in North Korea's problem. As a bargaining chip for China in international relations, it is believed that China supports North Korea's nuclear development as long as it does not evolve into military conflict. The consequence of a war is highly uncertain. Basing on the assumption that North Korea would be defected by the military of the US and its allies, refugee problem would be a headache to China, given its close proximity to North Korea. The impacts on Asia Pacific international relations can be huge. Some believe that an enlarged South Korea (after conquering the North) would make the US alliance in the region more powerful, while other believe the US' influence in the region would reduce as a major threat is eliminated. Only time will tell which view is correct but China, as well as the US, won't want to risk.

US

The stances of the US and President Trump can be different. Traditionally, the US has been adopting 'strategic patience', while insisting denuclearization of North Korean, on the Korean peninsula issue. The then-president Barack Obama's announcement of a 'pivot to Asia' in 2011, followed by proposal of the Trans-Pacific Partnership, was aimed at reassuring its Asian allies of the US' commitment to the region. However, Trump's swift withdrawal from TPP as soon as he has been in office, together with his close relations with Russia, has made his stance on North Korea's problem more ambivalent. While Trump has been keen on exchanging war of words with Kim jong-un, he is not ready for a real military strike when he is not yet capable of handling domestic politics well.

While we believe the chance of actual military strike is remote, ongoing missile tests by North Korea would cause financial market volatility. Therefore, safe-haven assets such as Japanese yen, Swiss franc and gold would be attractive during times of intensified tensions.

EURUSD

The EURUSD attempted to push higher last week topped at 1.2070 but whipsawed to the downside and closed lower at 1.1863. Overall I remain bullish but as long as stay below 1.2000 price is still in a valid bearish correction phase. The bias is neutral in nearest term. Immediate support is seen around 1.1823. A clear break and daily close below that area could trigger further bearish pressure testing 1.1750 – 1.1700 region. On the upside, a clear break above 1.2000 psychological level would potentially end the current bearish correction.

GBPUSD

The GBPUSD was indecisive last week. Price has been moving sideways without clear direction between 1.2980 – 1.2870 as you can see on my daily chart below and we need a clear break from that range area to see clearer direction. The bias is neutral in nearest term. A clear break and consistent movement above 1.2980 could trigger further bullish pressure testing 1.3030 before targeting 1.3125 region. On the downside, a clear break and daily close below 1.2870 would expose 1.2700 area or lower. Overall I remain neutral.

USDJPY

The USDJPY attempted to push lower last week slipped below 108.70 but whipsawed to the upside and closed higher at 110.25. Price has been moving sideways without clear direction between 108.70 – 111.00 range area for 5 weeks as you can see on my daily chart below. The bias is neutral in nearest term. Immediate support is seen around 108.70. A clear break and daily close below that area could trigger further bearish pressure testing 108.00 – 107.50 region or lower. Immediate resistance is seen around 110.50 followed by 111.00. Overall I remain neutral and prefer to stand aside for now.

USDCHF

The USDCHF attempted to push lower last week slipped below 0.9450 key support but whipsawed to the upside and closed higher at 0.9645. The bias is neutral in nearest term but the bullish pin bar formation printed on daily chart last week after a false break below 0.9450 still suggests a potential bullish view. Immediate resistance is seen around 0.9700. A clear break and daily close above that area could trigger further bullish pressure testing 0.9765 – 0.9807 key resistance which is a good place to sell. Immediate support is seen around 0.9525. A clear break and daily close below that area would trigger further bearish pressure retesting 0.9450 key support. I prefer to stand aside for now.

A thermonuclear North Korea has traders buying precious metals this morning, but be cautious of overbought RSI's.

Gold gapped higher this morning as North Korea's hydrogen bomb test yesterday, and heightened rhetoric from the U.S. saw traders rushing for safe havens. Having closed in New York at 1324.00, gold has rushed to a high of 1339.00 before subsiding to a still impressive 1334.00 in early trading. Friday's price action was constructive anyway following a less than impressive Non-Farm Payrolls figure and a weaker dollar following the number. The only story in town this week though will be the ramping up in tensions on the Korean Peninsula with North Korea's possible achievement of thermonuclear capability and aggressive rhetoric from the U.S. both a worrying escalation that comes in a very Central Bank rate announcement week.

GOLD

Gold's technical picture is impressive having retraced and held its 1296.00 breakout level. This is now strong support and a key longer term pivot level. Gold flirts with its next key resistance at 1337.00 having peeked above it this morning. A close above is significant technically, opening up further gains to the 1375.00 highs last seen in July 2016.

We would caution though that the daily RSI is now in a solid overbought territory. This implies that although the technical picture remains strong, some consolidation may now be necessary for further meaningful gains to be made.

SILVER

Silver closed just below its key resistance at 17.7600 on Friday and North Korea has ensured it has burst through that level this morning, touching 17.9000 in early trading.

Like Gold, the technical picture remains constructive as we trade at 17.8325 mid-Asia session. The charts are now clear of resistance until the April high around 18.6570, with support at 17.3900 and comfortably above its 100 and 200-day averages and trend line support on the chart below.

That said, Silver's RSI is also approaching very overbought territory, implying that some consolidation may be required around these levels to catch its breath again.

Geopolitical headlines will override technicals potentially and traders should be aware that Gold and Silver may move suddenly and unpredictably on them as the week progresses.