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Key Highlights

• The Euro after breaching 0.9000 traded as high as 0.9119 against the British Pound.
• There is a key bullish trend line forming with support at 0.9060 on the 4-hours chart of EUR/GBP.
• Germany's Gross Domestic Product preliminary reading for Q2 2017 came in at 0.6% (QoQ), down from the last +0.7%.
• Today, the US Retail Sales figure for July 2017 will be released, which is forecasted to increase by 0.4% (MoM).

EURGBP Technical Analysis

The past few months were mostly bullish for the Euro as it traded above 0.9000 against the British Pound. The EUR/GBP pair recently traded as high as 0.9119 and currently correcting lower.

Looking at the 4-hours chart of EUR/GBP, there is a key bullish trend line forming with support at 0.9060. The recent failure near 0.9120 was from a connecting resistance trend line.

At the moment, the pair is correcting lower and already trading below the 23.6% Fib retracement level of the last wave from the 0.9007 low to 0.9119 high.

There is a chance that EUR/GBP might continue to correct lower towards 0.9060. The mentioned 0.9060 is also the 50% Fib retracement level of the last wave from the 0.9007 low to 0.9119 high.

Therefore, the pair is likely to find buyers near 0.9060. On the upside, an initial resistance is near 0.9100, followed by the recent high of 0.9119.

Germany's Gross Domestic Product

The Euro Zone today saw the release of the German Gross Domestic Product for Q2 2047 (Preliminary reading) by the Statistisches Bundesamt Deutschland. The market was aligned for an increase of 0.7% in the GDP compared with the previous quarter.

The actual result was disappointing, as the German GDP is expected to grow at 0.6% in Q2 2017. It is less than the last +0.7%. In terms of the yearly change, the German GDP is expected to grow at 0.8% in Q2 2017, which is a lot less than the last +3.2% and the forecast +1.9%.

The report pointed out that:

The calendar effect in the first two quarters of 2017 was above average because, in the first quarter, there were 3 working days more and, in the second quarter, there were 3 working days less than a year earlier. When calendar-adjusted, GDP growth in the second quarter of 2017 was 2.1% (following 2.0% in the first quarter of 2017).

Overall, the EUR/GBP pair may continue to correct lower, but more likely to find support near 0.9060 or 0.9010 in the medium term.

Daily Pivots: (S1) 1.1389; (P) 1.1425; (R1) 1.1486; More...

Intraday bias in EUR/CHF remains mildly on the upside for retesting 1.1537 resistance. Break there will resumption of up trend from 1.0629. On the downside, below 1.1385 minor support will extend the consolidation from 1.1537 with another rise. In that case, we'd continue to expect strong support from 8.2% retracement of 1.0830 to 1.1537 at 1.1267 to bring rebound. However, firm break of 1.1267 will extend the fall and target 61.8% retracement at 1.1100.

In the bigger picture, firm break of 1.1198 key resistance confirms resumption of the long term rise from SNB spike low back in 2015. In this case, EUR/CHF would eventually head 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.

Global Markets:

• Asian stock markets: Nikkei rose 1.30 %, Shanghai Composite up 0.53 %, Hang Seng climbed 0.12 %, ASX up 0.49 %
• Commodities: Gold at $1281.13 (-0.72 %), Silver at $16.88 (-1.40 %), WTI Oil at $47.62 (+0.06 %), Brent Oil at $50.80 (+0.14 %)
• Rates: US 10-year yield at 2.25, UK 10-year yield at 1.06, German 10-year yield at 0.41

News & Data:

• EUR Industrial Production m/m -0.6 % vs -0.4 % expected
• JPY Industrial Production n/m 2.2 % vs 1.6 % expected
• CNY Retail Sales y/y 10.4 % vs 10.9 % expected
• CNY Fixed Asset Investment y/y 8.3 % vs 8.6 % expected
• North Korea Backs Off Guam Missile-Attack Threat – WSJ
• U.S. wages seen growing faster than headline data suggest- RTRS
• China says it will defend interests if U.S. harms trade ties- RTRS

Markets Update:

Asian equity markets extended gains after North Korea's leader signaled that he would delay plans to fire a missile near Guam as the prospect of war between the U.S. and North Korea receded

USD/JPY made considerable ground on Monday, as geopolitical tensions eased between the US and North Korea, the Yen fell over 0.5 percent against the USD from 109.70 up through 110.20 where it has since steadied.

EUR/USD was little changed and seen Trading flat on the day against the dollar at $1.1784. The Euro could not muster enough strength to close above August’s opening level at 1.1830 while the US dollar index added a mere 0.1 percent to 93.480

AUD/USD failed to sustain gains beyond the 0.79 handle yesterday and proceeded to fall sharply down to the mid-level support at 0.7850 before finally rising about 0.3 percent to session highs of 78.71 U.S. cents after the RBA minutes.

Upcoming Events:

• French Bank Holiday
• Italian Bank Holiday
• 06:00 GMT – (EUR) German Prelim GDP q/q
• 07:15 GMT – (CHF) PPI m/m
• 08:30 GMT – (GBP) CPI y/y
• 08:30 GMT – (GBP) PPI Input m/m
• 08:30 GMT – (GBP) RPI y/y
• 12:30 GMT – (USD) Core Retail Sales m/m
• 12:30 GMT – (USD) Retail Sales m/m
• 12:30 GMT – (USD) Empire State Manufacturing Index
• 12:30 GMT – (USD) Import Prices m/m

Asia Summary

Asian equity markets opened mostly higher as the risk of conflict between North Korea and the US eased off after Kim Jong Un said he would hold off on an attack on Guam and wait to see how the US behaves before taking any action. This also helped to stabilize currencies in the region. However, a major mover was USD/PHP when it fell to an 11 year low at 51.155. AUD/USD rose slightly but little change in RBA meeting minutes and mixed earnings in Australia failed to give much push. China skipped open market operations but lent CNY399.5B in 1-year medium-term lending facility (MLF) loans at 3.2%, unchanged yield. PBOC also weakened the yuan setting for the first time in 6 days.

Key economic data

(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 111.7 v 113.7 prior

(AU) AUSTRALIA JUL NEW MOTOR VEHICLE SALES M/M: -2.0% V 1.2% PRIOR; Y/Y: 1.8% V 3.6% PRIOR

(AU) RESERVE BANK OF AUSTRALIA (RBA) MEETING MINUTES: GDP GROWTH LIKELY PICKED UP IN Q2, ECONOMY SEEN GROWING AROUND 3% FOR 2018 AND 2019

(JP) Japan Jul Tokyo Condominium Sales y/y: +3.3% v -25.1% prior

Speakers and Press

China/Hong Kong

(CN) China Commerce Ministry (MOFCOM): Hopes US could be ‘prudent’ in review of China’s intellectual property (IP) policy; Will take steps if US takes actions that hurt bilateral trade relations

(CN) China National Energy Administration (NEA): China Jul power consumption: 607.2B KWH, +9.9% y/y (4th consecutive rise)

(CN) China Ministry of Commerce (MOFCOM): China will take actions to defend its interests if the US damages trade ties after President Donald Trump authorized an inquiry into China's alleged theft of intellectual property

(CN) PBOC research bureau head Xu Zhong: Inclusion of banks negotiable certificates of deposit (NCD) in the PBOC's macro-prudential assessment framework from Q1 2018 won’t have major impact on the nation’s banking system

(CN) China National Development and Reform Commission (NDRC) and other government agencies: China is holding back on building new coal-fired power plants to avoid risks from overcapacity and promote a clean energy mix

Australia/New Zealand

(NZ) New Zealand PM English: RBNZ does not need more housing tools; Want the RBNZ to remove loan-to-value ratios (LVRs) - NZ press

Korea

(KR) North Korea KCNA: US should stop its arrogant provocations; Kim Jung Un has discussed ground strike plan with officers

(KR) North Korea Kim Jong Un: Will not attack Guam yet, could change mind based on US actions

(KR) South Korea President Moon: Military action started on Korea peninsula can only be decided by South Korea, will prevent war at all means

Japan

(JP) Japan Fin Min Aso: Housing investment was the biggest driver of growth in Q2 GDP; rising domestic demand covered drop in external demand

Asian Equity Indices/Futures (00:00ET)

Nikkei +1.2%, Hang Seng +0.4%, Shanghai Composite +0.6%, ASX200 +0.7%, Kospi +0.0%

Equity Futures: S&P500 +0.3%; Nasdaq100 +0.5%, Dax +0.4%, FTSE100 +0.2%

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

EUR 1.1793-1.1768; JPY 110.23-109.61; AUD 0.7877-0.7850; NZD 0.7312-0.7285

Dec Gold -0.7% at $1,281/oz; Sept Crude Oil +0.2% at $47.66/brl; Sept Copper +0.2% at $2.91/lb

USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT: 6.6689 V 6.6601 PRIOR (1st weaker setting in 6 days)

(CN) PBoC lends CNY399.5B in 1-year medium-term lending facility (MLF) loans at 3.2%, unchanged yield; confirms that it skipped daily reverse repo operation

(TW) Taiwan sells NT$25B in 20-yr bonds; avg yield 1.591% v 1.798% prior; bid-to-cover 1.97x

Equities notable movers

Hong Kong/China

MMG, 1208.HK Reports prelim H1 Net $113M v -$93M y/y; -4.3%

Wheelock, 20.HK Reports H1 (HK$) Net 6.24B, +5.6% y/y; Rev 33.0B, +21.4% y/y; -4.2%

Japan

FujiFilm, 4901.JP Reports Q1 Net ¥43.8B v ¥12.1B y/y; Op ¥35.8B v ¥29.5B y/y; Rev ¥571.5B v ¥545.9B y/y; +7.5%

Australia

NRW Holdings, NWH.AU Announces 36.8M share purchase plan for existing shareholders at A$0.68/shr to raise A$25M towards the acquisition of Golding Group Pty Ltd; +30%

Domino’s Pizza Entertainment, DMP.AU Reports FY17 Underlying net A$118.5M v A$122Me; EBITDA A$230.9M v A$237Me; Rev A$1.07B v A$1.1Be; Announces A$300M buyback; -14%

For the 24 hours to 23:00 GMT, the AUD declined 0.66% against the USD and closed at 0.7856.

LME Copper prices declined 0.04% or $2.5/MT to $6351.0/MT. Aluminium prices declined 0.5% or $10.5/MT to $2030.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7868, with the AUD trading 0.15% higher against the USD from yesterday’s close, after minutes of the Reserve Bank of Australia’s (RBA) August meeting highlighted an upbeat outlook for the Australian economy.

Minutes indicated that policymakers expressed confidence that Australia’s economic growth is likely to pick up pace in the coming months. However, the central bank reiterated its view that the housing market as well as household debt warrants “careful monitoring” and that any further rise in the local currency could lead to slower growth and subdued inflation.

The pair is expected to find support at 0.7838, and a fall through could take it to the next support level of 0.7808. The pair is expected to find its first resistance at 0.7905, and a rise through could take it to the next resistance level of 0.7942.

The currency pair is trading between its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR declined 0.45% against the USD and closed at 1.1778, after the Euro-zone's seasonally adjusted industrial production eased more-than-expected by 0.6% on a monthly basis in June, declining for the first time in four months. Industrial production had recorded a revised rise of 1.2% in the previous month, while markets had anticipated for a fall of 0.5%.

The greenback advanced against its key peers, as geopolitical concerns surrounding the US and North Korea ebbed.

The US Dollar added to gains, after the New York Federal Reserve (Fed) President, William Dudley, stated that he favours another interest rate hike before the year-end if the economy improves in line with expectations.

In the Asian session, at GMT0300, the pair is trading at 1.1783, with the EUR trading a tad higher against the USD from yesterday's close.

The pair is expected to find support at 1.1755, and a fall through could take it to the next support level of 1.1726. The pair is expected to find its first resistance at 1.1825, and a rise through could take it to the next resistance level of 1.1866.

Trading trend in the Euro today is expected to be determined by the release of Germany's flash 2Q GDP data, scheduled in a few hours. Additionally, in the US, retail sales for July, NAHB housing market index for August and business inventories for June, all set to release later in the day, will pique significant amount of investor attention.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP declined 0.41% against the USD and closed at 1.2961.

In the Asian session, at GMT0300, the pair is trading at 1.2965, with the GBP trading slightly higher against the USD from yesterday's close.

The pair is expected to find support at 1.2939, and a fall through could take it to the next support level of 1.2912. The pair is expected to find its first resistance at 1.3007, and a rise through could take it to the next resistance level of 1.3048.

Going ahead, market participants will focus on Britain's inflation report for July, slated to release in a few hours.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.34% against the JPY and closed at 109.72.

In the Asian session, at GMT0300, the pair is trading at 110.18, with the USD trading 0.42% higher against the JPY from yesterday’s close.

Earlier in the session, data showed that Japan’s final industrial production climbed 2.2% on a monthly basis in June, higher than a rise of 1.6% indicated in the flash estimate. Industrial production had registered a drop of 3.6% in the prior month.

The pair is expected to find support at 109.60, and a fall through could take it to the next support level of 109.03. The pair is expected to find its first resistance at 110.49, and a rise through could take it to the next resistance level of 110.81.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.96% against the CHF and closed at 0.9721.

In economic news, Switzerland’s total sight deposits inched up to a level of CHF578.9 billion in the week ended 11 August, from CHF578.6 billion recorded in the previous week.

In the Asian session, at GMT0300, the pair is trading at 0.9734, with the USD trading 0.13% higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9663, and a fall through could take it to the next support level of 0.9592. The pair is expected to find its first resistance at 0.9771, and a rise through could take it to the next resistance level of 0.9808.

Looking ahead, market participants will focus on Switzerland’s producer and import prices data for July, set to release in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.37% against the CAD and closed at 1.2725.

On the data front, Canada's Teranet/National Bank house price index advanced 2.0% MoM in July. In the prior month, the index had climbed 2.6%.

In the Asian session, at GMT0300, the pair is trading at 1.2728, with the USD trading marginally higher against the CAD from yesterday's close.

The pair is expected to find support at 1.2690, and a fall through could take it to the next support level of 1.2652. The pair is expected to find its first resistance at 1.2749, and a rise through could take it to the next resistance level of 1.2770.

Ahead in the day, investors will closely monitor Canada's existing home sales data for July.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.