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In focus today

Danish CPI is due this morning, and we expect inflation to decline from 1.8% in June to 0.9% in July, as last year's temporary suspension of the electricity fee exits the inflation measure.

In the week ahead, we will watch out particularly for US inflation for July, due on Wednesday. We will also keep an eye on a Norge's Bank meeting, US retail sales, ZEW data out of Germany, and Q2 Japanese GDP data.

Economic and market news

What happened on Friday

Norwegian inflation came in line with market consensus with core printing at 3.3% y/y, well below Norges Bank's estimate of 3.7% from the June MPR, which could pave the way for a more dovish Norges Bank this week. Otherwise, markets were generally calmer on Friday after a week with high volatility across asset classes, as the VIX dropped 8% during the day.

This morning started off in a similar fashion as Japanese markets are closed for a public holiday today.

Market movements

Equities: Global equities ended higher on Friday, closing the week almost unchanged despite Monday's heavy sell-off. It seems like much more than just one week has transpired in the equity space. There was a market crash in Japan, which quickly returned to normal. The VIX spiked to over 65 before settling down to 20 by the end of the week. In our opinion, this volatility could lead to false assumptions among investors. It might cause some to think this was just another minor blip before the markets march towards new highs. However, we argue that things have changed compared to other blips we have experienced over the last few years, and therefore, one should act differently this time around. In the US on Friday, Dow +0.1%, S&P 500 +0.5%, Nasdaq +0.5%, Russell 2000 -0.2%. Markets are mostly higher in Asia this morning, with the most cyclical markets leading the advances, while Chinese markets are mostly lower. European futures are higher, while US ones are mixed.

FI: Global yields drifted marginally lower on Friday, with 10y Bunds ending 3bp lower at 2.22%. Following the initial rout early this month, the latter part of last week saw mostly sideways trading with 10y Bunds around the 2.2-2.25% level and 10y US treasuries just shy of 4%. After a rather violent repricing of ECB expectations earlier this month, markets are now pricing 68bp of rate cuts by year end with the September meeting priced to be a"“done dea"” at 24.7bp. Importantly for ECB, starting on Wednesday this week, we will have a sequence of important data indicating the evolution in the triangulation between wages, profits and productivity growth, which will be decisive for the rate outlook from the ECB. The focus this week is on the US CPI (Wednesday) and to lesser degree on the German ZEW tomorrow.

FX: The stock markets, bond yields and initially hard-hit risk-sensitive currencies recovered through the better part of the week following the blow-outs on Monday. The alleged recession risk seemed to moderate somewhat in the wake of some more encouraging data from the US. For example, the NOK fully erased losses vs the EUR as the cross first soared above 12.10 in light trading and closed the week around 11.80. Meanwhile, the SEK has been relatively stable in a balance act between risk off and closing of carry trades. USD/JPY is back above 146 whereas EUR/USD was range-bound within 1.0900-1.0950 most of last week. An exciting week ahead with focus on inflation (Sweden, US), activity (EA GDP, US retails sales) and central banks (Norge).

Daily Pivots: (S1) 1.0906; (P) 1.0919; (R1) 1.0929; More.....

Intraday bias in EUR/USD remains for the moment. While deeper retreat cannot be ruled out, downside should be contained well above 1.0776 support. On the upside, above 1.0944 minor resistance will bring retest of 1.1007 first. Further break there will resume rally from 1.0665 to 100% projection of 1.0665 to 1.0947 from 1.0776 at 1.1056 next.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's still be in progress. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). However, break of 1.0776 support will extend the correction with another falling leg back towards 1.0447 support.

Daily Pivots: (S1) 145.96; (P) 146.89; (R1) 147.49; More...

Intraday bias in USD/JPY stays neutral for the moment. While further rally cannot be ruled out, outlook will stay bearish as long as 38.2% retracement of 161.94 to 141.67 at 149.41 holds. Below 144.04 minor support will turn bias to the downside for 141.67. Break there will resume the fall from 161.94 to 140.25 support next. Nevertheless, decisive break of 149.41 will bring stronger rally to 61.8% retracement at 154.19, even as a corrective move.

In the bigger picture, fall from 161.94 medium term is seen as correcting whole up trend from 102.58 (2021 low). Deeper decline could be seen to 38.2% retracement of 102.58 to 161.94 at 139.26, which is close to 140.25 support. In any case, risk will stay on the downside as long as 55 W EMA (now at 149.77) holds. Nevertheless, firm break of 55 W EMA will suggest that the range for medium term corrective pattern is already set.

Daily Pivots: (S1) 1.2731; (P) 1.2753; (R1) 1.2779; More...

Intraday bias in GBP/USD remains neutral for the moment and more range trading could be seen above 1.2664. Another fall is in favor as long as 1.2839 resistance holds. Below 1.2664 will target 1.2612 support. Decisive break there should confirm that rise from 1.2298 has completed, and target this support next. However, break of 1.2839 resistance will argue that the pull back from 1.3043 has completed and turn bias back to the upside.

In the bigger picture, current development suggests that corrective pattern from 1.3141 is extending with fall from 1.3043 as another leg. Break of 1.2612 support would strengthen this case. But still, downside should be contained by 1.2036/2298 support zone even in case of deep decline. Rise from 1.0351 (2022 low) remains in favor to resume at a later stage.

Daily Pivots: (S1) 0.8632; (P) 0.8652; (R1) 0.8673; More…

Intraday bias in USD/CHF remains neutral. Recovery from 0.8431 might extend, but outlook will stay bearish as long as 38.2% retracement of 0.9223 to 0.8431 at 0.8734 holds. On the downside, below 0.8559 minor support will bring retest of 0.8431 first. Break there will resume the fall from 0.9223 to 0.8332 low. Nevertheless, firm break of 0.8734 will bring stronger rally to 61.8% retracement at 0.8920, even as a corrective move.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 0.6558; (P) 0.6581; (R1) 0.6596; More...

Intraday bias in AUD/USD stays mildly on the upside as rise from 0.6348 is in favor to continue. Sustained break of 55 D EMA (now at 0.6612) will target 0.6798 resistance. On the downside, break of 0.6506 minor support will indicate rejection by the 55 D EMA, and turn bias back to the downside for retesting 0.6348 instead.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with fall from 0.6798 as another falling leg. Deeper fall could be seen to the lower side of the range between 0.6169/6361. But strong support should be seen there to contain downside. Meanwhile, break of 0.6798 will target upper side of the range at 0.7156.

Daily Pivots: (S1) 1.3714; (P) 1.3733; (R1) 1.3749; More...

Intraday bias in USD/CAD remains neutral at this point. Strong rebound from current level, followed by break of 1.3790 minor resistance, will retain near term bullishness. Further rise should be seen to retest 1.3946 high. However, sustained trading below 55 D EMA (now at 1.3726) will dampen the original bullish view and bring deeper decline back towards 1.3588 support.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern, that might have completed at 1.3176 (2023 low) already. Firm break of 1.3976 will confirm resumption of whole up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149. This will be the favored case as long as 1.3588 support holds, in case of pullback.

Daily Pivots: (S1) 0.9370; (P) 0.9423; (R1) 0.9497; More....

Intraday bias in EUR/CHF stays neutral and further decline is still expected with 0.9476 support turned resistance intact. On the downside, break of 0.9354 minor support will turn bias back to the downside for retesting 0.9209 low first. On the upside, however, sustained break of 0.9476 will turn bias to the upside for strong rise back to 55 D EMA (now at 0.9601).

In the bigger picture, medium term corrective pattern from 0.9407 (2022 low) might have completed with three waves to 0.9928. Decisive break of 0.9252 (2023 low) will confirm long term down trend resumption. Next target will be 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. For now, outlook will stay bearish as long as 0.9928 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 0.8544; (P) 0.8562; (R1) 0.8573; More....

Intraday bias in EUR/GBP remains neutral for the moment. Some consolidations would be seen below 0.8624, with risk of deeper pullback. But downside should be contained by 38.2% retracement of 0.8382 to 0.8624 at 0.8532 to bring another rally. On the upside, firm break of 0.8624 will target 0.8643 resistance next.

In the bigger picture, while the rebound from 0.8382 is strong, there is no confirmation of trend reversal yet. As long as 0.8643 resistance holds, down trend from 0.9267 could still resume through 0.8382 at a later stage. However, firm break of 0.8643 will indicate that such down trend has completed, and turn outlook bullish for 0.8764 resistance next.

Daily Pivots: (S1) 1.6555; (P) 1.6589; (R1) 1.6642; More...

Intraday bias in EUR/AUD remains neutral for the moment. Outlook is staying bullish with 1.6474 support intact. On the upside, above 1.6798 minor resistance will bring retest of 1.7180 resistance first. Firm break there will resume larger up trend to 1.7715 fibonacci projection level next.

In the bigger picture, corrective fall from 1.7062 medium term top should have completed at 1.5996. Larger up trend from 1.4281 (2022 low) is resuming. Next target is 61.8% projection of 1.4281 to 1.7062 from 1.5996 at 1.7715. This will now remain the favored case as long as 1.6474 support holds.