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Daily Pivots: (S1) 1.0870; (P) 1.0908; (R1) 1.0960; More...

Focus stays on 1.0929 in EUR/USD as the pair is still struggling around this resistance. Sustained break of 1.0929 argue that the corrective fall from 1.1274 has completed with three waves down to 1.0764. Further rally would then be seen to 1.1064 resistance for confirmation. Meanwhile, rejection by 1.0929 will retain near term bearishness. Break of 1.0854 minor support will resume the decline through 1.0764, to 1.0609/34 cluster support next.

In the bigger picture, fall from 1.1274 medium term top is seen as a correction to up trend from 0.9534 (2022 low). Deeper decline would be seen to 1.0634 cluster support (38.2% retracement of 0.9534 to 1.1274 at 1.0609). Strong support could be seen there, at least on first attempt, to bring rebound. Yet, medium term outlook will be neutral for now, as long as 1.1274 resistance holds.

China's official PMI Manufacturing for August rose slightly to 49.7, surpassing market expectations of 49.5. Despite the increment, this marks the fifth consecutive month that the metric is below the 50-threshold, signaling a contraction in the manufacturing sector.

Key sub-indexes within the PMI data painted a mixed picture. Production sub-index saw improvement, rising from 50.2 in July to 51.9 . Similarly, the gauge for new orders nudged up to 50.2 from 49.5. On the downside, new export orders sub-index stayed low at 46.7, though it was slightly up from 46.3 , marking its fifth consecutive month in contraction territory.

Manufacturers' business expectations did see some improvement, rising from 55.1 to 55.6, indicating a slight uptick in future outlook despite current headwinds.

Zhao Qinghe, a senior official from China's National Bureau of Statistics, commented on the situation. "The survey results show that insufficient market demand is still the main problem that enterprises are facing, and the foundation for the recovery and development of the manufacturing industry needs to be further consolidated," he said.

Meanwhile, PMI Non-Manufacturing fell from 51.5 to 51.0, missing market expectations of 51.1, although it still remains in the expansionary territory above 50.

New Zealand's ANZ Business Confidence index showed a marked improvement in August, rising from -13.1 to -3.7. The data suggests a positive shift in the economic outlook among New Zealand businesses. Own Activity Outlook also jumped from a tepid 0.8 to a robust 11.2.

Several other sub-indicators within the report signaled optimism. Export intentions rose from 1.5 to 7.5, indicating that businesses are more confident about overseas demand. Investment intentions climbed from -3.3 to -1.3, suggesting that companies are less hesitant about capital expenditures. Employment intentions also saw a notable uptick, moving from -1.6 to 4.6, pointing to potential job market expansion.

On the inflationary front, businesses appear to be less worried. Cost expectations decreased from 80.6 to 75.3, pricing intentions fell from 48.1 to 44.0, and inflation expectations eased marginally from 5.14 to 5.06. This cooling in inflationary pressure might be a welcome sign for both the market and RBNZ.

In their commentary, ANZ stated: "Many firms appear to have been pleasantly surprised at how well demand has held up, considering; and the Reserve Bank has stopped raising the OCR (Official Cash Rate), (while reserving the right to change their minds), which may be creating a sense that the worst is over."

Full ANZ business confidence release here.

In a marked contrast to fellow BoJ board member Naoki Tamura's recent remarks, Toyoaki Nakamura, known for his dovish stance, stressed the need for a more cautious approach towards tightening Japan's monetary policy. Speaking at an event, Nakamura noted, "Sustainable and stable achievement of our 2% inflation isn't in sight yet. We therefore need more time before shifting to monetary tightening."

Nakamura emphasized the necessity for "close scrutiny of conditions and cautious decision-making" when it comes to modifications in Japan's ultra-loose monetary policy. He further cited weakening economic signs in China and potential ripple effects of aggressive US interest rate hikes as risks clouding Japan's economic outlook.

Interestingly, Nakamura was the sole dissenting voice last month against the BoJ's decision to loosen its grip on yield curve control, underscoring his position as the board's most dovish member. His comments are in stark contrast to those of board member Naoki Tamura, who expressed optimism yesterday that BoJ could have sufficient data by the first quarter of 2024 to assess whether the 2% inflation target could be met sustainably.

Japan's industrial production took a hit in July, falling by a worse-than-expected -2.0% mom, versus consensus forecast of -1.4% mom. The seasonally adjusted production index stumbled to 103.6, based on 2020 base of 100.

Production was primarily pulled down by substantial drops in electronic parts and devices, which declined -by 5.1% mom. Also, production machinery output shrank by -4.8% mom, with semiconductor manufacturing equipment segment plunging a stark 16.4% mom. However, not all was grim. Production of automobiles showed a modest uptick of 0.6% mom, attributed to the easing of supply chain bottlenecks.

A Ministry of Economy, Trade, and Industry official remarked that the slump in output across various sectors was largely due to diminishing domestic and overseas orders. Consequently, METI has revised its assessment of industrial output from "showing signs of moderately picking up" to "fluctuated indecisively."

Despite the grim industrial landscape, manufacturers surveyed by METI are optimistic, projecting a 2.6% rise in output for August and a 2.4% increase in September.

In contrast to the industrial sector's lackluster performance, retail sales exhibited considerable strength. Sales surged 6.8% yoy in July, beating expectations of a 5.4% yoy increase. This marks the 17th consecutive month of expansion since March 2022. Additionally, retail sales increased 2.1% mom in July, recovering from a -0.6% mom decline in the previous month.

Key Highlights

• NZD/USD is facing resistance near 0.6000 and 0.6020.
• It broke a major bearish line with resistance near 0.5935 on the 4-hour chart.
• EUR/USD recovered above the 1.0880 resistance zone.
• The US nonfarm payrolls could increase by 170K in August 2023.

NZD/USD Technical Analysis

The New Zealand Dollar extended its decline below the 0.6050 level against the US Dollar. AUD/USD even broke the 0.6000 level to move further into a bearish zone.

Looking at the 4-hour chart, the pair settled below the 0.6000 level, the 100 simple moving average (red, 4 hours) and the 200 simple moving average (green, 4 hours).

The pair tested the 0.5885 zone. A low was formed near 0.5886 and the pair is now attempting a recovery wave. It broke the 23.6% Fib retracement level of the downward move from the 0.6225 swing high to the 0.5886 low.

Besides, NZD/USD broke a major bearish line with resistance near 0.5935 on the same chart. On the upside, an initial resistance is near the 0.5975 level and the 100 simple moving average (red, 4 hours).

The first major resistance is near the 0.6000 level or the 38.2% Fib retracement level of the downward move from the 0.6225 swing high to the 0.5886 low.

A close above 0.6000 could start a decent increase. In the stated case, the pair could rise toward the 0.6050 level. Any more gains could send the pair toward the 0.6120 level.

If not, the pair might start a fresh decline below the 0.5940 support. The next key support is seen near the 0.5885 level. If there is a move below 0.5885, the pair could dive toward 0.5820.

Looking at EUR/USD, the pair is gaining pace and is currently eyeing a move above the 1.0940 level in the near term.

Economic Releases

• Germany’s Manufacturing PMI for August 2023 - Forecast 39.1, versus 39.1 previous.
• Euro Zone Manufacturing PMI for August 2023 – Forecast 43.7, versus 43.7 previous.
• UK Manufacturing PMI for August 2023 – Forecast 42.5, versus 42.5 previous.
• US ISM Manufacturing PMI for August 2023 – Forecast 47.0, versus 46.4 previous.
• US nonfarm payrolls for August 2023 – Forecast 170K, versus 187K previous.
• US Unemployment Rate for August 2023 - Forecast 3.5%, versus 3.5% previous.

Short Term Elliott Wave structure in Gold (XAUUSD) suggests the drop in Gold on August ended wave A at 1884.16 low. The metal now is extending higher in 3 swings to end a wave B correction. Up from 8.17.2023 low, wave (i) ended at 1904.50 and wave (ii) pullback ended at 1889.02. Rally from wave (ii), wave (iii) ended at 1922.89 and wave (iv) correction ended at 1911.40. Last push to complete wave (v) and the first leg of wave B as wave ((a)) ended at 1923.37. From here, the metal extended lower in 3 swing towards 1903.50 which ended wave ((b)) of B as a zigzag corrective structure. The metal then rallied again in wave ((c)).

Up from 1903.50 low, wave (i) finish at 1914.90 and wave (ii) retracement completed at 1912.20. Then, gold had a nice rally to end wave (iii) at 1949.05 and wave (iv) correction ended at 1941.45 . Currently, XAUUSD is expecting to trade to the upside to break wave (iii) high and end the last leg as wave (v) of ((c)) of B. Once the wave B is completed, we expect a reaction to continue to the downside or see 3 swings lower at least.

Gold 60 Minutes Elliott Wave Chart

Gold Elliott Wave Video

https://www.youtube.com/watch?v=28dq50jx5DA

• USDCAD reversed from key resistance level 1.3645
• Likely to fall to support level 1.3500

USDCAD currency pair previously reversed down from the key resistance level 1.3645 (which has been repeatedly reversing the pair from January, as can be seen below).

The downward reversal from the resistance level 1.3645 stopped the previous minor impulse wave 3 of the intermediate impulse wave (C) from the start of August.

Given the strength of the resistance level 1.3645, EURUSD currency pair can be expected to fall further toward the next support level 1.3500 (low of the previous correction 2).

• EURUSD broke daily down channel
• Likely to rise to resistance level 1.1045

EURUSD currency pair recently broke the resistance trendline of the daily down channel from the middle of July (which enclosed the previous short-term ABC correction ii).

The breakout of this down channel should accelerate the active short-term impulse wave iii of the higher impulse waves 3 and (3).

Given the clear daily uptrend, EURUSD currency pair can be expected to rise further toward the next resistance level 1.1045 (top of the previous correction b).