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Daily Pivots: (S1) 156.19; (P) 156.85; (R1) 157.43; More....

Intraday bias in EUR/JPY remains neutral for the moment, and outlook is unchanged. On the upside, decisive break of 157.99/158.03 will resume larger up trend to 162.82 projection level next. However, break of 155.10 will extend the corrective pattern from 157.99 with another falling leg instead.

In the bigger picture, as long as 151.60 resistance turned support holds, rise from 114.42 (2020 low) is in progress. On resumption, next target is 100% projection of 124.37 to 148.38 from 138.81 at 162.82. Nevertheless, sustained break of 151.60 will argue that larger correction is already underway. Deeper decline would be seen to 55 W EMA (now at 145.56).

Daily Pivots: (S1) 181.54; (P) 182.40; (R1) 183.03; More...

Intraday bias in GBP/JPY remains neutral at this point, but outlook is unchanged. Corrective pattern from 183.99 should have completed with three waves down to 176.29. Above 183.23 will target 183.99 resistance first. Decisive break there will resume larger up trend. However, break of 180.85 will turn bias to the downside to extend the corrective pattern from 183.99 with another falling leg.

In the bigger picture, as long as 172.11 resistance turned support holds, up trend from 123.94 (2020 low) is expected to continue through 183.99 at a later stage, towards 195.86 (2015 high). Nevertheless, firm break of 172.11 will argue that larger correction is already underway.

Daily Pivots: (S1) 0.9573; (P) 0.9611; (R1) 0.9637; More...

Intraday bias in EUR/CHF is turned neutral with 4H MACD crossed below signal line. Also, with 0.9670 support turned resistance intact, near term outlook stays bearish for further decline. Break of 0.9520 will resume the fall from 1.0095 towards 0.9407 low. Nevertheless, sustained break of 0.9670 will be the first sign of bullish reversal and target 0.9840 resistance for confirmation.

In the bigger picture, medium term outlook is staying bearish as the pair is capped well below falling 55 W EMA (now at 0.9876). Down trend from 1.2004 (2018 high) is in favor to continue. Sustained break of 0.9407 will target 61.8% projection of 1.1149 to 0.9407 from 1.0095 at 0.9018. For now, this will remain the favored case as long as 0.9840 resistance holds, in case of strong rebound.

Swiss CPI fell -0.1% mom in July, matched expectations. Core CPI (excluding fresh and seasonal products, energy and fuel) was down -0.2% mom. Domestic products prices rose 0.2% mom while imported product prices dropped -1.2% mom.

Annually, CPI slowed from 1.7% yoy to 1.6% yoy, above expectation of 1.5% yoy. Core CPI decelerated from 1.8% yoy to 1.7% yoy. Domestic products prices was unchanged at 2.3% yoy. Imported products prices dropped further from -0.1% yoy to -0.6% yoy.

Full Swiss CPI release here.

Markets

Bunds and US Treasuries parted ways yesterday. Yields on the latter surged more than 8 bps at the long end of the curve. That had little to do with the Fitch rating downgrade, though it was related to one reasons for the decision: the deterioration fiscal situation. US Treasury for the first time in over two years raised the amount on offer for several tenors in the August-October quarter. Next week’s mid-month refinancing operation for example will be $7bn higher ($103bn in total) than in the first month of the previous quarter. In addition, shortly before the announcement ADP’s employment report crushed a 190k consensus by adding 324k new jobs in July. Meanwhile, market talk is moving from a “soft landing” to “no landing” at all in the US. German yields, by contrast, fell 1.8 (30-y) to 6 (2-y) bps. They did close well off intraday lows though, especially longer maturities. Yield differentials as well as a sour equity mood (EuroStoxx50 -1.6%, Wall Street ended more than 2% lower in case of the Nasdaq) favoured the US dollar over the euro. EUR/USD extended its recent correction towards 1.094 after having traded north of 1.10 in earlier dealings. The trade-weighted dollar index closed around 102.59, the highest since early July. Risk-off also supported the yen while currencies with a riskier profile (AUD, NZD, SEK, NOK) suffered. Sterling too declined but managed a close off the lows. EUR/GBP ended north of 0.86.

The Bank of Japan for a second time this week intervened with an unscheduled bond buying programme. That happened as the 10-y moved beyond 0.65%. It is still trading around that level currently. The yen loses marginally even as sentiment is mixed, at best. Japan underperforms (-1.3%). EUR/USD stabilizes around yesterday’s closing levels. US yields extend their ascent. The 10-y yield tested 4.09% resistance yesterday but is now moving past that important level. Apart from intermediate resistance at 4.24%, it was the final hurdle before a return to the 4.33% cycle high. The drop in core bonds isn’t a UST exclusive. Bund yields are set for a higher open as well. 2.55-2.58% serves as an important level in the 10-y yield. Today’s economic calendar could be of importance in sustaining that move as well as the recent dollar comeback. The US services ISM is expected to ease from 53.9 to 53. Strong demand (new orders in June picked up three points) at least suggests no imminent collapse in activity. The Bank of England also convenes today. The jury is still out whether the central bank will make use of one lower-than-expected June CPI reading to ease the tightening pace from 50 to 25 bps. There is also growing talk of a potential speedier rundown of the balance sheet. If the BoE opts for that, it will probably complement a 25 bps rate hike (to 5.25%).

News and views

Brazil’s central bank declared the fight against inflation over by cutting the policy rate yesterday 50 bps to 13.25%. The dovish shift came as inflation eased from a 12.1% peak in April 2022 to 3.2% in June this year. That’s below this year’s 3.25% target. The steep deceleration was the result of the central bank acting swiftly on the post Covid-19 inflation surge. It started hiking early in 2021. By contrast, the likes of the Fed and ECB only began in March and July 2022. The Banco de Brasil together with other Latin American counterparts were lauded for their quick response of which they are now reaping the benefits. The central bank said that if the scenario evolves as expected, more rate reductions of the same magnitude will follow. Analysts and markets were leaning more towards a 25 bps rate reduction, so there might be some price adjustment in the Brazilian real when market reopens today. USD/BRL started bottoming out end of July after hitting the 4.70 barrier. A first meaningful resistance pops up at 4.90.

Spain’s ERC leader Aragones said the socialist PSOE should not take support from Catalonia’s separatist parties to form a new government for granted. Its his first interview after the July national elections yielded no clear majority for the left nor the right blocs. That made the likes of the ERC and Junts kingmakers in the government formation. ERC supported Sanchez’ PSOE in the last parliament, Junts didn’t. But this time around, Sanchez needs them both. Aragones wants further talks on Catalonia’s political future, cut the region’s contributions to the national public fincanes and to take control of local train services. Junts for its part demands a referendum on independence and amnesty for all separatists facing legal charges related to the failed 2017 independence bid.

Daily Pivots: (S1) 1.3292; (P) 1.3323; (R1) 1.3381; More....

Intraday bias in USD/CAD stays neutral first as range trading continues. As long as 1.3386 resistance holds, further decline is mildly in favor. Below 1.3242 minor support should resume larger decline through 1.3091 low. Nevertheless, on the upside, firm break of 1.3386 will indicate near term reversal and turn outlook bullish.

In the bigger picture, price actions from 1.3976 are viewed as a correction to up trend from 1.2005 (2021 low) only. But even so, deeper decline is expected as long as 1.3386 resistance holds. Further fall could be seen to 61.8% retracement of 1.2005 to 1.3976 at 1.2758. Meanwhile, break of 1.3386 will be a sign that the correction has completed and bring stronger rally back to retest 1.3976.

Daily Pivots: (S1) 0.6500; (P) 0.6565; (R1) 0.6603; More...

Intraday bias in AUD/USD remains on the downside for the moment. Rebound from 0.6457 could have completed at 0.6894 already. Deeper fall would be seen to retest 0.6457 first. Break there will resume the fall from 0.7156 to 100% projection of 0.7156 to 0.6457 from 0.6894 at 0.6195. On the upside, above 0.6628 minor resistance will turn intraday bias neutral first.

In the bigger picture, outlook is mixed for now as AUD/USD failed to sustain above both 55 D EMA (now at 0.6701) and 55 W EMA (now at 0.6784). On the upside, break of 0.65898 resistance will solidify the case that down trend from 0.8006 (2021 high) has already completed, and target 0.7156 resistance for confirmation. However, break of 0.6457 will likely resume the down trend through 0.6169 (2022 low).

Daily Pivots: (S1) 142.56; (P) 143.01; (R1) 143.79; More...

Intraday bias in USD/JPY remains on the upside as rise from 137.22 is in progress. Further rally should be seen to retest 145.60 resistance first. Decisive break there will resume whole rally from 172.20. Next target is 61.8% projection of 129.62 to 145.06 from 137.22 at 146.76. On the downside, below 141.99 minor support will mix up the outlook and turn intraday bias neutral first.

In the bigger picture, overall price actions from 151.93 (2022 high) are views as a corrective pattern. Rise from 127.20 is seen as the second leg of the pattern and could still be in progress. But even in case of extended rise, strong resistance should be seen from 151.93 to limit upside. Meanwhile, break of 137.22 support should confirm the start of the third leg to 127.20 (2023 low) and below.

Daily Pivots: (S1) 0.8727; (P) 0.8766; (R1) 0.8814; More....

Intraday bias in USD/CHF stays on the upside as rise from 0.8551 is in progress. Rejection by 0.8818 support turned resistance will maintain near term bearishness. Further break of 0.8863 minor support will turn bias back to the downside for retesting 0.8551. Nevertheless, decisive break of 0.8818 will carry larger bullish implication, and target 0.9146 cluster resistance

In the bigger picture, down trend from 1.0146 is seen as in progress as long as 0.8188 support turned resistance holds. Next target is 61.8% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.8317. However, sustained break of 0.8818 should indicate medium term bottoming, and bring stronger rise back to 0.9146 cluster resistance (38.2% retracement of 1.0146 to 0.8551 at 0.9160), even as a correction.

Daily Pivots: (S1) 1.2659; (P) 1.2732; (R1) 1.2784; More...

Intraday bias in GBP/USD stays on the downside as fall from 1.3141 is in progress. Deeper decline would be seen to 38.2% retracement of 1.1801 to 1.3141 at 1.2629, as a correction to rise from 1.1801. On the upside, above 1.2886 minor resistance will turn bias back to the upside for stronger rebound.

In the bigger picture, as long as 1.2678 resistance turned support holds, rise from 1.0351 (2022 low) is expected to continue through 1.3141 high at a later stage. However, sustained break of 1.2678 will argue that it's at least correcting this rally, with risk of bearish reversal. Deeper fall would be seen to 1.2306 support next.