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Daily Pivots: (S1) 1.7792; (P) 1.7840; (R1) 1.7892; More...

EUR/AUD is still struggling to sustain below 38.2% retracement of 1.7245 to 1.8155 at 1.7807 and intraday bias stays neutral first. Firm break of 1.7807 will should confirm that whole rise from 1.7245 has completed at 1.8155. Corrective pattern from 1.8554 should then be in its third leg. Further decline should be seen to 61.8% retracement at 1.7593. On the upside, break of 1.7932 resistance will retain near term bullishness and bring retest of 1.8155 resistance instead.

In the bigger picture, price actions from 1.8554 medium term top are seen as a corrective pattern. Such pattern could extend further with another falling leg. But even in that case, downside should be contained by 38.2% retracement of 1.4281 (2022 low) to 1.8554 at 1.6922 to bring rebound. Uptrend from 1.4281 is expected to resume at a later stage.

Daily Pivots: (S1) 0.9313; (P) 0.9338; (R1) 0.9358; More....

Intraday bias in EUR/CHF remains on the downside at this point. Firm break of 0.9317 would resume the decline from 0.9452. That would also solidify the bearish case that corrective pattern from 0.9218 has completed with three waves up to 0.9452 already. Deeper fall should then be seen to 0.9265 support, and then 0.9204 low. On the upside, above 0.9359 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 0.9394 resistance holds, in case of recovery.

In the bigger picture, the down trend from 0.9204 (2018 high) might still be in progress considering that EUR/CHF is staying well inside the long term falling channel. However, with bullish convergence condition in W MACD, downside potential should be limited in case of another fall. Instead, firm break of 0.9660 resistance will be an important sign of medium term bullish trend reversal.

Daily Pivots: (S1) 1.3779; (P) 1.3812; (R1) 1.3836; More...

Intraday bias in USD/CAD is turned neutral again with current retreat. On the upside, firm break of 13.923 resistance will resume whole corrective rebound from 1.3538. However, sustained break of 1.3725 will argue that the rebound has completed at 1.3923, and turn near term outlook bearish.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 1.4017) holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

Daily Pivots: (S1) 0.6559; (P) 0.6579; (R1) 0.6612; More...

Intraday bias in AUD/USD remains on the upside for retesting 0.6624 high. Firm break there will resume larger rally from 0.5913 to 0.6713 fibonacci level. On the downside, below 0.6580 minor support will turn intraday bias neutral first. But risk will stay on the upside as long as 0.6500 support holds, in case of retreat.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).

Daily Pivots: (S1) 147.05; (P) 147.82; (R1) 148.29; More...

Range trading continues in USD/JPY and intraday bias stays neutral. On the downside, break of 146.65 will suggest that fall from 150.90 is resuming. More importantly, sustained trading below 55 D EMA (now at 147.15) will argue that whole rebound from 139.87 has completed with three waves up to 150.90. Deeper decline should then be seen to 142.66 support next. However, break of 149.12 will turn bias back to the upside for retesting 150.90.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Daily Pivots: (S1) 0.7908; (P) 0.7952; (R1) 0.7976; More….

USD/CHF's decline is in progress and intraday bias stays on the downside for retesting 0.7871 low. Firm break there will resume larger down trend. Next target is 61.8% projection of 0.8475 to 0.7871 from 0.8170 at 0.7797. On the upside, above 0.7984 resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 0.8071 resistance holds, in case of recovery.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8475 resistance holds.

Daily Pivots: (S1) 1.3499; (P) 1.3528; (R1) 1.3574; More...

Intraday bias in GBP/USD remains on the upside at this point. Firm break of 1.3594 resistance will resume the rally from 1.3140 and target a retest on 1.3787 high. On the downside, below 1.3480 minor support will turn intraday bias neutral first. But risk will stay on the upside as long as 1.3332 support holds, in case of retreat.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.3132) holds, even in case of deep pullback.

Last night, as widely expected, the French government collapsed after losing a confidence vote. The lower house’s unusual coalition of far-left and far-right deputies rejected the government’s plan to rein in France’s ballooning budget deficit. In his response, the outgoing PM François Bayrou warned: “you can change the government but you can’t change the reality” of rising and more expensive debt. Indeed, France’s 10-year yield, which dipped into negative territory before the pandemic, was trading near 3.6% last week before easing. The spread over German Bunds widened past the 80bp before narrowing again.

The French political deadlock looks set to continue, with both Marine Le Pen and Jean-Luc Mélenchon likely to oppose any successor government. After all, this is the third government change in a year and the fifth PM in less than two years. The question is why French bonds performed relatively well over the past sessions despite the looming collapse. Most likely, the risks were already priced in, and/or investors are betting that France will find a way to finance its deficit before the year-end deadline. Still, as the UK learned under Liz Truss’s mini-budget fiasco, market confidence can evaporate overnight. Today, UK 10-year gilts yield above 4.5% and with unappetizing outlook, leaving little fiscal headroom for Keir Starmer’s government, forcing policy adjustments through higher taxes or lower spending. France could face a similar fate if investors lose faith.

But for now, the market impact seems limited. The Stoxx 600 rose 0.5% yesterday, with the CAC 40 also higher, helped by expectations of lower Fed rates on horizon. European futures point to some downside pressure this morning, but the upbeat sentiment in the euro this morning suggests that the French news are not a big deal - it’s already baked into the market prices. The EURUSD is about to retest the 1.18 psychological resistance and with the French no confidence vote out of the way – with no surprise – the pair could clear resistance and look at the next hurdle: the 1.20 mark.

In the US, investors took weak jobs data as confirmation that the Federal Reserve (Fed) is preparing to cut rates at its next three meetings, with some betting on a 50bp move as early as September. The S&P 500 on Monday consolidated just below record highs, while the 2-year yield fell to its lowest in a year. Still, this week’s inflation data could reinforce or derail those bets. JPMorgan analysts warn of a potential “sell-the-news” reaction to Fed’s upcoming rate cuts and recommend hedging with gold and VIX futures.

Meanwhile Gold continues its rally, supported by central bank buying and demand from investors seeking alternatives to Treasuries. For those who still love Treasuries, softer US yields reduce the opportunity cost of holding gold, reinforcing the golden momentum. The metal is technically overbought, but Goldman Sachs recently noted that if just 1% of privately held Treasuries were reallocated into gold, the price could approach $5,000/oz. Too high? Remember that one Bitcoin is worth more than $111K this morning.

In energy, US crude rebounded yesterday and is extending gains, even after OPEC signaled higher output over the weekend. Many analysts doubt OPEC will engage in a price war: US shale production generally struggles below $60–65/bbl, and several OPEC members are already pumping near maximum capacity. That suggests support for prices in the $60–62pb range, reinforced by a weaker dollar and persistent geopolitical risks, including the no-peace scenario in Ukraine in the near future.

In focus today

In the US, the Bureau of Labor Statistics will publish its preliminary estimate of the annual benchmark revisions for Nonfarm Payrolls at 16CET. The revision affects data from April 2024 to March 2025. We expect a negative revision of -400k jobs.

In France, attention turns to President Macron and his reaction to the collapse of the government. The Elysee Palace has announced that Macron will appoint a new prime minister in the coming days, aligning with our baseline scenario. This eliminates the immediate downside risk of a snap election. However, political uncertainty is expected to persist, as a new government will still have a hard time passing a budget, particularly with significant spending cuts.

Economic and market news

What happened yesterday

In France, PM Francois Bayrou lost a confidence vote yesterday after seeking parliamentary support to reduce the country's debt burden. President Emmanuel Macron plans to appoint a new prime minister in the coming days, but no obvious candidate has emerged who could get parliament's backing for a budget. Bayrou warned that the country is "drowning in debt", but opposition parties continued to rebuff his proposals for spending cuts. The market reaction was muted, with the euro and French bond futures little changed as investors had expected Bayrou's downfall.

In Norway, the general election ended with a majority for the 'red-green' side. This implies that the Labour party will continue as a minority government, seeking support mainly on the red-green side. Even if this could prove challenging, we think the effect on financial markets is negligible, as fiscal policy still will be restricted by the fiscal rule (an oil-adjusted budget deficit limited to 3 % of the Petroleum Fund).

In the euro area, the Sentix investor confidence indicator came in lower than expected at -9.2 (prior: -3.7), signalling a rough start to September for consumer sentiment. The report revealed a drop in the Current Situation Index to -18.8 from -13, while the Expectations Index slipped to 0.8 from 6.0.

In Denmark, foreign trade data showed a 3.3% rise in exports for July, driven by services and goods produced abroad by Danish companies. At the same time, industrial production, excluding pharma, increased modestly and thus continues to recover along the rest of the European manufacturing sector. The outlook remains positive, supported by expected growth in neighbouring countries. However, US demand will be monitored closely as uncertainties persist around items like medicine and wind turbines, as well as the broader economy.

Equities: Equities were mostly higher yesterday, with the Stoxx 600 closing up 0.5% and the S&P 500 rising 0.2%. Just as Friday, lower bond yields explained the strength in equities. Growth stocks and small caps outperformed, led by sectors such as tech and consumer discretionary. Although absolute moves were mild, this was a risk-on session, with global cyclicals outperforming defensives by 1 p.p.

As our readers know, this goes against our expectation of how yields and their impulse on equities would unfold. The weaker-than-expected labor market explains the divergence. While we remain in the positive camp, expecting higher equities, our call was based on accelerating macro data and rising long-end yields. In the short term, this leaves us wrong on the value trade in the equity space.

FI&FX: While political developments in France - and to a minor extent Norway - have caught the headlines market reactions have thus far been very modest. Instead, the big story for rates and FX market has been the continued decline in yields and the bullish flattening of global curves as the steepener trade has lost steam. In both the US and Norway easing bets are on the rise in a week with key data releases ahead of next week's FOMC and Norges Bank meetings. When it comes to currency moves the rally in US fixed income has weighed on the USD with EUR/USD moving back close to 1.18. EUR/NOK and EUR/SEK remain little changed relative to Friday's close.

Daily Pivots: (S1) 1.1723; (P) 1.1745; (R1) 1.1785; More...

EUR/USD's rally continues today and intraday bias stays on the upside for retesting 1.1829. Firm break there will resume larger up trend to 1.1916 projection level. On the downside, below 1.1702 minor support will turn intraday bias neutral first. But risk will stay on the upside as long as 1.1607 support holds, in case of retreat.

In the bigger picture, rise from 0.9534 (2022 low) long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 1.1604 support holds.