Sample Category Title

Pivot (invalidation): 1.1665

Our preference Long positions above 1.1665 with targets at 1.1725 & 1.1750 in extension.

Alternative scenario Below 1.1665 look for further downside with 1.1640 & 1.1620 as targets.

Comment The RSI calls for a new upleg

China Ministry of Commerce issued a brief statement in response to new round of US tariffs. It said "to protect its legitimate rights and interests and order in international free trade, China is left with no choice but to retaliate simultaneously". Also, "the United States insists on increasing tariffs, bringing new uncertainties to bilateral trade negotiations. China hopes the United States would recognize the negative consequences of its actions, and take convincing steps to correct its behavior in a timely manner."

No details are provided today. But based on information released last month, China already has a list of USD 60B of US goods to tariff.

Here is the link to MOFCOM's statement in simplified Chinese.

Now the ball is in the US court again. Trump pledged to move on with tariffs on USD 267B in Chinese goods if China retaliates on the tariffs announced yesterday. Keeping going POTUS!

Daily Pivots: (S1) 146.50; (P) 146.99; (R1) 147.67; More...

Intraday bias in GBP/JPY remains on the upside at this point. Current rise from 139.88 should target 149.50 resistance. Decisive break there will confirm our bullish view that decline from 156.59 has completed at 139.88. On the downside, below 146.24 minor support will turn intraday bias neutral and bring retreat. But further rally will remain in favor as long as 142.58 support holds.

In the bigger picture, as long as 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) holds, the decline from 156.69 is seen as corrective move. That is, rise from 122.36 (2016 low), is still expected to extend higher through 156.69. However, sustained break of 139.29/47 should confirm medium term reversal and turn outlook bearish.

GBPUSD recorded a stunning rally after it jumped above the 23.6% Fibonacci retracement level of the downleg from 1.4375 to 1.2660, around 1.3066, posting a fresh seven-week high of 1.3169. The buying interest following the rebound on the 1.2660 support level has shifted the bearish outlook to a neutral one. However, the 20-day simple moving average (SMA) created a bullish crossover with the 40-day SMA in the near-term, indicating a continuation of the upside correction move.

The momentum indicators are supportive of the bullish movement, with the RSI approaching the overbought zone and the MACD strengthening its movement above the trigger and zero lines.

If the bulls continue to have the upper hand then the expectation is a touch of the 38.2% Fibonacci level of 1.3315, before hitting the strong resistance level of 1.3370, identified by the high on July 9. Such a break would confirm a forthcoming higher high on the daily chart and send prices towards the 1.3475 barrier, taken from the high on June 7.

On the other side, a clear dip below the 1.3040 key level would bring the pair back and may set the stage for declines until the moving averages’ bullish cross at 1.2945. Further losses could drive cable down until the 1.2780 support, achieved on September 5.

To conclude, having a look at the bigger view, sterling has been developing in a bearish structure against the greenback since April and it seems ready for a significant upside retracement. However, it needs first to surpass the 1.3370 hurdle before switching to a possible bullish bias.

The dollar accelerated higher in early European trading, extending bounce from Asian low at 111.66.

Fresh advance hit new two-month high at 112.27 and pressuring Fibo barrier at 112.37 (76.4% retracement of 113.17/109.77.

Announcement that the US would put new tariffs on Chinese good revived risk appetite, increasing pressure on safe-haven yen, which fell across the board, in early Tuesday’s trading. However, risk of stall exists, as dollar stands at the back foot against other majors and studies also warn that fresh bulls could run out of steam.

Daily slow stochastic moves sideways in overbought territory, while momentum heads south after forming bear-cross.

Solid supports lay at 111.87/75 zone (broken Fibo 61.8%/former highs/rising 5SMA), ahead of rising 10SMA (111.50, loss of which would signal reversal. Bullish scenario needs clear break above 112.37 Fibo barrier to signal bullish continuation and unmask key resistance at 113.17 (19 July high).

Res: 112.27, 112.37, 112.62, 112.92
Sup: 111.87, 111.75, 111.50, 111.30

The euro continues to hold around the 1.1700 level against the greenback, following a strong move lower in the US dollar on Monday after more weak economic data from the American economy. EURUSD buyers need to break the 1.1730 level in the short-term or face a further technical rejection back towards the 1.1650 level. Euro traders now await a scheduled speech from European Central Bank President Mario Draghi.

The EURUSD pair is bullish while trading above the 1.1681 level, key resistance is found at the 1.1730 and 1.1750 levels.

If the EURUSD pair moves below the 1.1681 level, key technical support is found at 1.1650 and 1.1617 levels.

The British pound has risen to its highest trading level in six-weeks against the US dollar after positive Brexit headlines, with EU officials noting that they have agreed to some parts of British PM Theresa May’s Chequers Deal. The bullish inverse head and shoulders pattern continues to unfold across the lower timeframes, with the full projection of the pattern extending towards the 1.3300 resistance level.

The GBPUSD pair is strongly bullish while trading above the 1.3100 level, key support is found at the 1.3205 and 1.3300 levels.

If the GBPUSD pair moves below the 1.3100 level, key support is now found at the 1.3060 and 1.3000 levels.

Asian markets fell today after Donald Trump put new tariffs on Chinese goods. The 10% tariff will apply to Chinese goods worth more than $200 billion. The tariff will then rise to 20% in 2019 if the US does not make a deal with China. In return, China said that it too will announce fresh tariffs on US goods. The US markets ended the day lower yesterday, with the S&P 500 having its worst day in more than a month.

After initially falling, the Australian dollar rose after positive housing data and the RBA minutes. The house price index for the second quarter was minus 0.7%, which was better than the expected minus 7.0%. This rate was unchanged from the first quarter’s decline. The index measures the change in house prices in Australia’s eight capital cities. This year, a decline in house prices in Sydney and Melbourne has led to the index being in the negative territory. The AUS200 too rose after the data.

The RBA minutes for the previous meeting provided a catalyst to the Australian dollar and the AUS200. The minutes noted that the economy was doing well, with the impacts of the recent drought being well mitigated. They also noted that while there was no strong case for a near-term adjustment in monetary policy when it happens, it will be most likely to the upside.

EUR/USD

The EUR/USD pair is little moved from yesterday’s close of 1.1677. This level is between the range of 1.1522 and 1.1734 where the pair has been for the past week. It is in line with the 14 and 21-day EMA on the 30-minute chart and between the 61.8% and 100% Fibonacci Retracement level. Today, with no major economic data scheduled, the pair is likely to continue trading between this range.

AUD/USD

The AUD/USD pair started falling in February as shown below. Since then, it has fallen from a high of 0.8930 to a low of 0.7080. It is now trading at 0.7175, which is slightly higher than yesterday’s close. This price is in line with the 21 and 14-day EMA with the RSI at 51 and declining. It is also lower than the 100-day EMA. Even with today’s positive economic data, the downward momentum is likely to continue.

AUS200

At the end of last month, the AUS200 index fell sharply from a high of A$6385. It found a floor at A$6095 a week ago. In the past few days, the index has moved higher, establishing higher highs and higher low patterns. It is now trading at A$6159. The current price is at the middle Bollinger Band, heading lower. This is an indication that the index could fall slightly to the lower middle band of A$6125.

Daily Pivots: (S1) 130.17; (P) 130.61; (R1) 131.13; More....

EUR/JPY's break of 131.10 suggests resumption of rise from 124.89. Intraday bias is turned back to the upside for 131.97 resistance and then key fibonacci resistance at 132.56. On the downside, break of 130.09 minor support will turn intraday bias neutral again. But outlook stays cautiously bullish as long as 127.85 support holds.

In the bigger picture, as long as 124.08 key resistance turned support, larger up trend from 109.03 (2016 low) remains in favor to continue. Decisive break of 61.8% retracement of 137.49 to 124.61 at 132.56 will pave the way to retest 137.49 high. However, firm break of 124.08 will argue that whole rise from 109.03 (2016 low) has completed at 137.49. Deeper decline would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90 next.

Rates: US imposes new tariffs; markets react calm

US President Trump announced a 10% tariff on $200bn of Chinese goods. Markets react subdued as the move was anticipated and discounted. The US 10-yr yield remains near 3% resistance. Today's eco calendar is thin. Investors will further digest Trump's action and await a Chinese response. We expect technically-driven trading.

Currencies: US dollar doesn't profit from an 'escalation' in US/China trade war.

Yesterday, EUR/USD held remarkably strong even as markets were preparing for a further escalation in the US-China trade war. Overnight the US indeed imposed additional tariffs. However, the impact on global (FX) trading remains very modest. EUR/USD shows ongoing resilience. The EUR/USD 1.1733/91 resistance remains on the radar

The Sunrise Headlines

• US markets closed yesterday's trading day lower with NASDAQ(-1.43%) underperforming the bunch. Asian equity markets opened mixed this morning, with Japan outperforming. China holds strong despite new tariffs by the US.
• US President Trump has confirmed he will impose a 10% tariff on about $200bn of Chinese imports. He threatened to increase the rate to a 25% tariff by next year if no trade deal was reached. China already vowed to retaliate.
• South Korean leader Moon Jae-in has arrived in Pyongyang this morning to meet North Korean leader Kim Jong Un for a three-day summit. The pair will discuss Korean relationships and Kim's vow to the US for denuclearization.
• Argentina's Minister of Treasury has presented his plan in Congress to achieve a fiscal balance next year with the 2019 budget. In the meantime, Argentina is making progress with the IMF to strengthen its $50bn credit line.
• Hilary Benn, head of UK parliament's Brexit committee, does not agree with Prime Minister May that the only alternative for her Chequers plan is that the UK will leave without a deal. She said the government should have a back-up.
• Canadian Foreign Minister Freeland has said she will return to Washington this week to start a new round of trade talks with the US. They are running out of time to negotiate a new Nafta deal, as the US demands a deal by October 1st.
• Today's US eco calendar is again very thin with no basically no eco data. In Paris, ECB governor Draghi is expected to speech, as well as his colleagues Villeroy and Nouy.

Currencies: US Dollar Doesn't Profit From An 'Escalation' In US/China Trade War.

USD doesn't gain as trade war moves to next stage

On Monday, markets were looking out for the US announcing a new wave of tariffs on Chinese imports. However, this potential escalation in the trade war had only a modest impact on global markets, in particular on the dollar. An EUR/USD downside test was rejected and the pair started a steady rebound from 1.1620/30 to the high 1.16 area. European equities also largely ignored the trade risk. Ongoing positive headlines from Italy proably supported the outperformance of European assets. At the same time, the decline of the tradeweighted USD also suggested dollar softness. The new tariffs were 'preannounced' (Kudlow) during the US session and officially announced overnight. EUR/USD closed the session at 1.1683 (from 1.1625). USD/JPY finished at 111.85. Overnight, Asian equities are trading mixed. The reaction to the new US tariffs is muted, including on Chinese markets. The dollar remains in the defensive. The trade-weighted dollar hovers near recent lows. EUR/USD is again testing the 1.17 area, confirming yesterday's good performance. USD/JPY stabilizes near 112. This doesn't look like an outright risk-off reaction on FX markets. Most EM currencies also react moderately. USD/CNY is holding recent ranges. There are hardly any data in Europe or in the US today. So, the fall-out from the new US import tariffs will be the major driver for global FX trading. Contrary to what was often the case of late, the dollar apparently tends to become less of a beneficiary of the China-US trade war. The jury is still out, but we are keen to seen the reaction of the dollar in case of Chinese retaliation. It is not sure that this will support the dollar. We tend to become more neutral on EUR/USD in a daily perspective. The 1.1733/50/91 resistance is the first topside reference. A break won't be evident, but we are becoming more alert for a move in that direction.

Yesterday, EUR/GBP trading was mostly driven by technical factors as the news flow on Brexit remained rather mixed/diffuse. Sterling finally gained a few ticks. EUR/GBP closed the session at 0.8878. Today, there are again no important UK eco data. So the sterling trading dynamics could be quite similar to yesterday. Of late, sentiment on sterling turned less negative as markets saw tentative signs of an improvement in the UK-EU negotiatons. For now, we don't expect the move to go very far as long as there is no clear indication that PM May will receive enough political backing within her own party.

EUR/USD: 1.1733/91 resistance remains within reach