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The British pound has moved to a fresh monthly trading high against the US dollar after the UK economy posted better than expected wage earnings data this morning. As the GBPUSD pair rises, the MACD indicator continues to highlight price divergence across the lower time frames. Buyers will likely target the 1.3100 resistance level, while sellers will look to move price below the 1.3040 support level.

The GBPUSD pair is only bullish while trading above the 1.3040 level, key resistance is found at the 1.3100 and 1.3145 levels.

If the GBPUSD pair moves below the 1.3040 level, price may correct back towards the 1.3000 and 1.2955 support levels.

The US dollar has broken to the upside against the Japanese yen currency on Tuesday, as risk-on trading sentiment returns to broader financial markets. The USDJPY pair remains intraday bullish while trading above the 111.37 level and may test towards the peaks of September. The four-hour time frame also supports further gains as the MACD indicator continues to trend higher.

The USDJPY pair is only intraday bullish while trading above the 111.37 level, key resistance is found at the 111.75 and 112.05 levels.

If the USDJPY pair moves below the 111.37 level, key support is found at the 111.25 and 110.73 levels.

German Finance Minister Olaf Scholz urged EU to make progress on banking union this year. He said in the Bundestag lower house of parliament that "we must take action so that we can act in a new crisis - not everything has been done." Scholz also said Germany and France laid a foundation with an agreement in Meseberg in June. And so, "we can quickly take the last steps to make Europe stable and to equip ourselves for the next crisis".

He added that 'have the task of completing a banking union and we should fulfil the most important steps this year." Under the current EU plan, the Single Resolution Board will be given a clearer mandate to set the level of capital buffers that banks should hold against the risk of failure. However, another pillar of the union, a common bank deposit insurance scheme, is not agreed upon yet.

Tuesday September 11: Five things the markets are talking about

The three T's – trade, tariffs and Trump are driving capital market asset prices in September.

Today, thus far, is a good feel-day as market sentiment seems to be improving, supported by renewed optimism that the U.K can cut a Brexit deal in a timely fashion. This has pushed sterling (£1.3067) to a five-week high overnight.

However, be forewarned, emerging markets and recent commodity price weakness provides enough reasons for caution. This market is still waiting for the “other shoe to drop” in the Sino-U.S trade dispute after President Trump signalled late last week that he is ready to impose tariffs on even more goods.

This Thursday, the European Central Bank (ECB) is expected to deliver caution regarding concerns about protectionism and turmoil in EM at its monetary policy meeting. Draghi is likely to continue stressing that the eurozone's economic recovery remains “robust” and that policy makers are confident of a recovery in inflation, which will keep its monetary ‘normalization' intact.

Dollar ‘bulls' will be looking to strong data due later in the week for support – U.S core-CPI release on Thursday and retail sales on Friday are likely to come in strong and boost the buck.

In commodities, WTI crude speculators are looking to Hurricane Florence approaching the U.S east cost – will there be much disruption in supplies? Crude ‘bulls' are pushing WTI prices towards $68 bp.

1. Global equities mixed results

European stocks and U.S equity futures are a tad lower after a mixed session in Asia.

In Japan, equities had their best session in a month overnight, with exporters lifted by the yen weaker outright (¥111.48) and tech stocks boosted by gains stateside yesterday. The Nikkei ended the day +1.3% higher, while the broader Topix closed +0.67% stronger.

Down-under, Aussie shares rallied overnight, ending its eight consecutive days of losses, supported by financials and energy stocks. The S&P/ASX 200 index rose +0.6% at the close. In S. Korea, the Kospi weakened, tracking losses from China as Sino-U.S tariff worries continue to linger. At the close, the index lost -0.24%.

In Hong Kong, shares fell into bear market territory on Tuesday as the Hang Seng index ended atop of its 14-month low, on fears of further escalation in the U.S-China trade war. The Hang Seng index ended down -0.72%, while the China Enterprises Index lost -0.96%.

In China, shares hit a 31-month closing low on trade worries. At the close, the Shanghai Composite index was down -0.2%, while he blue-chip CSI300 index was down -0.18%.

In Europe, regional bourses trade lower across the board as the downtrend continues tracking U.S futures lower.

U.S stocks are set to open in the ‘red' (-0.2%).

Indices: Stoxx600 -0.5% at 373.6, FTSE -0.6% 7233, DAX -0.9% at 11879, CAC-40 -0.2% at 5257, IBEX-35 -0.3% at 9240, FTSE MIB -0.7% at 20775, SMI -0.1% at 8919, S&P 500 Futures -0.2%

2. Oil prices climb ahead of U.S. sanctions on Iran, gold lower

Oil prices have rallied overnight as U.S sanctions begin to squeeze Iranian crude exports. This is tightening global supply despite U.S encouraging other producers to increase output.

Note: It's not in the U.S's best interest to push up oil prices – it could depress economic activity or even triggers a slowdown in global growth.

Brent crude oil is up +50c at +$77.87 a barrel, while U.S light crude is +15c higher at +$67.69.

Note: Russia, the U.S and Saudi Arabia are the world's three biggest oil producers, delivering around a third of the world's almost +100M bpd of daily crude consumption.

U.S Energy Secretary Rick Perry met the Saudi's yesterday, and will meet the Russians on Thursday to encourages big oil-producing countries to keep output high.

Note: Before the year-end, OPEC and allies are to discuss cooperation post-2018 in Algeria. OPEC has the tools to use “quotas” if the market requires it. However, OPEC believes cooperation can continue without output quotas in 2019.

Ahead of the U.S open, gold prices are little changed, mostly capped by U.S rate hike concerns, while trade tensions weigh on the ‘yellow' metal. Spot gold is unchanged at +$1,195.79 an ounce, while U.S gold futures have rallied +0.1% to +$1,201.60.

Note: After last week's strong U.S payrolls, fixed income dealers are pricing in another Fed rate hike for September – it would be the third hike in 2018, with expectations of one rise more in December.

3. German Bund yields at five-week highs, Italian yields plummet

German 10-year Bund yields have backed up to their highest level in five-weeks overnight, as growing hopes of fiscal restraint in Italy and a Brexit deal being completed in the coming weeks.

Italy's BTP yields fell for a seventh consecutive session, with long-dated yields hitting their lowest level since late July. Comments from Italian politicians this month that E.U fiscal rules would be respected in next year's budget have supported the markets demand for Italian debt.

Note: Italy's 10-year BTP yield fell to its lowest in more than six weeks at +2.7%, while Germany's Bund yield rose more than +2 bps to a five-week high at +0.423% – the spread is +225 bps, its tightest since the start of August.

Elsewhere, the yield on U.S 10-year notes has backed up +1 bps to +2.95%, the highest in almost five-weeks. In the U.K, the 10-year Gilt yield increased +2 bps to +1.493%, the highest in 16-weeks.

4. Dollar falls, but is looking to regain momentum

The dollar trades lower ahead of the open, with EUR/USD up +0.3% at €1.1626, GBP at £1.3040 and JPY at ¥111.35, but strong U.S data, due later in the week, could give the ‘buck' some needed TLC – U.S core-CPI figures on Thursday and U.S retail sales on Friday are likely to come in strong.

The EUR has found support as easing concerns about Italian debt boosted the single currency for a second day, while broader moves in forex markets remain contained until there is further clarity in the Sino-U.S. trade dispute.

GBP (£1.3040) gets another Brexit boost. Market headlines appear more positive as the E.U seems more willing to compromise to achieve an agreement with the U.K. Also, domestic wage data beat expectations (see below) and justified the recent BoE rate hike.

The TRY ($6.4783) is little changed as investors wait for the Central Bank of the Republic of Turkey (CBRT) rate decision on Thursday. Current consensus is looking for the CB to hike 1-week repo auction rate by +325 bps to +21.00%.

5. U.K jobs and wage data

U.K data this morning provided the pound with some support. Stronger-than-expected U.K jobs data, pushed EUR/GBP briefly to a five-week low of €0.8887.

U.K. earnings for the three-months to July rose by +2.9%, up from a +2.7% increase in the previous period and above the market consensus of a +2.8%.

Other data showed that the U.K unemployment rate stayed flat at +4% in July vs. expectations of a +4.1% rise.

The Bank of England (BoE) meets Thursday and further proof of rising U.K wage growth may concern Governor Carney and company, however, ongoing Brexit uncertainty is expected to weaken any chances of another rate rise any time soon.

FTSE 100: Sell off may lead to reversal

The chart below on a daily time-frame shows the index FTSE 100 trading below all moving averages. Additionally, it is displayed that a steep sell off has taken place in the markets where the price has been trading towards the support zone (colored in green) which is priced at $7178.98. The previous time the price had touched this level dates back to the 28th of May. This does enforce a bearish sentiment.

However, due to the volume and force of the sell off, the markets may see a reversal. Moreover, if this does take place, then the price may begin to trade towards resistance (colored in red) which is priced at $7648.46.

The Balance of Power chart below indicates that the bears are in full dominance at present. However, if the reversal takes place, then this will allow the bulls to control the market.

Major support: 7178.98
Major resistance: 7648.46

German DAX: Bears hold dominance

The chart below on a daily time-frame shows the German index DAX trading below the moving averages which shows a bearish sentiment. Additionally, DAX is trading in a down trend which emphasizes the strength of the bears. Moreover, it can be displayed below that the price is trading substantially close to the down line of the downward channel and is driving towards the support region (colored in green) which is priced at $11,688.05. The current resistance zone (colored in red) which is priced at $12,871.08 may not have the bulls strength as of yet to move the price up to this level.

However, if the index gradually increases in price it may increase the possibilities of doing so.

The Balance of Power chart below shows the bears to hold full dominance and price control over the market for the German DAX. It may be the case that for now the price will possibly stay on the bears side.

Major support: 11,688.05
Major resistance: 12,873.08

Golds weakness against the dollar seems to continue. The expectations of gold declining are still in the air while factors supporting the greenback are present. The non-farm data coming better than expected gives incentive to the fed to increase interest rates in full force. Moreover, the rate hikes have been scheduled to take place this month where it is definite that it will be happening. This will push gold a lot further down while it falls victim to the dollar. Non-yielding bullion shows no advantage to investors in times of increased interest rates.

Trumps plans to impose tariffs on all Chinese imports has allowed the dollar to gain strength from a secondary source. The consequences of this are grave for gold. As, while the dollar sees increases on a modestly continuous basis it makes the precious metal more expensive for investors that do not hold the greenback as a currency. More individuals invest into the dollar because of these trade tariffs with belief that the U.S. has the least to lose in a trade war.

However, China has not yet retaliated to the extents that the opposing party has. Therefore, it is all but a waiting game, if the trade war escalates to the point where both parties make strong drastic decisions then we may even see a slowdown in economic growth. This would affect everything.

The precious metal has seen declines of approximately 12.6 percent from a high in April. This is because in current circumstances gold has lost sight of being seen as a safe-haven while dollar takes the lead.

Oil prices continue to increase while U.S. seeks to cover losses in supply. Moreover, the fatalities of a decline in supply could continue to rise prices if a solution is not found. On the other hand, it seems the U.S. understands this. Therefore, Russia, U.S. and Saudi Arabia being the three biggest oil producers by a mile off are believed to be attempting to reimburse the supply loss from Iran. Additionally, the oil produced by all 3 countries together has rose by 3.8 million barrels per day since September 2014.

Whereas, Iran was only able to reach a peak of 3 million barrels per day in the past 3 years. In addition, this brings some peace of mind, as it shows that together the 3 countries united together may be able to fill in the gaps that Iran once claimed. However, the size of positive impact from this solution will only unfold in November when the sanctions are in full force.

It has been known that Washington has begun to pressurize South Korea and Japan to cut off ties with Iran which will in turn lead the two countries to result to imports of oil from the U.S. Moreover, India had previously decided to resume trade. However, as of now it is believed that they are cooperating with the U.S..

EUR/USD

Current level - 1.1630

The failure at 1.1530 led to a new upswing, which is currently struggling below 1.1650 resistance. It is unclear if the general uptrend for 1.1830 is renewed or the consolidation pattern below 1.1740 is still underway. The hurdle at 1.1650 is not a  crucial one i that regard.

USD/JPY

Current level - 111.47

The outlook remains positive above 110.70, for a rise towards 111.80.

GBP/USD

Current level - 1.3055

The reversal above 1.2870 signals a finale of the consolidation pattern below 1.3040 and the bias is positive, for a rise towards 1.3250.

The European Single Currency appreciated 0.59% since Monday's trading session. The currency rate passed the simple moving averages and was located at the 1.1620 mark during Tuesday morning hours.

Most likely, the rate should be stopped by the weekly R1 at the 1.1632 mark and the upper boundary of the descending medium channel to fit back into the pattern during Tuesday's session.

In another scenario, the European Single Currency might take the support of the simple moving averages, which will push the rate to surge upwards to break the resistance levels of the weekly R1 and upper boundary of the medium pattern.

The British pound surged 1.08 % against the US Dollar due to fundamentals on Monday. The rate ignored most technical levels, but the weekly R1 at the 1.3040 mark together with the 100.00% Fibo stopped and held the rate at the 1.3040 level for the rest of Monday and Tuesday's midnight hours.

In regards to the near future, the rate should be stopped by the upper boundary of the ascending medium pattern to retrace back into the pattern. The SMAs will try to catch the rate during Tuesday's session.

On the other hand, the rate may use the support of the weekly R1 and the support of the SMAs, which might push the rate to surge even higher to break the pattern.

The US Dollar appreciated 0.53% against the Japanese Yen since Monday's session. The currency exchange was piercing the medium ascending pattern during Tuesday's midnight hours.

In regards to the near term future, it can be expected that the trend line will hold its ground once more and the rate will decline back down to the strong support cluster near the 111.20 mark, where various SMAs and a Fibonacci retracement level are located at.

On the other hand, if the trend line is broken, expect the pair to easily reach the 111.70 level, where the weekly R1 is located.