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The gold price depreciated 0.58% since Tuesday's trading session. The XAU/USD tried to break the monthly pivot point at 1,196.00 during Wednesday morning hours.

In regards to the near future, the yellow metal will trade horizontally among the monthly PP at the 1,196.00 mark and the lower trend lines of the descending and ascending patterns during next two trading days.

Eventually, the price should get squeezed between the lower trend line of the larger pattern and the pivot point and break out. Watch for that moment.

• NAFTA talks recommence on Wednesday as Trump seeks pre-midterm victory;
• Investors prepare for new Chinese tariffs this week;
• New book another embarrassment for the US President;
• BoC seen holding steady on rates this month.

As we head into the business end of the week, markets are trading with a slightly negative tone as traders turn their attention back to NAFTA talks and a potential announcement on Chinese tariffs.

Canada and the US are set to resume talks on Wednesday in an effort to bridge the divides that still exist on NAFTA and prevent the 24-year old deal being terminated by President Donald Trump, as he has threatened to do if the renegotiation isn’t successful. The two sides had hoped to come to an agreement by the end of last week, handing a big victory to Trump ahead of the mid-terms as he seeks the backing of the American people for his hard-line approach to trade talks.

Trump has threatened to tear up the agreement and replace it with a bilateral deal with Mexico is Canada doesn’t agree to the concessions that the US is demanding, which would likely be damaging for both countries should Congress support the decision, but prove to everyone else that he isn’t bluffing. That obviously isn’t the desirable outcome but as long as others believe it’s on the table, he may well draw at least some of the concessions he’s looking for.

Trump could also announce that the US will impose 25% tariffs on another $200 billion of Chinese imports over the next day or two, a move that has been criticized by many but seen by the President as being necessary to address the deficit problem that has existed for years. Trump may have been aiming to get NAFTA over the line ahead of the mid-terms but I think he’s in this one for the long run and the Chinese don’t appear to be in any mood to back down, even if they aren’t able to respond with the same volume of tariffs.

The trade conflict between the two largest economies has been a primary reason behind the markets struggling to make major gains this year, despite companies reporting more than 20% earnings growth. Investors are clearly concerned about the economic downfall from engaging in a long-term trade war with China and others which has stalled the rally this year. That said, the S&P 500 is trading back at all-time highs despite the correction earlier in the year so I doubt Trump is too concerned at the moment. A repeat of the sell-off earlier this year and to a greater extend may get his attention though.

Trump will be more concerned with other stories circulating around the White House right now, with a new book from journalist Bob Woodward attracting plenty of attention right now and filling the Twitter feed of the President. While the so-far reported stories are more humiliating for the President at the moment, rather than being potentially damaging – as in the case of the Mueller inquiry – it does just draw more negative attention to the White House and Trump and should more significant stories emerge, could prove costly further down the line.

On the economic side, traders will be paying close attention to the data heading into the end of the week, with the jobs report on Friday being the standout release. Today though it’s the Canadian rate decision that will be of most interest, with the Bank of Canada seen holding at 1.5% having already hiked twice this year, the most recent coming at the last meeting in July.

WTI oil price stands in red and below thin daily cloud, following previous day’s bearish close after bulls were strongly rejected at $71.38 and subsequent quick pullback returned and closed below $70 handle.

Concerns about negative impact from hurricane at US Gulf coast kept oil price well supported on Tuesday, however, bulls quickly lost traction after hurricane turned to tropical storm and had lower impact on oil infrastructure in the Gulf of Mexico than initially estimated.

Quick reversal weakened oil’s near-term techs, turning focus lower, as momentum weakens on daily chart and supports scenario.

Bears eye pivotal support at $68.73 (Fibo 38.2% of $64.43/$71.38) loss of which would generate fresh bearish signal for deeper pullback from $71.38 spike high.

Negative near-term tone could persist while the price remains below daily cloud.

Releases of US crude inventories (API report will be released later today and EIA report on Thursday) would generate fresh direction signals.

Res: 69.46, 70.00, 70.48, 71.17
Sup: 68.96, 68.73, 67.91, 67.08

Notes/Observations

• September carrying on the trends of August
• Trade concerns continue to simmer and erode risk appetite emerging market currencies continue to slide
• NAFTA talks restart in Washington on Wed
• Italian official turning more conciliatory on 2019 budget and following EU rules
• European Major Service PMI data mixed (Beats: UK, Spain, Russia; Misses: Germany, France, Italy, South Africa; In-line: Euro Zone)

Asia:

• Philippines Aug CPI Y/Y: 6.4% v 5.9%e
• Australia Q2 GDP Q/Q: 0.9% v 0.7%e; Y/Y: 3.4% v 2.8%e (fastest annual pace in 4 years)
• China Aug Caixin Services PMI: 51.5 v 52.6e (10-month low)
• BoJ said to believe its policy tweaks were working and satisfied with the yield range. Would need to see the 10-year JGB yield test 0.20% before any change
• *Reminder: The public comment period related to the US’ proposed tariffs on $200B in China goods due to end on Sept 6th (Thursday).

Europe:

• EU legislator suggests EU could adjust the Irish border backstop in order to get UK approval in Brexit negotiations
• Germany Chancellor Merkel stated that she aimed to come to agreement with UK on Brexit; Britain can't enjoy same rights as EU members post-exit
• German Finance Ministry reportedly set to drop plan to tax internet companies

Americas:

• Canada PM Trudeau: pleased with progress in NAFTA talks over autos; any deal must include Chapter 19 dispute resolution. Would not sign NAFTA deal that was not beneficial for Canada and that no agreement was better than a bad agreement

Energy:

• Saudi Arabia said to be seeking to keep oil prices in the $70-80/bbl range

Economic Data:

• (IN) India Aug Services PMI: 51.5 v 54.2 prior (3rd month of expansion); Composite PMI: 51.9 v 54.1 prior
• (IR) Ireland Aug Services PMI: 58.0 v 57.4 prior; Composite PMI: 58.4 v 56.8 prior
• (NO) Norway Q2 Current Account (NOK): 80.9B v 75.1B prior
• (RU) Russia Aug Services PMI: 53.3 v 52.4e (31st month of expansion); Composite PMI: 52.1 v 51.7 prior
• (SE) Sweden Aug Services PMI: 57.1 v 59.0 prior
• (MY) Malaysia Central Bank (BNM) left the Overnight Policy Rate unchanged at 3.25% (as expected)
• (CZ) Czech July Retail Sales Y/Y: 7.0% v 5.9%e, Retail Sales ex Auto Y/Y: 5.6% v 5.6%e
• (HU) Hungary Q2 Final GDP Q/Q: 1.0% v 0.9%e; Y/Y: 4.8% v 4.6%e
• (HU) Hungary July Retail Sales Y/Y: 5.3% v 6.9%e
• (ZA) South Africa Aug PMI (Whole Economy): 47.2 v 49.2e (2nd straight contraction and lowest since March 2016)
• (ES) Spain Aug Services PMI: 52.7 v 52.0e (57th month of expansion); Composite PMI: # v 52.4e
• (SE) Sweden July Private Sector Production M/M: -0.9% v -0.3%e; Y/Y: 1.8% v 3.5%e
• (SE) Sweden July Industrial Orders M/M: +9.8% v -5.1% prior; Y/Y: +9.4% v -2.3% prior
• (SE) Sweden July Industry Production Value Y/Y: 2.2% v 5.3% prior, Service Production Value Y/Y: 2.6% v 4.3% prior
• (IT) Italy Aug Services PMI: 52.6 v 53.1e (26th month of expansion); Composite PMI: 51.7 v 52.2e
• (FR) France Aug Final Services PMI: 55.4 v 55.7e (confirmed 26th month of expansion), Composite PMI: 54.9 v 55.1e
• (DE) Germany Aug Final Services PMI: 55.0 v 55.2e (confirms 62nd month of expansion), Composite PMI: 55.6 v 55.7e
• (TW) Taiwan Aug CPI Y/Y: 1.5% v 1.8%e; CPI Core Y/Y: 1.4% v 1.6%e, WPI Y/Y: 6.8% v 7.1% prior
• (EU) Euro Zone Aug Final Services PMI: 54.4 v 54.4e (confirms 62nd month of expansion), Composite PMI: 54.5 v 54.4e
• (UK) Aug New Car Registrations Y/Y: 23.1% v 1.2% prior
• (TW) Taiwan Aug Foreign Reserves: $459.9B v $458.5B prior
• (UK) Aug Services PMI: 54.3 v 53.9e; Composite PMI: 54.2 v 54.0e
• (UK) Aug Official Reserves Changes: $0.4B v $0.6B prior
• (EU) Euro Zone July Retail Sales M/M: -0.2% v -0.1%e; Y/Y: 1.1% v 1.3%e

Fixed Income Issuance:

• (DE) Denmark sold total DKK2.56B in 2023 and 2027 DGB bonds
• (SE) Sweden sold total SEK1.5B vs. 1.5B indicated in 2028 and 2029 bonds
• (VN) Vietnam sold total VND3.65T in 5-year, 10-year, 15-year and 20-year bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.7% at 377.0, FTSE -0.4% 7426, DAX -0.7% at 12118, CAC-40 -1.2% at 5279, IBEX-35 -0.7% at 9315, FTSE MIB -0.1% at 20580, SMI -0.8% at 8880, S&P 500 Futures -0.3%]

Market Focal Points/Key Themes:

• European Indices trade lower across the board continuing on from weakness seen yesterday following a weaker session in the US and Asia overnight and further weakness in US futures.
• The French CAC underperforms on a lower revised PMI reading and weakness in Oil giant Total.
• On the earnings front Bayer trades lower on an earnings miss and revised guidance. Vapiano also among notable dedclines after cutting outlook, while Kainos, Biomerieux, and Berkeley Group among risers. William Hill trades higher after forming a partnership with Eldorado Resorts in the US.
• Looking ahead notable earnings include Secureworks, Vera Bradley and HD Supply.

Movers

• Consumer Discretionary Vapiano [VAO.DE] -16% (Profit warning), Hugo Boss [BOSS.DE] +1.7% (Analyst downgrade), Swedish Match [SWMA.SE] -3.3% (Investor sells shares), William Hill [WMH.UK] +6.2% (JV with Eldorado Resorts)
• Consumer Staples Clas Ohlsen [CLASB.SE] +0.8% (Earnings)
• Financials Scor [SCR.FR] -2% (Investor day)
• Technology Kainos [KNOS.UK] +12% (Trading update)
• Real Estate Berkeley Group [BKG.UK] +1% (Earnngs)
• Healthcare Bayer [BAYN.DE] -1.8% (Earnings), Biomerieux [BIM.FR] +7.4% (Earnings)

Speakers

• ECB’s Praet (Belgium, chief economist): Should be possible to use guarantees to replace internal MREL and allow more flexibility in the allocation of resources within banking union
• Italy Interior Min Salvini (Dep Min) reiterates Italy deficit/GDP ratio a little above 2% for 2019 budget; will not break any EU rules or limits. Govt would not do everything immediately but working on a three-year time frame. He added that the flat tax remained a goal
• German govt spokesperson: No decision yet on digital tax; several options remain on the table (**Note: reports circulated that German Finance Ministry was set to drop plan to tax internet companies)
• South Africa Fin Min Nene: Putting together a package to respond to shocks; to be present details in the mid-term budget
• Malaysia Central Bank (BNM) Policy Statement noted that the current level of interest rates and degree of accommodation was consistent with its intended policy stance. It saw inflation rising upwards going forward into 201. Domestic economy was expected to remain on a steady growth path but dids face risks from trade tensions and prolonged weakness in mining and agricultural sectors. Financial markets remained resilient despite outflows

Currencies

• September was carrying on the trends of August as safe-haven flows continued to support the USD for a 5th straight session as dealers noted that public comment period related to the US’ proposed tariffs on $200B in China goods was due to end on Sept 6th.
• The EUR/USD was softer in the session trading below 1.1570 despite continued soothing commentary from Italian govt officials that they will respect EU budget laws. The Italian 10-year BTP yield was lower by over 5bps to test below 2.95% area
• The GBP/USD probed the lower end of 1.28 level as dealers noted the BOE would likely be on hold until after the March 2019 Brexit. Better Services PMI data helped to support Cable heading into the NY morning.
• Emerging market currencies continued to weaken with South Africa’s ZAR currency (Rand) hitting a 2-year low around the 15.70 level.

Fixed Income

• Bund Futures trades at 160.25 down 15 ticks Euro zone business activity picked up in Aug but optimism dimmed. Resistance moves to 161.82 then 163. A downside break of 159.85 sees 158.69 initially.
• Gilt futures trades at 122.47 up 10 ticks following the move in Treasuries. Continued support at 122.50, with a continued move higher targeting 123.93 then 124.00.
• Wednesday 's liquidity report showed Tuesday's excess liquidity rose from €1.915T to €1.924T. Use of the marginal lending facility fell from €44M to €41M.
• Corporate issuance saw 7 issuers raise $12.1B in the primary market

Looking Ahead

• (ZA) South Africa announces details of next bond auction (held on Tuesdays)
• (NL) Netherlands Debt Agency (DSTA) announcement for upcoming DSL bond auction for Sept 11th
• (IN) India to sell 3-month, 6-month and 12-month bills
• 05:30 (GR) Greece Debt Agency (PDMA) to sell 13-week bills
• 06:00 (PL) Poland Central Bank (NBP) Interest Rates Decision: Expected to leave Base rate unchanged at 1.50%
• 06:45 (US) Daily Libor Fixing
• 07:00 (RU) Russia to sell RUB15B in Feb 2024 OFZ bonds
• 07:00 (US) MBA Mortgage Applications w/e Aug 31st: No est v -1.7% prior
• 07:30 (CL) Chile July Economic Activity (monthly GDP) M/M: -0.4%e v -0.1% prior; Y/Y: 2.9%e v 4.9% prior, Economic Activity (ex-mining) Y/Y: No est v % prior
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 08:00 (HU) Hungary Central Bank (MNB) Aug Minutes:
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (US) July Trade Balance: -$50.2Be v -$46.3B prior
• 08:30 (CA) Canada July Int'l Merchandise Trade (CAD): -1.0Be v -0.6B prior
• 08:30 (CA) Canada Q2 Labor Productivity Q/Q: +0.5%e v -0.3% prior
• 08:55 (US) Weekly Redbook Sales
• 09:00 (BR) Brazil Aug Services PMI: No est v 50.4 prior; Composite PMI: No est v 50.4 prior
• 09:00 (MX) Mexico Aug Consumer Confidence: 103.1e v 105.0 prior
• 09:00 (RU) Russia Aug CPI M/M: 0.1%e v 0.3% prior; Y/Y: 3.1%e v 2.5% prior; CPI YTD: 2.5%e v 2.4% prior, CPI Core M/M: 0.2%e v 0.3% prior; Y/Y: 2.6%e v 2.4% prior
• 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to keep Interest Rate unchanged at 1.50%
• 15:00 (MX) Mexico Citibanamex Survey of Economists
• 16:00 (US) Fed’s Kashkari (non-voter, dove) in MT
• 16:30 (US) Weekly API Oil Inventories
• 20:00 (CO) Colombia Aug CPI M/M: +0.1%e v -0.1% prior; Y/Y: 3.1%e v 3.1% prior, CPI Core M/M: No est v 0.1% prior; Y/Y: No est v 3.9% prior

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.16173
Open: 1.15796
% chg. over the last day: -0.32
Day's range: 1.15428 – 1.15965
52 wk range: 1.0571 – 1.2557

The bearish sentiment continues to prevail on the EUR/USD currency pair. Demand for the American currency is still high. Investors expect a report on the labor market in the US, which will be published on September 7. At the moment, the key support and resistance levels are 1.15350 and 1.15700, respectively. The trading instrument has the potential for further reduce.

The news feed on 2018.09.05:

A number of indices of economic activity in the Eurozone at 11:00 (GMT+3:00);

The US trade balance at 15:30 (GMT+3:00).

We also recommend paying attention to the speeches by the FOMC representatives.

Indicators point to the power of sellers: the price has fixed below 50 MA and 200 MA.

The MACD histogram has moved to the negative zone, which indicates the bearish sentiment.

Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which also gives a signal to sell EUR/USD.

Trading recommendations

Support levels: 1.15350, 1.15000
Resistance levels: 1.15700, 1.15900, 1.16100

If the price fixes below the support level of 1.15350, the EUR/USD quotes are expected to fall. The movement is tending to 1.15000-1.14800.

Alternative option. If the price fixes above 1.15700, we recommend considering purchases of EUR/USD. The movement is tending to 1.16000-1.16200.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.28639
Open: 1.28549
% chg. over the last day: -0.11
Day's range: 1.28192 – 1.28695
52 wk range: 1.2361 – 1.4345

Since the beginning of the current week, the bearish sentiment has been prevailing on the GBP/USD currency pair. At the moment, the GBP/USD quotes are consolidating. The key range is 1.28150-1.28500. The trading instrument has the potential for further reduce. Financial market participants expect new information regarding Brexit. Positions should be opened from the key levels.

At 11:30 (GMT+3:00), the index of economic activity in the UK services sector will be published.

The price has fixed below 50 MA and 200 MA, which signals the power of sellers.

The MACD histogram has started declining, which gives a signal to sell GBP/USD.

Stochastic Oscillator is located in the neutral zone, the %K line is below the %D line, which also indicates a fall in the GBP/USD quotes.

Trading recommendations

Support levels: 1.28150, 1.28000, 1.27600
Resistance levels: 1.28500, 1.28700, 1.29000

If the price fixes below 1.28150, the GBP/USD quotes are expected to fall. The movement is tending to 1.27750-1.27500.

Alternative option. If the price fixes above 1.28500, we recommend considering purchases of GBP/USD. The movement is tending to the round level of 1.29000.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.30915
Open: 1.31762
% chg. over the last day: +0.63
Day's range: 1.31637 – 1.32052
52 wk range: 1.2059 – 1.3795

The USD/CAD currency pair continues to show positive dynamics. Since the beginning of this week, the growth of quotes has exceeded 150 points. At the moment, the USD/CAD currency pair is consolidating in the range of 1.31650-1.32000. Investors took a wait-and-see position before the Bank of Canada decision. It is expected that the regulator will keep the key interest rate at the previous level of 1.50%. We recommend paying attention to the comments by representatives of the Central Bank. Positions should be opened from the key levels.

At 17:00 (GMT+3:00), the Bank of Canada will announce its decision on the key interest rate.

The price has fixed above 50 MA and 200 MA, which signals the power of buyers.

The MACD histogram is in the positive zone and continues to rise, which signals to buy USD/CAD.

Stochastic Oscillator reached the overbought zone, the %K line is above the %D line, which gives a weak signal to buy USD/CAD.

Trading recommendations

Support levels: 1.31650, 1.31000, 1.30500
Resistance levels: 1.32000, 1.32500

If the price fixes above the round level of 1.32000, further growth of the USD/CAD quotes is expected. The movement is tending to 1.32500-1.32750.

Alternative option. If the price fixes below the local support of 1.31650, correction movement is expected. The target level for profit-taking is 1.31300-1.31000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 110.986
Open: 111.313
% chg. over the last day: +0.35
Day's range: 111.308 – 111.714
52 wk range: 104.56 – 114.74

Yesterday, the bullish sentiment prevailed on the USD/JPY currency pair. At the moment, quotes are consolidating. The technical pattern is ambiguous. Investors expect additional drivers. Local support and resistance levels are 111.300 and 111.500, respectively. We recommend opening positions from these marks.

Today, the news feed on the economy of Japan is calm.

The price has fixed above 50 MA and 200 MA, which indicates the power of buyers.

The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy USD/JPY.

Stochastic Oscillator is located in the neutral zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 111.300, 111.000, 110.750
Resistance levels: 111.500, 111.800, 112.000

If the price fixes above the resistance level of 111.500, the USD/JPY currency pair is expected to grow. The movement is tending to 111.700-112.000.

Alternative option. If the price fixes below the level of 111.300, it is necessary to consider sales of USD/JPY. The movement is tending to 111.000-110.800.

The crises process is intensifying in emerging economies, which also affects their markets and supports the demand for the dollar. S&P 500 lost 0.2% on Tuesday and returned under 2900 level, despite the Amazon's growth of capitalization over $1 trillion. Asian markets are declining after the data on business slowdown in China. The published Services PMI was weaker than expected, declining for the third month in a row to the lowest levels since last October.

MSCI for Asia-Pacific region ex Japan has been losing 0.5% for the second consecutive day; Nikkei225 has decreases by 0.4%. The Asian bourses remain concerned about the possible announce of the tariffs expansion for Chinese imports by the United States as early as tomorrow. But the markets are not less concerned about the situation in the emerging markets in different parts of the world. The currencies of Argentina, Turkey, South Africa and Brazil are considered vulnerable to changes of the investor sentiment due to large budget and current account deficits.

Investors first of all withdraw money from there due to changing prospects of the global growth. A number of hotbeds of concern and the structural problems of those countries do not allow hoping for a quick solution. Perhaps, the problems will even grow in the coming days. The Argentine peso, the Turkish lira, the South African rand have returned to the area of historical lows. The Indian rupee and the Brazilian Real have updated their lows to the dollar this week and remain close to these levels.

Against this backdrop, there is a growing demand for the dollar as a safe-harbour. The structural deficits in emerging markets are further exacerbated by the introduction of tariffs and threaten to stifle the China's growth.

The dollar index rose to a maximum of two weeks at 95.65 on Tuesday but lost most of its growth after the data on production activity in the US had been published. It exceeded expectations by regaining the demand for risky assets in the United States and somewhat softening fears. The U.S. is taking away from China the flag of the growth engine for the world economy.

The EURUSD fell yesterday to 1.1530 at one point, but starts the Wednesday close to 1.1600. On Friday and Monday, this level was an important short-term support, but now it looks like a meaningful resistance.

Among the macroeconomic news, the course of trades in the pair may be affected by the final estimates of Services PMI for the Eurozone countries. It is also important for the markets to publish the U.S. trade balance, which can bring the international trade back into the spotlight of the markets.

Italian 10 year bond yield drops sharply today as, Deputy Prime Minister Matteo Salvini reiterated the pledge not to blow up public accounts ahead of budget meeting. Salvini, leader of the far right League, said in a newspaper interview that "clearly we will not do everything in one shot, not even Italians expect that from us... If we want to run the country for a long period we cannot blow up its public accounts."

10 year Italian yield drops -0.088 to 2.943 so far today. It hit as high as 3.281 last week. The development suggests that investors concern over Italian budget is eased.

UK PMI services rose to 54.3 in August, up from 53.5, and beat expectation of 53.9. Markit noted in the released that there were stronger rises in business activity and new work. At the same time, input cost inflation accelerated, led by fuel prices and wage pressures. However, optimism towards the year-ahead business outlook was at lowest level since March.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:

"Faster service sector growth comes as much-needed welcome news after disappointing manufacturing and construction PMI surveys in August. The survey data indicate that the economy is on course to expand by 0.4% in the third quarter, a relatively robust and resilient rate of expansion that will no doubt draw some sighs of relief at the Bank of England after the rate hike earlier in the month.

"Faster service sector order book and employment growth also offset slowdowns of both in the manufacturing and construction sectors, but also highlights the extent to which the economy has become more reliant on services to support growth, and in particular an especially strong financial service sector. Financial services have outperformed all other sectors so far this year.

"Business expectations for the year ahead meanwhile sank markedly lower, down across all three sectors to one of the lowest levels seen since the EU referendum, largely reflecting increased anxiety over Brexit negotiations.

"Given the increasingly unbalanced nature of growth and the darkening business mood, risks to the immediate outlook seem tilted to the downside."

Full release here.

Eurozone PMI services was finalized at 54.4 in August, unrevised, up from July's 54.2. PMI composite was revised up to 54.5, up from July's 54.3. Among the countries, Ireland PMI composite hit 7-month high of 58.4. German PMI composite hit 6-month high at 55.6. However, Italy PMI composite hit 22-month low at 51.7.

Chris Williamson, Chief Business Economist at IHS Markit said:

"The Eurozone PMI shows the recent run of robust growth of business activity, new orders and employment extending into August. However, the expansion is looking increasingly uneven and the business mood has become more unsettled during the summer.

"The survey data for the third quarter so far suggest the single currency area is on course to at least match the 0.4% expansion of GDP seen in the second quarter, yet the downturn in optimism raises questions over whether this pace of growth can be sustained into the fourth quarter.

"Business expectations about activity levels in the year ahead dropped to the lowest for almost two years amid growing concerns about the impact of trade wars and heightened political uncertainty.

"Growth also looks worryingly unbalanced. Although all of the largest euro countries have seen growth moderate so far this year, solid expansion is still being signalled for Germany and, to a lesser extent, France.

"But Italy saw growth slow sharply in August to suggest the region's third largest economy on course for its weakest expansion for nearly two years, while in Spain the third quarter could be the worst for almost five years, barring a noticeable pick of business activity during September.

"Price trends are also varied across the region, ranging from near-record inflation in Germany to falling prices in Italy, serving as a reminder that deflationary pressures, it appears, have not completely disappeared from the euro area."

Full release here.

EUR/JPY

4 hour

The EUR/JPY is building a bear flag chart pattern which could indicate a continuation lower if price manages to break below the pattern.

The EUR/JPY could be aiming for the Fibonacci levels of wave E vs D which could act as support zones and potential bouncing spots.

Daily

EUR/JPY could have completed a large corrective triangle chart pattern. Price could now be building a wave E (purple) as long as price stays above the previous bottom of wave C (purple). A break below that support would invalidate it whereas a bullish break could confirm a continuation.

Weekly

The EUR/JPY is probably in a wave 4 correction (pink) as long as price stays above the support zone (blue). A break below the support would invalidate this particular wave pattern.