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The U.S. dollar was seen posting a recovery on Thursday. The currency gained amid economic data from U.S. showed that the core PCE price index increased 0.2% on the month. Personal spending data showed a 0.4% increase as expected while personal income increased 0.3% matching estimates.

Data from Canada showed that the monthly GDP numbers stayed flat. This missed estimates of a 0.1% that was forecast.

Looking ahead, the economic data for the day will see the release of the German retail sales for the month. Retail sales are forecast to fall 0.2%.

The Eurozone's flash inflation estimates are due later in the day. Headline inflation is forecast to rise 2.1%, the same pace as the previous month. Core inflation is also expected to rise 1.1%, rising at the same pace as the month before.

The NY trading session is relatively quiet with only the Chicago PMI expected to slip to 63.0.

EURJPY short-term Elliott wave view suggests that the decline to 124.87 low ended intermediate wave (2) pullback of a leading diagonal structure from 5/29/2018 cycle. Above from there, the rally higher is taking place as Elliott wave zigzag structure within intermediate wave (3) of a diagonal. In a zigzag ABC structure, lesser degree cycles should show sub-division of 5-3-5 structure i.e Minor wave A unfolds in 5 waves either impulse or a leading diagonal, Minor wave B unfolds in 3 swings corrective structure. Whereas Minor wave C unfolds in another 5 waves structure either impulse or Ending diagonal structure.

In EURJPY’s case, the rally higher from 124.87 low unfolded as 5 waves impulse structure in Minor wave A. Up from 124.87 the rally higher to 126.49 high ended Minute wave ((i)) in 5 waves structure. Down from there the pullback to 125.55 low ended Minute wave ((ii)) pullback. A rally higher from there to 130.275 high ended Minute wave ((iii)) with another lesser degree 5 waves structure. Below from there, a pullback to 129.55 low ended Minute wave ((iv)). Finally, a rally to 130.86 high ended Minute wave ((v)) & also completed Minor wave A. Currently Minor wave B pullback remains in progress in 3, 7 or 11 swings to correct the cycle from 124.87 low before the rally resumes, provided the pivot at 124.87 low stays intact. We don’t like selling it.

EURJPY 1 Hour Elliott Wave Chart

General Trend:

• Asian equity markets trade mixed, in line with Thursday’s US session
• Finance Ministers from Japan and China are holding talks in Beijing
• Bank of Japan is expected to release its bond buying schedule for Sept after the market close

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.2%
• (AU) Reserve Bank of Australia (RBA): High debt levels could complicate future policy decisions - Corporate Plan for 2018/19
• (AU) Australia July Private Sector Credit M/M: 0.4% v 0.3%e; Y/Y: 4.4% v 4.4%e
• (NZ) New Zealand ANZ Aug Consumer Confidence Index: 117.6 v 118.4 prior; m/m: -0.7% v -1.3% prior

China/Hong Kong

• Shanghai Composite -0.3%, Hang Seng -1.3%
• (CN) Pres Trump reportedly tells aides he is ready to implement the proposed $200B in new China tariffs as soon as next week, though final decision is still pending – press
• (CN) CHINA AUG OFFICIAL GOVT MANUFACTURING PMI: 51.3 V 51.0E; Non-manufacturing PMI: 54.2 v 53.8e
• (CN) China PBoC set yuan reference rate: 6.8246 v 6.8113 prior
• (CN) China PBoC Open Market Operation (OMO): Skips OMO (8th straight skip)
• (CN) China Finance Min Liu Kun: China and Japan should enhance macro-policy coordination

Japan

• Nikkei 225 opened -0.6%
• (JP) JAPAN JUL JOBLESS RATE: 2.5% V 2.4%E; Job-To-Applicant-Ratio: 1.63 v 1.63e (highest since Jan 1974)
• (JP) JAPAN JUL PRELIM INDUSTRIAL PRODUCTION M/M: -0.1% V +0.2%E; Y/Y: 2.3% V 2.7%E:
• Japan government cuts assessment of industrial output.
• (JP) Japan Aug Tokyo CPI Y/Y: 1.2% v 1.0%e; CPI EX-Fresh Food (core) Y/Y: 0.9% v 0.8%e
• (JP) JAPAN JULY ANNUALIZED HOUSING STARTS: 958K V 926KE; Y/Y: -0.7% V -4.1%E
• (JP) Japan Finance Min Aso: Monetary policies are normalizing in developed nations; meeting with China to improve financial cooperation
• (JP) Japan PM Abe likely to meet US President Trump on Sept 25th (during the UN General Assembly in NY) - financial press

Korea

• Kospi opened -0.4%
• (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50%; AS EXPECTED
• Bank of Korea Gov Lee: Today's decision was not unanimous, board member Lee Il-Houng voted for a rate hike
• (KR) Bank of Korea (BoK): Reiterates to maintain accommodative policy stance, carefully judge if necessary to adjust policy further
• (KR) South Korea July Industrial Production M/M: +0.4% v -0.2%e; Y/Y: 0.9% v 0.5%e

Other

• (ID) Rupiah (IDR) currency extends decline, trades at lowest level since 1998; Indonesia 10-yr bond yield trades above 8.02% (highest since Dec 2016)
• (ID) Indonesia Central Bank Official: Says intervening in the forex and bond markets 'decisively'

North America

• US equity markets ended lower: Dow -0.5%, S&P500 -0.4%, Nasdaq -0.3%, Russell 2000 -0.1%
• S&P500 Materials -1.1%
• (US) Pres Trump: will withdraw from WTO if it doesn't 'shape up'; don't regret naming Powell as Fed Chair - press interview
• (AR) Argentina Treasury Min Dujovne is said to plan to travel to Washington DC on Monday to meet with the IMF - US financial press
• (CA) Canada Trade Min: Sees possibility of US trade deal on Friday, looking for points of alignment with the US on trade deal
• (CA) Canada Foreign Minister: Had brief conversations with USTR Lighthizer, will reconvene in the morning

Europe

• (AT) ECB's Nowotny (Austria): Italian situation should not delay interest rate hikes; sees Italy as a special situation
• (EU) ECB's Weidmann (Germany): Euro zone budget could be counterproductive
• (UK) UK Aug GfK Consumer Confidence: -7 v -10e
• (UK) UK Aug Lloyds Business Barometer: 23 v 29 prior
• (TR) Turkey extends tax exemption on wealth repatriation by 6 months

Levels as of 01:30ET

• Nikkei 225, +0.1%, ASX 200 -0.4%, Hang Seng -0.8%; Shanghai Composite +0.2%; Kospi +0.4%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.2%, Dax +0.3%; FTSE100 +0.1%
• EUR 1.1691-1.1659 ; JPY 111.14-110.88 ; AUD 0.7270-0.7242 ;NZD 0.6663-0.6635
• Aug Gold +0.5% at $1,210/oz; Sept Crude Oil flat at $70.27/brl; Sept Copper +0.2% at $2.707/lb

Daily Pivots: (S1) 111.23; (P) 111.53; (R1) 111.98; More...

USD/JPY's breach of 110.93 minor support argues that the rebound from 109.76 might be finished. It also dampened out bullish view. Intraday bias is turned back to the downside for 109.76 support. For now, we'd still expect 109.36/76 key support to hold and bring rebound. But decisive there will carry larger bearish implications. on the upside, above 111.82 will revive the bullish case and target a retest on 113.17 high.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.36 support holds. However, decisive break of 109.36 will mix up the outlook again. And deeper fall should be seen back to 61.8% retracement of 104.62 to 113.17 at 107.88 and below.

Daily Pivots: (S1) 1.1632; (P) 1.1676; (R1) 1.1709; More.....

Intraday bias in EUR/USD remains neutral for consolidation below 1.1733 low. Further rise could still be seen. But for now, we'd continue to expect strong resistance from 38.2% retracement of 1.2555 to 1.1300 at 1.1779 to limit upside, at least on first attempt, to bring near term reversal. On the downside, break of 1.1529 minor will indicate completion of the rebound and turn bias to the downside for retesting 1.1300 low. After all, consolidation from 1.1300 will extend for a while before completion.

In the bigger picture, a medium term bottom should be in place at 1.1300, on bullish convergence condition in daily MACD and some consolidations would be seen. But still, note that EUR/USD was rejected by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. That carries some long term bearish implications. Thus, we'd expect fall from 1.2555 high to resume after consolidation completes. Below 1.1300 should send EUR/USD through 61.8% retracement of 1.0339 to 1.2555 at 1.1186. And, in that case, EUR/USD would head to retest 1.0339 (2017 low).

Daily Pivots: (S1) 1.2984; (P) 1.3013; (R1) 1.3042; More...

At this point, intraday bias in GBP/USD remains on the upside. Rise from 1.2661 is still in progress. Sustained break of 55 day EMA (now at 1.3056) will target 1.3212 resistance. For now, we'd expect strong resistance from 1.3316 fibonacci level to limit upside, at least on first attempt. On the downside, break of 1.2844 support will argue that the rebound is completed and bring retest of 1.2661 low.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA (now at 1.4091). The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.

Daily Pivots: (S1) 0.9679; (P) 0.9701; (R1) 0.9716; More.....

USD/CHF's fall extends to as low as 0.9672 so far. Intraday bias remains on the downside for 161.8% projection of 1.0067 to 0.9866 from 0.9981 at 0.9656 next. Break will target 200% projection at 0.8579 next. On the upside, above 0.9714 minor resistance will turn intraday bias neutral and bring recovery. . But outlook will now stay bearish as long as 0.9866 support turned resistance holds. And deeper fall will remain in favor even in case of recovery.

In the bigger picture, current development suggests that rise from 0.9186 low has completed at 1.0067, after failing to sustain above 1.0037 resistance. Fall from 1.0067 could extend to 61.8% retracement of 0.9816 to 1.0067 at 0.9523 and below. But for now, we don't expect a break of 0.9186 low. On the upside, firm break of 1.0067 will resume the rise to 1.0342 key resistance (2016 high).

Daily Pivots: (S1) 0.7237; (P) 0.7276; (R1) 0.7303; More...

AUD/USD is still bounded in range of 0.7237/7381 and intraday bias remains neutral first. Consolidation could extend but in case of another rise, we'd expect upside to be limited by 0.7452 resistance to bring larger down trend resumption eventually. On the downside, below 0.7237 will target a test on 0.7201 low first. Firm break there will resume the down trend from 0.8135.

In the bigger picture, rebound from 0.6826 (2016 low) is seen as a corrective move that should be completed at 0.8135. Fall from there would extend to have a test on 0.6826. There is prospect of resuming long term down trend from 1.1079 (2011 high). But we'll look at downside momentum to assess at a later stage. On the upside, break of 0.7452 resistance, however, will indicate medium term bottoming, on bullish convergence condition in daily MACD. In that case, a correction should be seen first, with stronger rebound would be seen to 38.2% retracement of 0.8135 to 0.7201 at 0.7558. The down trend from 0.8135 will resume after the correction completes.

Daily Pivots: (S1) 1.2922; (P) 1.2961; (R1) 1.3021; More...

A short term bottom was formed at 1.2886, ahead head of 1.2879 fibonacci level. Intraday bias is mildly on the upside for recovery, towards near term channel resistance (now at 1.3113). However, break of 1.3173 resistance is needed to confirm completion of the choppy fall from 1.3385. Otherwise, out will remain cautiously bearish for another fall. On the downside, below 1.2959 minor support will turn focus back to 1.2879 key fibonacci level again.

In the bigger picture, the break of channel support (now at 1.2988), argues that rise from 1.2246, as well as that from 1.2061, has completed at 1.3385. Focus is back on 38.2% retracement of 1.2061 to 1.3385 at 1.2879. Decisive break there will affirm the case of medium term reversal and target 61.8% retracement at 1.2567 and below. That will also put key long term support at 50% retracement of 0.9406 (2011 low) to 1.4689 (2015 high) at 1.2048 into focus. On the upside, break of 1.3173 resistance will revive the bullish case and target 61.8% retracement of 1.4689 to 1.2061 at 1.3685 and above.

Canadian Dollar is trading as the weakest one for today, followed by New Zealand Dollar and then Australian Dollar. Asian stocks are under pressured broadly, following the pull back in US equities overnight. Investors seemed to be bother by the worsening tensions between US and China. Trade is definitely a concern as Trump sounded like he's in not in the mood to back down in a Bloomberg interview. On the other hand, Swiss Franc is the strongest one so far, followed by Euro and then Sterling. Dollar is mixed.

While Australian and New Zealand Dollar have the own problems, the situation for Canadian Dollar is different. The 2.9% growth in Q2 GDP, while a miss, was certainly impressive. The trade negotiation between US and Canada is in progress even though there is no apparent breakthrough as the Friday deadline looms. But it should be remembered that the talks restarted on Tuesday right after US and Mexico made a deal. It's tremendous for for Canada within a very short period of time. A deal, be it called NAFTA or something else, is still on track to be agreed. BoC is expected to hike again this year, and September or October doesn't make a big difference. Hence, the Loonie's weakness is likely temporary.

In other markets, Nikkei closed slightly lower by 0.02% at 22865.15. It still cannot find the needed momentum to get through 23050 key resistance. At the time of writing, China Shanghai SSE is down -0.32%, Hong Kong HSI down -0.99%, Singapore Strait Times is down -0.32%. Overnight, DOW lost -0.53%, S&P 500 declined -0.44% and NASDAQ dropped -0.26%. But it should be reminded that the decline in Asian stocks is result of loss of momentum in corrective rebound. The decline in US stocks is healthy retreat in an up trend. They're vastly different. Gold breaches 1200 handle briefly but quickly recovered. Near term outlook in Gold stays bullish for another rise through 1214.

Trump said China devaluating Yuan while PBoC is lifting it, ready to start new rounds of tariffs

Trump complained in a Bloomberg interview that China is trying to devalue it's currency, and his administration is studying whether to name China as a currency manipulator. Additionally, he's looking into the "formula" for deciding who's doing currency manipulation. Separately, it's reported that Trump is ready to impose 25% tariffs on USD 200B in Chinese goods as soon as public hearing ends next week. And he told Bloomberg that, "we are a much stronger country," and "nobody's waiting us out. Our country is stronger than it's ever been financially."

At the same time, the People's Bank of China set the reference rate stronger than estimates for 17 days in a row, to slow the Yuan's decline. The currency's fixing was 0.1% stronger than the average forecast in a Bloomberg survey. It's a consensus among traders and analysts that the market doesn't want to bet against PBoC for now, as the central bank and the government are ready to deploy further "manipulative" policies to support Yuan's exchange rate and stabilize it.

Trump: Rejected EU offer to scrap auto tariffs, said EU is as bad as China

Trump rejected EU's offer to scrap auto tariffs on cars if US does the same. He said "it's not good enough" and added that "Their consumer habits are to buy their cars, not to buy our cars." He also added that EU is "almost as bad as China, just smaller." European Commission President Jean-Claude Juncker responded today by warning that if US raise auto tariffs, EU will do the same.

European Trade Commissioner Cecilia Malmstrom told the European parliament yesterday that "we are willing to bring down even our car tariffs down to zero … if the U.S. does the same." Nonetheless Malmstrom also expressed that "we do not agree with their methods of imposing massively billions of tariffs on China, as they have also done with Turkey. We do not share U.S. view that trade wars are good and easy to win."

Canada Freeland: No agreement yet and trade talk with US to continue on Friday

Canadian Foreign Affairs Minister Chrystia Freeland had four meetings with US Trade Representative Robert Lighthizer yesterday, yet there was no conclusion in trade negotiation yet. Freeland said "no, we don't have an agreement," and talks would "reconvene in the morning" on Friday.

She added that "we continue to be encouraged by the constructive atmosphere," and "there's a lot we're trying to do in a short period of time." And for now, Freeland is "focused on working hard on our issues with the United States", not the Mexico yet.

Diary is a key topic in the negotiation and Labour Congress President Hassan Youssef hinted that "the Canadian public should expect the American dairy industry will probably have more access to Canada by the time this agreement is concluded and we should not lose sleep over it,"

Prime Minister Justin Trudeau's spokesman reiterated his stance that "the federal government remains committed to ensuring that any agreement is in the best interests of Canadians."

The United States, Canada and Mexico are trying to come up with at least a preliminary agreement in principle by Friday, a deadline unilaterally set by Trump.

On the data front

UK Gfk consumer confidence improved to -7 in August, up from -10 and beat expectation of -11. Japan industrial production dropped -0.1% mom in July versus expectation of 0.3% mom. Housing starts dropped -0.7% yoy versus expectation of 0.4.3% yoy. Unemployment rate rose 0.1% to 2.5% versus expectation of 2.4%. Tokyo CPU core rose to 0.9% yoy in August versus expectation of 0.8% yoy. China official PMI manufacturing rose 0.1 to 51.3 in August, above expectation of 51.0. Official non-manufacturing PMI rose 0.2 to 54.2, above expectation of 53.8.

Looking ahead, Eurozone will release unemployment and August CPI flash today. Canada will release IPPI and RMPI. US will release Chicago PMI.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2922; (P) 1.2961; (R1) 1.3021; More...

A short term bottom was formed at 1.2886, ahead head of 1.2879 fibonacci level. Intraday bias is mildly on the upside for recovery, towards near term channel resistance (now at 1.3113). However, break of 1.3173 resistance is needed to confirm completion of the choppy fall from 1.3385. Otherwise, out will remain cautiously bearish for another fall. On the downside, below 1.2959 minor support will turn focus back to 1.2879 key fibonacci level again.

In the bigger picture, the break of channel support (now at 1.2988), argues that rise from 1.2246, as well as that from 1.2061, has completed at 1.3385. Focus is back on 38.2% retracement of 1.2061 to 1.3385 at 1.2879. Decisive break there will affirm the case of medium term reversal and target 61.8% retracement at 1.2567 and below. That will also put key long term support at 50% retracement of 0.9406 (2011 low) to 1.4689 (2015 high) at 1.2048 into focus. On the upside, break of 1.3173 resistance will revive the bullish case and target 61.8% retracement of 1.4689 to 1.2061 at 1.3685 and above.

Economic Indicators Update