Sample Category Title

Pivot (invalidation): 6960

Our preference Long positions above 6960 with targets at 7135 & 7235 in extension.

Alternative scenario Below 6960 look for further downside with 6875 & 6725 as targets.

Comment The RSI is mixed with a bullish bias.

The EUR/USD has made a breakout in the form of an inverted head and shoulders pattern, but the upside could be contained due to strong resistance close to the M H3 and W H4 pivot points, along with historical sellers. 1.1735-55 is the POC zone, and we might see some rejections within the zone. Only above 1.1760 the EUR/USD should we proceed with a bullish move targeting 1.1808. Rejections from the POC zone should target 1.1688 and 1.1630, with the continuation towards 1.1553 on a 4h close below 1.1630.

W L3 - Weekly Camarilla Pivot (Weekly Interim Support)

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

M H4 - Monthly Camarilla Pivot (Very Strong Daily Resistance)

M L3 – Monthly Camarilla Pivot (Daily Support)

M L4 – Monthly H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect the price to react - aka the entry zone)

The British pound maintains its position at 1.3020 on Thursday morning after rising by 1.2% from 1.2870 on Wednesday on the tone softening of the EU in the negotiations about Brexit. The chief negotiator from the EU suggested maintaining close ties with Britain, although outside the single market. These comments provoked the sharpest strengthening of the pound in 7 months by pulling the dollar index downwards. Technically, GDPUSD pair is now vulnerable to some correction after such a strong growth.

Canada's Prime Minister Trudeau claimed that he had hoped to make a deal on the NAFTA by Friday. Although Canada is not hastening to surrender the important points of the agreement, the parties demonstrate their good will to find agreement. The Canadian dollar continues to rise on expectations that the moment of the greatest uncertainty was left behind.

American S&P500 fixed another update of historical highs on Wednesday, rising by 0.5% to 2915. On Thursday morning, the futures on S&P500 lose about 0.2% due to increased caution of investors and negative dynamics of Chinese bourses.

The Hong Kong Stock Exchange index has lost 1.2% since morning. Investors are concerned that the date of tariff expansion by the US for Chinese goods over $200 bln approaches as early as next month. At the same time, the level of negotiations does not allow to hope that these tariffs might be avoided.

The expansion of trade restrictions threatens to slow down China's economy, which also has a negative impact on positions of the Australian and the New Zealand dollars. These currencies have returned to a decline, not being far from its 1.5 and 2.5-year lows, respectively.

Due to the weakening of commodity currencies and sluggish euro dynamics in the morning, the dollar index played the loss of the previous day, bouncing from its 4-week lows. Despite the weakening earlier this week, the U.S. currency retains a significant potential to strengthening through the increased investors' nervousness around the prospects of developing and commodity economies in case of a significant slowdown in China.

Rates: Gradually moving towards upper bound of sideways ranges

The US and German 10-yr yields continue their journey higher within established sideways trading ranges, respectively between 2.8% and 3% and between 0.3% and 0.5%. Today US (PCE) and German (CPI) inflation readings have most market-moving potential. A further rise probably won't go unnoticed. Risk sentiment on stock markets serves as a wildcard.

Currencies: Sterling captured by impressive short squeeze

Yesterday, risk sentiment continued to set the tone for the intraday USD price action. A further US equity rally blocked a tentative USD comeback. Today, good US data and a pause in the equity rally might help to put a floor for the USD. Sterling rebounded sharply after perceived soft comments from EU's Barnier. We consider the move mainly as a short-squeeze on recent sterling losses.

The Sunrise Headlines

• US stock markets closed yesterday's session well, with all US indices in green. NASDAQ (+0.99%) outperforms for a second straight day. Asian markets opened mostly with losses this morning, with China underperforming the bunch.
• US President Trump and Canadian prime minister Trudeau both commented that a deal on revamping Nafta by Friday is within reach. Trudeau remains cautious, however, saying “no Nafta deal is better than a bad Nafta deal”.
• According to EU's chief Brexit negotiator Michel Barnier, the bloc is ready to offer the UK an unprecedented partnership that goes far beyond any agreement the EU has made with other countries in the past.
• A source familiar with the Berlin government said Germany is likely backing Irishwoman Sharon Donnery as the next chief of the Single Supervisory Mechanism (SSM), the ECB's banking watchdog.
• EU Comm. Oettinger warned Italy that if EU budget contributions are not paid in time, it would face interest payments. Last week, Italy's Di Maio threatened to withhold EU contributions if it didn't agree to take in rescued immigrants.
• Turkey's Finance Minister Berat Albayrak does not expect a big risk to its economy or financial system. His quote illustrates a deep difference between Turkey and global investors over a worsening currency crisis.
• Today's eco calendar is richly filled, with in the US PCE inflation (July) Jobless Claims and spending/income data. EMU Economic Confidence for August and German inflation data will be released as well.

Currencies: Sterling Captured By Impressive Short Squeeze

Impressive short-squeeze of sterling

Yesterday, FX trading was mainly driven by global risk sentiment. The risk rally slowed in Asia and Europe, easing the recent slide of the dollar. However, US equities continued outperforming with several indices, including the Nasdaq and the S&P, setting new records. This US equity rally caused the dollar to reverse its intraday gains. EUR/USD closed the session at 1.1707. The trade-weighted dollar finished at 94.52. USD/JPY was the exception to the rule and succeeded a decent gain (111.68). This morning, Asian equities again fail to join the US rally. China still underperforms. The dollar shows no clear trend. EUR/USD struggles to stay north of 1.17. USD/JPY is little changed in the 111.65 area. The Aussie (AUD/USD 0.7285) and the kiwi (0.6655) dollars suffer from soft eco data. Today, the calendar heats up with the EC confidence data, German inflation and US July spending and income data. EMU data might not be too bad, but are probably only second tier for FX trading. US spending and income data are expected solid (0.4% M/M). FX markets will keep an eye at the price deflators. Global risk sentiment will also continue playing its role. Headlines on a US/Cananda trade deal look rather constructive. Question is whether this topic will yield enough additional positive news to fuel further (US) equity gains. If not, the dollar (except USD/JPY) might start some ST bottoming out pattern. In a broader perspective, the USD reversed the early August gain. EUR/USD returned in the 1.15/1.1850 consolidation pattern. The USD momentum eroded further after Fed Powell's Jackson Hole comments and due to a positive risk sentiment. The jury is still out, but the easiest part of this trade might be behind us. The EUR/USD rebound might slow. A EUR/USD break beyond 1.1791/1.1850 might be difficult.

Yesterday, sterling finally rebounded after comments from EU's Barnier as he said that the EU wants to keep a close, special relationship with the UK. The market saw the quotes as a sign of a more reconciliatory attitude from the EU. We are not convinced. The move was probably in the first place a short-squeeze on recent substantial sterling losses. Whatever, the correction was quite impressive and deserves monitoring. Today, UK monetary data will be published. We look out how far the short- squeeze goes. The 0.8900/8850 area should provide solid support. A break below this area would signal an improvement in ST sentiment on sterling. This is not our preferred scenario

USD (trade-weighted-DXY): risk rally weighs on the dollar. Trade to slow from here?

The US dollar has finally broken away from range-bound trading conditions against the Japanese yen currency, with the USDJPY pair hitting 111.80 after a strong technical breakout from a bullish descending triangle pattern. The short-term trend has now turned bullish, and further upside is expected in the USDJPY pair while price continues to trade above the 111.39 support level.

The USDJPY pair is intraday bullish while trading above the 111.39 level, key resistance is found at the 111.80 and 112.05 levels.

If the USDJPY pair moves below the 111.39 level, sellers may test towards the 111.20 and 110.90 support levels.

The British pound has moved sharply higher against the US dollar after EU chief negotiator Michel Barnier said that the EU was prepared to offer the United Kingdom a ‘deal like no other’. Short and medium-term buyers are likely to remain in control while price trades above the 1.2930 support level, the GBPUSD pair is also supported by bullish momentum on the four-hour time frame.

The GBPUSD pair is strongly bullish while trading above the 1.2930 level, key resistance is found at the 1.3030 and 1.3080 levels.

If the GBPUSD pair moves below the 1.2930 level, key support is found at the 1.2900 and 1.2848 levels.

Economic data will hold considerable sway for currency traders on Thursday, with a steady stream of reports coming our way from Europe and the United States. Action begins at 06:00 GMT and will continue through to 17:30 GMT.

Germany will begin the day bright and early with the latest import price index. The monthly indicator is forecast to flatline for July.

At 07:00 GMT, the Spanish government will release a pair of inflation indicators, including the consumer price index (CPI) and the Harmonised Index of Consumer Prices (HICP). The HICP indicator is forecast to come in at 2.3% annually for August.

Germany is back in the spotlight at 07:55 GMT with its monthly employment report. Germany's unemployment rate is forecast to hold steady at 5.2% during August.

A deluge of Eurozone sentiment indicators is scheduled for release at 09:00 GMT. These include services sentiment, consumer confidence, industrial confidence, economic sentiment and business climate. The August reporting period is expected to show little change compared with the previous month.

Three hours later, Germany will release a batch of inflation figures, including CPI and HICP. Germany's HICP likely rose 0.1% in August and 2% annually.

Shifting gears to the United States, the closely-watched personal incomes and outlays report is due at 12:30 GMT. The monthly data set includes three headline indicators, including personal spending, personal income, and the core personal consumption expenditure (PCE) index. The core PCE index is used by the Federal Reserve to measure inflationary trends. For the month of July, it likely rose 2% annually, according to a median estimate of economists.

The US Labor Department will report on initial jobless claims at 12:30 GMT. The number of Americans filing for first-time unemployment benefits likely rose by 4,000 last week to a seasonally adjusted 214,000.

North of the border, the Canadian government will report on second-quarter GDP at 12:30 GMT. The economy is forecast to have grown 3% annually following a disappointing 1.3% gain the previous quarter.

USD/CAD

The North American pair will be highly sensitive to the newswire on Thursday. A strong Canadian GDP reading could send the USD/CAD to fresh lows. The pair has declined nearly 200 pips over the past week and now sits at 1.2922.

EUR/USD

Europe's common currency continues to hold the line on 1.1700 US after failing to breach that all-important level the past two tries. Above 1.1700, the EUR/USD faces immediate resistance at 1.1750. On the flipside, immediate support is located at 1.1655.

GBP/USD

Cable jumped to a new weekly high above 1.3000 on Wednesday amid speculation over Brexit. At the time of writing, the pair is trading at 1.3029, with the bulls eyeing 1.3040 and 1.3070 as the next major targets.

USDJPY came close to breaking the 112.00 level on Wednesday, finishing the day at a one-month high of 111.86. According to the RSI, the market could maintain positive momentum in the short-term as the indicator is positively sloped above its neutral threshold of 50, though the fast Stochastics suggest that the market is located in overbought territory and therefore some weakness is possible; the green %K line is fluctuating around the red %D line in overbought zone above 80.

On the upside, the price could attempt to overcome the 111.86 high and retest the 112.00 round level, which if successfully broken the door could open for the 113.00 psychological level and the 113.15 top reached on July 19. Should traders continue to buy the pair above that peak, bringing the long-term uptrend back into play, resistance could then run towards the 114-114.72 area.

A reversal to the downside, however, could find immediate support at the 23.6% Fibonacci of the upleg from 104.62 to 113.15, around 111.14, while slightly lower the 111.00 key-level could also come into view. If the latter fails to halt bearish movements, the next target could be the 38.2% Fibonacci of 109.89 ahead of the 200-day SMA which currently lies near the two-month low of 109.76 marked on August 21.

Turning to the medium-term trading, the outlook is neutral over the past three months and only a decisive close above 113.15 could resume the bullish picture. On the other hand, a significant decline below May’s trough of 108.10 could shift the outlook to bearish.

XAUUSD (1203.90): Gold prices retreated from a three week high with price action currently posting strong consolidation near the 20-period moving average on the 4-hour chart. Gold prices are likely to extend the short correction toward 1197.50 region to establish support. Forming a base around the support level could potentially pave way for gold prices to target 1219.75. To the downside, a close below the support could push prices lower toward 1180.25.

GBPUSD (1.3031): The British pound posted strong gains after technical set up from the ascending triangle saw price action breaking past 1.2928. In the near term, the GBPUSD is likely to retest the breached resistance level. Establishing support at this level could indicate further gains to the upside. The next main resistance level is seen at 1.3205 which could be tested in the near term. To the downside, a close below 1.2928 could, however, signal a decline back with GBPUSD likely to trade within the range of 1.2928 and 1.2808.