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Daily Pivots: (S1) 0.7316; (P) 0.7337; (R1) 0.7366; More...

AUD/USD is staying in range of 0.7237/7381 and intraday bias remains neutral. More consolidation is likely in near term. In case of stronger rise through 0.7381 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.

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.

Market movers today

Another day with tier-2 releases, as we are waiting for euro area and US inflation data later this week.

In the US, we get consumer confidence and preliminary trade data.

In the euro area, money supply and lending data are due out.

In Sweden, retail sales and trade data are due out this morning. Norwegian consumer confidence was out this morning, falling to 16.4 in Q3 from 19.6 in Q2.

Selected market news

The US and Mexico struck a trade deal yesterday sending stock markets and bond yields higher, see Bloomberg for more details. The deal will replace NAFTA and Trump said yesterday that he hopes Canada will join the agreement as well. The deal has given some hope that Trump is moving back from the brink of a global trade war after his recent agreement with the EU as well. What s left is still a solution to the US-China trade war but it may be part of Trump's strategy to isolate China to put maximum pressure on them to get more concessions before making a trade deal. We still believe Trump will turn the pressure up a notch on China by announcing tariffs on another USD200bn worth of Chinese imports in September. However, market hopes of a trade deal with China sooner or later are moving higher as Trump strikes other deals.

Another positive for the European markets yesterday was an upside surprise in the German ifo business confidence. The expectations index, which is the forward-looking part of the survey, jumped from 98.2 in July to 101.2 in August (consensus 98.4), giving yet further evidence that the decline in euro area growth momentum is behind us, as also witnessed by euro PMI data last week.

The San Francisco Fed yesterday released a paper on the US yield curve as a predictor of recessions. The paper concludes that an inversion of the yield curve has been a reliable indicator of recession but that the most useful measure is the difference between US 10-year yields and the 3-month Treasury rate - not the spread between 10-year yields and 2-year yields, which is often referred to. Measured on this spread they highlight that the curve is still far from inverting as the spread is nearly one percentage point away from inverting. The paper also argues against the case that 'this time is different' compared to previous periods of curve flattening when judging the predictive properties of the yield curve. Finally, the authors highlight that correlation is not the same as causation and say that 'great caution is therefore warranted in interpreting the predictive evidence'.

If the paper is representative of the FOMC views it doesn't suggest that the yield curve should be an obstacle for a continued gradual hiking path well into 2019. For more on this topic listen to our Macro Strategy Views Podcast released yesterday: Why the UST curve will invert and implications for euro markets.

Daily Pivots: (S1) 110.88; (P) 111.12; (R1) 111.30; More...

USD/JPY is staying in tight range below 111.48 temporary top and intraday bias remains neutral. Outlook is unchanged that correction from 113.17 should have completed at 109.76 already. On the upside, above 111.48 will extend the rebound from 109.76 to 112.14 first. Break will target a test on 113.17 high. Meanwhile, below 110.74 minor support will dampen the bullish case and turn focus back to 109.76 instead.

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.

General Trend:

• Asian equities trade generally higher, S&P500 and Nasdaq traded at record highs on Monday
• Toyota Motor rises after confirming investment in Uber
• China bank earnings in focus: Bank of China, Agbank and Construction Bank may report results later today
• PBoC continues to strengthen the yuan after resuming counter-cyclical factor
• New Zealand PM establishes panel to address declines in business confidence
• HKMA continues to intervene in order to support the HKD

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• ASX 200 Financials index +1.3%, Resources +0.8%, Utilities +0.8%, REIT +0.6%; Telecom -2.2%
• (AU) Australia sells A$150M v A$150M indicated in Feb 2022 indexed bonds, avg yield 0.3481%, bid to cover: 5.0x
• (NZ) New Zealand PM Ardern: govt will not relax budgetary responsibility rules; establishes an advisory council amid weak business sentiment

China/Hong Kong

• Shanghai Composite opened +0.1%, Hang Seng +0.9%
• Hang Seng Materials index +1.4%, Info Tech +0.6%, Industrial Goods +0.6%, Energy +0.5%, Consumer Goods +0.4%, Financials +0.3%, Property/Construction flat; Services -0.4%
• (CN) CHINA PBOC SET YUAN REFERENCE RATE: 6.8052 V 6.8508 PRIOR (strengthens the CNY by the most since early June 2017)
• (CN) China Press Commentary: Reiterates yuan (CNY) exchange rate to keep stable
• (CN) China PBoC Open Market Operation (OMO): Skips OMO v skipped prior: Net: CNY50B drain v CNY120B drain prior
• (CN) China said to have proposed removing birth limits from law - Chinese Press
• (CN) China Agriculture Ministry: Recent rise in vegetable prices due to normal seasonal fluctuations
• (CN) China Dalian Commodity Exchange: To cut the trading limit and margin requirements for coke, coking coal and iron ore futures; effective from Aug 28th

Japan

• Nikkei 225 opened +0.7%
• TOPIX Marine Transportation index +2.9%, Securities +1.4%, Iron & Steel +1%, Electric Appliances +1%, Real Estate +0.9%; Retail Trade -0.5%
• Toyota Motor: Confirms $500M investment in Uber
• (JP) Japan to forgo expert panel for sales tax increase - Japanese Press
• (JP) Japan Fin Min Aso: Expects finance dialogue with China to produce results to pave the way for PM Abe's visit to China later in 2018

Korea

• Kospi opened +0.6%
• (KR) South Korea Finance Ministry Releases Statement on Budget Plan: To issue up to KRW97.8T of government bonds in 2019; Plans 2019 budget with fiscal spending of KRW470.5T, +9.7% y/y (as speculated)
• (KR) South Korea Aug Consumer Confidence: 99.2 v 101.0 prior (falls for 3rd straight month, lowest reading since March 2017)
• (KR) South Korea sells KRW1.3T v KRW1.3T indicated in 30-year bonds: avg yield 2.30%
• (KR) South Korea: No change in plan for Sept summit between President Moon and North Korea leader Kim - South Korean press

North America

• US equity markets ended higher: Dow +1%, S&P500 +0.8%, Nasdaq +0.9%, Russell 2000 +0.2%
• S&P500 Financials +1.4%, Materials +1.3%
• Campbell Soup: Board is said to be expected to note that the company will not sell itself - NY Post
• (US) US and Mexico reach trade deal to replace NAFTA
• US White House: Trump and Canada Trudeau agreed to continue 'productive' trade talks: Trump and German Merkel agreed on more talks over US/EU trade barriers

Europe

• (FR) France PM Philippe has asked ministers to prepare contingency measures in the case of a ‘no-deal’ Brexit – financial press
• (DE) Political allies of Germany Chancellor Merkel reportedly calling for tax cuts as surplus widens - German press
• (UK) UK Trade Sec Liam Fox: Uncertainties include deteriorating US/China trade dispute: expects EU reply on UK proposals in Oct

Levels as of 01:30ET

• Nikkei 225, +0.2%, ASX 200 +0.7%, Hang Seng +0.2%; Shanghai Composite -0.2%; Kospi flat
• Equity Futures: S&P500 flat; Nasdaq100 flat, Dax flat; FTSE100 +0.6%
• EUR 1.1698-1.1669 ; JPY 111.37-110.98 ; AUD 0.7356-0.7326 ;NZD 0.6713-0.6683
• Aug Gold flat at $1,216/oz; Sept Crude Oil flat at $68.88/brl; Sept Copper -0.4% at $2.721 /lb

Daily Pivots: (S1) 0.9773; (P) 0.9810; (R1) 0.9832; More....

USD/CHF's fall resumed by breaking 0.9807 and reaches as low as 0.9786 so far. Intraday bias is back on the downside for 100% projection of 1.0067 to 0.9866 from 0.9981 at 0.9780 and possibly below. As current decline from 1.0067 is seen as the third leg of consolidation from 1.0056, we'd expect strong support from 38.2% retracement of 0.9186 to 1.0056 at 0.9724 to bring rebound. On the upside, break of 0.9865 resistance should indicate short term bottoming and turn bias to the upside for 0.9981 resistance.

In the bigger picture, current development suggests that the consolidation pattern from 1.0056 is extending. As long as 38.2% retracement of 0.9186 to 1.0056 at 0.9724 holds, we'd expect rise from 0.9186 to resume at a later stage to retest 1.0342 key resistance (2016 high). However, sustained break of 0.9724 fibonacci level will bring deeper fall, as another declining leg in the long term range pattern.

Daily Pivots: (S1) 1.2847; (P) 1.2875; (R1) 1.2920; More...

GBP/USD is still bounded in range of 1.2798/2935 and intraday bias remains neutral first. As noted before, as long as 1.2956 support turned resistance stays intact, near term outlook remains bearish for further decline. On the downside, below 1.1798 minor support will target 1.2661 low first. Break will resume larger fall from 1.4376. However, considering bullish convergence condition in daily MACD, break of 1.2956 will indicate medium term bottoming. And stronger rebound would be seen back to 55 day EMA (now at 1.3060) and above.

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). Current downside acceleration argues that it's possibly resuming long term down trend. In any case, outlook will stay bearish as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. Retest of 1.1946 should be seen next.

For the 24 hours to 23:00 GMT, the EUR rose 0.41% against the USD and closed at 1.1681.

On Friday, Germanys seasonally adjusted final gross domestic product (GDP) advanced 0.5% on a quarterly basis in 2Q 2018, at par with market expectations and confirming preliminary figures. In the previous quarter, GDP had registered a rise of 0.3%.

In the macro news, data showed that, Germanys Ifo business climate index rose to a level of 103.8 in August, marking its highest level since February 2018 and compared to a reading of 101.7 in the previous month. Market expectation was for the index to climb to 101.8. Additionally, the nations Ifo current assessment unexpectedly jumped to a 5-month high level of 106.4 in August, compared to a revised level of 105.4 in the prior month. Moreover, the Ifo business expectations index registered a rise to 101.2 in August, marking its highest score since January and compared to a reading of 98.2 in the prior month.

The US dollar declined against basket of currencies, following the news of US-Mexico trade pact.

Separately, in the US, data on Friday indicated that, US preliminary durable goods orders slid 1.7% on monthly basis in July, compared to a rise of 0.8% in the prior month. Markets had expected the durable goods orders to fall 1.0%.

Meanwhile, the nations Chicago Fed national activity index a dropped to a level of 0.13 in July, compared to a revised level of 0.48 in the prior month. Market participants had envisaged the index to ease to a level of 0.45. On the other hand, the Dallas Fed manufacturing business index fell to a level of 30.9 in August. In the previous month, the index had registered a level of 32.3.

In the Asian session, at GMT0300, the pair is trading at 1.1677, with the EUR trading slightly lower against the USD from yesterdays close.

The pair is expected to find support at 1.1616, and a fall through could take it to the next support level of 1.1554. The pair is expected to find its first resistance at 1.1718, and a rise through could take it to the next resistance level of 1.1758.

Moving ahead, investors will await Germanys retail sales data for July, set to release in a while. Later in the day, US advance goods trade balance for July, followed by the Richmond Fed manufacturing index and the consumer confidence, both for August, will pique significant amount of traders attention.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.33% against the USD and closed at 1.2894.

On Friday, data showed that, UK's BBA mortgage approvals surprisingly eased to a level of 39.6K in July, defying market consensus for a rise to a level of 40.6K. In the prior month, the BBA mortgage approvals had registered a revised level of 40.3K.

In the Asian session, at GMT0300, the pair is trading at 1.2876, with the GBP trading 0.14% lower against the USD from yesterday's close.

The pair is expected to find support at 1.2836, and a fall through could take it to the next support level of 1.2797. The pair is expected to find its first resistance at 1.2908, and a rise through could take it to the next resistance level of 1.2941.

Trading trend in the Sterling today is expected to be determined by UK's Nationwide house price index for August, due to be released in a while.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD declined 0.07% against the JPY and closed at 111.13.

In the Asian session, at GMT0300, the pair is trading at 111.32, with the USD trading 0.17% higher against the JPY from yesterday’s close.

The pair is expected to find support at 111.06, and a fall through could take it to the next support level of 110.79. The pair is expected to find its first resistance at 111.47, and a rise through could take it to the next resistance level of 111.61.

The currency pair is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD declined 0.34% against the CHF and closed at 0.9797.

In economic news, Switzerland’s total sight deposits dipped to a level of CHF566.8 billion in the week ended 24 August, from CHF576.6 billion in the previous week.

In the Asian session, at GMT0300, the pair is trading at 0.9804, with the USD trading 0.07% higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9779, and a fall through could take it to the next support level of 0.9755. The pair is expected to find its first resistance at 0.9837, and a rise through could take it to the next resistance level of 0.9871.

With no macroeconomic releases in Switzerland today, investors would look forward to global macroeconomic releases for further direction.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.