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The USD/JPY bullish momentum is challenging the previous resistance spot (orange line). A bullish breakout could see the price move up towards the Fibonacci levels, which could be a bearish bouncing spot if the wave X (pink) pattern plays out. A break below the support trend line (blue) could confirm the end of wave X and the continuation of the wave E (purple).

The USD/JPY seems to be building a bull flag chart pattern in a wave 4 correction (blue) as long as the price stays above the 50% Fibonacci retracement level. A break below the 50% Fib and support zones (blue line and purple box) could indicate the start of a larger bearish correction. A bullish break above the resistance (red and orange lines) could indicate a move up towards the Fibonacci targets.

EURUSD continues to recoup losses which drove the market to a 1-year low of 1.1300 on August 15, with a spirited recovery to an almost 1-month high of 1.1652 during Monday’s Asian session. For short-term trading, the RSI and the MACD indicate that positive momentum could hold as the former picks up speed above the 50 neutral mark and the latter distances itself above its red signal line. Moreover, the market created a bullish doji around 1.1300, justifying the recent positive reversal. However, the fast Stochastic oscillator is warning that the rally could be overstretched and negative corrections in the very short-term are still possible; the green %K line and the red %D line move south after posting a bearish cross above 80 in the overbought area.

Should bullish pressures dominate, the price could try to overcome the 1.1700 round-level before it touches the 38.2% Fibonacci of 1.1724 of the downleg from 1.2412 to 1.1300. Even higher the area between 1.1800 and 1.1850 which encapsulates the 50% Fibonacci and June’s peaks could attract greater attention as any decisive close above this zone could trigger stronger bullish actions and at the same time increase speculation that an uptrend is on the way.

On the flip side, a reversal to the downside could meet support at the 23.6% Fibonacci of 1.1560, while slightly lower, the 1.1500 round-level could be a stronger obstacle to pass through as the market failed to pierce the level a couple of times from the end of May to early August. However, if bears manage to break through that barrier too, attention could turn to the 1.1400 and 1.1300 psychological levels.

Turning to the medium-term trading, the market returned to neutrality after the rebound on the 1.1300 key level, rising back into the range it recorded between 1.1500 and 1.1850 in the previous three months. Any close above this range could shift the medium-term picture to bullish, while a close below that could bring bearish outlook into play again.

To sum up, the market looks bullish in the short-term, while in the medium-term the picture remains neutral.

Daily Pivots: (S1) 128.64; (P) 129.03; (R1) 129.70; More....

No change in EUR?JPY's outlook. As long as 127.88 minor support holds, further rally is expected in EUR/JPY to resistance zone between 131.97 and 61.8% retracement of 137.49 to 124.61 at 132.56. However, break of 127.88 will argue that the rebound from 124.89 has completed. In that case, intraday bias will be turned back to the downside for 124.61/89 support zone.

In the bigger picture, EUR/JPY once again rebounded ahead of 124.08 key resistance turned support. It's also held above long term trend line from 109.03 (2016 low). The development argues that such rise from 109.03 might now be over yet. Decisive break of 61.8% retracement of 137.49 to 124.61 at 132.56 will pave the way to retest 137.49 high. But, firm break of 124.08 will argue that whole rise from 109.03 (2016 low) has completed at 137.49. Deeper decline would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90 next.

Here are the latest developments in global markets:

FOREX: The US dollar index is marginally higher on Monday (+0.06%), recovering some of the notable losses it posted on Friday following some relatively cautious remarks from Fed Chairman Powell that left the bulls disappointed. The euro capitalized on the dollar’s weakness and recovered across the board, while conversely, the yen retreated – weighed on by the boost in risk appetite that Powell fueled. Meanwhile, the British pound remained on the back foot, amid no signs of progress in Brexit talks.

STOCKS: Wall Street closed in the green on Friday, buoyed by some Fed signals that played down expectations for aggressive rate increases, thereby boosting risk appetite. The S&P 500 (+0.62%) and the Nasdaq Composite (+0.86%) both broke new record highs. The Dow Jones advanced too (+0.52%) but remained well away of its own all-time peaks. Futures tracking the S&P, Dow, and Nasdaq 100 are all currently safely in positive territory, pointing to a higher open today as well. In similar fashion, Asia was a sea of green on Monday. In Japan, the Nikkei 225 and Topix gained 0.88% and 1.16% respectively, while in Hong Kong the Hang Seng climbed by 2.17%. The same was true in Europe, where all the major indices were set to open much higher today, futures suggest.

COMMODITIES: WTI was down by 0.2% at $68.58 per barrel after posting its first weekly advance in around two months last week. A drawdown in US crude inventories, a strike in North Sea fields and upcoming US sanctions on Iran were factors supporting the precious liquid during the preceding week. Meanwhile, Brent crude traded lower by 0.1% at $75.73/barrel. In precious metals, dollar-denominated gold was flat at around $1.205.50 per ounce; in the previous week it gained on the back of broad dollar weakness.

Major movers: Dollar skids after Powell’s cautious remarks; NAFTA back in focus

The US dollar corrected lower on Friday, following some dovish-perceived comments from Fed officials, and most notably from Chairman Powell. Speaking at the Jackson Hole economic symposium, the Fed chief said he doesn’t see clear signs of inflation accelerating above the Fed’s target, and that the risk of the economy overheating is not major. His serene tone on the inflation outlook likely downplayed expectations for aggressive rate increases moving forward, sending the dollar lower and boosting risk appetite. Euro/dollar broke firmly back above the 1.1600 mark, while both the S&P 500 and the Nasdaq Composite touched new record highs in the aftermath as investors looked towards riskier assets.

The euro was the major beneficiary from the dollar’s weakness, advancing against all its major peers on Friday. Among the most notable movers was euro/sterling, which surged to reach a fresh one year high of 0.9057, before pulling back slightly today. Judging by the price action, sentiment towards the British pound remains highly fragile, amid a combination of a dovishly-priced BoE rate path and the continued lack of meaningful progress in the Brexit negotiations.

Turning to trade issues, recent media reports suggest that the US and Mexico are very close to completing a bilateral NAFTA agreement, setting the stage for Canada to finally rejoin the negotiations in order to finalize a trilateral deal. Adding credence to such expectations, US President Trump tweeted on Saturday that: “a big trade agreement with Mexico could be happening soon!”.

Indeed, seeing this through Trump’s eyes, a deal prior to the US midterm elections in November could be highly valuable, in the sense that it can be presented to the electorate as a victory with which to justify his administration’s confrontational trade policies. Any formal signs that a concrete agreement is inching closer could trigger a sizeable relief rally in the loonie, as trade uncertainty fades and investors price in a potentially more aggressive rate-hike path by the BoC.

Elsewhere, the yuan was little changed versus the greenback after surging on Friday to add 1.3%; the leg lower in USDCNH was spurred by the PBOC’s move to resume using a tool in its daily fixing of the pair that is supportive of the Chinese currency.

Day ahead: German Ifo surveys due; NAFTA deal on the horizon?

Monday’s calendar is rather light, featuring the Ifo surveys gauging business sentiment in Germany. Beyond releases, other developments, such as on NAFTA, will be closely monitored.

At 0800 GMT, the Ifo Institute’s surveys measuring business morale in Germany, the eurozone’s largest economy, will be made public. The business climate index, which barring a two-month period that remained steady, has been losing steam since reaching a record high in November, is anticipated to slightly improve in August. A minor improvement in August relative to July is also projected for the indices gauging current conditions and future expectations. Trade risks, including the threat of US tariffs on cars and auto parts, have been weighing on sentiment in previous months.

Dollar/peso started Monday’s trading with a gap lower as speculation that the US and Mexico are getting closer to a NAFTA deal continues to grow. Developments, which are also expected to affect the loonie, will be eyed.

Meanwhile, Brexit and trade are themes that remain in the background, with any commentary on these to fronts also having the capacity to move markets.

Technical Analysis: EURUSD eases a bit after touching 3½-week high; bearish signal by stochastics in very short-term

EURUSD has retreated a bit after hitting a three-and-a-half-week high of 1.1653 earlier on Monday. The Tenkan- and Kijun-sen lines remain positively aligned in support of a bullish bias, though the two have eased somewhat. In addition, the stochastics are giving a bearish signal in the very short-term, as the %K line has moved below the slow %D one.

Upbeat Ifo survey results out of Germany may boost the pair. Resistance to advances may come around the earlier hit three-and-a-half-week high of 1.1653, with stronger advances shifting the focus to the 1.17 round figure, and then to the zone around 1.1750 which encapsulates a few peaks from the recent past.

On the downside and in case of disappointing German data, immediate support seems to be taking place around the current levels of the Tenkan- and Kijun-sen lines at 1.1593 and 1.1572 correspondingly. Further below, the attention would turn to the area around the 100-day moving average at 1.1500.

Daily Pivots: (S1) 1.5812; (P) 1.5880; (R1) 1.5929; More....

Intraday bias in EUR/AUD remains neutral as consolidation from 1.5945 temporary top is in progress. Deeper retreat could be seen but downside should be contained by 4 hour 55 EMA (now at 1.5759) to bring rise resumption. Above 1.5945 will target 61.8% projection of 1.5271 to 1.5886 from 1.5601 at 1.5981 first. Break will target 100% projection at 1.6216, which is close to 1.6189 high.

In the bigger picture, EUR/AUD drew strong support from 55 week EMA and rebounded. And the development argues that medium term rally from 1.3624 (2017 low) is still in progress. Firm break of 1.6189 will target a test on 1.6587 (2015 high). On the downside, break of 1.5601 support will now be the first sign of medium term reversal, and will bring a test on 1.5271 key support for confirmation.

The euro currency continues to rise against the US dollar after Federal Reserve Chair Jerome Powell struck a dovish tone towards US inflation expectations at Jackson Hole. The EURUSD pair is only intraday bullish while trading above the 1.1600 level and is further supported by a bullish technical breakout above a well-defined triangle pattern.

The EURUSD pair is intraday bullish while trading above the 1.1600 level, key resistance is found at the 1.1650 and 1.1681 levels.

If the EURUSD pair trades below the 1.1600 level, sellers will likely target the 1.1575 and 1.1554 support levels.

The British pound is losing bullish momentum against the against the US dollar after the pair was sold aggressively from the 1.2880 level on Friday. Brexit concerns have limited the GBPUSD pairs upside, as the UK moves into the final stages of negotiations with the European Union. Buyers will continue to aim for the 1.2910 level, while sellers will target towards the 1.2775 support level.

The GBPUSD pair is only bearish while trading below the 1.2850 level, key support is now found at the 1.2810 and 1.2775 levels.

If the GBPUSD pair holds above the 1.2850 level, key intraday resistance is found at the 1.2910 and 1.2958 levels.

Daily Pivots: (S1) 0.9014; (P) 0.9036; (R1) 0.9071; More...

With 0.9001 minor support intact, intraday bias in EUR/GBP remains on the upside for further rally. Sustained trading above 61.8% retracement of 0.9305 to 0.8620 at 0.9043 will pave the way to retest 0.9305 key resistance. On the downside, below 0.9001 minor support will turn bias neutral and bring consolidations. But near term outlook will stay bullish as long as 0.8895 support holds.

In the bigger picture, EUR/GBP is staying in long term range pattern from 0.9304 (2016 high). The corrective structure of the fall from 0.9305 to 0.8620 is raising the chance that rise from 0.8312 to 0.9305 is an impulsive move. But we're not too confident on it yet. In any case, we'd stay cautious on strong resistance from 0.9304/5 to limit upside in case of further rally. Meanwhile, if there is another medium term decline, strong support will likely be seen from 0.8303 to contain downside.

Currency traders will be monitoring economic data from both sides of the Atlantic on Monday, with German and US reports set to generate the bulk of the headlines. In monetary policy, the fallout from the annual Jackson Hole Symposium is also on the agenda as traders prepare for multiple US interest rate hikes in the final four months of the year.

Action begins at 08:00 GMT with a report on German business confidence courtesy of the IFO Group. Germany's business climate index is forecast to rise to 102.0 in August from 101.7 the previous month. The current assessment indicator is forecast to edge up 0.2 points to 105.5. Meanwhile, the expectations gauge likely rose to 98.5 in August from 98.2 the month before.

Shifting gears to North America, the Chicago Federal Reserve Bank will release its monthly gauge of business activity. The Chicago Fed National Activity Index (CFNAI) is forecast to fall to 0.14 in July from 0.43 the month before.

The Dallas Federal Reserve Bank will release the regional manufacturing business index at 14:30 GMT. The monthly indicator is forecast to strengthen to 36.9 in August from 32.3 in July.

Economic data will remain in the headlines all week long, with the US Commerce Department scheduled to report on personal incomes and outlays, personal consumption expenditures and weekly jobless claims. Preliminary inflation figures for Germany and the broader Eurozone will also be released.

EUR/USD

Europe's common currency began its long road to recovery last week as the US dollar backtracked against a basket of its peers. The EUR/USD exchange rate jumped 0.7% on Friday to trade at 1.1626, the highest in more than two weeks. In terms of technical indicators, the pair faces immediate resistance at 1.1660, followed by 1.1700 and 1.1745. On the opposite side of the ledger, support is located at 1.1585, 1.1545 and 1.1500.

GBP/USD

Cable traded as high as 1.2929 last week before profit-takers drove prices back down toward the mid-1.2800 region. From a technical standpoint, the GBP/USD exchange rate faces immediate resistance at the psychological 1.2900 level. Above that point, last week's high is likely to limit gains. On the flipside, immediate support is located at 1.2800 followed by 1.12770.

AUD/USD

The Aussie bounced back sharply at the end of last week and looks poised to continue higher following the ousting of Australian Prime Minister Malcolm Turnbull. The AUD/USD exchange rate currently sits at 0.7335, with the bulls eyeing 0.7355 as the next target. On the opposite side of the ledger, immediate support is located at 0.7300.

Daily Pivots: (S1) 1.1384; (P) 1.1408; (R1) 1.1453; More...

Intraday bias in EUR/CHF remains on the upside as rebound from 1.1242 short term bottom is in progress for 1.1489 support turned resistance first. Decisive break there will add to the case of trend reversal ahead of key support zone between 1.1154/98. Further rise should then be seen to 1.1713 resistance. On the downside, below 1.1329 minor support, will turn bias to the downside for retesting 1.1242 low.

In the bigger picture, for now, the price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by 1.1198 (2016 high), 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. This cluster level is in proximity to long term channel support (now at 1.1189) too. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend.