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The Japanese yen is unchanged in the Wednesday session. In the North American session, USD/JPY is trading at 110.42, up 0.11% on the day. In economic news, Japanese All Industries Activity declined by 0.8%, missing the estimate of -0.7%. The U.S releases Existing Home Sales, which are expected to edge higher to 5.40 million. Today’s key event is the Federal Reserve minutes from the August 1 policy meeting. Later, Japan releases National Core CPI and the Services Producer Price Index. On Thursday, the U.S releases unemployment claims.

The Federal Reserve will be in the spotlight, with the release of the minutes of the August policy meeting. The Fed statement from that meeting described the economy as “strong”, the first time it used that term since 2006. Fed policymakers reiterated their commitment to raise interest rates gradually, as economic conditions remain strong. In the second quarter, GDP grew 4.1%, inflation has moved closer to the Fed’s target of 2%, and unemployment remains at record lows. The minutes are expected to underscore the Fed’s intent to raise rates twice more this year, in September and December. The Fed’s approach to rate hikes appears economically sound, but President Trump criticized the Fed this week, saying he was “not thrilled” with higher rates. Still, the Fed is widely expected to raise rates twice more this year, in September and December.

The yen continues to hug the symbolic 110 line and USD/JPY briefly broke into 109 territory earlier in the week. The Japanese currency has posted gains of 1.2% in August, with the currency benefitting from the risk apprehension due to the rash of tariffs that the U.S has slapped on its major trading partners, including Japan. However, the markets are hoping for an easing in trade tensions, with the U.S and China holding low-level talks on Wednesday and Thursday in Washington. Traders shouldn’t expect a dramatic breakthrough, but the fact that the two sides are talking has improved risk appetite. The U.S is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. Both sides have slapped tariffs of $34 billion on each other’s products, with another $16 billion in tariffs scheduled to kick in on Wednesday. If the talks show some progress, such as the cancellation of the upcoming tariffs, we could see some volatility from the currency markets.

German Chancellor Merkel expressed her support Foreign Minister Heiko Maas' new approach to transatlantic relationship. She said in a press conference that "it was an important contribution as it expresses in other words what I have said, that the transatlantic relationship is changing, we need to take more responsibility, Europe has to take its fate into its own hands".

Merkel also expressed that "on the question of independent payment systems, we have some problems in our dealings with Iran, no question, on the other hand we know that on questions of terrorist financing, for example, SWIFT is very important."

A spokeswoman of the Foreign Ministry said that Germany is discussing possibilities with partners, including Britain and France on an independent payment system. And she added that keeping financial channels open was vital to save the Iran nuclear deal.

The Euro remains firm at the beginning of the US session on Wednesday and pressuring 55SMA barrier t 1.1625, after bullish acceleration in European session broke above pivotal Fibo barrier at 1.1575 (61.8% of 1.1745/1.1300). Strong bullish tone extends into fifth straight day, marking nearly 3% advance from 15 Aug low at 1.1300. Momentum broke into positive territory, generating bullish signal but slow stochastic crested deeply in the overbought territory, partially offsetting positive impact. Firm break above 55SMA (also former high of 08 Aug) would generate bullish signal for extension of advance from 1.1300 towards daily cloud base at 1.1687. Broken 30SMA offers initial support at 1.1587, followed by broken Fibo barrier at 1.1575, which are expected to keep the downside protected. US housing data are in immediate focus (existing home sales 0.6% f/c vs -0.6% prev) ahead of FOMC minutes which are expected to generate fresh direction signals.

Res: 1.1625; 1.1640; 1.1687; 1.1745
Sup: 1.1587; 1.1575; 1.1538; 1.1523

Daily Pivots: (S1) 1.1501; (P) 1.1551 (R1) 1.1623; More.....

Intraday bias in EUR/USD remains on the upside as rebound from 1.1300 short term bottom is extending. Further rally could be seen towards 1.1745 resistance. We'd still expect strong resistance from there to limit upside to bring larger down trend resumption. On the downside, break of 1.1493 minor support will suggest that the rebound is completed. Intraday bias would be turned back to the downside for retesting 1.1300 low.

In the bigger picture, the down trend from 1.2555 medium term is in progress for 61.8% retracement of 1.0339 to 1.2555 at 1.1186. Note again 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. Sustained break of 1.1186 could pave the way back to retest 1.0339 low. For now, outlook will remain bearish as long as 38.2% retracement of 1.2555 to 1.1300 at 1.1779 holds, even in case of strong rebound.

Daily Pivots: (S1) 1.2822; (P) 1.2873; (R1) 1.2957; More...

Intraday bias in GBP/USD remains on the upside as rebound from 1.2661 short term bottom could extend. But we'd still expect upside to be limited by 1.2956 to bring larger down trend resumption. On the downside, below 1.2811 minor support will turn bias to the downside for retesting 1.2661 low first. However, decisive break of 1.2956 will turn focus to 1.3212 key resistance instead.

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 1.3212 resistance holds. Retest of 1.1946 should be seen next.

Daily Pivots: (S1) 109.84; (P) 110.20; (R1) 110.62; More...

USD/JPY is staying in range above 109.76 temporary low and intraday bias remains neutral first. At this point, we'd still expect strong support around 38.2% retracement of 104.62 to 113.17 at 109.90 to bring rebound. On the upside, above 111.42 will turn bias back to the the upside for retesting 113.17 first. However, sustained break of 109.90 will put 109.36 key support level in focus. Break of 109.36 will carry larger bearish implications.

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.

The Canadian dollar has posted small gains in the Wednesday session. In North American trade, USD/CAD is trading at 1.3019, down 0.16% on the day. In economic news, Canadian retail sales and core retail sales both posted declines, missing expectations. Later on, the U.S releases Existing Homes and the Federal Reserve will publish the minutes of the July policy meeting.

Canadian retail sales data for June was within expectations but nonetheless disappointed. Core Retail Sales declined 0.1%, after a strong 1.4% gain in May. This matched the estimate. Retail Sales dropped 0.2%, compared to a gain of 2.0% a month earlier. This missed the estimate of -0.1%.

All eyes are on the Federal Reserve, which publishes the minutes of its meeting from August 1. The Fed statement from that meeting described the economy as “strong”, the first time it used that term since 2006. Fed policymakers reiterated their commitment to raise interest rates gradually, as economic conditions remain strong. In the second quarter, GDP grew 4.1%, inflation has moved closer to the Fed’s target of 2%, and unemployment remains at record lows. The minutes are expected to underscore the Fed’s intent to raise rates twice more this year, in September and December. The Fed’s approach to rate hikes appears economically sound, but enter the undiplomatic President Trump, who has criticized the Fed, saying he was “not thrilled” with higher rates. Still, the Fed is widely expected to raise rates twice more this year, in September and December.

Central banks will be in market focus for the remainder of the week. On the heels of the release of the Fed minutes, the heads of the central bank will gather in picturesque Jackson Hole on Thursday. Investors will be keenly following, looking for hints regarding future monetary policy on the part of the ECB and the Federal Reserve. The U.S economy continues to show strong growth but inflation and wage growth continue to lag, and Fed chair Jerome Powell will be expected to address these issues.

Daily Pivots: (S1) 0.9818; (P) 0.9871; (R1) 0.9900; More....

USD/CHF's decline accelerates today and reaches as low as 0.9807 so far. Intraday bias remains on the downside for 100% projection of 1.0067 to 0.9866 from 0.9981 at 0.9780 and possibly below. But fall from 1.0067 is seen as the third leg of the consolidation pattern from 1.0056. Hence, we'd expect strong support from 38.2% retracement of 0.9186 to 1.0056 at 0.9724 to bring rebound. On the upside, 0.9852 minor resistance will turn intraday bias neutral first. But break of 0.9981 resistance is needed to confirm completion of fall from 1.0067. Otherwise, risk will stay on the downside.

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.

Dollar suffers fresh selling entering into US session, in particular against Euro and Swiss Franc. Two former aides of Trump, campaign manager  Paul Manafort and personal lawyer Michael Cohen are found guilty on a range of charges. More importantly, Cohen's attorney Lanny Davis said in a statement that Cohen "stood up and testified under oath that Donald Trump directed him to commit a crime by making payments to two women for the principal purpose of influencing an election." Additionally, Davis told MSNBC that Cohen has knowledge, regarding Trump, about the possibility of a "conspiracy to collude and corrupt the American democracy system in the 2016 election". Davis said Cohen would be willing to tell Mueller.

At the time of writing, Dollar is trading as the second weakest one, just better than Australian Dollar for the day. Euro and Swiss Franc are the strongest ones, followed by Canadian and New Zealand Dollar. US-China trade talk will resume in Washington today. But given that the involved officials are rather low leveled, there is no much anticipation for the meeting. FOMC minutes will also be a focus. But that was a meeting where Fed kept policy unchanged and the statement revealed nothing new. We are not expecting anything drastic from the today's minutes release. Fed is in no doubt on track for two more rate hikes this year.

Released from Canada, release sales dropped -0.2% mom in June, ex-auto sales dropped -0.1% mom. The data are not too far from market expectations. The Canadian Dollar will look into the NAFTA meeting between the US and Mexico today. There are rumors that a bilateral deal could be announced as soon as on Thursday. But at this year, there is no concrete information yet. Canada is still waiting for the door to open to rejoin the supposed trilateral negotiations.

German Merkel's government agreed to FM Maas call for European unity to counter the US

German Chancellor Angela Merkel expressed her agreements Foreign Minister Heiko Maas regarding the ideas is his recent articles. There Maas called for more unity in Europe to counter US policies. Merkel's spokesman Steffen Seibert said during a regular government news conference that, "the article by minister Maas conveyed much of what constitutes the common stance of the government towards the United States." Seibert added that Maas :presented observations that are preoccupying the government - namely stronger European unity and the question of Europe taking on more responsibility. There is a lot of agreement there."

In the article in  Handelsblatt business daily titled "Making plans for a new world order", Maas said "Europe's relationship with the US was changing even before Donald Trump and his provocative Tweets came along." An Germany now sees a historic opportunity to redefine EU's role. Mass urged "Europe United", meaning ". Europe is building on the rule of law, respect for the weaker, and our experiences that show that international cooperation is not a zero-sum game." He added that "it is in our own interest to strengthen the European part of the North Atlantic Alliance. Not because Donald Trump is always setting new percentage targets, but because we can no longer rely on Washington to the same extent.

Also, Maas emphasized the need to expose "fake news". For example, "if the current account balance of Europe and the US includes more than just trade in goods, then it is not the US that has a deficit, it's Europe." Also, " as Europeans, we have made it clear to the Americans that we consider the withdrawal from the nuclear agreement with Iran to be a mistake." Maas suggested that it is "essential that we strengthen European autonomy by establishing payment channels independent of the US, a European monetary fund and an independent SWIFT [payments] system."

Additionally, Mass said "we are striving for a multilateral alliance, a network of partners who, like us, are committed to sticking to the rules and to fair competition." And he has met with Japan, Canada and South Korea for an alliance already and more are to follow. He is proposing an "an association of states convinced of the benefits of multilateralism, who believe in international cooperation and the rule of the law", "alliance that supports and enhances a global, multilateral order".

RBA Debelle discussed low inflation in a speech

RBA Deputy Governor Guy Debelle discussed "Low Inflation" in a speech today. In short, he attributed low inflation to "include increased competition in the retail sector, historically low rental growth, the slow pace of wages growth and developments in some administered prices". Utility prices boosted inflation for "a number of years" but are expected to reduce in the period ahead.

Debelle reiterated RBA's forecast of a temporarily slow down in inflation in Q3. But beyond the September quarter, "we continue to expect inflation to be around 2¼ per cent over the next couple of years as above-trend GDP growth reduces spare capacity in the labour market and there is an associated pick-up in wages growth." Most of the others forces are expected to abut even though "there is uncertainty about how much longer they will persist".

New Zealand retail sales well above expectations

New Zealand Dollar rebounds strongly today after stronger than expected inflation data. Headline retail sales rose 1.1% qoq in Q2 versus expectation of 0.4% qoq. Core retail sales rose 1.4% qoq versus expectation of 0.8% qoq. Australian data was not bad. Westpac leading index rose 0.0% mom in July. Construction work done rose 1.6% in Q2 versus expectation of 0.9%.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9818; (P) 0.9871; (R1) 0.9900; More....

USD/CHF's decline accelerates today and reaches as low as 0.9807 so far. Intraday bias remains on the downside for 100% projection of 1.0067 to 0.9866 from 0.9981 at 0.9780 and possibly below. But fall from 1.0067 is seen as the third leg of the consolidation pattern from 1.0056. Hence, we'd expect strong support from 38.2% retracement of 0.9186 to 1.0056 at 0.9724 to bring rebound. On the upside, 0.9852 minor resistance will turn intraday bias neutral first. But break of 0.9981 resistance is needed to confirm completion of fall from 1.0067. Otherwise, risk will stay on the downside.

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.

Economic Indicators Update