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The US dollar is gradually moving higher against the Japanese yen currency, as optimism grows over low-level Sino-US trade talks in Washington. Despite the recent move higher, the USDJPY pair remains intraday bearish while price continues to trade below the 110.55 level. Traders now look to the FOMC Meeting Minutes and the outcome of Chinese and US trade talks.

The USDJPY pair is intraday bearish while trading below the 110.55 level, key support is found at the 109.80 and 109.00 levels.

If the USDJPY pair trades above the 110.55 level, buyers will likely test towards the 110.79 and 111.00 resistance levels.

The British pound is now starting to correct lower against the US dollar, after finding strong technical resistance above the 1.2900 level. The MACD indicator is also starting to trend lower on the lower time frames, adding validity to move lower. The GBPUSD pair still retains an intraday bullish bias while price trades above the 1.2845 level.

The GBPUSD pair is only bullish while trading above the 1.2845 level, key resistance is now found at the 1.2925 and 1.2958 levels.

If the GBPUSD pair moves below the 1.2845 level, key intraday support is found at the 1.2800 and 1.2775 levels.

WTI oil price rose on Wednesday, keeping bullish near-term bias and extending gains into third straight day.

Fundamentals were boosted by unexpected fall in crude stocks (Tuesday's API report showed draw of 5.17 million barrels compared to last week's 3.66 million barrels build) and rising concerns about the impact of US sanctions on Iran.

Improving technical studies add to positive outlook, as the price broke above 10SMA (which turned sideways and currently at $66.42).

Bulls eye next pivot at $66.85 (Fibo 61.8% of $68.35/$64.43) break of which would open way towards falling 20SMA ($67.48).

US EIA crude stocks report is in focus today (1.49 million barrels draw f/c vs 3.56 million barrels build last week) which is expected to maintain near-term bullish bias if data come in line / above expectations.

Stronger bullish acceleration could be expected on surprise (bigger than expected draw in crude inventories).

Supports at $66.21 (10SMA) and $65.93 (session low / broken Fibo 38.2% of $68.35/$64.43 bear-leg) are expected to hold and keep near-term bulls in play.

Res: 66.85, 67.48, 67.89, 68.35
Sup: 66.21, 65.93, 65.30, 64.78

Notes/Observations

• Quiet session in Europe
• Recent ECB wage data aids the case for policy exit down the road
• Awaiting release of US Fed Aug minutes and upcoming US-China trade talks

Asia:

• Australian PM Turnbull rejected cabinet resignations in bid to stave off renewed leadership challenge

Europe:

• EU Chief Brexit Negotiator Barnier: Brexit talks were entering final stage; talks to occur continuously from now on. Not working towards a no-deal Brexit but needed to be prepared for one
• UK Brexit Min Raab: Held a positive set of discussions over Brexit; still had significant issues to overcome but confident a deal could be reached in October. Hair raising scare stories' were far from the truth

Americas:

• US said to announce 'handshake' NAFTA deal related to Mexico on Thursday (Aug 23rd). (Note: Mexico said to deny the existence of a 'handshake' deal related to NAFTA
• Former Trump Campaign Manager Paul Manafort found guilty on eight counts including tax fraud, bank fraud charges
• Former Trump lawyer Cohen entered guilty plea at court hearing; says he violated campaign law at direction of the 'candidate', sought to influence the election

Energy:

• Weekly API Oil Inventories: Crude: -5.2M v +3.7M prior

Economic Data:

• (HU) Hungary Jun Average Gross Wages Y/Y: 11.2% v 10.0%e
• (PL) Poland July Retail Sales M/M: -0.3% v -0.2%e; Y/Y: 9.3% v 9.5%e; Real Retail Sales Y/Y: 7.1% v 7.4%e
• (ZA) South Africa July CPI M/M: 0.8% v 0.8%e; Y/Y: 5.1% v 5.1%e (highest annual pace since Sept)
• (ZA) South Africa July CPI Core M/M: 0.6% v 0.5%e; Y/Y: 4.3% v 4.2%e
• (TW) Taiwan July Unemployment Rate: 3.7% v 3.7%e
• (IS) Iceland July Wage Index M/M: 0.4% v 0.7% prior; Y/Y: 6.3% v 5.9% prior

Fixed Income Issuance:

• (SE) Sweden sold SEK1.5B in 0.75% 2028 bond; Avg Yield: 0.4689% v 0.7488% prior; Bid-to-cover: 3.13x v 3.14x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 0.0% at 384.1, FTSE 0.0% at 7563, DAX +0.3% at 12425, CAC-40 +0.2% at 5419, IBEX-35 -0.1% at 9536, FTSE MIB +0.1% at 20813, SMI -0.5% at 9040 S&P 500 Futures -0.2%]
• Market Focal Points/Key Themes: European Indices trade mixed with the DAx and CAC trending higher after an initial weaker open tracking lower US futures. In Germany shares of Continental trades sharply lower after cutting outlook on cost increases and warranty claims. Norwegian Fish farming names Greig Seafood, Marine Harest and Leroy Seafood were under pressure after results and lowered harvest volume outlook. Recent IPO Adyen trades higher after strong earnings growth, with Avast, GN Nord among other names trading higher after earnings. Hannover Re trades slightly higher after naming a new CEO; Capita also trades higher after naming former Go-ahead CFO as their new CFO. Looking ahead notable earners include Target, Royal Bank of Canada and Lowe's.

Movers

• Consumer Discretionary Headlam group [HEAD.UK] -3.6% (Earnings)
• Consumer Staples Marine Harvest [MHG.NO] -2.8% (Earnings), Leroy Seafood [LSG.NO] -2.6% (Earnings), Greig Seafood [GSF.NO] -5.3% (Earnings)
• Technology Avast [AVST.UK] +3.8% (Earnings), Adyen [ADYEN.NL] +3.8% (Earnings)
• Industrials Continental [CON.DE] -4.2% (cuts outlook) Tessenderlo [TESB.BE] -4.2% (Earnings), Costain [COST.UK] +1.9% (Earnings)
• Financials Hanover Re [HNVR.DE] +0.4% (names new CEO)
• Healthcare Capio [CAPIO.SE] +2.1% (Reports of potential higher offer)

Speakers

• Austria Central Bank to name a successor for Gov Nowotny by end-2018 (**Note: Nowotny term ends in Aug 2019)
• Former President Lula leads Datafolha Poll with 39% (if allowed to run). Bolsonaro (PSL party) has 22% lead without Lula
• Australia Liberal party members (ruling party) said to call a party room meeting for evening of Aug 22nd (**Note: Could be the precursor for another leadership challenge to PM Turnbull)
• BOJ reportedly may raise 10-year bond target (YCC) when inflation exceeds 1% on a sustained basis
• BOJ spokesperson: Gov Kuroda not to attend this year's Jackson Hole symposium (**Note: No ECB members were slated to appear at the symposium as well)
• Kuwait Oil Min Almarzooq: oil markets expected to remain stable until year end. OPEC and non-OPEC oil production to be reviewed at Algeria meeting

Currencies

• USD was off its worst levels for most of the session after a multi-day sell-off from recent cycle highs but appeared to remain on the defensive in a quiet EU session with participants awaiting release of US Fed Aug minutes and upcoming US-China trade talks
• EUR/USD and GBP/USD pairs were not too far from recent 2-week highs at 1.1590 and 1.2890 respectively. Dealers took notice of recent Euro Area wage data that aided the ECB case for policy exit down the road.

Fixed Income

• Bund Futures trades at 163.32 up 3 ticks retracing some of the move as European Indices trade higher. Resistance moves to 163.82 then 164. A downside break of 163.00 sees 162.69 initially.
• Gilt futures trades at 123.46 up 11 ticks following the move in Treasuries. Continued support at 123.12, with a continued move higher targeting 123.93 then 124.00.
• Wednedsay 's liquidity report showed Tuesday's excess liquidity fell from €1.878T to €1.877T. Use of the marginal lending facility rose from €45M to €46M.
• Corporate issuance saw 2 issuers raise $2.3B in the primary market

Looking Ahead

• (PT) Portugal Jun Current Account Balance: No est v -€1.2B prior
• (PE) Peru Q2 GDP Y/Y: 5.4%e v 3.2% prior
• 05:30 (DE) Germany to sell €3.0B in 0.25% Aug 2028 Bunds
• 06:00 (IE) Ireland July PPI M/M: No est v 0.2% prior; Y/Y: No est v -0.2% prior
• 06:00 (IL) Israel Jun Manufacturing Production M/M: No est v -2.8% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (US) MBA Mortgage Applications w/e Aug 17th: No est v -2.0% prior
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (CA) Canada Jun Retail Sales M/M: -0.2%e v +2.0% prior; Retail Sales (Ex-Auto) M/M: -0.1%e v 1.4% prior
• 09:00 (MX) Mexico Jun Retail Sales M/M: 0.4%e v 1.0% prior; Y/Y: 3.4%e v 2.5% prior
• 10:00 (US) July Existing Home Sales: 5.40Me v 5.38M prior
• 10:30 (US) Weekly DOE Crude Oil Inventories
• 11:30 (BR) Brazil weekly currency flow data
• 12:00 (CA) Canada to sell 2023 notes
• 14:00 (US) FOMC Aug Minutes
• 15:00 (AR) Argentina July Trade Balance: -$0.1Be v -$0.4B prior

Market players have entered Wednesday’s trading session with an intent to maintain some distance from riskier assets ahead of trade talks between US and Chinese officials later in the day.

Asian stocks closed mostly mixed while European markets dipped as investors evaluated the latest US political developments revolving around president Donald Trump. A fresh layer of uncertainty was created over Trump’s legal woes following reports of the president’s former lawyer Michael Cohen pleading guilty to Federal charges. Wall Street could edge lower this afternoon as uncertainty and caution ahead of the FOMC minutes continue to weigh on risk sentiment.

There seems to be a sense of optimism over the pending US-China trade negotiations easing trade tensions, despite Trump stating earlier in the week that he did not expect much progress. While the possibility of a breakthrough deal from the lower level trade talks remains very low, any signs of further negotiations in the future could support global sentiment.

Dollar waits for FOMC minutes

Buying sentiment towards the Dollar took a hit during the first half of the week after Trump stepped up his criticism of the Federal Reserve.

The depreciation felt slightly overexaggerated, especially when considering that this was not the first time Trump has attacked the Federal Reserve. While his attempt to verbally intervene may pressure the Dollar in the short term, the medium to longer term outlook remains tilted to the upside. With the fundamental drivers behind the Dollar appreciation firmly intact and expectations elevated over higher US interest rates this year, the Dollar remains king.

Much attention will be directed towards the FOMC minutes from the latest Fed meeting this evening which could reinforce market expectations of a Fed rate hike in September.

In regards to the technical picture, the Dollar Index could be experiencing a technical correction on the daily charts. The breakdown below 95.50 could encourage a decline back towards 95.00. If bears are able to push prices below the 95.00 support level, the next key level of interest may be found around 94.70.

GBPUSD challenges 1.2900

The British Pound reacted positively to reports of Britain holding continuous negotiations with the European Union in a fighting bid to secure a breakthrough in Brexit talks.

A depreciating Dollar has also offered Sterling bulls some support with the GBPUSD punching above 1.2900. While this new-found sense of optimism over Brexit talks could continue supporting the Pound, the question is for how long? With just over seven months left before Britain is scheduled to officially leave the European Union, the clock is ticking. Sterling is likely to be attacked from all directions if fears heighten over the UK crashing out of the EU with no trade deal in place.

Regarding the technical perspective, the GBPUSD has staged a remarkable rebound on the daily charts thanks to a softening US Dollar. A technical breakout above 1.2900 could inspire an incline towards 1.3030. However, sustained weakness below the 1.2900 level may result in prices trading back towards 1.2820 and 1.2770, respectively.

Commodity spotlight – Gold

Gold bulls were offered ample support in the form of Dollar weakness this week.

Although prices have staged a solid rebound from the $1160 yearly low, the outlook remains tilted to the downside. With the Dollar poised to recover on heightened US rate hike expectations and safehaven demand, Gold remains vulnerable to downside losses.

Repeated Dollar weakness could push Gold prices towards the $1200 psychological level. A solid break above this level could invite an appreciation towards $1216 and $1230, respectively. However, if $1200 proves as a stubborn resistance then prices could sink back to $1180.

Despite flashing bearish signals, EUR/USD failed to halt at the weekly R1 on Tuesday. The Euro did remain near this level during the morning session, but was then pushed higher by a strong three-hour surge up to 1.16. As a result, the total gain for the day was 100 pips.

As apparent on the chart, the Euro has been reluctant to move past the given psychological level. This means that the expected decline is likely to happen today. Technical indicators are starting to edge lower which is also a bearish signal. The nearest support is the 55-hour and 100-period (4H) SMAs and the weekly R1 circa 1.15.

In case fundamentals cause high volatility in the market, the Euro might even target the 200-hour SMA at 1.1420. In terms of upside potential, the senior channel and the monthly PP are located at 1.1685.

The Sterling has strengthened significantly against the US Dollar since mid-Friday. This marks a 175-pip surge, with 107 pips being added on Tuesday. By this morning, the pair had managed to reach the weekly R2 at 1.2915. The monthly S1 is also located nearby.

The Sterling has remained near this resistance cluster for some time now. It could point to a possible change in sentiment, thus resulting in a decline today.

The nearest support of importance is the weekly R1 and the 55-hour SMA near 1.2830; however, the trading range could be even wider in the wake of fundamental events later in the day. The pair is unlikely to fall below the 200-hour SMA, the monthly S2 and the weekly PP at 1.2750.

The Japanese Yen depreciated against the US Dollar during the morning hours. The main pair reached the 100– hour simple moving average at midnight to Wednesday which paused the surge. In general, the US Dollar recovered 47 pips or 0.43%.

On Wednesday morning, the main pair was at 110.40 showing a bullish signal. The 55– hour simple moving average was the support for the currency pair for the day. The simple moving average was also set to be strengthened by a monthly pivot point just above the SMA.

The upward momentum is likely to continue during the session reaching the 200-hour simple moving average.

The yellow metal has depreciated 0.35% against the US Dollar starting from 22:00 GMT on Tuesday until 07:00 GMT on Wednesday. The pair tested the bottom boundary of the trend line at 1,192.77 on Wednesday morning.

During Wednesday morning hours, Gold was at 1,197.42, testing the 55-period (4H) and 200-hour SMAs as additional support level to recover itself. In addition, the crossover of the 55 and 200-hour SMAs should be a strong buy signal for traders. It seems that during today's session the yellow metal should try to reach the upper boundary of the junior ascending channel.

In general, the main pair shows bullish signals continuing to the retracement of the rally from the monthly low of 1,160.25.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.14808
Open: 1.15703
% chg. over the last day: +0.83
Day's range: 1.15651 – 1.15767
52 wk range: 1.0571 – 1.2557

Yesterday, there were aggressive purchases on the EUR/USD currency pair. The growth of quotes exceeded 100 points. At the moment, the key support and resistance levels are 1.15400 and 1.15900, respectively. We recommend opening positions from these marks. The trading instrument has the potential for further growth. Investors took a wait-and-see attitude before the publication of the FOMC minutes.

The news feed on 2018.08.22:

Existing home sales in the US at 17:00 (GMT+3:00);

Publication of the FOMC minutes at 21:00 (GMT+3:00).

The price has fixed above 50 MA and 200 MA, which indicates the power of buyers.

The MACD histogram is located in the positive zone, but below the signal line, which gives a weak signal to buy EUR/USD.

Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which indicates a decrease in quotes.

Trading recommendations

Support levels: 1.15400, 1.14800, 1.14300
Resistance levels: 1.15900, 1.16200, 1.16500

If the price fixes above the resistance level of 1.15900, further growth of the EUR/USD currency pair is expected. The movement is tending to 1.16200-1.16500.

Alternative option. If the price fixes below the "mirror" support of 1.15400, we recommend considering sales of EUR/USD. The movement is tending to 1.14900-1.14500.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.27944
Open: 1.28750
% chg. over the last day: +0.84
Day's range: 1.28938 – 1.29132
52 wk range: 1.2361 – 1.4345

Yesterday, aggressive purchases prevailed on the GBP/USD currency pair. The growth of quotes exceeded 100 points. At the moment, local support and resistance levels are 1.29200 and 1.28700, respectively. The positions should be opened from these marks. The trading instrument has the potential for further recovery.

The news feed on the UK economy is calm.

The price has fixed above 50 MA and 200 MA, which indicates the power of buyers.

The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy GBP/USD.

Stochastic Oscillator is located in the neutral zone, the %K line is below the %D line, which signals to sell GBP/USD.

Trading recommendations

Support levels: 1.28700, 1.28200, 1.27700
Resistance levels: 1.29200, 1.29500

If the price fixes above 1.29200, GBP/USD currency pair is expected to grow. The target movement level is 1.29500-1.29700.

Alternative option. If the price fixes below 1.28700, the correction of GBP/USD quotes is expected. The target movement level is 1.28400-1.28200.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.30437
Open: 1.30367
% chg. over the last day: -0.09
Day's range: 1.30246 – 1.30413
52 wk range: 1.2059 – 1.3795

The technical pattern on the USD/CAD currency pair is ambiguous. The trading instrument is in a sideways trend. At the moment, financial market participants expect additional drivers. Local support and resistance levels are 1.30150 and 1.30450, respectively. We recommend opening positions from these marks.

At 15:30 (GMT+3:00) a report on retail sales will be published in Canada.

The price has fixed below 50 MA and 200 MA, which indicates the power of sellers.

The MACD histogram is near the 0 mark.

Stochastic Oscillator is located in the neutral zone, the %K line is crossing the %D line. There are no accurate signals.

Trading recommendations

Support levels: 1.30150, 1.29800
Resistance levels: 1.30450, 1.30700, 1.31000

If the price fixes below 1.30150, the USD/CAD quotes are expected to decline. The movement is tending to 1.29800-1.29600.

Alternative option. If the price fixes above the resistance of 1.30450, it is necessary to consider purchases of USD/CAD. The movement is tending to 1.30700-1.31000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 110.063
Open: 110.231
% chg. over the last day: +0.05
Day`s range: 110.413 – 110.428
52 wk range: 104.56 – 114.74

There is a variety of trends on the USD/JPY currency pair. Investors expect an additional drivers. At the moment, local support and resistance levels are 110.200 and 110.550, respectively. The positions should be opened from these marks. We recommend paying attention to the FOMC minutes.

The news feed on the economy of Japan is calm.

Indicators do not send accurate signals: the price has fixed between 50 MA and 200 MA.

The MACD histogram is in the positive zone, above the signal line, which gives a strong signal to buy USD/JPY.

Stochastic Oscillator is located near the overbought zone, the %K line is below the %D line, which indicates a decrease in quotes.

Trading recommendations

Support levels: 110.200, 109.850
Resistance levels: 110.550, 110.850, 111.150

If the price fixes above the resistance level of 110.550, the USD/JPY currency pair is expected to grow. The movement is tending to 110.850-111.000.

Alternative option. If the price fixes below 110.200, it is necessary to consider sales of USD/JPY. The movement is tending to 109.850-109.500.