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The euro currency continues to trade at a one-week high against the greenback on Monday, as the US dollar index slips lower over improving risk sentiment in broader financial markets. The EURUSD pair is trading against the neckline of a bullish inverted head and shoulders pattern with a large upside projection. Caution is warranted until the neckline break is confirmed, as the MACD indicator appears to be reaching overbought conditions on the four-hour time frame.

The EURUSD pair is intraday bullish while trading above the 1.1430 level, key resistance is found at the 1.1480 and 1.1555 levels.

If the EURUSD pair moves below the 1.1400 level key intraday support is found at the 1.1370 level.

Ethereum remains in correction mode on Monday alongside the broader cryptocurrency market, with the second largest crypto now pressing against the $300.00 resistance level. If we buyers breaking the $310.00 and holding price above this key area, a larger corrective move towards $350.00 seems likely. The MACD indicator across the four-hour time frame also suggests a large directional move is about to take place.

The ETHUSD pair is bullish while trading below the $300.00 level, key technical resistance is located at the $310.00 and $350.00 levels.

If the ETHUSD pair fails to break the $300.00 level, price may fall towards the $283.00 and $270.00 support levels.

A combination of economic data and central bank speeches will headline a relatively light event calendar on Monday.

Action begins at 06:00 GMT with a report on German producer inflation for the month of July. Germany's producer price index (PPI) rose 0.3% in June, which translated into a year-over-year gain of 3%.

At 09:00 GMT, the European Commission's statistical agency will report on construction output for the month of June. Construction spending is projected to grow 0.2% in June and 1.6% annually.

Shifting gears to North America, Bank of Canada (BOC) official Carolyn Wilkins will deliver a speech at 12:15 GMT. Later in the session, US Federal Open Market Committee (FOMC) member Raphael Bostic will deliver commentary. The FOMC voted to keep monetary policy unchanged earlier this month. The rationale for that decision will be provided on Tuesday with the release of the FOMC meeting minutes.

In addition to the economic calendar, traders are also keeping tabs on the latest developments in US-China trade negotiations. Last week, The Wall Street Journal reported that both sides were plotting a roadmap to resolve their trade dispute ahead of a multinational summit in November, where US President Donald Trump and Chinese counterpart Xi Jinping are expected to meet.

In currency news, the US dollar backtracked from yearly highs on Friday, though the fundamental picture continues to favor the greenback over the long haul. The US dollar index (DXY), which tracks the performance of the greenback against a basket of six currencies, was little changed at 96.11 on Monday.

EUR/USD

Europe's common currency took advantage of a weaker dollar on Friday, as prices reached a high of 1.1451 US. At the time of writing, EUR/USD was valued at 1.1434. Economic data could be a boon to the euro in the coming days, although the underlying outlook continues to favor the dollar. That said, several economic reports later in the week could dictate the flow of the euro-dollar cross.

GBP/USD

Cable strung together a modest recovery last week; however, the outlook remains fully tilted to the downside. The GBP/USD exchange rate currently sits at 1.2743, where it was down 0.1% from the previous close. The pair faces immediate support at 1.2700, followed by 1.2665. On the flipside, resistance is likely found at 1.2760 followed by 1.2790.

USD/CAD

The USD/CAD exchange rate is back on the defensive after a double-top formation rejected the bulls' attempt to take prices above 1.3200. At the time of writing, the North American cross is valued at 1.3065. The pair is testing the immediate support of 1.3067; a break below that level could expose 1.2970. On the opposite side of the ledger, the pair faces resistance at 1.3160, followed by 1.3292.

The EUR/USD is probably building a bullish pullback within the downtrend. The Fibonacci retracement levels of wave 4 vs 3 are critical levels of resistance.

A bearish bounce at the Fibs could confirm the wave 4 (blue) pattern and indicate a downtrend continuation towards the Fibonacci targets of wave 5 (blue) of wave 3 (purple). A break above the 61.8% Fibonacci level makes a wave 4 pattern less likely.

The EUR/USD seems to have completed an ABC (green) correction within wave 4 (blue). A break below the support trend lines (blue/greens) of the bear flag chart pattern is needed before a bearish breakout and continuation is likely.

General Trend:

• Asian equities trade generally higher following Friday’s gains in the US: Nikkei lags
• Shanghai Composite moves between gains and losses in early trade
• US/China expected to resume trade talks later this week
• Australian earnings in focus: Woolworths, Fortescue Metals and Ansell all decline after reporting financial results
• Australian financial services firm Eclipx rises on takeover bid
• US and China are expected to resume trade talks on Aug 22-23rd; talks expected to be held among lower ranking officials
• BHP expected to report earnings on Tuesday’s session
• RBA to release minutes for Aug policy meeting on Tuesday

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• ASX 200 Resources index +1%, Utilities +0.8%, REIT +0.5%, Consumer Discretionary +0.4%, Telecom +0.3%; Financials -0.7%
• (AU) Australia PM Turnbull: Enjoys the confidence of cabinet and party

China/Hong Kong

• Shanghai Composite opened +0.2%, Hang Seng +0.2%
• Hang Seng Info Tech index +2.2%, Services +1.8%, Telecom +1.7%, Energy +1.4%, Property/Construction +0.9%, Utilities +0.8%, Financials +0.3%; Industrial Goods -1.4%
• (CN) Share buybacks by State Owned Enterprises (SOE) can be used to help China equity market - Chinese Press
• (CN) China PBoC Open Market Operation (OMO): Injects CNY120B in 7-day reverse repos v CNY90B injected in 7-day reverse repos prior: Net: CNY120B injection v CNY90B injection prior
• (CN) China PBoC sets yuan reference rate: 6.8718 v 6.8894 prior
• (CN) China FX Regulator SAFE: Domestic commercial banks sold a net of $9.4B in forex in July
• (CN) China Banking and Insurance Regulator has asked financial institutions to continue to support companies that are having temporary operational difficulties - financial press
• (CN) US and China reportedly plot roadmap to resolve trade dispute before Pres Trump-Pres Xi meeting in Nov – press
• (CN) China begins 1-month safety inspections related to coal mines
• Walmart is actively working on plans to mitigate China tariffs, asking suppliers to change sourcing - press

Japan

• Nikkei 225 opened flat
• TOPIX Marine Transportation index -1.1%, Information & Communications -0.6%, Retail trade -0.6%, Electric Appliances -0.5%; Real Estate +0.6%
• Tokyo Steel: Maintains Sept prices for H-beam and hot-rolled coil steel products

Korea

• Kospi opened +0.5%
• (CN) China President Xi is expected to visit North Korea in Sept - financial press
• (KR) South Korea government said to plan to increase the 2019 budget by 9.7% to KRW470T - Local Press

Other

• (IN) Fitch: India sovereign credit risk from Rupee currency (INR) decline is 'limited'
• (MY) China Premier Li: China is ready to boost imports of Malaysia goods to 'large extent'
• (TH) Thailand Q2 GDP Q/Q: 1.0% v 0.9%e; Y/Y: 4.6% v 4.3%e

North America

• (MX) According to Mexico farm lobby, the US said to retract demand related to agriculture from NAFTA negotiations - financial press

Europe

• (TR) S&P cuts Turkey sovereign rating one notch to B+ from BB-; outlook stable (from Aug 17th)
• (TR) Moody’s cuts Turkey sovereign rating one notch to Ba3 from Ba2; outlook negative (from Aug 17th)
• (TR) US said to reject Turkey's offer to tie release of US pastor to bank relief - US financial press
• (DE) Germany Finance Ministry Monthly Report: Cites Turkey as global economic risk
• (IT) Italy expected to launch its infrastructure plan in Sept - financial press
• (UK) UK said to plan to allow EU migrants to remain under a 'No-Deal' Brexit - UK Press
• (UK) Aug Rightmove House Prices M/M: -2.3% v -0.1% prior; Y/Y: 1.1% v 1.4% prior
• (GR) ESM: Greece has successfully concluded its bailout program (as expected)
• (GR) Greece Central Bank Chief Stournaras: Said if we backtrack on what we have agreed, now or in the future, the markets will abandon us and we will not be able to refinance maturing loans on sustainable debt terms.

Levels as of 01:30ET

• Nikkei 225, -0.2%, ASX 200 flat, Hang Seng +0.8%; Shanghai Composite -0.2%; Kospi +0.1%
• Equity Futures: S&P500 flat; Nasdaq100 +0.1%, Dax flat; FTSE100 -0.2%
• EUR 1.1442-1.1427 ; JPY 110.61-110.40 ; AUD 0.7317-0.7294 ;NZD 0.6643-0.6615
• Aug Gold +0.7% at $1,192/oz; Sept Crude Oil -0.4% at $64.96/brl; Sept Copper -0.5% at $2.648 /lb

Market movers today

It is a very quiet start to the week on the data front with basically no economic releases being announced today. Instead, financial markets will continue to focus on the situation around Turkey (despite Turkey having a national holiday during the latter half of the week) and wobbly emerging market sentiment more generally.

Later this week, preliminary PMIs in the US, eurozone and Japan will provide clues on whether the recent pattern that the US is surprising on the downside and the eurozone on the upside when it comes to economic data will be sustained.

Selected market news

Asian equities got off to a mixed start to the week as financial markets are looking for further clues on the direction of the trade negotiations between the US and China and the global monetary policy stance, as central bankers gather in Jackson Hole at the end of this week. Compared to the frantic start last week, financial markets are in quieter mode as the Turkey risk is less present this morning than last Monday.

Turkey downgraded by major rating agencies late on Friday. Moody's downgraded Turkey to 'Ba3' ('junk') with negative outlook. S&P cut Turkey's sovereign debt rating one notch to 'B+' and the long-term local currency rating to 'BB-'. S&P expects a recession for Turkey in 2019. According to the agency, 'over the last two weeks, the Turkish lira has exhibited extreme volatility. This follows Turkey's prolonged economic overheating, external leveraging and policy drift.' The Turkish market will be closed during the latter half of this week due to the public holiday Kurban Bayrami (Sacrifice Feast). Trading in the TRY will be thin, but high volatility is likely to stay. The markets will remain in wait-and-see mode as the US could hit Turkey with new sanctions this week or there could be a diplomatic breakthrough with a possible release of the American pastor.

Over the weekend, there were calls from Italy for the ECB to prolong the QE programme. The point was made by Italian cabinet Undersecretary Giancarlo Giorgetti, who is a prominent member of the League, the government coalition partner. We doubt the ECB has any plans to do so, possibly setting the new Italian government up for a clash with the ECB later in the autumn. This will be in addition to a fight with the EU commission over the country's budgetary stance. On this issue, there were fresh reports that the government plans significant new spending on infrastructure in the wake of the Genoa bridge collapse, boosting the deficit to 1.6% of GDP instead of the 0.8% of GDP planned by the previous administration.

For the 24 hours to 23:00 GMT, the EUR rose 0.58% against the USD and closed at 1.1440 on Friday.

Macroeconomic data showed that Euro-zone's final consumer price index (CPI) rose as initially estimated to 2.1% on annual basis in July, at par with market expectations and recording its highest level since late 2012. In the previous month, the CPI had risen 2.0%. Moreover, the region's seasonally adjusted current account surplus recorded a steady reading of €24.0 billion in June.

In the US, data indicated that the preliminary Reuters/Michigan consumer sentiment index unexpectedly eased to a level of 95.3 in August, marking its lowest level in 11-months, amid slowdown in the household purchasing power. The index had registered a reading of 97.9 in the preceding month while market participants had anticipated the index to advance to a level of 98.0. Meanwhile, the leading indicator increased 0.6% on monthly basis in July, higher than market consensus for a rise of 0.4%. Leading indicator had climbed 0.5% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.1428, with the EUR trading 0.10% lower against the USD from Friday's close.

The pair is expected to find support at 1.1386, and a fall through could take it to the next support level of 1.1343. The pair is expected to find its first resistance at 1.1458, and a rise through could take it to the next resistance level of 1.1487.

Moving ahead, investors would await Euro-zone's construction output for June, along with Germany's producer price index for July, set to release in a few hours.

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 0.27% against the USD and closed at 1.2748 on Friday.

In the Asian session, at GMT0300, the pair is trading at 1.2743, with the GBP trading slightly lower against the USD from Friday's close.

On the data front, UK's Rightmove house price index dropped 2.3% on a monthly basis in August. In the prior month, the index had registered a drop of 0.1%.

The pair is expected to find support at 1.2709, and a fall through could take it to the next support level of 1.2676. The pair is expected to find its first resistance at 1.2765, and a rise through could take it to the next resistance level of 1.2788.

Amid lack of economic releases in the UK today, traders would focus on global macroeconomic events for further direction.

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

For the 24 hours to 23:00 GMT, the USD declined 0.32% against the JPY and closed at 110.59 on Friday.

In the Asian session, at GMT0300, the pair is trading at 110.54, with the USD trading 0.05% lower against the JPY from Friday’s close.

The pair is expected to find support at 110.27, and a fall through could take it to the next support level of 110.01. The pair is expected to find its first resistance at 110.85, and a rise through could take it to the next resistance level of 111.17.

In absence of key economic releases in Japan today, investor sentiment would be determined by global macroeconomic events.

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

For the 24 hours to 23:00 GMT, the USD declined 0.13% against the CHF and closed at 0.9958 on Friday.

In the Asian session, at GMT0300, the pair is trading at 0.9944, with the USD trading 0.14% lower against the CHF from Friday’s close.

The pair is expected to find support at 0.9927, and a fall through could take it to the next support level of 0.9911. The pair is expected to find its first resistance at 0.9966, and a rise through could take it to the next resistance level of 0.9989.

Trading trend in the Swiss Franc today is expected to be determined by Switzerland’s total sight deposits, due to be released in a while.

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