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NZDUSD made a new low, down from 0.6608 level which is an indication of a completed minor leg iv and that wave v is in play. Despite current drop, we see price approaching some support regions, so be aware of a temporary three-wave reversal which may follow from around the Fibonacci ratio of 38.2.

EURJPY is also dropping, ideally unfolding a five-wave minor development as part of wave 5 of one higher degree. Support for wave 5 can be around the Fibonacci ratio of 138.2/161.8, from where a new three-wave rally can follow.

Positive economic data from the US provides no support to investors' sentiments. US equities open sharply lower, following the global selloff. DOW falls more than -1% and hit as low as 25005.87 in initial trading. S&P 500 and NASDAQ are also down around -1%.

The strong break of 25120.07 support in DOW is a strong signal of near term reversal. That is, whole rise from 23997.21 has completed at 25692.72 already. Focus is back on 55 day EMA (now at 25030). Sustained break there will at least bring a test on channel support (now at 24412). Meanwhile, near term outlook will now stay cautiously bearish as long as 25339.51 minor resistance holds.

In the bigger picture, DOW is in medium term correction since 26616.71. Price actions from 23360.29 are seen as the second leg of the pattern. It's early to confirm. But firm break of near term channel support will argue that the third leg of the consolidation pattern has started. And DOW would target be targeting 23360.29 again.

Retail sales rose by a solid 0.5% in July – better than markets were expecting. The strength is offset somewhat by a downward revision to June sales, which are now up 0.2% (prev. 0.5%).

Sales at gasoline stations rose 0.8%, while those at auto & parts dealers rose a slight 0.2%. Excluding these two categories, sales were up a robust 0.6%.

Sales at building material stores were flat in July while sales at food services rose a healthy 1.3%, and are up 9.1% versus year ago levels. Indeed, putting aside the 22% increase over the past year in gasoline station receipts, (which is largely a move in prices), growth in food services is second only to online shopping over the past year. Sales at non-store retailers (predominantly online retailers) are up 11.3% year/year.

Excluding the above categories (gas, autos, building materials, and food services), the so-called 'control group' used in calculating GDP rose 0.5% on the month – also beating market expectations for a 0.4% gain. Delving into the details, sales of clothing were up 1.3%, while sporting goods (-1.7%), and health and personal care (-0.4%) were weak in July.

Key Implications

This was a very solid report. The downward revision only tempers the good news slightly. After some softness through the winter, Americans are confidently spending again. And why wouldn't they? The unemployment rate is near an 18-year low, and with tax cuts, many Americans' paychecks are larger.

Overall the July retail report is consistent with a healthy showing for the U.S. consumer in the third quarter, following through on its impressive 4% pace in Q2. We expect consumer spending to be a solid support to growth over the coming quarters, at around 2.5% or slightly better in real terms.

Dollar jumps higher in early US session as supported by strong retail sales data. But the greenback is once again outshone by Yen on risk aversion. At the time of writing, DAX is down -1.22%, CAC is down -1.19% and FTSE is down -1.17%. Earlier in Asia, Nikkei lost -0.68%, HK HSI dropped -1.55%, Shanghai SSE declined -2.08%.

But Turkish Lira is not the one to blame today as USD/TRY has indeed dipped further and breached 6.0 handle. Instead, poor earnings results of Tencent, selloff in Copper and Zinc which hit one year low are among the factors. And more importantly, we see selloff in Chinese Yuan, with USD/CNH hitting as high as 6.934 as a major reason. Meanwhile, Gold is accelerating downward after taking out 1200 earlier this week, hitting as low as 1183.93 so far. WTI crude oil is under renewed pressure and is back at 66.3, and that's a reason for Canadian Dollar's weakness too.

Technically, though, EUR/JPY, GBP/JPY and AUD/JPY are still holding above Monday's low at 125.13, 140.23 and 79.97 respectively. Thus, they're still considered as in consolidation. But these levels will for sure be watched. EUR/USD, GBP/USD and AUD/USD are staying in healthy decline and starts to pick up some momentum ahead. 0.9984 resistance in USD/CHF is the level to watch for the session too.

US retail sales showed strong growth, but industrial production disappoints

US headline retail sales rose strongly by 0.5% in July, much higher than expectation of 0.41% mom. Ex-auto sales rose 0.6%, also beat expectation of 0.4%. Empire State manufacturing index rose to 25.6 in August, up from 22.6 and beat expectation of 20.3. Non-farm productivity rose 2.9% in Q2, above expectation of 2.5%. But industrial production rose only 0.1% mom in July, missed expectation of 0.3% mom.

UK CPI rose to 2.5%, core CPI unchanged at 1.9%

UK headline CPI rose to 2.5% yoy in July , up from 2.4% yoy and met expectation. Core CPI was unchanged at 1.9% yoy, met expectation. RPI, however, slowed notably to 3.2% yoy, down from 3.4% yoy and missed expectation of 3.6% yoy. PPI input rose to 10.9% yoy, up from 10.3% yoy, above expectation of 10.8% yoy. PPI output slowed to 3.1% yoy, down from 3.3% yoy and missed expectation of 3.2% yoy. PPI output core dropped to 2.2% yoy, down from 2.4% yoy, missed expectation of 2.2% yoy. House price index slowed to 3.0% yoy in June, slowed from 3.5% yoy, above expectation of 2.8% yoy.

The rise is headline CPI is in line with BoE's own projection today. In the August Inflation Report, the bank projected CPI to climb to 2.5% in Q3 this year. The question is whether inflation will then slow from there. BoE expects CPI to slow to 2.2% in Q3 2019. The National Institute for Economic and Social Research pointed out that stripping out extreme price moves, CPI has indeed dropped in July. The trend reversal will likely emerge ahead.

SNB Zurbruegg: Recent developments show fragility in currency markets

SNB Vice Chairman Fritz Zurbruegg said in an even in Zurich that recent developments have shown that "the currency markets remain fragile". And that could lead to "safe have flows in the Swiss Franc". And that means, the central bank's current ultra loose monetary policy with negative interest rate is justified. And SNB stands ready to intervene when necessary. Some analysts tipped 1.2 as a level where SNB would start being active in intervention.

Turkish Lira rebounds further despite trade spat with US.

Turkey's clashes with the US has turned into trade war. The country doubled tariffs on some US imports including alcohol, cars and tobacco, in response to US doubling of steel and aluminum tariffs. Vice President Fuat Oktay tweeted that the moves are for US "deliberate attacks on our economy." However, relations with EU seemed to have improved after a Turkish court released two Greek soldiers pending trial. Additionally, the CBRT is squeezing liquidity as observed by bankers, which helped pushed interest rates higher.

USD/TRY dropped to as low as 5.9180 earlier today and stays soft.

Australia consumer sentiment dipped -2.3% mom, wage price grew 0.6% qoq

Australia Westpac Melbourne Institute consumer sentiment dropped -2.3% to 103.6 in August, down from 106.1. The index pared back half of the "surprisingly strong gains in June to Jule" as the impact of government's tax cuts faded. The decline also came against the backdrop of rising global trade tension and housing markets correction in Sydney and Melbourne.

Westpac pointed out RBA's projection that inflation will hit 2.25% by 2020 and expects next move is up. It noted an "obvious headwind" for RBA is "the impact that five years of underperformance in inflation will have on households' and firms' expectations." And, "lower expectations will make it that much more difficult to lift inflation back into the band". Westpac also noted that "certainly it will be quite some time before the Bank has a case to adjust the cash rate." And it maintains the view that RBA will be on whole in both 2018 and 2019.

Also from Australia, Wage price index rose 0.6% qoq, 2.1% yoy in Q2, in line with expectation. Private sector wage price grew 0.5% qoq, 2.0% yoy. Public sector wage grew 0.6% qoq, 2.4% yoy.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1306; (P) 1.1367 (R1) 1.1404; More.....

Intraday bias in EUR/USD remains on the downside as down trend continues. Next target is 61.8% projection of 1.2413 to 1.1509 from 1.1745 at 1.1186. Note that it's a cluster level with 61.8% retracement of 1.0339 to 1.2555 at 1.1186. Hence, we'll tentatively look for short term bottoming around 1.1186. On the upside, above 1.1430 minor resistance will turn intraday bias neutral and bring consolidations again.

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 1.1851 resistance holds, even in case of strong rebound.

Economic Indicators Update

Daily Pivots: (S1) 1.1306; (P) 1.1367 (R1) 1.1404; More.....

Intraday bias in EUR/USD remains on the downside as down trend continues. Next target is 61.8% projection of 1.2413 to 1.1509 from 1.1745 at 1.1186. Note that it's a cluster level with 61.8% retracement of 1.0339 to 1.2555 at 1.1186. Hence, we'll tentatively look for short term bottoming around 1.1186. On the upside, above 1.1430 minor resistance will turn intraday bias neutral and bring consolidations again.

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 1.1851 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 1.2672; (P) 1.2749; (R1) 1.2797; More...

GBP/USD reaches as low as 1.2674 so far today as recent decline continues. Intraday bias stays on the downside for 161.8% projection of 1.3362 to 1.2956 from 1.3212 at 1.2555 next. On the upside, above 1.2826 minor resistance will turn bias neutral and bring consolidation again.

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 1.4141). 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) 0.9912; (P) 0.9932; (R1) 0.9962; More....

USD/CHF is staying in range of 0.9894/9984 in spite of today's rise. Intraday bias remains neutral for the moment. On the upside, above 0.9984 will resume the rebound from 0.9866 to retest 1.0067 high. Decisive break there will resume whole rally from 0.9186. On the downside, below 0.9894 might extend the consolidation pattern from 1.0056 with another falling leg. But downside should be contained by 38.2% retracement of 0.9186 to 1.0056 at 0.9724 to bring rebound.

In the bigger picture, current development suggests that the consolidation pattern from 1.0056 is extending with another leg. 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) 110.72; (P) 111.02; (R1) 111.44; More...

USD/JPY edged higher to 111.42 earlier today but retreated sharply from there. Intraday bias is turned neutral again. Overall outlook is unchanged though. Choppy decline from 113.17 is seen as a correction. In case of deeper fall, downside should be contained by 38.2% retracement of 104.62 to 113.17 at 109.90 to bring rebound. On the upside, above 111.42 will target 112.14 minor resistance first. Break will argue that larger rally is possibly resuming for above 113.17.

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.

EUR/USD has posted small losses in the Wednesday session. Currently, the pair is trading at 1.1316, down 0.15% on the day. On the release front, there are no major eurozone events. In the U.S. today’s key indicators are retail sales reports. The markets are bracing for a downturn in the July data, with retail sales expected to dip to 0.1% and core retail sales forecast to drop to 0.3%.

The U.S dollar continues to make headway against the euro, as the pair is again below the 1.14 line. Currently, EUR/USD is trading at its lowest level since June 2017. The continuing chatter over trade war tensions between the U.S and its major trading partners has had a negative impact on the risk appetite and boosted the U.S dollar. Ironically, President Trump has continually complained about the strong dollar and his comments have weighed on the dollar, but only brief spells. Investors have let the booming US economy do the talking, rather than the ominous sounds of the President’s tweets.

Eurozone GDP in the second quarter managed to beat the estimate, but investors are not impressed. The economy posted a modest gain of 0.4% for a second straight quarter. The estimate stood at 0.3%. German ZEW Economic Sentiment gained ground in August but still remains in negative territory, with a reading of 13.7 points. Weak growth in the eurozone and trade tensions with the U.S have affected investor sentiment, and the euro has struggled as a result, trading at 14-month lows against a strong U.S dollar.

Entering into US session, Yen is trading as the strongest one for today on risk aversion. It over takes Dollar's position as the strongest major currencies again. But this time Swiss Franc doesn't follow. Instead Sterling is steady as the third strongest one after CPI came in meeting expectations. Canadian Dollar is the weakest one.

European indices are trading deep red at the time of writing. FTSE is down -1.13%, DAX down -0.94%, CAC down -1.15%. That followed broad based weakness in Asia earlier today. Nikkei closed down -0.68%, Hong Kong HSI down -1.55%, China Shanghai SSE down -2.08%, Singapore Strait times down -0.27%.

But this time, Turkish crisis is not the one to blame. Turkey's clashes with the US has turned into trade war. The country doubled tariffs on some US imports including alcohol, cars and tobacco, in response to US doubling of steel and aluminum tariffs. However, Lira is extending this week's rebound with USD/TRY hitting as low as 5.9180.

Instead, risk aversion is partly due to poor earnings report of Tencent. Also, copper and zinc prices fell to the lowest level in more than a year. And, probably more importantly, the Chinese Yuan is extending recent steep down trend. USD/CNH (offshore Yuan), surges to as high as 6.9324.