Sample Category Title

XAUUSD (1215.02): Gold prices managed to modestly push higher on the day. Price action was seen closing above the 1211.50 level of support. However, with the gains being very modest, there is a risk of further consolidation. The main resistance at 1219.75 remains a key level that needs to be breached. A close above this level could push Gold prices higher. The next main resistance level is seen at 1242.25 level.

USDJPY (110.79): The USDJPY currency pair closed below the support level at 111.13 - 110.85. The declines came on the back of a failure to close higher, following a brief retest of the support level. The move to the downside is expected to send the USDJPY lower. In the medium-term, we expect the declines to potentially push prices to test the lower support at 108.74 initially. However, with price action testing the 50-day moving average, we could expect some short-term support to hold the declines.

EURUSD (1.1612): The EURUSD currency pair was slightly bullish but price action was muted overall. The rather slow momentum following the bounce off the support level at 1.5400 could come at a risk of another decline to the downside. Price action on the 4-hour chart shows that there has been a retracement. However, while the currency pair is still trading within the range of 1.1730 and 1.1540, there is scope of a reversal. If the bearish short-term trend resumes, there is a potential for prices to break past the support level.

Daily Pivots: (S1) 1.2838; (P) 1.2899; (R1) 1.2946; More...

Intraday bias in GBP/USD remains on the downside at this point. Current decline, as part of the down trend from 1.4376, should target 100% projection of 1.3362 to 1.2956 from 1.3212 at 1.2806 first. Break will target 161.8% projection at 1.2555 next. On the upside, above 1.2959 minor resistance will turn bias neutral and bring consolidation. But upside should be limited below 1.3212 resistance to bring fall resumption.

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). Fall from 1.4376 has met 61.8% retracement of 1.1946 (2016 low) to 1.4376 at 1.2874 already. Decisive break of 1.2874 will raise the chance of long term down trend resumption through 1.1946 low. On the upside, break of 1.3212 resistance is needed to be the first indication of medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.

The U.S. Dollar was on the back foot on Wednesday. China is set to hit the U.S with fresh trade tariffs of the amount of $60 billion. The market reaction was however largely muted.

The British Pound was hit by a bout of negative sentiment. The currency weakened against the Dollar and the Euro as investors grew concerned about a no Brexit deal. The Euro was seen rising to a nine-month high. The sentiment increased as the UK's international trade minister, Liam Fox said that the odds of a no-deal Brexit had increased significantly.

The RBNZ held its monetary policy meeting during the overnight session. The overnight cash rate, OCR was left unchanged as widely expected. The RBNZ's monetary policy statement also did not see any major changes.

Earlier today, China's inflation data showed that consumer prices advanced 2.1% on an annualized basis in July. The data beat expectations of a 2.0% increase and was higher from 1.9% since June.

Looking ahead the U.S. will be reporting on the Producer Prices Index data. Consensus for the PPI is at 0.2% on both the headline and core PPI measures. The weekly unemployment claims report is also due later today too.

The markets are expected to be relatively quiet during the European trading session with no major releases scheduled.

New Zealand Dollar is clearly the biggest loser today after more dovish than expected RBNZ rate decision. Sterling is following as the second weakest, continues to be weighed down by no-deal Brexit worries. On the other hand, Canadian Dollar is staging a strong rebound as markets look pass the tensions with Saudi Arabia. Australian Dollar follows as the second strongest as boosted by the strong rebound in Chinese stocks. For the week as a whole so far, Australian Dollar is the strongest one, New Zealand Dollar and Sterling are the weakest ones.

In other markets, US equities pared back some gains overnight with DOW closed down -0.18%, S&P 500 lost -0.03%. But NASDAQ squeezed out 0.06% gain to 7888.33, very close to record high at 7933.31. US treasury yields were relatively steady with 10 year yield down -0.002 at 2.971. In Asia, Nikkei closed down -0.2% at 22598.39. China Shanghai SSE breached 2800 handle earlier today and stays firm at 2796 at the time of writing, up 1.9%. Hong Kong HSI is up 1.17% while Singapore Strait Times is down -0.4%. WTI crude oil dropped notably overnight and is now pressing 67 handle. Gold continues to range bound around 1210.

Technically, Sterling remains in clear down trend against Dollar, Euro, Yen and Swiss Franc. But oversold condition could start to limit downside potential. While Euro recovered this week, there is no follow through buying against Dollar. Similarly, even AUD/USD also lacks decisive up side momentum. A focus will be on whether these two pairs will head back towards recent range bottom at 1.1507 and 0.7309. USD/CAD spiked higher to 1.3066 but quickly retreated deeply back to 1.3000. For now, we're still favoring that recent correction from 1.3385 has completed at 1.2961. Thus, we're anticipating another strong rally in USD/CAD soon.

RBNZ kept OCR unchanged at 1.75, overall more dovish than expected

RBNZ's announcement comes in more dovish than anticipated. While leaving the Official Cash Rate (OCR) unchanged at 1.75%, the members pushed backward expectations for the next interest rate adjustment. OCR is expected to be kept low, "but for longer", through 2019 and into 2020. RBNZ also reiterated that the next move "could be up or down".

According to the new Monetary Policy Statement (MPS), RBNZ is now conditioning a full 25bps hike to 2.00% in December quarter of 2020. That's notably later than March quarter in 2020 as in May MPS. GDP growth forecasts were revised down to 2.7% in 2018 (2.8% in May MPS), 2.6% in 2019 (3.1%), 3.4% in 2020 (3.3%) and 3.2% in 2021 (3.1%). CPI forecasts were kept unchanged at 1.1% in 2018, 1.6% in 2019, 1.8% in 2020, and 2.0% in 2021.

More in RBNZ Delays Timing for Rate Change and Inflation to Reach +2%, Kiwi Slumps

And quick comments: NZDUSD, NZDJPY resume down trend after dovish RBNZ

77% economists expect no BoJ stimulus exit until 2020 or later

According to a Reuters poll, 73% of economists surveyed expected that BoJ will not start unwinding stimulus until 2020 or later. That's nearly double of 37% last month. Around one third said BoJ's July announcement as a small step on crafting the exit strategy. BoJ explicitly talked about allowing 10 year JGB yield to move between -0.1% and 0.1%. 77% of economists believed that would help bond market functioning.

On the economy, economists projected core CPI, excluding sales tax hike impact, to rise 0.9% in the fiscal year to March 2019, same as the prior fiscal year. That' notably lower than BoJ's own forecasts of 1.1% in fiscal 2019 and fiscal 2019. Economists also saw Japan GDP to grow 1.1% this fiscal year and then slow to 0.8% next.

Released from Japan, M2 rose 3.0% yoy in July, below expectation of 3.1% yoy. Machine orders dropped sharply by -8.8% mom in June versus expectation of -0.8% mom. Machine tool orders rose 13.0% yoy in July.

China Shanghai SSE breaches 2800 as tech stocks boosted by government focus

Chinese stocks are enjoying a strong rally today. The Shanghai SSE breaches 2800 handle and is holding 2% gain. Tech stocks led the way higher as the government indicated strong focus in development in the sector. Yesterday, the State Council renewed the " National Science, Technology and Education Leading Group" to "National Science and Technology Leading Group", showing the dedication in science and technology.

The group is headed by Premier Li Keqiang with Vice-Premier Liu He as deputy. Fourteen high level officials from National Development and Reform Commission, the Ministry of Education, and the Ministry of Science and Technology are also part of the group.

The major responsibilities of the group include studying and reviewing national strategies, plans and major policies for sci-tech development; deliberating major national scientific tasks and projects, and coordinating major sci-tech affairs among ministries, departments and local authorities.

Released from China, CPI accelerated to 2.1% yoy in July, up from 1.9% yoy, above expectation of 2.0% yoy. PPI slowed to 4.6% yoy, down from 4.7% yoy, matched expectations.

Canadian Dollar recovers as Trudeau said tension with Saudi just diplomatic difference of opinion

Selling pressure on Canadian appears to have eased after Canadian Prime Minister Justin Trudeau tried to tone down the tension with Saudi Arabia. Trudeau referred to recent events as a matter of "diplomatic difference of opinion" only. And he emphasized that "we don't want to have poor relations with Saudi Arabia." Trudeau went further and hailed that Saudi Arabia is a "country that has great significance in the world, that is making progress in the area of human rights."

Nonetheless, Trudeau also stood firm on Canada's position. He noted that "Canadians have always expected our government to speak strongly, firmly, clearly and politely about the need to respect human rights at home and around the world. We will continue to do that, we will continue to stand up for Canadian values and indeed for universal values and human rights at any occasion,"

The tension started last Friday when Canada expressed concerns over arrests of women rights activist in Saudi Arabia. The latter responded to the criticism by freezing new trade with Canada and expelled Canadian ambassador. It's reported yesterday by the Financial Times that Saudi central bank and state pensions ordered their overseas asset managers to sell their Canadian assets, including equities, bonds and cash holdings "no matter the cost". Saudi Arabia's foreign minister also said there is "nothing to mediate" with Canada.

USD/CAD spiked higher to 1.3119 yesterday but it's now back pressing 1.3000.

Looking ahead

ECB will release economic bulletin today. Canada will release housing starts and new housing price index. US will release PPI, wholesale inventories and jobless claims.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2838; (P) 1.2899; (R1) 1.2946; More...

Intraday bias in GBP/USD remains on the downside at this point. Current decline, as part of the down trend from 1.4376, should target 100% projection of 1.3362 to 1.2956 from 1.3212 at 1.2806 first. Break will target 161.8% projection at 1.2555 next. On the upside, above 1.2959 minor resistance will turn bias neutral and bring consolidation. But upside should be limited below 1.3212 resistance to bring fall resumption.

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). Fall from 1.4376 has met 61.8% retracement of 1.1946 (2016 low) to 1.4376 at 1.2874 already. Decisive break of 1.2874 will raise the chance of long term down trend resumption through 1.1946 low. On the upside, break of 1.3212 resistance is needed to be the first indication of medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.

Economic Indicators Update

Investors in Asia largely brushed off the ongoing trade fight between China and the U.S., with Shanghai’s blue-chip stocks climbing 2.4%, a move supported by the tech and financial sectors. Solid economic data and possible government intervention through monetary &fiscal policies encouraged investors to take some risk on Thursday. Data on Wednesday showed that China’s exports have not yet been impacted by U.S. tariffs rising 12.2% in July from last year. The Producer Price Index cooled slightly in July, coming at 4.6% from 4.7% in June and suggesting that policymakers may still have further room to loosen monetary policy. However, if President Trump goes ahead with his proposed tariffs of 25% on $200 billion worth of Chinese imports, these gains will be rapidly wiped off.

RBNZ pressures the New Zealand dollar

Currency markets were in focus duringearly morning trade with the New Zealand Dollar tumbling more than 1% against the U.S. Dollar. NZDUSD fell to its lowest level since March 2016 after the Reserve Bank of New Zealand surprised traders by announcing that it is committed to keeping interest rates at record lows through 2020. The central bank also downgraded its 2019 GDP forecast to 2.6% from 3.1%. Given the slowdown in economic activity and the ongoing global trade dispute, the RBNZ is sending a message that further easing may be possible in the months ahead. This is likely to keep the NZD under pressure and test new lows below 0.65 by year-end.

Ruble falls on sanctions

The period of sideways trading which lasted for four months seems to be over for the Ruble. The Russian currency fell more than 3.3% on Wednesday as Trump’s administration proposed fresh sanctions following the poisoning of a former Russian agent in the U.K. The decline in oil prices also helped to intensify the fall in the Ruble and with such uncertainty, investors will need to price in further risk premium on Russian assets. Investors will likely ignore the Russian economic fundamentals in the weeks ahead and focus on political developments. The Ruble may find some support around the 67 level, but a break above will lead to further selling pressure.

USDJPY edged sharply lower over Wednesday’s session as it penetrated the medium-term ascending trend line to the downside. Also, the price successfully dropped below the simple moving averages and the 23.6% Fibonacci retracement level of the upleg from 104.60 to 113.16, around 111.13. The technical indicators confirm the bearish retracement mode in the price action.

Looking at the daily timeframe, the stochastic oscillator plummeted near the oversold zone, while the RSI indicator is flattening below the threshold of 50. Moreover, the MACD oscillator is moving lower below the trigger line but remains in the positive area.

Further downfall movement could drive the price until the immediate support of the 110.25 hurdle, taken from the lows at the beginning of July. A break of this level could extend the south move until the 38.2% Fibonacci of 109.90 before being able to touch the 109.35 barrier.

Should investors turn the focus to the upside again and the price jumps above the aforementioned strong obstacles, such as 23.6% Fibonacci and moving averages, this would open the way towards the latest high of the 112.10 resistance level. Further advances above this level, could then target the area around the six-month high of 113.16.

To sum up, USDJPY ended the day below the medium-term ascending trend line, which has been holding since March 26, endorsing the scenario for a new bearish rally.

General Trend:

• Asian equities trade mostly higher
• Shanghai Composite Property index rises over 2%
• Reserve Bank of NZ (RBNZ) pushes back rate hike view
• NZD/JPY declines over 1%, NZ bond yields drop over 10bps
• New Zealand’s Fonterra said there may be a variation from its prior earnings guidance
• Shares of Mazda, Yamaha and Suzuki decline amid emissions testing concerns
• Various Japanese oil companies seen reporting results today
• Japan June Machine Orders miss ests, government cuts assessment
• Japan sells 30 yr JGBs at lower bid to cover
• China Commerce Ministry confirmed retaliatory tariff on $16B of US goods, to take effect on Aug 23rd
• China’s inflation accelerates in July, remains below target
• Philippines Q2 GDP misses ests, central bank expected to hike rates later today on inflation
• Japan prelim Q2 GDP due for release on Friday
• New Zealand expected to sell April 2029 bonds on tomorrow’s session

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.2%
• TOPIX Securities index -1%, Real Estate -0.7%, Retail Trade -0.4%, Marine Transportation -0.4%
• (JP) Japan Investors Net Buying of Foreign Bonds: ¥1.17T v ¥526.5B prior; Foreign Buying of Japan Stocks: -¥225.2B v -¥63.4B prior
• (JP) JAPAN JUN CORE MACHINE ORDERS M/M: -8.8% V -1.0%E; Y/Y: +0.3% V 10.5%E; Japan Govt cuts assessment of machine orders
• (JP) Japan July Money Supply: M3 y/y: 2.6% v 2.7%e; M2 y/y: 3.0% v 3.1%e
• (JP) Japan Government: Suzuki, Mazda and Yamaha Motor conducted improper tests
• (JP) Japan MoF sells ¥700B v ¥700B indicated in 0.7% (0.8% prior) 30-yr bonds; Avg yield: 0.850% v 0.704% prior; Bid to cover: 4.68x v 5.01x prior

Korea

• Kospi opened +0.1%
• (KR) South Korea vegetable prices +5.4% w/w due to heatwave - Korean press

China/Hong Kong

• Hang Seng opened -0.4%, Shanghai Composite -0.5%
• Hang Seng Info Tech index +2.9%, Consumer Goods +1.8%, Telecom +1.6% Materials +1.6%, Financials +1.4%, Property/Construction +0.9%
• (CN) CHINA JULY CPI M/M: +0.3% V -0.1% PRIOR; Y/Y: 2.1% V 2.0%E (matches highest reading since March)
• (CN) CHINA JULY PPI Y/Y: 4.6% V 4.5%E
• (CN) China said to have started evaluations of the asset management businesses of insurance companies - Chinese Press
• (HK) Large banks in Hong Kong are expected to increase mortgage rates on Aug 13th - US financial press
• (CN) China PBoC Open Market Operation (OMO): Skips OMO for the 15th straight session
• (CN) CHINA PBOC SETS YUAN REFERENCE RATE AT 6.8317 V 6.8313 PRIOR
• (CN) China Commerce Ministry confirms retaliatory tariff on $16B of US goods to take effect on Aug 23rd, reiterates stance that it was forced to retaliate (after the close yesterday)

Australia/New Zealand

• ASX 200 opened flat
• ASX 200 Consumer Discretionary index +1.5%, Financials +1.4%; Utilities -1.8%
• (NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%, AS EXPECTED; delays first rate increase
• (NZ) RBNZ Gov Orr: Risk to cash rate (OCR) outlook are balanced, in no rush to move rate - post rate decision press conference
• BHP.AU Settles class action over Samarco dam failure, to pay plaintiffs $50M with no admission of liability
• SUN.AU Reports FY18 (A$) net 1.06B v 1.0Be; to sell Australia life insurance business to Tal Dai-ichi Life; declared special dividend of A$0.08/share
• FCG.NZ Trading halted: Seeing variation from earnings guidance

Other Asia

• (PH) Philippines Q2 GDP q/q: 1.3% v 1.7%e; y/y: 6.0% v 6.6%e

North America

• US equity markets ended mixed: Dow -0.2%, S&P500 flat, Nasdaq +0.1%, Russell 2000 -0.1%
• S&P500 Consumer Staples -0.8%; Technology +0.3%
• RAD Agrees to terminate merger with Albertsons
• DNB To Be Acquired by Investor Group Led by CC Capital, Cannae Holdings and Thomas H. Lee Partners for $145/shr cash or $6.9B
• (MX) Mexico Economy Minister Guajardo: Definitely encouraged to keep on working, covering all the items that we have to cover for the NAFTA talks

Europe

• (UK) PM May writes letter to Tory grassroots seeking support for Chequers plan - financial press

Levels as of 01:30ET

• Hang Seng +1.3%; Shanghai Composite +1.9%; Kospi -0.1%; Nikkei225 -0.1%; ASX 200 +0.5%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax +0.2%; FTSE100 +0.6%
• EUR 1.1601-1.1619; JPY 110.71-111.44; AUD 0.7416-0.7453;NZD 0.6664-0.6763
• Dec Gold +0.1% at $1,222/oz; Sept Crude Oil +0.1% at $67.02/brl; Sept Copper +1.1% at $2.78/lb

The US dollar has fallen below the key 111.00 level against the Japanese yen, as Sino-US trade tensions continue to escalate on Thursday. Now that the 111.00 to 111.50 range has been broken, sellers are back in control of the price action over the short-term. The 110.55 support level is the key area bears now need to break, while buyers will look to push the price back above the 111.37 level.

The USDJPY pair is bearish while trading below the 111.00 level, key support is now found at the 110.55 and 110.00 levels.

If the USDJPY pair trades above the 111.00 level, buyers will likely test towards the 111.37 and 111.50 resistance levels.