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A pair of Eurozone data releases headline an otherwise slow session for the economic calendar ahead of a more active release schedule later in the week. Nevertheless, concerns over trade and economic growth will continue to fuel currency traders.

Action in Europe begins at 06:00 GMT with a report on German factory orders. The monthly release is expected to show a decline of 0.2% in June, based on a median estimate of economists. Factory orders surged 2.6% in May and 4.4% annually.

Later in the session, Sentix will release its Eurozone investor confidence index for August. The monthly gauge provides an outlook in investor sentiment based on a total of 36 indicators.

There are no other major releases scheduled for Monday. Later in the week, the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) will deliver their latest verdict on interest rates. No change in monetary policy is expected on either front.

In terms of upcoming data releases, reports on German trade, UK GDP and Chinese inflation will headline the economic calendar for the remainder of the week.

Investors can expect an active session for the US dollar on Monday following the release of July nonfarm payrolls. On Friday, the Department of Labor said jobless claims rose by 157,000 last month. While much less than expected, other readings of labor market health showed steady progress for the world's largest economy. In particular, the jobless rate dipped to 3.9% from 4%. Average hourly earnings, which are a gauge of wage inflation, rose 2.7% year-over-year.

EUR/USD

Europe's common currency entered oversold conditions last week, prompting some short-covering ahead of US nonfarm payrolls. That being said, EUR/USD returned below 1.1600 on Friday and is currently trading near its lowest levels of the year. The pair sat at 1.1568 at the start of Asian trade, with immediate support located at 1.1555. Resistance is likely found at 1.1615.

AUD/USD

The Australian dollar regained its poise on Friday, as prices clawed back above 0.7400 US. The AUD/USD exchange rate was trading as low as 0.7352 on Friday prior to the recovery. In terms of technical levels, the pair is testing the immediate resistance of 0.7400. Above that level, the bulls are eyeing 0.7445. On the opposite side of the spectrum, the pair faces immediate support at 0.7330.

GBP/USD

Cable is coming off a tepid Friday session where prices fell below 1.3000 US for the first time in two weeks. The GBP/USD exchange rate recovered at 1.3000, although considerable downside risks remain. From a technical point of view, the pair faces immediate support at 1.2970, followed by 1.2925. On the flipside, immediate resistance is located at 1.3045, followed by 1.3085.

Escalating trade tensions between the U.S. and China remain the financial markets' hottest topic. President Trump seems to be celebrating winning the first battle of this war, saying that “tariffs are working big time” in a Tweet on Sunday. He believes that they will enable the U.S. to start reducing the large amount of debt accumulated throughout Barack Obama's administration. Trump also cited the steep fall in Chinese equities as evidence that tariffs are working. In his opinion, they will make the U.S. much richer than it currently is and that“only fools would disagree”.

The tariffs so far are approximately on $85 billion of imported goods. Assuming a 25% tariff, it would raise $21.25 billion. This number represents 1.33 % of the $1.6 trillion in additional debt President Trump has accumulated since taking office in 2017 and only 0.1% of the current $21 trillion in total debt. So, it doesn't seem the imposed tariffs would reduce the American debt substantially.

In my opinion, a large portion of the tariffs will be paid by U.S. consumers and I also expect CPI figures to begin reflecting these higher prices, especially if Trump's administration imposes additional tariffs on $200 billion of Chinese goods. Rising inflation leads to higher U.S. interest rates, translating into higher cost of borrowing and debt servicing. Several U.S. companies have cut their profit forecast as a result of these tariffs, especially car makers; shares of GM, Ford, and Fiat Chrysler fell sharply after announcing their results. Other U.S. companies affected by Trump's global trade war include Tyson Foods, Harley Davidson, United Technologies, Caterpillar and Coca-Cola, among several others.

This explains why the S&P 500 failed to reach a new record high, despite 81% of companies so far managing to beat their profit forecast in one of the best earning seasons in history. Given that we're almost at the end of earning season, trade wars will return to dominate the headlines. The next big risk is likely to be the U.S. midterm elections in November. I think there's a high chance that the Democratic Party will take over the U.S. Congress and end the Republicans' single-party control. This won't be good news for equities, and I expect to see rotation to non-cyclical stocks and an increase of cash in investors' portfolios.

General Trend:

• Asian equity markets trade generally higher
• Shanghai Composite moves between gains and losses in early trade
• HSBC Reports H1 Net $8.4B v $8.0B y/y; adj Pretax $12.1B v $12.4B y/y; Adj Rev $27.5B v $27.0B y/y; will pay the DoJ a civil money penalty of $765M
• Australia’s Amcor is speculated to bid for Bemis Co.
• Rusal rises over 2% after Q2 results
• USD/CNY will not break the 7.00 level, according to a PBoC Adviser
• New Zealand’s Treasury sees rising risks to GDP forecasts; RBNZ expected to meet on Thursday
• Softbank is expected to report quarterly earnings later today
• White House is expected to issue details on new Iran sanctions later on Monday

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.1%
• TOPIX Iron & Steel index +1.4%, Information & Communications +1%, Retail trade +0.5%
• Megabanks track declines in JGB yields
• Yamato Holdings, 9064.JP Japan officials to inspect offices over allegations of overcharging - Japan press
• Subaru, 7270.JP Reports Q1 Net ¥45.5B v ¥82.3B y/y; Op ¥57.6B v ¥119.3B y/y; Rev ¥709.2B v ¥814.0B y/y; Global vehicle sales 238K units, -12.3% y/y
• (JP) Japan Internal Affairs Min Noda: Do not think BOJ needs inflation target

Korea

• Kospi opened flat
• (KR) South Korea Ministry of Economy and Finance and Ministry of Interior and Safety sees tax burden at >20% of GDP for the 1st time - Korean press
• (KR) Bank of Korea (BOK) sells KRW500B in 6-month Monetary Stabilization Bonds (MSBs) at 1.74%
• (KR) South Korea Finance Ministry sells KRW400B in 5-yr pre-issuance govt bonds at 2.37%
• KEPCO, 015760.KR Subsidiary Korea South-East Power is being investigated by the Korea Customs Service on charges of buying 9.7Kt of North Korean coal in Nov of 2017 and March of this year - press

China/Hong Kong

• Hang Seng opened +0.8%, Shanghai Composite -0.1%
• Hang Seng Services index -0.9%
• (HK) Some property developers are leasing property projects to associates in order to avoid the vacancy tax – South China Morning Post
• (CN) Friday’s move by the China PBoC to raise the reserve requirement on foreign currency forwards was seen as an attempt by the central bank to take aim at speculators betting against the yuan currency (CNY) – South China Morning Post
• (CN) Former FX Official: PBoC maximum level of tolerance for the yuan may be the 7.0 handle against the dollar - Economic Observer
• (HK) Hong Kong banks undergoing stress tests as trade war pressures rise - HK press
• (CN) China State Media: US escalates trade friction with China and turns international trade into a zero sum game; Governing a country is not like doing business
• (CN) China PBoC Open Market Operation (OMO): Skips OMO for the 12th straight session
• USD/CNY (CN) CHINA PBOC SETS YUAN REFERENCE RATE AT 6.8513 v 6.8322 PRIOR (weakest fix since May 2017)
• Rusal, 486.HK Reports Q2 adj Net $218M v $202M y/y; adj EBITDA $552M v $510M y/y; Rev $2.25B v $2.47B y/y
• (CN) China may lower soybean imports by over 10M tons (timing uncertain) - Xinhua
• (HK) Some banks in Hong Kong may raise mortgage rates for the first time in 12 years amid higher funding costs - HK Press
• (US) Group of US Senators send letter to Mnuchin worried that China is using their financing of international infrastructure projects under "Belt and Road Initiative" that will leave countries' indebted and needing bailouts
• (CN) CHINA COMMERCE MINISTRY (MOFCOM) RELEASES PROPOSED RETALIATION TO US TARIFF THREAT; to levy differentiated tariffs (import tax) on ~$60B in US goods (Friday after the close)

Australia/New Zealand

• ASX 200 opened +0.2%
• ASX 200 Resources index +1.2%, REIT +0.9%, Financials +0.6%, Telecom +0.7%, Energy +0.5%; Consumer Discretionary -0.5%
• (AU) China threat to implement 25% tariffs on LNG from US may give Australia LNG a boost - AFR
• Seek, SEK.AU Guides FY18 top ended of prior guided ex-items; To record A$178M charge in FY18
• (NZ) New Zealand Jul ANZ Commodity Price m/m: -3.2% v -0.9% prior
• (AU) Australia Jul ANZ Job Advertisements m/m: +1.5% v -1.7% prior
• Anteo Diagnostics, [+35%], ADO.AU Announces materials transfer agreement with a global manufacturer of battery materials in Asia
• FlexiGroup, [-16%], FXL.AU CEO Symon Brewis-Weston has resigned, to be replaced by Rebecca James as of Oct 15th; Affirms FY18 profit guidance
• (NZ) New Zealand Treasury: Risks to GDP growth forecasts are rising; Cites factors including housing slowdown, business confidence and trade
• (NZ) New Zealand PM Ardern: Aware that businesses want to hear more about policy

Other Asia

• TSMC, [-1%], 2330.TW Computer virus incident on Aug 3rd will impact Q3 revenues by 3% and gross margins by 1% due to costs and shipment delays
• (IN) India to defer retaliatory tariffs on 29 US products - India press

North America

• (CA) Saudi Arabia said to have frozen all trade investment with Canada - Press
• (CA) President Trump said to be reserving the right to impose tariffs on vehicles made in Canada - US press

Europe

• (UK) Chancellor of the Exchequer Hammond (Fin Min) claims France is trying to stall post-Brexit access to EU - FT
• (UK) Trade Minister Liam Fox (pro-Brexit member): Chances of leaving EU with no deal now seen at 60/40 – press
• (RU) Russia has told OPEC it will increase oil production by 170K bpd to help Trump Iran sanctions; UAE has said it will boost by 160K bpd – press
• (DE) ECB’s Lautenschlaeger (Germany, SSM member): In favor of rate normalization, worried about banking deregulation - German press
• (UK) Treasury said to have asked for help on Brexit action plan - press

Levels as of 01:30ET

• Hang Seng +0.4%; Shanghai Composite -0.9%; Kospi -0.1%; Nikkei225 -0.1%; ASX 200 +0.5%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax +0.1%; FTSE100 +0.0%
• EUR 1.1555-1.1667; JPY 111.16-111.37; AUD 0.7386-0.7405; NZD 0.6735-0.6755
• Dec Gold 0.0% at $1,223/oz; Sept Crude Oil +0.3% at $68.70/brl; Sept Copper -0.2% at $2.75/lb

For the 24 hours to 23:00 GMT, the EUR declined 0.13% against the USD and closed at 1.1572 on Friday.

Macroeconomic news indicated that Euro-zone's final services PMI dropped more than expected to a level of 54.2 in July, compared to a level of 55.2 in the prior month. The preliminary figures had indicated a drop to a level of 54.4, while market participants had envisaged the PMI to fall to a level of 54.4. On the other hand, the region's seasonally adjusted retail sales rose for the second consecutive month by 0.3% on a monthly basis in June, driven by food sales and undershooting market expectations for an advance of 0.4%. Retail sales had registered a revised similar rise in the prior month.

Separately, in Germany, the final services PMI eased to a level of 54.1 in July, following a level of 54.5 in the previous month. Market participants had anticipated the PMI to decline to a level of 54.4. The preliminary figures had recorded a fall to 54.4.

In the US, non-farm payrolls advanced by 157.0K in July, undershooting market expectations for a rise of 193.0K. In the prior month, non-farm payrolls had registered a revised rise of 248.0K. Meanwhile, unemployment rate slid to an 18-year low rate of 3.9%, meeting market expectations. In the previous month, jobless rate had recorded a rate of 4.0%. Moreover, the nation's average hourly earnings climbed 0.3% on a monthly basis in July, at par with market expectations. In the previous month, average hourly earnings had increased by a revised 0.1%. Further, trade deficit widened less than expected to $46.3 billion in June, from a revised trade deficit of $43.2 billion in the prior month. Markets had anticipated the nation to post a trade deficit of $46.5 billion.

On the contrary, data revealed that the final Markit services PMI eased to 56.0 in July, more than market expectations for a fall to a level of 56.2. The preliminary figures had indicated a fall to a level of 56.2. In the prior month, the PMI had registered a level of 56.5.

In the Asian session, at GMT0300, the pair is trading at 1.1561, with the EUR trading 0.10% lower against the USD from Friday's close.

The pair is expected to find support at 1.1542, and a fall through could take it to the next support level of 1.1522. The pair is expected to find its first resistance at 1.1596, and a rise through could take it to the next resistance level of 1.1630.

Going forward, investors will keep an eye on the Eurozone's Sentix investor confidence index for August, slated to release in a few hours. Additionally, Germany's factory orders for June and the Markit construction PMI for July, slated to release in a while, will be on investors radar.

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

For the 24 hours to 23:00 GMT, the GBP declined 0.10% against the USD and closed at 1.3005 on Friday, after BoE Governor Mark Carney signalled the likely prospects of the UK leaving the EU without a deal.

Data showed that the UK's services PMI declined to a 3-month low level of 53.5 in July, compared to a reading of 55.1 in the previous month. Market participants had expected the PMI to drop to 54.7.

In the Asian session, at GMT0300, the pair is trading at 1.2996, with the GBP trading 0.07% lower against the USD from Friday's close.

The pair is expected to find support at 1.2967, and a fall through could take it to the next support level of 1.2938. The pair is expected to find its first resistance at 1.3034, and a rise through could take it to the next resistance level of 1.3072.

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

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

For the 24 hours to 23:00 GMT, the USD declined 0.35% against the JPY and closed at 111.23 on Friday.

In the Asian session, at GMT0300, the pair is trading at 111.35, with the USD trading 0.11% higher against the JPY from Friday’s close.

The pair is expected to find support at 111.01, and a fall through could take it to the next support level of 110.67. The pair is expected to find its first resistance at 111.78, and a rise through could take it to the next resistance level of 112.21.

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 0.9942 on Friday.

On the macro front, Switzerland's consumer price index climbed 1.2% on an annual basis in July, in line with market expectations. In the previous month, the index had registered a rise of 1.1%.

In the Asian session, at GMT0300, the pair is trading at 0.9950, with the USD trading 0.08% higher against the CHF from Friday's close.

The pair is expected to find support at 0.9926, and a fall through could take it to the next support level of 0.9901. The pair is expected to find its first resistance at 0.9970, and a rise through could take it to the next resistance level of 0.9989.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.25% against the CAD and closed at 1.2989 on Friday.

In the Asian session, at GMT0300, the pair is trading at 1.2998, with the USD trading 0.07% higher against the CAD from Friday’s close.

The pair is expected to find support at 1.2964, and a fall through could take it to the next support level of 1.2931. The pair is expected to find its first resistance at 1.3035, and a rise through could take it to the next resistance level of 1.3073.

In absence of key economic releases in Canada 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 AUD rose 0.52% against the USD and closed at 0.7401 on Friday.

LME Copper prices declined 0.3% or $7.0/MT to $6167.0/MT. Aluminium prices rose 1.7% or $104.0/MT to $2016.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7396, with the AUD trading 0.07% lower against the USD from Friday’s close.

The pair is expected to find support at 0.7359, and a fall through could take it to the next support level of 0.7321. The pair is expected to find its first resistance at 0.7423, and a rise through could take it to the next resistance level of 0.7449.

Moving ahead, investors will closely monitor the Reserve Bank of Australia’s interest rate decision, scheduled to release early morning tomorrow.

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

For the 24 hours to 23:00 GMT, Gold rose 0.40% against the USD and closed at USD1222.40 per ounce on Friday, after weak than expected US non-farm payrolls data.

In the Asian session, at GMT0300, the pair is trading at 1224.20, with gold trading 0.15% higher against the USD from Friday’s close.

The pair is expected to find support at 1214.97, and a fall through could take it to the next support level of 1205.73. The pair is expected to find its first resistance at 1230.97, and a rise through could take it to the next resistance level of 1237.73.

The yellow metal is trading above its 20 Hr and 50 Hr moving averages.