Sample Category Title

Daily Pivots: (S1) 109.71; (P) 110.09; (R1) 110.62; More...

Break of 109.53 minor resistance argues that recovery from 108.26 has completed. Intraday bias is turned back to the downside for 108.12/26 support zone. Firm break of 108.12 support will resume the whole corrective decline from 118.65. In that case, USD/JPY will target 61.8% retracement of 98.97 to 118.65 at 106.48. In any case, outlook will remain cautiously bearish as long as 110.94 resistance holds. Nonetheless, considering bullish convergence condition in 4 hour MACD, break of 110.94 will indicate near term reversal and bring stronger rebound back towards 114.49 resistance.

In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it's uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it's a leg in the consolidation from 125.85. Hence, we'll be cautious on topping as it approaches 125.85. If fall from 118.65 extends lower, downside should be contained by 61.8% retracement of 98.97 to 118.65 at 106.48 and bring rebound.

The global financial markets will see limited action on Monday, as North America pauses for the annual Labour Day holiday.

The European Sentix investor confidence survey headlines the economic calendar at the start of the week. The monthly report, which is used to gauge the sentiment of institutional investors, is forecast to slip to 27.4 in September from 27.7 the previous month.

In terms of official data, the European Union's statistical agency will report on producer inflation at 09:00 GMT. The producer price index (PPI) is forecast to climb 0.1% in July after dropping 0.1% the previous month. This translates to a year-over-year gain of 2.2%, according to estimates.

IHS Markit and the Chartered Institute of Purchasing and Supply (CIPS) will also report on UK construction activity. The construction purchasing managers' index (PMPI) is forecast to edge up to 52.0 in August from 51.9 the previous month.

The economic calendar features several high-profile events this week, including a pair of monetary policy decisions by the Bank of Canada (BOC) and European Central Bank (ECB).

In currencies, the US dollar moved lower at the start of the week. The dollar index (DXY) fell 0.2% to 92.66 at the start of Asian trading. The greenback rebounded sharply last week on the heels of better than expected data releases.

On Friday, the US Labor Department said nonfarm payrolls rose by 156,000 in August, below forecasts calling for 180,000.

EUR/USD

The euro opened higher on Monday, as the market stabilized following a volatile week. The EUR/USD exchange rate rose 0.2% to 1.1886, where it was awaiting key fundamental cues in the form of monetary policy and economic data. The pair faces immediate support at 1.1820. Below that level, 1.1740 is the next immediate play. On the opposite side of the spectrum, resistance is located at 1.1920, followed by 1.1960. Only then can the pair extend its rally back toward the August high of 1.2064.

GBP/USD

The British pound broke higher on Friday after the nonfarm payrolls miss, with the GBP/USD moving past the 50-day simple moving average (SMA). The GBP/USD pair extended gains on Monday, climbing 0.1% to 1.2963. The psychological 1.30 level continues to offer immediate resistance. Above that level, the pair is eyeing 1.3040. On the downside, immediate support is likely found at 1.2880, followed by 1.2850.

GOLD

The gold rush continued Monday, with bullion surging to new yearly highs. Spot prices opened 0.8% higher, bullion reaching $1,336.00 a troy ounce on the Comex division of the New York Mercantile Exchange. The rush to gold likely reflects renewed risk aversion in the financial markets after North Korea tested its most powerful nuclear bomb yet.

Key Highlights

• The Euro corrected from 1.2070 to 1.1850 against the US Dollar this past week.
• The EUR/USD is currently holding a major bullish trend line support near 1.1850-70 on the 4-hours chart.
• The US Non-farm Payrolls in August 2017 were 156K, down from the last 189K (revised).
• The US Unemployment Rate was up in August 2017 from 4.3% to 4.4%.

EUR/USD Technical Analysis

The Euro was under pressure above 1.2050 against the US Dollar. As a result, there was a decline in EUR/USD recently, but the pair is holding a major support area near 1.1850.

Looking at the 4-hours chart, there is a major bullish trend line support near 1.1850-70. The mentioned 1.1850 level is also a key horizontal support. Furthermore, the 100 simple moving average (H4) is also positioned near 1.1825.

Therefore, the 1.1850 support is very important for the current uptrend in EUR/USD. On the upside, the pair face challenges near 38.2% and 50% Fib retracement level of the last decline from the 1.2070 high to 1.1823 low at 1.1917 and 1.1946 respectively.

US NFP, Unemployment Rate and ISM Manufacturing Index

This past Friday, there were a few important releases in the US such as the non-farm payrolls of August 2017, the unemployment rate and the ISM Manufacturing Index.

The nonfarm payrolls figure published by the US Department of Labor for August 2017 was forecasted to increase by 180K. However, the actual result was disappointing, as the nonfarm payroll employment increased by 156K in August 2017.

Furthermore, the last NFP reading was revised down to 189K. Looking at the US Unemployment Rate, there was an increase in August 2017 from 4.3% to 4.4%.

The report added that:

The labor force participation rate, at 62.9 percent, was unchanged in August and has shown little movement on net over the past year. The employment-population ratio, at 60.1 percent, was little changed over the month and thus far this year.

Later, the Institute for Supply Management (ISM) Manufacturing Index for August 2017 was released. The forecast was slated for a rise from 56.3 to 56.5. However, the result was positive, as there was an increase to 56.8.

Overall, the EUR/USD is holding a monster support at 1.1850. As long as the pair is above 1.1850, it might recover and trade back towards 1.1950-1.2000 in the near term.

USD/CHF - 0.9598

Most recent candlesticks pattern : N/A

Trend                                    : Down

Tenkan-Sen level                  : 0.9599

Kijun-Sen level                    : 0.9600

Ichimoku cloud top                 : 0.9613

Ichimoku cloud bottom              : 0.9610

New strategy  :

Buy at 0.9540, Target: 0.9640, Stop: 0.9505

Position : -

Target :  -

Stop : -

The greenback opened lower today and further consolidation below last week’s high of 0.9680 would be seen, hence downside risk is for another fall towards 0.9539-47 support area, however, if our view that low has been formed at 0.9428 last week is correct, downside would be limited and bring another rebound later. Above 0.9653-55 resistance would bring another test of 0.9680 but break there is needed to add credence to this view and extend gain to resistance at 0.9698-99 which needs to be penetrated to retain bullishness for headway to 0.9730-40. 

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent retreat. Below 0.9515-20 would risk weakness to 0.9490-00 but still reckon downside would be limited to 0.9450-60 and said support at 0.9428 should remain intact, bring another rebound later.

On Sunday, North Korea claimed that it had conducted a test of a hydrogen bomb meant to be carried by a long-range missile. The test of a 100-kiloton bomb was 10 times larger than anything previously tested and is 7 times more powerful than the bomb that destroyed Hiroshima to end the second world war.

Chinese President Jinping warned 'a dark shadow is looming over the world' and, in a joint statement with Russia said its ally North Korea would be 'appropriately dealt with'. With this latest test, geopolitical tensions have risen and the markets have reacted with a risk off sentiment turning to Yen and Gold to hold.

In economic news, the NFP release on Friday was a big surprise to the markets coming in at 156K against the consensus of 180K. The markets were hoping the recent strong ADP release (237K against the forecast 185K), whilst there is not a direct correlation between the two, would result in a strong NFP. With Average Hourly Earnings also decreasing (to 0.1% from the previous 0.3%), it is evident that the lack of upward inflationary pressure will likely delay the Fed in hiking rates this year. As a result, USD was sold against its peers, as the market has determined there is little value in holding the greenback.

ECB President Draghi is expected to express concern over EUR strength when the ECB meets on Thursday. A number of Federal Reserve officials are scheduled to speak this week, including member of the Board of Governors Lael Brainard, Minneapolis Fed President Neel Kashkari, Dallas Fed President Robert Kaplan and New York Fed President Bill Dudley, all of who have expressed doubt about the need for another rate hike this year. US markets are closed on Monday for the Labour Day Bank Holiday.

EURUSD is trading near early highs set on Monday, currently trading around 1.1899.

USDJPY was sold following the North Korea bomb test and is currently trading around 109.55.

GBPUSD is little changed from Friday, currently trading around 1.2955.

Gold is living up to its safe-haven status, climbing up to $1,337.98 in early Tuesday trading. Currently, Gold is trading around $1,337.

WTI is down 0.25% in early trading to currently trade around $47.60pb.

At 09:30 BST, the UK Chartered Institute of Purchasing & Supply and Markit Economics will release PMI Construction for August. Markets are expecting a slightly better release of 52, from the previous release of 51.9. Unless the release is significantly different from the consensus the markets do not expect to see any impact on GBP.

At 10:00 BST, Eurostat will release Eurozone Producer Price Index (YoY) for July. The consensus is calling for a lower number of 2.2% compared to the previous release of 2.5%. Whilst a lower number is traditionally seen as bearish for EUR, the markets do not expect any major impact to the value of EUR as they await further clarity of monetary policy from the ECB at their meeting on September 7th.

USDJPY (109.78): USDJPY is likely to resume its bullish trend following Friday's retest to the support level at 109.65. This was the level from which USDJPY broke out from the falling trend line. With price not quite testing the resistance level at 110.72, we could expect a breakout from this level. A convincing close above 110.72 will keep the bullish bias intact as USDJPY will now be targeting 113.00. To the downside, failure to hold above 109.65 will keep USDJPY consolidating with the potential to retest the 109.15 support.

GBP/USD - 1.2952

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2957

Kijun-Sen level                    : 1.2951

Ichimoku cloud top              : 1.2914

Ichimoku cloud bottom        : 1.2900

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although Friday’s anticipated rally has justified our bullishness, lack of follow through buying on break of previous resistance at 1.2979 suggests upside would be limited to 1.3000 and price should falter below another previous resistance at 1.3032, risk from there is seen for a retreat to take place due to loss of near term upward momentum.

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below 1.2930 would risk test of support at 1.2905 but only break there would signal top has been formed at 1.2996 instead, bring subsequent fall to 1.2875-80 and later towards said support at 1.2852.

GBPUSD (1.2955): The British pound managed to push higher, but the currency pair eased back after briefly rising to a 14-day high. Further upside gains can be expected as GBPUSD approaches the previously broken support level at 1.3033. A retest of this level as resistance will confirm the downside bias. This will also potentially mark the right shoulder formation in the chart pattern, setting the stage for a decline back to the neckline support at 1.2847. A breakdown below this neckline support will signal a move towards 1.2628.

EURUSD (1.1884): The EURUSD closed last week below 1.2000 handle. Friday's payrolls data briefly pushed the common currency to test the minor intraday resistance at 1.1963 following which the common currency reversed to close lower on the day. We now expect the EURUSD remain trading below 1.1882 into this Thursday's ECB meeting. The next main support is seen at the 1.1688 level which could be tested. However, for this to occur, EURUSD will need to break past the minor intraday support at 1.1825. A decline to 1.1688 could potentially mark a decent correction in EURUSD's rally to 1.2000.

The US dollar closed out on Friday with some modest gains. The nonfarm payrolls data was broadly mixed. According to the data from the Bureau of Labor Statistics, the US economy added 156k jobs in August. This was below consensus estimates of 180k. July's numbers were also revised down to 189k from 209k previously.

Average hourly earnings were also weak, rising just 0.1% on the month after rising 0.3% in July. The unemployment rate inched higher to 4.4%.

The rather weak payrolls report was offset by the ISM manufacturing PMI data. For August, manufacturing PMI rose to 58.8, beating estimates by a strong margin and accelerating from 56.3 in July.

Looking ahead, the economic calendar today will include the Eurozone Sentix investor confidence. Median estimates point to a reading of 27.4, slightly below 27.7 that was registered previously. The UK's construction PMI numbers will also be coming out later in the day with forecasts showing a modest increase from 51.9 in July to 52.1 in August.