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Daily Pivots: (S1) 1.2774; (P) 1.2803; (R1) 1.2828; More...

GBP/USD lost some downside momentum again but still, further decline is expected with 1.2915 resistance. Current fall from 1.3267 should be targeting to 1.2588 key near term support. As noted before, we're favoring the case that correction from 1.1946 is completed at 1.3267. Decisive break of 1.2588 will confirm our view and target a test on 1.1946 low. Though, break of 1.2915 will indicate short term bottoming and bring stronger rebound.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern. While further rise cannot be ruled out, larger outlook remains bearish as long as 1.3444 key resistance holds. Down trend from 1.7190 (2014 high) is expected to resume later after the correction completes. And break of 1.2588 will indicate that such down trend is resuming.

Daily Pivots: (S1) 0.9632; (P) 0.9664; (R1) 0.9688; More....

No change in USD/CHF's outlook as it's bounded in range of 0.9582/9772. Intraday bias remains neutral at this moment. On the upside, decisive break of 0.9772 resistance will revive the bullish case of reversal. That is, whole decline from 1.0342 has completed at 0.9437 after defending 0.9443 support. USD/CHF should then target channel resistance (now at 0.9849) next. Meanwhile, the pair is bounded inside medium term falling channel and limited below 38.2% retracement of 1.0342 to 0.9437 at 0.9783 for the moment. Break of 0.9582 will turn bias back to the downside for 0.9437. This could also extend the fall from 1.0342 through 0.9437/43 key support level.

In the bigger picture, we're slightly favoring the case that USD/CHF has successfully defended 0.9443 key support level. And long term range trading in 0.9443/1.0342 is extending with another rise. At this point, there is no sign of an up trend yet. Hence, while further rise is expected in USD/CHF, we'll start to be cautious on loss of momentum above 61.8% retracement of 1.0342 to 0.9437 at 0.9996. However, firm break of 0.9443 will carry larger bearish implication and would target next key support at 0.9072.

Daily Pivots: (S1) 108.69; (P) 109.26; (R1) 109.59; More...

USD/JPY continues to engage in consolidative trading above 108.59 temporary low. Intraday bias remains neutral for the moment. Near term outlook stays bearish with 110.94 resistance intact and deeper decline is expected. Break of 108.59 will target a test on 108.12 low. Whole corrective decline from 118.65 is possibly resuming and break of 108.12 will target 61.8% retracement of 98.97 to 118.65 at 106.48. Nonetheless, firm break of 110.94 will indicate short term bottoming and turn bias back to the upside.

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 markets are lacking a clear direction for the moment as traders await the highly anticipated Jackson Hole symposium of global central bankers. Sterling is the notably weaker one this week but there is no follow through selling seen today. The pound is trying to recovery against Dollar, Euro as well as Yen. EUR/USD is still staying in range below 1.1908 as recent consolidation extends. Some strength is seen in Canadian Dollar today as USD/CAD dips through 1.2525 temporary low. That could be thanks to WTI oil's recovery back above 48. Gold is also hovering in tight range below 1300.

Draghi not expected to deliver anything special

The Jackson hole symposium, titled "Fostering a Dynamic Global Economy," is hosted by the Kansas City Federal Reserve Bank. It kicks off later day and runs through Saturday. Main focus in on European Central Bank President Mario Draghi and Federal Reserve chair Janet Yellen. Both will deliver a speech on Friday. There were already talks that Draghi will not deliver a policy shift in the occasion. And it's understandable as he already indicated that ECB will discuss the composition of stimulus in September. Some analysts noted that Draghi's silence on monetary policy would clear up the risks of a dovish message. And in that case, Euro could finally gather the momentum to complete the near term consolidation from 1.1908 against Dollar.

Yellen won't neither

At the same time, Fed chair Janet Yellen is also unlikely to deliver anything new regarding Fed's policies. Fed has already indicated in the July FOMC minutes that "participants generally agreed that, in light of their current assessment of economic conditions and the outlook, it was appropriate to signal that implementation of the program likely would begin relatively soon, absent significant adverse developments in the economy or in financial markets". Fed is generally expected to announce the program to unwind its balance sheet in September. And we argue that Fed will still do it in spite of the uncertainties on raising the debt limit by Congress (more in US Debts Approach Limit. How Will It Affect Fed's Policy?) And for the moment, it's too early for Yellen to indicate whether Fed will hike again in December.

Fitch warns of rating review with negative implications

Raising of debt ceiling will be a key focus in the US in September. Credit ratings agency Fitch warned that failure to raise the debt ceiling would prompt a review on US AAA sovereign rating "with potentially negative implications". Fitch warned that "brinkmanship over the debt limit could ultimately have rating consequences, as failure to raise it would jeopardize the Treasury's ability to meet debt service and other obligations." It noted that "republican fiscal conservatives are likely to make support for lifting the debt limit conditional on measures to aggressively reduce the budget deficit. A 'clean' debt limit increase, unattached to other policy measures, appears possible, although it may require support from Democrats." And, "in Fitch's view, the economic impact of stopping other spending to prioritize debt repayment, and potential damage to investor confidence in the full faith and credit of the U.S., which enables its 'AAA' rating to tolerate such high public debt, would be negative for U.S. sovereign creditworthiness."

Trump blames Paul Ryan and Mitch McConnell

US President Donald Trump tweeted that "I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval. They didn't do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. Could have been so easy-now a mess!" But it's generally perceived by the analysts that risks of government shutdown and debt payment defaults surged after Trumps' threat that "if we have to close down our government, we're building that wall" of US-Mexico border. He has requested USD 1.6b for building the US-Mexico border wall but that is widely rejected by Democrats. And, even though the House has passed a spending package with the wall funding, Trump doesn't have enough support to pass in the Senate by September 30. And he could in the end veto the spending bill if wall funding is not included. At the same time, some Republicans are working on a bipartisan bill with Democrats on raising debt ceiling. But the Democrats are clear on their rejection of attaching any condition to the debt bill.

ECB Hansson not concerned with Euro strength

Separately, ECB governing council member Ardo Hansson talked down the concern of strength in Euro as ECB might taper the asset purchase program. He noted that "it's not surprising that markets might react and say, on balance, we're more upbeat about Europe than we were a while ago, which will cause the currency to be a bit stronger." Hansson said he doesn't have a view on what the packaged will be after the current EUR 60b per month asset purchase program ends by the end of the year. Regarding stimulus exit Hansson emphasized to split the "degree of accommodation" and "how you deliver it". And ECB may still want to maintain an "easing bias" but deliver it in "somewhat difference combination."

On the data front.

US initial jobless claims rose 2k to 234k in the week ended August 19, below expectation of 236k. Continuing claims were unchanged at 1.95m in the week ended August 12. UK Q2 GDP growth was unrevised at 0.3% qoq. UK index of services rose 0.5% 3mo3m in June, BBA mortgage approvals rose to 41.6k in July, CBI realized sales dropped to -10 in August. New Zealand trade surplus narrowed to NZD 85b in July but was better than expectation of NZD -200m deficit.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 108.69; (P) 109.26; (R1) 109.59; More...

USD/JPY continues to engage in consolidative trading above 108.59 temporary low. Intraday bias remains neutral for the moment. Near term outlook stays bearish with 110.94 resistance intact and deeper decline is expected. Break of 108.59 will target a test on 108.12 low. Whole corrective decline from 118.65 is possibly resuming and break of 108.12 will target 61.8% retracement of 98.97 to 118.65 at 106.48. Nonetheless, firm break of 110.94 will indicate short term bottoming and turn bias back to the upside.

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.

Economic Indicators Update

The GBP/USD broke below 1.2020, the weekly L3 level, thus turning the support into a resistance. After a short breakout that I showed on live trading webinar yesterday, the pair started to retrace towards the POC zone 1.2830-50 (Order block, ATR high, trend line, D H5, EMA89). The price could reject there towards the 1.2880 and 1.2770. Only a break below 1.2768 could spur additional weakness in the pair towards 1.2740 zone. The market is calm at this point but the increased volatility is expected during the 2017 Economic Symposium, "Fostering a Dynamic Global Economy", which will take place Aug. 24-26, 2017 at Jackson Hole, WY.

Renewed bulls strength in the pair should manifest on a 4h candle close above 1.2855. That could be a sign for a further correction towards 1.2925.

WTI oil is trading in consolidation mode on Thursday following strong rally on Wednesday after US crude stocks report showed further fall in inventories by 3.3 million barrels. Oil price rallied over 1% on Wednesday and hit high at $48.48. South-turning 20SMA limited action and acting as initial resistance at $48.56, marking pivotal resistance zone with former highs and double-rejection at $48.72 and Fibo 61.8% of $50.41/$46.44 downleg at $48.89. Daily studies are bullishly aligned and keep focus at the upside for eventual attack at $48.56/89 zone. Meantime, corrective easing should stay above $48.74 (converged 10/100 SMA's) to keep near-term bulls in play. Increased downside risk could be expected on break here that would re-expose strong support $47.01 (daily cloud top).

Res: 48.56, 48.72, 48.89, 49.14
Sup: 48.00, 47.52, 47.35, 47.01

Thursday August 24: Five things the markets are talking about

The majority expect ECB's Draghi to refrain from talking about the timing of exit from ultra-loose monetary policy at the Kansas City Fed's Jackson Hole symposium, which starts today, however, it is still worthwhile watching out for news as the three day annual meet of G10 central bankers is always good for a surprise or two.

The ‘mighty' U.S dollar is finding it difficult to gain meaningful traction over the past couple of sessions as investors digest U.S political uncertainty ahead of important speeches from central bankers – both the Fed's Yellen and ECB's Draghi take center stage tomorrow – President Trump threatened on Tuesday night to shut down the government to secure funding for a wall on the Mexican border and even raised doubts about a new NAFTA deal being reached.

Ms. Yellen is scheduled to speak about financial stability at 10 am EDT Friday, while ECB's Draghi is set to give a speech at 3 pm EDT.

1. Stocks mixed results

In Japan, the Nikkei (-0.4%) share average fell to a four-month low overnight, dragged down by stateside losses and a stronger yen. The broader Topix index fell -0.5%.

In South Korea, the Kospi index increased +0.4%, while down-under, Australia's S&P/ASX 200 Index added +0.1%.

In Hong Kong, the Hang Seng Index rallied +0.5% as the market reopened after being shut on Wednesday, supported by robust gains in financial and property stocks.

In China, stocks fell the most in nearly two-weeks on Thursday, as China Unicom tumbled after rallying earlier in the week as excitement over state enterprise reforms cooled. The blue-chip CSI300 index fell -0.6%, while the Shanghai Composite Index lost -0.5%.

In Europe, indices are trading a tad higher in light summer trade with cyclicals' helping many European names rise.

U.S stocks are set to open in the black (+0.1%).

Indices: Stoxx600 +0.4% at 375.5, FTSE +0.3% at 7407, DAX +0.3% at 12211, CAC-40 +0.4% at 5133, IBEX-35 +0.5% at 10391, FTSE MIB +0.8% at 21800, SMI +0.1% at 8964, S&P 500 Futures +0.1%

2. Oil steady as storm heads into Gulf of Mexico

Ahead of the U.S open, oil prices are steady, holding on to most of their recent gains after another fall in U.S crude inventories yesterday indicated a tighter market. Also supporting prices is the threat of a tropical storm heading towards oil producing facilities in the Gulf of Mexico.

Brent crude is down -5c at +$52.52, while U.S light crude (WTI) is also -5c lower at +$48.36 a barrel.

Note: Both contracts had rallied more than +1% yesterday, supported by potential output disruptions from the Gulf of Mexico storm Tropical Depression Harvey. Operators in the area are already closing down platforms for precautionary measures.

U.S crude oil production hit +9.53m barrels bpd last week; it's highest since July 2015 and is up over +13% from their most recent low in mid-2016.

Despite elevated production levels, EIA data yesterday showed that U.S crude stocks fell last week and that gas stocks were also down – crude inventories fell by -3.3m barrels in the week ending Aug. 18 to +463.17m barrels, down -13.5% from March's record levels.

Note: OPEC is to hold a joint OPEC, non-OPEC Joint Ministerial Monitoring Committee (JMMC) meeting on Sept 22 – All options will be on the table including production cuts and extension of current agreement. Planning to invite Nigeria and Libya to meeting.

Gold prices have nudged lower overnight, giving up some of its gains made after President Trump's threat of a government shutdown. Spot gold is down -0.2% at +$1,287.21 an ounce. The market is focused on Jackson Hole rhetoric.

3. Yields trade a tight range ahead of central bank meet

Yesterday, Canadian bonds ended a recent losing streak as fixed-income prices rose amid growing uncertainty on the future of Nafta following comments made by Trump.

The yield for Canada's two-year bonds fell -2 bps to +1.259%, while 10-year product was -4 bps lower at +1.883%. Canadian fixed-income continues to underperform U.S Treasury's amid ongoing muted summer trading conditions on the broader market.

U.S debt prices also rallied Wednesday, as combative rhetoric from President Trump this week pressured equities while fuelling demand for assets seen as a safe haven. The yield on U.S 10-year notes is at +2.185%, down from Tuesday's pre speech levels of +2.215%.

Elsewhere, Germany's 10-year Bund yield rallied +1 bps to +0.38%, the first advance in more than a week, while the U.K's 10-year Gilt yield increased +2 bps to +1.074%.

4. Dollar flounder ahead of Yellen's speech Friday

The EUR (€1.1790) has extended its gains outright, helped yesterday by data showing that U.S new-home sales fell sharply in July and by a provisional eurozone PMI survey on manufacturing activity that beat expectations.

Improvements in the eurozone economy, combined with heightened political uncertainty in both the U.S and the U.K will continue to support the single unit on pull backs – EUR/GBP continues to trade north of the psychological €0.92 handle.

Draghi's Jackson Hole speech is being seen as a potential mover as it will have more impact as it relates directly towards monetary policy. Consensus believes ‘no' changes are expected in the QE measures, however attention will be paid to any remarks on the EUR's strength.

Sterling (£1.2800) remains under persistent pressure, driven by concerns about Brexit, while USD/JPY (¥109.32) trades within a tight 120-pip range over the week heading into Jackson Hole conference. Any USD strength has been countered by geopolitical risk as U.S/South Korea continues their war exercises.

Bullish bets on the Chinese yuan are maintained at three-year highs. The currency has gained about +4.1% outright this year, supported by the People's Bank of China (PBoC) guidance of the daily trading band and controls on capital outflows.

5. U.K business investment slows as Brexit fuels uncertainty

Data this morning showed that U.K business investment slowed and posted no growth in Q2 – a sign that uncertainty linked to Brexit negotiations and June's general election may have weighed on firms' long-term plans.

Capital spending by businesses was unchanged compared with the preceding quarter, as well as the corresponding quarter of 2016, standing at +£43.8B.

U.K Ministers have suggested the U.K will seek a “transition agreement' to give businesses time to adapt, but mixed signals on the shape of such a deal have kept companies on edge.

Other data showed that U.K GDP data for Q2 expanded by +0.3% on the quarter, a slight improvement on the +0.2% seen in Q1. It was in line with expectations and on an annualized basis; the U.K economy grew by +1.2%. Household expenditure and government spending drove Q2 expansion.

• Equities recover from Trump-related declines;
• Jackson Hole gets underway but key speeches don’t come until Friday;
• UK growth softens as consumer and business spending slows.

US equity markets are poised to open higher on Thursday, paring Wednesday’s losses which came on the back of Donald Trump’s NAFTA and government shutdown warnings.

The short-term nature of the declines is probably a good reflection of how seriously people are taking Trump’s latest threats. We often see a knee jerk reaction to such negative remarks but the fact that we’re already pushing higher a day later suggests people don’t expect either to happen. Of course, should it become apparent that he will follow through on them then it will likely be a different story altogether.

Barring any political or geopolitical distractions, focus will likely now shift to the week’s main event, Jackson Hole. In what has otherwise been a very slow week for markets – as it typically the case at this time of year – this gathering of central bankers, policy experts and academics was always the standout event that could trigger some market volatility.

Unfortunately, we’ll have to wait until tomorrow for the highlight of the event, appearances from Federal Reserve Chair Janet Yellen and ECB President Mario Draghi. With both central banks on the cusp of making new policy announcements, their views will be poured over for the slightest hints. Markets don’t seem overly concerned about the Fed’s balance sheet plans so interest rate clues is what people will be looking for, whereas with ECB, it’s all about tapering. When will it happen, how much will it be and how long will it last.

On the data side, it’s once again looking a little quiet. We had second quarter GDP data from the UK this morning which painted a rather grim picture of the economy. Consumer spending – a key component of the UK economy – slowed once again as households continue to feel the squeeze of negative real wage growth while business investment stagnated. It’s clear that while the economy has not nose-dived, it is suffering in the aftermath of the Brexit vote. The pound fell initially after the data but quickly recovered to trade off it’s lows just below 1.28 against the dollar. The pair remains under pressure though and should this support break, 1.26 could be on the cards.

There’s a couple more pieces of data still to come from the US today including existing home sales for July, weekly jobless claims and mortgage delinquencies

The Aussie hit fresh low at 0.7866 on Thursday in extension of pullback from 0.7950, retracing 61.8% of 0.7807/0.7962 upleg.

Fresh weakness on Thursday marks the third straight day in red that broke below daily Tenkan-sen (0.7885).

Subsequent bounce from 0.7866 returned above cracked Tenkan-sen signaling hesitation at pivotal supports. Bears need close below both points to generate fresh signal for further easing.

Mixed signals on daily chart (conflicting MA’s / RSI / slow stoch in neutrality zone and negative momentum studies) do not provide clear direction signal, but bearishly aligned near-term tech keep focus at the downside.

Sustained break below 0.7866 to expose key near-term support at 0.7807, while lift above 0.7916 /25 (20SMA / bear-trendline off 0.8065) would shift near-term focus higher.

Res: 0.7916, 0.7925, 0.7950, 0.7962
Sup: 0.7885, 0.7866, 0.7844, 0.7807

Crude oil is trading mixed. Hourly support is given at 46.46 (17/08/2017 high). Strong resistance can be found at 50.41 (31/07/2017). Expected to show continued short-term sideways move.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).