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GBPUSD (1.2888): The British pound was seen trading subdued with price action trading flat for nearly four days after the price fell to 1.2847. A near-term upside is quite likely, however, with GBPUSD likely to test 1.3000 resistance level. On the 4-hour chart, we can see the short-term range at 1.2908 and 1.2847. A breakout from this level is required for GBPUSD to establish the near-term direction. The bias points to the upside given that the support level at 1.2847 has held up so far. However, in the event of a break down below this level, we could expect to see further declines in the short term.

EURUSD (1.1807): The EURUSD posted gains yesterday as the common currency rallied back above the price of 1.1800. The modest gains put the EURUSD back into the range of 1.1880 and 1.1800. This comes after price rebounded to the upside following the test of support at 1.1688. The upside breakout from the descending triangle puts the target for EURUSD towards 1.1882 which marks the previous resistance level. Any near-term dips in price could see a retest of the breakout level. This bullish bias will change only on a breakdown below the support at 1.1688. Below this support level, the next downside target for the EURUSD will be 1.1552.

The US dollar gave up the gains with price action trading rather subdued. Lack of any clear market movers and the upcoming Jackson Hole Symposium saw traders taking a breather.

Economic data yesterday was quiet with no major releases. The German Bundesbank released its monthly forecasts where it remained upbeat on the German economy. In Canada, the wholesale sales fell 0.5%, falling well below estimates of 0.6% and after rising 1% in the previous month.

Looking ahead, Canada's retail sales numbers are expected today. Estimates point to a 0.2% increase in retail sales on the month following a 0.6% increase in the previous month. Core retail sales are however expected to remain flat on the month after declining 0.1% previously. In the US, the Richmond Fed manufacturing index is also due later today. Forecasts expect the index to slip to 11 after rising to 14 previously.

EUR/CHF was rejected by the upper median line (uml) of the minor ascending pitchfork and by the WL3 of the major descending pitchfork. Is almost to reach the first upside target from the WL2, where he may find resistance again. We have an important target also at the WL4, is hard to believe that will take this out at this moment.

Price has found strong support right below the median line (ml) of the minor descending pitchfork and now has come back to retest some resistance levels. Right now is pressuring the inside sliding line (SL), could come to retest also the upper median line (UML) of the major ascending pitchfork. Actually, it could be attracted by the confluence area formed at the intersection between the UML with the upper median line (uml) of the minor descending pitchfork. The outlook is bearish as long as is trading within the descending pitchfork’s body.

Daily Pivots: (S1) 1.1753; (P) 1.1790 (R1) 1.1851; More...

While EUR/USD recovered, it's limited below 1.1846 minor resistance so far. Intraday bias remains neutral as consolidation from 1.1908 might extend. In case of another fall, downside should be contained by 38.2% retracement of 1.1119 to 1.1908 at 1.1606 to bring up trend resumption. Break f 1.1846 minor resistance will argue that larger rise from 1.0339 is resuming for 1.2042 long term support turned resistance next.

In the bigger picture, an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Sustained trading above 55 month EMA (now at 1.1768) will pave the way to key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. While rise from 1.0339 is strong, there is no confirmation that it's developing into a long term up trend yet. Hence, we'll be cautious on strong resistance from 1.2516 to limit upside. But for now, medium term outlook will remain bullish as long as 1.1295 support holds, in case of pull back.

Price is trading below the 0.7950 psychological level and looks a little overbought on the short term. Has retested a dynamic resistance and now could decrease if the dollar index will stay above the 92.94 previous low.

AUD/USD is still trading in the green on the short term, it maintains a bullish perspective as long as is located above a major dynamic support. Price is signaling an exhaustion and could come down to retest a support before will try to climb much higher.

Price is driven by the technical factors as we have a poor economic calendar. Technically could slip lower on the short term if will fail to close above the 0.7962 previous high. Right now is very important to see what will happen on the USDX, which is under bearish pressure on the Daily chart.

It is pressuring the median line (ml) of the minor ascending pitchfork, a failure to close above stabilize above will send the rate tumbling on the short term. The rebound towards the median line (ml) was expected after the failure to retest the lower median line (lml), but the false breakout above it shows an overbought.

Could come down to retest the median line (ML) of the major ascending pitchfork and the lower median line (lml). The perspective will remain bullish as long as is trading above these levels, but a valid breakdown will confirm a major drop.

The forex markets are lacking clear direction so far this week. It feels there is a lack of interest among traders ahead of Jackson Hole symposium. Euro attempted to resume recent rally against Dollar. While EUR/USD takes out a near term channel resistance, it's staying below 1.1846 resistance. Thus, the consolidation from 1.1908 is likely still in progress. GBP/USD and USD/JPY are also staying in very tight range. Canadian dollar strengthens with very weak momentum but USD/CAD is still in progress for deeper decline. The economic calendar is relatively light today but Canadian retail sales could trigger firmer momentum in USD/CAD.

Trump revealed Afghanistan strategy, Mnuchin urge to raise debt ceiling

US President Donald Trump revealed his Afghanistan strategy and said "a core pillar of our new strategy is a shift from a time-based approach to one based on conditions." But there are criticisms that Trump's new strategy was essentially the same as his predecessors, which failed to get the US our of that war. At the same time Treasury Secretary Mnuchin indicated that the Congress has to lift the ceiling by the end of September in a "clean" debt-ceiling increase. This was echoed by Senate Majority Leader Mitch McConnell who noted that there is a "zero chance" the US government fails to raise the ceiling. Mnuchin has been urging to lift the debt ceiling before leaving Washington for the August recess. Indeed, the Treasury has been using "extraordinary measures" since this spring to avoid breaching the debt ceiling but the trick cannot be used indefinitely due to weaker tax collection.

Japan businesses not keen on additional BoJ easing

According to a survey of 548 firms conducted for Reuters Nikkei Research, businesses in Japan were not too optimistic that BoJ could hit the 2% inflation target. Yet, they are not keen on having additional easing from the central bank. The results showed that 31% of respondents believed it's "impossible" for BoJ to achieve the inflation target. 37% believed that BoJ could hit it after three years. 46% said that BoJ's future policy direction should be standing pat. 40% said BoJ should seek exit from monetary easing. And only 14% believed that BoJ should adopt further monetary easing. Inflation expectation was also quite clear with 75% said they don't play to raise prices of their main goods and services.

ECB to hit 33% bond purchase ceiling soon

A report by Financial Times revealed that the ECB is about to break its self-imposed limit of owning 33% of a country's government debt, leading the central bank to taper no matter how well (or bad) inflation goes. It is projected that the limits for German, Portuguese and Irish debts could be breached as early as in February. At the same time, it's believed to be unlikely for ECB to raise the ceiling considering continuous legal challenges from Germany. President Mario Draghi's speech at the Jackson Hole symposium this Thursday is closely awaited. He would likely discuss about the Eurozone's economic outlook and hinted about the central bank's policy stance.

On the data front

Swiss trade surplus widened to CHF 3.51b in July. German ZEW economic sentiment is the main feature in European session. UK will release public sector net borrowing. Canada retail sales will be a major focus in US session. US will release house price index.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.1753; (P) 1.1790 (R1) 1.1851; More...

While EUR/USD recovered, it's limited below 1.1846 minor resistance so far. Intraday bias remains neutral as consolidation from 1.1908 might extend. In case of another fall, downside should be contained by 38.2% retracement of 1.1119 to 1.1908 at 1.1606 to bring up trend resumption. Break f 1.1846 minor resistance will argue that larger rise from 1.0339 is resuming for 1.2042 long term support turned resistance next.

In the bigger picture, an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Sustained trading above 55 month EMA (now at 1.1768) will pave the way to key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. While rise from 1.0339 is strong, there is no confirmation that it's developing into a long term up trend yet. Hence, we'll be cautious on strong resistance from 1.2516 to limit upside. But for now, medium term outlook will remain bullish as long as 1.1295 support holds, in case of pull back.

Economic Indicators Update

USD/JPY - 109.33

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 109.12

Kijun-Sen level                  : 108.99

Ichimoku cloud top             : 109.49

Ichimoku cloud bottom      : 109.20

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Despite yesterday’s all to 108.63, the subsequent rebound after holding above indicated support at 108.60 has retained our view that further consolidation would take place and another test of resistance at 109.60-67 cannot be ruled out, however, a firm break above there is needed to signal low has been formed at 108.60, bring a stronger rebound to 110.00 and later towards resistance at 110.37 which is likely to hold from here.

On the downside, below 108.80 would bring retest of 108.60 but only break there would signal recent decline has resumed and may extend further weakness to 108.30 (1.618 times projection of 110.95-109.67 measuring from 110.37), then towards 108.10-15 (61.8% projection of 110.95-108.60 measuring from 109.60), however, loss of downward momentum should prevent sharp fall below latter level and reckon 108.00 would hold from here, bring rebound later. As near term outlook is mixed, would be prudent to stand aside for now, then look to sell dollar on subsequent rebound. 

Sunrise Market Commentary

• Rates: Positive bias core bonds ahead of Yellen/Draghi
  We forecast trading to remain sentiment-driven ahead of speeches by ECB Draghi (tomorrow and Friday after close) and Yellen (Friday). Current market sentiment underpins core bonds as subdued inflation readings dealt a blow to tightening expectations while turmoil in Washington sparked some volatility on Wall Street.
• Currencies: dollar holding within reach of recent lows
  The dollar continues to trade soft, but nearby technical support levels are left intact as investors await CB speeches at the Jackson hole Fed symposium. Today's data won't change the global dollar picture. EUR/GBP extends its impressive rebound as investors look forward to the next round of Brexit negotiations

The Sunrise Headlines

• US equities ended little changed with energy (lower oil prices) and financials lagging and real estate outperforming. Asian equities started the day on a stronger footing (good corporate results) and US equity futures show gains too.
• Britain will be subject to the rulings of European courts after Brexit, the government has conceded, in an apparent climb-down from its promise of judicial independence, said the Guardian.
• President Trump made an open-ended commitment to Afghanistan that'll add as many as 4,000 more US troops into the country and keep American forces there as long as it takes to ensure a stable and enduring peace.
• Oil prices dropped sharply yesterday to €51.66/barrel, reversing Friday's gains. OPEC's Vienna meeting ended quietly without decision on the future of supply cuts. The cartel will discuss whether to extend or end the deal in November.
• The Hungarian central bank meets, but consensus unanimously expect an unchanged decision (base rate of 0.9%). The forint performed well recently and approaches the EUR/HUF 300 threshold (now 303.29).
• Today's calendar remains light with the August German ZEW economic sentiment and the US Richmond Fed manufacturing surveys. In the UK, public finances (July) and the CBI trends report are up for release. ECB Constancio speaks.

Currencies: Dollar Holding Within Reach Of Recent Lows

Dollar holding near the recent lows

EUR/USD held within reach of the early August top in recent weeks, but no new test occurred. This indecisive pattern continued yesterday. The dollar traded with a slightly negative intraday bias, partially due to a negative risk sentiment. EUR/USD drifted back north of 1.18 and closed the session at 1.1815. Investors awaited speeches of Fed's Yellen and ECB's Draghi at the Jackson Hole Fed symposium on Friday. USD/JPY drifted temporary below 109, but rebounded to the 109 area as risk sentiment improved later in US dealing.

Overnight, Asian equities show moderate gains, but volumes are low as there is no high profile (economic) news. The yen eases slightly. USD/JPY tries to find a bottom after a protracted decline throughout August. EUR/USD hovers near 1.18.

In EMU, the German August ZEW economic sentiment is expected to decline slightly. The current situation sub-index peaked in June (88). The expectations' component hovered sideways of late . A strong decline of the expectations would signal that the economy is rolling over, which we don't expect. The August Richmond Fed manufacturing index is expected to have declined to 10 from 14. Other recent surveys suggested that manufacturing is doing well. With a weaker dollar and signs of better domestic demand, we count on a stabilization of the Richmond Fed. The index is volatile and sharply surprised on the upside in July. The impact on USD trading should be limited. At the margin, the data might be slightly USD supportive, or at least slow the USD decline. The global equity performance remains a wildcard for USD trading. An easing of recent equity softness might be marginally USD supportive. Focus remains on the speeches of Yellen and Draghi later this week.

Broader context and technical picture. Late June, EUR/USD started a new upleg as investors anticipated a reduction of ECB bond buying to be announced in autumn. The Fed was expected to remove policy stimulation only in a very gradual way as US inflation remained soft. Uncertainty on the policy of the Trump administration was an secondary negative factor for the dollar. EUR/USD set a new correction top north of 1.19 before consolidating in a narrow 1.1662/1.1910 trading range. We expect this range will hold going into the Jackson Hole symposium. If US data remain ok (as most were this month) and if Draghi gives little information on next ECB steps, there might be room for a modest USD comeback. A return of EUR/USD to the 1.15/16 area is possible. Pockets of US political risk are a (negative) wildcard for the dollar.

A downward correction in core (US and European) yields supported the yen in August. USD/JPY declined from the mid 114 area mid-July to 108.60 last Friday. The April correction low (108.13) remains the key line in the sand. For now, this level won't be easy to break as quite some USD bad news is discounted after the recent protracted setback. A cautious buy-on-dips approach (with stop-loss protection below 108) may be considered

EUR/USD correction top stays within reach

EUR/GBP

EUR/GBP extends protracted uptrend

Yesterday, the gradual, but protracted EUR/GBP uptrend continued. Investors awaited new info on the Brexit negotiations going into a next round of formal talks next week. There were no UK eco data. In technical trading, EUR/GBP closed the session at 0.9162. Cable held an extremely tight sideways range in the upper half of 1.28/low 1.29. USD softness helped sterling.

Today, the UK monthly public finance data and the CBI trends orders data will be published. The data are usually only of second tier importance for sterling trading. The CBI orders are expected marginally softer at 8 from 10. Recent UK eco data were not too bad even as higher inflation is eroding Britons capacity to spend. The difficult Brexit talks remain a negative sterling factor MT. However, the recent rise of EUR/GBP has gone quite far and the pair is moving into overbought territory. So, we look for a correction, for whatever reason (correction in EUR/USD, decent UK eco data, improving global risk sentiment…).

From a technical point of view, EUR/GBP cleared the 0.8854/80 resistance (top end June), opening the way for further gains The move was the result of euro strength (ongoing strong EMU growth and expectations of the ECB reducing policy stimulation later this year). At the same time, UK price data remain soft enough for the BoE to keep a wait-and-see modus as the Brexit negotiations continue. MT, we maintain a buy EUR/GBP on dips approach as we expect the constellation of relative euro strength and sterling softness to continue. The 0.9415 flash-crash spike is the next MT target on the charts. However, we don't jump on the trend anymore after recent protracted EUR/GBP rally and wait for a correction, e.g to the technical support in the 0.88/89 area.

EUR/GBP: consolidation near recent top

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