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The GBP/USD fell sharply to the lowest level in four weeks, as the Britain's consumer price inflation report showed weaker than expected reading for July. The Pound retreated versus the US Dollar to the 1.2917 level, falling by 34 base points just after data were published.  

The Office for National Statistics revealed that the UK Consumer Price Index marked a 2.6% yearly increase in July, equal to the previous month's gain, while analysts expected a climb of 2.7%. The inflation growth was dampened by lower oil prices, while the main support came from rising costs of clothing, food and utilities. The weaker-than-expected CPI figure reduced expectations for a higher inflation as well as the prospect of the Bank of England's interest rate hike.

The EUR/USD currency pair dropped sharply owing to the strong US economic release. The Greenback strengthened against the Euro by 0.23% to reach the 1.1713 mark. However, by the end of the Tuesday's session the European single currency recovered to pre-data levels.

The Commerce Department revealed that retail sales in the United States recorder the biggest increase in the last seven months, surging 0.6% month-over-month in July and following an upwardly revised gain of 0.3% in the prior month. July's upbeat figures suggested that the economy kept gaining momentum in the Q3 amid higher confidence in the country's economic outlook. Meanwhile, the Federal Reserve became less likely to delay the next interest rate increase until 2018.

Daily Pivots: (S1) 1.1753; (P) 1.1796 (R1) 1.1822; More...

Intraday bias in EUR/USD remains neutral for the moment as it's bounded in range of 1.1688/1908. The consolidation from 1.1908 could extend with deeper pull back. But downside should be contained by 38.2% retracement of 1.1119 to 1.1908 at 1.1606 to bring rebound. On the upside, break of 1.1908 will extend recent up trend to 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.

Daily Pivots: (S1) 1.2819; (P) 1.2894; (R1) 1.2943; More...

GBP/USD's decline from 1.3267 is still in progress and intraday bias remains on the downside. As noted before, correction from 1.1946 is likely completed at 1.3267. Deeper fall should now be seen to 1.2588 key near term support. Decisive break there will confirm our bearish view. On the upside, break of 1.3030 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay cautiously bearish in case of recovery.

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.

Asia Summary

Asian equity markets opened mixed, with the biggest mover the Singapore Straits Times index falling 1.1%, led by banks. Most of the move is attributed to the fact that the odds for a Fed Dec rate hike his risen back up to 50/50 following US data. Late yesterday a PBOC adviser said that China is unlikely to raise rates or use RRR, more likely to use other measures. The PBOC did resume open market operations after skipping yesterday, with a next injection of CNY180B. An analyst report noted that China state owned firms are dominating M&A deals, accounting for 60% in H1 of 2017. As tensions continue to ease on the Korea peninsula, BOK Gov Lee and Fin Min Kim hold a meeting and jointly agree that any action from their respective offices will be harmonious. USD?KRW rose over 0.5% to 1,142 today.

Key economic data

(AU) AUSTRALIA JUL WESTPAC LEADING INDEX M/M: +0.12% V -0.14% PRIOR

(AU) AUSTRALIA Q2 WAGE PRICE INDEX Q/Q: 0.5% V 0.5%E; Y/Y: 1.9% V 1.9%E

(CN) China July yuan forex positions down CNY4.65B m/m to CNY21.5T

Speakers and Press

China/Hong Kong

(CN) According to Rhodium Group, China state-owned firms accounted for almost 60% of total M&A deal value in H1 - financial press

(CN) Moody's: China non-performing loan (NPL) securitization performance solid, though information limited – Xinhua

(CN) PBOC Adviser: Cut of RRR is not in line with China's policy, more likely to use SLF, MLF and PSL

Korea

(KR) US intel officials: North Korea has ability to produce missile engines and is not reliant on imports to do so – press

(KR) Bank of Korea (BOK) Gov Lee: Market volatility rising on North Korea risks; South Korea to put in efforts to stabilize markets

(KR) South Korea Fin Min Kim: Government will discuss with BOK and take "stern" action to stabilize markets if needed

Japan

(JP) Japan PM Abe: Govt is on high alert to deal with the possible threat faced by the prefectures over which North Korean missiles en route to Guam could fly

Asian Equity Indices/Futures (00:00ET)

Nikkei 0.0%, Hang Seng +0.5%, Shanghai Composite -0.2%, ASX200 0.0%, Kospi +0.5%

Equity Futures: S&P500 +0.4%; Nasdaq100 -0.1%, Dax -0.1%, FTSE100 -0.1%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.1746-1.1729; JPY 110.77-110.55; AUD 0.7838-0.7817; NZD 0.7241-0.7224

Dec Gold -0.1% at $1,278/oz; Sept Crude Oil +0.5% at $47.77/brl; Sept Copper +0.0% at $2.89/lb

(AU) Australia sells A$900M in 3.25% 2029 bonds; avg yield 2.7608%; bid-to-cover 2.96x

(JP) Bank of Japan (BoJ) announces expected purchase amounts for daily operation: Offers to purchase ¥440B in 5-10 yr JGBs v ¥470B prior

(CN) China PBoC OMO injects CNY280B v skips in 7 and 14-day reverse repos

USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.6779 V 6.6689 PRIOR

(KR) Bank of Korea sells KRW2.2T in 2-year monetary stabilization bonds at 1.74% v 1.64% prior

(CN) China sells 7-yr bonds; avg yield 3.6518%; bid-to-cover 2.89x

(TH) Thailand sells THB20B in 9.34-yr govt bonds; avg yield 2.4389%; bid-to-cover ratio 2.34x

Equities notable movers

Hong Kong/China

Carnival Group, 996.HK Announces rights offering to raise HK$1.72B; -12%

Geely, 175.HK Reports H1 (CNY) Net profit 4.34B v 4.04Be, Rev 39.4B v 18.1B y/y; +0.4%

Australia

Aveo Group, AOG.AU Reports FY17 adj Net A$252.8M, +118% y/y; FFO A%163.9M v A$141.3M y/y; Announces up to 54.3M share buyback; +10.5%

iSelect, ISU.AU Reports FY17 Net A$16.4M v A$18Me; EBIT A$22.5M v A$24Me; Rev A$185.1M v A$196Me; -14%

Daily Pivots: (S1) 0.9699; (P) 0.9728; (R1) 0.9755; More...

At this point, intraday bias in USD/CHF remains mildly on the upside for 0.9772 resistance first. Decisive break there 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 0.9862) next. On the downside, below 0.9675 minor support will turn intraday bias neutral first. Also, 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 dampen our bullish view and 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, current development argues 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) 109.90; (P) 110.37; (R1) 111.14; More...

Intraday bias in USD/JPY remains mildly on the upside for the moment. Current development argues that fall from 114.49 could have completed at 108.72. Further rise would be seen back to 112.18 resistance first. Break there will target 114.49 key near term resistance again. On the downside, break of 108.79 minor support will turn focus back to 108.72 instead.

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.

U.S. Retail Sales Post Biggest Rise In Seven Months. The dollar inched slightly lower on Wednesday but held most of its gains made after U.S. retail sales data suggested the economy continued to gain momentum in the third quarter and kept alive hopes for another Federal Reserve interest rate increase this year. U.S. retail sales rose 0.6% and core sales rose 0.5% in July beating economists’ estimate of a 0.4% and 0.4% reading. Minutes from the Fed’s July meeting will be watched for clues on the timing of rate hikes as well as whether the Fed is likely to announce a reduction in its balance sheet at its September meeting.

Gold Falls On U.S. Retail Sales Data. Gold prices were moderately lower prior to the release largely due to profit-taking pressure after prices hit a nine-week high on Friday. But, immediately after the data was published, December Comex gold fell even further, trading at $1,274.20, down 1.26% on the day. Gold prices firmed early on Wednesday as the dollar weakened slightly, with investors waiting for the release of minutes from the U.S. Federal Reserve’s last meeting in July for clues on the pace of potential interest rate hikes.

Oil Prices Edge On Falling US Crude Inventories. Oil prices rose early on Wednesday on a fall in U.S. crude inventories, although analysts said that markets were still being weighed down by general oversupply. Brent crude futures, the international benchmark for oil prices, were at $51.01 per barrel at 0023 GMT, up 21 cents, or 0.4 percent, from their last close.

Daily Pivots: (S1) 1.2723; (P) 1.2750; (R1) 1.2784; More....

USD/CAD's recovery from 1.2412 resumed and reaches as high as 1.2777 so far. Intraday bias is mildly on the upside for further rise. Nonetheless, such rise is viewed as a corrective move. And based on current momentum, upside should be limited by 38.2% retracement of 1.3793 to 1.2412 at 1.2940 to bring fall resumption. On the downside, below 1.2652 minor support will argue that the recovery is completed and turn bias back to the downside for retesting 1.2412.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. Such corrective fall is still expected to extend to 50% retracement of 0.9406 to 1.4869 at 1.2048. At this point, we'd look for strong support from there to contain downside and bring rebound. Nonetheless, on the upside, sustained break of 1.2968, 38.2% retracement of 1.3793 to 1.2412 at 1.2940 will be the first sign of completion of the correction and will turn focus back to 1.3793 key resistance.

A note on lower timeframe confirming price action...

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails ... essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

We typically search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 1-3 pips beyond confirming structures.

EUR/USD

The EUR/USD experienced another wave of selling on Tuesday, exacerbated by a broad-based advance in US retail sales. The single currency did, however, recover some ground going into the US segment as price struck the 1.17 handle, together with a minor daily demand base coming in at 1.1650-1.1733. Closing just ahead of the H4 mid-level resistance at 1.1750, where does this leave us in terms of trading opportunities?  

Buying above 1.1750 could be an option, but by doing so, we’d potentially be going up against weekly selling from the weekly resistance level planted at 1.1871!

What about a short below the 1.17 region? By selling sub 1.17, not only would you then be trading into daily buyers from the demand mentioned above, but you’d also be going up against possible buyers from the ‘hook’ shaped H4 demand marked with a green arrow at 1.1650-1.1664.

.Suggestions: Technically speaking, we do not see much to hang our hat on at the moment. No matter which direction we select to trade, there’s some form of higher-timeframe structure in the foreground. Therefore, we’ll remain on the sidelines for now and wait for further developments.

Data points to consider: EUR Flash GBP at 10am. US Housing numbers at 1.30pm, followed later by the FOMC meeting minutes at 7pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

GBP/USD

The British pound took an absolute hammering on Tuesday, plummeting nearly 100 pips from open to close! The first round of selling came after UK inflation data failed to meet market expectations, eventually forcing H4 price beneath the 1.29 handle. Further selling was seen later on in the day after better-than-expected US retail sales, forcing the unit to trade below June’s opening level at 1.2870 and into the H4 mid-level support barrier at 1.2850.

While the bulls have registered some interest from 1.2850, June’s opening level seen just above is well offered at the moment. In addition to this, over on the bigger picture we can see that the daily support area at 1.3058-1.2979 finally gave way and price now looks poised to challenge the daily support area pegged at 1.2818-1.2752. Further supporting the bears, the weekly timeframe shows space for the market to trade as far down as the demand area coming in at 1.2589-1.2759.

Suggestions: Although the higher timeframes suggest further selling could be upon us, shorting this market sub 1.2850 is challenging. Positioned only 30 pips beneath this number is the top edge of the aforementioned daily support area, followed closely by the 1.28 handle drawn on the H4 chart (not seen on the screen).Given the lack of space for sellers here, we’re going to take the safest position of all today: FLAT.

Data points to consider: UK employment figures at 9.30am. US Housing numbers at 1.30pm, followed later by the FOMC meeting minutes at 7pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

AUD/USD 

For those who read Tuesday’s report you may recall that we set a pending buy order at 0.7805, with a stop-loss order tucked beneath H4 demand at 0.7784. Thanks to yesterday’s selloff, fueled by better-than-expected US retail sales figures, we may see this order filled later on today.

Why we chose this H4 demand as a buy zone is due to the following:

The weekly candles recently came into contact with a support area marked at 0.7849-0.7752.

The daily timeframe also shows price interacting with a demand at 0.7786-0.7838, which encases a broken Quasimodo level at 0.7819.

The 0.78 handle is seen housed within the current H4 demand.

Suggestions: Wait for the pending buy order to fill and look to target 0.7850 as your initial take-profit zone. With a 21-pip stop and 42 pips to the first target, we have attractive risk/reward in play here.

Data points to consider: US Housing numbers at 1.30pm, followed later by the FOMC meeting minutes at 7pm GMT+1.

Levels to watch/live orders:

• Buys: 0.7805 ([pending order] stop loss: 0.7784).
• Sells: Flat (stop loss: N/A).

USD/JPY

The US dollar continued to rise against its Japanese counterpart on Tuesday, reaching a high of 110.84 on the day. Those who were looking to short the 110.50 region based on yesterday’s report, the level was unfortunately violated due to upbeat US retail sales figures. Never trade before high-impacting news!

The H4 candles are currently seen capped between June’s opening level at 110.80 and the 110.50 boundary, so where does one go from here? Well, according to the daily structure, a move lower could be on the cards due to price currently interacting with resistance at 110.76. The flip side to this, of course, is the weekly timeframe showing the unit trading from demand at 108.13-108.95.

Suggestions: Ultimately, what we’re looking for is a daily close above the current resistance. This, on the daily timeframe, would likely clear the pathway north up to resistance pegged at 111.91. As for a possible entry, a H4 close above 111, followed up with a retest as support and a H4 bullish candle (preferably a full-bodied candle) would be enough for us to pull the trigger and target the 112 region/July’s opening level at 112.09 (positioned just above the said daily resistance).

Data points to consider: US Housing numbers at 1.30pm, followed later by the FOMC meeting minutes at 7pm GMT+1.

Levels to watch/live orders:

• Buys: Watch for H4 price to close above the 111 region and then look to trade any retest seen thereafter ([waiting for a reasonably sized bullish candle to form following the retest – in the shape of either a full, or near-full-bodied candle – is advised] stop loss: ideally beyond the candle’s tail).
• Sells: Flat (stop loss: N/A).

USD/CAD

Following stronger-than-expected US retail sales data, the dollar appreciated against its Canadian rival and closed above the H4 supply fixed at 1.2747-1.2722. With the H4 candles now seen retesting this area, we may see price cross swords with the 1.28 handle seen overhead. On a similar note, daily action also crossed above the resistance area coming in at 1.2654-1.2734, which could, if the bulls remain in control, send the unit up to resistance at 1.2838. Further supporting the bid-side of this market is the weekly bulls from 1.2433-1.2569. We do not see any obvious resistance on this scale until the 1.3006-1.3115 area.

Suggestions: Given how well the H4 candles have held following a retest of the recently broken supply, a buy from current price is, in our opinion, valid. However, you need to be prepared to face some opposition from 1.28, and then the daily resistance at 1.2838.

Data points to consider: US Housing numbers at 1.30pm, followed later by the FOMC meeting minutes at 7pm GMT+1

Levels to watch/live orders:

• Buys: A long at current price is valid given the structure of this market (stop loss: aggressive: 1.2740 conservative: 1.2720).
• Sells: Flat (stop loss: N/A).

USD/CHF

In recent trading, the USD/CHF tested the H4 mid-level resistance at 0.9750 and managed to punch to a low of 0.9702 on the day. As you can see, 0.9750 is shadowed closely by a H4 Quasimodo resistance at 0.9764 and a daily Quasimodo resistance planted just above that at 0.9776. All of this structure – coupled with a major weekly trendline resistance extended from the low 0.9257, makes for an overbought market, in our humble view.

As we mentioned in Tuesday’s report, we are interested in the daily Quasimodo resistance mentioned above, largely because of how well price reacted when it came near to testing the boundary last week, and, of course, the converging weekly trendline resistance!

Suggestions: Although we believe price will bounce from the daily Quasimodo resistance, we still require a bearish H4 candle to form in the shape of either a full, or near-full-bodied candle. This just helps confirm whether there are interested sellers from this point.

Data points to consider: US Housing numbers at 1.30pm, followed later by the FOMC meeting minutes at 7pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 0.9776 region ([waiting for a reasonably sized bearish candle to form – in the shape of either a full, or near-full-bodied candle – is advised] stop loss: ideally beyond the candle’s wick).

DOW 30

Of late, we’ve seen the US equity market ease from highs of 22060 and clock a low of 21968. Seen directly below current price on the H4 timeframe is August’s opening level at 21913, which happens to fuse beautifully with a channel support line extended from the low 21273.

As noted in yesterday’s report, we do not see any higher-timeframe resistances on the horizon at the moment. Therefore, a retest of August’s opening level, alongside the aforementioned H4 channel support would, in our humble view, be a nice area to consider entering long from (green zone).

Our suggestions: As you are probably already aware trendlines are unfortunately prone to being faked, so we would highly recommend being patient and waiting for a H4 bullish candle to take shape in the form of a full, or near-full-bodied candle. This will, of course, not guarantee that the level will hold, but what it will do is show bullish intent from a potential buy zone!

Data points to consider: US Housing numbers at 1.30pm, followed later by the FOMC meeting minutes at 7pm GMT+1.

Levels to watch/live orders:

• Buys: 21913 region ([waiting for a reasonably sized H4 bullish candle to form – in the shape of either a full, or near-full-bodied candle – is advised] stop loss: ideally beyond the candle’s tail).
• Sells: Flat (stop loss: N/A).

GOLD

Demand for the safe-haven metal continued to diminish on Tuesday, bringing H4 price down to August’s opening level pegged at 1269.3. With tensions easing between the US and North Korea, and weekly price trading from a resistance area comprised of two weekly Fibonacci extensions 161.8/127.2% at 1312.2/1284.3 taken from the low 1188.1, a selloff in this market was high probability.

As well as seeing space for weekly price to continue selling off, we can also see that daily price shows room to trade down as far as a support level seen at 1258.9. However, as we mentioned above, August’s opening level is currently seen providing support.

Our suggestions: Until we see a H4 close print below August’s opening level, we will refrain from taking any shorts in this market. A close below this monthly line, followed up with a retest and a lower-timeframe sell signal (see the top of this report) would, in our opinion, be enough to confirm a sell trade down to the daily support mentioned above at 1258.9, followed closely by the H4 Quasimodo support at 1254.3.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for H4 price to close below 1269.3 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe sell signal to form following the retest is advised] stop loss: dependent on where one confirms this level).