Sample Category Title

STOCKS

Dow (21987.56, +0.18%) rose up to test 22040 on the upside before coming off from there to close at lower levels. Note that 22040-22060 is an immediate resistance which could keep the index trapped for a few sessions. An eventual rise towards 22100-22200 looks possible in the near to medium term.

Dax (12142.64, +0.72%) could test levels near 12300 on a break above 12200; else a fall back towards 12000 is possible. Overall broad range of 12300-11900 may hold for some more sessions before we gain some clarity on further course of direction.

Nikkei (19521.44, -0.86%) came off sharply from levels below our expected upside limit of 19800-19850. Although the index has been trying to move up, some inherent weakness seems to be still hovering around for the coming sessions. A fall back towards 19400-19300, is seen would not be surprising. Restating that while the US-Japan 10Yr yield differential (2.16%) has chances of falling towards 2% Dollar Yen (109.78) and Nikkei could be vulnerable to a sharp fall in the coming sessions.

Shanghai (3368.85, +0.05%) has been very quiet and stable above 3350 levels and could possibly continue to remain sideways for some sessions.

Nifty (9974.40, +0.57%) could possibly target 10200 levels again while above 9950 before seeing another down-leg towards 9800. Near term looks bullish.

COMMODITIES

Gold (1337) moved higher as expected and trading above its interim resistance of 1335. As it is not overbought yet, a quick rally could be seen towards 1350. Similarly Silver (17.94) has also broken its resistance of 17.80 and reached almost 18.00 mark. We had mentioned earlier that Gold and Silver both are out of their short term bearish channel with a strong bullish momentum as the supports of 1280 and 16.90 are intact.

Finally Copper (3.14) has penetrated its recent trading range of 3.00-3.12 on the higher side. we had told that above 3.12, higher levels of 3.26 can come into consideration. The only concern in the short term overbought condition which could be resulted short term profit taking anywhere between 3.12-3.26 levels. But we will remain bullish on copper while it is trading above 2.88 levels in the medium term time frame.

Brent (52.48) is hovering around the resistance of its near term trading range of 49.70-52.80.Only a close above 52.80 could open up 55 regions. WTI (47.41) is also trading within the range of 46.50-49 as well. We will remain neutral on Brent and WTI while they are trading below 52.80 and 48 regions respectively.

FOREX

Overall Dollar weakness still prevails for now with the Dollar Index (92.65) trading below crucial Resistances near 92.80-95 and 93.37. But, we have to be careful about chances of a break of this trend.

Some two-way volatility was seen in the Euro (1.1882) after the lower than expected US NFP data on Friday (+156K against the expectation of +180K), but there has not been much movement in Asia today in response to the North Korean provocations over the weekend. 1.1830 is a decent Support for the day, and we may see a range of 1.1830-1930 for a few days within the still prevailing overall uptrend.

There's been a bit of strengthening of the Yen (USDJPY 109.78) today in response to the North Korean tension. The two-way possibility talked about on Friday seems to be resolving into a sideways range of 108.50-109.50 for the next few days. Within this, a break below 109.50 can yield a dip to 109.20-10, even 109.00.

Contrary to expectation of a rise towards 132.45, the Euro-Yen (130.48) has broken below the earlier support of 130.80, being pulled down by Dollar-Yen. This opens up chances of a dip to 129.45 this week.

The Pound (1.2955) has managed to move up a bit more, perhaps drawing advantage from the slight weakness in the Euro. But, the trend is still not very clear. In the bigger picture, we might say it is trading sideways within a broad range of 1.2750-3150, with decent Resistance at the upper end of the range.

The Aussie (0.7960) has been unable to break above 0.80 yet, but is maintaining its overall strength and chances of an eventual break above 0.80 which could target 0.81.

The Chinese Yuan (USDCNY = 6.5482) continues to strengthen relentlessly for now, breaking below the 6.5785 support mentioned on Friday. Maybe the next target might be 6.50. We will not stand in front of the trend now.

Dollar-Rupee is likely to continue to trade sideways between 63.90-64.10 for some more days, waiting for global triggers to move the market.

INTEREST RATES

Euro moved lower asThe German-US 2 Yr Spread (-2.13%) has dipped from previous levels. There is no change in German-US 10Yr Spread (-1.76%) but Eur seems to be responding more to the German-US 2Yr Spread in short term time frame.

Sideways move had been seen in the benchmark US 10Yr yield, between 2.09-2.16 regions. But there are rooms for further downside towards 1.97 if the US 10Yr will close below 2.09% on a daily closing basis.

Muted price action in the Japanese 5Yr JGB (-0.14%), 10Yr JGB (0.00%) and the 30Yr JGB (+0.82%) as they are continuing their consolidation at current levels, suggesting a possible bounce in near term time frame.

The UK 5Yr and 30Yr Gilt Yields (5Yr 0.46% and 30Yr 1.61%) are continuing their bullish momentum in line with our expectation.The UK 10Yr (1.06%) has also rebound from its low of 1.00 as expected and moved higher .

USDCHF - With the pair backing off lower prices to close higher the past week, more strength is envisaged in the days ahead. On the downside, support lies at the 0.9600 level. A turn below here will open the door for more weakness towards the 0.9550 level and then the 0.9500 level. On the upside, resistance resides at the 0.9700 level where a break will clear the way for more strength to occur towards the 0.9750 level. Further out, resistance comes in at the 0.9800 level. Above here if seen will turn attention to 0.9850. All in all, USDCHF faces further upside pressure on corrective recovery.

EURUSD - With the pair rejecting higher to close lower the past week, more decline is envisaged. Resistance comes in at 1.1900 level with a cut through here opening the door for more upside towards the 1.1950 level. Further up, resistance lies at the 1.2000 level where a break will expose the 1.2050 level. Conversely, support lies at the 1.1800 level where a violation will aim at the 1.1750 level. A break of here will aim at the 1.1700 level. A cut though here will open the door for more strength towards 1.1650 level. All in all, EURUSD faces further downside pressure on corrective pullback.

North Korea detonated its largest test yet as it sprints toward nuclear-power status, and perhaps towards war. The yen and Swiss franc are strongly higher in early trading as a result. Gold gapped up to 1337 from Friday's 1325. CFTC positioning data showed further bets against the pound. US and Canadian markets are closed on Monday. 3 Premium trades are in progress but 2 trades will be added ahead of what will be prove to be a busy 1st week of September (Korea, BoC and ECB).

North Korea tested a nuclear weapon underground on Saturday that appeared to be 5-10x more powerful that previous tests. It was Pyongyang's 6th nuclear test, which triggered a 6.3-magnitude quake and was felt throughout northeastern China. A statement from Kim Jong-Un's government said it was a hydrogen bomb that was small enough that it could be loaded onto an ICBM.

Risk trades are under pressure with the yen and Swiss franc around 50 pips higher across the board. Expect more risk aversion as Europe begins trading and note that markets will be thin with the US on holiday.

The speed of North Korea's progress and testing is alarming. They are evidently years ahead of where experts had believed. In a tweet, Donald Trump said the United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea. That's almost-certainly a hollow threat because China is by far its largest trading partner with India second.

Most of the UN Security Council is angling to cut off North Korea's oil supplies. As recently as last week China said it didn't want further sanctions.

The immediate risk probably isn't nuclear war but some kind of trade spat between China and the United States. According to reports, Trump has already asked aides for tariffs on China for trade and political issues but if they pass and Trumps justifies them geopolitically, then it would certainly be interpreted as an escalation.

Ultimately, the fears and rhetoric will subside but at this point it looks like it will get worse before it gets better.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +87K vs +88K prior GBP -52K vs -46K prior JPY -69K vs -74K prior CHF -2K vs -2K prior CAD +53K vs +51K prior AUD +67K vs +60K prior NZD +19K vs +22K prior

The moves were modest this week but the trend has been a slow build in pound shorts and that's understandable given the endless Brexit risks. One spot that's vulnerable in the week ahead is NZD, which has caught specs off guard in a continuing slide.

It was one of the more bemusing NFP numbers in recent times as confusion reigned amidst technology errors and incorrect data postings adding to one of the more chaotic NFP releases. Initially, the USD tanked but quickly rebounded once traders factored in August seasonality and a correction on the AHE print.

But this morning's chatter is all about the weekend news stream which centred on another North Korea (NK) escalation after a hydrogen bomb was tested.

The US administration was quick to send out the troops. In an unprecedented move and a stage usually reserved for the president, Defence Secretary James Mattis with General Dunford as wingman rolled out to provide the White House brief to Washington's press corp sending a clear and unambiguous message that military options are on the table.

So it all eyes on dollar yen this morning, as it's expected this latest NK aggression, could further intensify geopolitical tensions.But while traders continue to trip over themselves shorting USDJPY on these flare ups, today's move to 109.00 was faded in the absence of any actual significant Japanese Institutional investors repatriation flow

But the key now is how the international community will respond given how ineffective the tightened UN sanctions have been at discouraging NK 's ambitions. However, given just how thin liquidity conditions are, level heads may opt for the sidelines until deeper pools emerge, or further clarity is given.

One would assume this recent thermonuclear test crosses that proverbial line in the sand, so eyes will be on China to see if they step up with further restrictions on NK energy exports.

While we should expect the usual FX haven trades to play out and a modest correction in equities, I think the street has grown accustomed that these moves remain short lived and may be viewed as a good opportunity to add risk. Unless there is an actual global military response, we should expect this hand to play out as we've seen in the recent past.

Euro

The Euro moves are all about the central bank policy dilemma.And while the Fed rate hike is not the only game in town, but with uncertainty building between the ECB hawks and dovish, the path to EU interest rate normalising looks a bit more clouded than it did a month ago.

Japanese Yen

Trader's can't avoid the temptation to get in front of possible repatriation flows even if a military escalation is unlikely. But with the Fed still appearing parked in neutral, coupled with risk aversion given the heightened geopolitical tension will likely keep the topside in check short term.

Good morning traders,

Another weekend goes by and another test by North Korea. This one however is a little more concerning… More from Bloomberg here:

"The yen and the Swiss franc posted the biggest gains among major currencies in early Asian trading after North Korea said it successfully tested a hydrogen bomb with "unprecedentedly big power"."

The words North Korea, Hydrogen Bomb and Success isn't something that you want to hear strung together when you're enjoying a lazy weekend, but we can't always get what we want and markets reacted accordingly on the open:

USD/JPY 5 Minute:

As you can see on the intraday chart, USD/JPY gapped down hard on the open, but immediately found support at Friday's NFP inspired swing low.

Remember when nothing would overshadow an NFP Friday?

Crazy times!

The gap fill level is marked and this level will be our barometer as to how seriously markets take this further escalation when it comes to North Korea and the threat of war.

Just keep your daily charts open for some perspective:

USD/JPY Daily:

Even with that 75 pip gap down, USD/JPY is still trading away from swing low support and actually in a range-bound upswing.

Just don't lose sight of the bigger technical picture in the emotion of headlines.

Best of probabilities to you!

EUR/USD jumped to 1.2069 last week but retreated sharply since then. The rebound from 1.1822 was short lived as the pair turned southward again. Initial bias is neutral this week first as consolidation from 1.2069 could extend. Below 1.1822 will bring deeper fall. But after all, there is no clear sign of trend reversal yet. Outlook will remain bullish as long as 1.1661 holds. Break of 1.2069 will extend larger rise from 1.0339 to next key fibonacci level at 1.2516. Nonetheless, break of 1.1661 will bring much lengthier consolidation first.

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 1.1774) 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. For now, medium term outlook will remain bullish as long as 1.1295 support holds, in case of pull back.

In the long term picture, 1.0339 is now seen as an important bottom as the down trend from 1.6039 (2008 high) could have completed. It's still early to decide whether price action form 1.0339 is developing into a corrective or impulsive move. But in either case, further rally would be seen to 38.2% retracement of 1.6039 to 1.0339 at 1.2516

USD/JPY dropped to 108.26 last week but recovered ahead of 108.12 support. As the pair is staying below 110.94 resistance, near term outlook remains bearish. Initial bias stays neutral this week first. On the downside, below 109.53 minor support will turn bias to the downside for 108.12 support first. 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. 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.

In the long term picture, the rise from 75.56 long term bottom to 125.85 top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.

GBP/USD's corrective rise from 1.2773 extended higher last week but stayed below 1.3030 resistance. Outlook remains unchanged and initial bias remains neutral first. We're favoring the case that correction from 1.1946 is completed at 1.3267. Below 1.2852 minor support will turn intraday bias back to the downside for 1.2588 key near term support first. Decisive break of 1.2588 will confirm our view and target a test on 1.1946 low. Though, break of 1.3030 will dampen this bearish view and turn bias back to the upside for retesting 1.3267.

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.

In the longer term picture, no change in the view that down trend from 2.1161 (2007 high) is still in progress. On resumption, such decline would extend deeper to 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532. However, firm break of 1.3444 should confirm reversal and turn outlook bullish.

USD/CHF dived lower to 0.9427 last week but failed to sustain below 0.9443 key support and rebound. Initial bias stays neutral this week first. Considering it's close to to 0.9443 key support, consolidation from 0.9427 might extend further. But still, break of 0.9772 resistance is needed to confirm near term reversal. Otherwise, outlook stays bearish for another decline. Below 0.9537 minor support will turn bias back to the downside for retesting 0.9427 first. Break of 0.9427 will resume whole decline from 1.3042.

In the bigger picture, current development suggests that 0.9443 key support (2016 low) could be taken out firmly as down trend form 1.0342 extends. There are various interpretation of the price actions. But in any case, medium term outlook will stay bearish as long as 0.9772 resistance holds. Current down trend could extend to 38.2% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.9090. However, break of 0.9772 will indicate that USD/CHF has successfully defended 0.9443 again and turn outlook bullish for 1.0099 resistance.