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USD/CAD's short-term bullish momentum continues. Hourly resistance is given at 1.2619 (03/08/2017) while support can be found at 1.2414 (27/07/2017 low). Expected to show continued consolidation above 1.2400.

In the longer term, the pair has broken longterm support that can be found at 1.2461 (16/03/2015 low) before bouncing back. Strong resistance is given at 1.4690 (22/01/2016 high). The pair should head further lower.

USD/CHF's bullish momentum is fading. Hourly support can be found at 0.9631 (01/08/2017 low). Strong resistance is given at 0.9771 (15/06/2017 high). Expected to to show further downside pressures.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015

USD/JPY's bearish momentum continues. The pair has failed to break resistance implied by the upper bound of the downtrend channel. The pair is heading towards 108.83 (17/04/2017 low). Expected to show further downside pressures.

We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

GBP/USD keeps on weakening. Hourly resistance is given at 1.3267 (03/08/2017 high). Hourly support is given at 1.2933 (20/07/2017 low). Expected to show further monitoring of support at 1.2933.

The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment

EUR/USD bullish pressures are still on despite ongoing consolidation. Hourly resistance is given at 1.1910 (02/08/2017 high). Hourly support can be found at 1.1715 (08/08/2017 high). Stronger support lies at 1.1613 (26/07/2017 low). Expected to show renewed bullish pressures.

In the longer term, the momentum is now turning largely positive. We favour a continued bullish bias. Key resistance holding at 1.1871 (24/08/2015 high) has been broken while strong support lies at 1.0341 (03/01/2017 low).

Dollar is quietly bouncing back

After several weeks in the doldrums, the greenback started to get some colours back this week, especially against the commodity currency complex. The encouraging July's jobs report is not the sole driver as a broad base risk-off move is also helping the greenback to recover. Higher yielding currencies such as the Aussie and the Kiwi were the first in line as they retreated 0.58% and 1.24% since Friday. On the other hand, safe haven assets got a booster shot as investors look to reduce risk after a sharp equity rally and a dollar's debasement that looks overdone. The Swiss franc was up almost 1% against the greenback on Wednesday, while the Japanese yen rose 0.45%. Finally, the yellow metal bounced back to 1,268, on its way towards the next key resistance that lies at 1,296.15 (high from June 6th).

We have been defending for some time the idea that the dollar's debasement was coming to an end and that this moment has been approaching fast. Obviously, a substantial part of the appreciation can be attributed to profit taking. However, we think the market has been overly optimistic about the ECB policy normalization and slightly too dovish regarding the Fed. Against the backdrop of weak global inflationary pressures, the likelihood that both central banks will stay rather neutral or slightly dovish has rose substantially recently. There is therefore room for downside adjustment in EUR crosses and a recovery in the USD.

Tomorrow's UK Industrial Production set to print on the soft side

This summer is calm in the markets. This sounds like a pleonasm but while the VIX index has reached its all-time lows earlier last week below 9.5, it feels like that one little piece of information may ignite markets. This is the reason why we keep on monitoring fundamentals data that should have a major impact in the markets.

In particular, any new UK data are important in the coming situation as Brexit negotiations are currently happening. Indeed, those data also reflect the overall sentiment and fears of economic players in the UK economy. Tomorrow's data should see the industrial production approaching the flat annualized growth rate of 0%.

We consider that markets still overestimate the Brexit impact. Proof is that the predicted collapse did not happen and won't likely happen. Currency-wise, the pound has appreciated above 1.32 against the US dollar before bouncing lower to 1.30 – This was anyway more because of the dollar weakness -. In our view, any UK soft data is another opportunity to buy the pound in the dips.

China's trade and inflation data surprised to the downside in July, likely drive by the government's targeted tightening monetary policy. GDP growth is expected to slow in second half of the year. Yet, given the strong readings in the first half, with the economy expanding +6.9% in both the first and second quarters, GDP growth should be able to meet government's target of “around +6.5%”. We believe the government would continue its tightening monetary policy in order to prevent and resolve systematic risks, and to curb excessive strength in property prices. Meanwhile, as ultra accommodative monetary policies across major central banks are coming to an end, with the Fed and BOC raising interest rates, while ECB will begin discussing reduction of asset purchases, it would be detrimental to the renminbi if the central bank pledges to maintain monetary easing. This would exacerbate capital outflow from China.

Inflation

China's headline CPI surprisingly slipped to +1.4% y/y in July, from +1.5% a month ago. The market had anticipated another +1.5% growth for the month. The disappointment was mainly brought by the -1.1% annual fall in food prices. Looking into the details of food prices, the biggest component of Chinese inflation, fresh vegetable prices, jumping the most in the food basket, gained +9.1% y/y, while pork prices slumped -5.5% for the month. Of non-food inflation, the biggest contributor of headline inflation, the medical and health care price component jumped +5.5% y/y in July. Core CPI stayed at +1.5% for the first seven months of the year, well below the upper bound of the government's target (+3%). Separately, PPI inflation stayed unchanged at +5.5% in July, compared with consensus of a rise to +5.6%.

Trade data

China's trade surplus widened to US$46.74B in July. Exports rose +7.2% and imports were up +11%, compared with +11.3% and +17.2%, respectively, in June. The slowdown in exports growth was already predicted in government's PMI report due on July 30. The manufacturing PMI eased to 51.4 in July from 51.7 a month ago. While the reading also missed consensus of 51.6, it remained the second highest July PMI since 2010. The biggest drop of the components came from new export orders index which slipped -1.1 points to 50.9. The widening gap between new orders index and new export orders signaled that the near-term driver has to be relied on domestic demand. The slowdown in imports growth in the trade report was probably driven by temporary factors such as very hot weather and slower progress in construction and production.

Meanwhile, China's trade surplus with the US narrowed mildly to U$$25.2B from US$25.4B in June. This was probably due to the recent strength of renminbi against US dollar. The renminbifixing rose +1.2% and +0.7% against US dollar in June and July, respectively. This probably affected China's exports to the US.

The broad-based USD weakness over the past months has sent renminbi to a 9-month high. Currently at 6.7075, the USDCNY fixing today has dropped to a level not seen since October last year. While the greenback has stabilized since last week, it remained soft against renminbi. We believe a reason is PBOC's tightening policy. It Various reports signaled that the PBOC has net withdrawn RMB 100B from the markets through open market operations, at which the central bank buy or sell in the market government notes in an attempt to adjust the interest rates slightly. The move came in line with the government's pledge at the fifth National Financial Work Conference (July 14-15) to deleverage, to prevent and resolve systematic risks, and to curb excessive strength in certain asset prices. We expect the tightening measures would affect economic growth, causing slowdown in the second half of the year.

German DAX made a five-wave overlapping affair recently in wave 4, which looks like a triangle correction. If that is the case, then we know that one more push lower can follow on the DAX. Ideally final wave 5 is already in motion and can search for a base near the Fibonacci ratio of 161.8 or 200.0.

A Triangle is a common 5-wave pattern labeled A-B-C-D-E that moves counter-trend and is corrective in nature. Triangles move within two channel lines drawn from waves A to C, and from waves B to D. A Triangle is either contracting or expanding depending on whether the channel lines are converging or expanding. Triangles are overlapping five wave affairs that subdivide 3-3-3-3-3.

Triangles can occur in wave 4, wave B, wave X position or in some very rare cases also in wave Y of a combination

German DAX, 1H

Let's now move on to the next one, the USDCAD.

USDCAD looks to be trading in final stages of an impulsive wave c) as part of a higher degree wave four. Current rally can so see limited upside near the Fibonacci ratio of 200 and later make a new minimum three-wave reversal lower. A later breach below the 1.2551 level would confirm a change in trend.

USDCAD, 1H

The common European currency depreciated against the US Dollar earlier than expected. The currency exchange rate was about to approach the resistance of the 100-hour SMA just above the 1.1820 mark when it suddenly dropped. The reason for the sudden plummeting of the currency exchange rate was the release of the almost never financial markets impacting JOLTS Job Openings. The published data was so much higher than the initially forecasted that the US Dollar skyrocketed all across the boards. For the EUR/USD pair that resulted in the rate reaching the zone near the lower trend line of the long term ascending channel pattern near the 1.1750 mark. It still has to be seen, whether a surge reoccurs or a decline of the pair continues. Clues for that might be on the longer term charts.

After breaching the senior channel down on Monday, the Pound managed to retrace from its upper boundary the following day. The rate found support at a support cluster formed by the weekly and monthly S1s circa 1.2950 and has since edged higher just to reach the 1.30 mark. The strong down-trend that guided the price last week has allayed, suggesting that the Pound may eventually appreciate against the US Dollar in this session. An immediate resistance is provided by the 55-hour SMA at 1.3025, while a more distant upside target for today is an intersection of the 100-hour SMA and the monthly PP circa 1.3000. In terms of a downside limit, the pair is not expected to go below the monthly and weekly S1s.