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USD/JPY increased significantly today after the Friday’s indecision. Is pressuring the downside line of the symmetrical triangle and the 50% retracement level. Price continues to move in range between the 23.6% retracement level and the 50% level, only a valid breakdown below the 50% retracement level will confirm a large drop.

EUR/GBP is still bullish on the Daily chart and looks motivated to take out a dynamic resistance. Price is going higher as the Euro has managed to increase versus its rivals, but we have to wait for a valid breakout to be sure that will resume the upside movement. Euro is bullish versus the Cable, even if the Euro-zone Industrial Production dropped by 0.6% in June, more versus the 0.4% estimate. The economic indicator plunged after the 1.3% growth in the former reading period.

We have a poor economic calendar today, the rate is driven by the technical factors, so a breakout above the third warning line (wl3) of the former descending pitchfork looks favored. I’ve said in the previous report that will climb much higher if will have enough energy to stabilize above the 50% Fibonacci line.

The next major upside target will be at the upper median line (UML) of the major ascending pitchfork, could also hit the 0.9226 static resistance. Price is trading in the green as the Cable is bloodless on the short term, GBP slips lower also versus the USD.

It is expected to approach and reach the 0.9226 major resistance because is moving in range, you can see that we have an extended sideways movement on the Daily chart.

Only a breakout above the 0.9226 swing high will confirm a medium and long term increase, but is premature to say what will happen because a rejection here will send the rate tumbling on the short term.

On Monday, the yen dipped into losses against the dollar after a strong rally on Friday, reacting reversely to government preliminary GDP growth data. The figures showed that the Japanese economy grew more than expected for the sixth consecutive quarter, posting its fastest expansion in more than two years.According to the preliminary data released by the cabinet office, the Japanese economy expanded by 4% year-on-year in the second quarter, surprising analysts who expected a growth rate of 2.5%. This was well above the upwardly revised reading of 1.5% seen in the previous quarter and was the highest rate recorded since 2015. On a quarterly basis, GDP growth more than doubled the previous mark of 0.4% (upwardly revised from 0.3%), rising by 1% and exceeding the 0.6% forecasted.

The economy strengthened significantly as private consumption and capital expenditure experienced the highest improvement in more than three years, offsetting the contraction in external demand. With households spending more in durable goods and leisure despite subdued wage growth, private consumption expanded by 0.9%, surpassing the forecast of 0.5% and the previous mark of 0.4%.

Capital expenditure posted the highest growth since June 2015, growing twice the forecast of 1.2% at 2.4% q/q and jumping above the 0.9% (upwardly revised from 0.6%) observed in the first quarter. This expansion happened mainly due to higher business investments in software and construction equipment.

With the Japanese output recording its longest pace of growth since 2005-2006, analysts are more confident that improvements in consumption which account for the two-thirds of the economy will lift inflation toward the 2% Bank of Japan target. Note that the BOJ lowered the timing of inflation reaching the target six times so far due to weaker consumption. However, the Ministry of finance, Toshimitsu Motegi, commenting the data, said that more policies are needed to ensure a continuing recovery in domestic demand, pledging to apply further reforms to improve human capital and productivity. Moreover, he added that for the meantime there is no need to stimulate monetary policy further as consumption and business investments are following the appropriate direction.

Looking at the reaction in the forex markets, the upbeat Japanese data could not provide support to the yen. Dollar/yen climbed by 0.47% to 109.68 after touching a three-month low of 108.71 on Friday. Euro/yen surged by 0.28% to 129.43 following a downtrend which led the pair to a six-week low of 128.03.

Monday August 14: Five things the markets are talking about

Last weeks geopolitical worries sent investors scampering for safe havens.

However, the fears of an escalation of tensions between the U.S and North Korea is showing signs of easing this Monday morning as equity markets in Europe follows Asia higher and U.S stock futures are in the black. Gold prices have slipped with U.S Treasuries and the yen.

Nevertheless, the dollar gains seem somewhat capped by the tensions on the Korean peninsula and doubts that the Fed will hike interest rates again this year.

Stateside this week, U.S consumer spending gets things rolling on Tuesday with U.S retail sales (08:30am EDT). The market is looking for it to rebound in ‘moderate' strength.

From a manufacturing data perspective, there is Tuesday's Empire state manufacturing index (08:30 am EDT), Thursday's industrial production (09:15am EDT) and the Philly Fed (08:30am EDT) which all are expected show some moderate strength to keep the market ticking over.

The highlight of the week will be Wednesday's FOMC minutes from last month's meeting which produced no action and no hint on when balance sheet unwinding begins.

Friday winds up with August's consumer sentiment (10:00am EDT), a report that is running well behind its rival consumer confidence report, which has been holding steady at massive highs.

That aside, geopolitical risks are expected to remain a key theme for the global markets in the near term – North Korea celebrates Liberation Day tomorrow to mark the end of Japanese rule.

The market should also be bracing itself for tensions ahead of August 21, when an annual joint U.S-South Korean military exercise is due to begin.

1. Stocks see the light of day

Global equity markets have retraced some of last week's pullback, as robust Asian corporate earnings and reduced fears of imminent military conflict between the U.S and North Korea lifted buying interest.

In Japan, the Nikkei share average fell -1.0% to a 3-month low following a holiday weekend (Japan markets were closed Friday and investors were basically playing catch up), as North Korean tension drove investors to lighten up on riskier assets. The yen's gains last week overshadowed data showing Japan's economic grew at a much stronger pace than expected in Q2 (see below). The broader Topix index finished -1.1% lower.

In South Korea, stocks rebound Monday after ending down for four consecutive sessions on geopolitical fears. The Kospi closed up +0.6%.

Down-under, Australia's S&P/ASX 200 Index rallied +0.7%, while in Hong Kong, the Hang Seng Index gained +1.3%, while the Shanghai Composite Index rose +0.9%.

In China, stocks closed higher on a tech-fuelled rebound. The blue-chip CSI300 index rose +1.3%, while the Shanghai Composite Index gained +0.9%. Investors were unperturbed by data overnight showing that China's factory output slowed more than expected last month, while investment and retail sales also disappointed (see below).

In Europe, easing geopolitical concerns is helping support risk sentiment – all sectors are moving higher, lead by financials and automakers. Lower oil prices are not dragging on energy stocks enough to pull them into negative territory.

Note: Tomorrow sees several European markets closed due to a holiday (France, Greece, Poland and Italy).

U.S stocks are set to open deep in the black (+0.6%).

Indices: Stoxx50 1.1% at 3,441, FTSE +0.6% at 7,347, DAX +1.1% at 12,141, CAC-40 +1.0% at 5,110, IBEX-35 +1.2% at 10,409, FTSE MIB +0.9% at 21,556, SMI +1.2% at 8,995, S&P 500 Futures +0.6%

2. Oil prices dip on weak Chinese refining activity, gold lower

Ahead of the U.S open, oil prices are a tad softer as a slowdown in Chinese refining activity growth is casting some market doubts over its crude demand outlook, while rising U.S shale output suggests supplies would likely remain high.

Brent crude futures are at +$51.92 per barrel, down -18c or -0.4% from Friday's close. U.S West Texas Intermediate (WTI) crude futures are at +$48.70 a barrel, down -12c or -0.3%.

Note: Chinese refineries processed +0.4% more crude oil in July y/y at +45.5m tonnes, or about +10.71m bpd – the lowest amount on a daily basis 10-months.

Despite the possible slowdown in China, the IEA indicated last week it expects 2017 oil demand growth of +1.5m bpd, up from a previous expectation of +1.4m bpd.

On Friday, Baker Hughes energy services firm said U.S drillers' added 3-rigs looking for new oil in the week to Aug. 11 bringing the total count up to 768, the most since April 2015.

Expect the usual inventory reports from API and EIA to shape the oil futures curve.

Gold starts the week under pressure (down -0.2% at +$1,286.39 per ounce) as the dollar inches away from last week's lows, but continues to trade atop of its two-month highs touched last week as the market keeps an eye on developments in the North Korean peninsula.

3. Global yields back away from their recent low

U.S Treasury yields fell further on Friday on the soft U.S. consumer prices data (+0.1% vs. +0.2%e). The 10-year Treasury yield touched +2.182% intraday, its lowest since late June, before pulling back a little to trade +2.204% ahead of this morning's session.

In Europe, government bond yields have rallied +2-3 bps across the board, bouncing from their recent lows following stronger-than-expected Japanese growth.

Note: Stronger G7 data further supports expectations that the global economy is on the mend and central banks can start to unwind extraordinary monetary stimulus.

The yield on Germany's 10-year Bunds is up +3.5 bps to +0.42%.

In contrast, Japanese government bond prices mostly edged higher; shrugging off the stronger data to catch up to global market moves after Tokyo markets were closed on Friday. The 10-year cash JGB's yield inched down -0.5 bps to +0.050%.

4. Dollar gains some traction

The mighty dollar trades a tad higher this Monday as tensions between the U.S and North Korea calm down a tad. This is keeping the EUR (€1.1800) down outright. However, the market remains a better EUR buyer on dips despite the fact that eurozone June industrial production came in worse-than-expected (see below).

Sterling (£1.2975) has dropped back below the psychological £1.3000 handle. Overall global equity strength has helped the USD/JPY (¥109.70) to strengthen. The pair has rebounded +100 pips from Friday lows.

The People's Bank of China (PBoC) strengthened the yuan to its strongest setting outright since September 2016. It was a fifth consecutive increase in the daily fix today by the PBoC amid continued dollar softness. The daily trading midpoint was put at ¥6.6601 as authorities try to guide market expectations of a firmer yuan.

5. Japan, China and Eurozone data

Overnight, Japan's economy grew in the Q2 at the fastest pace in more than two-years as consumer spending and capital expenditure both rose at the fastest in more than three years, highlighting stronger domestic demand. GDP expanded an annualized +4.0% in April-June, more than the median estimate for +2.5%.

In China, July industrial production came in lower than expected at +6.4% vs. +7.1%e – coal and power output all rose; while oil output fell. Other data showed that retail sales were also a bit weaker at +10.4% vs. +10.9%e.

In the Eurozone, industrial production for June was lower than expected, a hint that H2 may be slightly weaker than H1. Eurostat says the output of factories, mines and utilities was -0.6% lower than in May, while up +2.6% from the same month a year earlier. The market was looking for a -0.4% drop.

EUR/USD rose to the 1.18 line on Friday, and is showing little movement to start off the week. In the Monday session,the pair is trading at 1.1797, down 0.21% on the day. On the release front, it’s a quiet start to the week. In the Eurozone the sole event is Industrial Production, which came in at -0.6%, missing the estimate of -0.4%. On Tuesday, Germany releases Preliminary GDP, and the US publishes retail sales reports.

The euro continues to trade at high levels, and last week marked a fifth consecutive winning week for the currency. Tensions between North Korea and the US remain high, but the prevalent sentiment in the markets is that a diplomatic solution will be found to end the crisis. European stock markets have started the week with considerable gains, and EUR/USD is subdued in the Monday session. Still, Donald Trump and Kim Jon-un are unpredictable leaders, and any move by either side could easily ratchet up tensions and unnerve investors. Donald Trump continues to deal with domestic problems as well, and the White House faced stinging criticism from both Republicans and Democrats, as Trump failed to single out white supremacists for the violence in Charlottsville, Virginia, where one person was killed at a demonstration against far-right marchers.

For months, the ECB has consistently said that will not begin winding down its asset purchases program until inflation rises, but last month, the bank appeared to change its tune. In July, the ECB said it would hold discussions on the quantitative easing (QE) scheme in “the autumn”, and analysts are split as to whether that means September or October. Either way, this means that the markets expect to hear an announcement regarding QE. The bank tapered QE earlier in 2017, from EUR 80 billion to 60 billion/mth, and there are calls to reduce this to EUR billion/mth. The ECB is scheduled to terminate the asset purchases program in December, and could start tapering in early 2018. The bloc’s economy is forecast to expand a healthy 2.0% this year, and the eurozone outperformed both the US and the UK in the first half of 2017. The sore point remains inflation, which is stuck at low levels, despite the ECB’s ultra-accommodative monetary policy. Another factor which policymakers must deal with is the ECB’s bloated balance sheet, which stands at more than EUR 2 trillion.

WTI oil's near-term action remains bearishly aligned and may revisit Friday's low at $47.98 (reinforced by 100SMA) as last Thursday's long red daily candle continues to weigh.

Oil price is attacking again strong support at $48.49 (Fibo 38.2% of $45.39/$50.41 upleg, currently reinforced by rising 20SMA) which contained multiple attacks in past two weeks and was cracked on Thu/Fri but without close below it so far.

Return to $47.98 pivot would further weaken near-term structure and risk further downside on sustained break lower.

At the upside, 10SMA turned south and offers initial resistance at $49.04, guarding 200SMA at $49.43 and psychological $50 barrier, which capped upside attempts during past two weeks.

Res: 48.88, 49.04, 49.43, 50.00
Sup: 48.24, 47.98, 47.31, 47.00

The USD/EUR currency pair accelerated growth significantly on Friday, as the report showed that the US consumer prices rose less than anticipated in July. The Euro gained against the Greenback 30 base points or 0.26% to continue the trading session above the 1.1798 level. The Labour Department revealed that the US Consumer Price Index surged 0.1% over the course of July, missing expectations for a 0.2% rise. Despite the muted increase in consumer prices, some economists remained convinced that the expansion was affected by transitory factors. Furthermore, the Federal Reserve kept considering the key interest rate hike by the end of this year, albeit the decision would depend on further inflation growth pace.

• How long will the gradual return of risk appetite last?
• Yen lower even as Japanese GDP figures smash expectations;
• Gold lower after falling short at key resistance;
• USD stages rebound but dovish Fed continues to weigh.

Risk appetite is slowly returning to the markets on Monday, with no further escalation between the US and North Korea incentivising a gradual move back towards “riskier” assets.

I don't think this signifies a belief that relations between the two countries will suddenly improve, it's more a case of no news being good news and that will likely continue for as long as it lasts. The problem is that both sides can be rather unpredictable so things could escalate at any point and trigger another dash for safety. Gold, the yen and the Swiss franc may be coming off their highs at the moment but I'm not convinced it will last.

It seems this collective – and possibly temporary – sigh of relief that we're seeing is once again overshadowing the economic news that we had overnight, with Japanese GDP figures smashing expectations while numbers from China – retail sales, industrial production and fixed asset investment – were less encouraging. The safe haven status of the yen appears to be driving today's moves, rather than the data itself, with the currency down against its peers as traders unwind some of last week's positions.

Gold is also coming off its highs, having come close to $1,300 on Friday – peaking just above $1,190 – before once again running into resistance and dropping more than half a percentage point today. Should tensions between the two countries ramp up once again, I'm not sure that $1,300 level will hold for long though, which would see it return to the levels last seen in the immediate aftermath of the US election when markets temporarily went into strong risk aversion mode.

The US dollar is staging a small recovery this morning, after suffering more losses on Friday in response to another uninspiring batch of inflation data for July. Markets are becoming increasingly doubtful that another rate hike will come this year, with December's odds now down to 37%. This wasn't helped by comments on Friday from Robert Kaplan – a voter on the FOMC who typically falls somewhere in the middle – which have been perceived as being rather dovish, with the central banker unconvinced on inflation and wanting to see more evidence of progress before hiking again.

While the start of the week is looking a little quiet, with no data of note to be released on Monday, things will pick up in the coming days with FOMC minutes, retail sales and consumer sentiment figures, among many others, due.

As forecasted, the price of the yellow metal reached the 1,290 mark on Friday. However, the surge has most likely ended in the medium term.

The commodity price has reached and bounced off the upper trend line of a dominant ascending channel pattern near the 1,293 mark. The trend line was and still is supported by the various term levels of significance, which are located from the 1,290 to 1,295 levels. In addition, during the bounce off the junior ascending pattern was broken.

Most likely gold price will continue to decline and form a short term descending pattern, which will guide the metal to the support of the dominant pattern.

The US Dollar was relatively flat against the Yen on Friday, thus remaining in the 109.00/20 area for the whole session. The given lack of momentum changed this morning when the rate managed to reach the weekly PP at 109.62.

The steepness of the downtrend has shifted north, as apparent from the rate's inability to reach the lower channel boundary. Thus, the formation of a junior channel down was confirmed.

Taking into account bullish technical indicators, the upside limit for this session may be set at the upper boundary of either the senior or junior channel circa 109.80 and 110.20, respectively. The latter is also supported by the 200-hour SMA.