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Markets were cautious on Wednesday, as safe-haven assets pushed higher after tensions grew between the US and North Korea. Markets are concerned, as President Trump said, in response to a Washington Post report on North Korea’s nuclear capabilities, that “North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen”. North Korea has claimed it is examining an operational plan for firing a ballistic missile toward Guam. With concern mounting of a potential conflict the markets turned to a risk off sentiment with Gold, JPY and CHF gaining against USD, as investors entered into holding safe-haven assets.

More positive economic data came out from the US with Unit Labour costs lower and Nonfarm Productivity increasing in Q2. Initially the markets reacted with another round of USD buying, before giving back gains. With weakening oil prices, and doubts about OPEC’s ability to reduce production, the US EIA reported another surprising drawdown in US oil inventories of 6.5 million barrels for the week to August 4 – helping push Oil higher on the day.

EURUSD, following positive US data, traded down to 1.16887 before trading higher to 1.17634. Currently, EURUSD is trading around 1.1740.

As risk-off trades persists, USDJPY initially traded down to 109.559 on Wednesday, its lowest level in 2 months, before rebounding higher to 110.356. USDJPY is currently trading around 110.00.

GBPUSD continued to trade around 1.30 in relatively lackluster trading on Wednesday. Currently, GBPUSD is trading around 1.2985.

Risk trends will dominate USDCHF, which is currently trading around 0.9660.

Gold traded 1% higher to reach $1,276.06 on the day. Gold has continued pushing higher overnight and is currently trading around $1,279.

A further drop in US crude stocks raised hopes that an OPEC-led effort to wipe out a three-year, price-sapping supply glut is working, with WTI gaining 0.5% on Wednesday to trade as high as $49.75pb. WTI has continued trading higher overnight and is currently trading around $49.90.

At 09:30 BST, UK National Statistics will release a plethora of data for June: Manufacturing Production (MoM) & (YoY), Industrial Production (YoY) & (MoM), Goods Trade Balance, Total Trade Balance and non-EU Trade Balance. Recent indications are calling for a slight improvement in Industrial production and a reduction in the UK’s Trade Balance. Data significantly worse will see GBP come under downward pressure, conversely a release much better than expectations is likely to see GBP in demand.

At 13:30 BST the US Bureau of Labor statistics will release PPI data, Initial Jobless Claims and Continuing Jobless Claims. Expectations are calling for an improvement in all PPI data, with Jobless Claims holding steady at 240K. Positive data will help bolster USD and underscore US economic growth, which may help the Fed in hiking rates one more time this year. Poor data will see USD come under selling pressure.

At 15:00, FOMC Member & Federal Reserve Bank of New York President Dudley will deliver opening remarks and join a panel of New York Fed economists to answer questions, after the presentation of the Economic Press Briefing on Wage Inequality in the Region, in New York.

EUR/USD - 1.1727

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1744

Kijun-Sen level                  : 1.1730

Ichimoku cloud top             : 1.1770

Ichimoku cloud bottom      : 1.1754

Original strategy  :

Sold at 1.1770, Target: 1.1670, Stop: 1.1770

Position : - Short at 1.1770

Target :  - 1.1670

Stop : - 1.1770

New strategy  :

Hold short entered at 1.1770, Target: 1.1670, Stop: 1.1770

Position : - Short at 1.1770

Target :  - 1.1670

Stop : - 1.1770

As the single currency found support at 1.1689 yesterday and rebounded, suggesting consolidation above this level would be seen, however, as long as resistance at 1.1770 holds, bearishness remains for the fall from 1.1910 top to bring retracement of early upmove, hence further weakness to 1.0670 would be seen but reckon support at 1.1650 would remain intact due to oversold condition. 

In view of this, we are holding on to our short position entered at 1.1770. Above 1.1800-05 would risk another test of 1.1824-30 resistance but only break there would signal the erratic fall from 1.1910 has ended, bring further gain to 1.1855-60 first.

EUR/CHF plunged in the yesterday's session and touched the upper median line (uml) of the minor ascending pitchfork. Has closed much above the mentioned support level and above the third warning line (WL3) of the former descending pitchfork. Personally, I still believe that will come down to test and retest the confluence area formed at the intersection between the WL3 with the upper median line (wl1), only a rejection will signal a rebound.

USD/CHF rebounded from the 0.9634 static support, a minor consolidation above this level will bring another bullish momentum. Could come to retest the first warning line (WL1) before will climb higher again. You should know that only a valid breakout above the median line (ml) of the minor descending pitchfork will confirm a larger rebound.

GBP/USD slides further on the daily chart and is almost to hit another downside target. Is trading in the red as the USD is still supported by the USDX’s increase. The dollar index increased again in the last hours and maybe will try again to take out the 93.81 static resistance. The greenback could dominate the currency market if the USDX will have enough energy to jump and to stabilize above the 94.00 psychological level.

You should pay attention at the fundamental events today because most likely will bring a high volatility, the UK’s Manufacturing Production may increase by 0.0% versus the 0.2% drop in May, the Goods Trade Balance may decrease from -11.9B to -11.0B. Moreover, the Construction Output could increase by 1.4% in June after the 1.2% drop in the previous reading period, the Industrial Production is expected to increase by 0.1%, so the Cable could be saved by the economic figures.

The United States could bring a high volatility in the afternoon, only some good data will boost the greenback.

Price is very close to reach and retest the first warning line (wl1) of the minor ascending pitchfork. Personally, I believe that a will breakdown if will touch it, but we have to be patient to see what will happen because we may have a false breakout as well.

The perspective remains bullish as long as the warning line (wl1) is unharmed. I want to remind you that the minor decrease was expected after the false breakout above the up sloping red line and after the failure to approach and reach the lower median line of the minor ascending pitchfork and the 1.3527 major static resistance.

We may have a Rising Wedge pattern on the Daily chart, a breakdown below the warning line and below the UML will confirm it.

USD/JPY - 109.99

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 110.04

Kijun-Sen level                  : 109.87

Ichimoku cloud top             : 110.33

Ichimoku cloud bottom      : 110.18

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Despite falling to 109.54 yesterday, the subsequent rebound suggests consolidation above this level would be seen and test of previous support at 110.25 cannot be ruled out, however, break there is needed to signal low has been formed there, bring a stronger rebound to 110.55-60 but reckon upside would be limited to resistance t 110.83 and price should falter below 111.05 (last week’s high).

On the downside, below 109.70-75 would bring retest of said support at 109.54, break there would signal recent decline has resumed and extend weakness to 109.20-25, having said that, loss of near term downward momentum should prevent sharp fall below there and price should stay above 109.00. As near term outlook is mixed, would be prudent to stand aside for now.

USDJPY (110.01): The USDJPY continued to trade within the range of 110.80 where resistance has been formed and the support at 109.58. The sideways price action does signal a near-term breakout off these levels. Price action so far suggests a sideways movement on the daily and higher time frame charts. The falling trend line will be a key indicator as USDJPY is showing signs of turning flat near the support of 109.85. An upside breakout from the trend line could see further gains back to the resistance level of 110.81.

GBPUSD (1.2997): The British pound briefly retested the resistance level at 1.3025. We could expect some consolidation around this level in the near term although the bias to the downside is quite clear. Support at 1.2800 is the likely target to the downside. In the event that GBPUSD rises above 1.3025, then we could expect a retracement towards 1.3117. Still, the bias is to the downside. This is likely to change only on a continuation of the rally above 1.3117.

EURUSD(1.1740): The EURUSD touched an eight day-low yesterday before prices pulled back to close near the day's open. The pullback in prices coincided with price action bouncing off the support level at 1.1730. A break down below this support level is required for the EURUSD to post further declines. The next support level that will be tested is 1.1635. Further downside in prices can be expected in the near term below 1.1635. The current support level at 1.1730 is likely to be tested on a rebound off 1.1635. If resistance is established here, then we can expect further downside although EURUSD could remain range bound between these levels in the near term.

The Japanese yen, the Swiss franc and gold prices were supported as investors flocked to the safe haven assets. This comes amid mounting tensions between the United States and North Korea. Still, despite the gains, the US dollar was seen managing to maintain its gains from the previous days.

On the economic front, the RBNZ's monetary policy meeting yesterday saw the central bank holding the OCR unchanged. The central bank decision was widely in line with economists' forecasts. The RBNZ's decision saw the Kiwi give up some of the gains.

Looking ahead, the economic data today includes the UK's manufacturing, industrial and construction output data. The median estimates suggest a recovery in most of the sectors. The US producer prices data is also expectedtoday, and the forecasts show a 0.1% increase on a monthly basis.