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Daily Pivots: (S1) 1.3126; (P) 1.3140; (R1) 1.3162; More...

Intraday bias in GBP/USD remains neutral as consolidation continues below 1.3265. While deeper retreat cannot be ruled out, downside should be contained well above 1.3043 resistance turned support to bring rebound. On the upside, above 1.3265 will resume larger up trend to 100% projection of 1.2298 to 1.3043 from 1.2664 at 1.3409.

In the bigger picture, up trend from 1.0351 (2022 low) is resuming. Next target is 38.2% projection of 1.0351 to 1.3141 from 1.2298 at 1.3364. For now, outlook will stay bullish as long as 1.2664 support holds, even in case of deep pullback.

Daily Pivots: (S1) 146.08; (P) 146.62; (R1) 147.47; More...

Intraday bias in USD/JPY remains mildly on the upside at this point. Pull back from 149.35 should have completed at 143.43 already. Further rise should be seen to 149.35 resistance first. Firm break there will resume the rebound from 141.67 and target 100% projection of 141.67 to 149.35 from 143.43 at 151.11, as the second leg of the corrective pattern from 161.94 high. For now, risk will stay on the upside as long as 143.43 support holds, in case of retreat.

In the bigger picture, fall from 161.94 medium term top is seen as correcting whole up trend from 102.58 (2021 low). Deeper decline could be seen to 38.2% retracement of 102.58 to 161.94 at 139.26, which is close to 140.25 support. In any case, risk will stay on the downside as long as 55 W EMA (now at 149.47) holds. Nevertheless, firm break of 55 W EMA will suggest that the range for medium term corrective pattern is already set.

Daily Pivots: (S1) 0.8489; (P) 0.8513; (R1) 0.8542; More…

Intraday bias in USD/CHF remains neutral at this point and more consolidations could be seen above 0.8399. Further decline is expected as long as 0.8540 resistance holds. Break of 0.8339 will resume the fall from 0.9223 and target 0.8332 low. However, considering bullish convergence condition in 4H MACD, firm break of 0.8540 will confirm short term bottoming, and turn bias back to the upside for 0.8747 resistance instead.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Dollar is trading with a slightly firm tone this week, though overall forex market activity has been relatively subdued. It's worth noting that last month's sharp selloff in US stocks was actually started with disappointing ISM manufacturing data, which was then exacerbated by the non-farm payrolls report. Given this backdrop, today's release could trigger volatility if there are any surprises.

The US manufacturing sector has been contracting since late 2022, as indicated by the ISM index. The brief uptick to 50.3 in March, which signaled a return to expansion, turned out to be short-lived, with the index subsequently falling for four consecutive months, reaching a low of 46.8 in July. For August, a modest recovery to 47.8 is anticipated, but any negative surprise could reignite fears of a recession and lead to renewed market jitters.

In Europe, attention will be on Swiss CPI and GDP figures. Outgoing SNB Chair Thomas Jordan recently expressed concerns over the impact of a strong Swiss Franc and weak European demand on the Swiss industry. If today's GDP data disappoints, it could heighten concerns at the SNB, while a lower-than-expected inflation reading might provide the central bank with the flexibility to consider a 50 bps rate cut this month, rather than the widely anticipated 25bps.

Technically, AUD/USD is extending the retreat from 0.6823. While further fall cannot be ruled out, strong support should be seen from 0.6696 to bring rebound, and then resumption of whole rise from 0.6348. However, firm break of 0.6696 will indicate that deeper correction is underway for 38.2% retracement of 0.6348 to 0.6823 at 0.6642 and possibly below. The pair's next move will largely depend on the overall risk sentiment in the market as traders digest the upcoming economic data.

In Asia, at the time of writing, Nikkei is up 0.22%. Hong Kong HSI is down -0.38%. China Shanghai SSE is down -0.50%. Singapore Strait Times is up 0.25%. Japan 10-year JGB yield is up 0.0077 at 0.919.

NZIER expects Oct RBNZ rate cut, further easing hinges on demand recovery

The New Zealand Institute of Economic Research indicated today that it expects RBNZ to implement another interest rate cut during its October meeting. This follows RBNZ's decision in August to bring forward its easing cycle in response to "deterioration in economic outlook." However, NZIER notes that the pace of further easing remains highly uncertain, with a potential pause in November depending on how quickly demand recovers.

Weaker demand has become a significant concern for businesses, with 61% of firms identifying it as the primary constraint on their operations. This declining demand is also having an impact on the labor market, where there is now more slack as companies reduce hiring in response to the softer economic environment.

Looking ahead, NZIER forecasts GDP growth to remain subdued over the next year, contributing to further decline in inflation. The institute predicts that annual CPI inflation will fall back within RBNZ's target band by the end of this year, which underpins its expectation for another Official OCR cut in October.

However, the uncertainty surrounding the economic recovery suggests that any further rate cuts after October will be closely tied to the extent of demand recovery, with the November meeting likely to be a key decision point.

New Zealand's terms of trade improve in Q2 despite decline in export volumes

New Zealand's terms of trade saw a solid improvement in the second quarter of 2024, rising by 2.0%. This increase was driven by a 5.2% rise in export prices, which outpaced the 3.1% increase in import prices. However, the value of exports decreased by -1.5% to NZD 16.6 billion, largely due to a -4.3% drop in export volumes, even as higher prices provided some support.

Dairy products played a significant role in the export dynamics, with prices rising by 8.0%. Despite this, dairy export volumes fell sharply by -10%, leading to an 8-.0% decline in the overall value of dairy exports. The meat sector, on the other hand, performed better, with prices rising by 7.3%, volumes increasing by 4.1%, and the total value of meat exports up by 6.5%.

On the import side, the total value rose by 4.0% to NZD 18.9B, supported by a 3.2% increase in import volumes. Petroleum and petroleum products were notable contributors, with prices up by 4.0%. However, petroleum volumes declined by -8.0%, leading to a -4.4% decrease in the overall value of these imports.

Looking ahead

Swiss CPI and GDP are the two main focuses in European session. Later in the day, US ISM manufacturing will take center stage.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.8489; (P) 0.8513; (R1) 0.8542; More…

Intraday bias in USD/CHF remains neutral at this point and more consolidations could be seen above 0.8399. Further decline is expected as long as 0.8540 resistance holds. Break of 0.8339 will resume the fall from 0.9223 and target 0.8332 low. However, considering bullish convergence condition in 4H MACD, firm break of 0.8540 will confirm short term bottoming, and turn bias back to the upside for 0.8747 resistance instead.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Economic Indicators Update

The New Zealand Institute of Economic Research indicated today that it expects RBNZ to implement another interest rate cut during its October meeting. This follows RBNZ's decision in August to bring forward its easing cycle in response to "deterioration in economic outlook." However, NZIER notes that the pace of further easing remains highly uncertain, with a potential pause in November depending on how quickly demand recovers.

Weaker demand has become a significant concern for businesses, with 61% of firms identifying it as the primary constraint on their operations. This declining demand is also having an impact on the labor market, where there is now more slack as companies reduce hiring in response to the softer economic environment.

Looking ahead, NZIER forecasts GDP growth to remain subdued over the next year, contributing to further decline in inflation. The institute predicts that annual CPI inflation will fall back within RBNZ's target band by the end of this year, which underpins its expectation for another Official OCR cut in October.

However, the uncertainty surrounding the economic recovery suggests that any further rate cuts after October will be closely tied to the extent of demand recovery, with the November meeting likely to be a key decision point.

Full NZIER release here.

New Zealand's terms of trade saw a solid improvement in the second quarter of 2024, rising by 2.0%. This increase was driven by a 5.2% rise in export prices, which outpaced the 3.1% increase in import prices. However, the value of exports decreased by -1.5% to NZD 16.6 billion, largely due to a -4.3% drop in export volumes, even as higher prices provided some support.

Dairy products played a significant role in the export dynamics, with prices rising by 8.0%. Despite this, dairy export volumes fell sharply by -10%, leading to an 8-.0% decline in the overall value of dairy exports. The meat sector, on the other hand, performed better, with prices rising by 7.3%, volumes increasing by 4.1%, and the total value of meat exports up by 6.5%.

On the import side, the total value rose by 4.0% to NZD 18.9B, supported by a 3.2% increase in import volumes. Petroleum and petroleum products were notable contributors, with prices up by 4.0%. However, petroleum volumes declined by -8.0%, leading to a -4.4% decrease in the overall value of these imports.

Full New Zealand terms of trade release here.

Gold has been on a winning streak, rising for seven straight months and gaining 21% so far this year. The key question now is whether this momentum will continue in September or if the metal will take a break. The future of gold prices will largely depend on upcoming U.S. economic data and interest rate expectations. The overall market trend for gold remains positive, and many believe the metal is still undervalued, especially with ongoing inflation concerns. Additionally, lower bond yields, driven by expectations of Federal Reserve rate cuts, should continue to support gold's strength.

XAUUSD – D1 Timeframe

The Daily timeframe of XAUUSD gives a bare hint at the likelihood of a bearish rally based on the stochastic indicator being overbought; and creating a divergent pattern. This initial indication however needs closer observation before any form of conclusion can be made regarding the outcome.

XAUUSD – H1 Timeframe

The 1-hour timeframe presents a more reliable insight into the price action. Here on the chart, we see the supply zone created as a result of the break below the trendline support. Next, price bounced off the daily timeframe pivot zone, heading for the supply area. Now, if the rejection from the supply zone crosses below the secondary trendline support, we would have a confirmation for the bearish sentiment.

Analyst’s Expectations:

• Direction: Bearish
• Target: $2,489.79
• Invalidation: $2,529.10

The forex market was relatively quiet during the Asian trading session, with only minor changes seen across currencies. There was a slight dip in commodity currencies due to weaker-than-expected manufacturing data from China, though this was somewhat balanced by better results from the Caixin PMI report. This week will be crucial as traders look for clues on the Fed’s upcoming decisions on interest rate cuts, with important economic data like the ISM indexes and non-farm payrolls expected to provide direction. Here is the prediction from our weekly live analysis on YouTube. Enjoy!

EURUSD– H4 Timeframe

EURUSD began a steady decline last week, followed by a stalling in the price action as price seeks to find its course ahead of the rates decision. This week, I expect to see a continuation of the bearish momentum since price has already broken below the previous structure, and trendline. The retest of the confluence region between the trendline resistance, and the supply zone is my priority entry region.

Analyst’s Expectations:

• Direction: Bearish
• Target: 1.10028
• Invalidation: 1.10959

GBPUSD – H1 Timeframe

GBPUSD is currently trading within a descending channel, with the stochastic nearly completing a convergence pattern. This implies that the confluence of the supply zone and the trendline resistance can be expected to carry much more weight as a result of the stochastic confirmation. Ultimately, critical observation of the lower timeframe price action will determine the trigger point.

Analyst’s Expectations:

• Direction: Bearish
• Target: 1.31082
• Invalidation: 1.31928

• USDJPY reversed from support level 144.00
• Likely to rise to resistance level 149.35

USDJPY currency pair recently reversed up from the strong support level 144.00 (which has been reversing the price from January) standing near the lower daily Bollinger Band.

The upward reversal from the support level 144.00 created the daily Japanese candlesticks reversal pattern Bullish Engulfing – which started the active impulse wave (3).

Given the strength of the support level 144.00 and the continuation of the yen sales, USDJPY currency pair can then be expected to rise to the next resistance level 149.35 (top of the previous impulse wave (1)).

• USD/JPY rises for the fourth consecutive day, supported by US economic optimism.
• US employment data this week is crucial for Fed’s September rate decision and USD/JPY direction.
• Japanese economic indicators and seasonality may also influence USD/JPY’s trajectory.

USD/JPY continued its advance on a thin liquidity Monday. The greenback is up around 0.57% against the JPY and on course for a fourth successive day of gains.

The US Dollar has been on a steady rise over the past few days as investors remain optimistic about the US economy following last week’s GDP data. This was followed by a decent PCE print which went some way in allaying recessionary fears and offering the greenback some support.

There is a large swatch of data out of both the US and Japan this week which could shape the trajectory of the pair. The Japanese economy has been on an upward trajectory of late as speculation grows about further rate hikes from the Bank of Japan (BoJ). This is crucial as it comes at a time when Global central banks are looking to cut rates and not raise them.

US Employment Data is Key

I think the biggest impact this week on USD/JPY will come from the US jobs report. The importance of this release has grown in stature since the massive downgrade in job numbers by the BLS. It led markets to start speculating on a potential 50 bps rate cut in September.

A soft jobs print could bring this conversation back to the fore and could play a major role in determining the Fed decision on September 18. A strong jobs number could finally put an end to that debate as it appears that many Fed members are uncomfortable with beginning the rate cut cycle with a 50 bps move.

There are some mid-tier Japanese data releases which should show continued improvement in the Japanese economy. For more information on this please read the weekly market outlook.

Technical Analysis

From a technical standpoint, USD/JPY appears to have bottomed out just below the 144.00 handle before the recovery began. The pair has since posted 3 consecutive days of gains and is on course for a fourth.

Interestingly enough this comes despite the expectations of rate cuts from the Fed and rate hikes from the BoJ putting the two central banks on differing paths. In theory the Yen should be gaining ground against the greenback, however there could be an explanation as to why the greenback is on the up.

The answer may be two-fold as market participants appear to be betting on the US economy following a stellar GDP revision. Also, the initial USD selloff around the rate cut issue may mean that a lot of the expected 25bps cut in September has already been priced in.

Another consideration could be seasonality. Historically the US dollar enjoys a good month of September while US stocks seem to struggle. Will history repeat itself?

Today’s daily candle is on course to close above the 146.37 swing high which would signal a shift in structure where price action is concerned. This would increase the probability of further upside even if we do have a slight pullback first potentially to resistance turned support at 146.37.

USD/JPY Chart, September 2, 2024

Source: TradingView (click to enlarge)

Support

• 146.37
• 145.00
• 143.85

Resistance

• 148.00
• 150.00 (psychological level)
• 151.216 (200-day MA)