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The euro has extended its decline on Thursday. In the European session, EUR/USD is trading at 1.1095 at the time of writing, down 0.22% on the day. The US dollar has rebounded against the euro this week, climbing 0.89%.

German and eurozone inflation expected to ease in August

Inflation is expected to ease in Germany and the eurozone, which could have significant impact on the European Central Bank rate announcement on Sept. 12. Inflation declined in German states and the national harmonized inflation rate is expected to fall to 2.1% y/y in August, down from 2.3% in July.

The eurozone releases CPI on Friday. The market estimate for CPI stands at 2.2%, compared to 2.6% in July. The core inflation rate is expected to creep lower to 2.8%, down from 2.9% in July. A drop in inflation in Germany and the eurozone would support the case for another rate reduction next month. The weak eurozone economy and the fact that the Federal Reserve is also poised to lower rates have strengthened the case to cut rates. At the same time, concern about wage increases is a reason for the ECB to hold off on cutting rates.

The Federal Reserve is poised to cut rates next month, which would mark the US central bank joining in the global trend of central banks lowering rates now that the threat of inflation has largely abated. Most FOMC members have come out in favor of a September cut but Atlanta Fed President Raphael Bostic said on Wednesday that the Fed should wait for additional data before lowering rates as it would be a mistake to cut and then have to hike again.

EUR/USD Technical

• EUR/USD is testing support at 1.1087. Below, there is support at 1.1055
• There is resistance at 1.1138 and 1.1170

• Bitcoin find support following profit taking induced selloff.
• ‘Hodlers’ continue to accumulate Bitcoin at pace, adding 262k Bitcoin over the last 30 days.
• Bitcoin’s current price stabilization above the critical 58,500 support level, a new leg to the upside?

Bitcoin prices have stabilized at a key area of support above the 58500 handle following a sharp selloff. Following a rally that took the world’s largest cryptocurrency to within a whisker of the 65000 psychological handle, the sharp selloff took many by surprise.

A massive transfer of around $1.88 billion worth of Bitcoin on Monday added further uncertainty as prices began to drop. A transfer of that size generally spooks markets as it is seen as a massive increase in supply which may be put up for sale and thus having a downward impact on Bitcoin prices.

Data from Arkham Intelligence provided some form of clarity. It shows that both the Bitcoin address that sent the initial amount and the one that received 30,000 BTC are owned by Binance. This suggests it was some form internal transfer and that should have eased the concerns of market participants.

Interesting data out from AMBCrypto of late suggests that many market participants have been cashing in on short-term Bitcoin rallies. This could explain the sharp selloffs Bitcoin has been experiencing when approaching key resistance levels.

The data used by AMBCrypto is the Bitcoin Futures Open Interest chart which showed that when price reached key resistance levels of late closed positions increased, signaling potential profit taking.

Source: Coinglass (click to enlarge)

AMBCrypto also noted that there seems to be an increase in USDT outflows from exchanges just after significant rallies in the price of Bitcoin. This would suggest that market participants may be cashing out their gains from shorter-term positions.

Despite this however, long-term Bitcoin holders have ramped up their accumulation of late which is a sign that many of them are taking advantage of the dips in price.

Long-Term ‘Hodlers’ Step Up Accumulation

Recent CryptoQuant data showed that long-term Bitcoin holders continue to snap up Bitcoin at an impressive rate. Over the last 30 days, long-term Bitcoin investors have added a massive 262,000 BTC to their stash.

This increase has pushed their total holdings to an impressive 14.82 million Bitcoin, which now makes up 75% of all Bitcoin available. This surge in accumulation highlights their confidence in the cryptocurrency’s future.

Source: CryptoQuant (click to enlarge)

Technical Analysis BTC/USD

Bitcoin is sitting at a crucial support level around 58,500, which it has touched before. Today’s closing price is important because it could signal a recovery with a strong upward pattern or a drop below this key level, potentially leading to more declines.

There’s a bearish sign where the 100-day moving average has crossed below the 200-day moving average, usually indicating downward momentum. However, since this indicator reacts to past data, it’s not always a reliable predictor.

The overall trend still looks positive, but if Bitcoin closes below 58,500, it might indicate a change. If prices go up, they could face challenges at the psychological 60,000 level and then around 61,750.

On the other hand, if Bitcoin breaks below 58,500, it might test lower levels like 56,561 and possibly 55,000.

Support

• 58500
• 56561
• 55000

Resistance

• 60000
• 61750
• 62917

Bitcoin (BTC/USD) Daily Chart, August 29, 2024

Source: TradingView.com (click to enlarge)

The Dollar Index extends recovery into second straight day, lifted by short covering ahead of key supports at 100.29/21 zone (Dec 2023 low / 200WMA).

Oversold daily studies contributed to fresh rise, as stochastic and RSI emerged from oversold zone and bearish divergence of stochastic indicator signaled rebound in advance.

Bounce is likely to be a positioning for fresh push lower, as the dollar remains pressured by expectations for the first Fed rate cut in September, which was strongly signaled by the latest dovish comments from Fed’s Chair Powell.

Markets have fully priced in a 25 basis points cut, with rising bets for more aggressive action for 50 basis points cut, weighing on current recovery.

Key US economic data due today (Q2 GDP / Jobless claims) and on Friday (PCE price index, Fed’s preferred inflation measure) are expected to provide more information and contribute to Fed’s decisions in size and the pace of rate cuts.

The dollar index remains in a larger downtrend and is on track for the biggest monthly loss since November 2023, adding to likely scenario of limited correction, which should provide better levels to re-enter broader downtrend.

Technical picture remains bearish on daily chart (negative momentum / MA’s in bearish configuration), with cracked falling 10DMA (101.13) producing so far significant headwinds to recovery attempts and should ideally cap.

Stronger upticks, on the other hand should be limited under pivotal 101.95 barriers (falling 20DMA / former low of Aug 5) to keep larger bears intact for final attack at key supports at 100.29/00.

Res: 101.26; 101.50; 101.73; 101.95.
Sup: 100.78; 100.29; 100.00; 99.20.

Eurozone Economic Sentiment Indicator rose from 96.0 to 96.6 in August. Employment Expectations Indicator rose from 97.9 to 99.2. Economic Uncertainty Indicator fell from 17.9 to 17.2.

Eurozone industry confidence rose from -10.4 to -9.7. Services confidence rose from 5.0 to 6.3. Consumer confidence fell from -13.0 to -13.5. Retail trade confidence rose from -9.1 to -8.1. Construction confidence rose from -9.1 to -8.1.

EU Economic Sentiment Indicator rose from 96.5 to 96.9. Employment Expectations Indicator rose form 98.7 to 99.6. Economic Uncertainty Indicator fell from 17.1 to 6.6.

For the largest EU economies, the ESI improved strikingly for France (+4.3). It also improved significantly for Spain (+1.3) and the Netherlands (+0.9), while for Poland the ESI recorded only a slight increase (+0.3). The ESI deteriorated for Germany (-1.7) and Italy (-1.2).

Full Eurozone ESI release here.

The EUR/USD pair is holding steady at around 1.1134 as markets consolidate USD positions during a lull in significant news. Investors are now keenly awaiting the release of the Core PCE inflation data, a critical metric that the Federal Reserve uses to gauge inflationary pressures and shape its interest rate policy.

The anticipation surrounding this week's Core PCE release is particularly high due to the lack of impactful data from both the US and the eurozone earlier in the week. While significant shifts in expectations regarding the Fed's monetary policy trajectory are unlikely, the upcoming report will still be crucial for fine-tuning investor forecasts.

The market has currently primarily priced in a rate cut by the Fed at its September meeting, with the baseline expectation being a 25 basis point reduction. However, a 34.5% probability of a more aggressive cut of 50 basis points remains. This possibility is bolstered by recent comments from Fed Chair Jerome Powell indicating that the timing for a rate adjustment is appropriate now, echoing sentiments within the monetary policy community.

EUR/USD technical analysis

On the H4 chart of EUR/USD, the pair is forming a structure indicating an initial decline towards 1.1090. Following this decline, a corrective movement to 1.1150 is anticipated. Once this correction concludes, a further decline to 1.1030 is expected, potentially continuing to 1.0960. This bearish outlook is supported by the MACD indicator, with its signal line positioned above zero but trending sharply downwards.

On the H1 chart, EUR/USD has already declined to 1.1104. A corrective phase towards 1.1150 may follow, testing it from below before resuming the downward trajectory towards 1.1090. The Stochastic oscillator, currently above 80, suggests an impending drop to 20, reinforcing the likelihood of continued downward movement.

Market picture

The cryptocurrency market remained in the same position as the day before, with a capitalisation of $2.09 trillion (+0.07% in 24 hours). Bitcoin’s price stabilised after the crash, with Solana losing 3% and Ethereum recovering 2% over the same period.

Bitcoin buyers beat back several waves of selling on Wednesday, preventing the price from consolidating below $58K. This dynamic increases the chances of a rebound during the day on Thursday. A rise above $60K will allow us to talk about a more significant growth than just a technical rebound.

In the absence of a meaningful cryptocurrency rally, which is often the case in a half year, bitcoin has been consolidating its dominance, reinforced by the launch of ETFs at the start of the year. However, this story doesn’t apply to Ethereum, whose crypto market share has shrunk to 14.6% from 18.8% a year earlier. The ‘other’ category lost roughly the same market share over the course of the year but has been trending upward for the past month. Ethereum is in danger of fading into the sunset, as is Litecoin, whose capitalisation is now close to the cyclical market lows of two years ago.

News background

Experts believe that the collapse of TON due to the arrest of Telegram founder Pavel Durov could have been a catalyst for the deterioration of sentiment in the crypto market. The situation may have been exacerbated by technical problems with the blockchain caused by the crash. The network overload was caused by ‘garbage’ operations with the DOGS meme token.

Glassnode warned that Bitcoin’s relative calm last week will be replaced by a period of increased volatility. Both on-chain indicators and perpetual contracts have reached equilibrium. Such signs indicate a reduction in speculation and usually precede a significant increase in volatility.

CoinGecko notes that the political coin category (PolitiFi) has significantly outperformed the entire meme coin segment in terms of capitalisation growth in 2024 – 782.4% vs. 90.2%. Most of these assets are satirical and not officially linked to any politician.

Telegram founder Pavel Durov was released on €5 million bail on Wednesday and is banned from leaving the country. Durov is charged with six offences for which he faces up to 10 years in prison. In recent days, prosecutors in Germany and India have also announced investigations into Telegram and its founder for a similar range of offences.

EUR/USD

The euro has retreated from its previously reached highs. The 1.12000 level provided strong resistance to buyers, and after testing it twice, the price has corrected to 1.1100. This level has already offered support to the pair last week, so for now, we are seeing range-bound trading between 1.1200-1.1090.

What scenarios could unfold in the upcoming trading sessions?

• If the price breaks and holds below 1.1090, a full-fledged downward correction could develop, with a decline towards 1.1050-1.0980.
• If the price consolidates above 1.1200, the upward momentum could resume, with a rise towards 1.1400-1.1300.

Technical analysis of EUR/USD suggests the potential for a deeper downward retracement, as a “bearish harami” pattern has formed on the daily timeframe.

Key fundamental factors that could influence the pair’s price:

• Today at 10:15 (GMT +3:00): Speech by European Central Bank member Isabel Schnabel.
• Today at 12:00 (GMT +3:00): Eurozone Consumer Confidence Index release.
• Today at 15:30 (GMT +3:00): German Consumer Price Index (CPI) release.
• Today at 15:30 (GMT +3:00): US Q2 GDP data release.

EUR/CAD

Technical analysis of the EUR/CAD pair also indicates range-bound trading, but within a wider corridor. Two weeks ago, the price surged and tested key resistance at 1.5200. It failed to consolidate above on the first attempt, and the pair dropped to 1.4970. Last week, buyers made another attempt to break through 1.5200, but again without success. Currently, the price is trading at the lower boundary of the four-week range between 1.5220-1.4970.

A move below 1.4970 could trigger a resumption of the downward movement and a test of 1.4880. Consolidation above 1.5200 could lead to a new upward impulse towards 1.5600-1.5400.

Key events for the pair tomorrow:

• Tomorrow at 10:55 (GMT +3:00): German Unemployment Rate release.
• Tomorrow at 15:30 (GMT +3:00): Canadian GDP release.

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• AUDUSD increases 7% in August
• 20- and 50-day SMAs post bullish cross
• Stochastic in overbought region
• RSI still beneath 70 area

AUDUSD hit a new eight-month high above the 0.6800 round number, breaking the long-term descending trend line to the upside. Following the bearish spike on August 5, the pair gained over 7%.

Technically, the 20- and 50-day simple moving averages (SMAs) are ready for a bullish crossover. The stochastic oscillator is pointing north above the 80 level, whereas the RSI is moving horizontally near the 70 area.

More advances may drive the market towards the next resistance of 0.6870, which is taken from the high on December 28. If the bulls continue to buy the pair, then the market may challenge the 0.6900 round number, achieved in July 2023.

In the negative scenario, a drop beneath the diagonal line could indicate a retreat until the 20- and 50-day SMAs at 0.6660. Even lower, the 200-day SMA at 0.6610 could be a real struggle for traders.

Summarizing, AUDUSD has shown a significant improvement, but only a successful rally above 0.6800 could confirm a bullish retracement.

Markets

More technical, order driving trading for global markets yesterday. An almost empty eco calendar left investors counting down to upcoming data (EMU CPIs today and tomorrow, US PCE deflators on Friday, key early month data next week) and prevented clear directional moves. A $70 bln US Treasury auction was OK, but hardly left any traces on the charts. At the end of the day, US yields rose 1-2 bps across the curve (3.4 bps decline in 2-y yield was due to a benchmark change). German bunds outperformed with yields easing 1.9 bps (2-y) and 3.4 bps (30-y). (US) equities traded cautious ahead of Nvidia results after the close (Nasdaq -1.12%). Results mostly met analyst expectations, but investors apparently had hoped for a stronger forecast/guidance, triggering further (tech-driven) equity losses after the close. After a Fed-driven setback of late, the dollar tried to avoid further deterioration of the technical picture. DXY rebounded off the 100.52/62 area (YTD low/end 2023 low) to close at 101.09. EUR/USD for now also aborted the test of the 1.12 area (close 1.112). Sterling corrected against the overall USD comeback (cable 1.3191) but continued it outperformance against the euro as the BOE is expected to take longer to further join the ECB and Fed easing cycle (next step only seen at the November meeting, unchanged in September).

This morning, Asian equity markets mostly traded with in red, but the damage for the Nvidia setback yesterday on WS remains modest after all. US yields are little changed. Fed’s Bostic in a speech overnight admitted that there is a case for bringing forward the timing of rate cuts, but still wants more evidence as he wants to prevent a scenario where the Fed cut rates and then has to raise them again. The dollar for now fails to build on yesterday’s rebound (EUR/USD 1.1135, DXY 100.95). The yen slightly underperforms (USD/JPY 144.75). Today’s eco calendar is better filled with national August inflation data in Belgium, Spain and Germany. The EC also will release European confidence data. In the US, the second reading of the US Q2 GDP growth, pending home sales and jobless claims will be published. German and Spanish HICP inflation is expected to cool further to respectively 0.0% m/m and 2.0% y/y and 0.2% m/m and 2.5% y/y. ECB’s Lane is scheduled to speak. Easing of headline inflation will cement expectations for a next 25 bps ECB cut in September, but markets will keep a close eye at the underlying dynamics (core, services) to make up their mind on the timing for follow-up action. With the Fed focus now turning ever more to the labour market, jobless claims still might cause some intraday price jitters. In the run-up to next week key US data, we expect core yields to hold near recent bottom levels. We don’t anticipate a protracted USD comeback yet.

News & Views

ANZ New Zealand’s Business Outlook soared from 27.1 to 50.6 in August, the highest level in a decade. Especially the forward looking activity outlook improved, rising from 16.3 to 37.1. Experienced own activity rose only very marginally and remains at low levels, from -24.3 to -23.1. It implies that the hurdle for expecting better times ahead is very low. ANZ reported that 41% of firms intended to raise their prices in the next three months. The amount by which they intend to raise them rose from 1.4% to 1.6%. Inflation expectations on the other hand dived below 3% for the first time since July 2021 (2.9% from 3.2%). The survey specifically mentions that the large increases in confidence were already visible in the responses gathered ahead of the RBNZ’s first policy rate cut, though anticipation played as role as well of course. NZD swap rates rose 4 to 5 bps following the release. Kiwi dollar strength takes over from dollar weakness in this month’s NZD/USD surge with the pair approaching 0.63 (from <0.59 early August) for the first time since early January.

New EU car registrations were nearly flat in Y/Y-terms in July (+0.2%). Seven months into 2024, new car registrations increased by 3.9%, reaching more than 6.5mn units. This is the result of a low comparison base. Battery-electric (BEV) cars accounted for 12.1% of the EU car market, down from 13.5% the previous year. Hybrid-electric vehicles increased their market share, growing from 25.5% to 32%. The combined share of petrol and diesel cars fell to 46%, down from 50%. Registrations of BEV cars declined by 10.8% to 102.7k units with gains in Belgium (+44.2%!; 30% share), the Netherlands and France unable to offset a steep drop in Germany (-36.8%).

Graphs

GE 10y yield

The ECB cut policy rates by 25 bps in June. Stubborn inflation (core, services) make follow-up moves less evident. Markets nevertheless price in two to three more cuts for 2024 as disappointing US and unconvincing EMU activity data rolled in, dragging the long end of the curve down. The move accelerated during the early August market meltdown.

US 10y yield

The Fed in its July meeting paved the way for a first cut in September. It turned attentive to risks to the both sides of its dual mandate as the economy is moving to a better in to balance. Markets tend to err in favour of a 50 bps lift-off. The pivot weakened the technical picture in US yields with another batch of weak eco data pushing the 10-yr sub 4%. Powell at Jackson Hole didn’t challenge markets’ positioning.

EUR/USD

EUR/USD moved above the 1.09 resistance area as the dollar lost interest rate support at stealth pace. US recession risks and bets on fast and large (50 bps) rate cuts trumped traditional safe haven flows into USD. EUR/USD 1 1.1276 (2023 top) serves as next technical reference.

EUR/GBP

The BoE delivered a hawkish cut in August. Policy restrictiveness will be further unwound gradually on a pace determined by a broad range of data. The strategy similar to the ECB’s balances out EUR/GBP in a monetary perspective. Recent better UK activity data and a cautious assessment of BoE’s Bailey at Jackson Hole are pushing EUR/GBP lower in the 0.84/0.086 range.

Nvidia generated a record $30bn in sales in Q2 – up by 122%, the profits surged 166% to $16.6bn, the company said that they expect to sell $32.5bn in the current quarter (more than $31.9bn expected by analysts) and announced a $50bn share buyback program. It could hardly do better.

The actual results and the forecast beat the average market expectations by a great margin and there was nothing the company could do more to keep the enthusiasm going… but hey, they fell short of the highest estimates on Wall Street. And when I say ‘highest estimates’ I am talking about third quarter revenue forecast from some analysts of nearly $38bn, for example, which is off chart but which is also the reason why Nvidia’s stock price could challenge odds and rumours that it was maybe overvalued.

So guess what, investors were not impressed by the comfortable revenue beat that Nvidia announced last night – a 7th consecutive quarter beat and the 5th consecutive quarter beat of $2bn – and sent the stock price nearly 7% lower in the afterhours trading. The shiny results were clouded by the delay of the next-generation Blackwell chip and the rising worries that competition will soon arrive to tap into Nvidia’s monstrous market share – that stands near 80% for the advanced chips. Combined with the news that Nvidia is under the DoJ investigation regarding whether it has abused its dominant market position doesn’t make the Nasdaq futures look good this morning. They are down by around 0.62% at the time of talking.

Super Micro Computer dived another 20% yesterday after announcing that they will delay filing its annual financial disclosures – a day after Hindenburg threw mud on the company saying that they had ‘glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures and customer issues’. The delaying of the report naturally raises the odds that they might be right.

All in all, mood in the Big Tech is not great this morning. But the British and European futures seem little affected by Nvidia news. The futures point at a positive start this morning, and the waning appetite in Big Tech could cause more rotation toward the non-tech sectors as the Fed is on course to start cutting its interest rates in a couple of weeks. As such, the S&P500’s equal weight index could continue to close its gap with the technology-heavy, normal-weight index, but the upside potential could only be lower provided that the remaining S&P493 could barely make investors dream more than the Federal Reserve (Fed) rate cuts’ benefits on their valuations.

FX and commodities

The US dollar index rebounded yesterday from ytd low levels, although the US 2-year yield – that best captures the Fed rate expectations – continued its descent below the 3.90% level.

Today and tomorrow, attention shifts to economic data. The US will reveal its latest GDP update today and the core PCE index tomorrow, and over in Europe, the Eurozone countries will start revealing their flash CPI figures for August and the aggregate number will fall tomorrow morning. The US economy is expected to have grown 2.8% in Q2, double the number printed in Q1, but the price pressures are expected to have eased. And despite the strong looking Q2 GDP figure, the growth in the Q3 has likely slowed to 2%, according to Atlanta Fed’s GDP Now forecast. Therefore, even a figure in line with expectations may not discourage the Fed doves, if the price pressures continue to show further progress. In Europe, tomorrow’s figures are expected to confirm a further slowdown in inflation – combined with the sluggish economic data from the old continent – could reinforce the expectations that the European Central Bank (ECB) could cut more than the 50bp cut baked in the market prices. The Fed on the other hand is expected to cut 100bp which looks overdone. The EURUSD is off the recent highs and has room for a further downside correction.

Across the Channel, Cable remains bid below the 1.32 mark on expectation that the Bank of England (BoE) is set for a less aggressive – but a more realistic - rate cut path than its American peer, but the warnings from Mr. Starmer earlier this week that October’s budget ‘will be painful’ could weigh on Britain’s growth outlook and limit sterling’s upside potential.