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Bearish Corrective Scenario: Sell positions below 1.3130 with TP1 at 1.3103. Consider TP2: 1.3090, TP3: 1.3076, and TP4: 1.3057 only after a decisive break. Use a stop-loss (S.L.) above 1.3160 or at least 1% of account equity for intraday trades.

Bullish Scenario: Buy positions after a pullback (with prior PAR* formation) above 1.3103 with TP1: 1.3142, TP2: 1.3160, and TP3: 1.3172 on extension. Use a stop-loss below 1.3088 or at least 1% of account equity. Apply a trailing stop.

Fundamental Analysis:

The British pound (GBP) remains near its yearly high of 1.3130 against the dollar (USD), buoyed by ongoing optimism from a rise in UK consumer confidence according to the GfK index. Additionally, the Bank of England's expectations of potential rate adjustments following Andrew Bailey’s speech further support the bullish trend.

However, the recent strengthening of the dollar, driven by a rebound in bond yields and anticipation ahead of Jerome Powell's Jackson Hole address, limits further gains for the pound. Depending on central bank remarks, this context heightens volatility and could trigger short-term pullbacks.

Technical Analysis

GBPUSD, H2

• Supply Zones (Sells): 1.3160
• Demand Zones (Buys): 1.3102, 1.3026

The pair hit 2024 highs after breaking the July resistance at 1.3044, aiming to surpass the 2023 resistance at 1.3142 toward 1.3159 (a macro sell zone that was the broken support from December 2021 and resistance in April 2022) and potentially 1.32.

To extend gains toward these levels, the pair must stay above the last intraday demand zone between today’s Asian POC at 1.3102 and yesterday’s volume concentration near today’s opening at 1.3089.

If the subsequent rise reaches and exceeds the 80% and 100% Fibonacci extensions, the 1.3076 level will be validated as the last significant intraday point of the uptrend.

However, under the current scenario, if the price fails to decisively break Thursday's resistance at 1.3129 and sellers push decisively below the nearest demand zone (between the Asian POC at 1.3102 and yesterday's volume concentration near 1.3090), a broader correction would be confirmed, with further targets at 1.3056, 1.3044, and possibly the uncovered POC* at 1.3026.

The bullish bias remains intact as long as the last significant support of the uptrend at 1.3011 holds. A decisive break of this level, confirmed with a second lower low, would trigger an intraday bearish reversal.

Note:

*Uncovered POC: The Point of Control (POC) is the level or zone with the highest volume concentration. If a downward movement originated from this point, it is considered a sell zone and forms resistance. Conversely, if it led to an upward movement, it is a buy zone, often forming support levels.

Gold regained traction and bounced on Friday, reversing so far around a half on Thursday’s 1.1% drop, which broke and closed below psychological $2500 level.

Top of the former range at $2480 zone performed as solid support and contained dip, which also closed above rising 10DMA, adding to idea that deeper pullback was just positioning for fresh push higher.

Fresh gains cracked $2500, with daily close above to signal that bulls regained full control after a short-lived dip.

Daily studies are in full bullish setup and contribute to overall bullish picture, as the yellow metal recently hit a series of new record highs, boosted by growing expectations that the Fed will start cutting interest rates from September, geopolitical tensions and uncertainty over the US economic outlook.

All eyes are on Fed Chair Powell, who will deliver the speech in Jackson Hole symposium of central bankers later today, with wide expectations that he will confirm signals for September rate cut and provide more details about the depth and pace of policy tightening.

Dovish narrative, in line or above expectations to likely offer fresh boost to the metal and push price again into uncharted territory.

Violation of fresh all time high ($2531) to expose projections at $2547, $2564 and $2590).

On the other hand, any surprise from Powell, which cannot be completely ruled out as the Fed needs to consider several key factors (the timing and size of rate cut or no rate cut this time, consequences of each decision on the economy which is highly vulnerable and my slow further in an inappropriate and not finely balanced Fed decision) before making the final cut.

Gold price would come under fresh pressure in such scenario and probably enter deeper correction.

Res: 2509; 2519; 2531; 2547.
Sup: 2486; 2480; 2470; 2451.

AUD/USD is finding its footing, currently stabilising at around 0.6725, as the US dollar weakens further in anticipation of Fed Chair Jerome Powell's speech at the Jackson Hole symposium. Investors are watching closely for cues on future policy shifts, influencing forex forecasts.

The Australian dollar's resilience is bolstered by the minutes from the Reserve Bank of Australia's latest meeting, indicating that the central bank is not in a hurry to ease monetary policy despite a slowdown in inflation. The RBA remains cautious, projecting inflation to stay above its 2-3% target range until the end of 2025. This suggests that interest rates may remain steady for an extended period, providing a stable backdrop for the Australian dollar.

Recent data highlights robust performance in Australia's private sector for August, particularly in services, while the contraction in manufacturing is easing. This paints a picture of an Australian economy that is adjusting well and could sustain its momentum without immediate monetary stimulus.

Technical analysis of AUD/USD

The AUD/USD pair recently peaked at 0.6760 but is now poised for a correction. The immediate focus is on a potential descent to 0.6684, marking the first significant support level. Upon reaching this target, a retest of 0.6725 from below may occur, defining the boundaries of a possible consolidation range. A break below this consolidation could initiate a further decline towards 0.6600, potentially extending to 0.6555. The MACD indicator supports a bearish outlook in the short term, with the signal line peaking and poised for a downward trajectory.

In the hourly frame, AUD/USD has retraced from a recent low of 0.6696 to 0.6725, indicating a corrective phase. The anticipated continuation of this downtrend could see the pair targeting 0.6686 shortly. If this support holds, a rebound to 0.6725 could follow. The Stochastic oscillator indicates an overbought condition, with the signal line expected to move downwards from 80 to 20, supporting the potential for further declines.

• US 100 index exhibits bearish tendencies but stabilizes near 50-SMA
• Technical risk is two-sided as Powell prepares for his Jackson hole speech( 14:00 GMT)
• Bulls hope for a close above 19,880; bears need a drop below 19,350

The US 100 stock index came under pressure on Thursday after a downward revision in the US non-farm payrolls revived fears of a slowing US economy.

Fortunately, the 50-day simple moving average (SMA) prevented a further decline below 19,520, but the clear bearish engulfing candlestick pattern created at the top of the latest bullish wave both in the daily and four-hour charts warns that the selling wave might have more room to run.

Meanwhile the technical indicators have not confirmed a bearish bias yet. The RSI remains comfortably above its 50 neutral mark and the MACD continues to rise within the positive region, questioning the overbought signals coming from the stochastic oscillator.

Nevertheless, if sellers drive the price below the 50-day SMA, they may instantly reach the channel’s lower boundary seen at 19,350. A steeper decline below the formation could cease somewhere between the support trendline from October at 19,080 and the 20-day SMA at 18,955. If this floor cracks as well, the index could crash into the 18,400-18,586 zone.

Otherwise, should the index set a strong footing near its 50-day SMA, the bulls might again fight for a close above the 19,880-20,000 region. A successful break higher could pick up steam towards the channel’s upper band near 20,350, and then up to the all-time high of 20,771. The next mission could target the 21,000 psychological mark in the uncharted territory.

In brief, the US 100 index is in a state of neutrality and is looking for a new direction either below 19,350 or above 19,880.

Yesterday, the Purchasing Managers' Index (PMI) data for both the UK and the US were released.

According to ForexFactory, the UK figures were as follows:

→ Flash Manufacturing PMI: actual = 52.5, forecast = 52.1; previous = 52.1;

→ Flash Services PMI: actual = 53.3, forecast = 52.8; previous = 52.5.

As SPGlobal reports, the August PMI data signalled another significant expansion (the largest since April) in the UK's private sector output, supported by strong growth in new orders.

In contrast, the US figures were less encouraging:

→ Flash Manufacturing PMI: actual = 48.0, forecast = 49.5; previous = 49.6;

→ Flash Services PMI: actual = 55.2, forecast = 54.0; previous = 55.0.

In response to yesterday’s PMI releases, the GBP/USD rate has been climbing this morning towards the 2023 high around the 1.3140 level. Notably:

→ Since the August low, the pair has risen by over 3.5%;

→ A key driver of bullish sentiment for GBP/USD is the weakness of the US dollar, driven by expectations of a Fed rate cut in September.

Technical analysis of the GBP/USD daily chart today shows:

→ The price has broken upwards out of the consolidation triangle (which we mentioned on 15 August) and confidently surpassed the psychological barrier at 1.3000;

→ The RSI indicator has entered overbought territory;

→ The last few daily candles show long upper shadows, indicating increased selling activity;

→ The upper boundary of the ascending channel (shown in blue) could act as resistance.

Given these factors, it is reasonable to suggest that the rally might be losing momentum, and even if the bulls manage to challenge the 2023 high, it could potentially result in a bull trap.

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GBP/USD started a fresh increase above the 1.2920 zone. USD/CAD declined and now consolidates below the 1.3640 level.

Important Takeaways for GBP/USD and USD/CAD Analysis Today

• The British Pound is eyeing more gains above the 1.3130 resistance.
• There is a connecting bullish trend line forming with support near 1.3100 on the hourly chart of GBP/USD at FXOpen.
• USD/CAD started a fresh decline after it failed to clear the 1.3720 resistance.
•  Recently, there was a break above a short-term bearish trend line with resistance at 1.3585 on the hourly chart at FXOpen.

GBP/USD Technical Analysis

On the hourly chart of GBP/USD at FXOpen, the pair formed a base above the 1.2880 level. The British Pound started a steady increase above the 1.2920 resistance zone against the US Dollar.

The pair gained strength above the 1.3000 level. The bulls even pushed the pair above the 1.3050 level and the 50-hour simple moving average. The pair tested the 1.3130 zone and is currently consolidating gains.

There was a minor decline below the 1.3100 level. The pair dipped below the 23.6% Fib retracement level of the upward move from the 1.3010 swing low to the 1.3128 high.

However, the bulls remained active near the 1.3070 level. There is also a connecting bullish trend line forming with support near 1.3100. If there is another decline, the pair could find support near the 1.3070 level.

The first major support sits at the 76.4% Fib retracement level of the upward move from the 1.3010 swing low to the 1.3128 high at 1.3050. The next major support is 1.3000.

If there is a break below 1.3000, the pair could extend the decline. The next key support is near the 1.2880 level. Any more losses might call for a test of the 1.2650 support.

Conversely, the bulls might aim for more gains. The RSI moved above the 60 level on the GBP/USD chart and the pair is now approaching a major hurdle at 1.3130. An upside break above the 1.3130 zone could send the pair toward 1.3200. Any more gains might open the doors for a test of 1.3250.

USD/CAD Technical Analysis

On the hourly chart of USD/CAD at FXOpen, the pair climbed toward the 1.3700 resistance zone before the bears appeared. The US Dollar formed a swing high near 1.3685 and recently declined below the 1.3640 support against the Canadian Dollar.

There was also a close below the 50-hour simple moving average and 1.3620. The bulls are now active near the 1.3570 level. Recently, the pair corrected some losses and climbed above the 1.3600 zone.

There was a break above a short-term bearish trend line with resistance at 1.3585. The pair even surpassed the 23.6% Fib retracement level of the downward move from the 1.3685 swing high to the 1.3571 low.

If there is a fresh increase, the pair could face resistance near the 1.3620 level. The next key resistance on the USD/CAD chart is near the 61.8% Fib retracement level of the downward move from the 1.3685 swing high to the 1.3571 low is 1.3640.

If there is an upside break above 1.3640, the pair could rise toward the 1.3685 resistance. The next major resistance is near the 1.3710 level, above which it could rise steadily toward the 1.3800 resistance zone.

Immediate support is near the 1.3570 level. The first major support is near 1.3550. A close below the 1.3550 level might trigger a strong decline. In the stated case, USD/CAD might test 1.3500. Any more losses may possibly open the doors for a drop toward the 1.3450 support.

Read analytical USD/CAD price forecasts for 2024 and beyond.

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• USDCAD repeatedly tests the 200-day SMA
• Momentum oscillators are mixed

USDCAD has been battling with the 1.3600 round number and the 200-day simple moving average (SMA) over the last couple of days. A successful break beneath these critical levels could open the way for a downside retracement in the medium-term.

The technical oscillators are showing some contradictory signs. The stochastic is heading upwards after the bullish crossover within the %K and %D lines in the oversold area; however, the RSI is sloping down near the 30 level.

Steeper decreases could drive the bears to the 1.3480 support ahead of the 1.3450 barricade and 1.3420, taken from the lows between March and April.

A potential rebound off 1.3600 may increase optimism to traders increase optimism amongst traders, encouraging them to remain in a neutral-to-bullish mode, hitting the 50- and 20-day SMAs at 1.3710 and 1.3730, respectively. Moving up, the 1.3790 resistance may again act as a turning point.

All in all, USDCAD is hovering near key levels, and the next few sessions could clear up the market's next direction.

• GBPJPY attempts to recover from recent 8-month low
• But the rebound falters after testing 200-day SMA
• RSI and MACD remain tilted to the bearish side

GBPJPY experienced a vast selloff in July, dropping from a 16-year peak of 208.10 to as low as 180.07 on August 5, which is also an eight-month low. Since then, the pair has been in a recovery mode, but its rebound seems to have paused for now at the 200-day simple moving average (SMA).

Should the bears attempt to erase the latest uptick, the April support of 190.00 could prove to be the first obstacle for them to overcome. Further declines may then cease at the recent support of 188.22 ahead of the February low of 185.22. Failing to halt there, the price may descend towards the eight-month low of 180.07.

Alternatively, if the rebound resumes, initial resistance could be found at the recent rejection region of 192.01, which overlaps with the 200-day SMA. A break above that zone could open the door for the March peak of 193.52. Conquering this barricade, the bulls might attack the June support of 197.18, which could serve as resistance in the future.

In brief, GBPJPY has been attempting to erase its recent slump, but its efforts have met strong resistance at the 200-day SMA. Hence, a break above that crucial hurdle is needed for the bulls to regain confidence for a full-scale recovery.

Short Term Elliott Wave in Silver suggests that rally to 5.20.2024 high at 32.51 ended wave ((3)). Pullback in wave ((4)) ended at 26.4 as the 1 hour chart below shows. The metal has turned higher in wave ((5)), but it still needs to break above wave ((3)) at 32.51 to rule out a bigger double correction. Up from wave ((4)), wave (i) ended at 27.74 and wave (ii) dips ended at 27.2. Wave (iii) higher ended at 28, pullback in wave (iv) ended at 27.51. Final leg wave (v) ended at 28.04 which completed wave ((i)) in higher degree.

Pullback in wave ((ii)) ended at 27.16 with internal subdivision as a zigzag structure. Down from wave ((i)), wave (a) ended at 27.43 and wave (b) ended at 28.03. Wave (c) lower ended at 27.16 which completed wave ((ii)). The metal then resumed higher in wave ((iii)). Up from wave ((ii)), wave (i) ended at 28.43 and wave (ii) pullback ended at 27.74. The metal extended higher in wave (iii) towards 29.49 and dips in wave (iv) ended at 29.18. Final leg wave (v) ended at 29.96 which completed wave ((iii)) in higher degree.

Pullback in wave ((iv)) unfolded as a double three Elliott Wave structure. Down from wave ((iii)), wave (w) ended at 29.19 and wave (x) ended at 29.73. Wave (y) lower ended at 28.77 which completed wave ((iv)). Near term, as far as pivot at 26.4 low stays intact, expect pullback to find support in 3, 7, or 11 swing for further upside.

Silver (XAGUSD) 60 Minutes Elliott Wave Chart

XAGUSD Elliott Wave Video

https://www.youtube.com/watch?v=2fAg11L1h9Y

Markets

Yesterday’s EMU data releases cement the case for a second 25 bps rate cut by the ECB when they meet next on September 12. PMI’s picked up because of the 2024 Paris Olympics (French services), but that was only the tip of the iceberg. The manufacturing sector remains mired in recession. New orders fell on an aggregate level and input price pressure (unlike output prices) is waning. The latter was also confirmed by the central bank’s Q2 wage data which showed negotiated pay rising by 3.6% from a year ago in Q2 (from 4.7% in Q1 and the slowest pace since Q4 2022). Minutes of the July ECB meeting confirmed that the central bank would re-evaluate things in September. The figures had little market impact given that a 25 bps September ECB rate cut was already discounted.

Markets dynamics could be at a short term tipping point. It was actually already visible in long term bonds on Wednesday following the BLS payrolls revision and the release of soft FOMC Minutes. They still managed to pull short term US bond yields and the dollar lower, but longer term bond yields hit a floor/support levels. Short term Treasuries succumbed yesterday with the 2-yr yield adding 6 bps. The dollar got some breathing space (EUR/USD 1.1112) while US stock markets corrected up to 1.5% after their astonishing comeback rally the past fortnight. It points to some cautiousness going into this week’s main event, Fed Chair Powell’s speech at the Kansas City Fed’s Jackson Hole symposium. We expect Powell to give the final go ahead for a September rate cut, but simultaneously stress the need for gradualism. It’s been the buzz word throughout Fed speeches this month. It suggests a traditional 25 bps start to the cutting cycle contrary to the 50 bps some are hoping/betting on. It might mean as well that the updated dot plot won’t be as aggressive for this year and especially next as markets are currently positioned for. Apart from straightforward clues on the timing, pace and size of rate cuts, it will be interesting to learn how much additional weight the Fed chair gives to the maximum employment part of the mandate compared to the price stability. Such “gradualism” scenario could trigger a short term exhaustion move in USD and US rates or even an outright buy-the-rumour, sell-the-fact reaction going into the weekend. We’re not enticed to call it the final bottom yet as easing bets could rapidly return early September in case of disappointing ISM’s and/or payrolls. Apart from Powell’s speech, we keep an eye on first public comments by BoE governor Bailey since the August 1 rate cut. Sterling yesterday outperformed on stronger PMI data with EUR/GBP returning below 0.85 for the first time since the early August market meltdown.

News & Views

Japanese national inflation data were in line with expectations, but showed a slightly mixed picture for monetary policy. Inflation excluding fresh food rose 2.7% in July from 2.6% in June. Overall headline inflation printed unchanged at 2.8%, well above the BOJ’s 2% target. However, the ‘core-core measure’ excluding fresh food and energy dropped to 1.9% from 2.2%. The indicator strips out a sharp rise in utility bills as the government phased out support to mitigate energy bills. Services price inflation also eased from 1.7% to 1.4%. Both factors might be a reason for the BoJ to take a rather gradual approach as it started the process of policy normalization. The recent rise in the yen also might mitigate imported inflation going forward. In a hearing before Parliament this morning, BoJ Governor Ueda reiterated that the BoJ intends to further raise the interest rates if inflation stays on course to sustainably hold the 2% target. At the same time, the BoJ will be vigilant to market developments/volatility for the time being. The yen strengthens slightly this morning (USD/JPY 145.6).

UK consumer confidence as measured by GfK was reported unchanged at -13, the highest level in almost three years. A slight further improvement to -12 was expected. UK consumers become more optimistic on their personal finances (last 12 months and expected next 12 months). They also turned more positive on the climate for major purchases (-13 from -16). Savings intentions rose (33 from 27) but consumers turned slightly more cautious on the overall economic situation (both past and future) . After a stronger than expected UK PMI yesterday (composite 53.4 from 52.8) sterling yesterday strengthened below the EUR/GBP 0.85 support.

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 continuing to move better in to balance. Money 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%.

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 references.

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. Risk-off proved a more important driver of GBP recently, triggering a brief return from 0.84 towards 0.86.