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The British pound is showing limited movement on Wednesday, after a four-day rally in which it surged 1.7% against the retreating US dollar. GBP/USD is trading at 1.3047 in the North American session at the time of writing, up 0.1% on the day.

All eyes on Jerome Powell

The annual meeting at Jackson Hole has added significance this year as the Federal Reserve is expected to deliver a milestone rate cut in September. Fed Chair Powell will address the gathering on Friday and investors will be looking for clues about the anticipated September move.

The Fed last cut rates in March 2020, early in the Covid pandemic. The Fed has maintained its benchmark rate at 5.25% -5.5% for over a year and all signals point to an initial rate cut at the September 18 meeting.

The most likely scenario is a quarter-point cut but earlier this month the financial markets were routed and expectations for a large half-point cut soared. Now that the markets have recovered, a quarter-point cut is once again the most likely scenario.

With inflation under control, the Fed is keeping a close eye on the US labor market, which may be cooling too fast for the Fed. The July employment report showed a sharp drop in nonfarm payrolls and a rise in unemployment and the financial markets went into panic mode. Powell is sure to touch upon employment and inflation in his speech on Friday and his take on the economic outlook could move the US dollar.

The UK will release the July PMI report on Thursday. The manufacturing and services sectors are both showing growth, as the UK economic picture has improved. The services PMI is expected to inch upwards to 52.9, up from 52.8 in June. Manufacturing has been accelerated for three straight months but the PMI is projected to remain at 52.1. We’ll hear from Bank of England Governor Bailey on Friday at the Jackson Hole symposium.

GBP/USD Technical

• GBP/USD tested support at 1.3020 earlier. Below, there is support at 1.2989
• 1.3067 and 1.3098 are the next resistance lines.

Daily Pivots: (S1) 144.53; (P) 145.94; (R1) 146.67; More...

Intraday bias in USD/JPY remains mildly on the downside for the moment. Rebound from 141.67 could have completed at 149.35 after rejection by 38.2% retracement of 161.94 to 141.67 at 149.41. Deeper fall would be seen to retest 141.67 low. Firm break there will resume the whole fall from 161.94 to 139.26 fibonacci level next. For now, risk will stay on the downside as long as 149.35 resistance holds, in case of recovery.

In the bigger picture, fall from 161.94 medium term 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 149.63) holds. Nevertheless, firm break of 55 W EMA will suggest that the range for medium term corrective pattern is already set.

Daily Pivots: (S1) 0.8507; (P) 0.8572; (R1) 0.8605; More…..

USD/CHF's fall from 0.8747 is still in progress and intraday bias remains on the downside for retesting 0.8431. Firm break there will resume whole decline from 0.9223 towards 0.8332. On the upside, above 0.8616 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 0.8747 resistance holds, in case of recovery.

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).

Daily Pivots: (S1) 1.2989; (P) 1.3020; (R1) 1.3067; More...

Intraday bias in GBP/USD remains on the upside with focus on 1.3043 resistance. Decisive break there will resume whole rally from 1.2998 to 61.8% projection of 1.2298 to 1.3043 from 1.2664 at 1.3124, which is close to 1.3141 high. On the downside, below 1.2973 minor support will turn intraday bias neutral first. But further rally is in favor as long as 55 4H EMA (now at 1.2899) holds, in case of retreat.

In the bigger picture, corrective pattern from 1.3141 might have completed at 1.2298 already. Rise from there could be resuming the larger up trend from 1.0351 (2022 low). Decisive break of 1.3141 will target 38.2% projection of 1.0351 to 1.3141 from 1.2298 at 1.3364 next. However, break of 1.2664 support will delay this bullish case once again and extend the corrective pattern from 1.3141.

Daily Pivots: (S1) 1.1090; (P) 1.1112; (R1) 1.1151; More....

Intraday bias in EUR/USD remains on the upside for the moment. Firm break of 1.1138 resistance will target 161.8% projection of 1.0665 to 1.0947 from 1.0776 at 1.1232. On the downside, below 1.1071 minor support will turn intraday bias neutral and bring consolidations first. But outlook will now remain bullish as long as 1.0948 support holds.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's could still extend. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). However, break of 1.0776 support will extend the correction with another falling leg back towards 1.0447 support.

The forex markets are experiencing a lull today, with little movement in the absence of significant economic releases during European and early US sessions. The much-discussed non-farm payroll revision and the release of FOMC minutes later today are unlikely to spark significant volatility. Instead, markets are likely to remain subdued until tomorrow’s PMI data from major economies, which could prompt some brief moves. However, the primary event that traders are eagerly anticipating is Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday.

So far this week, Dollar remains the weakest performer, showing little sign of a sustainable recovery. Canadian Dollar is also under pressure, particularly after yesterday’s Canadian CPI data reinforced expectations for a rate cut by BoC in September. British Pound is the third worst-performing currency, though it may see a temporary boost if tomorrow’s UK PMI data surprises to the upside.

On the other hand, New Zealand Dollar has emerged as the strongest currency, continuing to recover from last week’s selloff following RBNZ’s rate cut. Swiss Franc and Japanese Yen are also performing well, likely benefiting from expectations of narrowing interest rate differentials with other major economies. Euro and Australian Dollar are trading in middle positions.

Technically, EUR/GBP's recovery from 0.8507 appears to be losing momentum after failing to sustain above 55 4H EMA. Deeper fall from current level will put near term bias back to the downside. Further break of 0.8507 will resume the pullback from 0.8624 to 61.8% retracement of 0.8382 to 0.8624 at 0.8474. in the near term.

In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.63%. CAC is up 0.56%. UK 10-year yield is down -0.0081 at 3.911. Germany 10-year yield is down -0.0072 at 2.212. Earlier in Asia, Nikkei fell -0.29%. Hong Kong HSI fell -0.69%. China Shanghai SSE fell -0.35%. Singapore Strait Times rose 0.10%. Japan 10-year JGB yield fell -0.0256 to 0.866.

ECB's Panetta: End of monetary restriction has already begun

ECB Governing Council member Fabio Panetta indicated today that the central has entered entering a phase of monetary easing following the rate cut in June. Speaking at an event, Panetta remarked, "The end of monetary restriction has already begun," adding that discussions are ongoing regarding the ECB's next steps in September.

While Panetta refrained from sharing his specific views on the upcoming decision, he suggested that ECB is likely to continue easing monetary conditions.

"I believe it is reasonable to expect that from now on, we will move towards a phase of easing of monetary conditions," he noted, pointing to falling inflation and a slowing global economy as key factors driving this shift.

Japan's July exports value reaches record amid yen weakness

Japan's exports surged 10.3% yoy in July, reaching JPY 9,619B—a record high for the month. The growth of export value was was largely driven by the weaker yen, which marked a -12.3% depreciation from a year ago. On volume basis, exports actually declined by -5.2% yoy.

Regionally, Japan's exports to the US grew by 7.3%, a slight deceleration from the previous month. Exports to China remained steady with a 7.2% increase, while shipments to the EU saw a decline of -5.3%.

On the import side, Japan recorded a 16.6% yoy increase, bringing the total to JPY 10,241B—the largest ever for July. As a result, the trade balance showed a deficit of JPY -622 B.

In seasonally adjusted terms, exports rose 1.7% mom to JPY 9,137B, while imports increased by 0.9% mom to JPY 9,893B, leading to a seasonally adjusted trade deficit of JPY -755B.

Australia's Westpac leading index points to modest growth, but sustainability in doubt

Australia's six-month annualized growth rate in the Westpac–Melbourne Institute Leading Index inched up to +0.06%, signaling a slight improvement in economic momentum.

However, Westpac cautioned that this positive signal may not be sustained due to "sharp falls in commodity prices." The detailed report highlights that the economy is facing "significant cross-currents," with economic activity improving but expected to remain "below trend into early 2025."

As RBA gears up for its next meeting on September 23–24, Westpac emphasized the importance of the upcoming June quarter national accounts, set to be released on September 4. These figures are expected to shed light on the strength of domestic demand and could ease some of the RBA's concerns regarding productivity growth.

However, Westpac noted that there is little chance of a policy shift at the September meeting, as the next quarterly CPI update isn't due until October 30.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1090; (P) 1.1112; (R1) 1.1151; More....

Intraday bias in EUR/USD remains on the upside for the moment. Firm break of 1.1138 resistance will target 161.8% projection of 1.0665 to 1.0947 from 1.0776 at 1.1232. On the downside, below 1.1071 minor support will turn intraday bias neutral and bring consolidations first. But outlook will now remain bullish as long as 1.0948 support holds.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's could still extend. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). However, break of 1.0776 support will extend the correction with another falling leg back towards 1.0447 support.

Economic Indicators Update

ECB Governing Council member Fabio Panetta indicated today that the central has entered entering a phase of monetary easing following the rate cut in June. Speaking at an event, Panetta remarked, "The end of monetary restriction has already begun," adding that discussions are ongoing regarding the ECB's next steps in September.

While Panetta refrained from sharing his specific views on the upcoming decision, he suggested that ECB is likely to continue easing monetary conditions.

"I believe it is reasonable to expect that from now on, we will move towards a phase of easing of monetary conditions," he noted, pointing to falling inflation and a slowing global economy as key factors driving this shift.

• Gold pulls below record high; might give up more ground
• Market trend stays positive as long as price holds above 2,463

Gold lost momentum after unlocking an all-time high of 2,531 on Tuesday near the rising constraining line drawn from July’s low, but it maintained its resilience above the 2,500 psychological number by the end of the day.

The technical picture in the four-hour chart has started to show some cracks. The precious metal appears to have formed a bearish engulfing candlestick pattern at the peak of its upward movement, indicating a potential downward shift in the price. The indicators are beginning to trend downward, further validating the negative scenario.

Nevertheless, the price is still in a bullish channel, so any possible drop can be seen as part of the upward pattern unless the bears break below 2,463. Meanwhile, the market could find support from the 20-period simple moving average at 2,500 and the 23.6% Fibonacci retracement of the July-August rally at 2,489.

The 50% Fibonacci level of 2,442 could ease selling forces below the channel ahead of the 61.8% Fibonacci levels of 2,420, while a step below the ascending trendline at 2,400, which has been buffering downside movements since the end of June, could send stronger bearish signals if breached.

If the bulls stay active, their goal will be to pierce through the border between 2,537 and 2,555, with potential to continue towards the next barrier at 2,600-2,620. Slightly higher, the 2,650 region could be another hurdle.

In short, gold could become more susceptible to downward risks in the upcoming sessions. However, market sentiment would only be dampened if the price falls below 2,463, whilst a rebound above 2,537-2,555 could increase buying interest.

• EURUSD extends rally, hits 1.1130
• But oscillators point to fading momentum
• A setback may be possible before the next leg north

EURUSD has been in a steady rally since August 15, when it hit support at 1.0950, and it is currently testing the key resistance zone of 1.1130, a zone that stopped the bulls from heading further north back in December, as well as back in July, 2023. Overall, the pair is trading above a short-term uptrend line drawn from the low of August 2, and well above the upper bound of a prior sideways range, at around 1.0900.

Although the technical picture on the 4-hour chart appears to be overly bullish, the short-term oscillators are suggesting that the upside momentum is fading, which means that a corrective setback may be in the works before the next leg north. The RSI has peaked within its above-70 zone, while the MACD, although extremely positive, has turned south as well and looks ready to fall below its trigger line.

A retreat may invite buyers from near the aforementioned uptrend line and the 1.1030. If this is the case, another bullish wave could surpass the 1.1130 high and aim for the 1.1240 area, marked by the high of March 1, 2022.

On the downside, a dip below 1.1030 could trigger a larger correction, as it would also take the pair below the short-term uptrend line. The bears may feel confident in targeting the low of August 15, at 1.0950, or the upper bound of the sideways range that contained most of the price action since the beginning of the year. That bound stands at 1.0900.

To recap, EURUSD remains in a steep short-term uptrend, but the short-term oscillators suggest that a corrective slide may be on the cards before the next impulsive wave.

The euro is calm on Wednesday after an impressive 3-day rally which saw EUR/USD jump 1.4%. Will the upswing continue? In the European session, EUR/USD is trading at 1.1220 at the time of writing, down 0.08% on the day.

ECB likely to lower rates in September despite stubborn inflation

The European Central Bank took the plunge and lowered interest rates in June, for the first time in four since 2019. This brought down the key rate to 3.75%, down from a record 4%. At the meeting, the ECB also revised upwards its inflation forecast for 2024 from 2.3% to 2.5%.

The ECB remains concerned about sticky inflation which is above the 2% target. The fact that inflation is above target won’t stop the central bank from further cuts since rate moves tend to take time until they filter through the economy. The ECB wants to continue cutting rates in order to boost a flagging eurozone economy but sticky inflation and strong wage growth remain are making it more difficult for the ECB to lower rates. Still, the markets have priced in a rate cut at the September 12 meeting at around 90%.

Next up: Jackson Hole Symposium

The annual meeting at Jackson Hole could be dramatic. Federal Reserve Chair Powell will address the gathering on Friday, ahead of a widely expected Fed rate cut next month. It is practically a given that the Fed will loosen policy, but by how much?

The most likely scenario is a quarter-point cut, but earlier this month, the financial markets were routed and expectations for a large half-point cut soared. With inflation under control, the Fed is keeping a close eye on the US labor market, and Powell’s take on the economic outlook could move the markets.
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EUR/USD Technical

• EUR/USD is testing support at 1.1112. Below, there is support at 1.1090
• 1.1151 and 1.1173 are the next resistance lines