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In focus today

In the US, minutes of the Fed's July meeting will be published in the evening. While the focus will naturally be on any clues regarding future rate cuts, the views are likely at least somewhat outdated given that the July jobs report was published only after the meeting. Furthermore, the US Bureau of Labor Statistics will publish revisions to the nonfarm payrolls and there is a very wide estimate for the revisions.

Economic and market news

What happened yesterday

In Sweden, the Riksbank cut policy rate by 25 bp as anticipated by the market. The Riksbank message of "two to three" more rate cuts for 2024 was however a tad on the dovish side to our expectations. In the statement, the bar to change this outlook is also seemingly high as they seem confident that upside risks to inflation have "declined significantly". We adjust our call by adding a 25bp rate cut in September, meaning that we expect 25bp cuts at the three remaining meetings for 2024. For 2025, we expect three cuts during the first half of the year, reaching an endpoint of 2.00% by summer (previously 2.00% by Q4-25).

In the US, Fed's Bowman (voting member) spoke about monetary policy. She sounded rather hawkish, as she warned against overreacting to any single data points, while she remains cautious about making any shifts in rates, as she sees continued upside risks for inflation. By this statement Bowman clearly positions herself as one of the most hawkish voices in the FOMC now. Our expectation is still that we will see a 25bp rate cut at the September meeting.

In the euro area, the final HICP data from July reveals that domestic inflation, measured by the ECB's 'LIMI' indicator, dropped slightly to 4.3% y/y in July from 4.4% in June. The persistently high inflation is crucial to the ECB's policy decisions and has been consistently highlighted in recent monetary statements. With decent demand in services, low unemployment, and high wage growth, domestic inflation is expected to remain strong. Consequently, it is unlikely to dip to 2% over the next year, even as overall HICP may hit that mark later this quarter. Given its importance in ECB policy, we expect continued restrictive measures, with the next policy rate cut in December, bypassing the September meeting, followed by three cuts next year.

In Turkey, The Central Bank of Turkey left the policy rate unchanged at 50% as largely expected. Slowing domestic demand should eventually ease inflationary pressures and the CBRT is expected to kick off the rate cutting cycle later this year. We still think risks are tilted towards higher inflation (and rates) for longer.

In Denmark, GDP grew 0.6% in Q2, mainly because of increased goods export. The Q2 growth was more modest than we expected, however, the Q1 decrease was revised down as well. Danish GDP fluctuates quite a bit now due to production in the pharmaceutical industry causing big movements. We expect growth to continue to spread also outside the pharmaceutical industry, which will help the economy grow for the rest of 2024.

The rebound in Oil prices proved short-lived and prices have slipped towards the low from two weeks ago. Other than reports on the tense geopolitical situation in the Middle East, there has been little news to drive the oil market. We further note that oil prices have failed to find support from the weaker USD. We think the weak sentiment reflects concerns over whether the US economy is slipping into recession and that is unlikely to go away in the near term.

Market movements

Equities: Global equities were lower yesterday, breaking a long streak of gains. There was basically no top-down data to significantly impact the market, so it seems reasonable to attribute the downturn to some investors taking profits after a sustained period of gains.

Notably, the energy sector was the biggest loser yesterday and has been on a downward trend lately, with oil prices declining in five of the last six sessions. Additionally, banks, particularly regional banks in the US, were sold off yesterday. US regional banks lost 2% and continue to be indicative of how investors view the soft-landing and small-cap outlooks. As many people enjoyed vacations in July, it is maybe worth mentioning that July was the peak month for the soft-landing narrative, with US regional banks rising more than 20% during the month. In the US yesterday, Dow was down 0.2%, S&P 500 decreased by 0.2%, Nasdaq dropped by 0.3%, and Russell 2000 fell by 1.2%. The negative sentiment is continuing in Asia this morning with most indices lower. US and European futures are mixed.

FI: Global bond yields declined yesterday, and the US curve steepened ahead of the speech from Fed Chairman Powell at the Jackson Hole conference. Today, we have the minutes from the latest Fed Meeting, which should also confirm that the Federal Reserve is on track to deliver rate cuts. Furthermore, the US Bureau of Labor Statistics will publish revisions to the nonfarm payrolls and there is a very wide estimate for the revisions. A significant downward revision would be supportive for a steeper curve and lower yields.

FX: SEK rallied after the Riksbank delivered the expected 25bp cut and signalled more cuts to come this year. The USD stayed on a weak footing with EUR/USD eclipsing the 1.11 mark.

Key Highlights

• GBP/USD started a fresh increase above the 1.2920 resistance.
• It broke a major bearish trend line with resistance at 1.2765 on the 4-hour chart.
• Gold prices are consolidating gains above the $2,500 resistance.
• EUR/USD surged toward the 1.1120 level and aims for more upsides.

GBP/USD Technical Analysis

The British Pound formed a base above the 1.2750 level and started a decent increase against the US Dollar. GBP/USD cleared 1.2900 to move into a positive zone.

Looking at the 4-hour chart, the pair climbed further above 1.3000 to set a new multi-week high. The pair traded as high as 1.3052 and is currently consolidating gains. It is still above the 1.3000 zone and showing positive signs above the 23.6% Fib retracement of the upward move from the 1.2664 swing low to the 1.3052 high.

Immediate support is near the 1.3000 level. The first major support is near the 1.2960 level. A downside break below the 1.2960 level could set the pace for a larger decline.

The next major support is near the 1.2860 level or the 50% Fib retracement of the upward move from the 1.2664 swing low to the 1.3052 high. Any more losses might send the pair toward the 1.2820 support level.

On the upside, the pair could face resistance near the 1.3050 level. The first key resistance sits near the 1.3120 level. A clear move above the 1.3120 level could set the pace for a move toward the 1.3200 level.

Looking at EUR/USD, the pair rallied above the 1.1000 level, and seems like the pair could continue to move higher toward the 1.1200 level.

Economic Releases

• FOMC Meeting Minutes.

Daily Pivots: (S1) 188.64; (P) 189.95; (R1) 190.68; More...

Intraday bias in GBP/JPY remains neutral as range trading continues inside 187.84/191.99.On the upside, above 191.99 will target 61.8% retracement of 208.09 to 180.00 at 197.35, as the second leg of the corrective pattern from 208.09. On the downside, however, firm break of 187.84 support will argue that rebound from 180.00 has completed, and turn bias back to the downside for retesting 180.00 instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). Current development suggests that the first leg has completed and the range of medium term consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09.

Daily Pivots: (S1) 161.10; (P) 162.14; (R1) 162.75; More....

Intraday bias in EUR/JPY remains neutral and outlook is unchanged. On the upside, break of 163.86 will target 61.8% retracement of 175.41 to 154.40 at 167.38, as the second leg of the corrective pattern from 175.41. On the downside, however, firm break of 160.57 support will suggest that the rebound from 154.40 has completed, and turn bias back to the downside for 154.40 instead.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Current development suggests that the first leg has completed. The range of consolidation should be seen between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high.

Daily Pivots: (S1) 0.8523; (P) 0.8532; (R1) 0.8547; More....

Intraday bias in EUR/GBP remains neutral for the moment. In case of another fall, strong support should be seen from 55 D EMA (now at 0.8498), to complete the correction from 0.8624. Break of 0.8591 resistance will argue that rise from 0.8382 is ready to resume through 0.8624. However, sustained break of 55 D EMA will bring deeper fall to 61.8% retracement of 0.8382 to 0.8624 at 0.8474.

In the bigger picture, while the rebound from 0.8382 is strong, there is no confirmation of trend reversal yet. As long as 0.8643 resistance holds, down trend from 0.9267 could still resume through 0.8382 at a later stage. However, firm break of 0.8643 will indicate that such down trend has completed, and turn outlook bullish for 0.8764 resistance next.

Daily Pivots: (S1) 1.6463; (P) 1.6484; (R1) 1.6517; More...

Focus stays on 1.6474 support in EUR/AUD. Decisive break there will argue that rise from 1.5996 has completed, and dampen the larger bullish view. Intraday bias will be back on the downside for deeper fall towards 1.5996 in this case. Nevertheless, strong rebound from current level, followed by break of 1.6745 resistance, will retain near term bullishness and bring retest of 1.7180 high.

In the bigger picture, corrective fall from 1.7062 medium term top should have completed at 1.5996. Larger up trend from 1.4281 (2022 low) is resuming. Next target is 61.8% projection of 1.4281 to 1.7062 from 1.5996 at 1.7715. This will now remain the favored case as long as 1.6474 support holds. However, decisive break of 1.6474 will argue that EUR/AUD is still engaging in medium term range trading.

Daily Pivots: (S1) 0.9483; (P) 0.9526; (R1) 0.9549; More....

Intraday bias in EUR/CHF remains neutral as consolidations continues below 0.9579. Further rally is expected as long as 0.9448 support holds. Sustained break of 55 D EMA (now at 0.9584) will pave the way back to 0.9972/0.9928 resistance zone. However, decisive break of 0.9448 will suggest rejection by 55 D EMA, and turn bias back to the downside for 0.9209 low.

In the bigger picture, medium term corrective pattern from 0.9407 (2022 low) might have completed with three waves to 0.9928. Decisive break of 0.9252 (2023 low) will confirm long term down trend resumption. Next target will be 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. For now, outlook will stay bearish as long as 0.9928 resistance holds, even in case of strong rebound.

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

EUR/USD's rally is still in progress and intraday bias stays on the upside. 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.

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

Intraday bias in USD/JPY remains on the downside at this point. 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) 1.2989; (P) 1.3020; (R1) 1.3067; More...

Intraday bias in GBP/USD remains on the upside for the moment. Decisive break of 1.3043 resistance 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 1.2889) 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.