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Daily Pivots: (S1) 0.6576; (P) 0.6606; (R1) 0.6640; More...

Intraday bias in AUD/USD stays neutral as consolidations continue below 0.6642 temporary top. Further rally is expected as long as 0.6506 support holds. Above 0.6442 will extend the rebound from 0.6348 to 0.6798 resistance next.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with fall from 0.6798 as another falling leg. Deeper fall could be seen to the lower side of the range between 0.6169/6361. But strong support should be seen there to contain downside. Meanwhile, break of 0.6798 will target upper side of the range at 0.7156.

Daily Pivots: (S1) 1.3704; (P) 1.3722; (R1) 1.3747; More...

Intraday bias in USD/CAD is turned neutral first with current recovery. Further decline is mildly in favor as long as 1.3764 minor resistance holds. Below 1.3688 will resume the fall from 1.3946 to 1.3588 key support. Nevertheless, break of 1.3764 will turn bias back to the upside for rebound towards 1.3946 high.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern, that might have completed at 1.3176 (2023 low) already. Firm break of 1.3976 will confirm resumption of whole up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149. This will be the favored case as long as 1.3588 support holds, in case of pullback.

Daily Pivots: (S1) 0.8517; (P) 0.8554; (R1) 0.8572; More....

EUR/GBP's corrective fall from 0.8624 resumed by breaking through 0.8530. Intraday bias is back on the downside for 100% projection of 0.8624 to 0.8530 from 0.8591 at 0.8497, which is close to 55 D EMA (now at 0.8494). Strong support should be seen there to bring rebound. But for now, risk will stay on the downside as long as 0.8591 resistance holds.

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) 1.6523; (P) 1.6635; (R1) 1.6710; More...

No change in EUR/AUD's outlook as range trading continues. Intraday bias remains neutral and further rise is in favor with 1.6474 support intact. On the upside, above 1.6798 minor resistance will bring retest of 1.7180 resistance first. Firm break there will resume larger up trend to 1.7715 fibonacci projection level next. However, firm break of 1.6474 will dampen the bullish view and bring deeper pullback towards 1.5996 support.

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.

Daily Pivots: (S1) 0.9537; (P) 0.9559; (R1) 0.9595; More....

Intraday bias in EUR/CHF remains on the upside as rise form 0.9209 short term bottom is extending. Further rally should be seen to 55 D EMA (now at 0.9592). Sustained break there will target 0.9772 resistance next. On the downside, below 0.9496 minor support will turn intraday bias neutral first.

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) 162.52; (P) 163.21; (R1) 164.47; More...

Intraday bias in EUR/JPY remains on the upside for the moment. Fall from 175.41 should have completed at 154.40 already. Rise from there is seen as the second leg of the corrective pattern from 175.41. Further rally is expected to 61.8% retracement of 175.41 to 154.40 at 167.38, and possibly above. On the downside, below 160.57 minor support will 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.

The market mood got a further boost yesterday after the latest data release from he US hinted that the economy is not doing that bad, after all. The retail sales rose 1% in July, more than expected by analysts, the initial jobless claims rose less than expected last week while NY Empire State and Philadelphia Fed manufacturing indices were mixed and didn’t attract much attention. Walmart, on the other hand, gave support to the positive vibes as the retailer did better than the estimates in Q2 and raised its FY revenue forecast on expectation that wealthier households will join the low-income segment in chasing good deals at its stores. The combination of encouraging economic data and robust Walmart earnings gave hope to investors that the US economy won’t collapse, revived the hope of seeing the US economy soft-land, and eased the jumbo rate-hike bets for the Federal Reserve’s (Fed) September meeting. As such, the US 2-year yield rebounded past the 4% mark and the 10-year yield shortly rose to 3.95% but eased back to around 3.90%. The S&P 500 jumped 1.61%, Nasdaq 100 rallied almost 2.50% as did the Russell 2000 index. The US dollar index bounced higher from an almost ytd low and US crude regained the 200-DMA level, near $78pb level, with however little appetite due to the sluggish Chinese growth. The oil refineries’ profits in China fell by over 90% in the first half of the year compared to the same time last year. And even the tense geopolitical situation of the Middle East and the possibility of another escalation between Iran and Israel don’t cheer up oil investors enough to bet for a rise above the $80pb level.

Easing inflation worries despite robust sales data

Even though yesterday’s retail sales data came in strong, and as another proof that the US consumers continue to spend despite high rates, high prices and high credit card debt, there are signs that hint that inflationary pressures are easing. And this brings me back to Walmart. If Walmart thinks that its sales will grow more than they previously forecasted this year, its because the wealthier segments of the market are also looking for deals to counter inflation. Walmart said yesterday that it cut the prices of 7200 products last quarter to maintain its ‘competitive price gaps’ with its rivals. And other retailers like Target, Walgreens, Aldi and Ikea also said to have done the same: cut prices to bring the inflation-squeezed customers back to stores and back to spending. Reportedly, the American cardealers also increased their discounts to the highest levels in three years and restaurants are unfolding meal deals to offer more affordable solutions to boost their customers’ appetite in hope that once they’re in, they will want to spend on non-deal items as well.

The news point that the widespread frustration with inflation is putting downward pressure on prices and could lead to more relaxed monetary policies. And if the monetary easing happens without a severe economic slowdown, Mr. Powell and investors will get the soft-landing that they were dreaming of, which could eventually keep the stock markets in a good shape, although the rotation from the technology stocks to non-technology sectors will likely tame the upside potential in major indices as the past weeks’ selloffs came as a warning that the market is oversaturated, the valuations are high and investors naturally are pickier to jump in at historically high levels without the promise of giant gains. Still, note that the latest earnings season somehow eased worries that the AI investments may not lead to the kind of profits that the companies and investors were looking for.

Too sick to play

Alibaba posted a meagre 4% revenue gain and a 27% plunge in Q2 profit. The cloud business showed a disenchanting 5.9% growth – compared to around 30% growth posted by the cloud segments of the US peers. Alibaba shares were flat in New York and gained 4% in Hong Kong, probably as the share buyback program helped countering the gloomy quarterly results. Its competitor JD.com jumped more than 4%, on the other hand, after its earnings beat expectations. But sales, there, grew just 1.2% in Q2. The numbers look too weak to take the China risks.

More broadly, things are not going well in China as you may have noticed. The fiscal and monetary stimulus measures can’t fuel growth. Investments grew slower than expected in July, the production disappointed while the property crisis continues in full swing: the prices of homes continue to fall. As such, not only the Chinese CSI 300 doesn’t benefit from a rebound in the developed markets, but the country’s biggest steelmaker Baowu Steel Group warned of the worst downturn since 2015. No wonder the iron ore prices continue to melt and Wisdomtree’s industrial metals ETF has given away almost all gains from May to July rebound. Copper futures also see resistance near the 200-DMA. The reflation trade on metals is not appetizing when China is too sick to play.

UK retail sales volumes rose by 0.5% mom in July, slightly below market expectations of 0.6% increase. On a broader scale, sales volumes in the three months leading up to July saw a 1.1% rise compared to the previous three months ending in April.

Breaking down the data, non-food stores—which include department, clothing, household, and other non-food stores—saw a notable 1.4% increase in sales volumes. Non-store retail sales, which encompass online and other forms of retail not conducted in physical stores, rose by 0.7%, driven primarily by a rebound in retailers other than mail order services. However, the overall growth was tempered by a -1.9% decline in automotive fuel sales volumes.

Full UK retail sales release here.

Daily Pivots: (S1) 189.77; (P) 190.89; (R1) 193.02; More...

Intraday bias in GBP/JPY remains on the upside at this point. Fall from 208.09 should have completed at 180.00 already. Rebound from there is seen as the second leg of the corrective pattern from 208.09. Further rally should be seen to 61.8% retracement of 208.09 to 180.00 at 197.35, and possibly above. On the downside, however, break of 187.84 minor support will 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.

Yen, Swiss Franc, and to a lesser extent, Dollar are trailing at the bottom of the weekly currency performance chart. Strong risk-on sentiment has swept through the US markets, and the positive momentum continued in Asia. This shift in sentiment was ignited by better-than-expected US retail sales data overnight, which has significantly reduced fears of a US recession, lowering the likelihood that Fed will feel compelled to deliver an aggressive rate cut at its upcoming September meeting.

In contrast, British Pound has emerged as the strongest performer of the week. Recent economic data has reinforced BoE's cautious stance, suggesting that a rate cut at the next meeting is far from certain. Australian Dollar is following closely behind, supported by RBA's consistent messaging that a near-term rate cut is premature. Euro also shows strength, ranking as the third strongest currency this week, while Canadian Dollar and New Zealand Dollar hold the middle ground.

Technically, S&P 500's strong rally this week confirms that pull back from 5669.67 has completed at 5119.26 already. But beware that there might be strong resistance from 5669.67 ahead to limit upside. Consolidation from there could still extend with one more down leg, and through 55 D EMA. But in this bearish case, strong support should be seen from 38.2% retracement of 41.03.78 to 5669.67 at 5071.50 to contain downside to complete the corrective pattern.

In Asia, at the time of writing, Nikkei is up 3.00%. Hong Kong HSI is up 1.77%. China Shanghai SSE is up 0.10%. Singapore Strait Times is up 1.07%. Japan 10-year JGB yield is up 0.0482 at 0.886. Overnight, DOW rose 1.39%. S&P 500 rose 1.61%. NASDAQ rose 2.34%. 10-year yield rose 0.0106 to 3.926.

RBA's Bullock dismisses near-term rate cut expectations

In her remarks to the House of Representatives' economics committee, RBA Governor Michele Bullock emphasized the careful balancing act in managing inflation while minimizing harm to the labor market. Bullock reiterated that the Board believes current monetary policy is "sufficiently restrictive" to bring inflation down over a reasonable timeframe without causing undue damage to employment.

Despite financial markets anticipating a rate cut by the end of the year, Bullock was clear in her message that it is "premature to be thinking about rate cuts" at this stage. She pointed out that inflation remains too high and, in underlying terms, is not expected to fall back within the target range until the end of next year.

While acknowledging that economic circumstances could change, Bullock firmly stated that, based on the current outlook, the Board "does not expect that it will be in a position to cut rates in the near term."

RBNZ confident in inflation outlook, emphasizes measured approach to further rate cuts

In a speech today, RBNZ Governor Adrian Orr expressed a "very strong level of confidence" that forward indicators are pointing to a return to low and stable inflation, within the target range of 1% to 3%. Orr emphasized the importance of keeping inflation expectations and pricing intentions "anchored" as the central bank continues to monitor economic conditions.

Assistant Governor Karen Silk, speaking in a separate interview, noted that RBNZ is observing a continued decline in price and wage-setting behaviors. Silk mentioned that if this adjustment occurs more rapidly than anticipated, it could open the door for the central bank to consider a different, potentially faster path for rate cuts.

Earlier this week, RBNZ lowered the OCR by 25 bps to 5.25% and projected that it would fall below 4% by the end of 2025. Silk reiterated that RBNZ is taking a "measured approach" to policy loosening and remains committed to a data-dependent strategy.

New Zealand BNZ manufacturing rises to 44, 17th month of contraction

New Zealand's manufacturing sector showed a slight improvement in July, with the BusinessNZ Performance of Manufacturing Index rising from 41.2 to 44.0. Despite this rebound, the sector remains deeply entrenched in contraction, marking its 17th consecutive month below the expansion threshold. The current level is still significantly below the long-term average of 52.6.

Breaking down the data, production saw an uptick, increasing from 35.7 to 43.4, while new orders also rose, moving from 39.0 to 42.5. However, employment in the sector continued to decline, slipping from 44.0 to 43.1. Finished stocks decreased from 47.7 to 46.5, and deliveries fell slightly from 44.8 to 44.3.

Despite the relative improvement in activity, the proportion of negative comments from respondents remained high, though it eased slightly to 71.1% in July from 76.3% in June. Businesses cited ongoing issues such as a lack of orders, customers, and sales, which have been persistent concerns in recent months.

BNZ's Senior Economist Doug Steel commented that "manufacturing activity will turn when the broader economy turns." He added that easing monetary conditions, including a lower OCR, could help stimulate a general pick-up in sales, but emphasized that this recovery would take time.

Looking ahead

UK retail sales and Eurozone trade balance are the main features in European session. Later in the day, Canada will release manufacturing sales. US will publish building permits and housing starts, and U of Michigan consumer sentiment.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 189.77; (P) 190.89; (R1) 193.02; More...

Intraday bias in GBP/JPY remains on the upside at this point. Fall from 208.09 should have completed at 180.00 already. Rebound from there is seen as the second leg of the corrective pattern from 208.09. Further rally should be seen to 61.8% retracement of 208.09 to 180.00 at 197.35, and possibly above. On the downside, however, break of 187.84 minor support will 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.

Economic Indicators Update