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US PPI for final demand rose 0.1% mom in July, below expectation of 0.2% mom. PPI goods rose 0.6% while PPI services fell -0.2% mom. PPI less foods, energy, and trade services rose 0.3% mom.

For the 12 months ended in July, PPI rose 2.2% yoy, slowed from 2.7% yoy, below expectation of 2.3% yoy. PPI less foods, energy, and trade services rose 3.3% yoy.

Full US PPI release here.

• New Zealand’s core inflation trend has decelerated at a faster pace than Australia.
• RBNZ may use tomorrow’s monetary policy meeting to offer dovish guidance and bring forward its projected first interest rate cut in H1 2025.
• A dovish hold by RBNZ may reinforce the continuation of the AUD/NZD medium-term bullish trend with key support at 1.0890/0840.

On Wednesday, 14 August, the New Zealand central bank, RBNZ will announce its monetary policy decision and issue its quarterly Monetary Policy Statement with fresh forecasts on growth, inflation, and monetary policy outlook.

The consensus is expecting RBNZ to maintain its official cash rate (OCR) steady again at 5.5% after it extended its rate pause for the eighth consecutive time in the July meeting where it peppered its July monetary policy statement with a dovish tilt that indicated the current high-interest rate environment in New Zealand had led to a decline in economic activities.

A possible dovish hold by RBNZ cannot be ruled out

In the previous quarterly Monetary Policy Statement released in May, the RBNZ signalled that the first interest rate cut in New Zealand would occur after Q2 2025.

However, given the latest lacklustre data on growth and inflationary trends in New Zealand, RBNZ is likely to relook at its monetary policy projection and may bring forward its first interest rate cut to the first half of 2025 as Q2 core inflation rate has declined significantly to 2.8% y/y from 3.7% y/y recorded in Q1, its slowest pace of growth in three years.

Hence, RBNZ may utilize Wednesday’s monetary policy meeting to offer guidance and lay the groundwork for an imminent interest cut cycle in New Zealand while maintaining its OCR unchanged at 5.5%.

New Zealand’s inflation trend is decelerating at a faster rate than Australia

Fig 1: Australia & New Zealand core inflation trends as of Q2 2024 (Source: TradingView, click to enlarge chart)

The path of the inflationary trend is slightly different from the two Antipodeans. The Q2 core inflationary rate in Australia was still rather sticky as it recorded almost the same rate of growth as seen in Q1 (3.9% y/y vs. 4% y/y).

Therefore, the current picture of Australia and New Zealand’s inflationary environment is a stark contrast when we measure the difference between them; since Q2 2023, Australia’s core inflation rate has been decelerating at a slower pace than New Zealand’s core inflation rate (see Fig 1).

Therefore, this difference in inflationary trends supports a further potential RBNZ dovish monetary policy guidance which in turn may trigger an outperformance of the Aussie dollar over the Kiwi.

The recent slide in AUD/NZD managed to find support at the key 200-day moving average

Fig 2: AUD/NZD major and medium-term trends as of 13 Aug 2024 (Source: TradingView, click to enlarge chart)

The recent decline of 2.80% from its 17 July 2024 swing high area of 1.1165/1190 has managed to stall at a key medium-term pivotal support at 1.0890/0840 (also the 200-day moving average).

In addition, the price actions of the AUD/NZD cross pair have started to oscillate within a medium-term ascending channel since the 22 February 2024 low of 1.0570 (see Fig 2).

A clearance above 1.1030 intermediate resistance may see a retest on the 1.1165/1190 medium-term resistance in the first step.

However, a breakdown below 1.0840 invalidates the recovery scenario to expose the next medium-term support at 1.0735.

The British Pound jumped 0.25% against the Dollar and 0.33% against the Euro due to the employment data. Although key parameters of the report exceeded market expectations, the overall negative trend remains.

In the three months to June, the unemployment rate fell to 4.2%, in sharp contrast to the previous two months (4.4%) and beating the expected rise to 4.5%. Although the current data are well above the low of 3.6% recorded two years ago, markets have taken a positive view of the turnaround.

Wage growth excluding bonuses also beat expectations, rising 5.4% year-on-year in the three months to June, well above the 4.6% expected.

However, in our view, the market is too focused on looking for positives to confirm a general recovery in risk appetite. At the same time, negative signals from the labour market remain unaddressed.

The claimant count rose by 135K in July. Month-on-month increases were higher only during the pandemic and at the beginning of 2009 because of the financial crisis.

Total earnings (i.e. including bonuses) rose by 4.5% 3m/y, the slowest pace since late 2021. We see the slowdown in this figure as a more important driver of spending pressures than payouts, excluding bonuses.

GBPUSD managed to hold above the 200-day moving average at 1.2650 early last week and is still trying unsuccessfully to break above the 50-day MA at 1.2780. The key technical level for us is the 1.2850 area, which is the 200-week MA that has acted as resistance for the past 13 months. The latest macroeconomic data tilts the scales towards the sellers.

Market Picture

Over the past 24 hours, the cryptocurrency market has rallied 1.6% to $2.08 trillion, but in the past few hours, there has been a sell-off from a high of $2.15 – roughly the midpoint of the past 30 days’ range. Although cryptocurrency prices are higher on average than the previous day, there is a noticeable selling trend on the upside. The sentiment index stands at 31 (fear), up from 25 the previous day.

Bitcoin does not break above $60K and faces selling after it tried to break above the 50—and 200-day MAs late last week, showing seller dominance. Although sentiment has moved out of extreme fear territory, the RSI index on the daily timeframe has moved out of oversold territory, losing momentum for further strength. In this environment, Bitcoin is likely to fall by $5K rather than rise by the same amount.

Ethereum is up 4.5% in 24 hours, but on the daily chart, the 61.8% Fibonacci level from the 22nd of July high to the 5th of August low acts as the upper boundary of the technical correction.

A sharp move lower in cryptocurrencies could be a harbinger of renewed momentum pressure on equities, which are still recovering from the 5 August lows.

News Background

According to CoinShares, investments in crypto funds rose by $176 million last week after a notable weekly outflow of $528 million. Bitcoin investments were up just $13 million, Ethereum investments were up $155 million, and Solana investments were up $5 million.

Inflows are recovering from the market correction as investors saw the recent pullback as a buying opportunity. Ethereum benefited the most from the correction, bringing year-to-date inflows to $862 million, the highest since 2021. Outflows from ‘short bitcoin’ ETFs were the largest since May 2023, showing a significant investor exit, CoinShares noted.

The US SEC said it needed more time to study the rationale and legal implications of simultaneously launching a universal ETF focused on Bitcoin and Ethereum.

MARA (formerly Marathon Digital) will raise $250 million through convertible notes to buy Bitcoin and for general corporate purposes. In July, MARA increased its holdings of the first cryptocurrency by 2,282 BTC to 20,818 BTC ($1.14 billion). MARA CEO Fred Thiel said the company is committed to a “full steam ahead” strategy.

According to Blockchain.com, bitcoin miners’ revenues have slumped to a one-year low. Bitcoin mining has been pushed to the brink of profitability by marketers without access to cheap electricity, according to BlocksBridge Consulting.

Keith, who has owned 1 million Ethereum since the ICO, transferred 5,000 coins ($13.2 million) to OKX. Over the month, he sent 48,500 ETH ($154 million) to the exchange at an average price of $3176,” Lookonchain noted.

As shown on the XAU/USD chart, the gold price is near $2,460 today, despite the 8th August candle opening around $2,385. This means that in just over three full trading sessions, the price per ounce has risen by approximately 3.3%. It is now only about 1.6% away from the psychological level of $2,500.

Bullish sentiment is being driven by rising geopolitical tensions. According to Trading Economics:

→ Israeli airstrikes on Khan Yunis on Monday killed at least 18 people, with several others injured.
→ Ukrainian forces last week breached the Russian border and are holding positions in the Kursk region.

Technical Analysis of the XAU/USD Chart

The gold price is forming a trading channel (indicated in blue), with:

→ the current rise pushing the RSI indicator into overbought territory;

→ the price reaching the upper boundary of the blue channel;

→ in similar past situations (marked by yellow circles), a pullback to the channel’s median has consistently occurred, but this does not guarantee the same outcome this time;

→ the $2,436 level may act as support for the current price, having shown resistance signs on Friday before being breached by bulls.

It is possible that the gold price could set a new all-time high, driven by volatility spikes in the coming days.

The current bullish sentiment may be supported by market participants positioning themselves ahead of key US economic news: the Consumer Price Index (CPI) report will be released tomorrow (at 15:30 GMT+3), and on Thursday (also at 15:30 GMT+3), Core Retail Sales data and unemployment news will follow.

According to Dow Jones Newswires, Axis Securities research analyst Deven Gaglani believes that “a break above the $2,483 high and a weekly close above this level would be a bullish signal, potentially pushing prices to $2,550.” He also suggests that news of easing inflation could lead to a rise in gold prices.

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Germany's ZEW Economic Sentiment index took a significant hit in August, falling sharply from 41.8 to 19.2, well below the expected 30.6. This marks the steepest monthly decline since July 2022. Current Situation Index also worsened, dropping from -68.9 to -77.3.

Similarly, Eurozone's ZEW Economic Sentiment index fell from 43.7 to 17.9, missing expectations of 35.4. However, Current Situation Index for Eurozone showed a slight improvement, rising by 3.7 points to -32.4, although it remains in negative territory.

ZEW President Achim Wambach noted that the economic outlook for Germany is "breaking down." He highlighted that this month's survey revealed the sharpest decline in economic expectations over the past two years, not just for Germany, but also for the Eurozone, the US, and China.

Wambach pointed out that expectations for "export-intensive" sectors in Germany are particularly bleak. He attributed this deterioration to ongoing high uncertainty, driven by unclear monetary policy directions, disappointing business data from the US, and escalating concerns about the Middle East conflict.

Full German ZEW economic sentiment release here.

• Unemployment rate fell to 4.2%, with a decrease in both short-term and long-term unemployment.
• UK wage growth slowed to its lowest level in two years, yet surpassed market expectations.
• Despite positive jobs data, BoE policymakers warn of potential inflation rebound in H2 2024, supported by a slight increase in grocery inflation.
• Cable edged higher but key resistance levels up ahead.

Cable has continued to edge higher this morning following the UK jobs report. The data was mixed with unemployment improving substantially while pay growth hit its lowest level in two years.

According to the Office of National Statistics (ONS), preliminary data for July 2024 shows a 0.8% increase in payrolled employees compared to July 2023, translating to an additional 252,000 workers. The health and social work sector saw the most significant annual growth, adding 163,000 employees.

In the UK, regular pay excluding bonuses increased by 5.4% year-on-year, reaching GBP 645 per week in the three months leading up to June 2024. This marks the smallest rise since August 2022, down from a 5.8% increase in the previous three months, yet surpassing market expectations of 4.6%.

Wage growth slowed in both the private sector (5.2% vs. 5.6%) and the public sector (6.0% vs. 6.4%). The finance and business services sector experienced the highest annual regular wage growth rates at 6.2%, followed by manufacturing at 6.0% and services at 5.5%. When adjusted for inflation, real-term wage growth for regular pay excluding bonuses slightly decreased to 2.4% from 2.5%.

The surprise came from the unemployment rate which fell to 4.2% with estimates of a 4.5% print. The number of unemployed individuals fell by 51,000, reaching a total of 1.44 million, primarily due to declines among those unemployed for up to 6 months, bringing the figure below last year’s levels.

Furthermore, the number of people unemployed for over 6 months and up to 12 months, as well as those unemployed for over 12 months, also decreased but remained higher than last year’s estimates. Concurrently, the number of employed individuals rose by 97,000 to 33.1 million, mainly driven by an increase in part-time employees and self-employed workers, partially offset by a reduction in full-time employees.

In the three months leading up to June 2024, the number of employed individuals in the United Kingdom rose by 97,000, marking the second consecutive period of growth following a 19,000 increase in the previous three months.

This period also saw the highest job creation rate since the three months ending in November 2023, primarily due to an uptick in part-time employees and self-employed workers. Conversely, the number of full-time employees declined during the latest quarter.

Source: ONS

The Bank of England (BoE) Policymakers Issue Inflation Warning

Despite the generally positive jobs report, BoE Policymaker Catherine Mann reiterated her concerns about a potential rebound in inflation during the second half of 2024. This echoes the sentiments expressed by Governor Bailey at the latest BoE MPC meeting.

Both Mann and Bailey’s comments were supported this morning as industry data showed grocery inflation rising for the first time since March 2023. According to market researcher Kanta, annual grocery inflation was 1.8% for the four weeks ending August 4, compared to 1.6% in the previous four-week period.

UK inflation data is expected tomorrow, and the recent rise in inflation may not yet be reflected in the figures. However, there is cause for concern. Despite various improving metrics in the UK, such as household savings, citizens remain cautious about the outlook for the next six months.

Technical Analysis

From a technical standpoint, GBP/USD has risen since last Thursday’s low of approximately 1.2665.

Observing the daily chart, the overall trend is still bullish, with a daily candle close below the 1.2618 support level required to signal a structural change.

After breaking the ascending trendline, GBP/USD is now retesting this level, where there is resistance around the 1.2800 mark.

A move upward will encounter resistance at 1.2850 and 1.2950. Conversely, any downward movement will find immediate support at 1.2750, followed by significant confluence and support around the 1.2690-1.2660 range.

GBP/USD Chart, August 13, 2024

Source: TradingView (click to enlarge)

Support

• 1.2750
• 1.2690
• 1.2600

Resistance

• 1.2850
• 1.2950
• 1.3000

EURUSD is holding within a narrow congestion, capped by Fibo resistance at 1.0933 (Fibo 61.8% of 1.1139/1.0601), as markets slowed ahead of key release this week – US inflation report.

German ZEW economic sentiment (July f/c 32.6 vs June 41.8) due in a while, would also impact Euro’s sentiment.

Technical picture is predominantly bullish on daily chart (strong positive momentum / 10-20DMA bull-cross), but firm break of 1.0933 pivot is required to revive larger bulls after consolidation and expose key barriers at 1.1000 zone (psychological / Fibo 76.4%) where the action faced strong upside rejection last week.

Near-term bias is expected to remain bullish above rising 10DMA (1.0901), guarding lower pivots at 1.0882/70 (20DMA / broken 50% retracement) loss of which would weaken near term structure and risk further drop.

Res: 1.0933; 1.0945; 1.0962; 1.1000.
Sup: 1.0901; 1.0882; 1.0870; 1.0832.

After five consecutive days of upward movement, Brent crude oil is now experiencing a consolidation phase, with prices retreating slightly to 81.80 USD per barrel on Tuesday. Market sentiment is being influenced by renewed concerns over global oil demand, particularly following OPEC's downward adjustment of its demand forecasts for 2024 and 2025. This adjustment reflects weaker-than-expected economic data from China and reduced regional demand projections.

OPEC now estimates global oil demand will grow by 2.11 million barrels per day (bpd) in 2024, down from its previous forecast of 2.25 million bpd. For 2025, the projection has been revised to 1.78 million bpd from 1.85 million bpd. These revisions are mainly due to the sluggish economic indicators emerging from China, a significant driver of global oil demand.

The ongoing conflict in the Middle East keeps market participants on edge. A new round of negotiations could be scheduled for Thursday, although there remains uncertainty about whether they will occur. Market players are particularly concerned about the potential for escalated conflicts involving Israel and Iran, which could disrupt oil supplies from the region and create further volatility in oil prices.

Technical analysis of Brent crude oil

The technical forecast on the Brent crude shows that the price is forming a consolidation range around 78.75 USD, with a recent upward breakout continuing the growth trend towards 81.97 USD. This level serves as a local target. Upon reaching this level, a correction back to 78.75 USD may occur, followed by a potential rise towards 82.40 USD. This bullish scenario is supported by the MACD indicator, which, despite being below zero, shows a clear upward trajectory.

On the H1 chart, Brent found support at 78.44 USD and is developing a growth structure towards 81.97 USD. Having already reached a local target at 81.90 USD, a corrective move to at least 80.17 USD could follow before resuming the upward trend. The stochastic oscillator, positioned near the 20 mark, indicates potential for upward movement, aligning with the broader bullish sentiment observed on the H4 chart.

• EURUSD maintains sideways move as 1.0940 barrier blocks the way up
• Technical risk is on the positive side; eyes on 1.0970 too
• US PPI due at 12:30 GMT; FOMC member Bostic speaks today

EURUSD continues to face restrictions near the 1.0940 level and the resistance trendline from July 2023, which squeezed the price below a seven-month low of 1.1007 last week.

The RSI has yet to reach overbought levels, remaining elevated within the bullish area. Similarly, the MACD is staying comfortably above its red signal line, implying that the bulls might continue to defend the bounce off the 20-day SMA.

A decisive close above the 1.0940-1.0970 area could provide direct access to the 1.1000 psychological mark, while an extension above the 1.1045 barrier could open the door for the 1.1100 round level. The 1.1150 region could be the next destination if upside forces persist.

On the downside, the 20-day SMA coupled with the 38.2% Fibonacci retracement of the October-December upleg may hinder selling pressure near 1.0875, preventing a drop into 1.0790-1.0815. Should the bears breach the latter, the decline could pick up steam towards the 1.0700 mark.

All in all, EURUSD might have some extra bullish fuel in the tank. Whether this will be sufficient to surpass the strong resistance range of 1.0940-1.0970 remains to be seen.