Sample Category Title

• AUDUSD reversed from the support level 0.6400
• Likely to rise to resistance level 0.6500

AUDUSD currency pair recently reversed up from the support level 0.6400, which has been reversing the pair since last November.

The support level 0.6400 was strengthened by the nearby lower daily Bollinger Band and the support trendline of the wide down channel from February.

Given the strength of the support level 0.6400, AUDUSD currency pair can be expected to rise further toward the next resistance level 0.6500 (former multi-month support from May).

GBPUSD bears are pausing on Monday after last week’s 1.2% fall, as oversold daily studies slowed the pace of fall, which registered the strongest acceleration last Thursday.

Consolidation was so far narrow, as the sterling remains weighed by strong dollar and overall bearish near-term structure.

Strong negative momentum on daily chart and MA’s in bearish setup signal that larger bears remain firmly in paly for further weakness, with additional bearish signal being generated on last week’s close below pivotal supports at 1.2640/26 (100DMA / Fibo 61.8% of 1.2307/1.3140 rally).

Former supports at 1.2626/40 reverted to initial resistances, with extended upticks to stay under the base of thick daily cloud (1.2724) to keep larger bears in play and offer better selling opportunities for fresh acceleration towards 1.2504 (Fibo 76.4%) and 1.2402 (200DMA) in extension.

Near-term action may also stay in sideways mode ahead of key economic releases from the US (due later this week) which are expected to generate stronger direction signals.

Res: 1.2626; 1.2640; 1.2689; 1.2704.
Sup: 1.2547; 1.2504; 1.2402; 1.2368.

The Japanese yen is trading quietly at the start of the week. In the North American session, USD/JPY is trading at 146.60, up 0.11%.

The yen has plunged 3.05% in August against the US dollar and is trading at its lowest levels since November 2022.

Powell, Ueda speak at Jackson Hole 

There was a degree of anticipation as major central bankers gathered at the Jackson Hole summit. The meeting has been used as a launch-pad for shifts in policy, but one would be hard-pressed to point to any dramatic news from the summit.

Bank of Governor Kazuo Ueda stayed true to his script that underlying inflation remains lower than the BoJ’s target of 2% and as a result, the BoJ will stick with the current ultra-easy policy. Ueda has followed his predecessor Haruhiko Kuroda and insisted that he will not lift interest rates until there is evidence that domestic demand and stronger wage growth replace cost-push factors and keep inflation sustainably around the 2% target.

Ueda continues to argue that inflation is below target and that he expects inflation to fall, but core inflation indicators continue to point to broad-based inflationary pressures and have remained above the 2% target for around 15 months. Still, the BoJ is sticking to its loose policy and trying to dampen speculation that it will tighten policy. The BoJ tweaked its yield curve control policy in July but at the time, Ueda insisted that the move was not a step towards normalization of policy.

Federal Chair Jerome Powell delivered the keynote speech on Friday, but anyone looking for dramatic headlines walked away disappointed. Powell reiterated that the battle to lower inflation to the 2% target “still has a long way to go”.

Powell was somewhat hawkish with regard to interest rates, saying that the Fed would “proceed carefully” with regard to raising rates or putting rates on hold and waiting for additional data. There was no mention of rate cuts, a signal that the Fed isn’t looking to trim rates anytime soon. The future markets responded by raising the odds of a rate hike in September to 21%, up from 14% a week ago.

USD/JPY Technical

• There is resistance at 147.19 and 147.95
• 145.86 and 145.10 are providing support

The EUR/USD currency pair is entering the final week of August in a phase of consolidation around the 1.0810 level. This follows a speech by Jerome Powell, the Chair of the Federal Reserve, during the recent Jackson Hole Symposium in the US. Powell highlighted the Fed's commitment to raising interest rates continuously to maintain elevated levels of inflation, while also considering the effectiveness of measures already in place.

As a result, the Federal Reserve plans to make necessary interest rate adjustments and maintain a stringent monetary policy until it successfully manages price control.

With a relatively quiet macroeconomic calendar at the beginning of the week, the market is relying on existing factors to determine direction.

Technical Analysis of the EUR/USD Currency Pair

On the H4 chart, EUR/USD has completed a decline to 1.0765, followed by a corrective structure forming up to 1.0816. Once this correction is complete, there is potential for the decline to continue to 1.0740, a local target. The scenario is supported by the MACD indicator, as its signal line is below zero and pointed downwards.

On the H1 chart, EUR/USD has undergone a correction to 1.0816, possibly leading to the formation of a consolidation range below that level. If the price breaks out of this range in a downward direction, a new wave of decline to 1.0740 could be formed. This scenario is backed by the Stochastic oscillator, as its signal line is currently above 80, indicating a potential drop to 50. A break of this level could open the door to a decline towards 20.

Markets

Neither Fed’s Powell nor ECB’s Lagarde at the Jackson Hole gathering offered groundbreaking views on the economy or monetary policy going forward. Add to that today’s empty (but backloaded!) calendar and lower trading volumes – the UK enjoys the Summer Bank Holiday – and you get the perfect background for a technical trading session. The ECB’s monthly credit survey is worth mentioning though. Annual M1 money growth in July was -9.2% compared to -8% in June. Growth in the broader monetary aggregate M3 also turned negative for the first time in more than 13 years. At -0.4% it matches the previous series low of February 2010. The annual growth rate in loans to households eased from 1.7% to 1.3% while the measure for non-financial companies fell from 3% to 2.2%. The numbers underscore the (lending) slowdown in the European economy after the bigger-than-expected drop in the (services) PMI already did so last week. Stocks in the region eke out a 0.90% gain (EuroStoxx 50) nevertheless. The Chinese measures announced on Sunday to “invigorate capital markets and boost investor confidence” to some extent help. US Treasuries trade with a strengthening bias. Yields ease between 1.0 bps (2-y) to -2.7 bps (10-y). German Bunds underperform with rates rising 1.9 bps at the front end of the curve while losing 1.0 bp further out. Austrian ECB Governing Council member Holzmann was the latest to weigh in on policy after the JH symposium. The monetary hawk said that, barring a big surprise, rates should be raised further. He argues against a pause in the cycle: “It’s better to achieve a peak rate faster, which also means we can eventually start going lower earlier”, adding that “It’s more difficult for markets to digest a stop-and-go rate path.” Holzmann also said that the ECB should consider speeding up the unwinding of its balance sheet by opening the debate on PEPP reinvestments sooner. They currently run at least through the end of 2024. FX markets trade quietly. The dollar loses a little ground but is off the intraday lows. EUR/USD trades just north of 1.08. The trade-weighted index changes hands around 104.10. USD/JPY (146.46) stays near the recent highs with the Japanese yen the only currency in the G10 landscape worse off than the USD. The Swedish krone (see below) and the Aussie dollar marginally strengthen against peers with the latter currency hoping for further concrete Chinese measures to stimulate its ailing economy. AUD/USD moves a tad higher towards 0.642.

News & Views

Excerpts of a speech of Riksbank Deputy governor Flodén show that the MPC member sees the weak krona as a problem. “It risks contributing to continued high inflationary pressures. The weakness seems to be linked, for instance, to trend-following behaviour, concern regarding the Swedish property sector, the geopolitical situation and the image of Sweden, as well as the expectation that the Riksbank will raise the interest rate less than other countries. But in my opinion, none of this can justify the size of the krona depreciation. There are also many strengths in the Swedish economy, and the krona will reasonably strengthen in the future”, the Riksbank website reads. Quotes on Reuters after the speech was given in Stockholm add that Flodén sees the krone as 20% undervalued and that currency intervention is not a very effective method to affect the level of a currency. The krona today gains marginally, but at 11.91, the Swedish currency continues to trade within reach of its all-time low level against the euro.

Sentiment in the German export industry deteriorated slightly further according the export expectations published by the German Ifo institute today. Export expectations declined to -6.3 in August from -6.0 in July. According to the head of surveys at Ifo, Klaus Wohlrable, German exports continue to struggle with weak global demand. However more German companies are also said to complain about being less able to compete at a global level. On the positive side, the chemical industry is reported to have turned around and now expects a rise in exports. Food and beverage exports also expect improved international sales. Positive and negative responses were reported more or less balanced for automobile manufacturers. On the negative side, the export outlook for manufacturers of machinery and equipment and in the metal industry deteriorated further.

Daily Pivots: (S1) 1.0761; (P) 1.0801; (R1) 1.0837; More...

No change in EUR/USD's outlook and intraday bias stays on the downside. Current fall from 1.1274 should target 1.0609/34 cluster support next. On the upside, break of 1.0929 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, fall from 1.1274 medium term top is seen as a correction to up trend from 0.9534 (2022 low). Deeper decline would be seen to 1.0634 cluster support (38.2% retracement of 0.9534 to 1.1274 at 1.0609). Strong support could be seen there, at least on first attempt, to bring rebound. Yet, medium term outlook will be neutral for now, as long as 1.1274 resistance holds.

Daily Pivots: (S1) 1.2535; (P) 1.2594; (R1) 1.2641; More...

Intraday bias in GBP/USD stays neutral for consolidation above 1.2546 temporary low. Near term outlook remains mildly bearish as long as 1.2799 resistance holds. On the downside, break of 1.2546 will resume whole fall from 1.3141 to 61.8% projection of 1.3141 to 1.2618 from 1.2799 at 1.2476. Firm break there could prompt downside acceleration to 100% projection at 1.2276.

In the bigger picture, for now, fall from 1.3141 medium term top is seen as a correction to up trend from 1.0351 (2022 low). Deeper decline would be seen to 38.2% retracement of 1.0351 to 1.3141 at 1.2075. Strong support would be seen there to bring rebound on first attempt. But outlook will be neutral at best as long as 1.3141 resistance holds, and consolidation from there is set to extend, until further development.

Daily Pivots: (S1) 0.8820; (P) 0.8848; (R1) 0.8874; More....

Intraday bias in USD/CHF remains neutral for consolidation below 0.8874 temporary top. But further rally is expected as long as 0.8758 support holds. On the upside, break of 0.8874 will resume the rise from 0.8551 to 0.9146 cluster resistance next.

In the bigger picture, rebound from 0.8551 medium term bottom is currently seen as a correction to the downtrend from 1.0146 (2022 high). Further rally would be seen to 0.9146 cluster resistance (38.2% retracement of 1.0146 to 0.8551 at 0.9160). Strong resistance could be seen there to limit upside, at least on first attempt. Nevertheless, medium term outlook is neutral at best as long as 0.8551 holds, until further developments.

Daily Pivots: (S1) 145.89; (P) 146.26; (R1) 146.79; More...

Outlook in USD/JPY remains unchanged and intraday bias stays on the upside. Sustained break of 61.8% projection of 129.62 to 145.06 from 137.22 at 146.76 will pave the way to retest 151.93 high. For now, outlook will stays cautiously bullish as long as 144.52 support holds, in case of retreat.

In the bigger picture, overall price actions from 151.93 (2022 high) are views as a corrective pattern. Rise from 127.20 is seen as the second leg of the pattern and could still be in progress. But even in case of extended rise, strong resistance should be seen from 151.93 to limit upside. Meanwhile, break of 137.22 support should confirm the start of the third leg to 127.20 (2023 low) and below.