Sample Category Title

• NZD/USD posts strong gains on Tuesday
• New Zealand retail sales are expected to decline by 2.6%

The New Zealand dollar has posted strong gains on Tuesday. In the European session, NZD/USD is trading at 0.5959, up 0.55%. On the data calendar, New Zealand retail sales are expected to decline by 2.6% q/q in the second quarter, compared to -1.4% in Q1.

The New Zealand dollar has gone on a dreadful slide since mid-July, falling as much as 500 basis points during that spell. The current downswing has been driven by weak global demand and jitters over China’s economy, which is showing alarming signs of deterioration.

Chinese releases have been pointing downward recently. Exports and imports have fallen, manufacturing activity is weak and the world’s second-largest economy is experiencing deflation. Last week, Evergrande, a huge Chinese property developer, filed for bankruptcy in the United States, raising fears of contagion to other parts of the economy.

It wasn’t long ago that the Chinese ‘miracle’ was being touted as an economic powerhouse on the global stage, but now the world’s second-largest economy is in deep trouble and is dragging down global growth. An interesting silver lining is that deflation in China could help lower inflation worldwide, which would be good news for the Fed, ECB and other central banks that are battling to push inflation lower.

The People’s Bank of China (PBOC) has responded in recent days to the economic slowdown with some cuts to lending rates, but surprisingly, has not trimmed the five-year loan prime rate, which has a major impact on mortgages. The PBOC’s lukewarm move to the economic crisis could mean China’s economy will continue to sputter, and that is bad news for the New Zealand dollar, as China is by far New Zealand’s largest trading partner. If Chinese releases continue to head lower, we can expect the New Zealand dollar to continue losing ground.

NZD/USD Technical

• NZD/USD has pushed above resistance at 0.5941 and is putting pressure on resistance at 0.5978. There is support at 0.5885 and close by at 0.5848

• New inflation methodology offers hope for BoE
• 1.28 could be major resistance point for GBPUSD
• A break of 1.26 could be bearish signal

Recent UK economic data has been a mixed bag, with wages rising at a much-accelerated rate but inflation decelerating as expected.

While the Bank of England will be relieved at the latter, the former will remain a concern as wage growth even near those levels is not consistent with inflation returning sustainably to target over the medium term.

The ONS released new figures overnight that appeared to suggest core inflation is not rising as fast as the CPI data suggests. The reportedly more sophisticated methodology concluded that core prices rose 6.8% last month, down from 7% the previous month and 7.3% the month before.

The official reading for July was slightly higher at 6.9% but down from only 7.1% in May. So not only is the new methodology showing core inflation lower last month but the pace of decline is much faster. That will give the BoE hope that price pressures are easing and they’re expected to do so much more over the rest of the year.

Will cable break key support or resistance?

The pound has continued to trend higher against the dollar over the last week or so having corrected quite considerably since the middle of last month.

GBPUSD Daily

Source – OANDA on Trading View

It’s not clear whether this will prove to be a resumption of the uptrend or merely a bearish consolidation. It is currently nearing 1.28, the area around which it has previously run into resistance this month and around the 38.2% Fibonacci retracement level.

Another rebound off here could be viewed as another bearish signal, which may suggest we’re currently seeing a bearish consolidation, while a move above could be more promising for the pound.

If the pair does rebound lower then the area just above 1.26 will be key, given this is where it has recently seen strong support. It is also where the 55/89-day simple moving average band has continued to support the price in recent months.

From the high of the year, set on July 18 near the level of 1.125, the price of EUR/USD fell in 1 month to the support of 1.085 (-3.4%). Today, the EUR/USD chart shows that the market is forming a rebound from this support, which has been in place since mid-June. What will be the further development?

Bullish arguments:

→ The market is in an uptrend (indicated by the blue channel) in 2023 and its lower boundary, which forms a powerful block of support at the level of 1.085, can help the bounce develop into a meaningful swing.

→ Support may come from SMA (100).

Bearish arguments:

→ The higher the price of EUR/USD rises, the closer the level of 1.095 becomes, which acted as support; but after the pin bar on August 10, the level was broken, and now resistance can be expected from it. If this is indeed the case, the market will form a weak bounce from the block of supports in the 1.085 area — a threatening sign for the current ascending channel.

Fundamental background:

→ Tomorrow morning (between 10:15 am and 11:00 am GMT+3) economic data from the Eurozone will be published, including the Purchasing Managers' Index (PMI), which is considered a leading indicator of the state of the economy. Last month, PMI values set multi-month lows, showing a slowdown in the economy in Europe, which led to a fall in the EUR/USD rate (shown by the arrow). It is possible that the market will get a new reason for a bearish momentum.

→ The media are writing about the weakening of the dollar on the eve of the symposium in Jackson Hole, where Powell is scheduled to speak on August 25. If the head of the Fed is clearly leaving the doors open for new rate hikes, this will allow the dollar to strengthen and put pressure on the EUR/USD rate.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Crude rallied only in three waves and stops between 50-61.8% Fib, so it appears that corrective pullback is still in play from 84.16 and that deeper supports can be retested. There is even a chance for a drop to 77 area where wave C may look for stabilization, possibly later this week.

The Japanese yen has bounced back on Tuesday after starting the week with losses. In the European session, USD/JPY is trading at 145.67, down 0.37%.

BoJ core inflation rises to 3.3% 

Earlier today, Japan released BoJ core inflation, one of the central bank’s preferred inflation indicators. Inflation reports used to be rather dull events when Japan experienced deflation. That has all changed now in the era of high inflation across the globe. Japan’s inflation is relatively low at 3% to 3.5%, but it has persistently been above the Bank of Japan’s 2% target and has raised expectations that the BoJ might have to tighten policy.

BoJ core inflation surprised on the upside in July, with a gain of 3.3% y/y. This was above the June reading of 3.0% and the consensus estimate of 2.9%. Last week, National Core CPI eased to 3.1% in July, down from 3.3% in June. We may have to wait for further inflation releases to get a handle on which way inflation is moving. In any event, the BoJ core inflation release was higher than expected and has given a boost to the Japanese yen.

Markets eye Jackson Hole

If it’s late August, there must be a lot of central bankers enjoying the Wyoming scenery. Fed Chair Powell hosts the annual Jackson Hole Symposium which begins on Thursday. Powell delivers a highly-anticipated speech on Friday, as investors will be looking for clues about the Fed’s future rate policy.

The Fed is expected to raise interest rates next month, but traders are divided on whether the Fed will raise rates or pause at the November meeting. Powell’s remarks could provide clues on what the Fed has planned in November. Inflation has been moving in the right direction but the Fed doesn’t want the markets to become too complacent, as the battle to wrestle inflation down to 2% is not over. I would expect Powell to send a cautious, perhaps hawkish message in his Jackson Hole speech.

USD/JPY Technical

• USD/JPY is testing support at 146.41. The next support line is 145.54
• There is resistance at 147.44 and 148.31

Daily Pivots: (S1) 185.41; (P) 186.04; (R1) 187.18; More...

Prior breach of 186.45 indicates that GBP/JPY is resuming the larger up trend. Intraday bias is back on the upside. Next target is 61.8% projection of 158.24 to 183.99 from 176.29 at 192.20. On the downside, however, break of 184.53 support should now indicate short term topping, and turn bias back to the downside for deeper correction.

In the bigger picture, up trend from 123.94 (2020 low) is in progress. Next target is 195.86 (2015 high). This will now remain the favored case as long as 176.29 support holds, even in case of deeper pull back.

Daily Pivots: (S1) 158.29; (P) 158.85; (R1) 159.89; More....

Prior breach of 159.32 suggests that EUR/JPY's up trend is resuming. Further rally is now expected as long as 157.64 support holds. Next target is 61.8% projection of 139.05 to 157.99 from 151.39 at 163.09. Nevertheless, break of 157.64 will now indicate short term topping, and turn bias to the downside for deeper correction.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 100% projection of 124.37 to 148.38 from 139.05 at 163.06. Sustained break there will pave the way to retest long term resistance at 169.96. This will now remain the favored case as long as 151.39 support holds, even in case of deep pull back.

Daily Pivots: (S1) 0.8528; (P) 0.8546; (R1) 0.8558; More...

Intraday bias in EUR/GBP stays neutral for the moment, and further decline is expected with 0.8592 resistance holds. Decisive break of 0.8502 will resume larger down trend. Next target is 61.8% projection of 0.8874 to 0.8502 from 0.8667 at 0.8437. On the upside, above 0.8592 minor resistance will mix up the outlook and extend sideway trading from 0.8502.

In the bigger picture, the down trend from 0.9267 (2022 high) is seen as part of the long term range pattern from 0.9499 (2020 high). Further decline is in favor as long as 0.8667 resistance holds. Break of 0.8502 will resume the fall towards 0.8201 (2022 low).

Daily Pivots: (S1) 1.6947; (P) 1.6993; (R1) 1.7034; More...

Intraday bias in EUR/AUD remains neutral for consolidation below 1.7062. While deeper retreat could be seen, outlook will stay mildly bullish as long as 1.6737 support holds. On the upside, firm break 1.7062 will resume larger up trend from 1.4281 to 1.7377 projection level.

In the bigger picture, the rise from 1.4281 (2022 low) is in progress. Next target is 100% projection of 1.5254 to 1.6785 from 1.5846 at 1.7377. For now, outlook will stay bullish as long as 1.5846 support holds, even in case of another pull back.

Daily Pivots: (S1) 0.9560; (P) 0.9581; (R1) 0.9593; More...

No change in EUR/CHF's outlook is it's bounded inside established range. Intraday bias remains neutral. On the upside, break of 0.9647 will resume the rebound from 0.9520. Further sustained break of 0.9670 will be the first sign of bullish reversal and target 0.9840 resistance for confirmation. On the downside, break of 0.9520 will resume the whole fall from 1.0095 towards 0.9407 low.

In the bigger picture, medium term outlook is staying bearish as the pair is capped well below falling 55 W EMA (now at 0.9849). Down trend from 1.2004 (2018 high) is in favor to continue. Sustained break of 0.9407 will target 61.8% projection of 1.1149 to 0.9407 from 1.0095 at 0.9018. For now, this will remain the favored case as long as 0.9840 resistance holds, in case of strong rebound.