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Daily Pivots: (S1) 1.1618; (P) 1.1665; (R1) 1.1728; More...

GBP/USD's rebound from 1.1404 short term bottom is in progress. Intraday bias stays on the upside for 55 day EMA (now at 1.1924). On the downside, below 1.1550 minor support will turn bias back to the downside. Decisive break of 1.1409 will resume larger down trend.

In the bigger picture, based on current momentum, fall from 1.4248 (2018 high) is probably resuming long term down trend from 2.1161 (2007 high). Sustained break of 1.1409 will target 61.8% projection of 1.7190 (2014 high) to 1.1409 (2020 low) from 1.4248 (2021 high) at 1.0675. This will remain the favored case for now as long as 1.2292 resistance holds.

Dollar and Yen are staying as the weakest ones for the week as focus turns to US inflation data. European majors are the strongest ones so far, even though Euro's rise is losing some momentum. Commodity currencies are mixed for now, despite improving risk sentiment.

Technically, EUR/JPY's rally is slowing ahead of 61.8% projection of 124.37 to 144.26 from 133.38 at 145.67. For now, further rally is expected as long as 142.62 minor support holds. Firm break of 145.67 will pave the way to 149.76 long term resistance (2015 high). The next move could come as reaction to US CPI today.

In Asia, at the time of writing, Nikkei is up 0.21%. Hong Kong HSI is up 0.48%. China Shanghai SSE is up 0.33%. Singapore Strait Times is up 0.45%. Japan 10-year JGB yield is down -0.0029 at 0.248. Overnight, DOW rose 0.71%. S&P 500 rose 1.06%. NASDAQ rose 1.27%. 10-year yield rose 0.041 to 3.362.

Australia NAB business confidence rose to 10, conditions rose to 20

Australia NAB business confidence improved from 8 to 10 in August. Business conditions rose from 19 to 20. Trading conditions rose from 26 to 30. Profitability conditions dropped from 18 to 16. Employment conditions also dropped from 18 to 16.

"The recent strength in business conditions carried into August," said NAB Group Chief Economist Alan Oster. "Official data for retail sales in July confirmed spending remained robust, as suggested by the previous survey, and today's release shows little sign that August was much different. Conditions are strong across most industries other than construction, where profitability remains a challenge."

"Confidence rose again in August, as did other forward indicators in the survey," said Oster. "Confidence took a hit around June as interest rates first began to rise but it seems that firms' initial concerns about the impact have eased and a more positive outlook is prevailing, at least for the time being."

US 10-year yield extending rally ahead of CPI

US consumer inflation data will catch all attention today. Headline CPI is expected to decline -0.1% mom in August, with annual rate slowed from 8.5% yoy to 8.1% yoy. On the other hand, core CPI is expected rise 0.3% mom, with annual rate accelerated from 5.9% yoy to 6.0% yoy.

Today's data is unlikely to alter Fed's decision on on September 21, where markets are pricing in 88% chance of another 75bps hike. While inflation is starting to slow, the decline in energy prices could free up some money for consumer to spend, which supports the economy. Fed's tightening will continue and there is a consensus that interest rate would reach 4% level by early next year.

Regarding market reaction to the data, some attention will be on 10-year yield, which rose 0.041 to 3.362 overnight. Current rise form 2.525 is expected to continue as long as 3.176 support holds, to retest 3.483 high. Such development should give Yen crosses a lift in general. But the next big move would depend more on whether 3.483 could be taken out decisively, at a later stage.

Elsewhere

Japan PPI rose 9.0% yoy in August, above expectation of 8.9% yoy. BSI large manufacturing index rose from -9.9 to 1.7 in Q3, above expectation of -8.1.

UK employment, Germany CPI final and ZEW economic sentiment, Swiss PPI will be released in European session. Later in the day, US CPI is the main focus.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.1618; (P) 1.1665; (R1) 1.1728; More...

GBP/USD's rebound from 1.1404 short term bottom is in progress. Intraday bias stays on the upside for 55 day EMA (now at 1.1924). On the downside, below 1.1550 minor support will turn bias back to the downside. Decisive break of 1.1409 will resume larger down trend.

In the bigger picture, based on current momentum, fall from 1.4248 (2018 high) is probably resuming long term down trend from 2.1161 (2007 high). Sustained break of 1.1409 will target 61.8% projection of 1.7190 (2014 high) to 1.1409 (2020 low) from 1.4248 (2021 high) at 1.0675. This will remain the favored case for now as long as 1.2292 resistance holds.

Economic Indicators Update

US consumer inflation data will catch all attention today. Headline CPI is expected to decline -0.1% mom in August, with annual rate slowed from 8.5% yoy to 8.1% yoy. On the other hand, core CPI is expected rise 0.3% mom, with annual rate accelerated from 5.9% yoy to 6.0% yoy.

Today's data is unlikely to alter Fed's decision on on September 21, where markets are pricing in 88% chance of another 75bps hike. While inflation is starting to slow, the decline in energy prices could free up some money for consumer to spend, which supports the economy. Fed's tightening will continue and there is a consensus that interest rate would reach 4% level by early next year.

Regarding market reaction to the data, some attention will be on 10-year yield, which rose 0.041 to 3.362 overnight. Current rise form 2.525 is expected to continue as long as 3.176 support holds, to retest 3.483 high. Such development should give Yen crosses a lift in general. But the next big move would depend more on whether 3.483 could be taken out decisively, at a later stage.

Australia NAB business confidence improved from 8 to 10 in August. Business conditions rose from 19 to 20. Trading conditions rose from 26 to 30. Profitability conditions dropped from 18 to 16. Employment conditions also dropped from 18 to 16.

"The recent strength in business conditions carried into August," said NAB Group Chief Economist Alan Oster. "Official data for retail sales in July confirmed spending remained robust, as suggested by the previous survey, and today's release shows little sign that August was much different. Conditions are strong across most industries other than construction, where profitability remains a challenge."

"Confidence rose again in August, as did other forward indicators in the survey," said Oster. "Confidence took a hit around June as interest rates first began to rise but it seems that firms' initial concerns about the impact have eased and a more positive outlook is prevailing, at least for the time being."

Full release here.

Key Highlights

• GBP/USD started an upside correction above the 1.1650 resistance.
• It broke a major bearish trend line at 1.1580 on the 4-hours chart.
• The UK Claimant count could change -9.2K in August 2022.
• The US CPI might rise 8.1% in August 2022 (YoY), down from 8.5%.

GBP/USD Technical Analysis

The British Pound started a steady recovery wave from the 1.1405 low against the US Dollar. GBP/USD cleared the 1.1500 and 1.1550 resistance levels to gain bullish momentum.

Looking at the 4-hours chart, the pair was able to clear the 1.1600 resistance zone and a major bearish trend line at 1.1580. There was a move above the 23.6% Fib retracement level of the downward move from the 1.2276 swing high to 1.1405 low.

The bulls were able to push the pair above the 1.1680 level and the 100 simple moving average (red, 4-hours). The pair is now facing resistance near the 1.1740 zone.

The next major resistance is near the 1.1840 level or the 200 simple moving average (green, 4-hours). It is near the 50% Fib retracement level of the downward move from the 1.2276 swing high to 1.1405 low.

Any more gains might send GBP/USD higher towards the 1.1940 resistance zone. The next major resistance is near 1.2000, above which the pair may perhaps rise towards the 1.2120 level.

If there is a fresh decline, the pair might find bids near the 1.1650 level. A downside break below the 1.1650 support might sent it to 1.1600. The next major support is near the 1.1550 level, below which the pair could even test the 1.1500 level.

Looking at EUR/USD, the pair was able to start a recovery wave above the 1.0050 and 1.0100 resistance levels. The next major resistance is near 1.0200.

Economic Releases

• UK Claimant Count Change for August 2022 – Forecast -9.2K, versus -10.5K previous.
• UK ILO Unemployment Rate for July 2022 (3M) – Forecast 3.8%, versus 3.8% previous.
• US Consumer Price Index for August 2022 (MoM) – Forecast -0.1%, versus 0% previous.
• US Consumer Price Index for August 2022 (YoY) – Forecast +8.1%, versus +8.5% previous.
• US CPI Ex Food & Energy for August 2022 (YoY) – Forecast +6.0%, versus +5.9% previous.

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The commodity market remains extremely volatile. On Monday, a Brent barrel is declining to 91.50 USD and looks unstable. Previously, the market was afraid that Russia will cut down on supply and pushed prices upwards, but risks of stable demand have become more serious now.

This week, investors will keep an eye on the flow of inflation statistics both from the EU and the US. In the latter case, the information will help to form clearer expectations from the results of the Fed’s meeting in September.

Baker Hughes statistics, published earlier, demonstrated a decline in the number of active oil rigs in the US – by 5 units to 591 rigs.

Regardless of Brent falling on, the current movement can still be interpreted as a correction of a mighty bullish trend. The quotes are now testing the support area that used to be a strong resistance level in 2018 and 2020. It was broken away only at the beginning of this year. The price pattern is a bullish 5-0. By this pattern, after a correction the price will head for renewing the high, so in the long run, the quotes may rise to 139.00. The downtrend may start again only if the lower border of the Cloud is broken and prices secure under 70.00.

On H4, Brent has bounced off the lower border of a bullish Wolfe Wave. The goal of the movement is 105.45. A strong signal confirming the growth of the pair will be a breakaway of the upper border of the descending channel. With it, the descending movement that started at the end of August will be over. The second signal is a Double Bottom reversal pattern forming on the RSI. The indicator is already testing the upper border of the pattern, and as soon as it is broken away, they might hit 80. A negative scenario for the bulls will be another price decline and securing under 86.00, which will cancel the bullish pattern and indicate further falling.

• WTI reversed from key support level 85.00
• Likely to fall to resistance level 90.00

WTI crude oil recently reversed up from the key support level 85.00 (former multi-month high from October of 2021), intersecting with the 61.8% Fibonacci correction of the upward impulse from December.

The upward reversal from the support level 85.00 created the daily candlesticks reversal pattern Morning Star – which marked the end of the earlier primary ABC correction from March.

WTI crude oil can be expected to rise further toward the next round resistance level 90.00.

• USDCAD falling inside short-term corrective wave (ii)
• Likely to fall to support level 1.2900

USDCAD currency pair continues to fall inside the short-term corrective wave (ii), which started earlier from the key resistance level 1.3200 (which stopped wave 1 in July).

Wave (ii) belongs to the higher-order impulse waves 3 and (3) from August and April respectively.

USDCAD can be expected to fall further toward the next support level 1.2900 (low of the previous correction (ii) from August and the target for the completion of the active wave (ii)).

Spot gold remains at the front foot on Monday and extends recovery as dollar pulls off twenty-year high, pressured by renewed risk appetite.

Bounce from $1690 zone, where a temporary base is forming, extended on Monday after an initial signal of a bear trap pattern forming on weekly chart, following double rejection under $1700 support.

Fresh advance dented pivotal barriers at $1732/34 (falling 20DMA / Fibo 38.2% of $1807/$1688), with firm break here needed to strengthen renewed bulls and open way for further gains.

Daily studies improved but still lack momentum, suggesting that the action is waiting for stronger direction signals. All eyes are on Tuesday’s release of US inflation report for August, with expectations that inflation would ease further to 8.1% in August, after dropping to 8.5% in July, from its multi-decade peak at 9.1%, hit in June.

Signals of further slowing in price pressures would ease the tensions and affect the Fed’s rate hike trajectory, as the US central bank so far kept aggressive stance and many bet for another 75 basis points hike in the next week’s policy meeting.

However, the Fed may soften its view if inflation falls further as this would generate stronger signal that inflation has peaked and started moving downwards.

Such scenario would be supportive for the yellow metal and further lift the price, with extension above $1732/34 pivots to expose next targets at $1748 (daily Kijun-sen / 50% retracement) and $1750 (daily cloud base). Conversely, disappointing US inflation figures would add to Fed’s hawkish stance and deflate metal’s price for renewed attack at psychological $1700 support.

Res: 1734; 1745; 1750; 1762.
Sup: 1716; 1712; 1700; 1694.