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Market movers today

Today's key economic release is the IFO survey of the business climate in August. After the relative weak preliminary PMI release on Tuesday, the IFO survey will probably also show a decline in confidence among German companies both regarding the current situation but also expectations to the future amid the headwinds from the energy crisis in Germany and high inflation.

We also get the details for the German second quarter GDP, which showed zero growth in the preliminary release.

In the US, the Jackson Hole Economic Policy Symposium 2022 begins today. The detailed programme will be released today, but we already know that Fed Chair Jerome Powell speaks tomorrow at 16.00 CET. US yields have been climbing higher in recent days suggesting financial markets expect Powell to come with a hawkish message.

The 60 second overview

China steps up stimulus of the economy: Overnight China outlined a further 1 trillion yuan (equivalent to USD146bn) in stimulus to support the Chinese economy which is hit by both property market problems, repeated COVID lockdowns and waning global demand. The stimulus package targets mainly new infrastructure spending through state-owned bank and local government lending. Asian equity and FX markets reacted mostly positively to the news.

Equities: Small moves in equities yesterday as investors await the Fed response at Jackson Hole. Sector performance was scattered, with an odd combination of real estate, communication services and financials among the top groups. S&P500 0.3%, Dow 0.2%, Nasdaq 0.4% and Russell 2000 outperforming, 0.8%. This takes S&P500 close to its 125-day moving average, where equities have not managed to stay more than a few days so far this year. Interestingly, most positioning indicators have risen over summer but this is not the case for trading volume that has continued lower. Hence, equities may very well continue its volatility and this is also what VIX is showing at 24.

FI: Global bond yields continue to rise ahead of the Jackson Hole conference as markets are expecting more hawkish comments from central banks as they prepare the market for more front-loading of rate hikes in order to bring down inflation. The tightening of monetary policy comes despite the risk of a recession especially in Europe. The pricing of ECB has shifted significantly during the past two weeks as we are now pricing some 200bp for 2022 and 2023 relative to 130bp two weeks ago.

FX: All in all yesterday was a fairly quiet session for FX markets. While the EUR spiked late in the session EUR/USD still failed to break above parity. HUF, MXN and NOK lead gains in majors space while NZD, AUD and GBP posted modest losses.

Credit: Credit markets were marginally positive yesterday with iTraxx main going 1.2bp tighter to 109.5bp while Xover tightened by 6.6bp to 542.7bp. Absolute spread levels continue to be wide though, reflecting the perceived risk of a stagflationary environment in the coming quarters. Even so, the primary markets seems to be open and we continue to see new deals being announced in both EUR and Nordic currencies.

Nordic macro

Yesterday, Martin Flodén broke the Riksbank's currency silence as the Riksbank is concerned that further weakness of the Swedish Krona could lead to additional inflation pressures. While it is interesting that the krona pops up on the agenda, comments like 'a stronger krona wouldn't hurt' (obviously it wouldn't!) and 'krona is way too weak' (normally 2% deviation from the KIX path would be described as noise!) are empty and of less significance to markets as long as they are not backed by further policy action or commitment.

Daily Pivots: (S1) 0.9919; (P) 0.9959; (R1) 1.0008; More...

Intraday bias in EUR/USD stays neutral as consolidation form 0.9899 is extending. Upside of recovery should be limited by 1.0121 minor resistance to bring another fall. Break of 0.9899 will resume larger down trend to 61.8% projection of 1.0773 to 0.9951 from 1.0368 at 0.9860. Firm break there should prompt downside acceleration to 100% projection at 0.9546.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, outlook will stay bearish as long as 1.0368 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 1.1753; (P) 1.1797; (R1) 1.1839; More...

Intraday bias in GBP/USD stays neutral and consolidation from 1.1716 is extending. Upside of recovery should be limited by 1.2002 support turned resistance to bring another fall. Break of 1.1716 will resume larger down trend to 1.1409 long term support.

In the bigger picture, fall from 1.4248 (2018 high) could be a leg inside the pattern from 1.1409 (2020 low), or resuming the longer term down trend. Deeper decline is expected as long as 1.2292 resistance holds. Next target is 1.1409 low. However, firm break of 1.2292 will bring stronger rise back to 55 week EMA (now at 1.2859).

Daily Pivots: (S1) 0.9625; (P) 0.9656; (R1) 0.9705; More...

Intraday bias in USD/CHF remains neutral and outlook is unchanged. Triangle correction from 1.0063 could have completed at 0.9369 already. Above 0.9691 will t target 0.9884 resistance next. Break there will argue that larger up trend is ready for resumption through 1.0063. On the downside, below 0.9500 minor support will dampen this view and turn bias back to the downside for 0.9369 support instead.

In the bigger picture, current development suggests that up trend from 0.8756 (2021 low) is still in progress. Sustained break of 1.0063 will target 100% projection of 0.9149 to 1.0063 from 0.9369 at 1.0283, and then 1.0342 (2016 high). For now, this will remain the favored case as long as 0.9369 support holds, even in case of deep pull back.

Daily Pivots: (S1) 136.46; (P) 136.86; (R1) 137.53; More...

Intraday bias in USD/JPY stays neutral for the moment. Overall, price actions from 139.37 are seen as a corrective pattern, with rise from 130.38 has the second leg. Above 137.70 will extend the rebound but upside should be limited by 139.37. On the downside, firm break of 135.57 will suggest that the third leg of the pattern has started, and turn intraday bias back to the downside for 131.72 support first.

In the bigger picture, price actions from 139.37 medium term top are seen as a corrective pattern to up trend from 101.18 (2020 low). While deeper decline cannot be ruled out, outlook will stays bullish as long as 55 week EMA (now at 123.21) holds. Long term up trend is expected to resume through 139.37 at a later stage, after the correction finishes.

Daily Pivots: (S1) 0.6881; (P) 0.6908; (R1) 0.6936; More...

Intraday bias in AUD/USD remains neutral first. Corrective rebound from 0.6680 could have completed with three waves up to 0.7135. Below 0.6855 will target a retest on 0.6680 low. However, break of 0.7135 will invalidate this view and resume the rebound from 0.6680 instead.

In the bigger picture, price actions from 0.8006 (2021 high) is seen more as a corrective pattern to rise from 0.5506 (2020 low). Or it could also be a bearish impulsive move. In either case, outlook will remain bearish as long as 0.7282 resistance holds. Next target is 61.8% retracement of 0.5506 to 0.8006 at 0.6461.

Daily Pivots: (S1) 1.2943; (P) 1.2981; (R1) 1.3009; More...

Intraday bias in USD/CAD stays neutral for the moment and some more consolidations could be seen below 1.3062. But outlook is unchanged that corrective decline from 1.3222 should have completed with three waves down to 1.2726. Above 1.3062 will resume the rebound to retest 1.3222 high. However, break of 1.2826 support will dampen this view and turn bias back to the downside for 1.2726 and possibly below.

In the bigger picture, down trend from 1.4667 (2020 high) should have completed at 1.2005, after defending 1.2061 long term cluster support. Rise from there should target 61.8% retracement of 1.4667 to 1.2005 (2021 low) at 1.3650. This will remain the favored case now as long as 1.2516 support holds.

Dollar turns softer in Asian session today, but stays in familiar range. Traders would likely remain cautious until Fed Chair Jerome Powell's speech at the Jackson Hole Symposium tomorrow. For now, Aussie and Kiwi are the stronger ones for the day. European majors and Canadian Dollar are soft too, next to Dollar.

Technically, AUD/JPY resumes the rise from 90.51 by breaking through 95.13 temporary top. The development affirms the case that whole corrective pattern from 96.86 has completed with three waves down to 90.51. Further rally should be seen through 95.68 resistance to retest 96.86 high. This will remain the favored case as long as 94.18 support holds. The question is whether this is an indication of return of risk rally.

In Asia, Nikkei rose 0.58%. Hong Kong HSI is up 1.54%. China Shanghai SSE is up 0.02%. Singapore Strait Times is up 0.37%. Japan 10-year JGB yield is up 0.0043 at 0.229. Overnight, DOW rose 0.18%. S&P 500 rose 0.29%. NASDAQ rose 0.41%. 10-year yield rose 0.052 to 3.106.

BoJ Nakamura: Cannot achieve price target in a sustained, stable fashion yet

BoJ board member Toyoaki Nakamura said in a speech that "Japan's economy is still in the midst of recovering from the pandemic-induced slump."

"Shifting to a monetary tightening stance, at a time when demand remains short of supply, would hurt the economy and act as a big restraint to household and business activity," he said.

"While core consumer inflation may accelerate toward year-end due to rising prices of energy, food and durable goods, such a boost will likely dissipate," he noted. "Japan is not yet in a situation where it can achieve our price target in a sustained, stable fashion".

New Zealand retail sales volume down -2.3% qoq in Q2, sales value relatively unchanged

New Zealand retail sales volume declined -2.3% qoq in Q2 to NZD 26B, worse than expectation of 1.7% qoq rise. 10 of 15 industries had lower seasonally adjusted sales volumes comparing with Q1.

Retail sales value was relatively unchanged, up slightly by NZD 1.1m to NZD 29B. 8 of 15 industries had lower seasonally adjusted sales values.

Looking ahead

Germany Ifo business climate and ECB meeting accounts are the main features in European session. US GDP revision and jobless claims will be released later in the day. Attention will also be on comments of central bankers coming out of Jackson Hole Symposium.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2943; (P) 1.2981; (R1) 1.3009; More...

Intraday bias in USD/CAD stays neutral for the moment and some more consolidations could be seen below 1.3062. But outlook is unchanged that corrective decline from 1.3222 should have completed with three waves down to 1.2726. Above 1.3062 will resume the rebound to retest 1.3222 high. However, break of 1.2826 support will dampen this view and turn bias back to the downside for 1.2726 and possibly below.

In the bigger picture, down trend from 1.4667 (2020 high) should have completed at 1.2005, after defending 1.2061 long term cluster support. Rise from there should target 61.8% retracement of 1.4667 to 1.2005 (2021 low) at 1.3650. This will remain the favored case now as long as 1.2516 support holds.

Economic Indicators Update

New Zealand retail sales volume declined -2.3% qoq in Q2 to NZD 26B, worse than expectation of 1.7% qoq rise. 10 of 15 industries had lower seasonally adjusted sales volumes comparing with Q1.

Retail sales value was relatively unchanged, up slightly by NZD 1.1m to NZD 29B. 8 of 15 industries had lower seasonally adjusted sales values.

Full release here.

BoJ board member Toyoaki Nakamura said in a speech that "Japan's economy is still in the midst of recovering from the pandemic-induced slump."

"Shifting to a monetary tightening stance, at a time when demand remains short of supply, would hurt the economy and act as a big restraint to household and business activity," he said.

"While core consumer inflation may accelerate toward year-end due to rising prices of energy, food and durable goods, such a boost will likely dissipate," he noted. "Japan is not yet in a situation where it can achieve our price target in a sustained, stable fashion".