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It's been an underwhelming start to the week in financial markets with the eternal optimism of investors clashing with the reality of Chinese economic data.

There's a ​ bizarre willingness to turn a blind eye to the economic reality at the moment as long as the Fed doesn't raise rates too fast. That doesn't feel particularly sustainable but as we've seen so often before, it can last much longer than you may expect.

Rate cut does little to ease Chinese fears

The economic data from China overnight was very disappointing, to put it mildly. Combined with the lending figures on Friday, it does not paint a good picture of domestic demand or the growth outlook. Retail sales were particularly weak, while fixed asset investment and industrial production were also well below the consensus. It seems the reopening boost was both uninspiring and short-lived.

And yet the PBOCs decision to cut the MLF and 7-day reverse repo rates by 10 basis points overnight came as quite the surprise. It seems no one saw that coming and it's understandable why. Loan demand isn't struggling because of high rates, it's Covid lockdowns, ongoing property market uncertainty and the global environment. This rate cut won't change any of that. But it does mean a cut to the LPR is now almost certain.
Japan recovering as inventories hold back Q2 GDP

The reopening in Japan boosted spending in the second quarter, although the GDP reading slightly missed expectations thanks to a decline in inventories which lifted the reading in Q1. These fluctuations can largely be ignored and the underlying picture remains positive for the Japanese economy. Of course, the global picture is increasingly gloomy and uncertain which could weigh into next year.
Eye-watering profits for Saudi Aramco

Saudi Aramco is the latest oil company to report record quarterly profits and as the biggest, the numbers are that much more eye-watering. Net income rose 90% from last year to $48.4 billion but the dividend remained the same at $18.8 billion as the company remains committed to investing in further expanding production. That naturally won't stop political pressure from mounting around the world as people struggle with the concept of soaring energy costs destroying household budgets and threatening the global economy at the same time as staggering record profits.

Oil slips amid poor China data

One area where traders are paying attention to the Chinese data is clearly commodity markets, with crude off 2% on Monday. The figures from China really are a concern and the authorities have a big job on their hands arresting flagging domestic demand. That doesn't bode well for oil demand especially when the country remains so committed to zero-Covid. And with cases continuing to rise, the downward pressure on oil prices could intensify.

Throw in a deal between the US and Iran and we may be able to wave goodbye to triple-digit oil prices for a while. Of course, it doesn't matter how close the two are, a deal can never be assumed to be done until it's signed. If it does get over the line, we could see oil slip below $90 and perhaps even stay there.

A technical reversal?

Gold has tried and failed again to sustainably break above $1,800 despite closing slightly above here on Friday. The yellow metal has slipped almost 1% so far today to trade back around $1,785 amid a strengthening dollar. This could just be a technical move, with the dollar seeing some support after pulling more than 4% off its highs. Similarly, it's been a strong rebound in gold and $1,800 is looking like an increasingly significant barrier.

Can Bitcoin break $25,000?

Bitcoin has tested the water above $25,000 and been pushed back on the first attempt. It seems the cryptocurrency, like many other instruments, is testing a potentially significant barrier following the recent recovery and we may be seeing some profit-taking. Whether that becomes a full rotation lower isn't clear yet but it doesn't appear to have the momentum for a breakout at this time.

Market picture

Bitcoin rose 5.8% over the past week to near $24.3K. Ethereum jumped 14.3% to $1970. Top altcoins showed a less consistent performance, ranging from -2.3% (BNB) to +12.8% (DogeCoin) over the previous seven days.

The total crypto market capitalisation increased by 5.7% over the week to $1.18 trillion, according to CoinMarketCap. The Bitcoin dominance index fell by 0.5 points to 40.2%. The cryptocurrency Fear and Greed Index rose to 45 by Monday versus 30 a week earlier and is now on the verge of transitioning from ‘fear’ into ‘neutral’ territory.

Bitcoin maintains upward momentum with steady but slight gains above previous local highs. Since Thursday, BTCUSD has sold off on repeated attempts to climb above $25K. In illiquid trading on Monday morning, the price managed to climb higher but is now pulling back to $24.5K. Despite the futility of the bulls’ attempts to warm up the price, the sellers’ overhang remains strong.

Ether has recently been above the market but selling off near $2000 since late last week. Investors, many of whom are retail traders and putting a higher value on the round numbers, are taking profits from the rally that has doubled the price since July.
News background

The EthereumPoW project (ETHPow) reported codebase readiness and broad support for the future fork of the Ethereum network from miners, hardware manufacturers and the crypto community. Ethereum’s transition to PoS will occur on 15 or 16 September, 3-4 days earlier than the estimated date. According to Santiment, crypto whales and institutions are buying ETH ahead of the September upgrade.

The creators of the anonymous cryptocurrency, Monero, carried out another network hardfork, reducing block size and increasing transaction speed and confidentiality. Cybersecurity company Netskope warned digital asset owners of increasing phishing attacks using Google Sites and Microsoft Azure SEO tools.

EUR/USD

The beginning of the week started rather calmly for the single European currency. After the market opening, the rate remained in a narrow range between 1.0260 and 1.2050. The last week's bull losses are likely to continue, unless they attempt to test the resistance at 1.0276 and relinquish their control over to the bears. They, in turn, will try to direct the course of the currency pair towards the support at 1.0240. The downward movement for the euro is probably not over, but the possible return of the bulls could be considered only after a breach of the resistance at 1.0309.

USD/JPY

The dollar continues to lose ground against the yen. The support at 133.26 was easily overcome by the bears and they are likely to head towards the area of the next support at 132.52. The return of the bulls can be expected only after a breach of the resistance at 134.40.

GBP/USD

The beginning of the session started calmly, and at the time of writing the analysis, the price of the currency pair is managing to hold its head above the support at 1.2134. As a result, we are likely to see a range move and a change in course towards the resistance at 1.2183. A signal that the bulls may return for a longer period on the market would be a breach of the resistance at 1.2291. If this does not happen, then the important supports that would make life difficult for the bears, would be the levels at 1.2063 and at 1.2020.

EUGERMANY40

At the end of last week, the German index breached the resistance at 13795 and managed to close above it. However, the beginning of the session started on a negative note as its opening price was below the previous week's closing level of 13877. This is a signal that we may see a correction resulting in a breach of the level at 13795 and an attack on the next support at 13630. If that doesn't happen and the bulls instead breach the resistance at 13883, then the next level that could hold them back and which is visible from the higher time frames, would be 13992.

US30

The U.S. blue-chip index managed to overcome the important resistance at 33650, and at the beginning of the new week, the bulls will probably have a new target – the level of 33890. However, the possibility for a correction and a potential bear return should still not be excluded. This, however, could only happen if the support levels at 33650 and 33304 are breached.

The Aussie Dollar started a steady increase from the 0.6920 zone against the US Dollar. The AUD/USD pair was able to move above the 0.7000 resistance zone.

It surged above the 0.7050 level and the 50 hourly simple moving average. The pair even climbed above the 0.7100 level before it faced sellers near 0.7135. A high was formed near 0.7136 and the pair is now consolidating near 0.7100 on FXOpen.

An immediate support is near the 0.7095 level. There is also a connecting bullish trend line forming with support near 0.7095 on the hourly chart. The next key support is near the 0.7065 level. A downside break below the 0.7065 support could lead the pair towards the 0.7020 support.

An immediate resistance on the upside is near the 0.7120 level. If there is an upside break above the 0.7120 level, the pair could rise steadily towards the 0.7165 level in the near term.

Daily Pivots: (S1) 1.0223; (P) 1.0276; (R1) 1.0312; More...

Intraday bias in EUR/USD remains neutral at this point. On the downside, break of 1.0201 support will argue that such rebound is completed, after rejection by 55 day EMA too. Intraday bias will be back to the downside for retesting 0.9951 low. Nevertheless, firm break of 1.0348 will argue that rally from 0.9951 is at least correcting the fall from 1.1494. Further rise should then be seen to 38.2% retracement of 1.1494 to 0.9951 at 1.0540.

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 1.0773 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 1.2085; (P) 1.2150; (R1) 1.2201; More...

Intraday bias in GBP/USD stays neutral as range trading continues. On the upside, decisive break of 1.2292 resistance will complete a head and shoulder bottom pattern (ls: 1.1932; h: 1.1769; rs: 1.2002). Further rally should then be seen to 1.2666 key resistance next. On the downside, however, break of 1.2002 will bring deeper fall back to retest 1.1759 low.

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 1.2666 resistance holds. Next target is 1.1409 low. However, firm break of 1.2666 will bring stronger rise back to 55 week EMA (now at 1.2897).

Daily Pivots: (S1) 0.9397; (P) 0.9423; (R1) 0.9440; More...

Intraday bias in USD/CHF stays neutral for consolidation above 0.9369 temporary low. Upside should be limited well below 0.9648 resistance to bring another fall. Break of 0.9369 will resume larger fall to 100% projection of 0.9884 to 0.9468 from 0.9648 at 0.9232.

In the bigger picture, break of 0.9471 support turned resistance argues that medium term up trend from 0.8756 has completed with three waves up to 1.0063. Long term sideway pattern might have started another falling leg. Deeper decline would now be in favor as long as 0.9648 resistance holds, to 0.9149 structural support. Sustained break there could pave the way back to 0.8756.

Daily Pivots: (S1) 132.96; (P) 133.42; (R1) 133.96; More...

Intraday bias in USD/JPY remains neutral for the moment. Outlook is unchanged that corrective pattern from 139.37 is still unfolding. Range trading between 126.35/139.37 will continue for a while. On the downside, break of 130.38 will target 100% projection of 139.37 to 130.38 from 135.57 at 126.58. On the upside, above 135.57 will resume the rebound form 130.38 to retest 139.37.

In the bigger picture, fall from 139.37 medium term top is seen as correcting whole 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 122.70) holds. Long term up trend is expected to resume through 139.37 at a later stage, after the correction finishes.

Daily Pivots: (S1) 0.7096; (P) 0.7112; (R1) 0.7139; More...

Intraday bias in AUD/USD is turned neutral with current retreat. But further rise is expected as long as 0.7008 support holds. Above 0.7135 will resume the rise from 0.6680 towards 0.7282 high. However, break of 0.7008 minor support will turn bias back to the downside for 0.6868 support 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 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) 1.2744; (P) 1.2773; (R1) 1.2807; More...

Intraday bias in USD/CAD is turned neutral with today's recovery. On the downside, break of 1.2726 will resume the decline from 1.3222 to towards 1.2516 support. ON the upside, however, above 1.2837 will turn bias back to the upside for 1.2984 resistance instead.

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.