Sample Category Title

Daily Pivots: (S1) 0.9189; (P) 0.9215; (R1) 0.9250; More....

Intraday bias in USD/CHF is turned neutral with the current retreat. ON the downside, break of 0.9149 will turn focus to 0.9098 support. Break there will target further decline to 0.9017 support. On the upside, break of 0.9239/41 will target 0.9273 resistance instead.

In the bigger picture, USD/CHF is still struggling around 55 week EMA (now at 0.9178) and outlook is mixed for now. Confirmed rejection by the 55 week EMA will retain medium term bearishness. That is, larger fall from 1.0342 would resume through 0.8756 low at a later stage. However, sustained trading above 55 week EMA will tilt favor to the case of bullish reversal. Focus would then be turned to 0.9471 resistance for confirmation.

Daily Pivots: (S1) 109.85; (P) 110.01; (R1) 110.16; More...

USD/JPY drops mildly today but stays in range of 109.10/110.79. Intraday bias remains neutral for the moment. On the upside, break of 110.79 will resume the rebound from 108.71 to retest 111.65 high. On the downside, break of 109.10 will target 108.71 support first. Firm break there will resume the decline from 111.65 and target 38.2% retracement of 102.58 to 111.65 at 108.18 next.

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. The pattern from 101.18 could still extend with another falling leg. Sustained trading below 55 day EMA will bring deeper fall to 107.47 support and below. Nevertheless, strong break of 111.71 resistance will confirm completion of the corrective decline from 118.65 (2016 high). Further rise should then be seen to 114.54 and then 118.65 resistance.

Aussie, AUDUSD has turned higher at the end of August, with a sharp and strong retracement back above former wave four, so it appears that we have a bottom in place.

However, nothing moves in straight line so current retracement is normal, probably just temporary for a wave 2/B which can look for a support near 0.7290; even potential area for a right shoulder of HS path.

AUD/USD 4h Elliott Wave analysis chart

Daily Pivots: (S1) 1.3808; (P) 1.3829; (R1) 1.3862; More...

GBP/USD's break of 1.3890 suggests resumption of rise from 1.3601. Intraday bias is back on the upside for 1.3982 resistance next. Decisive break there will indicate that fall from 1.4248 has completed. Stronger rally would then be seen back to 1.4248 high. On the downside, however, break of 1.3725 support will turn bias back to the downside for retesting 1.3570/3601 support zone instead.

In the bigger picture, as long as 1.3482 resistance turned support holds, we'd still treat price actions from 1.4248 as a corrective move. That is, up trend from 1.1409 (2020 low) is in favor to resume. Decisive break of 1.4376 key resistance (2018 high) would indeed carry long term bullish implications. However, sustained break of 1.3482 will at least bring deeper fall to 38.2% retracement of 1.1409 to 1.4248 at 1.3164, or even further to 61.8% retracement at 1.2493.

Dollar drops broadly after data shows declining headline consumer inflation in the US, and even quicker fall in core CPI. It's adding to the Fed's case that prior surge in inflation was just transitory. DOW futures responde rather positively to the news. Strengthening risk appetite could put Yen under some pressure too. Meanwhile, Sterling is currently the strongest one for today, but there is prospect of a rebound in commodity currencies today.

Technically, GBP/USD's break of 1.3890 resistance suggests resumption of the rebound from 1.3601 for 1.3982. GBP/JPY is also extending the rise from 149.16 towards 153.42 resistance Break of these two levels will solidify near term bullishness for the Pound, and pave the way for further rally ahead.

In Europe, at the time of writing, FTSE is down -0.16%. DAX is up 0.23%. CAC is down -0.31%. Germany 10-year yield is up 0.019 at -0.310. Earlier in Asia, Nikkei rose 0.73%. Hong Kong HSI dropped -1.21%. China Shanghai SSE dropped -1.42%. Singapore Strait Times rose 0.20%. Japan 10-year JGB yield dropped -0.0011 to 0.045.

US core CPI slowed for the second month to 4.0% yoy in Aug, missed expectations

US headline CPI rose 0.3% mom, in August, below expectation of 0.4% mom. CPI core rose 0.1% mom, below expectation of 0.3% mom. Over the 12 months, headline CPI slowed to 5.3% yoy, down from 5.4% yoy, matched expectations. CPI core slowed to 4.0% yoy, down from 4.3% yoy, missed expected of 4.2% yoy. That's indeed the second straight month of decline in core CPI.

Canada manufacturing sales dropped -1.5% mom in July

Canada manufacturing sales dropped -1.5% mom to CAD 59.6b in July, worse than expectation of -1.0% mom. Sales were down in 12 of 21 industries, led by the wood product (-21.8%), aerospace product and parts (-19.0%), miscellaneous (-12.1%) and petroleum and coal product (-2.3%) industries.

The declines were partially offset by higher sales in the motor vehicles (+13.5%), primary metal (+3.9%) and motor vehicle parts (+7.6%) industries.

Bundesbank Weidmann: A gradual approach makes sense in digital Euro

Bundesbank President Jens Weidmann said a "gradual approach" might make sense in digital Euro given the risks involved. "That means a digital euro with a specific set of features and the option to add further functionalities later," he added.

In particular, he warned that in times of crises, consumers could rush to covert bank deposits to central bank money. That would destabilize the financial system.

UK unemployment rate dropped to 4.7%, employment rate rose to 75.2%

UK unemployment rate dropped slightly from 4.7% to 4.6% in the three months to July. That's still 0.6% higher than pre-pandemic level. Employment rate rose to 75.2% but remains -1.3% below pre-pandemic level. Average earnings including bonus rose 8.3% 3moy, below expectation of 8.6%. Average earnings excluding bonus rose 6.8% 3moy, also below expectation of 7.3%. Claimant count dropped -58.6k in August, versus expectation of -71.7k.

From Swiss, PPI came in at 0.7% mom, 4.4% yoy in August.

RBA Lowe explains tapering asset purchases while extending the program

In a speech, RBA Governor Philip Lowe said, "n the economy, our central message is that the Delta outbreak has delayed – but not derailed – the recovery of the Australian economy". While the outbreak is a "significant setback", there is a "clear path out of the current difficulties".

Lowe provided some explanations to the decision to taper weekly asset purchases to AUD 4B, but extend the program till February next year. Firstly, give the delay in recovery, "we considered it appropriate that we delay any consideration of a further taper in our bond purchases until next year." Continuing the with purchases will also "provide some additional insurance against downside scenarios."

Secondly, fiscal policy is considered the "more effective policy instrument in responding to the Delta outbreak." Public balance sheet can be used to "offset the hit to private incomes during the lockdown". But monetary policy "works mainly on the demand side and the effects on income are felt with a lag".

Thirdly, "by continuing to purchase government bonds at the rate of $4 billion a week we will be adding to the support provided to the economy during the recovery phase."

Lowe also reiterated that the condition for lifting interest rate will "not be met before 2024". A "tighter labor market" is needed to meet the condition, with wages growing by "at least 3 per cent", comparing to the 1.7% yoy rate in Q2.

Australia NAB business confidence rose to -5, resilience and well positioned to rebound

Australia NAB business confidence rose slightly from -7 to -5 in August. Business conditions improved from 10 to 14. Looking at some details, trading condition rose from 12 to 19. Profitability condition rose from 5 to 15. Employment condition, however, dropped from 11 to 9.

NAB said, "while the sustained lockdowns now in place will cause a large hit to activity in the quarter, the resilience seen in the August survey results suggest that the supports in place, and lingering momentum from earlier in the year, are continuing to support the economy".

"There are also signs that progress on the vaccine rollout and growing certainty that lockdowns will end in coming months are providing a reason for optimism. The economy remains well positioned to rebound once restrictions are eased."

Also released, Australia house price index rose 6.7% qoq in Q2, above expectation of 6.2% qoq.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3808; (P) 1.3829; (R1) 1.3862; More...

GBP/USD's break of 1.3890 suggests resumption of rise from 1.3601. Intraday bias is back on the upside for 1.3982 resistance next. Decisive break there will indicate that fall from 1.4248 has completed. Stronger rally would then be seen back to 1.4248 high. On the downside, however, break of 1.3725 support will turn bias back to the downside for retesting 1.3570/3601 support zone instead.

In the bigger picture, as long as 1.3482 resistance turned support holds, we'd still treat price actions from 1.4248 as a corrective move. That is, up trend from 1.1409 (2020 low) is in favor to resume. Decisive break of 1.4376 key resistance (2018 high) would indeed carry long term bullish implications. However, sustained break of 1.3482 will at least bring deeper fall to 38.2% retracement of 1.1409 to 1.4248 at 1.3164, or even further to 61.8% retracement at 1.2493.

Economic Indicators Update

Canada manufacturing sales dropped -1.5% mom to CAD 59.6b in July, worse than expectation of -1.0% mom. Sales were down in 12 of 21 industries, led by the wood product (-21.8%), aerospace product and parts (-19.0%), miscellaneous (-12.1%) and petroleum and coal product (-2.3%) industries.

The declines were partially offset by higher sales in the motor vehicles (+13.5%), primary metal (+3.9%) and motor vehicle parts (+7.6%) industries.

Full release here.

US headline CPI rose 0.3% mom, in August, below expectation of 0.4% mom. CPI core rose 0.1% mom, below expectation of 0.3% mom. Over the 12 months, headline CPI slowed to 5.3% yoy, down from 5.4% yoy, matched expectations. CPI core slowed to 4.0% yoy, down from 4.3% yoy, missed expected of 4.2% yoy. That's indeed the second straight month of decline in core CPI.

Full release here.

The Australian dollar is considerably lower in the Tuesday session. Currently, AUD/USD is trading at 0.7333, down 0.53% on the day.

Lowe confirms Covid’s toll on economy

RBA Governor Philip Lowe confirmed that the Delta variant of Covid had caused significant damage to the economy. Lowe stated that the economy would contract in Q3, with the decline “likely to be at least two per cent, and possibly significantly larger than this”. Analysts have been warning about a sizeable decline, but Lowe’s stark assessment has soured investors on the Australian dollar on Tuesday. Lowe tried to put a positive spin on things, saying that he expected this “major setback” to be temporary and that the economy would grow in the fourth quarter and into 2022.

Lowe didn’t add anything new as far as policy. He said that the Bank would have a better idea in February of how the economy was responding to the easing of restrictions rather than in November, and would therefore wait until February to review the QE programme. Lowe reiterated that the Bank would not raise interest rates before 2024 from their record low of 0.10 per cent. Interestingly. Lowe admitted he couldn’t understand why the financial markets were much more hawkish and had priced in a cash rate of 0.25% by the end of 2022 and 1.0% by the end of 2024.

On Wednesday, we’ll get a look at the mood of Australian consumers, with the release of Westpac Consumer Sentiment for September. The August reading was dismal, coming in at -4.4%. The recent lockdowns may well have soured consumer confidence and we could see another decline, which would be bearish for the Australian dollar.

AUD/USD Technical

• There is resistance at 0.7433, followed by 0.7512
• The first line of support is at 0.7310, followed by 0.7266

Hurricane Nicholas lifts oil prices

Oil prices are rising once more, with WTI still sitting comfortably above USD 70 after recording two days of gains. The OPEC monthly report on Monday gave an encouraging assessment of crude demand this year and next, with the only glitch coming in the fourth quarter as a result of the Delta variant. But with demand seen exceeding pre-pandemic levels in 2022, things are looking up which should keep OPEC+ taper plans on schedule while continuing to chip away at inventories.

The US Gulf Coast is on high alert once more, as Hurricane Nicholas makes its way towards Texas. Coming so soon after Hurricane Ida caused havoc in the region, it seems oil traders are preparing for the worst. And with a couple more months of hurricane season still to go, prices may remain well supported.

Gold eyes US inflation data

Gold is back in consolidation as nerves grow ahead of next week’s Fed meeting. The yellow metal will remain sensitive to US economic releases this week, especially today’s inflation reading, with any delay to tapering being a positive catalyst in the coming weeks.

Gold did break back above USD 1,800 late last month but the rally ran out of steam quickly, as policymakers rushed to reaffirm their belief that tapering should begin this year. Some are still of the view that it should start asap so it seems many are unmoved by the weakness we’re seeing in the US data, most notably the shocking August jobs report.

Whether they’ll remain so entrenched if the data continues to display weakness, or if inflation pressures recede, is another thing. Fear that inflation may not be as transitory as is currently believed seems to be driving the rush to taper, even as the economic recovery loses momentum and Delta spreads rapidly.

Stocks are treading water early on Tuesday as we await key US inflation data ahead of the open on Wall Street.

This isn't the most exciting week as far as major event risk is concerned but the proximity to the Fed meeting next week combined with a few select US data releases is creating some tension in the markets. We may see a lot more of this fence-sitting behaviour over the next week as traders await more taper clues from the central bank.

Policymakers have appeared keen to stress that a taper this year remains their preference but there has increasingly been a disconnect between what they're saying and what the data is doing. If we continue to see softness in the data, will the FOMC still persevere with tapering this year or could they be persuaded to hold off?

That's the question investors are craving an answer to. For now, they'll have to settle for more data to see if it piles on the pressure or provides a release. Today it's CPI inflation and its significance has only grown in the absence of Fed speak, with the blackout period now being upon us. An overshoot could cause a wobble in the markets as it will give greater cause for debate on the nature of the inflation data, transitory or something more worrying. The opposite could keep investors on board for now.

Sterling rallies on encouraging UK labour market data

The pound has been given a small boost by the UK employment data on Tuesday. The numbers were largely in line with expectations but with the unemployment rate continuing to fall and the number of payroll employees back at pre-pandemic levels, there's plenty to be optimistic about.

Of course, we can't ignore the favourable impact of the furlough scheme on the data. With it coming to a close at the end of this month, the true impact of the pandemic on UK employment will be much better understood, with a rise in unemployment and underemployment inevitable.

Still, the data is encouraging, albeit not so much that it puts any real pressure on the Bank of England to raise interest rates. The central bank can continue to be patient on that front, at least for now with the end of the year bringing the threat of another surge in Covid cases and possible restrictions.

Bitcoin higher as support pours in once more

Bitcoin is back in positive territory on Tuesday after once again finding strong support around USD 44,000 a day earlier. It was some day for the crypto space after a fake story emerged of Walmart accepting litecoin which naturally triggered a big move higher before the story was found to be false.

Cryptos are an obvious breeding ground for pump and dump schemes as prices experience extreme fluctuations in normal trading conditions. Throw in a fake headline and we have seen what can happen. Especially a headline that appears more legitimate as a result of the actions of other major companies in regards to cryptos in recent months, Tesla and Paypal for example.

From a technical perspective, little has changed on the bitcoin front. A significant break of USD 44,000 could see a sizeable correction follow, one that has been building for a number of weeks.