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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 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.

Full release here.

Daily Pivots: (S1) 1.1782; (P) 1.1799; (R1) 1.1829; More...

Intraday bias in EUR/USD is turned neutral as it recovered after hitting 1.1769. On the downside, below 1.1769 will resume the fall from 1.1908 to retest 1.1663 low. On the upside, however, break of 1.1850 will turn bias back to the upside for 1.1907/1908 key structural resistance zone. Sustained break there will complete a head and shoulder bottom pattern (ls: 1.1751; h: 1.1663; rs: 1.1769). Such development will turn near term outlook bullish for retesting 1.2348 high.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally remains in favors long as 1.1602 support holds, to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again. Deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289 and below.

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

Intraday bias in GBP/USD stays neutral for the moment. On the upside, above 1.3890 will resume the rise from 1.3601 for 1.3982 resistance. Decisive break there will indicate that fall from 1.4248 has completed. 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.

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

Intraday bias in USD/CHF remains mildly on the upside, as rise from 0.9017 is resuming for 0.9273 resistance first. Firm break there will solidify near term bullishness for 0.9471 resistance next. However, break of 0.9149 support will turn focus back to 0.9098 support 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.

Financial markets remained eerily muted overnight, trading mostly sideways and leaving me asking myself, “Is September the new May?” A lack of tier-1 data is partially to blame as the street remains in limbo, torn over uncertainty about the Fed taper and its implications to juicy valuations everywhere, the delta-variant, inflation, uninspiring data from China and whether the global recovery is becoming more k-shaped than K-SHAPED.

That’s not to say there hasn’t been intra-day volatility. Another Fed official added their name to the tapering roster overnight, pushing the US dollar higher, although the rally quickly fizzled out. Oil prices moved higher as OPEC raised 2022 consumption forecasts above pre-pandemic levels. Stocks in the US finally attracted some dip-buyers after several slightly negative sessions.

If everything else is quiet, we can always rely on cryptos to provide some amusement. Litecoin, (whatever that is) spiked over 30% to nearly USD 240.00 of fiat currency after a fake press release saying Walmart would accept it. Walmart quickly denied any such thing leaving a tier-1 news outlet or two with digital egg on their face and some questions to be asked by management. Litecoin dragged the rest of the crypto “asset” space higher on the news before the pump and dump, I mean rally, because digital assets are becoming mainstream, don’t you know, fizzled out, and bitcoin tanked. Mainstream financial assets, um….check, 30.0% intra-day move up and down, errrrrrrrrrrr check.

Markets eye US inflation

Most eyes appear to be on the US inflation data tonight, with Headline Inflation MOM expected at 0.40% and Core Inflation MoM at 0.30%. Nobody was talking about tapering and inflation after the disastrous Non-Farm Payrolls two weeks ago; the fact that markets suddenly have a bee in their bonnet now probably tells you how quiet it is. With markets back on inflation and tapering watch, the path of least resistance is higher prints from the data. In that circumstance, I expect the US dollar to spike, US yields to rise, and equities to probably have a bad day at the office. But given the lack of momentum anywhere at the moment, I’m not sure it will last. The biggest casualty could be gold, which has been hovering on borrowed time at USD 1800.00 an ounce. Ironic, really, when it’s supposed to be an inflation hedge. I have long since concluded that gold does hedge inflation, but only Latin American-style inflation. We’re not there yet.

Today in Asia, Australian NAB Business Confidence tumbled to -5, showing the effects of the extended lockdowns in Q3 in New South Wales and Victoria. However, the House Price Index leapt by 6.70% QoQ for Q2. The result is a nil-all draw for financial markets, and I wouldn’t bet against a rapid rebound once restrictions are eased in the lucky country.

I noted with amusement that the Australian Prime Minister will once again be escaping from Alcatraz/Australia next week, on another junket, I mean essential diplomatic mission, to the United States to meet President Biden. That is despite locking his overseas-based citizens out of the country and locking his domiciled citizens in the country. Hopefully, no large forest fires break out in Australia while he is away, explaining to Joe the nature of his unhealthily close bromance with former President Trump, or another extended holiday to Hawaii beckons.

Japan’s Industrial Production and China FDI (YTD) are released this afternoon. Neither is likely to seriously move the dial with Japan markets myopically focused on post-Suga stimulus hopes and China releasing a bumper set of data tomorrow. That will be Asia’s highlight for the week. India WPI could see some jitters in onshore equities if the print comes in well north of 11.0%.

Whether US inflation impacts or not, we will probably see this price action continue until next week’s FOMC outlook. I would be happy to be wrong, though.

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

Sideway trading continues in USD/JPY and intraday bias remains neutral first. 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.

On Monday, the US Dollar declined by 51 pips or 0.40% against the Canadian Dollar. The currency pair breached the 50– hour simple moving average during Monday's trading session.

Everything being equal, the exchange rate could continue to edge lower during the following trading session. A breakout through the lower boundary of an ascending channel pattern could occur.

However, if the channel pattern holds, the USD/CAD currency exchange rate could make a pullback towards the 1.2750 area within this session.

On Monday, the GBP/JPY currency pair bounced off the support level formed by the 200– hour simple moving average at 151.80. As a result, the Pound Sterling surged by 42 pips or 0.27% against the Japanese Yen during Monday's trading session.

All things being equal, the exchange rate could continue to edge higher during the following trading session. The potential target for buyers will be near the 152.80 level.

However, the currency exchange rate could encounter resistance at 152.60 within this session.

On Monday, the Australian Dollar rose by 30 pips or 0.40% against the US Dollar. The surge was stopped by the 50– hour simple moving average during Monday's trading session.

If the resistance level, formed by the 50– hour SMA at 0.7367 holds, bearish traders could pressure the AUD/USD exchange rate towards the 0.7310 level during the following trading session.

However, if the currency exchange rate breaks the resistance line, the next target for buyers would be near the 0.7400 area.