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Daily Pivots: (S1) 0.9117; (P) 0.9139; (R1) 0.9161; More....

Intraday bias in USD/CHF remains neutral as sideway trading continues. On the downside, break of 0.9098 will target 0.9017 support first. Further break there will likely resume the decline from 0.9471 through 0.8925 low. On the upside, break of 0.9241 resistance should resume the rise from 0.8925 through 0.927.

In the bigger picture, USD/CHF is still struggling around 55 week EMA (now at 0.9176) 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) 109.52; (P) 109.79; (R1) 109.99; More...

Intraday bias in USD/JPY remains neutral as sideway trading continues. 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.

Daily Pivots: (S1) 0.7405; (P) 0.7441; (R1) 0.7487; More...

Intraday bias in AUD/USD remains mildly on the upside at this point. Current development suggests that whole correction from 0.8006 has completed at 0.7105 already, just above 0.6991/7051 support zone. Rise from 0.7105 should target 0.7530 support turned resistance first. Sustained break there will bring retest of 0.8006 high. On the downside, break of 0.7394 minor support will turn intraday bias neutral and bring consolidations first.

In the bigger picture, with 0.6991 cluster support (38.2% retracement of 0.5506 to 0.8006 at 0.7051) intact, we're seeing price action form 0.8006 as a correction only. That is, up trend from 0.5506 low would resume after the correction completes. In that case, main focus will be 0.8135 key resistance (2018 high). Sustained break there will carry larger bullish implications. However, sustained break of 0.6991 will argue that the whole medium term trend has indeed reversed.

Key takeaways

• The delta variant will continue to create headwinds for the global economy amid slow vaccination roll-out
• Global macro momentum is set to ease further amid fading boost from stimulus and stalling re-opening of economies amid continuing virus challenges.
• The balance of risk to our growth outlook is to the downside, while supply side problems could lead to more persistent inflation problems stoking stagflation concerns.

COVID-19 remains a big problem for the world economy

The more contagious delta variant continues to spread fast in most of Asia and in various US states. In contrast, the situation in Europe has improved following the Delta variant wave and steady roll-out of vaccine, with Euro Area seeing lower new infections while UK cases are rising again following widespread re-opening of its economy. Overall, for Europe and other regions that have vaccinated large parts of their populations, hospitalizations and deaths remain clearly below earlier levels, which is not the case in the US at the moment. Another exception is Israel, which has seen a surge in hospitalised COVID-19 patients, as vaccines appear to have lost their effectiveness earlier than thought.

Roll-out of vaccination has stalled in the US where a large part of the population remains sceptical about the vaccines. In most of Asian countries, roll-out of vaccines is also advancing slowly given the lack of available vaccines, logistical problems in rolling out vaccines and significant vaccine scepticism, while vaccines are being steadily rolled-out in most Latin American and European countries.

At the current pace, it will be difficult to reach the necessary vaccination level before the cold winter period in the US and Europe, where the contagious Delta variant will have better conditions to spread. Hence compared with our assumptions in our spring forecast that by the fall some degree of herd immunity would be achieved, countries like the US and in Asia, but even in Europe seems vulnerable to renewed virus problems which could trigger select lockdowns especially in the service sector. This also means that we
are most likely still discussing and talking about COVID-19 next year.

Full report in PDF.

Daily Pivots: (S1) 1.2496; (P) 1.2528; (R1) 1.2561; More...

Intraday bias in USD/CAD stays mildly on the downside at this point, at fall from 1.2947 is in progress for 1.2421 support. Sustained break there will argue that whole rise from 1.2005 has completed at 1.2947 already. Near term outlook will be turned back for 1.2301 support first. On the upside, however, break of 1.2701 minor resistance will retain near term bullishness, and turn bias back to the upside for retesting 1.2947 high.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Dollar recovers mildly in quiet Asian session today, but there is no sign of a sustainable rebound yet. Most major pairs and crosses are staying inside Friday's wide range. Strong rally is seen in Japanese Nikkei today, but there is little reaction in FX. Trading could remain subdued with US and Canada on holiday. Focuses will turn to three central bank meetings this week, including RBA, BoC and ECB.

Technically, our focuses will stay on 1.1907 key near term resistance in EUR/USD. Sustained break there will argue that whole correction from 1.2348 has completed and bring further rise back towards 1.2265/2348 resistance zone in the next few weeks. Similarly, firm break of 1832.47 resistance in Gold will also raise the chance that correction from 2074.84 has completed. Both developments, if happen, would seal the case for Dollar bearishness, at least for the near term.

In Asia, at the time of writing, Nikkei is up 1.80%. Hong Kong HSI is up 0.51%. China Shanghai SSE is up 1.02%. Singapore Strait Times is up 0.29. Japan 10-year JGB yield is up 0.0052 at 0.047.

Nikkei accelerates up, extending Suga rally

Japan Nikkei 225 extended rises sharply today, up more than 1.7% or 500 pts at the time of writing, overpowering other Asian markets. It's indeed on track to 30k handle again in the next few day, if the momentum could sustain.

The upside acceleration started last week, after Prime Minister Yoshihide Suga surprisingly declared he would not run for leadership of the ruling Liberal Democratic Party in September 29.

Suga explained that he'd like to focus on coronavirus measures, as "doing both takes enormous energy". But it's believed that his light pandemic restrictions and the spread of the infections prompted much grieve among both consumers and business owners. Stepping down as party leader, and prime minister now would lower LDP's chance of losing badly in the upcoming general election later in the year. The development gave extra support to the Japanese stock markets.

EU Gentiloni: A mistake for ECB to make conclusions too soon

EU Economy Commissioner Paolo Gentiloni urged ECB to monitor Eurozone inflation "very accurately", without making conclusions too soon on scaling back monetary stimulus. He added, "I think it would be a big mistake, because the mainstream consensus is on the fact that this inflation is still a temporary phenomenon."

He said Europe must avoid the "mistakes" of going "too soon back to normal", as they did during the global financial crisis.

RBA and ECB to meet, to taper or not to taper

Three central banks will meet this week and RBA would be the most interesting one to watch. The central bank indicated in August that it would stick to its tapering plan to lower weekly asset purchases from AUD 5B to AUD 4B starting September. But pandemic situation worsened quickly since then, with the two biggest states now fighting with surging COVID cases, and business struggling with tough lockdowns. It's now generally expected that RBA would decide to delay tapering, with some analysts calling for an increase. Yet, at this point, it's still unsure which path RBA would take.

ECB would be another interesting one, as the central will need to decide what do to with PEPP asset purchases in Q4. Purchases pace had be significantly higher in Q2 and Q3. Given the solid improvement in the economy, as well ass fast vaccination, there is room for ECB to bring purchase pace back to the level during Q1. That would also set the stage for finally ending PEPP next March.

As for BoC, it would probably be a non-event, as there is no urgency for policymakers to make any changes ahead of federal elections on September 20. Also, BoC would likely wait for the new economic projections in October before adjusting anything including forwards guidance.

Fed will also release Beige Book economic report. As for data, Eurozone Sentix investor confidence, Germany ZEW, UK GDP and production, Canada employment, US PPI, New Zealand manufacturing sales, China trade balance and inflation will be mostly watched. Here are some highlights for the week:

• Monday: Australia MI inflation gauge; Germany factory orders; Eurozone Sentix investor confidence; UK PMI construction.
• Tuesday: Australia AiG services, RBA rate decision; Japan household spending, average cash earnings, leading indicators; China trade balance; Swiss unemployment rate, foreign currency reserves; German industrial production, ZEW economic sentiment; Eurozone GDP revision.
• Wednesday: Japan GDP final, current account, bank lending; France trade balance; Italy retail sales; BoC rate decision, Ivey PMI; Fed's Beige book.
• Thursday: New Zealand manufacturing sales; China CPI, PPI; Germany trade balance; ECB rate decision; US jobless claims.
• Friday: Germany CPI final; UK GDP, trade balance, productions; France industrial production; Italy industrial production; US PPI; Canada employment.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2496; (P) 1.2528; (R1) 1.2561; More...

Intraday bias in USD/CAD stays mildly on the downside at this point, at fall from 1.2947 is in progress for 1.2421 support. Sustained break there will argue that whole rise from 1.2005 has completed at 1.2947 already. Near term outlook will be turned back for 1.2301 support first. On the upside, however, break of 1.2701 minor resistance will retain near term bullishness, and turn bias back to the upside for retesting 1.2947 high.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Economic Indicators Update

Japan Nikkei 225 extended rises sharply today, up more than 1.7% or 500 pts at the time of writing, overpowering other Asian markets. It's indeed on track to 30k handle again in the next few day, if the momentum could sustain.

The upside acceleration started last week, after Prime Minister Yoshihide Suga surprisingly declared he would not run for leadership of the ruling Liberal Democratic Party in September 29.

Suga explained that he'd like to focus on coronavirus measures, as "doing both takes enormous energy". But it's believed that his light pandemic restrictions and the spread of the infections prompted much grieve among both consumers and business owners. Stepping down as party leader, and prime minister now would lower LDP's chance of losing badly in the upcoming general election later in the year. The development gave extra support to the Japanese stock markets.

STOCKS

Corrective dip is seen in Dow and Dax but overall seem to be ranged within the broad 35250-35500 and 15600/15550-16000 range respectively for the near term. Nikkei has risen very sharply today,a further rise towards 30000 is possible in the coming sessions.Shanghai has come down slightly after making a high of 3613.948.While above 3550,the view is bulish to see a test of 3700.Nifty and Sensex have risen well in line with our expectations.Immediate resistance can be seen at 17400 and 59000 which can cap the upside for now.

Dow (35369.09, -74.73, -0.21%) has dipped a bit but is stuck between 35250 and 35500 since the past few sessions. A break above 35500 is needed for a rise towards 35750 in the medium term. Else we may continue to look for a sideways range of 35250-35500 to hold for a few more sessions.

DAX (15781.20, -59.39, -0.37%) broke below 15800 and can test 15600 before bouncing back from there. Overall a broad range of 15600/15550-16000 can be seen in the near term.

Nikkei(29638.17, +510, +1.75%) has risen very sharply today and has broken the level of 29000.The view is bullish to see a test of 30000 in the coming sessions.

Shanghai(3611.51, +29.77, 0.83%) has come down slightly after making a high of 3613.948.While above 3550 the view is bullish to see a test of 3700-3750 in the coming sessions. If a fall below 3550 is seen the shanghai can revisit 3500 levels.

Sensex(58129.95, +277.41 , +0.48%) rose sharply on Friday. A rise towards 58500-59000 is possible in the coming sessions before we see a corrective dip.

Nifty(17323.60, +89.45, 0.52%) rose well on Friday and is heading towards our expected level of 17400 to be tested in this week.A corrective dip from 17400 can take the index down towards 17000and even 16850-16800 before the uptrend resumes.A strong break above 17400 can open doors for a fresh rally and new upside targets.

COMMODITIES

Crude prices have fallen from respective resistances and while they hold, we may expect a fall towards 70-67.50 in Brent and towards 67 in WTI in the near term. Gold has risen but needs to rise above 1840 to head higher. Else a fall back to 1830-1800 can be seen in the medium term. Silver needs to sustain above 25 to test 26 else a fall from 25 would be bearish for a fall to 24-23.50 in the near term.

Brent (71.84) and WTI (68.38) fell from 73.69 and 70.53 respectively and look bearish for the near term. Brent is likely to hold within the broad 74-67.50 region while WTI has fallen from immediate resistance near 70.50 and could fall further towards 68-67 in the near term. Immediate view is bearish for crude.

Gold (1829.90) has risen but we need to see if the price manages to rise above 1840 to head higher towards 1860/80 in the medium term. Any fall from 1830/40 can again bring Gold back to the 1800-1830 region.

Silver (24.81) has broken above 24.50 but unless the price breaks above 25 it would be difficult to continue with the upward momentum. Watch price action to see if it breaks above 25 or falls off from there towards 24-23.50 again. Break above 25, if seen would be bullish to see 26.

Copper (4.3240) has risen and could re-test 4.40/45 in the near term. Immediate view is bullish while above 4.25.

FOREX

Dollar Index has dipped but while above 91.75 it can rise back to 92.50. Euro has fallen from 1.19 but it is needed to see if it falls below 1.1850. EURJPY needs to break above 130.50 to head higher else a fall back to 129.50-129 is possible. Aussie and Pound may fall in the near term as immediate resistances can hold. USDCNY fell sharply to 6.43 but has bounced back from there. While above 6.45, it can rise back to 6.47/48 in the near term. USDINR can be ranged within 72.90-73.30 and unless a break on either side is seen, it is difficult to predict immediate clarity.

Dollar Index (92.159) tested 91.94 before bouncing back from there. As expected the index is holding above 91.75 and while that holds, a bounce back to 92.40/60 is possible. Watch immediate support at 91.75.

Euro (1.1877) tested 1.19 before falling back from there. It is needed to see if the exchange holds above 1.19 or sees a corrective fall to 1.1850.

EURJPY (130.29) is trading below 130.50 but has scope to rise again and head towards 131-132 eventually.

Dollar-Yen (109.81) has support at 109.60 and while that holds, a bounce back to 110-110.40 is possible. Any break below 109.60 if seen can take it down to 109 in the medium term.

Aussie (0.7439) has risen well over the past few days and tested resistance at 0.75. If resistance at 0.75 holds, Aussie can fall to 0.74-0.7350 in the near to medium term. Watch price action near 0.75 over the next few sessions.

Pound (1.3857) fell sharply from 1.39. While that holds, a dip to 1.38-1.37 is possible. A break above 1.39 can be further bullish for the medium term.

USDCNY (6.4538) fell sharply to 6.4336 before bouncing back from there. If the price sustains above 6.45, it can rise towards 6.47/48 in the near term.

USDINR (73.9820) seems to be in a corrective range of 72.90-73.20/30 and needs to break on either side to see which way the pair moves in the near term. A break above 73.30 can rise to 73.40/50 before a fall is seen

INTEREST RATES

The US Treasury yields have risen after the weak jobs data release on Friday. The US Non-Farm Payroll increased by 235K as against the market expectation to see an increase by 750K. As mentioned on Friday we see high chances of the yields moving up further before resuming the broader downtrend again. The German yields continue to move up and retain the corrective rally. There is room to move up further in the coming days. The 10Yr and 5Yr GoI have dipped further and keep our bearish view intact. The yields extend the fall this week as well.

The US 2Yr (0.21%) and the 5Yr (0.78%) Treasury yields remain stable while the 10Yr (1.32%) and the 30Yr (1.94%) have risen back again. The 30Yr keeps intact the chances of breaking above 2% and moving up to 2.1% in line with our expectation. The 10Yr has to sustain above 1.3% in order to move up towards 1.4%-1.45%. Thereafter we expect the yields to fall-back and keep the broader downtrend intact.

The German 2Yr (-0.73), 5Yr (-0.68%), 10Yr (-0.36%) and 30Yr (0.14%) yields have moved up further across tenors in line with our expectation. The 10Yr is heading upto -0.30%/-0.25% and the 30Yr to 0.20% as expected. The price action thereafter will need a close watch to see for a reversal and the resumption of the broader downtrend

The Indian 10Yr GoI (6.1569%) has declined further and can head down towards 6.1% as expected. The downside can extend even up to 6% over the medium-term. The 5Yr GOI (5.5786%) has also come down further and keeps our bearish view intact of seeing 5.5% in the coming days.

Key Highlights

• EUR/USD started a decent increase above the key 1.1800 resistance zone.
• It broke a major bearish trend line at 1.1770 on the 4-hours chart.
• GBP/USD also gained traction and it surpassed the 1.3800 resistance.
• USD/JPY extended its decline below the 110.00 support.

EUR/USD Technical Analysis

The Euro formed a support base above the 1.1665 level against the US Dollar. EUR/USD started a steady increase and it broke the key 1.1800 resistance zone.

Looking at the 4-hours chart, the pair was able to clear a major bearish trend line at 1.1770. It settled above the 1.1800 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

It even broke the 1.1850 resistance and spiked above 1.1900. A high was formed near 1.1909 and the pair is now consolidating gains.

An immediate support is near the 1.1850 level. It is close to the 23.6% Fib retracement level of the upward move from the 1.1663 swing low to 1.1909 high. The next major support is near 1.1800.

The main support is forming near the 1.1780 level and the 200 simple moving average (green, 4-hours). It coincides with the 50% Fib retracement level of the upward move from the 1.1663 swing low to 1.1909 high.

On the upside, an immediate resistance is near the 1.1900 zone. The next major resistance could be 1.1940, above which EUR/USD could test 1.2000.

Looking at GBP/USD, the pair was able to clear the main 1.3800 resistance and it even spiked above the 1.3850 level.

Economic Releases

• German Factory Orders for July 2021 (MoM) – Forecast -1.0%, versus +4.1% previous.
• UK's Construction PMI for August 2021 – Forecast 56.9, versus 58.7 previous.

EU Economy Commissioner Paolo Gentiloni urged ECB to monitor Eurozone inflation "very accurately", without making conclusions too soon on scaling back monetary stimulus. He added, "I think it would be a big mistake, because the mainstream consensus is on the fact that this inflation is still a temporary phenomenon."

He said Europe must avoid the "mistakes" of going "too soon back to normal", as they did during the global financial crisis.