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BoJ Deputy Governor Masazumi Wakatabe said in a speech, the Japan economy has remained in a "severe state". But the bank judged that "pick-up trend in the economy as a whole has been maintained, supported by positive developments in the corporate sector on the back of a firm recovery in overseas economies".

"Positive developments are likely to spread from the corporate sector to the household sector as the impact of COVID-19 wanes gradually, mainly due to progress with vaccinations," he added. "The economic recovery is expected to become clear."

The key to realizing the positive outlook is "whether a virtuous cycle operates firmly". That is, "whether an increase in domestic and overseas demand expands household income and corporate profits, and in turn leads to a further rise in spending".

Full release here.

China Caixin PMI Manufacturing dropped to 49.2 in August, down from 50.3, below expectation of 50.2. That's the first contraction reading since April 2020. Caixin said output and new orders both declined modestly. Supply chain delays worsened amid uptick on COVID-19 cases. Companies trimmed purchasing activity and stagging levels.

Wang Zhe, Senior Economist at Caixin Insight Group said: "The latest Covid-19 resurgence has posed a severe challenge to the economic normalization that began in the second quarter of last year... Official economic indicators for July were worse than the market expected, indicating mounting downward pressure on economic growth. Authorities need to take a holistic view and balance containing Covid-19, stabilizing the job market, and maintaining stability in supply and prices."

Full release here.

Japan PMI Manufacturing was finalized at 52.7 in August, just slightly down from July's 53.0. Markit said output and new orders increased and slower rates. Export orders declined for the first time in seven months. Lead times lengthened to greatest extent in a decade amid ongoing disruption.

Usamah Bhatti, Economist at IHS Markit, said: "Latest PMI data pointed to a sustained expansion in the Japanese manufacturing sector midway through the third quarter.... A sharp rise COVID-19 cases in South East Asia was among the key factors listed by Japanese manufacturers for the easing in demand, both domestically and externally... Concurrently, severe supply chain disruption partly caused by pandemic restrictions and raw material shortages remained a dampener on production and orders."

Full release here.

Australia AiG Performance of Manufacturing dropped sharply from 60.8 to 51.6 in August. Looking at some more details, production dropped from -11.6 pts to 50.2. Employment dropped -9.4 to 51.4. New orders dropped -5.4 to 57.1. Supplier deliveries dropped -18.3 to 41.3. Exports dropped -8.5 to 45.1.

Ai Group Chief Executive Innes Willox said: "August saw a steep retreat from the healthy expansion in manufacturing performance that has characterised most of this year. Lockdowns across the country, particularly in NSW and Victoria were the major detractor from performance with ongoing strength outside of these states sufficiently strong to maintain the national performance in positive territory (although by a slim margin).

Full release here.

Short-term Elliott wave view in Silver (XAGUSD) suggests the rally from August 9, 2021 low is unfolding as a double three Elliott Wave structure. Up from August 9 low, wave W ended at 24.04 and dips in wave X ended at 22.85. Internal subdivision of wave X unfolded as a Flat structure. Wave ((a)) ended at 22.98, wave ((b)) ended at 23.954, and wave ((c)) of X ended at 22.86. The metal has broken above wave wave W at 24.04 confirming wave Y has started.

Up from wave X, wave (i) ended at 23.25 and pullback in wave (ii) ended at 22.95. The metal resumes higher in wave (iii) towards 23.69, wave (iv) ended at 23.51, and final leg wave (v) of ((a)) ended at 23.95. Wave ((b)) pullback has ended at 23.32 as a zigzag structure. Up from wave ((b)), wave (i) ended at 24.21 and pullback in wave (ii) ended at 23.78. Near term, as far as pivot at 22.86 low stays intact, expect the metal to extend higher in wave (iii) of ((c)). Potential target higher is 100% – 123.6% fibonacci extension from August 9, 2021 low at 24.55 – 24.96.

Silver 60 Minutes Elliott Wave Chart

Key Highlights

• Crude oil price started a fresh increase from the $62.00 support zone.
• There was a break above a major bearish trend line at $65.85 on the 4-hours chart of XTI/USD.
• EUR/USD is consolidating near 1.1800, but GBP/USD was rejected near 1.3800.
• The US ISM Manufacturing Index could decline slightly from 59.5 to 58.6 in August 2021.

Crude Oil Price Technical Analysis

After trading as low as $62.02, crude oil price started a fresh increase against the US Dollar. The price broke the $65.00 resistance zone to move into a positive zone.

Looking at the 4-hours chart of XTI/USD, the price even climbed above the $65.50 resistance zone. There was a clear break above a major bearish trend line with resistance at $65.85.

The price climbed above the $68.00 level and the 100 simple moving average (4-hours, red). However, it is now facing a strong resistance near the $69.75 level and the 200 simple moving average (4-hours, green).

A high is formed near $69.73 and the price is now consolidating gains. On the upside, an initial resistance is near the $67.75 level and the 200 simple moving average (4-hours, green). The first major resistance is near the $70.00 level, above which the price could rise towards $73.50.

An immediate support is near the $68.00 level. The first major support is near $67.50 and the 100 simple moving average (4-hours, red). Any more losses could open the doors for a move towards $65.80 support zone.

Looking at EUR/USD, the pair climbed above the 1.1800 resistance, but it is struggling to continue higher. Besides, GBP/USD failed to clear the 1.3800 resistance.

Economic Releases to Watch Today

• Germany’s Manufacturing PMI for August 2021 - Forecast 62.7, versus 62.7 previous.
• Euro Zone Manufacturing PMI for August 2021 – Forecast 61.5, versus 61.5 previous.
• UK Manufacturing PMI for August 2021 – Forecast 60.1, versus 60.1 previous.
• US Manufacturing PMI for August 2021 – Forecast 61.2, versus 61.2 previous.
• US ISM Manufacturing Index for August 2021 – Forecast 58.6, versus 59.5 previous.

Australia GDP grew 0.7% qoq in Q2, above expectation of 0.5% qoq. Over 2020-21, the economy grew 1.4%. Head of National Accounts at the ABS, Michael Smedes said: "Domestic demand drove growth of 0.7 per cent this quarter which saw continued growth across household spending, private investment and public sector expenditure. Lockdowns had minimal impact on domestic demand, with fewer lockdown days and the prolonged stay at home orders in NSW only commencing later in the quarter".

Full release here.

STOCKS

Dow and Dax are in a corrective decline while the Asian indices trade higher. Nikkei, shanghai, Nifty, Sensex are in the positive and could face immediate resistances but we need to watch and see if that produces a sharp decline or not.

Dow (35360.73, -39.11, -0.11%) can fall to 35250 before rising back towards 35500/750 in the longer run. The index looks bearish just now. Watch price action near 35250.

DAX (15835.09, -52.22, -0.33%) has dipped too but while above 15800-15600 there is scope to rise back towards 16000-16200 in the near term.

Nikkei (28446.81, +357.27, +1.27%) has risen sharply above 28000 contrary to our expectation. While that sustains, the view is bullish towards 29000 and 30000 eventually.

Shanghai (3577.62, +31.08, +0.88%) is holding above 3500.Immediate view is bullish towards 3580/3600 in the coming days.

Nifty (17132.20, +201.15, +1.19%) rose above resistance near 17100 yesterday and while that sustains it can rise towards higher resistance towards 17400. Failure to sustain above 17100 can drag it lower towards 16700/800 in the near term.

Sensex (57552.39, +662.63, +1.16%) has risen above 57500 contrary to our expectation of facing rejection there. Immediate resistance is seen near current levels which if holds can push the index down today also taking along Nifty. On the alternative, failure to fall from current levels can take it higher to 58500 eventually.

COMMODITIES

Gold is stable and trading below 1820 which can drag it lower to 1800 in the near term. Bullishness will only come above 1820. Silver has dipped and could trade within the broad 23.0-24.5 region. Copper has dipped and can fall towards 4.30/25 before again bouncing back. Crude prices have risen and could test respective resistances before again falling in the medium term.

Brent (71.99) and WTI (68.86) have risen yet again. We continue to look at immediate resistances at 72.50-74 on Brent to hold while WTI has similar resistance near 70. While the respective resistances hold, we may expect the price to dip in the medium term. Brent could trade within 72.50-67.50 for a few sessions.

Gold (1815.80) needs to sustain and break above 1820 in order to move up towards 1840/60. Else a sideways range of 1820-1800 can hold for now.

Silver (23.91) fell from 24.27 and while below 24.50, a dip towards 23 can be seen soon. A strong sustained break above 24 will be needed for the view to be bullish towards 24.5 again.

Copper (4.3280) has fallen and could test 4.30/25 in the near term. The price has bullish possibilities while above 4.20/25. On the upside resistance is seen near 4.40/50.

FOREX

Dollar Index has risen sharply leading to corrective movements in all currency pairs. Euro has fallen to 1.18 and while below 1.1850, view is bearish. Aussie and Pound have fallen too and could remain low for a few sessions before rising back sharply again. EURJPY looks bullish but we need to see if it breaks above 130.50 to head towards 131+ levels. USDINR can bounce from 72.90/75 support levels. USDJPY looks bullish but we need to see if it sustains above 110.50/80.

Dollar Index (92.75) bounced back sharply from 92.40 and is headed higher just now. If the bounce sustains, it can rise towards 93 again in the near term. Watch price action near current levels to see if the rise is short lived.

Euro (1.1801) has fallen from 1.1845 as warned yesterday. While below 1.1850, the exchange can fall to 1.1770 on the downside before again moving up. Immediate resistance of 1.1850 needs to be broken and sustained to be able to go strongly bullish in the medium term.

EURJPY (130.06) continues to rise and can test 130.50 in the next few sessions. Whether it will break above 130.50 is to be seen in which case the cross can attempt to rise further towards 131.30. Else a rejection from 130.50 may be seen.

Dollar-Yen (110.21) has risen to re-test 110.20 and if that holds, the pair can rise sharply towards 110.50/80 in the near term indicating strong bullishness moving forward. Watch price action over the next few sessions.

Aussie (0.7314) tested 0.7341 and declined from there. If immediate resistance near 0.7350 holds, we may have to allow for some ranged movements within 0.7350 and 0.7280 before breaking on either side of this range. A break above 0.7350 is needed to make the exchange bullish towards 0.74 or higher.

Pound (1.3734) has been pushed off sharply from 1.38 as warned and while that holds, Pound may fall sharply towards 1.37-1.3680 in the near term.

USDCNY (6.4629) dipped from 6.4718 and while that holds, the pair can be ranged below 1.4750/20. Note that there is support at 6.45 on the downside which cannot be negated and while below 6.48 immediate view could be to see a broad range of 6.48-6.45.

USDINR (73.0) has immediate support at 72.90 which if holds can take the pair higher towards 73.20/40 in the coming sessions. Failure to bounce from 72.90 will open up chances of a further fall to support zone of 72.75/50 on the downside. Watch price action while above 72.90 today.

INTEREST RATES

The US Treasury yields have bounced back again yesterday and are keeping alive the chances of seeing a corrective rally. It will have to be seen if the yields can sustain the bounce. The German Yields have risen sharply across tenors following an ECB member’s comments to begin reducing the asset purchase. The corrective rally that we have been mentioning over the last few days is happening now. The 5Yr GoI has an important support near current levels which has to hold to see a bounce back move from here.

The US 2Yr (0.21%), 5Yr (0.79%), 10Yr (1.33%) and the 30Yr (1.94%) Treasury yields have risen-back. Inability to sustain the dip below 1.3% (10Yr) and 1.9% (30Yr) keeps the chances alive of seeing the seeing the corrective rise to 1.45%-1.45% (10Yr) and 2%-2.1% (30Yr) before the broader downtrend resumes. The yields have to sustain above 1.3% (10Yr) and 1.9% (30Yr) to avoid a fall back to 1.2%-1.18% (10Yr) and 1.8%-1.75% (30Yr) from here itself. Overall it’s a wait and watch situation for now.

The German 2Yr (-0.73%), 5Yr (-0.68%), 10Yr (-0.39%) and 30Yr (0.09%) yields have risen sharply across tenors. The expected rise to -0.30%/-0.25% (10Yr) and 0.10%-0.20% (30Yr) is happening now. Thereafter we expect the yields to reverse lower and resume the broader downtrend.

The 5Yr GOI (5.6507%) had come-off sharply from the high of 5.6757% yesterday. 5.63% will be an important support which has to hold in order to produce a bounce-back move to 5.68%-5.70% again. A break below 5.63% can drag it to 5.6% and even lower. The price action at 5.63% will need a close watch.

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Facing resistance around $1,833

Gold was given a helping hand by Jerome Powell and the Fed on Friday when they signalled that they can be patient on tapering and that it is not linked to interest rates.

The comments brought US yields and the dollar lower and triggered a rally in gold which generally does well in more accommodative environments.

But while gold did rally and significantly break above $1,800, it still remains a little short of the July highs around $1,833 where it repeatedly ran into resistance.

So this remains the key barrier for gold . A break above here could be viewed as a very bullish signal for the metal. But will it have such a significant breakout in it?

While the Fed told investors what they wanted to hear on Friday, tapering is still likely this year, even if not in September. And rate hikes won’t be far behind, whether linked to tapering or not.

Gold may have been given a lift in the near term, but the medium-term doesn’t look so bright for the yellow metal. Will that hinder it around $1,833 this time around as well?

One thing that may help it above here and to generate some real upside is poor US data which could cast real doubt on a taper at all this year, especially if accompanied by a continued surge in delta cases.

A move above $1,833 could see traders eyeing up the early summer run towards $1,900. Perhaps a little ambitious looking right now but a lot has changed in the last few weeks. Who knows what the next few holds, starting with the jobs report on Friday.