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The common European currency rose by 26 pips or 0.20% against the Japanese Yen on Monday. The currency pair breached the resistance line at 129.65 during Monday's trading session.

Given that a breakout has occurred from the resistance level at 129.65, bullish traders are likely to continue to drive the EUR/JPY pair higher during the following trading session.

However, the currency exchange rate could encounter resistance near the psychological level at 130.00 within this session.

Daily Pivots: (S1) 1.2577; (P) 1.2606; (R1) 1.2637; More...

USD/CAD's fall from 1.2947 is resuming by breaching 1.2577 temporary low. Intraday bias is back on the downside for 1.2421 support. Sustained break there will suggest rejection by 1.3022 fibonacci level. Rise from 1.2005 could have completed in this case and deeper fall would be seen to retest this low. On the upside, 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.

Daily Pivots: (S1) 0.7281; (P) 0.7300; (R1) 0.7314; More...

AUD/USD's rise from 0.7105 continues today and intraday bias stays on the upside for 0.7425 resistance. Sustained break there will argue that whole correction from 0.8006 has completed at 0.7105 already, just above 0.6991/7051 support zone. Stronger rise would be seen to 0.7530 support turned resistance for confirmation. On the downside, below 0.7283 minor support will turn intraday bias neutral first.

In the bigger picture, rise from 0.5506 medium term bottom could have completed at 0.8006, after failing 0.8135 key resistance. Correction from there could target 0.6991 cluster support (38.2% retracement of 0.5506 to 0.8006 at 0.7051). We'd look for strong support from there to bring rebound. However, sustained break of this level would argue that the whole medium term trend has indeed reversed. Deeper decline would be seen to 61.8% retracement at 0.6461.

Daily Pivots: (S1) 109.77; (P) 109.86; (R1) 110.03; More...

Range trading continues in USD/JPY and intraday bias remains neutral for the moment. 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. On the upside, break of 110.79 will resume the rebound from 108.71 to retest 111.65 high.

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) 0.9122; (P) 0.9154; (R1) 0.9205; More....

Intraday bias in USD/CHF remains neutral at this point as range 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, the failure to sustain above 55 week EMA (now at 0.9176) retains medium term bearishness in USD/CHF. Break of 0.8925 support should resume the whole decline form 1.0342 (2016 high) through 0.8756 low. However, break of 0.9273 resistance and sustained trading above 55 week EMA will be an early sign of bullish trend reversal. Focus will then turn to 0.9471 resistance for confirmation.

Daily Pivots: (S1) 1.3736; (P) 1.3755; (R1) 1.3777; More...

GBP/USD's rebound from 1.3601 resumes today and the break of 1.3785 minor resistance suggests that fall from 1.3982 has completed. Intraday bias is back on the upside for 1.3982 resistance first. Firm break there will pave the way back to retest 1.4248 high. On the downside, break of 1.3678 will turn bias back to the downside for 1.3570 low, and possibly further to 1.3482 key resistance turned support.

In the bigger picture, current development argues that rise from 1.1409 (2020 low) has completed at 1.4248, after failing 1.4376 resistance. Fall from there could either be correcting the rise from 1.1409, or starting another falling leg inside long term sideway pattern. In either case, sustained break of 1.3482 resistance turned support will target 38.2% retracement of 1.1409 to 1.4248 at 1.3164 first. Break there will pave the way to 61.8% retracement at 1.2493.

The US dollar continues to weaken across the board from the post-Jackson Hole hangover. The Kiwi is at a crossroads as it climbs back to the daily resistance at 0.7050, the origin of the previous sell-off.

A bullish breakout would prompt sellers to cover their bets and lay the groundwork for a reversal.

0.7100 would be the next target. However, the RSI’s multiple ventures into the overbought territory may temper the bullish fever.

The base of the momentum at 0.6940 is the key to keeping the recovery valid.

The Japanese yen inched higher after a drop in July’s unemployment rate. The pair is in a narrowing trading range following its bounce off the demand zone at 109.10.

Sentiment remains optimistic as long as price action stays above this critical level.

However, the bulls may encounter selling pressure at 110.50 from the August sell-off. A bullish breakout would attract momentum buyers and extend the rally to above 111.00.

On the downside, a break below 109.50 would lead to a retest of buyers’ resolve.

The Dow Jones 30 index holds near its historic high on upbeat investor sentiment.

The break above 35330 has signaled the bulls’ commitment to maintain the upward bias, while 35200 is fresh support.

An oversold RSI has attracted the buying-the-dips mentality.

Price action has recouped the most recent losses and is now testing the peak at 35630. A bullish breakout may extend the rally towards the milestone at 36000. A deeper pullback would lead to the critical floor at 34700.

Markets

The Jackson Hole symposium was no game changer. Still, markets yesterday concluded there is no reason to fight Powell’s cautious approach on policy normalization. US data were second tier (pending home sales and Dallas Fed manufacturing activity both printed softer). US yields held Friday’s post-Jackson Hole downward bias, declining between 1.4 bp (2y) and about 3 bp (5 & 10 y). The EMU calendar was more promising with EC confidence and German and Spanish CPI’s. EC confidence eased slightly but remains strong (117.5 from 119). German HCPI rose from 3.1% Y/Y to 3.4%, as expected. Spanish CPI surprised on the upside (3.3% from 2.9%). Even so, the combined EMU data wasn’t able to trigger an autonomous reaction on European markets. Bunds slightly underperformed Treasuries with yields varying from unchanged (2-y) to -1.7 bp (30-y). ECB’s Villeroy apparently supports the idea of reducing the pace of PEPP purchases in Q4 as financing conditions eased during summer. The dollar kept Friday’s losses. EUR/USD closed little changed at 1.1797. Easy monetary conditions, even in a context of doubt on the pace of the recovery, were enough for the S&P (+0.43%) and the Nasdaq (+0.90) to extend their record race.

This morning, news from China only raises doubts on the recovery. The China August manufacturing PMI eases from 50.4 from 50.1, but activity in the services sector tumbled below the 50 boom-bust level (47.5 from 53.3) due to restrictions to address the flare-up of corona variants. A high level committee preparing more regulation on a wide range of sectors to fight monopolies, battle pollution and shore up strategic reserves all adds to market uncertainty. Chinese equities underperform (CSI 300 loss 1.0%). Sentiment elsewhere in the region is more constructive (gains of up to 1%). The impact on the yuan is close to non-existent (USD/CNY 6.467). The dollar and US Treasury yields remain downwardly oriented. EUR/USD trades in the 1.1820 area. At 92.51, the TW DYX USD index nears the 92.47 support.

Today’s calendar contains US housing prices, Chicago PMI and consumer confidence (Conference Board). The latter is expected to ease from post-pandemic peak levels (123.0 from 129.1). In Europe, the preliminary EMU CPI data and German labour statistics are interesting. Both EMU headline (2.7% from 2.2%) and core CPI (1.5% from 0.7%) are expected to set post-pandemic peak levels. German/EMU yields are also held back by global uncertainty. Even so, both activity and inflation data suggest no need for a new downleg going into next week’s ECB meeting. For the German 10y yield, the -0.40%/-0.38% resistance is still within reach. The US 10-y yield probably needs outright positive surprises from the ISM’s and the payrolls to get the 1.37% first resistance back on the radar. The US data are also a wildcard for the dollar. In a daily perspective, the euro maintains the benefit of the doubt. The pair tries to regain the 1.1805 resistance. If it succeeds, the 1.1909/75 end July/end June peak levels are the next targets. Sterling shows no clear trend with EUR/GBP holding in the 0.8575 area.

News headlines

Scottish first minister Sturgeon sealed the innovative power-sharing agreement between her governing Scottish National party and Scottish Greens by appointing co-leaders of the Greens as “minister for green skills, circular economy and biodiversity” and “minister for zero carbon buildings, active travel and tenants’ rights”. While respective ministers Lorna Slater and Patrick Harvie won’t be part of the cabinet inner circle, they will have pivotal roles in cutting carbon emissions and introducing rent controls. Sturgeon will give her annual speech on the government’s legislative priorities later today at Holyrood (Scottish parliament). The pact with the Greens gives Sturgeon the numbers (MPs) to push for a second referendum on independence. They agreed to disagree on other areas such as aviation policy and how to measure economic success.

The European Union released the bimonthly update of its travel list. The most eye-catching change was removing the United States of America from the list, thereby advising against non-essential travel from the US into the EU. Member states still have the prejudice to lift the ban for fully vaccinated travelers. The move comes as the Delta variant spreads to the US with vaccination rates limping behind EU ones. Frustration that the US isn’t willing to drop restrictions on EU travelers probably added to the argument. EC President warned earlier this month that the EU wouldn’t allow the lack of reciprocity to drag on for weeks.