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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.

EUR/USD

Current level - 1.1806

At the time of writing, the currency pair is consolidating around the level of the psychological resistance at 1.1800. A confirmation of the breach will pave the way for a test of the next significant resistance zone at around 1.1893, but before that, the bulls will need to overcome the minor resistance at 1.1830. The main support remains at around 1.1700. Today, there is no expected economic news and statements that will affect the market.

USD/JPY

Current level - 109.81

The situation with the Ninja remains unchanged after the unsuccessful breach of the support zone at 109.73 from the previous trading session. The currency pair continues to trade in the narrow range between 109.48 - 110.18 and only a breach of one of the boundaries of the channel could determine a clearer direction for the USD/JPY.

GBP/USD

Current level - 1.3761

At the time of writing, the consolidation around the resistance level at 1.3765 is not violated, with the most likely scenario being for an attempt to overcome the mentioned level. However, if the dollar manages to gain some positions against the British pound, we may witness a new depreciation towards the support zone at 1.3723, followed by the zone at 1.3600.

Nasdaq hit fresh record on Monday, as Apple, Google, Facebook traded at all time highs at the wake of Jerome Powell’s Jackson Hole speech, where Powell said tapering is coming and the markets priced the fact that we have no details on the start date and on the pace of winding down the bond purchases.

Curious times

Data-wise, the US jobs data will be the focus of the week, with the ADP report due Wednesday and NFP print due Friday. The expectations are strong, the US economy is expected to have added some 650K private and 750K nonfarm jobs in August. But we know that the numbers could be significantly higher or lower than these expectations as, with the pandemic, we somewhat lost our ability to make good predictions on these jobs figures. Still, strong job additions will certainly boost the investor appetite, along with the Fed’s cautious steps toward bond tapering, while a disappointment on the data front could lead to some profit taking, but nothing major, as BECAUSE we haven’t heard anything regarding the start date or the pace of bond tapering, there is always a bit of margin left for speculating to the dove-side.

So, in both cases, we could see the markets advancing higher. Isn’t that great?

The US 10-year yield is back below 1.30% and the VIX index hints at no sign of stress, at all.

Gold consolidates gains above the $1800 per oz. The CFTC data shows that the net speculative positions in gold have been increasing, even though we are now at the lowest levels since the beginning of the pandemic, meaning that there is room for a further rise in these net speculative positions. From a technical standpoint, there is a clear positive shift in sentiment, with the medium-term horizontal triangle and the 200-dma broken to the upside. But we may not see a sustained rally establishing parallel to the equity markets. Appetite in equities should slowly wane appetite in the yellow metal.

Else, Hurricane Ida is pressuring the natural gas and oil futures to the upside, causing severe damage in the Gulf Coast’s energy production. It is said that 94% of average natural gas production is shut and energy companies remain offline, which could impact gas prices.

US crude came close to the $70pb. But as it has been the case in the prior storms, the impact of the hurricane on the energy prices will certainly remain short-lived. Therefore, what OPEC will say at this week’s meeting matters much more for the overall picture. And the fact that OPEC will likely continue wind down the production restrictive measures despite rising Covid worries could bring in the oil bears and cap the recovery near the $70pb level.

Market movers today

• Today we get the August inflation print, which is the last inflation release before the September ECB meeting. Following yesterday's high German inflation print, we expect a noticeable rise in Euro zone inflation, where we look for a rise in Euro core inflation to 1.3% in August from 0.7% in July.
• In Denmark we expect gross unemployment has declined slightly in July following big declines in May and June.
• Overnight we get the Chinese Caixin manufacturing PMI and we get PMIs out of South East Asia. Here it will be very interesting to see what broken supply chains and local lockdowns in hard hit countries such as Malaysia, Vietnam, Thailand and the Philippines have done to manufacturing activity.

The 60 second overview

Markets: Global markets were still digesting the comments from Powell on Friday. With UK out for a bank holiday, bond yields ended marginally lower, with spreads to Bunds tighter. Equities continued to rise on continued support from the monetary policy side.

Asian markets are mixed this morning with Hong Kong lower as Chinese service PMI softened in August on the back of increased restrictions following spikes in the delta variant. European and US futures slightly higher this morning.

China: The Chinese PMI released over night was weaker than market consensus, with notably the non-manufacturing component missing the estimate, and declined to 47.5 which is the lowest level in more than a decade (except for the prints in the acute start of the pandemic). This is another print supporting our view that the global cycle peak is behind us.

COVID: With the spreading of the virus in certain parts of the US, the EU removed US from the safe-travel list.

Equities: Global stocks were higher yesterday as the goldilocks thinking dominated on the back of the dovish surprise from Powel Friday. With US 10 year yields dropping back below 1.3% growth stocks were the notable outperformer of value yesterday with the FAMMAG universe leading the way. Banks a clear underperformer together with energy despite oil price ending higher. In US S&P500 posted the 12th record high for the month and 53th for the year, index gain passed 20% yesterday. Dow -0.2%, S&P 500 +0.4%, Nasdaq +0.9% and Russell 2000 -0.5%.

FI: Yesterday's trading session can best be described as a wait-and-see with the UK being out for bank holiday and month-end approaching. The most important release near term is the US labour market report on Friday, with FOMC tapering eventually coming.

FX: Yesterday's session marked a fairly slow start to the week for FX markets with bilateral currency moves vs the EUR kept within +/- 1stdev. EUR/USD remained steady around 1.18 while both EUR/NOK and EUR/SEK edged a few figures lower.

Credit: Credit performance was mixed yesterday where iTraxx Xover tightened 3.8bp (closing in 228.7bp) and Main 0.8bp, taking it to 45.2bp. Cash bonds were less strong, with HY closing broadly unchanged and IG widening around ½bp.

Nordic macro

Riksbank Deputy Governor Martin Flodèn speaks about monetary policy and the current economic situation at 14.00 CET. Riksbank buys SEK3bn muni bonds. Danske Bank has released the August Boprisindicator showing price developments for Stockholm condos this morning.

General trend

• China gaming names lower on the report that China govt tightens gaming rules for teenagers/children (in line with prior policy announcements on gaming).
• Hang Seng has extended decline and underperformed [Video game-related firms drop; Reported probe related to Ping An Insurance weighs on Financials; Property names drop ahead of earnings from Evergrande].
• Shanghai Composite ended morning trading lower (-0.8%) [Consumer, IT and Industrial indices lagged].
• Nikkei has rebounded from the opening decline [Topix Iron & Steel and Marine Transportation indices outperform; Banks and Airlines lag].
• S&P ASX 200 has also moved higher [Materials and Consumer indices gain; Energy, Resources and Financial indices lag].

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened 0.0%.
• (NZ) New Zealand July Building Permits M/M: 2.1% v 4.0% prior (rises 2nd consecutive month).
• HVN.AU Reports FY21 (A$) Net 841.4M v 480.5M y/y; EBITDA 1.46B v 944.7M y/y; Rev 9.72B v 8.23B y/y.
• (AU) AUSTRALIA JULY BUILDING APPROVALS M/M: -8.6% V -5.0%E.
• (AU) Australia Q2 Current Account Balance (A$): 20.5B v 21.4Be.

Japan

• Nikkei 225 opened -0.4%.
• (JP) JAPAN JULY PRELIMINARY INDUSTRIAL PRODUCTION M/M: -1.5% V -2.5%E; Y/Y: 11.6% V 11.2%E.
• (JP) JAPAN JULY JOBLESS RATE: 2.8% V 2.9%E; Job-To-Applicant Ratio: 1.15 v 1.12e.
• (JP) Said that Japan PM Suga is considering reshuffling cabinet positions including replacing LDP Sec Nikai – Nikkei.
• (JP) Japan Fin Min Aso: Drafting a 3-year plan to tighten anti money laundering rules in country; Must compile high quality budget for next fiscal year (begins Apr) with eye on expenditures reform.

Korea

• Kospi opened 0.0%.
• (KR) South Korea July Retail Sales M/M: -0.6% v 1.4% prior; Y/Y: 7.9% v 1.6% prior.
• (KR) South Korea July Industrial Production M/M: +0.4% v -0.5%e; Y/Y: 7.9% v 7.2%e.
• (KR) South Korea July Cyclical Leading Index Change: -0.2 v 0.3 prior.
• (KR) South Korea Vice Fin Min Lee Eog-weon: Markets are maintaining an overall stable trend after volatility in stocks and currency expanded earlier this month on concerns about possible Fed tapering and the resurgence of coronavirus.
• (KR) South Korea President Moon: 2022 Budget to be KRW604.4T - Yonhap.

China/Hong Kong

• Hang Seng opened -0.1%; Shanghai Composite opened -0.3%.
• (CN) CHINA AUG MANUFACTURING PMI (GOVT OFFICIAL): 50.1 V 50.2E; Non-manufacturing PMI: 47.5 v 52.0e (1st contraction in 16 months).
• (CN) China SAFE (FX regulator) has been surveying companies (including banks) regarding risks related to yuan (CNY) volatility - US financial press (update).
• (HK) Hong Kong Monetary Authority (HKMA) with SFC is working on centralized trade databases, that will track concentrated exposures to stocks as part of efforts to prevent excessive risk taking – FT.
• (CN) China Lenders said to be experimenting with the Digital Yuan (DCNY) for purchasing funds and insurance products.
• (CN) China PBOC sets Yuan reference rate: 6.4679 v 6.4677 prior.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY50B in 7-day reverse repos v CNY50B in 7-day reverse repos prior; Net inject CNY40B v Net Inject CNY40B prior.
• (HK) Macau govt said to ease COVID test rules for mainland arrivals by air – press.
• (CN) Said that China power companies have been asking for permission to raise rates due to increased coal prices - Press.

North America

• (US) Colonial Pipeline to restart lines 1 & 2 Monday night (tonight, following shutdown related to hurricane Ida).

Europe

• (EU) ECB's Holzmann (Austria): See marginal impact from 4th wave of COVID on the economy, expect inflation rate to come down again later this year and next year.
• (UK) Aug Lloyds Business Barometer: 36 v 30 prior.
• (AT) Austria Fin Min Bluemel calls on EU countries to return to more conservative budget policies, most recent wave of COVID will require less stimulus – press.

Levels as of 01:15ET

• Hang Seng -0.8%; Shanghai Composite -0.4%; Kospi +1.0%; Nikkei225 +1.1%; ASX 200 +0.6%.
• Equity Futures: S&P500 +0.3%; Nasdaq100 +0.3%, Dax +0.1%; FTSE100 +0.2%.
• EUR 1.1825-1.1795; JPY 109.99-109.83; AUD 0.7315-0.7289; NZD 0.7038-0.6995.
• Commodity Futures: Gold +0.3% at $1,817/oz; Crude Oil -0.2% at $69.08/brl; Copper -0.4% at $4.36/lb.

Asia is suffering a dose of China nerves today after this morning's Manufacturing, and Non-Manufacturing PMIs disappointed. China's Manufacturing PMI clung on to expansionary territory, slightly underperforming at 50.1. However, it was the Non-manufacturing PMI that surprised, tumbling from 53.3 to 47.5 for August, well into contractionary territory.

Several factors are at work here. Covid-19 lockdowns in various cities and critical ports sapped domestic consumption, and consumers postponed travel as a result. However, it is likely that the ongoing government clampdowns in multiple sectors, notably student tuition and technology, are impacting both employment concerns in those affected and broader consumer confidence as fears of wider interventions rise. The latter is a fair point, with China announcing more limits on online game time for children and investigating brokerage margin policies.

It seems that new restrictions/investigations/penalties across various economic sectors are happening daily now. I certainly can't keep up with them. The cultural revolution-lite in China will, at best, limit the upside in China asset markets for now. By default, that will spill over to the rest of Asia. Manufacturing will also be a concern, and a RRR cut will likely occur sooner rather than later. We can probably expect more explicit stimulus from China if the past guides the future and possibly a weaker Yuan. That was likely to occur anyway as I believe the US Dollar will strengthen in Q4 once the Fed gets tapering. With Asian FX never far from the Yuan event horizon, it is reasonable to surmise the regional currencies, already looking wobbly on a medium-term basis, will suffer by association. When everyone has the same business model, in this case manufacturing consumer goods for the world, pain is jointly felt.

Elsewhere, the picture has been slightly rosier. South Korean Industrial Production rose 0.40% MoM in July, while Japan Industrial Production Mom Prel fell by 1.50%, less than expected. Looking into the South Korean data, electronics slumped as South Korea grapples with the same chip shortages and supply chain issues as the rest of the world. Not a case for panic yet, but worth monitoring in future data. Meanwhile, Singapore Bank Lending also expanded strongly in July, suggesting that the vaccinated City-state is well poised to emerge from its delta battle in good shape.

New Zealand Business Confidence slumped, unsurprisingly, but Australia posted a very healthy Q2 Current Account Surplus of AUD 20.50 billion. Private Sector Credit expanded by 0.70% MoM for July also. The current account is likely to bulge even more in Q3 as the state-wide lockdowns erode consumer demand while exports remain robust. Both the New Zealand and Australian Dollars have substantial upside potential in the shorter term if Covid-19 case numbers fall, as both countries appear to be weathering their outbreaks relatively well, at least on a headline basis.

The rest of the day's calendar is heavy with second-tier data across Asia, and Europe, ahead of the US Chicago PMI and Case-Shiller Home Prices. The calendar has a lot of noise, but little substance, with the street, now target fixed on Friday's US Non-Farm Payrolls. Eurozone Inflation is expected to rise to 2.70% YoY, following Germany's high inflation print yesterday. Only a reading above 3.0% is likely to shake the transitory inflation pillars of the ECB. Asia will need to negotiate the China Manufacturing and regional PMIs tomorrow and Australian GDP. After the official data today, tomorrows China and regional PMIs will assume greater importance. Low readings will see another leg down in Asia stocks and possibly halt the Asia FX rally in its tracks.

China PMIs sink Asia equities

Overnight, US markets enjoyed a positive day notable for strong flows into technology stocks. The S&P 500 and Nasdaq closed at record highs as the S&P 500 rose 0.43% and the Nasdaq climbed by 0.90%. The Dow Jones appeared to be suffering some Hurricane Ida effects as it finished 0.16% lower. US after-market futures on all three are slightly higher in Asia, rising around 0.10%.

The story in Asia is very different, though. Regional markets were always likely to struggle after China announced limits on children's online game time, with China tech stocks sure to have been in the firing line. But a barely expansionary China Manufacturing PMI and the surprise tumble by the Services PMI sealed the regions fate, and equity markets have mostly headed South.

After reasonable data releases, Japan and South Korea have recovered their post-China data losses, the Nikkei and Kospi rising 0.45% today. However, in China, the Shanghai Composite has fallen 0.75%, with the CSI 300 and Hang Seng tumbling by 1.45%. Singapore is 1.40% lower, with Taipei falling 0.65%, Jakarta by 0.25%, and Bangkok is flat. Malaysia is on holiday. Australia has taken its cues from New York, and post a solid current account release, the ASX 200 and All Ordinaries are 0.40% higher.

European equities are likely to look at China as a localised problem today and will likely push higher at today’s open. Similarly, I see nothing to stop the music playing in New York; that will have to wait for Friday's payroll data.

Despite the endless optimism of the dip buyers, the dead cat bounce may be with us for some time to come in China. With a seemingly new intervention by the China government in a new sector each day, it is clear that regulatory risk is not going away anytime soon. If China's economy is indeed slowing as well, the picture becomes darker once again, as it does for its more correlated regional neighbours. One bright spot is that a slowing economy in China will prompt stimulus measures from the central government, potentially limiting the fallout on equities.

Currency markets move sideways

Currency markets contented themselves with consolidating recent moves, with no data of note released overnight to shift expectations materially. The dollar index was unchanged overnight at 92.69 but has edged 0.15% lower to 92.55 in Asia. Today, the primary movers have been the Australian and New Zealand Dollars, which have dragged the Euro and Sterling higher, depressing the dollar index.

NZD/USD has risen 0.53% to 0.7035 today after Covid-19 cases fell for the third day in a row, raising hopes that the Kiwis have nipped the delta variant in the bud quickly, prompting reopening hops. NZD/USD looks to have triggered stops as it rose through 0.7010. That has lifted the AUD/USD 0.20% higher to 0.7310. NZD/USD has now unwound nearly all of its delta sell-off, which bottomed at 0.6800 last week. Should New Zealand have dodged another virus bullet, a rise by NZD>USD through 0.7100 could prompt further rallies to 0.7300, possibly quite quickly, as it will put the postponed RBNZ hikes back on the table.

USD/CNY has shown no reaction to the soft PMI data, being unchanged at 6.4660 today. Looking ahead, with another RRR cut on the horizon now and likely more stimulus domestically and to boost exports, a slightly weaker Yuan would be another piece of the puzzle. The Fed may do that job by starting to taper in Q4, and don't think a taper-tantrum is off the menu. USD/CNY is unlikely to spend much time below 6.4000 for the foreseeable, with the risks now skewed to the upside.

Today, Asia FX is firmer against the US Dollar, with the Indonesian Rupiah up 0.40%, the Thai Baht up 0.50%, and the Korean Won 0.30% higher. I can see no particular reason for the rally other than the momentum of last week continuing in the absence of any new information to continue the narrative. Tomorrow's regional PMI data could test that resolve.

Overall, I expect US Dollar weakness to continue this week, albeit at a slower pace, until the US employment data on Friday.

Oil prices edge higher on Ida

With the amount of actual damage to the US Gulf of Mexico production and refining infrastructure still unclear, oil prices edged higher overnight on supply concerns. Brent crude rose 1.10% to $73.35, with WTI climbing 0.70% to 69.10 a barrel.

Prices have eased in Asia after soft China PMI data and news that the critical US Colonial oil pipeline will partially reopen post-Ida. Brent crude has slipped 0.40% to $73.05, and WTI has retreated by 0.35% to $68.65 a barrel.

Attention will now turn to the OPEC+ meeting tomorrow, which will almost certainly keep its output policy unchanged and add another 400,000 barrels per day to production. Brent crude between $70.00 and $75.00 a barrel seems to be the grouping's sweet spot, and with the futures curve in backwardation, demand remains robust despite the short-term noise. Last week's V-shaped recovery in prices will also give OPEC+ confidence that markets can absorb the extra supply.

While we await more visibility from OPEC+ and IDA, I expect Brent crude to remain in a $72.00 to $74.00 a barrel range. Similarly, $68.00 to $70.00 a barrel should contain WTI.

Gold consolidates on technical support

With currency and bond markets having a quiet overnight session, gold saw some profit-taking on long positions. Gold edged 0.40% lower to $1810.50 an ounce in a nondescript session. Today, a weaker US Dollar in Asia has seen the yellow metal add 0.25% as it climbs to $1815.00 an ounce.

Gold's rally seems to have run out of momentum for now, but that said, it is not showing any meaningful signs of fatigue here either. Gold has nearby support in the shape of the 100 and 200-day moving averages (DMAs) at $1809.70 and $1813.20 an ounce. As long as gold holds above this zone on a closing basis, it will continue consolidating gains.

Only a fall through $1780.00 an ounce will call the rally's longevity into question while it faces formidable resistance between $1830.00 to $1835.00 an ounce. Like currency markets, gold looks to be waiting for Friday's US employment data to determine its next directional move.

Key Highlights

• GBP/USD started an upside correction above 1.3700 and 1.3720.
• It is facing a crucial bearish trend line with resistance near 1.3780 on the 4-hours chart.
• EUR/USD is consolidating gains near the 1.1800 region.
• Gold price is trading above $1,800, while crude oil price is still below $70.00.

GBP/USD Technical Analysis

The British Pound formed a base above the 1.3600 zone against the US Dollar. GBP/USD started a fresh increase and it broke the key 1.3700 resistance zone.

Looking at the 4-hours chart, the pair was able to climb above the 1.3720 resistance zone. There was a break above the 50% Fib retracement level of the downward move from the 1.3878 swing high to 1.3602 swing low.

It is now facing a crucial bearish trend line with resistance near 1.3780 on the same chart. The 61.8% Fib retracement level of the downward move from the 1.3878 swing high to 1.3602 swing low is also near the trend line resistance.

Moreover, the 100 simple moving average (red, 4-hours) coincides with the trend line. The next key resistance is near the 1.3800 zone the 200 simple moving average (green, 4-hours).

There was a close above the 1.3800 zone could start a fresh increase. The next major resistance is near the 1.3850 level. Any more gains could lead the pair towards the 1.3940 resistance region.

On the downside, an initial support is near the 1.3740 level. The main support is now forming near 1.3700. A close below the 1.3700 level might open the doors for more losses. The next major support is near the 1.3620 level.

Looking at EUR/USD, the pair was able to climb above the 1.1800 resistance zone and it is currently consolidating gains.

Economic Releases

• Germany’s Unemployment Change for August 2021 - Forecast -34K, versus -91K previous.
• Germany’s Unemployment Rate for August 2021 – Forecast 5.6%, versus 5.7% previous.
• Euro Zone CPI for August 2021 (YoY, Preliminary) - Forecast +2.8%, versus +2.1% previous.
• Canadian Gross Domestic Product for Q2 2021 (Annualized) – Forecast +2.5%, versus 5.6% previous.

STOCKS

Equities are mixed. Dow has dipped while Dax trades slightly higher and could decline after testing interim resistance. Nikkei and shanghai trade lower today but could be overall ranged for now. Shanghai can rise if 3500 holds. Nifty and Sensex have resistance near 17000 and 57000 which may hold and produce a fall in the near term.

Dow (35399.84, -55.96, -0.16%) seems to be holding well below 35500 and struggling to rise above that over the past 4-sessions. A sustained break above 35500 if seen will be bullish towards 35750 else failure to rise past 35500 will keep it ranged within 35500-35250 for a few sessions while further downside to 35222-34750 can also be tested in a corrective decline. Watch price action near 35500 for now.

DAX (15887.31, +35.56, +0.22%) is trading higher and has some scope to rise towards 16000 which if breaks will open up further chances of a rise to 16200 in the longer run. 15600 is an important trend support that may hold for now.

Nikkei (27735.34, -53.95, -0.19%) has decline from resistance at 28000. While below 28000, view is bearish to see a further decline towards 27500-27250 before a bounce sets in.

Shanghai (3503.84, -24.31, -0.69%) is likely to hold above 350 and bounce back to 3560 on the upside but if it fails to sustain above 3500, we may have to allow for a fall to 3480-3460 before a bounce is seen.

Nifty (16931.05, +225.85, +1.35%) has risen sharply yesterday. We need to be cautious today to see if 17000 produces a sharp rejection towards 16700-16500 in the near term before again resuming the uptrend. On the contrary, any rise above 17000 if seen and sustained would be surprising and keep the bullish momentum on for the rest of the week.

Sensex (56889.76, +765.04, +1.36%) is likely to face rejection from 57000 that could push it down to 56000 in the near term.

COMMODITIES

Crude prices are holding below immediate trend resistances near 74 and 70 on Brent and WTI respectively and is likely to hold and decline in the near term while Gold trades below 1820 still trying to gather some momentum that could help to break above 1820 and move up which if fails could lead to a fall back to 1800. Silver is headed to 24.50-25 while Copper is bearish while below 4.40.

Brent (71.78) and WTI (68.76) have both fallen from higher levels seen yesterday and if it sustains, we may expect the dip to extend towards 70-68 and 65-60 respectively. Immediate resistances near 74 on Brent and 70 on WTI are likely to hold for the next few sessions. View is bearish.

Gold (1816.00) has dipped from 1820 and while that holds, Gold can fall back to 1810-1800. A sustained break above 1820 is needed to take price higher towards 1840/60 in the medium term.

Silver (24.06) has risen in line with our expectations to test 24.View is bullish towards 24.50-25.

Copper (4.3505) has come down from 4.38 and while the price holds below 4.40, we are bearish on the view to see 4.30/25 in the near term.

FOREX

Although the euro trades higher and dollar Index has dipped, there is lack of follow-through selling seen in the Dollar Index that may lead to a pause or a turnaround in the index soon. We would wait and watch price action near current levels. EURJPY can rise towards 130-130.50 in the near term before falling from there. USDCNY can trade between 6.45-6.48. We need to see if USDINR can fall below 73.25/20 to test 73-72.90 or rise to 73.60

Dollar Index (92.5930) has broken below 92.75 and is trading lower. Immediate trend support is broken but unless we see follow-through selling, there is scope for a bounce back in the index from 92.47/40 in the near term. We would wait and watch price action near current levels.

Euro (1.1814) sustains to trade higher. We need to be cautious near 1.1830-1.1850 that could produce a rejection and take Euro down in a corrective dip to 1.1750 again. Watch price action near 1.1830/50.

EURJPY (129.77) is rising and could test 130.0-130.5 in the near term before facing any rejection from there.

Dollar-Yen (109.85) has bounced from 109.70 yesterday but while below 110.20, the pair can oscillate within the 110.20-109.40 region with possibility to test 109 on the downside. View is broadly ranged to bearish for the near term.

Aussie (0.7298) is stable just now. It may test 0.7350 before falling from there back to 0.7250.

Pound (1.3773) is trading in the green and has scope to rise to 1.38 before facing rejection. Immediate view is bullish.

USDCNY (6.4682) has bounced a bit and can rise to 6.47-6.4750 while above 6.46. 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 (73.2650) fell sharply yesterday to test support near 73.25/20. It would be important to see if the pair holds above 73.25/20 and bounces back to 73.60/80 or does RBI allow for a further decline to 73.0-72.90 before the expected bounce is seen especially today, being month closing.

INTEREST RATES

The US Treasury yields have dipped further and the chances of a rise that we were expecting have been reduced. A further fall looks likely in the coming days. The German yields continue to trade stable and have still chances of seeing a corrective rally in the coming days before resuming the broader downtrend. The 5Yr GoI has broken its 5.68%-5.72% range on the downside and has room to dip further today to test its next support at 5.63%-5.62%.

The US 2Yr (0.20%), 5Yr (0.76%), 10Yr (1.27%) and the 30Yr (1.89%) Treasury yields have come down further. The 10Yr has dipped below 1.3% and the 30Yr below 1.9% thereby reducing the chances of seeing 1.4%-1.45% (10Yr) and 2%-2.1% (30Yr). While below 1.3% (10Yr) and 1.9% (30Yr) the yields can fall further to 1.2%-1.18% (10Yr) and 1.8%-1.75% (30Yr) in the coming days.

The German 2Yr (-0.75%), 5Yr (-0.72%), 10Yr (-0.44%) and 30Yr (0.03%) yields have dipped slightly by 1 bps across tenors. View remains the same. As mentioned yesterday, the 10Yr has to break above -0.40% to see the corrective rally to -0.30%/-0.25%. The 30Yr however looks positive while above 0% and keeps alive the chances of seeing 0.10%-0.20% on the upside. Thereafter a fresh fall to resume the broader downtrend is possible.

The 5Yr GOI (5.6507%) has broken the 5.68%-5.72% range on the downside and has tested 5.66% as well. 5.63%-5.62% is a good immediate support which can be tested now. The price action in the 5.63%-5.62% will need a close watch in the coming sessions to see if the yields can bounce-back from there or not.