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Daily Pivots: (S1) 150.56; (P) 151.04; (R1) 151.61; More...

Intraday bias in GBP/JPY remains neutral at this point. On the upside, firm break of 151.38 will turn bias to the upside for 153.42 resistance first. Break there will argue that whole corrective pattern from 156.05 has completed, and bring retest of this high. On the downside, however, decisive break of 149.03 support will carry larger bearish implication and target 143.78 fibonacci level next.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). As long as 149.03 support holds, such rise would still resume at a later stage. However, sustained break of 149.03 support will indicate rejection by 156.59. Fall from 156.05 would be at least correcting the whole rise from 123.94. Deeper fall would be seen back 38.2% retracement of 123.94 to 156.05 at 143.78 first.

Markets

In the run-up to the Fed Powell’s Jackson Hole address, several regional Fed members highlighted the case for the Fed to start reducing asset purchases in the near future as they assessed that the conditions of substantial further progress toward the goals of maximum employment and price stability are met. The Fed chair took a more balanced, dovish approach. He agreed on inflation. Still he remained of the view that most of the current spike in inflation will likely prove temporary. On maximum employment he remains more cautious but agreed that, if the economy develops as expected, a reduction of asset purchases could start this year even as the spreading of the delta variant deserves further monitoring. Important for markets, the Fed Chair signaled a disconnect between the reduction of asset purchases and the start of raising policy rates :‘The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test’. Powell’s balanced approach convinced markets that monetary policy stimulation is here to stay for quite some time. US yields declined 2 bp for the 2-y, 5 bp for the 5-y and 4/3 bp at the longer end of the curve. Interesting, real yields again nosedived (10-y declined 8.75 bp). This also pressured the dollar. EUR/USD closed near 1.18. The Trade-weighted dollar (DXY) dropped to the 92.65 area and nears the 92.47 support area. The fallout from the decline in US yields on European interest rate markets was modest. German yields eased up to 1.5 bp for the 10-y. The prospect/hope that any reduction in policy normalization will develop in a gradual manner propelled the S&P (+0.88%) and the Nasdaq (+1.23%) to all-time record levels. European equities gained 0.25%-0.50%.

This morning, sentiment on Asian markets remains constructive, but gains are rather modest given the strong, Powell-inspired gains in the US on Friday. The dollar (EUR/USD 1.18) and US Treasuries maintain Friday’s losses.

Later today, the EC confidence data and German August inflation data will be published (expected at 3.40% Y/Y). They are a precursor for tomorrow’s EMU inflation which is expected to rise further north of 2.0% (2.7% for headline). An upward surprise might fuel the debate on the pace of ECB PEPP purchases going into next week’s ECB meeting. Later this week, the focus will turn to the US ISM’s and the labour market data. On interest rate markets, we look out whether some decoupling between the US and Germany/EMU can persist. The 1.38% area remains first strong resistance for the US 10-y yield. After Friday’s ‘correction’, the -0.40/-0.38% resistance for the German 10-y yield is still within reach. A similar reasoning applies to EUR/USD. Friday’s rebound was mainly USD weakness. However, strong German/EMU inflation might also support the single currency. A sustained break of 1.1805 would bring the 1.1909 correction high on the radar.

News headlines

The National Hurricane Center said the category 4 storm Ida made landfall in Louisiana, near New Orleans. While the NHC later downgraded Ida, it still labels it an extremely life-threatening storm. Most of the city and other parts of the state have to deal with power outages. Ida pushed gas futures higher (+14% since Wednesday’s close), while the impact on oil prices remains limited for now even with 96% of the Gulf Coast area’s production down following evacuations of offshore platforms. That represents some 15% of total US output. West Texas Intermediate oil prices opened stronger around $69.5/b but are currently around $1 cheaper, trading again in line with Friday’s levels.

IMF chief economist Gopinath in an interview with the Financial Times warned that emerging markets cannot afford a situation where you have some sort of a tantrum of financial markets originating from the major central banks. Gopinath specially referred to the Fed’s plans to scale down net asset purchases soon. EM are specifically vulnerable with the pandemic still raging and higher inflation risking to feed into inflation expectations. Several of them already started hiking rates. Gopinath endorsed Powell’s efforts to separate the start of a hiking cycle from scaling down purchases. That way, tightening of dollar financing conditions and potential reversals of capital flows can hopefully be avoided as net purchases are dialed back towards zero.

Daily Pivots: (S1) 129.24; (P) 129.50; (R1) 129.83; More....

Intraday bias in EUR/JPY remains mildly on the upside for the moment. Rebound from 127.91 short term bottom would target 130.54 resistance first. Sustained break there will argue that whole correction from 134.11 has completed and turn near term outlook bullish. Nevertheless, on the downside, below 128.58 minor support will turn bias back to the downside for retesting 127.91 low instead. Break will target 127.07 resistance turned support. That is close to 38.2% retracement of 114.42 to 134.11 at 126.58.

In the bigger picture, rise from 114.42 is seen as a medium term rising leg inside a long term sideway pattern. As long as 127.07 resistance turned support holds, further rise is still expected to retest 137.49 (2018 high). However, firm break of 127.07 will argue that the medium term trend has reversed, deeper fall would be seen to 61.8% retracement of 114.42 to 134.11 at 121.94.

Daily Pivots: (S1) 0.8560; (P) 0.8574; (R1) 0.8590; More...

Intraday bias in EUR/GBP remains neutral for the moment. Further rise is expected as long as 0.8504 support holds. On the upside, above 0.8592 will resume the rise form 0.8448 to 0.8668 resistance next. Firm break there will be a strong sign of near term bullish reversal at least On the downside, however, break of 0.8504 will turn bias back to the downside for retesting 0.8448 low instead.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8668 resistance holds, towards long term support at 0.8276. However, firm break of 0.8668 resistance would argue that a medium term bottom was already formed. Stronger rise would be seen to 0.8861 support turned resistance to confirm completion of the corrective pattern.

Daily Pivots: (S1) 1.6084; (P) 1.6175; (R1) 1.6226; More...

Intraday bias in EUR/AUD remains mildly on the downside at this point. Fall from 1.6434 short term top should target 1.5898 structural support first. Sustained break there will argue that choppy rise from 1.5250 has completed already. Outlook will be turned bearish for retesting 1.5250 low. On the upside, however, above 1.6263 minor resistance will retain near term bullishness, and turn bias back to the upside for 1.6434 high instead.

In the bigger picture, rise from 1.5250 medium term bottom is currently seen as a correction to the down trend from 1.9799 first. Stronger rise would be seen to 38.2% retracement of 1.9799 to 1.5250 at 1.6988 next. We'd tentatively expect strong resistance from there to limit upside, at least on first attempt. Meanwhile, break of 1.5898 support will indicate that the rebound has completed and bring retest of 1.5250 low.

Daily Pivots: (S1) 1.0728; (P) 1.0762; (R1) 1.0783; More....

Intraday bias in EUR/CHF remains neutral for the moment. With 1.0839 resistance intact, outlook remains bearish and further decline is expected. On the downside, firm break of 1.0694 will resume larger fall from 1.1149, to 138.2% projection of 1.1149 to 1.0863 from 1.0985 at 1.0590 next.

In the bigger picture, rebound from 1.0505 (2020 low) should have completed at 1.1149 already. The three-wave corrective structure argues that the downtrend from 1.2004 (2018 high) is not over yet. Medium term outlook will now stay bearish as long as 55 week EMA (now at 1.0859) holds. Break of 1.0505 low would be seen at a later stage.

The US dollar index tilted lower on Monday morning as investors continued focusing on the Jackson Hole Symposium speech by Jerome Powell. In it, the Fed chair said that the central bank was keen to start winding down its giant $120 billion per month asset purchase program later this year. He added that this will only happen if the bank sees more recovery amid the ongoing Delta wave. Still, he ruled out against hiking interest rates any time soon. Later today, the US dollar index will react mildly to the latest pending home sales numbers.

The euro rose against key economic numbers ahead of the latest flash consumer price index (CPI) data from key European countries like Germany, Spain, and Italy. Economists polled by Reuters expect the data to show that the headline CPI rose by 3.9% in August after rising by 3.8% in the previous month. They also expect the harmonised CPI to have risen from 3.1% to 3.4%. The CPI is expected to have risen by 2.8% in the Eurozone. Meanwhile, the European Commission will publish the latest consumer and business confidence numbers. In general, business confidence likely dipped slightly in August as companies faced more challenges as supply shortages remained.

The British pound held steady in early trading as investors kept worrying about inflation in the UK. In a recent note, the British Retail Consortium (BRC) said that the recent subdued food prices will likely not last long. The prices will likely rise because of the overall cost of doing business, which has been rising. For example, the cost of importing has risen because of the supply gridlock. Similarly, many retailers have been forced to increase wages as the labour shortage intensifies. Recent data by the ONS showed that food prices increased in May and June but they dipped slightly in July.

EURUSD

The EURUSD price jumped to 1.1800 on Friday during Powell’s speech. This price was substantially higher than Friday’s low of 1.1735. On the 30-minute chart, the pair moved above the 25-day moving average. It also rose above the key resistance level at 1.1780 while the Relative Strength Index (RSI) has moved slightly below the overbought level. It has also formed a bullish flag pattern. Therefore, the pair will likely keep rising as bulls target the key resistance at 1.1850.

GBPUSD

The GBPUSD pair rose to a high of 1.3757 in early trading. On the four-hour chart, the price is substantially above last week’s low at 1.3600. This price has moved slightly above the 25-day moving average while the RSI and MACD have moved slightly upwards. The pair is also forming the handle section of the inverted cup and handle pattern. Therefore, the pair may resume the downward trend as bears target the lower side of the cup at 1.3600.

USDCHF

The USDCHF pair declined to the key support at 0.9110. This was a support because the pair had struggled moving below the level several times in the past three weeks. The pair also moved slightly above the 50% Fibonacci retracement level. The RSI has also dropped while it has formed a small head and shoulders pattern. Therefore, the pair may keep falling so long as bears can sustain moves below 0.9110.

Daily Pivots: (S1) 0.7249; (P) 0.7283; (R1) 0.7344; More...

Intraday bias in AUD/USD remains mildly on the upside, as rebound from 0.7105 would target 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 0.7221 minor support will turn bias back to the downside for 0.7105 and possibly below. But we'd continue to look for strong support from 0.6991/7051 cluster support to bring rebound.

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) 1.2578; (P) 1.2643; (R1) 1.2680; More...

Intraday bias in USD/CAD Remains neutral for the moment, and another fall is in favor with 1.2711 minor resistance intact. On the downside, below 1.2577 will target 1.2421 structural 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 1.2711 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) 1.1753; (P) 1.1778; (R1) 1.1820; More...

Intraday bias in EUR/USD stays neutral first, with focus on 1.1804 resistance. Break there will bring stronger rise to 1.1907 resistance first. Firm break there will indicate that fall from 1.2265, as well as the consolidation pattern from 1.2348, have completed. Near term outlook will be turned bullish for 1.2265/2348 resistance holds. In case of another fall, we'd continue to look for strong support from 1.1602/1703 key support zone to bring rebound.

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.