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On Thursday, the common European currency fell by 30 pips or 0.25% against the US Dollar. The decline was stopped by the 100– hour simple moving average during Thursday's trading session.

If the exchange rate breaks the 100– hour SMA support line at 1.1746, a decline towards the 61.80% Fibonacci retracement level at 1.1723 could be expected within the following trading session.

However, if the support line holds, buyers could drive the EUR/USD currency exchange rate higher during Friday's trading session.

On Thursday, the British Pound fell by 66 pips or 0.48% against the US Dollar. A breakout occurred through the lower boundary of an ascending channel pattern during Thursday's trading session.

Given that a breakout has occurred, sellers are likely to continue to pressure the exchange rate lower during the following trading session. The potential target for bearish traders will be near the 1.3620 area.

On the other hand, the GBP/USD currency exchange rate could reverse from the current price level at 1.3694 within this session.

The USD/JPY currency pair failed to break the resistance level at 110.20 on Thursday.

Currently, the exchange rate is trading near a support level formed by the 100– hour simple moving average at 109.89.

If the currency exchange rate breaks the support level, a decline towards the weekly pivot point at 109.71 could be expected within this session.

However, if the 100– hour SMA holds, the US Dollar could strengthen against the Japanese Yen during the following trading session.

On Thursday, the yellow metal's price rose by 110 pips or 0.62%. The commodity breached the 55– and 100– hour simple moving averages during Thursday's trading session.

All things being equal, the precious metal could continue to trend bullish during the following trading session. The potential target for bulls will be near the 1810.00 level.

However, technical indicators suggest the XAU/USD exchange rate could edge lower within this session

EUR/USD

Current level - 1.1745

Following two unsuccessful attempts at breaching the resistance level of 1.1770, the pair is now consolidating around 1.1750 and will most likely test this resistance level one more time. Whether the test is successful or not will determine the future direction of the EUR/USD. A possible breach of 1.1770 would pave the way towards the psychological level of 1.1800. Alternatively, another unsuccessful attempt at 1.1770 would push the pair towards the support zone at around 1.1700 and the local bottom at 1.1670.

USD/JPY

Current level - 110.02

During the last couple of days, the currency pair has been trading in the narrow range between 109.48 and 110.18 and only a successful breach of one of the borders could set a clear direction for the USD/JPY. If the bulls are to prevail, then the resistance at 110.18 would be violated and the pair will most likely attack the next resistance levels at 110.50 and at 111.00. Alternatively, if 109.48 is violated, the pair would test the support at 109.11.

GBP/USD

Current level - 1.3680

Following an unsuccessful attempt to breach the resistance level of 1.3765, the Cable quickly tested and violated the support of 1.3723, which signals for the end of the corrective movement, which had started at the beginning of the week. The forecast is for the dollar to appreciate against the sterling and for the pair to test the main support level of 1.3600.

The US dollar index declined slightly after the relatively disappointing US GDP and jobless claims numbers published on Thursday. The data showed that the economy expanded by 6.6% in the second quarter. While this was better than the first estimate of 6.5%, it was worse than the median estimate of 6.0%. Meanwhile, the number of Americans filing for initial jobless claims rose from 349k to 353k last week. Similarly, initial jobless claims rose to more than 2.862 million. Later today, the currency will react to the latest American personal consumption expenditure (PCE) and a speech by Jerome Powell at the Jackson Hole symposium.

The Australian dollar tilted lower in the Asian session as the market reacted to the latest retail sales numbers. The data showed that the headline retail sales declined by 2.3% in July after falling by 1.8% in the previous month. This decline was worse than the median estimate of 2.3% and was attributed to the latest lockdowns. Meanwhile, data from China showed that industrial profits rose by 16.40% in July, which was lower than the previous increase of 20.0%. The profits have jumped by 57.3% year-to-date.

The economic calendar will be relatively muted today. In Germany, the statistics agency will publish the latest import and export price indices. At the same time, Sweden will release the GDP, retail sales, and consumer confidence numbers. These numbers will come a day after the statistics agency released the strong inflation data. Finally, Canada will publish the retail and industrial inflation numbers. The stock market will also be muted ahead of a speech by Jerome Powell.

EURUSD

The EURUSD price was little changed in the American and Asian sessions. The pair is trading at 1.1755, which is slightly above this week’s low of 1.1740. On the four-hour chart, the price is slightly above the lower side of the ascending channel shown in yellow. It has also formed an inverted head and shoulders pattern while the Relative Strength Index (RSI) has moved sideways. Therefore, the pair will likely keep rising as bulls target the upper side of the channel at 1.1780.

EURGBP

The EURGBP pair rose to a high of 0.8583, which was the highest level since August 23. This price was slightly higher than this week’s low of 0.8540. On the four-hour chart, the pair has moved above the upper line of the previous descending channel. It has also moved above the 25-day and 15-day moving averages. Meanwhile, the Awesome Oscillator has moved above the neutral level. Therefore, the pair will likely keep rising as bulls target the next key resistance at 0.8650.

AUDUSD

The AUDUSD pair retreated to an intraday low of 0.7220. On the hourly chart, this price was lower than this week’s high of 0.7280. It has also moved slightly above the 38.2% Fibonacci retracement level. The MACD has also moved below the neutral level while the Relative Strength Index (RSI) has been rising. Therefore, the pair may keep falling ahead of Powell’s speech.

Daily Pivots: (S1) 150.43; (P) 151.01; (R1) 151.41; More...

Intraday bias in GBP/JPY remains neutral first as it failed to sustain above 151.38 minor resistance. On the upside, sustained break of 151.38 should bring stronger rise back to 153.42 resistance first. Break there will confirm completion of the correction of 156.05. On the downside, however, sustained 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.

Market movers today

• The key focus today will be Fed chairman Jerome Powell's speech at Jackson Hole. The biggest discussion among Fed watchers has been whether the Fed will announce some sort of tapering plan in connection with the Jackson Hole seminar. We think it is a bit too early, as the next jobs report is due out on Friday next week, so the Fed has more information about the economic impact of the delta outbreak. So our base case is no major new policy signals this time around. A change is more likely in connection with the September meeting in three weeks.
• Ahead of the speech we get releases on US core PCE inflation and US personal spending. Core PCE inflation is the main number the Fed is focusing on but it is expected to mirror the release we had already earlier this month on core CPI inflation. It showed a moderation in the monthly gain in core prices. The personal spending will give more information on whether US goods consumption is starting to level off from the very high levels. It will also be interesting to see if the spread of the delta variant is hitting service consumption.
• Norwegian retail sales in July is due out this morning.

The 60 second overview

Hawkish FOMC members: The usual suspects (Fed's Kaplan, Bullard, and George) were quite hawkish yesterday (ahead of Fed Chair Powell's speech today) supporting tapering "sooner rather than later". That said, none of them are among the most important FOMC members.

Who will be the next Fed chair? President Joe Biden soon needs to decide whether to stick with Jerome Powell or find a replacement (most likely Lael Brainard). A new story suggests that Biden is considering a team consisting of Powell as Chair and Brainard as a chief regulator. We do not think the Fed's policy reaction function will change if Powell is replaced by Brainard but given that we prefer independent central banks, it is a bad sign if President Biden (like former President Trump) replaces the incumbent chair.

Equities: Equities in small moves lower yesterday as investors nerved themselves ahead of Jackson Hole. Most sectors in red, but real estate and utilities among relative outperformers. VIX snapped the downward trend and rose slightly below 20. US closed lower after three record setting sessions this week. S&P 500 -0.6%, Dow -0.5%, Nasdaq -0.6% and Russell 2000 -1.1%. Asian markets are in muted trading this morning but US futures slightly higher.

FI: It was a bit of a rollercoaster ride yesterday as European bond markets were trying to find its footing after the comments from de Guindos and Lane earlier on Wednesday.

FX: Yesterday was another quiet day in the FX markets. USD/JPY moved above 110.

Credit: The credit market pulled back slightly yesterday. Itraxx main widened by 0.4bp to +46bp, while xover widened by 1.5bp to +233bp.

Nordic macro

In Norway, retail sales levelled off in June after a big leap the previous month. With pretty much everyone holidaying within the country, we expect another good month for consumer spending in July. With consumption shifting more towards various types of services as the coronavirus restrictions are lifted, we nevertheless expect retail sales to fall 2% m/m in July.

In Sweden, the government released a new forecast yesterday with slightly lower growth in 2021 (now 4.3 % cal adj) and instead higher in 2022 (3.5 %) boosted by a quite significant SEK 74 bn in "reforms" (ca 1.5 % of GDP). Recall 2022 is an election year. The big hurdle is how to get it through the Riksdag given the current political turmoil with a new PM in November.

July hours worked suggested a good start to Q3 by rising 0.9 % mom, sa. Today, however focus is on the August NIER (KI) monthly confidence survey. Last month showed all time highs for the overall Economic Tendency Indicator and manufacturing confidence, hence, don't be surprised if there is a set-back this month (peak growth). Eyes will also be on Q2 GDP and its composition. The GDP indicator suggests +0.9 % qoq sa, however, we see a downside from consumption and inventories (out forecast +0.7 % qoq/9.1 % yoy).

Riksbank buys SEK1bn in linkers.

General trend

• WTI Crude FUTs rise, Tropical Storm Ida in focus.
• Equity markets are generally off of session lows.
• US equity FUTs trade higher after prior decline.
• Topix Marine Transportation index rises over 6%, Iron & Steel index lags.
• Australia Consumer Discretionary index weighed down by earnings from WesFarmers.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%.
• (AU) Australia sells A$1.0B v A$1.0B indicated in 0.25% Nov 2024 bonds, avg yield: 0.2599%, bid to cover 4.79x.
• (AU) Australia July Preliminary Retail Sales M/M: -2.7% v -2.5%e.
• (NZ) New Zealand expected to remain under lockdown until Aug 31st – Press.
• (NZ) New Zealand PM Ardern: Confirms lockdown extended until midnight Aug 31st; Auckland is likely to remain in Level 4 lockdown for a further 2 weeks.
• (NZ) New Zealand Aug ANZ Consumer Confidence: 109.6 v 113.1 prior; M/M: -3.1% v -0.9% prior.
• (NZ) New Zealand reports 70 additional coronavirus cases; Total cases at 347.

China/Hong Kong

• Hang Seng opened -0.3%, Shanghai Composite -0.2%.
• (CN) China Sec Journal Front Page Commentary: PBOC likely to cut RRR and step up credit supply 'soon', cites analysts; notes recent meeting between PBOC and financial institutions.
• (CN) China PBoC said to reiterate call to support rural sector of economy including with RRR - financial press.
• (CN) China Commerce Ministry (MOFCOM) spokesperson Gao Feng: Have maintained normal trade and economic communications with US; To study targeted measures to stabilize trade and logistics; No information on potential talks between Liu He and US Treasury Sec Yellen; Reiterates govt stance to keep economy within a reasonable range [comments from Aug 26th].
• (CN) China Commerce Ministry (MOFCOM): Extending anti subsidy investigation on Glycol Ethers imports from the US by additional 6 months, to conclude in Mar 2022; notes the 'complexity' of the case.
• (CN) China July Industrial Profits Y/Y: 16.4% v 20.0% prior.
• (CN) China Cyberspace Administration releases its draft rules for internet information algorithms, relates to the regulation of algorithms used by internet service providers to make recommendations to users.
• (CN) China Sec Times: China to launch Index fund that is linked to negotiable certificates of deposit (NCD).
• (CN) China is seeking opinions from automakers (including BYD) related to new-energy car development - press.
• (CN) China Civil Aviation Regulator (CAAC) suspended 2 flights after passengers tested positive for COVID; the companies impacted are Xiamen Airlines and China Southern Airlines – Xinhua.
• (CN) China Supreme Court said 'working 996' is severe violation of the law concerning the upper limit of extended working hours [relates to working extra hours].
• (CN) China said to release metals from its state reserves on Sept 1st (Wednesday).
• (CN) China Ministry of Finance (MOF): To moderately speed up special local gov't bond issuance.
• (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.
• (CN) China Ministry of Finance (MOF) Sells 1-month deposits: avg yield 3.00% v 3.35% prior.
• (CN) China PBOC sets Yuan reference rate: 6.4863 v 6.4730 prior.

Japan

• Nikkei 225 opened -0.6%.
• (JP) Japan Fin Min Aso: Japan has ~¥2.6T in reserve funds remaining after Japan Govt confirms to use of ¥1.4T in reserve funds.
• (JP) JAPAN AUG TOKYO CPI Y/Y: -0.4% V -0.3%E; CPI (EX-FRESH FOOD) Y/Y: 0.0% V -0.1%E (First non-negative reading in 13 months).
• (JP) Japan Financial Regulator (FSA): Will assess Crypto as anti money laundering.

Korea

• Kospi opened -0.4%.

North America

• (US) Kansas City Fed publishes agenda for Jackson Hole: Macroeconomic Policy in an Uneven Economy.
• (US) US President Biden said to make announcements on the US Fed later in the Fall; To reappoint Powell as Fed Chair and Brainard as Vice chair in effort to appease liberal Democrats.
• (US) NHC gives update on Tropical Storm Ida: Ida is forecast to strengthen; Ida could be near major hurricane strength when it approaches the northern Gulf coast.
• Shell: To shut production at four platforms in Gulf of Mexico ahead of Tropical Storm Ida - press.
• (US) US Supreme Court vacates Coronavirus eviction moratorium.
• (PE) Peru Congress has delayed confidence vote for the New Cabinet appointed by President Castillo until Aug 27th.

Europe

• (LY) Said that AGOCO (Arabian Gulf Oil Company) will suspend Oil Production due to lack of funds.

Levels as of 01:20 ET

• Nikkei 225, -0.4%, ASX 200 flat , Hang Seng +0.2%; Shanghai Composite +0.4% ; Kospi +0.1%.
• Equity S&P500 Futures: +0.2%; Nasdaq100 +0.3%, Dax flat; FTSE100 +0.1%.
• EUR 1.1762-1.1742 ; JPY 110.09-109.93 ; AUD 0.7249-0.7221 ;NZD 0.6954-0.6932.
• Gold +0.4% at $1,801/oz; Crude Oil +0.9% at $68.06/brl; Copper -0.1% at $4.2325/lb.

Daily Pivots: (S1) 129.15; (P) 129.45; (R1) 129.68; More....

Intraday bias in EUR/JPY is mildly on the upside at this point, for 130.54 resistance. Sustained break there will affirm the bullish case that correction from 134.11 has completed. Further rise would be seen to 132.68 resistance next. On the downside, however, below 128.58 minor support will turn bias to the downside for 127.91 first. 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.