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Daily Pivots: (S1) 1.2571; (P) 1.2607; (R1) 1.2627; More...

Intraday bias in USD/CAD remains mildly on the downside, as fall from 1.2947 would target 1.2421 support. Firm 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 other hand, break of 1.2711 minor resistance will revive near term bullishness, and turn bias back to the upside for retesting 1.2947 high instead.

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.

Market movers today

• While waiting for Fed chair Powell's speech at Jackson Hole tomorrow, we may start to get some headlines from other FOMC members already today.
• Besides that we have a couple of interesting data points today. Euro M3 and credit will provide more clues on the stimulus from monetary policy and demand for credit. After a sharp increase in money growth during 2020, the momentum has come down this year pointing to lower economic growth in the pipeline.
• ECB minutes are due out today.
• US releases jobless claims, which have moved lower in recent weeks pointing to further strength in the labour market.
• Overnight China will release data on industrial profits. After a very strong period, we expect profit growth to come down as the economy is slowing.
• Swedish PPI and employment data are due out today but are not expected to move markets.

The 60 second overview

The US is set to approve booster shots after six months due to wanting immunity amid a big delta outbreak in many states. A decision is likely in mid-September.

EU will today discuss whether to re-impose restrictions on visitors from the US. The fact that COVID-19 is still with us continues to create problems for some sectors, here possibly the tourism sector in Europe. COVID-19 is also creating problems for supply chains, as e.g. South East Asia is hard hit at the moment.

Hike in South Korea: The Bank of Korea hiked the policy rate by 25bp to 0.75%. Usually, this is not a major news in the markets we are covering but still a sign that central banks are more upbeat around the world (although to a different degree).

Equities: Global equities posted small movements on Wednesday, although US managed to new records. The big story was however investors seeking exposure towards value sectors, like banks, industrials and energy. Meanwhile, health care and tech continued to lag. S&P logged its fifth consecutive gain up 0.2%, Dow 0.1%, Nasdaq 0.2% and Russell 2000 0.4%. Equity sentiment muted again this morning with Asian markets slightly lower and US futures the same.

FI: Yesterday, European bond yields rose and the spread between the core-EU and periphery widened ahead of the Jackson Hole conference, which will begin today and where Powell will speak tomorrow. There was a string of comments from ECB's Lane yesterday on PEPP, Covid-19 and the economic outlook. The key message in our view was that - ECB will re-calibrate PEPP at the Sep meeting on higher staff projections, BUT also they want to downplay that re-calibration confirming their goal to achieve favourable financing conditions. The above is fully in line with our expectations.

FX: Yesterday was very quiet in the FX markets with EUR/USD, EUR/GBP, EUR/NOK and EUR/SEK broadly unchanged ahead of Fed Chair Powell's speech at Jackson Hole tomorrow.

Credit: Credit continues to demonstrate cautious optimism with marginal spread tightening. Main closes at +46bp, some 0.2bp tighter, while xover was tighter by 0.3bp ending at 231bp. Primary market activity is picking up, with several deal announcements yesterday.

Nordic macro

Today, PPI's, household lending data and employment figures (all for July) are set for release. Whereas PPI and lending data might be interesting in their own right, they are unlikely to matter for markets and as Statistics Sweden's data still suffer from quality issues, these remain a lesser priority for markets as well.

General trend

• Nikkei 225 pared opening gain.
• Hang Seng has moved modestly lower [TECH index drops over 1.5%, Xiaomi and Kuaishou decline after earnings reports; Financials trade generally lower; EV companies drop amid warning from the Chinese press].
• Shanghai Composite ended morning trading modestly lower (-0.5%) [Financials lag ahead of upcoming bank earnings; Consumer and IT indices also drop].
• S&P ASX 200 has remained lower amid focus on earnings [Resources index lagged; Transport index rises on results from Qantas]; Various cos. reported earnings (including Woolworths, Qantas, Flight Center, Appen).
• US Q2 GDP revision due later today.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%.
• (AU) AUSTRALIA Q2 PRIVATE CAPITAL EXPENDITURE Q/Q: 4.4% V 2.6%E.
• (AU) Australia total weekly payroll jobs change for July 17-31: -2.0% v -1.8% prior; Wages -2.7% v -3.2% prior.
• QAN.AU Reports FY21 (A$) Net -1.73B v -1.96B y/y; Underlying EBIT -1.53B v 395M y/y; Rev 5.93B v 14.3B y/y.
• WOW.AU Reports FY21 (A$) adj Net 1.97B v 1.17B y/y; adj EBIT 3.7B v 3.2B y/y; Rev 55.7B v 53.1B y/y; Announces A$2.0B off-market stock buyback.
• QUB.AU Reports FY21 (A$) Net 91.6M (includes discontinued operations) v 87.5M y/y; Rev 2.03B v 1.88B y/y; Declares A$0.035/shr final dividend.
• APX.AU Reports H1 Net $6.7M v $22.3M y/y; Rev $196.6M v $306.2M y/y; To acquire data provider Quadrant, involves upfront payment of $25M.
• (NZ) New Zealand PM Ardern: New coronavirus case numbers were not unexpected; Elimination remains best strategy, don't intend to use lockdowns forever.

Japan

• Nikkei 225 opened +0.3%.
• (JP) Japan lower house election expected in Oct or later (in line) - Japanese press.
• 6504.JP To invest additional ¥40B on chips, seeking to increase production capacity for power chips - Japanese press.
• (JP) Japan Investors Net Buying of Foreign Bonds: -¥225.2B v +¥661.8B prior; Foreign Net Buying of Japan Stocks: ¥55.9 v +¥198.8B prior - week ended Aug 21.
• (JP) Japan Ruling Party (LDP) agrees on leadership election on Sept 29th - Press.
• (JP) Japan MoF sells ¥1.2T v ¥1.2T indicated in 0.500% 20-year JGBs, avg yield: 0.4050% v 0.4040% prior, bid to cover 3.65x v 3.51x prior.

Korea

• Kospi opened +0.1%.
• (KR) BANK OF KOREA (BOK) RAISES 7-DAY REPO RATE BY 25BPS TO 0.75%; NOT EXPECTED (1st rate hike since Nov 2018).

China/Hong Kong

• Hang Seng opened -0.1%; Shanghai Composite opened -0.1%.
• (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 President Xi: Urging China to make efforts to meet 2021 growth targets.
• (CN) China PBOC to use multiple tools to ensure 'reasonably ample' market liquidity - PBOC backed Financial News.
• (CN) China Securities Daily: The electric vehicle market is overheating and shows risks.
• (CN) China PBOC sets Yuan reference rate: 6.4730 v 6.4728 prior.
• 1810.HK Reports Q2 (CNY) Net 8.27B v 5.99Be, Rev 87.8B v 53.5B y/y (yesterday after the close).

Other

• (PH) Philippines Central Bank (BSP) Gov Diokno: Central bank is keen on keeping monetary support as long as needed.

North America

• (US) Former Fed Chair Bernanke: Commodity prices will not add to inflation going forward.

Europe

• (UK) July Car Manufacturing 53.4K unit, -37.6% y/y (lowest since 1956); YTD Manufacturing 552.4K units, +18.3% y/y – SMMT.
• (DE) According to the latest Forsa poll, Germany SPD party is ahead of CDU, 23% v CDU's 22% - FT.

Levels as of 01:20 ET

• Nikkei 225, flat, ASX 200 -0.6% , Hang Seng -1.2%; Shanghai Composite -0.5% ; Kospi -0.4%.
• Equity S&P500 Futures: -0.1%; Nasdaq100 -0.2%, Dax -0.2%; FTSE100 -0.2%.
• EUR 1.1773-1.1761 ; JPY 110.11-109.92 ; AUD 0.7281-0.7255 ;NZD 0.6979-0.6957.
• Gold -0.2% at $1,788/oz; Crude Oil -0.8% at $67.81/brl; Copper -0.7% at $4.2360/lb.

Daily Pivots: (S1) 0.7249; (P) 0.7264; (R1) 0.7292; More...

Intraday bias in AUD/USD remains neutral first, with focus on 0.7288 support turned resistance. Decisive break there should confirm short term bottoming at 0.7105. Stronger rise should then be seen to 0.7425 resistance. Break there will argue that whole corrective fall from 0.8006 has completed. In case of another fall through 0.7105, we'd continue to look for strong support from 0.6991/7051 support zone 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) 0.8547; (P) 0.8558; (R1) 0.8566; More...

Outlook in EUR/GBP is unchanged and intraday bias stays neutral first. Further rise is in favor as long as 0.8504 support holds. On the upside, break of 0.8592 resistance will resume the rebound from 0.8448 to 0.8668 resistance. Firm break there will be a strong sign of near term bullish reversal at least. However, break of 0.8504 will turn focus back to 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) 1.6158; (P) 1.6189; (R1) 1.6212; More...

Intraday bias in EUR/AUD stays neutral with focus on 1.6182 resistance turned support. Decisive break of 1.6182 will bring deeper fall back to 1.5898 structure support. Rebound from current level will retain near term bullishness. Break of 1.6434 will resume larger rise from 1.5250 to 1.6827 resistance next.

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) 1.0734; (P) 1.0746; (R1) 1.0767; More....

Intraday bias in EUR/CHF remains neutral at this point. Outlook stays bearish with 1.0839 resistance intact and further fall is expected. On the downside, break of 1.0694 will resume larger fall from 1.1149. Next target is 61.8% projection of 1.0985 to 1.0715 from 1.0839 at 1.0672 first. Break will target 100% projection at 1.0569 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 1.0863) holds. Break of 1.0505 low would be seen at a later stage.

Daily Pivots: (S1) 150.73; (P) 151.10; (R1) 151.74; More...

Intraday bias in GBP/JPY remains neutral with focus on 151.38 resistance. Firm break there should indicate short term bottoming at 149.16. Intraday bias will be turned back to the upside for 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.

Daily Pivots: (S1) 129.00; (P) 129.26; (R1) 129.76; More....

EUR/JPY's strong break of near term falling channel resistance argues that correction from 134.11 might have completed at 127.91 already. Intraday bias is mildly on the upside for 130.54 resistance first. Sustained break there will affirm this bullish case and target 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.

Another round of selling was seen in Dollar overnight, as US stocks extended record run. But Yen was even weaker, following the strong rally in treasury yields. It remains to be seen if investors are already starting to position themselves for the Jackson Hole symposium. For now, Yen, Dollar, and Swiss Franc are the worst performers for the week. New Zealand Dollar is the strongest, followed by other commodity currencies.

Technically, we'd continue to monitor some levels in Dollar pairs on their reaction to incoming Jackson Hole news flows. In particular, the levels include 1.1804 resistance in EUR/USD, 1.3785 minor resistance in GBP/USD, 0.7288 resistance in AUD/USD, 0.9098 support in USD/CHF and 109.10 support in USD/JPY. Synchronized break of these levels would indicate that deeper selloff in Dollar is underway.

In Asia, at the time of writing, Nikkei is down -0.01%. Hong Kong HSI is down -1.44%. China Shanghai SSE is down -0.50%. Singapore Strait Times is down -0.05%. Japan 10-year JGB yield is down -0.0019 at 0.019. Overnight, DOW rose 0.11%. S&P 500 rose 0.22%. NASDAQ rose 0.15%. 10-year yield rose 0.052 to 1.342.

US 10-year yield jumped as focus turns to Jackson Hole

US 10-year yield staged a strong rally overnight, closing up 0.052 at 1.342. The development came as markets are awaiting the highly anticipated Jackson Hole Symposium, which kicks off today. While the main highlight is Fed Chair Jerome Powell's speech on Friday, there would likely be continuous news flow of central banker comments ahead of that.

After Fed hawk Robert Kaplan's comments the possibly of adjusting the timing of tapering, it seems less likely for Fed to make a September announcement. We'll look forward to other Fed officials for guidance, as Powell would act like what he used you be, composed, balanced, but non-inspirational.

Some suggested reading on Jackson Hole:

• Jackson Hole Symposium Preview: Affirming Likelihood of Taper Announcement in November while Striking Balance between Strong Data and Pandemic Resurgence
• What Will the Fed Signal at Jackson Hole?
• Jackson Hole Symposium Preview: Powell Under Pressure

As for 10-year yield, it's back pressing 55 day EMA (now at 1.344) with yesterday's rise. Sustained trading above there, followed by firm break of 1.420 resistance, should confirm that the correction from 1.765 has completed 1.128. That came after hitting 50% retracement at 1.1345. We should then see further rise back to retest 1.1765 high during the rest of the year, as the world is well-vaccinated to live with the coronavirus.

Japan corporate services price rose 1.1% yoy in Jul, on transportation fees

Japan corporate services price index rose 1.1% yoy in July, below expectation of 1.3% yoy. The increase was driven by 1.4% rise in transportation fees, and in particular, with international freight costs up 24.6%. Meanwhile, hotel service fees rose 10.8%, highest in six years, reflecting the impact of the Tokyo Olympics.

"The recent increase in infections will weigh on services producer prices, though we could see service demand perk up if progress in vaccinations help re-open the economy," said Shigeru Shimizu, head of the BoJ's price statistics division.

Bank of Korea raises interest rate, embarking normalization process

Bank of Korea raised interest rate by 0.25% to 0.75% today, becoming the first major Asian economy to hike. "The Board will gradually adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above 2% for some time, despite ongoing uncertainties over the virus," the BOK said in its monetary policy statement.

Governor Lee Ju-yeol said, "we've decided to put the focus on reducing financial imbalances, and as we raise the rate, we are embarking on a process of normalizing policy in line with economic recovery."

BoK maintained its forecast of 4% GDP growth this year. Consumer inflation forecast was, however, upgraded from 1.8% to 2.1%.

Looking ahead

Germany will release Gfk consumer sentiment in European session. Eurozone will release M3 money supply and ECB meeting accounts. Later in the day, US will release jobless claims and Q2 GDP revision.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 129.00; (P) 129.26; (R1) 129.76; More....

EUR/JPY's strong break of near term falling channel resistance argues that correction from 134.11 might have completed at 127.91 already. Intraday bias is mildly on the upside for 130.54 resistance first. Sustained break there will affirm this bullish case and target 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.

Economic Indicators Update