Sample Category Title

Daily Pivots: (S1) 149.71; (P) 150.23; (R1) 151.07; More...

Intraday bias in GBP/JPY remains neutral for the moment. Further decline is expected as long as 151.38 resistance holds. Decisive break there will carry larger bearish implication and target 143.78 fibonacci level next. On the upside, above 151.38 minor resistance will turn bias back to the upside for 153.42 resistance instead.

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) 128.42; (P) 128.79; (R1) 129.19; More....

Outlook in EUR/JPY remains unchanged and intraday bias stays neutral for consolidation above 127.91 temporary low. Further decline is expected as long as 130.54 resistance holds. On the downside, break of 127.91 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) 0.8541; (P) 0.8568; (R1) 0.8584; More...

Intraday bias in EUR/GBP is turned neutral with current retreat. At this point, 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) 1.6229; (P) 1.6327; (R1) 1.6381; More...

EUR/AUD's pull back from 1.6434 extends lower today, but stays above 1.6182 resistance turned support. Intraday bias remains neutral and another rise is still in favor. On the upside, break of 1.6434 will resume larger rise from 1.5250 to 1.6827 resistance next. On the downside, though, break of 1.6182 will bring deeper pull back towards 1.5898 structural support.

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) 1.0702; (P) 1.0730; (R1) 1.0744; More....

Intraday bias in EUR/CHF is turned neutral for now as sideway trading extends above 1.0694 temporary low. Outlook will stay bearish as long as 1.0839 resistance holds. 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.

US stocks kicked off the week on a positive note amid the FDA approval for the Pfizer and BioNTech vaccine, Comirnaty. That’s what the headlines say, but there is more than that for yesterday’s rally.

On Friday, Dallas Federal Reserve (Fed) President Robert Kaplan said that the rising Covid cases and the economic tensions that come along with it brings him to adjust his view about the idea of pulling away the Fed stimulus. He now thinks it may not be the right time. And, that’s exactly what the market was hoping to hear from a member who, so far, was backing a sooner-than-otherwise Fed tapering.

Kaplan’s dovish comments, combined with soft July PMI data boosted the Fed doves ahead of Jerome Powell’s Jackson Hole speech and sent US indices to fresh records.

I believe the cheery mood across the US equities is here to stay in the run up to the Jackson Hole meeting, as the Fed Chair Jerome Powell could only soften the hawkish tone of last week’s FOMC minutes. The rising Covid cases and the soft data can only keep the Fed alert and reluctant to act prematurely. And that’s all the market wants to hear.

In the FX, the softening Fed expectations weigh on the US dollar.

The GBPUSD rebounded on Monday and the FTSE gained on the back of cheaper British pound and jump in oil and commodity prices. The combination of soft pound and firmer oil should help keeping the FTSE 100 above the 7100p mark, but the 7200p will be a bigger challenge as enthusiasm in Brent crude should remain short-lived, and the gains capped approaching the $70 pb mark, as the global reflation trade is being questioned with the rising Covid cases, hinting that oil companies could again fall on the backfoot if the news don’t get better, and fast.

Interestingly, gold is making a positive attempt on the $1800 per oz. Gold’s positive correlation to equities is a sign that this is not a safe haven move, and the buy orders may not gain momentum above the $1800 mark, as equities remain more appetizing and offer much better returns in an environment of softening Fed expectations.

Market movers today

• We have no tier-1 data today but the US Richmond business survey for August may get some attention with the increased focus on the US manufacturing cycle. US new home sales are also up for release today. New home sales have dropped from the COVID-induced pick-up but is expected to have rebounded slightly in July.
• There are no market movers in Scandi today.

The 60 second overview

The financial markets continue to be driven by the economic impact of the corona crisis and the rise of infections as well as the roll-out of vaccines. Yesterday, the Pfizer vaccine was approved by the FDA and can thus be used in the US. Hence, with more vaccines available, the US stock market set a new record and the VIX volatility declined after having risen. There was also a rebound in the oil price.

However, US Treasury yields continue to be range bound and there has been modest impact from the rise in equity prices. In the Treasury market, the use of the Federal Reserve's reverse repo line continues to increase and reached a new record yesterday at USD 1136bn and the Treasury continues to run down its cash balance. Since early March the cash balance has been reduced by some USD 1000bn.

Looking forward, markets are looking towards Powells speech on Friday at the Jackson Hole conference and whether he will strike a more dovish tone than previously expected and a vaguer statement on tapering of the Federal Reserve QE programme.

Equities: Global equity markets kicked off week on strong note as the rebound continued. Sector performance reversed, with last week's losers like energy, materials an industrials among the winning sectors. Likewise, overbought defensives from last week, such as utilities and real estate, lagged. Gains in US stocks were relatively broad based, a third of the S&P500 higher. Volatility lower for its second session, now below 17. This took S&P just off record highs up 0.9%, Dow 0.6%, Nasdaq 1.6% and Russell 2000 1.9%. The rebound continuing in Asia this morning, with markets up 1-2%, with outperformance in Hong Kong as tech shares recoup some losses. US futures point to another green opening.

FI: There was a modest rise in European yields yesterday, while 10Y Treasuries were unchanged despite US equities reaching new highs yesterday. The bond markets are still in a wait-and-see stance ahead of the Jackson Hole conference that begins on Thursday.

FX: No major FX movements yesterday. EUR/USD rose but remains in the 1.17-area. EUR/GBP dipped marginally and remains below 0.86. EUR/NOK and EUR/SEK also fell.

Credit: Credit markets were in a good mood yesterday, with iTraxx Xover tightening 4bp (to 232½bp) and Main 1bp (to 46bp). HY bonds tightened 1½bp and IG ½bp.

General trend

• Australian government bond yields rise; AOFM priced indexed bond syndicate.
• Generally quiet session for the FX majors.
• Spot iron ore prices continue to rise as China curbs steel manufacturing in order to help ease pressure on input costs (steel mills were told not to exceed 2020 levels in July).
• Asian airlines stronger on the news that Pfizer-BioNTech COVID vaccine got FDA approval.
• Financials generally lag.
• Hang Seng has remained higher [TECH index rises over 4%, JD.com rises following earnings; Gaming sector tracks earlier rise on Wall St; Financials trade mixed].
• Shanghai Composite rose by 1% during morning session [Consumer Staples index outperforms as liquor firms rise; Financials lag].
• Nikkei 225 has extended gain [Topix Transport, Electric Appliances and Steel indices rise over 2%; Banks lag].
• S&P ASX 200 has moved higher, but underperformed [Energy and Resources indices rise; Financials lag; Wesfarmers’ ex-dividend weighs on Consumer Discretionary index; Health Care index drops following results from Ansell].

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened 0.0%.
• (NZ) New Zealand Q2 Retail Sales (ex-inflation) Q/Q: 3.3% v 2.5%e.
• BLD.AU Reports FY21 (A$) Net +639.9M v -1.14B y/y; adj EBITDA 882M v 825M y/y; Rev 5.35B v 5.73B y/y.
• AWC.AU Reports H1 Adj Net $69.2M v $85.7M y/y, Rev $2.38B v $2.15B y/y.
• ASB.AU Reports FY21 (A$) Net 81.1M v 89.0M y/y; Rev 1.57B v 2.1B y/y.
• MND.AU Reports FY21 (A$) Net 47.1M v 36.5M y/y; EBITDA 108.7M v 92.1M y/y; Rev 1.95B v 1.67B y/y.
• (NZ) New Zealand reports 41 additional coronavirus cases, total cases reach 148.

Japan

• Nikkei 225 opened +0.6%.
• 4004.JP Announces ¥109B share sale in domestic and overseas sale, to fund purchases of chip materials (yesterday after the close).
• (JP) Japan PM Suga and LDP Official Nikai said to be meeting on Aug 25th to discuss elections - Press.
• (JP) Japan MoF sells ¥2.5T v ¥2.5T indicated in 0.005% (prior 0.000%) 5-year JGBs; avg yield -0.1200% v -0.1150% prior, bid to cover 3.76x v 3.53x prior.

Korea

• Kospi opened +1.0%.
• (KR) South Korea Aug Consumer Confidence: 102.5 v 103.2 prior (second consecutive decline).
• (KR) Speculation South Korea 2022 Budget may exceed KRW604.7T - Yonhap.

China/Hong Kong

• Hang Seng opened +1.3%; Shanghai Composite opened +0.2%.
• JD Reports Q2 $0.45 v $0.41e, Rev $39.3B v $38.3Be (US morning).
• (CN) China economy likely to recover in H1 after slowdown in July - Economic Daily.
• (CN) Meeting between China President Xi and US President Biden on sidelines of Italy G20 this fall looking less likely, due to virtual attendance looking more likely due to COVID – SCMP.
• (CN) China PBOC sets Yuan reference rate: 6.4805 v 6.4969 prior.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Net CNY0B v Net CNY0B prior.
• (HK) Macau to accept negative COVID tests that have been taken within 7 days of entering (update).

Other

• (MY) Analysts expect chip shortage in auto industry to get worse as COVID continues to go unchecked in Malaysia, forcing factories of STMicoelectronics and Infineon to close - press.

North America

• (CN) US SEC has given new disclosure requirements to Chinese companies looking to list in the US - press.
• IFF Lanxess signs contract to acquire microbial control business from Iff; enterprise value $1.3B.
• (US) SEMI July North America-based Manufacturers of Semi Equipment Billings: $3.86B, +4.5% m/m and +49.8% y/y.
• NXPI Samsung said to be considering a bid but worried that regulatory issues will take the price even higher than the current leading bid of $68B, not given up on the idea all together; Texas Instruments also said to be interesting to Samsung – press.
• (US) VP Harris: China continues to "coerce, intimidate" in the South China Sea; China's actions undermine the rules based on order and sovereignty of nations; Indo-Pacific is a top priority for US - speech notes for Singapore.
• (US) Energy Dept to auction 20M barrels of crude from Strategic Petroleum Reserve, since it is holding its largest reserve in 7-years - press.

Levels as of 01:15ET

• Hang Seng +1.6%; Shanghai Composite +1.1%; Kospi +1.1%; Nikkei225 +1.0%; ASX 200 +0.2%.
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.1%, Dax +0.2%; FTSE100 +0.2%.
• EUR 1.1749-1.1734; JPY 109.80-109.64 ;AUD 0.7225-0.7200; NZD 0.6909-0.6878.
• Commodity Futures: Gold -0.1% at $1,804/oz; Crude Oil +0.3% at $65.83/brl; Copper +0.1% at $4.23/lb.

STOCKS

Equities globally trade higher and look bullish for the near term. Dow and Dax may target 35500/750 and 16000 respectively while Nikkei, Shanghai, Nifty and Sensex look bullish too towards 28000, 3520/40, 16600/700 and 56000 respectively. Immediate view is bullish and we may expect further rise today.

Dow (35335.71, +215.63, +0.61%) has been rising in line with our expectations. A break above 35250 now shows good signs of strength for the near term. We may expect a target of 35500-35750 to be seen soon.

DAX (15852.79, +44.75, +0.28%) has been rising too and could head towards our expected 16000 soon. Immediate view is bullish.

Nikkei (27763.43, +269.19, +0.98%) has risen further and is heading towards 28000. A strong break above 28000, if seen can take the index up to test 29000 too. Failure to break above 28000 can drag the index down to 27000 or lower in the longer run. Watch price action near 28000.

Shanghai (3509.51, +32.38, +0.90%) has bounced well and needs to break above 3520 to indicate bullishness towards 3540-3560 in the coming sessions. Watch price action near 3520.

Nifty (16496.45, +45.95, +0.28%) tested 16592 but came off from there to close lower. A break above 16500 is possible today again to eventually see a rise towards 16600/700 in the near term. Immediate view is bullish.

Sensex (55555.79, +226.47, +0.41%) has risen as expected and could head towards 56000 in the coming sessions.

COMMODITIES

Commodities trade higher today. Rise seen in Gold, Silver, Copper and crude prices. Brent and WTI can face rejection from 70-72.50 and 66-67 levels respectively while Gold may test crucial resistance at 1810 which needs to break in order to move further up. Silver may test 24 before coming down while copper if sustains above 4.20 can head towards 4.40/50. Overall immediate view is bullish for most commodities mentioned below.

Brent (69.04) has risen as expected but broke above 69 mentioned yesterday. It tested 69.48 before coming off from there. While above 69, there is scope to rise towards medium term resistance zone of 70-72.50 on the upside before facing rejection from there.

WTI (65.87) also tested 66.30 on the upside before coming off from there. While below 66-67 levels, immediate view is bearish for a fall towards 64.

Gold (1805.20) has risen in line with our expectations of seeing a rise towards 1800/1810. Watch immediate resistance at 1810 now, which can cap the upside and produce a rejection soon. The broad range of 1810-1770 remains intact unless a break on either side is seen.

Silver (23.64) has bounced in line with our expectations of seeing a bounce to 23.50/60 yesterday. If the price sustains above 23.60, it can move higher towards 24 else a sharp fall to 23 cannot be negated. Watch price action while above 23.50/60.

Copper (4.2375) has risen above 4.20.A sustained trade above 4.20 can take copper towards 4.40/50.

FOREX

Dollar Index has fallen but has support near current levels which if holds can produce a bounce back towards 93.30/40. Euro is down from 1.1750. View is bearish while below 1.1780-1.1750. Aussie and Pound have risen well but could soon face rejection and see a corrective decline. USDCNY is holding near immediate support at current levels and could bounce back to 6.49/50 again. USDINR can break below 74.20 to test 74. USDJPY remains ranged within 109-110.50.

Dollar Index (93.042) tested 92.94 before bouncing back from there slightly. There is support at current levels which if holds can take the index higher towards 93.30/40 again in the near term. Watch price action near current levels.

Euro (1.1736) has come off slightly from 1.1750 itself without attempting to move higher towards 1.1780. Could 1.1750 hold for now? In that case a fall back to 1.1730/1.1700 cannot be negated in the near term. While below 1.1780-1.1750, immediate view is bearish.

EURJPY (128.77) tested 129.14 but could not sustain the rise and instead fell back to levels below 129. A fall to 128.50-128.30 is possible before another bounce is seen. Overall broad range of 128-129.50 may hold for the near term.

Dollar-Yen (109.72) continues to hold within 110.50-109 zone. Unless a break on either side of the range is seen, there is lack of clarity on further direction. While above 109.50, a rise back to 110-110.50 looks possible within the mentioned range.

Aussie (0.7213) has risen as expected but we need to see if it manages to break above 0.7250 and sustain to move up further. While below 0.7250, view is to see a rejection that could take Aussie back towards 0.7150. Watch price action near 0.7250.

Pound (1.3714) has risen above 1.37 as expected but needs to sustain to break above 1.3750 to move further up. While below 1.3750, there is scope for a rejection that can take Pound back to 1.3650 soon. Watch price action to see if Pound manages to break above 1.3750. While below 1.3750, view continues to remain bearish for the medium term.

USDCNY (6.4816) has fallen to test 6.48/47 as mentioned yesterday. There is immediate trend support at current levels which may hold and produce a bounce back towards 6.49/50.

USDINR (74.2150) closed near 74.20 yesterday but fell sharply on the NDF markets. NDF rate quotes at 74.10 just now indicating a fall towards 74.10-74.00 is possible in the onshore markets today. We may expect an opening below 74.20 that could drag the pair to test 74 today. Thereafter, if it breaks below 74 or not will have to be seen.

INTEREST RATES

The US Treasury yields remain stable. We retain our view seeing a dip to test their crucial supports in the near-term while they trade below their immediate resistances. Thereafter it will have to be seen if they can bounce-back or not. The Fed Chairman’s speech at the Jackson Hole Symposium on Friday will be a key event to watch which could possibly set a direction for the yields. Until then, we can expect stable movement. The German yields are holding above their key supports and need to see if they can get a strong follow-through rise and a corrective rally. The 5Yr GoI can oscillate in a broad range of 5.62%-5.76% in the coming days.

The US 2Yr (0.23%), 5Yr (0.78%), (1.26%) and the 30Yr (1.88%) Treasury yields remain lower and stable. Our view remains the same. The 10Yr can test 1.18% while it remains below 1.3% and the 30Yr can dip to 1.8% while below 1.9%. Thereafter it will be important to see if the yields can bounce-back or not. Price action at 1.18% (10Yr) and 1.8% (30Yr) will need a close watch.

The German 2Yr (-0.76%) and 5Yr (-0.75%) yields remain stable while the 10Yr (-0.48%) and 30Yr (-0.03%) have inched up slightly. The key supports at -0.5% (10Yr) and -0.05% (30Yr) seems to be holding for now. It will have to be seen if the yields can see a strong follow-through rise from here and see a corrective rally before resuming the broader downtrend. It is a wait and watch situation now.

The 5Yr GOI (5.6896%) has come-off from the high of 5.71% yesterday. We retain our near-term bullish view of seeing a rise to 5.73%-5.74% and 5.76%. Broadly, we can look for a range of 5.63/62%-5.74/76%.

Daily Pivots: (S1) 1.2584; (P) 1.2711; (R1) 1.2779; More...

Intraday bias in USD/CAD is now mildly on the downside as fall from 1.2947 extends. Break of 1.2421 support 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 1.2777 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.