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Daily Pivots: (S1) 1.6329; (P) 1.6383; (R1) 1.6439; More...

Intraday bias in EUR/AUD is turned neutral with current retreat. Some consolidations could be seen but downside should be contained by 1.6182 resistance turned support to bring rebound. 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 to 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) 1.0707; (P) 1.0721; (R1) 1.0741; More....

Intraday bias in EUR/CHF stays mildly on the downside at this point. Current fall from 1.1149 should 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. On the upside, above 1.0756 minor resistance will bring recovery. But outlook will remain bearish as long as 1.0839 resistance holds.

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.

The Dax 30 retreats as investors grow wary of the recovery’s momentum.

The index had only briefly held onto the 16000 milestone. The break below the rising trendline has put a halt to a month-long rally.

The current consolidation is a sign of indecision after a round of liquidation. An oversold RSI has prompted traders to buy the dip near 15600.

The rally may only resume if the bulls succeed in lifting offers around 15970. Failing that, price action could be vulnerable below 15600.

The Canadian dollar tanked after last month’s retail sales failed to impress. The greenback saw increased momentum after it rallied above July’s peak at 1.2800.

The breakout can be a confirmation of a bullish reversal for the weeks to come. A pullback is necessary to let the bulls catch their breath.

An overbought RSI has swung towards the oversold territory. 1.2750 near the previous high is now the immediate support. A rebound would challenge the psychological level of 1.3000.

The pound drifted lower after Britain’s retail sales figures fell in July. The pair has given up all its gains from late July and is testing the critical support at 1.3600 from the daily chart.

A diverging RSI suggests a slowdown in the downward impetus. Its oversold situation may have attracted buying interest in the demand zone. 1.3770 would be the first target in case of a rebound.

Otherwise, a bearish breakout would trigger a new round of sell-off towards 1.3460 as those who bought the dip reverse gears.

Daily Pivots: (S1) 1.1674; (P) 1.1690; (R1) 1.1715; More...

Intraday bias in EUR/USD remains neutral at this point. In case of another fall, we'd continue to look for strong support from 1.1602/1703 key support zone to bring rebound. On the upside, above 1.1804 resistance will turn bias back to the upside for 1.1907 resistance first. However, sustained break of 1.1602/1703 will carry larger bearish implication and pave the way to 1.1289 fibonacci support.

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.

Markets

Last Friday ended on a positive note. The risk-off that took markets hostage for most of the week subsided. Dip-buyers entered European and equity markets, lifting the EuroStoxx50 from the 4100 support area (+0.55%) and the S&P500 (+0.81%) from similar technical references around 4400. US Treasuries erased earlier gains, leading to a bear flattening of the curve with the belly underperforming. Yield changes varied from +0.5 (2y) to +1.5/1.8 bps (5y/7y) to -0.2 bps (30y). German Bunds outperformed, trading a narrow sideways trading range to finish unchanged. The 10y yield remains within proximity of the -0.50% support. The dollar’s bull run reversed as sentiment improved. EUR/USD’s break below 1.1695/1.1704 on Thursday did not meet with follow-through action. Instead, the pair fought its way back north of 1.17. In parallel price action, the trade-weighted dollar’s (closed at 93.49) technical momentum generated after capturing 93.44 (previous 2021 high) faded. USD/JPY was little changed. EUR/JPY and EUR/CHF extensively tested 128 and 1.07 respectively in the days before, but both support zones survived, triggering a minor rebound going into the weekend. Sterling remained in the defensive after a week of unconvincing data made investors ponder the UK central bank’s hawkish turn earlier this month. EUR/GBP rose from 0.856 to 0.859. It started the week just north of 0.85.

Last week’s risk aversion to some extent was driven by China’s slowing growth momentum and tech crackdown. Today however, Chinese stocks are among the better performers. Japan (+2%) ignores poor PMIs (see below). Core bonds grind lower. The dollar is under pressure against all G10 peers but the Japanese yen. EUR/USD rallies further north of 1.17. In smaller currencies, the kiwi dollar underperforms after PM Ardern again extended the national lockdown to August 27 after identifying 35 new cases, bringing the total in the community outbreak to 107.

We believe the better risk context might get additional support from today’s European PMIs. We see some downside risks for the manufacturing gauge (already at or close to record highs) due to supply constraints which are hurting for example car makers (see last week’s reporting). The services PMI should confirm the sector is in a strong place, in part thanks to tourism picking up over the past few weeks. EUR/USD’s first resistance is situated at 1.1752. We’re cautious in expecting a sustained turnaround with the Jackson Hole symposium looming though. Powell might give more clues on the upcoming tapering and that’s a big risk for EUR/USD short term. The British pound better hopes UK PMIs do not disappoint as well. If they do, keep an eye at EUR/GBP 0.86.

News headlines

The Japan composite Jibun PMI dropped from 48.8 to 45.9, the lowest level since August of last year. The decline was mainly driven by a further contraction in activity in the services sector (43.5 from 47.4) as the impact of the delta corona variant forced the government to extend the state of emergency. Activity in the services sector printed below the 50 boom-or-bust level for the 19th consecutive month. Activity in the manufacturing sector continued to expand, but a more modest pace (52.4 from 53.0). According to Markit, new order inflows saw a sustained increase, although the pace of growth was the slowest since January, while severe supply chain disruption hampered the receipt of inputs for production. Even so, manufacturers expectations on demand remained strong, encouraging firms to increase staffing at the quickest peace since January 2020.

Swedish Prime Minister Stefan Lofven unexpectedly announced that he will step down as leader of the Social Democrats in November and end its term as Prime Minister. Lofven was prime minister since 2014. A new leader will be elected at a party Congress held November 3-7. This new leader also might become the new Prime Minister, to be approved by parliament. The replacement of Lofven is still to be decided, but Finance Minister Magdalena Andersson is mentioned as a candidate. Next general elections in Sweden are scheduled for September 11, 2022.

Daily Pivots: (S1) 1.3602; (P) 1.3623; (R1) 1.3643; More...

Intraday bias in GBP/USD is turned neutral first with current recovery. But further fall is expected as long as 1.3722 minor resistance holds. ON the downside, firm break of 1.3570 will resume larger fall from 1.4248 to 1.3482 resistance turned support next. Break there will target 100% projection of 1.4248 to 1.3570 from 1.3982 at 1.3304.

In the bigger picture, current development argues that rise from 1.1409 (2020 low) has completed at 1.4248, after failing 1.4376 resistance. Fall from there could either be correcting the rise form 1.1409, or starting another falling leg inside long term sideway pattern. In either case, sustained break of 1.3482 resistance turned support will target 38.2% retracement of 1.1409 to 1.4248 at 1.3164 first. Break there will pave the way to 61.8% retracement at 1.2493.

The Australian dollar tilted higher in early trading even after weak flash manufacturing and services PMI data. According to Markit, the services PMI declined from 44.2 in July to 43.3 in August. In the same period, the manufacturing PMI declined from 56.9 to 51.7. This performance was mostly because of controversial new lockdowns. Some of these lockdowns could go on for weeks as New South Wales recorded more than 818 new cases today. Further data showed that a quarter of all patients in ICU in the country were below the age of 40.

US and European futures rose in early trading as the market reflected on the improving situation in China. In a statement, the country’s government said that it recorded zero new local transmission. This happened after the country recorded more cases last week, pushing the government to record some lockdowns. The indices rose even as investors continued buying the dips after last week’s substantial sell-off. Meanwhile, Treasury yields ticked up while the US dollar declined. Further, the equities are rising because of the price of crude oil and the upcoming Jackson Hole symposium.

The economic calendar will be dominated by the upcoming flash manufacturing and services PMI numbers by Markit. The overall estimate is that the financial market remained steady in August even as countries continued dealing with the Covid-19 pandemic. In the Eurozone, analysts expect the data to show that the manufacturing PMI declined from 62.8 to 62.0 while the services PMI fell to 59.8. In the US, the two are expected to decline slightly to 62.8 and 59.4. The next key data to watch will be the existing home sales from the US. These sales are expected to have dropped from 5.86 million to 5.81 million.

EURUSD

The EURUSD pair popped in early trading as the risk-off sentiment eased. The pair rose to 1.1715, which was the highest level since August 18. On the four-hour chart, the pair managed to move above the 25-day and 15-day moving averages. It also rose above the key resistance at 1.1700 while the Relative Strength Index (RSI) has formed a bullish divergence, The pair also seems like it has formed a double bottom pattern. Therefore, the pair will likely keep rising as bulls target the next key resistance at 1.1750.

BTCUSD

The BTCUSD pair approached the 50,000 milestone during the weekend as enthusiasm about cryptocurrencies rose. The pair is trading at 49,900, which is above the short and longer-term moving averages. It has also moved above the upper side of the ascending channel. It also rose above the key resistance level at 48,183, which was the highest on May 16. Its MACD and the Relative Strength Index (RSI) have been on a bullish trend. Therefore, the pair will likely keep rising as bulls push it to 50,000.

AUDUSD

The AUDUSD pair rose to 0.7155, which was the highest it has been since Monday last week. The pair also formed a double-bottom pattern at 0.7100. It also rose slightly above the 25-day moving average while the MACD and the Relative Strength Index (RSI) have been in a strong bullish trend. The pair will likely keep rising with the next key target being at 0.7200.

Daily Pivots: (S1) 0.9156; (P) 0.9173; (R1) 0.9187; More....

Range trading continues in USD/CHF and intraday bias remains neutral for the moment. On the upside, break of 0.9241 resistance should resume the rise from 0.8925 through 0.9273. On the downside, break of 0.9098 will target 0.9017 support first. Further break there will likely resume the decline from 0.9471 through 0.8925 low.

In the bigger picture, the failure to sustain above 55 week EMA (now at 0.9180) retains medium term bearishness in USD/CHF. Break of 0.8925 support should resume the whole decline form 1.0342 (2016 high) through 0.8756 low. However, break of 0.9273 resistance and sustained trading above 55 week EMA will be an early sign of bullish trend reversal. Focus will then turn to 0.9471 resistance for confirmation.