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Daily Pivots: (S1) 1.3774; (P) 1.3826; (R1) 1.3858; More...

Intraday bias in GBP/USD remains neutral at this point. Outlook is unchanged that corrective pattern from 1.4240 could have completed with three waves down to 1.3570. On the upside, break of 1.3982 will resume the rise from 1.3570 to retest 1.4248 high. However, break of 1.3766 support will dampen this bullish view and bring retest of 1.3570.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed. GBP/USD would then be seen in another leg of long term range pattern between 1.1409 and 1.4376. Deeper fall could then be seen to 61.8% retracement of 1.1409 to 1.4248 at 1.2493, and even below.

Daily Pivots: (S1) 0.9217; (P) 0.9228; (R1) 0.9245; More....

USD/CHF is staying in consolidation from 0.9241 temporary top and intraday bias remains neutral first. Outlook is unchanged that corrective fall from 0.9273 should have completed at 0.9017. Above 0.9241 will target 0.9273 resistance. Firm break there will resume rise from 0.8925 to 100% projection of 0.8925 to 0.9273 from 0.9017 at 0.9365. However, break of 0.9128 will dampen this bullish view and turn bias back to the downside for 0.9017 support.

In the bigger picture, the failure to sustain above 55 week EMA (now at 0.9184) retains medium term bearish 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.

Daily Pivots: (S1) 1.1723; (P) 1.1735; (R1) 1.1747; More..

EUR/USD rebounds notably today and immediate focus is now on 1.1768 minor resistance. Firm break there will confirm short term bottoming and bring stronger rise to 1.1907 resistance. As by then, EUR/USD should have draw strong support from support from 1.1602/1703 support zone. Firm break of 1.1907 should indicate near term bullish reversal. Nevertheless, on the downside, sustained break of 1.1602 will argue that it's already reversing the trend from 1.1603, and target 61.8% retracement of 1.1603 to 1.2348 at 1.1289.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair. However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again.

Euro and Swiss Franc rise broadly as the markets are approaching the weekly close. On the other hand, Canadian Dollar is reversing some of this week's gains, while Dollar is following as second weakest for the day. As for the week, the Loonie is still the strongest, followed by Kiwi Swiss Franc is the weakest followed by Sterling. But there are still a few more hours to change the picture.

Technically, one major focus for the rest of the day and early next week is EUR/USD. Break of 1.1768 minor resistance will firstly indicate short term bottoming. More importantly, the could be an early sign of near term reversal, after drawing support from 1.1703 key near term support level. We'll see if EUR/USD's rebound would extend.

In Europe, at the time of writing, FTSE is up 0.40%. DAX is up 0.31%. CAC is up 0.27%. Germany 10-year yield is up 0.010 at -0.448. Earlier in Asia, Nikkei dropped -0.14%. Hong Kong HSI dropped -0.48%. China Shanghai SSE dropped -0.24%. Singapore Strait Times dropped -0.54%. Japan 10-year JGB yield dropped -0.0002 to 0.024.

Eurozone exports rose 23.8% yoy in Jun, imports rose 28.2% yoy

Eurozone exports to the rest of the world rose 23.8% yoy to EUR 209.9B in June. Imports from the reset of the world rose 28.2% yoy to EUR 191.8B. As a result, Eurozone record a EUR 18.1B surplus, comparing to EUR 20.0B a year ago. Intra-Eurozone trade rose 24.6% yoy to EUR 188.0B.

In seasonally adjusted terms, Eurozone exports dropped -0.1% mom to EUR 197.7B. Imports was nearly unchanged at EUR 185.3B. Trade surplus narrowed to EUR 12.4B, down from EUR 13.8B, above expectation of EUR 9.3B.

Also released in European session, Swiss PPI came in at 0.5% mom, 3.3% yoy, versus expectation of 0.3% mom, 2.8% yoy.

New Zealand BusinessNZ manufacturing rose to 62.6, second highest on record

New Zealand BusinessNZ Performance of Manufacturing Index rose from 60.9 to 62.6 in July. That's the second highest reading after March's 63.6. Looking at some details, production rose from 64.4 to 66.0.. Employment rose from 56.7 to 58.3, a new record. New orders rose from 63.6 to 65.0. Finished stocks dropped from 57.4 to 56.9. Deliveries rose from 55.2 to 57.9.

However, the position of negative comments (51.4%) still remained higher than positive ones (48.6%). Increased domestic and overseas orders was the common factor for positive comments. In contrast, tight labor market, supply chain issues and raw material costs were the negatives.

BNZ Senior Economist, Craig Ebert stated that "while New Zealand's PMI is doing exceptionally well, we are also conscious of the headwinds happening for global manufacturing. This is on account of the resurgence of COVID19 in its delta strain."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1723; (P) 1.1735; (R1) 1.1747; More..

EUR/USD rebounds notably today and immediate focus is now on 1.1768 minor resistance. Firm break there will confirm short term bottoming and bring stronger rise to 1.1907 resistance. As by then, EUR/USD should have draw strong support from support from 1.1602/1703 support zone. Firm break of 1.1907 should indicate near term bullish reversal. Nevertheless, on the downside, sustained break of 1.1602 will argue that it's already reversing the trend from 1.1603, and target 61.8% retracement of 1.1603 to 1.2348 at 1.1289.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair. However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again.

Economic Indicators Update

Markets are set for a quiet end to the week with SPX and DOW closing at new highs, while Nasdaq remains dragged by higher yields as cyclicals continue to gain favour. A strong US PPI reading helped to lift the US dollar on Thursday, highlighting the focus on price growth. The consumer will be in the spotlight Friday with the UMich consumer sentiment survey. Below is the latest sign of Cardano's resilience against Ethereum as ADA/USD regains $2.00. Ashraf has constantly pointed out over the past 6 weeks how Cardano contine to outperform most major cryptos (showing smaller declines than those seen in BTC and ETH).

The latest trade in global appears to be based on the belief that inflation is cresting and delta will be cresting soon, at least in the United States.

What's tricky about the trade is that no one knows what's coming next. Both the inflation and covid puzzles will take months to sort out and market participants will be along for the ride.

On Wednesday, the US dollar sold off on flat CPI number but on Thursday it turned higher again as PPI beat expectations at 7.8% compared to 7.3% expected. Core producer prices were similarly strong.

That ebb and flow is likely to be a microcosm of trading in the next year. The multitude of potential skews in pricing data makes it challenging to define how these will finally determine the final headline figure. CPI showed that auto prices are topping but how much of the gains they give back and how soon is a mystery.

Keep in mind that markets aren't just pricing in 2% vs 3.5% inflation or when those levels will be reached. The market has little reason to fear an overshoot in prices. The real risk is that a wage-price spiral puts the Fed behind the curve and leads to a jarring set of surprise hikes and upends the low rate environment. To be sure, that's a tail risk but given new highs in US equities, it's a a risk like no other.

Looking ahead, the UMich consumer sentiment survey will offer some insight on the health of the consumer, but the larger market mover may again be inflation. They survey includes 1-year and 5-10 year views on prices and if those shift even slightly, the market will take note.

Crude oil price started a fresh increase above the $68.00 resistance against the US Dollar. However, the price failed to surpass the $69.40 and $69.50 resistance levels.

A high is formed near $69.39 and the price is now slowly moving lower. It broke a major bullish trend line with support near $68.40 level on the hourly chart. It is also struggling to stay above $68.30 the 50 hourly simple moving average.

A break and close below the trend line support could lead the price towards the $67.70 support level. Any more losses might call for a test of $67.00 on FXOpen.

Conversely, there could be more upsides above the $68.80 level. The first key resistance is near the $69.40 level, above which the price might attempt a strong rally towards the $72.00 level in the near term.

Technical analysis

The EMA(50) is above the EMA(100), which can be beneficial for bulls

The MACD indicator line is slightly above 0

The RSI is above 50.

What the possible outcomes are

Today is not an eventful day for both the eurozone or the USA. In the absence of any significant statistics, the words of the German Minister of Economy that the country does not expect an increase in inflation pushed the EURUSD pair higher.

If the price passes the initial resistance level of 1.17539, it could test the next higher at 1.17626.

Alternatively, if the price reverses, then it could reach the first support level of 1.17292.

A pass below the first level can move the price up lower toward 1.17219.

Key levels

Support 1.17292 1.17219

Resistance 1.17539 1.17626

Notes/Observations

• Various release of EU inflation data largely ignored in session (France, Spain, Finland, Sweden and Poland CPIs; German Wholesale prices, Swiss Producer& Import prices).
• More emerging markets raising interest rates (Mexico & Peru overnight).
• Poland GDP reading providing calls for higher interest rates to combat the fastest inflation in a decade.
• Continued concerns over the surge of Covid-19 and its Delta variant; analysts note growing evidence that the current virus wave is affecting consumer activity.

Asia

• China coronavirus infection said to close shipping terminal at Ningbo-Zhoushan Port. All other terminals aside from Meishan have been operating normally (Insight: Closed terminal accounts for about 25% of container cargo through the port).

Coronavirus

• Total global cases 206.2M (+0.4% d/d); total deaths: 4.35M (+0.2% d/d). Active cases stand at 16.8M (+0.6% d/d).
• Japan daily new coronavirus cases to exceed 20,000 for the 1st time. Tokyo's daily new COVID-19 cases hit record 5,773.
• FDA on Thursday authorized third dose of Pfizer (PFE) and Moderna (MRNA) vaccines for immunocompromised patients.

Americas

• Canada PM Trudeau reportedly hold snap election scheduled for Sept 20th.
• UK and US said they’re sending troops to Afghanistan to help evacuate their embassy staff.
• Mexico Central Bank (Banxico) raised the Overnight Rate by 25bps to 4.25% (as expected) for its 2nd straight hike.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.23% at 475.92, FTSE +0.41% at 7,222.79, DAX +0.42% at 16,004.60, CAC-40 +0.29% at 6,902.69, IBEX-35 +0.25% at 9,001.00, FTSE MIB +0.31% at 26,639.50, SMI +0.34% at 12,471.90, S&P 500 Futures +0.07%].
• Market Focal Points/Key Themes: European indices open generally flat but later drifted into positive territory; upbeat sectors include consumer discretionary and industrials; while technology and energy sectors trend to the downside; energy sector under pressure after crude prices slip; Adidas divests Reebok to Authentic brands; Zooplus recieves takeover offer from Zorro; Babcock sells Frazer-Nash unit; earnings expected during the upcoming US session include Embraer and Crescent Point Energy.

Equities

• Consumer discretionary: Adidas [ADS.DE] +2% (sells Reebok unit), zooplus [ZO1.DE] +40% (offer).
• Consumer staples: ForFarmers [FFARM.NL] -5% (earnings).
• Healthcare: Ipsen [IPN.FR] -12% (withdrawal of NDA).
• Industrials: Babcock International [BAB.UK] +5% (divestment), Knorr-Bremse [KBX.DE] -1.5% (earnings).
• Technology: SimCorp [SIM.DK] +2% (earnings; buyback; new CEO).
• Materials: Avon Rubber [AVON.UK] -24% (trading update).

Speakers

• Germany Econ Ministry saw positive underlying momentum of overall domestic economy persisting. Saw no signs of a wage-price spiral that could lead to permanently high inflation.
• Czech Central Bank (CNB) Aug Minutes: Vote to raise rates by 25bps was not unanimous (4--1-2); Noted that rate hikes were needed to cap inflationary expectations. Majority view that interest rates are very low and likely need to be gradually raised over the coming H2.

Currencies/Fixed income

• USD steady in a listless market. Dealers noted that safe-haven demand for the greenback remained viable and being spurred by concerns over the surge of Covid-19 and its Delta variant.
• EUR/USD was steady in quiet trade with markets basically ignored the various releases of EU inflation during the session (France, Spain, Finland).

Economic data

• (FI) Finland July CPI M/M: +0.3% v -0.1% prior; Y/Y: 1.9% v 2.0% prior.
• (FR) France Q2 ILO Unemployment Rate: 8.0% v 7.8%e; Mainland Unemployment Rate: %7.8 v 7.6%e.
• (DE) Germany July Wholesale Price Index M/M: 1.1% v 1.5% prior; Y/Y: 11.3% v 10.7% prior.
• (CH) Swiss July Producer & Import Prices M/M: 0.5 % v 0.3%e; Y/Y: 3.3% v 3.1%e.
• (FR) France July Final CPI M/M: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e; CPI (ex-tobacco index): 105.55 v 105.56e.
• (FR) France July Final CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 1.5% v 1.6%e.
• (ES) Spain July Final CPI M/M: -0.8% v -0.7%e; Y/Y: % v 2.9%e.
• (ES) Spain July Final CPI EU Harmonized M/M: -1.2% v -1.2%e; Y/Y: 2.9% v 2.9%e.
• (ES) Spain July CPI Core M/M: -0.9% v +0.1% prior; Y/Y: 0.6% v 0.2% prior.
• (TR) Turkey Jun Current Account Balance: -$1.1B v -$1.2Be.
• (SE) Sweden July CPI M/M: 0.3% v 0.2%e; Y/Y: 1.4% v 1.3%e; CPI Level: 342.23 v 342.07e.
• (SE) Sweden July CPIF M/M: 0.3% v 0.2%e; Y/Y: 1.7% v 1.6%e.
• (SE) Sweden July CPIF (ex-energy) M/M: 0.0% v 0.0%e; Y/Y: 0.5% v 0.5%e.
• (CN) Weekly Shanghai copper inventories (SHFE): 93.0K v 99.5K tons prior.
• (PL) Poland Q2 Preliminary GDP Q/Q: 1.9% v 2.0%e; Y/Y: 10.9% v 10.7%e (fastest annual pace recorded).
• (PL) Poland July Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 5.0% v 5.0% prelim (confirmed 4th month above target range and highest since Jun 2011.
• (CZ) Czech Jun Current Account (CZK): 0.0B v -3.9Be.
• (RU) Russia Narrow Money Supply w/e Aug 6th (RUB): 14.25T v 14.19T prior.
• (HK) Hong Kong Q2 Final GDP Q/Q: -0.9% v -1.0%e; Y/Y: 7.6% v 7.5%e.
• (TW) Taiwan Q2 Final GDP Y/Y: 7.4% v 7.5%e.
• (EU) Euro Zone Jun Trade Balance (seasonally adj): €B v €10.8Be; Trade Balance NSA (unadj): €B v €7.5B prior.
• (CY) Cyprus Q2 Preliminary GDP Q/Q: % v 2.0% prior; Y/Y: % v -1.6% prior.

Fixed income issuance

• None seen.

Looking ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (IN) India to sell combined INR310B in 2026, 2033, 2035 and 2050 bonds.
• 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2038 and 2050 Bonds.
• 06:00 (PT) Portugal Q2 Labour Costs Y/Y: No est v 7.0% prior.
• 06:00 (UK) DMO to sell £3.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.5B respectively).
• 06:45 (US) Daily Libor Fixing.
• 07:00 (IN) India announces upcoming bill issuance (held on Wed.
• 07:30 (IN) India Weekly Forex Reserve w/e Aug 6th: No est v $620.6B prior.
• 08:00 (PL) Poland Jun Current Account Balance: €0.5Be v €0.1B prior; Trade Balance: €0.9Be v €0.2B prior; Exports: €23.6Be v €22.6B prior; Imports: €23.0Be v €22.5B prior.
• 08:00 (BR) Brazil Jun Economic Activity Index (Monthly GDP) M/M: +0.4%e v -0.4% prior; Y/Y: 8.6%e v 14.2% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) July Import Price Index M/M: 0.6%e v 1.0% prior; Y/Y: 10.5%e v 11.2% prior; Import Price Index (ex-petroleum) M/M: 0.5%e v 0.7% prior.
• 08:30 (US) July Export Price Index M/M: 0.8%e v 1.2% prior; Y/Y: No ets v 16.8% prior.
• 10:00 (US) Aug Preliminary University of Michigan Confidence: 81.2e v 81.2 prior.
• 11:00 (CO) Colombia Jun Trade Balance: -$1.4Be v -$1.0B prior; Total Imports: $4.9Be v $4.4B prior.
• 11:00 (EU) Potential sovereign ratings after European close (Moody's on Ireland sovereign rating; S&P on Sweden sovereign rating).
• 12:00 (RU) Russia Q2 Advance GDP Y/Y: +10.0%e v -0.7% prior.
• 13:00 (US) Weekly Baker Hughes Rig Count.
• (CO) Colombia Central Bank Economist Survey.

• Dollar edges sideways in thin summer trading, eyes weekly gains
• Dow and S&P post third straight day of record closes, Nasdaq plays catch up
• But Delta concerns weigh on Asian markets and oil

Dollar stands tall amid summer doldrums and Fed taper fixation

Speculation that the Federal Reserve is on the verge of announcing its plans on how and when it will begin to unwind its pandemic stimulus propped up the US dollar near four-month highs on Friday. Trading ranges have been narrowing and volumes thinning towards the end of the week as more traders set off for their summer breaks. But the greenback has been able to maintain its posture, keeping the pressure on its rivals, as investors are more certain than ever that tapering will come at one of the next three meetings.

The dollar index has been hovering around 92.95 since Wednesday when it got knocked down by not-so-worrying CPI data, having scaled a high of 93.19 earlier that day. However, there was little boost for the currency from yesterday’s stronger-than-expected rise in producer costs and solid weekly jobless claims, suggesting that the current rally has gone as far as it can for now.

Investors will most likely want to wait for the gathering of central bankers at Jackson Hole on August 26-28 for further signals from the Fed before placing fresh taper bets. However, there could be some clues from the minutes of the July FOMC meeting due next Wednesday amid a potentially divisive debate about whether or not a few more months of data are needed before starting the tapering process.

US and European stocks are on a roll

As taper speculation continues to be the main driver in FX markets, there were few signs of stress in equity markets about the prospect of reduced Fed stimulus in the next few months. The S&P 500 and Dow Jones Industrial Average notched up another record close on Thursday – their third in a row. Even the Nasdaq joined in this time, with the composite and 100 indices both snapping two days of losses to close about 0.4% higher.

Strong earnings and progress in Congress on the Biden administration’s ambitious infrastructure spending plan have helped Wall Street weather the tapering storm, even as daily virus cases and hospitalizations have risen substantially lately across the United States.

Investors are not panicking just yet about the Fed’s massive stimulus being scaled back soon because they don’t think the Fed will move very aggressively and see limited scope for rate hikes even if the timeline has been brought forward somewhat.

Traders in Europe also appear to be sticking to the optimistic scenario, with the continent’s main bourses opening in record territory today. Although the Delta variant has been pushing up infection rates throughout Europe, there are no plans yet to reintroduce strict curbs. The EU’s vaccination rate has now surpassed America’s, helping to keep hospital admissions manageable for the time being. Plus, ultra-accommodative monetary policy looks set to last even longer in the Eurozone thanks to the ECB’s recent policy strategy overhaul.

No respite from Delta surge in Asia, oil takes demand hit

However, the mood has been notably more downbeat in Asia this week as virus cases continue to escalate in the region, forcing tighter restrictions to be imposed. Countries in Southeast Asia and the Pacific have been hit especially hard by the Delta variant. A slow vaccine rollout in many of those countries combined with China’s recent crackdown on tech and education firms has further undermined investor confidence. The MSCI Asia Pacific Index excluding Japan is headed for weekly losses, while oil prices are close to wiping out their gains from earlier in the week.

The International Energy Agency on Thursday downgraded its forecast for oil demand for the second half of this year due to the worsening impact from the Delta strain.

WTI and Brent futures were last trading between 0.5% and 0.7% lower.

Gold traded in a near $20 an ounce range between $1740.00 and $1760.00 an ounce overnight but ultimately settled almost unchanged for the day at $1752.50 an ounce. Some weekend risk-hedging by Asian investors has lifted gold by a modest 0.20% to $1756.00 an ounce today.

The yellow metal staved of US Dollar strength overnight to the relief of gold bugs, even if that capped its intra-day rally. Weekend risk-hedging should support the metal into the close of the week. That said, the balance between buyers and sellers looks more even today, and after Monday morning’s early flash-crash, I doubt investors will have the nerve to go into the weekend heavily long.

Baring a sharp move higher by the US Dollar in New York, it should leave gold roughly contained between immediate support/resistance at $1840.00 and $1860.00 an ounce. Intermediate support lies at $1725.00 with the $1800.00 to $1805.00 region a formidable resistance zone.

Given the horror of last Monday’s flash-crash and given the Fed tapering noises grow louder by the day, lifting the US Dollar, it is hard to see gold powering higher from here. More than likely, the nervous FOMO long-positions initiated on Wednesday are likely to cut and run at the first sign of trouble.