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Daily Pivots: (S1) 1.1706; (P) 1.1724; (R1) 1.1739; More...

Intraday bias in EUR/USD is turned neutral with 4 hour MACD crossed above signal line. We'd continue to look for strong support from 1.1602/1703 support zone to bring rebound. On the upside, above 1.1768 minor resistance will turn bias back to the upside for 1.1907 resistance first. However, 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.

Dollar drops notably in early US session after consumer inflation data. Headline CPI was steady while core CPI slowed a little. At least, inflation hasn't been worsening from Fed's "transitory rhetoric". US stock futures also jump, probably on reduced concerns over monetary tightening. New Zealand and Australian Dollars are currently the strongest, followed by Swiss Franc.

Technically, as discussed in prior reports, Dollar's prior rally were mainly against Euro, Swiss Franc and Yen. Indeed, GBP/USD, AUD/USD and USD/CAD are all holding in familiar range. Focus will now turns to 1.3982 resistance, 0.7443 resistance and 1.2421 support, respectively, as Dollar is turning soft. Additionally, we'll keep an eye on 81.64 resistance in AUD/JPY. Break will resume the rebound from 79.82, and signal a comeback in the Aussie.

In Europe, at the time of writing, FTSE is up 0.46%. DAX is down -0.02%. CAC is up 0.26%. Germany 10-year yield is down -0.0063 at -0.460. Earlier in Asia, Nikkei rose 0.65%. Hong Kong HSI rose 0.20%. China Shanghai SSE rose 0.08%. Singapore Strait Times dropped -0.85%. Japan 10-year JGB yield rose 0.0171 to 0.042.

US CPI unchanged at 5.4% yoy in Jul, CPI core slowed to 4.3% yoy

US CPI rose 0.5% mom in July, matched expectations. Over the last 12 months, CPI rose 5.4% yoy, unchanged from June's reading, above expectation of 5.3% yoy.

Core CPI, excluding food and energy, rose 0.3% mom, below expectation of 0.4% mom. Over the past 12 months, CPI core slowed to 4.3% yoy, down from 4.5% yoy, matched expectation.

Fed Barkin: We'll get there to taper in the next few months

Richmond Fed President Thomas Barkin said "we're closing in" and he's "very support of tapering and moving back toward a normal environment". However, it's credible to think "we will get there in the next few months" and he didn't want to commit to a timetable yet.

"I would like to be at a normal level of participation in the asset markets and a normal level of rates," Barkin said. But "I also think that as a committee, when you put out forward guidance you think about it carefully and then do your best to live to that."

"On the employment side you have a hypothesis that you are going to bring a lot more back in. On inflation you have a hypothesis that these things are transitory," he said. "I need to test both of these."

Australia Westpac consumer sentiment dropped -4.4%, still reasonably confident

Australia Westpac-MI consumer sentiment dropped -4.4% to 104.1 in August, down from July's 108.8. It's now at the lowest point in a year, but was well above the pandemic trough, and even above the levels over the twelve months prior to the pandemic.

Westpac said: "The virus situation locally is clearly troubling, but consumers appear reasonably confident that it will come back under control, and that once it does, the economy will see a return to robust growth."

Westpac expects RBA to leave policy unchanged at next meeting on September 7. It added, "given its decision to sit pat in August despite a sharp deterioration to the near-term outlook, the hurdle for RBA action looks to be very high". It also maintain the forecast that RBA would start raising the case rate in Q1 of 2023.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1706; (P) 1.1724; (R1) 1.1739; More...

Intraday bias in EUR/USD is turned neutral with 4 hour MACD crossed above signal line. We'd continue to look for strong support from 1.1602/1703 support zone to bring rebound. On the upside, above 1.1768 minor resistance will turn bias back to the upside for 1.1907 resistance first. However, 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

Richmond Fed President Thomas Barkin said "we're closing in" and he's "very support of tapering and moving back toward a normal environment". However, it's credible to think "we will get there in the next few months" and he didn't want to commit to a timetable yet.

"I would like to be at a normal level of participation in the asset markets and a normal level of rates," Barkin said. But "I also think that as a committee, when you put out forward guidance you think about it carefully and then do your best to live to that."

"On the employment side you have a hypothesis that you are going to bring a lot more back in. On inflation you have a hypothesis that these things are transitory," he said. "I need to test both of these."

US CPI rose 0.5% mom in July, matched expectations. Over the last 12 months, CPI rose 5.4% yoy, unchanged from June's reading, above expectation of 5.3% yoy.

Core CPI, excluding food and energy, rose 0.3% mom, below expectation of 0.4% mom. Over the past 12 months, CPI core slowed to 4.3% yoy, down from 4.5% yoy, matched expectation.

Full release here.

Today’s main macro highlight will be the release of US CPI report at 13:30 BST. Economists expect CPI to show a slight moderation to 5.3% year-on-year in July from 5.4% in June, with core CPI seen easing to 4.3% from 4.5% previously. Depending on how the actual numbers deviate from these expectations, we might see the dollar, gold and stocks move sharply later in the day:

• If CPI comes in well above expectations, fears over inflation and the tapering that would come with it, may give US equity market bulls an excuse to lighten up their positions. So, there is the possibility we may see US indices react negatively if inflation proves to be too hot – especially the Nasdaq. In FX, the EUR/USD could break the 1.17 handle under this scenario.
• If CPI comes in around the expected figure, this would likely keep the stock market bulls happy, and the dollar firmer.
• However, if CPI comes in much weaker, then the markets will probably break sharply higher to new highs on Wall Street as tapering expectations will be pushed back. This scenario is also badly needed for gold and silver longs, and the dollar shorts.

Ahead of the US CPI inflation report, we have seen the dollar gain further ground across the board. The greenback’s gains have been more profound against the likes of the yen and euro, given the fact central banks in Japan and the Eurozone are more dovish compared to some of the others. The yen has also been undermined because of a strong risk appetite, which has reduced demand for safe-haven assets. As well as the Japanese yen and Swiss franc, gold and silver have also fallen sharply at the start of this week and remained under pressure since.

The stronger dollar and weaker pound have helped to keep the FTSE’s winning run intact with the UK index nearing its June high of 7216. The DAX was just a spitting distance from reaching its previous all-time high, while other European indices have also remained on the front-foot. Meanwhile, US indices have traded mixed in recent days with the S&P hitting a fresh record yesterday while the Nasdaq has pulled back a little on the back of firmer yields, reducing the appeal of low-yielding growth stocks in the technology sector.

Overall, the current risk-on sentiment is a reflection of ongoing central bank support, steady economic recovery, and decent earnings. In addition, there has been a lack of any significantly bearish factors to unnerve investors, with rising Covid cases being seen as a reason to keep central bank printing machines running at full throttle. Investors are also not showing any concerns over rising valuations for now – but this could come back to haunt them.

So, sentiment towards risk is undoubtedly very positive. But could the US CPI report change that? As mentioned, investors have been buying stocks, while the dollar has remained supported on the back of a very good US jobs report we saw on Friday, which has boosted speculation about taper timing announcement. There seems to be acceptance that we are getting very close to that time, but investors know the Fed will not apply the brakes too harshly. Fed Chair Jay Powell is expected to provide the roadmap for tapering either at the Jackson Hole Symposium or at the FOMC’s September meeting, after several Fed officials have all recently talked in favour of reducing the massive QE programme by later this year or in early 2022. So, even if we get a hot inflation report, the potential sell-off for the markets could be limited.

What about the EUR/USD?

Well, if the EUR/USD breaks and holds below support at 1.1700, then this could pave the way for a drop towards the next support circa 1.1600 but do watch out for the support trend line of the wedge that stands on the way to that downside target. A brief break below, followed by a positive close above 1.1700 would be deemed a short-term bullish development. Longer-term, the EUR/USD will need to form a higher high to end its bearish trend.

Notes/Observations

• Focus on US July CPI data due later today which could provide a clue as to when the Fed could start pulling back stimulus.
• German July Final CPI YoY reading confirmed its highest annual pace since 1993.

Asia

• South Korea July Unemployment Rate: 3.3% v 3.8%e.
• Singapore Q2 Final GDP Q/Q: -1.8% v -2.0%; Y/Y: 14.7% v 14.3%e.

Coronavirus

• Australia’s State of Victoria to extend its 6th lockdown by 1 additional week to Aug 19th.

Americas

• Senate passed the $1T bipartisan infrastructure plan; Bill now moves to House. Bill included money for: Roads/bridges at $110B; Rail at $66B; Power grid at $65B; Broadband at $65B; Water (inc. pipes) at $55B; Public transit at $39B; Airports at $25B; Pollution cleanup at $21B; Port at $17B; EV charge stations $7.5B.
• House Democratic leadership previously noted it would not pass the bipartisan infrastructure plan unless the Senate also passed a reconciliation spending bill with more social, climate change, and education spending.
• Most' [~46] GOP Senators sign pledge to not help Democrats on debt ceiling, these Republicans want the Democrats to raise the debt ceiling by using procedures that did not rely on GOP votes. (Note: Democrats do not have the 60 votes needed to pass a debt ceiling increase through the ordinary legislative process). Noted the Democrats' $3.5T budget outline did not include a measure to increase the debt limit.
• Fed's Evans (dove, voter) stated that would like to see a few more employment reports ahead of decision to taper the Fed's asset purchases; A difference of a month or two in the decision would not matter.

Energy

• (US) Weekly API Crude Oil Inventories: -0.8M v -0.9M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.08% at 472.68, FTSE +0.41% at 7,190.55, DAX +0.04% at 15,776.30, CAC-40 +0.24% at 6,836.27, IBEX-35 +0.47% at 8,941.00, FTSE MIB +0.31% at 26,281.50, SMI +0.17% at 12,383.10, S&P 500 Futures -0.13%].
• Market Focal Points/Key Themes: European indices open modestly higher across the board but several later slipped to trade slightly in the red; sectors leading to the upside include financials and materials; while technology and health care sectors among the underperformers; industrials sector weighed down by ThyssenKrup’s results; Vestas’ cut to outlook drags down Danish index; Hella starts the day trading down as takeover valuations appear to be less than expected; Vivendi divests stake in UMG to Pershing Square; Norton and Avast agree on merger; earnings expected in the upcoming US session include Perrigo, Wendy’s and ebay.

Equities

• Consumer discretionary: Ahold Delhaize [AD.NL] +2% (earnings), Deliveroo [ROO.UK] -2% (earnings).
• Financials: ABN AMRO Bank [ABN.NL] +2% (earnings).
• Industrials: Leoni [LEO.DE] -7% (earnings).
• Technology: Avast [AVST.UK] +3% (merger; earnings).
• Materials: Salzgitter [SZG.DE] -5% (earnings), Wienerberger [WIE.AT] -2% (earnings).

Speakers

• Senate Democrats said to adopt $3.5T budget plan. Budget included climate change strategy and several new domestic social programs. House needs to approve a budget resolution, extended August recess scheduled to end on Sept 20th.
• House Majority Leader Hover (D-Md.) sent letter to lawmakers on Tuesday that the chamber will return to session on Aug. 23rd to consider the budget resolution, assuming Senate adoption likely later this week.

Currencies/Fixed Income

• USD was slightly firmer in quiet trade on wed. Focus was on US July CPI data due later today which could provide a clue as to when the Fed could start pulling back stimulus. Dealers noted that focus on the inflation figures was intensifying after several Fed members recently expressed views calling for a reduction in bond purchases.
  EUR/USD hovering just above the 1.17 level while USD/JPY was approaching the 111 neighborhood.
• Yields were slight higher in Europe between 2-3bps. German 10-year yield was at -0.44% and the Italian 10-year BTP was at 0.58%. German July Final CPI YoY reading confirmed its highest annual pace since 1993.

Economic data

• (SE) Sweden July PES Unemployment Rate: 3.9% v 3.7% prior.
• (DE) Germany July Final CPI M/M: 0.9% v 0.9%e; Y/Y: 3.8% v 3.8%e (confirmed its highest annual pace since 1993).
• (DE) Germany July Final CPI EU Harmonized M/M: 0.5% v 0.5%e; Y/Y: 3.1% v 3.1%e.
• (NO) Norway Q2 Average Monthly Earnings Y/Y: 2.1% v 2.9% prior.
• (RO) Romania July CPI M/M: 1.0% v 0.3% prior; Y/Y: 5.0% v 4.4%e (3rd month above target range).
• (JP) Japan July Preliminary Machine Tool Orders Y/Y: 93.4% v 96.6% prior.
• (IT) Italy July Final CPI M/M: 0.5% v 0.3% prelim; Y/Y: 1.9% v 1.8% prelim; - CPI FOI Index (ex-tobacco): 104.2 v 103.8 prior.
• (IT) Italy July Final CPI EU Harmonized M/M: -1.0% v -1.1% prelim; Y/Y: 1.0% v 0.9%e.
• (CN) China July Aggregate Financing (CNY): 1.060T v 1.70Te.
• China July M2 Money Supply Y/Y: 8.3% v 8.8%e v 8.6% prior; M1 Money Supply Y/Y: % v 5.5% prior; M0 Money Supply Y/Y: % v 6.2% prior.
• (CN) China July New Yuan Loans (CNY): 1.080T v 1.200Te.
• (CH) Swiss Q2 Real Estate Bubble Index: 1.90 v 1.78 prio.

Fixed income Issuance

• (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills.
• (DK) Denmark sold total DKK3.1B in 3-month, 6-month and 9-month Bills.
• (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: -0.513% v -0.450% prior; Bid-to-cover: 1.27x v 1.26x prior.
• (UK) DMO sold £700M in 0.125% Mar 2039 inflation-linked bond (UKTi); Real Yield: -2.633%; bid-to-cover: 2.27x.

Looking Ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (ZA) South Africa July Sacci Business Confidence:
• 05:30 (DE) Germany to sell €4.0B in 0% Aug 2031 Bunds.
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
• 06:00 (PT) Portugal July Final CPI M/M: No est v 0.3% prelim; Y/Y: No est v 1.5% prelim.
• 06:00 (PT) Portugal July Final CPI EU Harmonized M/M: No est v 0.3% prelim; Y/Y: No est v 1.1% prelim.
• 06:00 (PT) Portugal Q2 Unemployment Rate: No est v 7.1% prior.
• 06:00 (CZ_ Czech Republic to sell combined CZK10B in 2029, 2032 and 2057 bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (RU) Russia to sell OFZ Bonds.
• 07:00 (US) MBA Mortgage Applications w/e Aug 6th: No est v -1.7% prior.
• 07:00 (MX) Mexico Jun Industrial Production M/M: 0.1%e v 0.1% prior; Y/Y: 15.5%e v 36.4% prior;
• Manufacturing Production Y/Y: 16.7%e v 48.0% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (HU) Hungary Central Bank July Minutes.
• 08:00 (BR) Brazil Jun Retail Sales M/M: 0.5%e v 1.4% prior; Y/Y: 8.6%e v 16.0% prior.
• 08:00 (BR) Brazil Jun Broad Retail Sales M/M: -1.8%e v +3.8% prior; Y/Y: 11.5%e v 26.2% prior.
• 08:00 (US) Fed’s Logan.
• 08:30 (US) July CPI M/M: 0.5%e v 0.9% prior; Y/Y: 5.3%e v 5.4% prior.
• 08:30 (US) July CPI (ex-food/energy) M/M: 0.4%e v 0.9% prior; Y/Y: 4.35e v 4.5% prior.
• 08:30 (US) July CPI Index NSA: 272.936e v 271.696 prior; CPI Core Index SA: 279.531e v 278.14 prior.
• 08:30 (US) July Real Avg Hourly Earning Y/Y: No est v -1.7% prior; Real Avg Weekly Earnings Y/Y: No est v -1.4% prior.
• 09:00 (RU) Russia Jun Trade Balance: $11.7Be v $10.2B prior; Exports: $36.5Be v $34.8B prior; Imports: $25.0Be v $24.6B prior.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).
• 10:30 (US) Weekly DOE Oil Inventories.
• 10:30 (US) Fed’s Bostic.
• 12:00 (US) Fed's George to speak to Business Economists.
• 13:00 (US) Treasury to sell 10-Year Notes.
• 14:00 (US) July Monthly Budget Statement: -$300.0Be v -$174.2B prior.
• 15:00 (AR) Argentina Jun Capacity Utilization: No est v 61.5% prior.
• 18:45 (NZ) New Zealand July Food Prices M/M: No est v 1.4% prior.
• 19:01 (UK) July RICS House Price Balance: 76%e v 83% prior.
• 19:50 (JP) Japan July PPI M/M: 0.5%e v 0.6% prior; Y/Y: 5.0%e v 5.0% prior.
• 21:00 (AU) Australia Aug Consumer Inflation Expectation: No est v 3.7% prior.
• 21:10 (JP) BOJ Outright Bond Operation; to Purchase 1~3 Years maturities.
• 22:00 (JP) Japan July Tokyo Avg Office Vacancies: No est v 6.19 prior.
• 23:00 (KR) South Korea Jun M2 Money Supply M/M: No est v 0.6% prior; “L” Money Supply M/M: No est v -0.5% prior.
• 23:00 (NZ) New Zealand Q3 2-yearInflation Expectation Survey: No est v 2.05% prior.

Technical analysis

The RSI is under line 50 but closer to 20, indicating that a downtrend may prevail with a possible upward correction

The Ichimoku indicator displays a bearish sentiment.

The Stochastic suggests a possible upward correction.

What the possible outcomes are

In our most likely scenario, the EURUSD pair may challenge the first support level of 1.17048.

A pass below the first level can move the price up lower toward 1.16352.

Alternatively, the EURUSD pair may attempt to recover towards the first resistance level of 1.17622.

If the pair surpasses the first resistance level, we should expect a continued surge towards the second resistance level of 1.18226.

Key levels

Support 1.16352 1.17048

Resistance 1.17662 1.18226

• Dollar extends rally, hits more than 4-month high ahead of crucial US CPI data
• Euro and yen can't catch a break, riskier currencies slip too
• Tech stocks take a tumble but Senate's infrastructure bill nudges Dow and S&P to record

Dollar charges ahead; will CPI data fuel or dent rally?

The post-NFP boost for the US dollar and Treasury yields showed no sign of abating on Wednesday as investors continued to ramp up their bets that the Federal Reserve will soon announce plans to taper its massive asset purchase program. Shifting expectations that policymakers will opt for an early fall rather than end-of-year tapering timeline following the robust jobs data have propelled yields higher.

The 10-year yield reached 1.36% early on Wednesday while the 30-year yield crossed above 2% for the first time in a month. Rising US yield spreads have lifted the greenback above the July peak of 93.19 against a basket of currencies. At this rate, the dollar index could soon surpass its 2021 high of 93.44.

However, key inflation data is due later today in the form of the consumer price index for July. The annual rate of CPI is expected to moderate slightly to 5.3%. If the slowdown is driven by the CPI components that were most affected by supply constraints and pent-up demand, investors may read that as a sign that inflation is peaking.

That could spark some profit taking in the dollar but may not necessarily alter expectations much about Fed tapering. The main priority for the Fed during the pandemic has been the labour market and it's now a question of how much further there is to go before achieving “substantial further progress”.

Divisions within the FOMC about how to measure this progress were laid bare on Tuesday when Chicago Fed President Charles Evans suggested he would need to see “a few more” jobs reports before making up his mind. This contrasts with comments by the recently dove-turned-hawk James Bullard, the President of the St. Louis Fed, who thinks the US economy has made sufficient progress and that tapering should begin soon.

Euro poised for new yearly low as dollar overpowers all

In the broader FX sphere, the euro and yen continued to get hammered by the surging US dollar. The Swiss franc struggled too, although gold appears to have steadied for now. The dollar climbed to a one-month top versus the yen, while the euro edged closer to brushing a fresh yearly low and was last trading at $1.1713.

A shock plunge in Germany's closely watched ZEW economic sentiment gauge in August yesterday underscored the view that the ECB is miles behind the Fed in terms of exiting its emergency stimulus.

But other majors were on the backfoot too on Wednesday, with the pound and the commodity-linked dollars all paring yesterday's gains. The New Zealand dollar's sluggish performance has been particularly surprising given that local bond yields are soaring on expectations that the RBNZ will hike interest rates in a week's time. It's possible that souring sentiment in neighbouring Australia, which is still battling the Delta variant, is infecting the kiwi too.

Value stocks shine but Big Tech gets the jitters

Wall Street remained mostly unhindered by the growing speculation that a Fed taper announcement is imminent. The Dow Jones Industrial Average, comprised mainly of value stocks, closed at a new all-time high on Tuesday, with the S&P 500 just about managing to eke out gains to finish at a record as well.

But the tech-dominated Nasdaq Composite ended the day down by 0.5% as higher yields began to bite. Rising long-term yields tend to reduce the present value of future cash flows, pressuring bloated stock valuations such as those in the tech sector.

However, value stocks are not impacted as much by higher yields and more importantly, the US Senate just passed a $1.2 trillion infrastructure bill, which should benefit old economy companies. Whilst there are still several hurdles to go until the bill completes its passage through Congress, not to mention the question marks about how the Democrats will be able to push through their follow-up $3.5 trillion budget resolution without needing the help of Republicans to increase the debt ceiling first, Wall Street is being buoyed by the mere prospect of more federal spending coming from Capitol Hill.

European shares also appear undaunted by either Delta or Fed tapering concerns, with many of the region's leading indices trading near or at record territory. US stock futures, though, were slightly in the red on Wednesday.

The US stock market traded without a single dynamic yesterday. At the close of the day, the Dow Jones index increased by 0.46%, making a new all-time high, the S&P 500 index added 0.10%, and the NASDAQ technology index decreased by 0.49%. The rise in Dow Jones was mainly due to the approval of the $1 trillion infrastructure project. The top gainers among Dow Jones index components were shares of Caterpillar Inc. (+2.46%) and Walmart Inc. (+2.13%). Today, the previous month’s US inflation data will be published. A rise in inflation could cause strong sales in financial markets, as cutting the Federal Reserve QE program is the only way to suppress inflation. Rising inflation could also heighten expectations of rate hikes next year. If inflation is lower, there is a possibility that everything will remain the same.

European stock indices mostly increased yesterday due to strong corporate reports. The Stoxx Europe 600 composite index of the largest companies in the region increased by 0.35%. British FTSE 100 jumped by 0.4%, German DAX added 0.16%, French CAC 40 increased by 0.1%, Italian FTSE MIB increased by 0.24%, Spanish IBEX 35 added 0.37%. At the same time, the ZEW economic sentiment index in Germany has sharply decreased to 40.4 in August (previously 63.3). The Eurozone economic sentiment index also decreased from 61.2 to 42.7. Such negative data indicated a slowdown in economic recovery in the region.

According to an Energy Information Administration (EIA) report, OPEC oil production will be below oil deal targets during the third and fourth quarters of 2021. Fundamentally, it plays in favor of higher oil prices. But concerns about the spread of the Delta strain in Asian countries are still holding back the rise in quotes.

Today, the consumer price index data for the previous month will be published in the US. Rising inflation will most likely lead to an increase in the dollar index and government bond yields, sending gold and silver prices sharply lower. Conversely, if inflation data is good (declining inflation), precious metal prices could jump.

Asian stock indices are mostly rising today ahead of key US inflation data. Lenovo shares jumped by 7.8%, as the company's quarterly net income increased to a record high. Meanwhile, due to stronger quarantine restrictions in Japan, China, South Korea, and other Asian countries, experts are already seeing signs of weakening economic activity in the region, especially in the tourism and manufacturing sectors. In Australia, the consumer confidence index fell to its lowest level within a year due to the restrictions.

Main market quotes:

• S&P 500 (F) 4,436.75 +4.40 (+0.10%)
• Dow Jones 35,264.67 +162.82 (+0.46%)
• DAX 15,770.71 +25.30 (+0.16%)
• FTSE 100 7,161.04 +28.74 (+0.40%)
• USD Index 93.06 +0.09 (+0.09%)

Important events for today:

• US Consumer Price Index (m/m) at 15:30 (GMT+3);
• US Core Consumer Price Index (m/m) at 15:30 (GMT+3);
• US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• US FOMC Member Bostic’s Speech at 17:30 (GMT+3).

The British Pound started a fresh decline after it failed to surpass 1.4000 against the US Dollar. The GBP/USD pair traded below the 1.3900 support level to move into a bearish zone.

The pair even broke the 1.3850 support and the 50 hourly simple moving average. It is now consolidating above the 1.3820 zone. An immediate resistance is near the 1.3840 level. There is also a major bearish trend line with resistance near 1.3840 on the hourly chart.

If there is a clear break above the 1.3840 and 1.3850 resistance levels, the pair could start a decent recovery towards the 1.3900 resistance.

On the downside, an initial support is near the 1.3820 level. The main support is forming near the 1.3800 level. If there is a downside break the 1.3800 support, the pair could decline towards 1.3750 on FXOpen.