Sample Category Title

Daily Pivots: (S1) 110.13; (P) 110.24; (R1) 110.46; More...

Intraday bias in USD/JPY remains mildly on the upside, as rise from 108.71 is in progress for 110.58 resistance. Decisive break there will confirm that correction from 111.65 has completed with three waves down to 108.71. Stronger rise would then be seen to retest 111.65 high. On the downside, though, below 109.69 minor support will mix up the near term outlook and turn intraday bias neutral first.

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. The pattern from 101.18 could still extend with another falling leg. Sustained trading below 55 day EMA will bring deeper fall to 107.47 support and below. Nevertheless, strong break of 111.71 resistance will confirm completion of the corrective decline from 118.65 (2016 high). Further rise should then be seen to 114.54 and then 118.65 resistance.

Daily Pivots: (S1) 1.2545; (P) 1.2567; (R1) 1.2601; More...

USD/CAD is staying in consolidation from 1.2421 and intraday bias remains neutral first. As long as 1.2605 resistance holds, further decline is expected. On the downside, break of 1.2421 will resume the fall from 1.2805 to 1.2301 cluster support (61.8% retracement of 1.2005 to 1.2805 at 1.2311). On the upside, break of 1.2605 will turn bias back to the upside for retesting 1.2805 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.

Daily Pivots: (S1) 0.7317; (P) 0.7340; (R1) 0.7353; More...

AUD/USD drops mildly but stays in consolidation from 0.7288. Intraday bias remains neutral for the moment. Outlook stays bearish as long as 0.7443 resistance holds. On the downside, break of 0.7288 will resume the fall from 0.8006 to 161.8% projection of 0.8006 to 0.7530 from 0.7890 at 0.7120 next. On the upside, break of 0.7443 will bring stronger rebound to 0.7530 support turned resistance instead.

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.

Dollar's rally continued last week as supported by hawkish comments from Fed officials. Expectations for tapering this fall continued to build up. Swiss Franc is trading broadly lower, as the pull back against Euro accelerated. Meanwhile, Australian is also trading lower on poor business confidence data. Focus will turn to Germany economic sentiment first, with an eye on any more comments from Fed officials.

Technically, while Dollar's rally continued, the strength against commodity currencies and Sterling is not too apparent yet. AUD/USD would have to break through 0.7288 low to show Dollar's underlying strength. Also, USD/CAD will have to break through 1.2605 minor resistance while GBP/USD will have to break through 1.3766 minor support. Otherwise, Dollar's rally is still a bit half-hearted.

In Asia, Nikkei closed up 0.25%. Hong Kong HSI is up 0.75%. China Shanghai SSE is up 0.52%. Singapore Strait Times is up 0.69%. Japan 10-year JGB yield is up 0.0094 at 0.024. Overnight, DOW dropped -0.30%. S&P 500 dropped -0.09%. NASDAQ rose 0.16%. 10-year yield rose 0.027 to 1.317, back above 1.3 handle.

Fed Bostic thinking about Oct-to-Dec range on tapering

Atlanta Fed President Raphael Bostic said yesterday, "we are well on the road to substantial progress toward our goal", and July's 943k job growth was "definitely quite encouraging in that regard."

"My sense is if we are able to continue this for the next month or two I think we would have made the 'substantial progress' toward the goal and should be thinking about what our new policy position should be," he said.

"Right now I'm thinking in the October-to-December range, but if the number comes back big" as with the last report "or maybe even a little bigger, I'd be open to moving it forward," Bostic said. "If the number really explodes, I think we would have to consider that."

Also, he said he favored a "balanced" approach on tapering both the MBS and treasuries purchases at the same fate, and "going relatively fast". "The economy is in a much different place today" and "I am pretty confident these markets are going to continue to function even with a more rapid withdrawal, and I would be willing to lean into that to try to get us to complete the taper in a shorter period than what we have done in previous rounds."

Fed Rosengren: More substantial job gains would imply tapering this fall

Boston Fed President Eric Rosengren said yesterday if the US continues to have job growth like the last two months, with "very substantial payroll employment gains", then by September meeting, the "substantial further progress" criteria should be met. That would "imply starting to taper sometime this fall".

"If you continue to purchase assets, the reaction primarily is in pricing, not so much in employment," he added. "I don't think asset purchases are having the desired impact on really promoting employment."

Australia NAB business confidence dropped to -8, conditions dropped to 11

Australia NAB business confidence dropped sharply from 11 to -8 in July. Business conditions dropped form 25 to 11. Looking at some details, trading conditions dropped form 32 to 12. Profitability conditions dropped from 25 to 6. Employment conditions dropped from 18 to 10.

NAB said: "The continuing lockdown in NSW and the briefer periods of disruption across a number of other states saw a further deterioration in activity in the business sector in July... Confidence took a big hit in the month with optimism collapsing on the back of ongoing restrictions."

"It is now widely expected that we will see a negative print for GDP in Q3. However, we know that once restrictions are removed that the economy has tended to rebound relatively quickly. We will continue to track the survey very closely for an indication of just how quickly that happens – particularly forward orders and capacity utilisation as we assess how the disruption has fed into expansion plans as conditions bounce back".

Elsewhere

UK BRC like-for-like retail sales rose 4.7% yoy in July, below expectation of 7.2% yoy. Japan Eco Watcher sentiment rose to 48.4 in July, above expectation of 42.9.

Looking ahead, Germany ZEW economic sentiment is the major focus in European session. US will release non-farm productivity and unit labor costs later in the day.

AUD/USD Daily Report

Daily Pivots: (S1) 0.7317; (P) 0.7340; (R1) 0.7353; More...

AUD/USD drops mildly but stays in consolidation from 0.7288. Intraday bias remains neutral for the moment. Outlook stays bearish as long as 0.7443 resistance holds. On the downside, break of 0.7288 will resume the fall from 0.8006 to 161.8% projection of 0.8006 to 0.7530 from 0.7890 at 0.7120 next. On the upside, break of 0.7443 will bring stronger rebound to 0.7530 support turned resistance instead.

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.

Economic Indicators Update

EUR/USD

Current level - 1.1733

The single European currency continues to lose ground against the US dollar, earlier this week. The most likely scenario is for another decline, as the bears will try to breach the support level at 1.1700. A successful break of the mentioned support could strengthen the negative sentiment of the investors and open the way to a test of the zone around 1.1600. Today, there is a possibility for increased volatility around the announcement of the ZEW economic sentiment data for the euro zone (09:00 GMT).

USD/JPY

Current level - 110.30

The appreciation of the US dollar against the Japanese yen continues, as at the time of writing, the currency pair is trading just below the resistance level at 110.37. The most probable scenario for today is for an attack of the mentioned level and with a successful breakthrough, we may witness an attack of the next resistance area around 110.60. In a negative direction, the first significant support is the level of 109.77.

GBP/USD

Current level - 1.3837

The dollar continues to gain ground against the British pound, with the trading being just above the support level at 1.3826. A successful break at this level could deepen the sell-off, which may lead to a test of the next support zone at 1.3770. In an upward direction, the main support is the level at 1.3977, which is also a psychological level for the investors.

General trend

• Modest equity moves have been seen.
• Nikkei pares gain following a holiday; Softbank Group to report earnings after the market close [Topix Air Transportation index rises; Financials see catch-up gains].
• S&P ASX 200 also pared advance [Materials index rises after guidance from James Hardie].
• Shanghai Composite ended morning trading generally flat.
• Hang Seng is trading below the opening level [TECH index rises over 1%].
• Precious metals and WTI have modest rebound.
• TSMC is due to report Jul sales later today.
• Companies due to report during the NY morning include Aramark, Casper, Gilat Satellite, II-VI, Sysco, Transdigm.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened 0.0%.
• JHX.AU Reports Q1 adj Net $134.2M v $9.4M y/y; Rev $843.3M v $626M y/y.
• (AU) Reserve Bank of Australia (RBA): Excess cash at exchange settlement (ES) accounts at A$351.6B v A$347.5B prior (fresh record high).
• (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: 98.6 v 101.8 prior (1st time below 100 since Nov 2020).
• (AU) Australia July NAB Business Confidence: -8 v +11 prior; Conditions: 11 v 25 prior.

Japan

• Nikkei 225 opened +0.2%.
• (JP) Japan Fin Min Aso: No new stimulus package or extra budget being put together (refutes press); lots of funds for COVID still unspent.
• (JP) Japan July Bank Lending Y/Y: 1.0% v 1.4% prior; Bank Lending (ex-trusts) Y/Y: 0.5% v 0.8% prior.
• (JP) Japan Jun Current Account: ¥905.1B v ¥855.0Be; Adj Current Account: ¥1.78Y v ¥1.71Te.

Korea

• Kospi opened +0.4%.
• (KR) North Korea to strengthen preemptive strike abilities – KCNA.
• (KR) North Korea leader Kim's sister, Kim Yo Jong, condemns the annual South Korea, US military drills; saying they will pay the price for their “self-destructive behavior" - KCNA.

China/Hong Kong

• Hang Seng opened +0.7%; Shanghai Composite opened -0.2%.
• (CN) China Economic Daily: Expects 2021 GDP Growth at 8.5% (v govt expectations >6.0%), cites Chinese Academy of Social Sciences (CASS).
• (CN) China Daily: China PBOC may need to fine-tune monetary policy, by cutting RRR or interest rate in order to boost growth.
• (CN) China PBOC sets Yuan reference rate: 6.4842 v 6.4840 prior.
• 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.
• Hong Kong Chief Exec Lam: Support adding China anti-sanctions law to the city’s constitution - press.
• 728.HK Reports H1 (CNY) Net 17.7B v 13.9B y/y; Rev 219.2B v 193.8B y/y.

Other

• (PH) Philippines Q2 GDP Q/Q: -1.3% v -1.1%e; Y/Y: 11.8% v 10.9%e.

North America

• SAFM Senator Grassley (R-IA) expresses concerns on Cargill's acquisition of Continental Grain from Sanderson.
• (US) Senator Schumer (D-NY): Have agreement for final passage of infrastructure bill, voting to take place tomorrow.
• KSU Canadian Pacific said to make a higher $31Boffer (prior offer $29B) - press.
• TMST To increase prices on special bar quality and seamless mechanical tubing products by $60/T, effective Sep 6th.
• NTR.CA Reports Q2 $2.08 v $2.09e, Rev $9.76B v $9.99Be; Raises FY outlook.

Europe

• (UK) July BRC Sales LFL Y/Y: 4.7% v 5.0%e (weakest growth in 5 months).

Levels as of 01:15ET

• Hang Seng +0.3%; Shanghai Composite +0.0%; Kospi -0.6%; Nikkei225 +0.2%; ASX 200 +0.2%.
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.1%, Dax -0.2%; FTSE100 -0.2%.
• EUR 1.1740-1.1731; JPY 110.40-110.28; AUD 0.7336-0.7316; NZD 0.6997-0.6969.
• Commodity Futures: Gold +0.5% at $1,735/oz; Crude Oil +0.8% at $67.00/brl; Copper +0.5% at $4.31/lb.

We don't need the UN's panel to tell us that our planet is struggling with the climate change, it's enough to watch the evening news to see that Turkey and Greece are fighting against the worst forest fires in their history due to extreme high temperatures, while Western Europe is inundated, with lakes overflowing and entire villages being swamped by flash floods. Add to that last years' wildfires in Australia, fires in California, and so. So, yesterday's UN report came just as a scientific confirmation that all these events have to do with our huge CO2 emissions, and that the planet will warm by 1.5 degrees Celsius within the next two decades and by 2 degrees Celsius within the 21st century.

What does it do with finance?

Nothing too obvious or too alarming, for now. Energy stocks traded lower on Monday. BP and Royal Dutch Shell were down in London, and Exxon lost some 1.14% in New York and not necessarily due to the UN's climate report but mainly due to the further retreat in oil prices, which pulled the barrel of US crude to $65 yesterday, before rebounding back to the $67 in Asia.

The rise in Covid's delta cases have been weighing on oil prices lately, as they weigh on global demand prospects – though not necessarily on the demand itself for now. But the latest weekly report from US inventories hinted at a surprise inventory build last week. If we continue seeing the same positive trend in US oil inventories for the weeks ahead, it could further discourage oil investors to let the crude recover above the $70 per barrel mark. In the short-run, we could expect to see some consolidation near the current levels, $67, which also matches the 100-day moving average. Yet, in the absence of oil-booster news, we'll probably see oil sliding towards the $60 mark, where stands the 200-day moving average. Lower oil prices could weigh on the energy stocks, which, normally, should benefit from economic recovery and the so-called reflation trade, but the positive trend could be slowed by potentially lower oil prices and perhaps – by the planet concerns?

The US indices had a flat session on Monday. Nasdaq eked out small gains.

Activity in FTSE futures (-0.18%) hints at a sluggish open in London, as softer oil and commodity prices should continue weighing on energy and mining-heavy FTSE, although the selling pressure should be somewhat compensated by the softening British pound amid a globally stronger US dollar.

Investors are holding their breath before tomorrow's US inflation data. There is a chance we see a stronger-than-expected easing in the July inflation numbers in the US, as we saw close to 20% retreat in oil prices during the same month. But even with softer inflation data, the progress in consumer prices will remain high compared to historical averages, and the Federal Reserve's (Fed) average 2% target.

And the Fed is anyway walking with solid steps towards policy normalization. Raphael Bostic, who has an FOMC vote this year, said he wants to see bond tapering start by September and Eric Rosengren said he wants to see bond purchases dialed back by ‘this fall'. And it's not a bad idea with Biden's extra stimulus package waiting to be approved by the policymakers, and which would add fuel to the fire in the coming months.

The US 10-year yield steadies a touch above the 1.30% mark, with prospects of further upside. That's applying a positive pressure on the US dollar, and a negative pressure on the EURUSD, which is now down to 1.1730, approaching the next natural bearish target of 1.17.

Finally, gold consolidates near the $1730 per ounce after the post-NFP flash crash, and should remain under the pressure of higher US yields into tomorrow's US inflation report.

Market movers today

• The ZEW Indicator of Economic Sentiment for the German economy is expected to show more optimism among analysts about current prospects of the German economy, while the uncertainty from COVID-19 virus mutations may temper the expectations component of the index.
• Fed's Mester (voter, hawkish) speaks at 16:00 CET. Following the calls for tapering from other Fed members Bostic and Rosengren yesterday, it will be interesting to see whether Mester repeats the message today.
• The House of Representatives of the US Congress may approve the USD 1 trillion infrastructure package, which would leave it to President Biden to sign it into law.

The 60 second overview

Fed: Last night Atlanta Fed President Raphael Bostic argued that the Fed should start tapering if we see another month or two of strong employment growth, as it would fulfill the "substantial progress" Fed goal. Bostic also argued for swift and faster tapering compared to past episodes, which should pave the way for a for a rate hike 'very late 2022". Fed's Rosengreen said yesterday in an AP interview that Fed should announce that it will start tapering at the September FOMC.

Higher yields: The Fed comments weighed on US treasuries and 10Y yield rose above 1.30 % for the first time since mid-July. In respect of the timing of the first-rate hike the market is pricing the first full hike in Q1 2023. We look for a September tapering announcement and the first-rate hike in Q4 2022.

Commodity prices under pressure: Oil prices have stabilized over night after falling more than 6% from the peak over the last two trading days. The rapid spread of the Deltas-variant is spooking traders. Especially, the resurgence of the virus and travel restrictions in China is seen as a threat to the demand outlook. The number of airline seats being offered in China dropped 32% last week as new travel bans were enacted. On top of the travel restrictions there is a growing concern that the Chinese vaccines Sinopharm and Sinovac are less effective against the Delta variant.

IPCC report: Yesterday, the UN Intergovernmental Panel on Climate Change published its sixth report on global warming. The report says that the world is likely to reach 1.5C of warming within 20 years even in a best-case scenario. The report also forecast further extreme weather events. The report will form the basis for the discussions at the COP26 UN Climate Change Conference in November in Glasgow.

Equities: Equities saw a slow start to the week. Moves were modest, but generally in favour of yield-sensitive banks and defensives. Bond proxy sectors like utilities and real estate, as well as cyclicals sold off. Energy the big decliner though with a continued selling pressure in oil. VIX snapped its four-day strike of declines and picked up slightly. In the US, Dow -0.3%, S&P 500 -0.1%, Nasdaq up 0.2% and Russell 2000 -0.6%. The mixed setting is continuing in Asia this morning, while US futures point to a small setback.

FI: Yesterday's EGB price action ended with broadly unchanged levels from Friday's close. Periphery recorded some outperformance of 2bp in the general flattening move we saw yesterday. Weidmann's comments from Welt on Sunday laying out the sequence of first ending PEPP, then APP, and then raise rates was highlighted in markets, but market did not seem to trade on it as it should be well understood already.

FX: USD and JPY gained vis-à-vis Scandies and CHF yesterday driven by higher US interest rates and falling commodity prices. EUR/USD sustained the move below 1.18 from last week and USD/JPY traded close to 110.

Credit: Sentiment was a bit downbeat yesterday in credit. iTraxx Xover widened 2bp (to 233½bp) and Main closed in 46½bp (+0.4bp). HY bonds widened 2bp and IG 1bp.

Australia NAB business confidence dropped sharply from 11 to -8 in July. Business conditions dropped form 25 to 11. Looking at some details, trading conditions dropped form 32 to 12. Profitability conditions dropped from 25 to 6. Employment conditions dropped from 18 to 10.

NAB said: "The continuing lockdown in NSW and the briefer periods of disruption across a number of other states saw a further deterioration in activity in the business sector in July... Confidence took a big hit in the month with optimism collapsing on the back of ongoing restrictions."

"It is now widely expected that we will see a negative print for GDP in Q3. However, we know that once restrictions are removed that the economy has tended to rebound relatively quickly. We will continue to track the survey very closely for an indication of just how quickly that happens – particularly forward orders and capacity utilisation as we assess how the disruption has fed into expansion plans as conditions bounce back"

Full release here.

Atlanta Fed President Raphael Bostic said yesterday, "we are well on the road to substantial progress toward our goal", and July's 943k job growth was "definitely quite encouraging in that regard."

"My sense is if we are able to continue this for the next month or two I think we would have made the 'substantial progress' toward the goal and should be thinking about what our new policy position should be," he said.

"Right now I'm thinking in the October-to-December range, but if the number comes back big" as with the last report "or maybe even a little bigger, I'd be open to moving it forward," Bostic said. "If the number really explodes, I think we would have to consider that."

Also, he said he favored a "balanced" approach on tapering both the MBS and treasuries purchases at the same fate, and "going relatively fast". "The economy is in a much different place today" and "I am pretty confident these markets are going to continue to function even with a more rapid withdrawal, and I would be willing to lean into that to try to get us to complete the taper in a shorter period than what we have done in previous rounds."