Sample Category Title

Daily Pivots: (S1) 1.3864; (P) 1.3898; (R1) 1.3921; More....

GBP/USD is staying in consolidation below 1.3982 temporary top and intraday bias remains neutral first. Outlook is unchanged that corrective pattern from 1.4240 could have completed with three waves down to 1.3570. Further rise is expected as long as 1.3766 support holds. 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) 109.08; (P) 109.43; (R1) 109.66; More...

Break of 109.05 support suggest resumption of fall from 111.65. Intraday bias is back on the downside for 38.2% retracement of 102.58 to 111.65 at 108.18. On the upside, above 109.82 minor resistance will turn bias back to the upside for 110.58 resistance instead.

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. For now, outlook won't turn bullish as long as 111.71 resistance holds, even in case of strong rebound.

RBA will taper in September after all

The Australian dollar continues its upswing and has posted considerable gains on Tuesday. AUD/USD is currently trading at 0.7396, up 0.51% on the day.

Analysts had widely expected that the RBA would maintain its benchmark interest rate and bond purchases, and this proved correct. However, the central bank managed to surprise the markets in announcing that it would stick to its plan to taper bond purchases in September. There were widespread expectations that due to a resurgence in Covid cases, the RBA might walk delay its planned taper, which it announced in July. In the end, the Bank was more hawkish than expected, which provided the Australian dollar with a lift.

The size of the taper is quite modest, with a reduction in bond purchases from AUD 5 billion per week to 4 billion. However, what is more important is the message to the markets that the RBA is tightening policy, and that further tightening can be expected, provided that the economy continues to recover.

RBA Governor Philip Lowe sounded positive about the economic outlook, despite the recent upsurge in Covid. Lowe emphasized the resilience of the economy, stating that “the experience to date has been that once virus outbreaks are contained, the economy bounces back quickly”.

Even with the surprise taper announcement, the RBA’s monetary policy remains dovish. The taper program will be reviewed in November, and Lowe reiterated that economic conditions will not be ripe for a rate hike prior to 2024.

The RBA will also be in the spotlight later in the week. RBA Governor Lowe testifies before lawmakers on Thursday and the RBA releases quarterly economic forecasts on Friday.

AUD/USD Technical

• AUD is testing resistance at 0.7402. This is followed by resistance at 0.7456
• AUD/USD has support at 0.7305. Below, there is support at 0.7262

Daily Pivots: (S1) 0.9037; (P) 0.9053; (R1) 0.9067; More....

USD/CHF's fall continues today and reaches as low as 0.9021 so far. Intraday bias stays on the downside for retesting 0.8925 low. On the upside, break of 0.9074 minor resistance will turn intraday bias neutral first. But another fall will remain in favor as long as 55 day EMA (now at 0.9126) holds.

In the bigger picture, failure to sustain above 55 week EMA (now at 0.9183) affirms 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. For now, risk will stay on the downside as long as 0.9273 resistance holds, in case of rebound.

Dollar is under some pressure as falling treasury yield is weighing down the greenback. Canadian Dollar is even weaker as WTI oil price breaches 70 handle again. New Zealand and Australian Dollars are the stronger ones but gains are limited. The post RBA lift on Aussie is so far short-lived. Swiss Franc is actually taking the spotlight, extending near term rise against both Dollar and Euro.

Technically, as USD/CHF is extending the fall from 0.9273, eyes is now on 109.05 support in USD/JPY. Break will resume the decline from 111.65. If that happens, we'd then pay attention to whether it's accompanied by break of 1.1907 resistance in EUR/USD, which signals Dollar selling. Or GBP/JPY would break of 151.59 minor support, which signals Yen buying.

In Europe, at the time of writing, FTSE is up 0.18%. DAX is down -0.11%. CAC is up 0.77%. Germany 10-year yield is up 0.0049 at -0.480. Earlier in Asia, Nikkei dropped -0.50%. Hong Kong HSI dropped -0.16%. China Shanghai SSE dropped -0.47%. Singapore Strait Times dropped -0.38%. Japan 10-year JGB yield dropped -0.0118 to 0.010.

Fed Bullard: monetary policy needs to be more nimble in new regime

St. Louis Fed President James Bullard told Reuters that current inflation, which is well over Fed's target, is at levels which former chairs like Alan Greenspan would have "immediately tried to quash." He called for swift action on ending the asset purchase program. "We are not being that preemptive. Our models say this will settle down, but in the meantime it will be pretty volatile," he said, "what I want to be prepared for and get the committee prepared for is the risk that this is an unpredictable situation."

Bullard also said a new "regime" may have arrived and "monetary policy needs to be more nimble." The global equilibrium was upset by the pandemic, and "the reverberations will continue, and you will have a lot more volatility than you are used to."

"We will have long, lingering effects as the rest of the world recovers. You have shortages and bottlenecks everywhere. You have Europe likely to grow more quickly in coming quarters," Bullard said. "You have industries still adjusting to the post-pandemic world - many things happening, and at a pace we are not used to."

Eurozone PPI rose 1.4% mom, 10.2% yoy in Jun

Eurozone PPI came in at 1.4% mom, 10.2% yoy in June, versus expectation of 0.9% mom, 10.3% yoy. For the month, industrial producer prices increased by 3.3% in the energy sector, by 1.3% for intermediate goods, by 0.4% for capital goods and by 0.3% for durable and non-durable consumer goods. Prices in total industry excluding energy increased by 0.7%.

EU PPI rose 1.4% mom, 10.3% yoy. For the month, the highest increases in industrial producer prices were recorded in Denmark (+5.1%), Estonia (+4.6%) and Latvia (+3.1%), while the only decrease was observed in Ireland (-0.3%).

Swiss consumer climate surged to 8 in Q2, highest since 2010

Swiss SECO Consumer Climate rose sharply from -7 to 8 in Q3. That's the highest level since July 2010, and well above long-term average of -5. Expectations of general economic growth rose to record 48. Employment expectations rose to 29, just slightly below pre-crisis level. Expected financial situation also rose to 3, back above long-term average for the first time in over six years.

RBA maintains tapering plan, left rate unchanged

RBA maintained cash rate target unchanged at 0.10%. Also, target for April 2024 government bond yield was also kept at 0.10%. More importantly, it maintained the tapering plan unchanged. Weekly purchases will be lowered from AUD 5B to AUD 4B starting early September, until at least mid-November.

RBA also pledged to "maintain its flexible approach to the rate of bond purchases". The conditions for rate hike is not expected to be met before 2024.

The central bank said the outlook for the coming months is "uncertain" and depends up on the "evolution of the health situation and the containment measures". Then, the central scenario is for the economy to grow by "a little over 4 per cent over 2022 and around 2½ per cent over 2023."

Unemployment is expected to trend lower to 4.50% at the end of 2022, and then 4.0% at the end of 2023. Inflation is expected to be at 1.75% over 2022 and than 2.25% over 2023.

Suggested readings on RBA:

• RBA Sticks with Tapering in September, Shrugging Off Short-term Impacts of Lockdown
• RBA Board Surprises by Maintaining Current Policy Settings
• (RBA) Statement by Philip Lowe, Governor: Monetary Policy Decision

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9037; (P) 0.9053; (R1) 0.9067; More....

USD/CHF's fall continues today and reaches as low as 0.9021 so far. Intraday bias stays on the downside for retesting 0.8925 low. On the upside, break of 0.9074 minor resistance will turn intraday bias neutral first. But another fall will remain in favor as long as 55 day EMA (now at 0.9126) holds.

In the bigger picture, failure to sustain above 55 week EMA (now at 0.9183) affirms 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. For now, risk will stay on the downside as long as 0.9273 resistance holds, in case of rebound.

Economic Indicators Update

Oil has a delta-dip mini

Oil prices plunged overnight as softer than expected PMI data from China and the United States sparked fears of a slowing recovery, and thus, lower oil consumption. Rising delta-variant cases in both countries added to the darkening outlook. To be fair, and as I noted yesterday, oil did look ripe for a correction lower, the recovery rally having lost momentum at the end of last week.

Brent crude fell by 2.60% to USD 73.20 a barrel, and WTI tumbled 2.85% to USD 71.60 a barrel. Brent crude and WTI are 0.60% lower at USD 72.80 and USD 71.15 a barrel. Prices on both have continued falling in Asia, although the overnight lows in New York have not been tested.

The falls overnight looks corrective, and the scope is nothing compared to the “delta-dip” of a couple of weeks ago, which was an outright capitulation trade. Oil’s fundamentals remain constructive, and only a widespread Covid-19 outbreak in China, leading to mass lockdowns, will change that.

The overnight lows on Brent crude and WTI at USD 72.35 and USD 70.60 a barrel provide initial support, followed by USD 72.00 and USD 70.00 a barrel, respectively. Any spike below the latter levels will be a buying opportunity, and I expect any aggressive sell-off due to stop-losses to be short-lived.

Gold is unchanged

Gold markets were content to watch from the sidelines overnight, with gold finishing almost unchanged at USD 1814.00 an ounce, edging slightly lower today in Asia to USD 1811.50 an ounce.

The fall by gold has moved it back into its broader July range of USD 1790.00 to USD 1820.00 an ounce. The failure of gold to hold gains in the face of even modest US dollar strength and ever-falling US yields is disappointing, but as long as USD 1790.00 an ounce holds on a closing basis, gold’s medium-term perspective still looks constructive. Interim support and resistance are found at its 100 and 200-DMAs at USD 1802.85 and USD 1820.50 an ounce.

If support at USD 1790.00 fails, gold could return to USD 1750.00 an ounce, potentially quite quickly. The US Non-Farm Payrolls should answer some questions regarding the US dollar’s direction on Friday. In the meantime, patience and playing the range are probably the best strategy.

Notes/Observations

• RBA was deemed hawkish as it kept its planned bond tapering for Sept despite recent virus lockdowns.

Asia

• RBA Left Cash Rate Target unchanged at 0.10% and maintained its 3-year Yield Target at 0.10% (both as expected). Reiterated its forward guidance that conditions to raise rates would not be met before 2024 at the earliest. Kept its taper plan for bond purchases but to remain flexible. The economy was still expected to grow strongly next year.
• Japan July Tokyo CPI Y/Y: -0.1% v +0.1%e v 0.0% prior; CPI (ex-fresh food) Y/Y: 0.1% v 0.0%e.
• South Korea July CPI remained above target for the 4th month and matched the fastest annual pace in almost a decade (Y/Y: 2.6% v 2.4%e).
• Japan Fin Min Aso noted that Japan's fiscal situation was deteriorating but should return to normal once vaccinations proceeded; Not considering additional extra budget at this point.
• Reserve Bank of New Zealand (RBNZ) might restrict high leverage mortgages to 10% of lending, effective Oct 1st.

Europe

• UK PM Johnson said to have canceled plans for an "amber" COVID watch list after Cabinet was vehemently against and worried about canceled vacations to the UK as a result.
• German CDU Wirtschaftsrat Business Group Sec General Steiger: Rising inflation was a troubling signal, ECB rates policy is a threat to the Euro.

Americas

• Treasury Sec Yellen's letter to Congress noted the US would meet statutory debt limit on Aug 1st; Treasury to begin implementing special measures by Aug 2nd to extend debt deadline.
• Fed's Waller (hawk, voter): Personal opinion is that Fed could make an announcement on taper in Sept; If we get 800K to 1M new jobs in next two jobs reports we will have regained 85% of jobs lost, which is 'significant further progress'.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.22% at 465.48, FTSE +0.29% at 7,101.95 , DAX +0.08% at 15,580.45, CAC-40 +0.76% at 6,726.51, IBEX-35 -0.02% at 8,757.00, FTSE MIB +0.16% at 25,392.50, SMI +0.19% at 12,193.68, S&P 500 Futures +0.35%].
• Market Focal Points/Key Themes: European indices open mixed and failed to gain direction as the session wore on; sectors leading to the upside include energy and financials; while sectors leading to the downside include technology and materials; energy sector supported following BP outlook; Sanofi to acquire Translate Bio; Smiths to sell medical unit; earnings expected during the upcoming US session include Blue Apron, Under Armour Eli Lilly and Lyft.

Equities

• Consumer discretionary: Domino's Pizza [DOM.UK] +2% (earnings).
• Energy: BP [BP.UK] +3% (earnings; buyback).
• Financials: Societe Generale [GLE.FR] +5% (earnings), Generali [G.IT] -1.5% (earnings), Standard Chartered [STAN.UK] +1.5% (earnings)
• Healthcare: Sanofi [SAN.FR] +1% (acquires Translate Bio).
• Industrials: Maersk [MAERSKB.DK] +1% (prelim earnings), BMW [BMW.DE] -4% (earnings), Stellantis [STLA.IT] +5% (earnings).
• Technology: TeamViewer [TMV.DE] -4% (earnings), Infineon [IFX.DE] -2% (earnings).
• Telecom:

Speakers

• Iran's incoming President Raisi stated that would take steps to lift US sanctions.
• China city of Beijing to ban train passengers from 23 regions to combat the spread of coronavirus. Regions included Zhengzhou, Nanjing, Yangzhou, Shenyang, and Dalian and were labeled with higher Covid-19 risks after a number of infections were found.

Currencies/Fixed Income

• FX market was relatively quiet in dull trading on Tuesday. Dealers noted that the recent bipartisan US infrastructure bill helped to aid risk appetite and keep the greenback on the defensive for now.
• GBP/USD was back above the 1.39 level with a focus on Thursday’s BOE rate decision. Dealers believe that BOE will signal that it was signal that it’s in no hurry to cut its Gilt purchase program from the current £875B levels. Also aiding the GBP currency was the likely reopening of borders in Thursday's UK travel restrictions review which was seen as improving the recovery story.
• AUD currency was firmer after the RBA noted it would push ahead with its plan to start tapering bond purchases in September. Dealers noted that decision came as a hawkish surprise and had anticipated that RBA to delay taper plans in response to the negative impact from the latest round of lockdowns.

Economic data

• (AU) Australia July Commodity Index: 142.3 v 131.1 prior.
• (CH) Swiss Q3 SECO Consumer Confidence: +7.8-5.3e.
• (ES) Spain July Net Unemployment Change: -197.8K v -166.9K prior.
• (TR) Turkey July CPI M/M: 1.9% v 1.6%e; Y/Y: 19.0% v 18.6%e; CPI Core Index Y/Y: 17.2% v 17.7%e.
• (TR) Turkey July PPI M/M: 2.5% v 1.7%e; Y/Y: 44.9% v 43.9%e.
• (BR) Brazil July FIPE CPI M/M: 1.0% v 0.9%e.
• (EU) Euro Zone Jun PPI M/M: 1.4% v 1.4%e; Y/Y: 10.2% v 10.3%e.

Fixed income Issuanc

• (ID) Indonesia sold a total IDR34.0T vs. IDR33.0T target in bills and bonds v 2.14x prior.
• (UK) DMO sold £2.0B in 1.25% July 2051 Gilts; Avg Yield: 0.972% v 1.274% prior; bid-to-cover: 2.41x v 2.24x prior; Tail: 0.5bps v 0.2bps prior.
• (AT) Austria Debt Agency (AFFA) sold a total €1.495B vs. €1.495B indicated in 2025 and 2031 RAGB bonds.
• Sold €805M in 0% Apr 2025 RAGB Bonds; Avg Yield: -0.742% v -0.596% prior; bid-to-cover: 2.05x v 2.42x prior.
• Sold €690M in 0% Feb 2031 RAGB Bonds; Avg Yield: -0.271% v -0.059% prior; bid-to-cover: 2.08x.

Looking Ahead

• (US) July Total Vehicle Sales data during the session.
• (EG) Egypt July Gross Official Reserves: No est v $40.6B prior; Net Reserves: No est v $40.6B prior.
• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• (BE) Belgium Debt Agency (BDA) to sell 3-month bills; Avg Yield: % v -0.672% prior; Bid-to-cover: x v 4.41x.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2040 and 2048 bonds.
• 06:30 (EU) ESM to Sell Up to €1.5B in 3-month Bills.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (MX) Mexico Jun Leading Indicators M/M: No est v 0.27 prior.
• 07:00 (MX) Mexico July Consumer Confidence: No est v 44.5 prior.
• 08:00 (BR) Brazil Jun Industrial Production M/M: 0.3%e v 1.4% prior; Y/Y: 12.3%e v 24.0% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (CA) Canada Jun MLI Leading Indicator M/M: No est v 1.4% prior.
• 08:30 (CL) Chile Central Bank Traders Survey.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 09:30 (CA) Canada July Manufacturing PMI: No est v 56.5 prior.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (20+ years).
• 10:00 (US) Jun Factory Orders: 1.0%e v 1.7% prior; Factory Orders (ex-transportation): No est v v 0.7% prior.
• 10:00 (US) Jun Final Durable Goods Orders: 0.8%e v 0.8% prelim; Durables (ex-transportation): No est v 0.3% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.5% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 0.6% prelim.
• 10:00 (MX) Mexico Weekly International Reserve data.
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.
• 11:00 (DK) Denmark July Foreign Reserves (DKK): No est v 458.4B prior.
• 14:00 (US) Fed’s Bowman at Fed Conference.
• 16:30 (US) Weekly API Oil Inventories.
• 17:00 (KR) South Korea July Foreign Reserves: No est v $454.1B prior.
• 18:00 (CO) Colombia Central Bank July Minutes.
• 18:45 (NZ) New Zealand Q2 Employment Change Q/Q: 0.7%e v 0.6% prior.
• 18:45 (NZ) New Zealand Q2 Unemployment Rate: 4.4%e v 4.7% prior.
• 19:00 (AU) Australia July Final PMI Services: No est v 44.2 prelim; PMI Composite: No est v 45.2 prelim.
• 20:30 (JP) Japan July Final PMI Services: No est v 46.4 prelim; PMI Composite: No est v 47.7 prelim.
• 20:30 (SG) Singapore July PMI (whole economy): No est v 50.1 prior.
• 20:30 (HK) Hong Kong July PMI (whole economy): No est v 51.4 prior.
• 21:00 (NZ) New Zealand July Commodity Price Index: No est v 0.8% prior.
• 21:00 (AU) Australia to sell A$800M in 1.75% 2032 Bonds.
• 21:10 (JP) BOJ Outright Bond Purchase Operation in 1~3 Years and 10~25 Years maturities.
• 21:30 (AU) Australia Jun Final Retail Sales M/M: -1.8%e v -1.8% prelim; Q/Q: 0.8%e v 0.5% prior.
• 21:30 (KR) Bank of Korea (BOK) to sell KRW2.2T in 2-year Bonds.
• 21:45 (CN) China July Caixin PMI Services: 50.5e v 50.3 prior; PMI Composite: No est v 50.6 prior.
• 23:00 (CN) China to sell 3-year and 7-year Upsize Bonds.
• 23:00 (TH) Thailand Govt to sell THB13B in 2042 Bonds.

EURJPY is drifting across the 129.61 level, which happens to be the 50.0% Fibonacci retracement of the up leg from 125.08 until 134.12, after the bearish correction bounced off the 200-day simple moving average (SMA). The 200-day SMA is defending the positive structure, while the 100- and 50-day SMAs are suggesting that negative powers are still active. The flattening of the 100-day SMA as well as a possible bearish crossover of it by the 50-day SMA is further signalling a tendency in the pair to steer lower.

The Ichimoku lines are indicating that buyers are fighting to regain buoyancy, while the short-term oscillators are revealing a persisting negative tone in the pair. The MACD is above its red trigger line but is demonstrating weak upside momentum, failing to climb to the zero threshold. The RSI is also struggling to boost upside impetus as it floats beneath the 50-level. On top of this, the negative charge in the stochastic oscillator is promoting additional deterioration in the pair.

If sellers manage to drive the pair below the 50.0% Fibo at 129.61, they may promptly encounter a durable support base of 128.28-128.82, which encapsulates the 61.8% Fibo of 128.54 and the 200-day SMA. Diving beneath this vital floor could then lead the pair to test the 127.30 border before the bears target the February 4 trough of 126.09.

Otherwise, if positive traction develops at the 50.0% Fibo, early upside friction could transpire between the red Tenkan-sen line at 130.05 and the blue Kijun-sen line at 130.50. From here, buyers would need to muster profound buying interest to overcome the resistance zone moulded between the 131.00 hurdle and the 50-day SMA at 131.50. Conquering this critical barricade could then propel the price to challenge the 132.34-132.87 barrier.

Summarizing, EURJPY’s short-term negative forces have yet to fully abate and a break beneath the 200-day SMA and the 128.28 trough could boost downside price action.

St. Louis Fed President James Bullard told Reuters that current inflation, which is well over Fed's target, is at levels which former chairs like Alan Greenspan would have "immediately tried to quash." He called for swift action on ending the asset purchase program. "We are not being that preemptive. Our models say this will settle down, but in the meantime it will be pretty volatile," he said, "what I want to be prepared for and get the committee prepared for is the risk that this is an unpredictable situation."

Bullard also said a new "regime" may have arrived and "monetary policy needs to be more nimble." The global equilibrium was upset by the pandemic, and "the reverberations will continue, and you will have a lot more volatility than you are used to."

"We will have long, lingering effects as the rest of the world recovers. You have shortages and bottlenecks everywhere. You have Europe likely to grow more quickly in coming quarters," Bullard said. "You have industries still adjusting to the post-pandemic world - many things happening, and at a pace we are not used to."

Eurozone PPI came in at 1.4% mom, 10.2% yoy in June, versus expectation of 0.9% mom, 10.3% yoy. For the month, industrial producer prices increased by 3.3% in the energy sector, by 1.3% for intermediate goods, by 0.4% for capital goods and by 0.3% for durable and non-durable consumer goods. Prices in total industry excluding energy increased by 0.7%.

EU PPI rose 1.4% mom, 10.3% yoy. For the month, the highest increases in industrial producer prices were recorded in Denmark (+5.1%), Estonia (+4.6%) and Latvia (+3.1%), while the only decrease was observed in Ireland (-0.3%).

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