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Daily Pivots: (S1) 152.44; (P) 152.94; (R1) 153.36; More...

GBP/JPY lost upside momentum ahead of 153.46 resistance and intraday bias is turned neutral first. Another rise is expected as long as 151.55 support holds. Firm break of 153.46 will pave the way back to retest 156.05 high. On the downside, break of 151.55 minor support will turn intraday bias back to the downside for 148.43 support instead.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). Focus remains on 156.59 resistance (2018 high). Sustained break there should confirm long term bullish trend reversal. Next target is 61.8% retracement of 195.86 (2015 high) to 122.75 at 167.93. On the downside, sustained break of 149.03 support, however, will argue that rise from 123.94 has completed. Further break of 142.71 would open up the bearish case for retesting 122.75 low.

Daily Pivots: (S1) 129.83; (P) 130.20; (R1) 130.49; More....

Outlook in EUR/JPY is unchanged for now and intraday bias remains neutral first. On the upside, break of 131.07 resistance will argue that choppy fall from 134.11 has completed. Intraday bias will be turned back to the upside for 132.68 resistance first. On the downside, break of 128.58 will resume the fall from 134.11, and target 127.07 resistance turned support next.

In the bigger picture, rise from 114.42 is seen as a medium term rising leg inside a long term sideway pattern. As long as 127.07 resistance turned support holds, further rise is still expected to retest 137.49 (2018 high). However, firm break of 127.07 will argue that the medium term trend has reversed, and open up the case for retesting 114.42.

Daily Pivots: (S1) 1.0759; (P) 1.0776; (R1) 1.0788; More....

EUR/CHF's fall from 1.1149 is still in progress and intraday bias remains on the downside. Next target is 1.0737/51 cluster support. Sustained break there will pave the way back to 1.0505 low. On the upside, break of 1.0863 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, current development argues that rebound from 1.0505 (2020 low) might be completed with three waves up to 1.1149 already, after hitting 1.1078 long term fibonacci level. On the downside, sustained trading below 55 week EMA (now at 1.0880) will affirm this bearish case. Further break of 1.0737 cluster support (61.8% retracement of 1.0505 to 1.1149 at 1.0751) will bring retest of 1.0505 low.

Daily Pivots: (S1) 1.6032; (P) 1.6067; (R1) 1.6111; More...

EUR/AUD is staying in consolidation from 1.6128 and intraday bias remains neutral first. Still, near term outlook stays bullish as long as 1.5773 support holds. On the upside, break of 1.6128 will resume the rise from 1.5250, as a correction to fall from 1.9799, to 1.6827 resistance next.

In the bigger picture, current development argues that a medium term bottom is formed at 1.5250, on bullish convergence condition in daily MACD. Rise from 1.5250 is seen as a correction to the down trend from 1.9799 first. Stronger rise would be seen to 38.2% retracement of 1.9799 to 1.5250 at 1.6988 next. This will remain the favored case for now, as long as 1.5614 support holds.

Daily Pivots: (S1) 0.8502; (P) 0.8511; (R1) 0.8522; More...

EUR/GBP's downside momentum diminished as seen in 4 hour MACD. But further decline is still in favor as long as 0.8555 resistance holds. Choppy corrective fall from 0.8718 is still in progress and could target a retest on 0.8470 low. On the upside, though, break of 0.8555 will turn bias back to the upside for 0.8668 resistance instead.

In the bigger picture, price actions from 0.9499 are still seen as developing into a corrective pattern. That is, up trend from 0.6935 (2015 low) would resume at a later stage. This will remain the favored case as long as 0.8276 support holds. However, firm break of 0.8276 support will suggest that rise from 0.6935 has completed and turn medium term outlook bearish.

Dollar suffered another round of selloff overnight and stays soft. Mild risk aversion in Asia is not helping the greenback much. But commodity currencies are following closely, in particular Aussie and Kiwi, as the next worst performers for the week. European majors look set to be the winners of the week, as led by Sterling. Nevertheless, a bunch of GDP data from Eurozone and Canada could change the picture before the weekend.

Technically, Euro's decline against Sterling appears to be low as seen in 4 hour MACD. EUR/CHF is also approaching a 1.0737 cluster support. There is prospect of some recovery in both Euro crosses. That might help finally push EUR/USD through 1.1880 resistance decisively, towards 1.1974 resistance. This would be a focus in the European session.

In Asia, at the time of writing, Nikkei is down -1.34%. Hong Kong HSI is down -1.63%. China Shanghai SSE is down -0.58%. Singapore Strait Times is up 0.13%. Japan 10-year JGB yield is up 0.0004 at 0.022. Overnight, DOW rose 0.44%. S&P 500 rose 0.42%. NASDAQ rose 0.11% 10-year yield rose 0.008 to 1.269.

Japan industrial production rose 6.2% mom in Jun

Japan industrial production rose 6.2% mom in June, above expectation of 5.0% mom. Output also revised much of the -6.5% mom decline in May. Manufacturers expected production to fall -1.1% mom in July and then rise 1.7% in August.

A government official said, "we are continuing to see the impact of the global chip shortage but it's moderating somewhat, mainly for automakers... But manufacturers' August output plan may not fully reflect the impact of the spread of new COVID-19 variants on global and domestic economies, as well as the risk of a prolonged chip shortage."

Also released, unemployment rate ticked down to 2.9% in June, down from 3.0%. Retail sales rose 0.1% yoy in May, slightly below expectation of 0.2% yoy.

ECB de Guindos: It's medical question first and foremost

Vice President Luis de Guindos said yesterday that "substantial monetary support" is needed for the economy "for some time to come. He added, "even if recovery is successful, there is still a lot of uncertainty." Pace of inflation will "slow down again" next year as a number of one-off factors wane, such as the temporary VAT cut in Germany last year.

He also said that when to end the PEPP is a "medical question first and foremost". He added,  "it depends on whether the vaccination campaigns are successful in combating the Delta variant and whether new, more resistant variants appear."

Elsewhere

Australia private sector credit rose 0.9% mom in June, above expectation of 0.4% mom. PPI rose 0.7% qoq, 2.2% yoy in Q2.

GDP from France, Germany, Italy and Eurozone are the main focuses in European session. Eurozone will also release unemployment and CPI flash. Swiss will release KOF economic barometer.

Later in the data, US will release personal income and spending, with PCE inflation. Canada will release GDP, IPPI and RMPI.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8502; (P) 0.8511; (R1) 0.8522; More...

EUR/GBP's downside momentum diminished as seen in 4 hour MACD. But further decline is still in favor as long as 0.8555 resistance holds. Choppy corrective fall from 0.8718 is still in progress and could target a retest on 0.8470 low. On the upside, though, break of 0.8555 will turn bias back to the upside for 0.8668 resistance instead.

In the bigger picture, price actions from 0.9499 are still seen as developing into a corrective pattern. That is, up trend from 0.6935 (2015 low) would resume at a later stage. This will remain the favored case as long as 0.8276 support holds. However, firm break of 0.8276 support will suggest that rise from 0.6935 has completed and turn medium term outlook bearish.

Economic Indicators Update

STOCKS

Dow hovers at the upper end of its 33000-35100 range and is likely to break the range on the upside. DAX is moving up towards the upper end of its 15200-15800 range. Nikkei is coming back towards the lower end of its 27000-29500 range contrary to our expectation to move up within the range. A break below 27000 can see a deeper fall to 26000. Shanghai can consolidate between 3300 and 3450 for some time. Sensex and Nifty can remain in the 52000-53200 and 15600-15900 range. The bias is bullish to see an upside breakout of the range.

Dow (35084.53, +153.60, +0.44%) oscillates around 35000 and keeps alive the chances of breaking above 35100 from here itself. Such a break will take the Dow up to 36000 in line with our bullish view. In case if the Dow dips sharply below 35000, a test of 34500-34000 can be seen again and it will delay the rise to 36000.

DAX (15640.47, +70.11, +0.45%) is moving up towards the upper end of its 15200-15800 range as expected. The bias is bullish to see an upside break of this range and a rise to 16000-16200 in the coming weeks.

Nikkei (27360.41, -422.01, -1.52%) is coming down towards the lower end of its 27000-29500 range. Inability to rise past 28000 this week increases the danger of breaking below 27000 and see a deeper fall to 26000. This will be contrary to our expectation for retaining the 27000-29500 range and see an upside breakout eventually. The price action at 27000 will need a close watch.

Shanghai (3391.51, +29.93, +0.89%) is attempting to bounce back after having fallen sharply in the first half of the week. As mentioned yesterday, a consolidation between 3300 and 3450 can be seen for some time and a strong break above 3450 is needed to bring back the bullishness. While below 3450, the chances of seeing 3200 on the downside cannot be ruled out.

Sensex (52653.07, +209.36, +0.40%) remained stable. It can continue to trade in the 52000-53200 range with a bullish bias to break 53200 eventually and rise to 54000 and higher levels. Strong supports are at 52000 and 51000.

Nifty (15778.45, +69.05, +0.44%) remained stable and can remain in the 15600-15900 range again for some more time. We expect Nifty to break 15900 and rise to 16000-16200 eventually. 15600 and 15500 are strong supports.

COMMODITIES

Commodities trade higher but have come off slightly from the intra-day highs. Crude prices have come off as interim resistances hold. While the prices trade below resistances, crude prices may fall in the coming days. Gold and Silver trade higher but may come off from resistances at 1840 and 25.80-26 respectively. Copper may trade within 4.60-4.40 for now.

Brent (74.49) and WTI (73.07) both tested 74.88 and 73.50 respectively before coming down from there. Brent has held below $75/76 and $74/75 as expected and while that holds, the prices can fall towards $72/70 in the coming days. Note that Brent has a series of resistances within $75-78 region and higher at $80 which is likely to hold and produce a sharp fall in prices over the medium term. WTI on the other hand is likely to hold below $75.

Gold (1832.40) trades higher today but could face rejection from 1840 and fall back to 1820 in the near term. A break above 1840 needs to be seen and sustained in order to take the price to higher levels of 1860. While below 1840, view is bearish to 1820-1800 again.

Silver (25.62) is also trading higher and could face rejection from 25.80-26.00 which if holds strong just now could push the price down towards 25 in the medium term. Watch price action while Silver may remain in the 25-26 region for sometime.

Copper (4.50) is trading in the middle of the 4.40-4.60 region and could move either ways from here. While below 4.60, view is bearish. A break above 4.60 is needed for Copper to turn bullish in the longer run. .

FOREX

Dollar Index trades lower but can bounce back from 91.50-91.80 in the near term. Euro on the other hand may face a short corrective dip from 1.19 before attempting to break higher in the medium term. Aussie and Pound look bullish for a rise to 0.7450/75 and towards 1.40 respectively. EURJPY can fall while below 130.50. USDCNY has fallen as expected but needs to rise from 6.44 to avoid any further decline towards 6.40. USDINR needs to break below 74.20 to fall lower else could be stuck within 74.20-74.40 for the day.

Dollar Index (91.95) has broken below 92 but we need to see if the fall sustains or bounces back towards 92.50 in the near term. Immediate support below current levels is seen at 91.50. Watch price action over the next few sessions.

Euro (1.1880) looks bullish for a rise to 1.19 which may hold and produce a dip to 1.1850 before any further rise is seen in the longer run. Watch price action near 1.19 in the near term.

EURJPY (130.13) tested 130.50 but could not sustain the rise and fell sharply from there. While below 130.50, we may expect the 130.50-129.50 range to hold for the medium term.

Dollar-Yen (109.52) is likely to hold above 109 and rise back to 110. A sustained break below 109 is needed for the pair to turn bearish towards 108.50-108 in the longer run. Watch price action near 109.

Aussie (0.7394) is attempting to break above 0.74 and if it succeeds, we may have to allow for a sharp rise to 0.7450-0.7475 in the near term. Aussie would be stongly bullish on a break above 0.74.

Pound (1.3954) may face rejection from 1.40 and fall to 1.39 in the near to medium term.

USDCNY (6.4527) has come down as expected. A bounce from 6.45/44 can take the pair back to 6.49/50 in the near term but if it fails to bounce from 6.44/45, we may have to allow for a further dip towards 6.42. Watch for a possible bounce from 6.44.

USDINR (74.2950) held above 74.20 yesterday and while that holds, we may have to allow for a possible bounce back to 74.30/40. A sustained break below 74.20 (preferred and more likely) is needed for the pair to fall further down to 74.0 or lower. Watch price action near 74.20 today.

INTEREST RATES

The US Treasury yields have inched slightly up at the far-end. The intermediate supports that are coming up on the Treasury yields can hold for now and produce a corrective rally in the coming weeks before the broader downtrend resumes. The German yields are closer to their supports from where we expect a corrective bounce within its overall downtrend. The 10Yr GoI is inching up with muted trades. The 5Yr has broken the 5.66%-5.7% range on the upside as expected and can now move up in the coming days.

The US 2Yr (0.20%) and 5Yr (0.72%) Treasury yields continue to trade stable while the 10Yr (1.25%) and 30Yr (1.90%) have inched slightly higher. Our view remains the same. The 10Yr has support at 1.2% and 1.1% from where a corrective bounce to 1.45%-1.5% is possible in the coming weeks. Thereafter the broader downtrend can resume. The 30Yr is at its support level of 1.9% and has another at 1.8%. A corrective bounce can be seen from either of these supports towards 2.1%-2.2% going forward.

The German 2Yr (-0.77%), 5Yr (-0.74%), 10Yr (-0.45%) and 30Yr (0.03%) yields continue to remain lower and stable. -0.45%/-0.5% on the 10Yr and 0%/-0.05% on the 30Yr are important supports. We expect the yields to see a corrective rally to -0.30%/-0.25% (10Yr) and 0.10% (30Yr) from there in the coming weeks and then the broader downtrend can resume again.

The 10Yr GoI (6.2301%) sustains above 6.2% and inching up with muted trades. A rise to 6.3%-6.32% looks likely before the broader downtrend resumes. The 5Yr GOI (5.721%) has broken above 5.7% as expected and can now rise to 5.76%

Key Highlights

• USD/JPY started a fresh decline from well above 110.50.
• A major bearish trend line is forming with resistance near 110.20 on the 4-hours chart.
• The US GDP increased 6.1% in Q2 2021 (Prelim), up from the last 4.3%.
• The US Personal Income is likely to decline 0.3% in June 2021 (MoM).

USD/JPY Technical Analysis

The US Dollar struggled to continue higher above 111.00 against the Japanese Yen. USD/JPY started a fresh decline from the 110.59 swing high and declined below 110.00.

Looking at the 4-hours chart, the pair even broke the 109.80 support zone. It settled below the 109.80 pivot level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

There was a clear break below the 50% Fib retracement level of the upward move from the 109.06 swing low to 110.59 high. The pair is now consolidating near the 109.50 support.

It is testing the 76.4% Fib retracement level of the upward move from the 109.06 swing low to 110.59 high. There is also a major bearish trend line forming with resistance near 110.20 on the same chart.

On the upside, the previous support at 109.80 and 110.00 could stop upsides. A close above the trend line resistance and the 200 SMA might start a decent increase towards 111.00 in the near term.

On the downside, an initial support is near the 109.40 level. The first key support is near the 109.10 level. Any more downsides could set the pace for a larger decline below 109.00. The next major supports sits near 108.40.

Looking at EUR/USD, the pair recovered above the 1.1850 resistance zone. Besides, GBP/USD is gaining pace above 1.3950.

Economic Releases

• Euro Zone CPI for July 2021 (YoY) (Prelim) - Forecast +2.0%, versus +1.9% previous.
• Euro Zone Core CPI for July 2021 (YoY) (Prelim) - Forecast +0.8%, versus +0.9% previous.
• Euro Zone Gross Domestic Product for Q2 2021 (Prelim) (QoQ) - Forecast 1.5%, versus -0.3% previous.
• US Personal Income for June 2021 (MoM) - Forecast -0.3%, versus -2.0% previous.

Vice President Luis de Guindos said yesterday that "substantial monetary support" is needed for the economy "for some time to come. He added, "even if recovery is successful, there is still a lot of uncertainty." Pace of inflation will "slow down again" next year as a number of one-off factors wane, such as the temporary VAT cut in Germany last year.

He also said that when to end the PEPP is a "medical question first and foremost". He added, "it depends on whether the vaccination campaigns are successful in combating the Delta variant and whether new, more resistant variants appear."

Japan industrial production rose 6.2% mom in June, above expectation of 5.0% mom. Output also revised much of the -6.5% mom decline in May. Manufacturers expected production to fall -1.1% mom in July and then rise 1.7% in August.

A government official said, "we are continuing to see the impact of the global chip shortage but it's moderating somewhat, mainly for automakers... But manufacturers' August output plan may not fully reflect the impact of the spread of new COVID-19 variants on global and domestic economies, as well as the risk of a prolonged chip shortage."

Also released, unemployment rate ticked down to 2.9% in June, down from 3.0%. Retail sales rose 0.1% yoy in May, slightly below expectation of 0.2% yoy.