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Daily Pivots: (S1) 1.1655; (P) 1.1682; (R1) 1.1713; More...

Intraday bias in EUR/USD remains neutral and further rally is in favor as long as 1.1573 support holds. Corrective fall from 1.1829 should have completed with three waves down to 1.1390. On the upside, above 1.1741 will bring retest of 1.1829 high first. Firm break there will resume larger up trend. However, sustained break of 1.1573 will dampen this view, and indicate that corrective pattern from 1.1829 is extending with another falling leg towards 1.1390 again.

In the bigger picture, rise from 0.9534 (2022 low) long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 1.1604 support holds.

Markets

Curve steepening was the name of the game yesterday. Higher risk premia (public finances) drove the underperformance at the long end of the curve in which the UK, as usual, took the lead. Its 30-year maturity hit the highest level since 1998. German and European (swap) rates joined the move higher, to a 14-year high and the 3% mark respectively. Japan’s 30-year yield gauge rose 2.7 bps and extends the rise this morning by adding 7 bps ahead of tomorrow’s auction. It is now trading at its highest level since inception in 1999. Treasuries slightly outperformed, with yields adding between 2.2 and 3.6 bps. They pulled back from their intraday highs in early US dealings and in the wake of the August US manufacturing ISM. The headline figure printed near consensus (48.7 vs 49 expected) and new orders rose (51.4) for the first time since January this year. The employment component, though, remains deeply mired in contraction territory. The 43.8 outcome was lower than expected (45) and among the weakest since the Covid recession. It reveals markets’ sensitiveness for any data points related to the labour market. Stock markets ended with losses and the greenback dominated the FX landscape. DXY advanced to 98.4, EUR/USD depreciated to 1.164, down from 1.171 at the open. The yen suffered not only from fiscal risks but (not totally unrelated) political ones as well after a key figure tendering his resignation sparked speculation for early party elections. USD/JPY tested the 200dMA around 148.9 and sticks around in today’s Asian session. Sterling was an obvious underperformer, most notably against the dollar. GBP/USD tumbled from 1.355 to 1.34 with follow-up losses this morning to 1.336.

US JOLTS job openings feature the economic agenda today. Though the indicator is lagging most other labour market gauges (July vs August readings), it could still trigger some intraday volatility. Tomorrow and Friday is the real deal though, with the ADP job report, services ISM and payrolls coming up. ECB’s Lagarde speeches at the European Systemic Risk Board’s conference, probably without touching on monetary policy. The Fed releases its Beige Book, kickstarting its FOMC September cycle. The US administration meanwhile plans to go to the Supreme Court today for an expedited decision on last Friday’s US Court of Appeals ruling on Trump’s reciprocal tariffs. Its outcome serves as a wildcard but probably shouldn’t be expected for the very near future. Short term, we’re looking for the public finances narrative to keep upward pressure on long-term yields and add to the steepening move. The 30-year (4.98%) in the US nears the symbolically important 5% barrier. That could release more market nervousness, particularly in stock markets. The dollar reaction yesterday suggests it can still enjoy some safe haven support but the jury’s out whether it'll remain the “go to” currency.

News & Views

Australian GDP growth accelerated to 0.6% Q/Q in Q2 after more subdued growth in Q1 (0.3% Q/Q; heavily impacted by weather events). Household spending accelerated from 0.4% Q/Q to 0.9% Q/Q with sales related to the end of the financial year and new product releasees contributing to discretionary spending on good. Government spending increased as well, with their final consumptions growing from 0.3% Q/Q to 1% Q/Q mainly because of a rise in social benefits to households. Net trade also contributed to GDP growth (+0.1 ppt), led by exports of mining commodities which saw a rebound in production following severe weather disruptions in Q1. Imports of services was the largest detractor to net trade led by travel services. Public investment was the largest detractor from overall growth with public investments falling by 3.9% Q/Q driven by a decrease in state government expenditure on transport and health infrastructure, and a fall in defense investment. Today’s strong GDP number took Australian markets by surprise. They turn less certain on another RBA rate cut at the November policy meeting. The AUD swap rate curve bear flattens this morning with yields rising by 6.7 bps (30-yr) to 9.5 bps (3-yr). The Aussie dollar fails to profits but holds steady against a stronger greenback at AUD/USD 0.6510.

Daily Pivots: (S1) 1.3306; (P) 1.3428; (R1) 1.3515; More...

Intraday bias in GBP/USD remains on the downside for the moment. Corrective pattern from 1.3787 is extending with another falling leg. Deeper decline would be seen back to 1.3140 support. But downside should be contained by 38.2% retracement of 1.2099 to 1.3787 at 1.3142. But still, for now, risk will stay mildly on the downside as long as 1.3459 resistance holds, in case of recovery.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.3104) holds, even in case of deep pullback.

Asian equities traded lower today, tracking the decline on Wall Street overnight, as investors grappled with rising bond yields and renewed trade uncertainty. Even stronger-than-expected Chinese services PMI and robust Australian GDP data failed to lift sentiment, with risk aversion setting the tone across the region. Additionally, markets remain cautious ahead of Friday’s closely watched U.S. nonfarm payrolls report, which will provide critical guidance for the Fed’s September decision. For now, positioning is defensive, with equities in the regional under some pressure.

At the heart of the market stress is a new wave of sovereign risk emanating from Europe. The UK’s fiscal outlook is under sharp scrutiny, pushing gilt yields to 27-year highs, while French bonds are suffering amid political instability and the risk of a government collapse in a confidence vote next week. Both countries embody the vulnerabilities of fiscal fragility and waning investor confidence.

The U.S. is also facing its own risks. A federal appeals court ruled last Friday that most of President Donald Trump’s sweeping global tariffs were illegal. The tariffs, estimated to generate USD 172.1 billion in 2025, face the possibility of some refunds if the ruling is upheld. That would likely force a surge in Treasury issuance to cover the shortfall, putting further pressure on bond markets. U.S. yields are already at elevated levels. The 30-year Treasury yield is trading near 4.985%, with economists warning that a break above 5% would be a troubling signal for the U.S. government and global markets.

In FX, Yen is currently the weakest performer this week so far, weighed down by rising global yields and persistent trade uncertainties. Sterling is the second-worst after sharp losses and an inability to recover with momentum, while Kiwi is also under soft. Dollar is the standout gainer, benefiting from higher U.S. yields and safe-haven demand. Loonie and Aussie follow, while Euro and Swiss Franc are trading mid-pack.

In Asia, at the time of writing, Nikkei is down -0.93%. Hong Kong HSI is down -0.48%. China Shanghai SSE is down -0.87%. Singapore Strait Times is down -0.25%. Japan 10-year JGB yield is up 0.029 at 1.636. Overnight, DOW fell -0.55%. S&P 500 fell -0.69%. NASDAQ fell -0.82%. 10-year yield rose 0.050 to 4.277.

Australia’s GDP rebounds 0.6% qoq in Q2, as spending and exports drive recovery

Australia’s economy grew 0.6% qoq in Q2, beating expectations of 0.5% qoq and expanding 1.8% yoy from a year earlier. The Australian Bureau of Statistics noted that growth rebounded after weather disruptions depressed activity in Q1. GDP per capita also rose 0.2% qoq, reversing the decline recorded in the March quarter.

Domestic final demand was the key driver, supported by a 0.9% qoq rise in household spending and a 1.0% qoq increase in government consumption. Public investment detracted from growth, but private demand proved resilient.

Net trade added 0.1 percentage points to GDP, driven by a rebound in exports of iron ore and LNG as production normalized after severe weather disruptions earlier in the year.

AUD/JPY eyes break A above 97.41 as Aussie strength, Yen weakness align

AUD/JPY extended its rally this week, surging toward the 97.41 resistance level and positioning to resume the broader uptrend from the April low of 86.03. The move has been driven by a powerful combination of Australian Dollar strength and Yen weakness, pushing the cross closer to levels not seen since earlier this year.

For Aussie, Q2 GDP surprised to the upside at 1.8% yoy, its strongest expansion since 2023 and above RBA own forecast of 1.6%. Household consumption and government spending were key contributors, while net trade added to growth thanks to stronger iron ore and LNG exports. The data reinforced a picture of an economy proving more resilient than feared. Meanwhile, inflationary pressures remain sticky. Released last week, July CPI accelerated to 2.8% year-on-year, a reminder that consumer demand is still strong and disinflation is not guaranteed.

Recent data reinforces that the RBA is firmly on hold this month, with November shaping up as the earliest window for another rate cut. Even then, any rate cuts are likely to remain gradual given the still-firm growth and inflation backdrop.

On the Yen side, stalled trade negotiation process is adding strain. Hopes for a U.S. executive order to reduce auto tariffs remain unfulfilled, and Deputy Governor Ryozo Himino’s warning about downside risks to growth underscores the BoJ’s reluctance to tighten further in the near term. Yen’s position has also been eroded by this week’s surge in global bond yields, led by gilts.

Technically, today's break above 96.81 resistance suggests that AUD/JPY’s correction from 97.41 completed as a five-wave triangle at 94.38. As long as 96.04 minor support holds, the bias remains firmly upward. Decisive break of 97.41 would resume the rise from 86.03, targeting the 38.2% projection of 86.03 to 97.41 from 94.38 at 98.72. Further break there break there could prompt upside acceleration to 61.8% projection at 101.41.

Looking medium term, the broader corrective downtrend from 2024 high at 109.36 should have completed with three waves down to 86.03. If that scenario holds, clearing structural resistance at 102.39 could open the way for a full retest of 109.36.

BoJ’s Ueda meets PM Ishiba, stresses stable FX and policy vigilance

BoJ Governor Kazuo Ueda said he discussed economic and market conditions, including foreign exchange moves, in a meeting with Prime Minister Shigeru Ishiba today. Ueda told reporters afterward that “it’s desirable for currency rates to move stably, reflecting fundamentals,” but declined to elaborate further on the details of the exchange.

On policy, Ueda reaffirmed that the BOJ remains prepared to raise interest rates further if the economy and prices evolve in line with projections. He emphasized that the central bank will “scrutinize without any pre-conception” whether those projections materialize.

China RatingDog services PMI rises to 53.0, optimism improves

China’s services sector gained fresh momentum in August, with the RatingDog PMI rising to 53.0 from 52.6, topping expectations of 52.5 and marking the highest level since May 2024. The composite index also improved, climbing to 51.9 from 50.8.

RatingDog founder Yao Yu highlighted that new business inflows surged to the highest since May of last year, while new export orders expanded at the fastest pace since February. More stable domestic demand and a recovery in foreign demand were key drivers, with service providers also reporting stronger optimism—the highest since March.

Price trends, however, remained challenging. Input costs rose modestly but firms were unable to fully pass them on, with output prices slipping back into contraction. That indicates profit margins have been under sustained pressure since late 2023.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3306; (P) 1.3428; (R1) 1.3515; More...

Intraday bias in GBP/USD remains on the downside for the moment. Corrective pattern from 1.3787 is extending with another falling leg. Deeper decline would be seen back to 1.3140 support. But downside should be contained by 38.2% retracement of 1.2099 to 1.3787 at 1.3142. But still, for now, risk will stay mildly on the downside as long as 1.3459 resistance holds, in case of recovery.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.3104) holds, even in case of deep pullback.

BoJ Governor Kazuo Ueda said he discussed economic and market conditions, including foreign exchange moves, in a meeting with Prime Minister Shigeru Ishiba today. Ueda told reporters afterward that “it’s desirable for currency rates to move stably, reflecting fundamentals,” but declined to elaborate further on the details of the exchange.

On policy, Ueda reaffirmed that the BOJ remains prepared to raise interest rates further if the economy and prices evolve in line with projections. He emphasized that the central bank will “scrutinize without any pre-conception” whether those projections materialize.

Nasdaq Futures (NQ) display a bearish sequence with a lower low from the 13 August high, signaling potential for further declines. The decline from this peak is unfolding as a double three Elliott Wave structure. From the 13 August high, wave W concluded at 23035. The subsequent wave X rally formed a zigzag pattern, with wave ((a)) peaking at 23369.25 and wave ((b)) dipping to 23076.75. The Index then climbed in wave ((c)) to 23804.49, completing wave X.

The Index has since resumed its descent in wave Y, breaking below the wave W low at 23035, confirming the next downward leg. From wave X, wave (a) ended at 23370.5, followed by a wave (b) rally to 23509.5. The Index then continued lower in wave (c) to 23025.25, finalizing wave ((w)). Currently, wave ((x)) is underway, correcting the cycle from the 29 August high before the Index turns lower again. In the near term, as long as the pivot at 23804.49 remains intact, expect any rally to falter in a 3, 7, or 11 swing, leading to further downside. The projected target for wave Y lies between 22111.1 and 22752, based on the 100% – 161.8% Fibonacci extension of wave W.

Nasdaq Futures (NQ) – 60 Minute Elliott Wave Technical Chart:

NQ – Elliott Wave Technical Video:

https://www.youtube.com/watch?v=CM1fO7k19XI

September didn’t start on a positive note for global markets. Market sentiment was less than cheery as the US returned from its long weekend, and the selloff in long-maturity bonds in developed markets accelerated. The US 30-year yield flirted with the 5% psychological mark, Japan’s 30-year yield pushed toward multi-decade highs, while the UK’s 30-year gilt yield climbed to levels not seen since 1998. In France, the 30-year yield spiked to 4.5% for the first time since 2009, and the spread between German and French 10-year yields widened beyond 80bp — highlighting mounting concerns around France’s budget standoff, where Bayrou’s budget plans face stiff political resistance.

The selloff in long-duration bonds is fueled by several factors: concerns over ballooning sovereign debt, political hurdles to fiscal tightening (France is a case in point), and structurally higher inflation pressures following the Covid disruptions and the ongoing trade war. Investors are demanding higher returns to hold bonds exposed to both inflation risk and elevated debt levels. Higher yields, in turn, push up borrowing costs for companies and weigh on valuations. As a result, equities and corporate bonds also kicked off the week on a weak note.

Big-cap, tech-heavy indices led the selloff: Roundhill’s Magnificent 7 ETF fell more than 1%, the S&P 500 dropped 0.69%, and small caps retreated 0.60% as shorter-dated Treasury yields also came under pressure. In Europe, equities slid 1.5%, with the CAC 40 losing 0.7% while Germany’s DAX suffered a sharper 2.3% decline. Asian markets also feel the heat: Chinese and Indian equities weakened despite improved diplomatic relations following the Shanghai summit and fresh energy cooperation deals, while the Nikkei is testing a long-term support trendline to the downside.

Where does capital go when both bonds and equities see heavy outflows? Alternative assets. Gold is breaking records, silver is extending gains and safe-haven demand is spilling into the dollar despite longer-term doubts over its status. Bitcoin also attracts buyers below the $110K mark. Oil prices surged as WTI crude broke above $65 on news of Ukrainian strikes on Russian refineries, which pushed Moscow’s processing runs to the lowest levels since mid-2022, according to Bloomberg. That has tightened the outlook for supply – reducing the outlook for supply glut expected in the H2. As a result, the WTI prompt spread is moving higher — a bullish near-term signal for oil traders. If WTI clears its 50-day moving average, oil bulls will likely target the 200-DMA around $67.65, although a softer demand backdrop should cap gains below $70.

On the macro front, US data continue to show strain from the trade war. Factory orders contracted for the sixth straight month, ISM manufacturing softened, and employment remained weak — though new orders provided a rare bright spot and price pressures came in softer than expted. Softer price pressures kept Federal Reserve (Fed) doves hopeful that the Fed will cut, and market-implied odds of a September rate cut climbed above 90%. This week’s jobs data will be key: another weak print would reinforce dovish bets. JOLTS data is due today, ADP tomorrow, and official jobs data on Friday. Appetite will likely remain limited until then.

But whatever the data tells, valuation dynamics are also tilting flows. In the US, the S&P 500’s earnings yield sits around 3.35%, below the 2-year Treasury yield of 3.65% — defying the rule of thumb that riskier assets should pay more. By contrast, European equities look more attractive: Stoxx 600 earnings yields are nearly double those in the US, and real yields are around 4% given lower inflation. That makes rotation into European equities still a viable story, even with slightly more hawkish (European Central Bank) ECB expectations.

Speaking of inflation, Eurozone CPI came in slightly hotter than expected, with core inflation holding at 2.3% instead of easing further. While this hasn’t shifted ECB expectations much, the euro remains under pressure from widening yield spreads and France’s political drama. The single currency and European equities are likely to stay subdued near term — but any French-backed selloff could offer dip-buying opportunities once the dust settles.

In focus today

In the US, today's main data focus will be on July JOLTs labour turnover report. The number of job openings is a key measure of labour demand for the Fed.

In Sweden, we get services and composite PMI. They both fell in July, driven by services PMI which had a strong and broad setback. All components fell, but especially employment, which had the lowest reading since March 2020.

In the euro area, we receive final services and composite PMI, and with much of Europe on holiday in August, late responses not captured in the preliminary release could influence the final print.

In Poland, the central bank (NBP) will announce their rate decision, we expect them to cut the policy rate by 25bp bringing it to 4.75%.

Economic and market news

What happened overnight

This morning, we published our Nordic Outlook with updated economic forecasts for the major economies and the Nordic countries. For the Nordics, we take note of the disappointing data we have received from Sweden and adjust down the outlook for both growth and for the Riksbank policy rate, where we now expect an additional cut this year. We lower the growth forecast for Denmark for 2025 by 1.4 percentage points, primarily reflecting large revisions to historical data. Growth in Norway, on the other hand, is revised up, and since it is driven by higher productivity growth it still leaves room for gradual rate cuts. For the major economies, we have only smaller adjustments, most notably an upwards revision of euro area growth in 2025. We have not seen much weakening of the economies following the US tariff hikes, which means that downside risk has decreased. Read more in Nordic Outlook - Caution, not crisis, 3 September.

What happened yesterday

In the euro area, HICP inflation rose to 2.1% y/y in August, up from 2.0% y/y in July, with core inflation at 2.3% y/y, above expectations of 2.2% y/y. This marks the fourth consecutive month that inflation has aligned with the ECB's target. Monthly trends remain consistent with what we have seen the past months. Services inflation stays elevated at around 3% y/y, while energy prices decline and goods price increases remain minimal. We expect inflation to average 2.1% y/y in Q4 before falling below target to 1.8% y/y in 2026.

In the US, ISM manufacturing rose to 48.7 in August from 48.0 in July, below expectations and PMI predictions. Sub-indices show promise, with modest declines in prices, a slight rise in the employment index, and improvements in new orders and order-inventory balances, hinting at future production growth. Meanwhile, manufacturing PMI climbed to 53.0 in August, the strongest improvement in operating conditions since May 2022, driven by a surge in production and solid growth in new order books. Despite the positive trends, the USD weakened slightly following the ISM release.

In the UK, PM Starmer did a backroom reshuffle in his Downing Street team and Treasury related roles ahead of the important Autumn Budget, a move that has the potential to sideline Chancellor Reeves, who represents the more responsible fiscal line within the Labour party. This move triggered a spike in 30Y Gilt yields which at one point traded at the highest level since 1998, although the increase was driven by a global move for higher yields as well. Regardless, the increase in borrowing costs worsens the position for the Labour government.

Equities: Global equities suffered yesterday, taking their cues from the long end of the yield curve again. Amid massive issuance volume in European debt markets (largely due to substantial deals in Italy and the UK alongside corporate issuance) and concerns over the UK fiscal path, risk sentiment deteriorated. This left Dow Jones -0.6%, S&P500 -0.7% and Nasdaq down -0.8%. In Europe, the Stoxx 600 ended 1.5% lower. The same pattern continued in the Asian session this morning with equities lower and long end Japanese yields higher.

Given the sour risk sentiment, with lower equities, higher bond yields and a VIX spike (now trading around 17), it came as no surprise that defensive sectors outperformed cyclicals. Only consumer staples, health care and energy managed to post gains. Unsurprisingly, the rate-sensitive sectors - tech, real estate and industrials - were the worst performing.

FI and FX: GBP and the UK bond market came under significant pressure yesterday as a surprise cabinet reshuffle sent worries over UK fiscal sustainability to new highs. EUR/USD dropped firmly below 1.17 as the dollar caught a bid in a broad risk-off environment. We have updated our Riksbank call and now expect a 25bp cut in November against our previous view of unchanged interest rates.

Key Highlights

• Gold started a fresh rally above the $3,500 resistance.
• A major bullish trend line is forming with support at $3,460 on the 4-hour chart.
• WTI Crude Oil prices could recover if there is a close above $66.65.
• GBP/USD dipped below the 1.3450 support zone.

Gold Price Technical Analysis

Gold prices formed a base above $3,320 and started a fresh increase against the US Dollar. It cleared many hurdles near $3,400 and $3,450.

The 4-hour chart of XAU/USD indicates that the price settled above the $3,440 level, the 100 Simple Moving Average (red, 4 hours), and the 200 Simple Moving Average (green, 4 hours). The upward move was such that the price spiked above $3,540.

Gold is now consolidating gains above the 23.6% Fib retracement level of the upward move from the $3,311 swing low to the $3,540 high. On the downside, initial support is near the $3,465 level and a bullish trend line.

The first key support is $3,450. The next major support is near the $3,435 level. A downside break below $3,435 might call for more downsides. The next key zone to watch could be $3,410 and the 50% Fib retracement.

On the upside, immediate resistance is near the $3,550 level. The next major resistance sits near the $3,560 level. A clear move above $3,560 could open the doors for more upside. In the stated case, the bulls could aim for a move toward $3,580, above which the price could rally toward the milestone level of $3,600.

Looking at WTI Crude Oil, the price shows signs of recovery, but the bulls need to push it above $66.65 in the near term.

Economic Releases to Watch Today

• Euro Zone Services PMI for August 2025 – Forecast 50.7, versus 50.7 previous.
• UK Services PMI for August 2025 – Forecast 53.6, versus 53.6 previous.
• Fed's Kashkari speech.
• Fed's Beige Book.
• Fed's Musalem speech.

AUD/JPY extended its rally this week, surging toward the 97.41 resistance level and positioning to resume the broader uptrend from the April low of 86.03. The move has been driven by a powerful combination of Australian Dollar strength and Yen weakness, pushing the cross closer to levels not seen since earlier this year.

For Aussie, Q2 GDP surprised to the upside at 1.8% yoy, its strongest expansion since 2023 and above RBA own forecast of 1.6%. Household consumption and government spending were key contributors, while net trade added to growth thanks to stronger iron ore and LNG exports. The data reinforced a picture of an economy proving more resilient than feared. Meanwhile, inflationary pressures remain sticky. Released last week, July CPI accelerated to 2.8% year-on-year, a reminder that consumer demand is still strong and disinflation is not guaranteed.

Recent data reinforces that the RBA is firmly on hold this month, with November shaping up as the earliest window for another rate cut. Even then, any rate cuts are likely to remain gradual given the still-firm growth and inflation backdrop.

On the Yen side, stalled trade negotiation process is adding strain. Hopes for a U.S. executive order to reduce auto tariffs remain unfulfilled, and Deputy Governor Ryozo Himino’s warning about downside risks to growth underscores the BoJ’s reluctance to tighten further in the near term. Yen’s position has also been eroded by this week’s surge in global bond yields, led by gilts.

Technically, today's break above 96.81 resistance suggests that AUD/JPY’s correction from 97.41 completed as a five-wave triangle at 94.38. As long as 96.04 minor support holds, the bias remains firmly upward. Decisive break of 97.41 would resume the rise from 86.03, targeting the 38.2% projection of 86.03 to 97.41 from 94.38 at 98.72. Further break there break there could prompt upside acceleration to 61.8% projection at 101.41.

Looking medium term, the broader corrective downtrend from 2024 high at 109.36 should have completed with three waves down to 86.03. If that scenario holds, clearing structural resistance at 102.39 could open the way for a full retest of 109.36.