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Daily Pivots: (S1) 198.31; (P) 198.77; (R1) 199.45; More...

GBP/JPY recovered after brief dip to 197.84 and intraday bias is turned neutral first. More consolidations could be seen and below 197.84 will bring deeper pullback. But overall, near term outlook will stay bullish as long as 195.01 support holds. On the upside, firm break of 200.26 will resume the whole rise from 184.35 to 100% projection of 180.00 to 199.79 from 184.35 at 204.14.

In the bigger picture, price actions from 208.09 (2024 high) are seen as a correction to rally from 123.94 (2020 low). The pattern might still extend with another falling leg. But in that case, strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. Meanwhile, decisive break of 208.09 will confirm long term up trend resumption.

Daily Pivots: (S1) 171.70; (P) 172.03; (R1) 172.54; More...

Intraday bias in EUR/JPY remains neutral as range trading continues. On the upside, above 172.99 will resume the rebound from 169.69 to retest 173.87 high. On the downside, however, firm break of 170.94 will suggest that the corrective pattern from 173.87 has started the third leg. Intraday bias will be turned back to the downside for 169.69 support, and possibly below. But downside should be contained by 38.2% retracement of 161.06 to 173.87 at 168.97 to bring rebound.

In the bigger picture, considering current strong momentum as seen in the rally from 154.77, corrective pattern from 175.41 could have already completed. Decisive break of 154.77 will confirm long term up trend resumption. Next target is 61.8% projection of 124.37 to 175.41 from 154.77 at 186.31. However, rejection by 175.41, followed by firm break of 55 D EMA (now at 169.95) will delay this bullish case.

Daily Pivots: (S1) 0.8644; (P) 0.8656; (R1) 0.8665; More...

Intraday bias in EUR/GBP remains mildly on the upside for the moment. Corrective pattern from 0.8752 should have completed at 0.8595 after hitting 38.2% retracement of 0.8354 to 0.8752 at 0.8600. Further rise should be seen to retest 0.8752. Firm break there will resume larger rebound from 0.8221. For now, risk will stay on the upside as long as 0.8595 support holds, in case of retreat.

In the bigger picture, the structure from 0.8221 medium term bottom are not impulsive enough to suggest that it's reversing the down trend from 0.9267 (2022 high). But even if it's a correction, further rise is expected to 61.8% retracement of 0.9267 to 0.8221 at 0.8867. This will remain the favored case as long as 55 W EMA (now at 0.8501) holds.

Daily Pivots: (S1) 1.8041; (P) 1.8099; (R1) 1.8136; More...

Intraday bias in EUR/AUD is turned neutral first with current retreat. Further rally is expected as long as 1.7942 support holds. Above 18155 will target 61.8% projection of 1.7245 to 1.8094 from 1.7671 at 1.8196. Sustained break there will extend the rally from 1.7245 to 100% projection at 1.8520, which is close to 1.8554 high. However, break of 1.7942 will bring deeper fall back to 1.7671 support instead.

In the bigger picture, price actions from 1.8554 medium term top are seen as a corrective pattern. Such pattern could extend further with another falling leg. But even in that case, downside should be contained by 38.2% retracement of 1.4281 (2022 low) to 1.8554 at 1.6922 to bring rebound. Uptrend from 1.4281 is expected to resume at a later stage.

Daily Pivots: (S1) 0.9365; (P) 0.9380; (R1) 0.9402; More....

Intraday bias in EUR/CHF is turned neutral first with current recovery. On the downside, sustained trading below 55 D EMA (now at 0.9366) will the rebound from 0.9218 has completed, and target 0.9265 support for confirmation. Nevertheless, break of 0.9400 support turned resistance will bring retest of 0.9452 resistance.

In the bigger picture, the down trend from 0.9204 (2018 high) might still be in progress considering that EUR/CHF is staying well inside the long term falling channel. However, with bullish convergence condition in W MACD, downside potential should be limited in case of another fall. Instead, firm break of 0.9660 resistance will be an important sign of medium term bullish trend reversal.

Daily Pivots: (S1) 1.3882; (P) 1.3897; (R1) 1.3926; More...

USD/CAD's rally continues today and intraday bias remains on the upside. Corrective rebound from 1.3538 should now target 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 1.4017). Strong resistance should be seen there to complete the corrective bounce. On the downside, below 1.3872 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

Daily Pivots: (S1) 0.6412; (P) 0.6424; (R1) 0.6434; More...

Intraday bias in AUD/USD remains on the downside at this point. Firm break of 0.6418 support will resume the whole corrective fall form 0.6624. Next target is 38.2% retracement of 0.5913 to 0.6624 at 0.6352. On the upside, above 0.6456 minor resistance will turn intraday bias neutral again first.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).

Daily Pivots: (S1) 1.3384; (P) 1.3434; (R1) 1.3462; More...

GBP/USD's breach of 1.3398 support suggests that rebound from 1.3140 might have completed at 1.3594 already. Intraday bias is back on the downside, for 61.8% retracement of 1.3140 to 1.3594 at 1.3313. Firm break there will bring retest of 1.3140 low. On the upside, above 1.3481 minor resistance will bring retest of 1.3594 first. Overall, corrective pattern from 1.3787 is extending.

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 1.3090) holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8050; (P) 0.8071; (R1) 0.8109; More….

USD/CHF is still kept in range despite today's rebound. Intraday bias stays neutral. On the upside, firm break of 0.8131 resistance will argue that consolidation from 0.8170 has already completed. Bias will be back on the upside. Further break of 0.8170 will resume the rise from 0.7871 towards 38.2% retracement of 0.9200 to 0.7871 at 0.8379. On the downside, break of 0.8020 support will bring retest of 0.7871 support.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8475 resistance holds.

Markets

With markets counting down to Jackson Hole, US data yesterday didn’t provide much need for Fed Chair Powell to commit to any aggressive further policy easing already at this stage. US jobless claims and the Philly Fed Business outlook were a bit softer than expected but that was more than counterbalanced by a big beat in the US August PMI. With the composite measure PMI at 55.4, US business activity grew at the fastest pace this year and suggests strong Q3 growth (S&P global sees it consistent with 2.5% annualized growth). Solid growth was seen both for services activity (55.4) and manufacturing (53.3, 39 month high), also resulting in strong job creation. The report mentions tariffs as a key driver of further costs increases, both for the services and the manufacturing sector. The report concludes that “combined with the upturn in business activity and hiring, the rise in prices signaled by the survey puts the PMI data more into rate hiking, rather than cutting, territory according to the historical relationship between these economic indicators and FOMC policy changes”. The US yield curve bear flattened with yields adding between 4.6 bps (2-y) and 2.2 bps (30-y). Also Fed’s Goolsbee in a Bloomberg interview at least showed some concerns on the recent up-tick in services inflation. After a less impressive (but still decent) EMU PMI, German yields added 3-4 bps across the curve. EUR/USD initially however in the mid 1.16 area, but the dollar finally took the lead after the PMI’s (EUR/USD close 1.1606, DXY 98.62). The strong PMI report didn’t help US equities with major indices again easing 0.35/0.50%. Oil trended higher (Brent $67.6/b).

Asian equities are trade mixed this morning. The dollar extends yesterday rebound with EUR/USD drifting below the 1.16 big figure as markets are looking for more specific guidance on Fed policy from Powell’s Jackson Hole speech (4pm CET). The WSJ suggests that the core of Powells speech might be the Fed Chair commenting the conclusions of the 5-year review of the Fed policy framework. The previous review was mainly focused on issues related to policy efficacy in a context of (too) low inflation and near zero policy rates. Amongst others, that review included an approach allowing a temporary overshoot of the 2% target. As such, changes/a reversal in the longer-term policy framework shouldn’t have too much impact on day-to-day policy. Still, a return to more balanced 2% inflation targeting contains somewhat of a more hawkish message. If the Fed Chair touches on short-term policy, we also expect him to hold to a guarded, data-dependent approach. In such a scenario, markets might turn more cautious on the chances for a September Fed rate cut. (currently 70 % discounted). It could support the recent USD rebound. EUR/USD might correct somewhat further south in the EUR/USD 1.18/1.14 trading range. It’s too early to draw any conclusions on the established USD downtrend yet.

News & Views

National Japanese inflation numbers for July printed broadly in line with expectations. Both headline and core CPI (ex fresh food) rose by 0.1% M/M with both annual readings slowing from 3.3% Y/Y to 3.1% Y/Y. Stripping out energy as well, inflation held steady at 3.4% Y/Y. Services inflation also matched June’s pace at 1.5% Y/Y. Sticky Japanese inflation above the BoJ’s 2% inflation target suggest that the central bank might be lured into continuing its normalization (hiking) cycle at the October 30 policy meeting, when new quarterly projections will be released. Japanese money markets currently see a 50/50 chance of that happening.

Market research firm GfK’s UK consumer confidence indicator rose from -19 in July to -17 in August, its best outcome since December. Especially household sentiment over personal finances improved (both last 12 months as next 12 months) with the Bank of England’s latest rate cut contributing to the improving mood. GfK commented that there’s no sense yet that consumer confidence is about to break out into fresher, more optimistic territory. It’s more wait-and-see with rising inflation and potential tax increases in the autumn budget being downside risks in the (near) future....