<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/usdjpy-continues-march-higher-with-key-resistance-still-some-distance-away-20220906/“>USD/JPY continues march higher with key resistance still some distance away</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/rba-raises-cash-rate-by-50-bps-to-235-as-expected-20220906/“>RBA raises cash rate by 50 bps to 2.35%, as expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/rba-plays-it-straight-hints-that-rates-are-now-in-neutral-territory-20220906/“>RBA plays it straight, hints that rates are now in neutral territory</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/uk-pm-truss-reportedly-plans-to-freeze-household-energy-bills-for-18-months-20220906/“>UK PM Truss reportedly plans to freeze household energy bills for 18 months</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/italy-plans-to-cut-gas-consumption-amid-energy-crunch-20220906/“>Italy plans to cut gas consumption amid energy crunch</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/germany-july-industrial-orders-11-vs-05-mm-expected-20220906/“>Germany July industrial orders -1.1% vs -0.5% m/m expected</a></li></ul><p>Markets:</p><ul><li>GBP leads, JPY lags on the day</li><li>European equities higher; S&P 500 futures up 0.6%</li><li>US 10-year yields up 7 bps to 3.26%</li><li>Gold up 0.1% to $1,712.03</li><li>WTI crude down 0.2% to $86.70</li><li>Bitcoin up 0.8% to $19,899</li></ul><p style=““ class=“text-align-justify“>The dollar continues to sit in a comfortable spot as we await the return of Wall Street from the long weekend. Treasury yields are higher and that is underpinning USD/JPY as the pair pushes to fresh highs since 1998, breaching 142.00 currently – up over 1% on the day.</p><p style=““ class=“text-align-justify“>Things are continuing to stay in place for the dollar as <a target=“_blank“ href=“https://www.forexlive.com/news/things-are-all-lining-up-for-the-dollar-towards-the-end-of-the-week-20220819/“ target=“_blank“>the factors that have driven the move since August</a> are still playing out. EUR/USD rose initially to 0.9985 only to fall back to flat levels now around 0.9925 as the euro is still sluggish amid the energy crisis in the region. GBP/USD is hopeful about new UK PM, Liz Truss‘ efforts to tackle soaring energy prices but I would argue that it is but a false dawn for the quid, with cable nudging up to 1.1600 before keeping around 1.1570 on the day – off two-year lows from yesterday.</p><p style=““ class=“text-align-justify“>Meanwhile, China is slowly guiding the yuan to weaken towards 7.00 against the dollar – in which I would expect them to draw a hard line there after having cut the FX reserve ratio yesterday. USD/CNY touched 6.96 today, which is its highest level in two years.</p><p style=““ class=“text-align-justify“>Elsewhere, the antipodeans are struggling with AUD/USD down 0.4% to 0.6765 after the RBA played it straight and hiked the cash rate by 50 bps to 2.35%, as expected. The central bank hinted at rates being at neutral territory but offered no additional hawkishness as they are very much just a passenger now to the Fed’s tightening drive.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>The energy crisis in Europe is one that is unavoidable at this stage and as gas flows from Russia have been heavily disrupted, there are going to be major risks this winter and the next as well. For Italy, they are planning to turn down the heat in households and businesses to help cut around 5.3 billion cubic metres in consumption.</p><p style=““ class=“text-align-justify“>The government plans to drop the heating temperature by 1 degree Celsius in industrial and residential buildings. Meanwhile, Rome itself is in talks to agree on a further reduction in consumption on a voluntary basis.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>The plan here would be to freeze energy bills at the current level for this winter and the next but the catch here is that they are to be paid for by government-backed loans to energy supplieres. So, what’s going to happen next? BBC reports that „those loans would be repaid over the next 10 to 20 years through supplements to customer bills“. To cut short, it is households who will have to pay for them eventually i.e. the cost is just being spread out instead.</p><p style=““ class=“text-align-justify“>Truss‘ scheme is said to possibly cost beween £100 to £130 billion.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>The RBA played it straight today, offering no major surprises as they raised the cash rate by 50 bps to 2.35% and hinted that rates are now in neutral territory. The thing about their latest move is that they are now very much following what the Fed is doing, so essentially one can think of it as the US central bank as being at the wheel while the RBA is merely the passenger going along for the ride.</p><p style=““ class=“text-align-justify“>That means if the Fed decides to slow down in the tightening cycle, so will the RBA. In that sense, the aussie can’t really find the edge in terms of policy backdrop. And when you weigh that against the landscape of falling equities, growing economic worries, and the dollar still being the cleanest shirt among the dirty laundry, it’s hard to see AUD/USD gain materially.</p><p style=““ class=“text-align-justify“>The only comfort is that the aussie isn’t going to perform as badly as the likes of the yen, euro, and pound in this environment. But in the case of an extended drop in equities, the aussie may still find itself in a tough spot as global recession worries play out.</p><p style=““ class=“text-align-justify“>For now though, the technicals suggest a likely return for AUD/USD towards the July lows with the head and shoulders pattern looking to exert itself on price action in the pair:</p><p style=““ class=“text-align-justify“>The July lows around 0.6681-14 will be the next key support region to watch alongside weekly trendline support (August to November 2021 lows) at around 0.6692. The weekly chart also points to support from the 50.0 Fib retracement level at 0.6756 so the confluence of support levels will be vital in trying to keep the pair afloat for the time being:</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>The firm notes that while natural gas pries have corrected lower in the past few weeks, they still represent a source of downside risk for EUR/USD especially. They argue that the euro area growth outlook is continuing to deteriorate and that inflation shows no signs of easing just yet. Adding that:</p><p style=““ class=“text-align-justify“>“The ECB is expected to make additional outsized moves in upcoming meetings (67/58/48 bps priced in for the Sept/Oct/Dec meetings) but hiking into a recession and further widening of BTP-Bund spreads is likely to mitigate any positive impact of higher rates on FX.“</p><p style=““ class=“text-align-justify“>They maintain a bearish bias on EUR/USD and eye further downside in EUR/JPY as well as EUR/CHF. Some snapshots from the report:</p>

This article was written by Justin Low at forexlive.com.