• The light optimism begins to fade in equities once again
• UK Q2 preliminary GDP +0.2% vs 0.0% q/q expected
• UK June monthly GDP +0.5% vs +0.2% m/m expected
• Spain July final CPI +2.3% vs +2.3% y/y prelim
• France July final CPI +4.3% vs +4.3% y/y prelim
• Chia July M2 money supply +10.7% vs +11.0% y/y expected
• IEA lowers forecast for oil demand growth for next year

Markets:

• GBP leads, NZD lags on the day
• European equities lower; S&P 500 futures flat
• US 10-year yields up 2.2 bps to 4.103%
• Gold up 0.3% to $1,918.65
• WTI crude up 0.6% to $83.33
• Bitcoin down 0.1% to $29,392

It was a quiet session as we observed yet another typical summer’s day in Europe. Market appetite was sapped and there wasn’t much follow-up action to the volatile moves after the US CPI data yesterday.

The dollar is marginally lower but nothing too outstanding once again. USD/JPY is seen retreating slightly after nearing 145.00 earlier, to around 144.50-60 levels now. Meanwhile, EUR/USD is little changed and keeping just under the 1.1000 mark.

The pound is a decent mover though, benefiting from stronger UK GDP data – which surprised to the upside. That is seeing GBP/USD up 0.4% to 1.2730 from around 1.2680 earlier on in the session.

Besides that, equities sentiment remains on edge after dip buyers were defeated yesterday. US futures were slightly higher earlier on but saw gains evaporate and in Europe, there is some catching up to do with the late selling in Wall Street overnight.

Looking ahead, don’t discount the data releases in the US as they may have the potential to stir up some added volatility before the weekend. We’ll have the US PPI and University of Michigan survey coming up.

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

As bond markets puked yesterday, it validated the drop in gold this week amid a firmer dollar as well. Gold may be up 0.3% today (at least for now) but is still down 1.3% on the week and set for its worst performance since mid-June. Looking at the chart:

The rally in July stalled upon hitting daily resistance at the June highs around $1,983. Since then, gold has struggled as yields turn higher with 10-year Treasury yields rising from 3.73% to 4.20% during said period.

And as the bond market continues to vote for higher yields as of late, that is dragging gold prices back down again.

The next key downside level to pay attention to is the $1,900 mark where the drop in June stalled. This time around though, it poses even more importance as the 200-day moving average (blue line) is now sitting there at $1,900.20 currently.

As such, that will be a key level for buyers to defend. And if sellers can break below that, there might not be much to stop gold from falling further towards the February and March lows near $1,800.

In any case, my structural bias remains long on gold and the two levels above are good spots for buyers to make a stand. The $1,900 mark may yet give way considering the bond market sentiment, so I’d rather scale in on longs than to jump with both feet if and when we do get to that level first.

And if we do get a significant retracement back to $1,800, I can imagine buyers licking their lips to get in on the action as the long-term outlook is likely to favour gold as central banks move to the sidelines on tightening further.

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

The dollar is little changed in general so far today as the market mood has calmed down after the US CPI report yesterday. As mentioned earlier here, the data doesn’t really change the overall Fed outlook and so we’re back to the drawing board for most dollar pairs after the back and forth action yesterday.

EUR/USD is up 0.1% to 1.0991 but stuck in a 28 pips range so far today. Even USD/JPY is down by just 0.1% to 144.60 but holding within a 33 pips range on the day. That exemplifies the lack of appetite for the most part, even as equities are starting to look a little more nervous during the session.

There are two dollar charts that I’d keep an eye out for before the weekend though.

The first and most obvious being USD/JPY as it comes close to clipping key resistance at 145.00 again. Japanese officials have been less verbal to speak out against the recent rise in the pair, so perhaps that may give the green light for a further move higher – especially since bonds are puking hard.

The other one is AUD/USD as after the double-top near 0.6900, the pair is now finding itself hitting a bit of a double-bottom at the lows for the year at 0.6500. The latter remains a critical daily support level and a break below that will invigorate sellers to go searching for a potential drop towards 0.6200 next.

The timing couldn’t be any worse for the aussie as it comes against a backdrop of:

1. Risk sentiment looking rather poor as equities are seeing rallies sold into
2. China woes continue to deepen, even if Beijing is defending the yuan currency
3. RBA moving to the sidelines alongside the Fed, keeping rate differentials in favour of the US dollar

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

Things are starting to turn in the equities space now as the selling since the turn of the month continues to stay the course. The turnaround and late dip in Wall Street yesterday certainly did break a lot of the confidence after the US CPI report and we are seeing the nerves carry over to today now.

Tech stocks are leading the downside with Nasdaq futures now down 0.3% on the day. In turn, that is translating to further losses in Europe. Here’s a snapshot of the regional indices:

• Eurostoxx -1.0%
• Germany DAX -0.6%
• France CAC 40 -0.9%
• UK FTSE -0.9%

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