• 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.

• All eyes on the US CPI report later today
• Dollar loses some ground to start European morning trade
• Stocks remain hopeful ahead of US CPI report
• A quick glance at the Fed funds futures curve before the main event today
• Italy July final CPI +5.9% vs +6.0% y/y prelim

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.5%
• US 10-year yields down 0.4 bps to 4.003%
• Gold up 0.3% to $1,921.01
• WTI crude down 0.5% to $84.00
• Bitcoin flat at $29,481

It was once again another quiet session in Europe, with a lack of key economic data releases not really helping the mood.

Markets are gearing towards the US CPI report later today, so there wasn’t really much to work with in European morning trade.

The dollar sagged during the session but the losses weren’t anything too substantial, while risk trades are holding some hopeful optimism ahead of the inflation numbers later.

EUR/USD moved up from 1.0990 to 1.1030 while USD/JPY slipped from 144.10 to 143.70 levels during the session. As stocks are keeping higher on the day – at least for now – the commodity currencies are also holding higher. AUD/USD is up 0.6% to 0.6560 levels currently, though the coast isn’t clear yet after the test of 0.6500 this week.

After the dip buying in Wall Street fumbled late yesterday, stocks are keeping higher so far today. That said, we’ll see if the US CPI report will validate that sentiment later on.

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

Essentially, not much has changed since the FOMC meeting last month. The Friday jobs report last week has only served to validate prevailing market sentiment and traders didn’t see much need to budge from the pricing after the Fed.

Considering that inflation data is the all the rage these days, there might be more of a reaction in Fed pricing today than we would have liked to see with the non-farm payrolls at the end of last week. But given that traders are not pricing in any more Fed rate hikes for the year (and some odds of a rate cut as early as March next year), there might not be much need to alter that outlook if the inflation data does fall within estimates i.e. still showing a gradually declining trend.

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

Here’s a snapshot of things so far today:

• Eurostoxx +0.8%
• Germany DAX +0.4%
• France CAC 40 +0.8%
• UK FTSE -0.1%
• S&P 500 futures +0.6%
• Nasdaq futures +0.7%
• Dow futures +0.5%

It’s a solid rebound after dip buyers were dealt a blow late yesterday in US trading. The question now though is, can this carry on until the end of the day? A lesson to be heeded was that things also started brightly in European morning trade yesterday for stocks.

And this time around, there’s also the curveball from the US CPI report coming up later. The bulls will be hoping for that to carry the early optimism shown today. But as mentioned here, the risks aren’t all that balanced right now after the stuttering start to August trading for equities.

I would reserve caution on risk sentiment, especially if the inflation numbers later come in higher than estimated.

And in the bigger picture outlook, how will the latest run higher in oil prices factor in to the inflation equation? And what if oil prices continue to rise further amid tighter market conditions? There’s certainly a lot to ponder and surely it isn’t going to be a straightforward declining trend in inflation until next year. That would be too easy for central banks.

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

• Which comes first? Low inflation or the economy breaking?

And as the Fed prepares to move to the sidelines, this question now involves how markets view the central bank outlook and if rates are sufficiently restrictive enough to bring inflation back towards the 2% target.

For the time being, traders are not pricing in any more Fed rate hikes and markets have more or less hinted that they can take in the prospects of a soft landing. And with each passing data point that validates such sentiment, it will give more confidence for risk trades and dollar bears to fan the flames.

The risk to this now is what happens when things don’t turn out according to the plan? Now, that’s the more interesting part and at least for the time being, there are no guarantees. We can only wait and see what the inflation numbers today will have to offer to this later.

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

• Prior +6.4%
• HICP +6.3% vs +6.4% y/y prelim
• Prior +6.7%

Just a slight change to the initial estimates but Italian inflation is seen cooling a little more going into the summer. That’s some relative comfort for the ECB but these figures are still way too high.

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

Ethereum,
like its big brother Bitcoin, continues to surprise as it remains resilient to
many headwinds. Yesterday we saw a big rally after some banking woes, which
resembled the bullish reaction following the regional banking crisis seen in
March. Looks like the cryptocurrencies like Bitcoin and Ethereum are the go-to
assets in case we see more troubles in the banking sector. The price action
remains choppy amid many drivers lately, so the technicals are the only way to
play it.

Ethereum Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Ethereum fell
all the way down to the 1816 support where we
had also the 50% Fibonacci retracement level.
The buyers stepped in, and we saw a nice bounce. The momentum is slowly
starting to favour the bulls although they will still have some key levels to
take out before getting back to the highs.

Ethereum Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can see that yesterday we
got a breakout of the trendline that was
keeping the buyers at bay and we saw a quick spike into the 1880 swing high.
That will be the level to break for the buyers if they want to confirm the
breakout and rally towards the highs. If the price falls back below the
trendline, it might turn into a fakeout and we could see a selloff back into
the 1816 support.

Ethereum Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see more
closely the key levels to watch for the buyers and sellers. The swing high at
1880 for the buyers and the trendline for the sellers.

Upcoming Events

This week the
main events will be the US CPI and Jobless Claims reports tomorrow. For the US
CPI, the market is likely to focus more on the Core readings as this is what
the Fed is more interested in. Higher than expected data may lead to a risk off
sentiment as the market should start to price in a more hawkish Fed and it
might weigh on Ethereum as well. On the other hand, lower than expected
readings may lead to a risk on sentiment due to the soft-landing narrative and
no more rate hikes and support the cryptocurrency. At the same time of the US
CPI data, we will also see the latest US Jobless Claims report, which might
have an even bigger effect if the data shows a big surprise. In fact, a miss
may cause recessionary fears and lead to a selloff in Ethereum, while a beat
may be taken as bad news because the Fed may keep on hiking.

This article was written by FL Contributors at www.forexlive.com.