Even prior to the focus in the past few sessions on Pelosi’s visit to Taiwan, the break lower in USD/JPY and Treasury yields was already taking shape since last week. The fact that markets are feeling apprehensive amid US-China tensions is also adding to the gravitational pull on both fronts.

I’ve put up these charts many a time since the Fed meeting and I’ll put them up again here as a reminder that we are seeing a shift in market sentiment after months of driving on the other side of the street. USD/JPY has been on a tear since March in a rally from 115.00 all the way towards 139.00 last month. But the break lower in the past few days is rather significant:

The pair is on course for a fifth consecutive daily decline, its first since the end of last year and has taken out some notable support levels on the way to targeting its 100-day moving average (red line) at 130.21 currently.

The subtle shift by the Fed last week is a key driver but that has also translated to a material move in the bond market. 10-year Treasury yields has fallen to its lowest in almost four months and has taken out its 100-day moving average (red line) as well as neckline support (white line) and the swing lows near 2.70%:

I can’t stress how big of a technical break that is but the fact that yields are continuing to freefall is a testament to the momentum in play at the moment.

Despite all the focus on US-China tensions today, central banks are still the main driver of markets for now and the RBA’s subtle shift today is also symbolic in the sense that it marks the next chapter in the tightening cycle. The BOE is up next on Thursday and then the focus will shift back towards the Fed outlook with US non-farm payrolls on Friday.

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

Equities are keeping lower on the day while bonds are firmer as market participants are feeling anxious amid US-China tensions. All eyes are on US House speaker, Nancy Pelosi’s visit to Taiwan with the jet believed to be carrying her delegation is seemingly en route to Taipei now.

China warned of potential military actions in response but I reckon markets will breathe a small sigh of relief just to know that Pelosi did arrive safely. I mean there are murmurs of flight safety concerns and while it isn’t something nice to say out loud, it is surely in the back of people’s minds just in case.

That said, expect China to retaliate in some other form or way to this event. The magnitude of said response is going to set the tone for markets in the sessions ahead. I want to say that the trade would be to buy value, sell hysteria i.e. fade the fear but we will see.

European indices are mostly down 0.4% to 0.7% currently with S&P 500 futures down 27 points, or 0.7%, on the day. Elsewhere, Treasury yields are still looking heavy with 10-year yields continuing its recent technical break lower:

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

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

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

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

This article was written by ForexLive at www.forexlive.com.

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

Old school technical analysis says that price itself is the most inportant technical indicator. Some claim that the most important part of technical analysis lies in the price itself, as it travels through time.

ETH, in terms of technical analysis, is also a potential bear flag. Bear flags extend/continue a downward trend. The bear flag pattern has a powerful downward move followed by an upward consolidation channel. Furthermore, even if we do not have a bear channel, ETHUSD seems to be in a channel, after creating the recent touch point at its upper band. This supports that previously profitable Longs may take partial or full profit, and new bears will open new short positions.

The Ethereum technical analysis video shows the 14 day RSI (relative strength indicator) along with its simple moving average and we look for an upcoming crossover that seems to be imminent despite not confirmed yet. The RSI presents historical market strength and weakness. And is used by many traders as a popular technical indicator on charts to identify price momentum changes

A trade idea is provided for your consideration, for shorting ETH with a healthy stop above $1800, and 2 profit taking targets with a reward vs risk of 1.5, and a second that is much higher. See the Ethereum technical analysis video below for more.

On a weekly timeframe, ETHUSD may also be showing a pattern of Head and Shoulders pattern. On a technical analysis chart, the Head and Shoulders formation happens when a market trend is about to change, either from a bullish to a bearish trend. If that Head and Shoulders pattern plays out, many times, traders look for the price to reach a low that completes a measured move from the top of the head, with the middle of the measured move being the neckline. That would take ETH to apx $600, as shown in the chart below.

ETHUSD weekly chart with head and shoulders formationHowever, if ETHUSD goes above $1816, the bull case is over, the head and shoulders pattern has failed or was mistakenly formed in the first place. In any case, it would be time for realizing that the bulls have regained control. A trade idea must always include a stop.

If and when the technical analysis with Ethereum plays out, one could also decide to play a parallel trade idea with Bitcoin or most other cryptocurrencies, especially the ones perceived as being relatively weaker according to your own research. Trade ETHUSD or any other crypto at your own risk only.

Visit ForexLive for additional technical analysis ideas and perspectives.

This article was written by ForexLive at www.forexlive.com.

Official PMIs come from the China National Bureau of Statistics and the China Federation of Logistics and Purchasing.

For July:

Manufacturing 49.0, its lowest in 3 months and back into contraction

• expected 50.3 and prior 50.2
• China’s NBS attributes the result, according to statements reported in State media (Xinhua), to traditional production off-peak period, insufficient market demand, and the weakened performances of energy-intensive industries.

Non-manufacturing 53.8

• expected 53.9, prior 54.7

The ‚Composite‘ of the two hit 52.5, down from June’s54.1.

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This is not the first time recently we’ve heard of „insufficient demand“ as a reason for the poor performance of the country’s economic indicators. Ongoing outbreaks and associated restrictions have played, and continue to play, a role in this.

On a brighter note the non-manufacturing PMI indicator (this shows the performance of services and construction sectors), while down from June, recorded a solid expansion.

At the margin these numbers are a negative input to China-proxy trades such as AUD.

China’s zero COVID policy is making it difficult for the country to exit 2020! Low inflation rates in the country do allow fiscal and monetary authorities to pump in economic stimulus though.

This article was written by Eamonn Sheridan at www.forexlive.com.

Biden appeared to emerge from a mild case of covid last week after a round of Paxlovid treatment but the virus returned today.

There was a time when the President getting covid was market-moving news but those days are long gone.

This article was written by Adam Button at www.forexlive.com.