It is a bit of a head scratcher considering the more positive mood in equities so far today. The only thing I can point to is lower commodity prices in which we are seeing iron ore prices fall slightly after the recent rally. That said, I reckon traders engaging in shorts are also seeing the bounce this week as an opportunity to add to their position.

I mean, not withstanding, the same factors that have driven the aussie lower since the middle of last month are very much still holding true today as well. And if you consider China’s struggles and a worsening global economy, that’s no good reason to suddenly turn to bullish bets on the aussie – especially when rate differentials are in favour of the dollar as well.

For AUD/USD, buyers will need to climb back above 0.6500 to at least have some form of confidence back. Otherwise, sellers have a key area to lean on to keep the downside momentum going.

For now, sellers will look to try and retest the 100 and 200-hour moving averages at 0.6427-38 again to try and regain some near-term control while buyers will look to defend that in order to maintain some hope on the recent bounce.

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

This is not a good look as UK retail sales is seen falling in August at its quickest pace since March 2021. Adding to the misery is that retail stores continue to see a tough time in the month ahead, with the expectations reading still deeply negative at -21 (although an improvement to the -32 reading last month). The quarterly business situation balance also falls to its lowest this year at -14 now, down from +6 in May.

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

• Germany August flash services PMI 47.3 vs 51.5 expected
• France August flash services PMI 46.7 vs 47.5 expected
• Eurozone August flash services PMI 48.3 vs 50.5 expected
• UK August flash services PMI 48.7 vs 51.0 expected
• Bond yields slump as ECB rate hike bets ease after PMI data
• EUR/USD on the brink as PMI data weighs on the euro
• Sterling’s turn to feel the PMI heat
• Equities pare early gains, Nvidia earnings still the one to watch

Markets:

• JPY leads, GBP lags on the day
• European equities mixed; S&P 500 futures up 0.16%
• US 10-year yields down 6.9 bps to 4.258%
• Gold up 0.4% to $1,904.34
• WTI crude down 1.4% to $78.51
• Bitcoin up 0.3% to $25,926

It was all about the PMI data releases in Europe today and there were some nasty downside surprises to the German and UK readings.

That led to selling in both the euro and pound, while the dollar kept steadier alongside the yen as bond yields also sank on the session. The poor readings were largely from the services sector, highlighting that the European economies are struggling hard in the summer and joining the manufacturing sector in contracting.

Traders pared ECB rate hike bets for September to roughly 50% while toning down their hawkish expectations on the BOE rates peak further away from 6%.

EUR/USD was hovering around 1.0860 earlier on but fell to 1.0805 and is keeping just above the crucial 1.0800 level with the 200-day moving average at 1.0797 and large option expiries at the figure level today providing some layer of defense – for now at least.

GBP/USD was arguably the bigger loser, falling from 1.2750 earlier in the day all the way down to 1.2630 levels now and testing its 100-day moving average at 1.2635.

USD/JPY kept lower throughout, with the fall in bond yields helping things along. The pair was hovering around 145.60 earlier on but is now near the lows for the day around 145.25 currently.

In other markets, oil is also down over 1% on worries about a further economic slowdown globally. Meanwhile, equities were initially turning a blind eye to the PMI data but have now seen gains pared ahead of US trading, with all eyes on the Nvidia earnings to come. Is it a case of buy the rumour, sell the fact this week?

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

European indices have pared their earlier gains as US futures also pull back from the highs earlier. At first, it seemed like the awful PMI data in Europe would have no impact on equities but we are starting to see some nerves creep up again now. Here’s a snapshot of things:

• Eurostoxx -0.1%
• Germany DAX flat
• France CAC 40 -0.1%
• UK FTSE +0.6%
• S&P 500 futures +0.16%
• Nasdaq futures +0.14%
• Dow futures +0.15%

Only the UK FTSE is the outlier in the list above as it is benefitting from a softer pound, whereby we are seeing cable run down by 0.7% to test its 100-day moving average at 1.2635 currently.

Going back to equities, it’s going to be a tough battle today as the anticipation continues ahead of the Nvidia earnings – which will come after market close. It has arguably been the key driver helping to drive the dip buying this week and we shall see if buyers will be vindicated as such.

Otherwise, I fear that if tech stocks can’t carry their weight in the aftermath, it could lead to yet another rough week for equities after having already been offered strongly so far in August.

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

• Prior -0.8%
• Market index 184.8 vs 193.0 prior
• Purchase index 142.0 vs 149.5 prior
• Refinance index 397.1 vs 408.4 prior
• 30-year mortgage rate 7.31% vs 7.16% prior

The pain in the mortgage market continues as we see another 4% drop in applications in the past week. Both purchases and refinancing activity suffered greatly as the most popular US home loan rate surges to its highest since 2000. Other parts of the US economy may be resilient to the Fed’s rate hikes, but the housing market is certainly being hurt the most I would say.

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

Bitcoin
eventually fold as the big picture outlook is starting to look more and more
bleak with global growth endangered by the Chinese ailing economy and lack of
big stimulus from the authorities, and the “higher for longer” stance from the
Fed or even more rate hikes. The resilience in the cryptocurrency has been
remarkable in the past months, but we might be at a tipping point now.

Bitcoin Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Bitcoin fell
below the trendline support
where we had also the 50% Fibonacci retracement level
for confluence. The
price has eventually bounced on the strong support at 25231
but it’s starting to look more like a “dead-cat bounce” rather than a start of
another rally. The buyers, nonetheless, are likely to pile in here with a
defined risk below the level to target new highs.

Bitcoin Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can see that if we get a
bigger pullback, the most likely resistances will be the 38.2% Fibonacci
retracement level and the stronger 61.8% level where we have also the broken
trendline. More conservative sellers may want to just wait for the price to fall
below the 25231 support to pile in and ride the selloff into the 21509 level.

Bitcoin Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor resistance at 26300 where the price got rejected multiple times.
So now we have a range between the 25231 support and the 26300 resistance. A
break on either side should lead to a more sustained move.

Upcoming Events

This week is
pretty empty on the economic data side as we will only have the PMIs today and
the US Jobless Claims tomorrow. Strong data should support Bitcoin in the short
term, but the prospects of more rate hikes might weigh on the cryptocurrency
soon after. Conversely, weak data is likely to cause some recessionary fears in
the markets leading to negative risk sentiment and eventually weighing on
Bitcoin. Remember also that this is the Jackson Hole Symposium week, so we will
hear from many central bankers including Fed Chair Powell, who is set to speak
on Friday.

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

The drop in the euro today comes as traders are also pulling back on odds of a 25 bps rate hike by the ECB next month. That has been trimmed to ~51% now from around ~65% before the PMI data. In turn, this is all weighing on the euro with EUR/USD now nudging towards key technical support as outlined here earlier.

The 1.0800 mark and the 200-day moving average (blue line) at 1.0797 are the key levels to watch at the moment. Keep in mind as well that there are large option expiries at 1.0800 for the pair as seen here. So, there is some interest in keeping price action thereabouts for now.

But once the expiries roll off and we get to US trading, we could see sellers try to make a play I reckon. In any case, if the move comes before that, it will be a slippery slope for the euro.

There isn’t much support after on a firm break with the May low only coming in at 1.0635 next.

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

US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US economic data keeps on surprising to the
  upside, but inflation expectations and CPI readings continue to show
  disinflation with the last two Core CPI M/M figures
  coming in at 0.16%.
• At the moment, the market doesn’t expect another
  hike from the Fed, but the next NFP and CPI data will be crucial to confirm or
  change this view.

Japan:

• The BoJ kept everything unchanged as expected but implicitly tweaked
  the YCC policy keeping the target band unchanged but giving more flexibility
  with a hard cap at 1.00%.
• They basically widened the YCC band
  without stating it explicitly.
• This has created lots of volatility
  in the JPY, but eventually led to a fast depreciation.
• The BoJ has also already intervened
  twice to smooth the rise in yields ultimately weighing on the JPY.
• Last week, the Japanese CPI data surprised to the upside with
  the core-core reading reaching again the previous high.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that from the double bottom at the
138.00 handle created after the BoJ policy meeting, USDJPY just kept on rising
with just one notable pullback. The pair recently broke above the previous high
at the 145.00 handle, but it’s struggling to keep with its rally as the market
may be awaiting new catalysts. It’s also worth reminding that the 145.00-150.00
range is considered the “intervention territory” as the BoJ last year
intervened more than once around these levels.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4
hour chart, we can see that the price has been diverging with the
MACD for a
while and this is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, the 145.00 support will be
key to determine if we will get just a pullback or a reversal.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
now have a range between the 145.00 support and the 146.50 resistance. If the
price falls back to the support, we can expect the buyers to pile in with a
defined risk below the level and target new highs. The sellers, on the other
hand, will want to see the price breaking below the support to pile in and
extend the fall into new lows with the 142.00 handle being the first target.

Upcoming Events

This week is
pretty empty on the economic data side as we will only have the PMIs tomorrow
and the US Jobless Claims on Thursday. Given the strong appreciation in the US
Dollar seen in the past weeks, we can expect some USD weakness if the data
misses expectations, and we will likely need much stronger than expected
readings to see another sustained rally in the greenback. Remember also that
this is the Jackson Hole Symposium week, so we will hear from many central
bankers including Fed Chair Powell, who is set to speak on Friday.

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

• Dollar eases lower in European morning trade
• USD/JPY down on the day but keep a close eye on the bond market
• Yuan fallout still being somewhat contained by Beijing for now
• BOJ’s Ueda says did not discuss FX volatility in meeting with Kishida
• Eurozone June current account balance €35.8 billion vs €9.1 billion prior
• UK August CBI trends total orders -15 vs -9 prior
• Switzerland July trade balance CHF 3.13 billion vs CHF 4.82 billion prior

Markets:

• NZD leads, EUR lags on the day
• European equities higher; S&P 500 futures up 0.5%
• US 10-year yields down 2.6 bps to 4.316%
• Gold up 0.4% to $1,900.91
• WTI crude down 0.4% to $80.40
• Bitcoin down 0.3% to $26,034

It was a fairly mixed session as markets remain slightly on the quiet side in Europe once again today.

The dollar nudged slightly lower as equities sentiment picked up once again, with tech shares leading the way after yesterday’s solid start to the week. US futures were flattish early on but are now seen higher with S&P 500 futures up 0.5% and Nasdaq futures up 0.7%. European indices has some catching up to do to yesterday, and so are posting gains of roughly 1% across the board.

EUR/USD raced up to a high of 1.0930 but sellers are holding on the 100-day moving average at that key level, before falling back to 1.0885 now. USD/JPY is keeping lower at around 145.70 levels from around 146.00 earlier as slightly lower bond yields are also weighing.

The lower yields in long-term Treasuries today is making for a bit more of a mixed mood early on but just be mindful that the bond market tends to take on a life of its own in US trading.

Despite the yuan’s softness (even with efforts by China to defend the currency), the aussie and kiwi are able to brush that aside temporarily. AUD/USD is up 0.5% to 0.6445 and NZD/USD up 0.6% to 0.5960 on the day.

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

The flash estimates for the August PMI readings in the euro area will be due tomorrow. And another set of relatively poor data could yet prove to be a drag for the euro in the days/weeks to come. The manufacturing sector is already well in recession and a slowing services sector as well is threatening to cause stagnant growth in the region during Q3.

While the ECB is still largely focused on the inflation mandate, policymakers cannot ignore economic developments as well. That especially as the Eurozone looks to be staring at a credit crunch right in the face.

For now, traders are pricing in roughly 68% odds of a 25 bps rate hike by the ECB for next month. The data tomorrow will likely have some impact on that one way or another. But markets will also stay guarded ahead of Lagarde’s appearance in Jackson Hole and more importantly, the inflation numbers that will come next week.

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