It looked like the bond market rout was going to extend at some point yesterday but the bulls are putting up quite a bit of fight at the first key test. 10-year Treasury yields hit 4.30%, which is a critical juncture on the charts, and so far that level is holding.

In the context of the rise in yields since last week, this isn’t much but it is already undoing the moves higher on Wednesday and Thursday this week.

It is but the first test of the 4.30% mark, so I’d caution against early thinking that this is where the bond market turns around.

Economic concerns continue to linger, especially from China, but bond traders have braved past that for many days already now. I can’t quite see how all of a sudden it becomes the main issue for a turnaround in sentiment. Not least when there is still plenty of talk about the waves of supply in Treasuries, which quietly might be the driving factor behind the move higher in yields since last month.

In any case, this continues to be the place to watch as we approach the end of the week. So far, it hasn’t quite have much reverberations to broader markets though. The dollar is mostly steadier and keeping mixed/little changed while equities are still slumping regardless, with US futures down on the day and pinning European indices lower as well.

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

The Fed
is waiting for the totality of the data to be released before deciding what to
do at their September meeting. As of now, the data supports the soft-landing
narrative as the disinflation in the core measures
continues but the strength in the labour market and consumer spending might
keep inflation higher for longer. This is something that might translate into
more rate hikes or a “higher for longer-er” stance. Recently the long-term
Treasury yields have been rising non-stop and this has benefited the US Dollar
but the reason for such a rally is still unclear.

On the other hand, 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%. So, 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. Today, the Japanese CPI data surprised to the upside with
the core-core reading rising further.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY broke above the previous high at the 145.00 handle and the breakout
might point to a rally towards the 150.00 level. We recently retested the resistance turned support and what
happens next will decide if we go higher or lower as a fall back below the
145.00 handle should point to a deeper pullback. Note also that the
145.00-150.00 range is considered the “intervention territory” for the BoJ.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price
recently fell below the red 21 moving average which
was acting as a great dynamic support. Maybe it’s an early sign of reversal? If
the price falls below the 145.00 handle, the sellers should start to look
forward to it and take the price into the 142.00 handle. We can also notice
that we’ve been diverging with the
MACD and this
is generally a sign of weakening momentum often followed by pullbacks or
reversals.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has bounced near the 145.00 support and
it’s now approaching a strong short-term resistance around the 145.60 level
where we have the confluence with
the previous swing low level, the 38.2% Fibonacci
retracement level and the red 21 moving average. We
can expect the sellers piling in here with a defined risk above the resistance
and target the 142.00 handle. The buyers, on the other hand, will need the
price to break above the resistance to pile in and extend the rally towards new
highs.

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

The Fed
is waiting for the totality of the data to be released before deciding what to
do at their September meeting. As of now, the data supports the soft-landing
narrative as the disinflation in the core measures
continues but the strength in the labour market and consumer spending might
keep inflation higher for longer. This is something that might translate into
more rate hikes or a “higher for longer-er” stance. Recently the long-term
Treasury yields have been rising non-stop and this has benefited the US Dollar
but the reason for such a rally is still unclear.

The RBNZ, on the other hand, kept its official cash
rate unchanged while stating that it will remain at the restrictive level for
the foreseeable future to ensure that inflation comes down back to target. The
recent New Zealand inflation and employment data surprised to the upside but
the PMIs are in contraction with the Services PMI this week plunging into
contraction. The wage growth has also missed expectations and it’s something
that the central banks are watching closely for second round effects.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD just
keeps on falling with very shallow pullbacks. The breakout of the 0.5987 low
has also opened the door for a fall into the 2022 low at 0.5514. The pair
remains in a “sell on rallies” mode as the trend is clearly bearish with the
price printing lower lows and lower highs and the moving averages crossed
to the downside.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we’ve been diverging with the
MACD for a
while which is a sign of weakening momentum often followed by pullbacks or
reversals. In this case, if we get a pullback, there will be a strong resistance at the
previous support turned resistance where we
can also find the trendline and
38.2% Fibonacci retracement level.
This is where the sellers are likely to pile in with a defined risk above the
trendline and target the 0.5514 low.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a divergence even on this shorter timeframe as the pair becomes more and
more oversold. The resistance is highlighted by the blue zone and the buyers
will need to break above it and extend the rally past the trendline to have
more conviction for a return towards the highs.

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

The pair is now up 0.1% to 0.6430 and well off the earlier lows of 0.6365 today. It comes alongside a bounce in the Chinese yuan, after this particular headline here. The offshore yuan has strengthened from 7.34 to 7.30 against the dollar and that is helping with sentiment in the aussie. A steadier risk mood is also helping somewhat on the day with US futures keeping gains of roughly 0.2% currently.

Despite the bounce, the technicals are still not looking bright for AUD/USD. The pair has been on a losing streak over the past seven days and it just vindicates the poor August seasonality that we have been accustomed to.

There’s still no real turnaround in the downside momentum just yet and it will take more on the part of buyers to try and turn things around. The May low at 0.6458 and 100-hour moving average at 0.6465 are the points to watch in case buyers do make an attempt.

However, with the fundamental outline still not looking favourable, the path of least resistance should be lower for the aussie especially if bond yields are able to keep higher for the time being. That suggests that the bounce here should be faded, with the technical resistance levels above being better spots to build on shorts.

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

The US
economic data keeps on showing a resilient economy and as a consequence the
higher for longer stance becomes more and more certain which is making Treasury
yields to rally. This has been supporting the USD as we’ve been seeing a
divergence in the data with the other major economies. The recent Retail Sales data
showed also that consumer spending remains strong and it might either lead to
more inflation or keep inflation high for longer.

On the other hand, the BoE
hiked by 25 bps as expected as the UK CPI missed expectations across the board and UK employment report showed a mixed picture with both
the unemployment rate and wage growth higher. The central bank seems to be
leaning more on the less hawkish side as a key line in the statement was
tweaked to indicate the propensity for a “higher for longer” stance rather than
keeping with additional rate hikes. This week we got the employment report showing even more wage growth
despite the unemployment rate ticking higher again and the UK CPI beat expectations pointing to a stagflation.
The BoE will hike by another 25 bps in September but things are looking ugly
for the UK.

GBPUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can see that we have a
strong support zone
around the 1.2593 level where we have also the 38.2% Fibonacci retracement level.
In fact, we can see that the price has bounced twice from there which might end
up being a double bottom. The moving averages are crossed
to the downside and the bias remains bearish as the price continues to print
lower highs. If the support gives way, we are likely to see a fall into the
1.2310 swing low level.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have a
strong downward trendline that’s
been acting as a reliable resistance for the sellers. In fact, we can see that
after the initial spike after the UK CPI data, the sellers piled in again and
the price fell to the levels seen before the CPI release. The buyers will want
to see the price breaking above the trendline to have even more conviction on
the upside and target the 1.2847 resistance.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
might have a bullish flag
forming around the trendline. Today’s US Jobless Claims should give the
direction as a break to the upside is likely to lead to a rally into the 1.2847
resistance, while a break to the downside should trigger a selloff into the
1.26 handle.

Upcoming Events

Today we will see the latest US Jobless Claims. This
is a key report as the market is particularly focused on the labour market
data. A miss should weaken the USD in the short term as the market will have
another confirmation that the Fed may be done with rate hikes. On the other
hand, a beat should trigger another hawkish repricing and support the
greenback.

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

Well, it’s not like it had helped that much but the yuan did bounce back towards the closing stages of onshore trading today. That is helping with the mood in the aussie and kiwi a little with the former paring losses on the day against the dollar now.

Unless something changes from a fundamental perspective, Chinese authorities will have to do more in order to keep the pressure off the domestic currency. For now, it could help to stem the bleeding but where’s the fiscal aid? How are things supposed to turn around for the economy? How long can they keep burying all the issues and keep propping up the yuan and local stocks?

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

• Will keep liquidity reasonably ample
• Will keep yuan exchange rate basically stable
• Will fend off systemic financial risks
• Will keep prices basically stable
• Will adjust, optimise property policies in a timely manner

These are all very bland and generic stuff from the PBOC. They aren’t anything different than what we have heard before. In other words, they aren’t going to vary on their approach. And we all already know where this path leads towards.

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

The US
real yields keep on rising non-stop and given the inverse correlation with
Gold, we saw the precious metal falling non-stop as well. The economic data
continues to show a resilient economy even after the second most aggressive
tightening in history and this makes the market wonder if the Fed might need to
do more. Overall, there are more bearish drivers for Gold than bullish ones at
the moment, and we should keep seeing the downtrend continue unless the data
starts to point towards a recession.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Gold has
reached the 1893 low. This is where we can expect the buyers to step in with a
defined risk below the level to target a bounce into the 1934 resistance. If the
price breaks lower though, the sellers should pile in even more aggressively
and target the 1805 swing low level.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD for
quite a while now. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, if we see a bounce, the
pullback should end at the trendline where we
can expect the sellers piling in to target a break below the 1893 low. If the
price breaks higher though, it will confirm the reversal and the buyers should
extend the rally into the 1934 resistance.

Gold Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the setup with the trendline and the Fibonacci
retracement levels for confluence.
That’s the resistance area to watch as we either get a rejection or a breakout.

Upcoming Events

The only big event left for this week is
the US Jobless Claims report
today. Given that we are at a key support it looks like a clear setup. If we
get a big beat, Gold is likely to break lower and fall. On the other hand, if
we get a big miss, Gold should rally as treasury yields should fall after such
a big rally.

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

• Sterling holds post-CPI gains for now
• UK July CPI +6.8% vs +6.8% y/y expected
• China says will strengthen policy coordination in order to meet growth target
• How does the Fed pricing look now?
• S&P 500 set to be put to the test later today
• Eurozone Q2 GDP second estimate +0.3% vs +0.3% q/q prelim
• Eurozone June industrial production +0.5% vs -0.1% m/m expected
• US MBA mortgage applications w.e. 11 August -0.8% vs -3.1% prior

Markets:

• GBP leads, CHF lags on the day
• European equities mixed; S&P 500 futures flat
• US 10-year yields down 3.4 bps to 4.187%
• Gold up 0.1% to $1,903.77
• WTI crude up 0.3% to $81.24
• Bitcoin down 0.2% to $29,118

It was a bit of a mixed session as markets continue to digest the concerns surrounding China but for the most part, broader sentiment is ignoring it somewhat.

Equities were a little higher earlier on but surrendered the light gains to be little changed and more tentative on the day now. The worry here is that the selling in August might look set to continue, with yesterday’s drop being another lesson.

We did have UK inflation data, which saw the headline number fall as expected but the core reading remains relatively stubborn. With markets already fully pricing in a 25 bps move by the BOE next month, the pound saw little gains on the day as the dollar is also keeping more mixed.

GBP/USD did move up from around 1.2700 to 1.2760 before keeping at around 1.2740 now. In general, the dollar isn’t doing a whole lot as it holds a minor advance against the yen and franc but is just marginally lower against the euro and aussie.

In the bond market, we are seeing yields come off the boil and undoing the move up from yesterday. But it is still early days and unless there are broader concerns regarding China, yields still have some scope to turn around as we have seen in Wall Street previously. That said, we’ll see what the session ahead brings.

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

Like
Bitcoin, Ethereum continues to surprise in light of many headwinds that range
from economic issues in China and risks of higher rates if inflation remains
stubbornly high given the resilience in the labour markets and consumer
spending.

Ethereum Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Ethereum seems
to be bottoming out near the trendline where we
can find the confluence with the
50% Fibonacci retracement level
and the 1816 support. This is
where the buyers are stepping in with a defined risk below the trendline to
target a breakout of the 2029 resistance. If the price falls below the
trendline, we should see the sellers piling in more aggressively to target the
1681 support.

Ethereum Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can see that the price
action has been rangebound around the support area as the market is awaiting a
catalyst to push more strongly on either side. This gives us a clear setup as a
break above the 1880 resistance should lead to a rally into the 2029 high,
while a break below the trendline should trigger a selloff into the 1681
support.

Ethereum Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor downward trendline defining the current bearish trend. This is
another level for the buyers to watch out for as a break above it might take
the price into the 1880 level.

Upcoming Events

This week is a
bit empty on the data front and the most important release will be the US
Jobless Claims tomorrow. Readings in line with expectations should be the most
favourable scenario. In fact, in case we see a big beat, we may see more
hawkish expectations around interest rates that can weigh on Ethereum. On the
other hand, a big miss is likely to cause recessionary fears and lead to
risk-off sentiment which might cause a selloff in the cryptocurrency.

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