• 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.

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.

New Zealand:

• The RBNZ 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 last 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.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after breaking
below the May low and extending to the downside some more, the NZDUSD started
to pull back into the broken level in what could end up being a classic “break
and retest” pattern. In fact, we can expect the sellers to pile in around the
0.5987 level with a defined risk above the level to target new lows with the
ultimate target standing at 0.5514.

NZDUSD 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, we are in fact seeing a pullback into the
resistance where we
can find the confluence with the
downward trendline and the
38.2% Fibonacci retracement level.

NZDUSD Technical Analysis –
1 hour Timeframe

On the
1 hour chart, we can see that the price is indeed rallying towards the 0.5987
resistance area where we are expecting the sellers to pile in strongly and
restart the downtrend. The buyers, on the other hand, will want to see the
price breaking above the resistance to have more conviction on the upside and
start targeting new highs with the 0.61 handle as the first target. More
conservative sellers may want to wait for the price to break below the
counter-trendline before joining the downtrend.

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.

• Prior -9

UK factory output drops at its fastest rate in nearly 3 years with the net balance of output for the three months to August coming in at -19 from +3 in July, marking the lowest reading since September 2020. As order books are also deteriorating, it’s a gloomy outlook to say the least for the manufacturing sector in the UK – much like the rest of Europe.

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

This is a similar view shared by Citi and Barclays as well quite a number of other analysts. Beijing already lacked in response to cutting the lending policy rates today but with mounting pressure on the economy and especially the property sector, further liquidity injections via RRR cuts would be much needed.

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

The
Nasdaq Composite selloff has been remarkable with key levels being breached
with no hesitation as the sentiment turned negative. The reason for the selloff
is unclear as the US data has been supporting the soft-landing narrative but
the sharp slowdown in the Chinese economy is expected to infect the other
advanced economies and drag the global economy down. Moreover, the quick rise
in long term Treasury yields is also tightening financial conditions with real
yields approaching the levels last seen during the Global Financial Crisis of
2008. It’s a tough environment for sure, so the technicals will be very helpful
in managing the risk.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite broke below the trendline and
extended the selloff into the key 13174 support. This is
where we can expect the buyers stepping in more strongly with a defined risk
below the level to target another rally to the high. The sellers, on the other
hand, will want to see the price breaking below the support to extend the
selloff into the 12274 level.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price is
indeed bouncing from the support at the moment and if see a bigger pullback,
the sellers are likely to step in near the broken trendline now turned
resistance, the 38.2% Fibonacci retracement level
and the red 21 moving average.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a strong minor trendline where the sellers have been leaning on to
position for more downside. We can expect them to do so again and we can see
that we have also the confluence with
the Fibonacci retracement levels and the previously mentioned moving average.
The buyers will need the price to break above the trendline to turn the bias
more bullish and get the conviction to target the high again.

Upcoming
Events

This week is
pretty empty on the data front with just the US PMIs scheduled for Wednesday
and the US Jobless Claims for Thursday. We seem to be at a point where good
news is bad news because of the Fed’s stance and bad news is bad news because
the slowdown in global growth will lead to a recession in many countries
included the US. Remember also that it’s the Jackson Hole Symposium week, so we
will get comments from Fed officials again and especially Fed Chair Powell who
is scheduled to speak on Friday.

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

There’s not much in terms of headlines driving the move but higher bond yields are certainly playing a part I would say. 10-year Treasury yields are still up 5 bps to 4.301% and that is underpinning yen pairs so far on the session. The near-term chart for USD/JPY is also seeing buyers seize back control now:

The pair bounced around its key hourly moving averages at the end of last week, with buyers holding a defense at the 145.00 mark as well. They are now regaining some momentum on a push back above the 100-hour moving average (red line), switching the near-term bias to being more bullish again.

But as is the case on Friday, any further break higher in the pair would also need approval from the bond market. For now, yields are threatening a break but we’re not there yet.

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

The rise
in US real yields coupled with a strong US Dollar is weighing a lot on Gold.
The precious metal can’t even find support from the economic data as we keep
getting strong releases that raise the risk of more rate hikes from the Fed.
All else being equal, Gold is likely to remain in a downtrend and new lows
should be expected.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Gold broke
below the June low at 1893 and this has opened the door for a fall into the
1805 swing level. The trend remains bearish as the price keeps printing lower
lows and lower highs and the moving averages are
crossed to the downside. We can expect the sellers to pile in at every
pullback.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that we keep diverging with the
MACD which is
a sign of weakening momentum often followed by pullbacks or reversals. In this
case, we keep getting pullbacks that are almost perfectly rejected by the red
21 moving average as the sellers keep piling in. The buyers will need the price
to break above the trendline to have
more conviction for a bigger pullback.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and how Gold trades perfectly within a falling
channel. A break below the recent low at 1885 should see the price falling
quickly into the lower bound of the channel where we might see another bounce
into the upper bound of the channel. As long as we stay within this channel the
sellers will remain in control.

Upcoming Events

This week is
pretty bare on the data front as we only have the US PMIs on Wednesday and the
US Jobless Claims on Thursday. The rise in Treasury yields and the US Dollar is
weighing a lot on Gold, so we will likely need to get bad data to see a bigger
pullback as good data should keep the precious metal on the backfoot. This is
also the Jackson Hole Symposium week so we will hear again from many Fed
officials with the Fed Chair Powell set to speak on Friday.

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

This continues from last week’s developments here:

• China reportedly told state banks to escalate yuan intervention this week

As concerns surrounding China’s economic prospects grow deeper, so is the pressure on the yuan currency. That continued today as well after the PBOC delivered a less-than-convincing rate cut. And as mentioned at the time last week, these stop-gap measures won’t really do. Where is the fiscal help, more importantly? Beijing has to dig deeper and fast.

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

UPCOMING EVENTS:

• Monday: PBoC LPR.
• Wednesday: NZ
  Retail Sales, AU/JP/EZ/GB/US PMIs, Canada Retail Sales.
• Thursday: US
  Jobless Claims.
• Friday: Fed
  Chair Powell speaks at the Jackson Hole Symposium (24-26 August).

Monday

The PBoC is expected to cut the LPR
rates by 15 bps as it did the last week with the MLF. The rate cuts follow
the promise of Chinese authorities to deliver more on the stimulus side to
propel its ailing economy. The markets didn’t react positively to rate cuts as
they probably want to see a stronger action.

Wednesday

New Zealand Retails Sales Q/Q is expected
at -2.6% vs. -1.4% prior, while Core Retail Sales Q/Q is seen at -2.5% vs.
-1.1% prior. Unless we see huge surprises, this data point is likely to be
disregarded by the RBNZ as it made clear that they are comfortable with the
current level of interest rate, and they are “ready to work through noisy data
in the near term”.

We will also see the Preliminary PMIs for
many advanced economies that are likely to lead the sentiment for the rest of
the day:

• Australia Manufacturing
  PMI 49.6 expected vs. 49.6 prior.
• Australia Services PMI
  47.9 expected vs. 47.9 prior.
• Japan Manufacturing PMI
  49.5 expected vs. 49.6 prior.
• Japan Services PMI no
  forecast vs. 53.8 prior.
• France Manufacturing PMI
  45.2 expected vs. 45.1 prior.
• France Services PMI 47.3 expected
  vs. 47.1 prior.
• Germany Manufacturing PMI
  38.6 expected vs. 38.8 prior.
• Germany Services PMI 51.5
  expected vs. 52.3 prior.
• Eurozone Manufacturing
  PMI 42.4 expected vs. 42.7 prior.
• Eurozone Services PMI 50.4
  expected vs. 50.9 prior.
• UK Manufacturing PMI 45.0
  expected vs. 45.3 prior.
• UK Services PMI 50.8
  expected vs. 51.5 prior.
• US Manufacturing PMI 49.4
  expected vs. 49.0 prior.
• US Services PMI 52.3
  expected vs. 52.3 prior.

The Canadian Retail Sales M/M is expected
at 0.0% vs. 0.2% prior, while the Core Retail Sales M/M is seen at 0.3% vs.
0.0% prior. Although another BoC rate hike in September is seen as a close
call, the recent surge in wage growth and higher than expected core
inflation data might be enough for them to proceed with another hike.

Thursday

Every Thursday is important because of one
key data point: the US Jobless Claims. The Fed and the Market are
particularly focused on the labour market data due to the fear that
continued tightness might lead to a wage price spiral (as it’s likely happening
in the UK) and it will be harder to bring inflation back to target sustainably.
Initial Claims are expected at 244K vs. 239K prior, while Continuing Claims are
seen at 1700K vs. 1716K.

Friday

Fed Chair Powell is scheduled to speak at
the Jackson Hole Symposium at 14:05 GMT. Given that the Fed will have
another month of key data points before the next meeting, it’s unlikely to see
Powell deviate from the recent comments and he should reaffirm once again their
data dependency and keep all the options on the table. Some say that Powell
is likely to be dovish because of the recent selloff in the stock and bond
markets, but he’s been trying for a year to see higher yields and lower equity
prices and now that the market might be finally doing the job for them, it
would be a bad strategy to say something.

This article was written by Giuseppe Dellamotta at www.forexlive.com.