<p style=““ class=“text-align-justify“>Despite the narrow range on the day, there is a lot to digest when it comes to looking at the EUR/USD chart at the moment. The most glaring detail is the break back below 1.0100 after the breakout above the range of 1.0100 to 1.0283 failed at the 61.8 Fib retracement level at 1.0361 highlighted earlier in the week <a target=“_blank“ href=“https://www.forexlive.com/news/eurusd-lower-on-firmer-dollar-failed-breakout-bodes-ill-for-the-euro-20220816/“ target=“_blank“>here</a>.</p><p style=““ class=“text-align-justify“>With the dollar seen firmer across the board and also making headway against the likes of the yen and pound, there is a strong argument for EUR/USD to head back towards parity in the sessions ahead.</p><p style=““ class=“text-align-justify“>So far, there is a lack of appetite for a strong move today but we’ll see if there is any major extension to follow once US traders come into the fray. It will be important to see how price action develops from here as I fear another retest of parity will not be one where the euro fares too well this time around.</p><p style=““ class=“text-align-justify“>The outlook for the euro area remains bleak as recession risks are on the rise and today’s record rise in German producer prices exemplifies the nature of which surging prices is taking a toll on the region. As much as euro area governments are playing down the risks, soarin energy prices ahead of winter is going to lead to a dark period for businesses and consumers.</p>

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

<p style=““ class=“text-align-justify“>European indices are deepening losses across the board with US futures also slumping more heavily now on the day. S&P 500 futures are down 35 points, or 0.8%, as the drop extends:</p><p style=““ class=“text-align-justify“>Meanwhile, the DAX is down 0.9%, Eurostoxx down 0.9%, and CAC 40 down 0.7% currently. Regional indices aren’t able to take much comfort after having seen German producer prices post a record increase in July <a target=“_blank“ href=“https://www.forexlive.com/news/germany-july-ppi-53-vs-06-mm-expected-20220819/“ target=“_blank“>here</a>.</p><p style=““ class=“text-align-justify“>But a firmer dollar and higher yields are also weighing on sentiment, but one can also argue that it is all tied together. Looking at US equities in particular, the rejection of the S&P 500 at the 200-day moving average seems to be the momentum breaker this week.</p>

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

<p style=““ class=“text-align-justify“>The push and pull feel in broader markets pretty much is the story so far today, as traders and investors lack any real conviction after not getting any sparks from the US retail sales and FOMC meeting minutes yesterday.</p><p style=““ class=“text-align-justify“>European stocks were little changed early on before slipping a little but are now trading higher as US futures also climb a little. The DAX is up 0.9% and the news from Germany <a target=“_blank“ href=“https://www.forexlive.com/news/germany-plans-to-lower-sales-tax-on-gas-to-7-20220818/“ target=“_blank“>here</a> is very much welcome for consumers. Elsewhere, the Eurostoxx is up 0.4% and CAC 40 up 0.5% on the day currently.</p><p style=““ class=“text-align-justify“>This comes as US futures also tick a little higher, with S&P 500 futures up 6 points now, or 0.15%, after having been down by 18 points earlier in the session. This is keeping major currencies on their toes as well with AUD/USD recovering from 0.6900 to 0.6950 and GBP/USD paring a decline from 1.1995 to 1.2055 at the moment as the dollar gives some back.</p><p style=““ class=“text-align-justify“>But looking ahead, Wall Street will have a challenge up their sleeves with the 200-day moving average a key focus for the S&P 500:</p>

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

<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/still-no-spark-yet-for-treasuries-this-week-20220818/“>Still no spark yet for Treasuries this week</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/dollar-gains-ease-up-amid-some-pushing-and-pulling-20220818/“>Dollar gains ease up amid some pushing and pulling</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/eurozone-july-final-cpi-89-vs-89-yy-prelim-20220818/“>Eurozone July final CPI +8.9% vs +8.9% y/y prelim</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/germany-plans-to-lower-sales-tax-on-gas-to-7-20220818/“>Germany plans to lower sales tax on gas to 7%</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-schnabel-the-outlook-for-the-ecb-has-not-changed-20220818/“>ECB’s Schnabel: The outlook for the ECB has not changed</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/boe-to-aim-for-unwinding-full-stock-of-bond-purchases-at-the-end-of-2023-or-early-2024-20220818/“>BOE to aim for unwinding full stock of bond purchases at the end of 2023 or early 2024</a></li></ul><p>Markets:</p><ul><li>AUD leads, EUR lags on the day</li><li>European equities higher; S&P 500 futures up 0.2%</li><li>US 10-year yields down 3 bps to 2.865%</li><li>Gold up 0.6% to $1,770.83</li><li>WTI crude up 1.2% to $89.20</li></ul><p style=““ class=“text-align-justify“>It was a quiet session that featured some indecisiveness among traders and investors, after having failed to gather any real conviction following the US retail sales and FOMC meeting minutes from yesterday.</p><p style=““ class=“text-align-justify“>The dollar firmed slightly early on while equities were a touch more defensive but now we’re seeing things run back the other way ahead of North America trading instead.</p><p style=““ class=“text-align-justify“>There weren’t any majro catalysts for the moves as broader markets are still finding it tough to settle on a firm narrative, with Treasuries also not really signaling at a change in the outlook over the past two weeks.</p><p style=““ class=“text-align-justify“>EUR/USD fell from 1.0170 to 1.0147 but remains caught in a host of large expiries around current spot levels today. GBP/USD took a bit of a drop from 1.2050 to 1.1995 before moving back up to 1.2050-60 levels now. Meanwhile, USD/JPY slipped from 135.40 to 134.80 after the attempt to keep above 135.00 looks to be exhausted amid a lack of poise in bond yields.</p><p style=““ class=“text-align-justify“>The aussie and kiwi also saw notable turnarounds against the dollar with AUD/USD dropping from 0.6940 to 0.6900 before climbing back up to 0.6970. That said, price is still keeping below 0.7000 and that is keeping sellers in control for the most part.</p><p style=““ class=“text-align-justify“>The switch came as equities turned a more sluggish session into one which is lightly more positive but even as US futures are pointing higher, the retreat yesterday is a note of caution with the S&P 500 having backed away from a test of its 200-day moving average. That will be a key level to watch in case dip buyers do try and step in towards the end of the week.</p>

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

<p style=““ class=“text-align-justify“>This is being announced by German chancellor, Olaf Scholz, as the government is trying to reduce the burden for consumers. For some context, the tax otherwise would be 19% and the government is hoping that companies will pass on the VAT cut in full to consumers as such.</p><p style=““ class=“text-align-justify“>The move above comes after Brussels rejected Germany’s request for an exemption on its new gas price levy – which was proposed as a measure by the German government in order to help Uniper and other gas importers cope with soaring prices due to reduced Russian export flows.</p>

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

<ul><li>Corporate bond auctions will commence from the week starting 19 September</li><li style=““ class=“text-align-justify“>Only bonds that mature on or after 6 April 2024 will be eligible for sale via the first instance</li><li style=““ class=“text-align-justify“>Nominal value of bonds eligible for sale via auctions is currently £13 billion</li><li style=““ class=“text-align-justify“>The pace of auction sales will be gradual and responsive to prevailing market conditions</li></ul><p style=““ class=“text-align-justify“>Some added details are that the auctions will typically be held twice a week, on Tuesday and Wednesday from 1100 to 1130 London time. And the average pace of sales during the auctions should be around £200 million per week.</p>

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

<ul><li>Core CPI +4.0% vs +4.0% y/y prelim</li></ul><p style=““ class=“text-align-justify“>No change to the initial estimates as euro area inflation continues to surge higher. That continues to make it a tough balancing act for the ECB.</p>

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

<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/uk-july-cpi-101-vs-98-yy-expected-20220817/“>UK July CPI +10.1% vs +9.8% y/y expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/sterling-does-the-rise-and-fall-as-uk-inflation-hits-40-year-high-20220817/“>Sterling does the rise and fall as UK inflation hits 40-year high</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/the-surge-in-uk-yields-is-rippling-across-global-bonds-20220817/“>The surge in UK yields is rippling across global bonds</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/kiwi-fails-to-find-comfort-from-hawkish-rbnz-20220817/“>Kiwi fails to find comfort from hawkish RBNZ</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/eurozone-q2-gdp-second-estimate-06-vs-07-qq-prelim-20220817/“>Eurozone Q2 GDP second estimate +0.6% vs +0.7% q/q prelim</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/us-mba-mortgage-applications-we-12-august-23-vs-02-prior-20220817/“>US MBA mortgage applications w.e. 12 August -2.3% vs +0.2% prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/musk-clarifies-tweet-about-man-utd-bid-says-he-is-not-buying-any-sports-teams-20220817/“>Musk clarifies tweet about Man Utd bid, says he is not buying any sports teams</a></li></ul><p>Markets:</p><ul><li>USD leads, AUD lags on the day</li><li>European equities lower; S&P 500 futures down 0.9%</li><li>US 10-year yields up 6 bps to 2.885%</li><li>Gold down 0.4% to $1,768.73</li><li>WTI crude down 0.2% to $86.33</li><li>Bitcoin down 0.9% to $23,754</li></ul><p style=““ class=“text-align-justify“>The day began with some shenanigans involving Elon Musk as he joked about buying Manchester United. It was some entertainment to kick start proceedings before markets quickly focused on the double-digit UK inflation print, the highest in 40 years.</p><p style=““ class=“text-align-justify“>The pound got a knee-jerk push higher only to fall back almost immediately, as traders reassess the dire outlook to the UK consumer. GBP/USD moved up from 1.2110 to 1.2140 before falling back now to fresh lows of 1.2060 as the dollar is seen firming across the board.</p><p style=““ class=“text-align-justify“>The UK inflation data kicked off a heavy round of selling in the bond market with UK yields surging and that spilled over to Europe and the US as well. 10-year Treasury yields are now knocking on the door of its 100-day moving average near 2.89% and that is underpinning USD/JPY to move up just above 135.00 on the day.</p><p style=““ class=“text-align-justify“>Higher yields seems to also be taking a toll on equities with US futures marked lower, after also having seen the S&P 500 test its 200-day moving average in trading yesterday. S&P 500 futures are down 0.9% and that is reflecting a more risk-off mood where the dollar is gaining all across the board.</p><p style=““ class=“text-align-justify“>USD/CAD is back up by 0.5% to above 1.2900 while AUD/USD is down over 1.3% to 0.6930 and NZD/USD down 0.9% to 0.6285, with the kiwi failing to even find any comfort from a more hawkish RBNZ earlier in the day.</p><p style=““ class=“text-align-justify“>It is now over to US retail sales and the FOMC meeting minutes to decide the next steps on the day.</p>

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

<p style=““ class=“text-align-justify“>The firm says that UK inflation is expected to accelerate further in the months ahead unless the government steps in with fresh measures to lower prices, noting that:</p><p style=““ class=“text-align-justify“>“In our view, the composition reaffirms the risk of more sustained domestic inflation. In the absence of offsetting support, we expect CPI inflation to accelerate to over 15% in Q1-23.“</p><p style=““ class=“text-align-justify“>They previously forecast UK inflation to peak at just below 12%, so this is a revision higher to that. Meanwhile, Citi has also revised up its expectations for BOE rate hikes, forecasting that the central bank would hike by another 125 bps to 3.00% by the end of this year – as opposed to their previous forecast of a 50 bps rate hike for the remainder of 2022.</p>

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

<p style=““ class=“text-align-justify“>Equities are looking more subdued on the day and that seems to be weighing on commodity currencies, particularly the antipodeans. <a target=“_blank“ href=“https://www.forexlive.com/news/kiwi-fails-to-find-comfort-from-hawkish-rbnz-20220817/“ target=“_blank“>The kiwi couldn’t even find much comfort</a> from a more hawkish RBNZ with NZD/USD now down 0.8% to 0.6295 on the day.</p><p style=““ class=“text-align-justify“>Perhaps a plunge in commodity prices (iron ore being one of that) is also to blame but the negative risk sentiment on the day sure isn’t helping. US futures are trading at the lows now, with S&P 500 futures down 31 points, or 0.7%, at the moment. Nasdaq futures are down 0.8% and Dow futures down 0.6%, while European indices shrugged off the light gains earlier to keep lower.</p><p style=““ class=“text-align-justify“>For the S&P 500, the retreat in futures could be in part a technical play as the cash market reached a critical juncture in trading yesterday. Of note, we saw buyers run up to test the 200-day moving average (blue line):</p><p style=““ class=“text-align-justify“>I’ve mentioned since the start of the week that there was some scope for gains in equities up until the key resistance point and now here we are. The question now is, can buyers turn things around and pull towards a retest of the key level? Or will we see a rejection and the start of a renewed downtrend as recession worries start to dominate broader markets?</p><p style=““ class=“text-align-justify“>I reckon we might also have to take a cue from the bond market and so far, there isn’t much firm direction just yet. So, let’s see if the US retail sales data and FOMC meeting minutes later today could provide any catalysts for a more meaningful move. If not, this could be where the latest rebound in equities perhaps look to take a pause.</p>

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