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.

• To strengthen coordination of various policies to boost growth
• To continue to expand policy room to bolster consumption, promote investment
• Will make greater efforts to attract and utilise foreign investment
• To fend off major risks

The cabinet meeting is said to be held amid mounting economic woes in the country. But it just appears to be a bit of a timely message I would say to try and comfort markets and the public. I mean, if you look at the Google trends image below, you can see that there is skyrocketing interest in the Chinese economy all of a sudden. And that isn’t a good thing.

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

• Prior -3.1%
• Market index 193.0 vs 194.5 prior
• Purchase index 149.5 vs 149.9 prior
• Refinance index 408.4 vs 416.1 prior
• 30-year mortgage rate 7.16% vs 7.09% prior

Mortgage applications continue to fall, this time largely due to a drop in refinancing activity. It’s not a good look for mortgage activity since the Fed began tightening monetary policy and even as we are near a pivot point, higher yields is not helping the overall outlook of the housing market for now.

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

US futures are now trading flattish again after a light advance earlier. There are lingering jitters from China and despite a retreat in bond yields today, it isn’t enough to really spur a push higher in stocks. That might be the tell for equities sentiment in general. However, we could use a technical test later today to confirm that.

The close yesterday saw the S&P 500 finish at its lowest level in five weeks. And now, we’re approaching the first technical test on the way down in the form of the trendline support from the March and late May lows. It’s a somewhat subjective line but in accordance to measuring the uptrend momentum, it might be an important one.

A fall below that would open the doors to potentially retreating back towards the late June low at 4,328 next. Then, we might start to see the 100-day moving average (red line) get called into question as well.

It’s a tough one for stocks at the moment I would say. There tends to be a turn in sentiment and selling when Wall Street comes in and that is regardless of what the bond market might do it would seem. But if bonds are more bid amid safety flows, then there is even more reason for equities to run and hide.

For now though, let’s see what the bond market will have to offer later in the day and if we are set for another turnaround again in US trading.

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

• Equities slump in the opening hour in Europe
• UK July payrolls change 97k vs -9k prior
• ICYMI: China with three rate cuts in one day to try and bolster the economy
• The bond market remains a key driver of broader sentiment at the moment
• Critical juncture for gold as higher yields continue to weigh
• Japan finance minister Suzuki says rapid FX moves are undesirable
• Russia’s central bank raises key interest rate from 8.5% to 12% in extraordinary meeting

Markets:

• EUR leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.5%
• US 10-year yields up 5.1 bps to 4.232%
• Gold down 0.3% to $1,901.09
• WTI crude down 1.0% to $81.69
• Bitcoin down 0.1% to $29,331

China was in the headlines once again, performing three rate cuts in one day to try and support the economy.

That didn’t do much to help the risk mood though, as the mood soured once again in the opening hour of European morning trade. Regional indices opened with a steadier hand but quickly took a dive as US futures also bled lower from flattish levels earlier in the day.

The retreat in stocks comes alongside a continued push higher in bond yields, this time around being helped the UK jobs report. The wages numbers continue to run hot and that is stoking more hawkish expectations for the BOE to keep acting but the labour market figures itself were not too convincing.

That saw UK gilt yields shoot higher with Treasury yields following. 10-year Treasury yields are now up to 4.23% – its highest levels since November last year.

At the balance, the pound did move a little higher with cable nudging up from 1.2680 to 1.2720 before sticking around 1.2700 now. A slightly mixed dollar isn’t really making things all too clear with EUR/USD itself up 0.3% to 1.0935 while AUD/USD is down 0.2% to 0.6470 from around 0.6500 earlier in the day.

If anything else, I’d continue watching the bond market for clues as we now turn the attention to the US retail sales data later.

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