• All eyes on the US CPI report later today
• Dollar loses some ground to start European morning trade
• Stocks remain hopeful ahead of US CPI report
• A quick glance at the Fed funds futures curve before the main event today
• Italy July final CPI +5.9% vs +6.0% y/y prelim

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.5%
• US 10-year yields down 0.4 bps to 4.003%
• Gold up 0.3% to $1,921.01
• WTI crude down 0.5% to $84.00
• Bitcoin flat at $29,481

It was once again another quiet session in Europe, with a lack of key economic data releases not really helping the mood.

Markets are gearing towards the US CPI report later today, so there wasn’t really much to work with in European morning trade.

The dollar sagged during the session but the losses weren’t anything too substantial, while risk trades are holding some hopeful optimism ahead of the inflation numbers later.

EUR/USD moved up from 1.0990 to 1.1030 while USD/JPY slipped from 144.10 to 143.70 levels during the session. As stocks are keeping higher on the day – at least for now – the commodity currencies are also holding higher. AUD/USD is up 0.6% to 0.6560 levels currently, though the coast isn’t clear yet after the test of 0.6500 this week.

After the dip buying in Wall Street fumbled late yesterday, stocks are keeping higher so far today. That said, we’ll see if the US CPI report will validate that sentiment later on.

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

Essentially, not much has changed since the FOMC meeting last month. The Friday jobs report last week has only served to validate prevailing market sentiment and traders didn’t see much need to budge from the pricing after the Fed.

Considering that inflation data is the all the rage these days, there might be more of a reaction in Fed pricing today than we would have liked to see with the non-farm payrolls at the end of last week. But given that traders are not pricing in any more Fed rate hikes for the year (and some odds of a rate cut as early as March next year), there might not be much need to alter that outlook if the inflation data does fall within estimates i.e. still showing a gradually declining trend.

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

Here’s a snapshot of things so far today:

• Eurostoxx +0.8%
• Germany DAX +0.4%
• France CAC 40 +0.8%
• UK FTSE -0.1%
• S&P 500 futures +0.6%
• Nasdaq futures +0.7%
• Dow futures +0.5%

It’s a solid rebound after dip buyers were dealt a blow late yesterday in US trading. The question now though is, can this carry on until the end of the day? A lesson to be heeded was that things also started brightly in European morning trade yesterday for stocks.

And this time around, there’s also the curveball from the US CPI report coming up later. The bulls will be hoping for that to carry the early optimism shown today. But as mentioned here, the risks aren’t all that balanced right now after the stuttering start to August trading for equities.

I would reserve caution on risk sentiment, especially if the inflation numbers later come in higher than estimated.

And in the bigger picture outlook, how will the latest run higher in oil prices factor in to the inflation equation? And what if oil prices continue to rise further amid tighter market conditions? There’s certainly a lot to ponder and surely it isn’t going to be a straightforward declining trend in inflation until next year. That would be too easy for central banks.

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

• Which comes first? Low inflation or the economy breaking?

And as the Fed prepares to move to the sidelines, this question now involves how markets view the central bank outlook and if rates are sufficiently restrictive enough to bring inflation back towards the 2% target.

For the time being, traders are not pricing in any more Fed rate hikes and markets have more or less hinted that they can take in the prospects of a soft landing. And with each passing data point that validates such sentiment, it will give more confidence for risk trades and dollar bears to fan the flames.

The risk to this now is what happens when things don’t turn out according to the plan? Now, that’s the more interesting part and at least for the time being, there are no guarantees. We can only wait and see what the inflation numbers today will have to offer to this later.

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

• Prior +6.4%
• HICP +6.3% vs +6.4% y/y prelim
• Prior +6.7%

Just a slight change to the initial estimates but Italian inflation is seen cooling a little more going into the summer. That’s some relative comfort for the ECB but these figures are still way too high.

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

Ethereum,
like its big brother Bitcoin, continues to surprise as it remains resilient to
many headwinds. Yesterday we saw a big rally after some banking woes, which
resembled the bullish reaction following the regional banking crisis seen in
March. Looks like the cryptocurrencies like Bitcoin and Ethereum are the go-to
assets in case we see more troubles in the banking sector. The price action
remains choppy amid many drivers lately, so the technicals are the only way to
play it.

Ethereum Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Ethereum fell
all the way down to the 1816 support where we
had also the 50% Fibonacci retracement level.
The buyers stepped in, and we saw a nice bounce. The momentum is slowly
starting to favour the bulls although they will still have some key levels to
take out before getting back to the highs.

Ethereum Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can see that yesterday we
got a breakout of the trendline that was
keeping the buyers at bay and we saw a quick spike into the 1880 swing high.
That will be the level to break for the buyers if they want to confirm the
breakout and rally towards the highs. If the price falls back below the
trendline, it might turn into a fakeout and we could see a selloff back into
the 1816 support.

Ethereum Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see more
closely the key levels to watch for the buyers and sellers. The swing high at
1880 for the buyers and the trendline for the sellers.

Upcoming Events

This week the
main events will be the US CPI and Jobless Claims reports tomorrow. For the US
CPI, the market is likely to focus more on the Core readings as this is what
the Fed is more interested in. Higher than expected data may lead to a risk off
sentiment as the market should start to price in a more hawkish Fed and it
might weigh on Ethereum as well. On the other hand, lower than expected
readings may lead to a risk on sentiment due to the soft-landing narrative and
no more rate hikes and support the cryptocurrency. At the same time of the US
CPI data, we will also see the latest US Jobless Claims report, which might
have an even bigger effect if the data shows a big surprise. In fact, a miss
may cause recessionary fears and lead to a selloff in Ethereum, while a beat
may be taken as bad news because the Fed may keep on hiking.

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

• WTI crude climbs to highest levels for the year as oil continues to impress
• Equities continue to hold steady so far on the day
• US MBA mortgage applications w.e. 4 August -3.1% vs -3.0% prior
• White House reportedly to detail plans restricting some US investments in China
• China considering talks with Japan at ASEAN meeting after Aso visit to Taiwan – report

Markets:

• EUR leads, CHF lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields up 1.4 bps to 4.038%
• Gold flat at $1,924.63
• WTI crude up 1.0% to $83.74
• Bitcoin down 0.6% to $29,813

It was a quiet session as there were no major economic data releases in European trading today. Market flows were relatively light as well, with major currencies not really showing too much appetite.

The dollar was mildly weaker earlier on but is now trading more mixed and little changed in general, as traders start to turn their focus towards the US CPI report tomorrow.

EUR/USD stuck around 1.0960-70 levels while USD/JPY held above 143.00 around 143.10-30 for the most part. There weren’t any exciting moves on the session involving FX as equities and bonds were also less enthused.

European stocks are holding higher, catching up to the late dip buying in Wall Street yesterday. Meanwhile, US futures are holding slightly higher but the gains are relatively mild for now and indicative of just a slight breather after the continued selling since August began.

The standout in terms of performance today is oil, with WTI crude rising to near $84 and up 1% to its highest levels for the year.

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

• Prior -3.0%
• Market index 194.5 vs 200.7 prior
• Purchase index 149.9 vs 154.1 prior
• Refinance index 416.1 vs 433.6 prior
• 30-year mortgage rate 7.09% vs 6.93% prior

A further slump in both purchases and refinancing activities led to another drop in mortgage applications in the past week. Housing market conditions are not faring well as rates continue to hold higher amid tighter financial conditions. Here’s a look at how purchases activity have been tracking:

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

It’s certainly an impressive run as oil has come up strong after rallying since July, now rising to its best levels since November last year.

WTI crude in particular has been sustaining around its 200-week moving average from March to June and even with the lack of initial excitement from the Saudi news, it is now turning things around and quite mightily to say the least.

The jump higher today is also taking out the April highs after a stunning turnaround yesterday amid the more negative risk mood. The rebound saw oil prices come up from a low of $79.97 to end the day higher at just under the $83 mark.

And with oil now breaking higher on the day, the technicals dictate that there is plenty of upside room for oil at the moment. Couple that with a tighter market and this rally could really have legs. Suddenly, those $100 forecasts don’t look too shabby.

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

Bitcoin continues
to surprise as it remains resilient to many headwinds. Yesterday we even saw a
big rally after some banking woes, which
resembled the bullish reaction following the regional banking crisis seen in
March. Looks like Bitcoin is the go-to asset in case we see more troubles in
the banking sector. Anyway, the price action remains choppy amid different
drivers, so the technicals remain the only way to play it.

Bitcoin Technical
Analysis – Daily Timeframe

On the daily chart, we can see that Bitcoin
yesterday has rallied above the support turned resistance and it’s
now eyeing the 31K high. We already saw a fakeout previously, so the buyers
will need to be careful here and manage well risk. Another fakeout should give
the sellers more conviction and take the price back to the 28475 level if not
lower.

Bitcoin Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can see that we got a
rejection right from the previous fakeout high, so the level to watch now will
be the 29500 support as a break below it should lead to a selloff into the
28475 level. The buyers will need the price to break above the 30K level to have
more conviction and pile in for a ride towards the 31K high.

Bitcoin Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor trendline that
is providing some support for the buyers. This is where the buyers may start to
pile in for another try for a break higher. As previously mentioned, a break
below the 29500 level would be ominous for the buyers and most likely lead to
more selling pressure.

Upcoming Events

This week the
main events will be the US CPI and Jobless Claims reports tomorrow. For the US
CPI, the market is likely to focus more on the Core readings as this is what
the Fed is more interested in. Higher than expected data may lead to a risk off
sentiment as the market should start to price in a more hawkish Fed and it
might weigh on Bitcoin as well. On the other hand, lower than expected readings
may lead to a risk on sentiment due to the soft-landing narrative and no more
rate hikes and support the cryptocurrency. At the same time of the US CPI data,
we will also see the latest US Jobless Claims report, which might have an even
bigger effect if the data shows a big surprise. In fact, a miss may cause
recessionary fears and lead to a selloff in Bitcoin, while a beat may be taken
as bad news because the Fed may keep on hiking.

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