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MongiIG

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  1. MongiIG
    Germany’s DAX Index price will look to include more stocks to better reflect the underlying economy.
    Source: Bloomberg   Shares Germany Security Market liquidity Stock exchange Technical analysis  Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Tuesday 07 September 2021. IG What changes are being implemented for DAX Index?
    Deutsche Boerse AG, the operator of the FrankFurt exchange in Germany will look to increase the number of stocks which make up the blue chip DAX index from 30 to 40.
    When will the DAX30 become the DAX40?
    The rebalancing of the index is scheduled to take place by 20 September 2021.
    Which new securities will be added to the new DAX40 index?
    A list of expected additions to the new DAX40 index are as follows:
    Airbus SE Zalando SE Siemens Healthineer AG Symrise AG HelloFresh SE Sartorius AG Vz Porsche Automobil Holding Brenntag SE Puma SE Qiagen N.V. Which DAX30 companies will make up the new DAX40 index?
    All of the existing DAX30 index constituents will form part of the new DAX40 index. The following table shows the make up of the DAX30 currently.
    Allianz
    Adidas
    Continental
    Deutsche Telekom
    Deutsche Wohnen
    Vonovia
    BASF
    E.ON
    Deutsche Boerse
    SAP
    Deutsche Wohnen
    Fresenius Medical Care
    Siemans
    Münchener Rückversicherungs-Gesellschaft
    HeidelbergCement
    Bayer
    Fresenius SE & Co.
    Merck
    Daimler
    Volkswagen
    MTU Aero Engines
    Infineon Technologies
    Deutsche Bank
    Covestro
    BMW
    Henkel AG & Co.
    Siemens Energy
    Linde
    RWE
    Delivery Hero
     
    Other recent changes to the DAX index
    Since the announcement that the DAX30 Index would become the DAX40 index, the Deutsche Borse has been implementing further regulatory changes for inclusion of blue chip companies into the index. These changes have been rolling out since December 2020 and include requirements such as having the most recent two of years financial reporting reflecting positive EBITDA (earnings before interest, taxes, depreciation and amortisation), more stringent financial reporting requirements and sanctions introduced for non-compliance.
    Why are changes being implemented on the DAX?
    Increasing the number of securities which make up the DAX is expected to provide more liquidity to a broader set of shares, and is expected create a better and more diverse representation of the broader German economy.
    How will the DAX change affect traders?
    The DAX30 will be renamed to the DAX40. On the IG platform, the Germany 30 will be renamed the Germany 40. Traders of the index will be able to trade it the same way as they did before, and the initial change to cash and futures prices should be marginal.
    The new diversity created by having more securities in the index should dilute the impact of sudden large moves by individual securities on the index price. Traders looking to use the DAX to hedge underlying portfolio’s might see a larger correlation to more securities than before.
    DAX30 – technical analysis
    Source: IG charts  
    The long term trend for the DAX30 (Germany 30) remains up. In the near term the price is consolidating within a range between levels $15730 (support) and $16020 (resistance).
    Traders respecting the long term uptrend will want to keep a long bias to trades on the index. Long entry might be considered on an upside break of the $16020 resistance level, or on a retest of either horizontal or trend line support. Only on a move below the major low considered at the $15065, would we reassess the longer-term trend bias.
    Summary
    The DAX30 will become the DAX40 by 20 September 2021 The new index weighting will provide a broader representation of the German economy The new index should provide increased liquidity to more companies on the German stock exchanges Stricter index inclusion criteria have been introduced by the Deutsche Borse The long-term trend for the DAX remains up The DAX trades in a rangebound fashion over the near term
  2. MongiIG
    AUD/NZD looking set for further downside, with RBA stretching out tapering timelines as vaccination rates lag behind New Zealand.
    Source: Bloomberg    Joshua Mahony | Senior Market Analyst, London | Publication date: Tuesday 07 September 2021. IG New Zealand to ramp up vaccination efforts
    Australia and New Zealand have taken a somewhat questionable approach to this pandemic, with the positives of keeping cases down counteracted by the lack of any notable vaccination programme.
    That decision to hold off on a widespread vaccination programme from the start raises the risk of continued lockdowns in response to relatively low numbers. The ability to raise protection is going to be crucial in a bid to stave off lockdowns and thus push onto a path of higher rates and strong economic growth.
    With that in mind, the efforts in New Zealand are impressive, with daily vaccinations surging over the past month.
    Source: Our World in Data  
     
    That recent vaccination drive has seen New Zealand overtake Australia in total vaccine protection, with the gap likely to grow given the daily rate of jabs seen above.
    Source: Our World in Data  
    The Reserve Bank of Australia's (RBA) meeting overnight provided a somewhat mixed tone from the bank, with their plan to go ahead and taper from $5 billion to $4 billion also counteracted by a delay to any further steps. That shift sees the bank project that their next move could come in February rather than November as previously stated.
    The AUD/NZD pair has understandably moved lower following that dovish shift, with the downtrend looking likely to kick back in. That plays into expectations that New Zealand will continue to vaccinate at a faster rate, which should also see a relatively more hawkish Reserve Bank of New Zealand (RBNZ).
    The chart below highlights how AUD/NZD is coming off the back of a period of weakness that has seen four of five months post significant downside. Notably, we have also seen price drop below 1.0418, bringing a double top formation into play.
    Source: ProRealTime  
    With the long-term downtrend in play here, there is a good chance we are set for further weakness. The intraday downtrend remains in play here, with the weakness seen today bringing a bearish continuation signal.
    With that in mind, a bearish outlook holds for AUD/NZD, with a break up through 1.0541 bringing about a more positive outlook for the pair.
    Source: ProRealTime
  3. MongiIG
    KEY TALKING POINTS:
    XAU/USD is holding to its bullish trendline but key resistance lies ahead Gold has lacked momentum so far in September
     
    Gold (XAU/USD) is starting to look a little feverish once again despite managing to pull higher at the end of last week. The pullback over the last two sessions is not yet overextended and is still likely to offer new buyers a better chance to get in, but there isn’t much wiggle room left before the outlook starts to look slightly bearish.
    So far the bullish trend since XAU/USD reversed higher back in August is mostly intact, with small reversals along the way allowing for another leg higher. The question now is whether this is another one of those momentum building reversals or if there is more to it, especially given how strong the pullback has been over the last two days compared to the other times.
     
    XAU/USD Daily chart

    The mood in the market has been pretty upbeat so far which isn’t helping the demand for safe havens and, as the Fed gears up for a potential taper towards the end of the year, the central bank’s inaction is no longer as strong of an appeal for those looking for a greater return from their investments in non-yielding assets like gold.
    Friday’s push higher on weaker than expected NFP data showed once again that moves in the price of gold are mostly conditioned by the US Dollar at this point, and with there still being room for a stronger currency as yields recover their pre-pandemic levels, the outlook for gold on the medium term isn’t looking too great.
    This is also true if the pandemic gets out of hand once again, with new cases rising rapidly worldwide, as the US Dollar can outperform no matter the state of the US economy as it will pick up safe haven demand, outshining gold as protective trade.
    XAU/USD Monthly chart

    The move so far in the 5 first trading days of September has been pretty much null, with a non-existent body and small tails showing a lack of momentum. The August candlestick shaped out to be a clear sign of indecision, with a long downside tail showing the bearish meltdown being reversed to finish the month completely flat, which makes it harder to build up stronger moves in September. So far XAU/USD has found strong resistance at the 38.2% Fibonacci retracement from the August 2020 highs, an area that has stopped bulls in the last three months running. To the downside, the 50% Fibonacci (1,763) is likely the best area of support going forward.
    Fibonacci Confluence on FX Pairs
    Learn more about the stock market basics here or download our free trading guides.
    Traders of all levels and abilities will find something to help them make more informed decisions in the new and improved DailyFX Trading Education Centre
    Written by Daniela Sabin Hathorn, Market Analyst, 7 September 2021. DailyFX
  4. MongiIG
    GBP PRICE, NEWS AND ANALYSIS:
    GBP/USD could come under downward pressure after its recent advance as UK Prime Minister Boris Johnson faces a backlash from within his own ruling Conservative Party to plans to increase National Insurance to pay for health and social care. The move would break a Conservative manifesto pledge and bring politics back into play as a factor affecting the Pound, particularly after a report that Johnson plans an October “firebreak” Covid lockdown. However, Bank of England policymaker Michael Saunders has suggested the UK no longer needs as much monetary stimulus as previously, and that could limit the downside.
    GBP/USD AT RISK OF WEAKENING
    GBP/USD will likely come under downward pressure as UK politics return as a major factor determining its next move.
    UK Prime Minister Boris Johnson is expected to hike National Insurance – effectively a tax rise – to pay for health and social care but that would break a manifesto pledge by his Conservative Party and face significant opposition from Conservative Members of Parliament and perhaps even from within his own Cabinet.
    Moreover, the Government has drawn up plans for an October “firebreak” Covid lockdown should hospitalisations continue at their current level and threaten to overload the National Health Service, according to the i newspaper.
    Against this background it would be no surprise if GBP/USD eased back after reaching its highest level for a month despite some hawkish comments early Tuesday from Bank of England policymaker Michael Saunders, who suggested the UK no longer needs as much monetary stimulus as previously.
    GBP/USD PRICE CHART, TWO-HOUR TIMEFRAME (MAY 10 – SEPTEMBER 7, 2021)

    Source: IG (You can click on it for a larger image)
    As for the technical picture, GBP/USD has broken above a resistance line marking the top of a downward-sloping channel it has traded in since mid-May. That trendline should now act as support but the pair is already challenging it and the latest move could prove to be a false break higher.

     
    Written by Martin Essex, Analyst, 7 September 2021. DailyFX
  5. MongiIG
    The Nikkei 225 Index has jumped close to 1.6% to start the week. What can we look out for?
    Source: Bloomberg   Forex Indices Japan MACD Technical analysis Yoshihide Suga  Yeap Jun Rong | Market Strategist, Singapore | Publication date: Monday 06 September 2021. IG What to expect with Japan Prime Minister Yoshihide Suga’s resignation
    Japan Prime Minister Yoshihide Suga has announced not to seek re-election as ruling-party leader last week, marred by a sinking approval rating partly due to perceived inadequacy for his Covid-19 responses. The race is therefore on to find the next successor, with less than a month to go before the party’s leadership appointment on 29 September. Based on an opinion poll conducted by Kyodo News, the top contender thus far is Taro Kono, Japan’s Covid-19 vaccine minister, with a 31.9% approval rating. This is followed by Shigeru Ishiba, who came in second with a 26.6% rating. The potential views of some of the key contenders are summarised below.
     
    *Opinion poll by Kyodo News was conducted on 4-5 September, asking 1,071 randomly-selected eligible voters on their choice for next prime minister.
    While public opinions are important, the contenders also need to seek factional support, which seems highly uncertain at the moment. Highly-watched factions, such as the Shikōkai and Hosoda factions, are yet to commit to their candidate of choice and the rally for support is expected to be highly watched over the coming weeks.
    As Suga’s rising unpopularity partly stems from perceived inability on his part to manage the Covid-19 pandemic, the new prime minister will seek to address this issue. This seems to bring high hopes of further economic stimulus to aid businesses and also bolstering of healthcare systems to tackle elevated Covid-19 cases. There may be some resistance with Japan’s government debt at 256% of GDP, but with ultra-low rates and the Bank of Japan (BoJ) holding more than half of all government bonds, the elevated debt may seem less of a problem. Other standpoints under a new leadership may remain largely unchanged, with Japan’s monetary policies on hold and tough stance towards China to continue.
    Technical analysis – Japan 225
    The Japan 225 index has broken above the upper trendline of its descending triangle pattern last week, signalling a shift in sentiments to the upside. This comes after its moving average convergence divergence (MACD) indicator forms a higher low, suggesting that downside momentum could be weakening. Bullish sentiments are riding on the expectations of an economic stimulus package to combat the Covid-19 pandemic from the new leadership. Currently, prices are hovering around 29,500, which will provide as near-term support. Resistance may be at 30,200 resistance level, where the index was weighed down on previous two occasions.
    Source: IG Charts  
    Technical analysis – USD/JPY
    The USD/JPY has largely been trading in a rectangle pattern since July this year, with a flat-lined MACD indicator suggesting ranging movement for now. After an initial bounce in reaction to the political catalyst, the gains were quickly pared back along the rest of the day. Near-term support may seem to be at 109.00, where the lower base of the rectangle pattern may serve as support, as it has been for the previous three occasions. Resistance may be at 110.60, near the upper range of the rectangle.
     
    Source: IG Charts
  6. MongiIG

    The Week Ahead On The Markets

    By MongiIG,


    Market News
    The Week Ahead
    Read about upcoming market-moving events and plan your trading week
      Week commencing 6 September
    Chris Beauchamp’s insight
    The week begins quietly with US markets closed for Labor Day, but with an ECB meeting on the calendar European assets will be in focus. An RBA rate decision and China data mean APAC markets will be ones to watch as well. Corporate news is quiet, but Morrisons provides a first-half update, as it prepares for its takeover by a US private equity firm. Video
      Economic reports
     
    Weekly view Monday
    US Labor Day holiday – stock markets closed

    9.30am – UK construction PMI (August): index to fall to 55.6 from 58.7. Markets to watch: GBP crosses
     
    Tuesday
    4am – China exports (August): exports to rise 11% YoY. Markets to watch: CNH crosses

    5.30am – RBA rate decision: no change to 0.1% rate expected. Markets to watch: AUD crosses

    10am – German ZEW index (September): economic sentiment to fall to 40.1. Markets to watch: EUR crosses
     
    Wednesday
    2.30am – Australia NAB business confidence (August): index to fall to -13 from -8. Markets to watch: AUD crosses

    3pm – Canada Ivey PMI (August): previous reading 56.4. Markets to watch: CAD crosses
     
    Thursday
    2.30am – China CPI (August): prices to rise 0.9% YoY and 0.2% MoM. Markets to watch: CNH crosses
    12.45pm – ECB decision (1.30pm press conference): no change in policy expected, but recent higher inflation prints will lead to some commentary around the outlook for easing. Markets to watch: EUR crosses
    1.30pm – US initial jobless claims (w/e 4 September): claims fell to 340K in the previous week. Markets to watch: USD crosses
    4pm – US EIA crude oil inventories (w/e 3 September): stockpiles fell by 7.17 million barrels in the preceding week. Markets to watch: Brent, WTI
    Friday
    9.30am – UK GDP (May-July average), trade balance (July): GDP to rise 4% from 4.8%, June trade deficit was £2.5 billion. Markets to watch: GBP crosses
    1.30pm – US PPI (August): prices to rise 0.9% MoM. Markets to watch: USD crosses
    1.30pm – Canada jobs report (August): previous month saw 94,000 jobs created and an unemployment rate of 7.5%. Markets to watch: CAD crosses
      Company announcements
     
     
    Monday
    6 September
    Tuesday
    7 September
    Wednesday
    8 September
    Thursday
    9 September
    Friday
    10 September
    Full-year earnings
    Dechra Pharmaceuticals
     
    Dunelm
        Half/ Quarterly earnings
     
    Cairn Energy,
    TP ICAP
      Morrisons,
    Computacenter
     
    Trading update
     
    DS Smith,
    Ted Baker
     
    Halfords
     
     
     
      Dividends
    FTSE 100: Croda, Avast, Polymetal, CRH, Melrose
    FTSE 250: Oxford Instruments, XP Power, Greggs, Derwent London, Gamesys, Hochschild Mining
     
    Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
     
    Index adjustments
      Monday
    6 September Tuesday
    7 September Wednesday
    8 September Thursday
    9 September Friday
    10 September Monday
    13 September FTSE 100    
    1.31       Australia 200 2.9 (2.9) 1.8 1.8 (1.8) 0.2 0.4 0.3 Wall Street     5.8 9.5   7.0 US 500 0.14 0.16 0.38 0.22 0.04 1.10 Nasdaq     0.42   0.08 1.41 Netherlands 25             EU Stocks 50     0.2       China H-Shares   1.8 5.5 0.8 1.7 2.3 Singapore Blue Chip             Hong Kong HS50   3.6 17.0 4.1 2.8 7.7 South Africa 40   52.1         Italy 40             Japan 225        
    IG.com
  7. MongiIG
    USD, NFP Price Analysis & News
    US NFP 235k vs Exp. 750k, Prior Reading Revised Higher Unemployment Rate & Higher Than Expected Wage Growth Counters Headline US Dollar Initial Drop Reverses
    NFP Mixed as Headline Misses, Revision Downgraded, While Unemployment Rates Beats
    A much weaker than expected NFP headline at 235k vs 750k, while the prior reading had been revised higher to 1053k from 943k. The unemployment rate fell 0.2ppts to 5.2% matching expectations with the labour force participation rate remaining unchanged at 61.7%. Elsewhere, average earnings beat expectations on both the monthly and yearly rate. As such, while the headline is somewhat of a shocker, markets had been positioned for soft report given the weaker ADP and contraction in ISM employment index, while in terms of the details, they are relatively firm, making for an overall mixed report.
    USD Drops and Gold Pops
    In reaction to the headline, the USD came under immediate pressure breaking below the 92.00 handle alongside yields, while the gold rose to its best levels of the day to hit a high of 1829. However, given the details are relatively firm than what the shocking headline would suggest, the market reaction has reversed back to pre-announced levels. This data is unlikely to notably alter the Fed’s tapering timeline given that Powell’s JH speech had essentially hinted that September would be too soon for an announcement.
    Find Out More About Non-Farm Payrolls and How to Trade it
    DATA OVERVIEW: DailyFX Economic Calendar

    Source: DailyFX
     
    USD, Gold, Rates Reaction to NFP: Intra-day Time Frame

    Source: Refinitiv
     
    By DailyFX Research Team, 3 September 2021.
  8. MongiIG
    GOLD PRICE OUTLOOK:
    Gold prices struggled for upside follow-through after Jackson Hole rally. US jobs report may weigh on gold if wage inflation continues to hold up. RSI divergence hints August rise might be fading, with a drop to follow.
    Gold prices marked time this week having roared higher in the wake of the Jackson Hole symposium. Traders seemingly read as ‘dovish’ a speech by Fed Chair Powell where he separated the start of tapering QE asset purchases from subsequent interest rate hikes, saying the latter remains distant even as the former may need to begin this year.
    The lack of follow-through seems telling. Traders were notably cheered by Mr Powell’s cautious posture, implying they were anticipating a firmer commitment to policy normalization. Nevertheless, their reluctance to carry this narrative forward this week appears to speak to the fact that the central bank head still offered the most hawkish assessment of future policy since the onset of the Covid-19 outbreak.
    Indeed, the markets bristled at the mere mention of considering a wind-back of QE just a few months ago. That they now saw the start of such a process within a short four months as ‘dovish’ speaks volumes about the Fed’s communication strategy, which seems to have successfully acclimated investors to the need for pulling back emergency support. This may embolden officials to escalate further, provided the economy complies.
    HOW WILL US JOBS DATA SHAPE FED POLICY BETS?
    That latter bit will be in focus as Augusts’ US employment report hits the wires today. It is expected to deliver a slowdown in hiring, with 750k rise in payrolls marking the smallest gain in four months. The jobless rate is expected to tick lower however while wage inflation remains at a formidable 4 percent on-year. Taken together, this hints that weakness in the headline number reflects labor shortages rather than weakening demand.
    This may inspire worries about a wage-push inflationary spiral, whereby companies pass on higher labor costs to consumers by raising prices, and workers respond by demanding still-higher wages to cope. Such a dynamic might turn what the Fed still argues is a “transitory” rise in price growth into something lasting, pulling the central bank off-course as it tries to land inflation at the target 2 percent (on average).
    If markets find appreciable risk in the probability of such a scenario following the jobs report, they may conclude that tapering QE may be made official as soon as this month’s FOMC meeting. Gold prices are likely to suffer against such a backdrop as the US Dollar gains alongside Treasury bond yields, undermining the appeal of the non-interest-bearing, perennially anti-fiat yellow metal.
     
    GOLD TECHNICAL ANALYSIS – RSI DIVERGENCE WARNS THAT UPSWING MAY FIZZLE
    Gold prices are idling below familiar resistance at 1834.14 having mounted a spirited recovery in August after tagging a four-month low. Negative RSI divergence warns that upside momentum is ebbing however, which may set the stage for a reversal downward.
    A daily close below support at 1787.37 may set the stage for challenging support at 1755.50. If that barrier is also overcome, a decline through the 1700.00 figure to revisit the 2021 floor at 1676.91 may be in the cards. Alternatively, a push above immediate resistance sees the next key upside barrier at 1870.75.

    Gold price chart created using TradingView
    GOLD TRADING RESOURCES
    What is your trading personality? Take our quiz to find out See our guide to build confidence in your trading strategy Join a free live webinar and have your questions answered Written by Ilya Spivak, Head Strategist, APAC for DailyFX. 3 September 2021.
  9. MongiIG
    Dow, NFP, EURUSD, USDCAD and USDJPY Talking Points
    Markets have been remarkably restrained this week – on point with the seasonal expectations but also an ominous lead in to Friday’s concentrated event risk While US NFPs are the top listing for the week, the ISM service sector activity report can similarly tap into Fed taper expectations As liquidity thins out before the US event risk Friday, be mindful of sudden and possibly extreme volatility in Dollar pairs and risk assets (eg Dow)
     
    WHERE SEASONAL TIDES MEET A ROGUE FUNDAMENTAL WAVE
    Just how steadfast are the markets? We have witnessed extraordinarily reserved conditions for the financial system this week as structural quiet converges on the height of seasonal doldrums. Yet, that curb on participation can do more to amplify volatility than suppress it when passing through critical event risk – and that is exactly what we are facing into this final trading session of the week…and season. US nonfarm payrolls (NFPs) for August are due at 12:30 GMT before the US open, and the market’s fixation on the Fed’s intended time table for a taper has not abated alongside volume. Thin markets, extremely tight trading ranges and key event risk is a potent combination that active traders and passive investors alike should monitor. With the Dow as a foundational blue-chip risk measure extending its extremely controlled (now 8 day) range and volatility, it will be a good measure of sudden outburst.
    Chart of Dow Jones Industrial Average with 50-Day SMA, 8-Day ATR and Range (Daily)

    Chart Created on Tradingview Platform
    While the event risk heading into the close of this week will be interpreted for its short-term potential for the final hours of trade left after the data hits until the weekend closes markets, it is important to remember that this fundamental heft for a general theme that will carry forward. The next major milestone for Fed timing is September 22nd, but with added liquidity starting next week, it can certainly turn the market over heartily with the mere return of speculative interests after the Labor Day holiday. Historical averages bear that out in SPX volume.
    Chart of S&P 500’s Volume in the Weeks Before and After the Labor Day Holiday Per Year

    Chart Created by John Kicklighter with Data from Bloomberg
    WHAT TO EXPECT WHEN YOUR EXPECTING…NFPS
    Historically, the monthly US labor report is one of the most market-moving releases in the pantheon of scheduled economic indicators. That said, its influence waxes and wanes depending on what high-level fundamental themes are spanning the entire financial system. As it happens, most major speculative roads trace back to the largesse of central banks, and there is no more prominent a benefactor to the speculator than the Federal Reserve. Officially, US inflation has met the targets for pulling back on accommodation, but uncertainty over the employment leg remains a sticking point. If there is a strong August showing, at least a few Fed members have said it could secure their conviction for an imminent taper vote. This past session, initial jobless claims and the Challenger job cuts dropped more than expected. That perhaps doesn’t carry as much a psychological effect on expectations for payrolls as the ADP and ISM manufacturing employment component did the day before, but it provides more speculative balance in the perceived possibilities.
    Chart of Change in NFPs and ADP Private Payrolls with Difference Between Both (Monthly)

    Chart Created by John Kicklighter with Data from BLS and ADP
    While the market has gone a long way towards warming to the possibility of a Fed normalizing path, the past weeks of extended risk reach and the slide from the Greenback suggest the bias heading into the data is more dovish and thereby bullish. That doesn’t insinuate the outcome from the data, but it suggests the greater impact would come from a stronger reading that charges the Dollar and pulls indices down. Another consideration for the trading day ahead is the second major US data run that will hit at 14:00 GMT: the ISM service sector activity report. The US economy is predominantly services based in both employment and economic output. So, while the manufacturing equivalent on Wednesday nudged risk appetite and weighed the taper debate, the forthcoming activity report holds far more fundamental potential.
    Chart of S&P 500 Overlaid with ISM’s Manufacturing and Service Sector Activity Readings (Monthly)

    Chart Created by John Kicklighter with Data from ISM
    THE MARKETS THAT WILL REGISTER THE NFPS MOST ACUTELY
    With the scenarios for the event risk ahead considered, it is important to then assess the vehicles through which you would particularly express a view on the outcomes. While the US indices as a juiced risk benchmark are very mature on a long-term basis, I don’t believe that stretch is culminating in a late, Friday reconciliation. There is certainly volatility risk, but the already limited follow through will be exceptionally truncated. The Dollar on the other hand has been under more distinctive pressure more recently. EURUSD is a proven productive after its break at the end of last week. The pair looks overbought on a technical basis and general conditions are tuned to balancing the market. To give a sense of the window of volatility we likely have to work with, the first vertical dotted line is the release time of the NFPs while the second is the close of the New York session. That is not a lot of time to generate serious progress.
    Chart of EURUSD with 50-Day SMA and Disparity Index 50-Day (2 Hour)

    Chart Created on Tradingview Platform
    If I’m looking for a Dollar-based cross that holds more potential for a further battering of the benchmark currency, the very recent slip through support from USDCAD looks a better candidate than EURUSD which has earned significant progress through the past few weeks. Should the employment statistics meaningfully disappoint the forecast for a 750,000 net increase in payrolls – and ideally the service sector report misses – a further break below the 50-day moving average could be another milestone to urge bears along.
    Chart of USDCAD with 50-Day SMA (Daily)

    Chart Created on Tradingview Platform
    I am a person that likes to account for different scenarios. That said, I can see the varying virtues of a Dollar bearish outcome from the collective event risk ahead; but the list of Dollar bullish pairs isn’t as clear. A pullback from EURUSD or AUDUSD may check us back into an established range like a quickly uncoiling spring, but the technical potential is inherently limited. A pair like USCAD would just present a mess in a false breakout reversal. USDJPY is an interesting alternative candidate with a symmetrical wedge within a broader 111.50 – 109.00 range. A bullish show for the Dollar could offer an upside break, but it is important to account how benefit to the currency may be interpreted for risk conditions as these can be offsetting projections in their rudimentary form.
    Chart of USDJPY with 100, 200-Day SMAs and 10-Day ATR (Daily)

    Chart Created on Tradingview Platform
     
    By John Kicklighter, Chief Strategist, 3 September 2021. DailyFX
  10. MongiIG
    Friday’s US jobs report could bring weaker outlook as ADP and PMI surveys hint at potential NFP disappointment.
    Source: Bloomberg   Shares Unemployment Payroll United States Employment Technical analysis  Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 02 September 2021  The August US jobs report is due to be released at 1.30pm, on Friday 3 September (UK time). Coming off the back of a period which has been dominated by concerns over the timing of tapering, the trajectory of the US economy is as important as ever.
    With that in mind, Friday’s jobs report provides us with a critical batch of information for both markets and the Federal Reserve (Fed) to consider in relation to monetary tightening. Last month saw an impressive 943,000 non-farm payrolls (NFP) figure, representing the best monthly rise in jobs for 11 months. Interestingly that also represents the third consecutive gain, and second consecutive month where the payrolls figure outperformed market estimates.
    Unfortunately markets are expecting that recent upward trajectory to reverse this month, with economists forecasting a NFP figure of 750,000. The chart below highlights how the strong July jobs figure involved a significant government element once again, while leisure and hospitality continues to represent the biggest driver of job gains. With Delta Covid-19 cases on the rise, there will be some questions around just how long that services-sector rebound will remain strong.
    Source: Tradingeconomics.com  
    Ultimately, while we have seen significant improvements over the course of the past 17 months, a sizeable gap remains to get back to pre-Covid-19 pandemic levels. The chart below highlights how the US remains some 5.7 million jobs away from fully recovering.
    Source: US Bureau of Labor Statistics  
    On the unemployment front, markets are expecting a continuation of the downward trajectory which has been evident throughout the past year. The rapid decline from 5.9% to 5.4% last time around is expected to be followed up with another move down to 5.3%.
    However, the significant decline in participation rate does highlight how many unemployed individuals will simply have dropped out of the measure. As the economy recovers, those individuals will typically start to come back into the fold.
    As such, it makes sense to also keep an eye out for the lesser-utilised U6 unemployment rate, which gives you a more widespread view of those out of work.
    Source: Fred  
    From an earnings perspective, markets are looking for the 4% year-on-year (YoY) average hourly earnings figure to remain steady. With inflation a key topic of note, the rate of earnings growth provides a key gauge of business costs going forward.
    What do other employment readings tell us?
    With the rising number of Delta variant cases and deaths in the US, there are fears that we could see the economic picture deteriorate as a result.
    It is therefore useful to keep an eye out for what some of the other main employment readings say about the US jobs market right now. Automatic data processing (ADP) payrolls – the latest August ADP payrolls figure provided a worrying sign of what could be coming on Friday, with the figure of 374,000 falling well short of the 640,000 expected by markets.
    It does represent an increase on the prior figure of 326,000, yet that prior reading was already significantly lower than the kind of job growth seen in the prior months. With that in mind, this does look like a potential reversal point for the headline NFP figure.
    Source: Tradingview.com  
    Jobless claims – both initial and continuing jobless claims have gradually drifted lower over the course of the recent months, with that trend continuing throughout August.
    While there is little direct correlation that can be drawn between these figures and the payrolls reading, it does at least provide us with a good idea of whether we have seen a spike in joblessness which could impact Friday’s jobs figure.
    Source: Tradingeconomics.com  
    Institute for supply management (ISM) manufacturing purchasing managers' index (PMI) – the latest manufacturing PMI reading from ISM did provide a positive move for the August survey. However, a closer look at the employment element of that survey has shown a sharp decline into contraction territory (49 from 52.9).
    This provides yet another sign that we could see a significant move lower for payrolls on Friday, with the negative outlook for manufacturing employment indicated by purchasing managers bringing the potential for a weaker payrolls figure.
    Source: Refinitiv Dollar index technical analysis
    The dollar has been on the back foot of late, with the index falling back into a confluence of 92.45 and 61.8% Fibonacci support.
    There is a good chance we are looking at a retracement before we head higher, although we would need to see outperformance from the jobs report to help drive the dollar higher. Instead, with markets expecting a somewhat downbeat assessment of the economic recovery, we could see the dollar decline further in the event that such an event comes to fruition.
    Near-term support comes into play at $92.23-$92.45, with a break below $91.77 required to bring a wider selloff into play.
    S&P 500 technical analysis
    The S&P 500 has continued its steady climb higher, with the index reaching record highs on a habitual basis.
    However, we are likely to see some form of pullback come into play before long, just like the move seen in mid-August.
    In any case, the bullish outlook remains in play until we see the price fall back below the latest swing-low of 4352.
    Source: ProRealTime
  11. MongiIG
    DOW, NFP, EURUSD, AUDUSD AND USDTRY TALKING POINTS
    Despite the long-awaited transition from August to September, the first day of trade in the new month didn’t bring a sudden resurgence of activity The US ADP private payrolls report and the employment component of the ISM’s manufacturing survey have leveraged the importance of Friday’s NFPs EURUSD and AUDUSD have put in for more convincing technical breaks, but what is the real capacity for this market to develop a genuine trend?
     
    WE ARE ENTERING THE PULL OF HOLIDAY LIQUIDITY
    The first full trading day of September is behind us, and clearly we have not made an immediate transition from Summer Doldrums to the seasonal volatility expected of the month. We have yet to pass the Rubicon of holiday trade and the urge to power down on speculative exposure is growing stronger in this very mature bull market. That said, the fundamental flash scheduled just before the weekend liquidity drain of the US NFPs (and ISM service sector report) poses a greater risk of twilight volatility – and traders are wary. In the meantime, uncertainty is palpable. The S&P 500 and Nasdaq 100 – leaders of the speculative charge even this week – have passed a second consecutive day of virtually no change. The most impressive anchor amongst the US indices though is from the blue-chip Dow Jones Industrial Average which has registered a 7-day ATR (measure of volatility that is at its lowest point since December 2019 while its trading range over the same time frame has dropped to a January 2nd, 2018 low. A breakout is due, but the question is whether it will happen this week or next.
    Chart of Dow Jones Industrial Average with 50-Day SMA, 7-Day ATR and Range (Daily)

    Chart Created on Tradingview Platform
    If we go by the seasonal measures, a break looks far less likely to find its traction this week. Historically speaking, this week is one of the most restrictive of the active trading year as it represents the height of holiday season which tends to be observed by far more than the Americans and Canadians who actually have a market closure Monday. Below is the volume for the week before the Labor Day holiday (Mondays) the week of the Labor Day holiday and the 20-week average of volume up until that point for each year going back to 2000. There is materially lower volume the ‘week before’ than the average and typically the ‘week of’ which suggest momentum is difficult to muster. Of course, thin conditions can lead to disproportionately higher volatility.
    Chart of S&P 500’s Volume in the Weeks Before and After the Labor Day Holiday Per Year

    Chart Created by John Kicklighter with Data from Bloomberg
    THE FUNDAMENTAL AMPLIFIERS FOR FRIDAY’S NFPS
    There was already a healthy interest in Friday’s top event risk (US payrolls) even before this past session’s fundamental offerings. After last week’s charged PCE deflator and Fed Chairman Jerome Powell’s soft warning that a taper was coming, it was clear that attention would shift to the component of the central bank’s dual mandate which has been couched it concern: employment. Some of the central bank members have said that another strong jobs report could tip their support for a hike later this month, which are remarks that will not be readily missed by astute traders. With a consensus forecast for a 750,000 net increase on Friday, it would seem that the hawkish push would be well founded, but doubt is creeping back in after the ADP’s own significant shortfall – 374,000 jobs added versus 613,000 expected. This series has a history of deviating from the government’s own numbers, but that factoid is not likely to soothe any serious concerns.
    Chart of Change in NFPs and ADP Private Payrolls with Difference Between Both (Monthly)

    Chart Created by John Kicklighter with Data from BLS and ADP
    Another important fundamental update from this past session that places further emphasis on the Friday payrolls was the ISM manufacturing activity report. While the headline measure reported an unexpected pickup from the previous month (59.5 to 59.9), the employment component unexpectedly dropped below the 50 threshold (a 49 print) which is indicative of net contraction. This is worrisome, but factory jobs are the minority in the United States. That will likely raise the profile of the other major US indicator due for release on Friday: the ISM service sector activity report.
    Chart of S&P 500 Overlaid with ISM’s Manufacturing and Service Sector Activity Readings (Monthly)

    Chart Created by John Kicklighter with Data from ISM
    THE DOLLAR IS MAKING SOME MOVES AND EM CURRENCIES HAVE WHIFFED
    Despite the disappointing turn in employment conditions this past session, the Dollar did not gain serious traction in its stumble. That is surprising given that the DXY is on the action side of a bearish break. We can see that same technical setup in reverse through EURUSD where the break of the 50-day moving average is a continuation of the wedge clearance we registered at the beginning of the week. This does look like a break, but it doesn’t exactly match most Dollar pairs. There is certainly some Euro lift to this performance as the Eurozone unemployment rate eased this past session – after the region’s inflation rate hit a multi-decade high the day before that. Talk of an ECB taper conversation is gaining more traction in the market, but the ECB can simply sit quiet and let market activity bleed off naturally.
    Chart of EURUSD with 50-Day SMA and Disparity Index 50-Day (Daily)

    Chart Created on Tradingview Platform
    Another outlier with impressive movement comes on behalf of AUDUSD. This pair would break its own bear trend to start the week in the move above 0.7300 but it hasn’t itself cleared the 50-day SMA. Looking out over the Aussie Dollar crosses, it seems pretty clear that this is where much of the traction is originating. After this past session’s Aussie GDP beat, it was reasonable to see a bullish charge. However, aside from the Australian trade data this morning (the US and Canada will release its own goods trade reports later), there isn’t much to fuel the fire. If this rally can continue – Aussie Dollar or AUDUSD – it would defy convention.
    Chart of AUDUSD with 50-Day SMA and 50-Day Disparity Index (Daily)

    Chart Created on Tradingview Platform
    Where I expected volatility to be heaviest this past session, there was the least traction to be found. The major emerging market currencies were saddled with a broad run of data this past session. PMI manufacturing activity reports were reported for China, Russia, India, South Korea, Brazil and Mexico. There were a few surprises among these numbers, but not much in the way of volatility to show for it. USDBRL was exhibiting particularly impressive restraint considering its own PMI slowed by 3.1 points while its 2Q GDP update showed a -0.1 percent contraction against expectations of a modest growth. That said, my attention was most sharply trained on USDTRY (US Dollar – Turkish Lira) with a strong technical reversal pattern coming to a head at 8.3000 support just as Turkey’s GDP was due. The 0.9 percent growth was materially slower than the 3.6 percent forecast, which would contradict the technical lean and ultimately reinforce the difficult market conditions. In these circumstances, the stars need to align for outperformance.
    Chart of USDTRY with 50 and 200-Day SMAs (Daily)

    Chart Created on Tradingview Platform
     
    By John Kicklighter, Chief Strategist, 2 September 2021. DailyFX
  12. MongiIG
    BRITISH POUND, GBP/CHF, GBP/AUD, GBP/CAD, GBP/NZD – TALKING POINTS
    GBP/CHF re-enters multi-month channel after bouncing off 200-DMA GBP/AUD breaks lower out of ascending channel, targeting 0.618 retracement GBP/CAD continues to oscillate above support, trend remains neutral GBP/NZD plummets through trendline, eyeing 200-DMA for fresh support
     
    GBP/CHF ANALYSIS
    The British Pound has been mixed of late against its Swiss Franc counterpart, with much of recent trade being confined to a tight consolidated range between. Recent CHF strength in August propelled the pair through the floor of the strong channel it had carved out over the summer months, with a test of the 200-day moving average (MA) providing a reversal point. The re-entry into the sideways range may see the pair once again challenge the 50-day MA, and any break above that near-term resistance could see GBP/CHF test a longer-run descending trendline from March.
    GBP/CHF DAILY CHART

    Chart created with TradingView
    GBP/AUD ANALYSIS
    GBP/AUD has experienced a full-fledged reversal from yearly-highs over the last month, with the pair breaking through the floor of the ascending channel carved out between May and August. The pair confirmed the downtrend on September 1 by trading through the 50-day MA, eyeing the 0.618 Fibonacci retracement for support around 1.8614. The cool-off in GBP/AUD came as the pair traded into overbought territory on the RSI (relative strength index), with a reading of 75.75 marking the peak on August 20. With the retreat fully in motion, support remains at the aforementioned 0.618 Fib level. Any upside reversal may be capped by the 50-day MA, but the pair may fall lower with plenty of room remaining before GBP/AUD achieves oversold status.
    GBP/AUD DAILY CHART
    Chart created with TradingView
     
    GBP/CAD ANALYSIS
    Despite GBP/CAD price action indicating sideways movement, bias should remain skewed to the upside, with the pair having traded back above long-term trendline resistance. As former resistance now becomes support, the pair may look to test the 0.618 Fib level above around 1.7458. The pair has found support recently in the form of the 0.5 Fib level as well as the 200-day MA, indicating market participants may want to explore higher prices. Of note, the 50-day MA crossed back above the 200-day MA for the first time since May 11, confirming that a move higher may potentially be on the cards. Upside momentum may also be stimulated by any continued weakness in oil prices.
    GBP/CAD DAILY CHART
    Chart created with TradingView
     
    GBP/NZD ANALYSIS
    GBP/NZD finally broke key neckline support on what appeared to be a “never-ending” formation of a head and shoulders pattern. The break of neckline support ushered in a swift move to the downside, a move that has not yet cooled off. The pair may look to a test of the 200-day MA at 1.9399 for near-term support. Should the 200-day MA fall victim to the trend, price may stabilize around 1.9200, a level that proved to be crucial support during the pair’s swift decline in April. With the RSI approaching oversold territory, momentum remains skewed to the downside. Mean-reversion traders may look for a reading below 30 on the RSI and a test of the 200-day MA for an entry-point on any reversal trade. Resistance on any reversal remains the aforementioned trendline support above 1.9700.
    GBP/NZD DAILY CHART
    Chart created with TradingView
    Resources for Forex Traders
    Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
    Written by Brendan Fagan, Intern. 2 September 2021. DailyFX
  13. MongiIG
    CRUDE OIL, OPEC, COVID, EIA, API – TALKING POINTS
    Crude and Brent oil dropped in August as Covid fueled demand fears OPEC+ decision may see cartel reign in supply to support prices Technical outlook is slightly bullish after retaking key trendline
    Crude and Brent oil benchmarks are slightly higher as September trading kicks off following the first monthly price drop since March. Oil prices started dropping in early August on global demand fears as the Delta Covid variant spread. The demand-sensitive energy commodity is seen as a barometer for global consumption and economic activity.
    Oil’s decline on the spread of Covid’s highly transmissible Delta strain comes after governments enacted restrictive lockdowns and other social distancing measures to counter the virus. Australia’s Greater Sydney Area has been in lockdown since late June. More recently, New Zealand enacted lockdown measures in response to a single initial case. China has also seen a wave of lockdowns through rural areas and coastal cities. Earlier this week, China’s NBS reported a sharp contraction in its services sector.
    Moreover, the EU Council recommended suspending non-essential travel from the United States earlier this week. Domestically, US air travel has also seen a decline in the number of fliers recently. Considering these demand-side woes, it's unsurprising to see oil, which is highly sensitive to economic activity, move lower. The American Petroleum Institute (API) provided an encouraging sign on Tuesday after it reported a drop in oil stocks. Crude oil inventories for the week ending August 27 dropped by 4.045 million barrels, beating an expected draw of 2.833 million barrels.

    The Energy Information Administration (EIA) will follow tomorrow with its own figures, which typically command more attention versus the private API report. Analysts expect the US government agency to report a 3.088 million barrel draw. That would add to a 2.979 million decrease from the prior week. Wednesday’s US session will also see manufacturing PMI data from ISM cross the wires, which will provide insight into the United States’ economic strength.
    However, this week’s main event for oil will likely be the Organization of the Petroleum Exporting Countries' (OPEC) decision on output. OPEC and its allies, known as OPEC+, may reconsider its prior decision to increase oil production by 400k barrels per day (bpd). The group’s decision may be announced Wednesday or Thursday. A suspension of the recent easing to output cuts would reign in some supply, which will likely have a bullish effect on prices, or at least curtail some of the selling. Overall, the decision will likely be a key driver for energy traders to keep an eye on.
     
    CRUDE OIL TECHNICAL FORECAST
    Despite the price drop in August, crude oil has recaptured a rising trendline formed off the March swing low. The 100-day Simple Moving Average (SMA) appears to be providing a confluent level of support. The psychologically imposing 70 handle will be crude oil’s next likely level to overcome if prices rise. If trendline support and the 100-day SMA fail, a drop to back near the August low may occur.
    CRUDE OIL DAILY CHART

    Chart created with TradingView
    CRUDE OIL TRADING RESOURCES
    Just getting started? See our beginners’ guide for FX traders What is your trading personality? Take our quiz to find out Join a free webinar and have your trading questions answered Subscribe to the DailyFX Newsletter for weekly market updates Written by Thomas Westwater, Analyst for DailyFX.com. 1 September 2021
  14. MongiIG
    GBP PRICE, NEWS AND ANALYSIS:
    GBP/USD continues to edge higher as the US Dollar slips back. Meanwhile, EUR/GBP looks ready for another upward move as a symmetrical triangle pattern on the charts suggests further gains ahead.  

    EUR/GBP WELL PLACED TO BREAK HIGHER
    EUR/GBP looks ready to break higher as a symmetrical triangle continuation pattern on the charts suggests further gains for the pair – as long as the break from the pattern is to the upside. That break would likely lead to an extension of the advance that started on August 12.
    EUR/GBP PRICE CHART, ONE HOUR TIMEFRAME (AUGUST 11-31, 2021)

    Source: IG (You can click on it for a larger image)
    With the cross trading around 0.8575 at the time of writing, a modest move above 0.8585 would likely start the new move higher, with the August 23 high at 0.8594 the immediate near-term target.

    GBP/USD BENEFITING FROM USD WEAKNESS
    In the meantime, GBP/USD continues the climb that began on August 20. Note, though, that this seems to be due largely to US Dollar weakness both before and after Fed Chair Jerome Powell’s dovish speech at the Jackson Hole symposium last week.
    Here the first resistance level is the 1.38 round number, which has to be hurdled before any further gains for the pair.
     
    Written by Martin Essex, Analyst DailyFX. 31 August 2021.
  15. MongiIG
    CRUDE OIL OUTLOOK:
    Crude oil prices up in risk-on trade as London reopens after bank holiday Follow-through may be limited as trend-defining chart barrier approaches API and EIA inventories data, OPEC+ meeting are in the spotlight ahead
    Crude oil prices have largely reflected broader sentiment trends recently. The WTI benchmark has tracked higher alongside the bellwether S&P 500 stock index – a proxy for investors’ mood market-wide – over the past week. The US Dollar fell in the meanwhile, offering USD-denominated commodity a further lift.
    Looking ahead, a seemingly convincing risk-on lead bodes well for oil prices. There is some sense of catch-up exuberance, with London taking its turn to price in Friday’s fireworks having been closed for a bank holiday on Monday. Scope for follow-through may be limited however considering yesterday’s timid US trade.
    On the data front, the weekly inventory report from API is now in focus. It will be weighed against forecasts calling for a 2.6-million-barrel draw to be reported in official EIA statistics on Wednesday. Follow-through may be somewhat limited however as traders eye this week’s OPEC+ meeting.
    The group – comprising the OPEC cartel and major like-minded producers, like Russia – will discuss its coordinated output scheme. An increase in output may be in the cards, which might dovetail with the restoration of output in the US following Hurricane Ida to pressure prices.
     
    CRUDE OIL TECHNICAL ANALYSIS
    An upswing in late August has brought crude oil prices back within striking distance of key resistance guiding them lower since a top was marked by a bearish Evening Star candlestick pattern early July (as expected).
    Neutralizing near-term selling pressure appears to call for a daily close above the 69.77-70.80 region. From there, prices may extend upward to challenge the swing high at 74.23, with perhaps a bit of friction in the 72.17-78 inflection area along the way.
    A dense layer of support rests in the 66.35-68.00 zone. Securing a foothold back below its lower boundary may bring prices downward to challenge the major support shelf at 61.56 anew. A bit of back and forth around the minor barrier in the 63.53-81 band might be in the cards if such a move is to materialize.

    Crude oil price chart created using TradingView
    CRUDE OIL TRADING RESOURCES
    What is your trading personality? Take our quiz to find out See our guide to build confidence in your trading strategy Join a free live webinar and have your questions answered Written by Ilya Spivak, Head Strategist, APAC for DailyFX. 31 August 2021.
  16. MongiIG
    POUND STERLING (GBP)TALKING POINTS:
    UK bank holiday likely to result in lower trading volumes on Monday GBP Tech setups ahead of major risk events: GBP/USD, EUR/GBP Major risk events: EU Core inflation then US consumer confidence, PMIs and NFP
    SLUGGISH STERLING START’S THE WEEK ON A QUIET NOTE
    Bank holiday (UK) Monday saw a relatively muted start to the week for the Pound, as expected.
    On the travel front, the UK has added 7 more countries to the ‘green list’ meaning that travellers coming from these countries back to the UK will not need to quarantine regardless of vaccination status. However, travel to and from other ‘amber’ or ‘red lists’ continue to elevate travel costs as Covid tests are required and in some cases expensive quarantine stays at government-approved hotels are mandatory.
    GBP KEY TECHNICAL LEVELS FOR THE WEEK AHEAD
    A slower start to the week is not always a bad thing as it allows time to consider potential setups that could play out once London traders return to their desks.
    The GBP/USD daily chart shows prices hovering at similar levels to Friday’s closing candle. The pair experienced short-lived volatility during Jerome Powell’s speech at the Jackson Hole Economic Symposium where he mentioned that bond and asset purchases could be reduced before the end of the year.
    The pair looks set to continue trading sideways, at least in the early stages of the week, as GBP drivers remain subdued. As the week progresses, significant risk events will become clearer with the US data heavy week coming to a close on Friday with the NFP print.
    Any continued bullish momentum off the back of Friday would need to clear the 1.3780 level of resistance before the 1.3920 zone of resistance comes into play. However, a pullback from Friday’s impulsive move would focus on the 1.3670 level with the 23.6% Fib level around 1.3580 the next potential level of support.
    GBP/USD Daily Chart

    Chart prepared by Richard Snow, IG
    Looking at the Euro vs the Pound we have witnessed higher price action after the bullish engulfing marked the recent lows in the pair. Since then, there appears to be a bullish pennant–like shape suggestive of a bullish continuation. In that case, be on the lookout for a break above the diverging trendlines towards the upside resistance of 0.8640 followed by 0.8720.
    Read through our comprehensive Educational library for more information on the bullish engulfing candle pattern and others like it.
    A failed break may lead to a continued period of sideways trading or possibly even another test of the low. Before that however, levels of support can be identified at 0.8540 before the resistance zone around the 0.8470 – 0.8500
     
    EUR/GBP Daily Chart

    Chart prepared by Richard Snow, IG
    US DOMINATES RISK EVENTS THIS WEEK
    Non-US data: Eurozone sentiment (Monday), Eurozone CPI (Tuesday), Eurozone Unemployment (Wednesday)
    US (High Impact) Risk Events:

    For all market-moving data releases and events see the DailyFX Economic Calendar
     
    Written by Richard Snow for DailyFX.com. 30 August 2021.
  17. MongiIG
    EUR/USD PRICE ANALYSIS
    EUR/USD unchanged post-Jackson Hole. Euro tests key technical levels. IGCS undecided as traders are equally split.
    EUR/USD FUNDAMENTAL BACKDROP
    This week's open did not have the dramatic effect of prior Jackson Hole re-opens as markets remained relatively subdued after Fridays close. In conjunction with a bank holiday in the UK, which may be adding to the slump in volatility during early trading, the weekends highlight was Fed Chair Powell taking a dovish stance on tapering which will now be highly data dependent – this proving more dovish than other Fed officials. Inflation concerns was yet again pushed aside by Mr. Powell who reiterated that they likely transitory, while Friday’s core PCE figures coming in as expected did not little in support of hawks. The COVID-19 delta variant has been of great concern which endures at elevated levels thus supporting the Fed’s decision to hold-off on immediate tapering.
    WORLD COVID-19 NEW CASES:

    Source: Refinitiv
    European consumer confidence for August was largely in line with estimates however, industrial sentiment did come in better than expected which relates to manufacturers confidence levels and makes up roughly 40% of the economic sentiment indicator.

    Source: DailyFX Economic Calendar
    This week’s Non-Farm Payroll (NFP) data will be crucial to QE taper talk and could have a significant impact on the EUR/USD pair should actual data vary from estimates. Later today German inflation (see calendar below) will be in the spotlight as a precursor to broader Euro core inflation figures expected tomorrow.

    Source: DailyFX Economic Calendar
    From the ECB perspective, Bank of France Head Francois Villeroy de Galhau stated that low interest rates will persist and that no signs of PEPP taper talk in the upcoming September meeting. Analysts were keeping a close eye on the divergence between the Federal Reserve and ECB in terms of taper talk but with Powell taking the aforementioned dovish stance, this is yet to martialize. It is apparent that the Fed will begin QE tapering before the ECB but timing and structure is key. Once additional detailed guidelines are revealed only then will markets have a clearer directional bias going forward.
    Visit the DailyFX Educational Center to discover why news events are Key to Forex Fundamental Analysis
    EUR/USD TECHNICAL ANALYSIS
    EUR/USD Daily Chart:
    Chart prepared by Warren Venketas, IG
    While the macroeconomic factors take a back seat ahead of Friday’s unemployment data, technical’s are expected to take the helm. The psychological level at 1.1800 is being tested and could prove significant should prices close above this area of confluence. The recovery off August lows around the 23.6% Fibonacci level (1.1680) has been strong as the dollar faded. There could be a consolidation (sideways move) this week as traders await key economic data. Short-term trading may be favored during this period as levels are likely to fluctuate between the 20-day (purple) and 50-day (blue) EMA’s – barring no surprise macroeconomic announcements. A break above or below these short-term support and resistance zones could open up room for price action to retest August lows (1.1680) and highs (1.1900) respectively.
    The medium-term support trendline (black) has also been breached above for the first time since mid-August and should the pair keep its head above this support trendline, 1.1900 looks highly likely.
    The bullish divergence (green) exhibited by the , the Relative Strength Index (RSI) has unfolded expectedly as the oscillator moves its way above the midpoint 50 level suggestive of bullish momentum.
    IG CLIENT SENTIMENT DATA FAVORS NEITHER BULLS NOR BEARS
    IGCS shows retail traders are currently distinctly short on EUR/USD, with 51% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, because the difference is marginal the short-term signal remains mixed.

     
    Written by Warren Venketas for DailyFX.com. 30 August 2021.
  18. MongiIG
    US DOLLAR, GOLD, CRUDE OIL, DOVISH FED, JACKSON HOLE AFTERMATH - TALKING POINTS
    The Jackson Hole symposium managed to deliver some action APAC equities slightly higher, joined by commodities and other currencies Undermined US Dollar boosts commodities. Where to for gold?
     
    Federal Reserve Chairman Jerome Powell delivered a dovish speech at the Jackson Hole symposium on Friday and markets took the cue to offload the US Dollar against most assets. Equities, bonds, commodities and other currencies, moved generally higher in the aftermath. Wall Street once again posted record highs. The Monday Asia-Pacific session saw no reason to question these moves, with most benchmark assets quiet near Friday’s closing levels and regional equities slightly firmer.
    The market focused on the language by the Fed calling to de-couple QE asset purchases and interest rate decisions. With a timeline for tapering purchases still elusive, this was interpreted as meaning that a rise in rates is an even longer way off than previously thought. While changes to QE may potentially be to arrive before year-end, this came with caveats around circumstances – the ongoing Covid crisis, for example – prevailing at the time.
    The impact of Hurricane Ida in the Gulf of Mexico saw large sections of the region without power. The shutdowns and evacuations caused by the storm continued to support gasoline prices while crude oil struggled to hold onto early gains in Asia. Other commodities were mixed in the APAC session. While gold and silver battled to hold onto a strong open, copper aluminium, nickel and steel held the higher ground.
    The week ahead has a slew of data coming out. After European CPI numbers today, we have Japanese Employment tomorrow followed by China PMI and then a series of GDP numbers and other data before the closely-tracked US employment statistics on Friday.
     
    GOLD TECHNICAL ANALYSIS
    The rejection of the 1,671 low in early August sees the rally in gold approaching the resistance level of the most recent previous high at 1,835. This rally also saw the price break above the 100-day and 200-day simple moving averages (SMA). Additionally, the 100-day SMA is potentially about to cross over the 200-day SMA, forming a bullish “Golden Cross” signal.

    Chart created in TradingView
     
    Written by Daniel McCarthy, Strategist for DailyFX.com. 30 August 2021.
     
       
  19. MongiIG

    The Week Ahead On The Markets

    By MongiIG,


    Market News
    The Week Ahead
    Read about upcoming market-moving events and plan your trading week
        Week commencing 30 August
    Chris Beauchamp’s insight
    The end of the August holiday period sees the return of more important economic data, including the monthly US job surveys, the ADP and NFP reports. The NFP report is expected to show a slowdown in job growth, but at a still-strong pace, while the ADP report is forecast to show an increase in job creation. Other key data include Chinese PMI figures for August and US ISM PMIs for the same month. Earnings news is still quiet, but UK retailer Superdry and housebuilder Barratt Developments report full-year numbers. Video
      Economic reports
    Weekly view Monday
    UK bank holiday – UK markets closed
    1pm – Germany CPI (August, preliminary): prices to rise 4.3% YoY. Markets to watch: EUR crosses
    3pm – US new home sales (July): sales fell 1.9% in June. Markets to watch: USD crosses
    Tuesday
    2am – China mfg & non-mfg PMI (August): July mfg reading 50.4 and non-mfg reading 53.3. Markets to watch: China indices, CNH crosses
    8.55am – German unemployment (August): expected to hold at 5.7%. Markets to watch: EUR crosses
    10am – eurozone inflation (August, flash): prices to rise 2.5% YoY and stay flat MoM, with core CPI rising 1.1% YoY. Markets to watch: EUR crosses
    2.45pm – US Chicago PMI (August): index to fall to 69.8. Markets to watch: USD crosses
    3pm – US consumer confidence (August): index to rise to 124. Markets to watch: USD crosses
    Wednesday
    2.45am – China mfg PMI (August): previous reading 50.3. Markets to watch: China indices, CNH crosses
    1.15pm – US ADP employment report (August): 575K expected to have been created, from 330K. Markets to watch: US indices, USD crosses
    3pm – US ISM mfg PMI (August): index to rise to 59.1. Markets to watch: USD crosses
    3.30pm – US EIA crude oil inventories (w/e 27 August): stockpiles fell by 3 million barrels in the previous week. Markets to watch: Brent, WTI
    Thursday
    1.30pm – US trade balance (July), initial jobless claims (w/e 28 August): trade deficit to narrow to $75.1 billion, and claims to fall to 340K. Markets to watch: US indices, USD crosses
    Friday
    2.45am – China Caixin services PMI (August): previous reading 54.9. Markets to watch: China indices, CNH crosses
    1.30pm – US non-farm payrolls (August): 763K jobs expected to have been created, from 943K in the previous month. Unemployment rate to fall to 5.2% from 5.4%. Markets to watch: US indices, USD crosses
    3pm – US ISM non-mfg PMI (August): index to rise to 63. Markets to watch: USD crosses
     
      Company announcements
     
     
    Monday
    30 August
    Tuesday
    31 August
    Wednesday
    1 September
    Thursday
    2 September
    Friday
    3 September
    Full-year earnings
     
     
     
    Superdry,
    Barratt Developments
    Ashmore
    Half/ Quarterly earnings
    Zoom
    Old Mutual,
    Bunzl
    Johnson Service Group
    EnQuest,
    Broadcom
     
    Trading update
     
     
    WHSmith
     
     
     
      Dividends
    FTSE 100: Melrose Industries (31 August), Glencore, Admiral, BHP Group, Antofagasta
    FTSE 250: Redde Northgate, Alliance Trust, Rathbone Brothers, Convatec, Centamin, Savills, Clarkson, PageGroup, Quilter, Genuit, Londonmetric, Grafton Group
     
    Dividends are applied after the close of the previous day’s session for each market. So, for example, the FTSE 100 goes ex-dividend on a Thursday, but the adjustment is applied at the close of the previous day, e.g. Wednesday. The table below shows the days in which the adjustment is applied, not the ex-dividend days.
     
    Index adjustments
      Monday
    30 August Tuesday
    31 August Wednesday
    1 September Thursday
    2 September Friday
    3 September Monday
    6 September FTSE 100    
    13.91 (12.62)       Australia 200 0.4 4.6 35.0 1.0 2.3 2.8 Wall Street 21.7 10.9         US 500 0.52 0.30 0.72 0.11   0.14 Nasdaq 0.95 0.81 1.57 0.11   0.06 Netherlands 25 0.14           EU Stocks 50     0.6       China H-Shares 2.2   6.3   4.2   Singapore Blue Chip       0.19     Hong Kong HS50 2.7   29.9 2.7 14.0   South Africa 40   533.4         Italy 40             Japan 225            
  20. MongiIG
    Zoom prepares to report Q2 earnings, but will the gradual easing of restrictions hinder its growth path?
    Source: Bloomberg  Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 27 August 2021. IG When will Zoom report its latest earnings?
    Zoom reports earnings for the second quarter (Q2) of their fiscal year after market close on Monday August 30, 2021.
    Zoom enjoyed incredible pandemic success, but will that continue?
    Zoom was perhaps the posterchild of the new lockdown norm, with this previously lesser-known tech company managing to fast-forward its development as business, friends, and family interactions were pushed online.
    Much like other such benefactors, the critical question for investors is whether the new normal involves a major role for companies such as Zoom. Ongoing restrictions do ensure an environment for the company to still thrive, although quite how much they have managed to embed their product into business and personal life beyond those temporary restrictions remains to be seen.
    The stock is currently over 400% up from pre-pandemic levels, highlighting the downside risk in the event of an earnings report which signals a reversal of this huge growth trajectory. Analysts do expect some degree of slowdown in growth given the gradual removal of restrictions in the likes of the US and UK.
    However, expectations remain lofty, with analysts largely expecting the numbers to move in the right direction.
    Zoom earnings – what to expect
    Markets expect to see Zoom revenues continue their upward trajectory, with forecasts of $990 million signalling a potential 49% rise compared with a year prior. Importantly, that would be an improvement from the $956 million reading last quarter.
    Interestingly, markets are expecting a sharp rise in costs for the stock, which could eat into profitability. Pre-tax profits are predicted to come in at $375 million, and while this is 34% up from last year, it also represents a decline from the $403 figure in the first quarter (Q1).
    Finally, that decline in profitability is expected to be reflected in the earnings per share reading of 1.16, which would be down from the 1.32 seen in Q1.
    Zoom earnings – valuation and broker ratings
    Despite an impressive rise over the course of 2020 and 2021, there are still many proponents of this stock, with 15 brokers rating the stock a ‘strong buy’ or ‘buy’ recommendation. There are twelve ‘holds’ and one ‘sell’ recommendation.
    Zoom shares – technical analysis
    Zoom shares have largely been trending downwards over the course of the past 10 months, with fears over how the company will fare post-pandemic hurting sentiment.
    However, should the firm prove that it can continue to grow despite easing restrictions, we could see price break higher from this period. T
    o the upside, we have trendline resistance to watch out for, with the recent level of $406.04 also playing a key role. A rise through that level would bring about a bullish breakout signal, with the stock at risk of a further near-term downside until that break occurs.
    Source: ProRealTime
  21. MongiIG
    USD Price Analysis & News
    All Eyes on Fed Chair Powell Fed Hawks Out in Force
    Fed Chair Powell takes centre stage today as market participants look for additional clues as to when an announcement over the tapering of QE will take place. In light of Fed’s Kaplan (hawkish) comments made last week that the spread of the Delta variant could adjust his views on policy and with the Jackson Hole Symposium becoming a virtual summit this has stoked expectations that Powell may provide a more cautious statement. However, what is interesting to note is that the Fed commentary ahead of Powell’s speech has come from the more hawkish members, alongside this, Kaplan’s most recent comments suggest that his view on the spread of the Delta have not adjusted his views. In turn, the risk may be more geared towards a more hawkish than expected outcome.
    Volatility Measures Remain Subdued
    Taking a look at EUR/USD one day implied volatility, option markets are not expecting a notable move in the FX space. Although, given how the Fed has tended to surprise in recent months, volatility measures could be somewhat misleading, while summer trading conditions may also be keeping implied volatility low.
    Fed Hawks Out in Force
    Fed's Kaplan says he does not see anything at the point that would cause him to materially change his outlook, business contacts are weathering Delta at least as well as previous surges.
    Fed’s Bullard says he wants to get going on tapering this year. Reiterates that he wants taper completed by end-Q1 2022.
    Fed’s George says the Fed should start on QE tapering this year; there has been good progress on the economy, inflation is coming in strong and suggests an opportunity to dial back QE but haven't seen the labour market fully recover.
    Source: Refinitiv, Bloomberg
    EUR/USD: Near term resistance resides at the 1.1800 handle and while markets are attempting to put in a short term base, it would take a close above 1.1800 to confirm. Risks remain lower for now as EUR/USD puts in another lower high, while the RSI fails to move above 50.
    EUR/USD Chart: Daily Time Frame

    Source: Refinitiv
    EUR/USD Tech Levels


    US Dollar: Short term support at 92.80 continues to hold firm with the greenback back above 93.00. A break below 92.80 however, opens the door to 92.50, while on the topside a push through 93.20 puts 93.50-60 in focus.
    USD Chart: Daily Time Frame

    Source: Refinitiv
     
    By Justin McQueen, Strategist, 27 August 2021. DailyFX
  22. MongiIG
    S&P 500, VXX AND EURURSD TALKING POINTS
    Heading into the final trading day of the week – but still in the thick of the liquidity doldrums –Fed Chairman Powell’s statement and the PCE update are a beacon The S&P 500 and most other risk-leaning assets swooned this past session as market participants readied for this week’s top event risk Considering the Fed is actively attempting to avoid market volatility and there is still more than a week until the end of the market’s ‘summer’, is there potential for a serious trend?
     
    A FINAL COURSE CHECK BEFORE TOP EVENT RISK…AND THE WEEKEND
    We are finally heading into Friday trade. On the one hand, this is the last session of an otherwise reserved week; and we are very close to the seasonal pivot from typical quiet into more active trading conditions – usually the US Labor Day holiday which this year falls on September 6th. Then again, anticipation is a collective sentiment that is difficult to suppress, particularly when moving into highly anticipated event risk capable of stirring speculators to action. In the forthcoming US trading session, we will wade into the deep end of the Jackson Hole Economic Symposium’s scheduled meetings, including a highly-anticipated speech by none other than Fed Chairman Jerome Powell. There was recognition of the potential this past session as risk-leaning assets edge back from their highs. The S&P 500 dropped back -0.6 percent to break a five-day advance with about the same level of commitment of previous charges of similar girth.
    Chart of the SPY S&P 500 ETF with Volume, 100-Day SMA and Consecutive Day Trends (Daily)

    Chart Created on Tradingview Platform
    There is some obvious expectation for market activity around this week-ending event risk beyond the modest set back in US indices. Implied volatility (which is another way of saying ‘expected volatility’), rose climbed 12 percent according to the VIX with a bump back up to 18.9 percent. Notably, the short-term volatility ETF VXX was also on the upswing with a more modest 4.3 percent advance from exceptionally low levels but with meaningful volume to support the move. These are still very reserved levels historically speaking, but the masses are not so confident in the general sense of quiet that market participants will simply hold on their costly exposures without some measure of hedge. Speaking of protection from the unexpected, the ‘trail risk’ index, also know as the SKEW, is relatively restrained at 157. It has ranged up to 160 since the beginning of July and hit a record high of 170 back in June.
    Chart of VXX Short-Term Volatility ETF with 100-Day SMA and Volume (Daily)

    Chart Created on Tradingview Platform
    WHAT TO EXPECT FROM JACKSON HOLE THROUGH FRIDAY
    Wading into the global monetary policy event of the year, I do believe there is significant market-moving potential. That said, the Federal Reserve (Fed) and other key players in the global monetary policy authority have been remarkably explicit about their intentions with forward guidance. This is all in an effort to back out of an extreme position without causing a cascade of risk aversion as the deep-pocketed buyer exits the market. In the even that these policy officials are successful in withdrawing without causing serious fallout, we are still navigating through the most reserved period of the trading year. August is known as the lull of the calendar year (according to the S&P 500) and we are still more than a week out from the Labor Day holiday. Left to our own devices, complacency would readily see these markets settle into a holding pattern awaiting the next signal for serious launch.
    Chart of S&P 500’s Performance, Volume and Volatility via VIX Per Calendar Month

    Chart Created by John Kicklighter with Data from Bloomberg
    As much as the US central banks wants to project a slow and measured policy shift that is guided by a robust economic forecast, the markets are driven by their speculative interpretations and appetites. I am almost certain that Fed Chair Powell and his team are looking to ease the market into the reality that they intend to withdrawal from their exposure so that the markets can evaluate risk on their own terms. Yet, even if Powell deftly navigates the messaging gauntlet, speculative interpretation can readily take over. I will note that this past session three hawks – who are also non-voters in 2021 – made clear their belief that a taper should come as soon as the next meeting. Jackson Hole host Esther George, President of the Kansas City Fed, was the most measured in her statement saying a taper should come ‘sooner rather than later’. Meanwhile, Dallas Fed President Steven Kaplan and St Louis Fed President James Bullard made clear their believe that a taper should start with the September 22nd meeting and that bubbles were starting to form in the financial system. Is this a warning to the markets of Fed consensus or an effort by a minority to sway the group to action?
    Table of the FOMC Members with Their Perceived Policy Bias

    Chart Created by John Kicklighter
    From a monetary policy perspective, it is important to consider the US central bank’s course not just from the internal dynamics and the eventual time frame for a taper – and longer term possibility for a rate hike. We should also register the path for the Fed relative to its major counterparts. This past session alone offered up some interesting perspective. The ECB leaned into its dovish views despite a few outlier hawkish voices according to its monetary policy minutes while the South Korean central bank actually hiked rates 25 basis points to 0.75 percent, though the Won actually dropped. The Fed isn’t the only game in town, but its policy decisions stretch far beyond its own financial borders.
    Chart of Perceived Monetary Policy Standing of Major Central Banks (Daily)

    Chart Created by John Kicklighter
    EURUSD STILL TOPS MY WATCH LIST
    There are quiet a few interesting assets and pairs to watch as we evaluation the take on US monetary policy. Aside from the US indices, I will also be keeping very close tabs on US Treasury yields and Fed Funds futures. These markets are about as close as you will get to pricing in immediate rate speculation. For the Dollar’s part, I think many of the so-called majors are interesting on a technical basis, but there isn’t a balanced bullish and bearish potential from most. If Powell were able to follow in the footsteps of the South Korean central bank and urge the market to see a dovish outlook despite a recognizable hawkish shift (taper warning versus an actual hike), I like a technical vehicle like EURUSD beak above 1.1775. If the Dollar were to actually advance, my expectations for an outright trend are low. Therefore, the range picture from GBPUSD (down to 1.3600), AUDUSD (down to 07100) and USDCAD (up to 1.2850) are of top interest.
    Chart of EURUSD with 50-Day SMA and 20-Day ATR (Daily)

    Chart Created on Tradingview Platform
     
    By John Kicklighter, Chief Strategist, 27 August 2021. DailyFX
  23. MongiIG
    Emerging market currencies look likely to reverse recent gains before long, with long-term USD/RUB, USD/MXN and USD/ZAR uptrends expected to return before long.

      Forex USD/ZAR USD/RUB USD/MXN Market trend Currency  Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 26 August 2021. IG Emerging currencies at risk despite recent rise in yields
    Emerging market currencies provide a key area for traders to utilize throughout periods of boom and bust. Typically, we see emerging currencies lose ground against the dollar over time, with those periods where that trend reverses largely coming as economic fears are allayed and treasury yields rebound.
    That can be seen below, where falling yields are correlated with three inverted EM FX pairs (USD/RUB, USD/MXN, USD/ZAR). This negative correlation means that as long as yields continue to fall, we are likely to see further downside for emerging market currencies against the greenback.
    With that in mind, this recent counter-trend move looks likely to continue if the outlook becomes clearly positive. However, any ongoing fears around the Delta variant or the recovery could seem FX hit once again.
    Source: TradingView USD/ZAR
    USD/ZAR provides the first chart of note, with price having dropped perfectly into the 76.4% Fibonacci support level.
    With the stochastic breaking out of the oversold territory, there is a clear signal that the bulls are coming back into dominance once again here. As such, another move higher looks likely here, but ultimately the bullish trend holds unless R11.51 low is taken out.
    Source: ProRealTime  
    The daily chart highlights how we have broken from the downtrend established after the initial pandemic surge for this pair.
    That push through trendline resistance does provide an initial signal that the bulls might be back in charge, yet a move through R15.57 would bring greater confidence that this downtrend is over.
    Source: ProRealTime USD/RUB consolidates within long-term uptrend
    A similar story for USD/RUB, although the uptrend is somewhat less convincing. Nonetheless, we have seen price fall back towards the 76.4% Fibonacci support level at ₽71.08.
    We have typically seen this market consolidate and drift lower for extended period of time, only to surge higher every once in a while. With that in mind, it looks likely we are in that latest consolidation phase, with another break higher expected to come down the line. A break below ₽68.03 would bring a more signal that we are due a more prologued period of downside.
    Source: ProRealTime  
    This pair is clearly still well within a consolidation phase, although a break up through the ₽75.35 level would bring greater confidence that we are starting to build a more bullish move.
    Source: ProRealTime USD/MXN finding support on Fibonacci level
    Once again we are looking at the 76.4% Fibonacci support level to come into play here for USD/MXN. The long-term uptrend provides a signal of further gains to come, with the recent inability to break below the MX$19.42.
    Fibonacci support level highlighting the potential for another leg higher before too long. Much like USD/ZAR, we are looking at another break out of the oversold territory for the stochastic, with momentum clearly reversing in favour of the bulls.
    The past three such signals have all provided strong long-term buying opportunities for the pair. A break below MX$17.45 would be required to negate that bullish long-term trend.
    Source: ProRealTime  
    That recent basing effect can be seen clearly on the daily chart, with price failing to break below MX$19.54 bringing some initial confidence for bulls.
    However, a push through the MX$20.75 level would be required to start building a more confident view that the next leg higher is taking shape.
    Source: ProRealTime
  24. MongiIG
    EUR/USD, FED, POWELL, INFLATION, US DOLLAR, CHINA, JACKSON HOLE - TALKING POINTS
    Markets remained subdued ahead of the Jackson Hole symposium. Fed-speak around inflation expectations will be closely watched EUR/USD liquidity may be short on surprises. Will the Euro downtrend resume?
    Increasing Covid-19 Delta variant cases in Asia continue to cause concern, particularly in China, which weighed on Hong Kong’s Hang Seng Index (HSI) stock benchmark as well as indices on mainland China. Other bourses were little changed in the session. The Bank of Korea raised rates by 25 basis points today to 0.75%, with BOK Governor Lee saying that Fed policy will be important for future direction. Strong private capex data in Australia, showing a rise of 4.4% against 2.5% expected, left AUD little-changed.
    With Jackson Hole almost upon us, the focus will be whether Fed Chair Powell will maintain a transitory view of inflation or tilt the rhetoric more toward structural inflation. Going into the symposium, the market believes the Fed and their inflation expectations.
    Inflation is currently being priced at or near 2.5% all the way out the curve, with the benchmark 10 year breakeven inflation rate at 2.35%. The “breakeven” is the difference between the yield on a US Treasury bond and the equivalent tenor Treasury Inflation Protected Security (TIPS).
    US Market Priced Inflation (Break-evens)

    Source: Bloomberg
    There has also been market chatter about when any tapering effort might end. While this is an important aspect of the overall story, the market appears to be getting ahead itself. As with most projected outcomes in markets, it depends. The one thing the Fed has made clear is that unfolding circumstances will determine the trajectory of tightening.
    There is also US jobless claims and US GDP data out tonight that may impact markets. An explosion in volatility may see some markets gap. The most traded currency pair, EUR/ USD, could see more interest than usual as participants gravitate toward more liquid markets should the Fed deliver something unexpected.
     
    EUR/USD TECHNICAL ANALYSIS
    The Euro made new lows last week and despite a rally this week, it remains trending lower within a channel chart formation. Should volatility break out, the big levels to watch for resistance will be 1.1910, the most recent high, and 1.2095, the pivot breakdown level. Support at 1.1600 will be critical as a breach could suggest an acceleration in the downtrend.

    Chart created in TradingView
    Written by Daniel McCarthy, Strategist for DailyFX.com. 26 August 2021.
  25. MongiIG
    British Pound (GBP) Price Outlook
    US dollar holds the key to the next GBP/USD move. UK new covid cases continue to rise.
     
    The British Pound is trading either side of 1.3750 against the US dollar as traders prepare for the main event of the week - and potentially a lot longer - the Jackson Hole Symposium. While various central bankers and key individuals will start the meeting today with official speeches and on-the-side interviews, Friday’s speech by Fed chair Jerome Powell is key. Expectations that the Fed chair may announce a timetable for slowing down its bond-buying program have been lowered in recent days, as covid continues to spread at an alarming rate in the US, harming growth prospects. It may be that the Fed will decide to wait to see next Friday’s Jobs Report (NFP) before announcing any tapering timetable at the September FOMC meeting. This current indecision is weighing on the US dollar.
    US DOLLAR BASKET (DXY) DAILY PRICE CHART (JANUARY – AUGUST 26, 2021)

    In the UK the spread of covid also continues at an increasingly alarming rate, despite the government’s successful vaccination program. The percentage of the UK population aged 16+ who have had two vaccination doses is a fraction under 88%, while over 77% have had a single jab. While this vaccination program is an undoubted success, the delta variant is seeing a substantial rise in new cases with nearly 36k people testing positive on August 24, bring the rolling 7-day total up to just under 237k cases. There were 149 deaths within 28 days of a positive test on Tuesday, touching a multi-month high, while the 7-day total hit 743. While the UK is nearly fully re-opened, if these levels of infection and fatalities continue, there may be a change of plan in the coming weeks especially as September sees the start of a new school year.
    GBP/USD’s reversal from the recent 1.3600 continues and is a mirror picture of the fall seen in the US dollar. There are no fundamental short-term GBP drivers, apart from covid data, so the pair will likely range trade going into Friday. The technical set-up remains negative with the pair below all three simple moving averages, which may leave the July 20 multi-month low at 1.3572 vulnerable in the case of a sell-off.
    GBP/USD DAILY PRICE CHART (JANUARY - AUGUST 26, 2021)

    Retail trader data show 62.11% of traders are net-long with the ratio of traders long to short at 1.64 to 1.The number of traders net-long is 4.89% lower than yesterday and 0.65% lower from last week, while the number of traders net-short is 3.92% lower than yesterday and 2.74% higher from last week.
    We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

     
    By Nick Cawley | Strategist | 26 August 2021. DailyFX

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