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The yen slipped on Tuesday on news a Japanese chipmaker was buying a U.S. peer for $6.7 billion, while sterling held onto overnight gains after the European Union’s top negotiator raised hopes a Brexit deal can be struck in the coming weeks.

Forex today witnessed a recovery in risk appetite, despite looming US-China trade concerns, as the renewed optimism on the Brexit deal and NAFTA lifted market sentiment. As a result, the safe-haven Yen was broadly sold-off, driving the USD/JPY pair closer...

USD/CHF bulls have been lifting the market for two consecutive days as they are creating a pullback in the main bear trend. USD/CHF rose to the 200-day simple moving average where it is finding resistance. In the near term more sideways to down price action is expected as the market is in a range between 0.9768 (September 4 high) and 0.9640 (2018 low).

Sterling edged higher on Monday after posting its biggest weekly drop in a month last week against a broadly stable dollar as investors cut some large short positions, but Brexit concerns checked the gains.

The dollar traded higher against a basket of currencies on Monday amid fears of a potentially major escalation in the China-U.S. trade conflict, while Sweden’s crown rose following the previous day’s election.

Our recent expectation for EUR to extend its rebound was proven wrong as it plummeted last Friday and hit a low of 1.1548. While the low was just above the 1.1530 ‘key support’, the weak daily closing in NY is enough to indicate that the recent mild upward pressure has eased.

Market events to watch this week

The US dollar rose on Friday against all major pairs after a strong U.S. non farm payrolls (NFP) report was published. The US added 201,000 jobs, but more importantly hourly wages beat expectations in August coming in at 0.4 percent. The market has priced in a rate hike by the U.S. Federal Reserve when Federal Open Market Committee (FOMC) members meet on September 25–26. Next up in the economic calendar are the releases of US inflation and retail sales data.

The pair built on its steady recovery move from over two-week lows and has now climbed to fresh session tops, further beyond the 111.00 handle on the back of upbeat US monthly jobs report.

The dollar edged lower against a basket of currencies on Thursday, as investors positioned themselves ahead of Friday’s highly anticipated jobs report for August.

We have held the same view since Monday (03 Sep, spot at 1.1595) wherein “EUR could drift lower but any weakness is viewed as part of a 1.1520/1.1675 consolidation range and not the start of a sustained decline”.

EUR/USD climbs to a fresh weekly-high (1.1659) even as data prints coming out of the euro-area instill a weakened outlook for the monetary union, and recent price action warns of a larger advance as the exchange rate initiates a fresh series of higher highs & lows.

Sterling will make solid gains on the dollar in the coming year, a Reuters poll found, but that climb is based on the assumption that Britain leaves the European Union next year with a deal.

We have held the same view since Monday (03 Sep, spot at 1.1595) wherein “EUR could drift lower but any weakness is viewed as part of a 1.1520/1.1675 consolidation range and not the start of a sustained decline”.

An overnight bounce in the pound after a report that the European Union could offer new guarantees to Britain to win London’s support for a solution aimed at avoiding a hard Irish border after Brexit faded on Wednesday as investors focused on the spreading selloff in emerging markets.

The British pound was set on Monday for its biggest daily drop against the euro in more than three months as concerns grew about the progress of Brexit negotiations.

EUR rebounded slightly after touching a low of 1.1582 yesterday. We continue to view last week’s 1.1733 peak as a short-term top and expect this level to remain intact for the next one week or so.

The greenback, gauges by the US Dollar Index, remains on the defensive at the beginning of the week although it manages well to keep business above 95.00 the figure for the time being.

The recent upward pressure has eased as EUR staged a surprisingly sharp decline last Friday and took out the 1.1590 ‘key support’. We indicated on Friday (31 Aug, spot at 1.1670) that a break of 1.1590 would suggest that a short-term top is in place. In other words, we do not...

Sterling fell on Monday as the latest Brexit headlines sapped investor sentiment, after the British currency gained to its highest in nearly a month last week.

Market events to watch this week

The US dollar is mixed in the last week of August. Risk aversion has risen after the US-Canada deal is close, but not agreed and new US tariffs on Chinese goods could start next week lifting the greenback abasing emerging markets and the EUR and CAD with only the GBP still flying after potentially beneficial Brexit news and the safe havens CHF and JPY.

Sterling held near a one-month high on Friday as hopes of a breakthrough on Brexit this week prompted some traders to cut back on aggressive short bets on the British currency.

The dollar edged up against its peers on Friday, finding support as the latest episode of U.S.-China trade tensions dulled investor risk appetite, with weakness in emerging market currencies also helping lift the greenback.

After touching a high of 1.1733 on Tuesday (28 Aug), EUR has not been able to make much headway on the upside. While upward pressure is starting to wane, there is still scope for EUR to make another run to test the major 1.1745 resistance.

GBP/USD has recorded slight losses in the Thursday session, after sharp gains on Wednesday. In North American trade, the pair is trading at 1.2996, down 0.25% on the day.

The EUR/USD pair faded an early European session bullish spike and quickly retreated around 40-45 pips from an intraday high level of 1.1718.

The euro fell to a one-week low against the British pound on Thursday, extending its losing streak overnight after the European Union’s chief Brexit negotiator signalled an accommodative stance towards the United Kingdom in ongoing talks.

There is not much to add to yesterday’s update (28 Aug, spot at 1.1680) as EUR extended its gain to an overnight high of 1.1733. As highlighted, there is still scope for further EUR strength and the focus is at 1.1745.

WTI (oil futures on NYMEX) extends its choppiness into Europe, although trades within a tight range, as markets await fresh impetus from the Energy Information Administration (EIA) crude stockpiles data for the next direction.

China’s yuan weakened against the U.S. dollar on Wednesday, snapping a three-day winning streak, pulled lower by rising corporate demand for cheaper greenbacks.

The dollar inched higher on Wednesday after dipping to a four-week low overnight, but relief over a U.S-Mexico trade deal was dimmed by concerns that the China-U.S. trade war will drag on for some time.

Analysts at Scotiabank explained that the GBP wobbled earlier in London trade on Brexit noise.

The Japanese yen is unchanged in the Tuesday session. In North American trade, the pair is trading at 111.05, down 0.03% on the day. On the release front, BoJ Core CPI edged up to 0.5%, above the estimate of 0.3%. In the U.S, manufacturing and consumer confidence data was stronger than expected. CB Consumer Confidence jumped to 133.4, crushing the estimate of 126.6 points. On Wednesday, Japan releases consumer confidence, while the U.S publishes Preliminary GDP and Pending Home Sales.

Major US equity indices opened with modest gains on Tuesday, with the S&P 500 and Nasdaq scaling fresh intraday records immediately after the opening bell. Meanwhile, the blue-chip Dow Jones Industrial Average has managed to hold above the 26,000 psychological mark and is now less than 2% away from record high level of 26,616 set on Jan. 26.

WTI (oil futures on NYMEX) stalled its corrective move lower near $ 68.65 region, as the bulls fought back control and prompted a tepid bounce, in an effort to regain the 69 handle.

The dollar held near a one-month low against a basket of its rivals on Tuesday as a U.S.-Mexico trade deal aimed at overhauling the North American Free Trade Agreement boosted appetite for riskier assets.

While we have been expecting a ‘robust recovery’ in EUR since last Tuesday (see update on 21 Aug, spot at 1.1485), the pace and extent of the rally over the past 2 days exceeded our anticipation (note that EUR rose by +1.21% over Friday and Monday, the largest 2day gain in 3 months).

USD/CAD testing make-or-break support on heels of US Mexico Trade Deal- 1.2950 key. The Canadian Dollar has continued to trade within the confines of the initial August opening range with news that a working US-Mexico trade deal has been negotiated sending USD/CAD to the monthly lows today in New York trade.

China’s yuan finished Monday afternoon trade at a near 4-week high to the dollar after the central bank revived a “counter-cyclical factor” in its daily fixing to support the currency, halting a record 10-week slide that rattled global markets and irritated Washington.

The dollar’s safe-haven appeal dimmed on Monday after risk sentiment in the broader markets improved following a well-received speech from Federal Reserve Chairman Jerome Powell.

We have held the same view since last Tuesday (see update on 21 Aug, spot at 1.1485) wherein the robust recovery in EUR has chance to test the major 1.1630 resistance. After a few days of choppy price action,

The US dollar is lower against most major pairs on Friday. The greenback was waiting for U.S. Federal Reserve Chair Powell’s speech at the central bank summit in Jackson Hole but in the end no new information was provided. Chair Powell reiterated the data dependency of the central bank and shared his optimism regarding inflation. The market is already pricing in two US rate hikes in 2018 and the somewhat dovish remarks from Powell did not add support to the US dollar.

Following its 100-pip rally on Thursday, the USD/CAD retraced almost all of its gains on Friday as it approached the critical 1.30 mark. At the moment, the pair is trading at 1.3020, losing 0.45% on the day.The greenback, which was already under a modest selling pressure, extended its losses after Fed Chairman's prepared remarks at the Jackson Hole Symposium was assessed as being dovish. On the inflation expectations, Powell said there were...

Crude-oil futures early Friday in New York popped higher, on pace to book weekly gains, as investors focused on tightening inventories, including signs of shrinking output from Iran, according to market participants.

The British pound slipped against the euro to within a whisker of its weakest since September 2017, hurt by a rally in the single currency and concerns about whether Britain can secure itself a trading deal with the European Union.

The dollar held onto recent gains in early trade on Friday after U.S. and Chinese officials ended two days of trade talks without any major breakthroughs.

EUR/USD: Neutral (since 21 Aug 18, 1.1485): Chance for EUR to test the major 1.1630 resistance. No change in view, see update from yesterday (23 Aug) below. The pull-back from 1.1623 was more rapid than expected but only a break of 1.1470 would indicate that the current upward pressure has eased

After closing the previous day a few pips above the 1.30 mark, the USD/CAD pair erased the majority of this week's losses on Thursday as the loonie failed to preserve its strength amid falling crude oil prices. At the moment, the pair is trading at 1.3060, adding 0.5% on the day.Despite the disappointing macroeconomic data releases from the United States, the greenback was able to hold on to its recovery gains in the NA session and was last seen moving sideways near 95.50, where it was up 0.43% on the day. The PMI data released by Markit today showed that activity...

Sterling fell on Thursday as the government stepped up planning for a no-deal Brexit, reviving concern among investors about what would happen to the currency if Britain left the European Union without having agreed new trade arrangements.

The dollar rose on Thursday as investors bought the greenback on the back of political turmoil in Australia and after the minutes of the Federal Reserve’s latest policy meeting indicated the U.S. central bank is on course to further raise interest rates.

We shifted to a neutral stance on Tuesday (21 Aug, spot at 1.1485) and held the view the ‘robust’ recovery in EUR could lead to a test of the major 1.1630 resistance. We added, it could “take several days before this level would come into the picture”.

The Japanese yen is unchanged in the Wednesday session. In the North American session, USD/JPY is trading at 110.42, up 0.11% on the day. In economic news, Japanese All Industries Activity declined by 0.8%, missing the estimate of -0.7%. The U.S releases Existing Home Sales, which are expected to edge higher to 5.40 million. Today’s key event is the Federal Reserve minutes from the August 1 policy meeting. Later, Japan releases National Core CPI and the Services Producer Price Index. On Thursday, the U.S releases unemployment claims.

The euro on Wednesday snapped a four-day rally that had lifted it to a two-week high as markets awaited news of U.S.-China trade talks and Federal Reserve minutes.

The dollar remained on the defensive on Wednesday, as U.S. President Donald Trump’s comments on monetary policy continued to weigh on the greenback and as markets awaited U.S.-China trade talks and Federal Reserve minutes for directional cues.

The upbeat sentiment in the risk-associated space remains well and sound so far this week, pushing EUR/USD higher although meeting strong resistance in the 1.1600 neighbourhood.

The Stoxx Europe 600 Index SXXP, +0.34% rose 0.5% to 385.20, after dipping between positive and negative territory earlier in the session. The index ended 0.6% higher on Monday, in a modest rebound from recent losses, including a 1.2% drop over the course of last week, which was its third straight weekly decline.U.S. stocks opened higher early Tuesday, putting the S&P 500 nearer to record levels.

The British pound rose to a near two-week high on Tuesday after the dollar fell following comments from U.S. President Donald Trump that he was unhappy with the Federal Reserve for raising interest rates.

The dollar traded lower against a basket of major peers on Tuesday after U.S. President Donald Trump said he was “not thrilled” with Federal Reserve Chairman Jerome Powell for raising interest rates.

We highlighted yesterday (20 Aug, spot at 1.1435) that “the bearish phase appears to be close to ending” and the break of 1.1460 indicates that the outlook for EUR has shifted to neutral.

Sterling fell on Monday as the dollar rebounded and investors shifted their focus to impending talks that may decide whether Britain gets a trade deal with the European Union before it quits the bloc.

The dollar edged higher on Monday as confirmation was awaited that there will be talks this week between China and the United States, which markets hope will lead to an easing of their trade disputes.

Instead of consolidating and trading sideways, as expected last Friday (17 Aug, spot at 1.1375), EUR extended its rebound and hit a high of 1.1445. The ‘stop-loss’ for our bullish view at 1.1460 appears to be vulnerable and a break of this level would indicate that the bearish phase that started early last week has ended.

Global trade worries have not disappeared, they are just on hiatus, as market participants prefer to regroup and strategize in this unorthodox U.S trade and foreign policy environment.

The index is down for the second session in a row at the end of the week, re-visiting lows in the 96.30/20 band although managing well to close the fourth week with gains, including a new YTD peaks in the 97.00 neighbourhood (August 15).

According to Japan’s Ministry of Finance trade statistics, nominal exports in July 2018 were up 3.9% y-y, below the consensus (Bloomberg survey median) forecast for a rise of 6.3%, and nominal imports were up 14.6%, in line with the consensus forecast for a rise of 14.2%, notes the research team at Nomura.

Gold found little traction even as the leading dollar index also churned in the red.The dollar, up modestly for the week but surging more than 3% in just the last three months, remains the key driver for the precious metals. A firmer buck, which makes buying gold more expensive to investors using another currency, remains near a roughly 14-month peak.

Instead of extending its decline (as expected yesterday), USD rebounded strongly from a low of 110.45. The underlying tone has improved with the recovery but any further USD strength is not expected to break above the major 111.50 resistance (minor resistance is at 111.30). Support is at 110.65 followed by 110.40.

We expected EUR to “trade sideways to slightly higher” yesterday but the registered range of 1.1333/1.1409 was much higher than our anticipated consolidation range of 1.1315/1.1375. Nevertheless, we continue to view the current price action as part of a broader consolidation phase and expect EUR to trade sideways from here.

Reuters reports a story carried by the New York Times on Friday, citing that the US will seek to pressure China to lift the Yuan in trade talks likely to be held later this month.

China will hold a fresh round of trade talks with the United States in Washington later this month, Beijing said on Thursday, offering a glimmer of hope for progress in resolving a conflict that has set world financial markets on edge.

The global rating agency, Fitch Ratings' in an update released this Wednesday said that Brexit uncertainty makes the smooth transition less likely and slow progress in negotiations with the EU aren't helping that either.

An unexpected fall in the Aussie unemployment rate helped the pair to break out of a short-term descending trend-channel formation on the 1-hourly chart. The pair now seems to have entered a consolidation phase and trying to establish a firm near-term firm base above the 100-hour SMA amid a weaker tone surrounding the USD.

Many emerging market currencies also rose, clawing back some of Wednesday’s losses thanks to easing fears over the knock-on effects from a slide in the Turkish lira.

We have held the same view since Monday (13 Aug, spot at 1.1400) that there is “room for further weakness” in EUR and the price action since then coincides with our expectation. EUR dipped to an overnight low of 1.1297 and as highlighted yesterday (15 Aug), the next ‘target’ at 1.1285 is likely within reach this week.

The dollar climbed to its highest level in over 13 months against a basket of currencies on Wednesday as investors stepped up their safe-haven holdings of the greenback due to worries about slowing Chinese growth and Europe’s exposure to Turkey.

Spot is now resuming the downside following another knee jerk in the EM FX space, where the Turkish Lira is giving away part of its daily gains after the Turkish court ruled out another appeal for the release of US pastor A.Brunson and the US sanctions kick in.

The pair has been trending higher alongside an ascending trend-channel formation on the 30-min chart, albeit descending trend-line now seems to hinder the positive momentum. Technical indicators on the mentioned chart have also started losing traction and hence, weakness below the trend-channel support would negate prospects of any further up-move.

The GBP/USD pair reversed a knee-jerk dip to fresh session lows at 1.2698 following the release of the UK CPI report and regained the 1.27 handle, as markets digested the upbeat annualized CPI reading.

AUD extended its recent weakness as it hit a ‘fresh’ low of 0.7224, just a few pips above the strong 0.7220 support. Despite the decline, we do not detect a significant improvement in downward momentum.

In line with expectation, EUR extended its decline as it hit a ‘fresh’ low of 1.1328 yesterday. As highlighted on Monday (13 Aug, spot at 1.1400), there is “room for further weakness in the coming days” and the next level to focus on is at 1.1285 followed by 1.1185.

Total household debt increased by $82 billion (0.6%) to $13.29 trillion in the second quarter of 2018," The Federal Reserve Bank of Ne York announced in its report titled 'Quarterly Report on Household Debt and Credit.

British foreign secretary Jeremy Hunt recently crossed the news wires saying that the risk of a no-deal Brexit had been increasing, as reported by Reuters. There is absolutely no guarantee that we will get a deal. We need to see a change in the attitude of the EU commission. Everyone needs to prepare for the possibility of a chaotic no-deal Brexit.

The catalyst for the break lower was the RBNZ’s dovish MPS, where it shifted its OCR forecast lower by as much as 29bp. The RBNZ is now not fully projecting a hike until Q1 2021. A lower growth outlook clearly has the RBNZ concerned.

Gold seesawed between tepid gains/minor losses through the mid-European session and was seen consolidating overnight slump to the lowest level since late-Jan. 2017. Despite a rout across global financial markets, triggered by crashing Turkish Lira, the precious metal came under some intense selling pressure on Monday and finally broke below the $1200 psychological round figure mark.

According to the latest UK employment details, released this Tuesday by the Office for National Statistics (ONS), the unemployment rate unexpectedly dropped to 4.0% during the past 3 months to July. Against the backdrop of a slight improvement in global risk appetite, which was seen weighing on the Japanese Yen's safe-haven appeal, the data provided a minor lift to the cross.

Analysts at Rabobank suggest that this morning’s data revealed that Germany again bucked the trend in Europe as the German economy did not meaningfully slow down, after having settled at a slightly slower growth rate than the extraordinary pace in 2017.

Analysts at National Bank Financial suggest that in Canada, a lot of attention will be on July’s consumer price index and the headline CPI may have increased 0.1% m/m (not seasonally adjusted), supported by an above-average rise in gasoline prices. This would allow the annual inflation rate to increase one tick to 2.6%. The annual rate of CPI-common, for its part, should remain unchanged at 1.9%. In June, manufacturing shipments may have posted another decent advance based on a healthy increase in exports of factory goods during the month

Sterling slid to its lowest level since June 2017 on Friday as a stronger dollar and continued concerns that Britain could leave the European Union without a trade deal pushed investors to sell pounds. The British currency dropped 0.8 percent to as low as $1.2723, roughly in line with the dollar’s large rise against a basket of major currencies.

We expected “a dip below 0.7348” last Friday but AUDplunged instead and hit a low of 0.7280 (before extending its decline early this morning to 0.7251). The rapid decline appears to be running ahead of itself and while a dip below 0.7250 would not be surprising, we do not expect a sustained decline below this level (next support is at 0.7220).

Expectation for sideway trading last Friday was wrong as USD dropped to hit a low of 110.48 (before extending its decline this morning to a low of 110.33). Despite the decline, downward momentum is patchy at best and we do not expect further USD weakness from here.

The commodity remains confined within a broader trading range, held over the past week or so, and hangs near YTD lows set early this month. The near-term range play constitutes towards the formation of a rectangular chart pattern on the 1-hourly chart, indicating consolidation phase before the next leg of directional move.

While we have the same view that EUR is expected to “retest the major 1.1500/10 support zone” since 03 Aug (spot at 1.1585), the ‘freefall’ upon the break of this major level last Friday (10 Aug) was not exactly expected.

The US dollar appreciated versus most major pairs on Friday. The Japanese yen outperformed the greenback as a safe haven, but all other major currencies suffered heavy losses during the week.

Analysts at Rabobank point out that this morning saw the publication of Japan’s first preliminary estimate of Q2 GDP and the growth surged by 0.5% q/q, and as a result returned into positive territory for this year after the small 0.1% decline in the first quarter.

Sterling steadied near 11-month lows on Thursday after a decline this week that was fueled by investor fears Britain will leave the European Union without an agreement on its future relationship with the bloc.

While traders believe the risk of a similar sudden devaluation in the yuan is unlikely for now, both Washington and Beijing appear to be digging in for a protracted trade battle that will keep pressure on the currency and the Chinese economy.

The near-term range-bound price action constituted towards the formation of a rectangular chart pattern on the 1-hourly chart, suggesting a brief pause in the trend. The pattern, however, is not complete until a decisive breakout in either direction has occurred and hence, it would be prudent to wait before positioning for a firm near-term direction.

GBP extended its decline and hit a fresh multi-month low of 1.2819 yesterday (09 Aug). While severely oversold, there is no sign that the current weakness is about to stabilize just yet and from here, further decline towards the next major support at 1.2775 would not be surprising. For today, we do not expect a sustained break below this level (next support is at 1.2735).