Image Source: Pixabay
 

Asian equity markets started the day with a bearish tone, influenced by the lacklustre performance on Wall Street. Investors there were grappling with concerns over rising yields, a strengthening dollar, and surging oil prices. However, the Nikkei 225  defied the broader trend, managing to breach the 33K handle, thanks to a weaker yen, which touched a new low for the year. On the other hand, the Hang Seng and Shanghai Composite faced losses, primarily driven by weakness in the tech sector. Notably, some property developers saw significant gains, fueled by hopes of additional policy support measures, with Sunac's stock surging by over 60% following its recent return to the Stock Connect program.

In the UK, market focus will centre on the afternoon session when Bank of England Governor Andrew Bailey, Deputy Governor Jon Cunliffe, and External MPC member Swati Dhingra are scheduled to appear before the Treasury Select Committee. The construction PMI for August is also set to be released, with July showing a return to growth in the sector (above 50), driven by robust commercial and infrastructure activity. However, residential output continued to decline. Expectations for August suggest that the overall index might dip just below the key 50 threshold to 49.8.

Eurozone retail sales for July are expected to show a slight decline. Retail sales were flat in Q2, ending a streak of five consecutive quarterly declines starting in 2022. Earlier today, Germany reported a sharp 11.7% month-on-month drop in July factory orders. Tomorrow, German industrial production figures will be released, with H1 GDP stagnating and the Bundesbank expecting Q3 to remain relatively flat.

Stateside, attention is on the ISM services survey and the release of the Fed Beige Book. The headline ISM index is projected to drop to 52.0 from 52.7, indicating a moderation in the pace of service sector expansion. The Beige Book will be closely watched for anecdotal insights into economic activity, including any special factors influencing growth. Global investors will also continue assessing the outlook for China's economy. Yesterday's Caixin services PMI for August revealed a larger-than-expected slowdown in expansion, falling to 51.8 from 54.1. On Thursday, external trade data from China will be released, with predictions of contractions in both imports and exports.
 

FX Positioning & Sentiment 

Global activity data indicating weakness has resulted in a stronger US dollar, signalling potential shifts in currency markets. Last week's USD index candlestick line, characterised by a long tail, is viewed as a bullish indicator, suggesting a potential uptrend for the greenback. The USD's trajectory is closely tied to its largest components within the index, primarily the euro and the yen. A decline in the EUR/USD pair below its August low has raised concerns about the technical outlook for the euro, potentially favouring the dollar. Meanwhile, the USD/JPY pair has been on the ascent, with its sights set on breaking above its recent peak for 2023. Historically, the US dollar tends to make gains against the Japanese yen in September, a pattern that is being observed once again. These factors collectively suggest a strengthening position for the US dollar in the current currency landscape.
 

CFTC Data As Of 31-08-23

• EUR net spec long 146,679 contracts by Tuesday vs 158,760 contracts previous week
• JPY short grows to 98,473 contracts vs 95,323 previously
• AUD short jumps to 70,185 contracts vs 63,786
• GBP long 48,401 vs 59,107
• CAD short 15,761 vs 12,070 (Source: Reuters)
   

FX Options Expiries For 10am New York Cut 

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

• EUR/USD: 1.0740-50 (2.53BLN), 1.0800-05 (454M)
• 1.0900-05 (720M), 1.0950-60 (863M)
• USD/JPY: 144.50 (1.0BLN), 145.50 (503M), 146.00 (224M), 146.50 (641M)
• 148.00-25 (531M)
• USD/CHF: 0.8750 (520M). EUR/CHF: 0.9550 (200M)
• GBP/USD: 1.2500 (1.21BLN), 1.2650 (756M). EUR/GBP: 0.8650-55 (352M)
• AUD/USD: 0.6395-00 (551M), 0.6445 (739M), 0.6530 (250M), 0.6545-50 (696M)
• 0.6565 (360M). NZD/USD: 0.5955-60 (339M)
• AUD/NZD: 1.0700 (715M), 1.0800 (400M), 1.1050 (688M), 1.1100 (736M)
• EUR/AUD: 1.6700 (240M). USD/CAD: 1.3525 (244M), 1.3600 (1.45BLN)
   

Overnight Newswire Updates of Note

• Soaring Dollar Raises Alarm As China, Japan Escalate FX Pushback
• Rate Hikes Curb Output For At Least A Decade, SF Fed Study Finds
• Fed Nominee Jefferson Moves Step Closer To Senate Confirmation
• US Commerce Sec Doesn't Expect Changes To Trump China Tariffs
• China Says Economic Fundamentals Steady Despite Its Slowdown
• BoJ Member Takata Pledges To Keep Easing, Ready To Act Flexibly
• Japan Warns It Will Not Rule Out FX Options If Yen Selling Persists
• Australia Economy Defies Rate Increases As Exports Drive Growth
• Bank Of Canada Set To Pause As Economic Headwinds Strengthen
• ECB’s Nagel: Peak ECB Rates Followed By Rapid Cuts Wrong Bet
• Oil Tests November High After OPEC+ Leaders Extend Supply Cuts
• VW Plant In Portugal To Suspend Production Due To Lack Of Parts

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
 

Technical & Trade Views

SP500 Intraday Bullish Above Bearish Below 4485

• Below 4474 opens 4435
• Primary support  is 4435
• Primary objective is 4550
• 20 Day VWAP bullish, 5 Day VWAP bearish

(Click on image to enlarge)

EURUSD Intraday Bullish Above Bearsih Below 1.0810

• Above 1.09 opens 1.095
• Primary resistance is 1.1066
• Primary objective is 1.07
• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

GBPUSD: Intraday Bullish Above Bearish Below 1.2650

• Above 1.27 opens 1.2750
• Primary resistance  is 1.2750
• Primary objective 1.23
• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

USDJPY Bullish Above Bearish Below 146.50

• Below 145 opens 144.90
• Primary support 143.90
• Primary objective is 148
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

AUDUSD Intraday Bullish Above Bearish Below .6450

• Above .6525 opens .6575
• Primary resistance  is .6620
• Primary objective is .6320
• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

BTCUSD Intraday Bullish Above Bearish below 26175

• Above 28200 opens 30000
• Primary resistance  is 28175
• Primary objective is 23300
• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

More By This Author: