Fundamentals to lead the way

After the turbulence created by the BRICS summit and their decision to expand as well as the Jackson Hole meeting, the market tries to digest the “higher rates for a longer period” message of Fed Chairman Powell. On a monetary level, there is fundamentally a chance for the USD to be supported especially if Fed policymakers remain hawkish. Overall, we expect fundamentals to lead the way for the markets today, given also, the lack of high-impact financial releases from the US, yet the markets are increasingly turning their attention to the release of the US employment report for August due out on Friday’s American session.

On a technical level, we note that the USD gained against the JPY, also due to dovish comments made BoJ policymakers. USD/JPY rose in the past sessions yet seems to have hit a ceiling for now at the 146.60 (R1) resistance level. For the time being, we tend to maintain a bias for the sideways motion of the pair to be maintained and for a bullish outlook, we would require the pair the clearly break the 146.60 (R1) resistance line and start aiming for the 148.80 (R2) resistance base. For a bearish outlook, we would require USD/JPY to drop, break the 145.10 (S1) support line and aim for the 143.35 (S2) support level.

On a second note, we highlight the market’s worries for the headwinds faced by China in its efforts to revitalize its economy, and market attention turns to the release of China’s August PMI figures later this week. It’s characteristic of the market’s worries for China’s property sector that Evergrande lost value at the restart of its share trading at the size of $2.4 bln as media reported. Should market worries for the Chinese economic recovery intensify, we may see the market sentiment turning more cautious which in turn may have a negative effect on the Aussie and the Yuan but also in other more risky assets.

AUD/USD for the time being seems to have hit a floor at the 0.6400 (S1) support line. We tend to maintain a bias for the sideways motion of the pair to continue currently given also that the RSI indicator seems to be running just below the reading of 50. Should a clearcut selling interest be expressed by the market the pair may break the 0.6400 (S1) support line and aim for the 0.6285 (S2) support barrier. Should the pair find extensive buying orders along its path we may see it breaking the 0.6515 (R1) resistance line and aiming for the 0.6620 (R2) resistance hurdle.  

Other highlights for the day:

We note an easy-going session today with no major financial releases. In tomorrow’s Asian session, we note the release of Japan’s Unemployment rate for July.

As for the rest of the week:

On Tuesday we get the Czech Republic’s Final GDP rates for Q2 followed by the US JOLTS Job openings figure for July. On Wednesday we make a start with Australia’s building approvals figure for July, followed by the Eurozone’s economic sentiment figure, Germany’s Preliminary HICP print and the US ADP Employment figure, all for the month of August which are to be followed by the US 2nd GDP rate estimated for Q2 and the Core PCE rates for Q2.

On a busy Thursday, we note China’s NBS Manufacturing PMI figure, France’s Final GDP rate for Q2, Preliminary CPI rates for August, Producer prices rate for July, followed by Turkey’s GDP rate for Q2 the Eurozone’s Preliminary HICP rate for August and Unemployment rate for July and closing of the day with the US Core PCE rates for July and weekly initial jobless claims figure. Finally on Friday, we get Australia’s, Japan’s, China’s, France’s, Germany’s, the Eurozone’s, Canada’s and the US manufacturing PMI figures for August and we highlight the release of the US Employment report for August, as well as the Canada’s GDP rate for Q2.

USD/JPY H4 Chart

Support: 145.10 (S1), 143.35 (S2), 141.50 (S3)

Resistance: 146.60 (R1), 148.80 (R2), 150.10 (R3)

AUD/USD H4 Chart

Support: 0.6400 (S1), 0.6285 (S2), 0.6170 (S3)

Resistance: 0.6515 (R1), 0.6620 (R2), 0.6725 (R3)

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