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The curve move in the US differed somewhat from previous sessions yesterday as it turned more inverse. Technical resistance levels do their part at the (very) long end. The US yr and yr yields shed bps and bps respectively, failing to take out % and % for now. The front end underperformed with yields rising by up to bps for the 2-yr which closed above the psychological 5% mark (%) for only the third time since Investors turn more nervous going into Friday’s Jackson Hole address by Fed Chair Powell. They gradually come to terms with the idea of higher policy rates for even longer, while simultaneously doubting their (the money market) view that the Fed policy rate already peaked. We stressed on many occasions the diverging view between Fed June Dots (2 additional hikes in ; one already implemented) and Minutes of the July policy meeting (most participants still have upward inflation risks as prime reason of concern & recession in H2 no longer base case scenario) and US money markets attaching only a 16% probability to a September 25 bps rate hike. This still means room for more underperformance at the front end of the curve if Powell gives the go-ahead. Persistently high core inflation should be the trigger.

The underperformance of the front end of the US yield curve pushed the trade-weighted dollar for another test of the July high at , but a break didn’t occur. The greenback closed at EUR/USD fell from an open at to after a first real test of the July low at EUR/GBP followed the slide in EUR/USD with a close at The YTD low at is near, but untested. European stock markets still managed a positive close despite waning intraday momentum while US indices closed flat to % lower. Today’s focus is on global PMI’s. There’s room for improvement especially in Europe following two months of weak figures. This could add some more selling pressure at the front end of the yield curve while temporary helping the euro in its battle of survival above first support lines.

News and views

New Zealand’s total volume of retail sales fell % in the June quarter. This fall comes after declines of % and % in the March and December quarters respectively. 11 of the 15 retail industries had lower sales volumes in the June quarter compared with the March quarter. The largest contributors to the fall in the June quarter were food and beverage services, down %, and hardware, building, and garden supplies, down %. Without adjusting for seasonal patterns and price effects, the value of total retail sales was $29bn in the June quarter, up % ($mn) compared with the June quarter. Last week, the RBNZ left its policy rate unchanged at %, but indicated that the policy rate needs to stay at restrictive levels for the foreseeable future to ensure that CPI inflation will return to the % target range. Today’s data might ease the RBNZ’s fear that activity doesn’t slow as needed to reach the inflation target. The data had little impact on the kiwi dollar. After a protracted decline over the previous month, NZD/USD today stabilizes near

Activity in the Japanese manufacturing sector in August stayed slightly in contraction territory with the Jibun Bank manufacturing PMI printing at from in July. The services PMI showed growth improving further from to Andrew Harker of S&P Global Market intelligence said “Growth across the Japanese private sector picked up pace during August, with the service sector again driving the overall expansion amid ongoing improvements in new orders”. With overall new orders continuing to rise, firms upped their staffing levels accordingly. The weakness in manufacturing demand acted to deter hiring there, however, with no change in employment ending a month sequence of factory job creation. On prices Harker said “rising oil prices were a key feature across the latest survey, with firms across both manufacturing and services reporting an impact on input costs. Overall, input prices increased at the fastest pace in four months”. The Japanese y government yield set a new cycle high at % this morning. The yen gains marginally with USD/JPY trading near

The foreign exchange are mostly stable today, with major currency pairs and crosses staying confined within the boundaries set yesterday. Both Sterling and Euro have had a lackluster week, emerging as the weakest performers. US Dollar, while subdued, still fares better, positioned ahead of Canadian Dollar as the third least impressive for the week.

In an unexpected turn, Australian Dollar has taken the lead as this week&#;s strongest contender, with New Zealand Dollar following closely. Yen, meanwhile, is mixed amidst these shifts.

Today&#;s economic docket is relatively thin, spotlighting only US jobless claims and durable goods orders. However, neither is anticipated to induce significant market ripples. Instead, all eyes are glued to the unfolding developments at the Jackson Hole Symposium.

On the technical front, the Dollar&#;s momentary surge from yesterday lost momentum just as swiftly. Yet, the greenback hasn&#;t witnessed any pressing sell-off. As long as minor resistance in EUR/USD and in GBP/USD hold, further rally is expected in the greenback. Break of and temporary lows will suggest Dollar buyers are back in.

In Asia, Nikkei closed up %. Hong Kong HSI is up %. China Shanghai SSE is up %. Singapore Strait Times is up %. Japan year JGB yield is down at Overnight, DOW rose %. S&P rose %. NASDAQ rose %. year yield dropped to

Eyes on NASDAQ&#;s next move after Nvidia&#;s earnings triumph boosts confidence

Investor sentiment is given a strong lift as Nvidia&#;s earnings results demolish expectations, despite a high bar set for the AI darling. The strong performance  was driven by its data center business, which includes the A and H AI chips that are needed to build and run artificial intelligence applications like ChatGPT. The company also said it expects fiscal third-quarter revenue of about USD 16B, suggests sales in the current quarter will grow % from the year-earlier period.

NASDAQ traders jumped the gun and pushed the index up % on close, before the Nvidia&#;s earnings announcement. The development now argues that pull back from has completed at , just ahead of the medium term channel support, as well as % retracement of to at

More importantly, if this turn out to be true, rise from should then remain intact for another high above The upside momentum for the rest of the week, in particular in reaction to Fed Chair Jerome Powell&#;s Jackson Hole speech, would be watched to decide the odds of this bullish scenario.

Silver accelerates up, taking Gold higher

Silver&#;s impressive rally intensified yesterday, pulling Gold upwards in its wake. This surge seems to be a direct response to the retracement of benchmark treasury yields in both the US and Europe, which were affected by less-than-stellar PMI figures. Market sentiment is now swaying towards the belief that major central banks might be quickly approaching the finale of their tightening cycle. All eyes are set on upcoming Jackson Hole Symposium. While the spotlight is certainly on the speech by Fed Chair Jerome Powell, insights and comments from other prominent central bankers are also poised to influence market directions.

Technically, Silver&#;s strong break of 55 D EMA affirms the case that consolidation pattern from has completed with three waves to Further rise is now expected as long as this 55 D EMA (now at ) holds, to resistance first. Decisive break there should confirm this bullish case, and should also resume whole up trend from ( low). Next target would be % projection of to from at

As for Gold, a short term bottom is in place at , with D MACD crossed above signal line. Further rebound is now in favor to 55 D EMA (now at ). Sustained break there will argue that whole corrective pattern from has completed with three waves down to , after defending % retracement of to at Stronger rally would then be seen to resistance to confirm this bullish scenario.

Looking ahead

US jobless claims and durable goods orders will be released today. But attention will definitely be on news flows out of Jackson Hole Symposium.

GBP/USD Daily Outlook

Daily Pivots: (S1) ; (P) ; (R1) ; More&#;

GBP/USD is still bounded in established sideway pattern from , despite yesterday&#;s volatility. On the downside, firm break of and sustained trading below resistance turned support will argue that it&#;s already in a larger correction. Deeper decline would then be seen to support next. Nevertheless, break of minor resistance will indicate that the pull back from has completed, and turn bias back to the upside for stronger rebound.

In the bigger picture, a medium term top could be in place at already, on bearish divergence condition in D MACD. Sustained trading below 55 D EMA (now at ) should confirm this case, and bring deeper fall to % retracement of to at , as a correction to up trend from ( low). For now, rise will stay mildly on the downside as long as resistance holds, in case of strong rebound.

Economic Indicators Update

Today sees the start of one of the major annual economic events that could really shake up the markets. The Jackson Hole Symposium will run for three days, with the main event being tomorrow, when Fed Chair Jerome Powell gives his much anticipated speech in the middle of the New York trading session.

Markets are anticipating some kind of guidance about what will happen to interest rates in the near future. Even if specific guidance is not provided, the size of the event and expectations around it could still move the market, anyway. It&#;s expected to have global implications, thanks to the participation of other central bankers, such as the ECB&#;s President, Christine Lagarde. She will speak also on Friday, but after the markets close.

What to look out for

Last year, Powell gave what has been called a &#;shotgun&#; speech: A short and dramatic presentation that shocked the markets. He committed to raising rates to get inflation under control, regardless of the economic pain that might cause. That announcement was in keeping with the tradition of Jackson Hole being the scene for general shifts in policy.

Now, inflation has come down dramatically, the unemployment rate is below structural level, and the economy is still growing, contrary to expectations. Even though inflation isn&#;t fully down to target yet, it&#;s close. There is a strong consensus among economists that it takes several months for the full effect of interest rate policy to be seen in the economy. This supports the theory that inflation will keep coming down even if the Fed moves to keep rates steady, as the effects of prior tightening take hold.

Time to announce mission accomplished?

The markets are relatively certain that the Fed is at the end of its rate hiking cycle. The vast majority of traders expect no rate hike in September, and a majority expect no rate hike thereafter. The Fed&#;s position has been still that one more rate hike might be necessary.

The anticipation in the markets is that this could be an opportunity for Powell to announce that the hiking cycle is done, and now it&#;s time to wait and see. Some have gone so far as to suggest that Powell could provide hints that the Fed might consider cutting rates in the medium to long term due to the economic situation. A suggestion that rates have topped out for now &#; though likely couched in conditionalities around the data &#; might offer a relief valve for the markets. It could hurt the dollar, but open the flood gates on risk appetite.

Is it too soon?

After the last rate hike in July, inflation data came in better than expected. Jobs creation also slowed down. Earnings reports were generally positive. But, there is another round of labor and price data coming out before the next time the Fed meets.

That opens the possibility that Powell will stay the course, and repeat the rhetoric of closely monitoring the data, with additional hikes potentially necessary. While this might support the dollar at the expense of other currencies, particularly the yen, it will likely decrease interest in taking on risk. Safe havens could be the biggest beneficiaries of this potential outcome.

• If Powell indicates a more hawkish stance, it could trigger another significant yen selloff.

• Experts have criticized the BOJ’s loose monetary policies for raising import costs.

• Money markets predict the Fed will maintain rates within the %% range.

Today’s USD/JPY forecast is bearish as investors take profits before the Jackson Hole Symposium. The Japanese authorities are concerned about this week’s Jackson Hole symposium. They fear that if US central bankers indicate a more hawkish stance, it could trigger another significant sell-off in the yen. Consequently, this would compel Tokyo to intervene to support the currency.

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Initially, investors had anticipated Powell to consider ending interest rate hikes due to signs of inflation moderation.

However, the current concern for Japanese officials is that Powell might convey the opposite direction due to persistent price pressures. This could result in a repeat of last year’s scenario when the yen sharply depreciated against the dollar.

Though the yen’s trajectory is closely linked to the dollar’s movement, the currency’s weakness has become a political issue. It has caused issues for Prime Minister Fumio Kishida and the Bank of Japan. Moreover, experts have criticized the BOJ’s loose monetary policies for raising import costs. 

Meanwhile, money markets predict that the Fed will maintain rates within the %% range until the second quarter of the following year before considering easing. Yet, investors will closely scrutinize Powell’s speech on Friday for hints about potential additional rate hikes. 

USD/JPY key events today

Investors are expecting the S&P Global US services PMI report from August. Additionally, they will watch housing data, including the building permits and new home sales reports.

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USD/JPY technical forecast: Bears are in the lead within the consolidation.

On the charts, USD/JPY is bearish, but the price has entered a period of consolidation. This comes after bulls failed to go beyond the resistance level. The price has now found a range area with support at and resistance at

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At the moment, bears are in the lead within the range as the price sits below the SMA. Moreover, the RSI trades under the pivotal level. Therefore, the price will likely soon drop to A break below this level would start a bearish trend, with the next target at

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Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.

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The GBP/USD pair retreated to the important support at and then bounced back during the American session. The pair was trading at , where it has been throughout this month.

The GBP/USD pair initially dropped on Wednesday after the relatively weak flash manufacturing and services PMI numbers from the UK. According to S&P, the country’s manufacturing PMI dropped from in July to in August. This decline was lower than the median estimate of

Similarly, the services PMI declined from in July to , worse than the estimated As a result, the composite PMI, which looks at the manufacturing and services sectors, moved to A PMI reading of less than 50 is usually a sign that a sector is contracting.

Activity in the US was not good either as the manufacturing and services indices dropped to 47 and 51, respectively. On the positive side, the US published strong new home sales data. Sales jumped from k in June to k in July, a % increase even as mortgage rates jumped to a two-decade high.

Looking ahead, there will be important economic data from the US on Thursday as the statistics agency will publish the latest durable goods orders numbers. Economists expect the data to show that durable goods orders fell by % in July while core orders rose by %.

The most important catalyst for the GBP/USD will be the Jackson Hole Summit, where Jerome Powell and Andrew Bailey will talk. The two leaders will provide more guidance on what to expect in the coming meetings as signs of a slowdown emerge.

The GBP/USD pair dropped to the important support at This was a notable level since it was the lowest level on August 3rd and August 14th. It also coincided with the % Fibonacci Retracement level on the 4H chart.

The pair remains below the period moving average while the Relative Strength Index (RSI) moved to the neutral point at Therefore, the pair will likely remain in this range on Thursday as traders wait for the upcoming Jackson Hole meeting.

The key support level to watch will be while the resistance point to watch will be at

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Jackson Hole: a pivotal signal from the Fed dead ahead?

It’s been years since the annual Jackson Hole symposium hosted by the Kansas City Fed has generated as much attention as this year's powwow. The theme this year is “Structural shifts in the global economy”. Not particularly specific, but some possible big hints, given the massiveness of the topic. Is the title meant to suggest an update of the remarkable ECB President Lagarde speech back in April titled “Central banks in a fragmenting world.”? That speech got far less attention than it deserved.  In it, Lagarde outlined a number of geopolitical developments that required the central bank’s attention, most importantly the need for the central bank to support investment that lowers the risk of supply shocks stemming from an increasingly fragmenting world (Covid having laid bare the excess reliance on China for supply chains and the Russian invasion of Ukraine making Europe’s energy supply chains suddenly so fragile and more expensive). The paragraph below is perhaps the most crucial one in that speech:

"For example, if fiscal and structural policies focus on removing supply constraints created by the new geopolitics – such as securing resilient supply chains or diversifying energy production – we could then see a virtuous circle of lower volatility, lower inflation, higher investment, and higher growth. But if fiscal policy instead focuses mainly on supporting incomes to offset cost pressures (in excess of temporary and targeted responses to sudden large shocks), that will tend to raise inflation, increase borrowing costs and lower investment in new supply."

What would a Fed Chair Powell speech equivalent of this speech be this Friday ( GMT)? Something along the lines of the same: supporting US fiscal objectives which are largely intended to avoid excessive reliance on China/Taiwan for strategically important goods, most notably semiconductors. Those are the Biden administration’s Inflation Reduction Act and CHIPS and Science Act, which are remarkable in helping to drive expanding deficits at a time of virtual full employment. At the same time, the Fed has to at least hint that it is considering the elephant that everyone knows is in the room: unsustainable debt dynamics that will quickly worsen with these high deficits (which will only worsen further  in a recession) and as new treasury issuance rolls into higher yield territory.

What to do then? The old answer would have been to stop quantitative tightening and restart QE. But this is not yet acceptable when the inflation dragon has yet to be slain and labor markets are so tight. Rather, there is wide-ranging speculation that the Fed could be preparing the market for policy shifts that improve the demand dynamics for US treasuries in order to at least delay the spiraling risk of higher long rates due to “fiscal dominance”. This paper has gotten considerable attention on that front and suggests that lower interest on bank reserves to zero would help stave off a rising rate spiral by forcing banks to pay less on deposits, thus both lowering bank earnings and effectively taxing depositors with “real losses” via an inflation tax as banks can’t offer attractive yields on deposits. This would also encourage depositors to buy treasuries directly themselves. Market outcomes: hard to discern, if we get clear policy signals confirming the above, it is likely very bad for banks and possibly economic growth, but could also mean lower long yields – so most bullish for the yen?

Others see the Fed taking its longer run Fed policy rate projections higher (the projections published in the Fed’s quarterly “dot plot”). On that front, a Wall Street Journal op-ed from “Fed whisperer” Nick Timiraos put out over the weekend was titled “Why the Era of Historically Low Interest Rates Could Be Over” and argued that higher productivity and higher deficits are possibly set to reset the Fed’s attitude on the appropriate longer term policy rate. The hawkish surprise on this front would be language hinting that the September FOMC meeting will deliver a bump in the longer run rate projections, even if there is no pushback against the notion that is mostly priced that the Fed has reached its terminal policy rate for this cycle. Since , the median longer term rate projection has been pinned at %. Market outcomes: A rise in the longer run rate projectionswould be the scenario most likely to deliver USD strength and risk-off.

The ”boring” scenario would be a discussion of the above without any solid takeaways or hints on either longer term implications or what the Fed is set to deliver at the September FOMC meeting. Market outcomes: the US dollar and other currencies will revert to their usual correlations with risk sentiment/China and yield direction.

Table: FX Board of G10 and CNH trend evolution and strength.

The USD and GBP strength (the latter on BoE leading the tables on further hike projections), while the smaller G10 currencies are still dragging on the weak risk sentiment up until yesterday’s and today’s huge surge. As noted above, the Jackson Hole conference has considerable potential to reset the narrative in the short term.

By Tom Westbrook

SINGAPORE, Aug 24 (Reuters) - The dollar nursed a sharp pullback against Asian currencies on Thursday, after softer-than-expected global economic data muddied the interest rate outlook and pushed down U.S. yields ahead of the Federal Reserve's Jackson Hole symposium.

The Australian dollar, which has been taking a battering for a few months on signs of China's slowdown and resilience in the U.S., jumped % overnight after U.S. manufacturing and services PMIs missed expectations.

"Weaker than expected data led markets to scale back their expectations for U.S. policy," said Commonwealth Bank of Australia currency strategist Carol Kong, with jobless claims the next focus ahead of Fed Chair Jerome Powell's Friday speech.

The New Zealand dollar also leapt overnight, as did the yen, which crossed below to the dollar for the first time in more than a week tracking a sharp move lower in U.S. Treasury yields.

Further moves for the major pairs were only slight in Asia morning trade, leaving the Aussie at $, the kiwi at $ and the yen firming slightly to per dollar.

The dollar index, which measures the greenback against a basket of six major currencies remains higher for the month, but dipped about % overnight. PMI data was soft globally, which tempered gains for the euro and sent sterling on a wide-ranging round trip before it steadied around $

The euro held at $ in early Asia trade.

Europe's contraction in manufacturing output extended and services activity fell into decline, overnight surveys showed. British factory output slumped, leaving the economy on course for recession. U.S. business activity growth was its weakest since February as the economy seems to be starting to stall.

Ten-year U.S. yields tumbled 13 basis points (bps) to %, their sharpest one-day slide in more than three months, which has taken some of the heat out of recent rises.

"The dollar's correlation with rate differentials has been very strong in recent weeks," said Standard Chartered's head of G10 FX research, Steve Englander.

"However, concerns on global and China growth may be high enough for any slippage in yields that pushes the dollar lower to be seen as a buy-USD, sell-bonds opportunity," he said.

"Our baseline remains that the USD is vulnerable on a medium-term horizon, but in the short term, it is unclear how big a shift in the Fed outlook is needed to reverse current market trends."

China's yuan, which has been supported by state-bank buying in recent sessions, was steady at in thin offshore trade.

(Reporting by Tom Westbrook Editing by Shri Navaratnam )

By Tom Westbrook SINGAPORE, Aug 21 (Reuters) - The dollar began on a firm footing on Monday, following five straight weeks of gains, as investors looked ahead to Federal Reserve's Jackson Hole symposium for a guide on where rates might settle when the dust of this hiking cycle clears. The dollar made a gain of % on the euro last week, inched ahead on the yen and surged by more than 1% on the Antipodean currencies as U.S. Treasury yields leapt in anticipation of interest rates staying higher for longer. In early trade, the Australian dollar, steady at $, was just above last week's nine-month low of $ and the New Zealand dollar was pinned at $, also uncomfortably close to last week's low of $ They have suffered a double blow lately as in both countries central banks have indicated they are on hold, and both are exposed, via exports, to China where market fears about the slowing economy have swelled as property problems deepened. "The Australian dollar will continue to underperform this week in our view," said strategists at the Commonwealth Bank of Australia in a note to clients. "We consider there is a growing risk that the Aussie dips below $ before year-end. It will likely take a big Chinese stimulus package focused on commodity-intensive infrastructure spending to turn around the downtrend." China vowed financial support on the weekend to resolve local government debt problems but details were light and in the absence of more concrete promises traders are starting to lose faith that Beijing will ride to the rescue. For China the focus on Monday is on an expected cut to lending benchmarks. The yuan steadied at per dollar in offshore trade, having bounced off last week's lows when state banks stepped in as buyers during London and New York hours. The yen is also on intervention-watch, having fallen to levels around which authorities stepped in last year. It was steady at per dollar in early trade. The euro held at $ Sterling hovered at $ The Swiss franc was just above a six-week low made last week at per dollar. Apart from waiting for news of stimulus in China, the upcoming Jackson Hole symposium - where Fed chair Jerome Powell is due to speak on Friday - is markets' major focus and may set the direction for U.S. yields. Ten-year yields rose 14 basis points for the week and touched a month high of %, within a whisker of a year high. Thirty-year yields rose nearly 11 bps to their highest in more than a decade. The theme this year for the annual gathering in Wyoming is "structural shifts in the global economy". "Two things that may come across are: decades of ultra-low rates backed by ultra-low inflation may be over," said Vishnu Varathan, head of economics and strategy at Mizuho Bank in singapore. "And global policy-makers may prefer to maintain restrictive real rates for a while, thereby keeping risks from volatile inflation alive." Bitcoin, which was battered to a two-month low last week as rising U.S. yields and China's slowing economy drove a wave of selling, nursed those losses at $26, ======================================================== Currency bid prices at GMT Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $ $ +% +% + + Dollar/Yen +% +% + + Euro/Yen % +% + + Dollar/Swiss % % + + Sterling/Dollar +% +% + + Dollar/Canadian % % + + Aussie/Dollar +% % + + NZ Dollar/Dollar +% % + + All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ (Reporting by Tom Westbrook. Editing by Sam Holmes)