eFXplus DATA

• AUD/JPY spiked lower early Asia, as tit-for-tat US-China trade war unnerves
• Risk assets likely to remain volatile and keep the pressure on AUD/JPY
• One bit of good news is Trump backing away from command US companies leave China nL5N25L0H2
• AUD/JPY looks very bearish technically with next support around 67.00
• The 76.4 of the 55.11 GFC low and 105.43 high comes in at 66.99
• Resistance is found at the daily tenkan line at 71.56 and 10-day MA at 71.80

Citi and NAB highlights the importance of today's close level in AUD/NZD technical outlook. Citi flags a scope for bearish reversal on the daily if the cross closes today below 1.0578. NAB thinks that a weekly close back above 1.0580 would be bullish towards 1.0700/50.

"AUDNZD would post a bearish daily reversal if it closes below 1.0578 tonight," Citi notes. 

"We anticipate AUD/NZD producing a weekly close above the 50-week MA at 1.0580 in the coming one to two weeks. This will confirm a likely multiweek target / test of 1.0700/50," NAB notes. 

• GBP/USD breaks abv Thurs high to 25-day high 1.2279, then back to 1.2252
• Pair lifted by dovish Powell tones, to act as appropriately on rates
• Pres Trump fires new salvo in trade war boosts havens, UST, gold USD hit
• Trump presses U.S. companies to close China operations nW1N24C01I
• Brexit angst sidelined as players look for backstop alternative nL5N25J1VL
• Res Daily Kijun 1.2286, 1.2399 50% Fib of 1.2784-1.2015; supt 1.2151 21-DMA

TD Research discusses USD/CAD tactical outlook and flags a scope for a move lower towards its high-frequency fair-value model 'HFFV' around 1.3150-1.3200 over the coming day.

"At this time, we think USDCAD could buck USD pressure as we find the pair not really trading in line with the typical drivers. This suggests to us that the latest run-up has been driven with an obsession that Poloz could signal a September cut (which is not priced) this weekend. These hopes have been dashed however with the BOC confirming no media plans at Jackson Hole," TD notes. 

"We remind markets here that Poloz has said in the past that August is typically for vacation. In any event, a non-committal Powell means even more reluctance from Poloz. As a result, we think USDCAD will correct tactically lower in the coming days towards our HFFV near 1.3150/1.3200 as a realignment to front-end curve," TD adds. 

USD/JPY has made new session lows after Fed Chair Powell disappointed market participants that were hoping he would be more attentive to economic risks from the trade war nN9N23A02K, particularly after China just announced its retaliation for the latest U.S. tariff hikes .
Treasury yields have made new lows in response to Powell's centrist policy comments, less because of expectations of more rapid rate cuts, but as a risk-off response to what some see as a Fed falling behind the rate-cutting curve and eventually having to catch up.
USD/JPY is falling toward the 10-DMA at 106.27 and tenkan support by 106.
Falling Treasury yields and wobbling stocks make sell stops below 106 vulnerable.
If USD/JPY closes below 106 the focus shifts to August's 105.05 low by large 105 options defenses, followed by 2019's flash-crash low at 104.10.
Beyond the academic presentations upcoming from Jackson Hole, the market focus now shifts to President Trump's G-7 meetings and possible response to today's China tariff increases.

Bank of America Merrill Lynch Global Research discusses USD/CAD outlook and maintains a bullish bias, expecting prices to rise to 1.35 in 3Q, holding steady in 4Q and thereafter moderating to 1.32 by the middle of next year as risk premium compresses.

"The Canadian dollar has moderately weakened against the US dollar since late July, supported by higher market volatility and lower oil prices. Data in Canada remain solid, though we remain concerned that softening could lie ahead as trade policy risks have increased. We previously identified potential trade war escalation as a source of USD/CAD upside risk. This risk has become reality," BofAML notes. 

"Although we assess cyclical fair value at about 1.31 (assuming a Fed-BoC policy rate differential of +25bp by early next year), we expect more overshoot on the back of a firmer overall USD, higher US-China trade policy risk, lack of progress on USMCA ratification and continuing external sector financing risks specific to Canada. Therefore, we think that the exchange rate will remain in a moderate uptrend over the next few months, overshooting levels we see as consistent with equilibrium over the economic cycle," BofAML adds. 

MUFG Research discusses USD/JPY tactical outlook and adopts a neutral bias, expecting the pair to trade in 105-107.50 range in the near-term.

"The lower bound for USD/JPY will likely be firmly supported by Japanese yen selling flows.

Looking ahead, we think the direction of monetary policy is unlikely to be any clearer even after Jackson Hole. Many of the central bankers will likely discuss how to understand the present uncertainty under the political pressure and US-China trade conflicts," MUFG notes. 

"We expect USD/JPY to remain range bound," MUFG adds. 

• Sideways action continues to frustrate our 106.50 short play
• Repeated failures in the 106.70 area keep us in the game
• A break below the 10DMA, 106.30, is needed to rein in our 105.10 objective
• Daily momentum flips to positive having held negative values Since Aug 1
• Critical level for bear remains the Aug 13 106.98 high
• Weeklies are construcive but not convincingly so

Two outcomes are likely for EUR/USD after Federal Reserve Chairman Jerome Powell speaks at Jackson Hole today.
It will either drop immediately or rally a little -- then drop gradually to retest 1.1000 again.
Chances of a sustainable rise are remote.
Traders are not that short EUR/USD, while the level of interest rates supports a bigger drop.
The disparity between bets on a drop and the rewards for those that sell has been apparent all year.
Recently, the number betting on a fall has declined substantially, but the rate gap has only narrowed slightly.
To turn the EUR/USD trend, Powell would have to talk like President Donald Trump -- promising huge cuts totally at odds with the pillars of Fed policy, unemployment and inflation.
That's not going to happen.
The governor might speak about insulating the economy with further easing but the scope of such measures is unlikely to be greater than what's already priced in.

With so few traders betting on a rally, it's unlikely that Federal Reserve Chairman Jerome Powell will be dovish enough at Jackson Hole today to change the dollar's fortune a great deal .
Much bigger speculative betting means he could have more influence on GBP/USD .
And GBP/USD has begun to turn higher in advance of Powell's speech.
The rise has been fuelled by hopes for some kind of Brexit solution, and hope has fuelled a big rise before.
In 2017-18, when speculators held GBP/USD shorts about the same size as today's, the hope was a no-deal exit could be avoided.
Brexit delays have hurt since then, but the GBP/USD rise in 2017-18 stretched roughly 1.25-1.45.
Given the size of those gains, those short GBP/USD have reasons to worry.
If Powell suggest more U.S. rate cuts are coming, there may be a scramble to cover positions.

• EUR/USD trades to 1.1061 low in Asia (EBS) lowest since Aug 1 @ 1.1027
• Weakness apparent ahead Powell expected to be cautiously dovish
• Despite some adjustment markets still price 70bp of easing by March 2020
• Powell apt to disappoint Trump, fall short of markets betting on deep cuts
• Fed split showing. No cut George nFWN25I0FF Harker nFWN25I0FF
• Kaplan hopes to avoid more cuts nFWN25I0GA Kashkari wants cut nFWN25H01V

• -0.2% in Asia, at the base of a 1.2235/1.2264 range with solid volume
• EUR/GBP was also busy in a 0.9040/0.9051 range and trades +0.1%
• GBP sellers into yesterday's 1.1% bounce led - an opportunity?
• Daily charts suggest short term base in place, weekly charts remain bearish
• Break above 1.2151 21 DMA with a bullish 5 DMA cross of 10 & 21 DMAs
• Close above 1.2309, 38.2% June/August fall would be positive for next week

• AUD/USD trading slightly higher around 0.6760 after 0.6745/63 range in Asia
• Rebound in the NZD/USD from multi-year low on Orr comments helped underpin nS9N23B01M
• Lower than expected USD/CNY fix also provided some support for AUD/USD
• Market will likely stay in range ahead of Powell speech later today
• AUD/USD support at Aug 14 low at 0.6735 and break targets 0.6677
• Resistance @ 21-day MA @ 0.6794 and close above would suggest bottom forming

• Flat after a week of consolidation around 1.1100 - tight Asian range likely
• Italian president gives Tuesday deadline to avoid snap election nL5N25I205
• EU hopes to ease trade tension with U.S. at G7 summit nL5N25I57P
• Negative charts - 5, 10 & 21 daily, weekly and monthly MAs track south
• First supports at 1.1063, this week's low, then 1.1027 August trend base
• Major resistance at the falling 1.1179 well tested TL from the June high
• Combination of Jackson Hole and the G7 should spark a fresh levels next week

• RBNZ Governor told Bloomberg they can now afford to wait on monetary policy
• Orr comment alludes to the factors behind decision to cut 50 BPs last month
• His comments were made at Jackson Hole to Bloomberg TV nS9N23B01M
• NZD/USD trading around 0.6390 after closing NY session at 0.6362
• NZD/USD worst performing CCY Thursday after stops below 0.6375 triggered
• Tough resistance at 10-day MA (0.6419) which has held since July 24

• Flat, opened +1.1% after misinterpreting Merkel comments nL5N25I4DR
• Market is short, so cable is vulnerable to occasional topside corrections
• Irish back stop remains the sticking point for no deal Brexit - no progress
• Daily charts suggest short term base in place, weekly charts remain bearish
• Closed above 1.2151 21 DMA with a bullish 5 DMA cross of 10 & 21 DMAs
• Close above 1.2309, 38.2% June/August fall would be positive for next week

• AUD/USD closed 0.37% lower, as 0.67% fall in NZD/USD and EM selling weighed
• EM ETF (EEM) fell 1.3%, as global growth concerns continue to hurt sentiment
• Volumes light, as market awaits key speech from Fed Chair Powell
• AUD/USD up slighlty in Asia after WH advisor said trade talks productive
• AUD/USD support at Aug 14 low at 0.6735 and break targets 0.6677
• Sellers ahead of 0.6800 with resistance at 21-day MA at 0.6794
• Range trading expected in Asia ahead of Powell speech

Citi discusses the USD Index 'DXY' technical outlook and highlights the importance of the the 98.48 resistance for the USD direction over the coming weeks.

"Markets continue to watch 98.48 resistance on the USD Index (DXY) which if broken, could open up a return to the August highs at 98.93.

However, technical indicators also point out that the monthly chart is exhibiting potential momentum divergence similar to that seen in January 2017 (triple monthly momentum divergence.) IF this were to complete, it would suggest the danger that a top is in for the DXY. This indicator has been very successful in signaling turns in the past," Citi notes. 

"The fundamental key driver of USD direction though remains US – China trade talks. A possible trade deal in September would likely signal renewed weakness in USD. Absent that, we could see an elevated USD for the remainder of the year even if the Fed embarks on a gradual rate cut exercise in line with the Citi analysts view," Citi adds. 

• GBP/USD firm into NY close +1.07% at 1.2255; NorAm range 1.2273-1.2138
• Holds gain as more Merkel comments on backstop give bulls hope
• Merkel's backstop comments provide further boost for GBP/USD
• Abv 30-DMA (1.2258), next res 1.2309/1.2399, 38.2/50% Fibs of 1.2784-1.2015
• Former res at 21/10DMA (1.2160/1.2112) now support
• EUR/GBP -1.02% at 0.9055, Thurs range 0.9156-0.9029; softer Brexit, exp'd ECB cuts weigh

EUR/USD is holding near the middle of its overnight range, around 1.1090, as markets await Friday's Jackson Hole speech by Fed Chair Powell, which could pose significant risks to the euro after Wednesday's FOMC minutes release came out less dovish tack than markets expected. Currently, the market is pricing nW1N24C01M in at least two more Fed rate cuts by December 2020, with FEDWATCH on Eikon showing -59bps of easing by the Dec meeting.
If Powell clings to his mid-cycle view on rate adjustments, EUR/USD should slide to new 2019 lows and the effects of a stronger USD, akin to a rate U.S. hike, will be seen as slowing the U.S. economy -- but also muting global growth. For now, significant options interest between 1.1000 and 1.1200, Click here