Daily Report: Sentiments Improved on Easing Geopolitical Tensions

Risk sentiments improved further on easing geo political tensions. Asian equities are generally higher as US stocks extended this week’s rebound overnight. Reactions in the Japan yen was muted though as treasuries yields dropped in spite of strength in equities. Russian President Putin pledged that his government would do what they can “so this conflict comes to end as soon as possible and the bloodshed in Ukraine comes to an end”. In the Middle East, Israel and Hamas agreed to extend their ceasefire for a further 3 days. In Iraq, Nouri al-Maliki has agreed to step down as PM and back Haider al-Abadi to form a new government. These developments calmed investors although peace would merely last temporarily.

Sterling remains the weakest major currency this month. Q2 GDP revision from UK will be closely watched today and is expected to show 0.8% qoq growth, unrevised. Index of services is expected to rise 1% 3mo3m in June. In other occasions, we’d talked about the bearish outlook in GBP/AUD, where price actions from 1.7735 are viewed as a consolidation pattern and the fall from 1.9185 is anticipated to resume sooner or later. Indeed, the break of near term channel support is taken as the first sign of fall resumption. Near term outlook is mildly bearish for 1.7821. Break there will affirm the bearish case and should send GBP/AUD through 1.7735 to 38.2% retracement of 1.4380 to 1.9185 at 1.7349.

In US session, a bunch of economic data will be released. From US, empire state manufacturing index is expected to drop to 2 in August. PPI is expected to slow to 1.8% yoy in July with core PPI slowed to 1.6% yoy. TIC capital flow might rise to USD 27.3b in June. Industrial production is expected to grow 0.3% in July. U of Michigan consumer sentiment is expected to rise to 8.3 in August.

Daily Pivots: (S1) 0.9044; (P) 0.9071; (R1) 0.9101; More….

The consolidation from 0.9114 continues and intraday bias remains neutral. Deeper decline could be seen as the consolidation extends. Below 0.9032 will turn bias to the downside and extend the correction to near term channel support (now at 0.8983). Strong support would likely be seen there to bring another rally. Above 0.9114 will target 0.9156 key resistance next. However, sustained break of the channel support will indicate reversal and target 0.8855 and below.

In the bigger picture, price actions from 0.9971 are viewed as a correction pattern. The break above 55 week EMA argues that it might be finished at 0.8698 already. Focus is back on 0.9156 resistance. Decisive break there should confirm this case and turn outlook bullish for a test on 0.9971 high. Meanwhile, break of 0.8855 near term support will dampen this bullish view and would extend the correction to 50% retracement of 0.7065 to 0.9971 at 0.8518 and below. In that case, we’ll start to look for reversal signal below 0.8518 again.

USD/CHF 4 Hours Chart

USD/CHF Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
08:30
GBP
GDP Q/Q Q2 P

0.80%
0.80%

08:30
GBP
Index of Services 3M/3M Jun

1.00%
1.00%

12:30
CAD
Manufacturing Shipments M/M Jun

0.50%
1.60%

12:30
USD
Empire State Manufacturing Aug

20
25.6

12:30
USD
PPI M/M Jul

0.10%
0.40%

12:30
USD
PPI Y/Y Jul

1.80%
1.90%

12:30
USD
PPI Core M/M Jul

0.20%
0.20%

12:30
USD
PPI Core Y/Y Jul

1.60%
1.80%

13:00
USD
Net Long-term TIC Flows Jun

27.3B
$19.4B

13:15
USD
Industrial Production Jul

0.30%
0.20%

13:15
USD
Capacity Utilization Jul

79.20%
79.10%

13:55
USD
U. of Michigan Confidence Aug P

83
81.8

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