What we are looking for

  • USD continued to strengthen: The higher yields are continuing to drive USD strength across major forex, with USD/JPY especially higher.
  • Indices struggling again: Higher yields and a stronger USD also translate to selling pressure on equity markets. European indices play catch-up on late falls on Wall Street, but US futures are also lower again.
  • Commodities fall back again: Higher bond yields weigh down commodities. Oil has broken to seven-month lows.
  • Data trading: EUR traders will watch for any surprise revision to the final Eurozone GDP (albeit unlikely). USD traders will keep an eye on the US Trade Balance. CAD traders will find volatility around the Bank of Canada decision.


Market sentiment continues to struggle with the prospect of tighter monetary policy. The US ISM Services PMI data beat expectations, with better than expected order books, but also the prices paid component also remained high. This suggests that economic activity remains positive but inflation is still an issue to be tackled. That feeds the expectation of a more hawkish FOMC monetary policy. US Treasury yields have moved decisively higher again, and the USD has strengthened.

However, higher yields and a stronger USD do not bode well for commodities. Gold and silver both turned decisively back lower yesterday. We are also seeing the oil price falling to multi-month lows this morning. This also equates to selling pressure on equity markets too. Wall Street fell in the wake of the ISM data and US futures continue to fall this morning. A strategy of selling into near-term strength remains viable. Elsewhere, the lower-than-expected growth in Chinese imports and exports adds to the negative sentiment surrounding markets today. 

The economic calendar has a big North American focus today. However, initially the loose ends of the Eurozone final Q2 GDP need to be tied up. However, with no revision expected it is likely to be rather uneventful. The US Trade Balance is expected to continue its recent improvement in July, close to a deficit of -$70bn which would be the lowest in nine months. The Bank of Canada will be the key event of the day, with an expectation of another 75bps hike. The question is whether it will continue the aggressive tightening in the months to come. The Fed’s Beige Book will add more meat to the bones of the Fed’s economic outlook for the US.

Today’s news

Market sentiment is struggling again this morning: Risk off and USD strength remain dominant

Treasury yields consolidate after yesterday’s rise: more of a consolidation in yields today after the US 10-year yield increased by +15bps yesterday.

Australian GDP slightly misses: Q2 growth came in at +0.9% which was slightly under the +1.0% consensus expectation. On a risk negative day, this is not helping AUD.

The Chinese trade surplus reduces: The balance fell to +$79.4bn (from +$101.3bn in July). The move came with the reduction in export growth falling to 7.1% YoY and import growth to +0.3% YoY. Both were lower than expected.

Cryptocurrencies falling again: Support has given way. After a phase of tight consolidation, Bitcoin has fallen sharply in the past couple of days. Bitcoin fell almost -4% yesterday and is another -1% this morning, back to test the support of late June lows between $18550/$18890.

Three Fed speakers due: The FOMC’s Barkin (voter in 2024, solid hawk) speaks at 13:00 GMT. Mester (2022 voter, strong hawk) speaks at 14:00 GMT. Brainard (permanent voter, dovish) speaks at 16:35 GMT.

Economic Data:

  • Eurozone GDP – Q2 final (09:00 GMT) The third and final reading of Q2 growth is expected to be unrevised at +0.6% (slightly higher than the +0.5% final Q1).
  • US Trade Balance (12:30 GMT) The trade deficit is expected to improve to -$70.3bn in July (from -$79.6bn in June)
  • Bank of Canada monetary policy (14:00 GMT) A +75bps rate hike is expected to take the interest rate to 3.25% (from 2.50%)
  • Fed Beige Book (18:00 GMT) 

Major markets outlook

Broad outlook: USD strength with a risk-negative bias.

Forex: The JPY is very weak again, whilst the USD is also weakening against the EUR and GBP.

  • EUR/USD saw a potential near-term recovery scuppered by a bull failure yesterday as the pair once more pressured back below 0.9900. This is testing 20-year lows again. Although there is still a lack of conviction in the selling, near-term rallies continue to struggle and there is a building band of resistance around 0.9950/0.9985 under parity. This adds to further resistance around 1.0030 and up towards 1.0095. With recoveries on the four-hour chart RSI continuing to fail around 50/60 this remains a sell into strength. 
  • GBP/USD failed in an attempted recovery in a move that has strengthed the resistance around 1.1590/1.1620. The four-hour chart shows the RSI consistently failing around 50 which suggests selling into strength. We favour further pressure on the low at 1.1443 and the post-COVID low at 1.1410.  
  • AUD/USD has fallen sharply despite the RBA rate hike and is lower again this morning. With a negative momentum configuration, near-term strength is a chance to sell. Recent bull failures are bolstering the resistance at 0.6840/0.6870. The support of the July low of 0.6680 is still likely to be tested.  

Commodities: The near-term recovery in precious metals continues, with oil also moving higher near-term.

  • Gold posted a bull failure in the key near-term resistance between $1720/$1726. This plays into the strategy to sell into strength. With the negative configuration of the daily RSI, we continue to favour a retest of $1680 in due course. Initial support is at $1688/$1690 now. A one-month downtrend is a basis of resistance around $1723 today.
  • Silver has simply re-affirmed the bearish outlook following yesterday’s bull failure. Leaving a reaction high at $18.58 has developed a band of overhead supply between $18.14/$18.58 which is where the market has failed in each of the past three completed sessions. It points to selling into strength, with a three-week downtrend falling at $18.38. We expect a retest of $17.55 in due course.
  • Brent Crude oil has fallen over to break the support at $93.25 and break the market to new seven-month lows. The configuration of daily RSI suggests that unwinding moves towards 50 remain a chance to sell. The resistance at $96.75/$98.30 is increasingly important now. The next support of note is around $90.45.

Indices: Yet again, intraday rallies are seen as a chance to sell. 

  • S&P 500 futures have fallen over again and any positive implications of the bull hammer have been scuppered. Another intraday rebound was sold into yesterday and the market has closed below the support at 3913. There is a mild rebound early today, but given how recent sessions have gone, there remains a bias to sell into strength. Initial resistance is around 3962 with the importance of resistance at 4018 growing. Below initial support at 3883 there is little support until 3820 and arguably 3724.
  • German DAX has been struggling to sustain recovery traction. Although support around 12590 has held in recent days, the intraday rallies are struggling to hold any recovery traction. The resistance of a sharp three-week downtrend is being tested, but there is considerable resistance overhead to restrict a recovery. Yesterday’s high at 12922 comes before the more considerable pivot area of resistance around 13010/13150. We favour selling into strength for a further test of 12590 in due course. 
  • FTSE 100 has seen a recovery falter around the resistance band between 7310/7370. This is overhead supply and bull failures will be a risk. An intraday rebound from initial selling pressure will need to get through the 7260/7275 resistance area to prevent another bull failure. The four-hour RSI now faltering between 50/55 suggests that rallies are increasingly struggling. Initial support at 7180 protects a retest of 7127. 

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.