Mid-Day Report

Dollar Rebound Extends after Solid ADP Employment, GDP Upward Revision

Typography

Dollar's rebound gathers additional steam in early US session after better than expected job data. AFP report showed 237k growth in private sector employment in August, beating expectation of 188k. Q2 GDP growth was also revised up to 3.0% annualized, up from 2.6% and beat expectation of 2.7%. Besides, US President Trump will finally kick-off his campaign on tax reform today. Trump will deliver a speech in Springfield, Missouri, and will likely tout the tax reform as a way to help the working class as well as the middle class. If the speech is consistent with Trump's usual rhetorics, it will likely focus on the "why" aspects of the reform. However, the markets would be more interested in know the "how" aspects of it. Nonetheless, for now, Dollar selling is likely past a climax and more upside is mildly in favor, at least until non-farm payroll release on Friday.

Risk aversion recedes as Korea tension didn't escalate

Risk aversion recedes today as the tension in Korea Peninsula didn't escalate after North Korea's firing of missile over Japan on Tuesday. The United Nations Security Council issued a condemned Presidential Statement and condemned North Korea for its "outrageous actions. UNSC demanded that the North-East Asia country "immediately cease all such actions." UNSC warned that the actions were "not just a threat to the region" but to "all UN Member States". And such actions "deliberately undermining regional peace and stability and have caused grave security concerns around the world." UNSC also demanded North Korea to "abandon all nuclear weapons and existing nuclear programs in a  "in a complete, verifiable and irreversible manner, and immediately cease all related activities".

UK PM May in first official Japan visit

UK Prime Minister Theresa May arrives in Japan today for her first official visit. May is accompanied by a large British trade delegation and she'll have an informal dinner with Japan Prime Minister Shinzo Abe. Formal talks will begin tomorrow, focusing issues regarding Brexit and bilateral economic cooperation between the two countries. However, it's reported earlier in the week that Japan would refrain from any agreement with UK until the Brexit picture becomes clear. And it's perceived Abe would also be cautious with UK as he's concerned with an inward-looking post-Brexit UK.

Coming at a point just after North Korea fired a missile over Japan, defense and will involving East Asia will certainly be a topic of discussion too. May called the missile launch as a "reckless provocation" and illegal testes". May "strongly condemn them and we will be working with Japan and other international partners to ensure that pressure is put on North Korea to stop this illegal action." May also urged China to exert "further pressure" including extending sanction. But a Chinese foreign ministry spokesman said that the focus should be on de-escalating the tensions rather than "just chanting about sanctions".

Swiss KOF points to steady growth

Swiss KOF leading indicator dropped to 104.1 in August, down from 106.8, missed expectation of 107.0. That's the first decline in three months. Nonetheless, KOF pointed out that "it still points to a level clearly above its long-term average." And, since the readings in the last few months "do not reveal any clear down-or upward trend", it suggests " a continuation of growth with rates above average, but no further acceleration should be expected." Also from Swiss, UBS consumption indicator was unchanged at 1.38 in July.

Eurozone confidence improved

Confidence indicators in Eurozone generally improved in August. Business climate rose to 1.09, up from 1.05 and beat expectation of 1.05. Economic confidence rose to 111.9, up from 111.2, beat expectation of 111.3. Industrial confidence rose to 5.1, up from 4.5, above expectation of 4.7. Services confidence rose to 14.9, up from 14.1, above expectation of 13.9. Consumer confidence was finalized at -1.5. From Germany, CPI rose to 1.8% yoy in August, in line with consensus.

Elsewhere, Japan retail sales rose 1.9% yoy in July. Australia construction work done rose 9.3% in Q2, building approvals dropped -1.8% mom in July. New Zealand building permits dropped -0.7% mom in July. UK BRC shop price index dropped -0.3% yoy in August.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1921; (P) 1.1996 (R1) 1.2046; More...

Retreat from 1.2069 extends lower today and deeper fall could be seen to 4 hour 55 EMA (now at 1.1866). But downside should be contained well above 1.1661 support to bring rise resumption. Above 1.2069 will extend the whole rally from 1.0339 to 61.8% projection of 1.1118 to 1.1908 from 1.1661 at 1.2149 first. Break there will target 100% projection at 1.2451 next.

In the bigger picture, an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Sustained trading above 55 month EMA (now at 1.1768) will pave the way to key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. While rise from 1.0339 is strong, there is no confirmation that it's developing into a long term up trend yet. Hence, we'll be cautious on strong resistance from 1.2516 to limit upside. For now, medium term outlook will remain bullish as long as 1.1295 support holds, in case of pull back.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:45 NZD Building Permits M/M Jul -0.70% -1.00% -1.30%
23:01 GBP BRC Shop Price Index Y/Y Aug -0.30% -0.40%
23:50 JPY Retail Trade Y/Y Jul 1.90% 1.00% 2.10% 2.20%
01:30 AUD Construction Work Done Q2 9.30% 1.00% -0.70% 0.90%
01:30 AUD Building Approvals M/M Jul -1.70% -5.00% 10.90% 11.70%
06:00 CHF UBS Consumption Indicator Jul 1.38 1.38 1.3
07:00 CHF KOF Leading Indicator Aug 104.1 107 106.8
08:30 GBP Mortgage Approvals Jul 69k 65.5k 64.7k
08:30 GBP M4 Money Supply M/M Jul 0.50% 0.40% -0.20% -0.10%
09:00 EUR Eurozone Business Climate Indicator Aug 1.09 1.05 1.05 1.04
09:00 EUR Eurozone Economic Confidence Aug 111.9 111.3 111.2 111.3
09:00 EUR Eurozone Industrial Confidence Aug 5.1 4.7 4.5
09:00 EUR Eurozone Services Confidence Aug 14.9 13.9 14.1 14.2
09:00 EUR Eurozone Consumer Confidence Aug F -1.5 -1.5 -1.5
12:00 EUR German CPI M/M Aug P 0.10% 0.10% 0.40%
12:00 EUR German CPI Y/Y Aug P 1.80% 1.80% 1.70%
12:15 USD ADP Employment Change Aug 237K 188K 178K 201K
12:30 USD GDP (Annualized) Q2 S 3.00% 2.70% 2.60%
12:30 USD GDP Price Index Q2 S 1.00% 1.00% 1.00%
14:30 USD Crude Oil Inventories -1.8M -3.3M