GBP/USD Cable extends directionless mode into fourth straight day, trading between 10DMA (1.1923) which offers solid support and strong barriers at 1.20 zone (psychological / falling 20DMA / Fibo 38.2% of 1.2406/1.1760 bear-leg. Pound benefited from stronger than expected UK PMI data, but remains weighed by weaker Euro on downbeat EU PMI’s and also by a new legal procedure the European commission launched against Britain over some rules governing post-Brexit trading arrangements for Northern Ireland. Technical studies on daily chart remain bearishly aligned and maintain pressure, with weekly close below 1.20 barrier to add to negative signals, though only sustained break below 10DMA would confirm recovery stall and shift near-term focus lower.  Res: 1.2000; 1.2007; 1.2045; 1.2083. Sup: 1.1923; 1.1890; 1.1861; 1.1804. Interested in GBP/USD technicals? Check out the key levels

There is one forsaken instrument on the market, and it could be this week’s winner, especially over the last two days. That instrument is gold. Gold has had a real rollercoaster ride this year. From long-term highs, above the 2000 USD/oz, to yearly lows, on 1680 USD/oz, in just a few months. The reason gold can shine again is that we finally see some demand here. On the chart you have weekly candles, and where we’re about to see the first bullish week since the beginning of June. That is something, especially since the bounce isn’t happening in some random place. No, XAUUSD is bouncing off 1680 USD/oz (green) an absolutely crucial horizontal support which has been helping lift the price since the middle of 2020. Also, the way the price bounces in and of itself isn’t random. Gold’s created a candle with a long tail and a bullish body on top – a hammer! Taking all that into consideration, our view on gold is positive, and for the first time in weeks. Previously, we were strongly bearish, mostly because of this yellow pattern, the head and shoulders (H&S) formation. However, as it meets and bounces off the 1680 USD/oz support, the influence of the H&S pattern fades away. Our view cancels should the price break the green support, but chances for that happening are now limited.

European central bank and President Lagarde surprised the market but the euro reaped only temporary gains. In a European economy that is in doubt and facing significant and fundamental problems an aggressive move of 50 basis points increase in key interest rates is definitely a decision with some risk. Today's announcement of the shrinking private sector in Germany confirms these concerns and has put the European currency in an environment of new pressures. The clouds of the possibility of stagflation in the European economy remain with the risk that the European Central Bank's attempt to control high inflation could endanger the development path of the European economy. In this environment, the European common currency made some gains in the wake of the announcement but failed to break the critical resistance levels of 1,0280-1.0300. International stock markets are showing signs of fatigue after recent bullish sessions leading to re-positions for the dollar as a safe haven currency. Although the decisions of the European Central Bank surprised us and were not in accordance with our basic scenario, the difficulty of the Euro to maintain the gains was quite expected as we noted in yesterday's report. Despite a strong upward reaction of almost 300 basis points in recent days which  driving the pair from the 0,9950 levels to 1.03  threshold  , the momentum seems to be returning to the downside . We would prefer to maintain a neutral position for the duration of the day awaiting lower levels for a possible repositioning in favor to euro .

US equities were stronger Thursday, S&P up 1.0%. US bonds rallied, 10yr yields down 15bps to 2.87% and 2yrs to 14bps after weak US data. Oil closed down 2.6%. but off the overnight lows The US employment situation is turning ugly as US continuing claims spiked higher, up to 1384k from 1331k the week prior. There are increasing reports of companies putting in place hiring freezes, if not moving to layoffs. Ford is reporting it has "too many staff." Meanwhile, Philadelphia Fed manufacturing at -12.3 has retraced half of the post-pandemic recovery.  But it is still a case of bad data is still good news for stocks and very much highlights the disconnect between Wall Street and Main Street.  What's good for Main Street and what's good for Wall Street aren't necessarily the same thing. Mainly because the financial markets, by their very nature, pull events forward, whereas the public lives the economic slowdown in real-time. By slashing staff, companies can preserve profits, and with the uptick in unemployment, the Fed is forced to reverse course with rate cuts supporting equity multiples. Eventually, the pendulum will swing again in favour of Wall Street over Main Street. OIL Oil is struggling amid concerns of increasing supply and a drop in gasoline demand in the US.  A counter-seasonal buyer's strike at the pump sees the US peak driving season running below the same week in 2020 as higher fuel prices hit consumption.  Production in Libya has risen to 700k bbl/day and is expected to return to 1.2mn bbl/day in a week after restrictions on the country's exports were lifted.  Also, US Deputy Treasury Secretary Adeyemo said a price cap on Russian oil should go into effect by December, allowing Russian energy to flow into the market.  Meanwhile, the Asian Development Bank lowered its GDP growth for China by 0.5pp, to 4.6% for 2022, due to the impact of the country's Zero Covid policy, which added further concerns on slower demand growth. ECB The ECB removed negative rates in one go, but the market, in the end, traders saw a dovish 50bp hike flashing across their screens. The terminal rate price remains at just below 1.5%, but that level seems vulnerable to the downside risks to growth that the ECB sees.  Considering early comments from ECB President Lagarde, it sounds like yesterday's 50bp hike was opportunistic. In the background, the hawks were squawking, "Could you get a jumbo rate hikes done while there's still a chance?" The ECB has long wanted to get out of negative rates and even more so with the EURUSD breaching parity. As we suggested yesterday, many macro traders went into the ECB decision with the plan to sell into EURUSD rallies which happened right on our 1.0270-80 sell order as the post ECB price action played out precisely as scripted. Rates traders were split going into the ECB, so when the 50bp decision was announced, the market immediately priced an excellent probability for 75bp in September, which boosted the euro. However, market sentiment changed towards the dovish side when ECB President Lagarde noted that the previous guidance for 50bp was 'not applicable' anymore, driving EURUSD back to below where it had started.  GOLD Gold is higher on softer US yields after weaker US data, especially on the employment claims, marginally increased the odds of a Fed pause. Ultimately, we expect gold to trend higher against the backdrop of slowing growth, rising recession risks, and as the Fed shifts back towards a more accommodative policy stance. 

EUR/USD The Euro recovers from today’s drop, with minor impact from weak EU PMI numbers that add to concerns about contraction in the third quarter but lacking direction for the third quarter. The single currency also failed to benefit more from ECB’s 0.5% rate hike (vs 0.25% forecast), though the ECB’s action keep the Euro inflated and preventing deeper fall for now, despite concerns about economic slowdown and darkened outlook. Near-term action is moving between daily Tenkan-sen (1.0115) and Kijun-sen (1.0283) which mark pivotal points and break of either would signal fresh direction. Traders await Fed’s decision next week, with initial euphoria about a jumbo 1% hike being cooled by some policymakers, keeping in play expected 0.75% that may disappoint those who expected more hawkish stance and possibly negatively influence the dollar. Technical studies are mainly bearish, though formation of bullish engulfing pattern on weekly chart may offer fresh support to Euro Res: 1.0283; 1.0330; 1.0361; 1.0400. Sup: 1.0205; 1.0153; 1.0115; 1.0078. Interested in EUR/USD technicals? Check out the key levels

EUR/USD The Euro recovers from today’s drop, with minor impact from weak EU PMI numbers that add to concerns about contraction in the third quarter but lacking direction for the third quarter. The single currency also failed to benefit more from ECB’s 0.5% rate hike (vs 0.25% forecast), though the ECB’s action keep the Euro inflated and preventing deeper fall for now, despite concerns about economic slowdown and darkened outlook. Near-term action is moving between daily Tenkan-sen (1.0115) and Kijun-sen (1.0283) which mark pivotal points and break of either would signal fresh direction. Traders await Fed’s decision next week, with initial euphoria about a jumbo 1% hike being cooled by some policymakers, keeping in play expected 0.75% that may disappoint those who expected more hawkish stance and possibly negatively influence the dollar. Technical studies are mainly bearish, though formation of bullish engulfing pattern on weekly chart may offer fresh support to Euro Res: 1.0283; 1.0330; 1.0361; 1.0400. Sup: 1.0205; 1.0153; 1.0115; 1.0078. Interested in EUR/USD technicals? Check out the key levels