EURJPY TECHS: Corrective Pullback

August's inflation report is expected to show a slight pickup in headline CPI vs July when measured on a Y/Y basis, but flat on a sequential non-seasonally-adjusted basis. More importantly the Bank of Canada's preferred measures of core inflation are seen remaining steady, with risks perceived to be slightly to the downside.

• MNI's compilation of analyst forecasts shows a median headline expectation of 1.9% Y/Y headline CPI (1.73% prior), with NSA M/M of 0.0% (0.3% prior) and the average trim/median Y/Y at 3.03% (implying some downside risks to the average remaining steady at 3.05%). The range of headline estimates is 1.8%, to 2.1%, with the pickup on a Y/Y basis due to base effects and not sequential pressures.
• Y/Y ex-food and energy is seen picking up to 2.7% (2.5% prior) with seasonally-adjusted M/M between 0.2-0.3%, albeit both of these "consensus" figures have just two inputs apiece.
• While it's unlikely that anything but a huge surprise will dissuade the Bank of Canada from cutting rates by 25bp Wednesday, the pickup in core measures had been seen as a potential obstacle to further cuts this summer - so a continuation of July's trends could help shape the message that the BOC retains its easing bias.
• While headline CPI is seen picking up, it would mark the 5th consecutive month below 2.0%, and likewise though ex-food/energy is seen rising that's from July's 5-month low 2.50%. July's average trim/median was the highest since April but each of the last 3 readings have been in the 3.00-3.05% range.
• Indeed, momentum in core indices was seen to have waned in July versus signs earlier in the summer that they were picking up partly on the back of effects from the US-Canada trade conflict. On top of a slowdown in various seasonally-adjusted measures (ex 8 most volatile & ind. taxes SA 0.06% M/M was a 5-monnth low), the trim/median average annualized 3-month moving average fell to a 10-month low 2.4% from 3.4% in June, and well down from 3.6% at the April peak. The implication from analyst forecasts is that this measure could drop further in August, to 2.2% or 2.3%.

• RES 4: 0.8769 High Jul 28 and the bull trigger   
• RES 3: 0.8744 High Aug 7 
• RES 2: 0.8728 76.4% retracement of the Jul 28 - Aug 14 bear leg
• RES 1: 0.8687/8713 High Sep 5 / 2  
• PRICE: 0.8651 @ 19:45 BST Sep 15
• SUP 1: 0.8637/8597 50-day EMA / Low Aug 14 and the bear trigger
• SUP 2: 0.8562 50.0% retracement May 29 - Jul 28 upleg 
• SUP 3: 0.8540 Low Jun 30 
• SUP 4: 0.8514 61.8% retracement May 29 - Jul 28 upleg

The latest pullback in EURGBP appears corrective. Support to watch lies at 0.8597, the Aug 14 low. Clearance of this level would cancel a bull theme and reinstate a recent bearish threat. For bulls, a resumption of gains would open 0.8744, the Aug 7 high. Key resistance and the bull trigger is at 0.8769, the Jul 28 high. Note that moving average studies remain in a bull-mode position. This highlights a dominant uptrend.

• RES 4: 1.3753 High Jul 2  
• RES 3: 1.3681 High Jul 4
• RES 2: 1.3636 76.4% retracement of the Jul 1 - Aug 1 downleg
• RES 1: 1.3620 High Sep 15
• PRICE: 1.3605 @ 19:30 BST Sep 15
• SUP 1: 1.3475/3333 50-day EMA / Low Sep 3
• SUP 2: 1.3315 61.8% retracement of the Aug 1 - 14 bull leg
• SUP 3: 1.3249 76.4% retracement of the Aug 1 - 14 bull leg 
• SUP 4: 1.3142 Low Aug 1 and a key support      

A bullish theme in GBPUSD remains intact and price traded higher Monday. The pair has pierced resistance at 1.3595, the Aug 14 high and a bull trigger. A clear break of it would strengthen bullish conditions and open 1.3636, a Fibonacci projection. Initial support to watch is 1.3475, the 50-day EMA. A clear breach of the EMA would highlight a potential reversal and signal scope for a deeper retracement.