US TSYS: Extending Lows

• RES 4: 1.3814 High Jan 30 
• RES 3: 1.3733 High Feb 4
• RES 2: 1.3696 76.4% retracement of the Jan 27 - Jun 24 bear cycle
• RES 1: 1.3603/76 High Aug 27 / 21 and the bull trigger
• PRICE: 1.3499 @ 16:48 BST Sep 02
• SUP 1: 1.3480 50-day EMA 
• SUP 2: 1.3475 Low Sep 02
• SUP 3: 1.3419 Trendline support drawn from the Jun 24 low 
• SUP 4: 1.3333 Low Jul 30

A bull cycle in GBPUSD remains intact and the latest pullback appears corrective. Note that the pair is approaching an important short-term support and pivot level at 1.3480, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement and expose a trendline support at 1.3419. The trendline is drawn from the Jun 24 low. Initial firm resistance to watch is 1.3603, the Aug 27 high. A breach of it would signal a bull reversal.        

Swiss August CPI data will be released tomorrow 07:30 BST / 08:30 CEST, followed in by a detailed Q2 GDP release at 08:00 BST / 09:00 CEST. The figures will form key inputs for the September 24 SNB decision, but even a large surprise seems unlikely to sway the bank away from a firmly priced hold at the meeting.

• Headline CPI is seen accelerating to 0.5% Y/Y after July's 0.35% print. A consensus print would mean Q3 CPI to date prints below the 0.6% SNB forecast. Despite this, the bank should remain calm around that, as they see inflation to accelerate gradually in coming quarters, with a temporary high of 0.8% in Q4 projected.
• This means the odds of a medium-term undershoot of the SNB's 0-2% target range are lower than they had been during the low-inflation period prior to the US-Iran war. The bank mirrored this assessment in their June minutes, saying "at present, inflation cannot be expected to rapidly rise above 2% or fall into negative territory", warranting a hold at 0%.
• On Swiss Q2 GDP, consensus sees confirmation of the notably high 1.5% Q/q flash print on a sports-event adjusted basis (which would imply a 6.0% SAAR rate). Recall that the statistics office added that "the industrial sector made the largest contribution to growth, which was driven in particular by the chemical and pharmaceutical industry. The services sector also grew as a whole" in terms of qualitative commentary to the flash release (which only contained the headline print).
• On the margin, higher growth acts as an inflation-positive over the medium term. Tomorrow's data will reveal to what extent the print is a one-off, which would reduce its feedthrough to projections for the likes of CPI.

• RES 4: 1.1797 High May 6 
• RES 3: 1.1742 High May 13
• RES 2: 1.1725 76.4% retracement of the Apr 17 - Jun 24 bear leg 
• RES 1: 1.1658/1711 High Aug 28 / High Aug 20 & 21 and bull trigger
• PRICE: 1.1592 @ 16:47 BST Sep 02
• SUP 1: 1.1566 Low Sep 02
• SUP 2: 1.1552 50-day EMA
• SUP 3: 1.1512 Low Aug 13
• SUP 4: 1.1455 Low Jul 31

A bull cycle in EURUSD remains intact and for now, the latest pullback is considered corrective. However, the pair is trading at its recent lows and attention is on the next important support at 1.1552, the 50-day EMA. A clear break of this average would undermine the bull theme and signal scope for a deeper retracement. For bulls, a resumption of gains would refocus attention on the bull trigger at 1.1711, the Aug 20 and 21 high.