EUR: Phase of EUR Weakness Stands Out, EUR/USD Within Range of Sizeable Strike

German core CPI momentum (3m/3m seasonally-adjusted) was fractionally lower in August than in July, at 0.57% vs 0.60% according to Bundesbank data released late Friday afternoon. That is technically the lowest since March, equivalent to 2.3% annualized at it starts to near the ECB's 2% inflation target.

• A marginal slowdown was seen in both services and manufactured goods ex-energy.
• Services momentum continued its downward trend, ticking down to 0.60% in August (0.63% July), its lowest rate since August 2022 (2.4% in annualized terms). On a sequential comparison, services printed 0.34% M/M this time (0.09% July, and 4.2% annualized).
• Manufactured good ex-energy ('core goods') meanwhile saw a 3m/3m SAAR rate of 0.37% in August (1.5% annualized), down from 0.42% in July and the first move lower in the category after three consecutive rises. On a sequential comparison, core goods printed 0.17% M/M in August (0.42% July, and 2.0% annualized).

• In FX, EURUSD has recovered from last week’s low. The trend set-up is bullish and short-term pullbacks are considered corrective. Note that the pair has pierced key support around the 50-day EMA, currently at 1.1607. A clear break of the average would signal scope for a deeper retracement. Key resistance and the bull trigger is at 1.1829, the Jul 1 high. A break would resume the primary uptrend.
• The outlook in GBPUSD remains bullish and the pair continues to trade above support. The Aug 22 price pattern - a bullish engulfing candle - signals the end of a recent corrective phase. An extension higher would open the short-term bull trigger at 1.3595, the Aug 14 high. Clearance of this level would signal scope for a climb towards 1.3636, 76.4% of the bear leg between Jul 1 and Aug 1. Key short-term support is 1.3391, the Aug 22 low.
• A bear threat in USDJPY remains present and the pair is trading closer to its recent lows. The short-term bear trigger lies at 146.21, the Aug 14 low. Clearance of this level would resume a downtrend that started early August and pave the way for an extension towards 145.40, 50% of the Apr - Aug upleg. For bulls, a resumption of gains would instead open 149.12, 61.8% of the Aug 1 - 14 bear leg.

OI data points to a mix of net long setting and short cover through SFRU7 on Friday, before a mix of net short setting and long cover came to the fore further out the strip, as SOFR futures twist steepened. Position setting outweighed cover in curve-wide terms.