The story about Fed’s interest rate action continues. Positive sentiment in early Monday that was sparked by comments about possible rate hike as soon as September, was diminished by dovish comments by Fed Governor Lael Brainard, who said that Fed is removing support to the economy too quickly. The comments dampened September’s hike hopes, as initial hawkish comments proved to be just the noise.

The US dollar fell across the board on dovish comments that reduced bets about interest rate raise this month, but managed to recover part of losses in early Tuesday’s trading.
The greenback jumped against yen to 102 level, after hitting low at 101.40, recovering around 0.3% after making loss of 0.8% on Monday.
The Euro is flat in early Tuesday’s trading, holding around the mid-point of Monday’s 1.1209/67 range, showing indecision, signalled by Monday’s Doji candle.
Sterling remains tall against the dollar, trading within 30-pips consolidation, after posting recovery high at 1.3344 on Monday.
Firmer US dollar put its Australian counterpart under renewed pressure on Tuesday, after limited recovery attempts were capped at 0.7565.

Spot Gold trades just under Monday’s high at $1330, where recovery attempts were capped so far, with indecision signalled by Doji candle on Monday. The yellow metal received support by short dollar’s weakness but maintains overall negative tone that maintains risk of further easing.

Asian stocks regained ground and recovered part of Monday’s losses on Tuesday, supported by weaker dollar.
MSCI index recovered around 0.4% after tumbling 2.4% on Monday, while Japan’s Nikkei was up around 0.3%.
Hong Kong’s Hang SEng index recovered 0.8%, Shangai was up around 0.2%, South Korea’s Kospi 0.5%, while Australian stocks recovered around 0.1% on Tuesday.

Highlights of the day
Asia
China’s data, released on Tuesday, beat expectations, signalling economy is gaining momentum. Industrial production came at 6.3% in August, vs 6.0% in July and forecast at 6.1%.
China’s Industrial Output grew the fastest in five months on stronger demand for various products rose on higher government spending, credits and property boom.
Retail Sales beat the forecast at 10.3% and July’s release at 10.2%, on Augusts’ 10.6% release.

Europe
Tuesday’s calendar is full, with highlight of European session at UK and EU data.
Inflation in UK rose to 20-month high at 0.6% y/y in July, beating expectations of 0.5%, however, still holding well below 2% target rate.
Forecast for August stands at 0.7%, with markets expecting significant pick-up in the UK inflation, as a reaction of 0.25% rate cut that the BOE made after Brexit vote.
Data is due at 08:30 GMT.

German ZEW economic sentiment is another highlight. The data will provide information on economic sentiment in EU’s largest economy. Forecast for Septembers stands at 0.7% vs 0.6% in August. The last two releases have been below expectations that raised concerns about the outlook for the German economy. Repeated poor numbers would put more downward pressure on the single currency.
Release is due at 09:00 GMT
.

Important levels
EURUSD

The Euro weakens in early European hours on Tuesday and probes below the floor of overnight’s narrow consolidation range and pivotal Tenkan-sen / Kijun-sen supports at 1.1226/17. The pair is attempting to establish fresh near-term direction after Monday’s indecision, signalled by long-legged Doji.
Initial supports at 1.1226/17 were cracked and sustained break lower will open Friday’s low at 1.1197, which guards more significant daily Ichimoku cloud top at 1.1167.
At the upside, session high marks initial resistance at 1.1240, followed by Monday’s high at 1.1267 and last Friday’s peak at 1.1284.

GBPUSD

The pair maintains positive sentiment after Monday’s rally and bullish close that sidelined mounting downside risk. Near-term consolidation holds below Monday’s high at 1.3344, above which next pivots lay at 1.3362 and 1.3373.
Near-term action so far holds above initial support at 1.3300, with north-turning daily Tenkan-sen line, underpinning the action at 1.3284.
Downside pivots lay at 1.3237/32, loss of which will attract the lower breakpoint at 1.3165 (daily cloud base, reinforced by Kijun-sen line).

GOLD

Gold remains under pressure overall, with near-term action in consolidation mode after strong three-day fall. Monday’s trading ended in Doji after hitting fresh low at $1320. Tuesday’s price action showed some positive tone, but the upside attempts remain limited at $1330 zone (Monday’s high).
Extended corrective action on oversold condition cannot be ruled out, however, upticks are expected to hold below daily cloud top at $1341., Market Analysis