Forex today: dollar to push higher now that liquidity returns

• Forex today was quiet across the time frames given the labour-day holidays.
• Essentially, prices were driving back after Friday's spike in the greenback and various cross-currents of fundamentally bearish news for most other currencies outside of the CHF and Yen. 
• The European session saw the DXY in consolidation between 95.01 to 95.21 and the dollar remains firm in a non-eventful Labour day shift in NY. 

The dollar is eyeing the 95.70 mark with the price above the H&S neckline and a subsequent run higher will determine the market's next broad-based positioning. The fundamentals are in place for more to come from the dollar, noting particularly that heightened capital outflows from emerging markets and an indication from the FOMC that rates could be increased by a total of 4 times this year has been underpinning the upside for the seventeenth consecutive week. The questions is, what can break a chink in this chain of events to cap the dollar and actually put a correction in place? 

The mid-August sell-off from the tops of the H&S in the DXY from a pip below 97 the figure was a mix of Chinese intervention, Trump's jawboning, Powell's surprise dovishness along with Turkey attracting international aid from Qatar and glimmers of hopes that the world will sidestep an emerging market contagion catastrophe and indeed markets cheered the idea that Trump was about to play ball with Cina in terms of finding a solution to the trade dispute. Yes, 2019 might well be less hawkish in terms of the Fed, no Trump can't make the Fed's mind up for them, contagion risk is still there and no matter how hard the Chinese and Turkey try to manipulate the currency markets, no nation or Central Bank is bigger than the market - and we are even further away from a trade war truce than ever.  So, is there more upside to be seen in the interim period from the greenback - well, of course there is - and this week is going to be a busy one. 

Currency action

Meanwhile, EUR/USD has stabilised on the 1.16 handle and made a pre-EZ data high of 1.1626 before the news that the German manufacturing data missed expectations. The pair was recovering some lost grind from lows 1.1584 where the euro took most of the brunt for the G10's in the dollar's resurgence.  Recent headlines that the Turks are going to hike rates at next week's meeting was giving some day-dreamers some relief but the supply took the pair back to 1.16 the figure on the August manufacturing PMIs for the eurozone’s peripheral countries. Meanwhile, the Italian government has to present its targets for economic growth and government finances by 27 September and that too is like;y to weigh on the single unit for this month. There was another bullish attempt and the price went on to make a higher high at 1.1628 but was faded again for an NY closing price of 1.1617. GBP/USD was also hurting on its own manufacturing data that came in at the lowest in 25 months at 52.8 vs 53.8 forecasted. Cable dropped to an intra-day low of 1.2887 by the time US opened and then bled some more down to 1.2854 before closing at 1.2865. The pair might be expected to head lower in the interim courtesy of negative Brexit headlines and that data miss while the greenback pulls in the market's bid. The cross rallied on the negative UK data to 0.9032 and stuck to a better bid range thereafter, with a low of 0.9013 - Eyes will be on the euro and EUR/JPY support levels where negative flow relative to cable could see a resumption of the downtrend - (UK BRC retail sales, Aug (Tuesday) will be next key test of cable. USD/JPY was trading between 110.85-111.19 Monday but has started to flake out on the 11 handle in Tokyo. The yen is starting to outperform in terms of safe haven status and a run of stops at the daily cloud base cloud base (110.64) and Fibo 61.8% of 109.77/111.82 (110.56) opens the floodgates. AUD/USD has been robust considering the miss in retails sales and inline Caixin Aug China MFG PMI. There is plenty to come from today's session in Asia though, and the price has been consolidating between 0.7185 and the correction high of 0.7220. However, sentiment towards AUD is still very bearish due to a number of factors which may be highlighted again by today's RBA event and the tone subsequent in the statement - In the main, EM & trade war concerns, lower commodities and global growth concerns all weigh on the outlook - eyes on minor support at May 2016 low at 0.7145.

Key events ahead in Asia:

Besides the Caixin China Services PM, analysts at TD Securities noted that it is another busy data day for the Aussie with two more crucial Q2 puzzle pieces:

• (1) net exports where we look for a marginal +0.1%pt contribution to GDP (mkt also 0.1%pt) and the current account deficit to remain at a low -2.6% of GDP or -$A12b (mkt -$A11b); 
• (2) still not on BBG ECO but for Q2 government spending we expect a solid +0.6%pts contribution to GDP via a +2% lift in consumption and a seasonal +5%/q bump in investment (the latter we attach upside). A few hours later we expect a cut and paste RBA policy statement. After the RBA communication saturation in August, there is literally nothing new to say. The Board could comment that Q2 GDP growth looks to be around 3%/y (they won't have the data early, just the same partials that we have) or could comment on a major bank lifting the key standard variable mortgage rate. If not enough to cover today, the RBA speaks in Perth at a post-RBA Board dinner, again likely more of the same but headlines will be watched just in case in London time.