• Equities slump in the opening hour in Europe
• UK July payrolls change 97k vs -9k prior
• ICYMI: China with three rate cuts in one day to try and bolster the economy
• The bond market remains a key driver of broader sentiment at the moment
• Critical juncture for gold as higher yields continue to weigh
• Japan finance minister Suzuki says rapid FX moves are undesirable
• Russia’s central bank raises key interest rate from 8.5% to 12% in extraordinary meeting

Markets:

• EUR leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.5%
• US 10-year yields up 5.1 bps to 4.232%
• Gold down 0.3% to $1,901.09
• WTI crude down 1.0% to $81.69
• Bitcoin down 0.1% to $29,331

China was in the headlines once again, performing three rate cuts in one day to try and support the economy.

That didn’t do much to help the risk mood though, as the mood soured once again in the opening hour of European morning trade. Regional indices opened with a steadier hand but quickly took a dive as US futures also bled lower from flattish levels earlier in the day.

The retreat in stocks comes alongside a continued push higher in bond yields, this time around being helped the UK jobs report. The wages numbers continue to run hot and that is stoking more hawkish expectations for the BOE to keep acting but the labour market figures itself were not too convincing.

That saw UK gilt yields shoot higher with Treasury yields following. 10-year Treasury yields are now up to 4.23% – its highest levels since November last year.

At the balance, the pound did move a little higher with cable nudging up from 1.2680 to 1.2720 before sticking around 1.2700 now. A slightly mixed dollar isn’t really making things all too clear with EUR/USD itself up 0.3% to 1.0935 while AUD/USD is down 0.2% to 0.6470 from around 0.6500 earlier in the day.

If anything else, I’d continue watching the bond market for clues as we now turn the attention to the US retail sales data later.

This article was written by Justin Low at www.forexlive.com.

Last
week, the US CPI came
basically in line with expectations, but the good news is that the Core M/M
reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked
higher, but Continuing Claims remained solid. We have already seen Claims
spiking higher in the past months, so it shouldn’t be worrying yet. The
long-term inflation expectations in the University of Michigan report
ticked lower, so on the data side the soft-landing narrative was supported. The
US Dollar, nonetheless, appreciated across the board as the attention may have
turned already on the next data given the higher energy prices and China starting to stimulate more.

The RBNZ, on the other hand, kept its official cash
rate unchanged while stating that it will remain at the restrictive level for
the foreseeable future to ensure that inflation comes down back to target. The
recent New Zealand inflation and employment data surprised to the upside but
the PMIs are in contraction with the Services PMI yesterday plunging into
contraction. Overall, it’s a mixed picture for the RBNZ but should be enough to
keep rates steady.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD broke
below the last low at 0.5987 and this has opened the door for a fall towards
the 0.5514 level as there’s no strong support until
then. The bias remains clearly bearish as the price keeps printing lower lows
and lower highs and the moving averages remain
crossed to the downside.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
recently pulled back into the trendline and got
rejected as the sellers stepped in with a defined risk just above it. If we see
another pullback, we can expect the sellers to lean on the trendline again. In
fact, the buyers will need a break above the trendline to switch the bias to
the upside and get more conviction to target new higher highs.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that at
the moment the price is consolidating just beneath the 0.5987 level as the
market is awaiting the economic data. A break to the upside should see the
buyers piling in and target the trendline, while a break lower should lead to
more bearish pressure.

Upcoming Events

This week is a
bit empty on the data front but we will still have some top tier economic data
and the RBNZ Policy Decision tomorrow. Today, we will see the latest US Retail
Sales report with strong data expected to support the USD while weak figures
likely to weigh on the greenback in the short-term. Tomorrow, the RBNZ is
expected to keep its policy rate unchanged, so the market will focus more on
clues on what’s next. On Thursday, we have the US Jobless Claims. A big miss in
Claims data should trigger some recessionary fears and send the market into
risk-off ultimately weighing on the NZD and supporting the USD. On the other
hand, strong data may even lead the market to expect the Fed to keep with its
hawkish stance and support the US Dollar as well.

This article was written by FL Contributors at www.forexlive.com.

The precious metal saw its worst weekly performance in seven last week and is keeping at that downside move so far this week. The slide comes amid higher bond yields which also is inadvertently propping up the dollar.

Given prevailing market sentiment, it is tough for gold to turn things around unless we also see bonds stop puking all over. If yields are going to keep stretching higher, gold prices are likely to be dragged further to the downside. And that comes despite the backdrop of major central banks starting to pivot away from tighter monetary policy.

From a technical perspective, the test of the 200-day moving average (blue line) now for gold is a crucial one. The level is seen at around $1,902.90 and a break below that as well as the $1,900 handle will set off alarm bells with a steeper drop impending.

The next key support will sit closer to the February to March lows just above $1,800. These were levels I previously highlighted in the linked post above and they are still holding true for now.

At some point, when recession signals light up and central banks are forced to move towards cutting rates, you would expect gold to flourish. That remains the key underlying factor for a more bullish structural proposition in gold but as always is the case, the bond market needs to attest to that first and foremost. And right now, that is certainly not the case yet.

This article was written by Justin Low at www.forexlive.com.

Bonds are continuing to suffer a beating and it’s not looking pretty. This is not a market that is too sensitive on inflation at the moment and it seems to be more of a supply-demand reaction. This is something Bill Ackman pointed to when he made his short bet earlier this month here.

There was a mild pullback at the start of this month in 10-year yields back to the 4% mark but we are now seeing yields push up to 4.22% and that is the highest since November last year.

The Fitch credit ratings cut may also be a factor although I wouldn’t pin that as being a crucial one in this instance.

If you’re only going to have one chart to watch in trying to read broader market sentiment, I would say this is probably the best one.

In response to higher yields, we have seen the dollar find a stronger footing, equities start to come under a little more pressure, and in particular gold stumble all the way back to near $1,900 again.

This article was written by Justin Low at www.forexlive.com.

Last
week, the US CPI came
basically in line with expectations, but the good news is that the Core M/M
reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked
higher, but Continuing Claims remained solid. We have already seen Claims
spiking higher in the past months, so it shouldn’t be worrying yet. The
long-term inflation expectations in the University of Michigan report
ticked lower, so on the data side the soft-landing narrative was supported. The
US Dollar, nonetheless, appreciated across the board as the attention may have
turned already on the next data given the higher energy prices and China starting to stimulate more.

The RBA, on the other hand,
kept its cash rate unchanged with a slight tweak to a line in
the policy statement that suggests that they are leaning more on the dovish
side. The data has been mixed as the Australian Jobs report surprised again to the upside but
the Inflation report and the Wages data missed expectations. Nonetheless,
they will see more data before the next meeting and can make a better-informed decision.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD has
eventually reached the 0.6459 low and a break lower would open the door for a
fall towards the 0.6168 level. The buyers should step in here with a defined
risk below to target the 0.66 handle first and the 0.69 resistance upon a
break higher. The overall bias remains bearish though, so the sellers will look
at the pullbacks as opportunities to re-enter at better prices.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have a divergence with the
MACD right at
the low. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, we may see a pullback into the trendline where
the sellers are likely to step in to target a break below the low. The buyers,
on the other hand, will need the price to break above the trendline to gain
more conviction and target new higher highs.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have also the Fibonacci levels for confluence near the trendline, so the
sellers will have more defined levels where to short from.

Upcoming Events

This week is a
bit empty on the data front but we will still have some top tier economic data.
Today, we will see the latest US Retail Sales report with strong data expected
to support the USD while weak figures likely to weigh on the greenback in the
short-term. On Thursday, we have the Australian Jobs report where we will see
if the data supports the RBA’s stance and then later in the day, we will see
the US Jobless Claims. A big miss in Claims data should trigger some
recessionary fears and send the market into risk-off ultimately weighing on the
AUD and supporting the USD. On the other hand, strong data may even lead the
market to expect the Fed to keep with its hawkish stance and support the US
Dollar as well.

This article was written by FL Contributors at www.forexlive.com.