The JPY is the strongest and the AUD is the weakest as the North American session begins. The BOJ did hike rates to 0.25% as leaked yesterday. Meanwhile Australia’s trimmed mean CPI was weaker than expected helping to weaken the AUD. The Fed rate decision is later today as is earnings from Meta. After the close yesterday, Microsoft disappointed, but AMD did not. Nevertheless, despite MSFT shares being down -3% in premarket trading, soon after the release it was over twice that decline. AMD shares are up 8.64%.

The Bank of Japan (BOJ) raised its policy rate to 0.25% from 0.10% in its July 31, 2024, meeting, with dissent from Nakamura and Noguchi. The BOJ will taper bond purchases to ¥3 trillion by Q1 2026, reducing monthly bond buying by ¥400 billion each quarter, and will review this plan in June 2025. The BOJ noted gradual inflation increases and moderate economic recovery, indicating potential future rate hikes based on economic conditions.

BOJ Governor Kazuo Ueda stated that Japan’s economy is recovering moderately, emphasizing the importance of monitoring financial and FX markets and their impact on the economy and prices. He pointed out that there are upside risks to prices and judged it appropriate to adjust the degree of easing. Real interest rates remain significantly negative, supporting the economy, and the BOJ plans to taper JGB purchases predictably while ensuring stability.

Ueda indicated that private consumption remains solid despite the impact of inflation, with wage hikes becoming more widespread, which will continue to support private consumption. He does not believe that the rate hike will significantly harm the economy and mentioned no specific ceiling for the policy rate, implying that it could go beyond 0.50%. The BOJ will analyze the impact of previous rate hikes when considering additional increases and will closely watch economic indicators such as wages, inflation, service prices, and the GDP output gap.

He noted that it is hard to comment on the FX impact of a stronger yen on the economy and prices, but it is an important risk factor. Ueda also mentioned that the weak yen was not the primary reason for the rate hike, and the BOJ’s central price outlook was not significantly influenced by it. The major issue is determining where to stop raising rates when approaching the neutral rate, which Japan is still far below.

The core CPI out of Australia showed a 0.8% rise for the quarter which was lower than the 1.0% expected. That weakened the AUD further (it has been on a downward trajectory of course) and may keep the RBA from raising rates to tame inflation at the August meeting next week.

The FOMC rate decision is at 2 PM with the press conference at 2:30 PM with Chair Powell. WSJ Timiraos stressed that the first 3 paragraphs are key with the statement being voted on by policy makers. Here is his cheat sheet for your guide.

The Fed is expected to keep rates unchanged, but September is pretty much fully priced in by the market. What wordsmithing will the Fed chose IF they do intend to lay the pipe for a cut at the next meeting?

IN stock news as earnings progress this week, Microsoft, Starbucks, AMD and Pinterest reported after the close yesterday. What are their stocks doing today in pre-market trading?

• Microsoft, -3.6% (now)
• Starbucks up 3.59%
• AMD, +8.53%
• Pinterest, -10.63% after disappointing earnings and guidance.

Looking at other big cap stocks: Nvidia is up 6.55%, Amazon is down -0.19%, Google +0.70%, Apple +0.67%, Tesla up 1.1%. Morgan Stanley named Nvidia as one of it’s Top Picks. Nvidia earnings won’t be announced until mid-month.

A slew of earnings were reported this morning with Boeing yet to come. Below are the summary and whether they beat, met or missed expectations:

Altria Group Inc (MO)

• Adj. EPS: $1.31 (expected $1.30) – Beat
• Revenue (ex. excise taxes): $5.28 billion (expected $5.39 billion) – Miss

Garmin Ltd (GRMN)

• EPS: $1.56 (expected $1.40) – Beat
• Revenue: $1.51 billion (expected $1.42 billion) – Beat

Kraft Heinz Co (KHC)

• EPS: $0.78 (expected $0.74) – Beat
• Revenue: $6.48 billion (expected $6.55 billion) – Miss

Marriott International Inc (MAR)

• Adj. EPS: $2.50 (expected $2.47) – Beat
• Revenue: $6.44 billion (expected $6.48 billion) – Miss

Automatic Data Processing Inc (ADP)

• Adj. EPS: $2.09 (expected $2.06) – Beat
• Revenue: $4.77 billion (expected $4.74 billion) – Beat

T-Mobile US (TMUS)

• Adj. EPS: $2.49 (expected $2.28) – Beat
• Revenue: $19.77 billion (expected $19.55 billion) – Beat

Humana Inc (HUM)

• Adj. EPS: $6.96 (expected $5.85) – Beat
• Revenue: $29.54 billion (expected $28.51 billion) – Beat

GE Healthcare (GEHC)

• EPS: $1.00 (expected $0.98) – Beat
• Revenue: $4.8 billion (expected $4.87 billion) – Miss

DuPont (DD)

• EPS: $0.97 (expected $0.85) – Beat
• Revenue: $3.171 billion (expected $3.05 billion) – Beat
• Outlook: FY EPS view $3.70-3.80 (expected $3.63), FY Revenue view $12.4-12.5 billion (expected $12.26 billion)

After the bell today, Meta (Facebook), Qualcomm, Carvana, Lam Research, Western Digital. Tomorrow, Amazon, Apple, Intel, Coinbase and DraftKings highlight the releases.

On the economic calendar today:

USD: ADP Non-Farm Employment Change

• Estimate: 147K
• Previous: 150K

CAD: GDP m/m

• Estimate: 0.1%
• Previous: 0.3%

USD: Employment Cost Index q/q

• Estimate: 1.0%
• Previous: 1.2%

USD: Pending Home Sales m/m

• Estimate: 1.4%
• Previous: -2.1%

A snapshot of the other markets as the North American session begins shows:

• Crude oil is trading up up $2.61 or 3.49% at $77.34. At this time yesterday, the price was at $75.37
• Gold is trading up $10.07 or 0.43% at $2421 . At this time yesterday, the price was trading at $2388.29
• Silver is trading up $0.24 or 0.84% at $28.62. At this time yesterday, the price is trading at $27.79
• Bitcoin trading at $66,062. At this time yesterday, the price was trading at $66,658
• Ethereum is trading at $3318.90. At this time yesterday, the price was trading at $3338.60

In the premarket, the snapshot of the major indices is to the upside ahead of the FOMC rate decision later today

• Dow Industrial Average futures are implying a gain of 57 points . Yesterday, the Dow Industrial Average rose 203.40 points or 0.50% at 40743.344
• S&P futures are implying a gain of 53 points . Yesterday the S&P index closed lower five -27.10 points or -0.50% at 5436.45
• Nasdaq futures are implying a gain of 304 points . Yesterday the index closed lower by -222.78 points or -1.29% at 17147.42
• Yesterday, the Russell 2000 index rose 7.80 points or 0.35% at 2243.14

European stock indices are trading mixed.

• German DAX, +0.454%
• France CAC, +1.08%
• UK FTSE 100, +1.22%
• Spain’s Ibex, -0.17%
• Italy’s FTSE MIB, -0.10% (delayed 10 minutes).

Shares in the Asian Pacific markets closed higher:.

• Japan’s Nikkei 225, 1.49%
• China’s Shanghai Composite Index, +2.06%
• Hong Kong’s Hang Seng index, +2.01%
• Australia S&P/ASX index, +1.75%

Looking at the US debt market, yields are trading marginally lower:

• 2-year yield 4.356%, -0.3 basis points. At this time yesterday, the yield was at 4.389%
• 5-year yield 4.027%, -0.9 basis points. At this time yesterday, the yield was at 4.066%
• 10-year yield 4.133%, -0.7 basis points. At this time Friday, the yield was at 4.170%
• 30-year yield 4.390%, -0.9 basis points. At this time Friday, the yield was at 4.423%

Looking at the treasury yield curve, the spreads are little changed from yesterday

• The 2-10 year spread is at -22.4 basis points. At this time yesterday, the spread was at -21.9 basis points.
• The 2-30 year spread is at 3.4 basis points. At this time yesterday, the spread was +3.5 basis points.

In the European debt market, the benchmark 10-year yields are lower:

This article was written by Greg Michalowski at www.forexlive.com.

Headlines:

• BOJ raises policy rate to 0.25% in July monetary policy meeting
• BOJ governor Ueda: Weak yen was not necessarily the biggest reason for rate hike
• BOJ governor Ueda says does not have 0.50% policy rate in mind as a ceiling
• BOJ governor Ueda: Hard to tell when the next rate hike may be
• USD/JPY extends fall as downside break eyed
• USD/JPY Technical Analysis – The pair cracked through the key 152.00 handle
• Eurozone July preliminary CPI +2.6% vs +2.5% y/y expected
• Italy July preliminary CPI +1.3% vs +1.2% y/y expected
• France July preliminary CPI +2.3% vs +2.4% y/y expected
• Germany July unemployment change 18k vs 15k expected
• Germany June import price index +0.4% vs +0.1% m/m expected
• Switzerland July UBS investor sentiment 9.4 vs 17.5 prior
• Plenty for markets to look out for as July trading winds down

Markets:

• JPY leads, AUD lags on the day
• European equities higher; S&P 500 futures up 0.9%
• US 10-year yields down 0.5 bps to 4.135%
• Gold up 0.5% to $2,420.53
• WTI crude up 3.2% to $76.27
• Bitcoin down 0.1% to $66,095

The BOJ certainly took their time with their decision but it was no secret after the leak yesterday already. They moved to raise the policy rate by 15 bps to 0.25% while announcing a slow and gradual taper to their bond purchases.

The yen whipsawed on the initial decision, with USD/JPY jumping down to 151.60 before moving back up to touch 153.88. The 100-hour moving average at 153.67 held at the time, keeping price action around 153.00-30 mostly. That was until BOJ governor Ueda’s press conference, before the yen gained further in a push all the way down to 150.04 and is holding near the lows currently.

Besides that, the action in major currencies were not too eventful. EUR/USD is up 0.2% to 1.0830 levels but nothing outstanding. GBP/USD is flat at 1.2835 and USD/CHF down 0.3% to 0.8800 on the day.

The aussie is the laggard following a softer Q2 CPI report, with AUD/USD keeping lower by 0.5% near 0.6500 currently.

In the equities space, stocks are staying buoyed ahead of month-end with S&P 500 futures racing up to near 1% gains as tech shares look to bounce back strongly. European indices are also looking to wrap up the month on a positive note with French stocks leading the charge.

It’s now over to the dollar side of the equation and the Treasury market to respond to the US ADP employment data and the Fed later in the day. Yields are in a cycle of lower highs, lower lows so that is something to be mindful of as we look to August trading.

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

• Prior -2.2%
• Market index 201.2 vs 209.3 prior
• Purchase index 132.8 vs 134.8 prior
• Refinance index 570.7 vs 614.9 prior
• 30-year mortgage rate 6.82% vs 6.82% prior

The drop in the past week owes much to a decline in refinancing activity but purchases activity also fell slightly. It continues to suggest a more subdued mood in the housing market overall as mortgage applications are keeping more repressed. The market index is the lowest since the final week of May.

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

Fundamental
Overview

The S&P 500 has been on a steady decline since the last US CPI report
on July 11th. In the first stages of the pullback, we’ve been seeing
a rotation from big cap stocks into small cap stocks as the Russell 2000
displayed an opposite price action. Eventually, the bearish momentum picked up
and we saw a more aggressive decline with the index falling by 5%.

A good argument
has been that most of the moves we’ve been seeing were driven by deleveraging
from strengthening Yen. Basically, the squeeze on the carry trades
impacted all the other markets. Given the magnitude of the recent appreciation
in the Yen and the correlation with many other markets, it looks like this
could have been the reason indeed.

It will be interesting to
see how things evolve in the next days and if this correlation finally fades
now that the BoJ decision is in the rear-view mirror. It’s already a good sign that despite some more yen strengthening this morning, the stock market held the gains. From a
big picture perspective, nothing has changed as the market continues to expect
at least two rate cuts by the end of the year and sees some chances of a
back-to-back cut in November.

Today, we will also have
the FOMC rate decision where the Fed is expected to keep rates steady and
signal a rate cut in September. Overall, this should continue to support the
soft-landing narrative and be positive for the general risk sentiment as the
Fed is going to cut rates into resilient growth.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 seems to be bottoming out at the major trendline around the 5435 level where we had
also the 38.2% Fibonacci retracement level for confluence. The buyers stepped with a defined
risk below the recent lows to position for a rally into a new all-time high.
The sellers will need the price to break below the trendline and the 5430 level
to increase the bearish bets into new lows.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a strong resistance zone around the 5540 level where we
can find the confluence of the previous swing low, the downward trendline and
the 50% Fibonacci retracement level. This is where we can expect the sellers to
step in with a defined risk above the resistance to position for a drop into
new lows. The buyers, on the other hand, will want to see the price breaking
higher to invalidate the bearish setup and increase the bullish bets into a new
all-time high.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we’ve been consolidating between the 5440 support and the 5540
resistance. The market participants might keep on playing the range for now,
but a breakout on either side should lead to a strong and sustained move. The
red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US ADP, the US Employment Cost Index and the FOMC Policy
Decision. Tomorrow, we get the latest US Jobless Claims figures and the US ISM
Manufacturing PMI. Finally, on Friday, we conclude the week with the US NFP
report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.