• USD/JPY fall draws in the next key support level
• USD/JPY Technical Analysis – 152.00 is the mother of all levels
• Backs against the wall for stocks in July trading
• Germany July Ifo business climate index 87.0 vs 88.9 expected
• Eurozone June M3 money supply 2.2% vs. 1.8% y/y expected
• France July business confidence 94 vs 99 prior
• UK July CBI trends total orders -32 vs -18 prior
• Japan government maintains economic assessment for the month of July
• Chinese yuan strengthens sharply as Beijing pushes back for now

Markets:

• JPY leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.2%
• US 10-year yields down 6.1 bps to 4.225%
• Gold down 1.1% to $2,370.38
• WTI crude down 1.5% to $75.45
• Bitcoin down 2.9% to $64,104

The risk retreat continues and the main beneficiaries continue to be the Japanese yen and Swiss franc this week. The dollar while falling against the two, remains mostly steadier across the board elsewhere.

USD/JPY was seen around 152.90 in the handover from Asia to Europe but then quickly fell to a low of 151.93 to start the session. The pair is still down 0.9% at around 152.50 currently, eyeing the next key support level from the 200-day moving average at 151.56 next.

USD/CHF also steadily moved lower in a push from 0.8830 to 0.8780 currently. Elsewhere, GBP/USD is down 0.3% to 1.2870 levels while commodity currencies stay pressured amid the more defensive risk sentiment. AUD/USD is down 0.9% to 0.6520 while NZD/USD is down 0.5% to test the 0.5900 mark.

In other markets, equities continue to come under pressure with European indices sinking across the board. The CAC 40 index is down 2% in a fall to its lowest since January while the DAX is also marked down by 1.2% on the day.

Meanwhile, US futures are also struggling after having held steadier in the earlier stages today. S&P 500 futures are down 0.2% with tech shares starting to lag once more ahead of the Wall Street open.

Bonds were more bid though as yields fell, marking a more defensive risk setup in general. 10-year yields in the US are down 6 bps to 4.225% currently.

And in the commodities space, the correction in metals is continuing with silver down nearly 5% to $27.58. The precious metal has now fallen back below its 100-day moving average for the first time since March, dropping to its lowest levels since early May. Besides that, gold is also down over 1% to a two-week low, cracking back below $2,400.

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

The firm argues that the dollar rally during the period of 2021 to 2022 means that there is still scope for a deeper correction to the downside momentum in the greenback moving forward. They don’t expect the dollar to retest the lows seen towards the end of 2020 but says that the currency should move lower as we look towards next year.

They anticipate USD/JPY as being the biggest loser after having been one of the biggest movers amid rising US yields in the last few years.

Societe Generale sees the pair falling back to 140.00 in early 2025. Besides that, they are of the view that EUR/USD could retest its 2022 highs in a push to 1.1400 by Q2 2025.

A word of warning is that one should always take these forecasts with a pinch of salt. They tend to be revised a lot based on more recent market developments. For example, Societe Generale made a forecast back in January here that USD/JPY would fall back under 140.00 in Q2 this year and were targeting the 135.00 mark by year-end. Look at how things turned out instead.

And looking at how things have played out in the last two years, a key lesson is that one should never underestimate the dollar. Sure, it isn’t posting gains in a swashbuckling mood. But when you consider that many in the market were calling for its demise in 2023 and also in 2024, the dollar’s resilience has been rather commendable.

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

• Prior -18

The manufacturing order book balance worsened again in July but the good news at least is that the expectations balance increased from 13 in June to 25 this month. The latter is the highest reading since March 2022. However, quarterly business optimism declined to -9 from +9 in April, marking the softest such reading since October last year.

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

The USD has been rallying
steadily against the major currencies since last Wednesday on the back of
general risk-off sentiment, although it’s unclear what has triggered the move.
From the monetary policy 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.

The data continues to
suggest that the US economy remains resilient with inflation slowly falling
back to target. Overall, this should continue to support the soft-landing
narrative and be positive for risk sentiment. The new driver could be Trump now
looking more and more like a potential winner and his policies are seen as
inflationary which could see the Fed eventually going even more slowly on rate
cuts.

The EUR, on the other hand,
has been supported against the US Dollar in the past weeks mainly because of
the risk-on sentiment, although that has changed last week. On the monetary
policy front, the ECB members continue to repeat that they will wait for the
data throughout the summer before deciding on a rate cut in September.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD couldn’t extend into the 1.10 handle, and as the price fell
back below the 1.09 handle, the sellers piled in more aggressively with the 1.0812
support now being in sight.

That’s where we can expect
the buyers to step in with a defined risk below the level to position for a
rally into the 1.10 level. The sellers, on the other hand, will want to see the
price breaking lower to increase the bearish bets into the 1.0727 level next.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor downward trendline defining the current bearish momentum.
We can expect the sellers to lean on it with a defined risk above it to
position for a break below the 1.0812 support with a better risk to reward
setup. The buyers, on the other hand, will want to see the price breaking
higher to gain some control and start targeting new highs.

EURUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have some consolidation at the 1.0850 level. This is where the
sellers will look for a rejection and a drop into new lows, while the buyers
will want to see a break above the trendline. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we will get the latest US Jobless Claims figures and the US Q2 Advance
GDP. Tomorrow, we conclude the week with the Tokyo CPI and the US PCE reports.

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

The barrage of easing measures this week was meant to bolster the economy and shore up confidence in domestic markets. However, it has been anything but that. In trading yesterday, the Chinese yuan had weakened to its lowest level since November against the dollar before bids came through. And that is before the sudden wave of strength today:

Needless to say, we all know who’s the one in the market or at least pulling the strings in getting domestic banks to do so.

It seems like they are drawing a line closer to the 7.28 mark, as evident by the previous pushback earlier this month.

Still, I would argue this doesn’t change the long-term directive of markets in their view towards China at the moment. Beijing is expending a decent amount of ammunition in trying to bolster the economy but markets remain unconvinced.

After having plunged last year, valuations were certainly attractive for Chinese stocks. There was a brief respite up until May this year but the selling has returned since then. And the troubling part for Beijing is that investors are failing to find much confidence that the recovery path will be a solid and smooth run.

Going back to the yuan currency itself, it doesn’t look like there’s much scope for a rebound until next year at least. That despite Beijing’s efforts to keep a floor on the currency as seen above. Even with the Fed cutting rates, the trend this year in USD/CNY has been clear. And in the bigger picture, nothing has really changed to the overall outlook since the start of the year.

The narrative continues to be that Beijing will want to smooth out the depreciation in the yuan to be a more gradual one.

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