• Not much to get excited about the ECB meeting decision later
• Major currencies slow things down after the action yesterday
• BOJ data does not suggest evidence of intervention on 17 July
• Japan chief Cabinet secretary says no comment on FX moves
• UK May ILO unemployment rate 4.4% vs 4.4% expected
• Switzerland June trade balance CHF 6.18 billion vs CHF 5.81 billion prior
• China’s Communist Party central committee adopts resolution on further deepening reforms

Markets:

• AUD leads, GBP lags on the day
• European equities higher; S&P 500 futures up 0.1%
• US 10-year yields up 4.3 bps to 4.188%
• Gold up 0.2% to $2,463.58
• WTI crude down 0.1% to $82.74
• Bitcoin up 0.2% to $64,687

It was a much quieter session as markets calmed down following all the action yesterday.

In FX, the Japanese yen nudged lower as BOJ data suggested no evidence of intervention yesterday. USD/JPY had already risen from a low of 155.36 in Asia to around 156.00-30 before pushing to around 156.45 now.

Meanwhile, the pound is also a touch softer as GBP/USD continues to stay under the 1.3000 mark. That despite the UK labour market report showing indications that wage pressures remain on the high side for the BOE.

Besides that, there is very little action elsewhere in the FX space with other major currencies not doing much.

That owes much to the calmer mood in equities today as well. US futures are steadier following the selloff in tech shares yesterday. But it is still early in the day, and we could see the overall mood switch up again – one way or another – later in US trading.

For now, it’s on to the ECB policy decision next. But that shouldn’t be one to get traders off their seats, given that the central bank is to keep rates unchanged and defer thing to the September meeting instead.

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

It is very much a placeholder meeting as the ECB has made it clear that they will not cut rates today. Instead, policymakers have been teeing up the idea of the next move coming in September. So, this will be a slight pause following the rate cut in June.

As such, there will be very little to scrutinise in the decision later. The narrative now is that the ECB is still reaffirming that policy is restrictive enough after the first rate cut. And that they are waiting to gain more confidence in the months ahead on the disinflation process.

In fact, the latter was already part and parcel of the equation in June as evident by the meeting accounts here. The governing council ended up supporting Lane’s proposal to cut key rates by 25 bps but there were quite a number of reservations put forward with regards to the inflation outlook.

So, those same reservations i.e. stronger services inflation and wage pressures, will be used as reasons for them to stay on the sidelines today.

I wouldn’t expect much from Lagarde either as it would not be prudent to pre-commit to a move in September. That would be a big misstep on her part if it happens. As poor as she has been in some of the pressers before, I don’t see her pulling off such a miscommunication this time.

It will be pretty much ensuring that September remains live with a strong probability of cutting again if things continue to trend accordingly. But at the same time, reaffirming that they have the flexibility to react to any surprises in the data.

The best way in telling that they did the job right today will be to observe minimal reaction in the euro itself.

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

When copper futures eyed a push above $5 per pound in May, it looked like we were starting to witness one of the breakout trades this decade. However, the hype quickly died down as price fell sharply towards the end of May and that led to another 5% drop in June. The slight rebound earlier this month has been dashed and copper is down almost 5% again in the last four days:

A key thing to note in the fall this week is that price is breaking below the 100-day moving average (red line) for the first time since February. That’s a big blow to the buying momentum and frees up room for a steeper decline. Now, the June low at $4.31 will be eyed before going back to support from the Fib levels above.

Fundamentally, the factors driving copper prices higher this year hasn’t changed too much. The drive for the green transition and supply concerns were key reasons in providing a tailwind for copper.

But at the same time, copper tends to correlate with the health of the global economy. And the outlook for the latter has been struggling, especially with the major slowdown in China since last year. For some context, China buys roughly 40%-50% of the newly mined copper each year. So, that’s a major demand source.

From a structural perspective, I believe that copper still has some bullish underlying factors going for it. But it might have to wait until after the summer for that to show up in the price. That as well as the technicals providing some supportive factor for buyers to step back in.

Looking at the seasonal pattern, August has been the worst month for copper over the last 20 years. So, that’s one reason to stay guarded for at least the next few weeks.

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

The Nasdaq posted its biggest daily decline since December 2022 yesterday
as the rotation out of big tech stocks into more rate sensitive names
continues. We can clearly see this internal market dynamic unfolding as the
Russell 2000 and the Dow keep on gaining.

In the big picture, the fundamentals did not change, on the contrary the
soft-landing narrative strengthened as we continue to see inflation falling
while the economy continues to grow. This week, we got more positive data with US Retail Sales and Industrial Production beating expectations by
a big margin.

It looks like the Fed is going to cut rates into a
resilient economy and that should be a strong bullish driver.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq had a pretty bad day yesterday posting the biggest daily
decline since 2022. The price broke through some key levels and extended the
move to the downside as the bearish momentum increased.

We now have another trendline around the 19700 level where we can
expect the dip-buyers to step back in with a defined risk below the trendline
to position for a rally into a new all-time high. The sellers, on the other
hand, will want to see the price breaking lower to increase the bearish bets
into the next major trendline around the 19000 level.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a good resistance zone now around the 20300 level
where we can find the confluence of the trendline, the previous resistance now turned support and the Fibonacci retracement levels.

If we get a pullback into
the resistance, we can expect the sellers to step in to position for a drop
into the 19700 level with a better risk to reward setup. The buyers, on the
other hand, will want to see the price breaking above the resistance and the
downward trendline to regain some control and position for a rally into new
highs.

Nasdaq Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is right in the middle of the key levels, so from a risk
management perspective, there’s not much to do here. More aggressive sellers
might pile in on a break below the yesterday’s low but the risk to reward setup
would be worse. The red lines define the average daily range for today.

Upcoming Catalysts

Today we get the latest US Jobless Claims figures.

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