Headlines:

• Japanese yen surge continues in European morning trade
• Japan top currency diplomat Kanda says no choice but to respond to speculators
• US futures fall further as tech shares feel skittish
• Traders trim BOE rate cut bets for August after inflation data
• UK June CPI +2.0% vs +1.9% y/y expected
• Eurozone June final CPI +2.5% vs +2.5% y/y prelim
• Fed’s Williams says rate cut could be warranted in the coming months

Markets:

• JPY leads, USD lags on the day
• European equities lower; S&P 500 futures down 1.0%
• US 10-year yields up 0.8 bps to 4.175%
• Gold up 0.1% to $2,470.15
• WTI crude up 0.4% to $81.05
• Bitcoin up 0.3% to $64,850

It was an eventful session with some big market moves this time around in European morning trade.

The Japanese yen came to life with USD/JPY falling from 158.30 in Asia all the way to a low of 156.10, before a light bounce after.

The move was a strong one-sided pull lower but spread across three hours. It wasn’t quite the sharp minute moves that we saw during the intervention last week. But still, there could be the possibility of Japan giving things a slight nudge to help with the move lower.

I mean, they have been changing up their strategy as of late to intervene when market conditions favour their directional view.

There were also other factors in play during the session, most notably a selloff in equities. That alongside a weaker dollar is arguably exacerbating the drop in USD/JPY, coupled with a technical break here.

After the gains yesterday, US stocks look set for an off day with futures pushed lower. S&P 500 futures are down 1% with tech shares slumping hard. Nasdaq futures are down 1.6% while Dow futures are „only“ down 0.3%. Russell 2000 futures are down 0.8% but briefly erased losses early on in European trading.

The softer risk environment is seeing USD/CHF also down 0.8% to 0.8865 while EUR/USD is up 0.4% to 1.0940 on the day. At the same time, GBP/USD is also pushing above 1.3000 for the first time in a year as UK inflation remains stubborn in June. That saw traders scale back on bets for an August rate cut.

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

• Prior -0.2%
• Market index 214.1 vs 206.1 prior
• Purchase index 140.4 vs 144.3 prior
• Refinance index 613.0 vs 532.3 prior
• 30-year mortgage rate 6.87% vs 7.00% prior

The jump in mortgage applications in the past week comes as the average rate of the most popular US home loan drops by some 13 bps back under 7%. The rebound owes to a surge in refinancing activity, which offset a decline in purchases on the week.

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

Fundamental
Overview

The USD remains on the
backfoot as the US data continues to point to resilient growth with falling
inflation. Yesterday, we got a good US Retail Sales report suggesting that the stories
of deteriorating consumer spending might have been exaggerated. Overall, this
should support the soft-landing narrative and be positive for the risk
sentiment.

The CAD, on the other hand,
remains supported against the US Dollar mainly because of the risk-on
sentiment. This morning we’ve been seeing even more weakness for the greenback
which might be due to the selloff in the USDJPY pair as flows there could have
spilled over into other markets. On the monetary policy front, yesterday’s Canadian
CPI sealed the rate cut at the upcoming meeting as the data missed
expectations across the board.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD bounced from the key 1.36 support zone and extended the rally into the 1.37
handle before pulling back. If the price falls back into the support zone, we
can expect the buyers to step in once again to position for a rally back into
the 1.3785 resistance. The sellers, on the other hand, will want to see the
price breaking below the support zone to increase the bearish bets into the new
lows with the 1.35 handle as the first target.

USDCAD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price this week broke out of the tight range between 1.3600 and
1.3650 levels and extended the rally into the 1.37 handle. We are now seeing a
pullback into the resistance
turned support at 1.3650 where we can expect the buyers to step in to
position for the continuation of the rally. The sellers, on the other hand,
will want to see the price falling back below the 1.3650 level to increase the
bearish bets into the 1.36 support targeting a breakout.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price today fell below the upward trendline
that was defining the recent bullish momentum. This might be a reversal signal
or just a more complex pullback. A break above the downward trendline should
give the buyers more confidence for new highs, while the sellers will likely
lean on it to position for a break below the 1.3650 level. The red lines define
the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking. Tomorrow, we have the latest US Jobless
Claims figures, while on Friday we conclude with the Canadian Retail Sales
data.

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

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Fundamental
Overview

The upward momentum in the S&P 500 has been kept at bay recently as the
goldilocks data triggered a strong rotation into small caps stocks with the
Russell 2000 having its best
week in 24 years.

It also looks like the rotation has been driven by hedge funds facing short
squeezes on their small cap hedges as yields come down. This is just internal
market dynamics as the fundamentals have not changed.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that in case we get a deeper pullback, the buyers will find a good support
zone around the 5500 level where we can find the confluence
of the trendline
and the 38.2% Fibonacci
retracement level. The sellers, on the other hand, will want to see the
price breaking below the trendline to increase the bearish bets into the 5200
level next. As of now though, there are no reasons to expect such a big
pullback.

S&P 500 Technical Analysis – 4 hour
Timeframe

On the 4 hour chart, we can
see that we have another minor trendline defining the current bullish momentum.
We can expect the buyers to lean on this trendline with a defined risk below it
to position for new all-time highs with a better risk to reward setup. The
sellers, on the other hand, will want to see the price breaking below the
trendline to position for a drop into the 5500 level next.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we’ve been having a rangebound price action recently as rotation into
small caps stocks kept the momentum at bay. The bias remains bullish
nonetheless and we have key levels where the buyers can limit their risk. The
red lines define the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking while tomorrow we conclude with the
latest US Jobless Claims figures.

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