UPCOMING EVENTS:

• Monday:
  Canada Holiday, Swiss Unemployment Rate, BoJ’s Summary of Opinions.
• Tuesday:
  NFIB Small Business Optimism Index.
• Wednesday:
  China CPI.
• Thursday:
  US CPI, US Jobless Claims.
• Friday:
  Japan Holiday, UK GDP, US PPI, University of Michigan Consumer Sentiment.

Monday:
The BoJ’s Summary of Opinions will be scrutinised by market participants for
details and clues regarding the BoJ’s monetary policy. Last time, there was
a little hint that indicated a possible change as Eamonn highlighted
correctly here.
In fact, the BoJ implicitly widened the YCC band with a soft cap at -/+0.5%
and a hard cap at -/+1.0%. As a reminder, the BoJ intervened twice last
week as yields on the 10y JGBs breached the 0.60% level. As of now though, it
looks like that the only way is up towards the 1.0% hard cap.

Wednesday:
The Chinese CPI Y/Y is expected to fall into deflationary territory at
-0.5% vs. 0.0% prior, while the M/M reading is seen flat at 0.0% vs. -0.2%
prior. The PPI Y/Y is expected to remain in negative territory at -4.0% vs.
-5.4% prior. Chinese authorities promised
more support for the economy, but we haven’t seen anything of substance yet.

Thursday:
The US CPI Y/Y is expected to tick higher to 3.3% vs. 3.0% prior due to
unfavourable base effects and higher gas prices, and the M/M figure to match
the prior reading at 0.2%. The Core CPI Y/Y is expected to tick lower to 4.7%
vs. 4.8% prior and the M/M reading to print at 0.2% vs. 0.2% prior. The Fed
is focused on Core
inflation; therefore, the Core M/M
figure will be at the top of market’s focus.

The US Jobless Claims remains a key market
moving report as the labour market data is at the top of the Fed’s and the
market’s attention. This week, Initial Claims are expected at 231K vs. 227K
prior, while there’s no consensus yet on Continuing Claims although the prior
week’s reading saw an increase to 1700K vs. 1679K prior.

Friday:
The US PPI Y/Y is expected at 0.7% vs. 0.1% prior, while the M/M reading is
seen at 0.2% vs. 0.1% prior. The Core PPI Y/Y is expected at 2.3% vs. 2.4%
prior, while the M/M figure is seen at 0.2% vs. 0.1% prior.

The University of Michigan Consumer
Sentiment Index is expected at 70.9 vs. 71.6 prior, but the market is likely to
focus more on the inflation expectations figures,with the prior
readings showing 3.4% and 3.0% for the 1-year and 5-year inflation expectations
respectively.

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

• US July non-farm payrolls +187K vs +200K expected
• Canada July employment change -6.4K versus 21.1 K estimate
• Fed’s Goolsbee: The July non-farm payrolls report is pretty much what we expect
• Fed’s Bostic: Fed likely to be in restrictive territory well into 2024
• Baker Hughes US oil rig count -4
• Fed still on track for a September hike after non-farm payrolls – CIBC
• Canada July Ivey PMI 48.6 vs 50.2 prior

Markets:

• Gold up $8 to $1941
• US 10-year yields down 14.5 bps to 4.04%
• WTI crude up $1.10 to $82.65
• EUR leads, CAD lags
• S&P 500 down 24 points, or -0.5%

The initial reaction to the non-farm payrolls report was to sell the dollar but then the market had a look at the higher wage data and there was a recovery. Ultimately though, a strong bid appeared for bonds and there was a growing sense that the Fed is probably done, something that Goldman Sachs reiterated in a note. Fed probabilities didn’t move much after the data but there’s only a 30% chance of another hike as the market grows confident that the economy is cooling.

I also strongly suspect that bond buyers were waiting in the weeds to buy Treasuries no matter the number. 30-year yields moved up as much as 30 bps this week but purchasers would have been scared to wade in and get blown up by another strong jobs report. So when the data was ‚good enough‘ they pulled the trigger, driving yields lower and taking the dollar with it.

Initially, the dollar trade was uniform but particularly strong for the euro and pound. The latter rose to the highest levels of the week in the aftermath and USD/JPY joined in as it fell below 142.00.

Later in the day there was something of a recovery in stock markets as equities stumbled. Stocks had been strong early but faded throughout the day in a 1% reversal. With that commodity currencies were hit particularly hard and CAD ended up at the bottom of the pile despite gains for oil and gas.

The week ahead features the US CPI report and that will be another big one as the market shifts from thinking about more Fed hikes to pondering when in 2024 the cuts will begin.

Have a great weekend.

This article was written by Adam Button at www.forexlive.com.

Closing changes:

• S&P 500 -0.5%
• DJIA -0.5%
• Nasdaq Comp -0.4%
• Russell 2000 -0.2%
• Toronto TSX Comp +0.5%

On the week:

• S&P 500 -2.3%
• DJIA -0.5%
• Nasdaq Comp -2.8%
• Russell 2000 -1.2%
• Toronto TSX Comp -1.4%

July was a great month for stocks but August has gotten off to a slow start. The market looked like it would turn today as yields fell but that ultimately wasn’t enough. US yields end the day 10-15 bps lower across the curve.

Still, this is the first substantial weekly decline since March so the bulls can’t exactly complain.

This article was written by Adam Button at www.forexlive.com.

Bank of America (BofA) outlines three primary
reasons why dips in the USDJPY exchange rate are likely to be both
shallow and short-lived. Despite the Bank of Japan’s (BoJ) recent
adjustments to its Yield Curve Control (YCC), BofA maintains its
expectation for USDJPY to rise to 147 by September.

Key Points:

• Unlikely Capital Repatriation: BofA does not foresee
  Japanese investors repatriating capital in the current fiscal year due
  to the recent YCC tweaks. This lack of repatriation is attributed to the
  preparation investors undertook last fiscal year in anticipation of
  BoJ’s policy normalization.

• No Indication of Multiple Rate Hikes: Despite the
  BoJ’s recent action, BofA believes it does not necessarily indicate a
  clear change in stance towards multiple rate hikes. Governor Ueda
  reiterated a patient stance, possibly acknowledging inflation’s upside
  risks.

• Reduced Market Volatility: Interestingly, the
  adjustments in YCC seem to have led to a decline in the USDJPY’s implied
  volatility, contradicting the idea that these changes might spark
  increased market volatility.

Summary:

BofA asserts that recent changes to the BoJ’s YCC are unlikely to
significantly impact the USDJPY exchange rate. The bank predicts that
any dips in the exchange rate will be both brief and limited in scope,
maintaining its outlook for USDJPY to reach 147 by September. This
forecast is supported by the lack of expected capital repatriation by
Japanese investors, no clear indication of multiple rate hikes from the
BoJ, and a decrease in implied market volatility.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.

This article was written by Adam Button at www.forexlive.com.

This bull market started with tech and it might die with tech.

Amazon shares surged higher today on strong cloud revenue but Apple posted slowing sales, including of the iPhone and that has led to a heavy round of profit taking. Shares are down 4.6%.

The entire summer run-up in Apple has now been erased and the fear is that we could get a deeper retracement, perhaps to the 38.2% or 50% levels of the one-way trade that started at the turn of the year. That would imply a further 7-12% decline.

Here is a sense of how revenues have trended in the past year, despite an inflationary environment:

• Rev.: $81.8B, -1% y/y
• iPhone: $39.7B, -2% y/y
• Mac: $6.8B, -7% y/y
• iPad: $5.8B, -20% y/y
• Services: $21.2B, +8% y/y

The bull case for Apple has been rising services fees but if you’re selling less hardware, then there isn’t a platform for people to buy the services on.

The decline in Apple shares has contributed to a turnaround in the broader market with the S&P 500 now down 21 points to 4480 from a high of 4540. That’s a 1% reversal.

This article was written by Adam Button at www.forexlive.com.

The US dollar has recovered some of the selling after non-farm payrolls as equities give back gains. Notably, Treasury yields remain near the lows of the day, led by a 13 bps fall in 7-year notes.

The dollar has been dragged around by fixed income this week but its stocks behind this move. The S&P 500 is now up just 4 points on the day at 4506 from a high of 4540.

The dollar bounce is strongest against commodity currencies but the euro is starting to move as well.

This article was written by Adam Button at www.forexlive.com.

The meeting was scheduled for 1130 GMT, so the timing does tie in to that. But with no policy change discussions on the agenda, it shouldn’t be one to impact oil prices today.

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

Here’s a snapshot of the equities space at the moment:

• Eurostoxx +0.1%
• Germany DAX -0.3%
• France CAC 40 +0.1%
• UK FTSE -0.3%
• S&P 500 futures +0.1%
• Nasdaq futures +0.3%
• Dow futures flat

That’s hardly indicative of a more positive risk sentiment, the one that we saw from Asia and early trading in Europe. There are more tentative tones now and if the US jobs numbers later do come in hot, we might just see equities make it four red days in a row to start August trading.

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

Last
week, the Fed hiked the interest rates by
25 bps as widely expected keeping everything unchanged. Fed Chair Powell
reiterated their data dependency and kept all the options on the table. The
economic data since the FOMC meeting has been pretty solid and the labour
market indicators keep on running hot. This week we got a selloff that began
with the rating agency Fitch downgrading US credit
rating to AA+ from AAA and then extended further as the US ADP report
came in hot again.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite is experiencing a deeper correction as it struggles to extend to the
14649 high. The price currently sits at the previous resistance turned support, but the
sellers may be targeting the upward trendline where
the buyers should step in more aggressively.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we had a divergence with the
MACD on the
last leg higher which is generally a sign of weakening momentum often followed
by pullbacks or reversals. The buyers should pile in here around the 13885 support where we
have also the confluence with the
50% Fibonacci retracement. The
sellers, on the other hand, should pile in more aggressively if the price
breaks lower and target the trendline first, and eventually the 13174 support.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current bullish setup with the price that may even print a little
inverted head and shoulders
pattern right at the support. What happens here will probably lead to a big
move afterwards, so buyers and sellers will watch this level carefully after
the NFP report today.

Upcoming
Events

Today, all eyes will be on the US NFP
report. The Fed will see another NFP report before the next meeting so this one
won’t decide what they are going to do but it can change market expectations,
nonetheless. It’s hard to see what the market is going to do with this data,
but a strong report should weigh on the Nasdaq Composite as the market would
expect the Fed to remain hawkish and weak readings are likely to cause a
selloff as the market may start to fear a recession on the horizon. The
technicals here should be more helpful to manage risk and position in line with
the flow.

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

Headlines:

• Not much appetite among major currencies for now, awaiting the US jobs report
• Underlying inflation has likely peaked in 1H 2023 – ECB
• Japan banking regulator says sees no big impact from BOJ shift for now
• Eurozone June retail sales -0.3% vs +0.2% m/m expected
• Germany June industrial orders +7.0% vs -2.0% m/m expected
• Germany July construction PMI 41.0 vs 41.4 prior
• UK July construction PMI 51.7 vs 48.0 expected
• BNP Paribas lowers BOE terminal rate forecast to 5.50%

Markets:

• USD leads, CHF lags on the day
• European equities mixed; S&P 500 futures up 0.2%
• US 10-year yields flat at 4.192%
• Gold down 0.1% to $1,931.15
• WTI crude up 0.6% to $82.05
• Bitcoin down 0.5% to $29,132

It was a bit of a sideways session as markets are waiting on the US non-farm payrolls later today.

Major currencies saw little appetite as the dollar keeps steady but mostly little changed overall. Meanwhile, equities were optimistic early on as tech shares were buoyed by Amazon’s earnings beat. But gains were tempered during the session, with European indices now trading close to flat levels while US futures are just slightly higher.

Treasury yields are also little changed in general as traders are waiting on the US jobs report later to see if they would want to pile on to the selling that we have seen so far this week in bonds.

The non-farm payrolls later is the first key hurdle highlighted by Powell at the FOMC meeting last week. As such, this could just be marking the calm before the storm later especially if the numbers continue to run hot.

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