The euro might have looked fairly optimistic early yesterday but is getting a reality check today. The first round of the French elections showed a clear win for Le Pen’s far-right faction. Although the margin of victory was a little less than expected, it also reaffirmed a failure on Macron’s government in appeasing the people.

The worry now is that we might just see a hung parliament in France. There’s a lot at stake as we head into the second round of 7 July. And the risks there are perhaps reflected in the euro’s lack of faith today.

EUR/USD is down 0.2% to 1.0715, nearly erasing the entirety of the opening gap higher from yesterday. Meanwhile, EUR/GBP and EUR/CHF are both down 0.1% to 0.8480 and 0.9685 respectively on the day.

It’s a tough situation for traders to balance out. On the one hand, major political uncertainty in the region’s second largest economy is not a good sign. And there’s the threat of this being a sign of things to come in other countries in Europe too. On the other hand, Le Pen has also promised to increase spending. And that entails fiscal risks to France at a time when they are already under scrutiny from the EU.

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

Here’s a snapshot of things currently:

• Eurostoxx -0.9%
• Germany DAX -1.1%
• France CAC 40 -0.7%
• UK FTSE -0.3%
• S&P 500 futures -0.4%
• Nasdaq futures -0.4%
• Dow futures -0.3%

In Europe, French political worries remain a concern and the inflation data here also continues to keep the ECB from feeling too confident in wanting to cut interest rates further. So, that is helping to see stocks pull back following the gains yesterday.

Meanwhile, tech shares were key in driving gains in Wall Street higher yesterday. But they are less enthused today and that is making for a bit of a mixed start to the week.

Just be reminded though that July tends to be a good month for US stocks in particular. But is it about time that the winning streak comes to an end? The first major hurdle of the month will be the US jobs report this Friday. So, we’ll have take it from there.

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

The USD has been overall
rangebound in the last couple of weeks. The last week’s strength might have
been influenced more by quarter-end flows rather than something fundamental as
the economic data didn’t change interest rates expectations. Nonetheless, all
else being equal, the data should continue to support the risk sentiment amid a
pickup in growth without inflationary pressures and that could weigh on the US Dollar eventually.

The CHF, on the other hand,
weakened a lot as the SNB cut
rates by 25 bps bringing the policy rate to 1.25%. Now, the rate cut wasn’t
really a surprise as the market was already pricing a 68% chance going into the
event. What added to the Swiss Franc weakness was the central bank lowering its
inflation forecasts.

The only
thing bullish for the CHF was the line saying that the SNB “will be ready to
intervene in FX market if needed and as necessary”, but we already knew that
from the Chairman Jordan’s comments,
and they won’t do it unless inflation surprises to the upside or they see risks
of inflation overshooting their projections.

USDCHF
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCHF rallied strongly following the SNB decision and the price is
not near the key trendline
around the 0.9050 level. This is where we can expect the sellers to step in
with a defined risk above the trendline to position for a drop into new lows.

The buyers, on the other
hand, will want to see the price breaking higher to increase the bullish bets
into the highs.

USDCHF Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor trendline now defining the current bullish momentum.
If we get a pullback from the major trendline, we can expect the buyers to lean
on the minor trendline with a defined risk below the 0.90 handle to position
for a break above the major trendline with a better risk to reward setup.

The sellers, on the other
hand, will want to see the price breaking below the minor trendline and the 0.90
handle to turn the bias more bearish and increase the bets into new lows.

USDCHF Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have also the 50% Fibonacci retracement level around the minor
trendline. This should technically strengthen the support zone and give the
buyers a good level where to lean on.

The sellers will need the
price to fall below the 0.90 handle to invalidate the bullish setup and
increase the bearish bets into new lows. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Job Openings and Fed Chair Powell speaking. Tomorrow, we
get the US ADP, the US Jobless Claims, the US ISM Services PMI and the FOMC
Meeting Minutes. On Thursday we will get the latest Swiss CPI figures and it’s
also going to be a US Holiday for Independence Day. Finally, on Friday, we
conclude the week with the US NFP report.

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

Crude oil extended the
gains after breaking above the key $80 resistance as the market eventually
caught up to the positive drivers. In fact, we got the OPEC+’s extension of
voluntary output cuts, and we’ve been seeing a pickup in
economic activity.

We have also some major
central banks beginning to ease their policies and China will likely continue
to do so as deflationary forces remain present. All else being equal, this
should support the demand outlook in the big picture.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil broke through the key resistance around the 80 level and after some
consolidation, extended the gains as the buyers piled in more aggressively. The
first target should be the 84.50 level where we might get a rejection and
possibly a pullback as the sellers will likely step in with a defined risk
above the level to position for a drop back into the 80 level.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor trendline
now defining the current bullish momentum. If we get a pullback, the buyers
will likely lean on it to position for a break above the 84.50 level with a
better risk to reward setup. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 80 level.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more closely the recent price action with the rally yesterday following the
US
ISM Manufacturing PMI. That was a headscratcher as the data came out on the
softer side.

Nonetheless, the buyers
might want to wait for a pullback before increasing their positions, while the
sellers will want to lean on the 84.50 resistance and increase the bearish bets
on key downside breaks. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Job Openings and Fed Chair Powell speaking. Tomorrow, we
get the US ADP, the US Jobless Claims, the US ISM Services PMI and the FOMC
Meeting Minutes. Thursday is going to be a US Holiday for Independence Day.
Finally, on Friday, we conclude the week with the US NFP report.

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

• Euro holds higher as France’s far-right sweep first round of elections
• USDJPY Technical Analysis – The bullish bias remains intact
• Bavaria June CPI +2.7% vs +2.7% y/y prior
• Eurozone June final manufacturing PMI 45.8 vs. 45.6 prelim
• UK June final manufacturing PMI 50.9 vs 51.4 prelim
• UK May mortgage approvals 59.99k vs 59.90k expected
• UK June Nationwide house prices +0.2% vs -0.1% m/m expected
• SNB total sight deposits w.e. 28 June CHF 452.0 bn vs CHF 451.8 bn prior

Markets:

• EUR leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields up 0.8 bps to 4.408%
• Gold up 0.5% to $2,336.82
• WTI crude up 0.6% to $81.97
• Bitcoin up 4.2% to $62,643

The main mover among major currencies to start the week is the euro. The single currency opened with a gap higher after the first round of the French elections, which shows a comfortable win for Le Pen’s far-right faction.

It is perhaps the lack of any real surprises that is giving some relief to the euro, with some pollsters anticipating a relative majority with an outside chance of an absolute majority for the National Rally party.

Macron’s alliance has been significantly weakened and it doesn’t look bode well for them ahead of the second round of votes on 7 July. That said, there is still much uncertainty as we have to wait on deal-making developments in the days ahead. I wouldn’t rule out a political standstill so quickly, so be cautious on the euro gains.

EUR/USD stuck around 1.0740-50 levels mostly, up around 0.3% to 0.4% on the day. The dollar is keeping more mixed across the board, with little changes elsewhere. USD/JPY continues to stay buoyed at around the 161.00 level.

Besides that, we got the German state CPI readings and they reaffirmed a slight softening in headline annual inflation for June. That should see the national reading later come in more or less around estimates of 2.3%.

In the equities space, French stocks are leading the way but have seen the optimism tempered slightly. The CAC 40 index opened with gains of around 2.6% but are now up just 1.5% on the day. As for US futures, S&P 500 futures are up 0.2% with Wall Street hoping to keep the July winning streak going this year.

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

The USD started the week on
the backfoot as the new month begins. The last week’s strength might have been
influenced more by quarter-end flows rather than something fundamental as the
economic data didn’t change interest rates expectations. Nonetheless, the data should
continue to support the risk sentiment amid a pickup in growth without
inflationary pressures.

The AUD, on the other hand,
should be favoured in such environment as it’s also backed by a slightly more
hawkish RBA. Last week, the Aussie got a boost from
another hot monthly CPI report which raised the chances of
a rate hike, although RBA’s
Hauser poured some cold water on the expectations as he would rather hold rates
steady for longer.

AUDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD is getting close to the key resistance zone around the 0.6713 level. All
else being equal, the fundamentals are in place for an upside breakout. That’s
what the buyers will want to see to increase the bullish bets into the 0.6870
level next.

The sellers, on the other
hand, will likely step in around the 0.6713 resistance zone with a defined risk
above it to position for a drop back into the bottom of the range at 0.66.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action between the 0.67 resistance and
the 0.66 support. These will be the key levels that the market will need to
break to start a more sustained trend. For now, we could keep bouncing around until
we get a clear breakout.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the recent price action has formed another minor range between the 0.6625
support and the 0.6680 resistance. From a risk management perspective, the
buyers will definitely have a better risk to reward setup around the supports,
while the sellers will want to lean on the resistances.

Nevertheless, if the
price stays above the 0.6680 resistance, the buyers should remain in control and
extend the rally into the 0.6713 resistance. The red lines define the average daily range for today.

Upcoming
Catalysts

This week is full of important events. We begin today with the release of the US
ISM Manufacturing PMI. Tomorrow, we have the US Job Openings and Fed Chair
Powell speaking. On Wednesday, we get the US ADP, the US Jobless Claims, the US
ISM Services PMI and the FOMC Meeting Minutes. Thursday is going to be a US
Holiday for Independence Day. Finally, on Friday, we conclude the week with the
US NFP report.

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

It’s tough to see this bounce as being any more than a slight relief for now. There were no major surprises to the outcome of the first round of votes in the French elections. And I reckon that’s what markets are responding to mostly, alongside the fact that the worst-case scenario of there being a political standstill may be avoided.

The pollsters have Le Pen’s far-right faction likely winning a relative majority with even a small chance of obtaining an absolute majority. I still hold reservations on the latter and in any case, it is still too early to be calling anything just yet. A lot can still change in the days ahead before the second round of votes on 7 July.

I outlined some of the more important details with regards to the parliamentary seats earlier here.

Going back to the euro, it opened with a gap higher today with EUR/USD consolidating gains around 1.0750-60 levels mostly. The high earlier touched 1.0775 but I would argue that the bounce on the day is not too outstanding.

The US ISM manufacturing PMI will be the next key risk event to watch later in the day.

Looking to the chart above, there is still the confluence of the 100 and 200-day moving averages at 1.0790-92 to work through. That alongside key offers at the 1.0800 mark. That will be the key resistance region in keeping a lid on any gains in the euro this week. And I reckon it will do just that.

Besides that, there are also some larger option expiries to take note of throughout the week itself.

On Wednesday, there will be a sandwich of expiries at 1.0700 (€1.5 billion), 1.0750 (€1.0 billion), and 1.0800 (€1.4 billion). On Friday, there are ones at 1.0700 (€1.7 billion) and 1.0800 (€1.9 billion). Those are also likely to factor into the equation in locking price action before we get to the US non-farm payrolls.

In the meantime, just look out for any developments on the French political front. That will be the other driver of EUR/USD price action before the big event on Friday.

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

The USD started the week on
the backfoot as the new month begins. The last week’s strength might have been
influenced more by quarter-end flows rather than something fundamental as the
economic data didn’t change interest rates expectations. Nonetheless, the data
continues to support the risk sentiment amid a pickup in growth without
inflationary pressures.

Even if the US Dollar weakens against the other major currencies, the JPY in this environment
should keep losing ground and the Japanese officials
can’t do much to reverse the trend unless the fundamentals change. We will
likely need weak US growth data to see some sustained Yen strength, although it
might be short lived if it’s not enough to make the market to price in more
aggressive rate cuts for the Fed.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY eventually managed to break above the key 160.00 handle and
extended the rally as the lack of intervention gave the market a bit more
confidence to target new highs.

If we get a pullback into
the 160.00 level, we can expect the buyers to step back in with a defined risk
below the level to target new highs. The sellers, on the other hand, will want
to see the price falling back below the 160.00 handle to gain some conviction
and start targeting the major trendline around the 157.00 handle.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor trendline defining the current upward momentum. We can
expect the buyers to lean on the trendline to keep pushing into new highs,
while the sellers will need to see the price breaking below the trendline and
the 160.00 level to start targeting new lows.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor resistance zone around the 161.25 level as the price
continues to consolidate just beneath it. The buyers will want to see the price
breaking higher to increase the bullish bets into the 165.00 level next, while
the sellers will keep on looking for a break below the trendline to target a
pullback into the 160.00 handle. The white lines define the average daily range for today.

Upcoming
Catalysts

This week is full of important events. We begin today with the release of the US
ISM Manufacturing PMI. Tomorrow, we have the US Job Openings and Fed Chair
Powell speaking. On Wednesday, we get the US ADP, the US Jobless Claims, the US
ISM Services PMI and the FOMC Meeting Minutes. Thursday is going to be a US
Holiday for Independence Day. Finally, on Friday, we conclude the week with the
US NFP report.

See the video below

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

• Prior 61.14k; revised to 60.82k
• Net consumer credit £1.5 billion
• Prior £0.7 billion; revised to £0.8 billion

Individuals borrowed, on net, £1.2 billion of mortgage debt in May – down from £2.2 billion in April. That sees the annual growth rate for net mortgage lending rising to 0.3% in May, up from 0.2% in April – which was the first rise in the growth rate since October 2022.

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

• Monday: China
  Caixin Manufacturing PMI, Swiss Retail Sales, US ISM Manufacturing PMI.
• Tuesday: RBA
  Meeting Minutes, Eurozone CPI, Eurozone Unemployment Rate, Canada
  Manufacturing PMI, US Job Openings, Fed Chair Powell.
• Wednesday:
  Australia Retail Sales, China Caixin Services PMI, Swiss Manufacturing
  PMI, Eurozone PPI, US ADP, US Jobless Claims, US ISM Services PMI, FOMC
  Meeting Minutes.
• Thursday: US
  Holiday, Swiss Unemployment Rate, Swiss CPI, ECB Meeting Minutes, Canada
  Services PMI, UK General Election.
• Friday: Eurozone
  Retail Sales, Canada Labour Market report, US NFP.

Monday

The US ISM Manufacturing PMI is expected
at 49.0 vs. 48.7. We got a great S&P
Global US Manufacturing PMI which increased
to 51.7 vs. 51.3 prior and overall the data highlighted the fastest economic
expansion for over two years, hinting at an encouragingly robust end to the
second quarter while at the same time inflation pressures have cooled.

The survey also brought welcome news in
terms of job gains, with a renewed appetite to hire being driven by
improved business optimism about the outlook. Selling price inflation has
meanwhile cooled again after ticking higher in May, down to one of the
lowest levels seen over the past four years. Historical comparisons
indicate that the latest decline brings the survey’s price gauge in line
with the Fed’s 2% inflation target.

Tuesday

The Eurozone CPI Y/Y is expected at 2.5%
vs. 2.6% prior, while the Core CPI Y/Y is seen at 2.8% vs. 2.9% prior. This
report won’t change anything for the ECB as they want to see the data
throughout the summer before deciding on a rate cut in September.

Nonetheless, a faster easing in inflation
during the summer or some quick deterioration in the economy should see the
market pricing in more rate cuts by the end of the year. At the moment, the
market sees 46 bps of easing by the end of the year assigning 61% probability of no
change at the July meeting and 83% chance of a cut in September.

The US Job Openings are expected to fall
to 7.850M vs. 8.059M prior. The last
report missed expectations by a big margin
with job openings falling to the lowest level since February 2021 and now
getting close to the pre-pandemic level.

This is good news for the Fed as the
labour market continues to rebalance via less jobs availability rather than
more layoffs, and inflationary pressures should keep abating. On the other
hand, the labour market is a spot to keep an eye on carefully in this part of
the cycle.

We will also hear from Fed Chair Powell
who’s speaking at the European Central Bank Forum on Central Banking 2024 in
Sintra, Portugal. I don’t expect him to signal anything and just maintain the
usual neutral stance.

In my opinion, a lot will depend on the
next inflation data. I think the Fed will be more dovish if we get a good
inflation report in July. Then, if we get some more good figures in August,
Powell will likely pre-commit to a rate cut in September at the Jackson Hole
Symposium.

Wednesday

The US Jobless Claims
continue to be one of the most important releases to follow every week as it’s
a timelier indicator on the state of the labour market. Initial Claims keep on
hovering around cycle lows, while Continuing Claims have been on a sustained
rise recently with the data setting a new cycle high last week. This is
something to keep an eye on. This week Initial Claims are expected at 235K vs.
233K prior, while there’s no consensus for Continuing
Claims at the time of writing.

The US ISM Services PMI is expected at 52.5
vs. 53.8 prior. This survey hasn’t been giving any clear signal lately. As previously
mentioned, the S&P
Global US PMIs surprised to the upside
with the Services measure in particular showing a strong rise. The focus
will likely be on the employment sub-index ahead of the NFP report but the data
we got until now suggests that the US economy is doing well, and the labour
market remains resilient.

Thursday

The Swiss CPI Y/Y is
expected at 1.4% vs. 1.4% prior, while the M/M measure is seen at 0.1% vs. 0.3%
prior. As a reminder, the SNB cut interest
rates by 25 bps to
1.25% at the last meeting and lowered its inflation forecasts. The SNB also
added the line that says “will be ready to intervene in the FX market if needed
and as necessary”, so if inflation surprises to the upside in Q3 or they see
risks of inflation overshooting their projections, then we will likely get some
interventions.

For context, the central
bank expects inflation to pickup slightly and average 1.5% in Q3, so this is
going to be the baseline and if inflation were to surprise to the downside,
then the market will price in higher chances of another rate cut in September.
At the moment, the market expects just one more rate cut in 2024 and the
probability of a rate cut in September stands at 62%.

Friday

The US NFP is expected to
show 180K jobs added in June vs. 272K in May
and the Unemployment Rate to remain unchanged at 4.0%. The Average Hourly
Earnings M/M is expected at 0.3% vs. 0.4% prior. The Fed at the moment is
very focused on the labour market as they fear a quick deterioration.

As a reminder, they
forecasted the unemployment rate to average 4% in 2024, so I can see them
panicking a bit and deliver a rate cut if unemployment rises to 4.2% in the
next couple of months. For now, the data suggests that the labour market is
rebalancing via less hires than more layoffs and overall, there are no material
signs of deterioration.

The Canadian labour market
report is expected to show 25K jobs added in June vs. 26.7K in May and the Unemployment
Rate to tick higher again to 6.3% vs. 6.2% prior. The last
report surprised to the upside although we got another uptick in the unemployment
rate. The key part was wage growth jumping to 5.1% vs. 4.7% prior, which is
what the BoC is most focused on.

As a reminder, the last
week the Canadian
CPI surprised to the upside, with the underlying inflation measures rising
but remaining within the 1-3% target band. This made the market to pare back
rate cuts expectations with the probabilities now standing around 50%. We will
get another inflation report before the next BoC policy decision, but if we see
another jump in wage growth, then the central bank will likely need very good
CPI figures to deliver a rate cut in July.

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