Headlines:

• USD/JPY at three-week highs as buyers look for further upside
• The dollar looks set to end the month as the weakest major currency
• Eurozone July preliminary CPI +5.3% vs +5.3% y/y expected
• Eurozone Q2 preliminary GDP +0.3% vs +0.2% q/q expected
• A little bit of this and that for the ECB today
• Germany June retail sales -0.8% vs +0.2% m/m expected
• Germany June import price index -1.6% vs -0.7% m/m expected
• Italy Q2 preliminary GDP -0.3% vs 0.0% q/q expected
• UK June mortgage approvals 54.66k vs 49.00k expected

Markets:

• AUD leads, JPY lags on the day
• European equities slightly higher; S&P 500 futures up 0.1%
• US 10-year yields down 0.6 bps to 3.962%
• Gold flat at $1,958.00
• WTI crude up 1.0% to $81.42
• Bitcoin up 0.2% to $29,391

It’s a pretty tame start to the new week, although not so much if you are a Japanese yen bull. The currency itself continues to suffer from the post-BOJ hangover, falling further today by over 100 pips.

USD/JPY was already higher in Asia around 141.70 before extending gains to 142.50 in European trading. That also comes amid a more positive risk mood in markets, recovering after an early setback in US futures – which are now higher.

The aussie and kiwi are also beneficiaries of that, aided by China stimulus news. AUD/USD is up 0.9% to 0.6705 currently and sitting at the highs for the day. Meanwhile, NZD/USD is up 0.6% to clip the 0.6200 mark.

The dollar is seen steadier across the board with just light changes against the euro, pound and franc. The ranges for the day are still rather narrow for those currency pairs, with European traders a little more guarded ahead of month-end trading later.

In terms of data, euro area core inflation remains sticky and Q2 GDP beat estimates by the slightest. But all in all, it offers up a mixed picture and one that the ECB can spin however way they would want still for now.

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

The earnings season continues with Apple and Amazon leading the charge this week. They will release their earnings after the market close on Thursday. The Nasdaq index has seen an increase of nearly 36.8% this year, while the S&P 500’s is up 19.3%. More than half of the companies listed on the S&P 500 had reported their second-quarter earnings by Friday, with 78.7% of them surpassing analysts‘ expectations, as per data from Refinitiv reported by Reuters.

The major companies reporting this week by data include:

Monday, July 31

• Sofi

Tuesday, August 1

• Uber
• Pfizer
• Caterpillar
• Merck
• Altria
• AMD
• Starbucks

Wednesday, August 2

• CVS
• Humana
• Kraft Heinz
• PayPal
• Shopify
• Qualcomm
• Unity

Thursday, August 3

• Warner Bros. Discovery
• ConocoPhillips
• Expedia
• Moderna
• Amazon
• Apple
• Coinbase
• Airbnb
• Draft King’s

This article was written by Greg Michalowski at www.forexlive.com.

Last week, the Fed hiked by 25 bps as expected and left everything
unchanged. The market was more focused on the press conference to see if Fed
Chair Powell would hint to the next policy move. Unfortunately, Powell just
repeated that they are data dependent and that all options are on the table for
the September meeting. Since the FOMC meeting, the data has been supporting the
soft-landing narrative as the US Jobless Claims beat expectations once again and
the US PCE and the Employment Cost Index missed forecasts.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite bounced again on the red 21 moving average and it’s
now eyeing the key 14649 resistance. A break
above that level would open the door for the all-time high, but the sellers are
likely to step in aggressively there.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the price pulled back to the trendline and
bounced as the buyers stepped in to target the breakout of the resistance.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
also had the 50% Fibonacci
retracement level near the trendline, so the buyers
had some good confluence there.
This is clearly a bull market, so the sellers are likely to lean on the 14649
resistance with a defined risk above the level to target a bigger pullback or
wait for the price to fall below the trendline to pile in and extend the fall
into the next major trendline.

Upcoming
Events

This week is packed with several top tier economic
indicators. We start tomorrow with the US Manufacturing PMI and the US Job
Openings data. Moving on to Wednesday, we will see the latest US ADP report. On
Thursday, the market will be focused on the US Jobless Claims and the US ISM Services
PMI. We then conclude on Friday with the main event of the week: the US NFP
report.

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

At one point after the US CPI report this month, the dollar looked like it was bound for a major breakdown. But as USD/JPY found its footing for a rebound, so did the dollar and that correlation was also highlighted at the time already here. The dollar is still set to end the month as the weakest among the major currencies but it really could’ve been a lot worse.

As the month draws to a close, dollar buyers will be happy with the fact that they avoided a much uglier scene – especially against the euro and pound. Against the yen itself, the BOJ played a helping hand in USD/JPY on its latest jump since Friday. As such, the pair is „only“ down 1.3% on the month so far.

So, what’s next moving forward for the dollar?

It’s going to be all about the data, specifically big data as highlighted here. The first of which is the US non-farm payrolls and labour market report coming up at the end of this week.

In the bigger picture though, what matters will be the Fed’s take on inflation and if we have seen a peak in interest rates already. There is certainly a suggestion that policymakers are looking to adopt that view, but it isn’t a given just yet.

For now at least, market pricing is definitely siding with that and so the dollar will go according to the flow in that regard.

But all else being equal, confirmation of a Fed pivot will not bode well for the dollar’s prospects. However, the saving grace for the greenback is that the US economy is continuing to surprise with stronger data while other key economies look to be flagging.

Europe is seeing credit conditions tighten significantly and dark clouds are starting to hover over the economy ahead of Q3 and Q4. Meanwhile, in the UK you have the cost-of-living crisis still to contend with alongside risks of stagflation building.

And when you consider rate differentials, the dollar is still in a good spot as well with many major central bank also looking to pivot alongside the Fed.

The RBA, who is meeting tomorrow, may not hike again and the ECB could be on a similar path as well. And in the case of the BOJ, sure they are letting yields push higher, but they’re not exactly capitalising on higher inflation to leave behind their ultra loose monetary policy – something which they might regret.

So, the dollar definitely still has a couple of redeeming qualities. So, unless we are due a hard landing in the US (which implies the Fed will have to cut rates sooner rather than later), the dollar might still find some backing or at least reason to not depreciate too rapidly.

Fed funds futures are showing that traders are anticipating the first rate cut to either be in March or May next year. If that pricing is wrong and the Fed is going to hold rates higher for longer while waiting on inflation to fall further (since the economy can take it), that is one tailwind that markets should really consider for the dollar.

In some sense, it is similar to this story right here. At the time, traders were seeing the Fed funds rate fall to 4.30% by December. For some context, that pricing is now seen at 5.37%.

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

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

EURUSD:

USDJPY:

GBPUSD:

AUDUSD:

This article was written by Greg Michalowski at www.forexlive.com.

• US June core PCE inflation +4.1% y/y vs +4.2% expected
• Canada GDP for May +0.3% versus +0.3% expected
• US employment costs for Q2 1.0% versus 1.1% expected
• Germany July preliminary CPI +6.2% vs +6.2% y/y expected
• July final UMich US consumer sentiment 71.6 vs 72.6 expected
• Atlanta Fed GDPNow model starts Q3 growth at 3.5%
• Dallas Fed June trimmed mean price index falls to 2.5% m/m annualized versus 3.2% prior
• Former ECB VP says ’no need for more hikes‘
• Canadian Q2 GDP is tracking at about 1%
• Baker Hughes weekly US oil rig count -1

Markets:

• Gold up $14 to $1958
• US 10-year yields down 4.9 bps to 3.96%
• WTI crude oil up $0.33 to $80.42
• S&P 500 up 45 points, or 1.0%, to 4608
• GBP leads, JPY lags

The Bank of Japan offered plenty of volatility and drama to wrap up a busy week for central bankers but as the dust settled the market grew comfortable selling the yen. USD/JPY started US trade near 139.00 before finishing near 141.00 after several moves in that wide range in the past 24 hours.

Helping the move were lower yields after a goldilocks US PCE report and falling employment cost index.

Outside of the yen, trading wasn’t exactly straightforward as a positive risk trade certainly didn’t flow into commodity FX, perhaps owing to domestic concerns and month-end flows. USD/CAD finished slightly higher despite another gain in crude and a rip in equities. AUD/USD tried to mount a comeback in North America but made little progress and finished the day down 0.8% as the market frets about next week’s RBA decision.

The euro and pound finished higher but only recovered a portion of the drop a day earlier. The gains came early in Europe and it was mostly sideways in North America with volatility low compared to JPY trades.

Have a great weekend, it was certainly an interesting week. Note that the VIX is down to 13 as the market grows increasingly sanguine.

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

The major indices are ending the day with solid gains. The gains are led by the NASDAQ index which surged by 1.86%. The Dow industrial average was the laggard today, but still rebounded by 0.50% on the day. All the major indices are closing higher for the week.

The final numbers for the day are showing:

• Dow industrial average up 176.20 points or 0.50% at 35458.97
• S&P index up 44.76 points or 0.99% at 4582.16. The S&P closed at its highest level since January 2022.
• NASDAQ index up 266.54 points or 1.90% at 14316.65

The small-cap Russell 2000 is also solidly higher with a gain of 26.64 or 1.36% at 1981.53.

For the trading week, the NASDAQ index is leading the way with the largest gain this week. The Dow industrial average which ended a 13-day win streak yesterday closed higher for the week, but was the laggard of the major indices.

• Dow industrial average rose 0.66%
• S&P index rose 1.01%
• NASDAQ index rose 2.02%

This article was written by Greg Michalowski at www.forexlive.com.

As we finish the trading week and look toward the new trading week, the sellers are more in control in the AUDUSD. The bias is more to the downside on both the daily and hourly chart.

Having said that, the pair has been mostly in an up-and-down trading range over the last 5 trading months.

With the bias down, what would tilt the bias more to the upside, and if those levels can’t be breached, what would get the price outside the 5-month up and down trading range.

This article was written by Greg Michalowski at www.forexlive.com.

As the dust settles from the Bank of Japan USD/JPY is rising above 141.00 and I think that’s the right trade. A week ago, I warned not to chase USD/JPY as it rose to 141.73 and we got a retracement all the way to 138.06 on a series of leaks and a messy trade. It certainly wasn’t easy but at the time I wrote:

I think the trade for the BOJ is to wait and see what they deliver and
if it’s yet-another kicking of the can on YCC, then buy USD/JPY with
both hands and dare the MoF to defend 145.00.

We didn’t exactly get a kicking of the can but that’s still the strategy. Whether YCC is 0.50% or 1.00% it’s still far lower than anything you’re getting in US 10s and every other developed economy. Yes, that spread has narrowed and that counts for something but at the same time, US rates are moving up on a strong economy so net-net it’s USD/JPY bullish.

Even more compelling is that now some of the headline risk is gone. The games the BOJ played were pure amateur hour and I can’t see any sense in the leaks and most-everything else Ueda has said in the past two weeks.

I spoke to Reuters today and offered some colourful language:

„This may be the first step towards a credibility crisis for the Bank of
Japan and that is really dangerous. They’re on the tightest of
tightropes above the pit of alligators. This is the first wobble, and
the Bank of Japan cannot afford to lose any of its credibility. I think
that’s the big reason why we still see so much volatility.“

What I’m talking about there is the monstrous amount of government debt in Japan and the further mountain of debt priced on it. The whole thing is held together by the assumption of low inflation and BOJ credibility.

That’s an enormous responsibility that the BOJ is dealing with. Maybe they somehow survive this round of global inflation but when Ueda says that risks remain towards too-low inflation, I shake my head. Too-low inflation isn’t perfect but it’s hardly an existential crisis. Meanwhile, if Japanese inflation went to UK-like rates, it would be catastrophic and the pain would reverberate through the financial system globally. I don’t understand why they want to take that kind of risk but — fine — perhaps Japanese consumers continue to defy the laws of economics. But even if you think that risk is minimal you can’t be sitting at the BOJ and leaking stuff all over the place then delivering some kind of convoluted decision that pretends a 0.50% cap that now extends to 1.00% hasn’t changed.

In any case, traders trade and the path for the yen is higher until the Ministry of Finance says it’s not. Given the booming risk trade, I can’t see any reason to buy the yen or to take off USD/JPY longs.

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