„Open your eyes, look up to the skies and see; Europe’s
caught in a landslide: The ECB’s monetary policy matters less, than
President Putin’s gas export strategy. Nordstream 1 came back online
yesterday, but markets aren’t comforted. Not when even the
European Commission President acknowledges that “Russia is using energy
as a weapon; It is a likely scenario that there is a full cut-off of
Russian gas and that would hit the while European Union”. So, the euro’s
pre-ECB euro bounce after failing to break convincingly below parity
with the dollar, wasn’t given further impetus by a 50bp rate hike and
isn’t supported by the market now pricing a 1% discount rate by
Christmas,“ SocGen notes.

„The big issue is that the most optimistic outcome for the rest of
this year is while President Putin keeps the gas flowing, he continues
to use uncertainty about how much will flow as a bargaining tool and as a
means of sowing uncertainty and discord among Europe’s political elite.
That still leaves the Euro, to all intents and purposes,
unbuyable for the time being (probably for the rest of this year given
that the leverage gas supplies afford the Russian President is at its
greatest in the winter),“ SocGen adds.

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.

However the number classified a symptomatic fell to 129 from 164.

The cases come from two main outbreaks in the northwestern province of Gansu and the southern region of Guangxi. Shanghai reported 3 symptomatic cases compared to 2 a day earlier while Beijing reported no local cases.

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

• We follow up on the previous bitcoin technical analysis and trade idea (see video within that page)
• What happens if we see new information that may affect our trade? Well, while sticking to trade plans is important, so is finding a balance between that and agility, as we adjust to the market and price action. Even react to things that we did not see beforehand, but it is still not too late now
• In our case, we see the upcoming 20 EMA (20 bar exponential moving average) on the daily timeframe. The EMA20, or 20 EMA, is the total of an asset’s closing prices during a period divided by the number of observations. For example, a 20-day SMA is the total of the last 20 trading days‘ closing prices divided by 20. EMA gives current prices more weight, whereas SMA gives all values equal weight. A shorter EMA weights the most recent price more than a longer EMA.
• Back to our trade and adjusting to new information, we show how to manage a profitable trade by adjusting a stop in order to break even within a worse case scenario, should BTCUSD turn against our short position, in this case. We do that by exiting one third of the position at a new take profit target, and stay in the short on the other two thirds. We show the principle of calculating the new stop price of the two thirds left trading
• In terms of the bitcoin technical analysis situatuon at this stage, Bitcoin is cooling off after faking out a breakout at the top of the presented channel, so the bears have gained control for the short term, at least

Bitcoin technical analysis, failed breakout, for now

• Watch the rest within the BTC technical analysis below

This article was written by ForexLive at www.forexlive.com.

• MON: Germany Ifo Survey (Jul), US National Activity Index (Jun)
• TUE: NBH Announcement, US Monthly Home Prices (May), US Richmond Fed Index (Jul)
• WED: FOMC Announcement, Chinese Industrial Profits (Jun), Australian CPI (Q2), US Durable Goods (Jun)
• THU: EZ Sentiment Survey (Jul), US GDP Advance (Q2), US PCE Advance (Q2)
• FRI: Australian PPI (Q2), German Flash GDP (Q2); German Unemployment (Jul), EZ Flash CPI (Jul), US PCE (Jun), US Chicago PMI (Jul), Canadian GDP (May), US Dallas Fed PCE (Jun), BoJ SOO

NBH ANNOUNCEMENT (TUE): Based on recent commentary the NBH will likely decide to conduct a further hike to their Base Rate which currently stands at 9.75%, at the same level as their One-Week Deposit Rate following a 200bp increase. ING looks for a 1.25% increase given it’s the average of the last two meetings 50bp and 200bp moves; however, caveating that with expectations so high, the bar for a disappointment is low and EUR/HUF could revert back to 410 over the summer. At the last update, Deputy Governor Virag said hikes will continue in determined steps, altering from their prior “gradual” language. Adding, that hikes are set to continue until such a time as when CPI is seen peaking; for reference, the last inflation release was prior to the One-Week’s 200bp move and had the headline YY lifting to 11.7% (prev. 10.7%, exp. 11.5%). The next inflation print is due on August 9th. Elsewhere, at the meeting, Virag added that they will be acting against FX movements which pose a sustained threat to price stability. A pledge that has been followed by days of concerted action from the NBH on this front, providing over EUR 1.5bln of liquidity to banks since at daily swap tenders.

FOMC ANNOUNCEMENT (WED): The FOMC is largely expected to raise its Fed Funds target range by 75bps to 2.25-2.50%, a territory considered to be ’neutral‘, to which it will guide smaller hikes ahead as policy becomes restrictive. Some signs/expectations of a cooling growth outlook (as evidenced by survey data and corporate commentary), and a lack of deterioration in inflation gauges post-June CPI (UoM inflation expectations fell), have taken the heat off of a 100bps rate hike that gained traction after the headline Y/Y consumer inflation print in June rose again to a multi-decade high of 9.1% from 8.6%. The consensus for 75bps was emboldened in the wake of comments from Fed hawks, Waller and Bullard, after the CPI, indicating their preference remaining for 75bps despite the speculation for a larger hike. Money markets now imply just a 10% chance of a 100bps move, as opposed to the greater than 70% implied in the immediate aftermath of CPI. With no SEPs at this meeting, traders will look to the statement and Powell’s presser for guidance on the rate path/terminal rate, with expectations for smaller hike increments at a ‚measured‘ pace now that the Fed Funds rate is being lifted above neutral (2.5% according to June median Dot Plot). Markets are currently pricing in a year-end Fed Funds rate at 3.25-3.50%, which also now happens to be the market-implied terminal rate with rate cuts priced in Q1 ’23. When June FOMC Dots were released they implied a terminal of 3.75-4.00%, so there is a disconnect between markets and the Fed’s forecasts as the former prices in risk of a growth/employment slowdown later this year while Fed officials are conducting policy on the knowns: solid job growth and consumer spending that is fueling consecutive increases in inflation. The Fed has said it will remain undeterred in its tightening path until inflation shows signs of returning to target, so to expect anything otherwise at the June FOMC appears unlikely.

CHINESE INDUSTRIAL PROFITS (WED): There are currently no forecasts for the June Industrial profit figures, but again, the metrics will likely be affected by the targeted tightening of COVID restrictions in some Chinese districts. As a reminder, the May data saw profits of industrial firms falling at a slower pace vs April as manufacturing resumed. May’s improvement was led by surging profits in coal, oil and gas – commodities which saw prices fall in recent weeks.

AUSTRALIAN CPI (WED): Q2 inflation is expected to tick lower to 1.9% Q/Q from 2.1%, whilst the Y/Y rate is seen accelerating to 6.3% from 5.1%. The Trimmed Mean metrics are both expected to rise, to 1.5% from 1.4% Q/Q, and 4.7% from 3.7% Y/Y. The Weighted Means are also forecast to rise, to 1.4% from 1.0% Q/Q and to 4.2% from 3.2% Y/Y. Desks flag significant unknowns regarding the supply distribution impact on downstream goods such as food, clothing & footwear, as well as household goods. Analysts suggest the recent drop in crude should provide some reprieve for Q3, “The surge in domestic energy prices is set to have a significant impact on retail electricity prices, and thus the CPI, but we don’t expect it to appear until the second half of the year, and even then state government rebates will offset this in the September quarter so the full impact will not appear until the December quarter.”, analysts at Westpac say, as they forecast that another 50bps hike in August seems highly likely.

EZ FLASH CPI (FRI): Headline Y/Y CPI is expected to rise to 8.8% in July vs. the 8.6% rate seen in June with the super-core metric seen rising to 3.8% from 3.7%. The prior report was once again characterised by a combination of rising energy and food prices, whilst remarks from President Lagarde at the most recent ECB press conference saw the policy chief note that price pressures are spreading across more and more sectors, in part owing to the indirect impact of high energy costs across the whole economy. Accordingly, the ECB expects inflation to remain „undesirably“ high for „some time“ with upside pressures also a by-product of EUR depreciation. On a more positive footing, the July S&P Eurozone PMI survey stated that „rates of inflation of both selling prices and input costs moderated amid an easing of supply constraints and weakened demand“. GDP metrics for Q2 will also be released alongside the CPI report whereby Q/Q growth is seen coming in at 0.2% vs. the 0.6% expansion observed in Q1, with the Y/Y rate expected at 3.4% vs. prev. 5.4%. Given that the ECB has already pulled the trigger on rates and the outturn for the September meeting is likely to be more guided by the inflation backdrop, the GDP figures are unlikely to shift the dial for the ECB. From a growth perspective, greater attention has been placed on the recent S&P Global PMI release which saw the Eurozone Composite metric slip to 49.4 from 52.0 with the report noting that „The eurozone economy looks set to contract in the third quarter as business activity slipped into decline in July and forward-looking indicators hint at worse to come in the months ahead“

US PCE (FRI): Core PCE M/M, the Fed’s main inflation gauge, is seen rising 0.5% in June compared to the 0.3% rise in May, while the Core Y/Y figure is seen rising 4.7%, the same pace as the prior. Bank of America’s economists are on the softer side, calculating a +0.4% M/M core PCE rise (+0.44% unrounded) after the June CPI and PPI M/M prints rose by 1.3% and 1.1%, respectively. They suggest the gap between core PCE and CPI to persist after forecasting the third consecutive month where the former comes in around 0.3ppts below the latter, „The wedge is mainly driven by the differences in weights and scope of the two measures.“

US ECI (FRI): The Q2 Employment Cost Index is seen falling to +1.2% from +1.4%. The Fed will be hoping for a fall in the index after the Q1 figure ramped up to 1.4%, the highest since the early 1990s; Powell has previously touted the index as a key gauge he watches. A sustained high figure will only deepen concerns around second-round inflation effects and affirm a „higher for longer“ outlook among the FOMC.

BOJ SOO (FRI): The BoJ will release the Summary of Opinions from the July meeting on Friday in which the central bank kept its policy settings unchanged, as expected, with rates at -0.10% and QQE with yield curve control maintained to target 10yr JGB yields at around 0%. The BoJ reiterated it will offer to buy 10yr JGBs at 0.25% every business day unless it is highly likely that no bids will be submitted and repeated its guidance on policy bias that it will take additional easing steps without hesitation as needed with an eye on the pandemic’s impact on the economy, as well as keeping forward guidance for short- and long-term rates to remain at present or lower levels. Furthermore, it stated that it must be vigilant to financial and currency market moves and their impact on Japan’s economy and prices, while it lowered the Real GDP growth forecast for the current fiscal year to 2.4% from 2.9%, but raised the Real GDP view for the two years after and increased CPI projections through to FY24. The policy announcement lacked any major surprises and the adjustment to the current fiscal year’s projection was previously flagged by source reports, while Governor Kuroda made it clear in the post-meeting press conference that there is no intention to raise interest rates under Yield Curve Control and no plan to widen YCC’s 0.25% cap range, as well as noting that increasing rates a little bit would not stop JPY weakness and a large hike would be needed to stop JPY weakness which would bring substantial damage to the economy and he does not believe such a policy is rationally feasible.

This article originally appeared on Newsquawk

This article was written by Newsquawk Analysis at www.forexlive.com.

• The final is set: It will be Sunak or Truss as the next UK Prime Minister

Bloomberg (gated) have polled analysts, finding that eight of the nine economists surveyed said Sunak would handle the economy better than Truss:

Truss has promised immediate reductions in taxes on companies and personal income, a measure that would probably stimulate the economy and boost inflation. The central bank, economists say, would probably respond by hiking rates, which are already at their highest point since 2009.

And, in the other corner:

Sunak has said he’d cut taxes only when the public finances are strengthened

—

I’m not picking sides, but Sunak’s time as Chancellor, doing the bidding of current PM Johnson, was not impressive.

Liz Truss and Rishi Sunak are slugging it out. There is around 7 weeks of voting ahead. This will give the UK a new PM just in time for another winter of discontent; high inflation & high rates are a bleak backdrop.

This article was written by Eamonn Sheridan at www.forexlive.com.

• US S&P Global July flash services PMI 47.0 vs 52.6 expected
• Canada May retail sales +2.2% vs +1.6% expected
• RBC forecasts a 12% drop in Canadian house prices
• ECB’s Nagel: I’m confident that TIP could withstand legal challenges
• Risky week next week. Calendar of earnings is full and then there is the Fed and GDP

Markets:

• Gold up $5 to $1723
• US 10-year yields down 15 bps to 2.75%
• WTI crude down $1.69 to $94.69
• S&P 500 down 1.0%
• JPY leads, CAD lags

The bond market is signaling less fear about inflation and more about growth. Yields continue to fall dramatically in a sign that bonds have seen enough hiking to price out inflation with the growing possibility that a hard landing is on the way.

Most of the worries are focused on Europe but today’s US services PMI was the worst since 2009 aside from a few months during the pandemic. It was far below estimates and initially caused USD selling on fewer Fed hikes but eventually transitioned to a classic ‚risk off‘ move on worries about global growth.

That sent commodity currencies on a ride as they initially strengthen but then completely reversed to finish the day lower. The euro and pound were stuck in the same dollar rollercoaster as they initially benefited only to give it all back.

The steady winner was the yen as the market begins to envision the rest of the world back in the low-inflation, low-growth trap that the BOJ has been struggling with for decades. USD/JPY fell 100 pips but yen crosses fell further.

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

Each one aside from the UK disappointed.

But it wasn’t until the US release that risk trades began to suffer. Why?

The market actually wants to see some economic softness because it will mean lower inflation and, by extension, interest rates. However there’s a limit. Most of those releases look like a soft landing but the US print looks like a recession. I think the market would have been forgiving if that was a reading on manufacturing because it’s suffering from a pandemic boom-and-bust but services are supposed to be holding up.

My hope is that this chart is the real tell:

There’s pessimism and uncertainty in the air but corporate and household balance sheets are strong.

But at the moment, the market is looking at a higher probability of a hard landing. Europe is in energy crisis, China is stuck fighting a hopeless covid battle and the idea that the US was much stronger is being put to the test.

So who is the loser in all of that?

Counter-intuitively it’s the Australian dollar. It’s a country that’s highly-levered to the global economy, particularly demand for raw materials. If we do get a hard landing in the US, it bodes poorly for the rest of the world and we can see that in the reversal in AUD today.

One thing that has caught my eye is that copper prices are up 0.6% today. Generally copper is a great barometer of global economic growth. It’s fallen badly since early June and was at the leading edge of pricing in a slowdown but it has stabilized lately and that’s worth watching.

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

• S&P 500 -1.0%
• Nasdaq -2.0%
• DJIA -0.4%
• Russell 2000 -1.8%
• Toronto S&P/TSX Comp -0.6%

On the week:

• S&P 500 +2.6%
• Nasdaq +3.3%
• DJIA +2.0%
• Toronto S&P/TSX Comp +3.1%

It was a disappointing day for the bulls but still an encouraging week.

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

They now project home resales to fall nearly 23% this year and 15% next year
in Canada, and the national benchmark price to drop 12.4% from
peak to trough by the second quarter of 2023.

A 12% drop would be larger than in any cycle over the past 40 years.

„Rising rates are squeezing housing affordability hard. By the time the
Bank of Canada is done, RBC’s aggregate affordability measure could
easily be at it worst-ever level nation-wide,“ they write.

Many are worried the decline could be even worse with Canada scoring some of the worst metrics globally for home prices and after a 50% rise during the pandemic. However RBC says it will be a correction, not a collapse.

„While a more severe or prolonged slump cannot be ruled out, we expect
the correction to be over sometime in the first half of 2023—lasting
approximately a year—with some markets likely stabilizing faster than
others. Solid demographic fundamentals (including soaring immigration)
and a low likelihood of overbuilding should keep the market from
entering a death spiral,“ the write.

Of course, no matter what the set of facts, would you expect the country’s biggest bank to forecast a housing collapse?

Read the report here.

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

• Germany July flash manufacturing PMI 49.2 vs 50.6 expected
• France July flash services PMI 52.1 vs 52.7 expected
• Eurozone July flash services PMI 50.6 vs 52.0 expected
• Euro sinks as German PMI data points to contraction in activity
• Bond yields slide as euro area PMI data sounds recession alarm bells
• 10-year German bund yields fall to seven-week lows
• ECB’s de Cos: We will see about September, we are data dependent
• ECB’s Kažimír: It is possible to expect 25 or 50 bps rate hike in September
• ECB’s Villeroy: Frontloading rate hikes does not mean terminal rate will be higher
• UK July flash services PMI 53.3 vs 53.0 expected
• UK June retail sales -0.1% vs -0.3% m/m expected

Markets:

• JPY leads, EUR lags on the day
• European equities higher; S&P 500 futures down 0.2%
• US 10-year yields down 10.7 bps to 2.801%
• Gold up 0.5% to $1,727.63
• WTI crude down 1.6% to $94.79
• Bitcoin up 1.9% to $23,558

Just a day after the ECB decided to raise rates, leading indicators in Europe started to flash recession signals with the PMI data suggesting that the Eurozone economy contracted in the month of July. Soaring prices and energy costs are to blame as demand conditions deteriorated. The worst part? Things look set to intensify in the months ahead with a gas crisis looming.

The euro tumbled on the headlines with EUR/USD falling from 1.0200 to 1.0130 before finding some footing to stick around 1.0150-60 levels, though still down 0.6% on the day currently.

The dollar caught a bid as risk sentiment also retreated slightly before some pushing and pulling is leaving the greenback more mixed now. GBP/USD also fell from 1.1985 to 1.1915 but the lows held at the 200-hour moving average once again.

Meanwhile, AUD/USD dropped from 0.6920 to 0.6895 before pulling itself up to 0.6940 at the moment, with European stocks recovering after the earlier drop on the PMI data.

However, bond yields sank hard with 10-year German bund yields dropping by nearly 19 bps to 1.03% – its lowest in seven weeks – while 10-year Treasury yields are also seen down by nearly 11 bps to 2.80% on the day.

That weighed on USD/JPY as the pair fell from 137.60 to 136.90 now as we look towards US trading.

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