Fundamental
Overview

The USD weakened across the
board last week following another soft US CPI report and benign Jobless Claims figures. The market not only fully
priced in a rate cut in September but also started to price in some chances of
a back-to-back rate cut in November.

Overall, we had a
goldilocks data release with an economy that is slowing but still growing. This
should support the soft-landing narrative and be positive for the risk
sentiment.

The EUR, on the other hand,
keeps on gaining against the US Dollar mainly because of the risk-on sentiment
as the US data continues to support at least two rate cuts from the Fed without
sending recessionary signals.

On the monetary policy
front, the ECB members continue to repeat that they will wait for the data throughout
summer before deciding on a rate cut in September. So, the ECB rate decision
this week should be a non-event.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD is struggling to break above the 1.09 level and extend the
rally into the 1.10 handle. This is where the sellers are stepping in with a
defined risk above the level to position for a drop back into the 1.0812 support. The buyers will want to see the price
breaking higher to increase the bullish bets into the 1.10 level next.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that from a risk management perspective, the buyers will have a better risk
to reward setup around the trendline at the 1.0840 level. We can also
see that we have another steeper trendline around the 1.0885 level. Some
aggressive buyers might lean on it or split their orders in half to avoid
missing a possible rally from these levels. The sellers, on the other hand,
will likely pile in at every break lower.

EURUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see the recent price action and we can notice that the momentum has indeed
waned at the 1.09 handle. Today we get the US Retail Sales data and that could
provide either a spike to the upside or a break below the trendline and a
possible pullback into the next trendline around the 1.0840 level. The red
lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US Retail Sales report. Tomorrow, we have Fed’s Waller
speaking. On Thursday, we conclude with the ECB rate decision and the latest US
Jobless Claims figures.

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

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

The latest yen-tervention efforts are a step out of the norm as Japan looks to be trying out a new strategy. And that is to bank on softer US data in driving down USD/JPY in particular. From earlier: BOJ data suggests Japan also intervened in the FX market on 12 July

They stepped in on Thursday following the US CPI report and did so again on Friday after arguably 30 mins following the US PPI report. On the latter, it seemed like they waited for a bit just to make sure that markets were not going to respond against them as the producer price numbers were hotter than expected.

Given the circumstances, there will be more intrigue surrounding the US retail sales data later today.

It’s not just one that is going to attract the attention of traders looking to price in the Fed outlook. But it is also one that could see USD/JPY get shoved lower by Japan, especially if the numbers miss on estimates.

A softer report would mean slowing consumption activity and bolsters the narrative for the Fed to cut sooner. In turn, that should keep the dollar pinned down and Tokyo officials might see that as another opportunity to step in again.

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

Headlines:

• Powell speech the main event to watch to start the week
• Treasury yields jump higher to start the week after Trump assassination attempt
• Eurozone May industrial production -0.6% vs -1.0% m/m expected
• Switzerland June producer and import prices 0.0% vs -0.3% m/m prior
• SNB total sight deposits w.e. 12 July CHF 458.9 bn vs CHF 453.4 bn prior
• Firms lower China 2024 growth forecast after softer data earlier

Markets:

• NZD lags on the day
• European equities lower; S&P 500 futures up 0.5%
• US 10-year yields up 3.9 bps to 4.225%
• Gold up 0.3% to $2,418.40
• WTI crude down 0.1% to $82.10
• Bitcoin up 2.7% to $62,460

The main story to start the week came over the weekend, that being the assassination attempt on former president Trump. The incident rebuffed the narrative of Trump winning his re-election bid and the betting odds translated somewhat to markets as well.

The dollar opened with a minor gap higher but saw that advance fade in European morning trade. Meanwhile, Treasury yields opened higher as well but are being kept in check during the session.

USD/JPY traded to a high of 158.43 in Asia but is now settling closer to 158.00 with large option expiries seen at the figure level. Likewise, EUR/USD also has large expiries pulling the pair close to 1.0900 after its opening gap lower near 1.0885.

There wasn’t too much significant action in major currencies, with the dollar still looking shaky after last week’s losses.

Elsewhere, European stocks are weighed lower as the EU is to meet to discuss fiscal plans. US futures gradually nudged higher though, continuing the good form in the last two weeks. S&P 500 futures are up 0.5% on the day with more bank earnings slipping in.

Coming up later, Fed chair Powell will be making an appearance so that will offer something for traders to be wary about to start the week.

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

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Unfortunately, I reckon we might get a repeat performance to his comments last week in Congress. Sure, there was the US CPI report in between that and now. But I don’t think Powell will choose to rock the boat again today. It will be too early to be that confident on the inflation outlook, or at least to not be explicit about it.

He might acknowledge last week’s report as being one in the right direction but the overall progress remains gradual. There’s still time before committing to a move in September, so there is little to gain by preempting that at this point in time.

Once again, it’ll likely be a case of what Powell doesn’t say is what might matter more for markets.

September is pretty much fully priced in now while traders are seeing some ~63 bps of rate cuts for the year.

He will be due to speak in an interview later at the Economic Club of Washington D.C. at 1600 GMT with the event to carry on until 1730 GMT.

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

Fundamental
Overview

The USD weakened across the
board last week following another soft US CPI report and benign Jobless Claims figures. The market not only fully
priced in a rate cut in September but also started to price in some chances of
a back-to-back rate cut in November.

Overall, we had a
goldilocks data release with an economy that is slowing but still growing. This
should support the soft-landing narrative and be positive for the risk
sentiment.

The NZD, on the other hand,
keeps on being supported against the US Dollar mainly because of the risk-on
sentiment as the US data continues to support at least two rate cuts from the
Fed without sending recessionary signals.

On the monetary policy
front, the RBNZ policy decision weighed on the Kiwi last week as
the central bank changed slightly its language to a more dovish leaning which
increased the odds of a rate cut at the next meeting as the market is now
assigning a 53% probability for such a move.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD couldn’t extend the gains following the bounce on the strong support zone around the 0.6050 level last week as the
surprisingly dovish RBNZ decision weighed on the Kiwi. If the price falls back
to the support zone, we can expect the buyers to step in again, while the
sellers will want to see the price breaking lower to increase the bearish bets
into new lows.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a range now between the 0.6150 resistance and the 0.6050
support. There’s not much to do here and the market participants will likely
keep on “playing the range” until we get a breakout on either side.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see the recent catalysts that eventually led to a rangebound price action. This
week we don’t have much on the calendar but the New Zealand Q2 CPI report on
Wednesday will be something to watch as a soft report might increase the odds
of an August rate cut. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have Fed Chair Powell speaking at the Economic Club of Washington,
D.C. Tomorrow, we get the US Retail Sales report. On Wednesday, we have the New
Zealand Q2 CPI and Fed’s Waller speaking. On Thursday, we conclude with the
latest US Jobless Claims figures.

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

Fundamental
Overview

The USD weakened across the
board last week following another soft US CPI report and benign Jobless Claims figures. The market not only fully
priced in a rate cut in September but also started to price in some chances of
a back-to-back rate cut in November.

Overall, we had a
goldilocks data release with an economy that is slowing but still growing. This
should support the soft-landing narrative and be positive for the risk
sentiment.

The CAD, on the other hand,
keeps on being supported against the US Dollar mainly because of the risk-on
sentiment as the US data continues to support at least two rate cuts from the
Fed without sending recessionary signals.

On the monetary policy
front, the next big event will be the CPI report tomorrow. We saw another jump
in wage growth in the latest labour market report, so the BoC will likely need
good CPI figures to deliver a rate cut in July. The market is assigning a 75% probability
for a rate cut at the upcoming meeting.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD remains confined in a tight range right at the key 1.36 support zone. That’s where the buyers keep on stepping
in to position for a rally back into the 1.3785 resistance 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 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 more clearly the tight range between 1.3600 and 1.3650 levels. There’s not
much to do here and the market participants will likely keep on “playing the
range” until we get a breakout.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we got a slight breakout in the Asian session but that was faded
quickly in the European session. It’s now just a waiting game until we get a
breakout on either side. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have Fed Chair Powell speaking at the Economic Club of Washington,
D.C. Tomorrow, we get the Canadian CPI and the US Retail Sales report. On
Wednesday, we have Fed’s Waller speaking. On Thursday, 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.

UPCOMING EVENTS:

• Monday: New
  Zealand Services PMI, PBoC MLF, China Industrial Production and Retail
  Sales, Eurozone Industrial Production, BoC Business Outlook Survey, Fed
  Chair Powell.
• Tuesday:
  Eurozone ZEW, Canada CPI, US Retail Sales, US NAHB Housing Market Index.
• Wednesday: New
  Zealand Q2 CPI, UK CPI, US Housing Starts and Building Permits, US
  Industrial Production and Capacity Utilization, Fed’s Waller, Fed Beige
  Book.
• Thursday:
  Australia Labour Market report, UK Labour Market report, ECB Policy
  Decision, US Jobless Claims.
• Friday: Japan
  CPI, UK Retail Sales, Canada Retail Sales.

Monday

The PBoC is expected to keep the MLF rate
unchanged at 2.50%. Reuters reported
that market participants believe the significance of the MLF rate will
gradually diminish as the PBoC tries to improve the effectiveness of its
interest rate corridor. The PBOC introduced a new cash management mechanism last
week and Governor Pan Gongsheng said recently that the seven-day reverse repo
rate „basically fulfils the function“ of the main policy rate.

Tuesday

The Canadian Trimmed Mean CPI Y/Y is
expected at 2.8% vs. 2.9% prior, while the Median CPI Y/Y is seen at 2.7% vs.
2.8% prior. The BoC will likely need benign data to deliver a back-to-back rate
cut in July given that wage growth jumped to 5.6% in the last labour
market report. The market is assigning
a 78% chance of a rate cut in July and with an upside surprise in the data that
might fall to roughly 50%.

The US Retail Sales M/M is expected at
0.0% vs. 0.1% prior, while the Ex-Autos M/M measure is seen at 0.1% vs. -0.1%
prior. Consumer spending has been pretty stable which is something you would
expect given the positive real wage growth and resilient labour market. We’ve
been also seeing some weakness in the UMich
Consumer Sentiment which could suggest that
consumer spending is likely to soften a bit.

Wednesday

The New Zealand Q2 CPI Y/Y is expected at
3.5% vs. 4.0% prior, while the Q/Q measure is seen at 0.6% vs. 0.6% prior. As a
reminder, the RBNZ kept the OCR unchanged at 5.5% in July but softened
the language a bit, which prompted
the market to increase the expectations of rate cuts by the end of the year.
The first rate cut is seen in October.

The UK CPI Y/Y is expected at 2.0% vs.
2.0% prior, while the M/M measure is seen at 0.1% vs. 0.3% prior. The Core CPI
Y/Y is expected at 3.4% vs. 3.5% prior. The market was assigning a 60% chance
of a rate cut in August but that went down to 50% following some hawkish
comments from BoE’s
Pill.

The central bank chief economist said that
it was an open question of whether the time for a rate cut was now or not and
added that more data will come before the next policy decision, but they had to
be realistic about how much any one or two releases could add to their
assessment.

This suggests that there’s not much
willingness to deliver the first cut in August unless the inflation data comes
out extremely good or the jobs data shows an extremely ugly picture.

Thursday

The Australian Labour Market report is
expected to show 20K jobs added in June vs. 39.7K in May and the Unemployment
Rate to remain unchanged at 4.0%. The data shouldn’t change anything in terms
of policy expectations as everyone is waiting for the Australian Q2 CPI report
on July 31st.

The UK Labour Market report is expected to
show 45K jobs added in June vs. -140K in May and the Unemployment Rate to
remain unchanged at 4.4%. The focus will be on wage growth with the Average
Earnings including Bonus expected at 5.7% vs. 5.9% prior and the Average
Earnings ex-Bonus seen at 5.7% vs. 6.0% prior.

The data shouldn’t influence that much the
expectations for the August BoE decision, but softening in wage growth or ugly
jobs figures should increase the expectations for more easing with the market
pricing in 49 bps of cuts by year-end.

The ECB is expected to keep interest rates
unchanged at 3.75%. The central bank speakers said countless times that they
are not going to do anything in July as they want to wait for more data.
Therefore, this is going to be a non-event and the next truly open meeting is
in September. The market is seeing an additional 46 bps of easing by year-end.

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 remain
pretty much stable around cycle lows and inside the 200K-260K range created
since 2022. Continuing Claims, on the other hand, have been on a sustained rise
recently with the data printing new cycle highs every week (although last week
we saw a pullback).

This shows that layoffs are
not accelerating and remain at low levels while hiring is more subdued. This is
something to keep an eye on. This week Initial Claims are expected at 235K vs.
222K prior, while there’s no consensus for Continuing Claims at the time of writing although the prior reading saw a drop from 1856K to 1852K.

Friday

The Japanese Core CPI Y/Y is expected at 2.7%
vs. 2.5% prior.Inflation
in Japan is basically at target and there are no strong signals that point to a
reacceleration. It’s hard to see a rate hike given that Japan strived to
achieve inflation for decades and it might ruin this accomplishment by
tightening policy.

The data shouldn’t change much for the BoJ
which is expected to trim bond purchases by a “substantial” amount at the upcoming
policy meeting where the market assigns also a 58% probability of a rate
hike.

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

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