The euro’s early gains have been pared with EUR/USD now flat at 1.1235 and the dollar is little changed overall once again. The Japanese yen is still slightly higher, with USD/JPY down 0.3% to 138.28 and that owes a to the slightly lower Treasury yields on the day.

This comes as equities continue to also keep in a more tepid mood. US futures are little changed and European indices are also more or less flat on the day at the moment. As much as the US retail sales data later may not be as important as the inflation numbers last week, it is still another key indicator of the economy and it seems like traders are waiting on that.

Besides the yen, the kiwi is the laggard with NZD/USD down 0.5% to just below 0.6300 again as we do see a push higher in AUD/NZD to 1.0820 on the day. The latter is running close to its 200-day moving average of 1.0823, so that could be a reason for the flows we’re seeing in the kiwi on the session.

Elsewhere, gold is up 0.4% to $1,962 but keeping within the ranges of the last few sessions. And WTI crude is little changed at $74.25 after having seen the Saudi spike higher yesterday fade rather quickly, with price action trapped between its 100 and 200-day moving averages at $73.50 and $77.04 respectively.

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

Headlines:

• Treasury yields look to resume the latest drop this week
• Saudi Arabia says will extend voluntary oil cuts until the end of December 2024
• The Fed and ECB may not be the biggest central bank risks to markets this month
• ECB’s Vasle: Core inflation remains high, resilient
• Italy June final CPI +6.4% vs +6.4% y/y prelim
• SNB total sight deposits w.e. 14 July CHF 494.7 bn vs CHF 486.6 bn prior
• JP Morgan slashes China full year GDP growth forecast to 5.0% from 5.5% previously

Markets:

• JPY leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.1%
• US 10-year yields down 3.3 bps to 3.787%
• Gold up 0.1% to $1,957.18
• WTI crude down 1.3% to $74.47
• Bitcoin flat at $30,202

The dollar is keeping more mixed today after last week’s drop, with equities looking more tepid and bond yields holding slightly lower on the day.

There wasn’t any major headlines to impact the greenback or risk sentiment, though we did get one for the oil market. Saudi Arabia said it would extend its voluntary output cuts until the end of next year, prompting a jump in oil prices.

However, that was quickly faded with WTI crude moving up from $74.15 to $76.00 only to erase all of that during the session.

Going back to the dollar, it is keeping little changed against the euro and pound. Meanwhile, USD/CHF is slightly lower and keeping just under 0.8600 as the break through the floor holds.

USD/JPY is lower as well with Treasury yields slightly lower on the day, holding around 138.10-20 levels mostly in European trading.

The antipodeans are the laggards, with AUD/USD down 0.3% to 0.6815 and NZD/USD down 0.5% to 0.6335 after following the fall in the Chinese yuan, which owes to a more disappointing Q2 GDP report here.

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

Following the miss across
the board in the US CPI report, the market is increasingly confident
that we are heading towards a soft landing. Such expectations are also supported
by the strong labour market, as we confirmed again by the US Jobless Claims last Thursday, and the rising
consumer sentiment, as seen in the University of Michigan report last Friday. As long as the
labour market continues to hold, we are likely to see new highs for the Nasdaq
Composite.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the buyers kept
leaning on the red 21 moving average to
position for more upside and eventually succeeded as the US CPI missed
expectations and led to a strong rally. The Nasdaq Composite should now be
eyeing the 14649 level where we should see strong sellers stepping in.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the Nasdaq
Composite broke out of an ascending triangle patter.
Generally, a breakout on either side leads to strong momentum in the direction
of the breakout, so the buyers have also this factor stacked in their favour.
At the moment we are seeing a pullback from overstretched levels as the price
was too far from the blue 8 moving average, and in such instances, we can generally
see some consolidation or a pullback into the moving average before another
strong move.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have two possible levels where the buyers may lean on to:

• The 38.2% Fibonacci
  retracement level near the 14000 level.
• The 61.8% Fibonacci retracement level near
  the previous resistance now
  turned support.

The sellers, on the other hand, should
wait for the price to break below the 13800 level before piling in and extend
the fall into the 13174 support.

Upcoming
Events

This week there are only two notable events: the US
Retail Sales tomorrow and the US Jobless Claims on Thursday. Given the
sentiment in the markets, we are likely to see a big selloff only if the data
misses expectations by a big margin as a little miss should just be an
opportunity to buy the dip. Conversely, higher than expected data should
reinforce the soft-landing narrative and lead to new highs.

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

The latest retreat continues to weigh on yields, with bonds still catching a bid today in European morning trade. The drop last week comes after 10-year yields met its March highs near 4.09% before falling back below the key 4% threshold and here we are now, down roughly 30 bps from there to 3.78%.

The fall was validated by the softer US CPI report last week. However, traders are still seeing good odds of a 25 bps rate hike by the Fed next week. Fed funds futures are showing a ~96% probability of such a move. But when you look out to the curve into next year, there has been a climb down in market pricing as compared to two weeks ago:

Put together, that reflects a market perception that is less hawkish/more dovish on the Fed outlook. And that view is so far being vindicated by the data, or at least the most important one – that being the US CPI report.

If that trend continues, it should lead to lower yields and added pressure on the dollar unless we do see economic conditions deteriorate significantly and/or there is a change in the hawkish gears among other major central banks.

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

I wouldn’t replace my real dog with a robot driven by AI, would you?

Artificial Intelligence (AI) is transforming our world, introducing profound changes in numerous domains, including writing emails, browsing the web, and even stock picking and trading. Yet, as I watched my dog, Mika, the thought occurred to me: how far are we willing to let AI replace the authentic experiences in our lives?

Imagine a future where AI has evolved to such an extent that I could replace Mika with a robotic counterpart, one so perfectly designed that it would be nearly impossible to distinguish from a real dog. This AI-driven robot would be the epitome of a perfect pet, never misbehaving or causing inconveniences.

Impeccable fur is the new black

With her impeccable fur and flawless behavior, this robot dog would never wake me up in the middle of the night with incessant barking, or leave unwanted surprises on the floor. Continuously learning and adapting, she would evolve to meet my needs perfectly, embodying the ideal of a ‘good dog.’

Faced with this futuristic scenario, I asked myself: Would I replace Mika with this flawless robotic dog? To my surprise, the answer was a resounding no.

Why not? Simply put, there’s something irreplaceable about the authenticity of Mika, about her realness. I would choose a real dog over a robot, even if the latter promises superior productivity or performance.

This decision reflects a human preference that I believe will persist as AI continues to disrupt various sectors. While AI might streamline many tasks, it will not completely replace the human desire for authentic experiences.

What about AI taking over investing and stock picking?

The same principle applies to stock picking, but to a much lesser extent than my example with Mika. Some investors may have a favorite stock or company – take Tesla, for instance. They might totally love Elon Musk for various reasons, choosing Tesla not based solely on valuation related P/E multiples or any measurable factor, but for their personal human preference. Even when AI suggests alternatives that may perform better, they still choose Tesla – much like I choose Mika.

But why to a lesser extent? Because people would still thrive to invest to generate a profit and would, thus, be inclined to trust or at least test advanced AI driven investment tools. Still, there will always be people that just love Elon Musk like I love Mika, and would not let AI override that.

In a world increasingly driven by AI, where do we draw the line? How much of our authentic, human experiences are we willing to replace for the sake of productivity?

As for me, I wouldn’t trade Mika for a robot, no matter how perfect. What about you? Would you replace your beloved pet with an AI-driven robot? And what do you think about Elon and Tesla stock, anyway? Please comment below.

This article was written by Itai Levitan at www.forexlive.com.

Alongside a hold at key resistance in AUD/USD here, USD/JPY is the other major pair that might act as a saving grace for the dollar. The greenback looked to be in dire straits after last week’s rout but there is still one key technical level to watch despite the several breakdowns in EUR/USD, GBP/USD, and USD/CHF.

USD/JPY may have already fallen by roughly more than 700 pips at the lows this month but part of that owes to a sharper correction in the yen itself alongside BOJ speculation here.

Add that to the dollar suffering last week and we came close to testing the confluence of the 100 (red line) and 200-day (blue line) moving averages on Friday. That saw buyers step in to defend the level with the dollar also taking a bit of a breather, rebounding to back above 138.00 as seen currently.

The key support region is seen at 137.01-03 and that pretty much holds the key in unlocking the next potential leg lower for the dollar. A break below that sets the pair up for a potentially quick drop towards 135.00 next.

On the flip side, buyers could also reflect the strength of their conviction by holding at the key support region above. That will be a good baseline to work with in order to try and work out a rebound at least. Things are certainly heating up and the technicals are coming into extreme focus as we look towards the Fed and BOJ policy decisions next week.

The overall mood today is not as inviting as we saw in the past week or so but it is still early and we also got US retail sales data as a potential trigger coming up tomorrow.

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

UPCOMING EVENTS:

Monday:
PBoC MLF.

Tuesday:
US Retail Sales, Canada CPI.

Wednesday:
New Zealand CPI, UK CPI.

Thursday:
PBoC LPR, Australia Jobs Report, US Jobless Claims.

Friday:
Japan CPI, UK Retail Sales.

Monday:
There’s no expectations for the PBoC to cut the MLF rate as the recent comments
by the PBoC deputy governor Liu Guoqiang last Friday indicated that there’s no
fear of deflation as they expect inflation to have a U-shaped recovery in the
second half of the year. The Medium-Term Lending Facility Rate (MLF) is the
main rate at which the central bank lends to big commercial banks. The MLF acts
as a guide for the Loan Prime Rate (LPR).

Tuesday:
The US Retail Sales are expected to increase by 0.5% vs. 0.3% prior, while the
Core measure is seen at 0.3% vs. 0.1% prior. The Control Group is expected to
rise by 0.2% vs. 0.2% prior. The US data has showed strength lately and the
last week the big miss in US Core CPI coupled with the big jump in Consumer
Sentiment on Friday, is giving the soft-landing narrative a tailwind. The
Retail Sales report should miss by a very big margin to cause fear in the
markets at this point.

The Canada CPI Y/Y is expected at 2.9% vs.
3.4% prior and the M/M figure at 0.3% vs. 0.4% prior. The Bank of Canada is
focused on underlying inflation measures for its policy decisions, so the data
points to watch are the Core CPI and the BoC’s favourite measures: CPI-common
expected at 5.0% vs. 5.2% prior, CPI-trimmed expected at 3.6% vs. 3.8% prior and
CPI-median expected at 3.7% vs. 3.9% prior.

Wednesday:
The New Zealand CPI (Q2) Y/Y is expected at 5.9% vs. 6.7% prior, while the Q/Q
reading is seen at 0.9% vs. 1.2% prior. The RBNZ last week left its official
cash rate unchanged at 5.5% as expected as the central bank aims at “remaining
at the restrictive level for the foreseeable future to ensure that consumer
price inflation returns to the 1-3% annual target range”.

The UK CPI Y/Y is expected at 8.2% vs.
8.7% prior and the M/M figure is seen at 0.4% vs. 0.7% prior. The Core CPI Y/Y
is expected at 6.8% vs. 7.1% prior, while the M/M reading is seen at 0.4% vs.
0.8% prior. Last time both the employment and inflation reports surprised to
the upside and prompt the BoE to surprise with a 50-bps rate hike. This time
the employment report surprised on the wages side but missed on the jobs side,
so if we see a miss in the data, the BoE should go ahead with a 25-bps
increase. On the other hand, if the data runs hot again, they should hike by
another 50 bps.

Thursday: The PBoC is likely to change the LPR rates
only if it surprises with a change in the MLF rate on Monday.

Last time the Australian Jobs report
surprised to the upside across the board. This time the expectations are for
Employment Change to increase by 17.0K vs. 75.9K prior and the Unemployment
Rate to remain unchanged at 3.6% and the Participation Rate at 66.9%. The RBA
would like some softening in the labour market to bring inflation back to
target.

The US Initial Claims are expected at 243K
vs. 237K prior and Continuing Claims at 1725K vs. 1729K prior. The US Labour
Market remains very strong and we haven’t seen any notable sign of weakness yet
with Jobless Claims still running near record lows.

Friday:
The Japan CPI Y/Y is expected at 3.5% vs. 3.2% prior and the Core Y/Y reading
is seen at 3.3% vs. 3.2% prior. The CPI ex-Food & Energy Y/Y is expected at
4.2% vs. 4.3% prior which is the highest reading in four decades. The BoJ is
still stuck with its dovish monetary policy, and they haven’t hinted to any
change at the upcoming meeting. Nevertheless, there are expectations for a
tweak in the YCC policy as the BoJ is seen raising its FY2023 inflation
forecast above 2% and a former BoJ director said that he expects the central
bank to widen the YCC band from -/+ 0.50% to -/+1.00% at the July meeting.

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

• S&P and NASDAQ snap four-day winning streak. Dow up for the 5th consecutive day
• Bank of Canada’s Macklem: Our forecast has inflation moving around 3% most of next year
• WTI crude oil futures settle at $75.42
• What earnings will be released next week?
• Baker Hughes oil rig count -3 to 537
• European major indices move modestly lower today but have solid gains for the week
• University of Michigan preliminary sentiment for July 72.6 versus 65.5 estimate
• Feds Goolsbee: There is a path to curb inflation without recession
• J.P. Morgan’s Dimon: The headwinds in the economy are substantial
• US import prices for June -0.2% versus -0.1% expected. YoY import prices -6.1%
• Canadian manufacturing sales for May 2023 1.2% versus 0.8% expected
• WSJ Timiraos: July is all but decided. Hawks already pushing for September
• The EUR is the strongest and the JPY is the weakest as the North American session begins.
• ForexLive European FX news wrap: Dollar rout hits pause for now

Today, the US Dollar rallied, stimulated by rising preliminary inflation expectations from the University of Michigan’s monthly consumer survey and overall stronger data. The bond yields also recorded a sharp incline.

The inflation reading depicted a minor increment, moving from 3.3% to 3.4%. Given a market that has reacted positively to the favorable CPI and PPI data this week, even the slightest gains in inflation have somewhat deflated the narrative of receding inflation.

Further, consumer sentiment indices also demonstrated a significant uplift:

• Consumer sentiment surged to 72.6 from 64.4 last month
• Current conditions ascended to 77.5 from 69.0 in the previous month
• Expectations climbed to 69.4 from 61.5 last month

In currency performances, the Euro marginally edged out the USD as the strongest among the major currencies, with the USD depreciating by 0.02% against the Euro. However, the dollar posted substantial gains against other currencies, most notably against the Canadian Dollar (+0.86%) and the Australian Dollar (+0.76%). Furthermore, the USD/JPY pair also saw an increase of 0.59%.

Although higher today, the US dollar is ending the trading week with declines vs all the major currencies. Below are the changes vs the majors:

• EUR, -2.34%
• GBP, -1.98%
• JPY, -2.38%
• CHF, -3.06%
• CAD, -0.46%
• AUD, -2.15%
• NZD, -2.60%

This week’s lower inflation readings from the Consumer Price Index (CPI) and Producer Price Index (PPI) have spurred hopes among traders that the Federal Reserve may opt for just one more rate hike in 2023. This expectation persists despite indications from several Fed officials, including Fed’s Daly and Waller, that two hikes still remain the most likely scenario.

Fed’s Waller highlighted that the September meeting still holds possibilities (although most anticipate the Fed would bypass that meeting) and maintained that he foresees „two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target.“

Earlier in the week, prior to the release of inflation data, Fed’s Daly suggested that two hikes were still probable. However, she slightly backtracked yesterday, clarifying that her comments were intended to keep open the possibility of an additional hike this year.

The Federal Reserve will announce its next rate decision on July 26. The subsequent meetings are slated for September 20 and November 1, offering an opportunity for two more sets of unemployment and inflation data before the September meeting, and three more before the November meeting. This will provide ample data to ascertain whether the decline in inflation has run its course and is reverting to an upward trajectory, or if it continues to decelerate.

This week the market was full of optimism for a Goldilocks economy with growth remaining but inflation moving lower.

In the US debt market today, yields corrected higher after falling lower earlier this week. For the day:

• 2-year yield 4.767% +15.7 basis points
• 5-year yield 4.045%, +11.0 basis points
• 10-year yield 3.830% +7.1 basis points
• 30-year yield 3.925% +3.1 basis points

For the trading week yields were still lower:

• 2-year yield fell -17.8 basis points
• 5-year yield fell -31 basis points
• 10-year yield fell -23 basis points
• 30-year yield fell -11.7 basis points

The lower yields and lower dollar – along with the Goldilocks scenario – helped to boost stocks this week:

• Dow industrial average added 774 points or 2.29%
• S&P index added 106.45 points or 2.42%
• NASDAQ index added 452.98 points or 3.32%

The NASDAQ gain was the largest since the week of March 27, 2023.

In Europe, the major indices were mostly lower today, but like US indices, they had strong gains for the week:

• German DAX, +3.22%
• Frances CAC, +3.69%
• UK’s FTSE 100, +2.45%
• Spain Ibex, +2.05%
• Italy’s FTSE MIB, +3.19%

In the Asian Pacific market:

• Japan’s Nikkei 225 rose 2.42%
• Hong Kong’s Hang Seng index increased 5.71%
• China’s Shanghai composite index rose 1.28%
• Australia’s S&P/ASX index rose 3.7%

European benchmark 10 year yields fell sharply:

• Germany, -15.9 basis points
• France, -15.2 basis points
• UK, -27.3 basis points
• Spain -15.7 basis points
• Italy -18.6 basis points

Canada’s 10-year yield fell by -20.7 basis points this week.

Next week, the US earning season will continue with more large financials including:

• Bank of America
• Morgan Stanley
• Charles Schwab
• PNC financial
• Bank of New York
• Goldman Sachs
• American Express

A significant number of regional banks, believed to be more susceptible to earnings fluctuations, are set to release their earnings announcements next week. Among the top 15 stocks in the KRE ETF (exchange-traded fund) designated for regional banks, 12 will be delivering reports. These 12 institutions represent roughly 25% of the index’s composition. According to sources, 60% of the KRE holdings will be announcing.

Other big names announcing next week include:

• Tesla, Netflix and IBM on Wednesday
• Johnson & Johnson, American Airlines, United Airlines and Travelers will announce earnings on Thursday

Looking ahead the week of July 24 will be the „big“ week for the large cap leaders:

• Alphabet is scheduled on Monday, July 24
• Microsoft is scheduled on Tuesday, July 25
• Amazon, Meta and Boeing are scheduled on Wednesday, July 26
• Bristol Myers Squibb, Intel, McDonald’s and Northrop Grumman are scheduled on Thursday, July 27

Nvidia is not scheduled to announce until toward the end of August.

Below is a summary of some of the major economic releases scheduled for release next week (times are ET)

Sunday, July 16

• 10:00 PM: China’s GDP for Q2 (Forecast: 7.1%, Previous: 4.5%)
• 10:00 PM: China’s Industrial Production YoY (Forecast: 2.5%, Previous: 3.5%)

Monday, July 17

• 8:30 AM: U.S. Empire State Manufacturing Index (Forecast: -3.5, Previous: 6.6)
• 9:30 PM: Australia’s Monetary Policy Meeting Minutes

Tuesday, July 18

• 8:30 AM: Canada’s CPI MoM (Forecast: 0.3%, Previous: 0.4%)
• 8:30 AM: Canada’s Median CPI YoY (Forecast: 3.7%, Previous: 3.9%)
• 8:30 AM: Canada’s Trimmed CPI YoY (Forecast: 3.6%, Previous: 3.8%)
• 8:30 AM: U.S. Core Retail Sales MoM (Forecast: 0.4%, Previous: 0.1%)
• 8:30 AM: U.S. Retail Sales MoM (Forecast: 0.5%, Previous: 0.3%)
• 6:45 PM: New Zealand’s CPI QoQ (Forecast: 0.9%, Previous: 1.2%)

Wednesday, July 19

• 2:00 AM: UK’s CPI YoY (Forecast: 8.2%, Previous: 8.7%)
• 9:30 PM: Australia’s Employment Change (Forecast: 16.5K, Previous: 75.9K)
• 9:30 PM: Australia’s Unemployment Rate (Forecast: 3.6%, Previous: 3.6%)

Thursday, July 20

• 8:30 AM: U.S. Unemployment Claims (Forecast: 242K, Previous: 237K)

Hope you have a great weekend.

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

The broader S&P and NASDAQ index snapped 4-day winning streaks, while the Dow industrial average extended its streak to 5 days. UnitedHealth soared by 7.27% today and was responsible for over 200 points of the Dow’s gains today. The Dow closed up $113.89 points.

A snapshot of the market shows

• Dow industrial average rose 113.89 points or 0.33% at 34509.04
• S&P index fell -4.64 points or -0.10% at 4505.41
• NASDAQ index fell -24.88 points or -0.18% at 14113.69

The small-cap Russell 2000 fell -19.80 points or -1.01% at 1931.08

The winning sectors today were led by:

• Healthcare, +1.5%
• Consumer staples +0.35%
• Consumer discretionary, +0.27%

The lagging sectors today included:

• Energy -2.75%
• Financials -0.68%, and
• Communication services, -0.62%

The top Dow stocks this week included:

• Salesforce +9.42%
• 3M +5.15%
• Home Depot +4.55%
• Caterpillar was 4.27%

The laggards of the Dow this week included:

• Verizon -5.21%
• Travelers -3.33%
• Merck -1.5%
• Cisco -1.20%

A look at the major indices this week showed gains across the board:

• Dow industrial average rose 2.29%
• S&P index rose 2.42%
• NASDAQ index rose 3.32%
• Russell 2000 rose 3.56%

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

BOC’s Macklem comments in a Globe and Mail article

• Inflation is going to be around 3% going forward
• Surprised by ongoing strength in demand in the economy, and persistence of underlying inflationary pressures
• Labor markets have eased a bit but remained a very tight
• Our forecast has inflation hovering around 3% for next year and then gradually moving back to 2% target
• Need to see a better balance in the labor market and we need to see wage growth moderate

Despite the more hawkish tilt, the USDCAD is trading to a new session high. The price moved above its 100-hour moving average at 1.31937. Its 200-hour moving average looms above at 1.3242. The price is also above its 38.2% retracement of the move down from last week’s high. That level comes in at 1.31937.

For an updated view of the technicals as we head into the close and into the new trading week, click on the video below.

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