The US CPI report
yesterday missed expectations across the board with unrounded figures being
even lower. This has led to a big rally in the EURUSD pair as the USD got
offered across the board. Curiously, the market is still fully pricing a 25 bps
hike at the next FOMC meeting, probably because of labour market tightness and
the Fed speakers not hinting to a skip or pause after the CPI release.

The ECB has already committed to a rate hike in
July, while there is a stronger debate on what will happen in September. In
fact, the ECB members keep repeating that the September hike will depend on the
data.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD has
rallied strongly since the bounce from the red 21 moving average. The
price is now at the top trendline of the
big rising wedge pattern.
We can also see that there’s a big divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. The price is also overstretched as we can see by the distance from
the blue 8 moving average. Generally, we can see some consolidation or a
pullback into the moving average before the next move.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we had the
ascending triangle pattern near the 1.0850 level and the breakout to the upside
led to a strong rally into the 1.1150 level. Here is where the sellers are
likely to step in with a defined risk above the top trendline and target the
bottom trendline somewhere near the 1.0750 level. The buyers, on the other
hand, will need to break above the top trendline with conviction to keep
bidding to new highs.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is breaking above the top trendline of the wedge pattern, but after such
a strong run to the upside there’s a high risk of a fakeout, especially if the
data in the next days goes against the trend. If we get a pullback, the buyers
are likely to lean on the blue trendline to try another breakout. The sellers,
on the other hand, should extend the selloff if the price breaks below the
trendline.

Upcoming Events

Today the market will
focus on the US Jobless Claims to see if the labour market remains healthy or
there are signs of cracking. At this point it looks like only very strong data
or very weak numbers can give the USD support. Tomorrow, we conclude the week
with the University of Michigan Consumer Sentiment report.

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

• The government strategy deployed is ‚completely inadequate‘
• There is too much focus on short-term economics rather than long-term risks
• Beijing has taken advantage of that, targeting the UK and its interest ‚prolifically and aggressively‘
• China has successfully penetrated every sector of the UK economy

We’ll see if that will evolve into any policy changes in how the UK will deal with China on trade, geopolitics, and general business investments. But considering the fragility of the UK economy at the moment, I doubt we will see any major changes any time soon.

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

Headlines:

• EUR/USD eyes April and May highs in latest push above 1.1000
• GBP/USD stays on the hunt of the 1.3000 mark
• USD/CHF on the verge of a steeper drop
• AUD/USD gets checked back ahead of US CPI data
• BOE: Global economic outlook is highly uncertain, risk environment is challenging
• BOE’s Bailey: UK economy, financial system have been resilient so far
• Spain June final CPI +1.9% vs +1.9% y/y prelim
• US MBA mortgage applications w.e. 7 July +0.9% vs -4.4% prior
• Fed speakers due today include Barkin, Kashkari, Bostic, Mester. Fed Beige book also.

Markets:

• JPY leads, GBP lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields down 3.8 bps to 3.944%
• Gold up 0.2% to $1,935.18
• WTI crude up 0.3% to $75.04
• Bitcoin up 0.5% to $30,726

It was a quieter session in Europe today as all the focus in markets is on the US CPI data to come later at 1230 GMT.

The dollar was softer initially but recovered some ground to keep more mixed, albeit marginally lower, on the day. EUR/USD stuck above the 1.1000 mark around 1.1020-30 levels while USD/JPY did fall below 140.00 to a low of 139.31 before keeping around 139.40-50 levels at the moment.

Meanwhile, cable got checked back on a move higher with the high earlier touching 1.2969 before retreating to 1.2915 currently. And AUD/USD also saw a similar move in a push to 0.6741 before falling back to 0.6690, near flat levels on the day.

In other markets, bond yields continue to be dragged lower while equities are keeping some optimism for a better (lower) set of inflation numbers later today.

Overall, the dollar is looking to be on the brink of a next leg lower and we’ll see if the US CPI data will deliver on that.

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

Lat Friday, the NFP missed expectations for the first time after
14 consecutive beats and caused a general USD weakness across the board. The
other details in the report were good though, with the unemployment rate
falling back to 3.6% and the average hourly earnings ticking higher, which is
not what the Fed would want to see. In fact, the market’s expectations for a 25
bps rate hike at the July meeting remained unchanged.

Conversely, the SNB raised
interest rates by 25 bps as expected at the last meeting and communicated that
additional rate hikes cannot be ruled out. The Swiss CPI data though showed the inflation
rate returning back within the SNB target band and should translate into a
pause for the SNB at the next meeting, all else being equal.

USDCHF Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCHF sold off
very hard after the miss in the US NFP report. We can notice that the bias was
anyway bearish as the moving averages were
crossed to the downside and the sellers leant on the red 21 moving average to
position for lower prices. The price has now reached the key 0.8760 level,
which is the 2020 pandemic low. We can also see that the price has been diverging with the
MACD for a
long time now, we might see a bottom here and a strong bounce into the 0.90
handle.

USDCHF Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the breakout
lower of the range supported by the miss in the NFP led to strong bearish
momentum as the sellers started to pile in aggressively. If we get a pullback
here, the sellers should lean on the downward trendline to
position for more downside and the break below the 0.8760 low. The buyers, on
the other hand, should start stepping in here with a defined risk below the
level and target the 0.90 handle. More conservative buyers may want to wait for
the price to break above the trendline before piling in.

USDCHF Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with the MACD falling right into the 0.8760 low. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. This should reinforce the buyers’ chances of getting a strong bounce
here. The sellers will wait at the trendline and the 38.2% Fibonacci
retracement level to position for more shorts.

Upcoming Events

Today
the market focus will be on the US CPI report. A beat to the expected numbers,
especially on the core side, should support the USD and lead to a rally in
USDCHF as the markets are likely to expect a more hawkish Fed. On the other
hand, a miss to forecasts across the board should lead to more USD weakness
going forward as the market would see less chances of higher rates and may even
bring forward rate cuts odds. We conclude the week with the US Jobless Claims
on Thursday and the University of Michigan Consumer Sentiment report on Friday.

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

• Prior -4.4%
• Market index 208.4 vs 206.5 prior
• Purchase index 165.3 vs 162.4 prior
• Refinance index 416.0 vs 421.3 prior
• 30-year mortgage rate 7.07% vs 6.85% prior

Mortgage applications increased slightly in the past week as the jump in purchases activity helped to offset a decline in refinancing activity. This comes despite a massive 22 bps jump in the average rate of the most popular US home loan to above 7% again – its highest since November last year.

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

The BoE surprised at the last meeting delivering a
50 bps rate hike instead of the 25 bps expected as the hot employment report
and the higher inflation data forced the central bank to choose a more
aggressive action. Yesterday we got another employment report and this
time it missed expectations on the jobs side but beat again on the wages side
which points to a wage price spiral in action. In fact, the market is pricing
in a higher chance of a 50 bps hike at the next meeting, although the UK CPI
report next week will probably decide if it’s going to be 25 bps or 50 bps.

On the other hand, the BoJ remains stuck with its
dovish monetary policy even if Japan’s core inflation keeps climbing to new
highs. There are tentative signs of a possible exit from this policy though but
the recent comments from the BoJ board members suggest that we won’t see any
change in the near future.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after the
incredibly strong rally out of the hot UK employment report in June the
momentum started to wane near the 183.00 level. The price then started to pull
back into the trendline but
without a change in the fundamentals, so this looks like a technical
retracement from overstretched levels. The moving averages are also
threatening a bearish crossover, which is something to watch closely.

GBPJPY
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the rising wedge around
the 183.00 led to the deeper pullback once the price broke out to the downside.
We can see that we also had a divergence with the
MACD
signalling weakening momentum and a possible pullback or reversal coming. The
price is now near a strong support zone
where we can find the trendline, the 180.00 round number, the base of the wedge
pattern and the 38.2% Fibonacci retracement level.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have another divergence with the MACD right when the price is nearing the
strong support zone. We should see the buyers stepping in here with a defined
risk below the level and target a new high into the 185.00 level. More
conservative buyers may want to wait for the price to first break above the
downward minor trendline before piling in. The sellers, on the other hand, will
want to see the price breaking below the strong support zone to pile in
aggressively and extend the selloff towards the 173.00 level.

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

The recession in the manufacturing sector in the
biggest economies in the world has been weighing on the Copper price. The lack
of economic stimuli coupled with low demand and restrictive monetary policies,
suggest that we may see even lower prices going forward. In the short term
though, China might start to stimulate its economy much more given the risk of deflation, so we
might see stable or higher prices going forward.

Copper Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Copper got
rejected from the 3.9575 resistance where we
had also the 61.8% Fibonacci retracement level
for confluence. The
strong selloff led to a downside crossover of the moving averages which
points to a bearish bias. We can notice that the sellers are now leaning on
that red 21 moving average and the 3.8245 resistance to position for more
downside. A strong break above the 3.8245 level should invalidate the bearish
setup.

Copper Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have also
the 50% Fibonacci retracement level at the 3.8245 resistance. This makes that
resistance zone a strong level and a break above the 61.8% Fibonacci
retracement level would entirely invalidate the bearish setup. In fact, we can
notice that the black trendline forms an
ascending triangle pattern
with the resistance, so a break on either side should lead to a sustained move
in the direction of the breakout.

Copper Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is basically ranging within the ascending triangle. The best strategy
would be to sit and wait for a breakout on either side supported by a
fundamental catalyst and then go with the flow.

Upcoming Events

Today we have the US
CPI report which is expected to be a pivotal release for the upcoming FOMC rate
decision and especially for the following ones. A miss to the expectations
should be risk positive and support Copper going forward, while a beat should
lead to a risk off mood in the markets and send the Copper price lower. After
the CPI we have the US Jobless Claims report on Thursday and the University of
Michigan Consumer Sentiment report on Friday.

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

Headlines:

• UK June payrolls change -9k vs 23k prior
• Cable resumes upside push after jobs data
• ECB’s Villeroy: We are close to the peak of interest rates
• Germany July ZEW survey current conditions -59.5 vs -60.0 expected
• Germany June final CPI +6.4% vs +6.4% y/y prelim
• US June NFIB small business optimism index 91.0 vs 89.4 prior
• China June M2 money supply +11.3% vs +11.2% y/y expected

Markets:

• JPY leads, NZD lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields down 4 bps to 3.966%
• Gold up 0.6% to $1,936.05
• WTI crude up 0.7% to $73.50
• Bitcoin down 1.2% to $30,409

It was a bit of a mixed session today in European trading, with the dollar moving all over the place against a host of different major currencies. The greenback started weaker initially but now is higher against the euro, aussie and kiwi while staying lower against the yen, pound and franc.

The pound itself was boosted a little by the UK labour market report, which once again was underscored by hot wages data. That said, with markets already pricing in a terminal rate close to 6.50%, this just reaffirms that mostly. GBP/USD moved up from 1.2870 to 1.2900 on the data before extending gains to 1.2935. The pair is now at 1.2900 levels as the dollar recoups some losses from earlier.

USD/JPY was the other notable mover as it fell sharply through 141.00 from Asia to hit a low of 140.17 in Europe. The pair remains down 90 pips at around 140.30 levels, with lower Treasury yields also weighing. The bond market stays more bid so far this week and 10-year Treasury yields have fallen back down below 4% today.

Going back to the dollar, it was initially lower against the euro with EUR/USD up at around 1.1000-10 levels but is now trading to the lows for the day at 1.0985. AUD/USD also saw a similar run to a high of 0.6695 before retreating now to 0.6660 levels on the day.

Looking elsewhere, equities are keeping steadier as investors are looking for further breathing room ahead of the US CPI data tomorrow. Gold is another decent beneficiary today, with lower yields also helping out as buyers are now contesting with some near-term resistance around $1,935.

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

In March, we started to get a rehash of the saying ‚the Fed will keep hiking until it breaks something‘. And when the banking crisis came along, there were many that thought „yup, that is it“. During that time, inflation was still high and markets were in for a spicy time as the Fed was perhaps forced to rescind its credibility on fighting inflation or stick with its guns and hope that the economy can take it.

They definitely played it right in the end and are they perhaps getting their just rewards? As we head towards the main event tomorrow, US CPI is estimated to fall further in June to 3.1% from 4.0% in May. Does that mean we’re reaching a point where the Fed can start to look towards pressing the pause button? Let’s discuss.

Despite headline annual inflation falling back, core annual inflation is estimated to keep at around 5.0% in June. While much less worrying than last year, there is still some ways to go before reaching the pivotal 2% mark that the Fed is targeting. And that’s not just in the US, it is very much the same case in most developed economies.

So, where does that bring us?

For one, we look to be on the path towards low(er) inflation again but it’s not a certainty either. Most policymakers are just hoping that we can get back to the 2% level by 2025. That’s still nearly two years away.

Until then, the narrative is that interest rates will have to be kept in ‚restrictive territory‘ for a prolonged period of time. What does that mean?

It just means tighter credit conditions and generally more pressure on certain parts of the economy, like the housing market.

And if inflation fails to come down significantly, we might be staring at the possibility of stagflation risks – something which the UK is dealing with right now.

The big question for markets then becomes what will come first? Will low(er) inflation come about and major central banks manage to thread the needle and achieve a soft landing? Or will higher rates suffocate the economy and lead to a stronger downturn across the globe and perhaps even see something else break? A hard landing, anyone?

That’s definitely a key consideration when viewing the major themes, not only for the months ahead but also for the year to come. If you’re considering any structural positions in the market, this should be the question you need to ask yourself.

The issue for market players is, there are no easy answers to this at the moment.

Inflation falling is definitely a welcome development for the economy but we’re still not in the clear yet, in saying with absolute certainty that it will head back to the 2% mark. As for the impact of higher rates on the economy, well let’s just say that markets were also caught rather blindsided by the banking crisis in March to April. So, that speaks to the level of awareness – or should I say lack thereof – in identifying what may break next.

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

Last Friday the US NFP report missed slightly the expectations for
the first time after 14 consecutive beats. The USD weakened across the board,
but it doesn’t look like the NFP is the main culprit. In fact, the market’s
expectations for a 25 bps hike at the July FOMC meeting remained unchanged as
the other details in the report were solid and the average hourly earnings
ticked higher.

The RBNZ, on the other
hand, decided to pause at the last meeting, and it should keep rates on hold as
long as the inflation numbers continue to show disinflation and the other top
tier economic indicators don’t show too much strength. In fact, the NZDUSD strength
is more about the USD weakness.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD is still
eyeing the 0.63 handle where we have the confluence with the
trendline and the
78.6% Fibonacci retracement level.
After the V-shaped recovery seen at the end of June, the bullish momentum
started to wane as the market is eagerly waiting to see the US CPI report
tomorrow.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that NZDUSD
rejected the swing high level at 0.6222. The bullish bias remains though as the
price has been printing higher lows. We might see a break to the upside soon,
but the US CPI report is a big risk. The measured target of the bullish flag that was
broken the last week remains the 0.63 handle.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is getting closer to the black trendline. This trendline defines the
ascending triangle pattern, so we should see the buyers stepping in here to
target a break to the upside and eventually a rally to the 0.63 handle. If the
price breaks below the trendline, the pattern would be invalidated and we
should see a fall into the 0.6120 support and, upon a further break, a selloff
towards the 0.60 handle.

Upcoming Events

Tomorrow all eyes will be on the US CPI
report. A miss to the expectations, especially on the core numbers, should
weaken the USD as the market would price out the hawkish bets and even bring
forward rate cuts bets. On the other hand, if the data beats forecasts, we
should see the USD strength across the board as the market would price in a
more hawkish Fed. We conclude the week with the US Jobless Claims on Thursday
and the University of Michigan Consumer Sentiment report on Friday.

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