I’m not going to keep beating a dead horse but with the retreat in bond yields today, it is adding to the downside momentum in USD/JPY at the moment. 10-year Treasury yields are down 4.6 bps to 3.960% and that is keeping a drag on the currency pair, which is down 0.8% or 110 pips to 140.20 currently.

I talked more about the technical considerations here earlier but after the rejection at 145.00 coming into July, the pair is pretty much caught in a big void between that and the 140.00 level. So, we’re pretty much just moving towards the lower extreme with the US CPI data in focus tomorrow.

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

The US NFP report last Friday missed slightly
expectations for the first time after 14 consecutive beats, but the inside data
remained solid with the average hourly earnings coming higher than expected,
which is something that the Fed don’t want to see. In fact, the market’s
probability for another 25 bps hike at the July FOMC meeting remained unchanged
at roughly 90%.

The RBA kept its cash rate
unchanged with the usual hawkish comments and the promise of doing more if the
data suggests so. They repeated their determination of bringing the inflation
rate to target and that they will do what is necessary to achieve that. Central
banks are seeing the end of the hiking cycle so they are guided by the incoming
economic data.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after the big
selloff from the 0.69 handle, AUDUSD got stuck in a range between the 0.66 and
0.67 levels. The moving averages have
crossed to the downside but in a rangebound market they can give false signals.
The sellers should keep on piling in around the 0.67 level and the red 21
moving average for another big push to the downside. The buyers, on the other
hand, will need the price to break above the 0.67 handle with conviction to
start targeting the 0.69 resistance.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more clearly the
rangebound price action between the 0.66 support and 0.67
resistance. There’s nothing to do here other than waiting for a breakout on
either side supported by a fundamental catalyst and then go with the flow. It’s
highly likely that tomorrow’s US CPI report will provide the breakout, so watch
out for that.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see how the
moving averages become pretty useless in a rangebound market. More aggressive
traders can “play the range” by buying at support and selling at resistance.
But the two main scenarios are clear:

• A break to the upside should see the
  buyers piling in and target the 0.69 handle.
• A break to the downside will give the
  sellers control and lead to a selloff into the 0.6459 low.

Upcoming Events

The main event of the week is the US CPI report
tomorrow. If we see the data beating expectations, especially on the core
numbers, the USD should strengthen across the board and lead to a big selloff
in the AUDUSD pair. On the other hand, if the data misses expectations, particularly
on the core side, we should see the greenback under pressure and the AUDUSD
pair flying into the 0.69 handle. After the US CPI report, the attention will
switch to 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.

Headlines:

• Equities recover a bit of poise on the session
• US CPI the main event this week
• Eurozone July Sentix investor confidence -22.5 vs -18.0 expected
• SNB total sight deposits w.e. 7 July CHF 486.6 bn vs CHF 491.9 bn prior
• BOJ raises economic assessment for 3 of Japan’s 9 regions in latest Sakura report
• China says agrees to keep high-level exchanges with US after Yellen visit
• China’s Xi pledges to continue working with Russia to develop strategic partnership

Markets:

• USD leads, AUD lags on the day
• European equities slightly higher; S&P 500 futures flat
• US 10-year yields flat at 4.048%
• Gold flat at $1,923.62
• WTI crude down 0.7% to $73.36
• Bitcoin down 0.2% to $30,194

It’s a quiet one to start the new week in Europe, as markets are gearing towards the main event – that being the US CPI data on Wednesday.

The risk mood was fairly sluggish early on but things are recovering now ahead of US trading. S&P 500 futures were down as much as 0.5% but are now flat and European indices saw a bit of a rough open before turning the tables to be slightly higher at the moment. Still, it just looks to be a bit of a breather after the heavy selling last week.

Treasury yields were also initially slightly higher but have fallen back to flattish levels, though 2-year yields are down 2.3 bps to 4.908% currently.

In FX, the dollar is recovering some poise as well after the Friday drop following the US non-farm payrolls. USD/JPY in particular was rather perky earlier as it hit 143.00 but has pared majority of those gains to be up by just 0.1% at 142.25 now.

Elsewhere, GBP/USD is down 0.4% to 1.2780 while the antipodeans are the ones struggling the most with AUD/USD down 0.7% to 0.6645 after another rejection at its key daily moving averages near 0.6683-96 on the day.

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

This comes just days after Yellen’s meeting with top Chinese officials and for Xi to make such a pledge, is basically a bit of a slap in the face to the US. Xi is saying that China will continue working with Russia to develop a „comprehensive strategic partnership of cooperation“.

If you compare the above to the words here, you can tell which one that China seems to be more keen to stick with.

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

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

The NFP report on Friday
despite missing slightly expectations for the first time after 14 consecutive
beats, didn’t change the market’s expectations about the next 25 bps rate hike
as the other parts in the report were still solid with average hourly earnings
even ticking higher. Now the market is focused on the US CPI report on
Wednesday and that might change the pricing and thus lead to some big moves in
Gold.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Gold got stuck
in range between the 61.8% Fibonacci retracement level
and the 1934 resistance level
where we can also find the red 21 moving average for confluence. The
bias remains bearish as the Fed is still seen hiking interest rates two or more
times this year if we don’t see a deterioration in the economic data. In case
we see a break to the downside, the sellers will target the 1805 level, while a
break to the upside is likely to lead to a rally into the 1984 resistance first
and then the 2076 high.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that the price
recently broke out of the trendline that was
defining the bearish trend. Now the buyers will need to break above the 1934
resistance to get back control and target the 1984 resistance. The sellers, on
the other hand, are likely to lean on that resistance to position for more
downside and target the break below the 61.8% Fibonacci retracement level to
extend the fall into the 1805 level.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see more
closely the choppy price action of the last few weeks as the market is uncertain
on the next path for interest rates. The US CPI report on Wednesday will
probably decide where the market will go for the following weeks, but the
levels are clear:

• A break above the 1934 resistance is
  likely to cause a rally into the 1984 resistance.
• A break below the 61.8% Fibonacci
  retracement level should see the sellers taking the price towards the 1805
  level.

Upcoming Events

This week will
be all about the US CPI report on Wednesday. A miss to the expected numbers,
especially on the core side, should lead to a rally in Gold as the market will
price out the hawkish expectations and even bring forward rate cuts bets. On
the other hand, a beat to the forecasts is likely to cause a more hawkish
repricing in the expectations and lead to more downside for Gold. After the CPI
report we will see the US Jobless Claims on Thursday and the University of
Michigan Consumer Sentiment on Friday.

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

Last Friday the US NFP report missed expectations for the first time
after 14 consecutive beats. The miss was very slight though and the other
details in the report were good, so in the end it showed that the labour market
is still solid even though there may be some minor softening. The market
rallied initially but eventually sold off into the close as the US CPI started
to be the next focus. The jobs data on Friday hasn’t changed the market pricing
for the upcoming FOMC meeting as the market still expects the Fed to hike by 25
bps. The data on Wednesday will decide the next big move for the market.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones
couldn’t sustain the breakout above the 34477 resistance again
and eventually sold off into a previous support. The price has also fell below
the red 21 moving average and the
moving averages have crossed to the downside. This is a bearish signal, and the
target should now be the support at 32684.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price is
now at the previous support level at 33885 where we can expect at least a
bounce into the red 21 moving average where the sellers are going to step in
again. If the price keeps falling below the support though, the sellers should
pile in even more aggressively as the bearish momentum would be high at that
point and lead to a selloff into the 33448 support where we can also find the
61.8% Fibonacci retracement level.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
price is now diverging with
the MACD right
at the support level. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, if we get a pullback, the
price is likely to rally towards the previous swing high level at 34200 where
we can also find the 38.2% Fibonacci retracement level for confluence.

That’s where we can expect the sellers
piling in to position for more downside with a defined risk above the
resistance zone. The buyers, on the other hand, can either enter here at the
support level with a defined risk below the support or wait for the price to
take out the swing high level to pile in and extend the rally towards the
previous high at 34700.

Upcoming Events

This week
everyone will be focused on the US CPI report scheduled for Wednesday as it
will likely decide the next big move for the market. A miss in the data,
especially on the core figures, should lead to a rally in the Dow Jones, while
a beat should weigh on risk sentiment and bring the market even lower. After
Wednesday, we will have the US Jobless Claims report on Thursday and the
University of Michigan Consumer Sentiment survey on Friday.

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

• MON: Riksbank
  Minutes, Bank of Israel Announcement, Chinese Inflation (Jun), Norwegian CPI
  (Jun), Chinese New, Yuan Loans (Jun)
• TUE: EIA STEO
• WED: BoC
  Announcement, RBNZ Announcement, German CPI Final (Jun), UK Jobs Data
  (May/Jun), German ZEW Survey (Jul), US CPI (Jun)
• THU: ECB
  Minutes, BoK Announcement, OPEC MOMR, IEA OMR, EU-Japan summit, UK GDP (May),
  US PPI final Demand (Jun)
• FRI: US
  University of Michigan Prelim. (Jul), German Wholesale Price

NOTE: Previews are listed in day-order

Riksbank Minutes (Mon):

June’s meeting saw a 25bp hike as expected and
guidance for further tightening ahead alongside a step up in the pace of bond
sales. All measures which were more or less expected heading in. From this, the
minutes will be scrutinised for just how much further tightening is likely,
with the statement stating “at least one more hike this year”. Additionally, it
will be interesting to see if any member(s) would have preferred another 50bp
increment. The increased pace of bond sales to SEK 5bln from 3.5bln was shy of
SEB’s 6-7bln forecast, and as such any discussion around alternative magnitudes
will be closely monitored. Most interestingly, though not designed for monetary
policy purposes, details on the Riksbank announcing it is considering hedging
some of its FX reserves are keenly sought. Given that details are currently
light, particularly on the monetary/SEK implications; though, desks are viewing
it as a balance-sheet-related measure, not a behind-the-scenes way of
influencing inflation and/or the SEK.

China Inflation (Mon):

There are currently no expectations for the
June inflation metrics. In terms of last month’s print, annual inflation rose
slightly to 0.2% in May 2023, falling short of the 0.3% market forecast, albeit
rising from April’s 26-month low of 0.1%. Increased costs for fruit and cooking
oil helped push up food inflation, while transport and housing costs dropped.
Core consumer prices rose 0.6% year-on-year. Consumer prices saw a 0.2% monthly
drop, marking a fourth consecutive m/m decrease. Using the Caixin PMIs as a
proxy, the release suggested “Average input prices fell for the first time in
just over three years, albeit fractionally, which in turn was driven by a drop
in manufacturing costs. Output charges fell slightly and for the third month in
a row”, although the Senior Economist at Caixin also suggested, “A slew of
recent economic data suggests that China’s recovery has yet to find a stable
footing.” Analysts at ING suggest “Weak domestic demand is the main culprit,
though there are also some helpful base effects and we should see inflation
return to around a 2% rate over the coming months. PPI inflation will remain
strongly negative, reflecting weak factory gate prices as well as subdued
commodity prices.”

Norway CPI (Mon):

In May, the core YY figure printed markedly
above forecast at 6.7% (exp. 6.2%, and the Norges Bank’s expected 6.01%) and
was a key driver behind the Norges Bank’s decision to hike by 50bp in June. In
terms of the forecasts from that meeting, the Bank significantly upgraded the
June view to 6.58% (prev. 6.01%) for CPI-ATE. As it stands, the Norges Bank’s
guidance is for another hike “most likely” occurring in August, with the rate
seen increasing to 4.21% by end-2023. In the scenario that CPI-ATE remains
around the May figure, i.e. above the new June forecast, this week then it may
well serve to cement expectations for a hike in August and make another 50bp
move a real possibility.

UK Jobs Data (Tue):

The ex-bonus average earnings (May) print is
expected to moderate slightly from 7.2% to 7.1%, while the Unemployment rate
(May) is seen remaining at 3.8%. While the employment metrics will draw focus,
and have influence for GDP ahead along with BoE expectations, the main focal
point of the release will be wages, particularly after the particularly firm
data in June for the April period. Reminder, that release showed the largest
growth rate for regular pay outside of the COVID period, and (when Gilts
opened) sparked a marked hawkish reaction. For May, the associated CPI and PMI
prints have had hawkish implications; in particular, the May Services PMI
highlighted “Intense wage pressures continued across the service economy,
despite a moderation in employment growth.”, with the latter remark also of
note for the accompanying unemployment metrics. For the BoE, the data is
another piece in the puzzle before the August 3rd meeting where the wage
figures and the June CPI (due July 19th) will be key in determining whether
another 50bp is delivered or if a return to 25bp is justified.

RBNZ Policy Announcement (Wed):

The RBNZ is likely to keep the Official Cash
Rate unchanged at next week’s meeting at the current 5.50% level, with money
markets pricing in a 92% probability that the central bank holds rates and just
an 8% chance of a 25bps hike. As a reminder, the RBNZ unsurprisingly hiked
rates by 25bps at the last meeting in May which was made by a majority of five
votes to two and was the first time the Monetary Policy Committee voted on the
decision. The announcement was seen as a dovish hike as the central bank
maintained its peak rate forecast at 5.50%, and therefore implied that its
hiking cycle is done, while it also omitted prior language regarding further
rate increases and stated that the OCR is set to remain restrictive for the
foreseeable future. The central bank also noted that the level of interest
rates is constraining spending and inflation, while inflation is expected to
continue declining from the peak and it forecast negative GDP growth for Q2 and
Q3. Since that meeting, Governor Orr stated that rates are restrictive and well
above neutral, as well as noting that economic growth and inflation are weaker
than expected, while Assistant Governor Silk suggested being mindful of
over-tightening monetary policy and that they can halt to see how things go.
Furthermore, the latest GDP data showed that the economy dipped into a
recession with Q2 GDP Q/Q at -0.1% vs. Exp. -0.1% (Prev. -0.6%, Rev. -0.7%)
which further reduces the prospects of a rate hike.

US CPI (Wed):

Consumer prices are seen rising +0.2% M/M in
June (prev. 0.1% M/M), while the annual measure is expected to pare back to
3.0% Y/Y from 4.0% in May. Core consumer prices are expected to rise 0.3% M/M
(prev. 0.4% M/M), while the annual measure of core inflation is expected to
slip to 5.0% Y/Y from 5.3% in May. Credit Suisse says the easing core inflation
would be welcome for the Fed since it has been stuck around a monthly rate of
0.4% this year. The bank notes that the volatile used auto prices component is
are expected to decline after a period of strong increases, while other goods
categories are likely to have minimal inflation. Meanwhile, on the services
inflation front, CS says that services inflation including shelter is expected
to continue declining, with hotel prices weighing; ex-shelter, the bank
predicts that services inflation will be slightly below 0.3%. CS is slightly
below consensus in looking for core inflation to rise 0.2% M/M; it says that a
reading in-line with its estimates would represent the lowest run rate for core
inflation in 22 months, and the first time core inflation has been broadly
in-line with target over that period. It adds that the decline is likely to be
exacerbated by volatile components, which could reverse higher later in the
year, but nonetheless, this would be encouraging for the Fed after months of
disappointment.

BoC Policy Announcement (Wed):

After a five month ‘pause’, the consensus
looks for the Bank of Canada to lift interest rates by 25bps for the second
straight meeting in July, takings it key rate to 5.00%, according to Reuters.
Recent inflation data showed a significant declin in price pressures, with the
annual rate diving to 3.4% Y/Y from 4.4%, though some analysts suggested that
it might be a result of base effect. The BoC itself does not see inflation
returning to its 2% target until early 2025. “The slowdown may not be enough to
remove another BoC rate hike from the table given stickier core rates of
inflation, while a decent GDP report coupled with a tight job market suggests
the economy remains sturdy,” BMO Capital Markets said. Analysts at another
Canadian bank, RBC, said that data is pointing to more persistent momentum in
consumer spending as well as labour demand, and the question is when are we going
to be able to see a material slowdown in labour market conditions as well as
the economic outlook; “in our heads, it is really a question of when, not so
much whether it is going to happen,” RBC adds. The Reuters poll also finds that
analysts are more split on the prospects of a recession, and ahead, analysts
think that after the July hike, the BoC will likely keep rates unchanged well
into 2024.

ECB Minutes (Thu):

The ECB Minutes will be closely watched for
any signs of a potential September hike, with a July hike wholly expected by
markets, as pricing currently infers an 88% chance of a 25bps hike and 12% for
a 50bps move. To recap the June meeting, the ECB delivered another 25bps hike
to the Deposit Rate, taking it to 3.5%. The decision to raise rates was once
again premised on the judgement that inflation “is projected to remain too high
for too long”. Going forward, policy decisions will continue to follow a
data-dependent approach and be taken on a meeting-by-meeting basis. Perhaps the
main takeaway from the initial announcement came via the accompanying macro
projections which saw upgrades to headline and core inflation for 2023 through
2025 with the core 2025 print expected above-target at 2.3%. From a growth
perspective, 2023 and 2024 forecasts were revised lower by 10bps. Elsewhere,
the GC confirmed that it will discontinue reinvestments under the asset
purchase programme as of July 2023. At the follow-up press conference, when
questioned on whether the GC expects to keep raising rates, Lagarde replied
that there was still “more ground to cover” and that the ECB is not done on
hikes. Note, Lagarde again refused to comment on where she saw the terminal
rate. Since the June meeting, Bloomberg sources suggested the ECB is set for a
“tough debate” next month over whether a possible September rate hike is
needed. Meanwhile, at the ECB Sintra Forum (26-28th June), GC members largely
kept the door open for a September hike, whilst refraining from telegraphing a
terminal rate and keeping a data-dependent approach. On that front, EZ CPI for
June was mixed vs expectations, with the core Y/Y rate narrowly topping
forecasts (6.8% vs 6.7%), although headline and super-core both printed 0.1ppts
under expectations.

BoK Policy Announcement (Thu):

The Bank of Korea is likely to maintain its
7-Day Repo Rate at the current level of 3.50% for the 4th consecutive meeting
next week as softening inflation and expectations of weak economic growth
reduce the urgency for the central bank to resume its hiking cycle. The BoK Board
was unanimous in its decision to keep rates unchanged at the last meeting in
May, although prospects of a future rate increase cannot be ruled out as six of
the seven members saw the need to keep the door open for one more rate hike,
while the accompanying statement noted that economic growth is to remain weak
for some time and inflation will likely fall considerably before rebounding
slightly for the rest of the year. Governor Rhee also stated that core
inflation is not easing as much as Board members had expected and uncertainty
increased over whether inflation will approach the 2% target before year-end,
while a senior official pushed back against the view that monetary tightening
is over and warned it is still too early to be relaxed over inflation. Nonetheless,
an immediate policy adjustment is seen as unlikely given that inflation
continued to soften in June with South Korean CPI YY at 2.7% vs. Exp. 2.9%
(Prev. 3.3%), albeit remaining above the central bank’s target.

EU-Japan Summit (Thu):

The upcoming NATO summit on July 11th and 12th
is expected to see a push by US President Biden to secure Sweden’s membership
in the alliance, amid Turkey’s ongoing objections. Biden met with Swedish Prime
Minister Kristersson and expressed support for its NATO bid, despite the
country’s entry being hindered by mainly Turkey. The summit also coincides with
a host of diplomatic events for Biden, including a visit to the UK and a
stopover in Finland, the alliance’s newest member. The discussions will likely
centre on NATO’s expansion, transatlantic coordination on key global issues,
and efforts to support Ukraine against Russia’s invasion. The summit is not
expected to see Sweden’s membership secured yet. Sticking with geopolitics,
Japan and the EU are planning to issue a joint statement declaring an increase
in their maritime, cyberspace, and supply chain security cooperation. The
decision will likely follow a summit scheduled for July 13 involving Japan’s PM
Kishida, European Council President Michel and European Commission President
von der Leyen. The statement may include a commitment to enhancing joint
activities in the Indo-Pacific region and strengthening Southeast Asian
countries’ maritime defences. This move comes as tensions rise in the region,
particularly concerning China’s growing influence and activities in the East
and South China seas, according to Kyodo.

UK GDP (Thu):

April’s data showed 0.2% MM growth, but failed
to entirely reverse the 0.3% contraction in March. At the time of this release,
Pantheon wrote that it expects to see GDP over Q2 to be relatively unchanged
QQ, a view that can be explained via soft consumer confidence generally and
also the additional Coronation Bank Holiday. However, the May PMI reported that
its “surveys are consistent with GDP rising 0.4% in Q2 after 0.1% in Q1” and
continuing the theme of PMIs implying a stronger economic performance than the
hard data shows. Further out and of concern on the growth outlook, the June PMI
indicated that the economy lost momentum again after the brief spring uptick
and “looks set to weaken further in the months ahead”, with emphasis placed on
signs of faltering around services. For the BoE, the findings are noteworthy,
but the MPC remains committed to breaking inflation’s persistence and thus the GDP
metrics are unlikely to change their focus. Though, it may have an influence on
market pricing which currently implies a 6.5% peak by February 2024.

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

• US June non-farm payrolls +209K vs +225K expected
• Canada June employment change 59.9K vs 20.0K expected
• Fed’s Goolsbee: I feel like we’re on the golden path to ’no recession and low inflation
• Air travel rebounds: Passengers at 69.1% of pre-pandemic levels
• EIA weekly US natural gas inventories 72 bcf vs 64 bcf expected
• Canada June Ivey PMI 53.4 vs 53.5 prior
• Timiraos: June jobs report keeps the Fed on track for July hike

Markets:

• Gold up $13 to $1924
• WTI crude oil up $1.86 to $73.66
• US 10-year yields up 2.3 bps to 4.06%
• S&P 500 down 0.2%
• JPY leads, USD lags

The initial reaction to the non-farm payrolls report was mixed as the softer headline competed with higher-than-anticipated wage growth. The dollar fell, then recovered most of the losses.

From there, the bond market took over. Yields began to fell and 2s fell back through 5%, kicking off a strong decline in the US dollar. The USD/JPY selling today was particularly notable and certainly raised some eyebrows regarding whatever the MOF or BOJ is going to deliver, but it could also be profit taking.

The pound and euro were also particularly perky as bot added around 90 pips from early New York levels. Cable tried the June high and matched it to the pip but couldn’t get through and gave a handful of pips back late.

The commodity currencies doubly benefited from stronger commodity prices and better risk appetite, putting up some strong gains. The loonie trailed its mates despite another strong jobs headline. One of the reasons might be the softer wage growth in the employment report. Next week’s Bank of Canada decision is going to be a big one with the implied probability of a hike at 67%.

Have a great weekend.

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

The major indices gave up gains into the close with all the major indices closing lower on the day.

At session highs the

• Dow was up 114.11 points
• S&P was up 28.29 points, and the
• she NASDAQ index was up 125.47 points.

At the close, the indices were all negative.

• Dow industrial average -187.25 points or -0.55% at 33735.00
• S&P index -12.59 points or -0.29% at 4399.01
• NASDAQ and -18.34 points or -0.13% at 13660.71

The small-cap Russell 2000 did close higher with a gain of 22.43 or up 1.22% at 1864.66.

For the trading week:

• Dow Industrial Average fell -1.36%
• S&P index fell -1.16%
• NASDAQ and the fell -0.92%

The Russell 2000 fell -1.27%.

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