Global air travel is perhaps the single-best indicator of covid impacts and the latest data shows that we’re on the cusp of a full retracement.

The May report from IATA shows that passenger-kilometers are at 96.1% of the pre-pandemic level, which is up 39.1% year-over-year. I strongly suspect the job is completed in June or July.

What’s notable is the skew in traffic and the risks later. Domestic air travel is above pre-covid levels for the second month but international travel is still down 9.2%. Some of that is the slower return of Asian customers and covid concerns when booking vacations but there’s also an element of business travel that’s missing.

The rise of remote work has curbed business travel demand and right now that’s being replaced by revenge travel post-pandemic. In time, the demand for travel might be satiated and that will result in travel settling out at lower levels, or at least a lower trajectory than pre-pandemic. Hotels are facing the same question but for now, a return to the office and international business travel has some momentum.

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

The pound has extended today’s day to 100 pips, touching 1.2848 in a late-week push. As the 4-hour chart above shows, buyers ran into the June high of 1.2848 exactly before backing off a few pips. The bulls may try to make another push late or in low liquidity at the Monday open in an attempt at a fresh 15-month high.

The pound is benefiting from a hawkish Bank of England and high inflation. I think ultimately this will prove to be playing with fire as some kind of accident happens if/when rates get to 6%. But for now it’s all about yield differentials and US dollar selling.

Some stops were already hit as 1.2800 gave way but with some real resistance above, the shorts have a good argument here.

Overall though, the US dollar is being sold hard in anticipation of next week’s CPI report. I also have to wonder if there are fears of Japanese intervention or a change from the BOJ as a factor.

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

The price of WTI crude oil futures settled at $73.86. That’s up $2.06 or 2.87%. The gain equaled the gain from July 5 which is the largest gain since June 15. The low price reached $71.19. The high price was at $73.91. The lower US dollar has contributed to the rise.

Technically, the move to the upside has the price testing it’s 100-day moving average currently at $73.86. The last time the price tested that moving average was back on May 1 and April 28. The price closed just above the moving average on April 28 but rotated lower the next day.

Next week, traders will need to decide whether to break above that key 100 day moving average moving average and look toward the 200-day moving average up at $77.47 (the last time the price tested that moving average back on April 13 when sellers leaned), OR use the moving average level to push price back to the downside?

For now, the momentum to the upside has reached its target. The buyers and sellers will now battle it out for control.

Fundamentally, Reuters reports that Russia still plans to cut oil exports in August due to domestic gasoline demand, but it’s unlikely to reduce output. Also, the Baker Hughes US Rig Count for the week ending July 7th reported oil rigs were down by 5 at 540, while natural gas rigs saw the biggest increase in six years, up 11 to 135, bringing the total rig count to 680.

For the trading week, the price of crude oil rose 4.53%. That’s the largest increase since the week of April 3.

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

The JPY is the strongest and the CHF is the weakest as the North American session begins.Overnight, Bank of Japan Deputy Governor Uchida, in an interview with Nikkei media, said that the central bank plans to maintain the Yield Curve Control (YCC) policy to continue easy monetary conditions. While discussing the possibility of adjusting YCC, he emphasized the importance of ensuring easy policy while considering its impact on financial intermediation and market function. He suggested that the risk of missing the 2% inflation target due to a premature policy shift is greater than the risk of being late in tightening monetary policy. He also acknowledged that there is a considerable distance to ending the negative interest rate, equating such a decision to a 0.1% rate hike. Uchida also commented on the Yen, saying that rapid, one-sided declines are undesirable and the currency should reflect economic fundamentals.

In addition, Former Japanese Vice Finance Minister Eisuke Sakakibara, also known as „Mr. Yen,“ predicts that the USD/JPY could potentially exceed 160, possibly next year. At that level, he suggests that authorities might be inclined to intervene to fortify the yen. He also indicated that the yen could continue to depreciate unless the Bank of Japan (BOJ) tightens its monetary policy. This could involve abolishing negative rates and relinquishing controls on bond yields by the end of next year. If the Japanese economy heats up as anticipated, he expects a likely tightening in 2024. As for his personal strategy regarding currency intervention, Sakakibara believes in the efficacy of surprise actions, suggesting that he would intervene unexpectedly, without waiting for the market. However, he acknowledges that the BOJ is unlikely to pre-announce any intervention, ensuring an element of surprise remains regarding timing.

Despite the tilt in comments to a weaker JPY, the JPY initially tried to move higher in the earlier Asian session with the comments. However, the JPY turned around and moved higher at the end of the Asian Pacific session, and in the European morning session. The USDJPY is traded to the lowest level since June 23 with the 38.2% of the move up from the June 1 low at 142.528 now in trader’s sites. PS the BOJ next meets on July 27/28.

In the European session this morning, European Central Bank (ECB) Vice President Luis de Guindos described labor market dynamics in the Eurozone and globally as very positive. He noted that inflation in the services sector has proven to be more persistent. The future of interest rates in September remains an open question. de Guindos mentioned the advanced transmission of their unprecedented policy hikes to tighter financing conditions and the emerging impact on the real economy. However, he emphasized the job isn’t done yet, with a need for continued monitoring of services inflation and labor costs. Even though underlying price pressures remain strong, he pointed out that most indicators have started to show signs of softening. The expectations are that the ECB will raise rates by 25 basis points when they announce their next decision on July 26.

Today is nonfarm payroll day in the US and the USD is trending modestly lower. Adam had a nice preview of the data posted yesterday (you can find it here). Expectations are for around 225K, but given the sharp rise in the ADP yesterday (plus 497K versus 170K estimate), the market will likely be looking for something higher.

Some employment statistics for June already released show:

• ADP employment 497K vs 170K expected
• ISM manufacturing employment 48.1 vs 51.4 prior
• ISM services employment 53.1 vs 49.2
• Philly employment -0.4 vs -8.6 prior
• Empire employment -3.6 vs -3.3 prior
• Initial jobless claims survey week 265K vs 259K expected.

Barring a huge surprise on the weak side today (like a negative number), the Fed is expected to hike rates by 25 basis points when they announce their next rate decision on July 26. The odds of a rate hike in July are up to over 92%. The probability of a September 20 move is 29%, but November 1 is near 50%. The Fed penciled in two hikes between now and the end of the year at the June meeting.

Yesterday, Dallas Fed President Lorie Logan, expressed that she would have been comfortable with a rate hike in June. She believed that additional rate hikes are likely needed and expressed concern about whether inflation will subside quickly enough. Logan attributed the decision to pause in June to the challenging and uncertain economic environment. She also noted that the process of rebalancing the economy has been slower than anticipated and expressed skepticism about the delayed impact of previous rate hikes by the Fed. Logan suggests that the housing market may have reached its lowest point, but warns that a rebound in the housing sector could pose a threat to controlling inflation.

Canada will also release their employment statistics 8:30 AM with expectations of an employment change of +19.8K with the unemployment rate moving to 5.3% from 5.2%.

A snapshot of the markets currently shows:

• Crude oil is trading up $0.30 or 0.42% at $72.10. Yesterday the price settle at $71.80
• Spot gold is trading up $6.54 or 0.34% $1917.34
• Silver is trading down $0.03 or -0.13% at $22.70
• Bitcoin is trading at $30,129. The price was at $30,240 near 5 PM yesterday

In the premarket for US stocks, the major indices are trading modestly lower after the indices fell yesterday

• Dow Industrial Average is trading down -2 points after yesterday’s -366.38 point decline
• S&P index is trading down -1.6 points after yesterday’s -35.21 point decline
• NASDAQ index is trading down -22 points after yesterday’s -112.62 point decline

In the European equity markets, the major indices are trading mixed. Yesterday the major indices all fell sharply to the downside.

• German DAX is up 0.55%. Yesterday the index fell -2.57%
• France’s CAC is up 0.56%. Yesterday the index fell 3.13%
• UK’s FTSE 100 is down -0.30%. Yesterday the index fell -2.17%
• Spain’s Ibex is down -0.53%. Yesterday the index fell -2.12%
• Italy’s FTSE MIB up 0.61% (delayed). Yesterday the index fell -2.53%

In the Asian Pacific market today, markets closed modestly lower

• Japan’s Nikkei tumbled -1.17% %
• Australia’s S&P/ASX 200 index tumbled -1.69%
• China’s Shanghai composite index fell -0.28%
• Hong Kong’s Hang Seng index fell -0.90%

In the US debt market, yields are modestly higher in early US trading

• 2-year yield 5.011%, +0.5 basis points
• 5-year yield 4.397% , +2.7 basis points
• 10-year yield 4.067%, +2.5 basis points basis points
• 30-year yield 4.013%, +1.0 basis points basis points

In the European debt market, benchmark 10-year yields are mixed:

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

Headlines:

• US non-farm payrolls the main focus, but have the numbers been severely overestimated?
• ECB’s Lagarde: We still have work to do to bring inflation back down to our target
• ECB’s de Guindos: We will continue to follow a data-dependent approach
• ECB’s de Guindos: Evolution of core inflation will be key to future policy decisions
• BOJ likely to hold off YCC tweak in July, says ex-central bank official
• Germany May industrial production -0.2% vs 0.0% m/m expected
• UK June Halifax house prices -0.1% vs 0.0% m/m prior
• Yellen says US seeking healthy competition with China

Markets:

• JPY leads, USD lags on the day
• European equities mixed; S&P 500 futures down 0.1%
• US 10-year yields up 1.9 bps to 4.059%
• Gold up 0.3% to $1,916.72
• WTI crude up 0.5% to $72.15
• Bitcoin down 0.5% to $30,169

It’s all about the US jobs report today and that made it a bit of a quieter one in Europe, though there were some light market moves.

In particular, the Japanese yen gained across the board with USD/JPY briefly falling below 143.00 from around 143.50 in the handover from Asia trading. The downside momentum in the pair continues despite higher bond yields, so that divergence is something to be wary about as we move towards the closing stages of the week.

Meanwhile, the dollar itself is slightly softer on the balance of things despite the risk mood being fairly tentative and cautious. European stocks opened lower but are now keeping more mixed while US futures are marginally down on the day.

EUR/USD is little changed just below 1.0900 while GBP/USD is up just 0.2% to 1.2770 on the day. The antipodeans are also holding minor gains against the greenback, with AUD/USD up 0.2% to 0.6640 and NZD/USD up 0.3% to 0.6175 currently.

It’s not much but we should be getting more action before the weekend comes along with the non-farm payrolls report later set to induce another round of volatility surely. Will we get the same reaction as yesterday on a beat in the data?

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

The US economic data has
been surprising to the upside since the last FOMC meeting. Given the Fed
willingness of hiking another two or more times if the data remains strong, the
market repricing interest rates expectations on the more hawkish side. Although
this development led to higher Treasury yields, the USDJPY pair struggled to
take off and instead pulled back.

On the other hand, the BoJ
maintains its dovish stance keeping rates at -0.10 and the YCC at the usual
settings. Core inflation in Japan keeps on rising and there are only slightly
tentative signs of a possible exit from the current policy. So, ss long as the
policy divergence between the two central banks continues, we should see more
higher highs for the pair, all else being equal.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that we finally got a pullback in USDJPY. In fact, the price has fallen into
the trendline where we
can also find confluence with the
38.2% Fibonacci retracement level
and the red 21 moving average. We can
expect the buyers piling in here with a defined risk below the 142.17 support and
target the 150.00 handle. The sellers, on the other hand, will want to see the
price to break below the 142.17 support to pile in and extend the selloff into
the next trendline.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the market
sold off pretty heavily yesterday although the US economic data was solid
pretty much across the board. This is a strange reaction as the US Treasury
yields rallied instead. The market may have just been too much overstretched and
it needed a pullback. This is a key zone now to decide where the USDJPY will go
next. A bounce should lead to another big rally, while a break lower would open
the door for a big selloff into the 139.00 handle.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a swing low resistance at 143.50. If the price pulls back into that level,
we can expect the sellers to pile in there to position for more downside. More
conservative buyers, on the other hand, will want to see the price to break
above that level to confirm the bounce and the continuation of the rally.

Upcoming Events

Today we have the US
NFP report. The market is already expecting good data so the only surprise may
come from a much higher than expected numbers or a miss to the forecasts. In
the first case, we should see the USD appreciate as the market will be pricing
a more hawkish Fed. In the second case, we can expect the USD to weaken as
Treasury yields will drop and take USDJPY with them.

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

There’s not much of direction so far on the session and you can understand why there is that sense of apprehension. Everyone is waiting on the US non-farm payrolls later and it’s tough to gather much conviction at the moment. European stocks started the day with losses but are now seeing a more mixed performance:

• Eurostoxx +0.3%
• Germany DAX +0.4%
• France CAC 40 +0.5%
• UK FTSE -0.3%
• Spain IBEX -0.5%

It still doesn’t chip away much at the heavy losses this week and US futures are also still looking rather tepid. S&P 500 futures and Nasdaq futures are down 0.1% while Dow futures are flattish currently.

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

The US data has been
consistently surprising to the upside since the last FOMC, and this has led the
market to price in a more hawkish path for the Fed. In fact, Fed Chair Powell
and other FOMC members repeated that they expect two or more rate hikes this
year if the data remains strong. .

The RBNZ 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.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the price
action displays a bullish bias as we got a selloff and then a V-shaped
recovery. This is generally a bullish signal, and the target should be the 0.63
handle where we can also find the downward trendline. A lot
will depend on today’s NFP report though.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely what
happened with the V-shaped recovery. In fact, the price broke out of the support and
after a little consolidation, rallied back strongly above the support turned resistance towards
the 0.62 handle. The price is now struggling to break above this swing high level,
but the bias remains bullish as the price has also broken out of the bullish flag. Once we
see a break above the 0.62 handle, the buyers should pile in and target the
0.63 resistance.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is now rallying towards the 0.62 handle. We can expect the sellers
leaning on that 0.62 resistance with a defined risk above the high and target
the 0.61 handle as first target and then a break lower. Alternatively, the
sellers can also wait for the price to break below the minor upward trendline
before piling in.

Upcoming Events

Today we have the US
NFP report, and the market is solely focused on that. The labour market data we
got up to now has been solid and the market’s expectation is skewed to the
upside. In fact, we may have a sustained move only if we get a big beat or a
miss. In case of a beat, the USD should strengthen, while a miss should see the
USD offered across the board.

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

Headlines:

• USD/JPY backs away from the 145.00 mark
• Dollar slips across the board ahead of North America trading
• US Treasury secretary Yellen to meet with China’s Liu He on Friday
• China’s Xi calls to deepen war, combat planning in visit to Eastern Theater Command
• BOE’s Bailey says cannot give a date on when interest rates will start to come down
• SNB’s Maechler: Further rate hikes cannot be ruled out
• Germany May factory orders +6.4% vs +1.2% m/m expected
• Germany June construction PMI 41.4 vs 43.9 prior
• UK June construction PMI 48.9 vs 51.0 expected
• US June Challenger layoffs 40.71k vs 80.09k prior
• US MBA mortgage applications w.e. 30 June -4.4% vs +3.0% prior

Markets:

• JPY leads, CAD lags on the day
• European equities lower; S&P 500 futures down 0.5%
• US 10-year yields up 2.6 bps to 3.971%
• Gold up 0.5% to $1,926.66
• WTI crude up 0.3% to $72.03
• Bitcoin up 2.0% to $31,087

It was another soggy session for risk sentiment, as equities continue to slump further after yesterday’s losses. European indices are down over 1% across the board while US futures are holding lower ahead of key US data to come later today and also tomorrow.

The market continues to see higher rates and that is propping up bond yields, though the dollar is faltering today while the Japanese yen is the lead gainer instead.

Major currencies were initially little changed before the yen took charge, with USD/JPY falling just below 144.00 at the start of the session. That was then accompanied by a further dollar drop across the board later on, with the greenback seeing decent losses against the euro, pound, and antipodeans at the moment.

EUR/USD is up 0.4% to near 1.0900 while GBP/USD is up 0.5% to 1.2770 levels on the day. Meanwhile, despite the negative mood in stocks, the aussie and kiwi are holding their ground with AUD/USD up 0.4% to 0.6683 and NZD/USD up 0.6% to 0.6215 – both holding near the highs for the day.

It’s tough to make out the flows in broader markets today but it could just be start of the quarter/half-year positioning perhaps. We’ll get to US data later and that will make things more interesting before the non-farm payrolls tomorrow.

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

The JPY is the strongest and the USD is the weakest as the North American session begins. The USD is weaker ahead of a number of employment releases today. The ADP employment data which will be released at 8:15 AM. US jobless claims, the JOLTS employment data, and Services ISM PMI data will also be released today (including the employment component). The US jobs report will be released tomorrow at 8:30 AM ET with expectations near 220K.

The USD is lower despite the FOMC meeting minutes yesterday that showed that although the Fed was unanimous in keeping rates unchanged in June, there were some who felt a raise was warranted in June, considering the economy hadn’t slowed significantly. These officials argued that the economy’s activity had surpassed earlier expectations and inflation was not clearly on track to meet the committee’s 2% target. The minutes used terms like „resilient“ frequently to describe the U.S. economy, financial markets, and banking system. The June meeting officials suggested two more increases this year would help shape public expectations about the need to increase rates to bring inflation down to the Fed’s 2% target. The minutes also hinted at a potential challenge in maintaining unity in future decision-making, given differing opinions among the officials. While some argue the Fed should pause and let current policies work, others see an urgent need for further increases. Ahead of the minutes‘ release, investors saw an 88% chance that the Fed would raise rates to between 5.25% and 5.5% this month, which would be a 22-year high.

Later near the US close yesterday, New York Federal Reserve Bank President John Williams expressed concerns with the current state of inflation, affirming that combating it is a chief responsibility of the Federal Reserve. He noted progress on inflation, but still finds price pressures too high, despite pandemic factors driving inflation easing. He highlighted the economy’s continued demand for labor and resilience in the housing market, which came as a surprise to him. Despite this, he thinks the economy has weathered rate hikes fairly well. He proposed it’s an open question of how quickly inflation will decrease next year. He also mentioned that a slower pace of rate increases makes sense currently, but future actions will be dependent on incoming data. Finally, Williams fully backed the Fed’s decision to keep rates steady in the June FOMC meeting. He also suggested that if the markets anticipate quicker progress on inflation than the Fed, it wouldn’t be a problem.

The overall tone of his comments suggests that he believes the Federal Open Market Committee (FOMC) is not done with rate hikes yet, with a 25 basis point rate increase predicted for the upcoming meeting later this month.

Today in Europe:

• German Factory Orders (month-on-month): Orders increased by 6.4%, significantly outperforming expectations of 1.1% and prior results of 0.2%. This indicates a robust growth in manufacturing orders for Germany.
• United Kingdom Construction PMI: The UK’s construction industry has contracted slightly, with the Purchasing Managers‘ Index (PMI) falling to 48.9 from last month’s 51.6, missing the expectation of 50.9. A figure below 50 indicates a contraction in the construction sector.
• Eurozone Retail Sales (month-on-month): Retail sales remained stagnant with 0.0% growth, matching last month’s figure but missing the forecast of a 0.2% increase.

BOE’s Bailey was chirping and said:

• He anticipates a substantial decrease in inflation but warns that the transition could be difficult for borrowers.
• He refrains from providing a specific date when interest rates will start to decrease.
• He noted that actions taken by regulators, especially in the fuel market, will assist in reducing inflation.
• He brings attention to evidence suggesting some retailers might be overcharging customers, indicating a concern about possible unfair market practices impacting inflation.

U.S. Treasury Secretary Janet Yellen is set to embark on a four-day visit to China in an attempt to ease the recent strain in relations between Washington and Beijing, heightened by disagreements over semiconductors and Taiwan. This visit comes after China implemented export controls on critical chipmaking materials, a move it claims is for protecting „national security and interests.“ Despite Yellen’s planned meetings with senior Chinese officials, there is limited optimism about substantial improvements in the strained relations.

Crude oil is higher helped by the private API data released late yesterday. That data showed:

• Crude oil inventories had a drawdown of -4.382 million barrels, which was more than the expected decrease of -2.0 million barrels.
• Gasoline inventories decreased by -1.615 million barrels, significantly more than the expected decrease of -0.1 million barrels.
• Distillates increased by 0.604 million barrels, which was slightly more than the expected increase of 0.5 million barrels.

The EIA data for the week will be released at 11 AM today, a day later due to the July 4 holiday on Tuesday.

Also on the calendar today:

• At 8:15 am, the forecast for the ADP Non-Farm Employment Change is 228K, down from the last months estimate of 278K. The data is a prelude to the US jobs report which will be released tomorrow with expectations of around 224K (vs 339K last month).
• At 8:30 am, Unemployment Claims are expected to be at 245K, up from the last week’s claim of 239K. The claims took a turn back to the downside last week after hovering around 262K for 3 weeks straight.
• Also at 8:30 am, the Trade Balance is forecasted to be -$69.0B, narrower than the previous figure of -$74.6B.
• At 8:45 am, FOMC Member Logan is expected to speak.
• At 9:45 am, the Final Services PMI is projected to remain unchanged at 54.1.
• At 10:00 am, the ISM Services PMI is forecasted to be 51.0, slightly higher than the previous reading of 50.3. The employment component last month came in at 49.2.
• Also at 10:00 am, JOLTS Job Openings are predicted to be 9.93M, lower than the last report of 10.10M.
• At 11:00 am, Crude Oil Inventories are projected to decrease by 2.0M barrels, significantly less than the previous draw of 9.6M barrels.

A snapshot of the markets currently shows:

• Crude oil is trading up $0.33 or 0.46% at $72.12
• Spot gold is trading up $9.98 or 0.52% at $1924.44
• Silver is up $0.06 or 0.27% $23.17
• Bitcoin is trading at $31,185. The price was trading at $30,485 near 5 pm yesterday

In the premarket for US stocks, the major indices are trading lower. The major indices moved modestly lower yesterday as traders reacted to higher rates and tighter Fed ahead.

• Dow Industrial Average is trading down -162 points after yesterday’s -129.83 point decline
• S&P index is trading down -19.75 points after yesterday’s -8.77 point decline
• NASDAQ index is trading down -59 points after yesterday’s -25.13 point decline

In the European equity markets, the major indices are trading sharply lower:

• German DAX is down -1.20%
• France’s CAC is down -1.83%
• UK’s FTSE 100 is down -1.23%
• Spain’s Ibex is down -1.02%
• Italy’s FTSE MIB is down -0.93% (delayed)

In the Asian Pacific market today, markets closed higher

• Japan’s Nikkei fell -1.70%
• Australia’s S&P/ASX 200 index fell -1.24%
• China’s Shanghai composite index fell -0.54%

In the US debt market yields are higher in early US trading

• 2-year yield 4.965% +1.5 basis points
• 5-year yield 4.29% +3.5 basis points
• 10-year yield 3.969% +2.4 basis points
• 30-year yield 3.948% +0.4 basis points

In the European debt market, benchmark 10-year yields are higher. The UK 10-year yield is pushing toward its October 2022 high yield of 4.632%. The German 10-year yield is scraping near the highest going back to March 10 near 2.556%.

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