Headlines:

• ECB turns a blind eye to recession risks for now
• ECB’s Lagarde: Inflation remains too high
• ECB’s Kazaks: Market bets on rate cuts in early 2024 are wrong
• ECB’s Simkus: Should not rule out the option of a September rate hike
• BOE’s Dhingra: UK wages are responding to inflation with a lag
• Morgan Stanley sees Fed hiking rates by 25 bps in July

Markets:

• EUR leads, JPY lags on the day
• European equities mixed; S&P 500 futures up 0.1%
• US 10-year yields flat at 3.721%
• Gold down 0.1% to $1,921.59
• WTI crude down 1.8% to $68.15
• Bitcoin up 1.7% to $30,668

It was a relatively quiet session as there wasn’t any economic data for market players to work with. But we did hear from some ECB speakers, and they continued to push through with a more hawkish rhetoric as they reaffirmed the rate hike for July.

That more or less is akin to brushing aside the poor economic data since Friday and that is seeing the euro gain some modest ground on the day. EUR/USD is up 0.4% to 1.0945 but the rest of the major currencies bloc is looking more subdued.

USD/JPY and GBP/USD are keeping in narrow ranges with the former flat at 143.55 with the latter up just 0.1% to 1.2725 currently.

EUR/JPY though is among the standout today as it jumps up to above 157.00 to its highest since 2008.

Meanwhile, the aussie and kiwi were initially upbeat in Asia, after China decided to intervene to prop up the yuan today. AUD/USD was up to around 0.6720 in the handover to Europe but is now trading just up 0.2% at 0.6680.

This comes as risk tones are also keeping more stale after a bit of an optimistic start. It looked like markets were wanting to take a bit of a breather but European stocks are now trading mixed with some major indices sitting lower. Treasury yields have also pared their early advance and that hints at more caution ahead of US trading again.

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

In case you missed the headlines from yesterday and today:

• ECB’s Kazaks: Market bets on rate cuts in early 2024 are wrong
• ECB’s de Cos: We will raise interest rates again in July
• ECB’s Simkus: At least one more rate hike required
• ECB’s Simkus: Should not rule out the option of a September rate hike
• ECB’s Lagarde: Inflation remains too high

Given the circumstances, it is not too surprising to see policymakers brush off the weaker economic performance towards the end of Q2. They have already signaled a rate hike for July, so there is no backing down now.

If you recall, the euro fell on Friday after the poor PMI figures for June here. And as the ECB brushes off those risks, we are seeing the single currency regather some poise this week. EUR/USD is up 0.4% to 1.0945 currently, also helped out by a calmer market mood and a marginally softer dollar.

But if you want a clear signal of policy conviction, you only have to look towards EUR/JPY as the divergence between the ECB and BOJ has sent the pair higher again to fresh highs since 2008:

This also comes as yen bulls have grown increasingly frustrated awaiting a pivot under the Ueda regime, which hasn’t come whatsoever since April.

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

Over the past week, many central
bank speakers have shared their perspectives. The prevailing consensus remains
unchanged: a wait-and-see approach is favoured to gauge the necessity of
further tightening. While the majority of the FOMC expects two additional rate
hikes this year, they consistently highlight that such decisions are subject to
the data. The latest data from last week leans towards a hike though as the housing market indicators surprised to the upside, the US Jobless Claims remained pretty stable, and the US Services PMI beat forecasts.

Naturally, the upcoming
release of the NFP and CPI reports will have a pivotal role in shaping future
actions but as long as we keep seeing positive data, it is likely that the
market’s current expectation of a rate increase by the Fed in July will be
realized. On a different note, the BoC surprised with a rate hike at the last meeting citing
stubbornly high inflation with the market expecting another hike from the BoC
all else being equal.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after breaking
below the key 1.3225 support, USDCAD
kept on falling with the 1.30 handle being the likely target for the sellers.
The trend has been really strong as the price couldn’t even probe above the
short-term blue 8 moving average. The
trend is clearly bearish, so it’s a tricky environment for the buyers. In fact,
they should have much more conviction if the price rises above the 1.3225 level
again.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4
hour chart, we can see that the price has been diverging with the
MACD for a
long time. This is generally a sign of a weakening momentum often followed by
pullbacks or reversals. In fact, USDCAD kept on pulling back into the trendline and
continuing its downtrend. We can expect the price to pull back again into the
trendline soon which will be another opportunity for the sellers to re-enter
the market or an opportunity for the buyers to ride a reversal in case the
price breaks above the trendline.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
last pullback got rejected at the 1.3225 support turned resistance and the
61.8% Fibonacci
retracement level. Today we have the Canadian CPI and
if we see a miss, we should see USDCAD rally towards the trendline and possibly
even higher. On the other hand, if we see a beat, we may see another push to
the downside.

This week is a
bit bare on the data front but today we have the Canadian CPI that may have a
big impact on the pair depending on the outcome. Later in the week we have the
US Jobless Claims on Thursday and the US PCE scheduled for Friday. We will also
hear again from many central bank members.

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

There was a report yesterday stating that OPEC were had invited Guyana, one of the more faster growing oil producers globally at the moment, to join its cartel. However, that was swiftly denied by the country itself:

„We were not formally invited to join OPEC. That is not something we are interested in. We have been invited, however, to participate in OPEC meetings.“

I guess there might be some words lost in translation but for now, it is clear that there is no change to the status quo just yet.

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

The blackout period ended last week, and we started to
hear comments from several Fed members. The prevailing sentiment remains is the
one of patience and relying on data to determine the appropriate extent of further
tightening. While the majority anticipates two additional rate hikes this year,
they consistently emphasize that such decision will be determined by the
incoming data.

The data we’ve seen last week leans towards supporting
a rate hike, as the housing market data exceeded
expectations, the US Jobless Claims remained
solid, and the US Services PMI beat
forecasts. The forthcoming NFP and CPI reports will undeniably play a crucial
role in shaping the future expectations, however, if we continue to get good
data, we can expect the Fed to raise rates in July, which is also the current
market’s expectation.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after breaking
out of the key 1934 support, Gold
has bounced on the 61.8% Fibonacci retracement level
and pulled back into the broken support turned resistance. The
sellers may lean on this resistance zone and pile in for more downside, but
another even better spot for shorts is the trendline where we
can also find the red 21 moving average. The
buyers would need a break above the trendline to gain the conviction for
further upside and target the 1984 level.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that we have a divergence with the
MACD which is
generally a sign of weakening momentum followed by pullbacks or reversals. In
this case, the pullback should come into the trendline where we can also find
the 61.8% Fibonacci retracement level for further confluence. A break
above the trendline would open the door for a rally into the 1984 resistance.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see that the
moving averages on this timeframe are crossed to the upside as the momentum
turned bullish after the bounce on the 61.8% Fibonacci retracement level. We
can notice that the buyers are leaning on the red 21 moving average and the
first target should be the trendline. More conservative sellers may want to see
the price make a new lower low breaking the 1915 level before piling in and
extend the fall to a new low.

This week
is pretty empty on the data front as we only have the US Jobless Claims and the
US PCE reports scheduled for the end of the week. However, we will hear again from
many Fed officials but since we have not seen any crucial economic indicator
yet, it is unlikely that they will provide signals regarding the next course of
action.

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

Headlines:

• Germany June Ifo business climate index 88.4 vs 90.7 expected
• Ifo economist says storm clouds are forming for the German economy
• Stocks pare gains right after the European market open
• German inflation to slow further in coming months – Bundesbank
• Japan chief Cabinet secretary Matsuno says closely watching FX moves
• SNB total sight deposits w.e. 23 June CHF 508.0 bn vs CHF 510.6 bn prior

Markets:

• CHF leads, GBP lags on the day
• European equities mixed; S&P 500 futures down 0.1%
• US 10-year yields down 5.5 bps to 3.685%
• Gold up 0.5% to $1,931.72
• WTI crude up 0.3% to $69.39
• Bitcoin down 1.9% to $30,320

It was a quiet session for the most part but risk tones continue to stay on the more cautious side after last week’s selling in equities.

The bid in bonds is what is notable today and that dragged stocks lower after a bit of a breather in Asia trading. A softer German Ifo report isn’t helping with the mood, as recession risks are starting to rise again in Europe.

There was also the typical verbal jawboning by Japanese officials on the yen, but USD/JPY is still keeping above 143.00 even if it is down 0.4% to 143.15 currently. The price action there is largely to do with the bond market though I would say, as 10-year Treasury yields are down heavily to start the week.

Meanwhile, the dollar itself is mostly mixed as it keeps little changed against the euro and pound. The franc is gaining some modest ground though, arguably due to safety flows while the kiwi is also holding higher with AUD/NZD accelerating its downside move from last week towards 1.0800 next.

As mentioned earlier in the session, there is something to consider for risk/equities this week:

„But can it (the calmer mood) last? The question last week was whether growth worries or the run up to quarter-end being reasons to have dragged equities lower. If it is the former, things haven’t really changed. If it is the latter, there’s going to be added focus this week as we gear towards Friday. That might make any rebound or slight relief like the one we’re seeing now rather tentative at best.“

Besides that, the news from Russia over the weekend isn’t really impacting markets all too much but it is worth keeping a watchful eye just in case.

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

Following the end of the blackout period after the
FOMC meeting, many Fed officials shared their views last week. The prevailing
sentiment remains consistent: awaiting data to determine the appropriate extent
of tightening measures. Although the majority anticipates two additional rate
hikes this year, they consistently reiterate that such decision is contingent
upon the data. The data seen last week inclines further towards a rate hike,
thanks to upside surprises in the housing market data, good US Jobless Claims figures,
and the US Services PMI beating
expectations. Naturally, the forthcoming NFP and CPI reports will heavily
influence the situation. However, if we continue to see good data, the Fed is
likely to raise rates in July, aligning with the current market expectations.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 couldn’t break above the 1920 resistance zone and
eventually retraced all the way back to the previous resistance turned support at 1820.
This pullback basically erased all the gains seen after the breakout in the
beginning of June.

We can also see that there is the 50% Fibonacci retracement level
and the red 21 moving average near the
1820 support, so the buyers have a strong zone here where they can lean on with
defined risk below the level and target the 1920 resistance. The sellers, on
the other hand, will want to see the price break lower to jump onboard and ride
the likely selloff into the 1720 support.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we already
have a downtrend on this timeframe as the moving averages are crossed to the
downside and the price keeps printing lower lows and lower highs. We can also
notice that this retracement was signalled by the divergence with the
MACD when the
price made the last leg higher into the 1920 resistance.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
bearish momentum is starting to slow down with the price coming closer to the
strong 1820 support. If we see a break lower, the sellers should pile in more
aggressively and extend the fall into the 1720 support. The buyers, on the
other hand, should lean on this support and target the 1920 resistance.
Alternatively, more conservative buyers can wait for the price to make a new
higher high and the moving averages to cross to the upside before piling in and
ride the likely bullish wave into the resistance.

On the data front, this week is even less exciting than the
previous one with only the US Jobless Claims and the US PCE reports scheduled
towards the end of the week. However, we will still get more comments from other
Fed members. Nevertheless, since we have yet to see any significant economic
indicator, it is unlikely that they will provide signals regarding the next
course of action at this stage.

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

• German economy has bottomed out
• A slight growth in GDP is expected in Q2
• German industry continues to largely weather decline in demand

It’s all about expectations. So, even if economic activity has been brighter in April and May, things seem to be running into the ground in June and that does not bode well for the outlook for Q3. I wouldn’t call a bottom just yet.

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

• Prior -10

Retail sales volumes continued to decline in the year to June, even if the pace has slowed slightly. The expectations reading for the month ahead is for no change (0) at least. However, the continued decline in sales volumes speaks to the difficulty faced by retailers at the moment as high inflation continues to impact demand negatively.

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

The Kremlin says Yevgeny Prigozhin will leave for Belarus is a deal that was brokered by Belarusian President Alexander Lukashenko. He agreed to leave the country in exchange for charges being dropped.

Kremlin spokesman Dmitry Peskov also said that Wagner fighters who didn’t take part in the uprising will sign contracts with the Ministry of Defense while those who did take part won’t be charged.

There was no word on changes as the Ministry of Defense but earlier rumours suggested Shoigu would be replaced.

Peskov said Putin will not make any further comment on the issue and the invasion of Ukraine will continue as normal.

I wouldn’t entirely believe any of this until Prigozhin himself acknowledges it and he’s certainly going to be looking over his shoulder for a long time.

/US dollar

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