• Prior -5.4%
• Market index 300.0 vs 305.3 prior
• Purchase index 224.3 vs 232.6 prior
• Refinancing index 685.3 vs 670.3 prior
• 30-year mortgage rate 5.74% vs 5.74% prior

Mortgage activity continues to decline with purchases dropping once again, more than offsetting a slight increase in refinancing activity in the past week. As the Fed looks set to raise rates further, the squeeze is on for the US housing market.

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

Again, for this to really work, you’d have to get India and China on board surely. And that is almost certainly not going to happen, so it’s tough to imagine how they are planning to execute this in a meaningful and significant manner.

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

Political fracture in Italy is nothing short of the norm these days and while Draghi’s reign as prime minister has been promising early on, we are seeing the same failings resurface ahead of the national election due in the first half of next year.

The Five Star Movement party is holding leadership talks today and as support for their party wither, they need a change to stay relevant and most key party figures are pointing towards breaking away from the current government coalition.

A recent split has seen the party lose a chunk of its support with many lawmakers joining a breakaway group led by Luigi Di Maio, a former leader of the Five Star Movement party. Those who have stayed on are urging for a change – blaming Draghi for watering down flagship measures that have been key pillars of the party.

The issue here is that if Five Star Movement pulls out, there is going to be a ripple effect. Matteo Salvini’s Lega party is adamant that they will not back the government if Five Star Movement withdrew from the coalition.

Meanwhile, that will also create a bit of a divide with the Democratic party – who at least still seems to be wanting to back Draghi and the government.

In any case, the wheels are set in motion already and if leadership talks this week for Five Star Movement result in a push away from the government, we could see election risks brought forward for Italy.

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

EUR/USD continues to keep around 1.0030-50 with the low earlier touching 1.0007 as the euro stays vulnerable close to parity. The outlook for the single currency is still rather poor as outlined here. But today, it is all about the dollar as the market keeps its focus on the US CPI data set to be released later in the day.

USD/JPY is holding slightly higher around 137.10-20, up 0.2%, as buyers stay buoyed in search of a further breakout this week. The retreat in Treasury yields yesterday tempered with the mood but we are seeing things pick up again today. Meanwhile, GBP/USD got a light nudge higher earlier to 1.1935 on the back of better-than-expected UK monthly GDP data but it came with a caveat.

Better health services on the month provided an outlier and the pound found little to be optimistic as such, with cable back down now to 1.1890 on the day – keeping rather flattish.

Looking elsewhere, the mood in equities is rather mixed with European indices holding lower while US futures are up slightly. That said, I wouldn’t look much into it until we get to the US CPI data later today.

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

• Prior +0.4%; revised to +0.5%
• Industrial production +1.6% vs +0.3% y/y expected
• Prior -2.0%; revised to -2.5%

Looking at the details, the production of non-durable consumer goods rose by 2.7%,
capital goods by 2.5% and durable consumer goods by 1.4%, while production of intermediate goods remained
unchanged and production of energy fell by 3.3% on the month in May.

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

Headlines:

• EUR/USD hits parity for the first time since 2002
• US June NFIB small business optimism index 89.5 vs 93.1 prior
• Germany July ZEW survey economic sentiment -53.8 vs -38.3 expected
• Yellen says did not discuss currency intervention with Japanese officials
• Japan, US agree to continue consulting on FX market, cooperate ‚as appropriate‘

Markets:

• JPY leads, GBP lags on the day
• European equities lower; S&P 500 futures down 0.4%
• US 10-year yields down 6.7 bps to 2.924%
• Gold up 0.1% to $1,735.32
• WTI crude down 4.7% to $99.20
• Bitcoin down 3.1% to $19,774

The key story on the session was EUR/USD hitting parity for the first time in two decades, with the pair briefly hitting level and then bouncing back slightly to around 1.0069 and then coming back down now to 1.0030-40 levels.

The move comes as the dollar continues to keep steady across the board, with GBP/USD also dragged to fresh lows below 1.1900. USD/JPY was lower throughout though, as a retreat in bond yields weighed on yen pairs. That saw price fall from 137.20 to 136.70 on the session as we see US 2s-10s invert by the most since 2007.

Equities were rather sluggish but there is a slight improvement in the mood with Nasdaq futures paring earlier losses, though overall sentiment remains on the softer side. European indices are in the red mostly as recession fears continue to emanate, with the German ZEW survey today highlighting a rather dire outlook.

Elsewhere, oil is weighed down once again with WTI crude falling past $100 as the push and pull continues. And Bitcoin is marked lower back below the $20,000 level as the downside pressure stays the course.

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

Nomura says that it expects the Fed to reach a terminal rate of around 3.50% to 3.75% by February 2023 before proceeding to start rate cuts in September 2023. Meanwhile, the firm expects the ECB to hike rates by 175 bps come March next year before starting out with a 25 bps rate cut in June 2023 as a potential recession drags on.

They also chip in with a BOE forecast, expecting two rate cuts in May and August next year after having seen 100 bps worth of rate hikes this year.

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

• Nasdaq futures continues its leg down in the range presented and we look at the key price levels to watch within the 4 hour timeframe
• We look at price levels, as derived from previous tactical highs, yesterday’s VWAP (volume-weighted average price), PoC (point of control) of the volume profile, and an important trend line to watch, as shown in the technical analysis video below

Trade the Nasdaq at your own risk. Visit Forexlive for upcoming technical analysis.

This article was written by ForexLive at www.forexlive.com.

• Prior 93.1

The reading is the lowest in nearly 9½ years – lowest since January 2013 – as concerns about inflation weighed on sentiment. That said, demand for labour remains solid as businesses continue to express intent to expand their operations. 34% of business owners said that inflation was their biggest single problem, an increase of six points from May and the highest level since Q4 1980.

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

All eyes are on the EUR/USD chart at the moment as the pair flirts with a potential break of parity. All things being equal, that’s a major psychological level but it may appear to be more symbolic if anything else considering sentiment that is at play.

I outlined some thoughts earlier here and with a break of parity, the euro could come under further pressure against the dollar towards 0.95 to 0.96 potentially. For now, it’s all about clearing parity and getting used to seeing the pair trade in and around the 1.00 mark.

But considering the market mood and sentiment, it’s tough to see this as being where the euro makes a grand stand against the dollar. The drop to parity today is the first since December 2002.

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