The decision on whether to hike rates will be a „close call“ and a „hard one to make“, according to one of the sources. Another said that it will be more of a „judgment call“ in terms of whether to act this month or wait until later in the year. But one thing is for sure is that they will unveil plans of tapering bond purchases at a gradual pace, with the thinking to halve it in the coming years.

Going back to the rate decision, the sources say that while the BOJ board agrees on the need to raise interest rates in the short-term, there is no consensus on when that might take place.

The key uncertainty is that domestic consumption is in a relatively weak spot and the outlook is still shrouded with doubt at the moment. The sources note that as policymakers take that into consideration, they could lean towards the choice of not rushing into hiking rates for now.

The details are certainly not as hawkish as what the headline might suggest I would say.

But in any case, I want to point something out about the recent price action in the Japanese yen. The currency has been strengthening in the past few days and it looks to be some flows tied to anticipation ahead of the BOJ meeting next week.

In that lieu, we might end up with a sell the fact trade regardless of what the BOJ does at the end of the day.

If they don’t hike, traders will take that as a more dovish decision. And if they do, overall policy is still very accommodative and they might not much scope to go with another one in September and/or October at least.

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

But alas, the ECB has to keep their focus on inflation pressures first and foremost. If growth expectations were the main argument, there would be a strong reason to push with a rate cut in September after the PMI data earlier. Instead, the situation now presents a bit of a headache for the central bank.

The economy is starting to slow down again after a resilient showing in Q1, followed by marginal growth in Q2. However, there hasn’t been too much progress on the inflation front over the last two to three months especially.

The disinflation process remains relatively gradual at best and one might even argue that it is stalling somewhat as of late.

Even from the PMI data today, HCOB noted that:

„Prices data did not provide hope for relief. Input prices in the services sector increased at a faster rate and selling prices rose at a similar pace to the previous survey period. To make things worse, input prices in manufacturing, which fell for more than a year between March 2023 and May 2024, have now increased for two months straight. Output prices fell only fractionally, which may make it more difficult for overall inflation to make the necessary progress towards the 2% target. Our conclusion is that while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months thereafter, unless the downturn morphs into a deep recession.“

The ECB might just be stubborn enough to still cut rates again in September. However, they might run into a wall in trying to cut rates another time later this year.

The current market pricing shows ~44 bps of rate cuts for the year. And if it were to be a one and done case, there will be some repricing to do in markets.

In turn, that might offer a minor tailwind for the euro. That being said, if inflation pressures are holding higher while the economy continues to suffer later in the year, I fear that such prospects will outweigh everything else for the single currency. Can anyone say stagflation?

That’s a serious risk to consider and might leave a scar on the euro and regional assets as we get deeper into the second half of the year.

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

• Silver hangs on at the June lows for now
• Dollar keeps on firmer footing following last week’s advance
• AUD/USD looks poised for longest losing streak since August last year
• Japanese yen continues to find bids in the early stages this week
• European equities open in a more mixed mood to start the day
• What are the main events for today?
• ECB’s de Guindos: September is a much more convenient month for taking decisions
• Eurostoxx futures +0.2% in early European trading
• USD/JPY remains heavy to start the week

The European
session was empty on the data front. The highlight continues to be the US
Dollar as the greenback has been gaining ground against the major currencies
since last Wednesday.

It’s not clear
what is behind the move. The data continues to point to a resilient economy
with inflation falling slowly back to target. That should see the Fed cutting
rates at least two times this year.

On the other hand,
Trump is looking more and more like a potential winner and his policies are
seen as inflationary, which could see the Fed eventually going even more slowly
on rate cuts.

In other markets,
the US and European stocks continue to rally, while the Chinese stocks remain
under pressure. Treasury yields are down on the day while Gold is up.

Crude oil has been
under sustained strain since last week and that could fit with Trump’s
presidency narrative due to higher supply expectations.

Bitcoin has been
stuck in a consolidation around a key resistance since last Friday, but a
Trump’s presidency should be a strong bullish driver for the cryptocurrency
(all else being equal).

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Despite the sharp fall since last week, silver is still hanging in there in July trading. On the month itself, the precious metal is now down by 0.3% after erasing its monthly gains in the last five trading days. Price is now currently trading around $29.05, down 0.4% on the day. Still, buyers are not completely down for the count just yet.

The low today hit $28.67 and that calls into question the June lows at the $28.57-65 region. For now, that is still largely holding but a break below that will be a massive blow to the upside momentum since March.

We’ve already cut back on half of the gains since the surge higher in May and a break below the supportive region above will draw more interest from other key support levels.

The 61.8 Fib retracement level at $28.50 is one to watch, alongside the 100-day moving average (red line) at $28.35 currently.

A technical break below the latter especially will give sellers more momentum to drive a deeper correction in silver next.

As things stand, commodity metals haven’t been enjoying a good month from a technical perspective. Copper is also one that is breaking down further ahead of what is typically its worst seasonal performance in August.

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

The Japanese yen is on its own at the front to start the week but the dollar is also seen holding slightly firmer now as after a short period of consolidation since Friday. Both EUR/USD and GBP/USD are down 0.3% to 1.0860 and 1.2895 respectively, touching their lowest levels since 11 July. The latter looks on course for a further retracement after buyers attempted and failed at their latest attempt to hold a break above 1.3000:

The 38.2 Fib retracement level at 1.2879 is the next minor support level to watch, before the 50.0 Fib retracement level at 1.2828 comes in.

The dollar’s slight nudge higher today comes despite yields keeping lower and equities holding a more tentative mood. US futures are flattish mostly now, with tech shares in focus awaiting earnings from Alphabet and Tesla after the close.

It’s a bit of a tough one to get a real grasp on the flows in the last few days. USD/JPY is still down 0.6% at 156.05 but the dollar is up elsewhere with AUD/USD and NZD/USD both also down 0.3% to 0.6620 and 0.5960 respectively currently.

It is not quite a quiet summer but it is one that is still tough to sort of the flows, at least for now. But as always, the best we can do is to at least look at the technicals and manage our approach from there.

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

Fundamental
Overview

The USD regained some
strength in latter part of last week. From the monetary policy perspective,
nothing has changed as the market continues to expect at least two rate cuts by
the end of the year and sees some chances of a back-to-back cut in November.

The data continues to
suggest that the US economy remains resilient with inflation slowly falling
back to target. Overall, this should continue to support the soft-landing
narrative and be positive for risk sentiment. The new driver could be Trump now
looking more and more like a potential winner and his policies are seen as
inflationary which could see the Fed eventually going even more slowly on rate
cuts.

The GBP, on the other hand,
has been supported against the US Dollar in the past weeks mainly because of
the risk-on sentiment, although that has changed last week. On the monetary
policy front, the data last week was a disappointment for the BoE as the UK CPI figures were unchanged from the prior month
and the labour market report showed wage growth remaining
at elevated levels. Therefore, the market doesn’t expect a rate cut in August
anymore.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD erased all the gains from the prior week and it’s now near the support
zone around the 1.29 handle where we can also find the 38.2% Fibonacci retracement level for confluence.

This is where we can expect
the buyers to step in with a defined risk below the support to position for a
rally into the 1.3140 level next. The sellers, on the other hand, will want to
see the price breaking below the support to increase the bearish bets into the
major trendline.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price is now consolidating just above the support zone as the
buyers are starting to pile in, while the sellers keep pushing towards a breakout
to the downside. There’s not much we can glean from this timeframe, so we need
to zoom in to see some more details.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is currently ranging between the 1.29 and 1.2940 levels. The
buyers will want to see the price breaking above the 1.2940 level to gain more
conviction and increase the bullish bets into new highs.

The sellers, on the other
hand, will look for a breakout to the downside to increase the bearish bets
into new lows. The red lines define the average daily range for today.

Upcoming
Catalysts

This week is pretty empty on the data front. We begin tomorrow with the release
of the UK and the US Flash PMIs. On Thursday, we will get the latest US Jobless
Claims figures. Finally, on Friday we conclude the week with the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Diving into the
world of financial markets, investors are often faced with the choice between
Forex and Futures trading. Both avenues offer unique opportunities and come
with their own sets of risks and rewards. Understanding the key differences
between these two types of trading can help investors make more informed
decisions. But which trading option aligns best with your financial goals and
risk tolerance?

Definition

Forex trading is
about exchanging one currency for another in the foreign exchange market,
whereas Futures trading involves the buying and selling of contracts that
obligate the buyer to purchase an asset, like commodities or financial
instruments, at a predetermined price at a specified future date.

Futures trading with
Plus500, a leading online trading platform, allows investors to speculate on the
price movements of various assets without actually owning them. This can
provide flexibility and diversification in an investor’s portfolio.

Market Size and Liquidity

As mentioned
earlier, the Forex market is the largest financial market in the world with an
estimated daily trading volume of over $6 trillion. This is significantly
higher than Futures trading, which has a daily volume of around $500 billion.

With such high
liquidity, Forex traders can easily enter and exit positions without worrying
about any significant price impact.

On the other hand,
Futures markets are more prone to price fluctuations as they are less liquid
compared to Forex.

Trading Hours

Forex markets
operate 24 hours a day, five days a week, providing ample opportunities for
traders to execute trades at their convenience. On the other hand, Futures
markets have specific trading hours depending on the asset being traded.

For example, energy
and agricultural futures have limited trading hours compared to stock index or
currency futures.

Leverage

Both Forex and
Futures trading offer leverage, which allows traders to control a larger
position with a smaller amount of capital.

However, the amount of leverage available in the two markets differs
significantly. Forex brokers typically offer higher leverage ratios, sometimes
up to 200:1 or more, while Futures brokers usually provide lower leverage
options.

Leverage can amplify
potential profits, but it also heightens the risk of losses. Traders must fully
understand and manage these risks before incorporating leverage into their
trading strategies.

Market Participants

The Forex market is
primarily dominated by large financial institutions, such as banks and hedge
funds, which use it for currency hedging and speculative purposes. However,
with the rise of online trading platforms, individual retail traders now make
up a significant portion of the daily forex trading volume.

Futures markets, on
the other hand, have a more diverse range of participants including commercial
producers and consumers of commodities, speculators, and even governments.
This can lead to higher volatility in futures prices due to the varying
motivations and trading strategies of these participants.

Regulation

Both Forex and
Futures markets are regulated to protect traders and maintain the integrity of
the markets. However, the regulatory bodies differ between the two markets.

Forex trading is
largely decentralized, with no central exchange or regulating body. Instead, it
is overseen by regulatory authorities in each country where it operates, such
as the Commodity Futures Trading Commission (CFTC) in the United States and the
Financial Conduct Authority (FCA) in the United Kingdom.

On the other hand,
futures trading takes place on centralized exchanges, such as the Chicago
Mercantile Exchange (CME), which are heavily regulated by government agencies
like the CFTC.

This centralized
structure provides greater transparency and protection for traders, but it also
means that exchanges have more control over the pricing and execution of
trades.

Conclusion

Both Forex and
Futures markets offer unique opportunities for traders, with their own pros and
cons. The decision to trade either market ultimately depends on a trader’s
individual preferences, risk tolerance, and trading strategy.

It is important for
traders to thoroughly research and understand the characteristics of each
market before making any investment decisions. With proper knowledge and risk
management, both Forex and Futures can be valuable tools for diversifying a
portfolio or generating income through trading.

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

Headlines:

• USD/JPY slides lower ahead of European morning trade
• USD/JPY Technical Analysis – Keep an eye on this important resistance
• ECB’s Kažimír: Market pricing of two rate cuts by year-end is not entirely misplaced
• Bundesbank calls for rate cuts to be „carefully considered“ as inflation risk persists
• PBOC lowers standing lending facility rates by 10 bps
• SNB total sight deposits w.e. 19 July CHF 461.3 bn vs CHF 458.9 bn prior
• Nvidia reportedly working on version of new flagship AI chip just for Chinese market

Markets:

• JPY leads, AUD lags on the day
• European equities higher; S&P 500 futures up 0.5%
• US 10-year yields down 2 bps to 4.219%
• Gold up 0.1% to $2,402.24
• WTI crude down 0.4% to $78.32
• Bitcoin up 0.7% to $67,470

It was a quiet session as the European calendar is looking to embrace the summer lull. There weren’t any key releases – the same case will be for tomorrow as well – so traders had very little to work with.

The Japanese yen saw a nudge higher early on before European markets opened, with USD/JPY falling from 157.30 to a low of 156.28. The pair bounced back slightly after but is still down 0.5% on the day, seen at 156.60 levels now.

There wasn’t any major catalyst for the move as traders are still sorting out their feet following the news over the weekend that Biden has bowed out of the presidential election. 10-year yields in the US are hanging slightly lower, down 2 bps to 4.219% currently.

Besides that, the dollar is keeping steadier elsewhere with light changes overall. The aussie and kiwi are slightly lower though, owing to a softer Chinese yuan. That comes after the PBOC introduced a number of easing measures earlier in the day, weighing on the yuan currency.

In other markets, equities are looking to bounce back after a disappointing showing last week. Tech shares are leading the charge with Nasdaq futures up nearly 1% now. However, we do have key earnings coming up tomorrow after the close with Alphabet (Google) and Tesla set to report.

It’s a brighter start to the new week after the heavy selloff in the second half of last week. But it’s still too early to say that the optimism here is enough to carry stocks until the end of the week.

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

• Some of the factors supporting the economy are making it more difficult to achieve inflation target
• The labour markets is still operating at a high capacity
• Wage growth is brisk and prices are rising strongly, particularly in the services sector
• Possible further interest rate cuts should therefore be carefully considered in light of current data

Besides that, they noted that the German economy itself likely grew a little slower than anticipated in Q2. Well, that’s not too surprising given that the industrial sector remains in a recessionary state.

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

Fundamental
Overview

Bitcoin rallied strongly last
week after a failed attempt to assassinate the former US
President Trump. The market reacted positively to the event because he’s been a
supporter of the crypto industry and Trump’s odds of winning the election
soared.

Last night, the price of
Bitcoin dipped on the news that Biden
dropped out of the presidential race probably on expectations that some
other candidate could have higher chances of beating Trump, but as Biden endorsed
Kamala Harris and others followed suit, Bitcoin erased the losses and rallied
into a new high as the market doesn’t expect Harris to have any better chances of
beating Trump.

Moreover, last week we got
the news that the German government finally offloaded all of its Bitcoin
holdings on July 12th, so that bearish driver is now in the rear-view mirror.
Also, the old crypto exchange Mt. Gox has been repaying its old clients since the
first week of July, so even this news should now be priced in.

So, we are left with lots
of bullish drivers and very few bearish reasons. On the macro level, the
soft-landing narrative strengthened as we continue to see inflation falling while
the economy continues to grow. Last week, we got more positive data with US Retail Sales and Industrial Production beating expectations by a big margin.

So, all
else being equal, we are getting rate cuts into resilient growth which should
ultimately be bullish for Bitcoin.

Bitcoin
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that Bitcoin eventually extended the rally into the key 67.275 resistance
as the bearish drivers dissipated while the bullish reasons increased. The buyers
will want to see the price breaking above the resistance to increase the
bullish bets into a new cycle high. The sellers, on the other hand, will likely
step in around the resistance to position for a drop back into the 60000
support.

Bitcoin Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price is struggling a bit at the resistance. If we get a pullback
from these levels, we can expect the buyers to step back in around the 64000
level where we can find the confluence
of the previous swing high, the trendline
and the 38.2% Fibonacci
retracement level. The sellers, on the other hand, will want to see the
price breaking below the trendline to increase the bearish bets into the 60K
level next targeting a breakout.

Bitcoin Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have some consolidation around the key resistance. We got a spike
lower yesterday on the news that Biden dropped out from the presidential race,
but the buyers bought the dip back quickly. There’s not much else to glean from
this timeframe but the buyers will likely continue to pile in above the 67275
resistance, while the sellers should take back control with a break below the
65700 level. The red lines define the average daily range for today.

Upcoming
Catalysts

This week is pretty empty on the data front. We begin on Wednesday with the
release of the US Flash PMIs. On Thursday, we will get the latest US Jobless
Claims figures. Finally, on Friday we conclude the week with the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.