They were down roughly 0.3% earlier in Asia trading but have kept largely steady in European morning trade thus far. Both Nasdaq futures and Dow futures are also up 0.1%, reflecting a more tentative mood overall I would say. There will be a couple of modest earnings releases coming up but all eyes will be on Microsoft after the close: Earnings maketh the market

Besides that, investors will have to continue the waiting game ahead of the BOJ and Fed meetings tomorrow. Don’t forget that it is also NFP week, so the relevant figures from the US are also on the radar this week.

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

Fundamental
Overview

The USD has been rallying
steadily against most major currencies in the recent couple of weeks, although the
catalyst behind the move has been unclear. A good argument has been that most
of the moves we’ve been seeing in the past 10 trading days were driven by
deleveraging from strengthening Yen.

Basically, the squeeze on
the carry trades impacted all the other markets. Given the magnitude of the
recent appreciation in the Yen and the correlation with many other markets, it
looks like this could be the reason indeed.

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 the general risk sentiment.

The CAD, on the other hand,
has been supported against the US Dollar in the past months mainly because of
the risk-on sentiment, although the recent events with the Yen boosted the US
Dollar against many major currencies. On the monetary policy front, the BoC
cut rates by 25 bps to 4.50% as expected last week signalling more to come
if inflation were to keep falling.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD eventually managed to break above the 1.3785 resistance zone and extended the rally into
the key 1.3860 level. This is where we can expect the sellers to step in with a
defined risk above the level to position for a drop back into the 1.36 support.
The buyers, on the other hand, will want to see the price breaking above the
resistance to increase the bullish bets into the 1.40 handle next.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a trendline defining the bullish momentum. The
buyers will likely keep on leaning on the trendline to target a break above the
resistance. The sellers, on the other hand, will want to see the price breaking
below the trendline to increase the bearish bets into the 1.36 support.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that if the price were to fall below the trendline, the buyers will have
another opportunity to step in around the previous resistance
now turned support at 1.3785. A further break below that support will
likely see the bearish momentum increasing with the sellers piling in for a
drop into the 1.36 support. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Job Openings and the US Consumer Confidence reports. Tomorrow,
we have the BoJ Policy Decision, the Canadian GDP, the US Employment Cost Index
and the FOMC Policy Decision. On Thursday, we get the latest US Jobless Claims
figures, the Canadian Manufacturing PMI and the US ISM Manufacturing PMI.
Finally, on Friday, we conclude the week with the US NFP report.

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

The tight range speaks to the lack of appetite among most dollar pairs so far today. The only exception once again is really USD/JPY, with the pair up 0.5% to 154.70 but off earlier highs as the 155.00 mark holds. As an aside, there are large expiries there in play so do be wary of that. Going back to EUR/USD, there’s little to work with despite the flurry of data in European morning trade.

The Q2 GDP data across the euro area reaffirms more resilience in the last quarter. But there are already early signs that the economy is beginning to stutter again as we get into Q3. Meanwhile, the Spanish and German state CPI readings aren’t really offering anything new to the picture thus far.

The disinflation process is still taking hold but at a very gradual pace. In fact, the bumps along the way are still very much persisting. In Germany, it looks like headline annual inflation might tick a little higher in July. But we’ll see on the core reading later, as that will be the bigger focus.

So far, the odds of an ECB rate cut in September are at ~65% and that is little changed from the ~68% before the session began. The ECB would definitely like more progress on inflation developments but they’re being made to wait. It looks like the August reading will be the more crucial one in determining whether the platform is right to act in September.

As such, that’s not leaving the euro with much to act upon today. EUR/USD is still holding just above its 200-day moving average (blue line) at 1.0821 with the 100-day moving average (red line) not too far away at 1.0795. That alongside bids layered at 1.0800 and the 50.0 Fib retracement level of the swing higher in July at 1.0807 will act as a key supportive region for the pair now.

But a firm break below that could set off more protracted losses for EUR/USD. If so, sellers will at least be looking to aim towards the June lows near 1.0666-70.

Do be mindful that the dollar side of the equation is also one to watch this week. That considering we have the Fed and the US jobs report coming up. Besides that, the overall risk mood is also an important factor as well amid key earnings releases for equities.

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

• Prior -14.0
• Economic confidence 95.8 vs 95.4 expected
• Prior 95.9
• Industrial confidence -10.5 vs -10.7 expected
• Prior -10.1; revised to -10.2
• Services confidence 4.8 vs 5.5 expected
• Prior 6.5; revised to 6.2

Of note, the employment expectations indicator dipped below its long-term average of 100 for the first time since April 2021. That suggests some softness to the labour market outlook moving forward.

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

Headlines:

• Dollar on steadier footing to kick start what will be a big week for markets
• Japanese yen stays in the spotlight with the BOJ coming up later this week
• USD/JPY Technical Analysis – The pair bounced on the key 152.00 support
• UK June mortgage approvals 59.98k vs 60.40k expected
• UK July CBI retailing reported sales -43 vs -24 prior
• Japan top council urges government, BOJ to be mindful of weak yen when guiding policy

Markets:

• USD leads, GBP and NZD lag on the day
• European equities mostly higher; S&P 500 futures up 0.4%
• US 10-year yields down 4 bps to 4.158%
• Gold up 0.1% to $2,388.23
• WTI crude down 0.6% to $75.52
• Bitcoin up 3.2% to $69,629

It was mostly a quiet session as markets are gearing up for a big week ahead.

The dollar is keeping on steadier footing, seen slightly higher across the board. USD/JPY was swingy in Asia but steadied mostly in European morning trade, hugging around 153.70-90 levels.

Besides that, the greenback posted a slight advance with GBP/USD falling to 1.2805 before keeping around 1.2820-30 levels now – down 0.4% on the day. EUR/USD is also softer, down 0.3% to 1.0820 while commodity currencies are marginally lower as equities are in a better mood today.

US futures are up but it’s early in the week to say anything about it, that especially with big earnings reports coming up. Four of the Magnificent Seven will be reporting and that will be one to watch for broader market sentiment, alongside the BOJ, Fed, and BOE meetings.

Elsewhere, Treasury yields are down on the day and that’s making for a bit of a mixed start to the new week with gold just marginally higher while oil is down despite Middle East tensions.

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

The decision is likely to be a finely balanced one though, with expectations of the bank rate vote being 6-3 or 5-4 in favour of a rate cut. But what are traders pricing in for the decision currently? The OIS market shows that there is a ~61% probability priced in, with roughly 55 bps of rate cuts for the year.

After the August decision, the BOE still has three meetings left for the remainder of 2024. That being in September, November, and December. So, there is still time to fit in the supposed two rate cuts priced in by traders at the moment.

Taking that into consideration, it might not matter too much if the BOE cuts this week or in September. That especially if they do send a more dovish signal at the meeting on Thursday. And even more so if the votes look to be close and the language is leaning towards moving to a rate cut at the next meeting.

Of course, the kneejerk reaction is to see the pound jump if the decision is to keep the bank rate on hold this week. But there is a strong likelihood to see that reaction quickly faded as well, unless the BOE sends a message that they are still very much uncomfortable with price pressures at present.

Just take note that the previous decision in June saw the central bank comment that the decision was already „finely balanced“, even if it was a 7-2 vote in favour of keeping the bank rate unchanged. Besides that, there was no easing language put in as the statement consisted of:

• Need to be sure inflation will stay low before cutting rates
• Monetary policy will need to remain restrictive for sufficiently long to return inflation to target
• BOE remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably
• Will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole

So, any changes to that will help to rebuff the two rate cuts priced in for the months ahead even if there is no rate cut in August. In other words, the details is the thing to look out for with the decision this week.

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

Fundamental
Overview

Bitcoin eventually managed
to break above the key 67275 resistance as the risk mood improved in the latter
part of last week. From a macro perspective, nothing has changed as the Fed is
going to cut into resilient growth, which should ultimately be a strong bullish
driver for the market.

Over the weekend, Trump delivered
some positive remarks on Bitcoin as he continues to double down on his
support for the crypto industry. As a reminder, Bitcoin rallied strongly from
the lows after the failed attempt to assassinate Trump. The market reacted positively to the event because his odds of winning the election
soared.

Moreover, the two main
bearish drivers that we had at the beginning of the month have been gone as the German
government finally offloaded all of its Bitcoin holdings on July 12th
and the old crypto exchange Mt. Gox has been repaying its old clients since the
first week of July.

Bitcoin
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that Bitcoin eventually managed to break above the key 67.275 resistance. The buyers should now have even
more confidence to pile in for a new all-time high. The sellers, on the other
hand, will want to see the price falling back below the 67.275 level to regain
some control and start targeting a drop into the 64000 level.

Bitcoin Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the recent breakout of the 67275 resistance and then the retest
before a rally into a new high. From a risk management perspective, the buyers would
have a better risk to reward setup around the trendline
and the 67275 level to position for a new all-time high. The sellers, on the
other hand, will want to see the price falling below the support and the
trendline to turn the bias more bearish and pile in for a drop into the 64000
level.

Bitcoin Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is now near the upper bound of the average daily range for today, so it might be a bad
idea to pile in around these levels for the buyers as there’s a risk of a
pullback.

Upcoming
Catalysts

Tomorrow we have the US Job Openings and the US Consumer Confidence reports. On
Wednesday, we have the US Employment Cost Index and the FOMC Policy Decision.
On Thursday, we get the latest US Jobless Claims figures and the US ISM
Manufacturing PMI. Finally, on Friday, we conclude the week with the US NFP
report.

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

UK retailers look to have endured another rough month as the retail sales balance slumps further in July. The headline reading is the weakest since April, with CBI noting that poor weather and softer demand conditions weighing on the retail sales. The outlook index for August is seen at -32, which is a mild improvement but still the weakest reading since February. Pain.

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

Fundamental
Overview

The Nasdaq has been on a steady decline since the last US CPI report on
July 11th. In the first stages of the pullback, we’ve been seeing a
rotation from big cap stocks into small cap stocks as the Russell 2000
displayed an opposite price action. Eventually, the bearish momentum picked up
and we saw a more aggressive decline with the index falling by 10%.

A good argument
has been that most of the moves we’ve been seeing in the past 10 trading days
were driven by deleveraging from strengthening Yen. Basically, the squeeze on
the carry trades impacted all the other markets. Given the magnitude of the
recent appreciation in the Yen and the correlation with many other markets, it
looks like this could be the reason indeed.

If that’s the case, we could see the market getting back to the old script
with the BoJ Policy Decision likely acting as a catalyst on Wednesday. In fact,
from a big picture 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 the general risk
sentiment as the Fed is going to cut rates into resilient growth.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq eventually pulled all the way back to the major trendline around the 18900 level where we had
also the 50% Fibonacci retracement level for confluence. The buyers stepped in with a
defined risk below the trendline to position for a rally into a new all-time
high. The sellers will need the price to break below the trendline to increase
the bearish bets into new lows.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline defining the current bearish momentum. If
the price rallies into the trendline, we can expect the sellers to lean on it
to position for a break below the major trendline with a better risk to reward
setup. The buyers, on the other hand, will want to see the price breaking above
the trendline to increase the bullish bets into a new all-time high.

Nasdaq Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we’ve been recently printing higher highs and higher lows on this
timeframe as the bullish momentum started to pick up. If the price drops back
into the major trendline, we can expect the buyers to buy back the dip again. The
sellers, on the other hand, will look to sell around the downward trendline or
increase the bearish bets on a break below the major trendline. The red lines
define the average daily range for today.

Upcoming Catalysts

Tomorrow we have the US Job Openings and the US Consumer Confidence reports. On
Wednesday, we have the BoJ Policy Decision, the US Employment Cost Index and
the FOMC Policy Decision. On Thursday, we get the latest US Jobless Claims
figures and the US ISM Manufacturing PMI. Finally, on Friday, we conclude the
week with the US NFP report.

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

Wall Street Journal Fedwatcher Nick Timiraos is out with his latest Fed preview and it doesn’t include any kind of leak about a potential cut. Instead, he highlights that the Fed will set the table for a September cut without pre-committing. That’s a consensus view given that Sept is fully priced in, including a small chance of a 50 bps cut.

„The Fed’s newfound readiness to cut rates reflects three factors: better news on inflation, signs that labor markets are cooling and a changing calculus of the dueling risks of allowing inflation to remain too high and of causing unnecessary economic weakness,“ he writes.

• Fed officials unlikely to change rates at July meeting, but could signal potential September cut
• „Officials have grown more wary of waiting too long and blowing a soft landing“
• Inflation progress and cooling labor market shifting Fed’s risk calculus
• Core inflation down to 2.6% in June from 4.3% a year ago
• Unemployment rate up to 4.1% in June from 3.7% at end of last year
• NY Fed’s Williams: „There is a decision ahead of us at some point“ on lowering rates
• Fed’s Waller: Labor market in „sweet spot,“ needs to be maintained
• Chicago Fed’s Goolsbee hints at argument for cuts: „We have tightened a lot since we’ve been holding at this rate“
• SF Fed’s Daly cautions: „We’re not at price stability yet“

I wouldn’t expect any strong hints of action in the statement but even incremental signals will be seen as validation, given that the Fed knows what’s priced into the market. In contrast, the Fed could look to push back at the 100% pricing for Sept to given themselves some optionality, especially in light of Friday’s strong GDP report.

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