The manufacturing order book balance worsened again in July but the good news at least is that the expectations balance increased from 13 in June to 25 this month. The latter is the highest reading since March 2022. However, quarterly business optimism declined to -9 from +9 in April, marking the softest such reading since October last year.
This article was written by Justin Low at www.forexlive.com.
The USD has been rallying
steadily against the major currencies since last Wednesday on the back of
general risk-off sentiment, although it’s unclear what has triggered the move.
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 EUR, 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 ECB members continue to repeat that they will wait for the
data throughout the summer before deciding on a rate cut in September.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD couldn’t extend into the 1.10 handle, and as the price fell
back below the 1.09 handle, the sellers piled in more aggressively with the 1.0812
support now being in sight.
That’s where we can expect
the buyers to step in with a defined risk below the level to position for a
rally into the 1.10 level. The sellers, on the other hand, will want to see the
price breaking lower to increase the bearish bets into the 1.0727 level next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor downward trendline defining the current bearish momentum.
We can expect the sellers to lean on it with a defined risk above it to
position for a break below the 1.0812 support with a better risk to reward
setup. The buyers, on the other hand, will want to see the price breaking
higher to gain some control and start targeting new highs.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have some consolidation at the 1.0850 level. This is where the
sellers will look for a rejection and a drop into new lows, while the buyers
will want to see a break above the trendline. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we will get the latest US Jobless Claims figures and the US Q2 Advance
GDP. Tomorrow, we conclude the week with the Tokyo CPI and the US PCE reports.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
The barrage of easing measures this week was meant to bolster the economy and shore up confidence in domestic markets. However, it has been anything but that. In trading yesterday, the Chinese yuan had weakened to its lowest level since November against the dollar before bids came through. And that is before the sudden wave of strength today:
Needless to say, we all know who’s the one in the market or at least pulling the strings in getting domestic banks to do so.
It seems like they are drawing a line closer to the 7.28 mark, as evident by the previous pushback earlier this month.
Still, I would argue this doesn’t change the long-term directive of markets in their view towards China at the moment. Beijing is expending a decent amount of ammunition in trying to bolster the economy but markets remain unconvinced.
After having plunged last year, valuations were certainly attractive for Chinese stocks. There was a brief respite up until May this year but the selling has returned since then. And the troubling part for Beijing is that investors are failing to find much confidence that the recovery path will be a solid and smooth run.
Going back to the yuan currency itself, it doesn’t look like there’s much scope for a rebound until next year at least. That despite Beijing’s efforts to keep a floor on the currency as seen above. Even with the Fed cutting rates, the trend this year in USD/CNY has been clear. And in the bigger picture, nothing has really changed to the overall outlook since the start of the year.
The narrative continues to be that Beijing will want to smooth out the depreciation in the yuan to be a more gradual one.
This article was written by Justin Low at www.forexlive.com.
The newswire says that the date had been decided by the German cabinet. It has to be held at the latest by 26 October 2025 and no earlier than 31 August 2025. So, this is right smack in the middle of the expected period in autumn.
This will be the elections for the federal parliament, with 630 seats up for grabs in the Bundestag (as of now). For some context, the last election in 2021 resulted in a „traffic light“ coalition taking charge between the SPD, FDP, and Greens. That broke the previous „grand coalition“ between the SPD and CDU/CSU.
This article was written by Justin Low at www.forexlive.com.
Mortgage applications fell back in the past week with a drop in purchases activity offsetting a marginal increase in refinancing activity. Overall, it still points to a more subdued sentiment in the US housing market.
This article was written by Justin Low at www.forexlive.com.
Crude oil has been under
sustained pressure since the beginning of July. Things got even worse as
Trump’s odds of winning soared after the failed assassination attempt. He is a
great supporter of the “drill, baby, drill” slogan and he will likely put an
end to the war in Ukraine if he gets elected.
Those should be bearish
drivers for crude oil as expectations of increased supply could give the buyers
a hard time for new cycle highs. On the macro side, we haven’t seen much change,
on the contrary, the latest US data continue to show a resilient economy with even
some pickup.
So, we now have some bearish
drivers on the supply side but bullish drivers on the demand side. Overall, it
shouldn’t give conviction for huge moves on either side and the market will
likely continue to trade in a range.
Crude Oil
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that crude oil broke through the key 80 support zone and extended the drop into the 77 level
as the sellers piled in more aggressively while the buyers folded.
We can
expect the buyers to step back in around this level with a defined risk below
it to position for a rally back into the key 80 level. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into the 72.50 level next.
Crude Oil Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a strong support around the 77 level as we can also find the 61.8%
Fibonacci retracement level for confluence. We have also a minor downward trendline
defining the current bearish momentum.
If the price were to break
higher, the buyers should gain some more confidence and increase the bullish
bets into the 80 level. The sellers, on the other hand, will likely keep on
leaning on the trendline to position for a break below the 77 support.
Crude Oil Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that the price is now around the trendline. This is where the sellers will
look for a rejection and a drop into new lows, while the buyers will look for a
breakout to the upside. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US Flash PMIs. Tomorrow, 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.
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.
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.