Headlines:

• Japanese yen surge continues in European morning trade
• Japan top currency diplomat Kanda says no choice but to respond to speculators
• US futures fall further as tech shares feel skittish
• Traders trim BOE rate cut bets for August after inflation data
• UK June CPI +2.0% vs +1.9% y/y expected
• Eurozone June final CPI +2.5% vs +2.5% y/y prelim
• Fed’s Williams says rate cut could be warranted in the coming months

Markets:

• JPY leads, USD lags on the day
• European equities lower; S&P 500 futures down 1.0%
• US 10-year yields up 0.8 bps to 4.175%
• Gold up 0.1% to $2,470.15
• WTI crude up 0.4% to $81.05
• Bitcoin up 0.3% to $64,850

It was an eventful session with some big market moves this time around in European morning trade.

The Japanese yen came to life with USD/JPY falling from 158.30 in Asia all the way to a low of 156.10, before a light bounce after.

The move was a strong one-sided pull lower but spread across three hours. It wasn’t quite the sharp minute moves that we saw during the intervention last week. But still, there could be the possibility of Japan giving things a slight nudge to help with the move lower.

I mean, they have been changing up their strategy as of late to intervene when market conditions favour their directional view.

There were also other factors in play during the session, most notably a selloff in equities. That alongside a weaker dollar is arguably exacerbating the drop in USD/JPY, coupled with a technical break here.

After the gains yesterday, US stocks look set for an off day with futures pushed lower. S&P 500 futures are down 1% with tech shares slumping hard. Nasdaq futures are down 1.6% while Dow futures are „only“ down 0.3%. Russell 2000 futures are down 0.8% but briefly erased losses early on in European trading.

The softer risk environment is seeing USD/CHF also down 0.8% to 0.8865 while EUR/USD is up 0.4% to 1.0940 on the day. At the same time, GBP/USD is also pushing above 1.3000 for the first time in a year as UK inflation remains stubborn in June. That saw traders scale back on bets for an August rate cut.

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

• Prior -0.2%
• Market index 214.1 vs 206.1 prior
• Purchase index 140.4 vs 144.3 prior
• Refinance index 613.0 vs 532.3 prior
• 30-year mortgage rate 6.87% vs 7.00% prior

The jump in mortgage applications in the past week comes as the average rate of the most popular US home loan drops by some 13 bps back under 7%. The rebound owes to a surge in refinancing activity, which offset a decline in purchases on the week.

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

Fundamental
Overview

The USD remains on the
backfoot as the US data continues to point to resilient growth with falling
inflation. Yesterday, we got a good US Retail Sales report suggesting that the stories
of deteriorating consumer spending might have been exaggerated. Overall, this
should support the soft-landing narrative and be positive for the risk
sentiment.

The CAD, on the other hand,
remains supported against the US Dollar mainly because of the risk-on
sentiment. This morning we’ve been seeing even more weakness for the greenback
which might be due to the selloff in the USDJPY pair as flows there could have
spilled over into other markets. On the monetary policy front, yesterday’s Canadian
CPI sealed the rate cut at the upcoming meeting as the data missed
expectations across the board.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD bounced from the key 1.36 support zone and extended the rally into the 1.37
handle before pulling back. If the price falls back into the support zone, we
can expect the buyers to step in once again to position for a rally back into
the 1.3785 resistance. The sellers, on the other hand, will want to see the
price breaking below the support zone to increase the bearish bets into the new
lows with the 1.35 handle as the first target.

USDCAD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price this week broke out of the tight range between 1.3600 and
1.3650 levels and extended the rally into the 1.37 handle. We are now seeing a
pullback into the resistance
turned support at 1.3650 where we can expect the buyers to step in to
position for the continuation of the rally. The sellers, on the other hand,
will want to see the price falling back below the 1.3650 level to increase the
bearish bets into the 1.36 support targeting a breakout.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price today fell below the upward trendline
that was defining the recent bullish momentum. This might be a reversal signal
or just a more complex pullback. A break above the downward trendline should
give the buyers more confidence for new highs, while the sellers will likely
lean on it to position for a break below the 1.3650 level. The red lines define
the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking. Tomorrow, we have the latest US Jobless
Claims figures, while on Friday we conclude with the Canadian Retail Sales
data.

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

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Fundamental
Overview

The upward momentum in the S&P 500 has been kept at bay recently as the
goldilocks data triggered a strong rotation into small caps stocks with the
Russell 2000 having its best
week in 24 years.

It also looks like the rotation has been driven by hedge funds facing short
squeezes on their small cap hedges as yields come down. This is just internal
market dynamics as the fundamentals have not changed.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that in case we get a deeper pullback, the buyers will find a good support
zone around the 5500 level where we can find the confluence
of 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 5200
level next. As of now though, there are no reasons to expect such a big
pullback.

S&P 500 Technical Analysis – 4 hour
Timeframe

On the 4 hour chart, we can
see that we have another minor trendline defining the current bullish momentum.
We can expect the buyers to lean on this trendline with a defined risk below it
to position for new all-time highs with a better risk to reward setup. The
sellers, on the other hand, will want to see the price breaking below the
trendline to position for a drop into the 5500 level next.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we’ve been having a rangebound price action recently as rotation into
small caps stocks kept the momentum at bay. The bias remains bullish
nonetheless and we have key levels where the buyers can limit their risk. The
red lines define the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking while tomorrow we conclude with the
latest US Jobless Claims figures.

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

• Dollar keeps steadier so far on the day, eyes on US retail sales later
• US retail sales gains more attention as Japan eyes big data to intervene
• BOJ data suggests Japan also intervened in the FX market on 12 July
• Eurozone May trade balance €13.9 billion vs €15.0 billion prior
• Germany July ZEW survey current conditions -68.9 vs -74.5 expected
• 10-year Treasury yields erase the jump higher from yesterday
• Italy June final CPI +0.8% vs +0.8% y/y prelim
• European stocks hold lower in the opening stages today
• What are the main events for today?
• Geopolitics trumps higher inflation as top tail risk in latest BofA fund manager survey
• Eurostoxx futures -0.4% in early European trading
• FX option expiries for 16 July 10am New York cut
• A couple of light releases to move things along in European trading today

It was an
uneventful European session with no central bank speaker and just the German
ZEW survey as the main highlight. The survey recorded the first decline in 2024
due to a bigger than expected fall in German exports in May, the political
uncertainty in France and the lack of clarity regarding the future monetary
policy by the ECB.

The index
has been climbing steadily, so a minor pullback isn’t something to be concerned
about. The situation indicator for the Eurozone, on the other hand, changed
only marginally climbing 2.5 points to a new reading of minus 36.1 points.

In the
markets, the major currencies are little changed with the US Dollar flat on the
day. Treasury yields erased yesterday’s gains. The S&P 500 and the Nasdaq
are mostly flat while the Russell 2000 continues to outperform.

Gold is
having another good day as it’s up 0.80% while crude oil is going for the third
consecutive negative day being down 1.40%. Bitcoin was down almost 4.0% at some
point but has recovered half the losses and it looks like it has further legs
to the upside.

The focus
will now switch to the Canadian CPI and US Retail Sales data both due in an hour.

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

There’s not much in it in European morning trade today. The dollar is largely steadier, with USD/JPY coming off a little from around 159.70 in Asia to 158.40 currently. That comes as traders look to be heeding some caution ahead of the US retail sales data later today. From earlier: US retail sales gains more attention as Japan eyes big data to intervene

Besides that, EUR/USD is trading narrowly near 1.0900 with large option expiries still locking the pair. And there is little change among GBP/USD, USD/CHF and USD/CAD as well.

The aussie and kiwi are marginally lower amid a softer Chinese yuan but that’s about it. NZD/USD though is also one to be wary about as it is vulnerable to a downside break.

It’s now over to the US retail sales data to see how that will shake things up on the day.

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

Fundamental
Overview

The USD weakened across the
board last week following another soft US CPI report and benign Jobless Claims figures. The market not only fully
priced in a rate cut in September but also started to price in some chances of
a back-to-back rate cut in November.

Overall, we had a
goldilocks data release with an economy that is slowing but still growing. This
should support the soft-landing narrative and be positive for the risk
sentiment.

The EUR, on the other hand,
keeps on gaining against the US Dollar mainly because of the risk-on sentiment
as the US data continues to support at least two rate cuts from the Fed without
sending recessionary signals.

On the monetary policy
front, the ECB members continue to repeat that they will wait for the data throughout
summer before deciding on a rate cut in September. So, the ECB rate decision
this week should be a non-event.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD is struggling to break above the 1.09 level and extend the
rally into the 1.10 handle. This is where the sellers are stepping in with a
defined risk above the level to position for a drop back into the 1.0812 support. The buyers will want to see the price
breaking higher to increase the bullish bets into the 1.10 level next.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that from a risk management perspective, the buyers will have a better risk
to reward setup around the trendline at the 1.0840 level. We can also
see that we have another steeper trendline around the 1.0885 level. Some
aggressive buyers might lean on it or split their orders in half to avoid
missing a possible rally from these levels. The sellers, on the other hand,
will likely pile in at every break lower.

EURUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see the recent price action and we can notice that the momentum has indeed
waned at the 1.09 handle. Today we get the US Retail Sales data and that could
provide either a spike to the upside or a break below the trendline and a
possible pullback into the next trendline around the 1.0840 level. The red
lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US Retail Sales report. Tomorrow, we have Fed’s Waller
speaking. On Thursday, we conclude with the ECB rate decision and the latest US
Jobless Claims figures.

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

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

The latest yen-tervention efforts are a step out of the norm as Japan looks to be trying out a new strategy. And that is to bank on softer US data in driving down USD/JPY in particular. From earlier: BOJ data suggests Japan also intervened in the FX market on 12 July

They stepped in on Thursday following the US CPI report and did so again on Friday after arguably 30 mins following the US PPI report. On the latter, it seemed like they waited for a bit just to make sure that markets were not going to respond against them as the producer price numbers were hotter than expected.

Given the circumstances, there will be more intrigue surrounding the US retail sales data later today.

It’s not just one that is going to attract the attention of traders looking to price in the Fed outlook. But it is also one that could see USD/JPY get shoved lower by Japan, especially if the numbers miss on estimates.

A softer report would mean slowing consumption activity and bolsters the narrative for the Fed to cut sooner. In turn, that should keep the dollar pinned down and Tokyo officials might see that as another opportunity to step in again.

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