The major indices are ending the day with solid gains. The gains are led by the NASDAQ index which surged by 1.86%. The Dow industrial average was the laggard today, but still rebounded by 0.50% on the day. All the major indices are closing higher for the week.

The final numbers for the day are showing:

• Dow industrial average up 176.20 points or 0.50% at 35458.97
• S&P index up 44.76 points or 0.99% at 4582.16. The S&P closed at its highest level since January 2022.
• NASDAQ index up 266.54 points or 1.90% at 14316.65

The small-cap Russell 2000 is also solidly higher with a gain of 26.64 or 1.36% at 1981.53.

For the trading week, the NASDAQ index is leading the way with the largest gain this week. The Dow industrial average which ended a 13-day win streak yesterday closed higher for the week, but was the laggard of the major indices.

• Dow industrial average rose 0.66%
• S&P index rose 1.01%
• NASDAQ index rose 2.02%

This article was written by Greg Michalowski at www.forexlive.com.

As we finish the trading week and look toward the new trading week, the sellers are more in control in the AUDUSD. The bias is more to the downside on both the daily and hourly chart.

Having said that, the pair has been mostly in an up-and-down trading range over the last 5 trading months.

With the bias down, what would tilt the bias more to the upside, and if those levels can’t be breached, what would get the price outside the 5-month up and down trading range.

This article was written by Greg Michalowski at www.forexlive.com.

As the dust settles from the Bank of Japan USD/JPY is rising above 141.00 and I think that’s the right trade. A week ago, I warned not to chase USD/JPY as it rose to 141.73 and we got a retracement all the way to 138.06 on a series of leaks and a messy trade. It certainly wasn’t easy but at the time I wrote:

I think the trade for the BOJ is to wait and see what they deliver and
if it’s yet-another kicking of the can on YCC, then buy USD/JPY with
both hands and dare the MoF to defend 145.00.

We didn’t exactly get a kicking of the can but that’s still the strategy. Whether YCC is 0.50% or 1.00% it’s still far lower than anything you’re getting in US 10s and every other developed economy. Yes, that spread has narrowed and that counts for something but at the same time, US rates are moving up on a strong economy so net-net it’s USD/JPY bullish.

Even more compelling is that now some of the headline risk is gone. The games the BOJ played were pure amateur hour and I can’t see any sense in the leaks and most-everything else Ueda has said in the past two weeks.

I spoke to Reuters today and offered some colourful language:

„This may be the first step towards a credibility crisis for the Bank of
Japan and that is really dangerous. They’re on the tightest of
tightropes above the pit of alligators. This is the first wobble, and
the Bank of Japan cannot afford to lose any of its credibility. I think
that’s the big reason why we still see so much volatility.“

What I’m talking about there is the monstrous amount of government debt in Japan and the further mountain of debt priced on it. The whole thing is held together by the assumption of low inflation and BOJ credibility.

That’s an enormous responsibility that the BOJ is dealing with. Maybe they somehow survive this round of global inflation but when Ueda says that risks remain towards too-low inflation, I shake my head. Too-low inflation isn’t perfect but it’s hardly an existential crisis. Meanwhile, if Japanese inflation went to UK-like rates, it would be catastrophic and the pain would reverberate through the financial system globally. I don’t understand why they want to take that kind of risk but — fine — perhaps Japanese consumers continue to defy the laws of economics. But even if you think that risk is minimal you can’t be sitting at the BOJ and leaking stuff all over the place then delivering some kind of convoluted decision that pretends a 0.50% cap that now extends to 1.00% hasn’t changed.

In any case, traders trade and the path for the yen is higher until the Ministry of Finance says it’s not. Given the booming risk trade, I can’t see any reason to buy the yen or to take off USD/JPY longs.

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

The Fed is out with a report with some suggestions for banks in raising liquidity.

• Banks should ensure they are familiar with the pledging process for different collateral types and be aware that pre-pledging collateral can be useful if liquidity needs to arise quickly
• Banks should consider small value discount window transactions at regular intervals
• Events of H1 underscore importance of liquidity risk management and contingency planning

This is good advice that banks will certainly ignore.

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

Headlines:

• BOJ announce no change to yield curve control (YCC) and no monetary policy change
• A look at how the BOJ has adjusted its yield curve control program
• 10-year JGB yields jump to its highest levels since 2014
• BOJ governor Ueda: Need to patiently continue monetary easing to support the economy
• BOJ’s Ueda: We aim to rely on markets to determine long-term rates but there are limits
• ECB’s Villeroy: Upcoming meeting decisions will be entirely data driven
• ECB’s Kazimir: Premature to consider a September pause the end of the tightening cycle
• ECB’s Simkus: Choice in September is between 25 bps rate hike and no change
• Germany Q2 preliminary GDP 0.0% vs +0.1% q/q expected
• France Q2 preliminary GDP +0.5% vs +0.1% q/q expected
• Spain Q2 preliminary GDP +0.4% vs +0.4% q/q expected
• Bavaria July CPI +6.1% vs +6.2% y/y prior
• France July preliminary CPI +4.3% vs +4.3% y/y expected
• Spain July preliminary CPI +2.3% vs +1.6% y/y expected

Markets:

• GBP leads, AUD lags on the day
• European equities mixed; S&P 500 futures up 0.5%
• US 10-year yields down 4.5 bps to 3.966%
• Gold up 0.6% to $1,956.54
• WTI crude down 0.2% to $79.90
• Bitcoin up 0.2% to $29,196

It was a busy session in markets as traders and investors had to digest an adjustment by the BOJ on its yield curve control program.

The leaked report from the Nikkei changed the complexion ahead of today’s decision and it certainly delivered plenty of volatility in markets with the USD/JPY itself seeing a 300 pips whipsaw.

The BOJ announced that it would allow more flexibility above its cap of 0.50% on 10-year JGB yields, with the hard line now being drawn at 1.00% instead. USD/JPY rose initially as the yields band itself was not changed, rising from 139.15 to 141.00 before falling all the way back to 138.05 as traders digested the change.

After a trip back to touch 140.00, the pair is now falling back to 138.85 in a volatile session for the Japanese yen.

As 10-year JGB bonds sold off, the move also saw some angst in bond markets elsewhere. European bond yields surged higher at the start of the session but have now pared the jump, with 10-year German bond yields now flat at 2.43% (the high earlier 2.55%). 10-year JGB yields did surge past the 0.50% mark though, to 0.56% – its highest levels since 2014.

But the latest retreat in bond yields now is helping to put a fresh drag on the dollar as well. 10-year Treasury yields are down 4.5 bps to 3.966% and that is weighing on the greenback – especially against the euro and pound.

EUR/USD is up 0.3% to just above 1.1000 again while GBP/USD is up 0.6% to 1.2870 levels currently.

Equities were unsure initially of the BOJ decision as well with US futures paring early gains only to rally back again. S&P 500 futures are up 0.5% and that’s a signal that investors are taking the view on a potential Fed pause with more weight. European indices were also lower at the start, playing catch up to the late retreat in Wall Street yesterday, but are now trading little changed.

Despite risk sentiment holding up somewhat, the Australian dollar continues to be trounced but that perhaps owes more to the technicals as outlined here. AUD/USD is down 0.5% today to 0.6670 currently.

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

The Fed hiked interest rates by 25 bps as expected and kept the policy
statement unchanged. The market was looking for clues and hints on the next
policy path, but it didn’t get anything. In fact, Fed Chair Powell just
reaffirmed their data dependency. Yesterday though, the US Jobless Claims beat expectations again by a big
margin sending the USD higher. As long as the US data remains this strong, the
USD should continue to appreciate.

The RBNZ, on the other hand, kept its official cash
rate unchanged while stating that it will remain at the restrictive level for
the foreseeable future to ensure that inflation comes down back to target. The
recent New Zealand inflation data though surprised to the upside
which might put some pressure on the central bank at the next rate decision,
although they are more likely to keep rates steady.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD sold off
strongly from the key 0.6389 resistance and it’s
now likely targeting the 0.5987 low. The moving averages have
crossed to the downside again as the bearish momentum prevails and the sellers
remain in control supported by stronger US data.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we recently
got a fakeout around the 0.6230 resistance. In fact, the price continued to
rally past the resistance zone and the 38.2% Fibonacci retracement level
and then got smacked back down by the strong US Jobless Claims. The price has
broken below a counter-trendline, and the
moving averages crossed to the downside again. This is a bearish signal, and
the sellers should pile in aggressively in case the price pulls back.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor downward trendline where the sellers can lean onto to position for
another fall. From a risk management perspective, if the price pulls back to
the orange 38.2% Fibonacci retracement level, the sellers will have a better risk
to reward setup and have the red 21 moving average and the 0.62 handle for confluence. The
buyers, on the other hand, may start to pile in already in case the price
breaks above the minor trendline, but they will need the price to break above
the 0.6240 resistance zone to get back in control and target the highs.

Upcoming Events

Today the market will
be focused on the US PCE and ECI reports. The PCE is less likely to be market
moving given that is less timely than the CPI, so it will need a big surprise
to trigger a notable reaction. In fact, the Employment Cost Index (ECI) is
likely to be more important given the Fed’s focus on wage inflation and the
strength in the labour market. Higher than expected data should be bullish for
the USD, while lower than expected figure should be bearish in the short term.

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

• Need to be pragmatic and keep an open mind
• Perseverance is now key given the time needed for full transmission of policy
• French inflation is falling even without a recession
• Our growing confidence in inflation moving towards the 2% target is based on good transmission of policy

Well, I’d like to chip in by saying that base effects are also playing a role in bringing headline annual inflation down in the past few months. It’s funny that Villeroy doesn’t highlight this as core annual inflation is still relatively high, all things considered. It just seems typical that central banks will spin the narrative however they want to fit with what they need to say at the point in time.

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

The Fed hiked interest rates by 25 bps as expected
leaving the policy statement unchanged. The market was eager to get some clues
on the next policy moves but was disappointed as Fed Chair Powell just
reaffirmed their data dependency and kept all the options on the table.
Yesterday, the US Jobless Claims beat
expectations by a big margin again and sent hawkish vibes across the markets.
Gold is inversely correlated with US real yields and therefore it weakened
following the data.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Gold rejected
the resistance 1984 and
fell into the red 21 moving average, where
we are seeing a bounce as the buyers are probably stepping in. The sellers will
need the price to fall below the 1934 support to get full control and target
the 1805 swing low.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that if we were to
get a pullback, we have a good resistance zone around the 1963 level where
there is confluence with the
50% Fibonacci retracement level
and the red 21 moving average. The sellers are likely to step in here with a
defined risk above the level and target the breakout of the 1934 support and
eventually the 1805 level. The buyers, on the other hand, will need the price
to break above the resistance zone to pile in for a breakout above the 1984
resistance.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see that some
aggressive sellers are already leaning on the short term 21 moving average and
a previous swing level. If this level breaks, the buyers will pile in to target
the breakout above the resistance zone, while the sellers will be waiting there
to position for a move lower.

Upcoming Events

Today the market will
be focused on the US PCE and ECI reports. Given that the market is already
looking forward to the next month’s CPI report, we are unlikely to see big
moves from the PCE unless there’s some big surprise. In fact, the market is
likely to focus more on the ECI as the Fed remains attentive to wage inflation
given the strength in the labour market. Higher than expected data should weigh
even more on Gold, while lower than expected reading should provide a pullback.

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

On the week itself, the pair is down roughly a little over 1% with the momentum from yesterday’s drop carrying over to today. The souring in the risk mood yesterday was a main drag for the aussie as well but the extension of the fall today looks to be more technical related I would say:

The pair saw a decent bounce off the 200-day moving average (blue line) on Monday but failed to really build on that. And the break of the key level via yesterday’s close is a signal for further downside. Adding to that is the break of the 100-day moving average (red line) today, which puts sellers firmly in control.

The next key downside support will come from the end-June and July lows near the 0.6600 region, before potentially talking about 0.6500 again.

So, what else has impacted the aussie so much besides risk sentiment in markets?

Well, the fact that traders are growing more uncertain about the RBA decision next week is a key factor as well. Just exactly a month ago, a 25 bps rate hike was all but certain. Fast forward to today, and the odds priced in for such a move are only at roughly 23%.

A key consideration for the change in pricing also came after the softer Australian CPI report earlier this week but also as the RBA left the cash rate unchanged in its July decision here. So, is the „skip“ ultimately turning into a „pause“ for the RBA? If so, there is scope for this week’s retreat to run further it would seem.

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

Headlines:

• Dollar stays in retreat mode so far on the session
• Equities pull higher in European morning trade
• What to expect from the ECB later today and how will the euro react?
• What are the key dates to watch before the next FOMC meeting in September?
• Germany August GfK consumer confidence -24.4 vs -24.7 expected
• UK July CBI retailing reported sales -25 vs -9 prior
• China tries to play down ‚malicious‘ hype on Qin Gang’s removal from minister post

Markets:

• NZD leads, USD lags on the day
• European equities higher; S&P 500 futures up 0.6%
• US 10-year yields up 1.8 bps to 3.868%
• Gold up 0.2% to $1,976.47
• WTI crude up 0.9% to $79.51
• Bitcoin down 0.3% to $29,481

The dollar was mildly lower in Asia but extended its post-FOMC losses in Europe today. Powell kept the door open for a September move but was not adamant about it and markets took that as a message that perhaps we have already seen a peak in interest rates in the US.

EUR/USD moved up from 1.1100 to 1.1150 and is holding just below that while GBP/USD pulled higher from 1.2940 to a high of 1.2995 but is now just marginally higher at 1.2960. The euro will be in focus with the ECB coming up next and the risks might be skewed to the downside for the single currency.

Anyway, the dollar is lower across the board with USD/CHF also dropping back below 0.8600 and AUD/USD held its early gains at around 0.8600 – up 0.6% since Asia amid a stronger Chinese yuan and better risk sentiment as well.

Equities were solid throughout with European equities rebounding from yesterday’s setback, while tech shares are driving US futures higher. Nasdaq futures are up 1.2% currently and that tees up a more positive mood ahead of Wall Street later. The Dow looks poised for a record streak, after matching 13 straight days of gains already – first since 1987.

It’s now over to Lagarde & co. to deliver the next part of the central bank bonanza this week, before the BOJ wraps things up tomorrow.

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