Beijing has moved to remove Yi Gang from the post of PBOC governor and he has been replaced with Pan Gongsheng. Meanwhile, Qin Gang has been removed from the post of foreign minister and will be replaced with Wang Yi. From before:
This article was written by Justin Low at www.forexlive.com.
The RBA, on the other hand,
kept its cash rate unchanged with the usual hawkish comments and the promise of
doing more if the data suggests so. In fact, the recent RBA meeting minutes showed that there was a strong case
for a rate hike but the central bank decided that holding steady was a better
choice and they will reconsider at the August meeting. The data for now points
to another rate hike as the Australian Jobs report last week surprised again to the
upside.
AUDUSD Technical Analysis –
Daily Timeframe
On the daily chart, we can see that AUDUSD couldn’t
break above the 0.69 resistance again
and sold off all the way down to the 0.6720 level basically erasing all the
gains after the miss in the US CPI report. The price has bounced on the red 21 moving average and it’s
now testing the resistance at 0.6781.
AUDUSD Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that we have a good
resistance level at 0.6781 where we can also find the 50% Fibonacci retracement level
for confluence. We
should see the sellers leaning on this level with a defined risk above the
resistance and target the 0.67 support first, and upon a breakout, the 0.6563
level. The buyers, on the other hand, will need the price to break above the
resistance to pile in and target the 0.69 handle again.
AUDUSD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see more closely
the key resistance to watch. This is where the market should decide where it’s
going to go in the next days or weeks. Above the resistance, the bias is
bullish, while below the level it’s bearish.
Upcoming Events
Today we have the US
Consumer Confidence report. This report is usually not a market mover, but if
we get some big surprise, we should see the market reacting to it. Tomorrow, we
will see the latest inflation figures for Australia, and they will be decisive
for the next RBA meeting. Later in the day, the Fed is expected to hike by 25
bps, but the market will want to see if there are any hints to something else
or they just reaffirm their data dependency. On Thursday, the US Jobless Claims
is likely to lead to more USD strength if the data beats expectations and some
weakness if the data misses. Finally, on Friday, we will see the latest US PCE
and ECI reports with the market likely to be more focused on the wages data
given the tightness of the labour market.
This article was written by FL Contributors at www.forexlive.com.
The dollar is little changed on the day as markets are not showing much enthusiasm so far in European trading. It’s one of those placeholder days as we await the Fed policy decision tomorrow. EUR/USD is down 0.15% to 1.1045 currently and with exception of the aussie, the rest of the major currencies are keeping less than 0.1% changed against the dollar now.
As for AUD/USD itself, I shared some thoughts earlier here already. In other markets, European equities are keeping steady while US futures are also little changed. Tech shares are slightly higher with Nasdaq futures up 0.3% but S&P 500 futures and Dow futures are flattish for now.
In the bond market, yields are keeping higher with 10-year Treasury yields up 4 bps to 3.90% as we see a bounce back following the drop after the sluggish European PMI data yesterday.
This article was written by Justin Low at www.forexlive.com.
The decline in UK manufacturing orders is now at the weakest rate so far this year but overall conditions are still rather poor to say the least. That said, the quarterly business optimism index did improve to +6 from -2 previously and that marks the highest reading since July 2021. But the overall picture still remains subdued. As the BOE hikes rates further, that is also going to weigh on investment plans among firms.
This article was written by Justin Low at www.forexlive.com.
Markets:
The highlight of the session was the rather poor and disappointing PMI readings in Europe and the UK today. Things were quieter in the run up to that before the French report disappointed and then the German report somehow managed to be worse. That took the euro for a tumble before the pound joined in as the UK report was also sluggish.
EUR/USD was holding around 1.1140 before falling to 1.1120 initially, then sliding further to a low of 1.1066 earlier before keeping closer to 1.1100 now. The drag on the currency came alongside that of regional bond yields, as markets get a little more worried about recession risks.
The fall in bond yields is helping to keep a bid in the Japanese yen at least. USD/JPY was holding around 141.30-40 early on in Asia before falling further to a low of 140.85 and is keeping thereabouts now.
As for the pound, it fell from 1.2850 to around 1.2810 against the dollar, before paring losses now to 1.2850 levels again as the greenback loses a bit more ground.
The dollar itself was steadier early, before keeping a fair bit more mixed after the barrage of PMI data. But is now holding slightly lower on the balance of things with USD/JPY leading the drop.
The overall risk mood is keeping steadier despite some mixed tones in Europe. US futures are keeping more optimistic, so that should at least help with some positivity ahead of the Wall Street open later.
This article was written by Justin Low at www.forexlive.com.
As we approach the FOMC
rate decision, some investors might be engaging in profit-taking or adopting
defensive positions, potentially contributing to the current market pullback.
Nevertheless, if the data keeps on showing a resilient economy, we should see
the dips in the Nasdaq Composite being bought.
Nasdaq Composite Technical
Analysis – Daily Timeframe
On the daily chart, we can see that the price has
started to pullback from the 14448 level as the market couldn’t sustain the
bullish momentum into the FOMC meeting this week. We have a strong support level at
the previous 13862 resistance. In fact, we can see that we will have the confluence with the
red 21 moving average which
provided great support the last time.
Nasdaq Composite Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we will also
have the confluence with the 50% Fibonacci retracement level
and the trendline that
defined the ascending triangle pattern.
That’s where we should expect the buyers to step in with a defined risk below
the trendline and target the 14649 resistance. The sellers, on the other hand,
will want to see the price breaking lower to pile in and extend the fall into
the 13174 support.
Nasdaq Composite Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more
closely the key support to watch. This is where the fight between buyers and
sellers will decide where the price will go next. A bounce should lead to 14649
resistance, while a break lower should lead to 13174.
Upcoming
Events
Throughout this week, a
series of market-moving events will hit the market. Commencing
today, all eyes will be on the US PMIs, and depending on whether the data
surpasses or falls short of expectations, we could see a market rally or a
decline. On Wednesday, the Fed is expected to hike by 25 bps, bringing the FFR
to 5.25-5.50%. This decision shouldn’t have a big impact on the market given
that it’s widely expected.
On Thursday, we will see the
latest US Jobless Claims, wherein positive data is expected to lead to a rally,
while a negative outcome might lead to a selloff. Concluding the week, the
attention will turn to the US PCE and ECI reports, with the market seeking
softer numbers to validate the soft-landing narrative.
This article was written by FL Contributors at www.forexlive.com.
Here’s a snapshot of bond yields at the moment:
The drag today comes largely off the back of the softer PMI readings in the euro area and the UK earlier. As high inflation continues to stay rampant across major economies, an added economic downturn is making things more difficult for central banks. Recession risks are on the rise and that’s not providing much confidence on the outlook in the months ahead.
What is even worrying is that as major central banks continue to tighten, they may risk breaking something down the road. Remember this argument here?
As for today, the Japanese yen is among the beneficiaries of the heavier bond yields. USD/JPY was hovering around 141.30-40 levels earlier but has now fallen to fresh lows of the day – down 0.5% to 141.10. Price fell short of testing the 142.00 mark and 61.8 Fib retracement level at the end of last week, but key support is still seen closer to 140.00 at this point:
This article was written by Justin Low at www.forexlive.com.
The miss in the US CPI report has given Gold some
support as the market repriced interest rates expectations on the more dovish
side. The US data though kept on surprising to the upside and the latest US Jobless Claims showed yet
again that the labour market is still very strong, which is something that
keeps the Fed wondering if more rate hikes could be required to bring inflation
sustainably back to their target. This is a headwind for Gold, and if we keep
seeing good data and the Fed remains hawkish, we could see more lows for the
yellow metal.
Gold Technical Analysis –
Daily Timeframe
On the daily chart, we can see that Gold has
eventually reached the 1984 resistance level
where the sellers were waiting to position for another low. The short-term bias
now is bullish as the price has broken out of the downward trendline and the moving averages are
crossed to the upside. The buyers will need to break above the 1984 resistance
to get back full control and target the 2076 high.
Gold Technical Analysis – 4
hour Timeframe
On the 4 hour chart, we can see that the rejection
from the 1984 resistance has led to a fall below the upward trendline and the
downside crossover of the moving averages. This is a bearish signal and we can
expect Gold falling to the 1934 support if the price fails to break above the
1965 level.
Gold Technical Analysis – 1
hour Timeframe
On the 1 hour chart, we can see that we
have a key resistance level at 1965 where the sellers are likely to pile in to
extend the fall into the 1934 support. The buyers, on the other hand, will need
the price to break above the resistance level to pile in and target the 1984 resistance
first, and upon a breakout, the 2076 record high.
Upcoming Events
Lots of top tier economic events are
scheduled for this week starting with the US PMIs today. Better than expected
data should put some pressure on Gold as the market may reprice interest rates
expectations on the more hawkish side. Conversely, lower than expected readings
should support Gold as the dovish pricing is likely to increase. Moving on to
Wednesday, the Fed is expected to hike by 25 bps although this is already
priced in and it’s unlikely to lead to sustained moves. On Thursday, another US
Jobless Claims report will show if the labour market is still strong, and if
that’s the case, we may see some bearish reaction in Gold, while worse than
expected data should provide a tailwind. We conclude the week with the US PCE
and ECI reports on Friday.
This article was written by FL Contributors at www.forexlive.com.
It’s safe to say that the post-Covid recovery hasn’t gone according to plan in China. In fact, it has been quite the opposite as domestic demand has basically sort of died. That has been a real issue over the last few months and local authorities are continually trying to do something about it.
But so far, their measures have not really panned out. We’ll have to see what Xi has up his sleeves next but just keep all this in mind when viewing the Chinese economy and their policy steps for the remainder of the year.
This article was written by Justin Low at www.forexlive.com.
UPCOMING EVENTS:
Monday:
EZ-UK-US PMIs.
Tuesday:
US Consumer Confidence.
Wednesday:
Australia CPI, FOMC Policy Decision.
Thursday:
ECB Policy Decision, US Jobless Claims, US Q2 GDP.
Friday:
BoJ Policy Decision, US PCE, US ECI.
Monday:
The Eurozone Manufacturing PMI is expected to tick lower to 43.3 vs. 43.4
prior, while the Services PMI is seen at 51.4 vs. 52.0 prior. Eurozone
economic data started to consistently surprise to the downside lately which
signals a possible recession hitting the economy in H2 2023 and the ECB ending
its rate hike cycle.
The UK Manufacturing PMI is expected at
45.9 vs. 46.5 prior, while the Services PMI is seen at 53.0 vs. 53.7 prior. This
pattern of contractionary Manufacturing Sector and expansionary Services Sector
has been the theme of this tightening cycle and what is probably delaying the
recession as the Services Sector is less sensitive to rate hikes.
The US Manufacturing PMI is expected a
touch higher at 46.4 vs. 46.3 prior, while the Services PMI is seen a touch
lower at 54.0 vs. 54.4 prior. A downside surprise should weigh on the USD as
the lower US inflation readings are still fresh in the market’s mind and may
cause another dovish repricing in interest rates expectations. On the flip
side, an upside surprise should give the USD some support as the market may start
to price in another rate hike.
Tuesday:
The US Consumer Confidence is expected at 113.0 vs. 109.7 prior. The last
month, we saw a huge upside surprise in
the report jumping from 104.0 to 109.7. The US Consumer may feel more upbeat
due to a strong labour market, lower inflation (energy deflation increased
disposable income) and higher stock market. In fact, the present situation
index in the Consumer Confidence report is seen as a leading
indicator for the labour market and it jumped
from 146.8 to 155.3 the last month. The higher stock market prices, on the
other hand, have a positive wealth
effect that keeps the labour market strong
and consumer spending healthy.
Wednesday:
The Australia CPI Y/Y is expected at 5.4% vs. 5.6% prior, while the CPI Q/Q is
seen at 1.0% vs. 1.4% prior. The RBA’s preferred measures of inflation, the
Trimmed Mean and the Weighted Mean, are seen all lower. The Trimmed Mean
Y/Y is expected at 5.9% vs. 6.6% prior, while the Q/Q figure is seen at 1.0%
vs. 1.2% prior. The Weighted Mean Y/Y is expected at 5.4% vs. 5.8% prior, while
the Q/Q reading is seen at 1.0% vs. 1.2% prior. The Australian
Jobs report last week beat
expectations across the board, and it tipped the expectations in favour for
another rate hike, but a miss in the inflation report may give the RBA an
excuse to keep the cash rate steady. As a reminder, the RBA’s inflation
target is 2-3% per annum.
The Fed is expected to hike by 25 bps and
bring the FFR to 5.25-5.50%. The market has already baked in this rate hike,
so it won’t be a surprise at all. In fact, the market will focus more on
hints for the next move as at the moment the Fed is seen as done with this July
increase. In my opinion, it’s unlikely that the Fed will pre-commit to anything
at this meeting as they remain data dependent and the recent lower Core
inflation reading should increase their hopes for a soft landing. They will
also see two more NFP and CPI reports before the September meeting, so I
think this meeting is likely to be the most boring one of the year.
Thursday:
The ECB is expected to hike by 25 bps and bring the deposit rate to 3.75%. This
rate hike was pencilled in already at the last
ECB rate decision as President Lagarde
said that “inflation is projected to remain too high for too long” and that
there was still “more ground to cover”. In fact, all the ECB speakers have been
repeating week after week that they will hike at the July meeting and that the
stronger debate will centre on the September decision, which will be much
more data dependent. In fact, we are unlikely to see any pre-commitment at
this meeting as the ECB is likely to just stress their data dependency and
resoluteness to bring inflation back to target.
The US Jobless Claims report keeps on
being one of the most market-moving events as the labour market continues to be
at the top of the market’s focus. Last
week, we saw another big beat in Initial
Claims that sent the US Dollar higher across the board, while Continuing Claims
ticked higher, although they lagged by one week the Initial Claims. As a
reminder, the last week Initial Claims data coincided with the NFP survey week.
This week Initial Claims are expected at 233K vs. 228K prior, and the
Continuing Claims are seen at 1742K vs. 1754K prior.
Friday:
The BoJ is expected to keep its monetary policy unchanged with rates at -0.10%
and YCC to flexibly target 10yr yields within -/+ 0.50% target band. The BoJ
will also release its Outlook Report where the central bank is expected to revise
higher its inflation forecasts. There were some expectations coming into this
meeting that the BoJ could tweak its YCC policy, but those were trumped first
by dovish Governor Ueda’s comments and eventually by a Reuters
report last Friday saying that the BoJ was
leaning towards keeping yield control policy at the upcoming meeting.
The US Core PCE M/M is expected at 0.2%
vs. 0.3% prior while there’s no expectation for the Y/Y figure at the moment,
although the Cleveland Fed Inflation Nowcast points to a 4.2% reading vs. 4.6%
prior. The market is likely to focus more on the US Employment Cost Index (ECI)
though which is expected at 1.1% vs. 1.2% prior.
This article was written by Giuseppe Dellamotta at www.forexlive.com.