• NASDAQ index closes higher for the 7th consecutive week
• US crude oil futures settle at $70.17
• Court records show Trump faces 37 criminal counts
• Morgan Stanley: USD to grind higher, JPY may lead G10 gains but USD/JPY shorts challenging
• EUR/USD struggles for direction amid eurozone recession and anticipated ECB hikes
• Baker Hughes US oil rig count 556 vs 555 prior
• European equity close: The FTSE 100 is down in 6 of the past 7 weeks
• SocGen foresees potential tweaks in Japan’s yield curve control policy in the near future
• Why Canadian home prices are bulletproof
• This is the best chart for understanding how US inflation will unfold in the months ahead
• Trading Week Recap (05-09 June 2023)
• How is the US consumer doing? It depends who you ask
• Canada capacity utilization Q1 81.9% versus 81.7% in the 4th quarter
• Canada May employment -17.3K vs +23.2K expected
• The NZD is the strongest and the JPY is the weakest as the North America session begins
• ForexLive European FX news wrap: Dollar steadies itself as markets take a breather
• How’s the Fed outlook shaping up to be right now?

This week, the US dollar, tracked within a 103.290-104.400 range in the DXY index. That index (heavily weighted to the EUR) for the week fell -0.49%. The decline was initially triggered this week by below-expectation US services ISM data. In that report, released on Monday, the index for May 2023 came in below expectations with a reading of 50.3 against the predicted 52.2. The figures mark a decline from the prior 51.9. Seeing the nonmanufacturing Index fall implies a potential weakening outside the goods sector.

Within the report:

• The employment index dropped to 49.2 from the previous month’s 50.8.
• The new orders index fell to 52.9, falling short of the expected 56.1.
• The prices paid index slid to 56.2, its lowest since May 2020, from the earlier 59.6.
• New export orders, imports, and the backlog of orders all saw declines compared to last month’s numbers, coming in at 59.0, 50.0, and 40.9, respectively.

The greenbacks fall deepened when the Reserve Bank of Australia (RBA) on Tuesday unexpectedly raised the cash rate to 4.10% and signaled further tightening to control inflation. The Australian dollar subsequently rebounded from a week low of 0.6578 on Monday to a Friday high of 0.6750. The price is closing the week near the pair’s key 100-day MA at 0.6740. Next week, moving above and away from that MA will be needed to increase the bullish bias. If there is a corrective move lower the 200-day MA at 0.66905 will be eyed for bullish clues. Stay above on a correction, will be indicative of bullish undertones remaining.

On Wednesday, the Bank of Canada (BoC) also increased its interest rate by 25 basis points due to insufficiently restrictive monetary policy and ended the pause that had been in place for 2 consecutive meetings. The USD/CAD moved to a low on Wednesday of 1.3320 (higher CAD). The market price for the USDCAD traded higher and lower on Thursday and again on Friday. The weaker-than-expected Canadian jobs data today took the USDCAD price up to a high of 1.33688 from a pre-employment low of 1.33157, but when the price couldn’t extend up to the falling 100-hour moving average (it currently is at 1.33813), the USD sellers reentered pushing the price back down to test the May low near 1.33132. Buyers leaned against the low level and the price bounced marginally higher into the close to 1.3340. Next week if the price of the USDCAD can’t get above the 100-hour moving average, the sellers will remain in control and a breach of the May low can be anticipated.

Despite the two central bank hikes this week, the market continues to anticipate no change in FOMC rates when they meet on Wednesday. That bias was reinforced on Thursday this week when the initial jobless claims surged to the highest level since October 2021. Jobless claims rose to 261K well above the 235K estimate.

Before the rate decision on Wednesday, the Federal Reserve will get the final key piece of economic data with the US CPI scheduled for release at 8:30 AM on Tuesday. The expectations are for a 0.2% gain MoM and the year-on-year measure to come down to 4.1% from 4.9%. The MoM gains from last year have been shedding the YoY inflationary numbers as they roll off. The YoY numbers have seen a fall from a high of 9.1% in June 2022 and have one more big MoM number to roll off when 1.3% drops out when the June CPI is announced in July. That should bring the YoY rate to the low 3% range, but still well above the Fed target of 2%. Going forward, it would take MoM numbers of 0.0% to 0.1% to reach the 2% target in 2023 which although possible, would be a stretch. Adam wrote about the math in his post HERE. Required reading over the weekend.

A look at the US dollar changes this week with the major currencies shows the USD was lower vs all the major currencies with the largest decline vs the AUD and the NZD.

• EUR, -0.38%
• AUD, -2.08%
• NZD -1.16%
• GBP, -1.06%
• CHF -0.62%
• CAD, -0.59%
• JPY, -0.36%

In other markets this week:

• Crude oil fell -2.19% as growth concerns in China weighed on the price
• Gold rose a modest 0.68% helped by the lower dollar
• Silver rose 2.77%
• Bitcoin fell $-651 which seems pretty good given the SEC suing Binance and Coinbase

In the US stock market, the NASDAQ rose for the 7th consecutive week and the S&P rose for the 4th consecutive week although gains were modest:

• Dow industrial average rose 0.34%
• S&P index rose 0.39%
• NASDAQ index rose 0.14%

US yields moved higher this week, despite the lower dollar and expectations of no change from the Fed. Investors are bracing for an estimated $1 trillion deluge of Treasury issuance as part of the latest debt-ceiling resolution, and that may have led to some backup in yields especially in the shorter end this week.

• 2-year yield up 9.5 basis points
• 5-year yield up 7 basis points acting like no key she didn’t know you go to far just in the cell the didn’t know when to see you will you mind my mind you find my my window
• 10-year yield up 4.7 basis points
• 30-year yield was unchanged

Thank you for your support this week. Hoping you have a good weekend.

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

The major US stock indices are closing marginally higher on the day and marginally higher for the week.

The NASDAQ’s gain this week was good enough for the 7th consecutive up week.

The final numbers are showing:

• Dow Industrial Average 43.17 points or 0.13% at 33876.84
• S&P index up 4.95 points or 0.12% at 4298.87
• NASDAQ index rose 20.61 points or 0.16% at 13259.13

Looking at the small-cap the Russell 2000, fell 15.07 points or -0.8% to 1865.70.

For the trading week:

• Dow Industrial Average rose 0.34%
• S&P index rose 0.39%. The gain was the 4th consecutive higher
• NASDAQ index rose 0.14%. The gain was the 7th consecutive up week. The index is up 12.3% from the low.
• Russell 2000 gained +1.900% despite declines over the last 2 trading days of the week

A look at the top 3 sectors:

• Technology up 0.46%
• Consumer discretionary up 0.44%
• Healthcare up 0.19%

The laggards today were:

• Materials -0.82%
• Energy -0.58%
• Utilities -0.57%

For the trading week:

• Consumer discretionary rose 2.44%
• Utilities rose 1.92%
• Energy rose 1.7%

on the downside this week

• Information technology -0.66%
• Consumer Staples -0.53%
• Communications -0.41%

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

The price of the WTI crude oil futures is settling at $70.17. That’s down -$1.12 or -1.54%. The low price today reached $70.10. The high price was at $71.77.

For the week, the price fell $1.57. The price last week settled that $71.74.

Crude oil prices recorded a second consecutive week of declines, impacted by the strength of the US dollar and sparse news. Prices initially rose due to Saudi Arabia’s commitment to production adjustments but were later pressured by increases in US fuel stocks and disappointing Chinese export data. The surprise contraction in the Canadian labor market, coupled with weak Chinese inflation data, may have also contributed to the drop in prices towards the end of the week.

In the US, Baker Hughes recounts were little changed in the current week after steady declines this year. Oil rigs increased by one to 556, while natural gas rigs decreased by two to 135, resulting in a total decrease of one rig to 695.

Looking to next week, factors such as demand during the summer driving season and upcoming macro events like US CPI, FOMC, ECB, US Retail Sales, and BoJ will be key in determining oil price movements.

Meanwhile, the US Department of Energy (DoE) plans to issue a new solicitation to purchase an additional 3 million barrels of crude oil for the strategic stockpile. These barrels are scheduled for delivery in September. In August, the DoE awarded contracts for the purchase of 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) at an average price of $73 per barrel.

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

The NZDUSD moved higher today based on the lows against a swing area near the 0.60829 level before moving to the upside and breaking outside of what has been an up-and-down trading range until today (largely under the 0.6100 level).

The move to the upside today did extend the range for the week and moved up to test the 38.2% retracement of the May trading range. The retracement level came in at 0.61367 and that’s where the price stalled.

If the buyers are to take more control, getting above the 38.2% retracement is a minimum retracement level needed to show that they are serious about moving against the current trend. Absent that, the move to the upside is just a „plain vanilla“ correction.

So as we head into the new trading week, getting about 38.2% retracement will be needed going forward. If the price can move above that level the 200-day moving average at 0.6148 level would be the next close hurdle. The price in the NZDUSD has not been above the 200-day moving average since breaking below it on May 24. Move above that level and 50% of the same move down would be targeted at 0.61838

On the downside, failure to get above the 38.2% retracement would have traders thinking toward a retest of the 0.6100 level. Move below that level and the 100 and 200-hour moving averages will be in play (blue and green lines on the chart below).

So although the price is solidly higher in trading today, the buyers could not really break to the upside and give the buyers more confidence. As a result, traders will go into the new week with the continued battle between buyers and sellers in the NZDUSD pair.

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

Over the weekend, OPEC+
delivered some good news for the oil market, indicating
their intention to maintain prices above the $70 mark. Notably, Saudi Arabia
declared an additional voluntary production cut of 1 million barrels per day
(bpd) commencing in July, initially for one month, with the possibility of
extension based on market conditions. Furthermore, all other members of OPEC+
will prolong their production cuts throughout 2024.

While the OPEC+ supply cuts
may generate short-term bullish sentiment, it is important to recognize that
during a contractionary business cycle, the demand side heavily influences the
oil market. As evidenced by the recent surprising production cut, which was soon
after faded, oil prices experienced a sharp decline from the $83 peak to $64.
However, had it not been for the Sunday cut announcement, prices could have
dropped even further by now.

The economic data this week
has also weighed on the oil market as we got big misses in the US ISM Services PMI and the US Jobless Claims yesterday.

WTI Crude Oil Technical
Analysis – Daily Timeframe

On the daily chart, we can see that oil just can’t
break above the $75 resistance as it
looks like we have found another range at a lower price level. That’s been the
case for quite some time now that the oil market gets stuck in ranges at lower
and lower levels as demand drops and OPEC+ cuts to avoid a bigger selloff in
prices. The support level at $64.30 will be key to watch as a break below that
should increase the selling momentum.

WTI Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that there isn’t
much to glean from this chart as the price action remains erratic beneath the
resistance zone. It’s just about waiting for a clear breakout or a fundamental
catalyst.

WTI Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a support zone at the $70 level. The buyers are likely to lean on this
zone to target the $75 level first and new highs afterwards. The sellers, on
the other hand, will want to see the price breaking lower to pile in and extend
the selloff towards the $64 support.

This article was written by ForexLive at www.forexlive.com.

Headlines:

• A mostly sideways session in European morning trade
• How’s the Fed outlook shaping up to be right now?
• PBOC governor says expects inflation to gradually rebound in 2H this year
• French finance minister says gotten pledge from manufacturers to lower prices
• Japan PM Kishida to hold press conference on 13 June

Markets:

• NZD leads, JPY lags on the day
• European equities lower; S&P 500 futures flat
• US 10-year yields up 3.7 bps to 3.751%
• Gold down 0.1% to $1,965.53
• WTI crude up 0.3% to $71.50
• Bitcoin down 0.2% to $26,590

It’s just one of those days where markets decided to take a bit of a breather, as we start to turn the page to next week’s main events.

There wasn’t any real conviction in the market moves today as trading appetite is sapped considering that there are no more major economic releases before the weekend. We do still have the Canadian jobs report to come later but that isn’t one to reverberate to broader market sentiment.

The dollar is largely steady but trading more mixed on the day with gains against the euro, yen and franc but now slightly lagging against the commodity currencies. USD/JPY in particular is just swinging around 139.40-60 mostly with large expiries sandwiching price action at 139.00 and 140.00 today.

In the equities space, the mood remains rather subdued with US futures keeping little changed mostly and European indices tracking just slightly lower now in the last hour after a relatively sideways session.

We’ll see what Wall Street has to offer later but there doesn’t seem to be much conviction across the board for now. However, that might still change up before the weekend. That being said, next week’s US CPI and Fed decision will still be the make or break moment for markets moving forward.

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

Here’s a look at the changes in the Fed funds futures curve over the last one week and compared to a month ago:

After the US jobs report on Friday last week, traders moved in to further price a higher for longer narrative by the Fed and that hasn’t changed by much even after yesterday’s weekly jobless claims data.

And when you compare to a month ago when traders were pricing in three rate cuts by year-end, it’s been a dramatic shift in the outlook as the Fed succeeded in getting their message through.

It all comes down to what the next message will be from Powell & co. as they make their decision next week. If they keep rates unchanged i.e. pause, I would expect it to be a hawkish one (or at least an attempt to be) as they are likely to talk up chances that they could only be „skipping“ a meeting before raising rates again.

However, we know how easily markets can waver and all it will take is just one misworded communication and the dovish floodgates will open.

But if the Fed does decide to raise rates by another 25 bps, that will certainly mean more pain for risk assets and there will be significant repricing across broader markets. In turn, expect that to spur a strong rally in the dollar unless the Fed explicitly says that this would be their final rate hike and that they will pause to reassess moving forward.

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

Last Friday’s release of
the NFP report once again exceeded expectations,
maintaining its impressive streak of positive results for 14 consecutive instances.
However, upon closer examination, the report unveiled less favourable findings.
The unemployment rate saw a significant jump from 3.4% to 3.7%, representing
the largest month-over-month increase since the pandemic began. Additionally,
there was a slight reduction in average workweek hours, a potential indicator
of impending layoffs by employers. Overall, the report presented a combination
of data that could be interpreted differently by different participants.

Shifting our attention to
the US ISM Services PMI, it reported a considerably lower
figure of 50.3, falling short of expectations and narrowly missing the threshold
for contractionary territory. The employment sub-index indicated contraction,
and the prices paid sub-index experienced a substantial decline, returning to
levels last observed in May 2020. Consequently, the market reacted by further
reducing the likelihood of the Federal Reserve implementing additional interest
rate hikes.

The recent surprising BoC rate hike boosted the CAD and the big miss in
US Jobless Claims yesterday weakened further the USD
as the market is getting increasingly comfortable with the idea that the Fed
may be nearing the end of the tightening cycle even if it leaves a door open
for another hike.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, the USDCAD eventually broke
below the 1.34 support and
extended the selloff as the BoC delivered the rate hike. The price is now near
the 1.3300 handle, and we started to see some consolidation as the market is
looking forward to the next week’s CPI report and FOMC meeting. We
might see a bounce or just a rangebound price action until then, so it would be
better to just wait until those risk events are out of the way and we get a
clearer picture.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that USDCAD ranged
a bit at the 1.34 handle and then broke out as the sellers leant on the red 21 moving average and
pushed the price lower trading into the BoC meeting. We are now seeing some
weakening momentum falling right into the 1.33 handle as depicted by the divergence with the
MACD. That’s
generally a signal of an imminent pullback or reversal, so we may see some
profit taking at the 1.33 level, if the price gets there, as traders may want
to take out some risk before the next week’s events.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
clearly the recent breakout of the box at the 1.34 handle. The USDCAD hasn’t done
much since the BoC rate hike and the big miss in US Jobless Claims. This should
be a clear sign that the market is awaiting the CPI and the FOMC before getting
the conviction for the next direction. The levels to watch are of course the
1.33 support and the 1.34 resistance. A break to the upside, may take us to the
1.3553 resistance again, while a break to the downside should result in a test
of the key 1.3225 level first and possibly a breakout afterwards.

This article was written by ForexLive at www.forexlive.com.

Major currencies are almost no different from the earlier snapshot here. EUR/USD is down slightly by 0.2% to 1.0760 but keeping within a 25 pips range only for the day. Meanwhile, USD/JPY is up 0.5% to 139.60 but again the pair is rather confined in between large option expiries between 139.00 and 140.00 currently. Besides that, there is a rather subdued mood everywhere else.

It’s a bit lifeless in equities space as well with US futures little changed near flat levels while European indices are also barely showing any change after the opening two hours. Here’s a look at how they are doing:

• Eurostoxx +0.1%
• Germany DAX flat
• France CAC 40 +0.1%
• UK FTSE +0.1%
• S&P 500 futures flat
• Nasdaq futures +0.1%
• Dow futures -0.1%

Talk about a snoozefest, eh? Meanwhile, bond yields are holding higher at least with 10-year Treasury yields up 3.3 bps to 3.747%. However, that just eats slightly into the over 7 bps drop yesterday after traders reacted to the US weekly initial jobless claims data.

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

It’s been yet another lackadaisical session mostly and while there is some dollar softness, it isn’t anything that stands out when put into context of the moves since Friday last week. Trading sentiment this week has been mired by a general sense of waiting and wondering, as market players are without any big data or Fedspeak to work with.

If not for the surprises by the RBA and BOC, it would’ve been an even more arduous wait and fewer moves in markets in general.

As things stand, Fed funds futures are pricing in 69% odds that Powell & co. will not hike rates next week. The other 31% are for a 25 bps move. Even though that feels like markets are favouring the former outcome, it must be said this is about as close to a coin flip as you can get on Fed odds.

Historically, policymakers have been clear on what they will do next for the most part. It was only in recent months, that we saw markets being unsure of whether the Fed will hike more aggressively or less aggressively. But this will be the first in this cycle in which the debate is between leaving rates unchanged and to hike rates once more.

The optics is going to be rather important, whatever the Fed may decide. A move to the sidelines means there is a chance that the Fed may be done. Meanwhile, hiking again suggests that they could pause at the next meeting but that’s no guarantee – similar to what we’re seeing now.

In any case, markets will only have a day to firm up their convictions ahead of the main event next week. Because whatever you might be thinking now, it will all change once we get to the US CPI data on Tuesday.

If there are further signs of inflation slowing down significantly, that will be a major boost for those expecting the Fed to „skip“ a meeting. It will also be a rather big boon for risk assets, all things being equal.

On the flip side, if inflation pressures are still rather persistent, there might be some angst and anxiety in markets as they prepare for another potential rate hike by the Fed.

In terms of Fed communication, it was a bit of a late message from the likes of Jefferson and Harker to call to „skip“ a rate hike at the June meeting. It was right before the blackout period and there were no other speakers on the agenda, leaving markets unsure if this was indeed a coordinated message from the central bank or just personal opinion.

The fact that markets can’t really make up their minds when looking at the odds in Fed funds futures, tells us that they are going to leave it up to fate the US CPI data next week before placing more heavy bets.

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