• US August prelim UMich consumer sentiment 67.8 vs 66.9 expected
• US July housing starts 1.238M vs 1.330M expected
• China issues new gold import quotas after pause — report
• Fed’s Goolsbee: There are some things that are flashing yellow
• July Canada housing starts 279.5K vs 245.0K
• Canada June manufacturing sales -2.1% vs -2.6% expected
• Baker Hughes US oil rig count -2
• Israeli intel believes Iran response will take place at later date — report
• Biden says Gaza ceasefire deal ‚is closer than three days ago‘
• Blinken to visit Middle East starting on Sunday
• Join me on Monday for a webinar on how to dodge 7 common trading traps

Markets:

• Gold up $51 to $2507
• WTI crude oil down $1.46 to $76.70
• US 10-year yields down 4.3 bps to 3.88%
• S&P 500 up 0.2%
• JPY leads, USD lags

The US dollar was broadly weak on Friday in a move that was challenging to explain. The entire USD/JPY rally from Thursday and the positive retail sales data was wiped out while other pairs continued to climb. The later was backed by a decent risk tone and modest decline in Treasury yields but it was an outsized move that was tough to pin down.

One spot I look at is ongoing de-risking. Some of those caught up in the August rout or carry trade unwind may still be looking to de-risk.

The moves were large with the euro closing above 1.10 for the first time since January and cable adding nearly a full cent in a breakout from the weekly range. The Australian dollar rode and improving risk trade to the best levels since July 22 as that rout continues to be erased across asset classes.

The big winner on the day though was gold as it hit an all-time high and broke $2500 for the first time. On the initial touch of $2500, there was some profit taking and a quick $20 drop but the bulls reorganized and bid right through the close. The catalyst was likely a report that Chinese banks have been given fresh buying quotas, along with the widespread USD weakness.

Overall though, it was a day that left us scratching our heads and early next week is likely to do the same with a very quiet economic calendar until Jackson Hole kicks off on Thursday.

Have a great weekend.

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

US stock markets started lower today but found a footing early and slowly climbed the hill. Overall volatility was lower than it’s been and newsflow was light but the bulls should be encouraged by another positive close, led by smaller caps today.

On the day:

• S&P 500 +0.2%
• Nasdaq Comp +0.2%
• DJIA +0.2%
• Russell 2000 +0.35%
• Toronto TSX Comp flat

On the week:

• S&P 500 +3.9%
• Nasdaq Comp +5.3%
• DJIA +2.9%
• Russell 2000 +2.9%
• Toronto TSX Comp +3.3% (best weekly close ever)

The weekly gain in the S&P 500 and Nasdaq was the largest since last October.

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

HSBC analyzes the factors behind GBP’s strong performance in 2024 and discusses the potential challenges ahead. While the currency has been resilient due to its high carry, HSBC warns that the outlook may not remain as favorable, especially with expected further rate cuts by the Bank of England (BoE).

Key Points:

• GBP’s Strength in 2024:
  • GBP has been the most resilient G10 currency this year, largely due to its high carry.
  • CFTC data shows long GBP positions are near all-time highs, highlighting the currency’s attractiveness to investors.

• BoE’s August Rate Cut:

  • HSBC notes that the BoE’s rate cut in August should not be overlooked, even though the central bank has maintained a cautious stance on easing.
  • The UK’s lackluster growth outlook suggests further easing is likely, with HSBC expecting another 25bp rate cut in November.

• Structural Challenges:

  • The UK’s current account deficit is primarily financed by „other investment“ flows, linked to the carry inflows supporting GBP this year.
  • As the carry buffer narrows, HSBC anticipates that GBP may start to weaken against the USD in the coming months.

Conclusion:

While GBP has shown remarkable resilience in 2024 due to high carry, HSBC foresees potential challenges ahead. The BoE’s continued rate cuts, coupled with the narrowing carry advantage, may lead to a decline in GBP’s strength, with targets of GBP/USD at 1.26 by the end of Q3 and 1.25 by the end of Q4.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.

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

The recent rally in the euro hasn’t gotten much attention because there isn’t a great fundamental backing behind it. Europe’s economy continues to struggle and the move is mostly about broader US dollar selling. That said, sometimes the technicals lead the fundamentals and the poor economy in Europe is priced in at this point while a US slowdown would be a surprise.

The pair is also beaten-down in the longer term from the 1.15-ish pre-pandemic space.

I find it hard to chase anything in Europe but there are a nice series of higher lows and it would be easy enough to squeeze the shorts, at least up to 1.12. I don’t see much of a catalyst in the week ahead though.

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

Headlines:

• USD/JPY eases lower alongside bond yields on the day
• Gold takes aim at key resistance as the weekend approaches
• What are the main events for today?
• Fed’s Goolsbee: You don’t want to tighten any longer than you have to
• UK July retail sales +0.5% vs +0.5% m/m expected
• Eurozone June trade balance €22.3 billion vs €13.9 billion prior
• Never underestimate the power of US the consumer

Markets:

• JPY leads, USD and CAD lag on the day
• European equities higher; S&P 500 futures down 0.2%
• US 10-year yields down 5.9 bps to 3.867%
• Gold up 0.6% to $2,469.79
• WTI crude down 2.9% to $75.86
• Bitcoin up 2.9% to $58,287

There wasn’t any major headline catalysts on the session but the dollar is giving back quite a decent chunk of its gains following the US retail sales data yesterday.

USD/JPY in particular is down over 120 pips to near the 148.00 mark, with lower bond yields weighing. 10-year Treasury yields are down nearly 6 bps to 3.867% and that is keeping the yen more bid during the session.

In the last three days, traders could look to US data for some sense of reprieve on the economic calendar. But today, they have to look to themselves to pull things back up now. S&P 500 futures were up 0.2% early on but are now down 0.2% as we look to North America trading.

Going back to major currencies, EUR/USD is up 0.2% to just under 1.1000 with large option expiries keeping a lid on things there. GBP/USD is up 0.4% to 1.2905 while USD/CHF is down 0.6% to 0.8675 currently.

The dollar is struggling alongside the loonie, which is perhaps weighed down by weaker oil prices on the day. WTI crude is down nearly 3% as the rejection from $80 continues to stay the course this week.

In other commodities, gold is once again closing in on the key resistance region of $2,475-80 as buyers are teasing a breakout before the weekend comes.

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

The dollar is now ceding quite a bit of ground in trading today, reversing the nudge higher after the US retail sales yesterday. It comes alongside a shove lower in Treasury yields. 10-year yields are now down 5.5 bps to 3.871% and that is weighing on the greenback. At the same time, US futures are also looking shaky as S&P 500 futures are also down 0.1% currently.

Going back to USD/JPY, the drop comes as price action stalls at the 38.2 Fib retracement level of the swing lower since July – seen at 149.42.

It’s going to be a tricky session for the dollar to navigate as traders will have to look to themselves to keep up the form from trading yesterday. There won’t be much on the economic calendar to help unlike in the past few days.

Looking to other dollar pairs, EUR/USD is up 0.2% to 1.0990 with large option expiries holding the pair near 1.1000. Meanwhile, GBP/USD is up 0.4% to test 1.2900 and USD/CHF down 0.6% to 0.8675 currently.

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

• Will make great efforts to enhance the sustained upward trend of the economy
• It is necessary to stick to goals and not to take a relaxed approach
• Need to expand domestic demand more vigorously, focus on boosting consumption
• Will explore new growth points for foreign trade
• To make differentiated policy support based on the needs of different groups of people

Once again, it’s all pretty words and the challenge for Beijing will be to implement all of this on the ground level. That will be what investors are looking for in terms of shoring up confidence. Since peaking in 2021, Chinese stocks have plunged considerably amid the government’s handling of the pandemic and there hasn’t been much to convince of a revival in domestic demand just yet.

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

• This is not what an overheating economy looks like to me

Given the latest jobs report earlier this month, I don’t think anyone thinks that the economy is overheating. But from the retail sales data yesterday, it’s not that bad either. Anyway, this just reaffirms that the Fed is trying to ease into a pivot to cut rates next month.

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

There is a bit of a flag pattern forming in gold as price action continues to sit near fresh record highs this week. There was an attempt to breach the key resistance region around $2,475-80 on Wednesday but buyers cooled off after. And after a slight setback, they are quickly turning things around again as we get closer to the weekend now.

As the Fed looks to cut and yields are weighed lower, the simple case is for a bullish argument for gold. That being said, the technicals are another thing. There has been almost no semblance of a pullback since the surging run higher in March this year.

Sure, there was a bit of a consolidation from mid-April to end-June. However, it’s not exactly a retracement of any sort. For some context, gold rose by a little over 13% over the course of 2023. Meanwhile, it is up nearly 20% already in just 2024 currently.

There are reasons to stay bullish in gold in the long-term and also some reasons to expect a pullback from a technical perspective.

But perhaps price action and price patterns make for the simplest argument for gold at the moment.

And that is to go with the break of the flag pattern above. That is either on a topside run above $2,475-80 or a push back lower below $2,400 to threaten the 100-day moving average (red line) near $2,362 currently.

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

Headlines:

• EUR/USD eyes firmer break above 1.1000 but still anchored for now
• Gold Technical Analysis – Struggling to break a key resistance
• Weekly update on interest rates expectations
• Fed’s Bostic says open to a rate cut in September as inflation cools
• RBNZ expected to cut cash rate by at least another 50 bps before year-end – poll
• UK Q2 preliminary GDP +0.6% vs +0.6% q/q expected
• UK June monthly GDP 0.0% vs 0.0% m/m expected
• Switzerland July producer and import prices 0.0% vs 0.0% prior

Markets:

• AUD leads, CHF lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields up 2.4 bps to 3.846%
• Gold up 0.6% to $2,461.26
• WTI crude up 0.9% to $77.71
• Bitcoin down 0.7% to $58,725

It was a session bereft of any major headlines as markets are digesting the US inflation numbers from yesterday while awaiting the retail sales data later.

Major currencies are settling into a calmer climate, with light changes overall for the most part. The euro and yen aren’t doing much with EUR/USD settling in just a 13 pips range so far today. Large option expiries may be playing a role there but USD/JPY itself is also little changed around 147.20-30 levels on the day.

The pound is slightly higher as UK Q2 GDP reaffirms some economic resilience while the aussie is up since Asia Pacific trading, buoyed by a more solid jobs report.

Besides that, the risk mood on the day is steadier with US futures sitting marginally higher currently. Bond yields are also just a touch higher with 10-year yields in the US looking to arrest a four-day drop. But it is still early in the day though, as we will have US retail sales data to work through later.

In other markets, precious metals are bouncing back with gold and silver both higher. The former is facing a triple top pattern at around $2,475-80 so it will be one to watch to see if buyers can catch a break before the weekend.

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