Headlines:

• Dollar recovers some poise after Friday drop
• Fed’s Williams does not rule out possibility of rates cuts next year
• Eurozone August Sentix investor confidence -18.9 vs -24.3 expected
• Germany June industrial production -1.5% vs -0.5% m/m expected
• UK July Halifax house prices -0.3% vs -0.1% m/m prior
• Switzerland July seasonally adjusted unemployment rate 2.1% vs 2.0% expected

Markets:

• NZD leads, CHF lags on the day
• European equities lower; S&P 500 futures up 0.3%
• US 10-year yields up 3.7 bps to 4.098%
• Gold down 0.3% to $1,935.74
• WTI crude down 0.9% to $82.04
• Bitcoin up 0.4% to $29,035

It was a quiet session as markets are observing a slower but calmer start to the new week.

All eyes are on the US CPI report on Thursday and it really can’t come soon enough. The dollar is recovering some ground after the Friday drop as markets don’t really have much else to reprice in terms of the Fed outlook as seen here. It’s on to the next big data and we will have to wait for the inflation numbers later this week before any further convictions appear.

European stocks were marked lower and kept that way in a bit of a catch up to the losses at the end of last week in Wall Street. But US futures are in a calmer mood, so there is some mixed sentiment in there today.

For major currencies though, the rebound in bond yields is the one that is helping to prop up the dollar. USD/JPY is continuing to keep above 142.00 on the day, seen around 142.20-30 levels mostly in Europe. EUR/USD is also down slightly by 0.3% to 1.0980 with the low earlier touching 1.0965.

The commodity currencies are mostly little changed against the dollar but AUD/USD remains in a precarious spot with sellers still searching for a move towards 0.6500 next.

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

Last
week, the NFP missed
expectations for a second time in a row and the previous numbers were all
revised lower. This was seen as a disappointment as the labour market seems to
be a touch weaker than previously expected and we saw a brief rally in Gold.
The unemployment rate though, fell once again and lessened the disappointment
from the miss in the payrolls number. The worse part for the Fed is that the
average hourly earnings beat expectations, and such high wage growth is not
consistent with a sustainable return to the 2% target. This may have led to the
selloff soon after the rally as it increases the risk of more hikes in the future.
It’s worth reminding though, that the Fed will see another NFP report before
the September meeting, so this NFP doesn’t change much, but the data leading
into the meeting can still weigh on sentiment.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Gold has
eventually reached the 1934 support after
the rejection from the 1984 resistance. This is where we should see the buyers
stepping in with a defined risk below the level to target the 1984 resistance
first and eventually the breakout. The sellers, on the other hand, will want to
see the price breaking lower to pile in even more aggressively and extend the
selloff into the 1893 low.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see more closely the
price action around the 1934 support. The spike lower after the miss in the NFP
led to a brief rally into the 1943 swing low resistance where we have also the
38.2% Fibonacci retracement level.
The sellers stepped in there with a defined risk above the level to target a
break below the 1934 support. The buyers will need to defend the level as a
break lower would open the door for the selloff into the 1893 level.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see that we
had a mini range around the 1934 support that was broken on both sides
following the NFP release. It’s always better to ignore the spikes after such
high impact news and focus on the levels and the direction that the news is
supporting with a higher probability. The price has returned back within the range,
and it will be another waiting game until we get a breakout.

Upcoming Events

This week the
main event will be the US CPI report on Thursday. The disinflationary trend
seen in the past months has been a tailwind for Gold as the market kept expecting
the Fed to be done with rate hikes soon, but strong US data kept coming in and
pushed the end of the hiking cycle further in the future, ultimately weighing
on the precious metal. In fact, an upside surprise in this report is likely to
weigh on Gold as the market would expect more hikes and push the pause even
further away. On the other hand, another miss in the data should provide some
relief and lead to a rally. After the US CPI we will also see the latest US
Jobless Claims report, which is less likely to move the market since it’s
released at the same time of the CPI, but big surprises should have an effect,
nonetheless. Finally, we conclude the week with the University of Michigan
Consumer Sentiment report on Friday where the market is likely to focus more on
the inflation expectations figures.

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

The dollar is holding higher across the board today as a rebound in bond yields is also helping. 10-year Treasury yields are up 5 bps to 4.116% and that is helping to prop up the greenback as well. Of note, EUR/USD is down 0.4% to 1.0966 at the lows for the day:

The pair threatened a rebound back above 1.1000 only to fall back now as sellers are starting to seize back near-term control. Euro sentiment isn’t the best at the moment amid worsening economic data and a looming ECB policy pivot. Meanwhile, it seems like traders have figured out the Fed outlook and we’ll see if the US CPI data this week will further validate that.

For EUR/USD, the 100-day moving average (red line) is the key technical spot to watch and that sits at 1.0921 currently.

USD/JPY is also seen up 0.4% now to 142.40 as buyers look to hold a rebound back above the 142.00 mark while USD/CHF is hoping to move towards testing the 0.8800 mark once again, up 0.5% to 0.8770 currently.

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

Last
week, the NFP missed
expectations for a second time in a row and the previous numbers were all
revised lower. This was seen as a disappointment as the labour market seems to
be a touch weaker than previously expected. Nonetheless, the unemployment rate
fell once again and lessened the disappointment from the miss in the payrolls
number. The worse part for the Fed is that the average hourly earnings beat
expectations, and such high wage growth is not consistent with a sustainable
return to the 2% target. It’s worth reminding though, that the Fed will see
another NFP report before the September meeting, so this NFP doesn’t change much,
but the data leading into the meeting can still weigh on sentiment.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite couldn’t extend the rally all the way into the key 14649 resistance.
In fact, we can see that we had a divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. The price is now at a previous resistance turned support where we
should expect the buyers stepping in with a defined risk below the level to
target the 14649 high.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
support around the 13865 level where we can also find the 50% Fibonacci retracement level
for confluence. The
buyers are likely to enter here, but the sellers will want to wait for a break
below the level to pile in even more aggressively and extend the fall into the trendline or the
13174 support.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have two key levels now:

· The support at
13865 where a break below it should give the sellers control.

· The
resistance at 14115 where a break above it should give the buyers control.

The best strategy would be to wait for a
break on either side and then join the wave.

Upcoming
Events

This week the
main event will be the US CPI report on Thursday. The market has been loving
the disinflationary trend seen in the past months, so an upside surprise is
likely to weigh on risk sentiment and push the market lower. On the other hand,
another miss in the data should provide some relief and lead to a rally. After
the US CPI we will also see the latest US Jobless Claims report, which is less
likely to move the market since it’s released at the same time of the CPI, but
big surprises should have an effect, nonetheless. Finally, we conclude the week
with the University of Michigan Consumer Sentiment report on Friday where the
market is likely to focus more on the inflation expectations figures.

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

• Inflation is coming down as hoped
• Expects unemployment to rise slightly as the economy cools, personally sees unemployment rate rising above 4% next year
• Does not rule out possibility of lowering rates in early 2024
• It all depends on the economic data

Well, that’s one of the first angles by the Fed in agreeing to the current market pricing as seen here. They have been adamant that rates are to hold higher for longer and keep in more restrictive territory, so this is a bit of an early take. But if they keep interest rates unchanged in September again and inflation data continues to point downwards, this may gather more traction.

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

UPCOMING EVENTS:

• Monday:
  Canada Holiday, Swiss Unemployment Rate, BoJ’s Summary of Opinions.
• Tuesday:
  NFIB Small Business Optimism Index.
• Wednesday:
  China CPI.
• Thursday:
  US CPI, US Jobless Claims.
• Friday:
  Japan Holiday, UK GDP, US PPI, University of Michigan Consumer Sentiment.

Monday:
The BoJ’s Summary of Opinions will be scrutinised by market participants for
details and clues regarding the BoJ’s monetary policy. Last time, there was
a little hint that indicated a possible change as Eamonn highlighted
correctly here.
In fact, the BoJ implicitly widened the YCC band with a soft cap at -/+0.5%
and a hard cap at -/+1.0%. As a reminder, the BoJ intervened twice last
week as yields on the 10y JGBs breached the 0.60% level. As of now though, it
looks like that the only way is up towards the 1.0% hard cap.

Wednesday:
The Chinese CPI Y/Y is expected to fall into deflationary territory at
-0.5% vs. 0.0% prior, while the M/M reading is seen flat at 0.0% vs. -0.2%
prior. The PPI Y/Y is expected to remain in negative territory at -4.0% vs.
-5.4% prior. Chinese authorities promised
more support for the economy, but we haven’t seen anything of substance yet.

Thursday:
The US CPI Y/Y is expected to tick higher to 3.3% vs. 3.0% prior due to
unfavourable base effects and higher gas prices, and the M/M figure to match
the prior reading at 0.2%. The Core CPI Y/Y is expected to tick lower to 4.7%
vs. 4.8% prior and the M/M reading to print at 0.2% vs. 0.2% prior. The Fed
is focused on Core
inflation; therefore, the Core M/M
figure will be at the top of market’s focus.

The US Jobless Claims remains a key market
moving report as the labour market data is at the top of the Fed’s and the
market’s attention. This week, Initial Claims are expected at 231K vs. 227K
prior, while there’s no consensus yet on Continuing Claims although the prior
week’s reading saw an increase to 1700K vs. 1679K prior.

Friday:
The US PPI Y/Y is expected at 0.7% vs. 0.1% prior, while the M/M reading is
seen at 0.2% vs. 0.1% prior. The Core PPI Y/Y is expected at 2.3% vs. 2.4%
prior, while the M/M figure is seen at 0.2% vs. 0.1% prior.

The University of Michigan Consumer
Sentiment Index is expected at 70.9 vs. 71.6 prior, but the market is likely to
focus more on the inflation expectations figures,with the prior
readings showing 3.4% and 3.0% for the 1-year and 5-year inflation expectations
respectively.

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

• US July non-farm payrolls +187K vs +200K expected
• Canada July employment change -6.4K versus 21.1 K estimate
• Fed’s Goolsbee: The July non-farm payrolls report is pretty much what we expect
• Fed’s Bostic: Fed likely to be in restrictive territory well into 2024
• Baker Hughes US oil rig count -4
• Fed still on track for a September hike after non-farm payrolls – CIBC
• Canada July Ivey PMI 48.6 vs 50.2 prior

Markets:

• Gold up $8 to $1941
• US 10-year yields down 14.5 bps to 4.04%
• WTI crude up $1.10 to $82.65
• EUR leads, CAD lags
• S&P 500 down 24 points, or -0.5%

The initial reaction to the non-farm payrolls report was to sell the dollar but then the market had a look at the higher wage data and there was a recovery. Ultimately though, a strong bid appeared for bonds and there was a growing sense that the Fed is probably done, something that Goldman Sachs reiterated in a note. Fed probabilities didn’t move much after the data but there’s only a 30% chance of another hike as the market grows confident that the economy is cooling.

I also strongly suspect that bond buyers were waiting in the weeds to buy Treasuries no matter the number. 30-year yields moved up as much as 30 bps this week but purchasers would have been scared to wade in and get blown up by another strong jobs report. So when the data was ‚good enough‘ they pulled the trigger, driving yields lower and taking the dollar with it.

Initially, the dollar trade was uniform but particularly strong for the euro and pound. The latter rose to the highest levels of the week in the aftermath and USD/JPY joined in as it fell below 142.00.

Later in the day there was something of a recovery in stock markets as equities stumbled. Stocks had been strong early but faded throughout the day in a 1% reversal. With that commodity currencies were hit particularly hard and CAD ended up at the bottom of the pile despite gains for oil and gas.

The week ahead features the US CPI report and that will be another big one as the market shifts from thinking about more Fed hikes to pondering when in 2024 the cuts will begin.

Have a great weekend.

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

Closing changes:

• S&P 500 -0.5%
• DJIA -0.5%
• Nasdaq Comp -0.4%
• Russell 2000 -0.2%
• Toronto TSX Comp +0.5%

On the week:

• S&P 500 -2.3%
• DJIA -0.5%
• Nasdaq Comp -2.8%
• Russell 2000 -1.2%
• Toronto TSX Comp -1.4%

July was a great month for stocks but August has gotten off to a slow start. The market looked like it would turn today as yields fell but that ultimately wasn’t enough. US yields end the day 10-15 bps lower across the curve.

Still, this is the first substantial weekly decline since March so the bulls can’t exactly complain.

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

Bank of America (BofA) outlines three primary
reasons why dips in the USDJPY exchange rate are likely to be both
shallow and short-lived. Despite the Bank of Japan’s (BoJ) recent
adjustments to its Yield Curve Control (YCC), BofA maintains its
expectation for USDJPY to rise to 147 by September.

Key Points:

• Unlikely Capital Repatriation: BofA does not foresee
  Japanese investors repatriating capital in the current fiscal year due
  to the recent YCC tweaks. This lack of repatriation is attributed to the
  preparation investors undertook last fiscal year in anticipation of
  BoJ’s policy normalization.

• No Indication of Multiple Rate Hikes: Despite the
  BoJ’s recent action, BofA believes it does not necessarily indicate a
  clear change in stance towards multiple rate hikes. Governor Ueda
  reiterated a patient stance, possibly acknowledging inflation’s upside
  risks.

• Reduced Market Volatility: Interestingly, the
  adjustments in YCC seem to have led to a decline in the USDJPY’s implied
  volatility, contradicting the idea that these changes might spark
  increased market volatility.

Summary:

BofA asserts that recent changes to the BoJ’s YCC are unlikely to
significantly impact the USDJPY exchange rate. The bank predicts that
any dips in the exchange rate will be both brief and limited in scope,
maintaining its outlook for USDJPY to reach 147 by September. This
forecast is supported by the lack of expected capital repatriation by
Japanese investors, no clear indication of multiple rate hikes from the
BoJ, and a decrease in implied market volatility.

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

This bull market started with tech and it might die with tech.

Amazon shares surged higher today on strong cloud revenue but Apple posted slowing sales, including of the iPhone and that has led to a heavy round of profit taking. Shares are down 4.6%.

The entire summer run-up in Apple has now been erased and the fear is that we could get a deeper retracement, perhaps to the 38.2% or 50% levels of the one-way trade that started at the turn of the year. That would imply a further 7-12% decline.

Here is a sense of how revenues have trended in the past year, despite an inflationary environment:

• Rev.: $81.8B, -1% y/y
• iPhone: $39.7B, -2% y/y
• Mac: $6.8B, -7% y/y
• iPad: $5.8B, -20% y/y
• Services: $21.2B, +8% y/y

The bull case for Apple has been rising services fees but if you’re selling less hardware, then there isn’t a platform for people to buy the services on.

The decline in Apple shares has contributed to a turnaround in the broader market with the S&P 500 now down 21 points to 4480 from a high of 4540. That’s a 1% reversal.

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