Headlines:

• Dollar holds more mixed with month-end, quarter-end in focus
• Risk appetite sapped as the session gets underway
• France June preliminary CPI +5.8% vs +5.7% y/y expected
• Germany June unemployment change +133k vs -6k expected
• Germany May retail sales +0.6% vs +0.5% m/m expected
• Germany May import prices +0.9% vs +1.6% m/m expected
• UK Q1 final GDP +0.8% vs +0.8% q/q second estimate
• UK June Nationwide house prices +0.3% vs +0.5% m/m expected

Markets:

• JPY leads, EUR lags on the day
• European equities lower; S&P 500 futures down 1.5%
• US 10-year yields down 5.6 bps to 3.037%
• Gold down 0.7% to $1,805.33
• WTI crude down 0.9% to $108.84
• Bitcoin down 5.9% to $18,995

A glance at markets would suggest a typical risk-off kind of day but that hasn’t really translated to much significant action in FX, for the most part at least.

Equities slumped early on with US futures being pummeled lower as the focus rests on month-end and quarter-end trading. That dragged European stocks down as well, erasing a lot of the good work from last week.

Treasuries were bid throughout with 2-year yields dipping back below 3% and commodities were also sold, with gold and oil both looking rather heavy on the session. Elsewhere, even Bitcoin slumped back below $20,000 and is in a battle to try and thwart obscurity at the moment.

The yen was a notable gainer on the session but a push lower in USD/JPY to 136.00 was quickly bid back up to 136.20-30 levels, as it is now – still down 0.2% on the day. The euro lagged as it continues to struggle for love from investors with EUR/USD falling back below 1.0400 for the first time in two weeks in a drop from 1.0450 to 1.0385.

GBP/USD was mostly little changed but is seen now down 0.2% to near 1.2100 as the dollar keeps a modest advance after a slow start. USD/CHF also recovered to push to 0.9600 only to drop back to 0.9570-80 levels now.

Against commodity currencies, the dollar is mostly little changed though USD/CAD is back up above 1.2900 with the help of some selling in oil. WTI crude is down 0.9% to $108.84 currently.

Well, it’s all about getting over the month-end and quarter-end hump today. But with tomorrow being a Friday and a long weekend in the US beckoning (Monday is 4th of July), it may be tough to read into much of the moves before next week.

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

After this concludes, the ministerial meeting will follow. There should not be any surprises as OPEC+ sticks to the status quo. A preview from earlier in the day here.

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

I never quite like the uncertainty and potential messiness that month-end flows have to offer. Sure, they’re great to fade but it’s never a guarantee especially now when there are also so many other moving parts in the market.

Risk tones are keeping softer on the day with European indices down between 1.7% to 2.3% while S&P futures are down 1.3% on the session currently. Treasury yields are holding softer but that has yet to translate to much meaningful action in major currencies, at least in my view.

EUR/USD is down 0.2% to 1.0415 after a bit of a climb to 1.0460 earlier and sellers are looking to pressure the double-bottom around 1.0365-70 on the charts:

Meanwhile, USD/JPY is down 0.2% to 136.30 after having hit a low of 135.97 earlier in the day with little conviction despite the more dour risk sentiment. Even commodity currencies are little changed against the dollar on the day.

The only decent mover is the franc as it gives back the gains from yesterday with USD/CHF rising up 0.4% to near 0.9600. EUR/CHF is also trading back up from 0.9970 to near 1.0000 again at the moment.

It’s tough to really get much conviction out there today and with month-end and quarter-end in focus, it will be tougher to digest any moves as well. Not only that, it will be a long weekend in the US with the 4th of July being a holiday and that will also make for a tricky close to the week tomorrow before the weekend.

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

• Prior 6.8%

The euro area unemployment rate fell to a new record low in May as the pandemic rebound continues to play out. In terms of numbers, the data shows a drop from 11.085 million persons without jobs in April to 11.004 million in May.

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

There’s quite a bit of change to the expiries board for today and tomorrow, with a host of expiries seen for EUR/USD tomorrow. That said, there are only a couple of large ones to be mindful of between 1.0540 to 1.0600.

Interestingly, there are also some largish expiries for USD/JPY again after a period of time where it has been somewhat lacking interest. We’ll see if that carries over to next week.

In any case, there isn’t much to really take note of for today considering where price action currently is. That will keep risk sentiment alongside month-end and quarter-end flows as the key focus in the day ahead.

For more information on how to use this data, you may refer to this post here.

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

 

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

• Prior +4.2%
• Market index 322.7 vs 320.4
• Purchase index 243.1 vs 242.8
• Refinancing index 726.1 vs 712.7
• 30-year mortgage rate 5.84% vs 5.98% prior

A slight rise in mortgage activity was seen last week after what I would say was a bit of a rush in home buying before the Fed raised rates again. The average rate of the most popular mortgage tenor did drop by 14 bps to 5.84%, but it still isn’t of much comfort to prospective home owners I would say after having seen a 33 bps rise in the week prior.

US dollar

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

• Central banks need to be resolute in acting to bring inflation down
• Policymakers cannot be complacent about a rise in longer-term inflation expectations
• Current inflation situation is a very challenging one
• Our policy communications are important for keeping inflation well anchored

Nothing new really by Mester. As mentioned earlier, markets have already more or less priced in a 75 bps rate hike next month and it’s tough to see the Fed go beyond that.

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

There isn’t much in this that hasn’t already been said in previous posts:

• EUR/CHF sticks with gradual descend to parity
• Parity beckons for EUR/CHF

The SNB policy pivot remains a key change to the major currencies landscape in the past few weeks and that is continuing to see the swissie gain as the central bank lifts up the anchor that has been weighing on the currency.

EUR/CHF is just steps away from parity and as mentioned before, that could just be the beginning of a bigger slide for the pair. The franc is the top performer today and one pair that I have also been harping about is CHF/JPY and that is up to 143.00 now. It was holding around 135.00 before the SNB pulled off the surprise two weeks back.

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

TerraUSD’s (UST) and
Luna’s crash is perhaps one of the most unexpected events in the cryptocurrency
market. While there was a lot of optimism about Luna’s future and the
ecosystem, the Terra venture still somehow nearly ended.

 

Seeing what happened,
now may be an excellent time to reexamine any expectations you have about
stablecoins. So here are four lessons to note from the collapse of UST and
Luna.

 

Crashes are Almost
Immediate

 

Being an algorithmic
stablecoin, the UST is pegged to the value of a steadier asset, the greenback.
However, that peg broke when the market was in a downtrend, pushing its value
as low as 4 cents. And since the UST has a strong correlation with Luna, its
sister token also lost around 90% of its value.

 

That slump occurred
only in hours, and some investors could not have enough time to make their
exit. That is why being alert and ready is crucial when you’re faced with
events such as this. One good move is to use stop-loss and take-profit orders
on your open positions.

 

Stable Reserves are
Vital

 

Stablecoins aims to
provide the benefits of the cryptocurrency’s speed and decentralization and the
fiat currency’s stability in value. However, the well-known stablecoins today
don’t follow a completely decentralized model.

 

Meanwhile, UST is an
algorithmic stablecoin that uses an alternative model. Instead of dollars
backing the token, the model made UST programmatically supported by the crypto
Luna.

 

UST holders can always
exchange their stablecoin for a dollar worth of newly minted Luna. Conversely,
investors can redeem their Luna holdings for a UST equal to the dollar value of
Luna redeemed.

 

That system resulted in
arbitrage incentives like the USDT that regularly redirected the stablecoin’s
market price to one dollar.

 

However, UST’s
stability and liquidity were not as strong as the real dollar. If many UST
holders were to exchange their holdings simultaneously, Luna’s value could take
a steep dive after exchanges were swamped with a great deal of supply. That,
unfortunately, is what exactly happened this month.

 

The UST could have
avoided such a situation if it was supported by an asset with a more robust
market and less unstable value when pressured.

Major Crypto Players
Can Still Fail

 

The UST’s and Luna’s
crash supports that cryptocurrency assets remain highly risky. While cryptos
like Bitcoin, Ethereum, and Cardano are already significantly valuable, they
still carry a lot of risks.

 

Like other assets,
cryptocurrencies are not entirely safe. Technical malfunctions, hacks, or
conflicts can disrupt the crypto market. As a result, even major crypto players
are at risk of experiencing sharp declines and losing their credibility.

 

Choose Value Over Hype

 

UST’s and Luna’s
misfortune proves that several professional investors don’t have much helpful
information about what is safe and not in the cryptocurrency space.

The reliability of an
investment is not based on its market value. While the majority is going where
the money is, that doesn’t mean you should do the same. Remember, using due
diligence is crucial.

 

UST failed due to a
flawed arbitrage mechanism that nearly everyone can analyze from the start.
Previous coins that used similar mechanisms were tested and failed several
years ago. That information, however, did not concern most investors.

 

So when they had the
chance to leave before the collapse took place, many investors could not do
their research and make the necessary preparations.

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