Headlines:

• Not much to get excited about the ECB meeting decision later
• Major currencies slow things down after the action yesterday
• BOJ data does not suggest evidence of intervention on 17 July
• Japan chief Cabinet secretary says no comment on FX moves
• UK May ILO unemployment rate 4.4% vs 4.4% expected
• Switzerland June trade balance CHF 6.18 billion vs CHF 5.81 billion prior
• China’s Communist Party central committee adopts resolution on further deepening reforms

Markets:

• AUD leads, GBP lags on the day
• European equities higher; S&P 500 futures up 0.1%
• US 10-year yields up 4.3 bps to 4.188%
• Gold up 0.2% to $2,463.58
• WTI crude down 0.1% to $82.74
• Bitcoin up 0.2% to $64,687

It was a much quieter session as markets calmed down following all the action yesterday.

In FX, the Japanese yen nudged lower as BOJ data suggested no evidence of intervention yesterday. USD/JPY had already risen from a low of 155.36 in Asia to around 156.00-30 before pushing to around 156.45 now.

Meanwhile, the pound is also a touch softer as GBP/USD continues to stay under the 1.3000 mark. That despite the UK labour market report showing indications that wage pressures remain on the high side for the BOE.

Besides that, there is very little action elsewhere in the FX space with other major currencies not doing much.

That owes much to the calmer mood in equities today as well. US futures are steadier following the selloff in tech shares yesterday. But it is still early in the day, and we could see the overall mood switch up again – one way or another – later in US trading.

For now, it’s on to the ECB policy decision next. But that shouldn’t be one to get traders off their seats, given that the central bank is to keep rates unchanged and defer thing to the September meeting instead.

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

It is very much a placeholder meeting as the ECB has made it clear that they will not cut rates today. Instead, policymakers have been teeing up the idea of the next move coming in September. So, this will be a slight pause following the rate cut in June.

As such, there will be very little to scrutinise in the decision later. The narrative now is that the ECB is still reaffirming that policy is restrictive enough after the first rate cut. And that they are waiting to gain more confidence in the months ahead on the disinflation process.

In fact, the latter was already part and parcel of the equation in June as evident by the meeting accounts here. The governing council ended up supporting Lane’s proposal to cut key rates by 25 bps but there were quite a number of reservations put forward with regards to the inflation outlook.

So, those same reservations i.e. stronger services inflation and wage pressures, will be used as reasons for them to stay on the sidelines today.

I wouldn’t expect much from Lagarde either as it would not be prudent to pre-commit to a move in September. That would be a big misstep on her part if it happens. As poor as she has been in some of the pressers before, I don’t see her pulling off such a miscommunication this time.

It will be pretty much ensuring that September remains live with a strong probability of cutting again if things continue to trend accordingly. But at the same time, reaffirming that they have the flexibility to react to any surprises in the data.

The best way in telling that they did the job right today will be to observe minimal reaction in the euro itself.

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

When copper futures eyed a push above $5 per pound in May, it looked like we were starting to witness one of the breakout trades this decade. However, the hype quickly died down as price fell sharply towards the end of May and that led to another 5% drop in June. The slight rebound earlier this month has been dashed and copper is down almost 5% again in the last four days:

A key thing to note in the fall this week is that price is breaking below the 100-day moving average (red line) for the first time since February. That’s a big blow to the buying momentum and frees up room for a steeper decline. Now, the June low at $4.31 will be eyed before going back to support from the Fib levels above.

Fundamentally, the factors driving copper prices higher this year hasn’t changed too much. The drive for the green transition and supply concerns were key reasons in providing a tailwind for copper.

But at the same time, copper tends to correlate with the health of the global economy. And the outlook for the latter has been struggling, especially with the major slowdown in China since last year. For some context, China buys roughly 40%-50% of the newly mined copper each year. So, that’s a major demand source.

From a structural perspective, I believe that copper still has some bullish underlying factors going for it. But it might have to wait until after the summer for that to show up in the price. That as well as the technicals providing some supportive factor for buyers to step back in.

Looking at the seasonal pattern, August has been the worst month for copper over the last 20 years. So, that’s one reason to stay guarded for at least the next few weeks.

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

Fundamental
Overview

The Nasdaq posted its biggest daily decline since December 2022 yesterday
as the rotation out of big tech stocks into more rate sensitive names
continues. We can clearly see this internal market dynamic unfolding as the
Russell 2000 and the Dow keep on gaining.

In the big picture, the fundamentals did not change, on the contrary the
soft-landing narrative strengthened as we continue to see inflation falling
while the economy continues to grow. This week, we got more positive data with US Retail Sales and Industrial Production beating expectations by
a big margin.

It looks like the Fed is going to cut rates into a
resilient economy and that should be a strong bullish driver.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq had a pretty bad day yesterday posting the biggest daily
decline since 2022. The price broke through some key levels and extended the
move to the downside as the bearish momentum increased.

We now have another trendline around the 19700 level where we can
expect the dip-buyers to step back in with a defined risk below the trendline
to position for a rally into a new all-time high. The sellers, on the other
hand, will want to see the price breaking lower to increase the bearish bets
into the next major trendline around the 19000 level.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a good resistance zone now around the 20300 level
where we can find the confluence of the trendline, the previous resistance now turned support and the Fibonacci retracement levels.

If we get a pullback into
the resistance, we can expect the sellers to step in to position for a drop
into the 19700 level with a better risk to reward setup. The buyers, on the
other hand, will want to see the price breaking above the resistance and the
downward trendline to regain some control and position for a rally into new
highs.

Nasdaq Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is right in the middle of the key levels, so from a risk
management perspective, there’s not much to do here. More aggressive sellers
might pile in on a break below the yesterday’s low but the risk to reward setup
would be worse. The red lines define the average daily range for today.

Upcoming Catalysts

Today we get the latest US Jobless Claims figures.

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

Headlines:

• Japanese yen surge continues in European morning trade
• Japan top currency diplomat Kanda says no choice but to respond to speculators
• US futures fall further as tech shares feel skittish
• Traders trim BOE rate cut bets for August after inflation data
• UK June CPI +2.0% vs +1.9% y/y expected
• Eurozone June final CPI +2.5% vs +2.5% y/y prelim
• Fed’s Williams says rate cut could be warranted in the coming months

Markets:

• JPY leads, USD lags on the day
• European equities lower; S&P 500 futures down 1.0%
• US 10-year yields up 0.8 bps to 4.175%
• Gold up 0.1% to $2,470.15
• WTI crude up 0.4% to $81.05
• Bitcoin up 0.3% to $64,850

It was an eventful session with some big market moves this time around in European morning trade.

The Japanese yen came to life with USD/JPY falling from 158.30 in Asia all the way to a low of 156.10, before a light bounce after.

The move was a strong one-sided pull lower but spread across three hours. It wasn’t quite the sharp minute moves that we saw during the intervention last week. But still, there could be the possibility of Japan giving things a slight nudge to help with the move lower.

I mean, they have been changing up their strategy as of late to intervene when market conditions favour their directional view.

There were also other factors in play during the session, most notably a selloff in equities. That alongside a weaker dollar is arguably exacerbating the drop in USD/JPY, coupled with a technical break here.

After the gains yesterday, US stocks look set for an off day with futures pushed lower. S&P 500 futures are down 1% with tech shares slumping hard. Nasdaq futures are down 1.6% while Dow futures are „only“ down 0.3%. Russell 2000 futures are down 0.8% but briefly erased losses early on in European trading.

The softer risk environment is seeing USD/CHF also down 0.8% to 0.8865 while EUR/USD is up 0.4% to 1.0940 on the day. At the same time, GBP/USD is also pushing above 1.3000 for the first time in a year as UK inflation remains stubborn in June. That saw traders scale back on bets for an August rate cut.

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

• Prior -0.2%
• Market index 214.1 vs 206.1 prior
• Purchase index 140.4 vs 144.3 prior
• Refinance index 613.0 vs 532.3 prior
• 30-year mortgage rate 6.87% vs 7.00% prior

The jump in mortgage applications in the past week comes as the average rate of the most popular US home loan drops by some 13 bps back under 7%. The rebound owes to a surge in refinancing activity, which offset a decline in purchases on the week.

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

Fundamental
Overview

The USD remains on the
backfoot as the US data continues to point to resilient growth with falling
inflation. Yesterday, we got a good US Retail Sales report suggesting that the stories
of deteriorating consumer spending might have been exaggerated. Overall, this
should support the soft-landing narrative and be positive for the risk
sentiment.

The CAD, on the other hand,
remains supported against the US Dollar mainly because of the risk-on
sentiment. This morning we’ve been seeing even more weakness for the greenback
which might be due to the selloff in the USDJPY pair as flows there could have
spilled over into other markets. On the monetary policy front, yesterday’s Canadian
CPI sealed the rate cut at the upcoming meeting as the data missed
expectations across the board.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD bounced from the key 1.36 support zone and extended the rally into the 1.37
handle before pulling back. If the price falls back into the support zone, we
can expect the buyers to step in once again to position for a rally back into
the 1.3785 resistance. The sellers, on the other hand, will want to see the
price breaking below the support zone to increase the bearish bets into the new
lows with the 1.35 handle as the first target.

USDCAD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price this week broke out of the tight range between 1.3600 and
1.3650 levels and extended the rally into the 1.37 handle. We are now seeing a
pullback into the resistance
turned support at 1.3650 where we can expect the buyers to step in to
position for the continuation of the rally. The sellers, on the other hand,
will want to see the price falling back below the 1.3650 level to increase the
bearish bets into the 1.36 support targeting a breakout.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price today fell below the upward trendline
that was defining the recent bullish momentum. This might be a reversal signal
or just a more complex pullback. A break above the downward trendline should
give the buyers more confidence for new highs, while the sellers will likely
lean on it to position for a break below the 1.3650 level. The red lines define
the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking. Tomorrow, we have the latest US Jobless
Claims figures, while on Friday we conclude with the Canadian Retail Sales
data.

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

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Fundamental
Overview

The upward momentum in the S&P 500 has been kept at bay recently as the
goldilocks data triggered a strong rotation into small caps stocks with the
Russell 2000 having its best
week in 24 years.

It also looks like the rotation has been driven by hedge funds facing short
squeezes on their small cap hedges as yields come down. This is just internal
market dynamics as the fundamentals have not changed.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that in case we get a deeper pullback, the buyers will find a good support
zone around the 5500 level where we can find the confluence
of the trendline
and the 38.2% Fibonacci
retracement level. The sellers, on the other hand, will want to see the
price breaking below the trendline to increase the bearish bets into the 5200
level next. As of now though, there are no reasons to expect such a big
pullback.

S&P 500 Technical Analysis – 4 hour
Timeframe

On the 4 hour chart, we can
see that we have another minor trendline defining the current bullish momentum.
We can expect the buyers to lean on this trendline with a defined risk below it
to position for new all-time highs with a better risk to reward setup. The
sellers, on the other hand, will want to see the price breaking below the
trendline to position for a drop into the 5500 level next.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we’ve been having a rangebound price action recently as rotation into
small caps stocks kept the momentum at bay. The bias remains bullish
nonetheless and we have key levels where the buyers can limit their risk. The
red lines define the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking while tomorrow we conclude with the
latest US Jobless Claims figures.

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

• Dollar keeps steadier so far on the day, eyes on US retail sales later
• US retail sales gains more attention as Japan eyes big data to intervene
• BOJ data suggests Japan also intervened in the FX market on 12 July
• Eurozone May trade balance €13.9 billion vs €15.0 billion prior
• Germany July ZEW survey current conditions -68.9 vs -74.5 expected
• 10-year Treasury yields erase the jump higher from yesterday
• Italy June final CPI +0.8% vs +0.8% y/y prelim
• European stocks hold lower in the opening stages today
• What are the main events for today?
• Geopolitics trumps higher inflation as top tail risk in latest BofA fund manager survey
• Eurostoxx futures -0.4% in early European trading
• FX option expiries for 16 July 10am New York cut
• A couple of light releases to move things along in European trading today

It was an
uneventful European session with no central bank speaker and just the German
ZEW survey as the main highlight. The survey recorded the first decline in 2024
due to a bigger than expected fall in German exports in May, the political
uncertainty in France and the lack of clarity regarding the future monetary
policy by the ECB.

The index
has been climbing steadily, so a minor pullback isn’t something to be concerned
about. The situation indicator for the Eurozone, on the other hand, changed
only marginally climbing 2.5 points to a new reading of minus 36.1 points.

In the
markets, the major currencies are little changed with the US Dollar flat on the
day. Treasury yields erased yesterday’s gains. The S&P 500 and the Nasdaq
are mostly flat while the Russell 2000 continues to outperform.

Gold is
having another good day as it’s up 0.80% while crude oil is going for the third
consecutive negative day being down 1.40%. Bitcoin was down almost 4.0% at some
point but has recovered half the losses and it looks like it has further legs
to the upside.

The focus
will now switch to the Canadian CPI and US Retail Sales data both due in an hour.

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