Headlines:

• Sterling looks to UK general election as next key risk event
• Reminder: US markets will be closed tomorrow
• Japan reportedly to issue new floating-rate bonds to help investors if BOJ hikes rates
• Fed’s Williams casts doubt over rise in neutral rate
• Eurozone May PPI -0.2% vs -0.1% m/m expected
• Eurozone June final services PMI 52.8 vs 52.6 prelim
• UK June final services PMI 52.1 vs. 51.2 prelim
• US June Challenger layoffs 48.79k vs 63.82k prior

Markets:

• EUR and GBP lead, JPY lags on the day
• European equities higher; S&P 500 futures flat
• US 10-year yields down 0.4 bps to 4.431%
• Gold up 0.7% to $2,345.23
• WTI crude flat at $81.93
• Bitcoin down 2.9% to $60,135

It was a relatively slow session with major currencies not up to much. USD/JPY continues to be in focus, extending gains and inching closer towards the 162.00 mark. The dollar itself is trading more mixed, holding in relatively narrow ranges for the most part.

There weren’t any meaningful headlines, with the only stand out perhaps being Japan reportedly looking to issue a new floating-rate type of bond. But that won’t be something that will happen any time soon at least.

Major currencies didn’t really get much help from broader markets as well. European equities are bouncing back strongly today after the gains in Wall Street yesterday. However, US futures are more muted on the day. Meanwhile, the bond market also isn’t offering much of anything.

It’s now over to the US ADP employment roulette report to see how that will shake things up before the holiday tomorrow.

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

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

US-based employers announced 47,786 job cuts in June, which is roughly 20% higher than the same month a year ago. The monthly pace of layoffs has been easing a touch since February, so that’s a slight positive.

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

• The value of R-Star is always highly uncertain
• But the case for a sizable increase has yet to meet two important tests
• Recent data reinforce the continuation of pre-pandemic trends in global demographics and productivity growth
• One should not overly rely on estimates of R-Star in determining appropriate monetary policy setting at a given point in time

This is a debate for economists and not really one for traders. There is a camp in the former that argues that the real neutral rate of interest has risen but Williams is downplaying that as you would expect, given that the Fed is looking to cut rates with no actual target floor just yet.

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

• Prior +0.8%
• Market index 206.5 vs 212.0 prior
• Purchase index 142.9 vs 147.8 prior
• Refinance index 544.1 vs 552.4 prior
• 30-year mortgage rate 7.03% vs 6.93% prior

Mortgage applications fell in the past week with both purchases and refinancing activity also declining. It comes as the average rate of the most popular US home loan rises back above the 7% mark. Overall, it still points to rather subdued conditions in the housing market.

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

• Euro’s lack of faith highlights risks surrounding French elections
• Stocks stay pressured in European morning trade
• Eurozone May unemployment rate 6.4% vs 6.4% expected
• Eurozone June preliminary CPI +2.5% vs +2.5% y/y expected
• ECB’s Vasle: We can cut rates further if things go as expected
• Fed’s Goolsbee: Interest rates are restrictive now
• ECB’s Centeno: Every meeting is open for us to make a decision
• ECB’s Muller: We can probably cut rates again before year-end
• ECB’s de Guindos: We are not following a pre-determined path on interest rates
• European equities sag at the open as early week optimism stumbles
• What are the main events for today?
• ECB’s Lane: June inflation data seems in line with our assessment
• ECB’s Wunsch: There is room for second rate cut barring any major negative surprises
• BOJ expected to trim monthly bond purchases by ¥16 trillion in first year – survey

The
European session was pretty much uneventful. We got some ECB speakers
reaffirming the need to wait for more data before deciding on a rate cut in
September. The main highlight was the Eurozone inflation report which showed
the headline reading ticking lower to 2.5% Y/Y and the Core measure remaining
unchanged at 2.9% Y/Y.

Zooming
out, inflation in the Eurozone stabilised around 2.5% Y/Y for the headline
reading and 2.9% Y/Y for the Core measure. The bad news for the ECB is the
stickiness in services inflation which has been stuck at 4.0% Y/Y since
November 2023.

The central
banks are now switching their focus from inflation to the labour market as
that’s what could keep inflation higher for longer. We saw ECB’s Vasle this
morning emphasising that the labour market will be important for the next
steps. This is also something that has been transpiring from the Fed’s
statements and speeches.

In the
markets, the US Dollar is basically flat on the day. Equities are down. Bonds
are mostly flat. Gold is lower and Crude oil is higher.

The focus
will now switch to the US Session as we get the US Job Openings which are
expected to ease further, and Fed Chair Powell
speaking the European Central Bank Forum on Central Banking 2024 in Sintra,
Portugal.

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

The euro might have looked fairly optimistic early yesterday but is getting a reality check today. The first round of the French elections showed a clear win for Le Pen’s far-right faction. Although the margin of victory was a little less than expected, it also reaffirmed a failure on Macron’s government in appeasing the people.

The worry now is that we might just see a hung parliament in France. There’s a lot at stake as we head into the second round of 7 July. And the risks there are perhaps reflected in the euro’s lack of faith today.

EUR/USD is down 0.2% to 1.0715, nearly erasing the entirety of the opening gap higher from yesterday. Meanwhile, EUR/GBP and EUR/CHF are both down 0.1% to 0.8480 and 0.9685 respectively on the day.

It’s a tough situation for traders to balance out. On the one hand, major political uncertainty in the region’s second largest economy is not a good sign. And there’s the threat of this being a sign of things to come in other countries in Europe too. On the other hand, Le Pen has also promised to increase spending. And that entails fiscal risks to France at a time when they are already under scrutiny from the EU.

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

Here’s a snapshot of things currently:

• Eurostoxx -0.9%
• Germany DAX -1.1%
• France CAC 40 -0.7%
• UK FTSE -0.3%
• S&P 500 futures -0.4%
• Nasdaq futures -0.4%
• Dow futures -0.3%

In Europe, French political worries remain a concern and the inflation data here also continues to keep the ECB from feeling too confident in wanting to cut interest rates further. So, that is helping to see stocks pull back following the gains yesterday.

Meanwhile, tech shares were key in driving gains in Wall Street higher yesterday. But they are less enthused today and that is making for a bit of a mixed start to the week.

Just be reminded though that July tends to be a good month for US stocks in particular. But is it about time that the winning streak comes to an end? The first major hurdle of the month will be the US jobs report this Friday. So, we’ll have take it from there.

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

Fundamental
Overview

The USD has been overall
rangebound in the last couple of weeks. The last week’s strength might have
been influenced more by quarter-end flows rather than something fundamental as
the economic data didn’t change interest rates expectations. Nonetheless, all
else being equal, the data should continue to support the risk sentiment amid a
pickup in growth without inflationary pressures and that could weigh on the US Dollar eventually.

The CHF, on the other hand,
weakened a lot as the SNB cut
rates by 25 bps bringing the policy rate to 1.25%. Now, the rate cut wasn’t
really a surprise as the market was already pricing a 68% chance going into the
event. What added to the Swiss Franc weakness was the central bank lowering its
inflation forecasts.

The only
thing bullish for the CHF was the line saying that the SNB “will be ready to
intervene in FX market if needed and as necessary”, but we already knew that
from the Chairman Jordan’s comments,
and they won’t do it unless inflation surprises to the upside or they see risks
of inflation overshooting their projections.

USDCHF
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCHF rallied strongly following the SNB decision and the price is
not near the key trendline
around the 0.9050 level. This is where we can expect the sellers to step in
with a defined risk above the trendline to position for a drop into new lows.

The buyers, on the other
hand, will want to see the price breaking higher to increase the bullish bets
into the highs.

USDCHF Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor trendline now defining the current bullish momentum.
If we get a pullback from the major trendline, we can expect the buyers to lean
on the minor trendline with a defined risk below the 0.90 handle to position
for a break above the major trendline with a better risk to reward setup.

The sellers, on the other
hand, will want to see the price breaking below the minor trendline and the 0.90
handle to turn the bias more bearish and increase the bets into new lows.

USDCHF Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have also the 50% Fibonacci retracement level around the minor
trendline. This should technically strengthen the support zone and give the
buyers a good level where to lean on.

The sellers will need the
price to fall below the 0.90 handle to invalidate the bullish setup and
increase the bearish bets into new lows. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Job Openings and Fed Chair Powell speaking. Tomorrow, we
get the US ADP, the US Jobless Claims, the US ISM Services PMI and the FOMC
Meeting Minutes. On Thursday we will get the latest Swiss CPI figures and it’s
also going to be a US Holiday for Independence Day. Finally, on Friday, we
conclude the week with the US NFP report.

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

Fundamental
Overview

Crude oil extended the
gains after breaking above the key $80 resistance as the market eventually
caught up to the positive drivers. In fact, we got the OPEC+’s extension of
voluntary output cuts, and we’ve been seeing a pickup in
economic activity.

We have also some major
central banks beginning to ease their policies and China will likely continue
to do so as deflationary forces remain present. All else being equal, this
should support the demand outlook in the big picture.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil broke through the key resistance around the 80 level and after some
consolidation, extended the gains as the buyers piled in more aggressively. The
first target should be the 84.50 level where we might get a rejection and
possibly a pullback as the sellers will likely step in with a defined risk
above the level to position for a drop back into the 80 level.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor trendline
now defining the current bullish momentum. If we get a pullback, the buyers
will likely lean on it to position for a break above the 84.50 level with a
better risk to reward setup. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 80 level.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more closely the recent price action with the rally yesterday following the
US
ISM Manufacturing PMI. That was a headscratcher as the data came out on the
softer side.

Nonetheless, the buyers
might want to wait for a pullback before increasing their positions, while the
sellers will want to lean on the 84.50 resistance and increase the bearish bets
on key downside breaks. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Job Openings and Fed Chair Powell speaking. Tomorrow, we
get the US ADP, the US Jobless Claims, the US ISM Services PMI and the FOMC
Meeting Minutes. Thursday is going to be a US Holiday for Independence Day.
Finally, on Friday, we conclude the week with the US NFP report.

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