Technical Analysis

The USD is the strongest and the CHF is the weakest as the North American session begins

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The USD is the strongest and the CHF is the weakest as the North American session begins and ahead of the key US jobs report. Most of the major currencies are bunched together. Apart from the USDCHF, the rest of the major currencies are down less than 0.18% vs the close yesterday and the EUR, GBP, AUD and NZD are all within 0.09%.

Yesterday the Bank of England raise rates by 25 basis points. In BOE’s Governor Bailey’s press conference he said:

  • Anticipates inflation to drop to approximately 7% in July and further decrease to around 5% by October.
  • BOE will evaluate the most fitting path for rates based on evidence, and balance risks accordingly.
  • Concerning the labor market, Bailey emphasized that the status of the labor market and wage rates significantly affect the economy.
  • Regarding economic growth and resilience, Bailey noted that projections for economic activity have weakened since May, with some unexpected downturns in June but also signs of recovery.

In the US yesterday, Richmond Fed President Barkin spoke and was hopeful for slower growth and inflation. He underscored a range of significant economic concerns and predictions. He expressed concern over the high rate of inflation, while also indicating some optimism regarding last month’s inflation reading, which he described as ‘good’ and hoped it signaled a positive trend. He clarified that the objective is not to cause a recession but to reduce inflation. In the event of a recession, he suggested it might be less severe and cause less labor market dislocation than might otherwise be expected. Looking forward, he anticipates that further economic slowing is ‘almost surely on the horizon’. Despite current weakening trends, he asserted that consumer spending is ‘far from weak’. He acknowledged that attempts to address inflation have resulted in ’mini-recessions’ in several industries. Interestingly, he stated that economic dislocation caused by the pandemic has been among the factors preventing a full-scale recession so far.

Overnight, European data came out mixed with France underperforming, while Germany outperformed. Retail sales disappointed in the EU.

  • German Factory Orders m/m were at 7.0%, significantly outperforming the forecast of -2.1% and higher than the previous value of 6.2%.

  • French Industrial Production m/m decreased to -0.9%, worse than the forecast of -0.3% and a significant drop from the last reading of 1.1%.

  • French Prelim Private Payrolls q/q came in at 0.1%, underperforming the forecast of 0.2% and lower than the previous 0.4%.

  • Italian Industrial Production m/m was at 0.5%, a positive surprise given the -0.3% forecast and a decrease compared to the last reading of 1.7%.

  • GBP Construction PMI stood at 51.7, higher than the forecast of 48.1 and the previous figure of 48.9.

  • EUR Retail Sales m/m were at -0.3%, lower than the forecast of 0.3% and a drop from the previous 0.6%.

Of course the US and Canada jobs reports will be released today. Each will be released at 8:30 AM ET. Canada is expected to show employment change of 21.1K vs 59.9K last month. The unemployment rate is expected to rise to 5.5% vs 5.4%.

Here is what to look for this month in the USD.

  • Consensus estimate +200K (range +140K to +300K)
  • Private +179K
  • February +311K
  • March +236K
  • April +190K
  • May +339K
  • June +209K
  • Unemployment rate consensus estimate: 3.6% vs 3.6% prior
  • Participation rate prior 62.6%
  • Prior underemployment U6 6.9%
  • Avg hourly earnings y/y exp +4.2% y/y vs +4.4% prior
  • Avg hourly earnings m/m exp +0.3% vs +0.4% prior
  • Avg weekly hours exp 34.4 vs 34.4 prior

Here’s the June jobs picture so far:

  • ADP employment 324K vs 190K expected
  • ISM manufacturing employment 44.4 vs 48.1 prior (lowest since July 2020)
  • ISM services employment 50.7 vs 53.1
  • Philly employment -1.0 vs -0.4 prior
  • Empire employment +4.7 vs -3.6 prior
  • Initial jobless claims survey week 228K vs 240K expected

You can read Adam’s other thoughts on the report by CLICKING HERE.

The earnings calendar had a slew of releases after the close with Apple and Amazon leading the way. Most of the major large-cap earnings releases are now over for this season. Nvidia is the exception with their earnings expected for release on August 23.

Apple Inc (AAPL) – BEAT

  • EPS: 1.26, expected: 1.19
  • Revenue: $81.80 billion, expected: $81.69 billion

Amazon.com Inc (AMZN) – BEAT

  • EPS: 0.65, expected: 0.35
  • Revenue: $134.4 billion, expected: $131.5 billion

Apple shares are trading down $-4.58 or -2.40% had $186.40. Amazon shares are going the other way with a gain of $11.18 or 8.67% $140.02

A snapshot of the markets as the NA session gets underway shows:

  • Crude oil is trading up $0.41 or 0.50% at $81.95. Yesterday Saudi Arabia announced that they would continue their 1 million barrel per day voluntary cut in production. That sent the price sharply higher. Resistance remained between $82.43 and $83.44.. Crude oil is up 1.59% this week
  • Spot gold is trading down $1.59 or -0.08% $1932.20
  • Silver is trading down 14.5 cents or -0.61% $23.40
  • Bitcoin is trading $29,118. The price near 5 PM yesterday was at $29,284

In the premarket for US stocks, the major indices are trading mixed after yesterday’s modest declines

  • Dow Industrial Average is trading down -43.8 points after yesterday’s -66.63 point decline
  • S&P index is trading down -3 points after yesterday’s -11.52 point decline
  • NASDAQ index is trading up 4 points after yesterday’s -13.73 point decline

Going into the final day of the week:

  • Dow Industrial Average is down -0.69%
  • S&P is down -1.75%, its worst week since March
  • NASDAQ index is down -2.49%, its worst week since March

In the European equity markets, the major indices are trading lower for the 5th consecutive day

  • German DAX, -0.61%. Down -4% this week
  • France’s CAC, -0.04%. Down -2.9% this week
  • UK’s FTSE 100, -0.5%. Down -2.58% this week
  • Spain’s Ibex, -0.22%. Down -4.03% this week
  • Italy’s FTSE MIB, -0.57% (delayed)

In the Asian Pacific today, equity markets closed higher:

  • Japan’s Nikkei 225, +0.10%
  • China’s Shanghai Composite, +0.23%
  • Hong Kong’s Hang Seng, +0.61%
  • Australia’s S&P/ASX 200, +0.19%

In the US debt market, yields are mixed. The shorter and today is higher in yield while the longer and is mostly lower reversing the pattern this week.

  • 2-year yield, 4.919%, +2.3 basis points. Two-year yields are up 5.3 basis points this week
  • 5-year yield, 4.316% +1.6 basis points. Five-year yields are up 15 basis points this week
  • 10-year yield, 4.185% -0.3 basis points. 10 year yields are up 23.3 basis points this week
  • 30-year yield, 4.281% -2.2 basis points. 30 year yields are up 27.2 basis points this week

In the European debt market, benchmark 10-year yields are higher. The UK yield lags a bit after the BOE raise rates by 25 basis points but had more dovish overtones

This article was written by Greg Michalowski at www.forexlive.com. Source