Oil up over $2/bbl as hopes fade for OPEC+ supply boost

Oil prices settled up more than $2 a barrel on Friday as attention turned to next week's OPEC+ meeting and dimming expectations that the producer group will imminently boost supply.

Brent crude futures contract for September, which expire on Friday, jumped more than $3 a barrel during the session and then pared gains to settle at $110.01 a barrel, up $2.87, or 2.7%. The more active October contract was up $2.14, or 2.1%, at $103.97.

U.S. West Texas Intermediate (WTI) crude futures settled at $98.62 a barrel, rising $2.20, or 2.3%, after jumping more than $5 a barrel.

Both contracts logged their second monthly losses, with Brent down about 4% for July and WTI nearly 7% lower.

Oil pared some gains after the release of data from oil services firm Baker Hughes, which showed that U.S. drillers added crude rigs for a record 23 months in a row, indicating more supply ahead. [RIG/U]

In July, the oil rig count rose 11, increasing for a record 23rd month in a row, while the gas count was unchanged after rising for 10 straight months, the Baker Hughes data showed.

Stronger stock markets supported oil, as did a weaker dollar, which makes oil cheaper for buyers with other currencies.

"These days, there has been a lot of macro influences on the oil market with the stock market making a nice rebound and a similar fall in the dollar feeding into (today's prices)," said John Kilduff, partner at Again Capital LLC.

Global equities, which often move in tandem with oil prices, were up on the hope that disappointing growth figures would encourage the U.S. Federal Reserve to ease up on monetary tightening. [MKTS/GLOB]

A Reuters survey forecast Brent would average $105.75 a barrel this year with U.S. crude averaging $101.28. [OILPOLL]

Front-month Brent futures are selling at a rising premium to later-loading months, a market structure known as backwardation, indicating tight current supply.

"The oil market in Europe is considerably tighter than in the U.S., which is also reflected in the sharply falling Brent forward curve," said Commerzbank (ETR:CBKG) analyst Carsten Fritsch.

Investors will next watch the Aug. 3 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together known as OPEC+.

OPEC+ sources said the group will consider keeping oil output unchanged for September with two saying a modest increase would be discussed.

A decision not to raise output would disappoint the United States after President Joe Biden visited Saudi Arabia this month hoping for a deal to open the taps.

Analysts said it would be difficult for OPEC+ to boost supply, given that many producers are already struggling to meet production quotas.

OPEC+ compliance with oil output cut pledges reached 320% in June, Russian Interfax news agency reported, citing a source familiar with the data. It said the group's combined oil underproduction was 2.84 million barrels per day last month.

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EUR/USD Price Analysis: Range bound within 1.0100-1.0260 since July 22

 

• The EUR/USD is set to finish the week almost flat, gaining 0.05%.
• The shared currency daily chart is neutral-to-downwards, but the hourly is neutral-to-upwards.
• EUR/USD Price Analysis: A daily close above 1.0200 could pave the way towards 1.0300; otherwise, it might drop towards 1.0096.

The EUR/USD is trading at 1.0220, after hitting a daily high at 1.0254, but later tumbled towards the daily low at 1.0145 on elevated US inflation data. In June, the Personal Consumption Expenditures (PCE) rose by 6.8% YoY, fueling expectations of additional Federal Reserve rate hikes, despite the market's pricing in only 80 bps of tightening.

EUR/USD Price Analysis: Technical outlook

From a daily chart perspective, the EUR/USD remains neutral-to-downward biased, helped by the 20-day EMA lying below the exchange rate at 1.0167. Nevertheless, the EUR/USD, unable to capitalize on an upbeat market mood, and broad US dollar weakness, keeps the shared currency exposed to further selling pressure. If EUR/USD buyers want to shift the bias to neutral, they must reclaim the May 13 low-turned-resistance at 1.0348. Once cleared, a challenge of the 50-day EMA at 1.0423 is on the cards. On the other hand, if EUR/USD sellers achieve a daily close below 1.0200, that would pave the road towards 1.0096.

U.S. Futures Rise as Amazon, Apple Shares Surge Before Market Open

U.S. stock markets are set to open higher Friday, set to end the week on a positive note on the back of strong earnings from tech giants Amazon and Apple.

By 6:46 AM ET (1046 GMT), Dow Jones futures were up 109 points or 0.34%, S&P 500 futures rose 0.77%, and Nasdaq 100 futures increased by 1.17%.

The main indices are on course for a second positive week in a row, with generally strong corporate earnings holding sway even after the Federal Reserve hiked interest rates by a further 75 basis points and GDP contracted for the second quarter in a row.

The blue-chip Dow Jones Industrial Average is 2% higher so far this week, while the broad-based S&P 500, and the Nasdaq Composite have both gained 2.8%.

Highlighting the session today will be earnings from the Big Tech sector, with both Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) surpassing expectations with their quarterly results released after the close on Thursday.

Shares in Amazon zoomed higher by more than 12% in premarket trade, thanks to a revised outlook from the company that offset slower net sales growth compared to the same period last year. Amazon now expects a jump in third quarter revenue, citing bigger fees from Prime loyalty subscriptions and resilient consumer demand.

Apple also forecasted strong demand for its flagship iPhone product despite consumers tightening other spending as economic growth slows. The firm also declined to give specific revenue guidance due to economic uncertainty but said annual sales should rise faster in the current quarter than the 2% growth it posted in the just-ended last three months.

Shares in Apple edged into the green by 2.28% in premarket trading.

A fresh batch of European data also helped ease some risk sentiment. The 19-nation Eurozone grew surprisingly strongly in the second quarter, defying expectations of a slowdown and the previous day’s weak U.S. release. Healthy performances in Spain, France, and Italy helped offset stalling growth in Europe's biggest economy, Germany.

However, inflation - which has weighed heavily on business and consumer activity in the region - came in at a new record high of 8.9% compared to the prior year, up from 8.6% in June. Analysts had been anticipating the number to stay at that prior level.

Concerns still remain that the Eurozone will tip into a recession either late this year or early next year despite the strong second quarter.

Meanwhile, crude oil prices moved up on Friday, helped by supply concerns ahead of next week’s meeting of a group of top producers even amid fears of a global recession.

By 7:08 AM EST (1108 GMT), U.S. crude futures were up 2.33% at $98.67 a barrel, while Brent crude was up 2.21% at $104.08 a barrel.

Additionally, gold futures popped slightly to $1,759.40/oz, while the EUR/USD was trading at $1.0225.

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Fed's Bostic: Fed is going to have to do more with interest rates

  "The Federal Reserve is going to have to do more with interest rates but details depend on the flow of data in coming months," Atlanta Fed President Raphael Bostic said on Friday, as reported by Reuters.

Additional takeaways

"The country is not in recession, but the real question is whether current conditions are creating hardship, inflation needs to be addressed."

There is still more work to be done on bringing demand and supply into balance."

"Rate hikes could hurt job growth, but so far seems there is momentum for continued hiring."

"Possible to control inflation while limiting the number of families who have really bad outcomes."

"The US is a ways from a recession, though concerned that recession fears could become self-fulfilling."

Market reaction

These comments don't seem to be having a significant impact on the greenback's performance against its rivals. As of writing, the US Dollar Index was down 0.25% on the day at 105.92.

Malaysia: Inflation surprised to the upside in June – UOB

 UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in the Malaysian economy.

Key Takeaways

“Headline inflation breached the 3% level for the first time this year at 3.4% y/y in Jun (from 2.8% in May). It came in higher than ours and Bloomberg consensus of 3.2%. Price pressures broadened with more consumer price index (CPI) components recording larger price increases last month compared to the preceding month, led by food and transport components.”

“We expect CPI growth to jump above 4.0% in 2H22 after averaging 2.5% in 1H22. Our 2H22 inflation outlook largely rests on high commodity prices, year-ago low base effects, persistent currency weakness, changes in some staple food prices (i.e. chicken, eggs and cooking oil), and recovering domestic demand. The new targeted fuel subsidy mechanism, which is currently under pilot testing, will pose upside risks to our inflation outlook should it be implemented over the next few months.   As such, our current full-year inflation forecast of 3.0% is subject to upward revision next month when the Jul CPI reading is released (vs. 2.5% in 2021, BNM est: 2.2%-3.2%).”

“The combination of factors including broadening second-round effects on inflation, firmer domestic economic recovery, and diminishing real interest rate gap with US continue to suggest a need for further policy normalisation. We expect Bank Negara Malaysia to deliver another 25bps rate hike at the next MPC meeting on 7-8 Sep, taking the Overnight Policy Rate (OPR) to 2.50%.

Gold price climbs to two-week high amid the post-FOMC USD selling, focus shifts to US GDP

Gold price scales higher for the second successive day and climbed to over a two-week high.

The post-FOMC USD selling bias remains unabated and is offering support to the metal.

Rebounding US bond yields, the risk-on impulse could cap gains ahead of the US Q2 GDP.

Gold price builds on the overnight goodish rebound from the $1,711 area, or a multi-day low, and gains some follow-through traction for the second successive day on Thursday. The positive move lifts the XAUUSD to over a two-week high during the early European session, with bulls now awaiting sustained strength beyond the $1,745-$1,750 strong resistance zone.

The US dollar prolongs the previous day's less hawkish FOMC-inspired decline and slips to its lowest level since July 6. This, in turn, is offering some support to the dollar-denominated gold. During the post-meeting press conference, Fed Chair Jerome Powell signalled that another large adjustment could be coming at the next policy meeting in September, but it would be dependent on the incoming data.

Furthermore, the Fed officials also acknowledged that economic indicators have softened and noted signs of a slowdown. This suggests that the US central bank would slow the pace of its interest rate hikes, which continued weighing on the greenback. That said, a goodish rebound in the US Treasury bond yields is acting as a tailwind for the buck and might keep a lid on the non-yielding gold, at least for the time being.

Apart from this, the risk-on impulse - as depicted by a generally positive tone around the equity markets - could further contribute to capping gains for gold. Even from a technical perspective, the $1,745-$1,750 region has been acting as a stiff resistance since the early part of July. This further makes it prudent to wait for strong follow-through buying before positioning for any further near-term appreciating move.

Market participants now look forward to the US economic docket, highlighting the release of the Advance Q2 GDP report later during the early North American session. The world's largest economy is expected to have grown by 0.4% annualized pace during the April-June period and avoid a technical recession. This would validate the Fed's view that the US economy isn't currently in a recession and provide a modest lift to the USD.

This, along with the US bond yields, would influence the USD price dynamics and drive the XAUUSD. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities around gold.

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GBP/USD falls towards 1.2000 as USD crawls higher ahead of data

GBP/USD returns to the red as the US dollar sees resurgent demand.

Lack of UK political news and risk-off flows weigh on cable.

The pair recaptures 21 DMA but RSI still remains bearish.

GBP/USD is extending its pullback from three-week highs of 1.2091 in the European session, as risk-off flows dominate amid the worsening European gas crisis and an imminent recession in Germany.

Investors seek refuge in the traditional safe-haven asset, the US dollar, as the buck picks up fresh bids to recapture 106.50 against its major peers. The ongoing sell-off in the US Treasury yields fail to deter the dollar bulls. The greenback also finds demand, as investors turn cautious ahead of the Fed’s expected 75 bps rate hike announcement.

Meanwhile, various factors continue to limit the bullish attempts in the pound. A lack of any encouraging on the UK political front, with candidates Liz Truss and Rishi Sunak battling out the leadership race. Ahead of next week’s BOE rate decision, money markets suggest a bold 50 bps than a conservative 25 bps increase. However, economists are much less certain, with 25 out of 54 polled by Reuters expecting a half-point hike, according to the latest Reuters poll.

Friday’s CFTC data showed IMM speculators reduced their GBP exposure by 10% in the fortnight to July 19, with gross GBP longs cut by 7,675 contracts to 33,850, per Reuters. The pair now awaits the US Durable Goods Orders and New Home Sales data. The main event risk for this week, however, remains the FOMC decision due on Wednesday.

Looking at the cable’s daily chart, the pair closed Monday above the bearish 21-Daily Moving Average (DMA), then at 1.2006.

Although with the 14-day Relative Strength Index (RSI) lurking below the midline, sellers have returned and look to retest the 21 DMA resistance turned support, now at 1.1997.

A sustained break below the latter will expose Monday’s low of 1.1960, below which a test of the 1.1900 level will be inevitable.

On the flip side, if bulls manage to defend the 21 DMA, then a fresh advance towards the descending 50 DMA at 1.2238 cannot be ruled out.

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GBP/USD strengthens beyond mid-1.2000s, hits fresh multi-week high amid weaker USD

• GBP/USD jumped to a fresh multi-week high amid the emergence of fresh USD selling.
• A positive intraday turnaround in the risk sentiment weighed on the safe-haven buck.
• Brexit woes might cap gains for the British pound ahead of the crucial FOMC decision.

The GBP/USD pair attracted some dip-buying near the 1.1960 area on Monday and shot to a nearly three-week peak during the mid-European session. The pair was last seen trading around the 1.2065-1.2070 region, up over 0.50% for the day.

Friday's better-than-expected flash UK PMI prints reaffirmed market bets for a 50 bps rate hike by the Bank of England in August and continued acting as a tailwind for the British pound. On the other hand, a positive turnaround in the global risk sentiment - as depicted by a strong intraday rally in the equity markets - weighed on the safe-haven US dollar. In fact, the USD Index languished near its lowest level since July 5 touched on Friday, which, in turn, was seen as another factor that provided a goodish lift to the GBP/USD pair.

Gold Down Over an Expected Fed Hike

Gold was down on Monday morning in Asia while investors braced for a 75-basis-point interest rate hike by the U.S. Federal Reserve this week.

Gold futures edged down 0.16% to $1,724.55 by 12:25 AM ET (4:25 AM GMT). Gold prices have dropped more than $350, or 16% since scaling above the $2,000-per-ounce level in early March due to the Fed’s aggressive rate hikes and the dollar’s rally.

The dollar which normally moves inversely to gold, inched down on Monday morning, while the benchmark U.S. 10-year Treasury yields hovered near eight-week lows.

“The fall in U.S. yields on the back of global recessionary concerns has underpinned gold,” said SPI Asset Management managing partner Stephen Innes.

“Today, we could be seeing a touch of indecision ahead of the Federal Open Market Committee which is likely to underscore the Fed dilemma of fighting inflation at the expense of growth.”

Investors are now keeping an eye on the U.S. Federal Reserve’s two-day policy meeting which concludes on Wednesday, and markets are pricing in a 75-bp interest rate hike.

The European Central Bank (ECB) joined its global peers to bring down soaring inflation and raised interest rates by 50 bps. It is expected to deliver another hike until inflation falls back to its 2% target.

In other precious metals, silver fell 0.57%, platinum edged down 0.20%, and palladium fell 1.59%.

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US Dollar Index looks bid above 107.00 ahead of PMIs

 

• The index posts decent gains beyond the 107.00 mark.
• US yields extend the decline across the curve on Friday.
• Flash Manufacturing/Services PMIs next on tap in the docket.

The greenback, in terms of the US Dollar Index (DXY), leaves behind Thursday’s pullback and regains the area beyond 107.00 the figure at the end of the week.

US Dollar Index now looks to data, FOMC

The index extends the erratic performance so far this week and advances north of the 107.00 yardstick, as market participants seen to have already digested the start of the hiking cycle by the ECB on Thursday.

Contrasting with the upbeat tone in the buck, yields in the US cash markets continue their march south and already navigate in multi-session lows across the curve ahead of the key FOMC event due on July 27.

In the NA session, the advanced Manufacturing and Services PMIs for the month of July will be the only releases of note later in the NA session.

What to look for around USD

The index looks side-lined in the 107.00 neighbourhood amidst a broad-based range bound theme so far this week.

In the meantime, the dollar remains underpinned by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and the re-emergence of the risk aversion among investors. On the flip side, market chatter of a potential US recession could temporarily undermine the uptrend trajectory of the dollar somewhat.

Key events in the US this week: Flash PMIs (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is up 0.49% at 107.12 and faces next contention at 106.38 (weekly low July 20) followed by 103.67 (weekly low June 27) and finally 103.41 (weekly low June 16). On the other hand, a break above 109.29 (2022 high July 15) would expose 109.77 (monthly high September 2002) and then 110.00 (round level).

UK Preliminary Services PMI drops to 53.3 in July vs. 53.0 expected

UK Manufacturing PMI eases to 52.2 in July, beats estimates.

Services PMI in the UK comes in at 53.3 in July, better than forecasts. 

GBP/USD keeps the rebound intact at around 1.2050 on upbeat UK PMIs.

The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) dropped to 52.2 in July versus 52.0 expected and 52.8 – June’s final reading.

Meanwhile, the Preliminary UK Services Business Activity Index for July arrived at 53.3 when compared to June’s final score of 54.3 and 53.0 expected.

Chris Williamson, Chief Business Economist at S&P Global, commented on the survey

“UK economic growth slowed to a crawl in July, registering the slowest expansion since the lockdowns of early-2021. Although not yet in decline, with pent-up demand for vehicles and consumer-oriented services such as travel and tourism helping to sustain growth in July, the PMI is now at a level consistent with just 0.2% GDP growth.“

“Forward-looking indicators suggest worse is to come. Manufacturing order books are now deteriorating for the first time in one and a half years as inflows of new work are insufficient to keep workforces busy, which is usually a precursor to output and jobs being cut in coming months."

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When is the European Central Bank (ECB) rate decision and how could it affect EURUSD?

ECB monetary policy decision – Overview

The European Central Bank (ECB) is scheduled to announce its monetary policy decision this Thursday at 12:15 GMT, which will be followed by the post-meeting press conference at 12:45 GMT. The ECB is all but certain to hike its benchmark interest rates for the first time since 2011. Markets, meanwhile, are split on whether the ECB policymakers would stick to the previously telegraphed 25 bps increase or raise rates by 50 bps to curb runaway inflation.

According to Dhwani Mehta, Senior Analyst at FXStreet: “The ECB will deliver a 50 bps lift-off this month, in the wake of rampant inflation, resumption of the Russian gas supply and the fact that the ECB is way behind the curve. It’s also worth noting that front-loading rates now may allow the central bank some room to pause or go slower on rate hikes when a recession hits.”

How could it affect EURUSD?

Given that the ECB has pre-committed to start the rate-hike cycle in July, a 25 bps increase is fully priced into the markets and might do little to provide a meaningful impetus to the shared currency. A bigger move, meanwhile, could trigger a sharp rise in the bond yields for highly indebted countries. The risk, however, could be mitigated if the ECB announces details of its new anti-fragmentation tool. Nevertheless, the event is likely to infuse some volatility around the euro cross and produce some meaningful trading opportunities around the EURUSD pair.

Eren Sengezer, European Session Lead Analyst at FXStreet, outlined important technical levels for the EURUSD pair: “On the downside, 1.0170 (Fibonacci 38.2% retracement of the latest downtrend) aligns as first support ahead of 1.0100 (psychological level, Fibonacci 23.6% retracement, 50-period SMA on the four-hour chart). In case the latter fails, the pair, once again, could test parity. Resistances are located at 1.0200 (psychological level), 1.0220 (Fibonacci 50% retracement, 100-period SMA) and 1.0270 (Fibonacci 61.8% retracement).”

About the ECB interest rate decision

ECB Interest Rate Decision is announced by the European Central Bank. Usually, if the ECB is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the EUR. Likewise, if the ECB has a dovish view on the European economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

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Gold price weakens further below $1,700, seems vulnerable near one-year low

 

• Gold price witnesses selling for the second straight day and drops to a nearly one-year low.
• The prospects for a further rise in interest rates continues to drive flows away from the metal.
• A positive risk tone exerts additional pressure; modest USD weakness fails to lend support.

Gold price is extending the overnight breakdown-momentum below the $1,700 mark and is continuing to lose ground for the second successive day on Thursday. The downward trajectory is draging the XAUUSD to its lowest level since August 2021, around the $1,689-$1,688 region during the early European session.

Gold price weighed down by hawkish central banks

The prospects for more interest rate hikes by major central banks is becoming a key factor contributing to driving flows away from the non-yielding gold. The European Central Bank is all set to raise interest rates for the first time since 2011 on Thursday. A Reuters report indicated earlier this week that policymakers might discuss a jumbo 50 bps rate hike move to tackle soaring inflation. The Federal Reserve is also expected to raise rates by another 75 bps at its policy meeting on July 26-27.

When is the Canadian consumer inflation (CPI report) and how could it affect USD/CAD?

 

Canada CPI Overview

Statistics Canada will release the latest consumer inflation figures for June later during the early North American session on Wednesday, at 12:30 GMT. The headline CPI is expected to ease from 1.4% in May to 0.9% during the reported month. The yearly rate, however, is anticipated to surge to its highest level since 1982 and come in at 8.4% in June, up from 7.7% in the previous month. More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, is estimated to rise 0.5% MoM in June and accelerate to 6.7% on a yearly basis from the 6.1% in May.

According to analysts at RBC Economics: “This continued acceleration was likely largely driven by higher food and energy prices – both of which have been boosted by global pressures. Oil prices rose another 4.8% from May and consumer food prices have been surging in part due to higher commodity prices and acute supply chain disruptions. Roughly half of inflation recently has been driven by forces beyond our borders by our count. Inflation pressures are unlikely to ease sustainably to the BoC’s 1% to 3% target range until the economy, and labour markets, have cooled substantially.”

How Could it Affect USD/CAD?

A stronger print would reinforce expectations that the Bank of Canada would continue raising interest rates more aggressively to cool demand and achieve the inflation target. This should be enough to provide an additional boost to the already stronger Canadian dollar and set the stage for a further near-term depreciating move for the USD/CAD pair.

Conversely, a softer reading - though seems unlikely - is likely to be overshadowed by the prevalent US dollar selling bias. This, in turn, suggests that the path of least resistance for the USD/CAD pair is to the downside. Hence, a subsequent slide below the 50-day SMA, towards the next relevant support near the 1.2830-1.2820 zone and the 1.2800 mark, looks like a distinct possibility.

On the flip side, any meaningful recovery attempt might now confront stiff resistance near the 1.2900 mark ahead of the 1.2925-1.2930 region. This is followed by the 1.2960 hurdle, which if cleared decisively could trigger a short-covering move and allow the USD/CAD pair to aim to surpass the 1.3000 psychological mark.

Key Notes

  •   Canadian CPI Preview: Forecasts from six major banks, inflation continued to heat up in June

  •   USD/CAD Analysis: Bears pause near 50-DMA/50% Fibo. confluence, focus shifts to Canadian CPI

  •   USD/CAD: 50 DMA guards the downside ahead of Canadian inflation

About Canadian CPI

The Consumer Price Index (CPI) released by Statistics Canada is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of CAD is dragged down by inflation. The Bank of Canada aims at an inflation range (1%-3%). Generally speaking, a high reading is seen as anticipatory of a rate hike and is positive (or bullish) for the CAD.

 Gold Price Forecast: XAUUSD path of least resistance appears down

Gold price gathers strength to retest 11-month troughs below $1,700.

US dollar stalls correction as risk sentiment turns cautious ahead ECB, BOJ.

XAUUSD faces a wall of resistance despite falling Treasury yields.

Gold price continues to mire in yearly troughs so far this week, lacking a clear directional bias amid repricing of the Fed rate hike expectations. Investors also refrain from placing any aggressive bets on the bright metal ahead of the ECB and BOJ monetary policy announcements. The BOJ is widely expected to stick to its ultra-loose monetary policy while the ECB may surprise markets with a 50 bps rate hike. More hawkish than expected ECB could weigh negatively on the non-interest-bearing gold price. Meanwhile, the lack of first-tier US macro data combined with the Fed’s ‘blackout’ period leaves the metal traders in search of a significant catalyst. Meanwhile, the XAUUSD price will remain at the mercy of risk trends, with the US earnings season underway.

The Technical Confluence Detector shows that the downside appears more compelling for Gold price, as it faces a wall of resistance should any recovery momentum pick up steam.

A dense cluster of healthy resistance levels is stacked up around $1,711, where the SMA10 four-hour, Fibonacci 61.8% one-day and Bollinger Band four-hour Middle coincide.

The next hurdle is seen at the Fibonacci 38.2% one-day at $1,714, above which bulls will need vigor to take out the confluence of the Fibonacci 23.6% one-day and 38.2% one-week at $1,716.

The previous day’s high of $1,719 will be the level to beat for XAU bulls.

Alternatively, strong support awaits at $1,704, which is the convergence of the pivot point one-day S1 and pivot point one-month S3.

The next relevant downside target is aligned at the previous week’s low of $1,698.

Further south, the pivot point one-day S3 at $1,693 will come to the rescue of gold buyers.

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USD/JPY to return to 130 area in Q2 next year – Rabobank

  Previewing the Bank of Japan's (BoJ) upcoming policy meeting, Rabobank analysts said that they expect the BoJ to revise up its inflation forecasts and lower its growth expectations.

We see USD/JPY returning to the 130 area in Q2 next year

"If USD/JPY were to spike to 145 or beyond, the inflationary impact of the BoJ’s easy policy would become greater and market speculation that the BoJ may capitulate on its YCC policy would likely increase."

The euro firmed to a one-week high on Monday, benefiting from the dollar's retreat after several Federal Reserve officials signaled they did not favour stepping up the rate hiking pace. The comments late last week knocked the dollar off two-decade highs and boosted global stocks and non-dollar currencies, especially the euro. The mood was also broadly helped by stimulus support signals from China. The greenback index, measuring its rate against six global currencies, is now almost 2% off last week's peak and by 1030 GMT, stood 0.5% lower at 107.27. The euro, the main component in that index, firmed 0.7% at $1.016, having plunged last week below parity to the dollar. "With equity markets still in positive territory, risk appetite is back so the comments from Fed governor (Christopher) Waller, ramming back on the 100 bps rise, have had the desired impact," said Derek Halpenny, head of research at MUFG. Waller and St Louis Fed governor James Bullard said they preferred a 75-basis-point interest rate increase at the Fed's July 26-27 meeting, rather than the 100 bps move some had pencilled in following an above-forecast inflation reading. After the comments, futures tied to the short-term federal funds policy rate firmly price a 75 bps hike. Speculators remain bullish on the dollar, however, with weekly U.S. CFTC data showing aggregate dollar long positions at a seven-week highs, while euro and yen short positions grew. GRAPHIC: Euro positions and volatility https://fingfx.thomsonreuters.com/gfx/mkt/zgpomxangpd/euro%20positions%20and%20vol.JPG Halpenny highlighted "a whole list of risks" for the euro. The European Central Bank is expected to raise rates by 25 bps on Thursday and investors are waiting to see if it outlines plans to deal with rising bond yields in southern euro bloc states, especially Italy. On the same day, Russia is meant to resume gas supply via the Nord Stream pipeline after a 10-day maintenance shutdown and failure to do so will spook markets, already fearing economic recession in the European Union. "With Nord Stream and the political situation in Italy, there is no compelling fundamental reason for a turnaround in euro/dollar," Halpenny said, contrasting the expected 25 bps ECB move with the 75 bps expected from the Fed. In Italy, investors are watching to see the fate of Prime Minister Mario Draghi who will address parliament this week after his resignation was rejected by the country's president. GRAPHIC: Germany's troubles https://graphics.reuters.com/GERMANY-ECONOMY/REVERSAL/gdpzygzkyvw/GermanyTroubles1.2.gif INFLATION ELSEWHERE Meanwhile, other central banks are upping the rate-hiking pace, with Canada delivering a 100 bps increase last week. New Zealand's three-decade high inflation print on Monday fuelled speculation of a bigger 75 bps move. That lifted the kiwi dollar to a 10-day high against the greenback of $0.62, up 0.4%. The Australian dollar touched a one-week high, rising 0.7%. Commodity currencies also got a boost after Chinese authorities flagged support for the property sector, lifting iron ore and copper prices Offshore-traded yuan firmed 0.5% at 6.74 per dollar. China's central bank may also deliver long-awaited policy easing on Wednesday. "The situation in China has probably troughed. We had regulatory clampdowns in the e-commerce, education and gaming space..The zero COVID approach to combat outbreaks has not allowed it to reopen the same way in West," Bill Maldonado, CIO of Eastspring Investments, said. "They are only now beginning to add stimulus to the economy."

 The euro firmed to a one-week high on Monday, benefiting from the dollar's retreat after several Federal Reserve officials signaled they did not favour stepping up the rate hiking pace.

The comments late last week knocked the dollar off two-decade highs and boosted global stocks and non-dollar currencies, especially the euro. The mood was also broadly helped by stimulus support signals from China.

The greenback index, measuring its rate against six global currencies, is now almost 2% off last week's peak and by 1030 GMT, stood 0.5% lower at 107.27.

The euro, the main component in that index, firmed 0.7% at $1.016, having plunged last week below parity to the dollar.

"With equity markets still in positive territory, risk appetite is back so the comments from Fed governor (Christopher) Waller, ramming back on the 100 bps rise, have had the desired impact," said Derek Halpenny, head of research at MUFG.

Waller and St Louis Fed governor James Bullard said they preferred a 75-basis-point interest rate increase at the Fed's July 26-27 meeting, rather than the 100 bps move some had pencilled in following an above-forecast inflation reading.

After the comments, futures tied to the short-term federal funds policy rate firmly price a 75 bps hike.

Speculators remain bullish on the dollar, however, with weekly U.S. CFTC data showing aggregate dollar long positions at a seven-week highs, while euro and yen short positions grew.

GRAPHIC: Euro positions and volatility https://fingfx.thomsonreuters.com/gfx/mkt/zgpomxangpd/euro%20positions%20and%20vol.JPG

Halpenny highlighted "a whole list of risks" for the euro.

The European Central Bank is expected to raise rates by 25 bps on Thursday and investors are waiting to see if it outlines plans to deal with rising bond yields in southern euro bloc states, especially Italy.

On the same day, Russia is meant to resume gas supply via the Nord Stream pipeline after a 10-day maintenance shutdown and failure to do so will spook markets, already fearing economic recession in the European Union.

"With Nord Stream and the political situation in Italy, there is no compelling fundamental reason for a turnaround in euro/dollar," Halpenny said, contrasting the expected 25 bps ECB move with the 75 bps expected from the Fed.

In Italy, investors are watching to see the fate of Prime Minister Mario Draghi who will address parliament this week after his resignation was rejected by the country's president.

GRAPHIC: Germany's troubles https://graphics.reuters.com/GERMANY-ECONOMY/REVERSAL/gdpzygzkyvw/GermanyTroubles1.2.gif

INFLATION ELSEWHERE

Meanwhile, other central banks are upping the rate-hiking pace, with Canada delivering a 100 bps increase last week. New Zealand's three-decade high inflation print on Monday fuelled speculation of a bigger 75 bps move.

That lifted the kiwi dollar to a 10-day high against the greenback of $0.62, up 0.4%. The Australian dollar touched a one-week high, rising 0.7%.

Commodity currencies also got a boost after Chinese authorities flagged support for the property sector, lifting iron ore and copper prices

Offshore-traded yuan firmed 0.5% at 6.74 per dollar.

China's central bank may also deliver long-awaited policy easing on Wednesday.

"The situation in China has probably troughed. We had regulatory clampdowns in the e-commerce, education and gaming space..The zero COVID approach to combat outbreaks has not allowed it to reopen the same way in West," Bill Maldonado, CIO of Eastspring Investments, said.

"They are only now beginning to add stimulus to the economy."

EUR/USD: Upside could be limited even on good news regarding gas supplies – Rabobank

  EUR/USD has come within a whisker of parity. How low the pair goes is likely to depend on whether or not Russia wants to worsen the economic war with Europe, economists at Rabobank report.

USD strength may not relent until next year

“From a fundamental perspective, it is not difficult to paint a scenario in which EUR/USD could break below 1.00 and hold at lower levels into the winter months. That has been the case for a while.”

“If the Nord Stream 1 natural gas pipeline is switched back on, in time next week after its scheduled maintenance, the EUR is likely to be granted a reprieve. That said, even if the EUR is boosted, we expect USD strength to dominate into next year suggesting upside for EUR/USD could be limited even on good news regarding Nord Stream.”

“For now, we retain our one-month forecast of EUR/USD 1.03. Evidence that Russian gas supplies into Europe will be further disrupted into the winter would cause us to downgrade our forecasts for the EUR further.”

Money markets price in 137 bps of ECB rate hikes by year-end – Reuters

  Money markets on Tuesday scaled back European Central Bank (ECB) rate hike bets to 137 basis points (bps) by the end of the year from 145 bps on Monday amid recession fears, Reuters reported.

Market reaction

This headline doesn't seem to be having a noticeable impact on the shared currency's performance against its rivals. As of writing, the EUR/USD pair was trading at 1.0010, where it was down 0.28% on a daily basis.

Meanwhile, markets remain cautious on Tuesday with the Euro Stoxx 600 Index losing 0.3% on the day. 

 

Malaysia: Labour market remains solid – UOB

 

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest labour market report in the Malaysian economy.

Key Takeaways

“Malaysia’s labour market recovery continued to gain traction in May, supported by the full reopening of economic and social activities as well as country borders since Apr. Both the labour force participation rate and employment increased further to a fresh high of 69.5% and 15.90mn persons respectively (Apr: 69.4% and 15.85mn persons). This helped to keep the unemployment rate unchanged at 3.9% in May.”

“Record hiring was again propelled by the continuing recruitment in almost all economic sectors, expect for the mining & quarrying industry which recorded a decline in employment for the 22nd straight month. Services sector, which made up about 58% of the national GDP, remained the key driver of overall employment in Malaysia with wholesale & retail trade, information & communication, and food & beverage services sub-sectors taking the lead during the month.”

“Although the labour market showed persistent improvement, it is still unlikely to fully recover back to pre-pandemic levels at this juncture given multiple headwinds on the horizon. Worsening supply chain disruptions, elevated cost and consumer price pressures, as well as mounting fears of global recession may soon see more firms hitting the brakes on recruitment. We reiterate our year-end unemployment rate forecast of 3.6% for 2022 (BNM est: ~4.0%, end-2021: 4.2%, end-2019: 3.3%).”

EUR/JPY Price Analysis: Further downside remains on the cards

 

• EUR/JPY attempts a mild rebound following Wednesday’s pullback.
• Immediately to the downside appears the 100-day SMA.

EUR/JPY manages to regain some composure and advances beyond 139.00 the figure, although gains did not stick so far.

The cross now faces prospects for extra decline after breaking below the 4-month support line, today around 139.45. That said, the next contention appears at the July low at 137.26 (July 6) ahead of the 100-day SMA, today at 135.93.

In the longer run, the constructive stance in the cross remains well propped up by the 200-day SMA at 133.03.

Downing Street Resignations: Housing Minister Stuart Andrew quits NEWS | 7/6/2022 12:16:19 PM GMT | By Eren Sengezer

 

"It is with sadness that I am resigning as Housing Minister," Conservative MP for Pudsey Stuart Andrew announced via Twitter on Wednesday.

Meanwhile, Sajid Javid, former British Health Minister who quit in protest at Prime Minister Boris Johnson on Tuesday, told Parliament that it had become increasingly difficult to be in PM's team.

 "It's not fair on conservative voters who expect better standards," Javid added. "At some point, we have to conclude that enough is enough. That point is now."

Market reaction

GBP/USD stays under heavy bearish pressure on Wednesday and was last seen trading at its weakest level since March 2020 at 1.1877, losing 0.67% on a daily basis.

Germany's Habeck: We want to prevent a domino effect in gas market

  

German Economy Minister Robert Habeck said on Tuesday that they will stick to their plan of prioritizing private households in case of a gas emergency, as reported by Reuters.

"The gas market situation is tense, cannot say whether more protection measures will be needed," Habeck added. "We want to prevent a domino effect in the gas market."

Market reaction

Safe-haven flows continue to dominate the financial markets following these remarks. As of writing, Germany's DAX 30 Index was down 1.5% on the day at 12,580.50 points.