Articles

• Fed’s Waller:Time to cut rates is getting closer based on analysis of potential scenarios
• Beige Book: Economic activity maintained a slight to modest pace
• US June housing starts 1.353M vs 1.300M expected
• US June industrial production +0.6% vs +0.3% expected
• Atlanta Fed GDPNow growth estimate for Q2 comes in at 2.7% up from 2.5% prior
• EIA weekly crude oil inventories -4.870M draw versus expectations of a draw of -0.033M
• Fed’s Barkin: Remarkable how strong consumer spending has remained
• More from Richmond Fed Pres Barkin: Fed will debate whether inflation is still “elevated”
• Fed’s Williams says rate cut could be warranted in the coming months
• Moe from Fed’s Waller: Exact timing of rate cut doesn’t matter a lot
• Democratic representative Adam Schiff calls on Biden to step down
• US treasury auctions off $13 billion of 20 year bonds at a high yield of 4.466%
• Teranet-National Bank Canada June house price index 0.0% vs +0.2% m/m prior

Markets:

• Gold down $11 to $2457 after hitting record $2483
• US 10-year yields down 1.5 bps to 4.15%
• WTI crude oil up $2.12 to $82.88
• S&P 500 down 1.4%, Nasdaq down 2.8%
• JPY leads, CAD and AUD lag

Turmoil expanded in markets on Wednesday as US politicians aimed at chip companies. Biden said he may tighten controls on chips getting to China while Trump said that Taiwan needs to pay for defense. The result was a 12% decline in ASML, 9% in Qualcom, 8% in Broadcom and 6.6% in Nvidia as it fell to the lowest close since June 4.

The turmoil in stock markets didn’t exactly flow through into broader markets. Treasuries initially sold off then rallied slightly while the US dollar didn’t provide any safe haven value.

Some of that was due to a big jump in the yen that kicked off in European trade. The pair fell 200 pips and tested 156.00 several times but has so far been unable to break. It could be a fresh round of intervention or could reflect broader deleveraging and position squaring in a market that’s been hit by heavy rotation.

Economic data wasn’t overly notable but Fed officials continued to open the door towards a September rate hike, with the usually-hawkish Waller noting that the time to cut is getting closer, depending on how data unfolds.

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

The NASDAQ tumbled today and had its worst trading day since December 2022 when the index fell -3.23%. The decline today pushed the index down -512.42 points or -2.77% to 17996.92 .

Meanwhile, the Dow industrial average rose 243.60 points or 0.59% to 41198.09. That was good enough for another record close for that index.

In between was the S&P index which fell -78.93 points or -1.39% to 5588.28.

The Magnificent 7 of Nvidia, Meta Platforms, and Tesla underperformed versus the NASDAQ index. Apple and Amazon were close to the -2.77% decline. Microsoft and Alphabet both fell but by a lesser percentage.

• Nvidia -6.64%
• Meta Platforms -5.68%
• Amazon -2.64%
• Alphabet -1.58%
• Apple -2.53%
• Microsoft -1.33%
• Tesla -3.14%

The top 5 Dow stocks today:

• UnitedHealth +4.43%
• Johnson & Johnson +3.67%
• Cisco +2.22%
• Chevron +2.22%
• JP Morgan +1.51%

After the close,

• United Airlines reported a revenue miss of $14.99 billion versus $15.1 billion estimate. They did beat on earnings per share with it coming in at $4.14 versus $3.93 estimate. Forward guidance for Q3 sees $2.75 – $3.25 versus expectations of $3.38. Shares are down -3.81% in after-hours trading.
• Kinder Morgan is also reporting and it has a revenue miss as well with $3.57 billion versus $4.13 billion estimate. Earnings-per-share came in at $0.25 versus $0.26 estimate. Shares are down -1.02% in after-hours trading.
• Alcoa EPS beats with $0.16 versus $0.08 expected. Revenues also be at $2.91 billion versus $2.84 billion estimate. Shares are up 1.63% in after-hours trading.

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

Australia’s employment report is expected to show a continued rise in employment and a steady unemployment rate.

I post a preview separately on this.

You’ll also note the RBA Bulletin is due. This is going to be a monetary policy decision, we’ll have to wait for the next meeting (due on August 5 and 6) for that. As a heads up, the widely held expectation is the Bank will leave the cash rate on hold. The thing to watch though is the CPI report due on July 31 that may impact on this.

• The Bulletin is published quarterly in March, June, September and December. It contains articles on the economy and financial system from teams throughout the Reserve Bank of Australia.

• This snapshot from the ForexLive economic data calendar, access it here.
• The times in the left-most column are GMT.
• The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

This article was written by Eamonn Sheridan at www.forexlive.com.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

It’s not clear what’s going on in yen trading today. Justin earlier speculated about intervention but noted that the move didn’t have the usual hallmarks of the Ministry of Finance slamming the bid.

What’s tough is that so much that’s happening in markets right now is tough to explain. There is some intense rotation ongoing in stock markets that’s led to the worst day for the Nasdaq since 2022 and chipmakers are falling hard. The Russell 2000 is 0.9% lower today but that’s after a 12% rally over 5 days.

It’s a confusing mess that’s seen volatility jump and yields decline.

I’m sympathetic to the arguments about intervention and wouldn’t rule it out but there is some real de-leveraging ongoing in a world that’s over-levered.

It’s a good time to look at the technicals.

Earlier, Greg highlighted the USD/JPY chart.

He noted that “the 38.2% retracement comes in at 156.18, so there’s reason for traders to stick a toe in the water right here but watch for sellers at 157.11.

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

Gold touched a record $2483 but has since reversed lower and is trading down $12 on the day to $2456.

Technically, I don’t see this reversal as overly damaging as it doesn’t come close to erasing yesterday’s spike higher. However we could see a retest of the old record high of $2450 set in May and that could be a pivot point.

My eyes are focused on China and its appetite for gold. The bull run started 20 months ago when the PBOC began adding to gold reserves. It ran into problems last months on the first reports that they had stopped adding to reserves. That news hurt again last week on a report that the buying had dried up for a second month.

Despite that, gold rallied to a record high anyway on rate cut hopes and political turmoil. That’s an impressive signal but the buying from China is fundamental for the bulls.

Today, Reuters reported that China isn’t done, citing a policy insider. They would like to bring gold to 10% of reserves from 4.9% and that would require buying another $170 billion at current prices. That would be about 70% of all the gold mined globally in any given year and that 70 million ounces compares to the 7 million China bought last year.

Needless to say, it will take some time.

The report says that PBOC buying is no longer price-insensitive and that leaves the market in a tricky spot. It puts a floor under gold prices in the $2000 range, which should be good for miners but it also lowers the ceiling unless other buyers can carry it or China reconsiders.

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

Crude oil futures is settling the day at $82.85. That’s up $2.09 or 2.59%.

Yesterday, the price fell below its 100-day moving average currently at $80.61, but closed back above the moving average level. Today the price did drift back below the moving average to a low of $80.45, but reversed, and is closing near the high for the day at $82.90.

On the topside, the downward sloping trendline cuts across near $84. Getting above that level and the high price from July at $84.52 are the next upside targets on further momentum higher.

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

• Overall Economic Activity

  • Economic activity maintained a slight to modest pace of growth in a majority of Districts
  • Seven Districts reported some increase in activity, while five noted flat or declining activity
  • Previously two
    noted no change in activity

• Labor Markets

  • Employment rose at a slight pace in most Districts
  • More mentions of flat or declining employment
  • Several Districts noted a slowing of wage growth due to increased worker availability and less competition for workers​
  • Wage growth continued at a modest to moderate pace

• Consumer Spending

  • Consumer spending was little changed overall.
  • Auto sales varied across Districts, with some noting lower sales due to a cyberattack on dealerships and high interest rates .

• Manufacturing

  • Manufacturing activity was mixed, with reports ranging from brisk downturns to moderate growth
  • Some Districts noted soft demand for manufactured goods .

• Real Estate and Construction

  • Residential real estate showed a typical seasonal slowdown with gradual increases in market inventory.
  • Commercial real estate activity varied, with retail leasing picking up but office leasing remaining weak .

• Banking and Finance

  • Loan demand remained modest overall, with slight increases noted in specific loan types like home equity loans and used auto loans.
  • Deposit levels continued to decline modestly .

• Prices

  • Prices increased at a modest pace overall, with some Districts reporting only slight increases (same as prior)
  • Several Districts noted increased consumer price sensitivity and retailers discounting items .

• Agriculture

  • Agricultural conditions improved slightly, with strong sales reported by cattle farmers and optimism among poultry farmers.
  • Weak demand continued for some row crops like cotton .

• Outlook

  • Expectations for future economic growth were for slower growth over the next six months, influenced by uncertainties around the upcoming election, domestic policy, geopolitical conflicts, and inflation

The overall economic activity remains positive but is showing signs of slowing down. Consumer spending is stable but not growing and customers are more price-sensitive. The economy is still growing, but the pace is modest, and there are increasing indications of areas where growth is stalling or declining.

This could signal a soft landing but remember that every hard landing starts out as a soft landing.

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

Synopsis: ING believes that EUR/USD is more likely to fall to 1.08 rather than rise to 1.10 after this week’s ECB meeting. The current balance between USD-positive US political developments and USD-negative Fed rate repricing is keeping EUR/USD near 1.09, with minimal contribution from the euro leg.

Key Points:

• Current Trading: EUR/USD remains close to 1.09, reflecting a balance between US political factors favoring USD strength and Fed rate repricing that is USD-negative.
• Eurozone Data:
  • ZEW Surveys: Confirmed a drop in the German expectations gauge but showed a surprising recovery in the current situation index, possibly due to the market-friendly French election results.
  • Eurozone Expectations Survey: Contracted, indicating a loss of momentum in activity sentiment over the past month.
• Growth Outlook:
  • Eurozone Growth: Cooling eurozone growth outlook and increasing concerns about the French fiscal situation amid political gridlock are likely to weigh on EUR/USD.
• ECB Meeting Expectations:
  • Guidance: ING expects the ECB Governing Council to refrain from offering new guidance at the upcoming meeting.
  • Market Impact: The market impact of the meeting is expected to be limited, with continued ECB caution suggesting modest bullish risks for EUR/USD.

Conclusion: ING anticipates EUR/USD is more likely to hit 1.08 than 1.10 in the coming weeks, driven by a cooling eurozone growth outlook and concerns about the French fiscal situation. The upcoming ECB meeting is not expected to significantly influence the market, reinforcing the likelihood of EUR/USD trending lower.

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

The tides have sure changed.

Democratic representative Adam Schiff (California) has called for Pres. Biden to step down as the Democratic candidate for president of the United States.

Schiff commented that there are growing concerns within the Democratic Party about President Biden’s ability to defeat former President Trump in the upcoming November election. These concerns stem from Biden’s age and mental fitness, particularly after a recent debate where he appeared confused. Despite acknowledging Biden’s significant contributions to the country throughout his career, there is a belief that a second Trump presidency could undermine democracy. Schiff has suggested that Biden should consider stepping down to allow another Democrat to run against Trump, although he emphasized that the decision ultimately rests with Biden. Schiff also pledged to support the Democratic nominee, whether it remains Biden or someone else.

The importance of Schiff’s lack of support is that he is a close ally of former House Speaker Pelosi who still carries a big weight politically. Is he a sounding board for Pelosi?

Meanwhile, the NYT reported today that “In Milwaukee, a GOP Transformation from Dysfunctional to Unified”.

Pres. Trump is spending time at the convention instead of staying away until near the end. He picked a once prescribed “Never Trumper” JD Vance as his VP running mate who is young, and from Ohio in the middle of the Rust Belt. Trump needs to carry the Rust Belt to win the electoral college.

In 2020, Biden took Ohio, but lost Michigan, Wisconsin and Pennsylvania to Biden. Those states along with Arizona and Gerogia were key battleground states for the election and remain just as important in 2024. .

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

• High yield 4.466% (last month was a little lower at 4.452%)
• WI level at the time of the auction 4.467%
• Tail -0.1 basis points vs six-month average of -0.6 basis points
• Bid to cover 2.68X vs six-month average of 2.63X
• Dealers 8.47% vs six-month average of 12.1%
• Directs 14.32% vs six-month average of 18.2%
• Indirects 77.2% vs six-month average of 69.7%

AUCTION GRADE B

The auction came in just below the WI level (-0.1 basis point tail). The Bid to cover (a measure of demand) was near the 6-month average. The dealer were left with much lower than expected as international buyers came in strong – buying 77.2% of the auction which was well above the average of 69.7%.

However, the domestic buyers were much less than the average.

So some good and some average/below average. The mix is good enough for B grade for the auction.

Looking at the yield curve:

• 2 year yield 4.444%, -0.1 basis point
• 5-year 4.084%, -0.6 basis point
• 10 year yield 4.155%, -1.1 basis points
• 30-year 4.367%, -0.7 basis points

The Nasdaq did reach to a new low below 18000 to 17972.87, but is currently trading down -510 points or -2.76% at 17998.

S&P index is down -1.38% and the Dow continues to better and on page 4 a another record high. Its up 174.20.43 percent at 41,130.36.

The small-cap Russell indexes down -1.05% as it takes a breather from the recent surge.

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

As London/European traders finish up the day, the major indices are closing the day mixed:

• German DAX -0.40%.
• France CAC, -0.12%
• UK FTSE 100 +0.28%
• Spain’s Ibex +0.13%
• Italy’s FTSE MIB, +0.03%

Looking at US markets as Europe leaves shows a mixed view as well but with more downside momentum for the losers. Both the S&P index and the NASDAQ index are getting hammered.

• S&P index -67.17 points or -1.19% at 5600
• Nasdaq index is faring much worse with a tumble of -452 points or -2.45% at 18054.57

For the NASDAQ it fell below its 100 hour moving average for the first time since June 4. There is a support near 17835 area where the 200 hour moving average is found and also the 38.2% retracement of the move up from the May 31 low. The 200-hour moving average comes in at 17839. The 38.2% retracement comes in at 17821.

The Dow industrial average is higher on the day by 192.51 points or 0.47% at 41,147. That index is on pace for another record closing level (3rd day in a row).

The Russell 2000 is currently down -14.81 points or -0.65% at 2248.99. The correction comes after a 12.81% run up from the low on July 3

Looking at the US debt market:

• 2-year yield 4.456%, +1.2 basis points
• 5-year yield 4.096%, +0.6 basis points
• 10 year yield 4.167%, unchanged
• 30-year yield 4.373%, -0.1 based points

The U.S. Treasury will auction off 20 year bonds at 1 PM ET.

Looking at other markets:

• Crude oil is trading up $1.91 or 2.37% at $82.68
• Gold is trading lower after reaching a new a day high price. The price is down $5.26 or -0.21% at 2463.33. The new all-time high price extended to $2483.76
• Silver is down $0.98 or -3.13% at $30.27. The low price today reach $30.16.
• Bitcoin is trading lower at $64,720. The high price that reached $66,129

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