Articles

• 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.

• Latest data getting us closer to a disinflationary trend that we’re looking for
• But would like to see more data to gain further confidence inflation is moving sustainably to 2% goal
• Last week’s data reflects a broad decline in inflation
• Things are moving in the right direction
• Even if Fed begins to cut rates, policy will remain restrictive enough

Williams did somewhat rule out a July move as well, not that markets were expecting it anyway. He says that the Fed is “going to learn a lot between July and September” in terms of gaining more confidence towards cutting rates. The full transcript can be found here (may be gated).

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

The latest strategy from Japan is to intervene when there are factors working in their favour in nudging USD/JPY lower. They did it last week after key US data releases and there is a suggestion that they are back at it again today. The drop lower in the pair isn’t quite a sharp one (that’s my only skepticism to this) but the selling pressure has been quite forceful in the last two hours.

And if Japan was looking for added support in giving a slight intervention nudge today, there are a few reasons.

The first being a key break of the trendline support for USD/JPY this year. That might have triggered stops amid a quick flush lower in the pair earlier, when price fell to around 157.00.

Then, there’s also the fact that we are seeing equities have an off day with risk sentiment turning sour. It’s not just the yen that has flourished so far today, even USD/CHF is down 0.7% to 0.8875 currently.

But perhaps a tell in there being heavy USD/JPY selling is that the dollar has struggled despite the more negative risk environment today. In fact, the greenback is the weakest performer across the board with even the commodity currencies sitting higher against the dollar.

Still, this points to some suspicion that Japan might have gave things a little nudge on the back. But from the price action, it’s not as clear as it was on Thursday and Friday last week.

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

• Prior +2.6%
• Core CPI +2.9% vs +2.9% y/y prelim
• Prior +2.9%

No change to the initial estimates and this doesn’t change anything before we get to the ECB tomorrow. Stick to the status quo is the message that Lagarde & co. will go with.

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

He makes mention that “if speculators cause excessive moves in FX market, we have no choice but to respond appropriately”.

They stepped into the market on Thursday and Friday last week, and that seems to have finally broken the resolve of dip buyers. USD/JPY is markedly lower again today, down by 1% to 156.75 currently. But the drop today could also be attributed to a technical breakdown as seen here. That and of course the more negative risk mood in general.

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

Despite a more negative day for equities, the dollar is not getting much love in trading today. Instead, traders are moving to the Japanese yen with USD/JPY itself down 1% to 156.75 currently. That comes amid a break of key trendline support in the pair, exacerbating the downside pressure. As the dollar struggles, GBP/USD is taking full advantage in a push to 1.3000 for the first time since July last year:

The shove higher also comes amid a break above its 200-week moving average (blue line) last week. And now buyers look to be finding a bit more appetite in pushing to test the 1.3000 mark.

The odds of a BOE rate cut in August have been trimmed after the UK CPI report earlier, seen around ~36% now. It was ~49% before we got the inflation numbers today.

The next key point to watch for the pair is the July 2023 high around 1.3140. A firm break above that could see cable buyers then set their sights on the 1.4000 mark in the bigger picture. That is a level that BofA is arguing to be a possible target here.

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

US futures, with tech in particular, are under a bit of pressure today. S&P 500 futures are now down 0.7% with Nasdaq futures down 1.2%. The Magnificent Seven is only due to report earnings next week but tech shares appear to be a little skittish already. That said, the drop so far today is a small one compared to the gains so far in July.

Dow futures are also seen down 0.2% and Russell 2000 futures marked down by 0.5% currently. So, it is a negative push across the board for equities in European trading thus far.

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

There’s no fresh catalyst in terms of headlines as the pair is just being driven lower on the session. But one can argue that it comes amid a break of key trendline support for the year as outlined here. The pair had previously held at the key level (white line) as seen in the chart above. But with the break here, it looks like dip buyers may be losing some of their appetite.

It’s a welcome development for Japan after having intervened in the market on back-to-back days last week.

There’s now a bit of a gap between here and a potential fall towards 155.00, with the 100-day moving average for the pair resting nearby at 155.05:

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

• Eurostoxx -0.5%
• Germany DAX -0.4%
• France CAC 40 -0.3%
• UK FTSE -0.1%
• Spain IBEX -0.3%
• Italy FTSE MIB -0.3%

US futures are also being pressured after the better showing in Wall Street yesterday. S&P 500 futures are down 0.5%, Nasdaq futures down 0.8%, and Dow futures down 0.3% currently. It’s shaping up to be more of a retreat in risk sentiment, although the flows elsewhere are much more contained. For European indices, it is looking to be three straight days of declines now this week.

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

The low earlier hit 157.70 and that puts it up against a test of key trendline support for the year, seen around 157.75 currently. It’s a big moment for USD/JPY as a break of that will start to chip away at the resolve of dip buyers. And that could lead to a more meaningful retracement lower for the pair in the short-term.

For today itself, a softer risk mood seems to be weighing on overall market sentiment as we look towards European trading.

S&P 500 futures are now down 0.4% with tech shares looking rather heavy in particular. Nasdaq futures are down 0.7% currently.

The dollar itself is keeping a bit more mixed and holding lightly changed elsewhere after yesterday’s action. The stronger US retail sales data helped to give the greenback a nudge higher but it proved to only be temporary.

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

It was previously closer to a coin flip at ~49% before the inflation numbers here. At the balance, the report proves inflation might be stickier but I would say the BOE could easily dismiss this as being part of the supposed “bumps in the road”. I mean, that’s the narrative that most central banks are trying to go with right now.

But if they are to take the safer approach, it would be more prudent to wait another month perhaps. As for the year itself, the odds haven’t changed too much. Traders are still seeing ~48 bps of rate cuts by year-end, just marginally lower from the ~50 bps earlier.

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

Sterling traders are closely watching today’s key CPI data release later today with the currency pair sitting close to key technical resistance. The headline year-on-year number is expected to show a 0.1% decrease to come in at 1.9% and therefore under the 2% target level which could push forward hopes for rate cuts from the Bank of England, with the next meeting due on the 1^st August. Cable is sitting just under trendline resistance on the hourly charts and the key psychological level at 1.3000 and a higher-than-expected print could see a move higher and a continuation of the recent trend.

A result significantly below that expected 1.9% print and lower that the 3.4% Core CPI number would see the pound drop back into recent ranges against the dollar and shake out some of the long positions in the market. Short-term trendline support is coming in around the 1.2930 level with the 200-Day Moving Average below that at 1.2878.

Resistance 2 : 1.3125 – 2023 High

Resistance 1 : 1.3000 – Trendline Resistance and Key Psych Level

Support 1 : 1.2930 – Trendline Support

Support 2 : 1.2878 – 200 Day Moving Average

The post Trade Cable on the UK Inflation Data first appeared on IC Markets | Official Blog.