Dollar Firm in Steady Markets, Awaits NFP

Overall markets are relatively quiet in Asian session today. There is little reaction to the tragic news that former Japanese Prime Minister Shinzo Abe was shot and gravely injured. Dollar and Yen remain the strongest ones for the week while Euro is the runaway loser, followed by Sterling by a distant. Focuses will now turn to job data from the US and Canada.

Technically, EUR/USD appears to be losing some downside momentum. There are two fibonacci projection levels from here to parity that could set a bottom for the pair. But a break of 1.0276 minor resistance is needed to be the first sign of bottoming. Meanwhile, reactions to NFP could be wild and they’re two-way. So beware.

In Asia, at the time of writing, Nikkei is up 0.77%. Hong Kong HSI is up 0.07%. China Shanghai SSE is up 0.17%. Singapore Strait Times is up 0.15%. Overnight, DOW rose 1.12%. S&P 500 rose 1.50%. NASDAQ rose 2.28%. 10-year yield rose 0.095 to 3.008.

Fed Waller: Definitely support another 75bps in Jul, probably 50bps in Sep

Fed Governor Christopher Waller said yesterday, “we need to move to a much more restrictive setting” and do that “as quickly as possible.”

“I’m definitely in support of doing another 75 basis point hike in July, probably 50 in September, and then after that we can debate whether to go back down to 25s,” he added.

“Inflation is a tax on economic activity, and the higher the tax the more it suppresses economic activity,” Waller warned. “If we don’t get inflation under control, inflation on its own can place us in a really bad economic outcome down the road.”

Fed Bullard continues to advocate getting to 3.5% this year

St. Louis Fed President James Bullard “I think it would make a lot of sense to go with the 75 at this juncture”, referring to the rate hike in this month’s FOMC meeting.

“I’ve advocated and continue to advocate getting to 3.5% this year, then we can see where we are and see how inflation’s developing at that point,” he added.

On the economy, Bullard said, there is a “a good chance of a soft landing.” “At this point, it appears that the GDI (gross domestic income) measure is more consistent with observed labor markets, suggesting the economy continues to grow.”

On the data front

Japan bank lending dropped -0.5% yoy in Jun, below expectation of 0.9% yoy. Current account surplus narrowed to JPY 0.01T, below expectation of JPY 0.16T.

Looking ahead, France trade balance and Italy industrial output will be released in European session. But main focuses will be on US non-farm payroll and Canada employment later in the day.

More on NFP and Canada:

• NFP Preview: 75bps Hike Likely Even if Jobs Disappoint
• Dollar Re-Energized ahead of Fed Minutes, NFP Report Amid Recession Jitters
• NFP This Week Will Test Dollar’s Year-Long Trend
• Canadian Jobs Data Eyed after Loonie’s Sharp Sell-off
• Canadian Dollar Eyes Job Data in Canada, US

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9699; (P) 0.9724; (R1) 0.9766; More…

No change in USD/CHF’s outlook as focus remains on 0.9731 minor resistance. Sustained break there will argue that the consolidation from 1.0063 has completed and bring stronger rally back to retest 1.0063 high. However, another fall below 0.9493 will dampen this view and target 0.9459 resistance turned support.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Next target is 1.0237/0342 resistance zone. This will remain the favored case as long as 0.9471 resistance turned support holds. However, sustained break of 0.9471 will extend long term range trading with another falling leg.

Economic Indicators Update