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NASDAQ poised for deeper correction

    By
    ActionForex
    -

    US stocks ended mixed overnight, driven primarily by disparate earnings results. DOW registered its first 9-day rally since 2017, gaining 0.47%, largely boosted by better-than-expected earnings results from pharmaceutical giant Johnson & Johnson. On the other hand, the tech-heavy NASDAQ slipped -2.05% due to disappointing results from streaming giant Netflix and electric carmaker Tesla.

    The notable pullback in NASDAQ suggests that US stock markets could be broadly transitioning into a consolidation phase. This shift happens in anticipation of the FOMC rate decision scheduled for next week, followed by crucial employment data in the subsequent week.

    From a technical perspective, NASDAQ could be bracing for a deeper correction, given that it was already close to 161.8% projection of 10088.82 to 12269.55 from 10982.80 at 14511.22. Break of 13864.06 resistance turned support would likely trigger deeper fall to 55 D EMA (now at 13306.68).

    Should this scenario transpire, it should confirm a near term shift in risk sentiment, potentially providing a boost to Dollar and extending its current rebound.

    Japan CPI core ticked up to 3.3% yoy, CPI core-core edged down to 4.2% yoy

      By
      ActionForex
      -

      Japan’s Core CPI, which excludes food, matched expectations, also ticked up from 3.2% yoy to 3.3% yoy. This marks the 15th month that the inflation reading has remained above BoJ’s 2% target.

      Meanwhile, CPI core-core, which excludes both food and energy, dropped marginally from 4.3% yoy to 4.2% yoy, aligning with expectations. This slight decrease represents the index’s first slowdown since January 2022. Headline CPI edged higher from 3.2% yoy to 3.3% yoy in June, surpassing 3.2% yoy expectation.

      Looking at some details, service prices slightly decelerated from 1.7% yoy to 1.6% yoy. Nevertheless, food prices remained robust, rising by 9.2% yoy. A significant increase was also observed in durable household goods, which rose by 6.7% yoy. Conversely, energy prices fell by -6.6% yoy.

      These figures raises the probability of BoJ making an upward revision to its inflation outlook for the current fiscal year, with its two-day policy-setting meeting slated for next week. However, BOJ might still perceive the economy as being far from a virtuous cycle of higher wages, robust consumption, and further price hikes. As Governor Kazuo Ueda indicated earlier this week, if this assumption holds true, “our overall narrative on monetary policy remains unchanged.”

      Full Japan CPI release here.

      Philadelphia Fed manufacturing outlook shows signs of optimism despite persistent negativity in general activity

        By
        ActionForex
        -

        The July Manufacturing Business Outlook Survey from the Philadelphia Fed presented a mixed bag of indicators. The diffusion index for current general activity marginally improved from -13.7 to -13.5, slightly exceeding expectations of -15.5. But it registered its 11th consecutive negative reading. Also, the persistent negativity was reflected as over 30% of the firms reported decreases, outnumbering the 17% that reported increases. Nearly half of the firms (49%) reported no change in current activity.

        The new orders index took a hit, dropping -5 points to -15.9, marking its 14th consecutive negative reading. The employment index also dipped marginally from -0.4 last month to -1.0 this month. Furthermore, the prices paid diffusion index decline by -1 point to 9.5.

        In a ray of hope, the diffusion index for future general activity saw a significant jump from 12.7 in June to 29.1, recording the index’s highest reading since August 2021. This indicates growing optimism about future business conditions. Nearly 40% of firms anticipate an increase in activity over the next six months, up from 33% last month, with only 11% expecting a decrease (down from 20%). Meanwhile, 46% anticipate no change, slightly up from 44% in the previous month.

        Full Philly Fed Survey release here.

        US initial claims fell to 228k, below expectations

          By
          ActionForex
          -

          US initial jobless claims fell -9k to 228k in the week ending July 15, below expectation of 245k. Four-week moving average of initial claims dropped -9k to 238k.

          Continuing claims rose 33k to 1754k in the week ending July 8. Four-week moving average of continuing claims fell -2k to 1732k.

          Full US jobless claims release here.

          Japan’s export to US up 11.7% yoy in Jun, to EU up 15%, to China down -11%

            By
            ActionForex
            -

            Japan’s exports rose by 1.5% yoy to JPY 8744B in June. The significant rise in exports to US by 11.7% yoy and to EU by 15.0% yoy was offset by the -11.0% yoy decline in exports to China (marking the most significant drop since January).

            Rise in US-bound exports was primarily driven by shipments of cars and mining machinery. Meanwhile, dip in exports to China was attributed the decreased shipments of steel, chips, and nonferrous metal, which led to an overall double-digit decline.

            Japan’s imports contracted by -12.9% yoy to JPY 8701B. The decrease in value of imports is primarily linked to drop in crude, coal, and liquefied natural gas.

            As a result, Japan recorded a trade surplus of JPY 43B, the first such instance in nearly two years since July 2021.

            In seasonally adjusted term, exports rose 3.3% mom to JPY 8269B. Imports rose 0.5% mom to JPY 8822B. Trade balance reported JPY -553B deficit, versus expectation of JPY -550B.

            Full Japan trade balance release here.

            Australia employment grew 32.6k, but demand met by people working more hours

              By
              ActionForex
              -

              Australian’s June employment data showed persistent tightness in the job markets. The 32.6k growth in employment significantly surpassed expectations of 15.0k. Employment-population ratio remained at record high. Monthly hours worked outpaced employment growth, suggesting that labor demand was met by people working more hours.

              Among the 32.6k job growth, rise of 39.3k full-time employment was offset by a decrease of -6.7k in part-time roles. Unemployment rate remained steady at 3.5%, below expectation of 3.6%. Participation rate dipped slightly from 66.9% to 66.8%. Monthly hours worked rose 0.3% mom, faster than growth in employment at 0.2% mom.

              Bjorn Jarvis, ABS head of labour statistics, stated: “The rise in employment in June saw the employment-to-population ratio remain at a record high 64.5 per cent, reflecting a tight labour market in which employment has recently increased in line with population growth.”

              He further emphasized that the current labour market is stronger than it was prior to the pandemic. Jarvis elaborated, “In addition to there being over a million more employed people than before the pandemic, a much higher share of the population is employed. In June 2023, 64.5 per cent of people 15 years or older were employed, an increase of 2.1 percentage points since March 2020.”

              Jarvis also highlighted the ongoing demand for labour, saying: “The strength in hours worked since late 2022, relative to employment growth, shows the demand for labour is continuing to be met, to some extent, by people working more hours.”

               

              Full Australia employment release here.

              BoE Ramsden: CPI inflation remains much too high

                By
                ActionForex
                -

                BoE Deputy Governor Dave Ramsden said yesterday, “CPI inflation has begun to fall significantly but remains much too high. The Monetary Policy Committee has consistently stressed that monetary policy decisions will address the risk of more persistent strength in domestic wage and price settling.”

                He went on to warn, “If there is evidence of more persistent pressures, then further tightening in monetary policy would be required.”

                Ramsden also mentioned BoE’s efforts in reducing its holdings of gilts and corporate bonds, which he expects to decrease by a total of GBP 100B by October. However, he pointed out that the central bank has almost completely run off its portfolio of corporate debt, possibly paving way for it to sell more government bonds.

                In light of these factors, Ramsden stated, “These factors support a carefully considered increase in the pace of reduction in the stock of gilts in the 12 months ahead.” However, he also stressed caution, noting, “I emphasize careful — like the MPC, I want Quantitative Tightening (QT) to set a gradual and predictable pace for unwind and to let it operate in the background, after all.”

                Eurozone CPI finalized at 5.5% in Jun, core CPI at 5.5%

                  By
                  ActionForex
                  -

                  Eurozone CPI was finalized at 5.5% yoy in June, down from May’s 6.1% yoy. Core CPI (excluding energy, food, alcohol & tobacco) was finalized at 5.5% yoy, up from May’s 5.3% yoy.

                  The highest contribution to annual Eurozone inflation rate came from food, alcohol & tobacco (+2.35%), followed by services (+2.31%), non-energy industrial goods (+1.42%) and energy (-0.57%).

                  EU CPI was finalized at 6.4% yoy, down from May’s 7.1% yoy. The lowest annual rates were registered in Luxembourg (1.0%), Belgium and Spain (both 1.6%). The highest annual rates were recorded in Hungary (19.9%), Slovakia (11.3%) and Czechia (11.2%). Compared with May, annual inflation fell in twenty-five Member States, remained stable in one and rose in one.

                  Full Eurozone CPI final release here.

                  UK CPI eased to 7.9% in Jun, core CPI down to 6.9%, both below expectations

                    By
                    ActionForex
                    -

                    UK CPI slowed from 8.7% yoy to 7.9% yoy in June, below expectation of 8.2% yoy. Core CPI (excluding energy, food, alcohol and tobacco) slowed from 7.1% yoy to 6.9% yoy, below expectation of staying unchanged at 7.1% yoy.

                    CPI goods slowed from 9.7% yoy to 8.5% yoy. CPI services also eased from 7.4% yoy to 7.2% yoy.

                    On a monthly basis, CPI rose just 0.1% mom, down from May’s 0.7% mom. Falling prices for motor fuel led to the largest downward contribution to the monthly change.

                    Full UK CPI release here.

                    Australia leading index records 11th consecutive negative month

                      By
                      ActionForex
                      -

                      Australia’s Westpac Leading Index rose to -0.51% in June from -1.01% in May, marking the eleventh consecutive negative print. This trend indicates that the Australian economy is likely to operate below its potential trend over the six to nine months outlook.

                      In light of these results, Westpac maintains a modest forecast for Australian economic growth. It expects modest expansion of 0.3% over the year to June 2024, with contraction in consumer spending of -0.2%.

                      Commenting on the upcoming RBA meeting on August 1, Westpac anticipates a 25 bps hike in interest rate. It noted, “By the August meeting we expect that the Board will be dealing with an inflation read still above 6%; an unemployment rate registering nearly 1ppt below the Board’s current estimate of full employment; and the recent report from the national accounts showing unit labour costs growing at 7.9% over the year.”

                      Full Australia Westpac Leading Index release here.

                      New Zealand’s Q2 CPI beats expectations despite slowdown

                        By
                        ActionForex
                        -

                        New Zealand’s CPI experienced a slightly slowed but stronger-than-expected rise in Q2, registering 1.1% qoq increase compared to Q1’s 1.2% qoq. This exceeded the anticipated 0.9% qoq rise for the quarter. Year-on-year inflation also surpassed expectations, with 6.0% yoy rise as opposed to expected 5.9% yoy, despite slowdown from 6.7% yoy in the previous quarter.

                        StatsNZ, New Zealand’s pointed out that food prices, which rose 2.2% qoq and 12.3% yoy, were the primary drivers of Q2 annual inflation rate. Rising prices for vegetables, ready-to-eat food, and dairy products like milk, cheese, and eggs played a significant role. Housing and household utilities, another crucial sector, experienced quarterly increase of 1.2% qoq and 6.0% yoy increase annually.

                        On analyzing the CPI data further, it was found that excluding food, inflation increased by 4.6% yoy. Excluding housing and household utilities, it increased by 6.1% yoy. When excluding alcoholic beverages and tobacco, the annual increase stood at 5.9% yoy. CPI increased by 6.1% yoy when food, household energy, and vehicle fuels were excluded.

                        Full New Zealand CPI release here.

                        BoJ Ueda: Sustainably achieving 2% inflation remains distant

                          By
                          ActionForex
                          -

                          BoJ Governor Kazuo Ueda, following a G20 finance leaders’ meeting in India, has restated the central bank’s stance on maintaining their ultra-loose monetary policy under yield curve control as sustainably and stably achieving 2% inflation target remains a distant objective.

                          He stated, “Based on this understanding, we have patiently continued our ultra-loose monetary policy under yield curve control.”

                          Ueda highlighted BOJ’s intent to thoroughly assess the pace of Japan’s progress towards sustainably achieving its 2% target during every policy meeting.

                          He added, “If our assumption (that sustained achievement of 2% inflation remains distant) is unchanged, our overall narrative on monetary policy remains unchanged,” indicating that any alteration to YCC policy will depend on the evidence of significant progress towards the central bank’s inflation target.

                          US retail sales rose 0.2% mom in Jun, ex-auto sales up 0.2% mom

                            By
                            ActionForex
                            -

                            US retail sales rose 0.2% mom to USD 689.5B in June, below expectation of 0.5% mom. Ex-auto sales rose 0.2% mom to 556.3B, below expectation of 0.3% mom. Ex-gasoline sales rose 0.3% mom to USD 637.0B. Ex-auto, gasoline sales rose 0.3% mom USD 503.8B.

                            Total sales for the April through June period were up 1.6% form the same period a year ago.

                            Full US retail sales release here.

                            Canada CPI down to 2.8% in Jun, led by gasoline base-year effect

                              By
                              ActionForex
                              -

                              Canada CPI slowed from 3.4% yoy to 2.8% yoy in June, below expectation and back inside BoC’s 1-3% target range. On a monthly basis, CPI edged up 0.1% mom down from May’s 0.4% mom.

                              Statistics Canada noted, “While deceleration was fairly broad-based, another base-year effect in gasoline prices led the slowdown in the CPI.” Excluding gasoline, CPI slowed from 4.4% yoy to 4.0% yoy.

                              Grocery prices at 9.1% yoy and mortgage interest costs at 30.1% yoy were the biggest contributor to CPI increase. Ex-food CPI was at 1.7% while excluding mortgage interest costs, CPI was at 2.0%.

                              CPI median decelerated from 4.0% yoy to 3.9% yoy, above expectation of 3.7% yoy. CPI trimmed slowed form 3.8% yoy to 3.7% yoy, above expectation of 3.6% yoy. CPI common slowed from 5.2% yoy to 5.1% yoy, above expectation of 5.0% yoy.

                              Full Canada CPI release here.

                              ECB Visco: Inflation may come down faster

                                By
                                ActionForex
                                -

                                Talking to Bloomberg TV, ECB Governing Council member Ignazio Visco said, “Since we have also been observing a substantial reduction in energy prices, we have to expect that this will be seen also in underlying inflation in the coming months, certainly by the end of the year.”

                                Visco also suggested the possibility of a quicker pace than initially forecasted by ECB, saying, “The ECB projects that by the end of 2025 there will be 2% — my impression is that it might be faster.”

                                Visco cautioned against the risks associated with making excessive adjustments, stating, “There is a risk of doing too much and I think that we have to be careful about that.” However, he also noted the potential risk of doing too little, emphasizing the need for balance and judicious decision-making based on incoming information.

                                Meanwhile, another Governing Council member Klaas Knot expressed his perspective on potential policy adjustments beyond July. “For July I think it (rate hike) is a necessity, for anything beyond July it would at most be a possibility but by no means a certainty,” Knot said. He urged careful monitoring of the data from July onwards, to assess the distribution of risks surrounding the baseline.

                                RBA Jul minutes: Hike considered, hold to reassess in Aug

                                  By
                                  ActionForex
                                  -

                                  Minutes from RBA’s July 4th meeting reveal that two options were considered: raising cash rate by additional 25 bps, or keeping it unchanged. RBA eventually chose the latter, acknowledging the “uncertainty around the outlook and the significant increase in interest rates to date.” Members agreed to “reassess the situation at the August meeting.”

                                  Despite maintaining status quo, RBA members acknowledged the possibility of future policy tightening. “Members agreed that some further tightening of monetary policy may be required to bring inflation back to target within a reasonable timeframe, but that this depended on how the economy and inflation evolve,” the minutes read.

                                  RBA’s decision underscores the central bank’s caution amid shifting economic conditions. With August meeting on the horizon, the Board anticipates additional data on inflation, the global economy, labor market, and household spending. This incoming information, combined with updated staff forecasts and a revised risk assessment, will guide the next policy decision.

                                  Full RBA minutes here.

                                  Bundesbank Nagel: We have to be a little bit more patient

                                    By
                                    ActionForex
                                    -

                                    Bundesbank President and ECB Governing Council member, Joachim Nagel expects a 25 bps increase for the upcoming July meeting of ECB. As for the meeting in September, Nagel stated on Monday, “we will see what the data will tell us.”

                                    Unlike previous financial cycles, core inflation rates in developed nations are not declining as swiftly, implying a more drawn-out recovery process. Despite this, Nagel dismissed the notion of an over-tightened policy risking a hard landing for Europe as interest rates rise. “It’s too early to really declare a certain kind of victory when it comes to our inflation fight,” Nagel remarked.

                                    Notably, the Bundesbank chief advised patience in the face of these challenges, acknowledging a potentially slower pace in transmission of monetary policy. “This time maybe we have to be a little bit more patient. The pace of the transmission channel is maybe not as fast as it was in the past,” he added.

                                    US Empire State Manufacturing fell to 1.1, waning optimism and moderating price increases

                                      By
                                      ActionForex
                                      -

                                      US Empire State Manufacturing Survey showed a decline in the headline general business conditions index, falling from 6.6 to a modest 1.1 in July, slightly above expectation of 0.0. While 29% of respondents reported improved conditions over the month, 27% reported a deterioration.

                                      Price increases showed a moderating trend. Prices paid index fell -5 pts to 16.7, and prices received index also declined by -5 pts to 3.9. Over the past year, the prices paid index has seen a near-50 point drop, while the prices received index has cumulatively fallen by -27 points.

                                      On the other hand, index for future business conditions declined from 18.9 to 14.3, signaling that although businesses are anticipating better conditions ahead, overall optimism remains relatively subdued.

                                      Full Empire State Manufacturing release here.

                                      Bundesbank: German inflation to cool post Sep, but core to stay high

                                        By
                                        ActionForex
                                        -

                                        Bundesbank, in its monthly report, anticipates a dip in Germany’s inflation rate starting from September. One-off effects, such as the temporary introduction of the “tank discount” and nine-euro ticket, are expected to fade, easing the inflationary pressure.

                                        The Bundesbank also envisions that the recent decrease in prices for primary products will progressively reflect in consumer costs, adding to the deflationary forces.

                                        Contrarily, core inflation rat is projected to remain substantially high over the summer months. The summer season typically witnesses elevated prices for holidays packages, and this year is expected to be no different.

                                        Full release here.

                                        Oil and Copper slide after China concerns

                                          By
                                          ActionForex
                                          -

                                          The release of disappointing Chinese economic data earlier today has cast a shadow on global sentiment, instigating downturns in oil and copper prices, as well as European indices and US futures.

                                          WTI crude oil experienced a fleeting rebound following a Reuters news alert suggesting that Saudi Arabia was extending voluntary output cut. However, the news alert was withdrawn shortly after, as it merely echoed an earlier report from June 4. Now, WTI prices are being pressured lower amid concerns over domestic demand in China and the partial restart of Libyan production that had been previously halted.

                                          Technically, near term bias is neutral in WTI after a top was formed at 77.22, ahead of 100% projection of 63.37 to 74.74 from 66.94 at 78.1. While the stay above 55 D EMA is a near term bullish sign, i cannot be ruled out that rebound from 63.37 is merely a corrective bounce. Break of 72.57 support will argue that the rebound have completed and target 63.67 and possibly below. Nevertheless, firm break of 78.01 will add another evidence for trend reversal and target 83.46.

                                          Copper, a commodity particularly sensitive to Chinese data, also felt the pinch. Rejection by 3.9501 resistance keep near term outlook neutral for now. While prior break of 55 D EMA is a bullish sign, upside is capped below falling trend line resistance (from 4.3556). On the upside, break of 3.9501 will resume the rebound from 3.5393 and argues that whole fall form 4.3556 has finished. However, break of 3.6706 would indicate that fall from 4.3556 is ready to resume through 3.5395.

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