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The Japanese yen was unchanged in the Asian session after the country released the household spending data. In May, spending rose by an annualized rate of 4.0%. This was better than the consensus estimate of 1.4% and April’s increase of 1.3%. On a MoM basis, spending increased by 5.5%, which was better than the expected 1.2% and the previous decline of -1.4%. The increased spending is a welcome thing for Japan, a country whose population is aging and where consumption is not all that common.

Today, the focus among market participants will be the US nonfarm payrolls, which will be released by the Labor Department. Data is expected to show that the economy added more than 160k jobs in June. This will be a bigger number than the 75k jobs that were created in May. The private payrolls are expected to be at 153k while the unemployment rate is expected to have remained at 3.6%. The average hourly earnings are expected to increase by 3.2%, which will be higher than the previous 3.1%. On Wednesday, ADP released its own data, which showed that the economy added more than 103k jobs in June. Continued weakness in the employment market could increase the case for more than one rate cut.

In Europe, investors will receive the factory orders from Germany. Numbers are expected to show that factory orders declined by -0.1% in May. This will be lower than the previous gain of 0.3%. Industrial production is expected to have declined by -0.4%, which will be better than the previous decline of -1.9%. In France, the trade deficit is expected to have remained unchanged at EUR 5 billion and in Spain, the industrial production is expected to have declined by -0.1%. In the UK, the Halifax house price index is expected to have increased by 5.9% in June. Meanwhile, in Canada, investors expect the economy to have added 10k jobs while the unemployment rate is expected to increase slightly from 5.4% to 5.5%.

EUR/USD

Over the past few days, the EUR/USD pair has remained in a holding pattern as investors wait for the June jobs data. The pair is now trading at 1.1283, which is between the 50% and 38.2% Fibonacci Retracement levels. As a result of the consolidation, the price is along the short and medium-term moving averages. The pair will likely remain on this level ahead of the jobs data. The key levels to watch will be the 23.6% and 61.8% Fibonacci Retracement levels of 1.1235 and 1.1.1320.

AUD/USD

The AUD/USD pair too was relatively unchanged in the Australian session. The pair is now trading at the 0.7025 level, which is above the weekly low of 0.6955. On the hourly chart, the price is slightly above the 25-day and 50-day moving averages. The 14-day triple exponential average moved lower to below the neutral line. Like with the EUR/USD pair, the AUD/USD pair will likely remain along this level ahead of the US jobs data.

USD/JPY

The USD/JPY pair moved slightly higher today after Japan released the household spending data. The pair is now trading at the 107.83 level, which is above the weekly low of 107.52. The current price is above the 50% Fibonacci Retracement level and between the Envelopes indicator. As with the other two pairs, the price will likely remain along these levels ahead of the US jobs data. The key points to watch will be the weekly low of 107.50 or the 61.8% Fibonacci level of 107.95.

Daily Pivots: (S1) 1.2567; (P) 1.2579; (R1) 1.2591; More....

No change in GBP/USD's outlook. With 1.2645 minor support intact, further decline is expected to 1.2506. Firm break there will resume larger fall from 1.3381 to 1.2391 low. On the upside, above 1.2645 minor resistance will extend the consolidation from 1.2506 with another rise. But upside should be limited by 38.2% retracement of 1.3381 to 1.2506 at 1.2840 to bring fall resumption eventually.

In the bigger picture, down trend from 1.4376 (2018 high) is still in progress. Break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don't expect a firm break there yet. Hence, focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 0.9841; (P) 0.9856; (R1) 0.9864; More...

No change in USD/CHF's outlook. With 0.9809 minor support intact, further rise is favor to 1.0014 resistance. Upside could be limited by 61.8% retracement of 1.0237 to 0.9695 at 1.0030. On the downside, below 0.9809 minor support will turn bias back to the downside for retesting 0.9695 low instead.

In the bigger picture, current development suggests that up trend from 0.9186 (2018 low) has completed at 1.0237 already. Deeper decline would be seen to 61.8% retracement of 0.9186 to 1.0237 at 0.9587 and below. For now, USD/CHF is seen as in long term range pattern between 0.9186 and 1.0342. Hence, we'd pay attention to bottoming signal below 0.9587. However, sustained break of 1.0014 will revive medium term bullishness and turn focus back to 1.0237 high.

Daily Pivots: (S1) 107.75; (P) 107.79; (R1) 107.88; More...

Intraday bias in USD/JPY remains neutral first. For now, outlook stays bearish as long as 108.80 resistance holds. On the downside, break of 107.53 will bring retest of 106.78 low. Break there will extend recent fall from 112.40 to 104.69 low. Nevertheless, sustained break of 108.80 will confirm short term bottoming at 106.78. In this case, stronger rise should be seen back to 110.67 resistance.

In the bigger picture, decline from 118.65 (Dec 2016) is still in progress, with the pair staying inside long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we'd expect strong support above 98.97 (2016 low) to contain downside to bring rebound. In any case, break of 112.40 is needed to the first serious sign of medium term bullishness. Otherwise, further decline will remain in favor in case of rebound.

Dollar recovers mildly today as US markets will be back from holiday. But understandably, upside momentum is rather weak so far as the crucial non-farm payroll report is awaited. Overall trading is mixed this week, as some technical level are not firmly take out, even breached. For example, Gold is staying in consolidation below 1439.23, despite the rally attempt earlier. Traders could finally make up their mind after today's job data. But for now, it seems that traders would still expect a Fed cut in July even if we'll get some strong data today. Risks for the greenback are skewed to the downside.

Technically, some more upside is mildly in favor in Dollar against European majors. But break of 1.1344 minor resistance in EUR/USD, 1.2645 minor resistance in GBP/USD and 0.9809 minor support in USD/CHF could indicate return of Dollar selloff. Similarly, break of 107.53 minor support in USD/JPY could suggest return of Yen's rally, and prompt selloff in EUR/JPY and GBP/JPY too. These are the levels to watch today.

In Asia, Nikkei closed up 0.11%. Hong Kong HSI is up 0.14%. China Shanghai SSE rose 0.17%. Singapore Strait Times is down -0.27%. Japan 10-year JGB yield is down -0.0072 at -0.163.

NFP watched as markets still pricing 100% chance of July Fed Cut

US non-farm payroll report will be the major focus today, as it's a crucial factor to Fed's rate decision later in the month. For now, fed funds futures are still pricing in 100% chance of a rate cut on July 31, with 30.7% chance of 50bps cut. The pricing suggests that even a set of strong job data today won't deter Fed's cut. But a set of weak number would solidifies it. At least, this seems to be what the traders think.

Looking at other job related data, ADP employment rebounded in June and grew 102k. ISM Manufacturing Employment rose from 53.7 to 54.5. ISM Non-Manufacturing Employment dropped from 58.1 to 55.0. Four-week moving average of initial jobless claims dropped rose slightly from 215k to 222k. Conference Board Consumer Confidence dropped from131.3 to 121.5, lowest since September 2017.

As for NFP, markets are expecting 164k growth in June. Unemployment rate is expected to be unchanged at 3.6%. Average hourly earnings are expected to rise 0.3% mom. Dollar could suffer some heavy selloff on downside surprises today. But reactions to upside surprise are relatively uncertain.

Some previews here.

• NFP Preview: Wages in Focus as Rate Cut Looms
• EUR/CAD Stalls At Major Juncture Ahead Of NFP
• The US NFP Data And What To Expect
• US Jobs Expected to Bounce Back but Fed Still Likely to Cut

China said to tie US agricultural purchases to lift of Huawei ban

An SCMP report in Hong Kong suggested that China's commitment to buy additional agricultural products, as part of the agreement with US to halt trade war escalation, was not unconditional. Apparently, as Chinese media noted, if US "flip-flops" again in future trade negotiations, the purchase will be stopped again.

Additionally, China would want to see how the ban on tech giant Huawei is lifted, before committing the purchases. Trump has promised to ease supply ban on Huawei and White House could make an announcement on the details soon. For now, it's believed that Trump's administration was still debating how to ease the restrictions.

BoJ Amamiya: No plan to issue digital currency in the near future

BoJ Deputy Governor Masayoshi Amamiya said today the central bank has no plan to issue digital currency in the near future. And he disagreed to the idea that  central banks can boost the effectiveness of negative interest rate policies by issuing digital currencies. "To overcome the nominal zero lower bound, central banks would need to eliminate cash," Amamiya said. "Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this."

On the economy, Amamiya still expected to climb to 2% target. But he repeated BOJ wouldn't hesitate to ease policy further if momentum to hit inflation target is disrupted. While downside risks are strong, he noted many global central bankers share the view that global economy will recover in the second half.

Japan household spending rose 4% yoy in May, highest in four years

Japan overall household spending rose 4.0% yoy in May, well above expectation of 1.40% yoy. That's the fastest pace in four years since May 2015. The results argued that pickup in consumption could help offset some weakness in external demand in Q2.

However, spending ahead could be weighed down by sluggish wage growth ahead. Sentiments could also weaken on uncertainty over economic outlook, due to trade war. Additionally, the scheduled sales tax hike could also have negative impacts on spending. For now, Prime Minister Shinzo Abe is holding on to the plan to raise sales tax to 10% this October.

Also released, leading indicator dropped to 95.2 in May, down from 95.9, below expectation of 95.3.

Looking ahead

Germany will release factory orders in European session. Swiss will release foreign currency reserve. US NFP will be a major focus. Canada job data will be equally important while Ivey PMI will be featured too.

USD/JPY Daily Outlook

Daily Pivots: (S1) 107.75; (P) 107.79; (R1) 107.88; More...

Intraday bias in USD/JPY remains neutral first. For now, outlook stays bearish as long as 108.80 resistance holds. On the downside, break of 107.53 will bring retest of 106.78 low. Break there will extend recent fall from 112.40 to 104.69 low. Nevertheless, sustained break of 108.80 will confirm short term bottoming at 106.78. In this case, stronger rise should be seen back to 110.67 resistance.

In the bigger picture, decline from 118.65 (Dec 2016) is still in progress, with the pair staying inside long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we'd expect strong support above 98.97 (2016 low) to contain downside to bring rebound. In any case, break of 112.40 is needed to the first serious sign of medium term bullishness. Otherwise, further decline will remain in favor in case of rebound.

Economic Indicators Update

US non-farm payroll report will be the major focus today, as it's a crucial factor to Fed's rate decision later in the month. For now, fed funds futures are still pricing in 100% chance of a rate cut on July 31, with 30.7% chance of 50bps cut. The pricing suggests that even a set of strong job data today won't deter Fed's cut. But a set of weak number would solidifies it. At least, this seems to be what the traders think.

Looking at other job related data, ADP employment rebounded in June and grew 102k. ISM Manufacturing Employment rose from 53.7 to 54.5. ISM Non-Manufacturing Employment dropped from 58.1 to 55.0. Four-week moving average of initial jobless claims dropped rose slightly from 215k to 222k. Conference Board Consumer Confidence dropped from131.3 to 121.5, lowest since September 2017.

As for NFP, markets are expecting 164k growth in June. Unemployment rate is expected to be unchanged at 3.6%. Average hourly earnings are expected to rise 0.3% mom. Dollar could suffer some heavy selloff on downside surprises today. But reactions to upside surprise are relatively uncertain.

Some previews here.

• NFP Preview: Wages in Focus as Rate Cut Looms
• EUR/CAD Stalls At Major Juncture Ahead Of NFP
• The US NFP Data And What To Expect
• US Jobs Expected to Bounce Back but Fed Still Likely to Cut

General Trend:

• Shanghai property index drops over 1.8%, China said to have asked trusts to limit financing to property sector (local press)
• Australian equities outperform, REITS and Energy companies gain
• Aussie iron ore miners underperform, China said to probe iron ore price increases
• USD/JPY trades in tight range ahead of US payrolls report

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• (AU) Australia APRA finalizes guidance on mortgage lending
• (AU) Australia Jun AiG Performance of Construction Index: 43.0 v 40.4 prior (10th consecutive month of contraction)

China/Hong Kong

• Shanghai Composite opened flat, Hang Seng flat
• China Commerce Ministry (MOFCOM): Tariffs must be removed for a trade deal with U.S.(comments from July 4th)
• (CN) China wants clarity on Huawei situation before making agricultural purchases from US - SCMP
• (CN) China Banking and Insurance Regulator (CBIRC) official Zhou Liang: H1 New Yuan Loans exceeded CNY9.0T (implies June new loans of over CNY990B v CNY1.18T m/m)
• (CN) China said to ask certain trusts to limit financing related to property sector - Chinese Press
• (CN) China state insurance fund expected to takeover Baoshang Bank’s NCDs from July 8th – financial press
• (CN) China regulators to examine drivers of rise in iron ore prices, plan to crack down on price increases that are 'arbitrary' - Chinese Press
• (CN) China reportedly considering to cut infrastructure project capital needs - China Press
• (CN) FT notes recent move by China money market rates to 10-year low following recent PBOC cash injections
• (CN) China police reportedly installing data-harvesting app MFSocket on smartphones during random street checks - US Press

Japan

• Nikkei 225 opened flat
• (JP) Japan FSA: Reportedly considering tougher rules for life insurance companies, notes low interest rate environment - Japan Press
• (JP) Japan May Household Spending Y/Y: +4.0% v 1.5%e (fastest increase since May 2015)
• (JP) Japan Jun Official Reserve Assets: $1.32T v $1.31T prior
• (JP) Japan PM Abe: To implement a macro policy approach should the global economic situation deteriorates (comments from July 4th)
• (JP) Bank of Japan (BOJ) Dep Gov Amamiya: For now, sticking to our baseline scenario on economy but we also recognize that downside risks are strong and high for main price scenario; Digital currencies would allow central bank to more effectively apply negative rates but no central bank is thinking of doing this

Korea

• Kospi opened +0.1%
• Samsung Electronics [005930.KR]: Reports Prelim Q2 (KRW) Op 6.5T v 6.0Te (-56.3% y/y), Rev 56.0T v 54.5Te (-4.2% y/y)

Other

• (PH) Philippines Jun CPI Y/Y: 2.7% v 2.8%e
• (SG) Singapore to release advance GDP on July 12 (Friday)

North America

• (US) Magnitude 6.5 earthquake reported earlier today in central/southern California (said to be the largest quake in over 20 years), followed by several smaller ones

Europe

• (DE) Bundesbank Spokesman said ECB member/Bundesbank President Weidman is not applying for job elsewhere; says Weidmann is 'happy' in current role as Bundesbank President - US financial press
• (IR) On Thursday, UK Royal Marines seized Iran oil tanker in Gibraltar - financial press

Levels as of 1:20 ET

• Nikkei 225,flat, ASX 200 +0.8%, Hang Seng +0.1%; Shanghai Composite -0.1%; Kospi flat
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.3%, Dax -0.1%%; FTSE100 flat
• EUR 1.1289-1.1277 ; JPY 107.88-107.78 ; AUD 0.7030-0.7020 ;NZD 0.6695-0.6681
• Gold -0.1% at $1,420/oz; Crude Oil -1.1% at $56.72/brl; Copper -0.3% at $2.670/lb

If the current wave outlook is correct, the GBP/USD is expected to move higher and complete a bullish swing within wave C (green). The current ABC (green) zigzag is invalidated if price breaks below the 100% Fibonacci retracement level whereas a break above the resistance trend lines (red) would make a move up more likely. The upside target is for the moment the 50% Fib of wave 4 vs 3.

The GBP/USD is moving sideways for the moment, which is probably caused by the fact that Thursday was a national holiday in the US and Friday has a large news event. Price will probably move the most when the NFP event takes place. The current wave pattern suggests that the wave C (orange) of wave B (green) has been completed at the recent low and 78.6% Fibonacci level.

Market movers today

In the US, the jobs report for June is due out. Overall, the labour market has started to show some weakness, so we think it is important to keep an eye on employment growth, which is an important recession indicator, in our view. The average monthly increase in nonfarm payrolls has declined to 164,000 this year, from 223,000 in 2018. We expect employment growth to come in around 175,000. We estimate average hourly earnings rose +0.20% m/m in June, unchanged at 3.1% y/y.

The tense situation between Iran and the west may escalate further after the UK seized an Iranian tanker carrying oil to Syria in violation of the European and US sanctions. Furthermore, Iran has set a deadline of Sunday for European countries to provide economic assurances to the country and hence chose their sides against the US. If not, Iran will restart enrichment of Uranium, increasing the risk of an adverse US action.

Greece is holding general elections on Sunday, with the Conservative party widely expected to win back power from the Leftish party Syriza. The Conservative party has promised a series of tax cuts to help stimulate the Greek economy that is still curtailed by the long adjustment process after the debt crisis.

Selected market news

Following yesterday's Fourth of July market closures in the US, Asian markets are mixed this morning. These markets are clearly in wait-and-see mode ahead of the US jobs report. With the crucial Fed meeting coming up in late July, a jobs report on either the strong or weak side could shift expectations of Fed policy actions. The possible action by the Fed and other major central banks has been a more important driver for equity markets lately than the salient trade ceasefire between the US and China over the weekend at the G20 meeting. European equities were slightly higher yesterday. The most noteworthy development in European markets was yields on 10-year German Bunds falling below the European Central Bank's deposit rate for the first time. The search-for-yield has given way for a significant rally in periphery markets, with Italy and Greece seeing significant compression of their spreads versus core markets.

Oil is generally trading on the weak side, setting up for the biggest weekly decline since May. Weak global demand concerns seem to be outweighing the recent proposal from the OPEC+ pact to extend supply curbs into 2020 and worries that a renewed US confrontation with Iran may threaten supplies. We continue to believe that oil prices will rebound over the course of this year following the OPEC+ deal, supply concerns in Iran, Libya and Venezuela and a modest recovery in the global economy towards the end of the year.

In Brazil, local market sentiment strengthened significantly after the government managed to get its crucial pension reform proposal through a key congressional committee on Thursday. This fuelled investor optimism that the bill can be approved by the lower house before its mid-year recess later this month. The pension reform is very important in ensuring public debt sustainability in the world's eighth largest economy.

For the 24 hours to 23:00 GMT, the EUR traded flat against the USD and closed at 1.1287.

On the data front, the Euro-zone's seasonally adjusted retail sales unexpectedly dropped 0.3% on a monthly basis in May, compared to a revised fall of 0.1% in the prior month. Market participants had envisaged the retail sales to record a gain of 0.3%.

Separately, in Germany, the construction PMI declined to a level of 50.0 in June, falling to its weakest level since October 2018 and following a reading of 51.4 in the preceding month.

In the Asian session, at GMT0300, the pair is trading at 1.1280, with the EUR trading 0.06% lower against the USD from yesterday's close.

The pair is expected to find support at 1.1271, and a fall through could take it to the next support level of 1.1262. The pair is expected to find its first resistance at 1.1291, and a rise through could take it to the next resistance level of 1.1302.

Moving ahead, traders would keep an eye on Germany's factory orders for May, slated to release in a few hours. Later in the day, the US non-farm payrolls, unemployment rate and average hourly earnings, all for June, will garner significant amount of investors' attention

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.