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Australia's employment figures for June showed a strong increase, with employment rising by 50.2k, well above the expected 20.0k. This growth included 43.3k full-time jobs and 6.8k part-time jobs.

Unemployment rate edged up from 4.0% to 4.1%, in line with expectations. Participation rate also increased from 66.8% to 66.9%, just 0.1% below the historical high of 67.0% set in November 2023. Additionally, the employment-to-population ratio rose by 0.1% to 64.2%, close to its historical peak of 64.4% from November 2023. Monthly hours worked increased by 0.8% mom.

Bjorn Jarvis, head of labour statistics at ABS, observed that both the employment-to-population ratio and the participation rate are still near their 2023 highs. He added that together the persistently high level of job vacancies indicates the labor market "remains relatively tight", even though unemployment rate has been above 4.0% since April.

Full Australia employment release here.

In June, Japan's exports grew by 5.4% yoy to JPY 9209B, falling short of 6.4% yoy expected. This marks the seventh consecutive monthly increase in export value. However, export volume fell by -6.2% yoy, indicating that the rise in export value was driven primarily by higher prices and falling Yen rather than increased demand.

By destination, shipments to the US increased by 11% yoy. Exports to China grew by 7.2% yoy, marking the seventh consecutive month of growth. Overall, exports to Asia rose by 7.7% yoy, but exports to the EU declined by -13.4% yoy.

Imports increased by 3.2% yoy to JPY 8985B, below the expected 9.3% yoy. Import volume also decreased by -8.9% yoy. For June, Japan recorded a trade surplus of JPY 224B.

In seasonally adjusted terms, exports declined by -0.2% mom h to JPY 8961B, while imports rose by 1.6% mom to JPY 9778B, leading to a trade deficit of JPY -817B.

Key Highlights

• Crude oil prices started a fresh increase from the $80.20 support.
• A major bearish trend line is forming with resistance at $82.95 on the 4-hour chart.
• Bitcoin is consolidating gains above the $63,500 pivot zone.
• EUR/USD extended its increase above the 1.0910 resistance.

Crude Oil Price Technical Analysis

After a downside correction, Crude oil prices found support above $80.00. The price formed a base near $80.20 and started a fresh increase.

Looking at the 4-hour chart of XTI/USD, the price climbed above the $81.20 resistance and settled above the 200 simple moving average (green, 4-hour). There was a move above the 50% Fib retracement level of the downward move from the $83.80 swing high to the $80.21 low.

The price tested the 100 simple moving average (red, 4-hour) and the 61.8% Fib retracement level of the downward move from the $83.80 swing high to the $80.21 low.

On the upside, the price is facing hurdles near the $82.50 level. There is also a major bearish trend line forming with resistance at $82.95 on the same chart.

The next major resistance is near the $83.20 zone, above which the price may perhaps accelerate higher. In the stated case, it could even visit the $84.65 resistance.

If not, the price might start another decline. The first major support on the downside is near the $81.20 level. The next major support is $80.20. Any more losses might send oil prices toward $78.80 in the coming sessions.

Looking at EUR/USD, the bulls remained in action, and they were able to push the pair above the 1.0910 resistance zone.

Economic Releases to Watch Today

• ECB Interest Rate Decision - Forecast 3.75%, versus 3.75% previous.
• US Initial Jobless Claims - Forecast 230K, versus 222K previous.

• GBPJPY reversed from the resistance area
• Likely to fall to support level 201.65

GBPJPY currency pair continues to fall after the price reversed down from the resistance area located between the upper trendline of the weekly up channel from last year and the upper weekly Bollinger Band.

The downward reversal from this resistance area created the weekly Japanese candlesticks reversal pattern Doji.

Given the overbought weekly Stochastic, strongly bearish sterling sentiment, and the equally strong yen optimism seen recently, GBPJPY currency pair can be expected to fall further to the next support level 201.65.

• EURCAD broke key resistance level 1.4920
• Likely to rise to resistance level 1.5040

EURCAD currency pair recently broke above the key resistance level 1.4920, which stopped the previous correction (2) at the start of June.

The breakout of the resistance level 1.4920 greatly accelerated the active impulse wave c of the ABC correction 2 from the end of last month.

Given the rising euro bullish sentiment, EURCAD currency pair can be expected to rise further to the next resistance level 1.5040 (former multi-month high from November).

In a speech today, Fed Governor Christopher Waller stated that Fed is "getting closer" to the time when a cut in the policy rate is warranted. He noted that Q2 data on inflation and the labor market has moderated, suggesting that "progress toward price stability has resumed." Waller believes the current data align with the goal of achieving a soft landing and will be watching for further data in the coming months to support this view.

Waller outlined three scenarios for the future. The first, and most optimistic, scenario is that Fed continues to receive "very favorable" inflation data, leading to a "nice run" that began in May. In this case, Waller could "envision a rate cut in the not-too-distant future."

The second scenario, which Waller considers "more likely to occur," involves inflation data coming in "uneven" but still indicating overall progress in disinflation. Under this scenario, a rate cut in the near future is "more uncertain."

The third scenario involves a "significant resurgence in inflation" in the second half of the year, but Waller assigns a "low probability" to this outcome.

Given his belief that the first two scenarios are the most probable, Waller concludes that the "time to lower the policy rate is drawing closer."

Full speech of Fed's Waller here.

USDJPY was sharply down on Wednesday (down 1.3% during the European / early US session), with markets suspecting another intervention, after Japan’s authorities intervened in the market and pushed yen away from the lowest levels in nearly four decades..

Although comments from top officials were not clearly pointing to intervention, the size and the pace of the latest move suggests that authorities continued to buy yen, in attempts to further strengthen weakening currency.

Fresh drop is pressuring pivotal Fibo support at 156.04 (38.2% of 146.48/161.95), with firm break here to add to negative outlook and allow for stronger correction towards 100DMA (155.04) and Fibo 50% (154.21).

Strong negative momentum and MA’s (10/20/55) in bearish configuration support the notion, wit broken 55DMA (157.55) to ideally cap.

Res: 157.55; 158.30; 158.86; 159.52.
Sup: 156.04; 155.71; 155.04; 154.21.

The Australian dollar is steady on Wednesday. AUD/USD is trading at 0.6743 early in the North American session, up 0.08% on the day.

Australia releases the June employment report early on Thursday. The market estimate stands at 20 thousand, compared to 39.7 thousand in May, which was a three-month high. The labor market has been tight, supporting the case for the Reserve Bank of Australia to avoid lowering interest rates.

Inflation hasn’t fallen as quickly as the RBA had hoped and unexpectedly rose in June from 3.6% to 4%, the highest level this year. The acceleration in inflation has policy makers concerned and the cautious RBA has kept the possibility of a rate hike on the table. The central bank has maintained the cash rate at 4.35% since December 2023 and a rate cut looks unlikely in the near term, barring an unexpected decline in inflation. The markets have priced in a 15% likelihood of a rate cut at the next meeting on August 6, according to the ASX RBA rate tracker.

We’ll hear from a host of Federal Reserve officials during the remainder of the week, and the markets will be hoping for insights about upcoming rate decisions. On Tuesday, Fed Governor Adriana Kugler said she was “cautiously optimistic” that inflation was returning the 2% target, noting that recent inflation readings have been softer than expected and wage growth has eased. Kugler didn’t provide a time line for a rate cut but said it would be appropriate to lower rates “later this year”.

AUD/USD Technical

• AUD/USD is testing resistance at 0.6738. Above, there is resistance at 0.6761
• 0.6711 and 0.6688 are the next support levels

Markets

After last-week’s softer than expected US CPI data, global investors gained ever greater confidence that the Fed will embark for a genuine, protracted easing cycle soon. Yields turned south, especially at the short end of the (US) yield curve. The dollar faced an uphill battle, but losses after all remained modest. Key support levels mostly survived. Even as (US) yields steadied, FX markets today tried/succeded some kind of catching up move. Remarkably, this USD decline occurred even as equities mostly trade in red, pondering the impact of a protectionist Trump trade policy regarding IT-related exports to China (amongst others). It has been different of late and a yen rebound after presumed BOJ interventions stalled earlier this week. Even so, today the Japanese currency was first to profit from a weak USD and forced the break. USD/JPY dropped below the 157.19 correction low, triggering further stop-loss unwinding of stale yen-short/USD-long positions. At 156.40, USD/JPY trades about 3.5% below the multi-year peak touched early this month. The euro isn’t the front-runner to profit from the USD setback, but the USD/JPY decline also pushed EUR/USD beyond 1.0916/20 resistance (currently 1.0945). The 1.0981 March top is the last stop before the 1.10 barrier. The broader USD decline and easing of global financing conditions broadly supports smaller currencies that are often sensitive to global (risk)sentiment (NOK, SEK, AUD, CAD and NZD, the latter after mixed domestic CPI data). In CEE, the Czech krone and the forint also succeded modest gains. The zloty, regional outperformer YTD, for the second day in row lost ground. We saw no obvious trigger for PLN underperformance. The technical break in several major USD cross rates is noteworthy, but we look out whether/how long this combination of USD-weakness and equity risk-off lasts.

Cable (1.3035) today was squeezed beyond the 1.30 barrier, a level last seen this time last year. Aside from USD weakness, sterling strength was also in play. The UK currency of late profited from a return of political stability after the UK Parliamentary election. Today, UK inflation data didn’t provide a clear trigger for the BoE to aggressively downsize sterling’s interest rate support anytime soon. At 0.1% M/M and 2% Y/Y, UK inflation for the second consecutive month matched the BoE target. Still, core- 3.5 % Y/Y and services inflation (5.7% Y/Y) flagged a clear warning signal that there is some work to do for the BoE. The minutes of the June meeting showed that the unchanged decision at that time was a rather close call as several members wanted to gradually scale back policy restriction. Today’s data don’t make it easier for ‘middle-of-the-road’ MPC members to change camp already at the August meeting. UK monetary policy is again drifting closer to the Fed’s path rather than to an ECB scenario. UK yields added between 3.5 bps (2-y) and 2.5 bps (30-y). The market now only sees a <40% chance on an August rate cut vs almost 50% before to data. UK labour data (tomorrow) and retail sales (Friday) might further finetune the debate. EUR/GBP (0.8385) is trading at the lowest level in almost 2-year with the Augst 2022 low (0.834) the next reference on the technical charts.

News & Views

Belgian newspaper De Tijd reports that Belgium is running a €27.8bn budget deficit according to preliminary data by the Budget Monitoring Committee in preparation of federal formation talks (4.6% of GDP). That’s close to the €27.5bn estimated by the outgoing government. For next year, the deficit is expected to widen to €29.4 bn. Under unchanged policy settings, this rises to €46.5bn by 2029 (vs previous estimate of €45bn). The lion share of these deficits are on a federal rather than regional level. To comply with EU rules, the federal government needs to finds €27.6bn by 2029.

An analysis by the National Bank of Poland showed that domestic companies expect their financial conditions to worsen in Q3 amid demand worries. A particularly clear weakening of demand forecasts was noted in consumer services and in the construction industry. Companies lowered their employment forecasts and reduced their planned increase in salaries. The number of companies planning new investment has decreased as well.

Graphs

USD/JPY: Yen taking the lead on broad USD correction

Cable (GBP/USD) jumping beyond 1.30 for the first time in a year as BoE maybe won’t be able to frontrun Fed policy easing.

NZD/USD: mixed New Zealand inflation report raises doubts on August RBNZ rate cut. Kiwi dollar rebounds.

EUR/PLN: zloty underperforms as EUR/PLN 4.25 proves tough support (zloty resistance).