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Daily Pivots: (S1) 1.3604; (P) 1.3623; (R1) 1.3639; More...

Intraday bias in USD/CAD remains neutral for the moment. Outlook is unchanged that corrective pattern from 1.3845 could extend. Break of 1.3589 will target 100% projection of 1.3845 to 1.3589 from 1.3790 at 1.3534. Strong support would be seen there to bring rebound. On the upside, above 1.3686 minor resistance will turn bias back to the upside for 1.3790 resistance instead.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Firm break of 1.3976 will confirm up resumption of whole up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149.

UK GDP grew by 0.4% mom in May, surpassing expectations of 0.2% mom increase. The primary driver of this growth was a 0.3% mom rise in services output, which significantly contributed to the overall monthly GDP increase. Additionally, production output grew by 0.2% mom , while construction output saw a substantial jump of 1.9% mom.

On a broader scale, real GDP is estimated to have grown by 0.9% in the three months leading up to May compared to the previous three months ending in February. This growth was predominantly driven by a 1.1% increase in services output. However, production remained stagnant with no growth, and construction output declined by -0.7%.

Full UK GDP release here.

Daily Pivots: (S1) 0.6735; (P) 0.6744; (R1) 0.6755; More...

Intraday bias in AUD/USD is back on the upside with breach of 0.6760 temporary top. Rise from 0.6361 is resuming and should target 61.8% projection of 0.6361 to 0.6713 from 0.6619 at 0.6837. On the downside, however, break of 0.6723 minor support will turn bias back to the downside for deeper pullback.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which could have completed at 0.6269 already. Rise from there is seen as the third leg which is now trying to resume through 0.6870 resistance.

Dollar weakened notably against Sterling and Aussie overnight, but held steady against other currencies. Market focus is now on the upcoming US consumer inflation data, with expectations of a slowdown in the headline CPI and steady core CPI. Fed Chair Jerome Powell's testimony this week boosted risk sentiment, driving US stocks to record highs. However, the bullish market trend faces a crucial test with today's inflation data. It's clear that Fed remains cautious about prematurely cutting rates to guard against inflation resurgence.

Sterling has emerged as the strongest performer this week, propelled by comments from BoE Chief Economist Huw Pill. Pill warned of "uncomfortable strength" in underlying inflation, signaling that an August rate cut is far from certain. The Monetary Policy Committee's decisions will still hinge heavily on upcoming data.

Elsewhere in the currency markets, Canadian dollar is the second strongest this week so far. Australian Dollar follows as the third strongest, supported by a healthy risk appetite among investors. In contrast, New Zealand dollar remains the weakest, impacted by RBNZ's dovish stance. Yen is the second weakest, continuing its inverse correlation with Nikkei, which has soared past 42k to new record highs. Swiss franc is the third weakest, facing additional pressure from reversals against other European majors, while Euro and Dollar are positioned in the middle.

Technically, GBP/CHF's extended rally this week argues that corrective fall from 1.1675 has completed at 1.1216 already. Further rise will now be in favor as long as 1.1448 support holds, for retesting 1.1675 high. Firm break there will resume whole rise from 1.0634 and target 61.8% projection of 1.0634 to 1.1675 from 1.1216 at 1.1859.

In Asia, at the time of writing, Nikkei is up 1.19%. Hong Kong HSI is up 1.64%. China Shanghai SSE is up 0.86%. Singapore Strait Times is up 0.44%. Japan 10-year JGB yield is p 0.0042 at 1.093. Overnight, DOW rose 1.09%. S&P 500 rose 1.02%. NASDAQ rose 1.18%. 10-year yield fell -0.02 to 4.280.

BoE's Mann foresees inflation bounce after touching 2%

BoE MPC member Catherine Mann, known for her hawkish stance, expressed caution in a speech overnight. Although headline inflation has fallen to 2%, Mann described this as a "touch and go," predicting that "we're going to be above 2% for the rest of the year."

Mann emphasized the need to see a "sustained deceleration" in services inflation, signaling her reluctance to support interest rate cuts at this stage. Her comments suggest she remains committed to resisting rate cuts despite recent data showing headline inflation at the BoE's 2% target.

Fed's Cook optimistic on soft landing, pledges vigilance on labor market dynamics

Speaking at an event in Australia today, Fed Governor Lisa Cook expressed optimism about the US economy's prospects, noting that the data so far appears to be "consistent with a soft landing". She highlighted that inflation has dropped significantly from its peak levels, and while the labor market has "cooled but remains strong".

Cook also pointed out that the ratio of job vacancies to unemployment has returned to pre-pandemic levels, and fewer workers are voluntarily quitting their jobs, indicating less confidence in finding better employment opportunities. "My baseline forecast (and that of many outside observers) is that inflation will continue to move toward target over time, without much further rise in unemployment," she said.

However, Cook underscored Fed's attentiveness to changes in the unemployment rate, noting that the situation could shift rapidly and that Fed would be "responsive" to such changes.

NASDAQ eyes 20k after Powell's balanced risk remarks

US stocks soared overnight, with NASDAQ and S&P 500 both extending their record runs with gains exceeding 1%. Investors responded positively to Fed Chair Jerome Powell's two-day semiannual testimony, even though forex markets remained relatively unchanged.

Powell refrained from hinting at the timing of Fed's first rate cut but acknowledged that the risks to the economy are now more balanced. He emphasized that "elevated inflation is not the only risk," reinforcing expectations that Fed would move quickly to ease policy if economic and job market conditions show significant signs of cooling.

Technically, near term outlook in NASDAQ will stay bullish as long as 18034.99 resistance turned support holds. Next target is 100% projection of 12543.85 to 16538.86 from 15222.77 at 19217.78.

Or, NASDAQ might be targeting long term target of 100% projection of 6631.42 to 16212.22 from 10088.82 at 19669.62. Or it's actually targeting 20k psychological level.

In summary, if NASDAQ can stay above 18k mark, a rapid move to 20k could be on the horizon.

Looking ahead

UK GDP is the major focus in European session while production and trade balance will also be released. Germany will release CPI final. Later in the day, US CPI will take center stage along with weekly jobless claims.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6735; (P) 0.6744; (R1) 0.6755; More...

Intraday bias in AUD/USD is back on the upside with breach of 0.6760 temporary top. Rise from 0.6361 is resuming and should target 61.8% projection of 0.6361 to 0.6713 from 0.6619 at 0.6837. On the downside, however, break of 0.6723 minor support will turn bias back to the downside for deeper pullback.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which could have completed at 0.6269 already. Rise from there is seen as the third leg which is now trying to resume through 0.6870 resistance.

Economic Indicators Update

US stocks soared overnight, with NASDAQ and S&P 500 both extending their record runs with gains exceeding 1%. Investors responded positively to Fed Chair Jerome Powell's two-day semiannual testimony, even though forex markets remained relatively unchanged.

Powell refrained from hinting at the timing of Fed's first rate cut but acknowledged that the risks to the economy are now more balanced. He emphasized that "elevated inflation is not the only risk," reinforcing expectations that Fed would move quickly to ease policy if economic and job market conditions show significant signs of cooling.

Technically, near term outlook in NASDAQ will stay bullish as long as 18034.99 resistance turned support holds. Next target is 100% projection of 12543.85 to 16538.86 from 15222.77 at 19217.78.

Or, NASDAQ might be targeting long term target of 100% projection of 6631.42 to 16212.22 from 10088.82 at 19669.62. Or it's actually targeting 20k psychological level.

In summary, if NASDAQ can stay above 18k mark, a rapid move to 20k could be on the horizon.

Speaking at an event in Australia today, Fed Governor Lisa Cook expressed optimism about the US economy's prospects, noting that the data so far appears to be "consistent with a soft landing". She highlighted that inflation has dropped significantly from its peak levels, and while the labor market has "cooled but remains strong".

Cook also pointed out that the ratio of job vacancies to unemployment has returned to pre-pandemic levels, and fewer workers are voluntarily quitting their jobs, indicating less confidence in finding better employment opportunities. "My baseline forecast (and that of many outside observers) is that inflation will continue to move toward target over time, without much further rise in unemployment," she said.

However, Cook underscored Fed's attentiveness to changes in the unemployment rate, noting that the situation could shift rapidly and that Fed would be "responsive" to such changes.

BoE MPC member Catherine Mann, known for her hawkish stance, expressed caution in a speech overnight. Although headline inflation has fallen to 2%, Mann described this as a "touch and go," predicting that "we're going to be above 2% for the rest of the year."

Mann emphasized the need to see a "sustained deceleration" in services inflation, signaling her reluctance to support interest rate cuts at this stage. Her comments suggest she remains committed to resisting rate cuts despite recent data showing headline inflation at the BoE's 2% target.

• Anticipation is high for the release of US CPI data, which is expected to influence market movements, especially the US Dollar Index (DXY).
• The market has priced in an 71.8% chance of a September rate cut, and if inflation aligns with or falls below forecasts, this likelihood could increase.
• Technically, the DXY is range-bound, hovering between 104.80 and 105.20, with support at the 100-day and 200-day moving averages and resistance at 105.63 and 106.00.

US CPI data is set to be released tomorrow, promising to stir volatility in an otherwise quiet week. Market participants are eagerly awaiting the data, as evidenced by the recent indecision in the markets.

The US Dollar Index (DXY) exemplifies this uncertainty with significant sideways price action this week. The inflation data follows a series of underwhelming data releases from the US, leading market participants to price in nearly an 71.8% chance of a rate cut in September.

Markets are expecting further moderation in tomorrow’s inflation data. If inflation moves closer to the Fed’s 2% target, it will bolster hopes of a rate cut, especially after Fed Chair Powell’s testimony this week. Powell emphasized that the Fed doesn’t want to wait until inflation reaches 2% to ease policy, explaining that the Fed seeks greater confidence in inflation trends.

Let us take a look at what Investment Banks are forecasting for tomorrow’s inflation print.

Source: The Kobeissi Letter

These comments will undoubtedly influence market participants as they approach tomorrow’s release. Should inflation match forecasts or come in lower, it could finally lead to sustainable market movements. This year has been characterized by quick, volatile moves quickly reversed in the days following. However, if inflation dips below the 3% mark, though unlikely, the market reaction could be markedly different this time.

Technical Analysis 

From a technical standpoint, the DXY has been rangebound for quite sometime. The last few days however has seen very little in terms of price movement, as the price has hovered between 104.80 and 105.20.

The DXY is at somewhat of a critical juncture as the ascending trendline, 100 and 200-day MAs rest just below current price. Inflation data may serve as a catalyst for a break below the long-term trendline or finally facilitate a move toward the multi-month resistance at 107.00.

Either way, market participants will hope for volatility and secondly some medium term direction.

Support

• 105.00 (100-day MA)
• 104.47 (200-day MA)
• 104.00
• 103.00

Resistance

• 105.63
• 106.00
• 107.00

US Dollar Index (DXY) Daily Chart, July 10, 2024

Source: TradingView.com (click to enlarge)

• Silver prices have risen due to a supply and demand gap, with demand outstripping supply for the fifth consecutive year.
• Industrial demand, driven by green energy, AI, and EVs, now accounts for 64% of global silver demand.
• A potential slowdown in China’s economy and prolonged high interest rates could dampen silver prices.
• Bullish Pennant pattern breakout hints at further upside. Will inflation data halt the move?

Silver prices have seen a remarkable rise this year, and with six months still to go, many are wondering just how high they could climb. One key factor to watch is the supply and demand dynamics, as demand for silver continues to outstrip supply.

According to the World Silver Survey, 2024 is the fifth year in a row with a silver shortage. In 2023, silver demand was higher than supply, leading to a market deficit of over 142 million ounces. By the end of 2024, this shortfall is expected to nearly double to 265 million ounces because of increasing industrial demand.

Silver Supply (Orange Line) and Demand (Green Line), 2019-2024 

Source: LSEG

Historically, half of the demand for silver was for industrial use and the other half for investment. Recently, industrial demand has grown significantly, now making up 64% of global silver demand, up 19% from last year.

This trend shows no signs of slowing. The primary drivers of the silver supply squeeze are the Green Energy Transition, particularly solar energy, and the high demand from the Artificial Intelligence and electric vehicle (EV) sectors. These industries are among the fastest-growing in the world today.

The only worry has been a recent dip in demand from China and the possibility of a slowdown in the Chinese economy. This could help balance the demand and supply gap. Prolonged higher interest rates from Central Banks could also dampen silver prices and possibly stop the rally. The sooner the US Federal Reserve cuts rates, the better it would be for silver prices.

The Week Ahead

The US CPI data has the potential to provide silver a shot in the arm and provide some impetus from a move away from the psychological 30.00 handle. A hot inflation print tomorrow could have the opposite impact and push Silver below the 30.00 handle in the short term, but the overall bullish trend is likely to remain intact.

Technical Analysis

From a technical standpoint, silver broke out of a bullish pennant pattern on the daily chart on July 3, which led to a rally up to around 31.50 before entering a pullback and consolidation phase.

Since then, silver has been forming lower highs and higher lows, creating a new bullish pennant pattern. Another important factor to watch is the moving averages; the 100-day MA is nearing a golden cross with the 200-day MA, suggesting further upside and bullish momentum.

However, if a 4-hour candle closes below the 30.600 level, it would signal a change in structure, invalidating the current bullish setup.

Support

• 30.60
• 30.20
• 30.00 (psychological level)

Resistance

• 31.35
• 31.70
• 32.00

Silver (XAG/USD) Daily Chart, July 10, 2024

Source: TradingView.com (click to enlarge)

S&P 500 broke key resistance level 5500.00
• Likely to rise to resistance level 5700.00

S&P 500 Index is under the bullish pressure after the price broke above the key resistance level 5500.00, which stopped the previous waves i and b at the end of June.

The breakout of the resistance level 5500.00 continues the active multi-impulse sequence made of the different-dimension nested impulse waves – iii, 3 and (3).

Given the clear daily uptrend, S&P 500 Index can be expected to rise further to the next resistance level 5700.00 (target price for the completion of the active impulse wave 3).