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Gold recouped some losses after the US dollar bulls took profit following inflation data in June. The price action has struggled to stay above September 2021’s lows at 1723. A bullish RSI divergence showed a slowdown in the sell-off. A rally above 1750 would act as confirmation and prompt sellers to cover their bets, paving the way for an extended recovery. Then 1805 along the 30-day moving average could be within reach. A drop below 1710 may attract more bears and send the metal to August 2021’s lows near 1682.

The Canadian dollar soared after the Bank of Canada surprised the market with a 1% hike. The greenback consolidated its gains after it broke above June’s peak at 1.3070. 1.2940 at the base of a previous bullish breakout has offered some support, though its retest is a sign of hesitation. 1.3050 is the last hurdle ahead and a bullish breakout may attract momentum buyers and resume the uptrend. On the downside, a fall below 1.2940 may cast doubt on the bulls’ commitment and deepen the correction to 1.2840.

The pound finds support from better-than-expected GDP growth in May. The pair is having a hard time holding onto its rally attempts. Bearish sentiment means that rebounds have rather been opportunities for trend followers to sell into strength. The RSI’s double bottom in the oversold area caught some buyers’ attention. But strong selling could be expected between the psychological level of 1.2000 and 1.2050. 1.1810 is a fresh support and its breach could trigger a new round of liquidation towards 1.1600.

American stocks declined while the U.S. dollar retreated after the strong American consumer inflation data. The numbers showed that the country’s inflation surged to a multi-decade high of 9.1% in June. That increase was bigger than the median estimates of 8.8%. However, core inflation rose at a smaller pace than what analysts were expecting. These numbers imply that the Federal Reserve will likely embrace a more hawkish tone in the coming months. Analysts are now pricing in a 100 basis points hike when the bank meets later this month. Today, the U.S. dollar will react to the latest producer price index (PPI) data.

American equities also retreated as several large American companies started publishing their quarterly results. Delta delivered a bigger profit than expected but warned that inflation will likely lead to thinner margins later this year. This view was shared by PepsiCo, the second-biggest beverage company in the world. Many large companies are expected to publish their results today. This includes companies like Taiwan Semiconductor, JP Morgan, Morgan Stanley, and Cintas. These are important companies because they lead their respective industries and are key barometers of the economy.

The Canadian dollar rose sharply against the US dollar after the latest interest rate decision by the Bank of Canada. The BoC caught most investors by surprise when it decided to hike interest rates by 100 basis points. It pushed the official rate to 2.25% and warned that more hikes will likely happen later this year if inflation remains stubbornly high. The economic calendar is relativle light today. The only important events will be the the U.S. PPI figures and initial jobless claims.

USDCAD

The USDCAD pair declined to an intraday low of 1.2945, the lowest level since July 11. On the four-hour chart, the pair has moved slightly below the 25-day moving average while the Stochastic Oscillator and the Relative Strength Index (RSI) have pointed downwards. The pair has also formed a triple-top pattern. Therefore, the pair will likely have a bearish breakout as sellers target the support at 1.2850.

EURUSD

The EURUSD pair dropped to the parity level after the strong US consumer inflation data. It then bounced back to the current 1.008, which was the highest point since Tuesday. It remains below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) and the Stochastic Oscillator are pointing upwards. Therefore, the pair will likely continue oscillating in this range and then have a bearish breakout.

EURGBP

The EURGBP pair moved sideways as investors focused on the political happenings in the UK. It is trading at 0.8453, which is slightly above this week’s low of 0.8400. On the four-hour chart, Bollinger Bands have narrowed while the MACD remains below the neutral point. The Williams % Range has moved above the oversold level. Therefore, the pair will likely have a bearish breakout as sellers target the next support at 0.8400.

Daily Pivots: (S1) 136.39; (P) 136.96; (R1) 137.44; More...

USD/JPY's up trend resumes by breaking 137.74 and intraday bias is back on the upside. There is sign of upside re-acceleration as seen in daily and 4 hour MACD too. Next target is 100% projection of 114.40 to 131.34 from 126.35 at 143.29. On the downside, below 136.46 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, current rally is seen as part of the long term up trend from 75.56 (2011 low). Next target is 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, which is close to 147.68 (1998 high). This will remain the favored case as long as 126.35 support holds.

Yen's selloff continues in Asian session today, on expectation of further divergence in BoJ's policy with other major central banks. BoC's mega 100bps hike overnight prompted talks that Fed could follow later in the month, given that headline consumer inflation is showing no sign of even plateauing. Dollar remains the strongest one for the week, followed by Canadian and then Swiss Franc. Yen is the worst performing, followed by Euro, and then Sterling.

Technically, CAD/JPY looks ready to follow USD/JPY in upside breakout finally. Immediate focus is now on 107.19 resistance. Firm break there will target 61.8% projection of 97.78 to 107.19 from 103.34 at 109.15, and then 100% projection at 112.75. However, for now, other Yen crosses are not showing similar bullish sign yet.

In Asia, at the time of writing, Nikkei is up 0.83%. Hong Kong HSI is down -0.14%. China Shanghai SSE is up 0.26%. Singapore Strait Times is down -0.79%. Japan 10-year JGB yield is down -0.0018 at 0.236. Overnight, DOW dropped -0.67%. S&P 500 dropped -0.45%. NASDAQ dropped -0.15%. 10-year yield dropped -0.054 to 2.904.

Fed Mester: No reason to have a smaller hike than 75bps

Cleveland President Loretta Mester told Bloomberg TV yesterday, the June inflation report was "uniformly bad". "There was no good news in that report at all," she said. "We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner."

"Certainly the inflation report suggests that there's no reason to say that a smaller rate increase than we did last time, right, because nothing moved in that direction," she added.

Asked if a 100bps hike is appropriate this month, Mester said, "We're going to have the meeting and we're going to talk about what the appropriate path of policy is. We don't have to make a decision today."

Fed Bostic: Inflation trajectory not moving in positive way

Commenting on yesterday's US CPI report, which showed headline inflation surged to 9.1%, Atlanta Fed President Raphael Bostic said the "numbers suggest the trajectory is not moving in a positive way". But, "how much I need to adapt is really the next question," as he needed to study the "nuts and bolts" of the report.

"The top-line number is a source of concern," Bostic said, "Everything is in play." Asked if that included by raising rates by a full percentage point, following BoC's surprised move, he replied, "it would mean everything."

Australia unemployment rate dropped to 3.5%, lowest since 1974

Australia employment grew 88.4k in June, above expectation of 30.0k. Full time jobs grew 52.9k while part-time jobs rose 35.5k. Unemployment rate dropped sharply from 3.9% to 3.5%, below expectation of 3.8%. That's the lowest level since August 1974. Participation rate rose from 66.7% to 66.8%. Monthly hours worked was essentially unchanged at 1856m.

Bjorn Jarvis, head of labour statistics at the ABS, said: "The 3.4 per cent unemployment rate for women was the lowest since February 1974 and the 3.6 per cent rate for men was the lowest since May 1976."

"The large fall in the unemployment rate this month reflects more people than usual entering employment and also lower than usual numbers of employed people becoming unemployed. Together these flows reflect an increasingly tight labour market, with high demand for engaging and retaining workers, as well as ongoing labour shortages."

Looking ahead

Swiss PPI will be released in European session. Later in the day, US will release jobless claims and PPI. Canada will release manufacturing sales.

USD/JPY Daily Outlook

Daily Pivots: (S1) 136.39; (P) 136.96; (R1) 137.44; More...

USD/JPY's up trend resumes by breaking 137.74 and intraday bias is back on the upside. There is sign of upside re-acceleration as seen in daily and 4 hour MACD too. Next target is 100% projection of 114.40 to 131.34 from 126.35 at 143.29. On the downside, below 136.46 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, current rally is seen as part of the long term up trend from 75.56 (2011 low). Next target is 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, which is close to 147.68 (1998 high). This will remain the favored case as long as 126.35 support holds.

Economic Indicators Update

Australia employment grew 88.4k in June, above expectation of 30.0k. Full time jobs grew 52.9k while part-time jobs rose 35.5k. Unemployment rate dropped sharply from 3.9% to 3.5%, below expectation of 3.8%. That's the lowest level since August 1974. Participation rate rose from 66.7% to 66.8%. Monthly hours worked was essentially unchanged at 1856m.

Bjorn Jarvis, head of labour statistics at the ABS, said: "The 3.4 per cent unemployment rate for women was the lowest since February 1974 and the 3.6 per cent rate for men was the lowest since May 1976."

"The large fall in the unemployment rate this month reflects more people than usual entering employment and also lower than usual numbers of employed people becoming unemployed. Together these flows reflect an increasingly tight labour market, with high demand for engaging and retaining workers, as well as ongoing labour shortages."

Full release here.

Cleveland President Loretta Mester told Bloomberg TV yesterday, the June inflation report was "uniformly bad". "There was no good news in that report at all," she said. "We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner."

"Certainly the inflation report suggests that there's no reason to say that a smaller rate increase than we did last time, right, because nothing moved in that direction," she added.

Asked if a 100bps hike is appropriate this month, Mester said, "We're going to have the meeting and we're going to talk about what the appropriate path of policy is. We don't have to make a decision today."

Commenting on yesterday's US CPI report, which showed headline inflation surged to 9.1%, Atlanta Fed President Raphael Bostic said the "numbers suggest the trajectory is not moving in a positive way". But, "how much I need to adapt is really the next question," as he needed to study the "nuts and bolts" of the report.

"The top-line number is a source of concern," Bostic said, "Everything is in play." Asked if that included by raising rates by a full percentage point, following BoC's surprised move, he replied, "it would mean everything."

DXY:

On the H4, with prices moving above the ichimoku indicator and along the ascending trendline, we have a bullish bias that prices will drop and rise from 1st support at 105.794 where the pullback support and 61.8% fibonacci retracement are to 1st resistance at 111.758 in line with 100% fibonacci projection and 78.6% fibonacci projection. Alternatively, price may break 1st support structure and drop to 2nd support at 103.401 where the horizontal swing low support and -27.2% fibonacci expansion are.

Areas of consideration:

• H4 time frame, 1st resistance at 111.758
• H4 time frame, 1st support at 105.794

XAU/USD (GOLD):

On the H4, with prices moving below the ichimoku indicator and along a descending trendline, we have a bearish bias that prices will drop to our 1st support at 1723.09 where the horizontal pullback support, 61.8% fibonacci retracement and 61.8% fibonacci projection are. Once we have downside confirmation of price breaking 1st support structure, we would expect bearish momentum to carry price to 2nd support at 1678.36 in line with swing low support and 100% fibonacci projection. Alternatively, price could rise to our 1st resistance at 1758.89 in line with overlap resistance and 38.2% fibonacci retracement.

Areas of consideration:

• H4 time frame, 1st Resistance at 1758.89
• H4 time frame, 1st Support at 1723.09

GBP/USD:

On the H4, with prices moving below the ichimoku indicator and within the descending channel, we have a bearish bias that prices will rise and drop from our 1st resistance at 1.18748 where the pullback resistance is to our 1st support at 1.17674 where the 78.6% fibonacci projection and 127.2% fibonacci extension are. Alternatively, price could break 1st resistance structure and rise to 2nd resistance at 1.19338 in line with the overlap resistance.

Areas of consideration:

• H4 1st resistance at 1.18748
• H4 1st support at 1.17674

USD/CHF:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise from our 1st support at 0.97233 where the horizontal pullback support is to our 1st resistance at 1.00485 in line with the 100% Fibonacci projection is. Alternatively, price may not break 1st support and head for 2nd support at 0.95268 where the horizontal pullback support.

Areas of consideration

• 1st support level at 0.97233
• 1st resistance level at 1.00485

EUR/USD :

On the H4, with price moving in an ascending trendline on our RSI, we have a bullish bias that price will rise from our 1st support at 1.00173 in line with the swing low and 100% fibonacci projection to the 1st resistance at 1.03634 at the pullback resistance. Alternatively, price may break the support structure at 1st support and drop to the 2nd support at 0.98416 in line with the -61.8% fibonacci expansion.

Areas of consideration :

• H4 1st resistance at 1.03634
• H4 1st support at 1.00173

USD/JPY:

On the H4, with price moving along an ascending trendline and above the ichimoku indicator, we have a bullish bias that price will drop and rise from our 1st support at 137.771 where the pullback support is to the 1st resistance at 139.536 in line with 100% fibonacci projection and -61.8% fibonacci expansion. Alternatively, price could break 1st support and drop to 2nd support at 136.706 where the overlap support, 38.2% fibonacci retracement and 100% fibonacci projection are.

Areas of consideration:

• H4 time frame, 1st resistance at 139.536
• H4 time frame, 1st support at 137.771

AUD/USD:

On the H4, with price moving below the ichimoku cloud and in a descending trendline, we have a bearish bias that price will continue to drop from the 1st resistance at 0.67656 in line with the 100% and 78.6% fibonacci projections to the 1st support at 0.66052 in line with the 161.8% fibonacci extension and 78.6% fibonacci projection. Alternatively, price may reverse off the 1st resistance and rise to the 2nd resistance at 0.68487 in line with the overlap swing high and 61.8% fibonacci projection

Areas of consideration

• H4 1st resistance at 0.67656
• H4 1st support at 0.66052

NZD/USD:

On the H4, with price moving below the ichimoku cloud and in a descending trendline, we have a bearish bias that price will continue to drop from the 1st pullback resistance at 0.61364 in line with the 127.2% fibonacci extension and 78.6% fibonacci projection to the 1st support at 0.60333 in line with the 161.8% fibonacci extension and 100% fibonacci projection. Alternatively, price may reverse off the 1st resistance and rise to the 2nd resistance at 0.62039 in line with the overlap swing high.

Areas of consideration:

• H4 time frame, 1st support at 0.60333
• H4 time frame, 1st resistance at 0.6136

USD/CAD:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise from our 1st support at 1.29525 where the horizontal pullback support and fibonacci confluence are to our 1st resistance at 1.30780 in line with the horizontal swing high resistance. Alternatively, price may not break 1st support and head for 2nd support where the horizontal swing low support is.

Areas of consideration:

• H4 time frame, 1st resistance at 1.30780
• H4 time frame, 1st support at 1.29525

OIL:

On the H4, with price moving below the ichimoku cloud, we have a bearish bias that price will drop to our 1st support at 89.44 where the 161.8% Fibonacci extension is from our 1st resistance at 96.93 in line with the horizontal pullback resistance and 50% Fibonacci retracement. Alternatively, price may break 1st resistance and head for 2nd resistance at 104.77 where the horizontal pullback resistance and 50% Fibonacci retracement is.

Areas of consideration:

• H4 time frame, 1st resistance of 96.93
• H4 time frame, 1st support of 89.44

Dow Jones Industrial Average:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise from our 1st support at 31218 where the horizontal pullback support is to our 1st resistance at 31866 in line with the horizontal swing high resistance. Alternatively, price may not break 1st support and head for 2nd support at 30434 where the horizontal swing low support is.

Areas of consideration:

• H4 time frame, 1st resistance of 31866
• H4 time frame, 1st support of 31218