EUR/USD - 1.0198 Euro's decline from Tue's near 4-week peak at 1.0293 to 1.0124 (Wednesday) suggests recent upmove from July's 20-year bottom at 0.9953 has made a top and despite staging a rebound to 1.0253 Thursday, selloff to 1.0142 on Friday and then Monday's rebound to 1.0221 on broad-based usd's weakness in tandem with U.S. yields would yield further choppy swings before fall. Below 1.0124/30, 1.0097 later. On the upside, only a daily close above 1.0221 would bring stronger gain to 1.0240/50 but 1.0290/95 should hold. Data to be released on Tuesday New Zealand retail sales, Australia NAB business conditions, NAB business confidence. U.K. BRC retail sales. U.S. labor costs, productivity and redbook retail sales.

Another decisive week for global markets lies ahead. The main event will be the latest CPI report from the United States, which will reveal whether inflation has finally started to cool off. That’s what business surveys and commodity prices suggest, setting the stage for a retracement in the almighty dollar. 

EUR/USD - 1.0166 Euro's decline from Tuesday's near 4-week 1.0293 peak to 1.0124 (Wednesday) suggests recent rise from July's 20-year bottom at 0.9953 has made a top and despite staging a strong bounce to 1.0253 on Thursday, subsequent selloff to 1.0142 on blowout U.S. NFP Friday would re-test 1.0124, 1.0090/95 but 1.0048/50 may hold. On the upside, only a daily close above 1.0209 would prolong choppy swings and risk gain to 1.0235/39 before down. Data to be released today Japan current account, trade balance, Eco watchers current, Eco watchers outlook, New Zealand inflation forecast, Swiss unemployment and EU Sentix index on Monday.

Markets After a bumper nonfarm payrolls print, market attention turns to US CPI on Wednesday. A slowdown in inflation remains the base case, but details of the CPI data will be critical. Back-to-back storming inflation prints will likely lead to complete repricing of the September Fed meeting and, ultimately, where the Fed ends up. Still, last Friday's payroll report indicates an overheated labour market that continues to tighten further. Hence at minimum, the markets expect another 100bp of Fed funds rate increases over the next three meetings: +50bp in September and +25bp in November and December, with risks skewed towards significant increases.  The FOMC would prefer to decelerate the pace of rate hikes, but the data permits them to do so. Lately, the data the FOMC uses as critical inputs for its decision-making process has shown signs of an overheated labour market and intense wage pressures. Hence this week's inflation report seems very unlikely to offer "compelling evidence" of a slowdown needed for the Fed to pull away from its aggressive inflation-fighting mode.   Oil Brent has fallen to a 6-month low, with analysts struggling to produce a satisfactory explanation when investors ask why.  The broader market sentiment has turned negative on recession risk, leading to growing concerns about oil demand. The base case for most commentators is that demand growth will slow globally, and demand destruction is not happening. The broader market is seeing fewer signs of stagflation. NFP was up 528k, consumer spending looks strong, and few signs of consumer demand destruction from the hawkish Fed. Still, there have been several bearish headlines recently, Chinese officials downplaying the 5.5% GDP target, US inventory data showing a crude build and weaker product demand, and renewed efforts to revive Iran nuclear talks, but nothing that has triggered a change in oil fundamentals that would explain a price drop of this magnitude.  On the bullish side, last week's OPEC+ meeting is confirmation of OPEC/Saudi unwillingness to respond to US pressure for an increase in production. Still, renewed speculation about where OPEC sits is heightening volatility. ' OPEC-10 production is ~1mb/d below quota, with OPEC+ ~2.8mb/d, and even if the spare capacity figures are accurate, there are valid concerns about the pace at which production can ramp up from here. Saudi Arabia's raised OSPs, and they will not raise prices if demand is not there, suggesting market tightness.  In addition, we have not yet seen the complete supply impact of western sanctions on Russian oil. Most of Europe and the US have not bought has found its way to India and China. Still, there could be a significant drop next year, particularly if sanctions expand to include restrictions on shipping and insurance.  We are grasping at straws here as traders still do not have a quantitative or qualitative answer beyond the fact that sentiment has turned negative to explain this month's dive in the plunge tank. And trying to anticipate sentiment shifts rather than relying on macro data for trend analysis makes it difficult to estimate where prices will stabilize and how soon. Still, the market structure seems more sensitive to bad news than good news for now. This year's estimates for oil prices range from Brent $50 to $115; hence, it appears the market is pulling numbers out of a hat to determine price forecasts.   Forex JPY The Yen has been volatile in recent trading sessions, especially since the July FOMC, its weakness leading up to mid-July surprised expectations for JPY strength on growing US recession risks. However, when looking at various periods of risk-off in markets, it is clear that the direction of rates is a crucial determinant of the path of USDJPY. Hence  JPY should remain tethered to the hip of 10-year US yields and how they react to this week's US inflation print. THB Brighter outlook ahead on tourism rebound, dip in oil and lower freight shipping costs. The number of foreign tourists in H1 exceeded BoT's expectation, notably in Q2, given the faster-than-expected relaxation of inbound travel and return quarantine restrictions globally.  The Thai Baht has depreciated almost 7% against the USD YTD and has underperformed several NJA currencies (on a spot basis), primarily driven by divergent monetary policies between the US Fed and the BoT.  However, we expect the BOT to start normalizing policy with a 25bp hike on the 10th of August MPC meeting, followed by a 25bp hike at the subsequent meetings until the policy rate reaches 2.5%.

S&P 500 bearish overtures were refused, bonds remained optically risk-on and strong, but the true picture reflects a daily stall. Refusal to drive prices higher in the absence of convincing, credibly strong NFPs. I have a hunch that a careful look under the hood would reveal some signs of weakness in the job market, the way hours worked last time did. While the Fed isn‘t drumming this point really as tightening would come at the expense of unemployment rate, because wage inflation needs to be broken down as well in order to get overall inflation under control. Some officials such as Kashkari aren‘t hiding the fact it would take several years to achieve the 2% goal again. Let‘s have a look at yesterday‘s Bank of England moves, kind of foreshadowing what‘s reasonable to expect from the Fed. In the UK, the prospect of entering recession Q4 2022 amd remaining in it for more than a couple of quarters, is being acknowledged. The central bank though intends to keep tightening anyway, preferring to take on inflation after it ran out of control longer they publicly anticipated. Meanwhile in the States, unemployment claims have edged higher – indicative of growing softness in the labor market. Long-dated Treasuries continue rising as is appropriate in these conditions of economic slowdown slowly gathering pace. Similarly to inflation expectations, they‘re not yet taking the Fed‘s hawkish rhetoric absolutely seriously unlike commodity prices that are at best carving out a bullish divergence (still in the making, therefore without implications yet). Precious metals appear farther along the route of acknowledging the upcoming stagflationary reality as I continue looking for inflation to remain in the stubbornly high 5- 6% range no matter the Fed‘s actions over the next 3 FOMC meetings at least. Obviously, the hotter the underlying markets, the more tightening has to be done, and that‘s extra headwind for the markets, and one making the Fed pivot a bit more elusive. S&P 500 and Nasdaq outlook S&P 500 underwent a daily consolidation, preparing for a spike that should be sold into. The bull trap is almost complete with VIX pushing to 21 – the degree of the overshoot is what matters. Credit markets HYG is going to attract a sell in the not too distant future. Its upswing isn‘t accompanied by coresponding rise in cyclicals, in risk-on sectors – there is still much defensive / slow growth driven flavor about the stock market rally. Gold, silver and miners Precious metals turned strongly up yesterday, but not yet absolutely decisively – there was some upper knot, and the volume could be higher too. Positive day in need of quite some follow through. Crude oil Crude oil weakness is getting the bulls worried, and I‘m leaning towards the $88 support slwoly giving way as $85 approach comes next. Longs are suitable only for medium-term investors. Copper Copper is holding up, but should another setback strike commodities, the red metal wouldn‘t escape unscathed. Short-term, the move in base metals is positive but it‘s too early to say whether that can survive the autumn storms. Bitcoin and Ethereum Cryptos are expecting a good outcome today – this is where the earliest signs of disappointment and peak would be found.

USD/CAD holding steady ahead of jobs data USDCAD shifted to the sidelines immediately after charting a new lower low at 1.2766 in the short-term picture, unable to reach the constraining 20-day simple moving average (SMA).   The technical indicators state a bearish-to-neutral bias as the RSI keeps flattening marginally below its 50 neutral mark and the MACD is extending its short horizontal move slightly below zero around its red signal line. Hence, traders may keep directing the market sideways unless they see a break above the 20-day SMA at 1.2900, and more importantly, a close above the 1.2963 restrictive zone. If that turns out to be the case, the bullish correction could ramp up to 1.3026, where the flattening 200-weekly SMA has been ceasing upside pressures over the past two months. Higher, a rally above the 1.3077 – 1.3120 resistance region could clear the way towards the 1.3222 top. Should sellers retake control, initial limitations could occur around the 1.2800 level. A successful step lower may then halt around the 200-day SMA at 1.2740, a break of which could re-test the restrictions within the 1.2960 – 1.2940 zone before stretching towards the 2021 support trendline seen at 1.2612. Summarizing, USDCAD is in a wait-and-see mode ahead of the US and Canadian jobs data due at 12:30 GMT. A close above 1.2900 or below 1.2800 could set the next tone in the market. GBP/JPY tests support trendline, bias bearish GBPJPY pulled back to test the support trendline at 161.00, which connects the lows from spring, after a failed attempt to pierce its 20- and 50-day simple moving averages (SMAs) around 164.00 on Thursday.   From a technical perspective, sellers seem to have the upper hand as the MACD keeps decelerating within the negative zone and the RSI is reversing southwards, putting in some distance below its 50 neutral mark. If the bears finally achieve a close below the ascending trendline, the 159.86 area, which coincides with the 50% Fibonacci retracement of the 150.96 – 168.70 upleg, could come to the rescue, rejecting any declines towards the 200-day SMA at 158.35. Should the downfall sharpen below the latter, neutralizing the broad picture, the spotlight will turn to the 61.8% Fibonacci of 156.64. On the upside, a durable move above the 38.2% Fibonacci of 161.95 may shift attention back to the 20- and 50-day SMAs currently at 163.55 and 164.00 respectively. The 23.6% Fibonacci and the key resistance trendline are also within a breathing distance at 164.53 and could deter any improvement towards the 166.23 border. Nevertheless, if upside pressures persist, traders will next target the 167.80 – 168.70 ceiling. In brief, GBPJPY continues to face negative risks despite finding a strong footing near an upward-sloping trendline. A close below 161.00 could set the stage for the next bearish round.

There's no such thing as a quiet week in the markets these days and this week has undoubtedly been no different. The jobs report was always expected to be the highlight but the Bank of England gave it a good run for its money on Thursday, hiking by the most in 27 years while putting out some pretty dire economic forecasts. It would appear we have very little to look forward to for the next couple of years here in the UK. While I believe other central banks are slowly gravitating toward the economic reality of soaring energy costs, high and widespread inflation, and rapidly rising interest rates, the BoE has very much been at the forefront of accepting the country's fate. That's probably as much a reflection of the fundamental shortcomings as much as anything but the latest forecasts really were especially bleak and may make some other countries, particularly across Europe, a little nervous. The US may already be in a technical recession, depending on your definition, but the economy is still in very good shape. The jobs report is expected to show that once more today, with 250,000 jobs forecast to have been added last month leaving the unemployment rate at 3.6%. The question everyone is asking though is what constitutes an ideal jobs report. That may seem a silly question, but having drifted back into a "bad news is good news" environment where more rate hikes are to be feared as they may cause a recession but a recession is ok as it means potentially fewer rate hikes, it's no longer that straightforward. With that in mind, perhaps the goldilocks report is one in which payrolls are strong but not overly so (so in line with forecasts), unemployment remains low but wage growth moderates a little. That would certainly fit the narrative of not a real recession while a slight moderation of wage growth could help build a case for inflation indicators easing, allowing for slower hikes into the end of the year. Of course, there are many other factors at play but with oil 20% off its highs and supply chains improving, the Fed may feel that pressures are abating. Of course, a decline in the headline figure is what it ultimately wants to see and there'll be a couple of opportunities at that before the next meeting in September. Oil slips below $90 as recession fears mount Oil prices are marginally higher on Friday after spending most of the week on the decline. It hasn't been the most bullish week of headlines for crude, whether that be all of the recession chat (most notably from the UK), the new OPEC+ deal or the EIA inventory build. The headlines have all been negative and so the price has continued to fall. WTI has broken below $90 to trade back at levels seen before the Russian invasion of Ukraine. Clearly, everyone is taking the threat of recession far more seriously as we're still seeing a very tight market and producers with no capacity to change that, barring a couple. Gold eyeing $1,800 ahead of the jobs report It's been another very good week for gold, despite Fed policymakers coming out in force to try and spoil the party. It seems traders are not particularly interested in being told that rates won't start falling towards the middle of next year or could still rise by 75 basis points in September despite the shift to data dependency. I mean, considering who's been right this past 12 months, I can hardly blame them. But gold has certainly benefited and the next challenge is $1,780-1,800 which is putting up quite the fight. Bitcoin only gets a mild lift from the Blackrock deal There was, what has become, a rare good news headline for bitcoin on Thursday after Coinbase was chosen to provide crypto services to Blackrock's clients. This is a big show of support for an asset class that's had a frankly terrible year so far. But clearly, there remains strong demand for cryptos which bodes well for the future. In the near-term, it's not provided much of a lift which is perhaps a little surprising given how much the space has craved some more positive headlines recently but perhaps that's a sign of the environment. Bitcoin continues to trade around $23,000, with a break above $25,000 now the next big test to the upside.

In this week’s Live from the Vault, Andrew Maguire is joined once again by Craig Hemke, founder of the TF Metals Report, to discuss the Fed’s refusal to accept the US is slipping into a recession. The two industry allies contemplate the approaching end of the COMEX’s confidence scheme, as investors wake up to widespread spoofing and join the mass exodus to fairer alternatives.

The price of the Australian Dollar almost stabilized on Friday. The Moving Average indicator maintains its bullish price signals. The momentum oscillator, the Relative Strength Index, remains within its normal zone; rising momentum will confirm the continuation of the uptrend. During today's European session, the AUD/USD pair traded inside a tight range. without making any significant breakthrough. Therefore, the difference between the day's high and low did not surpass 30 pips. At press time, the AUD/USD was trading at 0.6950, down 0.0020 or 0.29% for the intraday. This analysis relies on a 4-hour timeframe On a four-hour timeframe, the Moving Average Indicator reading reveals bullish signals. The signal indicates the continuance of the bullish trend in the short term. whereas the 50-MA rises above the 100-MA. In the meantime, the 100-MA rises above the 200-MA, supporting the bullish trend over the longer period. With a score of 52.8 on the value line, the Relative Strength Index remains in the neutral range. Any increase in the RSI would protect the Australian dollar from sliding back below the descending trendline. During the preceding two trading sessions, the AUD/USD exchange rate has been quite stable. Therefore, if the AUD/USD wants to maintain its positive trajectory, the Aussie must break through the first resistance level at 0.6962. A successful break of the indicated level would pave the way for yesterday's high of 0.6999. If the price is capable of closing the 4-hour candlestick above yesterday's high, that will shift market participants' focus to the 0.7032 level, followed by the 0.7070 resistance level, which prevented the bullish trend continuation on Monday. Alternatively, if the market is unable to advance over the resistance level of 0.6962, that may cause the price to slide toward the support level of 0.6921. A successful breach of the previously mentioned level would allow the price to retest the 0.6892 support level, which coincides with the descending trend line. A breach of this level would expose the support levels at 0.6860, followed by a 0.6835 support level. Note: When a resistance level is broken, it becomes a support level since the price will trade above it, and vice versa. Alternatively, the market may perform a false breakout or rebound after breaking support, or vice versa. Additionally, the market could bounce from any level of support or decline after breaking any level of resistance.

Summary If the U.S. economy is in a recession, no one seems to have told employers. Nonfarm payroll growth in July was more than double the Bloomberg consensus, registering a 528K monthly gain. This marked the second fastest pace of job growth in 2022. Employment growth was broad-based with nearly all major sectors adding jobs in the month. Average hourly earnings data added further fuel to the fire, increasing 0.5% in the month and 5.2% over the past year. The unemployment rate fell a tenth of a percentage point to 3.5%, which matches the 50-year low reached in 2019. Broadly speaking, the economic data are sending mixed messages at present, and the white-hot payroll numbers look increasingly out-of-line with other data points. That said, employment growth of more than half a million jobs per month and a falling unemployment rate are hard to ignore, and we suspect this data will give the FOMC the confidence it needs to push ahead aggressively with its fight against inflation. At least a 50 bps rate hike at the September 20-21 FOMC meeting seems likely at this point in time, and yet another 75 bps hike could be in store if inflation over the next two CPI reports shows no signs of trending lower. Download the full report

The US economy created 528K new jobs in July, doubling expectations and exceeding the peak employment level set before the pandemic. Notably, construction and manufacturing recovered, probably due to falling commodity prices in these sectors. The hourly earning rate has maintained at 5.2% y/y with an upward revision of the previous month and a gain of 0.5% for July. The unemployment rate declined from 3.6% to 3.5%, but this is mainly due to a decline in the active labour force from 62.2% to 62.1%. Such strong employment growth data came as a surprise to the markets. And understandably so, with the latest economic assessments betraying this picture. Weekly jobless claims have remained on an upward trend since March, and this divergence is not easy to explain. A solid increase in employment plus faster wage growth is raising expectations of a third consecutive 75 points Fed rate hike in September. CME's FedWatch tool shows a 69% chance of such a move, double that of a day ago versus 3.4% a month ago. This is obviously positive news for the dollar and negative for the stock market. Earlier in the week, Fed officials promoted the idea that markets were underestimating the central bank's hawkishness. With factual evidence of the economy's strength, investors may return to buying the dollar, betting on continuing extreme policy tightening.

Summary The Reserve Bank of Australia (RBA) raised its Cash Rate by 50 bps to 1.85% at its August meeting and signaled that further rate hikes will be needed to bring inflation back toward target over time. Several elements of the monetary policy announcement were essentially unchanged from previous meetings. However, there were also some important changes in language that lead us to believe the RBA will revert to smaller hikes going forward. Notably, the central bank indicated that while further normalization of policy is expected in the months ahead, it also noted that policy is "not on a pre-set path". The RBA also dropped references to "extraordinary monetary support" that had appeared in previous announcements, suggesting it now sees itself a bit further along the monetary tightening path, and perhaps does not need to move at an accelerated 50 bps pace anymore. Given these changes, we believe the RBA will be more flexible moving forward with regard to the size and timing of future rate hikes. With signals of further tightening but more flexibility, we now expect 25 bps rate hikes at the RBA's next several meetings in September, October, November, December and February, which would see the Cash Rate peak at 3.10% by early next year. View the full report