EUR/USD softens as ECB hikes lag behind The euro hovers over parity as the ECB is expected to kick off its tightening cycle this week. The ECB will likely deliver a 25 bp increase next week but may have limited impact on the single currency. The modest hike is more of a concession that policymakers’ hands are tied given the energy price shock and the fragmentation risk. Traders might focus on how the central bank would support peripheral bonds to avert another debt crisis as borrowing costs rise. The euro may struggle to maintain the parity milestone as the ECB cannot afford to normalise in a decisive manner. 0.9800 could be next with 1.0400 as a fresh resistance. USD/JPY soars as BoJ sits on sidelines The Japanese yen fell to a 24-year low against the US dollar as the Bank of Japan vowed to stay dovish. Governor Kuroda has repeatedly shrugged off the idea of tightening and gone contrarian instead. The BoJ may even consider further easing to support the recovery. Inflation shot above 2% mainly due to soaring fuel costs, and unless wage growth gains a foothold, the central bank has leeway to leave its policy loose. After the SNB raised its interest rate for the first time in 15 years, the BOJ is the last major central bank still kicking the stimulus can down the road. The pair is climbing towards 140.00. 135.00 is a fresh support. GBP/USD weighed by growth concerns The pound weakens as Britain faces multiple economic and political headwinds. Hawkish signals from the Bank of England have had little effect as the market frets that inflation compounded by Brexit trade frictions could be persistent in the UK. Higher consumer price data this week would underpin the inflationary spiral and a strong economic slowdown in the country. To rub salt into the wounds, an uncertain political outlook may continue to cast a cloud on the currency. Volatility could be expected as the leadership race for a new prime minister goes on. The pair is heading to March 2020’s low at 1.1450. 1.2050 is the closest resistance. XAU/USD falls as dollar surges amid record inflation The gold market remains under pressure as record high US inflation sends the dollar index to a 20-year high. Consumer prices surged 9.1% in June to a four-decade high, cementing expectations of more aggressive moves from the central bank. A 75bp hike has become the base scenario, but speculations grow that the Fed may follow in the footsteps of the Bank of Canada and deliver a supersized 100 bps rate hike later this month. As traders pile into the greenback, roaring volatility may continue to take a toll on the precious metal. The price is ab August 2021’s low near 1682. 1750 has turned into a supply area.

The Chinese economy is experiencing a sharp slowdown, raising a reasonable doubt that GDP will be able to grow by the initially planned 5.5% this year. Fresh data showed that China’s economy was only 0.4% higher in the second quarter than a year earlier.  The half-year increase is 2.5% compared to the same period a year earlier. A new round of problems for property developers and an increasing boycott by mortgage borrowers to pay their debts is becoming a bigger problem. Government intervention with massive infrastructure stimulus, for example, through nationalising troubled properties, looks logical. The flip side of the stimulus is an increase in the money supply and a weaker exchange rate. Technically, we have been seeing pressure on the Chinese renminbi against the dollar since the end of last week, and an analysis of the fundamentals suggests that this downward momentum has just begun. This is not the first time China had had to deflect against the wind by tightening policy when the world economies softened in 2020-2021. The developed countries are quickly taking money off the table, and China is again trying to offset the external downturn with domestic consumption. And this is bad news for the Chinese renminbi. The technical analysis indicates the almost three-month period of consolidation of the yuan against the dollar after the growth impulse in April is over. During May, the USDCNH corrected its surge from the year’s lows in February, stopping it at the classic 61.8% Fibonacci level. A bullish scenario for UDSCNH implies a rise to the 7.13-7.15 area, this is near the highs of 2019 and 2020 and at 161.8% of the rally in the first months of the year.

Summary Consumer sentiment rose a scant 1.1 points from last month's all-time low, but the REAL takeaway is that inflation expectations cooled. That is welcome news for Fed policymakers and it makes the pressure to "go big" at the next meeting less intense after this week's scorching CPI report. Read the full report here

The massive monetary binge is over. The Fed is taking the punch bowl away. The hangover is coming. The best cure is – except for the broth – gold. No Longer Doves 75 basis points! This is how much the FOMC raised interest rates in June. As the chart below shows, it was the biggest hike in the federal funds rate since the 1990s. Due to this huge move, the target range for the federal funds rate returned to the pre-pandemic level of 1.50-1.75%. Given how dovish and gradual the US central bank normally is, we may conclude that the inflation threat is really serious. The Fed has been so far behind the inflation curve that it must raise rates at the fastest pace in more than a quarter of a century! Last month, the US central bank also started reducing the size of its enormous balance sheet. Until September, the Fed will be cutting $45 billion a month from its massive holdings, and it will increase to $95 billion, almost twice as much as it did in the previous episode of quantitative tightening. As the chart below shows, the value of the Fed’s assets has already peaked, reaching $8.95 trillion in mid-May 2022. What does it all mean for the US economy? Well, let’s start with the observation that although the Fed is tightening its monetary policy, its stance remains accommodative. According to the Taylor rule, the federal funds rate shouldn’t be just between 1.50% and 1.75%, but at least above 5% (see the chart below taken from the Atlanta Fed)! At such a level, the Fed will be “neutral”, but to beat inflation it should be restrictive, not merely neutral! It means that the US central bank remains behind the inflation curve and would have to raise interest rates much further to combat high inflation. However, it raises a very important question: could the Fed raise rates so decisively without triggering the next economic crisis? This is, of course, a rhetorical question. As a reminder, the previous Fed’s tightening cycle of 2017-2019 led to the repo crisis, forcing the US central bank to reverse its stance and cut interest rates. Given how fragile the financial system is and how much indebted the American economy is, it’s almost certain that the current monetary policy tightening will lead to a sovereign-debt crisis or another kind of financial crisis. Right now, the commercial banks seem to be in healthy condition and with ample reserves, so the risk of a liquidity crisis in the very near future is low. However, as the tightening continues, the debt-servicing costs and share of nonperforming loans will increase, worsening the financial situation. So far, Powell is flexing his muscles, but this is only because the labor market remains strong, but when faced with the choice between fighting inflation and stimulating a crumbling economy, I doubt whether he could withstand the pressure from both Wall Street and the government, which are heavily indebted and addicted to easy money. Implications for Gold What does it all imply for the gold market? Well, theoretically, monetary policy tightening should be negative for gold prices, as higher real interest rates usually lead to lower gold prices. However, gold has been generally very resilient during the current tightening cycle. It’s true that it didn’t rally despite the outburst of inflation, but its gave a stellar performance (even when we take July plunge in the account) in the face of rising rates and in comparison to plunging equities or cryptocurrencies, as the charts below show. By the way, it seems that the debate about whether gold or Bitcoin is a better store of value has been settled. Powell still believes in a soft landing, but he may be the only one. You see, after a gigantic binge, there is always a hangover. When the host of the great party is taking away the punch bowl, drunken guests loudly express their dissatisfaction, which can even translate into brawling. Similarly, after a massive increase in the money supply, there is high inflation that you cannot just wait out, lying in bed and eating broth. You have to hike interest rates, but then borrowing costs are increasing, which hits many excessively indebted companies and investors, and the economic boom translates into a bust. Busts are awful, but not for gold. The yellow metal rallied during both the Great Recession and the coronavirus crisis (and also during the repo crisis), and I believe that this time won’t be different. We just have to wait until deteriorating economic conditions force the Fed to deviate from its planned course. Initially, when the next crisis hits, there might be a panic sell-off in the precious metals market in order to raise liquidity, but after this short period, gold should rally,...

Overview: The higher-than-expected US CPI and the strong expectation of a 100 bp hike by the Fed in two weeks is propelling the dollar higher. It jumped to almost JPY139.40 and the euro is off more than a cent from yesterday's high (though holding above parity). Even where there has been favorable economic news, like the strong jobs report in Australia, it failed to dent the greenback. Most of the large bourses in the Asia Pacific regions advanced. Hong Kong is a notable exception, and the Singapore and Philippines' stocks fell after the surprise tightening moves. Europe's Stoxx 600 is extending yesterday's 1% slide and is off around 0.8% in late morning turnover. The S&P and NASDAQ futures are trading lower. They have fallen in the first three sessions this week. The US 10-year yield is a few basis points higher around 2.96%. European benchmark yields are 8-18 bp higher, with Italian bonds getting hit by political concerns. But the peripheral premium more generally is widening. Gold is returning to its lows after being turned back from around $1750 yesterday. August WTI is trading at its lowest level in three months near $93.40. Higher gasoline prices in the US have seen demand slump to around 8 mln barrels a day last week. In seasonally adjusted terms, it is the lowest since the mid-1990s. After surging 8.5% yesterday, US natgas is off around 1.2% today. Europe’s benchmark is off 2.5% today after rallying 10% in the past two sessions. Iron ore prices collapsed 8% today after rising 3.6% yesterday. September copper is giving back yesterday's 1% gain plus some. It fell more than 6.5% Monday-Tuesday. Lastly, September wheat is trying to snap a three-day decline. It is near five-month lows. Asia Pacific Australia's much stronger than expected employment report and news that China is considering lifting the almost two-year ban on its coal failed to lift the Australian dollar. After edging higher in the past two sessions, the Aussie is trading a little lower, though in yesterday's range. Australia created 88.4k jobs last month, almost three-times more than the median projection in Bloomberg's survey, and of them, nearly 53k were full-time posts. The participation rate rose to 66.8%, a new record high, while the unemployment rate tumbled to 3.5% from 3.9%.  The city of Tokyo has lifted its Covid alert to the highest level as cases surge. According to reports, Tokyo has around 3.5k infections on July 1. Yesterday, it reached around 17k. Separately, foreign investors, who sold a record amount of Japanese government bonds, returned in a big way last week. Ministry of Finance figures show foreign investors bought JPY2.07 trillion (~$15 bln) last week, the second highest since the time series began in 2005. And that shocking 7.2% contraction in May industrial output (month-over-month) was revised to a 7.5% drop. Capacity use fell a stunning 9.2%. The weakness in household spending and this dramatic weakness warns that Japan's recovery from the contraction in Q1 stalled. There were two surprise central bank moves in Asia today. First, the Monetary Authority of Singapore signaled tighter monetary policy by allowing the Singapore dollar to appreciate. The exchange rate is the main channel of monetary policy. Although the economy appeared to have stalled in Q2, inflation is rising, and MAS lifted its inflation forecast from 4.5%-5.5% to 5%-6%. Second, at an unscheduled meeting, the Philippines central bank announced a 75 bp hike of the key borrowing rate to 3.25%. After raising rates last month, the central bank was not due to meet until August 18. The US dollar slipped slightly against the peso, losing about 0.2% on the day. The US dollar has jumped to around JPY139.40. There were options for nearly $1.5 bln at JPY139 that expired today and may have spurred more dollar buying as the greenback rose through the figure. The JPY140 level is the next target, however, the frenzied buying appears to have dried up for the time being. Below JPY139, support is seen in the eJPY138.60 area. US Yellen and Japan's Suzuki's statement earlier this week downplayed the likelihood of material intervention. The Australian dollar is languishing in its trough. Yesterday's attempt to resurface above $0.6800 was greeted with fresh selling. It is holding above the week's low set on Tuesday near $0.6710. The Chinese yuan slipped to its lowest level in a month as the greenback's strength proved too much. The US dollar rose to almost CNY6.75. which it has not seen since June 14 when it briefly traded above CNY6.76. The high for the year was in mid-May closer to CNY6.8125. The PBOC fixed the dollar tightly near expectations (CNY6.7265 vs. CNY6.7267. The PBOC indicated that there was plenty of liquidity and the overnight rate fell to an 18-month low. Europe The Tory Party is in...

Overview: The higher-than-expected US CPI and the strong expectation of a 100 bp hike by the Fed in two weeks is propelling the dollar higher. It jumped to almost JPY139.40 and the euro is off more than a cent from yesterday's high (though holding above parity). Even where there has been favorable economic news, like the strong jobs report in Australia, it failed to dent the greenback. Most of the large bourses in the Asia Pacific regions advanced. Hong Kong is a notable exception, and the Singapore and Philippines' stocks fell after the surprise tightening moves. Europe's Stoxx 600 is extending yesterday's 1% slide and is off around 0.8% in late morning turnover. The S&P and NASDAQ futures are trading lower. They have fallen in the first three sessions this week. The US 10-year yield is a few basis points higher around 2.96%. European benchmark yields are 8-18 bp higher, with Italian bonds getting hit by political concerns. But the peripheral premium more generally is widening. Gold is returning to its lows after being turned back from around $1750 yesterday. August WTI is trading at its lowest level in three months near $93.40. Higher gasoline prices in the US have seen demand slump to around 8 mln barrels a day last week. In seasonally adjusted terms, it is the lowest since the mid-1990s. After surging 8.5% yesterday, US natgas is off around 1.2% today. Europe’s benchmark is off 2.5% today after rallying 10% in the past two sessions. Iron ore prices collapsed 8% today after rising 3.6% yesterday. September copper is giving back yesterday's 1% gain plus some. It fell more than 6.5% Monday-Tuesday. Lastly, September wheat is trying to snap a three-day decline. It is near five-month lows. Asia Pacific Australia's much stronger than expected employment report and news that China is considering lifting the almost two-year ban on its coal failed to lift the Australian dollar. After edging higher in the past two sessions, the Aussie is trading a little lower, though in yesterday's range. Australia created 88.4k jobs last month, almost three-times more than the median projection in Bloomberg's survey, and of them, nearly 53k were full-time posts. The participation rate rose to 66.8%, a new record high, while the unemployment rate tumbled to 3.5% from 3.9%.  The city of Tokyo has lifted its Covid alert to the highest level as cases surge. According to reports, Tokyo has around 3.5k infections on July 1. Yesterday, it reached around 17k. Separately, foreign investors, who sold a record amount of Japanese government bonds, returned in a big way last week. Ministry of Finance figures show foreign investors bought JPY2.07 trillion (~$15 bln) last week, the second highest since the time series began in 2005. And that shocking 7.2% contraction in May industrial output (month-over-month) was revised to a 7.5% drop. Capacity use fell a stunning 9.2%. The weakness in household spending and this dramatic weakness warns that Japan's recovery from the contraction in Q1 stalled. There were two surprise central bank moves in Asia today. First, the Monetary Authority of Singapore signaled tighter monetary policy by allowing the Singapore dollar to appreciate. The exchange rate is the main channel of monetary policy. Although the economy appeared to have stalled in Q2, inflation is rising, and MAS lifted its inflation forecast from 4.5%-5.5% to 5%-6%. Second, at an unscheduled meeting, the Philippines central bank announced a 75 bp hike of the key borrowing rate to 3.25%. After raising rates last month, the central bank was not due to meet until August 18. The US dollar slipped slightly against the peso, losing about 0.2% on the day. The US dollar has jumped to around JPY139.40. There were options for nearly $1.5 bln at JPY139 that expired today and may have spurred more dollar buying as the greenback rose through the figure. The JPY140 level is the next target, however, the frenzied buying appears to have dried up for the time being. Below JPY139, support is seen in the eJPY138.60 area. US Yellen and Japan's Suzuki's statement earlier this week downplayed the likelihood of material intervention. The Australian dollar is languishing in its trough. Yesterday's attempt to resurface above $0.6800 was greeted with fresh selling. It is holding above the week's low set on Tuesday near $0.6710. The Chinese yuan slipped to its lowest level in a month as the greenback's strength proved too much. The US dollar rose to almost CNY6.75. which it has not seen since June 14 when it briefly traded above CNY6.76. The high for the year was in mid-May closer to CNY6.8125. The PBOC fixed the dollar tightly near expectations (CNY6.7265 vs. CNY6.7267. The PBOC indicated that there was plenty of liquidity and the overnight rate fell to an 18-month low. Europe The Tory Party is in...

Inflation spikes again confounding investors and policymakers. 100 basis point hike priced to near certainty before Waller and Bostic get all doveish. Recession is now priced to near certainty by money and commodity markets but not yet equities. Interesting to always note how the narrative is twisted to support exactly what the market wants to do. Last month the University of Michigan's Inflation expectations were cited by the Fed for its knee-jerk panic into hiking rates by 75 basis points. In the immediate aftermath, commentators pointed out how limited the survey is in its scope being based as it is on a few hundred survey responses. Now that the same survey this month shows a modest and it is very modest reduction, everyone is citing it as gospel. Inflation is cured, it's transitory, rally back on for risk assets. Excuse the sarcasm but we are not out of the woods by a long long long way. Equity markets are always the last ones to know and it looks like that feat is repeating itself if the latest developments are anything to go by. Inflation remains on fire and in fact rising and broadening its base. That broadening is the most worrying aspect as it means it will likely last longer than most expect. Transitory is now on the lexicon of investors who are pricing inflation to be brought to its knees by a recession in 2023.

Summary United States: This Party Is Breaking Up Fast Signals of a slowdown are starting to flash across sectors. Business and consumer sentiment have faltered, real consumer spending has weakened, housing activity has stalled and business investment is downshifting in response. On the other hand, robust employment growth and solid gross domestic income suggest we are not in the hole just yet. Next week: Housing Starts (Tue), Existing Home Sales (Wed), Initial Jobless Claims (Thu) International: U.K. Growth Surprises to the Upside, Bank of Canada Delivers a Super-Sized Hike U.K. GDP registered a gain in May, but some cracks in the economy may be starting to show, specifically with regard to the consumer sector. Elsewhere in the G10, the Bank of Canada delivered a super-sized 100 bps hike at its July monetary policy meeting, bringing the policy rate to 2.50% and signaling more rate hikes to come. Next week: U.K. CPI (Wed), Canada CPI (Wed), ECB Rate Decision (Thu) Interest Rate Watch: Asset Inflation Is Already Being Curbed The Federal Reserve is continuing to reduce its balance sheet holdings of Treasuries and mortgage-backed securities (MBS), increasing the pace of the drawdown in September. However, the reduction of the MBS portfolio may prove to be difficult in the face of rising interest rates that have curtailed mortgage refinancing. We will also be on the lookout for liquidity challenges in the fall as the Fed's balance sheet is reduced. Credit Market Insights: Record High for Monthly Auto Loan Payments The average monthly auto loan payment reached a record high of $712 in June with 12.7% of new car buyers paying at least $1,000 per month for their cars, according to Cox Automotive Inc. Ultimately, with peak inflation not yet behind us and a potential economic slowdown looming, household balance sheets may be further stressed by these large monthly payments. Topic of the Week: Beige Book Heralds Slowing Growth, Inflation Fears, Recession Risk This week, the Federal Reserve released the Beige Book for its July meeting. Regional banks are describing situations seen across the country with some of the following language: slowing growth, inflation fears and even some risks of recession. Read the full article here

Summary United States: This Party Is Breaking Up Fast Signals of a slowdown are starting to flash across sectors. Business and consumer sentiment have faltered, real consumer spending has weakened, housing activity has stalled and business investment is downshifting in response. On the other hand, robust employment growth and solid gross domestic income suggest we are not in the hole just yet. Next week: Housing Starts (Tue), Existing Home Sales (Wed), Initial Jobless Claims (Thu) International: U.K. Growth Surprises to the Upside, Bank of Canada Delivers a Super-Sized Hike U.K. GDP registered a gain in May, but some cracks in the economy may be starting to show, specifically with regard to the consumer sector. Elsewhere in the G10, the Bank of Canada delivered a super-sized 100 bps hike at its July monetary policy meeting, bringing the policy rate to 2.50% and signaling more rate hikes to come. Next week: U.K. CPI (Wed), Canada CPI (Wed), ECB Rate Decision (Thu) Interest Rate Watch: Asset Inflation Is Already Being Curbed The Federal Reserve is continuing to reduce its balance sheet holdings of Treasuries and mortgage-backed securities (MBS), increasing the pace of the drawdown in September. However, the reduction of the MBS portfolio may prove to be difficult in the face of rising interest rates that have curtailed mortgage refinancing. We will also be on the lookout for liquidity challenges in the fall as the Fed's balance sheet is reduced. Credit Market Insights: Record High for Monthly Auto Loan Payments The average monthly auto loan payment reached a record high of $712 in June with 12.7% of new car buyers paying at least $1,000 per month for their cars, according to Cox Automotive Inc. Ultimately, with peak inflation not yet behind us and a potential economic slowdown looming, household balance sheets may be further stressed by these large monthly payments. Topic of the Week: Beige Book Heralds Slowing Growth, Inflation Fears, Recession Risk This week, the Federal Reserve released the Beige Book for its July meeting. Regional banks are describing situations seen across the country with some of the following language: slowing growth, inflation fears and even some risks of recession. Read the full article here

All eyes are on the European Central Bank meeting next Thursday, when we are expecting a hike of 25bp. Despite increasing expectations of the larger hike, we believe the Fed will repeat June's move The market is split as to whether the Federal Reserve will raise rates by 75bp or 100bp on 27 July. The strong June US inflation print of 9.1% and the Bank of Canada’s decision to raise its own policy rate by 100bp have helped fuel expectations of a larger hike. However, the weakening economic growth outlook and the fact that two of the most hawkish FOMC members, Chris Waller and James Bullard, have hinted they favour 75bp means we think they will indeed opt to repeat June’s 75bp move. Given there is the usual Fed blackout period starting on 16 July, there will be no additional comments from officials to provide guidance – although that doesn’t rule out someone getting in touch with the Wall Street Journal should there be a material change. In any case, the data flow is largely second-tier with an update on the housing market, which given rising mortgage rates is likely to remain under pressure. Bank of England gearing up for 50bp August hike, despite little impetus from domestic data On the face of it, next week’s data is unlikely to offer too much in the way of support for a 50bp rate hike in August. Another notch higher in the unemployment rate and a slight uptick in inflation will come as little surprise to the committee, which only a few weeks ago resisted pressure to step up the pace of rate hikes, opting instead for another 25bp move. However, the potential for another 75bp rate hike from the Fed, mounting worries among Bank of England hawks about GBP weakness, and earlier explicit warnings about more aggressive hikes from officials, suggest the Bank may well be tempted to join the growing number of central banks that have opted for larger rate increases. We narrowly expect a 50bp rate hike in August, though this may well be a one-off. Our central view is that the Bank of England will stop hiking when the Bank rate gets to roughly 2%. Bank of Canada's 100bp hike was only the beginning – More to come In Canada, we will be closely following inflation data, which will hit new highs on rising gasoline, but there will be broad gains elsewhere too. The central bank's 100bp hike on 14 July was to “front load” tightening to ensure inflation expectations remain anchored, but an upside surprise in CPI could heighten fears it repeats the move in September. Currently, we favour a 75bp hike. ECB's first hike in 11 years: 25bp or 50bp? It’s ECB week next week, so naturally all eyes are on the Thursday meeting. Expect the ECB to fiercely debate whether the first hike in 11 years will be just 25bp or perhaps 50bp after all. Also key out of next week’s meeting will be the anti-fragmentation tool which investors will watch closely to see how robust it can be to curb spreads in the eurozone. With Italian political problems surfacing, an additional challenge is added to next week’s meeting. While summer meetings at the ECB can be dull, this one clearly won’t be. Also important is how much the economy is cooling off in the eurozone. Next week’s PMI and consumer confidence data will give some evidence of that. This will be especially important for how much the ECB will hike in the coming cycle and we expect the economy to cool enough to keep the ECB's cycle quite limited. Developed markets economic calendar Source: Refinitiv, ING Read the original analysis: Key events in developed markets next week 

Yesterday, JPMorgan Chase (NYSE: JPM) reported that the bank's second-quarter earnings fell as a result of adding $428 million in bad loan reserves. With this view, JPMorgan has chosen to temporarily halt its share repurchases in order to meet regulatory capital requirements. According to a statement from JPMorgan, the reserve rise was primarily to blame for the earnings decline of 28% from a year earlier to $8.65 billion. Additionally, JPMorgan, which has one of the largest operations on Wall Street, was hurt by the slowdown in Wall Street transactions. Investment banking fees dropped sharply by 54% to $1.65 billion, $250 million less than the forecasted $1.9 billion. Fixed income trading revenue increased by 15% to $4.71 billion, Although, strong results in macro trading were offset by a decline in credit and securitized products, resulting in a quarter- end revenue that was below analysts' $5.14 billion projection. On the positive side of its report, revenue from equity trading increased by 15% to $3.08 billion, beating the estimate of $2.96 billion. Rising U.S. interest rates and a growing book of loans are two positive factors for the firm. For the quarter, net interest income increased by 19% to $15.2 billion, exceeding analysts' expectations of $14.98 billion. JPMorgan stated during the firm's investor day in May that rising rates will allow it to surpass its main goal of 17% returns this year faster than anticipated. However, the firm has achieved that goal this month. JPM 1W JPM stock dropped about 5% in intra-day trading on Thursday but found the support to finally settle only 3.5% lower at closing. JPM now trades at a 90-week low, but with a rumored 100 basis-points rate hike due from the US Federal Reserve within a couple weeks, perhaps bank stocks will find their bottom before the rest of the market.

AUD/USD Current Price: 0.6748 Australian employment figures were upbeat, but so were inflation perspectives. Fluctuations in the market sentiment lead the way for AUD/USD. AUD/USD is neutral-to-bearish in the near term, could fall further once below 0.6710. The AUD/USD pair ended Thursday with modest losses around the 0.6750 level, hit by a dismal market mood and despite better-than-anticipated Australian employment data. The country reported it added 88.4K new jobs in June, much better than the 25K expected. Full-time new positions accounted for 52.9K, while part-time ones stood at 35.5K. Additionally, the Unemployment rate contracted to 3.5% from 3.9%, much better than the 3.8% expected, while the Participation Rate increased to 66.8%. On a down note, Consumer Inflation Expectations in July surged to 6.3%. The pair fell to 0.6680 early in the American session as risk-off flows dominated financial markets throughout the first half of the day, with the focus on potential recessions across the globe. It’s clear that central banks’ actions are having no evident effect on inflation, which continues to soar. Stocks plummeted, weighing on AUD/USD, although cooling expectations for an even tighter US monetary policy helped both bounce back. AUD/USD short-term technical outlook The daily chart for the AUD/USD pair shows that the risk remains skewed to the downside as the pair develops far below bearish moving averages. Furthermore, technical indicators remain in the negative territory, with the Momentum heading lower and the RSI consolidating at around 37. In the near term, and according to the 4-hour chart, the pair is neutral-to-bearish. AUD/USD is currently struggling to overcome a mildly bearish 20 SMA while the Momentum indicator consolidates around its 100 level. The longer moving averages maintain their bearish slopes far above the current level, while the RSI advances but within negative levels. Support levels 0.6710 0.6670 0.6625 Resistance levels: 0.6810 0.6850 0.6890 View Live Chart for the AUD/USD