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Rates Spark: Sterling rates most likely to fall, dollar rates more likely to rise US labour market data could trigger another leg higher in dollar rates but we doubt their euro peers will follow, barring a much stronger inflation print today. Hawkish BoE pricing is vulnerable to a pushback.   US labour market indicators take centre stage The start of the week is proving a constructive one for bonds. It seems the feel-good factor felt by markets, after the White House and House leader McCarthy reached a deal to raise the debt ceiling over the weekend, was short-lived. The deal is due to be voted on today by the lower chamber and later this week by the Senate. We think expectations are for the bill to pass, which also means the market-moving potential of a successful vote is limited. The same cannot be said of any delay on procedural grounds, although more would be needed to shake the market’s optimism.   Instead, the focus should now focus on more fundamental matters for interest rates valuations, namely this week’s two labour market releases. Today sees the publication of the ‘JOLTS’ job openings report, followed on Friday by the non-farm payroll report (which also includes wages). Rate cut expectations last month received a shot in the arm when job openings unexpectedly dropped but payroll data continues to go from strength to strength and we expect investors will be wary of chasing bond yields lower into the report as a result.   We expect investors will be wary of chasing bond yields lower into Friday's job report  

GBP/USD: On Friday, the pound fell by 75 pips amid mixed but not exactly weak US employment data. This morning, upon the news of President Biden signing a bill to lift the debt ceiling on Saturday, the pound lost another 20 pips, entering the range of the May 31 candle.     The nearest target at 1.2403, the MACD daily line, is now open. Breaking below this line opens up the target of 1.2273, which is both the April 3 low and the February 14 high. The Marlin oscillator is moving deeper into the downtrend area, and it may reach the oversold zone when the price approaches the target range of 1.2125/53.       On the four-hour chart, the price is moving between two target levels while the Marlin oscillator remains negative. It is likely that the price will attempt to break 1.2403. If successful, the pound will aim for the MACD line on the four-hour chart around 1.2370. Breaking below this support, the British pound will be aiming for 1.2273.  

AUD/USD: On Friday, the Australian dollar surpassed the entire range of target levels at 1.6567-0.6628, reaching resistance at the MACD line on the daily chart. The price then retreated below the upper limit of the range and continued to fall this morning.     AUD/USD: On Friday, the Australian dollar surpassed the entire range of target levels at 1.6567-0.6628, reaching resistance at the MACD line on the daily chart. The price then retreated below the upper limit of the range and continued to fall this morning.     There could be resistance from bulls in the upcoming medium-term decline, potentially leading to sideways movement. This is because the Reserve Bank of Australia will hold a monetary policy meeting on Tuesday, with the current rate of 3.85% expected to be maintained. To confirm the downtrend, the price needs to break below the support of the MACD line (0.6525), and the Marlin oscillator should enter the negative area.  

GBP/USD edged down on Monday. This is a classic depiction of how the pound is currently being traded. When it rises, the movement is sharp, but when it falls, it only edges down. It can rise even without macroeconomic or fundamental reasons, but it is reluctant to fall, even when there are corresponding causes.     For example, yesterday there was an excellent opportunity for a correction based on pure technicals. The pair could have fallen simply because it was overbought. However, instead of a significant correction, we saw the pair reverse its course by just 30 pips amidst a low-volume trading day. Throughout the day, neither the UK nor the US had any important events or reports. Speaking of trading signals, there was nothing notable about it. The pair did not even come close to any significant levels or lines.   This is probably a good thing because weak movements bordering on a flat can lead to false signals. Traders have been fortunate with the euro, but there simply hasn't been any signal for the pound. COT report: According to the latest report, non-commercial traders closed 5,200 long positions and 4,500 short ones. The net position dropped by 700 but remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. In fact, sentiment is now bullish, but it is a pure formality. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run may soon begin even though COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.   The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 52,500 sell positions and 65,000 long ones. We do not see the pair extending growth in the long term. 1H chart of GBP/USD In the 1-hour chart, GBP/USD maintains a bullish bias.   The ascending trend line serves as a buy signal but I believe that further growth of the British currency is groundless. The pound sterling has been climbing for too long and downward corrections are short-lived. Judging by the technical indicators, we have an uptrend. Yet, it is hard to find the reasons which may push it higher. However, it is naturally not advisable to sell the pair without proper signals. The market can sustain the trend even without a "fundamental" basis.   On June 20, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2494) and Kijun-sen (1.2724) may also generate signals when the price either breaks or bounces off them. A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits.   There are no significant events lined up in the UK, and only a few secondary events in the US. We believe that volatility may edge up today, as the Bank of England's meeting and the UK inflation report will be published later this week. The market may start to anticipate and react to this data in advance.  

AUD/USD slips after a four-day rally China’s Services PMI eases in June Australia’s retail sales jump 0.7% in May FOMC minutes will be released later on Wednesday The Australian dollar is in negative territory on Wednesday, after a four-day rally that saw the Aussie climb 100 pips. In the North American session, the Australian dollar is trading at 0.6663, down 0.42%.   China’s Services PMI eases but indicates expansion China is Australia’s largest trading partner, making the Aussie sensitive to Chinese data. China released the Caixin Services PMI on Wednesday, and the June report showed a deceleration to 53.9, down from 57.1 in May. This still points to expansion in business activity, but the reading was the lowest in five months, which is cause for concern as China experiences a bump recovery. The soft reading sent the Australian dollar considerably lower on Wednesday.   Australian retail sales jumps 0.7% If Australia is close to a recession, it looks like someone forgot to tell the consumer, who opened up the purse strings in May. Australia’s retail sales impressed with a 0.7% gain in May, unrevised from the flash estimate. This follows a flat reading in April and matched the consensus. This was the strongest showing since January. The Reserve Bank of Australia may have preferred a weaker retail sales release, as it needs the economy to continue to slow in order to push inflation lower. The RBA would love to continue pausing rate hikes and bring some relief to households, but inflation remains far too high – the 5.6% reading in May was still almost three times above the 2% target. The RBA announced a pause at the rate meeting this week but warned that inflation risks were tilted upwards and further rate hikes might be required. The central bank delivered a “hawkish pause”, signalling that the pause did not indicate an end to the current rate-hike campaign. Money markets have priced in a 45% chance of a rate hike in August, as investors are having a tough time figuring out the RBA’s rate path, which has wavered between hikes and pauses this year. All eyes are on the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate in a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but haven’t bought into Fed Chair Powell’s stance that another hike is coming in the fall. If the minutes are hawkish, the market could fall in line with Powell which would likely give the US dollar a boost.   AUD/USD Technical AUD/USD tested 0.6659 earlier on Wednesday. Below, there is support at 0.6597 0.6722 and 0.6784 are providing support

AUD/USD slips after a four-day rally China’s Services PMI eases in June Australia’s retail sales jump 0.7% in May FOMC minutes will be released later on Wednesday The Australian dollar is in negative territory on Wednesday, after a four-day rally that saw the Aussie climb 100 pips. In the North American session, the Australian dollar is trading at 0.6663, down 0.42%.   China’s Services PMI eases but indicates expansion China is Australia’s largest trading partner, making the Aussie sensitive to Chinese data. China released the Caixin Services PMI on Wednesday, and the June report showed a deceleration to 53.9, down from 57.1 in May. This still points to expansion in business activity, but the reading was the lowest in five months, which is cause for concern as China experiences a bump recovery. The soft reading sent the Australian dollar considerably lower on Wednesday.   Australian retail sales jumps 0.7% If Australia is close to a recession, it looks like someone forgot to tell the consumer, who opened up the purse strings in May. Australia’s retail sales impressed with a 0.7% gain in May, unrevised from the flash estimate. This follows a flat reading in April and matched the consensus. This was the strongest showing since January. The Reserve Bank of Australia may have preferred a weaker retail sales release, as it needs the economy to continue to slow in order to push inflation lower. The RBA would love to continue pausing rate hikes and bring some relief to households, but inflation remains far too high – the 5.6% reading in May was still almost three times above the 2% target. The RBA announced a pause at the rate meeting this week but warned that inflation risks were tilted upwards and further rate hikes might be required. The central bank delivered a “hawkish pause”, signalling that the pause did not indicate an end to the current rate-hike campaign. Money markets have priced in a 45% chance of a rate hike in August, as investors are having a tough time figuring out the RBA’s rate path, which has wavered between hikes and pauses this year. All eyes are on the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate in a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but haven’t bought into Fed Chair Powell’s stance that another hike is coming in the fall. If the minutes are hawkish, the market could fall in line with Powell which would likely give the US dollar a boost.   AUD/USD Technical AUD/USD tested 0.6659 earlier on Wednesday. Below, there is support at 0.6597 0.6722 and 0.6784 are providing support

On the hourly chart, the GBP/USD pair on Tuesday secured above the next corrective level of 127.2% (1.2917). Thus, the growth process can continue toward the next corrective level of 161.8% (1.3007). A level of 1.3000 can be considered a psychological mark, and such levels usually attract price. In other words, traders may subconsciously strive for such marks. The pair's consolidation below the level of 1.2917 will work in favor of the US dollar, and some fall toward the level of 1.2847. The waves are now painting us the same picture as with the euro.   Each peak of the next wave is higher than the previous one, and each low - is higher than the previous one. Thus, there are no prerequisites for a change in traders' sentiment to "bearish." However, the most important report of this week will be released today, so the market reaction can be strong and unexpected. The pound rose in the first two days of the week, although the grounds for purchases were quite dubious. For example, yesterday's unemployment reports in the UK showed a deterioration, and the pound could show a decline.   But traders have already focused on US inflation, which could drop to 3.1% in June. This value has already been factored in, but what if the report shows a different result? In this case, we are waiting for a move that will depend on the side of the deviation from the forecast. If the consumer price index turns out to be above 3.1%, then a decline in the pair can be expected. If below - new growth. The level of 1.3000 can be worked out a bit later, not today. Today the probability of a decline is higher. However, this does not mean traders' sentiment will change to "bearish."   On the 4-hour chart, the pair has rebounded from the level of 1.2745 and consolidated above the level of 1.2860. Thus, the growth of quotes can continue towards the next level of 1.3044. A "bearish" divergence is brewing at the CCI indicator, which may indicate the beginning of forming a "bearish" wave on the hourly chart. There are no sell signals now, and the pound ignores the news background, which should have led to its decline.   Commitments of Traders (COT) Report: During the previous reporting week, there was a shift in the "Non-commercial" traders' sentiment, which turned somewhat less "bullish." The count of long contracts held by speculators fell by 7,921 units, while the short contracts saw a decrease of 6,192. Despite this, the predominant sentiment among the major players remains distinctly "bullish," with a marked difference between long and short contracts: 96 thousand to 46 thousand. The pound has a favorable outlook for further growth, particularly as the current news environment lends it more support than the dollar. Nevertheless, anticipating a strong surge in the value of the pound sterling is increasingly challenging. The market is overlooking several factors that favor the dollar, and expectations of continual interest rate increases from the Bank of England primarily drive the pound's growth.     Here's the upcoming news schedule for the US and UK: US - Consumer Price Index (CPI) (12:30 UTC). US - "Beige Book" (18:00 UTC).   For Wednesday, the economic event calendar includes one report and one event. The "Beige Book," an aggregation of economic reports from various US regions, doesn't generally significantly influence the market. However, the inflation report may substantially sway traders' sentiments. As for the GBP/USD forecast and trading advice: Minimal selling of the pound during the "bullish" trend is possible. For instance, a rebound from the 1.3007 mark on the hourly chart with a target of 1.2917 or a closure below the 1.2917 level aiming for 1.2847 could be considered. New purchases could be advisable upon a rebound from the 1.2917 level on the hourly chart, aiming for 1.3007. However, movements in the latter half of the day may be considerable and vary in direction.  

US retail sales dip, core retail sales rise UK inflation expected to fall The British pound has edged lower on Tuesday. In the North American session, GBP/USD is trading at 1.3038, down 0.27%.     UK inflation expected to fall The UK is lagging behind other major economies in the fight to curb inflation. Will Wednesday’s inflation report bring some good news? In May, CPI remained stuck at 8.7% y/y but is expected to ease to 8.2% in June. The core rate is expected to remain steady at 7.1%. On a monthly basis, headline CPI is expected to fall from 0.7% to 0.4% and the core rate is projected to slow to 0.4%, down from 0.8%. The inflation report could be a game-changer with regard to the Bank of  England’s meeting on August 3rd. The BoE delivered an oversize 50-basis point hike in June and will have to decide between a modest 25-bp hike or another 50-bp increase at the August meeting. Last week’s employment report pointed to wage growth picking up, which moved the dial in favour of a 50-bp increase.   US retail sales report a mixed bag US retail sales for June provided a mixed spending picture. Headline retail sales rose just 0.2% m/m, below the 0.5% consensus estimate and the upwardly revised May reading of 0.5%. Core retail sales were much stronger at 0.6%, above the 0.3% consensus and the upwardly revised May release of 0.3%. The data points to resilience in consumer spending although momentum has slowed. The retail sales report did not change expectations with regard to rate policy, with the Fed expected to raise rates in July and take a pause in September. The Fed has tightened by some 500 basis points in the current rate-hike cycle and this has curbed inflation, which has fallen to 3%. Nevertheless, the Fed remains concerned that the solid US economy and a tight labour market will make it difficult to hit the 2% inflation target, and the Fed hasn’t given any hints that it will wrap up its tightening in July, although the money markets appear to think this is the case.   GBP/USD Technical GBP/USD has support at 1.2995 and 1.2906  There is resistance at 1.3077 and 1.3116    

Gold Gold traders have their rally caps on after ECB’s Knot signaled they could be ready to pause in September and after Canadian inflation dropped to the BOC’s control range for the first time since March 2021. ​ Global bond yields are falling and that is good news for bullion investors. ​     So far this earnings season, the big banks have outlined a vision that includes slowing growth in the US, which should allow the Fed to be one and done with rate hikes. ​ Unless core inflation proves to be a lot stickier than Wall Street fears, the peak in global rates should be in place by the fall. ​ Gold might struggle to make a run at the $2000 level, but that could change if bond yields continue to come down and the Fed signals they are likely done hiking next week after delivering one last quarter-point rate rise. ​ ​ ​ ​    

GBP: Good news on inflation, bad news for the pound Lately, we have been pointing at the pound’s vulnerable position. Markets' aggressive tightening expectations required data to offer no hints of abating price pressures and an overstretched positioning (on the long-end). It appeared that some long positions had been scaled back already ahead of this morning’s key CPI release, with the pound underperforming in the G10 space yesterday. Looking at the June figures released this morning, there is finally some encouraging news for the Bank of England. Headline inflation slid back below 7.9% (below consensus), illustrating a 0.4% MoM increase which has been the slowest seen since early 2022. We know that the BoE is mostly focused on service inflation, and there was good news here too – a decline from 7.4% to 7.2%, contrary to the BoE’s expectations. The question now is whether this is enough to tilt the balance to a 25bp hike in August. We are inclined to think so, even though it remains a close call. The post-CPI Sonia curve looks significantly changed, with 36bp priced in for August and 90bp to the peak, which marks a huge 55bp shift since last week. In FX, the pound is under pressure, down around 0.70% against the dollar. We suspect there is more room to fall in GBP/USD, especially if our expectations for some dollar support into the FOMC prove to be correct. A move to the 1.2800 area in Cable looks possible even before the BoE meeting. EUR/GBP has spiked, but we suspect markets may like some bullish narrative on the euro side beyond the 0.8700 level, and that may not come just yet if the ECB turns fully data-dependent and the eurozone outlook remains lacklustre at best.

USD/JPY Yesterday, the USD/JPY pair broke above the resistance level of 145.90. The 147.95 level is just ahead – an embedded line of the global price channel, and slightly above it is the target level of 148.50. However, the Marlin oscillator is turning downwards on the daily chart, which could indicate that the bearish correction has not yet ended.     The nearest support for this correction is the 144.73 mark, which the MACD line (blue moving average) is approaching. If the price consolidates below the level of 144.73, it may fall to 142.82. This morning, the price was unable to overcome the resistance of the MACD line on the four-hour chart. The signal line of the oscillator is returning to the area of negative values.     The first condition for restoring the correction is the price consolidating below the level of 145.90 on this chart. The first sign of succeeding growth will be the price consolidating above yesterday's high, which will automatically turn into a consolidation above the MACD line