USD/JPY turns lower for the second straight day and drops to over a one-week low on Thursday. The post-US CPI USD selling bias, sliding US bond yields continue to exert pressure on the pair. The risk-on impulse could undermine the safe-haven JPY and help limit the fall, for the time being.

The US Producer Price Index shank by more than anticipated in July, to 9.8% YoY. Wall Street is set to open firmly higher and extend its Wednesday rally. The EUR/USD pair has its bullish potential intact but needs to clear 1.0360.

Gold attracts some dip-buying and climbs to $1,800 neighbourhood amid sustained USD selling. Diminishing odds for a larger Fed rate hike, sliding US bond yields continue to weigh on the USD. The risk-on impulse seems to be the only factor capping the upside for the safe-haven commodity.

XAU/USD is keeping the corrective momentum intact, as it remains below the $1,800 mark. In the view of strategists at TD Securities, gold’s price action may be revealing substantial selling interest. 

EUR/USD adds to the weekly rebound and revisits the 1.0350 region on Thursday.

The continuation of the ongoing upside looks favoured in the short term. Immediately to the upside emerges the August high at 1.0368 (August 10), an area coincident with the 55-day SMA.

The breakout of the latter should pave the way for a challenge of the 6-month resistance line around 1.0390. If the pair clears the latter, it could then accelerate the upside to, initially, the 100-day SMA at 1.0530.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0901.

There were 262,000 initial jobless claims in the week ending August 6, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 248,000 (revised from 260,000) and came in slightly lower than the market expectation of 263,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1% and the 4-week moving average was 252,000, an increase of 4,500 from the previous week's revised average.

"The advance number for seasonally adjusted insured unemployment during the week ending July 30 was 1,428,000, an increase of 8,000 from the previous week's revised level," the DOL said.

The Producer Price Index (PPI) for final demand in the US declined to 9.8% on a yearly basis in July from 11.3% in June, the data published by the US Bureau of Labor Statistics revealed on Thursday. This print came in lower than the market expectation of 10.4%. 

The annual Core PPI fell to 7.6% from 8.2%, matching the market expectation. On a monthly basis, the Core PPI fell by 0.5% following June's 1% increase.

“Malaysia’s labour market continues its steady march towards full recovery with the number of employed persons and unemployment rate improving further. Total number of employed persons rose for the 11th month by 36.3k to 15.94mn in Jun. The non-seasonally adjusted unemployment rate edged lower to 3.8% while the seasonally adjusted rate fell to 3.6%, a shade above the prepandemic unemployment rate of 3.3%.”

“Employment gains recorded in the services sector particularly in food & beverages, wholesale & retail trade, and administrative & support services activities. Agriculture, manufacturing and construction sectors also saw job gains while the mining & quarrying sector recorded further declines in employment. The worker segment that is temporarily not working but had jobs to return to declined further to 87.8k (vs 801.1k in Jun 2021). Workers who are unemployed for more than 12 months also eased to 35.0k or 6.6% of total actively unemployed (vs 62.9k or...

In its monthly report published on Thursday, the Organization of the Petroleum Exporting Countries (OPEC) said that it lowered the 2022 full-year demand growth forecast to 3.1 million barrels per day (bpd) from 3.36 million bpd, as reported by Reuters.

DXY remains well on the defensive and puts the 105.00 support under further pressure on Thursday.

If the selling bias picks up extra pace, the dollar risks a deeper pullback to, initially, the August low at 104.63 (August 10), just ahead of the 6-month support line, today near 104.50.

Looking at the broader scenario, the bullish view in the dollar remains in place while above the 200-day SMA at 99.98.

AUD/USD catches fresh bids on Thursday and climbs to a two-month high amid weaker USD. Diminishing odds for a larger Fed rate hike in September, the risk-on mood weighs on the USD. The technical set-up favours bullish traders and supports prospects for further near-term gains.

“The Philippines’ economy held up its strong growth momentum with 2Q22 GDP growing 7.4% y/y (1Q22: revised down to +8.2% from +8.3% previously). The reading exceeded our estimate (+6.3%) but came in below Bloomberg consensus (+8.4%). It was largely credited to the easing of COVID19 restrictions on mobility, election-related spending, and continued government policy support during the quarter.”

“We raise our 2022 full-year GDP growth forecast to 7.0% (from 6.5% previously, official est: 6.5%7.5%), purely reflecting the robust economic growth of 7.8% in 1H22. For 2H22, we continue to expect the growth momentum to be considerably held back to around 6.4% as headwinds to growth have intensified. To counter lingering downside risks, a safe full reopening of the economy with higher national vaccination rates against COVID-19, broad policy continuity post presidential elections, and resilient overseas cash remittances are key to sustain the growth momentum in the near...

EUR/JPY bounces off weekly lows in the 136.60/50 band and reclaims part of the ground lost on Wednesday’s strong retracement.

So far, the August recovery appears to have met some initial resistance in the 138.40 zone (August 10). If the cross regains upside traction and surpasses this level, it could then extend the move to, initially, the 55-day SMAs, today at 139.06.

While above the 200-day SMA at 133.87, the outlook for the cross is expected to remain constructive. This contention zone also appears underpinned by the proximity of the August low at 133.39 (August 2).

EUR/USD climbed to its highest level in a month at 1.0368 on Wednesday. A sustained break above the 1.0360 area would clear the way towards June 27 high near 1.0615, economists at BBH report.

EUR/GBP regains positive traction on Thursday and climbs back closer to the overnight swing high. The BoE’s gloomy outlook is seen as a key factor behind the British pound’s underperformance. The post-US CPI USD weakness benefits the euro and remains supportive of the intraday move up.

The German government respects the European Central Bank's (ECB) independence and will continue to defend it, German Chancellor Olaf Scholz said on Thursday, as reported by Reuters.

"The European Union must handle these difficult times in solidarity, this is something I explicitly commit to," Scholz told journalists. "I believe that, as the biggest country with the greatest economy and the largest population at the centre of Europe, we have a special task."

“Malaysia recorded further foreign outflows of MYR3.4bn in Jul albeit narrower compared to MYR5.4bn in the previous month. This has reversed year-to-date cumulative flows to an outflow of MYR0.6bn in Jan-Jul (vs inflows of MYR2.9bn in 1H22). Jul’s net foreign outflows were concentrated in MYR debt securities (-MYR3.5bn) against a small net inflow into equities (+MYR0.1bn).”

“Bank Negara Malaysia (BNM)’s foreign reserves increased by USD0.2bn m/m to USD109.2bn as at end-Jul after dropping the most in nearly seven years by USD3.8bn m/m to USD109.0bn in the preceding month. The latest reserves position is sufficient to finance 5.8 months of imports of goods & services and is 1.1 times total short-term external debt.”

“Foreign capital flows are likely to remain volatile in 2H22 and into 2023 as investors weigh global recession risk, geopolitics and inflation against the Fed’s aggressive monetary tightening. Tighter global financial conditions, negative real...

USD/CHF drops to a fresh multi-month low amid the emergence of fresh USD selling. Diminishing odds for a later Fed rate hike in September continue to weigh on the USD. The risk-on mood undermines the safe-haven CHF and helps limit any further downside.

Gold price fails to capitalize on broad US dollar weakness and sluggish Treasury yields. US CPI data shows the first sign of peak inflation but not enough to dissuade hawkish Fed. XAU/USD bears could extend control below the key $1,784 support.

“China’s export rebound continued into Jul while import maintained a sluggish momentum in USD terms, thus bringing the trade surplus to a fresh record high of US$101.26 bn from previous high of US$97.94 bn in Jun.”

“Export growth in Apr-Jul averaged 14.2% y/y compared to 15.8% y/y in 1Q22, suggesting that activities have likely normalised from Shanghai’s two-month lockdown with the recovery over Jun-Jul.”

“We see downside risks to China’s trade outlook due to increasing external headwinds (higher inflation, sharper pace of global monetary policy tightening), uncertainties from COVID-19 and Russia-Ukraine war that could further disrupt the global supply chain, and the worsening relations with US and Taiwan.”

“Given the high comparison base in 2021 when China’s export and import rose 29.9% and 30.1% respectively, we expect a more moderate growth of 10-12% for export and around 5% for import this year.”

“German gas reserves to be fuller than last year.”

“The government to put forward the third package to tackle the crisis.”

“Tax relief is certainly part of an overall package to help citizens.”

“Securing prosperity is a central reform project of this government. “

“I do not think we will see unrest in this country.”

“In case the market mood continues to sour, GBP/USD could struggle to stretch higher and vice versa.”

“On the downside, 1.2175 (Fibonacci 23.6% retracement of the latest uptrend) forms strong support. In case the pair drops below that level, bears could show interest and drag cable lower toward 1.2150 (50-period SMA on the four-hour chart) and 1.2100 (Fibonacci 38.2% retracement, 100-period SMA).”

“1.2275 (the end-point of the uptrend) aligns as next important hurdle ahead of 1.2300 (psychological level), 1.2350 (static level) and 1.2400 (psychological level, static level).”

 

“The Fed’s continued path towards tight monetary policy together with most other G10 central banks hiking will keep the pressure on the JPY.”

“Without any changes from the Bank of Japan, which we don’t expect in the foreseeable future, the door will be open for the JPY to reach 140 once more.”