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.