A key focus in Japan to round off the week will be July wage growth data. These should reflect more than 80% of this year’s wage negotiations.

Headlines - By Vantage International

* USD and Treasuries rise ahead of Fed speak

* US initial jobless claims fall to lowest level since February

* Apple’s two-day slide nears $200bn on China iPhone curbs

* Crude oil futures fall by $1 a barrel on stronger dollar

FX: USD rose to its highest level in nearly seven months at 105.15. The March high and ytd top is at 105.88. A longer-term Fib retracement level sits around 105.37. This is the 38.2% of the fall from last year’s peak to current 2023 trough. The DXY is on track for an eight straight week of gains which would be a record win streak going back to 2014. The weekly initial jobless claims unexpectedly fell to a seven-month low. Unti labour costs and Q2 productivity were also revised upwards pointing to a still solid labour market.

EUR fell to fresh cycle lows at 1.0685. A major swing low is the late May bottom at 1.0635. German industrial production printed down for a third month as woes in the sector linger. Markets are pricing in less than 10bps of rate hikes now for the ECB meeting next week. There will be a big bounce in EUR if the bank raise rates.  

GBP fell to fresh three-month low at 1.2445. Money markets are questioning for the first time if we get a hike at all at the BoE meeting in a few weeks. There’s more than a 20% chance of the MPC keeping rates at 5.25%. This comes after Governor Bailey’s dovish comments on Wednesday. Data also showed an unexpected slowdown in UK property prices.

USD/JPY printed an inside day which denotes consolidation near recent highs. A retreat in US yields saw the major test 147 to the downside. We get a slew of Japanese data to kick off the last trading day of the week. That includes GDP, Current Account and Trade.

AUD printed another narrow ranges doji near recent lows. Soft trade updates, yuan and iron ore weakness weighed. CAD was the G10 underperformer. BoC Governor Macklem said policy might be tight enough to bring inflation to heel.

Stocks: US equities closed mixed as blue chips outperformed. The benchmark S&P 500 settled 0.32% lower at 4451. The tech-laden Nasdaq finished lower 073% at 15,258. But the Dow added 0.17% to finish at 34500. Apple fell again leading tech lower.

Asian futures are pointing to a weak open on US stock market weakness.

European equity futures are also indicating a lower open. The Euro Stoxx 50 cash index is down for seven days in a row which last seen in 2014. Prices have dropped below the 200-day SMA at 4228.

Gold is trading around the 200-day SMA at $1917. The 50-day SMA is above at $1924.

Day Ahead – Japan data and Canada Jobs

A key focus in Japan to round off the week will be July wage growth data. These should reflect more than 80% of this year’s wage negotiations. It is expected to show that total wage growth increased 2.4% y/y. That would be the third straight above 2% print. But given persistence in Japanese inflation, real wage growth is expected to have remained in negative territory for a 16^th consecutive month. We also get updated Q2 GDP figures. A notable upside surprise to the preliminary release saw growth accelerate 1.5%. That was the most since the last quarter of 2020. But growth is forecast to be revised down slightly. The yen is struggling against the Treasury-inspired rally.

The Canadian economy unexpectedly shed jobs in July while the jobless rate ticked up to 5.5%. That made it two out of the previous three months that jobs have been lost. The labour market had been resilient until then, helped by strong immigration. The recent BoC meeting saw policymakers stand pat with the door left open for more tightening. USD/CAD has failed at the April high at 1.3667 so far this week.

Chart of the Day – Apple suffering worst 2-day stretch since November

Apple is having a bad few days ahead of a big launch day next week. That is when the tech giant is due to release a new iPhone 15, watch and switch to USB-C. But in the meantime, news that China has ordered officials not to use iPhones at work has seen the stock lose 6.8% in the last two-days. The tech titan hit a market cap of $3 trillion for the first time earlier this year. But it is now down over 10% from its record closing high at $196.45.

The stock has gone from trading well above the 50-day SMA to trading below the 100-day SMA in two sessions. Key support is the mid-August low at $171.96. The 200-day SMA is down around $164 at present. Of course, where Apple goes, so does the broader market in many senses. The tech giant carries the biggest weighting in both the S&P 500 and Nasdaq.

THIS ARTICLE IS BROUGHT TO YOU BY VANTAGE INTERNATIONAL