The summer calm will have to wait a little longer as the coming week is filled with crucial events. Canada and New Zealand are geared to raise interest rates, although their currencies are ultimately at the mercy of global recession risks. In China, it’s a close call whether the economy contracted in Q2. Most importantly, US inflation might finally be losing its punch.

As written Sunday, CAD/JPY target at 103.24 traded to 103.35 lows from 106.00's and 300 pips. CAD/JPY is the middle currency pair that trades between AUD/JPY and NZD/JPY Vs EUR/JPY and GBP/JPY. CAD/JPY is the preferred currency to trade along with EUR/JPY and GBP/JPY. For next week, CAD/JPY sits oversold , EUR/JPY doesn't have a clue to direction at 137.00's, GBP/JPY do or die at 162.06. AUD/JPY short next week at 93.00's and short NZD/JPY at 84.00's. USD/JPY has been a dead issue for 2 weeks and stuck from 136.00's to 134.00's. Nothing more expected and the problem is seen from DXY. DXY achieved severe overbought status this week at 106.00's and decided to travel 100 pips higher to more overbought at 107.00's. DXY higher is traveling 100 pips higher into more massive overbought week to week and caught inside 200 pip ranges. Higher DXY into overbought sends EUR/USD lower to trade massive oversold. DXY and EUR/USD as FX leaders remains key drivers to overall markets as the distance between both are separated to extremes. Both must meet in the middle to normalize markets then decide proper normalized levels. All markets as FX prices drive and dictate all markets. SPX traded 169 points this week, 200 points last weelk and 200 points 2 weeks ago. Speaks volumes to the DXY and EUR/USD overbought and oversold extremes. SPX target this week at 3999 will struggle to achieve destinations. Today, any price above 3925 goes short. AUD/USD. RBA raised July 4th and AUD/USD traded 132 pips range from 0.6894 to 0.6762. A change of interest rates today and in the future is not worth the discussion as the change is seen and traded inside the current price. We're exposed to more public relations today than vital market knowledge, expertise and professionalism. AUD/USD trades oversold from 0.6800's and targets low 0.6900's easily and struggles to upper 0.6900's. Big winners over last weeks were EUR/NZD, GBP/AUD and EUR/AUD. All will maintain wide ranges and big winner status. All are recommended trades for the week ahead. All are deeply oversold to include GBP/NZD. USD/CAD trades deeply overbought and finally but slowly breaking out of its dead range coma over last months. Normally a great currency, good mover and terrific profits but lately extremely dead. Watch EUR/CAD as the next highest currency price to USD/CAD at current 1.3160. USD/CAD at 1.3000's vs GBP/USD at 1.1900's and 1100 pips is fairly high to extreme. Overall currency prices trade at massive overbought and oversold extremes. This market condition is the worst and most dangerous to all market periods and impossible to hold. A turnaround will come and should hit violently. EUR/USD, parity and ECU units EUR/USD from 2008 highs at 1.6011 to 1.0160 lows traveled a difference of 44% yet a decrease of 36%. EUR/USD to Parity at 1.00 entails another 1% drop or a total at 37% from 1.6011. Per year, EUR/USD dropped 4.62%. EUR/USD at 1.6011 highs aligned against USD/DEM as EUR/USD legacy currency at the January 1999 introductory rate at 1.6846 or DEM/USD 0.5936 Vs EUR/USD at 0.8613. DXY was 93.55 or 0.9344. EUR/USD increased from 0.8613 to 1.6011 at 85% or roughly 8% per year. Since January 1972 and the start of the new 50 year cycle and the new experiment to align exchange rates with interest rates, EUR/USD traded below parity 84 of 600 months from 1972 -1973, 1982 -1986 and 2000 to 2002 during the 9/11 terrorist attacks on the World Trade Center. Recall 1971 – 1972 and the Nixon revaluation to Gold. From 1982 to 1986 involved the Lourvre and Paris Accords to re-rate currencies to USD. A particular worldly situational reset existed for EUR’s justification below parity. EUR/USD transferred from Dem and all European currencies at 1:1. Below parity was never the intention, goal or purpose in 1999. ECU and EUR When the euro was introduced in January 1999, it replaced the ECU at par (that is, at a 1:1 ratio). ECU linked to the European Monetary System? The EMS was a limited-flexible exchange rate system that defined bands in which the bilateral exchange rates of the member countries could fluctuate. The bands of fluctuation were characterized by a set of adjustable bilateral central parities and margins that defined the bandwidth of permissible fluctuations. This set of parities was called a parity grid as it defined parities for all combinations of the ECU constituent currencies. The borders of the fluctuation bands were described by the upper intervention point and lower intervention point. Typically, the bandwidths were 2.25% to each side, with a wider margin for the Italian Lira. After a currency crisis in 1993, the bands were widened to 15% on each side, but in practice the fluctuations were kept within a narrow band. When a market exchange rate reached...

We’ve experienced some interesting market moves since the beginning of this year. Most significantly, at least for those who have pensions and investments, has been the savage decline in equities, particularly those in the tech sector. After hitting its all-time high in November last year, the US NASDAQ 100 lost 34% of its value over the following seven months. It had a modest rally, but the index has since given back most of these gains and remains within spitting distance of its mid-June low. The last time we experienced such market carnage was back in early 2020 when the NASDAQ 100 fell 31% on the pandemic panic. But it did this in the space of one month, whereas the current sell-off has lasted considerably longer. This latest decline came as investors reacted to a sudden hawkish turn from central bankers who finally reacted to headline inflation numbers as they hit multi-decade highs. Led by the US Federal Reserve, developed world central banks had previously insisted that the post-pandemic pick-up in inflation was transitory in nature, suggesting there was no need for monetary tightening. The thinking went that the global economy would soon return to normality as supply disruptions were eliminated and supply and demand got back in kilter.  Monetary and fiscal stimulus But that just hasn’t happened. The combined monetary and fiscal response to the government-imposed pandemic shut-down dramatically added to the stack of money already in the financial system. But rather than getting stuck in banks and other financial institutions as it had previously, this time round much of it went directly to individuals who were more than willing to spend it. Demand up; supply of goods constrained. Add in the Russian invasion of Ukraine and the resultant spike in energy prices and suddenly there’s a problem that even the economists at the Fed and Bank of England are forced to acknowledge.  Too late Most governments give their central banks the job of controlling inflation with a target, mandated or otherwise, but in every case arbitrary, of around 2%. Having done everything in the book since the Great Financial Crisis to push inflation up to this level, central bankers have proved to be powerless to control it now that it has shot above target. All they can do is try to take some heat out of the economy, principally by raising interest rates. But having delayed tightening monetary policy for so long, now they are doing this as economic growth slows significantly following its post-pandemic surge higher. This has significant effects on the global economic outlook which is still getting priced into financial assets.  Bond yields slump Perhaps the starkest example of this is yields on US Treasury notes which have pulled back substantially since mid-June. In early July both the yield on the 2 and 10-year notes were both around 2.80% and well below the 3.4-3.5% levels they hit in mid-June. This was just after the Federal Reserve hiked rates by 75 basis points and indicated that they would do the same in July. While we’ve seen a pick-up in yields since then, the pull-back suggests that investors expect the Federal Reserve to start cutting rates relatively soon, perhaps next year, as economic growth slows. The hope is that the Fed can engineer a soft landing and avoid a deep or long-lasting recession. Incoming data Next week sees the latest update on US CPI, the key inflation measure as far as investors are concerned, if not the Federal Reserve. Last month it hit 8.6%, its highest level in forty years. The concern is that it has yet to peak, which has forced the US central bank to undertake an unexpectedly aggressive pace of monetary tightening. This is having a devastating impact on equity and bond prices. But any indication that inflation has peaked, and that the Federal Reserve can ease up on raising rates could ease the downside pressure on equities. That’s why the central bank, and investors everywhere, are fixated on the release of every single scrap of inflation data.  And earnings We also have the start of the second quarter earnings season which could be another headwind for asset prices. Key here will be forward guidance from companies. If the numbers are bad, but corporations say they can see a way forward, then we could get a bounce-back in stock prices. But without this, equities could continue to struggle.

We’ve experienced some interesting market moves since the beginning of this year. Most significantly, at least for those who have pensions and investments, has been the savage decline in equities, particularly those in the tech sector. After hitting its all-time high in November last year, the US NASDAQ 100 lost 34% of its value over the following seven months. It had a modest rally, but the index has since given back most of these gains and remains within spitting distance of its mid-June low. The last time we experienced such market carnage was back in early 2020 when the NASDAQ 100 fell 31% on the pandemic panic. But it did this in the space of one month, whereas the current sell-off has lasted considerably longer. This latest decline came as investors reacted to a sudden hawkish turn from central bankers who finally reacted to headline inflation numbers as they hit multi-decade highs. Led by the US Federal Reserve, developed world central banks had previously insisted that the post-pandemic pick-up in inflation was transitory in nature, suggesting there was no need for monetary tightening. The thinking went that the global economy would soon return to normality as supply disruptions were eliminated and supply and demand got back in kilter.  Monetary and fiscal stimulus But that just hasn’t happened. The combined monetary and fiscal response to the government-imposed pandemic shut-down dramatically added to the stack of money already in the financial system. But rather than getting stuck in banks and other financial institutions as it had previously, this time round much of it went directly to individuals who were more than willing to spend it. Demand up; supply of goods constrained. Add in the Russian invasion of Ukraine and the resultant spike in energy prices and suddenly there’s a problem that even the economists at the Fed and Bank of England are forced to acknowledge.  Too late Most governments give their central banks the job of controlling inflation with a target, mandated or otherwise, but in every case arbitrary, of around 2%. Having done everything in the book since the Great Financial Crisis to push inflation up to this level, central bankers have proved to be powerless to control it now that it has shot above target. All they can do is try to take some heat out of the economy, principally by raising interest rates. But having delayed tightening monetary policy for so long, now they are doing this as economic growth slows significantly following its post-pandemic surge higher. This has significant effects on the global economic outlook which is still getting priced into financial assets.  Bond yields slump Perhaps the starkest example of this is yields on US Treasury notes which have pulled back substantially since mid-June. In early July both the yield on the 2 and 10-year notes were both around 2.80% and well below the 3.4-3.5% levels they hit in mid-June. This was just after the Federal Reserve hiked rates by 75 basis points and indicated that they would do the same in July. While we’ve seen a pick-up in yields since then, the pull-back suggests that investors expect the Federal Reserve to start cutting rates relatively soon, perhaps next year, as economic growth slows. The hope is that the Fed can engineer a soft landing and avoid a deep or long-lasting recession. Incoming data Next week sees the latest update on US CPI, the key inflation measure as far as investors are concerned, if not the Federal Reserve. Last month it hit 8.6%, its highest level in forty years. The concern is that it has yet to peak, which has forced the US central bank to undertake an unexpectedly aggressive pace of monetary tightening. This is having a devastating impact on equity and bond prices. But any indication that inflation has peaked, and that the Federal Reserve can ease up on raising rates could ease the downside pressure on equities. That’s why the central bank, and investors everywhere, are fixated on the release of every single scrap of inflation data.  And earnings We also have the start of the second quarter earnings season which could be another headwind for asset prices. Key here will be forward guidance from companies. If the numbers are bad, but corporations say they can see a way forward, then we could get a bounce-back in stock prices. But without this, equities could continue to struggle.

Summary United States: Payroll Growth Sizzles in June Despite Recession Fears June brought a strong 372K payroll gain, beating the consensus and calming recession concerns. The unemployment rate held at 3.6%. Total job openings remain highly elevated but fell by 427K to 11.3 million in May. The ISM services index edged down to 55.3 during June, marking a two-year low. The trade gap narrowed to $85.5 billion in May as exports rose at a slightly faster pace than imports. Next week: Consumer Price Index (Wed.), Retail Sales (Fri.), Industrial Production (Fri.) International: Some Cracks in Canada's Economic Outlook The past week saw some underwhelming news from Canada. June employment unexpectedly fell by 43,200, and while the Bank of Canada's Business Outlook Survey reported solid sales over the past three months, it also signaled a slowing in sales going forward. We expect Canadian GDP growth of 3.9% in 2022, but growth of just 1.5% in 2023. In Scandinavia, Sweden's GDP rose in May, while Norway's mainland GDP fell. Finally, the Reserve Bank of Australia raised its policy rate 50 bps at this week's monetary policy meeting, as expected. Next week: U.K. GDP (Wed.), Bank of Canada Policy Announcement (Wed.), China GDP (Fri.) Interest Rate Watch: Yield Curve Signals Recession on the Horizon The yield on the two-year Treasury note moved above the yield on the 10-year Treasury security this week. An inverted yield curve has historically been a reliable indicator of a looming recession. Topic of the Week: Collapse Goes the Commodities The Commodity Research Bureau's All Commodities Index ended Thursday down 1.9% over the week, while Bloomberg's measure slid 1.6% over the same period. The slide has been broad-based, with major declines in products stretching from copper to soybean oil. Read the full report

EUR/USD - 1.0169 Euro's selloff below May's 5-year low of 1.0350 to 1.0163 Wed and yesterday's break there to a fresh 20-year bottom of 1.0145 in New York on continued safe-haven usd buying suggests price would head to 1.0100/05, loss of momentum may keep price above projected 1.0075/80 support today. On the upside, only a daily close above 1.0236 confirms a temporary low is in place and risks stronger retracement to 1.0271/76. Data to be released on Friday: Japan all household spending, current account, trade balance, eco watchers current, eco watchers outlook. France current account, trade balance, imports, exports, Italy industrial output. US non-farm payrolls, private payrolls, unemployment rate, average weekly earnings, wholesale inventories, wholesale sales, Canada employment change and unemployment rate.