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  • USD/JPY has ticked down 10 pips or so in Tokyo’s opening hour in consolidating ahead of July 4th holiday.
  • All eyes will now be set on Nonfarm Payrolls and the implications for the FOMC this month.  

USD/JPY has ticked down 10 pips or so in Tokyo’s opening hour after  recovering from its Asian session losses, where it was grinding back to 107.80 overnight. It currently stands at 107.74 between 107.74/83. Global bonds rallied overnight on fears of geopolitical tensions rising to a climax between Iran and the US but shorter-term yields rallied as stocks jumped on expectations of a Fed cut following data misses and no obvious trade deal in sight between Washington and Beijing. The  10-year Treasuries were closing at year-lows, falling from 1.97% to 1.94% and to the lowest since 2016, weighing on the Dollar. The US 2-year treasury yield  jumped off 1.73% to 1.76%. Markets pricing 33basis points of easing at the July meeting, with a total of four cuts priced by mid-2020.

Washington looks to be going head-on with Tehran, pretty-much declaring war  as both sides enter into daily antagonistic verbal conflict. Following Iran’s president saying that Tehran will increase its enrichment of uranium to “any amount that we want” beginning on Sunday, Trump’s war-like rhetoric picked up today. He told  Iran that  threats `Can Come Back To Bite’ … “Iran has just issued a New Warning. Rouhani says that they will Enrich Uranium to “any amount we want” if there is no new Nuclear Deal. Be careful with the threats, Iran. They can come back to bite you like nobody has been bitten before!”

President Trump also fanned the flames of the currency wars, saying “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games – as they have for many years!”

As for data, the US trade deficit reached a record high in May. The ISM non-manufacturing activity index fell to 55.1 in June, it’s lowest reading since July 2017. Factory orders fell 0.7% in May, while mortgage data was a tad weaker. Employment data was mixed with initial jobless claims falling. However, the  ADP  employment change showed missed the mark and  expectations of 140,000 as small businesses and the manufacturing sector are struggling – there were at least a  further 102,000 workers hired, but we will have to see what the Nonfarm Payrolls gives us at the end of the week:

“Is excellent job creation, a staple of the US economy for two years and more about to shift to a lower level?  Have the well documented declines in business optimism finally worked into business decisions?” –  

“The appearance of two very weak payroll reports coupled with similar poor numbers from ADP would seem to indicate that more than statistical chance is at work.  Economic growth has shifted lower in the second quarter. The US/China trade dispute, the source of so much business angst does not seem to be headed for  resolution anytime soon.   In fact  given the situation,  it would be remarkable if there was no impact on the labor market. “

NFP leading indicators: Negative signs outweigh the positives

US Non-Farm Payrolls Preview: Three is not the charm



USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet notes  that the  USD/JPY  pair trades around the 38.2% retracement of its latest bullish run after nearing the 61.8% retracement of the same rally earlier in the day, this last at 107.45:

“In the 4 hours chart, the pair continues developing below all of its moving averages, which lack directional strength, as technical  indicators  remain within negative levels, the RSI heading marginally higher at around 48 while the Momentum turned back south, all of which indicates a limited upward potential.”