Technicals and Triggers for USD/JPY, EUR/USD, EUR/CHF and AUD/USD

 | Jul 06, 2023 01:03AM ET

The first half of the year was rather choppy for the US dollar as massive bets of weakness were scaled down. Many on Wall Street expected the dollar to weaken as most of the other major currencies were about to deliver significantly more tightening. Regional growth rotations on an improving outlook from a roaring Chinese economy were also supposed to support the case for strengthening commodity demand.

The dollar might be positioned for a little more short-term strength here as the odds for more rate hikes have steadily increased while rate-cut bets get pushed into next year. The Fed’s higher-for-longer stance on rates seems to slowly be winning over some traders.

Macro traders will undoubtedly be following the NFP report but may fixate on next week’s inflation report. We could actually get a soft report that gives us a headline 2.9% year-over-year reading. The June inflation report might be a short-term bottom for the disinflation process as the base effects will be responsible for a large part of the decline. By the end of summer, inflation might prove to be sticky given the current drivers, which include economic resilience, a strong labor market, and decent spending.

h2 USD/JPY/h2

Sell signals are emerging, and intervention talk is brewing, given we are at levels that triggered Japanese intervention last year. Many USD/JPY traders are focused on the 145.50 region and the 143.75 level. Technical traders that follow DeMark indicators are eyeing a potential sell countdown, which would require a drop below the 143.90 level. If prices close above the 145.51 level, further upside could target the 150 zone. Last year, the Demark countdown finished in mid-July, and it soon saw an over 6% drop.