GemForex - Weekly analysis | Monday, July 4

Last Friday, the US data revealed that the ISM Manufacturing PMI dropped to 53 in June from 56.1 in May. The Employment and New Orders components of the ISM's survey came in below 50, showing monthly contractions. The benchmark 10-year US Treasury bond yield broke below 3% after this data and ended up losing nearly 8% on a weekly basis. 

Following Friday's volatile action, markets stay relatively quiet on Monday. Stock and bond markets in the US will be closed in celebration of the Fourth of July holiday. For the news of the day, The European economic docket will feature Producer Price Index (PPI) data for July and the Bank of Canada will release its Business Outlook Survey in the second half of the day. 

Regardless, this upcoming week can be considered interesting for the Dollar due to multiple upcoming financial reports, like the Initial Jobless claims on Thursday, the ADP Employment rate, and the Nonfarm Payroll reports on Friday, 3 important reports indicating the latest general economic trend of the US as a whole. We will get additional confirmation of the US entering a recession if the reports result worse than expected, a situation which the economy hasnt been in since the crisis of 2008-2009.

• USD/CHF came under modest bearish pressure and was last seen trading below 0.9600 after the data from Switzerland showed that the Consumer Price Index climbed to 3.4% on a yearly basis in June from 2.9% in May. Thursday will prove to be an important day for the Swiss Franc due to the Unemployment rate report. 

• EUR/USD moves sideways below 1.0450 early Monday. The pair lost more than 100 pips last week with investors reassessing the European Central Bank's policy outlook amid mixed inflation data. All eyes are on the Retail Sales report for May coming up on Wednesday, as it will dictate the further future strength of the Euro. In the same tone, the Euro may see considerable movements if the German manufacturing reports on Tuesday and Wednesday will prove to be stronger than analysts predict.

• GBP/USD is trading modestly higher on the day above 1.2100 in the European morning. Over the weekend, foreign ministers of Germany and Ireland said in a joint statement there was no legal or political justification for the UK to unilaterally change the terms of the Northern Ireland Protocol. On another note, its predicted to be a quiet week for GBP domestic policies, and the cable will most likely follow USD developments and reach accordingly. 

• USD/JPY clings to gains near 135.50 early Monday after having closed the last two days of the previous week in negative territory. Kazuo Momma, a former top official in charge of monetary policy at the Bank of Japan (BOJ), told Bloomberg TV on Monday that he expects the BOJ to keep its easy monetary policy for many quarters to come. 

• Regardless, the Yen expects a quiet domestic week, but due to its relationship with the Dollar, we may potentially see considerable movements for the Yen, as all eyes are on US domestic economics reports, and the Japanese economy is exposed to the Dollar more than ever. 

• Gold dropped to its lowest level since January at $1,784 on Friday but managed to stage a rebound amid plunging US yields. XAU/USD moves sideways in a relatively tight range near $1,810 in the early European session. This week will distinguish the future movements of Gold, amid the volatile FX environment and the financial sanctions war that is happening on Russian Gold.