King Dollar Presses On | Morning Express 07/11/22

Posted: July 11, 2022, 8:51 a.m.

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- U.S. economic calendar slows for two days before big CPI read on Wednesday.

- Nonfarm Payrolls for June on Friday beat expectations with 372k jobs created versus 238k expected. Manufacturing topped at 29k versus 15k.

- Wage Growth was firm at +0.3% MoM, in line, and 5.1% YoY versus 5.0% expected. However, May was revised higher by 0.1 for both. Wages broadly sticky, but some pockets are beginning to slow such as warehouse and leisure/hospitality employees.

- Despite the strong data, the U.S. Dollar Index finished -0.13% and -0.74% from its session high.

- Dollar not subdued long as Asia and Europe again lift the Dollar Index to fresh 20-year highs

o Liberal Democratic Party leads elections in Japan, strong turnout on heels of Abe assassination.

o The energy crisis and bullseye on parody with the USD continues to drag the Euro. Gas prices out to 2023-2024 building premiums.

- The strong data Friday helped lift 10-year yield for a third straight session, pinging a high of 3.10%.

- Look to the psychological 3.0% as a barometer of risk-on/off tailwinds.

- Global unrest spreading, due to food shortages, cost of living, and poor political climate policy, Sri Lanka to Italy, to Netherlands.

- Virus update, mass testing in China has risk-assets on edge; if you test, you will find cases.

- Restrictions across many Chinese cities being implemented, impact nearly 30 million people.

- New variant detected in Shanghai.

- U.S. Treasury will auction $43 billion in 3-years today and $33 billion in 10-years tomorrow.

- Earnings season kicks off this week:

o PepsiCo earnings tomorrow, Delta Wednesday.

o JPMorgan, Morgan Stanley, Taiwan Semiconductor, and more Thursday

o UNH, Wells Fargo, Citi, and more Friday.

E-mini S&P (September) / NQ (September)

S&P, yesterday’s close: Settled at 3901.25, down 3.75 on Friday and up 74.00 on the week

NQ, yesterday’s close: Settled at 12,152.00, up 13.50 on Friday and 540.75 on the week

- Price action was firm on Friday but struggled to hold gains through close.

- Despite 10-year yields ripping back above 3.0%, S&P responded to first wave of major three-star support and NQ held well out above such, responding to first key support.

- U.S. Dollar Index strength cannot go unnoticed and will be a drag. On the other hand it is rallying as a safe-haven, therefore yields retreating.

- Move in FX and Treasuries similar to last Tuesday when stocks shook off overnight weakness through 10:00-11:00 am CT hour. Can they do it again.

- May see a “sell first, ask questions later” approach into CPI. This data point will define the week.

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NQ (September)

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Crude Oil (August)

Yesterday’s close: Settled at 104.79, up 2.06 on Friday and down 3.64 on the week

- Impressive rebound in Crude Oil from Tuesday’s -8.24%

- Weakness on the session is due to virus curbs in China and new variant detected in Shanghai. As we stated, we believe last Tuesday’s fallout began discounting the inevitable; if you test, you will find cases.

- U.S. Dollar strength is hurting commodities.

- President Biden to visit Saudi Arabia this week.

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Gold (August) / Silver (September)

Gold, yesterday’s close:  Settled at 1742.3, up 2.6 on Friday and down 59.2 on the week

Silver, yesterday’s close: Settled at 19.236, up 0.048 on Friday and down 0.431 on the week

- Despite strong Nonfarm Payrolls report, metals did trade favorably briefly with Gold hitting a high of 1751.7 and Silver 19.39, but persistent U.S. Dollar strength and tremendous overhead technical damage kept that rally in check.

- Treasury complex is firm this morning with Bonds up over a point, helping to stave off additional selling in metals due to U.S. Dollar new highs.

- All about CPI on Wednesday.

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Silver (September)

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