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The latest US Treasury report indicates a change in the mood of foreign holders. There is also a huge decrease in the stock market, with the accumulated minus for 12 months rising to $ 231.5 billion as of June, against $ 181.1 billion a month earlier.
The movement in treasuries shows a change in the structure of main holders of the US government debt. China continues to reduce its share, and falling volumes are replaced by Europe, from which the outflow of capital is increasing due to growing geopolitical tensions and impending energy crisis. The UK, Canada and Australia are also raising their shares.
In terms of other economic data from the US, they are mixed and do not paint a clear picture. Housing starts are down 9.6% to 1,446,000 in July, slightly lower than the estimated 1,527,000. Issued building permits also fell 1.3% to 1,674,000, but it is higher than the expected 1,640,000. Analysts have noted a sharp decline in demand caused by a drop in the real incomes of the population. Mortgage volume also decreased by 30% compared to the peak in December last year.
On the bright side, industrial production is higher than expected in June (+0.6% vs. +0.3%). Data on retail sales is also coming, followed by the release of the minutes of the FOMC meeting. Most likely, volatility will be low ahead of the protocol, and trading in major currencies will be in a range and without a clear direction. But at the end of the day, movements in one direction or another are possible, depending on what the Fed says in the minutes.
On another note, oil prices fell on expectations that a deal will be concluded to bring Iranian oil to the market. That will provide an additional 1.3 million barrels per day, but there is no clarity on this issue. If the deal is approved, pressure is likely to increase on commodity currencies, while demand for yen will rise.
USD/CAD
Inflation report in Canada came out mixed. The figure fell to 7.6%, while core inflation rose from 0.3% to 0.5% m / m. Seeing that all three key indicators rose, it is likely that the Bank of Canada will raise the rate immediately by 0.75% at its meeting on September 7.
In terms of the forex market, CAD is the only major currency that remains bullish against dollar. The change in position is up 72 million over the week, with the total long position 1.647 billion higher. But even though it is bullish, the settlement price continues to go up, which is not in favor of the currency.
Most likely, USD/CAD will will continue to trade inside the range, moving towards the local high of 1.3222, then to the technical resistance of 1.3335. There is little chance that it will decline to 1.2515.
USD/JPY
It appears that dollar already reached its peak, so a return to the bullish trend is less likely. Demand for yen will increase as markets are beginning to believe that the Fed will start cutting rates in 2023, after inflation reaches the Fed's target level. Expectations for global recession will largely depend on what pace the US central bank will keep, as well as on the elections in November.
In terms of positioning, short positions continue to decline rapidly. The weekly change is 1.7 billion in favor of the yen. Net short positions are down to -2.317 billion, and settlement price is falling. Most likely, yen will decline even more.
The decline of USD/JPY in the latter half of July was rapid, but short-lived. There are conditions for another decline, with the nearest target at 131.70. The pair will hit another local low (130.37) if the support level is broken. A move towards 126.33 is also possible.
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