FOREX: Hotter PPI Stalls USD Downtrend

• RES 4: 175.43 High Jul 11 ‘24 and a key medium-term resistance  
• RES 3: 174.86 1.764 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• RES 2: 173.43 High Jul 12 ‘24
• RES 1: 173.08 High Jul 15
• PRICE: 172.89 @ 16:42 BST Jul 15
• SUP 1: 170.81  Low Jul 11  
• SUP 2: 169.75 20-day EMA 
• SUP 3: 168.46 Low Jul 1   
• SUP 4: 167.09 50-day EMA   

The trend condition in EURJPY is unchanged, a bull cycle is in play and today’s climb reinforces current conditions. Fresh cycle highs confirm a resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Note that MA studies are in a bull-mode position, highlighting a dominant medium-term uptrend. Sights are on 173.43, the Jul 12 ‘24 high. Support to watch lies at 169.75, the 20-day EMA.

Boston Fed President Collins (2025 voter) reiterated in a speech Tuesday that she advocates an "actively patient" approach to policymaking. Speech text here. Note that she'd already implied in a previous appearance that she was one of two FOMC participants to only pencil in 1 cut in 2025, putting her slightly on the hawkish side of the median  (recall 10 of 19 participants in June saw 2 or more cuts).

• Collins writes:  "In my view, the economy continues to be in a good place overall, close to the Congressionally mandated objectives of price stability and full employment. However, going forward, I expect to see some upward pressures on inflation, as well as some downward pressures on employment and economic growth."
• She acknowledges that "services inflation has continued to moderate, especially on a 12-month basis, despite continued unevenness. This moderation reflects a more balanced labor market". But  core goods inflation "has picked up some, recently, and is currently running above the rates that prevailed before the pandemic. Some of these recent movements in goods inflation are likely tariff-related".
• She notes that "most" firms "plan to pass along some – even if not necessarily all – of the tariff costs" (pointing to ISM data - see table below) while the "typical household has the resources to at least partly offset a tariff-induced loss in purchasing power".
• She concludes that "it seems likely that core PCE inflation will be in the vicinity of 3 percent by year’s end, before resuming its decline. Concerning the labor market side of our mandate, tariffs should slow demand and hiring, though not necessarily by a large amount." Overall, "it seems likely that the economy will move away, at least temporarily, from the favorable conditions I have just described. Tariff policy is the main driver, with higher broad-based tariffs than last year likely leading to a rise in inflation, higher unemployment, and slower GDP growth."
• On the labor market not being a significant source of inflationary pressures, "when adjusted for productivity, the pace of [Employment Cost Index] growth has been running around 2 percent recently, which is consistent with the Fed’s 2 percent inflation target. Therefore, even though some indicators show wages still rising somewhat faster than before the pandemic, given recent productivity developments, I do not see wage growth as placing additional pressure on inflation."

• Stocks continue to trade near steady (SPX eminis) to mixed late Tuesday, the tech-heavy Nasdaq outperforming after the White House rescinded a ban on high speed chips to China. At the moment, the DJIA trades down 327.71 points (-0.74%) at 44134.32, S&P E-Minis down 6 points (-0.1%) at 6305.25, Nasdaq up 119.8 points (0.6%) at 20760.16.
• Semiconductor makers supported the the tech heavy Nasdaq after several were greenlighted for exports to China. Leading gainers included: Advanced Micro Devices +6.52%, NVIDIA +4.07%, Broadcom +2.38%, KLA Corp +2.15% and Lam Research +2.02%.
• On the flipside, the DJIA continued to underperform in late trade with the Materials sector, specifically mining stocks w/ Gold lower, and Health Care sectors weighed by pharmaceuticals.
• Weighing on the Materials sector: Newmont Corp -6.15%, Freeport-McMoRan -3.62%, Vulcan Materials -2.59% and Albemarle -2.21%. Pharmaceuticals weighed on the Health Care sector: Agilent Technologies -5.08%, Regeneron Pharmaceuticals  -4.10%, Moderna -3.80%, Eli Lilly -3.51% and Biogen Inc -3.34%.
• Individually, some banks and services underperforming after reporting earnings this morning, namely: State Street Corp -6.38%, Wells Fargo -6.26%, Blackrock -5.15%, Invesco -2.77% and American Express -2.70%.
• Earnings announcements expected early Wednesday: Prologis, Progressive, First Horizon, PNC Financial Services, Bank of America Corp, Johnson & Johnson, Goldman Sachs and Morgan Stanley. After the close: United Airlines Holdings, Rexford Industrial Realty, Alcoa Corp and Kinder Morgan.