EURJPY TECHS: Trend Structure Remains Bullish

The June meeting minutes captured a Committee that was leaning in a slightly more hawkish direction than earlier in the year, though probably no moreso than should have been expected. The Dot Plot released at the meeting already captured most of the story: a divided Committee retains its overall easing bias but needs varying degrees of certainty before supporting a resumption of the easing cycle. 

• The main headline from the minutes was on the Committee's split on the rate outlook, which was encapsulated in the Dot Plot mostly split between two and zero cuts for the year.
• "Participants generally agreed that, with economic growth and the labor market still solid and current monetary policy moderately or modestly restrictive, the Committee was well positioned to wait for more clarity on the outlook for inflation and economic activity."  "Most participants" thought a cut later this year would "likely be appropriate" with "some" seeing the "most likely appropriate path" being a hold through year-end, neither of which is a surprise given the Dot Plot.
• The primary area of interest within the rate outlook was whether anyone else on the Committee would join Waller and Bowman in supporting a July cut, and it turns out not: "A couple of participants noted that, if the data evolve in line with their expectations, they would be open to considering a reduction in the target range for the policy rate as soon as at the next meeting." With the Minutes taking no effort to massage this message, we take it as a clear signal that the Committee has no intention of cutting rates in July.
• With tariff policy crystallizing a little more clearly and uncertainty diminishing slightly, opinions were mixed as to the implications for the dual mandate targets. A minority clearly was concerned about labor market weakness, while it was interesting that "some" saw inflationary risks as gaining in importance vs employment since the May meeting. "Some participants commented that they saw the risk of elevated inflation as remaining more prominent, or as having diminished by less, than risks to employment. A few participants saw risks to the labor market as having become predominant."
• Overall the discussion of various risk scenarios to inflation and to the labor market/activity remained open-ended, providing optionality to act or not act according to incoming data and developments.

• After spiking sharply higher yesterday following President Trump’s 50% tariff threat, copper futures have pulled back today, with the red metal currently 2.6% lower on the session at $554/lb.
• Copper remains more than 10% up from yesterday, however, having broken key resistance at $546.15, the Mar 26 high.
• The breach is seen as a key bullish development and reinforces the current primary uptrend. Sights are on a retest of yesterday’s high at $589.55. Clearance of this level would open the $600.00 handle.
• Price action is likely to remain volatile, however. Key short-term support has been defined at $497.25, the Jul 8 low.
• Meanwhile, spot gold has edged up by 0.3% to $3,311/oz, as the yellow metal has struggled for direction today.
• Recent weakness in gold resulted in a breach of the 50-day EMA, and a trendline drawn from the Dec 30 ‘24 low and connected to the Feb 28 low. A clear break of both trend tools would signal scope for a deeper correction, and open $3,245.5, the May 29 low.
• However, the recovery from the Jun 30 low also highlights a possible false trendline break. A resumption of gains would refocus attention on $3,451.3, the Jun 16 high.
• WTI has also been largely rangebound as the market continues to monitor US trade policy and any impact on demand.
• WTI Aug 25 is up 0.1% at $68.4/bbl.
• Support to watch is the 50-day EMA, at $65.22. Initial resistance is at $71.20.

One hawkish note to the a largely unsurprising set of Fed minutes - we took note that "several participants commented that the current target range for the federal funds rate may not be far above its neutral level". 

• The last time participants' comments on the neutral level was noted in the minutes was in January's edition, when only "a few" said the same thing - and the Fed funds rate hasn't changed since then.
• While the estimated range of the neutral range is notoriously wide, this shift in language could suggest that participants may be eyeing a slightly higher end-point than they had previously.
• It also adds to this comment from Chair Powell at his congressional testimony last month in which he suggested that the "neutral" level of rates could start in just "a couple" of cuts from here: "If you just look in the rearview mirror and look at the existing data that we've seen, you could make a good argument that it would call for us to be at a neutral level, which would be a couple of cuts or maybe more."