Daily Market Report

[FOREX.com]

USD/JPY analysis: Asian Open – 4th September 2023​

Market Summary:​

• Nonfarm payrolls was mixed on Friday, with 187k jobs added above the 170k expected yet unemployment rose to 3.8% - its highest level since February 2022. Weekly hours rose to 34.4 (34.3 expected and previous) yet average earnings slipped to 0.2% m/m (0.3% expected, 0.4% previous)
• Money markets suggest the Fed are done with hiking rates, with the 30-day Fed Fund futures implying a 93% chance of the Fed holding rates in September
• However, bond yields and the US dollar gave a contradictory reaction, with both initially falling after the NFP release before reversing and posting strong rallies
• The US yield curve from the 2-year and higher all rose, particularly at the long end with the 20 and 30-year yields rising 8.7 and 8.1 bps respectively
• EUR/USD declined for a seventh consecutive week and closed firmly below 1.08, which is its most bearish sequence since October 2014
• The US dollar index reversed all losses sustained between Monday and Wednesday on Thursday and Friday, and closed just beneath its weekly high
• Canada’s GDP unexpectedly contracted in Q2 by 0.2% q/q, compared with 1.2% expected and 2.6% prior (downgraded from 3.1%). This all but confirms that the Bank of Canada (BOC) will likely hold rates at 5% this week.
• US manufacturing contracted at a slower pace according to two surveys on Friday. The S&P Global final PMI was at 76.6, above 47 expected and 46.4 prior. The ISM manufacturing PMI survey was at 48.4, compared with 43.9 expected and 42.6 previously.
• Output concerns saw WTI crude oil rise to a 9-month high and rally for a seventh consecutive day on Friday, which is its most bullish daily sequence since January.
• Russia agreed with OPEC+ to further cut is oil exports in October, adding to inflationary concerns. Manufacturing activity in China and the US were also stronger than expected last week.
• Gold rose for a second week, although t is showing signs of exhaustion around 1950 with a bearish pinbar forming on Friday

Events in focus (AEDT):

• It is a public holiday in the US and Canada (Labor Day)
• 11:00 – Australian inflation (Westpac-Melbourne Institute)
• 11:30 – Australian job ads (ANZ), company profits, business inventories

ASX 200 at a glance:​

• The ASX 200 enjoyed its most bullish week in seven, with all 11 sectors rising (led by consumer discretionary and materials)
• Whilst Friday snapped a 4-day winning streak, SPI futures point to a positive open despite the soft lead from Wall Street
• Resistance levels include 7318-7320, 7330, 7362-7370
• Supper levels include 7250, 7260,7280

USD/JPY technical analysis (1-hour chart):
USD/JPY formed a Doji last week to show indecision around the cycle highs. And perhaps that can be expected, with the BOJ slowly beginning to make comments about the forex market. Yet a bullish outside / engulfing day formed on Friday to show strong demand around 144.50.

Whilst this paints an upside bias, bulls should be cautious around current levels given the levels of potential resistance nearby. Last week’s VPOC (volume point of control) resides around 146.59 – the level a soft US CPI print triggered an aggressive selloff and has acted as resistance since. Therefore, bulls may want to wait for a pullback before seeking longs at lower prices, such as the 145.55 area near the daily pivot point. If pries rally from the open, I’d prefer to wait to see if resistance holds and produces a pullback before reconsidering longs.

 

[FOREX.com]

Gold, EUR/AUD analysis: Asian Open – 05/09/2023​

Market Summary:​

• Australian gross company profits slumped by -13.1% in Q2, falling much faster than the -1.9% expected.
• That makes it the worst quarter on record looking at data going back to 1994, although the series was suspended in March 2020 “due to the impacts of Coronavirus (COVID-19)”.
• Outside of China’s equity markets, moves were limited on Monday due to the long Labor Day weekend
• China’s HSCE index led the way higher with a 3.5% rally, the Hang Seng rose 2.5%, the China A50 was up 1.7% and the CSI 300 posted a 1.5% gain
• The Euro area’s Sentix economic index was weaker than expected at -21.5 (-20 expected), with the current situation falling to its lowest level since November and expectations falling back to -21. “Germany is once again the weak man of Europe” according to the report and “in a recession”.
• ECB President Christine Lagarde said that it’s “critical for central banks to keep inflation expectations firmly anchored” amidst changes in energy, labour markets and ongoing geopolitical turmoil. And that means we can forget any dovish rhetoric any time soon, despite economic weakness across Europe.
• EUR/USD managed to lift itself up marginally from Friday’s low yet remains beneath 1.0800, and a downside break and move towards 1.0700 remains on the cards.
• Trading volumes are expected to pick up in the US session as traders return to their desks after the 3-day Labor Day weekend
• The Black Sea grain deal can be restored soon according to Turkey’s Erdogan after he met with Putin in Sochi, which could alleviate some concerns of another round of inflation

Events in focus (AEDT):​

• 09:00 – Australian composite, services PMIs (final)
• 09:30 – Japan’s household spending
• 10:30 – Japan’s composite, services PMIs (final)
• 11:30 – Australian current account, net exports contribution to GDP
• 11:45 – Caixin services PMI
• 14:30 – RBA cash rate decision

ASX 200 at a glance:​

• The ASX 200 formed a small bullish outside day on Monday, and closed at a 3-week high
• Yet volatility levels remain relatively low due to the 3-day weekend in the US
• SPI futures were lower overnight, which means the ASX cash market is likely to open back within the small range formed below the current cycle highs, last week
• Moves may also be limited today ahead of the RBA meeting

Gold technical analysis (daily chart):​

Spot gold prices rose over 3.6% since the false break below 1900. Futures prices held above this key level which provide some confidence spot gold could bottom out, but a weaker US dollar and cooling of yields have also helped – although gold has also managed to withstand strength of these markets in recent sessions.

Prices are now consolidating around 1940, having broken above the August VPOC (volume point of control). I suspect we could be in for some noise around current levels as trading volumes become replenished, but I would welcome any dips towards 1920 – 1925 for a potential long setup, with a view of it moving to the 1960 – 1970 region. Of course, for this to stand any chance of playing out we’d likely need to see US yields and the dollar soften. So it should be a case of monitoring all three markets to better time the entry, or simply step aside until the market tips its hand.

EUR/AUD technical analysis (daily chart):​

EUR/AUD remains within an established uptrend on the daily chart, although have retraced back from their highs in three waves. We do not know whether this marks the end of the retracement and momentum will now realign with the bullish trend and break to new highs, or the cross is still within a retracement. Either way, we could be approaching a leg higher.

A small doji formed at the 50% retracement level and 20-day EMA yesterday, although this is due to low-liquidity trade as opposed to a high-volume indecision day. Therefore, we may want to allow for some noise around current levels. But the bias remains bullish above 1.6600 / July high, so any low volatility dips towards this level could be of interest for a near-term bullish setup.

 

[FOREX.com]

AUD/USD plunges ahead of GDP, yields and USD surge: Asian Open – 06/09/2023​

Market Summary:​

Falling demand saw China’s services PMI slump to its slowest pace of growth in eight months according to the private Caixin survey. Shedding -2.3 points in March to fall to 51.8 from 54.1 previously, it’s the third decline in three months, and its second fastest fall since September 2022. New export business declined for the first time this year and new orders were below the YTD average.

With that said, businesses remained “optimistic around the 12-month outlook” according to the report (believe that if you will), hiring was up in August and cost pressures eased.

The below chart shows the Caixin services survey and the ‘official’ NBS version, both of which show a loss of momentum in China’s services sector which points to slower global growth, with sprinkles of disinflation. IN fact the general theme from yesterday’s PMIs was that they were revised lower across the globe. And that didn’t bode too well for the risk-sensitive Australian dollar, which was the weakest forex major on Tuesday.

• AUD/USD maintained its spot as the weakest forex major through the European and US sessions. It was already on the ropes following weak data PMI data form China and a narrower current account surplus and stole the thunder from the RBA’s meeting.
• The RBA held rates at 4.1% as widely anticipated, making for an underwhelming exit for Dr Philip Lowe (Michelle Bullock takes over from mid September). I suspect the RBA kept in the obligatory phrase “some further tightening of monetary policy may be required” in order to make sure inflation expectations remain well anchored. Even though most Australian economic data points and softer China data warrants a peak rate at 4.1%.
• An ECB survey of economic forecasts saw the growth for the next 12 months in Europe downgraded to -0.7% and inflation expectation for three years rise to 2.4%.
• FOMC member Christopher Waller thinks the Fed have room to hike
• US bond yields were already rising on Tuesday in Asia, and the yield curve from 6-months above extended those gains in the US session. All yields from the 2-year and above rose 8.5bp or higher (and all above their 12-nmonth average)
• The US dollar index rose to a 17-month high and the US dollar was predictably the strongest forex major.
• Despite this, oil prices still managed to rise for a fifth consecutive day with Saudia Arabia and Russia extending their oil-supply cuts, which saw the front month futures contract of WTI crude oil reach $88 before pulling back
• EUR/AUD reached my initial target of 1.69 thanks to the general weakness of the Australian dollar, and the break above last weeks high increases the odds that Monday was the end of a 3-wave retracement

Events in focus (AEDT):​

• 11:30 – Australian GDP: I think it is fair to say that China’s PMIs have stolen the thunder from Australia’s GDP report today, and it would take quite an upside surprise for AUD/USD to truly off the negative sentiment it sustained yesterday.
• 16:00 – German factory orders
• 17:30 – German construction PMI
• 18:30 – UK construction PMI
• 19:00 – European retail sales
• 23:45 – US services PMI (S&P Global)
• 00:00 – ISM services PMI
• 00:00 – BOC (Bank of Canada) interest rate announcement. If odds favoured the BOC to hold rates at 5% today, then the GDP contraction in Q2 announce on Friday surely closes the deal.

AUD/USD technical analysis (daily chart):​

The combination of rising US bond yields, yet more weak data from China and the reinforced belief that the RBA are done with hiking interest rates saw AU/USD touch a fresh YTD low during its worst session in nearly five weeks. And the 0.6365 – 0.6400 support zone which I assumed would do a batter job of holding is very close to snaping.

If there is any reason for bears to be wary today, it’s that AUD/USD only briefly traded beneath the August low by a few pips before reverting slightly higher – and that hardly makes it a compelling breakout. With that said, the trend is clearly bearish and momentum turned lower after AUD/USD repeatedly failed to close above the 20-day EMA last week. Form here, bears may want to fade into minor rallies with yesterday’s bearish range-expansion day or wait for a break to new lows.

Australia’s Q2 GDP is released in a couple of hours. Perhaps it can give the Aussie a little boost for bears to fade into.

USD/CNH technical analysis (daily chart):​

Last week I outlined the bullish bias for USD/CNH, noting its consolidation above the June highs with trend support or the 2019/2020 highs nearby for potential support. Whilst we saw a couple of intraday attempts to break beneath the June high, it held above them on a closing basis.

A day of bullish range expansion saw prices clear the retracement line and momentum has realigned with the daily bullish trend. A move to the August highs, 7.35 or even the 2022 high could be on the cards.

 

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Dow Jones, ASX 200 cling to support after strong ISM report: Asian Open 07/09/2023​

Two key service PMI reports for the US diverged, with the S&P global reporting a minor expansion whilst the ISM painted a more optimistic picture. The ISM services PMI grew at its fastest pace in six month, 13/18 industries reported an expansion and the headline print if 54.5 indicates an annualised GDP rate of 1.6%. The employment index rose to a 21-month high and new orders hit a 6-month high, although prices paid also increased for a second month. Comments from the survey respondents also seemed to back up a soft landing scenario for the US economy, and Fed fund futures continues to imply that the Fed are done with hiking.

• US bond yields rose for a third day and Wall Street indices pulled back further as the ISM report plays into the ‘higher for longer’ narrative for Fed rates
• The S&P 500 pulled back to 4450 during its worst day in eight, the Nasdaq also retreated but found support at the 24 August high
• USD/CNH rallied for a second day and saw a nice break out of the 1-hour bull flag to exceed the lower target of 7.32. Although reports that China’s state banks were actively selling USD/CNH saw the pair hand back around half of the day’s gains
• GBP/USD fell to a 3-month low and was the weakest forex major on Wednesday as BOE governor Bailey said that the central bank was “much nearer” the end of its tightening cycle. This followed on from last week’s comments from the BOE’s chief economists that rates are more likely to plateau
• WTI crude oil rose for a sixth day and held on to gains on a report that crude inventories had dropped for a fourth week
• The Bank of Canada held rates as anticipated but warned that they could hike again of inflationary pressures persist.
• ECB member Knot said that markets are underestimating the risks for further ECB hikes

Events in focus (AEDT):​

• 11:30 – Australian trade balance, building approvals
• 11:30 – BOJ board member Nakagawa speaks, so traders should at least be on guard for further comments on yen given officials such as currency diplomat Kanda are beginning to make more noise
• 13:00 – China’s trade balance data is not expected to wow us given the increasingly negative numbers it has produced in recent months. But the consensus is for those declines to slow, but if we are to see a surprise that is meaningful to markets it likely needs to be to the upside – not the downside.
• 16:00 – German industrial production
• 18:30 – ECB's Elderson Speaks
• 19:00 – European GDP, employment
• 22:30 – US jobless claims

ASX 200 at a glance:​

• The ASX 200 cash index suffered its worst day in seven and closed beneath its 4-day consolidation
• SPI futures fell -0.4% which points to a weak open for the cash index today
• The chart below shows that the ASX has effectively moved sideways this year, although its highs and lows have converged as volatility coils up
• This can be an indication that volatility will at some point explode, although it doesn’t provide a timely cue as to when
• However, momentum turned sharply lower yesterday and the ASX now clings to support around 7200 and the 200-day EMA – which is likely a pivotal area over the near-term
• Traders may want to keep an eye on global sentiment to get a feel for whether the ASX can scrape a bounce from the 7200, or seek to seek bearish bets with a break (or retest) beneath it

Dow Jones technical analysis (daily chart):​

The Dow Jones tracked the S&P 500 and Nasdaq 100 lower, and finds itself approaching interest levels of support. Recent price action has generated some noise around the October trendline, and whilst it saw a daily close beneath it on 24 August we have since seen the market open and close on the trendline on 25 August and 6 September, meaning the trendline still has some relevance.

The 100-day EMA provided support for yesterday’s low, and the 100 remains above the 200-day EMA, so perhaps it has some fight left in it yet. Although I’d prefer to see it break back above the December 2022 high before regaining confidence a swing low has formed with a break above 35,070 being required to confirm a chance in trend (back to the bullish side). A move below 34,000 assumes the next leg lower is underway, although I’d expect the 200-day EMA around 33,840 to at least provide some initial support.

 

[FOREX.com]

Gold stabilizes around support, USD/CNH hints at breakout: Asian Open 08/09/2023​

Market Summary:​

• US jobless claims data was lower than expected to show the labour market remains resilient, and plays into the ‘higher for longer’ theme for the Fed’s rates
• The US dollar index rose to a fresh 6-month high despite the cooling of US yields. Although if yields struggle break above key resistance levels and march higher, I suspect the dollar’s rally could also lose steam.
• The positive employment data from the US weighed further on Wall Street, although parred losses after its lower opening gap
• Apple shares weighed further on Wall Street on reports that China’s government applied further restrictions on iPhones. Wall Street had originally reported that China had followed Russia’s lead on banning the devices at central government offices, but the restrictions have now been applied to government-backed agencies and state companies.
• The Japanese yen was the strongest forex major on Thursday, which saw USD/JPY pull back to Tuesday’s inverted pinbar low as it struggles to make a break for 148 for a third day. It also helped EUR/JPY reach my downside target on the 1-hour chart.
• The yen was stronger following comments from another BOJ official, with Nakagawa warning that the central bank is scrutinizing markets and currency movements
• The Canadian dollar was the weakest forex major despite hawkish comments from BOC governor Macklem, who warned that interest rates may not be high enough to tame inflation.
• GBP was the second weakest forex major as traders digested recent comments from BOE officials which eludes to a less-hawkish central bank
• WTI snapped a six-day winning streak and formed a bearish inside day to show the rally losing steam around $88.

Events in focus (AEDT):​

• 09:05 – Fed’s Logan speaks
• 09:30 – Japan’s wages data
• 09:50 – Japan’s Q2 GDP (revised)
• 16:00 – German CPI
• 22:30 – Canadian employment data
• 23:00 – Fed Vice Chair for Supervision Barr Speaks

ASX 200 at a glance:​

• The ASX 200 suffered its worst day in 16 and closed firmly beneath its 200-day EMA and 200-day average
• Daily trading volumes were above their 20-day average for a second day to show sellers stepping in
• 7200 / the 200-day EMA is likely to be a key area of resistance today, if the market can find the strength to retrace from its 7-day lows
• Whilst Wall Street provides a weak lead today, SPI futures suggest signs of stability for the ASX at today’s open

Gold technical analysis (daily chart):​

We have seen gold prices pull back in line with my bias laid out earlier this week. Gold is showing signs of stability around the 200-day average and 200-day EMA, and a simple-weighed gold basket against FX majors remains near its cycle highs, to show the pullback on XAU/USD has mostly been due to the strength of the US dollar. With US yields showing signs of weakness around current cycle highs, perhaps the US dollar can low some steam and help gold print a minor bounce from current levels.

USD/CNH technical analysis (daily chart):​

USD/CNH has risen back to the August high in line with my bullish bias outlined in recent weeks. Price action has remained defiantly bullish despite news that China’s state banks have been actively USD/CNH. But we enter today’s session with a clear level around 7.35 to monitor to see if it can break higher and head for the 2022 high, or further headlines arrive to shake bulls out of their positions and pull back. Either way, it could be argued that Beijing are more than happy to have a weaker yuan to boost exports (even if they do say they want a domestic-demand driven economy). And theories aside, this trend is bullish and there are no immediate signs of a top – although bulls may want to trade with caution given the headline risk.

 

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EUR/USD fell for an eight consecutive week: Asian Open – 11/09/2023​

Market Summary:​

• China’s consumer prices rose 0.1% y/y and 0.3% m/m in August, after just one month of deflation
• Joe Biden’s visit to Vietnam resulted in deals on semiconductors and minerals, although he has stated that he is not trying to star a cold war with China
• A Bloomberg survey favours AUD/USD rising to 68c by March and closing the year at 66c, on the assumption that China will provide adequate stimulus to boost their economy
• BOJ governor Ueda told the newspaper Yomiuri on Saturday that the central bank will “patiently” maintain its ultra-loose policy but should have enough data by the end of the year to determine if they’ll keep negative interest rate
• Japan’s Prime Minister said he will compile a “drastic” economic package and reshuffle his cabinet on Wednesday

Events in focus (AEDT):​

• 16:00 – Japan’s machine tool orders, M2 money stock
• 18:00 – China’s loan growth, total social financing, M2 money stock
• 01:00 – Consumer inflation expectations

Technically Speaking:​

• USD/JPY printed a bearish engulfing day on Friday
• EUR/USD declined for an eight consecutive week, a bearish sequence which has not been seen since September 2014
• USD/CNH closed at its highest level in nine months, and is now just -0.2% from the November 2022 high
• USD/CHF rose for an eight week, which is its most bullish sequence since February 2015
• Gold prices are trying to build a base above the 200-day average and printed an inverted hammer on Friday, and with the 200-day EMA around 1911 and the 1900 handle nearby for potential support levels, the reward to risk ratio seem unfavourable for bears
• The China A50 printed a small bearish doji on Friday, and whilst it doesn’t look set for a strong rally it does look like the downside is losing steam above 12,400 (a level which has provided decent support since June)
• WTI crude oil produced a small bullish candle on Friday, to suggest we may see an upside break from its small consolidation on the daily charet and attempt a move to 90

ASX 200 at a glance:​

• The ASX 200 declined for a fourth day on Friday and erased most of the prior week’s gains
• However, prices are holding above the bullish trendline projected from the March 2020 low
• If the ASX 200 manages to rally today, 7200 makes a likely resistance area given the 200-day EMA sits just above it

EUR/USD technical analysis (daily chart):​

EUR/USD declined for an eight consecutive week, which is its most bearish sequence in nine years. Yet the daily chart shows signs of stability above 1.07 with an inverted pinbar, and as I’d prefer not to be shorting around cycle lows I’d like to see a bounce towards the 1.0766 resistance level before considering short positions. If a swing high materialises beneath or around 1.0766, the bearish target is then 1.0650 or around the May low.

 

[FOREX.com]

AUD/USD, ASX 200 lift themselves from key lows: Asian Open – 12/09/2023​

Market Summary:​

• China’s loan growth in August of ¥1360 billion was nearly four times as expected, which shows a welcomed pickup in demand and a refreshing headline from China. Mortgage loans rebounded which suggests recent rate cuts are doing their bit to support the sector. Totally social financing also beat expectations, although the usual calls for more policy support are in the air.
• USD/JPY suffered its worst day in eight weeks following comments from BOJ Governor Ueda over the weekend, which suggested the central bank is laying the groundwork to raise rates (even if it remains unlikely to be this year)
• The PBOC gave the yuan its strongest fix bias on record yesterday, which saw USD/CNH fall nearly 1% during its worst session in six months
• Tesla (TSLA) rose over 10% after JP Morgan estimated a $600 billion rise in its market value, with its Dojo supercomputer likely to help productivity into robotaxis and software services
• AI optimism helped the Nasdaq 100 lead Wall Street indices higher and notch up its third daily gain.
• The US dollar pulled back from its highs during its worst session in nine, which allowed AUD/USD to finally produce a decent bounce from its cycle lows
• AUD/USD held up surprisingly well last week in the fact of stronger data from the US and weak data from China, and if we’re to be presented with a soft US inflation report on Wednesday then it could provide the likes of AUD/USD and EUR/USD fuel for a much larger bounce
• As noted in yesterday’s report, the US dollar has just notched up eight consecutive bullish weeks, which suggests we’re at or near a minor inflection point for the dollar, statistically speaking

Events in focus (AEDT):​

• 10:30 – Australian consumer sentiment (Westpac)
• 11:30 – Australian business sentiment (NAB)
• 16:00 – UK employment and wages
• 17:00 – Spanish CPI
• 19:00 – ZEW economic sentiment
• 21:00 – UK GDP estimate
• 21:00 – OPEC monthly report

ASX 200 at a glance:​

• The ASX 200 snapped a 4-day losing stream on Monday and produced a small bullish engulfing candle
• RSI (2) was oversold on Friday and prices have turned higher from the March 2020 trendline, to suggest a swing low has formed
• However, 7200 and the 200-day EMA are nearby, to bulls may either want to seek pullbacks within Monday’s range to increase the potential reward to risk, or wait for a break above the 200-day EMA

AUD/USD technical analysis (1-hour chart):​

The combination of firmer loan data from China and a softer US dollar helped AUD/USD notch up its best in six weeks on Monday. Whilst prices chopped around the March 2020 trendline and effectively invalidated it, ‘the battler’ has managed to climb back above 64c. A bullish divergence has also formed with RSI (2), so perhaps the market is trying to turn the ship around. Like the ASX 200, we’d prefer to seek dips within Monday’s range to increase the potential reward to risk ratio, and use the break of the cycle lows to invalidates the near-term bullish bias. 0.6500 seems a sensible target, as it sits just beneath the 30 August high and 50-day EMA. And it is likely down to how hot (or not) US inflation data is on Wednesday as to which direction AUD/USD trades heading into the weekend.

 

[FOREX.com]

Gold probes the 200-day EMA ahead of US CPI: Asian Open – 13/09/2023​

Market Summary:​

• Oracle (ORCL) fell over -13% during its worst day’s trade in 21 years after it reported slower growth of its cloud business
• Apple’s stock price (AAPL) fell as much as -2.5% during intraday trade After unveiling the iPhone 15 and other products such as the first ‘carbon neutral’ Apple Watch Series 9
• Oracle was the worst performer on the S&P 500 and another underwhelming product launch from Apple saw sentiment across Wall Street dented, with tech stocks leading the way lower
• UK wages were stronger than expected, yet weak employment figures fanned fears of stagflation and saw money markets trim expectations for further hikes slightly
• The British pound failed to hold on to initial gains and teased with a break beneath the 200-day EMA, with a stronger US dollar on the even of a key IS inflation report also playing its part
• Oil price continued to rise after OPEC maintained its bullish demand forecast for 2023 and 2024 and the Energy Information Administration (EIA) said its expected global inventories to decline by around 50% this year
• WTI crude oil broke out of its 5-day consolidation to the upside, reached a 10-month high and traders ~$1.20 from $90
• 95% of economists polled by Reuters now favour the Fed holding interest rates at next week’s FOMC meeting
• Slightly mixed numbers from the ZEW economic sentiment survey saw Germany’s current conditions fall to a 37-month low yet expectations tick up to a 2-month high
• Australian consumer sentiment continued to fall according Westpac Bank, who noted that the “cost of living and inflation remain key drags” on confidence and that households remain concerned about their finances despite being “less fearful” of rate hikes

Events in focus (AEDT):​

• 09:50 – Japan’s PI, BSI large manufacturing conditions, Reuters Tankan survey
• 16:00 – UK GDP, construction/manufacturing/industrial output, index of services, trade balance
• 22:30 – US inflation
• 23:15 – BOE deputy governor Mann speaks

ASX 200 at a glance:​

• The ASX 200 pulled back into Monday’s range and traded higher (in line with yesterday’s bias) before finding resistance around the 200-day EMA
• A weak lead from Wall Street and softer SPI futures reiterate the importance of resistance around 7200
• Given the US inflation report is looming, we have a flat bias today
• Going forward, we need to see a decent break above 7200 / 200-day EMA before we can get more excited a the potential that Monday was indeed a key swing low
• A break beneath Monday’s low also breaks the March 2020 trendline and brings 7100 into focus.

Gold technical analysis (daily chart chart):​

Momentum for gold prices turned lower and saw spot prices touch a 12-day low, before the 200-day EMA came to the rescue. With all eyes on today’s CPI report it remains firmly in the hands of the inflation report as to which side gold may finish on today. But with odds of choppy price action leading into the event likely high, we’d prefer to seek opportunities on lower timeframes.

Gold technical analysis (1-hour chart chart):​

Reward to risk can be a useful filter to decide if a trader wants to partake in any market. Taking the gold 1-hour chart as an example, it may not seem favourable for bulls or bears around current levels on this timeframe gives prices are midway between key support (200-day EMA) and the resistance zone. However, should prices drift into the resistance zone and form a reversal bar (or series of bearish reversal bars) around the resistance area then, perhaps we could consider a cheeky short towards the 200-day EMA. Or if prices manage to break above the resistance zone, and show evidence of a swing low around it, perhaps a long could be considered. Otherwise, we’d prefer to remain flat.

 

[FOREX.com]

USD/JPY rises into US CPI, GBP/AUD holds key support: European open 13/09/2023​

Asian Indices:​

• Australia's ASX 200 index fell by -60.9 points (-0.85%) and currently trades at 7,146.00
• Japan's Nikkei 225 index has fallen by -137.62 points (-0.42%) and currently trades at 32,638.75
• Hong Kong's Hang Seng index has fallen by -37.79 points (-0.21%) and currently trades at 17,988.10
• China's A50 Index has fallen by -85.42 points (-0.68%) and currently trades at 12,525.80

UK and Europe:​

• UK's FTSE 100 futures are currently down -38 points (-0.5%), the cash market is currently estimated to open at 7,489.53
• Euro STOXX 50 futures are currently down -28 points (-0.66%), the cash market is currently estimated to open at 4,214.27
• Germany's DAX futures are currently down -107 points (-0.68%), the cash market is currently estimated to open at 15,608.53

US Futures:​

• DJI futures are currently down -67 points (-0.19%)
• S&P 500 futures are currently down -7.75 points (-0.17%)
• Nasdaq 100 futures are currently down -19 points (-0.12%)

US inflation data is here once again, although CPI is expected to rise by 0.6% m/m, which would be its highest monthly print since June 2022 and twice its long-term average of 2.9%. CPI is also expected to rise to 3.6% y/y, which firmly places the theme of disinflation has made its way into the rear-view mirror.

And that means inflation prints going forward really serve to either reignite fears of another Fed hike, or simply elongate the time rates could remain ‘higher for longer’ as Jerome Powell suggested at the Jackson Hole symposium.

A significant majority pf economists expect the Fed to hold interest rates in September, which aligns them with money markets who have been pricing in a hold for weeks. However, if CPI rises 0.6% m/m or higher, markets could quickly shift their probabilities towards a hike.

Rising commodity prices are beginning to work their way back up the supply chain. The Baltic dry index (which measures the cost of shipping goods) is not expected to get much cheaper, leaving it vulnerable to upside surprises. Import costs and PMI "prices paid" are also ticking higher, which increases the risk of another round of inflation. China's CPI only managed one deflationary print before expanding again, which further supports this view.

With traders expecting a hot inflation report, the market response may be muted if the report is not as hot as feared. However, it is difficult to imagine an inflation report that would be considered "dovish" enough to trigger expectations of a Fed rate cut. This is because such a report would need to show a surprise drop in core CPI and a less-than-expected rise in overall CPI. And with inflationary pressures building, this seems unlikely.

Events in focus (GMT+1):​

• 07:00 – UK GDP, construction/manufacturing/industrial output, index of services, trade balance
• 13:30 – US inflation
• 14:15 – BOE deputy governor Mann speaks

USD/JPY technical analysis (1-hour chart):​

A nice clean trend has developed on the USD/JPY 1-hour chart, which saw the pair break out of a bull flag early in the Asian session. It is seemingly trying to close the large weekend opening gap which was created following relatively hawkish comments from Ueda on Saturday. Although momentum has since receded and resistance met around the daily R1.

1-day implied volatility suggests a relatively large range where USD/JPY could trade following CPI, so volatility is clearly expected. But if the US dollar maintains strength in the first half of the European session, perhaps we can see it break higher as it tries to close that gap ahead of CPI/ At which point it may be vulnerable to whipsaws of volatility. A hot report could see markets either reprice the potential for a Fed hike and support the US dollar accordingly. Yet if prices are rising into the report and CPI comes in softer than expected, bears may be tempted to pounce once the initial spikey moves are out of the way.

GBP/AUD technical analysis (daily chart):​

There comes a point where so many technical levels come together, fundamentals take a bit of a step back. We may be there with GBP/AUD. A doji formed on Monday at a cluster of support levels including the February trendline, 50-day EMA, historical high, 50% retracement level and 61.8% Fibonacci expansion level.

 

[FOREX.com]

AUD/USD holds 64c, bonds retrace post CPI, jobs up next: Asian Open 14/09/2023​

Gasoline prices pumped up US inflation to 3.7% y/y, above the 3.6% expected and the monthly read matched the relatively high estimate of 0.6% m/m. For context, that’s twice the 12-month average of 0.3% and now clearly trending the wrong way, which keeps the potential for another Fed hike in their November of December meeting alive. Perhaps more worryingly is that core CPI rose 0.3%, above the 0.2% estimated and remains more than twice the Fed’s target at 4.3% y/y.

If the Cleveland Fed’s Nowcast model is correct, CPI should pull back to 3.6% m/m next month, although that is still above its long-term average of 2.9% m/m.

The Fed are still expected to hold rates steady next week, but they’re applying around 40% chance of a hike at their November or December meetings. But a lot can change in the coming weeks with other key data points such as PCE inflation to absorb.

• FX markets were generally within their average daily ranges. And with the likes of gold, DXY etc essentially overlapping Tuesday's range it suggests much of the gloom of higher inflation was priced in.
• Gold has pulled back to a 3-week low and closed beneath the 200-day EMA. However, the daily range was not particularly large for a ‘bearish’ day I would not be too surprised to see at least a bit of a bounce, given spot prices are holding above $1900.
• WTI crude oil formed a small bearish hammer just beneath the $90 target after a surprise rise in stockpiles.
• Wall Street took the inflation report within stride, with the S&P 500 and Nasdaq posting minor gains

Events in focus (AEDT):​

The Australian labour force report more or less confirmed that the RBA had reached their terminal rate at 4.1%, with a trifecta of bad news; higher unemployment, lower participation rate and negative job growth. Today we get to find out if that was just a blip in the trend, as a strong report could bring the case of a peak rate into slight doubt (and perhaps provide the Aussie with a slight bounce above a key support zone). Of course, if the cracks continue to widen then it further builds the case of the RBA’s relatively low peak rate. But whether it can see the Aussie break beneath the September lows, given its resilience to bad data of late, remains to be seen.

• 11:00 – Australian inflation expectations (Westpac-Melbourne Institute)
• 11:30 – Australian employment report
• 14:30 – Japan’s industrial production
• 22:15 – ECB monetary policy statement, interest rate decision
• 22:30 – US jobless claims data, producer prices, retail sales
• 22:45 – ECB press conference
• 00:15 – ECB President Lagarde speaks

US 2-year bond yield technical analysis (daily chart):​

I’ve been keeping a close eye on yields given the 2-year’s tendency to pull back around the 5% level. Yesterday we saw US bond yields between the 2 – 30-year pull back after the US inflation report, presumably as the hotter print is deemed as more recessionary than a ‘soft landing’. Still, if the 2-year pulls back, the US dollar may continue to lose some of its steam. And as a gentle reminder, it has already rallied for 8 weeks so we’re probably closer to an inflection point than some may think. And if the US dollar pulls back, that could help the Australian dollar bounce from the key support levels it has so far resisted the urge to break.

AUD/USD technical analysis (daily chart):​

AUD/USD has continued to defy gravity and shake out bears with each false break below 64c. What it is missing is a bullish catalyst to really help it bounce. Whether today’s employment report benefits the Australian dollar remains to be seen, but it might take a particularly weak et of figures to drive this below 64c given its resilience so far. And as we have seen a bullish hammer on the daily chart with a higher low, and low volatility pullbacks within yesterday’s lower wick might be tempting for dip buyers. The near-term bullish bias remains intact whilst prices remain above the cycle lows, with targets simply at the 0.6450 and 0.6500 levels.