FOMC talk:

• Welcome to Fed day
• FOMC Preview – Watch out for these surprises
• Hawkish Fed or not? That will be the question

Headlines:

• Japan reportedly mulls tax breaks to boost yen repatriation
• UK April Nationwide house prices -0.4% vs +0.1% m/m expected
• US MBA mortgage applications w.e. 26 April -2.3% vs -2.7% prior

Markets:

• AUD leads, CHF lags on the day
• S&P 500 futures down 0.4%
• US 10-year yields down 0.5 bps to 4.682%
• Gold up 0.3% to $2,294.35
• WTI crude down 1.8% to $80.47
• Bitcoin down 4.7% to $57,792

It was a quiet session for the most part with European markets closed in observance of Labour Day.

Major currencies aren’t up to much with the dollar keeping steadier mostly, holding in smaller ranges on the day. All eyes are on the coming US data as well as the FOMC meeting later. The USD/JPY focus continues with the pair keeping just under the 158.00 mark throughout the session.

Meanwhile, equities remain fairly nervous after falling at the end of April trading yesterday. US futures are down with tech shares leading the declines again.

In other markets, gold is finding a temporary base just under $2,300 after yesterday’s plunge while oil is marked down to its lowest since March at $80.47 as geopolitical tensions fade. Bitcoin is one to watch as well as it comes under pressure amid a break below $60,000 on the day.

This article was written by Justin Low at www.forexlive.com.

• Prior -2.7%
• Market index 192.1 vs 196.7 prior
• Purchase index 141.7 vs 144.2 prior
• Refinance index 456.9 vs 472.7 prior
• 30-year mortgage rate 7.29% vs 7.24% prior

Mortgage applications continued to decline in the past week, with both purchases and refinancing activity also falling. It comes as the average rate of the most popular US home loan rises further by 5 bps to 7.29% – its highest since the end of November last year.

This article was written by Justin Low at www.forexlive.com.

The Israel retaliation really marked the top for Gold as the geopolitical risk faded and the market caught up with the rise in US real yields. The trend might be reversing and some key technical breaks are adding up to the chances of seeing a big correction to the downside. Looking ahead, the bears will need to see the strength in the US data continue as a quick deterioration will likely invalidate the bearish case.

Gold Technical Analysis – Daily Timeframe

On the daily chart, we can see that Gold fell below a key trendline recently, and after some consolidation, continued lower led by the market’s positioning into a hawkish Fed and the hot US Q1 ECI report yesterday. All else being equal, the natural target should stand around the next trendline near the previous all-time high at 2145 which can be reached if the US data continues to run hot.

Gold Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the price broke the bearish flag to the downside increasing the bearish momentum as the sellers piled in more aggressively. Technically, the measured target stands around the 2220 level. From a risk management perspective, the sellers will have a better risk to reward setup around the 2320 level as we will find the downward trendline acting as resistance, although we will liekly need some weak US data releases or a dovish Fed to get there. A break above the trendline should see the buyers stepping in with more conviction while a break above the 2352 high will invalidate the bearish setup.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The European Session is dull today as we have the Labour Day’s Holiday. Things will get much more interesting in the US Session as we get some key US economic data and then we finish the day with the FOMC rate decision. Let’s break down the upcoming data releases and see what could be the likely market impact.

• US ADP 12:15 GMT (08:15 ET)

The US ADP is expected at 175K vs. 184K prior. Last month, the data surprised to the upside with the biggest increase in hiring in eight months. The worrying part was the change in annual pay which showed an unchanged 5.1% rate for job stayers and a big jump to 10.1% vs. 7.6% prior for job changers. The problem here is that a resilient labour market with rising wage growth could not only stop the disinflationary trend but even reverse it. This is something that the Fed will want to avoid. Therefore, watch out for the pay gains data today as an upside surprise could fuel another hawkish reaction from the market with more buying momentum for the USD across the board and more downside for bonds, stocks and gold.

• US ISM Manufacturing PMI 14:00 GMT (10:00 ET)

The US ISM Manufacturing PMI is expected
to tick lower to 50.1 vs. 50.3 prior. Last
month, the index jumped into expansion for
the first time after 16 consecutive months in contraction with generally upbeat
commentary. The latest S&P
Global US Manufacturing PMI returned back
into contraction after the Q1 2024 expansion. The commentary this time has
been pretty bleak with even mentions of strong layoff activity, although there
was also good news on the inflation front. The ISM report is generally
considered more important by the market, so it will be used to confirm or
deny the S&P Global result.

If the data surprises to the upside, it will likely trigger a hawkish reaction as the market will brush off completely some latent worries from the S&P Global survey and lead to more bids for the USD and offers for bonds, stocks and gold. Conversely, if the data surprises to the downside, the market might reverse some of the moves seen in the last few days.

• US Job Openings 14:00 GMT (10:00 ET)

The US Job Openings is expected at 8.680M
vs. 8.756M prior. This will be the first major US labour market report of
the week and, although it’s old (March data), it’s generally a market
moving release. The last
report we got a slight beat with negative
revisions to the prior readings highlighting a resilient although normalising
labour market. The market will also focus on the hiring and quit rates as they
both fell below the pre-pandemic trend lately. This report will be overshadowed by the ISM Manufacturing PMI but watch out for big surprises as they could exacerbate or even reverse the moves from the ISM release.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Investors are feeling nervous awaiting the Fed later in the day. But at the same time, don’t discount the impact from the US data later. There is the ADP employment change, ISM manufacturing PMI, and JOLTS job openings before the FOMC meeting comes in. Those will also play a role in driving market sentiment in the first half of US trading at least.

But if we are to see a more hawkish Fed take later in the day, risk trades could really be in for a world of hurt. For the S&P 500, a test of the 100-day moving average (red line) will be the first key level to watch in that scenario:

This article was written by Justin Low at www.forexlive.com.