• UK August CPI +6.7% vs +7.0% y/y expected
• A one and done case for the BOE now?
• BOE rate hike odds for this week now a near coin flip
• BOE likely to keep bank rate unchanged tomorrow – Goldman Sachs
• ECB’s de Cos: Risks to inflation in the euro area are now balanced
• Talk of $100 too hot to handle for oil bulls?
• Japan former top currency diplomat warns of intervention if the yen falls further
• Switzerland ups economic growth forecast for the year but revises lower 2024 projection
• US MBA mortgage applications w.e. 15 September +5.4% vs -0.8% prior

Markets:

• NZD leads, GBP lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields down 2.2 bps to 4.344%
• Gold flat at $1,930.84
• WTI crude down 0.6% to $89.93
• Bitcoin down 0.3% to $27,089

With the Fed in focus, markets were prepared a slower session but the UK inflation surprise to the downside did help to provide some action at least.

A softer set of inflation numbers saw the pound fall as traders firmed up their conviction for just one more rate hike to come by the BOE during this cycle. The notable drop in price pressures are also feeding into some calls that the BOE may not even raise interest rates this week.

GBP/USD fell from 1.2385 to 1.2335 and the broader market reaction also saw equities move up a little while bond yields fell in the aftermath. The moves in turn are weighing on the dollar slightly and that helped to see GBP/USD recover back to 1.2365 currently.

Meanwhile, EUR/USD is up 0.2% to near 1.0700 with EUR/GBP up 0.4% to 0.8650 levels – its highest in nearly six weeks. The commodity currencies are the ones benefiting the most with AUD/USD up 0.5% to 0.6485 while NZD/USD is also up 0.5% to 0.5965 at the moment.

In the commodities space, gold is flattish awaiting the Fed while oil prices saw a dip in Asia trading below $90 and is sticking thereabouts for the time being.

It’s now over to the FOMC meeting decision to jolt markets back awake for the remainder of the week.

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

If you only have one chart that you can watch in trying to make sense of the FOMC meeting decision later today, this would be my pick.

Despite the Fed saying that they are in pause mode while looking to hold rates higher for longer, Treasury yields have been on the rise and even briefly hitting its highest levels since 2007 earlier this week in the case of 10-year yields.

This arguably remains the most important spot to watch in trying to gauge how the Fed decision impacts broader market sentiment, so let’s discuss the possibilities and potential.

The Fed decision in itself is a given, in that they will not be raising rates today. But instead, the most important things will continue to be the language and communication – which I would expect to be similar to the last meeting.

Policymakers are likely to allude to being data dependent and with the US economy staying rather resilient so far, there’s no reason to mess with things for now. If it ain’t broke, don’t try to fix it.

Meanwhile, the next thing to watch today will be the economic projections and dot plots. The latter will now be of less importance in my view but the former will be something to be mindful of.

If the Fed continues to see the economy as staying more resilient and the data supports that view, that is good reason to keep expecting yields to stay higher for longer alongside interest rates. And in turn, that will keep the dollar underpinned in the big picture.

And if we do get a breakout higher in 10-year yields above 4.36%, there might be more pain in markets especially for equities especially with higher oil prices also a concerning factor.

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

• Prior -0.8%
• Market index 192.1 vs 182.2 prior
• Purchase index 147.0 vs 143.7 prior
• Refinance index 415.4 vs 367.0 prior
• 30-year mortgage rate 7.31% vs 7.27% prior

Despite a further rise in the average rate of the most popular US home loan, mortgage applications rose in the past week – largely helped out by a big jump in refinancing activity. Purchases were also higher but very slightly, though the overall picture remains rather subdued against the backdrop of higher interest rates for now.

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

Bitcoin might be stuck in a major range between the
25231 support and the 31044 resistance as the uncertainty around the future
outlook is now at its highest levels. On one hand, we have some resilience in
the economies with the inflation rates slowly normalising, but on the other
hand, we have signs of weakening growth and the central banks committed to keep
monetary conditions tight for a long time. The technicals should help with the
risk management until we start to get a clearer direction.

Bitcoin Technical Analysis
– Daily Timeframe

On the daily chart, we can see that Bitcoin bounced
again on the key 25231 support and
rallied into the downward trendline where it
found a strong resistance. This is where we can expect the sellers to pile in
with a defined risk above the trendline to target a break below the key
support. The buyers, on the other hand, will want to see the price breaking
above the trendline to target the highs again.

Bitcoin Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD while it
approached the trendline. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we should see a pullback into
the black trendline where the buyers will pile in with a defined risk below the
trendline to target a break above the major downward trendline and new higher
highs. The sellers, on the other hand, will want to see the price breaking
below the trendline to confirm the reversal and position for a selloff into the
key support.

Bitcoin Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see more
closely the support zone around the black trendline and the 26800 level.
There’s nothing to do at the moment other than waiting for a pullback or a
breakout.

Upcoming Events

This week has a few important economic releases that can
have an impact on Bitcoin. Today, the Fed is expected to keep rates unchanged
with the market focusing more on the Dot Plot and Powell’s press conference,
where he’s likely to reaffirm their data dependency. Tomorrow, we will get the
latest US Jobless Claims report and much worse than expected data should weigh
on Bitcoin due to recessionary fears while much better-than-expected figures
are likely to weigh on the cryptocurrency due to risks of more tightening from
the Fed. Finally on Friday we conclude the week with the US PMIs data with the
same playbook as for the Jobless Claims, that is, weak data is likely to send
the markets into risk off and lead to weakness in Bitcoin, while strong data
should weigh due to a more hawkish repricing in rates.

This article was written by FL Contributors at www.forexlive.com.

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US CPI last
  week came in line with expectations, so the market’s pricing remained roughly
  the same.
• The labour market
  displayed signs of softening although it remains fairly solid.
• The other important economic data like the ISM
  Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
• The Fed members are leaning towards a pause in
  September and the next decision will still be dictated by the economic data.
• The market doesn’t expect the Fed to hike at the
  September meeting, but there’s now basically a 50/50 chance of a hike in
  November.

Japan:

• The BoJ kept everything unchanged as expected at the last meeting but
  tweaked the YCC policy keeping the target band unchanged but giving more
  flexibility with a hard cap at 1.00%.
• The Japanese CPI data surprised to the upside
  recently with the core-core reading reaching again the previous high.
• The Unemployment Rate surprisingly increased recently,
  although it remains near cycle lows.
• BoJ Governor Ueda last week said that his focus is on
  a quiet exit from the monetary easing and added that the BoJ should have enough
  data by year end to decide how to proceed.
• The Japanese wage data last week showed a slowing in wage
  growth, and this is something the BoJ focuses on particularly.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that the USDJPY pair looks to be trading within a rising channel with the upper
bound and the 150.00 handle being the target on the upside. The recent bounce
on the black trendline and the
red 21 moving average led to a
rally into the 147.85 resistance where
the price started to struggle. A break above the resistance should lead to a
rally into the 150.00 handle, while a break below the trendline might cause a
selloff into the 145.00 support.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price
action around the resistance has created an ascending triangle.
Generally, when the price breaks out of such patterns, we can see a strong and
sustained move following on. So, a break to the upside should see more buyers
piling in and target the 150.00 resistance, while a break lower is likely to
see more sellers stepping in and target the 145.00 support.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is testing the trendline again which is where we can expect the buyers to
pile in as well with a defined risk below the trendline to target a break to
the upside.

Upcoming Events

This week has just a couple of important economic
releases with the FOMC and BoJ rate decisions being the highlight. Tomorrow,
the Fed is expected to keep rates unchanged, and the market will focus more on
the Dot Plot and Fed Chair Powell’s press conference, although he’s likely to
repeat that they remain data dependent. On Thursday, we will get the US Jobless
Claims data. On Friday, we will see the latest Japan CPI report and then move
on to the BoJ policy decision where the central bank is expected to keep everything
unchanged. Later in the day we conclude the week with the US PMIs data.

This article was written by FL Contributors at www.forexlive.com.

• The waiting game continues…
• OECD raises global growth outlook for the year
• ECB are done hiking, rate cuts seen in Q3 next year – poll
• ECB’s Villeroy: We will maintain interest rates at 4% for a sufficiently long time
• Eurozone July current account balance €20.9 billion vs €35.8 billion prior
• Eurozone August final CPI +5.2% vs +5.3% y/y prelim
• Switzerland August trade balance CHF 4.05 billion vs CHF 3.13 billion prior

Markets:

• CAD leads, JPY lags on the day
• European equities mixed; S&P 500 futures up 0.1%
• US 10-year yields flat at 4.318%
• Gold up 0.1% to $1,935.33
• WTI crude up 0.9% to $92.34
• Bitcoin up 1.3% to $27,131

It was a relatively quiet session as markets continue the waiting game ahead of the main events later this week.

The dollar is mostly little changed but traded lower against the commodity currencies, with USD/CAD in particular being down 0.4% to 1.3427 currently. That comes as oil prices continue to surge higher in an otherwise slower start to the week for broader markets. Brent crude briefly clipped above $95 but is still sitting up 0.5% to $94.87 at the moment.

Meanwhile, outside of some light gains in the aussie and kiwi, the rest of the major currencies are more stuck in narrower ranges so far on the day.

In the equities space, things are slightly choppier but there remains little interest after the tepid moves in Wall Street yesterday. Investors seem settled to wait on the Fed tomorrow and the same can be said for Treasuries.

And so, the wait continues..

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

US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US CPI last
  week came in line with expectations, so the market’s pricing remained roughly
  the same.
• The labour market
  displayed signs of softening although it remains fairly solid.
• The other important economic data like the ISM
  Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
• The Fed members are leaning towards a pause in
  September and the next decision will still be dictated by the economic data.
• The market doesn’t expect the Fed to hike at the
  September meeting, but there’s now basically a 50/50 chance of a hike in
  November.

New Zealand:

• The RBNZ kept its official cash rate unchanged at the
  last meeting while stating that it will remain at the restrictive level for the
  foreseeable future to ensure that inflation comes down back to target.
• The recent New Zealand inflation and employment data surprised to the upside but
  the PMIs continue to slide further into contraction.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely.
• The recent New Zealand Retail Sales beat expectations although the data
  remains deeply negative.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting.

NZDUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the NZDUSD pair
is currently pulling back after a huge selloff from the key 0.6389 resistance. The divergence with the
MACD was a
signal that the bearish momentum was waning, and a correction was due. The red
21 moving average is
acting as a dynamic resistance at the moment, but a break above it should lead
to a rally into the 0.60 handle.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that on this
timeframe we have an uptrend as the price is printing higher highs and higher
lows. Although the price action remains messy, we have clear and defined
levels. In fact, a break above the 0.5933 resistance should lead to rally into the
next resistance around the 0.60 handle. That’s where we should find strong
sellers piling in with a defined risk above the level to target new lows.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see the range
between the 0.5895 support and the 0.5933 resistance. The price has been stuck
in this range for over a week and at some point we should see a breakout.

Upcoming Events

This week has just a couple of important economic
releases with the FOMC rate decision tomorrow being the highlight. The Fed is
expected to keep rates unchanged, and the market will focus more on the Dot
Plot and Fed Chair Powell’s press conference, although he’s likely to repeat
that they remain data dependent. Moving on to Thursday, we will see another US
Jobless Claims report, while on Friday we conclude the week with the US PMIs
data.

This article was written by FL Contributors at www.forexlive.com.

All 70 economists polled anticipate that the ECB is to hold the deposit rate unchanged at 4.00% until year-end. Meanwhile, 41 of 70 economists (~59%) see the ECB waiting until at least Q3 next year i.e. July at the earliest before taking the step to cut rates. Here are some of the comments from the poll:

„It will probably be some time before the ECB will describe it as such, but 4.00% is likely t o be the terminal rate, in our view. Lagarde apparently did not want to say rates have peaked… However, the hurdle to a further hike does feel relatively high.“ – Deutsche Bank

„Another rate hike is not our base case, but there is a fair risk a hike could materialise if wage growth and inflation remain strong through December.“ – Rabobank

In terms of the balance of risks for rate cuts, 23 of 38 economists replying to the question say that the risk is that it might be earlier than they forecasted.

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

With
the global economy weakening, you may wonder what will impact capital markets
in the second half of 2023. Will the U.S. Federal Reserve stop raising rates?
What factors will influence dollar and gold prices? What will be the key themes
of the year ahead? Several vital stories in the remainder of 2023 are worth
considering when investing in global markets.

Fed is expected to slow or pause rate
hikes in the remaining 2023

The
Fed has raised interest rates eleven times since March 2022 to control runaway
inflation, raising its key lending rate in July to the highest level in 22
years. This caused a decline in the U.S. stock market, a rise in Treasury
yields, a banking crisis, and a strengthening of the U.S. dollar.

In
the first half of September, U.S. Federal Reserve officials said the U.S.
central bank can afford to sit tight for now but do not rule out the
possibility of another rate hike to fight inflation. According to the CME FedWatch Tool, the probability of a pause at the upcoming FOMC
meetings is high, with a 93% probability of holding at the end of the September
2023 meeting and a 58% probability of pause at the end of the December 2023
FOMC meeting.

Investors
should keep in mind that business cycles usually outpace economic cycles.
Therefore, if a pause is announced at the September FOMC meeting on 19 – 20
September, the U.S. dollar will likely weaken, and stock market prices will
rise.

Early onset of U.S. presidential
election mania

The
next 60th presidential election is scheduled for 5 November 2024. On 15
November 2022, Donald Trump announced the launch of his campaign. On 25 April
2023, incumbent U.S. President Joe Biden announced his candidacy.

Suppose
we superficially characterise the two sides of the upcoming election. In that
case, it comes out that Donald Trump and the Republicans are committed to
traditional values, including being in favour of lowering the tax burden and
doing away with non-performing subsidies. At the same time, Joe Biden and the
Democrats welcome immigration, equality, and increasing the tax burden on the
rich.

Both
candidates have already launched their campaigns, meaning the number of
political commentaries will increase even before the primary elections in early
2024. In the current situation, the Republicans‘ preponderance of votes is
perceived as a positive signal for the markets—stock market growth. At the same
time, the preponderance of votes favouring the Democrats is perceived as a
negative signal—strengthening of the U.S. dollar. Investors should listen to
the early signs coming from the U.S. media regarding the presidential election
and adjust their investment strategy depending on the emerging early signals.

India’s wedding season could accelerate
the gold price

Seasonality
strongly influences gold performance throughout the year, particularly with
major consumers in India and China who use it for cultural and religious
purposes. The period from November to February is a particularly favourable
time for the precious metal, which falls in the middle of the wedding season in
India. More than half of all gold demand in India is for weddings, which
require a massive amount of jewellery, and gold is often seen as a sign of
wealth and status among Indians.

With
the U.S. Federal Reserve signalling a pause in key rate hikes, the effect of
the wedding season could be synergistic—rising demand for gold against a weak
dollar will boost gold prices from November 2023 onwards.

Conclusion

We
live in an unstable economic and political environment of challenge and
turmoil. However, amidst the challenges, there are opportunities for those
investors who keep their finger on the pulse of the action. From September 2023
onwards, there will be many opportunities, starting with the U.S. Federal
Reserve’s interest rate decision and the wedding season in India. If you want
to know more, read the rest of the article in part two.

About OctaFX

OctaFX is an international broker that has been providing
online trading services worldwide since 2011. It offers commission-free access
to financial markets and various services already utilised by clients from 180
countries with more than 42 million trading accounts. Free educational
webinars, articles, and analytical tools they provide help clients reach their
investment goals.

The
company is involved in a comprehensive network of charitable and humanitarian
initiatives, including the improvement of educational infrastructure and
short-notice relief projects supporting local communities.

OctaFX
has also won more than 60 awards since its foundation, including the ‘Best
Online Broker Global 2022’ award from World Business Outlook and the ‘Best
Global Broker Asia 2022’ award from International Business Magazine.

This article was written by FL Contributors at www.forexlive.com.

• The central bank bonanza heats up this week
• It’s not just major central banks that will be in focus this week
• The bond market is in the spotlight
• ECB’s Kazimir says cannot rule out further rate hikes
• Goldman Sachs lowers BOE terminal rate forecast to 5.50%
• China says yuan will show ‚positive changes‘ against dollar after ‚bottoming out‘
• China central bank and forex regulator meets with foreign financial institutions
• SNB total sight deposits w.e. 15 September CHF 473.0 bn vs CHF 468.9 bn prior

Markets:

• USD little changed
• European equities lower; S&P 500 futures down 0.2%
• US 10-year yields up 1.6 bps to 4.338%
• Gold up 0.1% to $1,926.46
• WTI crude up 0.6% to $91.30
• Bitcoin up 2.9% to $27,194

It was a quiet session overall as markets look to get settled into the new week, playing a bit more of a waiting game ahead of key central bank policy decisions still to come.

There will also be a host of major economic data and all eyes will be on the economic calendar in the days ahead, leaving little to work with for now.

As such, major currencies are still caught in relatively narrow ranges with little incentive to really move. Dollar pairs are tightly bound so there isn’t much to really touch on in the FX space.

In other markets, oil continues its impressive form with WTI crude inching above $91 while bond yields are also holding up with 10-year Treasury yields right on the cusp of a breakout to its highest levels since 2007.

Equities on the other hand are stuttering now ahead of the US open, after a relatively calmer session in Europe. The UAW strike is still a factor for US stocks, so keep that in mind as we get into the thick of things to start the new week.

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