Yesterday, we got the US CPI report and, although as expected it didn’t
have the same large impact as it used to, the core m/m figure surprised to the
upside.

The data triggered a
repricing in interest rates expectations with the market now seeing just a 13%
probability of a 50 bps cut at the upcoming FOMC meeting and less easing
further out the curve.

That weighed on the market
initially but as soon as the European session came to an end, we saw an
incredible reversal that pushed the price above the US NFP high of last Friday.

Right now, it looks like
the Fed is going to cut rates into a resilient economy, which is generally a
positive driver for the stock market but keep an eye on the growth and labour
market data as the market has become very sensitive to soft figures on that
front.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 yesterday rallied above the post NFP high which could
be a signal of further upside in the next weeks. The price is now back inside
the old range between the 5560 support
and 5665 resistance.

We can expect the buyers to
start targeting the resistance as long as the price stays above the support.
The sellers, on the other hand, will want to see the price falling back below
the range to position for new lows.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the price getting inside the old range. We are now seeing a
bit of a consolidation after yesterday’s one way move and today’s data might
either push the price further to the upside or we could see a pullback into the
5506 level.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the rally paused just above the 5560 level. If the price were to fall
below the level, we can expect the sellers to pile in to target a pullback into
the 5506 level. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the latest US Jobless Claims figures and the US PPI data.
Tomorrow, we conclude the week with the University of Michigan Consumer
Sentiment report.

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

In FX, the changes are light overall with dollar pairs keeping in relatively narrow ranges thus far today. The euro is in focus amid the ECB later but there shouldn’t be any real surprises from the decision itself. EUR/USD is trapped today in a 17 pips range and understandably so. The pair has very large option expiries in play as highlighted here earlier.

The rest of the major currencies bloc is also not up to much. USD/JPY briefly clipped 143.00 earlier in the session but is now up just 0.2% to 142.66 on the day. Besides that, the changes elsewhere are leaving a lot to be desired.

This comes as the overall market mood is steadier with the bid in bonds earlier this week subsiding. US futures are up slightly still while 10-year Treasury yields are also up 2.5 bps to 3.677% currently.

Besides the ECB, there will be some US data releases to work with later in the day as well. The weekly initial jobless claims and PPI data are ones to watch as well in US trading.

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

The IEA kept their forecasts for global oil demand broadly unchanged, seen at 900k bpd this year and 950k bpd for next year. That said, these numbers are way more pessimistic than other forecasters. That especially when you compare to OPEC, as seen here, even with their latest adjustments lower.

In keeping with their forecast, IEA warns that oil demand growth is „slowing sharply“ and it owes much to China’s economic growth slowing down. In their report, they highlighted how Chinese demand contracted for a fourth straight month and that Beijing’s oil imports have fallen to the lowest in almost two years.

As such, that will continue to be a downside risk for oil prices looking into the year ahead.

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

• Yields fall reverberates to broader markets to start the day
• USD/JPY Technical Analysis – Expectations for a 50 bps cut remain alive
• What is the distribution of forecasts for the US CPI?
• BOJ’s Nakagawa: Hard to comment on timing of next rate hike
• Fed to cut rates by 25 bps at each of the remaining three policy meetings this year – poll
• UK July monthly GDP 0.0% vs +0.2% m/m expected
• US MBA mortgage applications w.e. 6 September +1.4% vs +1.6% prior

Markets:

• JPY leads, USD lag on the day
• European equities a touch higher; S&P 500 futures down 0.1%
• US 10-year yields down 2.6 bps to 3.618%
• Gold up 0.3% to $2,522.42
• WTI crude up 2.6% to $67.49
• Bitcoin down 1.4% to $56,770

The most interesting part of the session was during the handover from Asia to Europe. That came as bond yields dipped and cast a bid on the Japanese yen in FX. USD/JPY in particular fell through to test 141.00 before touching a low of 140.70 during the day. The pair then caught a bounce back after, trading back up to 141.70 now but still down by 0.5%.

As yields fell, it put some light pressure on equities as well. S&P 500 futures fell as much as 0.6% before recovering most of that to be down just 0.1% now.

Focusing back on the bond market, 2-year Treasury yields flirted with a break to its lowest level in over two years. Yields were down by as much as 6 bps to 3.55% at one point, before keeping modestly lower now at 3.58%. 10-year yields on the other hand fell further to 3.61% and is keeping thereabouts.

With Treasury yields falling, the dollar is the laggard on the day as such. EUR/USD is up 0.3% to 1.1050 while USD/CHF fell to 0.8422 initially before rebounding back a little to 0.8460 now. Meanwhile, AUD/USD is also seen up 0.3% to 0.6670 on the day.

In other markets, gold is also starting to eye a further breakout as it hovers near the topside of its recent range. The precious metal is up 0.3% to $2,522 now, with buyers on the edge of their seats in wanting to chase a breakout.

That will be another area to watch out for as we turn the focus and attention to the US CPI report later.

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

• Prior +1.6%
• Market index 233.7 vs 230.5 prior
• Purchase index 138.6 vs 136.1 prior
• Refinance index 757.8 vs 751.4 prior
• 30-year mortgage rate 6.29% vs 6.43% prior

The average rate of the most popular US home loan dips further to its lowest since February last year. That comes amid a further drop in rates overall and that is helping mortgage activity catch a bounce. Both purchases and refinancing activities also picked up in the past week as such.

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

The bulls have been huffing and puffing over the last three weeks but they haven’t blown open the door for a stronger technical breakout yet. Gold price action has been consolidating in a bit of a range recently and the next trade is to arguably go with the break that comes.

I’ll continue to point out that there is a certain discomfort in the rise in gold prices this year. That being it is rather one-sided with little to no pullbacks. There have been consolidation phases like the one now and also from April through to June. However, there hasn’t been any meaningful correction to the surging run in 2024.

And that irks me a little even as a gold bull at heart. A healthy correction to the jump higher looks to be overdue but even then, it is going to be but a dip buying opportunity when it comes. At this stage, that’s the only warning signal I can attribute to gold on the charts.

But at the same time, it’s no surprise to see gold staying more bullish considering all the factors in play. China may have said that they have halted gold purchases for now. However, it is China we’re talking about here. So, I do hold my reservations on their actual motives and transparency.

Otherwise, the structural view continues to stay intact for gold as we look towards the Fed kicking off their rate cut cycle next week.

• The very simple case for buying gold

As for the bigger picture, it will be interesting to see how this gold run plays out as we move closer towards the seasonal buying rush in December and January. If the run stretches on, it might complicate the seasonal outlook when the time comes.

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

Last Friday, the Russell
2000 sold off following the weaker than expected NFP
report even though the details were better than the prior month. The
technical break below the key support around the 2120 level eventually increased
the bearish momentum.

The market has become very
sensitive to soft growth and labour market data. There’s also a good argument
that the market wants the Fed to deliver bigger cuts to avoid that the soft
landing turns into a hard landing.

The chances for a 50 bps
cut increased yesterday following the drop in Treasury yields after a weaker US NFIB Small Business Optimism Index and BoC’s Macklem comments on bigger cuts with people
wondering whether the bond market is signalling more economic weakness ahead.

Russell 2000
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Russell 2000 dropped back below the major trendline following the US NFP release. The
sellers took back control and they will now target a fall into the 1993 level.
The buyers, on the other hand, will need the price to rally back above the
trendline to start targeting new highs.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price broke through the strong support zone around the 2120 level
where we had the confluence of the trendline and the previous resistance turned support. The sellers piled in on a break
lower to position for a drop into the 1993 level, while the buyers folded waiting
for new opportunities. A rally back above the resistance should give the buyers
some control and increase the bullish momentum into new highs.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a downward trendline defining the current bearish momentum.
The sellers will likely keep on leaning on the trendline to position for more
downside, while the buyers will want a break to the upside to start piling in
for a break above the resistance. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US CPI report. Tomorrow, we have the latest US Jobless
Claims figures and the US PPI data. On Friday, we conclude the week with the
University of Michigan Consumer Sentiment report.

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

The bullish momentum in the
USD is starting to fade as Treasury yields continue to fall. We had two
possible catalysts yesterday.

The first one was the much
weaker than expected US NFIB Index which dropped to a 3 month low.
There wasn’t an immediate reaction in the markets on the release, but things
started to move as the American session began.

The second one was a
comment from BoC’s Macklem where he said that bigger cuts are
possible if the economy and CPI were weaker. There’s generally a groupthink
with central banks, so the market might have projected that to the Fed’s
decision next week.

The probabilities for the
Fed to cut by 50 bps at the upcoming meeting increased to 35% and a soft US CPI
report today might get us back to a 50/50 chance between 25 and 50 bps cut. For
the BoE, the market sees a 76% probability of no change at the upcoming meeting
and a total of 50 bps of easing by year-end.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD is bouncing from the key 1.3050 support where we have also the 38.2% Fibonacci retracement level for confluence. This is where we can expect the
buyers to pile in with a defined risk below the support to position for new
highs. The sellers, on the other hand, will want to see the price breaking
lower to increase the bearish bets into the trendline.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the bounce from the key support. The buyers will want to see
the price rallying and breaking above the 1.3140 level next to increase the
bullish bets into new highs.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor resistance around the 1.3110 level. We should see the
bullish momentum increasing on a break above the level with the 1.3140 level as
the next target. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US CPI report. Tomorrow, we have the US Jobless Claims
figures and the US PPI data. On Friday, we conclude the week with the
University of Michigan Consumer Sentiment report.

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

• The ECB meets later this week, what to expect?
• US August NFIB small business optimism index 91.2 vs 93.7 prior
• It’s debate night in the US
• A short-term bottom for USD/JPY?
• European equities open slightly lower to start the day
• What are the main events for today?
• Eurostoxx futures -0.3% in early European trading
• UK July ILO unemployment rate 4.1% vs 4.1% expected
• Germany August final CPI +1.9% vs +1.9% y/y prelim
• Japan LDP lawmaker Ishiba says key task for Japan is to completely exit from deflation
• TradeLocker: The Future of Trading for Brokers and Prop Firms
• FX option expiries for 10 September 10am New York cut
• A breakdown of China’s trade data for the month of August
• UK labour market data in focus in the session ahead
• China records ¥649.34 billion trade surplus in August
• Dollar holds steady after recent rebound

Markets:

• NZD leads, CAD lags on the day
• European equities lower;
  S&P 500 futures down 0.03%
• US 10-year yields up 1 bps to
  3.719%
• Gold up 0.02% to $2,506
• WTI
  crude down 1.12% to $67.94
• Bitcoin
  up 0.22% to $57,165

It’s been another
quiet session. The mood in the markets has been mixed and the moves have been
shallow.

We got just two notable releases: the UK jobs data and the US NFIB small business optimism index. The former came out generally better than expected, although the August payrolls figure printed negative. The latter disappointed with the index dropping to a two-months low.

There’s nothing else for the day except BoC’s Macklem speech at 12:25 GMT/08:25 ET.

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

It is not too uncommon to see the ECB not hog the spotlight during policy decision weeks. But when it is accompanied by a change in rates, that is a bit uncommon. This week though will be one of those weeks, as the ECB has already well telegraphed a 25 bps rate cut for this month.

So, the question now is what will come next?

For now, arguably more of the same. They can’t pre-commit to another move just yet and they cannot outright declare victory against inflation just yet.

The good news perhaps is that the economy is not slowing at a recession-like pace, forcing them to go faster in the cycle. It seems like things are just about right for the ECB at the moment.

Some policymakers have come out to say that one rate cut every quarter seems to be ideal currently. And I don’t think Lagarde will want to fight that this week. She may not be explicit about it but she surely won’t rule it out either. That considering the recent progress in economic developments.

As such, there won’t be much to scrutinise from the ECB policy decision this week. That unless we do get a surprise in terms of language from Lagarde. But by now, she should not make such a rookie mistake.

Market players are pricing in ~63 bps of rate cuts for the remaining three meetings this year. That just means it’s a toss up between two 25 bps rate cuts or three. And that will depend on the data in the weeks and month ahead, more so than the ECB decision.

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