NASDAQ and S&P indices end the week with five straight days of gains

• Goldman Sachs sees a 25 basis point cut from the Fed next week
• Next week will be dominated by the FOMC rate decision.
• Crude oil futures settled at $68.65
• ECB’s Makhlouf: ECB is not pre-committing to a particular rate path.
• Go big or go small? JP Morgan reiterates its call for 50 basis point cut next week.
• CNBC’s retail monitor sees consumer spending cooling
• Baker Hughes rig count for the current week
• Fitch: If this is an extended strike you could see Boeing downgraded
• That’s a wrap for the European stock markets.
• Paulson on CNBC: He favors a 50 basis point cut by the Fed
• University of Michigan preliminary sentiment for September 69.0 versus 68.5 estimate
• A 50 basis point cut is now 50-50 for the Fed decision next week
• Kickstart the FX trading day for Sept 13 w/a technical look at the EURUSD, USDJPY & GBPUSD
• Canada capacity utilization Q2 79.1% vs 78.6% last quarter
• Canada July wholesale sales +0.4% versus -1.1% expected
• US August import prices -0.3% versus -0.2% estimate. Export prices -0.7% vs -0.1% estimate
• University of Michigan consumer sentiment Preliminary. Import-export prices in the US
• The JPY is the strongest and the AUD is the weakest as the NA session begins
• ForexLive European FX news wrap: Yen firms as yields stay heavy
• ECB’s Holzmann: There could be room for another rate cut in December

As the day and week comes to a close, the JPY is ending the day as the strongest of the major currencies and the NZD is the weakest. The US is ending the day mixed with most of the declines coming vs the JPY and the CHF and gains vs the AUD and NZD. The greenback was near unchanged vs the EUR, GBP, and CAD today.

The NZDUSD moved lower today after reaching new highs near the 100 bar MA on the 4-hour chart near 0.6195. The subsequent fall took the price back down to the 100-hour MA at 0.6151. The 100 hour MA will be a key barometer for the pair going into next weeks trading.

For the USDJPY, it traded to a low of 140.275 and in the process tested the December 2023 low at 140.248. The pair rebounded into the close to 140.90. WIth the low today within a few pips of the December 2023 low, traders may look at the area as a double bottom to lean against into the new trading week.

For the EURUSD , the high prices today, stalled at the swing area that was defined back in August between 1.1097 and 1.11042 (see red numbered circles). The move back down has the pair trading at 1.1072 near the close for the week. The 100 hour MA at 1.1059 will be a key support target early next week. The swing area up to 1.11042 will be the key resistance that needs to be broken to increase the bullish bias.

The GBPUSD buyers took the price above a swing area and the 100 bar MA on the 4-hour chart at 1.31399, but falled. The price is trading between that MA and the 200 hour MA below at 1.31104. Those MAs will be the close support and resistance into the new week. A move below the 200 hour MA will also have the 100 hour MA at 1.30844 to contend with as support. It would take a move below it to give the sellers more control.

Looking at the US yield curve, yields today moved lower with the yield curve steepening. The 2-10 spread is now 7.2 basis points which is the most positive since June 2022. The 2-30 year spread isi near +40 basis points,also the highest since June 2022.

A snapshot of the yields near the end of day shows:

• 2-year yield 3.5886%, -5.9 basis points
• 5 year yield 3.436%, -3.0 basis points
• 10-year yield 3.658%, -2.1 basis points
• 30-year yield 3.984%, -1.1 basis points

For the week:

• 2 year yield fell -5.4 basis points
• 5 year yield fell -3.2 basis points
• 10 year yield fell -2.0 basisi points
• 30 year yield fell -0.6 basis points.

US stocks staged a solid rebound after the tumble last week. The Nasdaq and the S&P were both up every day of the week with the S&P rising 4.02% for the week and the Nasdaq rising 5.95%. The S&P fell -4.25% last week and the Nasdaq was down -5.77%. So back to the very begining of the calendar month. Remember September is traditionally, a negative month.

Next week, the FOMC meets (25 or 50 bp cut). The BOE and the BOJ will also meet with both expected to keep rates unchanage.

US retail sales will also be released along with Australia jobs and Canada CPI data (see the calendar here)

Thank you for your support this week. Wishing all a happy and healthy weekend. I hope your team wins.

This article was written by Greg Michalowski at www.forexlive.com.

The major US stock indices closed the day with gains. The NASDAQ and the S&P had a perfect week with five straight winning days. The NASDAQ index erased it -5.77% decline from last week with a gain of 5.95%.

A snapshot of the closing levels today shows:

• Dow industrial average rose 297.01 points or 0.72% at 41393.78
• S&P index rose 30.26 points or 0.54% at 5626.02
• NASDAQ index rose 114.30 points or 0.65% at 17683.98

The Russell 2000 rose 53.06 points or 2.49% at 2182.49.

For the trading week:

• Dow rose 2.60% after falling 2.93% last week.
• S&P index rose 4.02% after falling -4.25% last week.
• NASDAQ index rose 5.95% after falling -5.77% last week
• Russell 2000 rose 4.355% after falling 5.69% last week.

Some big winners this week included:

• ARM holdings +25.88%
• Broadcom, +22.41%
• Chewy, +22.03%
• Super Micro Comuputer, is 18.29%
• Palantir, +17.21%
• Nvidia, +15.82%
• AMD, +13.37%
• First Solar, +9.64%
• Tesla, +9.28%
• United Airlines, +9.17%
• Amazon, +8.81%

Losers this week included:

• Raytheon, -17.7%
• GameStop, -13.67%
• Moderna, -6.52%
• Adobe, -4.71%
• J.P. Morgan -3.82%
• Southwest Airlines -3.40%
• Biogen -2.58%
• Citigroup -2.37%
• Wells Fargo -2.22%
• Occidental -1.88%
• General Mills -1.84%
• General Motors -1.76%

This article was written by Greg Michalowski at www.forexlive.com.

Goldman Sachs is keeping it 25 basis point cut forecast for the Fed next week. They also see cuts of 25 basis points in both November and December.

This article was written by Greg Michalowski at www.forexlive.com.

As the week, moves to the close, what are the technicals telling traders going into the new trading week.

This article was written by Greg Michalowski at www.forexlive.com.

• Prior +6.3%
• New yuan loans ¥900 billion
• Prior ¥260 billion

China’s bank lending tumbled in July to its lowest in almost 15 years but it seen rebounding back a little in August, though estimates were expecting it to climb back up to around ¥1.0 trillion. Looking at the year-to-date figure, China’s new yuan loans is totaling up ¥14.43 trillion so far. Overall, I would argue that it still points to credit demand still being rather lackluster and the PBOC possibly has to do more as such to drive a resurgence in that area i.e. more rate cuts.

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

Headlines:

• USD/JPY stays pressured as lower yields weigh
• ECB’s Muller: Temporary acceleration in inflation is likely
• ECB’s Holzmann: There could be room for another rate cut in December
• ECB’s Villeroy: We should continue to reduce gradually and as appropriate
• ECB’s Rehn says will continue to base policy decisions on assessment of inflation outlook
• ECB’s Vasle: We are not committed to any predetermined rate path
• ECB’s Nagel: Core inflation is going in the right direction
• US reportedly finalises steep tariffs on China, with many to begin on 27 September
• China approves the plan to raise the retirement age for the first time since 1978
• Boeing US factory workers vote to go on strike, reject pay deal
• France August final CPI +1.8% vs +1.9% y/y prelim
• Eurozone July industrial production -0.3% vs -0.5% m/m expected

Markes:

• JPY leads, AUD lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields down 3.4 bps to 3.645%
• Gold up 0.4% to $2,567.88
• WTI crude up 1.1% to $69.75
• Bitcoin up 0.1% to $58,225

There weren’t any major headlines on the session but there were some decent market moves to be had. In particular, bond yields are staying pressured and that is weighing on USD/JPY again.

10-year yields in the US fell as low as 3.62% and that pulled USD/JPY to a low of 140.36 during the session. Yields are now at 3.64% but still down by over 3 bps, helping to see USD/JPY nudge back a little to 140.70 – still down 0.8% on the day though.

All of this comes after the action from yesterday, as traders step up bets for a 50 bps rate cut by the Fed for next week. In part, that can be attributed to Fed watcher Tsimiraos tossing said idea into the mix.

Looking at the dollar, it is holding more mixed on the session as it trades lower against the Swiss franc and euro but higher against the aussie and kiwi.

ECB policymakers did come out in droves to speak their views after the decision yesterday, but all were mainly echoing what Lagarde already mentioned.

In other markets, equities continue to put on a more positive front with US futures also sitting a little higher again on the day. As for gold, the run higher continues with the precious metal keeping with the technical breakout to fresh record highs yesterday. It is now trading up by another 0.4% to $2,567.

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

• Monetary policy is now on a good trajectory
• Inflation is much less worrisome than when ECB first started cutting rates in June
• „I am not per se against lowering rates, I only object when the timing does not look right“
• Headline inflation expected to rise temporarily in the coming months due to base effects
• October might not be the right time given limited amount of additional data

The full piece can be found here (may be gated). Anyway, this is as much of an endorsement as you’ll get to yesterday’s decision coming from an ECB hawk. It also reaffirms expectations of another pause by the ECB next month before going again in December.

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

Fundamental
Overview

Crude oil is finally
finding some footing this week as the dip-buyers might be looking forward to
the Fed’s easing cycle. As a reminder, the positioning in crude oil is at a
record 13 years low and the sentiment is very bearish.

These factors can generally
offer great contrarian opportunities. The main reason which could drive oil
prices higher is the imminent Fed’s easing into a resilient economy. Lower
rates generally lead to an increase in the manufacturing activity and therefore
increased demand for crude oil.

Moreover, the recent debate
between Trump and Harris might have also decreased the risk premium of higher
supply as Harris chances of winning the election according to betting markets
increased. This is just a marginal thing, but it could give the buyers a bit
more confidence.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil recently broke through the 67.68 low and extended the drop
into the 65.31 level before reversing. The target should now be the resistance
around the 71.67 level.

That’s where we can expect
the sellers to step in with a defined risk above the resistance to position for
a drop into the 64 support zone. The buyers, on the other hand, will want to
see the price breaking higher to increase the bullish bets into the major trendline.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price recently broke above the minor downward trendline that was defining the bearish momentum.
The buyers started to pile in more aggressively and with the break above the
most recent lower high at 69.05 level, the short-term trend should have
switched to an uptrend.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action and the break above the 69.05 level
yesterday. We got a bit of a consolidation around the level, but the bullish
momentum seems to be increasing.

We now have a minor upward
trendline defining the bullish momentum and we can expect the buyers to keep
leaning on it. The sellers, on the other hand, will want to see the price
breaking below the trendline and the 69 handle to position for a drop back into
the lows. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the University of Michigan Consumer Sentiment
report which is expected to print at 68.0 vs. 67.9 last month.

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

This will include steep tariff hikes on Chinese EVs, solar cells, semiconductors, and steel among other strategic goods. More specifically, it will be a 100% duty on Chinese EVs, 50% on solar cells, and 25% on steel, aluminum and key minerals. All of which will be going into effect on 27 September.

As for a 50% duty on Chinese semiconductors, that will be due to start in 2025.

Besides that, there will also be increases in tariffs on Chinese medical face masks and surgical gloves to 50% next year and then to 100% in 2026. That compares with the initial plan for an immediate 25% tariff. But the ones mentioned above are the heavy hitters.

Well, it looks like this is Biden’s parting gift before he steps down. And the ball is now over to China’s court is seeing how they will respond before potentially dealing with more of this if Trump does get elected come November.

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

The AUD is the strongest and the CHF is the weakest as the North American session begins. Having said that, the major currencies are also scrunched together. Low to high trading ranges are relatively narrow with the EURUSD only having a 18 pips trading range, the USDCAD only 20 pips and the GBPUSD only 29 pips. Those are well below the 22 day averages (about a month of trading) at 59 pips, 52 pips and 77 pips the averages for those three pairs respectively. The other ranges are also limited suggesting there may be „room to roam“.

The day in the US session does have a number of economic releases with the ECB rate decision set to kick things off at 8:15 AM ET. THe ECB is expected to cut the refinancing rate to 3.65% from 4.25%.. It cut that rate in June by 25 basis points from 4.5% to 4.25%. The Deposit Rate is expected to be cutr from 3.75% to 3.50%. In June it cut 25 basis points from 4.0%.

Guidance and Statement:

• Assessment: The statement will likely acknowledge that incoming information supports the ECB’s previous inflation outlook but highlights weaker growth.
• New Forecasts: Expected to show lower growth projections, a slight increase in near-term core inflation, and an unchanged medium-term outlook. Inflation is anticipated to approach 2% by the end of 2025.
• Domestic Price Pressures: Expected to be flagged, particularly in relation to high services price inflation.

Forward Guidance:

• Approach: The ECB is likely to maintain its data-dependent, meeting-by-meeting approach to policy adjustments.
• Risks: There may be a slight dovish tilt given the weakening growth outlook and internal discussions about whether this necessitates faster

For your guide, the:

ECB Refinancing Rate:

• The refinancing rate, also known as the Main Refinancing Operations (MRO) Rate, is the interest rate at which banks can borrow money from the ECB for a period of one week.
• It serves as the benchmark rate for lending in the Eurozone and influences other interest rates, including those for loans and mortgages.
• When the ECB adjusts the refinancing rate, it directly affects the cost of borrowing for banks and, consequently, the overall money supply in the economy.

ECB Deposit Rate:

• The deposit rate is the interest rate that the ECB pays to banks on their overnight deposits.
• This rate can be negative, which means banks are charged for keeping excess reserves with the central bank. A negative deposit rate encourages banks to lend more to businesses and consumers instead of parking their money at the ECB.
• The deposit rate is a key tool for controlling short-term interest rates and has been used extensively during periods of low inflation or economic stagnation.

ECBs Lagarde will conduct her press conference starting at 8:45 AM ET.

At 8:30 AM ET, the US PPI will be released with the expectations showing:

• PPI Final demand MoM 0.2% est. vs 0.0% last month
• PPI Final demand YoY 1.8% est. vs 2.2% last month
• PPI ex food and energy MoM 0.2% est. vs 0.0% last month
• PPI ex food and energy YoY 2.5% est vs 2.4% last month
• PPI Ex food, energy and trade YoY was 3.3% last month and rose 0.3% last month.

Also released today, the weekly initial jobless claims will also be released with the expectations:

• Initial jobless claims 230K vs 227K last week
• Continuing jobless claims 1.850M est vs 1.838M last week.

Canada building permits for July will also be released with expectations of 7.1% versus unstinting .9% last month.

At 1 PM ET, the US treasury will complete their coupon options with the sale of 30 year bonds. Both the three and 10 year note auctions were met with strong international demand pushing the yield lower vs the WI level at the time of the auction. The Bid to cover was higher than average.

A snapshot of the other markets as the North American session begins shows:

• Crude oil is trading up $1.01 at $68.30. At this time yesterday, the price was at $67.43
• Gold is trading up $6.64 or 0.26% at $2517.84. At this time yesterday, the price was $2523.80

• Silver is trading up up $0.10 or 0.35% at $28.75. At this time yesterday, the price is at $28.84
• Bitcoin is trading up $684 at $58,026. At this time yesterday, the price was at $56,801
• Ethereum is trading up $0.80 at $2348.70. At this time yesterday, the price was at $2328.90

In the premarket, the snapshot of the major indices are modestly higher after gains yesterday

• Dow Industrial Average futures are implying a gain of 52.12 points. Yesterday, the index rose 124.75 points or 0.31% at 40,861.71
• S&P futures are implying a gain of 7.12 points. Yesterday, the index rose 58.61 points or 1.07% at 5854.13.
• Nasdaq futures are implying a a gain of 12.45 points. Yesterday, the index rose 369.85 points or 2.17% at 17395.53

Yesterday, the small-cap Russell 2000 was higher by 6.411 points or 0.31% CAC 2103.84

European stock indices are trading modestly higher:

• German DAX, +1.12%
• France CAC, +0.76%
• UK FTSE 100, +0.77%
• Spain’s Ibex, +1.09%
• Italy’s FTSE MIB, +1.02% (delayed 10 minutes).

Shares in the Asian Pacific markets closed modestly higher:

• Japan’s Nikkei 225, +3.41%
• China’s Shanghai Composite Index, -0.17%
• Hong Kong’s Hang Seng index, +0.77%
• Australia S&P/ASX index, +1.10%

Looking at the US debt market, yields are little changed:

• 2-year yield 3.66%, +1.4 basis points. At the same Friday, the yield was at 3.581%
• 5-year yield 3.457%, +1.0 basis points.. At this time Friday, the yield was at 3.400%
• 10-year yield 3.664%, +1.2 basis points. At this time Friday, the yield is at 3.618%
• 30-year yield 3.982%, +1.9 basis points. At this time Friday, the yield is at 3.932%

Looking at the treasury yield curve,

• The 2-10 year spread is +0.4 basis points. At this time yesterday, the yield spread was +3.7 basis points.
• The 2-30 year spread is was 32.0 basis points. At this time yesterday, the yield spread was +35.6 basis points.

In the European debt market, the 10 year yields are mostly higher:

This article was written by Greg Michalowski at www.forexlive.com.