• Treasury yields continue to climb towards the end of the week
• UAW strikes kick off, plants at each of the three legacy Detroit carmakers affected
• ECB hawks trying to keep the door open for more rate hikes
• ECB’s Lagarde: We will set rates at restrictive level for as long as needed
• ECB’s Lagarde: We have not discussed rate cuts
• ECB’s Kazaks: Latest monetary policy move was not a ‚dovish hike‘
• Eurozone July trade balance €6.5 billion vs €23.0 billion prior
• France August final CPI +4.9% vs +4.8% y/y prelim
• Italy August final CPI +5.4% vs +5.5% y/y prelim

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.1%
• US 10-year yields up 3.2 bps to 4.322%
• Gold up 0.5% to $1,919.35
• WTI crude up 0.5% to $90.63
• Bitcoin down 0.3% to $26,502

It was a slower session overall as markets settle down in trying to get used to the new shift in the narrative among major central banks.

With the ECB signaling the end of rate hikes, it is now all about focusing on if central banks can stick with their perceived stance of higher rates for longer in the months ahead.

But that did not stop the move higher in bond yields though, as 10-year Treasury yields are up to above 4.32% and set for its highest weekly close since 2007.

That is helping to underpin USD/JPY with the pair up 0.2% to 147.80 but the dollar in general is sitting more mixed on the day. The overall changes are light with the greenback just marginally higher against the franc and loonie as well but down against the euro and aussie.

In the equities space, European stocks are continuing to race higher as rate hikes are out of the picture now for the ECB.

And in the commodities space, oil is continuing its run to the upside with WTI above $90 and that could play into inflation fears if the trend 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 this
  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.
• Last week the ISM Services PMI and Jobless Claims
  surprised to the upside, which point to a resilient economy overall.
• Yesterday, we got yet another beat in Jobless Claims followed
  by strong Retail Sales and PPI data.
• The Fed members are leaning more 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 and there’s just a 33% chance of a hike in November, although
  that can change if the data keeps on running hot.

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 are in contraction with the Services PMI recently plunging into contraction.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely for
  second round effects.
• The New Zealand Retail Sales beat expectations although the data
  remains deeply negative.
• Today, the Manufacturing PMI showed further contraction.
• 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 NZDUSD has been
diverging with the
MACD since
the breakout and this is generally a sign of weakening momentum often followed
by pullbacks or reversals. In this case, we are seeing a pullback with the
sellers leaning on the red 21 moving average to
position for another selloff. If the price breaks above the moving average, we
can expect the sellers to pile in around the 0.5987 resistance which
would give them an even better risk to reward setup.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price
action has been choppy but the pair is trading between key levels with an
upward tilt given that the price has been printing higher highs and higher lows
with the moving averages being crossed to the upside. A break above the 0.5930
resistance should lead to a rally into the 0.5987 resistance, while a break
below the 0.5892 support should result in a fall into new lows.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the short term price action between the key levels. We now have a range
between the 0.5930 resistance and the 0.5892 support. A break to the upside is
bullish, while a break to the downside is bearish.

Upcoming Events

Today the only notable
report left to be released for this week is the University of Michigan Consumer
sentiment survey. Consumer sentiment might have deteriorated given higher
energy prices and that might have filtered to higher inflation expectations.

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

• What we do next on rates will be on a data-dependent basis

If euro area economic data continues to worsen at the current pace, don’t expect talks of a rate cut to go away any time soon.

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

• It does not preclude future decisions
• Comfortable with current level of rates
• Sees inflation target being reached in 2H 2025
• April rate cut would be inconsistent with ECB’s macro scenario

On the headline, I reckon that interpretation is not up to him or the ECB to make. It is how their actions and communication is perceived by markets and it is what it is. So, you don’t get to go around telling people what it should be. Besides this report earlier, there hasn’t been any explicit remarks on any more rate hikes and that says a lot about the ECB’s current stance as a whole.

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

• We will return to 2% inflation target
• To set rates at restrictive level as long as needed for that
• Eurozone will not grow as much as expected earlier, but should pick up in 2024
• Weaker growth does not mean recession

She’s not really offering too much pushback or explicitly keeping the door open for another rate hike, similar to yesterday. As for the likelihood of a recession, let’s just say it never is a good sign when policymakers have to mention the R-word itself in trying to defend their stance.

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

Yesterday, the US CPI report
came basically in line with expectations as the market was already expecting
higher energy prices to push up the August inflation readings. The Core
measure, which is what the Fed is focused on, was in line with forecasts with
the monthly figure just a touch higher than expected. The core 3-month
annualised rate is now 2.4%, which is a good indicator for the Fed that their
policy is working well. Now, the question is whether the labour market softens
enough to bring inflation sustainably back to target without a recession. And
this is something that never happened in history.

Nasdaq Composite Technical Analysis
– Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite is still consolidating around the support zone at
13810 with the red 21 moving average acting
as dynamic support. The bias is more skewed to the upside given that the price
has made a new higher high recently around the 14148 level and the moving
averages are crossed to the upside but watch out for a break lower as that
could open the door for a much bigger fall.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we got a break
below the upward minor trendline recently
and the moving averages on this timeframe crossed to the downside. This might
turn into a bearish flag pattern
and the likely target would be the 12274 support. The buyers will need a strong
bounce on this support zone to invalidate the bearish setup, while the sellers
will want to see the price continuing lower to confirm the breakout of the
pattern and pile in to position for the selloff.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see the tight
range the Nasdaq Composite has been trading in for the past week. The levels to
watch are the last higher high at 13934 and the last higher low at 13732. In
fact, a break to the upside should see more buyers piling in and extend the rally
into a new high. The sellers, on the other hand, will want to see the price
breaking below the 13732 low to make a new lower low and pile in to target the
13174 support.

Upcoming
Events

Today is likely to be a volatile one given that we
are going to see lots of top tier economic indicators released at the same
time. In order of importance, we will get the US Jobless Claims, Retail Sales
and PPI data. The September FOMC meeting is already a done deal as the market
is pricing a 97% probability of a pause, so the data is going to influence the
November and December expectations. Tomorrow, we conclude the week with the
University of Michigan Consumer Sentiment report.

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

• PBOC calls on banks to hold off on immediate dollar purchases – report
• PBOC cuts RRR by 25 bps, with effect from 15 September
• China says it has the conditions to keep the yuan currency stable
• It’s a tall order for the euro to sustain any climb after the ECB today
• Don’t sleep on the major US data releases today
• Switzerland August producer and import prices -0.2% vs -0.1% m/m prior

Markets:

• AUD leads, GBP lags on the day
• European equities slightly higher; S&P 500 futures up 0.4%
• US 10-year yields up 1.4 bps to 4.262%
• Gold up 0.1% to $1,907.80
• WTI crude up 1.3% to $89.67
• Bitcoin up 0.5% to $26,362

Major currencies didn’t do a whole lot today, as traders are waiting on the ECB decision and some major US data to come later.

There wasn’t much conviction overall, with the dollar keeping more mixed and light changes being observed for the most part – continuing from the dull action after the US CPI report yesterday.

Some China headlines kept things interesting as the PBOC cut RRR again for the second time this year and called on banks to put off dollar purchases when they can, in order to alleviate pressure on the yuan currency.

In other markets, equities were solid throughout as stocks gained ground in European morning trade. US futures pushed higher with both S&P 500 futures and Nasdaq futures now up 0.4%. That is seeing European indices gather some confidence but there is still the ECB to come later in the day.

The bond market is little changed in general as it is still all to play for in the session to come. The ECB will be the main highlight but US retail sales, producer prices, and weekly jobless claims could also end up being key drivers of trading sentiment before the weekend comes along.

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

It’s certainly an interesting view especially with markets not pricing in any more rate hikes for the year. From earlier: Not too much change in the Fed funds futures curve after the US CPI data yesterday

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

Yesterday, the US CPI report
came basically in line with expectations as the market was already expecting
higher energy prices to push up the August inflation readings. The Core
measure, which is what the Fed is focused on, was in line with forecasts with
the monthly figure just a touch higher than expected. The core 3-month
annualised rate is now 2.4%, which is a good indicator for the Fed that their
policy is working well. Now, the question is whether the labour market softens
enough to bring inflation sustainably back to target without a recession. And
this is something that never happened in history.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones
recently bounced on the key trendline where we
had also the confluence with the
50% Fibonacci retracement level,
and rallied back into the resistance at
35000. The price then fell again and started to chop around as the market
remains uncertain on what’s next.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price
action formed a symmetrical triangle and we
are just waiting for a breakout to decide where to go next. In fact, when the
price breaks out on either side of the pattern, we can generally see momentum
picking up and the price moving in the direction of the breakout in a sustained
way. So, this is now a game of patience.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the price action within the triangle with the latest rejection from the
upper bound of the pattern. When the price starts to consolidate within such
patterns, there are no clear support and resistance levels as the price does
not respect them. The best strategy here is to wait for a breakout support by a
fundamental catalyst and then join the move.

Upcoming Events

Today is likely to be a volatile one given that we
are going to see lots of top tier economic indicators released at the same
time. In order of importance, we will get the US Jobless Claims, Retail Sales
and PPI data. The September FOMC meeting is already a done deal as the market
is pricing a 97% probability of a pause, so the data is going to influence the
November and December expectations. Tomorrow, we conclude the week with the
University of Michigan Consumer Sentiment report.

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

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