Market Update: Stocks Surge Amidst Cooling Economic Data

In a week filled with anticipation, investors find themselves on a roller-coaster ride as they await two pivotal data releases that promise to shape market trends. The week’s commencement has been nothing short of spectacular, with a fresh surge in US stocks, suggesting that the economy might be entering a cooling phase, and the Federal Reserve’s potential interest rate hikes may have reached their peak. The S&P index registered a 0.38% gain, while the Nasdaq enjoyed a 0.54% rise, and the Dow, though modestly, advanced by 0.1%. Particularly impressive was Nasdaq’s performance, showcasing robust growth. Simultaneously, the benchmark 10-year Treasury note experienced a dip, settling at 4.12%. US Treasury yields followed suit, marking a near three-week low. Meanwhile, the US dollar continued its downward trajectory against major currencies and commodities, as gold inched closer to the significant milestone of $1,950.

Critical Upcoming Factors: Federal Reserve’s Hurdles

Market players find solace in the recent US data releases, with GDP figures falling below expectations and employment statistics signaling a deceleration in the labor market. Encouragingly, these indicators underscore a slowdown rather than a catastrophic collapse of the economy. Amidst the optimism, all eyes are fixed on two key data releases: the impending non-farm payrolls announcement and the Federal Reserve’s favored inflation measure. However, as is often the case, these positive aspects are accompanied by substantial uncertainties. Traders find themselves straddling a delicate balance, preparing for the worst outcome while hoping for the best. A robust outcome in either of these data points could swiftly nullify the progress made over the preceding days.

Recap of US Session: What Unfolded?

The second assessment of Q2 GDP, along with the ADP Employment Report, fell short of market expectations. The ADP report unveiled the addition of 177,000 jobs in August, a figure that paled in comparison to the estimated 194,000. This decrease is significantly notable, given the 371,000 jobs recorded in July. After months of rapid employment growth, the pace noticeably slackened, chiefly attributable to the leisure and hospitality sectors.

However, the second Q2 GDP estimate was revised downwards, shifting from the initial 2.4% YoY projection to a more conservative 2.1% YoY. Contributing to this decline were decreased exports and a reduction in private inventory investment.

Asia Session Outlook: Impact on the Dollar Index (DXY)

The close of the US session witnessed the DXY retreating below the 103.00 threshold, reversing a prior rally that exceeded this mark. This downturn in the dollar’s value stands as a probable trend for the day ahead.

The Dollar Index (DXY): What’s in Store Today?

A pivotal event poised to influence the DXY’s trajectory is the release of the PCE Price Index for July, which serves as the Federal Reserve’s favored gauge of inflation. Given the recent spike in July’s CPI and PPI data, concerns about a resurgence of inflation loom large. The imminent PCE readings hold the potential to validate or dispel these apprehensions. Notably, both headline and core PCE readings for June demonstrated a substantial decline.

Concurrently, unemployment claims exhibited a two-week consecutive decrease, dipping below expectations. Anticipate heightened volatility at the time of these announcements, as both lower-than-expected claims and elevated PCE data could serve as robust bullish drivers for the DXY.

Insights into Central Bank Actions:

• The Federal Reserve’s target range for the federal funds rate stands at 5.25% to 5.50%.
• Firm commitment to restoring inflation to the 2.0% target.
• Willingness to adapt monetary policy in response to emerging risks that could impede goal achievement.
• Holistic consideration of factors including labor market conditions, inflation pressures, expectations, and global financial developments.
• Upcoming meeting scheduled from September 19 to 20, 2023.

What’s in the Cards for the Kiwi Dollar (NZD)?

Similar to its Pacific counterpart, the Kiwi Dollar initially soared past 0.6000, only to surrender its early gains overnight. It discovered support around the 0.5950 region before edging towards 0.5980 during the morning session.

The Kiwi Dollar’s Central Bank Stance:

• The Monetary Policy Committee maintained the OCR at 5.50% for the third consecutive meeting.
• A belief that persistently elevated interest rates will steer inflation back within the 1% to 3% target range while bolstering sustainable employment.
• Noteworthy decline in headline inflation and inflation expectations, juxtaposed against a relatively high core reading.
• Next scheduled meeting: October 4, 2023.

Euro (EUR) on the Move: Key Focus on CPI

For the day ahead, the Eurozone is poised to release flash readings for both headline and core CPI in August, with projections indicating a minor dip. Responding to yesterday’s US GDP data, the Euro experienced a sharp climb to 1.0945, and this trend might well continue.

Euro’s Central Bank Notes:

• The ECB implemented a 25 basis point increase across the three key interest rates.
• Slight downscaling of economic growth projections.
• Pledged commitment to interest rates with sufficient restraint to achieve the inflation goal, maintaining these levels as required.
• Rate determinations grounded in data-dependency, factoring in inflation prospects, economic data, underlying dynamics, and monetary policy efficacy.
• Next policy meeting scheduled for September 14, 2023.

Global Market Overview: Continent by Continent

Asian Stock Markets:

• Nikkei: Gained 0.97%
• Shanghai Composite: Declined by 0.53%
• Hang Seng: Experienced a dip of 0.26%
• ASX: Registered a 0.59% upswing

European Equities:

• DAX futures: Noted a decrease of 0.24%
• CAC 40: Saw a slight decline of 0.12%
• FTSE: Ticked up by 0.12%

US Stock Market:

• Dow Jones: Advanced by 0.11%
• S&P 500: Recorded a 0.38% increase
• Nasdaq 100: Enjoyed a robust 0.54% surge

Commodities: Current Status

• Gold: Hovered at $1945.88, marking a 0.18% uptick
• Silver: Priced at $24.58, with a minor decrease of 0.12%
• Brent Oil: Stood at $85.26, displaying a negligible 0.02% increase
• WTI Oil: Recorded a similar 0.02% rise, settling at $81.65

Upcoming News & Data to Watch

• Japanese Yen (JPY) Retail Sales (YoY) for July: Actual 6.8%, Forecast 5.4%, Previous 5.9%
• Chinese Yuan (CNY) Manufacturing PMI for August: Actual 49.7, Forecast 49.4, Previous 49.3
• Euro (EUR) German Unemployment Change for August: Forecast 10K, Previous –4K
• Euro (EUR) CPI (YoY) for August: Forecast 5.1%, Previous 5.3%
• US Dollar (USD) Core PCE Price Index (MoM) for July: Forecast 0.2%, Previous 0.2%
• US Dollar (USD) Initial Jobless Claims: Forecast 235K, Previous 230K

Technical Analysis Breakdown: Key Forex and Market Insights

GBP/USD: Pound Sterling vs. US Dollar

Exponential Moving Average (EMA):

• EMA 5: 1.2696 (Buy sentiment)
• EMA 20: 1.2666 (Buy indication)
• EMA 50: 1.2693 (Buy recommendation)

Simple Moving Average (SMA):

• SMA 5: 1.2697 (Buy sentiment)
• SMA 20: 1.2646 (Buy stance)
• SMA 50: 1.2690 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 55.43 (Positive signal)

Stochastic Oscillator:

• %K value: Positive condition

Resistance and Support Levels:

• Resistance: 1.2755
• Support: 1.2641

Summary and Trade Suggestion: Technical analysis favors a Buy outlook for GBP/USD. The alignment of indicators, moving averages, and oscillators suggests potential for a long position.

Trade Suggestion:

• Entry Point: 1.2781
• Take Profit: 1.2879
• Stop Loss: 1.2709

EUR/USD: Euro vs. US Dollar

Exponential Moving Average (EMA):

• EMA 5: 1.0903 (Buy signal)
• EMA 20: 1.0866 (Buy sentiment)
• EMA 50: 1.0889 (Buy indication)

Simple Moving Average (SMA):

• SMA 5: 1.0907 (Buy sentiment)
• SMA 20: 1.0843 (Buy stance)
• SMA 50: 1.0888 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 58.57 (Positive signal)

Stochastic Oscillator:

• %K value: Neutral stance

Resistance and Support Levels:

• Resistance: 1.0927
• Support: 1.0841

Summary and Trade Suggestion: EUR/USD presents a Buy sentiment according to technical analysis. The convergence of indicators and moving averages suggests potential for a long position.

Trade Suggestion:

• Entry Point: 1.0957
• Take Profit: 1.1042
• Stop Loss: 1.0894

AUD/USD: Australian Dollar vs. US Dollar

Exponential Moving Average (EMA):

• EMA 5: 0.6477 (Buy signal)
• EMA 20: 0.6453 (Buy sentiment)
• EMA 50: 0.6475 (Buy indication)

Simple Moving Average (SMA):

• SMA 5: 0.6483 (Buy sentiment)
• SMA 20: 0.6445 (Buy stance)
• SMA 50: 0.6455 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 55.58 (Positive signal)

Stochastic Oscillator:

• %K value: Negative stance

Resistance and Support Levels:

• Resistance: 0.6504
• Support: 0.6445

Summary and Trade Suggestion: Technical analysis points toward a Buy sentiment for AUD/USD. The alignment of indicators and moving averages suggests potential for a long position.

Trade Suggestion:

• Entry Point: 0.6521
• Take Profit: 0.6583
• Stop Loss: 0.6479

USD/JPY: US Dollar vs. Japanese Yen

Exponential Moving Average (EMA):

• EMA 5: 146.01 (Sell signal)
• EMA 20: 146.02 (Sell sentiment)
• EMA 50: 145.28 (Buy indication)

Simple Moving Average (SMA):

• SMA 5: 146.00 (Sell recommendation)
• SMA 20: 146.00 (Sell sentiment)
• SMA 50: 145.53 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 50.3 (Buy signal)

Stochastic Oscillator:

• %K value: Negative stance

Resistance and Support Levels:

• Resistance: 146.61
• Support: 145.62

Summary and Trade Suggestion: USD/JPY leans toward a Sell sentiment according to technical analysis. The alignment of indicators and moving averages suggests potential for a short position.

Trade Suggestion:

• Entry Point: 145.28
• Take Profit: 144.07
• Stop Loss: 146.36

S&P 500 Index

Exponential Moving Average (EMA):

• EMA 5: 4515.29 (Buy signal)
• EMA 20: 4469.46 (Buy sentiment)
• EMA 50: 4465.65 (Buy indication)

Simple Moving Average (SMA):

• SMA 5: 4520.22 (Buy sentiment)
• SMA 20: 4455.45 (Buy stance)
• SMA 50: 4451.53 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 65.88 (Positive signal)

Stochastic Oscillator:

• %K value: Neutral stance

Resistance and Support Levels:

• Resistance: 4530.22
• Support: 4498.61

Summary and Trade Suggestion: S&P 500 leans toward a Buy sentiment according to technical analysis. The alignment of indicators and moving averages suggests potential for a long position.

Trade Suggestion:

• Entry Point: 4543.39
• Take Profit: 4592.12
• Stop Loss: 4506.51

WTI Crude Oil

Exponential Moving Average (EMA):

• EMA 5: 81.47 (Buy signal)
• EMA 20: 80.62 (Buy sentiment)
• EMA 50: 80.32 (Buy indication)

Simple Moving Average (SMA):

• SMA 5: 81.58 (Buy sentiment)
• SMA 20: 80.08 (Buy stance)
• SMA 50: 80.58 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 64.48 (Positive signal)

Stochastic Oscillator:

• %K value: Neutral stance

Resistance and Support Levels:

• Resistance: 82.03
• Support: 80.96

Summary and Trade Suggestion: WTI Crude Oil leans toward a Buy sentiment according to technical analysis. The alignment of indicators and moving averages suggests potential for a long position.

Trade Suggestion:

• Entry Point: 82.35
• Take Profit: 83.75
• Stop Loss: 81.39

Silver

Exponential Moving Average (EMA):

• EMA 5: 24.55 (Sell signal)
• EMA 20: 24.24 (Buy sentiment)
• EMA 50: 23.83 (Buy indication)

Simple Moving Average (SMA):

• SMA 5: 24.62 (Sell recommendation)
• SMA 20: 24.33 (Buy sentiment)
• SMA 50: 23.43 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 63.98 (Positive signal)

Stochastic Oscillator:

• %K value: Negative stance

Resistance and Support Levels:

• Resistance: 24.71
• Support: 24.38

Summary and Trade Suggestion: Silver leans toward a Buy sentiment according to technical analysis. The alignment of indicators and moving averages suggests potential for a long position.

Trade Suggestion:

• Entry Point: 24.82
• Take Profit: 25.25
• Stop Loss: 24.50

Bitcoin

Exponential Moving Average (EMA):

• EMA 5: 27188.12 (Buy signal)
• EMA 20: 26690.57 (Buy sentiment)
• EMA 50: 26981.48 (Buy indication)

Simple Moving Average (SMA):

• SMA 5: 27309.81 (Sell recommendation)
• SMA 20: 26437.00 (Buy sentiment)
• SMA 50: 26757.32 (Buy indication)

Relative Strength Index (RSI):

• RSI (14-day): 63.99 (Positive signal)

Stochastic Oscillator:

• %K value: Neutral stance

Resistance and Support Levels:

• Resistance: 27438.03
• Support: 26828.59

Summary and Trade Suggestion: Bitcoin leans toward a Buy sentiment according to technical analysis. The alignment of indicators and moving averages suggests potential for a long position.

Trade Suggestion:

• Entry Point: 27952.25
• Take Profit: 28866.41
• Stop Loss: 27304.72

Conclusion

The analyses presented above highlight the varying sentiments across different trading instruments. From the GBP/USD and EUR/USD currency pairs to market indices like the S&P 500 and commodities like WTI Crude Oil and Silver, each analysis paints a unique picture of the current market landscape. These insights are not meant to be taken in isolation but rather as part of a broader strategy that combines technical analysis with fundamental research and risk management.