253380 August 31, 2022 22:21 FXStreet Market News
The US Institute for Supply Management will release the August Manufacturing PMI on Thursday, September 1. The index is expected to have declined from 52.8 in July to 52, hinting at slowing economic progress but signaling expansion.
Among the sub-components of the report, the most interesting forecast is that for Prices Paid as it reflects business sentiment around future inflation. The index is expected to retreat sharply from 60 in the previous month to 55.5. While lower-than-previous figures are usually understood as negative for the dollar, easing price pressures are for sure good news for the US.
The US Federal Reserve has pledged to maintain its aggressive quantitative tightening to bring record inflation back to acceptable levels of around 2%, regardless of the damage its policies can do to businesses or households. Chief Jerome Powell acknowledged the negative effects of higher rates but reiterated they would keep draining massive covid-related liquidity.
After peaking at a record 64.7 in March 2021, the index reflects slowing economic progress, although expansionary territory (more than 50). The deceleration gained pace in the second quarter of 2022, and the index is dangerously approaching the 50 barrier, which separates growth from contraction.
If the index comes out above 50, the impact on financial markets could be limited as painful progress is already priced in. Speculative interest, however, should become concerned if it falls below the threshold, as it would help confirm the arrival of a recession in the world’s largest economy.
The American currency is the strongest across the FX board, although there are tepid signs of bullish exhaustion. Nevertheless and as risk aversion continues to lead, the USD may extend its gains should the figure come out much worse than anticipated, pushing investors into safety.
An upbeat report, on the other hand, may bring some relief to market players and help high-yielding currencies to recover some ground. In such a scenario, and for the time being, the EUR has more chances of rallying, as it seems to be the strongest dollar’s rival.
Sellers seem reluctant to add shorts below parity, although bulls remain on the sidelines. EUR/USD has an immediate resistance at around 1.0050 but would need to advance beyond the next relevant level, at 1.0120, to shrug off the negative stance and be able to extend its advance. A near-term support level is 0.9970, with a break below it exposing the multi-year low at 0.9898.
Full Article253379 August 31, 2022 22:09 Forexlive Latest News Market News
Most people are watching Europe and the unfolding energy crisis but the collapse in confidence in Chinese real estate could also be a multi-year drag on growth.
The WSJ today reports on comments from Country Garden Holdings, which for years ranked as the top developer in China in terms of sales. It cited weakening expectations, sluggish demand, declines in property prices and resurgent covid.
“All these exert mounting pressure on all participants in the property market, which has slid rapidly into severe depression,” the company said.
To illustrate, it earned $89m in the first half compared $2.2b a year earlier. That’s a relatively rosy performace compared to some of its competitors, which are struggling with solvency and inventory that won’t move.
Full Article253378 August 31, 2022 22:05 FXStreet Market News
EUR/USD is capped at around 1.0050. Analysts at Scotiabank expect the world’s most popular currency pair to retest the 0.9900/10 area on a drop below 0.9985.
“After another failed test of 1.0050 earlier in the session (minor double top), a sustained push under 0.9985 (neckline trigger) will tilt risks towards a retest of the 0.9900/10 area.”
“Swaps are not yet fully priced for a 75 bps hike, reflecting 67 bps of tightening at the Sep meeting, but the trend is leaning towards the risk of a more aggressive hike which may provide the EUR with some underpinning below 1.00 for now.”
Full Article253377 August 31, 2022 22:05 FXStreet Market News
GBP/USD is floundering in the low 1.16s. Economists at Scotiabank expect the pair to continue its slide.
“Short, medium and long-term trend oscillators remain aligned bearishly against the GBP, implying that GBP rebounds are liable to remain shallow (1.17/1.18 range) and short-lived.”
“There is little in terms of notable support for the GBP below the market – the 1.16 and 1.15 points provide some psychological support but the only major point of note is the 1.1425 low from 2020.”
“Sterling is liable to retain a soft undertone at least until the new government team and its policies take shape.”
Full Article253376 August 31, 2022 22:02 FXStreet Market News
How low can the pound go? The GBP/USD pair could dive as low as 1.10, in the opinion of economists at Scotiabank.
“Beyond the stagflation risk, the GBP will not react well to renewed equity market weakness as central banks persist with interest rate increases while the domestic political backdrop remains unhelpful (a new PM, Brexit issues unresolved and independence movements at home stirring again).”
“The broad, trade-weighted index (TWI) measure of the pound could fall another 4-5% broadly or so before reaching the lows seen around the 1992 Exchange Rate Mechanism debacle, the 2008 financial crisis, the 2016 Brexit vote and the 2020 pandemic. The fact that broad TWI losses stalled around 73.5 on each of those very different calamities for the pound suggests it is a point worth keeping a close eye on moving forward. A return to that point in this cycle might imply – roughly – downside risks for GBP/USD to the 1.10 zone and upside risks for EUR/GBP to the 0.90 area in the next few months.”
Full Article253375 August 31, 2022 22:02 FXStreet Market News
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253374 August 31, 2022 21:56 Forexlive Latest News Market News
Booster shots will be rolled out shortly that target omicron. Hopefully this change can prevent omicron altogether, or come close. Of course, it’s only a matter of time until the virus mutates again. It will also be interesting to see the uptake on this round of shots.
Full Article253373 August 31, 2022 21:49 Forexlive Latest News Market News
The major US stock indices are tradiing higher at the start of the US session. Yesterday, was the same and the priced dumped and closed lower for the 3rd day in a row. Will traders dump again after overnight gains?
So far, the buyers are winning.
A snapshot 15 minutes into the open shows:
Looking at the debt market, yields are marginally higher:
253372 August 31, 2022 21:45 FXStreet Market News
The USD/CAD pair gathered bullish momentum and touched its highest level since mid-July at 1.3132 before erasing a portion of its daily gains. As of writing, the pair was up 0.1% on the day at 1.3107.
The data from Canada showed on Wednesday that the economy expanded at an annualized rate of 3.3% in the second quarter. This reading came in weaker than the market expectation for a growth of 4.4% and caused the loonie to lose interest.
On the other hand, the ADP reported that employment in the US private sector rose by 132,000 in August, missing the market expectation for an increase of 288,000 by a wide margin. This data caused the US Dollar Index (DXY) to lose its traction and made it difficult for USD/CAD to preserve its bullish momentum. Ahead of Wall Street’s opening bell, DXY stays flat on the day at around 108.90.
Meanwhile, crude oil prices started to rebound, helping the commodity-related CAD show some resilience against its rivals. The barrel of West Texas Intermediate, which dropped to a nine-day low of $88.20 earlier in the day, was last seen trading above $90.
There won’t be any other high-tier macroeconomic data releases in the remainder of the session but month-end flows toward the London fix could ramp up the market volatility.
253371 August 31, 2022 21:40 FXStreet Market News
Gold has come under renewed bearish pressure and hit a fresh monthly low below $1,710. Strategists at TD Securities note that any dip in the yellow metal increases the odds of a massive capitulation event in gold.
“Gold markets still feature an extremely concentrated and bloated position held by family offices and proprietary trading shops. Few traders are now holding an extremely bloated position. Further, this position does not appear to be associated with a stagflationary narrative. As prices approach this cohort’s pandemic-era entry levels, the risk of a large-scale capitulation is growing. This fits well with the risk of a breakout in the broad dollar index, which could coincide with a meltdown below the $1,675 range.”
“Considering that industrial demand has also resumed its slump, after the mean-reversion in demand signals showed signs of overshooting, silver prices are also vulnerable given little exposure to the rise in supply risk premia that has supported the base metals complex.”
“While palladium also proved vulnerable to demand headwinds, a recent CTA selling program has been whipsawed, translating to modest buying support that should soon run out of steam. Unless prices break north of $2,133, we expect a CTA selling program to imminently weigh on palladium.”
Full Article253370 August 31, 2022 21:40 FXStreet Market News
Following a knee-jerk to the 0.9970 region, EUR/USD managed to regain traction and reclaim the parity zone on Wednesday.
EUR/USD now looks to add to the positive start of the week, although it remains at the mercy of inconclusive risk appetite trends for the time being.
In the meantime, higher-than-expected inflation figures in the euro area for the current month appear to have lent further conviction to the investors’ perception of a 75 bps rate hike at the ECB event in September, which seems to have lent some wings to the single currency.
In the US docket, the revised ADP report showed the US private sector added 132K jobs in August, less than initially estimated.
EUR/USD now treads water amidst the renewed bid bias in the greenback as well as some worsening conditions in the risk complex.
So far, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence. However, potential shifts to a more hawkish stance from ECB’s policy makers regarding the bank’s rate path could be a source of strength for the euro.
On the negatives for the single currency emerge the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals.
Key events in the euro area this week: EMU Flash Inflation Rate, Germany Unemployment Change, Unemployment Rate (Wednesday) – Germany Retail Sales, Final Manufacturing PMI, EMU Final Manufacturing PMI, EMU Unemployment Rate (Thursday) – Germany Balance of Trade (Friday).
Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.
So far, spot is losing 0.11% at 1.0001 and the breach of 0.9899 (2022 low August 23) would target 0.9859 (December 2002 low) en route to 0.9685 (October 2022 low). On the other hand, the next up barrier comes at 1.0090 (weekly high August 26) seconded by 1.0202 (high August 17) and finally 1.0223 (55-day SMA).
Full Article253369 August 31, 2022 21:12 Forexlive Latest News Market News
Today’s eurozone preliminary CPI was up 9.1% y/y compared to 9.0% expected led by a 38% rise in energy prices. That was the final straw for Goldman Sachs, which also cited ‘upside risks to near-term growth(?)’.
Even as the odds of a 75 bps hike have risen, policymakers are continuing to deliver hawkish talk. That’s a strong sign that an agressive hike is coming.
The decision is Sept 8 and will be the highlight on next week’s economic calendar.
Full Article