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United States 4-Week Bill Auction unchanged at 5.28%
338491 August 31, 2023 23:35 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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US Dollar becomes two-faced as data points contradict each other
338490 August 31, 2023 23:29 FXStreet Market News
- US Dollar price action steadies after PCE data as both core and overall inflation fall in line of expectations.
- Initial and continuing claims point to a still strong jobs market.
- The US Dollar Index able to avoid a meltdown as PCE pushes back against weak data earlier this week.
The US Dollar (USD) turns two-faced after US Gross Domestic Product (GDP) and JOLTS decline issued alarm signals on the healthiness of the US economy and favored a weaker Greenback. Though, it does not look to be a one way street, with the several data points this Thursday giving some arguments in favor of a stronger US Dollar. First and foremost, the US Personal Consumption Expenditures (PCE) numbers were in line with expectations and are still positive for the month, which proves that the US Federal Reserve (Fed) is right in its assessment not to start cutting soon.
Another counterargument in order not to start cutting that quickly comes with the continuing and initial jobless claims, which were still quite low. The initial jobless number is even contracting a bit, which means that companies are reluctant to let go of the excess workforce. So the demand for workforce might be slowing down a touch, the labor force as such is still seeing steady headcount stability or an increase, which means that inflation pressures will remain sticky for the next couple of months with plenty of Americans still earning money and have the ability to spend it.
Daily digest: US Dollar halts downturn
- Traders are valueing EUR/USD around 1.0850 in the middle of the weekly range ahead of the US nonfarm payrolls on Friday.
- The White House asks Congress for a short-term extension of goverment funding in order to avert a shutdown during budget talks.
- Ahead of the US non-farm payrolls, Canadian payrolls rose 47.7K, from 129.9K.
- The print of the Personal Consumption Expenditures (PCE) came in perfectly in line of expectations: The overall index stayed steady at 0.2% for the monthly performance, and jumped from 3% to 3.3% on a yearly basis. The core PCE for the month remained steady as well at 0.2%, while the core yearly index headed from 4.1% to 4.2%.
- Additionally, the Weekly Continuing and Initial Jobless Claims will came out at the same time with PCE: the Initial Claims went lower from 230K to 228K and the Continuing Claims nudged higher from 1.702M to 1.725M.
- After a few days of silence, markets will get to hear from the Fed with Susan Collins from the Boston Fed due to speak at 13:00 GMT.
- To close off the eventful day of economic data, the Chicago Purchasing Managers’ Index for August came out at 13:45 GMT. The previous number was 42.8, and got beaten by an uptick to 48.7. Though still in contraction, the number was better than expected.
- A very mixed trading day in the equity markets with Japan closing up 0.80%. Yet the Hong Kong Hang Seng Index is down 0.55%. Overall, European equities are roughly flat, and US equities are having difficulties chosing a direction.
- The CME Group’s FedWatch Tool shows that markets are pricing in an 88.5% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. The prior 78% probability was quickly reassessed after the downbeat data from the JOLTS report.
- The benchmark 10-year US Treasury bond yield trades at 4.10% and is quickly losing steam as markets move forward those possible rate cuts from the Fed.
US Dollar Index technical analysis: Friday could go either way
The US Dollar is in a technical recovery this morning, off the weekly lows against most major G10 peers. This could be short-lived as the current uptick is only based on the support of the 200-day Simple Moving Average at 103.08 in the US Dollar Index (DXY). In case that technical element is breached again, more substantial US Dollar devaluation could be in the cards.
On the upside, 103.69, the high of August 30, comes into play as the level to beat in order to halt this downturn. Once that level is broken and consolidated, look for a surge to 104.00, where 104.35 (the peak of August 29) is an ideal candidate for a double top. Should the Greenback go on a tear, expect a test at 104.47 – the six-month high.
On the downside, the summer rally of the DXY is set to be broken as only one element now supports the US Dollar. That is the 200-day SMA, and it could mean substantially more weakness to come once the DXY starts trading further below it. The double belt of support at 102.35 with both the 100-day and the 55-day SMA are the last lines of defence before the US Dollar sees substantial and longer term devaluation.
NonFarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
USD/JPY slips below 146.00 on mixed US data, BoJ split policy views
338488 August 31, 2023 23:26 FXStreet Market News
- USD/JPY trades at 145.60, down 0.42%, as positive US data fails to lift the pair; DXY advances 0.51% to 103.718 but can’t buoy USD/JPY.
- CME FedWatch Tool suggests the Fed will keep rates unchanged in September.
- Japan’s retail sales exceed expectations with a 6.8% YoY increase, but a disappointing 2.4% contraction in Industrial Production adds to BoJ’s policy dilemma.
The Greenback (USD) prints losses against the Japanese Yen (JPY) after reaching a daily high of 146.22, back below 146.00. Data from the United States (US) came better than expected but failed to bring the USD/JPY to life. The pair is trading at 145.60, down 0.42%
Greenback struggles to attain gains vs. the Yen despite better-than-expected data
A busy weekly economic agenda keeps most US Dollar pegged currency pairs trading volatile. Following Tuesday and Wednesday’s session, the buck was under a lot of stress. However, it regained some of its composure against most G10 FX currencies, except for the Japanese Yen.
The US Commerce Department revealed that the US Federal Reserve’s (Fed) preferred gauge for inflation, the Core Personal Consumption Expenditure (PCE), came as expected, climbing 4.2% YoY and 0.2% MoM as both figures aligned with the street’s forecasts. Regarding headline inflation, PCE remained unchanged at 3.3% YoY and 0.2%.
Other data showed that Initial Jobless Claims for the week ending August 26 came at 228K, below its forecast of 235K, according to the US Department of Labor. This, is contrary to the latest jobs data released, which pointed out the labor market was losing steam.
Today’s data added to past jobs releases in the US, alongside month-end flows, underpin the US Dollar (USD), which reached a bottom and is climbing according to the US Dollar Index (DXY). The DXY, an index that tracks a basket of six currencies’ performance vs. the USD, advances 0.51%, up at 103.718.
Even though economic growth has lost a step, it remains above the prior estimate of 2%, at 2.1% in the second quarter. That, alongside the US Commerce Department saying that consumer spending remains steady, jumping 0.8% in July, could keep the Fed in check. The CME FedWatch Tool, which depicts traders’ beliefs about increasing borrowing costs in the US, portrays that the Fed will keep rates unchanged at the September meeting. However, for November, the odds remain at 44.1% for a 25 bps increase.
In the meantime, Atlanta’s Fed President Raphael Bostic said the policy was appropriately restrictive to bring inflation towards the US central bank’s 2% target over a “reasonable” period.
On the Japanese front, Bank of Japan (BoJ) policymakers split between seeking a normalization of monetary policy and continued stimulus. BoJ’s board member Toyoaki Nakamura said it’s premature to tighten monetary conditions, as high import prices have driven inflation. He added that once the “deflationary mindset” is eradicated, the BoJ won’t need the Yield Curve Control (YCC).
Data-wise, Japan’s retail sales grew higher than the 5.4% YoY expected and rose by 6.8% in July, while Industrial Production plunged -2.4%, disappointing investors, which were expected a contraction of -1.4%.
USD/JPY Price Analysis: Technical outlook
The pair remains upward biased despite falling below the Tenkan-Sen, which has been recovered by buyers early in Thursday’s session. Even though the bulls are in charge, the USD/JPY must climb above yesterday’s high of 146.53 to pave the way for further upside, eyeing the year-to-date (YTD) high of 147.37. Otherwise, downside risks emerge below 145.55, which, once cleared, the major can dive and test the August 23 swing low of 144.54.
Natural Gas slips with EU bloc buying Russian gas more than ever
338485 August 31, 2023 23:17 FXStreet Market News
- Natural Gas could fall as demand remains tepid and stockpiles high.
- The US Dollar is taking a step back with weak US data ahead of the jobs report.
- Expect a sideways to lower gas price as supply starts to build with less demand.
Natural Gas could be seen trading lower from its peak print in recent days on the back of concerns of a possible shut down from Australia’s LNG export to the rest of the world. As the week progresses, another local exporter was able to broker a deal and avoid any future strike actions. This opens the door for Chevron to strike a deal as well, which would mean that any supply issues are to be limited in the near future.
Meanwhile, the demand side is staying steady to lower as the European bloc is way ahead of its target for this winter in filling up the strategic gas storages. The European bloc is committed to shun away from fossil fuels by 2027 out of Russia. However, EU countries have bought a record 52% of all cubic metres of LNG that Russia has exported this year.
At the time of writing, Natural Gas is trading at $2.896 per MMBtu.
Natural Gas news and market movers
- The Energy Information Administration (EIA) is due to publish the weekly Natural Gas Storage Changes for this week at 14:30 GMT. In line with recent headlines, another build is expected from 18 to 29 billion cubic feet.
- Oman LNG has signed a new deal with Shell and OQ to deliver LNG.
- Trading profits for PetroChina have surged as the company expanded its role in the global gas market and Chinese firms were aible to enjoy the oil discount price from Russian crude.
- China’s LNG consumption for July has risen 9.6% year-on-year.
- The recent batch of weaker data from the US, with a lower than expected US Gross Domestic Product and a substantial decline in US JOLTS job openings, could point to less LNG demand in the coming quarters.
- European gas storage is at 93% and saw further stockpile growth this week.
- Australian local exporter Woodside Energy Group Limited has reached a breakthrough agreement with unions. This could mean that Chevron might broker a deal as well soon and still alleviate any possible strike actions at the start of September.
- Tropical storm Idalia is heading over Georgia as it weakens to a Category 1 hurricane.
- All eyes remain on the market moving US jobs report on Friday.
Natural Gas Technical Analysis: EU gas shortages are to be priced out
Natural Gas has been on a tear this week and starts to face a few headwinds. With the demand side not picking up any further and the supply side possibly not as tight as first foreseen, a small rebalancing of the gas price could be at hand. Expect to see some profit taking into the rally of this week, which means that the $3 handle looks out of reach.
On the upside, $3 is still the level to watch once Natural Gas prices can reclaim $2.9. Should prices recover, look for a close above $2.935, the high of August 15, in order to confirm that demand is picking up again. More upside toward $3 and $3.065 (high of August 9) would be targets or levels to watch.
On the downside, the trend channel has done a massive job underpinning the price action. Aside from one small false break, ample support was provided near $2.60. The 55-day Simple Moving Average (SMA) needs to give that much needed support at $2.69 ahead of the ascending trend channel at $2.61. Any falling knives can still be caught by the 100-day SMA near $2.55.
XNG/USD (Daily Chart)
Natural Gas FAQs
Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.
The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.
The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.
Colombia National Jobless Rate came in at 9.6% below forecasts (9.9%) in July
338484 August 31, 2023 23:12 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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Could US Nonfarm Payrolls provide directional cues Bitcoin needs?
338482 August 31, 2023 22:49 FXStreet Market News
- Bitcoin price has been on a slump after the Grayscale win and trades around $27,300.
- Crypto markets are likely to be volatile with the release of US Core PCE price index numbers on Thursday and the US NFP on Friday.
- According to forecasts, the total jobs added in August is set to decline from 187,000 in July to 170,000.
Bitcoin price is likely to see an additional spike in volatility as the United States Nonfarm Payrolls (NFP) number for August is set to be released on September 1. This event, in conjunction with others, will be a key data set that the US Federal Reserve will use to make interest rate decisions in September.
Also read: US Core PCE within market expectations in July, Bitcoin price likely to begin recovery
Key macroeconomic events that could affect Bitcoin price
According to forecasts, the total number of jobs added in August is around 170,000, which is a decline compared to July’s 187,000. This event is critical and can induce volatility in both the traditional and crypto markets should it deviate far from the forecasts.
Here are three possible outcomes for the US NFP numbers, which will be released on September 1 at 12:30 GMT.
The US Dollar is the common denominator in both markets. Hence, the effect of the NFP event on the Greenback needs to be understood first.
- NFP comes in hotter than expectations: This would indicate that the interest rate hikes have not slowed down job creation and indicate a higher probability of interest rate hikes from the Fed. A higher interest rate discourages borrowing and investment and encourages lending. Hence, investors are likely to sell risk-on assets like stocks or Bitcoin.
- NFP comes in equal to expectation: Such a result could lead to lower expectations of future rate hikes. In this case, the stocks and crypto markets are likely to rally while the US Dollar faces a sell-off.
- NFP comes in lower than expectations: This move would likely have a bullish effect on risk-on assets, but investors need to wait for interest rate decisions to get a better understanding.
Other factors affecting Bitcoin price moves
US Core PCE Inflation
In addition to the NFP data release, investors should watch out for the Core Personal Consumption Expenditure (PCE) price index, which has met the 4.2% expectation for the annual rate. Also known as Core PCE inflation, it is the Fed’s favored inflation gauge. Although Fed Chair Jerome Powell’s opening speech at the Jackson Hole Symposium gave away July numbers, the after-meeting press release said, “the data point for July 2023 is an estimate based on consumer price index and producer price index data.”
So, this event, while key, is unlikely to play an important role this month.
ADP Employment Change
The private sector employment published by Automatic Data Processing (ADP) on August 30 came in below the expectation of 195,000. ADP noted the private sector added 177,000 in August as opposed to the revised July numbers, which stand at 324,000.
Spike in Bitcoin and stock market correlation
Due to the sudden spike in Bitcoin’s correlation to stock market indices over the last month, there is a chance for the pioneer crypto to follow the stock market. Hence, any and all macroeconomic events that affect the US stock market is likely to affect cryptos as well.
Grayscale’s victory against SEC and upcoming ETF decisions
Bitcoin price saw a brief comeback in volatility on August 29 after Grayscale’s victory against the US Securities and Exchange Commission (SEC). This caused BTC to climb 8% in a matter of minutes. As mentioned in a previous publication, the SEC is set to make a decision for seven spot Bitcoin ETFs in the next five days. If this new investment vehicle is approved, it could trigger a FOMO-driven rally that propels Bitcoin price to $40,000 and disregards the macroeconomic event.
Read more: Spot Bitcoin ETF has a 75% chance of approval in 2023, analysts say
Conclusion
Yes, the US NFP could provide another spike in volatility for Bitcoin price, but it is unlikely that this push will last for a large enough period for traders to take a punt on a directional trade. As a result, the macroeconomic data will have an effect that is nothing but ephemeral.
Still, the Fed could resort to either keeping the interest rates higher for longer or, worse, announcing another 25 basis point hike when it meets on September 19-20. The latter scenario is not outside the realm of possibility, and if it were to manifest, investors would notice both the stock and crypto markets heading south.
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Russia’s Novak says they will be announcing main parameters of OPEC+ deal next week
338481 August 31, 2023 22:45 Forexlive Latest News Market News
It’s not entirely clear what Novak is referring to here but he said that Russia agreed with OPEC+ of further actions. He might be referring to an extension of Russian cuts or a larger OPEC deal. There are some ticks lower in oil on these headlines but I think the market might have that backwards.
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United States EIA Natural Gas Storage Change above expectations (25B) in August 25: Actual (32B)
338479 August 31, 2023 22:33 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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