Market News

Monday has started already ... 

• U.S. forces have struck two Iranian launchers near Strait of Hormuz

Early FX indications:

• EUR/USD 1.1582
• USD/JPY 160.11
• GBP/USD 1.3534
• USD/CHF 0.8080
• USD/CAD 1.3909
• AUD/USD 0.7160
• NZD/USD 0.5916

Axios with the report that U.S. forces have struck two Iranian launchers on Larak Island.

Islamic Revolutionary Guard Corps forces were observed preparing to launch rockets with sea mines into Strait of Hormuz.

Axios cited a US official statement. 

Earlier over the weekend, UKMTO reported an incident 12NM north of Khasab, Oman, that s tanker had been struck by an unknown projectile whilst transiting inbound in the Strait of Hormuz.

Any resumption of direct US strikes on Iranian territory near the Strait of Hormuz revives the risk premium that has underpinned oil markets since the conflict began in February. Brent had been easing toward the mid-eighties on hopes that Oman-brokered talks might open a temporary shipping corridor, so a strike…

• Fed's Warsh: Numbers on price stability are 'more concerning'
• Univ of Michigan final sentiment index for August 51.7 vs 51.0 estimate
• Fed's Hammack: It's time to act with rate hikes, waiting will create pain
• Canada GDP Q2 annualized 3.3% vs 3.4% estimate
• Fed's Goolsbee: Agrees with Warsh that inflation is Fed's main issue right now
• Non-farm payrolls benchmark revisions trimmed employment by 79K jobs

Markets:

• Gold down $145 to $4455
• US 10-year yields up 5.4 bps to 4.73%
• US 2-year yields up 12 bps to 4.36%
• WTI crude oil down 8 cents to $83.43
• USD leads, NZD lags
• Nasdaq down 0.5%
• S&P 500 down 0.2%

It was a fairly straight-forward day in terms of 'what happened and why' in financial markets. The cosnensus ahead of Warsh was that he wouldn't offer much of a…

Fed Chair Warsh's speech at Jackson Hole tilted the Fed tightening bias in the favor of a hike in September and the potential for another hike by the end of the year. The deficit well with traders US stocks the Russell 2000 down the most. The NASDAQ 100 and NASDAQ composite Index also fell by 0.70% and 0.50% respectively.

U.S. stocks closed lower, with small-cap stocks leading the declines:

• Dow industrial average: Fell 9.00 points, or 0.02%, to 53,565.35
• S&P 500: Fell 19.23 points, or 0.25%, to 7,711.75
• Nasdaq Composite: Fell 138.93 points, or 0.52%, to 26,402.42
• Russell 2000: Fell 41.97 points, or 1.39%, to 2,972.37
• Nasdaq 100: Fell 208.13 points, or 0.70%, to 29,433.43

For the trading week:

• Dow industrial average up 0.53%
• S&P 500 up…

• Germany August unemployment change 4k vs 5k expected
• Prior 6k
• Germany August unemployment rate 6.4% vs 6.4% expected
• Prior 6.4%

German unemployment rises slightly less than expected in August, bringing the overall figure of unemployed persons to 2.996 million. The jobless rate is seen holding steady and that continues to reaffirm that labour market conditions aren't exactly deteriorating at a sharp pace in Europe's largest economy.

Considering the manufacturing slump last year, one can argue that jobs data in Germany has held up modestly during this entire period. And zooming in to the July and August months, the unemployment figures have actually been not too bad this time around. Typically, you'll see a spike in unemployment due to school…

The AUDUSD is correcting lower after this week’s break above the May high, but the pair still has work to do if sellers are going to take greater control.

Fundamentally, Australian CPI helped fuel the earlier move higher this week (on Wednesday). Inflation rose 1.0% for the month  and 3.5% year over year, above the 3.3% annual estimate. The hotter reading supported the Australian dollar and helped push the AUDUSD above the May high going back to May near 0.7200.

However, the upside momentum stalled today after the price reached a  0.7207. Fed Chair Kevin Warsh’s more hawkish Jackson Hole speech helped strengthen the US dollar (weaken the AUDUSD), while market expectations for a Fed rate hike increased toward 60%.

Technically, the move back…

Last year at this time there was some serious hand-wringing about a non-farm payrolls benchmark revision that saw 911K jobs cut from payrolls.

For the latest edition, the consensus was +183K jobs but instead, employment fell by 79K jobs for the year ending in March. That's an average of 6.6K jobs per month lost and it's notable that private payrolls were -178K led by retail trade.

That's a dovish signal on where the jobs market stands but note that this is a preliminary revision, with the final number to come in January. 

The USDCAD has extended higher, helped by a stronger US dollar and a sharp rise in US yields following Fed Chair Warsh's hawkish comments. The US two-year yield is up 11.5 basis points at 4.347%, reflecting reduced expectations for near-term Fed easing and providing a fundamental catalyst for the USD’s move higher.

Technically, the low today stalled between the rising 200-hour moving average at 1.38370 and the 100-hour moving average at 1.38599. Holding that support cluster gave buyers the go-ahead to push higher, with the price subsequently breaking above this week’s previous high at 1.38970 - helped of course by the speech from Fed's Warsh.  

The pair is now extending to new highs for the day and testing the August 18 and August 19 high…

The S&P 500 is at the lows of the day, down 21 poitns to 7709 in a reversal from the initial Fed reaction.

There is a rumor going around that Warsh repeatedly referenced 'hikes' in his text to mess with the algos, but he only talked about physical hikes in the area. Perhaps that led to some kind of strange reaction but I tend to think that market participants piled into Nasdaq stocks initally despite the hawkish talk. The thinking there is from the last cycle where rate hikes didn't hurt tech stocks because of low debt levels at tech companies. I don't think that's the case any longer with a $3 trillion AI buildout but the market is like a trained monkey.

Or at least it was for a time as tech is now lagging alongside utilities (which is…

The USDJPY has extended higher, breaking above its 100-day moving average at 159.994 and the natural resistance at 160.00. The high price has reached 160.15 as buyers maintain firm control.

The move has been supported by hawkish comments from Fed Chair Powell and a sharp rise in U.S. yields. The two-year yield is up nearly 11 basis points at 4.34%, while the 10-year yield is higher by 5.2 basis points at 4.724%. Higher yields are helping to strengthen the dollar against the yen.

Technically, today’s advance also took the price above two other important resistance levels:

• The 50% retracement of the decline from the 40-year high of 163.98 at 159.599
• The August corrective high off the 2026 low at 159.23

Breaking those levels—and now the…

• Agrees with the Fed chair about details of the economy.
• Agrees that inflation is the Fed's main issue right now.
• On inflation it is important to understand what is the nature of the supplies shocks or is a demand driven inflation.
• Pretty clear that inflation from overheated demand is hard to address.
• Inflation has continued longer than expected.
• Was okay with holding rates steady at July FOMC
• Does not have strong opinion about number of FOMC meetings

The EURUSD has moved sharply lower as the market digests a more hawkish message from Fed Chair Kevin Warsh. The probability of a Fed rate hike has climbed to around 60%, up from the low-30% range earlier this week. That repricing has pushed U.S. yields and the dollar higher, sending the EURUSD toward a key cluster of technical support.

Earlier, the pair found willing sellers below its 100- and 200-hour moving averages. The subsequent break below the 200-day moving average, currently near 1.1630, added to the bearish technical bias and opened the door for the move toward the next downside targets.

The price is now testing a swing area between 1.15937 and 1.15872. Just below that zone sits the 38.2% retracement of the rally from the July low…