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12 September 2024,05:43
Daily Market Analysis
12 September 2024, 05:43
*Upbeat U.S. CPI data eases recession worries, strengthening the dollar and boosting Wall Street after the release.
*Gold prices were once again rejected at the $2,530 mark, indicating strong selling pressure at this level.
*All eyes are on today’s ECB policy decision, with expectations of a 25 basis points rate cut.
Market Summary
The U.S. CPI readings released last night exceeded market expectations, dispelling concerns about an economic contraction in the U.S. In response, Wall Street rallied, with the Nasdaq leading the gains, climbing over 350 points in the last session. In the bond market, swap traders are now fully pricing in a quarter-point rate cut for the upcoming FOMC meeting, putting an end to speculation of a larger 50 bps cut. This has further supported the dollar’s strength, with the Dollar Index (DXY) holding steady near its September highs.
In contrast, gold prices were hit by improved risk appetite and a stronger dollar. However, oil prices moved higher, buoyed by the better-than-expected U.S. economic data and supply disruptions caused by Hurricane Francine along the Gulf Coast.
Meanwhile, the British pound weakened following disappointing UK GDP data, which showed a decline in manufacturing output. Euro traders are now closely watching today’s ECB monetary policy decision for further market direction.
Current rate hike bets on 18th September Fed interest rate decision:
Source: CME Fedwatch Tool
-50 bps (15%) VS -25 bps (85%)
Market Movements
DOLLAR_INDX, H4
The Dollar Index rose as the US Core Consumer Price Index (CPI) — which excludes volatile food and energy costs — unexpectedly increased by 0.3% in August, the largest rise in four months, surpassing market expectations. This uptick in inflation boosted optimism about the US economy and pushed US 10-year Treasury yields higher, further supporting the dollar’s rebound.
The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 60, suggesting the index might extend its gains after breakout since the RSI stays above the midline.
Resistance level: 101.90, 102.35
Support level: 100.55, 99.70
Gold prices retreated from a key resistance level, maintaining a consolidative trading range after the release of the higher-than-expected US inflation data. With expectations now favoring a smaller 25 basis point rate cut from the Federal Reserve, investor confidence in the US economy has improved, leading to a shift toward higher-risk assets, including equities. This shift in sentiment has also contributed to gold’s decline.
Gold prices are trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 54, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline.
Resistance level: 2530.00, 2555.00
Support level: 2505.00, 2480.00
The GBP/USD pair dropped after the UK’s GDP data for August came in at 0.0%, falling short of the expected 0.2%. The combination of weaker UK growth and stronger-than-expected US inflation weighed on the pound, pushing the GBP/USD lower.
GBP/USD is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 35, suggesting the pair might extend its losses after breakout since the RSI stays below the midline.
Resistance level: 1.3105, 1.3215
Support level:1.3025, 1.2905
The EUR/USD pair continues to face strong selling pressure, approaching its monthly low. This downward momentum is primarily driven by the stronger U.S. dollar, which gained support from the upbeat U.S. economic data released yesterday. The improved economic outlook has bolstered dollar strength, putting additional pressure on the euro. Meanwhile, euro traders are closely watching today’s ECB policy decision, with expectations of a 25 bps rate cut. Such a move could further hinder the euro’s strength, potentially leading to more downside for the EUR/USD pair.
EUR/USD remains trading in a downtrend trajectory, suggesting a bearish bias for the pair. The RSI remains close to the oversold zone, while the MACD edge lower, suggesting the pair’s strong bearish momentum.
Resistance level: 1.1105, 1.1170
Support level: 1.0985, 1.0940
The GBP/JPY pair has dropped to its lowest level in a month, driven by the strengthening of the Japanese Yen and the weak performance of the Pound Sterling, which continues to exert downside pressure on the pair. The recent release of the UK’s GDP for July fell short of market expectations, signalling an economic contraction, further dampening the Pound’s strength. If the pair breaks below the current fair-value gap, it could signal a bearish continuation, potentially leading to further declines in the near term. Traders will closely watch for this technical level as a key indicator of future price movement.
The pair remains trading within its downtrend channel, suggesting a bearish bias. The RSI remains close to the oversold zone, while the MACD continues to edge lower, suggesting that bearish momentum is growing.
Resistance level: 186.70, 189.20
Support level: 183.20, 180.60
The USD/CHF pair is trading within a higher-high price pattern, indicating potential bullish momentum. However, it faces strong resistance at the 0.8525 level. A successful break above this resistance would signal a solid bullish trend for the pair. The recent movement has been largely driven by upbeat U.S. economic indicators, which have strengthened the dollar. Additionally, the expectation of a smaller rate cut from the Federal Reserve could serve as a catalyst for the pair to break through the current resistance level, potentially setting the stage for further upward movement.
The pair is now attempting to break above the current resistance level with growing bullish momentum. The RSI is approaching the overbought zone, while the MACD has broken above the zero line, suggesting that bullish momentum is gaining.
Resistance level: 0.8584, 0.8650
Support level: 0.8470, 0.8410
Crude oil prices saw a slight rebound following a positive US oil inventory report. The Energy Information Administration (EIA) reported an increase of 0.833 million barrels in crude inventories, slightly below market expectations of 0.9 million barrels. However, concerns over a potential increase in production from OPEC+ continue to weigh on the long-term outlook for oil.
Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 45, suggesting the commodity might extend its gains after breakout since the RSI rebounded sharply from oversold territory.
Resistance level: 67.55, 69.90
Support level: 65.60, 63.80
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