A Bullish Market Is Coming at the End of the Weekly Cosolidation?

Forex

Central Bank

Summary:

Risk sentiment improved after the release of the US inflation report. AUDUSD gained support and performed bullish technically. A bullish market is coming?

BUY AUDUSD

Close Time

CLOSED

0.66837

Entry Price

0.67500

0.66460

0.61926 -0.00010 -0.02%

66.3

Pips

Profit

0.66460

0.67500

Exit Price

0.66837

Entry Price

0.67500

Fundamentals

The United States Department of Labor released August CPI data on September 11.

Overall CPI: CPI rose 2.5% YoY in August and was lower than the previous reading of 2.9%. This is the fifth consecutive month of decline and the lowest level since February 2021, which aligns with market expectations. This indicates that the overall rate of US price rise is gradually slowing, but there is still a certain level of inflation. CPI rose 0.2% MoM in August as expected, and the previous reading is the same. This shows that US prices still have some upward pressure in the short term, but the increase is relatively modest.

Core CPI: Core CPI rose 3.2%YoY in August as expected. It rose 0.3% MoM, beating market expectations of 0.2% and the previous value of 0.2%. Core CPI, an inflation measure that excludes food and energy prices, is generally considered to be more reflective of underlying inflation trends. The MoM increase in core CPI exceeded expectations, indicating that US inflation is still sticky and potential inflationary pressures still exist.

Overall, the impact of this CPI data on the AUDUSD exchange rate is mixed. For one thing, the sequential decline in the YoY increase in headline CPI may strengthen the market's expectations for the Fed's rate cuts. This may weigh on the US dollar and support the AUDUSD exchange rate.

On the other hand, the market has increased concerns about the stubbornness of US inflation as the core CPI rose more than expected. This could limit the decline of the US dollar and even push the US dollar stronger in the short term, which may weigh on the AUDUSD exchange rate as a result.

Technical Analysis

Trading at the weekly timeframe, AUDUSD came under pressure and retreated quickly after testing 0.6870 in July. At the beginning of August, the price fell to the lower edge of the oscillation range and closed the lower shadow after the bulls pulled higher strongly. Since the bulls were aggressive throughout August, the asset may break out of the range and start a bullish market.

A Bullish Market Is Coming at the End of the Weekly Cosolidation?_2

Looking at the 4-hour chart, AUDUSD retraced to the support below 0.6644 after a surge by bulls to the 0.6870 level of pressure. As the price rose again, bulls tried to break out of the oscillation range with a strong desire. As AUDUSD remains bullish in the medium term, it is recommended to go long at low.

Trading Recommendations

Trading Direction: Buy

Entry Price: 0.6673

Target Price: 0.6750

Stop Loss: 0.6646

Deadline: Sep 26, 2024 15:00:00

Support: 0.6656/0.6644/0.6621

Resistance: 0.6694/0.6755/0.6823

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Forex

Summary:

EUR/USD struggles near a three-week low as the ECB is expected to cut rates by 25 bps. The U.S. dollar hits a weekly high amid persistent inflation concerns, leading to revised Fed rate cut expectations.

SELL EURUSD

EXP

EXPIRED

1.10000

Entry Price

1.09200

1.10700

1.02985 -0.00089 -0.09%

Pips

EXPIRED

1.09200

1.11276

Exit Price

1.10000

Entry Price

1.10700

In Thursday’s European trading session, the EUR/USD currency pair is grappling near a three-week low, hovering around the 1.1000 level. This persistent weakness underscores investor caution as they await the European Central Bank's (ECB) interest rate decision, scheduled for announcement at 12:15 GMT. The prevailing expectation is that the ECB will lower its Rate on Deposit Facility by 25 basis points (bps) to 3.5%.

This anticipated rate cut would mark the second reduction in the ECB's current policy easing cycle, which commenced in June. The ECB's decision to begin easing came as it gained confidence that inflationary pressures in the Eurozone would trend back towards its target of 2% by 2025. The central bank opted to hold its key borrowing rates steady in July, wary of exacerbating price pressures with a more aggressive monetary stance.

The market's anticipation of an ECB rate cut has been bolstered by recent sharp declines in Eurozone price pressures and mounting concerns about Germany’s economic health—the Eurozone’s largest economy. Germany's economy shrank by 0.1% in the second quarter and faces a heightened risk of recession due to a sluggish demand environment.

As the ECB's decision becomes almost a certainty, market participants will scrutinize any indications regarding future rate cuts. Chris Turner, an analyst at ING, noted, “The ECB is unlikely to provide sufficient guidance or updated economic forecasts to warrant expectations for another rate cut in October. Our forecast remains for a 25bps cut today and another on December 12.”

The EUR/USD pair remains under pressure as the U.S. dollar (USD) achieves a fresh weekly high during Thursday’s European trading hours. The U.S. Dollar Index (DXY), which measures the Greenback's performance against six major currencies, has risen to nearly 101.80. The USD's strength is attributed to signs of persistent inflation in the U.S., particularly after August's Consumer Price Index (CPI) data. This data has prompted traders to recalibrate expectations regarding aggressive Federal Reserve (Fed) interest rate cuts.

The August CPI data revealed that annual core inflation, excluding volatile food and energy prices, increased by 3.2%, aligning with expectations. However, the monthly core CPI rose by 0.3%, surpassing both prior figures and estimates. Meanwhile, the annual headline CPI grew by 2.5%, slower than the anticipated 2.6% and July’s 2.9%, largely due to decreased energy prices. Historically, Fed officials place greater emphasis on core inflation as it reflects underlying inflationary pressures more accurately.

The persistent nature of U.S. core inflation has solidified market expectations for a gradual reduction in the Fed's key borrowing rates. According to the CME FedWatch tool, the probability of a 50bps rate cut in September has decreased to 13%, down from 40% a week prior.

In Thursday’s session, market attention will shift to the U.S. Producer Price Index (PPI) data for August and Initial Jobless Claims for the week ending September 6, both set for release at 12:30 GMT. Recent comments from Fed officials have heightened the significance of jobless claims data, reflecting the Fed’s growing concern about stimulating job growth.

Technical Analysis

From a technical perspective, the EUR/USD price action has been characterized by weak sideways movement throughout the morning. The pair is waiting for a negative catalyst to resume its correctional bearish trend. The next downside targets are anticipated at 1.0990 and subsequently 1.0920. The formation of a double top pattern further suggests additional bearish targets over the longer term. The bearish trend remains intact and will continue to be valid unless the price breaks above 1.1040 and holds above 1.1100.

The expected trading range for today is between the support level at 1.0930 and the resistance at 1.1080. Given the current technical setup, the prevailing trend is bearish.

TRADE RECOMMENDATION

SELL EURUSD

ENTRY PRICE: 1.1000

STOP LOSS: 1.1070

TAKE PROFIT: 1.0920

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Forex

Summary:

The USD/CHF pair has strengthened, trading around 0.8550, buoyed by rising US Treasury yields and expectations of a smaller Fed rate cut in September.

BUY USDCHF

Close Time

CLOSED

0.85400

Entry Price

0.86730

0.84800

0.91238 +0.00008 +0.01%

60.0

Pips

Loss

0.84800

Exit Price

0.85400

Entry Price

0.86730

On Thursday, the USD/CHF pair extended its gains for the second consecutive session, trading around 0.8550 during European hours. This upward momentum is supported by the US dollar, which has been buoyed by increasing Treasury yields. The US Dollar Index (DXY), a measure of the dollar's value against six major currencies, has also experienced a winning streak, marking its fifth consecutive day of gains. The DXY currently hovers around 101.80, with 2-year and 10-year US Treasury yields reaching 3.67% and 3.65%, respectively.

The recent appreciation of the USD/CHF can be partly attributed to the evolving expectations surrounding US monetary policy. Speculation is growing that the Federal Reserve (Fed) might implement a smaller interest rate cut in September. This anticipation follows the release of August’s US Consumer Price Index (CPI) data, which revealed a notable drop in headline inflation to a three-year low. Specifically, the CPI fell to 2.5% year-on-year in August from 2.9% previously, coming in below the anticipated 2.6%. On a monthly basis, the CPI registered a 0.2% increase. Core CPI, excluding food and energy, remained stable at 3.2% year-on-year, with a monthly rise to 0.3% from the previous 0.2%.

Concurrently, the yield on the 10-year Swiss government bond has decreased to below 0.4%, reaching its lowest point in three weeks. This decline in Swiss bond yields coincides with a strengthening of the Swiss Franc (CHF), which recently hit its highest level for 2024. Market participants are now speculating that the Swiss National Bank (SNB) might implement a significant rate cut later this year. Swiss inflation also fell to 1.1% in August, further fueling expectations of a possible rate cut by the SNB. The market anticipates a 25-basis point reduction at the SNB's September meeting, with a total of 55 basis points of easing expected by year-end.

Technical Analysis

The recent price action has shown a bullish divergence, which often signals a potential trend reversal. The pair recently surpassed the Exponential Moving Average (EMA) 50 and breached the key resistance level at 0.8543. Holding above this level is crucial, as it suggests the potential for further gains. A breakout above the previous lower high would reinforce the buy signal, with the next target set at approximately 0.8673.

The bullish momentum in USD/CHF is further supported by the technical setup. The pair’s recent positive trades have confirmed the strength of the uptrend, and the potential for additional gains remains strong if the price continues to hold above the established resistance level. Traders should monitor the price action closely for any signs of confirmation or reversal, particularly in relation to key support and resistance levels.

TRADE RECOMMENDATION

BUY USDCHF

ENTRY PRICE: 0.8540

STOP LOSS: 0.8480

TAKE PROFIT: 0.8673

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

GBP/USD fell to $1.3036, with further declines expected to $1.2965 and $1.2894. The trend remains bearish, supported by the 50-period EMA.

SELL GBPUSD

EXP

EXPIRED

1.30250

Entry Price

1.28940

1.31200

1.22021 -0.00128 -0.10%

Pips

EXPIRED

1.28940

1.33167

Exit Price

1.30250

Entry Price

1.31200

The Pound Sterling exhibited a modest uptick against the US Dollar, yet it remains under pressure as expectations for a substantial Federal Reserve rate cut have waned. Investors are currently anticipating that the Federal Reserve will implement a modest 25-basis-point rate reduction, rather than a more aggressive cut.

The immediate outlook for the GBP/USD pair remains bearish as the US Dollar retains strength near a fresh weekly high. Market sentiment has shifted following the latest Consumer Price Index (CPI) data for August, which has tempered expectations for a significant Fed rate cut.

The US Dollar Index (DXY), which measures the greenback against six major currencies, is holding steady around 101.70. Recent speculation about the magnitude of the Federal Reserve’s forthcoming rate cut was influenced by the August CPI data, which revealed persistent inflationary pressures. Despite a lower-than-expected annual headline inflation rate, core inflation—excluding volatile food and energy prices—remained stubbornly high. Core inflation rose by 3.2%, aligning with forecasts, but the monthly increase of 0.3% exceeded the anticipated 0.2%, underscoring ongoing inflation concerns.

As a result, the market's anticipation for a substantial 50-basis-point rate cut by the Fed in September has significantly diminished. According to the CME FedWatch tool, the likelihood of such a reduction has decreased to 13%, down from 40% just a week prior.

In Thursday’s session, traders are focusing on the upcoming US Producer Price Index (PPI) data for August and Initial Jobless Claims for the week ending September 6, set for release at 12:30 GMT. The PPI is expected to show a slowdown in headline producer inflation due to declining energy prices, though core inflation is projected to accelerate.

The Pound Sterling showed some resilience against its major counterparts, except for currencies from the Asia-Pacific region, during Thursday's European trading hours. This uptick reflects market confidence that the Bank of England (BoE) will adopt a less aggressive policy-easing approach compared to other central banks.

A recent Reuters poll suggests that the BoE will likely keep interest rates unchanged at 5% during its September meeting. However, the BoE is expected to reduce rates again in November despite inflation remaining above the bank’s 2% target. Comments from BoE Governor Andrew Bailey at the Jackson Hole Symposium indicated a gradual approach to rate cuts to manage inflationary pressures.

The market's increased expectations for the BoE to maintain rates this month are supported by recent labor market data, which shows robust job growth and a decline in the unemployment rate. For the three months ending in July, the jobless rate fell to 4.1%, with UK employers adding 265,000 new jobs—far exceeding the previous estimate of 24,000.

Looking ahead, key factors influencing the Pound Sterling will be the UK Consumer Price Index (CPI) data for August and the BoE’s forthcoming interest rate decision, both of which are scheduled for release next week.

Technical Analysis

Technically, the GBP/USD pair experienced a notable decline yesterday, reaching the first key level of $1.3036. A break below this level is anticipated to lead to further bearish corrections, with potential support targets at $1.2965 and $1.2894. This outlook is influenced by the completion of a double top pattern, reinforcing the bearish trend.

The bearish trend remains intact on an intraday basis, supported by negative pressure from the 50-period Exponential Moving Average (EMA50). To sustain the expected decline, it is crucial for the GBP/USD pair to remain below $1.3124.

The anticipated trading range for today is between support at $1.2955 and resistance at $1.3100, with a bearish trend forecasted.

TRADE RECOMMENDATION

SELL GBPUSD

ENTRY PRICE: 1.3025

STOP LOSS: 1.31200

TAKE PROFIT: 1.2894

Risk Warnings and Disclaimers

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Winkelmann

Commodity

Summary:

The slight increase in U.S. core inflation has almost eliminated the expectation of a 50 basis point rate cut by the Fed in September. Gold prices surged and then pulled back. In the short term, attention remains on whether it can break above the 2530 resistance level.

SELL XAUUSD

Close Time

CLOSED

2518.02

Entry Price

2480.00

2534.00

2676.23 -0.97 -0.04%

159.8

Pips

Loss

2480.00

2534.05

Exit Price

2518.02

Entry Price

2534.00