Be Cautious of Traps, Trade after Breakthrough

Stocks

Central Bank

Summary:

NASDAQ 100 consolidated horizontally ahead of the Fed's interest rate decision. Now, this index is fighting with the descending trendline, showing an unclear ascending path.

BUY IXIC

EXP

EXPIRED

17900.00

Entry Price

18900.00

17164.00

19286.77 +17.31 +0.09%

Pips

EXPIRED

17164.00

17934.92

Exit Price

17900.00

Entry Price

18900.00

Fundamentals

The NASDAQ 100 moved horizontally today and extended the low-volatility trend. The market preferred wait-and-see ahead of the Fed's interest rate decision.

The first interest rate cut by the Fed since March 2020 is anticipated later today, with speculations revolving around reductions between 25 to 50 basis points—this could exert influence over stock markets.

Notably, the formation of lower highs (transitioning from demand zones to supply zones) suggests the persistence of bearish sentiment in the index.

Yet, observing the rotation across major American indices, both the S&P 500 and Dow Jones Industrial Average have reached record highs. Could this foreshadow an upward push for the NASDAQ-100 index in subsequent trading sessions? Upon such ascent, completing the test from demand to supply zones could catalyze breakout trades.

We recommend investors enter trades after breakouts above critical supply levels at 17,790 and 18,015.

Be Cautious of Traps, Trade after Breakthrough _1

Technical Analysis

Momentum indicators reveal no clear bullish direction. Specifically, the Average Directional Index (ADX) demonstrates horizontal movement, indicating weak bullish trends. Similarly, the Relative Strength Index (RSI) hovers near its midpoint, confirming the market's current low-volatility environment. Of greater significance, the stochastic oscillator is marginally climbing above its moving average line. Acceleration into the overbought territory could signal strong bullishness. However, this indication is obscure.

Should the market surge today, surpassing pivotal supply areas at 17,790 and 18,015, it may align with movements observed in the S&P 500 and Dow Jones. Such a rally could be akin to an AB=CD pattern, targeting an all-time high of 18,678.

In the event bears regain control, they may encounter robust support along the trendline established on July 11, 2024, coupled with the range of 17,481 to 17,335, fortified by the 50-day and 100-day SMAs. Succeding in breaking below this level could initiate a decline toward the 16,670 level.

Overall, investors are awaiting the outcome of the Fed's meeting, which has the potential to amplify volatility. Trading after a breakthrough appears to be the most viable strategy.

Trading Recommendations

Trading direction: Buy

Entry price: 17900/18050

Target price: 18900

Stop loss: 17164

Valid until: Oct 03, 2024 23:55:00

Support: 17487/17342/17012

Resistance: 17790/18015/18127

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Economic

Forex

Summary:

Eurozone inflation rose 2.2% in August, capping the Euro's recovery as dovish ECB comments weighed on sentiment. EUR/JPY fell 0.29% to 157.74, with traders eyeing the BoJ's upcoming policy decision.

SELL EURJPY

EXP

EXPIRED

157.000

Entry Price

155.000

158.500

163.442 -1.712 -1.04%

Pips

EXPIRED

155.000

158.906

Exit Price

157.000

Entry Price

158.500

The Eurozone’s inflation, as measured by the Harmonized Index of Consumer Prices (HICP), increased by 2.2% year-on-year in August, in line with market expectations but failing to provide any significant boost to the Euro. Instead, the single currency faced renewed pressure, particularly against the Japanese yen, after dovish signals from European Central Bank (ECB) officials.

At the time of writing, the EUR/JPY pair was down by 0.29%, trading at 157.80 after touching an intraday high of 158.25. The Euro’s struggle to recover came after comments from ECB officials hinted at a more accommodative stance going forward, while attention also shifted towards the upcoming Bank of Japan (BoJ) policy decision.

According to Eurostat, the Eurozone's HICP rose by 2.2% in August, maintaining the same pace as the previous month and staying close to the ECB's 2% target. This inflation reading was largely in line with expectations and marked a steady trend as inflationary pressures seemed to ease. However, this data failed to ignite any significant bullish momentum for the Euro, as traders had largely priced in the number.

The market’s subdued reaction can be attributed to dovish remarks from ECB official Francois Villeroy. He reiterated that the ECB might soon lower borrowing costs, further tempering any Euro recovery hopes. Villeroy's comments suggest that while inflation is nearing target levels, the ECB is still inclined to adopt a more accommodative stance in the coming months.

In contrast, Bundesbank President Joachim Nael pushed back on these dovish expectations. Nael emphasized that inflation is not yet at a satisfactory level, hinting that the ECB may still hold off on aggressive easing measures. This divergence in views within the ECB highlights the complexity of the current economic environment in the Eurozone, where inflation may appear to be cooling, but concerns remain about underlying economic weaknesses.

Meanwhile, across the globe, attention has shifted to the Bank of Japan's upcoming monetary policy meeting. The BoJ has leaned hawkish in recent months, signaling a possible tightening of monetary policy. However, the Yen’s strength has become a growing concern for Japanese policymakers. A stronger Yen could weigh on Japan’s export-driven economy by making goods more expensive abroad, while also reducing the cost of imports, potentially slowing inflation.

The current market sentiment suggests that the BoJ may be less aggressive in pursuing further rate hikes due to the Yen's strength. BoJ officials are likely to tread cautiously, as too strong of a Yen could hinder their inflation targets, further complicating their policy decisions.

Technical Analysis

The EUR/JPY pair has been trading with mixed sentiment, lacking the necessary negative momentum to drive a clear bearish move. Despite this, the pair remains under pressure, as it has struggled to break above the 158.00 barrier. The price is currently hovering around 157.80, which indicates that bearish forces are still dominant.

If EUR/JPY fails to generate sufficient buying momentum, it could break below the key 156.50 level, opening the door for a continued move lower towards 156.00 and possibly down to 155.00, a significant support zone. This potential bearish scenario is reinforced by the pair's inability to surpass 158.00 convincingly.

Should EUR/JPY manage to climb above 158.00 and sustain that level, however, the bearish outlook may be invalidated. In that case, the pair could embark on a new bullish trajectory, with an initial target at 159.20, a key resistance level. The technical picture suggests that traders should closely monitor price action around these critical levels as they will likely dictate the near-term direction of the pair.

The expected trading range for today is between 156.50 and 157.80, with the overall trend forecasted to remain bearish unless significant upward momentum materializes.

TRADE RECOMMENDATION

SELL EURJPY

ENTRY PRICE: 157.00

STOP LOSS: 158.50

TAKE PROFIT: 155.00

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Summary:

Gold prices have retreated slightly from their all-time high of $2,590 as markets await the Federal Reserve's interest rate decision.

BUY XAUUSD

Close Time

CLOSED

2582.38

Entry Price

2620.00

2560.00

2684.31 -21.97 -0.81%

223.8

Pips

Loss

2560.00

2559.98

Exit Price

2582.38

Entry Price

2620.00

The price of gold has pulled back from its all-time high of $2,590 per ounce, where it was trading earlier this week, and is now hovering around $2,570. The rally to this record high was fueled by rising speculation that the U.S. Federal Reserve might implement a 50-basis-point interest rate cut at its upcoming policy meeting. Investors are now watching the Fed's decision closely, as the outcome will likely determine gold’s next move.

Currently, gold’s upward trajectory seems to be in a holding pattern, with traders and investors cautious ahead of the Fed's announcement. Fed Funds Futures suggest there is about a 60% chance of a 50-basis-point cut, but if the central bank opts for a more modest 25-basis-point reduction, disappointment could ripple through the market. In such a scenario, gold prices could face pressure, potentially pulling back further from their recent highs.

Gold prices have historically been sensitive to changes in interest rates, particularly those set by the Federal Reserve. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors. The recent surge in gold prices has largely been driven by this dynamic, with traders betting that the Fed will take aggressive action to combat slowing economic growth and ease credit conditions.

If the Fed opts for the smaller 25-basis-point cut, as many analysts expect, gold could face some headwinds. However, the downside risks are likely to be contained unless the central bank signals a complete pause or a much less dovish stance than anticipated. For gold to make another run at new all-time highs and potentially break through the $2,600 resistance level, a 50-basis-point cut today, along with strong forward guidance for further rate cuts, would need to be clearly communicated.

Technical Analysis

Despite the recent pullback, the technical outlook for gold remains bullish. Since the beginning of the trading day, the precious metal has shown weaker performance but remains above the critical support level of $2,565. As long as this support holds, the bullish scenario stays intact. The stochastic indicator continues to send positive signals, suggesting that there is still momentum to the upside.

If the Fed delivers a more dovish tone and a significant rate cut, gold could easily test the next key resistance level at $2,620 per ounce. A sustained move above this level would likely open the door to new highs, particularly if market participants perceive that further monetary easing is on the horizon.

On the downside, a drop below the $2,565 support would challenge the bullish outlook. However, such a move would likely be contingent on a more hawkish-than-expected Fed stance, which, given the current economic conditions, seems less probable.

TRADE RECOMMENDATION

BUY GOLD

ENTRY PRICE: 2582

STOP LOSS: 2560

TAKE PROFIT: 2620

Risk Warnings and Disclaimers

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Alan

Forex

Central Bank

Summary:

USDJPY fell below 142.00 today. The U.S. dollar is suppressed as the market is confident of a sharp rate cut. Investors expect that the Bank of Japan (BoJ) will keep interest rates unchanged at 0.25% on Friday.

SELL USDJPY

Close Time

CLOSED

143.200

Entry Price

138.400

144.700

152.590 -0.307 -0.20%

150.0

Pips

Loss

138.400

144.701

Exit Price

143.200

Entry Price

144.700