Gold prices advance, underpinned by ETF Flows, China stimulus and safe haven flows, Gold ETF flows have been positive, and if this trend continues, it could further support the upward momentum of gold prices. From a technical analysis perspective, gold is in overbought territory, but this may not be a significant obstacle. The psychological $2,650 and $2675 handles are the next key resistance levels to watch. Most Read: China Slashes Rates – Stimulus Package by PBoC Welcomed by Markets Gold prices continue to hold the high ground, underpinned by heightened tension in the Middle East and stimulus from China. The precious metal is enjoying its best year in 14 as a host of challenges and concerns plague market participants. Gold continues to print fresh highs as geopolitical headwinds continue to sway back and forth. Earlier today we had a stimulus package announcement by the People’s Bank of China (PBoC) which has further aided the precious metal. As big as the stimulus package from China is, I do not believe it will hold a major sway on Gold prices but rather other metals in the sector.  Ongoing dovish comments from Federal Reserve officials only serve to add fuel to a fire which is already raging. Some policymakers have hinted at more aggressive cuts ahead which have underpinned gold prices to a degree overnight. The question regarding a lot of these events is how much of the premium is yet to be priced in given the current nature of the market. As things stand, markets are pricing in another 50 bps cut from the Federal reserve at the November meeting.  Source: CME FedWatch Tool Gold ETF Flows Hint at Further Support ETF flows remain positive following a huge spike in July to 47.7 tonnes. August came in more modest at around 28.5 tonnes the equivalent to $2.1 USD. North America led the way with the Western markets more active at present. Source: LSEG, World Gold Council Despite the excellent inflows over the last four months the year-to-date losses remain around 44 metric tonnes. The idea is that if these inflows continue however, this could keep the gold rally moving in the upward direction. Economists and analysts continue to upgrade their yearly forecasts. JP Morgan for its part stressed that the retail-focused ETF builds will be key for a sustainable gold rally, raising its price target for the precious metal to $2850/oz in 2025. Economic Data For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge) On the economic data front, we do have some high impact US data which could impact the US Dollar and thus gold prices. However, it would require the Core PCE data print to be extremely hot on Friday to see any lasting impact on the rate cut expectations from the Fed. Despite comments from Fed policymaker Bowman today intimating that inflation risks remain this is a long shot and any uptick in inflation may just be a temporary reprieve for Gold prices on its march higher. Technical Analysis Gold (XAU/USD) From a technical analysis standpoint, Gold is tough to read at the minute particularly where areas of resistance is concerned. As we continue to print fresh all time highs it makes it difficult due to the lack of historical price data to analyze.  To put things into perspective, the RSI on the daily, weekly and monthly timeframe are all in overbought territory. However, as we know an instrument can languish weeks and sometimes months in overbought territory on the larger timeframes so this seems to be irrelevant at present. The psychological 2650 mark is the most immediate area i would keep an eye on as we may see a reaction or profit taking at this area. Market participants love whole numbers and when it comes to gold the ’50 and 75′ levels are always key. Looking at support and the 2625 area has been key over the last two days serving as a base fro gold on the smaller timeframes as the precious metal advance toward the 2650 handle. This may be a level worth monitoring moving forward. GOLD One-Hour (H1) Chart, September 24, 2024 Source: TradingView (click to enlarge) Support 2625 2600 2587 Resistance 2650 2675 2700 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The British pound continues to gain ground. GBP/USD has climbed 2.6% since Sept. 12 and is at its highest level since March 2022. In the North American session, GBP/USD is trading at 1.3393, up 0.35% on the day. UK PMIs decelerate in September UK services and manufacturing PMIs softened in September but the data didn’t sour the mood of investors and the pound has moved higher today. The manufacturing PMI eased to 51.5, down from 52.5 in August which was also the market estimate. The services PMI dropped to 52.8, below the August reading of 53.7 and the market estimate of 53.5. The silver lining is that both manufacturing and services remain in expansion territory – services have expanded for 11 straight months, while manufacturing for five consecutive months. The 50 line separates contraction from expansion. Manufacturing and services firms both noted concern over next month’s Autumn Budget. The new Starmer government has signaled that it plans to raise taxes, which has complicated hiring and investment plans. The Bank of England holds its next meeting on November 7, just one week after the Autumn Budget. The UK economy showing signs of improvement and inflation has dropped to 2.2%, within striking distance of the BoE’s 2% target. The BoE is under pressure to deliver a rate cut after staying on the sidelines last week. The drama over the Federal Reserve’s first rate cut in over four years is finally behind us. The markets have digested the jumbo 50-basis point cut and will be looking for guidance from a host of Fed officials who will make public appearances this week. The move will increase the likelihood of a soft landing but concerns remain about the labor market which has weakened dramatically and triggered a global market meltdown in early August. GBP/USD Technical GBP/USD is testing resistance at 1.3389. Above, there is resistance at 1.3429 1.3318 and 1.3278 are providing support      

The US dollar has posted gains on Tuesday. In the North American session, USD/JPY is trading at 144.04, up 0.34% at the time of writing. BoJ’s Ueda says no rush to hike rates The Bank of Japan stayed on the sidelines at last week’s rate meeting but the markets continue to anticipate a rate hike, as inflation has been moving higher. On Tuesday, BoJ Governor Ueda sounded dovish about future rate hikes, saying that the central bank could afford to stay on the sidelines and monitor financial markets and the global economy before making any decisions. The BoJ will be keeping a close eye on domestic data and Ueda singled out October service inflation releases as being a key factor in determining if underlying inflation was rising towards to 2% target, a prerequisite for raising rates. This data won’t be released until November, which would appear to signal that the BoJ won’t raise rates until December at the earliest. The next BoJ meeting is on Oct. 31. Ueda noted that the yen had reversed its recent sharp losses and this had lowered inflationary pressures as inflation due to imports had eased. Ueda also discussed risks to the economic outlook, such as whether the Fed could guide the US economy to a soft landing and the recent volatility in the financial markets. BoJ senior officials have ruled out rate hikes while the markets shows instability. Japan will release BoJ core CPI, a closely-watched inflation indicator, early on Wednesday. The index is expected to remain unchanged at 1.8%. This will be followed by the BoJ minutes for the August meeting. USD/JPY Technical USD/JPY pushed above resistance at 144.32 and tested resistance at 145.04 earlier There is support at 143.02 and 142.44  

USD/JPY failure to have a clear break below 140.25 coupled with BoJ Governor Ueda’s cautious rhetoric has increased the odds of a mean reversion rebound. A swift increase in large speculators’ net bullish open positioning in the JPY futures market to a 5-year high makes the USD/JPY vulnerable to a short squeeze. Watch the key medium-term resistance zone of 146.90/149.30 on the USD/JPY. This is a follow-up analysis of our prior report “JPY crosses face another round of potential downside pressure as NFP looms” published on 6 September 2024. Click here for a recap. Before last Friday, 20 September Bank of Japan’s (BoJ) monetary policy decision, the USD/JPY weakened and hit the first medium-term support level of 140.25 on 16 September as highlighted in our prior report. Hawkish BoJ monetary policy statement toned down by cautious rhetoric from Ueda BoJ has left its overnight policy interest rate unchanged at 0.25% as expected and its monetary policy statement has been peppered with a lukewarm hawkish tone. It stated that inflationary expectations have heightened moderately, consumption is rising moderately, and economic growth in Japan is likely to achieve growth above potential. These liners suggest that BoJ is on track to resume its normalization policy by likely another rate hike of 25 basis points in either October or December. However, during the press conference, BoJ Governor Ueda offered a contrasting guidance where he surprisingly sounded less hawkish, stating that the upside risk to inflation from the recent Japanese yen’s weakness has eased, and BoJ is not in a stage to immediately hike rates immediately due to a lack of clarity in the economic growth conditions of the US. The cautious rhetoric from Ueda has reduced the odds of another rate hike by BoJ in 2024, and pricing in the short-term interest rate swaps market has indicated only a 30% chance of a 25 bps increase in the December monetary policy meeting. The USD/JPY has rallied by 1.95% from last Friday, 20 September Asian session intraday low of 141.74 to print a US session high of 144.50 on the same day. Overstretched net bullish positioning in JPY futures Fig 1: Commitments of Trader large speculators’ net positioning in JPY futures as of 16 Sep 2024 (Source: Macro Micro, click to enlarge chart) Based on the latest data Commitments of Traders data as of 16 September 2024 (compiled by Macro Micro), the aggregate net bullish open positions of large speculators in the JPY futures market (after offsetting the aggregate positions of large commercial hedgers) have risen to +128,679 contracts (net long), a significant increase of 176% in the past six weeks to hit a 5-year high after being net bearish open positioning for almost three years (see Fig 1). Given that net open large speculative positioning flows (primarily from hedge funds) are contrarian in nature which suggests that a relatively high level of net positioning may see an opposite reaction in price actions if related data or news flows disappoint. In the context of USD/JPY price action movements, the risk of an adjustment (short-squeeze) to such high levels of yen bullish open positioning cannot be ruled out as large leveraged speculators have committed a relatively high amount of net bullish open positions. Hence, the USD/JPY now faces an increased risk of a rebound after it declined by 13% from its July high of 161.95 in the past 11 weeks. Technical analysis suggests a potential mean reversion rebound Fig 2: USD/JPY medium-term trend as of 23 Sep 2024 (Source: TradingView, click to enlarge chart) Last week’s price actions of the USD/JPY have probed a significant key swing low of 140.25 formed on 28 December 2023. It failed to break below it on last Monday, 16 September, and staged a daily close above the 20-day moving average at 143.92 last Friday, 20 September (ex-post BoJ). In addition, the daily RSI momentum indicator has flashed out a bullish divergence condition at its oversold region which suggests the prior medium-term downside momentum from 11 July to 16 August has eased (see Fig 2). These observations suggest a possible mean reversion rebound at this juncture that may revisit the key medium-term resistance zone of 146.90/149.30 (also the downward-sloping 50-day moving average). On the flip side, a breakdown with a daily close below 140.25 may resume the downward trajectory to expose the next medium-term supports at 137.35 and 133.75.

The euro has started the trading week with considerable losses. EUR/USD is trading at 1.1103 in the European session at the time of writing, down 0.50% on the day. Later today, we’ll get a look at US services and manufacturing PMIs. Eurozone and German PMIs disappoint The August PMIs for services and manufacturing were a disappointment, as they decelerated in September and missed the estimates. The manufacturing sector remains mired in contraction. The eurozone manufacturing PMI fell to 44.8, below the August reading of 45.8 and the market estimate of 45.6 and was the sharpest decline this year. Germany, the largest economy in the bloc, saw manufacturing fall to 40.3, below the August reading of 42.4 and the market estimate of 42.3. This marked the weakest level in a year. The 50 line separates expansion from contraction. The services sector is looking a bit better, but also eased in September. The eurozone services PMI fell to 50.5, down from 52.9 in August and shy of the market estimate of 52.1. This was the weakest reading since February and indicates marginal expansion. It was a similar story in Germany, as the PMI reading of 50.6 was below the August read of 51.2 and the market estimate of 51.0. The weak data has sent the euro lower today and will support the case for lower interest rates. The European Central Bank has shifted gears and has embarked on rate-cutting cycle with a cut in June and a second cut earlier this month. Inflation is within striking distance of the ECB’s 2% inflation target and the current goal is to kick-start the weak economy and avert a recession. EUR/USD Technical EUR/USD has pushed below support at 1.1141 and tested support at 1.1094 earlier. There is resistance at 1.1212 and 1.1259

The Canadian dollar is steady on Friday. In the European session, USD/CAD is trading at 1.3573 at the time of writing, up 0.12% today. On the data calendar, Canada releases retail sales, while it’s an unusually quiet day in the US, with no releases. Canada’s retail sales expected to bounce back in July   Canada’s retail sales are projected to have jumped 0.6% m/m in July, compared to -0.3% in June. On an annualized basis, retail sales are expected to improve to 0.7%, up from 0.2% in July. The Canadian economy is showing weakness, as high interest rates have taken their toll on economic growth. The good news is that inflation appears under control, falling to 2% in August, down from 2.5% a month earlier. This matches the Bank of Canada’s target and the aim now is to keep trimming rates and avoid a labor market crash. The BoC has already cut rates three times for a total of 0.75%, bringing the benchmark rate to 4.25%. The BoC doesn’t meet again until October 23 and will have plenty of data to review beforehand. In the US, inflation is largely under control and the Federal Reserve has shifted its primary focus to the labor market, as job growth as deteriorated faster than expected. That slide has unnerved financial markets and may have been a key factor in the Fed’s jumbo rate cut of 50 basis points this week. Thursday’s unemployment claims for the period ending Sept. 14 were lower than expected, at 219 thousand. This was well below the revised 231 thousand reading a week earlier and beat the market estimate of 230 thousand. USD/CAD Technical   1.3580 is under pressure in resistance. Above, there is resistance at 1.3626 1.3511 and 1.3465 are the next support levels

The Australian dollar has posted sharp gains on Thursday. AUD/USD rose as much as 1% before paring most of those gains. In the North American session, the Australian dollar is trading at 0.6792, up 0.41% on the day. Australia’s job growth higher than expected Australia created 47.5 thousand jobs in August, close to the revised 48.9 thousand in July and crushing the market estimate of 25 thousand. The gains were all part-time positions as full-time jobs actually declined by 3.1 thousand. Still, investors gave a thumbs-up and the Australian dollar is up sharply today. The unemployment rate remained steady at 4.2%, in line with market expectations. The Reserve Bank of Australia remains an outlier among the major central banks as it is yet to lower rates. The RBA has maintained rates at 4.35% since November but its “higher for longer” stance has not brought down inflation as much as expected. Inflation has dropped to 3.5% but that is still higher than the inflation target range of between 2 and 3 percent. The RBA meets next Wednesday, a day before the August inflation report and is expected to maintain rates. Fed chops rates by 50 basis points In one of the most anticipated rate meetings in recent memory, the Federal Reserve surprised the markets with an oversize cut of 50 basis points. The markets were unsure right up to decision time whether the Fed would go with a modest 25 bps cut or the large 50 bps cut. In the end, the Fed opted for the deeper cut in a near-unanimous decision (11 of 12 members voted in favor). The message from the Fed was that it is confident that inflation will remain sustainably near the 2% target and that the weak labor market was in need of strong relief. In his press conference, Fed Chair Powell tried to assure the markets that the US economy was in good shape and that today’s move was not a signal that further 50 bps cuts were on the way. AUD/USD Technical AUD/USD is testing resistance at 0.6798. Above, there is resistance at 0.6862 0.6751 and 0.6687 are the next support levels

The New Zealand dollar has posted gains on Wednesday. NZD/USD is trading at 0.6211 at the time of writing, up 0.44% on the day. Fed set to cut rates Federal Reserve meetings are traditionally predictable affairs and don’t move the needle of the financial markets. Fed decision makers signal their intentions ahead of time in order to minimize market volatility. Today’s decision is up in the air and it remains unclear what the Fed is going to deliver – will it be a modest 25-basis point cut or a jumbo 50-bps slash? Market pricing of today’s cut has been swinging wildly, which could result in volatility after the decision. The Fed has maintained a stance of ‘higher for longer’ for over a year and has brought down inflation close to the 2% target. The expectation not long ago was that the Fed would kick off the new rate-tightening cycle with a traditional 25-bps cut. What has complicated matters is the recent deterioration in the US labor market. Job growth has fallen sharply and spooked the markets, with fears that the US economy could fall into a recession. The darkening employment picture has boosted the likelihood of a 50-bps cut, but such a deep cut could send a signal that the economy is in deep trouble and unnerve investors. The markets will be keeping a close eye on the Fed’s ‘dot plot’, which will signal the expected rate path over the next few years as well as updated economic forecasts. The Fed is expected to be aggressive in its rate cuts, now that inflation is largely beaten and the employment picture has deteriorated. Overshadowed by the dramatic Fed meeting, New Zealand will release second-quarter GDP early on Thursday. The markets are bracing for a contraction in growth. In the first quarter, the economy showed slight growth of 0.2% q/q and 0.3% y/y. This is expected to fall to -0.4% q/q and -0.5% y/y. NZD/USD Technical NZD/USD has pushed above resistance at 0.6199. Above, there is resistance at 0.6240 There is support at 0.6153 and 0.6112

The euro is calm on Wednesday. EUR/USD is trading at 1.1125 in the North American session at the time of writing, up 0.11% today. Fed poised to lower rates The Federal Reserve meets later today and it’s looking like a coin toss as to whether the Fed will lower rates by 25 or 50 basis points. This is the Fed’s biggest interest rate call in years and there are strong arguments to support both scenarios. This will be the Fed’s first rate cut in over four years. Beyond the burning issue of the extent of today’s rate cut, the markets will be keeping a close eye on the Fed’s ‘dot plot’, which will signal the expected rate path over the next few years as well as updated economic forecasts. The Fed is expected to be aggressive in its rate cuts, now that inflation is largely beaten and the employment picture has deteriorated. Fed meetings are traditionally fairly predictable, as policy makers communicate their intentions ahead of time in order to minimize market volatility. That is not the case this time, as the Fed prepares to join other major central banks in a rate-cutting cycle. The Fed has maintained a stance of ‘higher for longer’ for over a year and has brought down inflation close to the 2% target. There are still upward risks of inflation but the labor market has deteriorated sharply in recent months, and a rate cut is clearly necessary. The Fed would likely have preferred to kick off the new rate-cutting cycle with a modest 25 basis-point cut, but a 50-bps cut would provide a bigger boost to the economy and help consumers, who are struggling with high interest rates. EUR/USD Technical EUR/USD is putting pressure on resistance at 1.1123. Above, there is resistance at 1.1136 There is support at 1.1101 and 1.1089

The New Zealand dollar has started the new trading week with strong gains. NZD/USD is up 0.55% today, trading at 0.6191 in the European session at the time of writing. NZ Services PMI improves New Zealand’s services sector hasn’t shown growth in sixth months but there was a bit of positive news today as the services PMI improved to 45.5 in August, up from an upwardly revised 45.2 in July. This was its highest level since April. On Friday, New Zealand’s manufacturing PMI also improved, rising in August from an upwardly revised 44.4 to 45.8, although shy of the forecast of 47.0. Although services and manufacturing remain firmly in contraction territory (the 50 level separates contraction from expansion), the acceleration in August and the upward revisions a month earlier point to some positive momentum. The Reserve Bank of New Zealand joined the rate-cutting club last month, lowering rates by 25 basis points to 5.25%. The economy has been struggling and with inflation down to 3.3%, the central bank has started a rate-cut cycle as it tries to boost weak economic activity. The RBNZ meets next on October 9 and the sole tier-1 event until then is second-quarter GDP, which will be released on Thursday. The markets are braced for grim numbers as the economy is expected to have contracted in the second quarter (-0.4% q/q and 0.5% y/y) after posting small gains in the first quarter. If GDP contracts in Q2, there will be further pressure on the RBNZ to lower rates at the next meeting. NZD/USD Technical NZD/USD is putting pressure on resistance at 0.6199. Above, there is resistance at 0.6240 0.6153 and 0.6112 are providing support

Federal Reserve’s Upcoming Decision: Markets are split on whether the Fed will cut rates by 25 or 50 bps. Key data releases from China, Japan, the UK, and the US will shape market sentiment and potentially set the tone for Q4 2024. The DXY is nearing a critical support level, and its direction could determine the US Dollar’s trajectory ahead of the US election. Read More: Germany 30 Technical: A potential bearish reversal looms Week in Review: Market Participants Left with More Questions As the week draws to a close, US data remained robust with a marginal uptick in both the core CPI and PPI prints. Data leading into Thursday’s US session seemed to solidify a 25 bps cut from the Federal Reserve, however the idea of a 50 bps cut gained renewed traction late in the day. Comments from Former Fed Policymaker Bill Dudley, who explicitly said he would push for a 50 bps cut were he still in the committee. Some media outlets reported that it would be a tight decision between a 25 basis point and a 50 basis point change, which also played a role in the market’s dovish adjustment.  Market expectations saw a significant shift on Thursday with the probability of a 50 bps cut rising from 28% to 43%.  Source: CME FedWatch Tool The most intriguing part of Dudley’s speech however was his comments about the Fed and surprises. Dudley said “It’s very unusual to go into a meeting with this level of uncertainty – usually the Fed doesn’t like to surprise markets”. Dudley hit the nail on the head as I for one cannot remember the last time I was prepping for a Federal reserve meeting with such uncertainty in play. There is growing chatter and something hinted at by ING Think Research as well in that if markets continue to aggressively price a 50 bps cut ahead of the Wednesday meeting, it could sway the Fed to deliver such a cut. In light of the shift in rate expectations US equities continued their advance this week. The S&P 500 added around $1.8 trillion USD in market cap over the last week alone with NVIDIA up around 15% for the week. This leaves the S&P 500 just 1% away from all time highs, the Nasdaq 100 lags a little behind but is also within striking distance of the all time highs.  S&P 500 Weekly Heatmap Source: TradingView Gold received a shot in the arm Thursday afternoon following the rate cut chatter, coupled with rising concerns around the Russia-Ukraine conflict. This helped the precious metal push beyond the highs at 2531/oz before going on to print fresh highs around 2586/oz at the time of writing. On the FX front we saw a recovery for both cable and EUR/USD with USD/JPY coming under pressure during the course of the week. The DXY remains a key player where FX moves are concerned and is heading into an important week which could set the tone for the US Dollar for the rest of the year. The Week Ahead: Will it be a 25 or 50 bps Cut from the Fed? The week ahead is packed with high impact data releases in both developed and emerging markets. Three major central bank meetings and a host of other high impact economic data releases will drive market sentiment and could set the tone for Q4. Asia Pacific Markets In Asia, the upcoming week data dumps for China and Japan as well as a raft of Asian central bank meetings make for a busy week ahead. In China the August data release is set for Saturday morning, and we anticipate another month of tepid growth figures. Key economic indicators, including industrial production (previously 5.1%, now forecasted at 4.8%), fixed asset investment (previously 3.6%, forecasted at 3.5%), and retail sales (previously 2.7%, forecasted at 2.5%), are all projected to slow down. Market participants will also keep a close eye on the 70-city housing price data, seeking signs of stabilization. Although price declines have slowed over the past two months, the ongoing drop remains notable. The Bank of Japan is anticipated to maintain its current rates following the 15 basis point increase in July. Nonetheless, if the forthcoming growth and inflation figures align with the central bank’s projections, it is expected to restart its rate hikes in December. This is in line with comments late on Friday from Sanae Takaichi, a candidate for Prime Minister who stated the time is not right for another rate hike. Europe + UK + US A busy week in developed markets with both the BoE and Federal Reserve rate decisions taking center stage. There are a host of other data releases as well which are likely to be overshadowed by the Central Bank meetings. The Bank of England faces a different challenge to the Federal Reserve as UK data has remained strong. Recessionary fears have faded and market participants have tempered their rate cut bets following the latest batch of data. Part of the caution stems from services inflation, which, at 5.2%, remains higher than that of the US and the eurozone, similar to the trend in wage growth. However, this figure is notably lower than the Bank’s latest forecast, and July’s numbers also fell short of expectations. For now it appears a hold may be the most appropriate course of action before a cuts closer toward the year end. The Federal Reserve meeting has already been covered in depth above. The challenges for the Fed are clear as markets grapple with either a 25 or 50 bps cut next week. I am leaning toward a 25 bps cut but as I said earlier there are a host of uncertainties. If markets continue to price in a 50 bps cut ahead of Wednesday, will the Fed spring a surprise? For all market-moving economic releases and events, see the MarketPulse Economic Calendar. Chart of the Week This week’s focus is on the US Dollar Index (DXY), which continues to be intriguing and surprising. The week ahead could be make or break for the DXY as it still remains within striking distance of the psychological 100.00 level. The DXY put in an impressive start to the week before the momentum began to wane. Tuesday and Wednesday saw some sideways price action before a selloff on Thursday as rate cut bets changed.   The index is currently trading just below the support level at the 101.18 handle with 100.50 needing to be cleared if we are to finally test the 100.00 mark. On the upside now we have created a key area of resistance that needs to be cleared at around the 101.77 if a recovery is to gain any traction. US Dollar Index (DXY) Daily Chart – September 13, 2024 Source:TradingView.Com (click to enlarge) Key Levels to Consider: Support: 100.50 100.00 99.55 (July 2023 Low) Resistance: 101.80 102.16 103.00 103.80 (100 and 200-day MA) Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Wall Street indexes paused after Wednesdays rally as Core PPI came in hot. Moderna shares plunged 17.8% due to lower-than-expected sales projections. Nasdaq 100 shows potential for upward movement, but technical hurdles persist. Most Read: Gold (XAU/USD) Flirts with All-Time Highs. Will US CPI Prove the Catalyst for a Breakout? The major Wall Street Indexes have all taken a breather today following a significant rally on Wednesday. Markets digested the PPI print today which followed its CPI counterpart in that the core print came in hotter than expected.  The data comes as many investment banks and analysts have warned of late that rate cuts may not be as aggressive as the markets are expecting. The ECB delivering a 50 bps cut today may have emboldened some market participants but the release of the US PPI just 15 mins later kept any bullish interest in check. In August 2024, factory gate prices in the US rose by 0.2% compared to the previous month, after being flat in July, which had been revised downwards. This increase was higher than the expected 0.1% rise. Core producer prices followed in the same vein as core CPI in the United States, which exclude food and energy costs, rose by 0.3% over a month in August 2024, following a revised 0.2% fall in the prior month and compared with forecasts of a 0.2% increase. On an annual basis, core producer inflation was 2.4% in August, up from a downwardly revised 2.3% in July but slightly below market estimates of 2.5%. On an individual stock front, Shares of Moderna, trading under MRNA.O, plummeted by 17.8%, reaching their lowest point since November during intraday trading. This significant drop made Moderna the biggest loser on the S&P 500, following the company’s sales projection for the next year, estimated between $2.5 billion and $3.5 billion, which fell short of analysts’ expectations. Top Gainers and Losers – S&P 500 Source: LSEG Workspace (click to enlarge) Following the US data this week markets appear more cautious as it appears that rate cuts from the Federal Reserve may not be as aggressive as hoped. Markets are now pricing in a 77% probability that the Fed will deliver a 25 bps cut next week, the question is how much of that may already be priced in? Tech stocks rallied aggressively yesterday and were largely responsible for the rally in both the Nas100 and the S&P 500. Today however we are still seeing gains in some tech stocks but the magnificent 7 are a little more steady in comparison to yesterday and could in part explain the lack of movement in US Indexes. Nasdaq 100 Heatmap Source: TradingView (click to enlarge) Technical Analysis  NASDAQ 100 From a technical standpoint, the Nasdaq 100 has experienced a remarkable performance this week, heading towards its fourth straight day of gains. The recent daily close above the 100-day moving average suggests potential for continued upward movement. However, there are technical challenges ahead, including a descending trendline and the previous swing high near the 19,600 level. This area is a significant confluence zone that needs to be surpassed, and breaking through the trendline might propel the index toward the psychological 20,000 mark. A concern remains that although we’re seeing a four-day bullish streak, the Relative Strength Index (RSI) has just crossed above the 50 mark, indicating that further upward potential exists. Reflecting on the past, the previous rally starting on August 8 saw eight consecutive days of bullish movements before a downturn occurred. Could we see a similar pattern leading up to next week’s FOMC meeting? NASDAQ 100 Daily Chart, September 12, 2024 Source: TradingView (click to enlarge)  Support 19123 19000 18850 Resistance 19600 19850 20000 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The euro continues to show limited movement and is almost unchanged on Thursday. EUR/USD is trading at 1.1010 in the North American session at the time of writing. ECB expected to deliver 25 bps cut The European Central Bank meets later today and the markets are expecting a rate cut of 25 basis points, which bring down the key rate to 3.5%. This would mark the second rate cut after an initial 25-bps reduction in June. A jumbo 50-bps cut is also a possibility but I expect the ECB to play it safe and deliver a modest cut of 25-bps. Inflation has fallen to 2.2% its lowest level since July 2021 and is close to the ECB’s target of 2%, although core CPI is higher at 2.8%. Wage growth has eased and eurozone GDP for Q2 was revised downwards to 0.2%, which means that conditions are favorable for another rate cut at today’s meeting. If inflation remains low, the ECB could try to squeeze one final rate cut before year’s end and continue trimming in early 2025. ECB President Lagarde has ditched forward guidance, saying that rate decisions will be data-dependent. Still, the ECB has widely telegraphed that it will lower rates today and it’s no secret that the central bank is looking to continue cutting if the data is favorable. The ECB will also release updated economic forecasts today and investors will be looking for hints about future rate policy. If Lagarde sends a dovish message about future rate cuts, it would likely hurt the euro, which has gained 1.1% against the US dollar since late August. EUR/USD Technical EUR/USD is testing resistance at 1.1023. Above, there is resistance at 1.1044 There is support at 1.0991 and 1.0970

Bitcoin prices rebounded due to increased ETF inflows, ending an 8-day outflow streak. BlackRock warns of continued market volatility, citing recession concerns, US election anxiety, and investor sell-offs. On-chain data indicates decreased investor engagement and trading volumes in Bitcoin and Ethereum. Most Read: Gold (XAU/USD) Flirts with All-Time Highs. Will US CPI Prove the Catalyst for a Breakout? Bitcoin prices have recovered last week’s losses as ETF flows snap an 8 day streak of outflows. On September 10, there was a substantial increase in inflows, reaching $116.96 million, which is more than four times the $37.29 million recorded the day before. Source: SoSo Value (click to enlarge) Bitcoin tapped a high of 58000 yesterday before a pullback today pushed prices toward the psychological 55000 level. A bit of whipsaw price action today as markets digest US inflation data which has all but confirmed a 25 bps rate cut at next week’s meeting.  BlackRock, the world’s largest asset manager, has issued a warning that they see more volatility flare ups ahead and do not see the Fed cutting rates as fast as markets are predicting.  According to the note released by BlackRock Investment Institute, including Jean Boivin, several elements are contributing to market volatility: renewed recession concerns due to weaker economic data, anxiety surrounding the upcoming U.S. elections, and investors selling off to accommodate new stock offerings. On-Chain Data Analysis Looking at on-chain data analysis from Glassnode, investor engagement with exchanges is decreasing, as shrinking trading volumes indicate a reduced interest in both investing and trading activities.  Running a similar 30d/365d momentum cross-over for exchange-related inflows and outflows, we can see that the monthly average volume has fallen well below the yearly. This underscores a decline in investor demand and less trading by speculators within the current price range which is no surprise given the lack of conviction we are seeing.  Source: Glassnode (click to enlarge) While both Bitcoin and Ethereum ETFs are experiencing outflows, the level of investor interest in Bitcoin ETFs is considerably greater. Despite the recent outflows the Bitcoin ETF was a historic event for crypto markets and recent analysis by Chainalysis’ concurs.  According to Chainalysis, the spot Bitcoin ETF increased crypto transactions globally to unprecedented levels. The launch of the Bitcoin ETF in the US triggered an increase in the total value of Bitcoin activity across all regions and thus meant a significant milestone reached during the 2021 bull run has been surpassed. As always and more so when it comes to crypto, perspective is important. US Presidential Race and Debate Reaction The US Presidential debate took place yesterday and delivered very little. There was a notable omission of anything related to Bitcoin despite the crypto lobby having spent $119 million on the election so far. Donald Trump is still broadly seen as the pro-crypto candidate putting him at odds with Harris who is expected to continue the Biden administration’s hostile approach to crypto. For now, it would appear that markets are calm regarding the US election. However the closer the date gets the more chance there is that crypto will return as a talking point and that could stoke volatility. Technical Analysis BTC/USD Bitcoin fell today towards the psychological 55000 level before rebounding aggressively to trade above the support level at 56500. The daily candle close today will be crucial and could provide some insight into what to expect tomorrow. A bullish close will see the daily candle close as a hammer candlestick which hints at further upside tomorrow. A bearish close would be a hanging man, which in theory points to some form of pullback. If one thing has become clear lately, range trading remains very much in play as market participants bide their time. The on chain data confirms this with trading volume also suffering of late. Support 56515 55000 53900  Resistance 58500 60000 61555  Bitcoin (BTC/USD) Daily Chart, September 11, 2024 Source: TradingView.com (click to enlarge) Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

In the past four weeks, Gold (XAU/USD) has traded in a tight range environment below US$2,532 key intermediate range resistance. Positive momentum reading and a major bearish breakdown seen in the 10-year US Treasury real yield may trigger a bullish breakout in Gold (XAU/USD). Watch the key medium-term support at US$2,435 for Gold (XAU/USD). This is a follow-up analysis of our prior report “Gold Technical: The recent sell-off may have reached a potential bullish reversal level at US$2,353” published on 26 July 2024. Click here for a recap. Since our last publication, the price actions of Gold (XAU/USD) have managed to stage a rebound above the US$2,353 bullish reversal level and resumed its impulsive upmove sequence to print a recent fresh all-time level of US$2,352 on 20 August. Considering the upcoming key US inflation data release later today, where the core inflation rate for August is expected to show signs of a deceleration trend continuation of the inflationary conditions in the US, coming in at 3.2% y/y, a similar pace to 3.2% recorded in July, which was a three-month low. Through the lens of technical analysis, several positive elements have emerged that may support a potential bullish breakout for Gold (XAU/USD) after four weeks of tight-range trading. 10-year US Treasury real yield has staged a major bearish breakdown Fig 1: US 10-YR Treasury real yield major & medium-term trends as of 11 Sep 2024 (Source: TradingView, click to enlarge chart) The 10-year US Treasury real yield is measured by subtracting the 10-year breakeven inflation rate derived from 10-year US Treasury Inflation-Protected Securities (TIPS) from the nominal 10-year US Treasury yield. If the 10-year US Treasury real yield is trending downwards, it implies that the long-term real opportunity cost of holding Gold (XAU/USD) is reduced as Gold is a non-income bearing asset, and vice versa when the 10-year US Treasury real yield trends upwards (see Fig 1). Right now, the 10-year US Treasury real yield has just breached below major support at 1.62% (in place since late December 2023) which suggests that Gold (XAU/USD) has become more valuable as its associated long-term opportunity costs may be further reduced given the next medium-term support of the 10-year US Treasury real yield rests at 1.38%. Hence, it may propel more demand for Gold (XAU/USD) which in turn is likely to drive up its price. Medium-term momentum remains positive for Gold Fig 2: Gold (XAU/USD)  major & medium-term trends as of 11 Sep 2024 (Source: TradingView, click to enlarge chart) The price actions of Gold (XAU/USD) have continued to oscillate within its medium-term ascending channel in place since the 6 October 2023 low of US$1,810 and are supported by a rising 50-day moving average that is also confluences closely with its key medium-term pivotal support at US$2,435. In addition, the daily RSI momentum indicator has continued to display a series of “higher lows” above its 50 level and has not reached an overbought condition. These positive technical elements suggest that upside momentum may be building up for a potential bullish breakout for Gold XAU/USD, a clearance above US$2,532 may see the next medium-term resistance zone coming in at US2,640/715 in the first step (see Fig 2). On the other hand, a break below US$2,435 negates the bullish scenario to kick start a potential multi-week corrective decline sequence within its medium-term and major uptrend phases to expose the next support at US$2,359, and below it sees an increased risk for an extension of the corrective decline towards the US$2,285 long-term pivotal support (also close to the 200-day moving average).

Gold prices are inching higher as the market awaits the US CPI release. Market reaction to the CPI data will depend on whether rate cut expectations are already priced in. From a technical analysis perspective, the gold chart may be forming a double top pattern ahead of the CPI release. Most Read: Brent Crude – Oil Slides Below $70 a Barrel, First Time Since December 2021 Gold prices inched higher in Asian trade as market participants brace for the US CPI release. The precious metal continues to flirt with the all-time highs (ATH) around 2531/oz. Market participants may be eyeing US CPI as a catalyst which could inspire a breakout and push gold prices to fresh highs. I am a bit more skeptical however, and there are two reasons for that. The first being that US inflation data does not hold the same sway as it did a few weeks back. The second is the reaction following last week’s labor data suggests that a lot of the rate cut expectations may be priced in.  If that is the case we could see an initial spike to print a fresh high before a significant pullback. However, as the trading adage goes, ‘trade what you see, not what you think’. We need to keep this in mind and keep an eye on the data release as well as the market’s reaction to it. The US Dollar has struggled to maintain Monday’s momentum with the DXY failing to advance. This in part could explain gold’s rise overnight. This could be caution ahead of the CPI release with market participants mindful of the US Dollar price action we saw after the jobs data on Friday. For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge) Geopolitics remain in play and continue to underpin gold prices. A visit by US Secretary Blinken and UKs David Lammy to Ukraine has increased concerns that the US and UK may grant Ukrainians the ability to use weapons from Western Nations to strike at the heart of Russia.  Market participants may view this as an unnecessary risk which may keep gold prices supported. Such an attack would surely prompt a Russian response and the fear is that this could trigger attacks by Russia on European nations or potentially NATO members.  Technical Analysis Gold (XAU/USD) From a technical analysis standpoint, the four-hour gold chart could be forming a potential double top pattern heading into the US CPI release. The last time we had a double bottom pattern, gold prices rallied from 2471 on September 4 to a high of around 2529 on September 6. Will a double bottom lead to a similar move but to the downside? It is a tough one to call as we saw following the US jobs data release. Markets may have already priced in a substantial amount of rate cuts and thus only a significant miss from the CPI may warrant a significant reaction. Even then i remain skeptical that such a move would prove sustainable. A move lower from current price, may find some support at a key confluence area around 2507 which houses the 100-day MA. Conversely, a move higher from here needs to navigate its way past the ATH print of 2531 before the 2550 handle comes into play. GOLD (XAU/USD) Four-Hour (H4) Chart, August 23, 2024 Source: TradingView (click to enlarge) Support 2507 2500 2487 Resistance 2531 2550 2575 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The British pound has edged lower on Tuesday. In the North American session, GBP/USD is trading at 1.3055, down 0.14% on the day. UK wage growth drops to 2-year low UK wage growth eased in the three months to July, an encouraging sign for the Bank of England as it looks to continue lowering rates. Average earnings excluding bonuses climbed 5.1% y/y, down from 5.4% in the previous period and in line with the market estimate. This was the lowest level since June 2022. Wage growth is moving in the right direction but is still much too high for the BoE’s liking as it is incompatible with the target of keeping inflation at 2%. The UK labour market remains strong, as the unemployment rate edged down to 4.1%, down from 4%. The economy created 265 thousand jobs in the three months to July, up sharply from 97 thousand in the previous report and blowing past the market estimate of 115 thousand. The solid data means that the BoE isn’t under pressure to cut rates next week, and the markets are looking at another cut in November. The UK economy gets a report card on Wednesday, with the release of GDP for July. The economy flatlined in June and rose just 0.6% in the three months to June. Another weak GDP release could put pressure on the British pound. Investors will be keeping a close eye on Wednesday’s US inflation release. The Federal Reserve is now focused on employment now that inflation is between 2% and 3%, but a CPI surprise could shake up the markets and change market pricing for a Fed rate cut. The odds of a 50-basis point cut have been slashed to 29%, compared to 59% on Friday. GBP/USD Technical There is resistance at 1.3167 and 1.3225 1.3069 and 1.3011 are providing support    

The Australian dollar continues to have a quiet week. AUD/USD is trading at 0.6671 in the European session, up 0.17% today at the time of writing. With the Australian economy sputtering, it should come as no surprise that today’s confidence indicators pointed downward. Westpac consumer confidence change declined 0.5% m/m in September, falling from 85.0 to 84.6. This was better than the forecast of -1.2% but points to pessimistic consumers who remain nervous about potential job losses in a weak economy. The National Australia Bank business confidence index fell to -4 in August, its lowest level since November 2023. This followed back-to-back gains. Confidence was down across a range of sectors and business expectations also declined. Business confidence has been stronger than consumer sentiment this year but has now converged as both are showing deep pessimism about economic conditions. The financial markets have been showing strong swings and the market pricing of a Federal Reserve rate cut are also moving wildly. After Friday’s lukewarm nonfarm payrolls report, the odds of a 50-basis point cut shot up to 59%, up from 43% before the release, according to CME’s FedWatch. That has plunged to just 27% on Tuesday, ahead of tomorrow’s CPI report. We could see the rate-cut odds continue to swing if inflation surprises the markets, which expect a 2.6% gain for August, down from 2.9% in the previous reading. The Fed meets on Sept. 18 and is widely expected to deliver its first rate cut after a lengthy rate-hike cycle. Now that inflation is largely under control, the Fed is keeping a close eye on the US labor market as it tries to guide the economy to a soft landing. The labor market hasn’t crashed but recent nonfarm payrolls numbers indicate that the labor market is cooling and that could mean a series of rate cuts extending into 2025. AUD/USD Technical AUD/USD is testing resistance at 0.6666. Above, there is resistance at 0.6684 0.6643 and 0.6625 are the next support levels

UK labor data beats expectations, with regular pay rising by 5.1% and employment increasing by 265k. BoE faces challenges in balancing strong employment figures with moderating wage growth and rate cut hopes. US CPI and PPI, and BoE Deputy Governor Sarah Breeden’s comments, could impact GBP/USD’s trajectory. Most Read: Is EUR/USD Vulnerable Ahead of ECB Meeting…? DXY to Play a Major Role The GBP benefitted following a positive UK labor data release this morning. Cable rallied around 30 pips following the data release but has since surrendered the post data gains.    The implications for the Bank of England (BoE) will be interesting as the Central Bank was already expected to cut rates less than peers at the ECB and Federal reserve. The strong employment numbers will no doubt raise inflation concerns however, the moderation in wage growth may be a point that keeps dovish MPC members on board regarding further rate cuts. In the UK, regular pay, excluding bonuses, rose by 5.1% year-on-year to GBP 647 per week for the three months leading up to July 2024. This marks the smallest increase since June 2022 and follows a 5.4% rise in the prior period, aligning with market expectations. Wage growth decelerated in both the private sector, decreasing to 4.9% from 5.3%, and the public sector, dropping to 5.7% from 6%. The manufacturing sector experienced the highest annual regular wage increase at 5.9%, followed by the finance and business services sector at 5.4%, and the services sector at 5.1%. UK Wage Growth YoY Source: TradingEconomics, ONS Employment increased by 265k smashing estimates of 115k which is the highest rise in employment over the past 18 months. The drop in unemployment to 4.1% is of course another positive for the UK economy but only compounds the headache facing the Bank of England (BoE).  Economic Data Ahead There is quite a bit of data ahead this week which could impact GBP/USD. The majority of the data comes from the US with CPI released tomorrow and of course PPI on Thursday.  However, I will be more interested in comments from BoE Deputy Governor Sarah Breeden. Given the labor data today it will be key to gauge where BoE policymakers stand regarding rate cuts moving forward. Any sign of diverging policy with the Federal Reserve could have medium to long-term implications for GBP/USD and could be key in where the pair may end up come year-end.  For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge) Technical Analysis Looking at GBP/USD from a technical standpoint and the pair does look like a move lower may continue to unfold. Cable is on a two day losing streak having printed a lower high last week Friday at resistance around 1.3181. One of the concerns for bears from a price action perspective is that a lower low has already been printed which could pave the way for a short-term pullback. This coupled with UK labor data earlier in the day could prompt some short-term buying pressure.  Looking at the downside and immediate support rests at the 1.3000 psychological level, although cable may find support at around the 1.30400 handle which was the July 17 high. Conversely, a move higher here will first need to take out the current daily high around 1.3100 before the recent swing high at 1.3181 comes into focus.   GBP/USD Daily Chart, September 10, 2024 Source:TradingView.com Support 1.3040 1.3000 1.2942 Resistance 1.3100 1.3181 1.3250 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda