Suggestion Daily Market Analysis By Investizo

EUR/USD started the week with a decline to $1.09750 amid disappointing German retail sales data and mixed Eurozone economic data.

In terms of Eurozone data, Monday saw the release of July's harmonized consumer price index, which rose 5.5% year-on-year, as well as a flash GDP figure of 0.3% QoQ and 0.6% YoY. Despite a 1.6% y/y increase in German retail sales in June, the monthly figure fell to -0.8%. The ECB, raising interest rates, added 25 basis points to 4.25%, suggesting a pause in interest rate hikes in September as signs of weakening inflation and recession fears emerge. The media's interpretation of today's PMI, especially its sub-components - prices, employment and new orders - could affect market sentiment.

However, the US dollar showed resilience, reaching 102.00 on Tuesday, despite weak US inflation data released last week. annual. Meanwhile, the Chicago PMI for July came in at 42.8 and the Dallas manufacturing PMI improved slightly to -20. Although the likelihood of a Fed rate hike in September has diminished, signs of sustained growth in the U.S. economy remain. Sub-component analysis of the ISM manufacturing PMI may indicate that inflationary pressures are building. Further attention will be focused on the ISM non-manufacturing PMI released on Thursday. Market watchers are eyeing the upcoming US manufacturing PMI data for further guidance.

China's manufacturing PMI for July fell from 50.5 to 49.2, indicating weak demand both at home and abroad.

Investors will pay attention to manufacturing PMI data, unemployment rate in Germany and, above all, to the expected US non-farm payrolls report on Friday, forecasting the creation of 180,000 jobs and a stable employment rate of 3.6%. In particular, further price movement depends on the Eurozone manufacturing PMI, especially from Italy, and the final Eurozone figures are expected to have a significant impact.
Technical analysis and scenarios:


The EUR/USD pair is currently trading at 1.09750, near the 1.10000 support level, and is showing bearish sentiment according to various technical indicators. The Stochastic Oscillator (5,3,3) at 12.4204 and the signal line at 8.1969 are in oversold territory, hinting at a possible bullish reversal. However, this bullish signal should be confirmed by other technical indicators. The Bollinger Bands with middle band at 1.10120, upper band at 1.10990 and lower band at 1.09340 are pointing downwards, indicating a bearish trend. The price is currently in the lower range of Bollinger Bands, indicating that the bearish sentiment remains in the short term. The MACD (12,26,9) value of -0.002032 is below the -0.002158 signal line, further confirming the bearish trend.

Main scenario (SELL)
Recommended entry level: 1.09900.
Take Profit: 1.08140.
Stop Loss: 1.09500.

Alternative scenario (BUY)
Recommended entry level: 1.10690.
Take Profit: 1.11400.
Stop loss: 1.10350.

 

Fundamental analysis of XAU/USD

Gold is going through a volatile period marked by significant fluctuations and economic events that have affected its price and demand. XAU/USD is currently trading at 1949.50 after an upward correction.



One of the main catalysts for the rise in gold prices was the unexpected downgrade of the US credit rating by Fitch Ratings from AAA to AA+. The move was attributed to concerns over the country's slowing financial growth and increasing government debt over the next three years. While the previous downgrade sent the market into turmoil, this time the initial reaction was relatively calm, but experts continue to monitor the situation. U.S. Treasury Secretary Janet Yellen disagreed with the decision, calling it "arbitrary," and this disagreement has raised concerns about the U.S. debt ceiling crisis. The downgrade led to a drop in confidence in the economy, prompting investors to rush to gold, considered a safe-haven asset. This has led to an increase in demand, reflecting gold's historical role as a preferred investment during periods of economic uncertainty and stress.

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Fundamental analysis of USD/JPY

The USD/JPY pair is correcting after a slight decline and is trading at 143.340 as Japanese authorities took steps to defend the currency. This reaction is the result of cautious optimism in the markets and a weaker US dollar amid upcoming US economic data and changes in the dynamics of bond yields.



The Bank of Japan expanded the ceiling on the allowed rate on 10-year Japanese government bonds from 0.5% to 1.0%. The move pushed JGB yields to their highest levels in a decade, and to control the volatility of the Japanese yen, the BOJ announced unscheduled purchases of 5- and 10-year bonds. Japanese Governor Hirokazu Matsuno expressed confidence in the BOJ's strategy and remained vigilant against currency fluctuations.

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Fundamental analysis of XAU/USD

XAU/USD prices are trading in a narrow range at 1936.00 ahead of important macroeconomic data on the US economy.While the US dollar reached a four-week high and the yield on 10-year US Treasuries reached its highest level since November last year, XAU/USD is about to hit a three-week low. This situation makes gold more expensive for those who trade in other currencies and puts pressure on gold, which is fraught with the risk of breaking the support level of 1916.00.



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Fundamental analysis of XAU/USD

XAU/USD is currently in swing territory, trading at 1937.00 as traders ponder the potential impact of U.S. labor market trends and upcoming inflation data on the direction of U.S. monetary policy. While a weaker dollar and lower bond yields have supported the precious metal, the way forward remains unclear.



Current market conditions have been driven primarily by slowing US job growth, which has weakened the dollar and bond yields, and contributed to gold's rally last Friday. The U.S. jobs report for July showed slower than expected job growth, indicating that the labor market may be stabilizing. This suggested that the recent Fed rate hike could be the last in an ongoing tightening cycle. However, strong wage growth and a declining unemployment rate suggest that the labor market remains tight, providing an opportunity to assess the Fed's future interest rate decisions. In light of these mixed signals from the labor market, attention now turns to the upcoming consumer price index (CPI) data due on Wednesday. This data will be key in determining whether further rate hikes are needed to curb inflation. If interest rates rise, gold, traditionally a hedge against inflation, could lose its appeal.

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Fundamental analysis of WTI

WTI crude oil price is hovering at 82.35, pointing to concerns about a drop in Chinese oil demand following news on trade and inflation, as China is the largest oil consumer. These concerns were heightened when China's crude oil imports fell 18.8% in July. However, there is a positive side to the U.S. Energy Information Administration's monthly report. With GDP growth forecast for 2023 rising from 1.5% to 1.9% and crude oil prices rising since June, largely due to a prolonged voluntary production cut in Saudi Arabia and rising global demand, this is an optimistic sign. This optimism is also supported by Saudi Arabia's recent announcement to extend its voluntary oil production cuts and Russia's plan to cut oil exports in September.





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Fundamental analysis of EUR/USD

EUR/USD rose slightly and is trading at 1.09960. The US CPI report led to an unpredictable development: despite a lower than expected core inflation reading, core inflation remained flat, limiting further upside.





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Fundamental analysis of GBP/USD

The GBP/USD pair is trading around 1.26900, recovering from a one and a half month low as traders await the release of important economic data from the UK and the US. This small rally comes despite a cautious atmosphere in global markets and uncertainty surrounding major risk events.





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Fundamental analysis of XAU/USD

Gold prices rose, recovering from their lowest levels since late June, amid rising expectations of the minutes of the US Federal Reserve's monetary policy meeting. This rally in gold prices was supported by the emergence of cautious optimism in the market. The main contributing factors are expectations of further stimulus packages from China and the likelihood that the Fed will end the tightening cycle based on recent conflicting US data indicators. In addition, the recent passivity of major central banks appears to signal the end of the rate hike cycle. These moves have created a safety net for XAU/USD, especially given China's willingness to continue stimulus and India's economic measures. Despite this, the day before, gold prices were dragged to multi-day lows by strong US retail sales, data from China and US Treasury yields. The XAU/USD pair is also under pressure due to weakness in risk assets such as stocks, bonds and other commodities.





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Fundamental analysis of GBP/USD

Against the backdrop of a busy economic calendar, the GBP/USD pair is showing notable fluctuations. UK retail sales data for July showed a stronger-than-expected decline of 1.2%. On a year-on-year basis, retail sales fell 3.2%, contrasting with June's 1.6% decline, with core retail sales reflecting a similar downward trend. A number of factors, including rainy weather, higher cost of living and rising food prices, contributed to these low sales numbers. Lower retail sales may reduce the need for the Bank of England to tightly manage inflation. Rising interest rates and the current inflationary environment have led to lower consumer spending, which may ease demand-driven inflationary pressures. The UK Consumer Price Index (CPI) fell 0.4% for the month, ahead of market expectations. The core CPI, which excludes volatile components such as oil and food, presents a worrying picture of lingering inflation in the UK, which could prompt the Bank of England to raise rates further.





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Fundamental analysis of EUR/USD


The EUR/USD pair started the new week confidently, reaching the level of 1.09200, creating prerequisites for optimism in the European currency markets.
ECB Chief Economist Philip Lane recently stated that the Eurozone can avoid a prolonged recession. This sentiment has led to a rise in the single currency, especially as the German yield curve begins to tighten, suggesting that the ECB may adjust its policy. At the same time, the weakening of the US dollar provided support to the EUR/USD pair. The US Dollar Index fell to 103.130, but the resilience of the US economy suggests the possibility of a rate hike before the end of the year, which could offset the sharp fall in the US Dollar.





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Fundamental analysis of XAU/USD

After stabilizing around the key level of 1900.00, gold prices rebounded slightly to trade at 1903.50. This shift was driven by a decline in the US Dollar Index from a two-month high and a temporary slowdown in US Treasury yields, which recently hit a 16-year high. This allowed for some recovery to take place.





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Fundamental analysis of EUR/USD

On Thursday, EUR/USD resumed its uptrend for the second day in a row, trading near 1.08620. Much of Wednesday's gains were driven by weak US PMI data. Economic data from the eurozone was worrisome as the PMI for August fell to 47.0, below the forecast of 48.5. In eurozone leader Germany, the core PMI also fell to 44.7, well below market expectations of 48.3. Meanwhile, France's private sector contracted in the third quarter. In particular, confidence in the French economy fell sharply and there was considerable pessimism in the manufacturing sector.



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Fundamental analysis of EUR/USD

The EUR/USD pair continues to decline, trading at 1.07730. This behavior of the pair was influenced by such factors as the expectation of Fed Chairman Powell's speech and disappointing US economic indicators.

On Friday, data on the German economy takes center stage, focusing on the country's GDP and business climate index. After disappointing PMI data for August, market participants are preparing for potentially gloomier news. Germany's economy is forecast to contract by 0.2% year-on-year in the second quarter and remain flat in the next quarter. Notably, a quarterly contraction could have a significant impact on the market, which would also make the European Central Bank cautious. The business climate index is forecast to fall to 86.7 from a previous reading of 87.3, although this data could be overshadowed by GDP figures. While the focus remains on the state of the German economy, investors will be keeping a close eye on ECB statements, particularly the speech by its president Christine Lagarde, which is scheduled for today. Recent poor PMI results in the eurozone have cooled expectations for an ECB rate hike in September. Any hawkish remarks could revive buying interest.





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Fundamental analysis of XAU/USD

Gold prices started the week trading flat at 1916.00.Factors such as low Treasury yields and US dollar strength, despite hawkish comments from Fed Chairman Jerome Powell on interest rates during the year at a conference in Jackson Hole, contributed to gold's resilience. In his comments, Powell pointed to the strength of the US economy and raised the possibility of a rate hike amid growing concerns about inflation. However, the market reaction was somewhat subdued, suggesting that his views were in line with traders' expectations. Given the current rate of inflation and the continued strength of the US economy, a rate hike could come as early as November. Loretta Mester of the FRB Cleveland supported this view, saying that an interest rate hike after a period of relative equilibrium is possible.





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GBP/USD Fundamental Analysis

The GBP/USD pair is actively trading in an uptrend, having risen to the level of 1.26100. The key role in this achievement was played by the comments of Bank of England (BoE) Deputy Governor Ben Broadbent. He took a tough stance on monetary policy over the weekend, emphasizing the need for a prolonged period of tightening to keep inflation under control. Fears remain high despite Broadbent's hawkish remarks at the Jackson Hole symposium, where he emphasized the need to raise long-term interest rates. If interest rates remain high, the UK economy could fall into recession. Of the UK economic data, the main focus will be on the final manufacturing PMI, but the Bank of England's next statement will also attract attention. The focus this week will be on monetary policy divergence based on US economic data.





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Fundamental analysis of WTI

Oil prices rose on Wednesday for several reasons. The key driver of the rise was a significant decline in U.S. crude oil inventories, as evidenced by a weekly decline of 11.5 million barrels, which peaked on August 25. The sharp drop was the largest since September 2016 and exceeded market expectations, signaling strong demand for oil. The decline in inventories underscores the challenges of replenishing supply and signals growing demand for energy. Another reason for high prices is the threat of Hurricane Idalia in the Gulf of Mexico. Current forecasts suggest the hurricane could move eastward and bypass major sources of oil, but its very presence could lead to potential supply chain disruptions in the region. The Gulf is an integral part of U.S. oil production, accounting for nearly 15% of U.S. oil production. This environmental uncertainty certainly underscores the unpredictable nature of the oil industry.



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Fundamental analysis of WTI

WTI crude oil prices are showing uncertainty, fluctuating around the 81.65 level, indicating market caution over future US inflation and employment data. According to the Energy Information Administration, there was the largest inventory decline in the last four weeks, and according to the American Petroleum Institute - the record since September 2016. The oil situation is characterized by conflicting economic signals. China's manufacturing data fell for the fifth consecutive month, demoralizing the economy and casting a shadow over the outlook for the world's second-largest economy. Nevertheless, traders still have some hope as they await the Federal Reserve's decision and therefore the US personal consumption expenditure data is likely to have an impact on oil demand dynamics. Geopolitical events further complicate the global oil situation. The recent coup in Gabon has further complicated OPEC's supply outlook, while economic growth in the US has been revised down to 2.1% and private sector wage growth is set to slow for the foreseeable future. Against this backdrop, industrial unrest in Australia is shrinking the LNG market, while a shift in geopolitical alliance is changing the dynamics of global oil trade, with India and China becoming the largest consumers of oil from Russia.




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Fundamental analysis of XAU/USD

Gold prices (XAU/USD) are showing strength, trading at 1943.70, and have recently reached a high since early August, supported by a number of factors, including a weaker US Dollar on speculation over future Federal Reserve decisions. Over the past few days, the US Dollar Index has pared gains, consolidating at 104.05, amid mixed data on the US economy that suggests the Federal Reserve may maintain its current interest rate policy at its next meeting in September. In addition, a series of economic measures aimed at stimulating the economy of China, a global powerhouse and one of the largest consumers of gold, pushed the XAU/USD exchange rate higher. Notable measures include the government's efforts to revitalize the private sector, as well as significant adjustments such as the People's Bank of China's reduction in the required reserve ratio. In addition, some Chinese banks have adjusted RMB deposit rates. The disappointing performance of US Treasury yields over the past few weeks has contributed to gold prices, especially as the XAU/USD pair remains steady above key technical support levels. Despite the recent US dollar rally, this momentum appears to be waning, which indirectly boosts gold's appeal. However, the prospect of further rate hikes later this year could limit the dollar's decline and thus limit gold's upside.




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Fundamental analysis of WTI

Benchmark US crude oil WTI - currently trading around 86.70. The recent strengthening of prices is due to a number of factors, both domestic and global. According to preliminary data from the American Petroleum Institute, U.S. oil inventories declined by 5.5 million barrels in the week ending September 1. This figure indicates supply constraints. Globally, major oil producers Saudi Arabia and Russia played a key role in influencing the trajectory of WTI. Both countries have decided to extend voluntary oil supply cuts until the end of 2023. Saudi Arabia is expected to cut production by 1 million bpd in the last quarter of 2023. On the other hand, Russia has pledged to cut production by 300,000 bpd. It is important to note that this reduction will be assessed on a monthly basis depending on changes in market conditions. Under the influence of these factors, oil futures contracts rose. With quotes trading near a nine-month high, market sentiment indicates that a short-term supply cut is imminent.





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