Daily Market update: 30 August 2022

Dollar pulls back off fresh 20-year highs as market prices in a more hawkish ECB.

Dollar Index

Monday’s London session proved to be a battleground won by the Dollar as it added to Friday’s gains, hitting levels last traded in September 2002. A Key driver in this exuberance is the ever-increasing probability of a 75-basis point rate hike as opposed to a 50-basis point rate hike at the next FED meeting in September. This in turn has caused yields to rise, with the 2-year yield hitting fresh 5-year highs near 3.5% and ultimately gave the dollar its appeal to continue its upward trajectory.

Technical Analysis: H4

In terms of market structure, last week saw the completion of the larger bullish continuation pattern in the form of the falling wedge type structure that found support from the 104.00 level and produced an impulsive wave that went on to revisit the 109.00 area last week Friday before setting a new high just under 109.50.

Intra-day Overview: Current price action in Monday’s trading session broke through the previous high and created fresh 20-year highs before retreating into the range finding support within the 108.00 range. Henceforth buyers could push the index to continue its bull run, or on the flipside, sellers could be well positioned at the fresh 20-year highs set in Monday morning’s London session and could challenge buy pressure.

Stocks

At the time of writing, US Stocks have continued to sell off since Friday’s hawkish comments signalled a longer period of sustained higher interest rates.

• Dow Jones: Reacted by adding to the losses from last week by 0.07%.
• S&P 500: Pressure continued and added to losses from last week by 0.11%.
• Nasdaq: Was down on Monday by 0.49%.

 Currencies

Euro:

• Intraday overview: Price was buoyed by a pullback in the Dollar on Monday morning, which gave the Euro some impetus to claw back some of the losses made on Friday, retesting the upper end of the range at the 1.00291 area in the current bearish continuation structure.

Pound:

• Intraday overview: The 1.16481 area was the floor that supported a pullback on Monday morning, as the Pound clawed back some of the losses from Friday. The Intraday high was set around the 1.17432 area.

Commodities

Gold:

• Intraday overview: The $1 720 area was the floor that supported a pullback on Monday morning, helping Gold claw back some of the losses seen on Friday. The intraday high was set around $1 745.

Oil:

• Overview: On the back of the Saudis’ comments around their inclination towards slowing down production, the price of Brent hit $100 and shows the possibility of geopolitical factors supporting the bullish momentum for now, while the current economic outlook, and central banks’ monetary policies, are supporting a bearish sentiment.

Bitcoin

In the wake of Bitcoin falling below the psychological $20 000 level, there could be more support around the corner as crypto adoption seems to be getting “a shot in the arm” with the Monetary Authority of Singapore considering implementing certain regulations around leverage when it comes to cryptocurrencies. This initiative is aimed to protect inexperienced consumers as opposed to banning the crypto market altogether.

Economic Calendar

Source: Investing.com

Click here to access our Economic Calendar

Ofentse Waisi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

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Investment Bank Outlook 30-08-2022

Credit AgricoleSell USDJPY IdeaThe biggest drivers of the USD/JPY’s rally remain the US-Japan short-term rates differential as well as the USD’s safe-haven with yield appeal. We doubt the exchange rate can continue to rely on these factors to keep driving it higher, however.US inflation has likely peaked along with commodity price inflation. There are also signs the US economy is beginning to feel the effects of the Fed’s rate hikes thus far. Following FOMC Chair Jerome Powell’s address at Jackson Hole, we are likely passed peak Fed hawkishness. We maintain our view that the peak in the USD will be marked by the peaks in US inflation and Fed hawkishness.We continue to expect UST yield curve inversion to act as a brake on USD/JPY’s upside as Fed overtightening risks build. The slowing in US growth in the coming quarters will lead to further UST yield curve inversion. Indeed, Fed hawkishness in the face of this slowing would feed investor concerns about Fed overtightening.The inflation driven by the weaker JPY as well as higher food and energy prices is spilling over into broad inflation. There are two ways Japanese policymakers can address these pressures –FX intervention and/or the BoJ slightly changing tack at its September meeting.The JPY’s safe-haven appeal will return with a slowing in global growth and as investors look for an alternative safe-haven to an overvalued USD and the EUR, which remains weighed down by the Ukraine crisis.We recommend selling USD/JPY at 138.45with a stop-loss at 142.50 and target a decline to 130.The biggest drivers of the USD/JPY’s rally remain the US-Japan short-term rates differential as well as the USD’s safe-haven with yield appeal. We doubt this appeal can continue for the following reasons:1.US inflation has likely peaked: our Inflation Strategist believes US headline inflation has likely peaked in Q3 and forecasts it to slow from 8.8% YoY in Q3 to6.4%YoYinQ4.Theimpact of the Fed’s rate hikes in curbing domestic demand as well as the retreat in commodity prices likely mean the peak in US inflation is behind us; 2.PassedpeakFedhawkishness:FOMCmembersareclearlyunitedinthe view the Fed has to stay the course in terms of raising rates aggressively to contain inflation and of the need to clearly communicate this message to the market. Indeed, FOMC Chair Jerome Powell’s address to the Jackson Hole Symposium removed any doubt in investors’ collective mind of the Fed’s resolve to lower inflation and we think this likely represents the peak in Fed hawkishness;3.Overtightening risk: investors will not ignore softer US growth indicators and the growing risk of the Fed overdoing its tightening. Indeed, our US economist expects growth to slow sharply over the coming quarters and skirt recession in late 2023. Our US rates strategist expects further inversion in the UST curve and forecasts a bottom in the UST 2s10s spread of -85bp. We continue to see that Fed overtightening risk represents a brake on USD/JPY upside as well as the key to the exchange rate’s sell off;4.Kurodaunderincreasingpressure to admit inflation is not temporary: Tokyo CPI data for July surprised to the upside and indicates acceleration in nationwide inflation as the two are highly correlated. Tokyo headline and ex- food inflation are well above the BoJ’s 2% target and accelerating and all three measures of inflation –headline, ex-food and ex-food-and-energy inflation –are already above the BoJ’s forecasts for the current fiscal year.

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Netflix has plenty of life in it yet – here's how to trade the shares

Netflix still has plenty of scope for growth, says Matthew Partridge, and the shares are reasonably priced. Here's how to play the Netflix share price.

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Gold Futures ( GC1! ), H4 Potential for Bearish Continuation

Type: Bearish MomentumKey Levels:Resistance: 1778.2Pivot: 1740.8Support: 1709.5Preferred Case:On the H4, with price moving within a descending channel and below the ichimoku indicator, we have a bearish bias that price will drop from pivot at 1740.8 where the pullback resistance is to 1st support at 1709.5 where the 78.6% fibonacci retracement and 78.6% fibonacci projection are.Alternative Scenario:Alternatively, price could break pivot structure and rise to 1st resistance at 1778.2 where the swing high resistance is.Fundamentals:We have a bearish outlook on gold as a result of Powell's Hawkish Remarks about monetary policy at the yearly Jackson Hole Symposium.

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US30USD, H4 | Potential Bearish Drop

Type: Bearish BreakoutKey Levels:Resistance: 32613.63Pivot: 31890.53Support: 30448.75Preferred Case:On the H4, with price breaking the ascending trendline and moving below the ichimoku indicator, we have a bearish bias that price will drop to pivot at 31890.53 where the pullback support, 100% fibonacci projection, 61.8% fibonacci retracement and 127.2% fibonacci extension are. Should price break pivot structure, we would expect bearish momentum to carry price to 1st support at 30448.75 where the pullback support is.Alternative Scenario:Alternatively, price could rise to 1st resistance at 32613.63 in line with pullback

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Daily Market update: 29 August 2022

Dollar on the front foot on the back of hawkish Jackson Hole comments by FED chair Powell

Dollar Index

The dollar index ended Friday’s trading session with some exuberance, closing at the 108.73 level following a sustained hawkish tone from FED chair Powell at the Jackson Hole Symposium. His message was consistent with the narrative that the FED isn’t quite done yet fighting off inflation and a possible recession. Which essentially means Americans are going to have to brace for more interest rate hikes and consequently slower growth in the economy and a weaker job market.

Technical Analysis:

In terms of market structure, last week saw the completion of the larger bullish continuation pattern (falling wedge) that found support from the 104.00 level and produced an impulsive wave that went on to revisit the 109.00 area last week. Considering current price action and how it is approaching the 20-year highs in the form of a smaller bullish continuation pattern (descending channel), it’s an increasing probability that price could continue beyond the 109.00 key level henceforth.

Stocks

On the back of the dollar strength, there was a selloff in US Stocks, with a 3% decline on the prospect of the FED remaining firm on a sustained period of further rate hikes.

• Dow: Reacted to the statements by plunging 3% (just over 1000 points) on the day.
• S&P 500: Reacted to the statements and fell by 3.4%.
• Nasdaq: Being heavily linked to the technology sector, the Nasdaq is particularly more sensitive to interest rate hikes and reacted by falling 3.9%.

Currencies

• Euro: EURUSD slipped back to below parity levels, closing the day at 0.99654.
• Pound: GBPUSD closed the day retesting the weekly low at 1.17391 after hitting a session high at 1.1900.

Commodities

• Gold: Remained pressured by Powell’s comments despite a momentary bounce earlier in the week, ending Friday’s session at the $1 738 mark.

• Oil: The black gold remained resilient last week, closing the week buoyed by verbal intervention from the Saudis concerning the possibility of cutting oil production. This potentially lends credence to the idea that the Saudis are unable to tolerate a price below $90 a barrel at the present moment.

Bitcoin

The leading cryptocurrency broke through the psychological $20 000 mark as bears largely drove the market last week, seeing a 20% decline in a week from a high of $25 211.

An interesting sidenote going into September is that Bitcoin has produced a bearish market environment in price for each of the past four months in the year. It’ll be interesting to see how it performs going into the new month and the last part of the year.

Today – Speeches from ECB’s Lane, Fed Vice Chair Brainard.

Economic CalendarSource: Investing.com

Biggest Mover @ (06:30 GMT) NASDAQ (-3.9%). Dropped to 12387$ from 13206$.

Click here to access our Economic Calendar

Ofentse Waisi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

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EUR/USD Holds Parity, S&P500 Might Jump Soon

The currency pair EUR/USD remains in the supporting zone formed between the levels 0.9950 and 1.0000. This asset is likely to pull back, undergo correction, and jump, targeting the local downtrend. The downtrend is denoted by the blue line on the chart below.Oil is slowly approaching the resistance at the level of 107.50. It is likely to head north next week, and face resistance at the level of 107.50. Oil might even break the resistance and head further. So, let’s observe what the oil is about to do next.American stock index S&P500 is going down, targeting the supporting level of 3900.00 and uptrend, away from which it might potentially pull and jump.

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Three top-quality Japanese growth stocks to ride the recovery

Professional investor Nicholas Price of the Fidelity Japan Trust highlights three of his favourite Japanese growth stocks that should benefit from the country’s post-pandemic re-opening.

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A lesson for investors from a ill-fated silver mine

Mining methods may have changed since the industry’s early days, but the business hasn’t – digging ore from the ground and selling it at a profit. The trouble is, says Dominic Frisby, the scams haven't changed either.

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Why you should consider an offset mortgage – and what the best deals are

Interest rates on savings are pitifully low at the moment. But you can still put your money to work: get an offset mortgage. Ruth Jackson-Kirby explains what they are and picks the best deals on offer now.

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Events to Look Out for Next Week

Next week, with Jackson Hole out of the way, markets should have a clearer indication on 75 bps or 50 bps for September but also for the year end and the year ahead. All Central Bankers are expected to remain in hawkish mode and to continue to stress commitment to achieving goals via a front-loading approach. Concern over energy security and the jump in European gas and electricity prices will remain on tap. The agenda also sees NFP, and Inflation data from Canada, Europe and Switzerland.

Have a look at the most important events of the coming days in our usual weekly publication.

Monday – 29 August 2022

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• Retail Sales (AUD, GMT 01:30) – Australian Retail Sales for July are expected to rise to 0.3% from 0.2% m/m.

Tuesday – 30 August 2022

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• Consumer Price Index (EUR, GMT 12:00) – German CPI is expected to slowdown by 0.4% from 0.9% on a monthly basis.
• CB Consumer Confidence (USD, GMT 14:00) – Consumer confidence is expected to fall to a 2-year low of 92.0 from 95.7 in July, versus a 1-year low of 105.7 in February. The expectations index is expected to rebound to 66.0 from a 9-year low of 65.3 in July. Confidence is being pushed down by soaring prices with supply chain disruptions, high mortgage rates, stock price weakness, the war in Ukraine, and the ongoing pull-back in the 2020-21 confidence lift from stimulus.
• FOMC Member Williams Speech (USD, GMT 15:00) 

Wednesday – 31 August 2022

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• HICP (EUR, GMT 12:00) – Eurozone preliminary HICP inflation expected at 8.6% after it was confirmed at 8.9% y/y in the final reading for July, in line with expectations, and up from 8.6% y/y in the previous month. Core CPI is seen unchanged at 4.0% y/y. That is double the ECB’s 2% limit, and highlights that price increases are not confined to energy and/or unprocessed food, but are becoming increasingly widespread.
• FOMC Member Mester Speech (USD, GMT 12:00)
• Gross Domestic Product (CAD, GMT 12:30) – The final annualiazed Q2 GDP for Canadian is expected to grow by 5.4% q/q from 3.1% q/q.

Thursday – 01 September 2022

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• Consumer Price Index (CHF, GMT 06:30) – Swiss CPI for August is expected to contract by -0.1% from 0.5% on a monthly basis.
• ISM Manufacturing PMI (USD, GMT 14:00) – The ISM index is expected to fall to a 2-year low of 52.0 from prior low of 52.8 in July from 53.0 in June, versus an 18-year high of 63.7 in March ’21, an 11-year low of 41.6 in April of 2020, and an all-time low of 30.3 in June of 1980.

Friday – 02 September 2022

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• Event of the Week – Non-Farm Payrolls (USD, GMT 12:30) – A 230k August nonfarm payroll increase is anticipated, after gains of 528k in July, 398k in June, and 386k in May. Payroll growth should slow through 2022 alongside reduced GDP growth, and the climb in the initial and continuing claims in August suggests downside payroll risk for the month. We assume a 25k factory jobs rise in August, after a 30k July increase. We expect the jobless rate to hold steady for second month at 3.5%. Hours-worked are assumed to rise 0.1% after the 0.4% gain in July, while the workweek ticks down to 34.5 from 34.6 in July. Average hourly earnings are assumed to rise 0.2%, after a 0.5% July gain, while the y/y wage gain should hold steady from 5.2%. In the last expansion, we saw a 3.5% peak for y/y wage gains in both February and July of 2019, before the pandemic-boost to an 8.0% peak in April of 2020. The ensuing strength in wage gains has allowed continued robust y/y increases into 2022, though the return of low-paid workers to the workforce is likely restraining wage increases.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Market Spotlight: Trading Jackson Hole Today

All Eyes on PowellAhead of Fed chairman Powell speech at the Jackson Hole Symposium later today, market expectations are leaning broadly in favour of a hawkish outcome. On the back of a hawkish set of July FOMC minutes and following hawkish commentary from other Fed members at the end of last week and yesterday, traders are expecting Powell to reiterate the Fed’s core message of pushing ahead with rate hikes until inflation is back at target.However, given that this message is baked into price action here, the bigger focus will likely be on Powell’s outlook for next year. The market is already anticipating a Fed slowdown on rates as inflation moderates into next year. The key thing here will be timing. If Powell is seen forecasting a quicker end to the current inflationary peak (and thus a quicker end to tightening), this will no doubt fuel a USD sell-off. Alternatively, if the Fed sticks to a view of inflation staying at elevated levels for longer, this should keep USD demand intact near-term.Where to Trade Jackson Hole?AUDUSDThe Aussie has been the strongest beneficiary of the recent patch of USD weakness and risk-on trading. If USD weakens on the back of today’s event, AUDUSD looks well poised to advance higher. The pair is currently carving out a potential inverse head and shoulders pattern. As such, bulls can look for a break of .7132 targeting .7278 initially and .7564 as a longer-term target.

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Live Cattle Futures (LE1!), H4 Potential For Bullish Rise

Type: Bullish RiseKey Levels:Resistance: 143.975 Pivot: 141.950Support: 139.175Preferred Case:With the price moving above the ascending trendline and above ichimoku cloud, we have a bullish bias that the price may rise to the pivot at 141.950, which is in line with the 161.8% fibonacci projection and swing high to the 1st resistance at 143.975, where the previous significant swing high is.Alternative Scenario:Alternatively, the price may drop to the 1st support at 139.175, where the 23.6% fibonacci retracement and swing low are.Fundamentals:No key news.

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Market Spotlight: AUDJPY Looking To Breakout?

AUDJPY Bull FlagAUDJPY price action is looking interesting here. Following the latest peak in June, AUDJPY has been correcting lower within a bear channel, which can be viewed as a bull flag within the longer-term bull trend. With price well supported into the lows and now turning higher once again, the risks of an upside break are growing. Bulls can look for a break of the 95.67 internal highs targeting a move through YTD highs and up to 98.83 initially. More conservative bulls can wait for a break of YTD highs. Retail market is currently around 80% sort, reflecting plenty of scope for a fresh breakout here.Keep an Eye OnThe broader risk-on backdrop we’ve seen this week has helped lift AUD while weakening JPY through reduced safe-haven inflows. While this dynamic continues, we can expect the pair to continue higher near-term. With that in mind, today’s Jackson Hole event is the key. If traders sense any dovishness whatsoever from Powell, most likely with regard to next year’s outlook, then USD is likely to come off and risk markets will move higher, supporting AUDJPY.

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