On Wednesday, the stock market witnessed a downturn triggered by the Federal Reserve’s decision to maintain interest rates while signaling a looming rate hike. The S&P 500 and Nasdaq Composite both declined, with tech giants such as Microsoft, Nvidia, and Alphabet experiencing significant drops. The Federal Reserve’s cautious approach to rate hikes due to inflation concerns sent shockwaves through the markets, particularly impacting tech stocks that had been performing well earlier in the year. The increase in Treasury yields also raised concerns about the tech sector’s vulnerability to higher rates. Meanwhile, the US dollar had mixed movements in the currency market as the Fed’s hawkish stance influenced market sentiment but concerns about limited rate hike potential limited further gains.

Stock Market Updates

On Wednesday, the stock market experienced a decline in response to the Federal Reserve’s announcement of leaving interest rates unchanged but hinting at an impending rate hike. The S&P 500 dropped by 0.94% to 4,402.20, while the Nasdaq Composite slid by 1.53% to 13,469.13. This decline was primarily driven by significant drops in tech giants like Microsoft, which saw a drop of over 2%, and Nvidia and Google-parent Alphabet, which both experienced declines of around 3%. The Dow Jones Industrial Average also lost 76.85 points, or 0.22%, closing at 34,440.88, with all three major indexes ending the day at session lows.

The Federal Reserve’s decision to keep interest rates steady, while expected, raised concerns among investors as the central bank indicated that one more rate hike is likely before the end of the year. The Fed’s economic projections suggested that after this increase, they would begin cutting rates next year, although rates would remain higher than previously signaled in June. Fed Chair Powell emphasized the need to proceed cautiously in raising rates further due to ongoing concerns about inflation. This news sent shockwaves through the markets, particularly impacting tech stocks, which had been performing well earlier in the year based on the expectation of a less aggressive monetary policy. Additionally, the increase in Treasury yields, with the 2-year yield reaching levels not seen since July 2006 and the 10-year yield hitting a high not seen since November 2007, raised concerns about the potential adverse effects of higher rates on the tech sector.

Data by Bloomberg

On Wednesday, across all sectors, the market experienced a decrease of 0.94%. Some sectors showed modest gains, with Consumer Staples up by 0.15%, Real Estate by 0.13%, Utilities by 0.10%, and Health Care by 0.02%. However, several sectors saw declines, including Industrials (-0.39%), Financials (-0.66%), Energy (-0.95%), Materials (-1.03%), Consumer Discretionary (-1.09%), Information Technology (-1.77%), and Communication Services (-1.89%).

Currency Market Updates

In the latest currency market update, the US dollar experienced a day of mixed movements. Initially facing losses, the dollar index managed to stabilize as the Federal Reserve’s hawkish stance boosted market confidence. However, its ability to advance further was limited due to market consensus that there is limited room for the US central bank to raise rate expectations. The Fed’s dot plots indicated a preference for one more rate hike in the current year, reducing the median projection for rate cuts in 2024 from 100 basis points to 50 basis points. Federal Reserve Chair Jerome Powell emphasized the data-dependent nature of their decisions, noting that policy is already restrictive, and the full impact of previous tightening measures has yet to be felt. This announcement led to a sharp decline in the EUR/USD pair as 2-year Treasury yields rebounded to new highs for 2023.

Despite these developments, the dollar index is still grappling with overbought pressures that have arisen from its 6% increase since July. GBP/USD also saw fluctuations, initially dropping following below-forecast CPI data but rebounding ahead of the Federal Reserve’s announcement. To reverse the downtrend, GBP/USD would need to close above the 200-day moving average at 1.2434. Meanwhile, USD/JPY held relatively steady after the Fed events and briefly exceeded the 148 hurdle earlier in the day. The focus now turns to upcoming U.S. data releases and the Bank of Japan’s policy decisions, with potential tension between U.S. and Japanese officials regarding the timing of Japanese FX intervention. Overall, high-beta currencies like the Australian dollar retreated from their pre-Fed risk-on gains, stemming from expectations that major central banks’ tightening cycles are reaching their peaks.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Falls as FOMC Meeting Spurs Stronger US Dollar, Fed Signals Hawkish Stance

The EUR/USD experienced a significant decline, dropping from its weekly highs above 1.0730 to 1.0650 in response to the FOMC meeting’s outcome. The Federal Reserve unanimously maintained its interest rate target range at 5.25-5.50%, with minimal changes in the statement compared to the previous month. The Summary of Economic Projections suggests the likelihood of another rate hike by year-end, although Fed Chair Powell emphasized that the dot plot is not a firm plan. The market perceived the meeting as hawkish, causing US bond yields to surge to multi-year highs and Wall Street to turn bearish, subsequently strengthening the US Dollar. Upcoming US data releases and decisions from central banks like the Swiss National Bank and the Bank of England will remain pivotal for market dynamics.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD moved in high volatility on Wednesday and able to reach the upper band but then moves back lower and reach the lower band of the Bollinger Bands. This movement suggests the possibility of further consolidation. The Relative Strength Index (RSI) is currently at 39, indicating that the EUR/USD is in a neutral stance with a slight bearish bias.

Resistance: 1.0687, 1.0759

Support: 1.0605, 1.0523

XAU/USD (4 Hours)

XAU/USD Drop Amid Fed’s Hawkish Stance on Rates

Gold prices fell for the third consecutive day, trading around $1,925 during Asia’s early trading hours on Thursday. The US Federal Reserve (The Fed) kept its benchmark interest rate at 5.5%, but projected more rate hikes in 2023, leading to pressure on precious metals. The Fed’s revision of 2024 interest rate projections, from 4.6% to 5.1%, unexpectedly boosted the US Dollar, causing the US Dollar Index (DXY) to reach a six-month high at 105.60. US bond yields also rose, with the 10-year bond hitting 4.43%, its highest since 2007. Precious metals slipped after Fed Chair Jerome Powell’s press conference, where he reiterated The Fed’s commitment to a 2% inflation target and emphasized data-driven future decisions. More US data, including Weekly Jobless Claims, the Philadelphia Fed Manufacturing Survey, and Existing Home Sales Changes, will impact markets on Thursday.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved in high volatility on Wednesday and able to reach the upper band then moving back lower. Currently, the price is trading between the middle and lower bands. The Relative Strength Index (RSI) is currently at 48, indicating that the XAU/USD pair is back in neutral stance.

Resistance: $1,939, $1,951

Support: $1,922, $1,915

Economic Data

On Tuesday, the stock market experienced a decline as investors awaited the Federal Reserve’s policy meeting outcomes later in the week, resulting in the Dow Jones Industrial Average falling by 0.31%, the S&P 500 slipping by 0.22%, and the Nasdaq Composite dropping by 0.23%. Disney and Deere faced setbacks due to investment plans and downgrades, respectively, while Instacart stood out with a gain of over 12% after going public. The Federal Reserve’s two-day meeting garnered significant attention, with a 99% probability of no interest rate hike, but investors were keen on economic forecasts, oil prices settled lower, and the U.S. Treasury yield reached its highest level in years. In the currency market, the US dollar remained stable, and the euro to US dollar pair faced resistance, while the USD/JPY rose, and the British pound saw a modest increase. The Australian and Canadian dollars both gained, with additional support from energy prices, and the New Zealand dollar rose to its highest level in five days.

Stock Market Updates

On Tuesday, the stock market saw a retreat as investors anxiously awaited the outcomes of the Federal Reserve’s policy meeting scheduled for later in the week. The Dow Jones Industrial Average declined by 106.57 points, or 0.31%, closing at 34,517.73, while the S&P 500 slipped 0.22% to 4,443.95, and the Nasdaq Composite fell 0.23% to 13,678.19. Disney faced a significant setback, plummeting more than 3% following its announcement of plans to nearly double its investment in its cruise and parks business. Deere, often considered an economic activity indicator, also suffered a 3% drop after being downgraded by investment bank Evercore ISI due to concerns about agricultural production. However, grocery delivery company Instacart stood out with a gain of over 12% after going public.

The Federal Reserve’s two-day meeting, commencing on Tuesday, was the focal point for investors. While it was widely expected that the Fed would not raise interest rates in its Wednesday announcement, traders priced in a 99% probability of no hike, according to CME Group’s FedWatch tool. Only a 29% chance of a rate hike in November was anticipated. Investors are eagerly awaiting the Fed’s economic forecasts, especially regarding inflation and future monetary policy. Additionally, oil prices settled lower after reaching highs not seen since November, which seemed to boost market sentiment and lift stocks off their lows. Meanwhile, the 10-year U.S. Treasury yield hit its highest level since November 2007. In other news, the United Auto Workers union’s leadership warned of the potential for more members to strike if progress isn’t made by a Friday deadline. As a result, Stellantis saw an increase of more than 2% in its stock price, while Ford and General Motors each added more than 1%.

Data by Bloomberg

On Tuesday, across all sectors, the overall market experienced a slight decline of 0.22%. Among the sectors, Health Care showed a modest gain of 0.10%, while Communication Services and Information Technology both saw marginal increases of 0.01% and -0.08% respectively. The Materials and Financials sectors decreased by 0.10% and -0.11%, while Consumer Staples experienced a more significant decline of 0.25%. Industrials and Utilities both had substantial drops of 0.46% and 0.55% respectively. Real Estate and Consumer Discretionary sectors also saw notable decreases of 0.56% and 0.65%, while Energy had the most significant decline of 0.83%.

Currency Market Updates

In the currency market, the US dollar index remained relatively stable, showing slight upward movement after earlier declines in anticipation of important events from the Federal Reserve (Fed). Investors were closely watching the possibility of the Fed providing guidance suggesting another interest rate hike later in the year. This cautious sentiment was impacting expectations for any potential interest rate cuts before the second half of 2024. The dollar index had retreated from its recent six-month highs, encountering significant resistance, as it aimed to consolidate gains made since hitting lows in July. The euro to US dollar (EUR/USD) pair was in focus, with EUR/USD having recovered from last week’s probe of the major swing low at 1.0635 but facing resistance at 1.0718. The market’s attention was shifting towards the Fed, with the expectation that it might adopt a more hawkish stance compared to the European Central Bank (ECB), which had recently raised rates, citing that they were now restrictive enough to curb euro zone inflation.

In the USD/JPY pair, the US dollar rose by 0.17%, primarily driven by a rise in Treasury yields. Two-year yields were nearing their highest level since 2006, just below the peak seen in July at 5.12%, while ten-year yields were reaching levels not seen since 2007. This development led to a narrowing of Treasury-JGB yield spreads, potentially paving the way for a breakout in USD/JPY, assuming a hawkish stance from the Fed and the Bank of Japan’s expected policy normalization delay. Meanwhile, the British pound (GBP) saw a 0.06% increase, although it retreated from intraday highs due to the US dollar’s broader rebound. Concerns were rising that the Bank of England’s anticipated rate hike on Thursday might be its last, despite persistently high UK overall and core inflation rates at 6.8% and 6.9%, respectively. In the coming days, the currency market will closely monitor CPI releases, which are forecasted to show overall and core inflation rates at 7.0% and 6.8%. Finally, the Australian and Canadian dollars both gained 0.3%, with the latter receiving additional support from above-forecast data. Both currencies benefited from the recent surge in energy prices and signs of stabilization in China’s economy, while the New Zealand dollar rose by 0.15% to its highest level in five days, though it faced challenges in breaking above the 10-day moving average.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Sees Modest Decline as US Dollar Strengthens Ahead of FOMC Decision

The EUR/USD pair experienced a slight decline, falling from its peak above 1.0700 as the US Dollar gained strength due to deteriorating market sentiment and higher US yields in anticipation of the Federal Reserve’s (Fed) decision. The Eurozone Harmonized Index of Consumer Price Index showed a minor revision in annual rates, while economic data from Germany and the UK were on the horizon. However, all eyes were on the forthcoming FOMC decision, with expectations of a steady Fed Fund rate and a potential warning regarding the need for further tightening if inflation persists. The market’s direction, especially that of the US Dollar Index (DXY), hinged on the outcome of the meeting, leading to cautious anticipation among market participants.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD moved flat on Tuesday and is currently trading just above the middle band of the Bollinger Bands. This movement suggests the possibility of further consolidation. The Relative Strength Index (RSI) is currently at 49, indicating that the EUR/USD is in a neutral stance. (Note: the markets are waiting for today’s Fed rate decision which will create high volatility movement).

Resistance: 1.0711, 1.0759

Support: 1.0653, 1.0605

XAU/USD (4 Hours)

XAU/USD Stall as USD Gains Momentum Amid Inflation Concerns and Fed Speculation

On Tuesday, gold prices showed minimal movement, hovering around the $1,930 mark for XAU/USD. The US Dollar initially faced market disfavor but saw increased demand ahead of Wall Street’s opening and after the release of the Canadian Consumer Price Index (CPI), which indicated a higher-than-expected 4% YoY inflation rate for August. This global inflationary trend, coupled with surging US government bond yields, particularly the 10-year Treasury note reaching levels not seen since 2007 at 4.36%, bolstered the Greenback’s position. While the Federal Reserve’s forthcoming monetary policy announcement is widely expected to maintain the status quo, concerns loom, and Chair Jerome Powell’s words will be closely scrutinized for hints about future rate changes. Wednesday’s release of new economic projections by the Fed is expected to have a more significant impact on the market than the decision itself.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved in a tight range on Tuesday and moved between the middle and upper bands of the Bollinger Bands. Currently, the price is trading slightly above the middle band with the potential for further higher movement. The Relative Strength Index (RSI) is currently at 57, indicating that the XAU/USD pair is in a neutral stance with a bullish bias. (Note: the markets are waiting for today’s Fed rate decision which will create high volatility movement).

Resistance: $1,939, $1,951

Support: $1,928, $1,915

Economic Data

On Monday, the stock market showed subdued performance ahead of the Federal Reserve meeting later in the week. The S&P 500 inched up by 0.07%, the Nasdaq rose by 0.01%, and the Dow Jones gained 0.02%. Investors overwhelmingly expected the Fed to maintain its current policy, but uncertainty loomed about November’s actions, with a 31% chance of a rate hike. Apple’s stock surged by 1.7% on positive outlooks, while Ford, Stellantis, and General Motors faced declines due to ongoing union disputes. The US dollar dipped by 0.2% in anticipation of central bank meetings, and EUR/USD rose by 0.24%. USD/JPY struggled to breach resistance, and Sterling hovered below the 200-DMA. USD/CAD dropped by 0.23%, while AUD/USD and USD/CNH made modest gains. The market awaited crucial data and central bank decisions throughout the week.

Stock Market Updates

In the stock market, Monday saw a relatively flat performance as investors eagerly anticipated the upcoming Federal Reserve meeting later in the week. The S&P 500 made a modest 0.07% gain, closing at 4,453.53, while the Nasdaq Composite edged up by 0.01% to finish at 13,710.24. The Dow Jones Industrial Average also advanced by a slight 0.02%, closing at 34,624.30. Traders are overwhelmingly expecting the Federal Reserve to maintain its current policy during its two-day meeting, with a 99% probability of no change in interest rates, according to the CME Group’s FedWatch tool. However, the market remains uncertain about the Fed’s actions in November, with roughly a 31% chance of a rate hike. Investors are keen to decipher the central bank’s future guidance and messaging for potential insights into its next moves.

In company-specific news, Apple saw a 1.7% increase in its stock price, buoyed by optimistic outlooks from Goldman Sachs and Morgan Stanley regarding new iPhone demand. Conversely, Ford’s stock slid by over 2% as the United Auto Workers’ strike persisted, while Stellantis and General Motors, also embroiled in disputes with the union, saw their stocks decline by over 1%. The previous trading week ended with the S&P 500 and Nasdaq posting losses for the second consecutive week, while the Dow managed a slight 0.1% gain, setting the stage for a week of anticipation and cautious observation as market participants await the Federal Reserve’s decisions and guidance.

Data by Bloomberg

On Monday, across all sectors, there was a slight increase of 0.07% in the market. The sectors that saw gains were led by Energy, with a 0.68% increase, followed by Information Technology at 0.47%, Financials at 0.32%, and Communication Services at 0.27%. However, there were declines in other sectors, with the largest decreases occurring in Consumer Discretionary, which dropped by 1.01%, and Real Estate, which saw a decline of 0.81%. Other sectors that saw declines were Materials at -0.43%, Health Care at -0.18%, and Utilities at -0.05%. Industrials and Consumer Staples had smaller gains of 0.11% and 0.08%, respectively.

Currency Market Updates

In the midst of various global economic factors, the US dollar faced a 0.2% decline on Monday as it encountered significant resistance and EUR/USD found support. This decline occurred in anticipation of upcoming meetings by central banks, including the Fed, BoE, and BoJ. The day saw limited US economic data, with only the NAHB housing market index showing an unexpected downturn. Investors remained vigilant, considering the potential risks posed by the UAW strike and the looming threat of a US government shutdown.

EUR/USD experienced a rise of 0.24%, with factors such as opposition from ECB hawks to rate cut expectations and disappointing Michigan sentiment data lending support. Furthermore, the bond yields in the eurozone outpaced Treasury yields, and Brent crude oil prices approached triple-digit figures. Despite these dynamics, USD/JPY faced a 0.1% decline, failing to breach the 148 hurdle that had been impeding its upward trend for an extended period. The forthcoming Fed meeting was expected to influence the market’s perception of future rate hikes and Treasury yields, potentially opening room for USD/JPY to rise towards resistance around 150 before any substantial correction.

Meanwhile, Sterling remained stable but below the 200-day moving average (200-DMA), which it had broken and closed below in the previous week. Market expectations indicated an 81% probability of a BoE rate hike on Thursday, although Sterling’s performance could be influenced by perceptions of the likelihood of a follow-on rate increase. In addition, USD/CAD experienced a 0.23% drop, breaking below September’s lows, initially bolstered by rising oil prices, but subsequently facing a setback as WTI oil prices retreated below $90 later in the day. Canadian CPI data was awaited on Tuesday, potentially influencing the trajectory of USD/CAD. Meanwhile, AUD/USD and USD/CNH both recorded modest gains of 0.06% and 0.14%, respectively.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Fluctuates Amidst Central Bank Moves and Growth Outlook Uncertainty

The EUR/USD saw an initial rise to near 1.0700 on Monday, driven by a US Dollar correction in a calm session. Despite the European Central Bank’s expected 25 basis point rate hike last Thursday, the Euro weakened but found support at 1.0630, subsequently recovering. Market sentiment suggests no further ECB rate increases, shifting the focus to rate duration. Likewise, the Federal Reserve’s upcoming FOMC meeting anticipates no rate changes, focusing on statements, projections, and Chair Powell’s remarks. Current fundamentals favor the US Dollar due to a stronger US growth outlook. This week’s data, including preliminary PMIs and CPI readings, will offer insights into differing growth prospects between Europe and the US.

Chart EURUSD by TradingView

According to technical analysis, EUR/USD moved slightly higher on Monday and is currently trading just around the middle band of the Bollinger Bands. This movement suggests the possibility of further consolidation. The Relative Strength Index (RSI) is currently at 47, indicating that EUR/USD is in a neutral stance.

Resistance: 1.0711, 1.0759

Support: 1.0653, 1.0605

XAU/USD (4 Hours)

XAU/USD Starts the Week with Optimism Amidst Economic Uncertainty

XAU/USD started the week on a positive note, trading near the upper end of Friday’s range, while market focus remains on stocks and government bond yields due to a lack of significant news. The demand for the US Dollar is subdued as stock markets grapple with tepid earnings reports, particularly in the tech sector. European indexes saw modest losses, but Wall Street rebounded from last week’s slump. US Treasury yields continue to rise due to inflation concerns ahead of the Federal Reserve’s monetary policy meeting this Wednesday. Currently, the 10-year note yields 4.33%, while the 2-year note offers 5.06%. Speculators anticipate the Fed will keep rates unchanged this week, though caution prevails as market players hope for hints regarding future interest rate moves.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved higher on Monday and was able to create a higher push to the upper band of the Bollinger Bands. Currently, the price is trading slightly below the upper band with the potential for further higher movement. The Relative Strength Index (RSI) is currently at 65, indicating that the XAU/USD pair is now entering the bullish bias.

Resistance: $1,939, $1,951

Support: $1,928, $1,915

Economic Data

This week, traders are mainly focused on the rate decisions of major central banks, such as the Federal Reserve, Swiss National Bank (SNB), Bank of England (BOE), and Bank of Japan (BOJ). These decisions have the potential to influence the markets significantly. It’s advisable to exercise caution and stay informed about the latest developments to ensure a successful week of trading.

Here are some notable market highlights for this week:

Canada Consumer Price Index (19 September 2023)

Consumer prices in Canada rose 0.6% in July 2023, following a 0.1% gain in June 2023. 

Analysts expect a 0.6% increase in the figures for August, which are set to be released on 19 September.

Federal Reserve Rate Decision (21 September 2023)

The Fed raised its funds rate target to 5.5% in July. 

Analysts expect the Fed to keep interest rates at 5.5% following its upcoming meeting on 21 September.

Swiss National Bank Rate Decision (21 September 2023) 

The SNB raised its policy interest rate by 25 bps to 1.75% during its June meeting. It also raised the possibility of further rate hikes in the future to ensure price stability over the medium term.

The next rate decision will be released on 21 September, with analysts expecting another increase of 25 bps to 2%.

Bank of England Rate Decision (21 September 2023) 

The BOE raised its policy interest rate by 25 bps to 5.25% during its August 2023 meeting, marking the 14th consecutive increase. 

Analysts expect the central bank to raise its rate by another 25 bps to 5.5% at its upcoming meeting on 21 September.

Bank of Japan Rate Decision (22 September 2023)

The BOJ unanimously decided to keep its key short-term interest rate at -0.1% and 10-year bond yields at 0% during its July 2023 meeting.

For the upcoming meeting on 22 September, analysts anticipate that the central bank will maintain the current interest rate levels.

Flash manufacturing PMI for Germany, the UK, and the US (22 September 2023) 

Germany’s manufacturing PMI increased to 39.1 in August 2023 from 38.8 in July 2023. Meanwhile, the UK’s manufacturing PMI for the same period fell from 45.3 to 43. Additionally, the US’ manufacturing PMI for the same period decreased from 49 to 47.9

The next set of data will be released on 22 September. Analysts’ predicted manufacturing PMIs are 39 for Germany, 43.6 for the UK, and 48.8 for the US.

Flash services PMI for Germany, the UK, and the US (22 September 2023) 

Germany’s services PMI declined from 52.3 in July 2023 to 47.3 in August 2023. Similarly, the UK’s services PMI declined from 51.5 to 49.5 during this period, while the US’ services PMI also fell from 52.3 to 50.2 during the same period. 

Analysts’ predicted services PMIs for September 2023 are as follows: Germany at 47.2, the UK at 49.1, and the US at 50.2.

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The Dow Jones Industrial Average saw a robust rally, achieving its strongest performance in over a month, propelled by renewed excitement in Wall Street’s IPO sector and positive economic signals. The Dow surged by 331.58 points, or 0.96%, closing at 34,907.11, marking its first close above the 50-day moving average since September 1st. This substantial gain, the best since August 7th, was mirrored in the S&P 500, which rose by 0.84%, reaching 4,505.10, and the Nasdaq Composite, which saw a 0.81% increase, reaching 13,926.05. Arm, the chip design firm, also made headlines with a 24.7% surge following its successful IPO, injecting confidence into a previously dormant IPO market. Additionally, encouraging economic reports, including moderate core inflation and robust retail sales, suggested a balanced approach between inflation control and economic stability, aligning with the Federal Reserve’s goals. The US dollar strengthened due to the euro and pound weakening against it, influenced by the European Central Bank’s rate hike. Traders are closely monitoring the EUR/USD pair, considering its potential to fall below May lows, impacting speculative positions and Treasury-bond yield spreads after the Federal Reserve meeting. The rise in oil prices added to the risk-on sentiment, but concerns about its effects on inflation and discretionary spending complicated the Fed’s rate hike decisions. Amid global economic uncertainties, traders are closely watching various indicators to determine the future of the US dollar and its implications for financial markets.

Stock Market Updates

The Dow Jones Industrial Average experienced a significant rally, marking its strongest performance in over a month, driven by renewed enthusiasm in Wall Street’s IPO market and positive economic indicators. The Dow surged by 331.58 points, or 0.96%, reaching 34,907.11, with this being the first time it closed above its 50-day moving average since September 1st. This substantial gain was also the best day for the blue-chip average since August 7th. Similarly, the S&P 500 gained approximately 0.84%, reaching 4,505.10, while the Nasdaq Composite saw a 0.81% increase, reaching 13,926.05. Notably, chip design company Arm made headlines as its shares surged by 24.7% following its initial public offering (IPO), which was priced at $51 a share and closed at $63.59 a share on its first day of trading. This successful IPO has injected confidence into the market, suggesting the possibility of a revitalized IPO market after a relatively dormant 18-month period.

Additionally, investors received encouraging economic reports, with indications of moderate core inflation and a resilient consumer. The August producer price index showed that core PPI, excluding food and energy, rose by 0.2%, in line with economists’ expectations. However, the headline number increased by 0.7%, surpassing the expected 0.4% rise. August retail sales also outperformed expectations, surging by 0.6%, compared to the forecasted 0.1% increase, with a similar increase of 0.6% when excluding auto sales. These reports suggest a favorable balance between inflation control and economic stability, potentially aligning with the Federal Reserve’s efforts to achieve a soft landing. While the Fed is expected to maintain its current policies in its September meeting, the European Central Bank raised rates by a quarter of a percentage point but indicated that inflation was easing, hinting at a potential end to its rate-hiking campaign. Meanwhile, Adobe was anticipated to release quarterly results after the market closed on Thursday.

Data by Bloomberg

On Thursday, across all sectors, the market showed a positive performance, with a gain of 0.84%. The Real Estate sector performed exceptionally well, with an increase of 1.71%, followed closely by Utilities at 1.47% and Materials at 1.40%. Other sectors also saw gains, with Energy rising by 1.26%, Communication Services by 1.18%, Industrials by 0.99%, Consumer Discretionary by 0.88%, Financials by 0.87%, Consumer Staples by 0.82%, Information Technology by 0.70%, and Health Care lagging behind with a modest increase of 0.25%.

Currency Market Updates

The US dollar saw a notable rise in value, with the dollar index increasing by 0.6%. This increase was primarily driven by the weakening of the euro (EUR) and the British pound (GBP) against the dollar (USD), resulting in a 0.85% decline in the EUR/USD pair. This drop in the EUR/USD pair was influenced by the European Central Bank (ECB) raising rates, indicating that it might be their last hike before a rate cut in the following year. Despite higher inflation in the eurozone, the market perceived minimal risk of further rate hikes by the ECB. This shift in currency dynamics was further reinforced by positive US economic data, including above-forecast retail sales and Producer Price Index (PPI) reports, which were attributed to rising prices. As a result, traders and investors are closely monitoring the EUR/USD pair, expecting it to potentially fall below its May lows, with broader implications on speculative positions and Treasury-bund yield spreads, especially after the upcoming Federal Reserve meeting.

The US dollar also faced pressure from the Australian and Canadian dollars due to increased risk-on sentiment, driven in part by perceptions that the ECB and the Federal Reserve have concluded their tightening cycles. The rise in oil prices, with WTI prices up 7.8% in the current month, raised concerns about the impact on discretionary spending, tightening credit conditions, and rising inflation, potentially complicating the Federal Reserve’s decision-making regarding rate hikes. As the global economic landscape remains uncertain, traders are closely monitoring various economic indicators, including Chinese data and US industrial production and Michigan sentiment figures, to gauge the future direction of the US dollar and its implications for financial markets.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Downtrend Continues After ECB’s Final Rate Hike

The Euro faced a significant decline following the European Central Bank’s unexpected 25 basis point rate hike, which the market interpreted as the final move in this direction. Despite some analysts and Governing Council members hoping for a pause, ECB President Lagarde’s decision spurred the Euro’s fall. The US Dollar, on the other hand, gained strength during the American session thanks to better-than-expected US economic data, including a notable increase in the Producer Price Index and positive retail sales figures. With the Euro’s vulnerability persisting due to the combination of robust US data and the dovish ECB rate hike, further losses may occur in response to changing market sentiment.

Chart EURUSD by TradingView

According to technical analysis, EUR/USD moved flat on Wednesday and is currently trading just around the middle band of the Bollinger Bands. This movement suggests the possibility of further consolidation. The Relative Strength Index (RSI) is currently at 50, indicating that EUR/USD is in a neutral stance.

Resistance: 1.0759, 1.0803

Support: 1.0702, 1.0653

XAU/USD (4 Hours)

XAU/USD React to ECB Rate Hike and Mixed US Data

Gold prices initially declined following the European Central Bank’s (ECB) unexpected 25 basis point rate hike and dovish statement. However, they later rebounded due to optimistic stock market performance, hovering around the $1,910 mark. Meanwhile, the US Dollar experienced mixed results from local data, with strong retail sales offset by higher-than-expected wholesale prices. Despite inflation concerns, investors remained skeptical about the Federal Reserve’s potential for another rate hike, leading to a shift in risk appetite. The market’s sentiment for the upcoming trading day hinges on China’s release of August Industrial Production and Retail Sales data during the Asian session.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved flat on Wednesday and moving between the lower and middle band of the Bollinger Bands. Currently, the price is trading slightly above the lower band with the potential for further downward movement. The Relative Strength Index (RSI) is currently at 39, indicating that the XAU/USD pair is still biased towards the bearish side.

Resistance: $1,916, $1,925

Support: $1,903, $1,893

Economic Data

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On Wednesday, the U.S. stock market saw mixed performances, with the Dow Jones Industrial Average declining by 0.20% to 34,575.53, while the S&P 500 managed a slight uptick of 0.12%, and the Nasdaq Composite rose by 0.29%. These moves were in response to a surprising increase in August’s core inflation, which exceeded expectations, prompting concerns. In the currency market, the U.S. dollar initially gained strength due to the inflation data but later reversed course as core CPI figures aligned with forecasts. This led to a perception of disinflationary pressure and eliminated the possibility of an immediate Fed interest rate hike. Treasury yields attracted buying interest but fell short of this year’s peaks. Notably, EUR/USD declined, and the ECB meeting is closely watched with a 64% probability of an ECB rate hike priced in. USD/JPY showed resilience, and the Australian dollar remained flat, while the offshore yuan gained amid hopes of stabilizing financial and economic conditions in China.

Stock Market Updates

On Wednesday, the Dow Jones Industrial Average experienced a decline of 70.46 points, equivalent to a 0.20% drop, settling at 34,575.53, marking its second consecutive day of losses. In contrast, the S&P 500 managed a slight uptick of 0.12%, reaching 4,467.44, while the Nasdaq Composite saw a more significant gain, rising by 0.29% to conclude the day at 13,813.59. Within the Dow, CNBC and 3M bore the brunt of losses, with a sharp drop of over 5.7%, followed by Caterpillar, which saw its shares dip by 2%. Meanwhile, Apple shares declined for a second consecutive day, falling by more than 1%. Conversely, the tech sector bolstered the S&P 500 and Nasdaq, with Tesla shares gaining 1.4% as billionaire investor Ron Baron expressed optimism about the electric vehicle maker. Amazon shares also surged, reaching their highest level since August 2022, with an increase of over 2.5%.

The market reaction came in response to a surprising increase in August’s core inflation print within the consumer price index. The core inflation, which excludes volatile food and energy prices, rose by 0.3%, surpassing expectations for a 0.2% increase, and stood at 4.3% year-on-year, meeting forecasts. Federal Reserve officials typically focus on the core inflation number as it offers a more reliable indication of long-term inflation trends. In contrast, the headline numbers, including all components, increased by 0.6% in the past month and were up 3.7% compared to the same period last year. Economists surveyed had anticipated smaller increases of 0.6% and 3.6%, respectively. Although the unsettling inflation report raised concerns, experts believe the Federal Reserve is unlikely to take immediate action, with market participants not expecting any moves until November. Currently, Wall Street appears to have factored in a pause in interest rate hikes, with a 97% probability of rates remaining unchanged at the Fed’s upcoming meeting, according to CME FedWatch Tool data.

Data by Bloomberg

On Wednesday, the overall market saw a modest gain of 0.12%. Among the sectors, Utilities performed the best with a significant increase of 1.21%, followed by Consumer Discretionary, which rose by 0.90%. Communication Services and Information Technology also showed positive momentum, with gains of 0.40% and 0.31%, respectively. Consumer Staples and Health Care had smaller increases of 0.26% and 0.02%. However, Financials experienced a slight decline of -0.10%. The Materials sector saw a more notable decrease of -0.59%, while Industrials and Energy had more substantial losses of -0.67% and -0.76%, respectively. Real Estate was the weakest performing sector, declining by -1.03% on Wednesday.

Currency Market Updates

The currency market reacted to the U.S. CPI data with a cautious stance, as traders had entered the session with an excessively short position in Treasuries and a strong long position in the U.S. dollar. The dollar index initially saw gains following a higher-than-expected increase in core CPI and an above-forecast overall rise compared to the previous year. However, the core CPI figure fell to 4.3% from the August reading, aligning with forecasts, which led to a perception of disinflationary pressure, eliminating the possibility of a Fed interest rate hike in the near term. Two- and 10-year Treasury yields, which had approached their highest levels of the year, attracted significant buying interest but failed to surpass those peaks.

Meanwhile, in the currency pairs, EUR/USD experienced a 0.14% decline but remained above its Wednesday low. This was partly supported by higher bund-Treasury yield spreads. The market is closely watching the ECB meeting, with a 64% probability of an ECB rate hike priced in after being below 50% just a day earlier. Sterling remained relatively stable, recovering from an initial dip due to disappointing data and a subsequent drop following the U.S. CPI release. USD/JPY saw a 0.18% rise, showing resilience to the drop in Treasury yields, as concerns about a potential BoJ rate hike or FX intervention by the Ministry of Finance (MoF) receded. However, the path to higher prices in this pair depends on a resumption of the uptrend in Treasury yields. The Australian dollar remained flat, while the offshore yuan gained 0.4% on hopes of China’s FX actions and housing stimulus efforts stabilizing the financial and economic landscape amid growth concerns.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Holds Steady Ahead of ECB Meeting Amid Uncertainty

The EUR/USD maintained its position unaffected by the release of US consumer inflation data, trading within a familiar range with support around 1.0700. All eyes are now on the upcoming European Central Bank (ECB) meeting, which holds the potential to spark significant market movements due to the lack of consensus on policy actions. Reports suggest the ECB may raise its inflation forecast, fueling speculation about a rate hike. The ECB faces a dilemma between a rate hike and a pause, given economic conditions and persistent inflation. The outcome will be crucial, with potential implications for the Euro’s performance, while important US data releases could add to volatility in the days ahead.

Chart EURUSD by TradingView

According to technical analysis, EUR/USD moved flat on Wednesday and is currently trading just around the middle band of the Bollinger Bands. This movement suggests the possibility of further consolidation. The Relative Strength Index (RSI) is currently at 50, indicating that EUR/USD is in a neutral stance.

Resistance: 1.0759, 1.0803

Support: 1.0702, 1.0653

XAU/USD (4 Hours)

XAU/USD Slips as US Inflation Data Fails to Spark Dollar Rally

Gold traded around $1,910 in the American afternoon, marking its second consecutive day of losses. Earlier in the day, major assets remained within familiar ranges as investors awaited the release of US inflation figures. The Consumer Price Index (CPI) report for August showed a 0.6% MoM increase and a 3.7% YoY rise, surpassing market expectations, leading to an initial rally in the US Dollar. However, the Dollar’s gains were short-lived as the CPI readings were not strong enough to trigger a hawkish response from the Federal Reserve. Meanwhile, US indexes held modest gains, and US Treasury yields saw some uptick. Attention now turns to the European Central Bank (ECB) meeting, where expectations for a rate hike collide with economic challenges in the Euro Zone, leaving financial markets in a cautious state.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved flat on Wednesday and moving between the lower and middle band of the Bollinger Bands. Currently, the price is trading slightly above the lower band with the potential for further downward movement. The Relative Strength Index (RSI) is currently at 39, indicating that the XAU/USD pair is still biased towards the bearish side.

Resistance: $1,916, $1,925

Support: $1,903, $1,893

Economic Data

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In a mixed day for the financial markets, the Nasdaq Composite faced a 1.04% decline on Tuesday, spurred by Oracle’s sharp 13.5% drop following disappointing results. This decline, though not a massive stock, reflects broader business spending trends and impacted both the Nasdaq and the S&P 500. Meanwhile, tech giants like Apple and Adobe also saw their share prices decline. On the energy front, U.S. crude oil prices hit their highest level since last November, boosting energy stocks. In the currency market, the US Dollar Index showed a modest increase as investors awaited the release of the August US Consumer Price Index (CPI), which is expected to influence Federal Reserve monetary policy expectations. The week also holds key inflation data with the Producer Price Index (PPI) scheduled for Thursday. In the UK, mixed labor market data pointed to economic challenges, while in currency trading, the Pound weakened amid uncertainties. The EUR/USD pair faces upcoming Eurozone Industrial Production data and the European Central Bank’s meeting.

Stock Market Updates

On Tuesday, the Nasdaq Composite experienced a 1.04% decline, marking its first day of losses in three days. This drop was primarily driven by the sharp decline in Oracle shares, which tumbled 13.5% following disappointing quarterly results and a lackluster revenue forecast. This setback in Oracle, while not a massive stock, is indicative of larger business spending trends, impacting both the Nasdaq and the S&P 500. Additionally, other tech giants like Amazon, Alphabet (Google’s parent company), and Microsoft also saw their stock prices slide.

Meanwhile, Apple’s shares fell by 1.7% after the announcement of a new iPhone model, and Adobe’s shares dropped approximately 4% ahead of its upcoming earnings report. On a different note, U.S. crude oil prices reached their highest level since November of the previous year, driven by OPEC’s optimistic demand growth forecast. This surge in oil prices provided a boost to energy stocks, with Chevron and Exxon Mobil both seeing gains of about 1.9% and 2.9%, respectively. Investors are now closely watching key inflation data set to be released later this week, along with the European Central Bank’s interest rate decision on Thursday.

Investors eagerly await the release of key inflation data later this week, especially following a series of stronger-than-expected economic indicators from the previous week, which raised concerns about the possibility of the Federal Reserve increasing rates more than previously anticipated.

Data by Bloomberg

On Tuesday, the overall market slipped by 0.57%, with notable sector performance variations. Energy surged by 2.31%, and financials gained 0.85%, while utilities and real estate had slight gains of 0.13% and -0.03%, respectively. In contrast, information technology saw a substantial 1.75% drop, and communication services declined by 1.06%. Consumer discretionary, industrials, materials, and health care sectors faced moderate declines ranging from -0.17% to -0.89%, while consumer staples decreased by 0.71%. These sector-specific movements contributed to the market’s overall decline.

Currency Market Updates

The US Dollar Index saw a modest uptick on Tuesday, nearing 105.00 before retracing, with markets relatively calm as they awaited crucial US data. The highlight of the week, the August US Consumer Price Index (CPI), is scheduled for release on Wednesday. It’s expected to show an annual rate rebound from 3.2% to 3.6%, while the Core rate may slow down from 4.7% to 4.3%. These figures are poised to influence expectations about the Federal Reserve’s monetary policy, likely leading to increased volatility. Thursday will bring more inflation data with the Producer Price Index (PPI).

In the UK, mixed labor market data signaled a deteriorating economic situation, as the unemployment rate rose to 4.3% – the highest since September 2021 – accompanied by a decline in employment by 207K. Despite average hourly weekly earnings exceeding expectations at 8.5%, the Pound weakened. The GBP/USD pair approached its monthly low before rebounding toward 1.2500. Meanwhile, the EUR/USD pair reached a weekly high at 1.0769 and has Eurozone Industrial Production data scheduled for Wednesday, along with the European Central Bank’s Governing Council meeting on Thursday.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Sees Modest Pullback Ahead of Key Economic Data and ECB Meeting

The EUR/USD pair experienced a moderate pullback on Tuesday, initially spiking to 1.0769 during the Asian session, its highest level in a week, before retracing while still holding above the 1.0700 mark. Investors are eagerly awaiting the release of US consumer inflation data and the European Central Bank (ECB) meeting.

The market received mixed signals from Germany, with the current condition index dropping to -79.4, its lowest point since August 2020, and the expected index coming in at -11.4, surpassing the forecast of -15.0. These indicators contribute to concerns about a potential recession in Germany and the Eurozone, impacting expectations regarding an ECB rate hike. Market pricing suggests a nearly 50% probability of a rate hike on Thursday, but most analysts anticipate at least one 25 basis points rate hike by year-end. The economic outlook of the Eurozone, in contrast to the more resilient US economy, remains a critical factor influencing the direction of the EUR/USD pair, with the US Consumer Price Index (CPI) report on Wednesday poised to play a pivotal role in shaping market sentiment.

Chart EURUSD by TradingView

According to technical analysis, EUR/USD moved higher on Tuesday and is currently trading just below the upper band of the Bollinger Bands. This movement suggests the possibility of further continuation to the upside, potentially pushing towards the upper band. The Relative Strength Index (RSI) is currently at 57, indicating that EUR/USD is in a neutral stance with a slight bullish bias.

Resistance: 1.0759, 1.0803

Support: 1.0702, 1.0653

XAU/USD (4 Hours)

XAU/USD Dips Amid Dollar Demand but Recovers Slightly as Markets Await US CPI Data

Gold prices saw a decline on Tuesday, influenced by renewed demand for the US Dollar, as XAU/USD dropped to $1,907.53 per troy ounce. The decline in the precious metal was most pronounced during European trading hours, as weak local data raised concerns about economic setbacks in the United Kingdom and the Euro Zone.

However, the mood improved as Wall Street opened, with local indexes outperforming their international counterparts. The Dow Jones Industrial Average was in positive territory, while the S&P500 and the Nasdaq Composite posted minor losses. XAU/USD managed to recover some of its earlier losses, trading at approximately $1,912 per troy ounce.

Speculative traders are exercising caution in anticipation of significant events scheduled for the latter part of the week, refraining from making strong commitments. Nevertheless, Gold has been among the weakest performers against the US Dollar this week. Attention now turns to the United States (US) Consumer Price Index (CPI), which is expected to rise by 0.6% MoM and 3.6% YoY, surpassing July’s figures. Higher-than-expected CPI numbers could fuel speculation about an impending Federal Reserve (Fed) rate hike, benefiting the USD in a risk-averse environment. Conversely, if CPI figures fall short of market expectations, markets may turn notably optimistic.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved lower on Tuesday and reached the lower band of the Bollinger Bands. Currently, the price is trading slightly above the lower band with the potential for further downward movement. The Relative Strength Index (RSI) is currently at 35, indicating that the XAU/USD pair is still biased towards the bearish side.

Resistance: $1,919, $1,925

Support: $1,910, $1,903

Economic Data