Market News

Australian Dollar Vs US Dollar, Australia Jobs – Talking Points:

• AUD held gains after Australia jobs data beat expectations.
• AUD/USD is attempting to form an interim base.
• Speculative short AUD positioning is at the highest level since early 2022.
• What is the outlook for AUD/USD and what are the key levels to watch?

The Australian dollar held early Asia gains against the US dollar after the Australian economy created more jobs than expected last month.

The Australian economy created 64.9k jobs in August, compared with forecasts for a gain of 23k, following job losses in July. The unemployment rate remained flat at 3.7%, in line with expectations, just off five-decade lows. The solid jobs number was almost entirely due to part-time employment gains (62.1k), prompting a slight retreat in AUD/USD. Full-time employment rose 2.8k following losses of 24.2k in July.

AUD/USD 5-minute Chart

Chart Created by Manish Jaradi Using TradingView

The Australian jobs market is showing signs of cooling, reducing the urgency to tighten further. Recent Australian data, including GDP, composite, and services PMI, have been encouraging, coming in higher than previous readings.However, the Economic Surprise Index for Australia suggests the data have broadly been underwhelming. Wednesday’s jobs data does little to alter the broader expectations of RBA remaining on hold next month. Market pricing suggests a small possibility of a rate hike in November.

With the broader US inflation trajectory still pointing down, albeit gradually, US Federal Reserve rate expectations remained largely anchored around one more hike in November (about 40% chance) before rate cuts beginning mid-2024. US CPI rose by 3.7% on-year last month, against expectations of 3.6%, well above 3.2% in July. However, core inflation eased to 4.3% on-year from 4.7% previously.

AUD/USD 240-Minute Chart

Chart Created by Manish Jaradi Using TradingView

While the rates outlook for both economies remains similar until the year-end, the outperformance of the US economy has pushed up USD globally. In contrast, the outlook for the Australian economy has been deteriorating since the last year. Much would depend on the outlook on the Chinese demand, Australia’s largest export destination. Beijing has announced a spate of support measures/stimulus measures in recent weeks to cushion some of the downside risks, but those measures have yet to translate into an improved outlook for the economy.

AUD/USD Weekly Chart

Chart Created by Manish Jaradi Using TradingView

Meanwhile, on technical charts, AUD/USD looks oversold as speculative short AUD positioning is at the highest levels since early 2022. The hold in recent weeks around 0.6350, coinciding with the lower edge of a declining channel since March suggests AUD/USD is attempting to form an interim base. This is reinforced by developments on higher timeframe charts – the 14-week Relative Strength Index is near the 40-level, which was associated with a rebound on two occasions in H1-2023.

The rise earlier this week above 0.6400 is an encouraging sign for bulls. Any break above the end-August high of 0.6525 would trigger a minor double bottom (the August and September lows), pointing to gains toward 0.6700.

— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish

USD/JPY TECHNICAL ANALYSIS

USD/JPY advanced last week to its highest level since November 2022, but pulled back after a failed attempt to clear channel resistance, which coincided with comments from Bank of Japan Governor Ueda indicating that the monetary authority may be in a better position to move away from negative interest rates by year’s end.

Although the yen initially responded positively to these developments, its strength was short-lived. The daily chart below shows how USD/JPY has quickly resumed its upward trajectory in place since early 2023, a clear sign that the bulls are still in control of the market and may soon find the impetus to trigger a bullish breakout.

Looking ahead to the next potential leg higher, initial resistance lies near the psychological 148.00 level. However, a push beyond this technical barrier could lure new buyers into the market, creating the right conditions for an acceleration towards 148.80, followed by 150.00, the upper limit of rising channel in play since early March. On further strength, we could see a move towards 152.00.

In the event of a setback and subsequent weakness, technical support can be found at 145.90, and 144.55 thereafter. It’s conceivable that the price may establish a base in this range during a pullback, but in case of a breakdown, all bets are off as such a move could open the door for a retracement towards 143.85 ahead of a slide toward 141.75.

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USD/JPY TECHNICAL CHART

USD/JPY Chart Created Using TradingView

GBP/JPY TECHNIAL ANALYSIS

Starting in late July and continuing into August, GBP/JPY embarked on a robust uptrend. However, this upward momentum faltered following a failed attempt at breaching overhead resistance in the 186.75 area, with prices retreating since that rejection, guided lower by a short-term dynamic trendline. As of this update, the pair is sitting above a key floor stretching from 183.60 to 183.10.

In the event that the 183.60/183.10 technical support range fails to hold, selling momentum could intensify, setting the stage for a drop towards the psychological 180.00 mark. While this region may act as an initial shield against further declines, a breakdown could bring the 176.35 level into view. On further weakness, sellers could make a move on 174.73, the 38.2% Fib retracement of the 2023 rally.

Alternatively, if buyers reassert their influence and propel prices decisively higher, trendline resistance is positioned at 185.35. Successfully piloting above this ceiling could reinforce upward impetus, emboldening the bulls to mount an offensive against the 2023 highs.

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GBP/JPY TECHNICAL CHART

GBP/JPY Chart Prepared Using TradingView

US DOLLAR ANALYSIS AFTER US INFLATION

The U.S. dollar, as measured by the DXY index, advanced modestly on Wednesday following somewhat mixed U.S. inflation figures.

Headline CPI rose 0.6% on a seasonally adjusted basis in August, pushing the 12-month reading to 3.7% from 3.2% previously, one-tenth of a percent above consensus estimates. Meanwhile, the core gauge, which tends to reflect longer-term trends in the economy, climbed 0.6% monthly and 4.3% compared to the previous year, closely aligning with Wall Street’s projections in both instances.

US INFLATION DATA AT A GLANCE

Source: DailyFX Economic Calendar

Today’s data had little impact on market pricing for the September FOMC conclave, with traders mostly anticipating no monetary policy action. Regarding the November meeting, the initial response in swaps suggested a greater chance of a quarter-point hike, but these odds decreased again as the day progressed, highlighting investor uncertainty.

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FOMC MEETING PROBABILITIES

Source: FedWatch Tool – CME Group

With interest rate expectations in a state of flux and the Fed highly sensitive to new information, it is important to keep an eye on the economic calendar as incoming data may move the needle for policymakers and influence the path of monetary policy.

In this context, three pivotal reports—retail sales, wholesale inflation, and consumer sentiment—stand poised to offer invaluable insights into the broader U.S. economic landscape and establish the tone for the U.S. dollar against the British pound and the Aussie in the upcoming days. It is advisable for traders to keep a vigilant watch on these events.

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GBP/USD TECHNICAL ANALYSIS

GBP/USD has suffered heavy losses since mid-July but has held above its 200-day simple moving average around 1.2450, with the bulls defending this technical support tooth and nail so far, a sign that the worst may be over for sterling.

If the 200-day SMA holds in the coming days, it would be the clearest indication that the pair has bottomed out and that a recovery phase could soon begin. Under this scenario, we could see a move towards 1.2550, followed by a possible retest of trendline resistance near 1.2600. On further strength, the focus shifts to 1.2685.

On the flip side, if 1.2450 gives way, all bets are off. Such a breakdown could be a bad omen for the pound, reinforcing downside pressure and setting the stage for a pullback towards 1.2311, a key floor created by the 61.8% Fibonacci retracement of the March/July rally.

GBP/USD TECHNICAL CHART

GBP/USD Chart Prepared Using TradingView

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AUD/USD TECHNICAL ANALYSIS

The Australian dollar was choppy on Wednesday, oscillating between small gains and losses but lacking firm directional conviction. Despite the indecision, AUD/USD appears to be in the process of developing a double bottom, which usually tends to herald the exhaustion of downside pressure before a rebound.

To dig deeper into the particulars, a double bottom is a reversal technical formation consisting of two similar troughs separated by a crest in the middle. Confirmation of this bullish configuration occurs when prices complete the “W” shape and break above the neckline resistance defined by the intermediate peak.

To assess the potential extent of the price rise following the validation of the pattern, traders can project its height vertically from the breakout point. This estimate provides a practical approximation of the expected magnitude of the move, offering valuable guidance when considering trading strategies and risk management.

In the case of AUD/USD, the neckline resistance currently sits in the range of 0.6500 to 0.6510. If the pair can convincingly breach this barrier, buying momentum could gather pace, potentially opening the door for a climb beyond the psychological level of 0.6600.

Conversely, if sellers regain control of the market and spark a bearish turnaround, support can be found at 0.6360. A drop below this level would invalidate the double bottom, setting the stage for a decline towards 0.6275, followed by 0.6170 in the event of further weakness.

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AUD/USD TECHNICAL CHART

AUD/USD Technical Chart Created Using TradingView

XAU/USD PRICE FORECAST:

• Gold (XAU/USD) Bulls Remain Cautious Following Sticky US CPI. Retest of Recent Lows Grow More Appealing.
• The Technicals on Gold Remain Conflicted. A Golden Cross Pattern Printed in the Asian Session and a Death Cross Pattern Forming Just Another Sign of the Current Indecision at Play.
• IG Client Sentiment Shows that Retail Traders are Overwhelmingly Long on Gold Which Could Hint at Further Downside Ahead.
• To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section.

MOST READ: US Headline Inflation Nudges Higher, the US Dollar Remains Nonchalant

Gold prices spiked to a daily low following the US CPI print before regaining some composure to trade around $1911 at the time of writing. The precious metal has struggled for large parts of this week as expectations of higher rates for longer continue to weigh on prices.

US INFLATION AND FED RATE HIKE PROBABILITIES

US CPI showed signs of stickiness today as the headline figure beat estimates and increased by 0.4% MoM. The clarity that market participants had been hoping for has failed to materialize with today’s CPI print likely to stir up more conversations on the Federal Reserve’s next move. This has also largely kept the Greenback supported as markets adopt a more risk averse tone given the growing uncertainties both in Europe and the US.

Based on the CME data in the table below market participants seem assured of a Fed pause at next week’s meeting. The current probability resting at 97%. The November meeting however looks more interesting and despite the sticky US CPI print markets are pricing in a 57% chance of a hold in November. This has increased ever so slightly from yesterday’s 55% while the Feds December meeting showing similar numbers.

Source: CME FedWatch Tool

The US economy has remained resilient in 2023 but is likely to come in for sterner tests in Q4 as consumer savings continues to deteriorate. This coupled with an end to the student loan repayment freeze at the end of September could have a negative impact on both growth and consumption in Q4 and could factor into the Fed decision next week.

RISK EVENTS

We do have quite a bit of US data ahead this week but none of the events ahead are expected to make a major splash. The only thing that could change the narrative would be a massive beat of forecasts of the remaining data due which could see some hawkish repricing of the rate hike probabilities and in turn add further impetus for US Dollar bulls.

For all market-moving economic releases and events, see the DailyFX Calendar

GOLD TECHNICAL OUTLOOK

Form a technical perspective, Gold prices pierced through the 200-day MA yesterday and pushing further down toward the psychological $1900 level today. The 14-day RSI is also trading below the 50-mark pointing toward further downside ahead while the technicals on the four-hour chart providing mixed signals. This isn’t surprising given the uncertainty around the US Dollar as well which has been a driving force for Gold prices of late.

Gold (XAU/USD) Daily Chart – September 13, 2023

Source: TradingView, Chart Prepared by Zain Vawda

As mentioned above the Four-Hour chart below is providing mixed signals with a golden cross pattern in the Asian session while a death cross appears to be nearing completion as well. Looking at the bigger picture and i do see the potential for further downside in Gold prices but given that we just printed a fresh lower low there is a chance of a retracement toward the inner trendline which coincides with the 50, 100 and 200-day MAs around the $1923-$1925 handle. This would also provide potential shorts with the best risk to reward opportunity should a push below the $1900 mark come to fruition.

Gold (XAU/USD) H4 Chart – September 13, 2023

Source: TradingView, Chart Prepared by Zain Vawda

IG CLIENT SENTIMENT

Taking a quick look at the IG Client Sentiment, Retail Traders are overwhelmingly Long on Gold with 74% of retail traders currently Net-Long on the precious metal. Given the Contrarian View to Crowd Sentiment Adopted Here at DailyFX, is this a sign that Gold may fall further?

For a more in-depth look at GOLD client sentiment and changes in long and short positioning download the free guide below.

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda

Article by IG Senior Market Analyst Axel Rudolph

FTSE 100, DAX 40, S&P 500 Analysis and Charts

​​​FTSE 100 drops on disappointing UK growth

​The FTSE 100 is about to end its four straight day winning streak as much weaker-than-expected UK GDP pushes the index lower. UK GDP dropped by 0.5% month-on-month in July, the quickest pace in seven months, versus an expected 0.2% decline. Year-on-year GDP dropped to 0% versus a forecast 0.4%.

​The UK blue chip index is seen slipping back towards the 55-day simple moving average (SMA) at 7,476. Below it, the breached July-to-September downtrend line at 7,468, because of inverse polarity, might also act as support. ​While this and last week’s highs at 7,524 to 7,551 cap, the index is expected to range trade with a slight downward bias.

​Only a rise and daily chart close above Tuesday’s high at 7,551 could open the way for the 200-day simple moving average (SMA) at 7,638.

FTSE 100 Daily Chart

Download the Free FTSE 100 Sentiment Report

​

​DAX 40 on track for second day of losses

​The DAX 40 is heading back down again as European Central Bank (ECB) sources suggested last night that inflation forecasts would remain above 3% in 2024, strengthening the view that an interest rate hike will follow at the meeting on Thursday. Last week’s low at 15,575 is thus back in focus. As long as it holds on a daily chart closing basis, Monday’s low at 15,723 may be revisited. The next higher July-to-September downtrend line at 15,850 and the 24 August high at 15,895 are unlikely to be revisited on Wednesday, though.

​Were last week’s low at 15,575 to be slid through on a daily chart closing basis, the 200-day simple moving average (SMA) and August low at 15,528 to 15,469 would be in focus.

DAX 40 Daily Chart

​

​S&P 500under pressure

​Following a weaker finish on Wall Street, where tech stocks fell after disappointment around the Apple product event and pre-CPI nervousness, the index remains under pressure. ​A tumble back toward last Thursday’s low at 4,430 low may be underway.

​Provided that last week’s low at 4,430 holds, a bounce back towards the 24 August high and the 55-day simple moving average (SMA) at 4,474 to 4,479 may once more be seen, though. Above these sits this week’s high at 4,491 which needs to be overcome for the bulls to be back in control.​A drop through 4,430 would put the March-to-September uptrend line at 4,416 on the map.

S&P 500 Daily Chart

EUR/USD PRICE FORECAST:

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WEEKLY FORECAST: Japanese Yen Selloff Resumes: USD/JPY, EUR/JPY Eye Further Upside

The Euro staged a late recovery yesterday helped by a waning Dollar Index (DXY) as the day progressed. This was compounded by sources who suggest the ECB are about to upgrade their inflation outlook for 2024 to above 3% which saw a hawkish repricing of rate hike expectations from the ECB. This rhetoric has been echoed by comments from European Commission President Ursula Von Der Leyen this morning who stated that returning to the ECB inflation target is to take time.

This morning we are seeing a slight retracement in EURUSD as the Dollar Index (DXY) has started the day on the front foot. Is this drop a precursor for Dollar Weakness later in the day?

Currency Strength Chart: Strongest – USD, Weakest – GBP.

Source: FinancialJuice

ECB RATE HIKE PROJECTIONS AND US CPI DATA

News that the ECB are planning to upgrade rate hike expectations pose a headache from the Central Bank as the Euro Area economy continues to stutter. Yesterday we had ZEW data out with economist particularly concerned about Europe’s most industrialized economy, Germany. The ECB it would seem would like to hike rates tomorrow in what would be a 10th successive rate hike but the worsening economic conditions in the Euro Area pose a challenge. It seems to be 50/50 at this stage whether we get a hike tomorrow with the rise in oil prices likely to factor in as well. The fear might be that persistently high energy prices may eventually bleed into inflation increasing the likelihood of second round inflationary pressures.

The US CPI data is due out later today and will be the last inflation print before next weeks FED Meeting. It’s an interesting one with higher energy prices likely to see an uptick in headline inflation which in theory should keep the Dollar bid. Market participants appear convinced that the Federal Reserve will hold rates steady next week with a view to a possible hike in November. Will the resurgence in oil prices also weigh on the FED decision at next week’s meeting?

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RISK EVENTS AHEAD

From a risk event perspective there is US CPI and the ECB Interest Rate Announcement tomorrow which at this stage appear to be on different ends of the spectrum. US inflation is expected to be sticky and thus keep the USD supported while it is now a 50/50 bet on whether the ECB hike on rates tomorrow.

If the ECB pause tomorrow with a hawkish outlook there is a chance the Euro may still rally in the aftermath. It would not come as a complete shock as markets are still pricing in around an 80% chance of one more rate hike from the ECB in 2023. The next two days could be crucial for EURUSD as the end of the Q3 approaches.

For all market-moving economic releases and events, see the DailyFX Calendar

TECHNICAL OUTLOOK AND FINAL THOUGHTS

Looking at EURUSD from a technical perspective and we have bounced off a key area of support around the 1.0680 mark which served as a strong area of support in June. Further downside remains possible today with the US CPI print potentially serving as a catalyst for further USD strength.

A push lower here has that key support level of 1.0680 to contend with, with a break and daily candle close below opening up a possible retest of the 1.0500 psychological level. This narrative could prove challenging given the ECB rate decision tomorrow which may tilt toward the hawkish end of the spectrum.

All in all, the technical picture looks set to be clouded by the next two days of data releases after which the outlook on EURUSD from a technical standpoint may begin to clear up as Q4 approaches.

EUR/USD Daily Chart – September 13, 2023

Source: TradingView

IG CLIENT SENTIMENT DATA

IGCS shows retail traders are currently Net-Long on EURUSD, with 63% of traders currently holding LONG positions.

To Get the Full IG Client Sentiment Breakdown as well as Tips, Please Download the Guide Below

Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda

Major US indices turned in weaker overnight, with the Nasdaq reversing its previous day’s gains, as big tech stocks faltered despite Treasury yields little changed. Apple’s new product launch failed to impress, prompting a 1.7% overnight drop in its share price. Its new iPhone selling prices seeing not much of an increase seems to provide testament to the still-soft demand for the global smartphone market, despite some improvement in global shipments in 2Q 2023.

Ahead, all eyes will be on the US Consumer Price Index (CPI) data tonight, with the story likely to revolve around a resurgence in headline pricing pressures, but also further cooling in US core inflation. The headline inflation is expected to head higher to 3.6% from a year ago, up from the previous 3.2%. On the other hand, the core aspect is expected to moderate to 4.3% from previous 4.7%, with the key focus on whether a softer core inflation read will be sufficient for the Fed to keep rates on hold into next year.

The US dollar is little changed into today’s session, while US equity futures tread on their usual wait-and-see. Perhaps one to watch ahead may be the SPDR S&P Semiconductor ETF, which seems to display a potential head-and-shoulder pattern in formation. The neckline support at the 193.00 level may be crucial for buyers to defend, failing to do so may potentially pave the way to retest its May 2023 bottom at the 174.00 level next. Its weekly relative strength index (RSI) is currently back at its neutral 50 level, which may suggest a point of reckoning ahead.

Source: IG charts

Asia Open

Asian stocks look set for a mixed open, with Nikkei +0.27%, ASX -0.62% and KOSPI +0.44% at the time of writing. Higher oil prices may keep an overall cautious mood in place, given that most economies in the region are net oil importers, while little moves around the US dollar may also call for some wait-and-see ahead of the US CPI release. Chinese equities largely remain in its subdued state, as investors also look towards a slew of economic data out of China this Friday, where the trend of downside surprises over the past months may keep sentiments in check for now.

The economic calendar this morning saw South Korea’s unemployment rate head to a new record low in August (2.4% versus previous 2.8%), which may call for the Bank of Korea (BOK) to retain a hawkish stance and some policy flexibility for additional tightening if needed. That said, the USD/KRW did not see much of a move in today’s session, reflecting some reservations over prevailing growth risks justifying a prolonged rate hold for now. On the other hand, Japan’s wholesale inflation for August saw its eighth straight month of moderation, which provide room for the Bank of Japan (BoJ) for a more gradual policy normalisation process.

Upon a retest of the 145.80 level of support, the USD/JPY is back on its climb, further validating the level as a key support to defend for buyers. An ascending channel pattern remains broadly in place since the start of the year, which keep the overall trend bias to the upside. Further move above its early-September high could place the 149.90 level on watch next – the next level of yen-buying intervention by the BoJ back in October 2022.

Source: IG charts

On the watchlist: Brent crude prices continue its ascent to new 10-month high

Following a slight consolidation over the past week, oil prices have resumed its ascent to deliver a new 10-month high overnight, successfully defending its key US$90.00 level for Brent crude. The latest surprise build in US crude oil API data may serve as a slight dampener, but given that the trend from the official inventory data (EIA) over the past month is still on heavy drawdowns, while the US Strategic Petroleum Reserve (SPR) inventories remain around its 40-year low, it may have to take more than a single data to overturn the tight-supplies narrative.

A firm stick by OPEC to its optimistic forecast for global oil demand into next year also provides some reassurances for the prevailing upward trend in oil prices since July this year. For now, as technical conditions head into near-term overbought territory, the US$90.00 will be on watch as immediate support to hold, while prices eye for a retest of the US$98.00 level ahead.

Source: IG charts

Tuesday: DJIA -0.05%; S&P 500 -0.57%; Nasdaq -1.04%, DAX -0.54%, FTSE +0.41%

Article written by IG Strategist Jun Rong Yeap