Daily market analysis

Markets await Friday’s jobs report to measure Fed hawkishness

September 2, 2022

US stocks edged higher on Thursday, as investors await Friday’s jobs report to gauge how hawkish the Federal Reserve will be. Recent data pointed to a resilient US economy, buoying sentiment later in the day. Several Fed officials in recent days reiterated their promise to remain aggressive to control inflation, quashing any hopes of dovish pivot investors had come to expect after July’s inflation reading. A fresh batch of labour-market and manufacturing data this week also pointed to a resilient US economy, strengthening the central bank’s resolve. Besides that, China put the megacity of Chengdu under lockdown, delivering a blow to economic growth.  Moreover, traders are also assessing political risks as Russia’s invasion of Ukraine continues and tensions in Taiwan mount, with the latter shooting down a civilian after weeks of complaints about incursions by unmanned aerial vehicles from China.

The benchmarks, both S&P500 and Dow Jones Industrial Average rallied for the day, as S&P500 ended its losing streak after falling for most of the session. Seven out of eleven sectors stayed in positive territory, as Health Care performed the best among all groups, rising 1.65% on Thursday. The Nasdaq 100 finished the day flat, and the Dow Jones Industrial Average gained 0.5%, while the MSCI world index slid with a 0.6% loss on Thursday.

Main Pairs Movement

The US dollar surged on Thursday, after U.S. data showed a resilient economy, giving the Federal Reserve more room to aggressively hike rates to quell inflation. The U.S. currency firmed after a government report indicated that the number of Americans filing new claims for unemployment benefits declined further last week, which is consistent with strong demand for workers and tight labour market conditions. The DXY index continues its uptrend tendency and surged to a 20-year-high level of 109.9 during the US trading session.

The GBP/USD dropped with a 0.66% loss on daily basis for the day, as the cable notched its fifth consecutive day loss with a strong greenback across the board. The pound keeps weighting and tumbled to touch its lowest level since the pandemic below 1.150 during the early US trading session, following the US data announcement. Meantime, EUR/USD witnessed heavy selling transactions ahead of the US trading session and touched a daily low level below 0.992 after the U.S. readings. The pair dropped 1.07% on Thursday.

Gold plunged with a 0.79% loss for the day, as the yellow metal wandered around the six-week low $1,695 mark with downbeat consensus for US NFP teasing corrective bounce as DXY hovers around a 20-year high. The XAU/USD remained with bearish momentum and touched a daily low level below the $1,690 mark.

Technical Analysis

EUR/USD (4-Hour Chart)

The EUR/USD pair tumbled on Thursday, continuing to suffer heavy daily losses and extend its slide towards the 0.9900 area after the release of upbeat US economic data. The pair is now trading at 0.9942, posting a 1.09% loss daily. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as the dismal market mood and the expectations for a 75 bps rate hike in the September Federal Reserve monetary policy meeting continued to provide strong support to the greenback and undermined the EUR/USD pair. The US ISM Manufacturing PMI arrived at 52.8 in August, showing that the business activity in the manufacturing sector continued to expand at a healthy pace. For the Euro, the German Retail Sales jumped by 1.9% MoM in July, which came better than expected but failed to lift the shared currency higher.

For the technical aspect, the RSI indicator is 40 as of writing, suggesting that the bears are in control of the pair as the RSI dropped sharply toward 40. As for the Bollinger Bands, the price extended its slide and moved out of the lower band, therefore a strong downside trend continuation can be expected. In conclusion, we think the market will be bearish as the pair is heading to test the 0.9917 support. The technical indicators also turned south and are currently entering negative territory.

Resistance:  1.0007, 1.0054, 1.0171

Support: 0.9917

GBP/USD (4-Hour Chart)

The GBP/USD pair declined on Wednesday, being surrounded by heavy bearish momentum and dropped to fresh 2-year lows below the 1.1500 level amid the broad-based dollar strength and the risk-averse market environment. At the time of writing, the cable stays in negative territory with a 0.69% loss for the day. The US ISM Manufacturing report in August that showed better-than-expected numbers indicated the US economy remained strong, which supports the idea of the Fed going for a 75 bps rate hike for the third straight meeting. For the British pound, the deteriorating outlook for the UK economy and political uncertainty have both kept the nation’s currency remained among the weakest currencies of the G10 today, despite the UK Manufacturing PMI for August getting revised higher to 47.3.

For the technical aspect, the RSI indicator is 35 as of writing, suggesting that the pair is facing heavy bearish pressure as the RSI has reached the oversold zone below 30. As for the Bollinger Bands, the price preserved its bearish strength and moved alongside the lower band, therefore the downside traction should persist. In conclusion, we think the market will be bearish as the pair is heading to test the 1.1476 support, which was last seen in March 2020. A steeper intraday decline could be expected on a break below that critical support.

Resistance: 1.1655, 1.1738, 1.1853

Support: 1.1476

XAU/USD (4-Hour Chart)

Gold extended its daily losses and dropped to its lowest level since late July, below the $1,690 level. The 10-year US Treasury yield rose more than 2% on the day, weighing on the gold prices as upbeat US jobless claims and manufacturing PMI.

For the technical aspect, the RSI indicator is 28 as of writing, below the lower bound, suggesting that the price has reached the oversold zone and exists some correction risk. As for the Bollinger Bands, gold price edged lower along with the lower bound, maintaining slightly above the lower bound. With a downward moving average, persisting downside traction could be expected. The price now is close to the lower bound of its trading range since May 2020 at the $1,680 level, which is a pivotal level that gold investors must focus on. To the upside, if gold price finds support at the $1,680 level, we may see some upward surge as it has done several times since May 2020. To the downside, if the price breaks below, we should be prepared for the following fresh sell as many market participants have been betting on the rebound from the $1,680 level. In conclusion, we think the market is still under bearish pressure, and the next price action depends on US Nonfarm Payrolls on Friday. For more price action, eye at US Nonfarm Payrolls, which largely determine the following path of gold price while the gold price is at a key level.

Resistance: 1765, 1803

Support: 1685

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USDNonfarm Payrolls (Aug)20:30300K
USDUnemployment Rate (Aug)20:303.5%