BKFX

September NFP

The US Dollar aimed higher against its major counterparts this past week, fulfilling a move that markets had been building up since the beginning of August. Throughout June and July, the markets priced in a pivot narrative for the Federal Reserve despite the highest inflation in 40 years and the most aggressive tightening in decades.
The US nonfarm payrolls report will take center stage next week as speculation about the size of the Fed’s next rate hike goes into overdrive. Investors will also be keeping a close eye on the latest inflation readings in the euro area ahead of the September rate decision amid growing gloom about the bloc’s economic outlook. PMI indicators out of China and as well as quarterly data from Australia and Canada will be important too in helping to gauge the health of the big economies.
Three high-frequency economic prints next week will likely move the markets whether they meet expectations or not: China's PMI, the eurozone's CPI, and the US employment report.

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September NFP - bkfx.io The US Dollar aimed higher against its major counterparts this past week, fulfilling a move that markets had been building up since the beginning of August. Throughout June and July, the markets priced in a pivot narrative for the Federal Reserve despite the highest inflation in 40 years and the mos...

Gold Bears Pushing

Spot gold peaked on Thursday at $1,765.47 a troy ounce, retreating from the level but holding on to modest intraday gains, now at around $1,758. A better market mood weighed on the greenback throughout the first half of the day, although losses were modest as investors are still waiting for central bankers’ words at the Jackson Hole Symposium.

The American currency recovered following the release of a revision to US Q2 Gross Domestic Product, from -0.9% to -0.6%. Despite still indicating a technical recession, the upward revision encouraged dollar bulls. Meanwhile, US indexes hover around their opening levels, confined to tight intraday ranges. In addition, government bond yields eased from their weekly peaks, limiting the dollar’s gains in the near term.

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Gold Bears Pushing - bkfx.io Spot gold peaked on Thursday at $1,765.47 a troy ounce, retreating from the level but holding on to modest intraday gains, now at around $1,758. A better market mood weighed on the greenback throughout the first half of the day, although losses were modest as investors are still waiting for central....

WTI oil recouping losses

The Canadian dollar is drifting in a USDCAD range of 1.2940-1.3040 and will likely continue to do so until Fed Chair Powell delivers his speech at the Jackson Hole symposium.

The US Dollar is holding near a key spot of resistance today. This follows a massive topside run that developed in the currency last week. It all started with a bull flag formation that had setup ahead of last week’s open, which I talked about in the technical forecast. That breakout hit quickly, with USD finding resistance at a familiar level, setting up for another breakout last Tuesday. The next breakout hit on Thursday and prices continued to rally through last week’s close, and I took another look at the matter on Friday to set up ahead of this week.

West Texas Intermediate continues to recover from Monday’s low, with prices rising from $93.38 to $95.19/barrel overnight. The gain was supported by the American Petroleum Institute crude stock report showing inventories fell 5.632 million barrels in the week ending August 19.

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WTI oil recouping losses - bkfx.io The Canadian dollar is drifting in a USDCAD range of 1.2940-1.3040 and will likely continue to do so until Fed Chair Powell delivers his speech at the Jackson Hole symposium. The US Dollar is holding near a key spot of resistance today. This follows a massive topside run that developed in the curren...

Aussie Bullish

The Aussie appeared to be emulating the price action from June and the exchange rate may continue to track the negative slope in the moving average as the Federal Reserve prepares US households and businesses for a restrictive policy.

Though, new data announcements coming out of the US may prop up AUD/USD as the core PCE index, the Federal Reserve’s preferred gauge for inflation, is expected to narrow to 4.7% in July from 4.8% per annum the month prior, and signs of easing price pressures may encourage the Federal Open Market Committee (FOMC) to adjust its approach in combating inflation in an effort to foster a soft landing for the economy.

As a result, speculation for smaller Fed rate hikes may produce headwinds for the Greenback as the central bank acknowledges that “it likely would become appropriate at some point to slow the pace of policy rate increases,” and it remains to be seen if the FOMC will adjust the forward guidance at the next interest rate decision on September 21 as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).

Until then, the Aussie may stage a larger rebound as evidence of slowing inflation curbs bets for another 75bp Fed rate hike, but the recent flip in retail sentiment looks poised to persist as the exchange rate fails to defend the opening range for August.

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Aussie Bullish - bkfx.io The Aussie appeared to be emulating the price action from June and the exchange rate may continue to track the negative slope in the moving average as the Federal Reserve prepares US households and businesses for a restrictive policy. Though, new data announcements coming out of the US may prop up A...

Investors await Fed data

The Cable pair is moving into range of 1.1756-1.1769 in the early Asian session. The GBPUSD has witnessed a short-lived pullback after printing a fresh two-year low of 1.1742 on Monday. The less positive pullback move is expected to turn into a new downside move ahead and the asset may fall to near 1.1700.
The US dollar index (DXY) has retook the prices close to 109 and is expected to continue above the same as traders are awaiting the Federal Reserve (Fed) chair Jerome Powell’s speech at Jackson Hole Economic Symposium. After observing evidence of fatigue in the price pressures and accelerating effects of liquidity decline from the economy, it is likely that the Fed will scale down its hawkish tone on the interest rates. Thus, a rate hike by 50 basis points (bps) could be discussed at the Economic Symposium.
Traders are still in a hangover from the downbeat employment data released last week on the pound front. The Claimant Count Change landed at -10.5k, significantly lower than the expectations of -32k and the prior release of -26.8k. Also, the Unemployment Rate remained unchanged at 3.8%. The vulnerable employment data has trimmed the confidence of the Bank of England (BOE) in deploying tight quantitative measures unhesitatingly.

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Investors await Fed data - bkfx.io The Cable pair is moving into range of 1.1756-1.1769 in the early Asian session. The GBPUSD has witnessed a short-lived pullback after printing a fresh two-year low of 1.1742 on Monday. The less positive pullback move is expected to turn into a new downside move ahead and the asset may fall to near....

Gold Bulls Took Control

Economic data published on Thursday showed the Producer Price Index in the US fell by 0.5% in July, and the annual rate fell to 9.8%, against expectations of a 0.2% monthly advance. On Wednesday, it was reported the Consumer Price Index was unmoved in July against expectations of a 0.2% gain. The decline in inflation weighed on the US dollar.
Investors are expecting the Fed to hike rates by at least 50 basis points at the September meeting. Though, US yields are up even amid the probability of an inflation peak in the US. The US 10-year yield is up 1.90% at 2.83%, while the 2-year is at 3.20%, both at the highest level in almost a week.
The rise in US yields limited the upside in gold. XAU/USD’s inability to hold above $1800, even after the recent US data, rises doubts about the rally. The urgent support is seen at $1785 followed by the weekly opening at $1774. If the yellow metal consolidates above $1800 more gains seem likely

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Gold Bulls Took Control - bkfx.io Economic data published on Thursday showed the Producer Price Index in the US fell by 0.5% in July, and the annual rate fell to 9.8%, against expectations of a 0.2% monthly advance. On Wednesday, it was reported the Consumer Price Index was unmoved in July against expectations of a 0.2% gain. The de...

WTI crude oil heads higher ahead

The Loonie pair plunged the most since early June the previous day after the US Consumer Price Index (CPI) declined to 8.5% on YoY in July versus 8.7% expected and 9.1% prior. “After Wednesday’s CPI report, traders of futures tied to the Fed’s benchmark interest rate pared bets on a third straight 75-basis-point hike at its Sept. 20-21 policy meeting and now see a half-point increase as the more likely option,” said Reuters following the data.

POTUS Joe Biden also cheered the US CPI miss while saying, “Seeing some signs that inflation may be moderating,” as reported by Reuters. “We could face additional headwinds in the months ahead,” Biden added. “We still have work to do but we’re on track,” adds US President Biden.

Looking forward, the weekly readings of the US Jobless Claims and the monthly Producer Price Index (PPI) for July could entertain investors. Though, major attention should be given to the qualitative factors in the wake of recent risk-negative headlines. Also important will be the monthly oil demand forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).

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WTI crude oil heads higher ahead - bkfx.io The Loonie pair plunged the most since early June the previous day after the US Consumer Price Index (CPI) declined to 8.5% on YoY in July versus 8.7% expected and 9.1% prior. “After Wednesday’s CPI report, traders of futures tied to the Fed’s benchmark interest rate pared bets on a third stra...

US CPI in Focus

Aussie holds lower ground near 0.6960 during Wednesday’s Asian session, defending the downbeat inflation data from China. In addition to China CPI and PPI data, careful attitude ahead of the US inflation numbers and fears of economic recession also weigh on the Aussie pair.
China’s headline Consumer Price Index (CPI) eases to 2.7% YoY in July versus 2.9% expected and 2.5% prior. Further, the Producer Price Index (PPI) dropped to 4.2% compared to 8.0% market forecasts and 6.1% previous readings.
Wall Street’s slow performance, as well as a rebound in the US 10-year Treasury yields to 2.79%, reveals a bitter sentiment in the markets. Additionally, the S&P 500 Futures also print mild losses at around 4,120 by the press time and teases the AUD/USD bears, due to the pair’s risk barometer status.
Moving on, Aussie investors may observe a slow session ahead of the US CPI, expected to ease to 8.7% from 9.1% on YoY. However, risk catalysts may entertain the pair traders. Also, important to watch will be the CPI ex Food & Energy which is likely to rise from 5.9% to 6.1%.

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US CPI in Focus - bkfx.io Aussie holds lower ground near 0.6960 during Wednesday’s Asian session, defending the downbeat inflation data from China. In addition to China CPI and PPI data, careful attitude ahead of the US inflation numbers and fears of economic recession also weigh on the Aussie pair. China’s headline Cons...

Geopolitical/Recession Risks Lurking

Gold prices rose ahead this week reaching a high of USD 1794.23, 6.7% off the yearly lows with a rebound off support. Bullion surged 1.5% on Thursday and is heading for a run of three straight weekly gains after China fired missiles over Taiwan during military drills. Beijing has responded aggressively to US House Speaker Nancy Pelosi’s visit to the island this week, the highest-ranking American politician to go there in 25 years.

Gold has benefitted from a weakening dollar, falling US bond yields and some haven support amid the ongoing geopolitical risks. Bullish comments from Federal Reserve officials pledged the central bank would continue an aggressive fight to cool soaring inflation.

In the week ahead, as investors and the US Federal Reserve continue to closely monitor data and sentiment seems to shift after every release at the minute, next week’s inflation data is set to show inflation still at dangerously high levels. Should this be the case we could see a rising dollar which could lead to further downside for the precious metal.

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Geopolitical/Recession Risks Lurking - bkfx.io Gold prices rose ahead this week reaching a high of USD 1794.23, 6.7% off the yearly lows with a rebound off support. Bullion surged 1.5% on Thursday and is heading for a run of three straight weekly gains after China fired missiles over Taiwan during military drills. Beijing has responded aggressiv...

Geopolitical Risks Remain

Last week, US employers increased more than double the number of jobs forecast, showing a solid labor demand that softens recession fears and implies that the Federal Reserve will press on with steep interest-rate hikes to prevent inflation.

Next week, a light calendar ahead due to the August holidays slowdown. The most important figure will be the US Consumer Price Index (CPI). Consumer prices account for most of the overall inflation. Also, other high impact data announcements include the US Producer Price Index (PPI), Unemployment Claims, the UK GDP and the US Preliminary University of Michigan (UoM) Consumer Sentiment.

The most important economic data for next week will be as follows:

Early Monday the New Zealand’s quarterly Inflation Expectations
Tuesday will be relatively quiet with low impact announcements.
Wednesday the most important number of the week the US CPI will be released before the US open of the market.
Thursday, the Japanese banks will be closed in observance of Mountain Day. The US PPI and US Unemployment Claims will be released later before the opening of the US Stock Markets.
Early Friday, The UK will release its quarterly Preliminary GDP and monthly GDP. Later, the US will release its Preliminary University of Michigan (UoM) Consumer Sentiment.

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Geopolitical Risks Remain - bkfx.io Last week, US employers increased more than double the number of jobs forecast, showing a solid labor demand that softens recession fears and implies that the Federal Reserve will press on with steep interest-rate hikes to prevent inflation. Next week, a light calendar ahead due to the August holida...

Gold Bulls Took Control

The gold price rose on Thursday as the US bond yields fell and the Bank of England warned the United Kingdom’s economy could be headed for a recession later this year with inflation rising as high as 13%. XAU/USD has pushed don within its weekly bullish correction to mark a high of $1,794.23. Gold for December delivery was printing above $1,800 per ounce.

Gold has been profiting from softer US bond yields, bullish for gold since it offers no yield. The US 10-year note was last seen paying 2.699%, down 0.26% on the day. The US dollar was lower against most major currencies on Thursday, down some 0.5%. The positive impact of hawkish Federal Reserve comments disappeared this week while investors waited for more signs on the data front. Friday’s Nonfarm Payrolls and next week’s inflation data will be critical.

The Fed hiked rates by 75 basis points at its meeting in June and July. For now, the markets are pricing in a 50 basis point hike at the Fed’s September meeting, and a roughly 44% chance of another massive 75 bps increase. Today, Loretta J. Mester, president of the Federal Reserve Bank of Cleveland said on Thursday that the Fed should raise interest rates to above 4% in order to bring inflation back down to target.

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Gold Bulls Took Control - bkfx.io The gold price rose on Thursday as the US bond yields fell and the Bank of England warned the United Kingdom’s economy could be headed for a recession later this year with inflation rising as high as 13%. XAU/USD has pushed don within its weekly bullish correction to mark a high of $1,794.23. Gold...

Canadian Dollar Retreats

The Canadian dollar mostly ignored yesterday's China/Taiwan tensions, and US Treasury yield moves with USDCAD adrift in a 1.2833-1.2890 band since yesterday. The Canadian dollar remains to be boosted by the Bank of Canada's (BoC) aggressive inflation fighting posture, alongside relatively high oil prices.
The BoC raised interest rates by 100 basis points on July 13, which surprised the market. It shouldn't have. Governor Tiff Macklem and the Governing Council misread the inflation outlook since prices started to rise a year ago. They were happy to appoint the US Federal Reserve view that inflation was transitory.
They changed their pitch after inflation remained persistently above target and showed no signs of being transitory. They hiked rates by 0.50% in March, April, and June, but inflation continued to rise. They hiked 100 bps on July 13 and left the door wide open to a similar move in September.
The BoC agreed that Canada's inflation problem was due to a lot of external factors, including the war in Ukraine and the lingering impact of supply chain disruptions from the pandemic. The BoC also believes they can plan a "soft landing" because of the job market's strength.

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Canadian Dollar Retreats - bkfx.io The Canadian dollar mostly ignored yesterday’s China/Taiwan tensions, and US Treasury yield moves with USDCAD adrift in a 1.2833-1.2890 band since yesterday. The Canadian dollar remains to be boosted by the Bank of Canada’s (BoC) aggressive inflation fighting posture, alongside relatively high o...

Australian dollar recovers

The Reserve Bank of Australia increased the key interest rate by 50 basis points. The advice offered by the central bank was seen as “dovish” and drove the Aussie to the downside. The AUD/USD pair fell to 0.6910. After reaching a fresh daily high at 0.6909, it started to recover.
Since the beginning of the American session, it recovered more than 50 pips. At the same time, the AUDNZD that bottomed at 1.1007, the lowest in two weeks, rebounded and as of writing, it trades at 1.1055/60. The push to the upside took place as equity prices in Wall Street turned positive and as the US dollar lost momentum against commodity currencies, even amid higher US yields.
The AUDUSD pair chart shows the pair still moving sideways around 0.6970. The 0.6910 zone has become a critical support that if broken should clear the way to more losses, targeting first the 20-day Simple Moving Average at 0.6878.
Analysts at Rabobank, see scope for another bout of broad-based USD strength to push AUD/USD lower on a 1 to 3 month view but then they see a recovery. “We expect AUD/USD to rise to the 0.74 area on a 12 month view.”

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Australian dollar recovers - bkfx.io The Reserve Bank of Australia increased the key interest rate by 50 basis points. The advice offered by the central bank was seen as “dovish” and drove the Aussie to the downside. The AUD/USD pair fell to 0.6910. After reaching a fresh daily high at 0.6909, it started to recover. Since the begin...

BOE in Focus

The focus this week will shift to the Bank of England, which issues its monetary policy decision on Thursday, along with updated economic forecasts. The BOE began its rate hike cycle well ahead of the Fed in December, but has been limited to moves of no more than 25 basis points.
Governor Bailey recently indicated that a larger 0.5% increase is "among the options on the table" going forward, raising some expectations of a contract break, although he cautioned that this is not "locked in". However, the central bank is known for its communication deadlocks and doesn't have the best track record when it comes to providing guidance around its intentions.
Similar to the Fed, the Bank of England is concerned about skyrocketing inflation, which is expected to top 11% later in the year, so we'll also be eagerly awaiting updated forecasts.

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BOE in Focus - bkfx.io The focus this week will shift to the Bank of England, which issues its monetary policy decision on Thursday, along with updated economic forecasts. The BOE began its rate hike cycle well ahead of the Fed in December, but has been limited to moves of no more than 25 basis points. Governor Bailey rec...

NFP report

Last week, it was huge for stocks with a massive move showing up after the Fed’s rate hike on Wednesday. The FOMC hiked rates by 75 basis points and the S&P 500 jumped up to a fresh six-week-high. That move continued on Thursday and into Friday trade, helped along by an earnings report from Amazon on Wednesday afternoon and Apple on Thursday.
Next week, all eyes will be on the next Non-Farm payrolls report. For July, the economy is seen adding 250k positions, with unemployment sticking to 3.6%. A minor slowdown is seen in average hourly earnings, with a 4.9% year per year outcome expected from 5.1% prior. These are still healthy estimates and will likely contrast with the Fed pivot markets are anticipating.

The most important economic data for next week will be as follows:
• A quiet Monday this week with Swiss stock market will be closed in observance of Swiss National Day. Later in the day the US ISM Manufacturing PMI will be announced.
• Tuesday the Australian RBA Policy Announcement will be released and later the US JOLTS for June.
• Early Wednesday the New Zealand’s Employment Change and rate will be released. Later the Switzerland’s Consumer Price Index will be released, and later the US ISM Services PMI.
• Thursday will be an important day for UK as they BOE Monetary Policy Report will be released.
• Early Friday, the Australian RBA Monetary Policy Statement will be released. Later the most important number of the month the US and Canadian NFP employment Change and rate will be released.

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NFP report - bkfx.io Last week, it was huge for stocks with a massive move showing up after the Fed’s rate hike on Wednesday. The FOMC hiked rates by 75 basis points and the S&P 500 jumped up to a fresh six-week-high. That move continued on Thursday and into Friday trade, helped along by an earnings report from Amazon...

NFP in focus

The Euro moved just higher against the US Dollar this past week. That appears to be largely a result of general weakness in the US Dollar. The Euro-Area economic data is rather thin in the week ahead, so the focus on EUR will likely depend on external factors. In this case, it might make sense to look at what is going on in the United States. Although, it should be noted that the European Central Bank has been pushing out increasingly hawkish commentary as of late. But, as we will see, it still pales in comparison with the Fed.
Inflationary data this past week continued to show that the Fed has a problem to tackle. The Employment Cost Index, which is the central bank’s preferred wage gauge, surprised higher at 1.3% q/q in Q2 versus 1.2% seen. Meanwhile, the Fed’s ideal inflation gauge also beat estimates.
In the week ahead, all eyes will thus be on the next NFP report. For July, the economy is seen adding 250k positions, with unemployment sticking to 3.6%. A minor slowdown is seen in average hourly earnings, with a 4.9% y/y outcome expected from 5.1% prior. These are still healthy estimates and will likely contrast with the Fed pivot markets are expecting. As such, remain vigilant. Volatility can still return, opening the door for a US Dollar reversal, therefore pressuring the Euro.

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NFP in focus - bkfx.io The Euro moved just higher against the US Dollar this past week. That appears to be largely a result of general weakness in the US Dollar. The Euro-Area economic data is rather thin in the week ahead, so the focus on EUR will likely depend on external factors. In this case, it might make sense […]

Weaker US dollar

The July Fed meeting was a catalyst for global financial markets. Ditching its forward guidance, the FOMC has now moved to a data dependent stance. Fed Chair Jerome Powell didn’t do much to push back on market expectations that we’re on the other side of peak Fed hike expectations, and rates markets continue to discount rate cuts in 2023.

Forward looking measures of inflation indicate that peak inflation is in the rear-view mirror, and the 2Q’22 US GDP report indicated that the economy is slowing (recession or not, there’s no reason to quibble over the technical definition). These facts bring a more dovish Fed moving forward, whereby even if there are more rate hikes, they’re unlikely to be at the same 75-bps pace we’ve seen over the past two meetings.

These are expected to translate into a weaker US Dollar, or at least a US Dollar that’s less likely to continue its meteoric rise moving forward. But primarily, these developments mean that US real yields are likely to fall back in the near-term.

If there was any question about how much of a catalyst this is for precious metals, just look at how silver prices have performed: the gold/silver ratio has collapsed from a high of 93.61 on Monday to as low as 87.93 today (-6.07% this week alone).

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Weaker US dollar - bkfx.io The July Fed meeting was a catalyst for global financial markets. Ditching its forward guidance, the FOMC has now moved to a data dependent stance. Fed Chair Jerome Powell didn’t do much to push back on market expectations that we’re on the other side of peak Fed hike expectations, and rates mar...