Fundamentals expected to guide the markets

Peter Iosif, ACA, MBA IronFX

US inflation remains high

The USD got some support in the FX market yesterday as the US PCE rates for July failed to slow down, implying a resilience of inflationary pressures in the US economy. Today we expect fundamentals to lead the greenback, given also the lack of high impact US financial releases. North of the US border, the Loonie reached a one-week low point against the USD, as the US-Canadian trade dispute does not show any signs of easing, weighing on Canada’s macroeconomic outlook.

NVIDIA’s forecasts overshoot market expectations

US stock markets tended to edge higher, despite the US PCE rates failing to slow down. On the other hand, market worries for the situation in the Middle East tended to ease, an element enhancing a risk-on approach for the markets. Yet the main issue for US equities remains AI, with NVIDIA’s earnings report being better than expected and accompanied by a robust forward guidance, which is supportive for its share price but also for the market sentiment in the US equities markets.

Oil prices remain stable

Oil prices remained relatively stable yesterday and during today’s Asian session as market worries for the situation in the Strait of Hormuz tended to ease. Iran and Oman are reported to be finalizing the details in a deal that is expected to open the Straits of Hormuz, and a possible deal could ease market worries even further. Qatar’s foreign minister is to visit Iran today in an effort to end the six-months conflict. A possible deal, reopening the Strait of Hormuz could weigh further on oil prices in the coming days.

Gold’s price edged lower yesterday

Gold’s price dropped yesterday, recovering some ground in the today’s Asian session. The strengthening of the USD seems to have weighed on the precious metal’s price, while the debasement theory remains active, supportive for gold’s price, given the high US borrowing costs and the XXL size of the US national debt. With July’s US PCE rates being released, attention now turns towards Fed Chair Warsh’s speech at the Jackson Hole symposium tomorrow as the next big test for gold’s price.

Other highlights for today

Today we get Norway’s GDP rates for Q2, the weekly US initial jobless claims figure and Canada’s current account balance for Q2. In tomorrow’s Asian session, we get from Japan, Tokyo’s CPI rates for August.

Charts to keep an eye out

USD/CAD continued to rise yesterday and during today’s Asian session, teasing the 1.3880 (R1) resistance line. The RSI indicator is rising yet is still at low levels, and we remain a bit cautious, yet warn for the bullish tendencies of the pair. For a clearcut bullish outlook to emerge, we would require USD/CAD’s price to clearly break the 1.3880 (R1) resistance line and start actively aiming for the 1.3990 (R2) resistance level. Should the bears take over, we may see USD/CAD’s price action reversing the gains since the start of the week, break the 1.3770 (S1) support line and start aiming for the 1.3550 (S2) support level.

Nasdaq continued in a sideways motion just below the 29675 (R1) resistance line. We maintain yesterday’s bias for a sideways movement of the index to continue, given also that the RSI indicator remains near the reading of 50, implying a rather indecisive market, which could allow the sideways motion of Nasdaq to continue. Also the Bollinger bands are narrowing, implying less volatility for the index. Should the bulls lead Nasdaq, we may see it breaking the 29675 (R1) resistance base and start aiming for the record high level of 30770 (R2) resistance level. Should the bears take over, we may see the Nasdaq breaking the 28200 (S1) support line and aim for the 26870 (S2) support level.

USD/CAD daily chart

Support: 1.3770 (S1), 1.3550 (S2), 1.3420 (S3).
Resistance: 1.3880 (R1), 1.3990 (R2), 1.4125 (R3).

US 100 cash daily chart

Support: 28200 (S1), 26870 (S2), 25375 (S3).
Resistance: 29675 (R1), 30770 (R2), 32500 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

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