Strong US jobs, Middle East tensions and key inflation data ahead

Good morning all, hope you enjoyed your weekend.

Markets are starting the week after Friday’s stronger-than-expected US jobs report, which increased expectations that the Fed could raise rates at its September meeting. However, US markets are closed today for the Labor Day holiday, so liquidity should be lower and we may see slower price action. Middle East tensions also remain an important focus, especially around Iran and the Strait of Hormuz, keeping crude oil elevated and adding to inflation concerns. This is important because higher oil prices can keep pressure on inflation and support higher yields and interest rates. Looking ahead, we have a busy second half of the week, with US PPI and the ECB rate decision on Thursday, followed by the key US CPI report on Friday. After the strong jobs data, inflation numbers will be especially important for the Fed outlook, so US yields should remain one of the main drivers for the dollar, stocks, metals and crypto this week. We will also keep an eye on Japan and the JPY, as expectations for further BoJ tightening remain in focus.

Looking at the USD index, we have indeed seen an important rebound from the 78.6% Fib and more upside potential for wave c up remains possible, but we need still that overlap with 99.44 level that calls 100 later.

If 99.44 is not hit, and instead price go back to 98.83 bearish level, then most likely we will see more weakness into the August low.

GH