Daily Market Analysis

Latest Economic Insights

Key Headlines:

• The dollar moves past 99, supported by stronger-than-expected US economic data.
• The rise in the personal consumption expenditures index revives expectations of a rate hike before the end of the year.
• Markets are awaiting Kevin Warsh’s speech at the Jackson Hole symposium on Friday.
• Gold is trading near $4,620 and remains close to its highest levels in three months.
• Brent crude is near $87 and West Texas near $81 as the decline continues.
• Bitcoin continues its bullish momentum after rising by more than 25% since mid-August.

Fundamental Analysis

• The Dollar and Monetary Policy
  • The dollar index moved past the 99 level on Thursday after rising in the previous session, supported by US economic data that came in stronger than expected and reinforced expectations that the Federal Reserve may raise interest rates before the end of the year.
  • The personal consumption expenditures (PCE) price index rose by 0.2% on a monthly basis in July, exceeding expectations of 0.1%, after a decline of 0.1% in June, while annual inflation accelerated to 3.7% against expectations of 3.6%.
  • This data reinforced concerns that price pressures remain elevated to a degree that could push the Federal Reserve to maintain a more hawkish stance, especially with inflation remaining well above the central bank’s target.
  • Investors’ attention now turns to the speech of Federal Reserve Chairman Kevin Warsh at the annual Jackson Hole symposium on Friday, in search of fresh signals regarding monetary policy expectations, although markets do not expect him to provide direct guidance on the September decision.
  • At the same time, the decline in oil prices helped ease some inflation concerns in the near term, with indications emerging of diplomatic progress in the Middle East.
  • Investors also continue to assess the implications of the expanded debt buyback programme launched by the US Treasury Department, and the broader risks related to public debt and US fiscal sustainability.

• Gold:
  • Gold rose to around $4,620 per ounce on Thursday, recovering part of the previous session’s losses, with investors continuing to assess US interest rate expectations ahead of the important upcoming Federal Reserve meeting.
  • Gold remains close to its highest levels in three months, benefiting from continued concerns related to US debt and the weakness of the dollar over the broader term, in addition to what is known as the currency debasement trade.
  • Investment demand also continued to support the metal, as China’s net gold imports via Hong Kong rose by around 11% on a monthly basis during July.
  • On the other hand, the higher-than-expected US inflation data acted as a pressure factor, because it returned to markets the possibility of interest rates remaining high or a new increase being implemented before the end of the year.
  • Gold therefore remains caught between the support of fiscal risks and investment demand on one side, and the pressures of rising yields and expectations of monetary policy tightening on the other.

• Oil:
  • Brent crude retreated to near $87 per barrel, while West Texas Intermediate moved near $81, with prices continuing to decline for the fourth consecutive session amid indications of diplomatic progress in the Middle East.
  • President Donald Trump said that around 10 million barrels of oil passed through the Strait of Hormuz on Tuesday, repeating his assertion that the mines in the waterway have been removed.
  • Iran and the Sultanate of Oman also reached an agreement regarding each party’s share of the waters of the Strait of Hormuz and the associated revenues, a development that helped ease some of the concerns related to shipping movement and supplies.
  • Nevertheless, Tehran affirmed that the full reopening of the strait requires a settlement broader than merely an agreement with the Sultanate of Oman, which means that the geopolitical risks have not ended entirely.
  • Oil prices came under additional pressure after the new US sanctions on Iran came in less severe than markets had feared, as Washington has not so far taken harsh measures against all of Tehran’s trading partners.
  • On the other hand, the risks related to the war in Ukraine remain in place, with reports of Russia’s readiness to escalate the situation, which could revive some concerns about global energy supplies.

• Bitcoin
  • Bitcoin continued its positive performance after rising by more than 25% since mid-August, with the bullish momentum remaining relatively strong and the technical indicators not yet reaching clear overbought levels.
  • Options data showed a ratio of around 0.83 between put and call options, with the number of call options higher, while market makers hold hedges with a notional value exceeding $500 million within a range close to the spot price.
  • At the same time, large investors realised profits reaching around $614 million in a single day, coinciding with a rise in flows into Bitcoin-linked products and an improvement in liquidity in the spot market.
  • The current move points to the continuation of the positive trend after moving past the 200-day moving average, with a clear breakout appearing from a previous price base.
  • Nevertheless, it remains important to monitor leverage levels, trading volumes and exchange-traded fund flows, because increased profit-taking or a rise in hedging could lead to a short-term correction even with the general trend remaining supportive.

Today’s Economic Data (GMT+3 / KSA time)

From the United States of America, Unemployment Claims 15:30

GOLD

• Trend: Bearish
• Timeframe: 30 minutes
• Current price: 4,607.96
• First scenario: Buy on a break above 4,634.16
• Targets: 4,665.94 then 4,701.08
• Alternative scenario: Sell on a break below 4,592.65
• Targets: 4,558.47 then 4,525.73
• Note: Gold is trading below the moving averages after losing the upward momentum. A break above 4,634.16 returns strength to the buyers, while a break below 4,592.65 confirms an extension of the downward correction toward the next support areas.

CRUDE OIL

• Trend: Bearish
• Timeframe: 30 minutes
• Current price: 82.63
• First scenario: Buy on a break above 84.23
• Targets: 85.95 then 87.85
• Alternative scenario: Sell on a break below 82.10
• Targets: 80.25 then 78.48
• Note: Oil is holding a clear downward trend and is trading below the moving averages. A break above 84.23 is required to change the short-term momentum, while a break below 82.10 supports a continuation of the decline toward 80.25 and then 78.48.

EURUSD

• Trend: Bearish
• Timeframe: 30 minutes
• Current price: 1.16534
• First scenario: Buy on a break above 1.16694
• Targets: 1.16973 then 1.17326
• Alternative scenario: Sell on a break below 1.16371
• Targets: 1.16028 then 1.15735
• Note: The price is trading below the moving averages with the selling pressure remaining clear. A break above 1.16694 restores the positive momentum, while a break below 1.16371 supports an extension of the decline toward the next support areas.

GBPUSD

• Trend: Bearish
• Timeframe: 30 minutes
• Current price: 1.35876
• First scenario: Buy on a break above 1.36109
• Targets: 1.36438 then 1.36802
• Alternative scenario: Sell on a break below 1.35747
• Targets: 1.35392 then 1.35053
• Note: The immediate trend is clearly bearish after the strong drop below the moving averages. A break above 1.36109 could support the start of an upward recovery, while a break below 1.35747 confirms the continuation of selling pressure toward the lower supports.

NAS 100

• Trend: Bullish in the short term
• Timeframe: 30 minutes
• Current price: 29,419.83
• First scenario: Buy on a break above 29,537.61
• Targets: 29,670.36 then 29,795.56
• Alternative scenario: Sell on a break below 29,244.48
• Targets: 29,076.52 then 28,866.75
• Note: The price made a strong upward push and settled above the moving averages, but the resistance at 29,537.61 is still an important barrier. A break above it supports an extension of the advance, while a break below 29,244.48 restores selling pressure.