Daily Market Analysis

Latest Economic Insights

Key Headlines:

• The dollar steadies above 99 after stronger-than-expected US jobs data.
• The probability of a US rate hike in September rises to around 60%.
• Markets are awaiting the US inflation data this week to determine the Federal Reserve’s path.
• Gold is trading near $4,400 under pressure from rate hike expectations and higher energy prices.
• Brent crude is trading near $97 and West Texas near $92 amid the escalating US-Iranian confrontation.
• Bitcoin is holding its momentum with improved institutional demand and the return of short-term holders to realising profits.

Fundamental Analysis

• The Dollar and Monetary Policy
  • The dollar index steadied above the 99 level on Monday after recovering slightly in the previous session, supported by stronger-than-expected US labour market data, which again reinforced the bets on an interest rate hike by the Federal Reserve during the September meeting.
  • The data released on Friday showed that the US economy added around 162 thousand non-farm jobs during August, exceeding by a wide margin market expectations that had pointed to the addition of around 56 thousand jobs, while the July reading was revised upward to an increase of 23 thousand jobs.
  • At the same time, the unemployment rate held at 4.1%, while annual average wage growth slowed to 3.1%, but the decline came in less than economists’ expectations, which kept concerns over labour-market-related inflationary pressures in place.
  • The strength of the jobs report pushed investors to raise the probability of a US interest rate increase in September to around 60%, compared with around 50% before the release of the data, which returned some support to the dollar after the volatility it witnessed during the past weeks.
  • Markets’ attention now turns to the US inflation data scheduled for release this week, which will be a decisive factor in determining whether the Federal Reserve will actually proceed toward raising interest rates or will choose to wait for more data.
  • The dollar also benefited from safe-haven demand after a new escalation in the confrontation between the United States and Iran over the weekend, which pushed oil prices higher and brought energy-related inflation risks back to the forefront of the markets.

• Gold:
  • Gold traded near the $4,400 per ounce level on Monday after falling by around 1% in the previous session, affected by the return of expectations of a US interest rate hike following the strong jobs report for August.
  • The increase in the probability of a rate hike creates pressure on gold, since the rise in borrowing costs and yields makes income-generating assets more attractive compared with the metal, which offers no periodic return.
  • Gold also came under additional pressure from the sharp rise in oil prices, as the advance in energy costs revives inflation risks and strengthens the Federal Reserve’s position should it decide to continue tightening monetary policy.
  • On the other hand, the escalating geopolitical tensions in the Middle East provide some support for the metal as a safe haven, especially with the return of direct confrontations between the United States and Iran and the rise in the risks facing navigation in the Strait of Hormuz.
  • Gold’s direction during the week remains largely tied to the US inflation data, since high readings could reinforce rate hike expectations and pressure the metal, while weaker data could ease those expectations and support prices.

• Oil:
  • Brent crude rose to near $97 per barrel, while West Texas Intermediate moved past the $92 level, with oil’s gains continuing after the escalation of the confrontation between the United States and Iran over the weekend.
  • The United States targeted three Iranian oil tankers in response to ballistic missile attacks that targeted US Navy warships, which revived concerns over larger disruptions to energy flows from the region.
  • Tehran responded by announcing the establishment of a new prohibited zone outside the Strait of Hormuz extending to parts of the Arabian Gulf and including the blockade area of the US Navy, which increases the risks to the movement of commercial vessels and oil tankers.
  • At the same time, US Energy Secretary Chris Wright affirmed that the United States will continue its naval presence in the Middle East, including the blockade aimed at limiting Iranian oil exports and ensuring the safe passage of commercial vessels through the Strait of Hormuz.
  • The escalation came after around a month of relative calm, and has pushed oil prices up by around 10% as markets reassess supply risks and the probability of a widening of the confrontation.
  • The Strait of Hormuz remains the most sensitive factor for oil, since any further decline in shipping movement could push the risk premium higher still.

• Bitcoin
  • Bitcoin is maintaining a relatively positive picture with institutional demand continuing to improve through exchange-traded funds and other investment channels, in a shift that differs from the previous upward waves, which were led to a greater degree by retail investors.
  • CryptoQuant data showed the STH SOPR indicator rising above the level of 1 to around 1.01 for the first time in more than a year, which indicates that holders of Bitcoin for periods of less than six months have generally returned to realising profits.
  • This shift represents a signal of improving sentiment among short-term investors, but it could also lead to an increase in profit-taking if prices rise quickly during the coming period.
  • The current scenarios point to the possibility of Bitcoin moving toward the $90 thousand level if the price manages to hold the current consolidation phase and convert it into a clear upward breakout.
  • On the other hand, the current trading range remains relatively narrow, so trading volumes, institutional flows and the support and resistance levels will be among the most important factors determining whether the next move will confirm a continuation of the advance or begin a new correction phase.

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

• From the United States of America, Labor Day holiday all day
• From the Eurozone, Gross Domestic Product (YoY) 12:00

GOLD

• Trend: Bearish
• Timeframe: 30 minutes
• Current price: 4,396.92
• First scenario: Buy on a break above 4,421.76
• Targets: 4,453.53 then 4,488.68
• Alternative scenario: Sell on a break below 4,380.25
• Targets: 4,346.06 then 4,313.33
• Note: Gold is still under selling pressure and is trading below the main moving averages, so the downward trend remains in place unless it regains 4,421.76, while a break below 4,380.25 reinforces an extension of the decline.

CRUDE OIL

• Trend: Bullish
• Timeframe: 30 minutes
• Current price: 92.70
• First scenario: Buy on a break above 93.72
• Targets: 95.44 then 97.34
• Alternative scenario: Sell on a break below 91.53
• Targets: 89.73 then 87.96
• Note: Oil is holding a bullish structure and is trading above the main moving averages. A break above 93.72 confirms a resumption of the upward move, while a break below 91.53 weakens the momentum and opens the way for a broader downward correction.

EURUSD

• Trend: Sideways with an upward bias
• Timeframe: 30 minutes
• Current price: 1.16143
• First scenario: Buy on a break above 1.16324
• Targets: 1.16603 then 1.16956
• Alternative scenario: Sell on a break below 1.16001
• Targets: 1.15658 then 1.15365
• Note: The price is moving within an accumulation range between 1.16001 and 1.16324. A break above the upper limit supports the completion of the upward recovery, while a break of the support restores selling pressure.

GBPUSD

• Trend: Sideways with an upward bias
• Timeframe: 30 minutes
• Current price: 1.35237
• First scenario: Buy on a break above 1.35382
• Targets: 1.35711 then 1.36075
• Alternative scenario: Sell on a break below 1.35019
• Targets: 1.34665 then 1.34326
• Note: The pound is moving within a sideways range and is attempting to hold above the long-term moving average. Moving past 1.35382 supports a shift in the move in favour of the buyers, while a break below 1.35019 restores the bearish scenario.

NAS 100

• Trend: Bullish
• Timeframe: 30 minutes
• Current price: 29,613.01
• First scenario: Buy on a break above 29,743.51
• Targets: 29,876.26 then 30,001.46
• Alternative scenario: Sell on a break below 29,490.77
• Targets: 29,282.41 then 29,072.65
• Note: The index is holding a bullish structure and is trading above the moving averages after the recent upward wave. A break above 29,743.51 supports a continuation of the advance, while losing 29,490.77 could push toward a deeper correction.