Daily Market Analysis

Latest Economic Insights

Key Headlines:

• The dollar steadies near 98.8 with the main US inflation data awaited.
• Markets are pricing a probability of close to 60% for a US rate hike next week.
• Gold steadies near $4,400, benefiting from the weakness of the dollar despite the pressures of oil and yields.
• Bond yields rise after the Treasury announced the buyback of long-term debt with a value of up to $6 billion.
• Brent crude is trading near $100 and West Texas near $95 amid the escalating US-Iranian war.
• Bitcoin steadies near $78,400, with the $72 thousand level remaining important for the continuation of the bullish view.

Fundamental Analysis

• The Dollar and Monetary Policy
  • The dollar index steadied near the 98.8 level on Thursday, halting the recent wave of declines, with investors awaiting the main US inflation data, which may determine to a greater degree the direction of the Federal Reserve’s decision at its next meeting.
  • The US producer price index for August is scheduled for release today, followed by the consumer inflation report on Friday, data that will be pivotal in assessing the continuation of price pressures and the extent of the need to raise interest rates.
  • Market pricing currently points to a probability of close to 60% for a US interest rate increase of 25 basis points next week, after the recent jobs data came in stronger than expected and kept the hawkish expectations in place.
  • At the same time, Treasury yields rose after the US Treasury Department announced plans to buy back up to $6 billion of long-term debt, around three times the usual size, although investors viewed the step as less than expectations.
  • Geopolitical tensions in the Middle East also remained an important factor, as the continued rise in oil prices increased inflation risks and supported expectations that US monetary policy will remain tight.

• Gold:
  • Gold rose to near the $4,400 per ounce level on Wednesday, ending a wave of declines that had lasted two sessions, benefiting from the continued weakness of the dollar.
  • The decline in the US currency makes dollar-denominated gold more attractive to investors who use other currencies, which provided support for the metal despite the continuation of the pressures related to rate hike expectations.
  • On the other hand, the rise in oil prices remains a factor with a dual effect, since it supports gold as a means of hedging against inflation, but at the same time it strengthens the likelihood of monetary policy tightening, which could pressure demand for the metal, which generates no yield.
  • Gold’s movement over the coming days remains tied to a large degree to the US inflation data and the direction of bond yields and the dollar, in addition to developments in the conflict in the Middle East.

• Oil:
  • Brent crude rose to near $100 per barrel, while West Texas Intermediate moved near $95, with the escalation continuing in the war between the United States and Iran and rising concerns over energy supplies from the Middle East.
  • President Donald Trump said that the conflict may not end before the midterm elections in November, and also indicated that a significant decline in gasoline prices is unlikely before then, which reflects the limited scope for de-escalation in the near term.
  • Hostilities escalated during the past week after a period of relative calm, with an increase in the exchange of attacks between the United States and Iran.
  • The scope of the conflict also widened after Iran-backed Houthi militants targeted a number of energy facilities in Saudi Arabia, which led to a temporary suspension of some operations and increased concerns over the security of energy infrastructure.
  • On the other hand, markets continue to monitor shipping movement and supplies through the Strait of Hormuz, because any further disruption could push oil prices to higher levels and increase inflationary pressures globally.

• Bitcoin
  • Bitcoin steadied near the $78,400 level, with the market remaining sensitive to US interest rate expectations and the rise in oil prices.
  • Holding the $72 thousand level is considered an important factor for the continuation of the bullish view, while the near target remains at the $82 thousand area in the event that momentum returns and liquidity improves.
  • The short-term scenarios point to the possibility of Bitcoin rising above $82 thousand if the inflation data comes in supportive of high-risk assets, while it may steady near $79 thousand or retreat to the $77,600 level if the data comes in higher than expected.
  • Exchange-traded fund flows also continue to provide some support to the market, although leverage and elevated volatility remain factors that must be monitored.
  • CryptoQuant data showed that the SOPR indicator is still below the level that confirms the sustainability of the upward trend, as some long-term investors and large holders are selling at a loss, while retail investors’ interest remains limited.
  • A rise in the SOPR indicator above 1.0 remains an important factor in confirming an improvement in the market structure and the continuation of positive momentum.

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

• From the Eurozone, Marginal Lending Rate (September) 15:15
• From the Eurozone, Interest Rate Decision issued by the European Central Bank (September) 15:15
• From the United States of America, Producer Price Index (MoM) (August) 15:30
• From the United States of America, Producer Price Index (YoY) (August) 15:30
• From the United States of America, Unemployment Claims Benefits 15:30
• From the Eurozone, European Central Bank Press Conference 15:45
• From the United States of America, Existing Home Sales (August) 17:00
• From the United States of America, US Crude Oil Inventories 19:00
• From the United States of America, Federal Reserve Balance Sheet 23:30

GOLD

• Trend: Sideways with an upward bias
• Timeframe: 30 minutes
• Current price: 4,411.15
• First scenario: Buy on a break above 4,440.39
• Targets: 4,472.16 then 4,507.31
• Alternative scenario: Sell on a break below 4,389.69
• Targets: 4,364.69 then 4,331.96
• Note: Gold is moving within a sideways range with a gradual improvement in the movement above the short-term moving averages. A break above 4,440.39 supports an extension of the advance toward the higher levels, while a break below 4,389.69 restores selling pressure and opens the way for a decline toward the next support areas.

CRUDE OIL

• Trend: Bullish
• Timeframe: 30 minutes
• Current price: 95.20
• First scenario: Buy on a break above 96.75
• Targets: 98.47 then 100.37
• Alternative scenario: Sell on a break below 94.73
• Targets: 92.77 then 90.99
• Note: Oil is holding a clear bullish trend and is trading above the moving averages despite the recent correction from the top. A break above 96.75 supports a resumption of the upward wave, while a break below 94.73 makes it more likely that the price will enter a deeper downward correction.

EURUSD

• Trend: Bullish
• Timeframe: 30 minutes
• Current price: 1.16374
• First scenario: Buy on a break above 1.16522
• Targets: 1.16801 then 1.17154
• Alternative scenario: Sell on a break below 1.16200
• Targets: 1.15857 then 1.15564
• Note: The euro is holding a bullish structure and is trading above the moving averages, with the price continuing to consolidate close to the resistance. A break above 1.16522 confirms a continuation of the advance, while a break below 1.16200 weakens the positive momentum and opens the way for a downward correction.

GBPUSD

• Trend: Bullish
• Timeframe: 30 minutes
• Current price: 1.35540
• First scenario: Buy on a break above 1.35739
• Targets: 1.36068 then 1.36432
• Alternative scenario: Sell on a break below 1.35380
• Targets: 1.35022 then 1.34683
• Note: The pound is holding a bullish structure and is trading above the moving averages after a gradual upward wave. A break above 1.35739 supports a continuation of the advance, while a break below 1.35380 weakens the positive scenario and opens the way for a downward correction.

NAS 100

• Trend: Sideways with a downward bias
• Timeframe: 30 minutes
• Current price: 29,429.57
• First scenario: Buy on a break above 29,589.23
• Targets: 29,721.98 then 29,847.19
• Alternative scenario: Sell on a break below 29,296.11
• Targets: 29,128.14 then 28,918.37
• Note: The index is currently moving within a sideways range with the price remaining below the main moving averages. A break above 29,589.23 supports a recovery of the upward momentum, while a break below 29,296.11 makes a return of selling pressure and a continuation of the decline more likely.