Macro concerns increase odds for bigger Fed cut

Next 24 hours: Will cooler heads prevail?

Today’s report: Macro concerns increase odds for bigger Fed cut

Growing macro concerns are the talk of the town and have done a good job to overshadow last week’s less cool US core PCE data. We say this because odds for a 50-basis point rate cut from the Fed this month have risen back to 40%.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The Euro has been in a multi-month consolidation since bottoming out in 2022. Setbacks have since been exceptionally well supported on dips below 1.0500, with a higher platform sought out ahead of the next major upside extension. Look for a push through the 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.1276 – 18 July/2023 high – Strong
  • R1 1.1202 - 26 August/2024 high – Medium
  • S1 1.1020 - 19 August low– Medium
  • S2 1.0950 – 15 August low – Strong

EURUSD – fundamental overview

The Euro has sunk to its lowest level in two weeks, getting no help from the latest news out of Volkswagen. The company is considering whether it will need to close factories for the first time in its 87 year history. Market participants are concerned this news is a reflection on the state of the broader Euro economy. Key standouts on Wednesday’s calendar come from Eurozone, German, and UK services PMIs, Eurozone producer prices, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, US factory orders, and the Fed Beige Book.

EURUSD - Technical charts in detail

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September 2022. The door is now open for the next major upside extension towards the 2018 high at 1.4377. Any setbacks should be well supported ahead of 1.2500.

  • R2 1.3300 – Figure – Medium
  • R1 1.3266 – 27 August/2024 high – Medium
  • S1 1.3076 – 22 August low – Medium
  • S2 1.3011 – 21 August low – Medium

GBPUSD – fundamental overview

The Pound is already starting to worry about next month's UK Budget, which hasn't been to UK markets historically speaking. Tax hikes are expected and haven't helped matters. Key standouts on Wednesday’s calendar come from Eurozone, German, and UK services PMIs, Eurozone producer prices, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, US factory orders, and the Fed Beige Book.

USDJPY – technical overview

The market has entered a period of correction after extending the uptrend to a multi-year high through 160.00. Critical support comes in around 140.00, with only a monthly close below the barrier to compromise the bullish outlook. A higher low is ideally sought out above 140.00 in favor of a bullish continuation.

  • R2 147.21 – 2 September high – Medium
  • R1 147.00 – Figure– Medium
  • S1 144.65 – 30 August low – Medium
  • S2 143.44 – 26 August low – Strong

USDJPY – fundamental overview

There hasn't been much for traders to be looking at as far as the Japan economic calendar goes. A minor downward revision to some Japan PMI reads has had little impact on price action and more of the attention has moved towards tomorrow's wage data. Key standouts on Wednesday’s calendar come from Eurozone, German, and UK services PMIs, Eurozone producer prices, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, US factory orders, and the Fed Beige Book.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base with the market trading down into a meaningful longer-term support zone. Only a monthly close below 0.6200 would give reason for rethink. Back above 0.6900 will take the big picture pressure off the downside and strengthen case for a bottom.

  • R1 0.6824– 29 August high – Strong
  • R2 0.6762 – 21 August high– Medium
  • S1 0.6685 – 4 September low– Medium
  • S2 0.6637 – 19 August low – Strong

AUDUSD – fundamental overview

Aussie GDP came out at a slower pace than expected which has added to the latest wave of downside from broad based risk off flow. Key standouts on Wednesday’s calendar come from Eurozone, German, and UK services PMIs, Eurozone producer prices, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, US factory orders, and the Fed Beige Book.

USDCAD – technical overview

A sustained hold above 1.3000 over the past several months signals an end to a period of longer-term bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area, with a break to open a retest of the 2020 high just ahead of 1.4700. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3642 – 20 August high –Strong
  • R1 1.3587 –11 July low – Medium
  • S1 1.3440 – 28 August low – Medium
  • S2 1.3420 – 8 March low – Strong

USDCAD – fundamental overview

Oil had plunged to its lowest level since December 2023 which hasn't done anything to help the Canadian Dollar. The fact that Tuesday's Canada manufacturing PMI reads were better than expected has done nothing to inspire Canadian Dollar demand on account of the oil drop and downturn in investor risk appetite. Key standouts on Wednesday’s calendar come from Eurozone, German, and UK services PMIs, Eurozone producer prices, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, US factory orders, and the Fed Beige Book.

NZDUSD – technical overview

Overall pressure remains on the downside with the market continuing to stall out on runs up into the 0.6500 area. At the same time, there are some signs of the market wanting to put in a longer-term base. Ultimately, a break back above 0.6500 would be required to take the medium-term pressure off the downside and encourage this prospect. A monthly close below 0.5800 will intensify bearish price action.

  • R2 0.6370 – Monthly high/December 2023 – Strong
  • R1 0.6299 – 29 August/2024 high – Medium
  • S1 0.6150 – Mid-Figure – Medium
  • S2 0.6128 – 22 August high –Strong

NZDUSD – fundamental overview

Tuesday's New Zealand GDT auction results were less than impressive. This in conjunction with a wave of risk off flow in global markets has been behind the latest wave of downside pressure on the Kiwi rate. Key standouts on Wednesday’s calendar come from Eurozone, German, and UK services PMIs, Eurozone producer prices, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, US factory orders, and the Fed Beige Book.

US SPX 500 – technical overview

The longer term uptrend remains intact and dips continue to be exceptionally well supported. Critical support comes in at 5093, with only a break back below this level to compromise the structure and open the door for a more significant corrective decline. Until then, the focus remains on a retest and break back above the record high.

  • R2 5679 – 16 July/Record high – Strong
  • R1 5660 – 3 September high – Medium
  • S1 5497 – 4 September low – Medium
  • S2 5398 – 25 July low – Strong

US SPX 500 – fundamental overview

The US equities market remains exceptionally well supported in 2024 on the back of an ongoing expectation for more rate cuts than less going forward. Investors are feeling better about a soft landing in the US economy and this has also been accompanied by an accommodative adjustment of Fed policy. It will however be important to keep an eye on inflation, bigger picture economic data and geopolitical risk in the months ahead.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and this next major upside extension into the 2500-3000 area. Setbacks should now be well supported above 2200 on a monthly close basis.

  • R2 2600 – Psychological– Strong
  • R1 2532 – 20 August/Record high – Medium
  • S1 2350 – 4 July low – Strong
  • S2 2287– 7 June low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal has pushed record highs in 2024 with solid demand from medium and longer-term accounts. These players are more concerned about inflation, geopolitical risk and a less upbeat global growth outlook. All of this should keep the commodity well supported over the coming months.

Peformance chart: 30-Day Performance vs. US dollar (%)

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