Eyes on US data ahead

Eyes on US Data Ahead – After the long Labor Day weekend in the US, markets have resumed activity and are awaiting a new round of important economic releases. Currently, US equities futures are down by more than 0.5% each, with the Nasdaq experiencing the largest decline at -0.8%.

The Fed Funds Futures are currently pricing in a 34% chance of a 50-basis-point rate cut in September. However, this week’s data, including the ISM Services PMI, Manufacturing PMI, and the Jobs Report, may significantly change these expectations. If the economic releases are disappointing, the probability of a 50-basis-point rate cut could once again rise above 50%.

Today’s data

The main focus today will be on the ISM Manufacturing PMI, which is expected to remain in the shrinking phase at 47.5, indicating a slight improvement from last month. Investors will also be paying attention to ISM Prices Paid, New Orders, and the Employment components as they will provide more insight into the state of economic activity.

We will prioritize the New Orders and Employment Component over the Prices Paid, which are expected to decrease to 52.0 from 52.9 in August.

DXY near 102.0 resistance

The US Dollar Index is currently rebounding after a recent selloff and is approaching the 102.0 resistance area, which is the highest level since August 20th. However, this upward movement is expected to be short-lived as it is likely to encounter selling pressure between 102.20 and 102.40.

The technical indicators have moved away from being oversold, and the RSI is now trading around 44, well below the key level of 50. This suggests that the current upside move is part of a short-term retracement phase before the downside trend resumes at some point in the next few days or weeks.

EURUSD near 1.10 support

EURUSD retraced nearly 200 pips from its peak of 1.12, dropping to as low as 1.1035 earlier today. This movement caused the technical indicators to move away from overbought territory while still remaining above the key level of 50. Currently, this shift is considered a short-term retracement following the recent rally, and it is likely to be limited above 1.09 and 1.10 in the coming days or weeks.

On the upside, the next resistance areas are at 1.1090 and 1.11, followed by 1.1140. A break above that level would pave the way for further gains towards the recent peak at 1.12.

Yen rallies on BoJ remarks

The Yen strengthened after Bank of Japan Governor Kazuo Ueda restated that the central bank would continue to raise interest rates if the economy and prices meet expectations. USDJPY reversed yesterday’s gains and dropped to as low as 145.60 earlier today.

Even though the technical indicators have moved away from oversold territory, USDJPY has not yet confirmed the end of its upward retracement in the coming days, particularly after increasing for four consecutive days. There is still a possibility of another upward movement towards 147.0 and 148.0 before the downward pressure starts again.

Brent crude near $75 support

Despite geopolitical tensions in the Middle East, crude oil began the week under pressure, with Brent Crude trading below $76.0 and reaching the lowest level since Aug 5th at $75.50 at the time this report is released.

In the meantime, Brent crude has managed to stabilize above this area since December of last year. Breaking through that area would strengthen the downside pressure, potentially causing the price to continue towards $72. On the other hand, if the price stabilizes above $75, it might lead to another bounce back above $77.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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