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The rate hike cycle might be over

More rate hikes?

 

US economic releases came in with another surprise, adding more evidence that the Federal Reserve might not raise rates further, and that the rate hike cycle might be officially over. Although it’s too early to call, the evidence so far is clear enough.

 

Softer ADP Non-Farm

 

 

The ADP Non-Farm Employment Change came in less than expected, adding 177K new jobs in July, well below the 195K estimated, according to CNBC. This is the weakest figure since March, suggesting a weaker jobs report on Friday.

 

Less than expected GDP

 

 

The 2nd estimate for Q2 GDP came in less than expected, growing by 2.1% while it had been anticipated to grow by 2.4%, according to Reuters. Yet, this is still the highest growth since Q4 of last year. Personal Consumption also slowed to 1.7% in Q2 compared to over 4% in Q1 of this year.

 

Slower Core PCE Price Index

 

 

The Core PCE Price Index also slowed down further to 3.7% in Q2 compared to 4.9% in Q1, while it had been anticipated to slow down towards 3.8%. Bear in mind that this is the 2nd estimate. At the same time, this is the lowest figure since Q1 of 2021.

 

Markets are no longer pricing in 25bps a rate hike

 

After the data, the Fed Fund Futures dipped even further. Currently, there might only be an 11% chance of a rate hike in September, while November’s probability is now below 50%. However, what’s more interesting is that the probability of the first-rate cut now moved to May 2024 instead of June. This is what traders need to keep an eye on in the coming weeks and months. The more the first rate cut estimates keep pushing to earlier possibility, the weaker the dollar might get, while stocks might welcome such expectations.

 

DXY at 103.0 support

 

 

The US Dollar Index continued to decline further reaching as low as 103.0 support area right after the economic release. The next few days are crucial when it comes to the price and time method. On September 1st, the time and price might be equal. This means that the US Dollar moved higher for 34 days and added 3.4 points. A daily close below 102.98 would confirm a new down trend.

 

S3 S2 S1 Pivot R1 R2 R3
101.74 102.50 102.83 103.26 103.59 104.03 104.79

 

 

EURUSD about to confirm a new trend

 

 

EURUSD rallied above 1.09 yesterday, reaching as high as 1.0944 with a clear daily close above the 1.0900 resistance area, which now turns into a support. However, the end of the downside retracement is yet to be confirmed, possibly in the coming days by a daily and a weekly close above 1.0965.

 

S3 S2 S1 Pivot R1 R2 R3
1.0728 1.0818 1.0870 1.0908 1.0960 1.0998 1.1088

 

 

GBPUSD needs another push

 

 

GBPUSD bounced back above 1.27 with a clear daily close, which clears the way for further gains ahead, while the RSI is still under 50, but it has more room to go. Despite the current rally, the downside retracement might not be over yet. The pair needs to confirm the end of the downside retracement by breaking above 1.2780 with a clear daily and a weekly close first.

 

S3 S2 S1 Pivot R1 R2 R3
1.2441 1.2568 1.2645 1.2695 1.2772 1.2822 1.2949

 

 

Silver reached targets

 

Two weeks ago, we mentioned that Silver might outperform Gold at some point. Silver reached the target yesterday before retracing back to 24.50 during the Asian session today. In the meantime, the current dip is another short-term retracement, which we will be watching very carefully before rejoining the possible ongoing uptrend.

 

S3 S2 S1 Pivot R1 R2 R3
23.76 24.24 24.43 24.72 24.91 25.20 25.68

 

 

Gold near $1950

 

Gold managed to reclaim multiple resistance areas, including the $1940 with a clear daily close. Such a rally comes on the back of a weaker US Dollar which might continue in the coming weeks. The next resistance area possibly stands at $1950, while any downside retracement might remain above $1900 for now. A break above $1950 would clear the way for further gains ahead, possibly towards $1980.

 

S3 S2 S1 Pivot R1 R2 R3
1914.19 1928.17 1935.24 1942.15 1949.22 1956.13 1970.11

 

 

 

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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