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S&P 500 Gains on Four-Day Streak Amid Economic Data Evaluation

August 31, 2023

The S&P 500 extended its winning streak to four days, rising 0.38% and surpassing 4,500 points to close at 4,514.87. The Dow Jones Industrial Average added 0.11%, while the tech-oriented Nasdaq Composite advanced 0.54% to 14,019.31. The S&P’s recent gains helped trim month-to-date losses to approximately 1.6%. The tech sector saw an upswing with chipmaker Nvidia contributing to the rise, and Apple’s shares climbing nearly 2% as anticipation for the iPhone 15 unveiling event on September 12 grew.

Investors have reacted positively to underwhelming economic data for the second consecutive day. Disappointing payrolls data showed that private employers added only 177,000 jobs in August, well below expectations and the previous month’s figure. Additionally, the annual gross domestic product growth forecast was revised downward from 2.4% to 2.1%. This market behavior indicates a hopeful perspective that weaker economic data might lead to adjustments in the Federal Reserve’s policy stance.

Data by Bloomberg

On Wednesday, the S&P 500 showed a 0.38% overall increase. The Information Technology sector led the gains with a significant rise of 0.83%, followed by Energy at 0.51% and Industrials at 0.44%. Communication Services and Real Estate both recorded a 0.35% uptick, while Consumer Discretionary saw a 0.33% increase. Meanwhile, Consumer Staples and Materials experienced more modest growth with gains of 0.17% and 0.15%, respectively. Financials and Health Care registered smaller gains, rising by 0.12% and declining by 0.03%, respectively. Utilities were the only sector to show a notable decrease, falling by 0.42%.

Major Pair Movement

The dollar index decreased by 0.37% due to underwhelming revisions and significant drops in JOLTS and consumer confidence data. The impact of this setback hinges on the forthcoming core PCE on Thursday and the employment report on Friday, which will provide clearer insights into the dollar’s trajectory. While mid-week U.S. data hold less significance for the Fed’s primary inflation and employment assessments, the misses prompted EUR/USD to reach a two-week high, rising 0.4% on Wednesday and 1.63% from August’s lows.

EUR/USD’s advance surpassed multiple technical indicators, such as the downtrend line across July and August highs, the 21- and 100-day moving averages, and last week’s 1.0930 high. The upward momentum paused near the 30-day moving average at 1.0948, favored by trend followers, and the 61.8% retracement level of August’s drop. The British pound increased by 0.6%, encountering resistance near its 30-day moving average at 1.2747. The Bank of England (BoE) is projected to initiate two more 25bp rate hikes to address UK inflation, which stands at 5.3% compared to 3.2% in the U.S.

The Japanese yen gained 0.2%, but its appeal remains limited due to the BoJ’s negative rates and doubts about a near-to-medium-term shift from ultra-easy policies. Treasury-JGB yield spreads declined from recent highs, and market participants are waiting for U.S. inflation, employment, and ISM manufacturing reports to ascertain the direction of the trend. The Australian dollar remained steady, while USD/CNH rose 0.24% following weaker-than-forecast data and attempts to stimulate the sector. Upcoming events include euro zone CPI, U.S. core PCE, jobless claims, and Chicago PMI.

Picks of the Day Analysis
EUR/USD (4 Hours)

EUR/USD ‘s Upside Momentum Pauses Amidst Greenback Correction

The EUR/USD pair reached two-week highs at 1.0947 but retraced slightly, maintaining its position above 1.0900. The prevailing upward bias is fueled by US Dollar corrections due to recent disappointing US data, while Eurozone inflation rates suggest potential European Central Bank tightening. Despite the data undershooting expectations, upcoming US economic figures remain pivotal, including the Core Personal Consumption Expenditure Price Index and Jobless Claims on Thursday, followed by Friday’s Nonfarm Payrolls report. The US fundamentals’ relative strength compared to the Eurozone may cap further upside potential in the EUR/USD pair.

Chart EURUSD by TradingView

Based on technical analysis, the EUR/USD moves higher on Wednesday, reaching the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, showing that there’s potential for another higher movement. The Relative Strength Index (RSI) is currently at 65, signaling that the EUR/USD is in a bullish trend.

Resistance: 1.0935, 1.1003

Support: 1.0893, 1.0833

XAU/USD (4 Hours)

XAU/USD Hits Four-Week High as US Dollar Weakens Amid Fed Speculation

The US Dollar’s decline continued on Wednesday, driving XAU/USD to a four-week high of $1,949.02 per troy ounce, prompted by weak macroeconomic data fueling speculation of an impending end to the Federal Reserve’s tightening cycle. The USD’s descent was exacerbated by discouraging figures, including a decrease in private job creation in August and a downward revision of Q2 Gross Domestic Product to 2.1% QoQ. While stock markets gained modestly and government bond yields retreated, expectations for the Fed to remain on hold in September rose to 88.5%. However, discussions of the Fed pressuring regional banks to bolster liquidity strategies led to Wall Street pulling back from recent highs. Attention now shifts to US inflation data, with the July Core Personal Consumption Expenditures (PCE) Price Index expected to show a 5.3% YoY increase in August, potentially impacting rate hike expectations.

Chart XAUUSD by TradingView

Based on technical analysis, the XAU/USD moves higher on Wednesday and creating a push to the upper band of the Bollinger Bands. Currently, the price is moving below the upper band higher showing there’s potential for Gold to move even higher. The Relative Strength Index (RSI) is at 70 currently, showing that the XAU/USD pair is still in a positive mode but might have some correction lower.

Resistance: $1,954, $1,965

Support: $1,936, $1,926

Economic Data
CurrencyDataTime (GMT + 8)Forecast
USDCore PCE Price Index m/m20:300.9%
USDUnemployment Claims20:30236K