The latest Chinese lockdowns have caught the financial trading markets off guard. Chinese officials have advised that the lockdown will affect electronics and automaker supply chains.
However, investors are now turning their attention to the nonfarm payrolls figures, which are scheduled to be released tomorrow afternoon.
Most economists have advised that poor employment figures may not necessarily hurt the US Dollar but may further fuel the decline we are experiencing in the stock market.
Poor data may not affect the USD significantly due to the Federal Reserve’s hawkish stance, which may overshadow the announcement. Positive data, on the other hand, can potentially support the US Dollar and the stock market.
A higher-than-expected NFP figure will continue to fuel the idea that the US is not edging towards a recession as previously thought.
Analysts have advised that the interest rate hikes may not be enough to bring down inflation efficiently and that fiscal policy alteration may also be required.
The US Dollar Index has climbed to 109.05, increasing in value by 0.37%. The Dollar has formed its first full bearish candlestick against the Euro after three consecutive days of price increases.
The bullish price movement experienced by the EUR/USD has remained unassertive, with the price also forming strong movements in favor of the Dollar. We can see here that the Euro has not been unable to maintain control in the longer term.
The US Dollar has also formed its fifth consecutive bullish candlestick against the Japanese Yen. Currently, the market is witnessing the Dollar increase in value as we approach the employment figures for August.
This week's economic events have mostly favored the US Dollar. So far, economic figures confirm that the US employment sector remains strong with no major shocks after the Jackson Hole Symposium.
Additionally, August’s US consumer confidence data rose from 95.3 to 103.2 points. The figure is significantly higher than forecasted and indicates that consumer demand remains strong regardless of the recent increase in interest rates. However, this may change by the end of the year as the Federal Fund Rate (FFR) increases further.
As mentioned throughout this week’s market analysis, investors will likely focus on tomorrow’s employment figures and inflation data.
Gold - Technical View
Gold has formed its third consecutive decline and made new lows after Jul. 21. Previously, the price had found support at $1,680, slightly lower than the current price.
The increasing value of the US Dollar and rising bond yields continue to pressure the price. However, investors are also cautious that the price is again at the previous support level.
A positive for the price is the stock market decline which may trigger demand for safe-haven assets. However, this won't be easy while the Dollar continues its climb.
The price of gold will continue to be influenced by the Federal Reserve’s monetary policy. Most Federal Open Market Committee (FOMC) members have indicated that the FFR will need to reach above 4%.
However, yesterday, the head of the Federal Reserve Bank of New York, John Williams, noted that the optimal level would be 3.5%.
Some analysts are now contemplating whether the Fed may consider a 1% hike. Other economists have not yet backed this and will likely depend on the upcoming inflation figures.
The US Commodity Futures Trading Commission (CFTC) has confirmed in its latest report that speculative contracts on gold have decreased significantly.
This potentially indicates that the price is reaching the neutral price zone. This is also something that can be seen on certain indicators.
The report also confirms that the number of sellers remains more than the number of buyers, but simultaneously sellers are starting to close positions.
DAX - Technical View
The DAX is seeing a similar pattern to gold, with the price witnessing strong declines over the past three weeks.
It is again approaching the previous support level, which was formed on Mar. 11 and then triggered again on Jul. 3. Support levels are approximately 12,422 Euros, and the RSI indicates that the asset is oversold.
However, the question remains whether fundamentals will continue to push the price down throughout the remainder of the year. Most analysts remain pessimistic, but traders must continue to follow the shorter-term price action.
Economists don’t have much hope as the European Central Bank (ECB) looks to increase interest rates, and the region is predicted to experience a recession and an energy crisis.