03-Sep-2021

1) GBP/USD Eases From Monthly Highs Near 1.3850
2) AUD/USD Hits Seven-Week Tops, Bulls Remain In Charge Ahead Of NFP
3) XAU/USD At A Critical Juncture Ahead Of NFP, Upside Appears Favored
4) EUR/USD Holds Onto Four-Week Highs Ahead Of Critical Nonfarm Payrolls

 

 

1) GBP/USD Eases From Monthly Highs Near 1.3850

GBP/USD is trading under 1.3850, retreating from the highs it hit as investors position toward the all-important Nonfarm Payrolls. Elevated UK covid cases, worries about new taxes, and a downgrade of Services PMI for August weigh on sterling.

Contrary to fundamentals, the four-hour chart is painting a bullish picture. Pound/dollar broke above the 200 Simple Moving Average, the stubborn 1.3785 level, and downtrend support. It is also benefiting from upside momentum while the Relative Strength Index remains under 70 – outside overbought conditions.

Resistance awaits at 1.3850, the fresh high. It is followed by 1.3875 and 1.3895, which both capped recovery attempts during August. Further above, 1.3950 and 1.3985 await.

Support below 1.3785 is at 1.3725 and 1.3675, both stepping stones on the way up. The next lines to watch are 1.3635 and 1.36.

Better late than never that is what pound bulls have been thinking. GBP/USD has finally staged a convincing break above the tough 1.3785 line and the 1.38 round number. It owes to dollar weakness rather than sterling strength.

The greenback suffered three blows of weak data points on Tuesday and on Wednesday. Leading indicators toward Friday’s Nonfarm Payrolls from consumer confidence through ADP’s labor figures and to the ISM’s manufacturing employment component have all lowered Nonfarm Payrolls expectations. The dollar dropped in response and later extended its decline.

Thursday’s greenback grind is what finally sent GBP/USD higher, allowing it to catch up with other currencies’ rallies against the dollar. Nevertheless, there are several issues dogging sterling.

Markit’s final UK Services Purchasing Managers’ Index for August was downgraded from 55.5 to 55 points, reflecting some weakness in the British economy. Chancellor of the Exchequer Rishi Sunak is set to unveil new taxes, breaking an election pledge by Prime Minister Boris Johnson, who is already under fire for the hasty retreat from Afghanistan.

The most worrying issue for the UK is the persistently high number of COVID-19 cases, which could slow the economy even without new top-down restrictions. Brexit-related shortages of lorry drivers are not helping either.

Circling back to America’s jobs report, expectations are low, and that increases the chances of an upside surprise and a squeeze of dollar shorts. The economic calendar is pointing to an increase of 750,000 positions, but the “whisper number” is closer to 700,000. Wages are also of importance, as their rapid increase indicates inflation down the pipeline.

 

2) AUD/USD Hits Seven-Week Tops, Bulls Remain In Charge Ahead Of NFP

The AUD/USD pair continued scaling higher through the first half of the European session and climbed to seven-week tops, around the 0.7435-40 region in the last hour.

The prevalent bearish sentiment surrounding the US dollar assisted the AUD/USD pair to build on its recent strong rebound from the 0.7100 mark, or YTD tops. Apart from this, the risk-on environment was seen as another factor that provided an additional boost to the perceived riskier Aussie.

From a technical perspective, the overnight sustained move beyond 50-day SMA for the first time since June turned out to be a key trigger for bullish traders. A subsequent strength above the 0.7400 mark and the 0.7420-25 region might have already set the stage for an extension of the appreciating move.

The constructive outlook is reinforced by the fact that technical indicators on the daily chart have just started moving into the positive territory. That said, RSI (14) on hourly charts is flashing extremely overbought conditions and warrants some caution for aggressive bullish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before placing fresh bullish bets. Nevertheless, the AUD/USD pair seems poised to prolong the upward trajectory towards an intermediate hurdle near the 0.7475-80 zone en-route the key 0.7500 psychological mark.

On the flip side, any meaningful retracement slide might attract some dip-buying near the 0.7400 round-figure mark. This, in turn, should help limit the downside for the AUD/USD pair near the 0.7375-70 region, or 50-day SMA, which if broken decisively might prompt some long-unwinding trade. The corrective pullback might then drag the AUD/USD pair further towards the 0.7300 round-figure mark, with some intermediate support near the 0.7330 region.

 

3) XAU/USD At A Critical Juncture Ahead Of NFP, Upside Appears Favored

Gold price finds support amid sluggish USD, China’s stimulus hopes. Weak US data hint at dismal NFP print, weigh on Fed’s tapering expectations. Gold’s 4H technical setup remains in favor of bullish traders, NFP awaited.

As observed on the four-hour chart, the gold price is wavering in a symmetrical triangle formation after topping out at $1823 earlier on.

The metal has confirmed a bull cross on the said time frame after the 100-Simple Moving Average (SMA) pierced through the horizontal 200-SMA from below.

Meanwhile, the Relative Strength Index (RSI) holds above the midline, sitting flatlined at 53.85, which helps keep the buoyant tone intact around gold.

The abovementioned technical indicators point to a potential move higher. Therefore, acceptance above the upward-sloping 21-Simple Moving Average (SMA) at $1813 could call for a fresh advance towards the falling trendline resistance at $1817.

A four-hourly candlestick close above the latter will confirm a symmetrical triangle breakout, with a test of the August highs at $1823 on the cards. Further up, the $1830 round figure will be put to test.

Alternatively, a strong cushion is seen at $1806, which is the confluence of the bullish 50-SMA and rising trendline support.

If the latter gives way, then a downside breakout from the triangle will get validated, opening floors for deeper losses towards the $1793 level, where the 100 and 200-SMAs intersect.

Gold price extended its choppy trading above the $1800 mark for the fourth day in a row on Thursday, as investors failed to place any fresh directional bets on the metal heading towards Friday’s US Nonfarm Payrolls (NFP) release. Gold price fell as low as $1805 after US Treasury yields attempted a brief bounce in sync with the risk-on market sentiment.

However, gold price found its feet, as the recent series of disappointing US economic data, in the ADP jobs and ISM Manufacturing Employment sub-index, hinted a dismal NFP print while further downplaying Fed’s tapering expectations. Gold recovered from daily lows to end the day at $1810, still well off the highs at $1817, which remains a tough nut to crack. Amidst a likelihood of a delay in Fed’s taper plan, the US dollar languished in monthly lows against its major rivals, putting a floor under the gold price.

This NFP Friday, the market mood remains mixed, with China’s economic slowdown concern exacerbated by a contraction in the country’s services sector. On the other side, the stepping down of the Japanese PM Suga and hopes of more Chinese stimulus keep the Asian stocks afloat. However, investors remain cautious ahead of the critical US employment, as gold attempts a bounce amid a mixed sentiment. The US dollar is licking its wounds amid expectations of the NFP reading underscoring the market consensus of 750K in August and 943K booked in July. Gold’s fate hinges on the NFP outcome, with risks skewed to the upside while it defends the 200-Daily Moving Average (DMA). The US ISM Services PMI will be also eyed later in the NA session.

 

4) EUR/USD Holds Onto Four-Week Highs Ahead Of Critical Nonfarm Payrolls

EUR/USD is trading around 1.1880 intense tradings before the all-important Nonfarm Payrolls. The dollar is on the back foot after weak leading indicators. The euro is shrugging off disappointing eurozone PMIs.

With the bullish MACD conditions joining the 10-week-old trend line breakout, EUR/USD prices are likely to remain firmer towards July’s peak of 1.1908. However, the quote’s further upside will be challenged by the 50% Fibonacci retracement (Fibo) level of the May-August downside, around 1.1965, as well as the 200-DMA level of 1.2005. Alternatively, pullback moves will aim for the resistance-turned-support retest, near 1.1845, a break of which will be challenged by a confluence of 50-DMA and 23.6% Fibo near 1.1805.

The big day is here: Nonfarm Payrolls figures for August – critical for the Federal Reserve’s taper decision are set to be released and markets are holding their breaths.

While the current standstill is typical to pre-NFP Friday, currency markets were not quiet in the days leading to the event. The dollar tumbled down in response to weak leading indicators on Wednesday and extended its falls on Thursday – without additional triggers.

EUR/USD’s 200+ pip move in recent weeks has not fully been the result of dollar weakness but of expectations that the European Central Bank would have to reduce its bond-buying scheme sooner rather than later. Eurozone inflation hit 3% YoY in August, emboldening ECB hawks. Europe ahead of the US in vaccinations.

Nevertheless, the main upside driver is dollar weakness, but the NFP could change it. The downbeat ADP labor figures showing an increase of only 374,000 private-sector jobs – and contracting the ISM Manufacturing Purchasing Manages Index have caused some caution.

While the economic calendar is pointing to an increase of 750,000 jobs in August, real estimates are under that level. ADP data and official statistics have often been at odds and the ISM figure is only for the smaller industrial sector. The bar could be too low.

A better-than-expected outcome could boost the greenback and send EUR/USD down on expectations that the Fed could still taper bond-buying later this month.

An increase of 600-700K new positions would broadly meet lowered estimates and be a good result in absolute terms. If such an outcome is accompanied by a relatively modest increase in wages – projections stand at a repeat of July’s 4% annual increase – it would be even better.

That would mean robust growth without pressing inflationary pressures, allowing the Fed to sit back and refrain from a “Septaper” while the economy keeps on growing. In this case, stocks would rise and the dollar would further suffer. The EUR/USD rally would continue.

Perhaps the services sector is doing even worse than the manufacturing one. The ISM Services PMI is due out 90 minutes after the jobs report and this timing meant fewer figures to chew on ahead of the NFP.

In case the US economy gained fewer than 600,000 positions last month, it could cause worries of a substantial US slowdown. A figure under 500,000 and a sharp increase in salaries would further paint a picture of stagflation economic stagnation with fast price rises.

If the world’s largest economy is having its issues, the global economy is in deeper trouble – and such a mood could send investors to the safety of the dollar.