US: Weekly Initial Jobless Claims decline to 222K vs. 240K expected

Initial Jobless Claims fell by 6,000 in the week ending September 3.

US Dollar Index clings to small daily gains 109.50.

There were 222,000 initial jobless claims in the week ending September 3, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 228,000 (revised from 232,000) and came in better than the market expectation of 240,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1% and the 4-week moving average was 233,500, a decrease of 7,500 from the previous week's revised average.

"The advance number for seasonally adjusted insured unemployment during the week ending August 27 was 1,473,000, an increase of 36,000 from the previous week's revised level," the DOL said.

Market reaction

The greenback stays resilient against its major rivals after this data with the US Dollar Index posting small daily gains at 109.60.

WANT TO DIRECT TALK TO EXPERTS CONTACT MONEY LIFE RESEARCH

EUR/USD remains unfazed around parity post-ECB rate decision

EUR/USD keeps the daily range around the parity zone.

ECB raised its key rates by 75 bps, matching previous estimates.

The ECB now sees the region’s economy expanding 3.1% in 2022.

The single currency now alternates gains with losses and motivates EUR/USD to keep hovering around the parity region after the ECB raised rates on Thursday.

EUR/USD now focuses on Lagarde

EUR/USD keeps the daily range after the ECB raised the interests rates by 75 bps, as widely expected. That said, the interest on the main refinancing operations, the interest rate on the marginal lending facility and the deposit facility are now at 1.25%, 1.50% and 0.75%, respectively.

In its statement, the ECB predicts that further interest rate hikes are on the table over the next several meetings aimed at undermining demand and tackle upside risks in inflation expectations.

The updated macroeconomic projections now forecast inflation to rise at an average 8.1% this year, 5.5% in 2023 and 2.3% in 2024. Back to the economic growth, the bank’s staff now sees the region expanding 3.1% in 2022, 0.9% in the next year and 1.9% in 2024.

Moving forward, market participants will now closely follow the usual press conference by Chairwoman Lagarde and the subsequent Q&A session, while the speech by Fed's Powell will also grab investors' attention.

What to look for around EUR

EUR/USD now clings to the parity region ahead of the always important press conference by Chair Lagarde after the ECB delivered a widely anticipated 75 bps rate hike.

So far, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence. The latter, in the meantime, keeps closely following the prevailing debate around the size of the next interest rate hikes by both the ECB and the Federal Reserve.

On the negatives for the single currency emerge the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals.

Key events in the euro area this week: ECB Interest Rate Decision, Lagarde press conference (Thursday) – Eurogroup Meeting, Emergency Energy Meeting (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, the pair is gaining 0.06% at 1.0005 and faces the next resistance at 1.0090 (weekly high August 26) ahead of 1.0161 (55-day SMA) and then 1.0202 (August 17 high). On the other hand, a drop below 0.9863 (2022 low September 6) would target 0.9859 (December 2002 low) en route to 0.9685 (October 2002 low).

WANT TO DIRECT TALK TO EXPERTS CONTACT MONEY LIFE RESEARCH

Gold Price Forecast: XAU/USD bounces back to $1,700 mark, bearish potential intact

Gold slides back closer to the monthly low, though follow-through selling is limited.

Continued, relentless USD buying, aggressive Fed rate hike bets weigh on the commodity.

Recession fears, the risk-off mood offers some support to the safe-haven XAU/USD.

Gold continues losing ground through the first half of trading on Wednesday. extending the previous day's pullback from a one-week high. This, the third successive day of a negative move drags the XAU/USD further below the $1,700 mark, though it stalls just ahead of the monthly low touched last Thursday.

US dollar buying remains unabated and turns out to be a key factor exerting downward pressure on the dollar-denominated gold. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a fresh two-decade high amid expectations for a more aggressive policy tightening by the Fed.

The current market pricing indicates over a 70% chance that the Fed will raise interest rates by 75 bps at the upcoming meeting on September 20-21. The bets were reaffirmed by Tuesday's upbeat US ISM Services PMI, which triggered a sell-off in the US government debt market and lifted the yield on the 30-year bond to its highest level since 2014.

Moreover, the yield on the benchmark 10-year US Treasury note surged to levels not seen since June 16. This, in turn, is further offering additional support to the greenback and also contributing to driving flows away from the non-yielding gold. That said, the prevalent risk-off mood helps limit deeper losses for the safe-haven precious metal, at least for now.

The prospects for rapid interest rate hikes, along with the economic headwinds stemming from fresh COVID-19 curbs in China and the ongoing war in Ukraine, have been fueling recession fears. This continues to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets and underpins traditional safe-haven assets.

The flight to safety assists gold to bounce back to the $1,700 round-figure mark, though any further recovery still seems elusive. In the absence of any major market-moving economic releases from the US, speeches by Fed officials will play a key role in influencing the USD price dynamics. This, in turn, could produce short-term trading opportunities around the commodity.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

GBP/USD could extend its rebound if it manages to clear 1.1600

GBP/USD clings to daily recovery gains above 1.1550. The pair needs to clear 1.1600 to attract buyers.

The near-term technical outlook points to a bullish shift

“Near-term technical outlook points to a bullish tilt following the latest rebound.”

“1.1600 (psychological level, static level) aligns as immediate resistance. In case the pair manages to hold above that level, the 1.1640/50 area (50-period SMA, static level) could be seen as the next hurdle ahead of 1.1700 (static level, psychological level).”

“On the downside, 1.1550 (20-period SMA) forms first support before 1.1500 (psychological level, upper limit of the descending channel) and 1.1440 (September 5 low).”

WANT DIRECT TALK TO OUR EXPERTS JOIN MONEY LIFE RESEARCH

GBP/USD struggles to register any meaningful recovery, hangs near two-and-half-year low

GBP/USD attracts some intraday buying on Monday, though lacks follow-through.

A modest USD pullback from a two-decade high offers some support to the major.

The fundamental/technical backdrop still seems tilted in favour of bearish traders.

The GBP/USD pair stages a modest bounce from its lowest level since March 2020, around the 1.1445 area touched earlier this Monday. Spot prices hit a fresh daily high during the mid-European session, albeit seemed to struggle to capitalize on the move or find acceptance above the 1.1500 psychological mark.

The US dollar trims a part of its early gains to a fresh two-decade high and turns out to be a key factor offering some support to the GBP/USD pair. That said, expectations that the Fed will stick to its aggressive policy tightening path act as a tailwind for the greenback. Apart from this, a bleak outlook for the UK economy continue to undermine the British pound and kept a lid on any meaningful gains for the major.

It is worth recalling that the Bank of England had warned last month that the UK economy will enter a prolonged recession during the last quarter of the year. Adding to this, the British Chambers of Commerce (BCC) downgraded its forecast and now expects the UK economy to record three consecutive quarters of contraction. This, to a larger extent, overshadows the prospects for further interest rate hikes by the UK central bank.

On the UK political front, Liz Truss won the Conservative Party leadership race to become the next British Prime Minister. The news, however, did little to impress bullish traders, suggesting that the path of least resistance for the GBP/USD pair is to the downside. That said, relatively lighter trading volumes on the back of the Labor Day holiday in the US might hold back traders from placing aggressive bearish bets and limit losses.

Nevertheless, the fundamental backdrop still supports prospects for an extension of a three-week-old downward trajectory. Even from a technical perspective, acceptance below the 1.1500 mark and the GBP/USD pair's inability to attract any buyers suggests that the near-term selling bias is still far from being over. Hence, any attempted recovery move could be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

WANT DIRECT TALK TO OUR MARKET EXPERTS CONTACT MONEY LIFE RESEARCH

AUD/USD climbs back above 0.6800 mark amid modest USD weakness, NFP awaited

AUD/USD gains positive traction and reverses a part of the overnight slide to a multi-week low.

The USD moves away from a two-decade high and turns out to be a key factor lending support.

Aggressive Fed rate hike bets to limit the USD losses and cap the pair ahead of the NFP report.

The AUD/USD pair attracts some buying on Friday and recovers a part of the previous day's losses to the 0.6770 area, or the lowest level since July 18. The pair builds on its steady intraday ascent and moves back above the 0.6800 mark, hitting a fresh daily high during the first half of the European session.

The US dollar edges lower and retreats further from a two-decade high touched on Thursday, which, in turn, offers some support to the AUD/USD pair. A softer tone surrounding the US Treasury bond yields keeps the USD bulls on the defensive amid some repositioning trade ahead of the US monthly jobs data. Apart from this, signs of stability in the financial markets further undermine the safe-haven buck and benefit the risk-sensitive aussie.

That said, growing recession fears, economic headwinds stemming from fresh COVID-19 lockdowns in China and the war in Ukraine should cap any optimistic moves. Furthermore, expectations that the Fed will continue to tighten its monetary policy to tame inflation should act as a tailwind for the US bond yields and lend support to the greenback. This, in turn, warrants caution before placing aggressive bullish bets around the AUD/USD pair.

It is worth mentioning that the markets are pricing in a supersized 75 bps rate hike at the September FOMC meeting and the bets were reaffirmed by the recent hawkish remarks by several Fed officials. Traders now look to the US NFP report, which will provide a fresh insight into the economy's health and influence the USD price dynamics. This, in turn, will drive the AUD/USD pair ahead of the Reserve Bank of Australia (RBA) meeting next week.

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH

Gold Price Forecast: XAU/USD to meltdown below the $1,675 mark – TDS

With every downtick, the risk of capitulation in gold is rising. Economists at TD Securities expect the yellow metal to slump below the $1,675 level.

China's appetite for gold has remained resilient

“The top players in Shanghai markets continue to add to their gold length, despite a depreciating CNY. These flows, alongside central bank demand, have likely kept gold from melting in a liquidity vacuum amid a hawkish Fed narrative, Nonetheless, the risk of capitulation from bloated prop-shop positioning is growing with every tick lower in prices as we approach this cohort's pandemic-era entry levels.”

“The downtrend in gold is gaining steam, as the breadth of technical signals short continues to firm.”

“The risk of a breakout in the broad dollar index could coincide with a meltdown below the $1,675 range in gold.”

WANT DIRECT TALK TO OUR EXPERTS CONTACT MONEY LIFE RESEARCH