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4 Global Market Updates- 29 August, 2022

In this article, we have covered the highlights of global market news about the USD/CNH, Gold, USD/CAD and NZD/USD.
USD/CNH is currently aiming for 6.9400 rather than 6.9600 – UOB

According to Quek Ser Leang and Peter Chia, FX Strategists at UOB Group, if the upswing keeps on, USD/CNH may retest the 6.9400 level before reaching 6.9600 in the near future.

“USD rose and finished last Friday at 6.8923 (+0.60%),” the 24-hour report reads. During the early Asian hour, the USD kept moving upward and overcame the key obstacle at 6.9000. The quick ascent seems to be a little exaggerated, and for the time being, it is doubtful that the next significant barrier at 6.9400 will be challenged. The level of support is 6.9000, followed by 6.8870.

Within the next three weeks: “We have held a bullish USD view for roughly two weeks. We emphasised last Wednesday (24 August, spot at 6.8630) that the USD’s chances of extending its climb above 6.9000 have decreased due to the abrupt loss of shorter-term bullish momentum. Only a break of 6.8330, as we indicated, would signal that the USD’s strength has peaked. The US dollar failed to surpass 6.8330, and today it soared beyond 6.9000. Because of the quick increase in momentum, the USD’s strength may reach 6.9400 or perhaps 6.9600. On the downside, a break of 6.8600 (a level that was a “solid support” last Friday at 6.8330) would suggest that the USD is unlikely to gain further ground.

Gold price forecast: XAU/USD will continue under pressure ahead of the NFP

There is still strong negative pressure on gold. Prior to Friday’s release of the Nonfarm Payrolls (NFP) report, gold may find it difficult to stage a recovery as Fed officials reiterated the importance of the August inflation and employment statistics ahead of the September meeting, according to FXStreet’s Eren Sengezer.

“Eurostat will publish Harmonized Index of Consumer Prices (HICP) statistics for August on Wednesday. Markets anticipate that the annual HICP would slightly decline from 8.9% in July to 8.6% in August. A figure that is higher than anticipated might spark a euro rise and reduce demand for the dollar. In such case, gold may gain momentum, but it might struggle to continue rising if global yields rise.

“On Thursday, the US ISM Manufacturing PMI will be watched closely for new momentum. According to experts, the headline PMI will essentially remain steady in August at 52.6 and the Prices Paid Index will increase to 75 from 60 in July. Gold might move north or south depending on whether the inflation component shows that price pressures continued to diminish in August.

USD

The August employment data from the US Bureau of Labor Statistics will be closely watched by investors. By increasing the likelihood that interest rates would rise by 50 basis points in September, dismal growth in nonfarm payrolls might cause a sharp decline in the value of the dollar. On the other hand, a second print that exceeds 500K might signal a hike in the oversized rate and strengthen the dollar.

The USD/CAD exchange rate increases to its highest level since mid-July at about 1.3075.

The USD/CAD pair continues to advance following Monday’s robust rise from the area around 1.2900. During the early European session, the momentum drives spot prices to the 1.3075 region, which is the highest level since mid-July. The US dollar’s broad-based strength continues to be a strong support.

Jerome Powell, the chairman of the Fed, hinted on Friday that interest rates will be held higher for longer to rein in skyrocketing inflation, dashed expectations of a dovish shift. The markets responded swiftly and are now putting in a higher likelihood of a 75 basis point rate increase at the September FOMC meeting. This is confirmed by a recent increase in US Treasury bond rates, which on the first day of a new week drives the US dollar to a new 20-year high.

In addition, the widespread risk-off sentiment, which is reflected by a sea of red on the financial markets, gives the safe-haven dollar a boost. The confluence of variables continues to be supportive of the USD/CAD pair’s strong bid tone. However, a little increase in crude oil prices might provide some support for the commodity-linked loonie and temporarily restrain any significant gains for the major.

Hopes for the revival of Iranian oil shipments under sanctions were somewhat tempered by expectations that the major oil producer will reduce production in order to stop the current decline in oil prices. This supports the price of crude oil coupled with the crisis in Libya. Despite mounting worries that a global economic slump could affect gasoline consumption and the likelihood of a quicker tightening of monetary policy by the US central bank, the upside is still constrained.

NZD/USD is vulnerable just above the 0.6100 line due to a stronger USD.

On Monday, the NZD/USD pair experiences its second consecutive day of selling pressure and reaches its lowest point since mid-July. The pair is in decline during the early European session, and bears are now watching for a sustained breach below the round-figure level of 0.6100.

The US dollar continues to strengthen after a big intraday gain on Friday that was sparked by Fed Chair Jerome Powell’s hawkish comments, and it ends up being a major reason pushing the NZD/USD pair down. Ruining expectations of a dovish shift, he indicated in his address at the Jackson Hole Symposium that interest rates will remain higher for longer in order to lower the inflation that was out of control.

Investors responded quickly and have since increased their odds of a supersized 75 bps Fed rate rise at the September meeting. Expectations are strengthened if US Treasury bond rates continue to climb. This helps to drive flows away from the risk-sensitive kiwi and drives the safe-haven buck to a new 20-year high along with the risk-off mindset.

The NZD/USD pair has lost almost 170 pip from its swing high last week due to the most recent leg down, and it now seems vulnerable. The 50-week SMA crossed below the 200-week SMA, completing a bearish death cross pattern on the weekly chart. After a long green candle was followed by a similarly long red down candle the previous week, which was actually longer, the pair likewise produced a bearish two bar reversal pattern on the weeklies. To prepare for any additional decline down towards testing the YTD low, around the 0.6060 zone, reached in July, it may be smart to wait for any follow-through selling below the 0.6100 level.

Please click here for the Market News Updates from 27 Aug, 2022.

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