The Week Ahead 28th August – 1st September: Eyes on US non-farm payroll; how will the USD react?
<p>Welcome to Key to Markets preview of the Week Ahead.</p>
<h2>Currency Pair Performance</h2>
<p>5-day performance as of <strong>August 24, 2023. 11:30 GMT.</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25210 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-1-2.png" alt="" width="602" height="269" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-1-2.png 602w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-1-2-300×134.png 300w" sizes="(max-width: 602px) 100vw, 602px" /></p>
<p>Source: finviz.com</p>
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<h2>10 Big Stories Last Week</h2>
<p>In case you missed it…</p>
<p><strong>Eurozone PMIs a worrisome growth picture.</strong> Services PMI fell for the first time this year, and German composite PMI suffered the worst decline in 3 years.</p>
<p><strong>Nvidia smashes expectations.</strong> The AI chip king beat on earnings and revenue and forecast 170% growth in Q33. Executives announced a further $25bn share buyback.</p>
<p><strong>S&P downgraded 5 US banks.</strong> The rating agency followed Moody’s lead and downgraded five regional banks by one notch and signalled a negative outlook for several others.</p>
<p><strong>BRICS admitted six new members.</strong> The group of Brazil, Russia, India, China, and South Africa invited Saudi Arabia, UAE, Egypt, Argentina, Iran and Ethiopia to join. Is this the start of a new world order?</p>
<p><strong>Macy’s tumbled 16%.</strong> The department store chain beat on sales & and earnings but warned of weaker consumer spending in H2 and a faster-than-expected rise in credit card payment delays.</p>
<p><strong>GBPUSD fell on recession fears.</strong> Weak PMI data raised fears of a recession and saw the market rein in BoE rate hike bets. A peak rate of 5.5% is now expected.</p>
<p><strong>US 10-year treasury yield hit a 16-year high.</strong> Bond yields jumped amid fears over the interest rate outlook in the US and as China and Japan’s share on the US bond market hit a record low.</p>
<p><strong>Foot Locker dropped to a 52-week low.</strong> The sportswear retailer posted a 9.9% fall in Q2 sales and slashed its forecasts for the second time this year on a soft consumer outlook.</p>
<p><strong>China cut a key interest rate.</strong> The PBoC cut the 1-year loan prime rate by 10 basis points to 3.45%. This was less than the 15-basis point cut expected. The 5-year rate was left unchanged.</p>
<p><strong>Arm unveiled IPO plans.</strong> The UK headquartered chip stock is set to float on the Nasdaq next month and is expected to seek a valuation of $60-$70 billion.</p>
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<h2>Chart of the Week</h2>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25213 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-2-2.png" alt="" width="602" height="315" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-2-2.png 602w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-2-2-300×157.png 300w" sizes="(max-width: 602px) 100vw, 602px" /></p>
<p>Source: Bloomberg</p>
<p>Nvidia crushed Wall Street’s lofty expectations posting record revenue, margins, and earnings in the second quarter.</p>
<p>· Q2 revenue more than doubled to $13,5 billion vs. $11 billion forecast<br />
· EPS rose five-fold to $2.70 vs. $2.07 forecast thanks to soaring demand for its AI chips</p>
<p>The chip maker projected a 170% YoY rise in revenue in the current quarter after confirming that it was managing to overcome supply constraints more rapidly than expected.</p>
<p>The show-stopping results have been driven by a surge in demand for its chips that are capable of running AI and machine learning applications. As the new AI gold rush begins, Nvidia is the only shop in town selling shovels.</p>
<p>The release sent the share price over 8% higher in the pre-market, towards a fresh record high. The share price now trades up over 230% this year.</p>
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<h2>5 Things to Watch This Week</h2>
<p><strong>1. US non-farm payroll</strong><br />
The July non-farm payroll saw headline job creation rise by a lower-than-expected 187,000, its weakest rise since 2020, and June’s report was revised lower to 185k, suggesting that job growth is slowing, although wage growth remained strong. Another month of weaker job growth could support the view that the Fed’s rate hikes are starting to slow the economy.</p>
<p><strong>2. Eurozone inflation</strong><br />
Eurozone inflation data for August will be released on Thursday, August 31st. Inflation in the region has been steadily cooling, easing to 5.3% YoY in July, down from 5.5% in June and 6.1% in May. The recent PMI data shows that business activity shrank in August, and German PPI fell at the fastest pace in 16 years, which could be a signal that inflation is set to fall further. Cooler inflation could raise further questions over a September ECB hike.</p>
<p><strong>3. China manufacturing PMI</strong><br />
Concerns over the health of the Chinese economy have ramped up in recent weeks after a series of weaker-than-expected data and as the property crisis deepens. The manufacturing sector will be in focus with PMI data for August due on Thursday and Caixin manufacturing PMI on Friday, 1st September. Will the contraction in July carry over for another month?</p>
<p><strong>4. US Core PCE</strong><br />
The Fed’s preferred gauge for inflation is due to be released on Thursday, August 31. The data comes after core CPI rose 0.2% MoM for a second straight month in July. The smallest back-to-back gain in 2 years. Could core PCE display a similar pattern? Cooler than expected, inflation could pull the USD lower and boost Gold.</p>
<p><strong>5. Broadcom earnings</strong><br />
The chip maker is due to release Q3 earnings on Thursday, 31st August. The update comes as Broadcom’s $61 billion deal to acquire VMware is cleared by the UK CMA, paving the way forward for one of the largest-ever tech deals. Expectations are for EPS of $10.43 on revenue of $8.86 billion. The stock trades +57% YTD, helped higher by the AI frenzy earlier in the summer.</p>
<p><strong>Economic Calendar Highlights</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25216 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-3-2.png" alt="" width="602" height="479" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-3-2.png 602w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/Chart-3-2-300×239.png 300w" sizes="(max-width: 602px) 100vw, 602px" /></p>
<p>Source: FXStreet.com</p>
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<h2>Technical Analysis:</h2>
<p>TA of the major asset classes (Forex – Commodities – Indices…).</p>
<p><strong>EUR/USD (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25219 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/EURUSD-10.png" alt="" width="1916" height="867" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/EURUSD-10.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/EURUSD-10-300×136.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/EURUSD-10-1024×463.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/EURUSD-10-768×348.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/EURUSD-10-1536×695.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p>EUR/USD is in a downtrend, making lower highs and lows below the 50 SMA.<br />
Price has continued further below the 50 SMA and is now testing support at 1.083. A breakdown from here brings in support at 1.07, then the May low near 1.0650. The broader picture is that of a range-bound market with 1.095 as a midpoint.</p>
<p><strong>GBP/USD (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25222 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/GBPUSD-10.png" alt="" width="1916" height="867" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/GBPUSD-10.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/GBPUSD-10-300×136.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/GBPUSD-10-1024×463.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/GBPUSD-10-768×348.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/GBPUSD-10-1536×695.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p>GBP/USD is in a downtrend, forming lower lows and lower highs beneath the 50 SMA.<br />
After about 3 weeks of uncertain price action drifting under the 50 SMA and around 1.27, the price is again testing support at 126.1. The next downside target is approx 1.24. Should RSI turn oversold it could be the first sign a rebound in line with the broader uptrend is coming.</p>
<p><strong>USD/JPY (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25225 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/USDJPY-10.png" alt="" width="1916" height="867" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/USDJPY-10.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/USDJPY-10-300×136.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/USDJPY-10-1024×463.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/USDJPY-10-768×348.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/USDJPY-10-1536×695.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p>USD/JPY is in an uptrend, making higher highs and lows above the 50 SMA.<br />
Price is consolidating in a tight range near YTD highs around 146.5. The bias is for the uptrend to continue, but there is still a chance of a long-term false breakout, which would be confirmed with a drop under 144.</p>
<p><strong>Gold (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25228 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XAUUSD-10.png" alt="" width="1916" height="867" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XAUUSD-10.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XAUUSD-10-300×136.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XAUUSD-10-1024×463.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XAUUSD-10-768×348.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XAUUSD-10-1536×695.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p>XAU/USD is in a downtrend, making lower lows and lower highs while below the 50 SMA.<br />
As RSI came out of oversold condition, it ushered in a rebound off the lows in price, which could see a test of the 50 SMA then the 1950 round number. The meandering downtrend would suggest the rebound could go further, taking RSI back to overbought.</p>
<p><strong>Brent Oil (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25231 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XBRENT-10.png" alt="" width="1916" height="867" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XBRENT-10.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XBRENT-10-300×136.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XBRENT-10-1024×463.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XBRENT-10-768×348.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XBRENT-10-1536×695.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p>XBRENT is in a sideways trend, matching highs and lows above the 50 SMA.<br />
Price looks to form a bearish head and shoulders reversal pattern with a neckline around 82-82.50. The RSI is neutral. A break below the 50 SMA would add bearish confirmation.</p>
<p><strong>US500 (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-25234 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XUS500-10.png" alt="" width="1916" height="867" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XUS500-10.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XUS500-10-300×136.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XUS500-10-1024×463.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XUS500-10-768×348.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/08/XUS500-10-1536×695.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p>XUS500 is in a downtrend with lower highs and lows below the 50 SMA.<br />
The price broke below the 50 SMA last week and has now rebounded, retested the moving average and broken down again in what looks to be classic confirmation of a bearish breakdown. A move back over the 50 SMA is needed to turn bullish.</p>
<p>Thank you very much for reading – and have a great week trading!</p>
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<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/the-week-ahead-28th-august-1st-september-eyes-on-us-non-farm-payroll-how-will-the-usd-react-25209/">The Week Ahead 28th August – 1st September: Eyes on US non-farm payroll; how will the USD react?</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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