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On January 31st, OCBC strategist Christopher Wong stated that golds price action "confirms the adage a sharp rise is inevitably followed by a sharp fall." He believes that while Warshs nomination as Fed Chair was the trigger, a correction was already inevitable. "Its like one of the excuses the market has been waiting for—to liquidate those parabolic price movements." Precious metals had already paved the way for sharp fluctuations, as soaring prices and volatility put pressure on traders risk models and balance sheets. Goldman Sachs noted in a report that the record wave of call option buying also "mechanically reinforced the upward momentum," as sellers of these options hedged against rising prices by buying more metal.On January 31, Russian Deputy Foreign Minister Grushko stated that the best guarantee for Ukraines security is a concrete guarantee of Russias security, a guarantee that no one in the West has offered. He emphasized, "If we believe that Ukrainian territory will not be used as a bridgehead threatening Russias security, then Ukraines security will also be guaranteed." The Russian Foreign Ministry previously stated that any scenario involving NATO member states deploying troops in Ukraine is absolutely unacceptable to Russia and could lead to a sharp escalation of the situation. The Russian Foreign Ministry also stated that statements from Britain and other European countries regarding the possible deployment of NATO troops in Ukraine are incitement to continue the conflict.January 31st - According to Yahoo Finance, Kevin Warsh, President Trumps nominee for Federal Reserve Chairman, appeared in newly released Epstein case documents released by the US government on Friday. The documents show that Warshs name was listed in the email guest list for the "2010 St. Barths Christmas" event, alongside figures such as Russian oligarch Roman Abramovich; he also attended a dinner hosted by British aristocrat William Astor. This revelation occurred on the same day Warsh was nominated for Fed chairman. His main controversy previously stemmed from his relationship with Republican donor Ronald Lauder, who was accused of influencing Trumps interest in Greenland during his first term and holding business interests there. Warsh may now need to address his relationship with Epstein and his 2010 Christmas trip, and there is also speculation that Trumps nomination is related to their shared social circle.January 31 – With the House of Representatives in recess and unable to consider the appropriations bill, the U.S. federal government entered a technical, partial shutdown at midnight local time on January 31. Analysts point out that although the shutdown is expected to be short-lived, it once again highlights the structural predicament of U.S. fiscal politics. In recent years, temporary funding, short-term extensions, and marginal shutdowns have become the norm in congressional budget battles, with government operations frequently hampered by political disagreements. Currently, the market generally believes that the direct impact of this technical shutdown on financial markets and economic operations is limited, but if subsequent congressional negotiations are again stalled, the risk of a prolonged shutdown and a wider impact cannot be ruled out.January 31st - The US government officially began a partial shutdown early this morning local time. This followed the Senates passage of a spending bill to fund most federal government departments, which was then submitted to the House of Representatives for consideration. However, because House members were not in Washington and would not return until Monday (February 2nd), the Senate vote could not prevent a partial government shutdown.

Bears targeted the EUR/USD at 0.9950 ahead of US Durable Goods Orders and Jackson Hole

Alina Haynes

Aug 24, 2022 15:18

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In the Asian trading session on Wednesday, the Euro/Dollar exchange rate rejected bids to extend its recovery from the previous day's low near 0.9950 and instead accepted renewed offers to trade at its session low. This is a reflection of the market's flight to the US dollar in advance of high-tier data/events in search of risk safety, and the key currency pair. The Fed's bellicose rhetoric has also helped push the pair lower.

 

On the other hand, the US Dollar Index (DXY) hit a multi-year high the day before, rising to 109.27 before falling back. While the present downturn in US data is driving the quote to retreat, the DXY bulls are supported by concerns of an economic slowdown and the US Federal Reserve's (Fed) quick rate hikes. It's also possible that the EU's contradictory economic statistics helped EUR/USD purchasers.

 

Initial S&P Global Manufacturing PMI for the United States in August came in at 51.3, down from 52.0 forecast and 52.2 in July, while Services PMI fell to 44.1 from 47.3 and 49.2 market expectations. As reported by S&P Global, the Composite PMI has fallen to 45, the lowest level in 27 months, signaling a potential crisis for the US economy. In addition, the number of newly constructed homes sold in the United States dropped to 0.511 million in July, down from 0.585 million the previous month and 0.575 million the market had predicted. The US Richmond Fed Manufacturing Index dropped to -8.0 in August from a reading of 0.0 the month before.

 

While the Services index fell further in August, early data for Manufacturing PMIs in Germany and Europe showed improvement despite contraction. Despite this, Germany's manufacturing PMI rose to 49.8 from 48.2 expected and 49.3 earlier, and the bloc's activity index came in at 49.7, above the market expectation of 49.00. The Services Purchasing Managers' Index (PMI) for the Eurozone fell to 50.2 from 50.5 (previously reported) and 51.2 (expected) while the PMI for Germany fell to 48.2. The flash reading of the Euro area Consumer Confidence Indicator increased from a record low of -27.3 in July to a level of -24.9 in August. The market's expectation was -28, therefore this outcome exceeded that.

 

Minnesota Federal Reserve Bank President Neel Kashkari was quoted as saying, "The greatest risk is that we are misunderstanding underlying inflation trends," by Reuters. If the Fed sees inflation creeping closer to their target of 2%, they may slow their rate of rate hikes, according to the official. On the other hand, ECB board member Fabio Panetta suggested to Reuters on Tuesday that additional tweaks to monetary policy could be required. In addition, ECB member Panetta warned that a recession in the eurozone was becoming more likely and added that such a downturn would ease price pressures. Before that, Bundesbank President and ECB policymaker Joachim Nagel said that the ECB must keep raising interest rates even as the possibility of a German recession looms, because inflation will remain uncomfortably high through 2023.

 

At press time, US 10-year Treasury rates were lingering at 3.05%, the highest level in a month, despite small advances for the day on Wall Street. S&P 500 Futures have been declining somewhat as of press time, which is notable.

 

Speculators in the EUR/USD pair looking for fresh impetus should pay close attention to the US Durable Goods Orders for July, which are expected to be 0.6% versus 2.0% previously. However, the remarks made by Federal Reserve Chairman Jerome Powell at the Jackson Hole conference hosted by the Kansas City Fed on Friday warrant serious study.

 

At this time, the EUR/USD was trading near 1.0055, but the bears still had their eyes on the two-week-old declining resistance line. But near 0.9850, the 61.8% FE of the pair's gains during late May and early August appears to tempt short-term sellers.


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