Video summary
The upcoming US holiday-shortened week is expected to be driven by significant economic data releases that could heavily influence market direction. Analysts are closely watching the Producer Price Index (PPI) on Thursday, with expectations for a rise in both year-over-year and month-over-month figures, alongside a potential increase in food and energy costs. Even more critical is the August Consumer Price Index (CPI) report arriving on Friday morning, which carries extra weight due to comments made by Fed Governor Chris Waller regarding a potential rate hike in September. The market's reaction to these inflation reports will be pivotal, as hotter-than-expected numbers could push for tighter monetary policy, while cooler data might ease pressure on interest rates, directly impacting currency valuations and equity performance throughout the week.
In the foreign exchange markets, the Euro is currently consolidating after a significant decline, having retraced 38.2% of its previous rally, with key levels around 1.1640 acting as immediate resistance. The currency's path forward depends heavily on the interplay between the upcoming ECB meeting and US inflation data; a dovish stance from the ECB or weak US CPI figures could strengthen the Euro, whereas strong US data would likely weaken it further. Similarly, the British Pound is trading sideways below its 10-day exponential moving average, with its future trajectory hinging on US economic news that could push it toward either 1.3620 or back down to 1.3270. Meanwhile, the Japanese Yen has been strengthening materially as markets price in a higher probability of a Bank of Japan rate hike in September, though further downside below 152.50 remains possible if that hike does not materialize or if US data cools significantly.
Commodity and European equity markets are showing mixed signals with notable technical challenges ahead. Brent crude oil is approaching the major psychological level of $100, forming an ascending triangle pattern that suggests potential for a breakout toward $112, provided momentum remains controlled and the Relative Strength Index (RSI) continues to climb slowly. Conversely, gold is displaying weakness as it tests support at $4,350, failing to sustain the recent breakout momentum needed to reach new highs near $4,700. In Europe, the DAX has struggled since making a new high in August and is now hovering below its 10-day moving average, with significant room for downside movement toward 25,400 before finding stronger support. The UK's FTSE 100 presents an interesting divergence, breaking its uptrend despite recent strength in copper prices, indicating that the index may be vulnerable as it tests support around 10,680 and risks a drop back to the 10,350 region if momentum continues to deteriorate.
Finally, the major US indices are navigating a period of sideways trading with underlying weakness in technical indicators. The Nasdaq 100 is holding above its 10-day moving average but shows signs of slowing momentum, requiring a breakout above 29,600 to return to the 30,000 level or a break below 28,900 to retrace to early August lows. The S&P 500 remains supported at 7,600 but faces resistance at 7,750, with a breach of support potentially opening the door for further declines. The Dow Jones Industrial Average appears in the most vulnerable position among the three, sitting right on its support level after recent closes; given its price-weighted structure rather than market-cap weighting, any breakdown could lead to a sharper decline toward 51,450. Overall, while there are opportunities for rebounds if key resistance levels are breached, the prevailing sentiment suggests caution as markets await clarity from the week's critical economic data and central bank decisions.
Read the full video transcript
It's a holiday shortened week here in
the US, but that doesn't mean there
won't be plenty of action uh the rest of
this week. With the producer price index
coming on Thursday, September 10th,
analysts expect year-over-year PPI to
rise by 5.3% up from 4.7%.
Final demand month overmonth expected to
rise by 0.4%. PPI uh X food and energy
expected to rise by 4.6% from 4.2 while
uh month over month expected to rise by
0.3% up from 0.2. Of course, on Friday
morning, uh, September 11th, we'll be
getting the August CPI report, which is
probably going to carry a little bit of
extra weight since Fed Governor Chris
Waller had been made mention in one of
his last speeches before the blackout
period for him could push him towards
wanting to see a rate hike in September.
Core CPI for August expected to rise by
0.2% in line with last month.
Year-over-year expected to decline to
2.4% 4% from 2.5, while headline CPI
expected to rise by 0.4% up from 0.1 and
the year-over-year expected to remain
unchanged at 3.4%.
Uh, also, of course, we're going to have
an ECB meeting on Thursday, September
10th, as well. And that's going to have
a big impact on where the euro goes from
here. Uh markets are pricing in a rate
hike for the ECB on the September 10th,
but uh you can see that the euro really
hasn't done very much now since the big
decline that we saw at the end of
August. We've done the 38.2% retracement
off of the rally that formed from the
end of July to the middle of August. Uh
and right now we're also trying to set
up and potentially move even higher,
taking back some of the losses we saw
over the last two weeks. That's going to
take a breakout above this 116 and a
quarter region for that to happen. If
that does happen, then I think there's
opportunities for us to move back
towards 11680.
Uh if it doesn't happen and we see a
break down below 115 12, I think that
probably puts us on a path back to 113
12, even though it might find some
support in this 11520 area before that
happens. Obviously, if the if the ECB
comes across as dovish, if the CPI
should come in hotter than expected,
that's the perfect setup for uh the euro
to weaken. If the CPI report obviously
comes in cooler and the uh ECB just kind
of stands pat or indicates the potential
for future rate hikes sooner than the
market has priced in, then of course we
have a chance for the euro to
strengthen. So there's a lot of a lot of
pieces moving to where the euro goes
next and it's probably why we're seeing
it just settling out where it is right
now. Uh when we look at the pound, you
can see also very similar just kind of
trading sideways at the moment,
consolidating uh just below uh a
resistance level, consolidating just
below the 10day exponential moving
average. Uh again clearly you know if we
start getting you know cooler US
economic data or even a cooler than
expected PPI report which of course
feeds directly into PCE it could set up
a return on the pound back towards this
136 12 area. Uh likewise a hotter than
expected number on PPI or P or CPI could
be enough to get the pound strengthening
again potentially undercutting the 13485
area potentially sending it all the way
back towards the 13270. Again, it's
going to be data dependent this week.
It's going to be very tricky uh in terms
of where these markets are going to go.
The Japanese yen, on the other hand, has
been strengthening materially as markets
increase odds of a September rate hike
by the BOJ. Markets are really taking
this very seriously. Right now, we saw
that the um the yen was able to breach
support around the in 155 area, which
was I thought a very critical area of
support. Uh we did see the yen already
move down towards and test the 153 area.
I think for the yen to see further
downside we need to see it break 152 152
and a half. I think that opens a move
potentially to sub 150 maybe 149 a 12
149 even. Again that's going to largely
depend upon whether or not the boj is
going to go through with actually
raising rates uh and potentially a
cooler US number. But again, US number I
don't think matters quite as much here
as it does for a rate hike out of Japan
and signals that more rate hikes are
likely to come, which is uh which is
which is certainly possible given that
real yields on a 2-year in Japan are
still deeply negative, suggesting that
bank the Bank of Japan still has a lot
of work cut out for it in the future.
And Brent, uh oil is moving back up
again. We can see it's getting very
close now potentially breaking out as it
touches the $100 level. This obviously
is a major level of resistance that if
we see Brent break above this 101 to 102
region, I think opens a pathway all the
way back to 112 on Brent. You can
clearly see at this point not really
overbought yet, although we're close to
it. You can see that we're still only at
a 65 and a half or so on the RSI. While
we are scraping along the upper end of
the Ballinger band, we're not really
seeing it move fast enough to
potentially push it uh above the upper
Ballinger band. Right now, we're kind of
grinding along up it alongside of it.
And as long as the RSI continues to also
move up at a slow and controlled pace,
it's possible we could just see Brent
continue to expand higher. Uh if for
some reason developments change around
the world, you see that uh Brent
actually stalls here at this 100 10 100
and a half area um then we're talking
about the 10 and 20-day moving averages
again acting as support with the
potential for a move all the way back
down towards 88. Uh break below 88 I
think sets up a return to 81. Although
the momentum you're seeing in Brent and
the pattern that you're seeing in Brent,
which also appears to be that of a
ascending triangle probably means that
Brent prices are going to be heading
higher in the not too distant future. We
can see gold is also showing signs of
weakness
as it again tests this 4350 area. 4350 I
think is a key area of support because
you can see there's a lot of air in
between 4350 and 4180. And then after
that we're talking back towards 4,000.
So at least at this point the breakout
that we saw in gold that I know a lot of
people were very excited about is not
really seeing the follow through at this
point that is needed to continue to move
higher. Really at this point gold needs
to hold on to this 4350 area. I think if
it loses it the upside is really
diminished. If we can somehow get back
above 4500, then I think we're talking
about a retest of the highs around 4700.
But again, right now RSI turning lower.
We're not really seeing the momentum
there. And we're also seeing that the
10day exponential moving average is
serving as resistance. Germany has also
been struggling the last couple of weeks
now since uh making a new high here in
August. You can see we're back below the
10day exponential for a couple of days
now. We can also see that we're hitting
up above it and that's now acting as
resistance. There is lots of room for
the DAX to move lower here before it
really starts finding any support.
Potentially around 25,400 would be that
area. You can see there's a little bit
of support that's been built in here
around 25,850,
but we're sitting on it right now. So
any further move down probably means we
go lower back towards this 400
potentially all the way back to the
24,900 region.
A breakout above the 10day could send us
back towards the upper end of the range.
But again, you can see momentum is
turning lower. You can see the 10day
exponential is rolling over and that's a
negative indication at this point in
time. When we look at the Footsie 100,
you can actually see it's a bit of a
negative development that's that's
happened. uh clearly broke the uptrend
that was in place. RSI is change is
trending lower. 10day exponential moving
average trading below it. It's a little
bit surprising because we have seen some
considerable strength in copper the last
couple of days now where it actually
broke out to a new high. So, a little
bit of a divergence that's formed here
and we know that copper and the Footsie
tend to move together. Although we did
see uh back towards the beginning of the
year a little bit of a divergence as
well between Footsie and copper prices
where the Footsie moved up and copper
prices did not. We also saw copper
prices making new highs in this area
while the Footsie did not as well. So
while the the motions and the and the
steps of the Footsie may follow copper,
the actual making of a new high in
copper does not necessarily mean that
the Footsie will. But copper aside, we
have to be considerate of the fact that
the momentum indicator is declining that
the RSI that the trend line is broken to
the downside.
Support right now 10,680
really needs to hold for the Footsie to
to hold on to any sort of hope for an
upward move. Uh which if we could get
above 10,875
or so could open the door to new highs.
Um but again, it just has a weak look to
it. Um, and a break below 10,600
probably means we move back towards this
10,400 to 10,350
region. The NASDAQ 100 has just been
really trading sideways now the last
couple of weeks. Uh, right now trading
right above the 10day exponential which
is serving as support. You can see
though the RSI is trending a little bit
lower more recently. Right now, I think
uh a breakout above 29,600
probably returns it to about 30,000.
While there is some solid support in
this 28,900
to 29,100
region, uh if we did see the NASDAQ
break below that, I think again we're
talking about moving back towards the
level seen in early uh August, beginning
of July. When we look at the S&P 500,
very similar setup here. We haven't seen
uh we haven't really seen it yet break
down below support at 7600. Although
you've seen we put together a couple of
weak days now in a row. RSI also
trending lower. Uh right now if the S&P
can get above 7750
that opens the door to 7,800. But at
least at this point if we see a break
below 7600 which has been strong support
that would open further downside. But to
this point, we haven't been able to do
that. And that's the level I think that
that would define whether or not you're
going to see further downside. Uh the
Dow is in a little bit of a more
vulnerable spot only because you can see
it's sitting right on support after
today's close. You can see that it's
actually finishing around 52,750.
Uh if we see it uh the Dow break support
here, I think there's a chance we return
all the way back to 51,500 or so. It's a
much weaker setup than what you're
seeing in the S&P and the NASDAQ. And
that could just be due to the way that
it's weighted. Again, it's not weighted
like the S&P or the uh NASDAQ. It has a
it has a price cap waiting, meaning that
the higher the price is in the Dow, the
higher the waiting is in the Dow, where
the Dow, the S&P and the NASDAQ are
market cap weighted. So, a breakdown
probably sets up a lower move here
towards to 51,450.
uh resistance at 53,700
or so looks pretty firm at this point
and that's the level that needs to be
broken in order to us potentially
returning to the highs which again RSI
turning lower momentum looks pretty
weak. Uh the odds don't seem to favor it
at this point. Anyway, hope you have a
great rest of your week and we'll see
you next. Bye.