Market Update by Solidecn.com

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CPI in France Significantly Higher

France inflation data for August was published at 7:45 am BST time today:

• CPI: actual 4,8% y/y; expected 4,6% y/y; previously 4,3% y/y
• HICP: actual 5,7% y/y; expected 5,4% y/y; previously 5,1% y/y

Inflation data came in worse than expected. France is the only country among major EU members today that was expected to publish higher CPI data. Later today, investors will be presented with HICP and HICP core inflation data from the EU. EUR is clearly appreciating after the publication and EURUSD is trading higher.

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Euro’s Recovery Hinges on Inflation Data and US PCE Price Index

The Euro is trying to recover against the US Dollar and British Pound before the release of Euro area inflation data and US core PCE price index data. The Euro area economy has had some recent positive surprises, while the US economy has been less overwhelming. However, there is a risk that activity in the Euro area could contract again due to a drop in services PMI.

The key focus is on Euro area inflation data and US core PCE price index data. If the data meets expectations, the Euro's rebound could struggle. However, if the US core PCE figure is lower than expected and the drop in Euro area inflation is smaller than expected, it could be a bonus for the Euro.



There is still resistance for the Euro to clear before its short-term outlook turns positive again. The immediate hurdle is at last week's high of 1.0930, followed by a stronger barrier at the early-August high of 1.1065. A break below 1.0500-1.0600 area is needed to pose a threat to the multi-month uptrend.

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Germany Consumer Sentiments - Lower GFK Reading

A recent report shows that German consumers are feeling less confident about the economy. The GfK, a market research company, found that consumer sentiment in Germany is lower than expected and has decreased from the previous reading. This has caused a slight drop in the value of futures contracts on the DAX, a stock market index in Germany.

This decrease in consumer confidence could be a sign that the German economy is weakening. The European Central Bank (ECB) has been tightening its monetary policy, but with this new information, there may be pressure to keep interest rates unchanged at their next meeting in September.



According to the GfK, the chances of a strong economic recovery before the end of the year are decreasing. It is unlikely that private consumption in Germany will have a positive impact on the economy in 2023. This means that people may not be spending as much money, which could slow down economic growth.

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Chart of the Day - CNH Cash

Chinese equities were outperformers during today's Asia-Pacific session and there was a good reason behind this outperformance. A number of measures was announced over the weekend by Chinese authorities with an aim of supporting domestic equity markets. Those measures include:

• Halving stamp tax on securities trading (from 0.10% to 0.05%)
• Relaxing deposit requirements while trading at margin (from 100 to 80%)
• Imposing limits on stock selling by some institutions

While the first two measures listed are clearly positive for stock markets and have a potential to boost liquidity as well as encourage more investors to trade, the impact of the third measure is not so simple. Of course, putting restrictions on stock selling by major shareholders will reduce downward pressure on prices but it is a short-term measure. After all, putting restrictions on how investors can manage their portfolios is not a move that inspires confidence. It looks like that after an initial euphoria, the market seems to have realized it and started to shed gains.



Taking a look at Chinese index CHN.cash chart at H4 interval, we can see that the index launched today's trading with a big bullish price gap (over 3.5%) and traded near the downward trendline at the start of today's trading. However, no breakout above the trendline occurred and gains started to be trimmed after session launch. Price dropped back below the 6,300 pts price zone and reduced daily gain to below 1%. The key question now is whether the sell-off will continue and the stock drops below the 6,150 pts zone.

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EURUSD

The value of the EURUSD is at a 2.5-month low as people wait for speeches from Christine Lagarde, the President of the European Central Bank, and Jerome Powell, the Chairman of the Federal Reserve. The US economy is doing well and there are no signs of a recession, which makes the US Dollar stronger and the Euro weaker.

• Earlier in the day, Joachim Nagel from the European Central Bank and Boris Vujčić from the Croatian National Bank said that they think interest rates should stay high. However, there are concerns that the economy might slow down, which could mean that interest rates will have to be lowered.
• In the US, James Bullard and Susan Collins from the Federal Reserve said that they think interest rates should stay high. Patrick Harker from the Federal Reserve in Philadelphia said that interest rates might not go up anymore.
• The value of US government bonds is going up, which makes the US Dollar stronger. People think that Jerome Powell will say that interest rates will stay high for a long time.
• The US economy is doing well. There are more orders for durable goods and more jobs. This makes the US Dollar stronger.
• The value of the US Dollar is at its highest since June 07. The value of stocks is going down. The interest rate on 10-year US government bonds is going up.
• In Germany, there will be new information about how well the economy did in the second quarter of this year. There will also be new information about how people feel about the economy. This will affect the value of the Euro compared to the US Dollar.

Speeches from Christine Lagarde and Jerome Powell will be important to watch.




In technical analysis, if the value of the Euro compared to the US Dollar goes below 1.0765, it could decline more. If it doesn't break the 1.0765 barrier, it could return to 1.0805.

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US 100 - Chart of the Day

Just two days ago, we wrote that the main tech companies index, Nasdaq 100, was striving to break the 15,000-point level. After a strong nearly 8.0% correction that began at the end of July, the index rebounded with significant gains last Friday. At the beginning of this week, the mood in the tech sector started to improve, and in yesterday's session, the index gained a staggering 1.60%, returning again above the support line of the upward trend. After the close, Nvidia's results were published, further solidifying the optimistic sentiment for the Nasdaq 100. Despite the return to euphoric growth, investors should remain focused. The Jackson Hole symposium begins today, where market leaders and bankers are expected to signal the end of the interest rate hike cycle. Reality might again prove different. Recent comments from Federal Reserve members and the Fed's stance suggest that the Fed might not give in so easily, especially since the job market remains strong, and the latest inflation readings were higher than the previous ones, 3.2% year-on-year versus 3.0% year-on-year.




Nasdaq 100 (US100), after four days of gains, continues to rise today, gaining 0.40% before the Wall Street opening. The index has returned above the support line of the rising trend marked on the chart with a navy line. Currently, the bulls are battling resistance at the 15,400-point level. If the momentum isn't halted, it's conceivable the index might aim to retest the peaks at 15,900-16,000 points. However, if hawkish remarks are made during Jerome Powell's speech at Jackson Hole tomorrow, the market might once again retreat below the support line currently at around 15,100 points.

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US100 - Morning Wrap

• US indices ended yesterday's session with solid gains. The Nasdaq 100 Index gained 1.60%, while the S&P 500 was up 1.10%. The Dow Jones was the day's worst performer, rising only 0.54%.
• Asian equities and US futures rallied, driven by rising US tech shares and signs that the Federal Reserve's rate-hiking campaign is coming to an end. Stocks in Japan, Australia, and South Korea climbed, with Hong Kong's tech-led surge marking its best performance in a month.
• The upbeat mood in the Asia-Pacific markets followed the Wall Street session, with the Nikkei rising by 0.92%, the Kospi by 1.12%, the Nifty 50 by 0.39%, and the S&P/ASX 200 by 0.21%.
• Chinese indices performed exceptionally well after a prolonged period of being strongly oversold. The Hang Seng gained 2.30%.
• Regarding a potential Australia-EU trade deal, Trade Minister Dan Tehan shared optimism about forthcoming discussions with the EU trade commissioner, emphasizing enhanced access to essential minerals for Europe as one of the strongest positives.
• The CEO of National Australia Bank, one of Australia's 'big four', believes the country won't face a recession, highlighting the resilience of the housing market despite interest rate hikes by the Reserve Bank of Australia.
• Nvidia (NVDA.US) shares rose over 6.50% in pre-market trading after surpassing analyst earnings estimates and offering a positive future outlook.
• Nvidia reported revenues of $13.51 billion versus a $11.04 billion forecast, a 101% year-on-year growth. Earnings per share (EPS) stood at $2.7, compared to a forecast of $2.07 and $0.51 in Q2 2022. Data center revenues reached $10.32 billion against a $7.99 billion forecast, marking a 171% year-on-year surge.
• The Japanese Yen underperformed today, with USDJPY rising to 145.1. Conversely, after a period of lagging, the EUR emerged as the top performer, with EURUSD advancing 0.12% to 1.0815.

After strong increases yesterday, the US100 has once again broken above the support line of the upward trend that was recently breached. Good results from Nvidia will likely support the index today, and further increases may continue.

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Silver Gains 1.7%

Silver traders' position for a pause in rate hike cycle

Silver is trading around 1.7% higher today and almost 5% higher week-to-date. In spite of Chinese economy struggling, we have been observing gains not only on the precious metals markets recently but also on industrial metals markets. The latest rate cut from People's Bank of China was somewhat surprising with many being disappointed by a minor scale of the cut to 1-year lending rate and leaving the 5-year rate unchanged.





There has been a lot of speculation over a possible end of the rate hike cycle not only in the United States but also in euro area. While bond yields remain elevated, we can observe a small pullback in market rates today. Meanwhile, silver enjoyed a strong upward move that led to a break above the 50% retracement of the latest downward impulse. Silver bounced off the 22.20 area - a local low from June - and is now trading almost at $24 per ounce - above 50- and 200-session moving average. It should be noted that silver has been one of the best performing commodities over the 12-months but at the same time trades slightly lower year-to-date.

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US100 - Chart of the Day

Nasdaq-100 futures (US100) are attempting to climb above the 15,000 pts mark this morning. The index has been enjoying strong gains since Friday evening and the move higher accelerated yesterday. Sentiment towards the tech sector seems to be improving as Nvidia earnings releases approaches (Wednesday after session close). Results from Nvidia are expected to be a test for the AI-related bull market in tech shares. Investors seem to be optimistic with Nvidia shares rallying over 8% yesterday. Previous earnings release from the company triggered an around 25% jump in share price and launched a strong upward impulse on the broad market.





Taking a look at US100 chart at H4 interval, we can see that the index was pulling back during the first half of August, but declines were halted at the 14,625-pts support zone last week. The ongoing rebound push the index into an area, where the downward trendline as well as the upper limit of the Overbalance structure can be found. A break above the 15,045-pts zone could hint that the correction is over, and the index will resume gains. In such a scenario, the 15,400-pts zone is the next resistance to watch.