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The Week Ahead – Risk Assets Fall as Fed Yet to Have Last Word

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Economic Calendar 28.8.2023 -1.9.2023

USDCHF recoups losses as Fed stays hawkish

USDCHFThe US dollar rises back as the Fed may stay on course for longer than expected. Weak manufacturing and service data lately suggest that the US economy could be starting to stall under the constraint of restrictive borrowing costs. The triplet of data, namely nonfarm payrolls, PCE and GDP would be strong catalysts for the dollar’s next move. A robust labour market and resilient consumer spending would signal that the market might have got ahead of itself by dumping the greenback, and cement concerns of more hawkish surprises from the Fed down the road. The pair is recovering towards 0.9000 with 0.8550 as a fresh support.

AUDUSD drops as sentiment grows sour

AUDUSDThe Australian dollar slips as risk appetite takes a backseat across global markets. The RBA’s dovish turn to keep interest rates on hold for a while definitely did not help by dampening the appeal of its currency. Limited support by a rebound in iron ore, Australia’s biggest export may not last long as broader sentiment switched to the risk-off mode. Investors are keeping a wary eye on China, Australia’s largest export market, as the turmoil from its debt-fuelled property sector unfolds and its slowing economy could take a toll on the growth-sensitive Aussie. The pair is heading towards 0.6280 and 0.6600 is the first resistance.

XAUUSD under pressure against strong dollar

XAUUSD
Gold may continue to struggle as the US dollar regains momentum. While a recent surge in bond yields has kept a lid on the non-yielding metal, the price has managed to recover some losses on the back of a softer dollar amid lacklustre business data. However, with the course of monetary policy unlikely to change in the near future, a rally in Treasury yields would mean that gold may keep on facing difficulties. On the upside, a bullish opportunity may come if the employment and growth data show signs of weakness, which could trim demand for the dollar in favour of gold. 1985 is a major resistance ahead and 1870 the next support.

SPX 500 retreats as solid data could mean more hikes

S&P500The S&P 500 turns south as investors expect a hawkish message from Powell at Jackson Hole. Despite Nvidia briefly hitting a record high after its upbeat growth forecast, selling has been prevalent across major indices lately. This suggests that even the darling tech sector may have a hard time carrying the rest of the market if investors’ minds are wandering around amid growing uncertainties. As recent claims for US unemployment benefits hints at a still-resilient labour market, the upcoming set of data could expose the index to more of the downside if they fail to show cracks. 4330 is the closest support and 4600 the resistance ahead.

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