ECB Rate Cut Hints Pressure Euro, Markets Eye Fed (09.09.2024)

The Euro is under pressure as the European Central Bank (ECB) hints at a potential rate cut following Eurozone inflation and GDP data, impacting EUR/USD, with key support at 1.1040. Meanwhile, mixed US jobs data has clouded the Federal Reserve’s rate path, affecting both the yen and gold prices. The Japanese yen weakened after initial strength, while gold remained stable as traders awaited the Fed's decision. Silver surged on rate cut hopes, but gains could be limited by reduced geopolitical tensions. GBP/USD faces headwinds due to concerns over US labor data and a cooling UK job market. Key support and resistance levels are being closely watched across these currency pairs and commodities as markets await further economic updates. 

Euro Under Pressure as ECB Hints at Rate Cut

EUR/USD is attempting to recover from previous losses, trading around 1.1090 during Monday's Asian session. However, the pair's upside potential may be constrained, as recent Eurozone inflation data have heightened expectations for a rate cut by the European Central Bank (ECB) at its policy meeting on Thursday. With headline inflation nearing 2% and long-term forecasts stable, the ECB is likely to consider further monetary easing. Last week's mixed Eurozone GDP data also reinforced the likelihood of a rate cut. Meanwhile, US economic data from Friday introduced uncertainty about the extent of the Federal Reserve's potential rate cut in September. The US Bureau of Labor Statistics reported a 142,000 increase in Nonfarm Payrolls (NFP) for August, falling short of the 160,000 forecast but improving from July’s revised 89,000. The Unemployment Rate fell to 4.2%, matching expectations, down from 4.3% the previous month. According to the CME FedWatch Tool, markets are anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve in September, though the probability of a 50 bps cut has slightly decreased to 29.0%, down from 30.0% a week ago.

For the EUR/USD pair, the first support level is at 1.1040. If this level is breached, the next supports to watch will be 1.1000 and 1.0950. On the upside, the first resistance is at 1.1150; if this level is surpassed, the next targets will be 1.1200 and 1.1250.

US Jobs Data Clouds Fed Rate Path, Pushing Yen Lower

The Japanese yen dropped to 143 per dollar, reversing a recent uptrend as the dollar strengthened on uncertainty about the Federal Reserve's upcoming interest rate cut. The latest US jobs report did not clarify the Fed's rate path, leaving traders awaiting key US inflation data this week. Last week, the yen surged nearly 3% and reached a near year-to-date high, driven by expectations of further rate hikes by the Bank of Japan due to solid growth, rising wages, and ongoing inflation pressures. BoJ policymakers have also signaled that they will adjust monetary policy further if their economic and price forecasts are met. On the economic front, Japan's economy grew at an annualized 2.9% in the second quarter, below the advance estimate of 3.1% and market expectations of 3.2%.

From a technical perspective, the first resistance level is at 143.40. If this level is surpassed, the next targets will be 144.40 and 145.00. On the downside, the initial support is at 141.70; if this level is breached, the next support levels to watch will be 140.50 and 140.00.

Gold Prices Stable After Mixed US Jobs Report

Gold held steady around $2,500 per ounce on Monday as investors evaluated the Federal Reserve’s potential interest rate cut this month, following a mixed US jobs report. The report showed fewer job additions than expected and significant downward revisions for June and July. Despite this, the unemployment rate fell to 4.2%, as predicted, and wage growth rose to 0.4%, surpassing the 0.3% forecast. Federal Reserve Bank of New York President John Williams suggested that a rate cut is now suitable due to progress on inflation and a cooling labor market. The markets are split on whether the Fed will cut rates by 25 or a more significant 50 basis points in its next meeting but are generally anticipating a total of 125 basis points in cuts over the remaining meetings this year. A more accommodating monetary policy benefits gold by lowering the opportunity cost of holding non-interest-bearing assets.

Technically the first support level is at 2,470. If this level is breached, the next supports to watch will be 2,430 and 2,400. On the upside, the initial resistance is at 2,500; if this level is surpassed, the next targets will be 2,530 and 2,550.

GBP/USD Tests Key Support Level as Headwinds Increase

The GBP/USD pair rebounded to around 1.3100s after dipping during the Asian session on Monday, but several factors might hinder further gains. The recent US employment report indicated a labor market momentum slower than expected, raising concerns about the US economy's health. This has dampened investors' risk appetite, benefiting the US Dollar (USD) and creating volatility for GBP/USD. Additionally, a survey of recruiters showed a notable cooling in the UK's labor market last month, with a sharp decline in job placements and slower pay growth. This supports the case for potential interest rate cuts by the Bank of England (BoE), which may deter aggressive bets on the British Pound (GBP) and cap GBP/USD gains. Investors are now awaiting the UK monthly jobs data scheduled for Tuesday. In the meantime, USD price movements will remain a key factor influencing the GBP/USD pair, given the lack of significant economic data from the UK or US on Monday.

For GBP/USD, the initial support lies at 1.3080, followed by 1.3040 and 1.3000 below. On the upside, the first resistance is at 1.3140, with subsequent levels at 1.3190 and 1.3250 if the pair breaks above this resistance.

Silver Surges on Fed Rate Cut Hopes

Silver prices rose to nearly $28.00 per troy ounce during the Asian session on Monday, driven by weaker US jobs data that raises the chance of a 25 basis-point rate cut by the Federal Reserve (Fed) this September. Lower interest rates generally benefit silver by lowering the opportunity cost of holding non-yielding assets. However, silver's potential gains may be limited by shifting precious metal flows, as the recent de-escalation of geopolitical tensions in the Middle East could dampen demand for precious metals. Reports indicate that Israeli forces have withdrawn from Jenin, according to Reuters and the Palestine news agency WAFA.

From a technical perspective, the first resistance level to watch is at 28.00. If silver breaks above this level, the next resistance levels to watch will be 28.30 and 28.80, respectively. On the downside, the initial support level is at 27.70, with subsequent support levels at 27.20 and 26.70.