Global Markets Steady on US Recession Fears (09.04.2024)

Financial markets witnessed mixed performances on Wednesday, with key currency pairs and commodities reacting to economic data and central bank speculations. The EUR/USD remained steady at 1.1050 as weak US manufacturing data reignited recession fears, affecting expectations for the Fed’s upcoming rate cut. Similarly, the Japanese yen strengthened toward 145 per dollar due to safe-haven demand and anticipation of potential BoJ policy adjustments. Meanwhile, gold steadied above $2,490, as investors evaluated the Fed’s rate outlook amid weak economic indicators, while GBP/USD dipped below 1.3100, pressured by US recession concerns. Silver hovered around $28.00, fluctuating with ongoing economic uncertainty and global conflicts. Markets now await crucial US labor data, which could significantly influence future central bank decisions.

EUR/USD Steady at 1.1050 on Recession Fears

The EUR/USD traded at the 1.1050 level, and the dollar index held steady around 101.7 on Wednesday morning, following a two-week high reached the previous session, as safe-haven demand surged due to weak US manufacturing data rekindling recession concerns. The ISM Manufacturing PMI indicated that factory activity contracted for the fifth month and at a slightly faster pace than expected. US labor market reports, including the latest JOLTS, weekly jobless claims, and monthly payrolls are expected to be released, which could affect the Federal Reserve's anticipated interest rate cut this month. Currently, markets are pricing in roughly a 60% chance of a 25 basis point cut, compared to a 40% likelihood of a larger 50 basis point reduction.

The first support level is at 1.1000 for the EUR/USD pair. If this level is breached, the next supports to watch will be 1.0950 and 1.0900. On the upside, the first resistance is at 1.1100; if this level is surpassed, the next targets will be 1.1150 and 1.1200.

Yen Rallies with BoJ Policy Speculations

The Japanese yen strengthened towards 145 per dollar, rebounding sharply from two-week lows as weak US manufacturing data heightened recession fears, driving demand for safe-haven assets. Domestically, attention remained on the Bank of Japan's monetary policy outlook. Recent comments from BoJ policymakers indicated a readiness to adjust monetary settings if economic projections are met. Market expectations suggest the central bank might raise interest rates again in December. On the economic front, Japan's manufacturing PMI was slightly revised up to 49.8 from 49.5 in August, approaching stabilization, while the services PMI was revised downward but still indicated expansion.

From a technical perspective, the first resistance level is at 145.90. If this level is surpassed, the next targets will be 146.40 and 147.00. On the downside, the initial support is at 145.00; if this level is breached, the next support to watch will be 144.40 and 144.00.

Gold Steadies as Investors Weigh Fed Rate Outlook

Gold remained steady above $2,490 per ounce on Wednesday after recent declines, as investors evaluated new economic data and its implications for the Federal Reserve's interest rate decisions. ISM data revealed that US manufacturing activity dropped more than anticipated in August, underscoring the sector's struggles and challenging the view that the US economy is robust enough to handle higher borrowing costs. At the same time, expectations for a dovish shift were moderated by an increase in prices for goods producers that surpassed expectations. Investors are now looking ahead to further economic indicators, including the crucial jobs report later this week, which will shed light on the labor market’s performance following the subdued July report and the significant downward revision of payroll figures for the year ending March 2024. Despite this, markets continue to anticipate a 100 basis point reduction in rates from the Fed over its remaining three meetings this year, which would decrease the opportunity cost of holding non-interest-bearing assets.

Technically the first support level is at 2,485. If this level is breached, the next supports to watch will be 2,475 and 2,430. On the upside, the initial resistance is at 2,505; if this level is surpassed, the next targets will be 2,530 and 2,550.

GBP/USD Dips Below 1.3100 on US Recession Fears

GBP/USD weakened, briefly dipping below 1.3100 as the currency pair struggled to maintain its bullish stance with a short-term bearish correction. The US dollar gained traction after new Purchasing Managers Index (PMI) figures from the US fell short of market expectations, reigniting fears of a potential US recession. With minimal UK data scheduled for Wednesday, attention remains on the US labor market. The ISM Manufacturing PMI for August came in at 47.2, below the median market forecast of 47.5, and while it was an improvement from July’s multi-month low of 46.8, it was insufficient to bolster market confidence. This prompted investors to retreat from recent bullish positions. The focus now shifts to Friday's US Nonfarm Payrolls (NFP) report, which will be the last major labor data release before the Federal Reserve's rate decision on September 18. The NFP report is expected to significantly influence market expectations for the magnitude of a Fed rate cut, with investors fully anticipating the start of a new rate-cutting cycle this month.

For GBP/USD, the initial support lies at 1.3100, followed by 1.3050 and 1.3000 below. On the upside, the first resistance is at 1.3150, with subsequent levels at 1.3190 and 1.3265 if the pair breaks above this resistance.

Silver Holds Near $28 as US Data Fuels Recession Concerns

Silver started the day trading around the $28.00 level. Silver prices have fluctuated with ongoing global conflicts and precious metals demand. Weak manufacturing data from the US has heightened recession fears, contributing to a decline in silver prices. Investors will closely monitor jobless claims and other macroeconomic data to gauge potential movements in the silver market as the day progresses.

From a technical perspective, the first resistance level to watch is 28.50. If silver breaks above this level, the next resistance levels to watch will be 29.00 and 29.50, respectively. On the downside, the initial support level is at 27.80, with subsequent support levels at 27.50 and 27.00.