In early Asian trading on Friday (September 8), the US dollar index maintained a strong upward bullish trend after breaking through the 105 mark overnight. Gold and Bitcoin faced suppression, with gold prices at $1,920, challenging the $1,900 round mark, while Bitcoin traders sought to expand short positions. The number of first-time unemployment claims in the United States fell to 216,000, unexpectedly exceeding market expectations and boosting dollar buying. This proved two major things to the world, namely the success of the Federal Reserve in fighting inflation and the long-term maintenance of high interest rates.
Stocks on Wall Street were mixed, with the Dow up 0.17% and the Nasdaq down 0.89%. Caution remains prevalent in the market. Treasury yields initially rose after the release of U.S. economic data but then retreated, with the 10-year U.S. Treasury yield stabilizing around 4.25%.
Data released by the United States on Thursday showed that the number of first-time unemployment claims fell to 216,000, and the number of continuing unemployment claims fell to 1.679 million, exceeding market expectations. After the report was released, the US dollar index hit a peak of 105.15, the highest level since March, and then fell back slightly to 105.05. The economic data supports the argument that "interest rates are higher for a long time" and provides support for the US dollar.
The analysis by two Chicago Fed economists suggests that the Fed's 5.25 percentage point rate hikes over the past 18 months may be enough to lower inflation to the Fed's 2% target and avoid a recession. "According to the model's projections, the policy tightening that has already been implemented is sufficient to return inflation to near the Fed's target by mid-2024 while avoiding a recession," Stefania D'Amico and Thomas King wrote in a letter published Wednesday.
The analysis shows that the Fed's interest rate hikes over the past year and a half have helped slow inflation from a four-year high reached in June 2022. Economists found that about two-thirds of the tightening so far has translated into economic growth, while about 75% of that has translated into the consumer price index.
EUR/USD recorded its lowest daily close in three months, just below 1.0700. The euro seems vulnerable, with a clear downward bias and showing no signs of stabilization. The final version of the German consumer price index is about to be released, and no surprises are expected. Looking ahead, the European Central Bank (ECB) will hold its monetary policy meeting next week, and there is no clear consensus on the possible actions to be taken on the interest rate front.
“As the economic outlook deteriorates and markets turn more dovish, we expect the ECB to raise rates by 25 basis points at its September meeting, marking a peak in the deposit rate of 4.00%,” Danske Bank analysts said at the ECB conference. “After all, the ECB’s mandate is to control inflation, not to boost economic activity.”
USD/JPY retreated slightly after hitting a new multi-month high just below 148.00. The yen was supported by a reversal in U.S. Treasury yields on Thursday. Japan is scheduled to release second-quarter gross domestic product growth data on Friday.
GBP/USD fell for the fifth time in the past six days, hitting a three-month low of 1.2445, close to the 200-day simple moving average of 1.2425, before recovering losses and rising to 1.2470.
Despite signs of stabilization in China's trade data, the Australian dollar continues to face pressure from commodity prices and a stronger US dollar. AUD/USD remains range-bound between 0.6360 and 0.6400, close to monthly lows, with a downside bias.
Gold 1920 may face a deeper correction
Bruce Powers, an analyst at FXEmpire, said that gold consolidated in the lower half of Thursday's price range, and stopped falling in intraday trading, with the lowest price at $1,916. A decisive break below Thursday's low would trigger a bearish intraday decline signal, and a break below $1,915 further confirmed this signal. After that, gold will next target the 61.8% Fibonacci retracement level near $1,911 and the 200-day moving average of $1,910. In addition, it is necessary to pay attention to the rising trend line below.
Gold does look likely to pull back further as its 34-day moving average has begun to slope down, with today’s trading occurring in the lower half of yesterday’s price range and a close at the 50% retracement resistance at $1,919.50 is likely.
Gold is approaching the intersection of two trend lines, one up and the other down. It only has about seven days left to trade before breaking one of the lines. Once one line is clearly broken, volatility will increase. If the downside line is broken before the upside breakout, first focus on support near the 78.6% Fibonacci retracement level around $1,900. If weakness continues thereafter, the recent swing low of $1,885 and the subsequent price area starting from around $1,871 will be the next lower target.
On the upside, a daily close above the internal descending trendline, currently around $1933, would provide an early bullish signal. Generally speaking, trendlines themselves are not very reliable for signals. However, this indicates to the market that demand is picking up and buyers are starting to become more aggressive. A daily close above Wednesday's high of $1929 gives a more concrete bullish signal that needs further confirmation to increase its reliability as a sign of strength that could improve further.
Regardless, a decisive breakout above this week’s high of $1,946 provides a more reliable signal as it is based on the weekly chart, with a subsequent upside breakout triggering an intra-week breakout.
Bitcoin traders seek to expand short positions
The Bitcoin market has become less volatile, having hit $26,000 in a single hourly candle the day before, with local lows below $25,400. Bitcoin market participants are generally cautious, and predictions of a new downtrend are becoming more common.
Well-known trader TraderSZ analyzed: “Unless Bitcoin reclaims the possible low, I still think it will go lower. There is half of the short position here, with a target of $23,600. If we return to the May low, I will look to expand the scale of shorting.”
Trader and analyst Toni Ghinea was more explicit, saying that Bitcoin will hit $25,000 and lower next, and that altcoins will also be affected. "I said $25,000 would happen, I said altcoins would hit new lows. I now say Bitcoin will fall to the $19,000-23,000 range," he wrote.
