EUR/USD and S&P 500 wait with bated breath for the US CPI Announcement
EUR/USD make some gains, but EURO bulls cautious ahead of the US CPI
The EUR has made a slight comeback against the USD after dropping like stone on Friday due to the much better US NFP reading, which was announced at 528K new jobs created versus the prediction of just 250K. Currently trading around 1.0233 – which was the level the EURO/USD was trading at before the NFP announcement before collapsing to the 1.0153 after the job report was released – it is attempting a somewhat lukewarm fightback.
However, any further gains are currently being held back due to the anticipation of the US Consumer Price Index which is due to be released tomorrow at 12:30pm UTC.
US CPI (YoY) Expectations
The expectation is for the US CPI (YoY) to be announced at 8.7%, which is slightly lower than the July number of 9.1%. But any number, be it as expected or higher, would feed the market the belief that the FED will continue to be aggressive and raise rates by another 75 basis point in their next meeting in September.
In fact, the CME Group Fedwatch tool has indicated that there is a 68.5% chance that the FED will indeed raise rates by 75bps in September.
This combined with the better than expected NFP last week and a high CPI reading, the market will expect more aggressive moves by the FOMC, which could lead to potential USD strength across the board.
Bear in mind that we also have the German CPI tomorrow, with expectation of a 7.6% reading – but with the ECB taking the scenic route with increasing interest rates and the FED’s far more direct approach, the market is ready for the greenback to potentially exert its dominance.
tixee’s Global Head of Market Research, James Trescothick, will be holding a “tixee Live WatchAlong” on the US Consumer Price Index Announcement at 12:20pm(UTC), available live via YouTube and Facebook.
US CPI (Wednesday) Expectation: 8.7% Previous: 9.1%
Key Areas of Interest:
On a daily chart, there is a key potential resistance at 1.02684 which has held over several trading sessions. Keeping on a daily chart, there is potential support level at 1.01665 which is the middle band of the bollinger bands.
S&P 500 slips lower on growth concerns
This trading week started with the S&P 500 riding high following its third week of consecutive gains, the market is now wondering if that comeback was just a mere bear market bounce.
July was the best month for US equities since November 2020. There was hope that the momentum from that month could continue throughout August; however, there are concerns that that hope will be short lived as the market continues to be transfixed by guessing what future FED interest rates decision will be – and how the markets can handle them.
Not helping the S&P 500 cause was the announcement made by Nvidia yesterday that it expected to miss its estimated revenue of $8.1 billion, but will instead deliver a revenue of just $6.7 billion due to a slow down in the gaming market.
Currently trading at 4135.70, the S&P 500 appears to be responding like a lot of the market – with caution ahead of the key US CPI due tomorrow.
Key Areas of Interest:
Looking on a daily chart, there is potential support around the 4099.83, which is the 100 day sma and a potential resistance also on a daily at 4190.19 where there is evidence of sellers in previous sessions around this level.
Written by James Trescothick, Global Head of Market Research