All eyes on US inflation data today

All Eyes on US Inflation Data Today – The US stock market had a volatile day yesterday. It started off trading higher, then dropped until lunchtime. Later, the S&P500 and Nasdaq100 turned positive, ending the session up 0.45% and 0.90% respectively. However, the Dow Jones closed the day down by 0.23%.

Bond rallies remain strong, with the US 10-year yield reaching its lowest daily close since June of last year and dropping further today to around 3.6%. However, the 2-year to 10-year spread is now over 5 basis points, indicating a potential recession on the horizon.

The probability of a 50-basis-point rate cut in September, as indicated by the Fed Funds Futures, increased by 10% overnight to reach 37%, up from 27% at the close of yesterday’s trading.

Inflation data in focus today

The US inflation data will be released later today before the NYSE opening bell.

The Consumer Price Index (CPI) and Core CPI Month-over-Month (MoM) are expected to increase by 0.2%, the same as last month. However, the focus remains on the Year-over-Year (YoY) data. The CPI is expected to notably slow down to 2.5% from 2.9%, marking the lowest CPI outcome since February 2021. On the other hand, the Core CPI YoY is expected to remain unchanged at 3.2%.

Any downside surprise in the Core CPI YoY would continue to fuel expectations of a larger rate cut by the Federal Reserve on September 18th.

DXY near resistance

The US Dollar Index has seen three consecutive days of gains, approaching the 101.80 resistance level, and has remained strong since mid-August. Technical indicators on most timeframes are bearish, indicating that the current upward movement is likely a short-term retracement before the downward pressure resumes.

The overall bearish outlook remains unchanged as long as the index continues to trade below 102.80 for now. Looking at the downside, the next support is around 101.0, followed by 100.60. It’s important to closely monitor these levels, as a break below these supports could lead to further declines, possibly towards 100.0 and 99.60.

Gold near record high again

Gold continues to trade within the same range since mid-August, between approximately $2475 and $2530, without a clear break of those levels, while technical indicators remain mostly bullish on most time frames.

Gold has advanced for the third day in a row, reaching as high as $2528.99 earlier this morning. It is nearing the record high of $2531, and this should be closely monitored as a breakout of that resistance is likely to pave the way for further gains, possibly towards $2550 and $2580 in the coming weeks.

USDJPY below 142.0

In today’s Asian session, USDJPY once again fell below the August lows, dropping to as low as 140.71. This is the lowest level the pair has reached since December 2023. The decline occurred following more hawkish remarks by a member of the Bank of Japan, suggesting further interest rate hikes before the end of the year.

The technical indicators are not oversold, indicating that the pair may have more room to decline. If it breaks below 140.70, it could potentially drop further towards 140.30 and then 140.0. On the upside, the key resistance is currently at 144.0.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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