US futures higher after Friday’s selloff
US Futures Higher After Friday’s Selloff – US equities closed last week’s trading notably lower following the announcement of the US jobs report, which added more doubts about the cooling labor market, especially after they revised the previous two months’ data. The Dow Jones closed Friday down by 1%, while the S&P 500 lost 1.73% and the Nasdaq 100 was the biggest loser, declining by 2.69%.
The latest US jobs report has caused some confusion. In August, the economy added 142,000 new jobs, but the data for July and June has been revised down by 86,000 jobs. The manufacturing sector lost over 20,000 jobs in August, and the long-term unemployment rate increased to 7.9%.
On the positive side, the unemployment rate declined to 4.2%, in line with market estimates. The participation rate remained at 62.7%, and the average hourly earnings increased to 3.8% from 3.6%.
Some members of the Federal Reserve suggested that they might support a larger rate cut based on recent economic data. However, they seemed to backtrack by stating that more evidence is necessary. Nonetheless, the majority of members agreed that a rate cut will likely occur in September.
The Fed Funds Futures at one point indicated a 70% chance of a 50-basis-point rate cut in September, before falling back to 25%. This week’s data should provide us with more clues.
China’s disinflation continues
Deflation stalking China since last year is now showing signs of spiraling, threatening to worsen the outlook for the world’s second largest economy and raising calls for immediate policy action.
Data released Monday confirmed that apart from food costs, consumer price growth barely registered in large swathes of the economy at a time when incomes are sagging.
A broader measure of economy-wide prices known as the gross domestic product deflator will likely extend its current five-quarter drop into 2025, according to Bloomberg Economics and analysts at banks, including BNP Paribas SA. That would amount to China’s longest streak of deflation since data began in 1993.
DXY holding above 101.0
The US Dollar Index briefly declined to the 100.60 support area following the announcement of the US jobs report on Friday. However, the index managed to stabilize and rebounded above 101.0, reaching as high as 101.65 earlier today. In the meantime, the next resistance area is at 101.80, which was last week’s high.
The technical indicators still point to the upside, suggesting an extended retracement. If the price breaks above 101.80, it could lead to further gains, possibly towards 102.20 and 102.40 in the coming days.
USDJPY may retest 144.0
Last week, USDJPY had its lowest daily and weekly close since January of this year. This strengthened the bearish outlook, especially after it broke below the 144.0 support area, which had held since the beginning of August. The technical indicators are still not showing oversold conditions, leaving open the possibility for another downward movement.
In the meantime, USDJPY started the week higher, trading above 143.0. This upward movement might continue to retest the 144.0 level, which has now become a strong resistance before the downward pressure resumes.
Gold sideways continues
Gold prices have been trading within the same range since Aug 16th, between approximately $2475 and $2530, without a clear breakout or breakdown. This could present an opportunity for retail traders: shorting near the record high with a tight stop, or going long near the $2475 support area with a tight stop.
The technical indicators are still bullish on most timeframes. For the outlook to change significantly, we would need to see a monthly close below $2450, which could potentially lead to a deeper retracement. Otherwise, the bullish outlook will likely continue until further notice.
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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