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US100 - Morning Wrap

  • US indices ended yesterday's session with solid gains. The Nasdaq 100 Index gained 1.60%, while the S&P 500 was up 1.10%. The Dow Jones was the day's worst performer, rising only 0.54%.
  • Asian equities and US futures rallied, driven by rising US tech shares and signs that the Federal Reserve's rate-hiking campaign is coming to an end. Stocks in Japan, Australia, and South Korea climbed, with Hong Kong's tech-led surge marking its best performance in a month.
  • The upbeat mood in the Asia-Pacific markets followed the Wall Street session, with the Nikkei rising by 0.92%, the Kospi by 1.12%, the Nifty 50 by 0.39%, and the S&P/ASX 200 by 0.21%.
  • Chinese indices performed exceptionally well after a prolonged period of being strongly oversold. The Hang Seng gained 2.30%.
  • Regarding a potential Australia-EU trade deal, Trade Minister Dan Tehan shared optimism about forthcoming discussions with the EU trade commissioner, emphasizing enhanced access to essential minerals for Europe as one of the strongest positives.
  • The CEO of National Australia Bank, one of Australia's 'big four', believes the country won't face a recession, highlighting the resilience of the housing market despite interest rate hikes by the Reserve Bank of Australia.
  • Nvidia (NVDA.US) shares rose over 6.50% in pre-market trading after surpassing analyst earnings estimates and offering a positive future outlook.
  • Nvidia reported revenues of $13.51 billion versus a $11.04 billion forecast, a 101% year-on-year growth. Earnings per share (EPS) stood at $2.7, compared to a forecast of $2.07 and $0.51 in Q2 2022. Data center revenues reached $10.32 billion against a $7.99 billion forecast, marking a 171% year-on-year surge.
  • The Japanese Yen underperformed today, with USDJPY rising to 145.1. Conversely, after a period of lagging, the EUR emerged as the top performer, with EURUSD advancing 0.12% to 1.0815.
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After strong increases yesterday, the US100 has once again broken above the support line of the upward trend that was recently breached. Good results from Nvidia will likely support the index today, and further increases may continue.
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US 100 - Chart of the Day

Just two days ago, we wrote that the main tech companies index, Nasdaq 100, was striving to break the 15,000-point level. After a strong nearly 8.0% correction that began at the end of July, the index rebounded with significant gains last Friday. At the beginning of this week, the mood in the tech sector started to improve, and in yesterday's session, the index gained a staggering 1.60%, returning again above the support line of the upward trend. After the close, Nvidia's results were published, further solidifying the optimistic sentiment for the Nasdaq 100. Despite the return to euphoric growth, investors should remain focused. The Jackson Hole symposium begins today, where market leaders and bankers are expected to signal the end of the interest rate hike cycle. Reality might again prove different. Recent comments from Federal Reserve members and the Fed's stance suggest that the Fed might not give in so easily, especially since the job market remains strong, and the latest inflation readings were higher than the previous ones, 3.2% year-on-year versus 3.0% year-on-year.
 
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Nasdaq 100 (US100), after four days of gains, continues to rise today, gaining 0.40% before the Wall Street opening. The index has returned above the support line of the rising trend marked on the chart with a navy line. Currently, the bulls are battling resistance at the 15,400-point level. If the momentum isn't halted, it's conceivable the index might aim to retest the peaks at 15,900-16,000 points. However, if hawkish remarks are made during Jerome Powell's speech at Jackson Hole tomorrow, the market might once again retreat below the support line currently at around 15,100 points.
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USDTRY Surges After Massive Interest Hike

Central Bank of Republic of Turkey (CBRT) announced its latest monetary policy decision today at 12:00 pm BST. CBRT was expected to deliver a 250 basis points rate hike, bring the 1-week repo rate to 20.00%. However, the actual hike turned out to be much bigger than expected with 1-week repo rate being hiked to 25%!
 
Turkish lira surged following the decision as it looks like new Turkish monetary authorities are indeed taking inflation fight seriously. Increase in underlying inflation trend was given as a reason behind such a massive hike. USDTRY and EURTRY plunged more than 2% following the decision.
 
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USDTRY plunged after a bigger-than-expected CBRT rate hike and is attempting to break below the 50-session moving average (green line).
 
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EURUSD 

The value of the EURUSD is at a 2.5-month low as people wait for speeches from Christine Lagarde, the President of the European Central Bank, and Jerome Powell, the Chairman of the Federal Reserve. The US economy is doing well and there are no signs of a recession, which makes the US Dollar stronger and the Euro weaker.
  • Earlier in the day, Joachim Nagel from the European Central Bank and Boris Vujčić from the Croatian National Bank said that they think interest rates should stay high. However, there are concerns that the economy might slow down, which could mean that interest rates will have to be lowered.
  • In the US, James Bullard and Susan Collins from the Federal Reserve said that they think interest rates should stay high. Patrick Harker from the Federal Reserve in Philadelphia said that interest rates might not go up anymore.
  • The value of US government bonds is going up, which makes the US Dollar stronger. People think that Jerome Powell will say that interest rates will stay high for a long time.
  • The US economy is doing well. There are more orders for durable goods and more jobs. This makes the US Dollar stronger.
  • The value of the US Dollar is at its highest since June 07. The value of stocks is going down. The interest rate on 10-year US government bonds is going up.
  • In Germany, there will be new information about how well the economy did in the second quarter of this year. There will also be new information about how people feel about the economy. This will affect the value of the Euro compared to the US Dollar.
Speeches from Christine Lagarde and Jerome Powell will be important to watch.
 
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In technical analysis, if the value of the Euro compared to the US Dollar goes below 1.0765, it could decline more. If it doesn't break the 1.0765 barrier, it could return to 1.0805.
 
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Will the Price Drop Below $25,000 

Bitcoin’s price is falling and is currently around $25,400. A few days ago, the price went up after Grayscale won a court case against the SEC. However, the excitement didn’t last long. Major cryptocurrencies are having trouble keeping their value because there aren’t enough new investors. The SEC didn’t accept other applications for funds, including one from BlackRock. The next deadline for reviewing applications is in mid-October.
 
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Technically looking at the D1 interval, Bitcoin prices recently reacted at the support level of $26,000 (slightly breaching it earlier). This level stemmed from the lower limit of a broad 1:1 pattern. According to the Overbalance methodology, defending this level could result in a move to new highs. However, the upward movement was halted at the level of the 100-day EMA, after which the price dynamically moved downward. We are currently observing another attempt to negate the 1:1 geometry. Attention should be paid to the horizontal support zone at the level of $25,300, which is currently being tested. If this level is breached, the price drop may intensify. The next noteworthy support level is only at $23,600, which results from a 50% measurement of the last upward wave.
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Bank of Canada Expected to Keep rates unchanged tomorrow.

USDCAD enjoyed strong gains between June 2021 and October 2022, gaining over 15% over the period. However, the advance was halted in the final quarter of 2022 and the pair has traded largely sideways since. Recent USD strengthening allowed the pair to bounce off 10-month lows in the 1.3100 area and climb towards the upper limit of the trading range at 1.3650. An attempt to break above this zone was made today but so far, bulls failed to deliver a breakout. Decision from Bank of Canada tomorrow could be crucial for whether the pair breaks above this zone or pulls back from it. Should we see a strong hint that incoming data doesn't support rate hikes at future meetings, CAD may find itself under pressure with USDCAD potentially breaking above 1.3650 area.
 
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Oil - What You Need to Know

Recently, Russia and Saudi Arabia decided to keep reducing the amount of oil they produce until the end of 2023. This move has made a big impact on the price of oil worldwide. These two countries are important in the oil market, and their decision to cut back on oil production has made experts think that oil prices will go up. After this announcement, the price of Brent crude oil went up by more than 1.5%, reaching over $90 per barrel. The price of U.S. West Texas Intermediate (WTI) crude oil also went up by a similar amount, reaching $86.5 per barrel. This decision to extend the cuts was a surprise because most investors thought the cuts would only last until October.
 
To make sense of these numbers, Saudi Arabia said it would keep producing 1 million fewer barrels of oil each day for another three months, until the end of December 2023. Russia, on the other hand, decided to export 300,000 fewer barrels of oil each day for the same period. These cuts are on top of the cuts that the OPEC+ group had already agreed on, which will last until the end of 2024. It's important to know that Saudi Arabia needs the price of Brent crude oil to be around $81 per barrel to manage its budget, according to the International Monetary Fund. Russia, on the other hand, can manage with a lower oil price but wants to make more money to support its war efforts in Ukraine.
 
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Because there's not a lot of oil available right now, and the future is uncertain, the price of oil is likely to stay high in the short term. Rystad Energy, a research group, predicts that the demand for liquid fuels worldwide will be about 2.7 million barrels per day more than what's available in the next few months. The price of Brent crude oil for the month ahead is at its highest point in nine months, which means people expect there to be a shortage of oil soon. But there's a catch: in the U.S., oil refineries usually close for maintenance in September and October, which means they'll use less oil during that time. This could help keep oil prices from going too high.
 
Looking ahead, the OPEC+ group will have a meeting in November to decide how much oil they should produce in early 2024. Their decision will be really important in deciding how much oil costs and how the oil market works.
 
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Japanese Government Considers Intervention as Yen Volatility Continues
 
The yen in Japan has been quite unpredictable lately, which is causing worry for the country’s leaders. Masato Kanda, the Vice Minister of Finance for International Affairs, and other officials have hinted that they might step in to keep the yen stable and control speculative trading. They believe that activities not aligned with basic economic indicators are causing this unpredictability.
 
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Last year in October, the government took similar steps, showing that they are serious and ready to act firmly. However, when the USDJPY fell below 145 in August, the government softened its warnings. This left traders unsure about what the government might do next. Recently, the yen fell to its lowest point in ten months, getting close to levels that have led to government intervention in the past. Market experts have noted that if USDJPY falls to 150, the government might be forced to intervene in the market again.
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Apple Sanctions Shake Wall Street
 
Wall Street is down today. This is due to a strong reading of US claims, a sell-off in China, and sanctions against Apple. The strong claims reading shows that the labor market is doing well. This fits with the higher-than-expected ISM services report from yesterday.
 
The dollar is up because people are avoiding risk. Yields are also up, and the chances of the Fed raising interest rates have increased. In China, both imports and exports fell in August compared to last year. This shows that the economy is still weak. The rising dollar is also adding to people’s worries. It is being supported by strong labor market data, which is causing people to sell stocks. Unemployment claims fell again, and productivity and labor costs were revised up more than expected. Markets think there is a 7% chance that the Fed will raise interest rates in September.
 
Investors are worried about China’s decision to ban state employees from using iPhones. They say this is because of spying concerns. Apple is losing the most out of all the big tech companies today. Its stock is down 3.2% as people wait for the release of the iPhone 15. Investors are worried that China’s decision about iPhones could be part of a bigger plan. They think it could lead to more tension between China and the US, which are still very dependent on each other economically.
 
The background to today’s decline in the US stock market is the loss of momentum in China. This has happened many times this year, despite efforts to stimulate the economy and help the banking and real estate sectors. Chinese index futures are down nearly 3%. Imports fell 7.2% compared to last year, and exports fell more than 9%.
 
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The US100 index is trying to recover from earlier losses, but sentiment is still down in the short term. The key resistance level on the M15 chart is 15317 points.
 
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China Inflation to Rebound on Economic Recovery

China’s consumer price inflation, which measures the average change in prices over time that consumers pay for a basket of goods, is expected to increase in the coming months. This is due to the economy’s moderate recovery, which is being driven by various policy measures.
 
In August, consumer prices rose by 0.1% compared to the previous year. This was a reversal from July, when prices fell by 0.3%. This was the first decrease since February 2021.
 
The Chinese government has set an inflation target of around 3% for this year. The rise in prices was mainly due to a 0.5% increase in non-food prices, while food prices fell by 1.7%.
 
Core inflation, which excludes food and energy prices, remained steady at 0.8% in August. This was the highest level since January.
 
Meanwhile, the annual decrease in producer prices (the prices that producers get for their products) slowed to 3.0% in August from 4.4% in July.
 
Economists Zichun Huang and Julian Evans-Pritchard predict that producer prices will stop falling by the end of the year and consumer prices will continue to rise over the coming months. They expect an average inflation rate of around 1.0% in 2024 and 2025.
 
They also believe that core inflation will increase in the coming months as excess stock from the pandemic export boom is sold off and policy support leads to a partial recovery in domestic demand.
 
Despite a slump in the property market, Beijing expects to achieve a growth target of around 5% this year. The Chinese government has introduced several measures to combat the economic downturn following the reopening related bounce back at the start of the year.
 
The People’s Bank of China has also relaxed its borrowing rules and reduced mortgage rates for first-time home buyers.
 
In August, bank lending increased sharply to CNY 1.36 trillion from CNY 345.9 billion in July, exceeding the expected level of CNY 1.2 trillion. Total social financing (a broad measure of credit and liquidity in the economy) increased to CNY 3.12 trillion in August from CNY 528.2 billion in July.
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Bitcoin Analysis
 
Cryptocurrencies extend losses amid fears of FTX asset liquidation!
 
Bitcoin is down 2.70% and is struggling to maintain the key support zone at the level of 25,200 dollars. The sentiment in the market is not improving, and the upcoming decision on September 13th regarding the liquidation of FTX assets with a total value of 3.4 billion dollars is causing another wave of panic. The next level of support is 24,800 dollars. This was the low on June 15, 2023, following the market panic due to the delisting of many altcoins and SEC lawsuits.
 
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The liquidation of funds from FTX is to take place gradually, with between $100-200 million entering the market week by week. However, the details of the transaction are not yet known. It is possible that the assets will be sold on the OTC market - outside exchanges. In this case, all market concerns are panic, which only confirms the stage of the cycle we are currently in.
 
Another date to watch this week is the statement by the SEC chairman, Gary Gensler, before the Senate Banking Committee, which will take place on September 12th.
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Apple One Step Closer to iPhone 15 Debut
 
Apple's stock (AAPL.US) has gone up this year. However, the company hasn't shared its plans for artificial intelligence (AI) technology yet. Also, their second-quarter results showed that device sales are not growing, even though they're still making record profits and increasing their profit margins. Today, Apple is going to show off the new iPhone 15, which is always big news in the tech world. If they give any hints about future developments for their AI system, Siri, during this event, it could affect their stock price.
 
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Looking at the chart of Apple (AAPL.US), we see that the price has settled below the SMA50 and SMA100, and the last time it traded below both of them was at the beginning of the year. The main resistance level is set by the 23.6 Fibonacci retracement of the upward wave from January. A potential lower oversold range is at $170, where we see the 38.2 Fibo, and just below at $165 runs the long-term trendsetting SMA200 (red line).
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UK GDP Below Expectations, GBPUSD Ticks Lower!

The UK's Gross Domestic Product (GDP) data, which measures the size of the economy, didn't grow at all over the past year (0.0%), which was less than what was predicted (0.4%). It was also less than the growth seen in the previous period (0.9%). Over a three-month period, the GDP grew by 0.2%, which was also less than the forecasted 0.3% but equal to the previous period's growth. In July, the economy actually shrank by 0.5%, which was more than the predicted shrinkage of 0.2% and a reversal from the previous month's growth of 0.5%.
 
This shrinkage in July is attributed to poor weather affecting spending and strikes in the public sector. This makes it increasingly likely that the UK might experience a recession this year.
 
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As for Industrial Production, specifically manufacturing, there was a decrease of 0.8% in a month, which is actually better than the predicted decrease of 1%. However, it's a significant drop from the previous month's increase of 2.4%. Over a year, manufacturing grew by 3.0%, slightly less than the previous year's growth of 3.1%. The overall industrial production over a year grew by 0.4%, which was as predicted but less than the previous year's growth of 0.7%.
 
In summary, the UK's economic activity is weaker than expected based on GDP readings, and while manufacturing production was slightly better than anticipated, it still shows a downward trend. This resulted in a sudden drop in the value of GBPUSD (British Pound to US Dollar exchange rate) after this data was published.
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BOS's Dilemma: Balancing Economy and Inflation

 
The UK's currency, the British Pound, is falling against the US dollar today. This is due to weaker than expected economic growth data for July and a drop in industrial production. The economy shrank by 0.5% in July, the biggest fall since December 2022. All parts of the economy were affected, with the service sector seeing the biggest drop. This was unexpected, especially as this is usually a time when tourism boosts the economy.
 
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The Bank of England (BoE) is in a tough spot right now. The economy is showing signs of slowing down because of high interest rates. At the same time, average earnings, including bonuses, have gone up from 8.4% to 8.5%. This increase in wages adds to inflationary pressure. Despite already high inflation, this could lead to further interest rate hikes. Experts are predicting another increase of 0.25% at the BoE meeting next week on September 21st.
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EURUSD - Chart of the Day 

The European Central Bank (ECB) will make a decision today at 1:15 PM BST, and this could cause some changes in the value of the Euro compared to the US Dollar. The markets are unsure about what ECB's head, Christine Lagarde, will decide. The ECB might keep the interest rates the same at 4.25%. 

At the same time, the US will release some economic data at 1:30 PM BST. This includes information about retail sales, inflation, and changes in the number of people without jobs. This could give us more insight into the US job market.

If the ECB keeps the rates the same, it might cause the Euro to decrease in value compared to the Dollar. This could be because people are speculating that the ECB might stop increasing rates due to the weaker economy in the Eurozone. The Eurozone economy might have been affected by the previous nine rate increases. On the other hand, if the ECB increases the rates, the Euro might increase in value compared to the Dollar. This could mean that the ECB doesn't think the economy is weak enough to stop fighting inflation and start stimulating demand. However, the value of the Euro could also be affected by the US Federal Reserve's decision next week. 

It's important to note that the economy in Europe is weaker than in the US, which is clear in the industrial sector. So, any increase in the value of the Euro might be due to speculation, and any worsening data could stop further increases. This is as long as the US data continues to be stronger than Europe's. Christine Lagarde will start a conference at 1:45 PM BST.

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Looking at the Euro-Dollar chart, we can see that the value of the Euro is decreasing. This trend could only change if the value increases significantly to 1.08. Until then, there might be resistance at 1.078, which is where the value started decreasing in September. If the value decreases below the averages of 200, 100, and 50 days, which are all around 1.073, it might suggest that the Euro will continue to decrease to 1.06, which would be the lowest value this year.

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US30 - Chart of the Day

As we will learn a number of macro data from the US economy today and today we have 'Freaky Friday' so elevated volatility among Wall Street indices may continue. Although the share of industrial companies in the Dow Jones Industrial Average (US30) is quite limited these days, it is still substantial (including Boeing, Honewyell and General Electric) - it is today that we will learn data from US industry. The industrial production reading at 2:15 PM BST may show whether consumer and business demand is indeed strong enough to stimulate production, and data on consumer sentiment and inflation expectations will complete the picture of overall prosperity in the U.S. economy.

In the results of the rollover in the options and derivatives market, today's volatility on US30 may accelerate - and if investors' new positioning will be in line with the current upward trendline there are chances for a strong session on Wall Street. A Bank of America survey indicated a record $26.4 billion in inflows into US equity market this week, the vast majority of which ($18.7 billion) flowed into large-cap companies. Analysts pointed out that the market consensus is reassuring of a successful scenario for the stock market - a soft landing of the economy in the United States.

chart-of-the-day-us30.png

Looking at the Dow Jones (US30) contracts, we see that they are quite close to historical highs, and it is possible that the bulls will eventually reach record levels above 36,000 points. The upward trend line is maintained, and the index has not approached the SMA 200 (red line) since September 2022, demand reacted quickly in the 23.6 Fibonacci retracement zone at 32,400 points. So far, the current week has been exceptionally successful for the Dow Jones, as illustrated by the green candle with a large body. Seasonally, September has often proved to be a suitable time for stock accumulation for the last, usually successful 'Christmas quarter.' Bulls are hoping that this will also be the case this time.

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CHN.Cash - Chart of the Day

Today, Chinese stock markets are falling sharply, with CHN.cash down almost 1%. Economic data is weaker than expected. Excluding oil, exports from Singapore, the world's biggest port, dropped 3.8% month over month, which is worse than the 4.2% growth predicted and the previous 3.2% drop. This shows that some economic indicators are weakening for a longer period. China, which depends a lot on demand from Western countries, especially the US, could suffer greatly if demand from developed economies decreases, for instance, due to a recession. The fact that fewer goods are leaving China each month might indicate a wider problem. How a declining Chinese market affects global fund managers' portfolios is a big question because China's economic weakness is somewhat separate from other 'emerging markets'. 
 
Another risk factor was the nearly 20% drop in Evergrande shares at the start of the Chinese session. Although they recovered their losses, it raised wider concerns about China's real estate sector. Country Garden, which is financially troubled, faced two major challenges: the initial deadline for interest payments on more than $50 million in dollar bonds and the end of a creditor vote on a proposal to extend repayment of debt in yuan. While property sales in China increased month over month in August, other key indicators like new housing starts, total construction area and real estate investment continued to fall. Data from the 70 biggest cities show that property prices fell in most cities.
 
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Looking at the CHN.cash chart, we see that supply is maintaining the overall downward trend line and became active again last time at 7000 points. The rebound lost momentum at 6700 and now sellers are back in control again, who may want to test the 61.8 Fibonacci retracement of the upward wave from fall 2022 at 6000 points again. Alternatively, if this support breaks downwards it could lead to a test of 6750 points, which are near 5750 points - 61.6 Fibo retracement. To break the current trend, buyers would have to push the index above the SMA200, which is now at 6672 points.
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Bitcoin is testing its highest levels since August 31 ahead of the FOMC decision.

Today, we're seeing a general recovery in the cryptocurrency market. Interestingly, there aren't major changes happening in the foreign exchange market, especially with the dollar. In recent times, we've noticed that Bitcoin's performance is often linked to other assets like Wall Street indices or gold. Even though US100 contracts are having a weaker day today, Bitcoin is on the rise, which is also in line with an increase in gold prices. This could be due to the upcoming Federal Reserve meeting that might signal the end of interest rate increases. In the past, Bitcoin has benefited from a weaker dollar, which was partly due to reduced expectations of a rate hike. If the Federal Reserve adopts a cautious approach now, Bitcoin might break through the 28,000 mark and attempt to reach 30,000 USD. After that, the next target would be 32,000 USD, which is the highest level since May 2022.
 
bitcoin-solidecn.png
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Understanding the Impact of Rising Oil Prices on the Global Economy

The price of oil is going up, and people think it might stay high for a while. Some people think it won't go over $100 per barrel, but others aren't so sure. The price has already hit a 10-month high of $95 per barrel.
 
Countries like Saudi Arabia and Russia have been producing less oil, which means there's less oil available worldwide. This has helped push up the price.
 
Higher oil prices can lead to higher prices for other things too, because oil is used in many industries. This could lead to inflation, which is when prices go up across the board. People are worried about this because it could slow down economic growth.The stock market has been reacting to these changes. Some parts of the market might benefit from higher oil prices, while others might struggle.
 
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Investors are trying to protect themselves from the risks of higher oil prices and potential market volatility. They're using certain types of securities to do this. Some investors are still positive about the energy sector and are investing more in it. The changes in the oil market are having big effects on the global economy and financial markets, so investors and policymakers need to keep a close eye on things.
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USDCAD Technical Analysis

Inflation rates have increased due to a rise in gasoline prices. The inflation rate for the year ending in August was 4.0%, up from 3.3% in July. This was slightly higher than what economists predicted, which was 3.8%. From July to August, inflation increased by 0.4%, which was a bit more than the expected 0.3%, but less than July's 0.6%.

Core inflation, which excludes volatile items like food and energy, also increased to 3.3% from 3.2% in July, but it was less than the expected 3.5%. On a monthly basis, core inflation decreased to 0.1% from 0.5%.

Despite these changes, it's still expected that the Bank of Canada (BoC) will not change interest rates at their next meeting. However, the chances of a rate increase have gone up to about 43%. But with unemployment rates rising since May and signs of slower economic growth, a rate hike is still not likely.

USDCAD_2023-09-19_19-08-57_8c1e6_1.png

The USDCAD currency pair has recently experienced a bounce from the support area at 1.338. This upward movement suggests that bullish traders might be gearing up to test the resistance level at 1.35. However, it’s important to note that the overall trend appears to be bearish.

The bearish outlook remains valid as long as the pair continues to trade within the daily downward channel. This means that despite the recent bounce, we could still see a continuation of the downward trend.

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