Russell Shor

The spread between the US 10-year bond and 10-year Japanese Government bonds (JGBs) is a key driver of the USDJPY.

Both UKOil and USOil have charted a higher trough followed by a higher peak, putting the CFDs into uptrend. UKOil is now trading over $90 a barrel and USOil at $87.20 per barrel. Moreover, their stochastics are also trading in their respective upper quintiles. This suggests that there is a strong underlying momentum that is supporting oil prices.

On Sunday, at the IAAA Mobility auto show in Munich, Mercedes-Benz introduced a new electric-sedan concept vehicle. Branded as CLA Class, the concept vehicle has a range of more than 466 miles, based on global industry standards. This is competitive and is superior to Tesla’s Model 3 long range version, which has a range of 391 miles on the same measure.

The US 10-year real rate is a key driver of FXCM’s USDOLLAR. The two instruments have a robust positive correlation coefficient of 79%, with the USDOLLAR generally tracking the real rate.

Friday saw Canadian GDP print at -0.2% m/m compared with the previous number of 0.2% m/m. The manufacturing PMI also came in lower at 48 compared with the previous 49.6. At the same time, Canadian unemployment is drifting higher to 5.5%. In response, the Canadian 2-year note decline by 2.02% on Friday.

FXCM’s CHN50 basket offers some suggestion of contrarian price action.

Recording of NFP trade for 1 September 2023

UKOil has pushed into its bullish channel, between the upper blue and red bands. Its daily RSI is also above 50, which is the bullish side of the indicator. If these positions are held, there will be an underlying support for UKOil.

Core PCE printed at 4.2% y/y, up from the last release of 4.1% y/y, and headline inflation was higher at 3.3% y/y (compared with the previous 3% y/y). The upticks were due to base effects. Although regarded as volatile, the monthly figures for core and headline PCE were flat, and in line with projections at 0.2% m/m. This is annualised to 2.43%.

August has been a month highlighting US large-cap stock resilience. The robust artificial intelligence led rally in US stocks ran into headwinds during August. But the month is ending with the major US indexes showing signs of durability.

Job creation in the US decelerated for August, as indicated by the ADP report. This suggests that the U.S. economy, which has been resilient, could potentially be entering a phase of moderation due to the increased influence of elevated interest rates.