Wall Street Rally on Soft CPI

• CPI reading came soft catalyse Wall Street, Dow Jones topped the 40,000 mark for the first time in August. 

• Gold hit its all-time high price range before plummeting by over 1%. 

• BTC prices plunged after the U.S. government transferred large amounts of BTC confiscated from the Silk Road.

Market Summary

The most anticipated economic indicator of the week, the U.S. Consumer Price Index (CPI), was released yesterday, coming in at 2.9%, below the 3% threshold and in line with the Producer Price Index (PPI) data from the previous day. This further sign of easing inflationary pressure in the U.S. has heightened expectations that the Federal Reserve may implement its first rate cut in September.

Wall Street responded positively, with the Dow Jones surging past the 40,000 mark, buoyed by the prospect of a lower interest rate environment. Meanwhile, the dollar index remained relatively stable, having already priced in the easing inflation when the PPI was announced.

In the commodity market, gold hit an all-time high near $2,480 before strong selling pressure and profit-taking drove prices down by more than 1%. The low inflation reading also dampened demand prospects for oil, applying further downward pressure on prices.

In the cryptocurrency market, both Bitcoin (BTC) and Ethereum (ETH) experienced significant declines following the CPI release. A $600 million BTC transfer by the U.S. government related to the Silk Road case may have triggered the sell-off, while continued net outflows from Grayscale's BTC and ETH ETFs added to the selling pressure.

Current rate hike bets on 18th September Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (88.5%) VS -25 bps (11.5%) 

Market Overview

Economic Calendar

(MT4 System Time)

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

The Dollar Index extended its losses following the downbeat CPI report.The US Consumer Price Index (CPI) rose by 2.90% last month, slightly below the previous reading of 3.05% and market expectations. This weaker-than-expected CPI, combined with the recent downbeat Producer Price Index (PPI) data, signals a potential slowdown in US economic growth and stabilising inflation. Consequently, market participants are now anticipating a 50-basis point rate cut by the Federal Reserve in September.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 41, suggesting the index might experience technical correction since the RSI rebounded sharply from oversold territory. 

Resistance level: 103.35, 104.05

Support level: 102.40, 101.40

XAU/USD, H4

Gold prices surged initially after the CPI report but retracted as investors took profits, having already factored in the potential for rate cuts. Despite this, the long-term outlook for gold remains positive, driven by the anticipated rate cuts and weaker economic performance. Investors should now watch for further signals from US interest rate decisions.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 53, suggesting the commodity might extend its losses after breakout since the RSI retreated sharply from overbought territory. 

Resistance level: 2475.00, 2500.00

Support level: 2450.00, 2425.00

GBP/USD，H4

The GBP/USD pair remained largely unchanged following the release of crucial U.S. economic indicators yesterday. The U.S. CPI reading came in lower, indicating easing inflationary pressure. However, as this was in line with the PPI data released a day earlier, which had already been factored into the markets, the dollar index saw little movement in the last session. Pound Sterling traders are now turning their attention to today's U.K. GDP data and tomorrow's Retail Sales figures to assess the strength of the pound and potential future movements in the pair.

GBP/USD remain trading within its bullish trajectory at above 1.2800 level, suggesting a bullish bias for the pair. The RSI remains close to the overbought zone while the MACD remains above the zero line, suggesting that the bullish momentum remains intact with the pair. 

Resistance level: 1.2915, 1.2988

Support level: 1.2780, 1.2700

EUR/USD，H1

The EUR/USD pair reached its highest level of 2024 at 1.1047 before encountering profit-taking, which led to a minor decline. The euro's strength was underpinned by Eurozone GDP data indicating signs of economic recovery in the region. Additionally, expectations that the European Central Bank (ECB) may hold interest rates steady until inflation shows signs of easing have provided further support for the euro. Despite the slight pullback, the pair remains well-supported by these positive factors.

The EUR/USD has broken its psychological resistance level at the 1.1000 mark and remains above such a level, suggesting a bullish bias for the pair. The RSI remains in the overbought zone, while the MACD has rebounded above the zero line, suggesting the pair's bullish momentum remains. 

Resistance level: 1.1040, 1.1105

Support level: 1.0940, 1.0895

AUD/USD, H4

The AUD/USD pair gained momentum following the release of Australian employment data during Thursday's Sydney session. Although the unemployment rate saw a slight uptick, the substantial improvement in employment change, which rose by 58.2k, catalysed the strength of the Aussie dollar. This positive labour market data provided a solid boost to the currency, reinforcing its upward trend.

The pair remained trading within its uptrend trajectory despite had a technical correction in the last session. The RSI remains above the 50 level while the MACD flows flat at the elevated level, suggesting that the bullish momentum remains intact. 

Resistance level: 0.6673, 0.6730

Support level: 0.6550, 0.6500

BTC/USD, H4

Bitcoin (BTC) struggled to break through its strong resistance zone near the $60,800 level, leading to a subsequent decline. The U.S. government's transfer of a significant amount of BTC, valued at nearly $600 million, from Silk Road confiscations introduced uncertainty into the market. This move triggered selling pressure, resulting in a 4% drop in BTC prices since last night. The market remains cautious as traders assess the potential impact of these developments on Bitcoin's price trajectory.

BTC was rejected below the $61,000 level, suggesting the selling pressure at such a level is strong. The RSI has declined to near the oversold zone while the MACD is on the brink of breaking below the zero line, suggesting the bullish momentum is vanishing. 

Resistance level: 64860.00, 67540.00

Support level: 57060.00, 52530.00 

S&P 500, H4

The US equity market extended its gains for the fifth consecutive day, the longest winning streak in over a month. Financial, energy, and tech stocks led the rally. The retreat in US Treasury yields following the inflation report and expectations of rate cuts continued to support the equity market.

S&P 500 is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 57, suggesting the index might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 5460.00, 5670.00

Support level: 5320.00, 5150.00

CL OIL, H4

Crude oil prices fell sharply as concerns over a potential Iranian retaliation against Israel eased. The anticipated escalation in geopolitical tensions has not materialised, reducing the risk of supply disruptions. In addition, US Crude oil inventories surged by 1.36 million barrels, far surpassing market expectations. This unexpected increase in inventory has contributed to the downward pressure on oil prices, reflecting the market's shift away from supply concerns.

Oil prices are trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 44, suggesting the commodity might extend its losses since the RSI stays below the midline. 

Resistance level: 78.55, 80.90

Support level: 75.40, 72.45