Mohicans markets ：Fed officials' firm rate hike rhetoric boosts dollar, waits for OPEC+ meeting, or resists calls to increase output

Fed officials' firm rate hike rhetoric boosts dollar, waits for OPEC+ meeting, or resists calls to increase output

Fundamentals:

U.S. bond yields soar as Fed official says fight against inflation is not over

Chicago Fed President Charles Evans said he wants to raise rates by 50 basis points in September and then continue at a 25 basis point pace until early in the second quarter of 2023. San Francisco Fed President Daly said the Fed's fight against inflation is “far from over” and officials are firmly committed to maintaining price stability. Cleveland Fed President Mester said the Fed will need to see months of evidence that inflation has peaked before ending the rate hike cycle. U.S. Treasury yields rose across the board after hawkish comments from a number of Fed officials prompted traders to reduce bets on a rate cut next year. Treasury raises quarterly borrowing forecast to $444 billion.

The number of job vacancies was significantly lower than expected. The US labor market showed signs of slowing. The U.S. Labor Department's job openings and Labor Turnover Survey (JOLTS) released on Tuesday, Aug. 2, showed a slight slowdown in U.S. labor demand amid mounting economic pressures.

OPEC+ observers cast doubt on whether Biden's call to raise output will materialize

Commerzbank said the outcome of the OPEC+ meeting was highly uncertain. Gulf countries boost oil output OPEC+ cuts oil market surplus forecast. OPEC's crude output rose to a two-year high last month, rising by 270,000 bpd, as OPEC members in the Persian Gulf provided additional crude supplies to make up for shortages elsewhere. Among them, Saudi Arabia accounted for about two-thirds of the increase. G7: Ensuring energy supply, stabilizing markets, and slowing rising energy prices. The G7 statement said the seven countries will unite and coordinate closely to take action to mitigate the impact of supply disruptions.

On the Disk Performance:

Beijing time on Wednesday (August 3) in early Asian trading, the US dollar index traded around 106.34. On Tuesday, the US dollar rose nearly 1%, boosted by the Fed officials' firm remarks on raising interest rates. It fell to a nearly one-month low in early intraday trading; Due to the escalation of geopolitical tensions, the price of gold once approached a monthly high of $1,788 per ounce. As the dollar and U.S. bond yields rose, gold fell by nearly $30; investors waited for the OPEC+ meeting, and sources said a moderate increase in production would be discussed.

In terms of commodities closing, Brent crude oil futures rose 0.5% to settle at $100.54 a barrel, U.S. crude oil futures rose 0.6% to settle at $94.42 a barrel; U.S. gold futures ended up 0.1% at $1,789.70 an ounce.

At the close of U.S. stocks, the S&P 500 fell 0.66% to close at 4091.32 points. The Nasdaq lost 0.16% to 12,348.76 and the Dow Jones Industrial Average fell 1.23% to 32,396.30.

Technical:

Dollar:

Beijing time on Wednesday (August 3) in early Asian trading, the US dollar index rose slightly and is currently trading around 106.33. The U.S. dollar index has retreated recently as investors begin to reassess how aggressive the Federal Reserve will be on future rate hikes. On Tuesday, speeches by several Fed officials hinted that there will be more interest rate hikes in the short term, and the U.S. dollar index rose sharply, finally closing up 0.89% at 106.33. 

Investors are now focusing on U.S. non-farm payrolls data for July due on Friday (August 5). Big things to watch for on Wednesday: Philadelphia Fed President John Harker speaks at the Philadelphia Fed's Sixth Annual Fintech Conference, and Richmond Fed President John Balkin speaks on inflation.

As we reminded yesterday, “Don't be too bearish on the US dollar”, the US dollar bottomed and rebounded yesterday, and within full expectations, it has always suggested that the weekly 10-week moving average near 105 has a high probability of bottoming out and rebounding, and the adjustment for two consecutive weeks has basically come to an end.

Focus on resistance: 108.5 to 110 area    Focus on support: 104 to 105.16 area

Gold:

During the Asian session on Wednesday (August 3), spot gold fluctuated slightly, hitting a three-day low of $1,754.90 per ounce. Overnight, many Fed officials hinted that there will be more interest rate hikes and dispelled expectations of interest rate cuts next year. Data showed that the labor market of US is still tight, and the market's expectations for the Fed to raise interest rates by 75 basis points in September have increased. The dollar rebounded strongly from the monthly low, recording the largest one-day increase since July 11, which significantly suppressed the price of gold. Gold prices on Tuesday hit a new high of 1787.91 in nearly a month (close to the strong resistance of the low on May 16), and then fell back and closed near the 1760 mark.

The price of gold was blocked and fell near the strong resistance level, which significantly increased the possibility of the price of gold returning to the downward trend. However, concerns about the geopolitical situation have intensified. The US stock market is far from its high in nearly two months. The Dow fell by more than 1%, and the price of gold remained at the Above the 1750 mark, there is still a chance for the bulls in the market outlook.

On the whole, Fed officials are inclined to make further hawkish speeches this week. Investors need to pay close attention to the changes in the market‘s expectations for the Fed’s interest rate hike in September. This factor is biased against the price of gold, but investors need to pay more attention to economic data, especially the US economic data. The current market is not optimistic about the economic data such as non-agricultural data in the United States in July. Coupled with the tense geopolitical situation, if the price of gold can hold the support of the 1740-1750 area, the market will be inclined to oscillate and test the resistance near the 1800 mark.

From the chart, after the monthly analysis, the daily gold is still within the falling channel. This rebound is a technical need after the expectation of interest rate hikes is fulfilled, and it is more due to hedging. After all, the world is still in the midst of the epidemic, and there is another monkeypox epidemic. At the same time, in the big cycle, the global currency is tightening, and there is no bull market in gold for the time being. We look at it with a wide range of fluctuations. Therefore, we changed our thinking and mainly focused on the effectiveness of the resistance below.

Resistance: 1776----1786          Support: 1745----1720

Crude:

In early Asian trading on Wednesday (August 3), U.S. oil traded around $93.77 per barrel. API data in the morning showed that U.S. crude oil inventories increased last week, and the market waited for the evening OPEC+ meeting. At the same time, the escalation of geopolitical tensions limited the decline in oil prices . 

The focus will be on the 31st ministerial meeting of OPEC and non-OPEC oil-producing countries.

Overall, the increase in inventories and the spread of the monkeypox epidemic dragged down oil prices, but the escalation of geopolitical tensions, and it is expected that OPEC+ resists calls for production increases, the decline in oil prices may be limited. In the day, oil prices pay attention to the OPEC+ meeting and the geopolitical situation, and be wary of oil price fluctuations or greater.

Today's OPEC meeting has a great impact on the trend of crude oil. Judging from the current trend of the disk, oil prices rely on the support near 93 to start shocks, and the shocks are weak. There is an increased probability of a decline if it does not rise near a key support. The K-line entity of the daily chart has closed below 95, which is a sign of a break below, and it is almost confirmed now. If it breaks down, it will open up a falling space.

Resistance:95.22 to 100.5  Support:91.45 to 91.99

(The above analysis only represents the opinions of analysts and does not serve as any investment guidance recommendation, and does not assume any responsibility for any loss or damage caused by any direct or indirect transaction risks, losses or gains related to any personal investment.)