Investors rallied around tech stocks, propelling the Nasdaq Composite up by more than 1% on Tuesday, seeking respite in the closing stages of a challenging August for the market. The tech-centric index surged 1.74% to reach a closing figure of 13,943.76. Similarly, the S&P 500 marked its most robust performance since June 2, surging 1.45% to conclude at 4,497.63, while the Dow Jones Industrial Average managed a 0.85% rise, accumulating 292.69 points to cap off the session at 34,852.67.
Leading the ascent among tech stocks was chipmaker Nvidia, boasting a gain of over 4%, with Meta Platforms, Tesla, Apple, and Microsoft also closing the day in positive territory. The sector found support in declining bond yields prompted by the release of fresh U.S. economic data. Moreover, AT&T’s shares climbed 3.9% on the back of a Citi upgrade, while Best Buy saw a 3.8% increase after reporting better-than-anticipated earnings. As the month of August concludes, the Dow is projected to record a 1.9% dip, with the S&P 500 and Nasdaq anticipated to incur losses of 1.9% and 2.8%, respectively.
On Tuesday, all sectors of the market showed positive movement, with an average increase of 1.45%. Communication Services experienced the highest gain, rising by 2.46%, followed closely by Consumer Discretionary at 2.35% and Information Technology at 2.11%. Other notable sector increases included Materials at 1.68%, Real Estate at 1.15%, Financials at 0.88%, Health Care at 0.83%, Industrials at 0.78%, Consumer Staples at 0.41%, Energy at 0.30%, and Utilities at 0.28%.
Major Pair Movement
The dollar index started with gains but ended with a 0.55% loss due to disappointing JOLTS and consumer confidence data, causing Treasury yields to drop significantly. This shift, along with recent remarks from central bank leaders, suggests the Fed might prioritize rate cuts over hikes in 2024. Further U.S. data this week will likely influence this view. Despite initially strong levels, the dollar index’s momentum waned after speeches by Fed Chair Jerome Powell, ECB President Christine Lagarde, and BoJ Governor Kazuo Kuroda. EUR/USD stayed above key supports while USD/JPY reached new 2023 highs. However, Tuesday’s U.S. data led to a 0.64% gain for EUR/USD, raising it from crucial supports.
The ECB is leaning toward a rate hike by October, while the likelihood of a September hike is uncertain. Sterling rose 0.44%, hindered slightly by EUR/GBP clearing resistance, yet still reclaiming its 100-day moving average. The Australian dollar surged by 0.86% as falling Treasury yields boosted higher-risk assets. It also benefited from increased commodity prices and positive economic prospects after Chinese state banks lowered mortgage rates. Australian CPI data and the RBA’s stance on potential rate hikes will be closely watched. USD/CNH declined 0.15%, remaining within its recent range due to skepticism surrounding the resolution of structural issues impacting the Chinese economy. The upcoming release of German CPI, ADP data, and U.S. pending home sales on Wednesday, followed by more crucial U.S. data on Thursday and Friday, will further shape market trends.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USDSurges Amidst Dollar Weakness Triggered by Economic Data
The EUR/USD saw its most substantial daily gain in a month on Tuesday, surging from below 1.0800 to near 1.0900, driven by a notable correction in the weakening US Dollar, which stemmed from disappointing US economic indicators and a decline in Treasury bonds. US data unveiled employment setbacks, particularly in the JOLTS report and CB Consumer Confidence index, which led to a decline in US Treasury yields, applying downward pressure on the US Dollar. The DXY index dropped below 103.50 after being at 104.40. Upcoming economic data releases, including the ADP private employment report and US consumer inflation data, may continue to impact the US Dollar’s trajectory.
Based on technical analysis, the EUR/USD moves higher on Tuesday, reaching the upper band of the Bollinger Bands. Currently, the price is moving around the upper band, showing that there’s potential for another higher movement. The Relative Strength Index (RSI) is currently at 59, signaling that the EUR/USD is trying to move higher into a bullish trend.
Resistance: 1.0874, 1.0935
Support: 1.0833, 1.0789
XAU/USD (4 Hours)
XAU/USD Surges as US Economic Data Points to Easing Monetary Measures
On Tuesday, the XAU/USD shifted its trajectory, surging to $1,938.08 per troy ounce, driven by US macroeconomic indicators that suggested a potential conclusion to the monetary tightening cycle. The US Dollar faced a sharp decline after the US Bureau of Labor Statistics reported fewer job openings than expected, indicating a loosening labor market trend. The number of job openings stood at 8.82 million in July, down from the anticipated 9.46 million.
Adding to this, Consumer Confidence dwindled to 106.1 in August from 114.0 in July, reflecting a decrease in household demand. As a result, financial markets are increasingly predicting the Federal Reserve will maintain rates in the upcoming September meeting, with the likelihood of a 25 basis points hike in November dropping from 50.9% to 44.5%. This news spurred Wall Street to reach new weekly highs, and Treasury bond yields experienced a downturn, with the 10-year note yielding 4.12% (down 8 bps) and the 2-year note offering 4.88% (down 12 bps).
Based on technical analysis, the XAU/USD moves higher on Tuesday and trying to widen the bands for the Bollinger Bands. Currently, the price is trying to push the upper band higher showing there’s potential for Gold to move even higher. The Relative Strength Index (RSI) is at 73 currently, showing that the XAU/USD pair is still in a positive mode.
