North American News
US major indices close higher for the 4th consecutive day
- All 11 sectors of the S&P moved to the upside
The major US stock indices are closing higher for the 4th consecutive day.
- All 11 sectors of the S&P moved to the upside
- energy up 1.8%. Information technology up 1.63% and consumer discretionary rose 1.35%
- consumer staples was the worst performer with a gain of 0.42% and communication services rose by 0.44%
- The Dow is up 2.8% this month this month
- The S&P is up 3.9%
- The NASDAQ is up 3.8%
For the trading day:
- Dow industrial average rose 229.63 points or 0.71% at 32381.35
- S&P index rose 43.07 points or 1.06% at 4110.42
- NASDAQ index rose 154.11 points or 1.27% at 12266.42
- Russell 2000 rose 23.23.11.23 percent at 1906.08
US treasury auctions $32 billion of 10 year note today high yield of 3.330%
- WI level at the time of auction was 3.303%
- High yield 3.330%
- WI level 3.303%
- Tail 2.7 basis point
- bid to cover 2.37X vs. six-month average of 2.45X
- Dealers 19.8%vs. the six-month average of 15.3%
- Directs 17.9% vs. the six-month average of 17.7%
- In-directs 62.3 percent vs. the six-month average of 67.0%
US sells 3-year notes at 3.564% vs 3.550% WI
- Results of the 3-year Treasury auction
- Prior was 3.202%
- Bid to cover at 2.49 vs 2.50 prior
Commodities
Gold bulls are in control and take on a key resistance area
- Gold bulls are taking control as they move in on a critical technical level on the charts.
- The markets are awaiting the US CPI data on Tuesday for clues.
The gold price has rallied at the start of the week in a move that was forecasted in the weekly pre-open analysis here: Gold Price Forecast: XAU/USD bulls eye a 61.8% golden ratio daily target. At the time of writing, gold is 0.75% higher on the day having travelled from a low of $1,712.04 to a high of $1,735.18 so far, piercing into the 61.8% Fibonacci of the daily bear impulse.
A weaker USD saw commodity markets recover some of the losses at the start of this week and gold has been no exception, despite expectations of another aggressive rate hike by the Federal Reserve next week.
However, a weaker USD has improved investor appetite. US stocks rose along with gold and crude oil futures after midday on Monday, while government bond yields fell with the dollar index. The US 10-year rate slipped 3.262% intraday from 3.346% while the dollar index weakened against a basket of currencies, including the euro, falling 0.8% to 107.81.
With no data released on Monday, the focus is on Tuesday’s US Consumer Price Index for August. Core prices likely stayed firm in August, with the series registering another 0.3% MoM gain, analysts at TD Securities expect. ”Our MoM forecasts imply 8.0%/6.0% YoY for total/core prices.” That would be slower than the 8.5% pace in July.
Markets are seeking further evidence inflation has peaked in the US and the data will be important for the direction of yields, gold and the greenback. However, Federal Reserve officials said last week that more than a few months of consistently lower readings will be needed to assure that price increases have reliably slowed.
Fed officials are in the so-called quiet period through the Sept. 20-21 Federal Open Market Committee meeting. It remains in place until Chair Powell’s post-decision press conference on September 21. WIRP suggests over 90% odds of a 75 bp hike.
”Overall, we continue to expect that while rates markets appear to be nearing a fair pricing for Fed funds, precious metals’ price action is still not consistent with their historical performance when hiking cycles enter into a restrictive rates regime,” analysts at TD Securities said. ”Indeed, gold and silver prices have tended to display a systematic under performance when markets expect the real level of the Fed funds rate to rise above the neutral rate, as estimated by Laubach-Williams. We expect continued outflows from money managers and ETF holdings to weigh on prices, which will ultimately raise the pressure on a small number of family offices and proprietary trading shops to capitulate on their complacent length in gold.”
Silver Price Analysis: King Dollar’s reversal is catalyzing a ferocious short squeeze – TDS
Strategists at TD Securities analyze the outlook of silver (XAG/USD). They note that a consolidation lower in the USD has sent participants rushing for the exits.
Short positioning has grown to its highest levels since 2019
“With money managers short positioning in silver having grown to its highest levels since 2019, a consolidation lower in the USD has sent participants rushing for the exits. However, the coincident rally in gold prices has been more limited, which suggests little has changed with respect to the investment appetite for precious metals.”
“With 54% of silver’s demand tied to fabrication, silver remains highly sensitive to our deteriorating gauge of commodity demand.”
“We continue to expect that while rates markets appear to be nearing a fair pricing for Fed funds, precious metals’ price action is still not consistent with their historical performance when hiking cycles enter into a restrictive rates regime.”
EU News
European equity close: Strong gains start the week led by the German DAX
- Closing changes for the main European bourses
- Stoxx 600 +1.8%
- UK FTSE 100 +1.7%
- German DAX +2.4%
- French CAC +2.0%
- Spain IBEX +2.1%
- Italy MIB +2.1%
Other News
MUFG trade of the week: Stay long USD/JPY
- MUFG not ready to take profit
MUFG Research expects USD/JPY to continue rising higher in what’s been the best trend trade in FX in years.
They continue to like a prior recommendation of buying USD/JPY at 140.00 with a target of 146.00 (last week’s high was 144.99) and a stop at 136.50.
“We are maintaining a long USD/JPY trade idea although acknowledge that the balance of risks has become less favourable in recent days,” they write.
“We are not yet convinced that Japanese policymakers will back up words with action so are maintaining our long USD/JPY trade idea, but acknowledge that the balance of risks is no longer as favorable,” MUFG adds.
Cryptocurrency News
Bitcoin continues to find life after the latest washout
- Bitcoin up 4% today
The rally in bitcoin today is a bit of a puzzle. It’s tempting to say it’s a catch-up trade after weeks of ethereum outperformance on the merge hype. The Sept 15 event is a big risk for crypto and there’s a clear pattern of ‘sell the fact’ trades following mainstream crypto events.
Second is the speech that Gary Gensler gave last week which corresponded with the bottom in bitcoin. He said that the vast majority of tokens are securities but did appear to single out bitcoin:
Bitcoin, the first crypto token, is referred to by some as “digital gold”: trading like a precious metal, a speculative, scarce — yet digital — store of value.