Dollar Strength, Oil Highs, and S&P 500 Warning Signals
04 September 2023
Hello traders, welcome to the first full week of September. Friday, the first day of the month, delivered interesting developments in the market. But before we delve into the specifics, let's take a moment to discuss today's calendar.
Today, we're keeping an eye on Switzerland's GDP, expected to rise by 0.1%. It's a quiet day in North America, as both Canada and the United States celebrate Labor Day with market closures. At the end of the European session, ECB President Lagarde is expected to give a speech. Now that we've covered the calendar, let's move on to the Forex market.
Friday concluded with a robust strengthening of the American dollar, driven in part by perplexing employment data. While non-farm payrolls exceeded expectations, we also witnessed a surprising rise in the unemployment rate. This confusing data set contributed to gains in the American dollar, with the British pound and the Canadian dollar ending the day as the weakest currencies.
The market opened today with a modest correction. As of now, the American dollar and the Japanese yen are the weakest performers, while the Australian dollar, British pound, and New Zealand dollar are showing strength.
Big moves are unfolding in the commodities sector, particularly with oil. Brent oil climbed significantly higher on Thursday and Friday, now sitting at its highest levels since the turn of the year. It's trading just shy of a key horizontal resistance at $88 per barrel. WTI oil is also enjoying strong gains, sitting at levels not seen since November 2022, hovering close to a crucial horizontal resistance at $83.
However, it's not all roses for other commodities. Silver is lagging, and although gold is struggling, it remains at relatively high levels.
As for indices, they are off to a mixed start. The S&P 500 closed Friday with two consecutive daily shooting stars, a bearish sign that indicates potential for a downturn. Traders should proceed with caution, as these patterns may suggest the start of a bearish correction.
Finally, the late-week strength in the American dollar had significant implications for the EURUSD pair. It's currently grappling with the neckline of a triple-top formation. Any further declines in the pair could provide traders with a solid sell signal, making the pair one to watch closely as the week unfolds.