Eurozone PMI in Focus as Labour Day Hits U.S. Markets

Caixin Manufacturing PMI’s unexpected growth boosts the outlook for oil demand. European PMI figures could pressure the Euro while U.S. markets remain closed for Labour Day.

Asia Session Overview

The Caixin Manufacturing PMI for July surprised the market by showing an expansion, with a reading of 50.4, up from the expected contraction of 49.8. Consequently, this marks the ninth consecutive month of growth in China’s manufacturing sector. The rebound in new orders suggests improved conditions and may signal higher demand for crude oil, potentially stabilizing prices following last Friday’s sharp sell-off.

Despite this, crude oil prices face significant challenges today. Moreover, traders are increasingly concerned about OPEC+’s possible rise in production levels starting in October, which could exert downward pressure on oil prices in the medium term.

Implications for European and U.S. Markets

In Europe, analysts forecast that the final Manufacturing PMI for the Euro Area will contract again, with a reading of 45.6 for July. Consequently, this would mark over two and a half years of depressed output in the sector. A weaker-than-anticipated final print could pressure the Euro during the European trading session.

In the U.K., manufacturing activity has shown resilience, with August’s final forecast of 52.5 indicating its fourth consecutive month of expansion. Furthermore, a strong print could maintain demand for the Pound and support a move above the 1.3200 level for Cable.

Dollar Index (DXY)

With U.S. financial markets closed for Labour Day, trading activity and volume are expected to decline significantly after the European session ends. The DXY was around 101.70 at the start of the Asia session, with the support and resistance levels for today set at:

• Support: 100.50
• Resistance: 102.30

Central Bank Updates

The Federal Reserve’s recent stance on monetary policy remains unchanged, with the Federal Funds Rate target range at 5.25% to 5.50%. The Fed focuses on achieving maximum employment and a 2% inflation rate while carefully assessing incoming data and risks to adjust its stance as needed. So, the Fed will meet next on 17-18 September 2024.

Gold (XAU)

With U.S. markets closed today, a notable drop in trading activity and volume is expected post-European hours. Moreover, gold was trading around $2,500/oz at the start of the Asia session. Key levels for today are:

• Support: $2,473/oz
• Resistance: $2,530/oz

Eurozone PMI in Focus as Labour Day Hits U.S. Markets

Australian Dollar (AUD)

Australia’s manufacturing sector showed a second consecutive monthly rise but remained in contraction with an August reading of 48.5. Despite improved export orders, the overall demand remains weak, reducing purchasing activity. The Aussie traded near 0.6750 at the start of the Asia session and should stabilize around this level today.

New Zealand Dollar (NZD)

The Kiwi Dollar increased from a slight gap down, trading around 0.6250. Support and resistance levels for today are:

• Support: 0.6200
• Resistance: 0.6300

Japanese Yen (JPY)

The Japanese manufacturing sector contracted for the second consecutive month, though with a stabilizing reading of 49.8. The Yen has slightly weakened as the USD/JPY surpassed the 146 level. The Yen may see further movement as the day progresses.

Euro (EUR)

The final Manufacturing PMI for the Euro Area is expected to contract to 45.6 in July. This could further pressure the Euro during the European trading session.

Swiss Franc (CHF)

The Swiss Franc saw a rise in USD/CHF last Friday, closing at 0.8498. However, the currency pair rose above 0.8500 at the start of the Asia session. Key levels for today are:

• Support: 0.8400
• Resistance: 0.8550

Pound (GBP)

U.K. manufacturing activity is expected to maintain its expansion with an August forecast of 52.5. This could support further demand for the Pound, potentially pushing Cable above the 1.3200 level.

Canadian Dollar (CAD)

With both U.S. and Canadian markets closed for Labour Day, trading activity is expected to be low. The Loonie was trading around 1.3500 as Asian markets opened. Therefore, the key levels for today are:

• Support: 1.3430
• Resistance: 1.3575

Oil

The Caixin Manufacturing PMI’s expansion may suggest increased demand for crude oil, which could stabilize prices after recent declines. However, rising concerns about a potential increase in OPEC+ production levels from October could keep prices under pressure. WTI oil closed last week at $74.27 per barrel.

Next 24 Hours Bias

• Oil: Medium Bearish
• Gold: Weak Bullish
• Australian Dollar: Weak Bullish
• New Zealand Dollar: Weak Bullish
• Japanese Yen: Weak Bearish
• Euro: Weak Bullish
• Swiss Franc: Weak Bullish
• Pound: Weak Bullish
• Canadian Dollar: Weak Bearish

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