Fundamentals to lead the markets

The USD tended to gain slightly against its counterparts yesterday, as the greenback tends to show signs of recovery. Overall, we tend to see the case for the market to be moved mostly by fundamentals given the lack of high-impact financial releases. At the same time, we also note that volatility in the FX market seems to remain at low levels. Currently, we expect the USD to remain rather stable at its current low levels, given that the market on the one hand seems to have extensive dovish expectations for the Fed, yet those seem also to have been sufficiently priced in, weakening the USD over the past week. Should there be no event enhancing the market’s dovish expectations we may see the USD regaining some ground.

US stock markets also tended to send out mixed signals yesterday. Overall, the market’s expectations for rate cuts by the Fed in the coming months tended to allow US stock markets to extend their upward movement. We may see US stock market’s bullishness being somewhat saturated in the coming days unless the hopes for an extensive easing of financial conditions in the US economy are enhanced. Today, in the after-market hours, we highlight the release of NVIDIA’s (#NVDA) earnings report. The earnings report is expected to show an improvement in both the earnings and revenue figures if compared to the last report. Yet our worries for the release focus on the slowing growth rate of the revenue figure. The company remains maybe the dominant force in its sector and let’s not forget the influence of NVIDIA on the market given the AI frenzy. We expect the release to be closely watched by traders with a special focus also on any forward guidance.

On a technical level, NVIDIA’s share price has been moving in a sideways manner between the 131.15 (R1) resistance line and the 123.00 (S1) support level, since the 16 of August. We tend to maintain our bias for the sideways motion, between the prementioned levels to continue for the time being. It’s characteristic that the Bollinger Bands have narrowed signaling an easing of volatility for the share’s price, which could allow the rangebound motion to be maintained. Similar signals are also being sent by the RSI indicator which seems to be flattening just above the reading of 50, implying a relative indecisiveness on behalf of market participants for the direction of the share price’s next leg. Yet the release of NVIDIA’s earnings report may alter the direction of the share’s price. For a bullish outlook we would require NVIDIA’s share price to breach the 131.15 (R1) resistance line clearly and start aiming if not breaching also the 135.85 (R2) resistance base, which please note is a record high level. Should the bears take over we may see the share’s price action breaking the 123.00 (S1) support line, with the next possible target for the bears being the 118.50 (S2) level.

Other highlights for the day

Today we get France’s consumer confidence for August, while oil traders may be more interested in the release of the EIA weekly crude oil inventories figure. During tomorrow’s Asian session, Atlanta Fed President Bostic is speaking and we get from Australia the CAPEX rate for Q2 which could move the Aussie. Please note that during today’s Asian session, the Aussie got some support as Australia’s CPI rates for July, slowed down maybe less than expected. On a fundamental level, Aussie traders are hoping for an easing of the tensions in the US-Sino relationships, given also the visit of US National Security Advisor Sullivan in China currently.

AUD/USD edged higher yesterday and during today’s Asian session, yet the movement was immaterial placing the pair in the midst of the 0.6715 (S1) support line and the 0.6870 (R1) resistance line. We maintain a bias for the upward motion to be renewed as the upward trendline guiding the pair since the 5 of August remains intact. Should the bulls maintain control over the pair as expected we may see the pair breaking the 0.6870 (R1) resistance line, paving the way for the 0.7030 (R2) resistance level. For a bearish outlook, we would require the pair’s price action to break initially the prementioned upward trendline and continue to break the 0.6715 (S1) support line and aim for the 0.6575 (S2) support level.