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Asset Watch
Tuesday, 3 September 2024
The latest US PCE data released last week came in lower than expected, with the year-over-year headline figure for July holding steady at 2.5% compared to the forecast of 2.6%. Similarly, the core PCE remained unchanged at 2.6%, slightly below the expected 2.7%. This softer data supports market expectations that the Federal Reserve might start cutting rates at its upcoming September meeting. However, the key question remains: by how many basis points will the Fed decide to cut?
The July NFP report released last month heightened recession fears among investors, triggering a major sell-off. However, markets later rebounded as subsequent data suggested that a recession was not imminent. As a result, all eyes are now on the upcoming August NFP report to provide further insights into the US job market. Market expectations are for the US economy to have added 164,000 jobs in August, with the unemployment rate potentially falling from 4.3% in July to 4.2%.
If the data disappoints, concerns over the trajectory of the US economy could resurface, raising the likelihood of the Fed opting for a 50-basis points rate cut in September rather than 25. Such a scenario would likely weigh on the US dollar while providing a boost to precious metals like silver.
Chart Source: ADSS Platform
On August 30, the price closed below the 50-day simple moving average suggesting a weakening bullish momentum. Right now, the price tests the low end of the current trading zone spanning between 28.45 – 31.75, A daily close below that level could embolden bears to take the initiative and press towards 26.19. However, it is important to monitor the support levels located at 27.17 and the upward trendline originated from the Match 27 low.
On the flip side, a bounce with a daily close above the low end of the zone reflects that the bullish momentum remains intact, potentially driving the price to revisit the high end of the mentioned trading zone. In this scenario, the downward trend line originating from the May 20 high should be kept in focus.
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