The markets were relatively quiet overnight as US markets were closed for the Labour Day holiday, according to OCBC FX strategists Frances Cheung and Christopher Wong. However, they noted that there is a lot of data coming up this week that could potentially impact market activity. They mentioned that the focus will be on labour market-related data, as the Fed has shifted its focus towards supporting the labour market.
As data releases intensify throughout the week, market activity could pick up pace. The highlight of the week will be the payrolls report on Friday, which could have a significant impact on the market. The strategists pointed out that both good and bad data may point to USD strength, while data in line with estimates may lead to a more muted response to the USD. The DXY was last seen at 101.67, with daily momentum showing a mild bullish trend. However, they also warned of potential risks of a further short squeeze.
In terms of technical analysis, the strategists identified resistance levels at 102 (21 DMA) and 102.20 (23.6% fibo retracement of 2023 high to 2024 low), with support levels at 100.50. The focus of the week will be on key data releases such as JOLTs job openings on Wednesday, ADP employment and ISM services employment on Thursday, and the US payrolls report on Friday. These releases will provide insight into the state of the labour market, which has become a key focus for the Fed.
Overall, the upcoming data releases are expected to drive market activity and could potentially impact the USD strength. Traders will be closely watching the key economic indicators throughout the week to gauge the health of the labour market and the overall economy. The strategists advised caution as there could be potential risks of a further short squeeze, and recommended paying close attention to the technical levels for potential entry and exit points.
In conclusion, while markets were quiet overnight due to the Labour Day holiday in the US, there is a lot of data coming up this week that could impact market activity. The focus will be on labour market-related data, as the Fed has shifted its focus towards supporting the labour market. Traders should pay attention to key economic indicators throughout the week, such as the payrolls report on Friday, as they could provide insight into the health of the economy. It is important to closely monitor technical levels and exercise caution due to potential risks of a further short squeeze.
