Sep 05, 2023

Monday is a bank holiday in the United States and Canada for Labour Day. This could generate some volatility, as liquidity is often lower on holidays. However, Labour Day in the US is officially the end of the lower volumes associated with “Summer Trading.”

US30: Daily Chart

US30: Daily Chart

The US30 is currently trading at 34,837 after a nice bump last week. The next target is 35,000, with 34,000 as the support level.

With the return of traders from their annual summer vacation period, it is possible that trading volumes will increase and larger moves will occur, with the potential for either or both of the support and resistance levels to be tested.

US economic data disappointed last week, with rising unemployment and lower GDP growth. This could lead to a Fed rate pause, which could be bullish.

The ISM Manufacturing Index will be closely monitored this week on Wednesday, while the resurgence of COVID-19 in the news cycle should also be a concern for growth prospects.

“We are beginning to see this slow glide into a cooler labour market,’’ said Becky Frankiewicz at employment firm ManpowerGroup. “Make no mistake: Demand is cooling off. But it’s not a freefall.’’ 

The latest indication that hiring is losing steam would likely be welcomed by the Federal Reserve, which has been attempting to cool inflation by raising interest rates eleven times. The Fed is hoping to achieve a “soft landing,” in which hiring and growth slow enough to cool price increases without causing a recession. Economists have expressed doubts that the Fed will be successful.

ISM manufacturing numbers could boost stocks if the economy slows but doesn’t crash.

The next Federal Reserve interest rate meeting will be held on September 20, and markets will have almost three weeks to watch further economic data for clues on the next course of action. The US earnings calendar is light this week, with only a few mid-level tech stocks releasing their results. Traders should therefore look to Tuesday onwards for a return of volume that could react to recent data from the holidays.

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