Market drivers on August 31

The US dollar has started the week on the positive footing, while riskier assets are dipping down. Let’s discuss last market movements in more details.

Chinese economic activity has shown signs of a sustained recovery from the virus slump. Manufacturing PMI came out almost as planned: 51.0 vs. the forecast of 51.1. Non-manufacturing PMI turned out even better than analysts anticipated. It was 55.2, while only 54.0 was foreseen. As a result, the Chinese yuan gained significantly. Let’s look at the USD/CNH daily chart. The pair has been confidently declining since the end of May. Today it has almost reached the levels unseen since end of January. If it falls below the 200-week moving average of 6.8100, it will open doors towards the low of January 20 at 6.7500. Otherwise, if it jumps above the high of August 21 at 6.9200, it may surge to the nest resistance of 6.9700.

Let’s move on to Japanese latest news. The country is looking for a new prime minister. Besides, Japanese stocks have surged after Warren Buffet claimed an investment in the country’s local firms. The Japanese yen gained after the positive news, but then the US dollar outperformed it. The pair has bounced off the 23.6% Fibonacci retracement level at 105.51. If it breaks through the key psychological mark of 106.00, it may climb up to the key resistance of 106.00. In the opposite scenario, if it falls below 105.51 again, it may dip down to the low of August 19 at 105.15.

As for the virus, investors have optimistic prospects for a vaccine. China has approved the Sinovac COVID-19 vaccine candidate for emergency use. The US FDA claimed that it is planning to fast-track vaccine approval if benefits outweigh the potential risks.

S&P 500 reached the all-time high of 3 525. If it rises up to 3 550, it will jump to 3 600. Otherwise, the move below the key psychological mark of 3 500 will drive the price to the next support of 3 470.

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Finally, let’s talk about gold. It has reversed from the resistance of $1 975 and started falling down. If it breaks down the support of $1 955, it will fall deeper to the next one at $1 930. On the flip side, if it jumps above $1 975, it may climb up to the key psychological mark of $2 000.

Follow further news:

Fed’s chair, Richard Clarida will make a speech at 16:00 MT time. He may unveil some details of the Fed's new approach to inflation targeting, which sent the US dollar down last week.

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