Today's Economic Rollercoaster

MARKET OVERVIEW

It was a big disaster for tech giants after investors pulled out on A.I., causing over a trillion dollars of losses in the stock market in a single day. While big tech companies assure that AI is revolutionary and the next big thing, investing more in its development daily, Wall Street says that it sees a bubble.

How so？ They mentioned that currently, Big tech companies are “bleeding,” spending more than they are earning from these developments. Whats worse is that they have no sure roadmap on how they will use AI to earn profits.

Barclays said that Wall Street analysts expect Big tech companies to spend around $60B a year on developing AI models by 2026, but reap only around $20B a year. In a study, it mentions that Tech giants are set to spend around $1T on AI capex in the coming years.

This fall this Wednesday caused the following tech companies to perform as so: Nvidia -6.8%, Super Micro Computer -9.5%, Microsoft -3.6%, Alphabet -5%, Broadcom -7.6%, Apple -2.9%, and Meta -5.6%.

More to discuss on this in the coming analysis to determine why exactly these tech giants want AI development and what other alternatives they can look into if not AI.

Meanwhile, in elections, Kamala Harris secured enough support to be the Democratic Nominee for President to face off against Trump. A little over 40 hours after Biden stepped down and she stepped up, her party secured $250M as campaign funds from Democratic donors. However, Trump did not let this slide and attacked her funds, saying that her overtaking Bidens funds was a mockery of campaign finance laws.

Rightfully so, Trump must initiate an attack against her, the underdog of the elections, who started her campaign late, does not have a running mate and is yet to secure a nomination party but was able to win the first polls with Kamala Harris by a marginal level showing 44% of voters support her, while 42% with Trump. A minimal support but a win, nevertheless, despite Trumps height.

There was a study conducted looking into who is mentally sharper to tackle challenges, and more voters think that Kamala Harris is more than Trump. This is good for her party and may stand as an advantage along with her age.

Will she be able to beat Trump？ We will never know until the elections. In the 4 months that are to come, what will she do and how will she turn the tables against Trumps rallying support？ More into that in the following months.

There is a more urgent matter to discuss in the next week as we watch closely the rising tensions in the Middle East as Netanyahu asks for support, NATO-style, to stand against Iran despite calls against this.

GOLD -Gold falls into deeper retracement and is at 2365.443 before data release later, which is expected to determine rate cut expectations. Overall, we still see bullish Gold along with many other factors, but the fall is also not unexpected as investors book profits before impactful news releases. An opportunity to buy GOLD may come soon.

SILVER -Silver has shown a deeper retracement, breaking under 29.018. There is a possibility for the price to consolidate at current levels before data release later this Friday, but it may also fall toward the mid-point of the range at 25.477. However, this is a very low-probability trade as most fundamental indications point toward more bullish metals and safe-haven assets.

DXY - More to expect from the dollar this Friday as data release nears. But before that, there is a lot to discuss regarding previous data releases this week. Last Wednesday, Manufacturing PMI showed a contraction after reporting a 49.5 from 51.6, a far cry from its expected results of 51.7. Flash services PMI, however, reported growth to 56 from 55.3. This was followed by data released on Thursday showing Advance GDP q/q is experiencing growth to 2.8% from 1.4% - these data refer to a weaker economy as these growths, while significant at surface level, come from an already lowering trend of improvements.

Later, a lower Core PCE Price Index m/m will indicate softening inflation, supporting dovish expectations for monetary policy this coming September. Depending on the results, our expectations will shift. Position yourselves according to your analysis, but we call for support of a weaker dollar with rate cuts this coming September.

Do note that this trade will be risky and may call for a sudden shift in price volatility. Thus, trade with caution and do not over-leverage.

GBPUSD - As we called it, the pound reached 1.28508, which was a deeper retracement than anticipated. This price area may provide a great pivotal point before a buy comes after the data release. We are waiting for the data release to know the decided market direction.

AUDUSD - The Aussie dollar broke all the way to 0.65250, highlighting AUD weakness. We may expect more of its weakness to be reflected in the market sometime after the data release, but we may find recovery from the Aussie dollar in the near term. With that said, we may see the price reaching 0.66145 or 0.66541.

NZDUSD - The NZD weakness was the best trade this week as we see a still lowered price level despite its peers showing recovery ahead of the data release. Although the price may find recovery toward 0.59400, similar to the Aussie dollar, we expect the Kiwi to lose out against the dollar after news volatility as rate cut expectations continue to move market demand for the Kiwi.

EURUSD -The EUR is starting to report considerable gains but is leaning toward a more consolidated approach with the price. With that said, we expect a bullish EUR. With 1.08543 acting as an effective support level, we expect to see prices rising further from current levels.

USDJPY -The yen finding further strength is not uncalled for and we expect further demand for the Yen to rush into the markets as the BoJ may come into play while dollar weakness continues to become evident. However, until the data is released, we cannot know for a fact where this market is heading. Although we continue to put this on our intervention watch.

USDCHF - This market continues to show us good bearish momentum, finding comfort below 0.88886, reaching a lower low than previously reached. With that said, we expect the price to drop further and more strongly after the data release.

USDCAD - The CAD found gains at 1.38402 after traders saturated CAD weakness this week. We may find the CAD gaining for a bit as analysts reposition themselves and book profits from this market. We may see a better position to trade CAD weakness in the coming week.

COT Reports Analysis

CAD - WEAK (5/5)

CHF - WEAK (5/5)

GBP - STRONG (5/5)

JPY - STRONG (2/5)

EUR - STRONG (5/5)

AUD - STRONG (5/5)

USD - STRONG (4/5)

SILVER - STRONG (3/5)

GOLD - STRONG (5/5)