US Dollar Index
The US dollar, as measured by the US dollar index, consolidated and rose above 103.00 during Thursday's trading session. This was influenced by strong data released by the United States, but steady dovish bets continued to limit the dollar's gains. The US economy continues to be above trend, which suggests that the market may be too inclined to firm ease again. Atlanta Federal Reserve President Rafael Bostic said in an interview with the Financial Times earlier on Thursday that he was "open to a rate cut in September" as inflation cools down. The above dovish comments failed to boost the US dollar index as it maintained an overnight recovery above 102.60. Although there was no substantial change in market expectations for the upcoming monetary policy decision, forecasts for the trend of the US economy still point to above-trend growth rates. This pattern suggests that the market may once again overestimate the need for aggressive monetary easing in the future.
The technical indicators of the US dollar index show that the market continues to be bearish, and buyers have failed to make a big move. The index continues to be anchored below the 20-day (103.64); 100-day (104.80); and 200-day (104.14) simple moving averages, reinforcing the prevailing bearish sentiment. The 14-day relative strength index (RSI) of the technical indicator remains close to 30, indicating steady selling pressure. On the other hand, the moving average convergence divergence (MACD) has stabilized while remaining in negative territory with low red bars. Therefore, the support below can focus on 102.40 {lower line of the descending channel}, and the market psychological level of 102.00. The resistance above focuses on 103.00 (market psychological level), and 103.56 {50.0% Fibonacci retracement} levels.
Consider shorting the US dollar index near 103.15 today, stop loss: 103.20, target: 102.80, 102.75
WTI spot crude oil
WTI crude oil was above $78.00 in the European session on Thursday, having corrected from a three-week high of $78.78 in the past two trading sessions. Oil prices are expected to remain sideways due to the uncertainty of the Middle East conflict and market participants' overly high expectations that the Federal Reserve will cut interest rates from the September meeting. The growing uncertainty of global oil demand has locked up the upside. In the Asian market on Thursday, WTI oil prices extended their losses for the third consecutive trading day, trading around $77.76. Crude oil prices fell as geopolitical tensions in the Middle East led to easing supply concerns. The market expects the Federal Reserve to cut interest rates in September, and the downside of oil prices may be suppressed. However, due to the sluggish global crude oil demand, especially the market's continued concerns about the sluggish demand for crude oil in China, crude oil prices are expected to remain under pressure. In addition, according to Reuters, jet fuel demand may weaken as reduced consumer spending affects travel budgets, which may further drag down oil prices in the coming months.
WTI crude oil technical forecast shows that the price is forming a consolidation range around $77.35 (20-day moving average) and $76.92 {38.2% Fibonacci rebound level from 84.73 to 72.10}. The MACD indicator of technical indicators supports the bullish scenario, showing a clear upward trajectory despite the MACD indicator being below zero. Crude oil finds initial support at $76.60 (10-day moving average) and $76.92 {38.2% Fibonacci rebound level}, and a break below will test the $75.08 {23.6% Fibonacci rebound level} and $75.00 {market psychological barrier} area levels. Otherwise, a correction to $78.12 (20-day moving average), and $78.41 {50.0% Fibonacci rebound} is possible before resuming the uptrend. A rebound to $80.00 (market psychological level) indicates a possible upward move.
Consider going long on crude oil near $78.30 today, stop loss: 78.10; target: 79.50; 79.80
Spot gold
Gold prices fell to $2,430 on Thursday in direct reaction to stronger-than-expected U.S. data, and fell to above $2,450 during the U.S. trading session. The benchmark 10-year U.S. Treasury yield rose more than 2% on the day, exceeding 3.9%, reaching its upper limit. In early Asian trading on Thursday, gold prices fluctuated higher to near $2,450, interrupting a two-day losing streak. The weaker U.S. dollar provided some support for the precious metals on the day. Data released by the U.S. Department of Labor on Wednesday showed that U.S. inflation rose in July, in line with expectations. Now market expectations have shifted back to just a 25-basis point rate cut, so this could take away some momentum from the gold market. Fed officials have expressed a willingness to ease policy, but they have been careful not to commit to a specific timeline and pace of rate cuts. On the other hand, ongoing geopolitical tensions and an uncertain economic outlook could drive safe-haven flows, boosting gold prices. Iran rejected calls from Britain and other Western countries not to retaliate against Israel after the assassination of Hamas leader Ismail Haniyeh in Tehran last month, according to the BBC.
From a technical perspective, the daily chart for gold prices suggests that the bearish potential remains limited. Gold prices found an intraday bottom near the 23.6% Fibonacci retracement level of the June/July rally at $2,438.80 and are currently holding above that level. Meanwhile, technical indicators have lost upside momentum but remain at positive levels. Only the 14-day relative strength index (RSI) has turned downwards. Finally, gold prices continue to develop above their 20-day simple moving average at $2,418.20. However, technical readings in the 4-hour chart suggest that the decline could continue, especially if the price breaks below the Fibonacci retracement support at $2,438.80. Meanwhile, the price of gold has fallen below its 20-hour, around $2,455.00. The 100 and 200-hour are still below the current levels, somehow suggesting that a deeper decline is not yet in sight. The risk is skewed to the upside, with the price of gold ready to retest the all-time high of $2,483.70, and the psychological $2,500 mark.
Consider going long on gold today before 2,453.00, Stop Loss: 2,450.00; Target: 2,468.00; 2,472.00
AUD/USD
AUD/USD holds recent gains, trading above the 0.6600 mark as encouraging data from the US boosts sentiment. Reserve Bank of Australia Governor Michelle Bullock is set to testify before Congress. The Australian dollar appreciated on Thursday following the release of modest Australian employment and Chinese economic data. However, the AUD/USD pair faced challenges due to the decline in copper and iron ore prices. The decline was exacerbated by China's deteriorating credit data, which, together with reduced demand and commodity surplus, put further pressure on the market. The AUD/USD pair faced downward pressure as investors assessed the Reserve Bank of Australia's (RBA) monetary policy stance. Although the Reserve Bank of Australia's outlook remained hawkish due to faster wage growth in the second quarter, RBA Governor Michelle Bullock denied any possibility of a rate cut in the next six months. Bullock stressed that the RBA remains vigilant to inflation risks and is ready to raise interest rates further if necessary.
Daily chart analysis shows that the AUD/USD exchange rate is around 0.6600. And testing the 55-day moving average of 0.6638, which indicates a weakening bullish bias. If the pair breaks above 0.6642 (this week's high), and 0.6638 (55-day moving average), the next level will be towards 0.6691 {76.4% Fibonacci retracement level of 0.6798 to 0.6347}. Moreover, the technical indicator 14-day relative strength index (RSI) is slightly below 53, confirming the strengthening of bearish momentum. On the support side, 0.6572 {50.0% Fibonacci retracement level}, is the immediate support for the AUD/USD pair. A break below this level may lead to a test of 0.6554 (14-day moving average), followed by a pullback level of 0.6519 {38.2% Fibonacci retracement level}.
Consider going long on AUD today before 0.6600, stop loss: 0.6585; target: 0.6640; 0.6650.
GBP/USD
GBP/USD regained traction and edged up to around 1.2850 on the day. Although the pair faced bearish pressure following the release of strong US data, it managed to reverse direction as risk flows began to dominate financial markets. Midweek, GBP/USD pulled back and fell below 1.2850, with investors expecting a further decline in inflation after the US PPI and CPI inflation rates released this week showed a more pronounced decline in price pressures at the producer level. However, the decline in price pressures does not seem to be directly transmitted to consumers. The interest rate market currently only has a 40% probability of a 50-basis point rate cut by the Federal Reserve on September 18, down from 50% earlier this week and 70% the week before. UK inflation rose in July, but missed market expectations, coming in at 2.2% year-on-year, below the expected 2.3%. The figure was still higher than the previous reading of 2.0%, while core inflation fell to 3.3% from 3.5% previously.
GBP/USD broke a four-day rally to a near 3-week high of 1.2872 midweek after a technical rebound from the 200-day exponential moving flat near 1.2675 last week. Bulls remain in the driver's seat, but GBP/USD failed to break out and reclaim 1.2899 (61.8% Fibonacci rebound from 1.3045 to 1.2664), and the 1.2900 mark lost in mid-July. The long-term trend favors bulls, as dollar weakness pushes GBP higher, while the long-term technical pattern's higher lows keep bullish momentum in the driver's seat. If GBP/USD breaks above 1.2900 (psychological level), 1.2955 (76.4% Fibonacci retracement from 1.3045 to 1.2664) could be seen as the next resistance area. On the downside, the first support is at 1.2800 (psychological level), and 1.2809 (38.2% Fibonacci retracement), with a breakout towards 1.2753 (23.6% Fibonacci retracement) level.
Today, we recommend buying GBP before 1.2830, stop loss: 1.2815, target: 1.2880, 1.2890
USD/JPY
USD/JPY maintained bullish momentum during Thursday’s US session, breaking out of a one-week range. The pair traded above 149.00, up 1.1%. USD/JPY was struggling to build on the previous day's good rebound from the 146.00 round number, the week's low, and was trading in a narrow range during the Asian session on Thursday. However, USD/JPY remained above the 147.00 round number and remained in a one-week range as traders waited for new catalysts before determining the near-term direction. The uncertainty about when the Bank of Japan might raise interest rates again discouraged traders from making aggressive bets, causing USD/JPY prices to remain range bound. Apart from this, risk appetite generally positively weakened the safe-haven demand for the yen and continued to boost the USD/JPY currency pair. However, USD/JPY's upside remained limited as the US Federal Reserve is on the defensive with bets on more rate cuts and signs of cooling inflationary pressures in the US. Apart from this, US bond yields will drive the dollar's trend, and the market's risk appetite should provide some momentum for USD/JPY.
At this stage, USD/JPY is above 148.00 and has formed a short-term ascending triangle bullish pattern. Having broken above the upper resistance line of the triangle at 148.10 yesterday, the pair will face the next resistance at 149.20 {a support trendline extending upwards from the January 2023 low of 127.46}. This is followed by 150.00 {a psychological level in the market}. On the other hand, USD/JPY remains below the 14-day moving average at 147.88, indicating a bearish trend in the short term. Moreover, the 14-day relative strength index (RSI) is at 34.60 levels, suggesting a potential correction. For support, USD/JPY may face immediate resistance at the August 9 low of 146.27, with the next level pointing to 144.89 (78.6% Fibonacci retracement of 140.25 to 161.95).
Today, we recommend shorting the US dollar before 149.40, stop loss: 149.60; target: 148.40, 148.20
EUR/USD
Optimism is not enough to support the euro. Better-than-expected US data boosted risk appetite and pushed Wall Street higher. However, EUR/USD fell to 1.0950, rebounding slightly amid mild demand for the US dollar. EUR/USD briefly rebounded to a seven-month high midweek before retreating to around the 1.1000 mark. Following the eurozone gross domestic product (GDP) growth data that was exactly in line with expectations, EUR/USD briefly broke through 1.1000 and rose to 1.1050 levels. Meanwhile, EU industrial production remained sluggish, and US consumer price index (CPI) inflation data was in line with expectations but still disappointed the market. Investors had expected inflation to fall further. However, the decline in price pressures does not seem to be directly transmitted to consumers. The interest rate market is currently pricing in just a 40% chance of a 50bp rate cut by the Federal Reserve (Fed) on September 18, down from 50% earlier this week and 70% the week before.
EUR/USD rose for the third consecutive session on Wednesday, with EUR/USD decisively breaking above the 1.10 mark and extending its recent bullish trend to a seven-month high near 1.1050. Last week, the pair briefly broke above 1.10 before quickly retreating to 1.0950. The daily chart shows that the pair has broken above the intraday high, extending gains and maintaining positive momentum. Further breaking above the bullish moving averages, the 20-day (1.0895) accelerated higher above the 100 (1.0802) and 200-day (1.0839) simple moving averages. Meanwhile, technical indicators are close to overbought with moderate upslopes and no other signs of upward exhaustion. If EUR/USD remains strong, the current 1.1050 area will provide resistance until 1.1085, which is the next level to watch. On the other hand, there is a possibility that the bullish trend of EUR/USD will be exhausted as EUR/USD has fallen from 200 day moving average 1.0839 continued the momentum of the technical retracement too quickly. The next retracement target for EUR/USD is 1.0913 (Tuesday's low), followed by the 200-day simple moving average level of 1.0839.
Today, it is recommended to go long on the US dollar before 1.0960, stop loss: 1.0945 target: 1.1000, 1.1010.
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