US Dollar Index
The US dollar traded sharply weaker on Monday, hitting its lowest level since mid-January at 101.85, mainly due to the appreciation of the yen against the dollar by more than 1%. The market is betting that the Federal Reserve will start a rate cut cycle in September. San Francisco Fed President Mary Daly said that the Fed needs to take a gradual approach to reduce borrowing costs, which reinforced the market's expectations of the Fed's rate cut. The bearish bias of the US dollar has become a booster for this downward trajectory. In addition, the stock market maintains a generally bullish bias, which is another factor that suppresses the demand for the safe-haven dollar. Nevertheless, weak crude oil prices may suppress the commodity-linked dollar. In addition, investors will also closely watch the speech of Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium for new clues on the central bank's policy path. This will therefore have a key impact on the recent US dollar price trend. In addition, geopolitical developments in the Middle East, which tend to drive crude oil prices, will also provide some impetus for the US dollar.
From the recent technical analysis, the US dollar index has a sideways and soft trend, and technical indicators show deep consolidation in negative terrain. The Relative Strength Index (RSI) is currently around 32, approaching oversold levels, while the red bar of the Moving Average Convergence Divergence (MACD) indicator has stabilized, indicating weak price action. Despite the gains in the US Dollar Index in the middle of last week, the overall technical picture remains bearish. In the short term, the index is trading in the 101.34 - 102.87 range. On the downside, the 101.87 {87.6% Fibonacci retracement of 100.61 to 106.51}, and 101.34 {low of January 2 this year} levels can be watched. On the upside, the 102.87 {61.8% Fibonacci retracement}, and 103.00 {market psychological barrier} will become the main resistance levels for the US Dollar bulls.
Consider shorting the US dollar index around 102.00 today, stop loss: 102.10, target: 101.65, 101.60
WTI spot crude oil
On Monday, tail risks rose to the forefront, pushing oil prices down, and oil prices fell for the second consecutive day. Traders are worried that demand from oil importer China will weaken again, weighing on overall market sentiment. WTI oil prices fluctuated below $77.00 during the Asian session on Monday. Crude oil prices are under downward pressure due to concerns about weak crude oil demand from top oil importer China. Crude oil prices may rise as market concerns about geopolitical tensions in the Middle East continue to heat up after Hamas rejected a ceasefire agreement last Sunday. The downside of oil may be limited as the probability of the Federal Reserve starting to cut interest rates from September increases. Last week's US economic data showed that retail sales exceeded expectations, while both the Producer Price Index (PPI) and the Consumer Price Index (CPI) showed that inflation is falling. Lower borrowing costs may have a positive impact on US economic activity. According to the Financial Times, Mary Daly, president of the Federal Reserve Bank of San Francisco, stressed last Sunday that the Fed should take a gradual approach to reducing borrowing costs.
From a technical perspective, WTI crude oil continued to fall after being suppressed by the double strong resistance of the 200-day moving average {78.13} and $78.41 {50.0% Fibonacci rebound level from 84.73 to 72.10}. It has now fallen below all moving averages. The 14-day relative strength index of the technical indicator is biased towards the short side. In the short term, it may further test the support near $75.08 {23.6% Fibonacci rebound level}; and continue to test $73.48 {low point on the 2nd of this month}. As for the upside, pay attention to the resistance near $78.13 of the 200-day moving average. If it breaks, it may test the $80.00 {market psychological barrier} level.
Consider shorting crude oil near 75.50 today, stop loss: 75.80; target: 74.50; 74.30
Spot Gold
The continued selling of the US dollar, coupled with falling US yields and hopes of a rate cut by the Federal Reserve in September, have prompted gold prices to question the all-time high of more than $2,500 per ounce. Gold prices broke through the psychological level of $2,500 to hit a record high of $2,510 before the end of last week and found support from multiple factors. The US dollar once again came under selling pressure and fell back to the lowest level since January hit earlier this week, which in turn benefited commodities. In addition to this, geopolitical risks brought about by the ongoing conflict in the Middle East and the protracted Russia-Ukraine war also provided additional support for the safe-haven precious metal. At the same time, concerns about a possible recession in the United States have eased, which remains supportive to the general risk sentiment and puts some pressure on gold prices during the Asian session on Monday. Traders are also choosing to lighten their bets, preferring to wait for more clues about the Fed’s policy path before positioning for the next directional move. Therefore, the market focus remains on the FOMC minutes to be released on Wednesday and Fed Chairman Powell’s speech at the Jackson Hole Symposium.
From a technical perspective, the strength of last Friday’s breakout above the $2,470-2,472 horizontal barrier and the subsequent breakout above the previous all-time high of $2,483.70 is seen as a new trigger for bullish traders. Moreover, the oscillators on the daily chart remain in positive territory and have not yet entered the overbought zone, suggesting that there is a path of least resistance to the upside for gold prices. Nonetheless, bulls need to tread carefully if gold prices fail to continue their upward momentum after surpassing the psychological $2,500 mark. Therefore, it would be prudent to wait for some follow-through buying after Friday's time-allowed peak (near $2,509-2,510) before a further rise to $2,514.50 (123.6% Fibonacci retracement of 2483.70 to 2353.20). If gold successfully converts this level into support, then $2,548.90 (150.0% Fibonacci retracement) will be the next bullish target. A breakout points to the $2,600.00 {upper line of the ascending channel} level. Alternatively, a resistance breakout of $2,489.00 {upper line of the daily horizontal channel} now seems to protect the near-term downtrend. Any further decline is more likely to attract new buyers and remain capped around the $2,472-2,470 USD area.
Consider going long on gold today before 2,500.00, stop loss: 2,496.00; target: 2,520.00; 2,525.00
AUD/USD
AUD/USD continued its strong uptrend, reclaiming the key 0.6700 mark and hitting a five-week high ahead of the release of the Reserve Bank of Australia minutes. AUD/USD opened stronger at around 0.6680 on Monday. The overall risk appetite tone and rising market expectations of an imminent Fed rate cut weighed on the US dollar, providing some support for AUD/USD. The minutes of the RBA board's August meeting and a speech by Fed Chairman Jerome Powell will be the focus this week. The market is overconfident that the Fed will be eager to cut rates, but this depends on the upcoming data. A week ago, the market priced in a more than 50% probability of a larger Fed rate cut and a 50 basis point rate cut. Fed Chairman Powell's speech at the Jackson Hole Symposium last Friday may provide some hints on the Fed's easing pace. Dovish speeches by officials may put some selling pressure on the US dollar. On the other hand, the hawkish stance of the Reserve Bank of Australia continues to support the Australian dollar.
From a technical perspective, AUD/USD is expected to continue its upward trend. The daily chart shows that the 14-day relative strength index (RSI), an oscillator that shows market momentum, has been around 60, pointing upward and sending a bullish signal. Maintaining in the positive zone. Meanwhile, AUD/USD has encountered buying near 0.6625 (61.8% Fibonacci rebound from 0.6798 to 0.6347), and 0.6622 {30-day moving average}. If the bears can break through the upper support area, it is not ruled out that the currency pair will test the 0.6600 (market psychological barrier) area. A breakout would point to 0.6572 (50.0% Fibonacci rebound). On the contrary, if AUD/USD can hold above 0.6622-0.6625 at the beginning of the week, it can further challenge 0.6755 (July 17 high) and head towards the psychological market level of 0.6800.
Today, you can consider going long on AUD before 0.6720, stop loss: 0.6700; target: 0.6760; 0.6770.
GBP/USD
GBP/USD has maintained a good constructive stance at the beginning of this week and is approaching the key 1.3000 milestone against the backdrop of continued downward pressure on the US dollar. In the Asian market on Monday, GBP/USD rose to a more than one-month high near 1.2950 after breaking out last week. The strong upside for GBP/USD comes on the back of a recent bounce from the technically important 200-day simple moving average (1.2675), which could constitute a new trigger for bullish traders. The pound found support last week from relatively strong UK economic data, which indicated that the UK economy remains resilient and could dash hopes of another rate cut by the Bank of England in September. On the other hand, the US dollar is trading near its lowest level since January hit earlier this month, as the Fed maintains a dovish outlook. This expectation was reaffirmed by the latest comments from San Francisco Fed President Mary Daly, who said that the Fed needs to take a gradual approach to lower borrowing costs. This has kept US Treasury yields depressed, weighing on the dollar.
The GBP/USD exchange rate jumped to a high of around 1.2997. The GBP/USD pair extended its uptrend from a six-week low of 1.2665 after a positive divergence formed within the daily chart frame, with the pair continuing to establish higher lows while the momentum oscillator fell to lower lows. This usually leads to the resumption of the uptrend, but it should be confirmed with more indicators. The 14-day relative strength index (RSI) is around 64.00, showing signs of buying interest. On the upside, the psychological figure of 1.3000 and the year's high of 1.3045, the next level of 1.3100 will become the main resistance for the pound. On the downside, the first support is located at 1.2900 (market psychological level), and 1.2809 (38.2% Fibonacci rebound level of 1.3045 to 1.2664).
Today, it is recommended to go long on GBP before 1.2975, stop loss: 1.2960, target: 1.3050, 1.3060
USD/JPY
USD/JPY started the new week under heavy bearish pressure, falling to its lowest level in nearly two weeks at 145.18. As markets stabilized, risk sentiment improved slightly later in the day and the pair managed to recover to 146.00. USD/JPY continued to fall below 146.00 during early European trading. The pair remained heavy as the Fed and the Bank of Japan presented different policy outlooks ahead of the Fed Minutes and Powell's speech later this week. The yen appreciated against the dollar for a second consecutive day, driven by hawkish sentiment surrounding the Bank of Japan. Recent data showing GDP growth in Japan in the second quarter supported the possibility of a rate hike by the Bank of Japan in the near term. Japanese machinery orders, a key indicator of capital expenditure, rose 2.1% month-on-month in June, beating forecasts of 1.1%. The market now expects inflation data from Japan later this week for further insights into the direction of the Bank of Japan's monetary policy. The dollar continued to fall after dovish comments from Fed officials, which raised expectations for a rate cut by the Fed in September. In addition, last week's US economic data showed that both the Producer Price Index (PPI) and the Consumer Price Index (CPI) indicated that inflation is easing.
From a technical perspective, USD/JPY’s strong up move has shaken the 149.36 (38.2% Fibonacci retracement from 161.80 to 141.68) level, which should now act as a key pivot for traders. If the strength continues, it could trigger a short-covering rally that could take USD/JPY back towards the 150.00 psychological level. It could extend further to the intermediate resistance around the 150.75-150.80 area, and in turn, test the 151.00 round number and the 151.40-151.74 confluence – which encompasses the 200-day simple moving average and the 50% Fibonacci retracement level. On the other hand, USD/JPY could accelerate its decline towards the 147.00 round number and 146.42 {23.6% Fibonacci retracement level}. If the above support level cannot be held, the near-term bias may shift back to bearish traders and trigger aggressive technical selling, paving the way for a drop to the 145.00 mark and pointing to the 144.27 (August 7 low) level.
Today, it is recommended to short the US dollar before 146.75, stop loss: 148.00; target: 145.80, 145.50
EUR/USD
The EUR/USD rose to the level of late December 2023 and approached the key 1.1100 mark, which has always been the backdrop of continued selling pressure on the US dollar before the FOMC minutes and Powell's speech at Jackson Hole. In the Asian market on Monday, the EUR/USD extended its gains for the second consecutive trading day and traded around 1.1030. The reason for the rise in the EUR/USD may be the increase in the probability of the Fed starting to cut interest rates in September. Last week's US economic data showed that the market's concerns about the resilience of the economy have intensified, especially in the face of recent weak inflation and labor data. San Francisco Federal Reserve President Mary Daly stressed on Sunday that the Federal Reserve should take a gradual approach to lowering borrowing costs. Daly dismissed economists' concerns that the U.S. economy is on the verge of a sharp slowdown that would justify a quick rate cut. While it is uncertain whether the Fed will cut rates next month, not cutting rates could hurt the labor market. In the eurozone, investors expect the European Central Bank to gradually reduce interest rates. ECB policymakers are hesitant about the specific path of rate cuts due to concerns that price pressures may re-accelerate.
The relative strength index (RSI) on the daily chart has begun to rise towards 70.30 after falling to 60.30 last Thursday, reflecting the hesitation of sellers, and is at a positive level. Although the momentum is uneven, reflecting the hesitation of dollar sellers. On the bright side, 1.1100 (psychological level, dynamic level) direct resistance level aligned. Breaking through, it will go up to the strong static resistance area near 1.1140. After exceeding this resistance area. The next level points to 1.1275 (last year's high on July 17). The support levels are 1.0960 (static level), and 1.0950 is the direct support level before 1.0920 {weekly triangle upper rail resistance line}, and 1.0910 {last week's low} area.
Today it is recommended to go long on the US dollar before 1.1070, stop loss: 1.1055 target: 1.1140, 1.1150.
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