US Dollar Index
The dollar fell again on Tuesday after the hammer was pulled on Monday, sending the greenback lower against most major currencies again, with all eyes on the Fed’s Jackson Hole Symposium in Wyoming, where Fed Chairman Jerome Powell is set to deliver a key speech. The dollar, as measured by the dollar index, fell to its lowest level since January at around 101.34 after Treasury yields retreated. Market participants are awaiting clarity on the Fed’s policy outlook. Despite modest setbacks, the U.S. economy is showing continued above-trend progress, suggesting that markets may be overestimating aggressive easing in the future. With the Fed now likely to adopt aggressive easing in response to economic conditions, the market’s outlook on the dollar has changed. In the short term, uncertainty over global economic conditions, financial markets, the U.S. election, and the exact path of the Fed’s monetary policy could keep the dollar supported until the end of the year, followed by some weakness in early 2025. But assuming the Fed cuts rates by 50 basis points in September and November and slows the pace of easing in 2025, the dollar could recover lost ground in the second half of next year.
Technical indicators for the US Dollar Index are consolidating, albeit in negative territory, reflecting the sharp decline in the 14-day relative strength index (RSI) around 26 and weak price action. The Moving Average Convergence Divergence (MACD) bars appear to be turning red, indicating continued selling pressure. The breakout of the index marks the end of the sideways trading in the 102.50-103.30 channel, which strengthens the selling argument. Therefore, on the downside, the first focus can be on 101.00 {market psychological barrier}, and if it breaks, it will test 100.61 {low of December 28 last year}. On the upside, consider 101.87 {87.6% Fibonacci retracement of 100.61 to 106.51}, and if it breaks, it will test 102.87 {61.8% Fibonacci retracement}, and 102.70 {10-day moving average} resistance levels.
Consider shorting the US dollar index around 101.50 today, stop loss: 101.65, target: 101.05, 101.00
WTI spot crude oil
Oil prices fell for the third consecutive trading day as commodity tail risks eased further. According to Bloomberg, Israeli Prime Minister Benjamin Netanyahu confirmed that he supports the ceasefire proposal put forward by US Secretary of State Antony Blinken. On Tuesday, WTI crude oil prices fell for the third consecutive day and the fifth day of decline in the previous six days, and fell to a near two-week low in the Asian session. Crude oil prices are currently below $75.00 amid the hope of a ceasefire in Gaza. Israeli Prime Minister Benjamin Netanyahu has accepted a transitional proposal to resolve differences that have hindered the conclusion of a ceasefire agreement, which will help ease market concerns about wider conflicts in the Middle East and supply disruptions in major oil-producing areas, thereby suppressing crude oil prices. In addition, the economic slowdown in China, the world's largest oil importer, is expected to curb fuel demand and put further pressure on commodities. Nevertheless, the risk of further escalation in geopolitical tensions may provide some support to crude oil prices and help prevent crude oil prices from falling. In addition, the dollar fell to a new multi-month low as the market bets that the Federal Reserve will soon start a rate cut cycle. The dollar maintains a broad-based downtrend, which should also provide some support to crude oil prices.
Last week, a major warning has appeared on the chart after oil prices were unable to break through the important 200-day simple moving average of $77.86, and 78.63 {50.0% Fibonacci retracement of 72.62 to 84.65}, which is a key technical level. As the bears suppress, the 14-day relative strength index (RSI), one of the technical indicators in the daily chart, remains in the middle of its range and is not oversold. This could mean more downside ahead, especially when hedge funds start to unwind, triggering further declines to $72.62 {June 4 low}, and $73.48 {2nd low this month}, or even lower $70.00 {market psychological barrier}. As for the upside, $77.21 {61.8% Fibonacci retracement} is in focus, and the next level is the 200-day moving average resistance level near $77.86.
Today, consider going long on crude oil near 74.25, stop loss: 74.00; target: 75.50; 75.70
Spot gold
Gold continued its upward trend, trading at a new high of $2,531 on Tuesday. The benchmark 10-year U.S. Treasury yield remained in negative territory below 3.9%, allowing gold prices to continue to rise. Gold prices hovered near $2,500 in early Asian trading on Tuesday. Rising expectations of a September rate cut by the Federal Reserve and further weakness in the U.S. dollar could support gold prices in the short term. More dovish rhetoric from Fed officials this week could boost gold prices, as rate cuts typically reduce the opportunity cost of holding zero-yielding assets such as gold and silver. On Friday, Fed Chairman Powell's speech at the Jackson Hole Symposium may provide some signals on future interest rate trends. On the other hand, easing geopolitical risks and risk sentiment may limit gold's upside. The United States said that Israeli Prime Minister Benjamin Netanyahu has accepted a bridging proposal aimed at resolving differences between Israel and Hamas. The easing of tensions in the Middle East is likely to cause the geopolitical risk premium to disappear quickly.
The daily chart shows that gold prices recently hit a record high and are consolidating recent gains. The intraday decline met buyers in the $2,385 price range, leading to a quick recovery, which shows that speculative interest is willing to continue to rise on the basis of the decline. Technical indicators in the above timeframe have slightly retreated from near overbought readings, but gold prices are developing above bullish moving averages, with the 10-day simple moving average providing dynamic support around $2,460.00. Prior to this, the $2,470-2,472 level and the subsequent breakout of the previous all-time high of $2.483.70 became the first support area. Meanwhile, the 14-day relative strength index (RSI) of the technical indicator has remained around 66, pointing upwards and sending a bullish signal. It remains in the positive zone. The resumption of the rise after a slight downward correction reflects the dominance of the bull market. Therefore, on the upside, $2,514.50 (123.6% Fibonacci rebound from 2483.70 to 2353.20) should be considered, and a breakout will point directly to the $2,548.90 (150.0% Fibonacci rebound) level.
Consider going long on gold before 2,510.00 today, stop loss: 2,506.00; target: 2,525.00; 2,530.00
AUD/USD
AUD/USD picked up pace, rising to a five-week high near 0.6750, driven by increasing selling pressure on the US dollar and the hawkish tone of the Reserve Bank of Australia's minutes. On Tuesday, AUD/USD continued its winning streak, rising for the fourth consecutive trading day. AUD/USD could appreciate further after the minutes of the August meeting released by the Reserve Bank of Australia showed that the cash rate is likely to remain stable for a longer period. The Reserve Bank of Australia considered raising interest rates but believed that keeping interest rates stable would better balance risks. RBA members unanimously agreed that a rate cut is unlikely in the short term. The People's Bank of China kept the one-year and five-year loan prime rates unchanged at 3.35% and 3.85%, respectively, at its August meeting on Tuesday. As both countries are close trading partners, any changes in the Chinese economy could have an impact on the Australian market. The dollar continues to face downward pressure as the Fed officials' rhetoric increases the likelihood of an imminent rate cut by the Fed. The market is focused on the upcoming speech by Fed Chairman Jerome Powell at the Jackson Hole conference on Friday.
The daily chart shows that the Australian dollar was trading above 0.6700 on Tuesday. AUD/USD maintained its upward trend and is within an ascending channel, indicating a bullish bias. In addition, the 14-day relative strength index, a technical indicator, is at the 66 marks reinforcing the current bullish momentum. On the upside, AUD/USD could target the 0.6760 level near the upper line of the ascending channel. If the upper line of the ascending channel is broken, AUD/USD will rise to the 7-month high of 0.6798 reached on July 11. On the support level, the 50-day moving average of 0.6643 constitutes a key support level. After breaking below this level, the pair may test the support of 0.6600 (a psychological barrier in the market). If the pair breaks below this support area, it may show a bearish bias.
Consider going long on AUD before 0.6725 today, stop loss: 0.6710; target: 0.6770; 0.6780.
GBP/USD
GBP/USD maintained its bullish momentum and closed at the yearly high of 1.3045 set in July. The broad weakness of the US dollar has driven the rebound of the currency pair as investors await comments from Federal Reserve officials. In early European trading on Tuesday, GBP/USD retreated to around 1.2975, interrupting a three-day winning streak, affected by a slight recovery in the US dollar. In the absence of top-level data from the UK later this week, the US dollar price dynamics will be the main driver of GBP/USD. The speech of Federal Reserve Chairman Jerome Powell on Friday will be the focus of the market. Last week's inflation and employment reports in the UK support the Bank of England to keep interest rates stable at the upcoming September meeting. 5.0%. The Bank of England is most likely to keep interest rates unchanged at its next meeting in September. Expectations of more rate cuts from the Bank of England may put pressure on the pound in the short term. The dollar continued to retreat after the start of the new trading week, pushing GBP/USD higher. GBP/USD continued its recent reversal trend as investors shook off the recent downturn in market sentiment.
From the daily chart, the bullish momentum at the beginning of the week was strong, and GBP/USD bulls recaptured the main key resistance area of 1.3000. The 14-day relative strength index (RSI) indicator, a short-term technical indicator, climbed above 67, reflecting that GBP/USD is not technically overbought yet. Therefore, on the upside, the high of 1.3052 this year can be paid attention to, and the next level of 1.3100 will become the main resistance for GBP. If the currency pair undergoes a technical correction, the immediate support is at 1.2950 (Fibonacci 78.6% retracement of the recent decline), followed by 1.2900 (Fibonacci 61.8% retracement, psychological level) and 1.2850 (Fibonacci 50% retracement).
Today's recommendation is to go long GBP before 1.3015, stop loss: 1.3000, target: 1.3060, 1.3070
USD/JPY
On Tuesday, USD/JPY traded in the bearish zone around 145.50 for the third consecutive day. The decline in USD/JPY was mainly supported by the weaker US dollar. Traders will pay close attention to Japan's national consumer price index (CPI) for July and the speech of Federal Reserve Chairman Powell on Friday. Meanwhile, the US dollar index, which measures the value of the US dollar against a basket of foreign currencies, fell to a multi-day low near 101.34, which is bearish for USD/JPY. Investors believe that the Federal Reserve will start easing policy in September. On the yen, the positive Japanese GDP in the second quarter and the possibility of a rate hike by the Bank of Japan in the short term supported the yen. Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said the reports were generally positive, supporting the Bank of Japan's view that further rate hikes are coming, although the central bank will remain cautious as the last rate hike caused a sharp surge in the yen.
USD/JPY was trading around 145.30 on Tuesday. Daily chart analysis shows that the pair is slightly below the 9-day exponential moving average (146.85), indicating a short-term bearish trend. In addition, the 14-day relative strength index (RSI) is slightly above 30, indicating that the pair may see a correction. In terms of support, USD/JPY may test the seven-month low of 143.61 hit on August 6. Further declines may push the pair to the next important support level of 140.25. On the upside, USD/JPY may face immediate resistance near the 9-day moving average of 146.42 (23.6% Fibonacci rebound from 161.80 to 141.68), and 146.85. If the pair breaks above this level, it may target the 20-day moving average of 148.20.
Today, it is recommended to short the US dollar before 145.30, stop loss: 145.50; target: 144.30, 144.00
EUR/USD
Further weakness in the US dollar allowed EUR/USD to extend its continued upward trend and break through the 1.1100 mark, setting a new high for 2024 ahead of the Federal Open Market Committee minutes released on Wednesday. EUR/USD extended its gains for the third consecutive day driven by the continued weakness of the US dollar, hitting a new high for 2024 near 1.1131. As investors continue to believe that the Fed will start an easing cycle in September, the dollar accelerated its pullback and fell below the key support level of 102.00, hitting a new multi-month low. After the release of inflation data, the market's expectations for the Fed to cut interest rates by 50 basis points next month have weakened, and now believe that the Fed will cut interest rates by less. Other major fundamental data from the United States that are better than expected also support this expectation. Although the European Central Bank has remained silent, Fed policymakers are expected to announce their policy views as the September meeting approaches. It is appropriate to consider the possibility of the Fed cutting interest rates in September, citing the increasing possibility of a weaker labor market. If the Fed chooses to launch a more substantial rate cut, the policy gap between the Fed and the ECB may narrow in the medium and long term, which may support further gains in EUR/USD.
In terms of recent technical trends, after further gains in EUR/USD, the 14-day relative strength index (RSI) of the technical indicator rose to 73.00, which is at a positive level, reflecting the strength of US dollar buyers. It may test the December 2023 top of 1.1139 (December 28). After breaking, the currency pair will head straight for 1.1275 (last July 17 high). On the downside, the next target for EUR/USD is 1.1070 {Tuesday's low}, followed by 1.1000 {round mark} as an immediate support level.
Today, it is recommended to go long on the US dollar before 1.1115, stop loss: 1.1100 target: 1.1160, 1.1170.
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