Dollar Index
The dollar rebounded slightly on Monday after posting one of its worst weekly performances since June 2023 following better-than-expected durable goods orders data from the U.S. The dollar index — which measures the value of the greenback relative to a barrel of other currencies — fell 1.75% last week, with the latter portion of the decline driven by Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole. Market participants continued to sell the dollar so far last week, sending the dollar index to a new 2024 low near 100.60 as the week came to a close. Continued selling pressure stemming from rising odds that the Fed will kick off an easing cycle in September has kept the dollar lower amid volatile performance from U.S. yields, while some comments from Fed rate setters have also fueled the selling frenzy. Bets on a Fed rate cut next month remain elevated. This view also seems to be in line with the views of some Fed officials. U.S. yields across the curve mirrored the performance of the dollar, moving all the way down in the first half of last week. If there is a chance to pull back from this week’s slump, the pullback in yields is always associated with investor sentiment swings around the most likely Fed rate cut next month.
Since the US Dollar Index convincingly broke below the key 200-day moving average of 104.00, it has seen a new low in 2024 near 100.60. The probability of the index continuing to maintain a selling bias has increased. If sellers continue to dominate the market, the US Dollar Index may first fall to the December 2023 bottom of 100.61 and the double bottom bearish pattern formed by last week's low of 100.60. This will be followed by a test of the psychological price of 100.00. A breakout points to 99.57 (last July low). On the upside, on the daily chart, the 14-day relative strength index (RSI) of the technical indicator is still in the oversold area near 27, opening the door for a possible bullish attempt in the near term. Therefore, 101.00 {market psychological barrier}, and 101.06 (5-day moving average) are initial resistance, and then look to 101.59 (23.6% Fibonacci rebound from 104.80 to 100.60) as the second limit of price rebound.
Today, consider shorting the US dollar index around 100.98, stop loss: 101.10, target: 100.60, 100.55
WTI spot crude oil
Another weekend, another conflict broke out in the Middle East. After the sharp drop in oil prices in the middle of last week, a strong short-covering rebound can be seen, thanks to the market's hope that the market will feel friendlier when the US dollar takes a break. The trading price on Monday was around $78.00. WTI crude oil prices rose as the market's expectations that the Federal Reserve will cut interest rates at the upcoming September meeting became more firm. In short, when the dollar falls, risk sentiment tends to become more moderate, and a fall in oil prices in local currencies will not hurt. When tensions in the Middle East ease, the focus will turn to the increasing uncertainty of global oil supply and demand. The outlook is not optimistic. China is the world's second largest oil consumer and the biggest driver of global demand growth. China's oil demand has contracted for the third consecutive month, and China may reach its peak oil demand earlier than anyone expected.
From the daily chart, the 14-day relative strength index (RSI) and the stochastic index of the technical indicators have rebounded from 37 to around 53, indicating that oil prices continue to rise. If oil prices continue to stay above the 200-day moving average of $78.07. The initial resistance level is estimated at $79.90 {61.8% Fibonacci rebound level}, and $80.00 {market psychological level} will become a must-attack level for bulls. The first support below is expected at $76.92 {38.2% Fibonacci rebound from 84.73 to 72.10}, and $75.08 {23.6% Fibonacci rebound}, and the next level reference is around $73.45 as the next relevant support.
Today, consider going long on crude oil around 78.00, stop loss: 77.80; target: 79.20; 79.50
Spot gold
Gold prices retreated from the daily high of $2,527, but still managed to stay above $2,515 on Monday. In early Asian trading on Monday, gold prices remained stable around $2,513 due to the weak dollar and dovish remarks from Fed Chairman Powell. In his speech, Fed Chairman Powell said that the time has come to cut interest rates starting in September this year, which provided support for gold's rise. Financial markets have fully priced in the prospect of a 25 basis point rate cut by the Federal Reserve, while also pricing in a higher probability of a more aggressive rate cut, which could further support precious metals as it would make holding gold more attractive relative to holding other currencies. In addition, Hezbollah reportedly fired hundreds of rockets and drones at Israel early Sunday, with the Israeli military saying it carried out a wave of preemptive strikes in southern Lebanon to thwart a massive rocket and drone attack by Hezbollah. Continued geopolitical tensions in the Middle East could boost demand for safe-haven assets, benefiting gold prices.
After ending last week on a bullish note, gold entered a consolidation phase this week, paving the way for new highs. The 14-day relative strength index (RSI) indicator, a technical indicator on the daily chart, remains above 63, indicating that the bullish bias remains intact. The $2,500 round number (psychological level, the midpoint of the upward regression channel since mid-February) is a key support level for gold. If gold continues to use this as support, the resistance areas of $2,531.70 (previous all-time high), and $2,551.10 (161.80% Fibonacci rebound from $2450.20 to $2286.20) could be the next resistance levels ahead of the ascending channel ceiling of $2,620. Technical sellers could show interest if gold fails to stabilize above $2,500. In this case, $2,484.50 (Friday's low) could be considered the next support level, followed by $2,450.20 (previous all-time high on May 20).
Consider going long on gold before 2,514.00 today, stop loss: 2,510.00; target: 2,530.00; 2,535.00
AUD/USD
AUD/USD gave up Friday's strong gains, coming under pressure soon after approaching the key resistance zone around 0.6800 on the back of better-than-expected durable goods orders data from the US and a recovery in the US dollar. The Australian dollar edged lower in Asian trading on Monday, still hovering around a seven-month high of 0.6798. However, the AUD/USD pair moved higher as risk appetite warmed up following a dovish speech by Federal Reserve Chairman Powell at the Jackson Hole Symposium last Friday. The hawkish sentiment from the Reserve Bank of Australia regarding its policy outlook also provided support to the Australian dollar. The minutes of the Reserve Bank of Australia's recent meeting showed that the board members were unanimous in their view that a rate cut was unlikely anytime soon. In addition, RBA Governor Bullock said that the RBA would not hesitate to raise interest rates again if necessary to combat inflation. The US dollar depreciated as the probability of a rate cut in September rose. The market is now fully expecting the Fed to cut interest rates by at least 25 basis points at its September meeting.
Daily chart analysis shows that the Australian dollar is trading around 0.6770 at the beginning of the week. The AUD/USD pair has returned to the rising channel, suggesting that the bullish bias has strengthened. However, the 14-day relative strength index, a technical indicator, is close to the 65 mark, supporting the continued bullish momentum. In terms of resistance, AUD/USD is testing the seven-month high of 0.6798. If it breaks through this level, AUD/USD will test 0.6830 {a trend line extending to the right from the high of 0.6999 in July last year}, and if it breaks, it will point to 0.6871 {the high of December last year}. On the downside, AUD/USD may find support around 0.6707 {9-day moving average}, and 0.6700 {market psychological barrier} levels, and then a break below the above areas may weaken the bullish bias and push AUD/USD to 0.6670 (61.8% Fibonacci rebound from 0.6871 to 0.6347).
Consider going long on AUD before 0.6755 today, stop loss: 0.6740; target: 0.6800; 0.6810.
GBP/USD
GBP/USD has moved away from multi-month highs and consolidated gains around 1.3200 on Monday. Better-than-expected durable goods orders data from the US and a cautious market stance helped the US dollar to gain a foothold, limiting the pair's gains. GBP/USD retreated slightly to around 1.3200 in early Asian trading on Monday. Signals that the Federal Reserve will start easing monetary policy in September dragged the dollar lower and supported GBP/USD. At the Jackson Hole conference last Friday, Fed Chairman Jerome Powell sent a clear signal that the Fed will lower the target range for the federal funds rate at its next meeting on September 17-18 as inflation is returning to the 2% target sustainably. Firmer bets on Fed rate cuts continue to weigh on the dollar and boost GBP/USD. On the other hand, speculation that the Bank of England's policy easing cycle will be slower than other major central banks has provided some support to the pound. Bank of England Governor Andrew Bailey said late Friday that although many pricing pressures have eased faster than expected, inflation remains the main concern of the Bank of England.
UK markets were closed on Monday for the summer bank holiday, and trading was subdued. There were few signs of weakness in the technical picture for the pound. The bull run from the early August lows continued as expected and moved higher to 1.3230 earlier, a valid retest of the July 2023 highs. In the event of a corrective downturn, the intraday trend support near 1.3142 (July 10 low) and the previous trading day high of 1.3045 will be the initial points of contention, and a break below will further point to the 1.3000 key level. If GBP further breaks all short-term; medium-term; and long-term daily simple moving averages, the currency pair may encounter temporary resistance at 1.3280 (upper line of the weekly upward channel), and then buyers will target the 1.3300 round mark. A break below further points to the 1.3331 (76.4% Fibonacci rebound level from 1.4250 to 1.0356) level.
Today, we recommend going long on GBP before 1.3170, stop loss: 1.3155, target: 1.3230, 1.3240
USD/JPY
USD/JPY rebounded slightly to 144.50 yesterday as hawkish comments from Bank of Japan Governor Kazuo Ueda contrasted sharply with the dovish stance of Fed Chairman Powell. Bank of Japan Governor Kazuo Ueda told parliament last Friday that the central bank could raise interest rates further if economic forecasts are accurate. In addition, the national consumer price index (CPI) inflation data for July remained at its highest level since February, reinforcing the Bank of Japan's hawkish stance on its policy outlook. The dollar depreciated as the possibility of a rate cut in September rose. "It's time to adjust policy," said Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium. Traders expect the U.S. central bank to cut interest rates by at least 25 basis points in September.
USD/JPY traded around 143.90 on Friday. The daily chart shows that USD/JPY started the week trading around 143.45-144.50. The pair is moving downwards within a descending channel, suggesting a bearish bias. However, the 14-day relative strength index (RSI) of the technical indicator is still slightly above 33, indicating that the bearish trend may continue. On the downside, USD/JPY may sail around the 142.25 {central axis of the descending channel on the weekly chart} area. If it falls below this level, the 7-month low of 141.68 on August 5 will be the next target. If it falls below this level, USD/JPY will fall to the psychological support level of 140.00. In terms of resistance, USD/JPY may test the psychological price of 145.00. The short-term barrier near 145.20 is followed by the 9-day moving average at 145.20. If the 9-day moving average is broken, the next target is around 146.38 (23.6% Fibonacci rebound level from 161.80 to 141.61).
Today, it is recommended to short before 144.75, stop loss: 145.00; target: 143.60, 143.40
EUR/USD
EUR/USD was unable to sustain the earlier move to reach a year-to-date peak around 1.1200 and retreated to the 1.1180 area on the back of a bullish USD, in line with rising US yields across the curve. EUR/USD extended gains for the second consecutive session in Asia on Monday, trading around 1.1180. The upside in EUR/USD was attributed to the dollar's decline following the dovish speech by Federal Reserve Chairman Powell at the Jackson Hole Symposium last Friday. In addition, Philadelphia Fed President Patrick Harker on Friday stressed the need for the US central bank to gradually lower interest rates. On the euro side, ECB Governing Council member Olli Rehn reportedly said on Friday that slowing inflation and weakness in the eurozone economy strengthen the case for lower borrowing costs next month. The outlook for economic growth in Europe, especially in the manufacturing sector, is quite sluggish, which strengthens the case for a rate cut in September. In addition, the recent breakout in EUR/USD and the start of the Fed's new policy cycle suggest that a new trading range is forming. However, if key US data released in early September are stronger than market forecasts, EUR/USD could pull back to around 1.1000.
On the daily chart, the 14-day RSI remains in the overbought {70} zone, while momentum suggests that the current uptrend remains strong. The 55-day and 100-day moving averages continue to rise, temporarily at 1.0866 and 1.0824, respectively. Meanwhile, the spot price remains above the key 200-day moving average at 1.0849, so the short-term constructive bias remains good. Meanwhile, the exchange rate has the potential to move higher, while 1.1273 (July 18, 2023 high) and 1.1275 (61.8% Fibonacci rebound from 1.2351 to 0.9535) will act as near-term upside barriers. A break above this level could lead to a move towards the 1.1312 (upper limit of the weekly uptrend channel) high. If there is a pullback, the immediate support is at 1.1105 (last week's low), followed by the 200-week moving average at 1.1063.
Today, it is recommended to go long on EUR/USD before 1.1165, stop loss: 1.1150, target: 1.1230, 1.1250.
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