US Dollar Index
The US dollar, as measured by the US dollar index, continued to move horizontally above the 103.00 level during Monday's trading session. The market sentiment was relatively calm earlier, with US stock index futures unchanged and the 10-year US Treasury yield remaining close to 4% earlier in the day. However, the bullish trend of the US dollar index around 103.50 seems to have run out of steam as global stock markets recover further after recent turmoil. This week's US CPI inflation and retail sales data will be of particular interest as the Fed Funds target range rate repricing is dovish. The market expects the Fed to cut interest rates by 100 basis points this year and 40 basis points in September. If there is a broad downside surprise in the data this week, it can be expected that rate cut bets will increase this year, and investors may fully price in the 50 basis points of easing in the September meeting as a rate cut; this may also send the US dollar and US Treasuries south. Conversely, if there is an upside surprise, investors may reduce rate cut bets as it may induce the US Federal Reserve (Fed) to be cautious on rate cuts, thus supporting the US dollar and yields. However, the DXY has so far echoed the subdued tone, highlighting that sellers are likely to remain dominant.
Ahead of this week’s US Consumer Price Index (CPI) data, the DXY has rebounded modestly from support at 102.78. Despite benefiting from additional support from the lower line of the descending channel (starting from the low of 102.40) and the recent RSI touch to oversold territory (40.00), the bullish resolve from support is not encouraging. The reason for the weak rebound from support is likely that the market sentiment is biased towards the bears; since topping out at 106.15 in late June, bears have dominated price action, pushing the DXY through the 200-day simple moving average of 104.21. If the bulls change direction and extend the retracement from support, the resistance level of 104.00 (market psychological level) needs to be watched. In addition, given the weak response of the current support level and the current market sentiment is biased to the downside, the current support level may be broken this week, and the pendulum swing is favorable to touch the 102.86 {61.8% Fibonacci retracement of 100.61 to 106.51} and 102.40 {lower line of the downtrend channel} support levels.
Today, consider shorting the US dollar index around 103.25, stop loss: 103.38, target: 102.95, 102.8
WTI spot crude oil
Oil prices rose for the fourth consecutive day on Monday. Traders pushed oil prices to a recent high of $80.44 as OPEC lowered its demand outlook. WTI crude oil prices hovered around $77.40 per barrel during the Asian session. Crude oil prices may rise for the fourth consecutive day, driven by rising supply concerns amid geopolitical tensions in the Middle East. Positive economic data from China and the US also boosted oil prices. China's consumer price index rose more than expected in July. China's consumer price index (CPI) rose 0.5% year-on-year in July, higher than the expected 0.3% and the previous value of 0.2%. Meanwhile, the monthly index also increased by 0.5%, recovering from the previous value of 0.2% decline. Expectations of a possible rate cut by the Federal Reserve in September may provide support for oil demand as lower borrowing costs will support economic activity in the United States.
Oil prices are trying to continue the recovery and rise continuously. However, the current situation may turn optimistic and rise above the key levels of $78.17 {200-day moving average}, and $78.41 {50.0% Fibonacci rebound from $84.73 to $72.10} to the recent high level of $80.40. This allows bulls to find support in the above-mentioned areas. The 14-day relative strength index (RSI) of the technical indicator rebounded on the daily chart and moved into the positive zone, which means there is room for another rise. Looking up, the first level to watch is $80.00 {market psychological barrier}, and a break of that level will see $81.74 {76.4% Fibonacci rebound level}. On the downside, you can focus on $76.03 {5-day moving average}, and the next level is $75.08 {23.6% Fibonacci rebound level}.
Today, you can consider going long on crude oil around 79.60, stop loss: 79.40; target: 80.50; 80.80
Spot gold
On Monday, gold prices continued to rise to $2,473, after a recovery in the second half of the week. Escalating geopolitical tensions and growing expectations of multiple rate cuts by the Federal Reserve later this year helped gold prices move higher. Gold prices fluctuated around $2,426 during early Asian trading hours on Monday. A modest recovery in the dollar dragged gold lower. However, downside may be limited amid rising geopolitical tensions in the Middle East. Tensions in the Middle East will maintain bids for gold. In the medium term, the outlook for gold remains positive and any declines are likely to be short-lived due to underlying macroeconomic factors. Investors are divided on whether the Federal Reserve will announce a 50 basis point or 25 basis point rate cut, thereby adopting an aggressive monetary policy. This week will see the release of US inflation data, and these key US economic data may provide some hints on the state of the economy. Stronger-than-expected data may delay or reduce the likelihood of a larger Fed rate cut, weighing on gold prices.
In terms of recent trends, the uptrend of gold continues and faces fierce support around $2,430, breaking through the previous resistance areas of $2,450.00 {May 20 high} and 2,452.90 {76.4% Fibonacci rebound from 2,483.70 to 2,353.20} yesterday. The 14-day relative strength index (RSI) of the technical indicator shows that buyers are gathering momentum, which means that prices are likely to rise. If buyers maintain prices above $2,450 - $2,452, the next stop will be $2,477.70 {August 2 high}, and the previous historical high of $2,483.70. The next level will be $2,500. Conversely, a break below the 2,450-2,452 area could intensify the decline, leading to the $2,430.00 level.
Consider going long on gold today before 2,466.00, stop loss: 2,462.00; target: 2,490.00; 2,500.00
AUD/USD
AUD/USD quickly faded Friday’s losses, hitting just above the 0.6600 area again in the opening of the week, which has been benefiting from the uncertain price action of the US dollar. AUD/USD strengthened around 0.6565 during the early Asian session on Monday. Hawkish messages from the Reserve Bank of Australia and warming inflation data from China provided some support to the Australian dollar. However, escalating geopolitical tensions in the Middle East could limit the upside for the Australian dollar. The Reserve Bank of Australia kept interest rates unchanged at 4.35% for the sixth consecutive meeting last week. Michelle Bullock, Governor of the Reserve Bank of Australia, pointed out that there are upside risks to inflation and the RBA will not hesitate to raise interest rates if necessary. The RBA's hawkish stance may support the Australian dollar in the short term. In addition, due to seasonal factors such as weather, China's consumer price index (CPI) rose by 0.5% month-on-month in July, a larger-than-expected increase, boosting the Australian dollar. However, concerns about sluggish demand in China remain, which may limit the upside of AUD/USD.
From the daily chart, the price action of AUD/USD last week reflects that bulls have encountered huge resistance around the 0.6600 level, which coincides with the convergence of the 20-day {0.6570}; 100-day {0.6601}; and 200-day {0.6595} simple moving averages. However, support has remained strong at 0.6500 {psychological level}, and 0.6453 {23.6% Fibonacci rebound from 0.6798 to 0.6347}. While the Relative Strength Index (RSI) is stagnating near the neutral zone, fluctuating around 46, indicating no significant buying or selling pressure. On the upside, the pair could test the
0.6595 {200-day moving average}; 0.6600 {psychological level}; and 0.6601 {100-day moving average} important resistance levels. Breakouts look for 0.6625 {61.8% Fibonacci rebound}, and 0.6691 (76.4% Fibonacci rebound)
Consider going long on AUD before 0.6570 today, stop loss: 0.6560; target: 0.6610; 0.6615.
GBP/USD
GBP/USD has been trading in a tight range around 1.2750 on Monday. Investors are not taking large positions ahead of key inflation data from the UK and the US, making it difficult for the pair to find direction. GBP/USD has started the new week on a weak note and now seems to have stalled its two-day rally from the 1.2665 area hit last Thursday, or the lowest level since July. Spot prices are currently trading around 1.2750 as traders look forward to important macro data from the UK and the US this week. Meanwhile, the Bank of England recently cut interest rates on August 1, the first since 2020, and the market is betting on two more rate cuts in 2024, as well as the ongoing unrest in the UK, continue to weaken the pound. In addition, the risk of further escalation of geopolitical risks in the Middle East has provided some support to the safe-haven dollar and put pressure on GBP/USD. Therefore, it is prudent to wait for strong follow-through selling before positioning for GBP/USD to resume its three-week decline from the one-year high near the 1.3000 mid-point or in July.
Short-term operation suggestionsIn terms of technical trends, GBP/USD remains at the mercy of sellers and continues to move downwards below the ascending trendline support at the time, which was located at 1.2835. However, GBP buyers continue to defend the key 200-day simple moving average of 1.2660. The pair may extend its recovery momentum, but the recovery momentum will be limited as long as the 14-day relative strength index (RSI), a technical indicator, remains below the 50 level. Currently, the leading indicator is around 45.0, suggesting that GBP/USD appears to be trading in a "sell on rallies" trade. Therefore, reclaiming the 50-day MA of 1.2785 on a closing basis is key to further rebound. Further above is 1.2800 {a psychological barrier in the market}, further seeing the 21-day MA of 1.2846 could challenge the bearish commitment. The next upside hurdle is around 1.2900, which is the high of March 8, on the other hand, sellers need to hold down and break the 100-day and 200-day MA confluence area between 1.2670 and 1.2660 to open the door for further downside. The next target for sellers will be the June low around 1.2612.
Today's recommendation is to go long GBP before 1.2750, stop loss: 1.2735, target: 1.2790, 1.2800
USD/JPY
The yen fell as traders traded on low volumes as Japan celebrated the Mountain Day holiday. The dollar was supported by the reduced likelihood of a Fed rate cut after the release of optimistic data from the United States last week. The flow of safe-haven funds may limit the yen's decline amid rising geopolitical tensions. Stronger-than-expected US economic data released last week led traders to reduce their expectations for a Fed rate cut, thus providing support for USD/JPY. On Sunday, Federal Reserve Governor Michelle Bowman said she continued to see upside risks to inflation and continued strength in the labor market. Bowman reportedly hinted that the Fed may not be ready to cut interest rates at its next meeting in September. Last week, the Japanese Monetary Policy Outlook showed that Bank of Japan officials have indicated that they are ready to raise interest rates further, although they have become more cautious due to increased market volatility. Meanwhile, according to Reuters, Japanese Finance Minister Shunichi Suzuki stressed that monetary policy decisions fall within the purview of the Bank of Japan, while they will continue to closely monitor market developments.
USD/JPY is trading around 147.00 on Monday. Daily chart analysis shows that the pair is above the lower channel, indicating a weakening bearish bias. Moreover, the 14-day relative strength index (RSI) is at the 31 level. If the RSI moves towards 50, it could signal an improvement in the pair's momentum. Support-wise, USD/JPY could test the 145.44 {August 8} low, below which the pair could face downside pressure that could push it towards 144.89 (78.6% Fibonacci retracement of 140.25 to 161.95), and 144.56 (100-week SMA). Once these levels are broken, the next support would be the daily low of August 6 at 143.61. On the upside, USD/JPY could test the immediate barrier of the 10-day exponential moving average around the 147.45 level. A break above this level could weaken the bearish momentum and take the pair closer to 147.90 (last week's high), with the next resistance to come in the 148.90 area {a support trendline extending upwards from the January 2023 low of 127.46}. The next is 150.00 {a psychological level in the market}.
Today, it is recommended to short the dollar before 147.50, stop loss: 147.80; target: 146.50, 146.30
EUR/USD
Despite the general caution in the foreign exchange market, the euro/dollar has pulled back for four consecutive days and regained some balance, retesting the 1.0940 area amid weaker US dollar prices. The euro/dollar halted a four-day losing streak and traded around 1.0920 in the Asian session on Monday. Traders are awaiting the euro zone's preliminary second-quarter gross domestic product (GDP) data, which is scheduled to be released on Wednesday. The risk-sensitive euro may face difficulties due to the rising geopolitical tensions in the Middle East. On the dollar side, investors are likely to focus on the US producer inflation data to be released on Tuesday and consumer inflation data on Wednesday. Traders want confirmation that price growth remains stable. Expectations of a possible interest rate cut by the Federal Reserve in September may put pressure on the US dollar, providing potential support for the EUR/USD pair. Last Sunday, Federal Reserve Governor Michelle Bowman said that she continues to see upside risks to inflation and continued strength in the labor market. This suggests that the Fed may not be ready to cut interest rates at its next meeting in September, according to Bloomberg.
On the daily chart, EUR/USD continues to develop above the 20-day {1.0880}, and 100-day (1.0820} simple moving averages. Meanwhile, the 14-day relative strength index remains above 50, and is last at 58.50, suggesting that the pair is about to rise. EUR/USD is neutral to bullish. EUR/USD is encountering strong buying interest around the currently flat 20-day moving average of 1.0880. Once it holds above 1.0880, and 1.0900 {market psychological barriers}, the first target is 1.0981 {March 8 high}, and below it, 1.1000 {market psychological barrier}, and 1.1008 {August 5 high}. On the other hand, once it falls below 1.0880, it will look towards the 200-day moving average of 1.0831 level. The next level points to around 1.0777 {August 1 low}.
Today, it is recommended to go long on USD before 1.0916, stop loss: 1.0900 target: 1.0955, 1.0960.
Disclaimer: The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
