US Dollar Index
The US dollar weakened before the weekend after economic data and Fed speakers provided a much-needed boost to the greenback. Upbeat US Purchasing Managers Index (PMI) data showed a resilient services sector. On the other hand, the dollar fell across the board after Fed Chairman Jerome Powell delivered a much-anticipated speech at the Jackson Hole Symposium. He confirmed that the Fed is on track to start cutting interest rates, with the cycle likely to begin in September. The US Dollar Index, which tracks the performance of the US dollar against a basket of major world currencies, fell more than 0.6% to hit its lowest level in eight months at 100.60 immediately after Powell's speech. The latest batch of US data did not firmly support the Fed's 50 basis point rate cut in September, and the majority of FOMC members seemed mildly opposed to the prospect in their recent out-of-meeting remarks. The market tends to price in a more aggressive dovish stance. Risks on the US dollar moved slightly to the upside last week. The US dollar briefly outperformed its rivals late last week, while the risk-off sentiment in the market reflected by the sharp decline in Wall Street's main indexes also provided an additional boost to the US dollar. Nevertheless, Powell's speech is not expected to have a long-term impact on the foreign exchange market and will remain bearish on the US dollar in the short term.
The US dollar index posted its biggest daily drop since August 2 last week, closing the week with a negative line for the fourth consecutive week and its biggest monthly drop since November 2022. Meanwhile, some profit-taking is expected after the market digests Powell's message, while the support levels of 100.29 (December 2023 low) and 100.00 (market psychological level) may be headwinds as the 14-day relative strength index (RSI), one of the technical indicators on the daily chart, is at the extremely oversold level of 26.50. Once the above support area is broken, the next target will be 99.57 (last July 14 low). But as the latest remarks of the Fed Chairman boosted the broader negative sentiment of the US dollar, the likely reaction will be a limited correction, which will provide a better level for re-entering a broader downtrend. In order to achieve recovery, the US dollar index faces a long road. First, 101.00 and 100.31 (5-day moving average) are the levels for recovery. If it breaks, 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 100.80, stop loss: 100.95, target: 100.40, 100.35
WTI spot crude oil
Last week, WTI US spot crude oil prices plunged from $77.20 at the beginning of the week to $72.78, and then rebounded for two consecutive trading days in late last week to above $76.00. WTI oil prices are still expected to record a large weekly decline amid concerns about slowing demand. U.S. employers lowered the number of new jobs added this year to March, once again sparking market concerns about a possible recession in the world's largest oil consumer. Prior to this, the market had been worried about the economic slowdown in China, the world's largest oil importer, which became a key factor suppressing crude oil. In addition, the prospect of a ceasefire in Gaza also limited the upside of crude oil prices. In fact, an agreement between Israel and Hamas is close to being reached. This has eased market concerns about the wider conflict in the Middle East and supply disruptions in major oil-producing areas. That said, government data released on Wednesday showed a sharp drop in US crude oil inventories. This, coupled with expectations that the Federal Reserve's interest rate cut will promote economic activity, may limit the downside of crude oil prices. In addition, investors are watching the Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, which form OPEC+, may reconsider its plan to gradually lift some of its production cuts in October. OPEC+ said that, if necessary, the production increase plan can be suspended or revoked.
From the daily chart, the 14-day relative strength index (RSI) of the technical indicator is rebounding, but the MACD indicator has diverged and has broken the signal line, indicating that oil prices continue to have adjustment pressure. On the upside, the first thing to watch out for is the key $76.55 {10-day moving average}, and $76.92 {23.6% Fibonacci retracement level from 84.73 to 72.10} support areas. Next is the $78.06 {200-day moving average} level. If the bulls can break through it, then $79.90 {61.8% Fibonacci retracement level}, and $80.00 {market psychological level} will become the bulls' must-attack levels. On the downside, $73.45 is the next relevant support level. In the short term, the price will still look to the downside, with targets at $72.62 {June 4 low}, and $72.77 {Wednesday low}, respectively, below which support is at the August low of $71.70 and $70.00 {market psychological level} levels.
Today, you can consider going long on crude oil near 76.00, stop loss: 75.70; target: 77.20; 77.50
Spot gold
Last week, gold climbed to a record high of $2,531.80. Fed Chairman Powell said on Friday that the time for policy adjustment has come, suggesting an imminent rate cut. Analysts said Powell sent the strongest signal of a rate cut so far. The US dollar index closed down 0.86% on Friday, pushing gold prices to rebound sharply. Fed Chairman Powell said on Friday that the time for policy adjustment has come, suggesting an imminent rate cut. Analysts said Powell sent the strongest signal of a rate cut so far. The US dollar index closed down 0.86% on Friday, pushing gold prices to rebound sharply. It then fell, but managed to climb above the key level of $2,500 before the weekend. Dovish comments from Fed officials last week led to lower U.S. Treasury yields on Tuesday, paving the way for gold prices to hit a record high of $2,531.80. Although gold struggled to maintain its bullish momentum in the middle of last week, it managed to stabilize above $2,500 as the US dollar exchange rate failed to escape the selling pressure. The US economic data released in the middle of the week was better than the market expected, and the 10-year US Treasury yield rebounded, helping the US dollar find a foothold. In turn, gold prices turned downward and fell below $2,500. However, the improvement in risk sentiment made it difficult for the US dollar to continue the gains on Thursday and allowed gold prices to rise back above $2,500 before the weekend. Before the weekend, the speech of Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium put additional pressure on the US dollar and paved the way for gold prices to move higher.
The 14-day relative strength index (RSI) indicator, a technical indicator on the daily chart, remained above 70, indicating that the bullish bias remained intact. The round number of $2,500 (psychological price, the central axis of the upward regression channel since mid-February) is the central price of gold. If gold continues to use this as support, then at 2,531.70 (previous all-time high), a breakout looks towards resistance areas such as $2,551.10 (161.80% Fibonacci retracement from 2450.20 to 2286.20), and $2,575.00 (176.4% Fibonacci retracement). If gold fails to stabilize above $2,500 (a psychological level), technical sellers may show interest. In this case, $2,484.50 (Friday's low) can be seen as the next support, followed by $2,456.20 (5-day moving average), and $2,450.20 (previous all-time high on May 20).
Consider going long on gold today before 2,508.00, stop loss: 2,505.00; target: 2,522.00; 2,525.00
AUD/USD
Last week, AUD/USD rose nearly 2% to 0.6798, forming a double top bullish pattern with the July high of 0.6798. The dollar weakened after Fed Chairman Jerome Powell's speech at the Jackson Hole Symposium. Despite mixed economic signals from Australia, the Reserve Bank of Australia's (RBA) cautious stance due to high inflation continues to support the Australian dollar. The Australian dollar was supported by the latest minutes of the Reserve Bank of Australia, which showed that Australia is reluctant to ease monetary policy anytime soon. The Reserve Bank of Australia expects inflation to remain above its 2-3% target by the end of 2025, suggesting that interest rates may remain high for a long time. RBA Governor Bullock recently said that the bank has no plans to cut in the short term. China's recent measures to support the property market are not expected to have a significant impact due to underlying debt issues, but they do provide some additional support to the Australian dollar given the close economic ties between Australia and China.
From a technical perspective last week, the recent breakout above the 0.6600 key resistance level comprised of the 100-day (0.6615) and 200-day (0.6607) simple moving averages, and the subsequent breakout above the 0.6700 round number is seen as a new trigger for the bull market. Moreover, the 14-day relative strength index (RSI), one of the technical indicators on the daily chart, remains firmly in positive territory around 62.00, suggesting that the overall trend has turned strongly bullish. The bullish bias remains intact. This suggests that the path of least resistance for the AUD/USD pair is to the upside and supports the prospect of a continuation of the recent strong recovery from the year-to-date low of 0.6347 hit earlier this month. Therefore, bulls may wait for a strong break above the 0.6758 (78.6% Fibonacci retracement from 0.6871 to 0.6347), and 0.6760 (last week’s high) horizontal barriers before a sharp rise. AUD/USD may then challenge the year-to-date peak around 0.6800 before climbing further to the December 2023 high around 0.6871. On the other hand, the 0.6700 barrier may protect the current downtrend ahead of the 0.6670 (61.8% Fibonacci retracement) area, below which AUD/USD may fall back to the confluence resistance breakpoint around 0.6607 (200-day simple moving average), and 0.6600 (market psychological barrier) area, which has now turned into support. The latter should be a strong base.
Consider going long on AUD before 0.6780 today, stop loss: 0.6765; target: 0.6830; 0.6840.
GBP/USD
Last week, GBP/USD rose for the second week in a row and hit its highest level since March 2022 near 1.3230. GBP/USD had another strong week without any major economic events in the UK. The continued weakness of the US dollar against its major rivals was the main factor driving the strength of GBP/USD. Traders continued to be bearish on the US dollar as dovish expectations from the US Federal Reserve (Fed) heated up during the Jackson Hole Symposium week. Despite the high-risk aversion in the market environment, the US dollar failed to find safe-haven demand in the tense atmosphere before Powell's speech. The release of the Fed minutes on Wednesday was completely dovish, which dealt a new blow to the US dollar. The monetary policy divergence between the Fed and the Bank of England is still in play and is a favorable factor for the pound, while the US dollar is treading on thin ice waiting for Powell's speech. Powell noted that the time has come to adjust monetary policy and said that they do not welcome further cooling of labor market conditions. "We will do everything we can to support a strong labor market as we move further toward price stability," he added. The dollar immediately came under selling pressure again, allowing GBP/USD to climb above 1.3200 for the first time since March 2022.
The rebound from the five-week low of 1.2665 in GBP/USD gathered strength in the past week, with buyers breaking through the previous year-to-date high of 1.3045 in one fell swoop to reach a 29-month high above 1.3230, an increase of 4.5%. In the process, the pound further broke through all key daily simple moving averages (including: 20, 100, and 200 days). The 14-week relative strength index (RSI), a technical indicator on the weekly chart, is preparing to enter the overbought zone and is currently close to 68.50. In overbought conditions, GBP traders may see a short-lived correction, and every pullback may be bought as long as the indicator remains above the 60 level. GBP/USD may encounter temporary resistance at 1.3280 (upper line of the weekly upward channel), and then buyers will target the 1.3300 round number. A breakout will further point to the 1.3331 (76.4% Fibonacci rebound from 1.4250 to 1.0356) level. In the event of a corrective downturn, 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 test the 1.3000 key level.
Today, it is recommended to go long on GBP before 1.3190, stop loss: 1.3175, target: 1.3240, 1.3250
USD/JPY
USD/JPY remained under heavy selling pressure around 145.50 before the weekend. The yen gained again on domestic inflation data and BoJ Governor Ueda's willingness to hike further. The dollar fell after the speech of Fed Chairman Powell. The yen finished the week with good momentum, appreciating by more than 2% in the past 7 days. Last week, BoJ Governor Kazuo Ueda maintained a generally hawkish tone, probably to show himself unaffected by the recent turmoil in the Japanese stock market. Further rate hikes are possible, and the release of a surprisingly positive marginal CPI (2.8% vs 2.7% y/y) also helped the hawkish view. However, the market remains relatively hesitant about the move before the end of the year, with only 10 basis points of interest rates priced in as of December. The market believes that the possibility of a rate hike is once again underestimated, and pressure on the yen due to carry trades is unlikely to accumulate again. On the other hand, USD/JPY is supported by the improvement of the US dollar due to rising US Treasury yields. However, the potential for further gains in the US dollar may be limited by the increasing expectations of a Fed rate cut of at least 25 basis points in September. Therefore, the trend of USD/JPY is still downward sloping.
USD/JPY rebounded and then pulled back last week. USD/JPY rebounded slightly above 148.00 at the beginning of the week, but quickly fell back to the support area of 147.05 (upper line of the downward channel on the weekly chart) and 146.38 (23.6% Fibonacci rebound level from 161.80 to 141.61). And tested the 144.05 low in the past three weeks. The 14-week relative strength index (RSI) of the technical indicator is bearish. Momentum favors sellers, and once sellers drag prices below last Friday's low of 144.05, the ongoing downtrend may resume. In this case, USD/JPY may fall to the swing low of 141.61 on August 5, and the 140.00 (market psychological level) level. However, as the RSI target rises, buyers are gathering momentum. To extend the bullish trend, USD/JPY needs to break above 146.38 (23.6% Fibonacci retracement). Once cleared, the next resistance will be 148.13 (70-week MA), followed by the latest cycle high of 149.39 reached on August 15, and the 149.32 (38.2% Fibonacci retracement) area. If these levels are broken, buyers may retest the psychological 150.00 level.
Today's recommendation is to short the US dollar before 144.60, stop loss: 144.80; target: 143.50, 143.30
EUR/USD
The EUR/USD performed solidly last week, achieving a second consecutive week of gains, including setting a new 2024 high at 1.1200. The pair's strong rise was a response to the intensification of the US dollar's downward trend. Last week was a positive one for EUR/USD as market participants continue to punish the dollar on the assumption that the Federal Reserve could start cutting interest rates as soon as September. Despite the ECB's silence, investors still believe that the central bank will have two more rate cuts in the rest of the year, most likely in September and December, which would bring the reserve requirement ratio to 3.25% by the end of the year. The logic behind further ECB easing lies in the deteriorating economic and business activity conditions in Germany and the eurozone. While the recession in the Old Continent may be exaggerated, the likelihood of a slowdown in economic activity seems greater. The news out of Germany was quite grim, with both manufacturing and services slowing more than expected, and the composite index falling further to 48.5. If inflation and wage levels prevent the ECB from making big rate cuts, this will not have much impact on the euro. There is room for EUR/USD to rise in the coming weeks, but investors may let the pair retest the strong support level of 1.1100.
From a technical perspective, EUR/USD is expected to continue its recent month-long rally. On the weekly chart, the 14-week relative strength index (RSI) of the technical indicator remains above the 70 level, indicating that the short-term upward momentum is still very strong. The pair rose above the key 200-week moving average of 1.1063 last week, which indicates that the current bullish trend will continue. If it breaks through the high level of 1.1200 last week, it may head towards the resistance area of 1.1273 (July 18, 2023 high) and 1.1275 (61.8% Fibonacci rebound level from 1.2351 to 0.9535), and will move towards the milestone of 1.1312 (upper line of the weekly upward channel), and then point to the 1.1400 (round number) level. Once a pullback occurs, the direct support level will be 1.1063 (200-day moving average) and then 1.1008 (the central axis of the weekly horizontal channel) and 1.0893 (170-week moving average).
Today, it is recommended to go long on the US dollar before 1.1175, with a stop loss of 1.1160 and a target of 1.1230 and 1.1250.
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