USD Index

The economic data released by the United States is "encouraging." Not only were retail sales well above expectations, but the Producer Price Index (PPI) also showed an upward trend. In addition, initial jobless claims were lower than expected, indicating that the U.S. economy is still hot and ready to withstand further interest rate hikes by the Federal Reserve. Following the data release, traders' expectations of the Fed keeping rates unchanged at its policy meeting on September 19-20 weakened, causing the U.S. dollar index to briefly rise by 40 points to 105.43. The August Consumer Price Index (CPI) increased as expected by 0.6% month-on-month, the highest in 14 months, and overall inflation trends continue to favor the Federal Reserve. However, the unexpected resilience of inflation in August suggests the possibility of at least one more rate hike this year. The U.S. dollar index remains resilient, but it surged after the data release, leaving most U.S. dollar currency pairs struggling, with many nearing recent lows.

The Federal Reserve is set to announce its interest rate decision next Thursday and provide further explanations in the subsequent press conference. The market currently expects the Fed to keep rates unchanged, but Chairman Powell's remarks could become the primary driver of market price movements. If the Fed expresses caution when discussing further rate hikes, as Powell did at last month's Jackson Hole Global Central Bank Symposium, then the possibility of further rate hikes will largely depend on data performance.

In terms of the medium-term trend of the U.S. dollar index, the exchange rate found solid support at 99.57 and initiated a rebound. After three weeks of continuous upward momentum, the U.S. dollar index's trend has gradually changed, no longer seen as a minor rhythm of the previous downtrend but forming a major alternation in rhythm. After finding support around 102 and experiencing alternating bullish and bearish candles, the exchange rate broke through the key resistance level of 103.50-60, entering an upward trend in the medium term. The short-term trend of the U.S. dollar index has once again entered a sideways consolidation pattern, trading within the short-term range of 105.35-104.45, with the current trend relatively calm. The U.S. dollar is approaching support levels, and if it falls below the low point, it may target 104.10 (support trendline extending from the July low of 99.57) and the significant level of 104.40 (240-day moving average). The next level to watch is the 103.50 level. Resistance levels are currently at 105.35 (double top from February 22 and 23) and 105.88 (March high).

Today, it may be considered to go long on the U.S. dollar index near 105.15, with a stop loss at 104.90 and targets at 105.55 and 105.65.

WTI Crude Oil

On Thursday, oil prices reached a new high for the year, with Brent crude oil breaking above $93 for the first time this year, and U.S. WTI crude oil rising above the $90 mark. The spot price also touched a recent high of $90.19. U.S. crude oil inventories unexpectedly increased, causing crude oil prices to rise initially and then pull back. WTI crude oil briefly touched an intraday high of $89.40 before retracing. U.S. crude oil inventories increased by 3.955 million barrels up to September 8, well above the expected decrease of 1.912 million barrels. IEA Monthly Report: Saudi oil production cuts could lead to increased oil price volatility. Global observed petroleum inventories decreased by 76.3 million barrels in August, reaching their lowest level in 13 months. Overall, rising oil prices have been a significant driver of the August Consumer Price Index (CPI), accounting for more than half of the CPI increase, while the continuous rise in the housing index has also driven the rebound in the core CPI for August. The market is concerned that as the oil supply gap widens, if oil prices continue to climb towards $100, it could lead the Federal Reserve to maintain interest rates at a higher level for a longer time to control inflation. OPEC, EIA, and IEA monthly reports have reinforced the market's constructive view of oil, and with U.S. inflation rebounding for two consecutive months, higher interest rates could increase oil storage costs, making the closing price of WTI crude oil this week crucial.

WTI crude oil is expected to record its third consecutive week of gains and may achieve its highest closing price of the year. There is no doubt that once the levels representing a trend reversal are breached, it will trigger more buying interest and provide further upward momentum for oil prices. Therefore, it is crucial to monitor whether the closing price of WTI crude oil this week can stabilize above 87.20-50 (the high points of the past five trading days), which could be an important observation for the short-term bull and bear trends. If oil prices break above 89.36 (123.6% Fibonacci retracement level from 84.51 to 63.93) and 90.00 (a psychological round number), there is potential for further gains towards the $92.00-93.00 levels. On the downside, 87.20-50 has become a strong support, and if it is breached by the bears, the next support level to watch would be 84.51 (the low point on April 17).

Today, it may be considered to go long on crude oil near 89.70, with a stop loss at 89.40 and targets at 91.05 and 91.20.

XAUUSD

Yesterday's latest data showed that U.S. retail sales in August increased by 0.6%, well above the expected 0.2%. Data released on the same day also indicated that initial jobless claims in the U.S. for the week ending September 9 were 220,000, lower than the expected 225,000, and the Producer Price Index (PPI) also showed an upward trend. After the data release, spot gold temporarily declined by $6 in the short term, reaching an intraday low of $1,901.20 per ounce. Due to a stronger U.S. dollar, gold prices retreated, and the market expects the Federal Reserve to maintain interest rates at its policy meeting next week, which temporarily limits the downside for gold prices. Furthermore, the probability of keeping the benchmark interest rate unchanged through November is 56.1%. Considering the above data, gold prices may continue to face pressure because rate hikes could lead to increased demand for safe-haven assets, and gold is typically considered a safe-haven asset. However, if future inflationary pressures continue to rise, the Fed may adopt a more aggressive rate hike strategy, which could exert greater pressure on gold prices.

Gold prices have once again fallen below the recent weekly low, and the double bottom structure has not materialized, suggesting that gold may be testing new lows. Looking at the daily chart, short-term resistance levels to watch first are around the 200-day moving average at $1,921.60 and $1,930.70 (this week's high). The recent key level for gold bears remains at $1,930, and until the daily chart breaks above and stays above this level, any rebounds could be viewed as shorting opportunities. Gold ETFs are still in a phase of continuous selling, suggesting a bearish outlook. If gold falls below this week's low of $1,905.70, the key support levels to watch below are $1,900 (a psychological level) and $1,884.90 (the low on August 21).

Today, it may be considered to go short on gold before $1,914, with a stop loss at $1,918 and targets at $1,903 and $1,901.

AUDUSD

Australian employment data for August came in better than expected, but the Australian dollar initially rose and then pulled back; it is currently rebounding. The Australian dollar's fundamental outlook remains under pressure due to factors such as weakening Chinese demand, internal issues, and the strong U.S. economy. The overall Australian job market still shows signs of cooling, reducing the urgency for the Reserve Bank of Australia to tighten its policies further. The market continues to expect the central bank to pause its rate hikes next month. From a technical perspective, the AUD/USD is in a critical support area on the weekly chart and has formed a double bottom pattern, suggesting the potential for a short-term rebound. In the middle of the week, the AUD showed choppy performance, repeatedly oscillating between slight gains and mild losses without clear directional guidance. Despite the indecisive environment, the AUD/USD seems to be in the process of building a potential double bottom pattern.

With speculative short positions on the Australian dollar at their highest level since early 2022, the AUD/USD appears oversold on the weekly chart. In recent weeks, the currency pair has held above 0.6357, while forming a short-term double bottom bullish pattern, which may indicate that the AUD/USD is attempting to establish a midterm bottom. On the daily chart, the AUD/USD has formed a double bottom pattern (in mid-August and early September), with short-term potential for a rebound to test 0.6500 (a psychological round number) and the late August high of 0.6522. If these levels are breached, it could set the stage for further upside towards 0.6562 (38.2% Fibonacci retracement level of the rebound from 0.6895 to 0.6357), paving the way for a potential break above the important psychological level of 0.6600.

On the downside, if the double bottom support at 0.6357 is broken, further downside targets could be 0.6272 (the low from November 3 last year) and potentially the 0.6170 level, which was last seen in October 2022.

Today, it may be considered to go long on the Australian dollar before 0.6410, with a stop loss at 0.6380 and targets at 0.6470 and 0.6480.

GBPUSD

Previous data showed a significant unexpected contraction in the UK's economy in July, with Gross Domestic Product (GDP) shrinking by 0.5% compared to a forecasted contraction of 0.2% from June. This data has raised concerns about the UK economy entering a pessimistic phase of stagflation, and the probability of further interest rate hikes for the Pound has diminished significantly. In this scenario, the Pound is likely to appear vulnerable in the forex market. In recent times, the GBP/USD has closed below 1.25, making the downward trajectory of the Pound more apparent. Although technical indicators suggest it is oversold, it cannot be ruled out that the GBP/USD may continue its downward trend and explore lower levels. Only a break above the strong resistance level at 1.2550 in the near term could potentially temporarily halt the decline and initiate a recovery attempt.

Since mid-July, the GBP/USD has experienced a significant drop, briefly breaking below the 200-day moving average at 1.2430 and reaching a three-month low of 1.2396 yesterday. Currently, the GBP/USD is below the 200-day moving average. The bulls are struggling to reclaim this technical support, and if they can regain and hold above the 200-day moving average in the coming trading days, it would provide the clearest guidance that the GBP/USD has likely bottomed out and is poised for a swift recovery. In this case, the GBP/USD could potentially rise towards 1.2607 (23.6% Fibonacci retracement level from 1.3143 to 1.2446) and 1.2618 (120-day moving average). If the upward momentum continues, the focus would then shift to 1.2712 (38.2% Fibonacci retracement level) and 1.2746 (high from August 30). On the other hand, if the GBP/USD fails to hold above 1.2430, it would signal bearish pressure and open up the possibility of a decline towards 1.2400 (a support trendline starting from the low of 1.2275 on April 3). The next level to watch would be 1.2308, which could be a crucial support. This suggests that the worst may be over for the Pound.

Today, it is advisable to consider going short on the Pound before 1.2435, with a stop loss at 1.2460 and targets at 1.2360 and 1.2350.

USDJPY

The Japanese Yen is showing signs of weakness, with market participants digesting comments from the Bank of Japan Governor Haruhiko Kuroda regarding the possibility of an early exit from the negative interest rate policy. Following comments from Kuroda that pushed up the yen and bond yields, Hiroshi Ando, Secretary-General of the ruling Liberal Democratic Party, expressed a leaning towards adopting an ultra-loose monetary policy on Tuesday. On Wednesday, the USD/JPY rose above the 147.70 level. Overall inflation in the US for August continues to show growth, keeping US bond yields on an upward trajectory. Recently, the yields on 10-year and 20-year US bonds have approached 4.26% and 4.53%, respectively, further pressuring Japanese bond yields. The Bank of Japan has maintained a super-loose policy on interest rates for a long time, and its inaction on monetary policy has put direct pressure on the yen, leading to its depreciation. Despite concerns about potential interventions by the Bank of Japan, the USD/JPY is slowly rising.

On the daily chart, the USD/JPY has tested the 148.00-148.40 level multiple times recently without success. Therefore, the USD/JPY will likely need a bigger catalyst to attempt to approach the 148.00-148.40 price range. Once these levels are broken by the bulls, further targets are expected at the 150.00 level and even the highest level before Japan's intervention last year at 151.94. On the other hand, from a purely technical perspective, signs of a bearish divergence are gradually becoming apparent, so it's essential to remain vigilant against the possibility of a reversal. The RSI and stochastic indicators are in a downturn, and the MACD indicator has also shown a downward crossover signal, suggesting the need to be cautious about the potential for a USD/JPY downturn. Currently, support will first be observed at 146.00 (a support trendline starting from the low of 141.50 on August 7) and the 30-day moving average at 145.80, followed by a focus on the 144.11 level (38.2% Fibonacci retracement level from 138.05 to 147.87).

Today, it is advisable to consider going short on the US dollar before 147.90, with a stop loss at 148.20 and targets at 146.80 and 146.70.

EURUSD

The European Central Bank (ECB) raised interest rates for the tenth consecutive meeting on Thursday to combat stubborn inflation but signaled that it may have concluded its tightening cycle. The deposit rate was increased from 3.75% to 4%, marking a historic high. Markets and economists expect this to be the ECB's final tightening move for the foreseeable future, with a long pause expected, followed by a potential rate cut in the second half of next year. Despite the ECB's surprise 25 basis point rate hike, the EUR/USD came under selling pressure, dropping nearly 90 pips. Short-term German 2-year and 10-year bond yields declined, while US 2-year bond yields rose. This may reflect concerns among traders about the deteriorating economic outlook in the Eurozone as the ECB continues to raise rates. The EUR/USD fell to a one-week low and is currently trading at 1.0655. Upbeat economic data from the United States, including strong retail sales, rising PPI, and lower-than-expected initial jobless claims, indicate that the US economy is still robust and prepared for further Fed rate hikes. This suggests that the possibility of another Fed rate hike this year cannot be ruled out.

For the Euro, the ECB's decision appears to be a lose-lose situation. Even if the Euro initially strengthens due to the rate hike, the reaction is likely to be mild and short-lived. This is because the rate hike only exacerbates concerns about slowing economic growth and the potential for a mild recession.

On the daily chart, there are signs of a bullish divergence based on various technical indicators, and there is a potential MACD signal line crossover. This suggests the possibility of a short-term oversold rebound. Overall, the EUR/USD remains below the 200-day moving averages at 1.0826 and 1.0825 (a downward trendline formed since the high of 1.1275 in July), maintaining a solid downtrend. On the downside, if the EUR/USD falls below 1.07, or even breaks below 1.0686 (the low from September 7) and 1.0676 (the 250-day moving average), the next levels to watch would be 1.0614 (55-week moving average), and ultimately, the exchange rate would be targeting the 1.05 level.

Today, it is advisable to consider going short on the Euro before 1.0658, with a stop loss at 1.0680 and targets at 1.0585 and 1.0575.

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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.