US Dollar Index

Despite concerns about the labor market, the US Dollar, as measured by the Dollar Index, rebounded on Thursday. The price increase was attributed to sellers seemingly hitting the pause button. Key topics to watch include market expectations for a Federal Reserve rate cut in September and the weak US labor market, as these could exert additional pressure on the currency. On Thursday, the US Dollar Index continued to decline despite strong housing data reported by the European market. Factors contributing to the downward pressure on the dollar include dovish bets on the Federal Reserve and declining US Treasury yields. The US economic outlook shows signs of deflation, and the market remains confident about a potential rate cut in September. Federal Reserve officials continue to exhibit hesitation, eager to cut spending, and maintain a data-dependent approach, seemingly putting the July cut on the agenda.

In terms of recent technical trends, although the US Dollar has declined, the Dollar Index is still struggling to reclaim the support level formed by 104.04 (last week’s low); 104.00 (integer level); and 103.99 (June 4th low), which have now turned into resistance areas. Despite daily indicators such as the 14-day Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) being well below 50, indicating near-oversold conditions, the Dollar Index might still be in an adjustment phase. Strong support levels are at 103.33 (76.4% Fibonacci retracement) and 103.00 (psychological market level). The overall technical outlook remains bearish. Meanwhile, the upside for the Dollar Index is limited to the 104.00 and 104.41 (200-day moving average) levels.

Today, consider shorting the Dollar Index around 104.28, with a stop loss at 104.40, and target prices at 103.95 and 103.90.

WTI Crude Oil

Due to traders anticipating a Federal Reserve rate cut in September, crude oil might limit its decline. Federal Reserve Governor Christopher Waller stated that the Fed is "getting closer" to a rate cut. WTI crude oil prices continued to rise, building on a strong rebound from the 34-day simple moving average (SMA) support level of $80.47 and climbing to a new weekly high of $83.11. However, the commodity struggled to capitalize on this move. The dollar attracted some buyers and partially reversed the previous day's sharp drop to near a four-month low, which in turn was seen as a key factor against dollar-denominated crude oil prices. Additionally, signs of slowing economic growth in China, the world's largest oil importer, also helped curb this black liquid. However, the downward trend remained cushioned after the US weekly crude oil inventories declined more than expected. Data released by the US EIA on Wednesday supported the prospect of a significant rise in crude oil prices.

Even from a technical perspective, the failure to find support below the 100-day SMA at $80.56, and the rebound from the critical support of the 34-day SMA at $80.47, suggests that the path of least resistance for the commodity is upward. That said, daily technical indicators, such as the mixed oscillators, need to confirm that the recent pullback from around $84.00 or the two-month high of $84.65 reached on July 5 has ended and is preparing for further gains before proceeding cautiously. On the downside, the short-term focus should be on $81.81 (23.6% Fibonacci retracement of $72.62 to $84.65) and $80.56 (100-day SMA), with a break below potentially testing $80.00 (psychological market level). On the other hand, crude oil prices are expected to revisit $84.35 (a resistance trendline extending from the April 5 high of $87.08) and $84.65 (July 5 high) in the short term.

Today, consider going long on crude oil around $81.60, with a stop loss at $81.40, and target prices at $83.00 and $83.10.

Spot Gold

After a slight decline on Wednesday, gold stabilized around $2,450 on Thursday. However, due to safe-haven sentiment and resilient U.S. Treasury yields, the dollar rebounded, limiting the upward momentum of gold prices in the U.S. market. During the Asian session on Thursday, gold prices slightly rebounded to a high of $2,470 and currently appear to have halted the pullback from the previous day's new high. Gold is currently trading at $2,450, although a combination of factors may limit any significant intraday appreciation. The dollar attracted some buyers and, following a slight rise in U.S. Treasury yields, partially reversed the previous day's sharp drop to a nearly four-month low. This, combined with the strong bullish sentiment in global stock markets, could pose headwinds for the safe-haven gold price. However, recent bias seems to be firmly in favor of bullish traders. Investors now seem to have fully priced in a 25 basis point rate cut by the Federal Reserve in September. Additionally, market participants expect the U.S. central bank to lower borrowing costs again in December.

The daily chart shows that technical indicators such as the 14-day RSI and MACD are in positive territory, indicating that it is a good time to go long. However, given that short-term gold prices have reached overbought levels, this decline appears to be a consolidation. During the same period, gold prices are well above the bullish moving averages, with the 20-day simple moving average (SMA) around $2,371.50, maintaining an upward tendency, and also above the bullish 100-day and 200-day SMAs. Therefore, the support levels to consider are $2,445.20 (5-day SMA), $2,415.10 (0.786% Fibonacci retracement from $2,450 to $2,287), and $2,415.00 (9-day SMA). On the upside, targets to consider are $2,483.70 (Wednesday high) and $2,500 (psychological level), with a break above potentially testing the $2,578.20 area.

Today, consider going long on gold around $2,440.00, with a stop loss at $2,437.00, and target prices at $2,465.00 and $2,470.00.

AUDUSD

Amid a strengthening U.S. dollar, selling pressure in risk-related sectors accelerated, prompting AUD/USD to fall again, challenging the key support level around 0.6700. Official data released by the Australian Bureau of Statistics on Thursday showed that Australia's unemployment rate rose to 4.1% in June, higher than the expected and previous 4.0%. Additionally, employment change in Australia fell from 397,000 in May to 502,000 in June. The monthly employment details released by Australia helped AUD/USD slightly recover from the two-week low retested during the session. In the face of growing economic headwinds from China, the Australian dollar has been on a downward trend for the past week or so. Furthermore, the decline in copper prices is another factor weakening demand for the resource-linked Australian dollar, although the recent plunge in the U.S. dollar has helped limit AUD/USD losses. The market seems to believe that the U.S. will begin cutting rates in September and lower borrowing costs again in December. This has kept U.S. Treasury yields persistently low, close to multi-month lows, and along with widespread environmental risks, continues to undermine the safe-haven dollar.

This week, the Australian dollar has fallen for four consecutive days, despite optimistic market sentiment pushing Wall Street into uncharted territory. From a technical perspective, AUD/USD is broadly bullish, although upward momentum is temporarily lacking. The daily chart shows the bullish 20-day simple moving average (SMA) at 0.6707 has lost some upward force but remains below the current level and moderately above the 50-day (0.6667) and 100-day SMAs. Meanwhile, the 14-day RSI technical indicator remains in positive territory, consistent with a bullish scenario but lacking directional strength, indicating investor uncertainty about the next move. AUD/USD has a strong static resistance at 0.6798 (last week's high) and 0.6800 (psychological barrier), with gains above this level exposing the range of the December 2023 high at 0.6871. In case of a bearish reaction, the pair will initially find support around 0.6700 and 0.6690 (the lower support line of the ascending wedge on the weekly chart), followed by the 0.6667 level.

Today, consider going long on AUD/USD around 0.6695, with a stop loss at 0.6680, and target prices at 0.6740 and 0.6750.

GBPUSD

On Thursday, GBP/USD hovered in negative territory below 1.3000 during the U.S. trading session. The dollar benefited from deteriorating market sentiment, making it difficult for the pair to build on its weekly gains. GBP/USD rose further to new highs this week, testing the 1.3000 level on Wednesday. The broad expectation that the Federal Reserve will cut rates in September has kept the dollar persistently low, supporting the pound's weekly rise. The Fed's recent statements have been interpreted as decidedly dovish, with market participants noting signs that Fed officials acknowledge progress in tackling inflation. The rate market has fully priced in at least a 25 basis point rate cut at the Fed's September 18 meeting, with rate traders expecting three rate cuts in 2024, while the Fed's own forecast suggests one to two cuts. Earlier on Wednesday, the final UK Consumer Price Index (CPI) inflation figure met expectations, putting pressure on GBP traders, but the sharper-than-expected decline in UK Producer Price Index (PPI) inflation briefly weighed on the pound.

This week, GBP/USD traders pushed the pair to a 52-week high above the 1.3000 level at 1.3045. The bullish momentum accelerated, lifting GBP/USD above the 9-day moving average at 1.2922. Without sustained buying, GBP/USD could easily fall back to the recent uptrend line since early July, just above the 1.2600 level. The daily chart shows GBP/USD movement far outstripping technical levels, deeply entrenched in the bullish region above the 20-day moving average (1.2792) and 1.2777 (last week's low). Meanwhile, the 14-day RSI remains bullish, indicating an upward tendency as the price action continues to form higher highs and higher lows. The first resistance level will be 1.3045, with further upside towards the strong technical resistance around the July 18, 2023, peak at 1.3125.

Today, consider going long on GBP/USD around 1.2930, with a stop loss at 1.2915, and target prices at 1.2980 and 1.2985.

USDJPY

As the dollar rebounded, the yen slightly declined. Given that traders expect further intervention by Japanese authorities, the yen might limit its downside. The dollar might also face resistance due to rising expectations of a Federal Reserve rate cut in September. During the early Asian session on Thursday, USD/JPY attracted some sellers around 155.50. The pair declined due to the overall weakness of the dollar and speculation of intervention by the Bank of Japan. Market traders suspect that Japanese authorities have intervened in the forex market again to support the yen from multi-decade lows. This, in turn, might support the yen in the short term and limit the pair's upside. Data released by the Ministry of Finance on Thursday showed that Japan's trade balance climbed from -122.01 billion yen to 2.24 billion yen in June, better than expected. On the dollar side, the market sees little chance of a rate cut at the Fed's July meeting, but a 100% chance of a rate cut in September. Increasing bets on a Fed rate cut have put some selling pressure on USD/JPY.

The daily chart shows USD/JPY plunged to a one-and-a-half-month low of 155.36 mid-week, indicating a short-term downtrend. This suggests that it may be wise to hold off on buying dollars until signs of a trend reversal appear. Additionally, the RSI below 35 indicates a bearish bias. However, a further rise in the RSI might weaken the bearish sentiment. Currently, immediate resistance is observed around 157.80, followed by 158.09 (38.2% Fibonacci retracement from 151.85 to 161.95). A break above these levels might improve the sentiment for USD/JPY, with potential targets near the 160.00 (psychological level) area. On the downside, USD/JPY might find key support around 154.03 (123-day SMA) and 154.01 (78.6% Fibonacci retracement). A break below this level could pressure the pair down to 153.50 (134-day SMA).

Today, consider going short on USD/JPY around 157.60, with a stop loss at 157.80, and target prices at 156.60 and 156.45.

EURUSD

On Thursday, EUR/USD partially reversed the gains of the past two days, falling below the key support level of 1.0900 due to the increasing upward momentum of the dollar and the dovish stance of the European Central Bank. Midweek, the dollar accelerated its decline as the Bank of Japan was suspected of intervening again to support the yen. Against this backdrop, the Dollar Index clearly fell below the 104.00 support level, while EUR/USD rose further to near a four-month high of 1.0950. Persistent demand for bonds in the U.S. and German currency markets led to a further decline in bond yields across all maturities in both regions, causing mixed movements in the pair. Meanwhile, the macroeconomic situation remained stable. Investors widely expect the European Central Bank to cut rates twice more before the end of the year. In contrast, while the Federal Reserve currently anticipates a rate cut in December, the market continues to speculate on whether the Fed will cut rates once, twice, or three times this year. This could alleviate the ongoing divergence in monetary policy between the Fed and the ECB, occasionally supporting the pair in the near term. With the rising expectations of Fed rate cuts, this anticipation regains momentum.

In terms of recent trends, the 14-day Relative Strength Index (RSI) has climbed to around 62, indicating that bulls still dominate in the short term. The next upward resistance for EUR/USD is at 1.0970 (a resistance trendline extending from the May 16 high of 1.0896), followed by the March high of 1.0981 (March 8) and the psychological level of 1.1000. On a larger time frame, a breakout above the key level of 1.10 could lead to further gains. If bears take control, EUR/USD might test the 200-day moving average at 1.0808 and the psychological level of 1.0800, then fall to 1.0764 (61.8% Fibonacci retracement from 1.0666 to 1.0922).

Today, consider going long on EUR/USD around 1.0880, with a stop loss at 1.0865, and target prices at 1.0930 and 1.0940.

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