US Dollar Index

As the US dollar continues to recover, the asset strengthened in late last week. The Dollar Index, which tracks the value of the dollar against six major currencies, further rebounded to around 104.40. The dollar's appeal as a safe haven increased as more investors speculated that Republicans would defeat Democrats in the US presidential election scheduled for later this year, leading to a rise in the dollar. Market expectations for Donald Trump to win the election increased after he survived an assassination attempt. Additionally, discussions about President Joe Biden possibly dropping out of the re-election race due to health concerns have fueled investors' expectations of a Trump victory. Trump is known for his protectionist trade policies, which reduce imports and benefit the dollar. Moreover, despite investors' belief that the Federal Reserve will start cutting interest rates from September, US bond yields have risen. The yield on 10-year US Treasury bonds jumped to nearly 4.24%. Market expectations for the Fed to pivot to policy normalization have risen due to easing price pressures and a cooling labor market.

Although the Dollar Index fell below the key 200-day moving average (104.39) earlier last week, this drop did not convince the market, so a short-term rebound is still possible. Further gains should target the key 200-day moving average of 104.39 and 104.59 (38.2% Fibonacci retracement level from 106.13 to 103.65) as near-term targets for the bulls. Once this area is breached, the index is expected to face the next resistance at 104.89 (50.0% Fibonacci retracement level), followed by 105.00 (psychological level), and 105.01 (20-day moving average). Further up is 105.20 (July 9 high). On the other hand, the formation of a "death cross" bearish pattern between the 20-day and 30-day moving averages before the weekend close suggests potential downside risk. If the bears regain control, the index could initially fall back to 104.00 (psychological level), with the next levels being the July low of 103.65 (July 17), 103.50 (middle line of the descending channel), and then directly to the low of 103.00 (lower line of the descending channel).

Today, consider shorting the Dollar Index around 104.50, with a stop loss at 104.60 and targets at 104.10 and 104.05.

WTI Crude Oil

Last week, calls for a ceasefire in Gaza grew stronger, and the market perceived that the supply-demand imbalance in the oil market had eased. At the same time, a stronger dollar led to further declines in oil prices. Crude oil closing prices fell by more than $2 to their lowest levels since early June. WTI crude oil fell about 3.14%, closing at $79.66 per barrel, again breaking below the $80.00 mark. The Gaza war has led investors to factor in a risk premium when trading oil due to tensions threatening global oil supply. If a ceasefire agreement is reached, Iran-backed forces may reduce attacks on Red Sea merchant ships. Last week, stronger-than-expected US labor market and manufacturing data pushed the Dollar Index higher, putting pressure on oil prices. Additionally, a stronger dollar suppresses the demand for dollar-denominated oil from buyers holding other currencies. Global technical failures disrupted operations in multiple industries, airlines suspended flights, some broadcasters went off the air, and sectors including banking and healthcare experienced system outages. Meanwhile, Russia might reinstate a gasoline export ban, tightening the fuel market in the short term; geopolitical tensions will cause volatility in the crude oil market.

The daily technical chart shows a strongly bearish pattern, as the latest wave of decline from the significant drop starting at $84.73 (recorded high on July 5) has so far retraced to $80.12 (38.2% Fibonacci retracement level from $72.67 to $84.73) and below the key area of $80.00 (psychological level) to a more than one-month low of $79.64. The 14-day Relative Strength Index (RSI) has reached the negative territory near 42.50, but the recent sharp bearish trend (with oil prices down about 5% in the past two weeks) suggests that oversold conditions may prompt some short covering. Shorts should face solid support at $78.88 (200-day moving average) and $78.70 (50.0% Fibonacci retracement level), and if broken, oil prices will continue to move towards $77.27 (61.8% Fibonacci retracement level) and $75.39 (June 10 low). On the upside, $80.12 (38.2% Fibonacci retracement level from $72.67 to $84.73) and $80.00 (psychological level) are the first near-term resistance levels to watch. Once surpassed, oil prices will continue to rise, with the next levels at $81.88 (23.6% Fibonacci retracement level) and further towards $82.90 (upper line of the descending channel) and $83.34 (last week’s high).

Today, consider going long on crude oil around $79.35, with a stop loss at $79.10 and targets at $80.60 and $81.00.

Spot Gold

Last week, after setting a historic high of $2,483.80, gold continued a downward trend for the third consecutive trading day towards the end of the week, briefly dropping below $2,400 and closing near the crucial level of $2,400. Speculation that the Republican Party may win the upcoming U.S. presidential election later this year, along with decent recoveries in the dollar and bond yields, weighed on gold. Gold rebounded last week, briefly surpassing the previous high of $2,450 to another peak of $2,483.80. Currently, gold may be consolidating at elevated levels rather than forming a topping pattern as seen previously, indicating a pause within a broader upward trend. Pressure on gold prices is also influenced by the rise in the benchmark 10-year U.S. Treasury yields. Additionally, aside from profit-taking, the market is influenced by narratives of a soft landing, which could further pressure gold as investors shift funds from safe-haven investments to riskier assets. The market currently anticipates a 98% probability of a rate cut by the Federal Reserve in September. In a low-interest-rate environment, the appeal of non-yielding gold tends to strengthen. Furthermore, increased investment-driven demand has supported the rise in gold prices.

On the daily chart, after reaching a new high of $2,483.80 early last week, gold saw a downtrend for three consecutive trading days, briefly falling below the psychological level of $2,400 to around $2,394 before the weekend. The short-term outlook for gold remains robust, supported by upward trends in moving averages spanning from short-term to long-term: 20-day (at $2,375), 50-day ($2,358), and 100-day ($2,311). The 14-day Relative Strength Index (RSI) has dropped to 54.00, indicating a temporary pause in the upward momentum. Nevertheless, the recent outlook for gold remains resilient. Key support levels for gold are at $2,393.80 (last Friday's low) and $2,385.30 (50.0% Fibonacci retracement level from $2,286.80 to $2,483.80). A breach of these levels could pave the way for a further decline towards $2,374.50 (20-day simple moving average). On the upside, resistance levels include $2,420 (lower boundary of the upward channel on the daily chart), $2,437.30 (23.6% Fibonacci retracement level), $2,439.20 (5-day simple moving average), with the next target at $2,458 (midline of the upward channel on the daily chart).

Today, consideration may be given to buying gold around $2,396.00, with a stop loss at $2,392.00, and targets set at $2,415.00 and $2,420.00.

AUDUSD

Last week, the Australian Dollar (AUD) against the US Dollar (USD) continued to decline for five consecutive trading days, nearing a three-week low of 0.6680. The pullback in the AUD/USD exchange rate was primarily due to heightened risk aversion sentiment and a strengthening USD. However, better-than-expected employment change data from Australia indicated tightness in the labor market, which could raise concerns among investors about potential interest rate hikes by the Reserve Bank of Australia (RBA), thus limiting the decline of the Australian Dollar. Despite some signs of economic fragility in Australia, sustained high inflation is prompting the RBA to delay interest rate cuts, which could also restrict further depreciation of the AUD. The RBA remains one of the last central banks among the G10 countries expected to initiate rate cuts, a commitment that could reinforce the AUD's position. Additionally, the Federal Reserve's potential midterm easing contrasts sharply with the restrictive stance the RBA may adopt in the long term, which could support AUD/USD in the coming months. However, concerns about slowing momentum in Chinese economic growth could hinder sustained recovery in AUD/USD, as China continues to face challenges post-pandemic. Persistent lack of inflation traction in China may prompt the People's Bank of China to implement stimulus measures, potentially supporting the Australian Dollar in the end.

From a technical standpoint, following a significant rise in early July, the daily chart shows AUD/USD dropping from a peak of 0.6798 to retrace to a low of 0.6680 before last weekend. Technical indicators such as the 14-day Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest weakening bullish momentum, indicating a corrective phase for the currency pair. AUD/USD breached critical support levels around the 20-day Simple Moving Average at 0.6708 and the psychological barrier of 0.6700, falling to near the three-week low of 0.6680, which could raise concerns among bulls. As the market adjusts, AUD/USD may continue to test lower levels around 0.6634 (July 2nd low) and 0.6631 (38.2% Fibonacci retracement level from 0.6362 to 0.6798) in upcoming trading sessions. Overall, as long as AUD/USD remains above the 200-day moving average at 0.6578, the uptrend is expected to continue. If bullish momentum resumes, near-term targets include 0.6730 (midline of the upward channel) and the region around 0.6738 (9-day moving average). Further targets include the high of 0.6798 on July 11th and the psychological level of 0.7000.

Today, consideration could be given to buying AUD around 0.6672, with a stop loss at 0.6660, and targets set at 0.6720 and 0.6730.

GBPUSD

Last week, the British Pound against the US Dollar reached a 12-month high, breaking above 1.3000, but the GBP/USD currency pair halted its two-week uptrend, closing lower below 1.30. Despite the monetary policy divergence between the Federal Reserve and the Bank of England remaining a key driver for GBP/USD movements, a late-session rebound in the USD amid widespread risk aversion sentiment disrupted the Pound's rally. Earlier, stronger-than-expected UK Consumer Price Index (CPI) inflation bolstered market expectations that the Bank of England would not cut rates in August. Meanwhile, softer US inflation data and dovish comments from the Fed, including Powell's statement on Monday that the central bank would not wait for inflation to reach 2% before cutting rates, influenced the market significantly before the Fed entered its "quiet period". GBP/USD extended its prior week's upward momentum, touching its highest level since July 2023 at 1.3045; however, a shift in USD buying sentiment helped the USD stage an impressive rebound in the latter half of the week.

The daily chart shows that GBP/USD briefly attempted to break above the psychological level of 1.3000 USD last week before continuing its strong trend. The 14-day Relative Strength Index (RSI) has pulled back from overbought levels to around 60, indicating that upward momentum risks remain intact. However, if GBP/USD strengthens corrective momentum from the 2024 high of 1.3045, immediate support levels include the March 8th high of 1.2894 and 1.2880 (midline of the upward channel). A sustained drop below 1.2894 - 1.2880 would challenge key resistance levels near 1.2800 and 1.2795 (21-day moving average), where the 21-day simple moving average intersects. Further downward, the 50-day moving average at 1.2751 would be tested. On the upside, reclaiming the key level of 1.3000 on a weekly closing basis is crucial to revitalizing the uptrend towards the yearly high of 1.3045. If buyers establish firm ground above this level, a renewed push towards 1.3080 (upper trendline of the daily chart wedge), 1.3100 integer level, or higher levels cannot be ruled out.

Today's recommendation is to consider buying GBP around 1.2895, with a stop loss at 1.2880, targeting 1.2945 and 1.2955.

USDJPY

Before the weekend, the USD/JPY pair briefly dropped below 157.50 as the yen strengthened amid warnings from authorities. However, the USD strengthened and rising US Treasury yields stabilized the currency pair ahead of the Fed's speech. The yen retraced its gains from early in the week by the weekend. At the beginning of last week, apparent intervention by Japanese authorities pushed the USD/JPY pair to a one-month low of 155.36, strengthening the yen against the USD. Traders remain cautious about the possibility of further intervention. Japan's top currency diplomat, Masato Kanda, stated on Wednesday that he would have to respond if speculators cause "excessive" volatility in the currency market, with no restrictions on the frequency of interventions. The USD found support from slight improvements in US Treasury yields. However, the USD's upside potential may be limited as the Fed is likely to decide on a rate cut at its September policy meeting. Federal Reserve Governor Christopher Waller indicated on Wednesday that the Fed is "getting closer" to a rate cut. Meanwhile, Richmond Fed President Thomas Barkin suggested easing inflation.

The daily chart shows that the USD/JPY pair displayed a pattern of initial weakness followed by stabilization last week, but momentum still favors the bearish side. The 14-day Relative Strength Index (RSI) has turned bearish (42.10), signaling further weakness. Additionally, the "death cross" formation of the 9-day (158.53) and 34-day (158.71) moving averages at last weekend's close indicates a bearish outlook. Therefore, if the USD/JPY falls below 158.08 (38.2% Fibonacci retracement level of 151.85 to 161.95), it could exert downward pressure on the currency pair, pushing prices towards 156.95 (last Friday's low), followed by 155.73 (61.8% Fibonacci retracement level). Beyond these levels, the next support area would be the low of July 18 at 155.36, leading to 155.00. Conversely, if buyers intervene and push the USD/JPY above 158.00 (psychological barrier) and 158.08 (38.2% Fibonacci retracement level), then levels of 159.38 (23.6% Fibonacci retracement level of July 16) and 160.00 (psychological barrier) would be tested again.

Today's recommendation is to short the USD before 157.60, with a stop loss at 157.90, targeting 156.50 and 156.30.

EURUSD

EUR/USD halted its recent uptrend and closed last week slightly below the 1.0900 mark. However, the currency pair touched a multi-month high of 1.0948 midweek before turning lower following the European Central Bank's (ECB) measured announcement of monetary policy. Optimism about an impending rate cut by the United States initially exerted strong selling pressure on the USD early last week. However, both risk sentiment and the ECB's stance helped stabilize the USD. On one hand, as widely expected, the ECB kept interest rates unchanged and refrained from committing to any specific monetary policy path. Policymakers reiterated that rate decisions would depend on data and be taken meeting by meeting. Consequently, the EUR remained unchanged after the statement. On the other hand, the tech sector plummeted after the Joe Biden administration threatened strict restrictions on foreign chipmakers exporting to China. Friday's stock decline, exacerbated by a global internet outage affecting various industries and companies, including the London Stock Exchange, further bolstered the USD's performance. However, economic growth data will also influence Federal Reserve decisions. Optimistic GDP and PCE data could shift speculative interest regarding September. The USD could rise on this news, converting the current corrective uptrend into a bullish upswing.

From a technical perspective, EUR/USD is positioned towards the upper end of its recent range, with risks still skewed to the upside. On the weekly chart, the currency pair is developing above the 20-week (1.0792) and 100-week (1.0790) simple moving averages, forming a bullish "golden cross" pattern. Meanwhile, the moderately bearish 180-week near 1.0985 and 1.1012 (76.4% Fibonacci retracement level of 1.1139 to 1.0601) provide dynamic resistance. The 14-week Relative Strength Index (RSI) indicator has leveled around 55.42, suggesting waning market interest despite continued buyer control. However, no technical signs indicate a potential reversal in the current trend. On the daily chart, technical indicators align with the ongoing corrective downside but do not suggest an immediate continuation of the decline. They remain at positive levels. Conversely, moving averages are significantly below current levels, consistent with the primary bullish trend. EUR/USD needs to hold above 1.0806 (38.2% Fibonacci retracement level) and 1.0800 (psychological level) to maintain its bullish trend; breaking below this level would face the 1.0728 (23.6% Fibonacci retracement level) area. If the USD regains focus, the year's low of 1.0600 will be a major bearish target.

Today's recommendation is to buy the USD before 1.0865, with a stop loss at 1.0850, targeting 1.0925 and 1.0935.

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