USD

On Wednesday, the US dollar, measured by the dollar index, fell to 104.20, primarily influenced by mixed S&P PMI data and continued market bets on a dovish outlook for the Federal Reserve (Fed). As signs of deflation steadily appear, market participants are increasingly confident about a potential rate cut in September, but Fed officials continue to take a cautious approach, remaining data-dependent. Therefore, attention has shifted to upcoming key data, with the dollar potentially rising due to increased risk aversion. The rise in US Treasury yields may help support the dollar. Midweek, the dollar, measured by the dollar index, showed a slight increase, though the decline in US Treasury yields is expected to pose a significant challenge for the remainder of the week. Following Joe Biden's withdrawal, former President Donald Trump hinted at new economic plans, leading to changes in financial market expectations.

Despite currently breaking above the 200-day simple moving average at 104.36, the upward trend is capped by the 220-day simple moving average at 104.52 and the recent resistance area at 104.59 (38.2% Fibonacci retracement level from 106.13 to 103.65). At this stage, the outlook for the dollar index remains neutral to bearish. Bearish signals reappear as the technical indicator 14-day Relative Strength Index (RSI) remains largely in the negative territory (45.60), and a bearish crossover between the 20-day (104.81) and 100-day (104.82) moving averages is evident around 104.80. If this crossover completes, it will provide significant momentum for sellers. Targets will point to areas like 140.00 (psychological market barrier); July low at 103.65 (July 17); and 103.50 (midline of the downward channel). On the upside, resistance levels are at 104.59 (38.2% Fibonacci retracement level) and 104.89 (50.0% Fibonacci retracement level).

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 Spot Crude Oil

Due to the weekly decline in crude oil inventories last week, WTI prices have stopped falling. The EIA crude inventory change report is expected to show an increase of 700,000 barrels for the week ending July 19. Israeli Prime Minister Benjamin Netanyahu will address the US Congress, seeking to shift American attention to the Middle East. US WTI crude oil prices fell to $77.25 yesterday, the lowest level since mid-June, after falling about 3% last Friday, with most of the drop occurring in the evening. The current price weakness does not have oil market-specific triggers. Therefore, the headwinds are likely due to the general negative sentiment towards cyclical commodities. Oil prices initially held up, but the situation changed drastically last Friday. Concerns about demand have clearly taken the upper hand. OPEC+'s voluntary production cuts ensure an undersupplied oil market this quarter. The forward curve also reflects this. The significant decline in US crude oil inventories over the past three weeks also indicates tight supply. Currently, supply risks do not seem to impact the market. Given the prevailing demand concerns, oil prices may initially struggle to recover. However, due to the factors mentioned above, the market expects oil prices to rise again in the coming weeks.

From the recent technical trend, WTI crude oil found support after falling to $77.25, the lowest level since mid-June, but the bullish rebound failed to recover the key support low of $80.00 (psychological level) and the 38.2% Fibonacci retracement level at $80.12 (from $72.67 to $84.73). The intraday price trend is inclined to be bearish, and the 14-day Relative Strength Index (RSI) remains largely in the negative territory (37.30), indicating that recent momentum may have weakened, and WTI prices could continue to challenge the 61.8% Fibonacci retracement level at $77.27. Further support will directly point to the 76.4% Fibonacci retracement level at $75.51. Conversely, if WTI prices rebound above the 50.0% Fibonacci retracement level at $78.70 and the 200-day moving average at $78.79, the price may rise almost unhindered to break through the psychological level of $80.00 and the 38.2% Fibonacci retracement level at $80.12.

Today, consider going long on crude oil around $78.10, with a stop loss at $77.85, and targets at $79.40 and $79.60.

XAUUSD

Building on Tuesday's recovery gains, gold prices briefly traded above $2,420 on Wednesday. After the release of the US Purchasing Managers' Index (PMI) data, gold prices fell back below $2,400 during the US trading session. Gold prices rebounded from a one-week low of $2,383.78 on Monday due to reduced demand for the dollar ahead of significant US data and major earnings reports. However, market participants have increased their bets that the Federal Reserve will cut rates by 25 basis points in September and again by the same amount in December, which limits the dollar's bullish potential. Additionally, declining government bond yields have weakened demand for the dollar. Currently, with light economic events and upcoming key US events, the lack of clear directional momentum for gold prices is further exacerbated. Investors are awaiting the preliminary second-quarter GDP and the revised PCE price index data, the latter being the Fed's preferred inflation measure, both to be released on Friday.

The daily chart shows gold prices rebounding from the 50% Fibonacci retracement level of $2,389.30 from the $2,293.50/$2,483.80 rally. Meanwhile, the bullish 20-day simple moving average (SMA) at $2,388 is oscillating higher, below the mentioned Fibonacci retracement level, while larger moving averages are also trending upwards, maintaining a dominant bullish trend. Finally, momentum indicators are maintaining a downward trend but remain in positive territory, while the 14-day Relative Strength Index (RSI) is slightly declining around 53 but still supports a potential rise in gold prices. On the upside, the static resistance level at $2,425 can be watched. A break above this level would target the previous cycle high of $2,450, with the next target being the all-time high of $2,483.80 set last week. On the downside, gold prices might test $2,393.80 (last Friday's low), with a break below targeting the 50% Fibonacci retracement level of $2,385 and the 20-day SMA of $2,388. Further decline could reach the 50-day moving average support at $2,361.50.

Today, consider shorting gold before $2,398.00, with a stop loss at $2,402.00, and targets at $2,385.00 and $2,382.00.

AUDUSD

The selling pressure on AUD/USD shows no signs of abating, as the pair has fallen for the eighth consecutive day, breaking below the key 200-day moving average near 0.6584 and reaching a new two-month low. During the early Asian session on Wednesday, AUD/USD fell for the seventh consecutive day, hovering near the 0.6600 level. The mixed results from Australia's Judo Bank Purchasing Managers' Index failed to boost the Aussie. Traders are awaiting the preliminary June S&P Global Purchasing Managers' Index (PMI) for the US to provide fresh impetus for the Aussie. Weak economic activity in China over the past few weeks has exerted some selling pressure on the Aussie, while iron ore prices have fallen to their lowest level since early April. Additionally, the People's Bank of China's (PBoC) unexpected rate cut on Monday has sparked concerns about the Chinese economy's weakness. However, an increasing number of investors are speculating that the Federal Reserve will start cutting rates in September, which could pressure the dollar and limit the downside for AUD/USD. The CME FedWatch Tool shows that traders are currently pricing in a nearly 96% probability of a Fed rate cut in September.

The technical indicator 14-day Relative Strength Index (RSI) for AUD/USD is now below 32, indicating a bearish trend. Further declines might find initial support at the psychological level of 0.6600, followed by the more relevant 200-day simple moving average at 0.6584 and the June low of 0.6574 (June 10). Beyond this, the next support level would be the May 6 low at 0.6558. On the upside, the first obstacle is the initial barrier at 0.6663 (55-day simple moving average). This is followed by 0.6695 (23.6% Fibonacci retracement level) and then 0.6730 (channel midline).

Today, consider going long on the Aussie before 0.6570, with a stop loss at 0.6555, and targets at 0.6640 and 0.6650.

GBPUSD

On Wednesday, GBP/USD saw a slight uptick above 1.2900. The dollar struggled to maintain its gains from Tuesday, following mixed July PMI data, which kept the currency pair in positive territory for the latter half of the month. In the early hours of Wednesday, GBP/USD remained under pressure below 1.2900. The broad risk-averse sentiment counteracted the dollar's weakness caused by the decline in USD/JPY, negatively impacting the pair. The focus now shifts to the S&P Global PMIs for both the UK and the US. GBP/USD is gradually declining mid-week, preparing for busy market activity in the latter half of the week after a calm start. The global market widely expects the Federal Reserve to cut rates in September, with investors looking for signs of further weakening in US economic data to solidify the rate cut outlook. Rate policy traders believe there is nearly a 100% probability of at least a 25 basis point rate cut during the Fed's rate call on September 18. US Q2 GDP data will be released on Thursday, followed by the US PCE price index on Friday.

From a technical perspective, GBP/USD is currently slightly above the 1.2879 level (38.2% Fibonacci retracement level from 1.2612 to 1.2945). This support level is linked to the area near 1.2880 (midline of the ascending channel). Falling below this area could trigger a new round of selling, dragging GBP/USD down to the 1.2828 level (50.0% Fibonacci retracement level). The next significant psychological support is near 1.2800. A convincing break below this level would be seen as a new trigger for bears, paving the way for deeper losses. On the other hand, any positive factors pushing above the 1.2900 mark could attract new buyers, maintaining the pair near 1.2942 (23.6% Fibonacci retracement level) and 1.2945 (last week's high). Given that the oscillators on the daily chart remain in positive territory, GBP/USD may re-target a rebound.

Today, consider going long on GBP before 1.2900, with a stop loss at 1.2885, and targets at 1.2945 and 1.2960.

USDJPY

The yen's appreciation is due to hawkish sentiment surrounding the Bank of Japan's policy stance ahead of next week's meeting. Japan's July Manufacturing PMI fell from 50.0 to 49.2, while the Services PMI surged from the previous 49.4 to 53.9. The yen extended its gains for the third consecutive day on Wednesday, driven by the return of risk-averse fund flows. The market anticipates that the Bank of Japan will raise interest rates at next week's policy meeting, prompting short-covering and supporting the yen. According to market reports, senior ruling party official Toshimitsu Motegi urged the Bank of Japan to more clearly communicate its plan to normalize monetary policy through gradual rate hikes. Prime Minister Fumio Kishida added that normalizing the central bank's monetary policy would support Japan's transition to a growth-driven economy. Meanwhile, rising bets on a Fed rate cut in September are challenging the dollar, putting downward pressure on USD/JPY. The probability of a 25 basis point rate cut by the Fed at the September meeting is now 93.6%, up from 88.5% the previous day. Traders are awaiting Thursday's release of the annualized Q2 GDP data, which is expected to provide new insights into the US economic situation.

USD/JPY is trading slightly below 154.00 near a more than two-month low. Daily chart analysis shows USD/JPY within a descending channel, indicating a dovish bias. Additionally, the technical indicator 14-day Relative Strength Index (RSI) is below 28, reinforcing the bearish outlook. If RSI breaks below the 30 level, it may indicate oversold conditions and a potential short-term rebound. USD/JPY might find significant support around the 153.78 level of the 134-day simple moving average and the 153.60 level (May 16 low). Breaking below this level could further target the May low of 151.95. On the upside, the immediate resistance is at 155.77 (61.8% Fibonacci retracement level from 151.85 to 161.95). If this level is breached, USD/JPY could move towards the psychological resistance level around 162.00.

Today, consider shorting USD before 154.00, with a stop loss at 154.20, and targets at 153.20 and 152.80.

EURUSD

EUR/USD extended its Tuesday losses, dropping to a two-week low near 1.0825 amid a late USD rebound and overall market risk aversion. Despite the pullback in US and German bond yields, the dollar reversed and moved slightly higher, leading EUR/USD to resume its downward trend and fall further below the 1.0900 level in a risk-off environment. Regarding the Federal Reserve, the market has already priced in a rate cut in September, with expectations of another cut in December. In the Eurozone, European Central Bank (ECB) Vice President Luis de Guindos suggested a potential rate cut in September, highlighting that the ECB's new projections will be the "most important" factor in determining if inflation returns to target. Moreover, signs of a slowing US economy and the Eurozone's economic recovery prospects might occasionally support EUR/USD by narrowing the monetary policy gap between the Fed and the ECB. This view is bolstered by the increasing anticipation of Fed rate cuts.

From a daily chart perspective, the next short-term support for EUR/USD is expected at the critical 200-day moving average of 1.0816 and the 50-day moving average of 1.0812, followed by 1.0807 (50.0% Fibonacci retracement level from 1.0666 to 1.0948). If EUR/USD breaks below the psychological level of 1.0800, it could drop to 1.0773 (61.8% Fibonacci retracement level). On the upside, initial resistance is at 1.0881 (23.6% Fibonacci retracement level), followed by 1.0900 (psychological level) and 1.0948 (last week's high).

Today, consider going long on USD before 1.0830, with a stop loss at 1.0815, and targets at 1.0880 and 1.0890.

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