USD

The U.S. Dollar Index tracked a decline in the dollar ahead of the Federal Reserve's meeting on Wednesday, but managed to recover losses after the announcement. Under Powell's pressure, he left the door open for a rate cut in September, and with clearer signals from the market regarding when the Fed might start cutting rates, the dollar fell again. During the European session on Wednesday, the dollar remained sluggish. The Dollar Index, which tracks the value of the dollar against six major currencies, fell to around 104.30. The 10-year U.S. Treasury yield held steady at a four-month low of around 4.14%, as expectations for the Fed’s policy outcome may not support the consistency of a restrictive rate framework. Investors anticipate that the Fed will keep the rates unchanged in the 5.25%-5.50% range for the eighth consecutive meeting. However, due to easing inflationary pressures in the U.S. and a slowdown in labor market strength, a dovish communication on rate guidance is expected. Except for the Australian dollar, the U.S. dollar underperformed against other major currencies, particularly versus the Japanese yen. The dollar weakened due to expectations of a dovish shift by the Fed. The Australian dollar softened after a decline in the expected annual Consumer Price Index (CPI) for the second quarter.

On the daily chart, the Dollar Index has formed a "symmetrical triangle" pattern, exhibiting significant volatility contraction. This chart pattern leads to sideways movement, reduced trading volume, and smaller amplitude fluctuations. The recent trend remains bearish, with major resistance for dollar bulls at 104.80 (Tuesday’s high) and near the 50-day moving average at 104.86. Further resistance is at 105.00 (a key psychological level). The 14-day Relative Strength Index (RSI) is oscillating just above 40, indicating an overall bearish trend, though bearish momentum is not very strong. Key short-term support levels continue to be at 104.00 (a psychological level), and July 17th low of 103.65 and 103.60 (the lower boundary of the downtrend channel).

Consider shorting the Dollar Index near 104.15 today, with a stop-loss at 104.30 and targets at 103.80 and 103.70.

AUD

The AUD/USD managed to reverse its earlier decline to a new low near 0.6480 and recovered above the 0.6500 level as the dollar continued to weaken. Following the release of mixed Consumer Price Index (CPI) data on Wednesday, the Australian dollar fell against the U.S. dollar, providing potential insights into the future direction of the Reserve Bank of Australia's (RBA) monetary policy. The inflation report has heightened market expectations that the RBA might opt to keep interest rates unchanged at its policy meeting next week. However, economists caution that further rate hikes could jeopardize Australia's economic recovery. Additionally, the National Bureau of Statistics reported the Manufacturing Purchasing Managers' Index (PMI) for July at 49.4, slightly above the expected 49.3 but below the previous 49.5. Meanwhile, the Non-Manufacturing PMI came in as expected at 50.2. Given the significant impact of Chinese economic changes on the Australian market, these PMI readings are particularly important. The decline in AUD/USD may be limited.

On the daily chart, AUD/USD broke below its downtrend channel on Wednesday, touching a low of 0.6479. The 14-day Relative Strength Index (RSI) is hovering near the oversold level of 25, indicating a potential upward correction soon. Immediate support levels for AUD/USD are at the May low of 0.6465 and at 0.6464 (76.4% Fibonacci retracement from 0.6362 to 0.6798). The next support level is at the psychological level of 0.6400. On the upside, key resistance is at 0.6575, near the “previous support turned resistance” level, aligning with the 9-day moving average at 0.6576. A breakout above this level could lead AUD/USD to test the psychological level of 0.6600.

Consider buying AUD/USD near 0.6535 today, with a stop-loss at 0.6520 and targets at 0.6580 and 0.6590.

EUR

Following Chairman Powell’s hint at a potential rate cut in September, EUR/USD has rebounded from recent declines and hovers around 1.0840, responding to increased selling pressure on the dollar. In the early Asian session on Wednesday, EUR/USD consolidated around 1.0815. The pair has experienced volatility due to risk aversion and weaker-than-expected preliminary GDP data for Germany’s second quarter. Weak GDP data has put some selling pressure on the euro (EUR). However, Eurozone GDP for Q2 recorded a quarterly growth of 0.3%, surpassing the expected 0.2%. The Federal Reserve is expected to keep rates steady at 5.25%-5.50% for the eighth consecutive meeting, with this potentially being the final decision at this level before the Fed begins to ease policy in September, as inflation is slowing more rapidly than anticipated in June. If the easing progresses as expected, the Fed might even cut rates twice by 25 basis points each before the end of 2024.

EUR/USD is trading within its initial range for the week and is holding key support at 1.0800. After failing to maintain the breakout, the pair remains in a "symmetrical triangle" pattern on the daily chart. The pair is trading below the 20-day exponential moving average at 1.0857. EUR/USD may slide further towards support levels at 1.0810 (50-day moving average), 1.0807 (23.6% Fibonacci retracement from 1.0666 to 1.0948), and 1.0800 (psychological level). A break below these levels could target 1.0773 (61.8% Fibonacci retracement), with further testing possible at 1.0736 (July 3 low). On the upside, key resistance levels for euro bulls are at 1.0871 (14-day simple moving average) and 1.0881 (23.6% Fibonacci retracement). Following this, resistance is at 1.0900 (psychological barrier), and finally at 1.0948 (last week’s high).

Consider buying USD near 1.0810 today, with a stop-loss at 1.0800 and targets at 1.0860 and 1.0870.

GBPUSD

GBP/USD retraced recent losses and traded around 1.2840 during the Asian session on Wednesday. Analysis of the daily chart indicates that the pair is in the narrow part of a downtrend channel, suggesting a consolidation phase or a potential reversal. The market is likely to be more cautious ahead of the Bank of England’s policy meeting on Thursday. Since July 2023, the Federal Reserve has maintained its rate in the 5.25%-5.50% range, marking the longest period of restrictive monetary policy by the Fed in decades. Midweek data showed U.S. JOLTS job openings dropped to 8.184 million in June, while the U.S. Consumer Confidence Index rose from a revised 97.8 in June to 100.3 in July. Regarding the British pound, investors continue to price in the possibility of a rate cut by the Bank of England on Thursday, which has weighed on GBP/USD. According to Reuters, traders see a nearly 58% chance that the Bank of England will cut borrowing costs by 25 basis points to 5%.

The daily chart shows that after reaching a year-to-date high of 1.3045, GBP/USD continued to decline to a low of 1.2806 earlier this week. Buyers have been unable to rebound the exchange rate above the previous cycle high of 1.2893 from March 8. If the pair clears this level, losses may continue, with market participants eyeing the 50-day moving average at 1.2784 and the 61.8% Fibonacci retracement level at 1.2777 (from 1.2612 to 1.3045). The 14-day Relative Strength Index (RSI) suggests momentum is favoring sellers, indicating further tests of 1.2714 (76.4% Fibonacci retracement) and the psychological level of 1.2700. Consequently, the path of least resistance for GBP/USD appears to be downward. For a bullish correction, GBP/USD would need to break above the July 29 high of 1.2888 and the 38.2% Fibonacci retracement level at 1.2879, allowing buyers to challenge the year-to-date high.

Today, consider buying GBP near 1.2835, with a stop-loss at 1.2820 and targets at 1.2880 and 1.2890.

USDJPY

On Wednesday, USD/JPY fell by 1.5%, extending its recent bear market following an unexpected rate hike by the Bank of Japan (BoJ) during the early hours of trading. This marks the BoJ's second rate hike since 2007, and the first time Japanese rates have been above zero since September 2010. After concluding its two-day monetary policy review meeting on Wednesday, the BoJ's board decided to raise the short-term interest rate target by 15 basis points from 0%-0.1% to 0.15%-0.25%, leading to a further decline in the yen against the dollar. Additionally, the BoJ decided to reduce its monthly purchases of Japanese Government Bonds (JGBs) to ¥3 trillion starting in the first quarter of 2026. BoJ Governor Kazuo Ueda explained the rationale behind this unexpected policy move at a press conference. Ueda stated that adjusting the degree of monetary easing to sustainably achieve the 2% inflation target is appropriate. He also emphasized the necessity of gradually reducing JGB purchases in a predictable manner while ensuring market stability through increased flexibility.

The daily chart shows that USD/JPY dropped to 151.20, its lowest level since April. The pair is testing the lower bound of its downtrend channel. Additionally, the 14-day Relative Strength Index (RSI) is slightly below 20, indicating that the currency asset is oversold and suggesting a potential short-term rebound. Immediate support levels are at 149.50 and around 149.30. A break below these levels could reinforce the bearish outlook and drive USD/JPY lower, potentially reaching the 148.71 level (65-week moving average) where additional support may emerge. On the upside, the pair is testing the 50-day moving average at 150.93. A breakout above this level could lead to targets at 151.95 (May 3 low) and 152.64 (Tuesday’s low) where “previous support turned resistance” aligns.

Consider shorting USD/JPY near 150.20 today, with a stop-loss at 150.50 and targets at 149.00 and 149.50.

XAUUSD

On Wednesday, gold prices climbed to $2,450 and remained stable following the widely anticipated Federal Reserve decision. The Fed decided once again to keep the policy rate unchanged at 5.25%-5.5%, marking the eighth consecutive meeting without a rate adjustment. After this decision, gold prices saw a slight increase in the Asian session on Wednesday, buoyed by a weakening dollar, which helped gold prices rebound firmly. Additionally, month-end fund flows contributed to the strong rebound in gold prices amid a significant drop in the dollar. On the other hand, concerns over the escalating tensions in the Middle East have enhanced gold’s safe-haven appeal. Historically, during geopolitical tensions, investors view precious metals as a secure bet. Reports of Hamas leader Ismail Haniyeh’s death in an Israeli airstrike on Tehran have heightened fears of a full-scale war between Israel and Iran, raising concerns about potential Iranian retaliation and diminishing hopes for a ceasefire.

Midweek, gold buyers regained confidence, with the 14-day Relative Strength Index (RSI) rising above the 56 level. Gold prices broke out of the consolidation range following a close above the 21-day simple moving average resistance (then at $2,394) on Tuesday. In this context, if buyers manage to sustain a breakout above the static resistance levels of $2,450 and $2,451 (yesterday’s high), gold prices are likely to continue moving higher. The next upward resistance is at $2,475 (the July 18 high), and if buying momentum remains strong, gold may re-test the historical high of $2,483.70. Conversely, recent support levels are at the previous $2,437.20 (23.6% Fibonacci retracement from $2,286.80 to $2,483.70) and the $2,440 range. A further decline could target the $2,408.40 (38.2% Fibonacci retracement) level.

Consider buying gold near $2,444.00 today, with a stop-loss at $2,440.00 and targets at $2,465.00 and $2,470.00.

XTIUSD 

On Wednesday, the U.S. Energy Information Administration (EIA) reported a larger-than-expected decline in U.S. crude oil inventories, exacerbating the recent drop in U.S. oil production. West Texas Intermediate (WTI) crude oil prices rebounded to $78.18 per barrel. As widely anticipated, the Federal Reserve (Fed) maintained its interest rate stability, and the prospects of a rate cut in September contributed to a boost in commodity risk sentiment. WTI rebounded from the 8-week low of $75.19 hit on Tuesday, driven by escalating geopolitical tensions in the Middle East, which pose risks to oil supply. Despite diplomatic efforts by U.S. and UN officials to prevent a broader conflict in the Middle East, tensions have increased. Growing speculation about a possible rate cut in September could bolster economic activity in the world's largest crude oil consumer, the U.S., thereby supporting demand for the "liquid gold." However, the weak economic outlook in China, the world’s largest crude oil importer, has limited the upside for oil prices.

Earlier in the week, WTI crude oil fell below the 200-day moving average of $78.20 and the $75.45 level (76.4% Fibonacci retracement from $72.62 to $84.65), and briefly touched an 8-week low of $75.19. After the adjustment, it may follow the prevailing trend, which in this case suggests a continuation of the downtrend, indicating a fragile near-term outlook. The 14-day Relative Strength Index (RSI) has turned bearish at 39, suggesting momentum is shifting downward. If oil prices fall back to Tuesday’s low of $75.19, near the June 4 high of $74.00, this could present a selling opportunity, targeting the February 5 low of $71.46 and the psychological support level of $70.00. On the upside, only a break above the 200-day moving average of $78.20 would counter the downtrend of the past five days and open the door for a stronger rebound towards the psychological level of $80.00 and $80.12 (38.2% Fibonacci retracement from $72.67 to $84.73). A break above this level would target $80.49 (89-day moving average).

Consider buying oil near $79.00 today, with a stop-loss at $78.80 and targets at $80.00 and $80.20.

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