• EUR/GBP prepares to finish the week almost flat, compared to last week’s marginally down 0.06%.
• The cross-currency pair is range-bound in the 0.8400-0.8490 area, though risks are skewed to the upside.
• A EUR/GBP break of 0.8500 could put a re-test of the YTD high into play.

The EUR/GBP advances to fresh weekly highs, above the 100-DMA, erasing Thursday’s losses as Wall Street finishes the week in the green, falling between 3% and 4.10%, on Fed’s Chair Powell’s remarks, on Friday. At the time of writing, the EUR/GBP is trading at 0.8481.

EUR/GBP Price Analysis: Technical outlook

During the week, the cross-currency pair dropped towards its weekly low at 0.0407, below the 20-day EMA on Tuesday, though it achieved a comeback, and the pair reclaimed the 200-day EMA. Friday’s price action, broad euro strength, lifted the pair towards its weekly highs above the 0.8500 figure, but lack of impetus sent the cross towards the 50-day EMA at 0.8481.

The EUR/GBP bias is neutral-to-upwards. Through August, the pair achieved a successive series of higher highs/lows and might be closing with gains in the monthly chart, but unless the EUR/GBP breaks the 0.8500 mark, the pair will remain trading in the 0.8400 handle for a foreseeable period.

If the EUR/GBP clears the 0.8500 psychological level, their next resistance would be the July 21 high at 0.8584. Once cleared, the psychological 0.8600 will be the next supply zone, ahead of a test of the YTD high at 0.8721.

On the flip side, the EUR/GBP first support would be the 0.8400 figure. Break below will expose essential demand zones, like the August 17 daily low at 0.8386, followed by the MTD lows at 0.8339.

EUR/GBP Key Technical Levels

• Silver price prepares to finish the week with losses of 0.64%.
• Fed’s Chair Powell reiterated the US central bank goal of bringing inflation down, even if it generates “pain to households and businesses.”
• Upbeat US economic data weighed on the white metal prices, plummeting more than $0.30.

Silver price tumbles from around weekly highs around $19.42, back below the $19.00 figure after Fed’s hawkish rhetoric finally takes its toll on the market’s erroneous perception of a Fed pivot. That, alongside positive US economic data, underpinned the greenback, a headwind for the white metal price. Therefore, XAG/USD is trading at $18.86 a troy ounce at the time of writing.

US equities are plunging after Jerome Powell’s saying that the Fed’s primary goal is bringing inflation to its 2% goal even if it spurs slow growth and “pain to households and businesses.” He added that “without price stability,  the economy does not work for anyone.”

The US Dollar Index, a gauge of the buck’s performance against a basket of six currencies, gains more than 0.30%, set to finish the week above the 108.800 figure, while US Treasury bond yields are climbing, led by the short-end of the curve, with 2s up two and a half bps, at 3.398%. In the meantime, the US 10-year benchmark note sits at 3.039%, almost flat.

Fed’s favorite gauge of inflation edges lower, as well as American inflation expectations

In the meantime, the US Bureau of Economic Analysis reported that inflation in the US measured by the PCE slid to 6.3% YoY, less than estimates of 7.4%. Excluding volatile items like food and energy, the so-called Core PCE slowed to 4.6% YoY, lower than expectations of 4.7%.

Later, the University of Michigan’s Consumer Sentiment final release for August arrived at 58.2, upward revised from 55,1 preliminary reported, up from estimations of 55.2. Even though it’s a good reading, inflation expectations were the main spotlight. Americans expect inflation to top around 4,8% in the one-year horizon vs. 5% preliminary. Inflation is estimated to peak within five years at around 2.9% vs. 3% preliminary.

What to watch

In the next week, the US economic calendar will feature US CB Consumer Confidence, ISM Manufacturing PMI, the ADP Employment report and the Nonfarm Payrolls.

Silver (XAG/USD) Daily chart

• USD/CHF bounces from weekly lows, set to finish the week with gains of 0.73%.
• From a daily chart perspective, the USD/CHF has nowhere to go; it would likely remain in consolidation.
• Near-term, a symmetrical triangle in the USD/CHF 4-hour chart targets 0.9767.

The USD/CHF stages a comeback after hitting weekly lows around 0.9577 earlier in the day and is about to erase Thursday’s losses as the USD/CHF aims towards the 100-DMA, following hawkish remarks by the US Federal Reserve Chief, Jerome Powell. The USD/CHF is trading at 0.9659, up by almost 0.20%.

USD/CHF Price Analysis: Technical outlook

Consolidation in the daily chart will keep the USD/CHF trading within the 0.9600-0.9690 range, as shown by this week’s price action. Worth noting that the support/resistance levels are the 100 and 50-day EMAs, each at 0.9657 and 0.9614, respectively. Therefore, unless the exchange rate decisively breaks above/below the range, the USD/CHF might remain subdued.

Short term, the USD/CHF 4-hour scale depicts the formation of a symmetrical triangle on an uptrend, which was “false” broken to the downside, on the remarks of Fed’s Powell, though it closed within the top-bottom of the trendlines. Additionally, the USD/CHF bias is neutral-to-upwards biased, confirmed by the moving averages residing below the spot price, while the Relative Strength Index (RSI) turned the coroner and began to aim higher in positive territory.

Hence, the USD/CHF first resistance would be the top-trendline of the symmetrical triangle. Break above will expose the confluence of the R2 pivot point and the 0.9700 figure. Once cleared, the next supply zone would be the height of the symmetrical triangle, which targets 0.9767, followed by the psychological 0.9800 mark.

USD/CHF Key Technical Levels

• NZD/USD plunges more than 1% on Friday, in a risk-off mood.
• Powell said it would “bring some pain to households and businesses” in achieving the Fed’s 2% goal.
• US inflation readings show signs of peaking while US consumer sentiment improves.

The NZD/USD dropped to fresh weekly lows of 0.8150 on Friday, following hawkish remarks by US Federal Reserve Chair Jerome Powell, reiterating the Fed’s job of restoring price stability towards the bank’s 2% target. Furthermore, he acknowledged that it will “require a sustained period of below-trend growth.” Consequently, sentiment shifted sour, with US equities falling off the cliff.

NZD/USD falls on Powell’s hawkish remarks and upbeat US economic data

In the Asian session, the NZD/USD opened above the 0.6220 figure, fluctuating within the 0.6180-0.6220 range ahead of US economic data releases and Powell’s remarks on Jackson Hole. Nevertheless, once Powell took the stand, the NZD/USD seesawed as volatility increased, sending the major to week’s lows. At the time of writing, the NZD/USD exchanges hands at 0.6148, well below its opening price.

Summarizing Powell’s remarks, he said that reducing inflation will “bring some pain to households and businesses” amidst a period of higher interest rates, softening labor market conditions, and sluggish economic growth. The Fed Chair reiterated that the Fed would “bring inflation back down to our 2% goal,” commenting that the central bank is taking rapid steps to curtail demand, so it better aligns to supply.

Jay Powell welcomed the July inflation figures but quickly added that a “single month improvement falls far short of what the Committee needs to see” regarding the direction of inflation. Powell noted that being around a neutral stance “was not a place to stop or pause,” pushing against the market’s perceptions of a Fed pivot that triggered a 15% rally ons US equities from June’s lows.

Aside from this, the US economic calendar unveiled the University of Michigan Consumer sentiment for August on its final release. American citizens’ sentiment improved to 58.2 vs. 55.2 estimates, while inflation expectations for a one-year horizon fell to 4.8% from 5.2% last month.

Earlier on Friday, the Fed’s favorite inflation gauge, headline, and core Personal Consumption Expenditures (PCE) price Indices for July. Headline PCE rose by 6.3% YoY, higher than the 6.2% estimated, while core PCE, which excludes volatile items, decelerates to 4.6% YoY vs. 4.7% forecast.

NZD/USD Key Technical Levels

• USD/MXN remains above 19.90 but faces pressure
• More losses seem likely while under 20.20.

The USD/MXN is modestly higher on Friday, but it remains under 20.00. The pair found support above 19.80 and rebounded. The move higher so far shows lack of strength keeping the bias in favor of the Mexican peso.

A consolidation under 19.90 should clear the way for a test of the 19.80 area. A break lower would expose 19.70 an even stronger support area that protects 19.50.

A recovery above 20.00 could point to more gains and a test of 2017, the convergence of the 20 and 100-day Simple Moving Average. A daily close above 20.25 should trigger more gains, shifting the short-term outlook from bearish to neutral/bullish.

On a wider perspective, USD/MXN continues to trade in the 19.50/21.50 range as is has been the case since November 2020. A weekly close above 21.00 could suggest a test of 21.50.

USD/MXN Daily chart

Cleveland Federal Reserve President Loretta Mester said on Friday that the July inflation report was welcome news but added that she needed to see more convincing data to conclude inflation was coming down, as reported by Reuters.

Additional takeaways

"I think FOMC Chairman Jerome Powell delivered a very strong message."

"We're all in and we're going to be resolute about getting inflation to goal."

"Market is between 50 and 75 for September and that's where my head is, need to see more data though."

"We really have an imbalance in supply and demand, Fed tools really work on demand side."

"European situation may indicate that gasoline prices do not keep retreating."

"Need to be cautious in thinking that inflation has peaked."

"Would need to see convincing evidence of inflation coming down before we stop rate hikes."

"We're still in negative real rates, haven't even gotten to a neutral fed funds rate."

"I think will need to take rates above 4% and leave them there."

"Not predicting recession but expect below-trend growth this year and next."

"Will likely see weakening in labor market."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen losing 0.1% on the day at 108.30.

• Wall Street continues to bleed out on the back of hawkish Fed's Powell.
• S&P 500 is making fresh lows for the day. 

Stocks on Wall Street are bleeding out into the midday New York trade following Federal Reserve Chief Jerome Powell's comments made in a speech to the Jackson Hole central banking conference in Wyoming. He suggested the central bank will keep raising interest rates to tame inflation. The US economy will need tight monetary policy "for some time" before inflation is under control, he said.

The Fed is very clearly dependent on data and Powell said that while the US economy is slowing, he argues that it still has strong underlying momentum. For instance, and crucially, Powell explained that while ''July's lower inflation readings are ‘welcome’,'' they are ''short of what will be needed before we are confident inflation is moving down.''  

Investors were looking for clues as to whether the Fed was content with the less inflationary results in the data of late, but the speech from Powell shows little concrete evidence of that. In fact, he focused on not loosening policy too early but he didn't mention going any further on a hawkish side.

He did say that ''as policy tightens further, it will be fitting to halt the pace of rate rises at some time,'' however, that is somewhere over the horizon. Instead, he argues that ''restoring price stability will likely require maintaining a restrictive policy stance for 'some time.''' As a consequence, the Fed funds futures are showing odds of a 75bps hike in September now 56.5% vs 46.5% before Powell's speech.

From the moments just before the release of Powell's remarks at 1000 EDT, until now, the S&P 500 had fallen around 1.5%. It was roughly flat before the chairman's remarks. The index is now down 1.9% and has printed a fresh low for the day of 4,106.45. 

meanwhile, data earlier showed US consumer spending barely rose in July, but inflation eased considerably, which is yet another data input that could give the Fed room to scale back its aggressive interest rate increases. 

• USD/JPY edges higher by 0.56% on Friday amidst a downbeat market mood.
• Fed’s Powell: “Restoring price stability will likely require maintaining a restrictive policy stance for some time.”
• Money Market Futures odds of a 75 bps Fed rate hike ie at 56.5%.

The USD/JPY advances In the North American session, following hawkish remarks of Fed Chair Jerome Powell in the Jackson Hole Simposium, after the Fed’s favorite inflation gauge showed signs that prices are getting lower, meaning rate hikes are working.

The USD/JPY began trading near the day’s lows around 136.19, but in the last hour, the major seesawed around 136.20 – 137.34, past Powell’s remarks. At the time of writing, the USD/JPY is trading at 137.25, above its opening price, in a volatile session.

Summary of Powell’s remarks

The so-awaited Jerome Powell speech pointed out that the central bank will use its tools “forcefully” to bring supply and demand in balance. Powell welcomed July’s lower inflation readings but disregarded one month’s data and said they needed to see compelling evidence of slowing inflation.

The Fed Chair added that restoring price stability will take some time while emphasizing that the Fed needs to get to restrictive levels, to return inflation to the 2% target.

Worth noting that Powell’s speech did not give any forward guidance for the September meeting when Powell said that the bank would be data-dependant.

Powell added that the Federal funds rate at a long-run neutral estimate of 2.25% - 2.50% is “not a place to stop or pause.” Albeit mentioning that the Fed will slow the pace of rate hikes, he emphasized that restoring price stability would require keeping a restrictive policy for “some time.”

Elsewhere, money market futures expect the US Federal Reserve odds of going 75 bps, at 56.5% higher than 46.5% before Powell took the stand. Meanwhile, the greenback stages a comeback, as shown by the US Dollar Index, up by 0.18%, at 108.606.

US inflation lowered, while UoM Consumer Sentiment improved

Data-wise, the US economic docket featured the Fed’s favorite inflation gauge, headline, and core Personal Consumption Expenditures (PCE) price Indices for July. Headline PCE rose by 6.3% YoY, higher than the 6.2% estimated, while core PCE, which excludes volatile items, decelerates to 4.6% YoY vs. 4.7% forecast.

Meanwhile, the University of Michigan Consumer Sentiment for August’s final reading rose to 58.3, topping estimates of 55.2. Inflation expectation for a one-year horizon dropped to 4.8%

USD/JPY Key Technical Levels

• Risk aversion boosts the US dollar across the board.
• Fed Chair Powell warrants more rate hikes and a tight policy until inflation is under control.
• USD/CAD erases weekly losses after rising almost a hundred pips.

The USD/CAD bounced sharply on Friday after Powell’s speech and amid a sharp decline in equity prices in Wall Street. The pair climbed from 1.2920 to 1.3010, hitting a two-day high.

A reversal of the US dollar across the board followed by the deterioration in market sentiment boosted USD/CAD. The pair is hovering around 1.3000 and could test Wednesday’s high at 1.3018. The loonie erased weekly gains.

No surprises, but volatility

Fed Chair Powell mentioned the central bank needs to keep raising rates that will persist at higher levels for some time. “We still expect the Fed to raise key interest rates from the current 2.50% to as high as 4% by year-end. Powell's statements also signal that he supports a front-loading of rate hikes. The sharp tightening of monetary policy, however, is likely to trigger a recession next year”, said Dr. Christoph Balz, Senior Economist at Commerzbank.

Powell’s comments triggered volatility despite offering no major surprises. The US 2-year bond yield stands at 3.42% (up 1.45%), and the 10-year at 3.03% (up just 0.23% and below the level it had before).

In Wall Street, the Dow Jones is falling by 1.60% and the Nasdaq by 2.45%. The risk-off mode boosted the dollar. The DXY bottomed at 107.60 and as of writing, it is back at the 108.50, area.

The USD/CAD is about to end the week practically flat. It still faces resistance at the 200-week Simple Moving Average at 1.3025 while it is being supported by the 1.2890/1.2900 zone that contains the 20-day SMA.

Technical levels

• EUR/USD bulls remain in play despite hawkish Powell.
• Bulls can target 1.0120/50 so long as 1.0000/0.9980 holds. 

Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole created some volatility, but nothing out of the daily ranges as he did not say something significantly different to what Fed speakers have already been talking about. He was just as hawkish as any other speaker which leaves the status quo in place. 

The euro was shaken up initially on the knee-jerk but has not been bent out of shape technically on the 4-hour charts. EUR/USD remains above a key support area of 1.0000. The following illustrates the upside bias so long as this support remains intact for days ahead with a focus on 1.0120 on a breach of 1.0080. 

EUR/USD H4 charts

The bullish harmonic pattern leaves an upside bias on the charts so long as D holds around 0.9900. For the near term, for positive conviction, bulls will be more encouraged should the area between 1.0000/0.9980 hold, as per the W-formation's support zone. The neckline of the pattern is a 50% mean reversion of the range between points C-D. 

Zooming down, we can see there is resistance between the highs of the day and 1.0080. This is a high volume area that guards the target and 1.0145 higher up. 

• GBP/USD seesawed in a 1.1820-1.1900 range on Fed’s Powell speech.
• Fed’s Powell speech tone was hawkish but cautious, trying not to derail the markets.
• GBP/USD Price Analysis: Rallied towards 1.1900 as Powell’s ended its speech but has erased those gains.

The GBP/USD seesaws as Fed Chair Powell takes the stand at the Jackson Hole Symposium. During the day, the GBP/USD bounced off a daily low at 1.1775 and rallied sharply to a fresh daily high at 1.1900. However, as Powell finished his speech, the GBP/USD retraced from highs of the days towards the 1.1820s area. At the time of writing, the GBP/USD trades volatile, around the 1.1800-1.1810 area.

Fed’s Powell remarks

In his speech, Jerome Powell said that the central bank is moving “purposefully” to a sufficiently restrictive to return inflation to 2% while adding that restoring price stability will take some time, requiring a “forcefully” use of the central bank’s tools.

Powell added that the Federal funds rate at a long-run neutral estimate of 2.25% - 2.50% is “not a place to stop or pause.” He noted that the US central bank would be data-dependent for the September meeting. Even though he mentioned that the Fed will slow the pace of rate hikes, he emphasized that restoring price stability would require keeping a restrictive policy for “some time.”

After Jerome Powell’s remarks, money market futures odds of a Fed 75 bps rate hike diminished to 56.5%, vs. 46.5% before the speech. Meanwhile, the US Dollar Index recovered some ground after hitting a low at 107.588, recovering the 108.000 figure, but it is stills below its opening price.

At the same time, on its final reading, the University of Michigan Consumer Sentiment came in at 58.2 vs. forecasts of 55.2. Earlier on Friday, the Fed’s favorite measure for inflation rose 0.1% MoM, vs. 0.3% foreseen, while annually based, core PCE decelerated to 4.6% from 4.7%.

GBP/USD Key Technical Levels

• Volatility soars after US data and following Powell’s speech.
• Fed Chair keeps hawkish tone, says high interest rates will persist for some time.
• Gold under pressure, after short-lived rebound above 1750$.

Gold is having a volatile session, still showing a negative bias after being unable to break key short-term resistance levels. It bottomed at the begging of Powell’s speech and then rebounded.

The yellow metal bottomed at $1741, the lowest in three days and then rebounded, to as high as $1755. Again, the price failed to break the critical area and then pulled back under $1750.

It remains in negative territory for the day and the odd of another test of the $1740 support remains in place, particularly while under $1750. If gold managed to break firmly above $1755, the intraday outlook could change. Above the next strong barrier is seen at $1770.

Critical for gold price action, US yields are moving without a clear direction. The 2-year yield jumped to 3.45% and then pulled back toward 3.40% while the 10-year hovered around 3.04%, below the level it had prior to Powell’s speech.

Fed Chair mentioned that higher interest rates will persist for some time and added the “historical record cautions strongly against prematurely loosening policy”. The tone of Powell was seen as “hawkish”.

The latest report on Friday showed a better than expected reading in the University of Michigan’s Consumer Sentiment Index for August which came in at 58.2 against the market consensus of 55.2. 

Earlier on Friday, a report showed the Core Personal Consumption Expenditure Price Index dropped in July by 0.1% unexpectedly, the annual rate declined from 6.8% in June to 6.3% against expectations of 7.4%.

Technical levels

• AUD/USD dumped and pumped around the Powell speech.
• The hourly harmonic pattern is bearish and the focus is on the downside while below 0.7000.

Federal Reserve's Jerome Powell's hawkish speech has sent a bid on the US dollar and has rocked financial markets with stocks down and bond yields up. Given its high beta status, the Aussie dropped heavily, losing around 35 pips on the knee jerk. At the time of writing, AUD/USD is back trading at 0.699, recovering all of the losses some 15 minutes after the speech hit the wires, but it fell to a low of 0.6951. It is back trading towards the high of the day, 0.7005.

The Fed is dependent on data and Powell said that while the US economy is clearly slowing, he argues that it still has strong underlying momentum. For instance, and crucially, Powell explained that while ''July's lower inflation readings are ‘welcome’,'' they are ''short of what will be needed before we are confident inflation is moving down.'' 

Markets were looking for clues as to whether the Fed was content with the less inflationary results in the data of late, but the speech from Powell shows no evidence of that. He did say that ''as policy tightens further, it will be fitting to halt the pace of rate rises at some time,'' however, that is somewhere over the horizon. Instead, he argues that ''restoring price stability will likely require maintaining a restrictive policy stance for 'some time.''' As a consequence, the Fed funds futures are showing odds of a 75bps hike in September now 56.5% vs 46.5% before Powell's speech.

Meanwhile, the US dollar is consolidating the move around the lows. DXY, an index that measures the greenback vs. a basket of currencies is down 0.6%, losing territories from 108.753, printing a low of 107.588 so far on the day. Should the bears remain in play, AUD should struggle to move much higher and remain pressured below 0.70 the figure. 

AUD/USD technical analysis

The hourly harmonic pattern is bearish with the price being met by resistance in a supply zone around the 78.6% Fibonacci area of the XA range. Meanwhile, support is seen at 0.6970 guards 0.6950. A waterfall sell-off could be expected below there towards 0.69 the figure. 

The University of Michigan Surveys of Consumers Sentiment was revised upwards in August, with the final print arriving at 58.2 vs. the preliminary reading of 55.1 and 55.2 expected.

Additional takeaways

University of Michigan Surveys of Consumers Current Conditions Index Final Aug 58.6 vs. Prelim Aug 55.5 and Final July 58.1.

University of Michigan Surveys of Consumers Expectations Index Final Aug 58.0 vs. Prelim Aug 54.9 and Final July 47.3.

University of Michigan Surveys of Consumers 1-Year Inflation Outlook Final August 4.8 Pct vs. Prelim 5.0% and Final July 5.2%.

University of Michigan Surveys of Consumers 5-Year Inflation Outlook Final August 2.9 Pct vs. Prelim 3.0% and Final July 2.9%.

Market reaction

The US dollar index is rebounding firmly above 108.00, as investors assess the upward revision to the consumer sentiment data and Powell’s comments.

US Federal Reserve (Fed) President Jerome Powell is delivering opening remarks and speaking about the policy outlook at the central bank’s annual Jackson Hole Economic Symposium, in Wyoming.

Key quotes

Market reaction

In an immediate reaction to Powell’s comments, the US dollar index was largely unchanged, keeping its range near-daily lows of 107.71. The gauge is shedding 0.62% on the day.

Speaking in a Bloomberg TV interview on the sidelines of the Jackson Hole Symposium, Atlanta Fed President Raphael Bostic said that “I'd like to see our policy get to a 'marginally' restrictive.”  

Additional quotes

Market reaction

The US dollar index is licking its wounds around 107.80, losing 0.61% on the day, awaiting Powell’s speech for fresh trading impetus.

• EUR/USD hits a daily high at 1.0075, post sources reporting ECB members looking for a 75 bps rate hike.
• Fed’s favorite gauge of inflation shows that it’s slowing down.
• FOMC Chairman Jerome Powell speaks at Jackson Hole Symposium – live stream

The shared currency reclaimed parity, back above the 1.0020 area on Friday, as the US Fed’s preferred inflation gauge shows that interest rate increases keep working, consequently weakening the greenback, ahead of Fed’s Powell speech at Jackson Hole.

The EUR/USD struck the day’s lows during the European session, at 0.9946, before the common currency stayed a comeback, reaching a daily high at 1.0040, as investors await further hawkish guidance from Fed officials. At the time of writing, the EUR/USD is trading at 1.0065, above its opening price.

Before Wall Street opened, the US Department of Commerce reported that the Personal Consumption Expenditures (PCE) price index for July decreased by 0.1% MoM, less than estimates of a 0.3% increase. Excluding volatile items like food and energy, the so-called core PCE, the Fed’s favorite measure for inflation, rose 0.1% MoM, vs. 0.3% foreseen. On an annual basis, headline PCE uptick to 6.3% vs. 6.2% expected, while core PCE decelerated to 4.6% from 4.7%

EUR/USD and DXY’s reaction to US data

The EUR/USD jumped from around 1.0000 to 1.0020, once the headlines nit traders’ screens, and so far has reached the 1.0040 mark. At the same time, the greenback weakened, as shown by the US Dollar Index, dropping from around 108.350 to 107.920, so far down 0.43%.

In the meantime, Europe’s financial narrative hasn’t changed. The extreme energy crisis hitting the bloc, alongside recession fears augmenting particularly in Germany, the biggest economy in the area, kept euro buyers cautions from opening fresh long bets vs. the buck.

Lately, sources cited by Reuters reported that some ECB policymakers wanted to discuss a 75 bps hike for September due to further deterioration in the inflation outlook. The EUR/USD rallied sharply, from around 1.0040 to fresh daily highs around 1.0075, at 13:34 GMT.

What to watch

At 14:00, Federal Reserve Chairman Jerome Powell will hit the stand at Jackson Hole. You can follow the live stream here!

EUR/USD 5-minute chart

EUR/USD Key Technical Levels

• USD/CAD slides back closer to a one-week low amid a fresh wave of USD selling.
• Retreating crude oil prices undermine the loonie and seem to help limit the downside.
• Sustained weakness below the 1.2900 confluence will set the stage for further losses.

The USD/CAD pair witnessed an intraday turnaround from the 1.2955-1.2960 area and turns lower for the second straight day on Friday. The downward trajectory drags spot prices back closer to the one-week low touched the previous day, with bearish now awaiting sustained weakness below the 1.2900 mark.

The US dollar dives to a fresh weekly low in reaction to the softer US PCE report, which seems to have dashed expectations for more aggressive rate hikes by the Fed. This, in turn, is seen exerting some downward pressure on the USD/CAD pair. That said, a fresh leg down in crude oil prices could undermine the commodity-linked loonie and help limit the downside ahead of Fed Chair Jerome Powell's highly-anticipated speech at the Jackson Hole Symposium.

From a technical perspective, the 1.2900-1.2895 region marks confluence support comprising the 50% Fibonacci retracement level of the 1.2728-1.3063 rally and the 100-period SMA on the 4-hour chart. A convincing break below will be seen as a fresh trigger for bearish traders and make the USD/CAD pair vulnerable. The next relevant support is pegged near the 61.8% Fibo. level, around the 1.2855 region, which if broken will set the stage for further losses.

On the flip side, the 38.2% Fibo. level, around the 1.2935 area now seems to act as an immediate hurdle ahead of the daily swing high, around the 1.2955-1.2960 region. Some follow-through buying should allow bulls to aim back to reclaim the 1.3000 psychological mark. The latter coincides with the 23.6% Fibo. level, above which the momentum could further get extended towards the weekly swing high, around the 1.3060 region, en route to the 1.3100 round-figure mark.

USD/CAD 4-hour chart

Key levels to watch

Citing sources familiar with the matter, Reuters reported on Friday that some European Central Bank (ECB) policymakers want to discuss a 75 basis points (bps) rate hike next month due to a deterioration in the inflation outlook.

The looming eurozone recession should not slow or halt the ECB's policy normalisation, sources further told Reuters.

Market reaction

This headline seems to be providing a boost to the shared currency. As of writing, the EUR/USD pair was up 0.95% on a daily basis at 1.0067.

FOMC Chairman Jerome Powell will deliver his opening remarks at the annual Jackson Hole Symposium titled "Reassessing Constraints on the Economy and Policy" on Friday, August 26, at 1400 GMT.

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."

• Gold stalls the intraday decline following the release of softer US PCE data.
• The USD refreshes the weekly low and offers some support to the commodity.
• Elevated US bond yields to cap the upside ahead of Fed Chair Powell’s speech.

Gold continues losing ground through the early North American session, albeit rebounds from the daily low in reaction to softer US economic data. The XAU/USD is currently trading just above the $1,750 level, still down nearly 0.50% for the day.

The US dollar turns lower for the second straight day on Friday and drops to a fresh weekly low, which, in turn, offers support to the dollar-denominated gold. The USD witnessed some selling in the last hour after the US Bureau of Economic Analysis reported that the US Personal Consumption Expenditures (PCE) Price Index declined to 6.3% in July from 6.8% in June.

Excluding volatile food and energy prices, the Core PCE Price Index, which is Fed's preferred inflation gauge, eased further from the 40-year high and fell to 4.6%, missing the 4.7% print estimated. The data points to signs of easing inflation in the US and dampens the prospects for more aggressive Fed rate hikes, which, in turn, exert pressure on the greenback.

The US central bank, however, is still expected to hike interest rates by at least 50 bps at the next policy meeting in September. The bets were reaffirmed by hawkish comments by Atlanta Fed President Raphael Bostic and Philadelphia Fed President Patrick Harker, stressing the need for further policy tightening to get inflation under control.

This remains supportive of elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond manages to hold above the 3.0% threshold, which might keep a lid on any meaningful upside for the non-yielding gold. Traders might also refrain from placing aggressive bets ahead of Fed Chair Jerome Powell's highly-anticipated speech.

Technical levels to watch

Philadelphia Fed President Patrick Harker said on Friday that they need to methodically toward a "clearly restrictive stance," on Friday. "We will do what it takes to get inflation under control," Harker added, as reported by Reuters.

Additional takeaways

"Restrictive is clearly above 3%, how much more than that we'll have to see."

"If there is a recession, it would be shallow in my view."

"Possible Fed could risk recession to control inflation." 

Market reaction

The greenback is having a difficult time finding demand after these comments. As of writing, the US Dollar Index was testing 108.00, where it was down 0.4% on a daily basis.

Atlanta Fed President Raphael Bostic told CNBC on Friday that he is leaning toward a 50 basis points (bps) rate hike in September, as reported by Reuters.

Additional takeaways

"This is a sign economy is responding to policy."

"Need to bring policy closer to restrictive range."

"We are not there yet, restrictive is 3.5% -3.75% hopeful to get there by year-end."

"We need to get policy to restrictive to bring inflation down - that's most important."

"We need to make sure we don't overreact."

"We have to narrow the demand-supply imbalance and supply side can do some of the work."

"If we see the economy continue to slow, we could stay at 3.5%-3.75%."

"It's premature to think about cutting."

"There's a lot of uncertainty about where economy was, don't think we were that behind the curve."

"Still have data to watch before September meeting."

"The goal is to get to stable more restrictive stance as soon as possible and stay there."

Market reaction

The dollar came under renewed bearish pressure on these comments and the US Dollar Index was last seen losing 0.3% on the day at 108.08.

• GBP/USD attracts some dip-buying on Friday amid a fresh leg down in the greenback.
• The softer US PCE report keeps the USD bulls on the defensive and acts as a tailwind.
• Traders seem reluctant ahead of Fed Chair Jerome Powell’s highly-anticipated speech.

The GBP/USD pair reverses an intraday slide to the 1.1775 region and refreshes the daily peak heading into the North American session, though lacks follow-through buying. Spot prices hold steady around the 1.1825-1.1830 region and move little in reaction to the US macro data.

The US Bureau of Economic Analysis reported that the headline Personal Consumption Expenditures (PCE) Index unexpectedly declined by 0.1% MoM in July as compared to the 1% increase in the previous month. Adding to this, The yearly rate drops to 6.3% during the reported month from 6.8% in June, missing estimates for a rise to 7.4%. Furthermore, the Core PCE Price Index - the Fed's preferred inflation gauge - also missed expectations and falls to a 4.6% YoY rate in July from the 4.9% previous.

The data points to signs of easing inflationary pressures in the US and exerts some pressure on the US dollar, offering support to the GBP/USD pair. That said, investors still seem convinced that the Fed will stick to its policy tightening path and hike interest rates further. The expectations remain supportive of elevated US Treasury bond yields, which seem to act as a tailwind for the greenback amid expectations for a hawkish message from Fed Chair Jerome Powell at the Jackson Hole Symposium.

Apart from this, a bleak outlook for the UK economy continues to undermine the sentiment surrounding the British pound. This further seems to contribute towards capping the upside for the GBP/USD pair, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out in the near term and positioning for any meaningful upside.

Technical levels to watch

Inflation in the US, as measured by the Personal Consumption Expenditures (PCE) Price Index, declined to 6.3% in July from 6.8% in June, the US Bureau of Economic Analysis reported on Friday. This reading came in much lower than the market expectation of 7.4%.

The Core PCE Price Index, which excludes volatile food and energy prices, edged lower to 4.6% from 4.8% in the same period, compared to the market expectation of 4.7%.

Market reaction

With the initial reaction, the US Dollar Index came in under modest bearish pressure and the US Dollar Index was last seen losing 0.22% on the day at 108.18.

The oil price has risen sharply this week following Saudi Arabia’s verbal intervention. Economists at Commerzbank believe that the price recovery will continue.

Saudi Arabia lends verbal support to oil 

“The energy minister of the largest OPEC producer described cutting oil production as one possible way to bring oil prices back into alignment with fundamentals, talking in this context of a disconnect.” 

“The impression remains that Saudi Arabia is not willing to tolerate any price slide below $90. Speculators could view this as an invitation to bet on further price rises without the need to fear any more pronounced price declines.” 

“The production surveys due to be published next week are likely to show that OPEC again produced noticeably less oil than agreed in August.”

The US dollar was mostly weaker yesterday versus G10. Today, it is hard to see a big jump in FX vol on FOMC Chairman Jerome Powell's speech at the annual Jackson Hole Symposium, in the view of economists at MUFG Bank.

Fed officials set the tone for Powell 

“It feels like there’s certainly a consensus for at least another 125 bps of tightening this year. Fed President Bullard also spoke and cited frontloading and getting the fed funds to 3.75%-4.00%.”

“We can’t see Fed Chair Powell providing the grounds for a big move in rates. He is unlikely to commit to a size of move for the September FOMC and is more likely than not to imply implicitly that current market pricing seems reasonable.”

“We’d expect Powell to have a hawkish bias similar to other speakers this week which will help support the dollar without providing a catalyst for any notable gains from current levels.”

Gold witnesses some selling on Friday and snaps a three-day winning streak. All eyes are at Jackson Hole Symposium, as if markets believe that a 75 basis points rate hike next month is likely, XAU/USD would slump, economists at Commerzbank report.

Jackson Hole Symposium to drive gold price action in the short-term

“Though the gold price has recovered somewhat of late, there is no sign of any prolonged upswing. This is being thwarted by persistent ETF outflows, a still firm US dollar and the Fed rate hike expectations.”

“The short-term performance of the gold price will probably depend on the remarks made at the Fed symposium that is currently underway in Jackson Hole. If a 75 bps rate hike by the Fed next month is considered more likely, a renewed price fall would be on the cards.”

EUR/USD has tested parity but has failed to break sustainably that key level. Economists at BBH believe that the pair is still on track to test the September 2002 low near 0.9615.

Minutes of the European Central Bank underline its new approach to normalisation

“EUR/USD should continue to have trouble making much headway above 1.00. We believe the pair remains on track to test the September 2002 low near 0.9615.”

“The account of the ECB’s July meeting is worth discussing. The bottom line is that the ECB will continue to hike rates and simply hope that the market doesn’t test its resolve to keep peripheral spreads lower.” 

“We believe the account reflects ongoing reluctance of the creditor nation to unconditionally support the debtor nations. This is a dangerous stance to take as the September elections in Italy approach.”

GBP/USD has managed to recover above 1.1800 on Friday ahead of FOMC Chairman Jerome Powell’s remarks at the Jackson Hole Symposium. The pair will reveal a buildup of bullish momentum on a break past 1.1870, FXStreet’s Eren Sengezer reports.

Pound struggles to turn bullish ahead of Powell

“In case the chairman's comments suggest that the bank could opt for another 75 basis points in September, GBP/USD could turn south amid a stronger dollar. On the other hand, an optimistic tone inflation outlook should hurt the greenback and help GBP/USD gain traction.”

“On the upside, cable faces key resistance at 1.1870, where the Fibonacci 23.6% retracement level of the latest downtrend is located. Above that level, the 50-period SMA forms interim resistance at 1.1900 ahead of 1.1940 (Fibonacci 38.2% retracement).”

“1.1800 (psychological level, 20-period SMA) aligns as initial support before 1.1750 (static level, end-point of the downtrend) and 1.1720 (Aug. 23 low).”

Gold prices have declined by 3.6% year-to-date. Strategists at ABN Amro have downgraded their gold price outlook, expecting modest weakness for the remainder of 2022, before prices recover in 2023. 

New year-end forecasts are $1,700 in 2022 and $1,900 in 2023

“We expect modestly lower gold prices for the remainder of this year. There is a crucial support area layered at $1,680-$1,700. We expect these levels to be tested again and prices could move below these, albeit only temporary. Our new forecast for the end of 2022 is $1,700.”

“For 2023, the gold price outlook is more positive. Not only do we expect the US dollar to weaken, but we also expect the Fed to start cutting rates in the second half of 2023. On top of that, we expect lower US real yields. As a result, gold prices are likely to rebound next year. Having said that, we do not believe that gold prices will set a new high though.” 

“Our new year-end 2023 forecast is $1,900.”

US PCE Price Index Overview

Friday's US economic docket highlights the release of the Core Personal Consumption Expenditure (PCE) Price Index for July, scheduled later during the early North American session at 12:30 GMT. The gauge is expected to rise by 0.6% MoM during the reported month as compared to the 1% increase in June. The yearly rate, however, is anticipated to accelerate to 7.4% in July from the 6.8% previous. Meanwhile, the Core PCE Price Index - the Fed's preferred inflation measure - is anticipated to ease to a 4.7% YoY rate from 4.8% in June.

How Could it Affect EUR/USD?

A stronger-than-expected report will cement expectations that the Fed will continue to hike interest rates to tame inflation. This should result in higher US Treasury bond yields and a stronger USD, which, in turn, should exert fresh downward pressure on the EUR/USD pair.

A weaker reading could prompt some US dollar selling and provide a modest lift to the EUR/USD pair. That said, concerns about an extreme energy crisis in Europe should continue to act as a headwind for the shared currency and keep a lid on any meaningful upside for the major.

That said, the immediate market reaction is more likely to be short-lived as investors might prefer to move on the sidelines ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium.

Eren Sengezer, Editor at FXStreet, offers a brief technical overview of the major and writes: “EUR/USD continues to fluctuate between key technical levels for the third straight day on Friday. The Relative Strength Index (RSI) indicator on the four-hour chart moves sideways near 50, reflecting the pair's indecisiveness.”

Eren also outlines important technical levels to trade EUR/USD: “On the upside, 1.0000 (psychological level, static level) aligns as key hurdle. Above that level, 1.0020 (Fibonacci 23.6% retracement of the latest downtrend) could act as interim resistance before 1.0040 (50-period SMA) and 1.0080 (Fibonacci 38.2% retracement).”

“Immediate support is located at 0.9960 (20-period SMA). If that level is confirmed as resistance, additional losses toward 0.9920 (end-point of the downtrend) and 0.9900 (psychological level, multi-year lows) could be witnessed,” Eren adds further.

Key Notes

  •   US PCE Inflation Preview: Powell to steal the limelight

  •   EUR/USD Forecast: Euro defines key levels for the next breakout

  •   EUR/USD to tumble towards 0.97 by year-end – Nordea

About the US PCE Price Index

The Personal Spending released by the Bureau of Economic Analysis, Department of Commerce is an indicator that measures the total expenditure by individuals. The level of spending can be used as an indicator of consumer optimism. It is also considered as a measure of economic growth: While Personal spending stimulates inflationary pressures, it could lead to raise interest rates. A high reading is positive (or Bullish) for the USD.

• EUR/USD edges higher on Friday and climbs to the parity mark amid modest USD weakness.
• Worries about an energy crisis in Europe should act as a headwind for the euro and cap gains.
• Hawkish Fed expectations might help limit the USD losses ahead of Fed Chair Powell’s speech.

The EUR/USD pair edges higher on the last day of the week and moves back above the parity mark during the first half of the European session. The intraday uptick was sponsored by the emergence of some US dollar selling, though lacks bullish conviction amid worries about a deeper economic downturn in the Eurozone.

The greenback struggles to preserve its modest intraday gains and turns lower for the second successive day on Friday, which turns out to be a key factor lending support to the EUR/USD pair. The USD downtick could be solely attributed to some repositioning trade ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium, due later during the early North American session. That said, a softer risk tone, along with hawkish Fed expectations, could act as a tailwind for the buck.

The overnight optimism led by China's latest stimulus measures fizzles out rather quickly amid growing recession fears. Furthermore, economic headwinds stemming from the recent COVID-19 lockdowns in China temper investors' appetite for riskier assets, which is evident from a weaker sentiment around the equity markets. Apart from this, growing acceptance that the US central bank will stick to its policy tightening path should continue to limit any deeper USD downfall ahead of the key event risk.

The overnight hawkish comments by Fed officials reaffirmed bets for further interest rate hikes by the Fed. Policymakers, however, reserved their judgment on the size of the rate increase at the September FOMC policy meeting. Hence, investors will closely scrutinize Powell's remarks for clues about a 75 bps Fed rate hike move in September. This, in turn, will play a key role in influencing the USD price dynamics and help determine the next leg of a directional move for the EUR/USD pair.

In the meantime, concerns about an extreme energy crisis in Europe, which could drag the region's economy faster and deeper into recession, could act as a headwind for the shared currency. This suggests that the path of least resistance for the EUR/USD pair is to the downside. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a bottom near the 0.9900 mark, or a two-decade low touched earlier this week.

Technical levels to watch

• AUD/USD reverses a modest intraday dip amid the emergence of some USD selling.
• Hawkish Fed expectations, elevated US bond yields should limit losses for the buck.
• A softer risk tone further contributes to capping the gains for risk-sensitive aussie.
• Traders eye the US PCE data for some impetus ahead of Fed Chair Powell’s speech.

The AUD/USD pair edges lower on Friday and erodes a part of the previous day's strong gains to the 0.7000 neighbourhood, or over a one-week high. The pair remains on the defensive through the first half of the European session, though manages to find some support near mid-0.6900s and recovers a few pips from the daily low.

The US dollar surrenders its modest intraday gains and turns lower for the second successive day amid some repositioning trade ahead of Fed Chair Jerome Powell's appearance at the Jackson Hole Symposium. This is seen as a key factor that helps limit the downside for the AUD/USD pair, though any meaningful upside still seems elusive ahead of the key event risk.

The overnight hawkish comments by Fed officials reaffirmed market expectations that the US central bank will stick to its policy tightening path. Policymakers, however, reserved their judgment on the size of the rate increase at the September FOMC meeting. Hence, Powell's remarks will be scrutinized for clues about a 75 bps hike, which will drive the USD demand.

In the meantime, elevated US Treasury bond yields should continue to act as a tailwind for the buck. Apart from the prevalent cautious market mood - amid growing worries about a deeper global economic downturn, should continue to lend support to the safe-haven greenback. This, in turn, should keep a lid on any meaningful intraday positive move for the AUD/USD pair.

Heading into the key event risk, traders on Friday will also take cues from the release of the US Core PCE Price Index, due later during the early North American session. This, along with the US bond yields and the broader risk sentiment, could influence the USD and provide some impetus to the AUD/USD pair, though the immediate market reaction is likely to be short-lived.

Technical levels to watch

• USD/CAD catches fresh bids on Friday and reverses the overnight slide to the weekly low.
• Subdued oil prices undermine the loonie and offer support amid a modest USD strength.
• The market focus remains on Fed Chair Jerome Powell’s appearance at the Jackson Hole.

The USD/CAD pair regains positive traction on Friday and reverses a major part of the previous day's slide to sub-1.2900 levels, or a fresh weekly low. The pair maintains its bid tone through the first half of the European session and is currently placed near the daily high, just above mid-1.2900s.

Crude oil prices consolidate the overnight sharp retracement slide from a three-week low, which seem to undermine the commodity-linked loonie. This turns out to be a key factor lending support to the USD/CAD pair amid the emergence of some US dollar buying, bolstered by hawkish Fed expectations.

The progress in renewing Iran's nuclear deal raises hopes for the return of sanctioned Iranian oil to the markets. Apart from this, concerns that a deeper global economic downturn will dent fuel demand overshadow the prospects of production cuts by major oil producers and weighs on the black liquid.

The greenback, on the other hand, moves away from the weekly low touched the previous day and continues to draw support from growing acceptance for a further policy tightening by the Fed. The bets were reaffirmed by the upbeat US macro data and hawkish remarks by Fed officials on Thursday.

In fact, St. Louis Fed chief James Bullard noted that rates now are not yet high enough to begin curtailing price pressures. Furthermore, Kansas City Fed President Esther George said the Fed hasn’t yet raised rates to levels that weigh on the economy and may have to take them above 4% for a time.

Policymakers, however, reserved their judgment on the size of the rate increase at the September FOMC policy meeting. Hence, the focus remains on Fed Chair Jerome Powell's speech at the Jackson Hole Symposium, which might provide clues about the possibility of a 75 bps rate hike in September.

Heading into the key event risk, traders on Friday might take cues from the US Core PCE Price Index, due for release later during the early North American session. In the meantime, the cautious mood might continue to benefit the safe-haven USD and offer some support to the USD/CAD pair.

Technical levels to watch

• GBP/USD meets with a fresh supply on Friday and slides back below the 1.1800 mark.
• The USD regains traction amid hawkish Fed expectations and exerts downward pressure.
• Recession fears continue to undermine sterling and contribute to the intraday decline.
• Traders now eye the US PCE data for some impetus ahead of Fed Chair Powell’s speech.

The GBP/USD pair comes under some renewed selling pressure on Friday and extends the overnight pullback from the vicinity of the weekly high. Spot prices continue losing ground through the early European session and weaken further below the 1.1800 mark, hitting a fresh daily low in the last hour.

The steady intraday descent is exclusively sponsored by the emergence of fresh buying around the US dollar, bolstered by hawkish Fed expectations. The overnight hawkish remarks by Fed officials reaffirm market expectations for a further policy tightening by the US central bank. In fact, the markets are pricing in a greater chance of a supersized 75 bps rate hike move at the September FOMC meeting.

The British pound, on the other hand, is undermined by worries about a deeper economic downturn, amid the recent absurd surge in energy prices and the persistent rise in inflationary pressures. The Bank of England had predicted earlier this month that the country will enter a prolonged recession from the fourth quarter of 2022 and warned that the UK faces a very big inflation shock.

Apart from the aforementioned fundamental factors, sustained weakness below the 1.1800 mark seems to have aggravated the bearish pressure surrounding the GBP/USD pair. This might have already set the stage for additional losses. Hence, a subsequent slide towards retesting the YTD low, around the 1.1720-1.1715 area touched earlier this week, looks like a distinct possibility.

Traders, however, might prefer to wait for a more hawkish message by Fed Chair Jerome Powell at the Jackson Hole Symposium amid the uncertainty over the size of the next rate hike. In the meantime, traders on Friday will further take cues from the US Core PCE Price Index. The data might influence the USD price dynamics and produce short-term trading opportunities around the GBP/USD pair.

Technical levels to watch

EUR/USD has fallen to trade more convincingly below parity. Economists at Nordea expect the pair to sink towards 0.97 by end-2022.

A recession in the euro area increasingly likely over the winter

“We see more downside ahead and continue to target 0.97 by the end of the year.”

“A recession in the euro area and especially the German economy looks increasingly likely over the winter.”

• Gold witnesses some selling on Friday and snaps a three-day winning streak to a one-week high.
• Hawkish Fed expectations help revive the USD demand and exerted pressure on the commodity.
• Investors now eye the US PCE data for some impetus ahead of Fed Chair Powell’s appearance.

Gold comes under some selling pressure on Friday and snaps a three-day winning streak to the $1,765 area, or a one-week high touched the previous day. The XAU/USD remains depressed through the early European session and is currently placed near the daily low, just below the $1,755 level.

The US dollar regains some positive traction and recovers further from the weekly low, which turns out to be a key factor exerting 
downward pressure on the dollar-denominated gold. The resilient USD continues to draw support from growing acceptance that the US central bank will stick to its policy-tightening path. The bets were reaffirmed by better-than-expected US macro data and hawkish remarks by Fed officials on Thursday.

In fact, St. Louis Fed chief James Bullard stressed the need to keep raising interest rates. Adding to this, Kansas City Fed President Esther George said the Fed hasn’t yet raised rates to levels that weigh on the economy and may have to take them above 4% for a time. This, in turn, lifted bets for a supersized 75 bps rate hike, which remains supportive of elevated US bond yields and offers additional support to the greenback.

Policymakers, however, reserved their judgment on the size of the rate increase at the next FOMC policy meeting in September. Hence, the focus remains glued to Fed Chair Jerome Powell's appearance at the Jackson Hole Symposium. Investors will look for clues about the possibility of more aggressive rate hikes, which will drive the USD demand and help determine the next leg of a directional move for the non-yielding gold.

Heading into the key event risk, traders on Friday might take cues from the release of the US Core PCE Price Index, due later during the early North American session. The data could influence gold, which is traditionally seen as a hedge against inflation. The immediate market reaction, however, is more likely to remain short-lived. In the meantime, the prevalent cautious mood could lend support to the safe-haven precious metal.

Technical levels to watch

The Polish zloty is testing stronger levels. Nevertheless, economists at ING expect the EUR/PLN pair to revert back to the 4.770 mark.

Interest rate differential unlikely to be supportive of the zloty

“Zloty was supported yesterday by a rise in market expectations for a rate hike and could thus benefit from a rising interest rate differential for the first time in a while. However, this is not enough and if bets on rate hikes do not increase further, the zloty will revert back to 4.770 EUR/PLN.”

“Markets are already expecting more than a 50 bps rate hike at the September National Bank of Poland meeting at this point, which we already think is a very aggressive expectation. Therefore, we do not expect the interest rate differential to be supportive of the zloty.”

Friday's speech by Fed Chair Jerome Powell in Jackson Hole has been regarded as a pivotal event for markets. However, Powell may not want to shock the markets (in either direction), economists at ING report.

Fireworks not guaranteed

“We see a quite elevated risk that Powell may end up broadly matching the generally hawkish market expectations and avert any significant market shock.”

“We think that markets may find enough reason to push their peak rate pricing a bit closer to the 4.0% mark today and stir away from pricing back more than the current 1-2 rate cuts in 2023, which should ultimately offer some support to the dollar into next weeks’ payrolls release.” 

“We think DXY may touch 110.00 in the coming days, if not today.”  

“Despite not being our baseline case, the downside risks to the dollar are non-negligible today. A more alarming tone on recession and any hints that the Fed will be more considerate when it comes to tightening to avert a major dampening impact on the economy would likely trigger an asymmetric negative reaction on the dollar.”

EUR/USD trades in a tight range above 0.9950. In the opinion of economists at ING, the pair could retest the 0.99 level following FOMC Chairman Jerome Powell’s remarks at the annual Jackson Hole Symposium.

Fair value converging to spot?

“Today’s price action in EUR/USD should be entirely driven by the dollar reaction to Powell’s speech unless some further developments on the gas crisis story come to the fore.”

“As we expect a moderately dollar-positive impact from Powell, we think EUR/USD may retest the 0.9900 support.”

“The ongoing short-term undervaluation in EUR/USD is quite significant (around 5%), but a shrinking of the risk premium seems unlikely given the major threats to the eurozone’s economic outlook and may instead be triggered by a re-widening of the Fed-ECB rate expectations differential – i.e. with the fair value converging to spot and not the other way around.”

After having registered small daily gains on Thursday, GBP/USD has reversed its direction. A break under 1.1730 is a distinct possibility if the dollar strengthens following today's speech by Jerome Powell in Jackson Hole.

All eyes on Powell's speech at Jackson Hole Symposium

“Cable should move mostly in line with the dollar reaction to Jackson Hole. A break below the 1.1730 lows from earlier this week may well be on the cards on the back of USD strengthening, as 1.1500 (the 2020 flash crash bottom) is no longer looking like a remote possibility.”

“It will be interesting to see EUR/GBP reaction to today’s speech by Powell. We could see a small recovery in the pair in a hawkish scenario where risk sentiment is hit, considering GBP is normally more sensitive to global risk moves, but the low appetite for EUR longs should keep a cap on the pair for now.”  

• USD/JPY regains positive traction on Friday and is supported by a combination of factors.
• Hawkish Fed expectations help revive the USD demand and offer support to the major.
• The Fed-BoJ policy divergence and a positive risk tone undermine the safe-haven JPY.
• Traders now eye the US PCE data for some impetus ahead of Fed Chair Powell’s speech.

The USD/JPY pair attracts fresh buying on Friday and climbs back to the 137.00 mark during the early European session, reversing the previous day's losses.

The US dollar builds on the overnight bounce from the weekly low and gains some traction on the last day of the week, which, in turn, is seen lending some support to the USD/JPY pair. Firming expectations that the Fed will tighten its policy further to tame inflation continues to underpin the buck. The bets were reaffirmed by upbeat US macro data and hawkish remarks by Fed officials on Thursday.

In fact, St. Louis Fed chief James Bullard stressed the need to keep raising interest rates. Adding to this, Kansas City Fed President Esther George said the Fed hasn’t yet raised rates to levels that weigh on the economy and may have to take them above 4% for a time. Policymakers, however, reserved their judgment on the size of the rate increase at the next FOMC policy meeting in September.

Nevertheless, the markets are still pricing in a greater chance of a supersized 75 bps rate hike. In contrast, the Bank of Japan is expected to retain its ultra-easy policy stance, marking a big divergence in comparison to a more hawkish Fed. This, along with a generally positive tone around the equity markets, undermines the safe-haven Japanese yen and contributes to the USD/JPY pair's move up.

The fundamental backdrop supports prospects for a further near-term appreciating move. That said, bulls might refrain from placing aggressive bets and prefer to wait for a more hawkish message from Fed Chair Jerome Powell at the Jackson Hole Symposium. Ahead of the key event risk, traders might take cues from the release of the US PCE data, due later during the early North American session.

Technical levels to watch

• EUR/GBP picks up bids to refresh intraday high, pares the first weekly loss in four.
• Repeated bounces off three-week-old ascending support, steady RSI challenge bearish bias.
• 50-DMA acts as the key resistance, 61.8% Fibonacci retracement level adds to the upside filters.

EUR/GBP renews intraday high around 0.8445 to consolidate the weekly loss, the first in four, amid the early Friday morning in Europe. In doing so, the cross-currency pair defends the bounce off a three-week-old support line. Also keeping the EUR/GBP buyers hopeful is the steady RSI (14).

That said, the pair currently aims for the 50% Fibonacci retracement level of March-June rise, around 0.8465, before challenging the 50-DMA level near 0.8465.

In a case where the EUR/GBP prices remain firmer past 0.8485, the monthly high of 0.8511 appears the last defense of the bears before directing the quote toward the 0.8600 round figure.

On the flip side, the aforementioned support line, close to 0.8420 at the latest, restricts the EUR/GBP pair’s immediate downside.

Following that, the 61.8% Fibonacci retracement level near 0.8400 and the monthly low of 0.8340 could entertain the EUR/GBP bears.

It’s worth noting that the EUR/GBP pair’s weakness past 0.8340 could make it vulnerable to refreshing the yearly low, presently around 0.8200. Though, April’s bottom of 0.8250 may offer an intermediate halt.

EUR/GBP: Daily chart

Trend: Further recovery expected

FX option expiries for August 26 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9850 536m
• 1.0000-10 2.0b
• 1.0050-55 1.08b
• 1.0150 1.75b

- USD/JPY: USD amounts                     

• 135.00 360m
• 137.00-10 1.3b

- USD/CHF: USD amounts        

• 0.9755 250m

- USD/CAD: USD amounts       

• 1.2870 226m
• 1.2875-85 524m
• 1.2900 210m
• 1.3000 350m

Markets stay relatively quiet waiting for FOMC Chairman Jerome Powell to deliver his opening remarks at the annual Jackson Hole Symposium. A hawkish message should see the dollar strengthening, in the view of economists at Crédit Agricole CIB Research.

High bar for a hawkish surprise from Fed Chair Powell

“We continue to think that the recent price action is raising the bar for a hawkish surprise from the speech of Fed Chair Powell in particular. Indeed, the US rates market current pricing of policy tightening seems consistent with that signalled by the June Fed dot plot.”

“With many positives related to the Fed already in the price of the USD, we continue to think that the currency’s main support could be a potential further deterioration of risk sentiment. Indeed, should a hawkish message from Powell undermine global risk sentiment, the USD could be the main beneficiary.”

Here is what you need to know on Friday, August 26:

Markets stay relatively quiet early Friday as investors stay on the sidelines while waiting for FOMC Chairman Jerome Powell to deliver his opening remarks at the annual Jackson Hole Symposium. On Thursday, the improving market mood made it difficult for the dollar to find demand and the US Dollar Index (DXY) closed the day in negative territory near 108.50. The DXY posts modest gains in the European morning amid a negative shift witnessed in risk mood early Friday. The US Bureau of Economic Analysis (BEA) will release the Personal Consumption Expenditures (PCE) Price Index alongside Personal Income and Personal Spending data for July. 

Jackson Hole Symposium Preview: Will Powell power dollar bulls?

The data from the US revealed on Thursday that the BEA revised the Q2 GDP growth higher to -0.6% from -0.9% in its flash estimate. Additionally, the weekly Initial Jobless Claims declined to 243K, coming in better than the market expectation of 253K. 

While speaking on the sidelines of the Jackson Hole Symposium, several Fed policymakers repeated that it was too soon to decide on the size of the next rate hike. Philadelphia Fed President Patrick Harker, however, said that even a 50 basis points rate hike in September would still be a "substantial move" and this comment helped Wall Street's main indexes gain traction.

For the third straight day on Thursday, EUR/USD tested parity but failed to break that key level. In the early European morning, the pair trades in a tight range above 0.9950.

After having registered small daily gains on Thursday, GBP/USD reversed its direction declined toward 1.1800 on Friday.

Gold closed the third straight day in positive territory on Thursday and touched its highest level in a week at $1,765 before losing its traction. With the benchmark 10-year US Treasury bond yield rising 1% early Friday, gold stays on the backfoot below $1,760.

Supported by the renewed dollar strength and rising US Treasury bond yields, USD/JPY trades in positive territory near 137.00.

Bitcoin continues to move up and down in a narrow channel at around $21,500. Ethereum rose above $1,700 on Thursday but failed to hold there. As of writing, ETH/USD was down 2% on the day at $1,660.

UK Finance Minister Nadhim Zahawi said on Friday that “I am working flat out to develop options for further support on energy bills.”

"This will mean the incoming Prime Minister can hit the ground running and deliver support to those who need it most, as soon as possible,” he added.

His comments come after the British energy regulator, Ofgem, announced average annual household energy bills will rise by 80% from October to 3,549 pounds.

Meanwhile, the Chief Executive of Ofgem Jonathan Brearley said that the new prime minister will need to act urgently to address the issue of soaring energy prices.

Market reaction

GBP/USD has come under renewed selling pressure after Ofgem’s statement, currently trading at 1.1793, down 0.29% on the day.

The long-term chart of the GBP/USD pair looks truly awful, in the view of economists at Citi. Cable could even nosedive to and below parity.

Monthly close below 1.1760 materially bearish

"The long-term GBP/USD chart now truly looks awful. One can view it as a major double top forming as a continuation that suggests a move to and possibly below parity.” 

“There is no material support now (outside of the March 2020 spike low just above 1.14) until the major lows posted in 1985 at 1.0520.”

"A close this month, if seen, below 1.1760 will be a bearish outside month as a continuation.”

How weak is the euro? Analysts at Natixis conclude that the euro is only slightly weak compared with what it could be.

The euro is still quite strong against the yen

“The euro is currently weak, due to: Lower actual and expected interest rates than in the United States; Europe’s energy supply problems; The disappearance of the eurozone’s trade surplus.”

“We see that the euro is only slightly weak and that it could be much weaker, in particular, if the net open position in the euro became negative, if the euro depreciated against the yen or if non-residents sold their euro-denominated equities.”

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (Core PCE), will be published at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of six major banks.

Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Commerzbank

“Following weak inflation there in July, we expect correspondingly low values for the PCE deflator as well. The core rate, which excludes the volatile prices for energy and food, is likely to be only 0.1% month-on-month. However, this does not indicate that the inflation problem is solved. Rather, we expect higher month-on-month rates again in the coming months.”

TDS

“Core PCE prices likely slowed sharply in July and to an even slower pace than the core CPI (0.1% vs 0.3%). Shelter weights remain a key cause behind this divergence. The YoY pace likely fell to 4.6% from 4.8% in June, suggesting the series has peaked. Separately, personal spending likely slowed to a still firm 0.6% MoM pace after registering an even stronger 1.0% gain in June.”

NBF

“Still in July, the annual Core PCE deflator may have cooled one tick to 4.7%.” 

CIBC

“With retail sales flatlining in the US in July and services activity limited by the spread of Omicron subvariants, growth in total personal spending likely cooled to 0.4% on the month. However, the weakness in the goods categories will owe largely to the drop in gasoline prices. Personal income likely rose by 0.7%, reflecting strong labor income gains, and implying a rise in the savings rate, although it will remain well below pre-pandemic levels. Annual core PCE price inflation likely subsided to 4.7%. We are largely in line with consensus, suggesting no market reaction.”  

Citibank

“We expect a 0.7% MoM increase in personal incomes in July as both wages and job growth rose more than expected and should support nominal aggregate income growth. We also expects a 0.5% MoM increase in personal spending. We also expect a modest 0.10% MoM increase in core PCE inflation in July and up 4.6% from July 2021.”

Wells Fargo

“We forecast broader personal spending advanced 0.4% last month. Inflation remains the biggest issue for consumers, but the Consumer Price Index points to some moderation in July prices. If our forecast for no change in the PCE deflator in July is correct, real personal spending would rise 0.4% as well.”

The Central Bank of the Republic of Türkiye (CRBT) has imposed penalties on high lending rates. Economists at Commerzbank expect this measure to add further pressure on the lira. 

Negative impact in the macro-prudential outlook for banks

“CBRT has formally lowered the annual compound reference rate for commercial loans by 100 bps (to 15.34%). Latest data show that the banking sector's weighted average commercial loan rate works out to c.21%, hence the penalty will not apply at large. But herein lies the problem: the penalty will specifically penalise charging a risk premium for riskier loans. This will interfere with safe pricing of risky loans.”

“At any rate, the mechanism introduces inefficiency in how banks would naturally price risk, and will negatively impact the macro-prudential outlook for the sector. This is negative for the lira exchange rate.”

• USD/TRY seesaws around eight-month high, stays mildly bid during four-day uptrend.
• Downbeat Turkish data, inflation fears and chatters of US sanctions over ties with Russia favor bulls.
• US Core PCE Price Index for July, Fed Chair Jerome Powell’s speech at Jackson Hole will be crucial.

USD/TRY bulls keep reins at yearly highs, taking rounds to 18.20 heading into Friday’s European session, as the US dollar recovers ahead of the key data/events. Also fueling the Turkish lira (TRY) pair are the geopolitical fears surrounding Turkiye.

It’s worth noting that the quote rises for the fourth consecutive day and has ignored downbeat US dollar performance the previous day amid softer data from Home. That said, Turkish Capacity Utilization and Industrial Production both eased in August to respectively 76.7% and 102.1 from their previous readouts of 78.2% and 103.7 in that order.

On the other hand, the second estimate of the US Gross Domestic Product (GDP) Annualized improved to -0.6% in the second quarter (Q2) versus -0.9% flash estimations and -0.8% market forecasts. Further, US Initial Jobless Claims dropped to the lowest levels in seven weeks, to 243K for the week ended on August 19 versus 253K expected and a revised down prior of 245K.

It should be observed that the US warning of levying sanctions on Turkish products, due to Ankara’s ties with Russia, also appears to propel the USD/TRY prices.

Elsewhere, the market’s sour sentiment ahead of the Fed’s preferred inflation release and crucial Jackson Hole speech seem to favor the USD/TRY bulls. Adding to the sour sentiment could be the headlines surrounding China, Iran and Taiwan.

While portraying the mood, the S&P 500 Futures part ways from Wall Street’s gains and print mild losses around 4,195. Additionally portraying the risk-off mood is the two basis points (bps) of an increase in the US 10-year Treasury yields, at 3.045% by the press time.

Looking forward, USD/TRY prices are likely to remain firmer as a weak risk profile and Turkish resistance to higher rates may help buyers. However, Fed Chair Powell needs to defend the hawkish moves to keep the pair of bulls in the driver’s seat. Elsewhere, the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, needs to cross the downbeat forecasts to keep the Turkish lira pair directed towards the north.

Technical analysis

USD/TRY remains on the way to the 20.00 round figure, with the previous yearly top surrounding 18.35 acting as an intermediate halt, until the quote drops below a six-week-old support line near 18.10 by the press time.

• The DXY is marching towards 109.00 as investors shift behind DXY ahead of Fed’s Powell.
• Fed Powell’s commentary is expected to remain hawkish on interest rates.
• The core PCE price index is expected to trim by 10 bps to 4.7%.

The US dollar index (DXY) has given an upside break of the consolidation formed in a narrow range of 108.47-108.58. The asset is expected to display a bullish imbalance move ahead as a break of opening consolidation is generally followed by volumes and wider ticks. On a broader note, the asset is displaying back-and-forth moves in a tad wider range of 108.00-109.27 for the entire week.

Fed’s Powell to sound hawkish at Jackson Hole

Investors are getting mixed responses from analysts over expected commentary from Federal Reserve (Fed) chair Jerome Powell at Jackson Hole Economic Symposium. No doubt, the evidence from inflation data speaks that the price pressures are about to find their peak, and contraction in private sector activities compels the Fed should slow down its velocity of hiking interest rates.

However, the inflation rate still holds above 8% and in order to tame the same, the Fed’s laborious job of hiking borrowing rates is far from over.

US Core PCE data

Investors will also focus on the US Core Personal Consumption Expenditure (PCE) data, which is expected to decline to 4.7% from the prior print of 4.8%. Another inflation indicator is indicating that price pressures are near a peak now. However, this could be contaminated by a recent slump in the overall demand by households.

Key data next week: Consumer Confidence, ADP Employment Change, Initial Jobless Claims, ISM PMI, Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings.

USD/INR has been back near the 80 level. Economists at Société Générale expect the Reserve Bank of India (RBI) to intervene at key levels, providing an opportunity to buy the pair on dips.

Buy the dips in USD/INR

“The RBI is likely to intervene at key levels such as 80; however, we believe that such interventions would provide opportunities to buy on dips in the USD/INR, rather than establish sustained INR strength vs the USD.”

“Among Asian high yielders, on a relative value basis we prefer the IDR over the INR, and our short INR/IDR position is up by 2% since initiation.”

The symposium of the Kansas City Federal Reserve in the idyllic Jackson Hole will be closely watched on Friday. Economists at Commerzbank expect Fed Chair Jerome Powell to support the dollar with a convincing speech.

Powell likely to focus on the short-term challenges

“The market will have to continue guessing how the Fed would react should the economy cool down more significantly. And with that, of course, there is always the risk of a sudden adjustment in expectations and a sharp dollar move. However, we think it unlikely that Fed Governor Jay Powell will provide clarity in this regard in his speech at the opening of the symposium.” 

“Powell is likely to focus on the short-term challenges and endeavor to leave no doubt about the Fed's determination in the fight against inflation. If he succeeds convincingly, he could support the dollar, at least in the short-term.”

Gold price is edging lower near $1,750, snapping a three-day recovery. Hawkish Powell could revive XAU/USD downtrend towards $1,729, FXStreet’s Dhwani Mehta reports.

XAU/USD faces a wall of strong resistance levels heading into Powell’s speech

“Investors remain unnerved ahead of Fed Chair Jerome Powell’s speech at 1400 GMT on Friday. Powell could spill out hawkish beans on the size of the Fed’s rate hike move. Fed President is also expected to dampen speculation of lowering rates next year, as risks to growth mount.”

“Bulls could find immediate cushion around the previous day’s low of $1,750, below which the 50% Fibo level at $1,744 will be challenged. Selling pressure could intensify below the latter, opening floors towards $1,729, which is the golden ratio – 61.8% Fibo level.”

“Daily closing above monthly lows of $1,728 is needed to extend the uptrend.”

“Gold failed to sustain above $1,760, the 38.2% Fibonacci Retracement (Fibo) level of the recovery from yearly lows of $1,681 to the August 10 high of $1,80. The next powerful upside barrier is aligned around $1,769, where the 21 and 50-Daily Moving Averages (DMA) hang around. Acceptance above that supply zone will call for a test of the 23.6% Fibo resistance of the same ascent at $1,778.”

• EUR/USD remains pressured around intraday low, braces for the second weekly loss.
• RSI retreat, softer MACD also keep sellers hopeful.
• Multiple hurdles to offer a bumpy ride to buyers before giving them control.

EUR/USD takes offers to refresh intraday low around 0.9960 heading into Friday’s European session. In doing so, the major currency pair braces for the second weekly loss while staying around the lowest levels since late 2002, marked earlier in the week.

It’s worth noting that the quote’s latest moves portray a two-week-long bearish channel, which in turn suggests the pair’s further downside. Also favoring the sellers is the RSI (14) retreat and recently easing the bullish bias of the MACD.

That said, the EUR/USD pair’s latest U-turn from a horizontal area comprising multiple levels marked since July 12, around the parity level of 1.0000, seems to direct the sellers towards a three-day-old support line close to 0.9920.

In a case where the pair drops past 0.9920, the 0.9900 thresholds and lower line of the aforementioned channel, at 0.9800 by the press time, could lure the sellers.

Alternatively, an upside clearance of the 0.9985 hurdle would defy the bearish channel formation. However, the bulls will then need validation from the previously noted horizontal resistance near the 1.0000 round figure.

Even if the quote rises past 1.0000, multiple hurdles marked in the last six weeks, near 1.0090-95, quickly followed by the 1.0100 mark, could challenge the EUR/USD bulls.

EUR/USD: Four-hour chart

Trend: Further weakness expected

• The greenback bulls face barricades around 61.8% Fibo retracement at 0.9690.
• The 20-EMA at 0.9633 is acting as major support for the counter.
• A bullish flag formation is hinting at the continuation of the upside after a balanced profile.

The USD/CHF pair is displaying a lackluster performance after an upside move in the Asian session. The pair has turned sideways after a firmer rebound to near 0.9630. A rangebound move in the 0.9634-0.9643 range is expected to continue further as investors are awaiting fresh impetus from Federal Reserve (Fed) chair Jerome Powell’s commentary at Jackson Hole Economic Symposium.

On a four-hour scale, the asset has sensed barricades around 61.8% Fibonacci retracement (placed from July 14 high at 0.9886 to August 11 low at 0.9671) at 0.9690.

A Bullish Flag formation on a four-hour scale is underpinning the greenback bulls. The formation of a Bullish Flag denotes a consolidation phase after a vertical upside move. The north-side sheer move is been recorded from May’s low at 75.98. The consolidation phase of a Bullish Flag indicates an initiative buying structure in which the buyers initiate longs after the establishment of a bullish bias.

The 20-and 50-period Exponential Moving Averages (EMAs) at 0.9633 and 0.9600 respectively are aiming higher, which adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range ut that doesn’t resemble a bearish reversal.

A decisive move above 61.8% Fibo retracement at 0.9690 will drive the asset towards July 21 high at 0.9740, followed by July 18 high at 0.9790.

Alternatively, the Swiss franc bulls could drag the asset to near 38.2% Fibo retracement and August 8 low at 0.9568 and 0.9522 respectively if the asset drops below 50-EMA at 0.9600.

USD/CHF four-hour chart

• USD/CNH picks up bids to consolidate the biggest daily loss in a fortnight around two-year high.
• Covid woes, fears of economic slowdown and geopolitics keep buyers hopeful.
• Fedspeak, mixed US data and downbeat yields allowed seller’s entry earlier.
• Powell’s defense of rate hike, US PCE inflation data will be important for fresh impulse.

USD/CNH clings to mild gains around 6.8620 heading into Friday’s European session, after declining the most in two weeks the previous day. In doing so, the offshore Chinese yuan (CNH) pair seesaws near the highest levels in two years, marked on Wednesday, while bracing for the second weekly gain.

China’s attempt to defend the world’s second-largest economy with heavy stimulus, recently by one trillion yuan, appeared to have triggered optimism at home as multiple policymakers and domestic authorities joined hands to avoid recession. However, Bloomberg raises doubts on the recovery attempt by citing recently weaker fundamentals and grim conditions of the housing market.

On the other hand, China’s State Council-affiliated newspaper Economic Daily mentioned, per Reuters, "The yuan will remain flexible and has two-way volatilities in the mid-to long-term, while generally staying basically stable at reasonable and balanced levels," the newspaper said in a front-page commentary.”

Elsewhere, a covid-led lockdown near Beijing joined the US suspension of 26 Chinese carrier flights in response to China’s action to weigh on the risk appetite. Also, Taiwan’s increased military budget and a jump in the number of US diplomats visiting Taipei raised geopolitical woes and underpinned the US dollar’s safe-haven demand. On the same line is US President Joe Biden’s hard stand on Iran’s position in Syria.

It should be noted that the mildly positive US data and mixed Fedspeak favored the risk-on mood the previous day, which in turn portrayed the biggest USD/CNH fall in two weeks.

Amid these plays, the S&P 500 Futures part ways from Wall Street’s gains and print mild losses around 4,195. Additionally portraying the risk-off mood is the three basis points (bps) of an increase in the US 10-year Treasury yields, at 3.055% by the press time.

To sum up, the Chinese currency remains on the bear’s table and can decline more if Fed Chair Powell successfully defends the hawkish moves, as well as signal more rate hikes. Additionally important is the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Technical analysis

USD/CNH remains on the way to March 2020 low near 6.9050 unless providing a daily close below the May 2022 peak surrounding 6.8385.

• GBP/USD takes offers to renew intraday low, stays inside two-day-old symmetrical triangle.
• Clear upside break of one-week-old descending trend line keeps buyers hopeful, RSI conditions test upside bias.
• 200-HMA, fortnight-long resistance line challenge bulls, 1.1740 may act as additional downside filters.

GBP/USD renews intraday low around 1.1810 sellers try to excel ahead of the key data/events during early Friday morning in Europe. In doing so, the Cable pair remains inside a one-week-old triangle.

Given the descending RSI conditions, the quote is likely to decline further towards the stated triangle’s support line, near 1.1800.

However, the resistance-turned-support line from August 17, close to 1.1765, could act as the additional downside filter for the GBP/USD sellers.

It should be noted that the multiple supports around 1.1740 and the latest bottom around 1.1710, as well as the 1.1700 threshold, might as well as challenge the cable bears.

Alternatively, recovery moves need to cross the triangle’s resistance line, at 1.1860 by the press time, to convince GBP/USD buyers.

Even if the quote rises past 1.1860, the 200-HMA level surrounding 1.1900 could test the upside momentum.

Should the pair crosses the 1.1900 hurdle, a two-week-long resistance line near 1.1935 might become the last defense of bears.

GBP/USD: Hourly chart

Trend: Further weakness

• AUD/USD has witnessed barricades around 0.6970, downside looks favorable ahead of Fed Powell’s speech.
• Fed’s Powell is expected to sound hawkish on interest rates, keeping in mind the consequences.
• China’s announcement of liquidity infusion may support Australian exports.

The AUD/USD pair has witnessed selling pressures after facing barricades around 0.6970 in the Asian session. The asset is expected to display more losses as the US dollar index (DXY) is expected to pick up significant bids ahead. Investors are expected to underpin the greenback further as odds of a hawkish commentary on interest rates from Federal Reserve (Fed) chair Jerome Powell are advancing firmly.

Mixed responses from the market veterans on Fed’s next move over interest rates kept the DXY on tenterhooks in the past few trading sessions. There were different responses that either Fed should stick to its path of hiking interest rates at a severe pace or it should slow down due to the consequences of a liquidity squeeze in the market.

However, commentary from Reserve Bank of New Zealand (RBNZ)’s Governor Adrian Orr at Jackson Hole Economic Symposium has provided much clarity. As per RBNZ’s Orr, their respective central bank will announce at least a couple of interest rates to safeguard the economy from price pressures, being their foremost priority, to preserve the retail demand. And, in the execution of that, the economic activities will have to bear the slowdown. And, now a similar kind of commentary is expected from Fed’s Powell.

On the Australian front, investors are still in the hangover of the downbeat Aussie PMI data, released on Tuesday. Considering its trade relations, the Chinese economy has announced an infusion of one trillion Chinese Yuan (CNY) in its economy, which may also boost the Australian exports market apart from the Chinese economic activities. It is worth noting that Australia is a leading trading partner of China and growth prospects in China accelerate Australian exports significantly.

• Asian equities part ways from the stock futures, tracking Wall Street’s gains amid mixed clues.
• RBNZ’s Orr sounds cautiously optimistic, Fedspeak has been mixed.
• China’s covid woes, geopolitical tussles with Taiwan and US battle stimulus-led optimism to tease buyers.
• Investors expect clarity of the Fed’s next moves from Powell’s speech, US PCE Inflation.

Markets in the Asia-Pacific region remain firmer, despite the downside of US stock futures, as bulls expect downbeat verdicts from the global central bankers as they brace for Jackson Hole speeches on Friday. In doing so, the investors track Wall Street players ahead of the key data/events.

While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan renews weekly top, up 2.34% while Japan’s Nikkei 225 rises near 0.70% intraday to 28,680 by the press time.

Further, Australia’s ASX 200 adds 1.0% but equities in New Zealand are tepid as the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr sounds cautious. RBNZ Governor Orr initially mentioned that we think there will be at least another two rate hikes. The policymaker also said, “Our core view is we won't see a technical recession.” However, his comments like, “Central banks may need to push towards zero growth,” seemed to have weighed on the sentiment in Auckland.

Shanghai Composite Index advanced 0.1% to 3,250.10 while others in China are also printing mild gains as stimulus-inspired optimism battles geopolitical and covid woes. A covid-led lockdown near China’s Beijing joined the US suspension of 26 Chinese carrier flights in response to Beijing’s action to weigh on the risk appetite. Also, Taiwan’s increased military budget, a jump in the number of US diplomats visiting Taipei and US President Joe Biden’s hard stand on Iran’s position in Syria appears to have exerted additional downside pressure on the market sentiment.

Elsewhere, South Korea’s KOSPI rises 0.30% but Indonesia’s IDX Composite bucks the trend with mild losses at the latest. Furthermore, India’s BSE Sensex adds around 0.70% intraday amid upbeat performance at home.

On a broader front, the S&P 500 Futures part ways from Wall Street’s gains and print mild losses around 4,195. Additionally portraying the risk-off mood is the two basis points (bps) of an increase in the US 10-year Treasury yields, at 3.045% by the press time.

It should be noted that WTI crude oil reverses the previous day’s pullback as it rises to $93.20 at the latest. Fresh tensions between the US and Iran, as well as China’s stimulus, seem to have favored the oil buyers. However, OPEC+ hint of more output, covid woes in Beijing and recession fears challenge the quote’s further upside.

Looking forward, traders seek clarity of the major central bank’s next move, led by the US Federal Reserve (Fed), which in turn highlights Fed Chair Powell’s speech at the Jackson Hole and the US Core Personal Consumption Expenditure (PCE) Price Index for July, the Fed’s preferred inflation gauge. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Also read: S&P 500 Futures retreat, yields recover as Jackson Hole begins

• USD/CAD picks up bids to recover from one-week low.
• Oil prices reverse the pullback from three-week top amid mixed clues.
• Cautious mood ahead of the key data/events join risk-negative news to underpin recovery moves.
• Bulls need validation from Fed’s Powell to keep reins, US Core PCE Price Index is likely to ease in July.

USD/CAD recovers from weekly low as traders await the key US inflation gauge and Fed Chair Jerome Powell’s speech at the Jackson Hole in early Friday. That said, the Loonie pair takes the bids to 1.2955 by the press time.

In doing so, the quote ignores recently firmer prices of Canada’s main export, WTI crude oil. The black gold reverses the previous day’s pullback as it rises to $93.20 at the latest. Fresh tensions between the US and Iran, as well as China’s stimulus, seem to have favored the oil buyers. However, OPEC+ hint of more output, covid woes in Beijing and recession fears challenge the quote’s further upside.

Elsewhere, sour sentiment ahead of the Fed’s preferred inflation release and rate guidance from various important central bankers at the Jackson Hole seems to underpin the USD/CAD rebound. Adding to the sour sentiment could be the headlines surrounding China, Iran and Taiwan.

A covid-led lockdown near China’s Beijing joined the US suspension of 26 Chinese carrier flights in response to Beijing’s action to weigh on the risk appetite. Also, Taiwan’s increased military budget, a jump in the number of US diplomats visiting Taipei and US President Joe Biden’s hard stand on Iran’s position in Syria appears to have exerted additional downside pressure on the market sentiment.

It should be noted that the mildly positive US data and mixed Fedspeak joined China’s one trillion yuan stimulus a holistic approach by the domestic institutions to safeguard the world’s second-largest economy to underpin the risk-on mood the previous day.

Amid these plays, the S&P 500 Futures part ways from Wall Street’s gains and print mild losses around 4,195. Additionally portraying the risk-off mood is the two basis points (bps) of an increase in the US 10-year Treasury yields, at 3.045% by the press time.

Looking forward, USD/CAD prices are likely to remain firmer as a weak risk profile may help buyers. However, Fed Chair Powell needs to defend the hawkish moves to keep the pair bulls in the driver’s seat. Elsewhere, the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, needs to cross the downbeat forecasts to keep the Loonie pair directed towards the north.

Technical analysis

50-DMA defends USD/CAD buyers around 1.2915 but recovery remains elusive until the quote stays below an upward sloping resistance line from May 12, near 1.3085 at the latest.

• USD/INR is advancing towards 80.00 as a hawkish Fed Powell’s commentary looks imminent.
• The Indian rupee is enjoying significant foreign inflows after its indices bottomed out.
• Oil prices are expected to conclude their correction and may resume an upside journey.

The USD/INR pair is displaying extreme volatile moves in the opening session as investors are paring positions ahead of the Federal Reserve (Fed) chair Jerome Powell's commentary at the Jackson Hole Economic Symposium. The asset is expected to remain volatile, however, the upside remains favored as Fed’s Powell is expected to adopt a hawkish stance on guidance over interest rates.

As the inflation rate is still above 8% despite displaying exhaustion signals, more rate hikes announcement seems imminent. The foremost agenda of the Fed is to bring price stability in the economy as households are facing the heat due to lower valued paychecks. The investing community has already seen the consequences of inflationary pressures.

Meanwhile, the Indian economy is enjoying stellar inflows of foreign institutional investment for the past month after the Indian indices bottomed out. Well, the Indian rupee is underperforming against the mighty US dollar index (DXY) as investors have remained majorly risk-averse this year. But the performance of the Indian rupee has remained stellar against other powerful currencies.

On the oil front, a meaningful correction seems lucrative for the Indian rupee as its major portion of imports contains oil stockpiles. However, the correction in the oil prices is expected to conclude sooner and a fresh rally will kickstart. As OPEC will start trimming their oil production, oil prices will display more gains but simultaneously more deficit for the Indian fiscal balance sheet.

• AUD/JPY retreats from monthly high but defends the key resistance breakout.
• Firmer RSI, bullish MACD signals add strength to the upside bias.
• July’s peak appears an immediate hurdle, bears need validation from 94.70 to retake control.

AUD/JPY extends pullback from monthly high to 95.20 heading into Friday’s European session. Even so, the cross-currency pair stays on the bull’s radar as it keeps the previous breakout of the key hurdles amid firmer oscillators.

That said, the latest retreat remains elusive until breaking convergence of the resistance-turned-support line from early June and a three-week-old support line, near 94.70.

Following that, the mid-month low surrounding 93.00 could trigger the AUD/JPY rebound, if not then the 50% and 61.8% Fibonacci retracement of the pair’s May-June moves, respectively near 92.10 and 90.90, could lure the bears.

Meanwhile, recovery moves may initially aim for July’s peak of 95.75 ahead of challenging the yearly top marked in July at around 96.90.

Should the quote remains firmer past 96.90, and also cross the 97.00 hurdle, the AUD/JPY run-up could quickly challenge the 100.00 psychological magnet.

Overall, AUD/JPY buyers can ignore the latest pullback in prices unless witnessing a clear break of the 94.70 support level.

AUD/JPY: Daily chart

Trend: Further upside expected

• Gold price snaps three-day uptrend around weekly top.
• Cautious mood ahead of data, China-linked fears trigger XAU/USD pullback.
• Fed Chair Powell’s speech at Jackson Hole, US Core PCE Inflation data will be crucial for fresh impulse.
• Powell needs to defend rate hikes to keep gold sellers hopeful, US inflation figures may ease in July.

Gold price (XAU/USD) bounces off intraday low as sellers retreat from the crucial $1,750 support confluence during early Friday morning in Europe. Even so, the yellow metal prints the first daily loss in three around the week’s high.

The bullion’s latest weakness could be attributed to the market’s sour sentiment ahead of the Fed’s preferred inflation release and crucial Jackson Hole speech. Adding to the sour sentiment could be the headlines surrounding China, Iran and Taiwan.

News that China’s county near Beijing declared lockdown due to covid joined the US suspension of 26 Chinese carrier flights in response to Beijing’s action to weigh on the risk appetite. Also, an increased military budget, a jump in the number of US diplomats visiting Taipei and US President Joe Biden’s hard stand on Iran’s position in Syria appears to have exerted additional downside pressure on the market sentiment.

It’s worth noting that the mixed US data and Fedspeak joined a slump in the US Treasury yields to underpin the metal’s previous run-up. That said, the second estimate of the US Gross Domestic Product (GDP) Annualized improved to -0.6% in the second quarter (Q2) versus -0.9% flash estimations and -0.8% market forecasts. Further, US Initial Jobless Claims dropped to the lowest levels in seven weeks, to 243K for the week ended on August 19 versus 253K expected and a revised down prior of 245K.

On the other hand, Kansas City Fed President Esther George said on Thursday, "For the near-term thinking about higher interest rates seems reasonable to me." The policymaker also mentioned that (it’s) too soon to say what to expect in September (as) more key data coming. Philadelphia Fed President Patrick Harker was on the same line while he noted, per Reuters, that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points rate hike would still be a substantial move. Also, Atlanta Fed President Raphael Bostic said to the Wall Street Journal (WSJ) that “at this point, I'd toss a coin between 50 bps and 75 bps,” adding that “if data remains strong and inflation doesn't soften, it may make a case for another 75 bps.

Also favoring the metal prices was China’s near one trillion stimulus and a holistic approach by the domestic institutions to safeguard the world’s second-largest economy.

Against this backdrop, the S&P 500 Futures part ways from Wall Street’s gains and print mild losses around 4,195. Additionally portraying the risk-off mood is the two basis points (bps) of an increase in the US 10-year Treasury yields, at 3.045% by the press time.

Moving on, XAU/USD traders may witness the inactive session ahead of Fed Chair Powell’s speech at the Jackson Hole. However, the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, may entertain the traders. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Technical analysis

Gold price remains inside a two-week-old bearish chart pattern as sellers attack the confirmation level surrounding $1,750. Adding strength to the flag’s support is the 50-HMA level and steady RSI (14).

In a case where the quote drops below $1,750, the theoretical slump towards the yearly low near $1,680 could avail the monthly bottom of $1,727 and the $1,700 threshold as intermediate halts.

Meanwhile, recovery moves could aim for the flag’s upper line, around $1,771 by the press time, before aiming for the monthly high near $1,808.

Overall, gold prices are likely to remain pressured but a confirmation from the $1,750 support becomes necessary to convince bears.

Gold: Hourly chart

Trend: Further weakness expected

• EUR/USD is expected to deliver a lackluster performance ahead of Fed Powell’s speech.
• Fed’s Powell is expected to follow the footprints of RBNZ’s Orr and may sound hawkish
• The arrival of winter will impact the already vulnerable Europe energy market.

The EUR/USD pair is auctioning in a limited territory as investors are awaiting commentary from Federal Reserve (Fed) chair Jerome Powell at Jackson Hole Economic Symposium. The asset is oscillating in a narrow range of 0.9963-0.9976 ahead of cues from Fed Powell’s commentary for more informed decisions. However, the downside remains favored as odds are favoring a hawkish commentary on interest rates.

The cues from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr's commentary at Jackson Hole clear that the central bank will stick to its policy tightening strategy, keeping in mind that the economy will face more heat from the unavailability of cheap money in the economy. More or less, a similar hawkish commentary is expected from Fed’s Powell over guidance on interest rates.

There is no denying the fact that price pressures have displayed signs of maximum upside but an inflation rate figure above 8% is still vulnerable to the economy. So investors should brace for more decline in the extent of economic activities as rate hikes will keep up the ongoing pace.

On the Eurozone front, investors are worried over soaring energy prices as winter is knocking at the door. The European economy is facing the heat of an energy crisis after its embargo on Russian energy imports. It seems like the hasty decision by the European Union (EU) to boycott Russian energy is haunting European Central Bank (ECB) policymakers.

The energy supply crisis is expected to accelerate further as Nord Stream 1 pipeline from Russia to Germany through the Baltic Sea for supplying natural gas is going under unscheduled maintenance. Therefore, the pipeline will remain shut for the last three days of August.

• A loss in momentum brought exhaustion in the upside move.
• Divergence in asset price and momentum oscillator has accelerated the odds of a bearish reversal.
• A bear cross, represented by the 20-and 50-period (EMAs) adds to the downside filters.

West Texas Intermediate (WTI), futures on NYMEX, has displayed a short-lived pullback after printing a three-day low of $92.16 in the Asian session. The asset is advancing higher right from the first tick on Friday, however, the downside pressure remains favored as the asset has displayed exhaustion signals after a juggernaut rally.

The sheer upside rally from the past week has met exhaustion and a correction mode is undergoing. On an hourly scale, the asset consecutively formed higher highs but with a decline in buying interest, however, the momentum oscillator, Relative Strength Index (RSI) (14) formed lower highs. This advocates a loss of upside momentum as investors are treating the asset as an expensive bet.

A bear cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at $93.73, bolsters the case of a steep correction ahead.

Should the asset drops below the round-level support at $92.00, bears will get strengthen further and will drag the asset towards the August 22 high at $90.98, followed by August 17 high at $88.65.

Alternatively, bulls could regain control if the asset oversteps August 24 high at $95.10. An occurrence of the same will send the asset towards July 26 high at $98.4 and the psychological resistance at $100.00.

WTI hourly chart

• USD/JPY pares the biggest daily loss in two weeks inside a bullish chart pattern.
• Firmer RSI adds strength to the bullish bias, 100-SMA offers additional hurdle.
• Convergence of 200-HMA, fortnight-old ascending trend line appears key support.

USD/JPY picks up bids to refresh intraday high near 136.80 during Friday’s Asian session. In doing so, the yen pair advances inside a three-day-old bullish pennant.

The upside momentum also takes clues from the firmer RSI (14), not overbought.

However, a convergence of the stated pennant and the 100-HMA, near 137.00, appears a tough nut to crack for the USD/JPY buyers.

Following that, a rally towards refreshing the multi-year high marked in July at around 139.40 could be witnessed. It’s worth noting that the monthly high near 137.70 could act as a buffer during the run-up.

Meanwhile, a downside break of the pennant’s support line, at 136.50 by the press time, isn’t an open invitation to the USD/JPY bears.

The reason could be linked to the existence of the 200-HMA and an upward sloping support line from August 11, close to the 136.00 round figure.

In a case where the USD/JPY bears keep reins past 136.00, the early-month high near 135.60 could become an intermediate halt before directing the anticipated fall towards the monthly low near 130.40.

USD/JPY: Hourly chart

Trend: Further upside expected

China’s FX regulator, the State Administration of Foreign Exchange (SAFE) said on Friday, market players are acting in a rational manner and continue to sell forex on rallies, with stable expectations surrounding the yuan evident, state media Xinhua news agency reported.

Additional quotes

“The regulator suggested this will help stabilize the yuan at a balanced level. Since the start of August, both banks' forex settlement and sales and foreign-related receipts and payments have shown a surplus.”

“With a relatively high surplus in goods trading, the actual utilization of foreign capital continued to grow and foreign investors have bought Chinese securities on a net basis since the start of the month, reflecting the long-term investment value of yuan assets.”

Market reaction

USD/CNY is trading 0.10% higher on the day at 6.8560, at the press time, resuming the upside towards two-year highs of 6.8696 reached earlier this week.

South Korea's Vice Finance Minister Yong-beom Kim said on Friday, “we are monitoring the fx market.”

Additional comments

“Plan to deploy contingency plans to stabilize the FX market if needed.”

“Will review risks stemming from higher interest rates.”

Market reaction

USD/KRW was last seen trading at 1,334.42, down 0.09% on the day. The South Korean won (KRW) kept its minor recovery mode intact from six-day lows of 1,333.45 despite the above comments.

• Copper price extends recovery from weekly lows, renews daily high of late.
• China’s stimulus, power crunch favor bulls while Sino-American tension, covid woes test upside momentum.
• Cautious mood ahead of Fed Chair Jerome Powell’s Jackson Hole speech also challenge copper buyers.
• Increase in global copper mine production during January-June also teases bears.

Copper prices remain firmly on the way to the monthly high, marked earlier in the week, as buyers seem to prepare for a possible pullback ahead of the key data/events during early Friday. In doing so, the industrial metal struggles to justify mixed clues surrounding China and the US.

Talking about the positives, China’s near one trillion stimulus and a holistic approach by the domestic institutions to safeguard the world’s second-largest economy renewed the copper market optimism. On the same line could be the power shortage in the nation as it leads to more demand for the red metal used for power generation and transmission, as well as storage. Furthermore, mixed US data and Fedspeak also appear to underpin the metal’s recent upside momentum.

On the contrary, the cautious mood ahead of the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, as well as Fed Chair Powell’s Jackson Hole speech, seems to weigh on the sentiment and the copper price. Additionally, news that China’s county near Beijing declared lockdown due to covid joined the US suspension of 26 Chinese carrier flights in response to Beijing’s action to weigh on the quote. Also, an increased military budget of Taiwan, a jump in the number of US diplomats visiting Taipei and US President Joe Biden’s hard stand on Iran’s position in Syria appears to have exerted additional downside pressure on the market sentiment, as well as on the metal price.

Furthermore, a 1.3% YoY increase in the global copper mine production from January to June, totaling 10.6 million tonnes, as per the World Bureau of Metal Statistics (WBMS), also challenges the metal buyers.

It’s worth noting that Bloomberg’s analysis suggesting economic challenges for China, despite the latest efforts to avoid recession, seems to doubt the metal’s upside momentum.

Looking forward, the US Core PCE Price Index, expected to ease to 4.7% YoY from 4.8%, could decorate the calendar but major attention will be given to headlines surrounding China and Fed Chair Powell’s ability to defend hawkish moves.

• GBP/USD bears moving in as the US dollar perks up.
• The Jackson Hole is a key event for the pair where Fed's Jerome Powell will speak.

GBP/USD is under pressure and has moved back to a flat position for the day so far as the US dollar perks up in Tokyo ahead of the Federal Reserve's chairman Jerome Powell speaking at the Jackson Hole later today. 

The US dollar has gained against a basket of currencies on Friday,  but trades below the 20-year high. Chairman Powell will speak at 10.00 ET and investors will be on the lookout for fresh clues on how aggressive the central bank will be in its battle against inflation.

Following a number of critical data events this week, there have been signs that there could be a slowing in inflation and investors have started to pare back the most hawkish of expectations from the Fed. However, the overall sentiment is that the Fed will stay firm on its intent to battle against inflation which remains at 8.5% on an annual basis, well above the Fed's 2% target. Jerome Powell's speech in Jackson Hole will therefore be scrutinized for any indication that an economic slowdown might alter the Fed’s strategy. 

Leading into the event today, Fed funds futures traders are pricing in a 61% chance that the Fed will hike rates by another 75 basis points at its September meeting, and a 39% probability of a 50 basis points increase. The US dollar index DXY was last up 0.11% at 108.53, holding just below a 20-year high of 109.29 reached on July 14. Looking forward, developments in the US dollar, US real yields and central bank policy will continue to dominate the direction of the price of the yellow metal for the remainder of this year and in 2023.

Besides the Fed chair event, traders will be looking to US Personal Consumption Expenditure inflation that is consolidating at high levels and is expected to fall as price pressures gradually abate through this year. ''Consequently, personal spending will remain at risk as inflation continues to erode the purchasing power of household’s personal income,'' analysts at Westpac argued. 

• NZD/USD takes offers to refresh intraday low, pares weekly gains.
• Seven-week-old broad support area appears major challenge for bears.
• Bearish MACD signals, downbeat RSI strengthens downside bias.

NZD/USD holds lower ground near the 0.6200 threshold as it again reverses from the 50-DMA hurdle during Friday’s Asian session. Also keeping the Kiwi pair bears hopeful are the downbeat MACD signals and softer RSI (14), not oversold.

With this, the quote is likely to retest a horizontal support zone established since early July, between 0.6130 and 0.6150.

In a case where the NZD/USD bears keep reins past 0.6130, the 0.6100 round figure may act as an intermediate halt before directing them to the yearly low near 0.6060.

It should be noted that the Kiwi pair’s weakness past 0.6060 could make it vulnerable to testing the 0.6000 psychological magnet, as well as the 61.8% Fibonacci Expansion (FE) of April-August moves, at 0.5895 by the press time.

Meanwhile, a daily closing beyond the 50-DMA resistance level surrounding 0.6235 could quickly propel the NZD/USD prices towards the 0.6300 hurdle.

However, the bullish bias remains doubtful until the quote trades below a four-month-old descending resistance line, close to 0.6445 at the latest.

NZD/USD: Daily chart

Trend: Further weakness expected

• Market sentiment dwindles ahead of the key data/events.
• Geopolitical, covid headlines also contribute to cautious mood.
• S&P 500 Futures snap two-day uptrend, yields regain upside momentum.
• US PCE inflation data, Fed Chair Powell’s speech at Jackson Hole will be crucial.

Global markets fade the previous optimism ahead of the Fed’s preferred inflation release and crucial Jackson Hole speech from Powell in early Friday. Adding to the sour sentiment could be the headlines surrounding China, Iran and Taiwan.

While portraying the mood, the S&P 500 Futures part ways from Wall Street’s gains and print mild losses around 4,195. Additionally portraying the risk-off mood is the two basis points (bps) of an increase in the US 10-year Treasury yields, at 3.045% by the press time.

News that China’s county near Beijing declared lockdown due to covid joined the US suspension of 26 Chinese carrier flights in response to Beijing’s action to weigh on the risk appetite. Also, an increased military budget, a jump in the number of US diplomats visiting Taipei and US President Joe Biden’s hard stand on Iran’s position in Syria appears to have exerted additional downside pressure on the market sentiment.

Previously, the mildly positive US data joined mixed Fedspeak and China’s stimulus to portray an optimistic day. The second estimate of the US Gross Domestic Product (GDP) Annualized improved to -0.6% in the second quarter (Q2) versus -0.9% flash estimations and -0.8% market forecasts. Further, US Initial Jobless Claims dropped to the lowest levels in seven weeks, to 243K for the week ended on August 19 versus 253K expected and a revised down prior of 245K.

Further, Kansas City Fed President Esther George said on Thursday, "For the near-term thinking about higher interest rates seems reasonable to me." The policymaker also mentioned that (it’s) too soon to say what to expect in September (as) more key data coming. Philadelphia Fed President Patrick Harker was on the same line while he noted, per Reuters, that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points rate hike would still be a substantial move. Also, Atlanta Fed President Raphael Bostic said to the Wall Street Journal (WSJ) that “at this point, I'd toss a coin between 50 bps and 75 bps,” adding that “if data remains strong and inflation doesn't soften, it may make a case for another 75 bps.

Additionally, China’s near one trillion stimulus and a holistic approach by the domestic institutions to safeguard the world’s second-largest economy also renewed market optimism earlier.

Looking forward, global markets may with the inactive session ahead of Fed Chair Powell’s speech at the Jackson Hole. However, the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, may entertain the traders. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.8486 vs. the last close of 6.8470, following the weakest fix yesterday since Aug. 31, 2020.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

• The gold price is under pressure as the US dollar perks up in the Tokyo open.
• Bears will be looking for a break of key hourly support following the test of the 50% mean reversion on the daily chart. 
• The focus is on the Jackson Hole and the schedule for the day ahead. 

The gold price is losing some shine in the Asian session, down some 0.2% at the time of writing. The yellow metal is trading at $1,755.08 and has been stuck in a tight range of between $1,754.94 and $1,758.80 on the day so far, leaving bearish technically. Hawkish comments from Fed officials ahead of Federal Reserve chairman Powell’s Jackson Hole speech also weighed on investor demand for the precious metal. 

The US dollar has gained against a basket of currencies on Friday, albeit some way off the 20-year high, but is firming as investors waited for a speech by the Federal Reserve chairman at 10.00 ET for fresh clues on how aggressive the central bank will be in its battle against inflation. Following a slew of less inflationary data this week, traders had pared back the most hawkish of expectations, but still, the sentiment is that the Fed will stay firm on its intent to battle against inflation that remains at 8.5% on an annual basis, well above the Fed's 2% target. Jerome Powell's speech in Jackson Hole will therefore be scrutinized for any indication that an economic slowdown might alter the Fed’s strategy. 

Fed funds futures traders are pricing in a 61% chance that the Fed will hike rates by another 75 basis points at its September meeting, and a 39% probability of a 50 basis points increase. The US dollar index DXY was last up 0.11% at 108.53, holding just below a 20-year high of 109.29 reached on July 14. The mighty buck could give back some gains on Friday if Powell expresses any concerns about the impact of the monetary tightening, thus supporting gold prices higher. 

Looking forward, developments in the US dollar, US real yields and central bank policy will continue to dominate the direction of the price of the yellow metal for the remainder of this year and in 2023.

''We expect modestly lower gold prices for the remainder of this year,'' analysts at ABM Amro argued.

''We still expect the Fed to take the upper bound of the fed funds rate to 4% by early 2023, with the risk that some of that tightening will be frontloaded. This is slightly above market consensus. This should weigh on gold prices. We also expect the US dollar to remain relatively strong. However, we only expect a modest decline in gold prices from the current levels.''

Gold technical analysis

The price has met a 50% mean reversion. Should this hold and bears commit, then downside opportunities will be up for grabs on the lower time frames.

On an hourly basis, the price is in bearish territory and could be on the verge of a deeper move below the counter trendline towards $1,747.

• A Symmetrical Triangle formation indicates a volatility contraction.
• The asset is displaying a consolidation phase for the past two weeks.
• For a downside move, the RSI (14) needs to slip below 40.00 decisively.

The EUR/JPY pair is displaying a balanced market profile for the past two weeks after declining from the August 10 high at 138.40. In the Asian session, the cross is juggling in a narrow range of 136.00-136.23 and is likely to continue its sideways move till the release of a potential rigger for a decisive move.

The formation of a Symmetrical Triangle chart pattern on an hourly scale indicates a contraction in volatility. The upward-sloping trendline of the above-mentioned chart pattern is placed from August 16 low at 134.95 while the downward-sloping trendline is plotted from August 10 high at 138.40. An explosion of the symmetrical triangle will result in higher volume and wider ticks.

The 50-period Exponential Moving Average (EMA) at 136.35 is overlapping with the cross prices, which indicates a continuation of rangebound moves.

Also, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which signals the unavailability of a potential trigger.

Should the asset drops below August 4 low at 135.64, yen bulls will get strengthened further. An occurrence of the same will drag the cross towards the previous week’s low at 134.90, followed by August 2 low at 133.40.

On the contrary, the shared currency bulls could defy the downside momentum if the cross oversteps the round-level resistance of 138.00. This will drive the asset towards July 29 high at 139.51, followed by July 18 high at 140.80.

EUR/JPY four-hour chart

• AUD/USD takes offers to refresh intraday low, trims weekly gains.
• Bearish moving average crossover, pullback from nearby horizontal resistance favor sellers.
• 61.8% Fibonacci retracement level lures bears, upside momentum needs to cross 0.7050 to convince buyers.

AUD/USD consolidates the biggest daily gains in a fortnight as it drops back to 0.6955 during Friday’s Asian session. In doing so, the Aussie pair extends pullback from a three-week-old horizontal resistance area while portraying a death cross between the 50-SMA and the 200-SMA.

Given the bearish moving average crossover and the pair’s inability to surpass the short-term key hurdle, the AUD/USD sellers have a brighter scope of return.

That said, a convergence of the aforementioned SMAs around 0.6935-30 appears the immediate important support before directing the quote back to the 61.8% Fibonacci retracement level of July-August upside, near 0.6850.

It’s worth noting that the 50% Fibonacci retracement level near 0.6910 and 0.6800 are some extra filters to the south to watch for the AUD/USD bears.

On the flip side, the recovery moves remain elusive until the quote stays below the stated horizontal resistance area, around 0.6980-90. Also acting as the upside hurdle is the 0.7000 threshold.

Above all, AUD/USD bulls need validation from the early August swing high near 0.7050 to retake control.

AUD/USD: Four-hour chart

Trend: Further weakness expected

• GBP/JPY has turned sideways around 161.50 as focus shifts to UK winter energy shock fears.
• UK households are already facing the headwinds of high price pressures and lower paychecks.
• BOJ’s prudent monetary policy has failed to accelerate economic activities.

The GBP/JPY pair is juggling in a narrow range of 161.32-161.60 in the Tokyo session. The cross has turned sideways after a firmer rebound from 160.86 on Wednesday.  A successful re-test of Tuesday’s low near 161.00, pushed the cross higher, however, the unavailability of a potential trigger for strengthening the asset turned it sideways.

On a broader context, the cross could surrender the pullback move as the UK economy is getting near to a recession situation amid potential energy shocks. After Russia’s invasion of Ukraine, the UK economy is facing the heat of higher price pressures led by advancing gas and power prices due to an embargo on Russian energy imports. As the winter season is near and demands more energy, an expected 80% jump in its price cap is announced by the energy regulator.

The substantial increase in price cap for energy is likely to dent further the already dented sentiment of UK households. Price pressures are already near a 40-year high and the administration has totally failed in improving the labor cost index. Now, more energy bills pressure on the households will scale down the confidence of consumers in the economy. This could have major repercussions on the sterling.

On the Tokyo front, a continuation of prudent monetary policy by the Bank of Japan (BOJ) has failed to spurt the extent of economic activities in the yen area.  Japan’s Jibun Bank Manufacturing PMI has landed at 51, lower than the expectations and the prior release of 51.8 and 52.1 respectively. Also, Services PMI remained vulnerable at 49.2 from the consensus of 50.7 and the former figure of 50.3.

• EUR/USD fades recovery from nearly two-decade low, renews daily low of late.
• ECB v/s Fed divergence joined US data to underpin previous recovery moves.
• Geopolitical headlines, anxiety ahead of key data/events weigh on prices.
• Statistics from Germany, US will decorate calendar but Powell’s defense of hawkish moves will be the key.

EUR/USD returns to the bear’s table, after hiding in the last three days, as it drops to 0.9965 during Friday’s Asian session. The major currency pair’s latest weakness could be linked to the headlines surrounding the European Central Bank (ECB) and the cautious mood ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium, not to forget the key US PCE inflation data.

Reuters quoted anonymous sources late Thursday to signal that the ECB reinvestments could continue with the rate hikes, which in turn challenges the EUR/USD hawks amid fears of more inflation in the bloc. Also exerting downside pressure on the quote could be the headlines surrounding China, Taiwan and Iran.

The US suspends 26 Chinese carrier flights in response to China's action, per Reuters, which in turn renews the Sino-American tension and underpins the US dollar’s safe-haven demand. On the same line could be Taiwan’s increased military budget and a jump in the number of US diplomats visiting Taipei. Furthermore, a letter got viral quoting US President Joe Biden as saying, “The US struck Iran-backed forces in Syria in order to safeguard American civilians both at home and abroad,” which also challenged the previous risk-on mood.

It should be noted that the mixed prints of Germany’s IFO numbers and an upward revision to the nation’s Gross Domestic Product (GDP) for the second quarter (Q2) joined the hawkish European Central Bank's (ECB) July policy meeting accounts to favor the bulls previously.

On the other hand, firmer US data and mixed Fedspeak failed to impress US dollar bulls. Additionally, weighing on the greenback could be China’s near one trillion stimulus.

While portraying the mood, Wall Street marked the biggest daily jump in a week while the US 10-year Treasury yields dropped back to 3.03%, after rising to 3.10% the previous day. That said, the S&P 500 Futures drops 0.10% intraday by the press time.

Moving on, EUR/USD moves depend upon how well Fed Chairman Jerome Powell could defend the hawkish moves at the annual Jackson Hole speech.

Also important will be the US Core Personal Consumption Expenditure (PCE) Price Index for July, the Fed’s preferred inflation gauge. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior. It should be noted that Germany’s GfK Consumer Confidence Survey details for September, expected -31.8 veresus -30.6 prior, could also direct immediate EUR/USD moves.

Technical analysis

A two-week-old descending trend line, at the parity level of 1.0000 by the press time, restricts short-term EUR/USD upside. That said, the bears are on the way to 0.9900 threshold, for now, before eyeing the 61.8% Fibonacci Expansion (FE) of the pair’s May-August moves near 0.9855.

• USD/JPY has firmly crossed the immediate hurdle of 136.60 as DXY advances.
• The Fed will continue its path of hiking interest rates at a higher pace.
• For shifting to a neutral stance, the BOJ also needs to step up its wage rate along with price pressures.

The USD/JPY pair has delivered an upside break of the consolidation formed in a narrow range of 136.40-136.56 in the Tokyo session. The asset has extended its gains after overstepping the immediate hurdle of 136.60 as investors are shifting back behind the US dollar index (DXY) ahead of the Jackson Hole Economic Symposium.

The market participants are turning risk-averse amid uncertainty over the commentaries from global think-tank leaders at Jackson Hole. The stoplight will remain at Federal Reserve (Fed) chair Jerome Powell as investors will get realistic cues above the likely monetary policy action by the Fed in its September monetary policy meeting.

Most probably, the Fed will stick to its aggressive rate hikes strategy as the inflation rate is still above the whooping figure of 8%. No doubt, Fed policymakers are having evidence of near exhaustion in the price pressures but the entire inflation mess is needed to fix sooner. Therefore, more rate hikes will be discussed at the price of a further slowdown in the economic activities in the US. Well, these are the consequences, that investors have to go through due to delayed response by the Fed on ramping up inflationary pressures.

On the Tokyo front, the Japanese yen is set for a further slide broadly as the Bank of Japan (BOJ) will stick to its prudent policy even if inflation hits 3%. BOJ’s prudent stance is not only from the subdued inflation rate but also due to the stagnant labor cost index. As Japan’s economy is failing to elevate the wage rate, a neutral stance by the BOJ may accelerate troubles for the economy.

• US Dollar Index bears take a breather ahead of the key data/events.
• Shift in market’s mood adds filters to the trading momentum.
• Firmer sentiment, US data and cautious Fedspeak favored bears in the last few days.
• Fed’s preferred inflation gauge, Powell’s speech at the Jackson Hole will be crucial for fresh impulse.

US Dollar Index (DXY) consolidates the recent losses around the mid-108.00s as traders brace for the week’s key data/events during Friday’s Asian session. Also helping the greenback’s gauge versus the six major currencies are the headlines surrounding China and Iran, as well as a light calendar ahead of the all-important US session.

With the US suspending 26 Chinese carrier flights in response to China's action, per Reuters, the Sino-American tension renews and underpins the US dollar’s safe-haven demand. On the same line could be Taiwan’s increased military budget and a jump in the number of US diplomats visiting Taipei. Furthermore, a letter got viral quoting US President Joe Biden as saying, “The US struck Iran-backed forces in Syria in order to safeguard American civilians both at home and abroad,” which also challenged the previous risk-on mood.

It should be observed that China’s near one trillion stimulus and mildly firmer US data, as well as Fedspeak, favored the DXY sellers. Also, a holistic approach by the domestic institutions to safeguard the world’s second-largest economy renewed market optimism earlier.

US data and Fedspeak also exerted downside pressure on the US Dollar Index. Talking about the data, the second estimate of the US Gross Domestic Product (GDP) Annualized improved to -0.6% in the second quarter (Q2) versus -0.9% flash estimations and -0.8% market forecasts. Further, US Initial Jobless Claims dropped to the lowest levels in seven weeks, to 243K for the week ended on August 19 versus 253K expected and a revised down prior of 245K.

Elsewhere, Kansas City Fed President Esther George said on Thursday, "For the near-term thinking about higher interest rates seems reasonable to me." The policymaker also mentioned that (it’s) too soon to say what to expect in September (as) more key data coming. Philadelphia Fed President Patrick Harker was on the same line while he noted, per Reuters, that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points rate hike would still be a substantial move. Further, Philadelphia Fed President Patrick Harker noted on Thursday that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points rate hike would still be a substantial move, per Reuters.

Amid these plays, Wall Street marked the biggest daily jump in a week while the US 10-year Treasury yields dropped back to 3.03%, after rising to 3.10% the previous day. That said, the S&P 500 Futures drops 0.10% intraday by the press time.

Although the DXY prints gains, it remains on the way to posting the second weekly gain. However, it all depends upon how well Fed Chairman Jerome Powell could defend the hawkish moves at the annual Jackson Hole speech. Also important will be the US Core Personal Consumption Expenditure (PCE) Price Index for July, the Fed’s preferred inflation gauge. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Technical analysis

A daily closing below the two-week-old ascending trend line, at 108.70 by the press time, keeps DXY bears hopeful of breaking the 108.00 immediate support.

• USD/CHF picks up bids to refresh intraday high, adds to the second consecutive weekly gain.
• Cautious optimism drove US dollar downwards ahead of the latest rebound amid pre-data/event anxiety.
• Geopolitical headlines surrounding China, Iran also probe pair buyers.

USD/CHF grinds higher around the monthly top, picking up bids to refresh the intraday high near 0.9635-40 during Friday’s Asian session. In doing so, the Swiss currency (CHF) pair portrays the market’s sluggish performance as traders await this week’s key data/events for fresh impulse. That said, the risk-on mood joined mildly positive US data and Fedspeak to weigh on the quote the previous day.

Recently, the US has suspended 26 Chinese carrier flights in response to China's action, per Reuters, which in turn tested the previous risk-on mood and the USD/CHF bears. Further, a letter got viral quoting US President Joe Biden as saying, “The US struck Iran-backed forces in Syria in order to safeguard American civilians both at home and abroad.”

Previously, China’s near one trillion stimulus and mildly firmer US data, as well as Fedspeak, favored the USD/CHF sellers. Also, a holistic approach by the domestic institutions to safeguard the world’s second-largest economy renewed market optimism earlier.

Additionally, the second estimate of the US Gross Domestic Product (GDP) Annualized improved to -0.6% in the second quarter (Q2) versus -0.9% flash estimations and -0.8% market forecasts. Further, US Initial Jobless Claims dropped to the lowest levels in seven weeks, to 243K for the week ended on August 19 versus 253K expected and a revised down prior of 245K.

It’s worth noting that mixed Fedspeak, mostly downbeat, also exerted downside pressure on the USD/CHF prices. Kansas City Fed President Esther George said on Thursday, "For the near-term thinking about higher interest rates seems reasonable to me." The policymaker also mentioned that (it’s) too soon to say what to expect in September (as) more key data coming. Philadelphia Fed President Patrick Harker was on the same line while he noted, per Reuters, that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points rate hike would still be a substantial move. Further, Philadelphia Fed President Patrick Harker noted on Thursday that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points rate hike would still be a substantial move, per Reuters.

Having witnessed an upbeat day, USD/CHF traders may mark the inactive session ahead of Fed Chair Powell’s speech at the Jackson Hole. Before that, the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, may entertain the markets. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Technical analysis

A 10-week-old descending trend line and the 100-DMA, respectively near 0.9650 and 0.9665, restrict immediate USD/CHF upside. The bears, however, need validation from the 50-DMA support level near 0.9620 to take fresh entry.

• USD/CAD is within the bear's lair while below 1.2960, 1.2935.
• The price is in the process of forming an M-formation on the 4-hour chart.

USD/CAD has been melting to the downside following the bull's capitulation out of a rising trend from 1.3060s resistance. The following illustrates the bearish bias on the 4-hour chart:

USD/CAD H4 chart

The price rallied into a well-respected resistance zone and has been in the hands of the bears since the start of this week. The market left behind a harmonic pattern in the same time frame and we are seeing a series of lower lows:

Crucially, the price has broken a key support area, the neckline of the harmonic pattern near 1.2935. The price is retesting this as resistance and a little higher, near 1.2960. If these structures hold, then the bears will strap in for an accelerated move to the downside to challenge below key support of 1.2895 to target 50 pips lower.

However, the weekly W-formation's neckline is an obstacle:

• Overbought indicators on smaller timeframes may trigger a fresh sell sooner.
• A less-confident pullback has faded the odds of a bullish reversal.
• Downward sloping 200-EMA adds to the downside filters.

The GBP/USD pair is displaying back-and-forth moves in a narrow range of 1.1821-1.1842 in the early Tokyo session. The asset has remained sideways the entire week after printing a fresh two-year low of 1.1716 on Tuesday.

A less-confident pullback move after refreshing the two-year low at 1.1717 has faded the odds of a bullish reversal in the cable. The asset has shown a weak retracement to near 1.1875, which is expected to turn again into a downside move as momentum oscillators will get overbought on lower timeframes.

The 50-period Exponential Moving Average (EMA) at 1.1837 is acting as major resistance for the pound bulls. Also, the 200-EMA at 1.1965 is sloping downwards, which adds to the downside filters.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which signals a consolidation ahead. A downside move below 40.00 by the momentum oscillator will trigger a fresh sell.

The investing community will witness a vertical downside move if cable drops below the two-year low at 1.1717, which will drag the asset towards the 25 March 2020 low at 1.1638, followed by the 19 March 2020 low at 1.1472.

Alternatively, the pound bulls could regain their mojo and may drive the asset higher towards the August 3 low and high at 1.2135 and 1.2200 after violating the psychological resistance of 1.2000 decisively.

GBP/USD two-hour chart

• AUD/NZD has surpassed the immediate hurdle of 1.1220 firmly amid RBNZ’s Orr speech at Jackson Hole.
• The RBNZ will announce a couple of interest rate hikes further to combat its inflation.
• The NZ economy is facing a slowdown in retail demand amid a higher inflation rate.

The AUD/NZD pair has breached the immediate hurdle of 1.1220 forcefully and is eyeing to recapture its yearly high at 1.1290 sooner.  The cross has picked significant bids despite a hawkish tone by the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr at the Jackson Hole Economic Symposium.

RBNZ’s Orr has highlighted the consequences of soaring pressures in his commentary. The impact of the higher inflation rate is clearly visible on NZ Retail Sales. Investors should know that the economic data landed at -2.3%, lower than the prior release of -0.5% on Thursday.

According to the context, higher price pressures should have resulted in higher Retail Sales as households needed to make more payouts to offset the increment in prices. However, the overall Retail Sales have declined, which indicates a serious slowdown in retail demand.

On the interest rates front, the RBNZ sees a couple of more rate hikes, knowing the fact that the deployment of more policy-tightening measures could slow the economy further, which has dented the sentiment of kiwi investors. However, the RBNZ is confident that inflation will be contained sooner but still watching for a meaningful decline in inflation expectations.

On the Australian front, aussie dollar has strengthened on a bumper stimulus announcement by China to bolster growth. The administration is expected to infuse one trillion Chinese Yuan (CNY) into its economy, which may also boost the Australian exports market. It is worth noting that Australia is a leading trading partner of China and growth prospects in China accelerate Australian exports significantly.

• Silver price fades upside momentum around weekly top, portrays bearish chart pattern.
• MACD signals add strength to the bearish bias but 100-HMA challenges further downside.
• 200-HMA adds to the XAG/USD’s upside filters ahead of the flag’s top.

Silver price (XAG/USD) retreats towards $19.00, mildly offered near $19.20 during Friday’s initial Asian session. In doing so, the bright metal eases inside the weekly ascending trend channel forming the part of a bear flag formation suggesting further downside.

In addition to the bearish chart pattern, downbeat MACD signals also keep XAG/USD sellers hopeful.

However, the 100-HMA adds to the downside filters at around $19.05, in addition to the flag’s support line near $19.10. Also acting as support is the $19.00 threshold.

Should the silver price drops below $19.00, it confirms the south-run (theoretically) towards $17.00. Though, the monthly and the yearly lows, respectively near $18.70 and $18.10, probe the XAG/USD sellers during the anticipated fall.

On the contrary, silver buyers will have to refresh the weekly high, currently around $19.40, to regain the market’s confidence.

Even so, the 200-HMA and the upper line of the stated flag, close to $19.45 and $19.50 in that order, could challenge the XAG/USD buyers. Following that, a run-up towards the $20.00 threshold can’t be ruled out.

Silver: Hourly chart

Trend: Further weakness expected

• WTI slides from weekly highs around $95.73 on traders unable to crack the 200-DMA.
• Iran’s nuclear deal could add close to 3 million BPD to the market, easing energy prices.
• OPEC+ is open to cutting oil output at their next meeting via sources.

Western Texas Intermediate, also known as WTI, begins Friday’s Asian session almost flat after diving $2 on Thursday, spurred by several factors. Iran’s possible return to the oil market and higher US interest rates in the US would weaken demand for oil in the largest economy in the world. WTI is trading at $92.96 per barrel, recording marginal losses of 0.12%.

WTI falls on Iran nuclear deal and Powell’s speech

Sentiment remains upbeat, though with a cautious tone in the markets. Investors bracing for the US Federal Reserve Chair Jerome Powell’s speech maintain most of the market participants on the sidelines.

The Organization of Petroleum Exporters Countries, also known as OPEC, noted that the cartel could consider making output cuts at the next meeting, even though the theme has not been added to the agenda, according to sources.

Further headwinds for WTI is a possible agreement of a new nuclear deal between Iran and the US. If both parties get the job done, that will free Iran’s more than 2 million BPD into the oil market, tapping energy prices down amidst a worldwide environment of inflation hitting multi-decade levels.

WTI Key Technical Levels