• NZD/USD struggles to extend corrective pullback from 1.5-month low, steadies of late.
• Recession woes, hawkish central bankers underpin bearish bias.
• Market’s consolidation amid a light calendar triggered the Kiwi pair’s corrective bounce.
• US CB Consumer Confidence for August, Fedspeak will be important for intraday directions.

NZD/USD treads water around 0.6150, after bouncing off a 1.5-month low and retreating from 0.6168, as traders await fresh clues during Tuesday’s Asian session. Alike other major currencies, the Kiwi also cheered the US dollar’s pullback from nearly a two-decade high amid Monday’s volatile session. The recovery moves, however, remain elusive amid fears of economic slowdown and hawkish central bankers.

Markets began the US Nonfarm Payrolls (NFP) week on a sour note and underpinned the US dollar as global central bankers raised economic slowdown fears but refrained from stepping back on the rate hike trajectory. Among them, the US Federal Reserve (Fed) Chairman Jerome Powell gained major attention and propelled the hawkish Fed bets, which in turn fuelled the US Dollar Index (DXY) to a fresh high in late 2002.

However, the corrective pullback in prices and a light calendar joined firmer US data to help portray a consolidation in the US dollar’s latest gains and favored the NZD/USD prices to recover. Even so, economic fears and nearly 73% chances of a 75 bps Fed rate hike in September, per CME’s FedWatch Tool, exert downside pressure on the quote of late.

That said, Dallas Fed Manufacturing Business Index improved to -12.9 versus -20.2 expected and -22.6 prior.

It should be noted that Minneapolis Federal Reserve Bank President Neel Kashkari stated that people now understand how serious we are about getting inflation back to 2%.

On a different page, China’s economic slowdown fears escalate amid the fresh Sino-American tussles over the Taiwan Strait and doubts about the capacity of stimulus to help trigger the economic recovery also weighed on the NZD/USD prices.

Against this backdrop, equities remain downbeat but the US 10-year Treasury yields grew nearly eight basis points (bps) to 3.11% at the latest.

Moving on, a light calendar at home emphasizes US Consumer Confidence for August and comments from Fed speakers as the main catalysts to watch for fresh impulse.

Technical analysis

A 12-day-old resistance line around 0.6185 restricts immediate NZD/USD upside ahead of the key 50-DMA hurdle surrounding 0.6230. That said, the 0.6100 round figure appears to restrict the short-term downside of the pair.

• Aussie bulls look comfortable after establishing above the 50-EMA at 0.6894.
• The RSI (14) needs to shift into the bullish territory of 60.00-80.00 for a fresh rally.
• AUD/USD is marching towards the psychological resistance of 0.7000.

The AUD/USD pair is displaying a balanced profile after a meaningful pullback from Monday’s low near 0.6840. The asset is indicating signs of a squeeze in volatility amid a consolidation phase after failing to overstep the immediate hurdle of 0.6920.

On an hourly scale, the asset is hovering around the 38.2% Fibonacci retracement (placed from Aug 26 high at 0.7009 to Aug 29 low at 0.6841) at 0.6905. Earlier, the asset faced barricades around 50% Fibo retracement, which is placed near 0.6925.

The establishment of the asset above the 50-period Exponential Moving Average (EMA) at 0.6894, is bolstering conviction signs for a sheer upside ahead. However, the 20-EMA near 0.6903 is overlapping with the asset, which indicates a consolidation ahead.

Also, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates that the asset is awaiting a potential trigger for further upside.

For more upside, a decisive move above 100-EMA at 0.6915 will drive the asset towards 61.8% Fibo retracement at 0.6945, followed by Aug 26 high at 0.7009.

Alternatively, a decline below 23.6% Fibo retracement near 0.6880 will drag the asset towards Aug 29 low at 0.6841. A downside move below the latter may drag the asset towards the round-level support at 0.6800.

AUD/USD hourly chart

• EUR/JPY advanced sharply towards the 139.00 figure, though retraced some, as the 50-day EMA emerged as resistance.
• Expect consolidation in the near term, as the EUR/JPY 4-hour chart RSI’s is overbought.

The EUR/JPY rallies to fresh six-week highs around 138.97 during the North American session on Monday. As the Asian Pacific session begins, the EUR/JPY is trading at 138.72, so far invalidating a head-and-shoulders chart pattern in the daily chart.

EUR/JPY Price Analysis: Technical outlook

The EUR/JPY faced solid resistance at the 50-day EMA around 138.86 after reaching 139.00 on Monday. Worth noting that if the EUR/JPY breaks above the July 21 high at 143.32, it will invalidate the chart pattern, paving the way for further gains.

The EUR/JPY resistance levels lie at the 50-day EMA, followed by 139.00 and 140.00 psychological levels. On the flip side, the EUR/JPY first support would be the 100-day EMA at 138.28, followed by the 138.00 figure, followed by the 20-day EMA at 137.00.

EUR/JPY Daily chart

The EUR/JPY 4-hour chart illustrates the par breaking above the August 10 high at 138.39, opening the door to further gains. However, the Relative Strength Index (RSI) is in overbought territory, meaning the cross-currency could consolidate before resuming upwards.

On its way north, a break above 139.00 will expose the confluence of the July 27 high and the R1 daily pivot around 137,50, followed by the July 25 daily high at 140.07, ahead of the R2 pivot point.

EUR/JPY 4-hour chart

EUR/JPY Key Technical Levels

• EUR/USD fades the bound off one-month low, sidelined of late.
• Growing chatters over energy crisis in Europe, hawkish ECBspeak underpinned recovery.
• Increasing bets on 75 bps Fed rate hike in September, firmer US data keep US dollar buyers hopeful.
• Flash readings of Germany’s HICP data for August, US Consumer Confidence and Fedspeak will be in focus for intraday directions.

EUR/USD buyers seem to catch a breather after a volatile start to the NFP week. That said, the major currency pair initially slumped towards the one-week low before closing the day with mild gains around the parity levels, not to forget the retreat from 1.0029. In doing so, the quote struggled to justify multiple catalysts comprising recession fears in the eurozone and hawkish comments from the European Central Bank (ECB) officials, as well as firmer US data and hopes of faster rate hikes from the US Federal Reserve (Fed).

Fed Chair Jerome Powell led the policy hawks towards ignoring the economic slowdown fears in a mission to tame inflation, which in turn propelled the US Dollar Index (DXY) to a fresh 19-year high, before stepping back to 108.80. While praising the market’s reaction to the Jackson Hole speeches of the Fed policymakers, Minneapolis Federal Reserve Bank President Neel Kashkari stated that people now understand how serious we are about getting inflation back to 2%.

It should be noted that Dallas Fed Manufacturing Business Index improved to -12.9 versus -20.2 expected and -22.6 prior.

On the other hand, ECB Chief Economist Philip Lane appeared hawkish on the policy outlook as he said, “a steady pace - that is neither too slow nor too fast - in closing the gap to the terminal rate is important for several reasons," Lane explained. "The appropriate size of the individual increments will be larger the wider the gap to the terminal rate and the more skewed the risks to the inflation target."

Additionally, European Commission President Ursula von der Leyen renewed fears over the energy crisis as she reported that the EU is preparing an emergency intervention in its energy market to drive down skyrocketing electricity prices

Amid these plays, equities remain downbeat but the US 10-year Treasury yields grew nearly eight basis points (bps) to 3.11% at the latest.

Looking forward, the preliminary readings of August month German Harmonized Index of Consumer Prices (HICP), expected 8.7% YoY versus 8.5% prior, will offer immediate directions. Following that, US Consumer Confidence for the stated month and comments from various Fed policymakers will be important for the EUR/USD rate guidance. It should be noted that the hawkish central banks and recession woes keep the US dollar on the front foot, making sellers hopeful.

Technical analysis

A clear downside break of the 0.9900 threshold appears necessary for the EUR/USD bears to retake control. The recovery moves, however, need validation from a 10-DMA hurdle surrounding 1.0015.

• GBP/USD is displaying back-and-forth moves around 1.1700 as investors await US NFP.
• The US NFP is seen lower at 290k vs. 528k reported earlier.
• A minute improvement in earnings data is not lucrative for US households.

The GBP/USD pair has turned sideways after facing barricades around 1.1750 on Monday. The cable is oscillating in a narrow range of 1.1700-1.1710 in the early Tokyo session as investors are arranging their trades ahead of the US Nonfarm Payrolls (NFP), which will release later this week. On a broader note, the asset has displayed a pullback move after remaining in a negative trajectory. The asset printed a fresh two-year low at 1.1648 and a pullback move lacks conviction as the context is still bearish.

Federal Reserve (Fed)’s restrictive stance over guidance on interest rates dictated at Jackson Hole Economic Symposium is still haunting the risk-perceived currencies. Fed chair Jerome Powell is clear with his focus on bringing price stability first despite sacrificing growth prospects and unemployment. Although, it is necessary to tackle the inflation monster first as the price rise index has reached a whopping figure of 8.5% and is impacting the savings and consumption pattern of the households.

As per the preliminary estimates, the US Nonfarm Payrolls (NFP) is seen at 290k, lower than the prior release of 528k. Also, the Unemployment Rate is expected to remain stable at 3.5%. The economic data which could impact the greenback is the Average Hourly Earnings, which is likely to shift higher by 10 basis points (bps) at 5.3%. As price pressures are advancing dramatically, earnings have remained subdued. Therefore, households are facing headwinds amid higher payouts for inflation-adjusted goods and services.

On the UK front, investors are gearing up ahead of the elections season. The UK economy is going through a rough phase of political instability after the resignation of UK Prime Minister Boris Johnson. The UK markets will still remain in turmoil as energy crisis are crossing rooftops and may impact the households’ consumption further.

• USD/CHF from a long-term perspective remains upward biased, though solid resistance around 0.9700 sent the pair lower.
• Double-top in the 4-hour chart, to keep the pair below the 0.9700 figure, the highest high of August.

The USD/CHF marches firmly as Wall Street closes, finishing Monday’s session with gains of 0.16%, after hitting a daily high around the 0.9700 figure above August’s 23 high at 0.9692. Still, solid resistance at the latter dragged prices down towards the 0.9670s region at the time of writing.

USD/CHF Price Analysis: Technical outlook

The USD/CHF daily chart illustrates the major facing support at the 100-day EMA at 0.9665, which, once cleared, would pave the way to further losses. The Relative Strength Index (RSI) at 58.26, stays in bullish territory, though almost flat, meaning that consolidation lies ahead. Unless the USD/CHF records a decisive break below 0.9600 or above the 0.9700 figure, the USD/CHF will remain range-bound.

USD/CHF Daily chart

When looking at the 4-hour scale, the USD/CHF formed a double-top in the 0.9700 figure, suggesting that the Swiss franc might strengthen soon, targeting the 0.9500 figure. Oscillators have a downslope, with the RSI being in bullish territory, approaching the 50-midline, meaning a cross under would indicate sellers gaining momentum.

Therefore, the USD/CHF first support would be the S1 daily pivot at 0.9640. A break below will expose the S2 pivot point at 0.9610, immediately followed by the 200-EMA at 0.9600.

USD/CHF 4-hour chart

USD/CHF Key Technical Levels

• USD/CAD bears move in at the start of the week leaving a reversion pattern in play on the daily chart. 
• The 1.2980s area is exposed as a key area in the bearish formation. 

USD/CAD has started out the week on the wrong foot exposing territories in a prior resistance area that would be expected to offer some support for the days ahead. The following illustrates the meanwhile bearish bias. 

USD/CAD daily chart 

The W-formation is a reversion pattern that leaves the neckline exposed near 1.2980. Below there, the 1.2920s guard 1.2895  formation lows. 

USD/CAD H1 chart

USD/CAD is meeting a near 61.8% Fibonacci retracement of the hourly bearish impulse near 1.3100 the figure with prospects of a downside continuation in the near future that would mitigate the space between the prior highs and current lows. 

• Gold trades heavy in a bearish territory with potential demand sighted at around $1,710.
• Powell's Jackson Hole speech has reinforced the message that multiple and sizable hikes are still in the pipeline, supporting the greenback.

The gold price has been put back under pressure in New York trade and is wilting below the European highs of $1,745.55. The yellow metal is now losing 0.10% at the time of writing while the greenback firms again, basing itself on a key measure vs a basket of rival currencies. 

Powell's Jackson Hole speech has reinforced the message that multiple and sizable hikes are still in the pipeline and that easing should not be expected to be on the horizon anytime soon. The outcome has weighed on precious metals that have dropped on the back of a surge in US dollar, making them more expensive for overseas buyers.

The prospects of higher interest rates and a jump in yields took the US dollar to a fresh two-decade peak at 109.478 on Monday after Powell stated that the central bank would raise rates as high as needed to restrict growth, and would keep them there "for some time" to bring down inflation that is running at more than three times the Fed's 2% goal.

A capitulation on the gold price took effect on the back of his comments, chipping its way through the August lows and the week ahead could offer further catalysts from key economic data and Fed speakers. To start, embedding the hawkish sentiment, on Monday, in response to the market's reaction to last week's Jackson Hole, Minneapolis Federal Reserve Bank President Neel Kashkari crossed the wires emphasizing a seriousness about getting inflation back to 2%.

We will hear from other Fed officials and the data will be key with this Friday's US job report the highlight. The data is likely to show a robust outcome for August, according to analysts at TD Securities. 

Nevertheless, the euro could benefit should the report show a more moderate pace following the booming 528k print registered in July. ''High-frequency data, including Homebase, point to still above-trend job creation the analysts say. ''We also look for the UE rate to drop by a tenth for a second consecutive month to 3.4%, and for wage growth to advance at a firm 0.4% MoM (5.3% YoY),'' the analysts said. 

Gold technical analysis

Meanwhile, the price closed heavily in the red at the end of the week and there is little sign of it stalling for the near-term on the approach to presumed support near $1,710. The price has also recovered 50% of the prior bearish impulse which adds further weight to the downside outlook. If the bears commit to the course, a move below the said support area opens the risk of a test of the 2021 lows as far down as $1,678. On the flip side, $1,745 should be key. 

What you need to take care of on  Tuesday, August 30:

The dollar started the week with a strong footing but ended the day with modest losses across the FX board. Market players were trapped between recession fears and hawkish policymakers hinting at tighter monetary policies.

Following the Jackson Hole Symposium, odds for a US Federal Reserve 75 bps rate hike rose above 70% according to the CME FedWatch tool, while across the pond, market players are now seeing odds for a similar hike in Europe at 67%, up from 48% on Friday.

The macroeconomic calendar was scarce, although encouraging US data limited the dismal mood during US trading hours, helping Wall Street to trim most of its early losses.

Government bond yields, on the other hand, edged higher, with European indexes soaring after hawkish hints from ECB officials.

The President of the European Commission, Ursula von der Leyen, put back on the table the energy crisis as she reported that the EU is preparing an emergency intervention in its energy market to drive down skyrocketing electricity prices

The EUR/USD pair battles around parity, while the GBP/USD pair settled just above 1.1700 after falling to a two-year low of 1.1647. AUD/USD surged towards 0.6900 while USD/CAD eased to currently trading around 1.3000. Safe-haven currencies are little changed  against the greenback, with USD/CHF trading at around 0.9680 and USD/JPY at 138.70

Gold posted modest intraday gains and settled at $1,737 a troy ounce, while crude oil prices firmed up, with WTI now changing hands at around $96.90 a barrel.

 Ripple proponents take the bull by its horns, XRP price struggles to recover

• NZD/USD jumped from six-week lows on Monday, from around 0.6100.
• The Fed’s favorite inflation gauge ticked lower, though Powell disregarded the data, saying that one month’s data is not enough to pause.
• NZD/USD Price Analysis: Remains downward-biased, so a test of the YTD lows around 0.6060 is on the cards.

NZD/USD bounces from 6-week lows, recovering ground during the North American session, amid a risk-off trading session, courtesy of Fed’s Powell hawkish rhetoric, commenting that even with the US economy slowing down, the Fed would keep hiking rates to temper inflation down.

During the day, the NZD/USD opened near the day’s lows, around 0.6100. However, as the US dollar weakened, the New Zealand dollar rose, hitting a daily high at 0.6167k, some 20 pip higher than current price levels. At the time of writing, the NZD/USD is trading at 0.6154,

NZD/USD gains are courtesy of broad US dollar losses. The fall in US 2-year Treasury yields after refreshing 15-year highs spurred some weakness on the greenback, bolstering most G8 currencies against the US dollar, despite the hawkish speech of the US Federal Reserve Chair Jerome Powell at Jackson Hole.

He said that the Fed’s primary goal is to bring inflation down towards 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.”

Elsewhere, Friday’s US economic data revealed that the core PCE deflator, the Fed’s favorite inflation measure, increased by 0.1% MoM, less than estimated. Nevertheless, the three-month annualized figure is still high, and as Powell welcomed the data, he reiterated that the Fed needs to go into restrictive territory. Later, the UoM consumer sentiment improved to 58.2, reflecting lower gasoline prices.

What to watch

The New Zealand economic calendar will reveal the ANZ Business Confidence for August, estimated at 52. Meanwhile, the US economic docket will feature the US Consumer Confidence, Fed speakers, and the ISM Manufacturing PMI, alongside the US Nonfarm Payrolls report.

NZD/USD Price Analysis: Technical outlook

The NZD/USD daily chart portrays the pair as downward biased. Confirmation of the previously mentioned is that the daily EMAs are above the spot price, the RSI is in negative territory, and successive series of lower highs/lows cement the downtrend. Therefore, the NZD/USD first support would be the 0.6100 figure. Once cleared, the next support would be the YTD Low at 0.6060.

• EUR/USD bulls are under pressure around psychological resistance. 
• EUR/USD bulls eye a break above 1.0030 while above 0.9950.

EUR/USD trades parity at the time of writing, higher by 0.35% on the day thus far and hugging the psychological level while beaten down US stocks attempt to firm up in midday trade. The single currency has travelled between 0.9914 and 1.0029 so far.

A the start of the week, the dollar touched a fresh 20-year high fuelled by hawkish rhetoric by Federal Reserve Chair Jerome Powell last week although the euro has held its own on the back of growing expectations for European Central Bank (ECB) rate hikes. European Central Bank board member Isabel Schnabel said over the weekend that central banks must act forcefully to combat inflation, even if that drags their economies into a recession.

“Even if we enter a recession, we have little choice but to continue the normalization path,” Schnabel told the U.S. Federal Reserve’s Jackson Hole Economic Symposium. 

At the same conference, Powell reinforced that hawkish bias saying that the Fed will raise rates as high as needed to restrict growth, and would keep them there "for some time" to bring down inflation that is running at more than three times the Fed's 2% goal. This has seen the money markets ramping up bets for a more aggressive rate hike from the central bank in September, with the chances of a 75 basis point hike now seen around 70%, fuelling the greenback in the main. US Treasury yields have consequently seen the two-year bond yields extend to a 15-year high at near3.49%.

EUR/USD technical analysis

The price is consolidating the prior bearish trend at the Gartley's endpoint with a focus on the upside while above 0.9900.

Zooming in the euro is being pressured to the potentially firm support, with the next bullish objective being a break above 1.0030. On the downside, the bears could be in the clear on a break of 0.9950.

In response to the market's reaction to last week's Jackson Hole, Minneapolis Federal Reserve Bank President Neel Kashkari has crossed the wires saying people now understand how serious we are about getting inflation back to 2%.

Kashkari's comments

''Was not thrilled to see the stock market rally following our most recent federal open market committee meeting.''
''I am delighted by the market's reaction to the Jackson Hole.''
''I know how serious we are about lowering inflation and I believe the markets were misinterpreting that at the last FOMC meeting.''

In forex, the dollar has touched a fresh 20-year high to start the week fuelled by hawkish comments by Federal Reserve Chair Jerome Powell. DXY, which measures the greenback vs. a basket of rival currencies, is back to 108.80m pulling back from the 109.48 high scored earlier. 

• USD/JPY reached a fresh 7-week high at the 139.00 figure.
• Once the 139.00 figure is broken, the USD/JPY YTD high is next at 139.38, as the pair aims towards 140.00.

The USD/JPY extends its rally, underpinned by higher US Treasury bond yields, on Monday, amidst a downbeat sentiment propelled by last Friday’s Jerome Powell speech. He reiterated the Fed’s commitment to tackle inflation to the 2% goal, despite causing slower economic growth, alongside “pain to households and businesses.” At the time of writing, the USD/JPY is trading at 138.73, above its opening price.

USD/JPY Price Analysis: Technical outlook

Since the beginning of August, the USD/JPY resumed its upward bias after diving towards fresh two-month lows at 130.39. Worth noting that on its way toward current exchange rates, the USD/JPY cleared the 20 and 50-day-EMAs, opening the door to further gains.

The bias is further supported by the Relative Strength Index (RSI), which downtick under the 60 reading, made a U-turn, and broke above its 7-day RSI’s SMA, showing buyers gathering momentum.

In the short term, the USD/JPY is neutral-upward biased, but as the RSI entered overbought conditions, the USD/JPY retraced from daily highs, hitting 139.00. However, the USD/JPY’s first resistance would be the 139.00 figure. Once cleared, the next supply zone will be the YTD high at 139.38, followed by the psychological 140.00 mark.

On the other hand, the USD/JPY first support would be the R2 daily pivot at 138,41. Break below will expose subsequent pivot point levels, like the R1 at 137.95, followed by the 20-EMA at 137.39, before tumbling to the daily pivot at 137.07.

USD/JPY Key Technical Levels

• GBP/USD stalls at a key area of daily confluence-resistance.
• Eyes on US data following Powell's hawkish message.

GBP/USD is down on the day but reviving. At 1.1717, the pound is making its way from the lows of the day which has been 1.1648, travelling to 1.1743 at the star of new York. Markets in the UK being closed for Summer Bank Holiday have left volumes thin but the US dollar has been pressured supporting its rivals thus far.

Currently, stocks on Wall Street are showing their fragility to last week's speech from the Federal Reserve's chairman Jerome Powell which dominates the start of the weeks business leaving US data as the key focus. Markets are focused on the end of the week, when the ISM's national manufacturing reading for August will be released on Thursday followed by the all important monthly employment report on Friday ahead of the long holiday weekend. Additionally, there will be various Fed speakers this week and traders will be tentative to complimentary rhetoric to Powell's hawkish message.

For US obs, analysts at TD Securities expect employment to advance robustly in August but at a more moderate pace following the booming 528k print registered in July. ''High-frequency data, including Homebase, point to still above-trend job creation. We also look for the UE rate to drop by a tenth for a second consecutive month to 3.4%, and for wage growth to advance at a firm 0.4% MoM (5.3% YoY).''

Domestically, analysts at TD Securities expect the Bank of England's price stability mandate will force them to continue to hike even with a recessionary path forecasted by the BoE for 2023. This follows the recent double-digit UK Consumer Price Index print that confirmed the rates market's bias, supporting cable even in the face of a dollar in demand. 

Looking ahead, the analysts at TD Securities expect the Monetary Policy Committe to hike by 50bps at both its September and November meetings, and by 25bps in December, before an 8-month pause. ''From August 2023, we expect a series of cuts, returning Bank Rate to its neutral rate of around 1.75% in 2024.''

GBP/USD technical analysis

Cable is in a forceful downtrend, as per the weekly chart above, and there is plenty of momentum. That being said, in due course, the M-formation will be a pull to the upside, perhaps as a nearterm temporary pause in the trend. 

The daily outlook is pointing to a move lower, as per the 38.2% ratio aligning with prior lows. This appears to be bearish for the near term sessions. 

• AUD/USD advances close to 0.25% on Monday, trimming some of last Friday’s losses.
• Last week’s Fed’s rhetoric put a lid on the AUD/USD gains.
• Australian Retail Sales were better-than-expected, propelled by tourism.

AUD/USD reclaims the 0.6900 figure after hitting a six-week low at around 0.6840 in the North American session amidst a risk-off mood, spurred by last Friday’s Fed’s Powell hawkish rhetoric, sending US equities tumbling on average almost 3%, between the S&P 500, Nasdaq and the Dow.

The AUD/USD opened below last Friday’s close and edged towards 0.6840 before recovering some ground, reaching a daily high at 0.6925 before settling around current spot prices. At the time of writing, the AUD/USD is trading at 0.6907, above its opening price by almost 1%.

AUD/USD edges higher on positive AUS data, weaker US dollar

The Australian dollar gains are courtesy of a weaker US dollar, as shown by the US Dollar Index, down 0.09%, at 108.736. Additionally, commodity prices led by crude oil and Iron Ore are bolstering commodity-linked currencies, like the AUD, the NZD, and the CAD.

US equities are extending their losses following Jerome Powell’s last Friday remarks, 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.”

On Friday, US economic data revealed that the core PCE deflator, the Fed’s favorite inflation measure, increased by 0.1% MoM, less than estimated. Nevertheless, the three-month annualized figure is still high, and as Powell welcomed the data, he reiterated that the Fed needs to go to restrictive territory. Later, the UoM consumer sentiment improved to 58.2, reflecting lower gasoline prices.

In the Asian session, Australian Retail Sales for July, on its preliminary reading, came better than estimated, up by 1.3%, bolstering the AUD/USD. According to ANZ analysts, Aussie sales were bolstered by tourism and returning residents.

“We noted last month that very negative net arrivals in June may have been key to the weakness in retail sales growth, rather than the start of a consumer slowdown. We will be watching net arrivals as a signal for retail sales growth in the near term since the two datasets have been moving together in recent months,” ANZ analysts wrote.

AUD/USD Key Technical Levels

The key economic report of the week will be the US official employment report on Friday. Market consensus point to an increase in payrolls by 285K; analysts at Wells Fargo forecast a larger increase by 325K in August. 

Key Quotes: 

“July's employment report was a blowout, with nonfarm payrolls increasing 528K despite consensus expectations for "just" a 250K gain. Job growth was broad-based across most industries, and revisions to employment over the prior two months were mildly positive. However, the report likely still caused some indigestion for members of the FOMC. Wage growth came in stronger than expected, and the labor force participation rate fell by a tenth of a percentage point, putting it three-tenths of a percentage point below its March 2022 level.”

“Job growth of more than half a million new jobs per month is consistent with an economy that is experiencing robust economic growth. Yet, other indicators suggest the economy is slowing down, and monetary policymakers are charting a course that bring labor supply and demand more into balance. As a result, we would be surprised by job growth continuing anywhere near the July pace in the months ahead. We look for nonfarm payrolls to have risen 325K in August.”

After hawkish comments from European Central Bank (ECB) policymakers during the week, analysts at Danske Bank now expected the central bank to raise key interest rates by 75 basis points at next week’s meeting. 

Key Quotes: 

“We now expect ECB to hike 75bp next week, which will be followed by 50bp in October and 25bp in December, but acknowledge the increased uncertainty on the two latter hike size expectations. This is +25bp for our previous rate hike expectations at both the September and the October meetings, respectively, and we now see the endpoint of the ECB deposit rate at 1.5%.”

“We believe the euro area will face a recession and ECB will hike into that, however, we also acknowledge that even without the ECB tightening, the European economy was in a severe situation to begin with a worsening energy crisis.”

• USD/MXN fails to break key resistance near 20.20.
• Break above 20.20 to give momentum to the dollar.
• Price continues to consolidate around 20.00.

The USD/MXN is flat on Monday as it pulled back after reaching the highest level in almost a week at 20.16. The pair tested a critical resistance area around 20.17, the convergence of a short-term downtrend line and the 20 and 200-day Simple Moving Average.

A break above 20.20 should give momentum to the US Dollar and a close above 20.25 would point to more gains, with the next resistance located at 20.45.

A slide under 19.98 should put the Mexican peso to test the 19.90 support area. A break lower would expose the August low around 19.80, a strong support level that would likely hold, favoring a rebound to 19.90 before a break lower.

On a wider perspective, USD/MXN continues to consolidate around 20.00, moving without a clear direction. With the price under key daily moving average the bias is to the downside with momentum under 100. Although other technical indicators like the RSI are flat around midlines.

USD/MXN 4-hour chart

USD/MXN daily chart 

• Swiss franc among worst performers amid higher yields.
• USD/CHF breaks key range and extends rally.
• EUR/CHF at the highest level in 11 days.

The USD/CHF is holding onto daily gains on tis was to the highest close in a month. The pair peaked during the Asian session at 0.9707 and then pulled back, finding support at 0.9655/60.

The bias in USD/CHF is bullish in the short-term but while it remains unable to hold above 0.9700, the upside seems limited. A slide under 0.9600 could change the bias to bearish.

Dollar erases gains, Swissy fails to recover

The US dollar weakened during the American session and kept USD/CHF below 0.9700. The DXY is flat on Monday, hovering around 108.80, after hitting a multi-decade high at 109.47.

Comments from European Central Bank policymakers during the weekend pushed European yields to the upside and weighed on the Swiss franc. The German 10-year yield is at 1.50%, about to post the highest close since late June.

The EUR/CHF is up for the second day in a row and peaked at 0.9696, the highest since August 18. It is back above the 20-day Simple Moving Average. A key resistance area is located around 0.9700 and a break higher could trigger more gains.

Technical levels

• Gold price recovers some ground, jumping from July 25 lows around $1720.
• Worldwide central bank hawkish rhetoric, weighed on market sentiment, a tailwind for gold price.
• Gold Price Forecast: It could test $1800 if buyers reclaim $1770; otherwise, it could fall towards $1700.

Gold price bounced from five-week lows on Monday, amidst a downbeat market mood, after last Friday's hawkish remarks by Federal Reserve Chair Jerome Powell, spurred a fall in equities, propelling the greenback and US Treasury bond yields to fresh weekly highs. At the time of writing, XAU/USD is trading at $1740 slightly above its opening price.

Gold advances in tandem with the greenback

Global equities are trading in negative territory. Since Wall Street opened, the US Dollar Index a gauge of the buck’s value vs. a basket of six peers is almost flat exchanging hands at 108.831, a tailwind for the non-yielding metal, which is up by almost 0.80%, despite climbing US Treasury yields.

Meanwhile, the US 10-year Treasury yield stays edges up almost eight bps, sitting at 3.119%, at a time that market players expect that the US Federal Reserve would hike 75 bps, as shown by the CME FedWatcht tool, with odds lying at 70%.

On Monday, a light calendar keeps market participants reflecting on the Jackson Hole symposium. The US Fed Chair Jerome Powell said that the Fed would increase the rate to restrictive territory and would keep them there “for some time” as the US central bank tries to tame inflation down. Powell acknowledged that growth will slow down, and added that “it will also bring some pain to households and businesses.”

Adding to further central bank hawkish rhetoric, it should be noted that ECB’s members led by Schnabel, Villeroy, Kazaaks, and Rehn, echoed concerns about inflation, with Villeroy stating that a significant rate increase is needed in September, while Kazaaks commented that the ECB should discuss 50 or 75 bps rate hikes. Meanwhile, ECB’s Rehn commented that it’s time for the central bank to act with a weak euro and expect a “significant” interest rate hike.

Therefore, XAU/USD traders should buckle up their seatbelts, as the yellow metal braces for periods of high volatility, with incoming data that could reignite fears of a worldwide recession.

What to watch

The US economic docket will feature the US Consumer Confidence, Fed speakers, the ISM Manufacturing PMI, alongside the US Nonfarm Payrolls report.

Gold Price Forecast (XAU/USD): Technical outlook

From a daily chart, perspective, the XAU/USD is still neutral to downward, biased. Monday’s jump from multi-week lows threatens to form a hammer (a reversal candlestick pattern), signifying that the yellow metal is forming a bottom, before shifting upwards. Hence, if gold buyers reclaim $1770, a test of the $1800 is on the cards. Otherwise, a daily close below Friday’s low of $1734, would pave the way for further losses.

International Energy Agency (IEA) Chief Fatih Birol noted on Monday that Russia's oil production hasn't fallen as much as previously expected because it managed to find new markets outside Europe and added domestic demand remained robust, per Reuters. "Going forward, it would be difficult for Russia to maintain oil production due to the absence of western companies," Birol said.

Birol further noted that a further strategic petroleum reserve release was not off the table. He also reiterated that he stands by the IEA's report suggesting no new investments in oil and gas fields are needed if the world wants to achieve net zero emissions by 2050.

Market reaction

Crude oil prices edged modestly lower from session highs following these comments. The barrel of West Texas Intermediate (WTI) was trading at $95.70, where it was still up 3% on a daily basis.

European Central Bank (ECB) Chief Economist Philip Lane noted on Monday that inflation in the eurozone is expected to remain high in the near term but added that long-term inflation expectations stay close to 2%, as reported by Reuters.

Commenting on the policy outlook, "a steady pace - that is neither too slow nor too fast - in closing the gap to the terminal rate is important for several reasons," Lane explained. "The appropriate size of the individual increments will be larger the wider the gap to the terminal rate and the more skewed the risks to the inflation target."

Market reaction

The shared currency preserves its strength after these comments and EUR/USD was last seen gaining 0.53% on a daily basis at 1.0013.

• USD/TRY keeps the uptrend well in place near 18.20.
• Türkiye Economic Confidence improved further in August.
• Türkiye trade deficit widened near TL11B in July.

The Turkish lira remains on the back foot and helps USD/TRY advance to the boundaries of 18.20, or new 2022 highs, on Monday.

USD/TRY keeps targeting the YTD tops

USD/TRY fades Friday’s small downtick and started the fourth consecutive week with gains, trading at shouting distance from the all-time highs around 18.25 (December 20 2021) on Monday.

The lira prolongs its march south, as investors continue to hold a negative view of the currency, particularly following the latest decision by the Turkish central bank (CBRT) to reduce the policy rate, always in a context of persistent global and domestic elevated inflation and the relentless tightening bias in global central banks.

In the domestic calendar, the Economic Confidence Index improved a tad to 94.30 in August (from 93.40), while the trade deficit broadened to TL10.69B during July.

What to look for around TRY

The upside bias in USD/TRY remains unchanged and trades closer to the all-time high around 18.25. The uptrend in spot has been intensified after the unexpected interest rate cut by the CBRT on August 18.

In the meantime, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in July), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

In addition, there seems to be no other immediate alternative to attract foreign currency other than via tourism revenue, in a context where official figures for the country’s FX reserves remain surrounded by increasing skepticism among investors.

Key events in Türkiye this week: Economic Confidence Index, Trade Balance (Monday) – Q2 GDP (Wednesday) – Manufacturing PMI (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.30% at 18.1835 and faces the immediate target at 18.1973 (2022 high August 29) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 17.7586 (monthly low August 9) would pave the way for 17.5444 (55-day SMA) and finally 17.1903 (weekly low July 15).

• A dramatic USD turnaround from a 20-year high prompts some short-covering around GBP/USD.
• Hawkish Fed expectations, rising US bond yields and the risk-off mood should limit the USD losses.
• The UK’s gloomy economic outlook suggests that the attempted recovery is likely to be short-lived.

The GBP/USD pair stages a goodish bounce from the 1.1650-1.1645 region, or its lowest level since March 2020 touched earlier this Monday. The pair hits a fresh daily high during the early North American session, though lacks follow-through buying and is currently placed just above the 1.1700 mark.

A dramatic US dollar turnaround from a fresh 20-year high is seen as a key factor that prompted some intraday short-covering around the GBP/USD pair. In the absence of any fundamental catalyst, the USD pullback could be solely attributed to some profit-taking and is more likely to remain cushioned amid hawkish Fed expectations.

The bets were reaffirmed by Fed Chair Jerome Powell's remarks on Friday, signalling that interest rates would be kept higher for longer to bring down inflation. In fact, the markets are currently pricing in a greater chance of a 75 bps Fed rate hike in September. This is reinforced by a further rise in the US Treasury bond yields.

Apart from this, the prevalent risk-off environment - as depicted by a generally weaker tone around the equity markets - supports prospects for the emergence of some dip-buying around the safe-haven buck. This, along with a bleak outlook for the UK economy, warrants some caution before confirming that the GBP/USD pair has formed a bottom.

The fundamental backdrop still seems tilted firmly in favour of bearish traders, suggesting that any subsequent recovery could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. The market focus now shifts to the release of the closely-watched US monthly jobs report, popularly known as NFP on Friday.

Technical levels to watch

Economists at Wells Fargo expect the euro to remain under downside pressure. Subsequently, the EUR/USD pair is expected to slide to 0.9600 or even lower.

Further downside in the euro

“We still expect further downside in the euro.”

“Given energy supply disruptions, earlier Eurozone recession and a relatively limited monetary tightening cycle from the European Central Bank (ECB), we expect the EUR/USD exchange rate to fall to 0.9600 or lower.”

USD/JPY gains traction for the second straight day and climbs to its highest level since mid-July. Economists at Wells Fargo expect the pair to surge above 140 by early 2023.

BoJ to maintain the easy monetary policy

“Given modest Japanese growth and limited inflation, we expect the Bank of Japan to maintain the easy monetary policy and to continue to cap Japanese bond yields for the foreseeable future.”

 We expect the USD/JPY exchange rate to reach 140.00 or higher by early next year.”

• A combination of factors prompts some intraday selling around USD/CAD on Monday.
• Rising oil prices underpin the loonie and exert pressure amid a sharp USD pullback.
• Aggressive Fed rate hike bets should limit the USD losses and lend support to the pair.

The USD/CAD pair surrenders its early gains to the 1.3075 area, or the highest level since mid-July and refreshes the daily low during the early North American session. The intraday downfall is sponsored by a combination of factors and drags spot prices to the 1.3015 area in the last hour.

Expectations that major oil producers could cut output to stall the recent fall in oil prices provide a modest lift to the black liquid. This, in turn, underpins the commodity-linked loonie and acts as a headwind for the USD/CAD pair. Apart from this, a dramatic US dollar turnaround from a fresh 20-year peak attracts some selling around the pair and contributes to the intraday decline.

The USD pullback, meanwhile, lacks any obvious fundamental catalyst and could be solely attributed to some profit-taking. That said, rising bets for a supersized 75 bps Fed rate hike at the September meeting, along with the prevalent risk-off environment, should help limit the USD losses. This, in turn, warrants some caution before placing fresh bearish bets around the USD/CAD pair.

The market bets for a more aggressive policy tightening by the Fed were reaffirmed by hawkish remarks by Fed Chair Jerome Powell on Friday. During his speech at the Jackson Hole Symposium, Powell signalled that interest rates would be kept higher for longer to bring down inflation. A further rise in the US Treasury bond yields reinforces market expectations and favours the USD bulls.

In the absence of any major market moving-economic releases, either from the US or Canada, the fundamental backdrop supports prospects for the emergence of some dip-buying around the USD/CAD pair. This further makes it prudent to wait for strong follow-through selling before confirming that last week's goodish bounce from sub-1.2900 levels has run out of steam.

Technical levels to watch

Senior Economist at UOB Group Alvin Liew comments on the latest Industrial Production figures in Singapore.

Key Takeaways

“Singapore’s industrial production (IP) came in below expectations for the second month in a row as it declined by -2.3% m/m SA in Jul, which translated to a weaker growth of 0.6% y/y, matching the low print recorded in Jan 2022 (from the revised Jun readings of -8.0% m/m, 2.6% y/y) and fell short of Bloomberg survey estimates but perhaps closer to UOB’s internal estimates.”

“The weaker IP result for Jul was due to 6.3% y/y contraction in electronics output and a 25.7% y/y fall in pharmaceutical production while the main sources of IP growth were from the continued expansions in transport engineering (18.6% y/y), general manufacturing (14.6% y/y), and precision engineering (13.9% y/y), and a surprise rebound in chemicals (5.3% y/y), more than offsetting the drags from electronics and pharmaceuticals.”

“Accounting for the Jul’s increase, Singapore’s IP expanded 4.9% in the first seven months of 2022. We continue to be cautiously positive on the outlook for transport engineering, general manufacturing, and precision engineering, to drive overall IP growth but we are now also cognizant about a potentially much slower electronics performance in the remaining months of 2022. We maintain our IP growth forecast at 4.5% in 2022 (from 13.2% in 2021) but we note the increased risk of a weaker IP trajectory due to the faltering outlook for electronics. In the same vein, our full year 2022 and 2023 GDP growth forecasts are also unchanged at 3.5% and 2% respectively but the manufacturing outlook indicates the risk to our growth outlook is on the downside, as well. In addition, another dampener to headline growth is the relatively higher base levels for the rest of 2022, as IP expanded by double digit growth rates between May and Dec 2021 (except for Sep 2021).”

The benchmark 10-year US Treasury bond yield is trading above 3%. But economists at ABN Amro expect yields to slump to 2.55% by the end of the year.

10y Bund yield to fall to 1.1% by Q4

“We expect both Treasury and German bonds to rally from Q4 until mid-2023. We expect the 10y US Treasury yield to slide to 2.55% in Q4 2022. Similarly, we expect 10y Bund yield to fall to 1.1% by Q4 due to US spill-over effects and markets shifting back to risk-off mode, increasing safe-haven demand.” 

“However, as short-term inflation expectations continue to rise, we expect a stronger inversion of the Treasury curve and the Bund curve to bear-flatten in the near-term before steepening again in H2 2023.”

Economists at Danske Banke now expect Danmarks Nationalbank (DN) to raise its key policy by 75 bps next week followed by 50 bps rate hike in October and 25 bps in December. 

EUR/DKK below 7.4360 may force DN to cut rates or raise it by less than ECB

“We now expect a 75 bps hike in September followed by a 50 bps hike in October and 25 bps in December. It brings the key policy rate to 1.40% in December.”

“High inflation may force ECB, and thus DN, to make additional policy rate hikes in 2023.”

“Should EUR/DKK fall to 7.4360 again and trigger renewed DKK selling in FX intervention, DN may opt to cut its key policy rate or raise it by less than ECB – likely by 10bp. It is not our base case, but a reasonable possibility given the persistent low EUR/DKK.”

• EUR/USD regains composure after the earlier drop near 0.9900.
• Bullish attempts should meet initial hurdle near 1.0100.

EUR/USD reverses the initial pessimism, including a test of the vicinity of the 0.9900 zone on Monday.

The recent failure to advance beyond 1.0100 leaves this region as a potential near-term top, while the 0.9900 neighbourhood seems to offer quite a decent contention for the time being. The breach of the 2022 low at 0.9899 (August 23) could sponsor a deeper pullback to the December 2002 low at 0.9859.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0819.

EUR/USD daily chart

The dollar continues to build on its gains after Jackson Hole. Economists at BBH maintain their strong dollar call.

Fed officials to continue their aggressive communication efforts

“The swaps market is pricing in a terminal rate close to 4.0% and we think that process is likely to continue. It's not a coincidence that Fed officials keep bringing up Paul Volcker, as the implications are clear.”

“The real 10-year yield is trading near 0.53%, the highest since July 21. Further gains would set up a test of the June 1 high near 0.82%. Elsewhere, the 3-month to 10-year curve is trading near 35 bps, the steepest since last Wednesday and off the 21 bps low from August 10. While recession risks are palpable, this key metric does not yet signal that one is imminent.”

“As we saw after the July FOMC decision and then after the FOMC minutes, Fed officials blanketed the markets with a hawkish message. We expect a similar effort after Jackson Hole. We expect each and every Fed official to stick to Powell’s hawkish script.”

Eurozone economy is set to tip into recession in the coming quarters. Nonetheless, the EUR/USD pair is unlikely to see a sustained move under parity.

Narrowing yield spreads between the US and Germany to support the EUR in 2023

“A recession in the eurozone combined with a more aggressive path of rate hikes in the US compared to the eurozone will probably keep the euro under pressure versus the US dollar this year.”

“But we still think that a sustained move in EUR/USD below parity will be difficult. Therefore, we keep our forecasts for EUR/USD for end-2022 at 1.00.” 

“In 2023, we expect narrowing yield spreads between the US and Germany to support the euro, with our end-2023 forecast at 1.10 (was 1.15).”

USD/JPY has touched its highest level in over a month at 139.00. The pair could climb as high as the August 1998 peak of 147.65, economists at BBH report.

Bank of Japan stood out at Jackson Hole as the Lonesome Dove

“USD/JPY is trading at the highest since July 15 near 139 and will soon test the July 14 high near 139.40.”

“We maintain our medium-term target of 147.65, the August 1998 high, as the BoJ stood out at Jackson Hole as the Lonesome Dove.”

European energy crisis has intensified. Therefore, a deep recession is likely in Europe, economists at ABN Amro report.

Winter is coming

“We expect the energy crisis to tip European economies into recession over the coming months.”

“Even if gas rationing is somehow avoided, sky-high energy prices, weak consumer and business confidence and tighter financial conditions will be enough to put growth into reverse.”

“The silver lining is that, outside of energy, weaker demand is helping to ease supply bottlenecks.”

EUR/USD has tested the 0.99 area. However, the pair is set to remain under parity, in the opinion of economists at BBH.

Raising recession risks

“Moves above 1.00 will be hard to sustain and so the single currency remains on track to test the September 2002 low near 0.9615.”

“Germany, Italy, and now France are contracting and it's only going to get worse this fall/winter when energy shortages really bite. Sure, the US faces recession risks too but we still think that Europe is in much weaker fundamental shape.”

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest interest rate decision by the Bank of Korea (BoK).

Key Takeaways

“As expected, Bank of Korea (BoK) raised its benchmark base rate by 25bps to 2.50% at its meeting … as it dialed down from the 50bps hike in Jul. In total, BoK has hiked interest rate for seven meetings since Aug 2021, by a cumulative 200 bps. The decision was again unanimous in Aug.”

“BoK upped its inflation forecast for 2022 and 2023 and revised down the GDP growth forecasts for the two years.”

“BoK’s concerns that inflation will stay high for a longer period of time even after it peaks will keep its focus on combating price pressures in order to bring headline inflation rate to a comfortable level of around 3% by end-2023.”

“We keep our forecast that the BoK will continue to raise the base rate by 25bps per meeting in Oct and Nov to bring the benchmark base rate to 3.00% by year-end. Thereafter, we expect the BoK to stay on hold through 2023 but there remains prospect of further tightening if the inflation trajectory continues along a path that exceeds 3% by end-2023.”

• DXY prints fresh cycle highs near 109.50 on Monday.
• Further upside could revisit the September 2002 high at 109.77.

DXY extends the post-Powell rally to the area of 109.50, recording at the same time new cycle highs.

Further upside remains on the cards for the index in the near term. Against that, the surpass of the 2022 high at 109.47 (August 29) should open the door to the September 2002 top at 109.77 prior to the round level at 110.00.

In the meantime, while above the 6-month support line around 105.40, the index is expected to keep the short-term positive stance.

Looking at the long-term scenario, the bullish view in the dollar remains in place while above the 200-day SMA at 100.74.

DXY daily chart

• USD/JPY gains traction for the second straight day and climbs to its highest level since mid-July.
• The risk-off impulse offers support to the safe-haven JPY and caps any further gains for the pair.
• The Fed-BoJ policy divergence, sustained USD buying, rising US bond yields favour bullish traders.
• Sustained break through the 136.65-136.70 resistance zone adds credence to the positive outlook.

The USD/JPY pair stalls its intraday positive move near the 139.00 mark and retreats a few pips from the highest level since mid-July touched earlier this Monday. The pair slips back below mid-138.00s during the first half of the European session, though any meaningful pullback still seems elusive.

The risk-off impulse offers some support to the safe-haven Japanese yen and acts as a headwind for the USD/JPY pair. That said, a big divergence in the monetary policy stance adopted by the Fed and the Bank of Japan should cap gains for the JPY. Apart from this, the blowout US dollar rally to a fresh 20-year high and rising US Treasury bond yields should help limit the downside for the major.

From a technical perspective, the strong follow-through buying for the second successive day on Monday confirmed a breakout through the 137.65-137.70 resistance zone. This comes on the back of the recent strong bounce from the 100-day SMA and favours bullish traders. Hence, any subsequent downtick might be seen as a buying opportunity and is likely to remain limited, at least for the time being.

Traders now look to the 138.00 round-figure mark to offer some support ahead of the aforementioned resistance breakpoint, around the 137.70-137.65 region. A convincing break below might trigger some technical selling and accelerate the slide towards the 137.00 mark. The USD/JPY pair could eventually drop to the 136.80-136.75 intermediate support en route to the 136.45 support zone.

On the flip side, the 139.00 round figure now seems to have emerged as immediate resistance. This is followed by the 24-year high, around the 139.40 region touched in July. Some follow-through buying has the potential to lift the USD/JPY pair further towards the 140.00 psychological mark, which if cleared decisively should pave the way for a further near-term appreciating move.

USD/JPY daily chart

Key levels to watch

• Gold continues losing ground for the second straight day and drops to over a one-month low.
• Strong follow-through USD buying, rising US bond yields continue to weigh on the commodity.
• The risk-off impulse might turn out to be the only factor that might help limit any further losses.

Gold remains under heavy selling pressure for the second successive day on Monday and drops to over a one-month low, around the $1,720 area during the early part of the European session. The US dollar hits a fresh two-decade high amid rising bets for more aggressive Fed rate hikes and continues to weigh on the dollar-denominated commodity.

In fact, the markets are pricing in a greater chance of a 75 bps rate increase at the September FOMC meeting. A further rise in the US Treasury bond yields reinforces market expectations, which is seen as another factor driving flows away from the non-yielding yellow metal. That said, the prevalent risk-off environment could offer some support to the safe-haven gold and help limit any further losses, at least for the time being.

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the next relevant support for gold is pegged near the $1,719 area - Pivot Point One Day S2. This is closely followed by $1,714-$1,713 zone - Fibonacci 23.6% One month. A convincing break below will expose the $1,706-$1,705 support - Pivot Point One Week S2 and the $1,700 round-figure mark. Some follow-through selling might make the XAU/USD vulnerable to retesting the YTD low, around the $1,680 region touched in July.

On the flip side, attempted recovery moves might now confront stiff resistance near the $1,728-$1,729 confluence support breakpoint, comprising Previous Week Low and Pivot Point One Day S1. The next relevant hurdle is pegged near the $1,732-$1,733 region - Fibonacci 38.2% One Month. Sustained strength beyond could trigger a short-covering rally towards the $1,737 zone - Fibonacci 23.6% One Week - en route to the $1,741-$1,742 region - Fibonacci 38.2% One Week - and the $1,745 barrier.

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.
 

• GBP/USD drifts lower for the second successive day and drops to its lowest level since March 2020.
• Rising bets for more aggressive Fed rate hikes, the risk-off mood continues to underpin the USD.
• A bleak outlook for the UK economy weighs on the GBP and further contributes to the selling bias.

The GBP/USD pair extends Friday's sharp retracement slide from the 1.1900 round figure and continues losing ground for the second straight day. The downward trajectory drags spot prices to the lowest level since March 2020, around mid-1.1600s during the first half of trading on Monday and is sponsored by strong follow-through US dollar buying.

During his speech at the Jackson Hole Symposium, Fed Chair Jerome Powell squashed hopes of a dovish pivot and signalled that interest rates would be kept higher for longer to bring down inflation. This, in turn, lifts bets for a supersized 75 bps rate hike at the September FOMC meeting and triggers a fresh leg up in the US Treasury bond yields. Apart from this, the prevalent risk-off mood pushes the safe-haven USD to a 20-year peak and turns out to be a key factor exerting pressure on the GBP/USD pair.

The British pound, on the other hand, continues to be weighed down by worries about a deeper economic downturn amid the recent absurd surge in energy prices and the persistent rise in inflation. In fact, the Bank of England had predicted earlier this month that the UK economy will enter a prolonged recession from the fourth quarter of 2022. This, along with some technical selling below the previous YTD swing low, around the 1.1720-1.1715 region, further contributed to the GBP/USD pair's downward trajectory.

That said, slightly oversold conditions on intraday charts seem to hold back bearish traders from placing fresh bets and helping limit further losses, at least for the time being. Nevertheless, the fundamental backdrop supports prospects for an extension of the depreciating move. This, in turn, suggests that any attempted recovery move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly amid absent relevant market-moving economic releases.

Technical levels to watch

FX Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research notes USD/IDR could still edge higher in the short term.

Key Quotes

“We highlighted last week that USD/IDR ‘has scope to rise above the trend-line resistance at 14,925’. Our expectations did not materialize as it retreated from a high of 14,918. USD/IDR traded on a firm note today and the bias for this week is on the upside.”

“A break of the trendline (currently at 14,910) would not be surprising. For this week, the next resistance at 14,990 is unlikely to come under threat. On the downside, a break of 14,790 would indicate that USD/IDR is not ready to head higher.”

• EUR/JPY adds to the ongoing rebound and retakes 138.00.
• Further upside could see the 55-day SMA near 138.90 retested.

EUR/JPY extends recent gains and reclaims the area above the 138.00 mark at the beginning of the week.

The continuation of the uptrend initially targets the August high at 138.39 (August 10) ahead of the temporary 55-day SMA, today at 138.89. The surpass of this level should shift the attention to the weekly peak at 142.32 (July 21).

While above the 200-day SMA at 134.27, the prospects for the pair should remain constructive.

EUR/JPY daily chart

• AUD/USD falls to a multi-week low on Monday and is pressured by a combination of factors.
• Bets for aggressive Fed rate hikes, elevated US bond yields push the USD to a 20-year peak.
• The risk-off mood also benefits the safe-haven buck and weighs on the risk-sensitive aussie.

The AUD/USD pair witnessed some follow-through selling for the second straight day on Monday and drops to a six-week low during the early part of the European session. Currently placed around mid-0.6800s, spot prices have now retreated over 150 pips from levels just above the 0.7000 psychological mark touched on Friday amid a blowout US dollar rally.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, shot to a fresh 20-year high amid expectations for a more aggressive policy tightening by the Fed. The markets are pricing in a greater chance for a supersized 75 bps Fed rate hike move in September and the bets were reaffirmed by Fed Chair Jerome Powell's hawkish remarks on Friday.

During his speech at the Jackson Hole Symposium squashed hopes of a dovish pivot and signalled that interest rates would be kept higher for longer to bring down soaring inflation. A further rise in the US Treasury bond yields reinforces market expectations, which, along with the risk-off mood, offers additional support to the safe-haven buck and weighs on the risk-sensitive aussie.

The combination of aforementioned factors offset the upbeat Australian Retail Sales, which surpassed expectations by a big margin and rose 1.3% in July. Even the prospects for another 50 bps rate hike by the Reserve Bank of Australia at the next policy meeting on September 6 did little to impress bullish traders or provide any respite to the AUD/USD pair, favouring bearish traders.

In the absence of any major market-moving economic releases from the US, the prevalent strong bullish sentiment surrounding the USD adds credence to the near-term negative outlook. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside and any meaningful recovery attempt could now be seen as a selling opportunity.

Technical levels to watch

Further upside in USD/MYR should meet a tough hurdle at the 4.4980 region, suggests FX Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“Last Monday (22 Aug, spot at 4.4800), we held the view that USD/MYR ‘could strengthen further but the 2017 high at 4.4980 is likely out of reach’. However, USD/MYR did not strengthen but dipped to 4.4650 last Friday (26 Aug).”

“USD/MYR soared upon opening today (29 Aug) and the bias for this week still appears to be tilted to the upside. That said, 4.4980 could still be out of reach, at least for this week. On the downside, support is at 4.4650 followed by the major level at 4.4615.”

• Silver drifts lower for the second straight day and dives to over a one-month low.
• The technical set-up supports prospects for a further near-term depreciating move.
• A slightly oversold RSI on hourly charts warrants some caution for bearish traders.

Silver continues losing ground for the second successive day on Monday and drops to over a one-month low during the early European session. The white metal is currently trading around mid-$18.00s, down over 1.80% for the day and seems vulnerable to sliding further.

The XAG/USD faced rejection near the 200-hour SMA on Friday. Furthermore, acceptance below the $19.00 round-figure mark and a subsequent break through the previous monthly low, around the $18.70 region, could be seen as a fresh trigger for bearish traders.

The negative outlook is reinforced by the fact that technical indicators on the daily chart are holding deep in bearish territory. That said, RSI (14) on hourly charts is flashing oversold conditions and warrants some caution for aggressive traders.

Nevertheless, the technical set-up supports prospects for an extension of the depreciating move towards the YTD low, around the $18.15 area touched in July. This is closely followed by the $18.00 mark, which if broken will set the stage for additional losses.

On the flip side, any attempted recovery move now seems to confront resistance and attract some sellers near the $18.70 support breakpoint. This, in turn, should keep a lid on any further gains for the XAG/USD near the $19.00 round-figure mark.

The latter should act as a pivotal point, above which the XAG/USD could climb back to the 200-hour SMA hurdle, currently near the $19.30 zone. Some follow-through buying will negate the bearish outlook and trigger a fresh bout of a short-covering move.

Silver 1-hour chart

Key levels to watch

FX Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research noted USD/THB is poised to extend the upside in the near term.

Key Quotes

“Last Monday (22 Aug, spot at 35.85), we highlighted ‘further USD/THB strength appears likely even though overbought conditions suggest that 36.36 is unlikely to come into the picture’. Our view was not wrong as USD/THB subsequently rose to 36.34 before dropping to 35.78. USD/THB rebounded strongly from the low and today (29 Aug), it out 36.36. The rapid improvement in momentum suggests USD/THB could strengthen further.”

“That said, July’s high at 36.95 is unlikely to come into the picture for this week (there is another resistance level at 36.70). Overall, USD/THB is expected to trade on a firm footing as long as it does not move below 35.90 (minor support is at 36.10).”

• EUR/USD remains on the defensive below the parity level.
• The bid tone in the greenback has magnified following Powell’s speech.
• Markets’ attention now looks to the speech by FOMC’s Brainard.

EUR/USD stays under pressure in the lower end of the recent range well below the parity zone on Monday.

EUR/USD could revisit the 2022 lows

EUR/USD adds to Friday’s rejection from the vicinity of the 1.0100 level and trades at shouting distance from the 0.9900 area at the beginning of the week amidst investors’ reassessment of Powell’s speech last Friday.

Indeed, Powell’s speech fell on the hawkish side as widely expected, leaving well in place the odds for the continuation of the current stance to bring down inflation and also talking down the possibility of a shift to a looser monetary stance at some point in 2023 (rate cuts).

As market participants continue to adjust to Powell’s comments, US yields extend the mover higher – particularly in the short end of the curve – and the dollar gathers further traction to levels last seen nearly two decades ago.

Nothing scheduled data wise in Euroland on Monday, whereas the speech by FOMC’s L.Brainard will take centre stage across the pond.

What to look for around EUR

Occasional bullish attempts in EUR/USD remain unconvincing and appear to have resulted in selling opportunities for the time being.

So far, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence. However, potential shifts to a more hawkish stance from ECB’s policy makers regarding the bank’s rate path could be a source of strength for the euro.

On the negatives for the single currency emerge the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals.

Key events in the euro area this week: EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Tuesday) – France Flash Inflation Rate, Italy Flash Inflation Rate, EMU Flash Inflation Rate, Germany Unemployment Change, Unemployment Rate (Wednesday) – Germany Retail Sales, Final Manufacturing PMI, EMU Final Manufacturing PMI, EMU Unemployment Rate (Thursday) – Germany Balance of Trade (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, spot is losing 0.26% at 0.9938 and a break below 0.9899 (2022 low August 23) would target 0.9859 (December 2002 low) en route to 0.9685 (October 2022 low). On the flip side, the next resistance aligns at 1.0090 (weekly high August 26) seconded by 1.0202 (high August 17) and finally 1.0237 (55-day SMA).

EUR/USD has staged a rebound after having declined toward 0.9900. Hawkish ECB commentary could help the shared currency to limit its losses, FXStreet’s Eren Sengezer reports.

0.9920 aligns as first support before 0.9900

“The risk-averse market environment favors the greenback at the beginning of the new week but hawkish comments from European Central Bank (ECB) officials could limit the pair's downside in the near term.”

“On the upside, the 20-period SMA forms interim resistance at 0.9960 ahead of the all-important parity level. Even if the pair rises above the latter, it could face stiff resistance at 1.0020, where the Fibonacci 23.6% retracement of the latest downtrend meets the 50-period SMA.”

“On the downside, 0.9920 (end-point of the downtrend) aligns as first support before 0.9900 (psychological level, multi-year lows) and 0.9850 (static level from July 2002).”

The continuation of the uptrend could see USD/CNH retest the 6.9400 region ahead of 6.9600 in the short-term horizon, according to FX Strategists at UOB Group Quek Ser Leang and Peter Chia.

Key Quotes

24-hour view: “USD soared and closed at 6.8923 last Friday (+0.60%). USD continues with its advance during early Asian hour and took out the major resistance at 6.9000. The rapid rise appears to be a tad overdone and the next major resistance at 6.9400 is unlikely to come under threat for now. Support is at 6.9000 followed by 6.8870.”

Next 1-3 weeks: “We have held a positive USD view for about 2 weeks. As USD struggled to extend its advance, we highlighted last Wednesday (24 Aug, spot at 6.8630) that the rapid loss in shorter-term upward momentum has diminished the odds for USD to advance further to 6.9000. We pointed out that, ‘only a break of 6.8330 would indicate that USD strength has run its course’. USD did not break 6.8330 and today, it surged past 6.9000. The rapid boost in momentum indicates that the USD strength could extend to 6.9400, possibly 6.9600. On the downside, a break of 6.8600 (‘strong support’ level was at 6.8330 last Friday) would indicate that USD is unlikely to strengthen further.”

• The index adds to Friday’s advance well north of 109.00.
• US 2y bond yields rose to new 5-year highs near 3.50%.
• Dallas Fed Manufacturing Index, FOMC’s L.Brainard next on tap.

The greenback, in terms of the US Dollar Index (DXY), advances further and prints fresh cycle highs near 109.50 at the beginning of the week, an area last traded back in September 2002.

US Dollar Index propped up by yields, Fed

The index trades in the positive territory for the second consecutive session and extends the Powell-led rebound well past the 109.00 hurdle on Monday.

Indeed, investors continue to adjust to the hawkish message from Chief Powell at the Jackson Hole event last Friday, which lent fresh legs to the dollar and sponsored extra gains in US yields, particularly in the short end of the curve.

The continuation of the aggressive stance from the Fed has been reinforced by Powell and markets now see a 75 bps rate hike as the most likely scenario for the Fed’s meeting in September. On this, CME Group’s FedWatch Tool sees that probability at around 75%, from around 47% a week ago.

In the US docket, the Dallas Fed Manufacturing gauge is due seconded by a couple of short-term auctions and the speech by Fed’s Vice-Chair L.Brainard (permanent voter, dove).

What to look for around USD

No changes to the firm bullish stance in the US Dollar Index (DXY) on Monday, which extends the bounce to nearly 20-year highs around 109.50.

Bolstering the dollar’s strength appears the firm conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market. This view was recently reinforced by Chair Powell’s speech at the Jackson Hole Symposium.

Extra volatility in the dollar, however, should not be ruled out considering the ongoing debate around the size of the September’s interest rate hike by the Federal Reserve.

Looking at the more macro scenario, the greenback appears propped up by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: FHFA’s House Price Index, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications, ADP Employment Change (Wednesday) – Initial Claims, Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Thursday) – Nonfarm Payrolls, Unemployment Rate, Factory Orders (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation over a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

US Dollar Index relevant levels

Now, the index is advancing 0.39% at 109.25 and a break above 109.47 (2022 high July 15) would aim for 109.77 (monthly high September 2002) and then 110.00 (round level). On the other hand, the next support emerges at 107.58 (weekly low August 26) seconded by 106.37 (55-day SMA) and then 104.63 (monthly low August 10).

• NZD/USD drops to a multi-week low on Monday amid relentless USD buying interest.
• Bets for more aggressive Fed rate hikes, elevated US bond yields underpin the USD.
• The risk-off mood also benefits the safe-haven buck and weighs on the risk-sensitive kiwi.

The NZD/USD pair remains under some selling pressure for the second straight day on Monday and drops to its lowest level since mid-July. The pair remains depressed through the early European session, with bears now awaiting a sustained break below the 0.6100 round-figure mark.

The US dollar builds on Friday's strong intraday rally led by Fed Chair Jerome Powell's hawkish remarks and turns out to be a key factor exerting downward pressure on the NZD/USD pair. During his speech at the Jackson Hole Symposium squashed hopes of a dovish pivot and signalled that interest rates would be kept higher for longer to bring down soaring inflation.

Investors were quick to react and are now pricing in a greater chance of a supersized 75 bps Fed rate hike at the September meeting. A further rise in the US Treasury bond yields reinforces expectations. This, along with with the risk-off mood, pushes the safe-haven buck to a fresh 20-year high and contributes to driving flows away from the risk-sensitive kiwi.

With the latest leg down, the NZD/USD pair has dropped around 170 pips from last week's swing high and seems vulnerable to extending the depreciating move. That said, it will be prudent to wait for some follow-through selling below the 0.6100 mark before positioning for any further downside back towards testing the YTD low, around the 0.6060 region, touched in July.

There isn't any major market-moving economic data due for release from the US, leaving the NZD/USD pair at the mercy of the USD price dynamics. Meanwhile, elevated US bond yields and a weaker risk tone favour the USD bulls. This, in turn, suggest that the path of least resistance for the major is to the downside and attempted recovery might be seen as a selling opportunity.

Technical levels to watch

The ongoing surge higher for the price of gas in Europe has been encouraging market participants to price in more tightening from both the Euopean Central Bank (ECB). However, clearly growth risks are set to keep the euro under pressure, economists at MUFG Bank report.

Greater risks of the ECB under-delivering on rate hikes compared to the Fed

“If EUR/USD does extend further lower (which we expect over the coming months) then it is likely to be natural gas related leading to lower GDP growth expectations and there will be little the ECB could do to influence FX in that circumstance.”

“Based on the current macro risks related to the energy crisis in Europe we still see greater risks of the ECB and the BoE under-delivering on rate hikes compared to the Fed.” 

“The hit to growth in Europe will likely undermine the scope for tightening even as further EUR depreciation unfolds.”

• USD/CAD climbs to a multi-week high on Monday amid sustained USD buying interest.
• Rising bets for a 75 bps Fed rate hike in September, the risk-off mood underpins the buck.
• An uptick in oil prices offers some support to the loonie and might cap any further gains.

The USD/CAD pair builds on the previous session's strong rally from the 1.2900 neighbourhood and gains traction for the second successive day on Monday. The momentum lifts spot prices to the 1.3075 area, or the highest level since mid-July during the early European session and remains well supported by broad-based US dollar strength.

Fed Jerome Powell on Friday squashed hopes of a dovish pivot and signalled that interest rates would be kept higher for longer to bring down soaring inflation. The markets were quick to react and are now pricing in a greater chance of a 75 bps rate hike at the September FOMC meeting. This is reaffirmed by a fresh leg up in the US Treasury bond yields and pushes the US dollar to a fresh 20-year high on the first day of a new week.

Apart from this, the prevalent risk-off mood - as depicted by a sea of red across the equity markets - provides an additional lift to the safe-haven greenback. The combination of factors remains supportive of the strong bid tone surrounding the USD/CAD pair. That said, a modest uptick in crude oil prices could offer some support to the commodity-linked loonie and keep a lid on any meaningful upside for the major, at least for the time being.

Expectations that the major oil producer could cut output to stall the recent fall in oil prices helped offset hopes for the return of sanctioned Iranian oil exports. This, along with the conflict in Libya, acts as a tailwind for crude oil prices. The upside, however, remains capped amid growing concerns that a global economic downturn will hurt fuel demand and the prospects for a faster policy tightening by the US central bank.

From a technical perspective, acceptance above the 1.3055-1.3060 horizontal resistance suggests that the path of least resistance for the USD/CAD pair is to the upside. The mixed fundamental backdrop, however, warrants caution for aggressive bullish traders and before positioning for any further appreciating move amid absent relevant market-moving economic data.

Technical levels to watch

Is cash an efficient asset allocation? Though returns offered by cash have been historically bad over the last 10 years, the tide has begun to turn on cash yields and investors will want to take note, Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley, reports.

Poor risk-reward for US equities at current levels

“For equity markets, if investors can now receive higher yields on low risk cash, we think it's reasonable to think that that should lead investors to ask for higher returns elsewhere, which should lower valuations on stocks. We see poor risk-reward for US equities at current levels.”

“We think it supports holding more US dollar cash in a portfolio. That's true for US investors, but also globally, as we forecast the US dollar to continue to strengthen.” 

“Holding cash isn't necessarily a sign of caution, it may simply be efficient allocation to an asset that has recently seen a major jump in yield.”

Gold stays under heavy bearish pressure. With Fed policymakers reiterating the significance of the August inflation and employment data ahead of the September meeting, gold could struggle to stage a rebound ahead of Friday's Nonfarm Payrolls (NFP) report, FXStreet’s Eren Sengezer reports.

US August jobs report could impact the dollar's valuation in a significant way

“On Wednesday, Eurostat will release Harmonised Index of Consumer Prices (HICP) data for August. Markets expect the annual HICP to edge lower to 8.6% in August from 8.9% in July. A higher-than-expected reading could trigger a euro rally and cause the dollar to lose demand. Although XAU/USD could gain traction in that scenario, it could find it difficult to climb steadily if global yields push higher.”

“On Thursday, the ISM Manufacturing PMI from the US will be looked upon for fresh impetus. Experts forecast the headline PMI to stay largely unchanged at 52.6 in August and expect the Prices Paid Index to climb to 75 from 60 in July. In case the inflation component confirms that price pressures continued to ease in August, gold could turn north and vice versa.”

“Investors will pay close attention to the US Bureau of Labor Statistics August jobs report. Disappointing growth in Nonfarm Payrolls could trigger a deep dollar sell-off by ramping up the odds of a 50 basis points rate hike in September. On the other hand, another above-500K print could confirm a further oversized rate increase and provide a boost to the dollar.”

Economists at Commerzbank expect the US dollar to enjoy only mild appreciation through the end of the year. Therefore, the EUR/USD pair is expected to trade at 0.98 by end-2022.

USD to have only limited upside potential until next year

“The dollar will have only limited upside potential until next year when the time has come to prove that the Fed will remain steadfast.”

“The dollar strength this morning should not disguise the fact that the reaction to Powell’s speech was disappointing. Against this background, we are happy with our EUR/USD projections of 0.98 by year-end.”

USD/CNY opened higher towards the 6.92 level this morning. In the view of economists at Commerzbank, the risks are clearly tilted to the upside.

Adjustment from PBoC to manage CNY's weakness

“PBoC's mid-point fix for USD/CNY was set to the highest level this year at 6.8698. This was below our model's forecast of 6.8820, suggesting some adjustment from PBoC to manage CNY's weakness. The bias is tilted overwhelmingly to the upside however given the latest bout of USD strength.” 

“It is not just CNY weakness but USD strength as seen by the decline in Asian currencies across the board.”

• Gold price remains on the back foot around one-month low.
• Hawkish Fed bets, fears surrounding economic slowdown propel DXY towards the highest levels since September 2002.
• Light calendar, UK holiday could test bears on their way to refresh yearly low.
• US job numbers could weigh on XAU/USD as Powell warns Americans at the Jackson Hole Symposium.

Gold price (XAU/USD) extends Friday’s losses to renew its monthly bottom around $1,721, at $1,723.50 by the press time, as risk-aversion joins hawkish Fed bets to underpin the US dollar’s rally towards the multi-year high.

While portraying the mood, the US two-year Treasury yields rose to the highest since 2007, up 1.9% intraday near 3.468% at the latest, whereas the 10-year benchmark adds nearly 10 basis points (bps) to 3.129%. Furthermore, the S&P 500 Futures drop 0.80% intraday while tracing Friday’s downbeat Wall Street performance and highlighting the sour sentiment.

Also, market pricing now indicates a 74.5% chance the Fed will hike rates by 75 bps at its September meeting, per BOE’s FED WATCH tool. It’s worth noting that the US Dollar Index (DXY) also cheers the hawkish Fed bets and firmer yields to rise to the fresh high since September 2002, up 0.50% near 109.45 at the latest.

It should be noted that Fed Chair Jerome Powell’s resistance to step back from the aggressive rate hikes propelled the hawkish bets on the Fed rate hikes.

On the other hand, the US-China tussles over Taiwan, amid the latest chatters of vessels moving in Taiwan Strait, join Beijing’s suspension of meat imports from an American firm to raise economic fears and challenge the market sentiment, which in turn weigh on XAU/USD.

Looking forward, a light calendar and extended weekend in the UK may restrict gold price moves on Monday, likely to keep bearish. However, Fed Chair Powell’s warning that Americans were headed for a painful period of slow economic growth and possibly rising joblessness, per Reuters, emphasizes Friday’s US jobs report for clear directions.

Technical analysis

A clear downside break of a five-week-old ascending trend line, around $1,740 by the press time, directs XAU/USD bears towards the $1,700 threshold. It’s worth noting, however, that multiple lows marked during late July around $1,712 will precede the 78.6% Fibonacci retracement of the metal’s July-August upside, near $1,708, to offer intermediate halts during the anticipated fall.

It’s worth noting that the oversold RSI may challenge the gold price sellers around the $1,700 threshold, if not, then the south-run towards the yearly low near $1,680 appears more likely.

Meanwhile, corrective pullback needs validation from the 61.8% Fibonacci retracement level of $1,730 before aiming to retest the support-turned-resistance line, around $1,740.

In a case where XAU/USD remains firmer past $1,740, a one-week-old descending resistance line and the 100-SMA on the four-hour chart, respectively around $1,763 and $1,768, could appear as the last defense of bears.

Gold: Four-hour chart

Trend: Limited downside expected

Gold price extends the previous sell-off. In the opinion of strategists at TD Securities, Fed Chair Powell's hawkish speech is expected to weigh on the yellow metal.

Fed will continue to follow a hawkish trajectory well into 2023

“Growing expectations that the US Federal Reserve will continue to follow a hawkish trajectory well into 2023 prompted money managers to aggressively reduce gold length. The lack of upside potential, as the Fed signaled significantly higher rates for longer, also convinced investors to cut long exposure.” 

“Considering Jerome Powell's hawkish tone being communicated at the Jackson Hole Economic Policy Symposium, we see continued reduction in gold length and downside price pressures.”

Here is what you need to know on Monday, August 29:

Following FOMC Chairman Jerome Powell's speech at the Jackson Hole Symposium on Friday, the US Dollar Index gathered strength and posted weekly gains. The index started the new week on a firm footing and reached its highest level in two decades near 109.50. The economic docket will not be featuring any high-impact data releases on Monday and the risk perception alongside the market pricing of the Fed's rate outlook could continue to drive the market action. At the time of press, US stock index futures were down between 0.7% and 1.15%.

While delivering his opening remarks on Friday, Powell reiterated that restoring the price stability will likely require maintaining a restrictive policy stance for 'some time.' Regarding the September rate decision, Powell said the size of the rate increase will depend on the totality of the data since the July policy meeting. In turn, the CME Group FedWatch Tool showed that the probability of a 75 basis points (bps) rate hike climbed to 70% from 40% early Friday. 

Over the weekend, European Central Bank policymakers adopted a hawkish tone at the Jackson Hole Symposium but the shared currency failed to start the new week on a bullish note. ECB Governing Council member Francois Villeroy de Galhau noted that ECB needs another significant interest rate hike in September. ECB policymaker Olli Rehn noted the euro's exchange rate was a "significant consideration" when setting up the monetary policy. Finally, ECB Governing Council member Isabel Schnabel argued that they had little choice but to continue the normalization path even if the eurozone were to enter a recession. EUR/USD was last seen losing 0.3% on a daily basis at 0.9935.

During the Asian trading hours on Monday, the data from Australia showed that Retail Sales rose by 1.3% on a monthly basis in July, surpassing the market expectation for an increase of 0.3%. The AUD/USD pair struggled to benefit from the upbeat data and declined toward 0.6850.

Fueled by rising US Treasury bond yields, USD/JPY touched its highest level in over a month at 139.00 early Monday. The benchmark 10-year US Treasury bond yield was last seen rising 2.3% on the day at 3.11%.

Gold stays under heavy bearish pressure in the early European morning and pushes lower toward $1,720 on Monday. 

Following Friday's selloff, Bitcoin stayed under bearish pressure over the weekend and dropped below $20,000. Although BTC/USD staged a rebound early Monday, it continues to trade below $20,000. After having lost more than 10% on Friday, Ethereum extended its slide and touched its lowest level in a month at around $1,400 on Sunday. ETH/USD is edging higher in the European morning while trading below $1,500.

USD/TRY stays firmer at the yearly top. Economists at Commerzbank expect the lira to suffer a substantial drop.

There is a misconception that all is rosy on the growth front

“The deterioration of macroeconomic indicators such as inflation expectations, current-account and balance sheets is widely recognised. But there is a misconception that all is rosy on the growth front. To the contrary, as soon as one uses deeper, structural indicators, the growth performance evaporates.” 

“What is the implication for the lira? Well, our analysis puts the historical record straight. In this sense, it has no direct implication for the lira.”

“We expect that the next big depreciation of the lira may be just around the corner, but that would be for all the usual reasons.”

USD/JPY faces a potential move to the 139.00 region in the next weeks, comment FX Strategists at UOB Group Quek Ser Leang and Peter Chia.

Key Quotes

24-hour view: “USD soared and closed at 137.52 (+0.75%) last Friday before jumping above 138.00 during Asian hours. While the rapid rise appears to be overdone, strong upward momentum suggest USD could advance further. That said. A break of 139.00 is unlikely for today (there is another resistance at 138.60). On the downside, a breach of 137.70 (minor support is at 138.00) would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “Last Wednesday (24 Aug, spot at 137.00), we highlighted that USD could trade in a choppy manner, likely within a broad range of 135.20/138.00. USD soared above 138.00 today and the rapid surge in momentum is likely to lead to an advance to 139.00. In order to maintain the rapid build-up in momentum, USD should not move below 137.25 (‘strong support’ level) within these few days.”

Things are going in the right direction for the Bank of Japan (BoJ). The USD/JPY is likely to remain volatile but a substantial rise is not on the cards, in the view of economists at Commerzbank.

There is some relief on the exchange rate side

“In June it had seemed concerned in view of a 15% depreciation of the yen against the US dollar and stressed that it would keep a close eye on the developments on the FX market. Since then, the USD/JPY exchange rate has stabilised even though it is likely to remain volatile.”

“In view of the BoJ’s inability to act, USD/JPY is completely at the mercy of the USD side of things. However, in line with our in-house view that the Fed will cut interest rates in view of an economic slowdown in the coming year, any substantial upward move is likely to be only temporary in nature.”

Considering advanced prints from CME Group for natural gas futures markets, open interest shrank for yet another session at the end of last week, now by around 4.1K contracts. On the other hand, volume reversed two daily drops in a row and increased by around 55.4K contracts.

Natural Gas keeps targeting $10.00

Friday’s downtick in prices of the natural gas was on the back of diminishing open interest, which is supportive of the continuation of the uptrend in the short-term horizon. Against that, the commodity continues to target the 2022 highs around $10.00 per MMBtu (August 23).

Some European Central Bank (ECB) board members also used the symposium in Jackson Hole to convince the market of their efforts in fighting inflation. Eurozone inflation data on Wednesday could provide support to the euro, but in a limited way, economists at Commerzbank report.

The ECB too still has a lot of convincing to do

“The ECB talk is more or less irrelevant for the market. Here to action will be required to support the euro. I would even question whether a further 75 bps rate hike in September would be sufficient to convince the market in view of the fact that the ECB is likely to be seen as being well behind the curve.”

“The eurozone inflation data over the coming days is likely to illustrate how much convincing still needs to be done. If the euro was going to be able to appreciate significantly in reaction to surprisingly high data this would be a sign that the market expects a sufficiently strong reaction on the part of the central bankers after all. However, it is more likely that the data would provide only limited support for the euro.”

Gold price is accelerating the previous decline at the start of another critical week. As FXStreet’s Dhwani Mehta reports, XAU/USD eyes daily close below $1,738 to extend the downtrend.

There is more room for additional declines

“Gold price cracked the critical rising trendline support at $1,738, which bulls defended on Friday. Daily closing below the latter is needed to confirm a downside break and kickstart a fresh downtrend towards the $1,700 mark.”

“Bears took out the $1,728 demand area to refresh monthly lows at $1,723. Further down, sellers could test the July 27 low at $1,712 should the selling pressure intensify.”

“Any recovery attempts will need to find acceptance above the rising trendline support turned resistance at $1,738.  The $1,750 psychological level will be the level to beat for the bulls. Friday’s high of $1,759, around where the bearish 50-Daily Moving Average (DMA) lurks, will be the last line of defense for XAU bears.”

Federal Reserve Chair Powell used the opportunity that Jackson Hole provided to send a more forceful, hawkish message regarding the medium-term outlook for monetary policy. The rates market bear flattened in reaction. Economists at TD Securities expect to see more flattening ahead.

Fed will continue to tighten policy over the coming months

“Fed Chair Powell used the opportunity that Jackson Hole provided to send a more forceful, hawkish message regarding the medium-term outlook for monetary policy. The chairman broadly aimed his remarks to put to bed the idea that the Fed will be soon done with its tightening cycle and then following that up with rapid rate cuts as the economy shows additional signs of weakening in 2023.”

“We continue to look for the Fed to slow the pace of rate hikes in September to 50 bps, however, a larger 75 bps increase is on the table and will hinge on upcoming economic data.”

“The market is pricing in about 60% chance of a 75 bps hike in September and a terminal rate of 3.8% by early-2023. The market pared back some 2023 cuts, but pushed those cuts further out in time. This explains the flattening in the curve, and we think that the curve remains biased to flatten further until there is compelling evidence of a decline in inflation.”

In the opinion of FX Strategists at UOB Group Quek Ser Leang and Peter Chia, AUD/USD could recede further and revisit the 0.6815 level in the near term.

Key Quotes

24-hour view: “Last Friday, we highlighted that ‘the risk for AUD is still on the upside but any advance is expected to face solid resistance at 0.7005’. AUD rose to a high of 0.7009 during NY hours before plunging to close at 0.6892 (-1.28%). AUD extended its decline during early Asian hours. Strong downward momentum suggests AUD could drop below last week’s low near 0.6855. For today, the next support at 0.6815 is unlikely to come into the picture. Resistance is at 0.6895 followed by 0.6915.”

Next 1-3 weeks: “We highlighted last Friday (26 Aug, spot at 0.6960) that shorter-term momentum is beginning to build and the chance for AUD to move clearly above 0.7005 has increased. AUD popped briefly above 0.7005 (high of 0.7009) during early NY hours before staging a sharp selloff. The sell-off extended during early Asian and the risk from here is for AUD to weaken towards 0.6815. Resistance is at 0.6915 but only a break of 0.6945 (‘strong resistance’ level) would indicate that the downside risk has dissipated.”

CME Group’s flash data for crude oil futures markets note investors trimmed their open interest positions for the third session in a row on Friday, now by around 9.2K contracts. Volume, instead, remained erratic and rose by just 394 contracts.

WTI remains capped by the 200-day SMA

Prices of the barrel of the WTI charted an inconclusive session on Friday amidst the continuation of the downtrend in open interest and erratic activity in open interest. So far, the lack of a clear direction appears the most likely scenario for crude oil prices in the very near term, while the 200-day SMA, today at $96.00, continues to limit the upside in the commodity.

EUR/USD bounced around Friday amid hawkish signals from the Federal Reserve and the European Cenral Bank (ECB), but ended the week below parity. Economists at Danske Bank expect the world’s most popular currency pair to extend its slide. 

ECB officials warn of “sacrifice” needed

“ECB seems to follow in the footsteps of the Fed. On Friday, Reuters reported that ECB were to discuss a 75 bps rate hike at the December meeting, while a Bloomberg sources story during the weekend said that QT may be discussed towards the end of the year. Also Schnabel, Holzmann, Kazaks and Knot were all very hawkish.”

“Markets are focusing on discussing the message of 'coordinated tightening' from Jackson Hole as ECB and Fed appear to have re-committed to creating price stability: yields are shooting higher and risk assets are quite a bit lower since last week. This stands in stark contrast to the rally we have seen since June.” 

“We continue to see EUR/USD as declining further, targeting some 0.95 in 12m as dollar strength will likely pick up pace in this environment.”

• USD/TRY stays firmer at the yearly top, grinds higher of late.
• A jump in the hawkish Fed bets after Powell’s Jackson Hole speech propels DXY, yields.
• Inflation fears in Turkey, recession woes add strength to the upside momentum.
• Light calendar, holiday in the UK may restrict immediate moves ahead of Friday’s US NFP.

USD/TRY grinds higher around the yearly top, up 0.15% intraday near 18.15 heading into Monday’s European session.

In doing so, the Turkish lira (TRY) pair struggles to keep buyers hopeful even as the quote renews the nine-month high amid a lack of major data/events, as well as the holiday in the UK. Even so, fears of higher inflation in Turkey, as well as the Central Bank of the Republic of Türkiye’s (CBRT) resistance to higher rates, keep the pair buyers hopeful.

It’s worth noting that the 80% inflation couldn’t stop the CBRT policymakers from announcing a 100 basis points (bps) rate cut despite broad criticism of the nation’s qualitative measures to tame inflation.

Elsewhere, Federal Reserve following Chair Jerome Powell's hawkish speech on Friday turned down the market’s hopes of witnessing cautious remarks from Powell, considering the latest challenges to the economic slowdown. Also fueling the US Treasury yields could be the comments from US Senator Elizabeth Warren said on Sunday, per Reuters, that she was very worried that the Federal Reserve was going to tip the US economy into recession.

As a result, the US two-year Treasury yields rise to the highest since 2007, up 2.5% intraday near 3.487% at the latest, whereas the 10-year benchmark adds nearly 10 basis points to 3.129%. Also, market pricing now indicates a 74.5% chance the Fed will hike rates by 75 basis points at its September meeting, per BOE’s FED WATCH tool. It’s worth noting that the US Dollar Index (DXY) also cheers the hawkish Fed bets and firmer yields to rise to the fresh high since September 2002, up 0.50% near 109.45 at the latest.

Although the risk-aversion and the hawkish Fed bets keep the US dollar buyers hopeful, fears surrounding Friday’s US jobs report could join a light calendar in the UK and a light calendar elsewhere to restrict immediate USD/TRY moves.

• EUR/GBP has printed a fresh two-week high above 0.8500 ahead of Eurozone HICP.
• UK markets are closed on account of the Summer Bank Holiday.
• Nord Stream 1 pipeline to Germany for gas supply has gone under unscheduled maintenance.

The EUR/GBP pair is advancing firmly and has climbed above the psychological resistance of 0.8500 in the early European session. The asset has displayed a bullish open-drive session as the shared currency bulls are scaling higher right from the first tick in the morning session and have refreshed its two-week high at 0.8510. The cross has picked significant bids as investors are awaiting the release of the Eurozone Harmonized Index of Consumer Prices (HICP) data, which is due on Wednesday.

As per the market consensus, the Eurozone HICP is expected to land higher at 9% than the prior release of 8.9%. So, the third contender is ready to enter into the domain of a 9% inflation rate after the US and the UK. Soaring energy bills in the Eurozone have dented the market sentiment. Also, the electricity and energy prices are set for a fresh rally and may impact households further.

Investors should be aware of the fact that energy supplies to Germany from Nord Stream 1 pipeline by Russia under the Baltic Sea will remain shut for three days due to unscheduled maintenance. This may accelerate the energy crisis further as demand will improve further ahead of winter season.

Meanwhile, UK markets are closed on account of the Summer Bank Holiday. Therefore, investors will focus on cues from the eurozone. On a broader note, investors will focus on impetus from UK elections as will be a heavy volatile time for the pound bulls. Instability in the UK markets amid political turmoil will find some cushion ahead.

Gold suffered heavy losses on Friday and closed the week in negative territory. As FXStreet’s Eren Sengezer notes, the near-term technical outlook points to a bearish shift.

$1,720 aligns as the first support

“Following Friday's action, the Relative Strength Index (RSI) indicator on the daily chart dropped below 50, pointing to a bearish tilt in the near-term technical outlook.”

“On the downside, $1,720 (static level) aligns as the first support ahead of $1,700 (psychological level, the end-point of the latest downtrend). A daily close below the latter could open the door for an extended slide toward $1,680 (July 21 low).”

“$1,760 (20-day SMA, 50-day SMA) forms first resistance before $1,780 (Fibonacci 23.6% retracement of the latest downtrend) and $1,800 (psychological level, static level).”

FX option expiries for August 29 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9850 200m
• 0.9900 263m
• 1.0000-10 1.54b

- USD/JPY: USD amounts                     

• 137.75 310m
• 138.00 700m
• 140.00 540m

- AUD/USD: AUD amounts  

• 0.6765-70 580m
• 0.6800 284m
• 0.6925-30 306m
• 0.6940-50 738m

- USD/CAD: USD amounts       

• 1.3100 213m

- EUR/GBP: EUR amounts

• 0.8460 246m

• Copper price extends the previous day’s pullback from two-month high to refresh one-week low.
• Markets increase bets on Fed’s 0.75% rate hike in September after Chairman Powell’s Jackson Hole speech.
• China’s downbeat industrial production data, Sino-American tussles and a fall in copper imports in July weigh on the red metal.

Copper price takes offers to renew one-week low as pessimism surrounding China and the global industrial demand escalate during early Monday morning in Europe. Also exerting downside pressure on the industrial metal prices are the latest jump in the US dollar and the market’s risk-off mood.

That said, the copper futures on COMEX drop 2.55% to the lowest levels since August 18, around $3.61 by the press time. Further, the most-traded October copper contract on the Shanghai Futures Exchange (SFE) was down around 1.0% to near 62,700 yuan a tonne, at the latest.

Weak industrial data from the world's top metal consumer China exert downside pressure on the red metal. That said, China’s Industrial Profits for July fell 1.1% in the first seven months of 2022 versus an increase of 0.8% the previous month.

Not only China’s industrial profits but copper imports for the said month were also disappointing and weighed down on the metal prices. As per the latest data, China’s July month imports of copper ore, refined copper and copper scrap all fell on the MoM, despite posting YoY gains.

Elsewhere, the US-China tussles over Taiwan, amid the latest chatters of vessels moving in Taiwan Strait, join Beijing’s suspension of meat imports from an American firm to raise economic fears and challenge the metal’s industrial demand.

Above all, macro woes of the economic slowdown and the central bankers’ hawkish concerns, led by Fed Chair Jerome Powell, appear to be the key downside factor for copper prices. That said, Friday’s US jobs report for August will be more important as Fed’s Powell recently warned that Americans were headed for a painful period of slow economic growth and possibly rising joblessness, per Reuters.

Amid these plays, the US two-year Treasury yields rise to the highest since 2007, up 2.5% intraday near 3.487% at the latest, whereas the 10-year benchmark adds nearly 10 basis points to 3.129%. Also, market pricing now indicates a 74.5% chance the Fed will hike rates by 75 basis points at its September meeting, per BOE’s FED WATCH tool. It’s worth noting that the US Dollar Index (DXY) also cheers the hawkish Fed bets and firmer yields to rise to the fresh high since September 2002, up 0.50% near 109.45 at the latest.

Further weakness could drag GBP/USD to the 1.1630 region in the next few weeks, note FX Strategists at UOB Group Quek Ser Leang and Peter Chia.

Key Quotes

24-hour view: “We expected GBP to ‘trade sideways between 1.1770 and 1.1870’ last Friday. However, GBP spiked to 1.1900 before plunging to close at 1.1730 (-0.91%). GBP dropped sharply during early Asian hours and the rapid build-up in downward momentum is likely to lead to further decline. That said, the major support at 1.1630 is likely out of reach for now (there is another support at 1.1660). Resistance is at 1.1730 but only a breach of 1.1760 would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “Our latest narrative was from last from Wednesday (24 Aug, spot at 1.1830) where GBP is likely to consolidate and trade between 1.1720 and 1.1930. GBP plummeted to 1.1730 last Friday before breaking clearly 1.1700 during early Asian hours. Downward momentum has improved quickly and the price actions suggest GBP could weaken towards 1.1630. Overall, GBP is expected to trade on its back foot unless it can move above the ‘strong resistance’ level, currently at 1.1800.”

Open interest in gold futures markets resumed the uptrend and went up by around 1.2K contracts at the end of last week according to preliminary readings from CME Group. Volume followed suit and increased for the second session in a row, this time by nearly 63K contracts.

Gold could slip back to $1,700

Gold prices retreated sharply on Friday amidst rising open interest and volume, opening the door further losses in the very near term. That said, there is an initial support at $1,711 (low July 27) ahead of a probable visit to the round level at $1,700 per ounce troy.

Democratic US Senator Elizabeth Warren expressed her concerns on Sunday about a potential recession in the US economy, courtesy of the hawkish stance of Fed Chair Jerome Powell.

Key quotes

"Do you know what's worse than high prices and a strong economy? It's high prices and millions of people out of work. I am very worried that the Fed is going to tip this economy into recession.”

"What he calls 'some pain' means putting people out of work, shutting down small business because the cost of money goes up because the interest rates go up.”

"There is nothing in raising the interest rates, nothing in Jerome Powell's tool bag, that deals directly with those and he has admitted as much in congressional hearings.”

Market reaction

The US dollar rampage extends in early European trading, as risk-aversion and the bond market sell-off deepen on hawkish rhetoric by major global central bankers. The US dollar index is now trading at a fresh two-decade high of 109.48, gaining 0.60% on the day.

FX Strategists at UOB Group Quek Ser Leang and Peter Chia suggest EUR/USD risks further losses if 0.9870 is cleared.

Key Quotes

24-hour view: “We highlighted last Friday that the outlook for EUR is ‘mixed’ and we expected EUR to ‘trade within a range of 0.9925/1.0020’. However, EUR spiked to a high of 1.0089 before plummeting to 0.9945. EUR extended its decline during early Asian hours and while EUR could drop below 0.9900, the next support at 0.9870 is unlikely to come into the picture. On the upside, a breach of 0.9980 (minor resistance is at 0.9955) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “EUR spiked above our ‘strong resistance’ level of 1.0035 last Friday (high of 1.0089) before plummeting to end the day at 0.9961 (-0.13%). The break of the ‘strong resistance’ level indicates that the EUR weakness that started about 2 weeks ago has ended. While shorter-term downward momentum still suggests downside risk, EUR has to break below 0.9870 before a sustained decline is likely. The next support is at 0.9825. The odds for EUR to break clearly 0.9870 are not high for now but would remain intact as long as it does not move above 1.0015 within these few days.”

• AUD/USD takes offers to refresh six-week low, justifies downside break of short-term key support.
• Multiple levels marked during mid-July lure sellers, oversold RSI (14) challenges additional weakness.
• Bulls need clear break of 100-SMA to retake control.

AUD/USD remains on the back foot as sellers keep reins around a 1.5-month low heading into Monday’s European session. That said, the Aussie pair renews the multi-day bottom around 0.6840 by the press time.

In doing so, the quote takes clues from the clear downside break of an ascending support line from July 14, now resistance around the 0.6900 threshold. Also keeping the AUD/USD sellers hopeful are the bearish MACD signals.

It’s worth noting, however, that the RSI (14) approaches the oversold territory and may probe the AUD/USD pair’s further downside.

As a result, a six-week-old horizontal support area surrounding the 0.6800 round figure appears crucial to watch.

Should the quote drop below 0.6800, the odds of witnessing a slump towards the yearly low marked in July around 0.6680 can’t be ruled out.

Meanwhile, recovery remains elusive until the AUD/USD prices remain below the support-turned-resistance line, close to 0.6900 at the latest.

Even so, the 100-SMA and the latest swing high, respectively around 0.6970 and 0.7010, could challenge the pair’s upside momentum.

AUD/USD: Four-hour chart

Trend: Further downside expected

These are the highlights of the CFTC Positioning Report for the week ended on August 23^rd:

• Net shorts in the European currency clocked yearly highs and kept navigating the area of more than 2-year highs as a percentage on open interest (>6%) in the period under study. A plethora of hawkish messages from Fed’s rate-setters kept the dollar bid and the risk complex depressed, forcing EUR/USD to break below the parity level once again, although this time with certain conviction. Further downside in the euro should not be ruled out in light of the negative price action in combination with rising open interest.
• Gross shorts in the greenback edged higher and prompted net longs to retreat to an area last visited in early May beyond 35K contracts. Further comments from Fed-speakers underpinned the aggressive rate path by the central bank and lent oxygen to the dollar. However, softer-than-expected advanced PMIs and weak housing data results prompted the buck to give away some ground later. The US Dollar Index (DXY) flirted with YTD peaks near 109.30, although it gave away part of that advance later in the period.
• When it comes to safe havens, speculators added to their negative exposure to the Japanese yen and pushed net shorts to 3-week highs on the back of the resumption of an aggressive message from FOMC members and the impact on US yields. USD/JPY extended the uptrend past the 137.00 barrier from as low as the 131.70 zone in the previous week. Net shorts in the Swiss franc, on the other hand, shrank to levels last seen in late May 2021 pari passu with increasing speculation that the euro area could slip back to recession in the not-so-distant future. USD/CHF edged higher and returned to multi-week tops near the 0.9700 barrier.
• The sentiment around the Aussie dollar deteriorated further on the back of market chatter surrounding the likelihood of a deceleration in the Chinese economy and extra USD strength. AUD/USD extended the leg lower and flirted with lows in the mid-0.6800s, where some contention seems to have emerged.

• Asian indices are trading in deeply red ahead of the fresh rate hike cycle.
• Fed’s preference for bringing price stability over growth prospects has underpinned the risk-off mood.
• Oil prices have recovered their recent losses and have climbed to nearly $94.00.

Markets in the Asian domain are displaying a vulnerable performance as indices have fallen like a house of cards. Indices have witnessed an intense sell-off as the Federal Reserve (Fed) chose price stability over growth while addressing the world economy at the Jackson Hole Economic Symposium on Friday.

At the press time, Japan’s Nikkei225 plunged 2.66%, China A50 surrendered 1%, Hang Seng shed 0.76%, and Nifty50 tumbled 1.40%.

Considering the price pressures in the US economy, the inflation rate is 8.5% and the Fed is on a spree of hiking interest rates. No doubt, a meaningful impact of liquidity squeeze has been on the US growth rate but price stability demands huge sacrifices from growth rate and employment generation. And, its pain is visible on the Asian equities.

Meanwhile, the Chinese economy is facing the headwinds of a resurgence in Covid-19. Headlines from Reuters that China has reported 1,344 new asymptomatic coronavirus cases in the mainland on Aug 28 vs. 1,137 a day earlier has triggered lockdown fears to contain the spread. This has triggered recession fears in the Chinese economy as a restriction of the movement of men, materials, and machines will halt the production processes.

On the oil front, oil prices have rebounded firmly and have climbed to nearly $94.00. It is worth noting that investors are betting over supply issues amid the announcement of production cuts by OPEC to fix the recent carnage in the prices. Rather than focusing on a dent in global growth prospects ahead of a fresh rate hike cycle.

According to an equity strategist at Citigroup Global Markets Japan, Japanese stocks are poised to enter a bear market.

Key quotes (via Bloomberg)

“The Nikkei 225 Stock Average may eventually drop to 24,000 and the Topix may fall to 1,600 -- about 14% and 17% below current levels, respectively.”

Now that the market’s hopes for a dovish bias to Fed policy have been dashed, there may be an “intensifying adjustment for Japanese equities in the near future.”

“We think visibility on the scenario we had been outlining, namely that Japanese equities would peak moving forward, has risen.”

“We sense that a bear market for Japanese equities over the immediate future is all but unavoidable and foresee investors shifting from growth to value and from cyclicals to defensives.” 

• Markets turn risk-aversion after Fed Chair Jerome Powell appeared hawkish at Jackson Hole.
• Fears of recession add strength to sour sentiment and underpin US Treasury yields, DXY.
• Traders price in 75% chances of 0.75% Fed rate hike in September, US 2-year Treasury yields refresh 15-year high.

The post-Jackson Hole pessimism continues to propel the US Treasury yields and hawkish Fed bets during early Monday morning in Europe. The risk-aversion wave also took clues from fears of recession surrounding the UK and Eurozone.

That said, the US two-year Treasury yields rise to the highest since 2007, up 2.5% intraday near 3.487% at the latest, whereas the 10-year benchmark adds nearly 10 basis points to 3.129%. Also, market pricing now indicates a 74.5% chance the Fed will hike rates by 75 basis points at its September meeting, per BOE’s FED WATCH tool. It’s worth noting that the US Dollar Index (DXY) also cheers the hawkish Fed bets and firmer yields to rise to the fresh high since September 2002, up 0.50% near 109.45 at the latest.

Federal Reserve following Chair Jerome Powell's hawkish speech on Friday turned down the market’s hopes of witnessing cautious remarks from Powell, considering the latest challenges to the economic slowdown. Also fueling the US Treasury yields could be the comments from US Senator Elizabeth Warren said on Sunday, per Reuters, that she was very worried that the Federal Reserve was going to tip the US economy into recession.

Additionally, a study presented at the Jackson Hole Symposium stated that the central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies. "If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure," said Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed.

Elsewhere, the energy crisis in the UK and Europe join the Sino-American tussles, recently over Taiwan, to underpin the risk-off mood and fuel the US dollar. While portraying the mood, the S&P 500 Futures drop 0.80% intraday while tracing Friday’s downbeat Wall Street performance.

Moving on, market players could witness further US dollar strength amid hawkish Fed bets, which in turn could weigh on the prices of gold and currency majors. However, Friday’s US jobs report will be crucial for clear directions.

• GBP/USD holds lower ground at the recently flashed multi-month bottom.
• Fears of UK’s recession escalate as energy bill jumps, political anxiety escalates.
• Hawkish Fed, risk-aversion underpin DXY towards refreshing 19-year top.
• Holiday in the UK could restrict immediate moves, PMIs, US NFP will be crucial for near-term directions.

GBP/USD stays bearish at the lowest levels since March 2020, down 0.66% intraday to near 1.1660 during early Monday morning in Europe. That said, the Cable pair refreshed the multi-month low amid broad US dollar strength. The downside move, however, recently struggled as the UK markets are closed due to the Summer Bank Holiday.

That said, the US Dollar Index (DXY) rises to a fresh high in September 2002, up 0.50% near 109.35, while tracking the US Treasury yields to the north. The rush towards the greenback, as well as towards selling the US bonds, seemed to have taken clues from the Jackson Hole Symposium and the UK’s political drama. It should be noted that the US 10-year Treasury yields rise nine basis points (bps) to 3.123% at the latest, poking a monthly high.

The DXY rallied the previous day after Fed Chairman Jerome Powell said, “Restoring price stability will take some time, require using central bank's tools 'forcefully',” during his much-awaited Jackson Hole speech. The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for 'some time'.

Additionally, fears surrounding the UK’s economic slowdown escalate after the British energy regulator conveyed that the British energy bills will jump 80% to an average of 3,549 pounds ($4,188) a year from October.

To tackle the same, UK’s leadership frontrunner Liz Truss is considering cutting value-added tax (VAT) by 5% across the board to help tackle the cost-of-living crisis if she succeeds Boris Johnson as prime minister next month, the Sunday Telegraph reported. However, the move is considered less effective by supporters of the other candidate for leadership of the governing Conservative Party, former finance minister Rishi Sunak.

Elsewhere, economists at Goldman Sachs have sharply cut British growth forecasts and expect a recession to begin later in the year, as the impact of surging inflation on households' disposable incomes hits consumption.

Against this backdrop, the S&P 500 Futures drop 0.80% intraday while tracing Friday’s downbeat Wall Street performance.

It should be noted that the hawkish Fed and energy/political in the UK could exert downside pressure on the GBP/USD prices. However, a holiday in Britain may restrict immediate moves of the cable pair. Above all, chatters surrounding the recession and Friday’s US jobs report for August will be important for the pair traders to watch for fresh impulse.

Technical analysis

A daily closing below July’s low near 1.1760 directs GBP/USD bears towards March 2020 bottom surrounding 1.1410. It’s worth noting, however, that the oversold RSI (14) could offer intermediate halts during the pair’s south run.

• USD/INR is attempting to establish above 80.00 on soured market mood.
• The Fed is expected to announce a third consecutive 75 bps rate hike further.
• India’s GDP is expected to have grown in a range of 13-16.2% in the second quarter.

The USD/INR pair has opened above the psychological resistance of 80.00 as signals of the continuation of restrictive policy by the Federal Reserve (Fed) spiraled negative market sentiment. The asset is preparing for a fresh buying leg and is expected to recapture its all-time highs at 80.21.

An adaptation of the restrictive approach by Fed chair Jerome Powell at the Jackson Hole Economic Symposium while discussing interest rates cleared one thing that investors need to comprise with growth rates and employment generation for a period of time. Bringing price stability and achieving an optimal inflation rate near 2% will demand sacrifices in growth projections and job creation. However, the impact will be for the greater good and for a prolonged period.

Now, investors should brace for a third consecutive 75 basis points (bps) rate hike by the Fed in its September monetary policy meeting.

Meanwhile, oil prices have resumed their upside journey and have climbed to near $94.00. It seems that investors are betting over supply cuts by OPEC rather than a decline in global growth projections. It is worth noting that India is a leading importer of oil and a rebound in oil prices may impact the Indian fiscal balance sheet.

Looking at the data front, the US Nonfarm Payrolls (NFP) will remain in limelight. The economic data is expected to trim dramatically to 290k against the prior release of 528k. While in India, investors’ entire focus will be on Gross Domestic Product (GDP) data for the second quarter. The Indian economy is expected to have grown in a range of 13-16.2% in the second quarter of CY2022.

According to China’s highly influential media outlet, Global Times, “Chinese authorities have informed the US Department of Agriculture that Chinese customs will suspend meat imports transported by US firm Tyson Fresh Meat starting from Monday after its pig trotters failed to pass inspection.”

This could add to the ongoing concerns between the US and China over Taiwan, especially after “two American Navy warships have entered the Taiwan Strait in what is the first US naval transit in the waterway since US-China tensions spiked this month over a visit to the island by House Speaker Nancy Pelosi,” per CNN News.

Market reaction

At the time of writing, AUD/USD is shedding 0.52% on the day, trading at near-daily lows of 0.6849, undermined by notable US dollar demand and renewed US-Sino woes. AUD bulls fail to find any support from the upbeat Australian Retail Sales data.

Speaking at the Kansas City Fed annual Jackson Hole symposium on Saturday, Swiss National Bank (SNB) President Thomas Jordan warned of persistently higher inflationary pressure.

Key quotes

“Structural factors such as the transition to a greener economy, rising sovereign debt worldwide, the demographic transition and ultimately also the fact that globalization appears to have peaked -- at least temporarily -- could lead to persistently higher inflationary pressure in the coming years”

“There are signs that inflation is increasingly spreading to goods and services that are not directly affected by the pandemic or the war in Ukraine”

“Higher prices are being passed on more quickly.”

“Inflation expectations “have also been moving upwards slightly.”

“A decline in global economic integration could increase companies’ price-setting power, meaning that they would be able to push through price increases more easily.”

Market reaction

USD/CHF was last seen trading at 0.9695, up 0.33% on the day. The broad US dollar strength remains the main underlying driver behind the pair’s upswing to six-week highs.

• EUR/USD remains pressured towards nearly two-decade low marked the last week.
• Yields propel DXY towards refreshing close to 20-year high but ECB hawks seem to test pair bears.
• Stimulus news from Germany, light calendar adds filters to downside move.
• Light calendar, UK holiday could restrict intraday losses even as bulls are stopped.

EUR/USD takes offers to refresh intraday low around 0.9925 during early Monday morning in Europe. In doing so, the major currency pair respects the broadly firmer US Dollar Index (DXY) amid hawkish calls surrounding the US Federal Reserve (Fed) during a quiet session.

US Dollar Index (DXY) rises to the fresh high since September 2002, up 0.50% near 109.35, as the US Treasury yields rally after Fed Chairman Jerome Powell poured cold water on the market’s expectations of sounding cautious at the annual Jackson Hole Symposium.

Not only Fed Chair Powell’s ‘forceful’ defense of the aggressive monetary policy but fears of recession and the Sino-American tussles also underpinned the US dollar’s safe-haven demand. That said, Beijing and Washington recently jostled over the US vessels in Taiwan Strait.

Elsewhere, the escalating energy crisis in the Eurozone and doubts raised about the global central banks’ ability to overcome recession woes, as presented by the study at the Jackson Hole, highlight the risk-off mood.

While portraying the mood, the US 10-year Treasury yields rise nine basis points (bps) to 3.123% at the latest whereas the S&P 500 Futures drop 0.80% intraday while tracing Friday’s downbeat Wall Street performance.

Alternatively, the news that Germany’s ruling party Social Democrats (SPD) will propose further measures to help ease the impact of rising energy prices on citizens, per Reuters, seems to challenge the EUR/USD bears. On the same line were the hawkish comments from the European Central Bank (ECB) policymakers at the Jackson Hole. Among them were ECB board member Isabel Schnabel, French Central Bank chief Francois Villeroy de Galhau and Latvian central bank Governor Martins Kazaks who all argued for forceful or significant policy action, per Reuters.

Looking forward, EUR/USD traders will pay attention to the US Treasury yields and the DXY moves for fresh impulse amid a light calendar at home, as well as a holiday in the UK. However, Fedspeak and chatters surrounding recession, as well as the energy crisis could keep EUR/USD bears hopeful ahead of Friday’s US jobs report for August.

Technical analysis

Unless breaking the 10-DMA surrounding the 1.0000 threshold, EUR/USD bulls should remain away. On the contrary, the downside move needs validation from 0.9900, a break of which could direct bears towards the 61.8% Fibonacci Expansion (FE) of May-August moves, near 0.9840.

• Gold price is set for fresh selling as Fed declares no bar on interest rates.
• As per market estimates, the US economy generated 290k jobs in August.
• The gold prices have slipped below the 61.8% Fibo retracement placed at $1,729.35.

Gold price (XAU/USD) is displaying a less-confident pullback move after printing a fresh monthly low of $1,723.44 in the Tokyo session. The precious metal is expected to remain in a negative trajectory for a prolonged period as the Federal Reserve (Fed) chose price stability over growth at Jackson Hole Economic Symposium on Friday.

Inflationary pressures displayed signs of evidence that stated a limited luxury to the Fed to slow down the pace of hiking interest rates in August. While US economic activities displayed a meaningful slowdown due to lower liquidity in the economy. Considering the dual situation, market veterans were expecting that the Fed will trim the velocity of hiking interest rates to spur economic activities. However, the Fed chose to bring price stability as their foremost priority.

Going forward, the US Nonfarm Payrolls (NFP) data will be of utmost importance. The economic data is expected to land at 290k, lower than the prior release of 528k. Investors should not consider the decline in job creation as a major issue. The US economy is operating at full-employment levels for around six months, therefore, more room for job creation has been trimmed significantly.

Gold technical analysis

On an hourly scale, the gold prices have slipped below the 61.8% Fibonacci retracement (placed from July 21 low at $1,680.91 to August 10 high at $1,807.93) at $1,729.35. Declining 20-and 50-period Exponential Moving Averages (EMAs) at $1,738.08 and $1,745.84 adds to the downside filters. Also, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which signals more weakness ahead.

Gold four-hour chart

• The asset has extended losses after a downside break of the Inverted Flag.
• Broadly, the kiwi bulls will find a cushion around 0.6060.
• The RSI (14) has shifted into the bearish range of 20.00-40.00, which signals more downside ahead.

The NZD/USD pair has attempted a firmer rebound after declining to near 0.6100 in the Asian session. The pair has given an upside break of the consolidation formed in a narrow range of 0.6106-0.6120 and is expected to display a firmer pullback move ahead.

On a four-hour scale, the breakdown of the ‘Inverted Flag’ has resulted in a steep decline in the asset. Usually, the consolidation phase in the above-mentioned chart pattern indicates the initiation of significant shorts by the market participants. Going forward, the downside will remain favored, however, a pullback move towards the 10-Exponential Moving Average (EMA) cannot be ruled out. Also, the horizontal cushion for supporting the kiwi bulls is plotted from July 14 low at 0.6060.

The 20-EMA at 0.6180 is in a declining mode, which adds to the downside filters. Also, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates more downside ahead.

A pullback move to near 10-EMA at 0.6160 will trigger a bargain sell, which will drag the asset towards the round-level support at 0.6100, followed by July 14 low at 0.6060.

Alternatively, a break above Thursday’s high at 0.6252 will send the asset towards August 8 high at 0.6304. A breach of the latter will unleash the kiwi bulls for further upside towards the August 1 high at 0.6353.

NZD/USD four-hour chart

• GBP/JPY remains mildly bid inside monthly symmetrical triangle.
• Steady RSI hints at further grinding towards the north.
• 100-SMA adds strength to the upside filters, sellers should wait for sub-161.00 area for fresh entry.

GBP/JPY struggles to defend buyers inside a short-term symmetrical triangle, despite posting mild gains around 161.65 during Monday’s Asian session. In doing so, the cross-currency pair rises for the second consecutive day.

Given the steady RSI and the sluggish moves of the pair inside a pattern suggesting trend continuation, the GBP/JPY prices may remain sidelined while printing smaller gains.

However, the 100-SMA and the mentioned triangle’s resistance line highlight the 162.10-15 area as the key hurdle for the pair buyers to tackle.

Following that, a run-up towards the 200-SMA and the mid-month high, respectively near 163.00 and 163.60, can’t be ruled out.

It’s worth noting that multiple hurdles marked during late July and early August could act as the last defense of the GBP/JPY bears around 163.90-164.00.

Meanwhile, pullback moves remain elusive until staying beyond the stated triangle’s support line, at 161.20. Also acting as a downside filter is the 161.00 round figure.

In a case where GBP/JPY remains bearish past 161.00, the odds of witnessing a south-run towards the 160.00 psychological magnet and the monthly low near 159.45 could lure the bears.

GBP/JPY: Four-hour chart

Trend: Further upside expected

Japanese Chief Cabinet Secretary Hirokazu Matsuno tried to placate the yen bears on Monday morning in Asia.

The policymaker initially mentioned that the government keeps a careful eye on market movements with a sense of urgency.

It’s worth noting, however, that Japan’s Matsuno also talked down stock fluctuation as a trigger for the policy move.

That said, the USD/JPY renews monthly high as buyers approach 139.00, up 0.60% intraday near 138.60 by the press time. The yen pair’s recent upside could be linked to the firmer yields and the monetary policy divergence of the Bank of Japan (BOJ) versus the rest of the major central banks.

Also read: USD/JPY marches towards 139.00 as Fed vs. BOJ divergence propel yields, US NFP eyed

• USD/JPY refreshes five-week high as rush to risk safety propels US dollar, yields.
• Fed’s Powell appears sturdy on his way to rate hikes, BOJ’s Kuroda repeats his love for easy money policies.
• Fears of recession escalate amid doubts about central bankers’ capacity to tame inflation.
• The light calendar emphasizes risk catalysts for fresh impulse.

USD/JPY takes the bids to renew the monthly high around 138.60 during Monday’s Asian session. In doing so, the yen pair takes clues from the firmer Treasury yields, as well as the monetary policy divergence between the US Federal Reserve (Fed) and the Bank of Japan (BOJ), to keep buyers directed towards the yearly high marked in July.

That said, after Fed Chairman Jerome Powell said, “Restoring price stability will take some time, require using central bank's tools 'forcefully',” during his much-awaited Jackson Hole speech. The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for 'some time'. On the other hand, BOJ Governor Haruhiko Kuroda mentioned that the central bank will likely continue with its accommodative policy in Japan, per Reuters.

With this in mind, Reuters reported that the dollar index scaled to a fresh two-decade peak of 109.4 in early Asia trade, with greenback strength pushing other major currencies to new lows and putting pressure on its emerging markets counterparts.

It should be noted that the Bank of Japan said it offered to buy Japanese Government Bonds (JGBs) outright at fixed-rate with residual maturities of more than 5 years and up to 10 years from August 30, report Reuters.

Other than the central bankers’ moves, fears emanating from the US-China tension and chatters that the rate hikes aren’t enough to avoid recession also propel the USD/JPY prices of late.

US Senator Elizabeth Warren said on Sunday, per Reuters, that she was very worried that the Federal Reserve was going to tip the US economy into recession. On the same line was a study presented at the Jackson Hole Symposium stating that the central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies. "If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure," said Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed.

Amid these plays, stock futures drop nearly 1.0% while tracing Wall Street’s losses whereas the US 10-year Treasury yields rise seven basis points (bps) to 3.106% at the latest.

Looking forward, Fedspeak and the US PMIs may entertain USD/JPY watchers before Friday’s US jobs report for August. Should the employment numbers arrive as firmer, the greenback gauge could extend the latest run-up towards refreshing the multi-year high.

Technical analysis

A clear upside break of the three-week-old resistance line near 138.65 appears necessary for the USD/JPY bulls to approach the yearly high near 139.40. Meanwhile, the late July high near 137.45 and a 12-day-old support line, close to 136.50, restrict the short-term downside of the yen pair.

• USD/CNH has printed a fresh two-decade high at 6.9320 on the risk-off market mood.
• The odds of a higher Fed-PBOJ policy divergence will keep up the asset’s upside momentum.
• As per the consensus, the US NFP may decline to 290k. vs. 528k recorded earlier.

The USD/CNH pair is ramping up dramatically and has printed a fresh yearly high at 6.9320 in the Asian session. The asset is picking up significant bids as the hawkish tone adopted by Federal Reserve (Fed) chair Jerome Powell at Jackson Hole Economic Symposium underpinned negative market sentiment. The asset is advancing vigorously right from the first tick of the trading session.

After deciding to favor fixing inflation chaos over growth forecasts and the ongoing dent in the economic activities by Fed’s Powell, risk-perceived currencies faced the headwinds of heated market mood. As Fed will continue its path of hiking interest rates at the current pace to scale down the inflationary pressures, the slowdown fears will continue to accelerate in the US markets.

On the economic data front, investors are shifting their focus on the US Nonfarm Payroll (NFP) data, which will release later this week. As per the market consensus, the US economy generated 290k fresh jobs in August against the prior release of 528k. It is worth noting that the US employment data has not disappointed yet to Fed Policymakers, even this time, the NFP could continue its upbeat cycle.

On China’s front, investors have started worrying over a rebound in the number of Covid-19 cases. Headlines from Reuters that China has reported 1,344 new asymptomatic coronavirus cases in the mainland on Aug 28 vs. 1,137 a day earlier has triggered lockdown fears to contain the spread.

Apart from that, expectations for further divergence in Fed-People’s Bank of China (PBOC) policy will keep the asset stronger. The PBOC is bound to deploy higher liquidity into the economy to spurt the growth rates. Also, the central band trimmed its one-and five-year Prime Lending Rates (PLR) by five and 15 basis points (bps) last week.

India likely recorded strong double-digit economic growth in the last quarter but economists polled by Reuters expected the pace to more than halve this quarter and slow further toward the end of the year as interest rates rise, per the latest poll released on Monday.

Key findings

Also read: USD/INR: RBI intervene at key levels such as 80, providing opportunities to buy on dips – SocGen

“Progress toward an Iranian nuclear deal has thrown the spotlight onto a sizeable cache of crude held by Tehran that could be swiftly dispatched to buyers in the event an agreement gets hammered out,” said Bloomberg during a news published early Monday.

Key quotes

WTI remains firmer

Despite the price-negative news, WTI refreshes its intraday high near $93.85 amid concerns that the US-Iran trade deal is far and unclear.

Also read: WTI struggles around mid-$92.00s on US-Iran deal, recession concerns

• AUD/JPY pauses the pullback from intraday high but lacks upside momentum.
• Australia Retail Sales grew 1.3% MoM in July, versus 0.3% expected and 0.2% prior.
• Yields remain firmer amid hawkish central banks, recession woes.
• RBA versus BOJ divergence keeps buyers hopeful even as challenges to risk weigh on prices.

AUD/JPY keeps Friday’s pullback from a multi-day high even after Australia’s Retail Sales improved in July, per the data published during Monday’s Asian session. With this, the cross-currency pair also pauses the retreat from the daily peak while taking rounds to 95.00.

That said, Australia’s seasonally adjusted Retail Sales rose to 1.3% MoM, crossing 0.3% market forecasts and 0.2% prior during July.

It’s worth noting that the cross-currency pair, also known as the risk barometer, remains only mildly bid despite the latest uptick as the market fears economic slowdown amid the major central banks’ aggression towards the rate hikes. In doing so, the quote ignores firmer US Treasury yields, up seven basis points (bps) to 3.106% at the latest.

On the same line could be the weekend comments from the Bank of Japan (BOJ) Governor Haruhiko Kuroda. “Speaking at the Kansas City Fed’s annual conference in Jackson Hole Symposium, Wyoming over the weekend, Bank of Japan (BOJ) Governor Haruhiko Kuroda said that the central bank will likely continue with its accommodative policy in Japan,” reported Reuters.

The underlying reason could be linked to the Japanese yen’s safe-haven appearance, as well as previously dovish comments from the Reserve Bank of Australia (RBA), not to forget the latest US-China tussles. Additionally exerting downside pressure on the AUD/JPY prices could be the Japanese government’s readiness for more stimulus.

That said, AUD/JPY traders should wait for the clear signals from the monetary policy authorities of Australia and Japan, not forget tracking the recently higher recession woes amid fears of rate lifts, to determine short-term moves of the cross-currency pair.

Technical analysis

Triple tops around 95.75-80 tease AUD/JPY bears but the downside bias hinges on a clear break of a three-week-old support line, at 94.45 by the press time.

• AUD/USD will likely display a short-lived pullback on better-than-expected Aussie Retail Sales data.
• Aussie Retail Sales have landed at 1.3% vs. the consensus of 0.3%
• The DXY has refreshed its two-decade high at 109.32 on soaring risk-off.

The AUD/USD pair has sensed buying interest near 0.6850 as the Australian Bureau of Statistics has reported upbeat Retail Sales data. The economic data has landed at 1.3%, higher than the consensus and the prior release of 0.3% and 0.2% respectively.

The investing community should be aware of the fact that the Australian economy is facing the wrath of soaring inflation. Price pressures in the Australian economy have reached to 6.1%, which indicates that the households in the Aussie area are already making higher payouts for similar or with limited changes in quantity purchased. The Retail Sales data is upbeat and it could be stated that the overall demand is accelerating in the Australian economy.

On the dollar front, the US dollar index (DXY) is advancing firmly on soured market sentiment. After preferring inflation fix over lower growth forecasts by the Federal Reserve (Fed), the risk-off market mood has underpinned the DXY. The DXY is expected to recapture its two-decade high, recorded on July 14 at 109.29.

Considering the necessary fundamental concepts, the decision of fixing inflation chaos foremost rather than delighting the optimism seems mature. The US inflation rate is skyrocketing, and a one-time exhaustion signal is not enough to provide a sit-back and relaxed situation for Fed policymakers.

Australian Retail Sales surpassed expectations by a wide margin in July as consumer spending propped up on food and clothing, suggesting demand is recovering despite surging inflation and rising interest rates, the latest data published by the Australian Bureau of Statistics (ABS) showed on Monday.

Retail Sales rose 1.3% in July, the seventh straight month of growth and beat the consensus forecast of a 0.3% increment. The gauge booked a 0.2% increase in June.

Australian retail sales volumes rose 1.4% in the July quarter of 2022, hitting a new record level, for the third consecutive quarter, the ABS showed about a month ago.

Market reaction

In an initial reaction to the data, AUD/USD remained little changed above 0.6850. The pair was last seen trading at 0.6857, down 0.48% on the day.

Why do Australian Retail Sales matter to traders?

The primary gauge of Australia’s consumer spending, the Retail Sales, is released by the Australian Bureau of Statistics (ABS) about 35 days after the month ends. It accounts for approximately 80% of total retail turnover in the country and, therefore, has a significant bearing on inflation and GDP. This leading indicator has a direct correlation with inflation and growth prospects, impacting the Reserve Bank of Australia’s (RBA) interest rates decision and AUD valuation. The stats bureau uses the forward factor method, ensuring that the seasonal factors are not distorted by COVID-19 impacts.

The People’s Bank of China (PBOC) set the USD/CNY reference rate at 6.8698 on Monday when compared to the previous fix and the previous close at 6.8486 and 6.8715 respectively.

China’s central bank injected 2 billion yuan via 7-day reverse repos at 2.00% vs prior 2.00%.

• USD/CHF crosses 100-DMA, 2.5-month-old resistance line to keep buyers hopeful.
• MACD, RSI adds strength to the bullish bias targeting 50% Fibonacci retracement level.
• 50-DMA offers additional downside filter, monthly high guards immediate upside.

USD/CHF picks up bids to refresh one-week high around 0.9685, after crossing the 100-DMA and a downward sloping resistance line from mid-June, during Monday’s Asian session.

Given the firmer RSI (14), not overbought, as well as the bullish MACD signals, the USD/CHF upside is likely to set for refreshing the monthly high, currently around 0.9695.

In doing so, the Swiss currency (CHF) pair may aim for the 0.9700 threshold before challenging the 50% Fibonacci retracement of the June-August downside, near 0.9715.

Following that, the USD/CHF bulls could aim for the 61.8% Fibonacci retracement level near 0.9795, as well as the 0.9800 round figure, before challenging the previous monthly peak of 0.9885.

Meanwhile, the 100-DMA and the resistance-turned-support line from June could restrict the short-term downside of the pair to around 0.9665 and 0.9640 respectively. Also acting as the downside filter is the 50-DMA support near 0.9620.

In a case where the USD/CHF prices drop below the 50-DMA, the latest swing low of around 0.9575 could lure the bears.

Overall, USD/CHF buyers are likely to keep the reins but the upside momentum may appear slow.

USD/CHF: Daily chart

Trend: Further upside expected

Analysts at Goldman Sachs predict a recession for the UK in the fourth quarter of this year, backing the Bank of England’s (BOE) projections.

Key quotes

“Believe the UK economy will experience a recession in Q4.”

Goldman Sachs “lowers its 2022 GDP forecast from 3.7% to 3.5%.”

Goldman Sachs ‘lowers its 2023 GDP from 1.1% to 0.6%.”

“The UK recession is to be relatively mild.”

Related reads

• GBP/USD renews multi-month low under 1.1700 despite hawkish options market signals
• GBP/USD Weekly Forecast: Braces for more pain in the NFP week ahead

GBP/USD leans bearish towards 1.1680 as it drops to the fresh low since March 2020, extending Friday’s downside momentum, despite bullish options market signals.

That said, the one-month risk reversal (RR) for the GBP/USD, a difference between the call options and the put options, printed a four-day uptrend by the end of Friday, to 0.025 at the latest. In doing so, the RR figure also reverses the previous weekly print of -0.480 with the 0.295 positive numbers.

It’s worth noting that the bearish bias should have taken clues from the recently hawkish Fedspeak and economic fears surrounding the UK, especially amid political indecision.

“Restoring price stability will take some time, require using central bank's tools 'forcefully',” said Fed Chairman Jerome Powell during his much-awaited Jackson Hole speech on Friday. The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for 'some time'.

On a different page, Goldman Sachs sees the UK entering into recession in the fourth quarter (Q4) of 2022 while cutting the 2022 Gross Domestic Product (GDP) forecast to 3.5% from 3.7%. The US bank also mentions in its latest analytics that the recession is to be 'relatively mild'.

• Gold price remains pressured towards short-term key horizontal support area on breaking five-week-old support line.
• Fed policymakers’ determination for high rates join economic, geopolitical fears to also weigh on the XAU/USD prices.
• Second-tier data, Fedspeak can direct short-term moves ahead of Friday’s US NFP.
• Hawkish policymakers, challenges to risk exert downside pressure on gold price.

Gold price (XAU/USD) remains pressured at around $1,734, after breaking a short-term key support line the previous day. In doing so, the precious metal justifies the US dollar’s safe-haven demand amid mixed data, recession fears and hawkish Fedspeak during Monday’s sluggish Asian session.

Starting with the Fed policymakers’ speeches at the annual Jackson Hole Symposium, Fed Chairman Jerome Powell said, “Restoring price stability will take some time, require using central bank's tools 'forcefully'.” The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for 'some time'. Mostly on the same line was Federal Reserve Bank President Loretta Mester who stated that she would base her decision on whether to back a third straight 75-basis point interest rate hike next month on US inflation data, not the closely-watched jobs report.

It should be observed that the hawkish Fed concerns amplified recession woes. That said, US Senator Elizabeth Warren said on Sunday, per Reuters, that she was very worried that the Federal Reserve was going to tip the US economy into recession.

Furthermore, a study presented at the Jackson Hole Symposium stated that the central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies. "If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure," said Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed.

On a different page, escalating geopolitical tensions between the US and China also add strength to the DXY, which in turn weighs on the gold prices. China's military said on Sunday, per Reuters, that it was monitoring US Navy vessels sailing through the Taiwan Strait, maintaining a high alert and ready to defeat any provocations.

Amid these plays, Wall Street benchmarks dropped more than 3.0% each while the US 10-year Treasury yields printed mild gains to end the week around 3.04%. The S&P 500 Futures track Wall Street as it drops more than 1.0% by the press time.

Given the risk-off mood and firmer US dollar, the XAU/USD prices are likely to remain pressured towards the short-term key support area. However, the bears have limited downside room and there are key data ahead, including Friday’s US jobs report for August, which in turn could test the metal bears going forward.

Technical analysis

A clear downside break of the five-week-old ascending trend line directs XAU/USD bears towards the horizontal area comprising multiple levels marked since mid-July, around $1,715-12.

It’s worth noting, however, that the RSI conditions could challenge the XAU/USD pair’s further downside past $1,712, if not then the $1,700 threshold might appear as the last defense of bulls before highlighting the yearly low near $1,680.

On the flip side, the support-turned-resistance line near $1,740 precedes the 10-DMA and the 50-DMA, respectively around $1,751 and $1,763, to restrict short-term gold price upside.

Following that, a downward sloping resistance line from early June, around $1,788, appears a tough nut to crack for the XAU/USD bulls.

Gold: Daily chart

Trend: Further downside expected

• EUR/USD looks south towards 0.9900 as US dollar bulls refuse to give up.
• Rebounding yields, risk-aversion support the USD amid hawkish Powell.
• Friday’s close below 0.9965 support on the 4H chart suggests more pain for the pair.

EUR/USD is nursing losses below 0.9950 in Asia on Monday, extending the previous decline amid unrelenting US dollar demand across the board.

Hawkish Fed Chair Jerome Powell combined with rising expectations of a super-sized Fed rate hike in September have unnerved investors and triggered a wave of risk-aversion. The flight to safety has helped put a fresh bid under the greenback.

Further, the rebound in the US Treasury yields amid the revival of hopes for aggressive Fed tightening has also collaborated with the renewed buying around the dollar, as EUR/USD remains vulnerable under parity.

The shared currency fails to find any comfort in the ECB-speak even though a couple of the central bank’s policymakers favor a big rate hike next month. However, concerns over the inflationary impact of the EUR depreciation by the ECB officials keep the domestic currency undermined. The bleak euro area economic outlook amid the deepening gas crisis also continues to weigh down on the euro.

With a data-empty EU docket ahead, attention turns towards the speech from the Fed official Lael Brainard and the sentiment on global stocks for fresh trading opportunities in the pair.

Looking at EUR/USD’s four-hour chart, the latest uptick seems like a breather for sellers, which will be seen as a good selling opportunity ahead.

The bearish bias remains intact in the near term, supported by the downside break of the upward-sloping trendline support at 0.9966 late Friday.

All eyes now remain on a break of the 0.9900 level, as the 14-day Relative Strength Index (RSI) remains bearish while sitting just above the oversold territory.

EUR/USD: Four-hour chart

On the flip side, the confluence of the rising trendline resistance now support and the mildly bearish 21-Simple Moving Average (Sma) at 0.9970 will be the level to beat for bulls.

A sustained recovery above the latter will be ensured, as buyers look to recapture the downward-pointing 50 SMA at 1.0018 thereafter.

EUR/USD: Additional levels to consider

While easing challenges for US Fed Chair Jerome Powell’s hawkish bias, the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, extended pullback from a 10-week high towards 2.57% by the end of Friday’s North American trading session.

In doing so, the greenback gauge extended Thursday’s U-turn from a multi-day high after witnessing mixed US data. That said, the US Core Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s preferred inflation gauge, edged lower to 4.6% in July from 4.8% prior and 4.7% market forecasts. Further, the University of Michigan Consumers Confidence Index was revised upwards in August, with the final print arriving at 58.2, versus the preliminary reading of 55.1 and 55.2 expected.

It should be noted that Fed Chairman Jerome Powell said, “Restoring price stability will take some time, require using central bank's tools 'forcefully',” during his much-awaited Jackson Hole speech.

Given the recently easing inflation expectations, the market’s risk appetite may improve should the Fed policymakers consider the signal strong enough to step back from the rate hike trajectory. However, that road is long and bumpy, which in turn requires multiple prints of the US inflation expectations to push back the Fed hawks.

Also read: Gold Weekly Forecast: Bears look to retain control as focus shifts to US jobs report

• US Dollar Index holds onto Fed Chair Powell inspired upside momentum near one-week high.
• Fed’s Powell defends rate hikes, sounds tough on further monetary policy tightening despite recession woes.
• Doubts over central bankers ability to tame inflation and avoid recession join US-China tussles to also favor DXY bulls.
• Second-tier data, Fedspeak can entertain traders ahead of Friday’s US jobs report for August.

US Dollar Index (DXY) remains firmer around 109.20, after rallying the previous day, as traders begin the week comprising the US Nonfarm Payrolls (NFP) amid mixed signals. Even so, hawkish Fed and recession woes seem to keep the buyers hopeful amid a sluggish Asian session.

That said, the greenback gauge versus the six major currencies marked a notable run-up on Friday after Fed Chairman Jerome Powell said, “Restoring price stability will take some time, require using central bank's tools 'forcefully',” during his much-awaited Jackson Hole speech. The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for 'some time'.

Following him was Cleveland Federal Reserve Bank President Loretta Mester who stated that she would base her decision on whether to back a third straight 75-basis point interest rate hike next month on US inflation data, not the closely-watched jobs report.

It’s worth noting that not only the policymakers from the US Federal Reserve (Fed) but from the European Central Bank (ECB) were also hawkish and hence underpinned the US dollar’s safe-haven demand, especially when the markets fear a recession. In this regard, US Senator Elizabeth Warren said on Sunday, per Reuters, that she was very worried that the Federal Reserve was going to tip the US economy into recession.

On the same line was a study presented at the Jackson Hole Symposium stating that the central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies. "If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure," said Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed.

Furthermore, escalating geopolitical tensions between the US and China also add strength to the DXY. China's military said on Sunday, per Reuters, that it was monitoring US Navy vessels sailing through the Taiwan Strait, maintaining a high alert and ready to defeat any provocations.

Talking about the data, US Core Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s preferred inflation gauge, edged lower to 4.6% in July from 4.8% prior and 4.7% market forecasts. Further, the University of Michigan Consumers Confidence Index was revised upwards in August, with the final print arriving at 58.2, versus the preliminary reading of 55.1 and 55.2 expected.

Against this backdrop, Wall Street benchmarks dropped more than 3.0% each while the US 10-year Treasury yields printed mild gains to end the week around 3.04%. The S&P 500 Futures track Wall Street as it drops more than 1.0% by the press time.

Moving on, Fedspeak and the US PMIs may entertain DXY watchers before Friday’s US jobs report for August. Should the employment numbers arrive as firmer, the greenback gauge could extend the latest run-up towards refreshing the multi-year high.

Technical analysis

Friday’s clear rebound from 108.60 joins bullish MACD signals to hint at the DXY’s another attempt in breaking the 109.30 hurdle. However, overbought RSI conditions raise doubts about the greenback gauge’s further upside.

According to Bloomberg’s latest quarterly survey of economists, China’s economic growth prospects for 2022 are turning bleak amid lingering property market risks and covid flare-ups.

Key findings

• AUD/USD takes offers to extend Friday’s pullback from one-week high.
• Downbeat oscillators, U-turn from 100-DMA keep sellers hopeful.
• 78.6% Fibonacci retracement may test bears before highlighting the yearly low.

AUD/USD remains on the back foot at 0.6861, extending Friday’s south-run while attacking a 2.5-month-old horizontal support area amid Monday’s Asian session. In doing so, the Aussie pair marks another attempt to conquer the key support zone, after failing the last week.

It’s worth noting that the oscillators like RSI (14) and the MACD appear more bearish during this time and can help the quote to conquer the aforementioned key support zone around 0.6855-50.

Following that, the 78.6% Fibonacci retracement level of July-August upside, near 0.6780, may act as an intermediate halt during the expected south-run targeting the yearly low surrounding 0.6680 marked in July.

On the contrary, the 50% Fibonacci retracement level near 0.6910 guards the quote’s immediate recovery ahead of the 100-DMA resistance close to 0.7020.

Should the quote crosses the 0.7020 hurdle, the early August high near 0.7050 may test the AUD/USD bulls before highlighting the monthly peak of 0.7136.

Overall, AUD/USD bears keep the reins but the quote’s further downside hinges on its ability to conquer the 0.6850 support.

AUD/USD: Daily chart

Trend: Further weakness expected

South Korea's Vice Finance Minister Yong-beom Kim said on Monday that they “will respond to herd-like behaviors in financial markets.”

He added that they “need to monitor the financial market.”

Yong-beom Kim said on Friday that “we are monitoring the fx market.”

His comments come as Yonhap news agency reports that the government may increase city gas rates due to rising costs and a weaker won.

Earlier on, South Korea's new central bank Governor Rhee Chang-yong said that “rising US interest rates will lead to higher inflation in Korea via won.”

Market reaction

USD/KRW was last seen trading at 1,342, flat on the day. The South Korean won (KRW) licks its wounds after falling sharply against the US dollar on Friday after Fed Chair Jerome Powell’s hawkish stance.

Liz Truss, the UK Foreign Minister and the leading contender in the Conservative Party’s leadership race, is likely to officially declare China as an ‘acute threat’, The Times reports, citing allies of Truss.

Key takeaways

Market reaction

Amidst risk-aversion, GBP/USD is extending losses below 1.1700, the lowest level since March 2020. The pound could be hurt further by the above comments.

The spot is losing 0.48% on the day to trade at 1.1688, as of writing.

• USD/JPY catches a fresh bid in Asia on renewed USD buying.
• Powell, Kuroda underscore Fed-BOJ monetary policy divergence.  
• The triangle breakout on the 1D chart puts focus back on 139.39.

USD/JPY is rising for the second straight day on Monday, storming through the 138.00 hurdle for the first time in a week. The extension of the US dollar recovery amid broad risk-aversion and hawkish rhetoric from Fed Chair Jerome Powell is boding well for the currency pair.

However, the main catalyst behind the latest leg higher in the spot could be linked to the widening Fed-BOJ monetary policy divergence after Powell signaled a continuation of the Fed tightening cycle in coming months to tame inflation while BOJ Governor Haruhiko Kuroda said that the central bank will stick to its easing policy stance “until wages and prices rise in a stable and sustainable manner.”

Both central banks’ leaders delivered remarks on the economic and policy outlooks at the Kansas City Fed’s Jackson Hole Symposium held on August 25-27. Next of relevance for the major remains the US ISM business surveys and Nonfarm Payrolls due later this week, as Monday lacks top-tier economic events.

Meanwhile, markets will also pay close attention to the repricing of the Fed rate hike bets for September, in light of the incoming data. At the start of the week, markets are wagering a 64% probability of a 75 bps Fed rate hike next month, up from 61% seen on Friday.

From a short-term technical perspective, bulls are likely to flex their muscles going forward, especially after the pair validated an upside breakout from a triangle on the daily chart on Friday.

The bullish formation points to more upside in the near term, with buyers eyeing a test of the two-decade highs of 139.39.

Ahead of that, the 138.50 psychological level and the July 21 high of 138.87 will challenge the bearish commitments.

The 14-day Relative Strength Index (RSI) is trading listlessly above the midline, keeping bulls hopeful.

On the downside, the immediate cushion is seen at the triangle resistance now support at 137.43. Sellers will then seek a test of the mildly bullish 50-Daily Moving Average (DMA) support at 136.85.

USD/JPY: Daily chart

USD/JPY: Additional levels to consider

• WTI remains pressured amid mixed clues as the NFP week begins.
• Doubts about the US-Iran oil deal join recession woes to trouble traders.
• US jobs report, OPEC+ verdict will be crucial for near-term directions.

WTI crude oil struggles to extend the previous weekly gains, taking rounds to $92.50 during Monday’s Asian session, as traders witness mixed catalysts. Among them, concerns surrounding the US-Iran oil deal and recession gained major attention.

“The US and Iran remain at loggerheads over key details of an emerging deal to revive a landmark nuclear agreement and may need several weeks to resolve their differences, according to officials familiar with the talks,” reported Bloomberg on Saturday. The news also mentioned that even if Washington and Tehran agree to revive the accord, implementing it will be a challenge, according to the European official, implying that a full Iranian return to oil markets would take months. 

Alternatively, multiple central bankers sounded hawkish, led by Fed Chair Jerome Powell, during the latest annual Jackson Hole Symposium event, paying little heed to the impending recession woes. With this, the economic slowdown fears join rate hikes and can underpin the US dollar, which in turn could exert downside pressure on the black gold.

On the same line could be the recent increase in the US-China tension, which in turn could raise worries over the oil demand. China's military said on Sunday, per Reuters, that it was monitoring US Navy vessels sailing through the Taiwan Strait, maintaining a high alert and ready to defeat any provocations.

Elsewhere, Reuters cites multiple sources to mention the likelihood of the output cut by OPEC and its allies when and if Iranian production returns depending on the revival of the nuclear deal. During the last week, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said that OPEC and its allies (OPEC+) may be compelled to reduce oil production.

To sum up, the likely delay in the US-Iran oil deal and OPEC+ output cut could join the looming economic fears to entertain WTI traders. However, the US dollar strength appears the key catalyst to watch, which in turn highlights Friday’s US jobs report for August as an important factor for near-term directions.

Technical analysis

Contrary to the fundamentals, Friday’s Doji candlestick above the 21-DMA, at $90.78 by the press time, could help WTI crude oil buyers again poke the 50-DMA hurdle surrounding $96.10.

Citing a story carried by Sueddeutsche Zeitung newspaper over the weekend, Reuters reports that Germany's ruling party Social Democrats (SPD) will propose further measures to help ease the impact of rising energy prices on citizens.

Key takeaways

“A third relief package would include a similar ticket but with a less heavily discounted price tag of 49 euros per month,” according to a party resolution paper.

“The paper also envisages direct payments for middle and low-income households, measures to protect tenants from evictions if they cannot pay their ancillary bills, and reforms to housing allowance to include heating costs.”

“The party will also propose a readjustment of the gas levy that will come into force in October so that energy companies making profits do not also benefit from it.”

Market reaction

The shared currency fails to find any comfort from the above headlines, as EUR/USD is challenging daily lows near 0.9950, down 0.13% so far.