• USD/CAD retreats from a multi-day high, sidelined of late.
• Oil prices struggle to justify talks of the US-Iran deal on OPEC+ hints from Russia.
• Risk-off mood, hawkish Fedspeak underpin bullish bias ahead of the key US/Canada data.

USD/CAD grinds higher around 1.3090 during Wednesday’s Asian session as traders jostle with the US dollar’s strength amid sour sentiment and hawkish Fed bets, as well as mixed moves in oil prices, Canada’s main export item.

That said, WTI crude oil prices remain pressured around $92.00, after declining the most in seven weeks the previous day. The black gold’s downside could be linked to the statements from Iraq's State Organization for Marketing of Oil (SOMO) said on Tuesday that their delegation plans to travel to Germany for oil export talks. “Iraq ready to boost oil exports to Europe, if asked,” adds Iraq’s SOMO.

On the same line could be the headlines from OPEC and its allies, the group known as OPEC+, which stated, per the Russian news TASS, “Potential OPEC+ output cuts not under discussion now.” Also weighing on the black gold prices were expectations that Iran may release more oil.

Elsewhere, chatters surrounding the US-Iran oil deal appeared to have battled the oil bears.

It should be noted that the firmer US data and hawkish Fedspeak should have ideally fuelled the USD/CAD prices. That said, the US Consumer Confidence for August improved to 103.2 versus 95.3 in July, per the Conference Board’s (CB) latest survey details. Also, US Housing Price Index (HPI) rose by 0.1% MoM in June compared to May's increase of 1.3% and market expectation of 1.1%. Further, the S&P/Case-Shiller Home Price Indices eased to 18.6% YoY during the stated month versus 19.5% forecast and 20.5% previous readings. It should be noted that the US JOLTS Job Openings grew to 11.239M in July versus 10.475M expected and 11.04M prior (revised from 10.698M).

Following the data, Richmond Federal Reserve Bank President Thomas Barkin said, "I don't expect inflation to come down predictably." On the same line was Atlanta Fed President Raphael Bostic who said, “Slowing inflation data 'may give us reason' to slow interest rate hikes.” Recently, New York Fed President John Williams said, per the WSJ, “We are not at restrictive policy yet.” The policymaker also added, “We need to get interest rates higher than longer run a neutral level.”

Also, fears of the Sino-American war escalated as Taiwan fired the first warning shots at Chinese drones, which in turn favored the USD/CAD buyers. On the same line was the Wall Street Journal’s news stating that the US Army grounds entire fleet of Boeing-made Chinook helicopters.

While portraying the mood, the US 10-year Treasury yields rose to the highest levels in two months and Wall Street closed in the red while the US dollar regained upside momentum.

Moving on, the US ADP Employment Change for August, the early signal for Friday’s US Nonfarm Payrolls (NFP), expected 200K versus 128K prior, will be important to watch for fresh impulse. Also crucial will be Canada’s Gross Domestic Product (GDP) for the second quarter (Q2), expected 4.5% annualized versus 3.1% prior. Additionally, the monthly Canadian GDP is expected to grow 0.1% versus 0.0% previous readouts. Furthermore, China’s NBS Manufacturing PMI for August, expected 49.2 versus 49.0 prior, might offer immediate directions to the pair.

Also read: ADP Jobs Preview: Three reasons to expect the data to drive the dollar higher

Technical analysis

USD/CAD remains vulnerable to declining towards the 1.3000 psychological magnet unless providing a daily closing beyond the 13-day-old ascending resistance line, near 1.3110 by the press time.

• Drops below the 20-day EMA at 162.01 after hitting a daily high at 162.59.
• GBP/JPY’s failure to break below 161.23, opened the door for further buying pressure.

The GBP/JPY is subdued as Wednesday’s Asian Pacific session begins, trading within familiar levels, unable to break above/below the 160.80-162.83 region for nine consecutive days. At the time of writing, the GBP/JPY is trading at 161.76, below the 20-day EMA.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY daily chart illustrates the 162.80 resistance as a solid supply zone, ahead of the 100 and the 50-day EMAs, each at 162.98 and 163.23, respectively. Also, the Relative Strength Index (RSI) slope is horizontal, further cementing the pair’s consolidation for the last 14 days.

If the GBP/JPY breaks above 162.80, it will expose the 100 and 50-day EMAs on the upper side. Once cleared, the next stop will be a three-month-old downslope trendline, drawn from the YTD highs around 168.00, which passes around the 163.70 area, ahead of the 164.00 mark.

On the other hand, the GBP/JPY’s first support would be the August 23 daily low at 161.82, followed by the 161.00 mark, followed by the August 16 low at 160.08.

GBP/JPY Key Technical Level

• USD/CHF is marching towards the immediate hurdle of 0.9750 on hawkish Fed commentary.
• An improvement in the US JOLTS Job Openings data and Consumer Confidence has supported the DXY.
• Swiss’s Real Retail Sales data is expected to land at 3.3% vs. 1.2% recorded earlier.

The USD/CHF pair is marching towards the immediate hurdle of 0.9750 after a time-based correction to near 0.9726 on Tuesday. The asset has remained in the grip of bulls after a firmer rebound from Friday’s low at 0.9577. In the early Tokyo session, the major is displaying signs of volatility contraction, which is expected to turn into volumes and wider ticks.

The US dollar index (DXY) has turned sideways after a minor correction from Tuesday’s high of 109.11. Broadly, the asset is extremely bullish led by a solid improvement in the US JOLTS Job Openings data, upbeat Consumer Confidence, and hawkish commentary from Federal Reserve (Fed) policymakers.

The JOLTS Job Openings data landed at 11.239M, higher than the expectations of 10.475M and the prior release of 11.04M. This indicates that the labor market is rock solid, which will boost the confidence of the Fed in announcing more rate hikes. Also, the US CB Consumer Confidence improved dramatically to 103.2 vs. 95.3 reported in July.

The commentary from New York Fed Bank President John Williams that interest rates are needed to elevate further above 3.5% to tame the soaring price pressures. This has strengthened the odds of a third consecutive 75 basis points (bps) rate hike by the Fed in its September monetary policy meeting.

Going forward, the release of the US Nonfarm Payrolls (NFP) data will be of significant importance. As per the market expectations, the US economy has added 300k in August vs. 528k reported in July. While, the Real Retail Sales data from the Swiss zone will be keenly watched, which is expected to improve dramatically to 3.3% from the prior release of 1.2%. A decent improvement in the economic data indicates an acceleration in the overall demand.

• AUD/USD holds lower grounds near six-week low after recalling the bears the previous day.
• Headlines surrounding China, Taiwan join hawkish Fedspeak, strong US data to challenge early-week optimism.
• Downbeat Aussie Building Permits for July also facilitated seller’s return.
• China’s official PMIs for August will be crucial ahead of US ADP, NFP statistics.

AUD/USD remains pressured around 0.6860, after calling in bears the previous day, as traders await activity data from the key customer China during Wednesday’s Asian session. In doing so, the Aussie pair also takes clues from the risk-off mood, as well as justifies the cautious sentiment before important US employment data is released.

Having witnessed a mildly positive start to the day, AUD/USD returned to the seller’s radar as fears of the Sino-American war escalated as Taiwan fired the first warning shots at Chinese drones. On the same line was the Wall Street Journal’s news stating that the US Army grounds entire fleet of Boeing-made Chinook helicopters.

Also weighing on the quote were the strong US data releases and hawkish Fedspeak that propelled the bets on the Federal Reserve’s (Fed) 75 basis points of a rate hike in September.

US Consumer Confidence for August improved to 103.2 versus 95.3 in July, per the Conference Board’s (CB) latest survey details. Also, US Housing Price Index (HPI) rose by 0.1% MoM in June compared to May's increase of 1.3% and market expectation of 1.1%. Further, the S&P/Case-Shiller Home Price Indices eased to 18.6% YoY during the stated month versus 19.5% forecast and 20.5% previous readings. It should be noted that the US JOLTS Job Openings grew to 11.239M in July versus 10.475M expected and 11.04M prior (revised from 10.698M).

Following the data, Richmond Federal Reserve Bank President Thomas Barkin said, "I don't expect inflation to come down predictably." On the same line was Atlanta Fed President Raphael Bostic who said, “Slowing inflation data 'may give us reason' to slow interest rate hikes.” Recently, New York Fed President John Williams said, per the WSJ, “We are not at restrictive policy yet.” The policymaker also added, “We need to get interest rates higher than longer run a neutral level.”

At home, Australia’s Building Permits for July declined to -17.2% versus -2.0% market forecasts and -0.6% revised prior.

Against this backdrop, the US 10-year Treasury yields rose to the highest levels in two months and Wall Street closed in the red while the US dollar regained upside momentum.

Looking forward, AUD/USD traders may bear the burden of the sour sentiment to stay depressed. However, any surprise positives from China’s NBS Manufacturing PMI for August, expected 49.2 versus 49.0 prior, might offer an intermediate rebound to the pair. After that, the US ADP Employment Change for August, the early signal for Friday’s US Nonfarm Payrolls (NFP), expected 200K versus 128K prior, will also be important to watch for fresh impulse.

Also read: ADP Jobs Preview: Three reasons to expect the data to drive the dollar higher

Technical analysis

A clear downside break of the upward sloping support line from the mid-June, now resistance around 0.6870, directs AUD/USD bears towards the early July’s bottom surrounding 0.6760.

• A Falling Channel formation indicates that the broader context of cable is weak.
• Declining 20-and 50-EMAs signal more weakness ahead.
• A bearish range shift by the RSI (14) adds to the downside filters.

The GBP/USD pair has turned sideways after witnessing a steep fall below the crucial support of 1.1700 on Tuesday. The cable is auctioning in a narrow range of 1.1646-1.1670 after a short-lived pullback from Tuesday’s low at 1.1626. The pullback move looks less confident and is likely to turn into a fresh fall after the momentum oscillators will turn overbought.

The formation of a Falling Channel chart pattern on an hourly scale is indicating more downside ahead. The upper portion of the above-mentioned chart pattern is placed from August 11 high at 1.2249 while the lower portion is plotted from August 5 low at 1.2003.

A decent deviation in declining 20-and 50-period Exponential Moving Averages (EMAs) at 1.1677 and 1.1702 respectively is indicating more weakness ahead.

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 towards the 20-EMA at 1.1677 will trigger a bargain sell and will drag the asset towards Tuesday’s low at 1.1626, followed by 19 March 2020 low at 1.1472.

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

GBP/USD hourly chart

• EUR/USD struggles to extend two-day rebound ahead of the key data/events.
• Strong German inflation allowed ECB policymakers to back higher rates.
• Hawkish Fedspeak, risk-aversion challenges the upside momentum.
• China data/news may entertain traders ahead of EU inflation numbers.

EUR/USD fades upside momentum, after printing mild gains in the last two days, as the pair traders await Eurozone inflation data on Wednesday. That said, the major currency pair edged higher on Tuesday after upbeat statistics from Germany, as well as hawkish comments from the European Central Bank (ECB) policymakers. That said, the quote seesaws around to 1.0015 by the press time.

Germany’s Consumer Price Index (CPI) rose to 7.9% YoY in August from 7.5% in July, compared to the market expectation of 7.8%. Further, the Harmonised Index of Consumer Prices (HICP) for the nation, the ECB’s preferred gauge of inflation, rose to 8.8% from 8.5% as expected. Following the data, Reuters mentioned that near 50-Year high German inflation strengthens case for a larger ECB rate rise.

That said, policymaker Klaas Knot said on Tuesday that he was leaning toward a 75 basis points rate hike in September and also added that he was open to discussion. On the same line, ECB Chief Economist Philip Lane said on Tuesday, “We need to keep raising interest rates.” Further, ECB Governing Council member Madis Muller told Reuters on Tuesday that he thinks 75 basis points should be among the options for September given that the inflation outlook has not improved. Additionally, ECB member Joachim Nagel also said, “We shouldn’t delay the next interest-rate steps for fear of a potential recession”.

On the other hand, US Consumer Confidence for August improved to 103.2 versus 95.3 in July, per the Conference Board’s (CB) latest survey details. Also, US Housing Price Index (HPI) rose by 0.1% MoM in June compared to May's increase of 1.3% and market expectation of 1.1%. Further, the S&P/Case-Shiller Home Price Indices eased to 18.6% YoY during the stated month versus 19.5% forecast and 20.5% previous readings. It should be noted that the US JOLTS Job Openings grew to 11.239M in July versus 10.475M expected and 11.04M prior (revised from 10.698M).

Talking about the Fedspeak, "I don't expect inflation to come down predictably," said Richmond Federal Reserve Bank President Thomas Barkin. Following him was Atlanta Fed President Raphael Bostic who said, “Slowing inflation data 'may give us reason' to slow interest rate hikes.” Moving on, NY Fed President John Williams spoke to the Wall Street Journal (WSJ) while saying, “We are not at restrictive policy yet.” The policymaker added, “We need to get interest rates higher than longer run a neutral level.”

Elsewhere, Taiwan’s firing of the warning shots for 1st time at a Chinese drone, per Reuters, joined the Wall Street Journal’s news stating that the US Army grounds entire fleet of Boeing-made Chinook helicopters to also weigh on the market sentiment and the EUR/USD prices.

Amid these plays, yields renewed cycle high and Wall Street closed in the red while the US dollar regained upside momentum.

Moving on, the flash/preliminary readings of the Eurozone HICP for August, expected at 9.0% versus 8.9% prior, will be crucial for the EUR/USD pair buyers amid talks of higher rates and recession. Also important to watch will be the headlines surrounding China due to the latest geopolitical fear surrounding the dragon nation, as well as energy concerns relating to the old continent.

Also read: Eurozone Inflation Preview: Hotter HICP to cement a 75 bps ECB hike next week

Additionally, the US ADP Employment Change for August, the early signal for Friday’s US Nonfarm Payrolls (NFP), expected 200K versus 128K prior, will also be important to watch for fresh impulse.

Also read: ADP Jobs Preview: Three reasons to expect the data to drive the dollar higher

Technical analysis

A two-week-old descending resistance line restricts immediate EUR/USD upside ahead of late July’s bottom around 1.0100. On the contrary, pullback remains elusive beyond the recently flashed multi-year low near 0.9900.

• EUR/JPY is recording gains of almost 1.50% during the week.
• Buyers reclaiming the 100 and the 50-DMA is exacerbating a move towards 140.00.

The EUR/JPY slightly rises as the Asian Pacific session began, following Tuesday’s positive trading session, which witnessed the cross reclaiming the 100-day EMA at 138.31. Nevertheless, the cross-currency faced solid resistance around the 50-day EMA at 138.85, achieving a close above the former. At the time of writing, the EUR/JPY is trading at 139.00.

EUR/JPY Price Analysis: Technical outlook

The EUR/JPY daily chart illustrates the pair breaking a market structure to the upside when the pair cleared the 138.39 mark. That opened the door for further gains, once longs stepped in, as the EUR/JPY gets ready to test the 140.00 mark ahead of the ECB’s next week’s monetary policy meeting.

Worth noting that the Relative Strength Index (RSI) lies at 57.77, with enough room to spare, before reaching overbought territory; hence,  the EUR/JPY bias is upwards.

The EUR/JPY’s first resistance would be the 140.00 mark. Once cleared, the next resistance would be the July 21 daily high at 142, 32, followed by the YTD high at 144.27

EUR/JPY Key Technical Levels

• Gold price is oscillating in a $1,723.03-1,727.20 range as investors await US Employment Change data.
• An upbeat US JOLTS Job Openings data strengthened the DXY.
• Fed Williams sees interest rates above 3.5% to cool down price pressures.

Gold price (XAU/USD) is displaying lackluster performance after a bearish perpendicular move on Tuesday. The precious metal is oscillating in a narrow range of $1,723.03-1,727.20 in the Asian session. The yellow metal is auctioning around Monday’s low and is likely to witness a steep fall after violating the critical support of $1,720.00.

The precious metal went through some severe pain after the US dollar index (DXY) picked bids on better-than-expected US job openings data and hawkish commentary from New York Federal Reserve (Fed) Bank President John Williams. The JOLTS Job Openings data landed at 11.239M, higher than the expectations of 10.475M and the prior release of 11.04M. While Fed’s Williams sees the inflation rate scaling lower to 2.5-3% next year and has raised targets for interest rates above 3.5%.

Going forward, investors’ entire focus will remain on US Automatic Data Processing (ADP) Employment data, which is expected to improve to 200k, against the prior release of 128k. The US labor market is extremely tight, which is delighting Fed policymakers in raising interest rates unhesitatingly.

Gold technical analysis

On an hourly scale, 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 $1,729.72. The 20-and 50period Exponential Moving Averages (EMAs) at $1,728.89 and $1,733.33 are declining, 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.

Gold hourly chart

• Silver price slid almost 2% on Tuesday due to risk aversion.
• An improvement in consumer confidence, amongst an increase in job openings, would not deter the Fed from hiking rates.
• Most Fed officials estimate a 50 or 75 bps rate hike in the September meeting.

Silver price edges lower, hitting six-week lows below the $18.50 mark, extending its losses for three consecutive days, amidst a sour market sentiment spurred by expectations of a hawkish Fed, according to Powell’s speech at Jackson Hole. Echoing the same remarks are ECB’s Governing Council members, adding to a worldwide hawkish choir where higher rates, and high inflation, could trigger a recession.

XAG/USD git a daily high, near $18.84, but broad US dollar strength, spurred by three Fed regional bank presidents, alongside renewed China’s Covid-19 lockdowns, weighed on the white metal. Therefore, tXAG/USD tumbled towards the day’s lows at $18.32 before settling around current prices. At the time of writing, XAG/USD is trading at $18.40, down almost 1.70%.

XAG/USD stumbles on positive US consumer confidence, sour sentiment

During the New York session, the US Conference Board revealed that consumer confidence in the US was better than estimated. August’s figures came at 103.2, topping expectations of 98. At the same time, the US Department of Labor reported that job openings on the JOLTs Openings report rose by 11.2 million, exceeding all the forecasts, while quits diminished.

Aside from this, three Fed officials stressed the need for the US central bank to hike rates into restrictive territory. The New York Fed Williams expressed the need to increase rates beyond the 3.5% threshold, adding that once rates peak, they will need to stay higher for longer. Later, Richmond’s Fed Barkin expressed that the Fed’s goal is 2% and reiterated the Fed will “do what it takes to get there.”

Earlier, Atlanta’s Fed Bostic wrote that the Fed’s duty to curb inflation is “unshakable” while adding that he would be open to lower rate hikes.

On the ECB’s side, most Governing Council members, seven crossing newswires, expressed the need to front-load rates, some expecting a 75 bps rate hike, while others a 50. Some of the speakers said that the Euro area would enter a recession.

Aside from this, market participants’ focus turns to the US economic calendar. The docket will feature the US ISM Manufacturing PMI for September, alongside the US Nonfarm Payrolls report, which would shed some light on the employment situation.

XAG/USD Key Technical Levels

• NZD/USD is beaten down but bullish prospects are above the 0.6120s.
• A move beyond 0.6150 would be expected to see the 0.6180s.

NZD/USD is ending the North American day down by some 0.35%, sliding from a high of 0.6194 to a low of 0.6123 on the day. The day has been dominated by global recession fears and movement in the US dollar and yields. 

''This intraday volatility broadly reflects moves in US bond yields and equity index futures; the former had drifted off yesterday, but are back up again as markets weigh the prospects of stickier inflation, and that’s weighing on the NZD,'' analysts at ANZ Bank said.

''Markets remain attuned to the first in, first out thematic in relation to the policy cycle, and NZ has become the unwitting poster child of that concept, and it’s natural that markets have become cautious about the NZD with the Reserve Bank of New Zealand also hinting that they may pause after the next couple of hikes (while the Fed keeps hiking).''

NZD/USD technical analysis

Meanwhile, from an hourly perspective, the price is finding support in what could turn out to be the base of the last leg of a potential Gartley pattern. If the bulls commit above the 0.6120s, a move beyond 0.6150 would be expected to see the 0.6180s as price mitigates a price imbalance and heads towards the 0.6190s as the last defence for a move into the 0.6220s. 

reuters reports that Russia's gas giant Gazprom will fully suspend natural gas supplies to Engie, one its main European utilities, from Sept. 1 until it receives all payments for gas in full, the company said on Tuesday.

''Gazprom is further squeezing gas deliveries to Europe in a dispute over contracts, deepening concerns about Europe's winter energy supply.''

This is troublesome for the euro given that, Germany, the region’s largest economy and traditional growth driver, has a particular reason to worry as it’s largely reliant on Russian gas and is sliding toward a recession. Technically, however, the euro is holding in a bullish corrective formation on the daily chart, although while below 1.0120, the focus is on a bearish continuation:

The Gartley is a reversion pattern but the price could find pressures again in due course while below the neckline of the formation. 

What you need to take care of on Wednesday, August 31:

The dismal market mood eased early on Tuesday, although investors are far from optimistic. The greenback shed some ground throughout the first half of the day, particularly against high-yielding rivals, but posted a comeback during US trading hours, edging higher against most major rivals but the EUR.

The EUR/USD pair settled at around 1.0010, marginally higher for a second consecutive day, as odds for a 75 bps rate hike in September continued to increase. Several European Central Bank officers are jawboning on moving faster with quantitative easing to tame inflation. German CPI jumped by 7.9% YoY in August, according to preliminary estimates, while the EU will release inflation figures on Wednesday.

The GBP/USD pair, on the other hand, fell to a fresh two-year low of 1.1620, ending the day a handful of pips above the level.

Commodity-linked currencies suffered the most amid weaker oil and gold prices.  The AUD/USD pair struggles around 0.6860, while USD/CAD topped at 1.3107, now trading a handful of pips below such a high.

The bright metal trades near its August low at $1,720.28 and is technically poised to extend its slump. Crude oil prices fell on news that Iran and the US have reached an agreement on the Iranian nuclear deal that would be announced in two or three weeks. Furthermore, Tehran reported exports had not been affected by political clashes in Baghdad. The barrel of WTI currently trades at $91.70.

USD/CHF is marginally higher and trades around 0.9730, while USD/JPY is little changed on a daily basis hovering around 138.60.

Asian and European indexes posted modest intraday gains, but Wall Street turned south and closed in the red, with major indexes shedding roughly 1% each.

Shiba Inu new release: Shytoshi Kusama teases the launch of Shibarium

• Oil attempts to correct a strong sell-off on Tuesday.
• WTI is weighed by prospects of an economic slowdown that will likely that could slow demand.

The price of oil was sold off heavily on Tuesday, losing over 5% after falling from a high of $97.65 to a low of $90.55 on the day so far. Recession concerns have moved back to the fore at the same time that we have oversupply and while the potential for OPEC+ production cuts ease.

Friday's hawkish speech from Federal Reserve chair Jerome Powell and weekend comments from European officials saying an economic slowdown is likely that could slow demand. As a consequence, West Texas Intermediate crude for October delivery was last seen down US$2.31 to US$94.70 per barrel, while October Brent crude, the global benchmark, was down US$3.11 to US$101.98.

Meanwhile, the weekend reports of militia fighting in Libya raised concerns that the country's 1.2-million barrels per day of oil exports would again be at threat should oilfields and ports again be at threat, though shipments have not yet been impeded. "Following months of blockades of oilfields and oil terminals, production had only just normalised again at a level of 1.2 million barrels per day," Commerzbank said in a note.

Nevertheless, analysts at TD Securities argued, ''energy supply risk is soaring once again. Energy market participants are increasingly sceptical that a potential Iran deal is imminent, with final-hour negotiations showing signs of a potential impasse. President Raisi's recent comments suggest that the safeguards issue remains a point of contention that could derail a potential agreement if Iran does not concede.''

''We reiterate that failure to reach a deal with Iran would suggest that oil is still on a runaway train, as even slowing demand growth would still continue to sap the world's spare capacity. Further, signs that Saudi Arabia and Gulf nations are reviving the OPEC+ put reinforce the likelihood that energy supply risks will continue to insulate prices from demand-side headwinds as oil markets stare down the barrel of a recession.''

• USD/CAD is climbing sharply, above 1.3100, as a rising wedge threatens to drag the spot price below 1.3100.
• Solid resistance around 1.3110 could pave the way for a USD/CAD fall below the 1.3100 figure.

The USD/CAD rallied to seven-week highs, above the 1.3100 figure, but retreated as buyers lacked the strength to hold the fort above the latter during the North American session. At the time of writing, the USD/CAD is trading at 1.3103, up 0.71%.

USD/CAD Price Analysis: Technical outlook

The USD/CAD daily chart depicts the pair in a solid uptrend as buyers decisively conquered the 1.3000 mark when the major hit a daily high at 1.3108, but a pullback keeps the major around the 1.3090s area. If the USD/CAD achieves a daily close above 1.3100, that will pave the way for a re-test of the YTD highs at 1.3223. Otherwise, the major could consolidate in the 1.3000-1.3100 area ahead of the Bank of Canada’s (BoC) monetary policy meeting on September 7.

It is worth noting that a rising wedge in the daily chart formed, meaning that short-sellers could be adding to their positions, as the “wedge” targets a fall towards 1.2770.

Short term, the USD/CAD 4-hour chart portrays a negative divergence between price action and the Relative Strength Index (RSI(. While the USD/CAD is trending up, with successive series of higher highs/lows, the RSI’s last peak is lower than the previous, meaning buyers are losing steam. Aldo, the weekly high facing the R2 daily pivot at 1.3110, opened the door for a pullback.

Therefore, the USD/CAD first support would be the 1.3100 figure. Once cleared, the next demand zone would be the R1 daily pivot at 1.3060, followed by the daily pivot point at 1.3020.

USD/CAD Key Technical Levels

• GBP/USD is in the hands of the bears testing the 1.1650s. 
• From an hourly perspective, GBP/USD is decelerating into a 38.2% Fibonacci retracement level.

GBP/USD is down some 0.45% on the day so far while risk assets see some recovery following the bumpy ride into Jackson Hole Meeting. The pound climbed to 1.1760 from 1.1621 on Tuesday in what was a US dollar move across the board. The greenback has sunk as per DXY from the session highs of 109.111 and now idles at 108.80, up slightly on the day after rising from a low of 108.286.

The US dollar is softer despite world stocks retreating again on Tuesday amid concerns about the chance of more interest rate hikes in Europe and the United States. Data this week so far has kept the hawkish sentiment going while economic growth and inflation readings have remained firm on either side of the pond despite the policy tightening so far. US data showed on Tuesday that job openings increased in July, underpinning the case for the Federal Reserve to stick to its aggressive monetary policy tightening path. In other data, August’s US CB Consumer Confidence rose to 103.2, topping expectations of 98. At the same time, the US Department of Labor reported that job openings on the JOLTs Openings report rose by 11.2 million, exceeding all the forecasts, while quits diminished.

We have also heard from Fed speakers on Tuesday. New York Fed President John Williams told Wall the Wall Street Journal that inflation expectations in the US were well anchored but added that it would take a few years to bring inflation back to 2%. Richmond Federal Reserve Bank President Thomas Barkin said on Tuesday that the United States is facing "post-war-like" inflation.

There were no UK data scheduled for release on Tuesday, but the focus is on the Bank of England which is expected to raise interest rates by another 50 basis points at its Sept. 15 meeting.

GBP/USD technical analysis

GBP/USD has continued to bleed out but the M-formation being left behind on the daily chart is a reversion pattern that would be expected to see the price retrace at least to a 38.2% Fibonacci retracement in due course. 

GBP/USD H1 chart

From an hourly perspective, the price has extended in a bearish impulse and the correction is decelerating into a 38.2% Fibonacci retracement level that could see the price revert to the downside again. 

• EUR/USD advances underpinned by ECB’s Governing Council members expressing the need for a 75 bps rate hike in September.
• US Consumer Confidence surprisingly rose, while job vacancies topped estimations.
• August’s German inflation figures were aligned with estimations, except for headline inflation, closing to the 8% threshold.

The EUR/USD regains parity for the second time in the week, up 0.33%, despite a downbeat market mood, though a softer US dollar and ECB’s hawkish rhetoric bolstered the EUR/USD. At the time of writing, the EUR/USD is trading at 1.0021 above its opening price after hitting a daily high at 1.0054.

EUR/USD is firm amid ECB hawkish comments, despite mixed US data

EUR/USD is underpinned by ECB hawkish commentary of seven ECB speakers during the day. Meanwhile, August’s US CB Consumer Confidence rose to 103.2, topping expectations of 98. At the same time, the US Department of Labor reported that job openings on the JOLTs Openings report rose by 11.2 million, exceeding all the forecasts, while quits diminished.

Fed speakers led by New York Fed President Williams, Richmond's Barkin, and Atlanta's Bostic, crossed wires. They all reiterated the Fed's commitment to bringing inflation down while adding that the Fed needs to get to the restrictive territory. Williams stated that he wants rates above 3.5%, while Barkin said that the Fed would do "what it takes" to get to the 2% target. Meanwhile, Bostic said that if indeed inflation is moving down, then the Fed might refrain from the 75 bps rate hikes.

The ECB speakers parade was led by ECB Knot, who said he’s leaning towards a 75 bps rate hike, adding that normalization of rates is an “essential” first phase while adding that an economic slowdown later this year is unavoidable. Echoing some of his comments was ECB Vasle, adding that inflation is more persistent and backs a higher increase than 50 bps, while ECB Muller said the bank should discuss 75 bps.

Earlier in the day, ECB Wunsch said the bank has to act quickly on rate hikes to a level that may be restrictive, even if the EU’s economy enters a recession. ECB’s Muller said price stability is our main concern and has to come first, adding that the ECB needs to continue hiking.

During the European session, the EU’s economic and industrial sentiment missed expectations, but German inflation figures showed prices increasing as expected, except for the year-over-year reading, with German inflation at 7.9%, higher than 7.8% estimates.

EUR/USD Key Technical Levels

European Central Bank (ECB) Governing Council member Yannis Stournaras said on Tuesday that he expects inflation to peak this year before starting gradually decline in 2023, as reported by Reuters.

Commenting on the economic outlook, Stournaras acknowledged that risks to growth are tilted to the downside. 

Market reaction

These comments don't seem to be having a significant impact on the shared currency's performance against its major rivals. As of writing, the EUR/USD pair was trading at 1.0020, where it was up 0.25% on a daily basis. 

• The USD/CHF reclaims the 0.9700 figure, advancing towards the 0.9800 mark, up by 0.70%.
• USD/CHF Price Analysis: A daily close above 0.9740 opens the way towards 0.9900; otherwise, a fall to 0,9600 is on the cards.

The USD/CHF climbs during the North American session, hitting a six-week high at around 0.9762, leaving below the 20-day EMA, widening the gap from the long-term daily moving averages (DMAs). At the time of writing, the USD/CHF exchanges hands at 0.9746, up 0.70%.

USD/CHF Price Analysis: Technical outlook

The USD/CHF weekly chart illustrates the pair extended its gains above the 20-EMA, lying at 0.9676, following Monday’s unsuccessful break. Additionally, the Relative Strength Index (RSI) crossed above the 7-week RSI’s SMA, aiming higher, showing buyers are gathering momentum. Therefore, the USD/CHF is resuming its upward bias in the near term.

The USD/CHF daily chart illustrates the major bouncing off the 100-day EMA, after Monday’s failure to do, and extended its gains to hit a daily high at 0-9762 before retreating toward current price levels, just above the July 21 high at 0.9739. If the USD/CHF achieves a daily close below tie latter, a retracement towards the 0.9600 figure is on the cards. Otherwise, the USD/CHF could continue its way north, towards the 0.9886 mark, ahead of the 0.9900 psychological level.

Hence, the USD/CHF first resistance would be the 0.9800 figure, followed by the July 14 daily high at 0.9886, ahead of the psychologically 0.9900 mark. On the other hand, the USD/CHF first support would be the 0.9700 figure. Once cleared, the next demand area would be the 100-day EMA at 0.9665, followed by the 50-day EMA at 0.9616, and then the August 26 daily low at 0.9577.

USD/CHF Key Technical Levels

• Euro among top performers on Tuesday on ECB rate hike expectations.
• Pound under pressure amid risk aversion.
• EUR/GBP gains more than 170 pips during the last three trading days.

The EUR/GBP accelerated the move to the upside and jumped to 0.8601, reaching the highest level since July 6. While the euro is among the best performers, the pound is under pressure amid risk aversion.

No more range

The rally in EUR/GBP started on Friday, on the back of comments from European Central Bank officials suggesting a 75 basis points rate hike at the next meeting. On Tuesday, Governing Council members Muller and Knott spoke about the possibility of a significant hike, boosting the euro further.

The pound is under pressure across the board. Cable hit a new two-year low. Concerns about UK’s economic outlook are growing as energy costs soar. Also the decline in equity prices in Wall Street weighs on GBP. The Dow Jones is falling by 0.80% and the Nasdaq by 1.17%. 

Since last Friday, the cross has risen 175 pips. On Monday it broke the 0.8500 resistance area and the upper limit of a consolidation range. Now it is holding above 0.8540 and testing levels above the critical 0.8600 mark. The next resistance stands at 0.8640.

Technical levels

New York Fed President John Williams told Wall the Wall Street Journal on Tuesday that inflation expectations in the US were well anchored but added that it would take a few years to bring inflation back to 2%, as reported by Reuters.

Additional takeaways

"Some positive momentum into the second half of this year."

"Inflation is still way too high."

"We will look across data ahead of the next meeting including inflation, employment data, job openings and others."

"We clearly have an imbalance in the economy."

"We need to slow demand enough to meet supply."

"We will weigh all of this in the next meeting; the decision on the rate hike will depend on the totality of the data."

"Fed has to think about where we want to see interest rates both this and next year."

"If we need to get interest rates significantly higher by the end of the year, of course, that informs decisions at each meeting."

"We need to think about the path of policy; that depends on jobs, inflation data."

"We need to get real interest rates above zero."

"How high rates need to go depends on economic data; my baseline is we need rates somewhat above 3.5%."

"Financial conditions have tightened quite a bit since the beginning of the year."

"That tightening is consistent with the Fed's direction on policy."

"There will be a time when policy actions will change."

Market reaction

The US Dollar Index retreated from session highs following these comments and was last seen trading flat on the day at 108.75.

A report from Conference Board showed a recovery in consumer confidence in August according to preliminary data. Analysts at Well Fargo point out the rebound in confidence to its highest level since May took pace as gas prices fell throughout the month and stock prices rose during the first half of it. 

Key Quotes: 

“Lower gas prices throughout the month and a rebound in equities through the first half of it breathed some fresh life into consumer confidence in August. The headline print of 103.2 was a bigger gain than the consensus had expected and returns confidence to a level last seen in May.”

“While gasoline prices have continued to trend lower throughout the month, stock prices have not. The roughly 6.5% decline in the S&P 500 since August 16 could weigh on confidence if markets remain under pressure.”

“While it is true that employers report difficulty finding help these days, monetary policymakers are charting a course that is intended to bring labor supply and demand more into balance. On Friday of this week the official employment report will be released, and we would be surprised by job growth continuing anywhere near the July pace in the months ahead. We expect employers added 325K people to their payrolls in August.”

• US dollar gains momentum despite another decline in Wall Street.
• Higher US yields keep the yen under pressure.
• USD/JPY approaches again the 140.00 zone.

The USD/JPY is gained momentum during the American session and climbed to 139.08, reaching the highest level since mid-July. The pair remains bullish amid a stronger US Dollar across the board.

The greenback rose sharply supported by higher US yields. The 10-year yields climbed to 3.14% while the 2-year rose to 3.49%. Bonds dropped even as US equities turned sharply lower. The Dow Jones drops by 0.89% and the Nasdaq falls by 1.25%.

Economic data in the US showed an improvement in Consumer Confidence with the CB index rising from 95.3 in July to 108.80 in August. The numbers helped the US dollar.

Earlier on Tuesday, Japan reported labor market data. The Unemployment rate held steady at 2.6%. While market participants still see possible a 75 basis points rate hike from the Federal Reserve, they expect the Bank of Japan to maintain its ultra-loose policy.

The divergence in monetary policy has been driving USD/JPY to the upside during 2022. If the pair holds above 139.00, the next level to watch is the multi-decade high at 139.38; and then attention would turn to 140.00. On the flip side, support levels might be located at 138.70, followed by 138.05 (daily low) and 137.65.

Technical levels

• AUD/USD hit a weekly high of around 0.6956, but data and sentiment bolstered the greenback.
• Higher US Treasury bond yields underpinned the US dollar, a headwind for the AUD/USD.
• US consumer confidence improves while job openings increase.

The AUD/USD faced solid resistance at around the 20-day EMA at 0.6959, diving below the 0.6900 figure amid a risk-off impulse, with the US dollar regaining composure edging higher, underpinned by rising US Treasury bond yields. Global equities remain heavy due to expectations of an aggressive Federal Reserve following Chair Powell’s remarks.

The AUD/USD hit a daily high early in the European session, climbing towards the 0.6956 figure, though it retreated as sentiment shifted sour. Meanwhile, mixed US economic data turned out to be bad news for the AUD/USD, sliding towards its daily low at 0.6858 in the North American session. At the time of writing, the AUD/USD is trading at 0.6878, below its opening price.

AUD/USD edges lower on US dollar strength after mixed US data

The US Dollar Index, a gauge of the buck’s performance vs. a basket of six currencies, advances 0.21%, up at 198.976, while the US 10-year benchmark note sits at 3.13%, up two bps.

Meanwhile, US consumer confidence surprised to the upside, to 103.2, higher than estimates of 98, according to Reuters. “Looking ahead, August’s improvement in confidence may help support spending, but inflation and additional rate hikes still pose risks to economic growth in the short term,” said Lynn Franco, senior director at the Conference Board.

Additionally, the US Department of Labor reported that job openings, as released by the JOLTs Opening report, unexpectedly uptick in July, with vacancies increasing up to 11.2 million, above all estimates. The same report showed that quits easied from 2.8% to 2.7%.

Elsewhere, in the Asian session, Australia’s consumer confidence, as reported by the ANZ Morgan Consumer Confidence, softened by 0.7%. At the same time, housing data showed the impact of higher rate hikes, which increased mortgage rates.

Analysts at ANZ bank commented that rate hikes and increases in the cost of debt contributed to the decline in Building Approvals. They added, “We expect total building approvals to keep falling as more rate hikes put downward pressure on the borrowing capacity of both developers and individual home builders.”

What to watch

The Australian economic docket is light, contrarily to the US, where ADP figures, Fed speaking, ISM PMI, and the Nonfarm Payrolls report, are expected to offer fresh impetus to AUD/USD traders.

AUD/USD Key Technical Levels

"I think 75 basis points should be among the options for September given that the inflation outlook has not improved," European Central Bank (ECB) Governing Council member Madis Muller told Reuters on Tuesday.

"Still, I’m going into the meeting with an open mind and I want to both see the new projections and hear my colleague’s arguments," Muller added.

Market reaction

These comments failed to provide a boost to the shared currency and the EUR/USD pair was last seen posting small daily gains at 1.0008.

• Consumer confidence in the US improved in August.
• US Dollar Index turned positive on the day near 108.80 after the data.

The data published by the Conference Board showed on Tuesday that the Consumer Confidence Index improved to 103.2 in August from 95.3 in July.

Further details of the publication revealed that the Consumer Present Situation Index climbed to 145.4 from 139.7 and the Consumer Expectation Index rose to 75.1 from 65.6. Finally, the Jobs Hard-to-Get Index edged lower to 11.4 from 12.4.

Market reaction

The greenback gathered strength against its rivals on the upbeat data and the US Dollar Index was last seen posting small daily gains at 108.80.

• Gold meets with a fresh supply on Tuesday and drifts back closer to a one-month low.
• Aggressive Fed rate hike bets continue to drive flows away from the non-yielding metal.
• Retreating US bon9d yields, a weaker USD does little to impress bulls or lend any support.

Gold struggles to capitalize on the previous day's goodish bounce from the $1,720 area and meets with a fresh supply on Tuesday. The steady intraday descent extends through the early North American session and drags the XAU/USD to the $1,730 region, well within the striking distance of over a one-month low touched on Monday.

Despite modest US dollar weakness and a further decline in the US Treasury bond yields, gold, so far, has struggled to gain any meaningful traction amid expectations for more aggressive Fed rate hikes. In fact, the current market pricing point to a great chance of a 75 bps rate increase at the September FOMC policy meeting. The bets were reaffirmed by Fed Chair Jerome Powell's hawkish remarks on Friday, which, in turn, is seen exerting some pressure on the non-yielding yellow metal.

The downside, however, seems cushioned, at least for the time being, amid growing worries about a deeper global economic downturn, which continues to weigh on investors' sentiment. This is evident from the fact that the intraday optimistic move in the equity markets has already started losing steam. Recession fears could drive some haven flows and turn out to be the only factor that could help limit deeper losses for gold. That said, the emergence of fresh selling favours bearish traders.

Hence, a subsequent slide back towards the $1,700 round-figure mark, en route to the $1,680 region or the YTD low touched in July, looks like a distinct possibility. That said, traders might prefer to wait for a fresh catalyst before positioning for any further downside. Hence, the focus will remain glued to the release of the closely-watched US monthly jobs data on Friday. The popularly known NFP report will influence the USD price dynamics and provide a fresh directional impetus to gold.

In the meantime, traders will take cues from other important US macro data, starting with Tuesday's release of the Conference Board's Consumer Confidence Index and JOLTS Job Openings. Apart from this, the US bond yields, the USD and the broader market risk sentiment will be looked upon to grab short-term opportunities around gold.

Technical levels to watch

• EUR/USD adds to the positive start of the week above parity.
• Firm resistance is seen near the 1.0100 region so far.

EUR/USD rises to 2-day highs further north of the parity barrier on Tuesday.

Extra upside appears in store for the pair for the time being. Therefore, the recent weekly high at 1.0090 (August 26) now emerges as the next hurdle of significance prior to another weekly peak at 1.0202 (August 17).

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0813.

EUR/USD daily chart

• DXY adds to Monday’s pullback and retreats to the low-108.00s.
• The downside appears limited by the 107.60 zone (August 26).

DXY keeps correcting lower following Monday’s rejection from fresh cycle highs around 109.50.

The index seems to have moved into a consolidative phase, with the lower bound in recent lows near 107.60 (August 26 low). On the other hand, the surpass of the 2022 high at 109.47 (August 29) could encourage the dollar to revisit the September 2002 top at 109.77 ahead of the round level at 110.00.

In the meantime, while above the 6-month support line around 105.40, DXY 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 100.80.

DXY daily chart

• GBP/USD surrenders its modest intraday gains and retreats to the lower end of its daily range.
• A combination of factors helps the USD to pare intraday losses and exerts downward pressure.
• A bleak UK economic outlook supports prospects for a further near-term depreciating move.

The GBP/USD pair struggles to capitalize on its modest intraday uptick to the 1.1760 area and retreats to the daily low during the early North American session. The pair is currently placed near the 1.1700 mark and remains well within the striking distance of its lowest level since March 2020 touched the previous day.

The intraday optimism in the equity markets run out of steam amid growing worries about a deeper global economic downturn. Apart from this, growing acceptance that the Fed would continue to tighten its monetary policy at a faster pace assists the safe-haven US dollar to recover its early lost ground. This turns out to be a key factor that attracts selling around the GBP/USD pair at higher levels.

In fact, Fed Chair Jerome Powell, during his speech at the Jackson Hole Symposium on Friday, signalled that interest rates would be kept higher for longer to bring down inflation. The markets were quick to price in a supersized 75 bps Fed rate hike move at the upcoming policy meeting in September. This helps offset a further decline in the US Treasury bond yields and acts as a tailwind for the greenback.

The British pound, on the other hand, continues to be undermined by a bleak outlook for the UK economy. It is worth recalling that the Bank of England had predicted earlier this month that the UK economy will enter a prolonged recession from Q4 of 2022. This suggests that the path of least resistance for the GBP/USD pair is to the downside and any attempted recovery could be sold into.

Next on tap is the US economic docket, featuring the release of JOLTS Job Openings and the Conference Board's Consumer Confidence Index for the current month. This, along with the broader market risk sentiment and the US bond yields, might influence the USD and provide some impetus to the GBP/USD pair. The focus, however, remains on the US jobs report (NFP), scheduled on Friday.

Technical levels to watch

• EUR/JPY extends the uptrend and challenges the 139.00 mark.
• Next on the upside now emerges the key round level at 140.00.

EUR/JPY advances for the third session in a row and prints multi-week peaks near 139.00 at the same time.

The continuation of the uptrend now shifts the focus to the key level at 140.00. Beyond the latter, the cross might attempt another test of the weekly peak at 142.32 (July 21).

While above the 200-day SMA at 134.15, the prospects for the pair should remain constructive.

EUR/JPY daily chart

• House prices in the US rose at a softer pace than expected in June.
• US Dollar Index stays on the backfoot in the American session.

The monthly data published by the US Federal Housing Finance Agency showed on Tuesday that the Housing Price Index rose by 0.1% on a monthly basis in June. This print followed May's increase of 1.3% and came in lower than the market expectation of 1.1%.

Meanwhile, the S&P/Case-Shiller Home Price Index arrived at 18.6% on a yearly basis in June, compared to analysts' estimate of 19.5%.

Market reaction

The US Dollar Index stays in negative territory near 108.50 after these data releases.

• USD/CAD reverses an intraday dip and is supported by a combination of factors.
• A sharp pullback in crude oil prices undermines the loonie and acts as a tailwind.
• A modest USD rebound from the daily low contributes to the intraday move up.
• Retreating US bond yields, the risk-on mood might cap the USD and the major.

The USD/CAD pair bounces a few pips from the daily low and moves back above the 1.3000 psychological mark ahead of the Wall Street opening.

Crude oil prices retreat sharply from a one-month high touched earlier this Tuesday amid concerns that a deeper global economic downturn would hurt fuel demand. Apart from this, hopes for the resumption of sanctioned Iranian oil exports overshadow expectations that major oil producers could cut output and weigh on the black liquid. This, in turn, undermines the commodity-linked loonie and assists the USD/CAD pair to attract some dip-buying near the 1.2970 region.

The US dollar, on the other hand, trims a part of its modest intraday losses and further contributes to the USD/CAD pair's intraday bounce. Growing acceptance that the Fed will continue to tighten its policy at a faster pace turn out to be a key factor acting as a tailwind for the greenback. That said, a further decline in the US Treasury bond yields, along with the risk-on impulse, might keep a lid on any meaningful upside for the safe-haven buck and cap the upside for the major.

This, in turn, makes it prudent to wait for some follow-through buying beyond the daily swing high, around the 1.3025 region, before positioning for any meaningful intraday appreciating move. Market participants now look forward to the US economic docket - featuring JOLTS Job Openings and the Conference Board's Consumer Confidence Index. The data might influence the USD demand, which, along with oil price dynamics, should produce short-term opportunities around the USD/CAD pair.

Technical levels to watch

European Central Bank (ECB) policymaker Klaas Knot said on Tuesday that he was leaning toward a 75 basis points rate hike in September but added that he was open to discussion.

Knot further argued that going back to neutral would not be enough to tame inflation and added that they could see labour hoarding in the initial phase of economic slowdown.

Market reaction

EUR/USD retreated from daily highs in the early American session but was last seen moving in positive territory above parity. 

Richmond Federal Reserve Bank President Thomas Barkin said on Tuesday that the United States is facing "post-war-like" inflation.

"I don't expect inflation to come down predictably," Barkin noted and reiterated that the Federal Reserve is committed to returning inflation to the 2% target.

Commenting on the growth outlook, "we are not today in a recession," Barkin said and added that a recession does not have to be calamitous.

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen trading in negative territory near 108.50.

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in Malaysia.

Key Takeaways

“Headline inflation accelerated for the fourth straight month to a 14-month high of 4.4% y/y in Jul (from +3.4% in Jun), in line with our estimate (4.5%) and Bloomberg consensus (4.4%). This big jump in headline inflation largely reflected upward adjustments in prices of some essential food items (i.e. chicken, eggs, and cooking oil) and services, the lapse of low base effects in electricity tariffs, and costlier vehicle purchases after the sales tax exemption expired on 30 Jun 2022 as planned.”

“We raise our 2022 full-year inflation estimate to 3.5% (from 3.0% previously, BNM est: 2.2%-3.2%) following the full reflection of price adjustments for various price-administered items in the reporting month and higher-than-expected inflation outturns in May-Jun. The combination of factors including year-ago low base effects, still-high commodity prices, persistent currency weakness and intensifying cost pass-through effects will continuously keep headline inflation above 4.0% levels for the remaining months of the year. Our revised inflation outlook has yet to factor in the impact of the new targeted fuel subsidy mechanism that is currently under pilot testing.”

“Given a robust GDP growth print in 2Q22, signs of further economic expansion in 2H22 albeit at a moderate pace, and broadening second-round effects on inflation, Bank Negara Malaysia (BNM) will likely follow-through with a third 25bps rate hike at the coming monetary policy meeting on 7-8 Sep. This will bring the Overnight Policy Rate (OPR) to 2.50%. Besides internal factors, we believe the expected outsized Fed rate hikes in the coming months and global monetary conditions would also be taken into consideration by BNM at the Sep meeting.”

CAD/JPY has traded positively through August so far. A clear break above 107.65 would trigger a significant rise towards 112/114, economists at Scotiabank report.

New cycle highs to reinvigorate broad bull tone

“The daily studies are leaning neutral still but new cycle highs here would certainly reinvigorate the broader bull tone of this cross which was obvious earlier this year.” 

“A clear and sustained push above 107.65 would suggest scope for additional – and relatively rapid, we believe – CAD gains towards 112/114.”

“Support is 105.15 (40-day moving average) and 102.95/00.”

"A swift normalization of interest rates is an essential first phase, and some front-loading should not be excluded," European Central Bank (ECB) policymaker Klaas Knot said on Tuesday, as reported by Reuters.

"We must forcefully tackle the growing problem of persistently high inflation," Knot added and argued that an economic slowdown alone would be unlikely to bring inflation back to the ECB's objective over the medium term.

"I see several upside risks to inflation; expectations could become de-anchored," Knot warned.

Market reaction

The EUR/USD pair showed no immediate reaction to these comments and was last seen rising 0.35% on the day at 1.0030.

EUR/CAD rebounds from sub-1.30 test but undertone remains weak. Economists at Scotiabank note that the pair could plummet until 1.2470 on a break under last week’s low at 1.2875/80.

EUR/CAD retains a lot of underlying, downward momentum

“Short-term (intraday and daily) trend oscillators have moderated but bearish weekly and monthly DMI readings imply that this market retains a lot of underlying, downward momentum which will leave the EUR facing firm resistance on minor gains and ongoing downside risk.” 

“Stiff resistance above the market remains intact at 1.3290/00. At the very least, the EUR needs to regain – and hold above – this point to establish a stronger base for a reversal in what is now a very extended run lower in the EUR.” 

“Below last week’s low at 1.2875/80, there is nothing of note in terms of EUR support until 1.2470.”

• Inflatiın in Germany continued to rise in August.
• EUR/USD clings to modest daily gains above parity after the data.

Annual inflation in Germany, as measured by the Consumer Price Index (CPI), rose to 7.9% in August from 7.5% in July, Germany's Destatis reported on Tuesday. This reading came in slightly higher than the market expectation of 7.8%. 

Meanwhile, the Harmonised Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, edged higher to 8.8% from 8.5% as expected.

On a monthly basis, the CPI and the HICP arrived at 0.3% and 0.4%, respectively, matching analysts' estimates.

Market reaction

These figures don't seem to be having a significant impact on the euro's performance against its major rivals. As of writing, EUR/USD was up 0.35% on the day at 1.0030.

GBP/USD traded at a new low for this move on Monday near 1.1650 but has rebounded to trade just above 1.17. Economists at BBH expect the pair to test the March 2020 low near 1.1410.

The notion of a Truss-led UK government is concerning

“Cable remains heavy and on track to test the March 2020 low near 1.1410.”

“We’ve been pointing out for a while that the notion of a Truss-led UK government is concerning. The main planks of her platform are 1) large-scale tax cuts, 2) BoE mandate review, and 3) hard Brexit. None of these can be seen as positive for sterling and gilts and so along with likely recession in Q4, the reasons to be underweight UK assets are piling up.”

• AUD/USD gains traction for the second straight day and recovers further from a six-week low.
• Retreating US bond yields, the risk-on impulse weighs on the USD and offers support to the pair.
• Aggressive Fed rate hike bets should limit any deeper USD losses and keep a lid on the major.

The AUD/USD pair attracts some dip-buying near the 0.6875 region on Tuesday and turns positive for the second successive day. The momentum allows spot prices to recover further from a six-week low touched on Monday and climbs to mid-0.6900s during the first half of the European session amid the emergence of fresh US dollar selling.

A further decline in the US Treasury bond yields turns out to be a key factor dragging the USD away from a 20-year high touched the previous day. Apart from this, the risk-on impulse - as depicted by the strong rally in the equity markets – further underpins the safe-haven greenback and benefits the risk-sensitive aussie.

Chinese authorities pledged to stimulate the world’s second-largest economy and boosted investors' confidence. That said, growing worries about a deeper global economic downturn could keep a lid on any optimistic move in the markets. Furthermore, hawkish Fed expectations should limit the USD losses and cap the AUD/USD pair.

The markets seem convinced that the Fed will stick to its aggressive policy tightening path and have been pricing in a 75 bps rate hike at the September FOMC meeting. The bets were reaffirmed by Fed Chair Jerome Powell's hawkish remarks on Friday, signalling that interest rates would be kept higher for longer to bring down inflation.

The fundamental backdrop favours the USD bulls and warrants some caution before positioning for any further appreciating move for the AUD/USD pair. Moving ahead, traders now look forward to the US economic docket - featuring JOLTS Job Openings and the Conference Board's Consumer Confidence Index - for a fresh impetus.

The data, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader market risk sentiment might further contribute to producing short-term trading opportunities around the AUD/USD pair. The focus, however, remains on the closely-watched US monthly jobs report (NFP), due on Friday.

Technical levels to watch

• Silver remains on the defensive near a one-month low touched on Monday.
• The set-up favours bearish traders and supports prospects for further losses.
• Any attempted recovery move above the $19.00 mark is likely to get sold into.

Silver struggles to gain any traction on Tuesday and remains well within the striking distance of over a one-month low touched the previous day. The white metal is currently trading around the $18.70 region and seems vulnerable to prolonging its recent downtrend witnessed over the past two weeks or so.

Given last week's failure near the 200-period SMA on the 4-hour chart, acceptance below the $19.00 mark adds credence to the near-term bearish outlook for the XAG/USD. Furthermore, technical indicators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone.

Hence, a subsequent slide towards retesting the YTD low, around the $18.20-15 area touched on July 14, looks like a distinct possibility. This is closely followed by the $18.00 round-figure mark, which if broken decisively will be seen as a fresh trigger for bearish traders and set the stage for a further depreciating move.

On the flip side, any attempted recovery move is more likely to confront stiff resistance and attract fresh sellers near the $19.00 mark. This should cap the XAG/USD near the 200-period SMA on the 4-hour chart. The said barrier is currently pegged near the $19.45-$19.50 region, which should now act as a pivotal point.

Sustained strength beyond will negate the near-term negative bias and prompt some short-covering move. The XAG/USD might then aim to surpass an intermediate hurdle near the $19.80 region and aim back to reclaim the $20.00 psychological mark.

Silver 4-hour chart

Key levels to watch

Senior Economist at UOB Group Alvin Liew reviews Chief Powell’s speech at the Jackson Hole Symposium on Friday.

Key Takeaways

“The key takeaway from FOMC Chair Powell’s succinct speech at Jackson Hole Symposium last Fri (26 Aug) is that inflation is still the focus and the Fed will press on in its painful inflation fight with more rate hikes as ‘Our [the Fed’s] responsibility to deliver price stability is unconditional’.”

“Powell’s comments were widely interpreted as hawkish. He stated the Fed’s resolute commitment to ‘price stability’ even if it takes time (i.e. prolonged policy tightening) and forceful measures (i.e. larger than usual rate hikes), at the expense of a long period of sub-par growth outcome and ‘some pain’ in the short term for households and businesses. And while Powell reiterated a recent statement that ‘At some point, as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases’, it was unmistakable that Powell’s immediate message was that policy rates are going to continue higher into the restrictive realm and could stay there for some time.”

“FOMC Outlook – No Change To Our 50bps Rate Hike Expectations For Sep FOMC For Now, But Aug Jobs & Aug CPI Data Key To Sep Outlook: Powell’s latest speech reaffirmed the broad market view that the Fed is still on a tightening path and it does not change our view for the Fed Funds Target Rate (FFTR) to be hiked by 50 bps in the Sep 2022 FOMC, followed by another 50 bps rate hike in Nov FOMC before ending the year with a 25bps hike in Dec, implying a cumulative 350bps of increases in 2022, bringing the FFTR higher to the range of 3.50-3.75% by end of 2022, a range largely viewed as well above the neutral stance (which is further confirmed in Powell’s speech as 2.25-2.50%, the Fed’s long run projection of FFTR). Market’s attention will now fall on data, specifically the US Aug Employment (2 Sep) and Aug CPI inflation (13 Sep) reports from the Bureau of Labor Statistics (BLS) which may shape Fed expectations before Sep’s FOMC decision day.”

• USD/JPY meets with some supply on Tuesday and erodes a part of the overnight strong gains.
• Retreating US bond yields weigh on the USD and exert some downward pressure on the major.
• The risk-on impulse, Fed-BoJ policy divergence could undermine the JPY and help limit losses.

The USD/JPY pair edges lower on Tuesday and for now, seems to have snapped a two-day winning streak to its highest level since mid-July, around the 139.00 mark touched the previous day. The pair remains on the defensive through the first half of the European session and is currently hovering around the 138.30-138.25 area, just a few pips above the daily high.

The US dollar drifts lower for the second straight day and turns out to be a key factor exerting some downward pressure on the USD/JPY pair. The ongoing USD profit-taking slide from a 20-year high touched the previous day could be solely attributed to a further decline in the US Treasury bond yields. This, in turn, results in the narrowing of the US-Japan yield differential, which benefits the safe-haven Japanese yen and further contributes to the offered tone surrounding the major.

That said, the risk-on impulse, along with a big divergence in the monetary policy stance adopted by the Bank of Japan and the Federal Reserve, should cap gains for the safe-haven JPY. In fact, the Bank of Japan Governor Haruhiko Kuroda reiterated on Monday that the central bank will stick to its easing policy stance until wages and prices rise in a stable and sustainable manner. In contrast, the Fed is expected to deliver another supersized 75 bps rate hike at its September policy meeting.

The prospects for a more aggressive policy tightening by the Fed were reaffirmed by Fed Chair Jerome Powell's hawkish remarks 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. This, in turn, suggests the path of least resistance for the USD/JPY pair. Hence, any subsequent downtick might still be seen as an opportunity for bullish traders and is more likely to remain limited.

Market participants look forward to the US economic docket - featuring JOLTS Job Openings data and the Conference Board's Consumer Confidence Index later during the early North American session. This, along with the US bond yields, might influence the USD. Apart from this, the broader risk sentiment might contribute to producing short-term trading opportunities around the USD/JPY pair.

Technical levels to watch

On upcoming three-day maintenance at the Nord Stream 1 gas pipeline, the Kremlin said on Tuesday, “nothing hinders Russian gas exports besides technical problems from sanctions.”

Additional quotes

“Western sanctions against Russia are preventing maintenance and return of equipment to the place of work.”

“Russia is ready to fulfill its obligations on gas exports.”

Related reads

• EUR/USD extends the advance north of the parity level
• France’s Engie: Gazprom is to reduce gas deliveries starting Tuesday

• EUR/USD confirms the positive start of the week above parity.
• Germany preliminary inflation figures next on tap later in the euro docket.
• The US Consumer Confidence will be in the limelight across the pond.

The single currency adds to the auspicious start of the week and lifts EUR/USD further north the psychological parity level on turnaround Tuesday.

EUR/USD up on USD-selling, looks to data

EUR/USD is up for the second session in a row and continues to capitalize the renewed selling pressure hurting the greenback, which saw the US Dollar Index (DXY) print new 20-year peaks around 109.50 early on Monday, just to give away those gains afterwards.

The pair embarked on a corrective upside and reclaimed the area above the key parity level, as investors appear to have already digested the hawkish tilt from Powell’s message at the Jackson Hole Symposium on Friday.

The recovery in spot comes amidst a weak performance of the German 10y Bund yields, which retreats from Monday’s multi-week highs around 1.55%.

In the domestic calendar, the final EMU Consumer Confidence came at -24.9 and the Economic Sentiment at 97.6, both prints for the month of August. Later in the session, the advanced inflation figures in Germany will also take centre stage, whereas the Consumer Confidence tracked by the Conference Board will be the salient event in the US docket.

What to look for around EUR

EUR/USD continues to edge higher on the back of the renewed offered bias in the greenback.

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 gaining 0.49% at 1.0043 and the next hurdle comes at 1.0090 (weekly high August 26) seconded by 1.0202 (high August 17) and finally 1.0231 (55-day SMA). On the other hand, the breach of 0.9899 (2022 low August 23) would target 0.9859 (December 2002 low) en route to 0.9685 (October 2022 low).

After forecasting a recession in the UK economy last week, economists from the US investment bank Goldman Sachs warned on Tuesday Inflation in Britain could exceed 20% early next year if spiraling gas prices fail to recede.

Also read: UK economy will enter recession in Q4 but will be relatively mild – Goldman Sachs

Key quotes

"In a scenario where gas prices remain elevated at current levels, we would expect the price cap to increase by over 80% in January (vs 19% assumed in our baseline),"

"(This) would imply headline inflation peaking at 22.4%, well above our baseline forecast of 14.8%."

“The BoE looks set to raise interest rates by 50 basis points to 2.25% next month,” adding that “it saw upside risks to its forecasts for additional 25 basis-point hikes in following policy meetings.”

This comes after economists from Citigroup said that UK inflation was set to peak at 18.6% in January.

• Gold attracts some dip-buying on Tuesday, though lacks any strong follow-through.
• Retreating US bond yields undermine the USD and offer some support to the metal.
• The risk-on impulse caps the upside amid expectations for aggressive Fed rate hikes.

Gold reverses a modest intraday dip to the $1,729 area and turns neutral during the first half of the European session, though lacks follow-through. The XAU/USD is currently placed around the $1,735 region and so far, has struggled to capitalize on the overnight bounce from over a one-month low.

The US dollar meets with a fresh supply for the second straight day and retreats further from a 20-year high touched the previous day, which, in turn, offers some support to the dollar-denominated gold. The ongoing USD profit-taking slide could be solely attributed to a further decline in the US Treasury bond yields, which further benefits the non-yielding gold.

The upside, however, remains limited amid firming expectations for a supersized 75 bps Fed rate hike at the September meeting. The bets were reaffirmed by Fed Chair Jerome Powell's hawkish remarks on Friday, signalling that interest rates would be kept higher for longer to bring down inflation. This, along with the risk-on impulse, seem to cap gains for gold.

Chinese authorities pledged to stimulate the world’s second-largest economy and boosted investors' confidence. This is evident from a strong rally in the equity markets, which might hold back traders from placing bullish bets around the safe-haven precious metal. This warrants caution before confirming that gold has formed a bottom and positioning for any further gains.

Market participants look forward to the US economic docket - featuring JOLTS Job Openings data and the Conference Board's Consumer Confidence Index later during the early North American session. This, along with the US bond yields, might influence the USD. Apart from this, the risk sentiment might contribute to producing short-term trading opportunities around gold.

The focus, however, will remain on the closely-watched US monthly jobs report, popularly known as NFP, due for release on Friday. The August employment figures will provide some insight into the economy's health in the face of rising rates and stubbornly high inflation. This, in turn, will drive the USD demand and gold prices ahead of the next FOMC meeting in September.

Technical levels to watch

Eurozone's Final Consumer Confidence Index came in at -24.9 in August vs. -24.9 recorded previously, according to the latest data release from the European Commission. The data matched the market expectations of -24.9.

Meanwhile, the bloc’s Economic Sentiment Indicator for August dropped to 97.6 vs. 98.0 expected and 98.9 previous.

Sentiment in the industry worsened to 1.2 points from 3.4 in August and for services, the economy's biggest sector, to 8.7 from 10.4 n July.

Market reaction

EUR/USD is advancing to near 1.0035, undeterred by the mixed Eurozone sentiment data. The pair is adding 0.40% on the day, at the press time.  

Gold price is suffering from continued rate hikes. Economists at Commerzbank expect the yellow metal’s slide to continue somewhat for now.

Anticipating a gold price of $1,800 at year’s end

“The gold price found itself under pressure following Fed Chair Powell’s speech at the Fed symposium in Jackson Hole. The market interpreted Powell’s remarks as meaning that further rate hikes would be necessary in the near future because combating the high inflation remains a priority and that any rapid rate cuts next year are unlikely. This raises the risk of further ETF selling, which would cause the gold price slide to continue somewhat.”

“The environment for gold remains difficult. It will probably brighten only once an end to the Fed rate hikes is in sight and rate cuts are on the cards.”

“We continue to anticipate a gold price of $1,800 at year’s end.”

European Central Bank (ECB) Chief Economist Philip Lane said on Tuesday, “we need to keep raising interest rates.”

Further comments

“Interest rates should be raised step by step.”

“I expect some reduction of demand in the second half.”

“Every economic analysis points towards an economic slowdown in the eurozone, does not, however, rule out a milder technical and temporary recession.”

On Monday, Lane said that "a steady pace - that is neither too slow nor too fast - in closing the gap to the terminal rate is important for several reasons” while commenting on the policy outlook.

Market reaction

The shared currency remains uninspired by Lane’s remarks, consolidating gains around 1.0025 against the US dollar. The spot is higher by 0.31% on the day, as of writing.

Is EUR/USD set up for a short-covering rally ahead of payrolls? Kit Juckes, Chief Global FX Strategist at Société Générale, thinks the EUR/USD bearish consensus is excessive in the short-term.

Energy threat to Europe is not going away

“What if we see euro shorts cover ahead of payrolls data? Consensus expects a 300K increase, but any talk of a downside risk would shake things up.”

“Relative rates suggest EUR/USD would be around 1.08 if we weren’t so focused on energy market risks. I don’t, to be clear, think that the energy threat to Europe is going away, or that EUR/USD has seen its cyclical low, but I do think the EUR/USD bearish consensus is excessive in the short-term.”

Iraq's State Organization for Marketing of Oil (SOMO) said on Tuesday that their delegation plans to travel to Germany for oil export talks.

Additional quotes

Market reaction

WTI is fading its recovery from above $97, trading at $96.53, almost unchanged on the day, as of writing.  

EUR/USD has managed to climb above parity early Tuesday. Additional gains are likely above 1.0020, FXStreet’s Eren Sengezer reports.

Recovery gains could be witnessed in case the 1.0020 level is confirmed as support

“On the upside, 1.0080 (Fibonacci 38.2% retracement of the latest downtrend) aligns as the next recovery target ahead of 1.0100 (100-period SMA, psychological level) and 1.0130 (Fibonacci 50% retracement).”

“1.0020 (Fibonacci 23.6% retracement) forms key support. In case the pair retreats below that level and starts using it as resistance, it could extend its slide toward parity and 0.9980 (50-period SMA, 20-period SMA).”

Prospects for a move to 6.9400 ahead of 6.9600 in USD/CNH looks well in place for the time being, note FX Strategists at UOB Group Quek Ser Leang and Lee Sue Ann.

Key Quotes

24-hour view: “We highlighted yesterday that the ‘the rapid rise in USD appears to be a tad overdone’ and we held the view that ‘the next major resistance at 6.9400 is unlikely to come under threat for now’. Our view was not wrong as USD subsequently rose to 6.9325 before easing off. USD appears to have moved into a consolidation and is likely to trade sideways between 6.9000 and 6.9300 for today.”

Next 1-3 weeks: “Our update from yesterday (29 Aug, spot at 6.9140) still stands. As highlighted, the rapid boost in momentum indicates that the USD strength could extend to 6.9400, possibly 6.9600. On the downside, a break of 6.8700 (‘strong support’ level was at 6.8600 yesterday) would indicate that the USD strength that started two weeks ago has run its course.”

• The index regains downside traction and approaches 108.40.
• The dollar appears offered following Monday’s daily decline.
• CB’s Consumer Confidence, housing data, Fedspeak next on tap.

The US Dollar Index (DXY), which measures the greenback vs. a bundle of its main rival currencies, retreats modestly in the lower end of the range near 108.40 on turnaround Tuesday.

US Dollar Index looks to data, Fedspeak

The index adds to the pessimistic start of the week and revisits the 108.50/40 band on the back of further improvement in the sentiment surrounding the risk complex.

The resumption of the selling bias in the greenback comes amidst the bearish tone in US yields, while expectations for further tightening by the Federal Reserve remains well in place. On the latter, investors continue to favour a 75 bps rate raise at the September event, according to CME Group’s FedWatch Tool.

Later in the US docket, the Consumer Confidence gauged by the Conference Board will take centre stage seconded by the FHFA’s House Price Index and speeches by Richmond Fed T.Barkin (2024 voter, centrist) and NY Fed J.Williams (permanent voter, centrist).

What to look for around USD

The greenback comes under some downside pressure following Monday’s fresh cycle peaks around 109.50 when tracked by the US Dollar Index (DXY).

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 retreating 0.29% at 108.43 and faces the next contention at 107.58 (weekly low August 26) seconded by 106.42 (55-day SMA) and then 104.63 (monthly low August 10). On the flip side, a break above 109.47 (2022 high July 15) would aim for 109.77 (monthly high September 2002) and then 110.00 (round level).

• USD/CAD turns lower for the second straight day amid the emergence of fresh USD selling.
• Retreating US bond yields, the risk-on impulse exerts some pressure on the safe-haven buck.
• Bets for aggressive Fed rate hikes should limit the USD losses and lend support to the major.

The USD/CAD pair attracts fresh selling following an early uptick to the 1.3025 region and turns lower for the second successive day on Tuesday. The downward trajectory drags spot prices to the 1.2975 area during the early part of the European session and is sponsored by a combination of factors.

Speculations that major producers could cut output to stall the recent fall in crude oil prices assist the black liquid to hold steady near the top end of the monthly range. This, in turn, underpins the commodity-linked loonie. Apart from this, the emergence of fresh US dollar selling contributes to the USD/CAD pair's corrective pullback from a multi-week high touched the previous day.

A further pullback in the US Treasury bond yields, along with the risk-on impulse, drag the safe-haven USD further away from a fresh 20-year high set on Monday. That said, firming expectations that the Fed will stick to a more aggressive policy tightening path should limit the USD losses. In fact, the markets are currently pricing in a greater chance of a 75 bps Fed rate hike in September.

The bets were reaffirmed by more hawkish remarks by Fed Chair Jerome Powell on Friday, signalling that interest rates would be kept higher for longer to bring down inflation. Furthermore, concerns that a deeper global economic downturn will dent fuel demand and hopes for the return of sanctioned Iranian exports should cap crude oil prices, which, in turn, should lend support to the USD/CAD pair.

The fundamental backdrop favours bullish traders, warranting caution before confirming that the recent bounce from the very important 200-day SMA has run out of steam. Market participants now look to the US economic docket - featuring JOLTS Job Openings and the Conference Board's Consumer Confidence Index. This, along with oil price dynamics, might provide some impetus to the USD/CAD pair.

Technical levels to watch

The S&P 500 Index fell 3.4% on Friday. With rates likely to stay higher for longer, economists at UBS see limited upside for the S&P 500 in the near-term.

Fed will raise rates by another 100 bps by year-end

“We maintain our view that the Fed will raise rates by another 100 bps by year-end, with risks for more if inflation does not slow in line with our forecasts.”

“With rates likely to stay higher for longer, our base case is for further volatility, earnings downgrades, and higher-than-expected default rates over the course of the next year.”

“Our price target for the S&P 500 in June 2023 is 4,200, versus 4,057 as of Friday’s close, with the 10-year Treasury yield at 2.75%, compared to 3.03% at present.”

• GBP/USD remains confined in a narrow trading band and oscillates around the 1.1700 mark.
• Retreating US bond yields, a positive risk tone undermines the USD and offers some support.
• Aggressive Fed rate hike bets limit the USD losses and seem to cap the upside for the pair.
• A bleak outlook for the UK economy supports prospects for a further depreciating move.

The GBP/USD pair extends its sideways price move for the second successive day on Tuesday and remains confined in a range around the 1.1700 mark through the early European session. A subdued US dollar demand offers some support to spot prices, though a combination of factors seems to cap the upside.

In fact, the USD languishes below a 20-year high touched the previous day amid a further pullback in the US Treasury bond yields. Adding to this, a goodish recovery in the equity markets undermines the safe-haven buck and acts as a tailwind for the GBP/USD pair. That said, expectations for a more aggressive policy tightening by the Fed should help limit any deeper USD losses.

The current market pricing indicates a greater chance of a supersized 75 bps rate hike at the September FOMC policy meeting. The bets were reaffirmed by more hawkish remarks by Fed Chair Jerome Powell on Friday, signalling that interest rates would be kept higher for longer to bring down inflation. Apart from this, a bleak outlook for the UK economy keeps a lid on the GBP/USD pair.

It is worth recalling that 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, in turn, suggests that the path of least resistance for the GBP/USD pair is to the downside and the attempted recovery from the 1.1650 area, or the lowest level since March 2020 runs the risk of fizzling out rather quickly.

In the absence of any major market-moving economic releases, the USD price dynamics should continue to play a key role in influencing the GBP/USD pair's intraday momentum. Later during the early North American session, the US economic docket - featuring JOLTS Job Openings data and the Conference Board's Consumer Confidence Index - might allow traders to grab short-term opportunities.

Technical levels to watch

Here is what you need to know on Tuesday, August 30:

Following Monday's choppy session, markets seem to have calmed on Tuesday with the US Dollar Index (DXY) continuing to move sideways below 109.00 in the early European morning. US stock index futures are up between 0.2% and 0.4%, pointing to an improving market mood. Business and consumer sentiment data from the euro area and August inflation data from Germany will be featured in the European economic docket. In the second half of the day, the Conference Board's Consumer Confidence Index and JOLTS Job Openings data from the US will be watched closely by market participants.

FOMC Chairman Jerome Powell's hawkish remarks at the Jackson Hole Symposium last week caused the probability of a 75 basis points rate hike in September to rise to 70% and helped the dollar stay resilient against its rivals. The benchmark 10-year US Treasury bond yield, however, remained steady at around 3.1% on Monday and didn't allow the DXY to continue to gather bullish momentum. 

During the Asian trading hours on Tuesday, news from China showed that the country tightened coronavirus-related restrictions in Shenzen. There are also reports suggesting that China could start limiting industrial output to reduce emissions. Reflecting the negative impact of these developments, the Shanghai Composite lost nearly 0.5% on Tuesday. 

EUR/USD managed to stage a rebound and closed virtually unchanged slightly below parity on Monday. Hawkish comments from European Central Bank officials and heightened expectations for a 75 basis points ECB rate hike in September helped the shared currency hold its ground. Heading into the European session, the pair trades in a relatively tight range below 1.0000. Inflation, as measured by the Consumer Price Index, in Germany is forecast to rise to 7.8% on a yearly basis in August from 7.5% in July.

GBP/USD erased a small portion of its daily losses during the American trading hours on Monday but closed the day in negative territory. The pair fluctuates in a relatively tight range above 1.1700 early Tuesday.

Gold dropped to $1,720 during the European session on Monday before ending the day flat slightly below $1,740. XAU/USD stays under modest bearish pressure on Tuesday and trades at around $1,730.

USD/JPY gained nearly 100 pips on Tuesday but lost its bullish momentum after having failed to break above 139.00. The pair moves sideways around mid-138.00s on Tuesday. The data from Japan showed earlier in the day that the Unemployment Rate remained unchanged at 2.6% in July as expected.

Bitcoin rose nearly 4% on Monday and managed to reclaim $20,000. BTC/USD trades in positive territory near $20,5000 early Tuesday. Ethereum registered strong daily gains on Monday and extended its recovery beyond $1,500 on Tuesday.

The US dollar has remained relatively stable over the past week with the US Dollar Index (DXY) continuing to trade close to year-to-date highs at just below the 110.00 level. Fed’s hawkish inflation message continues to favour a strong USD, economists at MUFG Bank report.

Fed strikes hawkish tone

“While the pace of tightening is likely to slow as the Fed continues to tighten policy, Fed Chair Powell emphasized that restoring price stability will require restrictive policy for some time. Lessons from the 1970’s and 1980’’s highlighted that central banks can and should take responsibility for delivering low and stable inflation.”

“Another important lesson was for central banks to keep at it until the job is done. The need to maintain tighter policy for some time pushes back further against market expectations for a dovish pivot from the Fed in the year ahead. The US rate market has been scaling back expectations for rate cuts from the Fed as early as next year.” 

“Overall, the hawkish message from Fed Chair Powell should continue to support a strong US dollar.”

• Platinum price fades bounce off six-week low as sellers keep reins below 200-DMA.
• 61.8% Fibonacci retracement lures bears ahead of the key 23-month-old horizontal support.
• Nearly oversold RSI hints at limited downside room.

Platinum price (XPT/USD) holds lower grounds near $860 amid the early Tuesday morning in Europe. That said, the precious metal bounced off a 1.5-month low the previous day but couldn’t keep buyers on the board.

Given the quote’s sustained weakness below the 200-DMA, around $972.00 by the press time, XPT/USD is likely to remain pressured around the 61.8% Fibonacci retracement level of March 2020 to February 2021 upside, near $858.00.

In a case where bears manage to conquer the $858.00 support, the horizontal area comprising lows marked during September 2020 and in July 2022 could challenge the platinum bears around $830-29.00.

It should be noted that the XPT/USD south-run past $830.00 could make it vulnerable to breaking the $800 threshold while targeting June 2020 lows around $784.00.

Meanwhile, recovery remains elusive until the quote stays below the 200-DMA level surrounding $972.00, a break of which will propel the quote towards the $1,000 psychological magnet.

Even so, nearly oversold RSI might trigger the XPT/USD rebound targeting April’s swing low near $910.00.

To sum up, platinum is likely to remain on the bear’s radar unless crossing the 200-DMA. However, RSI approaches oversold territory and hints at a limited downside room.

Platinum: Daily chart

Trend: Limited downside expected

Weaker consumer sentiment is unlikely to blow the Fed off course. Therefore, economists at ING expect the strong dollar story to persist.

High bar for the Fed pivot leaves dollar in ascendancy

“Fed policy is designed to slow demand and that (orderly) weakness in equity markets and some softer consumer data (confidence and spending) are not enough to blow the Fed off its tightening course. This environment should keep the dollar bid.”

“Heavy positioning is probably the biggest challenge to a further dollar advance. Other than that it is hard to fight against dollar strength.”

“For today, look out for US Conference Board consumer confidence. Lower gasoline prices have consensus expecting a bounce here. But as above, we doubt even a softer number does much damage to the strong dollar story.”

“DXY probably finds demand under 108.50.”

• AUD/USD reverses an intraday dip, though lacks follow-through buying beyond the 0.6900 mark.
• Subdued USD price action, a positive risk tone offers some support to the risk-sensitive aussie.
• Hawkish Fed expectations limit the USD downside and cap gains amid growing recession fears.

The AUD/USD pair struggles to capitalize on the previous day's goodish rebound from the 0.6840 region, or a six-week low and attracts fresh selling on Tuesday. The intraday downtick, however, find some support near the 0.6875 area and lifts spot prices to a fresh daily high, around the 0.6915-0.6920 zone during the early European session.

The Australian Bureau of Statistics reported that building approvals plunged 17.2% in July, following a 0.6% decline in June. That data points to the steadily deteriorating conditions in the housing market amid rising interest rates, which, in turn, exert some downward pressure on the Australian dollar. That said, subdued US dollar price action helped limit the downside for the AUD/USD pair.

A further pullback in the US Treasury bond yields, along with a generally positive risk tone, seem to undermine the safe-haven greenback and offer some support to the risk-sensitive. The AUD/USD pair, however, might struggles to capitalize on the intraday bounce amid hawkish Fed expectations, which should continue to act as a tailwind for the greenback in the near term.

In fact, the markets are pricing in a greater chance of a supersized 75 bps Fed rate hike move at the September policy meeting. The bets were reaffirmed by Fed Chair Jerome Powell, signalling that interest rates would be kept higher for longer to bring down inflation. This, in turn, favours the USD bulls and should hold back traders from positioning for any meaningful upside for the AUD/USD pair.

Market participants look forward to the US economic docket - featuring JOLTS Job Openings data and the Conference Board's Consumer Confidence Index later during the early North American session. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the AUD/USD pair.

Technical levels to watch

Sterling has been a little weaker than analysts at ING thought. They still expect the GBP/USD pair to tumble towards the 1.15 level.

Soft equity environment is not helping

“Sterling typically shows higher correlations to equity markets than the euro (probably given the larger role of financial services in the UK economy). A tough environment for equities is, therefore, a real headwind to any sterling recovery.”

“0.8575/85 looks the obvious near-term target for EUR/GBP, while for GBP/USD it remains hard to fight a move to 1.15.”

EUR/USD has been finding some support near 0.9920 but remains vulnerable. The pair is set to trade within a 0.99-1.01 range this week, economists at ING report.

Look out this week for natural gas prices

“Markets now price a 63 bps ECB hike on 8 September – we expect 50 bps. And the market also prices 160 bps of ECB tightening by year-end, which again looks far too much according to our eurozone macro team.”

“Look out this week for natural gas prices. These corrected sharply in Europe yesterday. But whether Russia restarts gas flows via Nordstream 1 after three days of maintenance (starting tomorrow) will be a major driver of gas prices and also of the European currency complex this week.”

“EUR/USD should remain offered in a 0.9900-1.0100 range this week.”

Should risk aversion prevail for now, the Japanese yen (JPY) is likely to outperform ‘risk on’ currencies – but not the US dollar (USD), in the view of economists at HSBC. 

JPY to strengthen against the USD over the medium-term

“In the coming weeks, if US activity data weakens but the Federal Reserve (Fed) retains its ‘more work to be done’ narrative, then it will likely contribute to risk aversion. As a result, both the USD and JPY are likely to capitalize as ‘safe havens’, perhaps with modest USD outperformance.” 

“Given our expectation for a risk-averse environment (amid market concerns over global slowdown) to prevail for now, we expect the JPY to outperform ‘risk on’ currencies (like the AUD and NZD), but to move largely sideways against the USD as they share similar ‘safe-haven’ profile.”

“Looking beyond the near-term, we believe the JPY is under-priced for the risk of a global economic downturn and for the possibility that the BoJ may have to eventually tweak its monetary policy somehow. We still maintain our medium-term JPY bullish view.”

The continuation of the upside bias in USD/JPY could challenge the 139.50 region once 139.00 is cleared, comment FX Strategists at UOB Group Quek Ser Leang and Lee Sue Ann.

Key Quotes

24-hour view: “We indicated yesterday ‘strong upward momentum suggests further advance but a break of 139.00 is unlikely’. Our view turned out to be correct as USD rose to 139.00 before easing off. Upward pressure has eased and this coupled with overbought conditions suggests USD is likely to consolidate for today, likely within a range of 138.15/139.00.”

Next 1-3 weeks: “Yesterday (29 Aug, spot at 138.30), we highlighted that the rapid surge in momentum is likely to lead to an advance to 139.00. USD subsequently rose to 139.00 before easing off to end the day on a firm note at 138.69 (+0.85%). Further USD strength is not ruled even though the 139.00 level is a tough resistance and may be tough to break. Looking ahead, a break of 139.00 would shift the focus to 139.50. On the downside, a breach of 137.40 (‘strong support’ level was at 137.25 yesterday) would indicate that USD is unlikely to advance further.”

CME Group’s flash data for natural gas futures markets noted open interest reversed five consecutive daily drops and rose by around 11.1K contracts on Monday. Volume followed suit and rose by the second straight session, now by around 36.2K contracts.

Natural Gas appears supported around $9.00

Prices of natural gas started the week with decent gains supported by rising open interest and volume, which is indicative that the uptrend remains well in place for the time being. In the meantime, prices of the commodity appear so far well supported around the $9.00 mark per MMBtu.

FX option expiries for August 30 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9900-05 3.34b
• 0.9950-55 656m
• 0.9970-75 314m
• 0.9985 250m
• 0.9995-00 515m
• 1.0020-25 549m
• 1.0075 344m

- USD/JPY: USD amounts                     

• 135.80 1.13b
• 136.30-40 420m
• 137.00 280m
• 137.10-15 940m
• 139.00 280m

- AUD/USD: AUD amounts  

• 0.6850 320m

- USD/CAD: USD amounts       

• 1.3000 240m

- EUR/CHF: EUR amounts

• 0.9725 480m

The EUR/USD pair seems to have stabilized around parity. Economists at Crédit Agricole CIB Research expect to see a consolidation in EUR/USD in the near-term. 

Any upside surprises from Eurozone HICP to add to calls for a more aggressive ECB hike

“The recent widening of the EUR-USD short-term rate spread can persist and continue to give our short-term fair value for EUR/USD a boost. The resultant undervaluation of FX spot seems to be already rivalling that seen in mid-July and, if the latter episode is anything to go by, could usher in a period of EUR/USD consolidation.” 

“The prospect for a more front-loaded ECB tightening cycle could trigger the unwinding of some EUR-funded carry trades and thus force investors to unwind some of their EUR shorts.”

“Of key importance for EUR investors this week would further be the release of the Eurozone HICP estimate for August with any upside surprises from the data likely to add to calls for a more aggressive ECB hike.”

EUR/HUF is trading back in the area around 410. Fighting inflation or the weakening currency – what is the Hungarian central bank’s (MNB's) motivation? The extent of further forint weakness is likely to depend mainly on monetary policy, economists at Commerzbank report.

MNB can not allow any doubts as to whether it is prepared to further tighten its monetary policy

“The MNB can not allow any doubts as to whether it is prepared to further tighten its monetary policy beyond the rate hike of 100 bps priced in for today. Otherwise, the market is likely to feel confirmed in its concerns that the MNB is being driven by the weakened forint which would then come under even more intense pressure.”

“If the MNB remains on a clearly restrictive course, we see potential for the forint. In particular compared with other Central and Eastern European currencies, as both the Polish and the Czech central banks have signalled that further rate hikes are unlikely for now. If the MNB sticks to further rate hikes though the forint could soon become an attractive alternative in the region.”

• EUR/JPY snaps two-day uptrend while reversing from one-month high.
• Downbeat yields, upbeat Japan jobs report allowed buyers to take a breather.
• ECB vs. BOJ divergence restricts downside momentum.
• Preliminary readings of Germany’s August month HICP will be important for the day.

EUR/JPY bulls take a breather after cheering the biggest day since late June. That said, the cross-currency pair prints mild losses around 138.50, as it reverses from the monthly peak heading into Tuesday’s European session.

The quote’s latest losses could be linked to a pullback in the Treasury yields, as well as firmer Japan data. Also exerting downside pressure on the EUR/JPY prices could be the anxiety ahead of the flash readings of Germany’s key inflation gauge for August, namely Harmonized Index of Consumer Prices (HICP), expected 8.7% YoY versus 8.5% prior.

It should be noted that the US 10-year Treasury yields retreat to 3.08%, down two basis points (bps) following the two-day uptrend to refresh the monthly high.

On a different page, firmer prints of Japan’s Job/Applicants Ratio, to 1.29 in July versus 1.27 expected and prior, appears to have weighed on the EUR/JPY.

Furthermore, the energy crisis in Europe keeps the pair bears hopeful even as the bloc manages to stay ahead of the plan to reserve gas for winter. That said, the latest headlines suggest that Engie SA, a French multinational utility company conveyed that Russia’s Gazprom has informed them of a reduction in gas deliveries starting today due to disagreements between the parties over the application of several contracts.

Alternatively, the hawkish bias of the European Central Bank (ECB) policymakers contrasts with the Bank of Japan’s (BOJ) preference for easy money to challenge the EUR/JPY sellers of late.

Moving on, German inflation and Eurozone Consumer Confidence will be watched for immediate directions ahead of the Eurozone Consumer Price Index (CPI) for August, up for publishing on Wednesday.

Technical analysis

Although the 100-DMA and 50-DMA restrict the short-term EUR/JPY moves between 138.30 and 138.65, gradually advancing RSI, not overbought, keeps buyers hopeful.

German Economy Minister Robert Habeck said in an interview on Tuesday that only a small part of the gas levy would go to companies that don't actually need it.

Key quotes

“Less than 10% of the levy, which will be imposed from Oct. 1, would go to "free riders.”

“Companies that are benefiting from the levy even though they are not being hit by Europe's energy crisis are a problem still being worked out.”

Related reads

• Europe nears gas storage target early despite Russian supply cut – Bloomberg
• France’s Engie: Gazprom is to reduce gas deliveries starting Tuesday

Economists at Nomura expect EUR/USD to extend its slide into year-end. The pair is forecast at 0.90 this winter.

Inflation to climb further to multi-decade highs before peaking

“We expect a further rise in euro area HICP inflation in August, but expect the rise to be less sharp than previous increases. Naturally, for the market watching energy prices soar higher the question is how quickly will this feed through to CPI inflation with government subsidies making CPI inflation artificially low for now. This is why euro area producer prices may stand out more as a true reflection of price pressures and are also our preferred metric for calculating EUR’s fair value.”

“We expect EUR/USD to fall to 0.90 this winter, inflation to climb further to multi-decade highs before peaking, GDP to decline over the coming year and the ECB to first raise rates in response to higher inflation, and then cut next year as the energy-induced recession continues.”

See – Eurozone HICP Preview: Forecasts from five major banks, inflation has not yet peaked

Engie SA, a French multinational utility company, said in a statement on Tuesday that Russia’s Gazprom has informed them of a reduction in gas deliveries starting today due to disagreements between the parties over the application of several contracts.

more to come ...

Gold price is resuming its downtrend. In the view of FXStreet’s Dhwani Mehta, XAU/USD stays directed towards $1,712.

Any recovery attempts will need to find acceptance above $1,741

“Sellers need to take out the monthly lows of $1,720 to extend the bearish momentum towards the July 27 low of $1,712. Failure to sustain above the latter will open doors for a test of the $1,700 level.”

“On the upside, any recovery attempts will need to find acceptance above the rising trendline support turned resistance at $1,741. Bulls will eye the $1,750 psychological level as the next upside hurdle. Friday’s high of $1,759, around where the bearish 50-Daily Moving Average (DMA) lurks, will be the level to beat for XAU buyers.”

In the United Kingdom, inflation is likely to be fuelled further, increasing pressure on the Bank of England (BoE). Thus, GBP/USD seems to continuously trend weaker at present, economists at Commerzbank report.

No GBP recovery in sight

“The continued rise in gas prices entails the risk that the recession will be more pronounced and longer than previously expected. The pressure on the BoE is increasing to balance fighting the recession against high inflation rates.”

“Sterling is affected by structural issues. The effects of Brexit have not been overcome (e.g. labour shortage) and the currently ongoing leadership contest in the Tory party and the resulting uncertainties about the fiscal policy approach regarding economic challenges entails further risks.”

EUR/USD buyers struggle to keep the week-start rebound. In the view of economists at Commerzbank, investors are set to remain cautious amid the current challenging environment for the shared currency.

Euro scepticism continues 

“It is largely irrelevant for the euro whether the ECB hikes its key rate by 25, 50 or 75 bps in September. What matters instead is whether the FX market has confidence in the ECB to significantly tighten its monetary policy despite all adversities. And in that respect, the rate hikes to a final level of just under 2% currently priced in seem far from sufficient considering a rate of inflation of just under 9%.”

“The recently notoriously unreliable projections mean that the ECB wants to focus more on current developments when taking decisions. And the current environment (see inflation data) really does point towards stronger rate hikes for now. However, medium-term this is associated with the risk of the ECB quickly questioning its tightening measures once economic challenges increase.” 

“With a view to the coming winter and the threat of an energy crisis EUR-investors are likely to remain understandably cautious.”

Eurostat will release Harmonised Index of Consumer Prices (HICP) data for August on Wednesday, August 31 at 09:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of six major banks regarding the upcoming EU inflation print.

For August, the headline annualized HICP is seen a tad higher at 9.0%, with the core figure also likely to see a slight advance to 4.1%. On a monthly basis, the HICP in the old continent is expected to rise to 1.1% vs. 0.1% booked in July while the core HICP is foreseen at 0.4% against the previous figure of -0.2%. 

Commerzbank

“In July, the inflation rate in the euro area reached 8.9%, the highest level since the start of the monetary union. For August, there are signs of a slight decline to 8.8% thanks to the drop in prices for gasoline and heating oil. However, this does not mean that the high point of inflation is behind us. The underlying upward trend in prices is likely to have intensified again in August. The core inflation rate – i.e. the year-on-year rate of change in the consumer price index excluding the volatile prices for energy, food, alcohol and tobacco – is likely to have risen from 4.0% to 4.3%. And the rate of food inflation is also likely to have risen significantly to more than 10%. Already in September, the inflation rate could mark a new all-time high. The expiry of the 9-euro ticket for public transport and the gasoline discount in Germany at the end of August alone will push the rate up by more than 0.3 percentage points. Gas prices are then likely to take another leap upward in October when many utilities in Germany levy the gas surcharge for the first time. This could push the inflation rate in the eurozone above 10%.”

Danske Bank

“We look for a marginal slowdown in core inflation to 3.9%, but a further increase in headline inflation to 9.2% on the back of higher energy prices. In contrast to the US, we have not seen the inflation peak in the euro area yet and we look for further increases to double-digit rates in Q4, leaving the pressure on for more ECB hikes.”

TDS

“While declining fuel prices will weigh on inflation across the euro area, we still look for another acceleration in German HICP, mostly due to another strong increase in gas and electricity prices. However, we think the pullback in fuel will be enough to leave aggregate euro area inflation unchanged at 8.9% YoY, despite core strengthening to 4.2% YoY).”

SocGen

“We expect the August readings to show a pick-up in HICP of 10 bps to 9.0% YoY, despite the fall in gasoline prices and in core inflation of 30 bps to 4.3% YoY. Overall, we think stronger food and core inflation could push inflation to a cyclical peak of 9.7% in September. We think HICP will average 8.2% this year and 6.1% next year, while we see core inflation averaging 3.9% in 2022 and 4.4% in 2023.”

Citibank

“We expect headline HICP to print at 9.0% YoY, up from 8.9% in July, and core HICP at 4.2% YoY. This would imply a MoM seasonally-adjusted print for core of 0.6% MoM, replicating the July strong print.”

Deutsche Bank

“We see YoY CPI ticking down from the record +8.9% in July to +8.8% in August. However, we haven’t reached the peak yet, as they see CPI rebounding again in September up to +9.3%, so the ECB would still have a long way to go to get back to its target. On the question of core inflation, we see that moving up to +4.3% in August YoY, which would be the highest since the formation of the single currency.”

• EUR/USD picks up bids to poke the key upside hurdle.
• 200-HMA, upper line of the descending triangle highlight 1.0005 as important resistance.
• Two-week-old descending trend line adds to the resistance.
• Steady RSI, bearish MACD signals hint at further grinding of prices towards the north.

EUR/USD buyers struggle to keep the week-start rebound heading into Tuesday’s European session. In doing so, the major currency pair jostles with the 200-HMA and upper line of the nearby descending triangle bullish chart pattern.

It’s worth noting, however, that the RSI (14) remains sidelined and the MACD flashes bearish signals to challenge the upside momentum. Even so, the quote’s refrain from declining below the 0.9980 support keeps intraday buyers hopeful.

That said, the intraday run-up needs validation from the 1.0005 resistance confluence including the aforementioned HMA and the triangle’s top line.

Even so, a downward sloping resistance line from August 17, close to 1.0050 by the press time, could test the EUR/USD buyers. Also acting as an upside hurdle is the 61.8% Fibonacci retracement level of August 17-23 fall, near 1.0090.

Alternatively, a clear downside break of the stated triangle’s support line, close to 0.9980 at the latest, could recall the pair sellers. Following that, a south-run towards the 0.9900 threshold can’t be ruled out.

In a case where EUR/USD remains bearish past 0.9900, the lows marked during September and October 2002, respectively near 0.9685 and 0.9610, could lure the pair sellers.

EUR/USD: Hourly chart

Trend: Limited recovery expected

• NZD/USD is hovering around 0.6150 to cover time-based correction ahead of US NFP.
• As the US economy is operating at full employment levels, a minor decline in US NFP won’t impact DXY.
• The RBNZ is likely to announce a couple of interest rate hikes ahead.

The NZD/USD pair is displaying back-and-forth moves in a narrow range of 0.6139-0.6152 in the early European session. The asset is trading lackluster after a firmer rebound from Monday’s low near 0.6100. The overall context is indicating that the pullback move by the kiwi bulls will escalate further as the market mood looks firmer. The risk undertone seems bullish as the impact of the hawkish stance adopted by Federal Reserve (Fed) chair Jerome Powell at the Jackson Hole Economic Symposium looks fading now.

Now, investors are building their positions ahead of the US Nonfarm Payrolls (NFP) data, which will release on Friday. Market veterans are worried over an expected decline in employment generation numbers, which are expected to land at 285k. However, a decline in the US NFP is not so bad for the US dollar index (DXY) as the US economy is already operating at full employment levels. And, room for more job creation is extremely low ahead.

The US Unemployment Rate is expected to remain stable at 3.5%. And, the Average Hourly Earnings data is seen higher by 10 basis points (bps) at 5.3%. An improvement in the labor cost index doesn’t seem lucrative as price pressures are skyrocketing and a mild improvement in the paychecks won’t offset the forced higher payouts.

On the NZ front, the Reserve Bank of New Zealand (RBNZ) is continued on the path of hiking its Official Cash Rate (OCR). As per commentary from RBNZ Governor Adrian Orr at Jackson Hole, price stability carries significant importance over growth prospects in the current period. Investors should brace for a couple of interest rate hikes ahead.

NZD/USD popped a tad higher on Monday. Nonetheless, economists at ANZ Bank believe that the outlook for the kiwi remains bleak.

It looks more like a USD correction than a peak in the USD

“Having drifted off a fresh high, the USD move looks more like a correction than a direction shift, especially with the global growth outlook souring and safe-haven appeal a factor again.”

“Apart from higher interest rates, the advantage of which is narrowing rapidly, the NZD’s appeal is waning as the cycle matures.”

Further downside could now see NZD/USD recede to the 0.6060 region in the near term, note FX Strategists at UOB Group Quek Ser Leang and Lee Sue Ann.

Key Quotes

24-hour view: “We expected NZD to weaken yesterday but we were of view that ‘0.6060 is likely out of reach’. NZD subsequently dropped to 0.6103 before staging a surprisingly sharp rebound (high of 0.6167). The rebound appears to be running ahead of itself and NZD is unlikely to strengthen much further. For today, NZD is more likely to trade sideways between 0.6125 and 0.6175.”

Next 1-3 weeks: “We highlighted yesterday that downward momentum has improved and NZD could weaken towards 0.6060. NZD subsequently dropped to 0.6103 before rebounding sharply. Downward momentum has eased somewhat but only a break of 0.6185 (no change in ‘strong resistance’ level from yesterday) would indicate that downward momentum has dissipated.”

Considering advanced prints from CME Group for crude oil futures markets, traders added around 9.2K contracts to their open interest positions after three daily drops in a row on Monday. Volume, instead, remained erratic and went down by around 61.4K contracts.

WTI now targets the $100.00 mark near term

WTI prices started the week on a strong foot and surpassed the $97.00 mark amidst increasing open interest. Against that, further advance remains on the cards for the commodity in the very near term and with the next target at the key $100.00 mark per barrel.

• USD/TRY seeks fresh clues while taking rounds to the yearly top.
• Turkiye reported 147% YoY jump in foreign trade deficit during July.
• Optimism surrounding Ukraine’s grain exports and likely easing of supply crunch challenge pair buyers.
• The sluggish session, cautious mood ahead of Friday’s US NFP also stops USD/TRY bulls.

USD/TRY bulls take a breather, after refreshing the yearly top to 18.20, as the US dollar struggles for clear directions during the early Tuesday morning in Europe. Even so, downbeat catalysts surrounding Turkiye join hawkish Fed bets to keep the pair buyers hopeful.

Among them is the heavy trade deficit from Ankara. “Turkey's foreign trade deficit surged 147% year-on-year to $10.69 billion in July, with imports surging 41.4%, data from the Turkish Statistical Institute showed on Monday,” per Reuters. With this, the nation not only failed to achieve its previous target of returning to the trade surplus but also marks a nearly double trade deficit.

While defending the move, the policymakers appear optimistic by spotting the Ukrainian release of grain exports. “Ukraine's agricultural exports could rise to 6 million-6.5 million tonnes in October, double the volume seen in July, as its seaports gradually reopen, the country's agriculture minister said on Monday,” mentioned Reuters.

On a broader front, fears of economic slowdown, amid the aggressive rate hikes from the global central banks, also exert downside pressure on the steel price. That said, the CME’s FedWatch Tool signals a 72.5% chance of the Fed’s 75 basis points (bps) rate hike in September.

It should be noted that Turkiye’s resistance to the rate hike, despite nearly 80% inflation, joins the downbeat commodities to exert additional downside pressure on the USD/TRY prices.

Moving on, a light calendar at home emphasizes the US Consumer Confidence for August and comments from Fed speakers as the main catalysts to watch for fresh impulse. However, major attention will be given to Friday’s US jobs report as Fed Chair Powell raised concerns over economic slowdown and job market stress in his Jackson Hole speech.

Technical analysis

A slower grind to the north is likely to continue as USD/TRY remains beyond the five-week-old immediate support line near 18.10.

• GBP/JPY is receiving buying interest near 162.00 despite upbeat Japan’s employment data.
• Japan’s Retail Sales data is expected to remain upbeat despite little-deviated price pressures.
• Energy bills are likely to accelerate inflationary pressures in the UK economy.

The GBP/JPY pair has sensed a mild buying interest after hitting a low of 162.00 in the early European session. Earlier, the asset remained in a negative trajectory after the release of Japan’s employment data. Japan’s jobless rate remained unchanged at 2.6%. While the Jobs/Applicants ratio improved significantly to 1.29 from the expectations and the prior release of 1.27.

Japan’s tight labor market strengthened the yen bulls for a short span of time, however, the downside bias remains unchanged as the Bank of Japan (BOJ) is continued with its prudent monetary policy stance. BOJ’s agenda of keeping the inflation rate above 2% could not attain without soaring wages in Tokyo. Japan’s households won’t be able to make higher payouts for inflation-adjusted goods and services amid lower-valued paychecks.

Going forward, investors will focus on Japan’s Retail Sales data, which is seen on Wednesday. The annual Retail Sales are expected to display a decent upside to 1.9% against the prior release of 1.5%. This indicates an improvement in retail demand, which indicates the confidence of consumers in the economy. In times, when Western leaders are displaying weaker Retail Sales numbers, upbeat Japan’s Retail Sales data will strengthen the yen bulls.

Meanwhile, pound bulls are worried over soaring energy bills as the regulator has announced an increase in the price cap of energy prices by 80%. The inflation rate in the UK economy is still trading at four-decade levels and further acceleration due to higher energy bills will dent the sentiment of the households.

In the opinion of FX Strategists at UOB Group Quek Ser Leang and Lee Sue Ann, GBP/USD could extend the drop to the 1.1630 region in the next few weeks.

Key Quotes

24-hour view: “We expected GBP to weaken yesterday but we were of the view ‘the major support at 1.1630 is likely out of reach’. Our view was not wrong as GBP dropped to 1.1650 before rebounding. The rebound amidst oversold conditions suggests GBP is unlikely to weaken further. For today, GBP is more likely to trade sideways, expected to be within a range of 1.1670/1.1760.”

Next 1-3 weeks: “Yesterday, we noted that downward momentum has improved quickly and GBP could weaken towards 1.1630. GBP subsequently dropped to 1.1650 before rebounding. There is no change in our view for now even though oversold shorter-term conditions could lead to a couple of days of consolidation first. Overall, only a break of 1.1800 (no change in ‘strong resistance’ level from yesterday) would indicate that GBP is unlikely to weaken further.”

• USD/CHF prints mild losses around five-week high, snaps two-day uptrend.
• Convergence of 50-DMA, previous resistance from June and support of ascending triangle challenges bears.
• Multiple hurdles prevail to test buyers, sellers won’t hesitate to poke 200-DMA on breaking 0.9615.

USD/CHF holds onto the early Asian session’s bearish moves while snapping a two-day uptrend around the monthly high. In doing so, the Swiss currency (CHF) pair remains inside a short-term ascending triangle formation.

Given the RSI retreat, USD/CHF buyers appear to have run out of steam, which in turn favors the quote’s latest weakness towards the key 0.9620-15 support confluence, including the 50-DMA, previous resistance from June and the support line of the monthly ascending triangle.

In a case where USD/CHF breaks the 0.9615 support convergence, the pair’s south-run towards the 200-DMA support near 0.9450, as well as the monthly low of .9370 can’t be ruled out.

On the flip side, the pair’s further upside needs to defy the aforementioned triangle formation between 0.9710 and 0.9615.

Following that, a gradual upward trajectory towards the highs marked during July and June, respectively around 0.9885 and 1.0050, could entertain the USD/CHF buyers.

It should be observed that the 1.0000 psychological magnet could act as an extra filter to the north.

USD/CHF: Daily chart

Trend: Short-term pullback expected

Open interest in gold futures markets rose for the second session in a row on Monday, this time by just 454 contracts according to preliminary readings from CME Group. On the other hand, volume reversed two consecutive daily builds and shrank by around 24.3K contracts.

Gold: Next on the downside comes $1,711

Gold prices charted an inconclusive session at the beginning of the week amidst a small uptick in open interest. That said, further weakness should not be ruled out while the next support now emerges at $1,711 per ounce troy (weekly low July 27).

• Steel price extends the week-start pullback from a two-week top.
• China announces further covid-led manufacturing restrictions in Shenzhen.
• Output restrictions to limit emissions, talks of industry-wide capacity reduction targets also weigh on metal prices.
• Hawkish Fed bets join mixed concerns surrounding Beijing to keep sellers hopeful.

Steel price remains pressured on early Tuesday, drowned by grim concerns surrounding the largest consumer China, as well as fears of economic slowdown due to the aggressive central bank actions.

That said, steel rebar prices on the Shanghai Futures Exchange (SFE) fell 3.1% while hot-rolled coil dropped 2.4%. Stainless steel lost 1.2% on a day by the press time.

Steel prices stretched losses after authorities in China's southern city of Shenzhen shut the world's largest electronics market of Huaqiangbei and suspended service at 24 subway stations on Monday in a bid to curb a COVID-19 outbreak reported Reuters.  Additionally, steel production control to curb emissions in China also dents demand for metal.

It should be noted that Reuters also came out with the news suggesting that in Tangshan, China's biggest steel-producing city, authorities and mills reportedly met on Friday to discuss capacity reduction targets. “To meet its target, Tangshan's average daily output for the rest of the year should be less than 314,700 tonnes, compared with 352,300 tonnes over January-July, based on a calculation by industry information provider Mysteel,” per the news.

Elsewhere, Politico came out with the news suggesting the Biden administration to ask congress to approve a $1.1 billion arms sale to Taiwan, which in turn appears to have triggered the latest run-up. Before that, the movement of the US vessels in the Taiwan Strait and American diplomats’ visits to Taipei teased China. On the same line were concerns raised by Financial Times (FT), over the mounting pressure on Chinese banks. “Chinese residential property owners are rushing to pay off their mortgages early, heaping pressure on commercial banks that were already struggling to identify attractive lending opportunities,” mentioned FT.

On a broader front, fears of economic slowdown, amid the aggressive rate hikes from the global central banks, also exert downside pressure on the steel price. That said, the CME’s FedWatch Tool signals a 72.5% chance of the Fed’s 75 basis points (bps) rate hike in September.

• Gold price is marching towards $1,750.00 as DXY is performing subdued after a bumper rally.
• An expected decline in the US ISM PMI has limited DXY’s gains.
• The odds of a bullish reversal have strengthened as the gold prices have formed a balanced profile on a higher side.

Gold price (XAU/USD) has picked bids below $1,735.00 and is expected to advance firmly. The precious metal is oscillating in a tad wider range of $1,734.00-1,741.00 after a firmer rebound from Monday’s low at $1,720.40. Investors are underpinning the yellow metal against the greenback as the US Institute of Supply Management (ISM) is expected to display a subdued performance, which is due on Thursday.

As per the consensus, the US ISM Manufacturing PMI is expected to land at 52, lower than the prior release of 52.8. There is no denying the fact that the street is worried over shrinking economic activities led by the unavailability of cheap money for disposal. Therefore, a decline in manufacturing PMI forecasts is impacting investors’ sentiment.  

Apart from that, investors will also focus on New Orders Index data, which is expected to improve to 48.5 vs. 48 reported earlier. The New Orders Index data indicates forward demand for goods and an improvement in economic data may support the DXY. While, the show-stopper event for his week will be US Nonfarm Payrolls (NFP), which will release on Friday.

Gold technical analysis

On an intraday timeframe, the gold price is auctioning in a balanced profile in a narrow range of $1,734.00-1,741.25. Investors should be aware of the fact that the formation of a balanced profile above the prior one bolsters the odds of a bullish reversal.

The 50-period Exponential Moving Average (EMA) (50) at $1,735.83 is overlapping with the gold prices, which indicates a consolidation ahead. Also, the relative Strength Index (RSI) (14) is oscillating in 40.00-60.00, which signals that the market participants are awaiting a potential trigger.

Gold intraday chart

FX Strategists at UOB Group Quek Ser Leang and Lee Sue Ann suggest EUR/USD now faces some consolidation between 0.9900 and 1.0085.

Key Quotes

24-hour view: “Our expectations for EUR to ‘dip below 0.9900’ yesterday were incorrect as it rebounded strongly from 0.9912 (high has been 1.0028). Despite the robust rebound, upward momentum has not improved by much. That said, there is room for EUR to edge higher from here even though any advance is likely limited to a test of 1.0035. The major resistance at 1.0085 is not expected to come under threat. On the downside, a breach of 0.9955 (minor support is at 0.9975) would indicate that the current mild upward pressure has eased.”

Next 1-3 weeks: “We highlighted yesterday (29 Aug, spot at 0.9935) that the recent EUR weakness has ended. We noted ‘while shorter-term downward momentum still suggests downside risk, EUR has to break below 0.9870 before a sustained decline is likely’. EUR subsequently rebounded and took out our ‘strong resistance’ level at 1.0015 (high of 1.0028). The break of the ‘strong resistance’ level indicates that EUR is not ready to head lower just yet. From here, EUR is likely to consolidate and trade between 0.9900 and 1.0085.”

• USD/JPY extends pullback from a six-week high, renews intraday low of late.
• Rising wedge bearish formation gains major attention but 137.00 is the key to further downside.
• Yearly high appears a tough nut to crack as RSI nears the overbought territory.

USD/JPY takes offers to renew intraday low around 138.40 during early Tuesday morning in Europe. In doing so, the yen pair prints the first daily loss in three while reversing from the 1.5-month high marked the previous day.

That said, the quote’s latest pullback could be linked to the failure to cross an upward-sloping resistance line from August 05. Also highlighting the odds of a pullback is the nearly overbought RSI (14).

While the latest pullback moves are likely to direct USD/JPY bears towards the 138.00, the pair’s further weakness appears difficult as the confluence of the 10-DMA and a short-term support line challenges bears near the 137.00 round figure.

It’s worth noting, however, that the rising wedge bearish chart pattern around the multi-day high could gain major force if the USD/JPY breaks the 137.00 support.

Following that, the 61.8% Fibonacci retracement level of May-July upside and the monthly low, respectively near 131.30 and 130.40, could entertain traders during the theoretical target surrounding the 130.00 psychological magnet.

Meanwhile, recovery moves may aim to defy the wedge formation by crossing the 139.00 resistance.

Even so, the latest multi-month high near 139.40 and the 140.00 threshold might join the overbought RSI to probe the USD/JPY bulls.

USD/JPY: Daily chart

Trend: Further weakness expected

Japan’s Finance Minister Shunichi Suzuki said on Tuesday, the government will monitor US monetary policy trends, market moves when asked about post-Jackson Hole financial market turmoil.

Additional quotes

Market reaction

USD/JPY is holding lower ground around 138.40, losing 0.19% on the day, at the time of writing.

• Asian equities trade mixed amid softer yields, light calendar.
• Market’s pricing of a 75 bps Fed rate hike in September grew to 72.5%.
• Fresh covid woes in China, fears for Beijing’s banks and Sino-American tussles weigh on sentiment.
• Yields consolidate recent gains around monthly highs ahead of the key US data.

Markets in the Asia-Pacific region fail to portray a clear direction as China joins the hawkish Fed expectations to challenge the bulls amid a quiet session on Tuesday. Also keeping the traders on their toes is a cautious mood ahead of Friday’s US jobs report.

That said, MSCI’s index of the Asia-Pacific shares outside Japan drops 0.70% intraday whereas Japan’s Nikkei 225 adds 1.20% intraday by the press time. Further, stocks in Australia and New Zealand are also positive even as China’s key equity benchmarks drop between 0.50% and 0.70%, not to forget the 0.80% intraday loss of Hang Sang, at the latest.

On a broader front, the US 10-year Treasury yields retreat to 3.09% following the two-day uptrend to refresh the monthly high whereas the S&P 500 Futures struggles between gains and losses after the downbeat performance of Wall Street.

Politico came out with the news suggesting the Biden administration to ask congress to approve a $1.1 billion arms sale to Taiwan, which in turn appears to have triggered the latest run-up. Before that, the movement of the US vessels in the Taiwan Strait and American diplomats’ visits to Taipei teased China. On the same line were concerns raised by Financial Times (FT), over the mounting pressure on Chinese banks. “Chinese residential property owners are rushing to pay off their mortgages early, heaping pressure on commercial banks that were already struggling to identify attractive lending opportunities,” said the news.

Elsewhere, China's southern city of Shenzhen shut the world's largest electronics market of Huaqiangbei and suspended service at 24 subway stations on Monday in a bid to curb a COVID-19 outbreak.

It should be noted that the CME’s FedWatch Tool signals a 72.5% chance of the Fed’s 75 basis points (bps) rate hike in September.

Given the recently hawkish Fedspeak at the Jackson Hole Symposium, coupled with the fears of the economic slowdown and softer employment figures, Friday’s US job numbers will be crucial for investors.

Speaking during a Monday meeting of the State Council, China’s cabinet, the country’s Premier Li Keqiang said that Beijing has announced “more forceful” economic policies this year than it did in 2020

Key quotes

The size of the stimulus in 2022 has been “reasonable” and “appropriate.”

This year, in response to new challenges, we decisively launched a package of policies and follow-up policies to stabilize the economy, with the strength exceeding 2020."

Market reaction

AUD/USD remains pressured below 0.6900, despite the above comments. The pair was last seen trading at 0.6890, down 0.17% on the day.

• GBP/USD has scaled above the immediate hurdle of 1.1700 firmly.
• As the US economy is operating at full employment level, a decline in US NFP is admissible.
• A decline in US earnings data may dent the market sentiment.

The GBP/USD pair has delivered an upside break of the consolidation formed in a narrow range of 1.1687-1.1697 and is aiming to sustain above the immediate hurdle of 1.1700. The cable has turned sideways after a meaningful pullback move from Monday’s low at 1.1650. The asset is expected to continue its doldrums as investors are getting sidelined ahead of the US Nonfarm Payrolls (NFP), which will release on Friday.

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. Also, 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.

Apart from that, investors will also focus on 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. Sub-par growth in households’ earnings in order to offset the higher payouts may dent the sentiment of market participants.

On the UK front, soaring electricity and energy prices are creating havoc for the Bank of England policymakers. The UK economy is tackling multiple headwinds such as political instability after UK PM Boris Johnson's resignation, the energy supply crisis, and higher projections for the inflation rate.

• USD/INR takes offers to renew intraday low, reverses from monthly high.
• RSI retreat, sluggish MACD hints at further weakness towards short-term support line.
• Bulls await a sustained daily closing beyond 80.00 to retake control.

USD/INR snaps a three-day uptrend while taking a U-turn from the monthly top, taking offers to refresh the intraday low near 79.85 by the press time.

That said, the Indian rupee (INR) pair’s latest losses could be linked to the quote’s failure to cross a 1.5-month-old horizontal resistance surrounding 80.15-20.

The pullback moves also take clues from the sluggish MACD and RSI retreat to direct bears towards an upward sloping support line from August 03, near 79.70 by the press time.

Following that, the 20-DMA and another ascending support line, this time from early May, respectively near 79.60 and 79.20, could challenge the USD/INR bears.

It should be observed that a clear downside break of the 79.20 support could make the pair vulnerable to testing the monthly low of 78.41.

Alternatively, recovery moves need steady trading beyond the 80.00 threshold to convince buyers, in addition to breaking the 80.20 resistance mentioned above.

To sum up, USD/INR bulls appear to have run out of steam but the bears have a long way before taking control.

USD/INR: Daily chart

Trend: Pullback expected

• EUR/USD is aiming to sustain above the magical figure of 1.0000 for a fresh rally.
• The German HICP is expected to advance further to 8.7% amid the energy crisis.
• A decline in ISM Manufacturing PMI may weigh pressure on the DXY.

The EUR/USD pair has displayed a minor rebound after hitting the immediate support near 0.9980 in the Asian session. On a broader note, the asset is oscillating in a range of 0.9981-1.0029 and is likely to remain rangebound as the market participants are awaiting the release of the Germany Inflation figures.

As per the preliminary estimates, the German Harmonized Index of Consumer Prices (HICP) is expected to land at 8.7%, higher than the prior release of 8.5%. The investing community is aware of the fact that the energy crisis is driving the inflationary pressure in Germany. Also, Germany is a core member of the European Union (EU), therefore a meaningful impact on German economic activities will have repercussions on the shared currency.

As price pressures are expected to further rise in Germany, the European Central Bank (ECB) would require an adaptation of a hawkish stance on the interest rates. ECB President Christine Lagarde may tighten the policy rates in order to bring price stability. Meanwhile, supply cuts from Nord Stream 1 pipeline to Germany have started due to unscheduled maintenance. This may further escalate the energy shortage.

On the dollar front, the US dollar index (DXY) is displaying a lackluster performance in the Asian session. The DXY is hovering around 108.80 as investors are awaiting the release of the ISM Manufacturing PMI data, which will release on Thursday. The economic data is expected to land at 52, lower than the prior release of 52.8. As the Federal Reserve (Fed) is entirely focused on achieving price stability, economic activities are expected to go through severe pain.

• AUD/USD reverses the previous day’s rebound from six-week low.
• Australia Building Permits slump in July, down -17.2% versus -2.0% expected.
• Headlines surrounding China, hawkish Fed bets recall bears.
• US Consumer Confidence for August, Fedspeak could entertain before Friday’s US NFP.

AUD/USD bears return to the table, after an upbeat start to the key week, as risk-aversion underpins the US dollar’s safe-haven demand during early Tuesday morning in Europe. That said, the Aussie pair drops 0.37% to revisit 0.6880 levels, after a failed rebound from the 1.5-month low the previous day.

With this, the AUD/USD pair justifies its risk barometer status, as well as downbeat Aussie data, to portray the bearish play.

Australia’s Building Permits for July declined to -17.2% versus -2.0% market forecasts and -0.6% revised prior.

Also likely to have weighed on the AUD/USD prices could be the push on the Aussie industries towards increasing wages and the resistance to tame inflation. Andrew McKellar, Chief Executive Officer of the Australian Chamber of Commerce and Industry warned during a Bloomberg interview against pushing for wage growth to beat the current levels of inflation.

Elsewhere, downbeat headlines surrounding Australia’s biggest customer China also please AUD/USD bears. Politico came out with the news suggesting the Biden administration to ask congress to approve a $1.1 billion arms sale to Taiwan, which in turn appears to have triggered the latest run-up. Before that, the movement of the US vessels in the Taiwan Strait and American diplomats’ visits to Taipei teased China. On the same line were concerns raised by Financial Times (FT), over the mounting pressure on Chinese banks. “Chinese residential property owners are rushing to pay off their mortgages early, heaping pressure on commercial banks that were already struggling to identify attractive lending opportunities,” said the news.

It’s worth observing that the market pricing of a 75 bps Fed rate hike in September grew to 72.5% at the latest, per CME’s FedWatch Tool, which in turn acts as an additionally bearish catalyst for the AUD/USD pair traders to watch.

While portraying the mood, the US 10-year Treasury yields retreat to 3.09% following the two-day uptrend to refresh the monthly high whereas the S&P 500 Futures struggles between gains and losses after downbeat performance of Wall Street.

To sum up, the risk-off mood and the firmer DXY could keep the AUD/USD bear hopeful, today’s US Consumer Confidence for August and comments from Fed speakers could entertain intraday traders. However, major attention will be given to Friday’s US jobs report as Fed Chair Powell raised concerns over economic slowdown and job market stress in his Jackson Hole speech.

Technical analysis

AUD/USD fades the bounce off a 3.5-month-old horizontal support area, surrounding 0.6850-55, as the corrective pullback failed to cross the 50-DMA hurdle of 0.6912.

China’s Finance Ministry said in a statement on Tuesday, they will strive to stabilize employment and prices.

Additional comments

Market reaction

AUD/USD shows little to no reaction on the above headlines. The spot is currently trading at 0.6880, down 0.30% on the day.

• Copper prices have witnessed a steep fall as the DXY concludes time correction.
• Risk-off market mood is forcing investors to channel their funds into the DXY.
• A resurgence of Covid-19 in China has triggered fears of a slowdown in the overall demand.

Copper prices are declining firmly after sensing selling pressure around the critical hurdle of $3.625 in the Asian session. The pullback move displayed by the asset after hitting a low of $3.5715 on Monday is losing its stream and now the conclusion of the pullback move is indicating a fresh leg of selling ahead.

The base metal is expected to remain in the grip of bears amid negative market sentiment. The US dollar index (DXY) is set for a fresh upside move as investors have started supporting the DXY on hawkish commentary from Federal Reserve (Fed) chair Jerome Powell on guidance over interest rates at Jackson Hole Economic Symposium.

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.

On the China front, the resurgence of Covid-19 cases has accelerated fears of a slowdown in the Chinese economy. 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. A tepid demand ahead may weigh pressure on copper prices.

Goldman Sachs’ Chief Economist Jan Hatzius is brushing away the market’s concerns, preferring to focus on Powell’s less hawkish commentary.

Key quotes

“We continue to expect the FOMC to slow the pace from here, delivering a 50bp hike in September and 25bp hikes in November and December, for a terminal rate of 3.25-3.5%.”

“However, additional CPI and employment reports will be available by the September meeting, and Powell stressed that the decision will ‘depend on the totality of the incoming data and the evolving outlook.”

“We see the risks to both the near-term pace and our terminal rate forecast as tilted to the upside.”

• USD/CAD picks up bids to reverse the previous day’s pullback from six-week high.
• Sustained trading beyond key moving averages, support lines favor buyers.
• Sellers need validation from 1.2900 to retake control.

USD/CAD renews intraday top near 1.3025 as it rebounds from the 50-HMA to consolidate the week-start losses around a 1.5-month high. That said, the Loonie pair’s recovery moves also take clues from the MACD signals.

Given the looming bull cross of the MACD line to the signal line, as well as the bounce off the key HMA, USD/CAD may witness further upside.

However, a one-week-old upward sloping resistance line, near 1.3080 by the press time, could test the advances before highlighting the 1.6100 threshold.

Following that, 1.3130 and the 1.3200 round figures may entertain USD/CAD bulls before directing them to the yearly high near 1.3240.

Alternatively, pullback moves may initially test the 50-HMA support level of the 1.3000 threshold.

Even if the quote drops below the 1.3000 mark, the convergence of the 100-HMA and the 200-HMA, near 1.2980, will challenge the USD/CAD bears.

It’s worth noting that ascending support lines from August 11 and 17, respectively around 1.2940 and 1.2925, appear the key challenges for the pair sellers to watch past 1.2980. Additionally, the 1.2900 round figure appears the last defense of the pair buyers.

USD/CAD: Hourly chart

Trend: Further upside expected

• USD/CNH takes the bids to refresh intraday top, stays around multi-day high.
• Pessimism surrounding Chinese banks, Sino-American ties propel latest moves.
• Fed vs. PBOC divergence underpins the broad bullish bias.
• US Consumer Confidence, risk catalysts and Fedspeak are important ahead of NFP.

USD/CNH prints a three-day uptrend as bulls flirt with the 6.9200 threshold while keeping reins around the highest levels since August 2020. That said, the offshore Chinese yuan (CNH) pair’s latest run-up could be linked to the market’s risk-off mood, as well as concerns surrounding Beijing.

Politico came out with the news suggesting the Biden administration to ask congress to approve a $1.1 billion arms sale to Taiwan, which in turn appears to have triggered the latest run-up. Before that, the movement of the US vessels in the Taiwan Strait and American diplomats’ visits to Taipei teased China.

It’s worth noting that Financial Times (FT) raised concerns over the mounting pressure on Chinese banks to also add to the market’s fears. “Chinese residential property owners are rushing to pay off their mortgages early, heaping pressure on commercial banks that were already struggling to identify attractive lending opportunities,” said the news.

That said, the divergence between the monetary policies of the People’s Bank of China (PBOC) and the US Federal Reserve (Fed) appear to be the main catalyst for the USD/CNH bull run. Recently, 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, around 108.90 at the latest.

On Monday, 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%.

Amid these plays, the US 10-year Treasury yields retreat to 3.10% following the two-day uptrend to refresh the monthly high. With this, the S&P 500 Futures pares mild losses while tracking Wall Street.

While the risk-off mood and the firmer DXY could keep the USD/CNH buyers hopeful, today’s US Consumer Confidence for August and comments from Fed speakers could entertain intraday traders. However, major attention will be given to Friday’s US jobs report as Fed Chair Powell raised concerns over economic slowdown and job market stress in his Jackson Hole speech.

Technical analysis

A clear upside break of the ascending resistance line from April 2021, near 6.9050 by the press time, directs USD/CNH buyers towards June 2019 peak surrounding 6.9630.

In an interview with Bloomberg TV, Andrew McKellar, Chief Executive Officer of the Australian Chamber of Commerce and Industry warned against psuhing for wage growth to beat the current levels of inflation.

Key quotes

Wages are “going to increase with that market pressure. We can’t afford to chase after the inflation numbers that we are seeing at the moment.”

“That would be a big mistake.”

“The No.1 issue facing Australian firms at the moment is labor and skills shortages. We need solutions and we need them quickly.” 

“We are in an intense competition for skilled labor.”

“We have to reduce the red-tape, we have to make it much easier to access those skilled migrants and encourage them to come to Australia. That’s the only way we are going to maintain our position.”

Market reaction

At the time of writing, AUD/USD is losing 0.33% on the day to trade at 0.6880, having failed to find acceptance once again above 0.6900.

• Gold price fades upside momentum as US dollar bounces off intraday low.
• Market sentiment remains divided amid softer yields, mildly bid stock futures.
• Easing woes of energy crisis in Europe, fears of more US-China tussle trouble XAU/USD traders.

Gold price (XAU/USD) refreshes intraday low near $1,736 during Tuesday’s Asian session, following a failed bounce off the one-month low. In doing so, the metal prices take clues from the US dollar’s latest rebound from the intraday low, as well as justify the challenges to the market sentiment emanating from China and the central bankers’ front.

That said, the US Dollar Index (DXY) rebound from the daily bottom to 108.81, after reversing from a fresh 19-year high the previous day. In doing so, the greenback’s gauge versus the six major currencies seems to justify the market’s fears of higher rates despite the impending economic slowdown, as previously signaled by Fed Chair Jerome Powell.

It’s worth noting that the chatters of an increase in the Sino-American tussles over Taiwan also exert downside pressure on the XAU/USD prices, mainly due to Beijing’s status as one of the world’s biggest commodity users. The news also fuels the US dollar’s safe-haven appeals. Recently, Politico came out with the news suggesting the Biden administration to ask congress to approve a $1.1bln arms sale to Taiwan. Before that, the movement of the US vessels in the Taiwan Strait and American diplomats’ visits to Taipei teased China.

Alternatively, Bloomberg’s latest news surrounding the Eurozone’s ability to battle the energy crisis seems to challenge the XAU/USD bears. “The European Union is set to meet its gas storage filling goal two months ahead of target as the bloc braces for a tough winter with Russia limiting supplies and soaring energy prices raging through the continent,” mentioned Bloomberg.

On Monday, markets consolidated the latest moves amid a light calendar and mixed Fedspeak. 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%.

Amid these plays¸ the US 10-year Treasury yields retreat to 3.10% following the two-day uptrend to refresh the monthly high. With this, the S&P 500 Futures pares intraday gains.

Moving on, emphasizes the US Consumer Confidence for August and comments from Fed speakers as the main catalysts to watch for fresh impulse. However, major attention will be given to Friday’s US jobs report as Fed Chair Powell raised concerns over economic slowdown and job market stress in his Jackson Hole speech.

Technical analysis

Gold price pulls back from the previous support line from July 21, backed by RSI (14) retreat.

The latest weakness in prices, however, needs validation from the 61.8% Fibonacci retracement level of July-August upside, near $1,729, to convince XAU/USD sellers.

Following that, $1,710 and the yearly low marked in the last month around $1,680 will be in focus.

Alternatively, an upside clearance of the $1,740 immediate hurdle could quickly propel gold price towards a weekly resistance line near $1,761.

If at all the XAU/USD prices remain firmer past $1,761, the 100-SMA level near $1,766 might act as the last defense for bears before directing the quote towards the monthly peak of $1,807.

Gold: Four-hour chart

Trend: Further weakness expected

Bank of Korea (BOK) Governor Rhee Chang-yong said on Tuesday, “there has been no change in policy since the last meeting,” despite Fed Chair Jerome Powell’s hawkish stance.

Key quotes

We will closely examine the fed's policy decisions and their impact on financial markets.

Future Fed rate hikes may increase global market volatility.

There has been no change in policy since the last meeting.

Market reaction

USD/KRW rebounded firmly from near 1,344.50 levels on the above comments. The pair was last seen trading at 1,348.95, up 0.22% on the day.

Analysts at Goldman Sachs offer their outlook on the AUD/USD pair, citing they remain tactically cautious amid China's growth concerns.

Key quotes

"Since early April, the Australian dollar has weakened by -9% against the US dollar despite the support of positive terms of trade shocks. AUD's decline was driven primarily by deteriorating risk sentiment amid rising expectations of a faster pace of monetary tightening in the US, alongside rising global growth concerns.”

"Over the medium term, there are some macroeconomic tailwinds for the Aussie that could help support the currency, including a very strong trade surplus driven by strong prices of key exports from grains to metals and coal/LNG.”

“However, despite a fresh round of Chinese stimulus spending that could boost China's demand for Australian commodities, downside risks to China (and global) growth remain in focus and over more tactical horizons we remain cautious on AUD vs USD.”

• NZD/USD picks up bids to refresh intraday high, extends recovery from six-week low.
• Impending bull cross signals further upside, 50-SMA adds to the upside filters.
• Sellers have a bumpy road to the south before testing yearly low.

NZD/USD refreshes intraday top around 0.6180 while extending the previous day’s rebound from a 1.5-month low during Tuesday’s mid-Asian session.

In doing so, the Kiwi pair pokes the downward sloping resistance line from August 12 by stretching the bounce from a seven-week-old horizontal support area.

That said, a clear upside break of the 0.6170 appears necessary to convince NZD/USD bulls ahead of pushing them to the 50-SMA hurdle surrounding 0.6195, as well as to the 0.6200 threshold.

Following that, the 61.8% Fibonacci retracement level of July-August upside near 0.6220 and the month-start peak of 0.6353 will be crucial to watch for the buyers.

Meanwhile, a pullback from the current levels remains elusive until staying beyond the aforementioned horizontal support zone near 0.6100.

Also acting as immediate support is the one-week-old downward sloping trend line, around 0.6085.

Even if the NZD/USD prices decline below 0.6085, the quote needs validation from the yearly low marked in July, around 0.6060, before challenging the 0.6000 psychological magnet.

NZD/USD: Four-hour chart

Trend: Limited recovery expected

The People’s Bank of China (PBOC) set the USD/CNY reference rate at 6.8802 on Tuesday when compared to the previous fix and the previous close at 6.8698 and 6.9094 respectively.

In addition to the rate announcement, the PBoC also unveiled decision to inject 2 billion Chinese Yuan via 7-day reverse repos at 2% in open market operations.

About the fix

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

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

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

The market’s cautious optimism gained additional strength from Bloomberg’s latest news surrounding the Eurozone’s ability to battle the energy crisis during Tuesday’s Asian session.

“The European Union is set to meet its gas storage filling goal two months ahead of target as the bloc braces for a tough winter with Russia limiting supplies and soaring energy prices raging through the continent,” mentioned Bloomberg.

Key quotes

EUR/USD extends recovery

EUR/USD picks up bids to extend the previous day’s corrective pullback from the weekly low to 1.0010 by the press time.

Also read: EUR/USD struggles around parity amid hawkish ECB/Fed speakers, German inflation eyed

As per the latest data from the Confederation of British Industry, published during Tuesday’s Asian session, Britain's services businesses reported a record increase in costs over the past three months and are downbeat about the future, as inflationary headwinds look set to squeeze demand further.

Following the data release, Charlotte Dendy, the CBI's head of economic surveys, said, "There are slim pickings for those looking for positive signals in the services sector over the last quarter. Just as rising inflation is hurting households and every business sector, the services industry is no different.”

Key findings (per Reuters)

GBP/USD prints mild gains

Despite the downbeat news, GBP/USD remains mildly bid near 1.1720 amid the broad US dollar weakness.

• AUD/USD is facing barricades around 0.6900, upside remains favored amid volatile DXY.
• Lower consensus for the US NFP is hurting the DXY.
• In today’s session, investors’ entire focus will remain on the Aussie Buildings Permit data.

The AUD/USD pair is facing wrath around the immediate hurdle of 0.6900 in the Asian session. The asset is displaying topsy-turvy moves near the crucial figure of 0.6900 as the US dollar index (DXY) has turned volatile at the open. Broadly, the asset is displaying back-and-forth moves in a 0.6883-0.6926 range after a vertical upside move from Monday’s low near 0.6840.

The DXY is expected to scale down further after a corrective move as a rebound in the risk-sensitive currencies is hinting that gains are not limited for now. Apart from that, the dismal forecast for the US Nonfarm Payrolls (NFP) is also impacting the DXY.

According to the preliminary estimates, the US NFP is expected to decline dramatically to 285k, against the prior release of 528k. Also, the Unemployment Rate is expected to remain stable at 3.5%. It is worth noting that the US economy is conserving the jobless rate at 3.5% from a decent period and which has squeezed room for more job opportunities. The job creation process is increasing significantly but at a diminishing rate, which doesn’t warrant a decline in the labor data.

On the Aussie front, the market participants will focus on the Building Permits data, which is expected to decline further by 2% vs. the prior decline of 0.7%. A decline in the economic data may impact the aussie bulls. Also, the antipodean is still in the hangover of the Retail Sales data released on Monday. The Australian Bureau of Statistics reported upbeat Retail Sales data. The economic data landed at 1.3%, higher than the consensus and the prior release of 0.3% and 0.2% respectively.

GBP/USD struggles for clear direction after bouncing off the 29-month low, marked the previous day, as options market data favor bearish bias.

That said, one-month risk reversals on the British pound (GBP), a gauge of calls to puts, snapped a four-day uptrend while flashing -0.060 figures by the end of Monday’s North American session.

On the contrary, the cable’s weekly RR jumped the most in the last three weeks by the end of Friday.

In addition to the weekly hawkish bias, versus the daily pessimism, hopes of further consolidation in the GBP/UDS prices, due to the expectations that the UK could overcome the energy prices, also seemed to have restricted the GBP/USD moves of late. Recently, Bloomberg came out with the news suggesting that Europe nears gas storage targets early despite the Russian supply cut.

Also read: GBP/USD oscillates around 1.1700, spotlight shifts to US NFP

• EUR/USD struggles to defend the previous day’s recovery inside ascending trend channel.
• Convergence of previous resistance line, channel’s bottom appears a tough nut to crack for bears.
• RSI retreat adds strength to pullback moves, 200-SMA acts as additional upside filter.

EUR/USD eases back to the 1.0000 parity level, after bouncing off a one-week high, as traders struggle for clear directions during Tuesday’s Asian session.

In doing so, the major currency pair retreats from the resistance line of a one-week-old ascending trend channel. The pullback moves also take clues from the RSI (14) retreat and hence hint at the further weakness.

However, a confluence of the resistance-turned-support line from August 11 and the lower line of the stated channel, around 0.9890, seems a strong support for the EUR/USD bears to crack to retake control.

Following that, lows marked during September and October 2002, respectively near 0.9685 and 0.9610, could lure the pair sellers.

Meanwhile, recovery moves may initially aim for the upper line of the bullish channel, close to 1.0030 at the latest. Following that, the three-week-old horizontal resistance near 1.0120 and the 200-SMA level of 1.0150 could test the upside momentum.

It’s worth noting, though, that the EUR/USD advances past 1.0150 could enable buyers to aim for the monthly peak surrounding 1.0365.

EUR/USD: Four-hour chart

Trend: Pullback expected

• USD/JPY has witnessed a sell-off and has dragged to near 138.50 on stable Japan’s jobless rate.
• Japan’s Jobs-to-Applications ratio has improved to 1.29 vs. 1.27 recorded earlier.
• The Fed’s agenda of scaling down the inflation rate has challenged growth prospects.

The USD/JPY pair is witnessing a steep fall after the release of Japanese employment data. The asset has given a downside break of the consolidation formed in a 138.62-138.85 range. The major is declining firmly towards 138.27 and may display more losses if it violates the crucial support.

The Statistics Bureau of Japan has reported the Unemployment Rate has remained unchanged at 2.6%. While the Jobs/Applications ratio has improved significantly to 1.29 against the estimates and the prior release of 1.27. There is no denying the fact that the employment data has remained upbeat, however, and also the yen bulls are capitalizing on the same.

Meanwhile, the US dollar index (DXY) has turned into a correction mode after printing a fresh two-decade high at 109.40 on Monday. Earlier, the asset remained in the grip of bulls after Federal Reserve (Fed) chair Jerome Powell preferred a hawkish stance on guidance over interest rates despite declining US economic activities.

Fed’s commentary at the Jackson Hole Economic Symposium indicated that investors should brace for the continuation of the advancing interest rate cycle as bringing price stability to the economy is the foremost priority. The inflation rate is currently at 8.5% and households are facing the headwinds of higher payouts for similar quantities purchased by them on a recurring basis. Therefore, the US economic activities are required to maintain patience for recovery.

• AUD/NZD is under pressure below key hourly trendline support 
• The bears are pressing on1.12 the figure that guards 1.1180 key structure.

AUD/NZD has been pressured at the start of the week, breaking below hourly trendline support to take on the 1.12 area ahead of 1.1180 late July highs. The following is a top-down analysis from a bearish perspective while price stays below the 1.1250s.

AUD/NZD daily chart

The W-formation on the daily chart is a reversion pattern and the start of the week's doji could be the makings of a bearish formation requiring an engulfing bearish close for the days ahead. In this regard, 1.1180 guards deeper support territory towards 1.1150 and a 38.2% Fibonacci retracement target as illustrated on the daily chart above. 

AUD/NZD H1 charts

The price has slid below hourly trendline support to start the week, testing the bull's commitments at 1.12 the figure that guards 1.1180 key structure and a deeper correction for the week ahead.

• US Dollar Index stays pressured after reversing from fresh 19-year high.
• Markets pricing 72.5% chances of 75 bps Fed rate hikes in September.
• US NFP appears more interesting after Fed Chair Powell raised recession, employment concerns.
• Yields retreat amid market’s consolidation ahead of the key US data.

US Dollar Index (DXY) holds onto the week-start pullback from nearly a two-decade high during Tuesday’s Asian session, pressured around 108.60 by the press time. In doing so, the greenback gauge pares recent gains in search of fresh clues ahead of today’s US CB Consumer Confidence for August, as well as Friday’s Nonfarm Payrolls (NFP).

The DXY’s pullback from the multi-year high could be linked to the improvement in the US data, as well as mixed comments from the Fed policymaker, on Monday.

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%.

Also likely to have contributed to the quote’s weakness are the latest headlines that Europe approaches the gas storage target early despite Russia’s supply cut, per Bloomberg.

Even so, Fed Chair Jerome Powell’s sturdy push towards higher rates, despite caring for recession and/or employment slowdown, seems to keep the DXY buyers hopeful. On the same line could be the jump in the market’s hopes of a 0.75% rate hike by the US Federal Reserve (Fed) in September, after paring back the hawkish expectations previously. As per the latest readings of the CME FedWatch Tool, there is a 72.5% chance of the Fed’s 75 basis points (bps) rate hike in the next month’s Federal Open Market Committee (FOMC).

Against this backdrop, the US 10-year Treasury yields retreat to 3.10% following the two-day uptrend to refresh the monthly high. With this, the S&P 500 Futures print mild losses even as Wall Street closed in the red.

To sum up, a light calendar in Asia emphasizes the US Consumer Confidence for August and comments from Fed speakers as the main catalysts to watch for fresh impulse. However, major attention will be given to Friday’s US jobs report as Fed Chair Powell raised concerns over economic slowdown and job market stress in his Jackson Hole speech.

Technical analysis

A failure to provide the daily closing beyond the 109.30 hurdle directs DXY bears towards the 10-DMA support near 108.30.

• USD/CHF has displayed a breakdown of the 0.9678-0.9682 trading range amid weaker DXY.
• Fed’s preference for bringing price stability indicates a continuation of the rate hike cycle.
• Swiss Real Retail Sales are seen higher at 3.3% vs. 1.2% reported earlier.

The USD/CHF pair has given a downside break of the consolidation formed in a narrow range of 0.9678-0.9682. Earlier, the asset displayed exhaustion signals after failing to overstep the critical hurdle of 0.9700. The major has witnessed a lack of conviction in stepping above the crucial hurdle of 0.9700 as the US dollar index (DXY) is into a correction mode after a juggernaut rally.

The DXY has corrected to near 108.68 at open as investors are preferring long liquidation after a sheer upside. The asset remained in a positive trajectory after the hawkish commentary by Federal Reserve (Fed) chair Jerome Powell at the Jackson Hole Economic Symposium. Fed’s preference for scaling down the price rise index over growth prospects spooked the market sentiment.

Thinking from the perspective of households in the US economy, a restrictive approach on interest rates to cool down the heating inflation, which is hurting the paychecks of the households is quite justified. 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.

O the Swiss franc front, investors’ entire focus is on the Real Retail Sales data, which is expected to improve dramatically to 3.3% from the prior release of 1.2%. Investors are aware of the fact that price pressures are scaling higher in the Swiss economy, therefore retail sales data is contaminated with higher prices. Still, a decent improvement in the economic data indicates an acceleration in the overall demand.

• Silver price fades bounce off monthly low inside a bullish chart formation.
• Convergence of 200-SMA, 50% Fibonacci retracement level challenges the buyers.
• Sellers have a bumpy road to travel near the yearly low.
• Oscillators hint at the further grinding towards the south.

Silver price (XAG/USD) remains sidelined at around $18.80 during Tuesday’s Asian session, after bouncing off the five-week low the previous day. In doing so, the bright metal seesaws inside the three-week-old falling wedge bullish chart pattern.

It’s worth noting, however, that the bearish MACD signals and sluggish RSI (14) challenge the upside momentum.

That said, the quote’s recovery needs to cross the $19.00 hurdle to confirm the falling wedge bullish chart pattern. Even so, a confluence of the 200-SMA and the 50% Fibonacci retracement of the metal’s July-August upside, near $19.50, appear a tough nut to crack for the XAG/USD bulls.

If the XAG/USD prices rally beyond $19.50, the $20.00 threshold could test the buyers during the theoretical upside targeting $21.50.

Alternatively, pullback moves may initially confront the stated wedge’s support line, at $18.55 by the press time.

Following that, there are multiple supports near $18.50 and $18.30-25 that could challenge the silver bears before directing them to the yearly low near $18.15 marked in July.

Silver: Four-hour chart

Trend: Further weakness expected

• USD/CAD remains sidelined after reversing from a six-week high.
• WTI crude oil pares the biggest daily jump in 1.5 months.
• Hawkish Fed bets, fears of economic slowdown challenge energy prices, pair bears.
• US CB Consumer Confidence, PMIs can entertain traders ahead of Friday’s NFP.

USD/CAD remains sidelined after reversing from a monthly top, treads water around 1.3010 during Tuesday’s initial Asian session. The loonie pair’s latest inaction could be linked to the pause in the prices of Canada’s main export item, WTI crude oil, after the biggest daily jump in six weeks. Also limiting the moves is the traders’ lack of conviction amid a light calendar and cautious mood ahead of the key US jobs report for August, up for publishing on Friday.

WTI crude oil prices remain sidelined at around $96.50, after rising the most in 1.5 months the previous day. In doing so, the black gold seesaws around the monthly high while keeping the previous day’s upside break of the 50-DMA and the 200-DMA. It’s worth noting that the chatters surrounding no imminent relief to the energy markets even if the US-Iran oil deal passes, which has fewer supporting factors of late, seem to have propelled the black gold of late. On the same line were talks of the OPEC+ output cut.

Elsewhere, the US Dollar Index (DXY) rallied to a fresh 19-year high, before stepping back to 108.80, as markets consolidated amid firmer US data and a light calendar, not to forget mixed Fedspeak.

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%.

Global central bankers raised economic slowdown fears but refrained from stepping back on the rate hike trajectory, which in turn fuelled the risk-aversion wave in the last two days and portrayed the US Dollar Index (DXY) to a fresh high in late 2002.

Looking forward, 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. However, major attention will be given to Friday’s US jobs report as Fed Chair Powell raised concerns over economic slowdown and job market stress in his Jackson Hole speech.

Technical analysis

A clear upside break of the 1.3075-80 horizontal hurdle, established in early May, challenges USD/CAD bulls at the six-week high. The pullback moves, however, remain elusive until the quote stays above a 13-day-old support line, near 1.2935.

•  AUD/JPY consolidates in the 95.60s around a 61.8% Fibonacci retracement.
• Failures below 95.50 opens risk of a deeper correction of the prior bullish impulse into the 95.20s.

AUD/JPY has melted from the fresh daily highs printed at the start of the week into an hourly support area making for a bullish prospect for the day ahead. The following illustrates the potential of a positive extension should the bulls commit a key hourly 61.8% Fibonacci retracement.

AUD/JPY daily chart

The price is attempting a break of daily resistance at the start of the week, printing the highest level since the start of Junes business with sights on the 96.50/80 area, extending its bullish August run. The bulls can lean on 95.20 support where prior daily highs meet a 50% retracement. 

AUD/JPY H1 chart

From an hourly perspective, AUD/JPY has carved out a support in the 95.60s around a 61.8% Fibonacci retracement that meets an hourly area of prior resistance. Should the bulls commit here, the psychological round 96.00 number could become vulnerable in the sessions ahead. Failures below 95.50 opens risk of a deeper correction of the prior bullish impulse into the 95.20s.

• Gold prices are expected to deliver more gains after overstepping the immediate hurdle of $1,740.00.
• The DXY has shifted into a correction mode amid of lower consensus for US NFP.
• A Bullish Flag formation is indicating more upside ahead.

Gold price (XAU/USD) is displaying a lackluster performance after defending the immediate cushion near $1,736.00. The precious metal is auctioning in a narrow range of $1,737.00-1,738.28, however, an extension in recovery seems favored amid a correction in the US dollar index (DXY).

After printing a fresh two-decade high of 109.40 on Monday, the DXY shifted into a correction mode ahead of the lower consensus for the US Nonfarm Payrolls (NFP). Considering the market forecasts, the US NFP is expected to decline to 285k, against the prior release of 528k. Investors should be aware of the fact that the US economy is operating near full employment levels for the past seven months, which squeezes room for more job additions. Therefore, a decline in consensus for the US employment generation should not be considered as employment softening.

Also, the Unemployment Rate is seen as stable at 3.5%. One more economic data in which the market participants are keenly interested in the earnings data, which is expected to improve by 10 basis points (bps) to 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.

Gold technical analysis

On an intraday scale, the gold prices are forming a Bullish Flag chart pattern that indicates a continuation in the upside momentum after a consolidation phase. A bullish cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at $1,735.00, indicates more upside ahead.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 60.00-80.00. This doesn’t warrant a bearish reversal but states that a time correction will trigger a fresh rally ahead.

Gold intraday chart

• On Monday, the GBP/JPY rallied 0.65%, bouncing from last week’s lows towards the 162.00 mark.
• GBP/JPY will shift bullish-biased if it breaks above the 163.00 mark.
• A decisive break below 161.80 will open the door for the GBP/JPY towards 160.00.

The GBP/JPY pares some of its Friday losses and edges slightly higher as the Asian Pacific session begins. However, it remains trapped in the 160.80-162.83 area, unable to break beyond those boundaries for eight consecutive days. At the time of writing, the GBP/JPY is trading at 162.40.

GBPJPY Price Analysis: Technical outlook

The GBP/JPY daily chart illustrates the 162.80 resistance as a solid supply zone, ahead of the 100 and the 50-day EMAs, each at 163.02 and 163.35, respectively. Also, the Relative Strength Index (RSI) slope is horizontal, further cementing the pair’s consolidation for the last 14 days.

If the GBP/JPY breaks above 162.80, it will expose the 100 and 50-day EMAs on the upper side. Once cleared, the next stop will be a three-month-old downslope trendline, drawn from the YTD highs around 168.00, which passes around the 163.70 area, ahead of the 164.00 mark.

On the other hand, the GBP/JPY’s first support would be the 20-day EMA at 162.08. The break below will expose the August 23 daily low at 161.82, followed by the August 16 low at 160.08.

GBPJPY Key Technical Levels

• WTI bulls take a breather around monthly top after running the most in six weeks.
• Bullish MACD signals, clear break of the key DMAs favor buyers.
• Previous resistance line adds to the downside filters.
• 38.2% Fibonacci retracement level, late July peak lure buyers.

WTI crude oil prices remain sidelined at around $96.50, after rising the most in 1.5 months the previous day. In doing so, the black gold seesaws around the monthly high while keeping the previous day’s upside break of the 50-DMA and the 200-DMA.

The upside bias also takes clues from the bullish MACD signals and the quote’s ability to rebound from the resistance-turned-support line from early July on Friday.

That said, the 38.2% Fibonacci retracement of the energy benchmark’s downtrend from June, near $99.10, seems to lure the intraday buyers ahead of the $100.00 threshold.

However, late July’s swing high around $101.00 and the 50% Fibonacci retracement level of $103.35 could challenge the WTI buyers afterward.

On the contrary, the 50-DMA support of $96.20 could challenge the immediate pullback moves ahead of the 200-DMA, close to $95.15 at the latest.

Following that, the previous resistance line from July 08, near $90.30 at the latest, will be important to watch for the WTI bear’s entry.

WTI: Daily chart

Trend: Further upside expected