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• The EUR/USD fell below the 200-day SMA of 1.0800 towards the 1.0795 area to close the week.
• The Euro tallied a fourth consecutive weekly loss against the USD.
• The cautious stance by Christine Lagarde at the Jackson Hole Symposium weakens the Euro.

In Friday’s session, the EUR/USD bears broke through the 200-day Simple Moving Average (SMA) of 1.0800, setting a 0.72% weekly loss, its fourth in a row. In addition,the 20 and 100-day SMAs performed a bearish cross, suggesting that further downside may be on the horizon for the pair.

At Jackson Hole, Christine Lagarde, president of the European Central Bank (ECB), didn’t provide any highlights. She stated that the bank is ready to raise as much as possible rates but that a multi-legged approach is needed for effective policy. As for now, ECB expectations remain subdued, mainly driven by poor results shown by the Eurozone and according to the World Interest Rates Probabilities (WIRP), investors bet on 40% and 55% odds of a 25 basis point (bps) hike in the September and October meetings.

EUR/USD Levels to watch

Based on the daily chart, it is evident that EUR/USD leans toward a bearish outlook in the short term. Relative Strength Index (RSI) remains below its midline in negative territory, showcasing a southward slope nearing oversold conditions. Similarly, the Moving Average Convergence Divergence (MACD) exhibits red bars, emphasising the strengthening bearish momentum for EUR/USD. On the other hand, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), indicating that the sellers now dominate on the broader perspective.

Support levels: 1.0780, 1.0750, 1.0730.

Resistance levels: 1.0800 (200-day SMA), 1.0850, 1.0900. 

EUR/USD Daily chart

• GBP/JPY rose near 184.15, but further downside may be on the horizon as bullish momentum wanes.
• Japan reported soft inflation figures from July.
• Eyes on Ueda’s and BoE’s official speeches on Saturday.

At the end of the week, the GBP/JPY slightly advanced, tallying a 0.50% weekly loss. Inflation figures from July from Japan weakened the Yen while the GBP trades relatively soft against its rivals. There won’t be any highlights for the rest of the session, and the focus is on Ueda’s and BoE’s official speeches on Saturday.

On the Japanese front, August's Tokyo Consumer Price Index (CPI) came in soft and decelerated to 2.9% YoY vs. the 3% expected and the previous 3.2%. The Core CPI remained steady at 4%, while the measure excluding Fresh Foods failed to meet expectations and fell to 2.8% YoY, lower than the 2.9% expected. The low inflation readings exacerbated the dovish bets on the Bank of Japan (CPI), contributing to the JPY being one of the worst performers during the session amongst the major currencies. Focus now shifts to Governor Ueda’s speech on Saturday.

On the other hand, the Pound continues to trade weak against its rivals following the poor results of the  S&P Global PMIs from August. The economy showed signs of weakness and flashed alarms amongst the investors concerning the British economy’s health. Last week, the UK reported strong wages and inflation data, which doesn’t align with an economy sliding into a recession, just as the Bank of England (BoE) stated in its last statement.

Looking forward, markets continue to bet on the BoE lifting rates between 5.75%-6% in this cycle, including 25 basis points hikes in September, November and February 2024.

GBP/JPY Levels to watch

The technical analysis of the daily chart points to a neutral to a bearish outlook for GBP/JPY, indicating a decline in bullish strength. The Relative Strength Index (RSI) points north above its middle point, while the Moving Average Convergence (MACD) displays stagnant red bars. On the other hand, the pair is above the 20,100,200-day SMAs, indicating that the bulls are in command of the broader picture.

Support levels: 183.20 (20-day SMA), 182.00, 181.00

Resistance levels: 184.00, 185.00, 186.00.

GBP/JPY Daily chart

European Central Bank (ECB) President Christine Lagarde stated on Friday that critical inflation expectations remain anchored at 2%. She emphasized the importance of these expectations and expressed confidence that inflation numbers would look different by the end of the current year.

During an interview with Bloomberg TV, Lagarde mentioned that they would closely monitor wage developments. When asked about changing the inflation target, she argued that it would be misleading and counterproductive to anchoring inflation expectations.

Regarding the economy, Lagarde stated that German growth is not broken and is demonstrating resilience.

Market reaction

EUR/USD remains in consolidation around 1.0800, largely flat for the day, following speeches by ECB's Lagarde and Fed's Powell at Jackson Hole. On a weekly basis, the pair is heading towards its sixth consecutive weekly decline.

• EUR/JPY consolidates within the 157.00/158.50 range, with an upward bias influenced by ECB President Christine Lagarde’s hawkish tone on inflation.
• Technical indicators suggest a new trading range could form if the pair falls below 157.00, with key levels at August 3 low of 155.53 and August 23 low of 156.87.
• A breach above the Tenkan-Sen line at 158.18 could open the door for bulls, targeting the year-to-date high of 159.49, while a break below 158.00 may trigger a slide towards 157.00.

As the New York session closes, the Euro (EUR) recovers some ground against the Japanese Yen (JPY) after neutral to hawkish remarks by the European Central Bank (ECB) President Christine Lagarde emphasized the ECB’s commitment to inflation. Hence, the EUR/JPY pair resumes its uptrend, set to finish Friday’s session with gains of 0.31%.

EUR/JPY Price Analysis: Technical outlook

The EUR/JPY daily chart remains upward biased but is set to finish the week almost flat as the pair consolidates within the 157.00/158.50 area. Should be said that Friday’s uptrend was capped by the Tenkan-Sen line at 158.18, opening the door for a new trading range if the cross tumbles below 157.00. In that event, the pair’s new trading range would be the August 3 low at 155.53 and the August 23 low at 156.87.

Upside risks would emerge if the cross breaches 158.18. Once cleared, bulls would regain control, setting their eyes in the next target, the year-to-date (YTD) high at 159.49. Conversely, if sellers stepped in, achieving a decisive break below 158.00 could exacerbate a drop toward the 157.00 mark, followed by the August 23 low of 156.86.

EUR/JPY Price Action – Daily chart

European Central Bank President Christine Lagarde spoke at the Jackson Hole Symposium. In her speech, she mentioned that the fight against inflation "is not yet won." She emphasized the importance of central banks providing a nominal anchor for the economy and ensuring price stability. Lagarde stated that this entails setting interest rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the ECB's 2% medium-term target.

Key takeaway from the speech: 

Market reaction

EUR/USD has remained relatively stable, hovering around the 1.0800 level, following the initial reaction to Lagarde's speech. The pair is currently trading flat for the day, consolidating weekly losses.
 

European Central Bank (ECB) Governing Council member Martins Kazaks stated in an interview with Bloomberg on Friday that a pause in the interest rate hike cycle would not imply its termination. He further mentioned that current interest rates are restrictive.

Kazaks explained that prematurely stopping monetary policy tightening could present a larger problem compared to rate cuts. Regarding the economy, the ECB member highlighted that the labor market is a reason for concern over inflation.
 

• USD/CHF retreats to 0.8838, down 0.06%, as US Treasury yields dip following Powell’s hawkish remarks, putting sellers in the driver’s seat.
• A ‘gravestone-doji’ formation on the charts suggests further downside risk, challenging the pair’s recent six-week high of 0.8876.
• For a bullish reversal, USD/CHF must reclaim the 0.8900 level, with key resistance and support levels looming at 0.9000 and 0.8819, respectively.

USD/CHF retraces from a six-week high of 0.8876, drops as sellers outpaced buyers, as US Treasury bond yields dropped after the US Federal Reserve Chair Jerome Powell speech. At the time of writing, the USD/CHF is trading at 0.8838, down 0.06%.

USD/CHF Price Analysis: Technical outlook

From a technical standpoint, the USD/CHF clashed with a five-month-old downslope resistance trendline, reaching a new six-week high, but has retraced, trimming its earlier gains and turning negative, so far in the day, about to form a ‘gravestone-doji’ which would suggest further downside expected.

For buyers to resume their uptrend, the pair must reclaim 0.8900. A breach of the latter will expose the fourth-month-old previous support turned resistance trendline above the 0.9000 figure, followed by the 200-day Moving Average (DMA) at 0.9082. Conversely, the USD/CHF first support emerges at a May 4 daily low of 0.8819. Break below will send the pair towards 0.8800, followed by the current week’s low of 0.8759.

USD/CHF Price Action – Hourly chart

Loretta J. Mester, president of the Federal Reserve Bank of Cleveland said on Friday in an interview with Bloomberg, that they need to see a moderation in the labor market and wage growth. She mentioned they are not seeing evidence of a wage-price spiral but added, “inflation is still too high”. 

“I have a base case of soft landing”, explained Mester. She warned that under-tightening would be worse than overtightening. 

Market reaction

The US Dollar is pulling back in the market after rising in response to Fed Chair Powell's speech. The US Dollar Index (DXY) is currently trading marginally higher around 104.05, although it is far from the monthly high it reached earlier on Friday at 104.44.
 

• Jerome Powell sounded cautious with a hawkish tilt, leaving the door open for another hike in 2023.
• Markets are price back chances of a hike in November.
• Higher US yields opened the downside to the yellow metal.

On Friday, the Gold Spot price XAU/USD faced selling pressure after Jerome Powell’s words at the Jackson Hole Symposium. The spot trades near the $1,910 area, where the 20 and 200-day Simple Moving Average (SMA) are about to perform a bearish cross.

Chair Powell stated that the Federal Reserve (Fed) needs to be cautious regarding the next meetings. He commented that the economy hasn’t cooled down as expected and that the bank will maintain its restrictive policy until it shows signs of cooling down. As he pointed out in July, it will all come down to the incoming data. The Fed will get an additional Nonfarm Payrolls and inflation report from August, and those data points will help investors model their expectations.

Reacting to the speech, US yields, which tend to be negatively correlated with non-yielding metal prices, rose with the 2-year rate leading towards 5.06%, seeing more than 0.80% gains. In line with that, the odds of a 25 basis point (bps) hike in November, according to the CME FedWatch tool, rose to 44%.

XAU/USD Levels to watch

The technical analysis of the daily chart points to a neutral to a bearish outlook for XAU/USD, indicating a decline in the recent bullish strength. The Relative Strength Index (RSI) exhibits a negative slope below its midline, while the Moving Average Convergence (MACD) prints flat green bars.

Support levels: $1,900, $1,880, $1,850

Resistance levels: $1,915 (bearish cross between the 20 and 200-day SMA), $1,930, $1,950

XAU/USD Daily chart

Following Fed Chair Powell's speech, the focus for the next week will shift back to economic data. The job market indicators (including NFP) and inflation numbers will be crucial before the September FOMC meeting. Additionally, Australia and the Eurozone will release their inflation reports. The market will also pay attention to the Chinese PMI.

Here is what you need to know for next week: 

The US Dollar Index recorded its sixth consecutive weekly gain, reaching a multi-month high above 104.00. The strength of the US economy continues to bolster the US Dollar. While the US economy shows signs of softening, other economies face more challenging circumstances. This divergence in the outlook is a significant factor supporting the USD. 

The US Treasury yield curve showed mixed moves, with a decline in the 30-year yield and the 2-year yield posting its highest weekly close since 2007. Market participants are not anticipating further rate hikes from the Federal Reserve, and the likelihood of rate cuts next year has diminished. Stocks experienced a decline as market sentiment remained cautious due to a complex outlook characterized by slowing growth and higher interest rates.

Next week, market participants will continue to pay attention to central bankers' statements. Federal Open Market Committee (FOMC) members have been sending mixed signals. The Federal Reserve is data-dependent, and currently, economic indicators allow for potential future interest rate hikes, which would be appropriate if inflation proves to be more resilient and heats up. 

The release of the US Core Personal Consumption Expenditures (PCE) Index on Thursday will be necessary as it is the Fed's preferred inflation gauge. In terms of labor market data, the JOLTS report is scheduled for Tuesday, followed by the ADP Private Employment report on Wednesday. On Thursday, the weekly Jobless Claims data will be released, and the week's highlight will be the Nonfarm Payrolls report on Friday. These reports have the potential to generate volatility in the markets as they provide insights into the health of the labor market and overall economic conditions.

EUR/USD has experienced its sixth consecutive weekly decline and is consolidating below the 20-week Simple Moving Average (SMA), finding support at the 100-SMA. The overall bias remains tilted towards the downside; however, some indicators show oversold conditions. Starting Wednesday, Eurozone countries will release their preliminary August Consumer Price Index (CPI) figures. Additionally, the European Central Bank (ECB) will release its meeting minutes on Thursday.

After trading sideways for weeks, GBP/USD broke to the downside and dropped below 1.2600. The bias is tilted towards the downside, as the pair closed below the 20-day Simple Moving Average (SMA) for the first time since February. The British Pound lost momentum following weaker-than-expected UK data. EUR/GBP rebounded from monthly lows and finished the week in positive territory near 0.8600.

USD/JPY reached a new high at 146.63 but experienced a subsequent pullback. The 146.30 region remains a significant resistance area. The divergence in monetary policies between the Federal Reserve and the Bank of Japan continues to support the US Dollar. However, the potential for intervention by the Bank of Japan may limit further upside.

USD/CAD recorded another weekly gain but failed to consolidate above 1.3600, indicating potential signs of consolidation or a correction shortly. Canada releases GDP data on Friday.

Antipodean currencies continue to face downward pressure amid cautious market sentiment. The upcoming Chinese Purchasing Managers' Index (PMI) data, to be released on Thursday, will be closely monitored for further insights into the economic health of China, which can impact these currencies.

NZD/USD struggled to stage a significant recovery and ended the week flat, near monthly lows but above 0.5900. Similarly, AUD/USD finished the week around 0.6420 without any apparent signs of consolidation. The overall trend for both pairs remains downward.

In terms of events next week, Michele Bullock, the deputy governor of the Reserve Bank of Australia (RBA), will deliver a speech on Tuesday. It's worth noting that she will become the RBA governor on September 18. Additionally, Australia will release its Monthly Consumer Price Index (CPI) on Wednesday.
 

• DXY climbed 0.18% to 104.197 after Powell’s hawkish remarks, signaling a stronger dollar against a basket of six major currencies.
• CME FedWatch Tool indicates a 46.7% chance of a 25 bps rate hike in November, challenging previous estimates of the Fed holding rates steady.
• Mixed signals from the Treasury yield curve and diverging views from Fed officials like Harker and Mester add complexity to rate hike expectations.

The US Dollar Index (DXY), a gauge of the buck’s value against a basket of six currencies, advances 0.18% and exchanges hands at 104.197 following a hawkish speech from the US Federal Reserve Chair Jerome Powell at Jackson Hole.

Wall Street defies gravity while US Treasury yields are mixed; market eyes upcoming economic data

Despite Powell’s remarks, Wall Street trades in the green, gaining between 0.10% and 0.34%. US Treasury bond yields rise in the short-end of the curve, reflecting a hike in interest rates, while the belly and long-end drop between 0.05% and 0.30%.

The US 2-year Treasury note yield, the most sensitive to interest rate shifts, edges up three basis points, while the CME FedWatch Tool shows the market is pricing a 25 bps at the November meeting, with odds at 46.7%, above estimates for the Fed to hold rates unchanged.

The US Federal Reserve Chair Jerome Powell highlighted the ongoing concerns of the central bank regarding elevated inflation. He indicated that further rate hikes could be considered “appropriate” but stressed that these decisions would continue to rely on incoming data. Powell mentioned that while two consecutive months of positive inflation data are a positive sign, he underscored the significance of staying aligned with the Fed’s 2% inflation target, indicating that there is still a considerable journey ahead.

In light of robust economic expansion and a constrained labor market, Federal Reserve Chair Powell emphasized the need for continued tightening measures. He stated that additional rate hikes would be warranted if these positive economic indicators do not exhibit signs of relaxation. Powell acknowledged the potential risks associated with excessive and insufficient tightening while projecting the July Personal Consumption Expenditure (PCE) at 3.3% and the core PCE at 4.3%.

Recently, Philadelphia Fed’s Patrick Harker remarked that current interest rates are already at a restrictive level, and in the event inflation falters, there might be a necessity for additional rate hikes. Conversely, Cleveland Fed President Loretta Mester acknowledged that the economy has gained momentum, as evidenced by GDP and labor market indicators. She highlighted that a lower growth rate would be necessary to temper inflation while emphasizing the ongoing debate revolves around whether the present rates are sufficiently restrictive to attain the inflation target.

Next week, the US economic docket will feature the CB Consumer Confidence, JOLTs report, preliminary GDP data, inflation figures, ISM PMI and further Fed speakers.

USD Dollar Index Price Analysis: Technical outlook

From a technical standpoint, the DXY shifted upward bias, as it crossed the 200-day Moving Average (DMA) on August 16, showing signs of consolidation but not of retracing below the 200-DMA. A breach of the 104.699 level and the 105.000 mark would be up for grabs. Conversely, dropping below the 200-DMA would send the DXY diving towards the 50-DMA at 102.265.

• NZD/USD fell to its lowest point since November 2022, below 0.5900  then settled back above.
• US yields rose after Powell’s words at the Jackson Hole Symposium.
• Swaps markets reprice chances of a hike by the Fed in November and December.

In Friday’s session, the USD is one of the top performers, helped by a hawkish remark by the Federal Reserve (Fed) chairman at the Jackson Hole Symposium. On the other hand, New Zealand’s calendar had nothing relevant to offer. Eyes on potential Chinese government support to the real state sector of China.

After markets being cautious during the week, looking for clues regarding the next Fed’s moves, Chair Powell gave some clarity. He pointed out that the bank will retain its policy at restrictive levels until the economy shows signs of cooling down, accompanied by lower inflation. He then commented that the Fed will proceed carefully concerning the incoming data regarding the next decisions.

That being said, Thomas Barking and Loretta Mester also spoke. Barkin commented that the Fed will “clearly hold” through the end of the year, while Mester stated that the bank probably has some more work to do. In addition, the latter stated that she doesn’t see the Fed cutting in 2024.

As a reaction, according to the CME FedWatch, markets are buying the hawkish rhetoric, with the odds of a 25 basis point (bps) hike rising to nearly 44%. In line with that, the 2,5 and 10-year  US Treasury yields rose to 5.07%, 4.46% and 4.23% respectively, boosting the USD.

On the Kiwi side, it faced selling pressure during the week due to the Chinese economic woes, as China is one of its biggest trading partners. That said, reports suggest that the Chinese government will take action to relieve the housing sector. Those measures aim to encourage homebuying by removing restrictions on first-time buyers and providing tax rebates. Still, their effectiveness is limited due to existing market challenges and investor scepticism, as reflected in the continued poor performance of China's equities.

NZD/USD Levels to watch

Analysing the daily chart, the NZD/USD technical outlook is bearish in the short term. The Relative Strength Index (RSI) is comfortably positioned below its midline in negative territory. It has a southward slope, indicating a strong selling momentum. It is further supported by the negative signal from the Moving Average Convergence Divergence (MACD), which displays red bars, underscoring the growing bearish momentum. Additionally, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), highlighting the continued dominance of bears on the broader scale.

Support levels: 0.5885, 0.5850, 0.5830.

Resistance levels: 0.5940, 0.5970, 0.6000 (20-day SMA).

NZD/USD Daily chart

• Powell’s hawkish tone on inflation and potential for further rate hikes propels USD/CAD to a three-month high of 1.3640, currently trading at 1.3613.
• Philadelphia Fed’s Patrick Harker adds fuel to the fire, stating rates are already restrictive and may need to rise further if inflation stalls.
• Lackluster Canadian retail sales data at 0.1% MoM adds to the bullish momentum for USD/CAD as traders eye upcoming US and Canadian economic indicators.

USD/CAD edged higher for the second straight day and refreshed three-month highs at 1.3640, following the Federal Reserve Chair Powell’s hawkish speech, which triggered volatility across the board. Later, Patrick Harker from the Philadelphia Fed emphasized rates are at a restrictive stance. The USD/CAD is trading at 1.3613, printing gains of 0.36%.

Federal Reserve’s restrictive stance, emphasized by Fed officials and weak Canadian data, weighs on the Loonie

Opening remarks from the US Federal Reserve Chair Jerome Powell showed the central bank is still worried about high inflation, as he mentioned that further rate hikes could be ”appropriate,” though they would remain data dependent. Powell stated that although two months of good data on inflation are reasonable, there’s a long way to go, as he emphasized the Fed’s 2% inflation target.

Regarding the solid economic growth and a tight labor market, Fed Chair Powell warranted additional tightening. Further rate increases are justified if those economic indicators do not show signs of easing. Powell acknowledged the risks of over and under-tightening while foreseeing the July Personal Consumption Expenditure (PCE) at 3.3% and core PCE at 4.3%.

Of late, a slew of his colleagues are crossing the wires. Philadelphia Fed Patrick Harker noted that rates are already restrictive, and if inflation stalls, then more rate increases may be needed. On the other hand, Cleveland Fed President Loretta Mester acknowledged the economy had gathered momentum as shown by GDP and labor market figures stating that below growth would be needed to cool down inflation. She stressed the debate is if current rates are restrictive enough to achieve the inflation target.

On the Canadian front, stagnant June retail sales stood at 0.1% MoM, compared to the previous reading, suggesting that Canadians are spending less, despite more robust than expected figures earlier in the year, which warranted additional tightening by the Bank of Canada.

Next week, the US economic docket will feature the CB Consumer Confidence, JOLTs report, preliminary GDP data, inflation figures, and ISM PMIs. On the Canadian front, the agenda will reveal GDP

USD/CAD Price Analysis: Technical outlook

From a technical perspective in the short term, the USD/CAD has peaked so far at around the R2 pivot point at 1.3640, retraces towards the confluence of the R1 daily pivot and the 38.2% Fibonacci retracement at 1.3610/12. Dip buyers could emerge at the latter, or the 50% Fibonacci retracement, at around 1.3603 before diving below the 1.3600 figure. Contrarily, a drop below the day’s low of 1.3567 could pave the way for further downside, exposing the 200-hour Moving Average (HMA) at 1.3539.

USD/CAD Hourly chart

• AUD/USD fell more than 0.50%,  to a daily low near 0.6380.
• Jerome Powell opened the door to another hike in this tightening cycle.
• Rising US yields make the USD gain interest.

At the end of the week, the USD gained ground against its rivals, mainly driven by the Federal Reserve’s (Fed) chairman, Jerome Powell, at the Jackson Hole Symposium. On the Aussie side, no relevant data or events are on the docket in Friday’s session.

Jerome Powell’s speech at the Jackson Hole Symposium sounded hawkish. He stated that the economy didn’t cool down as expected and that the Fed will proceed “carefully” for the next decisions. He then pointed out that “there is no way to know what the neutral rate would be,” and markets are betting higher odds of another hike in 2023.

According to the CME FedWatch tool, the odds of a 25 basis points (bps) hike in November rose to nearly 44% vs. 33% a week ago. The odds of a pause remain high in September while investors are betting on cuts in June-July 2024.

As a reaction, the US Treasury yield rose, with the 2,5 and 10-year rates rising to 5.07%, 4.46% and 4.25%, respectively, giving the USD a boost.

AUD/USD Levels to watch

Based on the daily chart, it is evident that AUD/USD leans toward a bearish outlook in the short term. The Relative Strength Index (RSI) remains below its midline in negative territory, showcasing a southward slope. Similarly, the Moving Average Convergence Divergence (MACD) exhibits red bars, emphasising the strengthening bearish momentum for AUD/USD. Also, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), implying that the bears retain control on a broader scale.

Support levels: 0.6380, 0.6370 (cycle low), 0.6350.

Resistance levels: 0.6435, 0.6480, 0.6500 (20-day SMA).

AUD/USD Daily chart

Cleveland Federal Reserve President Loretta Mester told CNBC on Friday that they probably have some more work to do with rates, per Reuters.

Additional takeaways

"We are getting close to where we need to be with rates."

"We need to see more evidence inflation is cooling."

"Economy momentum has been stronger."

"Fed has made a lot of progress on inflation."

"Don't want Fed to overtighten interest rates."

"In June forecast did not see Fed cutting rates in 2024."

"Main fed debate is whether rates are restrictive enough."

"Fed has to be patient with policy right now."

"It's very likely below trend growth needed to lower inflation."

"Labor market has been stronger than expected given Fed policy."

"We are looking at data to determine next policy choice."

Market reaction

The US Dollar Index edged slightly lower following these comments and was last seen rising 0.2% on the day at 104.20.

Federal Reserve Bank of Philadelphia President Patrick Harker told Bloomberg on Friday that he doesn't see the need now for additional rate increases but added that he could call for more hikes if inflation retreat stalled.

Additional takeaways

"Should hold rates steady and see how policy affects the economy."

"Labor markets are cooling."

"Doubt rate cuts will be on the table until some point next year."

"We have to get inflation back to 2%."

"Shouldn't change course on balance sheet rundown at this point."

Market reaction

The US Dollar Index retreated slightly from the multi-month highs after these comments and was last seen rising 0.32% on the day at 104.32.

Silver has held support from the $22.11 June low. Economists at Credit Suisse analyze XAG/USD technical outlook.

Silver already holds a – small – base 

• Powell’s hawkish tone on inflation and rate hikes sends USD/JPY whipsawing, eyeing a test of the year-to-date high of 146.56.
• Despite signs of disinflation, Powell insists there’s still a “long road ahead” to reach the Fed’s 2% target, adding uncertainty to the market.
• Powell cites above-trend growth and a tight labor market as potential catalysts for further hikes in the Federal Funds Rate, keeping traders on their toes.

USD/JPY rallies after remaining within familiar ranges in a choppy trading session before the US Federal Reserve Chair Jerome Powell hit the stand and delivered hawkish remarks, putting into the table additional tightening. The USD/JPY is whipsawing around 145.70-146.50 as it eyes a test of the year-to-date (YTD) high of 146.56.

Federal Reserve Chair Jerome Powell’s hawkish tone propels the USD/JPY to new YTD highs

At Jackson Hole, the Fed Chair Powell said they are prepared to continue its tightening cycle if appropriate. He emphasized that the US central bank would be data-dependent and proceed “carefully” when deciding to pause or raise borrowing costs.

Regarding inflation, he said there’s a long way to go, despite two months of good data showing the disinflationary process continues towards the US central bank goal of a 2% target. Powell added they remain unsure about the neutral rate peak and acknowledged that monetary policy faces risks on both sides, meaning over and under-tightening.

Powell emphasized that the above trend growth and tightness in the labor market would be reasons to increase the Federal Funds Rate (FFR). He added that he expects July Personal Consumption Expenditure (PCE) at 3.3%, while core PCE at 4.3%.

USD/JPY reaction

The USD/JPY oscillated at around 145.70-146.10 on Powell’s remarks but gathered direction and rose to a new year-to-date (YTD) high of 146.63 before settling at around current exchange rates. Resistance on the upside is the 147.00 figure and the November 3 high at 148.45.

It should be said the Greenback (USD) is staging a recovery, as shown by the US Dollar Index, which turned positive, sits at 104.360, gains 0.35%, underpinned by US Treasury bond yields, which are beginning to track higher.

USD/JPY 5-minute chart

The recent rebound in the US Dollar is not expected to extend as Greenback will no longer benefit from interest rate differentials, economists at Credit Suisse report.

USD strength to reverse

• Silver price turns topsy-turvy above $24.00 as Fed Powell keeps doors open for more interest rate hikes.
• Jerome Powell stated in commentary that interest rates can be raised further if data remains encouraging.
• Silver price forms a Bullish Flag chart pattern on a two-hour scale, which is a trend-following pattern.

Silver price (XAG/USD) turns volatile with the crucial support of $24.00 in the early New York session. The white metal remains sideways as uncertainty about commentary Federal Reserve (Fed) chair Jerome Powell escalates. The situation of decent consumer spending, the tight labor market environment, and declining inflationary pressures have elevated uncertainty about interest rates.

S&P500 opened on a positive note ahead of Jerome Powell’s commentary at Jackson Hole. The US Dollar Index (DXY) corrects gradually to near 104.00 as investors remain uncertain about Powell’s commentary.

Jerome Powell stated in commentary that interest rates can be raised further if data remains encouraging. About the labor market, Fed Powell believes that the job market is not cooling enough and could warrant further policy action.

Meanwhile, Philadelphia Fed Bank President Patrick Harker supports sustaining interest rates at the 5.25% to 5.5% range. Harker sees no rate cuts this year.

Silver technical analysis

Silver price forms a Bullish Flag chart pattern on a two-hour scale, which is a trend-following pattern. The white metal consolidates above $24.00, portraying an inventory accumulation by institutional investors from retail participants. The 20-period Exponential Moving Average (EMA) is consistently providing support to the Silver bulls.

The Relative Strength Index (RSI) (14) trades in the bullish range of 60.00-80.00, which indicates that the upside momentum is intact.

Silver two-hourly chart

The broad risk-off sentiment, US growth outperformance and rising US real yields have broadly benefitted the USD in August. Economists at Danske Bank maintain their strategic case for a lower EUR/USD.

Scope for sustained USD resilience

• Powell warns inflation remains “too high,” signaling potential for more aggressive rate hikes to bring it down to 2%.
• Despite two months of positive data, Powell insists there’s a “long way to go” to achieve the Fed’s 2% inflation target, leaving markets jittery.
• Economic growth and a robust job market could be double-edged swords, possibly warranting further Fed action to cool down inflation and maintain stability.

The EUR/USD pair trades volatile in a 40 pip range, as the Federal Reserve Chair Jerome Powell warns that inflation remains “too high” in his Jackson Hole speech. At the time of writing, the EUR/USD is trading at around the 1.0815-40 range.

Federal Reserve Chair Jerome Powell’s hawkish tone sent EUR/USD into a tailspin.

US Fed Chair Jerome Powel commented that the central bank is prepared to hike rates further, if appropriate, until inflation moves “sustainable down to 2%.” He emphasized that the Fed would remain data-dependent and proceed “carefully” when pulling the trigger and lifting rates.

Powell said there’s a long way to go, and just two months of good data is the beginning of the Fed’s road to tame inflation towards the 2% target. When talking about a neutral rate level, policymakers remain uncertain. Fed Chair acknowledged that current monetary policy faces risks on both sides regarding growth and inflation.

Regarding economic growth and the labor market, Powell added that growth has surprised to the upside, and it might be a reason for more rate hikes while adding that the job market not cooling could also warrant more Fed action. He added, he expects July Personal Consumption Expenditure (PCE) at 3.3%, while core PCE at 4.3%.

EUR/USD reaction

The EUR/USD hourly chart shows the pair skyrocketed towards 1.0839 before reversing its course and found bids at 1.0810. Since then, the major skyrocketed towards 1.0841 but has retreated below the daily pivot point at around 1.0830. US Treasury bond yields are failing to gain traction, while the US Dollar Index is pairing some of its earlier losses, is down 0.06%, and sits at 103.930.

EUR/USD 5 minute chart

Economists at Rabobank share their EUR/USD forecast.

Dollar trend has further to run

See: Some downside risk for Eurozone yields and the Euro in the month ahead – MUFG

• UoM Consumer Confidence Index declined in August from 71 to 69.5.
• The Index fell 2.9% in August, up 19.4% from a year ago. 
• US Dollar Index hovers around 104.00, around monthly highs. 

Consumer sentiment in the US weakened in August, with the University of Michigan's (UoM) Consumer Confidence Index declining to 69.5 from 71.6 in July. The reading was revised from the preliminary 71.2.

Further details of the publication revealed that the Current Conditions Index declined to 75.7 (revised from 77.4) from 76.6 and the Expectations Index retreated to 65.5 (revised from 67.3) from 68.3.

The one-year inflation outlook increased to 3.5% from 3.4%, while the 5-year inflation outlook stayed at 3%. 

Market reaction

Traders are awaiting Federal Reserve (Fed) Chair Jerome Powell's speech. The US Dollar Index is flat for the day, hovering around 104.00, near monthly highs.
 

Kit Juckes, Chief Global FX Strategist at Société Générale, notes that China’s troubles are set to weigh on AUD, NZD and JPY.

The cracks in the Chinese economy are still worrying

USD/JPY has likely peaked for now, but Credit Suisse’s broader outlook remains positive.

Initial support aligns at 143.89

• EUR/USD bounces off lows around the 1.0770 zone.
• The continuation of the decline could see 1.0630 retested.

EUR/USD remains under pressure and wobbles round 1.0800 after bottoming out in the 1.0770/65 band, or new monthly lows, earlier on Friday.

The loss of the August low favours extra losses to, initially, the May low of 1.0635 (May 31) prior to the 2023 low of 1.0481 seen in early January.

A drop below the 200-day SMA should keep extra pullbacks in store for the time being.

EUR/USD daily chart

AUD/USD declined sharply following the surge in worries related to the Chinese real estate sector and financial stability. Economists at Danske Bank analyze the pair’s outlook.

Latest decline seems overdone from relative rates perspective

• DXY finally surpasses 104.00 and prints new two-month tops.
• Immediately to the upside emerges the 104.70 zone.

DXY picks up pace and advances to fresh tops around 104.30 at the end of the week.

A clear breakout of the 104.00 region could pave the way for a potential visit to the May top of 104.69 (May 31) prior to the 2023 peak of 105.88 (March 8) in the relatively short-term horizon.

While above the key 200-day SMA, today at 103.12, the outlook for the index is expected to shift to a more constructive one.

DXY daily chart

Gold holds steady above $1,910 ahead of Fed Chair Powell’s opening remarks at Jackson Hole. Economists at TD Securities analyze the yellow metal’s outlook.

A hawkish narrative may already be baked in

US growth optimism is driving the Dollar higher. Therefore, Kit Juckes, Chief Global FX Strategist at Société Générale, expects EUR/USD and GBP/USD to remain vulnerable. 

Euro and Sterling are hostage to economic data 

• USD/CAD corrects from 1.3600 as investors await Fed Powell’s commentary at Jackson Hole.
• It is still a mystery whether Jerome Powell will advocate for raising interest rates or will deliver neutral guidance.
• Canada’s consumer spending expanded by 0.1% in June in line with the former reading.

The USD/CAD pair finds some selling pressure near the crucial resistance of 1.3600 in the London session. The Loonie asset corrects to near 1.3570 as investors remain mixed about Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Symposium.

S&P500 futures have added decent gains in Europe, portraying some improvement in the risk appetite of the market participants. However, the market mood could turn cautious as Fed Powell is expected to take center stage at Jackson Hole sooner.

The US Dollar Index (DXY) corrected from the 11-week high of 104.26 as investors are sidelined due to uncertainty about Fed Powell’s speech. It is still a mystery whether Jerome Powell will advocate for raising interest rates further to tighten their grip on stubborn inflation or deliver a time period till interest rates remain steady at 5.25-5.50%. Meanwhile, the 10-year US Treasury yields have eased to near 4.24%.

The US Dollar could continue moving higher if Fed Powell delivers hawkish guidance on interest rates. Inflationary pressures in the United States economy in excess of the desired rate are extremely stubborn as the labor market is still tight and consumer spending is pretty good.

However, Fed policymakers: Boston Fed Bank President Susan Collin and Philadelphia Fed Bank President Patrick Harker commented on Thursday that the current interest rate level is enough to do the required job.

The Canadian Dollar failed to show action on Thursday despite nominal expansion in the monthly Retail Sales data for June. Consumer spending expanded by 0.1% in June in line with the former reading while investors anticipated a stagnant performance. Major consumer spending came in automobiles while discretionary spending remained weak.

• EUR/JPY adds to Thursday’s gains and approaches 158.00.
• Next on the upside for bulls emerges the 160.00 yardstick.

EUR/JPY picks up extra pace and flirts with the key hurdle at 158.00 the figure at the end of the week.

If the move higher gathers extra impulse, the cross should challenge recent 2023 peaks near 159.50 (August 22) ahead of the key round level at 160.00. The surpass of the latter should not see any resistance level of note until the 2008 high at 169.96 (July 23)

So far, the longer term positive outlook for the cross appears favoured while above the 200-day SMA, today at 147.64.

EUR/JPY daily chart

Fed Chairman Powell’s set-piece speech at the Jackson Hole central bank gathering is the focal point for markets today. Economists at Scotiabank analyze USD outlook ahead of themost interesting event of the day.

The USD looks more or less fairly priced for the status quo on rates

Loonie is soft but little changed in the session. Economists at Scotiabank analyze USD/CAD outlook.

Losses below the 1.35 area target further retrenchment to 1.34

GBP/USD steadies but loss of August range tilts risks to the downside, analysts at Scotiabank report.

Regaining 1.26+ may steady the Pound in the short run

EUR/USD slid under 1.08 in thin, early Asian trade but has clambered back a little. Economists at Scotiabank analyze the pair’s outlook.

EUR/USD could stabilize or improve in the short run above 1.08

Gold prices have recovered of late. Economists at Commerzbank analyze the yellow metal’s outlook.

XAU/USD seen at $2,000 by year-end

Turkish Lira surged higher by around 7.7% against the US Dollar following the Central Bank of Türkiye (CBoT’s) latest policy meeting. Economists at MUFG Bank analyze TRY outlook.

CBoT delivers large hike helping to restore investor confidence

In the past month, EUR/GBP has continued its move lower, now trading around mid-0.85. Economists at Danske Bank analyze the pair’s outlook.

GBP strength to subside

• AUD/USD delivers a less-confident pullback to near 0.6425 ahead of the Jackson Hole Symposium.
• The US Dollar Index faces some pressure after refreshing its 11-week high at 104.30.
• AUD/USD is testing the breakdown of the Rising Channel chart pattern.

The AUD/USD pair rebounded after discovering buying interest near the round-level support of 0.6400 in the European session. The Aussie asset delivers a pullback move to near 0.6425 but the downside bias is still solid amid cautious market mood ahead of the Jackson Hole Symposium.

S&P500 futures add some gains in London but overall market sentiment remains jittery as hawkish interest rate guidance from Federal Reserve (Fed) chair Jerome Powell at Jackson Hole will impact the growth outlook. The US Dollar Index (DXY) faces some pressure after refreshing its 11-week high at 104.30.

Going forward, the Australian Dollar will dance to the tunes of the monthly Retail Sales data for July, which will be published on Monday. In June, consumer spending slowed down by 0.8%.

AUD/USD delivers a pullback and is testing the breakdown of the Rising Channel chart pattern formed on a two-hour scale. A breakdown of the aforementioned chart pattern confirms that the trend has turned bearish now. The 20-period Exponential Moving Average (EMA) at 0.6430 is expected to act as a barrier for the Aussie bulls.

The Relative Strength Index (RSI) (14) is on the verge of shifting into the bearish range of 20.00-40.00. An occurrence of the same will activate the downside momentum.

Going forward, a breakdown below August 22 low at 0.6403 will expose the asset to August low at 0.6364, followed by the round-level support at 0.6300.

In an alternate scenario, a recovery move above the intraday high at 0.6490 will drive the asset toward August 9 high at 0.6571. A breach of the latter will expose the asset to August 10 high at 0.6616.

AUD/USD two-hour chart

• Oil (WTI) trades at $79.86 and holds cards to close back above $80.
• The US Dollar strength is rolling through markets in the wake of Powell's speech later this Friday.
• The surprise draw down from Wednesday is seeing follow-through on Thursday and Friday. 

Oil prices are off the low as a double bottom got formed on the back of the big drawdown beat from the oil figures past Wednesday. The WTI Crude Oil price has seen a double bottom being formed at $77.53 with both Wednesday and Thursday price action bounce off of that level. This morning headlines out of Russia are pushing prices back up again as suddenly supply to the market is starting to slow down a touch. 

Crude will be closing off the week with the Baker Hughes US Oil Rig Count. Last week the print of 520 was the lowest since February of 2022. Although Franklin did not really pose a threat to the Texas basin, a further decline in rig count numbers could underpin price action even further in Crude prices. 

At the time of writing, Crude Oil (WTI) price trades at $79.98 per barrel andBrent Oil at $83.98.

Oil news and market movers

• As of 14:00 GMT, a lot of headlines are expected out of the Jackson Hole Symposium: US Fed Chair Jerome Powell will give his keynote speech. Next at 15:00 GMT, the Fed’s Patrick Harker will speak alongside Loretta Mester. At 18:00 GMT, the Fed’s Austan Goolsbee will be taking the stage. Half an hour later, the Fed’s Loretta Mester is due to speak again at 18:30 GMT. To round out the week, Christine Lagarde from the European Central Bank (ECB) will speak at 21:00 GMT.
• The weekly Baker Hughes US Oil Rig Count for this week will come out at 17:00 GMT. The last print at 520 was another contraction and is at the lowest level since February 2022. Any further drops in rig counts could see an uptick in Crude prices as US production supply is seen further deteriorating. 
• A disturbance with a 70% chance of becoming a cyclone is projected to reach Florida some time next week. 
• US mulls easing Venezuelan oil sanctions in exchange for improved democracy ahead of elections next year. 
• Russian fuel exports are heading for a 15-month low amid increased domestic demand.
• Canadian heavy crude weakens as TMX pipeline expansion faces possible delay. 
• US officials have acknowledged that they and Iran have a secretive informal deal on oil flows between the two nations. 

Oil Technical Analysis: not out of the woods just yet

The Oil price is ticking up with the Relative Strength Index (RSI) moving away from the mid 50 level. The pickup comes after a floor was found near $77.57 from Wednesday onwards. The surprise cut in oil reserves of over 6 million barrels published on Wednesday has triggered a technical bounce as demand is expected to pick up while supply is steady to lower with Russian oil hitting markets at a 15-month low in volume. 

On the upside, $81.68,  Monday’s high, is the one to beat in order to trigger a small uptrend. Should WTI continue its performance of higher lows and higher highs, pressure could build toward $82. In order to print a fresh monthly high, the peak of mid-August at $84.32 is the one to beat when demand takes over and supply cannot follow suit. 

On the downside, a temporary bottom is being formed around $77.50 and acts as a base for this week. Should the Baker Hughes Rig Count jump substantially higher, expect to see the floor being tested as more supply is bound to come online. Once bears make it through that orange box level, expect to see more downside toward $74 before finding ample support to slow down the sell-off. 

WTI US OIL (Daily Chart)

• Gold price trades sideways as investors shift focus to the speech from Fed Powell at Jackson Hole.
• The market mood remains jittery as to whether Jerome Powell will deliver hawkish interest rate guidance or favor a neutral policy.
• Business spending on capital goods rose by 0.1% in July, swinging from a contraction of 0.4% recorded for June.

Gold price (XAU/USD) demonstrates a rangebound performance as investors await Federal Reserve (Fed) Chair Jerome Powell's speech at the Jackson Hole Symposium for further guidance. The precious metal is expected to remain on tenterhooks as the market mood remains uncertain as to whether Jerome Powell will deliver hawkish interest rate guidance or discuss the benefits of keeping interest rates unchanged for a longer period. Market participants would also like to know how much longer the Fed will keep interest rates elevated.

Fed policymakers: Boston Fed Bank President Susan Collin and Philadelphia Fed Bank President Patrick Harker commented on Thursday that the current interest rate level is enough to do the required job. The US economy is still resilient due to a tight labor market and easing inflation, but further policy-tightening by the Fed could dampen market sentiment.

Daily Digest Market Movers: Gold price consolidates ahead of Jackson Hole Symposium

• Gold price turns sideways above $1,910.00 ahead of Fed Chair Jerome Powell’s commentary at Jackson Hole Symposium.
• The uncertainty about Powell’s commentary at Jackson Hole has sidelined investors, however, the strength in the US Dollar indicates that the statement could be on the hawkish side.
• The US Dollar Index (DXY) extends its recovery to near 104.26, printing a fresh 11-week high as the US economy is resilient while other G7 economies’ growth is shrinking.
• Strength in the US Dollar Index also came from lower weekly jobless claims released on Thursday and deepening fears of a slowdown in the Chinese economy.
• The US Department of Labor reported on Thursday that individuals claiming jobless benefits for the first time rose to 230K, lower than expectations and the former reading of 240K for the week ending August 18.
• Gold price upside remains restricted as US Treasury yields rebounded after a downside move. The 10-year US bond yield recovered to near 4.26%.
• Mixed responses from market participants discern whether Powell will provide a time period for how long interest rates will remain stable at elevated levels or if the central bank consider further interest rate hikes.
• Investors will also focus on plans about how the Fed will shred the excess inflation and the outlook for the US economy for the second half of 2023.
• Meanwhile, Fed policymakers delivered neutral interest rate guidance on Thursday.
• Boston Fed President Susan Collins commented that interest rates are at a point where the Fed doesn’t need to raise them further. However, the option of further policy tightening will remain open.
• Philadelphia Fed Bank President Patrick Harker supports sustaining interest rates at the 5.25% to 5.5% range. Harker sees no rate cuts this year.
• US preliminary PMI for August reported by S&P Global on Wednesday indicated that the economy is losing its resilience due to higher interest rates and a deteriorating demand outlook.
• Vulnerable PMIs for August cast doubts over the growth rate in the third quarter. Firms are banking on lower operating capacity due to rising cost inflation.
• On Thursday, the US Census Bureau reported Nondefense Capital Goods Orders expanded by 0.1% in July as expected by investors, contracting from 0.4% in June.
• Going forward, investors will also focus on five-year consumer inflation expectations for August, which will be published at 14:00 GMT.

Technical Analysis: Gold price demonstrates a volatility squeeze above $1,910

Gold price demonstrates a volatility contraction phase above $1,910.00 ahead of the Jackson Hole Symposium. The precious metal struggles to continue its five-day winning spell amid a recovery in US Treasury yields. The yellow metal tussles with resistance to climb above the 20-day Exponential Moving Average (EMA) around $1,915.00 but has broken confidently above the 200-day EMA.

The Relative Strength Index (RSI) (14) has climbed into the 40.00-60.00 range, which indicates that the bearish impulse has faded.

• US Dollar price action in the green against nearly every major G10 currency.
• Traders will be hearing from both Lagarde and Powell this Friday.
• US Dollar Index strengthens sharply during European trading hours. 

The US Dollar (USD) is already storming out of the gate ahead of the long awaited speech from US Federal Reserve (Fed) Chair Jerome Powell later this Friday from the Jackson Hole Symposium in Wyoming. Already ahead of the statement, the Greenback is advancing firmly against every major peer from G10 currencies as several Fed members in the past few days repeated the same message: steady for longer. Markets are pricing out any early cuts and now see a first cut by May 2024.

Although Michigan Consumer Sentiment and Consumer Inflation expectations are due to be published on the macroeconomic data front, expect the speech from  Powell to be the only talk in town and the primary market moving event this Friday. Volatility will pick up already earlier on Friday as more central bank speakers are set to take the stage at Jackson Hole. 

Daily digest: US Dollar nears end game

• As of 14:00 GMT, a lot of headlines are expected out of the Jackson Hole Symposium: Near 14:00 US Fed Chair Jerome Powell will give his keynote speech. Next at 15:00 GMT, the Fed’s Patrick Harker will speak alongside Loretta Mester. At 18:00 GMT, the Fed’s Austan Goolsbee will be taking the stage. Half an hour later, the Fed’s Loretta Mester is due to speak again at 18:30. To round out the week, Christine Lagarde from the European Central Bank (ECB) will speak at 21:00 GMT. 
• At 14:00 GMT, the Michigan Consumer Sentiment will come out for August. The Index is expected to stay steady at 71.2. The inflation expectation is expected to remain unchanged as well at 2.9%.
• Germany’s Gross Domestic Product (GDP) stays flat at 0% and makes the Euro weaker on the back of that data. 
• The People's Bank of China (PBoC) did it again and fixed the Yuan at 7.1883 while 7.2826 was expected. Meanwhile, Chinese government asks banks to limit some Connect Bond outflows and to ease mortgage rules for home buyers. 
• ECB member Joachim Nagel said it is too early for a rate pause, though the ECB needs more data for its decision in September. After these comments, ECB member Boris Vujcic said that inflation has peaked and the economy in the eurozone is stagnating. 
• Equities are a mixed bag on this Friday: Asian equities are down with the Japanese Topix closing -0.88% lower. Hong Kong’s Hang Seng index is down -1.29%. European equities are flat together with US Futures for now. 
• The CME Group FedWatch Tool shows that markets are pricing in an 80.5% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. This is the lowest number in weeks as markets start to get afraid of possibly another rate hike.
• The benchmark 10-year US Treasury bond yield trades at 4.25% after touching  a new yearly high on Monday at 4.3618%. The bond market will be very sensitive to any news on Friday at the Jackson Hole Symposium. The whole US yield curve could move up or down depending on the speech from Fed Chair Jerome Powell. 

US Dollar Index technical analysis:  "Up and adam"

The US Dollar is hitting the currency pairs hard with the Greenback advancing in nearly every single cross or pair. Already this Friday morning during European trading hours, the Greenback received a tailwind from the 0% German GDP, which made investors flee into the US Dollar and away from the Euro. This results in a US Dollar Index firmly above 104.

On the upside, as you could have guessed from the above paragraph, 104.00 is the first nearby target. The high of last week’s Friday at 103.68 remains vital and needs to get a daily close above it in order for the DXY to eke out more monthly gains. Should this US Dollar strength persist for the last part of this year, May’s peak at 104.70 could become the reality again.   

On the downside, several floors are likely to prevent a steep decline in the DXY. The first one now is that level from last week Friday at 103.68, which now needs to hold for a daily close above. In case Powell completely flips the mood for the Greenback, look for the 200-day Simple Moving Average (SMA) at 103.16. Passing below the 103.00 figure, some room opens up for a further drop. However, around 102.38 both the 55-day and the 100-day SMAs await to backstop the pairs. 

USD continues to strengthen ahead of keynote speeches at Jackson Hole. Economists at MUFG Bank analyze Greenback’s outlook.

Rate hike expectations could change if Powell delivers a dovish surprise

This is the first time since March that Gold has fallen below $1,900. Economists at MUFG Bank analyze XAU/USD outlook.

Any dips below $1,900 is viewed as a buying opportunity

The Dollar has strengthened into the Jackson Hole Symposium and economists at ING think a hawkish tone by Fed Chair Powell is now largely priced in

Powell’s hawkishness looks largely in the price

See: Dollar is likely to give back a good part of the gains if Powell disappoints – Commerzbank

UOB Group’s Economist Ho Woei Chen comments on the latest BoK monetary policy meeting.

Key Takeaways

• Fed Chairman Jerome Powell will deliver a speech on the US economic outlook at the Jackson Hole Symposium.
• Powell’s comments on monetary policy and interest rate path will be scrutinized by markets.
• US Dollar could show significant reaction to Powell’s speech on the last trading day of the week.

Jerome Powell, Chairman of the Federal Reserve System (Fed), will deliver opening remarks at the annual Jackson Hole Economic Symposium on Friday, August 25. Powell’s speech – titled “Economic Outlook” – is expected to offer important clues on the Fed’s next policy step and ramp up market volatility heading into the weekend.

Please refresh the page for updates. A live video stream of Powell's speech and his remarks will be added to the article when they are available.

Following the Fed decision to hike the policy rate by 25 basis points (bps) to the range of 5.25-5.5% at the July policy meeting, Powell said in the post-meeting press conference that they have not made any decisions about any future meeting and reiterated the data-dependent approach. "We believe monetary policy is restrictive,” Powell told reporters and caused investors to refrain from pricing in another rate increase in September.

Since the July meeting, however, macroeconomic data releases from the US fed into expectations that the Fed could still opt for one more rate hike before the end of the year. The real Gross Domestic Product (GDP) of the US expanded at an annualized rate of 2.4% in the second quarter, compared to the market expectation of 1.8%, while the annual Consumer Price Index (CPI) inflation rose to 3.2% in July from 3% in June. Although Nonfarm Payrolls rose less than 200,000 in June and July, strong wage inflation readings and the historically low Unemployment Rate of 3.5% reaffirmed that conditions in the labor market remain tight.

According to the CME Group FedWatch Tool, investors see a more than 40% probability of the Fed lifting the interest rate one more time by 25 bps before the end of the year. The market positioning suggests that the US Dollar (USD) faces a two-way risk heading into the Jackson Hole event.

In an interview with Yahoo Finance on the sidelines of the Jackson Hole Symposiu on Thursday, Boston Federal Reserve President Susan Collins said that the may be at a place where the Fed can hold the policy rate steady. Similarly, "right now I think that we've probably done enough and with monetary policy in a restrictive stance" Federal Reserve Bank of Philadelphia President Patrick Harker told CNBC.

When is Powell speech at Jackson Hole and how could it affect the USD?

Fed Chairman Jerome Powell is scheduled to deliver a keynote speech titled “Economic Outlook” on the second day of the annual Jackson Hole Symposium. Powell’s speech is scheduled to start at 14:05 GMT. 

In case Powell leaves the door open for one more rate hike, citing sticky core inflation and tight labor market, the US Dollar could start gathering strength against its rivals with the initial reaction. On the other hand, Powell could emphasize the data-dependency and adopt a more cautious tone regarding the growth outlook. Investors are likely to see that as a dovish sign given Harker and Collins' comments from the day before, triggering a USD selloff.

Economists at Deutsche Bank don’t expect Powell to comment on the near-term policy outlook and explain:

“The overall title this year is “Structural Shifts in the Global Economy”, and Chair Powell’s speech on Friday is simply given the heading “Economic Outlook”. Our US economists don’t expect Powell to send strong signals about the near-term policy path. However, recent years have seen Powell deliver some important longer-term policy messages. In particular, last year saw him deliver a fairly short and direct message on the importance of price stability, which left little doubt as to the Fed’s resolve to return inflation to target.”

It’s worth mentioning that experts have already started to forecast Fed rate cuts as early as the second quarter of 2024. A recently conducted Reuters poll showed that a majority 80% of 110 economists do not anticipate any further interest rate hikes by the Fed this year. Moreover, a majority of the respondents expect the Fed to cut interest rates at least once next year, by the end of the second quarter.

Even if Powell doesn’t offer any clues regarding the next interest rate step, he could push back against the rate cut expectations in 2024. In that scenario, the USD could regather strength even if it weakens against its rivals with the initial reaction.
 

• Euro extends the decline to the sub-1.0800 region vs. the US Dollar.
• Stocks in Europe trade on the positive foot early on Friday.
• EUR/USD slips back to the 1.0770 zone amidst Dollar gains.
• The USD Index (DXY) advances north of the 104.00 hurdle.
• Business Climate in Germany surprised to the downside in August.
• All the attention will be on Chair Jerome Powell’s speech.
• ECB’s President Christine Lagarde will also speak later on Friday.
• Final Consumer Sentiment is due next in the US calendar.

The Euro (EUR) adds to the pessimism seen in the second half of the week vs. the US Dollar (USD) and forces EUR/USD to retreat further and print new ten-week lows in the 1.0780/75 band on Wednesday.

On the flip side, the Greenback keeps the march north unabated and surpasses the key 104.00 hurdle when measured by the USD Index (DXY), always helped by rising US yields across the curve as well as persistent cautiousness ahead of the Jackson Hole event.

Regarding monetary policy, there is currently a renewed debate surrounding the Federal Reserve's dedication to maintaining a more stringent approach over an extended period of time. This heightened attention stems from the remarkable resilience of the US economy, despite slight relaxation in the labour market and lower inflation figures observed in recent months.

On this, Philly Fed Patrick Harker suggested on Thursday that the Fed is still operating within restrictive bounds, while he argued that there could be potential interest rate reductions in the upcoming year if inflation subsides. Meanwhile, Susan Collins from the Boston Fed did not dismiss the possibility of further interest rate hikes.

Meanwhile, within the European Central Bank (ECB), internal divisions among its Council members have emerged regarding the possibility of prolonging tightening measures beyond the summer season. These disagreements are fueling a renewed perception of fragility, which is exerting a detrimental influence on the Euro.

Still around the ECB, Board member Mario Centeno hinted on Thursday at a prudent strategy for the ECB's September meeting.

Data-wise, in the euro region, Germany’s Business Climate tracked by the IFO Institute receded to 85.7 for the current month. Earlier in the session, final GDP figures saw the German economy contract at an annualized 0.2% during the April-June period and come in flat vs. the previous quarter.

In the US, the final Michigan Consumer Sentiment will be the sole release later in the NA session.

Daily digest market movers: Euro remains offered prior to Powell, Lagarde

• The EUR weakens to multi-week lows vs. USD.
• Rising prudence ahead of Jackson Hole weighs on the risk complex.
• US yields appear to gather some traction across the curve.
• Markets’ attention remains on the Jackson Hole gathering.
• Fed’s tighter-for-longer narrative keeps running in the background.
• Chair Powell’s speech is expected to fall in line with his latest message.
• The Fed is likely to maintain rates unchanged until Q1 2024.
• ECB’s Lagarde could unveil further details regarding the September meeting.

Technical Analysis: Euro’s outlook should shift to negative below the 200-day SMA

The selling pressure around EUR/USD gains extra pace and relegates the pair to trade in multi-week lows around 1.0770. The recent breakdown of the critical 200-day SMA does not bode well for bulls’ aspirations.

Further decline could motivate EUR/USD to revisit the August low around 1.0766 (August 25) ahead of the May low of 1.0635 (May 31) and the March low of 1.0516 (March 15). The loss of this level could prompt a test of the 2023 low at 1.0481 (January 6) to re-emerge on the horizon.

Occasional bouts of strength, in the meantime, should meet provisional resistance at the 55-day SMA at 1.0964 prior to the psychological 1.1000 barrier and the August high at 1.1064 (August 10). Once the latter is cleared, spot could challenge the weekly top at 1.1149 (July 27). If the pair surpasses this region, it could alleviate some of the downward pressure and potentially visit the 2023 peak of 1.1275 (July 18). Further up comes the 2022 high at 1.1495 (February 10), which is closely followed by the round level of 1.1500.

Furthermore, sustained losses are likely in EUR/USD once the 200-day SMA is cleared in a convincing fashion.

• GBP/JPY holds ground near 183.80 due to downbeat Japan’s inflation data.
• Weekly low appears to be the support following 38.2% Fibo.
• The cross could face a barrier around 184.00 psychological level.

GBP/JPY struggles to snap three-day losses, currently trading around 183.80 lined up with the 21-day Exponential Moving Average (EMA) during the European session on Friday. The cross experiences upward pressure due to downbeat Japan’s inflation data.

Tokyo Consumer Price Index (CPI) (YoY) declined to 2.9% in the month of August against the 3.0% expected, from the 3.2% prior. Tokyo CPI ex Food, Energy (YoY) remains unchanged at 4%, while Tokyo CPI ex Fresh Food (YoY) fell to 2.8% from the 3% figure in July, slightly lower than the market expectations of 2.9%.

The pair could meet support around the weekly low at 183.35, following the 38.2% Fibonacci retracement at 182.78 level. A firm break below the latter could open the doors for the GBP/JPY pair to navigate the region around the 50-day EMA at 181.61 level.

On the upside, the 184.00 psychological level appears to be the key resistance. A break above that level could support the pair to explore the area around nine-day EMA at 184.52.

The 14-day Relative Strength Index (RSI) remains below 50, which suggests a bearish bias of the GBP/JPY traders. The Moving Average Convergence Divergence (MACD) line stays above the centerline but lies below the signal line, which suggests that recent momentum is weaker.

GBP/JPY: Daily Chart

EUR/USD has dipped below 1.08. Economists at Société Générale analyze the pair’s technical outlook.

1.0930 must be overcome to affirm a short-term up move

EUR/CHF has weakened since since mid-January. But downside momentum seems to be fading, economists at Citi report.

Has CHF hit its lows against EUR?  

• EUR/JPY fails to capitalize on the overnight modest gains and meets with a fresh supply on Friday.
• Bets that the ECB will pause its rate-hiking cycle in September act as a headwind for the cross.
• The BoJ’s dovish stance continues to undermine the JPY and helps limit any meaningful decline.
• Traders also seem reluctant ahead of speeches by ECB’s Lagarde and BoJ’s Ueda on Saturday.

The EUR/JPY cross attracts fresh sellers near the 157.75-157.80 region on Friday and reverses a major part of the previous day's positive move. Spot prices drop to a fresh daily low, around the 157.25-157.20 area during the early part of the European session, albeit lack follow-through as traders seem reluctant to place aggressive bets ahead of the key central bank speakers.

The European Central Bank (ECB) President Christine Lagarde will speak at the Jackson Hole Economic Policy Symposium on Saturday. Market participants will look for cues about the future rate-hike path in the wake of mounting speculations that the ECB  will halt its rate-hiking cycle in September. The bets were lifted by the disappointing release of the flash PMI prints, which indicated that business activity in the Euro Zone declined more than expected in August and revived concerns about a deeper global economic downturn.

Adding to this, the IFO survey showed on Friday that the German Business Climate Index dropped further to 85.7 in August as compared to the previous month's reading of 87.4 and 86.7 anticipated. Furthermore, the Current Economic Assessment Index also missed consensus estimates and declined to 89.0 points for July's 91.4. Meanwhile, the IFO Expectations Index – indicating firms’ projections for the next six months – slipped to 82.6 in August from the previous month’s 83.6, falling short of expectations and further fueling recession fears.

This is seen as a key factor behind the shared currency's relative underperformance against its Japanese counterpart and exerting some pressure on the EUR/JPY cross. The downside, however, remains cushioned on the back of the prevalent selling bias surrounding the Japanese Yen (JPY), which is undermined by a dovish stance adopted by the Bank of Japan (BoJ). In fact, the BoJ is the only major central bank in the world to maintain negative rates. In contrast, the ECB has raised borrowing costs by a combined 425 bps since last July.

Moreover, the markets are still pricing in the possibility of one more ECB rate hike move by the end of this year. The BoJ, on the other hand, is expected to stick to its ultra-easy monetary policy settings and the bets were reaffirmed by Friday's release of Tokyo CPI, showing that consumer prices in Japan’s capital city grew at a slower-than-expected pace in August. The data, meanwhile, ensures that the BoJ may keep the status quo until next summer, which supports prospects for the emergence of some dip-buying around the EUR/JPY cross.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before positioning for an extension of this week's retracement slide from the vicinity of mid-159.00s, or the highest level since September 2008. Traders might also refrain from placing aggressive directional bets and prefer to wait for BoJ Governor Kazuo Ueda's statement on Saturday, which might further assist investors in determining the next leg of a directional move for the EUR/JPY cross.

Technical levels to watch

Markets remain focused on upcoming announcements from the Fed Chair Jerome Powell and the ECB President Christine Lagarde. Economists at ING analyze GBP outlook ahead of the Jackson Hole conference.

EUR/GBP can extend its rally beyond 0.8600 if Lagarde sounds hawkish 

USD/CNH now appears to have entered a consolidative range within 7.2500-7.3300 argue UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

The main event today will be the US Fed's Jackson Hole Symposium. Economists at Commerzbank analyze how Fed Chair Powell’s speech could impact the US Dollar.

Hawkish comments by Powell could push the USD a bit further

• USD/CAD consolidates below the 1.3600 psychological level.
• Investors await Fed Chair Powell’s speech, seeking further cues on the inflation outlook.
• China's economic situation drives Oil prices lower, influencing the Loonie pair.

USD/CAD extends gains for the second consecutive day, trading around 1.3590 during the European session on Friday. The US Dollar (USD) strengthened due to the solid United States (US) employment data, which reinforces the concerns over the inflation outlook. For the week ending on August 18, the index dropped to 230K from the previous reading of 240K, which was expected to remain consistent.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against six major currencies, hovers around 104.20. Market participants await the US Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Symposium, seeking insights into the financial and economic outlook, helping to shape potential strategies in response to placing bets on the USD/CAD pair.

Furthermore, the former President of the St. Louis Federal Reserve James Bullard, expressed hawkish sentiments that provided support to the US Dollar (USD). Bullard stated, as reported by Bloomberg, that "The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon." Conversely, Patrick Harker, President of the Federal Reserve Bank of Philadelphia, suggested the possibility of concluding the rate hike trajectory, while the President of the Boston Federal Reserve advocated for maintaining a bias to keep rates elevated for an extended period.

Investors remain positive on the Fed’s hawkish stance, leading to an increase in US Treasury yields and providing support to the Greenback. China's economic challenges are driving down the Oil prices, which in turn is having a negative impact on the Canadian Dollar (CAD), given Canada is one of the Crude oil exporters.

• NZD/USD continues losing ground for the second straight day and hits a fresh YTD low.
• Bets for more Fed rate hikes continue to boost the USD and exert pressure on the pair.
• Spot prices show resilience below 0.5900 as traders await Fed Chair Powell’s speech.

The NZD/USD pair drifts lower for the second successive day on Friday and touches a fresh low since November 2022 during the early part of the European session. Spot prices, however, once again show some resilience below the 0.5900 mark and quickly recover a few pips in the last hour, though any meaningful upside remains elusive amid the underlying bullish tone around the US Dollar (USD).               

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, advances to a two-and-half-month top as traders continue to price in the possibility of further policy tightening by the Federal Reserve (Fed). The bets were reaffirmed by the overnight hawkish remarks by Fed officials, keeping the door open for one more 25 bps lift-off by the end of this year. The outlook, meanwhile, remains supportive of elevated US Treasury bond yields and continues to underpin the buck.

Apart from the view that the Fed will keep interest rates higher for longer, worries about a deeper global economic downturn further benefit the safe-haven Greenback and should contribute to capping the NZD/USD pair. Against the backdrop of the worsening economic conditions in China, a host of manufacturing surveys on Wednesday painted a grim picture of the health of economies across the globe and fueled recession fears. This should act as a headwind for the growth-sensitive Kiwi.

Traders, however, might refrain from placing fresh bearish bets around the NZD/USD pair and prefer to move to the sidelines ahead of Fed Chair Jerome Powell's highly-anticipated speech at the Jackson Hole Symposium. Investors will look for fresh cues about the Fed's future rate-hike path, which will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the major. Nevertheless, spot prices remain on track to register losses for the sixth straight week.

Technical levels to watch

• German IFO Business Climate Index came in at 85.7  in August.
• IFO Current Economic Assessment fell to 89.0 this month.
• The August German IFO Expectations Index arrived at 82.6.

The headline German IFO Business Climate Index dropped further to 85.7 in August versus last month's 87.4 and the market expectations of 86.7.

Meanwhile, the Current Economic Assessment Index fell to 89.0 points in the reported month, compared with July’s 91.4 and 90.0 anticipated.

The IFO Expectations Index – indicating firms’ projections for the next six months, declined to 82.6 in August from the previous month’s 83.6 reading. The data fell short of market expectations of 83.8.

Market reaction

EUR/USD is holding lower ground on the downbeat German IFO survey. At the time of writing, the pair is down 0.35% on the day, trading at 1.0770.

About German IFO

The headline IFO business climate index was rebased and recalibrated in April after the IFO research Institute changed series from the base year of 2000 to the base year of 2005 as of May 2011 and then changed series to include services as of April 2018. The survey now includes 9,000 monthly survey responses from firms in the manufacturing, service sector, trade and construction.

The world’s two most prominent central bankers are both speaking at Jackson Hole today. ECB President Christine Lagarde has to deal with a worsening economic outlook in the Eurozone, but economists at ING suspect she will stick to data dependency and a hawkish tone.

EUR/USD can rebound

Reuters cited some sources with knowledge of the discussion on Friday, saying that momentum is growing for a pause in ECB rate hikes as recession fears rise but the debate is still open.

Additional takeaways

Markets currently price about 50% chances of a hike in September and a pause but expect the ECB to make a final 25 basis point (bps) hike to 4.0% at some point later this year.

Market reaction

EUR/USD is testing intraday lows near 1.0770 on the dovish report, down 0.35% on the day.

• Pound Sterling refreshes 11-week low as higher interest rates dampen economic prospects.
• UK construction firms go out of business due to stubborn cost inflation.
• The Jackson Hole Symposium will drive further price action in the FX domain.

The Pound Sterling (GBP) is consistently facing a sell-off due to the widening consequences of a historically aggressive rate-tightening cycle by the Bank of England (BoE). The GBP/USD prints a fresh 11-week low amid bearish market sentiment and rising risks of a recession in the UK economy. In the battle against stubborn inflation, the BoE has raised interest rates to 5.25%, the consequences of which are impacting UK corporations, forcing some to report insolvency due to their inability to cover interest obligations.

The UK’s persistent Consumer Price Index (CPI) inflation and eventually declining real income of households have resulted in weaker Retail Sales, portraying a bleak demand environment. This has compelled firms to operate at lower capacity. Market participants expect that the consequences of higher interest rates by the BoE will expand further as the central bank prepares to tighten monetary policy further in September.

Daily Digest Market Movers: Pound Sterling drops further due to rising recession risks

• Pound Sterling refreshes 11-week low near 1.2550 as market sentiment remains bearish with rising expectations that the UK economy is set to shrink.
• The current tightening cycle by the Bank of England is historically aggressive, and the UK economy is facing its consequences.
• This week, S&P Global reported preliminary UK Manufacturing PMI for August that dropped significantly to 42.5 from estimates of 45.0 and July’s reading of 45.3. This has been the lowest factory data figure since the pandemic period.
• Also, Services PMI shifted into the contraction phase, remaining below the 50.0 threshold. The economic data landed at 48.7, lower than estimates of 50.8 and July’s release of 51.3. This indicates that firms are underutilizing their entire capacity due to risks of deteriorating demand propelled by rising price pressures.
• The odds of UK firms announcing corporate default have risen amid their inability to obligate rising borrowing costs. A survey from the BoE shows that the share of non-financial UK companies experiencing a weak debt-service coverage ratio will rise to 50% by year-end from last year’s reading of 45%.
• UK’s Confederation of Business Industry (CBI) reported on Thursday that the monthly balance of retail sales fell to -44 in August from -25 in July. This was the biggest decline since March 2021. UK retailers are less interested in making fresh investments next year, said CBI economist Martin Sartorius.
• British construction companies have gone out of business at the highest rate in a decade as home building slowed down and government projects were delayed due to stubborn core inflation. UK authority’s Insolvency Service shows about 4,280 operators became insolvent in the past year through June.
• In spite of rising recession risks, the BoE cannot pause the rate-tightening spell as current inflationary pressures are excessively higher than the desired rate of 2%.
• Investors are now expecting that the BoE will raise interest rates by 25 basis points (bps) in September and interest rates will peak around 5.75% against the former projection of 6.0%.
• Meanwhile, British energy regulator Ofgem has come forward to provide some relief to UK households by lowering its price cap on household energy bills.  The cap was lowered to an annual level of GBP 1,923 for a typical dual-fuel household, compared with July’s price reduction of GBP 2,074. “The drop will save households an average of GBP 151 compared with the previous quarter,” the UK regulator said.
• On Monday, UK markets will remain closed due to the summer bank holiday.
• Market sentiment is bearish as investors remain worried about Federal Reserve (Fed) Chair Jerome Powell’s commentary at the Jackson Hole Symposium. Investors remain concerned whether Fed Powell will underpin more interest rate requirements or guide about how long interest rates will remain steady at elevated levels.
• The US Dollar Index (DXY) confidently climbs above the 104.00 resistance as fears of a slowdown in China deepen due to rising deflation risks. Also, 10-year US Treasury yields rebounded to 4.25%.

Technical Analysis: Pound Sterling refreshes 11-week low

Pound Sterling prints a fresh 11-week low near 1.2550. The Cable witnessed immense selling pressure after a breakdown of the crucial support at 1.2615. More downside in the major is expected as the 20 and 50-day Exponential Moving Averages (EMAs) delivered a bearish crossover. The Cable is expected to extend its downside toward the 200-day EMA, which currently trades at 1.2480. Momentum oscillators indicate that the bearish impulse has been triggered.

Considering advanced prints from CME Group for natural gas futures market, open interest resumed the downtrend and shrank by more than 8K contracts on Thursday. On the other hand, volume rose by more than 63K contracts amidst the ongoing erratic performance.

Natural Gas looks under pressure while below $3.00

Thursday’s advance in prices of natural gas was on the back of shrinking open interest, which seems to indicate that the continuation of the recovery is not favoured in the very near term. In the meantime, occasional bullish attempts remain capped by the $3.00 mark per MMBtu.

Economists at the Bank of America analyze how the Jackson Hole conference could influence the direction of the US Dollar.

Possibility of rate cuts could drag USD down

In the view of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, a more sustained advance in USD/JPY seems likely while above 146.55.

Key Quotes

USD/JPY has risen steadily in line with rebounding US treasury yields since Thursday’s early session when it touched a 144.50 low. Economists at ING analyze the pair’s outlook ahead of today’s speech by Fed Chair Jerome Powell at the Jackson Hole Symposium.

Tokyo inflation slows

• Silver moves away from a multi-week high set on Wednesday, albeit lacks follow-through.
• A convincing break below the $23.80 confluence should pave the way for deeper losses.
• Bulls might now wait for a move beyond the $24.35 region before placing aggressive bets.

Silver remains under some selling pressure for the second successive day on Friday and retreats further from a three-week top, around the $24.35 region touched on Wednesday. The white metal remains depressed through the early part of the European session and currently trades around the $24.00 round-figure mark, down just over  0.10% for the day.

The XAG/USD, however, manages to hold above the $23.85-$23.80 confluence, comprising the 23.6% Fibonacci retracement level of the recent rally from the monthly low and the 200-period Simple Moving Average (SMA) on the 4-hour chart. The said area could act as a pivotal point for intraday traders and help limit any further decline, against the backdrop of positive technical indicators on 4-hour/daily charts.

A sustained break below, however, might prompt some technical selling and drag the XAG/USD towards the 38.2% Fibo. level, around the $23.55 region. This is closely followed by another confluence support near the $23.40 area, comprising the 200-day SMA and the 50% Fibo. level, which if broken decisively might shift the near-term bias in favour of bearish traders and pave the way for some meaningful downside.

Silver 4-hour chart

Zooming out to the daily chart, the recent price action witnessed since early June seems to constitute the formation of a bearish head and shoulders pattern on the daily chart. The pattern, however, will be confirmed on a sustained break below the neckline support, around the $22.20-$22.10 region.

XAG/USD daily chart

In the meantime, bulls need to wait for some follow-through buying beyond the overnight swing high, around the $24.35 area, before placing fresh bets. The XAG/USD might then aim to surpass the $24.55-$24.60 intermediate hurdle and aim to reclaim the $25.00 psychological mark before climbing to the $25.25 zone, or the July monthly swing high. Some follow-through buying should pave the way for a rise to the $26.00 mark.

Technical levels to watch

• The index surpasses the 104.00 hurdle to print new highs.
• Chair Powell will speak later at the Jackson Hole Symposium.
• Final Michigan Consumer Sentiment takes centre stage in the US docket.

The greenback gathers extra steam and surpasses the 104.00 barrier to print new multi-week peaks when tracked by the USD Index (DXY) at the end of the week.

USD Index looks at Powell, data

The index adds to Thursday’s gains and surpasses the 104.00 hurdle for the first time since early June amidst rising cautiousness ahead of the speech by Chief J. Powell at the Jackson Hole Symposium later in the European afternoon.

The move higher in the dollar also appears bolstered by the equally robust performance of US yields across different maturities, which at the same time look supported by rising speculation that the Fed might hike rates at some point by year end.

Other that Powell’s speech, the US calendar will show the final print of the Michigan Consumer Sentiment for the current month.

What to look for around USD

The index picks up pace and trespasses the 104.00 hurdle helped by renewed market chatter pointing to a potential extra hike by the Fed in the latter part of the year.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which seems to have reignited the narrative around the tighter-for-longer stance from the Federal Reserve.

Furthermore, the idea that the dollar could face headwinds in response to the data-dependent stance from the Fed against the current backdrop of persistent disinflation and cooling of the labour market appears to be losing traction as of late.

Key events in the US this week: Jackson Hole Symposium, Final Michigan Consumer Sentiment, Chief Powell (Friday).

Eminent issues on the back boiler: Persistent debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is up 0.16% at 104.15 and the breakout of 104.27 (monthly high August 25) would open the door to 104.69 (monthly high May 31) and finally 105.88 (2023 high March 8). On the opposite side, immediate support appears at 103.12 (200-day SMA) followed by 102.32 (55-day SMA) and then 101.74 (monthly low August 4).

• USD/JPY strengthened on Japanese inflation and US employment data.
• Traders turn cautious ahead of speeches from central banks in Jackson Hole.
• Japan’s inflation fell amid US Initial Jobless claims printed lower than expected.

USD/JPY trades higher around 146.00, recovering the recent losses during early trading hours in the European session on Friday. The Japanese (Yen) experiences downward pressure due to mixed Japan’s inflation figures.

Tokyo Consumer Price Index (CPI) for August fell to 2.9% on the annual rate vs. 3.0% expected, from the 3.2% prior. Meanwhile, Tokyo CPI ex Food, Energy (YoY) remained consistent at 4% whereas Tokyo CPI ex Fresh Food (YoY) declined to 2.8% against the market consensus of 2.9%. The index printed the 3% figure in July.

On the other hand, US Initial Jobless Claims for the week ending on August 18, declined to 230K compared to the expectations of 240K, remaining consistent as prior. However, US Durable Goods Orders for July fell 5.2% compared to the market consensus of 4%, swinging from the previous figure of 4.4%.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against six major currencies, hovers around 104.20 ahead of Fed Chair Powell’s speech. The USD/JPY traders will also closely monitor the Bank of Japan (BoJ) Governor Kazuo Ueda’s speech at the Jackson Hole Symposium on Saturday, seeking insights into the financial and economic sectors, helping to shape potential strategies in response to place bets on USD/JPY pair.

Furthermore, The USD/JPY pair strengthened due to robust United States (US) employment data, higher US Treasury yields, and mixed sentiment around monetary policy tightening by the US Federal Reserve in the September meeting. Additionally, the US-China situation coupled with China’s economic woes contributed to the pair’s strength as a result of the export-trade ties between the two countries.

Economists at TD Securities expect the AUD/USD pair to bounce back higher.

0.64 offers support

AUD/USD seems to have now moved into a range bound theme, likely between 0.6365 and 0.6500, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

• USD/TRY pares the biggest daily loss since December 2021 amid broad US Dollar strength.
• Turkish Manufacturing Confidence, Capacity Utilization ease in August.
• Reassessment of CBRT’s bigger-than-expected rate hike, positioning for Fed Chair Powell’s Jackson Hole speech to recall Turkish Lira sellers.
• Other central bankers, mid-tier data from US, Turkiye can also entertain traders.

USD/TRY picks up bids to 26.20 as it consolidates the biggest daily loss since 2021 while bouncing off the two-month low marked the previous day amid early Friday morning in Europe. In doing so, the Turkish Lira (TRY) pair reverses the previous day’s heavy fall due to the bigger-than-expected rate hike from the Central Bank of the Republic of Türkiye (CBRT). That said, the US Dollar’s broad run-up ahead of Federal Reserve (Fed) Chairman Jerome Powell’s speech at the annual Jackson Hole Symposium also adds strength to the USD/TRY upside.

It should be noted that the recent downbeat releases of Turkish Manufacturing Confidence and Capacity Utilization for August, to 105.0 and 76.1% from 106.8 and 77.1% respectively, also propel the USD/TRY prices.

On Thursday, the CBRT surprised global markets by lifting the benchmark rates to 25%, versus 20% expected and 17.5% previous readings.

"Appropriate and highly needed move given the broad policy changes (fx protected lira scheme) and rising inflationary pressures," Ipek Ozkardeskaya, Senior Analyst at Swissquote and a regular contributor to FXStreet, told Reuters. "It is of course not enough, The CBRT should continue hiking thoroughly in the coming months, but the move finally surprised markets on the hawkish side - a feeling we had totally forgotten."

On the other hand, the US Dollar Index (DXY) rises to a fresh high since June 07, to 104.28 by the press time, after jumping the most in a month to renew the multi-day peak the previous day.

The DXY’s latest gains could be linked to the upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues. Also keeping the Greenback firmer are the early-day comments from the Fed policymakers and upbeat Treasury bond yields.

Former St. Louis Fed President James Bullard and the current Boston Federal Reserve President Susan Collins appeared hawkish in their speeches at the Jackson Hole interviews. Though, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of the rate hike trajectory and prod the Greenback buyers during the initial hours of the day.

It should be observed that the pre-event anxiety joins the US-China jitters ahead of US Commerce Secretary Gina Raimondo’s visit to Beijing, scheduled for next week, to also propel the US Dollar and the USD/TRY prices. Amid these plays, S&P 500 Futures remain depressed around 4,385 after falling the most since December 2022 the previous day, while the US 10-year Treasury bond yields reverse the previous pullback from the highest level since 2007, up two basis points (bps) to 4.25% by the press time.

Looking ahead, a slew of central bankers are scheduled to speak at the Jackson Hole Symposium in the next two days and can fuel volatility in the markets, as well as into the USD/TRY prices. However, major attention will be given to European Central Bank (ECB) President Christine Lagarde and Federal Reserve (Fed) Chairman Jerome Powell. Should they manage to push back the policy pivot concerns, the Turkish Lira might have more suffering ahead.

Technical analysis

USD/TRY rebound appears elusive unless crossing 27.00 hurdle on a daily closing basis. Alternatively, the downside break of 25.70 can favor Turkish Lira pair sellers to challenge the mid-2023 bottom surrounding 23.60.

All attention today will be on the Jackson Hole symposium. Antje Praefcke, FX Analyst at Commerzbank, analyzes how the event could impact the EUR/USD pair.

A different environment than last year

• EUR/GBP consolidates its gain around the 0.8580 area ahead of the ECB’s Lagarde speech.
• The German Gross Domestic Product (GDP) Q2 remained unchanged at 0% QoQ, the annual figure came in at -0.2%.  
• The downbeat UK data raised concerns of an impending recession in the economy.
• Investors await the ECB’s Lagarde speech later in the day. 

The EUR/GBP cross oscillates in a narrow trading range around 0.8580 heading into the early European session on Friday. Traders prefer to wait on the sidelines ahead of the European Central Bank (ECB) President Christine Lagarde's speech at the Jackson Hole annual symposium later in the day. 

The German Gross Domestic Product (GDP) QoQ for the second quarter remained unchanged at 0%, as expected. On a yearly basis, a growth number contracted at 0.2%, in line with market consensus. Investors had already priced in the lower likelihood of an interest rate rise at the September meeting, given moderate GDP growth and milder inflation data released.

Earlier in the week, the first reading of the Eurozone HCOB Composite PMI came In at 47.0 from 48.6 and against the expectation of 48.5. Germany’s Composite PMI declined to 44.7 from 48.5 prior lower than the estimation of 48.3.

On the other hand, the UK’s GfK Consumer Confidence for August improved to -25 from -30 prior and better-than-expected at -29. On Wednesday, the UK Manufacturing PMI dropped to 42.5 versus 45.3 prior. Meanwhile, Service PMI came in at 48.7, lower than the 50.8 expected and 51.3 in the previous month. The downbeat UK data raised concerns of an impending recession and convinced the Bank of England (BoE) to raise interest rates in a slower pace for the entire year, 

Moving on, market participants will keep an eye on ECB President Christine Lagarde’s speech at the Jackson Hole annual symposium. The speech could provide insights into economic conditions and hints about the ECB’s monetary policy. Traders will take cues and find trading opportunities around the EUR/GBP pair. 

FX option expiries for Aug 25 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0800 847m
• 1.0810 470m
• 1.0825 1.9b
• 1.0850 1.4b
• 1.0950 394m
• 1.1000 764m

- GBP/USD: GBP amounts     

• 1.2500 721m
• 1.2750 551m

- USD/JPY: USD amounts                     

• 146.50 530m

- AUD/USD: AUD amounts

• 0.6600 876m

- USD/CAD: USD amounts       

• 1.3500 506m
• 1.3580 664m

CME Group’s flash data for crude oil futures markets noted traders added around 6.3K contracts to their open interest positions on Thursday, reversing at the same time the previous daily drop. Volume followed suit and increased for the second straight session, now by around 64.6K contracts.

WTI: Decent support emerges just below $78.00

Prices of WTI left behind three consecutive sessions of losses on Thursday against the backdrop of rising open interest and volume. That said, further recovery in crude oil prices appears in store in the very near term. In the meantime, there is quite a decent contention area just below the $78.00 mark per barrel (August 23-24).

Here is what you need to know on Friday, August 25:

The US Dollar gathered strength against its rivals in the second half of the day on Thursday and the US Dollar Index (DXY) registered its highest daily close since early June. The USD preserves its strength early Friday as market participants eagerly await Fed Chairman Jerome Powell's speech at the Jackson Hole Symposium later in the day. The European economic docket will feature IFO sentiment survey and European Central Bank (ECB) President Christine Lagarde will speak in the late American session.

Although the USD struggled to outperform its rivals following some dovish comments from Fed officials early Thursday, the negative shift seen in risk sentiment provided a boost to the currency. Boston Federal Reserve President Susan Collins and Philadelphia Fed President Patrick Harker both said that they may have reached a point where they could hold rates steady. Following Wednesday's impressive upsurge, the Nasdaq Composite Index lost more than 2% on Thursday and the S&P 500 Index declined nearly 1.5%. Early Friday, US stock index futures trade mixed, while DXY clings to modest gains above 104.00. 

After recovering above 1.0850 during the European trading hours on Thursday, EUR/USD reversed its direction and closed the day deep in negative territory. The pair continued to push lower early Friday and was last seen losing 0.2% on the day at around 1.0780. Earlier in the day, the data from Germany showed that the real Gross Domestic Product contracted 0.2% on a yearly basis in the second quarter, matching the previous estimate and the market expectation.

GBP/USD lost more than 100 pips on Thursday and broke below 1.2600. The pair stays on the back foot and trades at its weakest level in over two months near 1.2570 in the European morning.

USD/JPY recovered above 145.00 late Thursday and extended its rally beyond 146.00 early Friday. The Annual Tokyo Consumer Price Index in August rose 2.9%, down from 3.2% recorded in July and slightly below the market expectation of 3%. Bank of Governor Kazuo Ueda will speak at the Jackson Hole Symposium on Saturday.

Despite the broad-based USD strength, Gold price recorded gains for the fourth straight day on Thursday as US Treasury bond yields edged lower on dovish Fed commentary. XAU/USD stays relatively quiet and trades in a tight channel above $1,910 early Friday.

Bitcoin failed to build on Wednesday's gains and closed in the red on Thursday. At the time of press, BTC/USD was moving sideways near $26,000. Ethereum fell more than 1% on Thursday and was last seen trading in negative territory slightly below $1,650.

USD/INR is now above 83.0, a lifetime high. Economists at ANZ Bank analyze the Reserve Bank of India’s (RBI) perspective on the role of exchange rate.

RBI’s evolving FX policy is supporting growth and stabilising inflation

GBP/USD risks a deeper pullback in the next few weeks, according to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

• Gold Price braces for the first weekly gain in five despite latest retreat.
• Firmer US Dollar ahead of Fed Chair Powell’s speech prod XAU/USD bulls.
• Confirmation of policy pivot at major central banks can join China-linked optimism to fuel Gold Price upside.

Gold Price (XAU/USD) reverses from a fortnightly high while consolidating the first weekly gains, so far, ahead of the top-tier central bankers’ speeches at the Jackson Hole Symposium. In doing so, the bright metal bears the burden of the recently firmer US Treasury bond yields and the US Dollar. However, the weekly fall can be attributed to the weekly pullback in the bond coupons after they refreshed the multi-year high on Tuesday.

That said, upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues, also allowed the second-ranked Fed officials to defend hawkish monetary policy and propel the US Dollar.

However, the early-week releases of the August PMIs and the upbeat sentiment surrounding the US-China ties, not to forget expectations of witnessing more stimulus from China, put a floor under the XAU/USD prices.

Furthermore, the BRICS flash mixed signals on the dedollarization and prod the Gold buyers ahead of the top-tier event.

That said, the Gold Price remains firmer past the $1,900 support confluence and hence the policymakers’ signals for the end of the hawkish cycle may allow the buyers to return to the table. Among the central bankers, European Central Bank (ECB) President Christine Lagarde and Federal Reserve (Fed) Chairman Jerome Powell gain major attention.

Also read: Gold Price Forecast: XAU/USD could revisit $1,900 area on hawkish Jerome Powell speech

Gold Price: Key levels to watch

As per our Technical Confluence indicator, the Gold Price stays well beyond the short-term key support of around $1,897 comprising the Fibonacci 38.2% on one-week.

Also putting a strong floor under the XAU/USD price is the convergence of the 5-DMA and previous monthly low, around $1,905.

It’s worth noting that, Fibonacci 161.8% on one-day and 61.8% on one-week joins Pivot Point one-day S2 to add strength to the $1,905 support.

Meanwhile, Fibonacci 61.8% on one-day, the middle band of the Bollinger on the one-hour and previous weekly high together restrict the immediate upside of the Gold Price near $1,920.

In a case where the bulls manage to cross the $1,920 hurdle, the Gold Price run-up toward the joint of the Fibonacci 161.8% on one-week, Pivot Point one-day R3 and 200-SMA on four-hour, close to $1,937, can’t be ruled out.

Overall, the Gold buyers remain on the driver’s seat beyond $1,900 despite the latest pullback. However, it all depends upon how well the central bankers justify the dovish bias.

Here is how it looks on the tool

About Technical Confluences Detector

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

On Friday, the British energy regulator, Ofgem, said it would lower its price cap on household energy bills from October to an annual level of GBP1,923 (USD2,418) for a typical dual-fuel household, compared with July’s price reduction to GBP2,074 ($2,617.60).

“The drop will save households an average of GBP151 compared with the previous quarter,” the UK regulator said.

Ofgem added, “the drop also represents the lowest level since October 2021 and reflects further falls in wholesale energy prices as the market stabilizes and suppliers return to a healthier financial position after four years of losses.”

Market reaction

GBP/USD is off the low but remains in the red near 1.2570 on the above news. The spot is down 0.17% on the day.

Open interest in gold futures markets rose for the second session in a row on Thursday, this time by just 969 contracts according to preliminary readings from CME Group. Volume, instead, kept the erratic performance and shrank by around 36.5K contracts.

Gold: Provisional hurdle emerges around $1930

Gold prices rose marginally on Thursday and once again closed above the key $1900 mark. The move was amidst a small raise in open interest and allows for the continuation of the recovery in the very near term. That said, there is an interim up-barrier at the 55-day SMA at $1932 per troy ounce.

August has marked a significant setback to NOK. Economists at Danske Bank analyze Krone’s outlook.

Favouring the topside for the rest of this year

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group note further downside pressure could drag EUR/USD to the 1.0730 region.

Key Quotes

• USD/RUB holds above 94.70 amid the USD demand.
• Russian President Vladimir Putin said that BRICS members will consider shifting trade away from USD.
• Traders will closely watch Fed Chairman Jerome Powell's Speech.

Russian Ruble(RUB) hovers around 94.65, the lowest value against the dollar since March 2022. Markets turn cautious ahead of the Federal Reserve (Fed) Chairman Jerome Powell Speaks at the Jackson Hole Symposium later in the day. Meanwhile, the US Dollar Index (DXY) surges above the 104.20 mark.

Russian President Vladimir Putin stated earlier in the week that the days of the US dollar dominating commerce among the BRICS nations are numbered. Putin added that members will consider shifting trade away from USD and towards national currencies, with the BRICS New Development Bank playing an important role.

Despite this, Russia's budget is under pressure as a result of the Ukraine conflict, and the central bank raised interest rates last week to stop the decline of the Ruble. That said, the Bank of Russia increased the interest rate by 350 basis points (bps) to reach 12%. Apart from this, Russia has increased its military spending objective for 2023 to more than $100 billion, representing a third of all state expenditure, as the escalating costs of the Ukraine conflict place an increasing strain on Moscow's finances.

On the US Dollar front, Boston Fed President Susan Collins said that further rate rises are possible and that sending a strong signal regarding the timing of rate cuts is premature. Philadelphia Fed President Patrick Harker stated that the central bank has probably done enough with restrictive monetary policy. He also said that he believes the Fed will remain interest rate stable this year, but that next year would depend on the data. If Fed Chairman Powell offers hawkish comments at the Jackson Hole Symposium, this could boost the Greenback against the Russian Ruble.

Moving on, market participants will monitor Fed Chairman Jerome Powell's Speech. The event could offer hints about further monetary policy and give a clear direction for USD/RUB. Also, the headline surrounding Russia’s war in Ukraine remains in focus.

• WTI crude oil recovers from key EMA confluence within 13-day-old falling wedge bullish chart formation.
• Steady RSI, bearish MACD signals and 4.5-month-old horizontal resistance area prod Oil buyers targeting fresh yearly top.
• Energy benchmark sellers need to conquer $77.30–20 zone to tighten grips.

WTI crude oil picks up bids to $79.30 as it extends the previous day’s U-turn from the key Exponential Moving Averages (EMA) heading into Friday’s European session. In doing so, the black gold improves within a two-week-old falling wedge bullish chart pattern as market players await Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.

It’s worth noting that the steady RSI (14) suggests the continuation of the latest rebound from the key EMAs towards the $80.00 round figure.

However, the stated wedge’s top line, close to $80.30, will be important to watch as a break which will confirm the black gold’s theoretical run-up towards $87.00.

During the run-up, a broad resistance zone comprising tops marked since April, between $83.40 and $84.40, will be a major challenge for the commodity buyers.

Meanwhile, a downside break of the 50-day EMA and the 200-day EMA confluence, close to $77.80, isn’t an open welcome for the WTI crude oil sellers as the stated wedge’s bottom line and the mid-July swing high could challenge the south-run near $77.30–20.

Should the Oil bears dominate past $77.20, the odds of witnessing a slump toward May’s peak of $74.70 can’t be ruled out.

WTI crude oil: Daily chart

Trend: Limited upside expected

• EUR/USD renews 10-week low amid broad US Dollar strength.
• Second-rank ECB, Fed officials seem struggling to defend hawkish policy bias but comparatively better US data weighs on Euro.
• Final readings of German Q2 GDP, IFO figures for August and US consumer sentiment numbers will decorate calendar.
• Hawkish comments from ECB’s Lagarde will be weighed against recession concerns, Fed’s Powell can fuel Greenback by defying rate cuts.

EUR/USD takes offers to refresh 2.5-month low near 1.0780 heading into Friday’s European session as market players await Jackson Hole speeches from European Central Bank (ECB) President Christine Lagarde and Federal Reserve (Fed) Chairman Jerome Powell. Apart from the pre-event anxiety, the recently upbeat US economic concerns and comparatively more hawkish Fed talks, as well as an absence of recession woes in the US, also add strength to the Greenback and weigh on the Euro pair.

Earlier in the day, ECB policymaker and Bundesbank Chief Joachim Nagel joined Croatian National Bank Governor and the ECB Board Member Boris Vujčić to defend the hawkish bias about the bloc’s central bank. However, fears of economic stagnation were cited to highlight the data dependency, which in turn favored the Euro bears.

On the other hand, former St. Louis Fed President James Bullard and the current Boston Federal Reserve President Susan Collins appeared hawkish in their speeches at the Jackson Hole interviews. Though, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of the rate hike trajectory and prod the Greenback buyers during the initial hours of the day.

However, the fresh run-up in the US Treasury bond yields toward the multi-year high marked on Tuesday underpins the fresh US Dollar run-up as market players anticipate Fed Chair Powell to push back against the rate cut bias and defend the “higher for longer” rates.

Additionally, upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues, also allowed the US Dollar Index to reverse the pullback from 11 weeks marked on Wednesday.

Against this backdrop, the US Dollar Index (DXY) rises to a fresh high since June 07, to 104.28 by the press time, after jumping the most in a month to renew the multi-day peak the previous day. That said, S&P 500 Futures remain depressed around 4,385 after falling the most since December 2022 the previous day, while the US 10-year Treasury bond yields reverse the previous pullback from the highest level since 2007, up two basis points (bps) to 4.25% by the press time.

Moving forward, the final readings of Germany’s second quarter (Q2) Gross Domestic Product (GDP) will precede the nation’s IFO sentiment data for August to entertain the EUR/USD traders. Following that, the mid-tier US sentiment and inflation clues will also entertain the intraday traders.

Above all, speeches from ECB’s Lagarde and Fed Chair Jerome Powell will be crucial to watch for clear directions.

Technical analysis

An ascending support line from March 15, close to 1.0765 by the press time, appears the key support for the EUR/USD bear to break to keep the reins. Otherwise, the oversold RSI may play its role and trigger a corrective bounce toward the 200-DMA, close to 1.0805 by the press time.

• GBP/USD takes offers to refresh multi-day low amid broad US Dollar strength.
• Improvement in UK sentiment fails to defend Cable buyers amid British recession woes.
• Mostly firmer US statistics, hawkish Fed talks exert downside pressure on Pound Sterling.
• BoE’s Bailey bears more pressure than Fed’s Powell as Jackson Hole closes in.

GBP/USD bears are on full steam while refreshing the 10-week low around 1.2550 heading into Friday’s London open. In doing so, the Cable pair respects the broad US Dollar strength ahead of the central bankers’ showdown at the annual Jackson Hole Symposium, as well as ignoring the upbeat sentiment data flashed at home.

Early Friday in Asia, the UK’s GfK Consumer Confidence for August recovered -25.0 from -30.0 versus -29.0 expected. With this, Britain’s private consumer sentiment gauge marked the biggest improvement since April. It’s worth noting, however, that the deterioration in the UK Retail Sales and PMIs have previously renewed the British recession woes and hence allow Pound Sterling bears to ignore the mid-tier data.

On the other hand, upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues, allowed the Fed policymakers to remain hawkish and fuel the US Dollar Index after it reversed from 11 weeks on Wednesday. Among the key Fed hawks, former St. Louis Federal Reserve President James Bullard was the first to underpin the US Dollar’s strength with his hawkish remarks. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.

It’s worth noting that the US Dollar Index (DXY) rises to a fresh high since June 07, to 104.28 by the press time, after jumping the most in a month to renew the multi-day peak the previous day.

Elsewhere, a light calendar and cautious mood ahead of Fed Chairman Jerome Powell’s speech also help the Greenback to remain firmer and drown the GBP/USD price. While portraying the mood, S&P 500 Futures remain depressed around 4,385 after falling the most since December 2022 the previous day, while the US 10-year Treasury bond yields reverse the previous pullback from the highest level since 2007, up two basis points (bps) to 4.25% by the press time.

Looking ahead, Fed’s Powell needs to defend the hawkish policies and rule out rate cuts to defend the US Dollar bulls. However, Bank of England (BoE) Governor Andrew Bailey has a tougher task than Powell as he not only needs to rule out the rate cut bias but also push back against the UK recession concerns to defend the Pound Sterling.

Technical analysis

A clear downside break of the four-month-old horizontal support zone, now immediate resistance near 1.2570–90, keeps the GBP/USD bears hopeful. However, the downside needs validation from the early June swing high of around 1.2545 before targeting the 200-DMA support of around 1.2400.

• USD/CHF gains momentum for two straight days above the 0.8850 mark on Friday.
• The pair holds above the 50- and 100-hour Exponential Moving Averages (EMAs) with an upward slope.
• The immediate resistance level will emerge at 0.8875; 0.8838, acts as an initial support level for the pair.

The USD/CHF pair extends its upside for the second consecutive day above the mid-0.8800s during the Asian session on Friday. Meanwhile, the US Dollar Index (DXY) surges above the 104.20 mark supported by the higher US Treasury yields and risk-off mood in the market ahead of the key event.

Philadelphia Federal Reserve (Fed) President Patrick Harker stated at the Jackson Hole Symposium that the central bank has probably done enough with restrictive monetary policy. He also said that he believes the Fed will remain interest rate stable this year, but that next year would depend on the data. While, Boston Fed President Susan Collins said further rate rises are possible and that sending a strong signal regarding the timing of rate cuts is premature. Market participants await Friday’s speech from Fed Chairman Jerome Powell at the Jackson Hole Symposium for fresh impetus. Hawkish comments from the officials could boost the USD and act as a tailwind for the USD/CHF pair.

According to the one-hour chart, USD/CHF holds above the 50- and 100-hour Exponential Moving Averages (EMAs) with an upward slope, which means the path of least resistance for the pair is to the upside. The Relative Strength Index (RSI) holds in bullish territory above 50. However, the overbought condition indicates that further consolidation cannot be ruled out before positioning for any near-term USD/CHF appreciation.

That said, the immediate resistance level for USD/CHF will emerge at 0.8875, representing a confluence of the upper boundary of the Bollinger Band and a low of July 7. The additional upside filter is located at 0.8915 (high of October 10) en route to 0.8950 (low of July 6) and finally at 0.8970 (high of July 7).

On the flip side, the midline of the Bollinger Band at 0.8838, acts as an initial support level for the pair. Further south, the next stop of the USD/CHF pair is located at 0.8815 (the 50-hour EMA). The key contention level to watch is the 0.8800-0.8805 region, portraying a psychological round mark, 100-hour EMA, and the lower limit of the Bollinger Band. Any intraday pullback below the latter would expose the next downside stop at 0.8765 (low of August 22).

USD/CHF one-hour chart

• AUD/USD trades lower around 0.6410 on upbeat US economic data.
• Traders turn cautious due to mixed statements made by Fed officials.
• Improved US employment data undermined the AUD/USD pair.

AUD/USD trades lower around 0.6410 during the Asian session on Friday, reversing from the weekly top. The pair experiences downward pressure due to upbeat United States (US) economic data overall, elevated US Treasury yields, and mixed sentiment around monetary policy tightening by the US Federal Reserve in the September meeting. Additionally, fading US-China optimism coupled with China’s economic challenges exert pressure on the Australian Dollar (AUD) as a result of the intricate export-trade ties between the two nations.

US Initial Jobless Claims suggested positive employment conditions, which have led to concerns about the inflation outlook in the US. For the week ending on August 18, the index fell to 230K lower than the expectations of remaining consistent as reported 240K prior. However, US Durable Goods Orders for July reported a reduction of 5.2% as compared to the market consensus of 4%, declining from the 4.4% reading in June.

The AUD/USD pair is weakening due to the mixed sentiments over more interest rate hikes by the US Fed, following Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium on Friday. Additionally, former St. Louis Federal Reserve President James Bullard made hawkish remarks, underpinning the US Dollar (USD). Bullard said “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon” – Bloomberg. Conversely, Federal Reserve Bank of Philadelphia President Patrick Harker hinted at an end of the rate hike trajectory whereas the President of the Boston Federal Reserve defended maintaining a bias towards keeping rates at higher levels for an extended duration.

The US Dollar Index (DXY), which measures the performance of the Greenback against six major currencies, is continuing to extend gains as Fed Chair Powell’s speech looms. The spot price trades higher around 104.30 at the time of writing. Traders will closely monitor the central banks’ speeches, seeking insights into economic conditions and inflation outlook, which will influence the Fed’s decision on upcoming monetary policy.

• USD/CAD attracts buyers for the second straight day and climbs back closer to the monthly peak.
• A bullish USD acts as a tailwind, though rebounding Oil prices might underpin the Lonoie and cap.
• The overbought RSI (14) might also hold back bulls from placing fresh bets ahead of Fed's Powell.

The USD/CAD pair gains some follow-through positive traction for the second successive day on Friday and climbs back closer to its highest level since May 31 touched earlier this week. Bulls now await a sustained strength and acceptance above the 1.3600 mark before placing fresh bets, though the setup warrants some caution.

The US Dollar (USD) climbs to over a two-and-half-month peak during the Asian session and remains well supported by growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer. This, in turn, is seen as a key factor pushing the USD/CAD pair higher. That said, a further recovery in Crude Oil prices, from a one-month trough set on Thursday, could underpin the commodity-linked Loonie and act as a headwind for the major. Traders might also prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's highly-anticipated speech at the Jackson Hole Symposium.

Even from a technical perspective, the Relative Strength Index (RSI) on the daily chart remains in overbought territory and makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. Hence, any subsequent move up is more likely to confront stiff resistance near the 1.3650-1.3655 horizontal zone. Some follow-through buying, however, will be seen as a fresh trigger for bulls and pave the way for an extension of the monthly uptrend. The USD/CAD pair might then aim to reclaim the 1.3700 mark and test the next relevant hurdle near the 1.3735-1.3740 area.

On the flip side, any meaningful corrective pullback might now find decent support near the 1.3545 region, which if broken might expose the 1.3500 psychological mark. A further decline, meanwhile, is more likely to get bought into near a technically significant 200-day Simple Moving Average (SMA), currently around the 1.3455 zone. A convincing break below might shift the bias in favour of bearish traders and prompt aggressive technical selling. This will set the stage for deeper losses towards the 1.3400 round figure before spot prices eventually drop towards testing the 1.3370 support zone.

USD/CAD daily chart

Technical levels to watch

• Asian stock markets open on a weak note on Friday ahead of the key event.
• Chinese central bank looks to target outflows and limit the amount of Yuan offshore.
• Japan’s Nikkei leads losses by almost 2%, dragged by tech stocks.
• Indonesian central bank decided to maintain its interest rate at 5.75%.
• Market players will keep an eye on the Fed’s Powell speech.

Asian stock markets trade in negative territory on Friday. Markets turn cautious ahead of the Federal Reserve (Fed) Chairman Jerome Powell's speech. Additionally, the primary forces propelling the Asian market are a stronger dollar and lingering fears about global growth in China.
At press time, China’s Shanghai is down 0.4% to 3,070, the Shenzhen Component Index dips 0.94% to 10,160, Hong Kong’s Hang Sang falls 0.86% to 18,057, South Korea’s Kospi is down 0.66%, Japan’s Nikkei dips 1.92% and Taiwan's Weighted Index slumps 1.23%

China's real estate sector, which accounts for almost a quarter of the world's second-largest economy, loses momentum due to the country's recent housing decline and sluggish consumer spending. The headline surrounding China’s economic woes remains in investors’ focus.
Furthermore, some Chinese banks were instructed by the People's Bank of China (PBOC) to minimize their overseas investments under the Bond Connect scheme, according to Reuters. Chinese central bank looks to target outflows and limit the amount of Yuan offshore.

Japan’s Nikkei leads losses by almost 2%, dragged by tech stocks. Japanese Finance Minister Shunichi Suzuki stated on Friday that authorities will monitor the impact of the Jackson Hole talks on the global economy.

In Indonesia, the central bank decided to maintain its benchmark interest rate at 5.75% for the seventh consecutive meeting on Thursday and for the entire year.

Looking ahead, market participants await Friday’s speech from Fed Chairman Jerome Powell at the Jackson Hole Symposium. The speech could provide insights into economic conditions and hints about further monetary policy.

• Gold price meets with some supply and snaps a four-day winning streak to a two-week high.
• The US Dollar buying remains unabated and is seen driving flows away from the XAU/USD.
• Looming recession risks might help limit losses ahead of Fed Chair Jerome Powell's speech.

Gold price extends the previous day's late pullback from the $1,923-$1,924 region, or a two-week high and drifts lower through the Asian session on Friday. The XAU/USD currently trades just below the $1,915 level, down over 0.15% for the day, as traders now look to Federal Reserve (Fed) Chair Jerome Powell's highly-anticipated speech at the Jackson Hole Symposium.

Investors will look for fresh cues about the Fed's rate-hike path, which, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and help determine the next leg of a directional move for the Gold price. The disappointing release of the flash PMI prints from the United States (USD) on Wednesday showed that business activity in the world's largest economy approached the stagnation point in August and pushed back expectations for further tightening by the Fed. That said, the overnight hawkish remarks by Fed officials keep the door open for one more 25 basis points (bps) lift-off by the end of this year.

Boston Fed President Susan Collins said that the Fed may be at a place to hold rates steady, though noted that more rate hikes are possible and that it is premature to signal the timing of rate cuts. Separately, Philadelphia Fed President Patrick Harker stated that the central bank must keep its restrictive stance and added that inflation needs to fall further to pave the way for any rate cuts. The hawkish outlook, meanwhile, remains supportive of elevated US Treasury bond yields and pushes the USD Index (DXY) to its highest level since June 6, which, in turn, is seen driving some flows away from the US Dollar-denominated Gold price.

That said, worries about a deeper global economic downturn might offer some support to the safe-haven precious metal and help limit the downside, at least for the time being. Against the backdrop of the worsening economic conditions in China, a host of manufacturing surveys on Wednesday painted a grim picture of the health of economies across the globe and fueled recession fears. This continues to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets and acts as a tailwind for the Gold price, warranting some caution before positioning for any further intraday decline.

Furthermore, the XAU/USD, so far, has managed to hold its neck above a technically significant 200-day Simple Moving Average (SMA) support. Hence, strong follow-through selling is needed to confirm that this week's goodish rebound from sub-$1,885 levels, or the lowest since March 13 has run its course. Nevertheless, the Gold price, for now, seems to have snapped a four-day winning streak, though remains on track to register first weekly gains in the previous five.

Technical levels to watch

• USD/JPY fades the previous day’s rebound from fortnight low.
• Japan inflation came in softer but the details are way past BoJ target, keeping Yen buyers hopeful.
• US Dollar traces firmer Treasury bond yields to justify upbeat data and hawkish Fed talks.
• Fed Chair Powell’s speech will direct Yen pair ahead of BoJ Governor Ueda’s statements.

USD/JPY struggles to defend the mid-week recovery from the lowest level in a fortnight, easing to 145.90 amid early Friday morning in Europe. In doing so, the Yen pair portrays the market’s cautious mood ahead of the speeches from the Bank of Japan (BoJ) and the Federal Reserve (Fed) leaders at the annual Jackson Hole Symposium.

Apart from that, a softer print of the Tokyo Consumer Price Index (CPI) for August contrasts with the upbeat details than the BoJ’s target to prod the JPY buyers. Also, the chatters that the BoJ’s tweak to the Yield Curve Control (YCC) policy will push for a bigger budget and propel the inflation exert additional downside pressure on the Yen pair.

Previously, the upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues, allowed the Fed policymakers to remain hawkish and sour the sentiment. Among them, former St. Louis Federal Reserve President James Bullard was the first to underpin the US Dollar’s strength with his hawkish remarks. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.

On the same line was the recently fading optimism about the US-China ties as the Chinese Commerce Ministry said in a statement on Thursday, “China will state its stance on economic and trade matters of concern,” while adding that they will push financial institutions to expand credit to businesses. China’s Commerce Ministry also called on the US to cancel potential arms sales to Taiwan, which in turn flagged fears of geopolitical tension when US Commerce Secretary Gina Raimondo visits Beijing next week.

Against this backdrop, S&P 500 Futures remain depressed around 4,385 after falling the most since December 2022 the previous day, while the US 10-year Treasury bond yields reverse the previous pullback from the highest level since 2007, up two basis points (bps) to 4.25% by the press time. Further, the US Dollar Index (DXY) rises to a fresh high in 11 weeks and put a floor under the USD/JPY price.

Looking forward, Fed Chair Powell’s speech will be crucial for the USD/JPY traders as BoJ Governor Kazuo Ueda will speak on Saturday. That said, a divergence between the policymakers’ speeches will be crucial to observe.

Technical analysis

A one-month-old bullish flag formation keeps the USD/JPY pair buyers hopeful unless it falls beneath the flag’s bottom line of 144.80. The upside moves, however, need validation from 146.30 to observe the theoretical target surrounding 154.00.

• USD/INR trades higher due to the positive tone around the US Dollar (USD).
• 23.6% Fibo acts as the barrier following nine-day EMA at 82.84.
• Indicators suggest the bearish sentiment of USD/INR traders.

USD/INR trades sideways around 82.50 psychological level at the time of writing during the Asian session on Friday, recovering recent losses. The pair is cheering up the positive sentiment around the US Dollar (USD) due to the upbeat US employment data released on Thursday.

The 23.6% Finonacci retracement at 82.62 acts as immediate resistance, followed by the 38.2% Finonacci retracement at 82.79. A break above the latter could support the USD/INR pair to explore the nine-day Exponential Moving Average (EMA) at 82.84.

On the downside, the pair could meet support around the weekly low at 82.37 level, followed by the 82.00 psychological level.

The 14-day Relative Strength Index (RSI) remains below 50, which suggests a bearish bias of the USD/JPY traders. The Moving Average Convergence Divergence (MACD) line stays above the centerline but lies below the signal line, which suggests that recent momentum is weaker.

USD/INR: Daily Chart

• AUD/JPY gains some positive traction during the Asian session, albeit lacks follow-through.
• The technical setup supports prospects for an extension of over a two-month-old downtrend.
• Bears still need to wait for a break below the 100-day SMA support before placing fresh bets.

The AUD/JPY cross attracts some dip-buying near the 93.45 region on Friday and reverses a part of the previous day's retracement slide from over a one-week high. Spot prices, however, struggle to capitalize on the move and remain below the 94.00 round-figure mark through the Asian session, warranting some caution for bullish traders.

The Japanese Yen (JPY) weakens a bit in reaction to data, showing that consumer inflation in Tokyo – Japan’s capital city – grew at a slower-than-expected pace in August, which reaffirms expectations that the Bank of Japan (BoJ) will stick to its dovish stance. This, in turn, provides a modest intraday lift to the AUD/JPY cross, though worries about a deeper global economic downturn keep a lid on further appreciating move for the growth-sensitive Australian Dollar (AUD).

From a technical perspective, spot prices have been oscillating in a familiar range since the early part of the current week. This, in turn, points to an indecision among traders over the next leg of a directional move. Meanwhile, the lack of any meaningful buying and the AUD/JPY pair's inability to capitalize on its recent bounce from the 100-day Simple Moving Average (SMA) suggests that the recent downtrend witnessed over the past two months or so is still far from being over.

Moreover, oscillators on the daily chart are holding in the negative territory and indicate that the path of least resistance for spot prices is to the downside. That said, it will still be prudent to wait for a sustained break below the 100-day SMA support, currently pegged around the 93.00 round figure, before positioning for deeper losses. The AUD/JPY cross might then accelerate the downfall towards the 92.00 mark en route to the July swing low, around the 91.80-91.75 region.

On the flip side, any positive move might continue to attract fresh sellers above the 94.00 level and is likely to remain capped near the monthly peak, just ahead of the 95.00 psychological mark. A sustained strength beyond the latter will shift the near-term bias in favour of bullish traders and lift the AUD/JPY cross further beyond the 95.30 intermediate resistance en route to the 95.80-95.85 supply zone and the 96.00 round figure for the first time since early July.

AUD/JPY daily chart

Technical levels to watch

• Market sentiment remains dicey as traders await key central bankers’ speeches.
• S&P 500 Futures struggle for clear directions after falling the most since December 2022 the previous day.
• US 10-year Treasury bond yields print mild gains to reverse early-week pullback from multi-year high.
• Fed Chair Powell needs to justify hawkish policy to keep yields, Greenback firmer but defending equities is a tough task.

The risk appetite shows the market’s cautious mood ahead of the top-tier central bankers’ speeches at the Jackson Hole Symposium on Friday. Adding strings to the lackluster markets is an absence of major data in Asia, as well as mixed sentiment surrounding the major economies.

While portraying the mood S&P500 Futures remain depressed around 4,385 after falling the most since December 2022 the previous day, mostly unchanged of late. That said, the US 10-year Treasury bond yields extended the previous day’s rebound from the weekly low to reverse the previous pullback from the highest level since 2007, up two basis points (bps) to 4.25% by the press time.

Furthermore, the US Dollar Index (DXY) rose to a fresh high in 11 weeks while the Gold Price prints mild losses on its way to posting the first weekly gain in five.

It’s worth noting that the stocks in the Asia-Pacific zone edge lower while tracking Wall Street’s heavy losses, as well as the downbeat concerns about China.

On Thursday, upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues, allowed the Fed policymakers to remain hawkish and sour the sentiment. On the same line was the recently fading optimism about the US-China ties as the Chinese Commerce Ministry said in a statement on Thursday, “China will state its stance on economic and trade matters of concern,” while adding that they will push financial institutions to expand credit to businesses. China’s Commerce Ministry also called on the US to cancel potential arms sales to Taiwan, which in turn flagged fears of geopolitical tension when US Commerce Secretary Gina Raimondo visits Beijing next week.

Elsewhere, Japan prints softer inflation figures but the outcome appears way too far beyond the Bank of Japan (BoJ) target and hence challenges the optimists.

Above all, the PMI-linked optimism fails to prevail after mostly upbeat US data and central bank statements favoring the “higher for longer” rate bias.

Looking forward, top-tier central bank leaders are likely to shake the markets and will be interesting to watch. Among them, European Central Bank (ECB) President Christine Lagarde and Fed Chairman Jerome Powell will be eyed closely.

also read: Forex Today: A firm Dollar awaits Fed’s Powell

• EUR/USD drops to a two-month low and seems poised to register losses for the sixth straight week.
• A break below the very important 200-day SMA supports prospects for a further depreciating move.
• The RSI is on the verge of breaking into oversold territory and warrants caution for bearish traders.
• The focus remains on Fed Chair Jerome Powell and ECB President Christine Lagarde's speech.

The EUR/USD pair remains under some selling pressure for the second successive day on Friday and drops to its lowest level since June 14 during the Asian session. Spot prices currently trade around the 1.0785-1.0780 region, down 0.25% for the day, and seem poised to end in the red for the sixth straight week.

The overnight hawkish remarks by Federal Reserve (Fed) officials keep the door open for one more 25 bps lift-off by the end of this year and lift the US Dollar (USD) to a more than two-month high. Apart from this, speculations that the European Central Bank (ECB) will halt its streak of nine consecutive rate hikes in September undermine the shared currency and contribute to the offered tone surrounding the EUR/USD pair.

From a technical perspective, the downward trajectory drags spot prices below the very important 200-day Simple Moving Average (SMA) for the first time since November 2022. This could be seen as a fresh trigger for bearish traders and supports prospects for an extension of the EUR/USD pair's over a one-month-old descending trend from a nearly 17-month peak, around the 1.1275 area touched on July 18.

That said, the Relative Strength Index (RSI) is on the verge of breaking into oversold territory. This, in turn, warrants caution ahead of Fed Chair Jerome Powell's speech on Friday and ECB President Christine Lagarde's statement on Saturday, at the Jackson Hole Symposium. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the EUR/USD pair is to the downside.

Furthermore, a convincing break and acceptance below a technically significant 200-day SMA add credence to the negative outlook. Hence, a subsequent fall towards the next relevant support near the 1.0750-1.0745 region, en route to the 1.0700 round-figure mark, looks like a distinct possibility. Some follow-through selling might then expose the May 2023 swing low, around the 1.0635 region.

On the flip side, any intraday recovery back above the 1.0800 round-figure mark might now be seen as a selling opportunity and remain capped near the 1.0840 region. This is followed by the 1.0870-1.0875 supply zone, which if cleared decisively might negate the bearish outlook. The EUR/USD pair might then aim to surpass the 1.0900 round-figure mark and test the 1.0915-1.0920 resistance zone.

EUR/USD daily chart

Technical levels to watch

• NZD/USD trades lower around 0.5920 attributed to upbeat US employment data.
• US Dollar (USD) remains supported by the possibility of the Fed’s hawkish stance.
• US Initial Jobless Claims helped the US Dollar (USD) to gain momentum.

NZD/USD extends its losses, trading lower around 0.5920 during the Asian session on Friday. The pair experiences downward pressure due to upbeat United States (US) employment data released on Thursday. The US Initial Jobless Claims indicated positive employment conditions, which raises the concerns over inflation scenario in the US. For the week ending on August 18, the index dropped to 230K from the previous reading of 240K, which was expected to remain consistent.

The US Dollar (USD) remains supported by the expectations that the US Federal Reserve (Fed) will stick to its hawkish stance ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium. Furthermore, former St. Louis Federal Reserve President James Bullard said in an interview with Bloomberg, “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon”.

Meanwhile, Federal Reserve Bank of Philadelphia President Patrick Harker hinted at a potential conclusion to the rate hike path. Susan Collins, President of the Boston Federal Reserve, advocated for maintaining a bias towards keeping rates at higher levels for an extended duration.

The Chinese authorities have implemented modest interest rate cuts and stimulus measures, but these actions appear insufficient to restore market sentiment. The worsening economic situation in China is exerting pressure on the New Zealand Dollar (NZD) due to export-trade relations between the two countries. Market participants also expect that the Reserve Bank of New Zealand (RBNZ) will start reducing the Official Cash Rate (OCR) earlier than initially anticipated if China’s economic situation worsens further.

The US Dollar Index (DXY), which measures the performance of the Greenback against six major currencies, extends its gains and trades higher around 104.20. Market participants will closely monitor Fed Chair Powell’s speech, seeking insights into economic conditions and inflation outlook, which will influence the monetary policy in September’s meeting. This event could provide support in determining a clear understanding for placing fresh bets on the NZD/USD pair.

• USD/CNH clings to mild gains during the first positive day in three.
• US Dollar benefit from mostly upbeat data, hawkish Fed signals and recovery in yields.
• PBoC aims to restrict offshore Yuan supplies via Bond Connect scheme.
• Fed Chair Jerome Powell needs to reject rate cut bias, signal one more rate hike to defend Greenback bulls.

USD/CNH seesaws around the intraday top near 7.2870 as it snaps a two-day losing streak early Friday. In doing so, the offshore Chinese Yuan (CNH) struggles to justify the People’s Bank of China’s (PBoC) efforts to defend the domestic currency via bond market moves amid the broad US Dollar strength ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.

Reuters cites two sources with direct knowledge of the matter while reporting the Chinese central bank’s push to the domestic banks to reduce their outward investments through the Bond Connect scheme. One of the sources said, "Restricting Yuan from flowing to offshore market could tighten offshore yuan liquidity to raise the financing cost,” per Reuters. It should be noted that the PBoC actively defends the Yuan with the day-to-day money market operations as it rose to the yearly high last week.

On a different page, the anxiety before Fed Chair Powell’s speech joins the recently fading optimism about the US-China ties, which in turn propels the USD/CNH prices. That said, the Chinese Commerce Ministry said in a statement on Thursday, “China will state its stance on economic and trade matters of concern,” while adding that they will push financial institutions to expand credit to businesses. China’s Commerce Ministry also called on the US to cancel potential arms sales to Taiwan, which in turn flagged fears of geopolitical tension when US Commerce Secretary Gina Raimondo visits Beijing next week.

Elsewhere, upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues, allow the Fed policymakers to remain hawkish and put a floor under the US Dollar Index after it reversed from 11 weeks on Wednesday. It’s worth noting that the US Dollar Index (DXY) rose to a fresh high since June 07 before a few minutes, after jumping the most in a month to renew the multi-day peak the previous day.

Amid these plays, the US 10-year Treasury bond yields extend the previous day’s rebound from the weekly low and favor the US Dollar buyers. However, mildly positive S&P500 Futures prod the Greenback and the USD/CNH price.

Looking forward, mixed headlines surrounding China and anxiety ahead of the top events may restrict the immediate USD/CNH moves. That said, Fed Chair Powell’s hawkish nature keeps the pair buyers hopeful unless he signals the rate cuts next year.

Technical analysis

Although multiple levels marked during late June and early July put a floor under the USD/CNH price near 7.2700, the offshore Chinese Yuan (CNH) pair needs to provide a clear break of the one-week-old descending resistance line, around 7.2870 by the press time, to convince the bulls.

Japanese Finance Minister Shunichi Suzuki said on Friday, he is “closely watching impacts from Jackson Hole debates on global economy.”

Additional comments

• USD/CAD trades in positive territory for the second consecutive day. 
• The US economic data showed mixed results, Hawkish comments could lift the US Dollar.
• Money markets lowered their expectations for a quarter-point rate rise in the Bank of Canada (BoC) September meeting.
• Market participants will keep an eye on Friday’s Fed Chairman Jerome Powell's Speech.

The USD/CAD pair gains momentum below the 1.3600 barrier during the early Asian trading hours on Friday. The major pair currently trades around 1.3583, up 0.01% on the day. Meanwhile, The US Dollar Index (DXY) climbs above 104.00, the highest in 11 weeks. Market participants await the Federal Reserve (Fed) Chairman Jerome Powell’s speech for fresh impetus.

On Thursday, Philadelphia Federal Reserve (Fed) President Patrick Harker indicated at the Jackson Hole Symposium that the central bank has probably done enough with restrictive monetary policy. He also said that the Fed would keep interest rates steady this year, but that next year will be determined by data. While Boston Fed President Susan Collins said that more rate hikes are possible. However, providing a clear signal about the timing of the rate cut is premature. Hawkish comments from the Fed officials could boost the Greenback and act as a tailwind for USD/CAD.

About the data, US Durable Goods Orders MoM declined -5.2% in July, above expectations of -4% but falling short of the previous month's gain of 4.4%. This is the greatest drop since April 2020. Meanwhile, the Chicago Fed National Activity Index increased to 0.12 in July from -0.33 prior, and the Kansas Fed Manufacturing Activity Index rose to 12.0 in August from -20.0 in the previous month.

On the Loonie front, Statistics Canada showed on Wednesday that monthly Canadian Retail Sales for June expanded by 0.1% from the previous month, better than the expectation of 0%. On a monthly basis, Retail Sales declined 0.8%, worse than the market consensus of an increase of 0.3%.

Following the publication of Canadian Retail Sales data, money markets lowered their expectations for a quarter-point rate rise in the Bank of Canada (BoC) September meeting. Investors priced in an 18% possibility once the data was released, compared to 27% prior. It’s worth noting that the BoC increased its interest rate by 25 basis points (bps) to 5%. In its July meeting. Meanwhile, a decline in oil prices weakens the Loonie as Canada is the largest exporter of crude to the US.

Moving on, Fed Chairman Jerome Powell's Speech on Friday will be a closely watched event. The speech could provide insights into economic conditions and hints as to whether inflation is under control or whether additional interest rate hikes are required to combat inflation. Traders will take cues and find trading opportunities around the USD/CAD pair.

• EUR/JPY struggles to gain any meaningful traction and oscillates in a narrow band on Friday.
• Bets that the ECB will pause its rate-hiking cycle in September act as a headwind for the cross.
• Expectations that the BoJ will stick to its dovish stance undermine the JPY and lend support.

The EUR/JPY cross attracts some buyers during the Asian session on Friday, albeit lacks follow-through and remains confined in the previous day's broader range. Spot prices currently trade around the 157.65-157.70 region, nearly unchanged for the day, awaiting the European Central Bank (ECB) President Christine Lagarde's speech at the Jackson Hole Symposium on Saturday.

Speculations have been mounting that the ECB will halt its streak of nine consecutive rate hikes in September, especially after the flash PMI prints showed that business activity in the Euro Zone declined more than expected in August. Hence, investors will closely scrutinise Lagarde's remarks for fresh cues about the future rate-hike path, which will play a key role in influencing the shared currency and provide a fresh directional impetus to the EUR/JPY cross.

In the meantime, the downside seems cushioned in the wake of the prevalent selling bias around the Japanese Yen (JPY). Receding fears of an imminent intervention by authorities, along with a more dovish stance adopted by the Bank of Japan (BoJ), continue to undermine the JPY and should lend support to the EUR/JPY cross. In fact, the BoJ is the only central bank in the world to maintain negative rates and is widely expected to stick to its ultra-ease policy settings.

The bets were reaffirmed by data released on Friday, showing that consumer inflation in Tokyo – Japan’s capital city – grew at a slower-than-expected pace in August. In fact, the Statistics Bureau reported that the headline Tokyo CPI eased to the 2.9% YoY rate in August from 3.2% prior, though the core figure, which excludes fresh food and energy costs, remained at 4% – its highest level in over 40 years. The data, however, fails to provide any respite to the JPY bulls.

The aforementioned mixed fundamental backdrop, meanwhile, holds back traders from placing aggressive directional bets around the EUR/JPY cross and contributes to the subdued/range-bound price action on the last day of the week. Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out and positioning for an extension of this week's retracement slide from the vicinity of mid-159.00s, or the highest level since September 2008.

Technical levels to watch

• Natural Gas Price remains inactive after rising the most in three weeks.
• Failures to defend bounce off six-week-long rising support line, struggle to cross 50-SMA keep XNG/USD bears hopeful.
• Fortnight-long previous resistance line puts a floor under the Natural Gas Price.
• Cautious mood ahead of Fed Chair Jerome Powell’s speech restricts immediate XNG/USD moves.

Natural Gas Price (XNG/USD) retreats to $2.67 as energy bulls struggle to defend the previous day’s heavy run-up, the biggest in three weeks, amid anxiety surrounding Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Symposium.

That said, the XNG/USD bounced off a 1.5-month-old rising support line the previous day before reversing from the 50-SMA upside hurdle. The pullback moves, however, fail to break the resistance-turned-support line stretched from August 10, close to $2.66 by the press time.

It’s worth noting that the bullish MACD signals and the market’s cautious optimism ahead of the key event also put a floor under the energy instrument.

Even if the quote breaks the previous resistance line, the aforementioned multi-day-old rising trend line support of $2.58 appears a tough nut to crack for the Natural Gas bears.

Following that, the monthly low of $2.50 and July’s bottom surrounding $2.47 will test the XNG/USD sellers before directing them toward the Year-To-Date lows of $2.11.

On the flip side, a clear break of the 50-SMA level surrounding $2.71 becomes necessary for the Natural Gas Price to convince energy buyers.

However, the XNG/USD bulls should remain cautious unless they witness a successful upside clearance of the one-month-old horizontal resistance area surrounding $2.78-80.

Natural Gas Price: Four-hour chart

Trend: Limited downside expected

Citing two sources with direct knowledge of the matter, Reuters reported that the People’s Bank of China (PBOC) called on some domestic banks to reduce their outward investments through the Bond Connect scheme.

The sources said that the PBOC guidance appears aimed at outflows and limiting Yuan offshore supply.

One of the sources said, "restricting Yuan from flowing to offshore market could tighten offshore yuan liquidity to raise the financing cost.”

Market reaction

At the time of writing, USD/CNY is trading 0.06% higher on the day at 7.2819.

• US Dollar Index takes the bids to refresh 11-week high after rising the most in a month the previous day.
• Mostly upbeat US data, hawkish comments from mid-rank Fed officials keep DXY buyers hopeful.
• Fed Chair Powell’s speech eyed as rejection of rate cuts, defense of “higher for longer rates” can keep Greenback firmer.
• Mid-tier US data, yields will also entertain intraday traders.

US Dollar Index (DXY) rises to a fresh high in 11 weeks as markets prepare for Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium during early Friday. Also helping the Greenback’s gauge versus the six major currencies are the recent statistics from the US, as well as the Federal Reserve (Fed) policymakers’ statements. With this, the DXY rose to the highest level since June 07, around 104.17 by the press time.

After witnessing the downbeat prints of the monthly PMIs for August, the US economic calendar flashed mostly upbeat signals on Thursday. That said, the US Durable Goods Orders for July marked the biggest slump since April 2020 by posting a -5.2% MoM figure versus -4.0% expected and 4.4% prior growth (revised). However, the Durable Goods Orders ex Transportation marked a positive surprise with 0.5% figures versus 0.2% market forecasts and previous readings. Further, the Nondefense Capital Goods Orders ex Aircraft also improved to 0.1% while matching the analysts’ estimations compared to -0.4% marked in June.

Additionally, the Chicago Fed National Activity Index for July improved to 0.12 from -0.33 prior whereas the Kansas Fed Manufacturing Activity Index for August was 12.0 versus -20.0 previous readings. On the same line, the weekly figures of the Initial Jobless Claims and Continuing Jobless Claims eased and signaled positive employment conditions.

Considering the data, former St. Louis Federal Reserve President James Bullard underpinned the US Dollar’s strength with his hawkish remarks. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.

Elsewhere, US-China optimism appears to fade as the Chinese Commerce Ministry said in a statement on Thursday, “China will state its stance on economic and trade matters of concern,” while adding that they will push financial institutions to expand credit to businesses.  China’s Commerce Ministry also called on the US to cancel potential arms sales to Taiwan, which in turn flagged fears of geopolitical tension when US Commerce Secretary Gina Raimondo visits Beijing next week.

As a result, the pre-event anxiety joins the China woes to underpin the US Dollar’s haven demand. However, the sluggish performance of the US Treasury bond yields around 4.25% by the press time joining the mildly bid S&P500 Futures to test the DXY bulls.

Looking forward, Fed Chair Powell’s hawkish nature keeps the US Dollar Index bulls hopeful unless he signals the rate cuts next year.

Technical analysis

A clear upside break of the key resistance line stretched from early March, now immediate support around 103.50, directs US Dollar Index (DXY) bulls toward May’s peak of 104.70.

• GBP/USD drifts lower for the fourth straight day and drops to a more than two-month low.
• Bets for a lower BoE peak rate undermine the British Pound and exert pressure on the pair.
• Technical selling below the 100-day SMA contributes to the downfall amid a bullish USD.

The GBP/USD pair prolongs its rejection slide from the 1.2800 mark touched earlier this week and remains under some selling pressure for the fourth successive day on Friday. Spot prices drop to a more than two-month low, around the 1.2585 region during the Asian session, confirming the overnight breakdown through a technically significant 100-day Simple Moving Average (SMA) for the first time since March 2023.

The British Pound (GBP) is undermined by rising bets for a lower Bank of England (BoE) peak rate, which, along with a bullish US Dollar (USD), continues to exert some downward pressure on the GBP/USD pair. The disappointing UK PMI prints released on Wednesday revived fears about an impending recession and convinced market participants that the BoE will not need to raise rates as high as previously thought to bring inflation back down to the target. In fact, money markets are now pricing in a small chance of any further rate hike after the anticipated 25 bps lift-off in September.

The USD, on the other hand, climbs to its highest level since June 7 and remains well supported by the overnight hawkish remarks by Federal Reserve (Fed) policymakers. In fact, Boston Fed President Susan Collins said that the central bank may be at a place to hold rates steady, though noted that more rate hikes are possible and that it is still premature to signal the timing of rate cuts. Adding to this, Philadelphia Fed President Patrick Harker stated that the central bank must keep its restrictive stance and added that inflation needs to fall further to pave the way for any rate cuts.

This, in turn, leaves the door open for one more 25 bps rate hike by the end of this year, which keeps the US Treasury bond yields elevated and continues to underpin the USD. Apart from this, some technical selling below the 100-day SMA contributes to the offered tone surrounding the GBP/USD pair and supports prospects for a further near-term depreciating move. Traders, however, might refrain from placing aggressive bets ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium, due later this Friday, and BoE Governor Andrew Bailey's statement on Saturday.

Technical levels to watch

• Gold price treads water around $1,915 as Fed Chair Powell’s speech looms.
• Mixed Fed talks at Jackson Hole support the precious metal.
• US employment data raises the concerns over inflation scenario.

Gold price struggles to continue the winning streak, trading around $1,915 per troy ounce during the Asian session on Friday. The yellow metal is on the path to recover from the losses registered in the previous four weeks ahead of the US Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole Symposium.

The precious metal has shown resistance despite the improving US Dollar (USD), which could be attributed to the mixed Fed talks at Jackson Hole and the recent pullback in US Treasury bond yields. Additionally, moderate economic data from the United States (US), helped the XAU/USD pair to hold ground.

As said, US Durable Goods Orders for July posted a decline of 5.2% as compared to the expectation of 4%, swinging from the 4.4% reading in June. However, Initial Jobless Claims indicated positive employment conditions, which raises concerns over the inflation scenario in the US. For the week ending on August 18, the index dropped to 230K from the previous reading of 240K, which was expected to remain consistent.

China’s modest interest rate cuts and stimulus measures seem to fail to restore the market sentiment as global investors are leaving the country and seeking more spending from the government. The gloomy situation around China is putting pressure on the price of Gold.

The US Dollar Index (DXY) rebounds and trades higher around 104.10, reinforcing the Greenback against the six major currencies. The recovery of the US Dollar (USD) is driven by moderate US employment data, prompting a cautious market sentiment as investors look for additional cues regarding the inflation outlook.

• AUD/USD licks its wounds after falling the most in three weeks the previous day.
• Markets brace for key central bank speeches at Jackson Hole Symposium.
• Mixed concerns about policy pivot, higher for longer rates prod traders amid light calendar.
• US Dollar stays firmer on mostly upbeat data, hawkish Fed talks ahead of Powell’s speech.

AUD/USD stays defensive around 0.6410-15 amid a lackluster Asian session on Friday, after a heavily volatile Thursday.

The Aussie pair dropped the most in three weeks the previous day while reversing from the weekly top, as well as the key resistance line, as the US Dollar cheered broad risk-off mood and mostly upbeat US data, not to forget recently hawkish Fed speak. However, the cautious mood ahead of today’s Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole Symposium restricts the risk-barometer pair’s immediate moves.

It should be noted that the mixed concerns about China, Australia’s biggest customer, also prod the AUD/USD moves.

That said, US-China optimism appears to fade as the Chinese Commerce Ministry said in a statement on Thursday, “China will state its stance on economic and trade matters of concern,” while adding that they will push financial institutions to expand credit to businesses.  China’s Commerce Ministry also called on the US to cancel potential arms sales to Taiwan, which in turn flagged fears of geopolitical tension when US Commerce Secretary Gina Raimondo visits Beijing next week.

Elsewhere, Australia’s Trade Minister Dan Tehan appeared optimistic about getting a better EU free trade deal offer after negotiations stalled in July.

Talking about the US data, the Durable Goods Orders for July marked the biggest slump since April 2020 by posting a -5.2% MoM figure versus -4.0% expected and 4.4% prior growth (revised). However, the Durable Goods Orders ex Transportation marked a positive surprise with 0.5% figures versus 0.2% market forecasts and previous readings. Further, the Nondefense Capital Goods Orders ex Aircraft also improved to 0.1% while matching the analysts’ estimations compared to -0.4% marked in June.

Additionally, the Chicago Fed National Activity Index for July improved to 0.12 from -0.33 prior whereas the Kansas Fed Manufacturing Activity Index for August was 12.0 versus -20.0 previous readings. On the same line, the weekly figures of the Initial Jobless Claims and Continuing Jobless Claims eased and signaled positive employment conditions.

After witnessing the mixed data, the Fed hawks allowed the US dollar to stay firmer. First, former St. Louis Federal Reserve President James Bullard underpinned the US Dollar’s strength with his hawkish remarks. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.

Against this backdrop, Wall Street closed in the red whereas the benchmark US 10-year Treasury bond yield prints mild weekly losses despite rising to the highest level since 2007 earlier in the week, as well as posting firmer closing the previous day. That said, the S&P500 Futures appears dicey near 4,390 after reversing from the weekly top with heavy losses.

Moving on, a light calendar may restrict immediate AUD/USD moves amid cautious markets. However, the bearish bias remains impulsive considering Fed Chair Powell’s hawkish nature.

Technical analysis

A clear U-turn from the six-week-old descending resistance line, around 0.6480 by the press time, keeps the AUD/USD bears hopeful of witnessing the fresh Year-To-Date (YTD) low, currently around 0.6365.

People’s Bank of China (PBoC) set the USD/CNY central rate at 7.1883 on Friday, versus the previous fix of 7.1886 and market expectations of 7.2923. It's worth noting that the USD/CNY closed near 7.2790 the previous day.

Apart from the USD/CNY fix, the PBoC also unveiled details of its Open Market Operations (OMO) while saying that the Chinese central bank injects 221 billion Yuan via 7-day reverse repos (RRs) at 1.80% vs. prior 1.80%.

However, with the 98 billion Yuan of RRs maturing today, there prevails a net injection of around 123 billion Yuan on the day in OMO.

About PBOC 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.

• WTI prices recovers some lost ground but remains below the $80.00 barrier in the early Asian session on Friday.
• Investors worry about the oil demand and the US's higher interest rate.
• US officials are working on a plan to lift sanctions on Venezuela.
• Oil traders will focus on Friday’s speech from Jerome Powell.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $78.95 mark so far on Friday. WTI prices remain under pressure as investors worry about the oil demand and the possibility of higher interest rates in the US.

S&P Global PMI data on Wednesday showed that the business activity in the US, UK, Japan, and the Eurozone lost momentum as the figure came in below the expectation. This, in turn, weighs on the WTI prices as a global economic downturn could diminish oil demand.

Furthermore, Boston Federal Reserve (Fed) President Susan Collins said further rate rises are possible and that sending a strong signal regarding the timing of rate cuts is premature. It’s worth noting that higher interest rates raise borrowing costs, which can slow the economy and diminish oil demand.

Meanwhile, despite US sanctions, Iran stated that its crude oil output will hit 3.4 million barrels per day (bpd) by the end of September, as stated by its oil minister. Additionally, US officials are working on a plan to lift sanctions on Venezuela. It would allow Venezuela to export more crude if the South American nation advances towards free and fair presidential elections. This development boosts the WTI prices despite the strengthening of the US Dollar.

Moving on, oil traders will focus on Friday’s speech from Jerome Powell. The speech could provide insights into economic conditions and hints as to whether inflation is under control or whether additional interest rate hikes are required to combat inflation. The events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI prices.

European Central Bank (ECB) policymaker and Croatian National Bank Governor Boris Vujčić crossed wires via Bloomberg TV interview as he appeared at the Jackson Hole Symposium.

The policy maker initially highlighted the stagnating economy of the bloc and a likely peak in the inflation before defending the current monetary policy.

ECB’s Vujčić also highlighted the need to see whether rates are restrictive enough to determine the future course of action.

Market reaction

After the news, EUR/USD drops to the fresh low in 10 weeks while taking offers to around 1.0794 by the press time of early Friday morning in Asia.

Also read: EUR/USD drills 10-week low near 1.0800 with eyes on ECB’s Lagarde, Fed Powell’s speech

• USD/JPY scales higher for the second straight day and is supported by a combination of factors.
• A softer Tokyo CPI print reaffirms the BoJ's dovish stance and continues to undermine the JPY.
• The USD climbs to over a two-month high and further acts as a tailwind ahead of Fed's Powell.

The USD/JPY pair builds on the previous day's strong move up from the vicinity of mid-144.00s and gains some follow-through positive traction for the second successive day on Friday. The momentum lifts spot prices back above the 146.00 round-figure mark during the Asian session, setting the stage for a further appreciating move towards challenging the YTD peak touched last week.

The Japanese Yen (JPY) continues to be weighed down by receding fears of an imminent intervention by authorities and a more dovish stance adopted by the Bank of Japan (BoJ). It is worth recalling that Atsushi Takeuchi, who was head of the BoJ's foreign exchange division in 2010-2012, said earlier this week that Japan will forgo intervening in the market unless the Yen plunges past 150 against its American counterpart. Furthermore, the BoJ is the only central bank in the world to maintain negative rates. Moreover, policymakers have emphasised that a sustainable pay hike is a prerequisite to consider dismantling the massive monetary stimulus.

Adding to this, data released on Friday showed that consumer inflation in Tokyo – Japan’s capital city – grew at a slower-than-expected pace in August. In fact, the Statistics Bureau reported that the headline Tokyo CPI eased to the 2.9% YoY rate in August from 3.2% prior, though the core figure, which excludes both fresh food and energy costs, remained at 4% – its highest level in over 40 years. Nevertheless, the data reaffirms that the BoJ will stick to its ultra-lose monetary policy settings. In contrast, the overnight hawkish remarks by several Federal Reserve (Fed) officials kept the door wide open for one more 25 bps rate hike by the end of this year.

Boston Fed President Susan Collins said that the Fed may be at a place to hold rates steady, though noted that more rate hikes are possible and that it is premature to signal the timing of rate cuts. Separately, Philadelphia Fed President Patrick Harker stated that the central bank must keep its restrictive stance and added that inflation needs to fall further to pave the way for any rate cuts. This remains supportive of elevated US Treasury bond yields, which lifts the US Dollar (USD) to its highest level since early July and further lends support to the USD/JPY pair. Bulls, however, could take a brief pause ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium.

Investors will look for fresh cues about the Fed's future rate-hike path, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY pair. Nevertheless, spot prices remain on track to register gains for the fourth straight week, also marking the fifth week of a positive move in the previous seven. Moreover, the fundamental backdrop still seems tilted firmly in favour of bullish traders and suggests that the path of least resistance for the major is to the upside.

Technical levels to watch

• USD/MXN edges higher after bouncing off the lowest level in three weeks.
• Six-week-old horizontal support zone, previous resistance-line from late May challenge Mexican Peso buyers.
• Bearish MACD signals, downbeat RSI prods pair buyers, convergence of 21-DMA, 50-DMA appear a tough nut to crack.

USD/MXN defends the previous day’s rebound from the lowest level in three weeks while making rounds to 16.82–83 during the early hours of Friday’s Asian session.

In doing so, the Mexican Peso (MXN) pair bounces off the 16.80 support confluence comprising a 1.5-month-long horizontal support area, as well as the resistance-turned-support line stretched from late May.

It’s worth noting, however, that the bearish MACD signals and downbeat RSI (14) line challenge the USD/MXN pair’s latest rebound.

Also acting as the upside filter is the joint of the 21-DMA and 50-DMA, around the 17.00 threshold.

Additionally, the mid-August swing high of around 17.20 and the monthly peak of 17.43 can test the USD/MXN pair buyers past the 17.00 psychological magnet before giving them control.

On the flip side, a daily closing beneath the 16.80 support confluence could quickly fetch the Mexican Peso (MXN) pair towards the Year-To-Date low of around 16.62.

Above all, the USD/MXN rebound appears elusive ahead of the key central bankers’ speeches. Among them, Fed Chair Jerome Powell will gain major attention amid recently mixed US data and concerns about the policy pivot.

Also read: 

USD/MXN: Daily chart

Trend: Limited downside expected

Japan’s media Nikkei Asia came out with the news citing hopes of witnessing a larger than expected budget sum request from the Japanese policymakers due to the latest increase in costs backed by the Bank of Japan’s (BoJ) tweak to the Yield Curve Control (YCC) policy.

“Budget requests from Japanese ministries for the next fiscal year will likely top 110 trillion yen ($753.37 billion) with rising interest rates on Bank of Japan's recent policy tweaks boosting debt servicing costs,” reported Nikkei Asia.

The news also states that the budget request should be submitted by the end of August to enable the Finance Ministry to drag the annual state budget in December.

“This fiscal year's budget stood at 114 trillion Yen,” added the news.

Market reaction

USD/JPY fails to provide any clear reactions to the news as it grinds near the 146.00 round figure after refreshing the intraday top following the mixed Tokyo inflation clues.

Also read: Japan Inflation: Tokyo Consumer Price Index eases to 2.9% YoY in August vs. 3.0% expected, USD/JPY edges higher

• GBP/JPY remains in the defensive near 183.85 after Tokyo Consumer Price Index (CPI) data. 
• The cross stands below the 50- and 100-hour EMAs with a downward slope.
• The first resistance level of GBP/JPY is seen at 184.15; 183.55 acts as an initial support level.

The GBP/JPY cross posts modest gains but remains below the 184.00 barriers during the early Asian session on Friday. The cross currently trades around 183.85, gaining 0.07% on the day following the release of Japanese inflation data.

The Statistics Bureau of Japan reported on Friday that the Tokyo Consumer Price Index (CPI) for August, fell to 2.9% YoY from 3.2% in the previous month, against 3.0% market predictions, while the Tokyo CPI ex Fresh Food and Energy remained stable at 4.0% YoY.

From the technical perspective, the GBP/JPY cross stands below the 50- and 100-hour Exponential Moving Averages (EMAs) with a downward slope on the one-hour chart, which means the path of the least resistance is to the downside. It’s worth noting that the Relative Strength Index (RSI) is located in bearish territory below 50 highlighting that further downside cannot be ruled out.

The first resistance level of GBP/JPY is seen at 184.15, representing the midline of the Bollinger Band. The additional upside filter to watch is 184.45 (50-hour EMA). The key barrier for the cross is located at 184.80, a confluence of the upper boundary of the Bollinger Band and the 100-hour EMA. Any meaningful follow-through buying will see the next stop at 185.50 (low of August 22) and 186.00 (a psychological round mark, high of August 23).

On the downside, a decisive break below 183.55 (the lower limit of Bollinger Band) will see a drop to 183.30 (the low of August 10). The key contention is seen at 183.00, portraying a high of August 9 and a psychological figure. Further south, the cross will see a downside stop at 182.35 (low of August 9).

GBP/JPY one-hour chart

• EUR/USD remains depressed after refreshing multi-day low, down for the second consecutive day.
• Broad US Dollar strength, cautious mood ahead of key central bankers’ speeches at Jackson Hole weigh on Euro pair.
• Hawkish ECB talks fail to put a floor under Euro prices as US data, yields favor Greenback.
• Mid-tier German, US data may entertain traders but major attention will be given to ECB, Fed talks.

EUR/USD bears keep control at the lowest level in 2.5 months despite struggling with the 200-DMA support amid the early hours of Friday’s Asian session. The Euro pair dropped the most in a month the previous day, as well as refreshed the multi-day bottom before a few hours, while flirting with the 1.0800 level.

In doing so, the Euro pair fails to justify the recently released hawkish statements from the European Central Bank (ECB) policymaker amid a broadly firmer US Dollar and cautious mood ahead of the speeches from ECB President Lagarde and Fed Chairman Jerome Powell.

“Underlying inflation in the eurozone remains sticky and monetary policy needs to be more stubborn than price growth,” said ECB policymaker and Bundesbank Chief Joachim Nagel during an interview with Bloomberg.

On the other hand, former St. Louis Federal Reserve President James Bullard underpinned the US Dollar’s strength with his hawkish remarks. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.

It’s worth mentioning that the US data was mostly mixed but the details joined hawkish Fed talks to impress the Greenback buyers and weighed on the EUR/USD price the previous day, especially amid the broad risk-off mood.

As per the latest rounds of the US data, the Durable Goods Orders for July marked the biggest slump since April 2020 by posting -5.2% MoM figure versus -4.0% expected and 4.4% prior growth (revised). However, the Durable Goods Orders ex Transportation marked a positive surprise with 0.5% figures versus 0.2% market forecasts and previous readings. Further, the Nondefense Capital Goods Orders ex Aircraft also improved to 0.1% while matching the analysts’ estimations compared to -0.4% marked in June.

Additionally, the Chicago Fed National Activity Index for July improved to 0.12 from -0.33 prior whereas the Kansas Fed Manufacturing Activity Index for August was 12.0 versus -20.0 previous readings. On the same line, the weekly figures of the Initial Jobless Claims and Continuing Jobless Claims eased and signaled positive employment conditions.

While portraying the mood, Wall Street closed in the red whereas the benchmark US 10-year Treasury bond yield prints mild weekly losses despite rising to the highest level since 2007 earlier in the week, as well as posting firmer closing the previous day. That said, the S&P500 Futures appears dicey near 4,390 after reversing from the weekly top with heavy losses.

Looking forward, the final readings of Germany’s second quarter (Q2) Gross Domestic Product (GDP) will precede the nation’s ZEW sentiment data for August to entertain the EUR/USD traders. Following that, the mid-tier US sentiment and inflation clues will also entertain the intraday traders. However, major attention will be given to the speeches of ECB’s Lagarde and Fed’s Powell as market players seek clues of policy pivot.

Technical analysis

A daily closing beneath an ascending support line stretched from mid-March, now immediate resistance surrounding 1.0815, keeps the EUR/USD bears hopeful even if the 200-DMA level of 1.0800 prods the Euro sellers ahead of the key events.