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Japan government forecasts decline in Industrial Production for July

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• WTI holds above $81.35 during Thursday’s early Asian session.
• The tighter oil supply caused by Saudi Arabia’s plan and crude oil inventories data lift WTI prices.
• Concerns about China's economic woes could cap the upside for WTI demand.
• Traders will monitor the US Core Personal Consumption Expenditure Price Index (PCE), the weekly Jobless Claims, and the Chicago PMI.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $81.35 mark so far on Thursday. WTI prices recover some lost ground due to the weakening of the US Dollar (USD). However, concerns about the Chinese economy might cap WTI’s upside.

About the data, the Energy Information Administration (EIA) revealed on Wednesday that US crude oil inventories declined by 10.584M barrels in the week ending August 25. The figure came in better than the expectation of a -3.267M barrels drop. On the same line, the American Petroleum Institute (API) reported that US crude oil inventories dropped by about 11.486M barrels compared to the previous week’s -2.418M barrels.

Higher WTI prices are also bolstered by Saudi Arabia's ongoing voluntary production curbs. Saudi Arabia is expected to extend a voluntary oil cut of 1 million barrels per day for the third month in a row into October. That said, the tighter oil supply caused by Saudi Arabia’s plan and crude oil inventories data boost WTI prices.

On the other hand, concerns about China's economic woes could cap the upside for WTI as China is the world's largest oil importer. The Chinese Caixin Manufacturing PMI for August will be closely monitored by market participants. The weaker-than-anticipated data may exert additional selling pressure on WTI.

Moving on, oil traders will keep an eye on the US Core Personal Consumption Expenditure Price Index (PCE), the weekly Jobless Claims, and the Chicago PMI due later on Thursday. US Nonfarm Payrolls will be in the spotlight this week. The US economy is expected to create 170K jobs for August. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI price.

• US Dollar Index remains depressed at the lowest level in 12 days.
• United States data keep proposing an end to Fed’s hawkish cycle but traders seek confirmation.
• Softer US Treasury bond yields, cautious optimism at Wall Street also favor DXY bulls.
• US Core PCE Price Index, second-tier employment and activity data eyed for clear directions.

US Dollar Index (DXY) stays pressured at the lowest level in a fortnight despite lacking downside momentum amid the pre-data anxiety on Thursday. With this, the Greenback’s gauge versus the six major currencies prods the key 200-DMA support of around 103.00 during the early hours of Asian session, close to 103.15 by the press time.

Having witnessed disappointing details of the US Consumer Confidence and activity data, as well as the housing market numbers, the US economic calendar marked another blow to the Federal Reserve (Fed) haws via downbeat growth and employment clues the previous day.

This time the early signal of Friday’s Nonfarm Payrolls (NFP) lured the DXY bears as the ADP Employment Change dropped to 177K compared to 195K market forecasts and 371K previous readings (revised from 324K). On the same line, the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) Annualized declined to 2.1% from 2.4% initial forecasts while the GDP Price Index also eased to 2.0% versus the first readings of 2.2%. Further, the preliminary readings of the Personal Consumption Expenditures (PCE) Prices also edged lower to 2.5% from 2.6% prior estimations for the said period.

Additionally, China’s reaction to the US allegations that “it’s being risky for businesses” challenged the previous hopes of a smooth running of the Sino-American talks in Beijing. However, a slew of Chinese banks reduced mortgage rates and favored the hopes of witnessing more stimulus from the Asian major, which in turn repaired the damages to sentiment and weighed on the US Dollar’s haven demand, especially amid dovish Fed concerns.

Amid these plays, the benchmark US 10-year Treasury bond yields remain pressured at the lowest levels in three weeks, around 4.11% by the press time, whereas Wall Street indices closed on the positive side despite retreating during the last hours.

Looking forward, the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August, will be crucial to aptly predict the DXY moves. Also important will be the second-tier activity and employment numbers. Should these figures remain weak, the DXY may snap its six-week uptrend.

Technical analysis

Although a downside break of the six-week-old rising trend line support, now immediate resistance around 103.80, keeps the US Dollar Index bears hopeful, the 200-DMA level surrounding 103.05, quickly followed by the 103.00 threshold, challenge the DXY sellers.

• Silver Price stays defensive after reversing from the highest level in five weeks.
• Failure to cross four-month-old resistance line, nearly overbought RSI teases bears.
• Previous resistance line from late July, bullish MACD signals restrict XAG/USD downside.
• Key DMAs stand tall to challenge Silver sellers; bulls need to cross previous monthly high for conviction.

Silver Price (XAG/USD) remains pressured around $24.60 during the early hours of Thursday’s Asian session, after reversing from a five-week high to print the biggest daily loss of the week.

In doing so, the XAG/USD justifies the overbought RSI and failure to cross a downward-sloping resistance line from May.

It’s worth noting, however, that the bullish MACD signals and the resistance-turned-support stretched from July 20, close to $24.50, puts a short-term floor under the Silver Price.

Hence, the XAG/USD weakness appears elusive unless it stays beyond $24.50, a break of which could quickly fetch the bright metal to the 100-DMA support of around $23.95.

However, a convergence of the 21-DMA and the 200-DMA, close to $23.40 at the latest, appears a tough nut to crack for the Silver bears afterward.

On the flip side, a daily closing beyond the multi-month-old resistance line surrounding $24.80 becomes necessary to reject the bearish bias about the XAG/USD. Even so, the bulls need validation from the previous monthly high of around $25.30 to retake control.

That said, the $25.00 and $26.00 round figures, as well as May’s peak of around $26.20, as extra upside hurdles for the Silver buyers to watch.

Apart from the technical details, the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August, will also be important to observe for clear direction, especially amid the latest dovish bias about the Fed.

Silver Price: Daily chart

Trend: Pullback expected

• AUD/USD remains flat around 0.6475 ahead of the the Australian data.
• The key US economic data showed worse-than-expected results.
• Australian CPI declined to a 17-month low.
• Traders await the Australian Private Sector Credit, the US Core PCE, the weekly Jobless Claims data.

The AUD/USD pair hovers around 0.6474 after retracing from a weekly high of 0.6522 during the early Asian session on Thursday. In response to the downbeat US data, the US Dollar Index (DXY) remains under pressure and declines for the third day in a row near 103.15 while the 10-year yield falls to 4.11%.

The Greenback faced some selling pressure following the softer-than-expected US data. That said, the US ADP Employment Change declined to 177K in August from 371K in July and below the market consensus of 195K.

Additionally, the first reading of Personal Consumption Expenditures (PCE) Prices for the second quarter decreased to 2.5% from 2.6% prior. Finally, the second reading of Gross Domestic Product (GDP) Annualized Q2 decreased to 2.1% from the first estimation of 2.4%.

On the Aussie front, the Australian Bureau of Statistics reported on Wednesday that the nation’s monthly Consumer Price Index (CPI) fell to 4.9% year on year in July from 5.4% prior and falling short of estimates of 5.2%. Meanwhile, Building Permits (MoM) declined 8.1% in July, compared to an expectation of a 0.8% drop and a 7.7% drop the previous month. The easing of inflationary pressure might convince the Reserve Bank of Australia (RBA) to hold the interest rate unchanged at its forthcoming policy meeting.

On Sunday, Australian Treasurer Jim Chalmers stated that the government monitored China for signals of economic weakness that could hurt the Australian economy, according to Reuters. It’s worth noting that China is Australia's major trading partner and the economic slowdown In China might exert pressure on the Aussie.

Looking ahead, the Australian Private Sector Credit will be released. Additionally, the Core Personal Consumption Expenditure Price Index (PCE), the weekly Jobless Claims, and the Chicago PMI will also be due on Thursday. The closely watched event this week will be the Nonfarm Payrolls (NFP) data on Friday. Traders will find trading opportunities around the AUD/USD pair.

• NZD/USD stays pressured after reversing from three-week high.
• Mixed concerns about China, downbeat NZ data weigh on Kiwi.
• US Dollar traces softer yields as US statistics suggest nearness to Fed policy pivot.
• China’s official PMI, NZ sentiment figures will entertain traders ahead of US Core PCE Price Index.

NZD/USD bucks the overall trend of cheering the US Dollar weakness by extending the previous day’s reversal from a three-week high to 0.5950 during early Asian session on Thursday. In doing so, the Kiwi pair justifies downbeat data at home and mixed concerns about a major customer China amid cautious mood ahead of the Fed’s preferred inflation gauge. It’s worth noting that the failure to cross May’s low during the early-week rebound also favored sellers of the Antipodeans.

A stark fall in New Zealand (NZ) Building Permits joins the Reserve Bank of New Zealand’s (RBNZ) status quo to weigh on the NZD/USD pair the previous day. That said, the NZ Building Permits for July marked a notable slump of 5.2% MoM versus 0.2% expected and 3.4% prior (revised from 3.5%).

On the other hand, China’s reaction to the US allegations that “it’s being risky for businesses” challenged the previous hopes of a smooth running of the Sino-American talks in Beijing. However, a slew of Chinese banks reduced mortgage rates and favored the hopes of witnessing more stimulus from the Asian major, which in turn repaired the damages to sentiment outside New Zealand.

Elsewhere, softer prints of the US statistics bolstered the call of Federal Reserve’s (Fed) policy pivot and weighed on the US Dollar, as well as the Treasury bond yields. That said, the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) Annualized declined to 2.1% from 2.4% initial forecasts while the GDP Price Index also eased to 2.0% versus the first readings of 2.2%. Further, the preliminary readings of the Personal Consumption Expenditures (PCE) Prices also edged lower to 2.5% from 2.6% prior estimations for the said period. More importantly, the ADP Employment Change dropped to 177K compared to 195K market forecasts and 371K previous readings (revised from 324K).

Amid these plays, the US Dollar Index (DXY) dropped for the three consecutive days to the lowest level in two weeks, making rounds to 103.15-10 of late. That said, the benchmark US 10-year Treasury bond yields remain pressured at the lowest levels in three weeks, around 4.11% by the press time.

Moving on, New Zealand’s ANZ Activity Outlook and Business Confidence survey details for August will join China’s official NBS Manufacturing PMI and Non-Manufacturing PMI for the said month to entertain the NZD/USD traders. However, major attention will be given to the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for August, for clear directions amid dovish calls about the US central bank.

Technical analysis

Failure to cross May’s low of 0.5985 during the early-week rebound from the yearly bottom surrounding 0.5885 keeps the NZD/USD bears hopeful even as the oversold RSI offers a bumpy road to the Kiwi sellers.

• AUD/JPY trades at 94.58, down 0.11%, as it approaches the Ichimoku Cloud, indicating a possible shift from a neutral to upward bias.
• First resistance lies at the August 30 high of 95.06, followed by the July 31 swing high at 95.83; a ‘bearish-harami’ pattern could signal a downside.
• Immediate support is at the August 30 low of 94.17, with a breach potentially exposing the Senkou-Span A at 93.87 and the August 21 low of 92.83.

The Australian Dollar (AUD) registers minuscule losses vs. the Japanese Yen (JPY) as Thursday’s Asian session begins and is threatening to break above the Ichimoku Cloud (Kumo), which would open the door for further upside. At the time of writing, the AUD/JPY is trading at 94.58, down 0.11%.

AUD/JPY Price Analysis: Technical outlook

The cross-currency pair daily chart portrays the par as neutral to downward biased, but it could shift to neutral if the AUD/JPY clears the top of the Kumo. In that event, the first resistance to test would be the August 30 high of 95.06, followed by the July 31 swing high at 95.83. Nevertheless, as the AUD/JPY formed a spinning top, price action could remain trapped within Wednesday’s high and low. If that scenario is about to play out, the pair could create a ‘bearish-harami’ candlestick pattern, which could pave the way for further losses.

In that event, the first support would be the August 30 low of 94.17, followed by the 94.00 figure. A breach of the latter will expose the Senkou-Span A at 93.87, followed by the August 21 low of 92.83.

AUD/JPY Price Action – Daily chart

• GBP/USD prods one-month-old descending resistance line at weekly top.
• Looming bull cross on MACD, steady RSI joins higher high formation to favor Cable bulls.
• 50-DMA acts as additional upside filter for the Pound Sterling buyers to cross.
• Pullback needs validation from five-month-old horizontal support zone.

GBP/USD buyers attack a downward-sloping resistance line from late July as they await the key US inflation gauge while pausing the three-day uptrend amid early Thursday morning in Asia. In doing so, the Cable pair seesaws around the 1.2720 level while defending the previous week’s rebound from a five-month-old horizontal support zone.

Not only a clear rebound from the key horizontal support but the impending bull cross on the MACD and the steady RSI (14) line also keep the GBP/USD buyers hopeful.

With this, the Pound Sterling is likely to cross the 1.2720 upside hurdle.

However, the 50-DMA level of 1.2780 acts as the last defense of the GBP/USD bears before giving control to the buyers.

Following that, a run-up towards the previous support line stretched from early March, close to 1.2930, and then to the 1.3000 psychological magnet can’t be ruled out.

On the flip side, the GBP/USD pair’s pullback may aim for the monthly horizontal area surrounding 1.2620–15 before revisiting the horizontal area comprising multiple levels marked since early April, close to 1.2545–30.

In a case where the Cable pair drops below 1.2530, it becomes vulnerable to decline toward May’s bottom of around 1.2310.

GBP/USD: Daily chart

Trend: Further upside expected

• EUR/JPY trades at 159.67, almost flat but off new YTD highs, as German HICP data beats estimates, fueling expectations of higher Eurozone rates.
• ECB’s Christine Lagarde’s emphasis on restrictive rates and rising Bund yields underpin the Euro, while BoJ’s loose policy pressures the Yen.
• Traders eye upcoming economic data from Japan and the Eurozone, including Retail Sales and CPI, for further direction in EUR/JPY trading.

The Euro (EUR) appreciated against the Japanese Yen (JPY) on Wednesday, courtesy of elevated inflation in Germany putting into the table higher rates in the Eurozone (EU), while the Bank of Japan (BoJ) maintaining its loose monetary policy keeps the JPY pressured.

As Thursday’s Asian session begins, the EUR/JPY is trading at 159.67, off the new year-to-date (YTD) highs reached yesterday, almost flat.

Euro strengthens on German inflation data, rising Bund yields

Data from the German Federal Statistics Office portrayed August inflation climbing in Germany. The Harmonised Index of Consumer Prices (HICP) rose by 6.4% YoY, above estimates of 6.3%, while on a  monthly basis, inflation was 0.4% above estimates of 0.3%.

Given the European Central Bank (ECB), Christine Lagarde’s words at Jackson Hole emphasized the need to set rates at restrictive levels to achieve its 2% inflation target, the release of German inflation triggered a reaction in Bund yields, which rose sharply, underpinning the Euro.

In the meantime, the JPY remains weaker as the Bank of Japan (BoJ) stays the course regarding an ultra-loose monetary policy. However, a BoJ board member, Naoki Tamura, said the central bank has inflation “clearly in sight,” signaling that he’s hoping that around the first quarter of 2024, the BoJ would have clarity on whether the country meets the BoJ’s inflation target.

The EUR/JPY bullish bias remains in place, but traders must be aware of a possible intervention in the Forex market. Although Japanese authorities remain quiet after expressing worries about the USD/JPY exchange rate level, caution is warranted.

What to watch?

The Japanese economic docket will feature Industrial Output, Retail Sales, and Housing Starts. On the Eurozone front, Retail Sales from Germany, CPI in France and Italy, followed by the release of inflation figures in the whole bloc would dictate the direction of the EUR/JPY pair.

EUR/JPY Technical Levels  

• EUR/USD seesaws at the highest level in two weeks after three-day uptrend.
• US Dollar drops on downbeat US ADP Employment Change, revised down US Q2 GDP favor Fed policy pivot bias.
• Germany’s HICP came in mixed but Euro cheered Greenback’s weaknes.
• Eurozone CPI, HICP and US Core PCE Price Index eyed for clear directions.

EUR/USD bulls attack the 100-DMA hurdle at two-week high as markets await the key inflation data from Eurozone and the US. That said, the Euro pair cheered the US Dollar weakness, while also ignoring mixed data at home, to rise in the last three consecutive days before making rounds to 1.0930 amid early hours of Thursday’s Asian session.

On Tuesday, the softer US data bolstered hopes of an end to the Federal Reserve’s (Fed) hawish cycle and favored the US Dollar sellers while the mixed German inflation clues failed to weigh on the Euro.

Talking about the US data, the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) Annualized declined to 2.1% from 2.4% initial forecasts while the GDP Price Index also eased to 2.0% versus the first readings of 2.2%. Further, the preliminary readings of the Personal Consumption Expenditures (PCE) Prices also edged lower to 2.5% from 2.6% prior estimations for the said period.

More importantly, the ADP Employment Change dropped to 177K compared to 195K market forecasts and 371K previous readings (revised from 324K).

At home, the first readings of Germany’s inflation per the Consumer Price Index (CPI) matched 0.3% market forecasts and prior on MoM basis but edged lower to 6.1% YoY from 6.2% previous readings, compared to the analysts’ estimations of 6.0%. Further, the inflation conditions per the European Central Bank’s (ECB) favorite gauge, namely the Harmonized Index of Consumer Prices (HICP), eased to 0.4% MoM and 6.4% YoY versus 0.5% and 6.5% respective priors, compared to 0.3% MoM and 6.2% YoY marked estimations.

It’s worth noting that European Central Bank (ECB) President Christine Lagarde appeared more hawkish than Federal Reserve (Fed) Jerome Powell in the last week’s Jackson Hole speech as the former clearly cited the need for higher rates versus Powell’s reliance on data dependency.

Elsewhere, China’s reaction to the US allegations that “it’s being risky for businesses” challenged the previous hopes of a smooth running of the Sino-American talks in Beijing. However, a slew of Chinese banks reduced mortgage rates and favored the hopes of witnessing more stimulus from the Asian major, which in turn renewed the market’s optimism.

Amid these plays, Wall Street again closed on the positive side while the US Treasury bond yields remain pressured despite marking an unimpressive daily close.

Moving on, Eurozone HICP and CPI will entertain the EUR/USD traders ahead of the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for August. Also important to watch are the second-tier employment and activity clues from the US.

Should the inflation and activity data arrive downbeat in the US, concerns about the Fed’s policy pivot is likely to gain more acceptance and can propel the EUR/USD price.

Technical analysis

A daily closing beyond the six-week-old descending resistance line, now immediate support around 1.0875, allows the EUR/USD pair to remain firmer while jostling with the 100-DMA hurdle of around 1.0930.

• XAU/USD tallies a three-day winning streak, trading near the $1,940 area, with around 0.30% of daily gains.
• Lower US labour market figures fueled dovish bets on the Fed.
• Gold price gathered momentum amid retreating US Treasury bond yields.

On Wednesday, the XAU/USD continued gaining traction for a third consecutive day, trading around the $1,940 zone, showing nearly 1.50% gains in the bullish streak. The pessimistic labour market data for the US caused the Greenback to trade weak against most of its rivals in Wednesday's session on the back of decreasing US Treasury bond yields, which allowed the yellow metal to find demand.

While market participants continued to digest soft July JOLTS Job Openings from Tuesday, the US reported weaker labour market figures on Wednesday as ADP Employment Change increased by 177,000 employed people in the US, lower than the expected 195,000 and the previous 371,000.

It's worth mentioning that Jerome Powell highlighted at last week’s Jackson Hole Symposium that the restrictive monetary policy will be maintained until the data shows a cooling trend and weak economic figures from the US opened the downside of the Treasury yields, which weighs on the Greenback. That said, the US bond for 2, 5 and 10-year yields decreased to 4.88%, 4.26% and 4.11%, respectively, with around 0.40% daily losses. As the Treasury bond yields are often seen as the opportunity cost of holding gold, their decrease explains the XAU/USD advance.

As for now, the CME FedWatch Tool suggests that investors are betting on higher odds that the Federal Reserve (Fed)  won't hike in the September 20 meeting, while the odds of a hike in November slightly decreased to 40%. In addition, swaps markets are now discounting sooner rate cuts in June 2024, which also applies downside pressure to the US bond yields. However, these bets may change after Friday’s release of the Nonfarm Payrolls from August.

XAU/USD Levels to watch

According to the daily chart, the XAU/USD outlook is bullish for the short term as the Relative Strength Index (RSI) shows a pronounced slope pointing north in the positive territory. In addition, the Moving Average Convergence Divergence (MACD) histogram lays out rising green bars, indicating that bulls are gaining ground. On the bigger picture, the pair trades above the 20-day and 200-day Simple Moving Averages (SMAs), suggesting that the bulls recovered significant ground in the short term. Traders should see a potential bullish cross between the mentioned averages, which could further boost the buying momentum.

Resistance levels:$1,950, $1,955 (100-day SMA), $1,970.
Support levels: $1, 940, $1,930, $1,915.

XAU/USD Daily Chart

• USD/CAD fell to 1.3530, tallying losses for the second day.
• Investors dumped the USD as its economy showed signs of cooling down.
• A hike by the Fed remains on the table, but rate cuts are seen sooner.

In the middle of the week, the USD was one of the worst performers in the FX markets, driven by soft ADP Employment figures and downward revisions of the Gross Domestic Product (GDP) annualised rate. On the CAD’s side, no relevant data was released as investors' eyes are on Friday’s Q2 GDP figures revisions from Canada.

The GDP annualised growth rates figures from the United States was revised lower to 2.1%, while the ADP Employment Change figures missed the consensus in August. They showed that the US economy added 177,000 figures, lower than the 195,000 expected and the previous 371,000. The cooling economy evidence remained investors that Jerome Powell stated last Friday that the Federal Reserve (Fed) would maintain its policy at restrictive levels if the economy didn’t cool down.

According to the CME FedWatch tool, markets are now pricing in that the Federal Reserve will cut rates in June 2024 sooner than the previous expectations, while the odds of a hike in November remain near 40%. For the rest of the week, investors will eye Personal Consumption Expenditures (PCE) figures from July on Thursday and Friday’s Nonfarm Payrolls from August.

USD/CAD Levels to watch 

 The daily chart analysis indicates a neutral to a bearish outlook for USD/CAD, as the bears show signs of taking control but still face challenges ahead. The Relative Strength Index (RSI) points downwards in the bullish territory, suggesting a possible trend reversal, while the Moving Average Convergence (MACD) shows weaker green bars. However, the pair is above the 20,100,200-day Simple Moving Average (SMA), pointing towards the prevailing strength of the bulls in the larger context.

 Support levels: 1.3495 (20-day SMA), 1.3460 (200-day SMA), 1.3450.

 Resistance levels: 1.3575, 1.3590, 1.3600.

USD/CAD Daily Chart

Thursday is a busy day in terms of economic data. Early on in the Asian session, Japanese retail trade and industrial production data will be released. Later, New Zealand's ANZ Business Confidence, Chinese PMI data for August, and Australian Private Sector Credit will be reported. The highlights of the day will be Eurozone CPI and US Core PCE.

Here is what you need to know on Thursday, August 31:

The US Dollar Index fell for the third consecutive day, reaching the lowest close in two weeks, just above 103.00. The Greenback continues to face downward pressure due to disappointing US data and declining Treasury yields. The 10-year yield hit a bottom at 4.08% (lowest since August 11) before rebounding to 4.11%.

Following Tuesday's JOLTS and Consumer Confidence figures falling below consensus, on Wednesday, the ADP employment change also came in below expectations, and Q2 GDP was revised lower. The change in employment reported by ADP was 177,000, below the market consensus of 195,000. These numbers do not bode well for Friday's Nonfarm Payrolls report. However, before the key employment report, on Thursday, the Core Personal Consumption Expenditure Price Index will be released. This index is the Federal Reserve's preferred measure of inflation. Additionally, the weekly Jobless Claims and the Chicago PMI are also due for release.

During the Asian session, a key report to watch out for is the Chinese August NBS PMI. The Manufacturing Index is expected to rise moderately to 49.4, while the Services Index is anticipated to decrease from 51.5 to 51.1.

Data released on Wednesday indicated that the German inflation rate fell from 6.2% to 6.1% in August, reflecting a continued downward trend. However, in Spain, inflation rebounded from 2.3% to 2.6% as expected. The Eurozone Consumer Price Index (CPI) is scheduled to be released on Thursday and also German Retail Sales and Unemployment. 

EUR/USD rose to 1.0947, reaching the highest level in two weeks, supported by a weaker US Dollar and increased expectations of a more hawkish stance from the European Central Bank at the September meeting. The pair experienced a pullback but still remains above 1.0900 with a bullish bias.

The Pound outperformed on Wednesday. EUR/GBP retraced from its weekly highs, falling to 0.8585. GBP/USD rose a hundred pips to 1.2747, the highest level since August 23, but later trimmed its gains. It is currently hovering around the 20-day SMA near 1.2720.

USD/JPY reached a low of 145.55 before rebounding to 146.25, ending the day in positive territory. The upward movement occurred as US yields moved away from their weekly lows. Japan is scheduled to release Retail Sales and Industrial Production data on Thursday.

The Australian Dollar was unaffected by lower-than-expected inflation data and the sharp decline in Building Permits. AUD/USD finished flat around 0.6470 after failing to hold above 0.6500. The short-term bias remains to the upside, but the Aussie has lost momentum. In Australia, Private Sector Credit and Capital Expenditure data are due for release.

NZD/USD faced rejection from above the 20-day SMA and the 0.6000 level, indicating difficulties in extending its recovery. The ANZ Business Outlook survey is scheduled for release on Thursday.

USD/CAD continued its retreat for the third consecutive day, extending the decline from 1.3645. The key support level is situated between 1.3490 and 1.3500.

Gold rose for the third consecutive day, encountering resistance at $1,950. Lower yields and a weaker Dollar provided support for the yellow metal. Silver reversed after reaching $25.00 and closed marginally lower at $24.60.

• GBP/JPY surges to 185.90, gaining more than 150 pips or 0.88%, as US economic data reduces the likelihood of Fed rate hikes.
• Technical outlook shows the pair broke above the Tenkan-Sen line, targeting the 186.00 level and potentially the YTD high of 186.76.
• Short-term 4-hour chart indicates upward bias, with the first resistance at 186.00; downside support lies at 185.06, the confluence of the Tenkan-Sen and the top of the Kumo.

The GBP/JPY rallied sharply on Wednesday, gaining more than 150 pips or 0.88%, as market sentiment remains upbeat, following the release of US economic data that could deter the US central bank from hiking rates. The pair is trading at 185.90 after hitting a daily low of 184.31.

GBP/JPY Price Analysis: Technical outlook

On Wednesday, the GBP/JPY broke above the Tenkan-Sen line, opening the door for further upside, putting into play the 186.00 mark, followed by the year-to-date (YTD) high of 186.76. Conversely, a daily close below 186.00 could exacerbate a re-test of the Tenkan-Sen line at 185.05, followed by the current week’s low of 183.35.

Short-term, the GBP/JPY 4-hour chart portrays the pair as upward biased, and after cracking above the Ichimoku Cloud (Kumo), the cross is extending its gains. First resistance emerges at the 186.00 figure, followed by December’s 2015 high of 186.35, before testing the year-to-date (YTD) high of 186.76.

Contrarily, if GBP/JPY edges lower, the first support would emerge at 185.06, the confluence of the Tenkan-Sen and the top of the Kumo, followed by the Kijun-Sen line at 184.68.

GBP/JPY Price Action – Hourly chart

• EUR/USD trades at 1.0919, gaining 0.36%, as disappointing US labor and GDP data suggest the Fed may hold off on rate hikes.
• US Dollar Index (DXY) loses 0.29% to 103.187, further supporting the Euro, as US Treasury bond yields also edge lower.
• German Harmonised Index of Consumer Prices (HICP) beats estimates, bolstering the Euro and setting the stage for a potential run at the 1.1000 level.

The Euro (EUR) registers solid gains against the US Dollar (USD) as US Treasury bond yields slump due to softer economic data in the United States (US), suggesting the US central bank might keep rates unchanged for the remainder of the year.

EUR/USD gains 0.36% amid weak US jobs and GDP data, while German inflation figures fuel the Euro

Late in the New York session, the EUR/USD exchanges hands at 1.0919, gains more than 0.36%, even though month-end flows usually bolstered the Greenback, but signs of an economic slowdown and high inflation reported in Germany keep the shared currency on the driver’s seat.

Given remarks of the US Federal Reserve Chair Jerome Powell, mentioning that a strong labor market and economic growth above trend could warrant rate hikes by the Fed, data in the last few days checked Powell’s reasons to not raise rates.

The August ADP National Employment report came below estimates of 195K, at 177K, reinforcing Tuesday’s JOLTs report, which began the trend of bad jobs data that could continue tomorrow, with Initial Jobless Claims ahead of Friday’s US Nonfarm Payrolls report.

At the same time, the US Department of Commerce showed the US economy is beginning to stall, as the second estimate for the Gross Domestic Product (GDP) in Q2 came at 2.1%, missing the previously released estimate of 2.4%.

The market participants’ response to the data was seen in US Treasury bond yields, with most edging lower, though pairing its earlier losses. Consequently, the Greenback is on the back foot, as shown by the US Dollar Index (DXY) losing 0.29%, at 103.187.

Across the Atlantic, the Euro was boosted by the German Harmonised Index of Consumer Prices (HICP), increasing monthly and annually based figures. Month-over-month inflation was 0.4% above estimates of 0.3% and 6.4% YoY, above the 6.3% foreseen.

Given the latest fundamental data, the EUR/USD bias would remain upwards, though set for a pullback, before challenging the 1.1000 area. On the upside, the pair would find resistance at the 100-DMA at 1.0925, which might not be easy to surpass ahead of Thursday’s data.

EUR/USD Technical Levels

• WTI wanders around the $81.30 zone just above the 20-day SMA.
• The US reported weak economic activity data and lower-than-expected EIA crude stockpiles.
• Investors eye hurricane Idalia.

In Wednesday’s session, the West Texas Intermediate (WTI) cleared most of its daily gains, taking the price to a high of $82.00 and settling near $81.30. On the data front, the US reported soft employment figures, a downwards revised Q2 Gross Domestic Product (GDP), and lower than expected US Energy Information Administration (EIA).

The Automatic Data Processing Inc. (ADP) Employment Change survey from the United States fell short of expectations in August. The figure came in at 177,000, versus the expected 195,000 and the previous figure 371,000. In addition, the Q2 GDP was revised lower to 2.1% YoY and hinted at a softening of the US economic activity. It's worth noticing that the US is the world's largest Oil consumer, so its economic health impacts Oil prices. That being said, the expectations of a less aggressive Federal Reserve (Fed) may limit the downside as lower rates cushion the black gold. Regarding stock figures, the EIA  reported that crude oil stockpiles fell by more than 10 million, higher than the 3.26 million expected in the week ending on August 25.

In addition, traders’ eyes are on hurricane Idalia, which neared major US oil production sites in the Gulf of Mexico, representing 15% of US oil output.

 WTI Levels to watch 

 Analysing the daily chart, WTI exhibits signs of bullish exhaustion, contributing to a neutral to bearish technical perspective. The Relative Strength Index (RSI) indicates weakening bullish momentum with a negative slope above its midline, while the Moving Average Convergence (MACD) exhibits stagnant red bars. Moreover, the pair is above the 20,100,200-day Simple Moving Average (SMA), indicating that the bulls are in command of the broader picture.

 Support levels: $81.15 (20-day SMA), $80.00, $78.50.

 Resistance levels: $82.00, $82.50, $83.00.

 WTI Daily Chart

• GBP/USD trades at 1.2710, up 0.58%, buoyed by weaker-than-expected US jobs data and a downward revision of Q2 GDP to 2.1%.
• US Dollar Index (DXY) fell 0.38% to 103.089, further boosting the Sterling, as US Treasury bond yields also slid.
• Bank of England’s expected rate hikes and a report showing restrained consumer borrowing in the UK further support the Pound.

Pound Sterling (GBP) advances for three consecutive days against the US Dollar (USD) amid a light economic calendar in the UK. A busy economic week for the United States (US), particularly leaning into jobs data, decreased the Federal Reserve’s odds of hiking rates for the remainder of the year. The GBP/USD is exchanging hands at around 1.2710 above its opening price by 0.58%.

GBP/USD gains for third straight day, on dismal US jobs data, GDP figures lowered Fed hikes expectations

Following last Tuesday’s worse-than-expected job openings report, August’s ADP National Employment report was no exception. The data showed companies hired less than estimates of 195K and added 177K jobs to the economy, indicating the labor market is losing traction. Speculation the Fed would not increase borrowing costs could be reflected in the CME FEdWatch Tool, with investors cutting their bets for a rate hike In November.

Other data showed the economy is deteriorating, with the second estimate of Q2 Gross Domestic Product (GDP) coming at 2.1%, below the previously reported 2.4%, signaling the economy is decelerating.

The GBP/USD reacted upwards and pierced the 1.2700 figure, which was broken to the downside on August 24, with the pair finishing the session at around 1.2591. Nevertheless, data in the last few days propelled the Sterling, while the Greenback bleeds as the US Treasury bond yield slides.

The US Dollar Index (DXY), which tracks the performance of six currencies vs. the US Dollar, prints losses of 0.38%, at 103.089.

Across the pond, additional rate hikes expected by the Bank of Englan (BoE) underpin the Cable. Market participants estimate the Bank Rate would peak at around 5.8%. In the meantime, a BoE report showed that British consumers increased their borrowing less than expected as higher rates bite its citizens.

Aside from this, upcoming data from the US, notably the Federal Reserve’s preferred gauge for inflation, the Personal Consumption Expenditures (PCE), and further labor market data would give direction to the GBP/USD pair.

GBP/USD Price Analysis: Technical outlook

Once the GBP/USD pair reclaimed 1.2700, the major is set to test the 50-day Moving Average (DMA) at 1.2779 in the short term, followed by the 1.2800 figure. If those two resistance levels are breached, the July 27 daily high, at 1.2995, could be up next. Conversely, if the pair slumps below 1.2700, further downside is expected at the current week’s low of 1.2548.

• AUD/USD rose near 0.6490 and consolidated above the 20-day SMA of 0.6473.
• The ongoing softness of the US labour markets makes investors bet on a less aggressive Fed.
• US yields dropped to a three-week low.

In Wednesday’s session, the AUD/USD gained traction, as the USD is trading weak against most of its rivals following fresh soft employment figures. On the Aussie front, Australia reported weak housing data during the Asian session, while the Monthly Consumer Price Index (CPI) dropped to 4.9% YoY.

The ADP Employment Change figures from the US missed the consensus in August. The figure came in at 177,000, while the markets expected 195,000, significantly lower than the last reading of 371,000. In addition, the Q2 Gross Domestic Product (GDP) was revised 
downwards to 2.1% YoY. The immediate reaction to the lower-than-expected ADPs and JOLTs from Tuesday was hopes that the tightening cycle from the Fed would end, which fueled a sharp decline in the 2,5 and 10-year yields to their lowest in three weeks. However, the CME FedWatch tool reflects that the odds of a hike in the November meeting slightly fell, but they remain high, around 44%. In addition, investors are pricing in that the Fed will cut rates sooner, in June 2024, which also weakens the USD.

That being said, before the September 20 meeting, the Fed will get an additional Nonfarm Payrolls (NFP) report this Friday, a Core Personal Consumption Expenditures (PCE) reading on Thursday and a Consumer Price Index (CPI) figures from August next Friday. Those inflation figures will likely weigh more on the Fed’s upcoming decisions.

 AUD/USD Levels to watch 

 The daily chart analysis indicates a neutral to bullish outlook for the AUD/USD in the short term. The Relative Strength Index (RSI) is below its midline in negative territory but with a positive slope, aligning with the negative signal from the Moving Average Convergence Divergence (MACD), which displays rising green bars, suggesting that the bulls are slowly regaining momentum. Additionally, bullish signals on the four-hour chart indicate a forceful buying momentum, establishing a marked bull dominance over sellers in the shorter time frame.

 Support levels: 0.6475 (20-day SMA), 0.6400, 0.6380.

 Resistance levels: 0.6500, 0.6525, 0.6540.

 AUD/USD Daily Chart

• USD/MXN trades at 16.7508, down 0.26%, as disappointing US labor and GDP data weaken the Greenback, pushing US Treasury yields lower.
• US Dollar Index (DXY) plunges over 1% to 103.133, amplifying USD/MXN losses amid a backdrop of overall USD weakness.
• S&P Global’s Jose Perez expects stable Mexican monetary policy into 2024, reinforcing a downward bias for USD/MXN, though the pair remains above its YTD low of 16.6238.

The Mexican Peso (MXN) strengthened against the US Dollar (USD) on Wednesday after data from the United States (US) that the economy is decaying, according to the latest jobs and growth data. Hence, US Treasury bond yields dropped, a headwind for the Greenback. The USD/MXN is trading at 16.7508, losing 0.26% after hitting a high of 16.8029.

Mexican Peso capitalizes on weak US GDP jobs data while stable Mexcian monetary policy brightens its outlook

An upbeat market sentiment boosts appetite for the emerging market currency, as reflected by US equities rising. The Greenback is on the back foot after the US Commerce Department downward revised Q2 Gross Domestic Product (GDP) from 2.4% to 2.1%. Although figures exceed the first quarter data, the economy is stagnating, as the current week’s labor market data had shown.

In regards to that, private hiring slowed down, as announced by ADP on its National Employment report, which reported private companies added just 177K jobs, below estimates of 195K. That, alongside a weaker weekly job openings report, paints a not-so-good scenario for Friday’s US Nonfarm Payrolls report.

US Treasury bond yields fell and weighed on the Greenback in reaction to the data. The US Dollar Index (DXY), a measure of the buck’s value against a basket of six currencies, plunged more than 1% at 103.133. Hence, the USD/MXN extended its losses amid overall USD weakness.

Across the border, Jose Perez, the head of Emerging Markets Research at S&P Global, said he does not expect significant changes in Mexico’s credit profile in 2024. Perez added he expects Mexico’s monetary policy to remain stable, and rates could begin to ease in early 2024.

That said, given the Bank of Mexico (Banxico) forward guidance of higher for longer, the USD/MXN outlook is likely to remain downward biased, but the lack of a more robust catalyst keeps the pair above the YTD low of 16.6238.

USD/MXN Price Analysis: Technical outlook

From a technical standpoint, the USD/MXN has consolidated at around 16.6900/16.8900 during the week, as the 50 and 20-day Moving Average (DMA) shifted flat at 16.9694 and 16.9886, respectively, suggesting the pair is awaiting a fresh catalyst. Downside risks emerge at the weekly low of 16.6923, exposing the year-to-date (‘YTD) low of 16.6238. Otherwise, if the USD/MXN exceeds the weekly high, the 50-DMA at 16.9694 would be up for grabs.

• USD/CHF dropped to 0.8775, below the 20-day SMA of 0.8780.
• ADP job creation figures from the US from August came in lower than expected, and the Q2 GDP was revised lower.
• Lower US yields and dovish bets on the Fed, weight on the USD.

In Wednesday’s session, the USD is trading weak against most of its rivals, driven by the report of weak economic figures. The Greenback had gained momentum against its rivals as its economy was resilient during the Federal Reserve (Fed) tightening cycle. Still, the report of soft economic figures warns investors that the lags of monetary policy may be kicking in. On the Swiss side, ZEW reported soft expectations figures from August.

The August survey from Automatic Data Processing (ADP), which gauges employment creation, indicated the generation of 177,000 jobs in the US. This figure fell short of the anticipated 195,000 and significantly declined from 371,000. Moreover, the second-quarter YoY Gross Domestic Product (GDP) underwent a downward revision, settling at 2.1%.

Reacting to the data, the USD, measured by the DXY index, dropped to 103.05, below its 200 and 20-day Simple Moving Averages, while the US Treasury yields continued to decrease and fell to their lowest in three weeks. In line with that, the markets continue to price in high odds of at least one more hike by the Federal Reserve (Fed) within this cycle, but the rate cut expectations have now been pushed to June 2024 from July.

Focus now shifts to Core Personal Consumption Expenditures (PCE) from July on Thursday, an essential gauge for inflation for the Fed. On Friday, markets will get the August Nonfarm Payrolls (NFP).

On the CHF side, the ZEW Survey of Expectation from August dropped higher than expected to -38.6 vs. the -31.3 expected, limiting the Swiss currency upside.

USD/CHF Levels to watch 

 As per the daily chart analysis, the USD/CHF has a bearish technical bias for the short term, with both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) residing in negative territory. The RSI also exhibits a southward slope below its midline, emphasising the presence of intense selling pressure. At the same time, the MACD, with its red bars, highlights the strengthening bearish momentum for the USD/CHF. Moreover, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), pointing towards the prevailing strength of the bears in the larger context and the buyers facing a challenging situation.

Support levels: 0.8750, 0.8730, 0.8700. 

 Resistance levels: 0.8782 (20-day SMA), 0.8800, 0.8890 (100-day SMA).

 USD/CHF Daily Chart

• USD/JPY trades down 0.13% at 145.68, pressured by disappointing US labor market data and lower-than-expected Q2 GDP growth.
• US 10-year Treasury Note yield dips to 4.102%, further weakening the dollar, as the DXY index slumps 0.43% to 103.041.
• BoJ board member Naoki Tamura signals inflation is "clearly in sight," hinting at a potential end to negative rates next year, which could bolster the Yen further.

The Japanese Yen (JPY) registers back-to-back positive sessions against the US Dollar (USD), which remains downward pressured after last Tuesday’s data depicted the US labor market is cooling. Today’s data reinforced the latter, easing pressure on the US central bank to increase borrowing costs. The USD/JPY is trading at 145.68, down 0.13%, after reaching a daily high of 146.84.

Yen gains momentum vs. a battered US Dollar amid soft labor and GDP data

The Greenback extended its losses courtesy of weaker-than-expected growth data. The US Commerce Department Q2’s Gross Domestic Product (GDP) was 2.1% below the government’s previous estimates of 2.4%, an uptick from Q1’s 2%. That, alongside the ADP National Employment report missing estimates of 195K at 177K, revealed the labor market is losing steam.

On Tuesday, the US Department of Labor revealed 1.51 job openings for every unemployed person, the lowest ratio since September 2021, compared with 1.54 in June.

Given the worse-than-expected economic data, US Treasury bond yields fell. The US 10-year Treasury Note yield slides two basis points down to 4.102%, a headwind for the USD/JPY pair due to its close positive correlation. That undermined the US Dollar (USD), which, according to its index, the US Dollar Index (DXY) slumps 0.43%, down at  103.041.

On the Japanese front, the Bank of Japan (BoJ) board member Naoki Tamura said that inflation is “clearly in sight,” indicating that negative rates could end next year. Market participants are eyeing the BoJ’s next move, as it’s the only global central bank easing monetary policy. Once the BoJ normalizes its monetary policy, broad Japanese Yen (JPY) strength is expected. It could trim its 11.22% YTD losses against the Greenback, suggesting further USD/JPY downside is expected.

USD/JPY Price Analysis: Technical outlook

From a technical perspective, the USD/JPY remains upward biased, though the pair slide below the Tenkan-Sen line at 145.95 could open the door for a pullback, with support emerging at the June 30 daily high turned support at 145.07. Otherwise, if buyers reclaim the Tenkan-Sen line, the next stop would be 146.00. A breach of the latter could pave the way for a test of the year-to-date (YTD) high of 147.37.

• NZD/USD kisses 0.6000 as the US Dollar faces intense selling pressure due to soft labor demand.
• Easing labor market conditions could allow the Fed to deliver a steady interest rate decision at the September meeting.
• The New Zealand Dollar as a proxy to China’s economy would face selling pressure if the Caixin Manufacturing PMI remains weak.

The NZD/USD pair rallied and tested the psychological resistance of 0.6000 in the early New York session. The Kiwi asset discovers significant buying interest as the United States labor market’s resilience eases due to higher interest rates by the Federal Reserve (Fed).

After fewer job vacancies in July, a weak private employment report for August confirmed that labor demand has softened as firms preferred to continue operating with the current labor force due to the deteriorating demand environment.

US Automatic Data Processing (ADP) reported that fresh payrolls in August were 177K, which was significantly lower than expectations of 195K and July’s reading of 324K. Investors should note that the four-month outperforming spell of US private employment has come to an end.

Releasing heat from a tight labor market would also keep inflationary pressures under control. Fed Chair Jerome Powell conveyed at the Jackson Hole Symposium that inflation is getting more responsive to the labor market. Jerome Powell also conveyed that further policy action will remain data-dependent and that easing labor market conditions could allow the Fed to deliver a steady interest rate decision at the September monetary policy meeting.

As per the CME Fedwatch Tool, more than 90% odds are indicating that interest rates will remain steady at 5.25-5.50% in the September policy. For the November policy, 57% chances are supporting a stable interest rate policy.

On the New Zealand Dollar front, investors await the Caixin Manufacturing PMI for August, which will be published on Friday at 01:45 GMT. The economic data is seen nominally higher at 49.3 vs. the former release of 49.2. Investors should note that a figure below the 50.0 threshold is itself considered a contraction in activities. The New Zealand Dollar as a proxy to China’s economy would face selling pressure if the economic data remains weak.

• EUR/USD maintains the bullish move intact so far this week.
• Further gains could revisit the 55-day SMA around 1.0970.

EUR/USD picks up further pace and climbs to weekly highs near 1.0930, an area coincident with the 100-day SMA, on Wednesday.

The pair’s current momentum seems to be favouring the continuation of the march north for the time being. That said, there is a temporary hurdle at the 55-day SMA at 1.0968, which precedes the psychological 1.1000 mark and the August top of 1.1064 (August 10).

In the meantime, the pair is likely to remain bid while above the 200-day SMA, today at 1.0810.

• Silver price climbs to near $25.00 as US hiring momentum slows due to higher interest rates by the Fed.
• US ADP reported fresh private employment additions in August were 177K, significantly lower than July’s reading of 324K.
• Silver price is approaching the horizontal resistance plotted from the July 20 high of around $25.27.

Silver price (XAG/USD) resumes its upside journey and looks set to recapture the psychological resistance of $25.00 in the early New York session. The white metal strengthens as United States Automatic Data Processing (ADP) reported fresh private employment additions in August were 177K, significantly lower than July’s reading of 324K. Investors projected 195K new private payrolls.

The US Dollar Index (DXY) extends its downside to near 103.00 as soft labor demand could allow the Federal Reserve (Fed) to keep interest rates steady for the entire year. Fed Chair Jerome Powell at the Jackson Hole Symposium that further policy action will remain data-dependent. He further added that inflation is getting responsive to the labor market.

US firms have slowed down their hiring momentum due to the deteriorating demand environment. Also, firms are underutilizing their entire operating capacity, which reduces demand for fresh payrolls. On Tuesday, JOLTS Job Openings data also remained weaker than expectations. Employers invited applications for 8.827M vacancies against 9.165M job openings in June.

Meanwhile, S&P is expected to open on a flat note, following cues from overnight futures. The 10-year US Treasury yields dropped further to near 4.10% as investors hope that interest rates by the Fed are peaked for now.

Silver technical analysis

Silver price is approaching the horizontal resistance plotted from July 20 high around $25.27 on a two-hour scale. Upward-sloping 50-period Exponential Moving Average (EMA) indicates that the upside momentum is extremely bullish.

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

Silver two-hour chart

• DXY adds to the weekly leg lower and threatens 103.00.
• Further retracement could revisit the 102.50 zone.

DXY drops for the third session in a row and puts the 103.00 support to the test on Wednesday.

If losses accelerate and the index breaks below the 200-day SMA (103.07), it could revisit interim contention at the 55-day and 100-day SMAs at 102.47 and 102.33, respectively, prior to the August low of 101.74 (August 4).

While above the key 200-day SMA, the outlook for the index is expected to remain constructive.

DXY daily chart

• EUR/JPY extends the rally north of 159.00 on Wednesday.
• Further up emerges the key round level at 160.00.

EUR/JPY keeps the buying pressure well and sound and surpasses the 159.00 hurdle on Wednesday.

If the move higher picks up extra pace, the cross should challenge recent 2023 highs 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 147.84.

EUR/JPY daily chart

• US Q2 GDP revised from 2.4% to 2.1%. 
• US Dollar Index extends slide after GDP data. 

The US economy expanded at an annual rate of 2.1% during the second quarter, a reading that came in below the previous estimate of 2.4%. “The updated estimates primarily reflected downward revisions to private inventory investment and nonresidential fixed investment that were partly offset by an upward revision to state and local government spending”, said the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0%.

The Personal Consumption Expenditure (PCE) Price Index increased 2.5%, a downward revision of 0.1 percentage point from the previous estimate. Excluding food and energy prices, the PCE price index increased 3.7 percent, a downward revision of 0.1 percentage point.

Key takeaways: 

Market reaction

The US Dollar experienced fresh daily losses across the board following the release of the GDP report. It was already weak due to the ADP Employment figures. As of writing, the DXY trades at 103.20, down 0.25% for the day, at its lowest intraday level in a week.
 

Private sector employment in the US rose 177,000 in August, the data published by Automatic Data Processing (ADP) showed on Wednesday. This reading followed the 371,000 increase (revised from 324,000) recorded in July and came in below the market expectation of 195,000.

"Job stayers saw a year-over-year pay increase of 5.9%, the slowest growth since October 2021," the ADP further noted in the press release and said pay growth also decelerated to 9.5% for job changers.

Assessing the report, “this month's numbers are consistent with the pace of job creation before the pandemic,” said Nela Richardson, chief economist, ADP.

“After two years of exceptional gains tied to the recovery, we're moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede,” she added.

Developing story, please refresh the page for updates.

Market reaction

The US Dollar came under modest selling pressure with the immediate reaction to the ADP jobs data. As of writing, the US Dollar Index was down 0.1% on the day at 103.38.

• USD/CAD remains supported above 1.3550 ahead of US ADP labor demand data.
• If Employment Change data replicates Job Openings performance, selling pressure on the USD Index would elevate.
• The Lonnie asset turns sideways after a sell-off move to near the 200-period EMA.

The USD/CAD pair retreats after a short-lived pullback move to near 1.3577 in the European session. The Loonie asset remained broadly sideways on Wednesday as investors sidelined ahead of the United States Employment Change data for August to be reported by Automatic Data Processing (ADP).

As per expectations, the US private sector recorded fresh additions of 195K, which were significantly lower than July’s reading of 324K. Job vacancies data released on Tuesday were downbeat and eventually built significant pressure on the US Dollar Index (DXY). If Employment Change data replicates Job Openings performance, selling pressure on the USD Index would elevate and it might slip into a bearish trajectory.

This week, the Canadian Dollar will dance to the tunes of the Q2 Gross Domestic Product (GDP) data. Investors are anticipating that the April-June quarter growth rate was lower than Q1's growth pace due to the upside risks of higher interest rates by the Bank of Canada (BoC).

USD/CAD discovered selling pressure after a Double Top formation on an hourly scale, which indicates that bids from investors were not enough while attempting a breakout above August 25 high at 1.3640. The Lonnie asset turns sideways after a sell-off move to near the 200-period Exponential Moving Average (EMA), which is around 1.3560.

A breakdown into the bearish range of 20.00-40.00 range by the Relative Strength Index (RSI) (14) will trigger the downside impulse.

Going forward, a downside move below August 29 low at 1.3550 will expose the asset to August 24 low at 1.3510, followed by August 9 high at 1.3454.

In an alternate scenario, a solid recovery above August 25 high at 1.3640 will drive the asset toward March 28 high around 1.3700 and March 27 high at 1.3745.

USD/CAD hourly chart

• CPI Inflation in Germany softened slightly in August.
• EUR/USD clings to small daily gains while trading below 1.0900. 

Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), declined to 6.1% on a yearly basis in August from 6.2% in July. This reading came in higher than the market expectation of 6%. On a monthly basis, the CPI increased 0.3%, matching analysts' estimate and July's increase.

The annual Harmonised Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, rose 6.4% in the same period, compared to 6.5% in July and the market forecast of 6.2%. Monthly HICP increased 0.4%.

Market reaction

The EUR/USD pair showed no immediate reaction to these figures and was last seen trading marginally higher on the day at 1.0885.

• US Dollar price action is positive this Wednesday against all major peers. 
• Another big batch of data, including US GDP data, could push the Greenback further down. 
• The US Dollar Index gave way to 104.00 and might retrace even further to 103.00.

The US Dollar (USD) is losing its shine as the Greenback is no longer the king. Lower US Consumer Confidence data and the sharp decline in JOLTS Job Openings points to a firm dent in the staggering performance of the US economy since last year. With several data points starting to flash and signal distress, the tipping point could come in sooner than the US Federal Reserve presumes, and might need earlier interest-rate cuts than needed in order not to crash the US economy and engineer a soft landing.

More data is ahead to assess if the numbers of Tuesday were one-offs or confirm that the US economy is starting to crumble. Markets will mainly be focused on the second estimate of the US Gross Domestic Product that will come out later this Wednesday. Add into the mix the ADP monthly Employment Change, where traders will get a taste of the Nonfarm payrolls numbers due Friday. 

Daily digest: US Dollar gains against major peers

• The US economic calendar starts off at 11:00 GMT with the Mortgage Bankers Association (MBA) weekly Applications Index. Previous result was a 4.2% decline.
• The monthly ADP employment change will be released at 12:15 GMT. Although there is no correlation with the official US Jobs number on Friday, it does create a sort of glance on what could come Friday. Previous numbers was 324K, and it is set to slide lower to 195K.
• The second estimate of US Gross Domestic Product data will come out at 12:30 GMT. For the second quarter, the Price Index is expected to stay steady at 2.2%. The annualized GDP growth is also seen unchanged from preliminary estimates, which came at 2.4%. Apart from this, Wholesale Inventories index for July is to come out as well, expected to head from -0.5% to -0.4%. 
• The US data agenda is to round off this Wednesday with Pending Home Sales at 14:00 GMT for both monthly and yearly performances. The monthly reading is expected to decline 0.6% in July, swinging from a 0.3% increase a month earlier. The annual number was in June -15.6%, with no forecast for July. 
• Asian equity markets are mildly in the green with no real outliers to mention. There is a similar picture in Europe, where clearly traders are sitting on their hands awaiting further confirmation from the US economic numbers. US equity futures are trading marginally in the red and could still go either way. 
• The CME Group’s FedWatch Tool shows that markets are pricing in an 86.5% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. The 78% probability got quickly reassessed after the downbeat data from the JOLTS report. 
• The benchmark 10-year US Treasury bond yield trades at 4.13%, sharply sliding  as investors were going long US bonds and US equities. 

US Dollar Index technical analysis: rally under pressure

The US Dollar is in good shape this Wednesday morning after the beating it took on Tuesday on the back of substantial shrinkage in the JOLTS jobs openings number. Still, the shiny Greenback is starting to fade a little bit and that is being translated with the US Dollar Index (DXY) sliding below 104.00. The overall summer rally for the DXY is still intact, though it is starting to get under pressure. 

On the upside, 104.69, the high of May 31, comes into play as the level to beat. Once that level is broken and consolidated, look for a surge to 105.00, where 105.10 (the peak of March 15) is an ideal candidate for a double top. Should the Greenback be on a tear, expect a test at 105.88 – the 2023 peak from March 8.

On the downside, several floors are likely to prevent a steep decline in the DXY. The first one is the big figure at 104.00. Though seeing the current decline, that does not look strong enough to hold. Rather look for the 200-day Simple Moving Average (SMA) at 103.14. That is a much better candidate in order to catch some profit-taking pressure and reenter. In case it does not hold, the safety net at 102.33 comes into play, holding both the 55-day SMA and the 100-day SMA. 

Analysts at TD Securities assess the latest data releases from the US and preview the upcoming ones.

Second tier data coming up with ADP and Home Sales

"JOLTS and Consumer Confidence both came in below consensus. We expected downside risks on both prints, which came in even larger. Job openings declined by 338k vs market consensus of an 82k decline. Both hiring and the job openings/job seekers ratios declined, while layoffs remained steady."

"Consumer confidence also declined by 7.9 when the market was only expecting 1.0. Overall, these point to both a weaker consumer and a cooling labor market, causing rates to rally and the market to price out hikes. We are still expecting a stronger payrolls print on Friday at 180k, vs consensus of 170k as the labor market remains resilient without increasing layoffs."

"Some second tier data coming up on Wednesday with ADP and Home Sales, as well as the second releases of GDP and Core PCE QoQ figures. All eyes will be on payrolls on Friday, so the market may be a bit reactive around any of these releases."

• Oil (WTI) experiences upside pressure driven by several elements favoring  a higher price.
• US Dollar strength abates after US JOLTS data points to weakening labor demand. 
• The Energy Information Administration is due to print its weekly numbers. 

Oil prices are heading higher again this week supported by several tailwinds. Adalia has turned into a life-threatening hurricane that is going over Florida, risking supply issues for deliveries of gas and oil further up north. Adding to that, data from the American Petroleum Institute showed a big drawdown in stockpiles, from -2,418M to -11,486M. 

As if that is not enough, the rumour is buzzing in the commodity space that OPEC+ is preparing the announcement of more production cuts to come at its November meeting. Meanwhile, the Greenback is sliding lower as traders start to price in a slowdown in the US economy. A perfect storm is brewing from the macro, stockpile and geopolitical sides that has the potential to push oil further up this week.

At the time of writing, Crude Oil (WTI) price trades at $81.34 per barrel and Brent Oil at $85.15.

Oil news and market movers

• The American Petroleum Institute (API) released its numbers for this week. the figures showed a staggering 11.486 million barrel draw in US crude inventories, well above the 2.418 million barrels draw seen a week earlier. 
• Should the Energy Information Agency (EIA) at 14:30 print another big drawdown, Crude price could post a new weekly high. Last week there was a cut of 6.135M, and the markets expects a decline of only 3.267M. With the already staggering print of the API overnight, the EIA number needs to be a big beat in terms of drawdown in order to really trigger another big move higher. 
• The US Gross Domestic Product numbers this Wednesday at 12:30 could trigger a small pullback, should the numbers signal a slowing US economy, which means less demand for oil. 
• Friday’s monthly US jobs report is key.. After the US Federal Reserve officials repeated at Jackson Hole they are prepared to keep rates higher for longer, any sudden slowdown in the US jobs market could force the hand of the Fed to start easing market conditions by cutting rates, which would mean a weaken the Greenback. 
• Storm Adalia is making its way over Florida and has turned into a life threatening Hurricane.  The production and supply for the Eastern part of the United States could come under pressure and might see Oil prices shooting higher as less supply will be available in a brief period. A state of emergency has been issued by the White House. 
• Equity markets are rallying for a third straight day this week, helping demand for commodities. 

Oil Technical Analysis: from one data to the next

Oil price is ticking up nicely and starts adding solid gains. This week traders will want to see if the tables have flipped, with this time the API printing a staggering drawdown (yellow box on the chart), while the EIA could undershoot expectations and trigger pullback and some profit taking. Meanwhile, oil will react to any contraction or disappointment in the US Gross Domestic Product numbers coming out at 12:30 GMT. 

On the upside, $81.68, Monday’s high, is the one to beat in order to trigger a small uptrend. Should WTI continue to rally and break that red descending trendline, more new highs will come into play. In order to print a fresh monthly high, the peak of mid-August at $84.32 is the target 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 tested as more supply is bound to come online. Once bears make it through that yellow box level, expect to see more downside toward $74 before finding ample support to slow down the sell-off. 

WTI US OIL (15 minute chart)

Analysts at Rabobank note that markets will have more labor market data from the US to scrutinize.

Atlanta Fed's GDPNow stands at a robust 5.9% for Q3

"The ADP's August private payrolls estimate is seen at 195K, down from July's lofty 324K. While the July figure painted a picture of a labour market that remains very expansionary, it was also almost double the BLS estimate of a somewhat more modest 172K change in private payrolls. With no meaningful correlation between the two reports, ADP's forecasting accuracy appears mostly random. If their estimate is right, it's almost serendipitous. If wrong, it’s a sitting duck for another portion of ridicule pointed at economists."

"We will also see the second estimate of US Q2 GDP. A 2.4% release is expected, unchanged from the first estimate. With September approaching, markets will likely ignore this backward-looking data and focus on Q3 growth instead. The Atlanta Fed's GDPNow forecast currently stands at a robust 5.9% for that quarter. Who would have thought that a year ago, when Fed Chair Powell warned that the Fed’s policy would bring pain to households and businesses?"

"Eurozone economic growth indicators have been surprising on the downside recently," European Central Bank (ECB) Governing Council member and Bank of Portugal Governor Mario Centeno said while speaking at Reuters Global Markets Forum on Wednesday.

Centeno further noted that downside risks for growth outlined in June projections macroeconomic projections have started to materialize and added that they have not yet seen a deanchoring of inflation expectations.

Market reaction

EUR/USD showed no immediate reaction to these comments and was last seen trading modestly higher on the day at 1.0880. 

• USD/JPY rebounds swiftly from 146.00 amid weakness in the Japanese Yen due to uncertainty about BoJ’s exit from the ultra-loose policy.
• The US Dollar retreats ahead of the US ADP Employment Change data.
• Employees in the US seem reluctant to switch jobs as the labor market is not as hot as it was earlier.

The USD/JPY pair discovered buying interest after dropping below the 146.00 support on Wednesday. The asset demonstrated recovery despite weakness in the US Dollar ahead of the United States Automatic Data Processing (ADP) Employment Change data for August.

S&P500 futures remain sideways amid a quiet market mood as investors await the US private employment data. US equities were significantly bought on Tuesday after weaker than anticipated Job Openings data, which elevated Federal Reserve (Fed) soft landing hopes. Softer labor demand indicates that the job market is losing its resilience.

Fewer demand for labor by US firms was also the outcome of lower resignations by workers. Employees seem reluctant to switch jobs as the labor market is not as hot as it was earlier. For more information about the current status of the US labor market, ADP Employment data will be keenly watched.

As per the projections, fresh private payrolls were 195K in August vs. July’s reading of 324K. Investors should note that the economic data has been outperforming consensus for past four months. Higher-than-expected payroll data could allow the Fed to keep discussions about one more interest-rate hike alive.

Meanwhile, weakness in the Japanese Yen remains persistent as the Bank of Japan (BoJ) is not expected to exit from dovish monetary policy sooner. BoJ board member Naoki Tamura said it will take a bit more time to judge whether Japan meets BoJ’s price target in a sustainable manner. Also, in what order and at what pace BoJ exits easy policy will depend on economic conditions at the time.

Japanese authority in its annual economic white paper said that "Japan has seen price and wage rises broaden since the spring of 2022,” adding that “such changes suggest the economy is reaching a turning point in its 25-year battle with deflation.”

• Gold price oscillates around $1,935.00 as investors shift focus to US ADP Employment data.
• US firms invite fewer applications for jobs as resignations drop.
• Investors hope that the Fed will not raise interest rates further this year.

Gold price (XAU/USD) trades directionless after a stalwart rally as investors await US ADP Employment Change data for further action. The precious metal capitalized on softer job openings data, which accelerated hopes of an unchanged interest rate decision to be taken at the September monetary policy meeting by the Federal Reserve (Fed). Employees’ declining confidence in the labor market gave comfort to Fed policymakers for keeping current interest rates at 5.25-5.50%.

Investors will keenly watch private sector employment data for August as Fed Chair Jerome Powell promised that further policy action will be data-dependent at the Jackson Hole Symposium. US ADP Employment Change has been outperforming consensus for the past four months. Weak labor demand from US private payrolls could allow Fed policymakers to discuss rate cuts sooner rather than later.

Daily Digest Market Movers: Gold price consolidates ahead of US private employment data

• Gold price consolidates in a narrow range above $1,930.00 as investors await the private payroll data for August, which will provide more details about the current labor market status.
• The precious metal struggles for a decisive move ahead of the ADP Employment Change data as it will set an undertone for the Federal Reserve’s September monetary policy.
• Investors project that fresh private sector payrolls in August were 195K, significantly lower than July’s reading of 324K. The last four reports have shown numbers significantly above market consensus.
• August labor market data carries significant importance as Fed Chair Jerome Powell conveyed at the Jackson Hole Symposium that inflation has become more responsive to the labor market.
• On Tuesday, the US Bureau of Labor Statistics reported that labor demand softened in July. Employers invited job applications for 8.827M vacancies against 9.165M job openings in June.
• Meanwhile, the number of resignations was their lowest since early 2021. This indicates that either US firms are working on retaining talent or the labor force lost confidence.
• Softening of key US job data indicates that the labor market is losing its resilience and elevates hope for the Fed’s soft landing.
• Weaker than anticipated job openings data elevated hopes of a steady interest rate decision by the Fed at the September FOMC meeting. As per the CME FedWatch Tool, there is an 86% chance of interest rates staying at 5.25-5.50%. Also, the odds of an unchanged interest rate policy at the November meeting jumped above 50%.
• If US hiring momentum slows further, the synergic effect of poor job vacancies and easing recruitment will make Fed policymakers comfortable with keeping the monetary policy unchanged this year.
• In addition to US Job Openings data, Consumer Confidence reported by the US Conference Board dropped sharply to 106.1 as fears of persistent inflation renewed.
• Investors hope that inflation in excess of the desired rate will be a hard nut to crack. Also, consumers' 12-month inflation expectations rose to 5.8% from 5.7% last month.
• Last week, Cleveland Fed Bank President Loretta Mester supported one more interest rate hike in 2023 to ensure that the goal of price stability is achieved before 2026.
• In this data-packed week, investors will shift their focus toward the Nonfarm Payrolls (NFP) data for August, which will provide an in-depth status of labor market conditions.
• Apart from the US NFP, ISM Manufacturing PMI data will also be on investors’ radar. Market participants hope that factory activities will remain below the 50.0 threshold for the ninth straight month.
• The US Dollar Index delivers a gradual recovery after an intense sell-off move to near 103.40. However, the downside bias is still solid as the Fed is expected to pause the policy tightening spell sooner.
• Meanwhile, 10-year US Treasury yields dropped to near 4.15%, indicating higher bets for a soft landing by the Fed.

Technical Analysis: Gold price trades sideways after stabilizing above $1,930

Gold price trades back and forth in a narrow range above $1,930.00 after a rally inspired by soft job openings data. After a stellar rally, the precious metal reaches near the upper portion of the Rising Channel chart pattern formed on a small time frame. The yellow metal extends its recovery above the 20 and 50-day Exponential Moving Averages (EMAs), which indicates that the mid-term trend has turned bullish.

• USD/CHF rebounds due to downbeat Swiss economic data.
• Investors will monitor Switzerland’s inflation data, seeking further cues on interest rate hikes by SNB.
• Market participants await US economic data to gain a clearer insight into the Fed policy decision.

USD/CHF rebounds from losses registered in the previous two days, trading around 0.8800 psychological level at the time of writing during the European session on Wednesday. The pair is experiencing upward pressure due to Switzerland’s downbeat ZEW Survey – Expectations (Aug) released on Wednesday. The report showed a reading of -38.6 against the market consensus of -31.3 and from the previous -32.6 figure.

As per Credit Suisse, the majority of analysts anticipate that the Swiss National Bank (SNB) will execute another increase in its key interest rates during the third quarter (Q3), given the expected upsurge in inflation projected for the upcoming autumn season. Moreover, the Swiss Consumer Price Index (CPI) will be released on Friday, which is expected to slow down in August. Market participants will observe the inflation figure to better understand the further monetary policy decision by SNB.

The US Dollar Index (DXY) treads waters around 103.70, recovering from the recent losses. This turnaround can be attributed to the rebound in US Treasury yields, which is offering support to the US Dollar. It's worth noting that the prevailing dovish sentiment surrounding the policy stance of the US Federal Reserve (Fed) is contributing to a weakening of the Greenback.

During the Jackson Hole Symposium, Fed Chairman Jerome Powell emphasized that any future decisions regarding interest rates will be guided by data-driven analysis. As a result, investors are set to closely monitor the upcoming US economic data, aiming to attain a more comprehensive understanding of the economic path of the United States (US).

Wednesday's macroeconomic schedule highlights important events, notably the unveiling of US ADP Employment Change statistics for August and the preliminary Gross Domestic Product Annualized data for the second quarter (Q2). These datasets are expected to have a substantial influence on shaping strategies before engaging in fresh trading positions on the USD/CHF pair.

• The Euro comes under pressure and recedes to 1.0880 vs. the US Dollar.
• Stocks in Europe opened Wednesday’s session on a mixed note.
• EUR/USD has left behind two consecutive daily gains so far on Wednesday.
• The USD Index (DXY) bounces off lows and climbs to 103.60.
• US and German yields attempt a mild rebound early in Europe.
• Inflation in Spain picked up pace in August at 2.6% YoY.

The Euro (EUR) is now losing some upside momentum vs. the US Dollar (USD), forcing EUR/USD to retreat to the 1.0860 region after Tuesday’s multi-day peaks, just pips away from 1.0900 the figure.

On the flip side, the Greenback manages to regain the smile and leaves behind part of the data-led sharp pullback seen in the previous session, lifting the USD Index (DXY) back to the 103.60 zone following the opening bell in the old continent midweek and amidst a mild bounce in US yields across different maturities.

In the meantime, the Federal Reserve’s (Fed) tighter-for-longer approach now appears somewhat dented in response to recent data releases, which also pour cold water over expectations of a 25 bps rate hike at the November 1 gathering.

By contrast, there is no news around the European Central Bank (ECB) regarding its potential decision on rates once the summer season is over.  

Data-wise in the region, flash inflation figures in Spain see the CPI rising 2.6% in the year to August, while Consumer Confidence in Italy receded a tad to 106.5 for the current month. Later in the session, the final Consumer Confidence in the broader euro area is due along with advanced inflation figures in Germany.

In the US, investors’ attention will be on the release of the ADP report, followed by another estimate of the Q2 GDP Growth Rate, Pending Home Sales and flash Goods Trade Balance figures.

Daily digest market movers: Euro meets some resistance ahead of 1.0900

• The EUR gives away part of the recent gains vs. the USD.
• German and US bond yields pick up some renewed traction.
• Market participants will now shift their focus to the ADP results.
• JOLTs Job Openings dropped to the lowest level since March 2021 in July.
• The Fed's'sighter-for-longer narrative seems to be losing momentum.
• Investors now see the Fed on hold for the remainder of the year.
• Further stimulus measures are likely to be taken by the PBoC in the near term.
• BoJ’s Tamura favoured the current loose monetary conditions.

Technical Analysis: Euro faces a minor hurdle at 1.0930

EUR/USD’s weekly recovery faltered just ahead of 1.0900 the figure on Tuesday. The current upside momentum could leave further room for extra gains in the short-term horizon.  

In case bulls push harder, EUR/USD is expected to face a minor resistance level at the weekly high of 1.0930 (August 22), which also appears reinforced by the provisional 100-day SMA. Further up comes the interim 55-day SMA at 1.0967 prior to the psychological 1.1000 barrier and the August top at 1.1064 (August 10). Once the latter is cleared, spot could challenge the weekly peak 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.

The resumption of the downward bias could motivate the pair to revisit the August low of 1.0765 (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.

Furthermore, sustained losses are likely in EUR/USD once the 200-day SMA (1.0810) is breached in a convincing fashion.

USD/CNH is still seen within the 7.2500-7.3300 range for the time being, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

• The index bounces off recent lows and regains 103.70.
• US yields attempt a mild rebound across the curve.
• Flash Q2 GDP Growth Rate, ADP report take centre stage.

The greenback manages to regain the smile and advances to the 103.70 region when tracked by the USD Index (DXY) on Wednesday.

USD Index looks bid ahead of data

The index gathers some traction and so far leaves behind two consecutive sessions of losses amidst some loss of momentum in the appetite for risk-linked assets on Wednesday.

Indeed, Tuesday’s data-driven sell-off in the dollar now appears mitigated and investors seem to be repositioning on the greenback against the backdrop of a tepid bounce in US yields across different timeframes and ahead of key data releases in the US calendar.

On the latter, the usual weekly Mortgage Applications by MBA are due in the first turn ahead of the ADP report for the month of August, another estimate of the GDP Growth Rate for the April-June period, advanced Goods Trade Balance and July Pending Home Sales.

What to look for around USD

The index picks up pace and regains the smile following the renewed pessimism in the first half of the week, which saw the dollar retreat from multi-week tops near 104.50 (August 25) to the vicinity of 103.60 on August 29.

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.

Running on the opposite side of the road, 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 have regain some traction as of late.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change, Flash Q2 Growth Rate, Advanced Goods Trade Balance, Pending Home Sales (Wednesday) – PCE, Core PCE, Personal Income, Personal Spending, Chicago PMI, Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending (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 gaining 0.19% at 103.68 and the breakout of 104.44 (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 downside, immediate support emerges at 103.07 (200-day SMA) followed by 102.34 (55-day SMA) and then 101.74 (monthly low August 4).

• AUD/USD trades lower on disappointing Australia’s inflation.
• Australian CPI declined to a 17-month low; investors expect no interest rate hike by the RBA.
• US Dollar (USD) weakened due to dovish sentiment surrounding the Fed policy decision.

AUD/USD retreats from a two-day winning streak, trading around 0.6460 at the time of writing during the European session on Wednesday. The pair is experiencing downward pressure due to the downbeat macroeconomic data from Australia released on early Wednesday.

Australia's inflation decreased to a 17-month low in July, a factor that could potentially lead the Reserve Bank of Australia (RBA) to decide on keeping interest rates unchanged during its upcoming policy meeting. As said, Australia’s Monthly Consumer Price Index (CPI) revealed that inflation declined to 4.9% (YoY) for July, lower than the expectations of 5.2% and from the previous reading of 5.4%. While the Building Permits (MoM) showed a fall of 8.1% for July compared to an expected fall of 0.8% and from the previous 7.7% decline.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against the six other major currencies, retraces from the previous two-day losses, currently trading higher around 103.70. US Treasury yields rebound from recent losses, providing support to the Greenback. However, the prevailing dovish sentiment regarding the US Federal Reserve's (Fed) policy stance is providing support in undermining the safe-haven US Dollar (USD).

Investors will closely watch the upcoming US economic data in order to obtain a clearer understanding of the economic trajectory of the United States (US). This emphasis has been prompted by Fed Chairman Jerome Powell’s comments during the Jackson Hole Symposium, underscoring that any forthcoming interest rate decision will be guided by data-driven analysis.

On Wednesday, the macroeconomic calendar features significant events, including the release of the US ADP Employment Change figures for August and the preliminary Gross Domestic Product Annualized data for the second quarter (Q2). These datasets will play a pivotal role in formulating strategies prior to initiating new positions on the AUD/USD pair.

• Pound Sterling aims for sustainability above 1.2600, supported by a risk-on mood.
• UK housing demand drops sharply due to rising mortgage rates.
• Investors hope that policy divergence between the Fed and BoE will vanish this month.

The Pound Sterling (GBP) is holding its ground on Wednesday as a higher risk appetite among market participants continues to improve the appeal for risk-sensitive assets. The GBP/USD pair remains well-supported as investors hope that the policy divergence between the Federal Reserve (Fed) and the Bank of England (BoE) will vanish this year. More interest rate hikes from the BoE are in the pipeline as the core Consumer Price Index (CPI) data remains sticky near its all-time peak.

In the battle against persistent inflation, the UK’s factory activities and its property sector have been major victims. British firms continue to operate at lower capacity due to a poor demand outlook, and higher mortgage rates have forced homebuyers to postpone their purchases. The BoE’s Broadbent warned that inflation will not fade as quickly as it emerged despite soft energy and fuel prices.

Daily Digest Market Movers: Pound Sterling capitalizes on upbeat market mood

• Pound Sterling gathers strength for a decisive break above the immediate resistance of 1.2650 amid an upbeat market mood.
• The asset secures an auction above 1.2600 as investors hope that the Fed-BoE policy divergence will vanish since the former is expected to keep interest rates steady.
• The BoE doesn’t have the comfort of pausing the policy-tightening spell in the current scenario as evidence that UK core inflation will loosen up is absent.
• UK core inflation is nominally lower at 6.9% from its all-time peak of 7.1% despite BoE raising interest rates to 5.25%.
• UK PM Rishi Sunak’s promise of halving inflation by year-end is at stake, which would keep the central bank on the policy-tightening path.
• The major catalyst behind persistent core inflation is the strong wage growth in the British economy. The UK’s jobless rate rose to 4.2% in July, but wage growth remained robust, which indicated that firms were heavily spending to retain talent.
• This week, BoE Deputy Governor Ben Broadbent said that inflation will not fade as quickly as it emerged despite soft energy and fuel prices. He warned that interest rates will remain higher for a longer period.
• BoE’s battle against stubborn inflation has come with plenty of consequences for the UK’s economic outlook. Repercussions of higher interest rates have widened to the property sector.
• UK property website Zoopla forecasted on Wednesday that new home purchases in 2023 are on course to decline by 21% to their lowest level since 2012 as homebuyers postpone their purchases due to higher mortgage rates, Reuters reported.
• An influential group of UK MPs stated that they must take a tougher stance on China over its severe human rights abuses and help Taiwan build its defenses to deter a potential attack from Beijing, reported by The Guardian.
• Major strength in the Pound Sterling on Wednesday came from bullish market sentiment, which was propelled by softer United States JOLTS Job Openings for July.
• US Bureau of Labor Statistics reported on Tuesday that employers invited applications for 8.827M vacancies vs. June’s reading of 9.165M. Market participants anticipated higher job openings at 9.465M.
• A significant drop in labor demand boosts hopes of ‘higher for longer’ interest rates by the Federal Reserve (Fed) and challenges expectations of further policy tightening this year.
• After labor demand data, investors shift focus to ADP’s Employment Change data for August, which estimates private payroll additions.
• The last four reports have shown numbers significantly above market consensus. This time, the market consensus is for an increase in US private payrolls of 195,000.
• Later this week, Nonfarm Payrolls (NFP) and ISM Manufacturing PMI will be keenly watched.

Technical Analysis: Pound Sterling strives for stabilization above 1.2600

Pound Sterling strives for a confident stabilization above the round-level resistance of 1.2600, capitalizing on bullish market sentiment. The Cable oscillates in the previous day’s range ahead of crucial US economic data, which will guide further direction. The broader trend is still weak as the 20 and 50-day Exponential Moving Averages (EMAs) have already delivered a bearish crossover.

 USD/JPY is now expected to navigate within the 144.50-147.20 range in the next few weeks, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

Open interest in natural gas futures markets reversed the previous daily drop and went up by nearly 12K contracts on Tuesday according to preliminary readings from CME Group. Volume, instead, shrank by around 41.6K contracts, partially setting aside the previous daily build.

Natural Gas faces the next up barrier at $3.00

Prices of natural gas extended the weekly uptrend on Tuesday. The move was on the back of increasing open interest and is indicative that extra gains appear in the pipeline for the commodity in the short-term horizon. That said, the next resistance emerges at the key $3.00 region per MMBtu.

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

The US Dollar holds its ground early Wednesday after suffering large losses against its rivals on Tuesday. The European Commission will release business and consumer sentiment data for the Euro area. Later in the session, Consumer Price Index (CPI) figures from Germany will be watched closely by market participants. The US economic docket will feature August ADP Employment Change, July Goods Trade Balance and Gross Domestic Product (GDP) data for the second quarter.

The US Dollar Index turned south and lost 0.5% on Tuesday after the US Bureau of Labor Statistics reported that the number of job openings on the last business day of July declined to 8.82 million from 9.16 million (revised from 9.58 million) in June. The benchmark 10-year US Treasury bond yield declined more than 2% after this report and further weighed on the USD. In the European morning on Wednesday, the USD Index clings to small daily gains slightly above 103.50 and the 10-year US yield stays in positive territory above 4.1%.

The data from Australia showed in the Asian session that the annual CPI rose 4.9% in July, down noticeably from the 5.4% increase recorded in June and below the market expectation of 5.2%. Following Tuesday's upsurge, AUD/USD lost its traction on soft inflation data. At the time of press, the pair was down 0.3% on the day at 0.6460.

After climbing to its highest level since November above 147.00 on Tuesday, USD/JPY made a sharp U-turn in the American session and closed the day in negative territory below 146.00. Bank of Japan (BoJ) board member Naoki Tamura said early Wednesday the timing of the exit from the easy policy must be not "too late but not too early," while refraining from commenting on exchange rates. The pair stays in positive territory near 146.50 in the European session.

EUR/USD gained more than 50 pips on Tuesday but lost its bullish momentum before testing 1.0900. The pair was last seen consolidating its weekly gains slightly above 1.0850.

GBP/USD closed the second straight day in positive territory on Tuesday as it benefited from USD weakness and improving risk mood. The pair holds steady above 1.2600 mid-week.

Gold price rose sharply on Tuesday and reached its highest level in three weeks near $1,940. With the 10-year US yield erasing some of its weekly gains on Wednesday, XAU/USD trades modestly lower on the day at around $1,935.

Bitcoin gathered bullish momentum and climbed above $27,000 on Tuesday before going into a consolidation phase at around $27,500. Ethereum gained nearly 5% on Tuesday and stabilized above $1,700. 

Breaking: Grayscale wins lawsuit against US SEC, Bitcoin price nears $28,000.

A more sustained advance appears likely once AUD/USD clears the 0.6500 level, according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

• NZD/USD loses momentum below the mid-0.5900 amid the cautious mood.
• New Zealand’s Building Permits for July fell 5.2% from an increase of 3.4% in the previous month.
• Market players await the US ADP private employment, US prelim GDP Q2 ahead of the US Nonfarm Payrolls.

The NZD/USD pair extends its downside after reaching 0.5977 during the early European trading hours on Wednesday. As of writing, the pair is trading around 0.5947, losing 0.41% on the day.

Markets turn to a cautious mood ahead of the key US economic data released, even though the US Dollar reversed from its recovery and drops below 103.60. That said, the Conference Board's (CB) Consumer Confidence Index dropped to 106.10 in August from 114.00 in July, missing the market consensus of 116.0. Meanwhile, the US Job Openings and Labor Turnover Survey (JOLTS) for July showed the lowest reading since March 2021 by decreasing to 8.827M versus 9.165M prior and against the 9.465M expected. The S&P/Case-Shiller Home Price Indices rose to -1.2% YoY versus -1.7% prior and -1.2% expected.

Federal Reserve (Fed) Chairman Jerome Powell remarked last week that the central bank will leave the door open for a potential additional rate hike, depending on the incoming data. The condition of the labor market may influence the USD's short-term direction. Investors will take cues from the US labor data due later this week, which could trigger volatility in the FX market.

On the Kiwi front, a Reserve Bank of New Zealand (RBNZ) policymaker stated that the central bank might cut the interest rate sooner than signaled if China experienced a more noticeable contraction than the RBNZ anticipates.

About the data, Statistics New Zealand showed that the total number of Building Permits for July fell 5.2% from an increase of 3.4% in the previous month. The figure came in below the market expectation of a 0.2% rise.

Furthermore, the headlines surrounding the US-China relationship remain in the spotlight. The exacerbating tension between the world’s two largest economies should dampen market optimism and cap the upside of the China-proxy Kiwi.

Later in the day, the US ADP private employment and estimate Q2 Gross Domestic Product (GDP) data will be released. The closely watched event this week will be the Nonfarm Payrolls (NFP) data on Friday. Traders will find trading opportunities around the NZD/USD pair.

• USD/MXN trades lower due to the dovish sentiment around Fed policy.
• US treasury yields recover from recent losses, supporting the US Dollar (USD).
• Investors anticipate less probability of interest rate hikes by the Fed.

USD/MXN snaps two-day winning streak, trading lower around 16.80 during the Asian session on Wednesday, possibly due to the dovish sentiment surrounding the monetary policy decision by the US Federal Reserve (Fed), which could be attributed to the United States (US) downbeat economic data on Tuesday.

US Consumer Confidence declined to 106.1 in August from 114.0 prior, compared to the expected 116.0. US JOLTS Job Openings reduced to 8.827 million in July against the previous 9.165 million. This contrasted with the expected rise to 9.465 million.

However, the USD/MXN pair experienced strength due to Mexico’s downbeat Gross Domestic Product (GDP) (YoY) for the second quarter on Tuesday. The report printed 3.6%, falling short of the expected to remain consistent at 3.7%. While, GDP (QoQ) declined to 0.8% from the previous 1.0%, against expectations of 0.9%.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against the six other major currencies, trades higher around 103.60. This upward movement could be attributed to the recovery in US Treasury yields after a decline of 2.77% in the previous two days. Currently, the yield on 10-year US trades at 4.14% by the press time.

According to the CME's FedWatch Tool, the current market assessment suggests an 11.5% probability of a rate hike in the upcoming meeting by the Federal Reserve. Investors project that the Fed is more inclined to postpone any rate increases until its meeting in September. This prevailing sentiment is contributing to a weakening of the safe-haven Greenback.

Investors will closely monitor the forthcoming US economic data to gain a more lucid understanding of the economic trajectory of the United States (US). This focus is spurred by Fed Chairman Jerome Powell’s remarks at the Jackson Hole Symposium, indicating that any future interest rate hikes will be determined based on data-driven analysis.

Wednesday’s top-tier macroeconomic docket includes the US ADP Employment Change for August and the preliminary Gross Domestic Product Annualized for the second quarter (Q2). These datasets will help in shaping strategies before making fresh bets on the USD/MXN pair.

• WTI crude oil extends the previous day’s recover to refresh multi-day top despite corrective bounce in US Dollar.
• Expectations of more energy demand due to adverse weather conditions, hurricane Idalia join China stimulus hopes to favor bulls.
• API Weekly Crude Oil Stocks Change marked the biggest draw since early September 2016.
• Risk catalysts, US data about inflation, employment and growth eyed for clear directions.

WTI crude oil buyers cheer a faster depletion in the inventories, as well as hopes of more energy demand, by ignoring the mildly bid US Dollar amid early Wednesday. That said, the black gold reached a weekly high near $81.40 by the press time.

API Weekly Crude Oil Stock marked the biggest slump since September 2016 while posting a fall of 11.486 million barrels (M) into the inventories versus the previous week’s decline of -2.418M. The same suggests faster exhaustion of the Oil stockpiles and challenges to refill the reserve tanks, which in turn signals more energy demand and fuels the WTI prices.

Elsewhere, fears of hurricane Idalia becoming ‘extremely dangerous’ Category 4 before storm surges hit Florida Gulf Coast, per The Guardian, flags geopolitical concerns about the energy benchmark and propel the WTI prices. Additionally, fears of heatwave in Europe and some parts of the US also increase hopes of witnessing higher energy demand.

Furthermore, the chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favor the Oil buyers.

However, China recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China flags jitters about the relations among the world’s top two economies and challenges the oil buyers.

On the same line, the International Monetary Fund’s (IMF) readiness to be more cautious while allocating Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand and check the Oil buyers.

Amid these plays, the US Dollar Index (DXY) clings to mild gains around 103.60 while tracing a corrective bounce in the Treasury bond yields. However, the stock futures lack clear directions after the equities rallied heavily the previous day on downbeat US data.

Moving on, WTI buyers need validation from the weekly US inventory data from the Energy Information Administration (EIA), as well as clues about the Federal Reserve’s (Fed) policy pivot. Should the scheduled statistics suggest higher inventory depletion and chances of a soft landing in the US, the Oil price may rise further.

Technical analysis

WTI crude oil buyers cheer an upside break of the 21-DMA, around $80.80 at the latest, to aim for the previous weekly high of near $81.70.

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

- EUR/USD: EUR amounts        

• 1.0775 1.4b
• 1.0800 1.4b
• 1.0865 414m
• 1.0875 1b
• 1.0900 13b
• 1.0990 590m

- GBP/USD: GBP amounts     

• 1.2600 316m

- USD/JPY: USD amounts                     

• 145.50 2.8b
• 146.30 710m
• 147.50 815m

- USD/CHF: USD amounts        

• 0.8850 807m

- AUD/USD: AUD amounts

• 0.6500 604m
• 0.6535 602m

- USD/CAD: USD amounts       

• 1.3440 492m
• 1.3560 1.2b

- NZD/USD: NZD amounts

• 0.6150 603m

- EUR/GBP: EUR amounts        

• 0.8625 301m
• 0.8725 747m

CME Group’s flash data for crude oil futures markets noted traders increased their open interest positions for the fourth session in a row on Tuesday, this time by around 8.6K contracts. In the same line, volume resumed the uptrend and rose by around 128.5K contracts.

WTI: Focus remains on the 2023 peak near $85.00

Tuesday’s rebound in prices of WTI came in tandem with rising open interest and volume, leaving the door open to further gains in the very near term and targeting the YTD high of $84.85 per barrel (August 10).

Analysts at Australia and New Zealand Banking Group (ANZ) express their view on a batch of Australian economic data released earlier this Wednesday.

Key quotes

“The monthly Consumer Price Index (CPI) indicator for July 2023 was below the market and our expectation of 4.9% y/y, which is an encouraging development ahead of Q3 CPI. While electricity prices jumped in July (6.0% m/m including rebate impacts) and rents continued to accelerate, the annual increase in overall housing costs was broadly stable (7.3% y/y in July vs 7.4% in June).“

“Total construction work done rose 0.4% q/q, relatively close to our expectation of a 0.2% q/q increase.”

“In short, growth in construction work done waned in the June quarter, albeit after a stronger March quarter result.” 

In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, GBP/USD could face some range bound trade above the 1.2685 level.

Key Quotes

• Gold consolidates its recent gain above $1,930 amid the USD weakness. 
• Gold prices may benefit from the renewed tension between the US and China.
• Market anticipated the odds for additional rate hikes by the Federal Reserve (Fed). 
• Traders will closely watch the US ADP private employment, US Gross Domestic Product (GDP) data due on Wednesday.

Gold Price (XAU/USD) struggles to gain around $1,935 during the early European session on Wednesday. The weaker US dollar and a sharp drop in US Treasury yields drags the Greenback lower across the board. Meanwhile, the US Dollar Index (DXY) edges lower to 103.55 while the 10-year yield fell from 4.20% to 4.14%, near the lowest level in two weeks.

The exacerbating tension between the US and China might benefit gold, the traditional safe-haven. US Commerce Secretary Gina Raimondo emphasized US concerns regarding difficulties operating American companies and national security issues during the visit to Beijing for four days. Furthermore, the US and China also discussed China's recent restrictions on gallium and germanium exports during a meeting. Market players will monitor the development surrounding the US-Sino relationship for fresh impetus. 

Furthermore, the odds of additional rate hikes by the Federal Reserve (Fed) might cap the upside for gold. It’s worth noting that gold is sensitive to rising interest rates as they raise the opportunity cost of holding non-yielding bullion. That said, Federal Reserve (Fed) Chairman Jerome Powell stated at the Jackson Hole Symposium that he would open the door for more rate hikes. However, it would depend on incoming data. According to the CME’s FedWatch Tool, markets are pricing in a 16% chance of a rate hike in the next meeting versus 20% prior. This, in turn, exerts some selling pressure on the USD. 

On the other hand, the announcement of China’s stimulus measure lifts investors' confidence and boosts the gold prices. On the weekend, the Chinese authorities said that they would reduce the 0.1% duty on stock trading to stimulate the capital market and strengthen investor confidence. Additionally, the China Securities Regulatory Commission (CSRC) is implementing measures to bolster market confidence in listed companies after the Chinese equities index slumped to nine-month lows. The positive development surrounding the stimulus plan from the Chinese government could limit gold’s downside as China is the major gold consumer in the world.

Gold traders will monitor the US ADP private employment and estimate of Q2 Gross Domestic Product (GDP) data due on Wednesday. Attention will turn to the Chinese Caixin Manufacturing PMI for August and highly-anticipated US Nonfarm Payrolls on Friday. The US economy is expected to create 170K jobs for August. These events could trigger volatility in the FX market and give a clear direction in gold prices. 

Considering advanced prints from CME Group for gold futures markets, open interest increased by nearly 10K contracts after three consecutive daily pullbacks on Tuesday. Volume followed suit and went up by around 61.5K contracts, keeping the erratic performance well in place for yet another session.

Gold now targets the $1955 area

Gold prices extended the upward bias on Tuesday, surpassing the key $1930 amidst rising open interest and volume. That said, extra gains seem likely in the very near term and with interim target at the 100-day SMA, today at $1955 per troy ounce.

• USD/CHF struggles to defend recovery from weekly low, prints the first daily gain in three.
• Market consolidates amid cautious mood before Swiss sentiment numbers, US employment, inflation cues.
• Downbeat US data bolsters expectations favoring end of Fed rate hikes but confirmations awaited.

USD/CHF clings to mild gains around 0.8790 as it consolidates the biggest daily loss since late July, marked the previous day, amid the early hours of Wednesday’s European session.

It’s worth noting that the US Dollar’s positioning for top-tier data and the market’s reassessment of the previous dovish bias about the Federal Reserve (Fed) allowed the Swiss Franc (CHF) pair to print the first daily gains in three.

That said, the US Dollar Index (DXY) clings to mild gains after the previous day’s US consumer confidence, employment and housing data flagged fears of the Fed’s policy pivot, especially after Fed Chair Jerome Powell highlighted the data-dependency for future moves to defend the hawkish bias. The same drowned the Greenback and the US Treasury bond yields.

Elsewhere, the mixed concerns about the US-China ties and indecision about the softer landing also fuel the USD/CHF rebound. China recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China. Previously, chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favored the market’s optimism. It should be noted that the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand.

Amid these plays, the US S&P 500 Futures print mild gains and prod the riskier assets, which in turn propel the USD/CHF prices. That said, the US 10-year Treasury bond yields seesaw around 4.15% after refreshing the weekly low the previous day.

Looking ahead, US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) data will be closely observed to confirm the Fed’s policy pivot concerns. Should the scheduled data confirm the need for exiting the restrictive monetary policies, the USD/CHF may witness further downside.

Technical analysis

A three-month-old previous support line puts a floor under the USD/CHF prices near 0.8765, which in turn joins upbeat oscillators to suggest the pair’s recovery towards the 100-DMA resistance of around 0.8885.

Further decline in EUR/USD seems to be losing traction, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

• GBP/JPY picks up bids to reverse the previous day’s retreat from weekly top.
• Three-week-old ascending support line puts a floor under the prices.
• 50-SMA, multiple hurdles since mid-August restrict immediate upside.
• Corrective bounce in yields adds strength to the GBP/JPY rebound but mixed sentiment prods bulls.

GBP/JPY renews intraday high to 184.60 as it reverses the previous day’s pullback from the weekly top heading into Wednesday’s London open. In doing so, the cross-currency pair recovers from a three-week-old rising support line while tracing the Treasury bond yields.

However, sluggish oscillators and multiple technical hurdles toward the north prods the GBP/JPY bulls.

That said, the 50-SMA hurdle of around 184.85 guards immediate upside. However, major attention is on the two-week-long horizontal resistance area surrounding 185.40-50.

Following that, a run-up towards the yearly high marked earlier in the month around 186.80 can’t be ruled out.

On the flip side, a clear break of the stated support line, close to 184.15, will seek validation from the 184.00 round figure before poking the early-month swing high of around 183.25.

Should the quote remain bearish past 183.25, the 61.8% Fibonacci retracement of July 28 to August 22 upside, near 180.30, and the 180.00 round figure, will lure the GBP/JPY sellers.

It’s worth noting that the likely cautious optimism and mixed concerns about the UK may allow the GBP/JPY to grind higher.

GBP/JPY: Four-hour chart

Trend: Limited recovery expected

“The timing of exit from the easy policy must be not too late but not too early,”  Bank of Japan (BoJ) board member Naoki Tamura said on Wednesday.

Additional comments

Market reaction

USD/JPY is paring gains on the above comments. The pais is retreating from intraday highs of 146.26, currently trading at 146.19, still up 0.22% on the day.

• USD/CAD picks up bids to pare the biggest daily loss in a month.
• Oil price cheers surprise inventory draw, expectations of China stimulus.
• US Dollar dropped heavily after downbeat data renewed Fed policy concerns before the latest consolidation.
• Clues about US employment, inflation and growth numbers eyed for clear directions of the Loonie pair.

USD/CAD consolidates the biggest daily loss in a month while posting mild gains around 1.3575 ahead of Wednesday’s European session. In doing so, the Loonie pair prints the first daily run-up, so far, despite upbeat prices of Canada’s main export item, namely the WTI crude oil. The reason could be linked to the US Dollar’s recovery ahead of the top-tier US data.

That said, the WTI crude oil renews weekly top around $81.40 amid expectations of witnessing mores stimulus from China, as well as higher demand due to the adverse weather conditions in the West. Additionally, a heavy draw of the US inventories, per the American Petroleum Institute’s (API) weekly Crude Oil Stocks Change data, also underpin the black gold’s run-up.

Elsewhere, the US Dollar Index (DXY) rises 0.20% to around 103.65 by the press time, reversing the previous day’s losses, the biggest in six weeks, amid market’s preparations for the key data/events. Also likely to have triggered the DXY rebound are the sluggish Treasury bond yields and doubts about the US-China ties.

It’s worth noting that the previous day’s US consumer confidence, employment and housing data flagged fears of the Fed’s policy pivot, especially after Fed Chair Jerome Powell highlighted the data-dependency for future moves to defend the hawkish bias. The same drowned the Greenback and the US Treasury bond yields.

However, the cautious mood ahead of today’s US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) data trigger the US Dollar’s corrective bounce. Furthermore, the US Treasury bond yields remain sidelined at a two-week low after reversing from the multi-year high in the last few days.

Additionally helping the USD/CAD buyers are the mixed  concerns about the US-China ties. China recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China. Previously, chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favored the market’s optimism. It should be noted that the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand.

Amid these plays, the US stock futures print mild gains and prod the riskier assets, which in turn propel the USD/CAD prices.

Technical analysis

USD/CAD recovery remains elusive unless providing a daily closing beyond a four-month-old resistance line, around 1.3605 by the press time.

• EUR/GBP oscillates in a tight trading band around 0.8604 on Wednesday.
• The softer Eurozone data might convince the European Central Bank (ECB) to pause interest rates in its next meeting. 
• Markets anticipate the odds of a rate hike by the Bank of England (BoE) in its September.

The EUR/GBP cross remains confined in the 0.8597-0.8607 range during the early European session on Wednesday. Market players await the release of the preliminary German Consumer Price Index for August. The cross currently trades around 0.8604, unchanged for the day. 

The weaker-than-expected economic data from the Eurozone might convince the European Central Bank (ECB) to pause interest rates at its next meeting on September 14. That said, the September’s German Gfk Consumer Confidence Survey reported on Tuesday came in at -25.5 versus -24.6 prior and worse than the expectation of -24.3. Additionally, the Eurozone money supply fell for the first time since 2010 as private sector lending slowed and deposits fell.

ECB policymakers were split between an interest rate halt and further tightening. This week's publication of Eurozone inflation figures and the ECB's updated economic projections might provide signals about future monetary policy and give a clear direction to the EUR/GBP cross. 

On the Pound Sterling front, the British Retail Consortium for August dropped to 6.9% year on year from 7.6% in July. According to the World Interest Rates Probabilities (WIRP) tool, markets are pricing in a 75% odds of a 25 basis point (bps) rate hike by the Bank of England (BoE) in September. This, in turn, might limit the downside of the Pound Sterling and act as a headwind for EUR/GBP.

Looking ahead, traders will monitor the preliminary German Consumer Price Index (CPI) for August due on Wednesday. The annual and monthly CPI figures are expected to rise 6% and 0.3%, respectively. Also, the Eurozone CPI, Retail Sales, and the ECB Meeting Minutes will be released later this week. Traders will take cues and find trading opportunities around the EUR/GBP cross. 

• EUR/USD pares the biggest daily gains in seven weeks with mild losses.
• Portrays consolidation ahead of German inflation clues, US employment, growth data.
• 100-SMA, 1.5-month-long descending resistance line together challenge Euro buyers.
• Pullback remains elusive beyond ascending trend line from late May.

EUR/USD reverses from weekly top while posting the first daily loss in three around 1.0860 heading into Wednesday’s European session. In doing so, the Euro pair marks the trader’s positioning for today’s top-tier German and the US data while taking a U-turn from a convergence of the 100-SMA and a downward-sloping resistance line from mid-July.

It’s worth noting that the RSI (14) line’s retreat joins the likely easing of the German inflation clues to weigh on the EUR/USD prices.

However, the pullback needs validation from the US data and a three-week-old rising support line, close to 1.0770 to convince the Euro bears. Following that, a slump toward May’s low of around 1.0635 can’t be ruled out.

In a case where the EUR/USD bears keep the reins past 1.0635, the yearly bottom marked in March around 1.0515 will be in the spotlight.

Alternatively, an upside break of the 1.0890 resistance confluence comprising the 100-SMA and a downward-sloping resistance line from July 18 could aim for the previous weekly high of around 1.0930 and the 50% Fibonacci retracement of May-July upside, near 1.0955.

Should the bears remain in control after 1.0955, the 200-SMA level of around 1.0980 and the 1.1000 psychological magnet will be in the spotlight.

EUR/USD: Four-hour chart

Trend: Pullback expected

• AUD/USD holds above the 50- and 100-hour EMAs with an upward slope.
• The Relative Strength Index (RSI) stands in bullish territory above 50.
• The immediate resistance level is seen at 0.6485; 0.6445 acts as the initial support level.

The AUD/USD pair recovers some lost ground near 0.6470 after retracing to the 0.6450 low during the early European session on Wednesday. The Australian Dollar (AUD) is under pressure after the monthly Consumer Price Index (CPI) revealed that inflation dropped to a 17-month low in July. This number might convince the Reserve Bank of Australia (RBA) to keep interest rates unchanged in the next policy meeting.

Technically, the AUD/USD pair trades above the 50- and 100-hour Exponential Moving Averages (EMAs) with an upward slope on the one-hour chart, indicating that the path of least resistance for the pair is to the upside.

It’s worth noting that the Relative Strength Index (RSI) stands in bullish territory above 50, challenging the pair’s immediate upside for the time being.

The immediate resistance level for AUD/USD is seen near a high of August 29 at 0.6485. Further north, the 0.6500-0.6505 regions appear a tough nut to crack for Aussie bears. The mentioned level represents the confluence of a psychological round mark, the upper boundary of Bollinger Band, and high of August 14. Any meaningful follow-through buying above the latter could pave the way to 0.6522 (high of August 15) and 0.6570 (high of August 9).

On the downside, the 50-hour EMA at 0.6445 acts as the initial support level for the pair. The additional downside filter to watch is seen at 0.6439 (100-hour EMA). Any intraday pullback below the latter would expose the next contention level at 0.6410 (the lower limit of the Bollinger Band). A decisive breach of the latter will see the next stop at 0.6380 (low of August 25) and finally at 0.6365 (low of August 17).
 

AUD/USD one-hour chart

• Market sentiment remains cautiously optimistic as traders await more clues to confirm Fed policy pivot, US-China optimism fades.
• MSCI’s index of Asia-Pacific shares ex Japan, S&P 500 Futures seesaw around two-week high.
• US Treasury bond yields lack momentum after refreshing weekly low.
• More clues to confirm Fed bias, global economic recovery eyed for clear directions.

The risk appetite remains firmer even as momentum traders take a breather during early Wednesday.

That said, the market sentiment improved the previous day after downbeat US data fuelled concerns about the Federal Reserve’s (Fed) nearness to policy pivot. Also previously favoring the risk-on mood were headlines surrounding China.

Alternatively, the fresh fears of the US-China tension and the market’s lack of belief in the Fed’s rate cut seem to recently prod the optimists.

As a result, the MSCI’s index of Asia-Pacific shares outside Japan and the S&P 500 Futures seesaw around the intraday high while the US Treasury bond yields seesaw at the weekly low. That said, the US Dollar Index portrays a corrective bounce while prices of the Gold and the WTI crude oil edge higher.

China recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China. Previously, chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favored the market’s optimism. It should be noted that the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand.

Elsewhere, the previous day’s disappointing US consumer confidence, employment and housing data flagged fears of the Fed’s policy pivot, especially after Fed Chair Jerome Powell highlighted the data-dependency for future moves to defend the hawkish bias.

It should be noted that Australia’s ASX 200 leads the gainers after witnessing downbeat Aussie inflation data while China stocks dribble. Further, Japan’s Nikkei pays little heed to fresh challenges to the Bank of Japan’s (BoJ) ultra-easy monetary policy.

Given the lack of clarity, traders will seek more clues to confirm the Fed’s policy pivot in 2023 and the stabilization of the US-China ties, as well as more stimulus from Beijing, for clear direction. Talking about the data, the US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) will direct intraday moves ahead of the US Core PCE Price Index and Nonfarm Payrolls (NFP).

Also read: Forex Today: US Dollar tumbles as markets get ready for key data

• USD/JPY trades higher around 146.20, retracing from recent losses.
• The monthly high could be the immediate resistance, following November’s high.
• 23.6% Fibo appears to be the key support aligned to 21-day EMA.

USD/JPY recovers from the previous day’s losses, trading higher around 146.20 at the time of writing during the Asian session on Wednesday. The pair registered losses due to the fall in the US Dollar (USD), which could be attributed to downbeat US Treasury yields and disappointing US economic data on Tuesday.

The pair could face the immediate barrier around the monthly high at 147.37 marked on Tuesday. A firm break above the latter could inspire the USD/JPY buyers to explore the area around the 148.00 psychological level, following November’s high at 148.82 level.

The 14-day Relative Strength Index (RSI) remains above 50, which suggests a bullish bias of the USD/JPY buyers. The Moving Average Convergence Divergence (MACD) line stays above the centerline and coincides with the signal line, which suggests that recent momentum is stronger.

On the flip side, the pair could meet the key support around the 14-day Exponential Moving Average (EMA) at 145.48, followed by the 23.6% Fibonacci retracement at 144.98 lined up with the 21-day EMA at 144.92.

A break below that level could put pressure on the USD/JPY pair to navigate around 38.2% Fibonacci retracement at 143.50.

In the short term, the underlying trend remains to be bullish as long as the USD/JPY stays above the 50-day EMA.

USD/JPY: Daily Chart

• EUR/SEK recovers some lost ground around 11.82, up 0.03% on the day.
• The German Gfk Consumer Confidence Survey came in at -25.5 versus -24.6 prior.
• The less hawkish stance of the Riksbank compared to the ECB might limit the upside of the Swedish Krona.
• Investors will monitor the German CPI, Eurozone Retail Sales, ECB Meeting Minutes due later this week.

The EUR/SEK cross posts a modest gain around 11.82 after bouncing off the weekly low of 11.79 during the Asian trading hours on Wednesday. Market participants await August’s preliminary German Consumer Price Index for fresh impetus. The annual and monthly CPI figures are expected to rise 6% and 0.3%, respectively.

The German Gfk Consumer Confidence Survey for September reported on Tuesday came in at -25.5 versus -24.6 prior and worse than the expectation of -24.3. Earlier, the Eurozone money supply fell for the first time since 2010 as private sector lending slowed and deposits fell. The softer economic data might convince the European Central Bank (ECB) to pause interest rates at its next meeting on September 14.

Nevertheless, policymakers were divided between a pause and additional tightening. The release of Eurozone inflation data and the ECB's new economic projections this week could offer hints about future monetary policy.

On the other hand, the Riksbank’s policymakers voted unanimously to increase the policy rate by 25 basis points (bps) to 3.75% on June 29. The Swedish central bank suggested that they might raise interest rates at least once more this year. However, the Riksbank is not acting forcefully enough against inflation in comparison to the ECB. This, in turn, might limit the upside of the Swedish Krona and act as a tailwind for EUR/SEK.

Market players will keep an eye on the preliminary German and Eurozone Consumer Price Index (CPI) for August, Eurozone Retail Sales, and the ECB Meeting Minutes. Traders will take cues and find trading opportunities around the EUR/SEK cross. 

• GBP/USD trades lower due to the improvement in US bond yields.
• US Dollar (USD) treads water to recover two-day losses.
• Investors await US economic data, seeking further clues on the Fed’s policy decision.

GBP/USD trades lower around 1.2630 on the back of a recovery in the US Dollar (USD), which could be attributed to the improvement in US Treasury yields snapping a two-day losing streak. The US Dollar Index (DXY), which measures the performance of the Greenback against the six other major currencies, trades higher around 103.60 at the time of writing during the Asian session.

The US Dollar (USD) is treading waters to retrace from the two-day losses. US Treasury yields fell by 2.04% on Tuesday, which exerted downward pressure on the buck. Currently, the yield on the 10-year US bond trades at 4.13%. Moreover, the disappointing economic data from the United States (US) on Tuesday further solidified the dovish sentiment regarding the Fed’s policy stance. This has contributed to an increase in downward pressure on the GBP/USD pair.

As said, US Consumer Confidence (Aug) fell to 106.1 from 114.0 prior, falling short of the expected 116.0. US JOLTS Job Openings showed a reduction in July, reporting 8.827 million against the previous 9.165 million. This contrasted with the expected rise to 9.465 million.

Investors anticipate a 25 basis points (bps) interest rate hike at the upcoming September’s monetary policy meeting by the Bank of England (BoE). However, there appears to be a sense of caution among investors, as the prospect of additional tightening of monetary policy could potentially have a negative impact on the economic outlook of the United Kingdom (UK).

On the other hand, the CME's FedWatch Tool currently indicates that the market is pricing an 11.5% likelihood of a rate hike during the upcoming meeting by the US Federal Reserve (Fed). Investors are foreseeing that the Fed will likely delay any rate hikes until its September meeting. This prevailing sentiment is leading to a downward pressure on the value of the Greenback.

Furthermore, at the Jackson Hole Symposium, US Federal Reserve (Fed) Chairman Jerome Powell emphasized that the Fed's decision regarding the next interest rate hike will be data-driven. Consequently, traders of the GBP/USD pair are currently in a state of anticipation as they await the release of upcoming US economic data.

With a lack of significant data from the UK during the week, investors’ focus has shifted towards gaining a clearer insight into the economic outlook of the United States (US). These upcoming datasets include the US ADP Employment Change for August and the preliminary Gross Domestic Product Annualized for the second quarter (Q2), both of which are scheduled to be released later in the North American trading session.

• USD/INR sticks to mild gains while reversing the previous day’s pullback from weekly top.
• US Dollar consolidates the biggest daily loss in six weeks amid mixed concerns about China, Fed.
• Firmer Oil price also puts a floor under USD/INR price.
• Cautious mood ahead of top-tier US, India data allows Rupee bulls to take breather.

USD/INR prints mild gains around 82.60 as it consolidates the biggest daily fall in a week amid early Wednesday’s market consolidation. That said, the Indian Rupee (INR) pair refreshed the weekly top the previous day before a slump in the US Dollar recalled the bears.

It’s worth noting that the disappointing US data and China-linked optimism weighed on the Greenback price before the latest US Dollar rebound amid the market’s mixed feelings about China and cautious mood before the top-tier data from the US and India.

Talking about China, the Dragon Nation recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China. Previously, chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favored the market’s optimism.

It should be noted that the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand.

Talking about the US data, the Conference Board's (CB) Consumer Confidence Index gained major attention as it slumped to 106.10 for August from a downwardly revised 114.00 prior (from 117.0), versus 116.0 market forecasts. That said, the US JOLTS Job Openings slumped to the lowest since March 2021, to 8.827M for July versus 9.465M expected and 9.165M prior (revised from 9.582). Additionally, the US Housing Price Index eased to 0.3% MoM for June from 0.7% prior and 0.2% while the S&P/Case-Shiller Home Price Indices improved to -1.2% YoY from -1.7% previous readings and -1.3% market forecasts.

The US statistics became more detrimental for the Greenback as fears of the Fed’s policy pivot in 2023 rallied on Chairman Jerome Powell’s Jackson Hole speech that highlighted the data dependency for future moves. With this, the CME’s FedWatch Tool signaled a 16% chance of a rate hike versus 20% prior. The same propelled Wall Street benchmarks and weighed on the US Treasury bond yields, as well as the US Dollar, before the latest rebound in the US Dollar Index and stabilization of the yields.

Apart from the US Dollar’s rebound, the firmer Crude Oil price also weighs on the Rupee due to India’s reliance on energy imports. That said, the WTI crude oil prods a one-week high near $81.30 by the press time.

Moving on, the US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) will direct intraday moves of the USD/INR pair as markets seek more clues to confirm the dovish bias about the Fed.

Following that, India’s Q2 GDP, US Core PCE Price Index and Nonfarm Payrolls (NFP) will be crucial to determine near-term USD/INR moves.

Technical analysis

A convergence of the 50-DMA and a one-month-old rising support line, close to 82.45 at the latest, appears a tough nut to crack the USD/INR bears.

• NZD/USD pares the biggest daily gains in six weeks within fortnight-old descending trend channel.
• Disappointing prints of New Zealand Building Permits for July recall Kiwi bears after two-day absence.
• Previous resistance line from late July lures Kiwi sellers but bullish MACD signals keep buyers hopeful.
• Key SMAs, bearish chart formation challenge bulls ahead of top-tier US data.

NZD/USD takes offers to refresh the intraday low near 0.5945 during early Wednesday morning in Europe. In doing so, the Kiwi pair justifies the downbeat New Zealand (NZ) housing data, as well as portrays the market’s cautious mood ahead of the top-tier US data.

New Zealand Building Permits for July marked a notable slump of 5.2% MoM versus 0.2% expected and 3.4% prior (revised from 3.5%).

It’s worth noting that the US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) are on the calendar and prod the sentiment, as well as the NZD/USD price. With this, the US Dollar Index (DXY) also licks its wounds around 103.60 after falling the most in six weeks the previous day.

Technically, a retreat from the top-line of a two-week-old bearish channel, as well as a downside break of the 100-SMA, favors the NZD/USD sellers to aim for the previous resistance line stretched from late July, close to 0.5920 at the latest.

However, the bullish MACD signals and the bottom line of the stated channel, near 0.5890 by the press time, challenge further downside of the Kiwi pair past 0.5920.

Meanwhile, the 100-SMA and the channel’s top-line, respectively near 0.5965 and 0.5980, guard immediate recovery of the NZD/USD pair.

Following that, a run-up towards the 200-SMA hurdle of around 0.6080 can’t be ruled out.

NZD/USD: Four-hour chart

Trend: Limited downside expected

• Gold Price remains sidelined at three-week high, prods two-day uptrend.
• Mixed concerns about China, cautious mood ahead of top-tier US data and sluggish yields test XAU/USD bulls.
• Clear upside break of 200-SMA, dovish Fed bias keep Gold buyers hopeful.
• Softer US employment, inflation concerns will allow the Gold Price to challenge monthly high.

Gold Price (XAU/USD) lacks upside momentum at the highest level in three weeks, making around to $1,937-38 of late, as traders seek more clues to confirm the dovish bias about the US Federal Reserve (Fed) that gained momentum after the previous day’s downbeat US data. Also challenging the XAU/USD bulls could be the mixed concerns about the US-China ties and the sluggish US Treasury bond yields.

The cautious mood ahead of the US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) seem to prod the Gold buyers at the multi-day high. That said, the previous day’s disappointing US consumer confidence, employment and housing data flagged fears of the Fed’s policy pivot, especially after Fed Chair Jerome Powell highlighted the data-dependency for future moves to defend the hawkish bias.

Elsewhere, China’s dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China prods the Gold buyers. On the same line could be the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation.

Amid these plays, S&P 500 Futures struggle to extend the three-day uptrend while the US Dollar Index (DXY) remains sidelined around 103.55 after falling the most in six weeks. That said, the US Treasury bond yields remain sidelined at a two-week low.

Looking forward, the US data and China headlines will be crucial for clear directions as XAU/USD bulls appear running out of steam.

Gold Price Technical Analysis

Gold Price struggles to justify the clear upside break of a monthly horizontal resistance, now support, as well as the 200-SMA, amid the overbought RSI (14) line.

Also challenging the XAU/USD bulls is the 50% Fibonacci retracement of its July-August fall, around $1,836.

In a case where the Gold Price remains firmer past the 200-SMA and the previously stated resistance-turned-support area, as well as ignore the overbought RSI, the XAU/USD bulls can challenge the 61.8% Fibonacci ratio of around $1,948.

However, a downward-sloping resistance line from July 20, close to $1,958 at the latest, will challenge the Gold buyers afterward.

Meanwhile, a clear downside break of the aforementioned key moving average and the support zone, respectively near $1,933 and $1,932–30, could recall the Gold sellers.

Even so, an ascending trend line from August 31, near $1,817 by the press time, can challenge the XAU/USD bears before giving them control.

Overall, the Gold Price remains on the bull’s radar unless it breaks the $1,817 support.

Gold Price: Four-hour chart

Trend: Further upside expected

• EUR/USD trades lower ahead of economic data releases from both economies.
• US Dollar (USD) weakened due to disappointing US economic data on Tuesday.
• Investors anticipate less likelihood of an interest rate hike in September’s meeting by the Fed.

EUR/USD snaps a two-day winning streak, trading around 1.0870 during the Asian session on Wednesday. However, the EUR/USD pair strengthened due to the retreating US Dollar (USD), prompted by the downbeat economic data from the United States (US) on Tuesday.

US Consumer Confidence (Aug) declined to 106.1 from the previous reading of 114.0, falling short of the projected 116.0. Furthermore, US JOLTS Job Openings experienced a reduction in July, recording 8.827 million compared to the previous 9.165 million. This contrasted with the expected rise to 9.465 million.

Market participants anticipate that the US Federal Reserve (Fed) will postpone rate hikes until its September meeting. As per the CME's FedWatch Tool, the market is reflecting an 11.5% probability of a rate hike occurring during the September meeting. This sentiment is consequently causing downward pressure on the value of the buck.

Additionally, during the Jackson Hole Symposium, US Federal Reserve (Fed) Chairman Jerome Powell conveyed that the Fed's forthcoming choice regarding the next interest rate hike will hinge on economic data.

As a result, the EUR/USD traders await the upcoming releases of economic data from the US and Eurozone, seeking a clearer understanding of inflation scenarios in both economies. These datasets include US ADP Employment Change (Aug) and preliminary Gross Domestic Product Annualized (Q2) are set to be released later in the North American session. On the Eurozone’s docket, the Consumer Sentiment, German preliminary Consumer Price Index (CPI) and Harmonized Index of Consumer Prices will be eyed.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against the six other major currencies, trades higher around 103.60 at the time of writing. The index is treading waters to retrace from the two-day losses. The downbeat US Treasury yields are exerting downward pressure on the Greenback. The yield on the 10-year US bond declined by 2.04% on Tuesday, currently trading at 4.12%.

• Natural Gas Price edges higher at two-week top, prints five-day winning streak.
• US Dollar consolidates the biggest daily fall in six weeks amid market’s preparations for US data.
• Hopes of more energy demand due to adverse weather conditions and China stimulus hopes favor XNG/USD buyers.
• Risk catalysts, US data for clear directions as bulls keep the reins.

Natural Gas Price (XNG/USD) remains on the front foot for the fourth consecutive day, up 0.80% intraday near $2.80 by the press time of early Wednesday in Europe. In doing so, the energy instrument struggles to justify the recent corrective bounce in the US Dollar Index (DXY) after it posted the biggest daily loss in six weeks.

Also likely to have favored the XNG/USD buyers could be the previous day’s upbeat US data that drowned the Greenback amid dovish bias about the Federal Reserve (Fed). It’s worth noting that the chatters about increasing energy demand in the US due to the adverse weather conditions and China’s readiness for more stimulus also keep the Natural Gas buyers hopeful.

The US data flagged fears of the Fed’s policy pivot in 2023 as Chairman Jerome Powell’s Jackson Hole speech highlighted the data dependency for future moves. With this, the CME’s FedWatch Tool signaled a 16% chance of a rate hike versus 20% prior. The same propelled Wall Street benchmarks and weighed on the US Treasury bond yields, as well as the US Dollar.

That said, the US Conference Board's (CB) Consumer Confidence Index gained major attention as it slumped to 106.10 for August from a downwardly revised 114.00 prior (from 117.0), versus 116.0 market forecasts. That said, the US JOLTS Job Openings slumped to the lowest since March 2021, to 8.827M for July versus 9.465M expected and 9.165M prior (revised from 9.582). Additionally, the US Housing Price Index eased to 0.3% MoM for June from 0.7% prior and 0.2% while the S&P/Case-Shiller Home Price Indices improved to -1.2% YoY from -1.7% previous readings and -1.3% market forecasts.

It should be noted that China’s dislike to the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China prod the XNG/USD buyers. On the same line could be the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation.

While portraying the mood, S&P 500 Futures struggle to extend the three-day uptrend while the US Dollar Index (DXY) remains sidelined around 103.55 after falling the most in six weeks. That said, the US Treasury bond yields remain sidelined at a two-week low.

Moving on, US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) are the key to watch for clear directions of the XNG/USD. Also, headlines about China, tropical storm Idalia and weather conditions in the US are extra catalysts for Natural Gas price.

Also read: US ADP Jobs Preview: A weakening trend US private

Technical analysis

Sustained trading beyond the 21-DMA resistance-turned-support around $2.75 keeps the Natural Gas Price positive for the bulls. Additionally challenging the XNG/USD bears is an upward-sloping support line from early June, close to $2.65 by the press time.

• WTI prices gain momentum due to a decline in the US Dollar.
• The market lowered their expectation of the Federal Reserve (Fed) rate hikes in its September meeting.
• Hurricane Idali might impact petroleum distribution and fuel consumption.
• Oil traders will focus on EIA Crude Oil Stocks Change, US ADP private employment, US Q2 GDP growth data.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $81.18 mark so far on Wednesday. WTI prices gain momentum amid the weakening of the Greenback after the release of US economic data. However, investors will closely monitor the impact of Hurricane Idalia, which will probably hit Florida this week.

Following the downbeat US data on Tuesday, The market anticipated that the Federal Reserve (Fed) will push back rate hikes in its September meeting. That said, Fed Chairman Jerome Powell said at the Jackson Hole Symposium that the central bank opens the door for a potential additional rate hike depending on incoming data. This, in turn, may limit the downside for WTI prices.

During this time, a major Hurricane, Hurricane Idali was predicted to reach level 3 with winds of at least 111 mph (179 kph) before making landfall on Florida's Gulf Coast early Wednesday. Hurricane Idali might impact petroleum distribution and fuel consumption ahead of the Labour Day vacation next week.

In addition, concerns about China's economic woes could impact WTI demand, as China is the world's largest oil importer. The Chinese Caixin Manufacturing PMI for August will be closely monitored by market participants. The weaker-than-anticipated data may exert additional selling pressure on WTI.

About the data, the American Petroleum Institute (API) reported on Wednesday that US crude oil inventories in the week ending of August 25 dropped by about 11.486M barrels compared to the previous week’s -2.418M barrels.

Meanwhile, higher oil prices have been supported by tighter supply caused by Saudi Arabia's ongoing voluntary production curbs. Saudi Arabia is expected to extend a voluntary oil cut of 1 million barrels per day for the third month in a row into October.

Looking ahead, oil traders will focus on EIA Crude Oil Stocks Change for the week ending August 25. The US ADP private employment and estimate of Q2 Gross Domestic Product (GDP) data will be due on Wednesday, followed by the US inflation data on Thursday. Attention will turn to the highly-anticipated Nonfarm Payrolls on Friday. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI price.

• AUD/JPY takes offers to refresh intraday low, snaps three-day uptrend while reversing from two-week high.
• Australia Monthly CPI, Building Permits for July push back RBA hawks.
• Sluggish oscillators join U-turn from key technical hurdles and hawkish BoJ bias to tease sellers.

AUD/JPY takes a U-turn from a two-week high while declining to 94.15 on the downbeat Australian inflation data amid early Wednesday. In doing so, the cross-currency pair also justifies disappointing housing market numbers from the Pacific major while reversing from the 50-DMA and a downward-sloping resistance line from June 19.

Australia’s Monthly Consumer Price Index (CPI) flashed the 4.9% YoY figures for July versus 5.2% expected and 5.4% prior while the Building Permits slumps with -8.1% figure for the said month compared to -0.8% market forecasts and -7.7% figures reported in June.

Given the sluggish oscillators and the recent hawkish concerns about the Bank of Japan (BoJ), the AUD/JPY may extend the latest pullback towards the 94.00 round figure. However, the one-week-old support line near 93.90 may prod the bears afterward.

In a case where the AUD/JPY pair breaks the immediate support, it can easily slump to the 100-DMA level of around 93.25.

Meanwhile, the aforementioned resistance line and the 50-DMA, respectively near 94.50 and 94.70, guard the immediate recovery of the AUD/JPY pair.

However, the pair sellers remain hopeful unless they witness a clear upside break of the previous support line stretched from late March, close to 95.80 at the latest.

AUD/JPY: Daily chart

Trend: Further downside expected

Bank of Japan (BoJ) board member Naoki Tamura is offering his view on the economic and inflation outlook during his appearance on Wednesday.

Key quotes

Market reaction

USD/JPY is testing highs on the dovish remarks from the BoJ official, currently trading at 146.10, up 0.15% on the day.

• AUD/USD takes offers to refresh intraday low, snaps two-day winning streak on downbeat Australia data.
• Australia inflation, housing numbers disappoint Aussie bulls, challenge incoming RBA Governor’s hawkish bias.
• China concerns, consolidation for US data also weigh on Aussie pair.

AUD/USD slides nearly 25 pips to 0.6450 on the downbeat Australia inflation and housing numbers early Wednesday. Adding strength to the pullback moves could be the fresh challenges about the US-China ties and the market’s consolidation of the previous day’s moves against the US Dollar, especially when the top-tier employment, growth and inflation clues are on the calendar.

That said, Australia’s Monthly Consumer Price Index (CPI) flashed the 4.9% YoY figures for July versus 5.2% expected and 5.4% prior while the Building Permits slumps with -8.1% figure for the said month compared to -0.8% market forecasts and -7.7% figures reported in June.

With this, the Aussie statistics challenge the previous day’s hawkish comments from the Reserve Bank of Australia (RBA) Governor-Designate Michelle Bullock. The policymaker conveyed too high inflation as the priority as Governor before flagging hopes of raising rates on Tuesday. However, RBA’s Bullock also showed readings to watch data carefully for further decision-making.

Elsewhere, concerns about China and fears of no easy money from the International Monetary Fund (IMF) also seemed to have prodded the AUD/USD bulls. Recently, China’s embassy in the US defended its cybersecurity review on the US chipmaker Micron by citing national security concerns, especially after US Commerce Secretary Gina Raimondo complained about the hardships for the US firms in China.

Earlier in the day, the IMF showed readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation.

Against this backdrop, S&P 500 Futures struggle to extend the three-day uptrend while the US Dollar Index (DXY) remains sidelined around 103.55 after falling the most in six weeks. That said, the US Treasury bond yields remain sidelined at a two-week low.

It should be noted that the downbeat prints of consumer sentiment and employment signals from the US drowned the US Dollar and the yields the previous day and fueled the AUD/USD price towards refreshing the weekly top.

Technical analysis

Failure to cross the 21-DMA hurdle surrounding 0.6480 directs the AUD/USD pair towards the six-week-old previous resistance line surrounding 0.6430.

According to the latest data published by the Australian Bureau of Statistics (ABS) on Wednesday, Australia’s monthly Consumer Price Index (CPI) rose 4.9% in the year to July 2023, as against the annual increase of 5.4% seen in June.

The market had expected an increase of 5.2% in the reported period.

Key takeaways

“The most significant price rises were Housing (+7.3%) and Food and non-alcoholic beverages (+5.6%).”

“Offsetting the rise was Automotive fuel (-7.6%).”

A closely watched measure of prices excluding volatile items and holiday travel slowed to 5.8%, from 6.1%.

Market reaction

The selling pressure in the AUD/USD pair gathered steam on cooling Australian inflation, which douses expectations of any more rate hikes by the Reserve Bank of Australia (RBA). The pair is losing 0.42% on the day to trade at 0.6450, as of writing.

15-minutes chart

Why Australian inflation data matters to traders?

The quarterly Consumer Price Index (CPI) published by the Australian Bureau of Statistics (ABS) has a significant impact on the market and the AUD valuation. The gauge is closely watched by the Reserve Bank of Australia (RBA), in order to achieve its inflation mandate, which has major monetary policy implications. Rising consumer prices tend to be AUD bullish, as the RBA could hike interest rates to maintain its inflation target. The data is released nearly 25 days after the quarter ends.

• USD/MXN remains sidelined after reversing from weekly top.
• Doji candlestick below the key DMA confluence lures Mexican Peso buyers.
• Downbeat oscillators, four-month-old bearish channel keeps USD/MXN sellers hopeful.

USD/MXN struggles for clear directions after reversing from a one-week high the previous day, making rounds to 16.80 during Wednesday’s Asian session. In doing so, the Mexican Peso (MXN) pair justifies the previous day’s Doji candlestick to lure the pair sellers, especially amid the bearish MACD signals and the downbeat RSI (14) line, not oversold.

It’s worth noting, however, that the cautious mood ahead of the top-tier US data prods the momentum traders of late. Among the scheduled US statistics, ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) are the key to watch.

Also read: USD/MXN climbs amid soft Mexican GDP, mixed US economic data

Not only Wednesday’s Doji and downbeat oscialltors, namely the MACD and the RSI line, but the quote’s sustained trading below the convergence of the 21-DMA and 50-DMA, around the 17.00 round figure by the press time, also favors the USD/MXN bears.

As a result, a horizontal area around 16.70, comprising multiple lows marked since the mid-July, lures the Mexican Peso (MXN) buyers.

Following that, the multi-month low marked in July near 16.62 and the bottom line of a four-month-old bearish channel, close to 16.40 by the press time, will be in the spotlight.

On the contrary, a daily closing beyond the aforementioned DMA confluence surrounding the 17.00 threshold becomes necessary for the USD/MXN bull’s return.

Even so, the bearish channel’s top line can challenge the Mexican Peso (MXN) sellers around 17.15 before giving them control.

USD/MXN: Daily chart

Trend: Bearish

• USD/CAD experienced losses due to downbeat US economic data.
• Investors seek more signals on monetary policy as Fed's Powell mentioned that the next interest rate hike will be data-driven.
• The rise in Crude oil prices exerted downward pressure on the USD/CAD pair.

USD/CAD retraces from the previous day’s losses, trading around 1.3560 during the Asian session on Wednesday. The pair experienced a downward pressure due to the pullback in the US Dollar (USD), following the downbeat United States (US) economic data released on Tuesday.

As said, Consumer Confidence for August declined to 106.1 from the previous 114.0, lower than the projected reading of 116.0. Additionally, the JOLTS Job Openings displayed a reduction in July, reported 8.827M, swinging from the previous 9.165M. The index was expected to rise to 9.465M.

US Federal Reserve (Fed) Chairman Jerome Powell’s statement at the Jackson Hole Symposium indicated that the Fed's decision on the next interest rate hike will be driven by economic data. Market participants are now awaiting more information to better understand the timing and magnitude of potential interest rate adjustments.

The US Dollar Index (DXY) hovers around 103.50 at the time of writing. The retreating US Treasury yields contributed to weakening the Greenback, which measures the performance of the US Dollar (USD) against the six other major currencies.

Additionally, the rise in Crude oil prices, contributed support to the Canadian Dollar (CAD) against the buck as Canada is one of the largest Oil exporters to the US. Western Texas Intermediate (WTI) trades near $81.35 by the press time.

Investors will like to monitor the upcoming data releases, seeking fresh impetus on the economic outlook of both countries. US Core Personal Consumption Expenditures (PCE) Index, weekly Jobless Claims, and Nonfarm Payrolls will be in focus during the week. On Canada’s docket, Gross Domestic Product (GDP) is due to be released on Friday.

People’s Bank of China (PBoC) set the USD/CNY central rate at 7.1816 on Wednesday, versus the previous fix of 7.1851 and market expectations of 7.2773. It's worth noting that the USD/CNY closed near 7.2796 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 382 billion Yuan via 7-day reverse repos (RRs) at 1.80% vs. prior 1.80%.

However, with the 301 billion Yuan of RRs maturing today, there prevails a net injection of around 82 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.

• USD/JPY appears dicey after reversing from yearly high.
• Fresh challenges to sentiment from China, cautious mood ahead of top-tier US data prod Yen pair sellers.
• Hawkish BoJ concerns contrasted with downbeat US data, Treasury bond yields to lure bears the previous day.
• More clues for Fed policy pivot in 2023, BoJ’s exit from restrictive measures eyed for clear directions.

USD/JPY licks its wounds after posting the biggest daily loss in a week, defending the previous day’s the pullback from the yearly top ahead of the US data about inflation, employment and the growth conditions. With this, the Yen pair retreats from intraday high to around 145.90 amid early hours of Wednesday’s Tokyo open.

US 10-year Treasury bond yields seesaw at the lowest level in 13 days while making rounds to 4.12% after refreshing the multi-day low on Tuesday. That said, the downbeat US data contrasted with the hawkish Bank of Japan (BoJ) bias to drag the USD/JPY pair from the highest level since late 2022. However, the cautious mood before the US statistics and challenges to sentiment prods the Yen pair traders of late.

Among the key fallouts of the US statistics, the US Conference Board's (CB) Consumer Confidence Index gained major attention as it slumped to 106.10 for August from a downwardly revised 114.00 prior (from 117.0), versus 116.0 market forecasts. That said, the US JOLTS Job Openings slumped to the lowest since March 2021, to 8.827M for July versus 9.465M expected and 9.165M prior (revised from 9.582). Additionally, the US Housing Price Index eased to 0.3% MoM for June from 0.7% prior and 0.2% while the S&P/Case-Shiller Home Price Indices improved to -1.2% YoY from -1.7% previous readings and -1.3% market forecasts.

The US data flagged fears of the Fed’s policy pivot in 2023 as Chairman Jerome Powell’s Jackson Hole speech highlighted the data dependency for future moves. With this, the CME’s FedWatch Tool signaled a 16% chance of a rate hike versus 20% prior. The same propelled Wall Street benchmarks and weighed on the US Treasury bond yields, as well as the US Dollar.

At home, Japan’s Unemployment Rate marked a surprise increase to 2.7% for July versus 2.5% expected and prior while the Jobs / Applicants Ratio eased to 1.29 for the said month versus 1.30 anticipated and previous readings.

Further, Japanese Finance Minister Shunichi Suzuki also said on Tuesday that the government “will consider economic measures to be adopted after September.”

However, the Japanese government recently released its annual report suggesting the inflection point for the inflation conditions in Japan after 25 years of efforts to overcome the deflation. That said, the report concluded that the government must work closely with the Bank of Japan (BoJ) to achieve sustained wage growth. Hence, the hawkish bias about the BoJ gained momentum and joined the downbeat yields,as well as the US Dollar, to initially weigh on the USD/JPY.

Recently, US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China prod the USD/JPY bears. On the same line could be the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation.

Amid these plays, S&P 500 Futures struggle to extend the three-day uptrend while the US Dollar Index (DXY) remains sidelined around 103.55 after falling the most in six weeks.

Looking forward, US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) are the key to watch.

Technical analysis

Despite the latest pullback from a two-month-old ascending resistance line, close to 146.90 by the press time, the USD/JPY pair remains on the front foot unless breaking a thee-week-long rising support line of near 145.55.

• USD/CHF slumped from 0.8858 to 0.8770 amid the USD weakness.
• Market anticipated that the Fed would push back rate hikes in the next meeting.
• The renewed trade tension between US-China could benefit the safe-haven Swiss Franc.
• Investors will focus on the Swiss KOF Leading Indicator, US ADP private employment and estimate of Q2 GDP growth.

The USD/CHF pair consolidates its recent loss below the 0.8800 barrier during the early Asian session on Wednesday. The Greenback faces some follow-through selling due to the downbeat US data and a decline in bond yields. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, hovers around 103.60 after reaching the bottom of 103.36. At the time of writing, the USD/CHF is trading at 0.8790, gaining 0.07%.

The US dollar is weakening broadly following softer US economic data. On Tuesday, the US Job Openings and Labor Turnover Survey (JOLTS) for July showed the lowest reading since March 2021 by decreasing to 8.827M versus 9.165M prior and against the 9.465M expected. Meanwhile, the Conference Board's (CB) Consumer Confidence Index for August fell to 106.10 from 114.00 in July, below the market expectation of 116.0. The S&P/Case-Shiller Home Price Indices improved to -1.2% YoY versus -1.7% prior and -1.2% estimated.

That said, Federal Reserve (Fed) Chairman Jerome Powell left the door open for a potential additional rate hike. However, it would depend on incoming data. The condition of the labor market may influence the USD's short-term direction. Market participants are awaiting the release of US employment data later this week, which could spark market volatility. The market anticipated that the Fed will push back rate hikes until the September meeting. According to the CME’s FedWatch Tool, markets are pricing in a 16% chance of a rate hike in the next meeting versus 20% prior. This, in turn, exerts some selling pressure on the USD.

On the other hand, US Commerce Secretary Gina Raimondo emphasized US concerns regarding difficulties operating American companies and national security issues during the visit to Beijing for four days. Furthermore, the US and China also discussed China's recent restrictions on gallium and germanium exports during a meeting. The exacerbating tension between the world’s two largest economies should dampen market optimism. This, in turn, might benefit the traditional safe-haven Swiss Franc and act as a headwind for the USD/CHF pair.

Moving on, market players will focus on the Swiss KOF Leading Indicator for August, the ZEW Survey, and the Consumer Price Index YoY. Across the pond, the US ADP private employment and estimate of Q2 Gross Domestic Product (GDP) data will be due on Wednesday, followed by the US inflation data on Thursday and the highly-anticipated Nonfarm Payrolls on Friday. These figures might trigger the volatility in the market and traders will find the trading opportunities around the USD/CHF pair.

Early Wednesday in Asia, China’s embassy in the US defended its cybersecurity review on the US chipmaker Micron by citing the national security concerns, especially after US Commerce Secretary Gina Raimondo complained about the hardships for the US firms in China.

China Embassy, however, also ruled out speculations of targeting particular countries or regions, as well as turned down chatters about Beijing’s exit of certain technologies or products from any specific country.

“China is working to ease market access further, treat foreign companies in the same manner as domestic firms,” said the Chinese embassy in Washington while adding that China will only open its doors even wider to the outside world.

Market reaction

The news prods the market’s optimism and allows the AUD/USD bulls to take a breather at the weekly high, as well as checks the US Dollar Index (DXY) bears.

Also read: US Commerce Secretary Raimondo: Companies complain China has become risky to do business

Overview

Australia’s monthly release of the Consumer Price Index (CPI) for July, scheduled for publishing on early Wednesday around 01:30 GMT, appears the crucial data for the AUD/USD pair traders to watch. Also increasing the importance of the time could be the recently hawkish comments from the Reserve Bank of Australia (RBA) Governor-Designate Michelle Bullock.

It’s worth noting that markets expect CPI to ease to 5.2% YoY from 5.4% prior. Additionally, Australia Building Permits for July and the second quarter (Q2) Construction Work Done also become important to determine near-term AUD/USD moves.

Given the downbeat forecasts, as well as the pre-data anxiety, the AUD/USD may witness a pullback in the prices.

Ahead of the release, Analysts at ANZ expect the CPI to rise by 5.5% y/y in July versus market expectations of 5.2% y/y.

On the same line, FXStreet’s Valeria Bednarik notes, "Inflation can surprise amid a change in the calculation, while the RBA can follow suit with its new Governor."

How could AUD/USD react to the news?

AUD/USD seesaws at the weekly high around 0.6480 after posting the stellar run-up on downbeat US data. That said, the hawkish comments from Reserve Bank of Australia (RBA) Governor-Designate Michelle Bullock also favor the Aussie pair buyers as markets brace for the key Australia inflation data, as well as the US numbers about inflation, employment and the growth.

That said, the market players’ downbeat expectations contrast with the previously positive signals for Aussie inflation keep the AUD/USD traders on a dicey floor. Hence, surprisingly upbeat Aussie inflation data won’t hesitate to bolster the hawkish RBA bets and propel the AUD/USD price. However, the run-up will also depend upon how well the scheduled US data fuel the hawkish Fed bias.

As a result, upbeat data may only provide a knee-jerk reaction to the AUD/USD prices while defending the overall bearish trend unless marking a heavy positive surprise, which is less expected.

Technically, A daily closing beyond the six-week-old falling resistance line, around 0.6430 by the press time, keeps the AUD/USD pair buyers hopeful.

Key notes

AUD/USD bulls cheer softer US data to approach 0.6500, Australia inflation eyed 

AUD/USD Forecast: Aussie looking at 0.6500 while above 0.6420

Australian Inflation Preview: Surprises in Monthly Consumer Price Index to rock the Aussie

About Aussie Consumer Price Index

The quarterly Consumer Price Index (CPI) published by the Australian Bureau of Statistics (ABS) has a significant impact on the market and the AUD valuation. The gauge is closely watched by the Reserve Bank of Australia (RBA), in order to achieve its inflation mandate, which has major monetary policy implications. Rising consumer prices tend to be AUD bullish, as the RBA could hike interest rates to maintain its inflation target. The data is released nearly 25 days after the quarter ends.

• Silver Price struggles with the key upside hurdle at monthly high.
• Descending resistance line from early May challenges XAG/USD bulls amid nearly overbought RSI (14) line.
• Clear upside break of four-month-old horizontal resistance area, bullish MACD signals favor Silver buyers.
• 100-DMA, key Fibonacci retracement levels can prod XAG/USD pullback.

Silver Price (XAG/USD) remains sidelined near $24.70–75 during early Wednesday as bulls jostle with the key upside hurdle ahead of the US data.

It’s worth noting that the nearly overbought RSI joins a 16-week-old falling resistance line surrounding $24.80 to challenge the XAG/USD buyers.

However, the bullish MACD signals a daily closing beyond the four-month-long horizontal resistance zone, now immediate support around $24.50–40, which will test the Silver sellers.

Following that, the 100-DMA support of around $23.95 will precede the 50% and 61.8% Fibonacci retracements of March–May upside, respectively near $23.00 and $22.30, to offer a bumpy ride to the XAG/USD bears.

Meanwhile, a daily closing beyond the aforementioned resistance line of around $24.80 needs support from the US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE).

Should the softer US data join the Silver Price upside beyond the immediate resistance line, the bulls can challenge the previous monthly high of around $25.30 ahead of targeting the yearly high marked in May at around $26.15.

Silver Price: Daily chart

Trend: Pullback expected