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Japan’s National Consumer Price Index (CPI) climbed 2.8% YoY in July, compared to the previous reading of 2.8%, according to the latest data released by the Japan Statistics Bureau on Friday,

Further details unveil that the National CPI ex Fresh food arrived at 2.7% YoY in July versus 2.6% prior. The figure was in line with the market consensus of 2.7%. 

CPI ex Fresh Food, Energy increased 1.9% YoY in July, compared to the previous reading of 2.2% rise.

Market reaction to Japan’s National CPI data

Following the Japan’s CPI inflation data, the USD/JPY pair is down 0.12% on the day at 146.10.

• USD/CAD weakens near 1.3605 in Wednesday’s early Asian session. 
• US S&P Global PMI was stronger than expected in August's flash estimate. 
• Markets expect the BoC to cut the rate by 25 bps for the remaining monetary meetings of the year.

The USD/CAD pair trades softer around 1.3605 during the early Asian session on Friday. However, the cautious mode in the market might lift the US Dollar (USD) ahead of the key event. The US Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Symposium will take centre stage on Friday. 

Data released by S&P Global on Thursday showed that the US Composite Purchasing Managers Index (PMI) fell slightly to 54.1 in August's flash estimate, its lowest level in four months, from 54.3 in July. This figure came in better than the expectation of 53.5. Meanwhile, Manufacturing PMI dropped to 48 in the same period from 49.6, while the Services PMI rose to 55.2 from 55. The Greenback edges higher in an immediate reaction to the encouraging US PMI data.  

The July FOMC Minutes released on Wednesday showed that the “vast majority” of FOMC participants supported the case to lower the interest rate at the upcoming September meeting if data met expectations. Investors have priced in a 100 basis points (bps) of a Fed total rate cut by year-end, but those odds will likely change after Powell’s speech. Any additional dovish comments from Fed officials might continue to undermine the USD against the Loonie. 

On the Loonie front, the recent Canadian July inflation data has triggered the bets that the Bank of Canada (BoC) would set for its third interest rate cut in a row come September. Money markets are now expecting rate cuts of 25 bps for the remaining monetary meetings of the year. This, in turn, might weigh on the Canadian Dollar (CAD) and help limit USD/CAD’s losses. 

New Zealand’s Retail Sales, a measure of the country’s consumer spending, fell 1.2% QoQ in the second quarter (Q2) from the previous reading of a 0.5% increase, according to the official data published by Statistics New Zealand on Friday. The figure came in worse than market expectations of 1.0% decline.

Market reaction to New Zealand’s Retail Sales

At the time of writing, NZD/USD is trading 0.26% higher on the day at 0.6140.

• GBP/USD managed to eke out a fresh 13-month high before falling back.
• Cable ended Thursday where it started, trading on the north side of 1.3000.
• UK PMI figures improved across the board, but mixed US PMIs spark risk aversion.

GBP/USD tipped into another fresh 13-month peak on Thursday, climbing to 1.3130 before broader market sentiment took a turn for the worse, bolstering the Greenback. Cable was dragged back to the day’s opening bids around 1.3090 after US Purchasing Managers Index (PMI). figures came in lopsided.

Forex Today: Investors look at Jackson Hole and rate cut bets

Friday will see all eyes turned to Federal Reserve (Fed) Chairman Jerome Powell who is slated to speak at the Jackson Hole Economic Symposium. Markets are hoping that the Fed head will introduce firmer guidance on how likely the Fed is to cut in September, as well as for how much. 

Market participants continue to pine for a September cut, but Thursday’s PMI data sparked a pullback from a recent upswing into bets that the Fed would cut 50 bps on September 18. Rate markets have pulled back to a healthier overall expectation of a single quarter-point cut in September, pricing in around 75% odds of a 25 bps rate trim.

UK PMI figures broadly bumped to a higher-than-expected print in August, with the Composite, Manufacturing, and Services PMI components all printing above forecasts and rising from their previous figures. UK Services activity rose to 53.3 from the previous 52.5, vaulting over the forecast 52.8 and rising to the indicator’s highest level since April.

US Manufacturing PMI figures tumbled back to 48.0 in August, well below the forecast steady print of 49.6. The US Services PMI unexpectedly tick upwards to 55.2 from 55.0 compared to the forecast decline to 48.0. Despite the upswing in Services PMI numbers, underlying employment figures continue to show a shortening in the US labor market, adding to concerns that were mostly ignored when the US Bureau of Labor Statistics retroactively wiped over 800K jobs from March’s Nonfarm Payrolls (NFP) print this week.

GBP/USD price forecast

Cable has snapped a five-day win streak, but bidding pressure in GBP/USD is still poised for a breach into multi-year highs, provided buyers can maintain pressure long enough to keep prices climbing beyond 2023’s July peak of 1.3142. Odds favor the buyers as GBP/USD has closed in the green for all but one of the last ten consecutive trading days.

GBP/USD daily chart

• NZD/JPY mildly rose on Thursday, trading at 89.70.
• The RSI is showing a rising tendency, indicating potential buying pressure, still below 50.
• The MACD continues to print flat green bars, suggesting a neutral trend.

The NZD/JPY currency pair is trading sideways within a neutral consolidation. Technical indicators display contrasting signals, with the Relative Strength Index (RSI) hinting at buying pressure and the Moving Average Convergence Divergence (MACD) showcasing a neutral trend.

The RSI, a measure of momentum, has been rising lately and is currently at 47, near the neutral territory. This suggests that buying pressure may be building, signaling a potential shift in market sentiment. However, the MACD, continues to show flat green bars, indicating that the upward momentum is not yet strong enough to trigger a trend reversal.

The pair has been consolidating within a range defined by the 89.50 support and 90.00 resistance levels. Volume has been relatively low, indicating a lack of conviction in the recent price movements. A break above 90.00 could signal a potential bullish trend reversal, pushing the pair up to 91.00 and 91.50, while a break below 89.50 could lead to further declines towards 86.00 and possibly 84.50.

NZD/JPY daily chart

• NZD/USD failed to extend its gains and consolidated in a narrow range around 0.6140.
• The RSI has fallen back to 62, while the MACD is now showing decreasing green bars, indicating that the bullish momentum is slowing down.
• A break below 0.6130 could lead to a further decline towards 0.6100.

In Thursday's session, the NZD/USD declined by 0.30% to 0.6140, failing to sustain its gains as the bulls took a breather. The pair is facing a neutral technical outlook with the Relative Strength Index (RSI) declining and the Moving Average Convergence Divergence (MACD) printing decreasing green bars.

On the daily chart, the RSI has fallen back to 62, indicating a neutral market sentiment with moderate buying pressure. The decreasing green bars in the MACD suggest weakening bullish momentum, supporting the view of a potential consolidation or reversal. The volume has been decreasing over the past few sessions, suggesting that the current consolidation is likely to continue.

NZD/USD daily chart

The NZD/USD pair is facing immediate resistance at 0.6170. A consolidation above this level could open the door for a further rally to retest the 0.6200 zone. On the downside, immediate support lies in the range of 0.6130 and 0.6150. A break below 0.6130 could lead to a further decline towards 0.6100.

• EUR/USD falls as robust US Treasury yields bolster the dollar, despite Fed signals of potential September rate cuts.
• Mixed US data: Rising jobless claims and PMI results show service growth but worsening manufacturing contraction.
• ECB's Kazaks suggests possible rate cuts with a cautious, restrictive policy approach.

The EUR/USD is set to finish Thursday’s session with losses of over 0.30% after the Greenback was bolstered by high US Treasury yields, even though Fed officials support a rate cut at the upcoming meeting in September. At the time of writing, the major clings around the 1.1100 figure for the third straight day.

EUR/USD hovers around 1.1100 for the third straight day, pressured by higher US Treasury yields

Wall Street ended the session with losses ahead of Fed Chair Jerome Powell's speech at Jackson Hole, due tomorrow at around 14:00 GMT. The Boston and Philadelphia Fed Presidents Susan Collins and Patrick Harker are ready to ease policy, with the former adding that the labor market remains healthy. At the same time, the latter said the Fed must lower rates in a “methodical” way.

Data-wise, US Initial Jobless Claims for the week ending August 17, were higher than the 230K expected, jumped by 232K, and exceeded the previous reading. Regarding business activity, S&P Global PMIs for August were mixed, with the Services expanding above estimates, while Manufacturing PMI contracted deeper, hinting at a more profound economic slowdown.

Across the pond, Eurozone Flash PMIs were mixed, yet the attention was on European Central Bank (ECB) ECB Martins Kazaks, who crossed the wires on Bloomberg. He said he’s open to discussing a rate cut in September yet suggests a gradual approach. He added that policy would remain restrictive despite lowering rates twice and hinted that if inflation goes sideways, they could still cut rates.

Ahead of the day, EUR/USD traders will eye the release of France Business Confidence data. On the US front, Fed Chair Jerome Powell's speech and housing data.

EUR/USD Price Forecast: Technical outlook

From a technical standpoint, the EUR/USD formed a ‘quasi bearish harami’ two-candle bearish chart pattern, yet sellers failed to push the exchange rate below 1.1100, which would’ve paved the way for further downside.

Momentum is still bullish, yet with the Relative Strength Index (RSI) exiting from overbought conditions, a EUR/USD drop below 1.11000 is possible.

In that outcome, the first support would be the August 14 high at 1.1047, followed by a test of the 1.1000 mark. On the other hand, if the pair clings above 1.1100, look for a re-test of the year-to-date (YTD) high of 1.1174, before challenging 1.1200.

• AUD/USD experienced a drop, adjusting to 0.6950, because of a USD recovery.
• Strong Australian PMIs might limit the pair's downside.
• The persistent hawkish views of the RBA keep backing the Aussie versus its peers.

On Thursday, the AUD/USD is seeing a moderate decline, retracing some of the gains after the approximately 2% rally from the last sessions. The narrative of monetary policy divergence between the Federal Reserve (Fed), contemplating a less assertive approach toward interest rates, and the steadfast position of the Reserve Bank of Australia (RBA) preserves the push on the pair, putting the Aussie ahead of the Greenback. However, the USD staged a recovery on Thursday ahead of Friday’s speech from Jerome Powell at the Jackson Hole Symposium.

In spite of a mixed Australian economic outlook, underlined by strong August PMIs, and the RBA's hawkish stance ascribed to high inflation, markets are anticipating a minimal 25 basis points of easing for 2024, upholding a solid stand for the Aussie.

Daily digest market movers: Aussie's rally slackens despite strong PMIs, policy divergences to limit the losses

• Softening US labor market data and soft S&P PMIs suggest that the Fed may follow a less assertive footing, leading to a potential depreciation of the USD.
• In contrast, preliminary August PMIs from Australia exhibit a stout picture of the economy.
• Manufacturing rose to 48.7 in contrast to 47.5 in July, Services scaled to 52.2 versus 50.4 in July, and the composite climbed to 51.4 in comparison to 49.9 in July. This development corroborates the RBA's hawkish policy disposition.
• Despite promising Australian data, the path of the pair will continue to be guided by incoming data from both countries.
• In the meantime, markets are extremely confident about a September cut by the Fed in September.

AUD/USD technical outlook: AUD/USD upsurge prevails with lower but firm momentum

Technical analysis suggests that the AUD/USD pair has persisted in its upward trajectory over the sessions, with a significant volume increase reinforcing a positive outlook. However, the price action suggests a consolidation of those gains.

The Relative Strength Index (RSI), which showcases market momentum, has risen slightly from previous sessions. Currently, at 59, the RSI suggests a slightly bullish sentiment and ongoing bullish pressure beneath the overbought level of 70, which was hit earlier in the week. Furthermore, the Moving Average Convergence Divergence (MACD) indicator aligns with this bullish tone with steady green bars.

Indeed, the AUD/USD pair appears to have consolidated above the 0.6700 support level, which now serves as a significant area for the pair. The immediate critical resistance comes in around the recent high of 0.6760-0.6800.

• USD/JPY gains momentum but struggles to clear Wednesday’s high of 146.90, keeping the pair range-bound.
• A break above 146.92 could lead to resistance at 147.00 and the August 15 high of 149.39, with 150.00 as a key target.
• If sellers push the pair below 144.45, the downtrend may continue, with support at 141.69.

The USD/JPY strengthened late during Thursday’s North American session, following choppy price action on Wednesday that saw the pair hover around 145.20. The push higher in US Treasury bond yields boosted the pair, which gains over 0.66% or 95 pips and trades at 146.24.

USD/JPY Price Forecast: Technical outlook

After printing a long-legged doji, the USD/JPY aims higher yet is shy of clearing Wednesday’s high of 146.90, keeping the pair range bound. Momentum favors sellers, with the Relative Strength Index (RSI) standing bearish. However, buyers are gathering momentum as the RSI aims up.

 For a bullish continuation, the USD/JPY needs to crack the Tenkan-Sen at 146.92. Once cleared, the next resistance would be 147.00, followed by the latest cycle high reached on August 15 at 149.39. If those levels are broken, buyers could re-test the 150.00 figure.

On the other hand, the ongoing downtrend could resume once sellers drag prices below the August 21 low of 144.45. In that outcome, the USD/JPY could dive toward the August 5 swing low of 141.69.

USD/JPY Price Action – Daily Chart

• The Canadian Dollar broadly recovered on Thursday, but lost ground against the Greenback.
• Canada saw a cooling in employment insurance claimants.
• US PMI misfire sends the US Dollar broadly higher.

The Canadian Dollar (CAD) broadly recovered its posture against most of its major currency peers, but a market-wide pivot back into the US Dollar sent USD/CAD bids higher in the back half of the trading week. The pair has snapped a recent winning run, sparked by a shudder through overall market sentiment.

Canada saw a pullback in Employment Insurance Beneficiaries Change figures in June, helping to ease the CAD higher for the day. However, a misprint in US Purchasing Managers Index (PMI) figures sent the Greenback higher across the board, putting a lid on Canadian Dollar gains on Thursday.

Daily digest market movers

• Canadian Employment Insurance Beneficiaries Change rose 1.3% MoM in June, down from the previous month’s 1.9% upswing in unemployment benefits claimants.
• US Manufacturing PMI figures contracted to 48.0 in August, below the expected steady hold at 49.6.
• The US Services PMI component ticked higher to 55.2 from 55.0, beating the forecast decline to 48.0, but an overall decline in reported employment figures in the PMI reports still threw a spanner in risk sentiment on Thursday.
• Markets still expect action from the Federal Reserve (Fed) in September, with rate markets pricing in 100% odds of at least some sort of cut on September 18.
• Bets of an initial double cut of 50 bps to kick off a rate cutting cycle have eased to less than 25% after Thursday’s PMI misfire, down from nearly 70% over a week ago.

Canadian Dollar price forecast

A market-wide recovery in Greenback bids has snapped a winning streak for the Canadian Dollar (CAD), pricing in a bullish candle in the USD/CAD pair for the first time in a week. Price action had initially declined below the 200-day Exponential Moving Average (EMA) at 1.3633, but Thursday’s bullish interruption has the pair poised for a technical congestion pattern before facing another go around the bullish wheel.

USD/CAD daily chart

• Gold retreats from a record high of $2,531 as US Treasury yields rise, with the 10-year note up 6.5 bps to 3.865%.
• US data shows mixed signals, with higher jobless claims and solid business activity despite ongoing manufacturing contraction.
• Fed Minutes hint at potential rate cut in September, but stronger US Dollar pressures Gold lower.

Gold price retreats on Thursday after running during the last five days to an all-time high (ATH) of $2,531. XAU/USD slumped below the previous ATH of $2,483 during Thursday’s session.

A tick up in US Treasury bond yields following the data release in the United States (US), bolstered the Greenback and weighed on the golden metal. The XAU/USD trades at $2,482, down by over 1%.

Data from the US Bureau of Labor Statistics (BLS) revealed that the number of Americans filing for unemployment benefits rose above estimates and the prior reading figures. Other data showed that Business Activity remains solid, even though manufacturing activity contracted for the second straight month, according to S&P Global.

Bullion traders digested the Federal Open Market Committee’s (FOMC) last meeting Minutes, released on Wednesday, which surprisingly showed that the “vast majority” of FOMC participants supported the case to ease policy at the September meeting if data met expectations.

The Minutes showed that policymakers had grown confident that inflation risks are skewed to the downside, while risks of achieving maximum employment had risen.

Boston Fed President Susan Collins echoed some of those views, commenting that the labor market is healthy and adding that it would be appropriate to lower interest rates soon. Recently, Philadelphia Fed Patrick Harker agreed with Collins on easing policy but added that the Fed should be methodical in cutting interest rates.

The non-yielding metal dipped even though Collins and Harker's views hinted at the first Fed cut. The rise in US bond yields, particularly the 10-year benchmark note up six and half basis points (bps) to 3.865%, boosted the buck. The US Dollar Index (DXY), which tracks the Greenback’s value against the other six currencies, rose by 0.39% to 101.52.

Given the backdrop, investors are preparing for Fed Chair Jerome Powell's commencement speech at Jackson Hole. In it, he’s expected to lay the groundwork for monetary policy for the second half of 2024.

Daily digest market movers: Gold price on the defensive post-US data

• Given the fundamental backdrop, profit-taking could be blamed as the main driver of Gold’s dip below $2,500 ahead of Powell’s speech.
• After today’s data, traders moderated their bets of the total amount of easing by the Fed in 2024, from around 102 bps to 94, via the Chicago Board of Trade (CBOT) December 2024 fed funds rate futures contract.
• US Jobless Claims rose to 232K in the week ending August 17, surpassing expectations of 230K and previous week's 228K.
• S&P Global Manufacturing PMI contracts again to 48.0; Services PMI rises to 55.2, beating estimates.
• US Existing Home Sales increased 1.3% in August, as expected, from 3.9 million to 3.95 million.

Technical outlook: Gold uptrend remains intact, despite surrendering $2,500

Gold’s uptrend remains intact, but a daily close below the previous ATH of $2,483 can trigger a deeper pullback.

The Relative Strength Index (RSI), despite being bullish, aims downwards, hinting that in the near term, sellers have the upper hand. Nevertheless, traders should be aware that in the mid-term, Gold is bullish.

If XAU/USD achieves a daily close below $2,500, sellers could push prices toward the May 20 peak of $2,450. Once that level is surpassed, further losses lie, and Gold could drop to the 50-day Simple Moving Average (SMA) at $2,398 before testing the next support at the 100-day SMA at $2,377.

On the other hand, if buyers lift Gold above $2,500, look for a re-test of the ATH at $2,531.

The loss of impetus in the risk-associated universe allowed the US Dollar to rebound from Wednesday’s 2024 peaks on Thursday, helped by the equally decent bounce in US yields, all prior to the speech by Fed’s Powell at Jackson Hole.

Here is what you need to know on Friday, August 23:

After bottoming out in the sub-101.00 region on Wednesday, the USD Index (DXY) regained some balance and revisited the 101.60-101.65 band on Thursday. Chief Powell’s speech at the Jackson Hole Symposium will take centre stage on August 23, seconded by New Home Sales.

The move higher in the Greenback prompted EUR/USD to give away part of its recent gains to level north of the 1.1100 mark. On August 23, the ECB will release its Consumer Inflation Expectations survey.

GBP/USD was the exception among its risky peers, managing to maintain a bullish bias for the sixth consecutive day and hitting a new YTD peak around 1.3130. The Consumer Confidence tracked by GfK is due on August 23, followed by the speech by the BoE’s A. Bailey.

USD/JPY rose markedly on the back of the robust bounce in the dollar and higher US yields. The BoJ’s K. Ueda will testify before Parliament on August 23, ahead of the Inflation Rate.

The sharp rebound in the dollar hurt AUD/USD and motivated it to add to Wednesday’s losses and challenge the 0.6700 neighbourhood. The next key event in Oz will be the RBA’s Monthly CPI Indicator on August 28.

Prices of WTI set aside usual demand concerns from China and focused on the prospects of interest rate cuts by the Fed, sparking a marked rebound  beyond the $73.00 mark per barrel.

Prices of Gold broke below the $2,500 mark per ounce troy in response to the strong pick-up in the dollar and higher US yields. Same path followed its cousin Silver, which retreated to three-day lows in the sub-$29.00 zone per ounce.

• USD sellers take a breather after four sessions of losses.
• Markets digest weekly Jobless Claims and August PMIs.
• Rate cut expectations remain high ahead of Powell’s words on Friday.

The US Dollar (USD), measured by the US Dollar Index (DXY), indicated an incline above the 101.00 level during Thursday's trading session. This occurs in a market environment, closely attending Chair Jerome Powell's Friday speech, while markets assess the release of recent Jobless Claims and S&P PMIs.

While market sentiment regarding future monetary policy decisions remains quite consistent, the economic outlook of the US suggests continued growth above trend. This unveils that the market possibly is overestimating the pricing for an aggressive easing once again.

Daily digest market movers: US Dollars gains traction, investors eye Jackson Hole Symposium for direction

• Markets await fresh directions on Jerome Powell’s words at the Jackson Hole Symposium on Friday to get a confirmation on whether the Federal Reserve (Fed) will cut in September.
• The Minutes from July's FOMC meeting were perceived as dovish, with several officials observing that recent progress on inflation and higher unemployment provides a feasible case for an interest rate range reduction of 25 basis points.
• The market still prices in 100 bps of total easing by year-end, but those odds will likely change after Powell’s directions.
• On the data front, the number of US citizens applying for unemployment insurance benefits rose by 232K in the week ending August 17, according to Thursday's US Department of Labor (DoL) report.
• This figure was slightly above the initial consensus of 230K and exceeded the previous weekly gain of 228K.
• The August flash estimate for the US S&P Global Composite PMI slightly slipped to 54.1 from 54.3 in July.
• However, this outperformed market expectations of 53.5, indicating that the business activity in the US's private sector continues to expand robustly.
• Concurrently, the S&P Global Manufacturing PMI plummeted to 48, illustrating ongoing contraction, while the Services PMI saw a minor rise to 55.2.

DXY technical outlook: Bearish momentum cools as the market recovers

DXY’s technical outlook sees a shift as the bearish momentum slows down, providing the market with a respite. Indicators took a hit this week with the Relative Strength Index (RSI) landing in oversold territory, though it's recovering. The Moving Average Convergence Divergence (MACD) currently prints flat red bars, hinting at a flattening bearish momentum. Hence, the overall technical signals suggest that bears are recuperating after propelling the index to its lowest level in a year.

Support Levels: 101.50, 101.30, 101.20

Resistance Levels: 102.00, 102.50, 103.00

• The Dow Jones shed 200 points on Thursday as investors blink.
• US PMI figures came in mixed, with Services up but Manufacturing down.
• Investors await further signs of Fed rate cuts.

The Dow Jones Industrial Average (DJIA) shed some weight on Thursday, easing back around 200 points after a misfire in US Purchasing Managers Index (PMI) figures gave investors a reason to pause. US PMI prints further highlighted a softening in the US labor market, sending jitters through markets, which continue to bet that a Federal Reserve (Fed) rate cut in September will solve all of their problems.

US Manufacturing PMI figures tumbled back to 48.0 in August, well below the forecast steady print of 49.6. The US Services PMI unexpectedly tick upwards to 55.2 from 55.0 compared to the forecast decline to 48.0. Despite the upswing in Services PMI numbers, underlying employment figures continue to show a shortening in the US labor market, adding to concerns that were mostly ignored when the US Bureau of Labor Statistics retroactively wiped over 800K jobs from March’s Nonfarm Payrolls (NFP) print this week.

Markets continue to pine for a September cut, but Thursday’s PMI data sparked a pullback from a recent upswing into bets that the Fed would cut 50 bps on September 18. Rate markets have pulled back to a healthier overall expectation of a single quarter-point cut in September, pricing in around 75% odds of a 25 bps rate trim.

The Jackson Hole Economic Symposium is underway in Wyoming today, and investors will be looking ahead to Friday’s expected appearance from Fed Chairman Jerome Powell. Markets are hoping that the Fed head will introduce firmer guidance on how likely the Fed is to cut in September, as well as for how much.

Dow Jones news

The Dow Jones index is easing slightly lower on Thursday, with roughly two-thirds of the index declining on the day. Losses are being led by Intel Corp. (INTC), which fell another 3.3% to $20.70 per share. Gains remain notably limited on Thursday, with the top of the board claimed by American Express Co. (AXP), which managed to eke out a 0.85% jump, climbing to $248.40 per share.

Dow Jones Price Forecast

With the Dow Jones pulling back, there is a building risk that a bearish correction could kick off with topside momentum running out of gas just below all-time highs set in July. The Dow Jones’ recent recovery is set to take a breather and give short pressure a chance to drag price action back down to the 50-day Exponential Moving Average (EMA) at 39,481.00.

Dow Jones daily chart

• GBP/USD hovers below 1.3100, with price action suggesting buyer caution amid Fed rate cut uncertainty.
• A break above 1.3100 could target the YTD high of 1.3130, with further gains towards 1.3200.
• A close below 1.3100 for a second day may trigger a pullback, potentially testing the 1.3010 level and the August 13 peak at 1.2872.

The Pound Sterling clung to minimal gains against the Greenback on Thursday, even though UK economic data revealed that business activity remains solid. At the time of writing, the GBP/USD trades at 1.3097, up by 0.10%.

GBP/USD Price Forecast: Technical outlook

After breaching the 1.3100 figure, the GBP/USD retreated somewhat, yet it remains hovering below the latter. Price action during the last couple of days hints that buyers remain reluctant to open fresh bets that the Pound will extend its gains amidst uncertainty on the Fed's interest rate cuts.

If GBP/USD climbs past 1.3100 and clears the year-to-date (YTD) high of 1.3130, expect a challenge of the 1.3200 mark.

On the other hand, if the pair registers a close below 1.3100 for the second straight day, it could pave the way for a pullback and threaten to challenge the August 20 low of 1.3010. If surpassed, the next demand area would be the August 13 peak of 1.2872.

GBP/USD Price Action – Daily Chart

• Mexican Peso extends losses, pressured by inflation still above Banxico's 2-4% goal despite recent declines.
• Economic data shows deceleration in Mexico’s GDP, hinting at potential for further rate adjustments by Banxico.
• US Dollar strengthens amid strong labor market data and Fed officials signaling potential rate cuts in September.

The Mexican Peso prolonged its agony and extended its losses to four straight days against the Greenback after data showed that inflation is coming down; but it remains above the Bank of Mexico’s (Banxico) 2 to 4% goal. The US Dollar appreciates against most currencies amid mixed economic data, yet the USD/MXN trades at 19.42 and gains 0.81%.

The USD/MXN bounced off daily lows of 19.24 as the Instituto Nacional de Estadistica Geografia e Informatica (INEGI) revealed that August’s mid-month headline and core inflation dropped. This could warrant another Banxico adjustment to its main reference rate following the August 8 meeting.

Other data showed the economy is decelerating. The Gross Domestic Product (GDP) for the second quarter of 2024 ticked lower on an annual basis yet remains above the 2% threshold.

Across the border, the US economic docket revealed that the labor market remains strong despite cooling. While S&P Global PMIs were mixed, they showed that the economy in the services sector remains strong.

Meanwhile, Federal Reserve (Fed) officials crossed the newswires, led by Susan Collins of the Boston Fed. She said that it would soon be appropriate to cut interest rates, adding that the labor market remains strong. Echoing her comments was Philadelphia Fed President Patrick Harker, who added they should ease policy in a slow and methodical approach and support a cut in the upcoming September meeting.

Ahead of the day, Banxico will release its August meeting minutes.

Daily digest market movers: Mexico Peso depreciates as economy remains tepid

• Mexico’s GDP in Q2 2024 was 2.1%, below estimates of 2.2% YoY, yet improved from Q1's 1.6% growth.
• August mid-month inflation rose by 5.16% YoY, below estimates of 5.31%, and July’s 5.61% increase. Core figures ticked below the 4% threshold, from 4.02% to 3.98% YoY and beneath expectations for a 4.06% increase.
• US Initial Jobless Claims for the week ending August 17 rose by 232K and exceeded expectations of 230K, compared to a 228K jump the previous week.
• In August, the S&P Global Manufacturing PMI contracted for the second straight month from 49.6 to 48.0. The Services PMI expanded from 55.0 to 55.2, exceeding estimates of 54.0.
• US Existing Home Sales grew 1.3%, as expected, in August, from 3.9 million to 3.95 million.

Technical outlook: Mexican Peso pressured as USD/MXN climbs toward 19.50

The USD/MXN uptrend remains intact, yet traders face key resistance. Although momentum favors further upside as depicted by the Relative Strength Index (RSI), the pair needs to clear the psychological 19.50 figure. If that level is surpassed, the Peso could lose additional ground, as the exotic pair could aim toward 20.00, followed by the year-to-date (YTD) high of 20.22.

Conversely, if USD/MXN drops below 19.00, sellers could enter the market and drive the exchange rate toward the 50-day Simple Moving Average (SMA) at 18.48. Further losses are seen once the pair slumps below 18.00, challenging the 100-day SMA at 17.75.

• EUR/GBP lost ground and fell below the 0.8500 support level.
• Bearish signals rise, indicating a possible downtrend in the next session.
• The 0.8470 area is another barrier for the bears.

On Thursday, the EUR/GBP pair continued its downward trend, losing 0.30% to finish at 0.8490. Technical indicators present a mixed outlook, with selling forces appearing to be taking command.

The Relative Strength Index (RSI) has declined to 49, which might signal a momentum shift. Meanwhile, the Moving Average Convergence Divergence (MACD) is displaying rising red bars, suggesting a growing bearish momentum. Volume patterns have been decreasing, with a lack of conviction among market participants.

The EUR/GBP pair is facing a potential bearish trend, with selling pressure likely to persist. A consolidation below the key 0.8500 support would strengthen the bearish bias and create opportunities for further declines. However, the 0.8470 area would present another strong wall to the bears. On the upside, the buyers must recover and consolidate convergence between the 20 and 100-day Simple Moving Averages (SMA) around 0.8500-0.8550. A move above this level would open the path towards 0.8600.

EUR/GBP daily chart

The short-squeeze play in Palladium markets is still on, but we now see some time-decay on the horizon, TDS Senior Commodity Strategist Daniel Ghali notes.  

Short-squeeze play in Palladium markets is still on

“Commodity Trading Advisor (CTA) buying activity over the last sessions has raised the risk that the long-awaited squeeze on algos could once again come to fruition. Our simulations of future prices do suggest scope for a large-scale short squeeze that would nearly wipe-out algo shorts.”

“However, discretionary traders now hold a larger short position than algos in Palladium markets. Our gauge suggests that this cohort has now nearly reaccumulated its record net short position, which adds vulnerabilities should algo shorts come under pressure.”

“The current set-up, however, has a time decay. Barring a continued rally in prices, CTAs could be back on the offer by the end of next week, even in a flat tape. This would take some pressure off the behemoth discretionary short.”

• Silver price slumps to near $29.40, weighed down by higher yields.
• Better-than-projected flash US PMI for August uplift bond yields and the US Dollar.
• Going forward, investors will focus on the Fed Powell’s speech at the JH Symposium.

Silver price (XAG/USD) falls sharply to near $29.40 in Thursday’s North American session. The white metal weakens as the US Dollar (USD) rebounds and bond yields rise after better-than-projected preliminary United States (US) S&P Global PMI data for August.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back to near 101.45 from a more than seven-month low of 101.00. 10-year US Treasury yields surge to near 3.86%. Higher yields on interest-bearing assets weigh on non-yielding assets, such as Silver, given that they increase the opportunity cost of holding an investment in them.

The flash PMI report showed that the Composite PMI expanded at a faster-than-expected pace to 54.1 but remained below July’s reading of 54.3, driven by upbeat demand in the service sector. While the Manufacturing PMI declined sharply to 48.0. Economists already anticipated activities in manufacturing activities to contract but at a steady pace to 49.6.

Meanwhile, investors await the Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole (JH) Symposium, which will start from 14:00 GMT and last to Saturday, at Friday, to get more cues about how deep interest rate cuts will be in September and by the year-end.

The CME FedWatch tool shows that the likelihood of a 50-basis point (bps) interest rate cut is 26.5%. while remaining point to a decline in key borrowing rates by quarter-to-a-point, signaling that traders are sure about the Fed pivoting to policy normalization in September.

Silver technical analysis

Silver price turns sideways after a decisive break above August 2 high of $29.20, which faltered the lower high lower low formation on a four-hour timeframe. The 20-period Exponential Moving Average (EMA) near $29.20 acts as a cushion for Silver price bulls.

A bull cross, represented by 50 and 200-day EMAs near $28.50, suggests that the overall trend has become strongly bullish.

The 14-period Relative Strength Index (RSI) falls to near 60.00, suggesting that the bullish momentum has concluded for now. However, the bullish bias remains intact.

Silver four-hour chart

Commodity Trading Advisor (CTA) trend followers have pummeled crude oil markets over the last sessions, Daniel Ghali, TDS Senior Commodity Strategist, notes.

Oil bulls face challenges from the supply-side

“While algos have just a few more bullets to fire, CTAs are now approaching their effective 'max short' positions in crude markets, with several consecutive whipsaws now diminishing the trend signals' strength and in turn their max size.”

“Still, crude bulls will have to fight additional tailwinds from supply risk premia, which continues to seep out of pricing despite continued geopolitical risks and uncertainty with respect to a ceasefire deal in the Middle East. This is further corroborated by weakening timespreads.”

“The challenge for oil bulls is now coming from the supply-side, feeding into concerns that the OPEC+ group of producers is now trapped between a rock and a hard place.”

• AUD/USD bounces back as the US Dollar falls after a short-lived pullback post US weekly jobless claims data.
• The upside in the US Dollar remains capped by optimism over Fed interest rate cuts in September.
• Australian Composite PMI returns to expansion in August.

The AUD/USD pair discovers buying interest from the intraday low of 0.6725 in Thursday’s New York session. The Aussie asset is expected to resume its upside journey as the US Dollar (USD) retreats after the release of the United States (US) Initial Jobless Claims report for the week ending August 16.

The report showed that the number of individuals claiming jobless benefits for the first time came in higher at 232K from the estimates of 230K and the prior release of 228K, upwardly revised from 227K, accelerating worries of deteriorating labor market conditions. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls after a short-lived pullback move to near 101.40.

The near-term appeal of the US Dollar is already vulnerable as the Federal Reserve (Fed) seems to be on track to start reducing interest rates in September. The latest Federal Open Market Committee (FOMC) minutes showed that the ‘vast majority’ of officials see interest rate cuts appropriate in September, given that price pressures continue to ease as expected.

Meanwhile, investors await Fed Chair Jerome Powell’s speech at the Jackson Hole (JH) Symposium on Friday. Investors will look for cues about the likely size of interest rate cuts in September and how much they will be reduced by the year-end.

In the Asia-Pacific region, the Australian Dollar (AUD) has outperformed the US Dollar in the last three weeks amid firm speculation that the Reserve Bank of Australia (RBA) will not cut interest rates this year. The RBA is expected to leave its Official Cash Rate (OCR) at its current level for an extended period as officials remain vigilant to upside risks to inflation.

On the economic data front, the flash Australian Judo Bank PMI report showed that the overall business activity expanded to 51.4 after contracting to 49.9 in July, boosted by a sharp increase in the service sector. While activities in the manufacturing sector contracted at a slower pace.

A period of high deficits, slowing growth, sticky inflation, currency devaluation and an imminent cutting cycle has already attracted capital towards Gold's warm embrace, TDS Senior Commodity Strategist Daniel Ghali notes.

Bullish narratives in Gold markets pose risks

“Our flow-based analysis now suggests that downside risks are more potent. After all, macro fund positioning is now at its highest levels since the depths of the pandemic. It is more statistically consistent with 370bps of Fed cuts over the next twelve months. CTAs are effectively 'max long'. Chinese Gold ETF outflows have resumed.”

“Shanghai trader positioning near record-highs already reflects Gold's allure in the face of a weaker domestic currency, stock and property market. Narratives in Gold markets are unanimously bullish and have attracted a nearly unanimous consensus for higher Gold prices, but we see significant risks to the near-term outlook tied to positioning.”

“Jackson Hole is the first potential catalyst, but the next payrolls release may be a more consequential potential catalyst.”

In an interview with Fox Business, Federal Reserve (Fed) Bank of Boston President Susan Collins said that it will soon be appropriate to begin cutting rates, per Reuters.

Key takeaways

"Labor market overall is quite healthy, and want to preserve that."

"Unemployment is still low and jobless claims indicate orderly rebalancing."

"Fed is in a healthy position overall and important to preserve that."

"Data will guide pace of rate cuts."

"Data on inflation are consistent with more confidence inflation getting back to 2%."

"Gradual, methodical pace of cuts once we are in different policy stance likely to be appropriate."

"Still see quite a bit of continued resilience among consumers, also stress pockets though."

"Preserving healthy labor market is a priority."

Market reaction

These comments don't seem to be impacting the US Dollar's valuation in a noticeable way. At the time of press, the USD Index was up 0.12% on the day at 101.25.

• EUR/GBP tests territory below 0.8500 as the Euro weakens against Sterling after soft Eurozone Q2 Negotiated Wage Rates.
• The ECB is widely anticipated to cut interest rates again in September.
• The Pound Sterling strengthens on upbeat flash UK PMI for August.

The EUR/GBP pair posts a fresh almost three-week low near 0.8480 in Thursday’s North American session. The cross weakens as the Euro is underperforming against the Pound Sterling after soft Q2 Negotiated Wage Rates boosted expectations of European Central Bank (ECB) rate cuts in September.

The ECB kicked off its policy-easing in June, and after a pause in July, it is expected to cut its key borrowing rates again in September. The data came in Thursday’s European trading hours showed that Negotiated Wage Rates grew at a slower pace of 3.55% from 4.74% in the first quarter this year, easing fears of inflation remaining persistent.

Economists at ING said in a note on Thursday, "The European Central Bank has remained uncomfortable with cutting interest rates while wage growth is elevated.”

Also, upbeat flash Eurozone HCOB Composite Purchasing Managers’ Index (PMI) data for August fails to strengthen the Euro (EUR). The preliminary report showed that the Composite PMI unexpectedly rose to 51.2. Economists projected the overall activity to have barely expanded. Strong growth in the Eurozone economy came largely from upbeat business activity in France due to the Olympic games in Paris, while the PMI in its largest economy, Germany, contracted at a faster pace.

Meanwhile, the Pound Sterling (GBP) performs strongly against its major peers on upbeat preliminary United Kingdom (UK) S&P Global/CIPS PMI data for August has strengthened its economic outlook. The Composite PMI expanded at a faster pace, boosted by a sharp increase in activities in both manufacturing and the service sector.

A sharp growth in overall business activity appears to be the outcome of the interest rate cut by the Bank of England (BoE) on August 1. The BoE is expected to cut interest rates one more time in the last quarter of this year.

• Initial Jobless Claims rose by 232K vs. the previous week.
• Continuing Jobless Claims rose by 1.863M.

US citizens that applied for unemployment insurance benefits increased by 232K in the week ending August 17 according to the US Department of Labor (DoL) on Thursday. The prints came in a tad above initial consensus (230K) and were higher than the previous weekly gain of 228K (revised from 227K).

In addition, Continuing Claims increased by 4K to 1.863M in the week ended August 10.

Market reaction

The US Dollar Index (DXY) extends its daily recovery from Wednesday’s 2024 lows and retests the 101.40 region, in the context of some mild rebound in US yields across the curve.

The Pound Sterling (GBP) is knocking on the door of last year’s spot high around 1.3140 following this morning’s UK August PMI data, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

Stronger resistance may develop nearer 1.32

“The numbers suggest the UK economy is in a fairly decent position (growth picking up, prices slowing). Manufacturing output (52.5) was above July’s level and better than forecast, reaching the highest in a little over two years. Services and Composite data reflected solid gains.”

“GBP has had only one down day in the past 11 sessions since rebounding from the 200-day MA test below 1.27 but the recovery might be able to develop a little more. Trend strength indicators are bullish on the intraday and daily DMIs but are not obviously stretched.”

“The July 2023 high at 1.3140 is a minor block on gains but stronger resistance may develop nearer 1.32 in the short run. Support is 1.3075.”

Preliminary Eurozone PMIs looked mostly positive, with the Services and Composite components advancing firmly in August (53.3 and 51.2 respectively) while Manufacturing (45.6) fell slightly versus July and was a little below expectation, Scotiabank’s Chief FX Strategist Shaun Osborne notes.   

Corrective losses may not extend much below 1.1050/75

“A second look showed that solid French Services/Composite data did all the heavy lifting (Olympics), however, while German data were all below forecasts and weaker than July.”

“EUR/USD was choppy around the headlines but eased back slightly as markets got to grips with the details. Meanwhile, the ECB’s wage data for Q2 reflected lower negotiated wages gains of 3.6% Y/Y, down from 4.7% in Q1.”

“Spot is consolidating. Price action is turning more neutral (an inside range session is potentially developing today) and oscillator studies are stretched. Intraday price action is putting short-term trend support at 1.1140 under pressure. Corrective losses may not extend much below 1.1050/75 for now, however.”

Kansas City Federal Reserve Bank President Jeff Schmid told CNBC on Thursday that the recently published revisions to labor market data don't change a lot, per Reuters.

Key takeaways

"We've seen some cooling in labor market, but generally pretty strong."

"I still believe quite strongly that we have to sustainably trend inflation back to 2%."

"There is still work to do on that."

"Unemployment rate bears looking harder at it."

"I am going to let the data show where we go."

"Last two or three inflation prints were pretty positive."

"You probably want to act before inflation gets to 2%."

"Rates are not overly restrictive, room to consider where we go from here."

"I frankly think we have time to decide."

Market reaction

The US Dollar Index clings to modest daily gains following these comments and was last seen rising 0.2% at 101.35.

The accounts of the European Central Bank's (ECB) July policy meeting showed on Thursday that the September meeting was widely seen as a good time to re-evaluate the level of monetary policy restriction, per Reuters.

Key takeaways

"Headline inflation was expected to fluctuate around current levels for the rest of the year."

"The signals from the different measures of underlying inflation remained mixed."

"It was therefore becoming harder to determine whether or not the slower decline signalled a genuine stalling of the disinflation process."

"Labour cost dynamics would continue to be a key concern."

"It was comforting to see that domestic cost pressures from high wage growth, including in the services sector, had been increasingly buffered by unit profits."

"Monetary policy transmission was unfolding according to expectations."

"Monetary policy would probably take longer to be transmitted to the services sector."

"It was seen as natural that the Governing Council’s policy response should be cautious."

"By the time of the September meeting, extensive new data would be available."

Market reaction

This publication failed to trigger a noticeable market reaction. At the time of press, EUR/USD was trading at 1.1133, losing 0.15% on the day.

The Canadian Dollar (CAD) is trading a bit off its overnight peak around 1.3575 but retains a generally firm undertone. The pro-risk mood might be extending CAD sentiment a little support, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

More USD/CAD weakness ahead

“A likelier explanation for CAD gains is that we may be seeing the impact of the record net CAD short positions reflected in the recent CFTC data feeling increasingly uncomfortable with CAD strength. Net short CAD activity picked up sharply through mid-year, reflecting weaker cyclical dynamics and the BoC’s relatively early start to the easing cycle.”

“Like previous (though less significant) ramp ups in net selling of the CAD (in April and November last year), the latest CAD slide stopped around 1.39 and now, the CAD’s three week advance from that low may be squeezing weaker CAD short hands and giving the CAD a short-covering lift. Spot losses have extended marginally below 1.3595 to reach a four-month low for the USD.”

“Trend strength signals are aligned bearishly for USD/CAD on the intraday and daily DMI oscillators while the weekly study is close to flipping bearish. Losses below 1.3590/95 (200-day MA and range lows from May and July) are marginal but suggest more USD/CAD weakness ahead. Support is 1.3560 (50% retracement of the 2024 USD rally) and 1.3475 (retracement and major trend). Resistance is 1.3625/50.”

South Africa continues to move in the right direction. In July, prices rose less than expected - inflation was only up 0.4% (non-seasonally adjusted) month-on-month, bringing the year-on-year rate down from 5.1% to 4.6%. This means that the annual rate is now only slightly above the mid-point of South African Reserve Bank's (SARB) target range of 3-6%, Commerzbank’s FX analyst Volkmar Baur notes.

Falling inflation paves the way for lower policy rates

“It is also encouraging that if we exclude administered prices, inflation is only 4.3%, although the decline here (from 4.4%) is much smaller than the overall decline. Administered prices are usually increased in July, and this year was no exception. Compared with the previous month, they rose by 5.4%, which is slightly less than a year earlier when they rose by 5.9% in July. This therefore contributed to the downside surprise in headline inflation.”

“Nevertheless, the rate of inflation in administered prices remains high, which will keep the inflation rate elevated due to the weight of these prices in the CPI basket of about 17%. The SARB should and will take this into account in its decision. Nevertheless, the dynamics, especially in recent months, look good enough to justify a rate cut by the SARB in September.”

“However, this should not negatively affect the ZAR. Although falling inflation paves the way for lower policy rates, the real interest rate is still quite high at around 3.5% (policy rate minus annual inflation). Moreover, lower interest rates are accompanied by structural improvements that will support the currency in the long run.”

• Oil price flirts with a break below $71.00 ahead of US PMIs and Jackson Hole. 
• Market concern grows on the question if OPEC made a policy mistake in its earlier meeting.    
• The US Dollar Index hits a new low for 2024 and flirts with the 101.00 barrier.

Oil prices eke out a very slight gain on Thursday, trying to find a bottom to the sharp sell-off seen in the last four trading sessions. The decline in prices can be attributed to concerns emerging on the supply side and despite the very large drawdown on US stockpile numbers reported on Wednesday. The supply-related concern comes after a Bloomberg report mentioned a Russian shadow fleet of worn-out tankers that are moving Russian sanctioned Oil across the globe. This shows that there is far more supply out there than markets are measuring, which doesn’t help prices when combined with a lacklustre demand outlook. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, gets caught in what one could call a “perfect storm”. After an already significant correction this week, more losses were added on Wednesday after the biggest downward revision in Nonfarm Payrolls in over a decade and the Federal Reserve (Fed) Minutes of the Fed’s July meeting revealed calls for a rate cut already back then. Not many, near nill, bullish elements seem to be able to support the Greenback. 

At the time of writing, Crude Oil (WTI) trades at $71.82 and Brent Crude at $75.70.

Oil news and market movers: More supply than you can imagine

• Swiss bank UBS has issued a note saying that a recovery to $90 per barrel is on the horizon if OPEC remains cautious into its next meeting in September and if the Chinese economy can gradually recover further, Bloomberg reports.
• Overnight Crude stockpile numbers from the US Energy Information Administration (EIA) revealed a drawdown of 4.649 million barrels, way above the expected 2.8 million drawdown. Last week’s number was a build on inventory of 1.357 million, Reuters reports.
• A Bloomberg report on Thursday shed light on a shadow fleet of tankers that are circumventing sanctions on Russian Oil. These are very outdated tankers, not up to standards, and with little to no insurance in case something goes wrong. It remains unclear how much additional excess Oil has been released into the market on top of the already flooded supply side.
• Traders see a potential policy risk by OPEC after it committed earlier this summer to let loose its voluntary production cuts. More production cuts might be needed in order to keep Crude prices at current levels, Reuters reports. 

Oil Technical Analysis: Oil and DXY look like twins

Oil sets forth another attempt to avoid another negative weekly close after having failed massively to do so earlier this week. Despite the large drawdown in US Crude stockpile numbers this week, it looks like WTI Crude and the US Dollar are in sync and that a recovery could not happen until both finally are able to turn around. US data this Thursday or the speech from Fed Chairman Jerome Powell on Friday could still spark that turnaround, supporting a less-weaker US Dollar and a small increase in Crude prices. 

On the upside, it becomes very difficult to be bullish with a lot of resistance levels nearby. The first element to look out for is the pivotal $75.27. Next up is the double level at $77.65, which aligns with both a descending trendline and the 200-day Simple Moving Average (SMA). In case bulls are able to break above it, the 100-day SMA at $78.45 could trigger another rejection as it did last week.  

On the downside, the low from August 5 at $71.17 is the best level for a bounce. Under $70.00, the $68.00 big figure is the first level to watch followed by $67.11, which is the lowest point from the triple bottom seen back in June 2023. 

US WTI Crude Oil: Daily Chart

Since the beginning of August, EUR-USD has been in a steady upward trend, and periods of stabilisation have been short-lived, Commerzbank’s FX analyst Michael Pfister notes.

The PMI figures are trickier than was expected

“Yesterday, the pair even hit a new high for the year. However, this is almost entirely a USD story. The US Dollar continues to depreciate steadily, while the euro has been virtually unchanged since the beginning of August. This should come as no surprise, as recent data from the euro area has been almost entirely in line with expectations.”

“This could may today with the release of the PMIs. The reading was higher, but the boost largely comes from a surge in services activity in France, likely linked to the buzz surrounding the Olympic Games in Paris. In contrast, the Germany’s PMIs came negative, so the market may price in more rate cuts and the highs in EUR/USD may come to an end for the time being.”

The US Dollar (USD) is expected to trade in a range between 7.1150 and 7.1450. USD is likely to edge lower. But, given the mild downward pressure, any decline is unlikely to reach July’s low of 7.0636, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

Likely to edge lower in the coming days

24-HOUR VIEW: “Yesterday, USD traded between 7.1135 and 7.1393, closing at 7.1325 (+0.22%). Despite the higher closing, there has been no significant increase in momentum. Today, USD is expected to trade in a range, probably between 7.1150 and 7.1450.”

1-3 WEEKS VIEW: “After closing lower for three days in a row, USD closed slightly higher yesterday (7.1325, +0.22%). The recent price action has resulted in an increase in downward momentum, albeit not much. From here, as long as USD remains below 7.1750, it is likely to edge lower in the coming days. Given the mild downward pressure, any decline is unlikely to reach July’s low of 7.0636.”

The US Bureau of Labour Statistics kept us on the edge of our seats yesterday - in the end, it was announced rather belatedly that job creation in the period April 2023 to March 2024 was likely to be 818,000 jobs lower than previously thought. On average, that would be about 68,000 jobs per month. Although there was no Bloomberg consensus for this, the figure is likely to have been on the high end of estimates, Commerzbank’s FX analyst Michael Pfister notes.

Market has a rather muted reaction to the labor data

“Over the past few months, I have discussed several times in this space that the Bloomberg survey seemed to systematically underestimate actual job growth. There was no other explanation for the regular (significant) upward surprises. However, if we now look at the revised figures, the BBG estimate was not so bad. The economists seem to have estimated the underlying trend better than expected.”

“However, if the figures are revised in this way, some market participants may question whether the initial reported figures can be taken at face value. The period now revised was probably an exceptional one. The labour market was only just recovering from the pandemic, while at the same time there was probably increased immigration into the US labour market, which generated more jobs than previously expected. In short, revisions in the coming years are unlikely to be as large.”

“Yesterday's figures illustrate another fact: a single data release should not lead to a fundamental reassessment. Just because one month's job creation surprises on the upside or last month's on the downside, for example, should not change the general view of the world. The data continue to show a robust labour market, but also a visible slowdown for almost a year. Just what the Fed wanted to get inflation under control. And yesterday's revisions did not change that.”

• The US Dollar struggles to find support as traders see Fed rate cuts as a given. 
• All eyes will be on the Fed’s Chair Jerome Powell at Jackson Hole to confirm the cuts. 
• The US Dollar index trades just above 101.00 and could fall to 100.00 if weak sentiment persists. 

The US Dollar (USD) trades broadly flat after it saw heavy selling at the start of the US session on Wednesday, triggering another leg lower towards a fresh 2024 low. The Nonfarm Payrolls revision highlighted 818,000 fewer jobs than previously estimated, the largest downward revision in over a decade, confirming market concerns about the US job market. Later, the release of the Fed Minutes for the July meeting confirmed that some members of the Federal Open Market Committee (FOMC) vowed for a rate cut back then, making this move almost certain in September. 

Although it looks like nothing can go wrong, big warning signs still need to be issued here. The Federal Reserve and Fed Chairman Jerome Powell have already advocated plenty of times that the risk of cutting too soon is one of their biggest fears. With the preliminary August Purchasing Managers Index (PMI) numbers, any strong figures might dampen the hope for either a big cut in September or further cuts down the line. 

Daily digest market movers: Cat’s out of the bag

• Markets are having difficulties to read the Purchasing Managers Index numbers from Europe. France saw an uptick in its Services PMIs driven by the Olympic Games taking place, while Germany saw its Services PMIs come in below expectations. The German Manufacturing component even fell further into contraction, which is bad news for Europe’s main economy. 
• At 12:30 GMT, the weekly US Jobless Claims are due:
  • Initial Jobless Claims are expected to rise to 230,000 from 227,000.
  • Continuing Claims stood at 1.864 million last week. No forecast available. 
• At 13:45 GMT, S&P Global will release the US preliminary PMIs for August:
  • The Services index is expected to remain quite stable, falling to 54 from 55 a month earlier.
  • The Manufacturing index is not expected to move, remaining  in contraction territory at 49.6.
  • The Composite index is seen declining to 53.5 from 54.3.
• At 14:00 GMT, Existing Home Sales are due to come out. Seeing the recent sharp decline in mortgage applications from the Mortgage Bankers Association data released Wednesday, a decline in Existing Home Sales for July is expected as well. Sales fell by 5.4% the previous month.
• The Kansas Fed Manufacturing Activity tracker for August will be released at 15:00 GMT. The previous print was -12.
• Asian equity markets are in the green across the board in anticipation that rate cuts from the Fed are now unavoidable. US futures are lagging, though, by trading rather flat. 
• The CME Fedwatch Tool shows a 67.5% chance of a 25 basis points (bps) interest rate cut by the Fed in September against a 32.5% chance for a 50 bps cut.  Another 25 bps cut (if September is a 25 bps cut) is expected in November by 39.7%, while there is a 46.9% chance that rates will be 75 bps below the current levels and a 13.4% probability of rates being 100 basis points lower. 
• The US 10-year benchmark rate trades at 3.81%, printing a fresh low for the week.

US Dollar Index Technical Analysis: It could all end in tears

The US Dollar Index (DXY) has been falling like a rock this week and will very likely be unable to avoid a weekly loss. However, traders should refrain from diving in massively in trying to jump on the “sell the dollar” train as there are some elements to keep in the back of one's mind. As it stands, markets are expecting a 75 bps rate cut by November. That is a very big cut considering that the Fed is until this date still data dependent. 

In this context, there is a big risk for a sharp upward correction in the DXY to recover some earlier losses. If US PMI numbers remain strong or even tick up further andFed Chairman Jerome Powell says that the Fed still remains data dependent and will want to watch recent data first before considering to start cutting, that would be a huge disappointment for markets. Traders seem to be expecting too many toys from Santa, while Santa might say he will want to wait with his deliveries of gifts in order to be sure that the market has been good enough.  

Looking up, the DXY faces a long road to recovery. First, 101.90 is the level to reclaim. A steep 2% uprising would be needed to get the DXY to 103.18 from where it is trading now, around 101.00.  A very heavy resistance level near 104.00 not only holds a pivotal technical value, but it also bears the 200-day Simple Moving Average (SMA) as the second heavyweight to cap price action.

On the downside, 100.62 (low from December 28) will be the next vital support in order to avoid another meltdown.  Should it break, the low of July 14, 2023, at 99.58 will be the ultimate level to look out for. 

US Dollar Index: Daily Chart

The US Dollar (USD) could trade in a range, likely between 144.40 and 146.50. USD is under pressure, but it does not appear to have sufficient momentum to threaten 141.66, the low registered early this month, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

Bears may try to reach 141.66 near term

24-HOUR VIEW: “USD swung between 144.44 and 146.59 in NY trade yesterday before closing largely unchanged at 145.26 (+0.01%). We are not able to glean much out of the price action. Today, USD could trade in a range, likely between 144.40 and 146.50.”

1-3 WEEKS VIEW: “After rebounding to a high of 149.39 last week, USD fell, reaching a low of 144.44 yesterday. Downward momentum has increased, but at this time, it does not appear to be sufficiently enough for USD threaten 141.66, the low registered early this month. Note that there is another support level at 144.00. On the upside, should USD break above 148.00, it would indicate that the current downward pressure has faded.”

We forecast a stronger yuan path than previously expected given our new forecast of a weaker dollar. Nevertheless, we forecast USD/CNY to remain above the 7 mark to reflect our expectation that the yuan will remain weak in the coming quarters, Commerzbank’s FX strategist Tommy Wu notes.

USD/CNY to fall to 7.05 by mid-2025

“The yuan strengthened against the dollar in August along with other Asian currencies, as the markets repriced Fed rate cut expectations and US Treasury yields fell across the curve. The negative China-US yield spreads narrowed and alleviated pressures on the yuan. USD/CNY largely hovered around 7.26-7.28 in most of July and fell to below 7.15 in mid-August.”

“We have revised our USD/CNY forecast lower to reflect a weaker dollar in the medium term than previously expected. This is because we now expect six Fed rate cuts in the coming quarters instead of three at the time of the last forecast, and that the structural US growth advantage will be less pronounced near term.”

Still, we don’t expect the yuan to appreciate significantly because yield differentials between China and the US will likely remain negative, albeit getting narrower or closer to zero in the coming quarters. In all, we expect USD/CNY to fall to 7.05 by mid-2025. As we expect the US growth advantage will return in H2 2025 following a soft patch, and that the Fed will stop cutting rates by then, the USD will likely strengthen for USD/CNY to rise back to 7.10.

• USD/CHF finds buying interest near 0.8500 amid a marginal recovery in the US Dollar.
• Lower revision of US Nonfarm Payrolls has exhibited concerns over labor market strength.
• Investors keenly await Fed Powell’s speech at the Jackson Hole Symposium.

The USD/CHF pair discovers buying interest near the psychological support of 0.8500 in Thursday’s European session. The Swiss Franc asset rebounds as the US Dollar (USD) edges higher after posting a fresh 2024 low. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, finds a cushion after refreshing a more-than-seven-month low near 101.00.

Market sentiment favors risky assets as the Federal Reserve (Fed) looks set to start reducing interest rates in September. S&P 500 futures have posted nominal gains in European trading hours.

Market speculation for Fed interest rate cuts in September has strengthened as officials see them as appropriate. The confidence of Fed policymakers for unwinding the restrictive monetary policy stance has increased due to consistently easing price pressures and cooling labor market strength, according to the Federal Open Market Committee (FOMC) minutes for the July 30-31 policy meeting.

The US Bureau of Labor Statistics (BLS) reported on Wednesday that the number of total employees hired was 818K lower than previously estimated in the year to March 2024.

Going forward, investors will focus on the preliminary United States (US) S&P Global PMI data for August, which will be published at 13:45 GMT. However, the major trigger for the US Dollar this week will be Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, which will be kicked off at 14:00 GMT and last till Saturday, on Friday. Fed Powell may provide cues about the likely size of interest rate reduction in September.

Meanwhile, the Swiss Franc will be influenced by market expectations of the Swiss National Bank’s (SNB) interest rate path amid the absence of top-tier economic data. The SNB is expected to cut interest rates further as price pressures remain well below the bank’s target of 2%.

The New Zealand Dollar (NZD) is expected to trade in a sideways range between 0.6135 and 0.6180. Overbought advance doesn’t appear to be losing steam yet; NZD could potentially reach June’s high of 0.6223, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

Expected to trade in a sideways range 0.6135/0.6180

24-HOUR VIEW: “NZD traded between 0.6133 and 0.6178 yesterday, closing unchanged at 0.6156. The price action is likely part of a sideways trading phase. Today, NZD is expected to trade between 0.6135 and 0.6180.”

1-3 WEEKS VIEW: “Yesterday, NZD rose slightly above July’s top of 0.6171, reaching a high of 0.6178. NZD closed unchanged at 0.6156. While the pace of this week’s advance has eased somewhat, the overbought rise doesn’t appear to be losing steam yet. Overall, we expect NZD to continue to rise. The level to watch is June’s high of 0.6223. To keep the momentum going, NZD must not break below 0.6090.”

EUR/GBP has stayed generally pressured, likely due to the higher beta of the pound and the improvement in risk sentiment, ING’s FX strategist Francesco Pesole notes.

A short-term target of 0.86 in EUR/GBP

“We remain quite confident about a rebound though, and there are two potential triggers today (ECB wage data) and tomorrow (Bank of England Governor Andrew Bailey’s speech in Jackson Hole).”

“Markets may be inclined to price out some ECB easing, but PMIs may also have a say in EUR/GBP price action. The surveys have been a testament to the growing growth sentiment divergence between the eurozone and the UK, which has helped keep EUR/GBP capped. However, markets are clearly more accustomed to negative growth news in the eurozone.”

“We maintain a short-term target of 0.86 in EUR/GBP as we see short-term spreads move in favour of the euro leg over the coming weeks.”

Silver prices (XAG/USD) fell on Thursday, according to FXStreet data. Silver trades at $29.54 per troy ounce, down 0.20% from the $29.60 it cost on Wednesday.

Silver prices have increased by 24.16% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 84.86 on Thursday, broadly unchanged from 84.87 on Wednesday.

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The Australian Dollar (AUD) is expected to trade in a 0.6720/0.6765 range. AUD could continue to advance, possibly to last month’s high, near 0.6800, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

Set to break above last month’s high near at 0.6800

24-HOUR VIEW: “AUD fluctuated between 0.6732 and 0.6761 yesterday, closing largely unchanged at 0.6744 (-0.04%). The current price movements are likely part of a range trading phase. Today, we expect AUD to trade in a range of 0.6730/0.6765.”

1-3 WEEKS VIEW: “AUD snapped its 4-day winning streak yesterday, closing marginally lower by 0.04% (0.6744). While upward momentum has slowed somewhat, it is too early to call for an end to the advance in AUD. Provided that the ‘strong support’ level at 0.6660 is not taken out, AUD could continue to advance, possibly to last month’s high, near 0.6800.”

Euro bulls have had to overlook some soft activity indicators recently, and we doubt there are any expectations for a near-term recovery in the eurozone’s growth outlook, ING’s FX strategist Francesco Pesole notes.

Solid and stable EUR/USD bullish momentum

“The question is whether the European Central Bank will react with faster easing due to slow growth. The answer to that depends on inflation and wage dynamics, which have so far argued against the doves.”

“Today’s ECB Negotiated Wages Indicator is a key release; the risk is that we see another disappointing print for the ECB after German wage figures were higher than expected. The first quarter print was 4.7% quarter-on-quarter, and while the headline number may decline, that may be down to one-off factors, and a closer look at the report may show the kind of underlying wage resilience that worries the ECB.”  

“We have seen solid and stable EUR/USD bullish momentum and given the risks of a hawkish repricing in ECB rate expectations (at -70bp by year-end, they are still quite dovish), we retain a positive bias on the pair. The short-term fair value level has risen to around 1.13 in our calculations, so there is no strong technical impairment for another leg higher, in our view.”

The Pound Sterling (GBP) could continue to rise, but it might not be able to break clearly above last year’s high of 1.3144 today, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

Bulls are set to test 1.3144

24-HOUR VIEW: “GBP soared yesterday, closing at its highest level since July of last year (1.3090, +0.43%). Impulsive momentum will likely override the severely overbought conditions, but while GBP could continue to rise today, it might not be able to break clearly above last year’s high of 1.3144. On the downside, should GBP breach 1.3030 (minor support is at 1.3060), it would mean that it is not rising further.”

1-3 WEEKS VIEW: “Yesterday, GBP closed higher for the fifth straight day (1.30+0, +0.43%). This is the highest daily closing since July of last year. Note that last year, GBP peaked at 1.3144. The price action suggests there is scope for GBP to rise to, and potentially break above 1.3144, as long as it does not breach the ‘strong support’ level at 1.2950. Looking ahead, the level to watch above 1.3144 is 1.3200.”

• EUR/USD bounces back as Eurozone’s flash PMI for August beats estimates.
• The German PMI suggested that activity contracted at a faster pace in August.
• The US Dollar remains in a bearish trajectory with Fed Powell’s speech in focus.

EUR/USD rebounds after a slight drop to near 1.1130 in Thursday’s European session as the flash Eurozone HCOB Composite PMI for August unexpectedly rose to 51.2, beating economists' expectations.

The report showed that the strong expansion came from robust growth in the service sector's activity. The Service PMI expanded strongly to 53.3 from the estimates and the prior release of 51.9. On the contrary, the Manufacturing PMI declined further to 45.6, lower than the 45.8 expected.

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: “The boost largely comes from a surge in services activity in France, with the Business Activity Index jumping by almost five points, likely linked to the buzz surrounding the Olympic Games in Paris. It’s doubtful this momentum will carry over into the coming months, however. Meanwhile, the overall pace of growth in the services sector has slowed down in Germany, and the Eurozone’s manufacturing sector remains in rapid decline.”

The slowdown in the German economy signaled by the PMI data is unlikely to weigh on market speculation about the European Central Bank (ECB) interest-rate outlook. Markets broadly expect the ECB is expected to cut its key borrowing rates one more time in the last quarter of this year, given that price pressures are anticipated to return to the bank’s target of 2% next year.

Daily digest market movers: EUR/USD remains broadly firm amid fragile US Dollar

• EUR/USD trades almost flat as the US Dollar (USD) remains close to a fresh 2024 low. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to 101.00. The outlook of the US Dollar remains bearish as the Federal Reserve (Fed) appears to be on track to cut interest rates in September.
• This would be the first dovish interest rate decision by the Fed in more than four years. The US central bank has maintained a restrictive monetary policy stance since March 2022 to bring down inflation.
• Market speculation for Fed interest rate cuts has strengthened as the "vast majority" of Fed officials see policy-easing in September as appropriate, given that inflationary pressures continue to ease further, according to the Federal Open Market Committee (FOMC) minutes of July 30-31 policy meeting. The FOMC minutes also showed that some policymakers were ready to reduce interest rates already back in July.
• For more cues on the interest rate path, investors will focus on Fed Chair Jerome Powell’s speech on Friday at the Jackson Hole (JH) Symposium, which will begin at 14:00 GMT. Investors will pay attention to clues about the size of interest rate cuts in September and by how much the Fed could reduce them this year.
• In Thursday’s session, investors will keenly focus on the US flash S&P Global PMI data for August, which will be published at 13:45 GMT. The preliminary PMI report is expected to show that the Composite PMI fell to 53.5 from 54.3 in July.

Technical Analysis: EUR/USD posts fresh year-to-date high at 1.1175

EUR/USD trades inside Wednesday’s trading range, with investors focusing on the Fed Powell’s speech at the JH Symposium on Friday. The major currency pair is expected to continue its four-day winning streak as its outlook has strengthened, given that it is trading close to a year-to-date high near 1.1175.

Earlier, the shared currency pair strengthened after a breakout of a channel formation on a daily time frame. All short-to-long-term Exponential Moving Averages (EMAs) are sloping higher, suggesting a strong uptrend.

The 14-day Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum. Still, chances of a corrective pullback increase as the momentum indicator is in overbought territory.

After a decisive break above the December 28, 2023, high at 1.1140, Euro bulls aim to recapture round-level resistance of 1.1200. On the downside, the round-level figure of 1.1100 will act as a major support zone.

• AUD/USD price may advance further daily chart analysis indicates strengthening of a bullish bias.
• The 9-day EMA is positioned above the 50-day EMA, suggesting the recent price action outperforming the longer-term trend.
• The seven-month high of 0.6798 level appears as the key barrier.

AUD/USD retraces its recent losses from the previous session, trading around 0.6750 during Thursday’s European hours. The daily chart analysis indicates that the pair trends upwards within an ascending channel pattern, reinforcing the bullish bias.

The 14-day Relative Strength Index (RSI) consolidates slightly below the 70 level, indicating that bullish momentum is in play. However, if the RSI reaches 70, it would signal that the AUD/USD pair is entering overbought territory, suggesting a potential correction might be imminent.

Moreover, the daily chart analysis also indicated that the 9-day Exponential Moving Average (EMA) is positioned above the 50-day EMA, which is typically interpreted as a bullish signal. This suggests that the recent price action is outperforming the longer-term trend.

In terms of resistance, the AUD/USD pair could target the region near its seven-month high of 0.6798, reached on July 11. A break above this level would likely encourage the pair to test the upper boundary of the ascending channel around the 0.6860 level.

On the downside, the AUD/USD pair may first test the lower boundary of the ascending channel around the 0.6700 level, followed by the nine-day EMA at 0.6686. The next support lies at the 50-day EMA at 0.6634.

A break below the 50-day EMA could weaken the bullish bias and increase downward pressure, leading the AUD/USD pair to test the throwback support at 0.6575. If the pair falls below this support, it could extend its decline toward the next throwback level at 0.6470.

AUD/USD: Daily Chart

The European Central Bank (ECB) released its indicator of the Euro area’s negotiated wages data for the second quarter of 2024 on Thursday.

Data showed that the Euro area negotiated wages increased at an annual pace of 3.55% in Q2 2024 after rising 4.74% in the first quarter of this year.

Market reaction to the EU negotiated wages data

The slowdown in the EU negotiated wage growth checks gains in the Euro, as EUR/USD stalls its rebound to trade near 1.1140, as of writing.

About ECB indicator of negotiated wage growth

The ECB indicator of negotiated wage growth is computed for a subset of countries only. The euro area aggregate is based on nine countries: Germany, France, Italy, Spain, the Netherlands, Belgium, Finland, Austria and Portugal. The indicator relies on data for negotiated monthly earnings. The euro area indicator is based on a mixture of monthly and quarterly time series and is based on non-harmonised country data.

• USD/CAD continues losing ground for the fifth straight day and drops to a multi-month low.
• The narrowing US-Canada rate differential continues to benefit the CAD and exerts pressure.
• Bearish Oil prices and a modest USD strength also do little to lend any support to the major.

The USD/CAD pair prolongs its sharp retracement slide from the vicinity of the mid-1.3900s, or the highest level since October 2022 touched earlier this month and remains under some selling pressure for the fifth straight day on Thursday. The downward trajectory drags spot prices to the 1.3575-1.3570 area, or over a four-month low during the first half of the European session and confirms a near-term breakdown through the very important 200-day Simple Moving Average (SMA). 

Investors seem convinced that the Federal Reserve (Fed) will start lowering borrowing costs in September. In fact, the markets started pricing in the possibility of a larger-than-normal, 50 basis points (bps) rate next month after data released on Wednesday suggested that the US labor market was not as strong as estimated. This, in turn, will result in the narrowing of the rate differential between the US and Canada, which is seen driving flows towards the Canadian Dollar (CAD) and dragging the USD/CAD pair lower. 

The downward trajectory, meanwhile, seemed rather unaffected by bearish Crude Oil prices, which tend to undermine demand for the commodity-linked Loonie. The revised US employment statistics revived recession fears in the world's largest fuel consumer and comes on top of persistent worries about a slowdown in China – the world's second-largest economy and the largest Oil importer. This, in turn, keeps Crude Oil prices depressed just above a multi-month low touched on August 5, albeit does little to ease the bearish pressure surrounding the USD/CAD pair. Even a modest US Dollar (USD) fails to lend support to the major. 

An uptick in the US Treasury bond yields assists the USD in attracting some buyers and snapping a four-day losing streak to a fresh YTD low touched the previous day. That said, dovish Fed expectations might hold back the USD bulls from placing aggressive bets ahead of Thursday's release of the Weekly Initial Jobless Claims and Existing Home Sales data from the US. The focus, however, remains glued to the Fed Chair Jerome Powell's speech on Friday, which should provide some meaningful impetus to the USD/CAD pair.

The US revised down first-quarter payrolls by 818k yesterday. The market reaction was tainted by a delay in the release and probably some leaks about the figure but the message is clear: the jobs market is softening from a weaker position than previously thought. If that wasn’t enough of a USD-bearish argument yesterday, the FOMC minutes from the July meeting sent dovish signals, ING’s FX strategist Francesco Pesole notes.

A move in September as appropriate

“Market pricing for September is at 34bp, still signalling some reticence to price in a 50bp move at the next meeting before tomorrow’s Jackson Hole speech by Federal Reserve Chair Jerome Powell. However, the reasoning behind a 50bp September cut was that the Fed would “make up” for missing out on easing in July, and yesterday’s minutes all but endorsed that.”

“Today’s price action will be influenced by S&P Global PMIs across some developed countries. These PMIs aren’t as highly regarded as the ISM surveys in the US but have the benefit of comparability with the European ones, and markets have been on high alert for activity signals also coming from tier-two data in the US.”

“The ‘hard reset’ in speculative positioning of the past few weeks has placed the FX market in the condition to take on new structural positions. We think the prospect of Fed easing means USD shorts will continue to prevail. Measures of trade-weighted USD are around 1% above the December lows. The way markets are trading Fed easing is similar to that in December and we see no reason to call for an inversion of the dollar bear trend for now.”

• Gold takes a pause in its rally ahead of key data and speeches at the Jackson Hole central banker symposium. 
• Weak US data signals an imminent fall in US interest rates and continues to be broadly supportive of Gold. 
• Technically, XAU/USD still has not reached its minimum upside target after its breakout from the range. 

Gold (XAU/USD) extends a modest pullback on Thursday during the European session as US yields bounce back into the green and the US Dollar (USD) – to which Gold is negatively correlated – inches back into positive territory after falling to year-to-date lows early Wednesday. 

Gold broadly supported by negative US data

Gold traders continue to assess the outlook for the US economy for guidance on the future path of interest rates, a key driver for the asset. Gold tends to appreciate as interest rates fall because this lowers the opportunity cost of holding the non-interest paying asset. 

The release of the Federal Reserve’s (Fed) July meeting minutes on Wednesday revealed a greater willingness on the part of Fed members to cut interest rates. Some members even saw a 0.25% cut as plausible in July despite eventually voting against such a move. The majority saw a cut in interest rates as necessary in September if macroeconomic data continued its current trend. Overall, the Minutes solidified expectations of a September rate cut. However, given the market has already fully priced in the probability of at least a 0.25% cut, the Minutes had little impact on asset prices.

The chances of a “mega cut” of 0.50% at the September meeting have edged up again over recent sessions and at the time of publication stand at 34.5% compared to the 28.5% a few days ago, according to data from the CME FedWatch Tool. Whether this could materialize is of interest to traders since a 0.25% cut is now a fait accompli. Whether Gold presses higher again may greatly depend on whether the Fed in fact goes ahead with the larger 0.5% reduction in interest rates. 

Given recent jitters about the state of the US labor market, the other key data out on Wednesday was the US Bureau of Labour Statistics (BLS) preliminary revisions to Nonfarm Payrolls (NFP) data for the 12 months to March 2024. These showed an aggregate downward revision of 818,000, which translates into an average of 68,000 fewer payrolls per month, bringing the average pace down from 242,000 per month to 174,000 instead. Although substantially lower, the data isn’t bad enough to flash recession-warning signs, and besides, as Jim Reid, a strategist at Deutsche Bank notes, “the revisions only affect the numbers up to March, and don’t change our understanding of the more recent figures, which is ultimately what the Fed cares about.”

That said, the poor data still adds to the narrative of a weakening labor market, adding further pressure on US yields, the US Dollar, and is broadly supportive of Gold. 

Global preliminary Purchasing Manager Index (PMI) data for August, which gauges activity levels in key industry sectors, is the main data point to watch on Thursday. The speech by Fed Chairman Jerome Powell at the central-banker moot in Jackson Hole will be the major event for Gold bugs on Friday. 

Technical Analysis: Gold extends shallow pullback

Gold (XAU/USD) extends a shallow pullback after rolling over from new all-time highs. The short-term trend, however, remains bullish and given “the trend is your friend” this continues to favor longs over shorts. 

The breakout of the range on August 14 generated an upside target at roughly $2,550, calculated using the usual method of taking the 0.618 Fibonacci ratio of the range’s height and extrapolating it higher. The target is a minimum expectation based on technical analysis. 

XAU/USD Daily Chart

Gold is in a broad uptrend on medium and long-term time frames, which further supports an overall bullish outlook for the precious metal. 

• Silver price moves sideways as traders remain cautious due to the Jackson Hole Annual Symposium scheduled for August 22-24.
• Fed Chair Jerome Powell will address the potential for interest rate cuts Annual Symposium on Friday.
• The Silver could find support due to safe-haven flows amid lacking a truce agreement between Israel and Hamas.

Silver price (XAG/USD) price edges lower to near $29.50 per troy ounce during the European hours on Thursday. Traders are focused on Federal Reserve Chair Jerome Powell's upcoming keynote speech at the Jackson Hole Annual Symposium on Friday, where he is expected to address the potential for interest rate cuts in the United States.

The downside for non-yielding Silver could be limited, as the Federal Reserve is expected to implement 100 basis points (bps) in rate cuts by the end of this year. However, there is some disagreement among market analysts on whether the Fed will opt for a 25 or 50 bps cut at its September meeting. Lower interest rates would make commodity assets like Silver more attractive to investors, as they may offer better returns in a low-rate environment.

CME FedWatch Tool suggests that the markets are now pricing in a nearly 65.5% odds of a 25 basis point (bps) Fed rate cut in its September meeting, down from 71.0% a day ago. The probability of a 50 basis point rate cut increased to 34.5% from 29.0% a day earlier.

FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool.

The safe-haven Silver could find support amid the ongoing deadlock in securing a truce agreement between Israel and Hamas, which raises the risk of a broader conflict in the Middle East. On Wednesday, US President Joe Biden urged Israeli Prime Minister Benjamin Netanyahu to prioritize achieving a truce in Gaza and the release of hostages, but both Israel and Hamas remained steadfast in their demands.

Vice President Kamala Harris also joined the conversation following the reports from Palestinian health officials that Israeli airstrikes had killed at least 50 Palestinians within 24 hours, according to a Reuters report.

• UK Services PMI edges higher to 53.3 in August, beats estimates.
• Manufacturing PMI in the UK climbs to 52.5 in August.
• GBP/USD extends gains above 1.3100 after upbeat UK business PMIs.

The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) improved from 52.1 in July to 52.5 in August. Markets had expected a 52.1 print.

Meanwhile, the Preliminary UK Services Business Activity Index rose to 53.3 in August, compared to July’s 52.5 and the estimated 52.8 figure.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation, according to provisional PMI survey data.”

“Both manufacturing and service sectors are reporting solid output growth and increased job gains as business confidence remains elevated by historical standard,” Chris added.

FX implications

GBP/USD catches a fresh bid to hit an intraday high at 1.3114 after strong UK PMI data. The pair is trading 0.15% higher on the day, as of writing.

The Euro (EUR) is likely to trade in a higher range of 1.1110/1.1180. Solid momentum indicates further EUR strength; it remains to be seen if the 2023 high of 1.1275 is within reach, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

The closest resistance is at 1.1180

24-HOUR VIEW: “EUR dipped briefly to 1.1099 in NY trading before soaring to 1.1173. EUR closed at 1.1150 (+0.18%). Today, EUR could rise above 1.1173, but any advance is viewed as part of a higher range of 1.1110/1.1180. In other words, EUR is unlikely to break clearly below 1.1110 or above 1.1180.”

1-3 WEEKS VIEW: “Yesterday, EUR broke above last December’s peak of 1.1140 (high of 1.1173) before closing at a 13-month high of 1.1150 (+0.18%). While solid upward momentum indicates further EUR strength, it remains to be seen whether the 2023 high of 1.1275 is within reach in the next couple of weeks. Overall, we will hold a positive EUR view provided that the ‘strong support’ level at 1.1045 is not breached.”

• GBP/JPY regains positive traction on Thursday and draws support from a combination of factors.
• A positive risk tone, along with the BoJ rate-hike uncertainty, undermines the safe-haven JPY.
• Diminishing odds for a BoE rate cut in September benefit the GBP and further act as a tailwind.

The GBP/JPY cross attracts some dip-buying near the 189.65-189.60 region on Thursday and climbs to the daily peak during the early part of the European session. Spot prices currently trade just below the mid-190.00s and remain confined in a familiar range held over the past week or so, below the very important 200-day Simple Moving Average (SMA). 

The British Pound (GBP) continues to draw support from diminishing odds for another interest rate cut by the Bank of England (BoE) following last week's UK inflation and labor market data. This, along with the upbeat UK GDP print, points to a resilient economy and fueled speculations that the BoE might keep rates unchanged at the September meeting. Furthermore, a generally positive risk tone is seen undermining the safe-haven Japanese Yen (JPY) and acting as a tailwind for the GBP/JPY cross. 

The JPY is further weighed down by domestic political uncertainty led by Japanese Prime Minister Fumio Kishida's decision to step down, which could lead to a pause in the Bank of Japan's (BoJ) plan to raise interest rates steadily. Investors, however, seem convinced that an improving macroeconomic environment in Japan should encourage the BoJ to raise rates again later this year. This, along with persistent geopolitical risks, should limit any meaningful JPY fall and keep a lid on the GBP/JPY cross. 

Market participants now look forward to the release of the flash UK PMIs for short-term trading opportunities. Meanwhile, the focus will then shift to the release of the Japanese Nationwide CPI print on Friday. Furthermore, BoE Governor Andrew Bailey's appearance at the Jackson Hole Symposium on Friday will infuse some volatility and provide some meaningful impetus to the GBP/JPY cross.

• Eurozone Manufacturing PMI declined to 45.6 in August, missing the 45.8 estimate.
• Bloc’s Services PMI jumped to 53.3 in August vs. 51.9 anticipated.
• EUR/USD remains in the red below 1.1150 after German, Eurozone PMI data.   

The Eurozone manufacturing sector extended its downturn while the services sector activity rebounded in August, according to the data from the HCOB's latest Purchasing Managers Index (PMI) Survey published on Thursday.

The Eurozone Manufacturing Purchasing Managers Index (PMI) fell from 45.8 in July to 45.6 in August, below the market forecast of 45.8. The index slumped to an eight-month low.

The bloc’s Services PMI jumped from 51.9 in July to 53.3 in August. The data outpaced market expectations of 51.9 and hit a four-month high.

The HCOB Eurozone PMI Composite unexpectedly rose to 51.2 in August vs. 50.1 expected and July’s 50.2 figure, recording a three-month peak.

EUR/USD reaction to the Eurozone PMIs data

EUR/USD trims losses following the mixed Eurozone PMIs. The pair is losing 0.06% on the day to trade near 1.1145, at the press time.

• The S&P Global preliminary PMIs for August are seen little changed from previous readings.
• Economic activity surveys are unlikely to affect the Federal Reserve’s upcoming decisions.
• EUR/USD is building a long-term bullish trend, but a downward correction is on the table. 

S&P Global will publish the preliminary estimates of the United States (US) Purchasing Managers Indexes (PMIs) for August on Thursday. The indexes are the result of surveys of the senior executives in the private sector and are meant to indicate the overall health of an economy, providing insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment, and inventories.

S&P Global releases three indexes: The Manufacturing PMI, the Services PMI, and finally, the Composite PMI, which is a weighted average of the two sectors. Readings above 50 indicate expansion, while figures below it represent economic contraction.

Since March 2023, the services sector has remained within expansionary levels while manufacturing has struggled to expand. For what it’s worth, the final July figures showed the Services PMI at 55, while the manufacturing index hit 49.6. 

“The US service sector began the second half of the year as it ended the first, seeing a marked expansion of business activity in July on the back of a rise in new orders. Growth of new business also encouraged firms to take on extra staff, as did positive expectations for the future,” the official report reads. 

What can we expect from the next S&P Global PMI report?

Financial markets expect a modest downtick in the August Services PMI, foreseen at 54, while the manufacturing index is expected to hold steady at 49.6. As a result, the Composite PMI is forecast to ease to 53.5 from 54.3 in July. 

Investors will closely monitor the figures, as concerns about the US recession are still pending in the back. Following the release of the July Nonfarm Payrolls (NFP) report, speculative interest feared a steeper economic setback and even rushed to price in an out-of-schedule rate cut before the September meeting. Concerns cooled afterwards, as macroeconomic data showed the US economy remains resilient. However, any surprise in growth-related figures could lead to a sharp shift in sentiment, as the focus is on the September Federal Reserve (Fed) monetary policy decision.

The Fed softened its hawkish tone in the July monetary policy meeting, and policymakers started paving the way for a September interest rate cut. Chairman Jerome Powell has long ago indicated that a loosening labor market and easing inflationary pressures were the two main conditions for a rate cut, but never mentioned economic progress. However, the risk of a recession could also lead to a rate cut amid the increasing risks that high rates pose to the economy. Policymakers won’t say so but indeed consider it. 

At this point, the Fed is widely anticipated to trim interest rates in the September meeting, and it seems unlikely these PMI figures will affect such a decision. However, they could introduce some near-term noise.  

When will the August flash US S&P Global PMIs be released, and how could they affect EUR/USD?

The S&P Global Manufacturing, Services and Composite PMIs report will be released at 13:45 GMT. As said, the figures are expected to show small variations from the final July readings, meaning they would likely have a limited impact on the US Dollar. 

Ahead of the release, the EUR/USD pair is trading at its highest level since December 2023, above the 1.1100 mark. The US Dollar's persistent weakness results from a combination of risk appetite and the belief that the Fed will trim interest rates in September.

According to Valeria Bednarik, FXStreet's Chief Analyst, “The EUR/USD pair is technically overbought, yet there are no signs of a change in the dominant trend. Upbeat PMI figures could temporarily support the US Dollar, but once the dust settles, market players will resume revolving around the upcoming Fed’s monetary policy decision. In the case of the EUR/USD pair, a corrective decline is now on the table, with supports at 1.1080 and the 1.1000 threshold. The latter should hold to maintain the bullish trend alive.”

Bednarik adds: “EUR/USD faces a strong static resistance level at 1.1140. Once above it, the case for a sustained rally will be firmer, with the 1.1200 mark coming up next.”

• NZD/USD treks within the upper boundary of the ascending channel pattern.
• The 14-day RSI rises to near 70 level, indicating a potential for correction.
• The nine-day EMA at 0.6092 appears as the immediate support for the pair.

NZD/USD continues its winning streak for the fifth successive session, trading around 0.6160 during the early European hours on Thursday. The daily chart analysis shows that the pair treks upwards within the upward boundary of the ascending channel, reinforcing the bullish bias.

Additionally, the 14-day Relative Strength Index (RSI) is positioned slightly below the 70 level, suggesting a confirmation of the bullish sentiment. Further movement will indicate currency pair overbought and a potential correction in the short term.

The nine-day Exponential Moving Average (EMA) is positioned above the 50-day EMA, indicating that the NZD/USD pair is experiencing upward momentum in the short term and continues to rise.

On the upside, the NZD/USD pair may find immediate resistance around the upper boundary of the ascending channel at 0.6190. A break above this level could lead the pair to test a two-month high of 0.6247 level, marked on Wednesday.

In terms of support, the nine-day EMA at 0.6092 appears as the immediate support. A break below this level could weaken the bullish bias and lead the NZD/USD pair to test the 50-day EMA at 0.6045 level, followed by the lower boundary of the ascending channel at 0.6030 level.

A breach below the latter could cause the emergence of a bearish sentiment, which may put pressure on the NZD/USD pair to navigate the region around “throwback support” at the 0.5850 level.

NZD/USD: Daily Chart

• The Pound Sterling aims to extend its five-day winning spell against the US Dollar.
• Investors await the August S&P Global PMIs for both the UK and the US.
• The major event this week will be Powell and Bailey’s speeches at Jackson Hole. 

The Pound Sterling (GBP) clings to gains near the round-level resistance of 1.3100 in Thursday’s London session. The GBP/USD pair is expected to move sideways after a five-day winning streak, with investors focusing on the flash August S&P Global Purchasing Managers’ Index (PMI) data for both the United Kingdom (UK) and the United States (US), which will be published at 08:30 GMT and 13:45 GMT, respectively.

The broader outlook of the Cable remains positive as the US Dollar trades on the backfoot, with growing speculation that the Federal Reserve (Fed) will start reducing interest rates from its September meeting. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near 101.00, the lowest level seen this year.

The confidence of investors that the Fed will pivot to policy normalization has increased after the Federal Open Market Committee (FOMC) minutes for the July 30-31 meeting showed that some policymakers suggested cutting borrowing rates already back then. Still,  the “vast majority” of officials said that "if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” according to the minutes.

Meanwhile, a downward revision in Nonfarm Payrolls (NFP) in the year to March 2024 renewed fears of a potential recession and prompted traders to increase bets of a 50-basis-points (bps) interest-rate reduction in September. The US Bureau of Labor Statistics (BLS) reported that the number of total employees hired during the period was 818K lower than previosuly estimated, which prompted expectations of a sizeable interest rate cut.

Now investors shift focus to the Jackson Hole (JH) Symposium, which will begin at 14:00 GMT and last till August 24. The highlight will be Fed Chair Jerome Powell’s speech scheduled on Friday. Investors will look for fresh cues about the potential size of interest rate cuts in September.

Daily digest market movers: Pound Sterling to be guided by flash UK S&P Global/CIPS PMI data

• The Pound Sterling exhibits a mixed performance against its major peers as investors have sidelined ahead of the preliminary UK S&P Global/CIPS data for August. The flash PMI report will hint at the current status of the UK economy. Economists estimate that the Composite PMI improved marginally, to 52.9 from 52.8 a month earlier, led by a sharper expansion of activity in the service sector. Meanwhile, activity in the manufacturing sector is seen growing at a steady pace.
• The flash PMI report could also show a significant improvement in employers’ morale and firm labor demand as a result of the Bank of England (BoE) interest-rate cut in August. This was the first reduction in borrowing costs since December 2021, when it started tightening monetary policy to contain high inflationary pressures bolstered by pandemic-led stimulus.
• This week, the major trigger for the Pound Sterling will be the BoE Governor Andrew Bailey’s speech at the JH Symposium on Friday. Andrew Bailey may guide about whether the BoE will cut interest rates again in September. Also, investors would look for cues over the outlook on wage growth and service inflation.
• According to a Reuters poll, the BoE is expected to deliver one more interest rate cut in November, given that inflation is expected to remain above the bank’s target of 2%. Analysts at Rabobank said in a note: "We're witnessing headline inflation inching towards 2.75%-3.00% by year-end.”

Pound Sterling Price Today:

Technical Analysis: Pound Sterling approaches two-year high of 1.3140

The Pound Sterling posts a fresh year-to-date high at 1.3050 against the US Dollar. The GBP/USD pair moves higher in a Rising Channel chart pattern in which each pullback is considered a buying opportunity by market participants. The upward-sloping 20-day Exponential Moving Average (EMA) near 1.2875 suggests that the near-term trend is bullish.

The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum. Still, it has reached overbought levels at around 70.00, increasing the chances of a corrective pullback.

• Germany’s Manufacturing PMI declined to 42.1 in August vs. 43.5 forecast.
• Services PMI for the German economy fell to 51.4 in August vs. 52.3 expected.
• EUR/USD remains pressured below 1.1150 after downbeat German PMIs.

The German manufacturing sector contraction deepened in August while the services sector activity worsened, the preliminary business activity report published by the HCOB survey showed Thursday.

The HCOB Manufacturing PMI in the Eurozone’s top economy came in at 42.1 this month, declining from July’s 43.2 while missing the forecast of 43.5 by a wide margin. The measure hit a five-month bottom.

Meanwhile, Services PMI fell from 52.5 in July to 51.4 in August, falling short of the market expectations of 52.3 in the reported period. The gauge also touched a five-month trough.

The HCOB Preliminary German Composite Output Index contracted to 48.5 in August vs. 49.2 anticipated and 49.1 booked in July. The index was at its lowest in five months.

FX implications

EUR/USD extends losses on the disappointing German data, currently trading 0.20% lower on the day at 1.1127.

• The Mexican Peso is depreciating in its key pairs ahead of the release of key data on Thursday. 
• Mexican inflation and GDP data could provide volatility, whilst flash PMIs in Europe and the US could influence counterparts. 
• USD/MXN shrugged off negative economic news from the US and continued rising on Wednesday. 

The Mexican Peso (MXN) extends losses in its key pairs on Thursday. The decline broadens the trend of the last few days, which has seen MXN lose 1.50% to 1.90% on Wednesday after a similar decline on Tuesday. 

Traders now await potentially market-moving data out of both Mexico and Europe on Thursday, and prepare for Federal Reserve (Fed) Chairman Jerome Powell’s speech at Jackson Hole on Friday. 

At the time of writing, one US Dollar (USD) buys 19.31 Mexican Pesos, EUR/MXN trades at 21.53, and GBP/MXN at 25.28.

Mexican Peso weakens against USD despite weak US data

The Mexican Peso’s 1.50% fall against the US Dollar (USD) on Wednesday came about despite the release of broadly negative Bureau of Labour Statistics (BLS) revisions to Nonfarm Payrolls and the US Federal Reserve’s (Fed) July meeting Minutes, which revealed policymakers are more open to cutting interest rates. The expectation of lower interest rates is generally negative for a currency as it reduces foreign capital inflows. 

The US Bureau of Labour Statistics (BLS) released their revisions for Nonfarm Payrolls in the year to March 2024 and these showed an aggregate downward revision of 818,000 to payrolls for the previous 12 months, which translates to an average of 68,000 per month. This is likely to add to concerns regarding the health of the US labor market and the US economy experiencing a hard landing. This is especially the case in light of the “flash crash” that followed the release of a weak July NFP number, which came out below expectations at 114,000, whilst the US Unemployment Rate edged up another notch to 4.3%.  

Although the US Dollar outperformed the Peso, the US Dollar Index (DXY) – which tracks the value of the Dollar against a trade-weighted basket of counterparts – did hit a new year-to-date low during the Asian session on Wednesday before rebounding, prior to the release of the weak BLS data and the Fed Minutes.

Data on the horizon

Thursday sees the release of more data for the Peso and its pairs. 

Mexican 1st Half-Month Inflation for August and Q2 Gross Domestic Product (GDP) data will be published by INEGI at 12.00 GMT. Followed by the Minutes from the Banco de Mexico’s (Banxico) August policy meeting. 

In the Eurozone and UK, meanwhile, preliminary Purchasing Manager Indexes (PMI) for August will be released at 8.00 and 8.30 GMT, respectively. Similar data for the US will be published at 13:45 GMT.

Eurozone wage negotiations data will also be released at 9:00 GMT on Thursday, and could color the outlook for inflation in the region. This in turn could influence the trajectory of monetary policy by the European Central Bank (ECB) with implications for the Euro (EUR) and EUR/MXN. 

Technical Analysis: USD/MXN extends new leg higher

USD/MXN extends its gains, further reversing the prior evolving down leg within the pair’s broader rising channel. 

The long green up days posted on Tuesday and Wednesday could indicate the short-term trend is changing and the pair may be about to begin a new up leg within the channel.

USD/MXN Daily Chart 

USD/MXN had been looking like it was unfolding in a bearish abc pattern within its rising channel, however, wave “c” has failed to extend all the way down to the lower channel line. 

The pair has also now broken above the top of wave “b” at 19.10, tilting the odds in favor of bulls. The break could indicate a stronger up move is underway, that could take the pair back up to the channel highs at roughly 20.50.  

The overall trend on the medium and longer-term time frames is arguably up, suggesting a bullish backdrop that provides extra support to the view that a new upward move is underway. 

Here is what you need to know on Thursday, August 22:

Following a recovery attempt seen in the first half of the day on Wednesday, the US Dollar Index turned south in the American session and closed the fourth consecutive day in negative territory. During the European trading hours on Thursday, preliminary August HCOB Manufacturing and Services PMI data from Germany and the Euro area, alongside the S&P Global/CIPS PMI figures, will be scrutinized by market participants. Later in the day, weekly Initial Jobless Claims, Existing Home Sales and S&P Global PMI data will be featured in the US economic docket.

The US Bureau of Labor Statistics announced on Wednesday that the preliminary estimate of the benchmark revision indicates an adjustment to March 2024 total Nonfarm employment of -818,000 (-0.5%). Later in the day, the minutes of the Federal Reserve's (Fed) July 30-31 policy meeting showed that a vast majority of policymakers believed that if incoming data continued to meet expectations, it would likely be appropriate to ease policy at the next meeting. The USD Index was last seen moving in a tight channel slightly above 101.20, already down more than 1% since the beginning of the week. Meanwhile, US stock index futures trade marginally lower on the day and the benchmark 10-year US Treasury bond yield stays near the lower limit of its weekly range at around 3.8%.

During the Asian trading hours, the data from Australia showed that the Judo Bank Composite PMI improved to 51.4 in August's flash estimate from 49.9 in July. This reading failed to trigger a noticeable reaction in AUD/USD, which continues to move sideways at around 0.6750.

EUR/USD climbed above 1.1170 on Wednesday and touched its highest level since July 2023 before going into a consolidation phase early Thursday. At the time of press, the pair was virtually unchanged on the day at 1.1150.

GBP/USD preserved its bullish momentum on Wednesday and advanced beyond 1.3100 for the first time in over a year. The pair stays slightly below this level in the European morning on Thursday.

USD/JPY failed to benefit from the selling pressure surrounding the USD and closed the day flat on Thursday. The pair extends its sideways grind at around 145.50 to begin the European session.

Gold corrected from the record-high it set at $2,531 on Tuesday but managed to stabilize above $2,500 late Wednesday. XAU/USD stays relatively quiet and trades at around $2,510 early Thursday.

• EUR/JPY drifts higher to near 162.00 in Wednesday’s early European session.
• The cross maintains a negative outlook below the 100-period EMA, with a bearish RSI indicator. 
• The potential resistance level emerges at 162.70; the initial downside target to watch is 161.17.

The EUR/JPY cross holds positive ground around 162.00 during the early European session on Thursday. A record of Japan’s trade deficit data weighs on the Japanese Yen (JPY) and creates a tailwind for EUR/JPY. Japan’s Merchandise Trade Balance fell into a deficit of ¥621.84 billion after maintaining a surplus in June as imports climbed faster than expected.

Later on Thursday, traders will focus on the preliminary Purchasing Managers’ Index (PMI) for August from Germany and the Eurozone. On the Japanese docket, the National Consumer Price Index (CPI) for July and the Bank of Japan (BoJ) Governor Ueda's speech will be closely watched. 

EUR/JPY keeps the bearish vibe unchanged on the 4-hour chart as the cross is currently below the key 100-period Exponential Moving Averages (EMA). Additionally, the Relative Strength Index (RSI) stands below the midline near 48.00, suggesting that there could still be room for further downward movement in the near term. 

The 100-period EMA at 162.70 acts as an immediate resistance level for the cross. Extended gains could expose 162.85, the upper boundary of the Bollinger Band. The additional upside filter to watch is 163.75, the high of August 16. 

On the flip side, the first downside target emerges at 161.17, the lower limit of the Bollinger Band. A breach of this level could pave the way to 160.42, the low of August 19. The next contention level is located at 159.91, the low of August 9.   

EUR/JPY 4-hour chart

FX option expiries for Aug 22 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

• 1.0910 860m
• 1.0915 1.1b
• 1.1000 982m
• 1.1100 2.3b
• 1.1115 537m

USD/JPY: USD amounts                     

• 145.70 1.2b
• 146.20 1.2b
• 147.00 1.2b
• 148.00 1.6b
• 148.65 1.7b
• 149.00 501m

AUD/USD: AUD amounts

• 0.6630 1.2b
• 0.6650 1.4b
• 0.6660 627m
• 0.6670 795m

USD/CAD: USD amounts       

• 1.3625 631m
• 1.3650 500m
• 1.3880 416m

NZD/USD: NZD amounts

• 0.5520 500m
• 0.5940 1.3b

EUR/GBP: EUR amounts        

• 0.8475 833m

• EUR/GBP moves sideways as traders adopt caution ahead of PMI figures from both economies.
• ECB officials adopt caution about committing to a rate-cut path due to concerns over inflation rebound.
• UK’s recent inflation and employment data have strengthened the argument for the BoE maintaining the rate at 5.0% in September.

EUR/GBP attempts to retrace its recent losses from the previous session, trading around 0.8520 during Thursday’s Asian hours. The upside of the EUR/GBP cross could be attributed to traders’ expectations of the European Central Bank (ECB) gradually lowering interest rates. However, ECB officials have been cautious about committing to a specific rate-cut schedule due to concerns over inflation rebound.

The likelihood of an ECB rate cut was strengthened after Tuesday’s Harmonized Index of Consumer Prices (HICP) data from the European Monetary Union (EMU) showed no month-on-month change for July, as expected. Additionally, the Core HICP decreased by 0.2%, matching the decline observed in June. Traders are now closely watching the Purchasing Managers Index (PMI) reports for the Eurozone and Germany, due to be released on Thursday.

In the United Kingdom, recent inflation and employment reports have strengthened the case for the Bank of England (BoE) to maintain the interest rate at 5.0% in its upcoming September meeting. This development may have given a boost to the Pound Sterling (GBP). Furthermore, Rupert Thompson, Chief Economist at IBOSS, indicated that "The BoE is expected to keep rates steady in September, with any potential rate cut likely being delayed until November."

On Thursday, the release of UK PMI data will be pivotal for the British Pound. The Composite PMI is anticipated to rise to 52.9 in August, up from the previous reading of 52.8, reflecting expected growth in both the manufacturing and services sectors. Stronger figures could reinforce the case for the Bank of England to maintain its current interest rate in September.

Gold prices fell in India on Thursday, according to data compiled by FXStreet.

The price for Gold stood at 6,753.30 Indian Rupees (INR) per gram, down compared with the INR 6,780.07 it cost on Wednesday.

The price for Gold decreased to INR 78,769.16 per tola from INR 79,081.43 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

(An automation tool was used in creating this post.)

• EUR/USD loses ground around 1.1145 in Wednesday’s Asian session.
• Fed officials noted the central bank might cut interest rates in September if inflation continued to cool. 
• The ECB is anticipated to resume its easing cycle in September.

The EUR/USD pair trades with mild losses near 1.1145, snapping the four-day winning streak during the Asian session on Thursday. The downside of the major pair is likely to be limited amid firmer expectations that the US Federal Reserve (Fed) will start easing its monetary policy in September. Later on Thursday, the preliminary Purchasing Managers’ Index (PMI) for August from the Eurozone and the US will be released. 

The minutes of the Fed’s July 30-31 meeting released Wednesday suggested that most Fed officials agreed last month that they would likely cut their interest rate at their next meeting in September as long as inflation continued to cool. Atlanta Fed President Raphael Bostic said, “We might need to shift our policy stance sooner than I would have thought before.” 

The Fed Chair Jerome Powell’s speech at Jackson Hole could offer some hints about the interest rate path in the US. Markets expect Powell will signal on Friday that inflation is on course to the Fed's 2% target. Any dovish remarks from Fed officials might exert some selling pressure on the Greenback and create a tailwind for EUR/USD.

Across the pond, the European Central Bank (ECB) policymakers refrained from committing to a specific path for interest rate cuts, citing expectations that inflation in the Eurozone would remain near its current levels for the remainder of the year. Nonetheless, ECB policymaker Olli Rehn said on Monday that the ECB may need to lower interest rates again in September due to persistent economic weakness. The markets have priced in nearly a 90% chance of a 25 basis points (bps) cut in the deposit rate to 3.5% in September and see at least one more move before the end of the year.

• GBP/USD bulls turn cautious amid the emergence of some USD buying on Thursday.
• The divergent BoE-Fed policy expectations might continue to lend support to the pair. 
• The technical setup warrants caution for bulls and before positioning for further gains.

The GBP/USD pair oscillates in a narrow band during the Asian session on Thursday and remains within striking distance of its highest level since July 2023, around the 1.3120 area touched the previous day. Spot prices currently trade around the 1.3085 region, nearly unchanged for the day, as traders now look to the flash PMIs from the UK and the US for short-term opportunities. 

In the meantime, a modest uptick in the US Treasury bond yields assists the US Dollar (USD) in recovering a bit from the YTD low touched on Wednesday. This, in turn, is seen as a key factor acting as a headwind for the GBP/USD pair, though diminishing odds for another interest rate cut by the Bank of England (BoE) in September lend some support. Furthermore, increasing bets for a more aggressive policy easing by the Federal Reserve (Fed) should cap gains for the buck and contribute to limiting losses for the currency pair. 

From a technical perspective, this week's sustained breakout through the 1.3000 psychological mark and a subsequent move beyond the previous YTD peak, around the 1.3045 region was seen as a fresh trigger for bullish traders. That said, oscillators on the daily chart have moved on the verge of breaking into the overbought zone, making it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move. Nevertheless, the bias remains tilted firmly in favor of bulls. 

Hence, any further slide towards the 1.3050-1.3045 region could be seen as a buying opportunity and remain cushioned near the 1.3000 round figure. The latter should act as a key pivotal point, which if broken decisively might prompt some technical selling and drag the GBP/USD pair to the next relevant support near the 1.2950 area en route to the 1.2900 mark. Failure to defend the said support levels might suggest that spot prices have topped out in the near term and pave the way for some meaningful corrective decline. 

On the flip side, the 1.3120 area, or the YTD peak touched on Wednesday, could act as an immediate hurdle ahead of the 2023 swing high, near the 1.3140 region. Some follow-through buying will reaffirm the constructive setup and set the stage for an extension of the recent strong uptrend witnessed over the two weeks or so. The GBP/USD pair might then aim to surpass the 1.3200 round figure and test the 1.3225-1.3230 resistance zone.

GBP/USD daily chart

• USD/CHF may continue its losing streak despite an improved US Dollar.
• The Swiss Franc may advance further due to safe-haven flows amid a lack of truce agreement between Israel and Hamas.
• The Greenback holds gains due to market caution ahead of Fed Chair Powell’s speech at the Jackson Hole Symposium.

USD/CHF remains tepid around 0.8520 during the Asian session on Thursday, with a negative bias to continue its losing streak for the fifth successive day. The Swiss Franc (CHF) might gain support from safe-haven flows due to the ongoing stalemate in achieving a truce agreement between Israel and Hamas, which leaves the door open for a broader conflict in the Middle East.

On Wednesday, US President Joe Biden urged Israeli Prime Minister Benjamin Netanyahu to prioritize securing a truce in Gaza and the release of hostages, but both Israel and Hamas remained firm on their respective demands. The conversation, which also included Vice President Kamala Harris, occurred after Palestinian health officials reported that at least 50 Palestinians had been killed by Israeli airstrikes within 24 hours, according to a Reuters report.

Commerzbank FX Analyst Michael Pfister observed that recent market turbulence spurred a strong demand for safety, which positively impacted the Swiss franc (CHF). However, Pfister anticipates moderate CHF weakness in the coming months, predicting that the Swiss National Bank (SNB) is likely to lower interest rates further.

Read the full article: CHF: Caught between the SNB and the flight into safe havens – Commerzbank

The US Dollar (USD) edges higher due to improved Treasury yields, which could be attributed to the market caution ahead of the Federal Reserve (Fed) Chair Jerome Powell’s keynote speech at the Jackson Hole Annual Symposium scheduled on Friday.

Additionally, FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool. Furthermore, traders await Fed Chair Jerome Powell's upcoming speech at Jackson Hole on Friday.

• The Japanese Yen lost ground following the trade deficit data released on Wednesday.
• A Reuters poll suggested that 31 out of 54 economists expect the BoJ to raise rates before the end of the year.
• The recent FOMC Minutes suggested that most Fed officials agreed on a rate cut in September.

The Japanese Yen (JPY) edges lower against the US Dollar (USD) on Thursday. The USD/JPY pair gains ground as the JPY remains tepid following the record trade deficit report on Wednesday. Traders are anticipating Bank of Japan (BoJ) Governor Kazuo Ueda's appearance in parliament on Friday, where he will discuss the central bank's decision last month to raise interest rates.

A Reuters poll conducted from August 13-19, published on Wednesday, indicated that 31 out of 54 economists expect the Bank of Japan to raise borrowing costs before the end of the year. The median forecast points to a 25 basis point hike, which would bring the end-of-year rate to 0.50%.

The US Dollar (USD) edged higher on Thursday, supported by a slight recovery in Treasury yields. However, the Greenback's upside may be limited, as the Federal Reserve is expected to implement 100 basis points (bps) in rate cuts in 2024. Market analysts remain divided on whether the Fed will opt for a 25 or 50 bps cut at its September meeting.

CME FedWatch Tool suggests that the markets are now pricing in a nearly 65.5% chance of a 25 basis point (bps) Fed rate cut in its September meeting, down from 71.0% a day ago. The probability of a 50 basis point rate cut increased to 34.5% from 29.0% a day earlier.

Daily Digest Market Movers: Japanese Yen consolidates ahead of BoJ Governor Ueda’s speech

1. Traders adopt caution ahead of the Federal Reserve (Fed) Chair Jerome Powell’s keynote speech at the Jackson Hole Annual Symposium on Friday. Powell may deliver a statement about the possibility of interest rate cuts in the United States (US) is highly anticipated.
2. FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool.
3. Japan's Merchandise Trade Balance fell into a deficit of ¥621.84 billion in July, reversing the surplus of ¥224.0 billion reported in June and missing market estimates of a ¥330.7 billion shortfall. Japan's imports surged by 16.6% year-on-year in July, reaching a 19-month high of ¥10,241.01 billion, significantly up from the 3.2% rise in June. Meanwhile, exports increased by 10.3% YoY to a seven-month high of ¥9,619.17 billion, falling short of market forecasts of 11.4%.
4. Federal Reserve (Fed) Governor Michelle Bowman expressed caution on Tuesday about making any policy changes, citing ongoing upside risks to inflation. Bowman warned that overreacting to individual data points could undermine the progress already achieved, according to Reuters.
5. According to Reuters, the Bank of Japan (BoJ) had projected that a strong economic recovery would help inflation reach its 2% target sustainably. This would justify further interest rate increases, following last month's hike as part of the BoJ's ongoing effort to unwind years of extensive monetary stimulus.
6. Federal Reserve Bank of San Francisco President Mary Daly emphasized Sunday that the US central bank should take a gradual approach to reducing borrowing costs, according to the Financial Times. Additionally, Federal Reserve Bank of Chicago President Austan Goolsbee warned that central bank officials should be cautious about keeping a restrictive policy in place longer than necessary, per CNBC.
7. On Thursday, Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said that the reports are simply positive overall and “it supports the BoJ’s view and bodes well for further rate hikes, although the central bank would remain cautious as the last rate increase had caused a sharp spike in the Yen.”

Technical Analysis: USD/JPY remains above 145.00

USD/JPY trades around 145.20 on Thursday. Analysis of the daily chart shows that the pair is consolidating under a downtrend line, suggesting a bearish bias. Furthermore, the 14-day Relative Strength Index (RSI) is slightly above 30, suggesting a potential correction for the pair.

For support levels, the USD/JPY pair might navigate the region around the psychological level at 144.00 A break below this level could lead the pair to navigate the area around a seven-month low of 141.69, which was recorded on August 5. A further drop could drive the pair toward the next significant support level at 140.25.

On the upside, the USD/JPY pair could encounter an immediate resistance at the downtrend line around the nine-day Exponential Moving Average (EMA) at the 146.45 level. A breakthrough above this level could weaken the bearish bias and support the pair to test the resistance level at 154.50, which has transitioned from previous support to current resistance.

USD/JPY: Daily Chart

• Silver drifts lower on Thursday, albeit holds above the $29.20 confluence hurdle breakpoint.
• The technical setup favors bulls and supports prospects for the emergence of some dip-buying. 
• A sustained move beyond the $30.00 mark will set the stage for a further appreciating move.

Silver (XAG/USD) attracts some sellers during the Asian session on Thursday and reverses a major part of the previous day's positive move. The white metal, however, manages to hold above the 50-day Simple Moving Average (SMA) and currently trades around mid-$29.00s, down 0.40% for the day.

The 50-day SMA, currently pegged near the $29.20 region, coincides with the 50% Fibonacci retracement level of the July-August decline and should act as a key pivotal point for the XAG/USD. Against the backdrop of Tuesday's failure near the $30.00 psychological mark, a convincing break below the said confluence might prompt some technical selling and pave the way for deeper losses. 

The XAG/USD might then weaken further below the $29.00 round figure, towards testing the 38.2% Fibo. level support near the $28.55 region. Some follow-through selling has the potential to drag the white metal towards the $28.00 mark, below which the downward trajectory could extend further towards the $27.25 region en route to the next relevant support near the $27.00 round-figure mark.

That said, oscillators on the daily chart have been gaining positive traction and are far from being in the overbought zone. This supports prospects for the emergence of some dip-buying at lower levels and warrants some caution for bearish traders. That said, it will still be prudent to wait for a sustained strength beyond the $30.00 mark before positioning for any meaningful appreciating move. 

The subsequent move-up will set the stage for a move towards the $30.55-$30.60 area, or the 78.6% Fibo. level, above which the XAG/USD could aim to reclaim the $31.00 mark. The XAG/USD might then accelerate the momentum further towards the $31.30-$31.40 supply zone en route to the July swing high, around the $31.75 region, the $32.00 level and the $32.50 area, or the YTD peak touched in May.

Silver daily chart

• DXY moves away from the YTD low set on Wednesday, albeit lacks bullish conviction.
• A modest uptick in the US Treasury bond yields offers some support to the Greenback.
• Rising odds for a larger Fed rate cut in September should cap any meaningful upside. 

The US Dollar (USD) edges higher during the Asian session on Thursday and for now, seems to have snapped a four-day losing streak to a fresh YTD low touched the previous day. The uptick, however, lacks bullish conviction, with the USD Index (DXY), which tracks the Greenback against a basket of currencies, trading with gains of less than 0.10% for the day, around the 101.25 region. 

A modest rebound in the US Treasury bond yields is seen as a key factor lending some support to the buck, though any further appreciating move seems elusive amid dovish Federal Reserve (Fed) expectations. The preliminary annual benchmark review of employment data published by the US Bureau of Labor Statistics showed that US employers added 818,000 fewer jobs than were reported during the year through March. This suggests that the US labor market is not as strong as estimated and supports prospects for a more aggressive policy easing by the Fed.

Furthermore, the minutes of the July 30-31 FOMC meeting revealed that a vast majority of officials backed the case for a rate cut in September, while some policymakers were leaning toward immediate action. Investors were quick to react and are now pricing in a 38% probability of a 50-basis points (bps) rate cut in September, up from 29% a day before. Moreover, the markets expect the Fed to announce about 100 bps worth of easing by the end of this year, which, in turn, should cap the US bond yields and hold back the USD bulls from placing aggressive bets. 

Moving ahead, traders now look to Thursday's US economic docket – featuring the release of the usual Weekly Initial Jobless Claims and Existing Home Sales data – for some impetus later during the early North American session. The focus, however, will remain glued to Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Friday. Investors will scrutinize Powell's remarks to see if the significantly weaker labor market report makes a strong case for a larger interest rate cut in September, which, in turn, will influence the near-term USD price dynamics.

• AUD/JPY loses traction near 97.90 in Wednesday’s Asian session.
• The upbeat Australian PMI data failed to boost the Aussie. 
• The BoJ is expected to raise rates again by the end of the year. 

The AUD/JPY cross trades in negative territory for the third consecutive day around 97.90 during the Asian trading hours on Thursday. The recent encouraging Australian Purchasing Managers Index (PMI) fails to boost the Aussie. Investors will closely monitor Bank of Japan's (BoJ) Governor Kazuo Ueda's speech on Friday for fresh impetus. 

Data released by Judo Bank and S&P Global on Thursday showed that the preliminary reading of Australia's Judo Bank Manufacturing PMI climbed to 48.7 in August from 47.5 in July. The Services PMI rose to 52.2 in August versus 50.4 prior. Finally, the Composite PMI rose to 51.4 in August versus 49.9 prior.  

The downside of the Australian Dollar (AUD) might be limited due to the hawkish stance of the Reserve Bank of Australia (RBA). The Australian central bank noted that the cash rate might stay unchanged for an extended period and that a rate cut is unlikely soon.

On the other hand, the expectation that the Bank of Japan (BoJ) will raise interest rates again by the end of the year lifts the Japanese Yen (JPY) against the AUD. According to a Reuters poll on Wednesday, the majority of the economists see the BoJ hikes again, with the median forecast for the end-of-year rate being 0.50%, marking a 25 basis points (bps) increase.
 
DBS Senior FX Strategist Philip Wee noted, “On August 23, Japan’s parliament will hold a special session regarding the Bank of Japan’s monetary policy decisions on July 31. BOJ Governor Kazuo Ueda should stand by the plan to raise rates again if the median forecasts set out on July 31 are met or exceeded.”

• NZD/USD loses ground due to risk aversion ahead of the Fed Chair Powell’s speech scheduled on Friday.
• The recent FOMC Minutes suggested that most Fed officials agreed on a rate cut in September.
• The New Zealand Dollar declines as Retail Sales is expected to fall by 1.0% QoQ for Q2.

NZD/USD breaks its four-day winning streak, trading around 0.6150 during the Asian session on Thursday. This downside of the NZD/USD pair could be attributed to the improved US Dollar (USD) amid higher Treasury yields.

Traders adopt caution ahead of the Federal Reserve (Fed) Chair Jerome Powell’s keynote speech at the Jackson Hole Annual Symposium on Friday. Powell may deliver a statement about the possibility of interest rate cuts in the United States (US) is highly anticipated.

However, the upside of the US Dollar could be limited as the Federal Reserve is anticipated to deliver 100 basis points (bps) in rate cuts by the end of this year. However, there is division among market analysts on whether the Fed will implement a 25 or 50 bps cut at its September meeting.

CME FedWatch Tool suggests that the markets are now pricing in a nearly 65.5% odds of a 25 basis point (bps) Fed rate cut in its September meeting, down from 71.0% a day ago. The probability of a 50 basis point rate cut increased to 34.5% from 29.0% a day earlier.

FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool. Furthermore, traders await Fed Chair Jerome Powell's upcoming speech at Jackson Hole on Friday.

In New Zealand, the dovish remarks from the Reserve Bank of New Zealand (RBNZ) after a surprise rate cut last week might have put pressure on the New Zealand Dollar (NZD), limiting the upside of the NZD/USD pair.

A close trade partner China is exploring a new approach to bolster its ailing real estate market by permitting local governments to use special bonds to purchase unsold properties, according to Bloomberg.

New Zealand's Retail Sales for the second quarter will be due on Friday, with markets expecting a fall of 1.0% quarter-on-quarter after a 0.5% growth in the first quarter, which was the first rise in nine quarters.

• The Indian Rupee weakens, snapping the three-day winning streak in Wednesday’s early Asian session.
• Strong USD demand from importers and outflows from equities have weighed on the INR. 
• Investors will monitor the advanced Indian August HSBC PMI data and the RBI’s MPC Minutes, which are due on Thursday. 

The Indian Rupee (INR) loses ground on Thursday, pressured by concerns about importers' US Dollar (USD) demand and foreign equity outflows. Nonetheless, the further decline of crude oil prices might underpin the INR as India is the world’s third-largest oil consumer and importer. The downside of the INR might also be limited amid the likely intervention from the Reserve Bank of India (RBI), which might sell USD to stabilize the Indian Rupee. 

Traders will keep an eye on the first reading of the Indian August HSBC Purchasing Managers Index (PMI) reports on Thursday, along with the RBI Monetary Policy Committee (MPC) Minutes. On the US docket, the preliminary US S&P Global Purchasing Managers Index (PMI) for August is due later in the day. Meanwhile, rising expectations of a Federal Reserve interest rate cut in September could drag the Greenback lower. 

Daily Digest Market Movers: Indian Rupee remains vulnerable amid multiple challenges

• The Indian Rupee is down 0.2% against the US Dollar in August, making it the worst-performing Asian currency. 
• The INR “faces persistent challenges — a widening trade deficit, ongoing foreign outflows, and relentless demand for USD from importers,” said Amit Pabari, managing director at FX advisory firm CR Forex in Mumbai. 
• According to the minutes of the Federal Reserve’s (Fed) July meeting released Wednesday, “the vast majority” of participants observed that it would likely be appropriate to cut the interest rate in the September meeting if the data continued to come in about as expected.
• Markets are fully pricing in a September cut, with a full percentage point worth of rate cuts anticipated by the end of this year.
• The preliminary estimate of the benchmark revision indicated an adjustment to March 2024 total Nonfarm employment of -818,000 (-0.5%), the US Bureau of Labor Statistics showed on Wednesday.

Technical Analysis: USD/INR maintains its constructive bias

Indian Rupee edges lower on the day. The USD/INR keeps the bullish environment on the daily timeframe as the price is well-supported above the key 100-day Exponential Moving Average (EMA). The pair bounces back above the 11-week-old uptrend line, while the 14-day Relative Strength Index (RSI) points higher above the midline again, indicating there could still be room for further upward movement before the market potentially encounters resistance.

The crucial upside barrier for USD/INR emerges near the 84.00 psychological mark. Any follow-through buying could pave the way to the record high of 84.24 en route to 84.50. 

On the downside, the low of August 20 at 83.77 acts as an initial support level for the pair. Extended losses will see a drop to the 100-day EMA at 83.56, followed by 83.36, the low of June 28. 

• Gold price remains confined in a familiar range held since the beginning of the current week. 
• A positive risk tone caps the upside, though a combination of factors continues to lend support.
• Fed rate cut bets, along with geopolitical risks, should help limit any meaningful corrective slide.

Gold price (XAU/USD) holds steady above the $2,500 psychological mark during the Asian session on Thursday and remains close to the all-time peak touched earlier this week. Data released on Wednesday showed that US job growth over the past year to March was significantly weaker than initially estimated. Adding to this, the July FOMC meeting minutes showed that several officials were leaning toward an immediate interest rate cut. This reaffirmed bets for an imminent start of the Fed's policy easing cycle in September, which battered the US Dollar (USD) to a fresh YTD low on Wednesday and continues to act as a tailwind for the non-yielding yellow metal.

Investors, however, are looking for more clarity if the not-so-strong US labor market makes the case for a larger interest rate cut next month. This puts more weight on Fed Chair Jerome Powell's speech at the Jackson Hole Symposium, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the Gold price. In the meantime, the prevalent risk-on environment caps the safe-haven XAU/USD, though the lack of progress in a truce agreement between Israel and Hamas should help limit the downside. Traders now look to the flash global PMIs, which, along with the US macro data, might produce short-term opportunities.

Daily Digest Market Movers: Gold price is undermined by upbeat market mood, Fed’s dovish outlook to limit the downside

• The US Dollar dived to a fresh YTD low on Wednesday in reaction to data indicating that the labor market was not as strong as estimated and assisted the Gold price in reversing an intraday dip to sub-$2,500 levels. 
• The preliminary annual benchmark review of employment data published by the US Bureau of Labor Statistics showed that US employers added 818,000 fewer jobs than were reported during the year through March. 
• Furthermore, the minutes of the July 30-31 FOMC meeting revealed that a vast majority of officials backed the case for a rate cut in September, while some policymakers were leaning toward immediate action. 
• The markets are now pricing in a 38% probability of a 50 basis points rate cut next month, up from 29% a day before, and about 100 bps worth of easing by the end of this year, underpinning the non-yielding metal. 
• Meanwhile, a truce agreement between Israel and Hamas still seems elusive, which keeps the risk of a broader Middle East conflict on the table and turns out to be another factor lending support to the XAU/USD. 
• Traders now look forward to the US economic docket – featuring the release of the Weekly Initial Jobless Claims and Existing Home Sales data – for short-term opportunities later during the North American session.
• The market focus, however, will remain on Fed Chair Jerome Powell's speech on Friday to see if the significantly weaker-than-expected US job growth makes a strong case for a larger interest rate cut in September.

Technical Analysis: Gold price might continue to attract dip-buyers, $2,480 throwback holds the key for bullish traders

From a technical perspective, the range-bound price action witnessed since the beginning of this week could be categorized as a bullish consolidation phase before the next leg up. Moreover, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone, validating the near-term constructive outlook. Hence, a move back towards retesting the all-time peak, around the $2,531-2,532 area touched on Tuesday, looks like a distinct possibility. Some follow-through buying will reaffirm be seen as a fresh trigger for bulls and pave the way for an extension of the recent well-established uptrend.

On the flip side, any meaningful pullback might continue to attract some buyers near the $2,500 round figure. This should help the downside for the Gold price near the $2,480 resistance breakpoint. A convincing break below the latter might prompt some technical selling and drag the XAU/USD towards the $2,455-2,453 horizontal support en route to the $2,430 region. The corrective slide could extend further towards the 50-day Simple Moving Average (SMA), currently pegged near the $2,400 mark.

• The Australian Dollar may appreciate as RBA Minutes indicate a hawkish mood on the rate trajectory.
• Australia's Judo Bank Composite PMI increased to 51.4 in August, fueled by stronger service sector growth.
• The latest FOMC Minutes indicate that most Fed officials agreed on a rate cut in September.

The Australian Dollar (AUD) moves sideways against the US Dollar (USD) on Thursday, driven by strong business activity data that lifted market sentiment. Further support for the AUD/USD pair came from the Reserve Bank of Australia's (RBA) August Meeting Minutes, which suggested that the cash rate might stay unchanged for an extended period.

Australia's Judo Bank Composite Purchasing Managers Index (PMI) rose to 51.4 in August, up from 49.9 in July. This increase marks the fastest expansion in three months, driven by a stronger performance in the services sector, despite a more pronounced contraction in manufacturing production.

The US Dollar (USD) edges higher due to a slight recovery in the Treasury yields on Thursday. However, the Greenback faced challenges as FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool. Furthermore, traders await Fed Chair Jerome Powell's upcoming speech at Jackson Hole on Friday.

Daily Digest Market Movers: Australian Dollar consolidates after PMI data

• CME FedWatch Tool suggests that the markets are now pricing in a nearly 65.5% odds of a 25 basis point (bps) Fed rate cut in its September meeting, down from 71.0% a day ago. The probability of a 50 basis point rate cut increased to 34.5% from 29.0% a day earlier.
• The Judo Bank Australia Services PMI climbed to 52.2 in August from 50.4 in July, marking the fastest expansion in services output in three months, according to preliminary data. Meanwhile, the Manufacturing PMI slightly increased to 48.7 from 47.5 reading, signaling a continued but slower decline in the sector's health for the seventh consecutive month.
• Federal Reserve (Fed) Governor Michelle Bowman expressed caution on Tuesday about making any policy changes, citing ongoing upside risks to inflation. Bowman warned that overreacting to individual data points could undermine the progress already achieved, according to Reuters.
• On Tuesday, the RBA Minutes suggested that the board members had considered a rate hike earlier this month before ultimately deciding that maintaining current rates would better balance the risks. Additionally, RBA members agreed that a rate cut is unlikely soon.
• China is exploring a new approach to bolster its ailing real estate market by permitting local governments to use special bonds to purchase unsold properties. Local authorities have already utilized more than half of this year’s CNY 3.9 trillion ($546 billion) bond allocation, and it's unclear how much of the remaining funds could be redirected toward home purchases if the plan is implemented, according to Bloomberg.
• Minneapolis Fed President Neel Kashkari stated on Monday that it would be appropriate to discuss potential US interest rate cuts in September due to concerns about a weakening labor market, per Reuters.
• RBA Governor Michele Bullock expressed that the Australian central bank will not hesitate to raise rates again to combat inflation if needed. Those comments came just days after the RBA decided to hold rates steady at 4.35% for the sixth straight meeting in August.

Technical Analysis: Australian Dollar consolidates around 0.6750

The Australian Dollar trades around 0.6740 on Thursday. Daily chart analysis shows the AUD/USD pair consolidates within an ascending channel, suggesting a bullish bias. Additionally, the 14-day Relative Strength Index (RSI) remains slightly below the 70 mark, supporting the ongoing bullish momentum. Further upward movement could indicate that the currency pair is overbought, potentially leading to a correction.

On the upside, the AUD/USD pair could test a seven-month high of 0.6798. A break above this level could lead the pair to explore the region around the upper boundary of the ascending channel at the 0.6860 level.

For support, the pair may find support around the lower boundary of the ascending channel at 0.6700 level, followed by the nine-day Exponential Moving Average (EMA) at 0.6683 level. A drop below the nine-day EMA could see the pair test the throwback level at 0.6575, followed by the next throwback level at 0.6470.

AUD/USD: Daily Chart

On Thursday, the People’s Bank of China (PBOC) set the USD/CNY central rate for the trading session ahead at 7.1228, as against the previous day's fix of 7.1307 and 7.1226 Reuters estimates.

• USD/JPY gains ground near 145.35 in Wednesday’s early Asian session.
• Fed Minutes indicated that the US central bank opened the door for a rate cut in September. 
• Japan’s Jibun Bank Manufacturing PMI rose to 49.5 in August vs. 49.8 expected; services PMI improved to 54.0 in August. 

The USD/JPY pair trades on a stronger note around 145.35 during the early Asian session on Thursday. A record of Japan’s trade deficit data has dragged the Japanese Yen (JPY) lower and supported USD/JPY. On Friday, traders will closely watch Bank of Japan (BoJ) Governor Kazuo Ueda's speech and the Fed Chair Jerome Powell’s speech at Jackson Hole. These events are likely to trigger the volatility in the market. 

The minutes of the Federal Reserve’s (Fed) July 30-31 meeting released Wednesday indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool. The policymakers kept their benchmark rate at 5.3% in July, which has stood for more than a year. Markets are fully pricing in a September cut, with a full percentage point worth of rate cuts anticipated by the end of this year. The rising expectation of a Fed rate cut might weigh on the Greenback and cap the upside of USD/JPY in the near term. 

On the other hand, the majority of the economists expect the BoJ to raise interest rates again by the end of the year. The median forecast for the end-of-year rate is 0.50%, marking a 25 basis points (bps) increase, according to a Reuters poll on Wednesday. Traders will take more cues from BoJ Governor Ueda's appearance in parliament on Friday. If Ueda delivers the hawkish remarks, this might lift the JPY against the USD. 

Data released on Thursday by Jibun Bank and S&P Global showed that preliminary Japan’s Manufacturing Purchasing Managers Index (PMI) rose to 49.5 in August from 49.1 in July, but below the market consensus of 49.8. Meanwhile, the Services PMI improved to 54.0 in August versus 53.7 prior.

• WTI price trades in negative territory for the fifth consecutive day in Wednesday’s early Asian session.
• WTI price declines as worries of a wider Middle East conflict fade, but rising bets on a Fed rate cut might limit its losses. 
• Crude inventories fell by 4.65 million barrels to 426.03 million last week, according to the EIA. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.70 on Thursday. WTI price edges lower on the back of easing fears of a wider Middle East war. However, firmer expectations of the Federal Reserve (Fed) rate cut in September after the FOMC Minutes might cap its downside. 

WTI prices have edged lower as Iran has refrained so far from attacking Israel in response to the killing of a senior Hamas leader in Tehran in late July. The United States hoped that a cease-fire in Gaza would prevent a wider war in the region. "Oil prices are falling, extending losses from the previous week amid ongoing concern over demand in China and amid progress in Middle Eastern ceasefire talks," said City Index analyst Fiona Cincotta.

On the other hand, a decline in US oil inventories and the minutes from the US Fed indicating a likely September rate cut might lift the black gold. The US crude inventories hit a seven-month low last week. According to the Energy Information Administration (EIA), crude oil stockpiles in the United States for the week ending August 21 fell by 4.65 million barrels to 426.03 million, compared to an increase of 1.36 million barrels in the previous week. The market consensus estimated that stocks would decline by 2.8 million barrels.

According to the Fed minutes of the July 30-31 meeting, “the vast majority” of participants indicated that it would likely be appropriate to ease policy at the next meeting if the data continued to meet expectations. 

Oil traders will monitor the preliminary US S&P Global Purchasing Managers Index (PMI) for August for fresh impetus. The attention will shift to Fed Chair Jerome Powell’s speech at Jackson Hole on Friday, which might offer some hints about interest rate plans in the future.