What happened in the US session?
The NFIB Small Business Index declined to 91.3 for the month of August as small business owners’ views on future sales growth and business conditions remain discouraging while prices rose slightly – inflation remains a high concern for this group. The dollar index (DXY) climbed as high as 104.90 before falling to 104.50 overnight.
What does it mean for the Asia Session?
The DXY has found relatively strong support around the 104.50-level this week thus far. It could continue to range between 104.50 and 105.00 during the Asia session as there is not a single notable event on the economic calendar to trigger a strong move in either direction this morning.
The Dollar Index (DXY)
Key news events today
CPI (12:30 pm GMT)
What can we expect from DXY today?
US CPI data is one of the most anticipated economic events of the week. With headline CPI rising to 3.2% YoY in July from 3.0% YoY from the previous month and the forecast for August pointing to another increase to 3.6% YoY, inflationary pressures appear to be returning to the forefront. This would cause the Federal Reserve to maintain its hawkish monetary policy stance and perhaps even increase interest rates once more at next week’s FOMC meeting. A hotter than expected CPI reading is more than likely to function as a bullish catalyst for the DXY.
Central Bank Notes:
- The federal funds rate target range will be 5.25% to 5.50%.
- The Committee is strongly committed to returning inflation to its 2.0% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labour market conditions, inflation pressures, inflation expectations, and international and financial developments.
- Next meeting runs from 19 to 20 September 2023.
Next 24 Hours Bias
Weak Bullish
Technical
The DXY (US Dollar Index) chart currently demonstrates a bullish momentum, indicating a potential upward trend in price movement. There’s a possibility of a bullish rebound from the 1st support level at 104.41, which is an overlap support. The 2nd support at 103.94 also reinforces the support zone as it aligns with a 50% Fibonacci Retracement level.
On the upside, the 1st resistance at 105.09 represents a multi-swing high resistance, indicating a level where price might face hurdles. Additionally, the 2nd resistance at 105.61, marked as the 161.80% Fibonacci Retracement level, further adds to the potential resistance.
The Euro (EUR)
Key news events today
Industrial Production (9:00 am GMT)
What can we expect from EUR today?
After increasing 0.5% MoM in June, industrial production for the Eurozone is expected to decline 0.8% in July. With the Composite PMI contracting for the second consecutive month in Europe, weaker production should not come as a surprise and could potentially weigh on the Euro during the European trading hours.
Central Bank Notes:
- The ECB raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- Next meeting on 14 September 2023.
Next 24 Hours Bias
Weak Bearish
Technical
The DXY (US Dollar Index) chart currently demonstrates a bullish momentum, indicating a potential upward trend in price movement. There’s a possibility of a bullish rebound from the 1st support level at 104.41, which is an overlap support. The 2nd support at 103.94 also reinforces the support zone as it aligns with a 50% Fibonacci Retracement level.
On the upside, the 1st resistance at 105.09 represents a multi-swing high resistance, indicating a level where price might face hurdles. Additionally, the 2nd resistance at 105.61, marked as the 161.80% Fibonacci Retracement level, further adds to the potential resistance.
The Pound (GBP)
Key news events today
GDP (6:00 am GMT)
What can we expect from GBP today?
The UK’s economy grew 0.54% MoM in June which was the highest growth rate since last October – this was mainly driven by the manufacturing, construction and services sectors. However, the current forecast for July points to a decline of 0.2% MoM. With the Composite PMI falling into contraction in August, weaker growth in the UK should be expected. The Pound could come under selling pressure during the European trading hours.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase the Bank Rate by 0.25 percentage points to 5.25%.
- One member preferred to maintain the Bank Rate at 5.0% while another two preferred to increase it by 0.5 percentage points.
- CPI inflation is expected to fall significantly to around 5% by the end of the year, accounted for by lower energy prices but services price inflation is projected to remain elevated in the near term.
- The updated projections show that CPI inflation is expected to decline to 2.0% and 1.9% at the two and three-year horizons, respectively.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Weak Bearish
Technical
The GBP/USD chart currently displays a bearish overall momentum, with one significant contributing factor being its position below a major descending trendline, which suggests the potential for further bearish movement. In this scenario, there’s the likelihood of a bearish continuation towards the 1st support level at 1.2448, which is marked as an overlap support and is associated with the 127.20% Fibonacci Expansion. Additionally, the 2nd support at 1.2372 is also identified as an overlap support.
On the resistance side, the 1st resistance at 1.2533 serves as an overlap resistance, coinciding with the 61.80% Fibonacci Retracement, which adds to its significance. Similarly, the 2nd resistance at 1.2603 is characterized as an overlap resistance.
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Following the weakness in the US dollar yesterday, USD/CAD dropped as low as 1.3545 before consolidating around 1.3555. This currency pair looks to have some support around this level and could edge higher during the Asian trading hours.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%.
- Canada’s economy was more substantial than expected in the second quarter of 2023, with GDP growth of 3.3%.
- The Bank expects CPI inflation to ease to around 3.0% in the summer, but concerns have increased about inflation staying above the 2.0% target.
Next 24 Hours Bias
Weak Bullish
Technical
The USD/CAD chart currently displays an overall bullish momentum, suggesting a potential upward trend in price movement towards the 1st resistance.
The 1st resistance level at 1.3573 is identified as an overlap resistance while the 2nd resistance level at 1.3636 is also identified as an overlap resistance, indicating its significance as a potential barrier to further bullish movements.
To the downside, the 1st support level at 1.3501 is identified as an overlap support. Additionally, the 2nd support level at 1.3434 is marked as a pullback support that aligns with the 127.20% Fibonacci extension level, reinforcing its potential role as a support level.
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Aussie traded around 0.6420 overnight but was looking weak as Asia markets came online. With US CPI data looming in the latter part of the day, the Aussie could break below 0.6400 with ease should inflationary pressures return for the US and trigger renewed demand for the greenback.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the third consecutive meeting.
- Inflation in Australia has passed its peak and is trending lower but needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 3 October 2023.
Next 24 Hours Bias
Medium Bearish
Technical
The AUD/USD chart currently exhibits an overall bearish momentum, driven by its position below the bearish Ichimoku cloud. There is a potential for a bearish continuation towards the 1st support level.
The 1st support level at 0.6386 is identified as an overlap support that aligns with the 61.80% Fibonacci retracement level. Furthermore, the 2nd support level at 0.6359 is marked as a pullback support that aligns with the 61.80% Fibonacci projection level, reinforcing its potential as a support level.
To the upside, the 1st resistance level at 0.6439 is identified as an overlap resistance that aligns with the 50.00% Fibonacci retracement level. Additionally, the 2nd resistance level at 0.6508 is also marked as an overlap resistance, indicating its significance as a potential barrier to further bullish movements.
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi traded around 0.5900 overnight but was looking weak as Asia markets came online. With US CPI data looming in the latter part of the day, the Kiwi could come under heavy selling pressures should US inflation come in hotter than expected to trigger renewed demand for the greenback.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the 1% to 3% target range while supporting maximum sustainable employment.
- Headline inflation and inflation expectations have declined but the core reading remains too high.
- Next meeting is on 4 October 2023.
Next 24 Hours Bias
Medium Bearish
Technical
The NZD/USD chart currently indicates an overall bearish momentum, supported by its position below the bearish Ichimoku cloud. There is a potential for price to experience a bearish breakout through the 1st support level to drop towards the 2nd support level.
The 1st support level at 0.5891 is identified as an overlap support that coincides with the 61.80% Fibonacci retracement level while the 2nd support level at 0.5862 is marked as a pullback support.
To the upside, the 1st resistance level at 0.5931 is identified as an overlap resistance that aligns with a confluence of Fibonacci levels i.e. the 50.00% retracement and the 50% projection levels, indicating a potential area of resistance. Additionally, the 2nd resistance level at 0.5987 is noted as an overlap resistance.
The Japanese Yen (JPY)
Key news events today
Machinery Orders (11:50 pm GMT)
What can we expect from JPY today?
Japan’s core machinery orders, which excludes shipping and electric power companies, rose 2.7% MoM in June following a large decline of 7.6% in May. July’s estimate points to a decline of 0.7%m highlighting the current unevenness for this industry metric. USD/JPY climbed as high as 147.20 overnight before pulling back slightly as Asian markets came online – this currency pair is now rising strongly towards 147.50.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2.0%.
- The Bank of Japan decided on the following measures:
- Yield curve control: Negative interest rate of -0.1% on policy-rate balances and purchase of Japanese government bonds to keep 10-year JGB yields around +0.5%.
- Inflation is expected to decelerate temporarily but is projected to accelerate moderately later, supported by improvements in the output gap and inflation expectations.
- Japan’s economy is expected to recover gradually.
- Next meeting is on 22 September 2023.
Next 24 Hours Bias
Medium Bullish
Technical
The USD/JPY chart currently demonstrates a neutral overall momentum, indicating a lack of a clear bullish or bearish trend. In this context, there’s potential for price to fluctuate between the 1st support and 1st resistance levels.
The 1st support at 146.15 is identified as a swing low support and aligns with the 61.80% Fibonacci Projection. Additionally, the 2nd support at 144.59 is characterized as a multi-swing low support, coinciding with the 100% Fibonacci Projection.
On the upside, the 1st resistance at 147.78 represents a multi-swing high resistance, while the 2nd resistance at 148.76 is marked as a swing high resistance.
