What happened in the US session?
Both the Industrial Product Price Index (IPPI) and the Raw Materials Price Index (RMPI) increased for the second month in a row with the IPPI reading coming in much stronger than the forecast. Adding this recent data to the increase in CPI from 2.8% YoY in June to 3.3% YoY in July, inflationary pressures are growing in Canada. Combined with higher crude prices, USD/CAD fell below the 1.3500-mark while the dollar index (DXY) traded within a narrow band from 105.00 to 105.35.
What does it mean for the Asia Session?
The minutes from the monetary policy meeting that took place on 5th September will be released today and could provide further insight into the outlook for future policy actions by the Reserve Bank of Australia (RBA). Hawkish minutes could provide a boost for the Aussie today.
The Dollar Index (DXY)
Key news events today
Building Permits (12:30 pm GMT)
What can we expect from DXY today?
After decreasing throughout 2022, building permits in the US stabilized in the first half of this year. However, permits have printed lower than the forecasts over the last two months which could signal a slowdown in the residential construction sector and possibly have a negative impact on 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 robust bullish momentum, buoyed by several key factors that contribute to its upward trajectory. Notably, the price maintains its position above a significant ascending trend line, signaling the potential for further bullish momentum and reinforcing the overall positive sentiment.
Additionally, the chart has recently crossed above the Ichimoku cloud, further confirming the bullish outlook. Within this context, there is a plausible scenario where the price may experience a bullish bounce upon reaching the 1st support level at 105.13, subsequently moving towards the 1st resistance at 105.41. The 1st support level holds substantial significance, classified as an overlap support, indicating its historical relevance as a potential strong support zone. Similarly, the 2nd support at 104.43 is also identified as an overlap support, underlining its role as a key support level.
On the resistance side, the 1st resistance at 105.41 assumes a pivotal role as a multi-swing high resistance, signifying its importance as a potential barrier for further upward movements. Beyond the 1st resistance, the 2nd resistance at 105.87 is categorized as a swing high resistance, highlighting its potential significance as a resistance point. With the chart’s overall bullish momentum,
The Euro (EUR)
Key news events today
CPI (9:00 am GMT)
What can we expect from EUR today?
The preliminary inflation readings in the Eurozone showed energy prices decreasing at a slower pace while inflation slowed for food, alcohol, and tobacco items as well as non-energy industrial goods and services. The respective forecasts for headline and core CPI point to both indices remaining unchanged at 5.3% YoY for the month of August – softer readings could add downward pressure on the Euro.
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 is on 26 October 2023.
Next 24 Hours Bias
Weak Bearish
Technical
The EUR/USD chart is currently characterized by a bearish momentum, influenced by key factors that contribute to its downward trajectory. Notably, the price resides below the bearish Ichimoku cloud, underlining the overall bearish sentiment and suggesting the potential for further downward movement.
In this context, there’s a plausible scenario where the price may encounter a bearish reaction upon reaching the 1st resistance level at 1.0692, followed by a potential decline towards the 1st support at 1.0633. The 1st support level holds significance as an overlap support, signifying its historical relevance as a potential strong support zone. Similarly, the 2nd support at 1.0593 is characterized by the presence of the 161.80% Fibonacci Extension, further emphasizing its role as a key support level.
On the resistance side, the 1st resistance at 1.0692 is a critical juncture, classified as an overlap resistance and aligning with the 38.20% Fibonacci Retracement, underscoring its potential as a barrier to any potential upward movements. Beyond the 1st resistance, the 2nd resistance at 1.0766 is also identified as an overlap resistance, further highlighting its significance. With the chart’s overall bearish momentum
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Pound fell sharply over the last two weeks and has continued its downtrend thus far this week. It currently trades below the 1.2400-mark and could slide lower as the day progresses.
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 exhibits a bearish overall momentum, characterized by several factors contributing to its downward trajectory, most notably, the price is situated below the bearish Ichimoku cloud, underscoring the prevailing bearish sentiment.
However, in the short term, there’s a potential scenario where the price may experience a temporary rise towards the 1st resistance level at 1.2407 before reversing and heading downwards towards the 1st support at 1.2372. The 1st support level is a notable consideration, classified as an overlap support, highlighting its historical importance as a potential strong support zone. Similarly, the 2nd support at 1.2308 is identified as a swing low support, reinforcing its role as a key support level.
On the resistance side, the 1st resistance at 1.2407 holds significance as an overlap resistance, signifying its potential as a resistance barrier in the short term. Beyond the 1st resistance, the 2nd resistance at 1.2448 is also categorized as an overlap resistance, further highlighting its relevance. As the chart maintains its bearish momentum
The Canadian Dollar (CAD)
Key news events today
CPI (12:30 pm GMT)
What can we expect from CAD today?
Both the Industrial Product Price Index (IPPI) and the Raw Materials Price Index (RMPI) increased for the second month in a row with the IPPI reading coming in much stronger than the forecast. Adding this recent data to the increase in CPI from 2.8% YoY in June to 3.3% YoY in July, inflationary pressures are growing in Canada. Another ‘hot’ CPI print for the month of August could strengthen the Canadian dollar and drive USD/CAD lower.
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 Bearish
Technical
The USD/CAD chart currently indicates an overall neutral momentum, suggesting a lack of a strong directional bias in this currency pair. It is anticipated that price could fluctuate between the 1st support and the 1st resistance levels.
The 1st support level at 1.3472 is identified as a pullback support that aligns with the 127.20% Fibonacci extension level while the 2nd support level at 1.3435 is marked as a support level that aligns with a confluence of Fibonacci levels i.e. the 127.20% extension and the 61.80% projection levels.
To the upside, the 1st resistance level at 1.3497 is identified as a pullback resistance. Further up, the 2nd resistance level at 1.3539 is noted as a swing-high resistance that aligns with the 78.60% Fibonacci retracement level.
The Australian Dollar (AUD)
Key news events today
Monetary Policy Meeting Minutes (1:30 am GMT)
What can we expect from AUD today?
The minutes from the monetary policy meeting that took place on 5th September will be released today and could provide further insight into the outlook for future policy actions by the Reserve Bank of Australia (RBA). Hawkish minutes could provide a boost for the Aussie today.
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
Weak Bearish
Technical
The AUD/USD chart currently indicates an overall neutral momentum, suggesting that the currency pair lacks a strong directional bias. In such scenarios, price is anticipated to fluctuate between the 1st support and the 1st resistance levels.
There is an intermediate support level at 0.64280 that is noted as a pullback support that aligns with the 50.00% Fibonacci retracement level while the 1st support level at 0.6402 is identified as an overlap support that aligns with a confluence of Fibonacci levels i.e. the 78.60% retracement and the 100.00% projection levels. In addition, the 2nd support level at 0.6365 is marked as a pullback support.
There is an intermediate resistance level at 0.6449 which is identified as a pullback resistance while the
1st resistance level at 0.6472 is marked as a swing-high resistance. Further up, the 2nd resistance level at 0.6509 is identified as a multi-swing-high resistance, potentially acting as a major barrier for any upward price movements
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi has been ranging between 0.5860 and 0.5940 since early September and continues to trade within this zone waiting for the next major catalyst to trigger a move in either direction.
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
Weak Bearish
Technical
The chart for NZD/USD indicates an overall neutral momentum, suggesting that the currency pair is lacking a clear directional bias and is anticipated for price to fluctuate between the 1st support and the 1st resistance levels.
The 1st support level at 0.5891 is identified as an overlap support that aligns with the 78.60% Fibonacci retracement level while the 2nd support level at 0.5859 is noted as a pullback support.
To the upside, the 1st resistance level at 0.5936 is identified as a pullback resistance that coincides with the 50.00% Fibonacci retracement level. Further up, the 2nd resistance level at 0.6001 is identified as a multi-swing-high resistance, potentially halting any further upward price movements.
The Japanese Yen (JPY)
Key news events today
Trade Balance (11:50 pm GMT)
What can we expect from JPY today?
Japan’s trade balance unexpectedly posted a deficit of ¥78.7B in July 2023 as exports fell for the first time in 29 months amid weak foreign demand while imports fell for the fourth consecutive month – the forecast for August points to another month of deficit. USD/JPY has made strong gains over the past two weeks and continues to remain elevated.
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
Weak Bullish
Technical
The USD/JPY chart currently maintains a strong bullish momentum, underpinned by several factors contributing to its upward trajectory. A notable signal of this bullish sentiment is the price’s recent cross above the Ichimoku cloud, confirming the favorable market conditions.
In this context, there’s a plausible scenario where the price may continue its bullish run towards the 1st resistance level at 147.94. The 1st support at 147.24 is of notable significance, classified as an overlap support, and its historical importance underscores its potential as a strong support zone. Similarly, the 2nd support at 146.55 is identified as an overlap support, further reinforcing its role as a key support level. On the resistance side, the 1st resistance at 147.94 assumes a pivotal role, characterized as a swing high resistance, signifying its potential as a point of resistance. Beyond the 1st resistance, the 2nd resistance at 148.44 is identified as a swing high resistance, and it aligns with the presence of the 78.60% Fibonacci Projection, adding an extra layer of reinforcement to its importance.
Additionally, an intermediate support level at 147.56 is in play, classified as an overlap support, further emphasizing its relevance as a support zone. With the chart’s overall bullish momentum.
