What happened in the US session?
Federal Reserve Chairman Jerome Powell’s delivered his opening remarks at the Jackson Hole Symposium on “Structural Shifts in the Global Economy” where he reiterated the Federal Reserve’s objective to bring inflation down to their 2% target and indicated that GDP growth has come in stronger than expected and that consumer spending has been especially robust thus far. Both of these data points suggest that the Fed is more than likely to keep interest rates elevated for the time being. Chairman Powell’s hawkish remarks functioned as a bullish catalyst for the US dollar causing the dollar index (DXY) to climb as high as 104.45 last Friday before settling around 140.20.
What does it mean for the Asia Session?
The DXY edged lower at today’s open sliding towards 104.00 before finding some support around this region. Asian markets will digest the latest remarks by Federal Reserve Chairman Jerome Powell as the new trading week gets underway. Although his remarks were hawkish, demand for the US dollar looks relatively weak this morning.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The DXY could come under pressure today despite Federal Reserve Chairman Jerome Powell’s hawkish opening remarks at the Jackson Hole Symposium last Friday. The 104-level will be a key threshold to take note of today.
- 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
Medium Bearish
Technical
The DXY (U.S. Dollar Index) chart currently exhibits a bullish momentum. This suggests the possibility that the price could continue its bullish trajectory, aiming towards the first resistance level.
The first support for the price is located at 103.57, acting as a pullback support. This level is expected to serve as a significant safety net for any short-term pullbacks. The 2nd support is at 102.67, which also holds the characterization of a pullback support.
On the potential barrier front, the first resistance is set at 104.72. What accentuates its significance is its confluence with the 127.20% Fibonacci Extension, cementing its position as a swing high resistance. The 2nd resistance is found at 105.74, marking another critical threshold in the potential upward journey of the DXY.
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
After hitting a low of 1.0770 last Friday, the Euro rebounded strongly and is currently trading above 1.0800 this morning – it is likely to climb higher today.
Technical
The EUR/USD chart is currently displaying bullish momentum, primarily influenced by the price’s position above a major ascending trend line. This position suggests that there’s a strong possibility for further bullish momentum in the future. Within this context, there’s potential for the price to experience a bullish bounce from the first support at 1.0783 and then make its way towards the first resistance at 1.0933. The first support at 1.0783 is particularly noteworthy because it’s an overlap support, and it aligns with both the 78.60% and 100% Fibonacci Projections, highlighting a Fibonacci confluence.
On the other side, the first resistance at 1.0933 is identified as an overlap resistance, indicating a potential area where selling interest might arise.
The Pound (GBP)
Key news events today
U.K. Bank Holiday
What can we expect from GBP today?
UK markets will be closed today for a bank holiday and lower trading volume should be expected during the European trading hours. The Pound opened strongly today and is climbing past 1.2600 as Asia markets came online.
Technical
The GBP/USD currency pair’s technical landscape reveals a tentative bearish undertone, albeit with subdued conviction. The recent breach below a critical ascending support line has precipitated a potential bearish inclination. This evolving narrative suggests the likelihood of a bearish continuation targeting the first support level pegged at 1.2314, identified due to its function as a swing low support.
On the other hand, any rallies might confront resistance barriers. The first resistance, set at 1.2647, is delineated as an overlap resistance, making it an essential point of observation. Similarly, a secondary resistance level is pinpointed at 1.2792, which also carries the classification of an overlap resistance. These technical demarcations offer pivotal zones to monitor, both for potential reversals and continuations in line with the emerging bearish sentiment.
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Following the surge in demand for the US dollar, USD/CAD hit 1.3640 last Friday but has since pulled back quite sharply to now trade under 1.3600. This currency pair is likely to slide lower today.
Technical
The USD/CAD chart has been showing an overall bullish momentum but could now exhibit a neutral momentum. There is a possibility for price to fluctuate between the upside and downside confirmation levels before price breaking through either level.
The upside confirmation level at 1.3672 is identified as an overlap resistance. Should price break through this level, there is a potential for further upward movement towards the first resistance. This first resistance level at 1.3837 is identified as an overlap resistance, implying that it could act as a hurdle to the price’s upward movement.
On the other hand, the downside confirmation level at 1.3515 is identified as an overlap support. Should price break through this level, there is a potential for further downward movement towards the first support. This first support level at 1.3341 is also identified as an overlap support, suggesting that it might provide additional support to the price.
The Japanese Yen (JPY)
Key news events today
Unemployment Rate (11:30 pm GMT)
What can we expect from JPY today?
Japan’s unemployment rate has remained relatively stable over the past one year with June’s reading edging lower to 2.5% from 2.6% in the previous month – July’s reading is likely to print within a similar range. With demand for the US dollar surging last Friday, USD/JPY touched 146.60 and could re-test this level once more today.
Technical
The USD/JPY chart currently displays a bullish momentum. Within this favorable trend, it is anticipated that the price might continue its bullish path, targeting the first resistance at 147.96. This resistance level is notable not just because it acts as a pullback resistance, but also due to its alignment with both the 61.80% and 100% Fibonacci Projections, highlighting a significant Fibonacci confluence that could influence price behavior.
Additionally, the first support is also situated at 147.96, which is identified as an overlap support. This suggests that this level might play a dual role, serving as both a potential floor for price retractions and an impending target for bullish pursuits. Further reinforcing the chart’s structure is the 2nd support at 141.63, which is similarly characterized as an overlap support.
The Australian Dollar (AUD)
Key news events today
Retail Sales (1:30 am GMT)
What can we expect from AUD today?
Retail sales declined strongly in June, falling 0.8% MoM as cost-of-living pressures continued to weigh on consumer spending. With the recent flash PMI report for August showing the Composite index contracting for the second consecutive month, further slowdown in sales figures cannot be ruled out. The Aussie opened strongly this morning to climb as high as 0.6440.
Technical
The AUD/USD chart is currently exhibiting an overall bearish momentum, indicating a prevailing downtrend. Given this momentum, there’s a possibility that the price might experience a bearish reaction off the downside confirmation level and subsequently drop towards the first support level.
The potential downward movement could continue should price break below the downside confirmation level at 0.6389 which is identified as an overlap support that aligns with the 78.60% Fibonacci retracement level. Furthermore, the first support level at 0.6177 is identified as a swing-low support, indicating that it has previously acted as a point of support during previous price swings.
To the upside, the first resistance level at 0.6499 is identified as an overlap resistance, suggesting that historical price action has seen resistance around this level.
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi, just like its Pacific neighbour, opened strongly this morning to climb as high as 0.5925 as demand for the greenback looks weak this morning. The 0.5900-level will be a key threshold to watch today.
Technical
The overall momentum of the NZD/USD chart is currently bearish, indicating a prevailing trend of downward movement. In this scenario, there is a possibility that the price could experience a bearish breakout off the downside confirmation level and potentially drop towards the first support level.
The downside confirmation level at 0.5898 is identified as a multiple swing-low support that corresponds to the 61.80% Fibonacci retracement level. In addition, the first support level at 0.5749 is identified as an overlap support that aligns with the 78.60% Fibonacci retracement level.
To the upside, the first resistance level at 0.5994 is identified as an overlap resistance where price may encounter a significant barrier to upward movement.
