US Dollar Index

The US dollar rose on Wednesday following the release of the US Consumer Price Index (CPI) for August. Despite a decline in the headline component, the monthly core inflation rate rose slightly. The dollar faced fresh selling pressure against its major currency rivals, mainly due to the decline in USD/JPY following comments from BoJ Nagawa. The lowest was seen near 141.80. The focus of the market is on inflation data this week. Despite positive economic indicators, the market may have exaggerated its expectations for aggressive monetary policy easing. The current growth rate is above the long-term trend, suggesting that the market may have overestimated the need for such measures. However, a 25 basis point rate cut seems to be a foregone conclusion. Short-term US Treasury yields are already faltering and trading well below the federal funds rate, and once the Fed starts an easing cycle, yields are likely to fall further, especially if the new data confirms the market's worst growth nightmare. This should be a bearish signal for the US dollar in all respects.

The technical analysis of the US Dollar Index suggests that market sentiment has improved slightly. Technical indicators including the 14-day relative strength index (RSI) and the moving average convergence divergence (MACD) remain in negative territory but are recovering, suggesting a possible shift in momentum. The US dollar index recently reclaimed the market psychological level of 101.00, providing support for the short-term outlook. To maintain this upward trend, buyers must continue to stay above this level. Key support levels to watch include 101.76 {25-day moving average}, and 102.00 {market psychological barrier}. On the other hand, USD/JPY fell after the comments of BoJ Nagawa. And strengthened the short-term outlook to 101.00, as well as the "triple bottom" support level of 100.60 (28/12/2023); 100.51 (27/8); and 100.56 (last Friday) lows, which then point to the psychologically important 100.00 level.

Consider shorting the US Dollar Index around 101.80 today, stop loss: 101.90, target: 101.40, 101.35

WTI Crude Oil

Crude oil prices are trying to hold onto Wednesday’s gains, rising nearly 1%. A positive trading day is very welcome for the battered commodity, which faced losses of nearly 10% in September, reaching its lowest level since May 4, 2023 on Tuesday. WTI Crude Oil is in a two-week loss of 8%, which was last seen 11 months ago. The decline in oil prices has investors concerned, and the big question is whether these price declines should be interpreted as a sign of doom and gloom. Oil prices are unpredictable, but this volatility could be the perfect reason to cut interest rates by 50 basis points. Weak global demand and sluggish economic activity are warning signs for risky assets. If the global economy continues to slow, investors may soon hit the brakes and withdraw from high-risk markets. Add in a new round of grim economic data from China, and it’s no wonder that cautious sentiment is quickly becoming the strategy of the moment. Meanwhile, oil prices are also in trouble. WTI crude oil has plunged more than 17% in the short term. These trends suggest that inflation is falling, and if these trends continue, inflation data is expected to plummet next year.

Crude oil may take the final blow, and prices may fall further to $65.00 or even $60.00. If the unofficial central bank of oil commits to further production cuts, it can easily push oil prices back up. On the upside, $68.50 (Tuesday's high), and $69.00 (9-day moving average) will be the first levels to return to. Next, WTI oil prices will retry the key level of $70.00 (market psychological barrier). If the bulls can break through this, the 14-day moving average of $71.25 will be the next target. On the downside, $64.75 (Tuesday's low) will be the key level for short-term declines. Once $64.75 is successfully broken again, the next level will fall to $64.38, which is the low of March and May 2023. A breakout points to the $62.34 (December 2021 low) area.

Today, consider going long on crude oil around 66.55, stop loss: 66.35; target: 67.85; 68.00

Spot Gold

Gold prices hit the top of the range after the release of US inflation data on Wednesday before retreating to $2,510. A rebound in the benchmark 10-year US Treasury yield and a stronger-than-expected monthly core CPI print dragged gold prices lower. Gold prices attracted some buyers for the third consecutive day on Wednesday and hit a one-week high around $2.520-2,521 during the Asian session. Meanwhile, the prospect of the Federal Reserve about to start an easing policy cycle failed to help the dollar build on the positive trend of the past three days, which is bearish for gold. Meanwhile, investors turned cautious in the face of key data risks, as evidenced by the generally weak tone in the stock market. This is seen as another factor supporting the safe-haven precious metal. However, bullish traders need to wait for strength outside the $2,525.00 supply zone before positioning for further appreciation.

From a technical perspective, any subsequent upward movement in gold prices is likely to continue in the $2,525-2,526 The dollar is encountering resistance near the supply zone. The aforementioned area is the top of the trading range from many weeks ago and should serve as a key pivot point. For bullish traders, some follow-up buying will serve as a new trigger, leading to a subsequent strong breakout above the historical peak of the $2,531.70 area. Given that the 14-day relative strength index (RSI) on the daily chart, one of the technical indicators, is above the 59.00 level, maintaining in the positive zone and still not entering the overbought zone, this adds credibility to the support of the gold price rebound. The gold price is likely to resume the uptrend established recently. The psychological price level of $2,550 will come into play as an upside target. On the other hand, the psychological level of $2,500 now seems to protect the recent downtrend, ahead of the $2,485 area and the $2,470 horizontal area. The latter is the support of the trading range and if decisively broken, it may trigger some technical selling, paving the way for larger losses. Subsequently, the gold price may accelerate its decline towards the 50-day simple moving average support, currently located at Around $2450-2449.

Consider going long on gold before 2,507.00 today, stop loss: 2,505.00; target: 2,520.00; 2,525.00

AUD/USD

The Australian dollar has reduced its losses against its US rivals, while the US index has also reduced inflation-induced losses. Australian consumer inflation expectations stood out in the Asian session. On Wednesday, the Australian dollar was steady against the US dollar following a speech by Sarah Hunt, the assistant governor of the Reserve Bank of Australia for economic affairs. However, the Australian dollar's decline may be taken seriously because RBA Governor Bullock maintained a hawkish outlook last week, emphasizing that it is too early to consider rate cuts amid high inflation. Sarah Hunt, assistant governor of the Reserve Bank of Australia, pointed out that high interest rates have suppressed demand, leading to an expected mild economic downturn. According to Reuters, Hunt also stressed that the labor market remains tight compared to full employment levels and employment growth is likely to continue, but at a slower pace than population growth. The latest US labor market report casts doubt on the possibility of the Federal Reserve to actively cut interest rates at the upcoming September meeting, which has led to a stronger US dollar and pressure on AUD/USD.

From the technical analysis of the daily chart, AUD/USD traded around 0.6650 on Wednesday and is still within the descending channel, showing a bearish signal. The 14-day relative strength index of the technical indicator is also below the 50 level, further confirming the ongoing bearish trend. On the downside, AUD/USD may point to the lower line of the descending channel at 0.6620 and the 200-day moving average at around 0.6618. If it falls below this level, the bearish outlook will be strengthened, which may push the currency pair to the 250-day moving average at 0.6580 and the support area near 6575. On the upside, AUD/USD is likely to face resistance near the 25-day exponential moving average at 0.6701, 0.6700 {round number}, and then the upper line of the descending channel at 0.6740. A break above this level would weaken the bearish bias, potentially paving the way for the pair to retest the seven-month high of 0.6798 reached on July 11.

Consider going long on AUD before 0.6660 today, stop loss: 0.6645; target: 0.6695; 0.6710.

GBP/USD

GBP/USD traded in negative territory below 1.3050 during the US session on Wednesday. The dollar remained resilient against its rivals and weighed on the pair after the latest data showed that the core CPI rose more than expected in August. GBP/USD resumed its upward trend during the Asian session on Wednesday and rose to a new intraday high, reclaiming the 1.3100 round mark. However, the spot price is still below the overnight swing high, so caution is needed before any meaningful recovery from the three-week low (near 1.3050-1.3045 hit the previous day). The US dollar stalled its positive trend in the past three days and retreated from near the monthly top amid the prospect of the Federal Reserve launching an easing policy cycle in September. This in turn is seen as a key factor providing some support to the GBP/USD pair. Nevertheless, the generally weak tone in the stock market may help limit the decline of GBP/USD and limit the decline of the currency pair amid bets that the Bank of England will announce more rate cuts this year.

As seen from the technical indicators of the daily chart, the MACD indicator broke below the signal line, but the 14-day relative strength index (RSI) indicator remained near 55, which suggests that there will be a fierce struggle between bulls and bears around the 1.31 level. At this stage, GBP/USD is likely to be in a correction phase. On the downside, 1.3040 (38.2% Fibonacci retracement level of the latest uptrend) becomes the next support level before 1.3000 (psychological level) and 1.2960-1.2962 (50% Fibonacci retracement, 200 hour moving average). However, as the pair is well above the 100, and 200 day moving averages, the overall outlook remains positive. Upward resistance is expected to be 1.3150 and 1.3200, and the next key resistance is estimated at 1.3266 {previous high}.

Today, it is recommended to go long GBP before 1.3030, stop loss: 1.3015, target: 1.3070, 1.3080

USD/JPY

USD/JPY fell for the second consecutive day, trading around 141.20 in the Asian session on Wednesday. The yen remained firm after a speech by Bank of Japan board member Junko Nagawa. USD/JPY faced selling pressure for the second day on Wednesday, although it found some support around 142.00. The decline was caused by divergence in monetary policy preferences between the Bank of Japan and the Federal Reserve, which continued to unwind carry trades and drive flows to the yen. In fact, Bank of Japan Governor Kazuo Ueda reiterated that interest rate hikes will continue if the Japanese economy meets the central bank's economic expectations in fiscal 2025. In contrast, the market has fully priced in the expectation of a 25 basis point rate cut by the Federal Reserve at its upcoming policy meeting on September 17-18. This, in turn, failed to help the US dollar consolidate its gains over the past three days. Apart from this, cautious market sentiment is seen as favorable for the yen's relative safe-haven status and exerts some downward pressure on the USD/JPY pair.

From the recent trend, the 14-day relative strength index (RSI) of the technical indicator is currently at 31, which is in the negative zone, indicating that the selling pressure has eased in the short term. It is expected that the selling pressure of USD/JPY may be slightly relieved in the short term, and there may even be a stronger rebound brewing, because last week's low is close to last week's low of 141.70 {double bottom}, so there is no break at present and it rebounds more obviously like that day, which is a very favorable technical signal. The current resistance can first pay attention to 143.80 {high point at the beginning of this week}, and the break will point to 145.55 {descending triangle resistance line of the daily chart}, and 145.40 {22-day moving average} area levels. As for the nearer support below, it will continue to refer to last week's low of 141.70 {double bottom}, further pointing to 140.25 (December 2023 low), and 140.00 {market psychological barrier}, which may slow down the decline of the currency pair.

Today, it is recommended to short before 142.50, stop loss: 142.70; target: 141.80, 141.60

EUR/USD

The euro/dollar exchange rate hovered around 1.1000 after U.S. inflation data cooled hopes for a big rate cut from the Federal Reserve. The European Central Bank will announce its monetary policy decision on Thursday. In Asia on Wednesday, the euro/dollar broke a three-day losing streak and traded around 1.1050. The euro/dollar's upside was attributed to the rebound in the dollar/yen, which hit a near one-year low of 141.80 after comments from Bank of Japan Nagakawa. The dollar faces challenges as U.S. Treasury yields continue to fall. The U.S. dollar index, which measures the value of the dollar against six other major currencies, stopped its three-day winning streak. The dollar index was around 101.30 intraday, with the 2-year Treasury yield and the 10-year Treasury yield at 3.57% and 3.62%, respectively. However, last week's U.S. labor market report added uncertainty to the prospects of an aggressive rate cut by the Federal Reserve at its September meeting. The latest German inflation data put downward pressure on the euro.

Judging from the recent trend, if the bulls regain the upper hand, EUR/USD will encounter initial obstacles before the 2024 high of 1.1201 (August 26) and 1.1200 {market psychological level}. The 14-day relative strength index (RSI) of the technical indicator is currently 51, which is in the middle area, indicating that the selling pressure has stopped in the short term. Once the bulls break through the 1.1200-1.1201 area, the currency pair will have a strong upward challenge to the 2023 peak of 1.1275 (July 18) and further point to 1.1300 {round number}. On the other hand, the next downside target for the currency pair is the September low of 1.1015 (September 10), and the 50-day moving average of 1.0963 will be seen if it breaks through. If the latter is broken, the pair may test 1.0870, and 1.0860, where the 100- and 200-day moving averages converge.

Today, it is recommended to go long before 1.1000, with a stop loss of 1.0985 and a target of 1.1060 and 1.1070.

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