US Dollar Index

The dollar strengthened ahead of the US trading session. Traders saw an increase in weekly unemployment claims this week. Despite a previous breakout, the dollar index returned to its narrow range. The dollar index, which measures the value of the dollar against a basket of currencies, fell to its lowest point since July 2023 at 100.22 after the Federal Reserve unexpectedly cut interest rates by a large 50 basis points. The move lowered the target range for the federal funds rate to 4.75%-5.00% at this stage. The Fed's decision marked a shift in its monetary policy stance and sent shock waves through the market, causing the dollar to depreciate. The dollar could fall further as the Fed is ready to cut interest rates further. This expectation stems from the Fed's shift in stance, indicating that it is ready to take more aggressive action if economic conditions allow. At the same time, the sell-off in US rates, combined with falling stocks and a stronger dollar, suggests that the market may have gotten ahead of itself and priced in too many rate cuts too quickly. What is clear is that the "why" behind the Fed's future rate cuts is far more important than the "when". Investors beware, the game is far from over.

From the daily chart, the technical analysis of the US dollar index shows a poor outlook, with the 14-day relative strength index (RSI) indicator still in the negative (39.70) zone. Indicating bearish sentiment. The moving average convergence divergence (MACD) is printing lower green bars, further supporting the bearish trend. The US dollar index has room to fall before it becomes technically oversold. In addition, the decline of the 20-day simple moving average (101.21) indicates a weakening of buying momentum. Therefore, support is located at the “triple bottom” formed by the lows of 100.56 (17/9); 100.51 (27/8); and 100.57 (low of September 6), and 100.00 (market psychological level), while resistance is located at 101.21 (20-day simple moving average), 101.52 {23.6% Fibonacci rebound from 104.80 to 100.51}, and 101.84 USD (last week's high).

Today, consider shorting the US dollar index around 100.85, stop loss: 101.00, target: 100.50, 100.40

WTI crude oil

WTI jumped above two-week highs on Wednesday due to fresh selling in the US dollar. The Federal Reserve's aggressive rate cuts, coupled with a positive risk tone, have weakened the safe-haven dollar. Concerns about slowing global fuel demand may limit further gains in crude oil prices. WTI crude oil prices recovered from the previous day's losses and traded at around $69.80 per barrel in Asian trading on Thursday. The Fed's decision to cut interest rates by 50 basis points, a larger-than-expected rate cut, provided support to oil prices, although the overall market reaction was relatively muted. But the decision highlights the Fed's determination to protect the labor market and prevent the economy from falling into recession. Lower borrowing costs may improve the economic outlook in the United States, the world's largest crude oil consumer, providing potential support for oil demand. In addition, WTI oil prices may receive support after the U.S. Energy Information Administration (EIA) reported that the change in crude oil inventories fell by 1.63 million barrels to 417.5 million barrels in the week ending September 13, far exceeding the expected decrease of 100,000 barrels.

The Fed's unexpectedly large rate cut of 50 basis points and the forecast of further rate cuts will be seen as oxygen for the battered crude oil prices. Crude oil prices will rise. The first level to watch on the upside is $72.10 {August 5 low}, and $72.08 {67.79 to 87.84 78.6% Fibonacci retracement} as the next level to watch. A breakout points to the $74.43 {50-day moving average} level. On the other hand, initial support should be very close to $68.44, which is where the 9-day moving average is located. Moving down, the next level is $67.75, which is this week's low. If this level faces a second test and falls, $64.75 (September 10 low) will become the target.

Consider going long on crude oil near 70.80 today, stop loss: 70.60; target: 71.80; 72.20

Spot gold

After retreating in early US trading, gold regained traction, trading decisively higher to around $2,595 on the day. The 10-year US Treasury yield retreated to 3.7%, supporting gold prices after the Fed. Gold prices reversed intraday after hitting a record high near $2,600, closing lower for the second consecutive day in the middle of the week. Gold prices began to surge after the US Federal Reserve decided to kick off the easing cycle with a sharp interest rate cut. However, gold's gains were weak after Fed Chairman Jerome Powell cooled hopes for a series of 50 basis point rate cuts in the future, which triggered a sharp recovery in the US dollar from a 14-month low and dragged down non-yielding gold. Gold prices subsequently fell to their lowest in four days, although a combination of factors limited further losses. Investors remain concerned about the economic slowdown in the world's two largest economies, the United States and China. This, coupled with the ongoing geopolitical risks arising from the ongoing conflict in the Middle East, has provided some support for the safe-haven precious metal.

From the recent technical trend, any subsequent decline is more likely to find suitable support near the previous cycle high, around $2,532-2,530. Some follow-up selling will expose the next relevant support level, around $2,517-2,515, below which gold prices may accelerate the corrective decline to the psychological $2,500 mark. A decisive breakthrough of $2,500 may make traders who are inclined to bearish in the near term. On the other hand, the $2,590 area now seems to be an immediate obstacle before the $2,600 mark or the all-time peak reached on Wednesday. The subsequent rise may allow gold prices to challenge the trend channel resistance, which is currently located near $2,613 {200% Fibonacci rebound from 2450 to 2287). A successful break above the above resistance level will become a new trigger point and lay the foundation for the continuation of the upward trend established over the past three months to the level of $2,660 (the upper line of the upward channel since mid-February).

Today, consider going long on gold before 2,580.00, stop loss: 2,576.00; target: 2,595.00; 2,600.00

AUD/USD

AUD/USD finally broke through the key 0.6800 mark, rising for the fourth consecutive trading day, thanks to the continued decline of the US dollar after the Fed's rate cut. The AUD/USD continued its upward momentum after the release of the labor market report on Thursday. In addition, Australia's employment increased by 47,500 in August, lower than the 58,200 in July, but much higher than the consensus forecast of 25,000. Data released by the Australian Bureau of Statistics showed that the unemployment rate remained stable at 4.2% in August, in line with expectations and the previous month's data. The Federal Open Market Committee lowered the federal funds rate to a range of 4.75% to 5.0%, and Fed Chairman Jerome Powell said in a press conference after the monetary policy meeting: We believe that through the correct adjustment of policy guidelines, inflation will be reduced to a sustainable 2% level.

Daily chart technical analysis shows that AUD/USD traded near 0.6800 on Thursday. It indicates that the potential bullish trend continues. The 14-day relative strength index (RSI) of the technical indicator is still above the 63 mark, indicating that the bullish trend is still in effect. On the upside, the AUD/USD pair may test 0.6800 (market psychological level), followed by the "double top" resistance level composed of 0.6823 (August 29 high), and 0.6821 (Wednesday's high). A return to the "double top" will strengthen the bullish tendency and push AUD/USD to 0.6900 (round mark) level. On the downside, AUD/USD may test the 14-day moving average at 0.6722, with the next support at the psychological level of 0.6700. A break below this level could push the pair towards the pullback support zone near 0.6662 {100-day moving average}.

Consider going long on AUD today before 0.6795, Stop Loss: 0.6780; Target: 0.6850; 0.6855.

GBP/USD

GBP/USD lost its bullish momentum after hitting its highest level since March 2022 above 1.3300, retreating to around 1.3280, in direct reaction to the Bank of England’s decision to keep the policy rate unchanged at 5%. GBP/USD climbed to around 1.3200 mark during the Asian session, but lacked follow-through on USD buying. The Fed’s decision to kick off a policy easing cycle, lowering borrowing costs by 50 basis points on Wednesday, has cooled hopes for future super-sized rate cuts. In addition, Fed policymakers’ view that inflation will not return to the 2% target until 2026 has triggered a sharp rebound in US Treasury yields. This, in turn, has pushed the dollar index, which tracks the greenback against a basket of currencies, to a one-week high and has been a key factor exerting some downward pressure on GBP/USD. Expectations that the Bank of England’s rate-cutting cycle may be slower than that of the United States continue to support the pound and help limit the pair’s losses.

Although GBP/USD hit a fresh 30-month high of 1.3315 just above 1.3300 midweek, the market quickly pared the day’s moves, keeping GBP/USD at familiar levels around 1.3200. A firm bullish trend remains embedded in the daily chart as the pair climbs above its 9-day moving average around 1.3138. If the pair re-enters 1.3266 (previous high) and 1.3300 (market psychological barrier) in the short term, the market will move towards 1.3350 (market barrier), and 1.3438 (March 1, 2022 high). As for the lower support area, first pay attention to 1.3200 (round mark), and a break will point directly to 1.3138 (9-day moving average) and 1.3120 (this week's low).

Today, it is recommended to go long on GBP before 1.3270, stop loss: 1.3260, target: 1.3325, 1.3340

USD/JPY

The yen is trading sideways amid hawkish sentiment surrounding the Bank of Japan. The Bank of Japan is expected to keep interest rates unchanged on Friday. Fed policymakers raised the long-term forecast for the federal funds rate from 2.8% to 2.9%. USD/JPY rebounded to around 143.95 before trading higher in Asian trading on Thursday. The pair's gains were driven by the dollar's recovery. Investors will turn their attention to the Bank of Japan's interest rate decision on Friday. The Federal Reserve cut interest rates by 50 basis points to 4.75% - 5.00% at its September meeting on Wednesday. The dollar fluctuated between gains and losses after the Fed's decision. Meanwhile, the dollar index, which measures the value of the greenback against most of its most important trading partners, rebounded from multi-month lows to recapture the 101.00 mark. On the other hand, the Bank of Japan is widely expected to keep interest rates unchanged at its two-day meeting that ends on Friday. The narrowing gap between US and Japanese interest rates could boost the yen against the dollar as the Fed begins to implement loose monetary policy at its September meeting.

The USD/JPY pair initially plunged to 140.40 after the Fed cut its key reference rate on Wednesday, but the market quickly regained balance, bringing the USD/JPY pair back to this week's highs near 144.00. The pair is now entering a familiar technical zone and could be stuck in a consolidation phase {145.00 - 142.00}, which could squeeze both buyers and sellers into a narrow but volatile range. Moreover, the 14-day relative strength index (RSI) on the daily chart remains slightly oversold in negative territory (44.00). From a technical perspective, the daily swing lows around the psychological 140.00 level now appear to be an immediate support area, above which short covering could allow USD/JPY to recapture the 142.95 (14-day moving average) mark. Some follow-through buying could potentially lift the spot price to the 144.86 (23.6% Fehenach rebound from 161.95 to 139.58)-145.00 (round number) resistance level. On the downside, watch out for 142.13 (9-day moving average), and 140.44 (Wednesday low).

Today, we recommend shorting the dollar before 142.80, stop loss: 143.00; target: 141.90, 141.80

EUR/USD

The EUR/USD pair managed to extend Wednesday's gains and climbed to a weekly high around 1.1180 following further dollar weakness as investors continue to consider the possibility of further rate cuts in the coming months. EUR/USD was flat in early European trading Thursday. The pair initially rose to a monthly high of 1.1189 after the Fed announced a 50 basis point rate cut overnight, before retreating to around 1.1120. ECB policymaker Joachim Nagel said on Wednesday that eurozone inflation is still not as low as the ECB would like, so interest rates need to remain high enough to mitigate price pressures. Looking ahead, if the Fed continues to cut rates additionally, the policy gap between the Fed and the ECB could narrow, providing potential support for EUR/USD. This is especially likely as the market expects the ECB to cut rates twice more and the Fed to ease policy by 100-125bps by the end of the year.

From the daily chart, the 14-day relative strength index (RSI) shows that bulls are still in control (RSI is currently at 62 levels). Further gains in EUR/USD may face early resistance near the September high of 1.1189 (September 18), before hitting the 2024 top of 1.1201 (August 26) and the 2023 high of 1.1275 (July 18). Conversely, the next downside target for the pair is 1.1080 (9-day moving average), followed by 1.1012 (September 11 low) and 1.1000 (round mark).

Today it is recommended to go long on USD before 1.1148, stop loss: 1.1130, target: 1.1195, 1.1220.

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