US Dollar Index

Last week, the attraction to the US dollar weakened due to the lower-than-expected US non-farm payrolls data for August. The US dollar index fell to a low of 100.56, and then recovered on Friday after the release of the August non-farm payrolls data. The data showed that the probability of the Federal Reserve implementing a 50 basis point interest rate cut in September is still high, but Fed officials may not accept it yet. Despite positive economic indicators, the market may have exaggerated expectations for aggressive monetary policy easing. The current growth rate exceeds the long-term trend, indicating that the market may overestimate the need for such measures. However, a 25 basis point interest rate cut is a foregone conclusion. Compared with the beginning of this week, the market is increasingly considering the possibility that the US Federal Reserve (Fed) will choose to cut interest rates significantly after a series of weaker-than-expected labor market-related data. Judging from the weak performance of the US dollar in the past few trading days, negative labor market data has obviously caused a greater reaction in the foreign exchange market. Therefore, even if the market is not optimistic about the non-farm payrolls data, the market may be prepared for lower data. The market is likely to set the rate cut at around 35-40 basis points when the Fed announces a rate cut on September 18. It is expected that the decline in the US dollar triggered by the non-farm payrolls will support low-interest currencies and pro-cyclical currencies.

From the recent technical trend analysis, the outlook for the US dollar index is bearish, as the 14-day relative strength index (RSI) of the technical indicator is still negative (39.30), indicating that bearishness dominates. From the key technical level, the US dollar index is back above 101. The daily momentum is mildly bullish, with the first resistance level at 101.52 {23.6% Fibonacci rebound level from 104.80 to 100.51}, and the next level will look at 101.92 {last week's high}. This resistance level has triggered a pullback earlier last week and now seems difficult to break through. Finally, the important resistance around 102.65 {50.0% Fibonacci retracement} holds key technical value, while the 103.16 {61.8% Fibonacci retracement}, and 103.24 {50-day moving average} areas are the second major resistance levels that limit price action. On the downside, 100.89 {August 29 low} will soon be tested. If the data supports further Fed rate cuts, the "triple bottom" formed by the 100.60 (28/12/2023); 100.51 (27/8); and 100.56 (last Friday) lows is a key support level. A breakout would see 100.00 {market psychological barrier}, and the ultimate focus is 99.57 {low since July 14, 2023}, once this level is lost, the level of 97.73 from earlier in 2023 will be in focus.

Today, consider shorting the US dollar index around 101.30, stop loss: 101.45, target: 100.95, 100.90

WTI crude oil

Last week, crude oil prices consolidated a sharp decline, falling below $70.00 to a new low of $66.72 so far this year. Crude oil prices remain depressed, mainly due to poor communication between the Organization of Petroleum Exporting Countries and its allies (OPEC+). Although several representatives of the consortium may say that an agreement is close to delaying the normalization of production, the market originally believed that OPEC would propose more radical and influential measures, thereby supporting crude oil prices more significantly. OPEC+ has agreed to postpone its planned production increase in October and November due to concerns about demand from the United States and China. Libya is expected to resume production after the domestic dispute is resolved, which also weighed on crude oil prices. Secondly, the dollar index also plummeted due to the strengthening of the yen, which may also support crude oil prices at a lower level. WTI oil prices fluctuated lower to a new low in 2024 to below $70.00 per barrel at $66.72. However, the postponement of oil production increase by OPEC+ and the large increase in crude oil inventories may help limit the decline of WTI oil prices. As China is the world's largest crude oil importer, the market's concerns about the Chinese economy and sluggish oil demand weighed on WTI oil prices. China's National Bureau of Statistics released a weaker-than-expected manufacturing purchasing managers' index, and the Caixin manufacturing purchasing managers' index released on Wednesday was also relatively weak, which led to the decline of WTI oil prices. However, due to the positive news from the Organization of Petroleum Exporting Countries and its allies (OPEC+) and the large increase in crude oil inventories, the downside of WTI oil prices may be limited.

In the past two weeks, the price trend of crude oil has been very tired, falling more than 15% from the high of $78.77 two weeks ago to the low of $66.72 this year. From a technical point of view, crude oil prices may still fall slightly this week and then eventually find important support for rebound. The 14-day relative strength index (RSI) momentum indicator of technical indicators confirms this argument (the latest report is 32.75). The indicator has not yet touched or tested the oversold area, giving investors a false impression that the rebound has begun. On the positive side, once the oil price re-crosses above $70.00 (market psychological level), $72.10 {August 5 low}, and $72.08 {67.79 to 87.84 78.6% Fibonacci retracement level} are the first key resistance levels, followed by $73.66 {20-day moving average}, and $73.69 {the axis of the daily chart downward channel}. A breakout would target $75.44 {61.8% Fibonacci retracement of $67.79 to $87.84}. On the downside, the August 5 low of $71.17 has been broken. From here, $66.72 (last week's low) is the first level to watch, followed by $66.20 (lower line of the downtrend channel).

Today, consider going long on crude oil around 67.40, stop loss: 67.20; target: 68.60; 68.90

Spot gold

After some bearish pressure in the first half of last week, gold benefited from the decline in US Treasury yields and regained $2,500. US inflation data for August may drive the next move for the precious metal. Before the weekend, gold prices fell, retreating from near-record highs hit earlier in the session, as mixed U.S. employment data recently cast doubt on the scale of the Fed's recent rate cuts. Some reports showed that nonfarm payrolls increased by 142,000 in August, while economists polled by Reuters estimated 160,000. July data was also cut to 89,000. The market believes that the Fed may cut interest rates further, at which time gold prices will face upside risks, but as the situation develops this year, we will begin to see gold prices move towards $2,700/ounce. At present, gold is still close to its historical highs, and while a significant improvement in nonfarm payrolls may help catalyze the expected repricing, it is not a necessary condition for gold prices to collapse. The increasingly sluggish price trend has also lowered the threshold for CTAs to sell, and although gold is still close to its historical highs, the sharp decline has the potential to stimulate selling activities by trend followers.

From the daily chart of gold, combined with the non-agricultural data last weekend, the price of gold fell rapidly after a brief rise to a high of $2,529.50, and has now fallen below the key support level of 2,500, while the short-term moving average group support has also been lost. The 14-day relative strength index (RSI) indicator of the technical indicator remains near 54.50, while the MACD and MA moving averages are in a dead cross state. This further confirms the weakness of the gold bulls in the early stage, and the big negative line closed last Friday further exacerbates this judgment. The recent support level is at $2,487 (the lower track of the upward channel on the daily chart). If gold falls below this level and confirms it as a resistance level, then $2,470 (the lower track support line of the horizontal channel) may be the next support level, followed by $2,461.3 (34-day moving average). On the upside, the first resistance level is at $2,506.30 (9-day moving average). Once gold breaks this barrier, its target may be the $2,531.70 {all-time high on August 20}, and the 2,532.00 (upper resistance line of the horizontal channel) area. Once gold breaks this barrier, its target may be the upper line of the ascending channel at the $2,650 level.

Today, you can consider going long on gold before 2,493.00, stop loss: 2,490.00; target: 2,510.00; 2,515.00

AUD/USD

Last week, AUD/USD gave up all intraday gains and turned negative before the weekend, plunging more than 1%, and fell below 0.6700 to a near 3-week low of 0.6660. The US August non-farm payrolls (NFP) data significantly increased the buying interest of the US dollar, and the Australian dollar asset fell to around 0.6700. The US dollar index, which tracks the greenback against six major currencies, reversed its downward trend and climbed to around 101.20. The US NFP report showed that job demand remained weaker than expected. New payrolls came in at 142k, below the expected 160k, but up from the 89k reported in July (down from 114k). The unemployment rate fell to 4.2% from the previously reported 4.3%, in line with expectations. The disappointing US jobs data gave the Fed a green signal to start tapering its policy easing process this month. The weak US jobs data also fueled market expectations that the Fed could start aggressive rate cuts. In the Asia-Pacific region, the Australian dollar was weak despite strong market speculation that the Reserve Bank of Australia (RBA) is unlikely to cut interest rates this year. The prospect of the RBA keeping interest rates at current levels until the end of the year strengthened after RBA Governor Michelle Bullock offered hawkish rate guidance.

In terms of technical trends this week, AUD/USD significantly increased buying interest in the U.S. dollar after the release of the U.S. August non-farm payrolls data last weekend, and gave up all intraday gains and turned to fall more than 1% in the U.S. market, and fell below 0.6700 to a near 3-week low of 0.6660. The currency pair has been in a downtrend since just above 0.6800 (market psychological level) in early September. The 14-day relative strength index (RSI) of the technical indicator is currently in the negative zone (46.26) and is sloping sharply downward, indicating that bears are in control of the market. The moving average convergence divergence (MACD) is also bearish, which confirms the increasing selling pressure. It has now broken below 0.6700 (round number), and is testing key support levels at 0.6643 (100-day moving average), and 0.6641 (0.6347 to 0.6823 38.2% Fibonacci retracement). A break below this level could lead to a further drop to 0.6600 (market psychological level) in the coming days. As for the upside, first pay attention to 0.6710 (23.6% Fibonacci retracement), and 0.6735 (9-day moving average). A break will point directly to 0.6800 (market psychological level), and 0.6815 (upward channel center axis) area levels.

Today, consider going long on AUD before 0.6655, stop loss: 0.6640; target: 0.6705; 0.6710.

GBP/USD

GBP/USD has been volatile in the pre-weekend trading session as weak US employment data has been increasing. This has left investors uncertain about whether the Fed will cut interest rates by 50 or 25 basis points at its meeting on September 17-18. The pair retreated slightly to 1.3130. After falling below the key 1.3100 support level earlier this week, GBP/USD has managed to regain balance and quickly returned above the 1.3200 mark after the US non-farm payrolls data (+142K jobs) disappointed market expectations on Friday. Although this move has subsequently faded, it was not enough to reverse the positive performance of GBP/USD this week. On the other hand, the dovish comments made by Fed Chairman Jerome Powell at the Jackson Hole Symposium in late August still support the selling stance of the US dollar. Powell's views were later supported by many Fed officials, who seemed to advocate for rate cuts as soon as this month.

Before the close of last weekend, a technical correction in GBP/USD took the pair down to 1.3100. If the bearish momentum continues, GBP/USD may retest the September low of 1.3087 (set on September 3), then the medium-term 50-day moving average of 1.2927 and the important 100-day moving average of 1.2787. Beyond these levels, the pair may fall to the August low of 1.2664 (set on August 8), and the June low of 1.2612 (set on June 27). On the contrary, the 14-day relative strength index (RSI) of the technical indicator remains around the 58.30 level, and the upward momentum is clearly continuing. The immediate resistance for GBP/USD is 1.3198 {upper resistance line of the rising wedge on the daily chart}, and .13200 {market psychological level}, which will eventually point to the 2024 high of 1.3266 (reached on August 27), and then the weekly top of 1.3298 (reached on March 23, 2023).

Today, it is recommended to go long on GBP before 1.3115, stop loss: 1.3100, target: 1.3165, 1.3175

USD/JPY

Last week, USD/JPY continued to fall, falling about 5.0% from the early week high of 147,20 to a low of 141.77 as the US dollar extended its broad weakness after weak US non-farm payrolls data. The dollar's appeal weakened after the August non-farm payrolls report was lower than expected. USD/JPY extended its decline, supported by the decline in the US 10-year Treasury yield. The dollar recovered against most G8 FX currencies, except for safe-haven currencies such as the yen. The report showed that 142,000 new jobs were added, lower than the expectation of 160,000, but higher than the revised 89,000 in July. The unemployment rate fell to 4.2% from 4.3% as expected. Other data showed that average hourly earnings increased by 3.8% year-on-year, exceeding expectations. The decline in labor market conditions, coupled with disappointing JOLTS job openings and ADP employment data, added to investors' concerns about an economic slowdown this week, and the market is increasingly confident that the Federal Reserve will cut interest rates more sharply in September.

From a technical perspective, USD/JPY’s break below 145.61 {20-day moving average} last week is seen as a fresh trigger for bearish traders. Moreover, the outlook for USD/JPY is negative as the 14-day relative strength index (RSI) is hovering around the oversold level of 32, signaling potential downside momentum. Moreover, the moving average convergence divergence (MACD) is showing higher red bars, reinforcing the bearish sentiment for the pair. This suggests that USD/JPY still has the least resistance to the downside. A break below 143.00 will confirm the negative bias and drag the spot price further towards the daily chart’s “double bottom” support of 141.69 – 141.77 levels and the 7-month low of 140.25 recorded on December 28 last year. On the other hand, the pair has been falling for four consecutive trading days and could see an upward correction at any time. Any meaningful rebound above the 143.00 mark may attract fresh shorts and remain capped by the 145.55 {descending triangle resistance line on the daily chart}, and 145.61 {20-day moving average} supply zones. The aforementioned zones should act as pivot points, and a decisive break above them could trigger a short-covering rally and lift the pair towards the next resistance near 147.20 {last week high}.

Today, we recommend shorting the USD/JPY before 142.50, stop loss: 142.80; target: 141.70, 141.40

EUR/USD

After hitting a weekly high of 1.1150 during the North American session at the end of last week, EUR/USD gave up gains intraday and fell below 1.1100. The shared currency pair's impressive gains have been reduced due to the strong recovery of the US dollar. Although the short-term appeal of the US dollar remains uncertain as the US non-farm payrolls data for August was lower than expected. The dollar's appeal has weakened as the US July JOLTS employment data and August ADP employment data released earlier last week deepened concerns about deteriorating labor market conditions. The slow progress of the EU economy has limited the euro's strength. In addition, the manufacturing purchasing managers' index (PMI) was revised down, but the result was still 45.8, indicating that the economy is still contracting. On the other hand, the services PMI was revised down to 52.9, and the composite PMI was 51.0. The European Central Bank will announce its monetary policy decision on September 12, and the market generally expects the European Central Bank to cut its three interest rate benchmarks by 25 basis points each. On the one hand, the inflation rate continues to approach the central bank's 2% target. On the other hand, due to the tepid economic development caused by restrictive policies, interest rate cuts have long been priced in, and what can really affect the euro's trend is the forward guidance that policymakers are willing to provide.

Last week, EUR/USD changed direction after falling to 1.1025, found some support mid-week, and is now trading just below 1.1100 after peaking at 1.1155 before the weekend. The weekly chart of EUR/USD shows that it has maintained a small rise, but it has also produced lower lows and lower highs, which is usually a sign of impending weakness. At the same time, the pair is struggling to stay above the mildly bearish 200-day simple moving average (1.0856), while the 25 {1.1049} and 100-day {1.0861} maintain a bullish slope well below current levels. Finally, the technical indicator 14-day relative strength index (RSI) remains above the midline {55.35}, slightly higher, limiting the bearish possibility, but not enough to suggest an imminent rise. However, the risk of another downward move in EUR/USD has increased. At the same time, the pair is exerting pressure on the bullish 25-day moving average. A break below this moving average would indicate that sellers are willing to add positions. Finally, the 100-day crosses above the 200-day moving average with a slightly rising slope, and the two converge near 1.0860. The 1.1040 level provides immediate support before 1.0990. Once below 1.0990, temporary support is at 1.0950, followed by the 1.0900 price area. Resistance is at 1.1145, and if it breaks through 1.1145, it will face the 1.1200 threshold.

Today, it is recommended to go long on the EUR/USD before 1.1070, stop loss: 1.1055, target: 1.1130, 1.1140.

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