US Dollar Index

The US Dollar Index, which measures the value of the greenback 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 by 4.75%-5.00%. 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. The dollar remained stable in the early part of the week, with little reaction to the release of retail sales data. It fell from its lows this year, but the recovery was small. Stronger economic data released by the United States has somewhat eased market concerns about a sharp slowdown in the US economy, allowing the dollar to successfully recover some of the losses in recent days.

From the daily chart, the 14-day relative strength index (RSI) indicator of the US dollar index technical indicators remains near the negative area of ​​39.90, while the moving average convergence divergence (MACD) is also on a downward trend, indicating that the US dollar index has room to fall before it is technically oversold. The index fell below its 20-day simple moving average (101.23) before the end of last week, indicating a weakening of momentum. Therefore, the downside position can focus on the key support level of the "triple bottom" formed by the lows of 100.56 (17/9); 100.51 (27/8); and 100.57 (September 6 low). Once the above levels are broken, it points to the psychologically important 100.00 level. If a rebound momentum emerges, bullish long attempts should meet immediate resistance at 101.13 {Monday high}, followed by 101.52 {23.6% Fibonacci rebound from 104.80 to 100.51}, and 101.84 (last week high).

Consider shorting USDX around 101.10 today, Stop Loss: 101.25, Target: 100.60, 100.50

WTI Crude Oil

Fed unexpectedly cuts interest rates by 50 basis points. WTI Crude Oil prices fell as nervous traders look forward to the Fed's interest rate decision on Wednesday. Overnight, API US weekly crude oil inventory data unexpectedly exceeded all expectations. The US Dollar Index remains under pressure, trading at the lower end of the September range. US WTI Crude Oil traded around $69.00 on Wednesday. WTI oil prices fluctuated higher on the back of supply disruptions in the Gulf of Mexico and hopes of a rate cut by the Federal Reserve on Wednesday. In addition, rifts between rival factions in Libya over crude oil dominance have led to supply disruptions, which has reduced oil production and lifted WTI oil prices. Crude oil supply disruptions are causing impacts, including the impact of Hurricane Francine on infrastructure in the U.S. Gulf of Mexico. Expectations of a rate cut by the Federal Reserve could revive demand in the No. 1 oil consumer, while concerns about Chinese oil demand could temporarily limit WTI oil price upside.

Crude oil prices may be rising, with recent data on Tropical Storm Francine providing some short-term positives for the commodity. However, with $70.00 on the horizon, at least another attempt to break through the $70.00 level is possible {as high as $70.65 was seen on Tuesday}. As mentioned earlier, the first upside level to watch remains $70.00. Once the daily close exceeds that level, $71.46 becomes the next level to watch. Breakouts look for $72.10 {August 5 low}, and $72.08 {67.79 to 87.84 78.6% Fibonacci retracement}. Finally, a return to $74.43 {50-day moving average} is still possible. As for support, crude oil prices should be very close to $68.31 (10-day moving average), and $68.19 (triple bottom in the summer of 2023). The next level is $64.75 (September low this year).

Today, consider going long on crude oil around 68.90, stop loss: 68.70; target: 70.20; 70.30

Spot gold

The target range of the federal funds rate was lowered by 4.75%-5.00%. The Fed's decision marked a shift in its monetary policy stance and sent shock waves through the market, leading to a depreciation of the dollar. Reversing its initial gains to hit a new all-time high around $2,600 an ounce, gold prices are again facing downward pressure and returning to the $2,550-$2,560 range in the late stage of the dollar's recovery. Gold prices retreated slightly from the record high near $2,590 hit at the beginning of the week and closed lower for the first time in the past four days on Tuesday. Meanwhile, the broad pricing of the Federal Reserve's super-large rate cut failed to help the dollar take advantage of the overnight rebound from its lowest level since July 2023 and revive demand for non-yielding gold prices. Nevertheless, the risk of further escalation of the conflict in the Middle East and political uncertainty ahead of the US presidential election in November are likely to provide support for the precious metal and limit its downside. This, in turn, suggests that any corrective pullback may still be seen as a buying opportunity.

From the technical trend this week, bulls may wait for gold prices to break through the $2,590 area again, the all-time high hit on Monday, before betting. The subsequent rise has the potential to take gold above the $2,600 mark and test the upper line of the short-term ascending channel extending from the sub-$2,400 level reached in late June. The aforementioned barrier is currently located around $2,609-2,610, and if decisively broken, it will confirm a new breakout and create conditions for the continuation of the recently established uptrend to $2,613 {200% Fibonacci rebound from 2450 to 2287), above which will test $2,660 (the upper line of the ascending channel since mid-February). On the other hand, if gold breaks below the low of this week at $2,560, some follow-up selling may pave the way for a drop to the strong level of $2,541.50 (10-day moving average). Any further decline is more likely to attract new buyers and continue to be limited to the $2,531.70 (previous all-time high) and $2,500 (market psychological barrier) support levels.

Consider going long gold before 2,555.00 today, stop loss: 2,550.00; target: 2,575.00; 2,580.00

AUD/USD

The Australian Bureau of Statistics (ABS) will release its monthly employment report at 1:30 GMT on Thursday. The country is expected to add 25,000 new jobs in August, while the unemployment rate is expected to remain stable at 4.2%. The Australian dollar has a firmer tone towards its US rival, with AUD/USD hovering around 06770. In early trading on Wednesday, AUD/USD stopped rising around 0.6775 after the Westpac Leading Index in Australia was down. However, the Fed's aggressive rate cuts have reignited the dollar sell-off, allowing the pair to maintain. AUD/USD rose for the third consecutive day. The AUD/USD pair could move higher as the Australian dollar remains supported by the hawkish stance of the Reserve Bank of Australia. RBA Governor Bullock said it is too early to consider a rate cut as inflation remains high. In addition, RBA Assistant Governor Sarah Hunt noted that while the labor market remains tight, wage growth appears to have peaked and is expected to slow further.

The daily chart shows that AUD/USD was trading around 0.6820 on Wednesday. AUD/USD is below the lower line of the rising wedge pattern, indicating a possible bearish reversal. However, the 14-day relative strength index (RSI) of the technical indicator remains above the 56 level, indicating that the bullish trend is still continuing. On the upside, a return to the rising wedge will strengthen the bullish bias and push the AUD/USD pair to test the seven-month high of 0.6798, followed by the 0.6800 level. Further resistance is seen at the upper line of the rising wedge at 0.6820, and 0.6823 (August 29) levels. On the downside, AUD/USD is likely to find immediate support at the 10-day exponential moving average at 0.6708, followed by the psychological level of 0.6700. If it falls below this level, AUD/USD may find support around the area around 0.6660 {100-day moving average}.

Today, consider going long on AUD before 0.6745, stop loss: 0.6730; target: 0.6790; 0.6795.

GBP/USD

GBP/USD hit a new yearly high of 1.3298 during the North American session after the Federal Reserve unexpectedly cut interest rates by 50 basis points. The pair retreated to fluctuate in the 1.3200 - 1.3210 range due to the press conference speech of Federal Reserve Chairman Jerome Powell. GBP/USD moved higher to around 1.3160 ​​during the Asian session on Wednesday. The Bank of England will announce its monetary policy on Thursday and the inflation level may affect its decision. Financial markets expect the Bank of England to keep the current interest rate at 5%, and it is expected to take a more aggressive approach from November. The Bank of England predicts that inflation may rise to 2.75% in the coming months and then gradually decline, and may fall below the target of 2.0% by 2025. On Tuesday, US retail sales rose 0.1% month-on-month in August, revised up to 1.1% in July, exceeding expectations of a 0.2% decline, indicating resilient consumer spending. Meanwhile, retail sales control group grew 0.3%, slightly lower than 0.4% in the previous month.

At the beginning of the week, GBP/USD once surged 0.7% and re-entered above the 1.32 level. However, this rally came to an abrupt halt on Tuesday before reaching 1.3150, and yesterday it rose sharply to 1.3298. The daily chart shows that GBP/USD continues to pull back to the highs, with a multi-year high near 1.3266. Despite the overall bullish outlook, the price action of GBP/USD is still at risk of falling into a bull trap. GBP/USD rebounded 1.66% from the previous low to the 1.3000 mark. The 14-day relative strength index (RSI) indicator climbed above 58, and GBP/USD closed above the 20-day simple moving average (1.3147), highlighting the strengthening of bullish momentum. Therefore, the upside targets can focus on 1.3200 (market psychological barrier), and 1.3266 (August 27 high) related resistance levels. If it breaks, bulls will find the next relevant regional levels at the 1.3300 round number mark, and the 1.3350 psychological mark.

Today, it is recommended to go long on GBP before 1.3195, stop loss: 1.3185, target: 1.3240, 1.3250

USD/JPY

USD/JPY fell in reaction to the Fed's 50 basis point rate cut. The Fed's dot plot on the interest rate outlook also fell. The market awaits the press conference of Fed Chairman Powell. USD/JPY attracted new sellers during the Asian session on Wednesday and fell back below the 142.00 mark, losing some of its overnight gains, hindering its recovery from the lowest level since July 2023 hit earlier this week. Meanwhile, the fundamental backdrop suggests that USD/JPY has the least resistance to the downside, but traders may avoid aggressive bets before the risk of key central bank events. Market focus will turn to the Bank of Japan policy update on Friday, which will have a key impact on the yen and provide new directional momentum for USD/JPY. Meanwhile, cautious market sentiment and divergent policy expectations between the Fed and the Bank of Japan have prompted some safe-haven flows to the yen and become a key factor weighing on USD/JPY. Recent hawkish signals from Bank of Japan officials suggest that the Bank of Japan will raise interest rates again before the end of this year. This is a key factor in the recent relative strength of the yen and one of the reasons for the strength of USD/JPY.

From a technical perspective, the lack of any buying interest suggests that the path of least resistance for USD/JPY remains to the downside. Nonetheless, spot prices have been able to hold support at the lower line of the short-term descending trend channel so far. In addition, the 14-day relative strength index (RSI), a technical indicator on the daily chart, is slightly oversold. Therefore, it would be prudent to wait for a short-term consolidation or a small rebound before positioning for the next leg down. Meanwhile, the 142.50 (this week’s high) area now seems to be an immediate hurdle for the pair in the short term, above which short covering could see USD/JPY retake the 20-day moving average at 143.60. Some follow-through buying could lift the spot price to the 142.80-142.85 resistance area, although any subsequent gains are more likely to be capped around 1.44.58 (50.0% Fibonacci retracement of 127.22 to 161.95). On the other hand, the 140.00 psychological level now seems to limit further declines to the yearly low of around 139.58 hit on Monday. If the aforementioned support fails to hold, the downside trajectory could extend further to around the 139.00 mark.

Today, it is recommended to short before 142.30, stop loss: 142.50; target: 141.50, 141.40

EUR/USD

The EUR/USD pair extended its losses on Tuesday after a post-FOMC rebound in the U.S. dollar prompted the pair to give up earlier gains to reach a three-week high of 1.1190. The EUR/USD pair strengthened around 1.1120 in the Asian session on Wednesday. Heightened expectations of a deeper rate cut from the Federal Reserve provided some support to the pair. Data released by the U.S. Census Bureau on Tuesday showed that U.S. retail sales unexpectedly rose 0.1% on month in August, compared with 1.1% in the previous month and better than the expected -0.2%. Meanwhile, industrial production jumped 0.8% on month in August, compared with a decline of 0.6% in July, better than the expected 0.2%. The EUR/USD pair was supported by less dovish interest rate guidance from European Central Bank officials. Looking ahead, if the Fed implements further or deeper rate cuts, the policy divergence between the Fed and the ECB could narrow, which could support the EUR/USD pair. This possibility is particularly high because the market expects the ECB to cut interest rates two more times. However, in the long run, the U.S. economy is expected to outperform its European counterparts, which could limit significant or sustained weakness in the U.S. dollar.

From the daily chart, the 14-day relative strength index (RSI) of the technical indicator shows that momentum suggests that bulls (58.00) are still dominant. Therefore, the upward target of EUR/USD should encounter early resistance at the September high of 1.1155 (September 6), and then hit the 2024 high of 1.1201 (August 26) and 1.1200 (market psychological level). Breaking through points to the 2023 high of 1.1275 (July 18). On the downside, the next downside target of EUR/USD appears at 1.1050, the 34-day moving average, and the next level looks at 1.1002 (the low of the 11th of this month), and 1.1000 (round number) area levels.

Today, it is recommended to go long before 1.1105, stop loss: 1.1090, target: 1.1150, 1.1160.

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