US Dollar Index

The US dollar retreated from Monday’s lows this week, as the US trading session begins this week. All investors’ eyes are on the Federal Reserve, and the manufacturing data from the Federal Reserve Bank of New York turned positive. The US dollar index may fall as it is testing the lower limit of the August bandwidth, and the pessimism surrounding the US dollar increased last week, causing the US dollar index to rise below 101.00 and fall to 100.60 lows, returning to the negative zone for the second consecutive week on the weekly chart. Looking at the US dollar index price action so far in September, the 102.00 mark is a pretty good resistance area, although the broader bearish outlook is expected to remain unchanged as long as it is below the key 200-day moving average of 103.85. The decline this week is mainly due to investors’ adjustment to the high probability that the Federal Reserve will reduce the federal funds target range by 25 basis points at the meeting on September 18. Market participants have begun to close their positions in the US dollar, putting the US dollar index under increasing pressure and prompting it to fall below the key support level of 101.00 again this weekend. The Fed meeting will be an important event to watch this week.

The daily chart shows that the US dollar index is likely to continue to be under downward pressure after decisively breaking below the important 200-day simple moving average at the beginning of last month (then at 104.23; currently at 103.85). If the bearish momentum continues, the US dollar index may first fall to the key support level of the "triple bottom" formed by the lows of 100.60 (28/12/2023); 100.51 (27/8); and 100.57 (September 6 low). Then fall to the psychologically important 100.00 level. Further down, it points to the 2023 bottom of 99.57 recorded on July 14. Bullish attempts should face immediate resistance at 101.52 {23.6% Fibonacci rebound from 104.80 to 100.51}, and 101.84 (last week’s high) levels before re-crossing 102.00 (psychological), and 102.27 (50-day moving average) areas.

Consider shorting USDX around 100.80 today, stop loss: 100.95, target: 100.50, 100.40

WTI Crude Oil

This week’s price action will largely depend on the Fed, which will cut interest rates, with the market heavily divided on whether it will be a mere 25bps or a 50bps cut. Traders will discourage a bigger rate cut to support growth and demand, supporting crude oil prices. U.S. WTI crude oil prices attracted some sellers during the Asian trading hours on Monday and are currently trading just below $68.00. Over the weekend, China released a series of poor data, which in turn is seen as a key factor affecting the black liquid, and market concerns about slowing fuel demand in the world's largest oil importer have resurfaced. Earlier, the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) lowered their demand growth forecasts and triggered a new round of selling around crude oil prices. That said, the prevailing selling tendency of the US dollar, mainly due to expectations of a sharp interest rate cut by the Federal Reserve, has provided support for commodities and helped limit the downside.

The 14-day relative strength index (RSI) indicator of technical indicators remains around 30, indicating that gold has more room to fall before it is technically oversold. However, it is not ruled out that oil prices will bottom out in the short term and make a technical rebound before re-searching for a bottom. The current resistance level is estimated at the key psychological level of $70 in the market. The more important ones are $72.10 {August 5 low}, and $72.08 {67.79 to 87.84 78.6% Fibonacci retracement level} as the first key resistance level, followed by $73.76 {9-week moving average}, and $73.86 {previous week high}. The support below is expected to be $67.49 (5-day moving average), and $66.64 (last Thursday's low). Further reference can be made to the key level of $64.60 of the "triple bottom" composed of $64.45 (last March low); $64.40 (last April low); and $64.75 (this September low).

Consider going long on crude oil near 69.10 today, stop loss: 68.90; target: 70.20; 70.40

Spot gold

Gold prices traded in a narrow range above $2,580 after hitting a new high near $2,590 earlier in the day. The benchmark 10-year U.S. Treasury yield remained above 3.6% ahead of the Fed meeting, making it difficult for gold prices to find direction. In early Asian trading on Monday, gold prices strengthened to around $2,586. Gold prices hit a record high of $2,586.10 last Friday as market expectations for a sharp rate cut from the Federal Reserve continued to heat up. The Fed's meeting on Wednesday will be the focus. Speculations of a rate cut from the Federal Reserve continued to heat up after U.S. economic data showed a slowdown, which boosted gold because lower interest rates reduce the opportunity cost of holding zero-yielding assets. The market is moving towards a lower interest rate environment, so gold becomes more attractive. In addition, ongoing geopolitical tensions in the Middle East have also provided further support for safe-haven gold prices. Nevertheless, the economic downturn and concerns about China's economic slowdown may limit the upside of precious metals as China is the world's largest producer and consumer.

Gold rose sharply in the second half of last week, and the decline in US Treasury yields put pressure on the US dollar, allowing gold prices to continue to rise last week. And set a record high above $2,586. The 14-day relative strength index (RSI) indicator, a technical indicator on the daily chart, remains near 70, indicating that gold has more room to rise before it is technically overbought. The next resistance level is $2,600 (round psychological level), and $2,613 {200% Fibonacci rebound level from 2450 to 2287), exceeding this level will test $2,660 (the upper track of the upward channel since mid-February). On the downside, $2,531.70 (previous all-time high), and the 5-week moving average of $2,520, are the first support levels before $2,500 (market psychological barrier) and $2,473.50 (9-week simple moving average).

Consider going long on gold before 2,575.00 today, stop loss: 2,570.00; target: 2,595.00; 2,600.00

AUD/USD

Further weakness in the US dollar has made AUD/USD quickly forget the pullback on Friday and resume the uptrend above 0.6700 in a rather auspicious start to the new trading week. AUD/USD strengthened to around 0.6700 in early Asian trading on Monday. The rise in AUD/USD is supported by the weakness of the US dollar. However, concerns about China's economic slowdown may limit the upside of the Australian dollar. The Fed's interest rate decision will be the focus of the market this Wednesday. Investors will get more clues about the outlook for US interest rates from the Fed press conference. If Powell indicates a more aggressive easing, this could put some selling pressure on the US dollar and boost AUD/USD. On the other hand, weak Chinese economic data released over the weekend could weigh on the Australian dollar. Sarah Hunt, assistant governor (economic) of the Reserve Bank of Australia, said last week that "the labor market remains tight relative to full employment. This comment supports the Reserve Bank's opposition to a near-term rate cut, which could boost AUD/USD".

Technical analysis of the daily chart shows that the AUD/USD exchange rate was close to a full-week high of 0.6732 before the weekend. The pair has broken through the upper resistance line of the descending channel at 0.6710, indicating a weakening bearish bias. In addition, the 14-day relative strength index (RSI) of the technical indicator has risen above 52.80, indicating a shift in momentum from a bearish trend to a bullish trend. On the upside, AUD/USD may rise to 0.6775 {76.4% Fibonacci rebound from 0.6823 to 0.6622}, breaking which points to explore the seven-month high near 0.6798, in line with the psychological level of 0.6800. On the downside, AUD/USD may find immediate support near 0.6654, the 100-day moving average, and 0.6650 {midline of the descending channel}, followed by 0.6600 (market psychological level), and 0.6598 (lower line of the descending channel) support areas.

Today, consider going long on AUD before 0.6735, stop loss: 0.6725; target: 0.6780; 0.6790.

GBP/USD

After Friday's volatility, GBP/USD has gathered bullish momentum and hit a new 10-day high just above 1.3200. The US dollar remains under pressure ahead of the Fed and BoE policy announcements, pushing the pair higher. GBP/USD attracted some bargain hunting at the open on Monday as trading was relatively light due to holidays in China and Japan. USD selling strengthened and GBP/USD is now trading around 1.3200 - 1.3210 range, still close to the one-week high hit on Friday. The generally positive market risk sentiment amid expectations of more aggressive easing by the Fed further weakened the relative safe-haven status of the US dollar. On the other hand, GBP has benefited from expectations that the Bank of England will ease less than the Fed in the coming year. However, the market is still betting on further rate cuts by the BoE. This may hinder bulls from making aggressive bets on GBP/USD. The fundamental backdrop favors the USD bears.

Observing from the daily chart, GBP/USD has recently resisted the bearish pressure and managed to hold above the key support of 1.3045 (July 17 high) after briefly testing the bids of 1.3000. On the way back up, the pair reclaimed the 21-day simple moving average with a daily closing price of 1.3127, negating the recent bearish outlook. The technical indicator 14-day relative strength index (RSI) has re-entered the 50 level and is currently around 63.00, which adds credibility to the renewed upward movement. On the upside, GBP/USD must break the descending trendline resistance of 1.3218 before aiming for the 29-month high of 1.3266. Further up, GBP buyers will find the next relevant resistance at the 1.3300 round mark, and the 1.3350 psychological mark. If buyers are blocked at the trendline levels of 1.3218, and 1.3200, a correction towards the July 17 high of 1.3045 is likely. Failure to sustain above this level could trigger a fresh decline towards 1.3000 {market psychological level}.

Today’s recommendation to go long GBP before 1.3200, Stop Loss: 1.3185, Target: 1.3245, 1.3255

USD/JPY

USD/JPY fell sharply to around 139.50, with all eyes on the Fed’s policy. Market expectations for a sharp rate cut by the Fed have increased. The Bank of Japan is expected to keep the rate at 0.25% on Friday. The USD/JPY pair remained subdued around $140.00 during the Asian session on Monday, with thin trading volumes due to the Japanese holiday, and looked vulnerable near the year-to-date lows reached last week. However, bearish traders may prefer to wait for major central bank event risk this week before positioning for any further depreciation. The Federal Reserve is scheduled to announce its decision at the end of its two-day meeting on Wednesday, followed by the Bank of Japan's policy update on Friday. Meanwhile, the divergence in Fed and Bank of Japan policy expectations has led to the recent unwinding of yen carry trades and continues to exert some downward pressure on the USD/JPY pair. Recent hawkish comments from Bank of Japan officials have reaffirmed market bets that the Bank of Japan will announce another rate hike before the end of this year.

In terms of recent technical trends, the path of least resistance for the USD/JPY pair remains to the downside and supports the prospect of a continuation of the downtrend that has been established over the past two months or so. That said, the generally positive risk tone may limit any meaningful gains in the safe-haven yen and prevent bulls from making new bets in the absence of any relevant macro data. Technical indicators for USD/JPY Today's relative strength index (RSI) and stochastics have just rebounded from oversold territory, and it is expected that USD/JPY selling pressure may ease slightly in the short term, and there is even a possibility that a stronger rebound is brewing. The current resistance can be 141.51 (5-day moving average), and 142.25 (9-day moving average), and the next level is 144.58 (50.0% Fibonacci retracement level from 127.22 to 161.95). As for the near support below, it is estimated to be 140.00 (market psychological level), and further refer to the low of 137.24 in July last year. And 135.42 (76.4% Fibonacci retracement level).

Today, we recommend shorting before 140.85, stop loss: 141.00; target: 140.00, 139.90

EUR/USD

The EUR/USD pair managed to regain upside momentum, breaking above the 1.1100 mark to 1.1130, hitting a new multi-day high as the greenback faced increasing downward pressure ahead of the crucial FOMC meeting. The EUR/USD pair traded higher around 1.1095 during Monday's Asian trading session amid a weaker US dollar. Investors will be closely watching the Federal Reserve's monetary policy meeting on Wednesday for more clues on how aggressively the central bank will cut interest rates. The EUR/USD pair started the week on a positive note, rising slightly to around 1.1090 during Monday's Asian session. Investors are now focusing on the much-anticipated policy decision of the Federal Reserve later this week. The market remains divided on whether the Fed will cut interest rates by 25 basis points or 50 basis points.

The EUR/USD pair remains capped below the descending trend channel on the four-hour chart. However, a constructive view on the major currency pair prevails while the price remains above the key 100-hour moving average (1.1088). Moreover, the upward momentum is supported by the 14-day relative strength index (RSI) of the technical indicator, which is above the midline near 72.00, indicating that the path of least resistance is to the upside. After breaking through the decisive position of 1.1100 - 1.1105 area, the upper limit of the trend channel may rebound to the high of September 6, 1.1155. Going further up, the next upward hurdle will appear near the high of August 26, 1.1200. On the other hand, the low of September 14, 1.1070, and 1.1087, which is the 100-hour moving average. If the above levels are broken, a drop to the low of September 3, 1.1026, may be possible. Additional downside filters appear at the psychological barrier of the market at 1.10 level.

Today it is recommended to go long before 1.1115, stop loss: 1.1100, target: 1.1160, 1.1170.

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