The American dollar was sharply down on Friday, following words from US Federal Reserve Chair Jerome Powell. Powell said back in July, speaking within the Jackson Hole Symposium, policymakers believed that it could be appropriate to start tapering this year, noting progress in employment but also adding the worrisome spread of the Delta variant. “We will be carefully assessing incoming data and the evolving risks,” he said. Quite a dovish comment that sent stocks up and the dollar down.
The Swiss Franc was the most advanced against the US Dollar, while the Japanese Yen was the worst. EURUSD flirted with 1.1800, holding nearby, while GBPUSD was rejected from around 1.3800. Commodity-linked currencies advanced, with AUDUSD currently trading around 0.7300 and USDCAD standing at around 1.2610.
Gold climbed to $1,819.26 a troy ounce, its highest in three weeks, ending the week around 1,817. Crude oil prices saw a modest advance, with WTI settling at $68.60 a barrel.
Bulls were in control in Wall Street rallied, with the S&P500 and the Nasdaq Composite posting record closes amid speculation the US Federal Reserve will maintain financial support, despite hawkish comments from multiple Fed officials.
US Treasury yields retreated from weekly highs but settled at the upper end of their range. The yield on the 10-year Treasury note stands at 1.31%.
All eyes turn now to the August’s US non-farm payrolls as the US may add 750k positions. Looking at the Citi Economic Surprise Index, US data is still managing disappoint relative to expectations. Given how closely the Fed is watching the labour market, a softer print could further push back tapering timeline bets. China releases manufacturing PMI, Australia updates GDP and oil prices await another OPEC+ meeting.
Major Currencies Performance and Signals
EUR/USD
The euro rallied a bit last week, especially now that Jerome Powell has come out and suggested that although tapering will probably happen sometime later in this year, the reality is that we will see no interest rate hikes weakening of the euro. We expect the EURUSD pair to trade with a neutral bias.
FORECAST: NEUTRAL
Resistance: 1.1850, 1.1900, 1.1950,
Support: 1.1800, 1.1750, 1.1700
GBP/USD
GBPUSD struggles to overcome nearby hurdles amid UK holidays. Firmer RSI conditions keep buyer’s hopeful but key SMAs, monthly resistance line challenge up-moves. The GBPUSD pair is expected to trade with a neutral bias.
FORECAST: NEUTRAL
Resistance: 1.3800, 1.3850, 1.3900
Support: 1.3750, 1.3700, 1.3650
AUD/USD
The Australian dollar has risen last week, looking like it is trying to turn things back around and take out the highs of the previous week. This will be all about the inflation picture, and right now it looks as if the market is trying to turn things back around and rally again.
FORECAST: BUY
Resistance: 0.7350, 0.7400, 0.7450
Support: 0.7300, 0.7250, 0.7200
USD/JPY
US Treasury yields managed to hold on to most of their weekly profits. The Japan’s Tokyo inflation came in worse than anticipated in August. USDJPY could extend its decline in the near term but hardly lose the 109.00 mark. We remain bearish this week.
FORECAST: SELL
Resistance: 110.00, 110.50, 111.00
Support: 109.50, 109.00, 108.50
USD/CAD
USDCAD remained quiet at the starting of the week. US Dollar Index slips below 93.00 following FOMC Chairman Powell’s speech. The Canadian dollar gains momentum as oil picks up after a storm hits US oil ports.
FORECAST: BUY
Resistance: 1.2650, 1.2700, 1.2750
Support: 1.2600, 1.2550, 1.2500
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