The greenback grew last week as the US bonds market saw some movement that limited the US Dollar losses. Simultaneously, the Swiss Franc lost its safe-haven status as the risk appetite somewhat improved during the week amidst declining Covid-19 cases across the world.
The US dollar briefly rose last week as some Fed officials reiterated the need for early tapering. However, it will be hard for the dollar to create a substantial trend until the markets have a more detailed knowledge of the Fed’s bond program.
Also, investors believe that the Fed will shortly start rolling back its enormous pandemic stimulus program. Furthermore, the US PPI data on Friday came as better than expected, which provided a break to the US dollar after witnessing some sessions of losing days.
The most important events the coming week include the US Consumer Price Index (CPI) released on Tuesday. Cleveland Federal Reserve Bank President Loretta Mester said on Friday that she saw risks of raising inflation forecasts and said she should begin tapering before the end of the year. Likewise, Rafael Bostick, president of the Atlanta Federal Reserve, said that the tapering would be appropriate at some point this year.
Investors may begin pondering a reduction in the Fed’s asset purchases if the consumer price index is stronger than expected, and vice versa.
Consumer sentiment data from the University of Michigan will be released on Friday ahead of the Philadelphia Fed Manufacturing Review, released on Thursday.
The EU and UK will publish only few minor figures and the final estimates of August inflation figures.
Major Currencies Performance and Signals
EUR/USD
The European Central Bank was far more cautious than anticipated, hurting the EUR. US Retail Sales and inflation-related data take centre stage this week.
EUR/USD has lost bullish potential in the long term, could retest 2021 low of 1.17
FORECAST: SELL
Resistance: 1.1850, 1.1900, 1.1950, 1.2000
Support: 1.1800, 1.1850, 1.1800,
GBP/USD
The GBPUSD has had a pullback last Friday but remains in a bullish trend eyeing the 1.40 psychological price line. We will have to see the UK inflation data this week and beware of any announcements from the Fed to gage a trend.
FORECAST: NEUTRAL
Resistance: 1.3850,1.3900, 1.3950
Support: 1.3800, 1.3750, 1.3700
AUD/USD
After giving back earlier gains, the Aussie closed lower due to the pressure by a rebound in the US Dollar. We expect the trend to continue lower.
FORECAST: SELL
Resistance: 0.7400, 0.7450, 0.7500, 0.7550
Support: 0.7350, 0.7300, 0.7250
USD/JPY
The USDJPY pair closed higher on Friday, backed by a rise in US Treasury yields as investors increased their bets on a sooner-than-expected Federal Reserve tapering, following the release of a solid producer price inflation report. We expect the pair to fluctuate in a range.
FORECAST: NEUTRAL
Resistance: 110.00, 110.50, 111.00
Support: 109.50, 109.00, 108.50
USD/CAD
The Canadian Dollar broke a two-week winning streak against the US Dollar with the USDCAD pair up more than 0.9% ahead of the US close on Friday. We expect the bullish momentum to continue this week as well.
FORECAST: BUY
Resistance: 1.2700, 1.2750, 1.2800
Support: 1.2650, 1.2600, 1.2550
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