US Dollar Index

The US dollar was flat on the first trading day of the week. The US market opened after the Labor Day holiday and the ISM PMI data did not bring any surprises. The US dollar index has an important resistance level to break. At the beginning of the week, the US dollar index, which measures the value of the US dollar against a basket of six major currencies, consolidated above 101.50 after rising more than 1% last week. The market awaits important labor data this week, and the August employment report released on Friday is expected to show a strong increase in non-farm payrolls (NFP), which may provide support for the US dollar. Although economic growth continues to exceed expectations, market expectations for aggressive monetary easing seem to be overdone. However, a September rate cut by the Federal Reserve is a foregone conclusion, but the extent of the cut will depend on the upcoming data. The US dollar index is currently retreating slightly, but it is still in a narrow range far above the 101.00 mark, awaiting JOLTs job openings (Wednesday), ADP employment data, ISM service industry employment data (Thursday), and the important US non-farm payrolls report on Friday.

The dollar and the market may be more sensitive to the busy US labor market data this week, which may be tricky to interpret given that the market has already priced in a very dovish Fed outcome this year. The market has identified three possible scenarios: 1/ If the US data is much better than expected. The dollar may rise, while expectations of a dovish Fed rate cut may be lifted. 2/ If the US data is much worse than expected. Then the view of a soft landing may be questioned. The dollar is at risk of being sold off. 3/ If the US data is roughly in line with expectations - neither good nor bad. This supports the view of a soft landing. Currently, the US dollar index recently reported above 101.50. The daily momentum turned mildly bullish, but the relative strength index (RSI) has slowed its rise. Therefore, the risk of further short squeeze is still seen in the short term, but it tends to fade the rebound. Resistance is at 101.98 (21-day moving average), and 102.00 {market psychological level}. The next level is towards 102.65 {50.0% Fibonacci retracement from 104.79 to 100.51}, and the 9-week MA at 102.85. The support level is 101.00 {round mark}, and if it breaks, it will rebound to 100.51 {(August 27} level. After breaking, we will focus on 100.00 {market psychological mark}.

Today, you can consider shorting the US dollar index around 101.90, stop loss: 102.00, target: 101.50, 101.40

WTI spot crude oil

On Tuesday, the US WTI spot crude oil traded at around $71.00 slightly above Tuesday. A sharp drop of about 5%, China's slowing manufacturing activity in August put some selling pressure on WTI prices. However, supply concerns about Libya's oil production may limit its downside. China's economic downturn and slowing oil demand have raised market concerns about the health of the economy of the world's largest oil importer, which has put pressure on WTI oil prices. Clashes between factions in Libya continued, and oil production was forced to stop across the country on Monday. Concerns about oil supply disruptions may provide some support for WTI oil prices. The current turmoil in Libya's oil production may provide room for OPEC+ to increase supply. But these fluctuations have become quite normal over the past few years, which means that any impact from Libya's production suspension is likely to be short-lived. The Federal Reserve's interest rate cuts generally support WTI oil prices because it reduces borrowing costs, which promotes economic activity and oil demand.

Market sentiment has further weakened due to new concerns about demand from the United States and China, the partial reopening of Libyan oil facilities, and OPEC's decision to increase production in October. The weak 14-day relative strength index (RSI), a technical indicator on the daily chart, has exacerbated the bearish short-term outlook. WTI crude oil prices continued to weaken and fell below $72.10 {August 5 low}, and $72.08 {67.79 to 87.84 78.6% Fibonacci retracement} key level, paving the way for a retest of key support levels of 70.00 {market psychological level}, and $69.18 (low this year). The August monthly close with a doji partially offsets the negative signal. A break above $75.44 {61.8% Fibonacci retracement}, and $75.54 {10-day moving average} marks initial resistance, and long-term gains will be limited by $77.81 {50.0% Fibonacci retracement}, and 200-day simple moving average (78.04) levels to keep larger bears in play.

Consider going long on crude oil around 70.80 today, stop loss: 70.50; target: 71.90; 72.30

Spot Gold

Gold prices continued to fall on Tuesday, trading at their lowest level in nearly two weeks, below $2,475. Despite a drop in U.S. Treasury yields to 3.8%, gold prices struggled to gain a foothold amid continued strength in the U.S. dollar. Gold prices fell at the start of the week as U.S. markets were closed for the Labor Day holiday. Conversely, the dollar remained firm as traders awaited the jobs report, which could influence the Fed's decision on the size of its September rate cut. Gold prices traded below $2,500. This week will be a busy one for U.S. economic affairs, with a slew of economic data set to be released. Yesterday, gold prices fell as the dollar strengthened and U.S. Treasury yields rose. That said, expectations that the U.S. Federal Reserve (Fed) will cut interest rates in September could support precious metal prices, as lower rates reduce the cost of holding zero-yielding assets like gold. Additionally, ongoing geopolitical tensions in the Middle East could boost safe-haven assets like gold. The highlight of the week will be the U.S. nonfarm payrolls data for August, which could determine the pace of the Fed's rate cuts and affect gold prices in the short term. Gold prices fluctuated lower on the day. 

The daily chart shows that although gold prices fluctuated lower on the day. But gold prices are still above the key 25-day moving average of 2,473, and the bullish outlook is dominant. The 14-day relative strength index reinforces the upward momentum. The indicator is above the midline, around 55.50, indicating that the possibility of continued climbing is greater than reversal. The key resistance level for gold prices is in the $2,530 to $2,540 area, which is the upper line of the rising channel and the historical high five months ago. If the above level is clearly broken, it may rebound to $2,544 {the central axis of the upward channel on the daily chart}. Once the gold price channel is above this level and confirms it as a support level, it may target $2,578.20/ounce {the 176.4% Fibonacci rebound level of 2,531.70 to 2,470.80}, or even the psychological price level of $2,600. On the other hand, the 25-day moving average of 2,473 and the low of $2,470 on August 22 are initial support levels for gold. A break below this level could drag gold prices further down to $2,432, the low of August 15.

Consider going long on gold before 2,487.00 today, stop loss: 2,484.00; target: 2,505.00; 2,510.00

AUD/USD

AUD/USD plunged to multi-day lows driven by the appreciation of the US dollar and threatened the 0.6700 area, while widespread concerns about China and falling commodity prices also added to the pessimism around the Australian dollar. AUD/USD once resumed its upward trend at the beginning of this week and was just one step away from the key level of 0.6800. AUD/USD rose after opening this week due to the inactivity of the US market due to the Labor Day holiday. On the data front, the final reading of the Australian Judo Bank Manufacturing Purchasing Managers' Index (PMI) was slightly lower than the initial reading, at 48.5, although higher than the July reading. AUD/USD gave up some of its gains. Meanwhile, the AUD's recovery last month was mainly driven by a weaker US dollar and improved conditions for risk-related assets. However, the AUD/USD exchange rate rose on Monday despite further weakness in copper and iron ore prices, especially after the release of Chinese data over the weekend. Nevertheless, the sharp drop in iron ore prices may limit the AUD's upward momentum. In addition, iron ore futures fell more than 3% overnight, partly due to deteriorating Chinese real estate sales data, while weak Chinese economic activity continued to drag down iron ore prices.

From the daily chart analysis, the Australian dollar is currently trading slightly above 0.6700. AUD/USD is above the 9-day moving average of 0.6767, suggesting a short-term bearish trend. In addition, the 14-day relative strength index fell from 61 to around 52 levels, breaking the overall bullish trend. In terms of resistance, AUD/USD may challenge the immediate resistance of 0.6767 {9-day moving average}. If it breaks above this level, the ongoing bullish momentum will be strengthened, which may push AUD/USD to 0.6800 {market psychological level}, and further challenge the high of 0.6871 on December 28 last year. On the downside, AUD/USD may test 0.6700 {round number}. A break below the above support area may weaken the bullish bias and increase downward pressure to 0.6650, and 0.6600 area levels.

Consider going long on AUD before 0.6690 today, stop loss: 0.6675; target: 0.6750; 0.6760.

GBP/USD

GBP/USD remained under bearish pressure on Tuesday, closing slightly above 1.3100. While the dollar struggled to benefit from the August ISM Manufacturing PMI data, the risk-averse market sentiment did not allow the pair to rebound. GBP/USD turned into a mid-range choppy early in the week, trapped by light economic events in the UK and the US market being closed for the holiday. Despite a choppy start to the week, GBP/USD is expected to continue to retreat in the near term if the US employment data released later this week does not put the market in a downturn. The UK will have a light economic event week with only secondary data to be released. US labor data will be the key data on Thursday and Friday. The US ADP employment change, which is scheduled to be released on Thursday, is the first hurdle leading to the US non-farm payrolls data on Friday. This week marks the last important labor data update before the Fed's highly anticipated interest rate decision on September 18. However, before that, the US JOLTS job openings for July, released on Wednesday, are expected to remain stable around 8.1 million.

From the daily chart, GBP/USD retreated from the multi-month high above 1.3266 to slightly above 1.3100 as the selling pressure on the US dollar cooled down, but after rising to a 29-month high in August, GBP/USD is currently fluctuating around the near-weekly low of 1.3110. The 14-day relative strength index (RSI) is oscillating in the bullish range of 59, indicating that the upward momentum is still valid. The price trend is still firmly inclined to the bullish side. If the currency pair can hold above 1.3100 this week, the upward resistance can focus on the 1.3198 {last Friday's high} and 1.3200 {market psychological level} area, and a break will point to the 1.3266 {previous high} level. The short-term downside technical target for the bears will be 1.3100 {round number}, and a break will fall to the July 17 high of 1.3045. Failure to sustain above this level could trigger a fresh decline to the 1.30 psychological level which is a key support for bulls.

Today’s recommendation is to go long GBP before 1.3100, Stop Loss: 1.3085, Target: 1.3150, 1.3160

USD/JPY

USD/JPY fell in late North American session, falling more than 0.80%, or more than 100 pips. Currently trading at 145.50. Bank of Japan Governor Kazuo Ueda reiterated his hawkish stance on remarks presented to a government panel. This was the main driver for the pair, along with a plunge in US 10-year Treasury yields. The yen snapped a four-day losing streak and moved higher against the dollar on Tuesday. However, the yen encountered resistance as weak Japanese manufacturing data sparked speculation that the Bank of Japan may delay further rate hikes. Japan will allocate 989 billion yen for energy subsidies to combat rising energy costs and the resulting cost of living pressures. Such intervention by the government could lead to inflation. The recent rise in inflation in Tokyo further reinforces the Bank of Japan's hawkish monetary policy stance. With the improvement in US Treasury yields and the strengthening of the US dollar, the downside of the USD/JPY exchange rate may be limited.

Daily chart analysis shows that USD/JPY was trading around 145.50 on Tuesday. The 9-day moving average of 145.35 is below the 21-day moving average of 146.10, indicating a bearish market trend. In addition, the 14-day relative strength index (RSI) of the technical indicator is still below 50 (42.00), indicating that the bearish trend is still valid. In terms of support, USD/JPY may first test the 9-day moving average near 145.35. If the pair falls below this level, it will hit the latest cycle low of 143.44, which is the low of August 26. Further looking to the 7-month low of 141.69 recorded on August 5 to find the next support level. On the upside, USD/JPY may test the immediate barrier of the 19 August moving average at 148.05. A break above this level may support the pair towards the psychological level of 150.00.

Today's recommendation is to short USD before 145.75, stop loss: 146.00; target: 144.80, 144.60

EUR/USD

The EUR/USD pair saw light buying at the start of the week, with the pair largely supported around 1.1000 as it attempted to hold onto recent gains. Volumes were noticeably light as the US markets were closed for the Labor Day holiday at the start of the week. Meanwhile, the rest of the week will see a flurry of US labor data releases. EU retail sales and GDP growth figures will be released later this week, on Thursday and Friday respectively. However, the big news of this trading week will be a slew of US labor data, starting with the July JOLTS job openings on Wednesday. Thursday’s US August ADP employment change is expected to rebound to 145K from 122K last month, but the key US labor data of the week will be the US August non-farm payrolls report on Friday. As this is the last round of non-farm payrolls before the Fed meets on September 18 to signal the start of the much-anticipated easing cycle in a new round of rate cuts, special attention will be paid to the releases and revisions to previous non-farm payrolls.

From the daily chart, EUR/USD recorded a slight decline near the 1.1050 mark at the beginning of the week after three consecutive trading days of correction. EUR/USD hit a 13-month high above 1.1200 at the beginning of last week, and the recent correction of the US dollar has caused bulls to seek long positions. EUR/USD is still above the 200-day moving average of 1.0845. Therefore, if the currency pair can resume its upward path this week, the targets are 1.1201 {13-month high}, and 1.1275 {last July 18 high}. Although EUR/USD is deeply in a bull market, it still faces a bearish correction as bears will look for opportunities to test downwards and gather above the 25-day moving average of 1.1020. A break will further retreat to 1.0950 {180-week moving average}, and 1.0900 {market psychological level}.

Today it is recommended to go long on USD before 1.1030, stop loss: 1.1010, target: 1.1070, 1.1080.

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