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US Dollar Index
On Thursday, September 21st, the United States released strong initial jobless claims data, but data for existing home sales and other indicators performed poorly. As a result, the US Dollar Index initially rose but later retreated. The Federal Reserve in the United States met expectations by keeping the target interest rate range unchanged, but the more optimistic economic growth outlook and the more hawkish policy outlook boosted the US dollar, causing a significant rally in the US Dollar Index from its intraday lows. Recent economic indicators indicate steady economic expansion. Employment growth has slowed in recent months but remains strong, and the unemployment rate remains at a low level. Inflation rates continue to be elevated. The US banking system is sound and resilient. Tightening credit conditions for households and businesses could exert pressure on economic activity, employment, and inflation, although the extent of these effects remains uncertain. The Committee continues to be highly attentive to inflation risks. The combination of the Federal Reserve's interest rate decision statement, outlook materials, and Powell's speech has reinforced a hawkish stance, thereby consolidating the upward momentum of the US dollar. Technically, the upward trend of the US Dollar Index since July remains intact, as long as it holds the support in the 104.50-104.70 area, the bullish outlook will be maintained.
The daily chart shows that the US Dollar Index has once again confirmed the key support at 104.50-104.70 (lowest seen at 104.80 on Tuesday, and 104.65 on Wednesday). This support area consists of the upward trend line starting from the low point of July at 99.57 (104.68) and the series of oscillation highs in May (104.55-70). In the future, the uptrend within the ascending channel may continue. If expectations are met, the upside target for the US Dollar Index will be 105.88 and 105.97 (upper channel line of the Bollinger Bands). Once this level is breached, more upside potential may open up to 106.42 (high point on November 22nd last year). If there is a downside move, continue to focus on the key support area (104.50-104.70). Maintaining stability will keep the bullish outlook intact. If an "unexpected" event occurs, and the US Dollar Index falls below 104.50 and 104.62 (middle axis of the Bollinger Bands), it will open up further downside potential, targeting 104.29 (23.6% Fibonacci retracement level from 99.57 to 105.73) or even lower levels.
Today, it may be considered to short the US Dollar Index near 105.50, with a stop loss at 105.70 and a target at 105.00 and 104.95.
WTI Crude Oil
WTI crude oil experienced a minor rebound on Thursday, closing at $89.28. The Federal Reserve maintained a hawkish stance, with Powell hinting at a potential increase in neutral interest rates, and cautioning against a sharp decline in market risk sentiment. As the global oil supply-demand outlook may be revised in the fourth quarter, a correction in WTI crude oil prices seems to have officially begun. With the expectation of the Federal Reserve keeping interest rates high for a longer period, the 10-year U.S. Treasury yields are expected to remain elevated, which puts pressure on U.S. stocks, especially resource-related stocks. Furthermore, the possibility of the Federal Reserve eventually transitioning to rate hikes increases, which is unfavorable for commodity oil prices. The short-term momentum of oil price increases may have already peaked. The recovery in Asian demand is nearing its end, and at current price levels, demand may weaken, limiting further price increases. As oil prices have continued to rise, major institutions have also raised their oil price expectations in their latest forecasts.
WTI crude oil prices are experiencing a long-awaited decline; however, this may be a correction triggered by severe overbought conditions, and the correction space may not be substantial given the favorable fundamentals. From a technical standpoint, WTI crude oil prices are testing support at $90.20 (upward support trendline starting from the low point of $77.50 on August 23) and the psychological level of $90.00. If confirmed to break below, support may be sought around the 20-day moving average at $86.26. The daily chart shows that WTI crude oil has recorded two consecutive days of declines after reaching a ten-month high of $92.23, and has fallen below the $90 level, indicating that a correction may have started, in line with the previous short-term expectation of a correction. Looking ahead, it is expected that WTI crude oil may undergo a short-term correction, with potential support levels at $86.26 and the $87.51 area (double top on the 5th and 6th of this month). In terms of the medium-term trend, if WTI crude oil can stabilize above $88.00 in the future, there is still the possibility of further upward movement towards $93.00 or even the $100.00 level.
Today, it may be considered to go long on crude oil near $89.00, with a stop loss at $88.70, and targets at $90.20 and $90.30.
On Thursday, September 21st, gold continued its decline, driven by the surge in the US dollar and US bond yields following the Federal Reserve's strengthening of its hawkish interest rate stance. The Federal Reserve announced its decision to keep the benchmark interest rate unchanged while implying that borrowing costs may remain elevated for a longer period after one more rate hike later this year. Monetary policy through 2024 is expected to be much tighter than previously anticipated. Despite being considered a hedge against rising inflation, higher interest rates have pushed up US Treasury yields, weakening gold's attractiveness as an alternative investment. Additionally, recent strong economic activity in the United States and rising oil and freight prices may lead to a stagnation or even a reversal of recent inflation, necessitating rate hikes. The Federal Reserve is currently maintaining a hawkish tone, which is limiting the upside potential for gold. On the other hand, there are voices in the market that differ from the Federal Reserve's hawkish stance and believe that rates may be lowered in early 2024. The September Federal Reserve interest rate meeting did not result in a collapse in gold prices. Next, the gold market may enter a period of broad-ranging trading.
From a technical perspective, gold prices touched a high of $1947.40 at one point this week, but subsequently dropped significantly below $1930. On the daily chart, gold prices formed a bearish "head and shoulders" pattern midweek. Bearish sentiment still prevails in the overall technical outlook. The short-term key support is at $1916, which is the upward support trendline extending from the August low of $1984.90. If gold breaks below $1916 and the 20-day moving average, the next support to watch would be at $1909.10 (23.6% Fibonacci retracement level from $1987.50 to $1884.90). However, further upward movement in the short term would offset the downward trend and suggest that the market bottom may already be in place around $1900.00. The next bullish target is around $1936.20 (50% Fibonacci retracement level from $1987.50 to $1884.90) and $1936.00 (resistance trendline extending from the July high of $1987.50). A breakout would target the high of $1947.30 from Wednesday and $1953 (high point on September 1st).
Today, it may be considered to go long on gold before $1917, with a stop loss at $1913, and targets at $1926 and $1928.
AUD/USD retreated on Thursday, briefly falling below 0.64 to reach a low of 0.6385. Earlier in the week, its exchange rate had briefly touched a peak of 0.6511, marking an increase of over 1.75% from the September lows. The latest data shows that U.S. inflation had risen in July and August after several months of decline. In August, the inflation rate increased by 3.7% following a 3.2% rise in the previous month. On Thursday, there were no economic data releases from Australia. Therefore, the AUD/USD exchange rate was driven by decisions from the Federal Reserve. The AUD/USD currency pair had been on a slow upward trend over the past few days, gradually rebounding from this month's low of 0.6357 to this week's high of 0.6511. The currency pair has formed an upward trend and retested the volatile high of 0.6521 from September 1st. After the Federal Reserve made its decision, the RSI, which had been rising steadily, began to decline. Sellers may target the previous low of 0.6357, and this currency pair could resume its downward trend.
Looking at the daily chart, AUD/USD briefly challenged the neckline resistance of the double bottom pattern (0.6357/0.6360) after testing the range of 0.6521-0.6522 and then dropped significantly to slightly below 0.64. The highest point during the week was 0.6511, which was the high point at the beginning of this month. If it can successfully break above the upper limit of 0.6521-0.6522 in the future, it may strengthen the bullish momentum, potentially opening the door to 0.6562 (38.2% Fibonacci retracement level from 0.6895 to 0.6357) and 0.6600 (psychological level). On the contrary, if market sentiment turns in favor of the bears and leads to selling, the initial support level to watch would be 0.6357 (previous low). Although AUD/USD may find support at this level during a pullback, a break below this level could trigger a significant decline, paving the way for a move down to 0.6275, at which point the double bottom pattern would no longer be valid.
Today, it may be considered to go long on the Australian Dollar (AUD) before 0.6400, with a stop loss at 0.6380, and targets at 0.6470 and 0.6480.
The Bank of England unexpectedly kept the benchmark interest rate unchanged at 5.25%, while the market had expected a 25 basis point rate hike. This decision came after 14 consecutive rate hikes, totaling 515 basis points since December 2021. However, traders reduced their bets on further rate hikes by the Bank of England, with peak rates now expected to be at 5.44%. Overnight index swaps indicate that the likelihood of a 25 basis point rate hike by the Bank of England in November dropped from 81% before the rate decision to 64%. GBP/USD experienced an immediate short-term decline of nearly 70 pips to a six-month low of 1.2236. Previously released data showed that the UK's August Consumer Price Index (CPI) unexpectedly dropped to a year-on-year increase of 6.7%. The decline in core inflation and service sector inflation may provide some comfort, and the interest rate differential supporting the British pound is gradually diminishing. After the surprise decision by the Bank of England to keep rates unchanged, the British pound fell to its lowest level since March, and GBP/USD is currently showing a downward trend. If it fails to recover the 1.23 level in the short term, the low range seen at the beginning of this year between 1.20 and 1.19 could be threatened. The 1.25 level above forms the initial resistance.
From a technical perspective, GBP/USD still appears to be constrained by the descending trendline resistance that has extended since July, currently around the 1.2520 level. There are currently no signs of a clear breakout from this weak downward trend, and the exchange rate needs to definitively break through this area for the pound to have a tendency to bottom out and rebound. Due to the RSI (24.03) being in the oversold region, the initial rebound targets are at 1.2400 (psychological level) and 1.2406 (220-day moving average), with resistance estimated at 1.2520 (descending trendline resistance since July) and the next level at 1.2590 (34-day moving average). Due to the continuous strength of the US dollar, GBP/USD has fallen to around a six-month low of 1.2236. At present, the pound remains weak. GBP/USD had a minor rebound for two consecutive trading days at the beginning of the week, but the strength was insufficient, and it failed to reach the resistance zone at 1.2400 and 1.2406 before turning lower in the middle of the week. On the downside, the first support level is at 1.2120 (76.4% Fibonacci retracement level from 1.1804 to 1.3143). If the closing price is below this level, it could lead to further decline towards the psychological level of 1.2000.
Today, it is suggested to go long on the British Pound (GBP) before 1.2260, with a stop loss at 1.2235, and targets at 1.2340 and 1.2360.
In early trading on Thursday, USD/JPY rose to 148.46, marking a fresh high not seen in nearly ten and a half months. Subsequently, USD/JPY, despite the rise in U.S. Treasury yields, retraced somewhat. Traders are concerned that if USD/JPY approaches the 150 level, the Bank of Japan may intervene, so they are not prepared to increase long positions above 148.00. The exchange rate fell below 148, closing at 147.58. On Friday, the Japanese yen is facing strong challenges from the US dollar. Additionally, Friday marks the one-year anniversary of the Bank of Japan's intervention to purchase yen, a move that took place for the first time in 24 years. A year ago, the then-Governor of the Bank of Japan, Haruhiko Kuroda, pledged to continue implementing accommodative policies after a board meeting, which led to a further depreciation of the yen and prompted the government to buy yen. When the current Governor, Kuroda Kuroda, delivers a speech on Friday, he will have to walk a fine line to avoid sounding too dovish or hawkish. If he strongly denies any intention of raising interest rates, the yen may further weaken, despite warnings from Treasury officials about the possibility of intervention measures to support the yen. U.S. Treasury Secretary Janet Yellen stated earlier this week that the United States would not oppose market actions as long as they aimed to eliminate market volatility rather than targeting exchange rate levels.
The daily chart shows that USD/JPY is above the 50-day (1.44.50) and 100-day (1.42.26) moving averages, sending bullish price signals. Midweek, USD/JPY finally broke through the 148.00 (psychological round number) resistance level and reached a high of 148.46, not seen in ten months. In the early part of this month, USD/JPY had repeatedly failed to decisively break through the 148.00 threshold, indicating that there may be a significant number of short positions in that area. This also suggests that a repeat of such results may not be ruled out after the midweek breakout. Once a convincing breakthrough occurs, there may be a challenge to 148.80, followed by support for USD/JPY to move towards the key resistance level of 150.00. Conversely, if there is a reversal in the recent trend (e.g., intervention by the Bank of Japan) leading to a profit-taking retracement, initial support may be found at 147.11 (20-day moving average) and 146.10 (76.4% Fibonacci retracement level from 151.94 to 127.21). If USD/JPY weakens further, the focus may shift to 144.44 (this month's low).
Today, it is suggested to go short on the US dollar (USD) before 148.00, with a stop loss at 148.40, and targets at 146.80 and 146.50.
During the midweek interest rate meeting, the Federal Reserve kept interest rates unchanged but adopted a more hawkish stance, with expectations of another rate hike before the end of the year. Following the meeting, Federal Reserve Chairman Powell stated that although some factors are beyond the Fed's control, aggressive rate hikes are unlikely to lead the economy into a recession. Meanwhile, the interest rate-sensitive two-year U.S. Treasury yield reached a 17-year high on Wednesday. The Federal Reserve seems determined to maintain its hawkish attitude on rate hikes, which undoubtedly continues to exert significant pressure on other currencies. The U.S. dollar received a boost after the signal from the Federal Reserve that it will raise rates again before the end of the year and lower next year's rate cut expectations by 50 basis points (compared to previous expectations). As a result, EUR/USD fell to a six-month low of 1.0617 under pressure from the hawkish Fed.
EUR/USD briefly fell below the low of 1.0616 seen since May 31st yesterday. Currently, the support level at 1.06 below is crucial, and if it cannot hold this level in the future, it may intensify downward pressure, leaving room for further decline towards the important psychological level of 1.05, and further towards 1.0405 (50% Fibonacci retracement level from 0.9535 to 1.1275). On the other hand, the MACD indicator on the daily chart appears to be showing signs of a bullish crossover with the signal line. If there is a tendency for the euro to stabilize above the 10-day moving average of 1.0689 in the future, it may see a resurgence. Furthermore, the descending trendline from the high of 1.1275 extending downward since July is currently at the 1.0760 level. It has the potential to ignite buying interest in the market, paving the way for a further rise towards the 200-day moving average of 1.0828.
Today, it is advisable to go long on the euro (EUR) before 1.0630, with a stop loss at 1.0600, and targets at 1.0695 and 1.0715.
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