US Dollar Index

Due to the possibility of the Federal Reserve cutting interest rates in September, the US dollar has weakened. There is a 91.7% likelihood of a 25 basis points rate cut in September. President Joe Biden has decided not to seek re-election and instead supports Vice President Kamala Harris against Republican Donald Trump. This decision caused the US dollar index to decline slightly at the beginning of the week to 104.28, compared to 104.36 on the previous Friday. Following Biden's announcement and endorsement of Harris, the dollar index saw intermittent declines, increasing the likelihood of Republican candidate Donald Trump returning to power. Trump's potential victory generally favors the US dollar due to his inclination towards combining low taxes with high tariffs, which is expected to stimulate inflation and interest rates. Given the rise in US Treasury yields, the dollar is expected to stabilize in Asia.

Despite the US dollar index breaking below the key 200-day moving average of 104.38 earlier last week and reaching a four-month low of 103.65, the market was not entirely convinced, leading to a rebound above 104.00 by the weekend. Further upside, however, is capped by key resistance levels including the 200-day moving average at 104.38 and 104.59 (38.2% Fibonacci retracement from 106.13 to 103.65). If these levels are breached, the index is expected to encounter resistance at 104.89 (50.0% Fibonacci retracement), followed by 105.00 (a psychological level) and 105.01 (20-day moving average) regions.

On the other hand, a "death cross" formed by the 20-day and 30-day moving averages at last weekend's close signals bearish sentiment. If bears regain control, the index could drop back below the psychological barrier at 104.00, targeting the July low of 103.65 (on July 17) and the 103.50 level (mid-channel support).

A short position on the US dollar index around 104.43 is advisable today, with a stop loss at 104.50 and targets at 104.05 and 104.00.

AUDUSD

The downtrend around the AUD/USD continued for another day, keeping the pair hovering near four-week lows below the key 0.6700 level. The Australian dollar saw a brief respite early in the Asian session, ending a five-day losing streak. It found support and briefly rose above 0.67 as strong employment data indicated tight labor market conditions, sparking concerns among investors about potential interest rate hikes by the Reserve Bank of Australia (RBA). Investors are awaiting this week's Australian manufacturing and services PMI data to gauge economic health. The People's Bank of China has cut its one-year and five-year prime loan rates by 10 basis points each to 3.35% and 3.85%, respectively. Any changes in the Chinese economy could impact the Australian market significantly, given their close trade relations.

AUD/USD retraced to a near three-week low of 0.6662. With increasing bets on a September rate cut by the Federal Reserve and persistent concerns over the weakness in the US labor market, the US dollar faces challenges.

Daily chart analysis shows that AUD/USD broke below the 50-day moving average at 0.6670 early in the Asian session and approached the lower boundary of the downward channel around 0.6645, indicating a bearish bias. The 14-day Relative Strength Index (RSI) is below 42, suggesting a bearish trend. AUD/USD might test the lower boundary of the downward channel near the 0.6645 level. A break below this level could force the currency pair to find support around 0.6634 (July 2 low) and 0.6631 (38.2% Fibonacci retracement from 0.6362 to 0.6798). Further downside could target the psychological level at 0.6600. Immediate resistance is seen at the psychological level of 0.6700, followed by 0.6730 (mid-channel support) and 0.6729 (9-day moving average) areas.

Considering these factors, today's strategy could involve buying the Australian dollar around 0.6630, with a stop loss at 0.6615 and targets at 0.6680 and 0.6690.

EURUSD

The slight uptick in EUR/USD yesterday was enough to partially offset two consecutive days of notable declines, although a convincing breakthrough above the 1.0900 barrier remained elusive. Early in the Asian session on Monday, EUR/USD briefly rose to just above 1.09. The decline in the US dollar provided some support for the currency pair. Increasing bets on a September rate cut by the Federal Reserve and concerns over the weakness in the US labor market exerted selling pressure on the dollar. New York Fed President John Williams indicated on Friday that rate cuts may be necessary in the coming months, though not at the July policy meeting. On the Euro side, the European Central Bank decided to keep interest rates unchanged, aligning with market expectations. ECB President Christine Lagarde did not commit to a predetermined path of rate cuts, emphasizing the ECB's data-dependent approach which could support the euro in the short term.

In terms of short-term trends, EUR/USD briefly fell below 1.0900 and is currently testing support around 1.0840, which is the 38.2% Fibonacci retracement level of the rally from the low of 1.0666 to the high of 1.0948, and the 17-day moving average at 1.0839. The 14-day Relative Strength Index (RSI) is around 59.50, indicating that buyers still have control, but further upside may face resistance near 1.0948 (last week's high). The next resistance level is at 1.10 (a psychological level). A clear break below 1.0840 - 1.0839 could open the door for further downside towards testing 1.0800 (a psychological level) in the coming days.

Today's suggestion is to consider buying USD before 1.0875, with a stop loss at 1.0860, targeting 1.0930 and 1.0940.

GBPUSD

On Monday, GBP/USD maintained its range above 1.2900 during the US trading session. Positive risk sentiment prevented the US dollar from strengthening and helped the currency pair stabilize ahead of key data releases later in the week. GBP/USD attracted some buying interest during the Asian session on Monday, seemingly halting the corrective decline that started from the 1.3045 region (last week's one-year high). The spot price is currently trading just above 1.2900, but remains close to the one-week low set on Friday. The US dollar started the new week on a weak note, reacting to weekend political developments in the United States, which also provided crucial support for GBP/USD. After a week of political turbulence, US President Joe Biden withdrew from the 2024 presidential election, coupled with increased investor preference for risk assets due to bets on a September rate cut by the Federal Reserve, weakening demand for safe-haven currencies like the US dollar. On the other hand, the likelihood of an August interest rate cut by the Bank of England continues to diminish, providing ongoing support for the British pound. The market focus remains on US political developments, which will drive broader risk sentiment and impact GBP/USD.

So far, the strong gains in July for GBP/USD may see further correction in the short term. Intraday signals suggest some weakness around the 1.29 area, while the 14-day Relative Strength Index (RSI) is above 60, indicating that upside risks remain intact. There is increasing demand for the British pound, hence if the currency pair breaks above last week's high of 1.3048, it could challenge levels around 1.3080 (upper boundary of a daily rising wedge) or 1.3100 and beyond. Conversely, sustained decline below the 16-day moving average around 1.2857 would challenge previous key resistance levels near 1.2800 and 1.2815 (20-day moving average) on the upside.

Today's recommendation is to consider buying GBP before 1.2920, with a stop loss at 1.2905 and targets at 1.2955 and 1.2965.

USDJPY

At the beginning of the week, USD/JPY faced significant selling pressure below 157.00. Despite a return of risk flows during European trading, the yen continued to strengthen, maintaining the pair's decline driven by USD weakness. Traders are awaiting new catalysts as they prepare for next week's Bank of Japan policy meeting, where a rate hike to support the yen is anticipated. According to Nikkei Asia, Japanese Prime Minister Fumio Kishida stated that normalizing monetary policy would help Japan transition to a growth-driven economy. Speculative short positions on the yen had risen to the second highest level, declining since suspected yen-buying interventions earlier this month, which surprised the markets. As reported by the U.S. Commodity Futures Trading Commission, hedge funds and other market participants held a total of 151,072 contracts in yen short positions as of Tuesday, marking a decrease of 30,961 contracts from the previous week, the largest drop since May 7 when short positions decreased by 33,466 contracts. USD/JPY may face limitations to its upside potential as the dollar confronts challenges due to increased bets on a September Fed rate cut and lingering concerns about the weakness in the U.S. labor market.

At the start of the week, USD/JPY was trading around 157.00. Daily chart analysis indicates the pair is below its 9-day moving average of 158.12, signaling a short-term downtrend. This suggests consolidation near current levels until signs of trend reversal emerge. Additionally, the 14-day Relative Strength Index (RSI) is below 40, confirming bearish momentum. Initial support for USD/JPY may be found at 156.26 (Monday's low), followed by a critical support at 155.73 (61.8% Fibonacci retracement from 151.85 to 161.95). Breaking below this level could pressure the pair towards hovering around June lows near 154.55. On the upside, immediate resistance is observed near the 9-day moving average at 158.12. A breakthrough could potentially lead USD/JPY to retest 159.38 (23.6% Fibonacci retracement) and challenge the psychological barrier at 160.00 once again.

Today's recommendation is to consider selling USD before 157.25, with a stop loss at 157.50, targeting 156.40 and 156.20.

Spot Gold

After breaking below the key level of $2400, gold has been under sustained bearish pressure, trading at lows below $2390 for over a week. With a lack of fundamental drivers, technical developments appear to be driving gold prices lower. The metal saw a brief end to a three-day decline during early Monday's Asian session. Reports of U.S. President Joe Biden withdrawing from the presidential race introduced uncertainty into U.S. politics, prompting an uptick in gold prices. Additionally, concerning headlines from the world's second-largest economy, China, boosted precious metals. It was reported that China's $715 billion hedge fund industry is facing new pressures due to stricter regulations taking effect next month. On the other hand, dovish comments from Federal Reserve policymakers and increased expectations of a September rate cut failed to lift gold prices on Friday. The International Monetary Fund stated last week that the Fed should not cut rates before the end of 2024. Investors will focus on U.S. economic data this week. Stronger-than-expected data could dampen hopes of a Fed rate cut this year and restrict upward momentum for gold.

Gold set a record high of $2483.80 early last week. However, profit-taking following the record surge led to a significant pullback in the latter half of the week. On the daily chart, the 14-day Relative Strength Index (RSI) fell below 58 on Friday, indicating a loss of bullish momentum. Yesterday, gold broke below key supports at $2408 and $2400, which mark the 38.2% Fibonacci retracement level and a psychological level from July's rally. Technical sellers may act to push gold lower towards $2385 (50% Fibonacci retracement) and $2378 (20-day simple moving average). On the upside, resistance levels lie at $2437 (23.6% Fibonacci retracement) and $2436.50 (5-day simple moving average), before challenging $2458 (midpoint of the daily uptrend channel).

Today's suggestion is to consider buying gold before $2392.00, with a stop loss at $2388.00, targeting $2405.00 and $2410.00.

WTI Crude Oil

Due to increasing concerns over the outlook for the Chinese economy, oil prices have further declined. The unexpected decision by the People's Bank of China to cut the loan prime rate by 10 basis points has contributed to this decline. Kamala Harris being nominated as the Democratic Party leader has added to the uncertainty in U.S. politics. WTI crude oil prices rose on Monday after plunging to a more than one-month low around the $79.60 region last Friday. However, the lack of strong follow-up buying kept gains in check. President Joe Biden's announcement on Sunday that he will not run for re-election prompted investors to unwind trades betting on a Trump victory. Moreover, growing investor belief that the Federal Reserve will begin an interest rate cut cycle in September has limited the recent rebound in the U.S. dollar from multi-month lows last week, supporting dollar-denominated commodities such as oil. Additionally, concerns over the prolonged Russia-Ukraine conflict and ongoing Middle East tensions causing supply chain disruptions have also bolstered oil prices. Meanwhile, the initial market response to developments in U.S. politics has been muted, evident in the minor rebound of the dollar from intraday lows. This, coupled with China's economic challenges, is likely to dampen significant upward movement in oil prices.

Even from a technical perspective, last Friday's oil price closed below $80.00 (a psychological level) and below $80.12 (the 38.2% Fibonacci retracement level from $72.67 to $84.73), potentially signaling new triggers for bearish traders. Furthermore, the daily chart's 14-day Relative Strength Index (RSI) near 43 in negative territory has just started to gain negative traction, indicating minimal downward resistance for the commodity. Therefore, in the absence of relevant macroeconomic data from the United States, any subsequent upward momentum in oil prices may be viewed as a short-selling opportunity, with gains expected to gradually fade. Downside targets could focus on $78.87 (200-day moving average) and $78.70 (50.0% Fibonacci retracement level), with a breach leading towards $77.27 (61.8% Fibonacci retracement level). On the upside, consideration could be given to $80.84 (34-day moving average). Once surpassed, crude oil prices could continue to rise towards $81.88 (23.6% Fibonacci retracement level) and further towards $82.90 (upper boundary of the downward channel).

Today, it may be considered to buy crude oil around $79.00, with a stop loss at $78.80 and targets at $80.20 and $82.50.

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