USD

The U.S. dollar, as measured by the U.S. Dollar Index, remained well-supported during Wednesday's trading session, mainly driven by selling pressure on the yen following a cautious outlook from the Bank of Japan. USD/JPY surged 2% throughout the day, prompting the Dollar Index to hold above 103.00 points. Although there won't be any economic data highlights on Wednesday, caution and risk perception may determine the dollar's direction. The Dollar Index rebounded to the 102.00 area after a significant drop on Monday, supported by improved market sentiment and a noticeable rebound in U.S. Treasury yields, consolidating around the key level. As market sentiment improves, the Dollar Index is capitalizing on its recent recovery gains around the 103.00 threshold. Furthermore, the cautious sentiment arising from a lack of news on the Middle East conflict between Iran and Israel is also supporting the dollar's current stance. However, the dollar's movement throughout the day may be limited by strong dovish bets on the Federal Reserve. The market seems worried about an economic recession due to the weak data in July, and officials are urging the public not to overreact to any particular data point.

The Dollar Index is recovering, with experienced traders making some bargain buying and capitalizing on the momentum to go against the tide. Since U.S. data in the near future is very light, the risk of any underperformance data seems limited, meaning the Dollar Index has room to rebound to July levels. A three-tier recovery is starting to take effect. The first tier rose to 103.18, a level that held on Friday but was broken during Monday's Asian session. Once the Dollar Index closes above that level, the next step is 104.00, which was a support level in June. If the Dollar Index can return above that level, the next resistance to watch for is the 200-day simple moving average at 104.23. On the downside, the Relative Strength Index (RSI) of 14 days should prevent the Dollar Index from suffering more severe losses after a significant decline. Nearby support is at 102.86 (61.8% Fibonacci retracement level from 100.61 to 106.51). Once that level is breached, the pressure will begin at the March 8 low of 102.35.

Today, consider shorting the Dollar Index around 103.35, with a stop loss at 103.45 and targets of 103.00 and 102.90.

AUD/USD

On Wednesday, AUD/USD extended its bullish attempt from Tuesday, hovering around the 0.6580 area while refocusing attention on the key resistance zone near the 200-day moving average at the 0.6600 mark. The noticeable rebound of the Australian dollar at the start of the week coincided with a modest recovery in copper and iron ore prices, regaining some upward momentum after several weeks of pullback. The Australian dollar further strengthened following the Reserve Bank of Australia's (RBA) hawkish stance at the meeting earlier on Tuesday. The RBA reiterated to market participants that it is not in a hurry to ease policies. RBA Governor Michele Bullock stated in a press conference that the bank did consider a rate hike and emphasized that a rate cut is "not on the agenda in the short term." Overall, the RBA is expected to be the last of the G10 central banks to begin cutting rates. The potential easing policy by the Federal Reserve in the medium term contrasts sharply with the RBA's likely long-term restrictive stance, which may support AUD/USD in the coming months.

After setting a new low for 2024 near 0.6347 on Monday, AUD/USD reversed and recovered some stability on Tuesday, rising above 0.6500 and returning to positive territory on the weekly chart. Meanwhile, the initial focus for the Australian dollar remains the key 200-day moving average at 0.6593. If this area is breached, the bullish outlook for AUD/USD is expected to dominate. The next targets would be the interim 100-day and 89-day moving averages at 0.6600 and 0.6609, respectively, before reaching 0.6642 (65-day moving average) and 0.6631 (38.2% Fibonacci retracement level from 0.6362 to 0.6798). If the bearish tone for AUD/USD reemerges, it may retest the 0.6464 level (76.4% Fibonacci retracement level) and the 0.6400 area (round number) before revisiting the year's low of 0.6347 (August 5).

Today, consider buying AUD around 0.6500 with a stop loss at 0.6485 and targets at 0.6555 and 0.6560.

EUR/USD

The further rise of the dollar has prompted EUR/USD to continue its previous day's pullback and return to around 1.0900, where there seems to be considerable debate so far. EUR/USD has trimmed its recent gains, retreating from the 1.1000 level earlier in the week as the market continues to digest the rebalancing of recent forex market capital flows. Investors have calmed down and resumed betting that the Federal Reserve will accelerate its pace of rate cuts starting in September. Eurozone economic data has had little impact on the market, with June retail sales in the Eurozone shrinking by -0.3% year-over-year, well below the expected 0.1% and the previous revised value of 0.5%. The CME FedWatch Tool shows that investors believe there is a 2-to-1 chance that the Federal Reserve will double rate cuts by 50 basis points at its September 18 rate decision announcement. Given the current rate cut pace, the interest rate market sees zero likelihood that the Fed will keep rates steady in 2024, expecting a total of four rate cuts of 25 basis points each by the end of this year.

From the daily chart perspective, EUR/USD has retreated from last week's high of 1.1009 after testing a major price level and is preparing to re-enter the overall downtrend channel. For most of 2024, EUR/USD has remained volatile, consolidating around the 200-day moving average (1.0830), and this trend is expected to continue as recent momentum shifts back to bearish territory. The bears are targeting the 1.0800 level, hoping to break through and retest the previous major swing low below 1.0700. On the upside, watch for levels at 1.0981 (March 8 high), 1.10 (psychological level), and 1.1009 (this week's high).

Today, consider buying EUR at 1.0900 with a stop loss at 1.0885 and targets at 1.0935 and 1.0940.

GBP/USD

Following a sharp decline on Tuesday, GBP/USD managed a slight recovery during the U.S. session, rising above 1.2700. Although the pair struggled to gather bullish momentum, it managed to stay in the positive territory, supported by improved risk sentiment. Earlier this week, GBP/USD fell nearly one percent as the pound continued to weaken against the broader forex market. Hopes for a Fed rate cut in September continue to rise, and the market has shifted back to a risk-on stance, with the dollar showing slight weakness. However, the pound depreciated quickly, with GBP/USD falling to a five-week low near 1.2672. The Bank of England recently cut rates from 5.25% to 5.0%, triggering large-scale outflows from previous pound-heavy positions, leading to continued pound depreciation. Over the weekend and into the new week, social unrest across the UK and investor doubts about the UK's economic outlook have led to reduced bullish bets on the pound. When the FOMC announces its rate decision on September 18, investors see a 2-to-1 chance of a 50 basis point rate cut.

From the daily chart, GBP/USD fell by -0.9% earlier this week, dragging the pair to within reach of the 200-day exponential moving average at 1.2651. This is the first time GBP/USD has fallen below this long-term moving average since breaking above it in May. Since retreating from its 12-month high of 1.3045 in July, GBP/USD has fallen nearly 3%. The remaining few pound bulls will hope for a technical rebound supported by the higher daily chart lows, but if it continues to fall to 1.2612 (June 27 low), GBP/USD will enter a steady decline towards the 1.2600 (psychological level) area. On the upside, watch for 1.2777 (61.8% Fibonacci retracement from 1.2612 to 1.3045) and 1.2785 (50-day moving average). Further targets point to 1.2800 (psychological barrier).

Today, consider buying GBP at 1.2675 with a stop loss at 1.2660 and targets at 1.2735 and 1.2745.

USD/JPY

After testing 148.00 early Wednesday, USD/JPY remains strong above the 146.00 level. Despite optimistic market sentiment, traders are digesting dovish comments from BOJ official Uchida, which have helped the yen regain some ground. The policy divergence between the Fed and the BOJ remains a focal point. Gains on Tuesday were minimal, and bulls failed to push USD/JPY above 146.00, resulting in a pullback towards the 144.00 area. Following the Asian session's open on Wednesday, USD/JPY traded around 144.50. BOJ Deputy Governor Shinichi Uchida commented on the BOJ's rate outlook, exchange rates, and current market volatility, stating that it is appropriate to maintain the current monetary easing policy for the time being. Japan's real interest rates are very low, and monetary conditions are very loose. If economic and price trends align with forecasts, adjusting the degree of monetary easing is appropriate. The impact and speed of exchange rate changes on prices are greater than before. The yen's weakness and the resulting increase in import costs pose upside risks to inflation. After the dovish comments from BOJ officials, the yen faced renewed selling pressure, and USD/JPY surged to retest 148.00.

From a technical perspective, after BOJ Deputy Governor Shinichi Uchida's dovish comments mid-week, the yen faced a new wave of selling, and USD/JPY surged, retesting 147.50. However, it faced resistance near 148.53 (61.8% Fibonacci retracement from 140.25 to 161.95) and 148.90 (a trendline extending rightward from March last year), where bears intervened and pushed USD/JPY below 147.00, paving the way for a subsequent decline. Although the 14-day Relative Strength Index (RSI) remains in the oversold zone, price action suggests USD/JPY may consolidate between 144.00 and 148.00 before the next downward move. If bears strengthen and push USD/JPY below 144.00, the next support will be the August 2 low at 141.70, followed by 140.25 (a key level in December) and 140.00 (a psychological level). On the upside, if USD/JPY breaks above 148.00, the next resistance will be 148.90, followed by 150.00 (a psychological level).

Today, consider selling USD at 146.90 with a stop loss at 147.10 and targets at 145.60 and 145.50.

XAU/USD

Despite escalating geopolitical tensions in the Middle East and expectations of monetary policy easing by the Federal Reserve, gold prices fell below $2,400 during the North American session on Wednesday, erasing earlier gains. On Wednesday, gold extended its recent pullback from near record highs, marking a fourth consecutive day of declines, although the drop lacked bearish conviction. Global stock markets appeared to stabilize after recent sharp declines. This, coupled with a slight strengthening of the dollar, was a key factor applying downward pressure on the precious metal. Additionally, economic woes in China, combined with rising geopolitical tensions in the Middle East, might curb market optimism. Furthermore, dovish expectations from the Fed could support the zero-yield asset's price. As market panic subsided, gold extended its Monday losses and traded around $2,385. On one hand, the stock market's recovery after an early-week plunge, with U.S. indices climbing following mixed performances from overseas, has dampened demand for gold. On the other hand, a rebound in government bond yields, with the 10-year U.S. Treasury yield climbing over 20 basis points after hitting multi-year lows, supported the dollar against gold. Nevertheless, market participants remained concerned about the U.S. economy's health and continued betting on substantial Fed rate cuts by the end of the year.

From a technical perspective, as long as gold prices decline, they may continue to seek support near the 50-day simple moving average, located around $2,367.70. Following this is last week's swing low, roughly in the $2,353-$2,352 region, and the $2,344.40 area, representing the 100-day moving average. A sustained move lower will become a new trigger point for bearish traders and pave the way for further declines. On the upside, if gold prices recover above the $2,400 (psychological level) threshold, they might encounter resistance near the overnight swing high, around $2,418. Some follow-up buying could push gold past the $2,430 mark, rising towards the next relevant resistance in the $2,448-$2,450 area. This momentum might further extend into the $2,468-$2,469 region, aiming towards the all-time high reached in July in the $2,483-$2,484 area.

Today, consider buying gold at $2,378, with a stop loss at $2,375 and targets at $2,395 and $2,400.

XTI/USD

Due to increasing concerns about supply tightness from Middle Eastern tensions, WTI has broken its losing streak. It rebounded over 3%, with U.S. WTI crude oil initially falling below $73.00 per barrel to a low of $72.10 at the start of the week, as the oil market struggles to find support after a four-week decline, keeping WTI prices firmly at the low end. The American Petroleum Institute released crude oil inventory data for the week ending August 2, reporting an increase of 180,000 barrels in U.S. crude oil inventories. Nonetheless, this data seems to end the trend of significant weekly declines in U.S. crude supply, as last week's data showed a decrease of 4.495 million barrels in U.S. crude stocks. Over the weekend, persistent conflicts between Israel and Hamas in Palestine could escalate following two suspected assassinations of Iranian Hezbollah officials. Despite clearly escalating geopolitical tensions, the oil market has struggled to attract buyers, with WTI prices remaining sluggish.

As U.S. crude oil is at a disadvantage and possibly on track for a fifth consecutive weekly decline, WTI has fallen back below $73.00 per barrel, although technical pressure has increased to keep buying interest above $73.05 (a trendline extending from the February 5 low of $71.32) and $72.80 (the lower boundary of the descending channel). Price action is firmly tilted downward, with daily charts showing a -15.00% decline from early July's peak of $84.73 per barrel. Therefore, on the downside, attention can be directed to the June low of $72.48 and $72.10 (early week's low), further sliding towards the $71.32 {February 5 low} level. A break below could further challenge the psychological barrier around $70.00. On the other hand, the first rebound to $75.90 (the median line of the descending channel on the daily chart) will be critical, and once it returns above that level, it will point to the 200-day moving average level of $78.25.

Today, consider going long on crude oil at around $75.60, with a stop loss at $75.35 and targets at $76.80 and $77.00.

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