USDX trade ideas
$ RATE CUT IN THE AIR, WILL IT BOUNCE BEFORE THE DESCENT?The recent decline in the U.S. dollar can be attributed to several economic factors. Firstly, recent inflation data indicates that inflation in the United States is slowing down. The annual inflation rate for June 2024 was 3.0%, down from previous months. This slowdown has strengthened expectations of a less restrictive monetary policy from the Federal Reserve. Investors now anticipate a rate cut in September, possibly followed by another cut in November or December, which tends to weaken a country's currency.
Despite positive data from the Producer Price Index (PPI) for June 2024, the dollar continued to fall. The PPI showed a 0.1% year-over-year increase, with a 0.1% rise in goods and a 0.2% rise in services, both better than analysts' expectations.
The critical question now is whether the dollar will rebound before further declines. We are in a crucial zone, and a short-term rise might occur before any further drop, but much depends on Powell's speech scheduled for Monday. If the Federal Reserve Chair hints at a rate cut in September, the dollar could take another hit. Conversely, if Powell does not confirm this expectation, the dollar might benefit from the positive PPI data and rise temporarily.
Be careful!
Weekly Outlook Sep 2-6 $DXYTVC:DXY retest of trend line on broad market pullbacks/weakness. Bearish continuation expected until EOY. Short term upside, longer term downside. 96 on TVC:DXY still on the table.
Dollar strength until... ?DXY is currently testing previous local resistance as support around 101.25. Losing support could mean a test of 4HR 50MA or 100.5 area. Holding support and clearing 101.5 could mean an attempt at 101.85.
DXY STRUCTUREAs we approach NFP, using market structure, prices are printing bullish movements and we will only be looking out for prices to get into the 15 Min OB before we can look for further confirmations before we can look for sell-offs, for now we exercise patience and sit on our hands and wait. do well to like share and follow and what ever trading style you use do well to not trade against the trend flow with it. use this and work with other correlated pairs that moves alongside DXY.
Dollar Index - 5 Weeks Of Risk-On Conditions. 100 Is Near...Higher time frame biases are important in scenarios like this as this week has clearly shown love to the monthly Sellside liquidity pool down at 100.617 before closing just shy of the area.
There in unfinished business at this area with 100.427 also being a point of interest. This does not mean i am expecting a closure for the week as we could see a sharp retracement coming to the end of next weeks trading.
Further risk on scenario for Dollar Index will present continued long opportunities for certain FX pairs and stock index pairs + commodities
DXY: Market Is Looking Down! Sell!
Welcome to our daily DXY prediction!
We made our analysis today using SMC and ICT trading theories, which, combined with our trading experience all point to the downside. So we are locally bearish biased and the target for the short trade is 101.725
Wish you good luck in trading to you all!
Levels discussed on Livestream 3rd September3rd September
DXY: Still in consolidation. Watch the resistance at 102 round number. Looking for downside, needs to break 101.50 (23.6%), could trade down to 101.15
NZDUSD: Sell 0.6205 SL 20 TP 60
AUDUSD: Retracing, could retest 0.68 resistance level
GBPUSD: Buy 1.3170 SL 40 TP 90
EURUSD: Look for reaction at 1.10 round number support level
USDJPY: Sell 145.70 SL 250 TP 80
USDCHF: Could trade higher, look for reaction at resistance level
USDCAD: Could trade lower, look for reaction at support 1.3440
Gold: Choppy price action, until 2508, beyond that, could trade up to 2520
DXY - US Dollar Strengthens Above 101.70 Market AnalysisThe US Dollar Index (DXY) is showing renewed strength, climbing above the 101.70 mark after a relatively flat Monday. This move extends the momentum from last week, where the DXY gained over 1%. As the market braces for key labor data later this week, all eyes are on the August jobs report, set to be released on Friday. This report is expected to reveal a solid increase in Nonfarm Payrolls (NFP), which could provide further support to the US Dollar.
Technical Analysis: Reversal from Key Demand Area
From a technical standpoint, the DXY has already exhibited a significant reversal from a key Demand area around 100.535. As forecasted, the price rebounded from the 100.515 level, confirming the strength of this support zone. This reversal was anticipated based on previous analysis, and it has played out as expected, setting the stage for the current bullish momentum.
Sentiment and Seasonal Trends Support a Bullish Outlook
The Commitments of Traders (COT) report adds an interesting layer to the analysis, showing that retail traders are aggressively short on the US Dollar. This aggressive short positioning often acts as a contrarian indicator, suggesting that there might be further upside potential for the DXY.
Additionally, seasonal trends are aligning with a possible bullish rally in the US Dollar. Historically, this period has seen increased demand for the USD, and the current setup appears to be following that pattern. When combining the COT data with the technical bounce from the Demand area, the outlook for the US Dollar remains positive.
Conclusion: A Confluence of Factors Supporting USD Strength
The DXY's move above 101.70 is supported by a confluence of technical and sentiment factors. The reversal from the Demand area, coupled with the contrarian signal from the COT report and favorable seasonality, all point towards a continued increase in the value of the US Dollar. As the market awaits the crucial NFP report on Friday, the stage is set for potential further gains in the DXY, reinforcing our bullish outlook for the US Dollar.
Previous Forecast
✅ Please share your thoughts about USD in the comments section below and HIT LIKE if you appreciate my analysis. Don't forget to FOLLOW ME; you will help us a lot with this small contribution.
DXY MARKET OUTLOOK!Price is currently at 100.649 what do we expect next ahead of NFP & Fed reserve interest rate that’s coming up in few days ?
Are we going to expect a difference in price?
Let’s watch and see how price reacts to this area.
Beginner Chart Patterns: Head & Shoulders, Double Tops and MoreWelcome to the world of chart patterns—the place where every price action tells a story. And if you read it right, you might just walk away with profits. In this Idea, we explore the immersive corner of technical analysis where chart patterns shape to potentially show you where the price is going. We’ll keep it tight and break down the most popular ones so you’d have more time to take your knowledge for a spin and look for some patterns (risk-free with a paper trading account ?). Let’s roll.
Chart patterns are the market’s version of geometry paired with hieroglyphics. They might look like random squiggles at first, but once you learn to decode them, they might reveal where the market is headed next. Here are the mainstay chart patterns everyone should start with: Head and Shoulders, Double Tops, and a few other gems.
1. Head and Shoulders: The King of Reversals
First up is the Head and Shoulders pattern—an iconic, evergreen, ever-fashionable formation that traders dream about. Why? Because it’s a reliable reversal pattern that often signals the end of a trend and the beginning of a new one.
Here’s the breakdown: Imagine a market that’s been climbing higher. It forms a peak (a shoulder), pulls back, then rallies even higher to form a bigger peak (the head), only to drop again. Finally, it gives one last weak attempt to rise (the second shoulder), but it can’t reach the same height as the head. The neckline, a horizontal line connecting the two lows between the peaks, is your trigger. Once the price breaks below it, it’s time to consider shorting or bailing on your long position.
And yes, there’s an inverted version of this pattern too. It looks like a man doing a handstand and signals a trend reversal from bearish to bullish. That’s Head and Shoulders—flipping trends since forever.
2. Double Tops and Double Bottoms: The Market’s Déjà Vu
Next up, we have the Double Top and Double Bottom patterns—the market’s way of saying, “Been there, done that.” These patterns occur when the price tries and fails—twice—to break through a key level.
Double Top : Picture this: The price surges to a high, only to hit a ceiling and fall back. Then, like a stubborn child, it tries again but fails to break through. That’s your Double Top—two peaks, one resistance level, and a potential trend reversal in the making. When the price drops below the support formed by the dip between the two peaks, it’s a signal that the bulls are out of steam.
Double Bottom : Flip it over, and you’ve got a Double Bottom—a W-shaped pattern that forms after the price tests a support level twice. If it can’t break lower and starts to rally, it’s a sign that the bears are losing control. A breakout above the peak between the two lows confirms the pattern, signaling a potential bullish reversal.
3. Triangles: The Calm Before the Storm
Triangles are the market’s way of coiling up before making a big move. They come in three flavors—ascending, descending, and symmetrical.
Ascending Triangle : Here’s how it works: The price forms higher lows but keeps bumping into the same resistance level. This shows that buyers are getting stronger, but sellers aren’t ready to give up. Eventually, pressure builds and the price breaks out to the upside. But since it’s trading, you can expect the price to break to the downside, too.
Descending Triangle : The opposite of the ascending triangle, this pattern shows lower highs leaning against a flat support level. Sellers are gaining the upper hand and when the price breaks below the support, it’s usually game over for the bulls. But not always—sometimes, bulls would have it their way.
Symmetrical Triangle : This is the market’s version of a coin toss. The price is squeezing into a tighter range with lower highs and higher lows. It’s anyone’s guess which way it’ll break, but when it does, expect a big move in that direction.
4. Flags and Pennants: The Market’s Pit Stop
If triangles are the calm before the storm, then flags and pennants are the pit stops during a race. These patterns are continuation signals, meaning that the trend is likely to keep going after a brief pause.
Flags : Flags are rectangular-shaped patterns that slope against the prevailing trend. If the market’s in an uptrend, the flag will slope downwards, and vice versa. Once the price breaks out of the flag in the direction of the original trend, it’s usually off to the races again.
Pennants : Pennants look like tiny symmetrical triangles. After a strong move, the price consolidates in a small, converging range before breaking out and continuing the trend. They’re short-lived but pack a punch.
Final Thoughts
To many technical analysts, chart patterns are the best thing the market can do. The secret code, or however you may want to call them, they can give you insight into the dealmaking between buyers and sellers and hint at what might happen next.
Whether it’s a Head and Shoulders flashing a trend reversal, a Double Top marking a key resistance level, or a Triangle gearing up for a breakout, these patterns are essential tools in your trading garden.
So next time you stare at a chart, keep in mind that you’re not just looking at random lines. You’re reading the market’s mind from a technical standpoint. And if you know what to look for, you’re one step closer to cracking the code.
DXY- Where to?After forming a double top above the 106 level, with the second top occurring at the beginning of July, the DXY (US Dollar Index) began to decline.
After breaking the 104 neckline of this pattern, the index tumbled to the key support level at 100.50, which coincides with the price level from the start of the year.
As expected, the price started to recover, and at the time of writing, it is trading at 101.66. Although there has been a rebound from support, it's too early to consider the trend reversed. For a confirmed reversal, the price needs to break back above the 102.50 zone.
If this happens, the price could continue upward, with a longer-term target around the 106 level and an interim resistance at 104.
Conversely, if the index fails to break above 102.50 and drops back to 100.50, there is a high probability of a further decline, with 98 as the next target.
Emotional Intelligence in Trading: Developing Self-AwarenessIn trading, success is not just about having the right strategy or access to the best tools—it's also about mastering your emotions. Emotional intelligence (EI) plays a crucial role in trading performance, influencing decision-making, risk management, and overall resilience in the market. The ability to recognize, understand, and manage our emotions, as well as the emotions of others, can significantly enhance trading outcomes.
1️⃣ Understanding the Role of Emotions in Trading. Emotions like fear, greed, and overconfidence can lead to impulsive decisions, which often result in poor trading outcomes. Recognizing the influence of these emotions is the first step in managing them. For instance, fear can cause you to exit a position too early, missing out on potential gains, while greed can lead to holding onto a position for too long, resulting in losses. By developing emotional intelligence,you can better identify these emotional triggers and mitigate their impact on decision-making.
Example: During the 2008 financial crisis, many traders who allowed fear to dominate their decision-making process exited their positions at a loss, only to see the market recover later. Those with higher emotional intelligence were better equipped to manage their fear, allowing them to make more rational decisions.
2️⃣ The Importance of Self-Awareness in Trading. Self-awareness is the foundation of emotional intelligence. It involves being conscious of your emotions, strengths, weaknesses, and how these factors influence your trading decisions. By regularly reflecting on your emotional state and how it affects your trading, you can develop greater self-awareness, which can help in making more informed and objective decisions.
Practical Exercise: Keep a trading journal where you not only record your trades but also note your emotional state during each trade. Over time, patterns will emerge, allowing you to identify which emotions typically lead to poor decisions and which contribute to success.
3️⃣ Developing Emotional Regulation Skills. Once you are aware of your emotions, the next step is learning how to regulate them. Emotional regulation involves managing your emotional responses, especially in high-pressure situations, to ensure they don't negatively impact your trading. Techniques such as deep breathing, meditation, and cognitive reframing can help in maintaining composure during market volatility.
Historical Instance: In the 1990s, hedge fund manager Paul Tudor Jones famously used visualization techniques to regulate his emotions and maintain focus during market crashes, which contributed to his long-term success. I often recommend these techniques to my students.
4️⃣ The Role of Empathy in Trading. Empathy, the ability to understand and share the feelings of others, may seem less relevant to trading, but it plays a crucial role in market psychology. By understanding the emotional states of other market participants, you can better anticipate market movements. For example, recognizing widespread panic selling can provide opportunities to buy undervalued assets.
Case Study: During the COVID-19 pandemic, traders who empathized with the fear and uncertainty in the market were able to capitalize on the sharp declines by purchasing assets at a discount, leading to significant gains when the market rebounded.
5️⃣ Building Resilience Through Emotional Intelligence. Trading is inherently stressful, and setbacks are inevitable. Emotional intelligence helps traders build resilience, enabling them to recover quickly from losses and maintain a long-term perspective. Resilient traders are less likely to be discouraged by short-term failures and more likely to learn from their mistakes.
Practical Example: After experiencing a significant loss, instead of dwelling on it, a trader with high emotional intelligence might analyze what went wrong, adjust their strategy, and approach the next trade with renewed focus and confidence.
6️⃣ Integrating Emotional Intelligence with Technical Analysis. While technical analysis provides the data-driven foundation for trading decisions, emotional intelligence adds a layer of psychological insight. By combining these two approaches, you can avoid the common pitfall of over-reliance on charts and signals. For instance, a technically sound trade setup might be ignored if emotional cues suggest that market sentiment is unusually euphoric or fearful.
Strategy: Before executing a trade based on technical analysis, take a moment to assess your emotional state and the broader market sentiment. Ask yourself if your decision is influenced by overconfidence or fear, and adjust accordingly.
7️⃣ The Long-Term Benefits of Emotional Intelligence in Trading. Developing emotional intelligence is not a one-time effort but an ongoing process that yields long-term benefits. Traders who invest in their emotional growth tend to experience more consistent performance, lower stress levels, and greater overall satisfaction with their trading careers. They are better equipped to handle the psychological challenges of trading, such as uncertainty, volatility, and the pressure to perform.
Emotional intelligence is a critical yet often overlooked component of successful trading. By developing self-awareness, emotional regulation, empathy, and resilience, you can enhance your decision-making process and achieve more consistent results. The ability to manage one's emotions can make the difference between a good trader and a great one.
Daily Technical Analysis of Gold,Currencies,and Indices 3/9/2024Daily Technical Analysis of Gold, Currencies, and Indices - September 3, 2024
Introduction
Hello, I am Mohammed Qais Abdulghani, a financial markets expert, providing you with a detailed outlook on the major currency pairs, commodities, and financial indices for today, Tuesday, September 3, 2024.
First, let’s review the key economic data scheduled for release today, which could impact price movements upon release:
• 4:45 PM (KSA Time): US Manufacturing PMI.
• 5:00 PM (KSA Time): ISM Manufacturing PMI.
We begin with the analysis of the US Dollar Index (DXY). We observe that the markets are moving sideways, and the US Dollar Index continues to trade under pressure, near its previous closing level. Trading below the 102 level keeps the index within a bearish trend channel, making it susceptible to further declines towards the 100.3 level.
EUR/USD Analysis:
The EUR/USD pair is attempting to end its downward corrections. Staying above 1.1000 supports a bullish scenario targeting the 1.1200 level. This scenario will remain valid as long as prices do not break below the 1.1000 level.
GBP/USD Analysis:
The GBP/USD pair is holding above the support level at 1.3100. Remaining above this level enhances the chances of a rise towards 1.3250 and 1.3360. Breaking below the 1.3100 level will negate this bullish scenario.
USD/JPY Analysis:
The USD/JPY pair is attempting to break free from bearish pressures. Staying above the 145 yen level supports attempts to form an upward secondary trend, which will only be confirmed by surpassing the 149 yen level.
USD/CHF Analysis:
The USD/CHF pair is trying to enter a corrective upward wave. Breaking through the 0.8510 level could lead to an increase towards 0.8675 and 0.8800. The upward scenario will be invalidated if prices fall back below 0.8510.
AUD/USD Analysis:
The AUD/USD pair maintains its positive momentum, with prices holding above 0.6670, targeting levels of 0.6900 and 0.7100 in the medium term. A break below 0.6670 will invalidate the upward scenario.
NZD/USD Analysis:
Breaking below 0.6225 could push the NZD/USD pair into further bearish corrections towards 0.6100. Holding above 0.6225 may keep the pair within an upward range.
USD/CAD Analysis:
The USD/CAD pair is holding above the 1.3450 level, enhancing the chances of reducing losses and rising towards 1.3600. Breaking below the 1.3450 level could bring back bearish momentum.
GBP/JPY Analysis:
The GBP/JPY pair remains under bearish threats and will not break free unless it breaches the 196 yen level, which could restore upward momentum towards 202 and 208 yen.
EUR/JPY Analysis:
Breaking above 164 yen could lead to an increase targeting 168 and 174 yen. Trading below 0.8450 could pave the way for further declines towards 0.8375 and 0.8300.
EUR/GBP Analysis:
Trading below the 0.8450 level may open the door for further declines towards 0.8375 and 0.8300.
USD/TRY Analysis:
The USD/TRY pair is attempting to enter corrections. Breaking below the 34 lira level could lead to improved exchange rates towards 33.40 and 33 lira.
BTC/USD Analysis:
Bitcoin is stable below the 60,000 USD level, keeping it under the threat of further declines towards 52,000 and 44,000 USD. Surpassing the 60,000 USD level is necessary to release Bitcoin from bearish pressures.
ETH/USD Analysis:
Ethereum remains under pressure and will not break free from bearish pressures unless it surpasses the 2800 USD level. The next targets could be 2200 USD or lower.
XRP/USD Analysis:
Breaking below 55 cents will place XRP in a bearish path towards 48 and 40 cents, while holding above 55 cents could maintain a positive direction.
Gold (XAU/USD) Analysis:
Gold is trading sideways around its previous closing level of 2502.98 USD. Staying above 2460 USD keeps the bullish scenario intact, with the potential to achieve new levels if the 2520 USD level is broken. Upcoming significant economic data will have a substantial impact on the US dollar and, consequently, gold prices.
Crude Oil (WTI) Analysis:
Crude oil is attempting to break free from bearish pressures. Holding above 73 USD per barrel could push prices towards 77 and 83 USD. A break below 73 USD will bring back negative momentum.
Silver (XAG/USD) Analysis:
Silver is trading under pressure below 29 USD. Returning above this level is necessary to maintain positivity, while a decline could target 27.5 and 26 USD.
Natural Gas (NG) Analysis:
Natural gas stands at a critical psychological barrier at 2.20 USD. Surpassing this level could lead to gains towards 2.40 and 2.60 USD, while failure to break it could lead prices to decline towards 2.00 USD.
Dow Jones Industrial Average (DJI) Analysis:
Staying above 41,000 points supports a bullish scenario towards 42,500 and 44,000 points.
S&P 500 (SPX) Analysis:
Holding above 5700 points is necessary to create new buying opportunities.
NASDAQ Analysis:
Staying above 19,250 points enhances the chances of rising towards 24,000 and 25,000 points.
Russell 2000 Index (RUSSELL 2000) Analysis:
The Russell Index continues to trade around its previous closing level. Surpassing 2225 points is essential to resume gains towards 2320 and 2440 points.
FTSE 100 Analysis:
The FTSE index is trading below its previous closing level, with a need to surpass 8400 points to create new buying opportunities.
DAX Index Analysis:
Staying above 18,750 points supports a bullish scenario towards 19,250 and 20,000 points.
CAC 40 Index Analysis:
Holding above 7600 points supports a bullish scenario towards 7900 and 8200 points.
Nikkei 225 Index Analysis:
Staying above 37,000 points supports a bullish scenario towards 41,000 and 44,000 points.
Conclusion:
We have now completed our daily technical analysis segment. Thank you for tuning in, and we wish you a successful trading day. Stay safe.
This analysis has been prepared by Mohammed Qais Abdulghani, a financial markets expert, based on current data and market trends. Please note that all strategies and analyses are subject to market changes, and it is advisable to follow economic updates for informed decision-making.
Will the dollar bounce back from its current decline?
The US July PCE was in line with market consensus. Headline PCE prices rose 0.2% from a month ago and 2.5% from a year ago, which aligns with market expectations. Core PCE, the Fed's price benchmark, rose only 0.16%, slower than the previous month's 0.18%. This is the lowest level this year and has catalyzed the market sentiment of the Fed’s rate cut.
It is worth noting that despite a 0.3% increase in personal income, surpassing the previous month's 0.2%, the savings rate remains alarmingly low. This is because personal consumption expenditures are growing at a faster rate than personal income.
The current savings rate has dropped to 2.9%, marking only the second instance in the past 16 years, since the global financial crisis, the savings rate has fallen to the 2% range.
This implies that consumption in the United States could decline quickly, serving as a cautionary signal that if employment falters, there may be insufficient buffers to sustain consumption.
DXY sustained its uptrend after breaking out of the descending channel and advanced to 101.60. The price consolidates around the 101.50-101.70 range, waiting for an additional price trigger.
If the price breaches the resistance at 101.80 while holding above the EMA, the price may gain upward momentum toward 102.60. Conversely, if DXY fails to stay above both EMAs and retreats to the support at 100.50, the price could fall further to the 100.00 threshold.
Bullish bounce?US Dollar Index (DXY) is falling towards the pivot which has been identified as a pullback support and could bounce to the 1st resistance which acts as a pullback resistance.
Pivot: 101.53
1st Support: 101.16
1st Resistance: 102.144
Risk Warning:
Trading Forex and CFDs carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Forex and CFDs may not be suitable for all investors, so please ensure that you fully understand the risks involved and seek independent advice if necessary.
Disclaimer:
The above opinions given constitute general market commentary, and do not constitute the opinion or advice of IC Markets or any form of personal or investment advice.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, are intended only to be informative, is not an advice nor a recommendation, nor research, or a record of our trading prices, or an offer of, or solicitation for a transaction in any financial instrument and thus should not be treated as such. The information provided does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it. Please be aware, that past performance is not a reliable indicator of future performance and/or results. Past Performance or Forward-looking scenarios based upon the reasonable beliefs of the third-party provider are not a guarantee of future performance. Actual results may differ materially from those anticipated in forward-looking or past performance statements. IC Markets makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or any information supplied by any third-party.
DXY Gap Up! - Sell the GapDXY is about to come back online after a long holiday weekend in the USA.
Im looking for a gap up into resistance around the 101.700 level for shorts to be taken down to swing lows around 101.4
DXY (1h timeframe )hello dear traders
this price acton for dollar curency index .... this is my personal opinion....
fundamental reason:
While British fund manager abdrn predicts that the U.S. economy will see a soft landing, there is still the risk of a prolonged slowdown in 2025, said Kenneth Akintewe, the company’s head of Asian Sovereign Debt.
Is the economy already weaker than the headline data suggests and should the U.S. Federal Reserve already be easing? Akintewe questioned on CNBC’s “Squawk Box Asia.”
In the U.S. on Friday, data showed the personal consumption expenditures (PCE) price index, the Federal Reserve’s favored measure of inflation, ticked up 0.2% last month, as expected. The data seems to back a smaller rate cut...
Dxy Bearish continuation Welcome! I am expecting dollar index to get rejected for monthly order block where i can see a 4H FVG just inside the Monthly OB. Let’s see how it reacts on the marked areas. Cheers
DXY DOLLAR INDEX - LONG TERM TARGET Bearishness AheadHello this is my forcast on DXY. i see the Dollar taking Previous Year Low .
elections coming up trade safe feel free to share with me your opinions.
GU setting up nicely Price is finally rejecting off of a psychology level with an ascending channel. I only want price to break below the MA and pullback to it then I will engage.
Market News Report - 01 September 2024This past week, the euro faltered the most compared to other currencies. Meanwhile, the winners included the New Zealand and Canadian dollars.
Let's see what to expect from all the major forex markets performance-wise in our latest news report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
STIR (short-term interest rate) markets expect at least four full rate cuts before the end of this year. They also suggest a 30% chance of a 50 bps cut at the next meeting in mid-September.
Another bearish focus for the US is the slowing labour market. As with the beginning of any month, watch out for the unemployment rate and Non-Farm Payrolls on Friday.
The DXY chart aligns perfectly with the fundamentals, having recently reached a major support area (100.617) on the daily chart. Meanwhile, the key resistance is far away at 107.348 and will likely remain untouched for some time.
Long-term outlook: bearish.
Markets anticipate several full rate cuts before the year ends. Also, data on weakened jobs is another bearish driver for the dollar.
Only geopolitical risks, bond market selling, and interest rate differentials can affect this sentiment.
Euro (EUR)
Short-term outlook: weak bearish.
The European Central Bank (ECB) has stressed that it is data-dependent. This means that certain economic data, like employment data, may boost the euro.
However, the primary bearish driver is the interest rate, with STIR markets anticipating a 100% chance of a 25 bps rate cut at the next meeting this month.
On the bright side, German inflation recently fell to its lowest level since March 2021, to 1.9% (from 2.3% in July 2024).
Meanwhile, the chart tells a slightly different story. After breaking the last major resistance, the next target is 1.12757. Meanwhile, the key support area lies far below at 1.07774.
Long-term outlook: weak bearish.
The ECB hasn't committed to a specific future path with the interest rate. They are data-dependent, meaning data around inflation, growth, and wage improvement can lift the euro. However, their meeting in July was slightly more dovish than hawkish.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) cut the interest rate by 25 basis points at the beginning of last month. However, the BoE remains data-dependent and has no set future path. STIR markets are currently pricing two additional cuts for the remainder of 2024.
The central bank's current key theme is fighting persistent inflation in the United Kingdom. Any future failures here would likely weaken the GBP.
As with the euro, the British pound has been saved by dollar weakness on the charts. It has just broken the major resistance at 1.31424. Despite this, it remains an area of interest due to appearing in a high time frame.
On the other hand, the nearest key support is far away at 1.26156.
Long-term outlook: weak bearish.
While the interest rate is the chief bearish driver for the pound, the BoE has yet to signal a future path in this regard.
STIR markets predict a rate hold next month (74% chance vs. 62% chance last week). Furthermore, two-way risks remain based on upcoming economic data, particularly with inflation.
Japanese yen (JPY)
Short-term outlook: bullish.
The yen is the only currency where a change to the short-term outlook is necessary (from 'weak bullish' to 'bullish')
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision to hike the interest rate.
STIR markets expect a hold (99% probability, up from 95% last week) at the next meeting but a hike at the start of next year. So, the bias is intact, and we should expect buyers on dips, more so with the dollar's macro outlook indicating a decline.
After cooling down recently, USD/JPY looks to have resumed its downtrend, aligning with the outlook mentioned.
The major support level to watch is 140.252. Meanwhile, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
In addition to the recent rate hike, other bullish catalysts for the yen include lower US Treasury yields.
Also, the Bank of Japan is actively intervening in the forex markets, contributing to the JPY's upside.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) unsurprisingly kept the interest rate unchanged not long ago to keep the fight against persistent inflation rate. Based on their language, a hike isn't out of the question this year.
Like many currencies, the Aussie remains data-sensitive, whether we look at economic growth, labour, or inflation going forward. The recent rise in China's share prices, which correlates with the Aussie, has been positive for the currency. Still, there is doubt over the longevity of this run.
The Aussie market has risen noticeably of late, having reached a recent resistance level. While the next nearby target is 0.68711, we need to see how it behaves at the latter.
Meanwhile, the major support level is down at 0.63484.
Long-term outlook: weak bullish.
The RBA remains hawkish as per last week's meeting, focusing on core inflation. Overall, it's crucial to be data-dependent with the Aussie, with recent labour data keeping the bullish script alive.
However, the Australian dollar is pro-cyclical, so it is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
New Zealand's central bank recently dropped the Kiwi's interest rate from 5.50% to 5.25%.
Lower-revised cash rate projections also hint at the potential for further cuts in the near future.
The Kiwi has recently breached a major resistance at 0.62220. While we can look towards a future level, this area is still worth considering.
Conversely, the major support is at 0.58498, an area which it is unlikely to test soon.
Long-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD. As with its counterpart, traders should be data-dependent.
Canadian dollar (CAD)
Short-term outlook: bearish.
The ongoing mortgage stress in Canada has forced the Bank of Canada (BoC) to be dovish, the first major bearish catalyst. With a rate cut last month, STIR markets have increased the probability to over 90% of the same in Wednesday's meeting.
The CAD continues to strengthen mildly due to USD weakness. It now looks to test the next major support target at 1.33586, while the major resistance is far ahead at 1.39468.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point, with the BoC governor Macklem himself saying it's reasonable to expect more cuts in the future. Moreover, STIR markets have priced in an additional cut sometime this year.
The mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it. Still, this narrative is getting tired.
Expect encouraging oil prices, along with general economic data improvement to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a rate cut later this month (a 35% chance) and December this year.
Secondly, SNB expects a moderate improvement in inflation, GDP (Gross Domestic Product), and unemployment to rise slightly in the near term.
However, the Swiss franc can strengthen during geopolitical tensions like the Middle East crisis.
After a notable retracement at the start of last month, USD/CHF is looking to test the support area at 0.83326. Meanwhile, the major resistance level is far higher at 0.92244.
Long-term outlook: weak bearish.
The expected rate cut in the next SNB meetings for 2024 is the main bearish driver. However, the SNB's chairperson, Thomas Jordan, expressed that "appreciation of the Swiss Franc has an impact on monetary policy." This means that potential intervention by the central bank can go either way.
Conclusion
The fundamental outlooks of each currency have remained mostly unchanged from the previous report, except for JPY and NZD. Key news events to watch this week include the US unemployment rate and the CAD interest rate decision.
As always, hope for the best and prepare for the worst, but this report should help guide you in determining the bias you should have for each currency.
