US Dollar Awaits Clarification From Jackson Hole

Equity markets reached new highs last week, recovering from the temporary hiccup. The US Dollar Index rallied early, but failed to sustain any traction, ending the week at comfortably below the 98 level, which might prove to be the next resistance level.

The Core Consumer Price Index (CPI) came in hotter than expected. At the same time, the Producer Price Index (PPI) clocked significantly higher, showing the effects of the current administration’s tariffs on domestic prices. Key foreign news went as expected, with the Reserve Bank of Australia lowering rates by 25 bps.

The market overwhelmingly expects the current data to support the Fed’s rate cut in September. The clarification might potentially come from Chairman Jerome Powell, who will deliver a keynote speech at the annual Jackson Hole Symposium.

Other notable news that might move the currency market includes Canada’s and Great Britain’s inflation data, New Zealand’s rate decision (25 bps cut expected), and German PMI.

Key News

• Tuesday:  CAD – CPI
• Wednesday: NZD – Interest Rate, GBP – CPI, USD – FOMC Minutes
• Thursday: EUR – German PMI, USD – Unemployment, PMI
• Friday: USD – Powell Speech

Pairs In Focus

1. CAD JPY

This pair is starting to roll over on the weekly chart, where it has created a potentially lower high. On the daily timeframe, it has broken the key level at 107.044. Thus, any pullbacks while still staying below that level on the daily could be interpreted as opportunistic shorts.

CAD/JPY Daily Chart, Source: TradingView

The potential for the downward move is at least the swing low from July, which is around 105. Retail sentiment is overwhelmingly long at 76% making this pair a good contrarian opportunity.

2.GBP SGD

This pair remains on the watchlist, as it has touched the 1.73800 key level but failed to close above it decisively. An ideal price move would be to close above sweeping the early July highs around 1.74300. This scenario offers a potential opportunity to buy on any subsequent dips, targeting at least the June high of 1.75.

 GBP/SGD Daily Chart, Source: TradingView

Notes:

• AUD NZD: Edged higher, closing at a multi-month high. The bias remains bullish.
• AUD CAD:  Remains in an established range between 0.88750 and 0.90. Failed to break 0.9 on the third attempt in the last two months.
• AUD CHF: Failed to break the resistance around 0.52900. The support below the market is around 0.51800.
• AUD JPY: Failed to break through the key level at 96.900. The support sits around 96.00.
• AUD SGD: Failed to break above 0.83800, turning lower. The price will most likely challenge support at 0.83150.
• CHF JPY:  Failed to push higher, keeping in a tight range between 181.700 and 183.450.
• EUR AUD: Once again rebounded from the 1.78240 support. The most likely upward target is 1.81.
• EUR/JPY: Price movement is undecided, as the market might have made an unconfirmed lower high at 172.600. To confirm the trend reversal, it would need to make a lower low.
• EUR NZD: Rallied to a new multi-month high, and is likely going to tag the yearly high at 2.00.
• GBP AUD: Broke the 2.07 intermediate resistance, but failed at a key level of 2.08400. This level will provide a further clue about the next trend for this pair.
• GBP JPY: Briefly broke the milestone 200 level before retracing lower. The key level to watch is 198.230.
• GBP NZD: Broke the multi-month resistance at 2.27. The price could stall here before moving toward the yearly high.
• NZD JPY: Failed to break the key level at 88.165. Support awaits below at 86.650.

Disclaimer: Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. Singapore Forex Club is not responsible for any financial decisions based on this article's contents. We provide research and promote forex trading in Singapore, and readers may use this data for information and educational purposes only.

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