The Dollar Index Future (DXY)
Despite the US labour market showing robust growth for two months, the appallingly low Q2 GDP and retail sales figures imply that economic growth and inflation rise are still weak. On Tue 16th Aug, the dollar index future (September) extended the weakness it has shown since Friday. A result of the disappointing retail sales report, the lowered market expectations for a Fed rate hike, and the dovish statement made by John Williams, the president of San Francisco Fed.
The dollar index fell like a stone, from the intra-day high of 95.605 to a post Brexit referendum low of 94.355, a 1.31% fall, the second biggest intra-day fall post referendum. The dollar has weakened across the board.
The bearish momentum continued as US CPI (MoM), Core CPI (YoY and MoM), and Building Permits (MoM) in July, released subsequently, underperformed, driving the dollar index further down. The three significant support levels were broken in eight hours, including the 38.2% Fibonacci retracement level at 95.41, 95.00, and 50.0% Fibonacci retracement level at 94.73. When nearing the support level at 94.35, the index bounced off sharply, as New York Fed president William Dudley commented that a September rate hike is possible. It is currently oscillating in the range between the major resistance at 95.0 and 94.73, be aware of a pullback.
Upside significant resistance is at 95.0, followed by 95.20, 95.325, 95.41, 95.50 and 95.60. Downside support line is at 94.73, followed by 94.35, 94.20 and the 61.80% Fibonacci retracement level at 94.06.
Keep an eye on the FOMC Meeting Minutes, released at 19:00 GMT+1 on Wednesday 17th August, as they will influence the market sentiment and the strength of the dollar.
As the first post referendum UK CPI figures released outperformed, GBPUSD surged and broke the downtrend channel resistance at 1.2962 and the significant resistance level at 1.30. It is currently oscillating in a range between 1.30 and 1.305.
The resistance level is at 1.303 followed by 1.305, 1.307 and 1.310. Downside newly formed support line is at 1.30, followed by 1.297, 1.295 and 1.293.
Keep an eye on the upcoming Claimant Count Change and Unemployment Rate in July, to be released shortly, at 09:30 GMT+1 on Wed 17th August. The Retail Sales (YoY and MoM) and the Core Retail Sales (YoY and MoM) in July are released at 09:30 GMT+1 on Thu 18th August.
With positive figures, the resistance at 1.303 and 1.305 will likely be tested again, while lower-than-expected figures, will likely drive the price down and test the downside support levels.
USDJPY
As the dollar weakened, USDJPY plunged from the intra-day high of 101.283 to a post EU referendum low of 99.526, a 1.73% fall. The two significant support levels at 101.00 and 100.00 were both broken, followed by a rebound. It is currently testing the newly formed resistance at 101.00. The 4 hourly KD indicator is at a high level, suggesting a pullback.
Downside support line is at 100.70 followed by 100.50, 100.00, 99.80, and 99.50. Upside resistance is at 101.0 followed by 101.50, and 102.00.
FxPro UK Limited is authorised and regulated by the Financial Services Authority, registration number 509956. CFDs are leveraged products that incur a high level of risk and it is possible to lose all your capital invested. Please ensure that you understand the risks involved and seek independent advice if necessary.
Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation 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 other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07) and FxPro UK Limited is authorised and regulated by the Financial Services Authority, Number 509956.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.