USD remains strong in the FX market

Peter Iosif, ACA, MBA IronFX

USD strengthens given the market’s hawkish expectations for the Fed

The USD continued rise as the week began and during today’s Asian session, as the market’s expectations for the Fed to tighten its monetary policy tomorrow but also in December, were enhanced. JPY seems to stabilise, and in the Land of the Rising Sun, we get some financial releases in tomorrow’s Asian session, yet the market’s attention is on BoJ. The bank risks disappointing the markets on Friday with its interest rate decision, should it fail to deliver a rate hike and sound sufficiently hawkish.

US equities edge lower

US equities edged higher yesterday yet futures corrected lower in today’s Asian session. Market worries for the Fed to tighten its monetary policy, high oil prices and warnings for a slowdown in the development of AI technology, tend to keep US stock market participants cautious. A possible further intensification of the market’s worries could force US equities even lower.

Oil prices remain high

Oil prices edged higher and overall tend to remain at high levels. Iranian allies, the Houthis attacked Saudi Arabian airbases, highlighting that the conflict is intense in the area. Also, negotiations seem to be dragging on without results and while a threatened outage of Saudi oil production was reported, given the strikes on the Saudi East West pipeline. All of that tends to enhance the oil market’s worries pushing oil prices higher on a fundamental level.

Bearish tendencies for Gold’s price remain

The bearish tendencies for gold’s price seem to be maintained in the market. The bearish pressure on the precious metal’s price seems to be fundamentally driven by the strengthening of the USD in the FX market, high bond yields and the market’s expectations for the Fed to hike rates. For the time being we expect fundamentals to continue to weigh on gold’s price.

Other highlights for today

Today we get UK’s employment data for July, France’s final HICP rate for August, Germany’s ZEW indicator for September, US NY Fed manufacturing index for September, Canada’s while sale trade for July, and the US API weekly crude oil inventories figure. On a monetary level we note that ECB’s Buch, Cipollone and Schnabel as well as BoE’s Wilkins speak. In tomorrow’s Asian session, we get New Zealand’s Current account balance for Q2, Japan’s machinery orders for July, trade data and Chain store sales for August.

Charts to keep an eye out

USD/JPY continued to tease the 155.00 (R1) resistance line during today’s Asian session. Also the RSI indicator has bounced on the reading of 50, implying a slight bullish predisposition of the market for the pair. Yet the pair’s price action seems to have some difficulty in breaking the R1, which allows us to maintain our bias for a sideways motion for the time being. For the adoption of a bullish outlook we would require the pair to break the 155.00 (R1) line clearly and start aiming for the 157.50 (R2) level. Should the bears take over we may see the pair dropping, breaking the 152.10 (S1) level and start aiming for the 149.40 (S2) barrier, yet we consider this scenario as remote at the current stage.

XAU/USD dropped yet seems to have hit the floor at the 4275 (S1) support line. The RSI indicator has edged below the reading of 50, implying some bearish tendencies, yet the precious metal’s price action seems to find it hard to break the S1. For the time being, we maintain a bias for a sideways motion, yet issue a warning for the bearish tendencies of gold’s price. Should the bears take over, we may see gold’s price dropping below the 4275 (S1) line, aiming for the 3960 (S2) barrier. For a bullish outlook, gold’s price has to break the 4550 (R1) line, thus opening the gates for the 4890 (R2) level.

USD/JPY daily chart

Support: 152.10 (S1), 149.40 (S2), 146.50 (S3).
Resistance: 155.00 (R1), 157.50 (R2), 160.50 (R3).

XAU/USD daily chart

Support: 4275 (S1), 3960 (S2), 3600 (S3).
Resistance: 4550 (R1), 4890 (R2), 5245 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

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