AUD/USD is likely to continue rallying from near 0.7200 currently to 0.7800 over the next year, CBA says. The pair is already around its highest levels since early 2019. The risk over the medium term is higher commodity prices as China ramps up commodity-heavy infrastructure spending, with iron-ore prices likely to remain above US$100/ton for the rest of the year because of strong Chinese demand, the bank says. President Trump winning the U.S. election in November could push AUD/USD into a pothole given that USD strength would likely ensue. Still, that would fade relatively quickly.
Most Asian currencies weaken against the USD following the FOMC minutes. The minutes “brought the USD back from the brink,” DBS says, noting they affirmed the Fed wasn’t considering yield-curve control. In addition to expected covering of short-USD positions, the greenback’s selloff is looking stretched on the technical charts, DBS says. Unless the USD Index breaks below 91.70 or its 100-month moving average, the USD’s longer-term downtrend isn’t confirmed, DBS adds. The ICE U.S. Dollar Index is up 0.2% at 93.03, USD/KRW rises 0.3% to 1,186.27 and USD/THB gains 0.3% to 31.41.
Minutes from the U.S. Federal Reserve’s latest meeting showed that officials expected the economy to require “additional accommodation” for recovering from the coronavirus pandemic. Later today, investors will watch closely numbers of Initial Jobless Claims (a decline to 920,000 expected) and Continuing Claims (a fall to 15.00 million expected). The Conference Board Leading Index will also be released (+1.1% on month in July expected).
👉 US stocks eased as the Fed warned the pandemic would weigh heavily on the US economy in the short term despite signs of recovery. S&P 500 lost 0.44%. Nasdaq -0.57%, with Apple hitting $2 trillion market cap. European benchmarks increased.
👉 The US dollar index (USDX) surged above 93 level, ending a five-day selloff. July FOMC meeting minutes showed no interest in Yield Curve Control and failed to provide the timetable of a new forward guidance. The yield on 10-year Treasuries increased to 0.68%.
👉 EUR fell to 1.1839 amid the USD strength. GBP closed lower at 1.3099 despite the upbeat July CPI figures. USD/JPY rebounded sharply to close above 106 level.
👉 AUD pulled back to 0.7181 after recording another yearly high at 0.7275 in the session. NZD plummeted to 0.6556. USD/CAD bounced off the seven-month low to 1.3220, capped by the 5-day EMA.
👉 Gold plunged from a one-week high to $1927.27. We are seeing a medium-probability bullish scenario and failure to hold below the 2044.59 resistance level could see the pendulum swing towards a run up to the 2077.78 resistance target. Looking ahead, Gold prices remain on track to continue on its uptrend, supported by rising geopolitical tensions and the low interest rate environment. Moreover, Silver dropped below $27.
We have sent a SELL signal yesterday from our VIP Channel, and this is the Before and After screenshot.
👉 WTI crude turned lower, with the US crude oil inventories declining less than expected. The commodity eased from a five-month high in New york after a report signaled surging U.S. gasoline stockpiles before OPEC and its allies meet to assess its supply agreement. Oil is struggling to advance past $43 a barrel with many major economies battling to contain the pandemic, raising doubts about a sustained recovery in consumption. OPEC+ is testing the appetite for demand by returning about 1.5 million barrels a day, even as refiners face lean profits and fuel stockpiles at major oil hubs stay high.
As we have observed in the Currency Monitoring Chart at 10:25 am, after the FOMC meeting earlier at 2:00 this morning. The difference between currencies are still in a minimal level. Possibly waiting for the economic releases later this evening.
INTRADAY MARKET INSIGHTS
USD/JPY Intraday:
Upside prevails. The pair continues a strong rebound from a low of 105.14, and has regained the key 106.00 level. Technical indicators (20-period, 50-period moving averages, relative strength index) are still well directed supporting a bullish intraday bias. A further rally should bring the pair toward 106.25 and 106.50 on the upside. Key support is located at 105.75.
EUR/USD Intraday:
Watch 1.1810 downside. The pair remains subdued after retreating from a high of 1.1948. It is still capped by the descending 20-period moving average, which stands below the 50-period one. A break below 1.1830 (around the low of yesterday) would trigger a further decline toward 1.1810. The trailing key resistance has been lowered to 1.1875.
AUD/USD Intraday:
Downside prevails. The pair is holding on the downside after yesterday’s downward acceleration. The declining 20-period moving average should pressure the prices lower. To conclude, as long as 0.7205 holds on the upside, expect a further decline with targets at 0.7170 and 0.7155 in extension. Alternatively, a break above 0.7205 would bring a rebound with 0.7230 and 0.7255 as targets.
NZD/USD intraday:
Under pressure. The pair is under pressure below the key resistance level at 0.6578, which should maintain the selling pressure. The death cross between 20-period and 50-period moving averages has been identified. To conclude, unless the resistance level at 0.6578 is violated, the pair should reach 0.6528 and 0.6515 on the downside. On the other hand, a break above 0.6578 would open a path to 0.6600 on the upside.
GBP/USD Intraday:
Further decline. Despite the pair posted a rebound from 1.3090, it is still capped by a declining 20-period moving average. The relative strength index is locating at 30s, suggesting the downside momentum for the prices. To conclude, as long as 1.3135 is not surpassed, look for a drop with targets at 1.3090 and 1.3070 in extension. In an alternative scenario, a break above 1.3135 would bring a bounce with 1.3160 and 1.3190 as targets.
USD/CHF Intraday:
Look for 0.9185. The pair is holding on upside and is supported by a rising 20-period moving average. The relative strength index stays above its overbought level at 70. In this case, as long as the support level at 0.9120 holds on the downside, we anticipate a further upside with targets at 0.9165 and 0.9185 in extension. Alternatively, below 0.9120, expect a return with 0.9100 and 0.9080 as targets.
USD/CAD Intraday:
Further advance. The pair has broken above a bearish channel drawn from August 10. In fact, the 20-period moving average has moved further above the 50-period one, and the relative strength index has climbed to the 60s, indicating continued upward momentum. Unless the key support at 1.3185 is violated, the pair should advance to 1.3235 and 1.3260. Alternatively, below 1.3185, expect a pull-back to 1.3160.
EUR/JPY Intraday:
Rebound. The pair has stabilized after reaching the day-low of August 18. Currently, it has rebounded and is challenging the 20-period moving average, while the relative strength index shows upward momentum. As long as the key support at 125.23 holds, expect a rebound to 125.99 and 126.17. Alternatively, a break below 125.23 would open a path to 124.92 on the downside.
EUR/GBP Intraday:
Target 0.9072. The pair maintains a bullish bias above the key support at 0.9012. In fact, the 20-period moving average has crossed above the 50-period one, while the relative strength index stays above the neutrality level of 50, suggesting a bullish bias. Above the key support at 0.9012, the pair should target 0.9060 and 0.9072 on the upside. Alternatively, a break below 0.9012 would trigger a decline to 0.8991.
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