Fundamentals to lead in a quiet Monday

In an easy-going Monday, the USD seems to be licking its wounds from Friday as it weakened against its counterparts. Market expectations for the Fed to remain dovish tend to weigh on the greenback. Hence, we tend to highlight the planned speech of Fed Board Governor Waller later today and should the dovish orientation of the Fed be confirmed we may see the USD continuing to slip lower. For the week, we note the release of the Fed’s July meeting minutes on Wednesday. On a fundamental level, the market tends to be focusing on the Jackson Hole meeting. Fed Chairman Powell is to deliver his keynote speech, and should he highlight a continuous easing of the bank’s monetary policy without hesitation, we may see USD slipping. On a monetary level, we also note the release of RBA’s last meeting minutes during tomorrow’s Asian session and should the document highlight the bank’s decisiveness to maintain a tight monetary policy or even tighten it further, the release could provide some support for the Aussie. Also Aussie traders are expected to keep a close eye on the release from China of PBOC’s interest rate decision, given the close Sino Australian ties and a possible easing of the bank’s monetary policy could weaken CNH.

On the flip side AUD/USD rose on Friday and opened with a positive gap during today’s Asian session, aiming for the 0.6715 (R1) resistance line. We note the that the pair’s price action has an upward trendline supporting it since the 5 of August and we intend to maintain a bullish outlook as long as the upward trendline remains intact. Should the bulls maintain control as expected, we may see the pair’s price action breaking the 0.6715 (R1) resistance line and aiming for the 0.6870 (R2) resistance level. Should the bears take over, we may see the pair reversing direction, breaking initially the prementioned upward trendline, in a first signal that the upward motion has been interrupted, and AUD/USD may start aiming for the 0.6575 (S1) support line.

Also in the FX market, we note the renewed buying interest for JPY and it seems that there is a fundamental change of hearts, in the market for the Japanese currency. Please note that the market expects further tightening of BoJ’s monetary policy and could provide some support for JPY if its enhanced. Also please note that on Friday Japan’s inflation data for July and a possible acceleration of the rates could support JPY.

On a technical level we note that USD/JPY fell on Friday and opened with a negative gap today breaking just below the 146.00 (R1) support line now turned to resistance. We tend to maintain a bearish outlook for the pair, given also that the RSI indicator nearing the reading of 30, implying an enhancement of the bearish sentiment among market participants. Should the bears maintain control over the pair’s direction, we may see the pair aiming if not breaking the 143.40 (S1) support line. Should the bulls take over, we may see the pair reversing direction breaking the 146.00 (R1) line and aiming for the 148.90 (R2) resistance level.

Other highlights for the day

During tomorrow’s Asian session, we get New Zealand’s trade data for July, and on the monetary front from China PBOC’s interest rate decision and from Australia, RBA’s August meeting minutes.

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On Tuesday we note Sweden’s Riksbank and Turkey’s CBT interest rate decisions on the monetary front and note the release of Canada’s and the Eurozone’s July inflation metrics. On Wednesday we get Japan’s trade data and Canada’s producer prices, both for July and on the monetary front we note the release of the FOMC’s July meeting minutes. On Thursday we get Australia’s, Japan’s, France’s, Germany’s, the Eurozone’s, UK’s and the US’s preliminary PMI figures for August, while we also note the release of Norway’s GDP rate for Q2, the US weekly initial jobless claims figure and Eurozone’s preliminary consumer confidence for August. On Friday we get Japan’s CPI rates for July and Canada’s retail sales for June.