USD bears take a break

USD bears seem to take a break, yet the market’s dovish expectations for the Fed seem to be still present and could drive the greenback lower over the coming week. The bank seems to have made a U-turn and now attention is mostly on the US labour market instead of inflation as was the case before. For the time being, we concur with the notion of the bank easing its monetary policy, yet we may see the bank failing to deliver a full 1% of rate cuts until the end of the year which would imply a double rate cut which is currently priced in for the November meeting.

Also in the FX market we note the release of Australia’s CPI rates for July during tomorrow’s Asian session. Should the rate accelerate, or even fail to slow down from June’s 3.9% yoy, we may see the market’s expectations for RBA’s hawkishness sharpen, thus supporting AUD. It should be noted that the bank in its last meeting minutes revealed that it was tempted to hike rates, yet refrained to do so preferring to keep the official rate high and steady for a prolonged period. Please note that at the time Aussie traders may be on the lookout for any escalation in the tensions of the US-Sino relationships, as US National Security Advisor Jake Sullivan is currently visiting China.

On a technical level, AUD/USD edged lower yesterday, stabilizing somewhat between the 0.6715 (S1) support line and the 0.6870 (R1) resistance level. We tend to maintain a bullish outlook for the pair as long as the upward trendline guiding the pair’s price action since the 5 of August, remains intact. We also note that the RSI indicator remains close the reading of 70, implying the presence of a bullish predisposition of the market for AUD/USD. Should the bulls maintain control over the pair, we may see it breaking the 0.6870 (R1 ) resistance line with the next possible target for the bulls being set at the 0.7030 (R2) level. Should the bears take over, we may see AUD/USD breaking the prementioned upward trendline in a first signal that the upward motion has been interrupted, breaking the 0.6715 (S1) support line and start aiming for the 0.6575 (S2) level.

Oil prices on the other hand have been on the rise since last Thursday, as market worries for the conflict in Israel are intensifying. The possibility of a spill-out of the Israeli-Palestinian conflict seems to be increasing. The issue tends to highlight the market worries for the international oil supply line. The supply side of the international oil market seems to be tightening even further as oilfields in eastern Libya that account for almost all the country’s production will be closed and production and exports halted, the eastern-based administration said on Monday, after a flare-up in tension over the leadership of the central bank, as per Reuters. Oil traders may be also interested in the release of the API weekly crude oil inventories figure. On the demand side of the oil market we get bearish signals as China is expected to lower its demand.

WTI’s price continued to rise yesterday breaking the 75.50 (S1) resistance line, now turned to support. We expect the upward motion to be maintained, given the steep upward slope of the pair’s price action, yet the rise may have been a bit overstretched and a correction lower may be ripe. For the time being we note that the RSI indicator has reached the reading of 50, implying that the bearish sentiment for the commodity’s price in the market has faded away yet a bullish sentiment has still to be build up. Should the buying interest be maintained we may see WTI’s price breaking the 78.70 (R1) resistance line and start aiming for the 83.90 (R2) resistance base. For a bearish outlook we would require WTI’s price actions to break the 75.50 (S1) support line and aim for the 71.15 (S2) support level.

Other highlights for the day

Today we get Germany’s detailed GDP Rate for Q2, UK’s CBI distributive trades for August and in the American session, we get from the US the Consumer confidence and Richmond Fed Composite Index, both being for August.