Sat, Oct 23, 2021 @ 17:29 GMT
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USD Continues To Strengthen

The USD continued to rise against a number of its counterparts yesterday in the aftermath of a strong employment report for July, which tended to enhance market expectations for the Fed to start tapering its QE program. The possibility of the Fed starting to tighten its monetary policy tended to weaken safe heavens such as gold and bonds and its characteristic that US treasury yields were on the rise for the past few days. Fed officials seem to be leaning also towards an earlier tapering, as Atlanta Fed President Bostic yesterday stated that he is eyeing the fourth quarter for the bank to start tapering its QE program, while Boston Fed President Rosengren stated that the Fed should begin slowing stimulus efforts by fall. Both statements tended to intensify market expectations for the Fed to taper its QE program rather sooner than later. Yesterday the JOLTS job openings for June came out higher than expected and inflation is the next big question for the US economy. We expect the US CPI release for July due out tomorrow Wednesday, to draw the attention of USD traders as it would provide additional information that could affect the Fed’s stance and until then probably fundamentals are to take over and guide the greenback.

The USD Index continued to rise yesterday distancing its price action from the 92.75 (S1) support line. We tend to maintain a bullish outlook for the index yet the RSI indicator below our 4-hour chart has surpassed the reading of 70, which on the one hand confirms the dominance of the bulls, yet on the other may imply that the index is overbought and a correction lower is possible. Should the USD continue to be in demand we may see the USD Index breaking the 93.20 (R1) resistance line and aim for the 93.65 (R2) resistance level. Should a correction lower come into play and a selling interest be displayed we may see the index breaking the 92.75 (S1) support line and aim for the 92.30 (S2) support level.

AUD leans on the soft side

AUD continued to weaken against the USD yesterday, as dropping commodity prices and ongoing lockdown measures back home tended to weigh. Iron ore prices continue to fall weakening the outlook for the Aussie given that Iron Ore is one of the main export products of Australia and seems to feel the pressure from China which is a main importer of the industrial metal. At the same time the path of the pandemic back home remains highly worrisome as lockdown measures in the most populous state, New South Wales are extended and concerns about the spreading of Covid remain high. It’s characteristic that business conditions and confidence for July dropped yesterday underscoring the weaker outlook for the Aussie.

AUD/USD continued to retreat yesterday breaking the 0.7335 (R1) support line now turned to resistance. We tend to maintain a bearish outlook for AUD/USD as long as it remains below the downward trendline incepted since the 5th of August. Should the bears actually maintain control over the pair’s direction, we may see AUD/USD aiming if not breaking the 0.7265 (S1) support line, in search of lower grounds. Should the bulls take over we may see AUD/USD breaking the prementioned downward trendline, the 0.7335 (R1) resistance line and aim for the 0.7400 (R2) level.

Other economic highlights today and the following Asian session:

Today, in the European session, we get Norway’s and the Czech Republic’s CPI rates for July as well as Germany’s ZEW indicators for August. In the late American session, we get from the US the weekly API weekly crude oil inventories figure, while during tomorrow’s Asian session we get Australia’s consumer sentiment for August. Please note that on the monetary front, during today’s American session Chicago Fed President Evans is scheduled to speak and could draw considerable attention, given the current hype regarding the Fed’s intentions.

USD Index H4 Chart

Support: 92.75 (S1), 92.30 (S2), 91.75 (S3)

Resistance: 93.20 (R1), 93.65 (R2), 94.25 (R3)

AUD/USD H4 Chart

Support: 0.7265 (S1), 0.7200 (S2), 0.7145 (S3)

Resistance: 0.7335 (R1), 0.7400 (R2), 0.7465 (R3)

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