Sat, Oct 23, 2021 @ 18:15 GMT
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USD Down As Consumer Sentiment Retreats

The greenback was on the back foot on Friday after a rather disappointing Preliminary Un. Mich Consumer sentiment reading that displayed a drop to 70.2 from previous 81.2. According to the Dollar Index, this may have been the largest daily drop for the greenback so far in August confirming traders considered the news as rather important at this stage. The reading maybe raising hopes among traders that the Fed could postpone its QE program tapering.

Gold prices on the contrary gained substantially on Friday after the pre mentioned release as some traders may prefer the fast-moving metal over indications of weak economic data. Gold has rebounded most of the ground lost in the previous weeks and seems to be undertaken by a different interest in August. Today traders await the NY Fed Manufacturing reading while the week ahead seems to offer a plethora of events and opportunities for traders.

On Friday USD/JPY broke beneath the (R1) 109.80 level turning it into our first resistance. If the downward trend continues then the currency pair could find support at our (S1) 109.05. Lower than that the (S2) 108.65 support can also be attended in a stronger selling scenario. Yet in case of a breakdown, the (S3) 108.25 line is also imminent even though it has not been tested since May making it a monthly low. On the contrary, if the currency pair is favored by an upward momentum then a return to the (R1) 109.80 could signal more bullish appetite maybe on the way. In this case the (R2) 110.35 level which has been various time in the previous week is the most possible point for traders to consider opening or closing more trades. At the top the (R3) 110.80 is our highest resistance in this case representing also the highest price reached so far in August. With the latest selloff the RSI indicator below our chart has dropped below the 30 level possibly indicating the bearish momentum could be peaking.

Oil displays bearish tendencies

CAD traders have an interesting day ahead with the release of Manufacturing Sales figure in the US session. The Loonie is marginally higher in August and the challenge for CAD bulls to reverse the trend is on in the days ahead also. WTI prices continued to drop on Friday after the International Energy Agency stated the spread of coronavirus variants is an additional downside to oil prices and demand. Another reason maybe also that from August onward the OPEC+ group will be easing production cuts thus some bearish tendencies may exist through the month. Even though WTI prices have lost considerable ground in August so far, the commodity continues to trade at $67 per barrel not far away from its yearly high price reached in July.

From a technical perspective and considering the latest sessions bearish tendencies the commodity seems eager to test the (S1) 66.60 support that was tested briefly on the 11th of August. If the (S1) is breached then the road can be set for the (S2) 64.95 to come into play. Lower the (S3) 63.50 seems the most considerable stop if the selling is extended even further. In the opposite direction the (R1) 68.60 which was a constant target for the bulls in the previous week remains the most relevant level for a recapture. Higher than that the (R2) 70.10 could confirm the bulls are back in the picture as this is the highest level reached so far in August. Yet our (R3) 71.40 can be the highest target for the bulls also representing a considerable challenge. The RSI indicator below our chart seems to be leaning towards 30 implying further selling could persist among traders.

Monday’s Asian session provides volatility

With the release of several economic readings during Monday’s Asian session, traders were motivated to take notable action that deserves to be mentioned. First, Japanese GDP data outperformed expectations with figures moving in positive territory supporting the JPY. Considering the Japanese Quarterly GDP Annualized data which jumped from previous -3.9% to +1.3% the JPY gained further ground against the USD making it the instrument with the largest movement among major pairs. On the other hand, AUD weakened against the USD as Chinese Industrial Output and Retail sales came out lower than both previous and expected figures. The effect may persist into the European session and even in the US thus caution is advised when trading the pre mentioned FX pairs.

Other economic highlights today and the following Asian session:

Today during the European session we get Eurozone’s Reserve Assets for July and the Norwegian Trade Balance for July. In the American session we note the release of the preliminary NY Fed Manufacturing figure for August and the Canadian Manufacturing Sales for June. During Tuesday’s Asian session we get RBA releases minutes of last meeting.

USD/JPY H4 Chart

Support: 109.05 (S1), 108.65 (S2), 108.25 (S3)

Resistance: 109.80 (R1), 110.35 (R2), 110.80 (R3)

WTICash H4 Chart

Support: 66.60 (S1), 64.95 (S2), 63.50 (S3)

Resistance: 68.60 (R1), 70.10 (R2), 71.40 (R3)

 

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