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The dollar index ticked lower in European trading on Thursday, after bounce from 8-month low (101.94, posted on Monday) started to lose traction.

Weak picture on daily chart (MA’s in bearish configuration / strong negative momentum) warn of limited recovery before bears regain control.

The dollar was hit by the recent strong rally of yen, which was the one of key factors of the latest drop, with outlook for the Fed action on interest rates, turning more dovish and expected to add pressure on the US currency.

The latest economic data signaled that the US economy is slowing and recession threats, narrowed space for the central bank’s action and resulted in sharp rise in bets for 50 basis cut in September (against initial expectations for 25 basis points rate cut) and even spreading rumors that the Fed would opt for emergency rate cut before the September meeting.

Partial stabilization of the situation in the markets eased tensions for now, but outlook remains darkened by all these factors.

Markets await release of US July inflation report (due next week) and the speech of Fed Chair Powell at the Jackson Hole symposium (due Aug 22/24) for more information.

Immediate support lays at 102.55, loss of which would further weaken near term structure, while lift above upper pivot at 13.24 would sideline downside risk.

Res: 103.24; 103.55; 103.64; 103.93.
Sup: 102.70; 102.55; 101.94; 101.75.

Gold (XAU/USD) prices have rebounded to 2394 USD per troy ounce, paring previous losses as the likelihood of a US Federal Reserve rate cut increases. Market sentiment is increasingly cautious amid recession fears, influencing stock market dynamics and bolstering the appeal of non-yielding assets like gold.

Current market indicators, notably the CME FedWatch tool, suggest an almost certain probability of a rate reduction by the Federal Reserve in September. Such monetary easing typically enhances the allure of gold, which does not offer interest income.

Investor focus is now on upcoming US unemployment claims data, which will provide further insight into employment market conditions. Recent statistics from China revealed that the People’s Bank of China did not purchase gold bullion in July, marking the third consecutive month without an increase in gold reserves. This suggests a shift towards domestic economic stimulation as the Chinese economy faces challenges.

Ongoing tensions in the Middle East also underscore gold’s status as a safe-haven asset.

Technical analysis of XAU/USD

The H4 chart shows a declining trend towards the 2345.00 level, with a local target recently reached at 2364.23, followed by a correction to 2411.00. The market is anticipated to continue this downward trajectory towards 2355.80 before potentially rebounding to 2381.60. A further decline to 2345.00 is likely, aligning with the primary downtrend target. This bearish outlook is supported by the MACD indicator, which shows the signal line trending downwards from above zero.

On the H1 chart, gold is currently consolidating above 2381.60. A downward breakout towards 2355.80 is expected, which would serve as a local target. Subsequent retesting of 2381.60 from below may occur before the downward movement continues to 2345.00. This bearish scenario is corroborated by the Stochastic oscillator, with the signal line poised to drop from above 80, suggesting a potential decline.

As investors and traders navigate these dynamics, gold’s status as a hedge against uncertainty remains a key theme in its valuation.

EUR/USD edged higher in Asia / early Europe on Thursday, hinting that pullback from Monday’s spike high (1.1009) might be over.

Signals of formation of a higher base at 1.0900 zone add to positive near-term outlook, as technical studies on daily chart are predominantly bullish, though sustained break above 1.0950/60 zone needed to confirm.

On the other hand, hourly studies are weakening, and recovery attempts may face headwinds on approach to 1.0950 pivot (hourly cloud top / 50% retracement of 1.1009/1.0892 pullback).

This would keep the downside vulnerable, especially on loss of 1.0925 pivot (hourly cloud base / hourly Kijun-sen), which would risk retest of 1.0900 and open way for deeper pullback on break.

Look for clearer direction signal.

Res: 1.0950; 1.0965; 1.0981; 1.1000.
Sup: 1.0925; 1.0890; 1.0875; 1.0850.

Daily Pivots: (S1) 1.0907; (P) 1.0922; (R1) 1.0938; More.....

EUR/USD is extending the consolidation from 1.1007 and intraday bias remains neutral. While deeper retreat cannot be ruled out, downside should be contained well above 1.0776 support. On the upside, break of 1.1007 will resume recent rally from 1.0665 to 100% projection of 1.0665 to 1.0947 from 1.0776 at 1.1056 next.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's still be in progress. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). However, break of 1.0776 support will extend the correction with another falling leg back towards 1.0447 support.

Daily Pivots: (S1) 1.2669; (P) 1.2703; (R1) 1.2726; More...

Intraday bias in GBP/USD stays on the downside despite some loss of momentum. Fall from 1.3043 should continue to 1.2612 support. Decisive break there should confirm that rise from 1.2298 has completed, and target this support next. However, break of 1.2839 resistance will argue that the pull back from 1.3043 has completed and turn bias back to the upside.

In the bigger picture, current development suggests that corrective pattern from 1.3141 is extending with fall from 1.3043 as another leg. Break of 1.2612 support would strengthen this case. But still, downside should be contained by 1.2036/2298 support zone even in case of deep decline. Rise from 1.0351 (2022 low) remains in favor to resume at a later stage.

Daily Pivots: (S1) 0.8530; (P) 0.8596; (R1) 0.8683; More…

Intraday bias in USD/CHF remains neutral and further decline is expected with 0.8711 resistance intact. On the downside, below 0.8500 will bring retest of 0.8431 first. Break there will resume the decline from 0.9223 to retest 0.8332 low.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 144.69; (P) 146.30; (R1) 148.31; More...

Intraday bias in USD/JPY remains neutral an further decline is expected with 150.88 resistance intact. On the downside, below 144.04 minor support will bring retest of 141.67 first. Break there will resume the fall from 161.94 to 140.25 support next.

In the bigger picture, the strong break of 55 W EMA (now at 149.98) argue that fall from 161.94 medium term is correcting whole up trend from 102.58 (2021 low). Deeper decline could be seen to 38.2% retracement of 102.58 to 161.94 at 139.26, which is close to 140.25 support. In any case, risk will stay on the downside as long as 55 W EMA (now at 149.83) holds. Nevertheless, firm break of 55 W EMA will suggest that the range for medium term corrective pattern is already set.

• EURJPY is hovering around the 159.64 level
• It is trading around 9% lower from its recent high
• Momentum indicators are mixed, all eyes on stochastics

EURJPY is trading lower today, close to the 159.64 level and considerably above the August 5 low of 154.38. The market is clearly trying to find its footing following the recent rout that was triggered by the bigger-than-expected rate hike by the BoJ and fears about an imminent US recession. JPY was the primary beneficiary of this acute market reaction with EURJPY dropping around 9% from the all-time high of 175.41.

In the meantime, momentum indicators are mostly mixed. More specifically, the RSI is edging higher, but remains very close to its multi-year low. Similarly, the Average Directional Movement Index (ADX) is moving sideways, potentially signaling a weakening bearish trend in EURJPY. More importantly, the stochastic oscillator has surpassed its moving average, and it is preparing to cross above its oversold territory (OS). Should this move take place, it could be seen as a strong bullish signal.

Should the bulls remain confident, they would try to keep EURJPY above the February 22, 2007 high at 159.64 and then gradually stage a rally towards the 23.6% Fibonacci retracement level of March 7, 2022 – July 11, 2024 downtrend at 163.37. The next key resistance area could then come at the busy 164.29-164.97 region.

On the other hand, should the bears remain hungry, they would try to break below 159.64 and then push EURJPY towards the June 28, 2023 high at 157.99. If successful, they could then test the support set by the 38.2% Fibonacci retracement level at 155.92, a tad above the 2024 low of 154.38.

To sum up, the bulls are trying to recover part of their strong losses but EURJPY’s correction might still have legs.

In August, the Japanese yen became one of the most popular instruments in the forex market. Following an unexpected rate hike by the Bank of Japan and weak labour market data from the US, the USD/JPY pair dropped by more than 1000 pips, settling below the psychological level of 150.00. The divergent monetary policies of the US and Japanese regulators contributed to increased volatility in yen pairs. However, after a speech by the Bank of Japan's Deputy Governor, the yen sharply corrected. Shinichi Uchida stated that "it is necessary to maintain the current level of monetary easing," which the market interpreted as a signal that the yen's rate is unlikely to increase this year.

Currently, the yen is experiencing a corrective pullback. Let's consider the possible developments in the upcoming trading sessions.

USD/JPY

Technical analysis of the USD/JPY pair indicates a potential continuation of the corrective pullback, as a "bullish harami" pattern formed on the daily timeframe two days ago. If the recent high at 147.90 is surpassed, the price may test the important area of 151.00-150.00. A decline below 145.40-145.00 could lead to a resumption of the downward movement towards 142.00-141.00.

The following events will be crucial for USD/JPY price formation:

• Today at 15.30 (GMT +3:00) the release of the US initial jobless claims data.
• Today at 19.00 (GMT +3:00) the publication of the Atlanta Federal Reserve’s GDPNow indicator.

EUR/JPY

The EUR/JPY pair also saw a sharp decline last month. Currently, the price is trading near the psychological level of 160.00. If the pair's buyers can push the price above yesterday's high, the corrective rise could continue towards 165.00-164.00. A resumption of selling could be expected after a firm move below 158.70-158.00.

Events that could impact the current state of EUR/JPY include:

• Today at 09.45 (GMT +3:00) the release of France's trade balance.
• Tomorrow at 09.00 (GMT +3:00) the release of Germany's Consumer Price Index (CPI) for July.

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Daily Pivots: (S1) 0.6494; (P) 0.6535; (R1) 0.6559; More...

Intraday bias in AUD/USD remains neutral as rebound from 0.6348 is still struggling to extend through 0.6567 resistance decisively. On the downside, break of 0.6472 minor support will retain near term bearishness and bring retest of 0.6348 low first. However, strong break of 0.6567 will bring stronger rally to 55 D EMA (now at 0.6616) and possibly above.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with fall from 0.6798 as another falling leg. Deeper fall could be seen to the lower side of the range between 0.6169/6361. But strong support should be seen there to contain downside. For now, risk will stay on the downside as long as 55 D EMA (now at 0.6617) holds, in case of rebound.