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Daily Pivots: (S1) 1.0942; (P) 1.0980; (R1) 1.1010; More.....

Intraday bias in EUR/USD remains on the upside for 100% projection of 1.0665 to 1.0947 from 1.0776 at 1.1058. Decisive break there could prompt upside acceleration through 1.1138 resistance to 161.8% projection at 1.1232. However, considering bearish divergence condition in 4H MACD, break of 1.948 support will suggest near term reversal and turn bias to the downside for 1.0880 support and below.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's could still extend. 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) 1.2879; (P) 1.2913; (R1) 1.2979; More...

GBP/USD's rise from 1.2664 is still in progress and intraday bias stays on the upside for retesting 1.3043 high. Firm break there will resume whole rise from 1.2998 to 61.8% projection of 1.2298 to 1.3043 from 1.2664 at 1.3124, which is close to 1.3141 high. On the downside, below 1.2880 minor support will turn intraday bias neutral first.

In the bigger picture, corrective pattern from 1.3141 might have completed at 1.2298 already. Rise from there could be resuming the larger up trend from 1.0351 (2022 low). Decisive break of 1.3141 will target 38.2% projection of 1.0351 to 1.3141 from 1.2298 at 1.3364 next. However, break of 1.2664 support will delay this bullish case once again and extend the corrective pattern from 1.3141.

Dollar continues to face broad-based selling pressure as the markets move into US session. Fed Governor Christopher Waller is set to speak, but he is expected to maintain his consistent view that Fed is nearing a rate cut while the economy remains on track for soft landing. The market's primary focus, however, is squarely on Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium later this week, where traders hope for more definitive guidance on the Fed's next steps.

In the upcoming Asian session, attention will turn to China, where it is widely expected to keep one-year and five-year loan prime rates unchanged. This follows a modest 10 basis point cut in July, signaling a cautious approach to monetary easing. Meanwhile, RBA will release the minutes from its August meeting. Given the RBA’s firm stance that a rate cut is not on the horizon, the minutes are unlikely to offer any surprises, though traders will still comb through them for any hints of policy shifts.

Overall, Dollar is currently the day’s weakest performer, pressured by a mix of cautious sentiment and positioning ahead of Powell's speech. Canadian Dollar and British Pound are also underperforming. In contrast, Japanese Yen has strengthened considerably, making it the strongest currency of the day, followed by Australian and New Zealand Dollars. Euro and Swiss Franc are trading in the middle of the pack.

Technically, a major immediate focus is whether Yen's rebound will gain further momentum. Key levels to watch include 160.57 minor support in EUR/JPY and 187.84 minor support at 187.84. USD/JPY has already broken corresponding level of 146.06 already. Firm break of these levels would argue that Yen's near term pull back has completed, and these Yen crosses might then be ready to revisit the lows set earlier in the month.

In Europe, at the time of writing, FTSE is up 0.18%. DAX is up 0.37%. CAC is up 0.54%. UK 10-year yield is up 0.0094 at 3.941. Germany 10-year yield is down -0.001 at 2.250. Earlier in Asia, Nikkei fell -1.77%. Hong Kong HSI rose 0.80%. China Shanghai SSE rose 0.49%. Singapore Strait Times rose 0.08%. Japan 10-year JGB yield rose 0.0145 to 0.890.

Fed's Kashkari: Appropriate to discuss rate cut in September

Minneapolis Fed President Neel Kashkari indicated that Fed's focus is increasingly shifting toward concerns in the labor market, moving away from the inflation side of its dual mandate.

In an interview with WSI, Kashkari emphasized that "the balance of risks has shifted more towards the labor market," making the debate over a potential rate cut in September "an appropriate one to have."

While acknowledging that inflation is showing signs of progress, Kashkari expressed concerns about "concerning signs" in the labor market.

Despite these, he stated that there is no compelling reason to lower interest rates by more than a quarter percentage point at a time, citing the continued low levels of layoffs and unemployment benefit claims, which do not yet indicate a significant downturn in the labor market.

NZ BNZ services rises to 44.6, modest improvement, but remains under pressure

New Zealand BNZ Performance of Services Index saw a modest rise in July, climbing from 40.7 to 44.6. However, the PSI has averaged only 46.5 for 2024, a stark contrast to its historical average of 53.2.

Breaking down the details, there were slight improvements across most categories. Activity/sales increased from 36.2 to 39.1, and employment ticked up from 45.7 to 46.6. New orders/business rose from 38.9 to 45.3, and stock/inventories edged higher from 43.9 to 45.1. On the downside, supplier deliveries slipped slightly from 41.4 to 41.0.

Despite these gains, the overall sentiment remains cautious, with 67.0% of respondents expressing negative views about the current economic climate, unchanged from June. High living costs and rising interest rates were frequently cited as significant challenges.

BNZ’s Senior Economist Doug Steel provided a sobering perspective, noting that "the increase in the PSI does not even get the index back to the level it was during the depths of the GFC back in 2008/09."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2879; (P) 1.2913; (R1) 1.2979; More...

GBP/USD's rise from 1.2664 is still in progress and intraday bias stays on the upside for retesting 1.3043 high. Firm break there will resume whole rise from 1.2998 to 61.8% projection of 1.2298 to 1.3043 from 1.2664 at 1.3124, which is close to 1.3141 high. On the downside, below 1.2880 minor support will turn intraday bias neutral first.

In the bigger picture, corrective pattern from 1.3141 might have completed at 1.2298 already. Rise from there could be resuming the larger up trend from 1.0351 (2022 low). Decisive break of 1.3141 will target 38.2% projection of 1.0351 to 1.3141 from 1.2298 at 1.3364 next. However, break of 1.2664 support will delay this bullish case once again and extend the corrective pattern from 1.3141.

Economic Indicators Update

The price of gold continues its impressive ascent, balancing around $2500 per troy ounce early this week, hovering near record peaks. The primary catalyst driving this rally is the intensified demand for safe-haven assets amid ongoing geopolitical tensions.

The spotlight remains on the Middle East conflict, with U.S. Secretary of State Antony Blinken slated to participate in ceasefire talks between Israel and Gaza. However, the fluctuating news from the region casts doubt on the success of these negotiations, thereby boosting gold's appeal as a secure investment.

Further supporting gold's rally are the market expectations surrounding the U.S. Federal Reserve's upcoming actions. Despite robust economic indicators, inflation is inching closer to the Fed’s target, prompting speculation of forthcoming interest rate reductions. Investors are currently anticipating a 25 basis point cut in September, with potential for additional cuts at the year's remaining meetings, summing up to 75-100 basis points.

This week is pivotal for gold investors, with the Federal Reserve set to release the minutes from its latest meeting and a scheduled speech by Fed Chairman Jerome Powell. These events are expected to clarify the Fed's stance on monetary policy, influencing gold's trajectory.

Technical Analysis of XAU/USD

Gold has completed a growth structure reaching $2509.00 on the H4 chart. Currently, a consolidation pattern is forming below this peak, with expectations leaning towards a downward breakout initiating a decline towards $2426.44, potentially extending down to $2347.55. This bearish outlook is technically supported by the MACD indicator, where the signal line is set for a downward trajectory from above the zero level.

On the H1 chart, gold has achieved the upper boundary of its latest growth wave at $2509.77, followed by a formation of a tight consolidation range. Anticipations are set for a downward movement, targeting a decline to $2468.00 with a further potential to reach $2426.90. This bearish perspective aligns with the Stochastic oscillator's signal line, which is poised to drop from below 80 to 20, suggesting a potential selloff in the near term.

As geopolitical events unfold and the Federal Reserve's monetary policy becomes clearer, gold’s price dynamics are expected to remain a focal point for investors seeking stability in uncertain times.

Minneapolis Fed President Neel Kashkari indicated that Fed's focus is increasingly shifting toward concerns in the labor market, moving away from the inflation side of its dual mandate.

In an interview with WSI, Kashkari emphasized that "the balance of risks has shifted more towards the labor market," making the debate over a potential rate cut in September "an appropriate one to have."

While acknowledging that inflation is showing signs of progress, Kashkari expressed concerns about "concerning signs" in the labor market.

Despite these, he stated that there is no compelling reason to lower interest rates by more than a quarter percentage point at a time, citing the continued low levels of layoffs and unemployment benefit claims, which do not yet indicate a significant downturn in the labor market.

• Gold prices surpassed the $2500/oz level on Friday despite a decrease in the likelihood of a 50 bps cut at the Federal Reserve’s September meeting.
• The rally in gold prices is attributed to dovish remarks by Federal Reserve policymakers and concerns over rising tensions in the Middle East.
• From a technical standpoint, the weekly chart indicates a strong bullish trend for gold, but a retracement towards the 2450 mark is possible.

Gold prices are aiming to consolidate above the $2500/oz level after surpassing this psychological threshold on Friday. This movement took some market participants by surprise, especially considering the initial reaction of the precious metal to the US CPI data earlier in the week.

Despite the reduction in the likelihood of a 50 bps cut at the Federal Reserve’s September meeting—dropping from 50% to 28.5%—gold managed to breach the $2500/oz mark. This reduction in the expected rate cut theoretically should have exerted downward pressure on gold prices.

Source: CME FedWatch Tool

Examining the reasons behind the recent rally in gold prices, it primarily stems from dovish remarks made by Federal Reserve policymakers. Chicago Fed President Austin Goolsbee expressed caution about maintaining the restrictive policy for longer than necessary. These comments, along with ongoing concerns regarding a ceasefire deal in the Middle East, are likely driving factors behind the surge in gold prices.

Markets are also uneasy about rising tensions in the Middle East and the potential for an attack on Israel by Iran. Such an event could lead to increased demand for safe-haven assets and might materialize if a ceasefire agreement over Gaza is not achieved.

Technical Analysis Gold (XAU/USD)

From a technical standpoint, the weekly chart shows that the bullish trend remains strong. However, a retracement towards the 2450 mark is possible and would not negate the bullish outlook, given that the prior swing low is around 2350 on the weekly chart.

Therefore, the current range is substantial, and even a significant pullback might not deter bulls from re-entering long positions if the price corrects sufficiently.

GOLD (XAU/USD) Weekly Chart, August 19, 2024

Source: TradingView (click to enlarge)

Gold formed a morning star candlestick pattern after the daily close on Friday. However, since this pattern emerged following a brief retracement within what might still be considered the peak of an uptrend, its reliability is questionable.

Additionally, the possibility of profit-taking after Friday’s substantial rally suggests that further upward movement could be restricted today, with an increasing chance of a price pullback towards the $2472-2480 range.

GOLD (XAU/USD) Daily Chart, August 19, 2024

Source: TradingView (click to enlarge)

Support

• 2472
• 2450
• 2432

Resistance

• 2500
• 2509
• 2525

We noted bullish sentiment in the gold market six days ago:

→ The price is moving within an ascending channel (shown in blue);

→ Bulls may attempt to set a historic record amid the release of economic news.

As today's XAU/USD chart shows, the gold price has risen above the psychological level of $2500. This was influenced by last week's news, indicating that market participants expect the Federal Reserve to cut rates as early as September. Notably, important signals regarding U.S. monetary policy may be given later this week at the annual economic symposium in Jackson Hole, attended by finance ministers and central bank governors.

Technical analysis of the XAU/USD chart shows that gold continues to move within the ascending channel.

It's worth noting two historical records set this year – in May and July. In both cases:

→ The price encountered resistance at the upper boundary of the channel;

→ The RSI indicator entered the overbought zone;

→ The rise above the previous peak was minimal;

→ A subsequent decline to the median line of the blue channel followed (as shown by the arrows).

It’s possible that a similar pattern could repeat for a third time, considering that the $2500 psychological level might act in favour of the bears – similar false breakouts (but in reverse) were observed at the $2300 level in June.

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USDJPY dips further on Monday, adding to signals that corrective phase off 141.68 (Aug 5 spike low) is likely over.

Upleg from 141.68 was repeatedly capped at pivotal Fibo barrier at 149.36 (38.2% retracement of 161.80/141.68) with subsequent weakness being sparked by renewed risk appetite.

Yen also appreciates on signals that gap between policies of two central banks (Fed and BOJ) may widen further, as dovish tones returned expectations for Fed’s next steps on monetary policy while Japanese central bank keeps hawkish stance.

Markets focus on two key events of the week – FOMC Minutes of the last policy meeting and speech of Fed Chair Powell in Jackson Hole symposium, which should provide clearer signals about Fed’s next steps (25 bp rate cut in September is widely expected, but renewed narrative of 50 bp easing, adds to expectations for more dovish Fed’ stance, which will further deflate the dollar.

Daily studies are turning into full bearish configuration following today’s breach of 10 DMA (146.93) and probe below 50% retracement of 141.68/149.40 corrective leg), while negative momentum remains strong and RSI / Stochastic head south.

Daily close below 10DMA is required to keep fresh bears in play, while sustained break of 145.51 (50% retracement) to boost bearish signals for extension towards next target at 144.63 and 143.50 (Fibo 61.8% and 76.4% respectively).

Res: 146.94; 147.58; 148.05; 148.22.
Sup: 145.54; 145.18; 144.63; 143.50.

The dollar index remains firmly in red in early Monday trading, and extends Friday’s 0.93% drop, to breach key support at 101.94 (Aug 5 low, the lowest in eight months).

The dollar was weaker across the board on renewed risk mode and growing expectations on more dovish stance by the US central bank on two key events this week- FOMC Minutes on Wednesday and speech of Fed Chair Powell on Jackson Hole symposium of central bankers on Friday.

Traders fully priced in a 25 basis points Fed rate cut in September, while bets for 0.5% cut started to rise again that adds pressure on the US currency.

Firm break of 101.94 pivot to signal continuation of larger downtrend, with violation of nearby Fibo support at 101.73 (76.4% of 100.29/106.36) to confirm the signal and unmask targets at 100.29/00 (Dec 2023 low/psychological).

Falling daily Tenkan-sen / broken Fibo 61.8% offer strong resistance at 102.60 zone, followed by barriers at 103.10 zone (Aug 13/15 double-top) which should cap extended upticks.

Res: 102.39; 102.65; 103.10; 103.33.
Sup: 101.82; 101.73; 101.01; 100.29.

The Australian dollar has started the week with slight gains. AUD/USD is trading at 0.6685 in the European session, up 0.24% on the day at the time of writing. Earlier today, the Australian dollar rose as high as 0.6694, marking a one-month high.

Will RBA minutes shake up the Aussie?

Hawkish remarks from Reserve Bank of Australia’s Governor Bullock sent the Aussie flying on Friday. Bullock reiterated that there would be no interest rate cuts in the “near term”. Bullock used the same language after the meeting on August 6 and when she clarified that this meant a period of at least six months, the Australian dollar responded with strong gains. The RBA statement at the meeting expressed the Bank’s frustration that inflation remains too high and is coming down slower than the central bank had expected.

Will we gain any insights from Tuesday’s RBA minutes release? The minutes will indicate that the Board discussed the possibility of a rate hike, but that isn’t really news since the Board did the same thing at the previous two meetings. If the minutes show that the RBA has little appetite for a rate cut, that could send the Australian dollar lower as the markets are at odds with Bullock’s hawkish message.

The markets have fully priced in a rate cut of 25 basis points in November and expect further cuts early in 2025. The rate statement noted that inflation remained too high and was coming down slower than expected.

China will announce its loan prime rates (LPR) on early Tuesday. A month ago, China’s central bank surprised the markets and lowered the rates for the one-year and five-year LPRs for the first time in close to a year. The central bank is expected to maintain the one-year LPR at 3.35% and the five-year loan rate at 3.85%.

AUD/USD Technical

• AUD/USD is testing resistance at 0.6691. Close by, there is resistance at 0.6713
• 0.6650 and 0.6628 are the next support levels