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The Aussie Dollar started a fresh decline from the 0.7000 resistance zone against the US Dollar. The AUD/USD pair declined below the 0.6950 level to enter a bearish zone.

There was a clear move below the 0.6920 support and the 50 hourly simple moving average. The pair spiked below the 0.6860 level and formed a low at 0.6848. It is now consolidating near the 0.6850 level.

An immediate support is near the 0.6850 level. The next key support is near the 0.6825 level. A downside break below the 0.6825 support could lead the pair towards the 0.6800 support.

An immediate resistance on the upside is near 0.6880 on FXOpen. If there is an upside break above the 0.6880 level, the pair could rise steadily towards the 0.6920 level in the near term. The main resistance now sits near the 0.6950 level.

The Chinese Yuan extends recent decline and hits a new 2-year low today. This comes on the back on broad based strength in Dollar, on expectation that Fed's interest rate will stay high for long even after the current tighten cycle finishes. On the other hand, Yuan's weakness is also driven by weaker than expected economic data and rate cut by PBoC. China's PMI data to be released later in the week, and US non-farm payroll, could trigger even steeper selloff in Yuan against the greenback.

USD/CNH's up trend resumes today and hit as high as 6.9323 so far. Outlook will stay bullish as long as 6.8459 support holds. Next target is 61.8% projection of 6.3057 to 6.8372 from 6.7159 at 7.0444. A question is whether there would be intervention by the Chinese authority above the 7.0000 mark.

The Aussie dollar started the week in negative mode, opening with gap lower after hawkish comments from Fed chair Powell further boosted the US dollar and extending last Friday’s 1.2% drop.

Fresh bears cracked key supports at 0.6850 zone (daily cloud base/Fibo 61.8% of 0.6681/0.7136 upleg/higher base, but face strong headwinds here and so far unable to break lower, despite firmly bearish technical studies on daily chart, as significantly better than expected Australian July retail sales also contributed to reducing pace of fresh bears.

The price may hold in extended consolidation while 0.6850 pivots hold, with l upticks (under 0.6915, converged 10/55DMA’s) to offer better selling opportunities, for firm break of 0.6850 zone that would generate strong signal of bearish continuation.

Res: 0.6885; 0.6915; 0.6957; 0.6982.
Sup: 0.6841; 0.6802; 0.6789; 0.6719.

The USDJPY rose to six-week high on Monday after markets digested comments from Fed Chair Powell last Friday and hawkish stance that the central bank kept, sent stocks lower and further lifted the dollar.

Strong Fed’s hawkish stance that signals prolonged period of higher borrowing cost but also widens the divergence between the US and other major central banks’ monetary policies, remains the main driver of the US dollar, along with growing uncertainty about further slowdown in economic growth, as a result of higher interest rates.

Bulls cracked 139 barrier and pressure 2022 high (139.39) violation of which would expose psychological 140 level and risk acceleration towards 1998 peaks, if conditions remain unchanged or worsen.

Res: 139.00; 139.39; 140.00; 141.51.
Sup: 138.00; 137.53; 137.15; 136.59.

The US 500 stock index (cash) has experienced a massive drop in the previous session, extending the retreat from its recent resistance point.  Even if the decline has come to a halt at the congested territory that includes the 50-day simple moving average (SMA) and the lower Bollinger band, the index retains its bearish near-term picture.

The short-term indicators currently suggest that bearish forces have gained the upper hand. Specifically, the MACD histogram is approaching zero after crossing below its red signal line, while the RSI has flatlined beneath its 50-neutral mark.

Should selling pressures intensify, initial support could be found at the 50-day SMA, currently at 4,010.  Sliding beneath that floor, the index could descend towards 3,920 or lower to test the May low of 3,810. Any further declines may then cease at the July support of 3,720.

On the flipside, if negative momentum wanes and the price drifts higher, 4,215 might act as the first line of defence. Piercing through this region, the bulls could aim for the recent reversal point of 4,325 before 4,510 appears on the radar. A violation of the latter could open the door for the March peak of 4,638.

Overall, the US 500 index’s short-term picture has deteriorated, with a break below 50-day SMA potentially accelerating the downfall. 

Cable remains in strong defensive mode and accelerates below 1.17 handle in early Monday, hitting new lowest since March 2020.

Fresh dollar’s strength following Fed Powell’s signals of extended period of higher interest rates and slower economic growth, in fight to restore price stability, further deflated sterling, which closed in red for the second consecutive week and posted new 2022 low on Monday.

The pair is on track for a massive monthly loss (over 4% so far) that weighs on sentiment and adds to scenario of retesting pandemic spike low at 1.1410.

Bearish technical studies support the notion, though oversold conditions on weekly chart warn that bears may face headwinds en-route.

Falling daily Tenkan-sen (currently at 1.1895) should keep the upside protected to provide better selling opportunities, but caution on extended bounce and violation of daily Kijun-sen (1.1971) and daily cloud base (1.1985) that would put larger bears on hold.

Res: 1.1717; 1.1760; 1.1852; 1.1900.
Sup: 1.1648; 1.1634; 1.1556; 1.1493.

The Euro edges lower in early Monday’ following a triple-Doji last week that signaled strong indecision but the action is still moving above new 2022 low at 0.9900, posted on Aug 23.

The single currency came under pressure on Fed’s hawkish stance, confirmed by the statement of chief Powell in Jackson Hole last Friday, though expectations that the European

Central Bank might be more hawkish than expected in their September’s policy meeting that partially offsets negative impact and so far keeps the single currency afloat and above 0.9900 support.

Daily studies are in full bearish configuration, with negative picture being boosted by eventual weekly close below parity level for the first time in two decades and the pair being on track for the third consecutive strong monthly fall.

However, investors still keep an optimism that the ECB would be more aggressive in September, as rising inflation threatens to further damage already fragile economic situation in the EU bloc and the central bank needs to intensify its fight to restore the price stability.

Oversold weekly studies add to hopes of rebound, which would remain in play while the price stays above 0.9900, with return above parity to add to initial positive signals, however, more work at the upside will be needed to sideline immediate downside risk and generate stronger bullish signals.

Res: 1.0000; 1.0024; 1.0089; 1.0122.
Sup: 0.9900; 0.9853; 0.9793; 0.9744.

The Australian dollar has started the week in negative territory, extending the sharp losses seen on Friday. In the European session, AUD/USD is trading at 0.6849, down 0.63%.

US dollar flies after Powell’s rate remarks

The US dollar ended the week on a high note, courtesy of Fed Chair’s hawkish speech at the Jackson Hole Symposium on Friday. Powell’s message didn’t veer from what the Fed has been telegraphing the markets for weeks, but this time around investors internalized the message, which sent the equity markets reeling before the weekend. Powell stated that the Fed would continue to use all its tools to fight inflation, acknowledging that high interest rates would remain for some time, and the Fed would be careful not to ease policy prematurely. Significantly, Powell said that the Fed would not change policy based on one or two reports of lower inflation. This statement could well have been a response to the market euphoria about a Fed U-turn in policy after July’s inflation dropped unexpectedly.

Powell’s speech was unusually brief, which may have been an attempt to prevent investors from looking for some dovish remarks in the speech and ignoring Powell’s message. The concise speech left no room for ambiguity – the Fed will continue to raise rates until it’s convinced that inflation has peaked and is on the decline.

In Australia, retail sales bounced back in July with a strong 1.3% gain, blowing past the estimate of 0.3% and above the 0.2% reading in June. The reading hasn’t helped the Aussie any, as investors continue to digest Powell’s speech at Jackson Hole. The RBA meets next week, and the rebound in retail sales will make it easier for the central bank to remain aggressive and deliver a 50 basis point hike for a fourth straight time.

AUD/USD Technical

• There is resistance at 0.6919, followed by a monthly resistance line at 0.6983
• 0.6830 is a weak support line. Below, there is support at 0.6766

Daily Pivots: (S1) 160.87; (P) 161.77; (R1) 162.33; More...

Range trading continues in GBP/JPY and intraday bias remains neutral. Corrective pattern from 168.67 would extend for a while. On the upside, break of 163.91 will bring stronger rise to 166.31 resistance. On the downside, below 160.07 will turn bias to the downside for 159.42 and below.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will remain the favored case as long as 155.57 support holds, even in case of deep pull back.

Daily Pivots: (S1) 136.10; (P) 137.03; (R1) 137.97; More....

EUR/JPY is trying to resume the rebound from 133.38 by breaking 137.93 minor resistance. Intraday bias is mildly on the upside. Firm break of 138.38 will confirm and target 142.31 resistance next. On the downside, break of 134.93 will turn bias back to the downside for 133.38 support. Overall, corrective pattern from 144.26 could extend further with more choppy trading.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 134.11 resistance turned support holds, even in case of deep pull back. Next target is 149.76 (2015 high). However, sustained break of 134.11 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.