The long awaiting FOMC minutes report were released yesterday and as expected, the attributes needed for a September hike had not been fulfilled. From the disappointing NFP results at the start of the month to the events in China all attributed to the FED's decision, something which rippled across the currency markets. The minutes had some hint of doves but showed that the banks were moving closer to raise rates, it still remained a matter of when rather than if. The USD responded to this news by losing some ground across the board with the USD Dollar index closing in on a crucial support whilst Gold bulls took full advantage and surged to new weekly highs.
Most officials expressed the view that the influx of information from the States and global events had not provided grounds that inflation would close in on the 2% target in the medium outlook. It looks like China remains a problem for the FED with further uncertainty about when wages may begin to accelerate. The events of August have slowly chipped away the bullish momentum which the USD was exuberating across the board. Sentiment still remains somewhat bullish, but now I wonder when the hike eventually happens if market participants would have already priced this move. Most precious metals and commodity currencies reacted in a positive fashion to the release which weakened the USD.
Gold had some stability post-Yaun devaluation, but yesterday’s events offered fuel for the bulls, prices surged with aggression, trading to the highs of 1142.X. These are levels which have not been seen since July. As correlation states, the rising price of Gold should have trickled over to the AUD but the AUDUSD traded to the downside with the resistance at 0.7375 defending quite well. Bearish sentiment weighed down on the AUD regardless of sharp move up on Gold.
The main focus today will be Unemployment claims followed by Existing home sales for the USD. There has been a slight array of negative releases from the States and it would not be a surprise id unemployment claims increase, thus causing more weakness to the USD. These releases add to the attributes which will induce the correct environment for the FED to hike rates before the end of the year.
US Dollar index
US Dollar index balances on thin ice. Some bullish sentiment still remains on the USD, but yesterday’s events have chipped away a relevant chunk, making things look technically bearish. Prices currently trade below the daily 20 SMA and the MACD has crossed to the downside. There seems to be a respectable level of resistance below the weekly and monthly pivot. A breakdown below the 22950 support may open a path to the next relevant low of 11900. A bullish move back above the 12000 level invalidates this daily bearish outlook.
USD weakness is very apparent on the charts. The EURUSD has rallied to the upside currently trading just below the monthly R1 of 1.1200. With a strong level of support above the 1.100 regions which is also coincidently where the new higher lows reside, things are looking technically bullish on the daily timeframe. A strong daily close above the 1.1200 may suggest a further incline to the 1.13X regions. Further USD weakness may offer fuel to this technically bullish market.
The sharp bearish decline on the USDJPY may have opened a path to the monthly pivotal levels of 123.00, has bullish sentiment has been chipped away from the USD?. Prices currently trade below the daily 20 SMA and the MACD has crossed to the downside. As long as bears can keep below 124.50, more decline may be expected.
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