Jump to content

Market update: US dollar toppish ahead of Powell

Recommended Posts

USD retreat on Wednesday could be an early sign of cracks in the rally and USD hurt by below-expected US PMI data.


original-size.webpSource: Bloomberg


 Manish Jaradi | IG Analyst, Singapore | Publication date: Thursday 24 August 2023 

Outlook for US dollar vs euro, British pound, Australian dollar

There are growing signs that the US dollar could be in the process of making an interim top. To be fair, this wouldn’t necessarily imply that the uptrend is over. 

Downbeat US manufacturing and services purchasing managers' index (PMI) on Wednesday triggered a material slide in the US dollar globally, even as euro area and UK factory output contracted. The outsized response to otherwise not-so-bad (single set of) data -- at least in terms of levels of the PMIs compared with its peers – is a reflection of the broader mood. This is especially true given the most recent set of data, including industrial production, retail sales, and housing starts looked solid.

DXY index daily chart


original-size.webpSource: TradingView

Powell's speech eagerly awaited

The key focus is now on US Federal Reserve Chair Jerome Powell is due to speak on Friday at the three-day meeting of central bankers at the Jackson Hole Economic Symposium beginning Thursday. A balanced, data-dependent assessment could provide an excuse for a further retreat in the US dollar globally. However, if Powell’s tone turns out to be hawkish guided by the recent strong US data, then USD’s retreat could be limited. 

DXY index 240-minutes chart


original-size.webpSource: TradingView

USD rally likely to stall

On technical charts, the DXY index (USD index) has been struggling to clear above a stiff barrier on the 200-day moving average and a downtrend line from early 2023. Back-to-back doji/small body candles in recent days coupled with an inverted hammer on Wednesday raise the odds that the USD rally could be about to stall.

Zooming on to the hourly charts, any break below the immediate converged floor at 102.50-1.0300, including the 89-period moving average and the lower edge of the Ichimoku cloud on the 240-minute charts would confirm that the upward pressure had faded.

EUR/USD 240-minutes chart


original-size.webpSource: TradingView

EUR/USD: awaiting confirmation of a low

EUR/USD is holding above a crucial floor at the 89-day moving average, the 200-day moving average, and the lower edge of the Ichimoku cloud on the daily chart. While a necessary condition to ensure a low is in, the hold above support on its own isn’t sufficient to conclude the worst is over.

The pair would need to rise above the initial resistance at 1.0900-1.0950 for the immediate downside risks to fade. Subsequent resistance is at the August 10 high of 1.1065. 

GBP/USD: settles in a range

GBP/USD appears to have settled in a narrow range this month of 1.2600-1.2800. The lower edge also coincides with the 89-day moving average, the lower edge of the Ichimoku cloud on the daily chart, and the end-June low of 1.2600.

There is plenty of support under 1.2600 to limit any downside, including the 200-day moving average and the May low of 1.2300. On the upside, GBP/USD needs to rise above the August 10 high of 1.2820 for the immediate downward

GBP/USD 240-minutes chart


original-size.webpSource: TradingView

AUD/USD: At vital converged support

AUD/USD looks deeply oversold as it tests a vital converged support on the median line of a declining pitchfork channel since June and a downtrend line from the end of 2023. The rise on Wednesday above minor resistance at Tuesday’s high of 0.6450 could be an early sign of a potential turnaround in AUD/USD.

A cross above the 89-period moving average and the upper edge of the Ichimoku cloud on the 240-minute charts would be confirmation that AUD/USD had formed a base in the interim. 

AUD/USD daily chart


original-size.webpSource: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • this sounds like an amazing opportunity for users in the crypto world. It's important to approach futures trading competitions with caution, ensuring one's financial stability and a comprehensive understanding of the market. While the prizes are enticing, responsible trading remains the ultimate goal. Thanks for sharing such an intriguing event, I’ll definitely be taking a look at it ! 
    • As a newbie crypto trader, I dove headfirst into the world of futures trading on Bitget. Feeling overwhelmed by the charts and analysis, I discovered their copy trading platform. It was a revelation! Following the strategies of Bitget's elite traders, I learned the ropes while making real profits. Their expertise took the guesswork out of trading, allowing me to focus on understanding the market. This new Bitget Futures Elite Trader Selection Program is fantastic news. It incentivizes these top traders, giving them greater exposure, while also helping new users like myself identify proven performers. It's a win-win for everyone, and a huge step forward in making futures trading more accessible and successful for beginners. Thanks Bitget!    
    • Ontology is a high-performance, open-source blockchain that aims to revolutionize the way we approach digital identities, data sharing, and trust in the digital realm. One of the standout features of Ontology is its dual-token model, which separates the roles of ONT and ONG. While ONT serves as the staking tool for nodes and governance, ONG operates as the value-anchoring utility token for on-chain applications and transactions. This innovative approach mitigates the risk of turbulent fluctuations in the native asset value, ensuring a stable and efficient ecosystem. The ONG listing on Bitget is particularly exciting for several reasons. Firstly, it aligns with Ontology's recent announcement of a $10 million fund aimed at fueling the innovation and adoption of Decentralized Identity (DID) through the ONT and ONG tokens. This initiative underscores the project's commitment to empowering, educating, and evolving its ecosystem in exciting new ways.
  • Create New...