Forex-novosti i prognoze od 21-08-2022

• GBP/USD is stalling following last week's drop with corrections on the cards.
• The bears eye a deeper descent into the 2020 lows near 1.1400.

GBP/USD has been in free fall over the last three trading days, reaching a pivotal point around 1.1800. However. it has started to stall and there are prospects of a significant correction in the days ahead if the bears cannot get over the line. The following illustrates this on a daily chart and weekly charts.

GBP/USD daily chart

The M-formation is a reversion pattern and should the price be unable to break the lows then a correction could be on the cards towards the 38.2% Fibonacci of the recent drop from the mid-1.2050s. 

GBP/USD weekly chart

The weekly M-formation offers prospects of a far deeper correction into the neckline near 1.1993. Failing this scenario, however, given the close below prior structure, the bears will be in the runnings for a deeper descent into the 2020 lows near 1.1400.

• EUR/USD is declining towards the magical figure of 1.0000 ahead of Jackson Hole Symposium.
• Fed Powell may sound hawkish as the road to price stability is far from over.  
• An expectation of a decline in the US Durable Goods Orders may restrict the DXY bulls.

The EUR/USD pair has continued its two-day losing streak after dropping below Friday’s low at 1.0032 in its opening session. The asset is declining towards parity as investors are expecting hawkish guidance from the Federal Reserve (Fed) at US Jackson Hole Symposium this week.

Earlier, the asset witnessed a steep fall after slipping below the critical support of 1.0122 as the release of the Fed minutes dictated the expectation of more rate hike announcements this year. However, the pace of the rate hike is likely to slow down to dodge the consequences of squeezing liquidity dramatically from the economy.

Price pressures have trimmed in the US economy with a meaningful impact, however, the vision of achieving price stability by attaining 2% annual inflation is still far from over. Therefore, hawkish guidance is highly expected from Fed chair Jerome Powell this week.

Apart from the US Jackson Hole Symposium, investors will also focus on the US Durable Goods Orders data, which will release on Wednesday. The economic data is seen lower at 0.6% from the prior release of 2%. In times, when the US economy has already displayed an unchanged US core Consumer Price Index (CPI), a decline in the economic data is not lucrative for the US dollar index (DXY).

On the eurozone front, investors are awaiting the release of the Eurozone Consumer Confidence, which is due on Tuesday. A preliminary estimate for the economic data is -28, lower than the prior release of -27. A further trim in consumer confidence may keep the eurozone bulls on the tenterhooks.

• Gold prices are likely to sustain below $1,750.00 as investors await US Jackson Hole Symposium.
• Mixed commentary from Fed policymakers on policy guidance has confused investors.
• Apart from the US Jackson Hole Symposium, the US Durable Goods data also hold significant importance.

Gold price (XAU/USD) has declined consecutively for five trading sessions after printing a monthly high of $1,807.96. The precious metal has slipped below $1,750.00 for the first time in August. It is likely to establish below the above-mentioned critical point as investors are trimming their longs from gold assets dramatically on an expectation of hawkish guidance by the Federal Reserve (Fed).

Earlier, observing mixed comments from the Fed minutes on policy guidance brought exhaustion to the gold rally. St. Louis Fed President James Bullard favored one more 75 basis points (bps) interest rate hike to bring price stability sooner. While a few Fed policymakers have passed a commentary of slow down the pace of hiking interest rates to safeguard their economy from inflation risks ahead.

Geopolitical tensions are also weighing heavily on gold prices as that Chinese President Xi Jinping and Russian President Vladimir Putin have confirmed that they will attend the G20 summit in November. This may refresh the mankind assault by Moscow in Ukraine.

On the economic data front, investors are awaiting the release of the US Durable Goods Orders data, which is expected to decline to 0.6% from the prior release of 2%. In times, when the US economy has already displayed an unchanged US core Consumer Price Index (CPI), a decline in the economic data is not lucrative for the US dollar index (DXY).

Gold technical analysis

On an hourly scale, gold prices have declined to near 50% Fibonacci retracement (placed from July 21 low at $1,680.91 to August 10 high at $1,807.93) at $1,744.70. The 20-and 50-period Exponential Moving Averages (EMAs) at $1,751.90 and $1,757.50 respectively are declining sharply, which adds to the downside filters. Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a bearish range of 20.00-40.00, which favors more downside ahead.  

Gold hourly chart

• 135.90 could come into the picture in the coming days.
• 136.90 on the upside is important that guards closing highs of 137.14.

USD/JPY is firm in the open following the sharply higher US 10-year bond yield and firm close on Friday that put a bid into the greenback and helped to buoy the cross that is balancing a tightrope on the hourly chart as illustrated below:

USD/JPY H1 chart

The price is testing prior lows and hourly support. A break there opens the risk of a significant move to the downside for the week ahead. If bears commit, then 135.90 could come into the picture in the coming days in the build-up to the Jackson Hole. However, should the Fed sentiment brew in a hawkish manner, then a break of 136.90 will bring the prior closing highs of 137.14 into the picture again. 

• For the open, the Aussie will need to break above 0.6880 or the bulls will be under heat with prospects of a run below 0.6866.
• The RBA and Fed remain the key drivers of price.

AUD/USD was under pressure into the final days of last week with the labour market data providing a bit of something for everyone. However, the market's opinion about the policy path for the Reserve Bank of Australia keeps the prospects of an increase of 50bp in September to keep the cash rate above 3% by the end of 2022.

Meanwhile, the US dollar remains firm and up for the third straight day and four of the five days this week, ending Friday at 108.1030 and marking a high of 108.215. This was the highest since July 15 and it is on track to test the July 14 high near 109.294. 

The Fed debate continues 

There is plenty coming up in terms of the Federal Reserve and key data, starting with the Jackson Hole on August 25-27 where the central bank is expected to maintain its hawkish stance.  In terms of data, the August jobs report will be on September 2, inflation will be on September 13, followed by some early September Fed surveys scattered through that week before the Fed decision on September 21.  

The data points will be important in determining whether the Fed will hike by either 50 or 75 bp as the Fed said, it's data dependent but if the market gives the Fed 75 bp, it will take it without hesitation.  A the moment, the market is leaning towards 50 bp, so the Fed could make a very strong hawkish statement by delivering a surprise 75 bp and the Jackson Hole could be a game changer in that regard should Chair Powell reignite such sentiment. WIRP suggests a 50 bp hike is fully priced in for the September 20-21 FOMC meeting, with 55% odds of a 75 bp hike. 

Last week, a slew of Fed speakers kept the doves grounded and dollar bears in hibernation. 

The most hawkish of the chorus of Fed officials was CEO of the Federal Reserve Bank of St. Louis Jim Bullard who expressed a desire for a 75bp hike at September's meeting and added he isn’t ready to say the economy has seen the worst of the inflation surge.

“We should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation” and “I don’t really see why you want to drag out interest rate increases into next year,” Bullard said in a Wall Street Journal interview.

As for the immediate risk,  the key loan prime rate (LPR) from the PBOC is due at 0115 GMT today with both one- and five-year interest rates to be set. Low fixesof late have helped push the greenbackhigher and has weighed on the Aussie. 

AUD/USD technical analysis

The daily chart above shows that the price is firmly penetrating the daily support that could lead to a significant move lower for the week ahead. The hourly structure for the open is as follows:

Below 0.6880, there are prospects of a run at 0.6866 to break the lows of 0.6859.