FUNDAMENTAL ANALYSIS ON USD
USD tumbled on Friday as Powell failed to deliver a neutral tone on future monetary policy. Powell, while not saying explicitly where he thought rates should go, promised that the Fed "will act as appropriate to sustain the expansion," a phrase he has used several times in the recent past. This brings nothing new to the market and USD tumbled.
Federal Reserve Chairman Jerome Powell repeated his pledge Friday to keep the economic expansion going while acknowledging that tariffs and other factors are causing growth to slow. Less than an hour after the speech, President Donald Trump blasted Powell on Twitter, referring to him as "our enemy. Powell also said in his annual remarks at the central bank's Jackson Hole symposium that the "economy is close to both goals" of the Fed's dual mandate of full employment and price stability. The market is still expecting a 25 bps cut in next FOMC meeting. USD could edge lower today as the market grows more concerned about recessions. This week we will see the release of core Durable Goods Orders and Prelim 2Q GDP, which could provide more impetus for USD.
FUNDAMENTAL ANALYSIS ON GBP
Recent Brexit optimism caused the GBP to edge higher, with French President Emmanuel Macron commenting that a no-deal Brexit could be prevented should they find a way to resolve their differences. Looking ahead, it is a light calendar week for the currency, with the GFK consumer confidence data due at the end of the week which could result in short term volatility, pushing the currency lower should it miss estimates. That said, much of the currency movement is very dependent on the outcomes of Brexit negotiations and in the event that Boris Johnson is able to reach a Brexit agreement with the EU, we could be seeing a further rally in the currency. For now, given the uncertainty surrounding Brexit, we decided to maintain a neutral view for the currency.
KEY TECHNICAL LEVELS ON GBPUSD (D1)
GBPUSD is approaching our first resistance level which is a 23.6% Fibonacci retracement, horizontal pullback resistance and 100% Fibonacci extension.
FUNDAMENTAL ANALYSIS ON EUR
EUR rallied against the greenback as Fed signals readiness to deliver another further rate cuts to reduce the economic impact from heightened trade tensions between the US and China. Looking ahead, on the data front, investors will be keeping a close watch on Germany's unemployment rate, GDP, GFK consumer climate and CPI where missing estimates could put the currency under renewed pressure. Meanwhile, if the numbers fell short of market's expectations, we could be seeing a plunge in the currency as this could pressure ECB to adopt additional monetary stimulus to boost the Eurozone's economic growth.
KEY TECHNICAL LEVELS ON EURUSD (H4)
EURUSD is approaching resistance which is also a horizontal overlap resistance, 61.8% Fibonacci retracement and a descending resistance line.
FUNDAMENTAL ANALYSIS ON JPY
Asian shares were a sea of red on Monday as the latest salvo in the Sino-U.S. trade war shook confidence in the world economy and sent investors steaming to the safe harbours of sovereign bonds, gold and the Japanese yen. Yields on benchmark 10-year Treasury debt dropped to their lowest since mid-2016, while gold hit its highest since April 2013 as risk was shunned.
At the G7 meeting in France over the weekend, Trump caused some confusion by indicating he may have had second thoughts on the tariffs. But the White House said on Sunday that Trump wished he had raised tariffs on Chinese goods even higher last week, even as he signaled he did not plan to follow through with a demand that U.S. firms close operations in China. The market is now risk off with chances of the very fragile negotiations spiraling out of control. JPY could edge up higher as risk aversion persists.
KEY TECHNICAL LEVELS ON USDJPY (H4)
USDJPY is approaching 1st resistance (horizontal swing low support, 100% Fibonacci extension,50% Fibonacci retracement).
FUNDAMENTAL ANALYSIS ON AUD
Late last Friday, both the US and China announced fresh tariffs on each other's goods. Further China's state media mentioned that they would fight the trade war all the way to the end. The impact of such news caused commodities across the board to weaken further. The weekend announcement further dampened risk sentiments globally. As pointed out by one strategist watching the Aussie closely, "It is worth to note that AUDUSD and USDCNH have been negatively correlated at -0.90 for the last quarter." This shows that right now, the AUD is closely correlated to the Chinese Yuan. We watch closely for further developments on the US China Trade War. Given the negative outlook, we expect AUD to be bearish for this week.
KEY TECHNICAL LEVELS ON AUDUSD
AUDUSD is reacting below 1st resistance 0.67500 (100% Fibonacci extension) with room for further downside towards 1st support at 0.67080 (100% Fibonacci extension, horizontal swing low support).
FUNDAMENTAL ANALYSIS ON NZD
The Kiwi weakened as recent economic data released showed that New Zealand's trade deficit widens. With imports rising to 8-month highs. Furthermore, an escalation in the US China trade war over the weekend added further bearish pressure on the Kiwi. However, with the outcome of the Jackson Hole talks bearing no clear direction, the markets took it as a sign that the Fed may cut interest rates again in the future if things get worse. This news could limit NZD from weakening further. We turn bearish on NZD this week.
KEY TECHNICAL LEVELS ON NZDUSD
NZDUSD holding below 1st resistance at 0.64100 and long term EMA (30). Room for further downside potential towards 1st support at 0.63360 noted.
FUNDAMENTAL ANALYSIS ON CAD
Late last Friday, both the US and China announced fresh tariffs on each other's goods. Further China's state media mentioned that they would fight the trade war all the way to the end. The impact of such news caused commodities across the board to weaken further. This in turn led to the weakening of the CAD. Further no high impact economic news release in the next few days can seem to possibly bring relief to the Loonie. We turn bearish on the CAD for this week. Canada’s CPI news this coming Friday should provide relief for the CAD should the report show better than expected data. Otherwise, further weakness on the CAD will be expected on weak data..
KEY TECHNICAL LEVELS ON USDCAD
USDCAD holding between its resistance at 1.3340 (61,8% & 78.6% Fibonacci retracement, 100% Fibonacci extension, horizontal swing high resistance) and its support at 1.32750 (61.8% Fibonacci retracement).
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support