26-Aug-2021

1) GBP/USD Dips Under 1.3750 As Brexit Causes Shortage Warning
2) USD/JPY Holds Steady Near 110.00 Mark, Bullish Lack Conviction
3) NZD/USD Flirts With Session Lows, Around Mid-0.6900s Amid Stronger USD
4) XAU/USD Bears Testing The Bullish Commitments, As Jackson Hole Kicks Off

 

 

1) GBP/USD Dips Under 1.3750 As Brexit Causes Shortage Warning

GBP/USD is trading below 1.3750 after UK supermarkets warned of food shortages over Christmas due to Brexit. The dollar is on the rise as traders reposition ahead of Fed Chair Powell’s speech on Friday. US GDP data is eyed.

From a technical perspective, the overnight move up marked a breakout through a two-day-old trading range. A subsequent acceptance beyond the 38.2% Fibonacci level of the 1.3984-1.3602 slide has set the stage for additional gains. Hence, some follow-through strength, back towards the 1.3800 mark, remains a distinct possibility. The mentioned handle represents a confluence hurdle, comprising of the 50% Fibo. level and the 100-period SMA on the 4-hour chart, which if cleared decisively will be seen as a fresh trigger for bulls. The next relevant resistance is pegged near the 61.8% Fibo. level, around the 1.3835 region. The momentum could further get extended, allowing bulls to surpass an intermediate hurdle near the 1.3875-80 region and reclaiming the 1.3900 mark.

On the flip side, the 38.2% Fibo. level, around the 1.3745-40 region, coinciding with the trading range breakpoint, now seems to protect the immediate downside. This is followed by strong support near the 1.3700-1.3690 region, or the 23.6% Fibo. level. A convincing break below will negate any near-term positive bias and turn the pair vulnerable to accelerate the slide back towards challenging monthly swing lows, around the 1.3600 round figure.

The GBP/USD pair showed some resilience below the 1.3700 mark for the second straight session and attracted some dip-buying on Wednesday. The early downtick was exclusively sponsored by a modest US dollar strength, which drew some support from a strong follow-through uptick in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond jumped to 1.3474% amid expectations that the Fed might still begin rolling back its pandemic-era stimulus in 2021. That said, the underlying bullish sentiment acted as a headwind for the safe-haven greenback and assisted the pair to regain some positive traction.

The USD had a rather muted reaction to the mixed release of US macro data, which showed that the headline Durable Goods Orders declined 0.1% in July. This marked a sharp deceleration from the 0.8% growth recorded in June, though was slightly better than consensus estimates for a 0.3% fall. Orders excluding transportation also surpassed expectations and rose 0.7% in July, while the previous month’s reading was revised higher to show a 0.6% increase as against 0.3% reported earlier. Further details revealed that orders excluding defense dropped 1.2% MoM, while transportation equipment orders fell 2.2% during the reported month.

Meanwhile, the global risk sentiment remained supported by the fact that the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine on Monday. The development raised hopes that inoculations in the US could accelerate. This was followed by optimistic comments from the top US infectious disease expert, Dr. Anthony Fauci, saying that COVID-19 could be under control by early next year. This further boosted investors’ confidence, which was evident from a generally positive tone around the equity markets and dented demand for traditional safe-haven assets, including the greenback.

Nevertheless, the pair built on its recent bounce from the 1.3600 neighborhood, or one-month lows touched last Friday and ended in the green for the third successive day. The uptick, however, lacked any follow-through amid worries about the spread of the 0highly contagious Delta variant of the coronavirus in the UK, which has been reporting over 30K cases per day. This comes on the back of a study in Britain, which has found that protection from two doses of the Pfizer or AstraZeneca vaccines begins to wane within six months. Apart from this, Brexit woes further held the GBP bulls from placing aggressive bets.

Moreover, investors also seemed reluctant, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium. Powell’s remarks will be scrutinized for fresh clues about the likely timing of the Fed’s tapering plan. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the major. In the meantime, traders might take cues from Thursday’s release of the Prelim US GDP print (second estimate) and Initial Weekly Jobless Claims. This, along with the broader market risk sentiment, might produce some trading opportunities around the pair.

 

2) USD/JPY Holds Steady Near 110.00 Mark, Bullish Lack Conviction

The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the early part of the trading action on Thursday.

The pair struggled to capitalize on the previous day’s positive move or find acceptance above the key 110.00 psychological mark and witnessed a subdued/range-bound price action on Thursday. The underlying bullish tone continued undermining the safe-haven Japanese yen. This, along with a modest pickup in demand for the US dollar, acted as a tailwind for the USD/JPY pair.

The global risk sentiment remained supported by the fact that the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine on Monday. Adding to this, comments from the top US infectious disease expert, Dr. Anthony Fauci, saying that COVID-19 could be under control by early next year further boosted investors’ confidence.

Meanwhile, the USD benefitted from expectations that the Fed might still begin rolling back its pandemic-era stimulus in 2021. This pushed the yield on the benchmark 10-year US government bond to 1.3474% on Wednesday. That said, a modest pullback in the US Treasury bond yields held the USD bulls from placing fresh bets and capped gains for the USD/JPY pair.

Investors also seemed reluctant, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium. Powell’s remarks will be scrutinized for fresh clues about the likely timing of the Fed’s tapering plan. This will influence the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY pair.

In the meantime, traders might take cues from Thursday’s release of the Prelim US GDP print (second estimate) and Initial Weekly Jobless Claims later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, might produce some short-term trading opportunities around the USD/JPY pair.

 

3) NZD/USD Flirts With Session Lows, Around Mid-0.6900s Amid Stronger USD

The NZD/USD pair remained on the defensive through the early European session and was last seen hovering near the lower boundary of its intraday trading range, just above mid-0.6900s.

The pair witnessed a modest pullback from the 50-day SMA hurdle, around the 0.6980 region and for now, seems to have stalled this week’s strong recovery from the 0.6800 neighborhood, or YTD lows. This marked the first day of a negative move in the previous four sessions and was exclusively sponsored by a goodish pickup in the US dollar demand.

Investors seem convinced that the Fed might still begin tapering its massive asset purchases in 2021 amid the optimism the Delta variant of the coronavirus won’t derail the economic recovery. The US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine and raised hopes that inoculations in the US could accelerate.

Adding to this, the top US infectious disease expert, Dr. Anthony Fauci, said that COVID-19 could be under control by early next year and further boosted investors’ confidence. The market expectations were reinforced by the recent strong positive move in the US Treasury bond yields, which continued acting as a tailwind for the greenback.

That said, the underlying bullish sentiment in the financial markets capped any further upside for the safe-haven USD and extended some support to the perceived riskier kiwi. Apart from this, investors also seemed reluctant to place any aggressive bets ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.

In the meantime, traders might take cues from Thursday’s release of the Prelim US Q2 GDP print (second estimate) and the usual Weekly Jobless Claims. This, along with the US bond yields and broader market risk sentiment, might influence the USD price dynamics and produce some short-term trading opportunities around the NZD/USD pair.

 

4) XAU/USD Bears Testing The Bullish Commitments, As Jackson Hole Kicks Off

Gold price fell for the second straight day on Wednesday, witnessing heavy losses following a breach of critical support near the $1791 region. However, the bulls managed to deliver a daily closing above the latter. The downside in the gold price was mainly fuelled by the upbeat market mood, with yet another record rally on Wall Street indices and strengthening US Treasury yields. Higher yields dull the attractiveness of the non-yielding gold.

The risk-on theme was floated amid fading jitters over a potential Federal Reserve (Fed) tapering and the renewed US fiscal stimulus optimism. The US House of Representatives approved a $3.5 trillion budget framework and agreed to vote by September 27 on a $1 trillion Senate-passed infrastructure bill, which lifted the Wall Street indices to fresh record highs. However, the US dollar’s weakness, courtesy of the risk-on flows and mixed US Durable Goods data, offered some respite to gold bulls at the close. The gold price rose as highs as $1803 on Wednesday before slumping to $1783. The price eventually finished the day at $1791, falling 0.7% while recording its biggest one-day decline in more than two weeks.

Attention now turns towards the much-awaited three-day Fed’s Jackson Hole Symposium, kicking off Thursday. The speeches by the Fed policymakers, especially the one from Chair Jerome Powell will set the tone for the market in the coming weeks. Amidst growing Delta covid variant concerns, the Fed is widely expected to tone down its hawkish stance, pouring cold water on the expectations of a taper timeline. Investors are expected to remain on the sidelines heading into the event while the US GDP and weekly Jobless Claims could also offer some trading impetus. However, the gold price action will likely remain subdued ahead of Powell’s speech due at 1400 GMT on Friday.

At the time of writing, the gold price is holding the lower ground around $1787, as the US dollar duplicates Wednesday’s Asian price moves, attempting a tepid bounce across the board.

Gold price defied the bullish odds on Wednesday, extending the drop following a rejection at the critical 200-Daily Moving Averages (DMA), then at $1810.

Now looking from a near-term technical perspective, the gold price has breached the 50-Simple Moving Average (SMA) at $1789, unleashing the additional downside towards the mildly bearish 100-SMA at $1777.

Ahead of that support, Wednesday’s low of $1783 could be retested. Should the 100-SMA cushion give way, then a drop towards the $1750 psychological level would be inevitable.

The Relative Strength Index (RSI) trades listlessly below the midline, keeping floors open for further declines.

On the flip side, acceptance above the 50-SMA could recall the buyers, aiming for powerful resistance around $1795. That level is the confluence of the 200 and 21-SMAs.

Further up, the $1800 threshold will challenge the bullish commitment on its way to the August 24 highs of $1810.