28-Aug-2020

1) US Dollar Soars After Fed Changes Monetary Policy Strategy
2) EUR/USD: Euro Set To Burst Above 1.19 After Powell Pummels The Dollar
3) Gold: Strongest Resistance At 1.970 Remains The Better Selling Opportunity This Week

1) US Dollar Soars After Fed Changes Monetary Policy Strategy

The US dollar gained in overnight trading as investors reacted to a statement by Jerome Powell, the Federal Reserve chair. In the statement, he announced that the Fed would start a new policy shift that will allow inflation to run hotter with the goal of supporting the labour market. As a result, the bank will allow inflation to go above the 2% target for some time. It will do that by leaving interest rates low for a longer period. Traditionally, the bank tends to hike rates when the economy is doing well and when the unemployment rate is low. From a data point, the US dollar will react to personal spending and trade data that will come out later today.

The Japanese yen weakened against the US dollar as traders reacted to weak inflation data from Tokyo. According to the statistics office, the core CPI in Tokyo dropped to -0.3% in August from 0.4% in June. That decline was lower than the 0.3% increase that analysts were expecting. In the same month, the headline CPI rose to 0.3%, a decline from the previous 0.6%. These numbers are important because of the importance of Tokyo to the Japanese economy. It has a population of more than 9 million people and is responsible for about 20% of Japan’s $4.7 trillion economy.

The euro was little changed against key currencies ahead of important data from Europe. The Economic & Financial Affairs department of the Eurostat will release consumer confidence data. Analysts expect that business and consumer survey will increase to 85.0 from the previous 82.3. They also expect that consumer confidence will remain unchanged at -14.7. Other important data will be the GDP data from Sweden and Austria. Also, Germany will release its consumer climate data and the import price index while France will release its preliminary inflation data. Elsewhere. The Canada’s statistics office will release the second reading of the country’s GDP data.

The USD/JPY pair rose to an intraday high of 106.93, which is the highest it has been since August 14. On the four-hour chart, the price is a few pips below the 50% Fibonacci retracement level. It is also slightly below the 50-day and 100-day exponential moving averages. Also, the price moved above the upper side of the ascending triangle pattern. Therefore, the pair is likely to continue rising as bulls aim for moves above 107.00.

The EUR/USD pair rose after the new strategy shift by the Federal Reserve. The pair is trading at 1.1856, which is just above the 50-day EMA on the four-hour chart. The price is slightly below the upper line of the ascending channel that is shown in yellow. Also, the accumulation and distribution line has been rising. The pair is likely to remain between this channel today. However, a move above the upper line at 1.1870 will send a signal that bulls have prevailed.

The NZD/USD pair rose to an intraday high of 0.6660, which is the highest it has been since August 7. On the four-hour chart, the price has moved above the short and long-term moving averages. The signal and main line of the MACD have continued rising while the price is above the ascending white trend line. The pair is likely to continue rising as bulls aim for the next resistance at 0.6690.

2) EUR/USD: Euro Set To Burst Above 1.19 After Powell Pummels The Dollar

The jury is in – and the verdict is downing the dollar. The world’s reserve currency has entered a more persistent downtrend after an initial whipsaw on Thursday – responding to a dovish message from Jerome Powell, Chairman of the Federal Reserve.

The world’s most powerful central banker laid down a new policy framework prioritizing reaching full employment at the expense of letting inflation overheat. Powell and his colleagues at the Fed will also allow consumer prices to exceed the 2% target for one year in order to compensate for past low inflation.

Investors hesitated at first, as price pressures are nowhere to be seen and the announcement was telegraphed in advance. However, while the news has no immediate policy implications – the Fed pledged low rates through 2022 – it implies lower borrowing costs for far longer.

Thursday’s high volatility – a move of over 100 pips within a short time, made way for a consistent march to the upside for EUR/USD.

Investors continue shrugging off the increase in the old continent’s coronavirus cases. Spain remains the leader in the grim contest and France is also in the spotlight after Parisians were ordered to wear face masks in all public places.

US COVID-19 infections are sloping downward, but deaths continue mounting at a worrying pace – passing the 180,000 threshold. Nevertheless, investors are steering the immense efforts to develop a vaccine and Abbott Laboratories’ announcement of developing a rapid test – promising a result within 15 minutes and at a cost of $5.

Friday’s economic calendar features US Personal Income and Personal Spending for July – with both figures set to be more stable than in recent months. The federal government’s massive fiscal stimulus kept Americans’ income high through July.

Thursday’s batch of economic statistics was mixed. Second-quarter Gross Domestic Product was upgraded to a crash of 31.7% annualized. Continuing claims for the week ending August 14 – when Non-Farm Payrolls surveys are conducted – disappointed with 14.5 million.

In US politics, two weeks of party conference ended with President Donald Trump delivering a long acceptance speech. For markets, his words about ending reliance on China “once and for all” are of interest. Nevertheless, investors have shrugged off the bluster.

Overall, several forces are set to shape trading, with echoes from Powell’s speech likely to have the most dominant role.

3) Gold: Strongest Resistance At 1.970 Remains The Better Selling Opportunity This Week

Gold Spot in a volatile sideways consolidation exactly as predicted many days ago, making holding longs risky at this stage despite the longer term bull trend. There are risks of a further correction to the downside.

An unexpected spike up to the selling opportunity at 1970/75 was a gift as we topped exactly here & immediately crashed through minor support at 1928/26 for next targets of 1921 & 1914/12. We are seeing a small bounce back to minor resistance at 1950/52.

I would only consider medium term long positions again on a break above 1980.

Silver Spot also in an erratic, volatile sideways trend & likely to remain difficult to trade. More confusing than Gold imo!

Gold same levels apply despite today’s volatile conditions with minor levels at 1933/35 & at 1950/52 in the sideways trend. Strongest resistance at 1970/75 remains the better selling opportunity this week. Shorts need stops above 1980. A break higher is more positive initially targeting 1990 & 1996/98.

Minor support at 1933/35 but below here targets 1928/26 & 1921 before a retest of 1914/12. Further losses retest 1902/00. A break lower targets 1193/92 & perhaps as far as 1884/82.

Silver holding first support at 2705/00 re-targets resistance at 2735/40. Unlikely but further gains retest this week’s high at 2785/90 before last week’s high 2740/44.

Good support at 2670/55. A break below 2645 is a sell signal targeting 2630 & 2605/00, perhaps as far as 2575/70. A break below 2560 risks a slide to 2510, perhaps as far as support at 2485/75.