Forex pairs experienced another day of weakness on Friday, weighed down by renewed strength in the U.S. dollar and ongoing concerns over global economic growth. The dollar received a boost from better-than-expected U.S. initial jobless claims and strong S&P Global Composite PMI data, signaling resilience in the U.S. economy despite rising interest rates. This strengthened the market’s expectations that the Federal Reserve may maintain its current policy stance for an extended period. With the Jackson Hole Symposium now underway, traders are keenly watching for any remarks from Fed Chair Powell that might provide further insights into the central bank’s future monetary policy direction.
The Japanese yen continued its downward trend, with the USD/JPY pair approaching the 146.00 level. Despite the release of Japan’s National CPI data, which showed a slight uptick in inflation, the yen struggled to gain any significant traction as investors remain focused on the widening interest rate differential between the U.S. and Japan. The yen’s weakness is further exacerbated by rising U.S. Treasury yields, which are bolstering demand for the dollar.
In Europe, the euro faced selling pressure following the release of disappointing Eurozone Manufacturing PMI figures, which highlighted the ongoing struggles in the region’s industrial sector. The EUR/USD pair dropped sharply, testing key support levels around 1.1120. The euro’s weakness was compounded by uncertainty over the European Central Bank’s next policy moves, with markets speculating that the ECB may adopt a more cautious approach given the mixed economic signals from the region.
Commodity-linked currencies like the New Zealand dollar also saw significant declines, with the NZD/USD pair hitting new lows around 0.6140. Despite a modest improvement in New Zealand’s retail sales data, the kiwi was unable to shake off the broader risk-off sentiment. The market’s focus remains on the Jackson Hole Symposium, where any hints of a more hawkish stance from the Fed could further pressure the Kiwi and other risk-sensitive currencies.
Gold prices remained under pressure as the stronger dollar continued to weigh on the yellow metal. Investors were largely on the sidelines ahead of Fed Chair Powell’s speech at Jackson Hole, which could set the tone for gold’s next move. With the Fed expected to remain hawkish, the outlook for gold remains bearish in the near term, especially if the dollar continues to strengthen.
Oil prices experienced a slight uptick, supported by a further drawdown in U.S. crude inventories. However, gains were capped by ongoing concerns about demand, particularly from China, where economic data continues to signal a slowdown. Traders are watching the Jackson Hole Symposium and upcoming OPEC meetings for any developments that could impact supply and demand dynamics in the oil market.
NZD/USD
Technicals in Focus:
The NZD/USD pair has continued to decline, with the pair now trading around the 0.6135 level. The MACD is below the zero line, with histograms in a declining mode, reinforcing the bearish outlook. The Stochastic Oscillator is in oversold territory, suggesting that a technical bounce could occur, but the overall trend remains negative. The 14-D RSI is also nearing oversold levels, indicating that the pair may soon face exhaustion in its downtrend.
Trading Strategy: Neutral to Sell
Sell below 0.6150-0.6130 with targets at 0.6100-0.6070 and 0.6030-0.6000 with a stop loss above 0.6180. Consider long positions above 0.6180 with targets of 0.6200-0.6250 and 0.6280-0.6300 with stops below 0.6150.
EUR/USD
Technicals in Focus:
The EUR/USD pair experienced a sharp sell-off, breaking below key support levels at 1.1130. The MACD is below the zero line, and histograms are expanding on the downside, signaling increasing bearish momentum. The Stochastic Oscillator is in the oversold territory, which may prompt a short-term bounce, but the overall bias remains negative. The 14-D RSI is also pointing towards continued downside pressure.
Trading Strategy: Neutral to Sell
Sell below 1.1120-1.1100 with targets at 1.1070-1.1050 and 1.1020-1.1000, with a stop loss above 1.1150. Buy positions above 1.1150 could target 1.1180-1.1200 and 1.1240-1.1270 with stops below 1.1100.
GBP/USD
Technicals in Focus:
The GBP/USD pair has retreated after testing the 1.3120 level, now trading around 1.3100. The MACD remains above the zero line, but histograms are in a decreasing mode, indicating waning bullish momentum. The Stochastic Oscillator is in the neutral region but is beginning to tilt lower, suggesting the potential for further downside. The 14-D RSI is also neutral, offering no clear directional signal at this time.
Trading Strategy: Neutral to Buy
Buy above 1.3100-1.3080 with targets at 1.3150-1.3180 and 1.3220-1.3250, with a stop loss below 1.3050. Sell below 1.3050 with a target of 1.3020-1.2990 and 1.2950-1.2920, with a stop loss above 1.3100.