As we head into Wednesday, August 28, 2024, global markets are bracing for a session filled with potential volatility driven by key economic data releases and central bank communications. The U.S. dollar continues to be the focal point as traders assess the implications of recent U.S. economic data, including consumer confidence, and prepare for upcoming figures such as crude oil inventories. Tuesday’s trading session saw mixed movements across major currency pairs, reflecting ongoing uncertainties in the global economic landscape.
In Europe, the euro remains under pressure amid ongoing concerns about the region’s economic outlook. The EUR/USD pair saw fluctuations but largely remained within a tight range, with the Eurozone’s CPI data and unemployment figures providing little to boost market sentiment. As the day progresses, traders will be closely watching any updates from the European Central Bank (ECB) and additional economic data that could influence the euro’s direction.
Meanwhile, the Canadian dollar has come under significant selling pressure, with the USD/CAD pair dropping sharply in response to weaker-than-expected Canadian economic data. The loonie’s performance is likely to remain sensitive to further economic releases, particularly in the energy sector, as crude oil prices continue to play a crucial role in the currency’s valuation.
EUR/USD
Technicals in Focus
The EUR/USD pair traded within a narrow range around the 1.1160 level throughout the session, reflecting a lack of clear direction. The pair’s movements were influenced by softer Eurozone CPI data, which came in at 2.2% year-over-year for August, down from the previous 2.6%. The Eurozone’s unemployment rate remained unchanged at 6.5%, offering no significant support to the euro.
On the technical front, the MACD remains below the zero line, with histograms showing a flattening pattern, indicating that while bearish momentum persists, it is showing signs of stabilization. The Stochastic Oscillator has slightly moved up from oversold territory, suggesting a potential short-term recovery. However, the 14-D RSI remains neutral, pointing to a cautious outlook.
Trading Strategy: Neutral to Sell
Sell below 1.1160-1.1140 with targets at 1.1110-1.1090 and 1.1060-1.1040, with a stop loss above 1.1180. Alternatively, consider long positions above 1.1180 with targets of 1.1210-1.1240 and 1.1270-1.1300, with stops below 1.1140.
USD/CAD
Technicals in Focus
The USD/CAD pair experienced a sharp decline, dropping towards the 1.3450 level as the Canadian dollar weakened. This movement was largely driven by disappointing Canadian GDP data for June, which showed only a 0.1% increase, falling short of expectations. The quarterly GDP figures also failed to impress, contributing to the loonie’s weakness.
Technically, the MACD is well below the zero line, with histograms expanding on the downside, signalling strong bearish momentum. The Stochastic Oscillator is deep in oversold territory, which may suggest the possibility of a technical bounce, but the 14-D RSI remains firmly in oversold territory, reinforcing the bearish outlook.
Trading Strategy: Neutral to Sell
Sell below 1.3500-1.3480 with targets at 1.3450-1.3420 and 1.3390-1.3360, with a stop loss above 1.3530. Alternatively, consider long positions above 1.3530 with targets of 1.3560-1.3590 and 1.3620-1.3650, with stops below 1.3480.
AUD/USD
Technicals in Focus
The AUD/USD pair showed signs of recovery after trading lower earlier in the session. The pair hovered around the 0.6780 level, reflecting ongoing market uncertainty. The Australian dollar’s movements were influenced by the general market risk sentiment and upcoming U.S. economic data, which traders are closely monitoring.
On the technical side, the MACD is near the zero line, indicating a lack of clear momentum. At the same time, the Stochastic Oscillator has rebounded from oversold territory, suggesting the potential for further upside. The 14-D RSI is neutral, offering no strong directional bias.
Trading Strategy: Neutral to Buy
Buy above 0.6780-0.6760 with targets at 0.6800-0.6830 and 0.6860-0.6890, with a stop loss below 0.6740. Sell below 0.6740 with targets at 0.6720-0.6700 and 0.6680-0.6650, with a stop loss above 0.6780.
Market Outlook
The upcoming U.S. economic data, including crude oil inventories and the 5-year note auction, will be pivotal as traders assess the resilience of the U.S. economy and its impact on the dollar. The market’s response to these data points could set the tone for the dollar’s trajectory in the near term.
In the Eurozone, traders will continue to monitor inflation and employment data, along with any communications from ECB officials, as they seek to gauge the central bank’s policy direction. The euro’s performance will largely hinge on these factors, as market participants weigh the likelihood of further monetary easing.
The Canadian dollar’s outlook remains closely tied to developments in the energy sector and any further economic releases. With the loonie already under pressure, additional downside risks could emerge if economic data continues to underperform.
Overall, the market is expected to remain sensitive to economic data and central bank communications, with potential for increased volatility as traders react to new information.