Dollar Gains on Strong Data, Yen and Gold Adjust as Markets React (08.09.2024)

The dollar steadied around 103.2, bolstered by better-than-expected US jobless claims that eased recession fears and tempered expectations for significant Federal Reserve rate cuts. The yen approached a weekly low below 147 per dollar, as strong US data diminished its safe-haven appeal. Meanwhile, gold dipped to $2,420 per ounce, with geopolitical tensions providing support, though market uncertainty about the Fed's next move kept prices in check. The GBP/USD pair tested key support at 1.2720 amid ongoing market volatility. Explore our detailed analysis for further insights into these market shifts.

Dollar Steadies Around 103.2 After Better-Than-Expected Jobless Claims

The dollar index maintained its recent gain, sitting around 103.2 on Friday, close to a one-week high, as better-than-expected US jobless claims data eased concerns about an economic downturn. Thursday’s data revealed that initial jobless claims dropped by 17,000 to a seasonally adjusted 233,000 last week, marking the largest decline in about 11 months and coming in below the anticipated 240,000. Following this data, markets scaled back expectations for Federal Reserve interest rate cuts, with the likelihood of a 50 basis point reduction in September decreasing from 69% to 54%. Overall, the dollar is set to close the week with little change as the market recovers from losses incurred during Monday’s selloff. Meanwhile, the safe-haven yen and Swiss franc have retreated from recent highs, reflecting an improving macroeconomic outlook.

In the pair, which has been trading sideways since the beginning of the week, the first support level is at 1.0900. If this level is breached, the next supports to watch will be 1.0850 and 1.0800. On the upside, the first resistance is at 1.0960; if this level is surpassed, the next targets will be 1.1000 and 1.1050.

Yen Approaches Weekly Low as Dollar Gains on Strong US Data

The Japanese yen fell below 147 per dollar, approaching a one-week low, as the dollar gained strength following better-than-expected US jobless claims data that eased recession fears. Investors also adjusted their expectations for Federal Reserve interest rate cuts, with the market divided on whether the US central bank will implement a 25 or 50 basis point reduction in September. Domestically, investors are evaluating the outlook for the Bank of Japan’s monetary policy after Deputy Governor Shinichi Uchida stated this week that the central bank would not raise rates in an unstable market. Additionally, the summary of opinions from the BOJ’s July policy meeting revealed that some members advocated for further rate hikes, with one member suggesting that rates should eventually be raised to at least 1%.

The first resistance level is at 148.00. If this level is surpassed, the next targets will be 149.30 and 150.90. On the downside, the initial support is at 145.60; if this level is breached, the next support levels to watch will be 144.00 and 141.70.

Geopolitical Tensions Support Gold, But Prices Dip as Market Awaits Fed

Gold prices eased to around $2,420 per ounce on Friday after a nearly 2% increase in the previous session. The metal continues to benefit from ongoing geopolitical tensions and expectations of a Federal Reserve rate cut. Its safe-haven appeal has been strengthened by escalating conflicts, including anticipated retaliatory actions by Iran against Israel and a rare Ukrainian strike on Russia. While expectations for a Fed rate cut in September remain, investors have moderated their predictions. The market is now split on whether the US central bank will opt for a 50 basis point reduction or a more modest 25 basis points. This shift follows a significant drop in initial weekly jobless claims in the US, easing fears that a weakening labor market might signal a recession, and coincides with positive sentiment from a strong ISM services PMI for July. Overall, gold is poised to decline for the week, reversing the substantial gains made in the prior week.Bottom of Form

In gold, first support level is at 2,410. If this level is breached, the next supports to watch will be 2,390 and 2,375. On the upside, the initial resistance is at 2,430; if this level is surpassed, the next targets will be 2,450 and 2,500.

GBP/USD Tests Support at 1.2720 Amid Market Uncertainty

For GBP/USD, the initial support lies at 1.2720, followed by 1.2650 and 1.2600 below. On the upside, the first resistance is at 1.2730, with subsequent levels at 1.2830 and 1.2870 if the pair breaks above this resistance.