Dollar Weakness Drives EUR/USD Higher, Yen Steady, and Gold Holds Near Highs (08.20.2024)

The dollar index dropped below 102, reaching its lowest point in over seven months as markets brace for potential Federal Reserve rate cuts. This decline has pushed EUR/USD closer to key resistance at 1.1100, with further potential to 1.1150 and 1.1190 if momentum continues. Meanwhile, the yen held steady at 146.5 per dollar, reflecting similar expectations of rate cuts, while gold remained near record highs around $2,500 per ounce, supported by its safe-haven status and anticipation of Fed Chair Jerome Powell's upcoming speech at Jackson Hole. The GBP/USD pair also remains strong above 1.29, though gains may slow as the market awaits UK PMI data and BoE Governor Bailey's speech.

Dollar Index Drops Below 102 as Markets Brace for Potential Fed Rate Cuts

On Tuesday, the dollar index remained below 102, continues to decline over the past two sessions and reaching its lowest point in over seven months. This drop reflects strong expectations that the Federal Reserve will soon begin reducing interest rates. Investors are also preparing for Fed Chair Jerome Powell’s upcoming speech at Jackson Hole, Wyoming, on Friday, looking for indications on whether the central bank might cut rates by 25 or 50 basis points in September. Also today, the upcoming inflation data in Europe will provide clues about whether the ECB will continue its interest rate cuts, and it will also be decisive in determining whether the strength of the currency pair can be maintained.

In the EUR/USD pair, the first support level is at 1.1065. If this level is breached, the next supports to watch will be 1.1000 and 1.0950. On the upside, the first resistance is at 1.1100; if this level is surpassed, the next targets will be 1.1150 and 1.1190.

Yen Steady at 146.5 with Fed Rate Cut on the Horizon

On Tuesday, the Japanese yen held steady at 146.5 per dollar after reaching its highest point of the last two weeks. This stability reflects strong expectations that the Federal Reserve will soon cut interest rates. Fed officials have indicated concerns about the labor market and broader economy, suggesting a readiness to lower borrowing costs next month. In Japan, machinery orders rose 2.1% in June, surpassing forecasts. Also, the economy grew 0.8% quarterly in Q2, rebounding from a contraction in Q1 and exceeding predictions. Markets are now awaiting domestic inflation data later this week for insights into the Bank of Japan's monetary policy.

The first resistance level is at 147.30. If this level is surpassed, the next targets will be 149.30 and 151.80. On the downside, the initial support is at 143.80; if this level is breached, the next supports to watch will be 141.70 and 140.00.

Gold Remains Near Record Levels as Investors Eye Fed Rate Cut

On Tuesday, gold remained near $2,500 per ounce, staying close to record highs due to its status as a safe haven while investors awaited further signals from the Federal Reserve. On Monday, US Secretary of State Antony Blinken announced that Israel had agreed to a proposal aimed at resolving the delays in a Gaza ceasefire and called on Hamas to follow suit. Despite this, concerns about a wider conflict persist following Hamas’s claim of responsibility for a bombing in Tel Aviv. Additionally, markets are preparing for Fed Chair Jerome Powell's speech at Jackson Hole on Friday, seeking clues about the extent of the anticipated rate cut by the Federal Reserve in September.

In gold, the first support level is at 2,470. If this level is breached, the next supports to watch will be 2,450 and 2,412. On the upside, the initial resistance is at 2,510; if this level is surpassed, the next targets will be 2,550 and 2,580.Top of Form

GBP Remains Strong Above 1.29, Market Eyes Key Economic Indicators

The Pound Sterling (GBP) has made slight gains today and remains comfortably in the upper 1.29 range. With UK PMI data due on Thursday and BoE Governor Bailey scheduled to speak at Jackson Hole on Saturday, the GBP's rebound from early August lows has been strong but might slow down in the near term. Current gains are supported by positive short-term trend indicators, though they appear to be tapering off around 1.2954 this morning. Any dips in GBP to the 1.29 range should find solid support for the time being.

In the pair, initial support for the GBP is at 1.2920, with further levels at 1.2860 and 1.2800 below. On the upside, the first resistance is at 1.3000, and if the pair surpasses this level, the next resistance points are at 1.3050 and 1.3100.