Dollar Rebound On Upbeat U.S. Economic Indicators

• U.S. dollar fuels upbeat U.S. economic data and rebound from its critical support level in the last session.
• Watch out for today’s U.K. Retail Sales reading, as the Pound Sterling has been strong lately.
• Gold prices seesawed in the previous session but witnessed strong selling pressure above the $2470 mark.

Market Summary

The U.S. dollar rebounded after being weighed down earlier in the week by softer-than-expected PPI and CPI readings. The turnaround was driven by stronger-than-anticipated U.S. Retail Sales growth and Initial Jobless Claims, which eased recession fears and bolstered the dollar’s strength in the last session. Wall Street reacted positively to the upbeat economic data, with the Nasdaq leading the charge, closing nearly 400 points higher and edging close to the 20,000 psychological mark.

Forex traders are closely monitoring the strong performance of the Pound Sterling, which has been bullish this week. The U.K.’s Retail Sales data, due later today, is expected to show signs of improvement. A positive reading could further bolster Sterling’s strength, supporting continued gains in GBP pairs.

In the commodities market, gold prices seesawed following the release of U.S. economic data. The stronger U.S. dollar initially pressured gold prices lower, but losses were quickly recovered, leaving gold buoyed above the $2,450 mark. Oil prices saw a technical rebound on improved economic sentiment, but the ongoing uncertainty in the oil demand outlook continues to weigh on prices, preventing a sustained move back above the $80 mark. 

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Current rate hike bets on 18th September Fed interest rate decision: 

Source: CME Fedwatch Tool

-50 bps (27.5%) VS -25 bps (72.5%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index has formed a double-bottom price pattern near its support level at 102.30, prompting a nearly 0.5% jump in the last session. However, the dollar is expected to trade within a wide consolidation range between 103.40 and 102.30 as it currently lacks a strong catalyst. The high market expectation of a Federal Reserve rate cut in September is also weighing on the dollar, limiting its potential for further gains. 

The Dollar Index had a double-bottom price pattern and performed a technical rebound, suggesting a bullish bias for the index. The RSI has rebounded from the oversold zone while the MACD has formed a higher high pattern, suggesting a bullish signal for the index as well. 

Resistance level: 103.35, 104.05

Support level: 102.40, 101.40

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XAU/USD, H4

Gold prices are currently positioned near recent high levels but remain capped below the $2,480 mark due to persistent selling pressure. In the last session, gold prices fluctuated as they reacted to the release of upbeat U.S. economic data. The stronger economic indicators bolstered the U.S. dollar, initially driving gold prices lower. However, the losses were quickly erased, allowing gold to hold above the $2,450 level, indicating resilience despite the dollar’s strength. Traders closely watch the $2,480 resistance as a key level for potential further movement.

Gold prices are kept below their short-term resistance level at $2460. If they are able to break above such a level, it will be a bullish signal for gold. The RSI has eased while the MACD is edging lower, suggesting that the bullish momentum is easing. 

Resistance level: 2482.00, 2520.00

Support level: 2450.00, 2385.00

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GBP/USD，H4

The British pound strengthened against the US dollar following the release of robust U.K. economic data. The U.K. economy grew as anticipated in the second quarter, with GDP rising by 0.6% quarter-on-quarter and 0.9% year-on-year, reflecting a solid recovery from the previous 0.3% annual growth rate. Additionally, U.K. Manufacturing Production surged by 1.1% in June, significantly surpassing the forecasted 0.1% increase and rebounding from the revised 0.3% decline in the previous month. Both Industrial Production and Manufacturing Production showed strong gains of 0.8% and 1.1%, respectively, further boosting confidence in the pound.

GBP/USD is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 66, suggesting the pair might extend its gains since the RSI stays above the midline. 

Resistance level: 1.2930, 1.3030

Support level: 1.2865, 1.2775

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EUR/USD，H4

The EUR/USD pair continued its downward trend, primarily driven by the strengthening US dollar. The recent lack of significant market catalysts from the Eurozone allowed the dollar to dominate, as the US released a series of positive economic reports. Retail Sales, Initial Jobless Claims, and Core Retail Sales all exceeded expectations, prompting investors to shift their portfolios towards the dollar, thus diminishing the appeal of the euro.

EUR/USD is trading lower while currently near the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 54, suggesting the pair might experience technical correction since the RSI rebounded sharply from midline. 

Resistance level: 1.1025, 1.1105

Support level: 1.0945, 1.0835

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AUD/USD, H4

The AUD/USD pair is currently hovering near its recent high at the 0.6635 level, awaiting a catalyst to push above this resistance. The Aussie dollar has been buoyed by strong job data released earlier this week, which has led the market to anticipate a hawkish tone in the upcoming Reserve Bank of Australia (RBA) meeting minutes scheduled for next Tuesday. If the RBA maintains a hawkish stance on monetary policy, it could bolster the Aussie dollar further, enabling the pair to break through its next resistance level. Traders are closely watching the upcoming RBA release for confirmation of this potential move.

The pair is currently hovering at its recent high level and a long lower wick from the previous candle stick suggest a strong support level at 0.6590. The RSI is flowing flat close to the overbought zone while the MACD is edging lower suggest the bullish momentum is easing. 

Resistance level: 0.6673, 0.6730

Support level: 0.6550, 0.6500

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NASDAQ, H4

US stocks climbed while bonds fell, as strong retail spending and labor market data underscored the resilience of the US economy, easing fears of a deeper slowdown that could be triggered by Federal Reserve actions. As economic concerns diminished, equities extended their rebound into a sixth consecutive session. The S&P 500 rose by approximately 1.6%, while the Nasdaq 100 gained 2.4%, signalling renewed investor optimism.

Nasdaq is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 64, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 20015.00, 20705.00

Support level: 19035.00, 17865.00

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CL OIL, H4

Crude oil prices experienced a technical rebound from their recent bearish trend, driven by upbeat U.S. economic data that eased recession fears and improved market risk appetite. However, despite this recovery, oil prices remain under pressure due to a pessimistic demand outlook and lacklustre economic performance in China. As a result, the black gold currently lacks the necessary catalyst to push prices above the $80 mark, leaving the market cautious about further gains.

Oil prices, despite a technical rebound, remain trading within their bearish trajectory, suggesting a bearish bias for oil. The RSI continues to decline, while the MACD is edging lower toward the zero line, suggesting the bearish momentum remains intact. 

Resistance level: 80.90, 83.50

Support level:  75.30, 72.45

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