USD INDEX SELL-OFF INTENSIFIES AFTER DOVISH POWELL

The US dollar index tilted lower on Monday morning as investors continued focusing on the Jackson Hole Symposium speech by Jerome Powell. In it, the Fed chair said that the central bank was keen to start winding down its giant $120 billion per month asset purchase program later this year. He added that this will only happen if the bank sees more recovery amid the ongoing Delta wave. Still, he ruled out against hiking interest rates any time soon. Later today, the US dollar index will react mildly to the latest pending home sales numbers.

The euro rose against key economic numbers ahead of the latest flash consumer price index (CPI) data from key European countries like Germany, Spain, and Italy. Economists polled by Reuters expect the data to show that the headline CPI rose by 3.9% in August after rising by 3.8% in the previous month. They also expect the harmonised CPI to have risen from 3.1% to 3.4%. The CPI is expected to have risen by 2.8% in the Eurozone. Meanwhile, the European Commission will publish the latest consumer and business confidence numbers. In general, business confidence likely dipped slightly in August as companies faced more challenges as supply shortages remained.

The British pound held steady in early trading as investors kept worrying about inflation in the UK. In a recent note, the British Retail Consortium (BRC) said that the recent subdued food prices will likely not last long. The prices will likely rise because of the overall cost of doing business, which has been rising. For example, the cost of importing has risen because of the supply gridlock. Similarly, many retailers have been forced to increase wages as the labour shortage intensifies. Recent data by the ONS showed that food prices increased in May and June but they dipped slightly in July.

EURUSD

The EURUSD price jumped to 1.1800 on Friday during Powell’s speech. This price was substantially higher than Friday’s low of 1.1735. On the 30-minute chart, the pair moved above the 25-day moving average. It also rose above the key resistance level at 1.1780 while the Relative Strength Index (RSI) has moved slightly below the overbought level. It has also formed a bullish flag pattern. Therefore, the pair will likely keep rising as bulls target the key resistance at 1.1850.

GBPUSD

The GBPUSD pair rose to a high of 1.3757 in early trading. On the four-hour chart, the price is substantially above last week’s low at 1.3600. This price has moved slightly above the 25-day moving average while the RSI and MACD have moved slightly upwards. The pair is also forming the handle section of the inverted cup and handle pattern. Therefore, the pair may resume the downward trend as bears target the lower side of the cup at 1.3600.

USDCHF

The USDCHF pair declined to the key support at 0.9110. This was a support because the pair had struggled moving below the level several times in the past three weeks. The pair also moved slightly above the 50% Fibonacci retracement level. The RSI has also dropped while it has formed a small head and shoulders pattern. Therefore, the pair may keep falling so long as bears can sustain moves below 0.9110.