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The USD got some support yesterday as July’s US PPI rates came in hotter than expected, implying a substantial rise in prices at a producer level. The release rekindled discussions about the possible inflationary effects of US President Trump’s tariff policy. Furthermore, worries were expressed by analysts that should producers in the US continue to experience an increase in prices, that the increase would be rolled over to the consumers. The release also had an effect on the market’s expectations for the Fed’s next moves, as the idea of the bank remaining on hold resurfaced, and the market’s expectations for three rate cuts until the end of the year were reduced to two, immediately after the release of the PPI rates. Currently, Fed Fund Futures continue to imply that the idea of a 25-basis points rate cut in the September meeting remains dominant among market participants, yet as mentioned before, only two rate cuts are expected until year’s end. Should we see the market’s expectations for the Fed’s intentions turning even less dovish, we may see the USD gaining further ground against its counterparts.
On a fundamental level, we highlight today’s meeting between Trump and Putin in Alaska. Over the past week, media had highlighted the possibility of a deal under which Ukrainian territory could be given to Russia in exchange for peace. Yet White House officials have downplayed the possibility of such a scenario and its characteristic that they regard the meeting more like a “feel out” for the two Presidents. Also the notion of a second meeting emerged, after a short while, hence today’s meeting is expected to be of a preparatory nature to see if the two sides actually agree on what is to happen and should an agreement be reached, then Ukraine and possibly the Europeans will be invited. Should the meeting result in a thawing of tensions in the US-Russian relationships, we may see the USD getting some support, while should the summit result in a failure we may see it weighing on the greenback.
In the FX market, USD/JPY edged higher yesterday and dropped during today’s Asian session, yet its price action remained well between the 146.25 (S1) support line and the 149.15 (R1) resistance level. We continue to maintain a bias for the pair’s sideways motion to be maintained and we note that the RSI indicator continues to run along the reading of 50, which implies a relative indecisiveness on behalf of market participants for the pair’s direction. Should the bears gain control over the pair’s direction, we may see it clearly breaking the 146.25 (S1) line and start aiming if not reaching the 142.20 (S2) level. Should the bulls take over, we may see the pair breaking the 149.15 (R1) line and start aiming for the 151.20 (R2) level.
Gold’s price edged lower yesterday, yet remains currently well between the 3450 (R1) resistance line and the 3245 (S1) support level. We maintain our bias for the sideways motion of the precious metal’s price to be continued within the boundaries of the prementioned levels. Our opinion seems to be supported also by the RSI indicator which runs along the reading of 50 and the relative narrowness of the Bollinger Bands. For a bearish outlook to emerge we would require the bullion’s price action to break the 3245 (S1) support line and start aiming for the 3120 (S2) support level. For a bullish outlook to be adopted we would require the precious metal’ price to break the 3450 (R1) resistance level, close to the all-time high of $3500 and set as the next possible target for the bulls the 3650 (R2) resistance level.
Other highlights for the day:
Today, we get the NY Fed manufacturing figure for August, July’s retail sales and industrial production and the preliminary UoM Consumer Sentiment for August, while from Canada, we get June’s manufacturing sales and wholesale trade rates. On Monday’s Asian session, we get UK’s house prices by Rightmove for August and Japan’s chain store sales for July.
USD/JPY Daily Chart
- Support: 146.25 (S1), 142.20 (S2), 139.60 (S3)
- Resistance: 149.15 (R1), 151.20 (R2), 154.65 (R3)
XAU/USD Daily Chart
- Support: 3245 (S1), 3120 (S2), 2955 (S3)
- Resistance: 3450 (R1), 3650 (R2), 3800 (R3)
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Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.
JA 
