Dollar was under pressure most of the week and selling accelerated again after the big disappointment in employment data. The non-farm payroll report could show that job market recovery had made a “substantial setback” rather than “substantial further progress”. A tapering announcement from Fed in September is basically off the table. Overall development in US stocks were mixed with NASDAQ and S&P 500 making new record highs but DOW was stuck in range. 10-year yield also struggled in range but managed to close firmly above 1.3 handle.
Swiss France, Yen and Dollar were the worst performing ones for the week, on underlying risk-on sentiment. New Zealand and Australian Dollars were the winners. Overall development suggests that Dollar’s near term weakness is here to stay. But Dollar index will need to break through 91.78 key support level to solidify bearishness. That would correspond to firm break of 1.19 handle in EUR/USD. At the same time, Gold will also need to break through 1832 resistance to double confirm Dollar selling. As for going long against the greenback, Aussie could be a candidate as it continued to strengthen upside moment. But that would also be subject to reaction to RBA policy decision ahead.
Dollar index eyes 91.78 key support to decide medium term bearishness
Dollar index tumbled sharply last week, following broad based selloff in Dollar. 93.72 is confirmed to be a short term top, on bearish divergence condition in daily MACD. The main question is whether price actions from 89.20 are merely a three-wave consolidation that has completed at 93.72, after failing 38.2% retracement of 102.99 to 89.20 at 94.46.
Focus is now immediately on 91.78 support for the near term. Sustained break there will affirm this medium term bearish case and target a test on 89.20/53 support zone next. Also, if that happens, it’s likely that whole down trend from 102.99 (2020 high) is ready to resume through 89.20, and possibly through 88.25 (2018 low) too.
Gold to target 1916 after clearing 1832 resistance firmly
Gold’s rise from 1682.60 resumed last week and it’s now pressing 1832.47 resistance. Reactions to this level in the next few days is important in determining the medium term outlook. Sustained break of 1832.47 should at least confirm that fall form 1916.30 has completed at 1682.60 already.
More importantly, such development would also argue that whole consolidation pattern from 2074.84 has finished, after drawing support from 38.2% retracement of 1046.27 to 2074.84 at 1681.92 twice. Gold should then at least have a test on 1916.30. Firm break there will pave the way to retest 2074.84. If that happens it would double confirm Dollar index’s downside breakout mentioned above.