The dollar starts week in strong bullish mode against the basket of majors, inspired by hawkish comments from Fed. Traders raised their bets on an interest rate increase after Fed Chair Yellen’s hawkish speech on Friday, pointing on upbeat comments on the US economy and increasing hopes for rate hike soon.
In addition, Fed’s number two policy maker, Fischer said that Fed is on track to hike rates this year, with focus on Non-Farm Payrolls data for August, due on Friday, which is expected to weigh on rate hike decision.
Following Friday’s comments, interest rate futures indicated the market priced in more than a 30% chance of a hike in September from 18% before Yellen and Fischer spoke, according to CME Group’s FedWatch tool. For December, the odds rose to more than 60%, from 57% Friday morning.
Dollar’s major counterparts started trading at the back foot in early Monday.
The Euro holds around 1.1200 handle, following Friday’s strong bearish close and overnight’s dip to 1.1173. The pair is down around 1.7%, on pullback from 1.1365, 18 Aug high.
British pound lost around 1.3% from Friday’s spike high at 1.3277, probing below 1.3100 support in early European trading on Monday.
Dollar/yen is establishing above 102.00 handle, after Friday’s strong rally and weekly start with gap-higher. The pair approaches strong resistance at 102.64, with extension towards 103 barrier not ruled out, on strong bullish sentiment.
Antipodean currencies are pressured by stronger dollar on Monday, with Australian dollar testing strong support at 0.7520, down 2.2% from Friday, while New Zealand dollar dipped to round-figure support at 0.7200.
Spot Gold extended lower in early Monday’s trading, on fresh strength of the dollar, on speculations on rate hike. The yellow metal extended close to technical support at $1310, with stretch towards psychological $1300 support not ruled out.
Oil prices fell over 1% on Monday, holding negative sentiment on dollar’s strength, pressured by Iraq’s production increase.
WTI oil hit session low at $46.77 in early European trading on Monday and Brent oil trading off session low at $49.11, holding below psychological $50.00 barrier.
Global oil executives and policy makers are meeting in Norway from August 29 to September 1 for the Offshore Northern seas energy conference amid a severe downturn in the industry.

Highlights of next week

With the Jackson Hole economic symposium behind us – and hopefully a heads up from Janet Yellen on the timing of the next US rate hike – this week starts slowly and builds up gradually to end with the monthly favourite, US non-farm payrolls on Friday.

US personal consumption expenditure
This index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying US inflation trends. Year-on-year core PCE increased 1.6% in June, the same as the previous month. The data is released today.

UK Nationwide house price index
One of two major monthly house price surveys in the UK, this month’s print should contain more post-Brexit data. House price information is derived from Nationwide’s lending for owner/occupier house purchases at the post-survey approval stage. July’s year-on-year number of 5.2% beat economists’ expectations of 4.5% and June’s reading of 5.1%. The data is released on Wednesday.

Manufacturing PMI’s are due on Thursday
With over 30 manufacturing PMIs being released during the day, there’s sure to be something for everyone. The Eurozone index is expected to slip to 51.8 from a prior 52, the US is seen falling to 52.4 from 52.6 while the UK index is seen picking up from July’s shock reading of 48.2, the worst pace of contraction since early 2013.

US non-farm payrolls
Last month’s payroll data surprised on the upside with a rise of 255,000 versus an expected 180,000, with job growth seen in professional and business services, health care and financial activities. The labour market is expected to remain strong as long as consumers maintain their robust spending pace.
Expectations for August centre around 167,000. The data is released on Friday.

Important levels

EURUSD
The Euro extended strong Friday’s weakness in early Monday and touched strong support at 1.1170 (daily cloud top). Bearish signals generated on bearish daily / weekly close. Consolidation above loud top is expected ahead of fresh weakness. Daily Kijun-sen reinforces cloud top support at 1.1157. Further bearish acceleration could extend towards 1.1112 (daily cloud base).
Initial resistance lies at 1.1210 (20SMA), ahead of 1.1244 (30SMA) and daily Tenkan-sen at 1.1267.

GBPUSD
Near-term action is pointing lower, as 1.3100 support is broken. Bearish extension will look for 1.3070 and 1.3020 supports, with psychological 1.3000 support eyed.
Bearish signal was generated on Friday’s red candle with long upper shadow.
Upside attempts were so far limited by daily Kijun-sen line, with extended upticks expected to face solid resistance at 1.3170 zone (former low of 25 Aug).
Only break above 1.3200 would revive near-term bulls.

WTI Oil
Near-term price action remains under pressure, as Monday’s fresh weakness offsets Friday’s indecision signal (long-legged Doji). The price holds within descending daily cloud, with near-term focus at key supports at 46.40 and 46.20 (higher base (Fibo 38.2% support), loss of which would trigger stronger bearish acceleration.
Extended consolidation above 46.40 is seen likely for now, with limited upside attempts, as sentiment remains negative.
Only break above 47.70/88 (daily Tenkan-sen / Friday’s spike high) would neutralize downside threats., Market Analysis