The dollar was lower across the board in early Monday, reversing some of strong gains on Friday, sparked by better-than-expected US inflation data. Strong CPI numbers in August showed build-up of inflation that could support Fed’s intension of raising interest rates this year.
The dollar index was up 0.52% in late Asian trading; the Euro stood at 1.1170, up from late Friday’s daily low at 1.1148, while the greenback fell to 102.00 support against Japanese yen, on reversal from Asian session high at 102.39 and Friday’s recovery rejection at 102.44.
Australian dollar was the top gainer of Asian session, posting one-week high at 0.7544, on weaker US dollar, as bets on possible Fed’s action on this week’s meeting are lower.

The British pound was the top loser on Friday and probed below psychological 1.3000 support, marking the strongest weekly fall in past 10 weeks. Cable came under increased pressure after important technical supports were lost and increased worries on further impact of Brexit vote, and rising bets of BOE’s another rate cut this year, in order to cushion the economic blow from Brexit.
The pound erased the largest part of recent recovery, sparked by better-than-expected UK data that signalled less significant impact of Brexit vote to the British economy than it was initially anticipated.
The pound bounced to 1.3050 zone against the dollar on Monday, but negative sentiment persists and keeps the risk of further easing in play.

Gold recovered some ground and gained 0.5% for the session on Monday, after strong bearish acceleration on stronger dollar last Friday, approached key short-term support at $1302. The yellow metal remains under pressure after losing around 1.3% last week, awaiting one of the key events this week, FOMC meeting, due on 20/21 September.

Crude oil was up around 1.4% at $44.47 per barrel in early Monday’s trading, correcting losses of last Friday. Oil price jumped after Venezuela said OPEC and non-OPEC producers were close to reaching deal on output stabilizing. Also, clashes in Libya that threaten to disrupt restart of country oil export and Iran’s oil export that hit five-year high near pre-sanction levels, supported oil price.
However, overall outlook for oil remains negative, as the price fell further last week and approached strong technical support at $43.00 per barrel.

Weaker dollar also supported global stocks on Monday. Asian jumped on the first day of the week, with MSCI index gaining 1.2%; Taiwan 2.8%; Shanghai 0.5%, while Tokyo was closed for a holiday.
European stocks followed positive sentiment and opened higher on Monday. Dax was 0.35% higher on opening; FTSE was up 0.34%, while French CAC-40 registered 0.62% gains on Monday’s opening.
Highlights of the week

Few expect the Fed to increase US interest rates on Wednesday but Janet Yellen, who chairs the rate-setting Federal Open Market Committee, is widely expected to keep open the possibility of a rate hike in December, once the US has elected a new president.
Analysts see the week ahead as the most important week before the US elections, with hawkish tone by Fed speakers expected, despite the US data losing momentum and increasing risks from elections in November.
The FOMC is widely expected to stay on hold this week, but will have to communicate that rate hike is still likely this year, maintaining slightly hawkish tone.

The Bank of Japan’s interest rate decision, monetary policy statement and press conference on Wednesday are another top event of this week. The BoJ is likely to refocus policy on reducing three- to five-year rates and redesigning its quantitative and qualitative monetary easing policy with a negative interest rate, to prolong and allow more flexibility for the asset-purchase programme but will probably skip another rate cut if markets remain broadly stable.
The announcement that a comprehensive assessment of monetary policy would be carried out at the upcoming Bank of Japan meeting has triggered even more speculation than usual about possible changes of direction.
Markets expect the negative policy rate to be cut further and asset purchases to be stepped up. Some new measures, such as lending to commercial banks at negative interest rates, may also be introduced.

Important levels
EURUSD

The Euro is slightly higher on Monday, after making the strongest daily fall since the end of August last Friday. Rising downside pressure was also signalled by strong bearish weekly close. Last Friday’s bearish acceleration approached the first of several strong supports, 200SMA at 1.1145, which lies just above 31 Aug low at 1.1122 and daily cloud base at 1.1115. Firm break lower is expected to trigger fresh weakness towards 1.1045 (05 Aug trough), possibly to psychological 1.1000 support.
Initial resistances lay at 1.1180 and 1.1200 (former strong support), which should ideally cap and guard barriers at 1.1230 and 1.1250.
GBPUSD

Cable made the strongest daily fall since July 5 on Friday. The pair lost strong support at 1.1167 and fresh bearish acceleration cracked psychological 1.3000 support. Strong bearish sentiment has established for final break below 1.3000 handle that could trigger fresh acceleration towards next strong support at 1.2864 (15 Aug low), which guards post Brexit’s crash low at 1.2795.
Initial resistance lies at 1.3089, followed by 1.3136, with former breakpoint at 1.3167 )daily cloud base / Kijun-sen line), expected to cap extended corrective attempts.

GOLD

Spot gold bounces from Friday’s low at $1306, which lies just ahead of key supports at $1302/00 (01 Sep low / psychological support). Strong Friday’s / weekly bearish close maintains negative sentiment for final attack at $1302/00 breakpoints, loss of which could spark fresh acceleration towards next targets at $1290 and $1283 in extension.
Corrective rally cracked initial resistance at $1317, with extended upticks expected to hold below strong resistance zone at $1330 (converging daily Tenkan-sen / Kijun-sen lines)., Market Analysis