Asian Open

Price action remains choppy on WTI crude oil's daily timeframe, which further backs up the case that last week's bearish reversal candle marked the beginning of a correction. The question now is how deep can it retrace before dip buyers seek to return in force? The ASX 200 has shown tentative signs of stability above 7,000, but given the bearish breakdown seen last week we prefer to seek bearish setups around resistance levels.

Weak PMIs on Friday were the latest economic data sets to warn of a slowdown and weighed on global indices accordingly. The S&P 500 suffered its worst week in six months and shows the potential to fall further. Although support levels nearby suggest it may try to bounce head of its next leg lower.

The US dollar handed back its post-FOMC gains despite surging bond yields, which saw USD/JPY form a 2-bar reversal day after a false break of 148. And this leaves the potential for a deeper pullback towards its 20-day EMA before its trend resumes (keep in mind Japan's CPI report and BOJ interest rate decision is in focus today).

At the most basic level the Fed delivered what was expected; another policy pause with the potential for further hikes. The opening paragraph tipped noted an economy which is “expanding at a solid pace” with a slower but “strong” job growth and elevated inflation. There’s nothing remotely dovish there. And then we look at the numbers…

Whilst WTI crude oil made light work of breaking above $90, it faltered around $95 and left a potential key reversal day below historical highs. And with the potential for the Fed to be more hawkish than money markets are currently pricing in, it could shake the bullish oil tree and trigger a correction against its strong trend.

Gold provided a false break and recovery bac above its 200-day EMA last week, and Monday's trade saw gold find support back above its 200-day MA. The ASX 200 handed back around half of Friday's gains, although there's a reasonable chance it might be able to find support around 7200 given the 200-day EMA resides in the area.

Gold prices enjoyed their best day in 13 on Friday and rallied from the 200-day EMA, after finding support above 1900 on Thursday. Yet key resistance levels loom overhead meaning we'd prefer to see a pullback before reconsidering longs ahead of key events this week including the FOMC meeting.

The ECB delivered a relatively dovish hike whilst US data once again outperformed. And that was the perfect catalyst to send EUR/USD to a 4-low (and speculative positioning suggests there may be further downside to come). WTI crude oil rose above $90, and it appears to have more fuel in the tank to perhaps head for the October high.

Outside of China's equity markets, ranges were limited on Monday due to the long Labor Day weekend in the US. But with economic data picking up and volumes likely to be replenished, hopefully volatility will follow. We take a look at a couple of potential setups on the gold and EUR/AUD daily charts.

USD/JPY managed to produce a bullish engulfing / outside day on Friday, despite a mixed Nonfarm payrolls report seeing money markets price in a 93% probability of the Fed holding rates steady at their next meeting.

The combination of a verbal BOJ warning shot and relatively dovish comments from an ECB official saw EUR/JPY suffer its worst session in five weeks on Thursday. Given the increased odds that yen weakness is very near (or at) a turning point, I am going to stick my neck on the line and speculate that EUR/JPY has topped for now. We also take a look at the USD/JPY 1hour chart ahead of today’s NFP report.

Despite an exciting start to Monday's Asian session, which saw some of China's stock market indices rally over 4% (and then hand much of it back), it was a quiet session in Europe and the US due to the UK public holiday. USD/JPY has stalled around a key resistance zone. USD/CNH looks appealing to bullish eyes, and AUD/USD (aka "the battler") is refusing to simply roll over and fall below 64 cents.

Jerome Powell delivered a slightly more hawkish message than expected at Jackson Hole, by suggesting that the Fed may need to raise rates at least one more time. This helped the US dollar rise for a sixth week and send the 2-year yield to a 17-year high. Still, we see the potential for AUD/USD to hold above key support and WTI crude oil rise to $82.

The US dollar was broadly higher alongside US yields ahead of Powell’s Jackson Hole speech. ASX 200 futures tracked Wall Street lower and USD/JPY regained its footing.

Flash PMIs dominated sentiment across the European and US sessions with downside disappointments. The US dollar index (DXY) topped just below 104 and closed back beneath the July high, hinting at a false break ahead of Jerome Powell’s Jackson Hole speech tomorrow. And this saw EUR/USD rebound from 1.08 and AUD/USD and gold bears continue to cover shorts.

The US dollar tracked the short-end of the yield curve higher on Tuesday, although gold managed to withstand dollar strength with spot prices flirting with a break above 1900. But having looked look at gold futures, I suspect the next level of support for spot gold prices could be around $1870 if momentum reverts lower.