US dollar extends losses on dovish Powell comments: Asian Open

Market Summary:

Jerome Powell said what traders wanted to hear during his testimony to the House Committee; rate cuts are coming
This sent the US dollar broadly lower on renewed optimism that the Fed’s dovish pivot is finally here, although ignored the part where he said cuts would only arrive if further evidence warranted easing
USD/JPY closed at a 3-week low, EUR/USD rose to a 5-week high and looks set to break above 1.09
As for the elections, Powell said the Fed would “keep our heads down”, meaning they would not bae their policy to appease any party
And on that note, Nikki Haly withdrew from the race to the Whitehouse to ensure Trump will be the Republican nominee for the Whitehouse
The Bank of Canada held rates at 5%, and pushed back against doves by saying that they do not expect to get back to 2% inflation this year and the “clear consensus inside governing council” called for rates to stay at 5%
Gold closed at another record high on renewed bets of Fed easing
WTI crude prices rallied over 3.5% by the intraday high as US inventories rose less than expected

Events in focus (AEDT):

10:00 – Japan’s wages data
10:50 – Japan’s foreign investment in bonds, stocks
11:30 – Australia’s trade balance
12:30 – BoJ Board Member Nakagawa Speaks
14:00 – China’s trade balance
23:30 – US job cuts
00:30 – US jobless claims, trade balance

ASX 200 technical analysis:

The bullish bias for the ASX 200 is playing out well. AN inverted head and shoulders pattern (bullish continuation during an uptrend) projects a target around 7900. A bull flag also projects a target around 7285, and the 100% projection of the prior rally sits on 7800. Momentum clearly favours bulls thanks to renewed bets of RBA easing, therefore we prefer to buy dips on intraday timeframes and target 7800 and hopefully beyond.

US dollar index technical analysis:

The US dollar index broke convincingly below the cluster of moving averages, but bears could not quite drive it down to 103. There is a high volume node around 103 which makes it a likely support level. And as I suspect traders have placed too much emphasis on Powell’s supposedly dovish comments, I do not expect 103 to simply give way. And that leaves the potential for a bounce from current levels. Bulls could enter long with a stop below 103 and a target around the MA cluster, and allow incoming data to dictate its potential to rally further or eventually break below 103.

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.