KVB Market Analysis | 27 August: AUD/USD Holds Below Seven-Month High Amid Divergent Central Bank Policies

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Spot Gold retains its bullish bias at the beginning of the week, extending Fridays gains towards the record high posted last week at $2,531.60. The US Dollar trades mixed across the FX board but was overall weak after Federal Reserve (Fed) Chairman Jerome Powell said that the time has come for monetary policy to adjust, speaking at the Jackson Hole Symposium. Once again, Powell conditioned an interest rate cut to incoming data, but market participants are confident the Fed will deliver a rate cut in the upcoming September meeting.

Technical Analysis:

The daily chart for XAU/USD shows the bright metal hovers around Fridays high and aims to extend gains. Technical indicators have partially lost their upward strength but hold well above their midlines, far from suggesting bullish exhaustion. At the same time, Gold stands above all its moving averages, with the 20 Simple Moving Average (SMA) heading firmly north at around $2,458.75.

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

EUR/USD paused its multi-week upward momentum and faced some downward pressure after reaching fresh highs just above 1.1200 at the beginning of the week. This small corrective move occurred amidst a tepid resurgence of buying interest in the US Dollar (USD). That said, the Greenback bounced back from its recent 2024 lows near 100.50 (August 26), as reflected by the US Dollar Index (DXY). This rebound was driven by a decline in risk appetite following Fridays strong advance in response to the dovish message from Chair Jerome Powell at the Jackson Hole Symposium.

Technical Analysis:

Further north, EUR/USD is expected to challenge its 2024 high of 1.1201 (August 26), ahead of the 2023 top of 1.1275 (July 18). The pair's next downside target is the weekly low of 1.0881 (August 8), which comes before the key 200-day SMA at 1.0848 and the weekly low of 1.0777 (August 1). From here, the low of 1.0666 (June 26) comes before the May bottom of 1.0649 (May 1). Looking at the broader picture, the pair's upward trend should continue as long as it remains above the key 200-day SMA. So far, the four-hour chart shows a slight slowdown in the upward bias. The initial resistance level, 1.1201, precedes 1.1275. However, there is quick support at 1.1098, seconded by the 55-SMA of 1.1078, and then 1.0949. The relative strength index (RSI) decreased to about 62.

Product: AUD/USD

Prediction: Increase

Fundamental Analysis:

The Australian Dollar (AUD) moves sideways against the US Dollar (USD) on Tuesday, holding a position just below the seven-month high of 0.6798 recorded on Monday. However, the downside of the AUD/USD pair would be limited as traders expect different policy outlooks between the two central banks. The recent Reserve Bank of Australia (RBA) Minutes showed that the board members agreed that a rate cut is unlikely soon. Additionally, RBA Governor Michele Bullock expressed that the Australian central bank will not hesitate to raise rates again to combat inflation if needed.

Technical Analysis:

The Australian Dollar trades around 0.6770 on Friday. Daily chart analysis shows the AUD/USD pair has breached below the ascending channel, suggesting a weakening of a bullish bias. However, the 14-day Relative Strength Index (RSI) remains below the 70 mark, supporting the ongoing bullish trend. In terms of resistance, the AUD/USD pair tests the immediate barrier at the seven-month high of 0.6798 level, followed by the lower boundary of the ascending channel at 0.6800 level. A break above this level could lead the pair to explore the region around the upper boundary of the ascending channel at the 0.6940 level.

Product: WTU

Prediction: Increase

Fundamental Analysis:

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $76.15 on Monday. WTI price edges higher on the back of firmer expectations that the Federal Reserve (Fed) will cut interest rates in its upcoming September meeting. WTI gained ground after the dovish comments by Fed Chair Jerome Powell indicated the US central bank was preparing to cut interest rates. Fed‘s Powell gave a clear signal on Friday at the Jackson Hole symposium that it’s time to start cutting the target range for the federal funds rate at the next meeting on September 17-18. Lower interest rates generally support the WTI price as it reduces the cost of borrowing, which can boost economic activity and oil demand.

Technical Analysis:

Crude oil price rallied upwards strongly to surpass 76.86$ level and achieve our awaited extended target at 78.35$, noticing that the price is facing solid resistance there to head towards potential decline in the upcoming sessions, targeting testing 76.86$ before turning back to rise again. Note that the mentioned levels form the next trend keys, and the price needs to surpass one of them to detect its next destination clearly.

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