GBPUSD retreats from yearly high as US Dollar rebound ahead of Fed Chair Powell’s speech

A long weekend in Japan joined the cautious mood ahead of Fed Chair Jerome Powell’s speech to restrict market moves in Monday’s Asian session. Even so, fears of China’s sluggish economic transition and anxiety before this week’s key earnings report challenged the sentiment and allowed the US Dollar to pare recent losses.

As a result, the US Dollar Index (DXY), the US Dollar’s gauge versus six major currencies, bounces off a six-week low marked the previous day despite lacking upside momentum. The same joins the market’s preparations for this week’s European Central Bank (ECB) monetary policy announcements and downbeat EU data, not to forget political woes in the Old Continent, challenge the EURUSD buyers at a multi-day high. That said, GBPUSD also retreats from the yearly top as optimism about the UK’s new government contrasts with fears of economic challenges faced by the nation.

USDJPY pares previous losses while bouncing off a short-term key support line, especially amid Japan’s lack of ability to defend the hawkish bias about the Bank of Japan (BoJ).

That said, AUDUSD and NZDUSD bear the burden of China woes and fresh challenges to the policy hawks whereas USDCAD extends recovery after a pullback in Oil prices.

Crude Oil struggles for clear directions after snapping a four-week uptrend whereas Gold price extends Friday’s pullback from a two-month high amid the US Dollar’s rebound and fears of lesser bullion demand from China.

Elsewhere, BTCUSD and ETHUSD both ignore the US Dollar’s recovery while rising for the fourth consecutive day as hopes of Donald Trump’s victory in the US Presidential Elections join technical breakouts. It should be noted that the heavy inflow into the ETFs also helped the cryptocurrencies to pare previous losses.

Following are the latest moves of the key assets:

• WTI Crude oil stays defensive above $82.00 after snapping a four-week uptrend.
• Gold extends the previous day’s retreat from a two-month high, mildly offered near $2,405 by the press time.
• The USD Index bounces off a six-week low to snap a three-day losing streak near 104.30.
• Wall Street closed on the positive side and allowed the Asia-Pacific markets to edge higher. However, equities in Britain and Europe printed mild losses during the initial trading hour.
• BTCUSD and ETHUSD both rise more than 3.0% intraday to around $62,900 and $3,350 respectively as we write.

US Dollar licks its wounds with eyes on Fed’s Powell…

Be it the US Consumer Price Index (CPI) or Federal Reserve (Fed) Chairman Jerome Powell’s failure to defend policy hawks, not to forget Friday’s University of Michigan (UoM) Consumer Sentiment Index and Consumer Inflation Expectations, the US Dollar Index (DXY) had to bear the burden of all and drop for to a six-week low, down for the second consecutive week. It’s worth noting that the traders’ bets on the Fed’s September rate cuts have increased of late and joined upbeat equity market performance to weigh on the Greenback of late. However, the cautious mood ahead of today’s speech from Fed Chair Powell allowed the DXY to lick its wounds at a multi-day low.

Apart from the USD’s consolidation ahead of the key catalysts, China’s softer economics and geopolitical woes in the West also allowed the Greenback to pare recent losses. Furthermore, anxiety ahead of China’s third plenum meeting, starting on Monday, provides additional help to the DXY.

The US Dollar’s rebound joins the preparations for this week’s European Central Bank (ECB) monetary policy meeting to stop the EURUSD bulls at a six-week high while snapping a three-day uptrend. On the same line, GBPUSD also eased from the highest level since late July 2023, marked the previous day, as Bank of England (BoE) policymaker Swati Dhingra said that the demand is too soft for inflation to rise sharply. Further, USDJPY bounces off a seven-month-old rising support line to snap a two-day losing streak amid holidays in Japan. In doing so, the Yen pair also consolidates the previous weekly loss after Japanese intervention to save the national currency at the time of the US Dollar’s broad decline. It should be observed that Reuters cited two Japanese government sources to hint at downward economic growth forecasts from Tokyo later this month.

AUDUSD snaps four-day uptrend as economic fears about Australia’s largest customer China join recently dovish concerns for the Reserve Bank of Australia (RBA) to challenge the bulls. NZDUSD also follows suit as downbeat China statistics join softer Business New Zealand (NZ) PSI for June and growing chatters of the Reserve Bank of New Zealand’s (RBNZ) rate cuts during late 2024. Moving on, USDCAD rises to the highest level in more than a week as sluggish prices of Oil, Canada’s key export item, join fresh clues of the Bank of Canada’s (BoC) dovish moves and disappointing housing market data from the nation.

Crude Oil marked the first weekly loss in five despite the softer US Dollar as OPEC and IEA kept energy demand forecasts mostly unchanged while supply-crunch woes eased. On the top, China’s softer statistics and unimpressive change of the weekly US Rig Counts also stopped the black gold buyers.

Gold Price rose in the last three consecutive weeks despite falling on Friday, as well as extending retreat from a two-month high early Monday. The yellow metal’s latest pullback could be linked to fears about China’s economic growth and a pause in the dragon nation’s bullion buying, not to forget the US Dollar’s corrective bounce ahead of today’s speech from Fed Chair Jerome Powell.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

Powell’s speech, mid-tier data from US/Canada eyed…

Although Fed Chair Powell’s speech will be the key event to watch for intraday directions, especially after the US central banker failed to convince policy hawks, the Empire State Manufacturing Index for July and Canada Manufacturing/Wholesale Sales will also entertain the momentum traders. Also important to watch will be the Eurozone Industrial Production for May. That said, the US Dollar is likely to consolidate previous losses as Fed’s Powell may try hard to convince markets about the US soft landing and tame dovish bets on the Fed policy measures. If at all the traders fail to justify Powell’s attempt, this week’s US Retail Sales and ECB announcements will be important to watch for a possible rebound in the Greenback.

May the trading luck be with you!