Markets to watch this week

US Dollar Index: Upward trendline remains on watch

Further inflation progress reflected in the US Personal Consumption Expenditures (PCE) price data to end last week saw the US dollar weakened slightly, as the data seems to reaffirm expectations for the Federal Reserve (Fed)’s easing process to kickstart in September. The rates market is now pricing a 60% probability for a September rate cut.

That said, the formation of higher lows since the start of the year still seems to suggest a near-term upward trend in place for the US dollar. Its daily relative strength index (RSI) revealed a firm sit above the key mid-line as well, which generally shows buyers in control. Any downside may see an attempt from buyers to defend a key upward trendline support at the 104.97 level ahead, while on the upside, the 106.14 level which marked a previous consolidation zone may be eyed for a retest.

Last week, the Commodity Futures Trading Commission (CFTC) data revealed further build-up in aggregate dollar positioning vs G10 for the second straight week.

Levels:

R2: 107.00
R1: 106.14

S1: 104.97
S2: 104.00

US Dollar Index chart:

Spot Gold: Still in broader indecision as upside momentum ebbs

Gold prices have been trading in broad consolidation over the past two months, as the call for patience among Fed policymakers was weighed with the uncertainty in the Middle East and France’s parliamentary election. The lower highs in the daily RSI since April this year do point to some ebbing upside momentum, but the indicator has since settled around the mid-point in reflection of some near-term indecision.

The US$2,292 level will serve as a crucial horizontal support to hold, having been defended on three occasions before. Failure for the level to hold could signal sellers in greater control, which could drive further unwinding to the US$2,223 level next. On the upside, a near-term downward trendline may serve as immediate resistance to overcome for now.

Levels:

R2: 2,450
R1: 2,390

S1: 2,292
S2: 2,223

Spot Gold chart:

EUR/USD: Symmetrical triangle formation in place

The EUR/USD has been trading within a symmetrical triangle formation, with recent interaction with the lower triangle trendline finding room for a bounce. This comes amid a bullish crossover at its daily moving average convergence/divergence (MACD), while its daily RSI eyes for a potential cross back above its mid-line. The lower triangle trendline will serve as immediate support to hold at around the 1.065 level, while on the upside, buyers may seek to retest the 1.084 level ahead where previous interactions with the level were met with strong resistance.

Levels:

R2: 1.096
R1: 1.084

S1: 1.065
S2: 1.054

EUR/USD chart:

Japan 225: Rising channel pattern in focus

The Japan 225 index has found its way to a near three-month high lately, with a weaker yen environment and resilience in US tech offering some tailwinds. The index has been trading within a rising channel pattern since April this year, with recent interaction with its upper channel trendline finding some near-term resistance.

Trading within the channel may still leave the formation of a higher low on watch, with further retracement likely to find support at the 38,400 level where the lower channel trendline resides. After some indecision, buyers seem to be taking greater control, with its daily MACD finding the way into positive territory while its daily RSI also registered its highest level since March this year.

Levels:

R2: 41,136
R1: 40,000

S1: 38,400
S2: 36,600

Japan 225 chart: