📝 Executive Summary
After the July job numbers integration and with the August numbers yet to be released, the dollar will start Friday on the back foot. Governor of the Federal Reserve, Christopher Waller, said Wednesday that some signs of disinflation would justify a holding of monetary policy at the September meeting. The markets priced in odds of a Fed rate increase standing at 50 percent, as opposed to 63 percent the previous day. The dollar is set to close the week in negative territory amid positive oil prices and persisting inflation concerns due to the Iranian crisis. In the August jobs report, payrolls are expected to show growth of about 56,000, a significant improvement from the July figure which decreased by 23,000. Unemployment is expected to stay steady at 4.1 percent. It is also expected that the report will show the moderation of wage growth. A reporting of lower numbers would encourage they Fed to pause, and higher numbers may cause expectations to resume. The euro, on the other hand, has the opposite of the U.S. in regard to monetary policy. A Reuters poll of 65 economists shows that there is a unanimous consensus that the ECB will raise the deposit rate by 25 basis points to 2.50 percent on September 10. Inflation in the euro zone remained at 3.3 percent for August with energy costs being a main driver, however core inflation has dropped to 2.4 percent. The problem for the ECB is likely to be the same after September: slow and steady with policy to avoid tipping an unstable economy into a recession. Sterling is gaining from more aggressive rate hike expectations from the Bank of England. Huw Pill argued in favor of an even more abrupt rate hike, anticipating that an energy shock caused by the Iran situation may cause inflation to rise and remain entrenched in the economy. The markets are not expecting a rate hike until September, but there is a much higher expectation for rate hikes in the near future. Concerns over the UK government's cash flow, due to raised yields on UK government bonds, are still present. This will likely set the government's budget for October. Fundamental bias: DXY neutral-to-bearish, EUR moderately bullish, GBP moderately bullish; payrolls in the United States are expected to be the strongest driver of the market today. The DXY broke below 99.08 and is now focused on the 98.83 level. A move below that level will likely indicate further movement toward the 98.68 and then the 98.56 levels. The selling pressure will likely continue as long as DXY moves beneath the 99.08 level on a sustained basis. The broad structure of the market will likely remain the same even with a small move to the 98.83 level, which will likely be resisted. I will wait to see whether the DXY can move toward the critical support level of 98.83, which is tested in the current market. If not, I will shift my focus to 99.08 and higher, which is the first of the important resistance levels. Just below that level there is 99.22 and 99.35, which will also likely act as resistance levels, and then retun to the important resistance level of 99.48-99.62. The RSI is currently in oversold territory, so a correction could happen in the near future. However, until DXY moves above 99.35 and especially 99.48, I will maintain my bearish outlook. Should those levels be broken, I will need to consider a more bullish outlook. Until that point, I will likely view rebound attempts as correction within a bearish structure. GBP/USD is trading at 1.3542 after rebounding from the 1.3477 support zone. The RSI is back in bullish territory, but well overbought, and suggests the bulls defended the support zone. I am not convinced symmetrically this move has ended the broader bearish correction. 1.3565 presents an integral level of immediate resistance, while 1.3606 and the 1.3656-1.3676 supply zone demonstrate initial resistance. On the other side of the equation first support lies at 1.3526, while 1.3477 and 1.3435 offer additional support. Downside momentum is all but depleted as RSI sharply recovered toward neutral. I am taking a neutral stance with slightly more bullish bias, while price action stays above 1.3526. I would take a more favorable view on the rebound if we were to see price push beyond 1.3565. Below this level I would expect a slip back toward 1.3477. EUR/USD is currently trading at 1.1629 on a 4 hour chart as it pushes above a descending trendline that has capped price since August. What's interesting is that the 1.1625 resistance area has been broken and has moved up to support price. 1.1625 has been a resistance area many times in the past. This move looks strong when compared to other moves. 1.1659 and 1.1686 are the next major resistance levels with 1.1711 being out of sight. The first key support rests at 1.1625 and then dips to the key demand area at 1.1571. The RSI is currently in the bullish zone and does not look overextended which is supporting further price increases. EUR/USD is looking bullish and will remain bullish until it closes below 1.1625. A close below 1.1599 will show a failed breakout of the pattern and a move toward 1.1659 will become more likely. This article was originally posted on FX Empire Microsoft, Apple and Oracle Face Rising Rate Pressure US Dollar Price Forecast: Fed Hike Bets Lift DXY as EUR/USD and GBP/USD Fall EUR/USD, USD/CAD, USD/CHF Forecast: Dollar Faces NFP Risk XRP Price Eyes $1.80 as Active Addresses Hit Record High Bitcoin Price Forecast: BTC Holds $73K Support as Elliott Wave Setup Targets $90K USD/JPY Eyes Breakout as Rising Yields Support US Dollar