USDCAD is coming lower,  after 75bp increased by BoC, but Rogers noted that the rates will need to be rised further. At the same time, we see USD making a strong reversal across the board while crude oil is trying to stabilize near 80-82USD. This makes a perfect case for some bearish price action. However this reversal can be temporary as we are now tracking wave b pullback that can belong to a higher degree fifth wave of an ending diagonal.  Ideall resistance is at 1.3300/1.3400 area. I think that later this year or in 2023 current USD bull cycle can come to an end, but of course this will depend on further FEDs interest rate policy decision. As soon as FED will signal that they are approaching end of the cylce the USD will be expected to turn south across the board. 

Another pivotal week lies ahead for currency traders, with the latest US inflation report set to decide whether the dollar’s relentless rally will finally cool off. Meanwhile, markets are leaning towards a half-point rate increase from the Bank of England, although sterling’s fate is mostly in the hands of global forces.    Inflation cooldown It’s been a glorious year for the US dollar so far. The reserve currency is essentially the only asset that has gained ground over the last nine months, riding a perfect wave of widening interest rate differentials, safe-haven flows, and an absence of alternatives.  The Fed poured gasoline on this rally recently when Chairman Powell pledged to do whatever it takes to eradicate inflation, even if that means a period of economic pain. He reinforced the notion that interest rates will need to be kept high for some time, sending traders scrambling to price in a ‘higher for longer’ path.  Encouraged by a labor market that is essentially at full employment, the Fed chief is convinced the economy can absorb this blow without sliding into a deep recession. Markets are currently pricing in an 85% probability for another three-quarter point increase this month and a terminal rate of just under 4% to be reached early next year.  Naturally, the upcoming data will be a crucial piece of this puzzle. The CPI inflation report for August is out on Tuesday and forecasts point to a negative monthly print, which would drag the yearly rate down too. Gasoline prices kept sliding during the month and business surveys from S&P Global suggest services companies raised their selling prices at the slowest pace in one-and-a-half years, adding credence to the forecast.  A second consecutive month of softening price pressures would be music to the ears of Fed officials, but it wouldn’t be enough to get them off their warpath. The Fed’s second-in-command, Lael Brainard, said this week it would take “several” months of low inflation readings before they become confident inflation is moving down to its 2% target.  As for the dollar, even a disappointing inflation print is unlikely to change the overall trend. The markets could start flirting with a half-point Fed hike this month and that might deal a blow to the greenback, but it is difficult to envision a reversal while Europe is suffering from energy shortages, the yen is in freefall, and China’s property crisis is deepening.  Retail sales for August will follow on Thursday, ahead of the latest University of Michigan consumer survey on Friday, which has turned into a market-moving release lately.   BoE - double or triple?  Over in the United Kingdom, the Bank of England will announce its rate decision on Thursday. Market pricing is leaning towards a half-point rate increase, assigning a 65% probability to this scenario against a 35% chance for a larger move of three-quarters of a percent.  It’s a tough choice for the BoE. Business surveys point to an economy that's already contracting as demand crumbles under the weight of the cost-of-living crisis. Along with the government’s plan to cap energy prices, which will likely prevent inflation from reaching the 13% peak the BoE envisioned in its latest forecasts, there is a strong case that policymakers should play it safe and opt for the smaller move.  The problem with that is the exchange rate. Sterling has already depreciated dramatically, second only to the collapsing Japanese yen this year. Going for half measures would invite further weakness, exacerbating inflationary pressures.  There’s a barrage of data releases ahead of the rate decision that will help shape market expectations. The show will kick off on Monday with GDP stats for July, ahead of the employment report for the same month on Tuesday, and the latest inflation data on Wednesday. Then on Friday, retail sales for August are due out.  As for sterling, the most important variable won’t be how hard the BoE strikes next week but rather what happens with stock markets. Because of the UK’s chronic twin deficits, the pound has developed a tremendous sensitivity to global risk sentiment, with Cable trading in lockstep with the S&P 500 most of the time.  In this respect, the outlook for stocks remains challenging. The Fed is hell-bent on keeping rates high until inflation is vanquished, the pace of quantitative tightening doubled up last week, valuations are still not cheap, and a series of earnings downgrades might be imminent if Europe and China continue to roll over.  A glance at China Finally, the monthly data dump from China that includes retail sales and industrial production will be released on Friday. Investors will pay close attention to assess the damage from a property sector in freefall and the recent lockdowns of major cities.  Ahead of this dataset, Australia’s latest jobs numbers and New Zealand’s GDP print for...

DXY traded to 110.78 highs against tops to the 40 and 50 year averages at 110.72 to 111.55. Points 110.72 - 111.55 holds as tops for months to come. DXY tops are driving non USD anchor pairs higher such as AUD/USD, NZD/USD, EUR/USD and GBP/USD. DXY tops drove USD/CAD 100 pips lower to current 1.3000's from 1.3200 highs. USD/JPY from reported 144.82 tops now trades 142.00's. DXY at current 108.00 crossed below 109.00's CAD/JPY. On the way higher for DXY to 110.78, EUR/AUD broke above vital 1.4740 to trade 1.4881 highs. Next FX focus is wide range currencies EUR/AUD, EUR/NZD, GBP/AUD and GBP/NZD. AUD/USD currently trades 0.6868 Vs AUD/EUR at 0.6749 and EUR/AUD at 1.4815. Last evening at 4:00 pm EST, AUD/USD traded 0.6750 Vs AUD/EUR at 0.6754 and EUR/AUD 1.4807. As DXY dropped to assist AUD/USD higher, AUD/USD was provided further assistance to cross above AUD/EUR to trade 126 pips higher to 0.6876. NZD/USD at current 0.6138 competes with NZD/EUR at 0.6081 Vs EUR/NZD at 1.6444 as NZD/USD crossed above NZD/EUR. EUR/CAD at 1.3124 Vs CAD/EUR 0.7619 to CAD/CHF 0.7379 and CAD/USD 0.7695. Yesterday at 4:00 pm, EUR/CAD 0.7642 Vs USD/CAD 0.7640 and CAD/CHF 0.7414. Actual at 4 yesterday, USD/CAD 1.3090 Vs EUR/CAD 1.3085. CAD/GBP at 0.6623 trades above NZD/GBP at 0.5286 and AUD/GBP at 0.5909. Next week DXY at 108.00's Vs EUR/USD at 1.0000's and parity offers roughly an 800 pip spread and down from 1100 at week's beginning. Despite DXY at extreme 50 year highs and judged by wide range currency reciprocals, moves won't see violent up and down swings but rather fairly normal movements. EUR/USD is expected a close in the vicinity of 1.0052 to range next week from 0.9944 to 1.0085. EUR/USD big break for higher prices is now 1.0225. Targets next week then become 1.0154. USD/JPY target and big break is located at 141.11. USD/JPY must break 135.00's for a deeper move lower. JPY cross pairs trade severely overbought but must break for GBP/JPY is found at 162.47 and EUR/JPY at 138.59 while CAD/JPY is held higher by 104.00's, AUD/JPY at 93.00's and NZD/JPY 84.00's. Next week to short JPY cross pairs targets EUR/JPY 140'ss and GBP/JPY easily 163.00's. USD/CAD most vital is located at 1.2958 and targets 1.2834. USD/CAD broke below the 5 year average at 1.2980. DXY lower then targets USD/CAD at 400 pips from the 5 year average at 1.2563. Lower USD/CAD and DXY challenges EUR/CAD big break at 1.3245 GBP/USD trades 1.1574 to 1.1783 in wide ranges. Severely overbought EUR/NZD for lower must clear 1.6338 and not much to changes since last week. Overbought EUR/NZD continues its wide divergence to oversold GBP/NZD. GBP/CHF at 1.1200's trades a lifetime low never seen before in 69 years of trade since 1953. GBP/CHF at the 2008 crash traded 1.9948 and dropped 8700 pips or 600 pips per year.

Markets have ended the week on a firmly risk-on note, with stocks making further headway in the final session. Stocks rally to end the week “Investors have put the ECB hike and Powell’s warning about more rate increases firmly behind them, and the rally of the past two days has gathered strength. While the broader bear market most likely has further to run, it looks like the next bear market rally has also kicked into action. This provides scope for some significant short-term upside in stocks, although traders will probably only stick around for a while, and investors should be careful not to jump in too quickly or too enthusiastically.” Markets keep calm and carry on “UK investors will no doubt be feeling somewhat conflicted given the current events, and the BoE has followed the lead set by other institutions by postponing its rate increase. But otherwise it is very much business as usual, and next week will still see a significant focus on the UK with CPI and employment data, although it is unlikely to provide a real change in trend for sterling, which still looks to be on a downward path against the dollar.”

Gold failed to make a convincing move in either direction. August inflation data from the US could trigger a significant reaction. Gold’s technical outlook points to a lack of recovery momentum. Following a quiet start to the week, gold edged lower but managed to stay afloat above $1,700. With the dollar facing heavy selling pressure ahead of the weekend, XAU/USD extended its upward correction and reached a ten-day high near $1,730 on Friday. Nevertheless, the pair failed to preserve its bullish momentum and closed the week little changed below $1,720. August inflation data from the US next week could have a significant impact on gold’s valuation. What happened last week The trading action was subdued on Monday as US financial markets remained closed in observance of the Labor Day holiday. With trading volumes returning to normal levels on Tuesday, risk aversion became apparent in markets, and the dollar started to gather strength, causing XAU/USD to stretch lower. Following Gazprom’s decision to halt gas supplies to Europe late Friday, the company’s Deputy CEO Vitaly Markelov stated on Tuesday that the Nord Stream 1 pipeline will not be launched until Siemens Energy replaces the faulty equipment. Over the weekend, however, Siemens said it had not been asked to do the job and added that sanctions would not prohibit maintenance. Heightened concerns over a deepening energy crisis in the euro area provided an additional boost to the greenback. Meanwhile, the ISM reported on Tuesday that the Services PMI improved to 56.9 in August from 56.7 in July. The Employment Index returned into the expansion territory above 50 and the Prices Paid Index, the inflation component, edged slightly lower to 71.5 from 72.3. The 75 basis points (bps) Fed rate hike probability in September climbed above 70% after this data, lifting US Treasury bond yields and further weighing on gold.  The data from China showed early Wednesday that Imports and Exports both rose at a softer pace in August than expected. Although the disappointing trade figures from China forced gold to stay on the backfoot in the first half of the day, the yellow metal reversed its direction during the American session. The Federal Reserve’s Beige Book showed that US firms saw progress on labor supply and price pressure in July, causing the US Dollar Index to pull away from the multi-decade high set at 110.78. On Thursday, the European Central Bank (ECB) announced that it hiked its key rates by 75 bps as expected. ECB President Christine Lagarde adopted a cautious tone regarding future rate increases, but the 10-year US bond yield rose more than 10%, causing XAU/USD to suffer losses. In turn, XAU/USD also registered daily losses despite the greenback’s uninspiring performance. In a speech delivered on the same day, FOMC Chairman Jerome Powell reiterated that they need to act strongly on inflation and said that history cautions against prematurely loosening the policy. Nevertheless, these remarks had no lasting impact on the USD’s performance against its rivals. Ahead of the weekend, the positive shift witnessed in risk sentiment triggered a deep dollar sell-off and gold climbed to its highest level in over a week at $1,729.55. Some profit-taking toward the end of the European session, however, capped the precious metal’s gains. Next week The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for August on Tuesday. On a monthly basis, the CPI is expected to decline by 0.1%. The Core CPI, which excludes volatile food and energy prices, is forecast to stay unchanged at 0.3%. FOMC policymakers refrained from confirming a 75 bps rate hike in September and a soft inflation report could cause the probability of a 50 bps rate increase to rise. In that scenario, US T-bond yields are likely to fall sharply and trigger a decisive rally in gold. On the flip side, stronger-than-expected CPI prints could cement a 75 bps rate hike and not allow XAU/USD to turn north. It’s worth noting, however, that markets are already leaning toward an oversized hike, suggesting that the dollar’s potential gains could remain limited.  August Retail Sales figures will be featured in the US economic docket on Thursday, but investors are unlikely to react to these data due to the fact that they are not adjusted for price changes.  On Friday, August Industrial Production and Retail Sales data from China will be looked upon for fresh impetus. Both prints are forecast to reveal a stronger expansion than recorded in July. If these figures disappoint, gold could have a hard time finding demand, with investors losing hope for a steady recovery in gold’s demand and vice versa. Finally, the University of Michigan’s flash September Consumer Sentiment Index report will be released on Friday. Market participants are likely to pay close attention to the long-run inflation expectations component of...

EUR/USD climbs to a two-week high on Friday amid the emergence of fresh USD selling. The risk-on impulse seems to be the only factor exerting pressure on the safe-haven buck. Bets for more aggressive Fed rate hikes could limit the USD downside and cap the major. The EUR/USD pair witnessed good two-way price swings on Thursday and finally settled nearly unchanged for the day, around the parity mark. The shared currency struggled to attract buyers after the European Central Bank (ECB) delivered an unprecedented 75 bps rate hike to snuff off record high inflation. It is worth mentioning that the Eurozone CPI surged to 9.1% in August and is expected to rise to double-digits in the coming months. In the accompanying monetary policy statement, the ECB said that it expects to raise interest rates further to dampen demand. The jumbo rate hike, however, was already priced in the markets and hence, did little to provide any meaningful impetus to the shared currency. This, along with the emergence of some intraday US dollar buying, dragged the pair to the 0.9930 area. Speaking at a Cato Institute conference, Fed Chair Jerome Powell reiterated the central bank's strong commitment to bringing inflation down and warned against prematurely loosening monetary policy. Powell added that the Fed needs to keep going until it gets the job done and reaffirmed market bets for a supersized rate hike at the next FOMC meeting on September 20-21. This, in turn, triggered a fresh leg up in the US Treasury bond yields and provided a modest lift to the greenback. That said, the risk-on impulse, as depicted by a goodish recovery in the US equity markets, acted as a headwind for the safe-haven buck. Furthermore, ECB sources noted that a 75 bps hike in October remains on the table if the inflation outlook warrants an additional big step, assisting the EUR/USD pair to recover early losses. The recovery momentum extends through the Asian session on Friday and lifts spot prices to a two-week high. The USD comes under renewed selling pressure and retreats further from a two-decade high touched earlier, which, in turn, is seen pushing the EUR/USD pair higher. It, however, remains to be seen if the pair can capitalize on the move amid worries about the gas supply crisis in Europe, which could drag the region's economy faster and deeper into recession. The indefinite shutdown of the Nord Stream 1 pipeline has only raised fears of an imminent worst-case scenario, warranting some caution for bulls. Traders now look forward to ECB President Christine Lagarde's speech, the EU Economic Summit and the Eurogroup meeting for a fresh impetus. Later during the North American session, comments by Fed officials will influence the USD and produce short-term trading opportunities around the major. Technical Outlook From a technical perspective, a strength beyond the 38.2% Fibonacci retracement level of the August-September downfall might have already set the stage for additional gains. That said, any subsequent move up is likely to confront stiff resistance near the 50% Fibo. level, around the 1.0115 region. Some follow-through buying has the potential to lift the EUR/USD pair further towards the 1.0175 area, or the 61.8% Fibo. level. This is followed by the 1.0200 round-figure mark, above which spot prices could accelerate the momentum towards the next relevant hurdle near the 1.0265-1.0275 supply zone. On the flip side, weakness below the 1.0050 area (38.2% Fibo. level) could now be seen as a buying opportunity and remain limited near the parity mark. The latter nears the 23.6% Fibo. level and should act as a pivotal point for intraday traders. A convincing break below could make the EUR/USD pair vulnerable to retesting the overnight swing low, around the 0.9930 region, before eventually dropping to the 0.9900 round figure. The downward trajectory could further get extended towards a two-decade low, around the 0.9865 zone touched earlier this week, which if broken decisively will be seen as a fresh trigger for bearish traders.