During the Asian session on Thursday (September 7), USDCNH traded around 7.1986, up 17 bps from the previous reading. Last week, the released August PMI data of China was positive, and the level of economic prosperity remained generally stable. Meanwhile, US economic data was mixed, with final Q2 GDP and ADP employment data falling short of expectations. In addition, the non-farm payrolls didn't perform well, but the PMI was better than expected. Therefore, the US dollar continued to rise, once standing above 105, but non-US currencies were still under pressure to depreciate, and so did the RMB. USDCNH rose as high as 7.3350, approaching the mid-July high of 7.3500. We also noticed that the People's Bank of China continued to cut the reserve requirement ratio last week. This has happened twice in the past 2022. One was on April 25 last year, the foreign exchange reserve ratio was lowered by 1% in China, and the RMB exchange rate fell from 6.35 to 6.64 against the dollar in the same month. Another was on September 5 of the same year, the foreign exchange deposit reserve ratio was reduced by 2%, and the RMB exchange rate fell from 6.91 to 7.14 against the dollar in the same month. Will the depreciation continue this time? Last year, the dollar was at its strongest while China's economy was at its weakest. How about this time? Perhaps the context has changed.

Policy: China's central bank has cut the reserve requirement ratio for foreign exchange deposits of financial institutions by 2% to 4% since September 15. The foreign exchange deposit reserve ratio refers to the ratio of foreign exchange deposit reserves deposited by financial institutions to the central bank and their absorption of foreign exchange deposits. This is the second step after the central bank and the foreign exchange bureau raised the macro-prudential adjustment parameters for cross-border financing of enterprises and financial institutions from 1.25 to 1.5 on July 20 this year.

USDCNH has continued to swing back to 7.23 since hitting a stage high of 7.35 in mid-August. In early September, the exchange rate began to thrive as the dollar continued to strengthen, which was standing above 7.30 again and approaching the previous high. If the record high of 7.35 could be broken effectively, then the subsequent depreciation pressure will be even greater. Perhaps the pair will break the high of October 25 last year at 7.3748 and challenge the 7.40 mark, or even higher 7.50. However, with the action of China's central bank this week, further regulation will be implemented. We believe the RMB is more likely to return below 7.30. Even if not, the chance of breaking last year's high in the short term is very small. If the price can fall below 7.23 effectively, then this depreciation trend can be regarded as suppressed in this stage, which will lower the possibility of further sharp depreciation in the short term. From a monthly perspective, this round of rise also formed a double top with the peak of last year, which was also in the seriously overbought zone. Investors can still try to go short with small positions but must avoid chasing long. At the moment, the technical bullishness is far inferior to the policy bearishness.

Traders are recommended to sell high. When the price rises to 7.3500, you can seize the opportunity to go short with small positions. The stop loss is 7.3600. The first target is around 7.2800, where you can take profit partially and move your stop loss to break even. The second target is at 7.2300, which is the support of the previous low.

Trading Direction: Short

Entry Price: 7.3500

Target Price: 7.2800

Stop Loss: 7.3600

Support: 7.2850/7.2450

Resistance: 7.3350/7.3700

In Thursday's (September 7th) Asian session, spot gold oscillated upward slightly, and it is currently trading near 1920. Overnight, the released U.S. data was strong, and the Fed issued hawkish signals. In addition, the Beige Book from the Fed supports an optimistic view, and the market continues to go long, once pushing the dollar up to 105. In contrast, the gold price declined under pressure, once fell to 1915. Today, several Fed officials will speak, and gold may remain under pressure. At present, the support at 1915 is still reliable, but gold may have significant oscillations at this price.

Data: U.S. non-manufacturing PMI rose to 54.5 in August, the highest reading since February. It surged from July's 52.7, while Reuters' expectation was only 52.5.

Today's focus: Initial jobless claims and EIA crude oil data. 

Daily chart: On Monday, we expected that gold would decline soon, and it did decline to 1935 that day. It kept plummeting to 1925 on Tuesday and to 1915 on Wednesday. Thus, the bearish momentum is getting released step by step, and such a depreciation reached 40 dollars. It retraced by 60% from the last $65 appreciation ($1885 to $1950). Gold is expected to rebound on Thursday and Friday. If gold gets stable at 1915 and rebounds, it will rise further. If gold drops below 1915, investors should focus on the support near 1900. If gold gets stable above 1925, it will restart the ascending trend, with the resistance in the range from 1930 to 1935. 

Trading recommendations: Buy at lows. If gold falls to 1915 today, investors could go long with small positions and set the stop-loss at 1910. To take profits, the first target will be 1930, where investors should move the stop-loss to breakeven, and the second target should be set at 1940. If gold appreciates to 1935, aggressive investors could go short with small positions and fix the stop-loss at 1940. To take profits, the first target will be 1925, where investors should move the stop-loss to breakeven, and the second target could be fixed at 1915.

Trading direction: Long

Entry price: 1915

Target price: 1935

Stop loss: 1910

Support: 1915.000/1900.000

Resistance: 1930.000/1953.000

During the Asian session on Thursday, September 7, WTI crude oil swung in a narrow range, and it is currently trading around $87.1 per barrel. Yesterday, crude oil prices continued to fluctuate higher and surged to 87.5 in European and U.S. sessions on bullish U.S. economic data and inventory data, closing at 87.07 with a large bull candle. There was also a correction as the price once fell to the 85.4 level, but the amplitude was too small for traders to enter long positions. Current oil prices are still boosted by oil production cuts, but there will be some downside risks next. As the peak demand period has been over, refineries enter a maintenance period from September to October. This will limit the rise in oil prices. Besides, the potential increases in oil supply from Iran, Venezuela and Libya will also have an impact. Overall, oil prices are expected to keep moving up, but the momentum is weakening. It is not suitable to chase the rise at this time. Instead, we can go long after a retracement or go short after a surge.

Inventories: U.S. API crude oil inventories decreased by 5.521 million barrels for the week of September 1, compared to the expected decrease of 1.429 million barrels and the decrease of 11.485 million barrels last week.

Data: ISM non-manufacturing purchasing managers' index (PMI) for August was 54.5, compared with 52.5 expected.

News: Iran currently produces nearly 3.1 million barrels per day and it plans to boost it to about 3.4 million bpd, which should dampen a sharp rise in oil prices.

Today we need to focus on the EIA crude oil inventory report.

In the daily chart, oil prices retraced to 85.4 first yesterday, then rose to 87.5 in the night session, and finally closed at 87.1. WTI has risen for 7 consecutive days. The market remains strong. But there is a bearish divergence. And as it has risen for 7 consecutive days, the bullish momentum is weakening, so there is a demand for a correction. Without a retracement, new bulls may worry about their profits at such a high oil price.

It is recommended to buy low and sell high. If WTI crude oil rebounds to 87, investors can try to short it in the near term, with the stop loss set at 87.5, and take profit at 85.5 where they can reduce their positions and move the stop loss to break even and set the second target at 84.5. If oil prices fall to 84.5, traders can also go long, with the stop loss set at 84.0 and take profit at 85.5, and the second target can be set at 86.8.

Trading direction: Short

Entry price: 86.800

Target price: 85.000

Stop loss: 87.300

Support: 85.500, 84.500

Resistance: 87.500, 89.800

The European Central Bank (ECB) has been at the forefront of financial discussions lately, with market players closely monitoring the odds of an interest rate hike. The Euro, which has witnessed recent weakness, is poised for a pivotal moment that could significantly impact its trajectory.

Several factors have contributed to the speculation of an impending rate hike. Notably, persistently high inflation rates have caught the ECB's attention. The central bank's focus on present economic conditions, as opposed to predictions, plays a role in this consideration. There is also a palpable fear of prematurely ending the tightening cycle.

Acknowledging the ECB's dilemma is essential. Despite inflation remaining elevated, economic activity is notably slowing. Plunging sentiment indicators suggest a looming risk of recession. This conflict of economic signals complicates the decision-making process.

The ECB may opt to allow the impact of previous rate hikes to materialize before making further decisions. This approach provides the central bank with time to assess the effectiveness of past measures.

Headline inflation continues to present challenges, and the recent upswing in oil prices could prompt the ECB to revise its inflation forecasts upward. Eurozone wage growth, currently at 5.0%, aligns with the ECB's concerns regarding sticky inflation levels. This factor further underscores the central bank's delicate balancing act.

The ECB's emphasis on actual data over forecasts is a recurring theme. The central bank perceives a higher risk in prematurely ending tightening measures than in maintaining them for too long.

If market predictions of an imminent rate hike prove accurate, the Euro could experience a strengthening effect in response to the ECB's decision and accompanying guidance.

From a technical perspective, the EUR/AUD currency pair is distinctly within an uptrend. Recent price action has confirmed this bullish bias, as a higher low was established after testing the previously breached resistance level around 1.6700. Additionally, the breakout from a falling wedge pattern adds further credence to the bullish outlook. Notably, there's a confluence of an upward trendline and a key Fibonacci retracement zone, suggesting potential support and additional upside potential.

As the ECB's decision looms, both fundamental and technical factors will influence the Euro's direction. Market participants will keenly await the central bank's guidance, which may well set the tone for the currency's near-term trajectory.

ENTRY PRICE : 1.6850

STOP LOSS : 1.6600

TAKE PROFIT : 1.7200

The USD/CAD exchange rate has been making waves recently, reaching a 22-week high at 1.3651 in European trading, with a marginal increase of 0.06%. However, the real intrigue lies ahead, as the Bank of Canada (BoC) prepares for its upcoming meeting. In this article, we unravel the complex dynamics at play in the BoC's decision-making process and its potential impact on the currency markets, particularly the USD/CAD pair.

Market sentiment suggests that the BoC is likely to maintain its current interest rates at 5.0%. The probability of a rate hike is minimal, estimated at just 6% according to data from the TMX Group. This stance reflects the central bank's cautious approach amid a backdrop of economic uncertainty.

BoC Governor Macklem faces a delicate balancing act. On one hand, he must acknowledge that the previous rate hikes have had a cooling effect on the Canadian economy and subdued inflation. On the other hand, he must maintain the BoC's credibility by not ruling out the possibility of future rate hikes. Striking this balance is no small feat, given the contrasting economic signals.

Recent economic data, including the GDP report, paints a challenging picture. It indicates a 0.2% contraction in the Canadian economy, a stark contrast to the BoC's earlier forecast of 1.5% growth. The rate hikes in June and July have raised concerns about the risk of a recession, adding complexity to the policy decision.

While the Federal Reserve in the United States and the Reserve Bank of Australia have adopted a more hawkish stance on inflation and left room for further rate hikes, the markets are considering potential rate cuts. This divergence in central bank policies adds to the uncertainty in the financial markets.

The Federal Reserve's upcoming meeting on September 20th is of particular interest. Market expectations point towards a pause in rate hikes, signaling that rates may have reached their peak. Federal Reserve Governor Christopher Waller has hinted at proceeding cautiously with rate hikes given the downward trend in inflation.

Market participants are closely watching the BoC's decision and its potential impact on currency markets, particularly the USD/CAD exchange rate. Currently trading at 1.3651, with resistance tested at 1.3657, the next resistance line stands at 1.3721. Traders are cautious and waiting for a correction before considering buy orders. Support levels at 1.3573 and 1.3509 are significant in this scenario, adding further complexity to the market dynamics.

ENTRY PRICE : 1.3680

STOP LOSS : 1.3580

TAKE PROFIT : 1.3840

Central bank decisions have far-reaching implications for a nation's economy and its currency. The BoC's choice to maintain interest rates has generated considerable interest, especially given the recent performance of the Canadian economy.

Following the BoC's announcement, the CAD faced a weakening trend against most of its G10 counterparts. This decline in CAD value can be attributed to the central bank's decision to keep rates steady and its expressed confidence in forecasts that predict lower inflation in the upcoming months.

The decision to hold interest rates steady stems from concerns over recent disappointing GDP figures. The BoC believes these figures are indicative of the repercussions of prior rate hikes on Canada's economic landscape.

While acknowledging the existence of broad-based inflationary pressures, the BoC also noted a significant wage growth ranging between 4-5%. Such wage growth has implications for both costs and consumers' purchasing power.

The BoC acknowledges that the lagged effects of prior monetary policy decisions, including rate hikes, are gradually taking hold. This necessitates a cautious approach to assess the impact of these policies on wage and price pressures.

The BoC has signaled its readiness to raise interest rates again, should it become necessary. This practice serves to prevent money markets from prematurely anticipating rate cuts, which could nullify the impact of prior rate hikes.

Despite the BoC's cautionary stance on future rate hikes, some analysts, including CIBC, anticipate that rising unemployment rates in the coming months may signal that the current 5% rate represents the peak for this rate cycle. Nevertheless, rate cuts do not appear imminent at this juncture.

I am observing a potential selling opportunity in the GBP/CAD currency pair. Here are the specific criteria I am looking for:

A close below the psychological level of 171.000.

Subsequent price retracement either to this level or to the  trendline.

The emergence of bearish price action that indicates a structural shift on lower time frames, where previous support turns into resistance.

I will provide updates on this trade if it begins to unfold on lower time frames.

It's worth noting that the current price movement might be an attempt to clear out equal lows, a tactic known as seeking liquidity, which could be followed by a reversal back into the established channel, leading to an upward movement. It's essential not to become overly confident in any single trading bias. Consider potential buy opportunities if the price rises above 171.800.

ENTRY PRICE : 1.7080

STOP LOSS :1.7200

TAKE PROFIT : 1.6900