Forex Today: The Dollar does not give up

Monday is a holiday in the United States and Canada. Later, the Reserve Bank of Australia and the Bank of Canada will announce their monetary policy decisions. China trade data, Australian GDP and Canadian employment data are some of the most relevant reports to watch out for.

Here’s what to know for next week:

Chinese data will follow closely. National PMIs were mostly above expectations, providing some relief. Further stimulus measures may be announced. Trade data will be released on Thursday.

US economic data did not hold many surprises during the week and provided the Federal Reserve with arguments to keep rates unchanged at the next meeting. The September 13 Consumer Price Index will be crucial before the FOMC meeting on September 19-20. In the United States, factory orders and the revision of unit labor costs for the second quarter will be reported.

Despite the mixed Nonfarm Payrolls data, the Dollar Index rose on Friday, breaking above 104.20 and heading for the highest daily close since April. However, the 104.50 area remains a major resistance level. The DXY needs to consolidate above that area to open the doors for further gains, while below it would be vulnerable to sharp corrections.

The latest data shows a slowdown in inflation in the Eurozone, although not as fast as expected, and the outlook for activity worsens. This puts the next meeting of the European Central Bank (ECB) in a precarious situation. The prospect of a less dovish ECB weighed on the euro, which fell sharply after hitting weekly highs against the dollar, pound and yen. The common currency was one of those that lost the most. Next week, Eurostat will report on the Producer Price Index and compensation per employee for the second quarter.

The EUR/USD pair posted its seventh straight weekly decline after erasing Friday’s gains. The bias remains bearish. Meanwhile, EUR/GBP continues to move sideways within a wide range between 0.8500 and 0.8700.

GBP/USD closed the week around 1.2600. Just when it seemed poised for a more significant correction, the pair pulled back sharply, dipping towards the monthly lows and below the 20-week SMA. The current bias is sideways, with downside risks. On Wednesday, members of the Bank of England will testify before the Treasury Select Committee.

In a volatile week, USD/JPY ended up hovering around 146.00. The pair remains undecided as it hit fresh monthly highs but then pulled back sharply.

USD/CHF managed to post another week of gains after the rally on Friday. However, it remains below the 20-week SMA, which is currently near 0.8900. Failure to break above that level could trigger a sharp correction, while if it breaks above it, the USD/CHF pair could continue to advance. On Monday Switzerland will report its GDP for the second quarter.

The Australian dollar was the best performing major currency during the week. The AUD/USD pair posted weekly gains after six straight weeks of declines. However, the pair is still struggling to break above 0.6500.

The Reserve Bank of Australia will announce its monetary policy decision on Tuesday. No changes are expected. Outgoing RBA Governor Lowe is due to deliver a speech on Wednesday, explaining the latest decision. More importantly, the central bank meeting could be overshadowed by the second quarter GDP report, which is expected to show 0.3% expansion, up from 0.2% in the first quarter.

USD/CAD ended the week around 1.3600, after rising on Friday on weaker than expected Canadian GDP data. The bias remains bullish, but the 1.3650 barrier remains intact. Following Friday’s negative GDP surprise, the Bank of Canada is expected to hold interest rates on Wednesday. On Friday, Canada will report employment.