The euro surged over 1% against the greenback to the 1.192 area after ECB Governor Draghi’s speech at the Jackson Hole symposium on Saturday morning, as his endorsement of the economic growth of the euro area led to a boost in investors’ confidence.

The cyclical recovery was gathering both pace and geographical breath, he said, adding that even with inflation remaining low, the economy was ‘gaining ground’. 

Against the backdrop of the strong euro, the dollar index tumbled nearly 1% to the 92.4 area, breaking through the 161.8% Fibonacci extension level of 92.6. Technically, the trend for the dollar index remains bearish as both its 10-Day Simple Moving Average line and SuperTrend (10,2) continue to slope downward. 

The weak dollar fuelled the rally of precious metals, with gold and silver prices advancing to their key resistance levels at US$1,295 and US$17.16 respectively. 

As expected, neither Janet Yellen nor Mario Draghi offered any explicit clues on central bank policies concerning, balance sheet shrinking and tapering respectively. The focus has now shifted to the upcoming ECB meeting on 9 September for more hints of the exit plan to end the ECB’s massive bond-purchasing program. 

US equity indices were little moved on Friday, as investors remained sceptical over Trump’s tax reform plans, with the earlier optimism about the economy and progressive policies now fading. Asian shares opened mostly lower, with the strong Japanese yen dragging down the Nikkei 225 index and sentiment for southeast Asian markets remaining soft. Singapore’s Straits Times Index continued its consolidation due to a lack of fresh catalysts and soft oil prices. 

In Hong Kong, however, the Hang Seng index surged to a nearly-two-year high last Friday as fund flowed into the insurance, metals, bank and brokerage sectors. Strong momentum led to a rally in Hong Kong-listed Chinese financial stocks. The Hang Seng Index advanced over 300 points, or 1.2%, to 27,848 points. 

Technical Analysis:

US Dollar Index

  • 10-Day Simple Moving Average sloped downwards
  • SuperTrend (10,2) is sloped downwards, suggesting more downside pressure
  • Immediate resistance level at 92.6 (161.8% Fibonacci extension level)
  • Immediate support level at 91.8 (200% Fibonacci extension level)

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