Dow stays side-lined as AUD/USD trades in 2-month high and US natural gas nears key support  

Macro Update

Asian equities begin the week on the front foot: Markets across the region moved higher, led by gains in China and Hong Kong, with MSCI's Asia-Pacific index excluding Japan rising 0.5% as investors looked ahead to key Chinese economic data and a softer US interest rate outlook.

Expectations of a Fed rate hike continue to fade: Markets have reduced the probability of a Federal Reserve rate increase next month to around 30%, down from 50%, after weaker US retail sales and consumer sentiment data raised concerns over the strength of the world's largest economy.

Dollar softens as policy outlook shifts: The US dollar weakened against most major currencies as investors pared expectations for further Fed tightening, while the yen strengthened modestly despite softer-than-expected Japanese GDP figures.

Oil prices remain elevated despite softer demand signals: Brent crude edged towards $90 a barrel, while WTI traded little changed, with persistent Middle East tensions and ongoing disruption risks around the Strait of Hormuz continuing to underpin a sizeable geopolitical premium.

Gold extends its recent rally: Spot gold gained around 0.5% to approximately $4,396 an ounce, supported by the weaker dollar and easing expectations of higher US interest rates, leaving bullion up nearly 10% over the past month.

Investors prepare for a busy week of economic data and earnings: Markets are focused on Wednesday's Federal Reserve minutes, key European economic indicators and Canadian inflation data, while results from major US retailers including Walmart and Home Depot are expected to offer fresh insight into consumer resilience.

Dow Jones consolidates further still

The Dow Jones Industrial Average retraced lower last week but is so far holding above its July 53,294 previous record high which is expected to act as support, were it to be revisited.

A rise above Thursday's 54,054 high may begin another up leg with the 11 August high at 54,228 ahead of the early August all-time high at 54,749 being in focus. If bettered, a long-term 161.8% Fibonacci extension level at 58,979 may be eyed.

Short-term outlook: neutral while above last week's 53,627 low

Medium-term outlook: bullish while above the 23 July 51,547 low 

Dow Jones daily candlestick chart

AUD/USD trades at two-month high

AUD/USD's rally from its $0.6866 late June low is seen gunning ahead with the 61.8% Fibonacci retracement of the May-to-June decline at $0.7121 being tested. If overcome, the mid-March highs at $0.7150 may be reached next, ahead of the March peak at $0.7187 and the  78.6% Fibonacci retracement at $0.7189.

While the cross remains above Thursday's low at $0.7044, bullish momentum should prevail. Minor support above this level may be found around the 12 August $0.7091 high.

Short-term outlook: bullish while above $0.7044

Medium-term outlook: bullish now that the $0.7088 mid-June high has been exceeded; this view will remain valid as long as the 3 August low at $0.6984 underpins

AUD/USD daily candlestick chart

US natural gas futures prices fall out of bed

US natural gas futures are rapidly falling towards their early August low at 250.4 which may offer interim support. If slipped through, the April trough at 235.1 may be back in the limelight. En route lie the late April low at 248.2 and the mid-April trough at 240.4.

Minor resistance sits at the 13 August low at 259.6.

Short-term outlook: bearish while below the 12 August high at 270.1

Medium-term outlook: bearish while below the 23 July high at 289.4

US natural gas daily candlestick chart