• Dollar softens ahead of Jerome Powell’s speech.
  • USDCAD pulls back from eight-month high on dollar softness
  • USDCNY remains range-bound as PBOC talks monetary policy
  • Gold turns bullish powers through $1800
  • US stocks correct lower amid tapering jitters

The US dollar rally paused on Friday as all eyes awaited the highly anticipated speech from the Federal Reserve Chair Jerome Powell. Hawkish tapering calls from FED policymakers have in recent days affirmed the greenback strength near four-month highs.

The dollar index, which measures the greenback’s strength against other major currencies, has pulled lower but remains in the touching distance near the 93.00 level.

USDCAD pullback on dollar softness

The dollar strength might as well be the catalyst behind the USDCAD pair bounce back from one-week lows. The pair remains well supported above the 1.2600 level after a steep pullback from eight-month highs of 1.29483.

After a recent pullback, a buying spree may be witnessed on the pair breaking above 1.2690, which could trigger rallies to the 1.2815 level.

Chart Showing USDCAD trending upward

On the flip side, a decline followed by a close below the 1.2585 level could trigger an increased sell-off to the 1.2490 level before targeting 1.2450.

USDCAD price action is at the mercy of dollar movements heading into the weekend. St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan fuelling tapering calls continue to affirm dollar strength.

In contrast, Powell is coming out more dovish and cooling; any push for tapering before the end of the year could trigger renewed dollar weakness that could see USDCAD correcting even lower.

USDCNY range-bound

Amid the dollar softness heading into the Powell speech, the USDCNY pair remains range-bound, with the Chinese yuan shrugging off dollar strength. USD/CNY continues to oscillate in a tight trading range between 6.46 and 6.48.

Chart showing USDCNY consolidation

Growing concerns about the health of the Chinese economy in the aftermath of the Delta variant have continued to weigh heavily on the yuan. The Chinese central bank PBOC has already reiterated that it is committed to deploying all the monetary policy tools at its disposal to bolster development. 

As the Chinese central bank contemplates pumping more money into the fragile economy, the Federal Reserve is considering tapering stimulus policy.

Gold above $1800

In the commodity market, gold regained its upward momentum, with XAUUSD powering through the $1800 level Friday morning. Above the critical support level, the precious metal could make a run for the $1815 level ahead of $1825.

Chart shows XAUUSD powers through $1800

Amid the bullish tone on gold, the focus is on the US PCE inflation data. However, the Powell address later in the day could trigger increased volatility on the metal influencing dollar strength. A dovish statement sending the dollar lower could cause XAUUSD to rerate higher, probably to the $1830 level. However, Powell affirming the need for tapering could trigger buck strength and cause XAUUSD to edge lower.

US indices retreat

US stock’s impressive run in the week came to a halt on Thursday, sending major US indices lower. The S&P 500 fell 0.6%, ending the recent streak of gains. The NASDAQ was also on the receiving end, dropping 0.6% as the Dow Jones Industrial Average fell 0.5%.

Image showing Dow Jones pull back

The sell-off came at the back of investors remaining cautious following explosions in Afghanistan. In addition, investors remain on edge ahead of a Federal Reserve gathering that might provide hints on the stimulus paring. With views unclear whether the address will provide a clear guide on tapering, markets are expected to remain on edge.

Bitcoin and Ethereum at support levels

In the cryptocurrency markets, Bitcoin and Ethereum remain bullish despite the recent pullback from four-month highs. BTCUSD finding support above the $47,000 could open the door for price gains back to the $50,000 level.

Chart showing BTCUSD pulls back

On the flip side, bears pushing BTCUSD below the $47,000 level could trigger an increased sell-off back to the $45,000 level. Likewise, ETHUSD is flirting with key support at $3,000 after the recent slide to the $3,100 level.

Chart showing ETHUSD near $3,000

A sell-off followed by a close below the $3,000 level could trigger an increased drop that could see ETHUSD tanking to the $2,905 level.