Last week was a tough one for USD backers, as values fell across the majors. September USD Index futures illustrated the prevailing bearish sentiment, posting losses on four-out-of-five trading days. All in all, the third week in August was a brutal one for Greenback bulls. Will things pick up as the month draws to a close? Let’s dig into this market and find out.

Post-FOMC Economic Calendar

The primary event last week was Wednesday’s release of the U.S. FOMC Minutes. We covered it in depth at FX Leaders, here is a quick recap: the U.S. economy is strong, the U.S./China trade war is bringing uncertainty, and the FED is going to adjust policy on-the-fly for the remainder of 2018.

This week brings us another relatively open economic calendar facing the USD. Things heat up later in the week, but through Wednesday forex action may be quiet. Here are the key events:

Event                                                                         Day                Previous             Projected

Core Personal Consumption (Q2)                     Wednesday              2%                            2%

Gross Domestic Product (Q2)                            Wednesday             4.1%                         4.0%

Core Personal Consumption Exp.(July)            Thursday                 1.9%                         2.0%

It comes as little surprise, but analysts are calling for Q2 GDP to be revised downward from 4.1% to 4.0%. This is no shocker, as the 4.1% number released earlier this summer was an epic figure — it being tapered is not an earth-shattering event.

The big question now is what does Q3 GDP hold? Without a doubt, the U.S. economy is strong and still growing. Nonetheless,  fallout from the ongoing trade strife, natural disasters (wildfires in the Western U.S.), and somewhat disappointing real estate metrics will surface at some point. GDP for the third quarter may throw a curveball to the markets. If it does, the FED’s tightening policy will bear the blame and the likelihood of a December rate hike (#4 for 2018) will fall.

USD Index Futures

September USD Index futures took some serious heat beginning last Monday through the closing bell on Friday. The lone bright spot was a nice rally on Thursday. Other than that, the bears were in full control.

Both the Daily SMA and Bollinger MP will be recalculated on Monday’s open, so they will be omitted here. However, there are a few “big picture” numbers to watch for the coming week:

• Resistance(1): Psyche Level, 95.500
• Support(1): 78% Retracement August Range, 94.855
• Support(2): August Low, 94.290
• Support(3): Psyche Level, 94.000

Overview

The USD Index closed Friday’s session in a non-committal area on the daily chart between the Bollinger MP and Daily SMA. It will not be a shock if we see slow conditions early in the week, with trade rotating within the 95.000-95.500 range.

Nonetheless, this market is trading at a key area of support. After Wednesday’s test and rejection of the 78% retracement of August’s range (94.855) bulls took price to 95.500, where it failed. Going into Monday’s session, last week’s downtrend is still very much in play, prompting me to maintain a bearish bias. If the August 78% retracement (94.855) is taken out, then we will see the August low (94.290) violated by next Friday’s close.

The coming week is the last of August and summer trading. Tuesday, September 4, marks the beginning of the fall trading season and a bulk return of institutional money to the marketplace. So, enjoy one more week of muted seasonal action on the markets. Once September kicks off, it is likely to be a whole new ballgame.