Greenback Strikes Back Ahead of FED’s Pivot

Nvidia Earnings Impress, Stock Falls on Chip Delays

The most expected publication during this week was earnings for Nvidia – the tech behemoth, holding the entire AI narrative this year. The report had met or even beat forecasts by every metric, but investors got used to strong numbers already.

The company reported production challenges with its new Blackwell AI chips, causing fears of delays. Although Nvidia‘s revenue for the third quarter is projected at $32.5 billion, surpassing analysts’ average predictions, it missed the high end of estimates, thus the stock price had fallen after hours. This situation had pushed Nasdaq down.

Market Awaits PCE, Dollar’s Slide May End

Other than NVDA earnings, the next big thing is PCE publication on Friday, which is known as “FED’s inflation”, which is expected to rise 0.1-0.2% for the related period. Now the consensus among market participants points to the almost guaranteed one step decline of the interest rate in September, and the main question is whether it will be one or two step declines.

The US dollar was under significant pressure in August, as investors rushed into bonds anticipating the long awaited Fed’s pivot to the dovish cycle. Though, according to the CME group’s Fedwatchtool, 62% of traders are still sure that the upcoming interest rate decline would be no more than for one step, thus the freefall of the greenback might be already over, as most dovishness of the Fed is already priced in.

Yields of 30-year bonds of the United States have also stabilized above 4.1%, not showing any signs of change.

This situation may point to overheated negative sentiment around the US dollar, which may lead to a pullback of the US dollar index, and it has already started happening. Thus, in this review, we will focus on potential long positions for the US dollar.

EUR/USD

EURUSD had shown a massive engulfing pattern on a daily chart, magnified by another bearish close following the initial pattern. Usually this situation might lead to the price sliding down to the height of the formation, which points to a potential target area of 1.1012.

The price might not move immediately to the downside: from historical studies we know that there’s an increased probability of a retest of 50% of the pattern, which may serve as an intermediate-term resistance level. If this level gets rejected, price can proceed moving down and achieving the projected target.

The opinions in this article are personal to the writer. They do not reflect those of Exness or FX Empire.

This article was submitted by Stanislav Bernukhov, an analyst at Exness.