Reserve Bank of New Zealand Governor Orr spoke to various media, further conveying his message that the Bank intends to lower interest rates toward a more neutral setting at a measured pace. The RBNZ began its easing cycle on Wednesday, Orr was out selling it today again. The New Zealand dollar hasn’t done a lot on the session. It dipped but bounced back with the rising AUD (more to comeon this)

From Japan we had data for Q2 GDP, showing the economy expanded by a much faster-than-expected annualised 3.1% in the quarter. It rebounded from the contraction in Q1. Consumption grew strongly. The Bank of Japan will be eyeing this as support for its rate hike cycle. The yen weakened a little but is back to mid range and thereabouts as I post.

Australia’s economy added 58,200 jobs (full-time employment rocketed 60,500, for a third month of strong gains) in July after the 52.2K rise in June. Participation rose to a record high, while the unemployment rate ticked up a little to 4.2%. AUD/USD has risen from pre-data lows of under 0.6575 to 0.6620+ as I post.

The regular People’s Bank of China Medium-term Lending Facility (MLF) operation did not take place today. Its been scheduled for August 26. The Bank added in nearly 600bn yuan in a 7-day reverse repo, which more than covers the 401bn yuan of MLF maturing. See bullets above for more info if needed.

Arch Capital Global Chief Economist Parker Ross remarked on the US CPI Report and the Fed rate path, stating,

“Core services inflation (0.31% m/m) – the sticky component the Fed has been worried about – bounced back in July from its weakest monthly reading since 2021.”

The CPI Report shifted the focus to the US labor market data and the US economy. The Fed hawks may have little ground to keep interest rates unchanged if there’s a marked deterioration in labor market conditions.

Short-term Forecast: Bearish

USD/JPY trends will hinge on Japan’s GDP and US economic data. Upbeat GDP numbers from Japan and weaker US data could push the USD/JPY toward 145.

Investors should remain alert. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered well below the 50-day and 200-day EMAs, confirming the bearish price trends.

A USD/JPY breakout from the 148.529 resistance level and the top trend line could signal a move toward 150. Furthermore, a break above 150 could bring the 151.685 resistance level into play.

Economic indicators from Japan and the US require consideration on Thursday.

Conversely, a drop below the 145.891 support level could signal a fall toward the 143.495 support level.

The 14-day RSI at 33.31 suggests a USD/JPY break below 147 before entering oversold territory.

• Recently, the EUR/USD exchange rate has consolidated its gains made in early August in recent trading, but it may have room to decisively overcome the nearby resistance around 1.0935 and approach the 1.10 level in the coming days.
• According to reliable trading platforms, the EUR/USD pair did not change much last week after giving up the big gains the pair made on Monday over the following days.
• Moreover, the losses were limited to a small part of the progress it made in early August, and the trend remains up.

This is due to the significant increase on August 5th when US jobs data for July surprised expectations sharply, prompting markets to bet on multiple US interest rate cuts by the end of the year. Commenting on the performance of the currency pair and the influencing factors, Jane Foley, head of FX research at Rabobank, said on Friday: ‘We have largely removed our three-month target of 1.05 for the EUR/USD pair based on the view that imminent interest rate cuts by the Federal Reserve are likely to prevent a decline to this level this year.’ The analyst added, “For now, we continue to favor selling EUR/USD on any moves towards 1.10”.

The bets on an interest rate cut of up to 100 basis points have seen the euro begin to erode the technical resistance around 1.0935, and we might see the EUR/USD pair set its sights on the psychological resistance level of 1.10 this week. This is partly due to polls indicating that Democratic Party presidential candidate Kamala Harris has turned the tables on former President Donald Trump. Also, because the U.S. inflation figures for July, which will be released on Wednesday. Obviously, this data is likely to reinforce market expectations of an imminent rate cut by the Federal Reserve.

According to Rabobank analysts, “From a 3 to 6-month perspective, we see potential risks for price increases due to the weakness of the U.S. dollar rather than the strength of the euro. This could be due to a weaker-than-expected U.S. economy or a Harris win in the election, although our baseline forecast is based on a Trump victory.”

Overall, the recent shift in the polls undermines one of the key sources of support for the US dollar and its outlook through the end of the year as Trump’s protectionist trade policy agenda and use of tariffs is quite positive for US business investment, output, employment and GDP. However, the consensus also sees US inflation rising 0.2% m/m when July data is released on Wednesday, with the annual rate expected to be cut to 2.9%, from 3%. Consequently, this keeps the US deflationary process intact and should weigh on the dollar as it is loosely negatively correlated with inflation.

The recent breakdown of the U.S. dollar exchange rate and the upward breakout of the EUR/USD pair suggest that the pair may be on the verge of closing the gap with its fair value, which is around 1.1577, up from 1.1511 at the beginning of the year.

This estimate is derived from the analyst’s fair value model, which uses inflation, interest rates and the spreads between their cross-currencies to estimate where currencies should trade as inflation rises and falls.

On the stock trading front, US stock markets start the week with mixed performance. US stock markets struggled to maintain momentum on Monday, after a turbulent week, as investors braced for a week of crucial economic data. According to trading, the S&P 500 closed lower, the Nasdaq added 0.2% and the Dow Jones lost 140 points.

This week, according to the economic calendar, the focus will be on key indicators such as the US Consumer Price Index, Producer Price Index, Retail Sales and Industrial Production. Clearly, those data are expected to shed light on the strength of the US economy and the ongoing inflation challenges.

According to market trading, Real estate and telecommunications services led the losses of the session while technology, energy and utilities sectors closed in the green. Among the stocks, shares of Nvidia rose 4% as the chipmaker aimed to overcome concerns about its next-generation processors. In contrast, shares of Qualcomm fell 1% after its rating was downgraded from outperform to peer perform. Shares of JetBlue Airways plunged 20.7% after announcing plans to borrow $2.75 billion, using its loyalty program as collateral.

EUR/USD Technical analysis and forecast:

According to the performance on the daily chart attached, the Euro against the US Dollar EUR/USD price is in a neutral position. Technically, the bulls will prevail if it succeeds in breaking the psychological resistance of 1.1000. On the other hand, and over the same period of time, the upward efforts will fail if the bears return the EUR/USD pair towards the support level of 1.0820. As we mentioned before, the EUR/USD price will remain in a narrow range until the markets and investors react to the announcement of the US inflation figures and statements by US Federal Reserve officials.

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EUR/USD Current price: 1.1038

• The US Consumer Price Index eased further in July, fueling the market’s optimism.
• Investors are pretty much convinced about an upcoming rate cut from the Fed.
• EUR/USD trades at its highest since January and aims to extend the advance.

Optimism reigned throughout the first half of the day, putting pressure on the US Dollar. The EUR/USD pair surged above the 1.1000 threshold and traded as high as 1.1034 during the European session and ahead of first-tier data. 

The upbeat mood resulted from mounting speculation that the United States (US) Consumer Price Index (CPI) will support an interest rate cut when the Federal Reserve (Fed) meets in September. The release of the softer-than-anticipated US Producer Price Index (PPI) on Tuesday acted as a catalyst, sending high-yielding stocks firmly up.

The US inflation data finally came out and initially hit the USD. The CPI rose by 2.9% on a yearly basis in July, easing from 3% in June. The annual core CPI, which excludes volatile food and energy prices, rose 3.2%, below the 3.3% previous, although matching expectations. Finally,  the monthly CPI and the core CPI MoM both rose 0.2%.

The US Dollar initially fell with the news, as it meant the Fed would likely deliver an interest rate cut in September. But after a few minutes, the market understood the news did not change much what it believed before it. As a result, the USD recovered some ground, but not enough to turn bullish. Ahead of Wall Street’s opening, markets are still struggling for direction, although risk appetite prevails.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it has already surpassed the aforementioned intraday high, extending gains and maintaining its positive momentum. The pair further advanced beyond bullish moving averages, with the 20 Simple Moving Average (SMA) accelerating higher above the 100 and 200 SMAs. Technical indicators, in the meantime, approach overbought readings with modest upward slopes without any other sign of upward exhaustion.

The near-term picture indicates resurgent buying interest. In the 4-hour chart, technical indicators keep advancing despite already developing within extreme readings. At the same time, the 20 SMA accelerated north above the longer ones. The current 1.1040 area offers resistance ahead of 1.1085, the next level to watch should EUR/USD maintain its strength.

Support levels: 1.0990 1.0950 1.0900

Resistance levels: 1.1045 1.1085 1.1120

The EUR/USD pair is experiencing a substantial rise. The market counts on weak economic signals from the US. Find out more in our analysis dated 14 August 2024.

EUR/USD forecast: Key trading points

• The EUR/USD pair has reached a new high in seven trading sessions.
• The market is increasingly confident about a substantial Federal Reserve interest rate cut in September.
• EUR/USD forecast for 14 August 2024: 1.1000 and 1.1011.

Fundamental analysis

The EUR/USD rate has markedly increased and is hovering around 1.0994 on Wednesday.

Yesterday’s US statistics caused the instrument to surge. The Producer Price Index increased by only 2.20% y/y in July, down from 2.60% previously and the forecasted 2.40%. Month-over-month data was also weaker than expected.

A “cooler” PPI report might suggest that today’s inflation release will also be weak. The CPI statistics due later today may confirm the disinflation course in the US. If forecasts align with the reality, the likelihood of a 50-basis-point Federal Reserve interest rate cut in September will increase markedly.

The baseline scenario assumes that US inflation stood at 3.00% y/y in July. The CPI, excluding groups of volatile goods, may reach 3.20% compared to 3.30% in June. The EUR/USD forecast will depend on these indicators.

EUR/USD technical analysis

The H4 EUR/USD chart shows that the market has reached the growth wave target of 1.0945. A consolidation range has formed around this level. With an upward breakout, the EUR/USD rate could rise to 1.1000. The price is expected to reach this level today, 14 August 2024, and then decline to 1.0974. Subsequently, another growth structure may develop, targeting 1.1011, marking the completion of the growth potential. A new decline wave is expected to begin, aiming for 1.0880 as the initial target.

Summary

The EUR/USD pair is steadily rising. Technical indicators suggest a continued growth wave towards the 1.1000 and 1.1011 levels.

Read the original analysis: EURUSD surges to a seven-day high, driven by weak US PPI data