• During last Friday’s trading session, the US dollar fell and then recovered after the release of the weaker-than-expected US Labor market report.
• According to licensed trading platforms, the GBP/USD exchange rate recovered to 1.3230 from 1.3170 after the US non-farm payrolls data came in below expectations at 160,000 jobs after falling to 142,000 jobs in August.
• The pair then fell again to fall below 1.32, perhaps due to a speech from John Williams of the Federal Reserve, which did not include a clear commitment to cut US interest rates by 50 basis points later this month.

Williams said that the time had come for a US interest rate cut, but market expectations of a large 50 basis point move faded as he showed no inclination for such an aggressive initial cut. In addition, the US non-farm payrolls numbers were not significantly below expectations and remained above 114K in July. Additionally, the unemployment rate fell to 4.2% from 4.3%, which was expected. Also shining on the positive side for the US dollar was the stronger-than-expected earnings data of 0.44% on a monthly basis, which was stronger than the expected reading of 0.3%.

Widely, Hurricane Beryl is believed to have tarnished the picture in July, which is why the smoothing of the data on a three-month basis provides a good glimpse into the direction of the Labor market. The three-month rolling average has now fallen to 116K from 146K, confirming a clear trend of weakness.

According to Forex trading, the US dollar’s ​​reaction after the payrolls is likely to be limited to recent ranges as there is not enough evidence in this report to clearly indicate whether the Fed will raise US interest rates by 50 or 25 basis points, ensuring that an element of uncertainty remains.

Overall, the US inflation report this week will provide more guidance for the markets, but it should be noted that the US Federal Reserve has shifted its focus from inflation to employment, believing that higher prices are eventually expected to decline further in the coming months. The Fed will be concerned about rising unemployment if it does not take action, but the debate now is over how strong the opening strike will be.

Concurrently, the Fed is expected to cut US interest rates by a total of 100 basis points this year, meaning at least one of the remaining meetings will see a 50-basis point rate cut. If that happens, the US dollar could continue to fall as US interest rates converge with those in other parts of the world.

An analysis from Bank of America says: “With the US 10-year Treasury yield trending lower after the first Fed cut, global financial conditions are set to improve further. The US dollar could see further weakness as other central banks, especially those that cut rates before the Fed, are now able to let the Fed do some of its work.”

On the stock exchanges front, the FTSE 100 failed to recover and closed down about 0.7% at 8,181.5 on Friday, its lowest level in nearly a month, extending losses to a sixth straight session. Meanwhile, the performance came as global traders reassessed the latest US jobs report, which pointed to continued slowdown in the Labor market, reinforcing expectations of an imminent interest rate cut by the Federal Reserve. However, uncertainty persisted over the scope of the potential cut. Locally, figures from Halifax showed that UK house prices rose to a two-year high in August as confidence rebounded amid easing interest rates. Among individual stocks, Vestry Group shares hit the bottom of the index, down 6.3% after UBS analysts stuck to a “sell” rating on the housebuilder despite positive results on Thursday. Burberry shares lost more than 5% ahead of their imminent FTSE 100 plunge. Also, industrial mining shares fell on the back of lower copper and iron ore prices.

For the week, the FTSE 100 index of UK shares fell 2.3%.

Technical forecasts for the GBP/USD pair today:

The GBP/USD price is trying hard to avoid collapsing to the psychological support level of 1.3000 so that the current bullish hopes do not evaporate. Technically, this is the most prominent level on the daily chart below and the GBP/USD price may remain in the current performance area until the financial markets and investors react to the announcement of the US inflation figures. Obviously, this latest economic data that will determine the fate of the US Federal Reserve’s decision in the coming days. In contrast, the resistance of 1.3250 remains the most important for the strength of bulls’ control. At the same time technical indicators are moving towards strong overbought levels.

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US Dollar vs Japanese Yen Technical Analysis

The US dollar has bounced a bit in the early hours against the Japanese yen against the backdrop of the 142 yen level offering massive support. This is an area where I think a lot of traders will be looking to find buyers. And therefore, the little bit of a bounce does make a certain amount of sense as the 142 yen level has been crucial multiple times. When you zoom out, it doesn’t take a whole lot of imagination to see that the market is most certainly testing an area of pretty significant support, not only based on the 142 yen level, but a massive trend line that goes back to the beginning of 2022.

So, it’s somewhat now or never for the dollar. Keep in mind that on the 18th, we have the next Federal Reserve meeting. And while it is expected to be a cut, it’s the language that people will be paying the most attention to. Furthermore, two days later on the 20th, we have the next interest rate decision from the Bank of Japan.

So, the next week or two might be somewhat choppy as we hang around this general vicinity, but this is an area that if we are going to see a turnaround, this would be a prime candidate. If we break down below the 140 yen level, this whole thing probably falls apart, and we could find ourselves down at 125 yen rather quickly.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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EUR/USD Current price: 1.1046

• Fears of a Eurozone recession weighed on the Euro.
• US inflation and ECB’s monetary policy coming up this week.
• EUR/USD under selling pressure, critical support at 1.1020.

The EUR/USD pair eased towards 1.1035 during European trading hours, as the Euro got hit by poor local data fueling concerns about the Eurozone’s economic performance. At the same time, the US Dollar remained resilient amid caution ahead of first-tier events scheduled for later this week.

The EU released  September Sentix Investor Confidence, which fell for a third consecutive month, printing at -15.4. The accompanying report showed the economy is on the brink of a recession and that the poor performance of the German economy plays a major role in this.  The United States (US) macroeconomic calendar will remain light on Monday, as the country will release July Wholesale Inventories and Consumer Credit Change for the same month.

However, the US will publish the August Consumer Price Index (CPI) on Wednesday, expected to have risen by 2.6% in the previous twelve months. Such a reading will be still above the Federal Reserve (Fed) goal of around 2%, but will be better than the 2.9% posted in July. Additionally, the European Central Bank (ECB) will announce its decision on monetary policy on Thursday. The ECB is widely anticipated to trim interest rates by 25 basis points (bps) after already delivering an interest rate cut. EU data released earlier today supports the case for a looser monetary policy amid the risk high rates imply to economic progress.

EUR/USD short-term technical outlook

The EUR/USD pair is sharply down for a second consecutive day, and technical readings in the daily chart show the slide may continue. The pair gapped lower at the opening and fell after filling the gap. A mildly bullish 20 Simple Moving Average (SMA) provides resistance at around 1.1090, while the 100 SMA slowly advances above the 200 SMA in the 1.0850 price zone. Nevertheless, technical indicators head firmly south, and the Momentum indicator has already crossed below its 100 level, in line with continued selling pressure.

In the near term, and according to the 4-hour chart, the risk skews to the downside.  The pair has extended its slide below the 20 and 100 SMAs, with the shorter one slowly gaining downward traction. Technical indicators have stabilized as the pair bounced from the aforementioned intraday low, but remain within negative levels, without signs of downward exhaustion. An immediate support level comes at 1.1020, with a break below it likely resulting in another steep leg south.

Support levels: 1.1020 1.0975 1.0930

Resistance levels: 1.1090 1.1115 1.1150  

• Expectations of further tightening of the Bank of Japan’s monetary policy continue to support the strength of the Japanese yen against other major currencies, especially against the US dollar.
• According to licensed trading platforms, the USD/JPY pair has plunged to the support level of 141.75, near its lowest level in 2024, and is stabilizing around the 142.15 level at the beginning of this important week, which is titled with US inflation figures that may define the features of the US Federal Reserve’s decisions.

According to forex market trading, for two years since the US Federal Reserve began its aggressive battle against inflation, equity traders have been glued to their screens on the days the US Consumer Price Index was announced. Meanwhile, things should be different next Wednesday when the latest US CPI data is released. But why?

Because with inflation falling toward the Fed’s target and the central bank poised to cut interest rates, the reading is less important to the stock market. Instead, it’s all about the weak employment outlook and whether the central bank can avoid a sharp decline. The S&P 500 is coming off its worst week since the collapse of Silicon Valley Bank in March 2023 as big tech stocks tumbled, led by a 14% drop in Nvidia Corp. shares. Volatility is back, with the Cboe Volatility Index, or VIX, rising from 15 on Aug. 30 to a high of nearly 24 on Sept. 6.

At the same time, options traders are betting on more of that, but less than the market expected, on CPI Day. As of Friday morning, they were pricing in a 0.85% move in either direction for the S&P 500 on Wednesday. If that happens, it would be among the smallest CPI Day moves this year, according to data compiled by Piper Sandler.

On the other hand, traders were pricing in a 1.1% implied move for the S&P 500 ahead of Friday’s weak U.S. jobs report. That was among the highest this year in absolute terms and 83% above the average implied daily move in 2024, according to data compiled by Susquehanna International Group. Moreover, the benchmark stock index managed to beat expectations, falling 1.7%.

Overall and fundamentally, market thinking has now shifted as US interest rate cuts have become a foregone conclusion, but the strength of the economy seems less secure. Federal Reserve Chairman Jerome Powell virtually declared victory in the battle against inflation during his comments at the central bank’s symposium in Jackson Hole, Wyoming, on August 23. Since then, more policymakers such as New York Fed President John Williams, Chicago Fed President Austan Goolsbee. Also, Fed Governor Christopher Waller have indicated that cuts are necessary – but the size is up for debate.

Now the Fed is turning to the other side of its dual mandate, and maximizing employment. The US jobs report released on Friday showed that non-farm payrolls rose by 142,000 jobs last month, putting the three-month average at its lowest level since mid-2020, according to the Bureau of Labor Statistics. Looking ahead to the Fed’s interest rate decision on September 18, swaps contracts are fully pricing in at least a quarter-point cut. At the same time, implied moves ahead of major employment-related macro events are gaining momentum, and with equity volatility measures like the VIX remaining elevated as traders hedge for more downside risks to stocks, according to data compiled by UBS AG Group.

USD/JPY Technical Analysis and Expectations Today

Friday’s pullback pushed USD/JPY below its 100-hour moving average. As a result, the pair is back near oversold levels on the 14-hour Relative Strength Index. In the short term, based on the hourly chart, USD/JPY is trading in a descending channel formation. Also, the 14-hour RSI has declined to approach oversold levels. Therefore, bears will seek to extend the current decline towards 140.44 or lower to the support at 138.52. On the other hand, bulls will seek to pounce on the rebounds at around 143.87 or higher at the resistance at 145.79. In the long term, based on the daily chart, USD/JPY is trading in a descending channel formation. The 14-day RSI also supports a long-term bearish bias as it approaches oversold levels. Therefore, bears will target long-term gains at around 136.27 or lower at the support at 129.66. On the other hand, bulls will seek to pounce on gains at around 149.07 or higher at the resistance at 155.40.

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• Prior to the close of last week’s trading, the EUR/USD pair declined following a speech by John C. Williams, President of the Federal Reserve Bank of New York.
• According to reliable trading platforms, the US dollar rose against the euro and other G10 currencies after a speech by John C. Williams, President of the Federal Reserve Bank of New York. Williams, a voting member of the Federal Open Market Committee, said it was time to cut interest rates but was not enthusiastic about starting the cycle with a large 50 basis point cut.

As a result, the euro fell against the US dollar EUR/USD 1.1065 after attempts to rebound higher with gains that reached the resistance level of 1.1155 and settled around the level of 1.1088 at the beginning of trading in the week of announcing the European Central Bank policy decisions amid expectations of a reduction in addition to the announcement of important US inflation figures. Williams had said in a speech he gave to the Council on Foreign Relations: “With the US economy now stable and inflation heading towards 2%, it is now appropriate to reduce the degree of restriction in the policy stance by reducing the target range for the federal funds rate.”

What the financial markets were looking for was any indication that the Federal Reserve was ready to cut US interest rates by 50 basis points. Instead, Williams said: “The stance of monetary policy could be moved to a more neutral framework over time depending on the development of data, expectations, and risks to achieving our objectives.”

He suggested there was no need to panic about the economy and the prospect of a more conventional 25bp cut seemed to disappoint the market, which had seen the odds of a 50bp move closer to 50%. Equity markets fell as expectations of a more aggressive pace of easing receded. In turn, US Treasury yields rose, as did safe-haven currencies such as the franc and the dollar. The euro/dollar exchange rate gave up its high of 1.1154 to trade at 1.1080 at the time of writing.

Before his speech, the very important US jobs report for August was released, and there was no “conclusive evidence” for supporters of a 50-basis point move. Certainly, the headline payroll figure was below expectations at 160,000 at 142,000, but this was higher than July and was not a big surprise. Additionally, the unemployment rate fell to 4.2% from 4.3%, and earnings beat expectations at 0.44% month-on-month, which was stronger than the expected 0.3%.

What will affect the EUR/USD pair in the coming days?

All eyes are now on this week’s US inflation figures, as a significant drop in expectations could activate bets on a 50-basis point move, which could in turn boost the EUR/USD exchange rate. However, anything close to consensus would warrant a 25-basis point move, which could keep the pair under pressure as the US dollar continues to make a comeback in September.

According to stock trading platforms, Wall Street markets end the week sharply lower. According to trading, US stocks fell on Friday, affected by concerns about a slowing Labor market and technology selloffs. The S&P 500 fell 1.7%, the Dow Jones lost 409 points, and the Nasdaq fell 2.5%. Big tech stocks like Amazon (-3.6%), Alphabet (-4%), and Meta (-3.2%) saw big losses, while chipmakers like Broadcom (-10.3%) and Nvidia (-4.1%) also saw sharp declines. According to the economic calendar, the US jobs report for August, which showed 142,000 new jobs versus 161,000 expected, added to the market tension. In addition, comments from Federal Reserve Governor Christopher Waller increased expectations for a further US interest rate cut in September. Also, he emphasized the growing risks in the Labor market and expressed his openness to cutting interest rates further if necessary. Over the past week, the S&P 500 lost about 4%, recording its worst week since March 2023. Likewise, the Nasdaq fell 5.6%, recording its worst start to September since 2001. Similarly, the Dow Jones fell 2.5%, recording its biggest decline in early September since 2008.

EUR/USD Technical analysis and forecast:

According to the daily chart, the Euro against the US Dollar EUR/USD is in a neutral position, and the trend will be more bullish if it moves towards the resistance levels of 1.1120 and 1.1200, respectively. On the other hand, and for the same period of time, the support level of 1.0945 will remain the most important for bears to control the trend again. Ultimately, we expect the Euro Dollar price to remain in narrow ranges until the reaction to the announcement of the European Central Bank policy decisions and the US inflation figures.

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• You can see that the British pound initially rallied during the trading session on Friday, but then collapsed quite significantly to show extreme signs of weakness.
• At this point in time, the market is likely to continue to see a lot of uncertainty.
• With the jobs number in the United States coming out weaker than anticipated, that has people worried about the global growth situation. And of course, whether or not the trader is going to continue to chase risk, or will they run into something like the US bond market in order to protect their wealth?

That is a very real possibility, but we’ll have to wait and see how that plays out. Keep in mind, this is a market that has been very, uh, bullish for some time. And we are now consolidating quite drastically. This suggests that the market will more likely than not continue to see the dips as potential buying opportunities, but if we really start to see panic take over the market, the US dollar is almost always a big winner.

A breakdown below the 1.3050 level opens up the possibility of a move down to the 1.30 level and then the 50 day EMA. In general, this is a market that I think continues to be very noisy and no matter what happens next, it is going to be a choppy affair.

If we were to break above the 1.3250 level, then the 1.35 level could end up being a target, which being a psychologically important large figure, it also could end up being a ceiling. We will wait to see if that ends up being the case, and as a result, I think this is a market that will remain volatile, but over the next few weeks, we should get a bit of clarity if the Federal Reserve can do its job of conveying their plans to the marketplace.

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• The USD/PY pair reached new lows on Friday after a mixed US employment report.

• The US nonfarm payrolls report showed slower job growth in August.

• Japan’s GDP grew by 2.9% compared to estimates of 3.2%.

The USD/JPY forecast shows a slight recovery in the pair from Friday’s plunge as the yen loses some of its shine. At the same time, the dollar gained as it became clear that the Fed might cut rates gradually. 

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After a mixed US employment report, the USD/PY pair reached new lows on Friday. The nonfarm payrolls report showed slower job growth, with the economy adding 142,000 jobs compared to estimates of 160,000. Meanwhile, the unemployment rate eased to 4.2%.

The initial reaction was a decline in the US dollar. However, it recovered as it became clear that the labor market was slowing down steadily. Therefore, the risk of a recession remains low. Although most major peers lost against the dollar on Friday, the yen remained steady due to rate hike optimism. 

Notably, on Thursday, BoJ board member Hajime Takata said the central bank should continue hiking interest rates. Nevertheless, he emphasized a cautious approach amid increased market volatility. Policymakers are ready to push interest rates higher as long as economic consumption increases. 

However, by Monday morning, economic data from Japan dampened some of this rate hike optimism. Japan’s economy grew slower than forecast in the second quarter. The GDP grew by 2.9% compared to estimates of 3.2%. Weaker-than-expected economic performance creates a challenge for the BoJ’s rate hike outlook. 

USD/JPY key events today

Market participants do not expect any high-impact economic releases in Japan or the US. 

USD/JPY technical forecast: Bears found rock bottom at 142.03 support

On the technical side, the USD/JPY price is recovering after finding support at the 142.03 level. Nevertheless, the price trades below the 30-SMA, with the RSI in bearish territory. Therefore, the bias is bearish, meaning the rebound might only be temporary. 

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Bulls are approaching a solid resistance zone comprising the 0.382 Fib and 144.00 key levels. Moreover, the SMA trades just above this zone. Consequently, the price will likely pause at this level and bounce lower. A break below 142.03 will confirm a continuation of the downtrend.

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• The Pound Sterling resumed its weekly recovery above the 1.3200 level.  
• GBP/USD remains poised for extra advances amidst Dollar weakness.
• The Pound Sterling is expected to closely follow key UK releases.

Following a drop below the key 1.3100 support earlier in the week, the Pound Sterling (GBP) managed to regain balance against the US Dollar (USD), lifting GBP/USD back north of the 1.3200 hurdle soon after US Nonfarm Payrolls disappointed expectations on Friday (+142K jobs). While that move fizzled out afterwards, it was not enough to reverse Cable’s positive weekly performance.

Pound Sterling continued to look at Dollar dynamics 

GBP/USD reversed the previous week’s downward bias on the back of the persistently bearish tone in the Greenback. The US Dollar remained under pressure against the backdrop of a renewed and aggressive Federal Reserve (Fed) easing narrative, which now includes a potential 50-basis-points interest-rate cut at its September 18 gathering.

The Dollar’s offered stance remained propped up by dovish remarks from the Fed’s Chairman, Jerome Powell, at the Jackson Hole Symposium in late August. His views were later reinforced by many Fed officials, who seem to have advocated for starting to reduce interest rates as soon as this month.

The BoE thinks otherwise

Following the Bank of England’s (BoE) rate cut on August 1, Governor Andrew Bailey argued that it remained uncertain whether the persistent elements of inflation were aligned with keeping price increases at the bank’s 2% target. He also questioned whether the current decline in inflation persistence was largely assured as global shocks that previously drove up inflation were easing, or if the UK economy would need a period of slack.

Furthermore, at his speech in Jackson Hole, Bailey said that he believed longer-term inflation pressures were easing. However, he highlighted that further interest-rate cuts would not be made hastily, as it was still too early to be certain that inflation had been fully controlled.

A survey released on Thursday indicated that British companies expect to raise their selling prices by the smallest margin in nearly three years, while wage growth shows no signs of slowing. This mixed news poses a challenge for BoE officials assessing inflation pressures.

Indeed, according to the BoE’s Decision Maker Panel (DMP), closely monitored by the Monetary Policy Committee, businesses in the three months to August anticipated a 3.6% rise in selling prices over the next year. This is the lowest figure since September 2021, slightly down from a previous estimate of 3.7%. However, projections for wage growth, a key factor for the BoE in monitoring inflation, remained steady at 4.1% for the three months to August, unchanged from July’s survey. The monthly data revealed that wage growth forecasts have been stable at 4.0% to 4.1% since May, indicating that the sharp decline in expectations seen over the past 18 months has halted. That said, persistent wage growth remains a major concern for the hawkish members of the MPC, who are worried that it could lead to prolonged inflationary pressures in the economy.

Investors estimate about a 25% likelihood that the “Old Lady” will cut interest rates at its September 12 policy announcement, while a rate cut is fully anticipated for November.

What’s next for the Pound Sterling?

All the attention is expected to be on the publication of US inflation figures tracked by the Consumer Price Index (CPI). However, the UK calendar appears pretty interesting with the releases of the always-relevant labour market report on Tuesday, and GDP figures among other key fundamentals, on Wednesday.

GBP/USD: Technical Outlook

If bearish momentum takes hold, GBP/USD could retest the September low of 1.3087 (set on September 3), followed by the interim 55-day SMA at 1.2900 and the important 200-day SMA at 1.2720. Beyond these levels, the pair may target the August low of 1.2664 (from August 8), the June low of 1.2612 (from June 27), and the May low of 1.2445 (from May 9). A break below this zone could bring the 2024 bottom of 1.2299 (recorded on April 22) back into focus, seconded by potential moves toward the weekly lows of 1.2187 (from November 10, 2023) and 1.2069 (from October 26), and ultimately the October 2023 low of 1.2037 (from October 4).

Conversely, on the upside, the immediate resistance for GBP/USD stands at the 2024 high of 1.3266 (reached on August 27), ahead of the weekly top of 1.3298 (from March 23, 2023) and the February 2022 peak of 1.3643 (from February 10). The daily RSI has eased a tad below 63.

I wrote on 1^st September that the best trade opportunities for that week were likely to be:

• Long of the EUR/USD currency pair following a bullish daily close above $1.1057. This set up on Wednesday but ended the week only at break even.
• Long of Gold in USD terms following a daily close above $2,525. This did not set up.
• Long of the S&P 500 Index following a daily close above 5,668. This did not set up.

Last week’s key takeaways were:

1. US Non-Farm Payrolls data came in notably lower than expected, with only 142k net new jobs created last month, compared to the expected figure of 164k. This was dovish for the US Dollar and the Fed’s monetary policy outlook. However, average hourly earnings data released simultaneously showed a month-on-month increase of 0.4% when only 0.3% was expected, which slightly tempered the dovish effect. The overall result of the data was to push the US Dollar and US treasury yields lower. Markets now expect the Fed to cut rates by a full 1%, at least by the end of 2024.
2. The Bank of Canada cut its interest rate by 0.25% for the third consecutive meeting, from 4.50 to 4.25%. The cut was widely expected, and the Bank held out the prospect of further reductions if inflation continued to look tame.
3. The only other significantly notable data release was Swiss CPI (inflation), which showed no change month-on-month, while an increase of 0.1% was expected. This continues the trend of most G20 nations, showing inflation falling faster than expected, which globally is a dovish trend for monetary policy.
4. Commodity currencies such as the Australian and New Zealand Dollars and commodities in general (especially softs) had a tough week as chilly risk-off winds breezed through markets. The week’s big winner was the Japanese Yen, followed by the Swiss Franc, another traditional safe haven. The US Dollar ended the week softer following weaker-than-expected NFP data.
5. Stock markets saw strong losses, especially technology stocks.

It will be a slightly slower week ahead in terms of data, but it includes more important data, with the most important items this coming week expected to be:

1. US CPI data – this event is currently the most important monthly data release in the Forex market.
2. US PPI
3. European Central Bank Main Refinancing Rate and Monetary Policy Statement – the ECB is expected to cut its Official Rate from 4.25% to 3.65%.
4. UK GDP
5. US Unemployment Claims
6. UK Unemployment Claims (Claimant Count Change)

I forecasted that the EUR/USD currency pair would rise in value during September. The performance of my forecast so far is as follows:

Last week, I made no weekly forecast, as there was no large group of currency crosses with unusually large directional movement, which is the basis of my weekly trading strategy.

This week, I again give no weekly forecast, as although 6 currency crosses fluctuated in value by more than 2%, I only like to trade when at least 7 have done so. The odds of profitable reversals are better when many crosses have abnormally large price movements. The volatility now is in the Japanese Yen alone.

Directional volatility in the Forex market rose last week—56% of the most important currency pairs and crosses fluctuated by more than 1%.

Last week, the Australian Dollar was the strongest major currency, while the Japanese Yen was again the weakest.

You can trade these forecasts in a real or demo Forex brokerage account.

The US Dollar Index printed a bearish candlestick last week, albeit with a significantly lower wick, suggesting the bearish momentum may not be strong. The price is below its levels three and six months ago, suggesting a long-term bearish trend in the greenback. Recently, the price broke down below the long-term consolidating triangle pattern, which was a significant bearish sign.

The overall picture is bearish, but the price is likely to consolidate until next Wednesday’s release of US CPI (inflation) data. Data from last week suggested that the US economy is a little weaker than expected, and it is now expected that the US Federal Reserve will cut rates by a full 1% before the start of 2025.

This week, I am cautiously bearish on the US Dollar due to the bearish trend.

The EUR/USD currency pair ended the week printing a higher candlestick, but looking at the price chart below, it is hard to say it looks bullish – but for this currency pair, which is prone to deep retracements, it still might be. That large upper wick is daunting for bulls, though.

The price remains within a valid long-term bullish trend.

Just like last week, I think a long trade here is still a good possibility, provided that the nearest support level at $1.1066 survives.

Much will depend on US CPI data, the policy statement, and the likely rate cut from the European Central Bank, which is due later this week. These events will likely cause some volatility here, as both currencies in the pair are directly affected.

The USD/JPY currency pair continues to be at the heart of the modern Forex market and is still showing a high level of range volatility.

The Yen was the strongest of all major currencies two weeks ago, and it was again this week. There are two good reasons for the strength of the Japanese Yen:

1. There is increasing fear in the market of recession, especially in the USA, which has caused a run to safe havens. As the US Dollar is seeing increasingly dovish tilts in its monetary policy, the number one choice for a safe currency is now the Japanese Yen (the Swiss Franc is also strong for the same reason).
2. The Bank of Japan has decisively shifted away from its former ultra-loose monetary policy after years of negative interest rates, which has prompted a belief that the Yen will continue to advance.

Last week’s candlestick was very bearish—it was relatively large, and the price closed very near the low of its range. It was the lowest weekly close seen in more than eight months, and the price is very near a full eight-month low.

I see this currency pair as a sell.

I expected the USD/CAD currency pair to have potential support at $1.3471.

The H1 price chart below shows how the price action rejected this support level with a very large and very bullish hourly pin bar, marked by the up arrow within the price chart below. This rejection occurred just at the start of the overlap of the London / New York sessions, which can often be a great time for reversals such as these in the US Dollar.

The trade made a profit so far of slightly less than 2 to 1.

All the commodity currencies are weak, and the Canadian Dollar is no exception, although it remains notably stronger than the Australian and New Zealand Dollars. The bearishness in Crude Oil helps drag the Loonie lower, with WTI reaching a new 1-year low price last week.

Gold in US Dollar terms has been grinding higher for weeks in a choppy, long-term bullish trend. Over the last few weeks, it has rejected the blue sky above the big round number $2,500 at least five times. This is a bearish sign despite the long-term bullish trend and recent record highs.

Last week, the price briefly touched a new all-time high, but looking at the weekly price chart below, we can see that last week’s candlestick was the third indecisive candlestick in a row and the second doji within that three-candlestick formation. This indicates indecision in the market.

The bearish retracement from the record high is still shallow, so it could be too soon to go short, especially if the price keeps finding support at $2,494.

Something to watch for is if the price turns strongly bullish again and decisively takes out the record high. This could be a decisive bullish sign after the five rejections, suggesting that a new long trade entry could be an excellent trade.

I see Gold as a buy if we get a daily close this week above $2,525.

The NASDAQ 100 Index fell strongly last week, in what was one of its worst-performing weeks in recent times. The large size of the bearish candlestick and the fact that it closed right on the low of its range are bearish signs.

Markets are firmly in risk-off mode and will likely remain that way until there is more clarity on the prospects of a soft landing for the US economy. US CPI data due this week will likely provide a clue on this or prompt the Fed to give more clarity on its intentions.

The price is still not very far from its record high, but it looks like the bullish stock market, especially in the technology sector, might be over.

 However, I think it is too early to take a short trade here—shorting is a risky undertaking in stock markets.

The price is sitting on two key support levels and has not broken the levels of a recent bullish pin bar. Therefore, bears should not open any new short trades here.

Some CFD brokers offer trading in US Treasury Yields, and traders with larger bankrolls can access this asset through the CME micro futures market. Treasury yields can be great for trend traders as they have historically tended to trend very reliably.

The continuing slowdown in the US economy, lower inflation, and increasing fears of a recession in the USA have all combined to push expectations of the Federal Reserve in an increasingly dovish direction. This has pushed short-term (2-year) treasury yields lower and lower.

The daily price chart below shows that the yield fell strongly last Friday following lower-than-expected US non-farm payrolls data. It made the lowest daily close in one year and also traded at a new six-month low.

As all trend traders should be, I am interested in being in a short trade here as it aligns with the direction the Fed is getting pushed in.

I see the best trading opportunities this week as:

• Long of the EUR/USD currency pair following a bullish bounce off $1.1066.
• Long of Gold in USD terms following a daily close above $2,525.
• Short of the USD/JPY currency pair.
• Short of the 2-Year US Treasury Yield.

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