• Last week, the USD/JPY continued its decline, reaching the support level of 155.37, the lowest for the pair in a month and a half, continuing a sell-off from the yen’s weakest level in 38 years.
• Since mid-week, the USD/JPY rebounded to reach the resistance level of 157.86, stabilizing around 157.35 at the beginning of this week’s trading.
• The USD/JPY rate will continue to be influenced by the future of central bank policies and the extent of Japanese intervention in the forex markets. 

According to reliable trading platforms, the performance of the US dollar was mixed at the opening of the first trading session of last week, as the assassination attempt on US presidential candidate Donald Trump sparked volatile trading conditions in the United States. As markets continue to price in a September rate cut by the Federal Reserve, the US dollar struggled to find support. 

Meanwhile, Tepid comments from Fed Chairman Jerome Powell on Monday evening left the greenback rudderless, before a stronger-than-expected batch of US retail sales data lifted the greenback on Tuesday afternoon. While growth stalled in June, an upward revision to the May release provided modest support to the US dollar. Recently, the US dollar has been continued to slide on Wednesday as bets on a Fed rate cut held back any significant movement. However, in the latter part of the session, the dollar attracted some investor support after the release of US industrial production data. 

 The release showed higher-than-expected output in June, while May’s figures were also revised higher. The latest US initial jobless claims data was released on Thursday. Also, the data showed a higher-than-expected number of newly unemployed Americans filing for benefits, suggesting continued stagnation in the US Labor market. However, the US dollar managed to resist losses after recovering from a brief period of oversold trading throughout the week, driven by overbought bets on a Fed rate cut. 

Overall, rising US Treasury yields and cautious market sentiment have supported the US dollar as a safe haven as the week draws to a close. 

USD/JPY Technical analysis and Expectations Today 

USD/JPY has now risen to trade near the 100-hour moving average line. As a result, the pair is trading near overbought levels on the 14-hour Relative Strength Index (RSI). In the near term, based on the hourly chart, USD/JPY is trading within an ascending channel. Also, the 14-hour RSI has risen to trade near overbought levels. Therefore, bulls will target extended gains around 158.00 or higher at 158.60. On the other hand, the bears will look to pounce on pullbacks around 156.80 or lower at 156.00. 

In the long term, based on the daily chart, the USD/JPY pair is trading within an ascending channel. However, the 14-day RSI has recently declined to trade near the oversold levels of the indicator. Therefore, the bears will target extended pullbacks around 154.81 or lower at the 152.53 support. On the other hand, the bulls will look to pounce on pullbacks around 159.72 or higher at the 162.00 resistance. 

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• EUR/USD trades in a tight range slightly below 1.0900 early Monday.
• Market reaction to US politics remain subdued at the beginning of the week.
• The pair could stretch lower if 1.0880 support fails.

After closing the last two days of the previous week in negative territory, EUR/USD seems to have entered into a consolidation phase slightly below 1.0900 early Monday. The pair’s technical outlook points to a lack of buyer interest in the near term.

The US Dollar (USD) benefited from the souring risk mood in the second half of last week and caused EUR/USD to turn south. Additionally, several European Central Bank (ECB) officials hinted at another rate reduction in September on Friday, making it difficult for the Euro to gather strength.

Over the weekend, US President Joe Biden announced that he will no longer run for President at the upcoming election and endorsed Vice President Kamala Harris to be the new nominee. Nevertheless, markets showed little to no reaction to this development. 

In the European morning, US stock index futures trade modestly higher on the day. Investors, however, could refrain from taking large positions ahead of Tesla and Google’s second-quarter earnings figures, which will be released after the closing bell on Tuesday.

The US economic docket will not feature any high-tier data releases on Monday. Later in the week, S&P Global PMI data from Germany, the Eurozone and the US will be watched closely by market participants. On Thursday, the US Bureau of Economic Analysis will release its first estimate of the second-quarter Gross Domestic Product (GDP) growth ahead of Friday’s Personal Consumption Expenditures (PCE) Price Index. 

EUR/USD Technical Analysis

EUR/USD failed to return within the ascending regression channel coming from late June after testing the lower limit at the beginning of the week. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50, reflecting a lack of buyer interest.

On the downside, 1.0880 (Fibonacci 23.6% retracement of the latest uptrend) aligns as immediate support. If EUR/USD falls below that level and starts using it as resistance, 1.0840-1.0835 (Fibonacci 38.2% retracement, 100-period Simple Moving Average) could be seen as next support before 1.0810-1.0800 (Fibonacci 50% retracement, static level).

In case EUR/USD manages to rise above 1.0900-1.0910 (lower limit of the ascending channel, 20-period Simple Moving Average) and stabilize there, technical buyers could take action. In this scenario, 1.0940 (mid-point of the channel, static level) could act as strong resistance before 1.1000 (static level, psychological level) could be set as the next bullish target.

• EUR/USD trades in a tight range slightly below 1.0900 early Monday.
• Market reaction to US politics remain subdued at the beginning of the week.
• The pair could stretch lower if 1.0880 support fails.

After closing the last two days of the previous week in negative territory, EUR/USD seems to have entered into a consolidation phase slightly below 1.0900 early Monday. The pair’s technical outlook points to a lack of buyer interest in the near term.

The US Dollar (USD) benefited from the souring risk mood in the second half of last week and caused EUR/USD to turn south. Additionally, several European Central Bank (ECB) officials hinted at another rate reduction in September on Friday, making it difficult for the Euro to gather strength.

Over the weekend, US President Joe Biden announced that he will no longer run for President at the upcoming election and endorsed Vice President Kamala Harris to be the new nominee. Nevertheless, markets showed little to no reaction to this development. 

In the European morning, US stock index futures trade modestly higher on the day. Investors, however, could refrain from taking large positions ahead of Tesla and Google’s second-quarter earnings figures, which will be released after the closing bell on Tuesday.

The US economic docket will not feature any high-tier data releases on Monday. Later in the week, S&P Global PMI data from Germany, the Eurozone and the US will be watched closely by market participants. On Thursday, the US Bureau of Economic Analysis will release its first estimate of the second-quarter Gross Domestic Product (GDP) growth ahead of Friday’s Personal Consumption Expenditures (PCE) Price Index. 

EUR/USD Technical Analysis

EUR/USD failed to return within the ascending regression channel coming from late June after testing the lower limit at the beginning of the week. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50, reflecting a lack of buyer interest.

On the downside, 1.0880 (Fibonacci 23.6% retracement of the latest uptrend) aligns as immediate support. If EUR/USD falls below that level and starts using it as resistance, 1.0840-1.0835 (Fibonacci 38.2% retracement, 100-period Simple Moving Average) could be seen as next support before 1.0810-1.0800 (Fibonacci 50% retracement, static level).

In case EUR/USD manages to rise above 1.0900-1.0910 (lower limit of the ascending channel, 20-period Simple Moving Average) and stabilize there, technical buyers could take action. In this scenario, 1.0940 (mid-point of the channel, static level) could act as strong resistance before 1.1000 (static level, psychological level) could be set as the next bullish target.

• The EUR/GBP pair looks as if it is trying to continue its overall trajectory to the upside.
• Ultimately, the market has fallen rather significantly only to turn around and show signs of life. The 0.84 level has been conquered again, so we can stay above your that would obviously be a very bullish sign.
• If we can continue to go higher, then we could challenge the 50-Day EMA, which of course is a technical indicator that a lot of people would pay close attention to.
• If we can break above that, then it’s likely that the market could go looking to the 0.85 level.

Volatility of course is going to continue to be a major issue, and we have of course seen a lot of negativity overall. The market is most certainly in a very negative trend, and therefore I think we’ve got a situation where a lot of people will be looking at this as a potential issue, but it certainly is worth noting that the 0.84 level is a massive support level on the monthly chart, so we are most certainly in an area where you are going to see a lot of decisions asked.

Euro, and the European Central Bank

The euro of course is moving based upon the recent statements coming out of the European Central Bank, and the fact that perhaps the central bank did not cut rates like a lot of people thought they with this past week. However, the question then becomes whether or not the euro is going to continue to strengthen. That of course is a completely different question, but I do believe that if the market were to rally from here and break above the 0.85 level, that would be a huge boon for the euro itself.

If we were to see the market breaks significantly lower, then we could see this pair trade all the way down to the 0.80 level. Because of this, I think you’ve got a scenario where buyers are trying to come in and pick up a bit of value, but even if we do turn things around here, it’s going to be more or less a grind to the upside.

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• The British Pound has been all over the place against the Japanese Yen as we initially tried to rally, only to turn around and show signs of negativity.
• The previous session on Thursday formed a massive hammer, which of course is something worth paying attention to.

The 203 Yen level of course is an area that is a large round psychologically significant figure, and the fact that we have turned around to show signs of life and then break above the top of it suggests that we are more likely than not going to go looking to the 205 yen level if we can get any type of momentum jumping back into the market. It’s probably worth noting that the bottom of the hammer is sitting just above the 50 day EMA. So that of course is crucial.

The Importance of the 50-Day EMA

The 50 day EMA is an area that I think a lot of systematic traders will pay close attention to. If we were to break down below there, then the 200 yen level is a major area of interest as well. And obviously has a lot of psychology attached to it. If we turn around and break to the upside, then not only will we go looking to the 205 yen level, but possibly after that, even go looking towards the 208 yen level. Keep in mind that the market is highly sensitive to the interest rate differential between the British pound and the Japanese yen, and I think that will continue to be a major reason why this market goes higher. I don’t have any interest in shorting this market. I certainly don’t want to pay interest just to hold the Japanese yen as the Bank of Japan is essentially stuck with its loose monetary policy.

With all of this being said, I think you need to still look for buying opportunities but recognize that we have a lot of noise at the moment, so position sizing will be crucial at this point. The market is likely to see choppiness.

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STORY LINK Pound to Dollar Week Ahead Forecast: USD Volatility Tipped as Biden Withdraws

During the week, the Pound drew support from a shift in yield spreads in favour of the UK currency.

Expectations of a Bank of England August rate cut faded again while markets are now much more confident over a Fed move in September.

The Pound to Dollar (GBP/USD) exchange rate hit a 12-month high above 1.30 before a correction to 1.2920.

Bank of America considers that a sustained GBP/USD move above 1.29, could lead to a medium-term advance to 1.40.

Danske Bank has revised its Pound forecasts higher, but still forecasts a GBP/USD decline to 1.21 on a 12-month view.

Headline UK inflation held at 2.0% for June compared with expectations for a marginal decline to 1.9% while the core rate held at 3.5%.

Importantly, the services-sector remained at 5.7%, well above the Bank of England’s comfort zone.

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Overall, markets are now pricing in less than a 50% chance that the Bank of England will cut rates at the August policy meeting. HSBC commented; “If the central bank decides to keep rates unchanged in August, it should be GBP positive. However, over the medium term we believe the relatively poor growth-inflation mix in the UK compared to the US, should work in the USD’s favor.”

US data releases did not have a major impact.

Overall yield spreads hampered the dollar, but political considerations were a key influence.

Markets considered that the chances of a Trump election victory in November had increased sharply after surviving an assassination attempt.

There was also further pressure for President Biden to withdraw from the Democrat nomination.

Trump called on the Fed not to cut interest rates in September.

Commerzbank looked on the potential ramifications of political pressure on monetary policy; “If the Fed lowers the key interest rate in September, this may be seen as an immediate USD-negative signal. But it would also signal that the Fed is resisting political pressure. And that in turn would be USD-positive, especially in the long term of four upcoming Trump years.”

Credit Agricole notes the possibility of a dollar rebound if expectations are disappointed; “Any potential reality check could in turn lend the USD a hand at some point, while the seasonality also turns more favourable for the USD in August.”

Citigroup expects that A trump victory in November would be positive for the dollar due to the impact trade policy and tariffs together with a more expansionary fiscal policy with stronger growth and higher yields.

It added; “we do not expect markets will actively trade the election until August/September. A “red wave” scenario should be worth +5% for the DXY, and we expect markets will have this fully priced as a likely outcome going into the election itself. Therefore, the USD rally may actually peak into the election, with limited upside follow-through even in the event a “red wave” materializes.”

As this post was updated, Joe Biden announced his withdrawal:

pic.twitter.com/RMIRvlSOYw

— Joe Biden (@JoeBiden) July 21, 2024

There will also be important implications if the US slides into recession.

According to Citigroup; “recessions tend to start as USD negative events (as softening growth leads to markets pricing a more dovish Fed) but then becomes USD positive events as acute recession concerns start impacting risk markets and increasing volatility.

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TAGS: Pound Dollar Forecasts

1. Long of the EUR/USD currency pair following a daily close above $1.0920. This trade set up on Wednesday and gave a loss of 0.53%.
2. Long of the GBP/USD currency pair. This pair fell over the past week by 0.58%.
3. Long of the S&P 500 Index following a daily close above 5,634. This trade set up on Monday and gave a loss of 2.86%.

The overall result was a net loss of 3.97%, giving an average return of -1.32% per trade.

Last week’s key takeaways were:

1. Inflation data was released in the UK, Canada, and New Zealand. The data in Canada and New Zealand showed slightly stronger than expected falls in the rate of inflation, which is good news for stocks globally. Still, the UK data showed inflation coming in a fraction higher, albeit no higher than the target rate of 2%.
2. Fed Chair Jerome Powell said the US economy was on a deflationary path, and shortly after, the S&P 500 Index closed at a new record high. However, it spent the rest of the week selling off strongly.
3. The European Central Bank left its Main Refinancing Rate unchanged at 4.25%, as was widely expected. The ECB has stopped giving forward guidance, leaving analysts guessing about a possible rate cut in September.
4. US Retail Sales data came in slightly higher than expected, suggesting that US consumer demand may be slightly stronger than expected despite the slowing economy.

There were a few other events last week which were of lower significance:

1. US Empire State Manufacturing Index – slightly lower than expected.
2. UK Retail Sales – much worse than expected.
3. Canadian Sales – strongly worse than expected.
4. Australian Unemployment – the rate remained unchanged, but net new jobs were higher than expected.
5. UK Unemployment Claims – slightly worse than expected.
6. US Unemployment Claims –marginally worse than expected.

The most important items over this coming week will be:

1. US Core PCE Price Index.
2. US Advance GDP.
3. Bank of Canada Overnight Rate, Rate Statement, and Monetary Policy Report. The Bank is expected to cut its Overnight Rate from 4.75% to 4.50%.
4. US Unemployment Claims.
5. US, German, UK, French Flash Services & Manufacturing PMI.

This month, I forecasted that the USD/JPY currency pair would increase in value. The performance of this forecast to date is as follows:

Last week, I made no weekly forecast. Although there were some large directional movements in the NZD/JPY and EUR/NOK currency crosses, I had little faith that these would reverse over the coming week, so I did not want to take these trades. This was a great call, as both would have been losers.

Last week, the NZD/JPY currency cross experienced an unusually large directional price movement. However, I do not have faith that the price will revert over the coming week, so I again make no weekly forecast.

Directional volatility in the Forex market fell slightly last week, with 41% of the most important currency pairs fluctuating by more than 1%.

Last week, the Swiss Franc was the strongest major currency, while the Australian Dollar was the weakest.

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

The US Dollar Index printed a bullish candlestick last week, closing near the top of its range. This is a sign of short-term bullish momentum. However, bulls could not push the price into the zone of strong resistance between 103.92 and 104.15. Another bearish factor—a strong one—is that the greenback is now well established within a long-term bearish trend, being below its levels of both three months ago and six months ago.

I see the US Dollar as ripe for a bearish turnaround at the current price area. Once we start to see some kind of convincing bearish reversal in the price action, a trade against the US Dollar over the coming week could be a good idea.

Alternatively, if the US Dollar can establish itself above 104.15 over the coming days, that will be a bullish sign and likely a signal to stop shorting the Dollar.

The EUR/USD currency pair advanced quite strongly at the start of last week to make the highest daily close in three months. The close was near the top of the day’s range at the breakout, and the closing price was above the technically significant level of $1.0920. For these reasons, many trend traders took a long trade entry here. However, the price turned bearish by failing to rise above the nearby resistance level at $1.0945, which lowered the price. The downward move then got a tailwind by increasing strength in the US Dollar towards the end of the week.

Trend traders might still be involved on the long side until the price breaks below $1.0800 or the support level nearby at $1.0833. However, given that last week’s candlestick, shown in the price chart below, is a bearish pin bar, it may not be wise to be long here. Zooming out, the long-term price action is quite consolidative, which might be another reason not to be in a trade here.

I will enter a long trade if we get a daily close this week above $1.0939. This is not likely likely to happen.

I expected the USD/CHF currency pair to have potential support at $0.8820.

The H1 price chart below shows how an engulfing bar, marked by the up arrow, rejected this support level right at the start of last Thursday’s Tokyo session, signalling the timing of this bullish rejection.

This trade could still be open, but so far, it has given a maximum reward-to-risk ratio of approximately 3 to 1.

Gold advanced quite strongly at the start of last week to advance to a new record high well above $2,450. However, the price then broke down quite strongly over the rest of the week, so the weekly candlestick ended up as a bearish pin bar.

Although the price action can be seen as a bearish development, it is worth noting that the decline has not been very large and that a support level just below $2,400 succeeded in holding the price up during the final hours of last week’s market.

The price of Gold may well continue to fall as the new week gets underway, but if the support level holds and the price rises again to make a daily close above $2,468, I will enter a long trade.

Most trend traders will remain long here, but it is probably unwise to enter a new long trade without the price making a significant high first.

The S&P 500 Index reached a new all-time high last week after rising firmly during the first part of the week. However, we then saw a strong selloff over the latter days of the week, so strong that the price fell by more than three times the long-term average true range, which is enough for most trend traders to exit a long trade which has been nicely profitable.

While the US stock market has a way of bouncing back, the price action here suggests a major bearish reversal. The weekly candle is a bearish outside candle that closed very near the low of its range.

The US stock market has risen strongly recently, so we may be overdue for a fairly strong correction. Alternatively, the price might bounce back. There is much talk about a rotation away from tech stocks. It is true the NASDAQ 100 Index performed even worse last week, but we still see the broader stock market also selling off.

The best strategy here is remaining on the sidelines and only getting involved on the long side if we get a strong rebound ending in a new record-high daily close.

The NASDAQ 100 Index sold off strongly last week, after making then rejecting a record high during the previous week with a bearish doji candlestick.

While the US stock market has a way of bouncing back, the price action here suggests a major bearish reversal. The weekly candle is large and bearish, and it closed very near the low of its range. The weekly decline was the worst since April.

The US stock market has risen strongly recently, so we may be overdue for a fairly strong correction. Alternatively, the price might bounce back. There is much talk about a rotation away from tech stocks. Technology stocks have performed poorly over the past two weeks after going on a record run.

The best strategy here is remaining on the sidelines and only getting involved on the long side if we get a strong rebound ending in a new record-high daily close. I do not think that this is a likely scenario.

I see the best trading opportunities this week as follows:

1. Long of the EUR/USD currency pair following a daily close above $1.0939.
2. Long of XAU/USD (Gold) following a daily close above $2,469.
3. Long of the S&P 500 Index following a daily close above 5,668.

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US Dollar vs Japanese Yen Weekly Technical Analysis

The US dollar plunged during a major portion of the week, but it looks like the 155 yen level is trying to hold out of support. This of course is a large round psychologically significant figure and an area that people will be paying close attention to. So, with that being said, it looks like we are going to do something along the lines of forming a hammer. If we can break above the top of the candlestick, then it could open up the possibility of a move to the 160 yen level. And then perhaps to the 162 yen level.

Clearing that of course just kicks off the next leg higher. And although the Bank of Japan continues to intervene occasionally, the reality is there’s only so much that they can do. After all, the debt level in Japan is so massive, the interest rates rising could just absolutely rumble the economy. Japan is essentially stuck.

And at this point in time, it looks like inflation continues to be an issue in the United States. So, rates are going to stay high in the US for a while. And even if we do get cuts, you’re probably talking about 25 basis points between now and the end of the year, which is not enough to change the overall fundamentals of this pair. The question now is more or less, are we going sideways for a while and then going higher or are we just going to turn around and go higher? I have no interest in shorting this market.

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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US Dollar vs Japanese Yen Technical Analysis

The U.S. dollar initially pulled back just a bit against the Japanese Yen, only to turn around and show signs of life. We tested the 50-day EMA before pulling back just a bit, but ultimately, this is a pair that I think has offered enough value that people have begun to get involved yet again. The 155 yen level underneath, of course, is an area that I think a lot of people will be paying attention to as it is a large round, psychologically significant figure, and an area where we’ve seen buyers step in previously. With this being said, the market is likely to go looking to the 160 yen level, which is a large round figure as well.

All things being equal, this is a market that I think as the interest rate differential continues to favor the United States, we will continue to see this market rally quite a bit over the longer term. We have recently seen the Bank of Japan get involved, but this is just a band aid really for Japan in what is a bigger wound. They simply can get involved to slow the ascent of the dollar against the yen down, but to change the fundamentals, they just can’t do.

The interest rate differential is huge, and that’s because Japan simply cannot raise rates with the amount of debt that Japan has. The 155 yen level underneath is massive support, so if we were to somehow break down below there, it would obviously be a big deal. But I think at this point we are in the midst of stabilizing and if we can take off to the upside, perhaps clearing the 158.40 yen level, then the floodgates open and the buyers rush in.

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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Australian Dollar vs US Dollar Technical Analysis

The Australian dollar has drifted a little bit lower during the trading session on Friday and now we are hanging around the 0.67 level. The 0.67 level, of course, is an area that previously had been resistance and now market memory dictates that we could see a little bit of support. The 50 day EMA is sitting just below, and it is rallying. So, I think there’s an area where we might see buyers come in and try to pick up a little bit of cheap Aussie dollars.

The 0.6650 level underneath continues to offer plenty of support, but I think given enough time, we will probably try to see the market turn things around. If we were to break down below the 0.6650 level, then it’s likely that the Aussie dollar could go looking to the 200-day EMA. If we can break to the upside and clear the most recent swing high, then we could go looking to the 0.6850 level.

In general, this is a market that I think continues to be noisy, but that’s nothing new. All you have to do is look at the last several months and see just how choppy this pair typically is. The Australian dollar, of course, is highly influenced by commodities and Asia, so keep that in mind as well. But as things stand right now, I think we’ve got a market that may have a little bit of interest underneath. We’ll just have to see how Friday ends up.

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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