USD/JPY Fundamental Daily Forecast – More Downside Pressure Likely as Financial Markets Remain Unsettled

The Dollar/Yen is trading higher on Tuesday after posting a sharp sell-off the previous session due the safe-haven buying of the Japanese Yen. The Forex pair is being supported early in today’s session by a technical bounce in global equity markets and slight rise in U.S. Treasury yields. Despite the rebound, traders remain cautious due to contagion fears in the Asia-Pacific region and general uncertainty ahead of the start of the Federal Reserve’s two-day meeting on Tuesday.

At 01:40 GMT, the USD/JPY is trading 109.552, up 0.172 or +0.16%. This is up from Monday’s low at 103.324.

Safe-Haven Buying Drives Demand for Japanese Yen

The USD/JPY retreated on Monday as worries about the fallout from property developer Evergrande’s solvency issues spooked financial markets and lifted safe-haven currencies like the Japanese Yen.

Market sentiment is being rattled by the potential contagion from Evergrande, which is trying to raise funds to pay a host of lenders, suppliers and investors. A deadline for an $83.5 million interest payment on one of its bonds is due on Thursday, and the company has $305 billion in liabilities.

Evergrande’s woes worsened on Monday after warnings from Chinese regulators that the company’s insolvency could fuel broader risks in the country’s financial system if not stabilized.

Fed Meeting on the Radar

Ahead of Monday’s turmoil, the U.S. Dollar had been pushing higher against the Japanese Yen and a basket of other major currencies on expectations the Federal Reserve will begin reducing its monthly bond purchases this year, with the central bank’s policy announcement due on Wednesday.

Daily Forecast

Despite the early strength, the USD/JPY could still face some downside pressure because the financial markets remain unsettled. Some traders are getting their first taste of a classic flight to safety move into the U.S. Dollar and the Japanese Yen until we get some sense of clarity on whether or not Evergrande’s assets will be liquidated in an orderly fashion or just dumped on the open market.

Australia, for example, is facing huge risks because Evergrande is one of the major property owners in the country. Evergrande is expected to be forced to liquidate large amounts of property to fulfil their debt obligations and that will really hurt property and property-related commodities and stocks.

Global debt and equity markets are especially at risk. If they continue to tumble then investors will flock to the Japanese Yen for protection.

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

AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Minutes to Take Backset to Evergrande Contagion Fears

The Australian Dollar is edging higher against the U.S. Dollar early Tuesday, shortly ahead of the release of the Reserve Bank of Australia’s (RBA) policy meeting minutes at 01:30 GMT. The Aussie was under pressure the previous session as a stronger U.S. Dollar weighed down commodities and commodity-linked currencies. The catalyst behind the selling pressure was a looming catastrophe at indebted property giant China Evergrande.

At 0:55 GMT, the AUD/USD is trading .7254, up 0.0001 or +0.02%.

Aussie traders are extremely nervous because Evergrande is one of the major property owners in Australia. A forced liquidation of those properties to fulfil their debt obligations will put tremendous pressure on property and property-related stocks. It could also hurt the mortgage market and may even force the RBA to delay any tightening of policy. New liquidity from the central bank could become an option if the situation gets worse enough. All of these factors could weigh on the Australian Dollar.

RBA Minutes to Provide Little Help if Focus Remains on Threat of Evergrande Contagion

The RBA will on Tuesday release the minutes from its monetary policy meeting on September 7.  At the meeting, the RBA kept its key interest rate unchanged at a record low 0.10 percent and confirmed to taper its bond purchases.

AUD/USD traders seemed to have been slightly caught off guard by the RBA’s decision to taper its bond purchases at the policy meeting.

Although initially the Aussie Dollar jumped, it reversed course soon after. The Aussie spiked about 0.3 percent after the meeting but went on to trade 0.3 percent lower than before the RBA’s meeting.

After the policy announcement, a high-ranking RBA official said he expects the economy to “bounce back” from virus lockdowns as vaccination rates rise and as governments ease health restrictions, giving the central bank confidence to begin dialing back its $200 billion bond-buying stimulus.

RBA Governor Philip Lowe said after the bank’s monthly board meeting on Tuesday the lockdowns in NSW and Victoria would “delay”, but “not derail”, the economic recovery.

Dr. Lowe admitted there was uncertainty about the timing and pace of the bounce-back, and it was likely to be slower than earlier in the year.

“Much will depend on the health situation and the easing of restrictions on activity.”

Daily Forecast

Everything the RBA has to say in its minutes is expected to be downplayed due to the financial ramifications from the widely expected Evergrande property liquidation in Australia and the lingering impact of the move.

No one is certain how this situation will play out so there is no strong incentive to buy the AUD/USD at this time especially before the start of the Federal Reserve’s two-day meeting on Tuesday.

Traders are bracing for contagion and fallout from the Evergrande problem so rallies are likely to be sold until there is more clarity.

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

September 21st 2021: EUR/USD Eyes H1 Prime Resistance at $1.1767-1.1776 After $1.17 Support

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Technical studies reveal movement hovering north of prime support at $1.1473-1.1583 on the weekly timeframe. Gleaning additional technical confluence through a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, this base remains a key watch, long term. With respect to trend on the weekly chart, the market has largely been bullish since the early 2020.

Meanwhile, a closer reading of price on the daily timeframe reveals Monday spiked to within a stone’s throw of Quasimodo support at $1.1689. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support. Assuming bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Charted a pip ahead of the daily Quasimodo, the $1.1690-1.1705 decision point put in an appearance on Monday, encouraging H4 sellers to dial back and hand the baton to buyers. Quasimodo support-turned resistance at $1.1742 is now in range on this timeframe, with subsequent bullish interest to perhaps take aim at Quasimodo resistance from $1.1771.

Intraday action on Monday was interesting. The US dollar, in addition to other safe-haven currencies such as the Japanese yen and Swiss franc, gained traction Monday, elevated amidst clear-cut risk-off sentiment. Europe’s single currency, however, reclaimed a large slice of lost ground, aided (technically) not only by the H4 decision point mentioned above at $1.1690-1.1705, but also $1.17 on the H1. At the time of writing, H1 resistance at $1.1728 is active; rupturing the latter paves the way to $1.1742 on the H4, a level shadowed by H1 prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Extending recovery gains on short-term charts may have sellers move in on prime resistance at $1.1767-1.1776 on the H1 and supply from $1.1762-1.1774, which dovetails with H4 Quasimodo resistance at $1.1771. However, prior to this, sellers might engage with Quasimodo support-turned resistance at $1.1742 on the H4.

An alternative scenario to be mindful of is a whipsaw south of $1.17 on the H1 to daily Quasimodo support parked at $1.1689. $1.1689 bids feeding off sell-stops below $1.17 could be enough to chalk up a bullish wave.

AUD/USD:

(Italics: previous analysis)

Latest out of the weekly timeframe has AUD/USD touching gloves with prime support at $0.6968-0.7242. Since printing a two-week recovery in late August, the currency pair has been fighting to entice fresh bullish interest. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe’s technical landscape informs traders bids are perhaps thin within weekly prime support, at least until price shakes hands with Fibonacci support at $0.7057-0.7126. Those who follow the relative strength index (RSI) will note the value journeyed through the 50.00 centreline last week and had Monday dip a toe below 40.00. This highlights a bearish atmosphere until making contact with oversold territory.

Price action on the H4 timeframe came within touching distance of a half-hearted decision point at $0.7200-0.7218 on Monday. To the upside, two resistances are on the radar at $0.7281 and $0.7317.

Lower on the curve, a H1 decision point at $0.7269-0.7259 elbowed into the spotlight, an area formed in the early hours of Monday which saw price tunnel through demand at $0.7248-$0.7259. Continued interest to the downside has $0.72 to target.

Observed Levels:

Each timeframe analysed underlines a bearish energy.

Weekly prime support at $0.6968-0.7242 appears vulnerable due to the daily timeframe exhibiting scope to approach Fibonacci support at $0.7057-0.7126. This, on top of the H1 timeframe’s decision point at $0.7269-0.7259 making a show, implies a short term move to $0.72 (H1) could be in the offing (note $0.72 aligns with the lower band of the H4 decision point at $0.7200-0.7218).

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Range support, as you can see, is currently in the frame. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

Broad declines observed in major US equity indexes elevated demand for the safe-haven JPY Monday. USD/JPY downside swings technical curiosity to the H4 double-top pattern’s (¥110.44) profit target around ¥108.71—sharing chart space with a 1.618% Fibonacci projection at ¥108.86 and a 1.272% Fibonacci projection at ¥108.72. However, in order to reach the aforesaid pattern target, the lower edge of the daily range support highlighted above at ¥108.96-109.34 must be taken.

Heading into early US trading on Monday, H1 crossed swords with Quasimodo resistance-turned support at ¥109.45, and clocked a ¥109.65 top before changing gears and heading towards Quasimodo support at ¥109.31. Territory below the latter reveals support at ¥109.11.

Observed Levels:

In keeping with the H4 timeframe, booking additional losses is possibly on the cards until the double-top pattern’s (¥110.44) profit target around ¥108.71. Still, to reach the aforementioned profit target, sellers must marginally defeat the daily timeframe’s range support at ¥108.96-109.34 and take on any bullish interest from weekly demand at ¥108.40-109.41.

Should we nudge through H1 Quasimodo support at ¥109.31, this could be an early sign of bearish muscle making an entrance, and with this, additional selling might take shape.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling kicked off the week on the ropes, clocking one-month lows versus the US dollar. GBP/USD remains comfortable beneath the 200-day simple moving average at $1.3831 and is within reach of Quasimodo support at $1.3609. Previous analysis underlined the daily chart has communicated a rangebound environment since late June between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, extended position below the 50.00 centreline and scraped through 40.00 on Monday. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Yesterday’s bearish presence established a decision point at $1.3750-1.3721, an area forming a decision to tunnel through Quasimodo support from $1.3693 (currently serving as resistance). Daily Quasimodo support mentioned above at $1.3609 calls for attention as a downside objective also on the H4 scale.

From the H1 timeframe, mid-way through London on Monday clipped the lower side of $1.37 and also brought in resistance at $1.3689—a previous Quasimodo support level drawn from 26th August. Further softening places Quasimodo support at $1.3618 and the $1.36 figure in sight.

Observed Levels:

Having noted scope for the daily timeframe to test Quasimodo support at $1.3609, retesting either H4 resistance at $1.3693 or the H4 decision point at $1.3750-1.3721 could stir a bearish theme. Adding weight to $1.3693 is H1 resistance coming in at $1.3689 and the $1.37 figure.

The H1 Quasimodo support at $1.3618 forms a reasonable downside target, arranged just north of the noted Quasimodo support on the daily timeframe.

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World Shares Tumble as China Evergrande Contagion Fears Spread

MSCI’s gauge of stocks across the globe shed 2.09%, on pace for its biggest one-day fall since October 2020, as Wall Street’s major indexes sagged more than 2%.

Investors moved into safe havens, with U.S. Treasuries gaining in price, pulling down yields, and gold rising.

Shares in Evergrande, which has been scrambling to raise funds to pay its many lenders, suppliers and investors, closed down 10.2% at HK$2.28.

Regulators have warned that its $305 billion of liabilities could spark broader risks to China’s financial system if its debts are not stabilized.

“Investors are concerned that the Evergrande issue is going represent a domino,” said Jack Ablin, chief investment officer at Cresset Capital Management. “Investors are tending to sell first and look into it to later.”

The Dow Jones Industrial Average fell 787.6 points, or 2.28%, to 33,797.28, the S&P 500 lost 101.41 points, or 2.29%, to 4,331.58 and the Nasdaq Composite dropped 408.25 points, or 2.71%, to 14,635.71.

Economically sensitive sectors, including financials and energy, were hit particularly hard.

The pan-European STOXX 600 index lost 1.67%, with mining stocks sliding.

The selloff on Monday has seen a cumulative $2.2 trillion of value wiped off the market capitalization of world equities from a record high of $97 trillion hit on Sept. 6, according to Refinitiv data.

Worries over Evergrande follow a pullback in equities recently as investors worry over the impact of coronavirus cases on the economy, and when central banks will ease back on monetary stimulus.

The U.S. Federal Reserve is due to meet on Tuesday and Wednesday as investors look for when it will begin pulling back on its bond purchases.

Investors were also keeping an eye on other central bank meetings spanning Brazil, Britain, Hungary, Indonesia, Japan, Norway, the Philippines, South Africa, Sweden, Switzerland, Taiwan and Turkey.

The dollar index rose 0.061%, with the euro unchanged at $1.1725.

The offshore Chinese yuan weakened versus the U.S. currency to its lowest level in nearly a month.

“We are seeing a classic flight to safety in the dollar until we get some sense of clarity on whether or not it is going to be an orderly or disorderly resolution to Evergrande,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, DC.

Benchmark 10-year notes last rose 22/32 in price to yield 1.2972%, from 1.37% late on Friday.

The iShares exchange-traded fund tracking high-yield corporate bonds edged down 0.5%.

Oil prices fell but drew support from signs that some U.S. Gulf output will stay offline for months due to storm damage.

U.S. crude fell 2.18% to $70.40 per barrel and Brent was at $73.99, down 1.79% on the day.

Spot gold added 0.4% to $1,761.29 an ounce, rising off of a one-month low.

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

(Reporting by Lewis Krauskopf in New York and Tom Arnold in London; Additional reporting by Anushka Trivedi in Bengaluru, Saikat Chatterjee in London, Karen Pierog and Chuck Mikolajczak in New York and Wayne Cole in Sydney; Graphic by Sujata Rao; Editing by Jane Merriman, Mark Potter and Jan Harvey)

USD/CAD Daily Forecast – Canadian Dollar Is Under Pressure At The Start Of The Week

U.S. Dollar Gains Ground Against Canadian Dollar

USD/CAD made an attempt to settle above the resistance at 1.2900 but lost momentum and declined towards 1.2830 while the U.S. dollar lost momentum against a broad basket of currencies.

The U.S. Dollar Index faced strong resistance at 93.40 and declined towards 93.20. The nearest support level for the U.S. Dollar Index is located at 93.10. In case the U.S. Dollar Index declines below this level, it will head towards the support at 92.80 which will be bearish for USD/CAD.

While it’s an Election Day in Canada, foreign exchange market traders focused on general market sentiment and dynamics of commodity markets which were under pressure on fears about financial problems of China’s Evergrande.

U.S. dollar was gaining ground against a broad basket of currencies as demand for safe-haven assets increased. However, traders were not ready to push the U.S. currency towards yearly highs as they remained cautious ahead of the Fed meeting.

Meanwhile, Canadian dollar was under pressure as WTI oil made an attempt to settle below the psychologically important $70 level. If WTI oil settles below this level, it will head towards the 50 EMA at 69.40 which will be bearish for commodity-related currencies, including Canadian dollar.

Technical Analysis

usd cad september 20 2021

USD to CAD is currently trying to settle back above 1.2830. RSI is close to the overbought territory, but there is enough room to gain upside momentum in case the right catalysts emerge.

In case USD to CAD manages to settle above 1.2830, it will head towards the next resistance level at 1.2850. A successful test of this level will open the way to the test of the resistance at 1.2865. If USD to CAD gets above 1.2865, it will head towards the next resistance at 1.2900.

On the support side, a move below 1.2830 will push USD to CAD towards the support at 1.2785. In case USD to CAD declines below 1.2785, it will head towards the support at 1.2760. A move below 1.2760 will open the way to the test of the support at 1.2730.

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

USD/CAD: Loonie Hits Over One-Month Low on Subdued Oil Prices, Election Uncertainties

The Canadian dollar hit over a one-month low against its U.S. counterpart, sliding for the third straight day on Monday as falling energy prices and snap election uncertainties weighed on the commodity currency.

The USD/CAD pair rose to 1.2895 today, up from Friday’s close of 1.2766. The Canadian dollar lost over 1.2% last month and further depreciated over 1.5% so far this month.

Today’s federal reserve decision and the election in Canada will be closely watched by investors. There is no sign of a majority in the Canadian election on Monday, a second time in a row, leaving either Justin Trudeau or Erin O’Toole trying to govern with a minority.

Investors are concerned that elections will lead to a deadlock that hinders government action against COVID-19 and impedes the recovery of the economy.

“What we think will matter the most from a market perspective is whether there will eventually be a workable majority. Up until some majority emerges, the Canadian dollar may continue to discount political uncertainty,” noted Francesco Pesole, FX Strategist at ING.

“At the same time, barring the worst-case scenario of a hung parliament and new elections, we still expect a gradual dissipation of political risk in the coming weeks to help CAD close its mis-valuation gap (USD/CAD is 2% overvalued, according to our short-term fair value model) as the loonie may start to benefit more freely from its good fundamentals – and above all, the prospect of more BoC policy normalisation. We still expect USD/CAD to trade below 1.25 in 4Q21.”

Canada is the world’s fourth-largest exporter of oil, which edge lower as production in the Gulf of Mexico slowly returns. U.S. West Texas Intermediate (WTI) crude futures were trading 1.38% lower at $70.99 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

“We don’t think the federal election is weighing on the CAD in any significant way.  In fact, while the CAD has fallen against the USD this week, it has lost less ground than most of its G10 currency peers.  Short-term CAD vols have firmed but remain within this year’s range (1w vol peaked at 9% in February),” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“The election race remains tight, and another minority government remains the most likely outcome.  Research by our Scotia Economics colleagues suggests that there is ultimately very little difference in the fiscal outcomes through 2025 between either the Liberal or Conservative parties’ platforms.  Either way, a minority will limit the next government’s room for significant manoeuvre.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.01% higher at 93.204. The dollar reaches a one-month high, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet this week and open discussions about reducing their monthly bond purchases are expected.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

EUR/USD, GBP/USD Analysis & Setups 20 – 21 Sep 2021

The EUR/USD is testing the previous bottom and key decision zone. The GBP/USD seems to be creating a triangle chart pattern if price action makes a bullish bounce.

If you think our videos, analysis, and education can help you become a better trader, then you can ask your own questions via our form and we will answer them in the weekly live webinar every Tuesday.

EUR/USD & GBP/USD Overview

The EUR/USD needs to break above the double top at 1.19 or the 88.6% Fib at 1.17 before a clear bullish or bearish swing can be expected.

The GBP/USD is probably in a triangle pattern unless there is an immediate break, pullback, and continuation below the support line.

Check out the video below for the full analysis and trade plans on 20 – 21 September 2021:

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

Good trading,

Chris Svorcik
CTA

 

USD Bears Are Fresh Out of Honey Pots

With headline after headline attempting to knock the USD Index off of its lofty perch, I warned on Sep. 13 that dollar bears will likely run out of honey sooner rather than later.

I wrote:

While the USD Index was under fundamental fire in recent weeks, buyers eagerly hit the bid near the 38.2% Fibonacci retracement level. And after positive sentiment lifted the greenback back above the neckline of its inverse (bullish) head & shoulders pattern last week, the USDX’s medium-term outlook remains profoundly bullish.

More importantly, though, after the USD Index rallied by 0.63% last week and further validated its bullish breakout, gold, silver, and mining stocks ran in the opposite direction. And with the divergence likely to accelerate over the medium term, the swarm should sting the precious metals during the autumn months.

Please see below:

ChartDescription automatically generated

Conversely, if the USD Index encounters resistance as it attempts to make a new 2021 high, gold, silver, and mining stocks could enjoy an immaterial corrective upswing. However, the optimism will likely be short lived, and it’s likely a matter of when, not if, the USD Index reaches the illustrious milestone.

Equally bullish for the greenback, with the USD Index’s technical strength signaling an ominous ending for the Euro Index, I warned on Sep. 13 that the latter faced a tough road ahead.

I wrote:

While I have less conviction in the Euro Index’s next move relative to the USD Index, more likely than not, the Euro Index should break down once again and the bearish momentum should resume over the medium term.

And after the Euro Index sunk below the neckline of its bearish head & shoulders pattern last week, lower lows remains the most likely outcome over the medium term.

Please see below:

Chart, line chartDescription automatically generated

Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around).

Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration.

Moreover, as the journey unfolds, the bullish signals from 2014 have resurfaced once again. For example, the USD Index’s RSI is hovering near a similar level (marked with red ellipses), and back then, a corrective downswing also occurred at the previous highs. More importantly, though, the short-term weakness was followed by a profound rally in 2014, and many technical and fundamental indicators signal that another reenactment could be forthcoming.

Please see below:

ChartDescription automatically generated

Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea.

Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind still remains at the greenback’s back.

Please see below:

ChartDescription automatically generated

The bottom line?

Once the momentum unfolds, ~94.5 is likely the USD Index’s first stop, ~98 is likely the next stop after that, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters.

In conclusion, the USD Index’s sweet performance left sour tastes in the precious metals’ mouths. And with the former’s bullish breakout signaling an ominous future for the latter, gold, silver, and mining stocks will likely confront new lows over the medium term. However, once the autumn months fade and the winter weather approaches, buying opportunities may present themselves. And with unprecedented monetary and fiscal policy likely to underwrite new highs in the coming years, the long-term outlook for gold, silver, and mining stocks remains extremely bright.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

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

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

USD/JPY Price Forecast – US Dollar Gives Up Early Gains

The US dollar initially tried to rally during the trading session on Monday but gave back gains near the ¥110 level. The market continues to look at the ¥110 level as an area of importance, so it should not surprise you at all to see that we have rolled over again. At this point in time, the ¥109 level underneath continues to be an area of support, right along with the ¥110.75 offering a significant amount of resistance. With the ¥110 level in the middle being a bit of a magnet for price, it looks as if nothing has really happened quite yet to discern where we are going longer term.

USD/JPY Video 21.09.21

That being said, it is worth noting that the market is currently looking at the 200 day EMA underneath as significant support, although it should also be noted that the 50 day EMA has gone sideways for quite some time, meaning that we are still stuck in the same meaningless range. Eventually we will break out, but until then it simply going to be a short-term range bound type of situation. With this being the case, the market is going to continue to be very noisy, so you will have to be somewhat nimble to take advantage of a well-defined range.

I do believe that it is only a matter of time before we get a bigger move, probably coinciding with the overall risk appetite of the markets. The pair does tend to favor the Japanese yen it in times of concern, so that of course could be something worth paying attention to as the Chinese credit situation continues to become headline news.

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

GBP/USD Price Forecast – British Pound Slices Through 200 Day EMA

The British pound has gotten hammered during the trading session on Monday, as there was a general “risk off” attitude around the world. Credit contagion issues in China are starting to take front and center with the headlines, and one would not be surprised at all to see the US dollar be a big winner as traders try to get back into bonds for safety. Furthermore, there will be a flood of money coming out of emerging markets, so that in and of itself will help the greenback.

GBP/USD Video 21.09.21

The fact that we sliced through the 200 day EMA and the 1.37 level at the same time suggests there is quite a bit of significant selling pressure, and therefore we could go looking towards the 1.36 handle. The 1.36 handle has been crucial for keeping the market somewhat afloat, and if we were to break down through that level, then I think it opens up a new flood of selling as it will almost certainly kick off a lot of stop losses. At that point, I would not surprise me at all to see this entire trend change again to reach much lower.

Alternately, if we turn around and recapture the 200 day EMA then I would not be surprised to see this market go looking towards the 50 day EMA above, an area that has offered a significant amount of resistance in the past. In other words, we are either going to break down or we are going to bounce back into the same consolidation. That being said, you probably need to pay attention to the fact that we have been drifting lower in general over the last several months.

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

GBP/JPY Price Forecast – British Pound Testing ¥150

The British pound has broken down significantly during the course of the trading session on Monday as it was a “risk off” type of scenario. Ultimately, this is a market that looks as if it is trying to press lower to break through a significant support. The ¥150 level extends support all the way down to the ¥149 level, and if we break down below there then it really starts to break down quite drastically.

GBP/JPY Video 21.09.21

The size of the candlestick certainly suggests that we have quite a bit of negativity here, and therefore I think it is probably only a matter of time before we break through the bottom. If we do, that is a sign that we are going to go much lower, as it could very well open up a move down to the ¥145 level, maybe even the ¥140 level over the longer term.

On the other hand, if we took out the candlestick from the Monday session to the upside, that could be a very bullish sign. Nonetheless, I think the one thing you can probably count on is a lot of noisy behavior, so I think that if we rally from here, it is very likely that it is time to start fading short-term rallies that show signs of exhaustion. Keep in mind that the Japanese yen is considered to be a safety currency, and therefore you need to pay close attention to risk appetite in general. As the Americans are starting to lift risk appetite higher, I suspect that this will be more or less a “fade the rallies” type of market.

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

EUR/USD Price Forecast – Euro Continues to Descend

The Euro has fallen a bit during the course of the trading session on Monday, to reach down towards the 1.17 level. This is an area that would attract a certain amount of attention, but quite frankly I think the main reason that we have bounced at all is due to the pair being oversold at this point. Because of this, I think this is a market that you will be looking for rallies to sell into or break down below the bottom of the candlestick for the session on Monday to signify there is even more selling coming.

EUR/USD Video 21.09.21

The US dollar of course is thought of as a safety currency, so this suggests that we are going to see a lot of noisy behavior of the next couple of days, as people worry about the credit situation in China. If that begins to become an even bigger issue, the US dollar will spike as a result. As far as Europe is concerned, the energy shortage on the continent at the moment is going to work against the currency itself, but I also recognize that we probably have somewhat limited downside anyway. The 1.16 level is massive support, so I think that comes into the picture as a potential “floor the market” even if we do see a lot of selling. To the upside, if we can take out the 1.19 level, that would be an extraordinarily bullish sign but that is not something that we will be doing anytime soon, as it would take a Herculean effort to get above there.

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

AUD/USD Price Forecast – Australian Dollar Continues Volatility

The Australian dollar continues to be very noisy as we have seen a lot of risk on/risk off type of behavior around the world. The Chinese credit issues are the latest headlines have people paying close attention to, and as a result is not a huge surprise to see that there would be a lot of selling of the Aussie dollar as it is so highly levered to the Chinese economy. After all, Australia has a huge export situation when it comes to China, with hard commodities such as iron, gold, and the like. With this being the case, the market is likely to see a major correlation to what happens on the Chinese mainland and this currency pair.

AUD/USD Video 21.09.21

Furthermore, the US dollar is considered to be a “safety currency”, so it does make a certain amount of sense that we would see the market’s favorite when there are times of uncertainty. To the downside, if we were to break down below the bottom of the candlestick, that probably opens up a bigger move towards the 0.71 level. To the upside, if we turn around and take out the inverted hammer from the Friday session, then we can start to think about the 50 day EMA.

Regardless, this is going to be a very noisy and messy situation, so I think you need to be cautious about your position size, at least not until we get a bit of clarity going forward. Because of this, we need to be very cautious about how much money you put to work right away, but ultimately this is a market that I do think probably will make an impulsive move sooner or later, that we can start following.

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

EUR/USD Mid-Session Technical Analysis for September 20, 2021

The Euro is under pressure on Monday as weaker commodity prices, worries about Chinese property company Evergrande and caution ahead of this week’s U.S. Federal Reserve meeting pressured stocks and boosted safe-haven demand for the U.S. Dollar.

The major concern for global investors is the Evergrande issue. Not only are investors worried about what the stress from Evergrande will mean for China’s economy and its growth prospects, but whether this is the start of something major that could spread to the global financial markets.

Basically, the fear of contagion is driving investors into the safety of the U.S. Dollar. Investors learned from the Euro Zone crisis and the credit market meltdowns over a decade ago that where’s there’s smoke, there’s fire and that it’s better to trim speculative positions now rather than wait for conditions to worsen.

At 12:40 GMT, the EUR/USD is trading 1.1712, down 0.0013 or -0.11%.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 1.1664 will change the main trend to down. A move through 1.1909 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through 1.1846 will change the minor trend to up.

The short-term range is 1.1664 to 1.1909. The EUR/USD is currently trading on the weakside of its retracement zone at 1.1758 to 1.1787, making it new resistance.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to 1.1725.

Bearish Scenario

A sustained move under 1.1725 will indicate the presence of sellers. Taking out the intraday low at 1.1700 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the last main bottom at 1.1664.

The trend changes to down on a trade through 1.1664. This could extend the selling into the November 4, 2020 bottom at 1.1603.

Bullish Scenario

A sustained move over 1.1725 will signal the presence of buyers. This could trigger an intraday rally into the retracement zone at 1.1758 to 1.1787, which is new resistance. Since the main trend is down, sellers could return on the first test of this area.

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

Say Bye-Bye to Major Supports. We May Not See Those Levels for a While

And it happened! The bears were talking about this for a long time and it finally happened; a bearish correction. The price broke the long-term up trendline on the SP500 and is aiming lower. The target for the drop is still far away, so it might be nice to buckle up.

The DAX also dropped like a rock after the breakout of the long-term up trendline and the neckline of the triple top formation. The next target: 14100 points.

Although indices are sliding, gold is not climbing higher. A stronger dollar is definitely not helping.

The GBPUSD came back inside the falling wedge pattern. That’s definitely negative.

The CADJPY is aiming for the 38,2% Fibonacci to test it as a crucial support.

The EURNZD is inside a small sideways trend. A breakout from it, will show us a direction.

The EURJPY has failed to create the inverse head and shoulders pattern and dropped lower.

The USDJPY bounced from the upper line of the triangle and brought us a sell signal with the target being on the lower line of this pattern.

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

EUR/GBP Bullish Reversal at 61.8% Fibonacci Support Zone

The EUR/GBP has made a key bullish bounce at the 61.8% Fibonacci retracement. This occurred after price action made a breakout above the key resistance trend line (dotted red).

This article will examine whether a long-term bullish reversal can indeed take place on the daily chart.

Price Charts and Technical Analysis

EUR/GBP daily chart

The EUR/GBP daily chart is showing wicks on the bottom of the daily candle. Price action is now testing the 21 ema resistance zone:

  1. A push above the 21 ema zone could indicate a bullish breakout (green arrow).
  2. The first target is the -27.2% Fibonacci level at 0.8658.
  3. A bull flag or pullback after hitting the first target could see price action move up again towards the second target at the -61.8% Fibonacci level at 0.8715.
  4. A break (blue arrow) above the resistance zone (red box) could indicate a larger bullish reversal via a wave 3 (purple) pattern.
  5. A bearish bounce (orange arrow) leaves the window open for an ABC (grey) pattern.

On the 4 hour chart, the EUR/GBP is showing a bullish breakout above the resistance trend lines (red dotted):

  1. Price action seems to have completed a 5 wave pattern (pink) in wave 1 (purple).
  2. A bearish ABC (pink) could have completed wave 2 (pink).
  3. A bearish breakout (red arrows), however, below the support trend line (green) could indicate a deeper wave 2 at the 78.6% Fibonacci level.
  4. A break below the bottom invalidates (red circle) the wave 1-2 (purple) pattern.
  5. A bullish continuation (green arrow) above the current candle indicates an immediate push higher. A small pullback (orange arrow) also could see a push up (green arrow).
  6. A bull flag pattern (grey arrow) could kick start a larger bullish breakout (blue arrow).

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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

EUR/USD Daily Forecast – Euro Remains Under Pressure Against U.S. Dollar

Euro Is Weak At The Start Of The Week

EUR/USD is currently trying to settle below the support at 1.1720 while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index gained strong upside momentum and is testing the resistance level at 93.40. In case this test is successful, the U.S. Dollar Index will move towards yearly highs near 93.75 which will be bearish for EUR/USD.

The economic calendar is empty today so foreign exchange market traders will focus on general market sentiment. Global markets are losing ground, and there are several reasons for this move.

First, markets are worried about the fate of China’s Evergrande, whose financial problems may have broader impact. Second, traders remain cautious ahead of the Fed Interest Rate Decision which will be released on September 22. It remains to be seen whether Fed is ready to announce the reduction of its asset purchase program, but markets look very nervous ahead of the important meeting.

Technical Analysis

eur usd september 20 2021

EUR/USD settled below the support at 1.1750 and is trying to settle below the next support level at 1.1720. In case this attempt is successful, EUR/USD will move towards the support at 1.1690.

A successful test of the support at 1.1690 will open the way to the test of the next support level which is located near yearly lows at 1.1660. In case EUR/USD declines below this level, it will head towards the support at 1.1630. A move below this level will push EUR/USD towards the next support at 1.1615.

On the upside, EUR/USD needs to get back above 1.1720 to have a chance to develop upside momentum in the near term. The next resistance level for EUR/USD is located at 1.1750.

If EUR/USD gets above 1.1750, it will move towards the next resistance at 1.1775. A successful test of this level will open the way to the test of the resistance which is located at the 20 EMA at 1.1785.

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

GBP/USD Daily Forecast – U.S. Dollar Stays Strong At The Start Of The Week

British Pound Is Under Pressure

GBP/USD is currently trying to settle below the support at 1.3690 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the resistance at 93.10 and is moving towards the next resistance level which is located at 93.40. In case the U.S. Dollar Index gets to the test of this level, GBP/USD will find itself under more pressure.

There are no important economic reports scheduled to be released in the U.S. and UK today so foreign exchange market traders will focus on general market sentiment and continue to wait for the Fed Interest Rate Decision which will be released on September 22.

Traders will also keep an eye on the developments in China as Evergrande’s problems have already put pressure on markets. The U.S. dollar may benefit from rush to safety due to its safe-haven status.

Technical Analysis

gbp usd september 20 2021

GBP/USD managed to get below the support at 1.3710 and is trying to settle below the next support level at 1.3690. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

In case GBP/USD declines below the support at 1.3690, it will head towards the next support level at 1.3665. A successful test of this level will open the way to the test of the next support at 1.3635. If GBP/USD gets below 1.3635, it will continue its downside move and head towards the next support at 1.3600.

On the upside, the previous support level at 1.3710 will serve as the first resistance level for GBP/USD. A move above this level will push GBP/USD towards the next resistance at 1.3745. In case GBP/USD gets above 1.3745, it will head towards the resistance level near the 20 EMA at 1.3780. A successful test of this level will open the way to the test of the next resistance which is located near the 50 EMA at 1.3800.

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

Tapering Sentiments Boost U.S Dollar To A Month High

A fragile mood started off the week with the greenback strong on the first trading session, while worries about a financial catastrophe at indebted developer China Evergrande further contributed to weakness.

The euro fell slightly to $1.1721 in thin trading due to the holiday season in Japan and China, marking its weakest week in a month.

There is a bit of support for safe haven currency from the expectation of imminent Fed asset purchase cuts in addition to caution as equity markets begin to sway. Everyone is watching for the Fed to signal its tapering intentions.

In order to assess how USD is performing against a basket of currencies used by US trade partners, traders use US Dollar Index, or DXY.

In case of a strengthening dollar against these currencies, the index will rise, whereas a weakening dollar against these currencies will cause it to fall.

A month-high of 93.263 was seen for the U.S. dollar index. Dollar/yen exchanged hands at 110.01.

While traders are mostly focused on the Fed during this week, there are also central bank meetings in Japan, Switzerland, Sweden, Norway, the United Kingdom, Indonesia, the Philippines, Taiwan, Brazil, South Africa, Turkey and Hungary.

Wednesday marked the end of its two-day meeting, and markets expect that the Fed will continue with its extensive plans to taper this year but won’t provide specifics for at least a month.

However, the rate rise in the 10-year Treasury yield for the fourth week in a row last week suggests either a hawkish surprise is coming, or that inflation expectations could shift to showing hikes as soon as 2022, both of which would help the dollar.

Changing just two Fed members’ minds would translate into median projections reflecting a hike next year in the “dot plot”.

Some market pundits predict there will be at least one interest rate rise next year after forecasting no changes in interest rates this year. In addition, two hikes are now anticipated for 2023 – that number could easily rise to three as well.

With the exception of the Bank of England, other major central banks are expected to leave policy settings unchanged, but traders see potential gains in the currency if the central bank adopts a more hawkish tone or more members call for a tapering of asset purchases.

AUD/USD Forex Technical Analysis – Weakens Under .7249, Strengthens Over .7293

The Australian Dollar hit its lowest level since August 27 against the U.S. Dollar on Friday after better-than-expected retail sales numbers in the United States boosted bets on the strength of the U.S. economy and earlier monetary policy tightening by the Federal Reserve. The Aussie was also pressured by a rise in the 10-year U.S. Treasury yield.

On Friday, the AUD/USD settled at .7265, down 0.0029 or -0.40%.

The Federal Reserve meets for two days next week and on Wednesday is expected to give further details as to when it may start to slow its $120 billion in monthly bond purchases that have supported the recovery from the pandemic.

Fed Chief Jerome Powell has said the so-called tapering could occur this year, but investors are waiting for more specifics.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is up but momentum is trending lower. A trade through .7222 will change the main trend to down. A move through .7478 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through .7347 will change the minor trend to up.

The short-term range is .7107 to .7478. The AUD/USD closed inside its retracement zone at .7293 to .7249 on Friday.

The major resistance is the retracement zone at .7499 to .7592.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD early Friday is likely to be determined by trader reaction to the 50% level at .7293.

Bearish Scenario

A sustained move under .7292 will indicate the presence of sellers. The first downside target is the Fibonacci level at .7249, followed by the main bottom at .7222.

Taking out .7222 will change the main trend to down and could trigger an acceleration to the downside.

Bullish Scenario

A sustained move over .7293 will signal the presence of buyers. The first upside target is the minor top at .7347. Taking out this level will change the minor trend to up. This will also shift momentum to the upside with the next minor top at .7410 the next likely target.

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