USD/JPY Forex Technical Analysis – Strengthens Over 109.938, Weakens Under 109.781

The Dollar/Yen closed higher on Friday as investors continued to bet on a reduction of asset purchases by the Federal Reserve before the end of the year. The Fed holds a two-day monetary policy meeting on September 21-22 and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond.

On Friday, the USD/JPY settled at 109.975, up 0.233 or +0.21%.

Speculation about a Fed taper this year gathered pace after U.S. retail sales unexpectedly increased in August, data showed Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business survey also showed a big improvement.

In other news, the yen has shown limited reaction to the ruling Liberal Democratic Party’s leadership race, which formally kicks off on Friday ahead of a September 29 vote. The LDP’s parliamentary dominance means the party’s new leader will become prime minister.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 109.113 will signal a resumption of the downtrend. A move through 110.448 will change the main trend to up.

The main range is 107.479 to 111.659. Its retracement zone at 109.569 to 109.076 is support. This zone stopped the selling on September 15 at 109.113.

The minor range is 110.448 to 109.113. The USD/JPY closed slightly above its retracement zone at 109.938 to 109.781, making it new support.

The short-term range is 111.650 to 108.722. Its retracement zone at 110.191 to 110.537 is the next upside target zone and potential resistance. The last main top at 110.448 falls inside this zone, increasing its importance.

Daily Swing Chart Technical Forecast

The early direction of the USD/JPY on Monday is likely to be determined by trader reaction to 109.938.

Bullish Scenario

A sustained move over 109.938 will indicate the presence of buyers. The first upside target is 110.191. Look for sellers on the first test. They are going to be defending the trend and the main top at 110.448. Taking out this top will change the main trend to up, likely extending the rally into 110.537.

Bearish Scenario

A sustained move under 109.938 will signal the presence of sellers. The first downside target is 109.781, followed closely by 109.569.

The downside pressure could increase if 109.569 fails as support. The first downside target is 109.596, followed by the main bottom at 109.113.

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

NZD/USD Forex Technical Analysis – Sellers Targeting .6988 – .6945 Retracement Zone

The New Zealand Dollar was pressured on Friday despite strong bets for a Reserve Bank of New Zealand rate hike on October 6. The price action reflects a stronger U.S. Dollar that was driven higher on Friday by better-than-forecast U.S. retail sales data released on Thursday that backed expectations for a reduction of asset purchases by the Federal Reserve before the end of the year.

On Friday, the NZD/USD settled at .7034, down 0.0039 or -0.55%.

The Fed holds a two-day monetary policy meeting on September 21-22 and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond.

Daily NZD/USD

 Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7157 will change the main trend to up.

The minor trend is also down. A trade through .7137 will change the minor trend to up. This will also shift momentum to the upside.

The main range is .7316 to .6806. The NZD/USD is currently trading on the weak side of its retracement zone at .7061 to .7121, making this area resistance.

The long-term support zone is .7027 to .6924. The NZD/USD is currently testing the upper or 50% level of this zone.

The minor range is .6806 to .7170. Its retracement zone at .6988 to .6945 is the next target area. This zone falls inside the long-term zone.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD early Monday is likely to be determined by trader reaction to the main 50% level at .7027.

Bullish Scenario

A sustained move over .7027 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the 50% level at .7061. Since the main trend is down, look for sellers on the first test. Overcoming this level will extend the rally.

Bearish Scenario

A sustained move under .7027 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the retracement zone at .6988 to .6945.

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

U.S Dollar Propels High On Strong Retail Data

As a result of better-than-forecast retail sales data released recently, the greenback reached three-week peaks on Friday, boosting expectations for the Federal Reserve to reduce asset purchases before the end of the year.

US retail sales unexpectedly rose 0.7% in August despite expectations of a 0.8% decline, data showed on Thursday, fueling speculation about a Fed taper this year. The sentiment of business owners has also improved significantly.

As for the Michigan consumer sentiment survey for September, it rose to 71 from 70.3 last month but did not reach the levels of the Empire States and Philadelphia Fed manufacturing surveys.

US dollar demand has been awakened by expectations of a Fed taper announcement and softer risk sentiment.

This is the highest level since the third week of August for the dollar index used basically to measure how the greenback is doing against six major currencies. At last check, it was up 0.4% at 93.207 index points.

The DXY index at the end of the week gives back a part of its gains after hitting new monthly highs.

As a result, and looking at the broader outlook, the constructive stance is still present on the dollar, which is currently trading at 91.41, above its 200-day Simple Moving Average

The dollar index surged by 0.6% for the week, its biggest weekly percentage gain since mid-August.

Fed representatives are expected to talk about reducing monthly bond purchases at a meeting next week and tie any actual change in monetary policy to the growth of U.S. jobs.

In light of growing cyclical inflationary pressures, the new economic projections may offer some insight into the FOMC’s reaction function.

A number of market commentators remain convinced that inflation will remain high in the U.S. for an extended period of time, which will support higher yields in the U.S. and a strengthened dollar

Weekly Technical Market Insight: 20th – 24th September 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

Deprived of resistance, the US dollar pencilled in a second consecutive gain last week, adding 0.7 percent, according to the US dollar index.

Support from 91.78-91.96 has proved persistent since the beginning of July, withstanding three successive downside attempts—the latest being early September.

Dollar bulls, as you can see, entered an offensive phase at the tail end of the week. While it’d be unwise to rule out a retracement at current levels, further buying could emerge as Quasimodo resistance calls for attention at 93.90. Strategically placed north of the 93.73 20th August high, and sharing space with 100% and 1.618% Fibonacci projections at 93.88 and 93.82, respectively, 93.90 delivers reasonably weighty confluence.

With respect to trend, 2020 was disappointing. 2021, nonetheless, has observed a defence off support at 89.69 and, year on year, is 3.7 percent higher.

The relative strength index (RSI), a popular gauge of momentum, retested the 50.00 centreline over the week and is now on the doorstep of trendline resistance (taken from the high 92.41), pinned a short distance below overbought territory.

  • While chart studies, in particular the relative strength index, suggests upside momentum may flatten out this week, Quasimodo resistance at 93.90 delivers technical confluence traders might be drawn to should further buying take shape.

EUR/USD:

(Italics: previous analysis)

Europe’s common currency shed 0.7 percent versus a broadly-bid dollar last week, seating price action within range of prime support on the weekly timeframe at $1.1473-1.1583. Fibonacci enthusiasts will note the 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550 circling the upper range of the aforesaid support. Interestingly, long-term stops likely rest south of the $1.1640ish lows, perhaps accommodating enough energy to fill $1.1473-1.1583 bids. With respect to trend on the weekly chart, the market has largely been bullish since the early months of 2020.

The second half of the week witnessed an acceleration to the downside, throwing light on Quasimodo support at $1.1689 from the daily timeframe. 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 this week.

Assuming a 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).

Against the backdrop of higher timeframes, price action on the H4 chart passed through Quasimodo support at $1.1742 in strong fashion Friday. With $1.1742 likely to serve as resistance, the $1.1690-1.1705 decision point putting in an appearance should not surprise. Statistically, though, decision points left untested following the immediate move out of the base tend to offer unreliable structure. $1.1690-1.1705 also teams up closely with daily Quasimodo support mentioned above at $1.1689, which you may recall chart studies have labelled fragile.

Through the lens of a simple technical trader, limited support is also evident on the H1 scale until $1.17 (sat within the walls of the H4 timeframe’s decision point at $1.1690-1.1705). Stacked demand is present between $1.1706 and $1.1744 (23rd August), with little inside of this formation revealing that active buyers will show interest. For that reason, $1.17 is a key downside objective this week. However, buyers entertaining the idea of bouncing from August 24th lows around $1.1728 shines the spotlight on a pullback to prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Long term:

Weekly prime support at $1.1473-1.1583, coupled with a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, might welcome price action this week. As underlined above, $1.1473-1.1583 is in a reasonably privileged location: below the $1.1640ish lows. Overturning daily Quasimodo support at $1.1689, therefore, is a possible scenario, targeting daily Fibonacci support at $1.1420-1.1522.

Short term:

In conjunction with the longer-term picture, a bearish energy is present on the lower timeframes this week.

Any pullback, therefore, would be viewed as a sell-on-rally scenario, either from H4 resistance at $1.1742 (previous Quasimodo support) or H1 prime resistance at $1.1767-1.1776 (and supply at $1.1762-1.1774).

The combination of $1.17 on the H1 and its surrounding decision point on the H4 at $1.1690-1.1705 offers a clear downside target.

AUD/USD:

(Italics: previous analysis)

Prime support at $0.6968-0.7242 on the weekly timeframe has been fighting to entice fresh bullish interest since the area powered a two-week recovery in late August. 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 scraping through prime support at $0.7286-0.7355 in the latter part of the week broadcasts weakness. This delivers free rein to Fibonacci support at $0.7057-0.7126, set within the parapets of weekly prime support at $0.6968-0.7242. With the relative strength index (RSI) cementing position below the 50.00 centreline—telling traders that average losses over the 14-day lookback period surpass average gains—this adds weight to a bearish atmosphere.

Although the higher timeframe canvas favours sellers, the H4 timeframe touched gloves with prime support at $0.7236-0.7266 (glued to the upper edge of weekly prime support at $0.6968-0.7242). You may recall this area was made reference to throughout the week—see below from previous writing (italics):

Sellers assuming leadership yesterday hauled the currency pair through stacked demand on the H4 timeframe between $0.7282 and $0.7343, dropping to within a stone’s throw from prime support at $0.7236-0.7266. The latter may interest bullish eyes—a base arranged to receive downside momentum derived from sell-stops below stacked demand.

Recognising $0.7236-0.7266 welcomed price action late Friday, $0.7310 stands in as an initial target early week should buyers stage a recovery.

Meanwhile, out of the H1 chart, early London on Friday responded to trendline resistance, extended from the high $0.7469, hardened by the 61.8% Fibonacci retracement at $0.7319 and a 1.272% Fibonacci projection at similar levels. This led movement under $0.73 heading into US trading hours and concluded within reach of $0.7248-$0.7259 demand (a zone placed within H4 prime support at $0.7236-0.7266).

Observed Levels:

Long term:

Weekly prime support at $0.6968-0.7242 is a key base on the bigger picture, though having noted the daily timeframe’s prime support giving up position at $0.7286-0.7355, a deep dive into the aforementioned weekly zone is a possibility.

Short term:

Focus is on the H4 timeframe’s prime support at $0.7236-0.7266, as buyers potentially gear up to take advantage of selling pressure (sell-stops) below stacked demand. As underlined above, the initial upside goal north of $0.7236-0.7266 sits at $0.7310.

$0.7248-$0.7259 demand on the H1, therefore, could be brought into the fight before a short-term bid arises.

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. Reluctance to commit outside of these areas toughens the consolidation; range limits, therefore, are likely to remain on the watchlist this week. 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.

A three-day recovery in the 10-year yield and a muscular USD bid, together with technical support derived from the 1.272% Fibonacci projection on the H4 timeframe at ¥109.14, aided USD/JPY at the tail end of the week. This, as you can see, left the double-top pattern’s (¥110.44) profit target around ¥108.71 (plotted alongside a 1.618% Fibonacci projection at ¥108.86) unchallenged. Continued interest to the upside this week is likely to close in on supply at ¥110.82-110.39 (entertains the noted double-top configuration and shares a connection with daily prime resistance at ¥110.86-110.27).

Price action on the H1 timeframe accommodated ¥110 on Friday, though momentarily explored ground north of the figure ahead of Quasimodo resistance at ¥110.11. Prime support coming in from ¥109.74-109.80 is particularly interesting, stationed beneath intraday lows around ¥109.81.

Observed Levels:

Long term:

Recognising weekly demand is in play at ¥108.40-109.41, joined by the end-of-week rebound from range support on the daily timeframe at ¥108.96-109.34, points to a test of daily range resistance at ¥110.86-110.27 this week.

Short term:

In harmony with the longer-term bullish image, any bearish attempt from ¥110 on the H1 could feed buyer interest from prime support at ¥109.74-109.80. This sets the stage for an initial upside objective at approximately ¥109.90ish.

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 extended its underperformance against a spirited USD on Friday; the currency pair finished the week lower by 0.7 percent. Despite many desks forecasting an interest rate rise in the UK as early as May, candle action discovered deeper water below the 200-day simple moving average at $1.3829. This raises the possibility of Quasimodo support at $1.3609 presenting itself this week.

It was also aired in recent writing that the daily chart communicates a rangebound environment. Since late June, buyers and sellers have been squaring off between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, however, is below the 50.00 centreline and on the doorstep of 40.00. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Interestingly, H4 prime support at $1.3689-1.3724 was acknowledged heading into Friday’s close. This area may interest those looking at price taking out stops beneath lows around $1.3730 (blue oval), with a primary profit objective set at $1.3765.

For those who read Friday’s technical briefing you may recall the following H1 analysis (italics):

Elsewhere, short-term action based on the H1 chart has the pair circling the lower side of $1.38, as we write. Interestingly, supply at $1.3837-1.3812 lurks directly overhead and could help facilitate what many traders will recognise as a stop-run after the event. Chart space below $1.38 shifts attention to Quasimodo support from $1.3751.

As evident from the H1 timeframe, we can see price did indeed slice through $1.38 and tag supply at $1.3837-1.3812 before plunging lower. Two key Quasimodo supports were taken in the process at $1.3759 and $1.3751 (both now potential resistances), and punctured the $1.3726 8th September low. What’s interesting from a Fibonacci perspective is $1.3726 is accompanied by Fibonacci support between $1.3715 and $1.3732.

Observed Levels:

Long term:

Scope to unearth lower price levels this week is a possibility, both on the weekly and daily timeframes. A reasonable downside target rests with the daily timeframe’s Quasimodo support at $1.3609, which sits within weekly supply-turned demand at $1.3629-1.3456.

Short term:

While higher timeframes eye lower ground, H4 and H1 timeframes imply a pullback could be in the offing early week from H4 prime support at $1.3689-1.3724 and H1 Fibonacci support between $1.3715 and $1.3732. H1 resistances are seen at $1.3759 and $1.3751, though the H4 target resistance is a touch higher at $1.3765.

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USD/CAD: Loonie Hits Nearly One-Month Low Ahead of Snap Election

The Canadian dollar hit a near one-month low against its U.S. counterpart on Friday as falling energy prices and September 20 election uncertainties weighed on the commodity currency.

Next week’s federal reserve decision and the election in Canada will be closely watched by investors. Investors are concerned that Monday’s elections will lead to a deadlock that hinders government action against COVID-19 and impedes the recovery of the economy.

The USD/CAD pair rose to 1.2762 today, up from Thursday’s close of 1.2681. The Canadian dollar lost over 1.2% last month and has depreciated about 1% so far this month.

“Barring the scenario of a hung parliament, political uncertainty in Canada should ultimately dissipate, helping CAD realign with its short-term fair value. The latest data (labour market and inflation) have all but confirmed the view that the Bank of Canada will have to step in with another round of tapering in October, which should leave it on track to fully unwind QE by year-end, or by early-2022,” noted Francesco Pesole, FX Strategist at ING.

“Ultimately, markets will be left with some room to speculate that the first hike will be delivered before mid-2022 (which is currently in the BoC rate-path projections). The set of good fundamentals should, in our view, provide some sustained support to CAD into year-end, and we expect USD/CAD to trade consistently 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 1.29% lower at $71.66 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

On Thursday, Canada’s Statistics Canada reported that wholesale sales declined 2.1% to $70.1 billion in July, as building materials and supplies sales plummeted. In total, it was the second consecutive decline and the biggest since April 2020. That raises concerns among investors that the economy is slowing.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.25% higher at 93.164. The dollar reaches a three-week high, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet next 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.

USD/CAD Daily Forecast – Test Of Resistance At 1.2760

Canadian Dollar Is Losing Ground Against U.S. Dollar

USD/CAD is currently trying to settle above the resistance at 1.2760 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is testing the resistance level at 93.10. In case this test is successful, the U.S. Dollar Index will move towards the next resistance level at 93.40 which will be bullish for USD/CAD.

Today, U.S. released Michigan Consumer Sentiment report which indicated that Consumer Sentiment improved from 70.3 in August to 71 in September compared to analyst consensus of 72.

WTI oil managed to get below the $72 level and made an attempt to settle below $71.50 which was bearish for commodity-related currencies, including Canadian dollar.

Foreign exchange market traders also focused on the developments in U.S. government bond markets. The yield of 10-year Treasuries is currently trying to settle above monthly highs near 1.38%. A move above this level will push it towards the resistance at 1.42% which will be bullish for the American currency.

Technical Analysis

usd cad september 17 2021

USD to CAD settled above the resistance level at 1.2730 and is trying to settle above the next resistance at 1.2760. In case this attempt is successful, USD to CAD will move towards the resistance at 1.2785.

A successful test of the resistance at 1.2785 will open the way to the test of the next resistance level which is located at 1.2810. If USD to CAD gets above the resistance at 1.2810, it will continue its upside move and head towards the next resistance level at 1.2830.

On the support side, the previous resistance at 1.2730 will serve as the first support level for USD to CAD. In case USD to CAD manages to settle below this level, it will head towards the next support at 1.2710.

A successful test of the support at 1.2710 will push USD to CAD towards the next support at 1.2685. If USD to CAD declines below this level, it will move towards the support at the 20 EMA at 1.2650.

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

USD/JPY Weekly Price Forecast – US Dollar Recovers to Reach Towards Same Magnetic

The US dollar has initially fallen during the course of the trading week but remains very much in the same vicinity that we had been in for quite some time. In fact, we have been bouncing around in the same area for quite some time. The ¥110 level seems to be a bit of a magnet for price, and as a result it makes quite a bit of sense that we would see this market go back to that level. The ¥110 level is essentially “fair value” at the moment, as we have been bouncing around between the ¥109 level on the bottom and the ¥110.75 level on the top.

USD/JPY Video 20.09.21

The weekly candlestick of course is a hammer, so that is a bullish sign. That being said, there are a lot of long wicks just above that formed over the last month or so, so it does suggest that we are going to struggle going higher. This is a market that I think continues to see a lot of confusion and choppy behavior, so it is not until we break out of this little consolidation area that I think longer-term traders can get involved.

The market currently offers a lot of short-term back-and-forth type of trading, so if you are range bound day trader, then you may like this market a lot. Otherwise, if you are a longer-term trader, you need some type of clarity, something that we just do not have right now. Ultimately, this is a market that I think continues to see more noise.

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

GBP/USD Weekly Price Forecast – British Pound Gives Up Early Gains for The Week

The British pound has initially rally during the course of the week but failed at the 1.39 level to turn things back around yet again. The British pound has been all over the place as of late, and it looks to me as if the market is going to continue to see a lot of uncertainty and volatility. The 1.37 level underneath is where the 200 day EMA is on the daily timeframe, so that will attract a certain amount of attention, but what I am focusing on from a longer-term standpoint is there was recent lows that we had formed near the 1.36 handle.

GBP/USD Video 20.09.21

If we were to break down below the 1.36 level, then it is likely that we could see an even bigger flush lower, just as if we can turn around a break above the 1.40 handle, which would open up a move towards the 1.42 handle. At that point, it would be a major selloff of risk appetite, as traders go rushing towards the greenback for safety. Watch the bond markets, because if they continue to attract inflows, that could be reason enough for the British pound to fall. At this point, I think it is much more about the greenback than the British pound.

I would anticipate that this is a market getting ready to build up momentum, but we have not quite had the reason to go in one direction or another. That being said, the market is likely to make a move sooner or later, and right now it looks like we are “tilting” to the downside more than anything else.

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

GBP/JPY Weekly Price Forecast – British Pound Has Choppy Week

The British pound has gone back and forth during the course of the trading week, as we have seen quite a bit of confusion. That being said, it is worth noting that this pair is highly sensitive to risk appetite, and therefore we have to pay attention to other markets in general. The Japanese yen is of course considered to be a safety currency, so it is worth paying close attention to. The market falling from here could open up a move down towards the ¥150 level, which extends down to the ¥149 level. All of that is an area that I think that if we break down below, it could open up a flood of selling.

GBP/JPY Video 20.09.21

On the other hand, if we were to break above the top of the candlestick for the week, it is possible that we could go looking towards the ¥155 level above, which is an extreme high that we had recently pulled back from. That being said, you can make a serious argument for a potential head and shoulders pattern forming over the last several months, so it is possible that we could be starting to see cracks in the surface and a potential selloff. Nonetheless, you need to be very cautious about the position size going forward, and only add as it works out in your favor. As far as jumping in with both feet, I would be very cautious about doing so. I think that we will continue to see a lot of choppy behavior, so it is worth noting that we are still at risk overall.

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

EUR/USD Weekly Price Forecast – Euro Gives Up Early Gains to Show Signs of Weakness

The Euro has initially rallied during the course of the trading week to reach towards the 1.150 level, an area that has been significant resistance. At this point in time, the market looks as if it is going to try to close towards the lows of the week, as we are threatening the 1.1750 region. Breaking down below there, the market is likely to go towards the 1.17 level. After that, then you have the 200 week EMA which is sitting just above the 1.16 level, an area that had been major support previously.

EUR/USD Video 20.09.21

Rallies at this point in time should continue to be selling opportunities, at least until we can break above the 1.19 level. That being said, this is a pair that even if you are a longer-term trader, you are probably going to be better served looking on shorter-term charts for entries. The Euro tends to be very choppy in general, as this is the most widely traded currency pair by far. Furthermore, high-frequency trading has entered the realm of the EUR/USD currency pair, so that does have a little bit of an effect as well.

At this juncture, we are still very much range bound, but I think what we are going to see is a lot of back and forth choppy behavior. This is a market that is highly influenced by the bond market in the United States and of course the Federal Reserve. There are now talks of tapering gaining momentum in the United States, so that obviously could have an effect on the greenback itself. In general, this is a market that is slumping lower, but it does not necessarily mean that we are going to fall apart.

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

AUD/USD Weekly Price Forecast – Australian Dollar Drifts Lower for the Week

The Australian dollar has fallen a bit during the course of the trading week to drop below the 200 week EMA. More importantly, we have also pierced the 0.73 level which had been major support. If we continue to drop from here, is very likely that we will go looking towards the 0.71 handle, where we bounced from about a month ago. Because of this, I think there would be a certain amount of interest in that area, extending down to the 0.70 level. That being said, this is a market that has a lot of external influence from China, so pay close attention to what is going on there. There is the possibility that the Chinese mainland is about to suffer a bit of a hit due to the Evergrande default.

AUD/USD Video 20.09.21

At this point, I think that the next week or two will end up being very crucial. If we break down below the bottom of this week, then it is likely that we could go looking towards the 0.71 handle. However, if we turn around a break above the top of the candlestick for the week, then it is likely that we go looking towards the 50 week EMA, even the 0.75 level above which is a large, round, psychologically significant figure.

Keep in mind that this pair is highly sensitive to risk appetite, and therefore the Aussie could be thrown around by a lot of different things, and not just the Chinese real estate issue. That being said, the US dollar is a safety currency, so if we see the US dollar picking up steam, it is very possible that we could be talking about a run towards the US bond market and therefore safety.

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

If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher?

Last month marked the 50th anniversary of President Nixon’s suspension of the convertibility of US dollars into gold. This move broke the last, thin link between world currencies and the yellow metal, effectively ending the ersatz of the gold standard that we still had back then (the official end came in March 1973, marking the start of an era of freely-floating fiat currencies).

I wrote about the collapse of the Bretton Woods in the last edition of the Gold Market Overview, but as it was a truly revolutionary event that paved the way for today’s monetary conditions, it’s worth mentioning the topic again.

You see, as weak the diluted post-war version of the gold standard was, it limited the US central bank’s ability to increase the money supply, as there was still a possibility that other participants of the system would redeem their dollars for gold. But Nixon “suspended temporarily” the convertibility of the dollar into gold, and while gold is away, the mice will play. Without any true constraints, the pace of annual money growth hit double digits. The CPI inflation rates followed, and the great stagflation of 1970s emerged, as the chart below shows.

What’s more, without the discipline imposed by the gold standard, the central bank could much easier monetize the public debt. The governments could spend more, maintain fiscal deficits and increase their indebtedness. In short, without gold as an anchor for monetary policy, we got more money printing, more debt, higher inflation, and more severe financial crises.

Now, one could ask: if the current monetary system, or – as some analysts prefer to call it – non-system is so bad, why isn’t the price of gold higher? Shouldn’t it be rallying, indicating how rotten our fiat-money-debt-fueled economy is?

Well, there are many answers to this questions. First of all, let’s note that the price of gold has already surged about 4100%, or more than 7.7% annually, on average, since 1971 (see the chart below), which is really something!

Second, financial markets are great supporters of the current monetary system, as they love loose monetary policy and liquidity drips from the central banks. Please remember that the US stock market welcomed the closure of the gold window by increasing 3% the next day after Nixon’s infamous speech.

Third, even poor systems can work for a while. Communist economies didn’t collapse immediately, despite their obvious inefficiency. The Breton Woods worked for almost 30 years despite its evident flaws. Furthermore, there were some institutional changes implemented in order to strengthen the current system, such as central banks’ independence, inflation targeting, prohibition of direct monetization of public debt, etc.

However, probably the most important reason is that the gold standard was in a way replaced by the US dollar standard, as the greenback substituted gold as the world’s reserve currency. In such a system, there is simply no alternative to the US dollar as a global reserve. This is because America became even more central to global finance than it was in 1971 and because practically all countries conduct similarly unsound monetary and fiscal policies (and some central banks like the ECB or BoJ are even more radical than the Fed). The greenback’s strength limits dollar-denominated gold prices.

However, it’s worth remembering that unlike the gold standard, under which currencies were backed by gold (or: they were actually defined as units of gold’s weight), today’s currencies are backed only by the reputation of their issuers, which is not set in stone. This is actually why the Breton Woods eventually collapsed. Initially, the US enjoyed a great reputation, and no one even dared to question Uncle Sam’s ability to convert dollars to gold. But the prolonged war in Vietnam, Johnson’s great social programs, increased government spending and growing deficits undermined this reputation, and other countries started to demand gold for their dollars.

The same may happen in the future, especially given that Trump has left some scratches on America’s reputation. With Biden continuing his predecessor’s populist economic doctrine, the greenback should face further headwinds. What’s more, with ultra-low interest rates and a mammoth pile of debt, the room for inflating the economic bubble is limited. Although the return to the gold standard seems unlikely, the recurring business cycles and economic crises are more than certain. That’s great news for gold.

In other words, the current system persists mainly thanks to the faith in the central banks’ ability to control inflation, even without the discipline of the gold standard. However, this belief can break down one day. The Fed might be right that the current high inflation is temporary. But if not, we could have “Powell’s shock”, which could strengthen gold, just as Nixon’s shock did.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

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

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care.

 

USD/JPY Price Forecast – US Dollar Climbs Back Towards ¥110 Level Yet Again

The US dollar has rallied a bit during the trading session on Friday to reach towards the ¥110 level, an area that has been important more than once. Because of this, you should not be surprised at all to see that the market is stalling a bit. Nonetheless, the ¥110 level is essentially an area of magnetism for price, and what I would consider to be roughly “fair value” in this market. The 50 day EMA is slicing through this general vicinity, and therefore that is another reason to think that we are hanging around this area.

USD/JPY Video 20.09.21

To the upside, I see the ¥110.75 level as resistance, while I see the ¥109 level underneath as a significant support level. The 200 day EMA sits just below the support level, so I think that adds a little bit more interested that area. Ultimately, this is a market that I think will have to make a bigger decision, but as we see at this point in time, we are essentially still stuck in the same consolidation that we have been in for a while.

Keep in mind that there is a certain amount of risk appetite built into this pair, but you should also pay close attention to the fact that the 10 year notes from both countries have a major influence on where we go as well, as this pair is highly sensitive to yield differential. The market will continue to bounce around in the short term, and I do not see a breakout being imminent. However, if we do finally get that breakout, the market could move rather quickly.

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

GBP/USD Price Forecast – British Pound Goes Back and Forth Yet Again

The British pound has gone back and forth during the course of the trading session, suggesting that the market is going to see a lot of choppy behavior. The 50 day EMA sits just above, which in and of itself could offer a little bit of resistance, showing hesitation. This is a market that is starting to try to figure out whether or not we are trying to go higher, or lower. Quite frankly, this is a market that seems to be a bit confused, which makes quite a bit of sense, but you should also take a look at the technicals to give you a little bit of a heads up as well.

GBP/USD Video 20.09.21

To the upside, the 1.39 level will offer resistance, perhaps opening up the possibility of a move towards the 1.40 handle. To the downside, the 1.37 level underneath will offer significant support, as the 200 day EMA sits there, and if we break down below there then it is likely that we could go looking towards the double bottom at the 1.36 handle.

The market breaking down below there would signify a bit of a collapse, perhaps opening up the possibility of a major “risk off” type of situation. On the other hand, if we were to break to the upside, clearing the 1.40 handle would open up the possibility of a move to the 1.42 level, at the very least. After all, the market would have kicked off a major “W pattern” if that does happen. All things been equal, this will have a lot to do with risk appetite more than anything else.

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

GBP/JPY Price Forecast – British Pound Recovers to Close Out Week

The British pound has rallied a bit during the course of the trading session on Friday, after forming a hammer on both Wednesday and Thursday. That being said, there is still a significant amount of resistance above, and that is something that could come into the picture. The ¥152.50 level above is the beginning of significant resistance that extends to the ¥153 level. That is an area that I think will be very difficult to get above, but if we do finally break above there then it would be a major turn of events in this pair, opening up a continuation of the longer-term uptrend.

GBP/JPY Video 20.09.21

On the other hand, if we turned around to break through those hammers, that would be a very negative turn of events to open up the possibility of a move down to the ¥150 level. The ¥150 level is a large, round, psychologically significant figure, as well as the beginning of 100 points worth of support. If we were to break down below the ¥149 level, then I believe that the market unwinds drastically at that point, in a major “risk off” type of event, having people rush into the Japanese yen as it is considered to be a safety currency. At that point, the market is likely to go all the way down to the ¥145 level, maybe even the ¥140 level.

One thing is for sure, this market is going to continue to be very choppy and noisy, so you need to be very cautious with your position size, as it is a market that does tend to move quite rapidly. I will be putting small positions on and then adding as things work out.

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

EUR/USD Price Forecast – Euro Bounces Slightly

The Euro has rallied a bit during the course of the trading session on Friday to show signs of life again, but quite frankly this is a market that is trying to figure out what it wants to do next but the candlestick on Thursday certainly gave us a bit of a “heads up” as to where we may be heading next. That type of negativity showing up in the market all of the sudden based upon the retail sales numbers in America suggests that the traders out there are starting to worry about the idea of the Federal Reserve tightening monetary policy, so we have seen the market go looking towards the greenback again.

EUR/USD Video 20.09.21

Furthermore, you have to keep in mind that there are a lot of potentially bad things out there happening, and that could have a major influence on where we go next as well. Remember, the US dollar is considered to be a safety currency, so if there are a lot of concerns out there it makes quite a bit of sense that the greenback attracts inflows. Not only do people want to own the US dollar itself, but they will be involved in the bond market, which has its own implications as it demands that you use those very same greenbacks in order to buy those bonds.

When you look at the chart, you can see that the 50 day EMA above sloping lower suggests that the downtrend is going to continue, and short-term rallies will probably be sold into. With this I am looking at short-term charts for opportunities to get short yet again. To the downside, I suspect that we go looking towards 1.17 level.

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

AUD/USD Price Forecast – Australian Dollar Recovers to Close Out Week

The Australian dollar is rallying to close the week out, recovering from a break down below the 0.73 level. The 0.73 level has been important multiple times, so the fact that we breakdown through there was a very negative sign. That being said, now that we have recovered a bit during the day on Friday, it is very likely that sellers will come back into the picture on signs of exhaustion. Because of this, I am looking at this market through the prism of selling the rallies, which is the best way to play a choppy downtrend line.

AUD/USD Video 20.09.21

Above current trading, there is the 50 day EMA, which comes into the picture. The 50 day EMA is an area that I think will continue to attract a lot of attention, currently sitting at roughly the 0.7385 above. Now that we have made that move lower, I suspect that we are going to see this market continue the overall choppy but negative behavior. Looking at this situation, I think that US dollar strength may continue to be the mainstay in this market, especially as Australia is suffering at the hands of massive lockdowns and protests, while the government tries to destroy its own economy.

Furthermore, the Chinese are rattling sabers again when it comes to the Aussies, at the same time they are having issues with the economy itself. Remember, the Chinese are major consumers of hard commodities when it comes to Aussie goods. The 200 day EMA previously had been massive resistance and kicked off this move to the downside. All things been equal, I think we do continue the downtrend, but it is not necessarily going to be a smooth ride.

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

EUR/USD Mid-Session Technical Analysis for September 17, 2021

The Euro is trading higher on Friday as the U.S. Dollar gave back some of yesterday’s gains. Nonetheless, slightly higher Treasury yields may be helping to cap gains.

Despite the early strength, the Euro held near its lowest level against the U.S. Dollar since August 27, reached during Thursday’s session. Yesterday’s selling pressure was fueled by better-than-expected retail sales data in the United States that boosted bets on the strength of the U.S. economy and earlier monetary policy tightening.

At 10:30 GMT, the EUR/USD is trading 1.1785, up 0.0017 or +0.15%.

To recap Thursday’s events, U.S. retail sales unexpectedly increased in August, rising 0.7% from the previous month despite expectations of a 0.8% decline, while a business sentiment survey by the Philadelphia Fed also showed a big improvement. However, jobless claims for the week ended September 11 came in at 332,000, above a Dow Jones forecast of 320,000.

Later today, the University of Michigan is due to release its preliminary consumer and inflation data for September at 14:00 GMT. These reports could be the source of intraday volatility. Consumer sentiment is expected to rise to 71.9 from 70.3. Last month, inflation expectations came in at 4.6%.

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 1.1750 will indicate the downside momentum is getting stronger. Taking out the minor bottom at 1.1726 will reaffirm the trend. The minor trend will change to up on a trade through 1.1846.

The short-term range is 1.1664 to 1.1909. The EUR/USD is currently trading inside its retracement zone at 1.1787 to 1.1758.

The main range is 1.1603 to 1.1975. Its retracement zone at 1.1820 to 1.1856 is resistance.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Friday will be determined by trader reaction to 1.1758.

Bullish Scenario

A sustained move over 1.1758 will indicate the presence of buyers. The first upside target is the 50% level at 1.1787. Taking out this level with strong volume could lead to an extension of the rally into the main 50% level at 1.1820.

Bearish Scenario

The inability to overcome 1.1787 will indicate the early buying is weakening. A trade through 1.1758 will indicate the selling pressure is getting stronger. A move through 1.1750 could trigger a steep break into the minor bottom at 1.1726.

The minor bottom at 1.1726 is a potential trigger point for an acceleration to the downside with 1.1664 the next major target price.

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

EUR/USD Daily Forecast – Euro Tries To Rebound Ahead Of The Weekend

Euro Gains Some Ground Against U.S. Dollar

EUR/USD is currently trying to settle back above 1.1775 while the U.S. dollar is losing some ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to get back below 92.80. In case the U.S. Dollar Index settles below this level, it will move towards the next support at the 20 EMA near 92.60 which will be bullish for EUR/USD.

Today, foreign exchange market traders will have a chance to take a look at the final reading of Euro Area inflation reports for August. Analysts expect that Euro Area Inflation Rate increased by 3% year-over-year while Euro Area Core Inflation Rate grew by 1.6%.

In the U.S., traders will focus on Michigan Consumer Sentiment report which is expected to show that Consumer Sentiment improved from 70.3 in August to 72 in September.

Trading will likely remain nervous ahead of the Fed Interest Rate Decision which will be released on September 22 as traders try to guess whether Fed is ready to announce the reduction of its asset purchase program.

Technical Analysis

eur usd september 17 2021

EUR/USD did not manage to settle below the support at 1.1750 and is trying to get back above 1.1775. In case this attempt is successful, EUR/USD will move towards the next resistance level which is located near the 20 EMA at 1.1800.

If EUR/USD manages to settle above the 20 EMA, it will gain additional upside momentum and head towards the next resistance level at the 50 EMA at 1.1815. A successful test of the resistance at 1.1815 will open the way to the test of the next resistance at 1.1830.

On the support side, the nearest support level for EUR/USD is located at 1.1750. In case EUR/USD manages to settle below the support at 1.1750, it will head towards the next support level which is located at 1.1720. A successful test of this level will open the way to the test of the next support at 1.1690.

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

GBP/USD Daily Forecast – British Pound Is Mostly Flat After Retail Sales Data

UK Retail Sales Declined By 0.9% In August

GBP/USD is currently trying to settle below the support level at 1.3800 while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the resistance at 92.80 but failed to get to the test of the 93 level. In case the U.S. Dollar Index settles above 93, it will head towards the resistance at 93.10 which will be bearish for GBP/USD.

UK has recently reported that Retail Sales declined by 0.9% month-over-month in August compared to analyst consensus which called for growth of 0.5%. On a year-over-year basis, Retail Sales were flat, while analysts expected that they would grow by 2.7%.

Foreign exchange market traders will also continue to monitor the developments in U.S. government bond markets. The yield of 10-year Treasuries managed to get above the 50 EMA at 1.33% and is trying to develop additional upside momentum. In case this attempt is successful, U.S. dollar may get more support.

Technical Analysis

gbp usd september 17 2021

GBP/USD continues its attempts to settle below the support level at 1.3800. 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 manages to settle below the support at 1.3800, it will get to another test of the next support level at 1.3780. A successful test of this level will open the way to the test of the support at 1.3745. In case GBP/USD gets below 1.3745, it will continue its downside move and head towards the support at 1.3710.

On the upside, a move above 1.3800 will push GBP/USD towards the resistance at the 50 EMA at 1.3815. In case GBP/USD settles above this level, it will head towards the next resistance at 1.3835. A successful test of this level will push GBP/USD towards the next resistance level which is located at 1.3865.

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