The Week Ahead – Central Bank Chatter, Evergrande, and a Busy Economic Calendar in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 1st October. In the week prior, 39 stats had also been in focus.

For the Dollar:

Core durable goods orders for August kicks things off on Monday.

The focus will then shift to consumer confidence figures on Tuesday. We have seen market sensitivity to consumer confidence heightened in recent months.

On Thursday, the focus will then shift to final GDP numbers for the 2nd quarter and weekly jobless claims. Barring a marked revision to the GDP numbers, expect the jobless claims to be key.

At the end of the week, inflation, personal spending, and ISM Manufacturing PMI figures will also influence.

On the monetary policy front, we will expect increased sensitivity to FOMC member chatter in the week. FED Chair Powell and a number of FOMC members are scheduled to speak in the week.

In the week ending 24th September, the Dollar Spot Index rose by 0.14% to 93.327.

For the EUR:

It’s a relatively busy week on the economic data front.

German consumer sentiment and unemployment figures will be in focus on Tuesday and Thursday.

Consumer spending from both France and Germany will also draw interest on Tuesday and Friday.

Manufacturing PMI figures for Italy and Spain, and finalized PMIs for France, Germany, and the Eurozone wrap things up on Friday.

With inflation still a key area of interest, prelim member state and Eurozone inflation figures will also influence in the week.

On the monetary policy front, ECB President Lagarde is also scheduled to speak in the week. Expect any chatter on the economic outlook or monetary policy to move the dial.

For the week, the EUR fell by 0.04% to $1.1720.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Key stats include 2nd quarter GDP and finalized manufacturing PMIs due out on Thursday and Friday.

Expect any revision to prelim figures to influence.

On the monetary policy front, BoE Governor Bailey is due to speak on Wednesday. Following the BoE’s hawkish guidance last week, there will be plenty of interest in the Governor’s speech.

The Pound ended the week down by 0.45% to $1.3679.

For the Loonie:

It’s yet another quiet week ahead on the economic calendar.

RMPI figures will be in focus on Thursday ahead of GDP numbers on Friday.

Expect the GDP numbers to have a greater impact in the week. Much will depend on market risk sentiment, however.

The Loonie ended the week up 0.88% to C$1.2652 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week.

Retail sales figures due out on Tuesday will be the key stat of the week. On Thursday, private sector credit figures will also influence, however.

Away from the economic calendar, updates on government plans vis-à-vis lockdown measures will also be key, however.

The Aussie Dollar ended the week down by 0.23% to $0.7262.

For the Kiwi Dollar:

It’s another quiet week ahead.

Economic data is limited to business confidence figures due out on Thursday.

With the markets looking at the impact of the latest lockdown measures, expect interest in the numbers.

Key, however, will be updates from the New Zealand government on any plans to reopen.

The Kiwi Dollar ended the week down by 0.36% to $0.7015.

For the Japanese Yen:

Industrial production and retail sales figures will draw interest on Thursday.

Of greater significance, however, will be 3rd quarter Tankan survey numbers due out on Friday.

The Japanese Yen fell by 0.73% to ¥110.97 against the U.S Dollar.

Out of China

Private sector activity is back in focus.

NBS manufacturing and non-manufacturing PMIs along with the all-important Caixin Manufacturing PMI will test market risk sentiment on Thursday.

Another set of weak numbers will likely weigh heavily on riskier assets.

The Chinese Yuan ended the week flat at CNY6.4662 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the China, in particular, will need monitoring following last week’s holiday.

The Weekly Wrap – Economic Data, Monetary Policy, and Evergrande Delivered a Choppy Week

The Stats

It was a quieter week on the economic calendar, in the week ending 24th September.

A total of 39 stats were monitored, which was down from 61 stats in the week prior.

Of the 39 stats, 15 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.

Looking at the numbers, 10 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 29 reflected a deterioration from previous.

For the Greenback, monetary policy divergence delivered support in the week. In the week ending 24th September, the Dollar Spot Index rose by 0.09% to 93.281. In the previous week, the Dollar had risen by 0.66% to 93.195.

Out of the U.S

A quiet start to the week left the markets on hold ahead of Wednesday’s FOMC policy decision and projections.

Stats were limited to housing sector numbers that had a muted impact on the Dollar and beyond.

On Wednesday, the FED left policy unchanged as anticipated. The markets had expected a firm timeline on tapering, which didn’t materialize, however. While there were no fixed timelines, the projections revealed a divided camp on the interest rate front, with some pointing to rate hikes from 2022.

It was good enough to deliver Dollar support as central banks elsewhere shifted back due to the Delta variant.

On Thursday, economic data pegged back the Greenback, with the stats skewed to the negative.

In the week ending 17th September, initial jobless claims climbed from 335k to 351k.

Prelim private sector PMIs pointed to softer growth, albeit marginally.

In September, the Manufacturing PMI fell from 61.1 to 60.5, with the Services PMI declining from 55.1 to 54.4.

FED Chair Powell wrapped things up at the end of the week, with the FED Chair looking to soften market expectation of rate hikes near-term.

Out of the UK

It was a busy week.

On the economic data front, CBI Industrial Trend Orders rose from 18 to 22 in September.

The numbers had a muted impact on the Pound, however, with the BoE policy decision in focus.

Private sector PMIs came in softer in September, according to prelim figures, which pegged the Pound back.

The Manufacturing PMI fell from 60.3 to 56.3, with the Services PMI declining from 55.0 to 54.6.

In spite of weak numbers, the BoE was in action later in the day, delivering strong Pound support.

While leaving policy unchanged, the MPC noted that there was a stronger case for a rise in interest rates.

In the week, the Pound fell by 0.45% to end the week at $1.3679. In the week prior, the Pound had fallen by 0.71% to $1.3741.

The FTSE100 ended the week up by 1.26%, reversing a 0.93% loss from the previous week.

Out of the Eurozone

Private sector PMIs and German business sentiment were in focus, with the stats skewed to the negative.

In September, the French Manufacturing PMI fell from 57.5 to 55.2, with the Services PMI down from 56.3 to 56.0.

Germany’s Manufacturing PMI declined from 62.6 to 58.5, with the Services PMI falling from 60.8 to 56.0.

As a result, the Eurozone’s Manufacturing PMI fell from 61.4 to 58.7, and the Services PMI down from 59.0 to 56.3.

Germany’s IFO Business Climate Index fell from 99.6 to 98.8, with the Current Assessment sub-index down from 101.4 to 100.4. The Business Expectations sub-index declined from 97.5 to 97.3.

For the week, the EUR slipped by 0.04% to $1.1720. In the week prior, the EUR had fallen by 0.75% to $1.1725.

The CAC40 rallied by 1.04%, with the DAX30 and the EuroStoxx600 ending the week with up by 0.27% and 0.31% respectively.

For the Loonie

Retail sales were in focus in the 2nd half of the week.

In July, core retail sales fell by 1.0%, with retail sales down 0.6%. Core retail sales had risen by 4.7% in June, with retail sales having increased by 4.2%.

While the stats were Loonie negative, rising oil prices delivered support.

In the week ending 24th September, the Loonie rose by 0.88% to C$1.2752. In the week prior, the Loonie had fallen by 0.57% to C$1.2764.

Elsewhere

It was yet another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 0.45% to $0.7262, with the Kiwi Dollar ending the week down by 0.36% to $0.7015.

For the Aussie Dollar

There were no material stats to provide direction, leaving the RBA meeting minutes in focus.

Renewed lockdown measures supported the RBA’s view that there would be no rate hike until 2024.

The minutes did note, however, that the Delta variant impact was likely to be temporary, however.

For the Kiwi Dollar

Consumer sentiment and trade data were in focus, with the stats Kiwi Dollar negative.

In the 3rd quarter, the Westpac Consumer Sentiment Index fell from 107.1 to 102.7. While down, the decline was modest when compared with the impact of the first lockdown on sentiment.

A surge in imports led to a record trade deficit in August.

Month-on-month, the trade deficit widened from NZ$397m to NZ$2,144m. Compared with August 2020, the deficit widened from NZ$1,100m to $2,940m.

For the Japanese Yen

In August, core consumer prices were unchanged, year-on-year, after having fallen by 0.2% in July.

Service sector activity saw a softer contraction in September, which was also good news. The Services PMI rose from 43.5 to 47.4. Manufacturing sector activity did see slower growth, however, with the PMI falling from 52.7 to 51.2.

On the monetary policy front, the BoJ went largely unnoticed, with the September hold on monetary policy.

The Japanese Yen fell by 0.73% to ¥110.73 against the U.S Dollar. In the week prior, the Yen had risen by 0.01% to ¥109.93.

Out of China

There were no major stats in a shortened week.

On the policy front, the PBoC left loan prime rates unchanged, which was in line with expectations.

In the week ending 24th September, the Chinese Yuan was unchanged at CNY6.4662. In the week prior, the Yuan had ended the week down by 0.34% to CNY6.4661.

The CSI300 and the Hang Seng ended the week down by 0.13% and by 2.92% respectively.

Dollar Climbs as Evergrande Uncertainty Percolates

China Evergrande Group owes $305 billion and has run short on cash, missing a Thursday deadline for paying $83.5 million and leaving investors questioning whether it will make the payment before a 30-day grace period expires. A collapse of the company could create systemic risks to China’s financial system.

The safe-haven dollar had its biggest one-day percentage drop in about a month on Thursday after Beijing injected new cash into the financial system and Evergrande announced it would make interest payments on an onshore bond, boosting risk sentiment.

The offshore Chinese yuan weakened versus the greenback at 6.4641 per dollar.

The decline came a day after the greenback was lifted by Wednesday’s announcement from the U.S. Federal Reserve that it will likely begin to trim its monthly bond purchases as soon as November and flagged interest rate increases may follow suit sooner than expected as the central bank moves away from its pandemic crisis policies.

“We are in one of the situations, and this doesn’t always happen, where the dollar is the beneficiary of multiple ideas,” said Joseph Trevisani, senior analyst at FXStreet.com.

“The U.S. economy does look better than most of its competitors, there is lingering fear out there over Evergrande and what else is out there in the rather untransparent Chinese economy and political system, plus the Fed appears finally ready.”

The dollar index rose 0.237%, with the euro down 0.2% to $1.1713.

Kansas City Fed President Esther George said the U.S. labor market has already met the central bank’s test to pare its monthly bond purchases, and the discussion should now turn to how its massive bondholding could complicate the decision on when to hike rates.

Cleveland Fed President Loretta Mester echoed the sentiment for a tapering this year, and said the central bank could start raising rates by the end of next year should the job market continue to improve as expected.

In prepared remarks in a listening session with a wide swath of economic players, Fed Chair Jerome Powell did not elaborate on his own economic or monetary policy outlook, which he had outlined at the close of the two-day Fed meeting on Wednesday.

Sterling weakened a day after hawkish comments from the Bank of England on Thursday pushed the pound to its biggest one-day percentage gain since Aug. 23.

The Japanese yen weakened 0.43% versus the greenback at 110.77 per dollar, while Sterling was last trading at $1.3666, down 0.36% on the day.

Cryptocurrencies slumped after China’s most powerful regulators increased the country’s crackdown on the digital assets, with a blanket ban on all crypto transactions and crypto mining.

Bitcoin, the world’s largest cryptocurrency, last fell 5.89% to $42,256.47.

Smaller coins, which generally move in tandem with bitcoin, also dropped. Ether last fell 8.08% to $2,899.10 while XRP last fell 7.2889413% to $0.93.

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

(Reporting by Chuck Mikolajczak; Editing by Dan Grebler and Sonya Hepinstall)

USD/JPY Weekly Price Forecast – US Dollar Testing Resistance

The US dollar initially fell against the Japanese yen during the course of the week but found support just above the ¥109 level. This is an area that has been resistance previously, and therefore I think it will be interesting to see if we get through. If we do, then the ¥111.50 level could offer quite a bit of resistance. If we break above there, then the market goes looking towards the ¥112.50 level. Furthermore, when you look at this chart, you can see that we have been in a range for a while, with the ¥110 level being a bit of a magnet for price. All things been equal, this is a market that I think continues to see a lot of choppiness, but you should keep in mind that this market is highly risk sensitive.

USD/JPY Video 27.09.21

If we break down from here, then the market is likely to test the ¥109 level yet again, and if we break down below there, the market is likely to fall even further. With that being said, the market tends to favor the Japanese yen when there is a lot of concern out there. That being the case, pay close attention to this market. That being said, the market is also forming an ascending triangle, so we need to make some type of decision sooner or later.

The move has been rather strong, but at this point now we are really starting to press the issue when it comes to the technicals when it comes to the market, and therefore we need to see some type of clarity but it certainly looks as if it is starting to favor the upside.

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

USD/JPY Price Forecast – US Dollar Rallies Towards Resistance Again

The US dollar has rallied again during the trading session on Friday to reach towards the ¥110.75 level. This is an area that continues to show a lot of resistance, so it would not be surprising to see the market rollover from here. If it does, that will drag a lot of the Japanese yen related pairs lower, as it is a strength or weakness meter for the Japanese yen overall. At this point in time, we are approaching the very top of where we have been for several months, and therefore it is not surprising at all to see a little bit of trouble.

USD/JPY Video 27.09.21

That being said, if we were to break above the ¥110.75 level, the market could very well go looking towards the ¥111.50 level. On the other hand, the ¥109 level underneath is massive support, sitting at the 200 day EMA as well. If we were to break down below there, then the market would almost certainly fall apart. That being said, I just do not see how it happens, so I think at best we are probably looking at consolidation in general.

The ¥110 level has been a bit of a magnet for price, as it is essentially “fair value” for the overall consolidation area that we have been in. It is also a large, round, psychologically significant figure, and therefore bit of a magnet for price as well. With this, I think you are looking at a market that will attract a certain amount of selling pressure in the short term, but obviously if we break out to the upside yet to change your tactics rather quickly.

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

Economic Data and Central Bank Chatter Put the EUR and the Dollar in Focus

Earlier in the Day:

It was relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Japanese Yen were in action this morning.

For the Kiwi Dollar

Trade figures were in focus in the early hours.

In August, New Zealand’s trade deficit widened from NZ$397m to NZ$2,144m. Year-on-year, the deficit widened from NZ$1,100m to NZ$2,940m.

According to NZ Stats,

  • Imports rose by NZ$1.08bn, compared with August 2020, leading to a record monthly trade deficit.
  • Exports were little changed, falling by NZ$42m.
  • Vehicles, parts, & accessories imports were up NZ$415m, with mechanical machinery & equipment up NZ$223m.
  • Petroleum & petrol product imports increased by NZ$207m.

The Kiwi Dollar moved from $0.70713 to $0.70704 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.11% to $0.7077.

For the Japanese Yen

In August, core consumer prices remained unchanged in August, year-on-year, which was in line with forecasts. Core consumer prices had fallen by 0.2%, year-on-year, in July.

Of greater significance were prelim private sector PMIs.

In September, the Services PMI rose from 43.5 to 47.4, while the Manufacturing PMI declined from 52.7 to 51.2.

The Japanese Yen moved from ¥110.402 to ¥110.408 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.05% to ¥109.380 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was up by 0.23% to $0.7312.

The Day Ahead

For the EUR

It’s a quieter day ahead on the economic calendar. Business sentiment figures for Germany will be in focus in the early part of the European session.

Following the disappointing PMI numbers from Thursday, a larger than expected decline would test support for the EUR.

At the time of writing, the EUR was up by 0.07% to $1.1747.

For the Pound

It’s a particularly quiet day ahead on the economic calendar.

There are no material stats due out of the UK to provide the Pound with direction.

Following the BoE’s more hawkish stance on Thursday, risk sentiment would need to deteriorate to weaken the Pound.

At the time of writing, the Pound was up by 0.12% to $1.3736.

Across the Pond

It’s a relatively quiet day ahead. Key stats include new home sales figures, which should have a muted impact on the Dollar.

FED Chair Powell and other FOMC member are scheduled to speak later in the day, however, and could move the dial.

At the time of writing, the U.S Dollar Spot Index was down by 0.02% to $93.063.

For the Loonie

It’s a particularly quiet day ahead for the Loonie. There are no material stats due out of Canada later today.

The lack of stats will leave the Loonie in the hands of market risk sentiment and crude oil prices.

At the time of writing, the Loonie was up by 0.08% to C$1.2645 against the U.S Dollar.

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

September 24th 2021: EUR/USD Prime Resistance Calling for Attention at $1.1767-1.1776

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Weekly timeframe:

Technical elements on the weekly timeframe reveal EUR/USD has been somewhat stationary since mid-June. Deserving attention, however, is prime support at $1.1473-1.1583, a long-term base sharing chart space with a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550. Note the 100% value represents a harmonic AB=CD bullish point, which brings a 1.13 BC Fibonacci extension also to table at $1.1623.

Also technically interesting on the weekly scale is the possibility of long-term sell-stops residing south of late September lows at $1.1612 (2020).

In addition, we see trend on the weekly chart has largely been bullish since early 2020.

Daily timeframe:

Quasimodo support at $1.1689 welcomed healthy buying on Thursday, clipping a portion of early-week losses.

Sustained interest to the upside on this timeframe seats $1.1900ish resistance in sight. The opening above $1.1900 shines light on prime resistance at $1.2115-1.1990 and the 200-day simple moving average at $1.1981.

Failure to command a bullish position above $1.1689 swings the technical pendulum in favour of eventually reaching 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).

Momentum studies, according to the relative strength index (RSI), shows the value moving in on the 50.00 centreline. Reclaiming 50.00+ indicates positive momentum: average gains exceeding average losses.

H4 timeframe:

The $1.1690-1.1705 decision point had its lower boundary clipped late US hours Wednesday—a direct response to the latest FOMC policy meeting. Sell-stops beneath $1.1690-1.1705 potentially helped fuel recovery gains that, in recent hours, hauled the pair above resistance at $1.1742, a previous Quasimodo support base.

Quasimodo resistance at $1.1771, therefore, demands attention.

H1 timeframe:

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

$1.1742 commanding position could swing the pendulum in favour of a test of $1.17 on the H1. And by testing the psychological level, a whipsaw south to daily Quasimodo support at $1.1689 is a potential scenario to have noted on the technical watchlist. $1.1689 bids feeding off sell-stops below $1.17 might be enough to chalk up a bullish wave.

As evident from the daily and H1 charts, the above came to fruition, aided by USD downside (DXY 0.5 percent). Not only that, additional sell-stops were tripped under the H4 timeframe’s decision point at $1.1690-1.1705.

Going forward, technical eyes are likely on prime resistance coming in at $1.1767-1.1776 on the H1, joined by supply at $1.1762-1.1774 and H4 Quasimodo resistance mentioned above at $1.1771. Interestingly, meaty stops are perhaps located a touch above the Fed-induced high at $1.1755, liquidity that may excite sellers from $1.1767-1.1776/$1.1762-1.1774 on the H1.

Observed Technical Levels:

Short-term flow is geared towards a whipsaw above Wednesday’s high at $1.1755, a move perhaps drawing sellers into the market from $1.1767-1.1776/$1.1762-1.1774 on the H1. Focus, however, is directed to $1.1767-1.1776, as this area houses H4 Quasimodo resistance from $1.1771.

$1.1767-1.1776 sellers will likely adhere to strict trade management, as daily buyers off Quasimodo support from $1.1689 could take aim at higher levels.

AUD/USD:

(Italics: previous analysis)

Weekly timeframe:

The weekly timeframe has the currency pair retesting prime support at $0.6968-0.7242.

Since printing a two-week recovery in late August, however, the unit 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.

Daily timeframe:

From the daily chart, attention is concentrated on Fibonacci support at $0.7057-0.7126 and prime resistance at $0.7506-0.7474.

Outside of the aforementioned areas is a Quasimodo support-turned resistance at $0.7621 and the 200-day simple moving average at $0.7596. Nearby we also note a 100% Fibonacci projection at $0.7604, a 61.8% Fibonacci retracement at $0.7585 and a 1.618% Fibonacci extension at $0.7644.

To the downside, support also falls in around $0.7021.

Those who follow the relative strength index (RSI) will acknowledge the indicator zeroing in on the 50.00 centreline, coming from below. Moving above the latter signals momentum is to the upside.

H4 timeframe:

Upbeat market sentiment and the US dollar index registering losses witnessed AUD/USD climb resistance at $0.7281 on Thursday, leaving the $0.7200-0.7218 decision point unchallenged.

Resistance drawn from $0.7317 entered the fray in recent hours, a level boasting historical significance. Should we overthrow current resistance and (potentially weak) supply, touching gloves with a decision point at $0.7395-0.7410 may be in the offing.

H1 timeframe:

Thursday saw bulls take on $0.73 and hold the level as support, a move shifting resistance at $0.7322 in the headlights. Although the said resistance is a potential headwind for the currency pair, buy-stops above the level might fuel an assault on Quasimodo resistance at $0.7339. This is a short-term level, therefore, that has the capacity to entice sellers.

Failure to contain buyers, continuation moves could shape in the direction of prime resistance from $0.7401-0.7379.

Observed Technical Levels:

Having recently observed H1 action break/retest the $0.73 figure to the upside, and understanding price is showing signs of bullish life from weekly prime support at $0.6968-0.7242, H4 resistance at $0.7281 is unlikely to deliver much to write home about.

With that being said, buyers may remain in the driving seat today, taking on the noted H4 resistance as well as H1 resistance from $0.7322 and Quasimodo resistance at $0.7339 to target H1 prime resistance at $0.7401-0.7379. Although do note that $0.7339 is well placed to welcome a short-term bearish pop.

USD/JPY:

(Italics: previous analysis)

Weekly timeframe:

¥108.40-109.41 demand recently welcomed a bullish ripple. Yet, before getting too enthusiastic, this area has failed to ignite buyers since mid-July.

Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance may eventually emerge to familiar supply at ¥113.81-112.22.

Daily timeframe:

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 resistance—thanks to surging US Treasury yields—acknowledged price action on Thursday, which if a break comes to pass brings light to neighbouring Quasimodo resistance at ¥111.11.

Based on the relative strength index (RSI), the value remains confined in similar fashion to current price movement, between 40.87 and 56.85. Technicians will recognise the indicator tests the mettle of the upper range limit, as we write.

H4 timeframe:

Thursday’s continuation rally arranged a decision point at ¥109.76-109.98, and manoeuvred price to within a stone’s throw from two Quasimodo resistances at ¥110.48 and ¥110.42. The aforesaid levels also work with a 1.272% Fibonacci extension at ¥110.37 and a 78.6% Fibonacci retracement at ¥110.44.

Note the H4 Quasimodo levels and associated Fibonacci structure resides within the daily timeframe’s range resistance at ¥110.86-110.27.

H1 timeframe:

A closer examination of price action has the H1 candles closing in on Quasimodo resistance at ¥110.32, which happens to align closely with channel resistance, etched from the high ¥109.90. A response from noted structure could turn price towards support at ¥110.11, a previous Quasimodo resistance base.

¥110.32 interest are urged to pencil in the possibility of a whipsaw higher to take in willing sellers around H4 resistance between ¥110.48 and ¥110.37. Notice that a pop higher will also trip any stops located above ¥110.32, perhaps delivering enough liquidity to persuade heavier selling interest.

Observed Technical Levels:

Short-term focus directs emphasis towards Quasimodo resistance at ¥110.32 on the H1, and adjoining channel resistance. However, as referred to in the above text, a pop higher to bring in any H4 seller interest around resistance at ¥110.48-110.37 could also be on the cards before sellers attempt to put in an appearance.

In conjunction with lower timeframe resistances, the daily timeframe’s range resistance is also currently in play at ¥110.86-110.27, alongside the chart’s RSI indicator also displaying range resistance.

The only caveat to the above, of course, is weekly demand coming in at ¥108.40-109.41, albeit an area that’s been unable to inspire much bullish activity of late.

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Dollar Slumps as Risk Appetite Rebounds

Investors’ risk appetite improved after Beijing injected fresh cash into its financial system ahead of an $83.5 million bond coupon by embattled property giant Evergrande, at risk of becoming one of the world’s largest-ever corporate defaults.

Worries about Evergrande’s payment obligations and what systemic risks to China’s financial system the property giant’s difficulties pose have weighed on global financial risk sentiment in recent sessions.

“Commodity currencies are broadly higher while havens are weaker, leaving the USD trading generally lower after a firm close following the FOMC (Federal Open Market Committee),” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

The U.S. Dollar Currency Index, which measures the greenback against a basket of six rivals, was 0.5% lower at 93.037. The index, which had risen 0.25% on Wednesday, was on pace for its biggest daily percentage drop in a month but remains close to the near 10-month high touched in late August.

The offshore Chinese yuan strengthened versus the greenback at 6.4599 per dollar.

The dollar found little support from data that showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week amid a surge in California.

Thursday’s improved mood boosted risk-sensitive commodity currencies, with the Australian dollar rising 0.9% and the New Zealand dollar up 1.0%.

The improved risk-appetite was reflected in Wall Street’s major equity indexes, with the S&P 500 on track for a gain of more than 1% and its largest two-day percentage gain since late July.

On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected.

While positive for the dollar, the boost from the Fed’s announcement was undercut by hawkish messages from several central banks in Europe, and as Norway became the first developed nation to raise rates.

Norway’s crown jumped to a 3-1/2 month high versus the euro on Thursday after the central bank raised its benchmark interest rate and said more hikes will follow in the coming months.

Sterling extended its rise on Thursday after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations for an interest rate rise to March.

In emerging markets, the Turkish lira plummeted to a record low after a surprise interest rate cut of 100 basis points to 18% that came despite inflation hitting 19.25% last month

Meanwhile, bitcoin extended its recovery from a sharp fall earlier this week, rising 2.42% to a 3-day high of $44,642.78.

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

(Reporting by Saqib Iqbal Ahmed and Chuck Mikolajczak; Additional reporting Sujata Rao and Saikat Chatterjee in London and Tom Westbrook in Singapore; Editing by Bernadette Baum, Will Dunham and Hugh Lawson)

Stocks Surge, Dollar Sags as Investor Risk Appetite Expands

Wall Street’s S&P 500 surged well over 1% following solid gains for European markets.

MSCI’s gauge of stocks across the globe jumped 1.06%. As it gained for a third session, the index had recovered all its losses from Monday, when it posted its biggest percentage drop in two months.

Safe-haven trades faded after benefiting earlier in the week, with gold prices dropping.

“We are seeing markets rally on the premise that while the situation in China particularly with Evergrande is not going away, the outcome is not perhaps going to be as severe or prompt some form of contagion that was originally feared,” said Craig Fehr, investment strategist at Edward Jones.

“You combine that with the fact that the tone that the Fed struck yesterday at its meeting suggests that while a reduction in stimulus is certainly coming, the Fed is not particularly eager to start tightening policy dramatically in the near term.”

The Fed said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signalled interest rate increases may follow more quickly than expected as the U.S. central bank’s turn from pandemic crisis policies gains momentum.

In Hong Kong, shares of debt-laden property group Evergrande jumped 18% ahead of a key debt payment deadline. Fears the group’s distress could spill into the broad economy helped spark an equity sell-off to start the week.

On Wall Street, the Dow Jones Industrial Average rose 544.68 points, or 1.59%, to 34,803, the S&P 500 gained 59.11 points, or 1.34%, to 4,454.75 and the Nasdaq Composite added 146.28 points, or 0.98%, to 15,043.13.

The pan-European STOXX 600 index rose 0.93%.

Norway’s central bank raised its benchmark interest rate and said it expects to hike again in December, joining a short but growing list of nations moving away from emergency-level borrowing costs. Norway’s crown strengthened to its highest level since mid-June versus the euro.

In other currency trading, the dollar index fell 0.492% after hitting a one-month high earlier, with the euro up 0.49% to $1.1743. The Japanese yen weakened 0.34% versus the greenback at 110.15 per dollar.

Sterling was last trading at $1.3743, up 0.87% on the day, after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations of an interest rate rise to March.

Benchmark 10-year notes last fell 21/32 in price to yield 1.401%, from 1.331% late on Wednesday. Key Euro area bond yields also climbed after the hawkish signals from major central banks.

Oil prices rose, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

U.S. crude gained 1.59% to $73.38 per barrel and Brent was at $77.25, up 1.39% on the day.

Spot gold dropped 1% to $1,749.66 an ounce.

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

(Additional reporting by Sujata Rao in London and Alun John in Hong Kong; Editing by Hugh Lawson, Alex Richardson, Steve Orlofsky and Catherine Evans)

USD/JPY Price Forecast – US Dollar Back at Familiar Level

The US dollar has rallied again during the trading session on Thursday to reach towards the ¥110 level. That being said, we can break above there, the market is likely to go looking towards the ¥110.75 level, an area that is most certainly worth paying close attention to. If that is going to be the case, then it is likely that we will see a turnaround between now and then, but if we were to break above there, then we could really start to see momentum pick up.

USD/JPY Video 24.09.21

As things stand right now, the market is likely to see a lot of choppy behavior going back and forth, as it is an area that has been paid close attention to for several months. That being said, the market is likely to continue to see the area hold, because quite frankly this is a market that has done nothing for so long that range bound traders have been taken advantage of this. The 50 day EMA is flat, and the 200 day is racing towards the support level underneath.

This pair is somewhat sensitive to risk appetite, but that is somewhat limited in the fact that both currencies are considered to be “safety currencies.” If nothing else, this is a great currency pair to pay attention to if you are trying to figure out the strength or weakness of the Japanese yen, and extrapolate that to other pairs such as the GBP/JPY pair, AUD/JPY pair, etc. This would be a process known as “triangulation”, when you measure the strength of a couple of currencies against the US dollar. As things stand right now, the Japanese yen is very stable.

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

How to Manage Risk in Your Forex Trading Account

Table of Content

Forex Money Management Defined

It is universally accepted that Forex money management is a set of processes that a Forex trader will use to manage the risk in their Forex trading account.

Successful Forex traders tend to accept the adage, “If I’m right on the entry, the upside will take care of itself. If I’m wrong, the downside or losses can be unforgiving.”

The underlying principle of Forex money management, or for that matter, any speculative investment, is to preserve trading capital. This doesn’t mean you won’t have any losing trades because that is impossible. The objective of Forex money management is to minimize trading losses so that they are “manageable”. That means keep your losses small and try to manage a winning trade to get the most profit out of the move.

Essentially a successful Forex trader doesn’t necessarily have more winning trades than losing trades, but rather the dollar amount of his winning traders are consistently bigger than the dollar amount of his losing trades.

The concept of money management is often used interchangeably with the term risk management. However, they are not the same. Risk management is about preparing for and managing all identifiable risks – that can include things as arbitrary as having a backup quote service or charting program. Money management, on the other hand, relates entirely on how to use your capital to grow your trading account balance without putting it in a position to risk it all.

How to Best Avoid Losing Money when Trading Forex Markets

The implementation of a Forex money management plan may be the best way to try to avoid losing money in the Forex market. No trading system is perfect nor are humans, or even robot traders. They all have similar traits (good or bad), but collectively, they do share common mistakes. These common mistakes are the ones that successful traders strive to avoid.

Successful Forex traders tend to think of trading as a business. In that business, there will be profitable trades and overall profitable days, but there will also be losses. Once again, if you want to stay in business then your profits are going to have to be greater than your losses. And once again, we are not saying that you can’t have any losses.

It is important to say at this time that yes, you can lose all your money in any investment where your funds are put at risk. So it is your job as trader/business owner to minimize the chance of that happening.

There are ways to fine tune a trading strategy i.e. optimal entry and/or optimal exit, tighter, well placed stop losses or identifying better profit objectives, with the goal to win more and lose less.

But that is not usually the main reason traders lose money in the Forex markets. The main reason tends to be having no specific money management rules to follow. Here is a list of the rules that top Forex money managers tend to follow.

Top Forex Money Management Rules to Follow

Define Your Risk Per Trade Using a Position-Sizing Model

The idea behind this rule is that a trader should risk only a small percentage of their trading capital on any one trade. Several books or papers on Forex trading preach the ‘2% rule” where a trader should risk 2% of their account on every trade.

This ‘Fixed Percentage Risk’ can actually be any amount you are comfortable with and can afford.

If your trading account has a $50,000 balance then 2% of that amount will be $1000 of risk per trade.

A $1000 risk per trade may be a huge amount to a trader with a balance of $5000 in his account. In this case, 2% risk will be $100 of risk per trade.

The reason you’ll want to risk a fixed percentage is because if the first trade is a loss then the next trade will carry a smaller amount of dollars at risk.

Taking a smaller amount of risk following a loss will allow you to ride out a losing streak longer than an individual who risks the same amount on every trade. This will buy you time and allow you to have a big enough balance to perhaps start a willing streak.

Know Your Maximum Drawdown Level

A drawdown is the difference in account value from the highest the account balance has been over a certain period and the account value after some losing trades. For example, if a trader begins with $5000 in his account and she loses $1000 then she has a 20% drawdown.

The larger the drawdown, the harder it is to become profitable.

Following a 20% drawdown, a trader would have to make 25% in the market just to get back to even. If your trading system has never shown that kind of return over a reasonable time period then your maximum drawdown rule will tell you to stop trading.

At that point, you can reevaluate your trading strategy. You can lower your fixed percentage of risk, but most of all you can relax and breathe again, allowing you to regroup and reload after you have learned from your mistakes.

Assign a Risk/Reward Ratio to Every Trade

The generally accepted rule in the trading industry is that traders should aim to have winning trades that are on average twice as big as losing trades. With this risk:reward ratio, the trader need win only a third of their trades to breakeven.

The mathematics behind this rule says if a trader choses a risk/reward ratio of 1:1, then the trader must win a higher number of trades (at least 6 out of 10) trades to be profitable. If the trader chooses a risk/reward ratio of 3:1, then they need to win fewer trades (1 in every 4 trades) to break even.

It should be noted that this rule works great on paper, but in reality a trader really has little control of the actual risk/reward he will achieve on a trade.

Furthermore, a trader may be able to control is losses through stops (provided there is no slippage), but at the same time, a trader could cut his profits by not allowing a winning trade to end naturally, for example, by hitting a trailing stop.

The best trading strategy tends to cut losses and let profits run. Over the long-run you’ll get the actual risk/reward ratio.

Essentially, a successful trader has larger average wins than average losses. The bigger the average win, the less a trader has to worry about having a high percentage of wins. For example, you can have 90% accuracy, but if you average loss is $50 per trade and your average win is $10 per trade then one average loss will wipe out 5 of your winning trades.

Use a Stop Loss and Set a Profit Objective

Using a stop loss locks in the maximum amount a trader can expect to lose in any one trade, while a profit objective order locks in the maximum amount the trader can profit.

Don’t just use dollar stops. Place a stop in a place where you are wrong on the trade.

Additionally, if your strategy has been tested for fixed profit levels then follow the rules. If your strategy calls for trailing stops to lock in profits then follow that strategy. Try to avoid mixing your exit strategies because it can skew the risk/reward ratio your trading system needs to be profitable over the long-run.

Remember, in order to be successful, you’ll need to have a few big winners to offset a series of small losses.

Only Trade with Risk Capital

Successful trading is only possible when a trader can make unemotional decisions about what to do when a trading opportunity presents itself.

If you are undercapitalized, you will trade scared. If you trade scared then you will cut corners which could be trading without a stop, taking profits too soon, doubling down on a losing trade or putting yourself in a position too big to handle. If you do any of those things then you limit your chances of success.

Only trade with money you can afford to lose.

A Busy Economic Calendar and the BoE to Keep the Markets Busy

Earlier in the Day:

It was another particularly quiet start to the day on the economic calendar this morning. There were no major stats from the Asian session to provide the markets with direction.

While there were no stats, the markets responded further to the overnight FOMC projections, statement, and press conference.

For the Majors

At the time of writing, the Japanese Yen was down by 0.03% to ¥109.810 against the U.S Dollar, with the Aussie Dollar down by 0.08% to $0.7241. The Kiwi Dollar was down by 0.06% to $0.7005.

The Day Ahead

For the EUR

It’s a busy day ahead on the economic calendar. Prelim September private sector PMIs for France, Germany, and the Eurozone are due out along with Spanish GDP numbers.

Expect the PMIs to draw plenty of interest as the markets look for any further signs of a slowdown in momentum.

At the time of writing, the EUR was up by 0.06% to $1.1694.

For the Pound

It’s a particularly busy day ahead on the economic calendar.

On the economic data front, prelim September private sector PMIs will be in focus. Expect the Services PMI to have a greater impact.

The main event of the day, however, will be the BoE monetary policy decision. With inflationary pressures lingering, will there be any decent to bring the Pound back to life?

At the time of writing, the Pound was flat at $1.3622.

Across the Pond

It’s a relatively busy day ahead. Key stats include prelim private sector PMIs for September and the weekly jobless claim figures.

Expect the jobless claims and services PMI to be the key drivers on the day.

Following Wednesday’s FOMC projections, FOMC member chatter will also influence.

On Wednesday, the U.S Dollar Spot Index rose by 0.26% to end the day at $93.450.

For the Loonie

It’s a relatively quiet day ahead for the Loonie. Retail sales figures for July will be in focus later in the day.

With little else for the markets to consider, expect today’s stats to influence.

At the time of writing, the Loonie was up by 0.01% to C$1.2771 against the U.S Dollar.

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

Fed Signals Bond-Buying Taper Coming ‘soon,’ Rate Hike in 2022

The moves, which were included in the Fed’s latest policy statement and separate economic projections, represent a hawkish tilt by a central bank that sees inflation running this year at 4.2%, more than double its target rate, and is positioning itself to act against it.

That action may proceed slowly, with interest rates seen rising to 1% in 2023, faster than projected by the Fed in its projections in June, and then to 1.8% in 2024, which would still be considered a loose monetary policy stance.

Inflation throughout that time would be allowed to run slightly above the Fed’s 2% target, consistent with its new, more tolerant approach to the pace of price increases, while unemployment is seen falling back to around the pre-pandemic level of 3.5%. Policymakers also downgraded their expectations for economic growth this year, with gross domestic product expected to grow 5.9% compared to the 7.0% projected in June.

Still, the shift shows movement among policymakers divided over whether the coronavirus pandemic’s ongoing impact on the economy or the threat of breakout inflation constitutes the bigger risk.

While no decisions have been made on the exact pace and timing of how the central bank will reduce its asset purchases, Fed Chair Jerome Powell said it seems “appropriate” that the taper could begin “soon” and be completed by the middle of 2022.

“Participants generally view that as long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” he said in a news conference after the end of the Fed’s latest two-day policy meeting.

Powell told reporters financial conditions would remain accommodative even after the Fed stops purchasing Treasuries and mortgage-backed securities and emphasized that the decision on the bond-buying program was separate from any actions regarding interest rates.

The Fed on Wednesday held its current target interest rate steady in a range of 0% to 0.25%.

“It’s probably a little bit more hawkish than many would have anticipated basically acknowledging that should the economy continue to grow as we have seen it would warrant a tapering to occur,” said Sam Stovall, chief investment strategist for CFRA Research in New York. “You could say it’s a tentative tapering announcement even though they did lower their 2021 GDP forecast.”

U.S. stocks extended gains after the release of the statement before retreating slightly during Powell’s news conference, with the S&P 500 index up 1.2% on the day. The dollar rose while the yield on the U.S. 10-year Treasury note edged lower.

SLOWING RECOVERY

Though acknowledging the new surge of the pandemic had slowed the recovery of some parts of the economy, overall indicators “have continued to strengthen,” the central bank’s policy-setting Federal Open Market Committee said in its unanimous policy statement.

If that progress continues “broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” it said.

The statement had been widely expected to signal that the Fed would soon begin winding down the $120 billion in monthly bond purchases it has been making to blunt the economic impact of the pandemic.

Fed officials said last December that they would continue purchasing bonds at the current pace until there was “substantial further progress” on the central bank’s goals for maximum employment and inflation.

Powell on Wednesday said officials could decide as soon as the next policy meeting in November that both of those standards have been met, based on what happens with the labor market and the broader economy, and make a decision on whether to taper.

But it was in their broader economic outlook that Fed policymakers made a less anticipated change.

The outlook for inflation jumped 0.8 percentage point for 2021 and the unemployment rate seen at the end of this year rose. In turn, two officials brought forward into 2022 their projected timeline for slightly lifting the Fed’s benchmark overnight interest rate from the current level, enough to raise the median projection to 0.3% for next year.

The move to lower GDP growth expectations for 2021 reflected concerns that the coronavirus is weighing on the economy.

“The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery,” the Fed said in its policy statement.

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

(Reporting by Howard Schneider; Additional reporting by Jonnelle Marte and U.S. Finance and Markets Breaking News teamEditing by Paul Simao)

FOMC Teases Start of Taper “soon”

The actions, which were included in the Fed’s latest policy statement and separate economic projections, represent a hawkish tilt by a central bank that sees inflation running this year at 4.2%, more than double its target rate, and is positioning itself to act against it.

The current target interest rate was held steady in a range of 0% to 0.25%.

In a press conference after the statement Fed Chair Jerome Powell elaborated that if the economy continues to improve the FOMC could easily move ahead with tapering at the next meeting in November. The bar for lifting rates from zero is much higher than for tapering, he said.

STOCKS: The S&P 500 briefly extended a rally and was last unchanged from before the statement up 0.95%

BONDS: The 10-year U.S. Treasury note yield seesawed and was last up at 1.3226% and the 2-year yield firmed to 0.2342%

FOREX: The dollar index turned 0.2% firmer

COMMENTS

LAWRENCE GILLUM, FIXED INCOME STRATEGIST, LPL FINANCIAL, FORT MILL, SOUTH CAROLINA

“There are some notable takeaways. The divergence of views within the committee is interesting. We’re seeing a 50-50 split in terms of rate hikes in 2022. There’s just a big divergence of opinions on rate hikes and even further into 2023, a big range of potential Fed Fund target rates.

“The Fed did talk about potentially moderating its asset purchases soon, that’s setting up the committee to announce tapering in November, with a decision to actually taper coming in December. The Fed has made progress in that taper timeline and we think that will likely take place this year.”

“The other takeaways were the adjustments to the summary of economic projections. Inflation expectations have move higher for a touch longer than they originally thought, and then those growth expectations have come down a touch as well.”

JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON

“Very mixed signals from the Fed, resulting in the dollar’s choppy performance. Once the dust settles it seems that there are enough hawkish signals to keep the dollar biased higher, as the market pencils in a sooner-than-expected rate hike. Inflation also continues to trend higher. And although the Fed marked down its forecasts for growth and unemployment, it still has robust expectations for the economy.”

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CAMBRIDGE GLOBAL PAYMENTS, TORONTO

“Markets initially read the statement as hawkish, but that reaction is fading out as traders read more deeply into the Statement of Economic Projections. Fed officials acknowledged making ‘substantial further progress’ toward the central bank’s inflation goal, and demonstrated confidence in the labor market meeting that test by the end of the year.

“The FOMC warned markets of an imminent tapering decision, saying that a ‘moderation in the pace of asset purchases may soon be warranted’ if  economic conditions continue to evolve as expected.

“A record number of participants are worried about upside risks on the inflation front, suggesting that the central bank could move aggressively if price growth remains elevated into the early part of next year.”

“Officials are now deadlocked on raising rates in 2022, but the median forecast is for a 1% Fed funds rate in 2023, and only 1.8% by the end of 2024. This is not rapid tightening by any means – it’s slightly slower than the 25-basis-point-per-quarter pace seen in previous cycles.

“This could also mean that estimates of the ‘terminal rate’ at the end of the cycle have been lowered. This is dovish, and will be welcomed in financial markets. The dollar could tumble from here, particularly if Powell follows prior patterns and tramples on the dot plot during the presser.”

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA Research, NEW YORK

“It’s probably a little bit more hawkish than many would have anticipated basically acknowledging that should the economy continue to grow as we have seen it would warrant a tapering to occur. You could say it’s a tentative tapering announcement even though they did lower their 2021 GDP forecast.”

“The reason the Fed is tapering is because the economy and corporate earnings are strong enough to withstand it. So investors are basically saying let’s buy equities because the economy is strong and the Fed won’t be raising rates until a year plus from now.”

“The Fed is not going to get behind the curve and won’t have to end up surprising us by raising rates much more quickly than currently anticipated.”

JOHN CANAVAN, LEAD ANALYST, OXFORD ECONOMICS, NEW YORK

“Basically what we’re seeing here is a (U.S. Treasury yield) curve flattening shift in response to the summary of economic projections pulling forward Fed rate hikes. The Fed is now projecting a rate hike in 2022 as their median forecast, which is up from steady in the July summary of economic projections. As a result, what we’re seeing is a little bit of pressure on the front end (of the curve), while the long end views the slightly more hawkish Fed as a positive sign for keeping inflation in check along with some potential risk of the Fed moving too quickly and acting to slow the economy in the coming years.”

“We have seen a bit of an acceleration in the curve flattening based on the view that we’ve seen peak inflation and some of the risks related to the slowing economy in the third quarter.”

STEVEN VIOLIN, PORTFOLIO MANAGER, F.L.PUTNAM INVESTMENT MANAGEMENT COMPANY, WELLESLEY, MASSACHUSETTS

“It is an interesting point in time here, the tapering of quantitative easing seems very likely now in November but this was something of a given and remains couched in a lot of qualifying criteria in the event that various risks emerge, whether it is the debt ceiling debate, COVID outlook, the China property market intervening. The increase in the Fed’s projections in future interest rates though seems to be more what has caught the market by surprise at the margin, it is still consistent with our view that the Fed is likely to continue allowing inflation to run hot and remain anchored in the same measured pace as prior cycles. It really only increases the inflation risk that we have been taking seriously as we see some of the supply chain and labor shortages clearly not resolving with the end of unemployment benefits. Longer-term there is a lot of powerful disinflationary forces but for the moment they are clearly being offset and the risk is that becomes entrenched in consumer expectations.”

“For the moment, the markets seem to be taking this in stride with a relatively positive reaction from the stock market and from longer-term bonds, as far as the inflation outlook goes, I’m not sure this is a positive development.”

“It is also the measured pace, some increase in the dots was expected by the market and priced in to some extent but there wasn’t any acceleration, in fact there is a deceleration, which indicates perhaps some members of the committee have revised lower their terminal rate, it is hard to know, but the current dots as they are showing fewer increases in the out years and this is the first look we have gotten in the 2024 projections. So that is a notable development that perhaps is what is driving the positive response in longer-term interest rates and the shifts in currency markets.”

TOM GARRETSON, SENIOR PORTFOLIO STRATEGIST, RBC WEALTH MANAGEMENT, MINNEAPOLIS

“Across the board it’s exactly what we were expecting, the Fed took another step towards a formal taper announcement, and that’s probably going to come at the next meeting or two.

“The key behind the potential rate hike was the upgrade to their inflation outlook. There are signs inflationary pressures are going to be transitory, but they are more persistent than expected. That’s the key driver as to why the balance has shifted to a potential rate hike in 2022 as opposed to 2023.

“We’re watching yield curves flatten. The Treasury market’s interpreting it as a hawkish surprise.

“It was very inline with expectations. Powell will use the press conference to reiterate to the idea that tapering is coming in the several months. It’s what I expected, not too hawkish and not too dovish.”

JOSEPH LAVORGNA, AMERICAS CHIEF ECONOMIST, NATIXIS, NEW YORK

“Unless we know who is who, which we don’t, I’m not sure the dot-plot accurately reflects the Fed’s thinking. I don’t think the Fed’s tightening is going to be anywhere near as hawkish as they anticipate. It’s going to be hard for them to execute on this plan as the economy slows next year.”

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

(Compiled by the U.S. Finance & Markets Breaking News team)

Dollar Choppy After Fed Statement, Evergrande Exhale Lifts Risk-Sensitive Currencies

The Federal Reserve on Wednesday cleared the way to reduce its monthly bond purchases “soon” and signaled interest rate increases may follow more quickly than expected, with half of the 18 U.S. central bank policymakers projecting borrowing costs will need to rise in 2022.

“The tapering of quantitative easing seems very likely now in November but this was something of a given and remains couched in a lot of qualifying criteria in the event that various risks emerge, whether it is the debt ceiling debate, COVID outlook, the China property market intervening,” said Steven Violin, portfolio manager at F.L.Putnam Investment Management Company in Wellesley, Massachusetts.

The dollar index rose 0.094%, alternating between gains and declines after the announcement, with the euro down 0.1% to $1.1711.

Property giant and Asia’s biggest junk bond issuer Evergrande said it “resolved” one payment due on Thursday via a private negotiation, easing concerns of default and possible contagion risk, while the People’s Bank of China injected 90 billion yuan into the banking system to support markets.

“Being able to make tomorrow’s bond coupon payment, that definitely lifted risk sentiment overnight and you saw a typical follow-through reaction in risk currencies, so Canadian dollar high, Aussie dollar higher, Kiwi dollar higher – that was kind of an understandable reaction,” said Erik Bregar, an independent FX analyst in Toronto.

Still, uncertainty remains whether the developer will be able to pay the coupon on its offshore dollar bonds, due on Thursday.

The Australian dollar rose 0.33% versus the greenback to $0.726 after rising as much as 0.49% to $0.7268 while the Canadian dollar rose 0.58% versus the greenback to 1.27 per dollar.

The offshore Chinese yuan strengthened versus the greenback to 6.4628 per dollar.

The safe-haven Japanese yen weakened 0.50% versus the greenback to 109.78 per dollar in the wake of the Bank of Japan’s decision to keep policy on hold.

Sterling was last trading at $1.3637, down 0.16% on the day ahead of a policy announcement by the Bank of England on Thursday, with expectations for a rate hike being pushed down the road by investors.

In cryptocurrencies, Bitcoin last rose 6.93% to $43,409.48 following three straight days of declines.

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

(Reporting by Chuck Mikolajczak; Editing by Will Dunham and Andrea Ricci)

USD/JPY Price Forecast – US Dollar Recovers From Extreme Lows of Range

The US dollar has rallied a bit during the course of the trading session on Wednesday as the ¥109 level continues to offer significant support. The support level has been very reliable multiple times, and therefore you should also look at this as a potential return towards the ¥110 level. The ¥110 level has been a bit of a major magnet for price, and that of course is something that you need to keep in the back of your mind. All things being equal, this is a market that I think does in fact continue to show the same back-and-forth attitude that we have seen for some time.

USD/JPY Video 23.09.21

Looking at this chart, if we were to break down below the 200 day EMA underneath, that could open up massive selling pressure to the downside, perhaps reaching towards the ¥107.50 level. On the other hand, if we were to turn around a break above the ¥110.75 level, then the market goes looking towards the ¥111.50 level. With that being the case, the market continues to see a lot of noisy behavior, and therefore I think you need to be cautious with your position size, but if you are a short-term trader this might be a nice range bound market to be involved in.

There is a certain amount of risk appetite that goes into the thought process of this market, so keep that in mind as well. The Japanese yen being the ultimate safety currency is going to attract attention every time there is a certain amount of concern when it comes to financial markets around the world.

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

USD/JPY Fundamental Daily Forecast – Hawkish Fed Could Spike Dollar/Yen Higher

The Dollar/Yen is trading higher early Wednesday after surviving an earlier attempt to drive it through a key support area. The Forex pair is being supported by a somewhat hawkish outlook for the Federal Reserve’s monetary policy decisions to be released later in the day, an easing of concerns over an Evergrande default in China and a dovish outlook for the Japanese economy by the Bank of Japan.

At 07:10 GMT, the USD/JPY is trading 109.567, up 0.350 or +0.32%.

Key Technical Area Holding as Support

The main range is formed by the April 23 main bottom at 107.479 and the July 2 main top at 111.659. The USD/JPY is currently trading inside its 50% to 61.8% retracement zone at 109.569 to 109.076.

Earlier in the session buyers came in at 109.122 to stop a price slide. This area has been tested successfully four times since Mid-July.

Overtaking 109.569 will indicate the presence of buyers. A failure to hold 109.076 will indicate the selling pressure is getting stronger.

Federal Reserve Could Surprise Markets with Hawkish Shift

The Federal Reserve is expected to drop more hints on its future policy path, including when to start tapering its bond buying and when to start raising interest rates.

There are also rising expectations the central bank will signal its plans to start reducing its massive bond purchases in November if incoming data holds up.

The so-called “dot plot”, which charts policymakers economic and rates projections, will attract attention for clues on when the Fed will hike its interest rate hikes from the current near zero level.

Investors will interpret a change in the first expected rate hike from 2023 to 2022 as hawkish.

Easing Concerns over Contagion from an Evergrande Default Driving Risk Sentiment

Investors are seeing a shift in sentiment to “risk on” which is pressuring safe-haven demand for the Japanese Yen. Investors are drawing some relief in news embattled Chinese property developer Evergrande would make a coupon payment on its domestic bonds on September 23, calming fears of an imminent default.

BOJ Keeps Policy Steady, Offers Bleaker View on Exports, Output

The Bank of Japan (BOJ) kept monetary policy steady on Wednesday but offered a bleaker view on exports and output, reinforcing expectations the bank will maintain its massive stimulus even as major counterparts eye a withdrawal of crisis-mode support.

Daily Outlook

The price action will be dictated by the movement in U.S. Government bonds. If the Fed moves up the timeline for its first rate hike from 2023 to 2022 then Treasury yields could spike higher. This would widen the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive asset.

Gains in the USD/JPY could be capped, however, if risk sentiment turns negative due to renewed fears over an Evergrande default on its interest rate payment scheduled for Thursday.

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

Marketmind: Some Relief – But How Long Will it Last?

A look at the day ahead from Dhara Ranasinghe.

U.S. stock futures, the yuan and the risk-sensitive Australian dollar are riding high, while the safe-haven yen and U.S. Treasuries are on the back foot.

Don’t get too comfortable — even if Evergrande makes its Sept. 23 onshore bond payment, it has not indicated whether it can pay $83.5 million in interest due on its March 2022 bond on Thursday. Nor is there any sign the Chinese government plans to mount a last-minute rescue.

And with the U.S. Federal Reserve set to conclude its two-day meeting later on Wednesday, perhaps this week’s market excitement is not over yet.

After all gas prices are at lofty levels, threatening to hurt consumption, which means central banks meeting across the globe this week are likely to be challenged on the message that inflation is transitory.

For the Fed, weaker-than-anticipated jobs numbers have already dampened expectations it will announce an imminent start to tapering bond-buying stimulus.

It might however clear the way for tapering later this year and show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing more on the economic outlook.

The Bank of Japan just kept monetary policy steady but offered a bleaker view on exports and output, reinforcing expectations it won’t join peers mulling a withdrawal of crisis-mode support.

Elsewhere, Democrats in the House of Representatives passed a bill on Tuesday to fund the U.S. government through Dec. 3 and suspend a borrowing limit until end-2022. Senate Republicans however have vowed to block it.

Key developments that should provide more direction to markets on Wednesday:

– Macy’s to hire 76,000 workers for holiday shopping season

– China keeps lending benchmark LPR unchanged

– DraftKings makes $22.4 bln offer for UK’s Entain

– Euro zone flash consumer confidence

– U.S. existing home sales data

– U.S. sells 2 year FRNs

– Deputy Bank of England governor Sam Woods speaks

– Brazil may raise interest rates by 100 basis points.

– European earnings: Playtech, IG Group

– U.S. earnings: Nike

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

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)

September 22nd 2021: Dollar Movement Unchanged Ahead of FOMC Meeting

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Dollar movement Tuesday—according to the US dollar index—finished considerably off session lows (93.05), forming what many technicians label a hammer candlestick pattern on the daily timeframe (bullish signal). EUR/USD, given its negative correlation with the DXY, concluded in the shape of a shooting star candle pattern on the daily chart (bearish signal).

The economic calendar offered thin pickings, though US housing starts (number of residential buildings that begun construction) came in at a little over $1.6 million (seasonally adjusted), beating economists’ forecasts of $1.55 million. On tap today, of course, is the much-awaited FOMC meeting.

Through the lens of a technical trader, EUR/USD charts are interesting.

While the H4 timeframe discovered resistance from $1.1742, a previous Quasimodo support base, lower on the curve the H1 timeframe exhibits scope to approach prime resistance coming in at $1.1767-1.1776 (joined by supply at $1.1762-1.1774 and H4 Quasimodo resistance at $1.1771).

An additional technical observation out of the H1, supposing $1.1715 intraday lows maintain grip, is the prospect of a bearish AB=CD pattern forming at $1.1762 (marked by way of a 100% Fibonacci projection). Fibonacci fans will also note a neighbouring Fib cluster around $1.1756 (61.8% and 38.2% Fibonacci retracements).

Technical studies on the bigger picture reveal price 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, the daily timeframe shines the technical spotlight on 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).

Observed Technical Levels:

Should H4 resistance at $1.1742 continue to command position, a test of the H1 timeframe’s $1.17 figure could be in the offing. However, as highlighted in our previous technical briefing, a whipsaw south of $1.17 on the H1 to daily Quasimodo support parked at $1.1689 is a potential scenario. $1.1689 bids feeding off sell-stops below $1.17 could be enough to chalk up a bullish wave.

Alternatively, if $1.1715 intraday lows hold on the H1, an AB=CD bearish pullback to prime resistance at $1.1767-1.1776 may be welcomed by sellers. This, nonetheless, implies a breach of H4 resistance mentioned above at $1.1742.

AUD/USD:

(Italics: previous analysis)

The Australian dollar eked out a fourth consecutive daily loss against the US dollar on Tuesday. Renewed AUD/USD downside emerged mid-way through London hours, weighed by the US dollar index defending 93.05.

Earlier in the session, the Reserve Bank of Australia (RBA) policy meeting minutes reiterated a similar theme: the surroundings for an increase in interest rates will not be met until 2024[1]. Ultimately, limited price movement followed.

The technical landscape watched AUD/USD’s H1 candles level off from a 61.8% Fibonacci retracement at $0.7283—a touch south of trendline resistance, taken from the high $0.7469, and neighbouring Quasimodo support-turned resistance at $0.7288. Support is present at $0.7221, placed a handful of pips above the H4 timeframe’s decision point coming in at $0.7200-0.7218. Note also this H4 base houses $0.72.

Against the backdrop of shorter-term flow, the weekly timeframe has the currency pair touching gloves with prime support at $0.6968-0.7242. Since printing a two-week recovery in late August, the 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.

Interestingly, 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 acknowledge the value journeyed through the 50.00 centreline last week and recently dipped a toe below 40.00. This highlights a bearish atmosphere until making contact with oversold territory.

Observed Technical Levels:

According to chart studies on the higher timeframes right now, sellers are in the driving seat, and unlikely to give way until daily Fibonacci support at $0.7057-0.7126.

This echoes a bearish vibe and consequently places a question mark on the H4 decision point at $0.7200-0.7218 and, by extension, the H1 timeframe’s support at $0.7221 and $0.72.

Bearish themes sub $0.7221 and $0.72?

USD/JPY:

(Italics: previous analysis)

Ahead of key Bank of Japan (BoJ) and FOMC meetings, market sentiment echoed an indecisive tone on Tuesday: global equity indexes closed higher on the session, yet safe-haven currencies also voyaged to the upside.

According to the technicals, H1 Quasimodo support at ¥109.31 relinquished position yesterday and turned the spotlight on H1 support at ¥109.11 and the ¥109 figure. This also calls attention to the H4 chart’s framework, swinging the pendulum in favour of a possible decline to the H4 double-top pattern’s (¥110.44) profit target around ¥108.71—sharing space with a 1.618% Fibonacci projection at ¥108.86 and a 1.272% Fibonacci projection at ¥108.72.

Considering the weekly timeframe, since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy. 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 under pressure, with a breach underscoring potential downside to a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a similar consolidation (between 40.87 and 56.85) and the indicator is testing the mettle of the lower range limit, as we write.

Observed Technical Levels:

Recognising H1 Quasimodo support at ¥109.31 was taken, and the daily timeframe’s range support at ¥108.96-109.34 displays little sign of bullish life, further selling additional losses is possible, targeting the H4 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 and take on any bullish interest from weekly demand at ¥108.40-109.41.

GBP/USD:

(Italics: previous analysis)

Sterling gripped four-week lows against the buck on Tuesday, pressured amidst a USD recovery phase, as market participants look towards today’s FOMC meeting and also the outcome of tomorrow’s Bank of England (BoE) meet. Many desks forecast the Fed is likely to wait until later this year regarding a taper announcement.

Settling a touch higher on Tuesday, technical observations on GBP/USD show H4 Quasimodo support-turned resistance made an entrance at $1.3693, a level organised a short distance beneath a H4 decision point at $1.3750-1.3721. Seeing buyers and seller squaring off around $1.3643 lows, probing $1.3693 and facing $1.3750-1.3721 is still on the table.

What’s technically interesting about $1.3750-1.3721 is its location on the H1 timeframe: directly above the $1.37 figure. Any technical trader worth their salt appreciates the attention a round number attracts. For that reason, a whipsaw above $1.37, movement stabbing buy-stops, could welcome robust selling from $1.3750-1.3721.

In terms of the higher timeframes, supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. Yet, pattern traders will also note that the $1.3629-1.3456 test simultaneously closed below a double-top pattern’s neckline at $1.3669, broadcasting a relatively long-term sell signal. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Behind the weekly timeframe, a closer examination of price action on the daily timeframe reveals Quasimodo support at $1.3609. It’s important to note, nevertheless, the previous $1.3609 reaction (20th August) failed to find acceptance above the 200-day simple moving average at $1.3833, suggesting $1.3609 weakness. Sub $1.3609, limited support is visible until around $1.3168. Momentum studies, on the authority of the relative strength index (RSI), shows the value below 40.00, with subsequent downside pressure to perhaps take in an oversold reading.

Observed Technical Levels:

With the daily timeframe a stone’s throw from testing Quasimodo support at $1.3609, a whipsaw through $1.37 on the H1 scale to bring in willing offers around the H4 decision point at $1.3750-1.3721 could stir a bearish theme.

A $1.3750-1.3721 reaction may witness price action zero in on H1 Quasimodo support at $1.3618, arranged north of the noted Quasimodo support on the daily timeframe.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

  1. https://www.rba.gov.au/monetary-policy/rba-board-minutes/2021/2021-09-07.html

It’s all Eyes on the FOMC, the Economic and Interest Rate Projections…

Earlier in the Day:

It was a particularly quiet start to the day on the economic calendar this morning. There were no major stats from the Asian session to provide the markets with direction.

While there were no stats, the BoJ is in action later this morning. The markets are not expecting any surprises, however, leaving the FOMC policy decision and projections in focus.

For the Majors

At the time of writing, the Japanese Yen was down by 0.02% to ¥109.250 against the U.S Dollar, with the Aussie Dollar up by 0.04% to $0.7234. The Kiwi Dollar was up by 0.01% to $0.7006.

The Day Ahead

For the EUR

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk appetite and sentiment towards FED monetary policy and projections due late in the day.

At the time of writing, the EUR was down by 0.01% to $1.1725.

For the Pound

It’s also a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment, though there will be some consideration of Thursday’s MPC policy decision. Ahead of the disappointing retail sales figures, economic data had pointed towards a more hawkish MPC…

At the time of writing, the Pound was up by 0.02% to $1.3662.

Across the Pond

It’s also a relatively quiet day ahead. Housing sector numbers for August are due out later in the day.

We don’t expect the numbers to influence, however. The market focus will be on the FOMC monetary policy decision, projections, and the press conference.

Key areas of focus will include the timing and size of a tapering of the asset purchasing program and interest rate projections. Will the FED be looking to lift cash rates earlier than previously expected?

On Tuesday, the U.S Dollar Spot Index fell by 0.08% to end the day at $93.204.

For the Loonie

It’s a quiet day ahead for the Loonie. There are no material stats due out of Canada to provide the Loonie with direction.

Crude oil inventories and market risk sentiment will remain the key drivers on the day.

Political uncertainty, following the early election, appeared to be of little concern as Trudeau fell short of a majority.

At the time of writing, the Loonie was up by 0.05% to C$1.2814 against the U.S Dollar.

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