BOJ’s Amamiya Voices Hope of Stronger Recovery Driven by Vaccinations

By Leika Kihara

But he stressed the central bank’s readiness to ease monetary policy further if the economy needed additional support to pull it out of the doldrums.

“We have room to take additional easing steps including by cutting short- and long-term interest rates,” Amamiya said on Wednesday.

“While we don’t have any specific plans now, we can also consider schemes similar to existing programmes aimed at supporting corporate funding,” he told a news conference.

A resurgence in infections led the government to impose a new state of emergency in Olympic host city Tokyo that will last throughout and beyond the Games, dashing policymakers’ hope of a strong revival in growth during the quarter.

Amamiya said while the curbs will hurt consumption, the damage will be offset by robust exports that are boosting corporate profits and underpinning Japan’s recovery.

Strength in the corporate sector will help prop up consumption, as companies boost wages and give households more purchasing power, he said.

“In the short-term, the BOJ must focus on downside risks,” Amamiya said. “But there’s a chance the economy may overshoot expectations next year and beyond, depending on the pace of vaccinations.”

Amamiya said the government and BOJ must work closely, but stressed that the BOJ “won’t tie its policy directly with that of the government,” when asked whether the bank could ease policy if the government deploys another spending package.

The deputy governor was sanguine on the potential negative impact from global commodity inflation, even as some BOJ policymakers worried it could hurt corporate profits.

“While recent rises in commodity prices could increase costs, corporate profits are expected to improve against the background of improvements in domestic and overseas demand,” he said in a speech delivered before the news conference.

The BOJ kept monetary policy steady last week and cut this fiscal year’s economic growth forecast, but maintained its view the economy is on track for a moderate recovery.

(Reporting by Leika Kihara; Editing by Chang-Ran Kim & Shri Navaratnam)

A Quiet Economic Calendar Leaves Growth Concerns and the Dollar in Focus

Earlier in the Day:

It was a busy start to the day on the economic calendar this morning. The Japanese Yen and the Aussie Dollar were in action in the early hours.

For the Japanese Yen

Trade data was in focus this morning and drew plenty of interest ahead of the start of the Olympic Games.

According to figures released by the  Ministry of Finance, Japan’s trade balance rose from a ¥189.4bn deficit to a ¥383.2bn surplus. Economists had forecast a surplus of ¥400bn.

  • Exports were up 48.6% year-on-year in June, down marginally from a 49.6% rise in May.
    • To the U.S, exports surged by 85.5%, with exports to Western Europe up 50.0%.
    • Exports to China increased by 27.7% year-on-year.
  • Imports increased by 32.7% in June, year-on-year. In May, imports had been up by 27.9%.

In response to the numbers, the Japanese Yen moved from ¥109.920 to ¥109.896 against the Dollar. At the time of writing, the Japanese Yen was down by 0.04% to ¥109.890 against the U.S Dollar.

For the Aussie Dollar

All-important retail sales figures were also in focus this morning.

In June, retail sales fell by 1.8%, month-on-month, according to prelim figures. In May, retail sales had risen by 0.4%.

According to the ABS,

  • Food retailing (+1.5%) was the only industry to see a rise in June.
  • By state, Victoria (-3.5%) and New South Wales (-2.0%) led the decline, with both states imposing stay-at-home orders for part of the month.

The Aussie Dollar moved from $0.73296 to $0.73220 upon release of the numbers. At the time of writing, the Aussie Dollar was down by 0.15% to $0.7319.

Elsewhere

At the time of writing, the Kiwi Dollar was flat at $0.69180.

The Day Ahead

For the EUR

It’s another quiet day ahead on the economic data front. There are no major stats to provide the EUR with direction.

The lack of stats will leave industrial production figures from Italy and COVID-19 news in focus.

At the time of writing, the EUR was down by 0.05% to $1.1775.

For the Pound

It’s another particularly quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

The lack of stats will continue to leave COVID-19 in focus. While the government has removed restrictions, a further spike in new cases could further derail market optimism near-term.

At the time of writing, the Pound was down by 0.04% to $1.3622.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no major stats to provide the Greenback with direction in what has been a quiet start to the week.

The lack of stats will leave market risk sentiment as the key driver near-term.

At the time of writing, the Dollar Spot Index was up by 0.03% to 92.999.

For the Loonie

It’s also quiet day ahead on the economic calendar, with economic data limited to housing sector numbers.

We don’t expect the numbers to influence, however, leaving crude oil inventories and market risk sentiment as key drivers.

At the time of writing, the Loonie was down by 0.08% to C$1.2692 against the U.S Dollar.

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

 

July 21st 2021: Safe-Haven Bid Elevates Dollar Index to Three-Month Highs

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Closing the book on the month of June had EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent.

A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, July trades 0.6 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Since mid-June, the daily timeframe has been carving out a falling wedge ($1.1848/$1.1975), a pattern accommodating two tests at either side of the structure. Note some technical analysts prefer wedge formations to display at least three tests.

Nevertheless, in the event price continues to compress within the falling wedge, Quasimodo support at $1.1688 is likely to make an entrance, arranged south of 31st March low at $1.1704 (a place sell-stops will be tripped).

Any upside attempts (a breakout above the current wedge pattern) reignites interest at the 200-day simple moving average, circling $1.2002 (sheltered beneath supply at $1.2148-1.2092).

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

Out of the relative strength index (RSI), the value occupies trendline support-turned resistance (around 40.00), extended from the low 29.54. Resistance is also close by at 51.36, serving reasonably well since November 2020. A breakout above 51.36 signals momentum is to the upside (average gains surpass average losses) and, therefore, traders could observe a breakout above the noted falling wedge.

H4 timeframe:

Technical Structure Unchanged from Previous Analysis.

Aside from June’s downside bias, technical areas to be mindful of remain at Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

Fibonacci studies reveal a 61.8% Fib retracement at $1.1890, plotted south of a 38.2% Fib retracement at $1.1906.

H1 timeframe:

Stationed just south of the 100-period simple moving average ($1.1806), $1.18 has proven robust resistance in recent trading, aided by the US dollar index (ticker: DXY) refreshing multi-month highs as the market remains cautious regarding the spread of the Delta variant. This also weighed on risk-sensitive currencies, such as the Australian dollar and New Zealand dollar.

As stated in previous writing, noting short-term flow residing south of $1.18, a 1.272% Fib expansion at $1.1745, a 100% Fib projection at $1.1747 and a 1.27% Fib extension at $1.1748 is seen uniting with H4 Quasimodo support underlined above at $1.1749.

Observed levels:

In light of recent price movement, the technical outlook remains unchanged.

From the monthly timeframe, support at 1.1857-1.1352 is in play. In conjunction with the monthly, the daily timeframe is chalking up a falling wedge ($1.1847/$1.1975), which, given June’s decline, highlights a potential reversal pattern.

Short-term flow is centred on a possible sell-off towards the H1 timeframe’s Fibonacci structure between $1.1745 and $1.1748, joined by H4 Quasimodo support from $1.1749.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following June’s 3.0 percent decline, July recently elbowed through support at $0.7394. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Month to date, July is down 2.2 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018).

Daily timeframe:

The risk-sensitive Australian dollar staged a modest recovery off multi-month lows against the US dollar on Tuesday, finishing the session largely unmoved.

Resistance calls for attention at $0.7453-0.7384, whereas any downside interest shifts focus to support at $0.7204. That is assuming Fibonacci bids—the 1.272% Fib projection at $0.7273—is overthrown.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

According to the relative strength index (RSI), oversold conditions remain. In light of sustained selling since early May, oversold readings are likely to remain, and between 50.00 and 40.00 could stand in as overbought signals.

H4 timeframe:

A closer reading from the H4 scale reveals the currency pair shook hands with interesting Fibonacci structure between $0.7293 and $0.7315. Note that within this area, a 100% Fib projection at $0.7313 exists, a level harmonic traders will recognise as an AB=CD bullish formation.

Bulls occupying position out of current Fibonacci support directs focus to resistance at $0.7364, closely shadowed by supply at $0.7390-0.7371.

H1 timeframe:

Interestingly, the technical landscape on the H1 scale has short-term action easing off $0.73, initially establishing what’s known as a hammer candle pattern—bullish cue. Further buying has Quasimodo resistance at $0.7347 to target, with subsequent bullish intent beyond here perhaps taking aim at $0.74 and the 100-period simple moving average around $0.7395.

The relative strength index (RSI), finding a floor off support at 27.02, is within striking distance of connecting with the 50.00 centreline. Moves north of the latter signal momentum gaining to the upside: average gains surpassing average losses.

Observed levels:

Knowing monthly price dropped through support at $0.7394, as well as daily flow exhibiting scope to approach at least a 1.272% Fib projection at $0.7273, any upside from $0.73 on the H1 and from Fibonacci structure between $0.7293 and $0.7315 on the H4 may be limited.

With that being said, this market echoes a sell-on-rally scenario, with sellers possibly targeting H1 Quasimodo resistance at $0.7347 as a base to work with. Alternatively, H4 resistance from $0.7364 (and a possible whipsaw into H4 supply at 0.7390-0.7371) could draw a bearish scenario.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66. Although April finished lower by 1.3 percent and snapped a three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

Month to date, however, July trades 1.1 percent in the red and is on track to chalk up a bearish outside reversal.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Tuesday observed the US dollar recover ground against the Japanese yen, lifted amid improved risk sentiment and higher US Treasury yields. Despite this, absence of support until supply-turned demand at ¥107.58-106.85—an area sharing chart space with the 200-day simple moving average at 106.92—opens the risk of further selling from a technical standpoint. This follows early July tunnelling through trendline support (taken from the low 102.59).

Trend studies, despite the trendline support breach early July, reveals the pair has been trending higher since the beginning of the year.

Concerning momentum, the relative strength index (RSI) spun lower from within a whisker of a recently breached ascending channel between 58.82 and 47.51 last week, and finished Tuesday just ahead of 40.00.

H4 timeframe:

The latest advance—extending recovery gains out of demand coming from ¥109.02-109.20—shines light on trendline resistance, drawn from the high ¥111.66 (2021 highs), together with Quasimodo resistance at ¥110.09.

H1 timeframe:

Supply at ¥109.83-109.71 was a noted area in Tuesday’s analysis (considered an important zone, having it been within this base a decision was made to channel lower), which, as you can see, entertained a short-term bearish tone heading into London yesterday. Although triggering a 40-pip decline, bulls entered an offensive phase going into US trading and dethroned the aforementioned supply as well as the 100-period simple moving average at ¥109.83.

As of writing, you will note ¥109.83-109.71 is being retested as demand, a touch south of ¥110 and Quasimodo resistance coming in at ¥110.22.

From the relative strength index (RSI), the value is engaging with space above the 50.00 centreline and threatening moves into overbought, possibly targeting resistance at 78.38.

Observed levels:

Between H1 Quasimodo resistance at ¥110.22 and ¥110 (note that inside of this area intersects with H4 Quasimodo resistance at ¥110.09 and H4 trendline resistance) is a zone we may see sellers welcome today if tested.

This area is in line with daily and monthly timeframes showing space to move lower.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, possibly serving as support if retested.

Month to date, July trades 1.5 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Recording a fourth successive daily loss on Tuesday, cable cemented position south of the 200-period simple moving average, circling $1.3695, and challenged Quasimodo support at $1.3609. Technicians may also note the daily scale recently elbowed under a double-top neckline at $1.3670 (double top formed between 24th Feb high at $1.4241 and June 1st high at $1.4250).

Trend on this chart has been somewhat rangebound since late February. Though continuation moves to the downside beyond Quasimodo support at $1.3609 could trigger a bearish vibe.

As for momentum studies, the relative strength index (RSI) is pencilling in bullish divergence, informing traders of strengthening momentum.

H4 timeframe:

Out of the H4 chart, we are seeing the currency pair cross paths with a 100% Fib projection at $1.3640 and a 1.618% Fib extension at $1.3613. Harmonic traders will acknowledge the Fibonacci formation represents an AB=CD bullish configuration. What’s also technically interesting is daily Quasimodo support at $1.3609 connecting with the H4 levels.

H1 timeframe:

The modest $1.36 recovery seen into the close Tuesday, alongside the relative strength index (RSI) exiting oversold territory and breaching 39.68 indicator resistance, throws light on a possible run back to $1.37.

Observed levels:

Daily Quasimodo support at $1.3609, the $1.36 figure on the H1 and Fibonacci structure on the H4 between $1.3613 and $1.3640 may interest buyers in this market, at least until reaching $1.37. Do be aware that the 200-day simple moving average aligns closely with the round number at $1.3695, and therefore could be a location sellers make an entrance to take advantage of possible bearish flow below the daily timeframe’s double-top neckline at $1.3670.

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

The US dollar has initially tried to rally during the course of the trading session on Tuesday but gave back the gains as we got close to the 50 day EMA. We have formed a bit of a negative candlestick, and as you can see the market has been rolling over for a while. The US dollar has been strengthening against everything else, but the Japanese yen is of course considered to be the “ultimate safety currency.” With this being the case, I think we will continue to see more of the same, as people are concerned about the Delta variant and the possible shutdown of the world’s economy yet again. While that might be a little bit of a stretch, it is obvious that some economies around the world are certainly going to be hit, perhaps causing supply chain shortages to expand.

USD/JPY Video 21.07.21

In other words, it is also worth noting that the market is at the top of a significant range, which sees a lot of resistance on longer-term charts between the ¥111 and the ¥112 region. That being said, looking at the longer-term chart, it is easy to see where we could pull back from here, so I think this all lines up quite nicely. At this point in time, the market is likely to go looking towards the 200 day EMA underneath, which of course is a major technical indicator for a lot of traders. With that being the case, the market is going to continue to be erratic to say the least. If we do break down below the 200 day EMA, it opens up a move to the ¥107.50 level.

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

RBA Minutes Put the Aussie Dollar in Focus ahead of German Wholesale Inflation Numbers

Earlier in the Day:

It was a busier start to the day on the economic calendar this morning. The Japanese Yen was in action in the early hours. On the monetary policy front, the RBA meeting minutes and the PBoC loan prime rates decision will also be in focus later this morning.

For the Japanese Yen

Inflation drew interest in the early hours of this morning.

According to the Ministry of Internal Affairs and Communication, inflationary pressures returned in June. Consumer prices rose by 0.2% year-on-year, reversing a 0.1% decline from May. Economists had forecast for consumer prices to hold steady.

The core annual rate of inflation ticked up from 0.1% to 0.2%, which came in ahead of a forecasted 0.1%.

In response to the numbers, the Japanese Yen moved from ¥109.507 to ¥109.539 against the Greenback. At the time of writing, the Japanese Yen was down by 0.11% to ¥109.552 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.04% to $0.7341, with the Kiwi Dollar down by 0.13% to $0.6935.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic data front. German wholesale inflation figures will be in focus, with little else for the markets to consider.

As the markets continue to monitor inflationary pressures, a further pickup in wholesale inflationary pressures would drive EUR support.

While the FED has talked of a willingness to allow inflation to go hotter for longer, the ECB has simply lifted its inflation target to 2%. Ahead of Thursday’s press conference, we can therefore expect EUR sensitivity to the numbers.

Away from the economic calendar, however, the continued global rise in new COVID-19 cases remains a negative.

At the time of writing, the EUR was down by 0.07% to $1.1792.

For the Pound

It’s another quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

The lack of stats will continue to leave COVID-19 in focus, which has become a major area of interest for the markets.

At the time of writing, the Pound was down by 0.03% to $1.3671.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Housing sector data for June will be out later in the day.

We don’t expect the numbers to influence the Dollar or the broader market, however.

On Monday, the Dollar Spot Index rose by 0.22% to sensitivity 92.891.

For the Loonie

It’s also quiet day ahead on the economic calendar, with no material stats to provide the Loonie with direction.

A lack of stats will continue to leave market risk sentiment as the key driver on the day.

At the time of writing, the Loonie was up by 0.02% to C$1.2748 against the U.S Dollar.

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

July 20th 2021: Souring Risk Appetite Provides Dollar Boost; DXY Refreshes Multi-Month Peaks

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Closing the book on the month of June had EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent.

A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, July trades 0.5 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Since mid-June, the daily timeframe has been carving out a falling wedge ($1.1848/$1.1975), a pattern accommodating two tests at either side of the structure. Note some technical analysts prefer wedge formations to display at least three tests.

Nevertheless, in the event price continues to compress within the falling wedge, Quasimodo support at $1.1688 is likely to make an entrance, arranged south of 31st March low at $1.1704 (a place sell-stops will be tripped).

Any upside attempts, a breakout above the current wedge pattern, reignites interest at the 200-day simple moving average, circling $1.2002 (sheltered beneath supply at $1.2148-1.2092).

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

Out of the relative strength index (RSI), the value occupies trendline support-turned resistance, extended from the low 29.54. Resistance is also close by at 51.36, serving reasonably well since November 2020. A breakout above 51.36 signals momentum is to the upside (average gains surpass average losses) and, therefore, traders could observe a breakout above the noted falling wedge.

H4 timeframe:

Technical Structure Unchanged from Previous Analysis.

Aside from June’s downside bias, technical areas to be mindful of are Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

Fibonacci studies reveal a 61.8% Fib retracement at $1.1893, plotted south of a 38.2% Fib retracement at $1.1912.

H1 timeframe:

Europe’s single currency refreshed monthly lows against the greenback on Monday. US Treasury yields plummeted amidst increased demand for safe-haven assets, elevating the US dollar, the Swiss franc and Japanese yen.

Technically, heading into early US hours, EUR/USD staged a recovery and whipsawed through $1.18 offers, a psychological barrier dovetailing with the 100-period simple moving average.

Noting short-term flow residing south of $1.18, a 1.272% Fib expansion at $1.1745, a 100% Fib projection at $1.1747 and a 1.27% Fib extension at $1.1748 is seen uniting with H4 Quasimodo support underlined above at $1.1749.

Those who study price momentum will note the relative strength index (RSI) dipped a toe under the 50.00 centreline on Monday after fading 61.00.

Observed levels:

From the monthly timeframe, support at 1.1857-1.1352 is in play. In conjunction with the monthly, the daily timeframe is chalking up a falling wedge ($1.1847/$1.1975), which, given June’s decline, highlights a potential reversal pattern.

Short-term flow is centred on a possible sell-off towards the H1 timeframe’s Fibonacci structure between $1.1745 and $1.1748, joined by H4 Quasimodo support from $1.1749.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following June’s 3.0 percent decline, July recently elbowed through support at $0.7394. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Month to date, July is down 2.3 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018).

Daily timeframe:

The risk-sensitive Australian dollar fell sharply versus the US dollar on Monday, weighed on the back of risk aversion amidst concerns surrounding the spread of the Delta variant spread.

Supply-turned demand at $0.7453-0.7384 was overthrown, consequently exposing support at $0.7204. This may be interpreted as a warning sign of further weakness. Also of technical importance is the unit trading below its 200-day simple moving average at $0.7581, a dynamic value sheltered below resistance from $0.7626.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

Momentum studies, according to the relative strength index (RSI), shows oversold conditions in this market. However, in light of the sustained downside bias since early May, oversold readings are likely to remain common for the time being, and between 50.00 and 40.00 standing in as overbought signals.

H4 timeframe:

Monday’s decline swept through Quasimodo support at $0.7364—a level now serving as resistance beneath supply at $0.7390-0.7371. Space to the downside throws light on Fibonacci studies between $0.7293 and $0.7315. Note that within this area we have a 100% Fib projection at $0.7313, a level harmonic traders will recognise as an AB=CD bullish formation. Yet, a buy from here involves going against current bias, potentially diminishing the pattern’s appeal.

H1 timeframe:

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

As evident from the chart, supply at $0.7450-0.7436 welcomed sellers on Friday and guided the currency pair under $0.74, as expected.

Having price action maintain a bearish theme beneath $0.74, the currency pair is on the doorstep of $0.73, a level residing within Fibonacci support on the H4 scale between $0.7293 and $0.7315.

As you would expect, the relative strength index (RSI) is crawling along the indicator’s oversold threshold, clinging to support at 27.02. In similar fashion to the daily timeframe’s RSI condition, between 50.00 and 40.00 traders are likely expecting this area to serve as temporary oversold space on the H1 scale.

Observed levels:

Chart studies indicate sellers have the upper hand.

Monthly support at $0.7394 is poised to step aside; daily price steamrolled through supply-turned demand at $0.7453-0.7384, and H4 and H1 timeframes exhibit scope to shake hands with the $0.73ish neighbourhood.

The above suggests a retest at H4 resistance from $0.7364 (and possible whipsaw into H4 supply at 0.7390-0.7371) could draw a bearish scenario, targeting $0.73 on the H1.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66. Although April finished lower by 1.3 percent and snapped a three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

Month to date, however, July trades 1.5 percent in the red and is on track to chalk up a bearish outside reversal.

Daily timeframe:

Absence of well-defined support until supply-turned demand at ¥107.58-106.85—an area sharing chart space with the 200-day simple moving average at 106.92—opens the risk of further selling. This follows early July tunnelling through trendline support (taken from the low 102.59).

Trend studies, despite the trendline support breach early July, reveals the pair has been trending higher since the beginning of the year.

Concerning momentum, the relative strength index (RSI) spun lower from within a whisker of a recently breached ascending channel between 58.82 and 47.51 last week, and finished Monday just ahead of 40.00.

H4 timeframe:

Latest out of the H4 chart reveals price stabbed into the walls of demand coming from ¥109.02-109.20, a move enticing short-term recovery gains into the close.

Trendline resistance, extended from the high ¥111.66 (2021 highs), together with Quasimodo resistance at ¥110.09, could enter the frame.

H1 timeframe:

Spinning higher north of ¥109 as we transitioned into US trading on Monday lands Tuesday within a stone’s throw from resistance at ¥109.61, followed closely by supply at ¥109.83-109.71. The noted supply is considered an important zone, having it been within this base a decision was made to channel lower yesterday.

The picture from the relative strength index (RSI) shows the value rebounded from oversold in recent hours, missing support by a whisker at 18.76. Crossing above the 50.00 centreline informs traders that average gains exceed average losses: strengthening to the upside.

Observed levels:

Monthly flow is on the verge of revisiting descending resistance-turned support, pulled from the high ¥118.66. This is inline with the daily timeframe’s technical landscape, suggesting weakness until supply-turned demand at ¥107.58-106.85.

In terms of the short-term picture, H1 supply at ¥109.83-109.71 is likely a key watch. Whipsawing through H1 resistance at ¥109.61 into the aforesaid supply unlocks a possible bearish scene, in line with the higher timeframe direction.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, possibly serving as support if retested.

Month to date, July trades 1.1 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Sterling slumped to levels not seen since February against the US dollar on Monday as risk aversion took centre stage.

Price closed beneath the 200-period simple moving average, circling $1.3692, and is on the verge of crossing swords with Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641).

Trend on this chart has been somewhat rangebound since late February. As for momentum studies, the relative strength index (RSI) is pencilling in bullish divergence, informing traders of strengthening momentum.

H4 timeframe:

Monday trading on the ropes directed the currency pair beneath Quasimodo support at $1.3712 (now serving resistance) to highlight a 100% Fib projection at $1.3640 and a 1.618% Fib extension at $1.3613. Harmonic traders will acknowledge the Fibonacci formation represents an AB=CD bullish configuration.

H1 timeframe:

Despite modest defence, $1.37 was brushed aside in early US Monday, a move which led price to lows ahead of support at $1.3652 (set above the H4 timeframe’s 100% Fib projection at $1.3640).

According to the relative strength index (RSI), bullish divergence is in the initial stages of forming. Confirmation of the divergence signal is movement above resistance at 36.98.

Observed levels:

Between Quasimodo support at $1.3609 and the 38.2% Fib retracement at $1.3641 on the daily timeframe, this is a floor that may draw bullish attention if tested. What’s interesting is the H4 100% Fib projection at $1.3640 and H1 support from $1.3652 aligns closely with the daily levels.

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.

 

U.S. Dollar Index (DX) Futures Technical Analysis – 92.495 Support, 93.430 Next Major Upside Target

The safe-haven U.S. Dollar is trading higher against a basket of major currencies on Monday as investors grew nervous about a raging coronavirus variant that could threaten the outlook for a global economic recovery. The greenback jumped even as the benchmark U.S. 10-year Treasury yield dropped to a more than five-month low of 1.176%.

At 18:56 GMT, September U.S. Dollar Index futures are trading 92.840, up 0.153 or +0.17%.

After an initial thrust to the upside into a three-month high, the greenback pared some of its gains as the Yen and Swiss Franc, two index components, advanced with the decline in risk appetite.

The Delta variant of COVID-19 is now the dominant strain worldwide, accompanied by a surge of deaths around the United States almost entirely among unvaccinated people, U.S. officials said on Friday.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier in the session when buyers took out the last main top at 92.840. A trade through 92.075 will change the main trend to up.

The minor trend is also up. A trade through 92.275 will change the minor trend to down. This will shift momentum to the downside.

The index is also trading on the strong side of a pair of long-term retracement zones at 92.495, 91.950, 91.850 and 91.490, making them support. The short-term pivot at 92.280 is also support.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar Index into the close on Monday is likely to be determined by trader reaction to 92.690.

Bullish Scenario

A sustained move over 92.690 will indicate the presence of buyers. If this move continues to generate enough upside momentum then look for a possible retest of the intraday high at 93.050. This is a potential trigger point for an acceleration into the March 31 main top at 93.430.

Bearish Scenario

A sustained move under 92.690 will signal the presence of sellers. If this move creates enough downside momentum then look for a possible break into 92.495.

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

U.S. Dollar, Yen Gain as Delta Variant Weighs on Risk Sentiment

By Gertrude Chavez-Dreyfuss and Ritvik Carvalho

The greenback climbed to a more than three-month peak against a basket of major currencies, but has come off its highs as the yen and Swiss franc advanced with the decline in risk appetite.

The U.S. dollar though remained sharply higher against risk-sensitive currencies such as the Australian, Canadian, and New Zealand dollars.

The yen, meanwhile, climbed to its highest in 1-1/2 months versus the dollar.

The Delta variant of COVID-19 is now the dominant strain worldwide, accompanied by a surge of deaths around the United States almost entirely among unvaccinated people, U.S. officials said on Friday.

U.S. cases of COVID-19 are up 70% over the previous week and deaths are up 26%, with outbreaks occurring in parts of the country with low vaccination rates, U.S. Centers for Disease Control and Prevention Director Rochelle Walensky said during a press briefing.

“The Delta variant concerns are triggering this flight to safety across the world,” said Edward Moya, senior market analyst at online FX trading platform OANDA in New York. “There’s just this tremendous amount of nervousness, which is good for the dollar and the Japanese yen.”

In mid-morning trading, the dollar index, which measures its value against six major currencies, rose to its highest since April 5. But it was last flat on the day at 92.655.

The dollar was firmly higher against commodity currencies. It rose 1% against the Canadian dollar to C$1.2752. The Aussie dollar dropped 0.7% versus the greenback to US$0.7343, while the New Zealand dollar fell 0.8% to US$0.6940.

The yen surged on Monday, rising to its highest since late May against the greenback, which was last down 0.8% at 109.16 yen

The Swiss franc gained as well, pushing the dollar down 0.3% to 0.9171 franc

With England lifting all COVID-19 social restrictions on what some local media has dubbed “Freedom Day”, the continued spread of the Delta variant of the coronavirus drew further doubt from investors about whether a total economic recovery to pre-pandemic levels is possible.

Over the weekend, British health minister Sajid Javid announced he had tested positive for COVID-19 and was in self-isolation, also forcing Prime Minister Boris Johnson and finance minister Rishi Sunak into quarantine. Sterling hit a 3-month low against the dollar of $1.3703.

The pound was last down 0.4% at $1.3694.

The euro was little changed against the dollar at $1.1810, after earlier dropping to a three-month low of $1.1764. Investors will look to this week’s European Central Bank meeting.

========================================================

Currency bid prices at 10:13AM (1413 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 92.7110 92.6590 +0.07% 3.034% +93.0410 +92.6270

Euro/Dollar $1.1814 $1.1805 +0.08% -3.30% +$1.1824 +$1.1764

Dollar/Yen 109.2050 110.0800 -0.78% +5.71% +110.0950 +109.0700

Euro/Yen 129.01 129.96 -0.73% +1.65% +129.9700 +128.9000

Dollar/Swiss 0.9171 0.9197 -0.24% +3.70% +0.9221 +0.9164

Sterling/Dollar $1.3696 $1.3764 -0.48% +0.26% +$1.3767 +$1.3690

Dollar/Canadian 1.2770 1.2621 +1.24% +0.34% +1.2807 +1.2614

Aussie/Dollar $0.7337 $0.7401 -0.86% -4.62% +$0.7403 +$0.7329

Euro/Swiss 1.0833 1.0852 -0.18% +0.24% +1.0862 +1.0830

Euro/Sterling 0.8626 0.8572 +0.63% -3.48% +0.8627 +0.8565

NZ $0.6937 $0.7000 -0.93% -3.43% +$0.7004 +$0.6922

Dollar/Dollar

Dollar/Norway 8.9300 8.8575 +0.96% +4.14% +8.9615 +8.8695

Euro/Norway 10.5500 10.4553 +0.91% +0.81% +10.5710 +10.4225

Dollar/Sweden 8.6769 8.6755 +0.04% +5.86% +8.7271 +8.6692

Euro/Sweden 10.2512 10.2466 +0.04% +1.73% +10.2691 +10.2448

(Reporting by Gertrude Chavez-Dreyfuss in New York and Ritvik Carvalho in London; Editing by William Maclean and Andrea Ricci)

USD/JPY Price Forecast – US Dollar Falls Against Yen In Safety Bid

The US dollar has fallen rather hard during the course of the trading session on Monday, as we are reaching towards the ¥109.50 level. At this point in time, we are looking at a very ugly opening for the week across the risk spectrum, so it does make quite a bit of sense that the Japanese yen gets a bit of a bid, as it is considered to be a “safety currency.” That being said, the market is likely to continue to see a lot of noisy behavior, but at this point it looks like we have more of a downward bias than anything else right now.

USD/JPY Video 20.07.21

When I look at this chart, it looks very likely that we are going to go reaching towards the 200 day EMA underneath, which is at the ¥108 level currently, and therefore I think what we are going to see is more of a grind lower, because the US dollar itself is rather strong at the same time. In general, this is a run towards safety and therefore all of this makes quite a bit of sense. Furthermore, when I look at this chart it more or less becomes an indicator that I use for other yen related pairs such as the British pound against the Japanese yen, or the Canadian dollar against the Japanese yen, both of which look horrible right now.

All things been equal, I have no interest in buying this pair because the area above or we pull back from was major resistance for longer-term traders, seen on the weekly and monthly charts, which I do believe continues to hold going forward.

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

USD/JPY Forex Technical Analysis – Trading on Weakside of Short-Term Fibonacci Level at 110.133

The Dollar/Yen is trading lower early Monday as fears of rising inflation and a relentless surge in coronavirus cases soured investor risk appetite, making the safe-haven Japanese Yen a more attractive investment.

Lower Treasury yields and Covid-driven risk aversion are the catalysts driving the price action today

At 06:31 GMT, the USD/JPY is trading 109.965, down 0.121 or -0.11%.

According to Reuters, global economic growth is beginning to show signs of fatigue while many countries, particularly in Asia, are struggling to curb the highly contagious Delta variant of the coronavirus and have been forced into some form of lockdown. The specter of elevated inflation, while the market has long feared, is also haunting investors.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 109.535 will signal a resumption of the downtrend. A move through 111.659 will change the main trend to up.

The minor trend is also down. A trade through 109.715 will indicate the downside momentum is getting stronger. A trade through 110.698 will change the minor trend to up. If sellers take out 109.715 then 110.342 will become a new minor top.

The short-term range is 109.192 to 111.659. The USD/JPY is currently trading on the weak side of its retracement zone at 110.133 to 110.426. This is potential resistance.

On the downside, the major support is a retracement zone at 109.569 to 109.076. The upper level of this retracement zone stopped the selling at 109.535 on July 8.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to the Fibonacci level at 110.133.

Bearish Scenario

A sustained move under 110.133 will indicate the presence of sellers. If this creates enough downside momentum then look for a test of 109.715, followed by 109.569 to 109.535. The latter is a potential trigger point for an acceleration to the downside with 109.192 to 109.076 the next likely downside target area.

Bullish Scenario

A sustained move over 110.133 will signal the presence of buyers. This could trigger the start of a labored rally with a series of levels at 110.342, 110.426 and 110.597 the next potential upside targets. Since the main trend is down, sellers are likely to re-emerge on a test of this area.

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

A Quiet Economic Calendar Leaves Central Bank Chatter and COVID-19 in Focus

Earlier in the Day:

It was a particularly quiet start to the day on the economic calendar this morning. There were no material stats to provide the majors with direction in the early hours.

The lack of stats left the markets to consider COVID-19 news updates from the weekend and plans to combat the pandemic.

For the Majors

At the time of writing, the Japanese Yen was up by 0.18% to ¥109.870 against the U.S Dollar, while the Aussie Dollar was down by 0.24% to $0.7383. The Kiwi Dollar was down by 0.17% to $0.6987.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic data front. There are no material stats to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of COVID-19 news updates, as the Delta variant continues to push new cases northwards.

At the time of writing, the EUR was flat at $1.1806.

For the Pound

It’s also a quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

On the monetary policy front, BoE member Haskel is due to speak late in the day. Expect any views on the economic outlook, COVID-19, or monetary policy to influence.

Away from the economic calendar, COVID-19 news updates will also need monitoring. Any announcement by the UK government to delay removing existing restrictions would test support for the Pound.

At the time of writing, the Pound was down by 0.05% to $1.3760.

Across the Pond

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

There are no major stats to provide the Dollar and the broader markets with direction later in the day.

The lack of stats will leave the Dollar in the hands of FOMC member chatter and COVID-19 news.

At the time of writing, the Dollar Spot Index was up by 0.02% to 92.705.

For the Loonie

It’s also quiet day ahead on the economic data front. There are no material stats to provide the Loonie with direction.

A lack of stats will leave market risk sentiment as the key driver on the day.

At the time of writing, the Loonie was down by 0.11% to C$1.2627 against the U.S Dollar.

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

Rates and Currencies Act like They are From Different Planets

The 10-year yield slipped four basis points on the week to 1.32%. The yield has risen in three of the past 15 weeks. It is tough to argue that it is a fluke. While it is holding above the 200-day moving average (~1.25%), the 30-year yield has spent the last two sessions below its 200-day moving average (~1.975). The implied yield of the December Eurodollar futures fell five basis points last week and is off near 15 bp over the past five weeks.

The dollar rose against all the major currencies but the Japanese yen, which eked out a negligible gain. The combination of economic data and central bank statement (and an end to asset purchases) spurred the market to price in an RBNZ rate hike as early as next month (August 17). Still, the Kiwi finished slightly lower on the week. Still, it joined the yen and Swiss franc, whose central banks are widely expected to be among the laggards in adjusting monetary policy, to be the only currencies that have risen here in July against the US dollar.

Perversely, the other two high-income countries in the front of the queue to adjust policy, Norway and Canada, have the poorest performing currencies this month (~-2.80% and -1.70%, respectively).

Dollar Index

The Dollar Index rose by about 0.6% last week. Still, it is up less than 0.30% in July after rising 2.9% in June. In recent days, it has held below the three-month high set on July 7, near 92.85. The MACD is slowly declining, while the Slow Stochastic has pulled back from overbought territory but is threatening to cross higher. The year’s high was set at the end of March near 93.45. A break of that March high would have bullish implications and it least signal at test on the 94.40-94.50 area. On the other hand, a move below 91.55 would suggest a high may be in place.

Euro

The euro fell to new three-month lows last week, slightly above $1.1770. The single currency has spent the last three sessions within the range set on July 13 (~$1.1770-$1.1875). Immediate resistance is seen in the $1.1840-$1.1850 area. Ahead of the ECB meeting on July 22, the risk is on the downside as the market prepares for a dovish forward guidance adjustment in light of its new symmetrical 2% inflation target. The MACD has not confirmed last week’s lows. The Slow Stochastic edged out of oversold territory but has moved sideways in the second half of last week. A convincing low does not appear to place, and the next important support area is seen closer to $1.17.

Japanese Yen

After matching a five-day high on July 14 (~JPY110.70), the dollar reversed lower, arguably with the drag of falling yields, and finished below the previous session’s low. The outside down day saw follow-through dollar selling the following day, but good bids were seen around JPY109.70. The greenback recovered a bit ahead of the week, as yields edged higher and settled slightly above JPY110.05.

Although the MACD and Slow Stochastic appear to be poised to turn higher, they haven’t yet. The correlation between US 10-year yield and oil prices over the past 30-day is near the highest since March 2019 (~0.52, rolling 30-day correlation of differences). A move above JPY110.85 could see the dollar rested the month and year high around JPY111.65. Below the JPY109.50 area, support is seen ahead of JPY109.00.

British Pound

Strong inflation and consumption figures spurred hawkish rhetoric from a couple of BOE officials and firmer short-term UK rates, but sterling still fell around 0.95% against the US dollar and lost about 0.35% against the euro. Indeed it posted a weekly close below $1.38 for the first time since April. Sterling closed poorly, and although it held above the recent lows in the $1.3730-$1.3740 area, it looks weak.

The cap near $1.39 looks stronger than support, and the 200-day moving average may beckon (~$1.3695). The Slow Stochastic has cycled to the middle of the range without a strong recovery in prices, and it looks to be poised to level out. The MACD moved gently off its lows but could turn down again.

Canadian Dollar

What a miserable two-week stretch for the Canadian dollar. It has fallen in eight of the ten sessions and has fallen by 2% over this run. The data has been firm, and the Bank of Canada did take another step toward slowing its bond purchases. The greenback covered the week’s range in two days. There were buyers for it on the pullback after the Bank of Canada’s announcement near CAD1.2425, and the following day it was flirting with the upper Bollinger Band (~CAD1.2610) and the 200-day moving average around (~CAD1.2625).

Above there, the CAD1.2700 marks the halfway point of the US dollar’s sell-off since last November’s election, but there appears to be little chart resistance ahead of the CAD1.2740-CAD1.2750 area. The MACD is stretched but continues to move higher. The Slow Stochastic has flatlined below last month’s high.

Australian Dollar

With a little more than a quarter of the population having received a single vaccine and a longer and tighter lockdown in parts of the country, the economic prospects have dimmed. They offer a stark contrast with New Zealand. The Australian dollar was sold to new lows for the year ahead of the weekend, as it slipped below $0.7400. We have recognized the risk of a move to $0.7380, which would complete the retracement (61.8%) of the rally since the US election last year. Below there may not be much support for another half of a cent. The MACD has is nearly a horizontal line in the trough, while the Slow Stochastic is moving sideways a little above the low set earlier this month.

Mexican Peso

The US dollar set the week’s range on July 13 (~MXN19.8150-MXN20.0820). It finished the week near the lower end of the range, but this represented only a small loss for the greenback (<0.15%). Still, it is the third decline in the past four weeks. The JP Morgan Emerging Market currency index eked out a minor gain last week (0.1%) to end a two-week decline. Although the peso is the only LATAM currency to rise so far here in July (0.4%), it was a poor performer last week in the region.

The Brazilian real came back into favor rising 2.8%, the Peruvian sol rose 1.6%, and the Colombian peso rose slightly more than 0.6%. The Chilean peso lost the most in the region (~1.25%) despite the central bank hiking rates and suggesting it may be the first of several. The momentum indicators are mixed. Broad sideways trading seems like the most likely near-term scenario. The MXN19.75 area offers support below MXN19.80.

Chinese Yuan

The yuan was virtually unchanged against the dollar last week, finishing slightly below CNY6.48. It leaves it off by about 0.33% here in July and up by nearly 0.75% year-to-date. Three-month implied volatility settled June a little above 5%. It began last week above 5% and finished at its lowest level since March 2020 (~3.93%).

The lower end of the near-term dollar range appears around CNY6.45, but it looks poised to test the upper-end that comes in around CNY6.49. The greenback has not traded above CNY6.50 for about three months. Although the firmness of June economic data shows the quarter ending on an upbeat, the PBOC does not appear to be in a hurry to ease policy further. The 10-year onshore yield fell to fell to 2.92% on July 13, its lowest in a year.

The low currency volatility and the non-correlation of the bond market to other major bond markets attract foreign asset managers. Year-to-date, the US 10-year yield has risen 40 bp, the German Bund by 22 bp, the British Gilt 43 bp, and the Chinese bond yield is off almost 20 bp.

This article was written by Marc Chandler, MarctoMarket.

The Week Ahead – COVID-19 , Economic Data, and the ECB in Focus

On the Macro

It’s quieter week ahead on the economic calendar, with 32 stats in focus in the week ending 23rd July. In the week prior, 66 stats had also been in focus.

For the Dollar:

On Thursday, jobless claims will draw plenty of attention.

At the end of the week, prelim private sector PMIs for July will also be in focus.

Expect the services PMI and the initial jobless claim figure to be the key numbers of the week.

In the week ending 16th July, the Dollar Spot Index rose by 0.60% to 92.687.

For the EUR:

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

Late in the week, business and consumer confidence figures will be in focus. With the ECB looking for consumption to fuel the economic recovery, the numbers will influence.

On Friday, prelim private sector PMIs for France, Germany, and the Eurozone will also be in focus.

The markets will be looking for any economic speed bumps following disappointing stats from Germany recently.

On the monetary policy front, the ECB is also in action on Thursday. With the policy revamp and some uncertainty over the economic outlook, it should be an interesting press conference…

For the week, the EUR fell by 0.59% to $1.1806.

For the Pound:

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

CBI industrial trend orders will draw interest on Thursday.

At the end of the week, however, private sector PMI and retail sales figures will be the key stats of the week.

A pickup in spending and service sector activity would deliver the Pound with strong support.

The Pound ended the week down by 0.96% to $1.3767.

For the Loonie:

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

House price figures are due out along with retail sales data.

Expect the retail sales figures to be key on Friday. With economic data on the lighter side, crude oil prices and market risk sentiment will also influence in the week.

The Loonie ended the week down 1.33% to C$1.2613 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Retail sales figures are due out on Wednesday. With consumer spending key to a sustainable economic recovery, Wednesday’s stats will draw plenty of interest.

On the monetary policy front, the RBA monetary policy meeting minutes are due out on Tuesday.

Following the RBNZ’s surprise move last week, any talk of a tightening of monetary policy would give the Aussie Dollar a boost.

The Aussie Dollar ended the week down by 1.16% to $0.7401.

For the Kiwi Dollar:

It’s a particularly quiet week ahead, with no major stats to provide the Kiwi with direction.

A lack of stats will leave the Kiwi in the hands of market risk sentiment in the week.

The Kiwi Dollar ended the week up by 0.19% to $0.6999.

For the Japanese Yen:

Inflation and trade data on Tuesday will be the only stats of the week. Expect the trade data to garner the greatest interest.

On Wednesday, the BoJ’s monetary policy meeting minutes are due out for the June meeting. We don’t expect the dated minutes to have a material impact on the Yen, however.

The Japanese Yen rose by 0.06% to ¥110.070 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to provide the markets with direction.

A lack of stats will leave chatter from Beijing in focus through the week.

In the week, the PBoC is in action, though the markets are expecting loan prime rates to be left unchanged.

The Chinese Yuan ended the week flat at CNY6.4792 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need continued monitoring…

Weekly Technical Market Insight 19th – 23rd July 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

In the face of the prior week’s shooting star—a candlestick formation frequently interpreted as a bearish signal—dollar bulls went on the offensive last week and added 0.7 percent.

According to the US dollar index (ticker: DXY), additional recovery gains shine the technical spotlight on the 93.44 31st March high, established alongside a 100% Fib projection and neighbouring Quasimodo resistance from 93.90. Lower on the curve, the widely watched 200-day simple moving average is on the radar (91.37), grouped with substantial support at 90.64-91.40.

Trend studies reveal the greenback has echoed a recovery phase since the beginning of 2021, following a sizeable decline during 2020. After realising support at 89.34 (a level displaying historical significance), this has motivated a bullish defence, up +3.0 percent year to date.

Although comfortable north of the 200-day simple moving average, which many technicians acknowledge as bullish suggestion, a longer-term trend change is recognised above the 94.74 25th September (2020) high (blue arrow). By the same token, beyond the 89.21 6th January low (red arrow), chart studies suggest an extension to the 2020 downtrend.

The relative strength index (RSI), a popular gauge of momentum, is content above support at 55.67 (a level with clear history dating as far back as April 2020). This demonstrates that momentum remains to the upside, despite exiting overbought territory and moulding bearish divergence heading into July.

  • Sellers making an entrance this week and clearing near-term bids reveals limited support until 90.64-91.40. Ultimately, a daily close below 6th July low at 92.00 could stir a bearish scene. Continued interest higher up, on the other hand, has the 93.44 31st March high in focus, closely followed by Quasimodo resistance at 93.90 and a 100% Fib projection.

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Closing the book on the month of June had EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent.

A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, July trades 0.5 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Since mid-June, the daily timeframe has been carving out a falling wedge ($1.1848/$1.1975), a pattern accommodating two tests at either side of the structure. Note some technical analysts prefer wedge formations to display at least three tests.

Nevertheless, in the event price continues to compress within the falling wedge, Quasimodo support at $1.1688 is likely to make an entrance, arranged south of 31st March low at $1.1704 (a place sell-stops will be tripped).

Any upside attempts, a breakout above the current wedge pattern, reignites interest at the 200-day simple moving average, circling $1.2002 (sheltered beneath supply at $1.2148-1.2092).

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

Out of the relative strength index (RSI), the value occupies trendline support-turned resistance, extended from the low 29.54. Resistance is close by at 51.36, serving reasonably well since November 2020. A breakout above 51.36 signals momentum is to the upside (average gains surpass average losses) and, therefore, traders could observe a breakout above the noted falling wedge.

H4 timeframe:

Aside from June’s downside bias, technical areas to be mindful of this week are Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

Fibonacci studies reveal a 61.8% Fib retracement at $1.1896, plotted south of a 38.2% Fib retracement at $1.1917.

H1 timeframe:

In light of Friday’s lacklustre performance, the unit remained toying with $1.18. Thus, for those who read Friday’s technical briefing you may recall the following (italics):

A closer reading of price action on the H1 chart reveals that while short-term flow shakes hands with $1.18, Fibonacci structure resides on both sides of the market—commonly referred to as Fibonacci clusters.

Upstream, a 100% Fib projection at $1.1878, a 1.272% Fib expansion at $1.1880 and a 1.618% Fib extension at $1.1886 is visible, plotted just south of demand-turned supply from $1.1895-1.1911.

Downriver, a 1.272% Fib expansion at $1.1745, a 100% Fib projection at $1.1747 and a 1.27% Fib extension at $1.1748 is seen dovetailing with H4 Quasimodo support underlined above at $1.1749.

The relative strength index (RSI) is attempting to climb the 50.00 centreline, which if successful implies momentum could strengthen and take aim at overbought conditions.

Observed levels:

Long term:

From the monthly timeframe, support at 1.1857-1.1352 is in play.

In conjunction with the monthly, the daily timeframe is chalking up a falling wedge ($1.1847/$1.1975), which, given June’s decline, highlights a potential reversal pattern.

Short term:

Short-term flow is centred on the H1 timeframe’s Fibonacci structure this week: between $1.1886 and $1.1878 for resistance and between $1.1745 and $1.1748 for support.

The $1.18 figure is currently offering a floor, though attracts limited convergence with additional technical tools. Traders may, nonetheless, feel the round number is fragile due to the unit trending lower since June.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following June’s 3.0 percent decline, July’s candle knocked on the door of support at $0.7394 last week. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Forging support places trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082 in sight.

Month to date, July is down 1.4 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018).

Daily timeframe:

Supply-turned demand at $0.7453-0.7384—an area housing key Fib ratios, including a 100% projection at $0.7418 and a 1.272% extension at $0.7424—is in a tight corner right now. However, recognising monthly support inhabits the lower range of the demand at $0.7394, and directly below the area we also have a 61.8% daily Fib retracement at $0.7379, buyers could make a show.

Territory above demand points to the 200-day simple moving average at $0.7581, a dynamic value sheltered below resistance from $0.7626.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

From the relative strength index (RSI), the indicator continues to emphasise a position of bullish divergence. What this shows traders is from mid-June, the currency pair reflected less downside momentum.

H4 timeframe:

The 100% Fib projection at $0.7427 and a nearby 1.13% BC Fib extension at $0.7423, despite delivering support since 8th July, was moved aside Friday amidst a light USD bid.

Sellers securing position south of the latter shifts focus to Quasimodo support drawn at $0.7364.

H1 timeframe:

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

Immediate flow directs attention to the engulf of demand at $0.7416-0.7431. Not only has the move unlocked the $0.74 region as possible support, neighbouring supply from $0.7450-0.7436—the decision point to venture lower—is on the radar.

The report also went on to observe that the big figure $0.74 may also interest traders, having seen the level arranged above monthly support at $0.7394. Traders are urged to pencil in the possibility of a whipsaw through $0.74 to test the monthly barrier, action which could welcome buyers into the market.

As evident from the chart, supply at $0.7450-0.7436 (currently positioned under the 100-period simple moving average at $0.7453) welcomed sellers on Friday and guided the currency pair under $0.74.

With regards to the relative strength index (RSI), the value is back on the doorstep of oversold after failing to find acceptance above the 50.00 centreline.

Observed levels:

Long term:

Monthly support at $0.7394 making an arrival, a level housed within the lower range of daily supply-turned demand at $0.7453-0.7384, might prompt a bullish scenario.

An AUD/USD bid emerging this week has the 200-day simple moving average ($0.7581) to target, followed by daily resistance at $0.7626.

Short term:

The combination of monthly support at $0.7394, daily supply-turned demand at $0.7453-0.7384, and $0.74 on the H1, may interest buyers in early trade.

Closing above H1 supply at $0.7450-0.7436 and the 100-period simple moving average at $0.7453 is likely to encourage further upside to the $0.75 neighbourhood.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66. Although April finished lower by 1.3 percent and snapped a three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

Month to date, July trades 1.0 percent in the red.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The technical picture from the daily chart shows price languishing below trendline support-turned resistance (taken from the low 102.59), an ascending line mingling with long-term resistance at ¥111.88-111.20.

Brushing aside July 8th low at $109.53 potentially sets the technical stage for additional weakness to ¥107.58-106.85: supply-turned demand.

Trend studies—despite the trendline support breach early July—reveals the pair has been trending higher since the beginning of the year.

Concerning momentum, the relative strength index (RSI) spun lower from within a whisker of a recently breached ascending channel between 58.82 and 47.51, and finished the week sub-50.00: the indicator’s centreline. This informs traders that average losses exceed average gains, therefore traders are likely to monitor the indicator closely below 50.00 for further deterioration.

H4 timeframe:

Technical elements on the H4 scale to be aware of this week are supply coming in at ¥110.99-110.80, an area accommodating a 100% Fib projection at ¥110.90 and a 61.8% Fib retracement value from ¥110.85. Harmonic traders will note the 100% Fib projection denotes an AB=CD bearish configuration.

Chart space below seats familiar Fibonacci support between ¥109.48 and ¥109.70 in sight, a zone pinned above demand at ¥109.02-109.20.

H1 timeframe:

Heading into the early hours of London Friday, bullish forces overwhelmed ¥110 offers and addressed a 61.8% Fib retracement value from ¥110.32 before withdrawing to within striking distance of ¥110 into the close. Also technically noteworthy is supply between ¥110.54-110.41 and ¥110.50-110.35, and a 1.618% Fib projection at ¥110.37.

Unwinding below ¥110 this week reasons Quasimodo support at ¥109.61 could enter the fold (enclosed within the parapets of the H4 timeframe’s Fib support mentioned above between ¥109.48 and ¥109.70), assuming lows at ¥109.74 give way.

The relative strength index (RSI) levelled off a touch under overbought Friday as price clipped the 61.8% Fib ¥110.32. Interestingly, the indicator’s value stepped through the 50.00 centreline into the close, signifying further downside momentum. Indicator support set within oversold at 18.76, therefore, is in view.

Observed levels:

Long term:

Monthly action encourages a bullish outlook, following April’s retest of descending resistance-turned support, pulled from the high ¥118.66. This is somewhat clouded by the daily timeframe trekking through trendline support, drawn from ¥102.59.

The above implies a retracement as far south as supply-turned demand from ¥107.58-106.85, prior to monthly bulls taking the reins.

Short term:

¥110 is a key watch early hours this week.

A H1 close below ¥110 hints at a bearish theme to H1 Quasimodo support at ¥109.61. A ¥110 retest in the form of resistance, therefore, may appeal to any bearish interest.

Retesting and defending ¥110, on the other hand, sets up price to knock on the door of H1 supply between ¥110.54-110.41 and ¥110.50-110.35.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, possibly serving as support if retested.

Month to date, July trades 0.5 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The tail end of the week watched sterling slip versus the buck, fashioning two back-to-back bearish candles. This informs chartists that Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3685) could be thrown in the mix this week.

Overhead, resistance at $1.4003 remains centre stage—a level displaying commitment since March of this year.

Momentum studies, according to the popular relative strength index (RSI), recently came within a whisker of the 50.00 centreline and concluded the week under 40.00. With that, traders are urged to monitor for a possible oversold signal this week.

H4 timeframe:

Since the beginning of July, buyers and sellers have been carving out a consolidation between the 61.8% Fib retracement at $1.3898 and a 100% Fib projection at $1.3909, and familiar Quasimodo support present at $1.3761.

Areas outside the noted range casts light on supply from $1.3986-1.3958 and a resistance zone at $1.4027-1.3998, while lower on the curve, Quasimodo support can be found at $1.3712, which may be challenged this week if the end-of-week test at $1.3761 stands aside.

H1 timeframe:

Bids thinned at $1.38 during US trading on Friday, following an earlier test at the underside of the 100-period simple moving average at $1.3839.

Subsequent flow witnessed sellers strengthen their grip, boosted on the back of a USD bid and technical breakout selling.

$1.3750 is a level of note, drawing support since early July. Fibonacci traders will also acknowledge the level shares chart space closely with a 1.618% Fib expansion at $1.3748 and a 1.272% Fib projection from $1.3744.

Downside momentum also pulled the relative strength index (RSI) to within touching distance of oversold territory at the week’s end. Should the value turn from oversold, bullish divergence might develop, a signal showing strengthening momentum.

Observed levels:

Long term:

Should buyers continue to take a back seat on the daily timeframe this week, Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3685) deserves notice.

Yet an upside move would shift attention back to daily resistance at $1.4003.

Short term:

Although the H4 timeframe has price dipping a toe in waters south of Quasimodo support at $1.3761, the $1.3750 support on the H1, joined together with a 1.618% Fib expansion at $1.3748 and a 1.272% Fib projection from $1.3744, could form a floor early week, potentially stirring a pullback to $1.38ish.

A H1 close below $1.3750, nonetheless, brings light to a short-term bearish play, targeting Quasimodo support on the H4 at $1.3712, closely shadowed by the $1.37 figure (H1).

DISCLAIMER:

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The Weekly Wrap – The Greenback Comes out on Top as U.S Inflation Spikes

The Stats

It was a busier week on the economic calendar, in the week ending 16th July.

A total of 66 stats were monitored, which was up from 42 stats in the week prior.

Of the 66 stats, 34 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There were 9 stats that were in line with forecasts in the week.

Looking at the numbers, 32 of the stats reflected an upward trend from previous figures. Of the remaining 34 stats, 32 reflected a deterioration from previous.

For the Greenback, economic data continued to deliver Dollar support. The upside came in spite of FED Chair Powell delivering dovish testimony in the week. In the week ending 16th July, the Dollar Spot Index rose by 0.60% to 92.687. In the previous week, the Dollar had fallen by 0.13% to 92.102.

Out of the U.S

Inflation figures drove support for the Greenback early in the week.

The annual rate of inflation accelerated from 5.0% to 5.4% in June, with the core annual rate of inflation picking up from 3.8% to 4.5%.

Wholesale inflationary pressures were also on the rise, with the producer price index increasing by 1.0% in June. In May, the index had risen by 0.7%.

In the 2nd half of the week, jobless claims, retail sales, and consumer sentiment were in focus.

It was a mixed set of numbers for the Dollar.

In the week ending 9th July, initial jobless claims fell from 386k to 360k.

Retail sales beat forecasts, with sales up 0.6% month-on-month. Economists had forecast a 0.5% decline following a 1.7% slide in May. Year-on-year, sales was up 18%, coming in ahead of a forecasted 14.0% increase. In May, retail sales had risen by 27.6% year-on-year.

While the jobless claims and retail sales figures were positive, consumer sentiment waned in July.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 85.5 to 80.8. Economists had forecast a rise to 86.0.

Manufacturing sector data from Philly and NY State, industrial production, and business inventories were also out but had a muted impact on the markets.

On the monetary policy front, FED Chair Powell delivered 2 days of testimony to lawmakers. Powell talked of the FED’s willingness to let inflation run hotter in order to avoid the mistake of tightening policy too soon. The FED Chair’s assurances had limited impact on the Greenback, however.

In the equity markets, the NASDAQ slid by 1.87%, with the Dow and the S&P500 ending the week down by 0.52% and by 0.97% respectively.

Out of the UK

It was busier week. Mid-week, inflation figures delivered Pound support, with the UK’s annual rate of inflation picking up from 2.1% to 2.5%.

On Thursday, employment figures were also positive for the Pound.

In June, claimant counts slid by 114.8k, following a 92.6k decline in May.

The unemployment rate saw an increase from 4.7% to 4.8% in May, though this is likely to fall back following the June claim figures.

While the stats were positive for the Pound, uncertainty over the impact of the Delta variant on the economy lingered.

In the week, the Pound fell by 0.96% to end the week at $1.3767. In the week prior, the Pound had risen by 0.56% to $1.3901.

The FTSE100 ended the week down by 1.60%, following a 0.02% loss from the previous week.

Out of the Eurozone

It was another busy week.

Industrial production and trade data for the Eurozone were in focus along with finalized inflation figures for June.

For the Eurozone, industrial production fell by 1.0%, reversing a 0.6% rise from April.

In June, the Eurozone’s trade surplus narrowed from €10.9bn to €7.5bn. Economists had forecast a widening to €16.4bn.

Following a shift in the ECB’s policy on price stability, however, the inflation figures had limited impact.

The Eurozone’s annual rate of inflation softened from 2.0% to 1.9%, falling below the ECB’s new 2% target rate.

The core annual rate of inflation softened from 1.0% to 0.9%.

For the week, the EUR fell by 0.59% to $1.1806. In the week prior, the EUR had risen by 0.09% to $1.1876.

The CAC40 fell by 1.06%, with the DAX30 and the EuroStoxx600 ending the week down by 0.94% and by 0.64% respectively.

For the Loonie

Monetary policy was the main area of focus in the week.

While holding monetary policy unchanged on Wednesday, the BoC revised down growth forecasts, weighing on the Loonie. The BoC revised its 2021 growth forecast down from 6.5% to 6.0%. While revised down for 2021, the BoC revised its growth forecast for 2022 up from 3.7% to 4.6%.

In spite of the downward revision to this year’s growth forecast, the BoC announced that it would reduce its weekly bond purchases from $3bn to $2bn, citing a strengthening in the economic recovery…

Stats in the week included manufacturing sales, ADP employment change, and wholesale sales figures.

While having limited impact on the Loonie, the stats were skewed to the negative.

Also weighing on the Loonie were falling crude oil prices in the week.

In the week ending 16th July, the Loonie slid by 1.33% to C$1.2613. In the week prior, the Loonie had fallen by 1.01% to C$1.2447.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 16th July, the Aussie Dollar slid by 1.16% to $0.0.7401, while the Kiwi Dollar rose by 0.19% to $0.6999.

For the Aussie Dollar

It was a busier week, with consumer confidence and employment figures in focus.

The stats were skewed to the positive, though had a limited impact on the Aussie Dollar.

In July, the Westpac Consumer Confidence Index rose by 1.5% to $108.8. The survey was carried out before the rollout measures announced on 9th July.

Employment figures also impressed, with a 51.6k jump in full employment following a 97.5k increase in May. As a result of the further increase in hiring, the unemployment rate fell from 5.1% to 4.9% in June.

While the stats were positive for the Aussie Dollar, new COVID-19 restrictions weighed on the Aussie in the week.

For the Kiwi Dollar

It was a busy week.

Early in the week, electronic card retail sales and business confidence figures delivered mixed results.

In June, card retail spending increased by a further 0.9%, following a 1.7% rise in May.

Business confidence waned, however, with the NAB Business Confidence Index falling from 20.0 to 11.0.

By contrast, economic data in the 2nd half of the week impressed.

In June, the Business PMI rose from 58.6 to 60.7, with inflation accelerating in the 2nd quarter.

The annual rate of inflation accelerated from 1.5% to 3.3%, with consume prices up 1.3% in the quarter.

While the stats influenced, the RBNZ monetary policy decision on Wednesday was key.

Catching the markets off-guard, the RBNZ agreed to end the additional asset purchases under the LSAP programme by 23rd July.

For the Japanese Yen

It was another relatively busy week.

Early in the week, machinery orders provided some comfort, with orders up 7.8% in May.

Industrial production figures disappointed, however, with production falling by 6.5% in May.

Tertiary industry figures were also week, with the index falling by 2.7% in May.

At the end of the week, the Bank of Japan was also in focus but failed to deliver any surprises.

The Japanese Yen rose by 0.06% to ¥110.07 against the U.S Dollar. In the week prior, the Yen had risen by 0.82% to ¥110.140.

Out of China

It was a big week on the economic data front.

Early in the week, trade data for June was in focus ahead of 2nd quarter GDP numbers on Thursday.

While trade data impressed, with exports up 32.2%, GDP numbers disappointed in the week.

Year-on-year, the Chinese economy expanded by 7.9%, which was down from 18.3% in the 1st quarter. Quarter-on-quarter, the economy expanded by 1.3%, which was up from 0.6% growth in the 1st quarter, however.

Other stats at the end of the week included fixed asset investment, industrial production, and retail sales data.

The full set of numbers were softer in June than back in May, adding further pressure on riskier assets.

In the week ending 16th July, the Chinese Yuan ended the week flat at CNY6.4792. In the week prior, the Yuan had fallen by 0.09% to CNY6.4790.

The CSI300 and the Hang Seng ended the week up by 0.50% and by 2.41% respectively.

Stocks Slide, Bond Yields Dip as Inflation Worries Linger

The Commerce Department said retail sales rose 0.6% in June, contrary to an expected decline, adding weight to those who say inflation will run faster than the Federal Reserve forecasts and force interest rates to rise sooner than it projects.

Yet bond yields pared most initial gains, with the benchmark 10-year U.S. Treasury note trading at 1.2987%, or a scant 0.2 basis points higher on the day. The Fed’s dovish outlook outweighed fears of a prolonged inflation spike.

Equity markets declined as investors turned risk-averse, with defensive stocks gaining both on Wall Street and in Europe.

MSCI’s all-country world index, a gauge of global shares, closed down 0.62% at 719.17. The index scaled a record peak earlier in the week, but lost 0.61% by week’s end.

In Europe, the FTSEurofirst 300 index fell 0.38% to 1,754.64. European defensive shares rose, with real estate, utilities and healthcare up between 0.5% and 1% as worries about the coronavirus mounted.

England’s coronavirus crisis could return again surprisingly quickly, the British government’s chief medical adviser said, before lifting all pandemic-led restrictions on Monday despite rising COVID-19 cases.

In California, Los Angeles county will reimpose a mask mandate this weekend, the latest sign of public health officials struggling with rising cases of the Delta variant.

The slide on Wall Street is surprising given earnings from the companies that have reported second-quarter results so far have surpassed estimates by 22.1%, Credit Suisse said in a note.

Removing year-ago comparisons show earnings are up decently from levels two years earlier and inflation is likely running about 2.6%, once last year’s low baseline is removed, said Jason Pride, chief investment office for private wealth at Glenmede in Philadelphia.

“That should ultimately be acceptable to the (equity) market and permit an ongoing upward grind,” Pride said. “My one hesitation is equity market valuations are high.”

Economically sensitive industrials, energy, financials, consumer discretionary and materials are projected to more than double earnings, while so-called big tech and non-cyclicals are expected to grow 36% and 10%, respectively, Credit Suisse said.

The Dow Jones Industrial Average closed down 0.86%, the S&P 500 slid 0.75%, and the Nasdaq Composite lost 0.80%.

For the week, the Dow lost 0.53%, the S&P 500 fell 0.97% and the Nasdaq shed 1.87%. The S&P 500 real estate index rose to a record high on Friday.

Gold prices dipped as a stronger dollar dulled bullion’s appeal, while bond yields were subdued after Fed Chair Jerome Powell this week pledged “powerful support” to ensure the U.S. economic recovery does not falter.

Mark Haefele, chief investment officer at UBS Global Wealth Management, adviser to many of the world’s super-rich, said he expected rates to move higher as the recovery fully takes hold.

“We believe the downward trend in yields will reverse as confidence in the economic recovery mounts. However, we see a rebound in 10-year yields to 2% by year-end as consistent with a continued rally in equities.”

In Europe, Germany’s 10-year yield fell to a new three-month low in cautious trade ahead of next week’s European Central Bank meeting.

Oil ended the week lower, sapped in volatile trade by expectations of growing supplies just when a rise in coronavirus cases could lead to lockdown restrictions and depress demand.

Brent crude settled down 12 cents at $73.59 a barrel. U.S. crude rose 16 cents to end at $71.81 a barrel.

U.S. gold futures settled 0.8% lower at $1,815 an ounce.

In foreign exchange, major currencies were little changed on the day but the dollar headed for its best weekly gain in about a month. The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.10% to 92.675.

The euro slid 0.02% at $1.1810, while the yen rose 0.17% at $110.0500.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.4%, weighed down by a 1.1% drop in China’s blue-chip index and a 0.8% fall for Taiwanese shares.

The Asian weakness was in large part driven by lackluster earnings from TSMC, Asia’s biggest firm by market capitalization outside China, which saw its shares fall 4.1%.

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

(Reporting by Herbert Lash, additional reporting by Hideyuki Sano, Swati Pandey, Sujata Rao and Dhara Ranasinghe; Editing by Marguerita Choy, David Gregorio and Sonya Hepinstall)

 

USD/JPY Weekly Price Forecast – US Dollar Continues to Hover Around ¥110

The US dollar has gone back and forth during the course of the week against the Japanese yen, as we are hanging about the ¥110 this is an area that obviously would attract a lot of headline attention, and therefore it makes sense that we would see choppy behavior. Furthermore, we also have the questions about the Japanese economy, so therefore it makes sense that the yen has lost a little bit of value. Beyond that, we also have the US dollar strengthening overall, and we are seeing that across-the-board. That being said, keep in mind that this pair does have a significant risk on/risk off component built into it as well.

USD/JPY Video 19.07.21

At this point, I do believe that this pair probably false, as we are forming a bit of a “rising wedge”, which of course is fairly negative, so I think that if we break down below the ¥109 level, it is likely that we are going to continue to reach towards the 250 week EMA indicators, which means roughly ¥108. After that, the bottom falls out and we could go looking towards the ¥105 level. This would be a major “risk off” move, which quite frankly I am seeing some hints of it in the currency markets currently.

As far as going long is concerned, we need to get past the ¥112.50 level to have the “all clear” to go much higher. If that is the case, then I imagine this would be one of those situations where you hang on to the position for months, if not years. That seems highly unlikely at this point though.

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

USD/JPY Price Forecast – US Dollar Continues to Consolidate Against Japanese Yen

The US dollar has rallied a bit against the Japanese yen during the trading session on Friday, breaking above the ¥110 level. This is a continuation of the overall uptrend, but it should be noted that the last couple of large candlesticks have both been negative, which suggests to me that perhaps we are going to continue to see choppy trading going forward. From a longer-term standpoint, this makes quite a bit of sense as we are at the bottom of a bullish channel, but furthermore we also have a significant amount of resistance above at the ¥112 level.

USD/JPY Video 19.07.21

To the downside I think we are more likely than not to see plenty of “buy on the dips” traders down towards the ¥108 level, but that does not necessarily mean we cannot get there. After all, we are essentially pulling back from a major resistance barrier in the past so it makes sense that we could see a little bit of follow-through. At this point, it looks as if the market is trying to decide whether or not there really is follow-through, which of course could send this market much lower.

Currently, the Japanese market looks horrible, especially on the bond side. As long as that continues to be the case, it could make the Japanese yen a bit of a victim against other currencies, but there is also the argument about safety so eventually we will probably see the market rollover again. In the short term, I believe that this is a market that is going to simply bounce around sideways as we are hanging around the flat 50 day EMA as well.

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

July 16th 2021: DXY Comfortable North of 92.00; AUD/USD Observing H1 Supply

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Closing the book on the month of June witnessed EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent.

A bullish revival shines the spotlight on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

July currently trades 0.5 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The US dollar—according to the US dollar index—recovered some lost ground on Thursday, following Fed Chair Powell on Wednesday stating he’s confident recent inflation is associated with post-pandemic growth and will fade.

Technically, EUR/USD structure remains unchanged as the pair continues to work with a reasonably narrow range between $1.1880 and $1.1776. Quasimodo support at $1.1688 calls to the downside, while any upside attempts perhaps reignites interest at the 200-day simple moving average, circling $1.2002 (sheltered beneath supply at $1.2148-1.2092).

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

The relative strength index (RSI) worked its way out of oversold territory in recent sessions and is on the door step of the 50.00 centreline. Crossing north informs traders that average gains exceed average losses, and momentum is to the upside.

H4 timeframe:

Since the beginning of July, price has been carving out a descending channel, drawn from $1.1895 and $1.1781. External areas to be mindful of are Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

H1 timeframe:

A closer reading of price action on the H1 chart reveals that while short-term flow shakes hands with $1.18, Fibonacci structure resides on both sides of the market—commonly referred to as Fibonacci clusters.

Upstream, a 100% Fib projection at $1.1878, a 1.272% Fib expansion at $1.1880 and a 1.618% Fib extension at $1.1886 is visible, just south of demand-turned supply from $1.1895-1.1911.

Downriver, a 1.272% Fib expansion at $1.1745, a 100% Fib projection at $1.1747 and a 1.27% Fib extension at $1.1748 is seen dovetailing with H4 Quasimodo support mentioned above at $1.1749.

As for the relative strength index (RSI), the value stepped below the 50.00 centreline on Thursday, showing average losses exceed average gains for now. Oversold territory could, therefore, be on the cards today.

Observed levels:

According to charts studies, attention is on the H1 timeframe’s Fibonacci structure: between $1.1886 and $1.1878 for resistance and between $1.1745 and $1.1748 for support. The $1.18 figure boasts limited convergence with additional technical tools, aside from the market perhaps viewing this angle as feeble due to the unit trending lower since June.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

June’s 3.0 percent decline lands July in reach of support at $0.7394. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Forging support places trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082 in sight.

July is currently down 1.1 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018).

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Supply-turned demand at $0.7453-0.7384—an area housing key Fib ratios, including a 100% projection at $0.7418 and a 1.272% Fib extension at $0.7424—remains in the picture, despite the lacklustre bullish vibe. What’s interesting is this area houses monthly support underlined above at $0.7394.

Territory above demand shines light on the 200-day simple moving average at $0.7579, a dynamic value sheltered south of resistance from $0.7626.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

From the relative strength index (RSI), the indicator continues to emphasise a position of bullish divergence. What this shows traders is from mid-June, the currency pair reflected less downside momentum.

H4 timeframe:

AUD/USD largely overlooked better-than-expected Aussie employment data early hours Thursday, as the US dollar climbed higher across the board. Also in the spotlight again was Fed Chair Powell backing up his recent comments to continue supporting the economy in spite of higher inflation.

From a technical viewpoint, the currency pair is on the verge of dethroning a 100% Fib projection at $0.7427 and a nearby 1.13% BC Fib extension at $0.7423, movement throwing light on Quasimodo support drawn at $0.7364.

H1 timeframe:

Immediate flow directs attention to the engulf of demand at $0.7416-0.7431. Not only has the move unlocked the $0.74 region as a possible support, neighbouring supply from $0.7450-0.7436—the decision point to venture lower—is on the radar.

The relative strength index (RSI) defending oversold space underpins a potential test of $0.7450-0.7436 today, targeting at least $0.74.

Observed levels:

As highlighted on the H1 chart, a test of supply at $0.7450-0.7436 is in sight, with $0.74 targeted short term.

The big figure $0.74 may also interest traders, having seen the level arranged above monthly support at $0.7394. Traders are urged to pencil in the possibility of a whipsaw through $0.74 to test the monthly barrier, action which could welcome buyers into the market.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle, March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

July trades 1.2 percent in the red.

Daily timeframe:

Leaving the lower belly of trendline support-turned resistance (taken from the low 102.59) unchallenged, the US dollar extended Wednesday’s downside presence on Thursday. Despite the US dollar index outperforming, USD/JPY was weighed by increased selling in US Treasury yields amidst the risk-averse setting.

Brushing aside last Thursday’s low at $109.53 potentially sets the technical stage for further weakness to as far south as ¥107.58-106.85: supply-turned demand.

Trend studies—despite the trendline support breach—reveals the pair has been trending higher since the beginning of the year.

In terms of the relative strength index (RSI), the value rotated south ahead of the lower side of a recently breached ascending channel between 58.82 and 47.51, encouraging moves through the 50.00 centreline. Traders, therefore, will likely be monitoring this indicator for further weakness beneath 50.00, possibly headed for oversold waters.

H4 timeframe:

Trendline support-turned resistance, taken from the low ¥108.56, served sellers well early Wednesday, delivering energetic downside. Thursday’s bearish extension finished within a stone’s throw from familiar Fibonacci support between ¥109.48 and ¥109.70.

Ground south of Fib support has demand at ¥109.02-109.20 in the line of fire.

H1 timeframe:

Late Wednesday tunnelled below ¥110, underpinning a retest scenario on Thursday, which, as you can see, welcomed fresh selling. Sustained pressure to the downside urges traders to take note of two Quasimodo support levels at ¥109.37 and ¥109.61.

North of ¥110, above the 100-period simple moving average around ¥110.21, supply is seen between ¥110.54-110.41 and ¥110.50-110.35.

The relative strength index (RSI) failed to find acceptance above the 50.00 centreline yesterday, with the value retreating to 40.00 by the session’s end. Indicator support set within oversold at 18.76, therefore, is in view.

Observed levels:

H1 Quasimodo support at ¥109.61 could draw bullish curiosity if challenged, a level bolstered by Fibonacci support between ¥109.48 and ¥109.70 on the H4 scale.

Though having recently witnessed both daily and H4 timeframes cut through trendline supports, sellers may still have the upper hand and push towards H1 Quasimodo support at ¥109.37 and H4 demand from ¥109.02-109.20.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, which could serve as support if retested.

July is currently unchanged.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Since the beginning of July, sterling has exhibited a narrow range versus the US dollar between $1.3901 and $1.3740.

Resistance at $1.4003 remains centre stage—a level displaying commitment since March of this year.

Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3686) is in the spotlight.

The relative strength index (RSI) continues to inch higher, yet reluctant to cross swords with the 50.00 centreline. Movement above here—showing average gains exceed average losses and momentum is therefore to the upside—could fuel a test of price resistance underlined above at $1.4003.

H4 timeframe:

The 61.8% Fib retracement at $1.3898 and a 100% Fib projection at $1.3909 continues to deliver resistance on the H4 scale. Space higher up on the curve casts light on supply from $1.3986-1.3958 and a resistance zone at $1.4027-1.3998.

Lower, familiar Quasimodo support is present at $1.3761, a level assisting buyers this month—located just north of another layer of Quasimodo support at $1.3712.

H1 timeframe:

Quasimodo resistance at $1.3910, together with a 100% Fib projection at $1.3909 (H4), a 1.13% Fib extension at $1.3918, and the $1.39 level, has served this timeframe well as a ceiling since 9th July. Area above points to resistance at $1.3935.

Equally interesting is $1.38—joined by a 61.8% Fib level at $1.3804—furnishing the chart with support since mid-July. Technical eyes will note the 100-period simple moving average circling between the two aforesaid areas at $1.3856.

Sub $1.38 unlocks support around $1.3750.

View from the relative strength index (RSI) shows the indicator in the process of forming what appears to be a symmetrical triangle between 76.87 and 24.82.

Observed levels:

Price is hovering nearby $1.38 on the H1 scale. Despite the base holding back sellers in recent days, and aligning with a 61.8% Fib at $1.3804, the level brings little to the table in terms of confluence. With that being said, the unit slicing through $1.38 should not surprise, with follow-through action perhaps taking aim at $1.3750 on the H1, a level partnering with H4 Quasimodo support at $1.3761.

Of course, H1 traders will also likely be keeping a close eye on resistance between $1.3918 and $1.39, given its connection with H4 Fibs at $1.3898 and $1.3909.

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.

Economic Data Puts the EUR and the Greenback in the Spotlight, with the BoJ also in Focus

Earlier in the Day:

It was a quieter start to the day on the economic calendar this morning. The Kiwi Dollar was in focus in the early hours. Later this morning, the Bank of Japan will also be in action, delivering its July monetary policy decision.

For the Kiwi Dollar

Business PMI and inflation figures were in focus.

In June, New Zealand’s Business PMI jumped from 58.6 to 60.7. Economists had forecast a decline to 57.0.

According to the latest survey,

  • The employment index climbed from 52.0 to 56.5, supported by a further pickup in new orders.
  • In June, the new orders sub-index rose from 63.5 to 63.6, while the production sub-index fell from 64.8 to 64.5.
  • Despite slower activity in Wellington, as a result of a partial COVID-19 lockdown, other regions saw strong expansion in the month.
  • In spite of the pickup in activity, the proportion of negative comments (53.1%) remained higher than positive ones (46.8%).
  • Negative comments centered around labor shortages and logistics disruptions that manufacturers are now facing.

On the inflation front, the annual rate of inflation accelerated from 1.5% to 3.3% in the 2nd quarter. Economists had forecast a rate of 2.4%. Quarter-on-quarter, consumer prices increased by 1.3%, following a 0.8% rise in the 1st quarter. Economists had forecast a 0.6% increase.

According to NZ Stats,

  • This was the biggest increase in nearly 10-years, driven by higher prices for housing and petrol.
  • Supply chain disruption pushed the cost of building a new house up 7.4% for the year and up 4.6% for the quarter.
  • Rent prices increased by 2.9% for the year and by 0.9% for the quarter.
  • Petrol prices jumped by 16% year-on-year and by 2.6% for the quarter.
  • Price increases were widespread, with 10 of the 11 main groups in the CPI basket having higher prices on average than a year ago.
  • The sharp increase was attributed to lower prices in the June 2020 quarter, which was as a result of measures put in place during the COVID-19 lockdown.
  • Quarterly inflation at 1.3%, however, was also the highest in over a decade.

The Kiwi Dollar moved from $0.69853 to $0.70304 upon release of the figures before easing back. At the time of writing, the Kiwi Dollar was up by 0.31% to $0.70060.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.02% to ¥109.810 against the U.S Dollar, with the Aussie Dollar up by 0.04% to $0.7426.

The Day Ahead

For the EUR

It’s a busier day ahead on the economic data front. Finalized June inflation figures for Eurozone and Eurozone trade data are due out later this morning.

With little else for the markets to consider, expect the numbers to provide some direction. With the ECB’s shift in policy on price stability, however, the trade figures should garner more interest.

At the time of writing, the EUR was up by 0.01% to $1.1813.

For the Pound

It’s a quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

The lack of stats will leave the Pound in the hands of market risk sentiment and COVID-19 news updates.

At the time of writing, the Pound was down by 0.01% to $1.3828.

Across the Pond

It’s another busy day ahead on the economic calendar. Retail sales and consumer sentiment figures are due out later today.

While the retail sales figures will be key, expect the consumer sentiment figures to also influence later in the day.

Away from the economic calendar, FOMC member chatter will also need monitoring following FED Chair Powell’s testimony in the week.

On Thursday, the Dollar Spot Index rose by 0.23% to end the day at 92.624.

For the Loonie

It’s another quiet day ahead on the economic data front. Wholesale sales figures for May will be in focus alongside foreign securities purchases.

Barring particularly dire numbers, however, the numbers should have a relatively muted impact on the Loonie.

Market risk sentiment will likely be the key driver on the day.

At the time of writing, the Loonie was down by 0.01% to C$1.2596 against the U.S Dollar.

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