KVB Market Analysis | 21 August: USD/JPY Stalls Near 145.50 Amid Diverging Economic Indicators

Product: EUR/USD

Prediction: Increase

Fundamental Analysis: 

The Euro climbed higher against the US Dollar for the third day in a row, hitting a new high for the year at 1.1120. This rise was fueled by a weakening US Dollar, as investors anticipate the Federal Reserve to start lowering interest rates in September. The Fed's potential rate cuts, combined with the European Central Bank's expected interest rate increases, could give the Euro an additional boost. However, the US economy is projected to perform better than Europe in the long term, which might limit the Euro's gains. Important events to watch this week include the release of the FOMC Minutes, flash PMIs, a speech by Fed Chair Jerome Powell at Jackson Hole, and testimony by the Bank of Japan's Governor Kazuo Ueda.

Technical Analysis: 

EUR is expected to continue its upward trend against USD, potentially breakinging its 2024 high of 1.1119, followed by the December 2023 high of 1.1139, and then the 2023 peak of 1.1275. However, if the pair falls below the crucial 200-day moving average at 1.0843, the upward trend could be disrupted. The immediate support level is at 1.0978 (55-SMA), followed by 1.0949 and 1.0881. The technical indicators suggest a strong positive bias, with the Relative Strength Index above 80.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis: 

Gold prices are holding steady near a record high, supported by a weakening US Dollar and expectations of a US interest rate cut in September. Investors are looking ahead to the release of the Federal Open Market Committee minutes, which could provide further clues about the Fed's thinking on interest rates. However, market participants are already expecting a rate cut in September, so the minutes are unlikely to have a significant impact on the US Dollar or gold prices.

Technical Analysis: 

Gold prices are still on an upward trend, despite a recent dip from record highs. The price is above all its moving averages, which are still sloping upwards. The 20-day Simple Moving Average is currently at $2,492.70, while the 100-day SMA is at $2,439.60. Technical indicators suggest that the recent dip is likely a correction and that the price is likely to continue moving higher. The Relative Strength Index is currently at 65, indicating that the price is still in a strong upward trend.

Product: GBP/USD

Prediction: Increase

Fundamental Analysis: 

The British Pound rose against the US Dollar for a third consecutive day, reaching a 13-month high. This was driven by a weakening US Dollar, which was influenced by positive economic data released in the US. However, risk appetite in the markets returned, causing the US Dollar to weaken and the GBP/USD to rise. The pair is expected to be influenced by risk sentiment in the second half of the day, with US stock market performance playing a key role.

Technical Analysis: 

The British Pound is expected to face resistance levels at 1.3040 and 1.3060 against the US Dollar. These levels represent Fibonacci retracement levels of the recent downtrend. On the downside, support levels are located at 1.2850-1.2840, 1.2800, and 1.2760. These levels are also based on Fibonacci retracement levels and moving averages.

Product: USD/JPY

Prediction: Decrease

Fundamental Analysis: 

USD/JPY is defending bids near 145.50 in Asian trading on Wednesday, sustaining the bounce from two-week lows of 144.95. The Japanese Yen against the US Dollar since last Thursday, driven by stronger-than-expected Japanese GDP growth. This raised expectations of a potential interest rate hike by the Bank of Japan (BoJ). However, the USD/JPY pair received support from a stronger US Dollar, boosted by higher Treasury yields. The potential for further gains in the US Dollar may be limited by expectations of a rate cut by the US Federal Reserve (Fed) in September. The Fed's decision on the size of the rate cut remains uncertain, with a 25 basis point cut being the most likely outcome, but a 50 basis point cut is still possible.

Technical Analysis: 

The US Dollar is trading near 145.50 against the Japanese Yen. Technical indicators suggest a short-term bearish trend, with the price below the 9-day EMA and the RSI slightly above 30, indicating potential for a correction. Support levels are at 141.69 (seven-month low) and 140.25. Resistance levels are at 147.53 (9-day EMA), 153.40 (50-day EMA), and 154.50. This suggests that the USD/JPY pair could move lower in the short term, but there is potential for upside movement if it breaks through the resistance levels.

Market Analysis Disclaimer: 

The market analysis provided by KVB Prime Limited is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any financial instrument. Trading forex and other financial markets involves significant risk, and past performance is not indicative of future results. 

KVB Prime Limited does not guarantee the accuracy, completeness, or timeliness of the information provided in the market analysis. The content is subject to change without notice and may not always reflect the most current market developments or conditions.

Clients and readers are solely responsible for their own investment decisions and should seek independent financial advice from qualified professionals before making any trading or investment decisions. KVB Prime Limited shall not be liable for any losses, damages, or other liabilities arising from the use of or reliance on the market analysis provided.

By accessing or using the market analysis provided by KVB Prime Limited, clients and readers acknowledge and agree to the terms of this disclaimer.

RISK WARNING IN TRADING

Transactions via margin involve products that use leverage mechanisms, carry high risks, and are certainly not suitable for all investors. THERE IS NO GUARANTEE OF PROFIT on your investment, so be wary of those who guarantee profits in trading. You are advised not to use funds if you are not prepared to incur losses. Before deciding to trade, ensure that you understand the risks involved and also consider your experience.