Sample Category Title

• USDJPY broke resistance level 144.85
• Likely to rise to resistance level 148.00

USDJPY currency pair recently broke the resistance level 144.85 (previous multi-month high from July, which stopped the previous wave C).

The breakout of the resistance level 144.85 accelerated the C-wave of the active ABC correction (2) from the start of July.

Given the clear daily uptrend, USDJPY can be expected to rise further toward the next resistance level 148.00 (target price for the completion of the active impulse wave C).

• • Japanese yen dips below 145 line
  • Japan’s GDP expected to expand by 3.2%

• US retail sales projected to rise by 0.4%

The Japanese yen continues to slide. USD/JPY touched the symbolic 145 line on Friday and has moved higher on Monday. In the North American session, USD/JPY is trading at 145.37, up 0.27%.

The yen had its worst week of the year, falling 2.26%, and dropped on Monday as low as 145.58, its lowest level since November 2022. Investors haven’t forgotten the currency interventions late in 2022 that shocked the markets and sent the yen higher, albeit only briefly. At the time, the yen had fallen below 150, which proved to be a line in the sand for the Ministry of Finance (MOF).

The yen may not be currently at 150, but there’s no doubt that the yen’s sharp deterioration in just a few weeks is making policy makers nervous – just one month ago, USD/JPY was trading around 138. The MOF and the Bank of Japan have said in the past that they are most concerned with sharp swings in the exchange rate and not so much with a particular value for the yen. If the sharp deterioration in the yen continues, we could see another dramatic currency intervention by the MOF.

Japan starts off the week with Preliminary GDP for Q2 on Tuesday. The economy is expected to have expanded by 3.2% y/y, up from 2.7% in the first quarter. There has been some improvement in domestic demand and if that trend continues, there will be more pressure on the Bank of  Japan to shift away from its ultra-loose monetary policy.

The US economy remains in solid shape despite the Fed’s aggressive rate-hike cycle. Retail sales for July will be released on Tuesday. Headline retail sales and the core rate are both expected to accelerate to 0.4% m/m in July, up from 0.2% in June. This would signal resilient consumer spending as inflation continues to fall.

USD/JPY Technical

• There is resistance at 146.13 and 147.31
• 145.17 is providing support, followed closely by 144.79

This Monday, 14 August, the major currency pair is hovering near 1.0940.

The market is focused on the future actions of the Federal Reserve System. Last weekend, major US investment houses made their forecasts on the prospects of the interest rate. The Federal Reserve is expected to start bringing the rate down by June 2024, making quarterly decreases from then on. It means that inflation is forecast to reach the target mark of 2% by that moment.

It is a curious position that coincides with the actual state of affairs.

This week, the Fed will publish the minutes of its latest meeting. In them, as usual, market participants will be looking for hints and indications of the reasons and facts on which the regulator will base its September interest rate decisions.

Technical analysis of EUR/USD currency pair:

On the H4 chart, EURUSD performed a corrective wave to the 1.1064 level, where a new decline started. Today, the market reached 1.0940. At the moment, a consolidation range is forming around this mark. The price is expected to break downwards, heading for 1.0880, after which it might rise to 1.0940 (testing this level from below). Next, a decline to 1.0820 could follow. It is the first target. Technically, the MACD, whose signal line is below zero, could confirm such a scenario. The indicator is expected to go on declining to new lows.

On the H1 chart, EURUSD is forming a consolidation range around 1.0940. Escaping it upwards, the price could start a correction link to 1.0966 and drop to 1.0880 later. It is a local target. Technically, this scenario is confirmed by the Stochastic oscillator, whose signal line has broken the 20 mark upwards and continues growing to 50. The line is expected to rebound from this mark and fall to 20.

Daily Pivots: (S1) 1.2660; (P) 1.2700; (R1) 1.2733; More...

Immediate focus is now on 1.2618 support in GBP/USD with today's fall. Firm break of 1.2618, and sustained trading below 1.2678 resistance turned support will argue that it's already in a larger correction. Deeper decline would then be seen to 1.2306 support next. Nevertheless, break of 1.2817 minor resistance will indicate that the pull back has completed, and turn bias back to the upside for stronger rebound.

In the bigger picture, a medium term top could be in place at 1.3141 already, on bearish divergence condition in D MACD. Sustained trading below 55 D EMA (now at 1.2725) should confirm this case, and bring deeper fall to 38.2% retracement of 1.0351 to 1.3141 at 1.2075, as a correction to up trend from 1.0351 (2022 low). For now, rise will stay mildly on the downside as long as 1.3141 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 0.8740; (P) 0.8760; (R1) 0.8785; More....

USD/CHF's rebound from 0.8851 resume today and intraday bias is back on the upside. Sustained trading above 0.8818 support turned resistance will carry larger bullish implication. Further rally should then be seen to 0.9146 cluster resistance next. For now, outlook will stay cautiously bullish as long as 0.8688 support holds, in case of retreat.

In the bigger picture, A medium term bottom could be in place at 0.8551 already, on bullish convergence condition in D MACD. Sustained trading above 0.8818 will bring further rise to 0.9146 cluster resistance (38.2% retracement of 1.0146 to 0.8551 at 0.9160), even as a correction. Nevertheless, break of 0.8851 will resume the down trend from 1.0146 instead.

Daily Pivots: (S1) 144.59; (P) 144.79; (R1) 145.17; More...

Intraday bias in USD/JPY remains on the upside as rise from 127.20 is extending. Next target is 61.8% projection of 129.62 to 145.06 from 137.22 at 146.76. On the downside, below 144.40 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, overall price actions from 151.93 (2022 high) are views as a corrective pattern. Rise from 127.20 is seen as the second leg of the pattern and could still be in progress. But even in case of extended rise, strong resistance should be seen from 151.93 to limit upside. Meanwhile, break of 137.22 support should confirm the start of the third leg to 127.20 (2023 low) and below.

Daily Pivots: (S1) 1.0926; (P) 1.0965; (R1) 1.0988; More...

Break of 1.0911 support indicates resumptions of fall from 1.1274. Intraday bias in EUR/USD is back on the downside for 1.0832 support. Sustained trading below there will target 1.0609/34 cluster support. On the upside, break of 1.1064 resistance is needed to indicate completion of the fall. Otherwise, outlook will stay cautiously bearish in case of recovery.

In the bigger picture, a medium term top could be formed at 1.1274, after failing to break through 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 decisively, on bearish divergence condition in D MACD. Sustained trading below 55 D EMA (now at 1.0966) will bring deeper correction to 1.0634 cluster support (38.2% retracement of 0.9534 to 1.1274 at 1.0609). Strong support could be seen there, at least on first attempt, to set the range for consolidation.

Dollar surges broadly today, breaking through near term support against Euro, 145 handle against Yen, as well as near high of the year against Chinese Yuan. Worries over China's property, as well as finance sector are weighing heavily down on sentiment. But Swiss Franc and Yen are not benefiting much from risk aversion as in early US session. Indeed, European majors are trading as the worst performers for now, while commodity currencies are trying to recover. That's a development that warrants more monitoring.

Technically, both EUR/USD has taken out 1.0911 support while USD/CHF broke 0.8804 resistance. Both developments indicate resumption of Dollar's rebound. A focus is now on when GBP/USD would follow by breaking through 1.2618 support to resume the fall from 1.3141. The imminent question though revolves around tomorrow's UK job data – could this potentially breathe life into the Pound, triggering a rebound?

In Europe, at the time of writing, FTSE is down -0.42%. DAX is up 0.30%. CAC is down -0.04%. Germany 10-year yield is up 0.0034 at 2.629. Earlier in Asia, Nikkei dropped -1.27%. Hong Kong HSI dropped -1.58%. China Shanghai SSE dropped -0.34%. Singapore Strait Times dropped -1.41%. Japan 10-year JGB yield rose 0.0296 to 0.619.

Chinese Yuan nosedives to year low amid deepening property sector concerns

The Chinese Yuan nosedived to its lowest mark this year, echoing growing anxieties that spread from the real estate domain to the financial sector. Fueling this downturn, JPMorgan Chase & Co. rang alarm bells today, highlighting heightened liquidity strains for debt-ridden developers and their non-bank stakeholders. This follows a notable hiccup by a subsidiary of Zhongzhi Enterprise Group Co., which stands among China's premier private wealth management entities. The said unit stumbled in ensuring timely payments across multiple products.

These defaults in the trust sector could potentially trigger a detrimental cycle impacting the onshore debt of privately-owned enterprise developers. The escalating apprehensions regarding potential developer defaults have soured the investment climate. Consequently, trust entities may either find it challenging or may express reluctance in rolling over existing products tied to real estate.

USD/CNH's break of 7.2853 resistance confirms resumption of whole rally from 6.6971 (Jan low). Purely technically speaking, current rise should target 7.3745 resistance first (2022 high), and then 61.8% projection of 6.8100 to 7.2853 from 7.1154 at 7.4091. However, market watchers are most intrigued by a looming question: When will China's authoritative bodies intervene to arrest the Yuan's descent?

Japan in Spotlight: Q2 GDP, Nikkei, and Yen dynamics garner attention

Investor attention is set to pivot towards Japan's Q2 GDP data in the upcoming Asian session. Preliminary forecasts project a qoq growth of 0.8%, translating to an annualized expansion of 3.1%. In today's trading, Nikkei took a significant hit, sliding by -1.27% or -413.7 points, largely influenced by bearish sentiments rooted in China's property sector. Meanwhile, Yen showed signs of wavering post an initial surge, setting the stage for a keen watch on its reaction, as well as Nikkei's, to the impending GDP figures.

After some initial volatility following BoJ's adjustment on YCC on July 28, Nikkei has weakened notably. Technically, it's now pressing 55 D MEA and looks vulnerable to deeper decline. Nevertheless, Overall price actions from 33772.89 are just viewed as a corrective move to the long term up trend only, as also supported by the structure. Hence, even in case of a deeper pull back, strong support should be seen from 38.2% retracement of 25661.89 to 33772.89 to contain downside. Meanwhile, strong rebound from current level, would bring retest of 33772.89 high.

Meanwhile, Yen continued to weaken after brief post-BoJ spike, with USD/JPY breaking through 145 handle today. Market chatter suggests a potential pushback by Ministry of Finance in the 145-148 range, though tangible signs of intervention remain absent. Yet it's a wait-and-watch game to discern if Japan would act beyond the 145 mark. Nevertheless, technically, 61.8% projection of 129.62 to 145.06 from 137.22 at 146.76 doe present a resistance to overcome.

NZ BNZ services plunges down to 47.8, deepening contraction as activity dives

New Zealand's service sector, as gauged by the BusinessNZ Performance of Services Index, experienced a marked decline in July, descending from 49.6 to a worrying 47.8. This latest reading is not only the lowest since January 2022 but also trails the long-term average of 53.5 significantly.

A detailed analysis of the index highlights concerning trends. The activity component has sharply dropped from 50.9 to 39.6, marking its worst performance since August 2021 and setting a gloomy record. Specifically, this month's reading stands as the worst non-lockdown related reading on record since 2007. New orders within businesses have taken a substantial hit, plummeting from 50.4 to 43.8.

Meanwhile, employment showed a marginal decrease, moving from 49.1 to 49.0. On a brighter note, stocks or inventories observed an increase, jumping from 47.2 to 54.0, with supplier deliveries also ticking up from 51.0 to 52.1.

BusinessNZ's Chief Executive, Kirk Hope, said. "The further fall into contraction during July also saw another lift in the proportion of negative comments," he remarked, drawing attention to the sharp increase in negative feedback, which escalated to 67% from 55.6% in June and 49.4% in May.

Hope continued, "Overall, negative comments received were strongly dominated by a general downturn in the economic conditions/slowing economy, as well as ongoing increased costs."

BNZ Senior Economist, Doug Steel, weighed in on the data, highlighting a distressing pattern. "The results all point to a sharp drop in demand in July, significantly accelerating the slowing trend that had been evident for many months," he said.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0926; (P) 1.0965; (R1) 1.0988; More...

Break of 1.0911 support indicates resumptions of fall from 1.1274. Intraday bias in EUR/USD is back on the downside for 1.0832 support. Sustained trading below there will target 1.0609/34 cluster support. On the upside, break of 1.1064 resistance is needed to indicate completion of the fall. Otherwise, outlook will stay cautiously bearish in case of recovery.

In the bigger picture, a medium term top could be formed at 1.1274, after failing to break through 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 decisively, on bearish divergence condition in D MACD. Sustained trading below 55 D EMA (now at 1.0966) will bring deeper correction to 1.0634 cluster support (38.2% retracement of 0.9534 to 1.1274 at 1.0609). Strong support could be seen there, at least on first attempt, to set the range for consolidation.

Economic Indicators Update

The Chinese Yuan nosedived to its lowest mark this year, echoing growing anxieties that spread from the real estate domain to the financial sector. Fueling this downturn, JPMorgan Chase & Co. rang alarm bells today, highlighting heightened liquidity strains for debt-ridden developers and their non-bank stakeholders. This follows a notable hiccup by a subsidiary of Zhongzhi Enterprise Group Co., which stands among China's premier private wealth management entities. The said unit stumbled in ensuring timely payments across multiple products.

These defaults in the trust sector could potentially trigger a detrimental cycle impacting the onshore debt of privately-owned enterprise developers. The escalating apprehensions regarding potential developer defaults have soured the investment climate. Consequently, trust entities may either find it challenging or may express reluctance in rolling over existing products tied to real estate.

USD/CNH's break of 7.2853 resistance confirms resumption of whole rally from 6.6971 (Jan low). Purely technically speaking, current rise should target 7.3745 resistance first (2022 high), and then 61.8% projection of 6.8100 to 7.2853 from 7.1154 at 7.4091. However, market watchers are most intrigued by a looming question: When will China's authoritative bodies intervene to arrest the Yuan's descent?