Sample Category Title

Forex trading continues to be subdued today, with Dollar gaining slightly in the early US session after better-than-expected jobless claims data. This data is particularly crucial as market participants are closely monitoring employment figures following the triggering of the Sahm Rule, which signals potential rapid employment deterioration leading to a recession. However, so far, there are no signs of such a downturn in materializing.

In the broader currency market, the dynamics remain largely unchanged. Canadian Dollar is leading among commodity currencies, maintaining its position as the strongest performer this week. Conversely, British Pound is the worst performer, followed by Swiss Franc and Japanese Yen. Dollar and Euro are holding their positions in the middle of the pack. Notably, the strength of the commodity currency rebound is relatively weak, as is the pullback in Yen and Franc, indicating that the market is in a consolidation phase, likely awaiting a resurgence of risk-off sentiment.

Technically, while NZD/USD rebounded strongly this week, it struggled to break through falling 55 D EMA (now at 0.6030). Break of 0.5911 minor support would indicate rejection by the EMA and bring retest of 0.5849/51 support zone. Firm break there will resume the whole fall from 0.6368 to 0.5771 low. Nevertheless, firm break of the EMA would bring stronger rebound towards channel resistance (now at 0.6170).

In Europe, at the time of writing, FTSE is down -1.21%. DAX is down -0.67%. CAC is own -1.12%. UK 10-year yield is up 0.0230 at 3.977. Germany 10-year yield is down -0.006 at 2.265. Earlier in Asia, Nikkei fell -0.74%. Hong Kong HSI rose 0.08%. China Shanghai SSE rose 0.00%. Singapore Strait Times rose 0.37%. Japan 10-year JGB yield fell -0.0477 to 0.833.

US initial jobless claims fall to 233k, below exp 245k

US initial jobless claims fell -17k to 233k in the week ending August 3, lower than expectation of 245k. Four-week moving average of initial claims rose 2.5k to 241k.

Continuing claims rose 6k to 1875k in the week ending July 27, highest since November 21, 2021. Four-week moving average of continuing claims rose 7k to 1869k, highest since November 27, 2021 too.

One BoJ member suggests gradual rate hike to above 1% neutral rate

BoJ's Summary of Opinions from the July 30-31 meeting reveals that board members discussed further rate hikes after implementing the second interest rate increase this year at the meeting.

One member's opinion stood out, suggesting that, assuming the price stability target is achieved in the second half of fiscal 2025, BoJ should raise the policy interest rate to the level of the "neutral interest rate." This neutral rate is estimated to be "at least around 1 percent." To avoid rapid hikes, BoJ should increase the policy interest rate in a "timely and gradual manner."

The consensus among members is that economic activity and prices have been developing generally "in line with the Bank's outlook." Consequently, it is deemed appropriate for to raise the policy interest rate and adjust the degree of monetary accommodation.

One opinion highlighted that raising interest rates at a "moderate pace" aligns the adjustment in monetary accommodation with underlying inflation. Such moves "will not have monetary tightening effects."

RBA's Bullock: Rate hikes still possible as inflation timeline extends

RBA Governor Michele Bullock revealed in a speech today that the board "explicitly considered" another rate hike during Tuesday's meeting. Although they decided to hold rates steady, Bullock stressed that RBA "will not hesitate" to hike if necessary.

Bullock highlighted two main points from the meeting. First, despite weak economic growth, the gap between aggregate demand and supply is "larger than previously thought," leading to "persistent inflation." Second, demand growth is expected to "pick up over the next year," though there is significant uncertainty about this outlook.

Due to these factors, the Board's inflation target timeline has been "pushed out". "We don't expect to be back in the 2–3 percent target range until the end of 2025 – over a year away," Bullock stated. This delay prompted the board to consider another rate hike to ensure inflation continues to decline.

Ultimately, RBA decided to keep interest rates unchanged, believing this would balance their inflation and employment objectives. However, Bullock emphasized that the Board remains vigilant regarding upside inflation risks and "will not hesitate to raise rates if it needs to."

RBNZ inflation expectations drop across all horizons

RBNZ latest Survey of Expectations showed a notable decline in inflation expectations across all time horizons. One-year-ahead annual inflation expectations fell by 33 basis points, dropping from 2.73% to 2.40%. This marks the sixth consecutive quarterly decline since June 2023.

The two-year-ahead inflation expectations, a closely monitored indicator, also saw a decrease from 2.33% to 2.03%. These expectations are now below the average level observed since 2002, indicating a substantial shift in business outlook regarding future inflation.

Long-term expectations followed a similar trend. Five-year-ahead inflation expectations decreased to 2.07%, while ten-year-ahead expectations dropped to 2.03%.

Survey respondents also provided their outlook on the OCR. On average, they expect OCR to be 5.40% by the end of the September 2024 quarter, with a projected decrease to 4.24% by the end of June 2025. The current OCR stands at 5.50%.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0907; (P) 1.0922; (R1) 1.0938; More.....

EUR/USD dips mildly in early US session as consolidation from 1.1007 extends. Intraday bias remains neutral first. While deeper retreat cannot be ruled out, downside should be contained well above 1.0776 support. On the upside, above 1.0944 minor resistance will bring retest of 1.1007 first. Further break there will resume recent rally from 1.0665 to 100% projection of 1.0665 to 1.0947 from 1.0776 at 1.1056 next.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's still be in progress. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). However, break of 1.0776 support will extend the correction with another falling leg back towards 1.0447 support.

Economic Indicators Update

US initial jobless claims fell -17k to 233k in the week ending August 3, lower than expectation of 245k. Four-week moving average of initial claims rose 2.5k to 241k.

Continuing claims rose 6k to 1875k in the week ending July 27, highest since November 21, 2021. Four-week moving average of continuing claims rose 7k to 1869k, highest since November 27, 2021 too.

Full US jobless claims release here.

• The Bank of Japan (BoJ) released their summary of opinions, accompanied by bearish comments from BoJ policymakers.
• Geopolitical concerns could bolster the Yen, but the safe haven appeal might be divided among the US Dollar, Yen, and Swiss Franc.
• From a technical perspective, USD/JPY, GBP/JPY, and EUR/JPY have all rebounded strongly and formed an imperfect morning star candlestick pattern, which typically signals a bullish move.

The Bank of Japan (BoJ) has released their summary of opinions, accompanied by some bearish comments from BoJ policymakers. BoJ Deputy Governor Shinichi Uchida softened some of Governor Ueda’s more aggressive remarks, aiding in market stabilization.

The BoJ noted that the probability of reaching the inflation target has risen, but the Central Bank also anticipates some upward pressure. The BoJ projects that inflation will hit the target by the second half of 2025. This scenario presents an intriguing question for market participants and could position the Yen strongly next year.

While central banks worldwide are cutting rates, the BoJ plans to tighten and raise rates. This could propel the Yen to the forefront of gains in 2025. Although there is a considerable journey ahead, it is something to keep in mind.

In the short term, Yen pairs remain interesting yet face downside pressure. Geopolitical concerns could bolster the Yen. However, the safe haven appeal might be divided among the US Dollar, Yen, and Swiss Franc, potentially negating Yen gains against the Dollar but benefiting it against the Euro and GBP.

Technical Analysis

USD/JPY

From a technical perspective, USD/JPY has rebounded strongly and formed an imperfect morning star candlestick pattern. Typically, such a pattern signals a bullish move, but various factors need to be considered.

From a price action viewpoint, the H4 chart has shown higher highs and higher lows since bottoming out at 141.67 on Monday, suggesting a potential return to the 150.00 level in the coming days.

What could invalidate the bullish move? An H4 candle closing below the recent lower swing high around 144.25 would invalidate the bullish outlook. This would break the current structure and could drive the Yen to retest the psychological 140.00 level.

A move higher from here faces immediate resistance at 148.00 before the 150.00 psychological level comes into focus.

USD/JPY Daily Chart, August 8, 2024

Source: TradingView (click to enlarge)

Support

• 145.00
• 144.00
• 141.65

Resistance

• 148.00
• 150.00 (psychological level)
• 150.87

GBP/JPY

GBP/JPY is mirroring the USD/JPY chart, currently trading just above the important support level at 185.00. The H4 chart shows a similar pattern to USD/JPY, with higher highs and higher lows since Monday’s dip just below the 180.00 mark.

Bulls are in control for the moment, but a break and H4 candle close below 183.30 would invalidate the bullish structure. This could lead to a retest of recent lows and possibly a move towards the 175.00 level.

On the upside, resistance is found at 187.65, followed by the 190.00 mark. Beyond 190.00, there’s a resistance zone around 192.00 before the descending trendline becomes relevant.

GBP/JPY Four-Hour (H4) Chart, August 8, 2024

Source: TradingView (click to enlarge)

Support

• 185.00
• 183.30
• 180.00

Resistance

• 187.65
• 190.00
• 192.00

EUR/JPY

Once again, the chart nearly mirrors USD/JPY and GBP/JPY, with the daily chart displaying an imperfect morning star candlestick pattern. This morning, EUR/JPY retested the support area around the 159.00 level before bouncing back to trade at 159.66 at the time of writing.

On the H4 timeframe, a candle close below the recent lower swing high at 157.50 would invalidate the current bullish trend, potentially leading to a retest of the recent lows around the 154.40 level. There is some support at 156.72 that would need to be breached for a retest of the recent lows to occur.

On the upside, immediate resistance lies at 160.00, followed by the 161.86 level. Beyond this, the 163.51 zone could be crucial, as it also aligns with the 200-day moving average just above.

EUR/JPY Daily Chart, August 8, 2024

Source: TradingView (click to enlarge)

Support

• 159.00
• 156.72
• 154.40

Resistance

• 160.00
• 161.85
• 163.50

The dollar index ticked lower in European trading on Thursday, after bounce from 8-month low (101.94, posted on Monday) started to lose traction.

Weak picture on daily chart (MA’s in bearish configuration / strong negative momentum) warn of limited recovery before bears regain control.

The dollar was hit by the recent strong rally of yen, which was the one of key factors of the latest drop, with outlook for the Fed action on interest rates, turning more dovish and expected to add pressure on the US currency.

The latest economic data signaled that the US economy is slowing and recession threats, narrowed space for the central bank’s action and resulted in sharp rise in bets for 50 basis cut in September (against initial expectations for 25 basis points rate cut) and even spreading rumors that the Fed would opt for emergency rate cut before the September meeting.

Partial stabilization of the situation in the markets eased tensions for now, but outlook remains darkened by all these factors.

Markets await release of US July inflation report (due next week) and the speech of Fed Chair Powell at the Jackson Hole symposium (due Aug 22/24) for more information.

Immediate support lays at 102.55, loss of which would further weaken near term structure, while lift above upper pivot at 13.24 would sideline downside risk.

Res: 103.24; 103.55; 103.64; 103.93.
Sup: 102.70; 102.55; 101.94; 101.75.

Gold (XAU/USD) prices have rebounded to 2394 USD per troy ounce, paring previous losses as the likelihood of a US Federal Reserve rate cut increases. Market sentiment is increasingly cautious amid recession fears, influencing stock market dynamics and bolstering the appeal of non-yielding assets like gold.

Current market indicators, notably the CME FedWatch tool, suggest an almost certain probability of a rate reduction by the Federal Reserve in September. Such monetary easing typically enhances the allure of gold, which does not offer interest income.

Investor focus is now on upcoming US unemployment claims data, which will provide further insight into employment market conditions. Recent statistics from China revealed that the People’s Bank of China did not purchase gold bullion in July, marking the third consecutive month without an increase in gold reserves. This suggests a shift towards domestic economic stimulation as the Chinese economy faces challenges.

Ongoing tensions in the Middle East also underscore gold’s status as a safe-haven asset.

Technical analysis of XAU/USD

The H4 chart shows a declining trend towards the 2345.00 level, with a local target recently reached at 2364.23, followed by a correction to 2411.00. The market is anticipated to continue this downward trajectory towards 2355.80 before potentially rebounding to 2381.60. A further decline to 2345.00 is likely, aligning with the primary downtrend target. This bearish outlook is supported by the MACD indicator, which shows the signal line trending downwards from above zero.

On the H1 chart, gold is currently consolidating above 2381.60. A downward breakout towards 2355.80 is expected, which would serve as a local target. Subsequent retesting of 2381.60 from below may occur before the downward movement continues to 2345.00. This bearish scenario is corroborated by the Stochastic oscillator, with the signal line poised to drop from above 80, suggesting a potential decline.

As investors and traders navigate these dynamics, gold’s status as a hedge against uncertainty remains a key theme in its valuation.

EUR/USD edged higher in Asia / early Europe on Thursday, hinting that pullback from Monday’s spike high (1.1009) might be over.

Signals of formation of a higher base at 1.0900 zone add to positive near-term outlook, as technical studies on daily chart are predominantly bullish, though sustained break above 1.0950/60 zone needed to confirm.

On the other hand, hourly studies are weakening, and recovery attempts may face headwinds on approach to 1.0950 pivot (hourly cloud top / 50% retracement of 1.1009/1.0892 pullback).

This would keep the downside vulnerable, especially on loss of 1.0925 pivot (hourly cloud base / hourly Kijun-sen), which would risk retest of 1.0900 and open way for deeper pullback on break.

Look for clearer direction signal.

Res: 1.0950; 1.0965; 1.0981; 1.1000.
Sup: 1.0925; 1.0890; 1.0875; 1.0850.

Daily Pivots: (S1) 1.0907; (P) 1.0922; (R1) 1.0938; More.....

EUR/USD is extending the consolidation from 1.1007 and intraday bias remains neutral. While deeper retreat cannot be ruled out, downside should be contained well above 1.0776 support. On the upside, break of 1.1007 will resume recent rally from 1.0665 to 100% projection of 1.0665 to 1.0947 from 1.0776 at 1.1056 next.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's still be in progress. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). However, break of 1.0776 support will extend the correction with another falling leg back towards 1.0447 support.

Daily Pivots: (S1) 1.2669; (P) 1.2703; (R1) 1.2726; More...

Intraday bias in GBP/USD stays on the downside despite some loss of momentum. Fall from 1.3043 should continue to 1.2612 support. Decisive break there should confirm that rise from 1.2298 has completed, and target this support next. However, break of 1.2839 resistance will argue that the pull back from 1.3043 has completed and turn bias back to the upside.

In the bigger picture, current development suggests that corrective pattern from 1.3141 is extending with fall from 1.3043 as another leg. Break of 1.2612 support would strengthen this case. But still, downside should be contained by 1.2036/2298 support zone even in case of deep decline. Rise from 1.0351 (2022 low) remains in favor to resume at a later stage.

Daily Pivots: (S1) 0.8530; (P) 0.8596; (R1) 0.8683; More…

Intraday bias in USD/CHF remains neutral and further decline is expected with 0.8711 resistance intact. On the downside, below 0.8500 will bring retest of 0.8431 first. Break there will resume the decline from 0.9223 to retest 0.8332 low.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 144.69; (P) 146.30; (R1) 148.31; More...

Intraday bias in USD/JPY remains neutral an further decline is expected with 150.88 resistance intact. On the downside, below 144.04 minor support will bring retest of 141.67 first. Break there will resume the fall from 161.94 to 140.25 support next.

In the bigger picture, the strong break of 55 W EMA (now at 149.98) argue that fall from 161.94 medium term is correcting whole up trend from 102.58 (2021 low). Deeper decline could be seen to 38.2% retracement of 102.58 to 161.94 at 139.26, which is close to 140.25 support. In any case, risk will stay on the downside as long as 55 W EMA (now at 149.83) holds. Nevertheless, firm break of 55 W EMA will suggest that the range for medium term corrective pattern is already set.