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The struggling Japanese yen is in negative territory for a fourth straight day. In the European session, USD/JPY is trading at 136.71, up 0.61%.

Japanese Core CPI hits 14-year high

Japan’s core inflation continued to accelerate, with a gain of 2.4% YoY in July. This matched the forecast and was higher than the 2.2% reading in June. The reading is significant as it is the highest inflation level since 2008 and is the fourth straight month where inflation has exceeded the Bank of Japan’s target of 2%.

For years, Japan grappled with deflation, which resulted in fiscal and monetary policy with an accommodative stance. The world has changed dramatically since the Russian invasion of Ukraine, however, which has set off a massive rise in inflation. Japan’s inflation rate is nowhere near those in the US or the UK, but nevertheless, higher inflation has forced the BoJ to explain why it is not tightening policy. Governor Kuroda has repeatedly stated that the BoJ’s number one priority is to stimulate weak growth, and he has vigorously defended a cap on JGB yields. Kuroda has argued that inflation is not being driven by strong domestic demand, but rather by higher import prices due to the surge in wheat and oil prices. Until wage growth strengthens, which would point to broad-based inflation, we can expect “business as usual’ from the BoJ.

The price for the BoJ’s ultra-accommodative stance has been the sharp depreciation of the yen, which hit 140 in July, its lowest level since 1998. If inflation’s upward trend continues and CPI hits 3%, the BoJ may have to reconsider whether to make changes to policy.

USD/JPY Technical

• There is resistance at 1.3744 and 139.30
• 135.46 has switched to support, followed by 1.3350

GBPJPY faced another rejection from the 20-day simple moving average (SMA) at 162.66 on Thursday, which has been capping bullish corrections since the start of the month, but the pullback was only mild, with the price immediately pausing around 161.95.

The momentum indicators remain cautious as the RSI keeps oscillating sideways marginally below its 50 neutral mark and the MACD has yet to distance itself above its red signal line. Having said that, as long as the safety net of 160.35 – 159.86 formed by two support lines and the 50% Fibonacci retracement of the 150.96 – 168.70 upleg holds, hopes for a new bull run are reasonable.

Should the pair close above the 20-day SMA, some consolidation could initially take place near the 50-day SMA at 163.65 before the door opens for the resistance line at 165.00. A sustainable move higher from here could then test the 166.31 barrier ahead of the 167.80 – 168.70 ceiling.

In the bearish scenario, where the price depreciates below 159.86, the 200-day SMA may first attract attention at 158.80. If the latter proves fragile, the decline may continue towards the key 61.8% Fibonacci of 156.64, a break of which could next take a breather somewhere between May’s low of 155.58 and the 78.6% Fibonacci of 154.80.

All in all, GBPJPY looks indecisive within the 162.66 – 161.95 territory at the moment. Any violation at the boundaries could navigate the market accordingly, though only a downfall below 159.86 or a rally above 165.00 would question the negative trend in the short-term picture.

USDCAD is heading north above the short-term simple moving averages (SMAs) after a bounce off the 200-day SMA, which holds near the 1.2730 support level. According to the technical indicators, the MACD is gaining ground above its trigger and zero lines, while the RSI successfully surpassed above the neutral threshold of 50.

Should the price close comfortably above the 1.2985 resistance, which has been unbreakable over the past month, traders could add more value to the pair, pushing the market up to 1.3175. More advances could lead the way for a retest of the 20-month peak of 1.3225.

In the negative scenario where the 40- and the 20-day SMA halts upside movements, the market could retest to the bottom of 1.2730. If this proves easy to overcome this time, the decline may next pause somewhere near the uptrend line at 1.2650, while even lower, investors could shift attention to the 1.2517 level.

In brief, USDCAD is in a bullish mode in the very short-term and any moves beyond 1.2985 could confirm the current positive bias.

The Nasdaq 100 consolidates as the Fed stays committed to raising rates to rein in inflation. The market mood further improved after a close above last May’s high at 13500. However, the RSI has edged again into the overbought zone on the daily chart and suggests that the bull run could use some breathing room. The index is consolidating its gains above 13280 which coincides with the 20-day moving average. Buying interest could be expected in this congestion area. A rally above 13700 could lift offers towards 14200.

The Japanese yen softened as July’s core CPI was in line with expectations. A break above this month’s high at 135.50 indicates renewed interest in the US dollar. As the uptrend remains intact in the medium-term, the bulls may look for opportunities to accumulate. An extended recovery could pave the way for a trend continuation. 137.40 at the start of a sell-off in late July is an important resistance. Its breach may carry the pair to the recent peak at 139.40. On the downside, 134.80 is the first support in case of a pullback.

The US dollar surged over fewer jobless claims last week. A fall below 1.0200 has weighed on sentiment, invalidating the latest bounce. The former support has turned into a resistance. The euro’s failure to hold above the previous consolidation area at 1.0120 suggests that the directional bias is still down. The RSI’s oversold condition may attract some bargain hunters, but buyers need to clear 1.0200 before the pair could get back on track. 1.0030 is the next support and a breach could trigger momentum selling below parity.

EUR/USD

The better-than-expected U.S. unemployment data gave the dollar a strong boost and it rose against the single European currency, easily breaching the support at 1.0119. At the time of writing, the price is consolidating around the next support at 1.0086. For now, the bears have settled permanently in the market and it looks like they will have no problem attacking the levels at around parity. There, the bulls could be expected to enter the market and hold off their pressure for a while. Only a breach of the resistance at 1.0188 could be seen as an attempt at forming a range trend that has become so typical of the pair, but this does not seem very likely for now.

USD/JPY

The breach of the resistance at 135.38 proved to be successful, reaffirming the positive sentiment for the appreciation of the dollar against the yen. The next target for the bulls will be the resistance at 137.28. A more sustained bearish reversal is not expected, unless the supports at 134.33 and 133.29 are both overcome.

GBP/USD

The bears managed to break through the support at 1.2020 after the U.S. jobless claims data came in slightly better than expected. At the time of writing the analysis, the price is hovering around the support at 1.1933, where the bulls are trying to hold off the bearish pressure, but the expectations are that they will fail and that the price will likely head towards the support at 1.1804.

EUGERMANY40

During the past session, the price of the German index consolidated in the range between the levels of 13785 and 13620. While the positive sentiments are likely not over yet, should the bears manage to overcome the supports at 13623 and at 13507, then it is possible that we will see a deeper correction towards the level of 13339. If, however, the resistance at 13785 is overcome, then the positive trend will return and the next target for the bulls – the level at 13885 – will likely be easily overcome.

US30

The positive trend for the U.S. blue-chip index is probably not over yet. Although the price has been moving in the range between 34279 and 33829 for the past three sessions, the breach of the support at 33892 has still not been confirmed. Even if it does end up being breached, however, signs of a follow-up correction could only be expected following the breach of the support at 33552. If this does not happen and the resistance at 34279 is overcome instead, then the next level for the bulls will be 34873, which can be seen from the higher time frames.

USD/JPY:

On the H4 chart, prices seem to have pulled back a little but the overall trend is still bearish biased. Price has broken the intermediate resistance at 133.908 which is the 50% Fibonacci retracement and is now testing the first resistance at 135.605 where the previous swing high. 61.8% fibonacci retracement and 78.6% projection sits.If the bearish momentum continues it will pull back to test the first support at 131.711 where the 78.6% retracement and 100% projection sits

Areas of consideration:

• H4 time frame, 1st resistance at 135.605
• H4 time frame, 1st support at 131.711

DXY:

On the H4, prices seem to be moving in an ascending trend and is in a bullish momentum. Price is now around the first resistance at 106.945 where the 50% Fibonacci retracement and the previous swing high sits. We’re looking for price to test the first resistance again and if price continues with bullish momentum, it will test the second resistance at 107.453 where the 61.8% fibonacci retracement sits. If fails to break the first resistance, it will pull back to test the first support at 104.635 where the 78.6% retracement is and subsequently the second support at 103.697 which is the previous swing low

Areas of consideration:

• H4 time frame, 1st resistance at 106.945
• H4 time frame, 1st support at 104.635

EUR/USD :

On the H4, prices have broken the ascending trend and are below the ichimoku indicator, we are bearish bias. Prices have ascended slightly but we’re looking for a pull back to test the first support at 1.0108 where the 61.8% Fibonacci retracement sits. If prices continue in the bearish momentum, it will test the second support at 0.9948. Alternatively price could go back to test the first resistance at 1.0363 where the 61.8% Fibonacci retracement sits and then the second resistance at 1.0465

Areas of consideration :

• H4 1st resistance at 1.0363
• H4 1st support at 1.0108

GBP/USD:

On the H4, prices seem to be in a bearish momentum. It is currently testing the 50% Fibonacci retracement and if the bearish momentum continues, it will pull prices to our first support 1.2025 where our swing low sits. If prices pull back further it will test the second support at 1.1767 where our 78.6% Fibonacci projection sits. Alternatively price could hit resistance at 1.2275 around the 78.6% projection and the first resistance at 1.2403 where the swing high sits

Areas of consideration:

• H4 1st resistance at 1.2275
• H4 1st support at 1.2025

USD/CHF:

On the H4, with prices moving below the ichimoku cloud and along the descending trend, we are bearish bias that the price will continue with the bearish momentum. Price is now testing at the 61.8%% Fibonacci retracement and it may rise to test the first resistance at 0.9542 again. If bearish momentum continues, it should pull back to test at the intermediate support at 0.9468 where the previous swing low is then the first support at 0.9369 where the 61.8% projection and 127.2% extension sits

Areas of consideration

• H4 1st support at 0.9369
• H4 1st resistance at 0.9542

XAU/USD (GOLD):

On the H4, with prices breaking the ascending and below ichimoku cloud, we have a bearish bias that the price may drop from the 1st support at 1754.980, which is in line with the overlap support to the 2nd support at 1729.489, which is in line with the pullback support and 61.8% fibonacci retracement. Alternatively, the price may rise to the 1st resistance at 1784.601, which is in line with the 61.8% fibonacci retracement and overlap resistance.

Areas of consideration:

• H4 time frame, 1st support at 1754.98
• H4 time frame, 2nd support at 1729.489

AUD/USD:

On the H4, with the the price breaking the ascending channel and below the ichimoku cloud, we have a bearish bias that price may drop to the 1st support at 0.68713, where the swing lows is to the 2nd support at 0.67812, which is in line with the 78.6% fibonacci retracement. Alternatively, the price may rise to the 1st resistance at 0.70167 which is in line with 50% fibonacci retracement.

Areas of consideration

• H4 1st support at 0.68713
• H4 2nd support at 0.67812

NZD/USD:

On the H4, with the price moving within the descending channel, below ichimoku cloud and MACD indicators are below zero, we have a bearish bias that the price may drop from the 1st support at 0.62362, which is in line with the 61.8% fibonacci retracement and pervious swing lows to the 2nd support at 0.61411, which is in line with the swing low and 78.6% fibonacci retracement. Alternatively, the price may rise to the 1st resistance at 0.62778, where the 23.6% fibonacci retracement is.

Areas of consideration:

• H4 time frame, 1st support at 0.6236
• H4 time frame, 2nd support at 0.61411

USD/CAD:

On the H4, with the price moving within the ascending trendline and above the ichimoku cloud, we have a bullish bias that the price may rise to the 1st resistance at 1.29890, where the swing high, 61.8% fibonacci projection, 50% fibonacci retracement are. If the price breaks the 1st resistance, we can expect the price to rise to the 2nd resistance at 1.30508, which is in line with the 100% fibonacci projection and previous swing highs. Alternatively, the piece may drop to the 1st support at 1.28966, where the current swing low, previous swing highs and 23.6% fibonacci retracement are. IF the price breaks the 1st support, we can expect the price drop down to the 2nd support at 1.28470, which is in line with the swing low and 50% fibonacci retracement.

Areas of consideration:

• H4 time frame, 1st resistance at 1.29890
• H4 time frame, 2nd resistance at 1.30508

OIL:

On the H4, with price breaking the descending channel and DIF line is breaking zero, if the price break the 1st resistance at 99.360, which is in line with the 61.8% fibonacci retracement, 78.6% fibonacci projection, we can expect the price rise to the 2nd resistance at 102.765, which is in line with the overlap resistance. Alternatively, the price may drop to the descending trendline and go down to the 1st support at 93.456, which is in line with the swing low.

Areas of consideration:

• H4 time frame, 1st resistance at 99.360
• H4 time frame, 2nd resistance at 102.765

Dow Jones Industrial Average:

On the H4, with price moving above the ichimoku indicator and along an ascending trendline, we have a bullish bias that price will rise to 1st resistance at 34127 where the pullback resistance is. Once there is upside confirmation that price has broken 1st resistance structure, we would expect bullish momentum to carry price to 2nd resistance at 35526 where the swing high resistance, 161.8% fibonacci extension and -61.8% fibonacci expansion are. Alternatively, price could drop to 1st support at 33493 where the pullback support, 61.8% fibonacci projection and 23.6% fibonacci retracement are.

Areas of consideration:

• H4 time frame, 1st resistance of 34127
• H4 time frame, 1st support at 33493

DAX:

On the H4, with price moving above the ichimoku indicator, we have a bullish bias that price will rise to the 1st resistance at 13683.48 where the pullback resistance is. Once there is upside confirmation of price breaking the 1st resistance structure, we would expect price to rise to 2nd resistance at 14221.23 in line with 100% fibonacci projection and 78.6% fibonacci retracement. Take note of intermediate resistance at 13948.80 where the swing high resistance and 61.8% fibonacci projection are. Alternatively, price could drop to 1st support at 13378.95 where the overlap support, -27.2% fibonacci expansion, 127.2% fibonacci extension and 38.2% fibonacci retracement are

Areas of consideration:

• H4 time frame, 1st resistance of 13683.48
• H4 time frame, 1st support at 13378.95

ETHUSD:

On the H4, with price moving within an ascending channel and bouncing off the ichimoku support, we have a bullish bias that price will rise to the 1st resistance at 1916.72 where the pullback resistance is. Once there is upside confirmation that price has broken 1st resistance structure, we would expect bullish momentum to carry price to 2nd resistance at 2015.54 where the swing high resistance is. Alternatively, price could drop to 1st support at 1792.30 where the overlap support, 38.2% fibonacci retracement and 100% fibonacci projection are.

Areas of consideration:

• H4 time frame, 1st resistance of 1916.72
• H4 time frame, 1st support at 1792.30

BTCUSD:

On the H4, with price breaking out of a bullish channel and moving below the ichimoku indicator, we have a bearish bias that price will drop to 1st support at 22560.82 where the pullback support, 61.8% fibonacci retracement and 78.6% fibonacci projection are. Once we have downside confirmation of price breaking 1st support structure,we would expect bearish momentum to carry price to 2nd support at 20708.23 where the -61.8% fibonacci expansion, 161.8% fibonacci extension and swing low support are. Alternatively, price could rise to 1st resistance at 24703.69 where the pullback resistance, 50% fibonacci retracement and 61.8% fibonacci projection are.

Areas of consideration:

• H4 time frame, 1st resistance of 24703.69
• H4 time frame, 1st support at 22560.82

S&P 500:

On the H4, with prices moving above the ichimoku indicator, we have a bullish bias that the price will rise to 1st resistance at 4278.78 where the overlap resistance is. Once there is upside confirmation that price has broken the 1st resistance structure, we would expect bullish momentum to carry price to 2nd resistance at 4420.02 where the pullback resistance, 78.6% fibonacci retracement and -61.8% fibonacci expansion are. Alternatively, price could drop to 1st support at 4182.68 where the pullback support, 78.6% fibonacci projection and 23.6% fibonacci retracement are.

Areas of consideration:

• H4 time frame, 1st resistance of 4278.78
• H4 time frame, 1st support at 4182.68

Markets

An avalanche of Fed members hit the wires yesterday, especially during US trading hours. Voting member St.-Louis Fed Bullard argued in favour of a third consecutive 75 bps rate hike in September. In a WSJ interview, he vows to continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation. He is a fan of frontloading tightening, with the policy rate at a restrictive level of 3.75%-4% by year-end. Bullard argues that continuing the cycle on the next three meetings should be taken for granted. Afterwards, the Fed should re-evaluate the state of the economy and inflation dynamics to consider how to move forward in 2023. If one thing is sure, he believes that market speculation over rate cuts is definitely premature. Bullard fears that high inflation will prove more persistent than what many parts of Wall Street think. On top, he errs on the optimistic side of expectations when it comes to H2 2022 growth on the back of the strong US labour market.

Non-voting SF Fed Daly said that she was open to raising rates by 50 or 75 bps next month and underlined that the Fed wasn’t in a hurry to reverse course next year.

Non-voting Minneapolis Fed Kashkari wants to tackle the Fed’s inflation problem right now. He stressed that economic fundamentals are strong and wants to get down inflation urgently.

Voting Kansas City Fed George is in favour of slowing down the tightening pace, mainly because of the lagging impact on inflation from the Fed’s actions. She already dissented in June, in favour of a smaller rate hike. Nevertheless, when it comes to the terminal interest rate, she doesn’t want to talk about a stopping point yet as the Fed has to be completely convinced that inflation is coming down.

Markets at the moment seem to turn a deaf ear to the new vigilance coming from Fed members. They discount an additional 125 bps (3.5%-3.75%) of tightening by year-end and that’s about it. US money markets even discount a 25 bps policy rate cut by end 2023. This suggests that we might see more hawkish repositioning next week in the sidelines of the Jackson Hole symposium (Aug 25-27). This year’s topic is “reassessing constraints on the economy and policy”. Fed Chair Powell was yesterday confirmed as speaker on August 26. He will share his views on the economic outlook.

US Treasuries yesterday even outperformed German Bunds and UK Gilts. US yields dropped by 1.6 bps (30-yr) to 8.5 bps (2-yr). The German and UK yield curves bear flattened on the contrary with yields up around 5 bps at the front end and marginally higher at the very long end of the curve. In FX space, the dollar outpaced the euro which on his turned performed better than sterling. Relative yield dynamics are void at the moment as trading theme. EUR/USD yesterday fell below the 1.01 big figure. We tend to argue in favour of more USD strength going into the Jackson Hole gathering. EUR/GBP flipped sides around the 0.8450 mark. The pair is currently testing the topside of the corrective downward trend channel since mid-June. This morning’s better than expected UK retail sales (0.4% M/M for core) don’t immediately come to sterling’s rescue. Today’s eco calendar is empty. Apart from the Fed symposium, market keep next week’s EMU PMI’s in the back of their minds.

News Headlines

UK consumer confidence (GfK, growth from knowledge) fell to a new record low of -44 in August. GfK has been tracking consumer confidence since 1974. All measures declined (personal financial situation over last/over next 12 months, general economic situation over last/over next 12 months and major purchase index), reflecting acute concerns as the cost-of-living soars. A sense of exasperation about the UK’s economy is the biggest driver of these findings. GfK Client Strategy Director Staton says that the crisis of confidence will only worsen with the darkening days of autumn and the colder months of winter.

Daily Pivots: (S1) 161.47; (P) 162.36; (R1) 163.03; More...

Intraday bias in GBP/JPY is turned neutral first but outlook is unchanged. Corrective pattern from 168.67 is extending. Break of 163.91 will bring stronger rise to 166.31 resistance. On the downside, below 160.07 will turn bias to the downside for 159.42 and below.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will remain the favored case as long as 155.57 support holds, even in case of deep pull back.