- AUD/USD refreshes intraday high while bouncing off 0.7139.
- Bullish MACD, recovery from 61.8% Fibonacci retracement favor buyers.
- Multiple upside resistances to challenge the bulls past-0.7200.
AUD/USD stays well bid while refreshing the intraday high to 0.7186, currently around 0.7183, during the pre-European session on Tuesday. The aussie pair recently bounced off 61.8% Fibonacci retracement of its August 03/07 upside. However, the bulls are jostling with 100-HMA to mark further upside.
With the bullish MACD signals joining the pair’s repeated bounces off the key Fibonacci retracement level, the pair buyers are likely to cross the immediate resistance around 0.7188 and regain 0.7200 mark during the further rise.
Though, 0.7215 and the monthly high near 0.7240/45 can challenge the bulls before pushing them to the year 2019 top surrounding 0.7300.
Meanwhile, a downside break of 0.7140 comprising 61.8% of Fibonacci retracement, could recall 0.7100 round-figures on the chart.
In a case where the bears dominate past-0.7100, a confluence of July 24 low and June 10 high near 0.7065/60 could restrict the pair’s additional weakness.
AUD/USD hourly chart
- GBP/USD keeps gains from 1.3065 despite the latest pullback from 1.3096.
- UK Consumer Spending recovers in July, London-Tokyo trade talks linger.
- No10 vows action on illegal French fishers, BOE’s Ramsden signal further QE if the economy worsens
- US dollar fades upside momentum, market sentiment stays positive despite risk-negative headlines.
GBP/USD picks up the bids near 1.3090, up 0.11% on a day, while heading into the London open on Tuesday. The Cable extends Monday’s winning streak despite downbeat comments from the BOE policymaker as well as Brexit woes. The reason could be spotted from the US dollar’s pullback after rising for two consecutive days. Though, the traders remain cautious ahead of the key UK employment numbers for July that may please the pair buyers.
Early in Asia, the Bank of England (BOE) Deputy Governor Dave Ramsden showed readiness on the part of the “Old Lady” to escalate the Quantitative Easing (QE) if the economy falters again. The BOE recently raised its economic forecasts during last Thursday's monetary policy meeting but struck a cautious tone.
Also on the negative side is the Daily Express news suggesting the UK government has vowed to take action against illegal French fishermen at the conclusion of the EU transition period. The same worsens odds of a good Brexit at a time when the talks are struggling for a pace. On the other hand, the UK-Japan trade negotiations also stuck on Monday whereas British PM Boris Johnson’s readiness to recall the lockdown flashed red signals for the coronavirus (COVID-19) watchers.
It should also be noted that Reuters relied on the data from Barclaycard and the British Retail Consortium to convey that British consumers spent the most last month since the country went into a coronavirus lockdown in March, as pubs, restaurants, barbers and beauty salons reopened.
Alternatively, US President Donald Trump’s executive orders pushed China to retaliate by sanctioning 11 American diplomats. However, the positive impacts, concerning the increased odds a stimulus, were majorly followed.
Against this backdrop, the S&P 500 Futures and stocks in Asia-Pacific flash gains whereas the US 10-year Treasury yields rise one basis point to 0.584% by the press time. The same cool down the US dollar index (DXY) that grew during the last two days.
Looking forward, the UK employment data will be the key for the GBP/USD pair traders as bulls will analyze the clues of the recent economic restart and stimulus to foresee near-term moves of the pair. Forecasts suggest the headline Unemployment Rate rise to 4.2% from 3.9% and join the downbeat comments from the BOE policymaker’s to challenge the latest upside moves.
Read: UK Jobs Preview: Feeble figures still furloughed? Another robust report may boost BOE-fueled rally
Following the UK data, risk catalysts will be in the spotlight amid a light calendar.l
While overbought RSI conditions could be spotted for the pair’s inability to rise, 10-day EMA and an ascending trend line from April 14, respectively near 1.3035 and 1.3000, offer strong downside support to challenge the sellers. Even so, buyers are likely to remain cautious unless successfully breaking 1.3200 mark comprising March month high.
- EUR/USD finds acceptance under key SMA, charts double top pattern.
- German ZEW Survey is forecasted to show slight decline in economic sentiment.
- The focus would also be on US stimulus talks and Sino-US tussle.
EUR/USD closed below the 10-day simple moving average (SMA) for the second straight trading day on Monday, establishing the widely-tracked short-term SMA as resistance for the first time since June 25.
While the 10-day MA is now sidelined near 1.1798, the 5-day SMA is trending south for the first time since June 5. Also, the pair looks to have carved out a double top pattern on the daily chart. All this indicates the bullish trend has run out of steam.
German ZEW survey eyed
ZEW Economic Sentiment figures for Germany and the Eurozone are scheduled for release at 09:00 GMT.
The German ZEW Economic Sentiment, which measures the difference between the share of investors that are optimistic and pessimistic, is forecasted to have dropped to 58.00 in August from July's 59.3. A below-forecast print would strengthen the case for a notable pullback put forward by technical studies.
Later in the day, the focus would shift to the US NFIB Business Optimism Index (Jul) and Producer Price Index (July).
Apart from the macro data releases, the pair could take cues from the US Congress' discussions and negotiations regarding the next federal stimulus package. President Trump said on Monday that that top congressional Democrats wanted to meet him for discussing virus-related economic relief, reviving hopes for additional stimulus. Also, news flow related to the lingering US-China tensions could influence demand for the safe-haven US dollar. At press time, the pair is trading largely unchanged on the day at 1.1747.
- GBP/CAD prints three-day losing streak with latest U-turn from 1.7506.
- One-week-old falling trend line, break of short-term support line favor sellers.
- Bulls will have a bumpy road even after the monthly high.
GBP/CAD drops to 1.7445 during the early Tuesday. The pair recently slipped below an ascending trend line from July 23 to portray a third day of losses. Additionally, a downward sloping trend line from July 31 and normal RSI conditions also weigh on the quote.
As a result, the monthly low near 1.7350 becomes the sellers’ first choice ahead of 50% Fibonacci retracement of July 16-31 upside, at 1.7304.
However, the pair’s downside past-1.7304 will be challenged by 1.7260 and 61.8% Fibonacci retracement near 1.7215.
Alternatively, an upside break of the immediate resistance line, at 1.7475 will attack the support-turned-resistance trend line, at 1.7500, during the fresh pullback.
However, the monthly top near 1.7590 and July 31 peak surrounding 1.7676 will stop the bulls prior to diverting them towards highs marked in May and late-March around 1.7705 and 1.7800 respectively.
GBP/CAD four-hour chart
Rating agencies Moody's and Fitch have reportedly said that the European Union's (EU) recent decision to issue €750 billion of bonds to fund its effort to reverse the coronavirus-induced slowdown poses no immediate threat to bloc's AAA rating.
The EU's ratings are a reflection of the fact that borrowings are direct and unconditional obligations of the EU, guaranteed through the EU budget by all EU member states, according to the European Commission.
- EUR/CHF looks south after creating an inverted hammer on Monday.
- The pair risks falling to the immediate support located at 1.0712.
The path of least resistance for EUR/CHF appears to be on the downside.
On Monday, the pair faced rejection at 1.0793 and ended with marginal losses at 1.0746, forming an inverted bearish hammer candle and validating or confirming the buyer exhaustion signaled by the repeated bull failure at 1.0838 seen over the past two weeks.
Put simply, Monday’s inverted hammer has titled the bias in favor of the bears, opening the doors for a decline to the July 24 low of 1.0712.
The daily chart slow stochastic indicator is also reporting bearish conditions with a below-50 print.
A close above 1.0793 is needed to invalidate the bearish outlook.
- USD/CAD's key SMA studies have produced a death cross.
- SMA crosses are lagging indicators and often trap traders on the wrong side of the market.
USD/CAD is trading near 1.3330 at press time, representing a 0.15% decline on the day. The bulls failed to clear the psychological hurdle of 1.34 on Monday.
The daily chart shows the 50-day simple moving average (SMS) has crossed under the 200-day SMA, confirming the so-called death cross, a long-term bearish indicator.
The death cross, however, is based on backward-looking averages and tends to lag prices. As such, it is often considered a contrarian indicator.
In addition, the slow stochastic has created higher lows contradicting lower lows on the price chart. That bullish divergence is suggestive of the ebbing of downward momentum. A similar sentiment is being echoed by the long tail attached to the previous week’s candle.
All in all, the odds appear stacked in favor of a stronger corrective bounce, possibly to the 50-day SMA, currently at 1.3496. The case for a notable bounce would weaken if the spot finds acceptance under the Aug. 5 low of 1.3233.
- NZD/USD becomes the bull’s favorite after bouncing off 0.6584.
- Normal RSI conditions, two-month-old support line favor the buyers.
- July month’s high becomes the key upside barrier.
NZD/USD takes the bids near 0.6610, up 0.34% on a day, amid early Tuesday’s trading. In doing so, the kiwi pair snaps the previous two days’ downside but stays below 21-day SMA immediate resistance.
Other than the 21-day SMA level of 0.6625, the monthly top near 0.6690 and July 31 peak surrounding 0.6715/20 will also challenge the bulls during the pair’s further upside.
On the contrary, sellers will refrain from entries unless the quote drops below an ascending trend line from June 02, at 0.6570 now. Following that, June 23 high of 0.6534 will be on their radars.
If at all the NZD/USD prices stay weak below 0.6530, 0.6450 and June month’s bottom close to 0.6385 will return to the charts.
NZD/USD daily chart
- ASX 200 climbs to resistance last seen in June of this year.
- Financial stocks and miners are performing well on the session.
Australian shares have been climbing on Tuesday, scoring the highest levels since mid-June.
At the time of writing, the ASX 200 index is trading almost 1% higher at 6170, travelling from a low of 6110.
A measure of Australian business conditions rose in July as the service sector rebounded from a national lockdown, but confidence was badly hit by a renewed outbreak of coronavirus in the second most populous state of Victoria.
National Australia Bank's NAB index of business conditions bounced to 0 in July, from -8 in June. That was up from a low of -34 in April at the height of the pandemic and nearer to the long-run average of +6.
However, the survey's measure of business confidence fell back to -14 in July, from 0 in June, though it remained well above the April trough of -46.
"Conditions have now recovered to be broadly around their pre-COVID level with improvements across the country," said NAB Group Chief Economist Alan Oster
Financial stocks lifting all boats
Meanwhile, heavyweight financial stocks rallied on the news that the country's second-most populous state-reported a small rise in new COVID-19 infections, lifting investor sentiment.
Australian banks have taken the financial sub-index.AXFJ higher by 1.2% to its highest since July 30.
Reuters reports that daily infections in Victoria peaked at 725 on Aug. 5 and have been trending lower in recent days, following the imposition of a hard lockdown in Melbourne on July 19.
The Commonwealth Bank of Australia CBA, which is slated to report is annual results on Wednesday climbed 1.7%, while the rest of its "Big Four" have added between 2% and 2.3%.
Miners follow in suit
Mining stocks.have also climbed 0.8% with the world's fourth-largest iron ore miner, Fortescue Metals Group FMG, adding nearly 2% to hit a record high after it won a tender to supply Chinese steelmaker HBIS Group.
Industrial metals were also stronger, with copper and aluminium leading the sector higher.
The prospects of additional stimulus packages helped support sentiment in commodity markets.
Nevertheless, we have seen some sectors struggling to keep their head above water. Precious metals ended lower, with gold falling.
ASX 200 levels
The index is now at a crossroads in the 6170s where it meets daily and weekly resistance at the 61.8% Fibonacci retracements of the 2020 sell-off.
6055 is ket support here. Howevere, a break back below the 20-week moving average would open te case for a continuation to the downside.
Analysts at Citigroup offer a sneak peek at what to expect from Wednesday’s Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, which will be followed by Governor Adrian Orr’s press conference.
“RBNZ ... policy will be left unchanged but risks are dovish.
Activity data since the last forecast in May has recovered sufficiently to justify an upward revision to growth forecasts.
However, of greater focus for markets will be the RBNZ's review of its monetary policy tools -especially around the potential to adjust the LSAP (currently NZD60bn), purchasing foreign assets or implementing negative interest rate policy
Seasonality shows that there is more risk avoidance in August than in other months, and in the G10 currency space NZD tends to fall in line with AUD
This is an anomaly, and we see no clear reason for this type of seasonality. However, with a general election due in September, if the market environment this year changes to risk-off again, the probability that NZD will depreciate over the next month, even if only temporarily, is likely to get higher.”
- WTI prints gains on renewed hopes for additional US stimulus.
- China's factory deflation eased in July, adding to bullish pressure around oil.
The American benchmark for the sweet light crude gained ground during Tuesday’s Asian trading hours in hopes for additional US coronavirus stimulus and signs of recovery in China, the world’s second-largest economy.
At press time, a barrel of West Texas Intermediate (WTI) is trading near $42.15, representing 0.5% gain. Prices rose by nearly 1% on Monday.
The black gold picked up a bid after President Trump tweeted Monday that top congressional Democrats wanted to meet him for discussing virus-related economic relief. The talks between Democrats and the Trump administration broke down last week, according to Reuters.
And yet hopes for additional stimulus may not be the only reason for the uptick in oil. Additional bullish pressure looks to be stemming from comments made by Saudi Aramco on Sunday that oil demand is rebounding in Asia with the gradual reopening of economies.
In addition, oil markets seem to be cheering the upbeat China producer price index (PPI) released on Monday, which showed factory deflation eased for the second month in July.
Gains, however, could be capped by lingering US-China tensions. As per the latest reports, China has unveiled a slew of policies to help boost the domestic semiconductor industry. The move comes after the US’ latest sanctions on Huawei exposed China’s reliance on external chipmakers.
- AUD/JPY extends recovery moves from 75.68 despite mixed NAB data from Australia.
- NAB Business Conditions recovered, Business Confidence slumped in July.
- Market cheers return of Japanese traders, hopes of further stimulus.
AUD/JPY stays well bid as bulls attack 76.00, currently near 75.95, during the early Tuesday’s trading. The pair gains 0.25% as it defies the previous declines while preferring to cheer the risk-on mood versus mixed Aussie data.
National Australia’s Bank’s (NAB) Business Confidence slumped below +1 previous to -14 whereas Business Conditions grew beyond -7 prior to 0 in July. Additionally, payroll updates from the Australian Bureau of Statistics (ABS) also got a little attention from the AUD traders. The ABS recently said, “Nationally, payroll jobs remained 4.5% below mid-March.”
The data fails to weigh on the pair as the market’s risk-tone sentiment remains positive.
While returning from Monday’s Mountain Day off, Japanese traders cheer increased hopes of the US stimulus following President Donald Trump’s executive orders. In doing so, the market players ignore the escalations in the US-China tussle as well as the coronavirus (COVID-19) woes.
In retaliation to the American sanctions, Beijing also raised bars for 11 US diplomats. This pushes the American leader to say that phase one deal with China means “very little” to him now.
Elsewhere, Australia’s Victoria continues to struggle with the pandemic as death toll refreshes record high with 331 figures. On the other hand, Japan also bears the negative impacts of the deadly virus as Kyodo said, Japan's total coronavirus cases topped 50,000 Monday, increasing by 10,000 in just one week, as urban centers including Tokyo and Osaka continue to see high levels of infections since the central government fully lifted the nationwide state of emergency in late May.
Amid all these catalysts, Japan’s Nikkei 225 rises 1.5% whereas Australia’s ASX 200 adds 1.0% gains. Further, S&P 500 Futures also prints mild gains while the US 10-year Treasury yields rise one basis point to 0.58% by the press time.
Traders may now keep eyes on Japan’s Eco Watchers Survey data for immediate direction while paying more attention to the risk catalysts.
Unless declining back below 75.30, comprising an ascending trend line from June 12, the pair can keep trying to refresh the monthly high near 76.45.
According to the latest data published by the Australian Bureau of Statistics (ABS), payroll jobs nationwide remained steady through July while Victoria saw a fall.
"Payroll jobs fell 1.5% in Victoria through July ahead of the introduction of stage 4 COVID-19 restrictions."
"Nationally, payroll jobs remained 4.5% below mid-March."
The data comes ahead of the official monthly jobs report due this Thursday, with the country’s unemployment rate likely to jump to 7.8% in the reported month.
AUD/USD picked-up fresh bids on the NAB Business Survey and the above data release, now challenging daily highs near 0.7165, up 0.27% on a daily basis.
- AUD/USD moves to session highs on data, although remains subdued in the main in quiet markets.
- Commodities a tough firmer, although the risks are for a strong greenback as Sino and US tensions ratchet up.
AUD/USD has been consolidating Friday’s decline in a mere 0.7147-73 range while the US dollar stages a moderate comeback following a marginal move higher in real yields on Friday.
At the time of writing the commodity, the currency is barely higher at 0.7158 vs the dollar after a slight chop in a mostly lacklustre time on Wall Street.
AUD/USD was choppy at times but at 0.7150, it is barely changed from Friday’s fall.
In recent trade, we have seen Australia NAB business confidence -14 (prior 1) and business conditions 0 (prior -7).
The data has had little bearing on the currency, although it has ticked higher to score the high for the session.
Meanwhile, with the conservative approach from the Reserve Bank of Australia all digested and done for the time being, its a focus back to the greenback and Sino/US trade tensions.
China sanctioned 11 US officials in retaliation to similar moves made by the US against Chinese officials last week, although there was little reaction to this.
Yi Gang, governor of PBoC: China to continue implementing phase-one trade agreement
Meanwhile, the hope of further stimulus packages has been helping to support sentiment in commodity markets.
Metals recovered much of the lost ground seen Friday, with copper rebounding 1.5% to $6,401 and aluminium up 0.68% to $1,783.
The ANZ China Commodity Index was ending Monday’s session up 0.1%.
Nevertheless, it was a cautious move higher, with some sectors struggling to keep their head above water,
analysts at ANZ bank said.
Precious metals ended lower, with gold falling. Bulk commodities were also weaker, with iron ore and coking coal coming under pressure. Agriculture inched lower, weighed down by falls in palm oil and cotton. Crude oil gained, along with natural gas. Industrial metals were also stronger, with copper and aluminium leading the sector higher.
AUD/USD continues to hover over the near-term uptrend at 0.7147 with bullish bets on a run to the 200-week ma at 0.7257 and the 55-month moving average at 0.7284, as noted by analysts at Commerzbank.
If seen, we would allow this to again hold as we note the diverging RSI. Above 0.7284 lies the 0.7394.
We have the December high at 0.7031 and the 4-month uptrend at.6905. Key support is offered by 0.6778/74, the February high and mid-June low. This latter level is reinforced by the 200-day ma at .6707.
White House (WH) National Security Adviser O'Brien said in a statement early Tuesday, the US is 'deeply troubled' by the arrest of Hong Kong media tycoon Jimmy Lai.
His comments come after the geopolitical tensions intensified between the US and China after the police in Hong Kong arrested Jimmy Lai, founder of the popular tabloid Apple Daily, on charges of collusion under the national security legislation.
Over the weekend, Trump administration announced sanctions against 11 Hong Kong officials, including the leader Carrie Lam. On Monday, China promptly retaliated by sanctioning 11 American lawmakers, including Senators Marco Rubio and Ted Cruz.
The risk-sentiment remains unperturbed by the above comments, with S&P 500 futures and Asian equities flashing green. AUD/USD jumps 0.21% to fresh daily highs of 0.7165, at the time of writing.
- Gold is feeling the pull of gravity during Tuesday's Asian trading hours.
- Gold's daily chart stochastic has diverged in favor of the bears.
- RSI continues to report overbought conditions with an above-70 print.
The People's Bank of China (PBOC) has set the yuan reference rate at 6.9711 versus Monday's fix at 6.9649.
- EUR/JPY snaps two-day losing streak while recovering from 124.34.
- July 22 high offers immediate support, 125.00 becomes nearby resistance to watch.
- 21-day SMA and three-month-old support line add to the downside barriers.
EUR/JPY picks up the bids near 124.48, up 0.07% on a day, during the early Tuesday’s trading. The quote recently recovered from July 22 top, also comprising the lowest levels in a week, while disturbing the previous declines during Friday and Monday.
Although MACD conditions are against the latest pullback, sellers will not risk taking entries unless the quote slips below 124.30, comprising the mentioned late-July top. Hence, bulls may eye 125.00 as an immediate target ahead of challenging the monthly peak surrounding 125.60.
In a case where the buyers keep the reins past-125.60, the 126.00 threshold will be on their radars.
Meanwhile, a 21-day SMA level of 123.78 will precede the ascending trend line from May 07, at 123.00 now, to challenge the bears below 124.30.
If at all the pair declines below 124.30 on a daily closing basis, the early-July peak close to 122.00 will lure the sellers.
EUR/JPY daily chart
- S&P 500 Futures recover early-Asian session losses following its bounce off 3,347.
- The risk gauge cheers hopes of further stimulus, return of Japanese traders.
- Coronavirus woes, fears of escalating US-China tension gain a little attention.
S&P 500 Futures rises to 3,354, up 0.05% on a day, during the initial hour of Tokyo open on Tuesday. The risk barometer recently picked up the bids as Japanese traders return after the extended weekend. Also supporting the mild optimism is increasing odds of the US stimulus.
Traders from Tokyo welcome the US catalysts suggesting the break of stimulus deadlock while returning from Monday’s Mountain Day off. American President Donald Trump’s executive orders concerning the jobless claims and other help to combat the coronavirus (COVID-19) pushed Democratic Party members to return to the negotiation table for the much-awaited stimulus package.
It should also be noted that the Republican leaders’ sanctioning of 11 Chinese diplomats and the banning of business with TikTok and WeChat strengthened the Washington-Beijing tension. In retaliation to the US moves, Beijing also increased hardships for 11 of the American diplomats. Though, the People’s Bank of China (PBOC) Governor Yi Gang struck an upbeat tone while saying “China will continue implementing the phase-one economic and trade agreement with the United States, while measures announced to open up china's financial sector will continue.”
Following that, US President Trump exerted more pressure on the Asian major while saying phase one deal means “very little” to him.
Against this backdrop, the market’s risk-tone remains mildly positive with Nikkei 225 rising over 1.00% to 22,568 while the US 10-year Treasury yields stay upbeat near 0.577% by the press time.
Although the economic calendar in Asia remains silent, Japanese traders’ return will offer notable moves to the risk catalysts and offer an active session ahead.
GBP/NZD comes as a compelling trade on the back of a northerly projection into a key supply area.
We have the reserve Bank of New Zealand on Wednesday and the longer-term outlook remains highly uncertain which leaves all options on the table.
There should be some bearish headwinds for the bird on the back the meeting, although the pound is hardly a bullish prospect in the same regard.
Nevertheless, there is some upside in the charts while the cross sits above the daily structure.
However, a break to the downside opens prospects of a bearish head and shoulders and medium-term bearish play on the cards as illustrated in this top-down analysis.
The price has corrected back towards a high-level os supply and in the realms of a 38.2% Fibonacci retracement target.
Weekly prospects of a move back to higher volume
As illustrated, the price action can go higher while the pair holds above the structure.
However, a break below will open the doors to a barroom brawl which should result in a downside move and form a bearish head and shoulders.
GBP/JPY Head & Shoulders prospects
- Silver bears attack lower-end of $28.66-$29.27 trading range.
- Bearish MACD, RSI conditions favor the sellers, short-term ascending trend lines restrict further declines.
- $30.00 becomes the key upside barrier beyond $29.30 immediate resistance.
Silver prices drop to $28.78, down 1.11% on a day, amid the initial hour of Tokyo open on Tuesday. The white metal recently took a U-turn from $29.27 while keeping nearby trading range amid bearish MACD and downward sloping RSI conditions. However, multiple support lines stand tall to challenge the pair sellers and keep the bulls hopeful.
Among the aforementioned support lines, one from August 05, at $28.58 now, gains the immediate market attention ahead of another downside barrier stretched from July 28, currently around $25.75.
In between these trend-lines, July 28 top near $26.20 and $27.00 might entertain the bullion traders.
On the upside, a downward sloping trend line from Friday, at $29.30 now, followed by $30.00 round-figures could restrict the metal’s immediate recovery moves.
However, the precious metal’s ability to cross $30.00 on a daily closing basis enables it to aim for November 2012 bottom surrounding $30.65/70.
Silver four-hour chart
- EUR/USD retreats to 1.1735, having faced rejection above 1.19 last Thursday.
- The pair failed to keep gains above 1.19 on July 31.
- Daily chart now shows a double top pattern with neckline at 1.1696.
EUR/USD looks to have formed a double top bearish reversal pattern on the daily chart with the neckline support at 1.1696 (Aug. 3 low).
A daily close below that level would confirm the double top breakdown and create room for a sell-off to 1.1475 (target as per the measured height method).
At press time, the pair is sidelined near 1.1735, having declined for the second straight trading day on Monday.
A move to the double top necklines support at 1.1696 looks likely with the recent candlestick arrangement signaling a bullish-to-bearish trend change and bearish divergences of the the 14-day relative strength index and the slow stochastic.
- USD/JPY prints three-day winning streak, trades near the one-week high flashed on Monday.
- US dollar remains on the front foot amid stimulus hopes, risk-off mood.
- Japanese traders return from an extended weekend with upbeat Trade Balance, Current Account data.
- Japan’s Eco Watchers Survey, risk catalysts remain in the spotlight.
USD/JPY takes the bids near 106.10 as Tokyo begins the week’s trading after enjoying Monday’s off due to the Mountain Day. In doing so, the pair prints a three-day winning streak while challenging the highest levels since August 03. Although risk-tone remains sluggish, the broad US dollar strength lures the pair bulls.
King Dollar dominates…
The US dollar index (DXY) extends its recovery moves from over two-year low while rising to 93.65, up 0.03%, by the press time. US President Donald Trump’s executive orders recently renewed the US dollar strength after the banning of TikTok and WeChat joined the sanctions on 11 Chinese diplomats and unlocking the unemployment claims benefits together with other helps at home. Further favoring the greenback is the US-China tussle and hopes that the much-awaited hopes of a multi-trillion American stimulus will be out soon.
China retaliated to the US moves of sanctioning their policymakers by increasing hardships for 11 American diplomats. However, the PBOC Governor struck an upbeat tone while saying, “China will continue implementing the phase-one economic and trade agreement with the United States, while measures announced to open up china's financial sector will continue.” Even so, US President Trump said that China phase one deal means “very little” to him.
Elsewhere, the coronavirus (COVID-19) woes keep dominating with Australia’s Victoria marking another record-high death toll of 331 while infections in Japan also escalate. “Japan's total coronavirus cases topped 50,000 Monday, increasing by 10,000 in just one week, as urban centers including Tokyo and Osaka continue to see high levels of infections since the central government fully lifted the nationwide state of emergency in late May,” said Japan’s Kyodo news.
Against this backdrop, S&P 500 Futures drop 0.10% to 3,350 whereas Japan’s Nikkei 225 gains 0.84% to 22,530 by the press time. However, the US 10-year Treasury yields fail to extend the previous day’s run-up while taking rounds to 0.57% as we write.
Further, Japan’s economic data flashed welcome signals as well. The Current Account for June rose well beyond ¥110 B forecast to ¥167.5B while Trade Balance - BOP Basis grew past-¥-556.8 B prior to ¥-77.3 B. On the contrary, Bank Lending slipped below 6.5% expected to 6.3% in July.
Moving on, traders will take note of Japan’s Eco Watchers Survey data for July for immediate direction. Though, major attention will be given to the risk catalysts for fresh impetus.
Having successfully broken a descending trend line from July 20, at 105.85 now, the pair aims to cross 21-day SMA level near 106.20 ahead of challenging the monthly top around 106.50. Meanwhile, a downside break of the 105.85 resistance-turned-support will recall 105.30 on the chart.
- GBP/JPY bears waiting patiently for a signal below the currency daily support structure.
- Weekly downside target is compelling as the monthly chart meets the first critical resistance level.
The price of the pound vs the Japanese yen is an interesting trade considering both have been accumulating net longs in positioning data while the US dollar now starts to correct higher.
DXY 4hr double bottom
The yen is renowned for its safe-haven qualities and the pound is a dubious bid in the face of a resurgence of geopolitical risks and the greenback.
The following is a top-down analysis depicting the prospects of a downside correction in the weekly resistance to weekly support.
However, there is nothing to be had from a daily perspective until the following support structure illustrated is broken and retested mounting to a bearish impulse, bullish correction before the next wave to the downside.
The monthly chay shows that there was a strong level of support and the bulls have been in control since, targeting upside structure in a phase of accumulation.
However, the price is already struggling at a prior support structure looking left and there should be resistance shown in the weekly chart.
The weekly chart shows the price is at a resistance looking left to the double top and opens scope for a restest of the prior downside structure as illustrated within the chart above.
The daily structure remains bullish, however, if the pound weakness and the support breaks, a retest of the level will be an opportunity for short to coincide with the weekly and monthly chart readings.
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