Market Analysis

Pipscollector.com - Key Points:

• The Japanese Yen edges higher following the Jibun Bank Services PMI on Wednesday.
• Japan’s Yoshimasa Hayashi monitors domestic and international market developments with urgency.
• The US Dollar holds ground as traders adopt caution ahead of US employment data.

The Japanese Yen (JPY) continues to strengthen against the US Dollar (USD) following the release of the Jibun Bank Services PMI data on Wednesday. The index was revised to 53.7 in August from an initial estimate of 54.0. Although this marks the seventh consecutive month of expansion in the service sector, the latest figure remains unchanged from July.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated on Wednesday that he is "closely monitoring domestic and international market developments with a sense of urgency." Hayashi emphasized the importance of conducting fiscal and economic policy management in close coordination with the Bank of Japan (BoJ). He also stressed the need for a calm assessment of market movements but declined to comment on daily stock fluctuations.

The US Dollar receives support as traders adopt caution ahead of US employment data, particularly the August Nonfarm Payrolls (NFP). This data may provide further insights into the potential timing and scale of Federal Reserve (Fed) rate cuts.

Daily Digest Market Movers: Japanese Yen extends gains due to the hawkish mood surrounding BoJ

• The US ISM Manufacturing PMI inched up to 47.2 in August from 46.8 in July, falling short of market expectations of 47.5. This marks the 21st contraction in US factory activity over the past 22 months.
• On Tuesday, Japan announced plans to allocate ¥989 billion to fund energy subsidies in response to rising energy costs and the resulting cost-of-living pressures.
• The US Bureau of Economic Analysis reported on Friday that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous reading of 2.5% but falling short of the estimated 2.6%. Meanwhile, the core PCE, which excludes volatile food and energy prices, rose by 2.6% year-over-year in July, consistent with the prior figure of 2.6% but slightly below the consensus forecast of 2.7%.
• Tokyo's Consumer Price Index (CPI) increased to 2.6% year-on-year in August, up from 2.2% in July. Core CPI also rose to 1.6% YoY in August, compared to the previous 1.5%. Additionally, Japan’s Unemployment Rate unexpectedly climbed to 2.7% in July, up from both the market estimate and June's 2.5%, marking the highest jobless rate since August 2023.
• Federal Reserve Bank of Atlanta President Raphael Bostic, a prominent hawk on the FOMC, indicated last week that it might be "time to move" on rate cuts due to further cooling inflation and a higher-than-expected unemployment rate. FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Bostic’s words as neutral with a score of 5.6.
• The US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, exceeding both the expected and previous growth rate of 2.8%. Additionally, Initial Jobless Claims showed that the number of people filing for unemployment benefits fell to 231,000 for the week ending August 23, down from the previous 233,000 and slightly below the expected 232,000.
• Japan’s Finance Minister Shunichi Suzuki stated last week that foreign exchange rates are influenced by a variety of factors, including monetary policies, interest rate differentials, geopolitical risks, and market sentiment. Suzuki added that it is difficult to predict how these factors will impact FX rates.

Technical Analysis: USD/JPY reacts off 21-day EMA, further downward pressure expected

USD/JPY trades around 145.40 on Wednesday. An analysis of the daily chart shows that the nine-day Exponential Moving Average (EMA) is below the 21-day EMA, signaling a bearish trend in the market. Additionally, the 14-day Relative Strength Index (RSI) remains below 50, further confirming that the bearish trend is still in place.

For the USD/JPY pair, support may be found around the seven-month low of 141.69, recorded on August 5, with the next key support level near 140.25.

On the upside, the pair might first encounter resistance at the nine-day EMA around 145.63, followed by the 21-day EMA at 146.73. A break above this level could pave the way for a move toward the psychological barrier of 150.00, with further resistance at the 154.50 level, which has transitioned from support to resistance.

USD/JPY: Daily Chart

Japanese Yen PRICE News

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

Quote source: Fxstreet.

- Pipscollector -

Pipscollector.com - Key Points:

• EUR/USD under pressure as Germany's Ifo index misses expectations; US Dollar strengthens on robust Durable Goods Orders.
• US Dollar Index steady at 100.88, supported by a 9.9% surge in Durable Goods Orders; key pivot at 100.92 in focus.
• US 10-year bond yield consolidates near 3.82%, with potential impacts on the Dollar; key resistance at 3.84%.

Pipscollector.com - Key Points:

• Gold closed the week hitting a fresh all-time high despite markets doubting a large Fed rate cut in September.
• XAU/USD technical outlook suggests that the bullish bias remains intact.
• Investors will scrutinize PMI data and comments from Fed officials next week.

Gold (XAU/USD) reached a new record high of $2,500 despite struggling to gather bullish momentum in the first half of the week. Macroeconomic data releases from the US and Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole Symposium next week could trigger the next big action in Gold.  

Gold touches new record high on Friday

Following the rebound seen in the second half of the previous week, Gold preserved its bullish momentum on Monday and closed above $2,470. In the absence of high-tier macroeconomic data releases, the pullback seen in the US Treasury bond yields helped XAU/USD push higher at the beginning of the week. In the meantime, Gold benefited from high geopolitical tensions as the Israeli Defense Minister said over the weekend that they were still expecting Iran to launch an attack despite calls from Western nations to refrain from retaliation. 

On Tuesday, the data from the US showed that the Producer Price Index (PPI) rose 0.1% on a monthly basis in July as expected. Markets largely ignored this data and Gold went into a consolidation phase, closing the day virtually unchanged.

The Bureau of Labor Statistics (BLS) reported on Wednesday that inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 2.9% on a yearly basis in July from 3% in June. The core CPI, which excludes volatile food and energy prices, rose 3.2% on a yearly basis, while the CPI and the core CPI both increased 0.2% on a monthly basis. These figures came largely in line with market expectations but the probability of the Fed lowering the policy rate by 50 basis points in September declined below 40% from 52% ahead of the data release, per CME Group FedWatch Tool. As bets for a big rate cut faded, Gold erased a portion of its weekly gains.

More upbeat macroeconomic data releases from the US on Thursday caused investors to leaven further into a 25 bps Fed rate cut in September and made it difficult for Gold to gather bullish momentum. The Department of Labor reported that the weekly Initial Jobless Claims declined by 7,000 to 227,000 in the week ending August 10, while other data showed that Retail Sales rose 1% on a monthly basis in July, beating the market expectation for an increase of 0.3%. The odds of a 50 bps Fed rate cut in September fell below 30% after these releases.

As risk flows started to dominate the action in financial markets on Friday, the USD struggled to find demand, allowing XAU/USD to regain its traction and reach a new record high of $2,500.

Gold investors await US data, Fed Chairman Powell’s appearance at Jackson Hole

The US economic calendar will not feature any high-tier data releases in the first half of the week. On Wednesday, the Fed will publish the minutes of its July 30-31 meeting. In the post-meeting press conference, Fed Chairman Jerome Powell acknowledged that there was a “real discussion” about cutting the policy rate at the July meeting. Investors will scrutinize remarks surrounding the rate cut discussions. In case the publication shows that several policymakers advocated for a surprise rate cut in July, the USD could come under renewed selling pressure. 

On Thursday, S&P Global will release the preliminary Manufacturing and Services Purchasing Managers Index (PMI) data for August. In case the S&P Global Services PMI falls into the contraction territory by coming in below 50, it could revive concerns over an economic downturn in the US and weigh on the USD, helping XAU/USD push higher.

The 2024 Jackson Hole Economic Policy Symposium titled "Reassessing the Effectiveness and Transmission of Monetary Policy" will be held on August 22-24. Fed Chairman Jerome Powell will deliver a speech at the second day of the event on Friday.

Even if Powell confirms a rate cut in September, it is unlikely to trigger a market reaction, since such a decision is already fully priced in. Powell could push back against market expectations about the Fed possibly lowering the policy rate by 50 bps at a future meeting and note that they are likely to ease policy at a steady pace. In this scenario, US T-bond yields could stretch higher and cause Gold to edge lower.

In a recently published report, TD Securities senior commodity strategist Daniel Ghali noted that the positioning in Gold markets is becoming technically bearish with Commodity Trading Advisors (CTAs) remaining “max-long.”

“Several of the major cohorts in Gold markets are now facing buying exhaustion, whereas the narrative that propelled prices to these all-time highs now appears stale. The risk of a positioning washout is at its highest levels of the year,” Ghali noted and added:

“A repricing in Fed expectations could be the catalyst to shake-out some complacent length, potentially catalyzing subsequent liquidations with several major cohorts simultaneously vulnerable. Jackson Hole is the next potential catalyst, but Nonfarm [Payrolls] data on the following week will be key.”

Gold technical outlook

The Relative Strength Index (RSI) indicator on the daily chart stays above 60, suggesting that the bullish bias remains intact.

On the upside, $2,500 (psychological level, static level, record high) could act as the next resistance. In case Gold manages to flip this level into support, the upper limit of the ascending channel could be seen as the next bullish target at $2,600.

Technical sellers could show interest if Gold drops into the lower half of the ascending regression channel by returning below $2,480 and using this level as resistance. In this scenario, the 20-day Simple Moving Average (SMA) could be seen as next support at $2,425 before $2,400 (psychological level, static level). A daily close below the latter could open the door for an extended correction toward the 100-day SMA, currently located at $2,380.

Quote source: Fxstreet.

Pipscollector.com - Key Points:

• EUR/USD climbs above 1.0950 on soft US PPI report for July.
• Market speculation for a 50 basis points interest-rate cut in September has slightly improved.
• ECB Rehn supports more rate cuts to boost Eurozone economic growth.

EUR/USD gains sharply above 1.0950 in Tuesday’s New York session. The major currency pair rises as the US Dollar (USD) dips after the United States (US) Producer Price Index (PPI) data turned out softer than expected in July. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls sharply below 103.00.

The data showed that the annual headline came in lower at 2.2% from the estimates of 2.3% and June's figure of 2.7%, upwardly revised from 2.6%. In the same period, the core PPI, which excludes volatile food and energy prices, decelerated to 2.4% from expectations of 2.7% and the former release of 3%. Month-on-month headline PPI rose expectedly by 0.1%, while the core figure remained flat.

Slower growth in prices of goods and services at factory gates has boosted expectations of a big interest rate cut announcement by the Federal Reserve (Fed) in the September meeting. According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that traders see a 54.5% chance that interest rates will be reduced by 50 basis points (bps) in September. The likelihood of a 50 bp rate reduction has increased from the odds of 49.5% after the release of the soft PPI report but still remained far below the 68% chance recorded a week ago.

Daily digest market movers: EUR/USD capitalizes on weak US Dollar

• EUR/USD jumps to near 1.0950 as the US Dollar slips after the release of the soft US PPI report. The US Dollar is expected to face more volatility ahead as the US Consumer Price Index (CPI) data for July is lined up for release on Wednesday. The inflation data will significantly influence market speculation about the size and timing of interest rate cuts by the Fed for the entire year.
• Annual headline and core inflation is expected to have decelerated by one-tenth to 2.9% and 3.2%, respectively, with monthly figures growing by 0.2%. The inflation data will indicate whether the Fed will adopt a cautious policy-easing approach or will choose to reduce interest rates more aggressively.
• Meanwhile, the Euro (EUR) faced mild selling pressure after the release of the downbeat German and Eurozone ZEW Survey-Economic Sentiment for August, which is a key measure to investors' morale. ZEW Survey-Economic Sentiment for Germany and the Eurozone declined sharply to 19.2 and 17.9, respectively. ZEW president Achim Wambach said, "Economic expectations are still affected by a high level of uncertainty, driven by ambiguous monetary policy, disappointing business data from the US economy and growing concern about an escalation of the conflict in the Middle East."
• More broadly, the Euro's performance is being guided by market speculation for European Central Bank (ECB) rate cuts. Economists are mixed about the ECB’s monetary policy outlook, namely whether the central bank will cut interest rates aggressively or use a calibrated approach.
• The Eurozone economy grew faster than expected in the second quarter, but its largest country, Germany, is facing a vulnerable demand from domestic and overseas markets. The German GDP contracted by 0.1% in the second quarter of this year. Last week, Finnish ECB policymaker Olli Rehn said that “rate cuts would help the eurozone economy recover, in particular the fragile industrial growth and subdued investments,” Reuters reported.

Euro Price Today:

Pipscollector.com - Key Points:

• XRP tumbled 6.44% on Monday, August 5, ending the session at $0.4897.
• Ripple effects from the Bank of Japan’s monetary policy decision overshadowed hopes of a settlement.
• On Tuesday, August 6, SEC vs. Ripple case-related updates require consideration as the SEC meeting looms.

XRP Extends Losing Streak to Six Sessions

On Monday, August 5, XRP tumbled 6.44%. Following a 5.78% slide on Sunday, August 4, XRP ended the session at $0.4897. Significantly, XRP extended its losing streak to six sessions as the broader crypto market slid by 7.15% to a total market cap of $1.868 trillion.

The Bank of Japan and the Yen Carry Trade

XRP and the broader crypto market continued to feel the effects of the Bank of Japan’s rate hike and reduction in Japanese Government Bond (JGB) purchases.