KVB Market Analysis | 19 August: JPY Gains Ground on USD Amid Rate Cut Uncertainty and Strong GDP Data

Product: EUR/USD

Prediction: Increase

Fundamental Analysis:

The Euro (EUR) is strengthening against the US Dollar (USD) as investors anticipate a potential interest rate cut by the US Federal Reserve in September. Initially, strong US economic data, including lower unemployment claims and higher retail sales, boosted the USD and pushed the EUR/USD pair lower. However, improving market sentiment and positive US stock futures are now supporting the EUR's rise. The pair is currently trading near 1.1000. Upcoming US economic data releases, including housing starts and consumer sentiment, may have a short-term impact on the exchange rate. If US stock markets continue to rise, the USD could weaken further, potentially leading to further gains for the EUR.

Technical Analysis:

EURUSD is showing signs of strength, with the RSI indicator suggesting that sellers are losing momentum. The EUR/USD pair is currently facing resistance around 1.1040, with further resistance levels at 1.1050-1.1060 and 1.1100. Support levels are located at 1.0960, 1.0940, and 1.0900. This suggests that the EUR may continue to rise, but it could face resistance at the 1.1000 level. If the EUR breaks through this resistance, it could continue to rise towards the 1.1050-1.1060 and 1.1100 levels. However, if the EUR falls below the 1.0960 support level, it could continue to decline towards the 1.0940 and 1.0900 levels.

Product: GBP/USD

Prediction:Increase

Fundamental Analysis:

GBP is strengthening against USD, reaching a one-month high. The move was initially triggered by a bounce off a key technical level and has been supported by positive market sentiment. Strong US economic data, including lower unemployment claims and higher retail sales, initially boosted the USD, but risk appetite and positive US stock futures are now favouring the GBP. Upcoming US economic data releases are unlikely to have a significant impact on the GBP/USD pair, as investors are focused on overall market sentiment. If US stock markets continue to rise, the USD could weaken further, potentially leading to further gains for the GBP.

Technical Analysis:

GBP/USD is currently facing resistance at 1.2950, with further resistance level at 1.3000. Support levels are located at 1.2850-1.2840, 1.2800, and 1.2760. This suggests that the GBP may continue to rise, but it could face resistance at the 1.2900 level. If the GBP breaks through this resistance, it could continue to rise towards the 1.2950 and 1.3000 levels. However, if the GBP falls below the 1.2850-1.2840 support level, it could continue to decline towards the 1.2800 and 1.2760 levels.

Product: XAU/USD

Prediction:Increase

Fundamental Analysis:

Gold prices are fluctuating, initially rising on hopes of US interest rate cuts but then falling after strong US economic data. The strong retail sales and job market data suggest the US economy is resilient, easing recession fears and strengthening the US Dollar. This is negative for gold, which is priced in USD and doesn't pay interest. While some analysts caution against reading too much into the data, others see it as a sign that the Fed might only cut interest rates by 25 basis points in September. Gold traders will be watching the US Purchasing Managers Index and Fed Chair Powell's speech this week for further clues on the future direction of gold prices.

Technical Analysis:

Gold prices are currently moving sideways within a range, potentially forming a triangle pattern. The short-term trend is likely to continue in this range, with gold possibly dropping to $2,400 or even $2,390. A break below $2,432 would confirm this downward trend. However, a decisive breakout above the range ceiling, characterised by a strong green candle, could signal a continuation of the longer-term bullish trend, potentially reaching a new all-time high of $2,550.

Product:USD/JPY

Prediction: Decrease

Fundamental Analysis:

JPY is strengthening against USD after Japan's GDP growth exceeded expectations, raising the possibility of a near-term interest rate hike by the Bank of Japan. The USD/JPY pair initially received support from a stronger US Dollar and higher Treasury yields, but this was countered by increasing expectations of a US interest rate cut in September. The recent US inflation data has fueled debate about the size of the potential rate cut, with traders favouring a smaller 25 basis point reduction but still considering a larger 50 basis point cut. This uncertainty about the Fed's future path is weighing on the USD and supporting the JPY's gains.

Technical Analysis:

JPY is showing signs of strength against USD, with the USD/JPY pair trading slightly below its nine-day moving average, suggesting a short-term bearish trend. The RSI indicator also suggests potential for a correction. Support levels are located at 142.00 and 141.70, while resistance levels are at 147.53, 153.40, and 154.50. This means the pair could continue to decline, but it may find support at the 141.70 level. If it breaks through this level, it could continue to decline towards the 140.25 level. However, if the pair rises above the 147.53 level, it could continue to rise towards the 153.40 and 154.50 levels.

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