KVB Market Analysis | 16 August: USD/JPY Forecast: Short-Term Bearish Trend Amid Dollar Consolidation

Product: XAU/USD

Prediction: Decrease

Fundamental Analysis:

On Wednesday, gold prices gave up earlier gains and dropped by as much as 0.9% after U.S. inflation data showed that inflation eased in July. Despite the drop, gold remains close to the record high it reached last month. So far this year, gold prices have risen by 19%, mainly due to optimism about monetary easing and central banks buying more gold. After the U.S. data was released, the U.S. dollar rose against other currencies, making gold more expensive for holders of other currencies. Additionally, the yield on the 10-year U.S. Treasury bond also increased significantly.

Technical Analysis:

The daily chart for XAU/USD shows the pair is still trading within its usual range. Although it's trading higher, it recorded a lower high and a lower low, which is often seen as a bearish signal. Technical indicators have slightly turned down but are still in positive territory, reducing the chances of a significant drop. The pair continues to trade above all its moving averages, with the 20-day SMA flat and above the bullish 100 and 200-day SMAs. Overall, a sharp decline seems unlikely.

Product: USD/JPY

Prediction: Increase

Fundamental Analysis:

The gains from this year's arbitrage trades have been wiped out, with various broad bank indicators showing that 65%-75% of these positions have been closed. The dollar's reaction has been somewhat expected but also slightly disappointing. A 100 basis point rise in U.S. short-term interest rates is too significant for the dollar to ignore. JPMorgan has lowered its dollar forecasts, especially for USD/JPY, now predicting $146 in Q4 2024 and $144 in Q2 2025, down from $147. While the U.S. job market is weakening, other data remains solid. Historically, the dollar tends to consolidate after such large rate swings.

Technical Analysis:

USD/JPY trades around $147.40 on Thursday. The daily chart shows the pair is just below the nine-day Exponential Moving Average (EMA), indicating a short-term bearish trend. The 14-day Relative Strength Index (RSI) is slightly above 30, hinting at a possible correction. Support may be found near the seven-month low of $141.69 from August 5, with further downside targeting $140.25. On the upside, the pair could face resistance at the nine-day EMA around $147.53, followed by the 50-day EMA at $153.40.

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

EUR/USD fell below the $1.1000 mark on Thursday, even as overall market sentiment improved. US Retail Sales jumped to an 18-month high of 1.0% in July, far exceeding the expected 0.3% increase and reversing the previous month's -0.2% drop. These positive signs are easing fears of a possible US recession. However, the market's expectations for a significant rate cut by the Federal Reserve have decreased. According to the CMEs FedWatch Tool, the chances of a 50 basis point cut in September have dropped to 25%, down from 70% last week. A smaller 25 basis point cut is still widely expected.

Technical Analysis:

From a technical perspective, the daily chart for EUR/USD suggests it might continue to decline. The pair is trading above all its moving averages, with the 20-day Simple Moving Average (SMA) trending upwards around $1.0890. The 100 and 200 SMAs are also pointing upward but are far below the 20 SMA, reducing the likelihood of a significant drop, especially if the $1.0950 support level holds. On the 4-hour chart, the pair shows a neutral-to-bullish stance. Technical indicators lack clear direction but remain in positive territory, as EUR/USD attempts to move back above the bullish 20 SMA after dipping below it earlier.

Product: BTC/USD

Prediction: Decrease

Fundamental Analysis:

FXEmpire analyst Ibrahim Ajibade reported that the U.S. government moved 10,000 Bitcoin, worth nearly $600 million, to a Coinbase Prime wallet. According to Arkham Intelligence, this Bitcoin was initially received in a government wallet two weeks ago and has now been transferred to Coinbase Prime‘s deposit wallet. This transaction is likely part of the $2 billion worth of Bitcoin seized by the U.S. Department of Justice from the Silk Road dark web marketplace. In early April, a wallet holding over 30,000 Bitcoin sent a similar test transaction involving a small amount to Coinbase Prime. Historically, such government-related transactions have significantly impacted Bitcoin’s price. For example, in March 2024, a similar move caused Bitcoins value to drop by 12% within 48 hours.

Technical Analysis:

The upcoming expiration of crypto options might add significant selling pressure on Bitcoin, potentially pushing its price below another key support level. Bitcoin options worth $1.4 billion are set to expire on August 16 at 8 AM UTC. The “max pain” point for these options is at $60,000, meaning most options contracts would be worthless if Bitcoin remains at this price. In the past 24 hours, Bitcoin dropped as low as $56,100. This suggests that unless Bitcoin rebounds above $60,000, the expiration could lead to more downward price swings, as options expiration usually brings more volatility to the crypto market.

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