KVB Market Analysis | 9 September: USD/JPY Under Bearish Pressure Despite Initial Gains; Focus Shift

Product: EUR/USD

Prediction: Increase

Fundamental Analysis:

The EUR/USD pair is trying to recover from losses, trading around 1.1090 during Monday's Asian session. However, gains may be limited due to recent eurozone inflation data, which supports expectations of a rate cut by the European Central Bank at its meeting on Thursday. With headline inflation close to 2% and stable long-term forecasts, the ECB may ease its monetary policy further. Last week's mixed GDP data also reinforced this outlook.

In the U.S., economic data raised uncertainty about a significant interest rate cut by the Federal Reserve. Nonfarm Payrolls increased by 142,000 in August, below expectations, while the unemployment rate dropped to 4.2%. Markets expect at least a 25 basis point cut, with the chance of a 50 basis point cut slightly lower at 29%. Chicago Fed President indicated that officials are aligning with market expectations for a policy adjustment, with his comments rated as dovish.

Technical Analysis:

The Relative Strength Index (RSI) on the 4-hour chart is just below 70, indicating that EUR/USD has room to rise before becoming overbought. Immediate resistance is at 1.1160, followed by 1.1200 (the peak of the recent uptrend) and 1.1250 (a key level from July 2023).

If EUR/USD falls below 1.1100, which is supported by the 100-period and 50-period Simple Moving Averages and the 23.6% Fibonacci retracement, it may turn this level into resistance, prompting sellers to act. In that case, the next support could be at 1.1040 (38.2% Fibonacci retracement) and then 1.1000 (200-period SMA, 50% Fibonacci retracement).

Product: XAU/USD

Prediction: Decrease

Fundamental Analysis:

Gold prices fell over 0.80% after failing to reach the all-time high of $2,531, trading at $2,493, down from $2,529. U.S. economic data raised doubts about a 50 or 25 basis point interest rate cut by the Federal Reserve in September. Nonfarm Payrolls for August missed estimates but improved from July, with the unemployment rate down and average hourly earnings up.

Market expectations shifted, with a 25 basis point cut becoming more likely at 73% odds, while the chance of a 50 basis point cut dropped to 27%. Fed officials expressed support for easing. Despite falling U.S. Treasury yields, Gold prices declined, and the U.S. Dollar Index recovered slightly to 101.22.

Technical Analysis:

Gold prices have a generally positive outlook, but short-term trends appear to be turning negative. After XAU/USD peaked above $2,520, it reversed and formed a "bearish engulfing" candle pattern, indicating potential losses ahead.

The momentum is shifting bearish, as the Relative Strength Index is close to crossing below neutral. If XAU/USD falls below the August 22 low of $2,470, further declines are likely, with support found between $2,435 and $2,431.

Conversely, if prices rise above $2,500, the next resistance will be the year-to-date high of $2,531. If that level is broken, targets would shift to $2,550 and then $2,600.

Product: GBP/USD

Prediction: Increase

Fundamental Analysis:

The GBP/USD pair experienced some buying interest during the Asian session on Monday, climbing back towards the mid-1.3100s. However, several factors may limit further gains. Recent U.S. employment data revealed a slowdown in the labour market, raising concerns about the U.S. economy. This has made investors more cautious, benefiting the safe-haven U.S. Dollar and adding pressure on GBP/USD.

In the UK, a recruiter survey indicated a noticeable cooling in the labour market, with a sharp decline in job placements and slower pay growth. This supports the likelihood of interest rate cuts by the Bank of England, which could deter bullish sentiment for the British Pound. Investors are awaiting UK jobs data due Tuesday, while U.S. Dollar movements will also influence GBP/USD.

Technical Analysis:

The Relative Strength Index on the 4-hour chart has fallen below 60, indicating a loss of bullish momentum. Immediate support is at 1.3130, which corresponds to the Fibonacci 23.6% retracement of the recent uptrend. If this support breaks, the next target could be 1.3100, aligned with the 100-period Simple Moving Average, followed by 1.3040 at the 38.2% Fibonacci retracement.

For GBP/USD, the first resistance level is at 1.3200. If the pair surpasses this level, it may aim for 1.3260 (the peak of the uptrend) and then 1.3300 (a static level).

Product: USD/JPY

Prediction: Decrease

Fundamental Analysis:

USD/JPY is starting the week on a positive note, holding recovery gains just below 143.00. A late rebound in the U.S. Dollar on Friday, along with a downward revision of Japan's Q2 GDP, supports the pair, though differing expectations for Bank of Japan and Federal Reserve policies may limit its rise. Attention is focused on U.S. CPI data set to be released later this week.

On Friday, USD/JPY dropped 0.30% as the dollar continued its overall weakness following disappointing Nonfarm Payrolls, which showed only 142,000 new jobs in August, below the anticipated 160,000. The unemployment rate fell to 4.2%, while average hourly earnings increased by 3.8% year-on-year, beating expectations. Concerns over a slowing economy have led to speculation about a larger interest rate cut by the Fed in September.

Technical Analysis:

The outlook for USD/JPY is bearish as the Relative Strength Index (RSI) is close to the oversold level of 30, suggesting possible downward momentum that could trigger a correction. Additionally, the Moving Average Convergence Divergence (MACD) shows increasing red bars, indicating continued bearish sentiment. The pair has experienced four consecutive sessions of losses, but an upward correction could happen soon.

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