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Abstract:This year's arbitrage gains have been erased, with 65%-75% of these positions closed. The dollar's reaction has been as expected but slightly disappointing, with a significant 100 basis point rise in U.S. short-term interest rates impacting it. JPMorgan has reduced its dollar forecasts, now predicting USD/JPY at $146 in Q4 2024 and $144 in Q2 2025, down from $147. Despite a weakening job market, other economic data remains strong.
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.
Market Analysis Disclaimer:
The market analysis provided by KVB Prime Limited is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any financial instrument. Trading forex and other financial markets involves significant risk, and past performance is not indicative of future results.
KVB Prime Limited does not guarantee the accuracy, completeness, or timeliness of the information provided in the market analysis. The content is subject to change without notice and may not always reflect the most current market developments or conditions.
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Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
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The Japanese Yen (JPY) strengthened against the US Dollar (USD) on Thursday, boosted by stronger-than-expected Q2 GDP growth in Japan, raising hopes for a BoJ rate hike. Despite this, the USD/JPY pair found support from higher US Treasury yields, though gains may be capped by expectations of a Fed rate cut in September.
Gold prices (XAU/USD) rebounded on Thursday after dipping below $2,500 per ounce. Expectations of US interest rate cuts and ongoing political and geopolitical tensions are boosting demand for gold, as lower rates reduce the opportunity cost of holding the non-yielding metal.
The Japanese Yen rose 0.7% against the US Dollar after BoJ Governor Kazuo Ueda hinted at potential rate hikes. This coincided with a recovery in Asian markets, aided by stronger Chinese stocks. With the July FOMC minutes already pointing to a September rate cut, the US Dollar might edge higher into the weekend.