Today's analysis: USD/JPY Under Pressure as Yen Strengthens Amid Risk-Off Sentiment

Product: XAU/USD

Prediction:Increase

Fundamental Analysis: 

Gold prices are struggling to gain traction during the Asian session on Tuesday, languishing near a one-and-a-half-week low. This is due to the improved global risk sentiment following Biden's withdrawal from the US presidential race and unexpected interest rate cuts by the People's Bank of China.

Spot gold has continued its decline, trading around $2,390, after hitting a record high of $2,483.63 last week. The US dollar has gained strength as stocks recover from one of the worst weeks of the year, with optimism benefiting the American currency despite political noise.

Investors are in a wait-and-see mode as they anticipate the release of key US economic data, including the Q2 GDP estimate and revisions to the PCE Price Index.

Technical Analysis: 

The XAU/USD pair has been declining for four consecutive days, but the pace of the slide is slowing, suggesting the correction may be nearing its end. The daily chart shows the pair holding above a bullish 20-day Simple Moving Average (SMA), which is also above the ascending 100 and 200 SMAs, providing dynamic support around $2,377.10. Technical indicators are losing their downward momentum while remaining in positive territory, indicating the overbought correction is nearing completion.

However, the 4-hour chart paints a more bearish near-term picture, with the pair trading below a firmly bearish 20-SMA and pressuring a mildly bullish 100-SMA, suggesting continued selling pressure. Technical indicators are also heading south, near oversold levels, with no signs of a reversal yet. 

Product: EUR/USD

Prediction:Increase

Fundamental Analysis: 

The EUR/USD pair traded in a narrow range just below 1.0900 on Monday as the new trading week kicked off with limited economic data. Investors are awaiting key PMI figures from the EU and US on Wednesday.

The US dollar retreated slightly, leaving the DXY around 104.30, despite a rebound in US yields. In response, EUR/USD halted its two-day pullback and revisited the 1.0900 level, but the move lacked conviction.

Yields in the US and Germany edged higher following changes in the US political landscape, while an ECB member advocated for two more rate cuts this year. The market expects the Fed to cut rates in September and December.

Upcoming US GDP and PCE data, as well as global PMIs, are expected to drive market sentiment in the coming days.

Technical Analysis: 

The EUR/USD pair is expected to face increasing resistance at the July peak of 1.0948, followed by the March high of 1.0981 and the key 1.1000 level. If the bears regain control, the pair may approach the 200-day SMA at 1.0813 before falling to the June low of 1.0666 and potentially the 2024 bottom of 1.0601.

However, the overall outlook suggests more gains if the pair maintains trade above the 200-day SMA. The 4-hour chart indicates temporary consolidation, with the initial resistance at 1.0948, followed by 1.0981 and 1.1000. On the downside, the 100-SMA at 1.0838, 200-SMA at 1.0793, and 1.0709 are the key support levels. The RSI has improved to around 48.

Product: USD/JPY

Prediction: Decrease

Fundamental Analysis: 

The USD/JPY pair remains under pressure, trading below 157.00 early Tuesday. The Japanese Yen is gaining strength as risk-off sentiment returns in the Asian session, driving the US Dollar lower. The pair is now looking to Japanese verbal intervention and upcoming US economic data for direction.

On Monday, the USD/JPY fell by more than 0.20%, trading near the top of the narrowest part of the Ichimoku Cloud. As the Asian session begins on Tuesday, the pair is trading at 156.96, virtually unchanged from the previous close.

The pair's near-term outlook remains tilted to the downside, with traders closely monitoring the situation for potential further declines.

Technical Analysis: 

The USD/JPY pair is technically neutral to downward biased, as more bearish signals emerge. This, combined with a potential deceleration of inflation, could weigh on the US Dollar and push the pair lower. Momentum suggests sellers are in control, opening the door for further downside.

Key bearish signals include the Tenkan-Sen crossing below the Kijun-Sen and the Chikou Span piercing below price action. A break below the July 22 low of 156.28 could lead to further declines, with support at the bottom of the Kumo around 155.90/156.00 and the July 18 test at 155.37.

On the upside, a move past the latest cycle peak at 157.86 could face resistance at the Tenkan-Sen and Kijun-Sen around 156.58.

Product: GBP/USD

Prediction: Increase

Fundamental Analysis: 

The GBP/USD pair traded sideways on Monday, consolidating just above 1.2900 as markets take a breather after last week's surge in the US Dollar. The pair is cycling a technical level near 1.2925 as markets await key data releases from both the UK and the US, starting Wednesday.

After reaching a one-year high above 1.3000 last week, GBP/USD closed the week lower as the US Dollar regained strength. The technical outlook suggests a lack of recovery momentum for the pair.

Ahead of the upcoming data releases, the market atmosphere remains risk-averse, potentially limiting the US Dollar's gains. However, the political developments in the US, such as President Biden's withdrawal and Vice President Harris' potential nomination, are yet to have a significant market impact.

Technical Analysis: 

The GBP/USD pair is trading slightly below the lower limit of the ascending regression channel formed since early July. Additionally, the 4-hour Relative Strength Index (RSI) remains below 50, suggesting a lack of recovery momentum for the pair.

On the upside, the immediate resistance levels are 1.2930-1.2940 (50-period Simple Moving Average, lower channel limit), followed by 1.3000 (psychological level) and 1.3030 (midpoint of the channel).

On the downside, potential support levels are 1.2900 (psychological level) and 1.2830 (100-period SMA).

The technical indicators suggest the pair is struggling to gain upside traction, with the downside risks remaining elevated in the near term.

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