KVB Market Analysis | 31 July: USD/JPY Holds Near 152.50 as Markets Eye BoJ and Fed Decisions

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold price is consolidating its previous day's strong gains, holding above the $2,400 mark during the Asian session on Wednesday. Traders are waiting for more cues about the Fed's policy path before making a directional move, with the focus on the upcoming FOMC meeting outcome.

Gold struggled to regain the $2,400 mark on Tuesday, trading just below the threshold as the market assesses news from the US, including the JOLTS report and the rise in the Consumer Confidence Index.

The focus remains on upcoming central bank decisions, with the Bank of Japan potentially discussing raising rates and reducing government bond purchases. Investors are also hoping the Fed will provide clues on a potential September rate cut.

Technical Analysis:

From a technical perspective, the bearish potential for gold (XAU/USD) appears limited. In the daily chart, the pair is trading just below a still bullish 20-day moving average, while the longer-term moving averages maintain an upward slope well below the current level. Technical indicators remain neutral, with the metal confined to a tight range for the second consecutive day.

In the near term, the 4-hour chart shows a neutral-to-bullish outlook. The pair is trading just above the 50% Fibonacci retracement of the June/July rally at $2,388.25, while still contained between directionless moving averages. However, the technical indicators have picked up modestly within positive levels, suggesting a potential upside bias. 

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

The EUR/USD pair is consolidating its losses around 1.0815 during the early Asian session, amid risk-aversion and weaker-than-expected preliminary Q2 GDP from Germany. The pair charted modest losses on Tuesday, building on the prior session's pullback, as investors remain cautious ahead of the upcoming Federal Reserve decision.

The US dollar was unable to sustain its early gains, particularly in response to the Japanese yen's rebound after speculation that the Bank of Japan may signal further policy tightening. Yields on both US and German bonds declined as investors anticipate rate cuts from the Fed and ECB.

On the data front, Germany's flash inflation rose more than expected, while its GDP unexpectedly contracted. The broader Eurozone GDP growth, however, came in above estimates.

Technical Analysis:

On the downside, the EUR/USD pair's next targets are the weekly low of 1.0798, the 100-day moving average at 1.0794, the June low of 1.0666, and the May low of 1.0649.

On the upside, the initial resistance is the July high of 1.0948, followed by the March top of 1.0981 and the critical 1.1000 level.

The pair's bearish bias is likely to return if it remains below the 200-day moving average at 1.0821. The four-hour chart shows some acceleration in the negative bias, with support at 1.0864, 1.0798, and 1.0709. The RSI has rebounded to around 40.

Product:USD/JPY

Prediction: Decrease

Fundamental Analysis:

The USD/JPY pair oscillates near 152.50, above a recent three-month low, as traders await the crucial Bank of Japan (BoJ) policy decision. The markets are discounting a greater chance of a rate hike, which is supporting the Japanese Yen (JPY) and acting as a headwind for the currency pair.

Going forward, investors will focus on the BoJ meeting, where policymakers are expected to hike rates by 10 basis points and announce plans to taper bond-buying operations, further boosting the Yen's appeal.

Meanwhile, a slight recovery in the US Dollar has temporarily halted the major's upside. The US Dollar Index moves higher to near 104.50 as investors turn cautious ahead of the Federal Reserve's policy meeting, where officials are expected to leave rates unchanged but maintain a dovish interest rate guidance.

Technical Analysis:

The USD/JPY pair is trading within a tight range, holding above the crucial support of 156.00 on Monday's European session. Investors are focused on the upcoming interest rate decisions by the Bank of Japan (BoJ) and the Federal Reserve (Fed), scheduled for Wednesday.

The BoJ is expected to raise interest rates, which could support the Japanese Yen and act as a headwind for the USD/JPY pair. Meanwhile, the Fed is anticipated to leave rates unchanged but provide guidance on future monetary policy, which will be closely monitored by the markets.

Traders are adopting a cautious stance, waiting for the outcomes of these key central bank meetings before making any significant moves in the USD/JPY pair.

Product: GBP/USD

Prediction: Decrease

Fundamental Analysis:

The GBP/USD pair is trading defensively near 1.2840 during early Asian hours on Wednesday, as investors remain cautious ahead of the Federal Reserve's interest rate decision on the same day, followed by the Bank of England's policy meeting on Thursday.

The pair touched a nearly three-week low below 1.2810 earlier this week but has since retraced some of the losses, though the technical outlook is yet to point to an extended recovery.

Investors seem reluctant to take any major positions in the GBP/USD pair ahead of the central bank announcements. The upcoming US economic data, like the Consumer Confidence Index and JOLTS Job Openings, could also impact the pair's movements.

Technical Analysis:

The GBP/USD pair is trading slightly below a descending trend line, currently located at 1.2860. The Relative Strength Index (RSI) on the 4-hour chart also remains slightly below 50, indicating a lack of buyer interest.

On the downside, the pair faces interim support at 1.2830 (50% Fibonacci retracement), followed by 1.2800-1.2790 (psychological level and 200-period SMA) and 1.2750 (static level).

If the GBP/USD clears the 1.2860 level and stabilizes above it, the next resistance could be at 1.2880 (38.2% Fibonacci retracement) and then 1.2900 (100-period SMA).

The overall technical picture suggests a consolidation phase, with buyers and sellers lacking clear direction at the moment.

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