KVB Market Analysis | 14 August: USD/JPY Stabilizes Amid Inflation Data; Technical Indicators Suggest Potential Correction

Product: XAU/USD

Prediction: Decrease

Fundamental Analysis:

On Tuesday, the U.S. Producer Price Index (PPI) rose by 0.1%, with core PPI unchanged, signalling a continued slowdown in inflation. Traders are now focused on Wednesday's U.S. Consumer Price Index (CPI) and Thursday's retail sales data to anticipate the Federal Reserve's next moves. XAU/USD prices saw some selling near the monthly high, erasing the previous day's 1% gain. A generally positive stock market tone reduced demand for safe-haven assets, and some repositioning ahead of the key U.S. inflation data added pressure on precious metals.

Technical Analysis:

On the daily chart, gold has finally rebounded to the resistance zone near the $2483 level. Bears are expected to step in above this level, aiming to push the price back down to the $2360 support level. On the other hand, bulls are hoping for a further breakout to increase their bullish bets and drive the price to new highs. On the 4-hour chart, the price is still stuck in a range between the $2360 support and the $2483 resistance. Market participants may continue to “range trade” by buying at support and selling at resistance until a breakout occurs.

Product:USD/JPY

Prediction: Decrease

Fundamental Analysis:

The yen weakened for a second day, while the U.S. dollar softened in quiet trading as markets awaited U.S. inflation data that could signal future Fed rate cuts. The July U.S. Producer Price Index (PPI) rose less than expected, with lower service prices offsetting goods costs, showing continued easing inflation. This led to dollar weakness. Since July, the yen's sharp rise disrupted the forex market, unwinding carry trades and causing stock declines. However, the dollar's drop to $146.98 against the yen on Tuesday suggests the market may have moved past the worst of recent volatility.

Technical Analysis:

USD/JPY is trading around $147.40 on Tuesday. The daily chart shows the pair is below the nine-day Exponential Moving Average (EMA), indicating a short-term bearish trend. The 14-day Relative Strength Index (RSI) has moved above 30, suggesting a possible correction. If the RSI moves closer to 50, it could signal an improvement in momentum. For support, the USD/JPY pair might test the seven-month low of $141.69 from August 5, followed by support at $140.25. On the upside, the pair could test the immediate resistance at the nine-day EMA near $147.72. A breakout above this level might reduce bearish pressure and push the pair toward the 5-day EMA at $153.68.

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

EUR/USD rose on Tuesday as the U.S. dollar weakened following a sharper-than-expected drop in Producer Price Index (PPI) inflation. Traders are now waiting for the Eurozone GDP growth data, due early Wednesday, but the main focus remains on the upcoming U.S. Consumer Price Index (CPI) inflation figures. Euro-area GDP for Q2 is expected to stay at 0.3% quarter-on-quarter and 0.6% year-on-year. While no changes are expected, a significant deviation could trigger risk-off selling if the data is lower, or boost the current bullish trend if growth surprises to the upside.

Technical Analysis:

EUR/USD is likely to test the August high of $1.1008 before aiming for the December 2023 high of $1.1139. On the downside, the next target is the 200-day SMA at $1.0835, followed by the weekly low of $1.0777 from August 1 and the June low of $1.0666 from June 26, before reaching the May bottom of $1.0649. Bullish momentum may continue to push prices up intraday, but there is still a risk of technical weakness as EUR/USD struggles to stay above the 200-day Exponential Moving Average (EMA) at around $1.0820.

Product: BTC/USD

Prediction: Increase

Fundamental Analysis:

U.S. President Biden and Iranian officials suggested that retaliatory attacks might be delayed, even though Israel ordered residents of Khan Younis to evacuate immediately after Hamas attacked Tel Aviv for the first time in months. Poor U.S. PPI data has increased the likelihood of interest rate cuts, with a 50 basis point cut in September now possible. The market fully expects a 100 basis point cut by the end of the year. Bitcoin has bounced back above $60,000. Ongoing withdrawals from U.S.-listed Bitcoin ETFs on Monday, along with recent fund transfers from the Mt. Gox wallets reported by Arkham Intelligence, are increasing uncertainty in the market.

Technical Analysis:

Bitcoin's recent price action suggests that it could continue to rise, supported by favourable technical indicators. Bitcoin is trading near the midpoint, with resistance at $67,667 and support at $54,336. There is potential for further upside, with $67,667 being the next major long-term resistance target. If Bitcoin successfully closes above the $61,001 resistance level, it could signal another attempt to reach the $67,667 resistance. Breaking through this level might pave the way for a retest of the $65,000 psychological barrier, which could attract more buyers and boost bullish momentum.

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