KVB Market Analysis | 28 August: Yen Strengthens on BoJ Rate Hike Hints; USD/JPY Faces Uncertainty

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

The Gold price (XAU/USD) gains traction above $2,500 per troy ounce on Wednesday, bolstered by the escalating geopolitical tensions in the Middle East. Additionally, US Federal Reserve (Fed) Chair Jerome Powell's speech at the Jackson Hole symposium last week, signalling “time has come” to begin lowering interest rates, supports the precious metal as it reduces the opportunity cost of holding non-interest-paying assets.

Technical Analysis:

The Gold price edges higher on the day. The precious metal remains capped under a five-month-old ascending channel upper boundary and the record high. A broader positive outlook of yellow metal remains unchanged as it holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which stands above the midline near 64.70, affirming continued bullish pressure in the near term. The key resistance level for XAU/USD emerges at $2,530, representing the confluence of the all-time high and the upper boundary of the trend channel. A bullish breakout above this level could make a play for the $2,600 psychological barrier.

Product: EUR/USD

Prediction: Increase

Fundamental Analysis:

EUR/USD drifted into the high side on Tuesday, bolstered by a continued broad-market easing in Greenback bidding pressure. Fibre ticked back into the high end after the trading week kicked off with a slight pare back in recent gains, but a fresh round of risk-on market sentiment sent bids back into recent highs. Still, the pair remains trapped below the 1.1200 handle as Euro bulls struggle to confidently force Fibre higher. Fed Chair Jerome Powell all but confirmed that the central bank will pivot into a rate-cutting cycle on September 18 during an appearance at the Jackson Hole Economic Symposium last Friday, sending market appetite into the ceiling once again.

Technical Analysis:

EUR/USD is on pace for its best single-month performance since November of 2022, up over 3.1% just in the month of August. Despite this weeks early technical exhaustion pullback, Fiber has gained ground for four consecutive trading weeks, and is bidding well above the 200-day Exponential Moving Average (EMA) at 1.0832. Despite a healthy bid deep into bull country, Fiber is running a deep exposure to a bearish pullback, and a lack of topside momentum could see price action tumble all the way back to the 50-day EMA at 1.0925.

Product: USD/JPY

Prediction: Increase

Fundamental Analysis:

The Japanese currency strengthened, with the Yen gaining as much as 0.7% against the US dollar, following comments from Bank of Japan (BoJ) Governor Kazuo Ueda suggesting further interest rate increases. This development coincided with a recovery in Asian markets, buoyed by improved performance in Chinese stocks. Given we have already perused the FOMC minutes from July where the majority of the committee agreed that a rate cut in September is appropriate, there could be very little new information being shared today. Under such a scenario it wouldnt be unusual to see the dollar breathe a sigh of relief and trade a little higher heading into the weekend.

Technical Analysis:

The pair has attempted a pullback after the massive downtrend, which culminated after a softer US CPI print encouraged Japanese officials to intervene in the FX market to strengthen the yen. USD/JPY now trades lower while markets attempt to assess the next move. If the Fed adopts a bearish outlook while the BoJ continues to move forward with one more rate hike in December, it is possible there will be further weakness heading into the end of the year. Support lies at the spike low of 141.70, followed by 140.25 – a prior swing low from December last year. Resistance lies at the recent swing high of 149.40.

Product: BTC/USD

Prediction: Decrease

Fundamental Analysis:

Price breakouts have become rather short-lived in the crypto market recently, with the most recent case being Bitcoin‘s BTC/USD brief rally to $65,000 on Aug. 24. According to data from Glassnode, traders have become more risk-averse and wary of using leverage to chase larger gains in the crypto market. In the Aug. 27 The Week Onchain Newsletter, the analysts explained that the “phenomenon” or reduced appetite for speculation and leverage is reflected by “a vast swathe of tokens now displaying a neutral funding rate,” suggesting that “spot markets are likely to be in the driver’s seat for the near term”.

Technical Analysis:

Bitcoin is in a falling trend channel in the short term. This shows that investors over time have sold at lower prices to get out of the currency, and indicates negative development for the currency. The currency is moving within a rectangle formation between support at 52811 and resistance at 68440. A decisive breakthrough at one of these levels indicates the new direction for the currency. The currency is between support at points 61400 and resistance at points 64000. A definitive break through of one of these levels predicts the new direction. Volume tops and volume buttons correspond badly with tops and bottoms in the price. This confirms the trend. The RSI curve shows a rising trend, which is an early signal of a possible trend reversal upwards for the price as well. The currency is overall assessed as technically negative for the short term.

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