KVB Market Analysis | 14 Oct: JPY Weakens Against USD Amid Economic Concerns

Product: XAU/USD

Prediction: Decrease

Fundamental Analysis:

U.S. consumer inflation data came in higher than expected, reducing the market's expectations for a 50 basis point rate cut by the Federal Reserve next month. However, analysts point out that even though expectations for aggressive easing have weakened, the central bank still plans to cut rates. After Thursday's CPI data, gold could have dropped below $2,600 per ounce, but it quickly stabilised. While the U.S. economic calendar is relatively light this week, the market will focus on key consumer data. Economists are eager to see if U.S. consumer spending remains strong. Other analysts also note that beyond economic data and interest rates, gold continues to be well-supported as a geopolitical safe haven. The unrest in the Middle East may continue to influence investment flows next week.

Technical Analysis:

The daily chart for gold shows that after dropping to a neutral level of 50 earlier this week, the Relative Strength Index (RSI) is rising toward 60, suggesting that gold prices are still leaning towards a bullish trend after a technical correction. On the upside, the midpoint of the upward channel since June, at $2,660, acts as short-term resistance. If this barrier is broken, the next target for gold will be $2,675 (static level), followed by $2,700-$2,710 (round number, upper edge of the channel). If gold falls below $2,600-$2,590 and uses this level as resistance, technical sellers may take action.

Product: USD/JPY

Prediction: Increase

Fundamental Analysis:

The Japanese Yen (JPY) slipped lower against the US Dollar (USD) on Friday, halting the recovery it saw the previous day from its lowest point since early August. Comments from Japan's Prime Minister Shigeru Ishiba on monetary policy, combined with a drop in real wages for the first time in three months, lower household spending, and easing pressure from raw material costs, have raised doubts about the Bank of Japans (BoJ) plans to raise interest rates. These factors weakened the JPY, helping the USD/JPY pair gain some interest from buyers as the USD saw a modest increase. Even though there are signs of a weak labor market, traders no longer expect a more aggressive interest rate cut from the Federal Reserve (Fed).

Technical Analysis:

From a technical view, USD/JPY broke above the 50-day Simple Moving Average (SMA) for the first time since mid-July and held above the 38.2% Fibonacci retracement level, signalling bullish momentum. Daily chart indicators are gaining traction without being overbought, suggesting further upside potential. Any drop is likely to attract buyers near the $148.00 mark, which acts as key support. If breached, the pair could fall to 147.35 and then 147.00. On the upside, resistance is seen at 149.00, with the next target at 149.55-149.60, potentially reaching the 150.00 mark and 150.75-150.80 region.

Product: BTC/USD

Prediction: Decrease

Fundamental Analysis:

A recent tweet from The Kobeissi Letter notes that the total money supply in the US, Eurozone, Japan, and China has reached a record $89.7 trillion, with $7.3 trillion added in the past year. Historically, Bitcoin tends to rise with the M2 money supply, usually with a 75 to 90-day delay. Many analysts predict a strong rally for BTC as 2024 ends, despite potential economic challenges. Market analyst Joe Consorti suggests that this M2 trend could push Bitcoin to $90,000 by the end of 2024, a view supported by data from CryptoQuant.

Technical Analysis:

From a technical analysis view, Bitcoin's price outlook remains uncertain until it breaks the $65,000 resistance level. While the current price movement is bullish, it is limited by this key resistance, which acts as a psychological barrier for market participants. If Bitcoin fails to break $65,000, it risks a bearish pullback. The first major support level is at $61,591, followed by a stronger support at $59,434. If buyers lose momentum, these levels will be crucial in deciding if Bitcoin can maintain its upward trend or enter a deeper consolidation phase. If large buyers continue and macro conditions favor risk assets, Bitcoin could rise again. Breaking $65,000 may open the door to $70,000 or higher.