KVB Market Analysis | 8 Nov: USD/JPY Rises on Dollar Strength Despite Intervention Risks

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

EUR/USD retreated to around 1.0800 on Thursday after the Federal Reserve announced a widely anticipated 25 basis point rate cut. With November's decision made, traders are now looking ahead to the Fed's meeting on December 18.

The pair showed some recovery, bouncing back above 1.0800 after falling to about 1.0680 the previous day, influenced by Donald Trumps election win and the possibility of a “Red Sweep.”

Despite these gains, EUR/USD remains below the 200-day moving average near 1.0870, indicating potential for further declines. Meanwhile, the U.S. Dollar reversed sharply, losing ground after rising above 105.00 on the Dollar Index (DXY), as U.S. yields fell and German bund yields rose.

The Fed's statement highlighted easing labor market conditions and inflation nearing the 2% target, while the ECB remains cautious after lowering its deposit rate to 3.25%. Key policy decisions from both the Fed and the ECB will likely shape the future of EUR/USD.

Technical Analysis:

Further losses could see EUR/USD drop to the November low of 1.0682, followed by the June low of 1.0666.

On the upside, the November high of 1.0925 is the first resistance level, followed by the 55-day SMA at 1.0995 and the 2024 high of 1.1214.

Additional declines are likely as long as EUR/USD remains below the 200-day SMA at 1.0868.

The four-hour chart suggests some potential for short-term recovery. Initial resistance is at 1.0824, then at the 200-day SMA of 1.0932, and 1.0996. Initial support is at 1.0682, followed by 1.0666 and 1.0649. The relative strength index is around 48.

Product: XAU/USD

Prediction: Decrease

Fundamental Analysis:

Gold prices are hovering around $2,700 in the Asian session on Friday, struggling to extend their recovery from near the 50-day SMA support, close to a three-week low. Increased demand for the U.S. Dollar, despite a positive risk tone, is adding pressure on gold.

Spot gold rallied after Wall Street opened, approaching $2,700 after dropping to $2,643.28 earlier in the session. The U.S. Dollar weakened as stocks strengthened following the presidential election results, with most Asian and European indexes closing higher.

U.S. indexes are mixed, with the S&P 500 continuing its rally while the Dow Jones Industrial Average struggles. Investors are awaiting the Federal Reserve‘s announcement, expecting a 25 basis point rate cut. Attention will be on how the Fed responds to Trump’s victory, which may disrupt current monetary easing and raise inflation concerns, potentially supporting gold prices.

Technical Analysis:

From a technical perspective, the upside for XAU/USD appears limited. On the daily chart, gold remains below its 20 Simple Moving Average, which is still bullish. The 100 and 200 SMAs are also rising, but they are far below the current price, indicating a long-term bullish trend. Technical indicators have edged slightly higher, with the Momentum around neutral levels and the Relative Strength Index near 50; however, this slight increase is insufficient to signal further gains.

On the 4-hour chart, indicators have corrected from oversold conditions, but the upward movement is losing momentum. The pair has moved above a flat 200 SMA, currently providing support at about $2,687.40, but the 20 SMA is still declining above the current price, which limits short-term bullish potential.

Product: USD/JPY

Prediction: Increase

Fundamental Analysis:

USD/JPY is holding minor support above 153.00 early Friday, recovering some losses from Thursday after reaching its highest point since July 30. Positive market sentiment and a rebound in the U.S. Dollar following the Fed's recent decisions are boosting the pair, but speculation about potential Japanese intervention is limiting its upward potential.

On Thursday, USD/JPY traded slightly above 153.00 as investors looked for direction after the Federal Reserve met expectations with a quarter-point rate cut on November 7. With one more meeting scheduled for 2024, market participants remain cautiously optimistic about another 25 basis point cut this year.

Technical Analysis:

The overbought U.S. Dollar (USD) rally may push above 155.00 before pausing, but the next resistance at 156.00 is unlikely to be reached soon. However, the increase in momentum suggests that the USD could continue rising, potentially reaching 156.00.