JPY strengthens across the board

JPY unexpectedly rallies

In a surprise move in the FX market, JPY strengthened across the board. JPY’s strengthening seems to be linked to BoJ board member Takata’s hawkish comments. He stated that BoJ could conduct rate hikes in a nimble manner to fight inflationary pressures. The comment enhanced market expectations for the bank to hike rates in the September meeting and currently, JPY OIS imply a 77% probability for a 25 basis points interest rate increase and a 60% for another rate hike in the December meeting. 

Drop of Oil prices allows US stock markets to rise

US equities seem to have edged higher yesterday as oil prices corrected lower, easing market worries somewhat. In a latest development, Microsoft (#MSFT) reported sales of its Azure cloud segment on a quarterly basis, making it directly comparable with Amazon’s respective department. The move could be considered as highly competitive and imply high prospects for MSFT.

Oil prices correct lower

Oil prices corrected lower yesterday and during today’s Asian session. Oil market worries about tensions in the Middle East tended to ease as US President Trump stated that the renewed attacks on Iran are not to last long. The news enhanced market expectations for the flow of oil through the Straits of Hormuz to resume, weighing on oil prices. 

Gold benefits from USD weakness

Gold’s price edged higher, benefiting from USD’s weakness. The corresponding moves were another display of the negative correlation between the two trading instruments. We continue to consider the Fed’s intentions as the main driver for gold’s price and any hawkish comments by Fed policymakers could weigh on gold’s price and vice versa. We consider the release of the US employment report for August tomorrow as the next big test for gold’s price. 

Other highlights for today

Today we get Switzerland’s and Turkey’s CPI rates for August, Switzerland’s GDP rate for Q2, UK’s services PMI figure for August, the US weekly initial jobless claims figure, Canada’s trade data for July, the US ISM non-manufacturing PMI figure for August, while the Fed’s Waller, Hammack and Goolsbee speak. In tomorrow’s Asian session we get Japan’s July All Household spending. 

Charts to keep an eye out

USD/JPY tumbled breaking the 157.50 (R1) support line, now turned to resistance. We expect the bearish outlook to continue at the current stage, before a stabilisation of the pair takes place. We note that the RSI indicator has dropped nearing the reading of 30, implying an intense bearish market sentiment for the pair, supporting our outlook. The pair’s price action has breached the lower Bollinger band, which may be reason for a correction higher of the pair. Should the bears maintain control over the pair, we may see USD/JPY breaking the 155.00 (S1) support line with the next possible target for the bears being set at the 152.10 (S2) support level. Should the bulls take over, we may see USD/JPY reversing the losses made since yesterday, by breaking the 157.50 (S1) support line and start aiming if not reaching the 160.50 (R2) resistance level.   

XAU/USD’s price bounced on the 4275 (S1) support line, edging higher yesterday. As the precious metal’s price has been interrupted we switch our bearish outlook in favour of a sideways motion bias between the R1 and the S1 for the time being. Also the RSI indicator seems to stabilise at the reading of 50, implying a rather indecisive market. Should the bulls take control of gold’s price, we may see it breaking the 4550 (R1) resistance line and start aiming for the 4890 (R2) area. Should the bears be in charge, gold’s price may break below the 4275 (S1) line, and continue lower aiming for the 3960 (S2) support level.

USD/JPY daily chart

• Support: 155.00 (S1), 152.10 (S2), 149.40 (S3).
• ·Resistance: 157.50 (R1), 160.50 (R2), 162.80 (R3). 

XAU/USD daily chart

• Support: 4275 (S1), 3960 (S2), 3600 (S3).
• Resistance: 4550 (R1), 4890 (R2), 5245 (R3).