Market Analysis

EURUSD

Forecast: Further Downside Likely

Fundamental Analysis:

EUR/USD dropped on Tuesday following Germany's inflation report, which increased the chances of another interest rate cut from the European Central Bank (ECB). As the Asian session kicks off on Wednesday, EUR/USD hovers around 1.1021, continuing its downward trajectory toward the 1.1015-1.1010 zone, largely driven by strong U.S. Dollar demand.

The U.S. Dollar Index remains steady near 101.70 as U.S. Treasury yields retrace. Traders are now focused on the upcoming U.S. Consumer Price Index (CPI) data, which may offer clues regarding potential Federal Reserve rate cuts, particularly following recent comments from Fed officials.

While the ECB has not given any strong indications of an imminent rate cut, weaker-than-expected CPI data could prompt a reevaluation at its September 12 meeting. If the Fed decides to cut rates, the narrowing policy gap between the Fed and ECB might lend support to the EUR/USD pair. However, with the U.S. economy expected to outperform the Eurozone in the long term, any weakness in the dollar may be limited. Speculative traders have increased net long positions on the Euro, while commercial traders have boosted net short positions, indicating a significant uptick in market activity.

Technical Analysis:

Should bulls regain momentum, EUR/USD faces initial resistance at the recent September high of 1.1155 (September 6), followed by the 2024 peak at 1.1201 (August 26) and the yearly high of 1.1275 (July 18).

On the downside, the pair is eyeing the September low of 1.1015 (September 10) as the next support level, followed by the 55-day Simple Moving Average (SMA) at 1.0936 and the weekly low of 1.0881 (August 8). Further declines could target the 200-day SMA at 1.0858, with additional support levels at 1.0777 (August 1) and the June low of 1.0666. The pair's overall uptrend remains intact as long as it stays above the 200-day SMA.

XAUUSD

Prediction: Increase

Fundamental Analysis: 

Gold prices are holding firm as traders await the release of U.S. Consumer Price Index (CPI) data, seeking insight into the Federal Reserve's approach to interest rate cuts. With key economic reports approaching, expectations of a Fed rate-cut cycle, along with a decrease in demand for the U.S. Dollar, and a cautious market sentiment are likely to provide support for XAU/USD.

On Tuesday, gold continued its upward momentum, trading around $2,513 per troy ounce during the mid-U.S. session. Investors exhibited risk aversion ahead of critical upcoming events, boosting the U.S. Dollar against most currencies. However, safe havens like gold, the Swiss Franc, and the Japanese Yen posted modest gains. The market's cautious sentiment appears to stem from the anticipation of Wednesday’s U.S. CPI report and the European Central Bank’s policy decision on Thursday. Despite forecasts of easing inflationary pressure, inflation remains above the Federal Reserve’s 2% target. Next week, the Fed is widely expected to announce a 25 basis point rate cut.

Technical Analysis: 

The daily chart for XAU/USD presents a neutral-to-bullish outlook, with the pair drawing in buyers near the 20-period Simple Moving Average (SMA), which is trending upward. However, technical indicators provide mixed signals. The Momentum indicator is hovering near the 100 mark, and the Relative Strength Index (RSI) is consolidating around 58. Although both the 100 and 200 SMAs are rising, they remain significantly below the current price, limiting the downside risk.

In the short term, the 4-hour chart also shows a neutral stance. XAU/USD is trading above its 20 and 100 SMAs, with the 200 SMA positioned well below the current price. Technical indicators are flat, while the RSI, sitting at 56, suggests a lack of bearish momentum in the market.

GBPUSD

Prediction: Decline

Fundamental Analysis:

The GBP/USD pair continues to face downward pressure, edging closer to 1.3050 during the U.S. trading session. Despite receiving a brief boost from positive UK employment data earlier, the pair struggles to maintain its momentum in a cautious market atmosphere.

On Tuesday, the UK’s Office for National Statistics reported that the ILO Unemployment Rate dropped slightly to 4.1% for the three months ending in July, down from 4.2%, aligning with expectations. Employment figures showed a notable increase of 265,000 jobs, compared to the previous rise of 97,000. However, wage growth on an annual basis eased to 5.1% from 5.4%, dampening the overall outlook.

The focus now shifts to U.S. inflation data, with the August Consumer Price Index expected to slow to 2.6% year-on-year. In addition, market sentiment around Federal Reserve rate cuts has stabilized, with the likelihood of a 50 basis point cut this month reduced. Investors are anticipating 100-125 basis points of easing by the end of the year, with attention turning to Fed Chair Powell's press conference on September 18.

Technical Analysis:

The GBP/USD pair has fallen below the 20-day Simple Moving Average, signaling a short-term bearish trend. However, as it remains above both the 100 and 200-day SMAs, the broader outlook remains positive. Technical indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) have flattened in negative territory, suggesting that while bearish pressure exists, it is not currently overwhelming.

USDJPY

Prediction: Potential Decline

Fundamental Analysis: 

The USD/JPY pair is under selling pressure for the second consecutive day, finding support near the 142.00 level and seeing a slight recovery, now trading around 142.30. This is close to the one-month low reached last week. The recent downturn is largely driven by contrasting monetary policies between the Bank of Japan (BoJ) and the Federal Reserve (Fed), leading to a reduction in carry trades and higher demand for the Japanese Yen. BoJ Governor Kazuo Ueda confirmed plans to raise interest rates if Japan’s economic outlook aligns with projections through FY2025.

On the other hand, markets have already factored in a 25-basis point rate cut by the Fed during its meeting on September 17-18, limiting the U.S. Dollar’s upside potential. Additionally, the current cautious market sentiment enhances the safe-haven appeal of the Yen, further pressuring the USD/JPY pair downward.

Given these conditions, the outlook for USD/JPY remains bearish. However, traders may hold off on decisive moves until the release of the U.S. Consumer Price Index (CPI), which could offer further insight into the Fed’s rate-cut trajectory and shape near-term U.S. Dollar dynamics.

Technical Analysis: 

The USD is expected to range between 142.40 and 144.00 in the short term, with a gradual downward bias over the long term. While the overall trend suggests weakening, the key support level at 140.80 is unlikely to be breached in the near future. The USD’s downward momentum could persist as long as it stays below the strong resistance at 144.00, which continues to hold steady.

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