Market Analysis

EURUSD

Prediction: Decrease

Fundamental Analysis: 

The Euro declined by 0.44% on Monday, continuing its drop after breaching the key 1.1100 support level. This downward pressure is primarily driven by growing expectations of a European Central Bank (ECB) rate cut at their September 12 meeting. As the Asian trading session kicks off, EUR/USD is hovering around 1.1036. Meanwhile, the U.S. Dollar Index gained strength, reaching 101.70, as mixed U.S. labor market data dampened hopes for a more aggressive 50-basis-point rate cut from the Federal Reserve.

Market participants are now focusing on the upcoming U.S. Consumer Price Index (CPI) report, which could influence the Fed's next policy move. Recent ECB meeting minutes revealed a split among policymakers regarding growth and inflation outlooks, and weaker-than-anticipated CPI figures could intensify discussions about potential rate cuts. Speculative traders have increased their net long positions in the Euro, while commercial traders have raised their net short positions.

Technical Analysis: 

EUR/USD appears poised to test its 2024 high at 1.1201, followed by the 2023 peak at 1.1275 and the psychological level of 1.1300. On the downside, the first key target is the September low at 1.1026, followed by the 55-day simple moving average (SMA) at 1.0930 and a weekly low at 1.0881. If the pair falls further, the critical 200-day SMA at 1.0857 comes into play, with additional support at the weekly low of 1.0777 and the June low of 1.0666.

The broader upward trend remains intact as long as EUR/USD holds above the 200-day SMA. However, the four-hour chart indicates a shift in sentiment toward the downside, with initial resistance at 1.1155, followed by 1.1190 and 1.1201. Immediate support lies at 1.1026, with the next levels at the 200-day SMA of 1.0997 and 1.0949. The relative strength index (RSI) hovers near 40, suggesting weakening momentum.

XAUUSD

Prediction: Bullish

Fundamental Analysis: 

Gold prices are struggling to build momentum after recovering from a multi-day low, fluctuating just above the $2,500 level during Tuesday's Asian session. The gains for XAU/USD are being capped by positive risk sentiment and a stronger U.S. Dollar.

Spot Gold is trading close to $2,500, showing minimal change from Monday and remaining within a narrow intraday range. It reached a peak of $2,505.18 earlier in the American session as Treasury yields initially rose but later fell to 3.70% from a high of 3.76%.

The market is awaiting U.S. inflation data, with the August Consumer Price Index scheduled for release next Wednesday, anticipated to increase by 2.6% year-on-year, down from 2.9% in July. Following the Nonfarm Payroll report, there is growing speculation that the Federal Reserve might consider a 50 basis point rate cut next week due to easing inflation pressures.

Technical Analysis: 

On the daily chart for XAU/USD, buyers are currently in control but remain cautious. The pair is trading near the slightly bullish 20 Simple Moving Average, with buyers showing interest on dips below this level. However, technical indicators are near their midlines, indicating a lack of clear direction. Longer-term moving averages show modest bullish trends but are positioned below the current price.

In the short term, the outlook is neutral to bearish. Resistance is provided by the converging 20 and 100 SMAs near the recent high, while the 200 SMA trends upward around $2,465. The Momentum indicator is pointing lower, suggesting potential downside risk, and the Relative Strength Index is flat around 50.

GBPUSD

Prediction: Bearish

Fundamental Analysis:

GBP/USD has experienced a decline for three consecutive days, trading around 1.3060 during Tuesday’s Asian session. This drop is largely attributed to a stronger U.S. Dollar, buoyed by recent labor data that cast doubt on the likelihood of a significant Federal Reserve rate cut in September.

On Friday, the pair faced selling pressure during the American session, erasing previous gains and ending the week unchanged. It has now reached its lowest level since August 22, falling below 1.3100. Despite weaker labor market data, the U.S. Dollar saw increased demand as a safe haven ahead of the weekend.

The U.S. Bureau of Labor Statistics reported an August Nonfarm Payroll increase of 142,000, falling short of the 160,000 forecast, while the unemployment rate decreased to 4.2%. In contrast, the UK’s FTSE 100 Index rose over 0.5%, and U.S. stock futures gained between 0.4% and 0.75%. With limited macroeconomic data scheduled for release, the U.S. Dollar's strength may wane if risk appetite increases later in the day.

Later today, the UK’s Office for National Statistics will publish employment data, and market participants will be eyeing the U.S. Consumer Price Index (CPI) data set for Wednesday.

Technical Analysis:

GBP/USD has closed a 4-hour candle below the 100-period Simple Moving Average (SMA) for the first time since mid-August. The Relative Strength Index (RSI) on the 4-hour chart is approaching 30, suggesting the pair may be nearing oversold conditions.

If the 1.3100 level (the 100-period SMA) acts as resistance, sellers could continue to dominate GBP/USD. Key support levels to watch include 1.3040 (Fibonacci 38.2% retracement), 1.3000 (a psychological level), and 1.2960-1.2970 (Fibonacci 50% retracement and 200-period SMA).

Conversely, if GBP/USD breaks above 1.3100, it may face resistance at 1.3130 (Fibonacci 23.6% retracement), followed by 1.3150 (50-period SMA) and 1.3200 (another psychological level).

USDJPY

Forecast: Potential Downtrend

Fundamental Analysis: 

The USD/JPY pair has shown a positive movement for the second consecutive day after reaching approximately 142.85 during the early Asian session. However, the bullish momentum remains weak. Currently, prices are trading modestly higher, just below the mid-143.00s, but are still near the one-month low hit last Friday.

The pair has recently breached a crucial multi-year trendline, suggesting that the long-term uptrend might be losing strength. For a definitive reversal, the price needs to break below and close beneath the August 5 low of 141.69.

Key support is located at 140.25, which may halt the decline. A drop below this support level would further confirm a potential trend reversal.

Technical Analysis: 

The USD/JPY has fallen below a significant multi-year trendline, signaling a potential weakening of the long-term uptrend. To confirm a reversal, the price must drop below and close under the August 5 low of 141.69, preferably on a daily or weekly basis.

Strong support is at 140.25, which may slow the pair’s descent. Should the price fall below this support, it would further indicate a trend reversal.

Technical analysis highlights the principle that "the trend is your friend," suggesting that recognizing the trend direction can aid in predicting future price movements. A breakdown below key support levels is likely to lead to further declines.

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