Yen Strengthens with Possible BoJ Policy Tweak

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Bank of Japan (BoJ) Governor Ueda's hawkish statements over the weekend have contributed to the strength of the Japanese Yen during the Asian morning session. Ueda mentioned that the Japanese Central Bank may have enough data by the end of the year to assess whether wage growth and inflation in Japan are rising sustainably. At the same time, the US dollar has shown remarkable strength, recording an 8-week winning streak, a move not witnessed since 2005. This strength is attributed to resilient US economic data, which has heightened expectations of further interest rate hikes from the Federal Reserve. However, this strong dollar has pressured gold prices and the equity market. Meanwhile, oil prices have remained steady, hovering near the $87 mark amid concerns over dwindling oil supplies.

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Current rate hike bets on 20th September Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (93.0%) VS 25 bps (7.0%)  

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 Market Movements

DOLLAR_INDX

The US dollar remained on its bullish momentum, with investors on the edge of their seats, eagerly awaiting upcoming inflation data. The greenback has maintained its steady course, showing signs of resilience, especially following recent employment figures that, while not dazzling, did alleviate immediate concerns of an aggressive Fed rate hike to combat inflation.

The dollar index extended its gains while currently testing the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 55, suggesting the index might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 105.25, 106.25

Support level: 104.25, 103.05

XAU/USD

Gold prices retreated slightly as hopes persist for a resilient US economy, heightening expectations of Federal Reserve rate hikes. Yet, much like other vital dollar-denominated assets, the gold market is expected to remain subdued in anticipation of crucial inflation reports.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 42, suggesting the commodity might extend its losses since the RSI stays below the midline. 

Resistance level: 1925.00, 1935.00

Support level: 1910.00, 1895.80

EUR/USD

The euro has been on a bearish trajectory, primarily under the shadow of the resurgent US dollar. Market participants, wary of looming inflation figures, have sought refuge in the haven of the dollar. Unlike some of its central bank counterparts, the European Central Bank (ECB) is anticipated to keep its interest rates unchanged at its upcoming policy meeting. This is largely due to disheartening economic data, including Eurozone GDP figures that fell short of market expectations, casting doubt on the possibility of ECB rate hikes soon.

EUR/USD is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 35, suggesting the pair might enter oversold territory. 

Resistance level: 1.0970, 1.1235

Support level: 1.0690, 1.0540

GBP/USD

The week began with a modest gain for the British Pound (GBP), primarily attributed to the easing of the strong US dollar (USD). The dollar index has seen an 8-week gain and maintained a strong bullish trend. In contrast, the lacklustre performance of the UK's economy has hindered the GBP from staging a rebound. Investor focus will be on Wednesday when the UK is set to release its Gross Domestic Product (GDP) data, followed by the US Consumer Price Index (CPI). Both of these economic data releases are expected to have a direct impact on the movement of the GBP/USD currency pair.

The cable consolidated and showed signs of easing from its sluggish trend. The RSi has also rebounded slightly from the 30-level while the MACD has crossed, suggesting the bearish momentum has eased. 

Resistance level: 1.2540, 1.2640

Support level: 1.2460, 1.2390

USD/JPY

Over the weekend, Kazuo Ueda, the Governor of the Bank of Japan (BoJ), made a hawkish statement during a newspaper interview, which subsequently strengthened the Japanese yen (JPY) and caused a gap down in the USD/JPY currency pair. Governor Ueda suggested that the BoJ could possibly have enough data by the end of the year to assess the sustainability of wage growth and inflation in Japan. This statement has led the market to speculate that the BoJ might consider ending its ultra-loose monetary policy early next year, further bolstering the Yen.

USD/JPY encountered a strong resistance level at 147.80 and has formed a triple-top price pattern. The MACD is moving downward while the RSI has dropped to below 50-level, suggesting a diminishing bullish momentum for the pair. 

Resistance level: 148.90, 151.45

Support level: 145.10, 141.88

Nasdaq 

US equity markets continue to consolidate within a range, due to lack of the catalysts necessary to propel them forward. However, this calm may be short-lived as market participants brace themselves for the potential rising volatilities with the release of fresh CPI and PPI inflation readings later in the week.

Nasdaq is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 51, suggesting the index might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 15780.00, 16585.00

Support level: 14610.00, 13660.00

BTC/USD

Bitcoin (BTC) has experienced a period of significant sideways trading over the past week. This comes after the cryptocurrency market saw fluctuations following Greyscale's court case victory and the SEC's decision to delay its determination on the spot BTC ETF until October. As speculation regarding a potential rate hike by the Fed intensifies, it has a dampened effect on riskier asset markets, including cryptocurrencies. The crypto market appears to be awaiting a significant catalyst to trigger movement. All eyes will be on the U.S. Consumer Price Index (CPI) data set to be released on Wednesday, as it may provide insight into the Fed's future actions and their implications for the crypto market. 

BTC traded extremely sideways and has failed to defend its crucial psychological support level at $26000. Both RSI and MACD moving flat give a neutral signal for  BTC. 

Resistance level: 26250, 27200

Support level: 25700, 25000

CL OIL

Oil prices find themselves perched near a nine-month zenith, driven by concerns over tightening oil supplies, courtesy of Saudi Arabia and Russia's extended supply cuts. These two OPEC giants have volunteered to cut a combined 1.3 million barrels per day until the end of 2023. While this bodes well for the bullish trend in oil prices, the key to sustaining this momentum lies in China's economic prospects, with investors keeping a keen eye on the country’s recovery progress.

Oil prices are trading flat while currently testing the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 53, suggesting the commodity might be traded lower as technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 87.70, 92.30

Support level: 84.45, 81.25