Today's analysis: USD/JPY Rises Amid Yen's Historic Low and Limited Government Intervention

Product:EUR/USD

Prediction: Increase

Fundamental Analysis: 

The EUR/USD exchange rate has been rising for the third consecutive day, trading around 1.0750 during Asian trading hours on Monday. Speculation that the US Federal Reserve may cut interest rates in 2024 is weakening the US dollar, supporting the EUR/USD pair.

Recent US economic data shows that inflation has eased to its lowest annual rate in over three years. The Federal Reserve Bank of San Francisco President Mary Daly stated that while monetary policy is working, it's still too early to determine when to cut interest rates.

In Europe, ECB Governing Council member Olli Rehn indicated that the central bank could lower interest rates two more times this year. Inflation data from various European countries showed mixed results. Additionally, the first round of the French legislative elections saw a strong performance by Marine Le Pen's National Rally party.

Technical Analysis: 

The EUR/USD was trading within a narrow range last Friday. The currency pair is facing resistance from a Symmetrical Triangle pattern, and a breakdown of this pattern could lead to further downside. The overall trend appears bearish, as the EUR/USD is trading below the 200-day Exponential Moving Average (EMA) near 1.0780. The Relative Strength Index (RSI) is hovering around 40.00, and a drop below this level could indicate bearish momentum. Investors are cautious and are refraining from making any decisive positions until the inflation data is released.

Product:GBP/USD

Prediction: Increase

Fundamental Analysis: 

The GBP/USD pair is trading at a stronger level around 1.2655 during early Asian trading on Monday. The US dollar is edging lower as the US Personal Consumption Expenditures (PCE) Price Index for May eased to its lowest annual rate in over three years, providing some support to the major pair.

Traders are awaiting the release of the US June ISM Purchasing Managers Index (PMI) for further direction. The US core PCE, the Federal Reserve's preferred inflation measure, continued to cool in May, prompting speculation that the Fed may cut interest rates this year.

The upcoming UK general election on Thursday is likely to trigger volatility in the GBP/USD pair. According to the latest exit polls, the Opposition Labor Party is expected to win over the UK Prime Minister Rishi Sunak-led Conservative Party.

Technical Analysis: 

The GBP/USD is facing a crucial resistance zone around 1.2640, where the 100-day and 50-day Simple Moving Averages converge. If the pair fails to break above this level, it could open the door for a deeper correction towards the 1.2600 psychological support and the 200-day SMA at 1.2550. On the upside, the 50-period SMA on the 4-hour chart at 1.2670 is an immediate resistance, followed by the 200-period SMA around 1.2710-1.2720. The pair's ability to hold above 1.2640 will be crucial in determining the short-term direction.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis: 

Gold prices retreated after an inflation report showed progress in the disinflationary process, raising hopes of Fed rate cuts in 2024. The US PCE Price Index was in line with estimates, providing an optimistic outlook. Yields rose, and gold dropped as traders digested the data, but the dollar remained near daily lows. American consumer sentiment improved, and Fed officials adopted a cautious approach, indicating cooling inflation and working monetary policy. The market is pricing in a 69% chance of a 25-bps Fed rate cut in September, with a 35-bps easing implied for the end of 2024.

Technical Analysis: 

Gold remains under pressure as a bearish Head-and-Shoulders chart pattern emerges, suggesting the potential for further downside. The Relative Strength Index (RSI) is tilted bearish, indicating a lack of buying momentum. If gold breaks below $2,300, the next support levels are the May 3 low of $2,277 and the March 21 high of $2,222, with the Head-and-Shoulders pattern objective ranging from $2,170 to $2,160. Conversely, a break above $2,350 could expose resistance at the June 7 cycle high of $2,387 and the $2,400 level.

Product: USD/JPY

Prediction:Increase

Fundamental Analysis: 

The Japanese Yen has hit another historic low, with traders ignoring the Japanese government's attempts to intervene. Despite the Finance Minister's warnings, the markets continue to defy the government's efforts to prop up the Yen.

Consequently, the US Dollar Index has risen, benefiting from the Yen's weakness. This occurred even though recent US economic data, such as Durable Goods and Pending Home Sales, was not overly positive. Additionally, the Personal Consumption Expenditures figures aligned with the disinflationary trend, not causing significant market waves.

Overall, the Yen's decline and the US Dollar's strengthening against a basket of foreign currencies are the key takeaways from the latest developments in the foreign exchange market.

Technical Analysis: 

The USD/JPY has reached a new multi-decade high, driven by the Japanese government's inability to effectively intervene. Despite the Finance Minister's warnings, the markets continue to push the Yen lower, leaving the government with limited options.

While the Relative Strength Index (RSI) is overbought on the daily chart, a correction could take some time. Even if the PCE data shows further disinflation, it may not be enough to drive the USD/JPY down to the 151.91 level. Instead, traders may focus on the 55-day and 100-day Simple Moving Averages (at 156.53 and 153.81, respectively) as potential support levels, before attempting to test the highs again and challenge the Japanese government's resolve.

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