USD/JPY Fundamental Analysis August 25, 2014 Forecast

The USD/JPY  is trading at 103.80 well above its average trading range as the greenback maintains its momentum and traders move away from safe haven trades. Strong US data helped support the greenback while traders remain focused on a slew of lackluster data from Japan.  U.S. dollar initially extended this week’s rise initially against major currencies in Asia on Thursday, however, the greenback rebounded as investors took profit ahead of Friday’s Fed Chair Yellen speech at the annual economic symposium of the Federal Reserve Bank of Kansas City held in Jackson Hole, Wyoming. Euro fell to a fresh near 1-year low at 1.3242 versus U.S. dollar in Asia before rebounding to 1.3288/90 on improved risk appetite in New York.  The greenback strengthened to a fresh 4-1/2 month peak at 103.96 in Asia before retreating to 103.60.

Fed’s Williams said ‘argument for earlier rate hike would be bolstered by really good economic improvement, inflation moves back towards objective; rate hike in middle of 2015 seems reasonable; expects inflation will only gradually come back; still no convincing signs of higher wage growth.’  The dollar has risen over the past week as solid data and Fed minute’s fuelled speculation that the Fed may start raising its key interest rates sooner than expected.

A lackluster trade balance report from Japan continues to weigh on the yen after the report showed a climb in exports which was solely due to the devaluation of the yen.

USD/JPY Forecast August 22, 2014, Technical Analysis

The USD/JPY pair broke higher during the course of the day on Thursday, and then turned back around and formed a shooting star. This suggests to us that the market could fall from here, but quite frankly we feel that this market is very bullish and the breakout above the 103 level is in fact a good sign. If we fall from here, we think the buyers will step in and we are more than willing to buy supportive candles and perhaps break out above the 104 level. At this point in time, we have no interest in selling.

GBP/USD Forecast August 22, 2014, Technical Analysis

The GBP/USD pair fell during the course of the day on Thursday, but did get a little bit of a bounce during the latter part of the session. The resulting candle is a hammer, but the candle before that is a shooting star. With that being said, it looks as if the market is going to grind sideways in this area and perhaps take a break from the very bearish move that we’ve had. If we break down below there, we feel that the market will test the 1.65 handle, but if we break higher we think that the market needs to test the 1.6750 level. Either way, we think short-term moves are going to be what’s coming.

EUR/USD Forecast August 22, 2014, Technical Analysis

The EUR/USD pair initially fell during the session again on Thursday, but found enough support below to turn things back around and form a little bit of a hammer. We are not willing to buy this market though, as we believe that a resistant candle above will offer yet another selling opportunity. We believe that a break below the bottom of the range for Thursday is also a nice selling opportunity as we expect the EUR/USD pair to eventually have the 1.30 handle. At this point time, we have no interest in buying this market until it reaches above the 1.35 handle.

The US Dollar Eases But Holds Its Stength

The US dollar eased after the release of US data on Thursday. Although data printed better than forecast showing unemployment claims falling and housing soaring above expectations followed by an incredible Philly Fed Index. The US dollar is trading at 82.18 this morning. The National Association of Realtors figures show existing home sales rose 2.4 per cent to a ten-month high in July and factory data by Markit revealed a jump from 55.8 to 58 in July, which is the highest level since March 2011.
Markets are eagerly awaiting a key-note speech from Federal Reserve chair Janet Yellen tomorrow at the economic gathering in Jackson Hole, Wyoming, where she is expected to give more clues on the outlook for US interest rates.

The dollar maintained its strength in Asia Friday as investors awaited a speech by the US Federal Reserve chief for any hint at when the bank will start raising interest rates. The US unit was changing hands at 103.90 yen in Tokyo late morning trade, compared with 103.85 yen in New York Thursday afternoon.  The euro was mixed, buying $1.3276 and 137.95 yen against $1.3280 and 137.91 yen in US trade.

The German PMIs declined a bit, but were stronger than expected. The composite PMI remains around 55 and clearly points to a rebound in German activity in Q3 after the contraction in Q2. Stocks of finished goods and stocks of purchases increased in August and the order-inventory balance points to a decline in the German manufacturing PMI going forward. Overall, the figures continue to show that the domestic-driven service sector is doing very well, whereas the manufacturing sector, which to a larger extent is affected by geopolitical uncertainty and a lagged impact of weak foreign demand, is the weak link. However, manufacturing PMI remains above 50 and points to expansion. The composite PMI new orders increased marginally to 52.9 in August from 52.7 in July and continue to indicate GDP growth around 0.4% q/q. This is much stronger than in Q2, where the euro area economy stagnated mainly due to temporary factors.

Asian currencies were fairly quiet with no data in the early session. The New Zealand dollar gained overnight, popping back above the key 84 US cent level, as traders look to an upcoming speech by US Federal Reserve chair Janet Yellen. The Australian dollar has rebounded back above 0.9300 after losing ground on Thursday on the back of weak Chinese manufacturing data. This week’s USD rally left the dollar on the verge of breaking above its April peak of 104.13 yen, a move that could open up the way to 105.45, set in January. The dollar held steady at about 103.83 yen, not that far from a 4-1/2 month high near 103.97 yen on Thursday.