USD/JPY Strengthens As JPY Weakens Due To Lower Chances Of Interest Rate Rise

Zi Cheng

Forex

Traders' Opinions

Summary:

For the second consecutive day on Tuesday, the USD/JPY is trading in positive territory.

BUY USDJPY

Close Time

CLOSED

146.091

Entry Price

151.905

139.775

154.242 -2.023 -1.29%

176.2

Pips

Profit

139.775

147.853

Exit Price

146.091

Entry Price

151.905

Fundamental Analysis

During the early Asian session on Tuesday, the USD/JPY pair remains in positive territory below the 146.00 barrier, supported by the broader strength of the US Dollar. Investors are eagerly anticipating fresh cues from the upcoming US NY Empire State Manufacturing Index, expected to reveal a decline of 5 in January from the previous reading's fall of 14.5. As of the latest update, USD/JPY is trading at 145.90, reflecting a 0.08% gain for the day.

Japan's Statistics Bureau reported that the Producer Price Index for December exceeded expectations, growing 0.3% MoM compared to November's 0.2%. On an annual basis, the PPI figure remained unchanged at a flat rate in December, surpassing the market consensus of a 0.3% decline.

USD/JPY Strengthens As JPY Weakens Due To Lower Chances Of Interest Rate Rise_1

Bank of Japan Governor Kazuo Ueda emphasized the necessity of maintaining an ultraloose monetary policy while awaiting additional data to determine the persistence of inflation. Ueda indicated that the central bank would consider abandoning the negative rate when it becomes sufficiently confident in achieving sustainable inflation of 2%.

Reports suggest the deployment of Iran's Revolutionary Guard to assist Houthi terrorists in Yemen, potentially increasing safe-haven demand and benefiting the Japanese Yen.

Meanwhile, market expectations lean towards interest rate cuts at the upcoming Fed meeting in March, with a nearly 71% probability according to the CME FedWatch tool. Atlanta Federal Reserve President Raphael Bostic cautioned against premature interest rate cuts, stating that inflation must convincingly return to the 2% target.

Later in the day, the focus will be on the US NY Empire State Manufacturing Index, with the Fed’s Christopher J. Waller expected to provide insights into future monetary policy. Wednesday brings attention to US Retail Sales, projected to show a 0.4% increase in December, potentially influencing the direction of the USD/JPY pair.

Technical Analysis

As seen from the chart below, USD/JPY has been gaining strong bullish momentum and price have closed above the 200 Day Moving Average indicating that it could continue to form bullish market structure of higher highs and higher lows.

TRADE RECOMMENDATION

BUY USD/JPY

ENTRY PRICE : 146.107

STOP LOSS : 139.775

TAKE PROFIT : 151.905

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Ukadike Micheal

Commodity

Forex

Traders' Opinions

Summary:

Gold has successfully breached the critical supply area at $2050, establishing a comfortable trading position above it. While anticipation grows for the confirmation of a new demand point, buyers exhibit reluctance in swiftly embracing momentum within the $2020-$2024 zone, holding the price hostage just above $2050 without decisive momentum.

BUY XAUUSD

Close Time

CLOSED

2024.00

Entry Price

2070.00

2012.00

2563.11 -1.39 -0.05%

10.8

Pips

Loss

2012.00

2022.92

Exit Price

2024.00

Entry Price

2070.00

Gold prices are on the rise in early trading, fueled by escalating geopolitical tensions in the Middle East. Investors seeking safe-haven assets are turning to gold, and one analyst predicts a potential bullish breakout. The precious metal has already seen a significant recovery, surging by 6.46% over the past three months, with recent events in the Red Sea further supporting this upward trend.

The latest incident, involving Houthi rebels in Yemen firing an antiship cruise missile at an American destroyer in the Red Sea amid Israel's conflict with Hamas, has intensified global concerns. While the ongoing conflict is a driving force behind the increased interest in gold as a safe-haven investment, additional indicators point to a possible bullish breakout.

According to Oanda senior market analyst Kelvin Wong, recent chart analysis reveals a V-shaped bullish reversal in gold during the latter half of the previous week. This reversal occurred at the lower boundary of the medium-term ascending channel, which has been in place since early October. Wong also highlights a bullish momentum condition signaled by the daily relative strength index's momentum indicator.

Moreover, gold has surpassed the upper boundary of a former minor descending channel that persisted since late December, as observed on the one-hour chart. Wong identifies the 20-day moving average and the next resistance level to watch at $2,090 per ounce. As of early Monday, spot gold was trading up 0.29% at $2,057 per ounce. Escalating Middle East Tensions Propel Gold Prices Higher, Setting the Stage for a Potential Bullish Breakout_1

Escalating Middle East Tensions Propel Gold Prices Higher, Setting the Stage for a Potential Bullish Breakout_1

GOLD 4 HOUR CHART

The current geopolitical tensions in the Middle East have propelled gold prices higher, drawing investors to the metal as a safe-haven asset. Analysts point to technical indicators suggesting a bullish breakout for gold, adding further intrigue to its recent price surge. As events unfold, the precious metal remains a focal point for investors navigating the impacts of geopolitical uncertainties on financial markets.

TRADE RECOMMENDATION

XAUUSD BUY

ENTRY: 2020-2024

STOPLOSS: 2012

TAKE PROFIT: 2070

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Summary:

As the Australian Dollar faces pressure in the early weeks of 2024, the Pound to Australian Dollar (GBP/AUD) exchange rate has retraced into a familiar range, propelled by fading bets on U.S. Federal Reserve rate cuts.

BUY GBPAUD

EXP

EXPIRED

1.90800

Entry Price

1.93000

1.89500

1.95100 -0.01093 -0.56%

Pips

EXPIRED

1.89500

1.92389

Exit Price

1.90800

Entry Price

1.93000

The Pound to Australian Dollar (GBP/AUD) has undergone a retreat into its 2023 range amid shifting market dynamics. The resurgence of the Australian Dollar in the latter months of 2023, driven by rising global equity markets and commodity prices, has given way to a reversal as robust U.S. data takes center stage in 2024. The Pound has benefited, leading to a breach of the lower bound of the range at 1.8961, signaling a potential shift in momentum.

The focus turns to the upcoming Australian labor market statistics, with expectations set at a +15K reading.The importance of this data for the Reserve Bank of Australia, potentially impacting the rate-hiking cycle. An above-consensus reading at 35K could boost the Australian Dollar, indicating resilience in labor demand.

Chinese GDP figures midweek present another significant market event, with expectations at 5.2%. Given China's status as Australia's main trading partner, any surprise deviation could influence the Australian Dollar. Notably, disappointing Chinese data has supported the AUD in the past, raising expectations for additional stimulus announcements.

Technical Analysis

The daily chart highlights the Pound-Aussie exchange rate's critical support at 1.8961, now acting as a crucial level going forward. The proximity of the 100-day moving average at 1.9127 suggests potential resistance/support in recent price action. I expect continued weakness in the Australian Dollar against the U.S. Dollar, supporting the GBP/AUD range-bound movement.

A break above the 100-day moving average could pave the way for an extension of the GBP/AUD rally towards the upper range at 1.9334. However, a sustained move to the October high of 1.9271 may be more likely over the next one to two weeks if positive momentum persists.

TRADE RECOMMENDATION

BUY GBPAUD

ENTRY PRICE : 1.90800

STOP LOSS : 1.89500

TAKE PROFIT : 1.9300

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Summary:

Gold reached new heights, surpassing $2,050 per ounce for the third consecutive session, fueled by heightened tensions in the Middle East and a surprising dip in US producer inflation.

BUY XAUUSD

Close Time

CLOSED

2050.00

Entry Price

2150.00

2020.00

2563.11 -1.39 -0.05%

300.0

Pips

Loss

2020.00

2019.99

Exit Price

2050.00

Entry Price

2150.00

Gold, a key commodity, experienced a robust ascent, breaching the $2,050 mark on Monday, marking its third consecutive session of gains. The surge was fueled by a confluence of factors, prominently including escalating tensions in the Middle East and an unexpected decline in US producer inflation data.

The recent US and British military strikes on Houthi targets in Yemen, aimed at preventing attacks on Red Sea ships, have heightened geopolitical uncertainties. In response, the Houthi militia issued a stern warning of a "strong and effective response" against the US. This geopolitical unrest has triggered a surge in safe-haven demand for gold, a trend that has been evident in the market over the past few sessions.

Simultaneously, the unexpected 0.1% month-over-month decline in US producer prices in December has defied market forecasts, sparking speculations of an early interest rate cut by the Federal Reserve. This surprising dip in producer inflation data contradicts previous strong Consumer Price Index (CPI) results, fostering hopes for a gradual alignment of inflation with the Fed's target.

Gold Soars Beyond $2,050 Amidst Escalating Middle East Tensions and Unexpected US Producer Price Dip_1

From a technical standpoint, gold faced a test of support at $2,020 twice last week, ultimately finding its bottom following the release of US inflation data. The rebound was significant, reaching a high of $2,062 before closing the week at $2,048. However, the precious metal struggled to maintain a foothold above the crucial $2,050 level.

Analyzing the 1-hour chart, gold broke through the downward resistance line originating from the recent peak of $2,088 during the US trading session last Friday. This breakthrough signaled the end of the short-term downward cycle on the hourly chart. Despite challenges, the price surpassed the $2,050 resistance late last week, indicating a weakening selling resistance at that level.

Looking ahead, the trading range is anticipated to broaden, expanding from the previous range of $2,020-$2,050 to $2,015-$2,065. The medium-term outlook remains positive, with expectations of a rise to $2,150, supported by weak US producer price index (PPI) data and escalating geopolitical tensions in the Middle East.

Gold Soars Beyond $2,050 Amidst Escalating Middle East Tensions and Unexpected US Producer Price Dip_2

On the 4-hour chart, gold successfully broke through the trend line and corrected as anticipated, validating the fundamental analysis predicting the precious metal's medium-term outlook. Medium-term resistance is identified in the $2,050 to $2,070 range, presenting the possibility of gold breaking through and reaching new highs. Overall, the market sentiment remains bullish, propelled by a combination of technical indicators and external factors, reinforcing gold's position as a favorable investment amid current global uncertainties.

TRADE RECOMMENDATION

BUY XAUUSD

ENTRY PRICE : 2050

STOP LOSS : 2020

TAKE PROFIT : 2150

Risk Warnings and Disclaimers

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Saif

Forex

Summary:

In the dynamic world of foreign exchange, a judicious combination of fundamental and technical analysis often proves to be a key driver in making informed trading decisions. This week, all eyes are on Canada as the Consumer Price Index (CPI) inflation rate is set to be released on Tuesday. Anticipated to rise to 3.3%, this surge is expected to fortify the Canadian dollar, influencing the country's central bank to maintain higher interest rates. Meanwhile, recent developments in the United States, particularly the Producer Price Index (PPI) falling 1% below market expectations, have cast a shadow over the US dollar, suggesting potential weakness.

SELL USDCAD

EXP

EXPIRED

1.33422

Entry Price

1.32094

1.34062

1.40821 +0.00229 +0.16%

Pips

EXPIRED

1.32094

1.34656

Exit Price

1.33422

Entry Price

1.34062

Fundamental Analysis

The impending rise in Canada's CPI inflation rate presents a compelling scenario for traders. Historically, central banks respond to heightened inflation by maintaining or increasing interest rates to curb it. In this case, a strong Canadian dollar may emerge, fueled by the market's expectation of a 3.3% inflation rate. Simultaneously, the disappointing PPI figures in the United States could lead to a weaker US dollar, setting the stage for a favourable opportunity to sell the US dollar against the Canadian dollar. This fundamental analysis underscores the potential for a currency trade that involves buying the Canadian dollar while selling the US dollar. CPI Inflation Rate Coming in Canada Will it Make the Canadian Dollar Stronger?_1

CPI Inflation Rate Coming in Canada Will it Make the Canadian Dollar Stronger?_1

Canada CPI YoY

U.S. PPI YoY

Technical Analysis

Examining the 4-hour chart provides valuable insights into the current market dynamics. The prevailing market price, situated at 1.34066, intersects with a long-term downtrend line. A detailed analysis suggests an imminent breakthrough of the preceding demand zone, with a subsequent pullback before a breakthrough to the established demand zone at 1.32000. This technical outlook points toward the creation of a downtrend formation, characterized by lower highs and lower lows. Notably, the 20-moving average is indicating a downward trajectory, adding weight to the bearish sentiment.

Combining fundamental and technical analyses offers a holistic perspective for traders. The upcoming CPI inflation rate in Canada and the recent PPI outcomes in the United States set the stage for a potential trading opportunity. The confluence of a strengthening Canadian dollar and a weakening US dollar, supported by technical signals indicating a downtrend formation, suggests a prudent strategy: selling the US dollar against the Canadian dollar. As always, it's crucial for traders to stay vigilant and adapt to evolving market conditions for successful navigation in the forex landscape. CPI Inflation Rate Coming in Canada Will it Make the Canadian Dollar Stronger?_3

CPI Inflation Rate Coming in Canada Will it Make the Canadian Dollar Stronger?_3

USDCAD Price Chart

Trading Recommendation

Trading Direction: Short

Entry Price: 1.33422

Target Price: 1.32094

Stop Loss: 1.34062

Risk Warnings and Disclaimers

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Eva Chen

Economic

Commodity

Summary:

On Friday, concerns over supply disruptions intensified as the US and its allies conducted airstrikes against Houthi rebels, leading to a significant surge in oil prices. The likelihood of retaliatory actions from Iran-backed Houthi rebels raises the potential for widespread conflict in the Middle East.

BUY WTI

Close Time

CLOSED

72.850

Entry Price

77.600

69.900

66.868 -1.546 -2.26%

427.2

Pips

Profit

69.900

77.122

Exit Price

72.850

Entry Price

77.600

Fundamentals

On Friday, supply concerns deepened after the US and its allies conducted airstrikes against Houthi rebels, propelling WTI crude oil to around $75.25.

The airstrikes prompted expectations among investors that shipping rates would remain elevated, resulting in a surge in European shipping and energy stocks. Shares of German shipping company Hapag-Lloyd rose by 4.8%, while Maersk saw an increase of up to 3.9%. European oil giants such as Shell and Total Energies SE also rose by over 1%. The ripple effect of geopolitical tension in the Red Sea region is driving up shipping rates and valuations.

Vandana Hari, the founder of consulting firm Vanda Insights, stated to the media that the risk of escalated conflict has already been priced in. She expects the involved parties to exercise a certain level of restraint in the ongoing conflict, but oil prices may continue to rise.

We believe the market has underestimated the severity of the deteriorating situation in the Red Sea. Houthi leaders said they would retaliate for the strikes and continue their attacks, adding that all “interests” of the US and Britain are now “legitimate targets”. Shipping company TORM has suspended all transport through the southern Red Sea.

We believe WTI crude oil could rise to above $77.00, but considering the subdued outlook for oil demand, Friday's sharp increase might be temporary. Risk assets have not shown much concern about the recent ship attacks in the Red Sea over the past few weeks. Unless the situation develops into a broader regional conflict, the market may avoid a significant reaction.

Meanwhile, data released by the EIA indicates that US crude inventories increased by 1.3 million barrels to 432.4 million barrels for the week ending January 5th, contrary to market expectations of a 700,000-barrel decrease.

Investors are now awaiting the release of the US Producer Price Index (PPI) for December, as the market speculates on the Fed potentially starting rate cuts in March, which could introduce some volatility. Additionally, comments from Fed official Neel Kashkari during the New York session are sought for further insights into the US economic landscape.

Geopolitical Tensions to Set the Tone for Recent Trading_1

Technical Analysis

WTI crude oil has been developing within a downtrend channel since late September. Currently, the market is holding above the 20-day SMA and has breached the strong resistance level of $74.25.

The MACD is moving above the zero level, and the Relative Strength Index (RSI) is hovering around the 70 level, indicating strength in the price momentum. A break above the $75.00 level could target $76.20, followed by testing point D around $77.60 (as seen in the chart), which coincides with the 200-day SMA. A successful breach of this level could open the door for a bullish correction, with a potential target up to the psychological level of $80.00.

On the other hand, if the price retraces, it may find support around $73.20, followed by a series of higher lows formed during the ongoing uptrend.

Overall, WTI crude oil appears to show signs of forming a bottom, but a move above the 200-day SMA is needed to trigger optimistic sentiments for a potential upward recovery. Otherwise, the mid-term outlook for oil prices remains negative. In terms of trading, the focus should be on strategic positioning.

Trading Recommendations

Trading Direction: Long

Entry Price: 72.50

Target Price: 77.60

Stop Loss: 69.90

Valid Until: 2024-01-26 23:55:00

Support: 70.00, 72.50, 71.00

Resistance: 74.25, 76.20, 77.60

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Summary:

WTI crude oil prices surged over 4% to breach the $75 per barrel mark, fueled by military actions in Yemen and heightened geopolitical tensions in the Red Sea. Attacks by Houthi rebels on global shipping vessels, responding to perceived involvement by the US and Israel in the Gaza conflict, prompted major shipping route diversions, increasing freight costs.

BUY WTI

Close Time

CLOSED

74.000

Entry Price

79.000

71.000

66.868 -1.546 -2.26%

300.0

Pips

Loss

71.000

70.998

Exit Price

74.000

Entry Price

79.000

WTI crude oil prices experienced a remarkable ascent, climbing more than 4% to surpass the $75 per barrel milestone on Friday. This surge was primarily driven by escalating geopolitical tensions, as both the United States and Britain conducted military strikes against Houthi-controlled areas in Yemen. The retaliatory attacks by Houthi rebels on global shipping vessels in the Red Sea further intensified the situation. In response to perceived involvement by the US and Israel in the Gaza conflict, these attacks prompted major shipping companies to redirect routes via southern Africa, circumventing the Suez Canal and Red Sea. This strategic shift not only lengthened shipping journeys but also incurred higher costs, consequently elevating ocean freight rates.

The week witnessed a substantial overall increase in crude prices, with a nearly 2% gain building upon the previous week's 3% upswing. The cumulative effect of these geopolitical events has injected a notable level of uncertainty into the oil market, influencing supply chain dynamics and contributing to the bullish sentiment.

Technical Analysis

After about four months of falling, the trend in oil prices has finally changed. Tensions in the Red Sea caused a shift, and now oil seems ready to go up. During the fall, the price of oil responded to certain levels, forming a triangle pattern.

Recently, the price broke out of this downward channel and is now testing that breakout point. This is happening at a level that's acting as a new support, and it matches with a specific percentage retracement in technical analysis (61.85 Fibonacci Retracement). This suggests that the price might continue to go up.

If this upward movement continues, experts are looking at a target price of $79. This estimate is based on the combination of different technical factors, including the retested support level and the Fibonacci Retracement, indicating a potential for a significant increase in oil prices.

TRADE RECOMMENDATION

BUY WTI

ENTRY PRICE : 74.00

STOP LOSS : 71.00

TAKE PROFIT : 79.00

Risk Warnings and Disclaimers

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USD/JPY Strengthens As JPY Weakens Due To Lower Chances Of Interest Rate Rise

Fundamental Analysis

Technical Analysis

TRADE RECOMMENDATION

Escalating Middle East Tensions Propel Gold Prices Higher, Setting the Stage for a Potential Bullish Breakout

GOLD 4 HOUR CHART

TRADE RECOMMENDATION

GBP/AUD Steps Back Into Range Following False Breakout

Gold Soars Beyond $2,050 Amidst Escalating Middle East Tensions and Unexpected US Producer Price Dip

CPI Inflation Rate Coming in Canada Will it Make the Canadian Dollar Stronger?

Fundamental Analysis

Canada CPI YoY

U.S. PPI YoY

Technical Analysis

USDCAD Price Chart

Trading Recommendation

Geopolitical Tensions to Set the Tone for Recent Trading

Fundamentals

Technical Analysis

Trading Recommendations

Oil Prices Skyrocket 4% Following US and UK Strikes on Iran-Backed Houthis

Risk Disclosure