KVB Market Analysis | 4 September: USD/JPY Faces Downward Pressure as BoJ Signals Possible Rate Hike

Product: XAU/USD

Prediction: Increase

Fundamental Analysis: 

The US Dollar rose on Tuesday, benefiting as a traditional safe-haven currency due to the sell-off in stocks and riskier currencies. Traders are preparing for a busy week of data releases, including the US Non-Farm Payroll report on Friday, which could impact the Federal Reserve's plans for rate cuts. Geopolitical tensions are also supporting gold prices. On September 3, Ukraine's national railway company reported that Russian forces launched a major attack on Ukraine's railway facilities, targeting infrastructure and locomotives in the Sumy and Dnipropetrovsk regions. Gold remains our preferred hedge against geopolitical and financial risks. The upcoming rate cuts by the Federal Reserve and ongoing gold purchases by emerging market central banks will provide additional support for gold.

Technical Analysis: 

XAUUSD is leaning towards an upward movement, but the momentum has shifted in favor of sellers, making a drop to $2,470 possible. The Relative Strength Index (RSI) suggests that buyers are still in control, but gold might weaken in the short term. If the price stays below $2,500, the next support level will be the August 22 low of $2,470. If it breaks below this level, the next target will be around $2,427-$2,431, where the August 15 low and the 50-day Simple Moving Average (SMA) meet. On the other hand, if gold rebounds and breaks above $2,500, the next resistance level will be the all-time high of $2,532, followed by the $2,550 level.

Product: USD/JPY

Prediction: Increase

Fundamental Analysis: 

Kazuo Ueda reiterated in a document submitted to a government panel on Tuesday that the central bank is ready to raise interest rates further if the economy and inflation perform as expected, according to Reuters. Inflation in Japan remains high. The Tokyo Consumer Price Index (CPI), excluding Fresh Food, rose to 2.4% in August, up from both the July figure and the estimated 2.2%. Despite the US Dollar gaining strength, USD/JPY continues to face downward pressure.

Technical Analysis: 

From a technical perspective, USD/JPY is showing a downward trend, forming a 'bearish engulfing' pattern, which suggests more declines ahead. This is further supported by the Relative Strength Index (RSI), indicating that momentum favors sellers. With the price more likely to drop, the first support level is at $145.33. If it breaks below this, the next target is $145.00, followed by $143.45, which was the daily low on August 26. This level is the last strong support for buyers before the August 5 low of $141.69. For buyers to regain control, they need to push the price back up to $148.45, and then above $150.00, surpassing the recent high of $149.39.

Product: EUR/USD

Prediction: Increase

Fundamental Analysis: 

On Tuesday, EUR/USD moved lower, hitting a two-week low before ending the day near 1.1050 again. Price movements were limited as markets prepared for the upcoming US Nonfarm Payrolls (NFP) report this week. However, weak US ISM Purchasing Managers Index (PMI) data raised concerns about a possible recession. There’s not much important European data at the start of the week, but on Thursday, traders will focus on the European Retail Sales report for July and US labor data ahead of Friday’s NFP release.

Technical Analysis: 

EUR/USD has fallen back into short-term resistance levels, but buyers are still trying to keep the price balanced, even though they haven't managed to trigger a strong recovery. Last week, EUR/USD reached a 13-month high just above $1.1200, but a recent pullback in US Dollar strength has buyers struggling to maintain the bullish trend. The pair is still trading well above the 200-day Exponential Moving Average (EMA) at $1.0845. However, even in a strong bullish position, EUR/USD is facing increasing downward pressure as sellers target just above the 50-day EMA at $1.0956.

Product: BTC/USD

Prediction: Decrease

Fundamental Analysis: 

Bitcoin dropped 6.5% over the past week, and on Tuesday, when the US stock market reopened, the Dow Jones fell by 1.2%, continuing its decline. At the same time, the S&P 500 fell by 1.3%, and the Nasdaq Composite Index dropped by 1.8%. Some traders attributed the drop to a statement from the Bank of Japan (BoJ), which reignited concerns about the global economy's health. This situation reminded market participants of late July when the BoJ raised its benchmark borrowing costs, triggering the unwinding of yen carry trades and causing instability in risk assets like Bitcoin. In early August, the unwinding of yen carry trades shook global markets, contributing to Bitcoin's drop to $49,577 on August 5.

Technical Analysis: 

Since reaching an all-time high on March 14, Bitcoin has had mixed performance but continues to trade within the $50,000 to $70,000 range. Tuesday's drop in the cryptocurrency market is part of a correction within its current downward parallel channel pattern. For example, since its decline from $2.734 trillion in March, the total cryptocurrency market value has fallen by 27%. During this downtrend, the total market value lost key support levels, including the $2.2 trillion mark and the middle boundary of the descending channel at $2.108 trillion. Bitcoin's fair value reflects its intrinsic value based on its underlying economic fundamentals. Analysts' charts show that Bitcoin's current price is hovering near its fair value, indicating that Bitcoin's valuation is reasonable.

Market Analysis Disclaimer: 

The market analysis provided by KVB Prime Limited is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any financial instrument. Trading forex and other financial markets involves significant risk, and past performance is not indicative of future results. 

KVB Prime Limited does not guarantee the accuracy, completeness, or timeliness of the information provided in the market analysis. The content is subject to change without notice and may not always reflect the most current market developments or conditions.

Clients and readers are solely responsible for their own investment decisions and should seek independent financial advice from qualified professionals before making any trading or investment decisions. KVB Prime Limited shall not be liable for any losses, damages, or other liabilities arising from the use of or reliance on the market analysis provided.

By accessing or using the market analysis provided by KVB Prime Limited, clients and readers acknowledge and agree to the terms of this disclaimer.

RISK WARNING IN TRADING

Transactions via margin involve products that use leverage mechanisms, carry high risks, and are certainly not suitable for all investors. THERE IS NO GUARANTEE OF PROFIT on your investment, so be wary of those who guarantee profits in trading. You are advised not to use funds if you are not prepared to incur losses. Before deciding to trade, ensure that you understand the risks involved and also consider your experience.