Technical Outlook: XAG/USD, USD/JPY, GBP/USD

(Slobodan Drvenica – Windsor Brokers)

XAG/USD outlook: Silver hits new multi-month low in extension of August 11.4% fall

Spot silver entered new month firmly in red and hit new lowest in over two-years on Thursday, in extension of August’s 11.4% fall (the biggest monthly loss since September 2020).

The metal is under pressure by rising dollar on expectations of further aggressive rate hike and also by slower recovery in certain sectors where silver is used (industrial and jewellery).

Bearish studies add to negative outlook, along with negative signals on weekly bull-trap above 200WMA; completion of weekly failure swing pattern and converged 20/200WMA’s, about to form bear-cross.

Additional negative signal was generated by Aug close below pivotal Fibo support at $18.44 (61.8% of $11.23/$30.10 rally).

Bears eye June 2020 low ($16.94), violation of which would risk test of Fibo 76.4% support at $15.68.

Oversold conditions warn of some adjustment in coming sessions, with upticks to be ideally capped by falling daily Tenkan-sen (18.53) to keep bears intact.

Only bounce through $19.25/28 (daily Kijun-sen / daily cloud base) would put larger bears on hold.

Res: 18.00; 18.53; 18.74; 19.25.
Sup: 17.64; 16.94; 16.45; 15.68.

USD/JPY outlook: Hits new 24-year high, pressures psychological 140 barrier

The USDJPY posted new 24-year high on break through former 2022 peak, posted in July.

The dollar remains strongly underpinned by a hawkish stance of Fed, as many market participants bet for another 75 basis points rate hike in the policy meeting later this month, as Fed expressed its strong commitment to restore price stability by tightening its monetary policy, even at cost of significant slowdown in economic growth.

On the other side, the Bank of Japan sticks to its ultra-loose policy and widening gap between the policies of two central banks would continue to be a main driver of the greenback against yen.

Although bulls cracked key barrier at 139.39, headwinds should be expected here as daily studies are overbought.

Limited dips (ideally to be contained at 128.00/137.80 zone) should offer better buying levels for clear break of 139.39 pivot and test of psychological 140 barrier, with further acceleration higher on break of 140 barrier, not ruled out on current conditions or more hawkish signals from the US central bank.

Res: 139.68; 140.00; 141.51; 142.82.
Sup: 138.63; 138.05; 137.80; 137.26.

GBP/USD outlook: Sterling may retest 2020 low after 4.5% drop in August

Cable dips below 1.16 handle in early Thursday, hitting the lowest levels in 29 months, pressured by fading risk appetite on darkening economic outlook and strong dollar, driven by expectations for further aggressive stance of the US Federal Reserve.

Near-term action showed a little reaction on slightly better than expected UK housing data and will look for today’s release of US manufacturing PMI data for further signals, while larger picture sees ECB, BOE and Fed policy meetings later this month as key events which could influence pound’s performance.

Sterling was down 4.5% in August, in the biggest monthly loss since June 2016 post-Brexit vote drop and is on track for the third consecutive weekly fall that adds to negative outlook, along with bearish technical studies on all larger timeframes.

Bears eye pandemic low at 1.1410 (Mar 2020), but may face significant headwinds on approach as studies are oversold on daily, weekly and monthly chart.

In current environment, a limited correction would be likely scenario, with upticks to provide better levels to re-join firmly bearish market.

Res: 1.1634; 1.1693; 1.1737; 1.1760.
Sup: 1.1556; 1.1493; 1.1430; 1.1410.