(Jing Ren – Orbex)
GBP/USD tests major demand zone
The US dollar rallies as hiring remains strong despite moderate wage growth. As the pair approaches March 2020’s lows around 1.1450, the RSI’ oversold situation prompts sellers to take some chips off the table. Along with ‘buying-the-dips’ in this demand zone, the pound may find some support. 1.1650 is the closest resistance where trend followers could be expected to sell into strength. A fall below March 2020’s lows at 1.1450 would force the last buyers out and open the door for further extension to the south.
XAU/USD struggles to bounce
Bullion finds temporary respite in the wake of mixed nonfarm payrolls. The price action is hovering above July’s low and a critical floor at 1680. This is a decisive moment as a breakout would invalidate the previous recovery and send the precious metal into a bearish spiral. A combination of profit-taking from short-term traders and bargain hunting from medium-term traders may drive the price higher. 1724 is the first resistance and its breach could lift offers to the support-turned-resistance at 1745.
GER 40 hits resistance
Equities remain under pressure as investors brace for more aggressive tightening by central banks. A bearish MA cross on the daily chart suggests that sentiment has shifted to the cautious side and the selling pressure might intensify. On the hourly chart, the index found support at the origin of the rally back in mid-July at 12550, but 13040 has proven to be a tough level to crack. The whipsaws could direct the Dax 40 back to the double bottom near 12420 which is the level that separates a recovery from a bearish continuation.
GBP/USD outlook: Pound remains in red ahead of appointment of Britain’s new prime minister
(Slobodan Drvenica – Windsor Brokers)
Cable hits new 29-month low on Monday, in extension of bearish acceleration in past three weeks, a part of larger downtrend.
The pound remains under strong pressure on risk aversion, driven by growing economic and geopolitical tensions that continues to lift dollar.
Today’s top event will be appointment of the UK’s new prime minister, with wide expectations that Liz Truss, current foreign minister and front runner to replace Boris Johnson, will be named as Britain’s next PM. If appointed, Truss will face a number of huge obstacles, as the country has been in a series of crisis since 2015 when Conservatives came on power.
Truss will face a fight with skyrocketing inflation, which reached a double-digit values, soaring cost of living, industrial sector crisis and recession that altogether darken the outlook.
The sentiment remains firmly negative in such conditions, while bearish technical studies on all larger timeframes (daily/weekly/monthly) add to negative outlook.
Bears eye 2020 low (1.1410) violation of which would risk further fall and unmask lows of 1985.
Meanwhile, near-term action may see some price adjustment as daily studies are oversold.
Upticks should offer better selling opportunities while the price action stays below falling 10DMA (1.1670).
Res: 1.1569; 1.1634; 1.1703; 1.1760.
Sup: 1.1430; 1.1410; 1.1352; 1.1227.
Daily technical and trading outlook – USD/JPY
Trend daily chart
21 HR EMA
55 HR EMA
Trend hourly chart
13 HR RSI
14 HR DMI
Consolidation b4 one more rise.
141.13 – 100% proj. of 136.21-139.06 fm 138.28.
140.99 – 61.8% proj. of 139.07-140.79 fm 139.93.
140.79 – Last Fri’s fresh 24-year top.
139.93 – Last Fri’s NY low.
139.67 – Last Thur’s Asian high (now sup).
139.39 – Jul’s high (now sup).
USD/JPY – 140.43.. Dlr continued its recent winning streak in tandem with U.S. yields, price ratcheted higher abv prev. 2022 high at 139.39 (Jul) on Thur n then hit a fresh 24-year peak of 140.79 in post-NFP NY Fri b4 retreating.
On the bigger picture, dlr’s spectacular rally fm 2011 historic low at 75. 32 (Mar) due to co-ordinated CCY intervention by G7 central banks to weaken the yen in the aftermath of Japan’s earthquake and tsunami of Mar 2011 to as high as 125.86 (2015) confirms major low has been made. Although the pair fell back to 99 .00 in mid-2016 n swung broadly sideways until 2021, price rallied in tandem with U.S. yields to a 24-year peak of 139.39 in mid-Jul b4 retreating. Despite a sharp fall to a 7-week 130.41 trough on Aug 01, dlr’s subsequent gain in tandem with U.S. yields n then break of 139.39 to 140.79 last Fri would extend uptrend to 143 .00, reckon 145.00 would cap upside. Only below 138.06 risks retrace. twd 135.82.
Today, as 139.93 in post-NFP NY has contained intra-day retreat fm 140.79 , consolidation with upside bias remains b4 heading twd 141.00, ‘bearish divergen ces’ on hourly indicators would cap price at 141.50/55. Only a daily close below 139.93 risks stronger retracement to 139.67, possibly 139.39 b4 rebound.