As expected, the Federal Reserve kept its benchmark interest rates unchanged near zero. The central bank said in a statement: “The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, (…) The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world.”
Commonwealth Bank of Australia offers three reasons to explain its divergent view of the USD/JPY compared to the consensus forecasts. CBA predicts the USD/JPY will reach 101.0 by the year-end, whereas consensus expectations are for 107.0.
📌 Firstly, CBA expects the large U.S. budget deficit will expand its current account deficit while Japan will retain its current account surplus.
📌 “Second, the real 10-year interest rate spread between the U.S. and Japan is likely to remain near zero,” CBA Says.
📌 “Third, the tense relationship between the U.S. and Chinese governments supports the JPY more than the USD.” The USD/JPY is at 104.945 early on Thursday.
👉 The post-lockdown bounce in New Zealand business confidence looks like it is running out steam, according to the final results of ANZ’s monthly confidence survey. Net 31.8% of firms were pessimistic about the economic outlook in July, a modest improvement from June, but down from the preliminary result early in the month. Companies’ expectations for their own business activity also worsened from the preliminary result. “Bounces are fun, but this one has probably nearly run its course,” ANZ says. The impact of the border closure and sharply weaker global economic growth is likely to be increasingly felt as the jolt from stimulus wears off, the bank says.
👉 Australia’s annual inflation may have turned negative for the first time in 22 years in pandemic-hit 2Q but don’t call it deflation, says High Frequency Economics. Wednesday’s data showed annual inflation falling to -0.3%, from +2.2% in 1Q. “We are observing the impact of declines in three specific components of a fixed-weight price index,” says Carl Weinberg, High Frequency’s chief economist.
👉 The US dollar weakens against most major currencies, including 0.6% against the euro and close to 0.1% against the yen. The WSJ Dollar Index falls 0.4%. The Fed kept rates steady and maintained its commitment to supporting the economy amid the pandemic.
👉 Bank of Canada research issued Wednesday suggests equity investors are pricing in protracted, shallow economic recovery, even though benchmark stock indexes have rebounded following a pandemic-induced March low to reach fresh highs. “The rapid recovery in the stock market should be interpreted with caution,” said the author in a piece titled, “Is the stock market pricing in a V–shaped recovery?”
👉 The Bank of England reported 40,000 Mortgage Approvals for June, higher than 35,000 expected. GBP/USD struck against the key level of 1.3000 on the upside, its highest level since March.
👉 Oil prices climbed after the U.S. Energy Information Administration reported an unexpected reduction of 1.2 million barrels in crude-oil stockpiles last week. U.S. WTI crude oil futures (September) rebounded 0.6% to $41.27 a barrel.
👉 Goldman Sachs raised its gold price forecast for the next 12 months to $2,300 an ounce from $2,000 previously. However, spot silver price was down for a second day as it decline 0.5% to $24.31 an ounce. Spot gold price advanced $12.00 (+0.62%) to $1,970, a fresh record close.
The following is USD/JPY long-term forecast looking at Daily chart:
INTRADAY MARKET INSIGHTS
Key resistance at 105.20. The pair has repeatedly failed to break above the key resistance at 105.20. Meanwhile, it is struggling to keep the key level of 105.00. A return to the immediate support at 104.75 (around the low of yesterday) would open a path toward 104.45 on the downside. Alternatively, a cross above 105.20 would trigger a further advance toward 105.45 on the upside.
Bullish above 1.1750. The pair is off a high of 1.1806 seen overnight. It is currently trading at level around the ascending 20-period moving average while standing above the key support at 1.1750. A revisit to the overhead resistance at 1.1805 would call for a further advance toward 1.1830. Alternatively, a break below 1.1750 would open a path toward 1.1720 on the downside.
Bias remains bullish. The pair keeps trading at levels around both 20-period and 50-period moving averages, which are positively-sloped. Unless the key support at 0.7160 (around the lower Bollinger band) is breached, the pair is expected to target 0.7195 (around the upper Bollinger band) and 0.7220. Alternatively, below 0.7160, support would only be found at 0.7145.
Upside prevails. The pair posted a rebound and returned to the level above both 20-period and 50-period moving averages. The relative strength index is locating at the buying zone between 50 and 70, indicating a bullish outlook for the prices. Hence, as long as 0.6645 acts as the support level, we anticipate a further bounce to 0.6703 before rising to 0.6718 in extension. Alternatively, a break below 0.6645 would open a path to 0.6619 on the downside.
Upside prevails. The pair is challenging the key level of 1.3000 while trading at levels around the ascending 20-period moving average. Upon securing the 1.3000 level, the pair should then aim at 1.3015 (around the high of yesterday) and 1.3050 on the upside. Alternatively, a return to the key support at 1.2950 would open a path toward 1.2910 on the downside.
Downside prevails. The pair edged lower along the lower Bollinger band. Currently, the prices are trading below both declining 20-period and 50-period moving averages. In this case, unless the resistance level at 0.9155 is violated, the pair should reach 0.9095 and 0.9070 on the downside. Alternatively, a break above 0.9155 would bring a rebound with 0.9185 and 0.9225 as targets.
Under pressure. The pair is under pressure below both declining 20-period and 50-period moving averages. The relative strength index stays below its neutrality level at 50, suggesting the lack of upward momentum for the prices. In this case, as long as the resistance level at 1.3375 is not surpassed, intraday bearish bias remains with down targets at 1.3320 and 1.3300 in extension. On the other hand, crossing above 1.3375 would trigger a technical rebound with 1.3400 and 1.3430 as targets.
Further upside. The pair is holding on the upside and stays above the rising 20-period moving average. The relative strength index is locating at 60s, suggesting the upward momentum for the prices. To sum up, as long as 123.36 is not broken, we anticipate a further advance with targets at 124.19 and 124.40 in extension. In an alternative scenario, a break below 123.36 would call for a return with 123.00 as a target.
Rebound expected. The pair posted a rebound after validating a false breakout signal. In fact, the prices returned the level above both 20-period and 50-period moving averages. The relative strength index also crosses above its neutrality level at 50. Hence, above 0.9046, expect a further bounce to 0.9106 and even to 0.9121 in extension. On the other hand, only a break below 0.9046 would turn the outlook to negative and trigger a drop to 0.9020 as a target.