Market Beat: Yen Rises Again as Pound Breaks below Key Level

August 10, 2016

Surprising JPY meaningful rising yesterday, and GBP trading a bit higher today with another round of negative news surfaced regarding the economy following the Brexit vote.

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Market Beat: Yen Rises Again as Pound Breaks below Key Level

This article is originally referred from Daily FXGlobe

Forex markets were calm once again on Tuesday after a very volatile week and a flat Monday session. Most of the major currencies finished close to their opening rates, with only the Japanese Yen rising meaningfully yesterday. The Great British Pound was the weakest of the majors yet again, although it’s up today in early trading, as another round of negative news surfaced regarding the economy following the Brexit vote. The Euro got slightly higher compared to most of its peers, as the Dollar drifted lower towards the end of the day.

Commodities and related currencies were mixed for the second day in a row, as oil declined slightly after a strong week. The most traded commodity still trades above key support levels and that might help commodity currencies in the coming weeks. The Australian hit a new 3-month high, as we expected, while the Canadian Dollar and the Kiwi also had a slightly bullish day. Precious metals also rebounded after a negative run yesterday, as they were helped by the bearish USD in late trading.

GBP/USD (current price: 1.3067)

The Pound fell below the all-important 1.30 level in early trading yesterday after the release of the Manufacturing Production number. The indicator showed a decrease of -0.3% compared to the expectations of a flat month. The British Goods Trade Balance also missed expectations and the releases weighed on the pair as well. Cable finished back above the crucial level after recovering in late trading, and that might signal an upcoming correction.

Our assessment: GBP/USD is trading around its 30-year low near the 1.30 mark, but it bounced back quickly after yesterday’s break-down with another support level still below the current rate at 1.2850.

GBPUSD still stuck close to the Brexit lows on the Daily Chart, Created by FxGlobe MT4

GBP/USD still stuck close to the Brexit lows on the Daily Chart, Created by FxGlobe MT4

EUR/JPY (current price: 112.96)

The Japanese Yen still looks way stronger than the Euro, as the pair is stuck below the prior declining long-term trend channel, and it’s trading close to the post-Brexit lows near the 110 level. The Yen’s strength is especially surprising with the major U.S. stock indices trading on all-time highs and other risk assets around the world having a positive period lately. The cross may dip even lower if a meaningful correction develops in international markets in the coming weeks.

Our assessment: EUR/JPY is only slightly above the recent multi-year low, and a dip below 110 might lead to another leg lower in the ongoing downtrend, despite the oversold levels of the momentum indicators.

USDJPY in a short-term correction on the Daily Chart, Created by FxGlobe MT4

USD/JPY in a short-term correction on the Daily Chart, Created by FxGlobe MT4

NZD/USD (current price: 0.7205)

The pair looks bullish before today’s rate decision despite the expectations of a rate cut that would follow the Royal Bank of Australia’s cut last week. The Kiwi got higher this week after the encouraging Chinese releases as the Asian country is the most important trading partner of New Zealand. The pair is just below the 12-month high near 0.73, with support levels near 0.7050 and 0.6965. If the RBNZ fails to cut the benchmark rate, the currency might start a strong rally.

Our assessment: The cross has been trading in a relatively narrow range recently, as investors wait for the central bank’s decision this evening, but the Kiwi stayed close to the crucial resistance level during the correction.

NZD/USD trading around the 0.72 level on the Daily Chart, Created by FxGlobe MT4

NZD/USD trading around the 0.72 level on the Daily Chart, Created by FxGlobe MT4

Gold (current price: $1348.00) and Silver (current price: $20.06)

Precious metals were led higher by silver yesterday, and the commodity is higher today in early trading as well, as gold is slightly underperforming, being just below the crucial 1350 level this morning. The metals got hit after the release of the better than expected U.S. Jobs Report last week, and they bounced back yesterday after the bearish British releases. Both gold and silver are in long-term up-trends which started in last December, despite the more than one-month long consolidation.

Our assessment: Gold is inside a bullish triangle consolidation pattern since hitting a high near 1375 in early July, as the 1310 level provided support for the commodity during the recent correction.

Gold still in a long-term uptrend, just 2.5% below the prior high on the Daily Chart, Created by FxGlobe MT4

Gold still in a long-term uptrend, just 2.5% below the prior high on the Daily Chart, Created by FxGlobe MT4

Economic Releases

The New Zealand Dollar will be in focus today, as the local central bank will decide on its benchmark late during the evening session. The RBNZ will also release its Monetary Statement, which might be even more important than the rate, especially if the bank doesn’t lower the interest rate as expected. Only the French Industrial Production number will be released in the relatively calm morning session, while the U.S. Job Openings and Crude Oil Inventories will highlight the afternoon.

Original Source: Daily FXGlobe

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