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USDJPY Advances Beyond the 143 Yen Threshold
Anticipating US CPI Report.
“USD/JPY Advances Beyond the 143 Yen Threshold, Anticipating US CPI Report”
In today’s economic landscape, the USD/JPY pair sustains its upward trajectory, carrying forward the momentum initiated in mid-July, and presently reaching the upper echelons of the 143 yen range. However, a prevailing atmosphere of uncertainty encapsulates market sentiment, as participants await the impending release of the US Consumer Price Index (CPI) scheduled for tomorrow. This anticipation complicates the task of establishing a definitive market direction.
Discerning market analysts underscore the heightened susceptibility of contemporary currency markets to risk factors. This underscores the widely-held expectation that risk-averse sentiment will likely hold sway in the imminent period. In this context, the US dollar is anticipated to uphold a substantial level of support. Additionally, certain perspectives posit that an outcome wherein tomorrow’s US CPI report surpasses market expectations, subsequently catalyzing instability in the US stock market, could feasibly trigger an augmented demand for the dollar.
However, with respect to the forthcoming US CPI publication, the composite index is predicted to experience a transitory deterioration owing to the base effect of the previous year, despite an overarching increase when compared to the previous iteration. Conversely, the acceleration of the decline in goods prices during July, coupled with the foreseen diminution of service prices from the pinnacle observed last year, collectively signal a protracted deceleration in inflation. This underscores the prevailing projection of a Federal Reserve (FRB) move toward winding down the current rate hike cycle.
Within the dynamic interplay of the EUR/USD pair, a discernible trend of buybacks becomes evident. The 21-day moving average has been surpassed, while the 100-day moving average serves as a resilient underpinning. As of today, the 100-day moving average stands at approximately $1.0925.
Experts have observed that unless positive economic data surfaces, the EUR/USD may potentially experience a decline come September. This assertion gains prominence as investors are anticipated to significantly reduce their long positions in the euro during this timeframe. Converging factors, including the yield differential between two-year maturities and growth prospects in the Eurozone and the United States, collectively portend a substantial downturn in the EUR/USD.
While existing long positions on the EUR/USD exhibit robustness, it is discerned that by the onset of September, these positions may necessitate a retreat unless economic indicators and the policy trajectories of the Federal Reserve (FRB) and the European Central Bank (ECB) align favorably with the euro.
In today’s trade, the GBP/USD pair contends with a modest selling pressure, extending the trend of retracement sales initiated in mid-July. A backdrop of risk aversion pervades the market atmosphere, fostering the ongoing resilience of the US dollar.
Furthermore, the pound exhibits a predisposition toward selling vis-à-vis the euro today. However, owing to the projections of heightened inflation in the UK and the likelihood of supplementary rate hikes by the Bank of England (BoE), a prevailing perspective asserts that the pound may exhibit resilience against the euro over the upcoming weeks. The persistent elevation of inflation in the UK and the prevailing expectations of rate hikes by the BoE are anticipated to reinforce the pound’s position. Concurrently, apprehensions regarding an economic downturn within the Eurozone are construed as a constraining influence on the euro.
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