Author: Michalis Efthymiou

Michalis Efthymiou brings over 9 years of extensive experience in the financial services industry across the United Kingdom and Europe. Initially serving as a financial advisor in London for 5 years, he has transitioned into the field of market analysis over the past 4 years.

USD/JPY – Market Analysis

Posted on by Michalis Efthymiou

Here’s the revised version with the specified wording removed:

– Gold declines while Silver, Palladium, Platinum, and other metals see gains.
– Bond yields have improved but remain well below Monday’s opening levels, reinforcing expectations of a rate cut in September.
– Rate cut predictions continue to support the stock market and Gold, with investors turning their attention to the FOMC Meeting Minutes for clearer indications.
– The US Dollar’s downward trend loses momentum after three days of strong declines.

USD/JPY Analysis

The USD/JPY pair is primarily driven by the US Dollar, which has fallen in value over the past week due to lower inflation and weaker employment data in July. These factors are contributing to market expectations of a rate cut in September, with experts considering it a near certainty. The key question now is whether the Federal Reserve will opt for a 25 or 75-basis point cut.

The Chicago exchange suggests a 70% probability of a 25-basis point cut and a 30% chance of a 50-basis point cut. By year-end, most believe the Fed will reduce rates by 0.75% to 1.00%. Larger and more frequent cuts are generally negative for the US Dollar, leading investors to increase exposure to the Yen as the Dollar loses its safe-haven and inflation-hedge status. The upcoming FOMC Meeting Minutes are crucial as investors look for further insights.

Investors are also focused on Fed Chair Jerome Powell’s upcoming speech at the Economic Symposium in Jackson Hole, where he is expected to confirm the agency’s plans to reduce the interest rate by 25 or 50 basis points at the September meeting.

Technical Analysis

The USD/JPY exchange rate is currently trading below the 75-Period EMA and 100-Period SMA, and remains under the neutral level on the RSI, indicating a potential downward trend in the medium term. Although the price has risen during the first two sessions today, a shift in direction is necessary to generate a sell signal. For instance, if the price drops below 145.630, the moving averages may form a bearish crossover, signaling further downward movement. Additionally, the Fibonacci analysis on the 2-Hour chart suggests that a sell signal could emerge if the price falls below 145.367.

Key factors to watch over the next 24 hours include the FOMC Meeting Minutes, Services PMI, Manufacturing PMI, and Friday’s Fed Speech at the Jackson Hole Symposium at 14:00 GMT. Although no significant news is expected from Japan, the Yen, despite a 0.40% decline today, has been regaining strength over the past two hours.

Market Analysis: The Stock Market And Dow Jones!

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The Dow Jones rarely tops the performance charts due to its focus on stable, less volatile stocks, but Wednesday was an exception. The index’s upward momentum was driven by strong earnings reports from Cisco Systems and Caterpillar. Investors now shift their focus to Walmart’s upcoming quarterly earnings report.

On Wednesday, 80% of the Dow’s stocks gained value, fueled by improved investor sentiment. The drop in the US inflation rate from 3% to 2.9%, along with steady core inflation at 3.2%, boosted market confidence, particularly supporting the Dow Jones.

Cisco’s latest earnings report added to the momentum. Earnings per share exceeded Wall Street predictions by 2.49%, and revenue increased by nearly $1 billion from Q1 to Q2, driving the stock up 5.75% after market close. American Express and Goldman Sachs also performed strongly. Walmart, which will release its earnings report before the market opens, is now in the spotlight.

Analysts expect Walmart’s earnings per share to rise from $0.60 to $0.65, with revenue increasing from $159 billion to $167 billion. Walmart has consistently exceeded earnings expectations over the past year as budget-conscious consumers turned to the retailer amid high inflation. On Wednesday, Walmart’s stock rose 0.78%, with an additional 0.52% gain after market close, signaling investor confidence in the company’s continued strong performance. Walmart holds a 1.12% weight in the Dow, while Cisco Systems holds 0.74%.

Following lower inflation data for both consumers and producers, there’s a 64% chance of a 25-basis point rate cut in September. Analysts predict the Federal Reserve will reduce rates by 0.75% by the end of 2024, with some expecting a full 1.00% cut. The CME Group data suggests a 44% chance of a 1.00% cut by December.

Investors are now eyeing US Retail Sales, Core Retail Sales, and Weekly Unemployment Claims. Ideally, they hope for data slightly above expectations but not so strong as to diminish the likelihood of rate cuts. The Empire State Manufacturing Index and Philly Fed Index could also cause market fluctuations, though to a lesser degree. Rising tensions in the Middle East remain a potential concern.

Currently, the VIX shows no major changes, and bond yields are stable, but a decline throughout the day would benefit the stock market.

Dow Jones – Technical Analysis

Technical analysis shows that buyers are maintaining momentum. On the 2-hour chart, the price is trading above the 75-Period and 100-Period EMAs, with the RSI above 70, indicating strong momentum but not an overbought condition. On the 5-minute chart, bullish crossovers continue to form, and the price remains above the VWAP. Price movement as we approach the US session will largely depend on the global stock market performance and Walmart’s earnings report.

GBPJPY Analysis – Key UK Data to Drive the Pound’s Direction!

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  • Economists predict the US inflation rate will hold steady at 3.0% or dip to 2.9%, with core inflation (excluding food and energy) expected to decline to 3.2%.
  • Federal Reserve Governor Mrs. Bowman suggests rate cuts are warranted only if inflation continues to trend downward.
  • CME Group data reveals investors are divided on whether the Fed will opt for a 0.50% or 0.25% cut.
  • The upcoming US inflation data, due tomorrow and Wednesday, will be crucial in determining the Fed’s next move.
  • The Dow Jones is on standby, awaiting key earnings reports from Home Depot (August 13th), Cisco Systems (August 14th), and Walmart (August 15th).

GBPJPY – Key UK Data to Drive the Pound’s Direction

The GBPJPY is trading near its recent average, but the Pound is gaining momentum as vital UK economic data approaches. The Pound’s strength will largely hinge on the results of five key economic releases. Meanwhile, the Japanese Yen has slightly weakened following the Bank of Japan’s dovish tone at their latest press conference. The Yen’s performance will be influenced by the dovish stances of other central banks, including the Fed, Bank of England, and European Central Bank.

This week, the UK will release the following crucial economic data:- Claimant Count Change
– Average Earnings Index
– UK Inflation
– Gross Domestic Product (GDP)
– Retail Sales

The Pound’s value will depend on how the UK economy and inflation have fared over the past month compared to expectations. If UK inflation and GDP exceed forecasts, economists believe the Pound will likely strengthen. However, investors will also be watching UK employment data closely, as the unemployment rate has risen to 4.4%. If this trend continues, the UK’s unemployment rate could reach its highest level in three years, potentially prompting a more dovish response from the Bank of England.

Currently, the Pound is outperforming most currencies, except for the AUD and NZD. Typically, the AUD and NZD lose momentum as the European session begins, but the New Zealand Dollar is also gaining ground ahead of the RBNZ’s rate decision. The GBP is trading 0.20% higher in the Asian session so far. Technical analysts and economists suggest that investors may be increasing their exposure in anticipation of positive economic data throughout the week.

From a technical perspective, GBPJPY is trading above the 75-Period EMA and 100-Period SMA for the first time since July 11th. The RSI is at 59.00, indicating that buyers might be gaining control. Meanwhile, the Japanese Yen index is down 0.42%, showing no immediate conflict, but investors will continue monitoring this as the US releases its inflation data. Prices above 188.405 signal stronger buy opportunities, while a drop below 186.477 will have traders eyeing sell signals.

The Dow Jones’s Reaction To Lower Consumer Demand!

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The Dow Jones price quickly collapsed after the US trading session opened and remains low on Thursday. The decline was mainly triggered by the poor performance of Amgen (-5.00%) and Walt Disney (-4.46%), both under pressure from quarterly earnings reports that highlighted some risks. On Wednesday, only 35% of the Dow Jones stocks rose in value, while 65% fell.

Disney’s Earnings Per Share for the latest quarter were significantly higher than expected, up 16%, while revenue met expectations. However, the poor performance of the company’s theme parks dampened sentiment and impacted the overall stock market. Economists attribute the drop in theme park revenue to inflation and lower consumer demand, affecting not just Disney’s stocks but the market as a whole.

In August, poor data can trigger overreactions due to low risk appetite. The next significant quarterly earnings report for the Dow Jones is from Home Depot, due on Tuesday before the market opens.

Adding to market pressure, JP Morgan recently commented that the US economy faces a higher risk of recession in 2024, with a recent selloff wiping out three-quarters of the global carry trade and erasing this year’s gains. Despite this, some observers now believe a national recession is unlikely, even with the cooling of key industries. Experts anticipate a significant adjustment in US Fed monetary policy, which will support GDP growth. JPMorgan Chase & Co. experts predict three reductions in borrowing costs this year: 50 basis points in both September and November, and another 25 basis points in December, though a more cautious approach is also possible.

Technically, the Dow Jones continues to find support at the $38,577.09 level, though it’s testing this level for the fourth time this week. The index is currently trading below the 75-Period EMA, 100-Period SMA, and below the 50.00 level on the RSI. On a positive note, the VIX index and bond yields are trading lower.

Will Amgen and Caterpillar Earnings Save the DJIA?

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The Dow Jones fell 1.39% despite its exposure to defensive stocks. However, during the US trading session, shareholders refrained from further selling as leading economists indicated two large rate cuts by the Fed. Additionally, economists assure investors that the data points to a slowdown rather than a recession. Will the Dow Jones rebound?

A potential upward correction for the stock market depends on three factors. Investors would prefer to see stable economic data, though no major US data is due this week. For the Dow Jones to recover, the upcoming earnings data must exceed expectations to soothe investor nerves.

Amgen and Caterpillar will release their quarterly earnings reports before the US session opens. Amgen is the fifth most influential stock for the Dow Jones, and Caterpillar is the sixth, together comprising 10.80% of the index. Both stocks declined on Monday but have beaten earnings expectations for the past four quarters. If they do so again, along with positive forward guidance, a Dow Jones correction becomes more likely.

In the medium to long term, other risks remain. Monday’s decline was also due to escalating geopolitical tensions in the Middle East. Reports indicate Israel is on high alert, with a potential full-scale war involving Israel, Iran, and Lebanon. Escalating tensions could dampen stock market sentiment and overall market risk appetite.

If earnings from Amgen and Caterpillar are positive and the price breaks above the current breakout level of $39,151.92, a buy signal is possible. Conversely, if the price falls below $38,675, it would signal a bearish trend continuation pattern. Medium-term targets for a bearish trend are $38,410.60 and $38,231 (Fibonacci).

Market Summary

– Investors are buying the dip, but is the collapse truly over? Asian and US indices rebound as the US session opens.
– The Dow Jones rises by 0.40%, but risks persist without positive earnings data.
– Investors are reassured by potential significant interest rate cuts from the Federal Reserve, with JP Morgan and Citigroup predicting two large cuts in 2024.
– US economic data remains weak, but economists suggest a recession is not yet on the horizon.
– Investors are now focusing on earnings reports from Amgen, Caterpillar, and Airbnb.

The NASDAQ Drops 6% On Monday! Will the decline hold?

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The NASDAQ began the day with a bearish price gap of 0.85% and then dropped an additional 5.33%, bringing it nearly 17% below its recent high and to its lowest level since April 25, 2024. What is driving this bearish sentiment?

Three main factors have triggered this risk-off sentiment:

1. US Employment Data: The latest figures suggest economic weakness for the rest of 2024. The US Unemployment Rate rose from 4.1% to 4.3%, higher than the predicted 4.1% and the 6-month average of 3.9%. Additionally, the NFP figure fell to 114,000, the lowest since February 2021 and below market expectations. While this data doesn’t yet indicate a recession, it signals stagnation, prompting investors to cash in profits from the past three years.

2. Middle East Escalation: Rising tensions in the Middle East, with a potential Iranian attack on Israel in retaliation for the killing of a Hamas leader, are causing global market jitters. The uncertainty of Iran’s response and its implications for regional peace are negative for the stock market.

3. Berkshire Hathaway Actions: The company confirmed it sold almost half of its Apple stocks and continues to reduce its exposure to Bank of America by nearly 9%. The latest quarterly report shows a shift towards currencies and other sectors.

Investors now question the intrinsic value of the NASDAQ and when to buy the dip. Typically, significant price stress without a market crash leads investors to look at clear support levels or the 12-month average price. The nearest support level is at $16,953.30, 3.34% below the current price, and the 12-month average is $17,133.00. Trend indicators point to a continued downward trend unless buyers reenter the market. The 5-minute timeframe using Fibonacci Levels and Crossovers indicates strong sell trades if the price falls below $17,378.22.

However, buyers are likely to re-enter only if Middle East tensions subside and US economic data improves. Throughout the day investors will be concentrating on the US final Services PMI and ISM PMI. Currently, only 10% of the NASDAQ’s Stocks are not experiencing a decline in pre-trading hours. In addition to this, the VIX index points towards a clear risk-off sentiment within the market.

The NASDAQ As Earnings Season Kicks-Off!

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The NASDAQ rose on Friday despite higher-than-expected US inflation data. Analysts noted that investors took advantage of lower prices following Thursday’s 2.20% decline. Investors may still seek to increase exposure to stocks and indices, anticipating a rate cut and strong earnings data.

The Producer Price Index came in at 0.2% versus the 0.1% expectation. Investors were concerned that the Core Producer Price Index exceeded expectations by more than double. However, the good news is that the US inflation rate fell from 3.3% to 3.0%, the lowest since June 2023. Today, investors will focus on the Empire State Manufacturing Index release, which could benefit from a slightly higher reading. Additionally, the Fed Chairman’s speech at 16:00 GMT may trigger volatility depending on his comments.

While none of the earnings reports released Friday were part of the NASDAQ index, they still captured investors’ attention. JP Morgan, CitiGroup, and Wells Fargo all surpassed earnings and revenue expectations, but their stocks depreciated in the following session, with Wells Fargo falling over 6.00%. The primary cause was the cautious forward guidance from all three banks regarding economic conditions in the coming months ahead of the elections. Citi’s US consumer lending division saw profits plunge by 74% compared to last year, with CFO Mark Mason noting a general decline in consumer spending and account balances below pre-Covid levels. Additionally, JP Morgan indicated that lower-income consumers are likely to struggle over the next 3-4 months.

On the technical side, the NASDAQ is trading above the 75-Period EMA and 100-Period SMA. The RSI is also above the 50.00 level, indicating that buyers are regaining market control. Buy signals are likely to strengthen as the price crosses above the $20,471.10 and $20,552.77 levels.

NASDAQ Market Analysis: Today’s CPI Reading

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The NASDAQ increased in value for a fourth consecutive day as investors anticipate a rate cut in September. On Wednesday, the index rose by 1.05%, but the continuation of this bullish trend will hinge on today’s inflation reading. Investors are expecting a decrease in inflation; however, if this expectation is not met, it could exert downward pressure. Conversely, if inflation drops to 3.1% or lower, shareholders are less likely to sell shares ahead of earnings season, potentially sustaining the bullish trend.

The prospect of a rate cut in September has gained traction due to rising unemployment and a shift in the Federal Reserve’s tone. Earlier this week, the Fed Chairman noted signs of weakening in the employment sector, while yesterday, the Fed Governor indicated that inflation would reach the target without a significant further increase in the unemployment rate. Lower interest rates support the economy but also make bonds and the US Dollar less attractive.

Only 25% of the NASDAQ’s 100 stocks declined on Wednesday, applying minimal pressure. The bullish movement was driven largely by the top 8 most influential stocks, which all rose in value, comprising 49.08% of the entire index. The only stocks applying minor pressure were Netflix, which fell by 1.18%, and Intuit, down by 2.70%. These two stocks hold a combined weight of 3.08%.

One of the significant supporters of the NASDAQ in 2023 and 2024 has been NVIDIA. Leading analysts note that the company’s quarterly report is scheduled slightly later than its main competitors, potentially providing an advantage and an opportunity to improve performance. KeyBanc Capital Markets raised NVIDIA’s target price from $130 to $180, citing higher-than-expected demand for GB200 graphics processors, especially the more expensive NVL72 configuration, which is gaining interest over the previously popular NVL36. Wolfe Research LLC also adjusted its price target from $125 to $150.

Currently, the price is trading within a symmetrical triangle, indicating a lower high but a higher low. Volatility is likely to remain minimal until the US Consumer Price Index (CPI) release. If the CPI meets expectations and the price increases, traders should be cautious of potential profit-taking and price retracement. In the medium to long term, the price remains above the 75-Period EMA and 100-Period SMA, indicating that buyers are controlling the market. Based on price action, buy signals are likely to materialize again if the price rises above $20,697.40.

Employment Data Eases Concerns and Pushes NASDAQ Close to an All-Time High!

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The NASDAQ has climbed 1.40% this week as market risk appetite improves and institutions position themselves for the upcoming earnings season. The NASDAQ has now formed a second higher high and a third higher low, prompting technical analysts to suggest a potential bullish trend. Economists also predict strong performance for the NASDAQ in the second half of the year.

Bulls entered the market quickly during yesterday’s trading session following positive employment data. Analysts had expected the JOLTS Job Openings to fall to its lowest level since the COVID lockdowns, but the data showed 180,000 more vacancies than anticipated. Investors reacted positively, interpreting the data as a sign that the employment sector is balanced—strong but not so strong as to significantly drive up salaries and inflation.

Federal Reserve Chairman Jerome Powell added to the positive sentiment by noting that recent data suggests a return to a disinflationary path, despite persistently high inflation reports earlier in 2024. However, economists warn that rising oil prices, which increased by 8.40% in June 2024, could make inflation stickier if prices hover around $85 per barrel.

Even with potential inflation concerns, investors are starting to focus on the upcoming earnings season, set to begin on Friday, July 12th, with momentum picking up on the 17th. On Tuesday, 75% of NASDAQ stocks and 83% of its most influential stocks rose in value.

Currently, the NASDAQ is showing buy signals, trading comfortably above the 75-bar EMA and the Volume Weighted Average Price. Oscillators also indicate buyer control, though technical analysts are closely monitoring for sustained momentum. Key breakout levels are at $20,036.03 and $20,045.64, with the NASDAQ’s all-time high at $20,128.31.

French CAC: Analysis, Targets and Price Drivers!

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  • Projections indicate that France’s Far Right Party will lead the first round of parliamentary elections.
  • The Euro is the day’s best-performing currency, increasing in value by more than 0.40%.
  • European indices soar! The Euro Stoxx 50 rises 1.85% and the DAX 1.00%.
  • Investors are focusing on today’s German inflation data, with analysts expecting the Consumer Price Index to rise by 0.2%.

Following an exceptionally high voter turnout, the National Rally is leading with 34% of the vote. The left-wing New Popular Front is in second place with 28%, and President Emmanuel Macron’s Ensemble Alliance has dropped to a disappointing third place with 20%, according to initial estimates. Although the National Rally seems poised to secure the most seats, France could be facing a hung parliament and increased political uncertainty. Even so, technical analysis signals a possible correction upwards, and the market is showing a clear “risk-on” sentiment. The higher risk appetite is due to the far-right failing to win a majority. Bottom fishing refers to investors buying at the lowest price!

By the market close on Friday, the French CAC was near its lowest level for 2024. Since Sunday’s elections, all European indices have risen, with the French CAC trading up 2.65%. Investors have bought the dip, triggering a large price gap and a significantly higher price. Nonetheless, the price remains 7.00% lower than the index’s all-time high. The price is being influenced by three major factors: upcoming earnings data, higher stock appetite, and the French elections.

However, the outcome will depend on the political outcome and if indeed the French National Party fail to win a majority. In addition to this, the outcome will also depend on if the New Popular Front and President Emmanuel Macron can come to an agreement to join forces. If this is not possible, the political uncertainty can trigger another decline. Investors which have already entered into a buy position will now be hoping for political calm and for today’s German CPI to read lower than expectations.

The risk-on sentiment can be seen across the global stock market. All European and US indices are increasing on Monday. The Euro Stoxx 50 has risen 1.85%, the DAX 1.00%, the S&P 500 0.35%, and the NASDAQ 0.40%. Some Asian stocks are also continuing to rise. Lastly, the VIX index trades 1.59% lower, indicating a higher risk appetite.

In terms of technical analysis, the CAC40 is attempting to establish itself above the 75-Bar EMA and above 50.00 on the RSI. On smaller timeframes, the momentum is forming bullish crossovers, further indicating an increase. The only concern for investors is the resistance level at 7,729.48, which pressured the index last week. If the price forms a breakout above this level, the index will likely see buy signals strengthen. If the price retraces to 7,614.55, traders have the opportunity to trade the upcoming breakout. However, if the price falls below this level, the buy signal will no longer be valid for the time being.