Daily Market Analysis from ForexMart

SEC on a new form of cryptocurrency regulation​​​​​​​

Sentiment to increase regulatory oversight of cryptocurrencies continues to gain momentum after it was revealed on Wednesday that the Securities and Exchange Commission (SEC) asked major hedge funds to report their exposure to cryptocurrencies.

Under the proposal, the SEC and the Commodity Futures Trading Commission (CFTC) are seeking to amend the Form PF process to require accurate reporting of digital asset strategies that involve an amount of at least $500 million.

Form PF was created in the aftermath of the 2008 financial crisis to help regulators identify asset bubbles and other potential risks to financial market stability by bringing greater transparency to the opaque private equity landscape.

Both agencies cited the rapid growth of the hedge fund industry as the main reason for the proposed changes, as well as the fact that cryptocurrencies did not yet exist when the form was originally introduced. Consultations have been held with the Treasury Department and the Federal Reserve to ensure that there are no risks to the private fund industry as a result of the changes.The number of private funds increased by about 55% from 2008 to the third quarter of 2021, according to a newsletter published with the offer, with IBISWorld data showing that there were 3,841 hedge funds in the US as of early 2022.

SEC Chairman Gary Gensler noted that under this form of regulation, which includes business practices, complexity, and changes in investment strategies, the gross asset value of the private fund industry has risen nearly 150 percent.

As to why he supports the proposal, Gensler stated that "if passed, it would improve the quality of the information we get from all PF form fillers, with a particular focus on large hedge fund advisors, which will help protect investors."

The proposal requires comments from the investment community on whether the funds should disclose details of the cryptocurrencies they hold, such as their name and characteristics.

Members of the Securities and Exchange Commission voted 3-2 in favor of passing the motion, with Republican commissioners Hester Pierce and Mark Ueda voting against. Concerns raised by those who disagree included whether the government really needed all the information the new PF form would collect.

The music did not play for long, the yen danced for a short time

The dollar is getting up from its knees after a crushing fall on Wednesday. The yen is currently feeling the greatest pressure from the greenback, which showed the strongest growth on the US inflation data the day before.

The market freaked out
By the end of the week, investors continue to digest the July statistics on US inflation. Recall that the data turned out to be cooler than forecasts, which caused a large-scale sell-off of the dollar.

Last month, annual inflation in the US fell from the previous value of 9.1% to 8.5%, although economists had expected the CPI to fall to 8.7%.

A significant easing of inflationary pressures has increased fears that the Federal Reserve may reduce the degree of its aggressiveness with respect to interest rates already at the September meeting.

The reaction of the market was lightning-fast and very emotional: the yield of US government bonds fell sharply, followed by a plunge in the dollar. The DXY index sank 1.5% to a low of 104.646 on Wednesday.

The dollar's weakness provided support to all major currencies, but the yen gained the most in this situation. The yen soared by more than 1.6% against its US counterpart, to a mark of 135.

The dollar is gaining momentum
After a loud fall on Wednesday, the yield of 10-year US government bonds turned towards growth yesterday. It rose by 3.41% during the day and reached a new high of 2.902%.

The sharp increase in the indicator again widened the gap between the yields of US treasury bonds and their Japanese counterparts.

The yen, which is very sensitive to this difference, could not resist the pressure and moved to decline.

The USD/JPY pair managed to recover by 0.12% to 133.19 on Thursday. It was also supported by the general strengthening of the dollar.

The greenback grew by 0.1% against its main competitors. Its index remained almost unchanged and stayed at 105.2 during the day.

Yesterday's comments by Federal Reserve members contributed to the reversal of the yield of US government bonds and the dollar. Despite the slowdown in inflation in July, the tone of officials still remains hawkish.

Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, said that the latest CPI data did not change his expectations about the Fed's future course.

In addition, he stressed that the central bank is still very far from declaring victory over inflation.

The head of the San Francisco Federal Reserve, Mary Daly, was in solidarity with her colleague. She also does not rule out the continuation of the Fed's hawkish policy, unless, of course, the next portions of macro data will favor such a sharp increase.

Recall that the key Fed's goal is to bring interest rates from the current level of 2.25–2.5% to 4% by the end of the year.

Some analysts believe that the central bank will try to solve this problem as soon as possible, and predict another rate increase of 75 bps at a meeting in September.

Why does the yen have no chance?
This year the dollar index rose by 10%. The greenback received such a solid increase thanks to the aggressive policy of the Fed.

Since March, the US central bank has raised interest rates by 225 bps. This makes it the undisputed leader: none of the major central banks can compete with the Fed in the pace of tightening.

But the biggest divergence in monetary policy right now is between the US and Japan. Despite the global increase in rates, the Bank of Japan is still bending its line and continues to keep the rate at a low level.

The priority for the Japanese central bank is not to fight inflation, but to restore the economy, which has been hit hard by the COVID-19 pandemic.

Unlike the US and EU, which have already managed to get out of the crisis caused by the coronavirus, the Japanese economy is just beginning to show signs of recovery.

According to preliminary estimates, in the second quarter, Japan's annual GDP could show growth of 2.7%, which is in line with pre-pandemic indicators.

Statistics on the gross domestic product will be published on Monday. But even if the data turns out to be positive, it most likely will not affect the policies of BOJ Governor Haruhiko Kuroda in any way.

Many experts are inclined to believe that the head of the BOJ will not give up his commitment to a super-soft monetary rate. The main argument in its favor now will be the low wages remaining in the country.

At this stage, salaries in Japan are far behind the rate of inflation, which undermines the purchasing power of citizens.

Another big reason to keep rates low is the coronavirus statistics. Japan is at the epicenter of a new COVID-19 outbreak, posing a major threat to the world's third largest economy.

According to economists at the Japan Research Institute, the BOJ's position can be changed to hawkish only after Kuroda leaves his post.

Given that he is due to retire no earlier than April 2023, one can estimate how long the downward trend promises to be for the yen.

Analysts at the Finnish bank Nordea predict that the USD/JPY pair will continue to strengthen on the tight policy of the Fed and reach the level of 140 in the foreseeable future.

GBP/USD: How deep could GBP fall?

The pound encountered support after the release of better-than-expected data. The fact that the British economy is not in its best state ahead of the winter season is clear. There are great risks of a recession in the country as monetary tightening along with high energy prices are posing a threat to the economy.

Meanwhile, Pantheon Macroeconomics sees Q4 GDP rising by 0.3% from the previous period.

"A winter recession can't be ruled out, given that the rise in Ofgem's energy price cap in October will boost CPI inflation—and hence reduce real incomes—by nearly four percentage points. But with fiscal support likely to be scaled up considerably by the next PM and high income households still possessing substantial savings, we think that GDP will flatline through the winter, rather than fall," economists at Pantheon Macroeconomics said.

In the second quarter, the British economy contracted by 0.1%, below the expected 0.2%. Overall, the economy expanded by 2.9% year-on-year, above the market forecast of 2.8%.

The pound saw an increase in volatility, but traders made no attempts to trade in any direction. In light of a rise in the dollar, however, a sell-off occurred. At the beginning of the trading week, the pair is trying to consolidate. Demand for the pound is decreasing and the currency is edging down amid gloomy forecasts made by the Bank of England.

On Monday, bearish pressure on the pound increased, and the price fell below 1.2100. So, GBP/USD was unable to rise on better-than-expected macro data.

At the same time, the dollar does not show steady growth either. Traders are now uncertain about the Federal Reserve's further monetary stance. The hawkish comments of some policymakers hint that the regulator will remain aggressive. Yet, there are still questions. The situation will get clearer when the FOMC Minutes are released this week. Should the Federal Reserve stay aggressive, the greenback's rally will extend.

Therefore, the dollar is unlikely to be bearish at the beginning of the trading week although its growth potential will be limited. So, GBP/USD may recover eventually.

Weekly outlook for GBP

This week, the focus will be on the retail sales report scheduled for Wednesday as well as US weekly jobless claims and the FOMC Minutes.

"Next week's FOMC minutes will contain some discussion of the FOMC's apparent desire to slow the pace of hikes soon. But we do not expect it to be a lasting relief," Goldman Sachs said.

Analysts now see a 50 basis-point hike as the unlikely outcome at the September meeting.

US macro data will surely be of great importance to the GBP/USD quotes. Still, macro results in the United Kingdom could affect the Bank of England's interest rate forecast.

On Tuesday, traders will see the release of data on the UK labor market report, which will influence the Bank of England's monetary policy stance.

Meanwhile, the inflation report published on Wednesday will be of primary importance as it will affect both the BoE's monetary policy and the pound's short-term potential. At this point, it is unclear how the market could react to a possible increase or decrease in rate hikes.

Therefore, in light of a busy trading week, the pound is likely to trade in a trend in the coming days after consolidation.On Monday, bullish demand for the pound is falling. In the short-term, the pair is expected to be bearish, with targets at 1.2050 and 1.2000 (psychological level).

Resistance is seen at 1.2200, 1.2265, and 1.2315. Support stands at 1.2080, 1.2030, and 1.1965.

Tips for beginner traders in EUR/USD and GBP/USD on August 16, 2022

Details of the economic calendar for August 15

Monday was traditionally accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States were not released.

In this regard, traders focused on the information flow, and practiced technical analysis.

Analysis of trading charts from August 15

The EURUSD currency pair, during an intense downward movement from the resistance level of 1.0350, reached the lower limit of the previously passed flat of 1.0150/1.0270. As a result, there was a local reduction in the volume of short positions in the market, which led to a slowdown.

The GBPUSD currency pair accelerated its decline after breaking through a number of variable levels. As a result, the quote came close to the important psychological level of 1.2000, where it formed a small stagnation.

Economic calendar for August 16

At the opening of the European session, the UK labor market data was released, where unemployment remained at the same level of 3.8%. At the same time, employment in the country increased by 160,000 against 296,000 in the previous reporting period. Forecasts assumed that employment would grow by 256,000. At the same time, the change in the number of applications for unemployment benefits in July decreased by 10,500, which is good, but forecasts assumed -32,000.

Statistics for the UK stand out only by the unemployment rate, since everything is ambiguous on other indicators. The pound sterling was standing still at that time.

During the American trading session, data on the construction sector in the United States will be published. The number of issued building permits and the volume of new housing starts is assumed to decrease.

Subsequently, data on the volume of industrial production will be published, which is assumed to decline from 4.2% to 4.0% YoY and grow by 0.3% MoM.

Time targeting:

U.S. Building Permits Issued – 12:30 UTC (prev. 1.696M; prog. 1.65M)

US Housing Starts – 12:30 UTC (prev. 1.55 M; prog. 1.54 M)

US Industrial Production – 13:15 UTC

Trading plan for EUR/USD on August 16

Presumably, the 1.0150 area will put pressure on sellers, which may lead to a gradual slowdown in the downward cycle, resulting in a technical pullback in the market.

Traders will consider a prolonged downward cycle if the price stays below 1.0100. In this case, the quote will rush towards the parity level.

Trading plan for GBP/USD on August 16

In this situation, the area of the control level puts pressure on sellers, negatively affecting the volume of short positions. In view of the local signal about the oversold pound sterling, we can assume the formation of a pullback.

Traders will consider the next downward move if the price holds below 1.1950. Under this scenario, a resumption of the medium-term downward trend is possible.

Tips for beginner traders in EUR/USD and GBP/USD on August 17, 2022

Details of the economic calendar for August 16

The UK's Office for National Statistics (ONS) report on the labor market yesterday showed unemployment rate stabilized at around 3.8%. Employment in the country increased by 160,000 against 296,000 in the previous reporting period. Forecasts predicted that employment would grow by 256,000. At the same time, the change in the number of applications for unemployment benefits in July decreased by 10,500, which is good, but they predicted -32,000.

Statistics for the UK stand out only by the unemployment rate, since everything is ambiguous on other indicators. The pound sterling stood still at the time of publication.

During the American trading session, data on the construction sector in the United States were published, which recorded a widespread decline in performance.

Details:

U.S. Building Permits Issued – Prev. 1.696M; Fact. 1.674M.

U.S. Housing Starts – Prev. 1.599M; Fact. 1.446M.

Subsequently, data on the volume of industrial production were published, which recorded a slowdown from 4.02% to 3.9% YoY, and increased by 0.6% MoM.

Conclusion:

Data on the US came out negatively; the dollar was under pressure from sellers.

Analysis of trading charts from August 16

The EURUSD currency pair overcame the support level of 1.0150 locally during an intense downward movement, but the sellers failed to stay below the reference value of 1.0100. As a result, there was a pullback in the market above the support level.

The GBPUSD currency pair rebounded from the psychological level of 1.2000 with surgical precision. As a result, there was an increase in the volume of long positions, strengthening the pound sterling by about 100 points.

Economic calendar for August 17

At the opening of the European session, data on UK inflation was published, which recorded an increase from 9.4% to 10.1%. Such a high level of inflation is likely to lead to an even stronger increase in the interest rates of the Bank of England.

In Europe, the second estimate of GDP for the second quarter will be published, where no reaction is expected since it should coincide with the first estimate, which is already included in the current quotes.

During the American trading session, traders expect retail sales data in the United States, the growth rate of which is likely to slow down from 8.4% to 8.1%. Even with a possible slowdown, retail sales are still at a high level. However, the very fact of a slowdown amid fears of a recession will be a catalyst for fear among investors. Thus, the US dollar may be under pressure.

Near the closing of the European session, and when Western traders will be in the active phase, the FOMC minutes will be published.

Time targeting:

EU GDP – 09:00 UTC

US Retail Sales – 12:30 UTC

FOMC protocol – 18:00 UTC

Trading plan for EUR/USD on August 17

Presumably, the area of the level of 1.0150 is still putting pressure on sellers. For this reason, one of the possible scenarios for the price development is a rebound towards 1.0240.

As for the prolongation of the downward cycle, this scenario will be relevant only after holding the price below 1.0100 for at least a four-hour period. In this case, the quote will rush towards the parity level.

The pullback stage may well slow down the move around 1.2120/1.2150. In this case, there will be a gradual increase in the volume of short positions, returning the quote to the psychological level of 1.2000.

Prolonging the current pullback will be considered if the price holds above the value of 1.2160 in a four-hour period.

Dollar - period. USD again trumps on all fronts

The FOMC minutes, published on Wednesday, became another springboard for the dollar. Today, the US currency, inspired by the hawkish mood of the Federal Reserve officials, is growing in all directions.

Temporary weakness
Yesterday investors focused on the minutes of the FOMC meeting. Immediately after its release, the dollar was defeated, but a little later the market interpreted the report in favor of the greenback.

Short-term pressure on the USD came from Fed officials' concerns about a recession. During the meeting, it was noted more than once that sectors of the economy that are sensitive to higher interest rates have already begun to show signs of slowing down.

Some Fed members fear that as part of their commitment to bring inflation under control, the central bank may tighten policy more than is necessary to restore price stability. In this case, the American economy is unlikely to survive.

The rhetoric of the FOMC meeting participants initially seemed dovish to the market. After the release of the minutes, the probability of a rate hike by 75 bps fell to 40% in September, while earlier traders estimated it at 52%.

Against this background, the yield of US government bonds began to decline, which provoked a fall in the dollar index. The greenback's low from yesterday was the 106.39 mark.

The euro won the most from the short-term rebound of the greenback. After the release of the July minutes, the EUR/USD pair rose by almost 50 points and reached the level of 1.0202.

This helped the euro to close the day with a slight increase (+0.13%), while other major currencies, on the contrary, sank in tandem with the USD.

Invincible Hulk
Despite short-term weakness, the dollar index finished Wednesday's session with growth. The revaluation of the FOMC minutes by the market helped it recover.

When the first emotions subsided, the main thing came to the fore: the Fed still intends to fight inflation, which implies further aggression towards interest rates.

At the July meeting, absolutely all of its participants agreed to raise rates by 75 bps. Moreover, many of them supported the view that the Fed will continue to move at the same pace if necessary.

Of course, by "necessary" we mean the persistence of inflationary pressures. At this stage, Fed members do not see convincing signs of a decrease in price growth, so they do not exclude that even more efforts will be needed to resolve the situation.

As for the economy, politicians said they would closely monitor its adaptation to the new monetary rate and take all necessary measures to prevent a recession.

In the ranks of the Fed, they do not deny a possible slowdown in economic growth, but at the same time officials manage to remain optimistic. Many of them believe that thanks to a strong labor market, US GDP could grow in the third quarter.

The data on retail sales in America, which were published on Wednesday, also helped reduce fears of a recession.

The US Department of Commerce said that in July the indicator rose by 10.3% year on year, which is higher than the forecast estimate (8.3%) and more than the previous month's value (8.5%).

A positive retail sales report coupled with hawkish FOMC minutes provided strong support for the dollar. Yesterday, the US currency managed to strengthen against its competitors by almost 0.1%.

The most important outsider was the Australian dollar. It plunged 1.23% against the greenback. The aussie's appeal has also been eroded by heightened concerns about Chinese demand for commodities, including iron ore.

The greenback soared 0.98% against the New Zealand dollar, negating the earlier growth of the NZD. Recall that on Wednesday the Reserve Bank of New Zealand increased interest rates by 50 bps to 3%, and signaled the continuation of the aggressive rate in the coming months. This triggered the rise of the kiwi.

The US dollar jumped 0.55% against the Japanese yen to 134.97. Such significant dynamics is a completely logical reaction of the USD/JPY pair to another increase in the gap between the yields of US and Japanese government bonds.

The greenback edged up 0.34% against the pound. The pound's weakening on Wednesday was also facilitated by the release of July statistics on inflation in the UK.

The report showed that consumer prices in the peninsula hit 10.1% last month, the highest in 40 years.

Double-digit inflation has heightened investor fears that the Bank of England will have to be even more aggressive on rates. This raises the already high risk of a recession in Britain.

Brilliant outlook for USD
"Now the overall picture for the dollar looks very positive. It is in a strong upward trend across the board," notes analyst Matt Simpson.

On Thursday morning, under the pressure of the greenback, the euro, the only currency from the group of 10, which showed growth yesterday in tandem with the USD, could not resist.

EUR/USD fell to 1.0150 amid growing recession risks. Recall that yesterday Eurostat presented the second estimate of the eurozone GDP for the second quarter. The indicator was revised downward.

Also, the euro is under strong pressure from the energy crisis flaring up in the eurozone, which is aggravated by abnormal heat.

Record high temperatures and a lack of rainfall caused the Rhine to dry up in Germany. Since the water level in the river has fallen below the critical level of 40 cm, the transport of coal, food and other goods has been significantly reduced.

Also, the appetite for the euro is now declining amid anti-risk sentiment among investors. The safe dollar is in high demand due to another escalation in geopolitical tensions between the US and China. Washington just announced official trade talks with Taiwan earlier this fall.

As you can see, the EUR/USD pair has fallen into a "perfect storm". According to analysts' forecasts, the dollar will continue to strengthen against the euro in the foreseeable future. Its growth is also expected in other directions.

Tips for beginner traders in EUR/USD and GBP/USD on August 19, 2022

Details of the economic calendar for August 18

The annual inflation rate in the euro area accelerated to 8.9% in July from 8.6% a month earlier, eventually updating the historical record. The market ignored the data since it completely coincided with the preliminary estimate. Nevertheless, rising inflation in the EU points to further steps by the ECB to raise interest rates.

During the American trading session, weekly data on jobless claims in the United States were published, where, despite the divergence of forecasts, we still saw an increase in their volume.

Statistics details:

Continuing claims for benefits increased from 1.430 million to 1.437 million.

Initial claims for benefits decreased from 252,000 to 250,000.

Analysis of trading charts from August 18

The EURUSD currency pair, after a short stagnation within the 1.0150 level, managed to regroup trading forces. As a result, traders managed to properly increase the volume of dollar positions. This step led to a breakdown of the reference value of 1.0100.

On the trading chart of the daily period, there is an attempt to prolong the medium-term downward trend. The recovery of the dollar relative to the recent correction is 72%.

The GBPUSD currency pair noticeably accelerated the decline, which led to the breakdown of the psychological level of 1.2000. Typical speculative interest has accelerated the sale of the pound by more than 140 points, placing the quote below 1.1900.

On the trading chart of the daily period, there is also an attempt to resume the medium-term downward trend. The recovery of dollar positions relative to the recent correction is 72%.

Thus, based on the daily charts, it can be seen that EURUSD and GBPUSD are moving after, actively restoring the downward trend.

Economic calendar for August 19

At the opening of the European session, UK retail sales data were published, its rate of decline slowed down from -6.2% to -3.0%. And let's talk about the decline in sales. The very fact of slowing down this process is important.

Important statistics in Europe and the US are not expected.

Trading plan for EUR/USD on August 19

Despite the local signal of oversold euro in the short term, the market remains in a downward interest. Thus, the subsequent price retention below the 1.0100 mark may push the quote towards parity.

Traders will consider an alternative scenario if the price returns above 1.0100 in a four-hour period.

Trading plan for GBP/USD on August 19

The current price change suggests a recovery of the downward trend relative to the recent correction. Keeping the price below the 1.1880 mark may well prolong the set inertial move in the direction of the local low of the medium-term trend at 1.1750.

It is worth considering that the signal about the oversold of the pound sterling is already taking place in the short-term and intraday periods. Thus, a technical pullback in the market cannot be ruled out.

Asian markets close mixed on Monday

Asian stock markets were mixed on Monday. The Shanghai Composite and the Shenzhen Composite gained 0.57% and 0.64% respectively, while the Hang Seng Index went up by 0.12%. The Nikkei 225 decreased by 0.55%, the S&P/ASX 200 fell by 0.96%, and the KOSPI lost 1.15%.

Investors are awaiting new information from Fed chairman Jerome Powell regarding the further monetary policy course of the US central bank. Powell is set to give a speech this week.

Furthermore, market players took note of the Chinese central bank decreasing two of its key interest rates. The People's Bank of China cut its one-year loan prime rate to 3.65% from 3.7%. The five-year rate was cut to 4.3% from 4.45%. The move was not unexpected – earlier, the PBoC decreased its medium-term lending facility loan rate by 10 basis points to 2.75%.

The Chinese central bank's rate cuts are aimed at boosting the country's economic growth, which has slowed down due to rising energy prices, weak property market, and COVID-19 lockdowns.

On the Hang Seng Index, the biggest movers were Agile Group Holdings, Ltd. (+6%), CIFI Holdings (Group), Co. (+7%), Country Garden Holdings, Co., Ltd. (+3%), and China Resources Land, Ltd. (+2%)

Shares of Sinopec Engineering (Group), Co. gained 4% after the company reported that its net profit increased by 0.6% in the first half of 2022.

In Japan, the worst-performing stocks on the Nikkei 225 were Hino Motors, Ltd. (-3.5%), CyberAgent, Inc. (-3.1%), and Nippon Sheet Glass Co., Ltd. (-2,9%).

The share price of Ai Holdings, Corp. advanced by 5%, thanks to the company's net profit jumping by 32% in the previous fiscal year.

In South Korea, Samsung Electronics, Co. and Hyundai Motor, Co. lost 1.6% and 0.5% respectively.

In Australia, BHP shed 0.2%, while Rio Tinto declined by 0.53%.

Shares of NIB, Ltd. gained 6.6% thanks to the company's operating profit exceeding market expectations.

Technical analysis recommendations on EUR/USD and GBP/USD for August 23, 2022​​​​​​​

EUR/USD

Higher timeframes

Last week's sentiment retained its strength and predominance, which contributed to the continuation of the decline. Bears managed to close the last day below the indicated reference points of psychological support (1.0000) and the minimum extremum (0.9952). If bulls recover their positions, the passed levels of 1.0000 and 0.9952 can exert attraction and resistance. Reliable consolidation below 1.0000 and 0.9952 will restore the downward trend of the higher timeframes. The reference points for a further decline in the current situation can be the psychological level (0.9000) and the minimum extremum of 2000 (0.8225).

H4 – H1

Bears currently have the advantage on the lower timeframes. They are now testing the first support for the classic pivot points (0.9896). Further reference points for the decline within the day are two other supports of the classic pivot points—0.9851 (S2) and 0.9775 (S3). With the correction developing, bulls will need to focus on passing the key levels, which are now the resistance levels 0.9972 (central pivot point of the day) and 1.0088 (weekly long-term trend). Intermediate resistance can be noted at 1.0017 (R1).

GBP/USD

Higher timeframes

Yesterday, bears updated the minimum extremum and tested its support (1.1759). Soon, the result of interaction with the level will form. As the downward trend movement continues, the next reference point will be the minimum extremum of 2020, fixed at 1.1411.

H4 – H1

The pair continues to decline, there is a downward trend, and the main advantage in the lower timeframes belongs to the bears. The reference points for the decline within the day are the support of the classic pivot points (1.1725 – 1.1685 – 1.1630). A corrective rise, consolidation above the key levels of 1.1780 (central pivot point of the day) – 1.1936 (weekly long-term trend) and a reversal of the moving average will help change the current balance of power. Intermediate resistance on this path can be provided by the resistance of the classical pivot points (1.1820 – 1.1875 – 1.1915).

USD/JPY: sadness, melancholy, sorrow...

After a multi-day rally on Tuesday, the USD/JPY pair reversed sharply to the downside and bounced down hard. This morning, the bulls are struggling to regain the advantage, but the bears are gaining.

Who brought down the dollar?
Yesterday, nothing foreshadowed a catastrophe of this magnitude. Ahead of the release of the next batch of US economic data, the dollar index reached a multi-year high of 109.27.

In the first half of the day, the greenback felt the strong support of the Federal Reserve's hawks, which helped it strengthen against the yen to a 5-week peak of 137.70.

However, US statistics turned out to be worse than forecasts and traders were disappointed, as a result of which the USD/JPY pair abruptly changed direction and shot down to the level of 135.80.

Literally overnight, the dollar plunged against the Japanese currency by 100 points, or 0.7%. The key pressure on it was increased concerns about the slowdown in the American economy.

The risk of recession has increased due to the pessimistic data provided by S&P Global. The agency reported that in August, the composite purchasing managers' index fell from the July value of 47.7 to the level of 45, which is the lowest since February 2021.

The PMI in the services sector showed an even more significant drop this month. The indicator dropped from 47.3 to 44.1, while economists, on the contrary, expected an increase to 49.2.Fresh statistics on the US real estate market, which was published on Tuesday, also added fuel to the fire. New home sales in the US fell by more than 12% in July, to the lowest level in six years (from 585,000 to 511,000).

In addition, the dynamics of the index of manufacturing activity from the Richmond Fed, which was also published yesterday, turned out to be negative. The index fell to -8.0 in August from the previous reading of 0.0.

Taken together, all of these data pointed to signs of a slowdown in US economic growth. Now the markets are once again fearing that the Fed may loosen its hawkish grip on inflation with the looming recession.

The resumption of speculation about a less aggressive rate hike has awakened the dollar bears. They increased their pressure on the USD, even though in the coming days Fed Chairman Jerome Powell may trample on the root of all doubts about the US central bank's decisiveness.

Caution: High volatility!
Most analysts predict that in the short term, the USD/JPY pair will continue to storm strongly. The high volatility of the asset will be associated with the continuing uncertainty about the Fed's future course.

Now traders expect that Powell's speech on Friday at the 3-day Fed symposium in Jackson Hole will bring clarity to this issue.

Many experts are betting that Powell will remain true to the current monetary rate despite the increasing risks of recession.

This opinion is supported by recent hawkish comments by members of the Fed. So, yesterday, the president of the Federal Reserve Bank of Minneapolis Neil Kashkari said that the central bank will have to act more aggressively for a longer time if inflation turns out to be much more stable than expected.

According to analysts, any hint by the head of the Fed to further tightening at a given pace can inspire the dollar to new highs. And most of all, in this case, the yen will suffer again.

Recall that this year, the JPY plunged more than other currencies from the group of 10 against the dollar due to the divergence in the monetary policy of the Fed and the Bank of Japan.

According to forecasts, after Jackson Hole, bulls can push the USD/JPY pair to the psychologically important 140 mark.

However, let's not force things, especially since today we are expecting a new batch of important economic data from the United States.

Statistics on basic orders for durable goods will be published on Wednesday. According to economists, the indicator will be 0.2% against the previous value of 0.4%.

If the forecast is justified and the volume of orders falls, this will indicate a decrease in the activity of manufacturers, which will be another blow to the gut for the dollar.

In the near future, the USD/JPY pair risks being far down again. The technical picture also gives hope to intraday bears: a pullback of the RSI (14) and bearish MACD signals.