#EURUSD,#GBPUSD & #USDJPY Forecast: August 2022
EUR/USD Forecast: August 2022
I have absolutely no interest in buying the euro until it breaks above the 1.06 level.
- The EUR/USD pair has been on a downward trajectory for some time, as we are threatening parity.
- As we are heading lower over the longer term, it makes sense, though we will eventually break through there.
- A lot of this is going to come down to what the Federal Reserve does going into the future, but it’s obvious that inflation is a major problem.
Rallies in August
Even if the market were to rally, I believe at this point in time there are plenty of areas above that could cause major issues. The 1.04 level is the next major resistance level, which extends to the 1.05 level. All things being equal, I believe that rallies heading into this month are going to be squashed, and it is probably only a matter of time before we see sellers return. This is especially true considering that it’s not just about the Federal Reserve, it’s about the absolute disaster that the European Union is.
Anytime you have a situation where energy could be an issue, there’s no real argument to be made for a currency to appreciate. In fact, Vladimir Putin has cut back gas to the EU down to just 20% of potential capacity. Ultimately, this will put quite a bit of negativity into this market over the longer term, so I think that anytime we rally, you have to be looking at signs of exhaustion for an opportunity to start shorting.
It’s also possible that we could send this market down to the 0.98 level, and below. It is going to be difficult to imagine a scenario where the euro turns around anytime soon, especially as the bond yield differential between the two economies is so wide. With this, I have absolutely no interest in buying the euro until it breaks above the 1.06 level. At that point, things could change, but it seems very unlikely to happen anytime soon.
As economic conditions continue to worsen, the US dollar will continue to strengthen based upon a flight to quality, something that I think will continue to be a major factor through the rest of the summer, perhaps even the rest of the year. Any move above the 1.06 level would have to be taken seriously, but it also would have to be accompanied by some type of shift in fundamentals.
GBP/USD Forecast: August 2022
Expect volatility to pick up not only in this market, but other markets as well.
- The GBP/USD currency pair has been hanging about the 1.20 level during most of July.
- However, the market has been very noisy in general, due to the fact that the world is worried about a recession.
- Ultimately, this is a market that continues to see a lot of noise, but I think you can say that about almost anything.
- The market has been in a downtrend for a while, so I think it’s going to take a lot to change that.
Keeping an Eye on 1.20
The 1.20 level underneath would be crucial, as it is a large, round, psychologically significant figure, and an area where we have seen a lot of action previously. We had bounced significantly from that level a couple of weeks back, and now I think it’s very likely that we eventually get down to that level. If we break down below that level, then it opens up the possibility of a move down to the 1.18 level, possibly even the 1.15 level. However, it’s also worth noting that we have done a lot of damage to the British pound, so it’s going to be a scenario where the market may need a bit of a relief rally.
I will be looking at this potential relief rally as an opportunity and treat it as such. The first signs of exhaustion could be in a selling opportunity, just as we see the 1.24 level as a major resistance barrier. That area extends all the way to the 1.25 handle, so it’s not until we break above all of them that I think the British pound could have a bit of momentum. Remember, we had sold off so much that a bounce of one or two handles would not be out of the question. However, I will not be chasing the British pound higher, because it will need to prove itself.
This will be especially true when we get deeper into the summer, as the world will have to come to grips with the idea of a global recession. As long as that is a real threat, one has to favor the US dollar in general. The interest rate differential continues to favor the US dollar as well, so it’s all lining up in the same direction. Expect volatility to pick up not only in this market, but other markets as well.
USD/JPY Forecast: August 2022
After creating a high not seen since 1998 in the USD/JPY in mid-July, the currency finished trading for the month near lows not seen since mid-June.
August promises to be a speculative playground for USD/JPY traders. And as children and their parents know, it is best to use playgrounds carefully and not be reckless. A vast amount of volatility was delivered by the USD/JPY currency pair during July. A high of nearly 139.500 was displayed on the 14th of July, a mark not seen since September of 1998. A low for the USD/JPY occurred this past Friday, the 29th of July when the Forex pair touched approximately 132.500, which is a value that had last been seen on 17th of June. Precautions are important via risk taking tactics.
Choppy and fast conditions were a guarantee taking into consideration the bullish trend the USD/JPY has been pursuing the past handful of months, and the knowledge the U.S Federal Reserve was going to undertake an additional interest rate hike this past Wednesday. But what wasn’t known was the exact trajectory, nor the reactions by financial institutions. Retail traders who were hoping to catch movements perhaps found more than they bargained for as they wagered.
Bank of Japan Stays Relatively Quiet while U.S Fed Stays Hawkish
Technical traders may claim they saw the sudden downturn coming, which started to be generated it can be argued on the 14th of July after reaching the apex high. However, trading conditions the past two weeks of July to finish the month saw sharp reversals, and traders not using stop loss and take profit orders may have felt more pain than pleasure. A true downward spike lower happened this past handful of days. On the 27th of July the USD/JPY recovered upwards to about the 137.450, but then began a steady decline. As the month of August gets set to begin, day traders have plenty of decisions to make.
- Interest rate differential between USD and JPY has grown considerably, but financial institutions also need to consider economic outlook.
- Technical charts remain challenging and support levels should be studied carefully for volatility as they continue to be tested.
- USD/JPY showed the ability to come off highs and produce a solid reversal lower, but will the price action be sustained?
Economic Outlooks Remain Challenging for Japan and U.S
The sudden and swift downward movement of the USD/JPY was strong the past couple of days going into the weekend, and the results were not surprising. When the USD/JPY moves quickly it has the ability to take no prisoners and fly through support levels, just like it can jump past resistance ratios with relative ease sometimes. Economic and central bank policies via the Bank of Japan and U.S Federal Reserve remain unclear. Political decisions will certainly affect economic policy decisions from both central banks, and that may not be particularly good decisions for the public.
USD/JPY Outlook for August 2022
Speculative price range for USD/JPY is 129.100 to 137.900
The 132.000 support level will produce a quick insight for day traders when the USD/JPY starts trading in August. After swift moves downward the past two days, traders will want to see if momentum continues or a sudden reversal higher occurs. If the 132.000 should falter and the 131.750 to 131.250 vicinities find they are being challenged as the month begins, this could open the door for the consideration that many view the USD/JPY as remaining overbought.
However, skeptics taking into consideration that economic clarity remains murky may believe the higher range of the USD/JPY is still worthwhile and should be speculated on, which means they may use support levels to initiate long positions and seek moves upward. If the 131.000 level were to suddenly be tested, the 130.000 level may find durable support. The notion that the USD/JPY could sink to the lower depths does seem difficult to imagine, but it should be remembered the Forex pair was trading near 129.100 on the 1st of June, which is not so long ago.
If economic numbers remain perplexing from the U.S and data like inflation continues to show it is troubling in things like core consumer products, the USD/JPY from a fundamental perspective may remain near its higher values. While many may believe the worst is over via inflation data, surprises are still possible particularly if energy prices remain inflated.
The USD/JPY may not challenge its apex highs seen in July, but moves which retest the 133.000 to 134.000 levels should not be unexpected and perhaps higher. Traders are cautioned to use risk management during the month of August, which is a month traditionally when trading volumes decrease slightly because of holidays among workers in the financial industry being taken, meaning volatility can sometimes happen when it is least expected.
0 comments:
Post a Comment