USD/JPY shows strong momentum while AUD/USD tests resistance levels once more
On Monday, Australia's economic indicators were disappointing, with manufacturing PMI, job advertisements, and corporate profits all falling short of expectations. The manufacturing PMI registered at 48.5, marking the 18th consecutive month of contraction, though it was the slowest decline in three months. New orders decreased, and vendor performance worsened at the fastest rate in two years. Job advertisements dropped by 2.1% in August, marking the seventh consecutive decline. Additionally, corporate profits fell by 5.3% quarter-on-quarter, experiencing their sharpest decline in four quarters, just ahead of an important GDP report on Wednesday. These results may complicate the RBA's plans for interest rate hikes, despite likely maintaining a hawkish stance.
In China, a weak manufacturing PMI negatively impacted stock markets on Monday. Data from the National Bureau of Statistics revealed that the manufacturing PMI fell to 49.1 from 49.4, indicating the steepest contraction since February. The Hang Seng index dropped by 1.7%, forming a bearish engulfing pattern that casts doubt on its four-week rally.
Meanwhile, members of the ECB are split regarding the growth outlook for the eurozone. While another rate cut in September seems almost certain, there is disagreement on whether the economy is headed for recession or if inflationary pressures will continue, complicating predictions for future cuts beyond September.
Last week, I mentioned several times that I anticipated a bullish mean reversion for the US dollar. The US dollar index increased over the last three days of the week, aided by month-end flows, and a weaker yen pushed USD/JPY up for a fourth straight day on Monday.
USD/JPY has now exceeded my initial target of 146, and we may be eyeing a move towards the base of the falling wedge around 149. However, the daily RSI (2) is in overbought territory, and with EUR/USD forming a bullish inside day and the US dollar index rally slowing down, a minor pullback for the dollar might be necessary before USD/JPY can advance further. Additionally, US economic data will start coming in tonight, and any signs of weakness could revive expectations of a dovish Fed.
The 1-hour chart shows a strong uptrend, though bearish divergences are also evident on this timeframe. Resistance has been encountered at the weekly R1 pivot point. The 1-hour trend remains bullish as long as it stays above the 145.76 low, with the monthly pivot point at 146.25. I'm looking to buy on dips toward these levels for the next potential swing trade opportunity.
This is simply a brief update to my weekly AUD/USD outlook report. On Monday, a small bullish inside day emerged, closing just below the July high and the 68-cent level. We haven't yet seen a daily close above these points, although there have been three daily wicks that indicated false breakouts.
The current bias suggests a downward move before potentially reaching 69 cents. However, the 1-hour chart is showing a gradual uptrend, which may allow for one or two more upward movements before the expected decline. Bulls may look for dips around the weekly pivot point near 0.6870 to target a return to the July high or the weekly R1 at 0.6808. On the other hand, bears might consider selling into these levels or wait for the RSI (2) to enter overbought territory before contemplating short positions.
Expect increased volatility overnight as US traders return following the Labor Day weekend. The ISM manufacturing data will be the first significant release of the week from the US. While the services report on Thursday holds more importance, any surprises in the manufacturing data could influence expectations for upcoming employment figures ahead of Friday’s NFP. It will also provide insight into underlying inflation and growth trends.
Australia's net exports contribution could prompt banks to adjust their GDP forecasts for Wednesday if it strays significantly from expectations. Traders anticipating a dovish stance from the RBA will be looking for a substantial negative print to align with expected lower growth figures this week.
- **08:45** – NZ Terms of Trade
- **11:30** – AU Net Exports Contribution, Current Account
- 16:30 – CH CPI
- 23:45 – US Manufacturing PMI (Final)
- 00:00 – US ISM Manufacturing PMI
Original Source >>>> FOREX
In China, a weak manufacturing PMI negatively impacted stock markets on Monday. Data from the National Bureau of Statistics revealed that the manufacturing PMI fell to 49.1 from 49.4, indicating the steepest contraction since February. The Hang Seng index dropped by 1.7%, forming a bearish engulfing pattern that casts doubt on its four-week rally.
Meanwhile, members of the ECB are split regarding the growth outlook for the eurozone. While another rate cut in September seems almost certain, there is disagreement on whether the economy is headed for recession or if inflationary pressures will continue, complicating predictions for future cuts beyond September.
Technical analysis of USD/JPY:
USD/JPY has now exceeded my initial target of 146, and we may be eyeing a move towards the base of the falling wedge around 149. However, the daily RSI (2) is in overbought territory, and with EUR/USD forming a bullish inside day and the US dollar index rally slowing down, a minor pullback for the dollar might be necessary before USD/JPY can advance further. Additionally, US economic data will start coming in tonight, and any signs of weakness could revive expectations of a dovish Fed.
The 1-hour chart shows a strong uptrend, though bearish divergences are also evident on this timeframe. Resistance has been encountered at the weekly R1 pivot point. The 1-hour trend remains bullish as long as it stays above the 145.76 low, with the monthly pivot point at 146.25. I'm looking to buy on dips toward these levels for the next potential swing trade opportunity.
Technical analysis of AUD/USD:
The current bias suggests a downward move before potentially reaching 69 cents. However, the 1-hour chart is showing a gradual uptrend, which may allow for one or two more upward movements before the expected decline. Bulls may look for dips around the weekly pivot point near 0.6870 to target a return to the July high or the weekly R1 at 0.6808. On the other hand, bears might consider selling into these levels or wait for the RSI (2) to enter overbought territory before contemplating short positions.
Key Events to Watch (AEDT):
Expect increased volatility overnight as US traders return following the Labor Day weekend. The ISM manufacturing data will be the first significant release of the week from the US. While the services report on Thursday holds more importance, any surprises in the manufacturing data could influence expectations for upcoming employment figures ahead of Friday’s NFP. It will also provide insight into underlying inflation and growth trends.
Australia's net exports contribution could prompt banks to adjust their GDP forecasts for Wednesday if it strays significantly from expectations. Traders anticipating a dovish stance from the RBA will be looking for a substantial negative print to align with expected lower growth figures this week.
- **08:45** – NZ Terms of Trade
- **11:30** – AU Net Exports Contribution, Current Account
- 16:30 – CH CPI
- 23:45 – US Manufacturing PMI (Final)
- 00:00 – US ISM Manufacturing PMI
Original Source >>>> FOREX