The pair will likely have a bearish breakout as sellers target the first support of the pivot point at 1.1700.

Bearish view

• Sell the GBP/USD pair and set a take-profit at 1.1700.
• Add a stop-loss at 1.1850.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.1840 and a take-profit at 1.1900.
• Add a stop-loss at 1.1750.

The GBP/USD currency pair was in a tight range on Thursday morning as market participants waited for commentaries by Jerome Powell and Andrew Bailey at the Jackson Hole Symposium. It was trading at 1.1795, which was slightly above this week’s low of 1.1720.

Jackson Hole Symposium

The Federal Reserve and the Bank of England have embraced a more hawkish tone this year as they fought the soaring inflation. The BoE has hiked interest rates in all its meetings since December while the Fed has increased rates by 225 basis points. In their most recent meetings, the two hiked by 50 and 75 basis points, respectively.

There are signs that these rate hikes are having a negative impact on the respective economies. Data published by S&P Global on Tuesday showed that the manufacturing and services PMIs declined sharply in July.

Therefore, the GBP/USD price will likely show some volatility during this week’s Jackson Hole Symposium. The two central bank governors will provide more details about the status of rate hikes and whether they will continue hiking.

Analysts expect that the Fed will hike rates by 0.50% and then shift to smaller increases afterward. On the other hand, the BoE will find it difficult to hike rates as the economy goes through substantial challenges. The BoE expects that inflation will rise to 13% this year. In a report this week, analysts at Citigroup predicted that inflation will rise to 18.3%.

The BoE responds to high inflation by hiking interest rates. However, it is unclear whether interest rates will lower this inflation since it will be caused by rising wholesale gas prices.

The GBP/USD pair will react mildly to US economic data that will come out on Thursday. Economists expect the data to show that the country’s economy contracted in Q2.

GBP/USD forecast

The four-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few weeks. It managed to move briefly below the important support level at 1.1760, which was the lowest level in July this year. At the same time, the pair moved below the standard pivot point, the 25-day exponential moving average, and the Ichimoku Cloud.

Therefore, the pair will likely have a bearish breakout as sellers target the first support of the pivot point at 1.1700.

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The pair will likely continue falling as sellers target the next key support level at 0.6950.

Bearish View

• Sell the AUD/USD pair and set a take-profit at 0.6950.
• Add a stop-loss at 0.7050.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 0.7050 and a take-profit at 0.7150.
• Add a stop-loss at 0.6970.

The AUD/USD price dropped to a low of 0.700 as the market reacted to the latest minutes by the Reserve Bank of Australia (RBA). The price was about 2% below the highest level this month ahead of the latest US retail sales and FOMC minutes.

FOMC Minutes and US Retail Sales

The AUD/USD has been in a strong bearish trend as the market waited for the upcoming US retail sales numbers. These are important data because consumer spending is the biggest part of the American economy.

Economists expect the numbers to reveal that the volume of retail sales dropped in July this year. They believe that sales dropped from 1.0% in June to 0.1% in July. In the same period, analysts expect that core sales dropped from 1.0% to -0.1% in July.

These results comes a day after the some of the biggest retailers in the country published their results. Walmart said that its revenue rose by 8.4% in the second quarter to $152.85 billion. Similarly, Home Depot, the biggest home improvement retailer, said that its net income rose to $5.17 billion. Other firms like Target and Lowe’s are expected to publish strong results.

The AUD/USD price will also react to the latest minutes by the Federal Open Market Committee (FOMC). These minutes will provide more details about the deliberations took place in its July meeting. In it, the bank decided to hike interest rates by 0.75% and continue with its quantitative tightening policy.

Most Fed officials believe that the bank will continue hiking interest rates even after last week’s weak inflation numbers. The data showed that the country’s inflation dropped slightly in June as gasoline prices dropped.

AUD/USD Forecast

The AUD/USD price dropped to 0.700, which was the lowest level since August 10. On the four-hour chart, the pair moved slightly below the important support level at 0.7050, which was the highest point on August 1st. It moved slightly below the 25-day and 50-day moving averages and the standard pivot point.

The pair has also formed a break and retest pattern by retesting the key point at 0.7050. Therefore, the pair will likely continue falling as sellers target the next key support level at 0.6950. A move above the resistance at 0.7055 will invalidate the bearish view.

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The pair will likely resume the bearish trend as sellers attempt to move below the support at 1.2000.

Bearish View

• Set a sell-stop at 1.2000 and a take-profit at 1.1900.
• Add a stop-loss at 1.2200.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2135 and a take-profit at 1.2250.
• Add a stop-loss at 1.2000.

The GBP/USD price rose slightly ahead of the upcoming UK consumer and producer inflation data and the relatively weak US housing numbers. It rose to 1.2100, which was about 70 basis points above the lowest level this week.

UK Inflation and US Retail Sales Data

The GBP/USD price will be in the spotlight on Wednesday as investors reflect on key data from the United States and the UK.

The Office of National Statistics (ONS) will publish July’s inflation numbers. Economists surveyed by Reuters expect the data to show that inflation continued rising in July. Precisely, they expect that the headline CPI rose from 9.4% in June to 9.8% in July on a year-on-year basis. On a positive note, they believe that inflation dropped from 0.8% to 0.4%.

Excluding the volatile food and energy prices, analysts expect that the country’s inflation rose from 5.8% to 5.9%. On Tuesday, data compiled by Kantar showed that food prices in the country rose by 11.6% YoY in the four weeks to August 7. This was the biggest increase since the company started collecting the data in 2008.

The data will come a day after the UK published relatively weak jobs data as the unemployment rate rose from 3.7% to 3.8%. The employment rate dropped t 75.5% while the number of open vacancies dropped to 1.27 million.

The GBP/USD price will next react to the upcoming American retail sales numbers. With inflation soaring, analysts believe that sales dropped from 1.0% in June to 0.1% in July while core sales fell from 0.6% to -0.6%. On a positive note, top retailers like Walmart and Home Depot published strong results on Tuesday.

The pair will also react to the latest minutes of the FOMC. These minutes will provide more color about what the officials talked about in their meeting.

GBP/USD Forecast

The GBP/USD pair has been in a strong downward trend in the past few days. This decline started when the pair formed a double-top pattern at around 1.2288. In price action analysis, this pattern is usually a bearish sign. The pair rose in the overnight session after it hit the neckline of this pattern.

The GBP/USD pair remains below the 25-day and 50-day moving averages and the 38.2% Fibonacci Retracement level. Therefore, the pair will likely resume the bearish trend as sellers attempt to move below the support at 1.2000.

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This is a market that I think will continue to see a lot of choppy behavior, with the 4200 level above could offering a bit of a barrier.

• The S&P 500 Index drifted a little bit on Tuesday as we are awaiting the CPI numbers on Wednesday.
• The CPI numbers will give us a bit of a hint as to where the Federal Reserve will be looking as far as monetary policy is concerned.
• Keep in mind that the market is likely to see a lot of noisy behavior ahead of this announcement, and then most certainly after it.

Keep an Eye on CPI

The Core CPI is going to be the measurement to watch and is expected to come in at a 0.5% month-over-month reading. If it comes in hotter than that, the S&P 500 will almost certainly get sold into. If we break down below the 4100 level, it’s likely that the market could go down to the 4000 handle. The 50-day EMA is sitting underneath there and could offer support as well, but it’s closer to the 4900 level.

This is a market that I think will continue to see a lot of choppy behavior, with the 4200 level above could offering a bit of a barrier. If we were to somehow break above there, then it’s likely that we could go to the 4300 level. Keep in mind that we are at a major area of noise in the past, and an area where I think a lot of “market memory” could come into the picture. The size of the candle is neither here nor there, but the fact that we pulled back from a shooting star is not a huge surprise. I suppose you could take a look at this through the prism of a “hint”, as we had formed a hammer followed by a shooting star, and then actually had a bit of a body in this negative candlestick. However, if there is enough of a surprise from the announcement, that could cause the volatility to pick up in either direction.

When you look at the chart, you can see that I have attached a blue box where we had action previously, and I think this is what we are struggling with right now due to the “market memory” in that general vicinity. This is a market that continues to see a lot of interest, so it’ll come down to whether or not Wall Street thinks it’s going to get it’s fixed.

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Speculators who enjoy opportunistic markets and wagering on the USD/INR may have a rather intriguing path ahead this week.

The USD/INR has delivered strong bumps in the past week of trading, and there is plenty of reason to suspect the rather challenging ride ahead will be equally volatile.  Traders who like a wagering environment in which they can test their perceptions may find the USD/INR currency pair fits their desires in the coming days. As of this writing the USD/INR is near the 79.5600 ratio with quick action being demonstrated.

After Testing Important Short Term Lows on Friday a Sudden Bullish Reversal Higher for USD/INR

On Friday of last week the USD/INR hit the 78.9300 vicinity, while retesting depths last seen on the 3^rd of August.  On the 2^nd of August the USD/INR sunk to nearly the 78.3800 level. The last time the USD/INR had seen this ratio was the last week of June, this before the currency pair began to shoot much higher eventually touching the 80.2000 mark in the middle of July, before erosion lower.

Technical Highs of mid-July are Actually Still within Sight for the USD/INR

Technically the USD/INR may be perceived as having reached highs in mid-July and having sold off incrementally since then. However, traders who follow fundamentals appreciate the behavioral sentiment being generated by U.S Federal Reserve interest rate hikes and outlooks. The slump to short term lows on Friday suddenly saw a reversal, when it became apparent via U.S economic data that wage inflation remains a credible danger in the States and the U.S central bank is likely to be confronted with this issue.

• If the 79.5100 level continues to prove durable as support for the USD/INR in the short term, this could spur on speculative buying positions.
• This entire week is likely to see rather choppy price action as financial houses interpret their analysis regarding the U.S Feds actions in the months to come.
• A hawkish perspective of the U.S Fed could lead to more buying of the USD/INR.

While important all-time highs certainly met with rather strong selling and hit lower depths in early August, after last Friday and this morning’s price action the USD/INR is still within eyesight of July’s strong bullish activity. Speculators who feel the USD/INR could test higher values should keep realistic targets and not aim for the stars.

However looking for quick hitting upward movement after support levels prove durable could be a worthwhile wager on the USD/INR. It is not out of reason to suspect the USD/INR could challenge the 79.8000 ratio sooner rather than later. Again, traders are urged to cash out winning positions if they develop and not let them vanish into thin air, this while using stop loss orders as risk management too.

USD/INR Short Term Outlook:

Current Resistance: 79.6190

Current Support: 79.5089

High Target: 79.7980

Low Target: 79.3000

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I will be waiting on the sidelines for the next 24 hours until I put any money to work on Monday as it could be a much clearer situation by then.

• The NASDAQ 100 Index has gone back and forth during trading on Thursday
• We continue to see the market focus on inflation and whether or not the Federal Reserve is going to be involved.
• The market is likely to get a bit of resolution after the Non-Farm Payroll number on Friday, as traders are trying to figure out whether or not the Federal Reserve is serious about tightening monetary policy.

It’s amazing how many Federal Reserve members have come out during the past week and discussed that the Federal Reserve is serious about tightening rates and fighting inflation, so you should keep in mind that once the market “gets it”, it could be a very vicious turnaround. However, if the inflationary headwinds start to abate, that could cause another melt-up. When you look at the fundamental information out there, there’s no real reason for this to be happening other than hope

If the market were to turn around and break down below the 13,000 level, that gets in this market much lower, but I think the only thing you can count on is a lot of volatility and noise. The 50 Day EMA sits just below the 12,250 level and is curling higher. That’s an area where people should start to pay close attention to for support, and if we were to break down below that level, it’s likely that this market goes much lower.

I think the only thing you can count on here is going to be a lot of noise, therefore it’s likely that we would see a lot of back-and-forth trading, therefore you need to be very cautious. Nonetheless, it will be interesting to see how we close on Friday because it could give you an idea as to how much faith people have in the market because holding on to a position for the weekend speaks volumes. If the market cannot do so, then it shows you that they have no real belief in this rally, and we probably have further to go to the downside. Either way, I will be waiting on the sidelines for the next 24 hours until I put any money to work on Monday as it could be a much clearer situation by then. However, the proof will be in the price action.

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The pair will likely resume the bearish trend as sellers target the important support at 0.6850.

Bearish View

• Set a sell-stop at 0.6920 and a take-profit at 0.6850.
• Add a stop-loss at 0.7020.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 0.6970 and a take-profit at 0.7060.
• Add a stop-loss at 0.6850.

The AUD/USD price remains significantly below its highest this week as investors reflected on the latest Reserve Bank of Australia (RBA) decision. The pair dropped to 0.6945, which was about 1.40% above the lowest level this week.

US Jobs Data Ahead

The AUD/USD pair retreated after the RBA delivered its August interest rate decision. The bank decided to hike interest rates by 0.50%, meaning that it has increased rates four times this year. This is the most hawkish that the bank has been in decades.

The pair declined as investors worried about the pace of future interest rates since there are signs that inflation is peaking. For example, the price of crude oil has dropped from a year-to-date high of over $135 to less than $100.

Some analysts believe that oil prices will continue falling as OPEC+ hikes production. This is notable since oil is the biggest part of inflation in Australia and other countries. Moreso, the RBA warned that the country’s economy will continue slowing down in the coming months. The RBA will publish its minutes on Friday.

The next key catalyst for the AUD/USD price will be the upcoming US jobs data and statements by Fed officials. This week, officials like Charles Evans of Chicago and Lorretta Meister said that the Fed would continue hiking interest rates even as strains to the American economy remain.

For example, there are signs that the housing sector is slowing after data showed that new and existing home prices dropped sharply in June.

The US will publish the official jobs data on Friday. Economists expect these numbers to show that the country’s economy added fewer jobs in July than in the previous month while the unemployment rate remained unchanged at 3.7%.

AUD/USD Forecast

The four-hour chart shows that the AUD/USD pair made a strong bearish breakout on Tuesday after the latest RBA decision. The pair managed to move below the lower line of the ascending channel. It also moved slightly below the 25-day and 50-day moving average. The Relative Strength Index (RSI) has moved to the neutral point.

Therefore, the pair will likely resume the bearish trend as sellers target the important support at 0.6850. This is both an important psychological level as well as the lowest point on June 14th.

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The pair will likely continue falling as sellers target the next key support at 1.200.

Bearish View

• Sell the GBP/USD pair and set a take-profit at 1.2000.
• Add a stop-loss at 1.2230.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2200 and a take-profit at 1.2300.
• Add a stop-loss at 1.2100.

The GBP/USD price remained under pressure during the Asian session as investors waited for the upcoming Bank of England (BoE) decision and US non-farm payrolls (NFP) data. It is trading at 1.2152, which is a few points below this week’s high of 1.2292.

BoE Interest Rate Decision

The Bank of England will conclude its two-day monetary policy meeting on Thursday. Economists, judging by recent words of Andrew Bailey, anticipate that the bank will hike interest rates by 0.5%. If the bank does this, it will be the biggest increase in more than 27 years.

The BoE has been one of the most hawkish central banks this year. It has hiked rates by 0.25% in all its meetings since December. Analyts believe that the rate hike will be balanced in nature since he bank is aiming to tighten without causing a recession. They also expect that rates will peak at about 3%.

The BoE decision comes a week after the IMF downgraded its outlook for the economy and inflation. As a result, the agency recommended that the BOE should take tough measures even if it hit growth, jobs and wages in the short-term.

UK’s economic data have been mixed. The labor market is strong while wage growth has continued well. On the other hand, consumer confidence has slipped to the lowest level in decades while inflation has surged to 9.4%, the highest point in over three decades.

Historically, currencies tend to rally after a central bank hikes rates. However, in this case, a retreat is also possible since the 50 basis points hike has already been priced in.

The next key data to watch will be the upcoming US jobs data scheduled for Friday. Analysts expect the data to show that the labor market continued slowing down.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair has retreated sharply in the past few days. It dropped from a high of 1.2291 to a low of 1.2100. The current price is along the lower side of the ascending channel that is shown in green. It has also moved slightly below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral point at 50.

Therefore, the pair will likely continue falling as sellers target the next key support at 1.200. A move above the resistance at 1.2225 will invalidate the bearish view.

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The pair will likely keep falling ahead of the RBI decision.

Bearish View

• Sell the USD/INR and set a take-profit at 78.50.
• Add a stop-loss at 79.50.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 79.35 and a take-profit at 80.
• Add a stop-loss at 78.50.

The USD/INR price dropped to the lowest level since July 11th as investors waited for the upcoming interest rate decision by the Reserve Bank of India (RBI). It fell to a low of 78.90, which was significantly below the year-to-date high of 80.18.

RBI Decision Ahead

The Indian rupee has done well in the past few days as the strength of the US dollar fades. The currency has jumped by 1.42% from the lowest level this year. The focus among market participants is on the upcoming interest rate decision by the RBI that is scheduled for Thursday this week.

Economists expect that the RBI will continue with its hawkish moves as it continues its battle against inflation. Precisely, they believe that the bank will hike the repo rate by between 35 and 50 basis points. Those at Bank of America expect the RBI to hike by 0.35% while those at Housing.com see the bank raising by 0.25%.

Unlike other major central banks, the RBI is not under intense pressure since inflation is moving in the right direction. The headline inflation dropped to 7.01% in June, meaning that the bank will likely lower its inflation target for the year.

Besides, there are signs that commodity prices are falling, which is a good sign for inflation. For example, the price of crude oil is substantially lower than where it was earlier this year.  Similarly, the cost of key commodities like iron ore, copper, and aluminum has dropped in the past few weeks.

Last week, the Federal Reserve decided to hike interest rates by 0.75%, bringing the total YTD increases to 225 basis points. The RBI has raised by just 90 basis points since inflation pressures are not as significant.

USD/INR Forecast

The four-hour chart shows that the USD/INR price soared to a high of 80.23 in June this year. Since then, the pair has been moving sideways as investors worry about whether the recovery has any more room left. It has dropped below the 25-day and 50-day moving averages while the MACD has moved below the neutral point.

The Relative Strength Index (RSI) has been moving downwards. Therefore, the pair will likely keep falling ahead of the RBI decision. The next key support level to watch will be at 78.50.

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Amid bearish momentum, and for three trading sessions in a row, the USD/JPY currency pair is settling in narrow ranges between the support level of 135.56 and the level of 136.90, which is stable around it at the time of writing the analysis. As I mentioned at the beginning of this week’s trading, the dollar-yen pair will continue to move in a narrow range until the US Federal Reserve announces the decision to raise US interest rates today. It will also announce the US economic growth rate and the Fed’s preferred inflation reading, and the personal consumption expenditures price index. These data and events are important to predict the path of the US dollar against the rest of the major currencies in the coming days.

The US Federal Reserve has raised its benchmark short-term interest rate three times since March. Last month, the Federal Reserve raised the interest rate by three-quarters of a percentage point, its largest rise since 1994. The Fed’s policy-making committee is expected to announce another three-quarter point increase on Wednesday.

Important Events to Affect US Economy

Economists are now concerned that the Fed, having played down inflation, will overreact and raise rates ever higher, putting the US economy at risk. They are warning the Fed against tightening credit too hard.

Prices in Japan are showing more signs of a rally on a larger scale as higher commodity prices and a weaker yen force companies to charge consumers higher costs not seen in decades. Multiple measures of deeper inflation trend reached record levels in June, according to data from the Bank of Japan. The contracting average, a measure of price growth based on the largest gains and declines, was up 1.6% from the previous year. This was the fastest rate of increase in data since 2001, according to the bank.

The weighted average, a price measure that gives more importance to key items, also hit a new record high. Meanwhile, the share of increasing items in the consumer price basket rose to 71.3%, the highest on record. While the indicators show that price dynamics in Japan are cooler than the sharp growth in the United States and Europe, they indicate a widening trend of inflation within the economy. This would make the rally in prices more likely to continue and influence policy.

BoJ Governor Haruhiko Kuroda has repeatedly stressed the need for sustainable inflation before he considers adjusting the easing stance. The Bank of Japan has become the leading party among the major central banks as they rush to raise interest rates. Kuroda insisted that higher wages was needed to turn cost-push inflation into permanent price growth.

Another report from the Bank of Japan earlier showed that rates for services among businesses rose 2% from a year earlier in June. Excluding the impact of the sales tax increase, this is the largest gain since May 1992, although the gains were driven by transportation and postal services, a segment directly affected by higher fuel prices. Other changes in price trends were also monitored. Some BOJ board members reported signs of a shift in Japanese consumers’ mindset about prices, according to the minutes of the June policy meeting, also released earlier on Tuesday.

USD/JPY Forecast:

There is no change in my technical view of the performance of the USD/JPY currency pair. Despite the recent performance, the currency pair still has an opportunity in the upward direction, especially if it returns to the top of the resistance 138.20, which in turn supports the move towards the historical psychological resistance level of 140.00, respectively. On the other hand, according to the performance on the daily chart, moving towards the support level 134.40 will be important for the bears to have a stronger control over the trend.

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