USD/JPY: Trading The FOMC And BoJ - Nomura
Nomura Research discusses the USD reaction around this week's FOMC and BoJ policy meetings.
"The most important event for USD/JPY this week is the FOMC meeting on Wednesday. Although the market has priced in the possibility of a 50bp hike in September at 80-90%, the initial reaction is likely to be a stronger USD/JPY if the median 2022 dots is 2.875% and a weaker USD/JPY if it is 2.625%.
Actual JPY buying intervention is still unlikely, but the BOJ’s reaction this week is crucial for JPY. Although we do not expect the BOJ to change its policy at this week’s meeting, after the BOJ shared concerns over rapid JPY weakness with the government in the statement, Governor Kuroda’s comments on FX may clearly change, potentially judging JPY weakness is no longer positive for Japan’s economy. Then, investors’ expectations for BOJ normalization may recover, which would likely strengthen JPY," Nomura notes.
"Recent price action has been disappointing for our bullish JPY view, but we still believe USD/JPY retracement is likely into H2 this year, maintaining USD/JPY short exposure via digi put options (125, expire on 5 September)," Nomura adds.
Nomura Research discusses the USD reaction around this week's FOMC and BoJ policy meetings.
"The most important event for USD/JPY this week is the FOMC meeting on Wednesday. Although the market has priced in the possibility of a 50bp hike in September at 80-90%, the initial reaction is likely to be a stronger USD/JPY if the median 2022 dots is 2.875% and a weaker USD/JPY if it is 2.625%.
Actual JPY buying intervention is still unlikely, but the BOJ’s reaction this week is crucial for JPY. Although we do not expect the BOJ to change its policy at this week’s meeting, after the BOJ shared concerns over rapid JPY weakness with the government in the statement, Governor Kuroda’s comments on FX may clearly change, potentially judging JPY weakness is no longer positive for Japan’s economy. Then, investors’ expectations for BOJ normalization may recover, which would likely strengthen JPY," Nomura notes.
"Recent price action has been disappointing for our bullish JPY view, but we still believe USD/JPY retracement is likely into H2 this year, maintaining USD/JPY short exposure via digi put options (125, expire on 5 September)," Nomura adds.
USD: Overvaluation Worsens; GBP: A Recession Upson US - Credit Agricole
Credit Agricole CIB Research discusses the USD long-term fair-value and GBP near-term outlook.
"The recent USD broad rally has aggravated its overvaluation against the rest of G10 according to our latest G10 VALFeX model update based on the most recent quarterly data as of Q122. In particular, while the USD uptrend seemed to follow the currency’s improving real rate advantage against most of the G10 currencies, the FX gains contrasted with a loss of real yield advantage and relative productivity across the board," CACIB notes.
"A combination of weak economic data, returning Brexit fears and fragile global risk sentiment has sunk the GBP more recently and could keep it on the defensive in the very near term. Recent GDP data has suggested that the slowing UK economy has lost considerable momentum and may be on course to contract already in Q2 while the Johnson government proposed legislation yesterday that, if voted into law, will allow UK ministers to overturn the Northern Ireland (NI) protocol," CACIB adds.
Credit Agricole CIB Research discusses the USD long-term fair-value and GBP near-term outlook.
"The recent USD broad rally has aggravated its overvaluation against the rest of G10 according to our latest G10 VALFeX model update based on the most recent quarterly data as of Q122. In particular, while the USD uptrend seemed to follow the currency’s improving real rate advantage against most of the G10 currencies, the FX gains contrasted with a loss of real yield advantage and relative productivity across the board," CACIB notes.
"A combination of weak economic data, returning Brexit fears and fragile global risk sentiment has sunk the GBP more recently and could keep it on the defensive in the very near term. Recent GDP data has suggested that the slowing UK economy has lost considerable momentum and may be on course to contract already in Q2 while the Johnson government proposed legislation yesterday that, if voted into law, will allow UK ministers to overturn the Northern Ireland (NI) protocol," CACIB adds.
USD: Expecting A Brief Pause In The USD Rally Before Next High CPI Print - Danske
Danske Research discusses the USD outlook in light of yesterday's FOMC policy meeting.
"At the FOMC press conference, Fed Chair Jerome Powell had a lot of focus on 'dangers', 'data dependency', 'clouded outlook', and so forth. To us, this is playing a bit of both side and a more clear (hawkish) message could have been delivered, if he so wanted. At present, high-frequency indicators point towards one more 1% m/m print on the headline CPI and there is mostly tentative evidence that CPI has peaked. That said, markets sold (broad) USD and bought risk on the back of this somewhat ambiguous message. However, looking ahead, we see inflation prints as remaining high amid a cyclical slowdown. If data confirms this, then we also expect Fed to underpin our forecast for seeing EUR/USD towards parity in 12M," Danske notes.
"Our view is that Fed on the margin could have chosen to do more to underline hawkishness - and that we might see a brief pause in the USD rally before we see the next data print/evidence of high CPI and cyclical slowdown but that Fed did not push markets to add to such defensive pricing during the press conference," Danske adds.
Danske Research discusses the USD outlook in light of yesterday's FOMC policy meeting.
"At the FOMC press conference, Fed Chair Jerome Powell had a lot of focus on 'dangers', 'data dependency', 'clouded outlook', and so forth. To us, this is playing a bit of both side and a more clear (hawkish) message could have been delivered, if he so wanted. At present, high-frequency indicators point towards one more 1% m/m print on the headline CPI and there is mostly tentative evidence that CPI has peaked. That said, markets sold (broad) USD and bought risk on the back of this somewhat ambiguous message. However, looking ahead, we see inflation prints as remaining high amid a cyclical slowdown. If data confirms this, then we also expect Fed to underpin our forecast for seeing EUR/USD towards parity in 12M," Danske notes.
"Our view is that Fed on the margin could have chosen to do more to underline hawkishness - and that we might see a brief pause in the USD rally before we see the next data print/evidence of high CPI and cyclical slowdown but that Fed did not push markets to add to such defensive pricing during the press conference," Danske adds.
USD: 3 Narratives Supporting A Stronger USD Into Year-End - ING
ING Research maintains a bullish bias on the USD over the coming weeks.
"Last week’s action in the FX market conveyed a clear message that it is too early to turn more structurally bearish on the dollar or bullish on pro-cyclical currencies. This week, markets may find further confirmation that this is the case, with a few key threads to follow.
First, US CPI figures on Thursday should show a decline (we estimate from 8.3% to 8.1%) in headline inflation caused primarily by lower gasoline prices, but at the same time an acceleration in the core rate (we estimate from 6.3% to 6.5%), mainly driven by housing costs and recreation prices," ING notes.
"Second, Fed communication. A 75bp hike for November and a 4.60-4.70% peak rate are now in the price, but additional hawkish comments – if backed by an inflation surprise for example – could encourage markets to speculate on larger hikes or a more prolonged tightening cycle.
Third, geopolitical and energy market developments. There have been signs over the weekend that any optimism over an imminent de-escalation in the Ukraine conflict may be misplaced.
A re-test of the 114.76 September high in DXY is our base case over the next few days," ING adds.
ING Research maintains a bullish bias on the USD over the coming weeks.
"Last week’s action in the FX market conveyed a clear message that it is too early to turn more structurally bearish on the dollar or bullish on pro-cyclical currencies. This week, markets may find further confirmation that this is the case, with a few key threads to follow.
First, US CPI figures on Thursday should show a decline (we estimate from 8.3% to 8.1%) in headline inflation caused primarily by lower gasoline prices, but at the same time an acceleration in the core rate (we estimate from 6.3% to 6.5%), mainly driven by housing costs and recreation prices," ING notes.
"Second, Fed communication. A 75bp hike for November and a 4.60-4.70% peak rate are now in the price, but additional hawkish comments – if backed by an inflation surprise for example – could encourage markets to speculate on larger hikes or a more prolonged tightening cycle.
Third, geopolitical and energy market developments. There have been signs over the weekend that any optimism over an imminent de-escalation in the Ukraine conflict may be misplaced.
A re-test of the 114.76 September high in DXY is our base case over the next few days," ING adds.
Three reasons to buy Gold now – UBS
Gold remains 8.2% higher since the start of this year, and economists at UBS think it is likely to break its all-time high later this year with multiple mid- to longer-term drivers.
1. Central bank demand should remain robust
“Central banks are on track to buy around 700 metric tons of Gold this year, much higher than the average since 2010 of below 500 metric tons. We think this trend of central bank buying is likely to continue amid heightened geopolitical risks and elevated inflation.”
2. Broad US Dollar weakness supports Gold
“The direction of a weakening USD is clear, we believe the reduction in US yield carry will continue to weigh on the greenback. Gold has historically performed well when the US Dollar softens due to their strong negative correlation, and we see another round of USD weakness over the next 6-12 months.”
3. Rising US recession risks may prompt safe-haven flows
“Recent data coming out of the US showed the country’s growth is slowing. Tighter credit conditions, evidenced by the Fed’s latest Senior Loan Officer Opinion Survey, are also likely to weigh on growth and corporate profits. Based on data since 1980, Gold’s relative performance versus the S&P 500 improved significantly during US recessions.”
Gold remains 8.2% higher since the start of this year, and economists at UBS think it is likely to break its all-time high later this year with multiple mid- to longer-term drivers.
1. Central bank demand should remain robust
“Central banks are on track to buy around 700 metric tons of Gold this year, much higher than the average since 2010 of below 500 metric tons. We think this trend of central bank buying is likely to continue amid heightened geopolitical risks and elevated inflation.”
2. Broad US Dollar weakness supports Gold
“The direction of a weakening USD is clear, we believe the reduction in US yield carry will continue to weigh on the greenback. Gold has historically performed well when the US Dollar softens due to their strong negative correlation, and we see another round of USD weakness over the next 6-12 months.”
3. Rising US recession risks may prompt safe-haven flows
“Recent data coming out of the US showed the country’s growth is slowing. Tighter credit conditions, evidenced by the Fed’s latest Senior Loan Officer Opinion Survey, are also likely to weigh on growth and corporate profits. Based on data since 1980, Gold’s relative performance versus the S&P 500 improved significantly during US recessions.”
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XAU/USD to see strength back to $1,968, then $2,063/2,075 record highs – Credit Suisse
Gold has achieved Credit Suise’s target/support zone at $1,900/1,890, and the bank looks for a floor here.
A weekly close below $1,862 would be seen to reinforce the longer-term sideways range.
Gold has achieved our target of price support and the 38.2% retracement of the 2022/2023 uptrend at $1,900/1,890. With the key rising 200-DMA seen not far below $1,862, our bias remains for a major floor to be found here.
We thus look for $1,862 to hold on a closing basis for strength back to the 55-DMA at $1,968 initially, then a retest of major resistance at the $2,063/2,075 record highs. We still stay biased to an eventual break to new record highs later in the year, which would then be seen to open the door to a move above $2,300.
A weekly close below $1,862 though would be seen to reinforce the longer-term sideways range, and a fall to support next at $1,810/05.
Gold has achieved Credit Suise’s target/support zone at $1,900/1,890, and the bank looks for a floor here.
A weekly close below $1,862 would be seen to reinforce the longer-term sideways range.
Gold has achieved our target of price support and the 38.2% retracement of the 2022/2023 uptrend at $1,900/1,890. With the key rising 200-DMA seen not far below $1,862, our bias remains for a major floor to be found here.
We thus look for $1,862 to hold on a closing basis for strength back to the 55-DMA at $1,968 initially, then a retest of major resistance at the $2,063/2,075 record highs. We still stay biased to an eventual break to new record highs later in the year, which would then be seen to open the door to a move above $2,300.
A weekly close below $1,862 though would be seen to reinforce the longer-term sideways range, and a fall to support next at $1,810/05.
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Gold is booming primarily due to escalating trade tensions between the U.S. and China, with the U.S. imposing tariffs of 145% on Chinese goods and China responding with 125% tariffs on U.S. imports—measures that have weakened the U.S. dollar and triggered a flight to safe-haven assets. At the same time, global central banks are ramping up gold purchases to diversify away from the dollar, boosting overall demand. Adding to this momentum are persistent geopolitical conflicts and inflation concerns, prompting investors to turn to gold as a hedge against economic uncertainty.
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Gold has surged to new highs amid persistent overnight buying from Asia, with volumes well above average. Goldman Sachs highlights that despite the rally, positioning is not yet stretched. Their bullish year-end forecast now stands at $3,700/oz, with a $4,500/oz tail-risk scenario under potential Fed policy shifts.
GBP/USD nears 1.3400 — its lowest in 3 weeks — as risk-off sentiment dominates amid escalating Middle East tensions and safe-haven demand boosts USD.
📰 Early optimism faded after Iran reportedly launched new missile and drone strikes, reinforcing USD strength.
📊 Ahead:
• UK CPI – Wednesday
• Fed decision – Wednesday
• BoE rate decision – Thursday (no change expected)
Stay sharp — high-impact volatility ahead.
📰 Early optimism faded after Iran reportedly launched new missile and drone strikes, reinforcing USD strength.
📊 Ahead:
• UK CPI – Wednesday
• Fed decision – Wednesday
• BoE rate decision – Thursday (no change expected)
Stay sharp — high-impact volatility ahead.
📈 Gold Fundamental Analysis
XAU/USD is holding firm above $3,300, supported by strong U.S. labor data — jobless claims hit 227K vs. 235K expected, signaling a resilient job market.
However, hopes for a July Fed rate cut are fading. High Treasury yields and a strong USD are limiting upside momentum.
📝 Fed Minutes: While some policymakers still favor a cut, most remain cautious due to inflation concerns, especially from new tariffs.
🇺🇸 President Trump has imposed 50% tariffs on Brazil, adding to global uncertainty and keeping safe-haven demand for gold intact.
📊 ETF Flows: Gold ETFs recorded the largest inflow since Aug 2022, with $38B added in H1 and holdings rising by ~397 tons, reflecting solid investor interest.
📌 I think Gold remains stable but range‑bound. Key drivers: labor data, yields, Fed stance, and geopolitics. Watch the $3,282–$3,345 range for breakout or rejection signals.
XAU/USD is holding firm above $3,300, supported by strong U.S. labor data — jobless claims hit 227K vs. 235K expected, signaling a resilient job market.
However, hopes for a July Fed rate cut are fading. High Treasury yields and a strong USD are limiting upside momentum.
📝 Fed Minutes: While some policymakers still favor a cut, most remain cautious due to inflation concerns, especially from new tariffs.
🇺🇸 President Trump has imposed 50% tariffs on Brazil, adding to global uncertainty and keeping safe-haven demand for gold intact.
📊 ETF Flows: Gold ETFs recorded the largest inflow since Aug 2022, with $38B added in H1 and holdings rising by ~397 tons, reflecting solid investor interest.
📌 I think Gold remains stable but range‑bound. Key drivers: labor data, yields, Fed stance, and geopolitics. Watch the $3,282–$3,345 range for breakout or rejection signals.
🚨 Trump Reportedly Weighs Firing Fed Chair Powell
According to a CBS News report citing multiple sources, former US President Donald Trump asked GOP lawmakers in a recent Oval Office meeting whether he should fire Federal Reserve Chairman Jerome Powell.
Several attendees indicated that Trump appears likely to go through with it.
💥 Market Reaction: The US Dollar weakened sharply following the news. The USD Index (DXY) dropped 0.55%, currently trading near 98.10.
According to a CBS News report citing multiple sources, former US President Donald Trump asked GOP lawmakers in a recent Oval Office meeting whether he should fire Federal Reserve Chairman Jerome Powell.
Several attendees indicated that Trump appears likely to go through with it.
💥 Market Reaction: The US Dollar weakened sharply following the news. The USD Index (DXY) dropped 0.55%, currently trading near 98.10.
🟡 GOLD (XAU/USD) Market Update
Gold is trying to break above the $3,378 level.
If successful, we may see a move towards the psychological level of $3,400,
followed by the next resistance at $3,451.
Key Drivers:
🔸 Gold price rises to around $3,374 due to mild USD correction
🔸 Traders reduce Fed rate cut expectations after June CPI report
🔸 Trump’s tariffs are starting to impact the US economy
📊 Keep an eye on price action — a breakout could lead to strong bullish momentum.
Gold is trying to break above the $3,378 level.
If successful, we may see a move towards the psychological level of $3,400,
followed by the next resistance at $3,451.
Key Drivers:
🔸 Gold price rises to around $3,374 due to mild USD correction
🔸 Traders reduce Fed rate cut expectations after June CPI report
🔸 Trump’s tariffs are starting to impact the US economy
📊 Keep an eye on price action — a breakout could lead to strong bullish momentum.