This week's key economic events include significant data releases and decisions from major global economies. The UK will report its monthly GDP on Wednesday, followed by the US CPI and EIA Crude Oil Stocks Change data later in the day. Thursday will see the European Central Bank's interest rate decision, as well as US PPI and unemployment claims reports. In the forex market, technical analysis of the USDJPY pair points to a bearish outlook, with potential downside targets identified, though a positive divergence in indicators suggests a possible upward correction. The Bank of Japan's policy outlook may also shift based on inflation and wage growth trends.
Overview
This week's key economic events include significant data releases and decisions from major global economies. The UK will report its monthly GDP on Wednesday, followed by the US CPI and EIA Crude Oil Stocks Change data later in the day. Thursday will see the European Central Bank's interest rate decision, as well as US PPI and unemployment claims reports. In the forex market, technical analysis of the USDJPY pair points to a bearish outlook, with potential downside targets identified, though a positive divergence in indicators suggests a possible upward correction. The Bank of Japan's policy outlook may also shift based on inflation and wage growth trends.
Key Economic Events
Wednesday 09:00 am (GMT+3) - UK: GDP m/m (GBP)
Wednesday 15:30 (GMT+3) - USA: CPI m/m (USD)
Wednesday 17:30 (GMT+3) - USA: EIA Crude Oil Stocks Change (USD)
Thursday 15:30 (GMT+3) - Europe: ECB Interest Rate Decision (EUR)
Thursday 16:30 (GMT+3) - USA: PPI m/m (USD)
Thursday 16:30 (GMT+3) - USA: Unemployment Claims (USD)
Technical Analysis
After reaching a high price of 161.951 on July 3, the USDJPY pair experienced a bearish reversal known in technical analysis as a failure swing. Specifically, the peak at 161.805 failed to surpass the previous peak, and subsequently, prices dropped below the trough of 160.262. The price then followed a pattern of lower peaks and lower troughs, consistently remaining below the 50-period Exponential Moving Average. A decisive close below the August 5 daily low of 141.684 will signal the continuation of the downtrend. Using the Fibonacci Retracement tool from the most recent swing low to the swing high, we can identify three potential downside targets: 141.104, 137.318, and 131.193. The 50-period Exponential Moving Average (EMA), the Momentum oscillator, and the Relative Strength Index (RSI) all support the bearish outlook. Specifically, prices are below the 50-period EMA, the RSI values are below 50, and the Momentum oscillator registers values below the 100 baseline, indicating a decline. Upon closer examination, there is a positive divergence between the oscillators and the price, suggesting a potential upward correction.
Potential Upside Targets
If the bulls take control of the market, traders may consider the following four potential upside targets:
143.444: The first resistance is seen at 143.444, which corresponds to the daily low marked on August 26, coinciding with the weekly Pivot Point (PP).
145.760: The second price target is identified at 145.760, representing the weekly resistance (R1) calculated using the standard Pivot Points method.
147.209: The third resistance level is established at 147.209, representing the peak formed on September 3.
149.392: An additional resistance is recognized at 149.392, aligning with the peak formed on August 15.
Potential Downside Targets
If the bears maintain control of the market, traders may find potential opportunities in the following four downside targets:
140.318: The initial level of support is identified at 140.318, corresponding to the weekly support (S1) calculated using the standard Pivot Points method.
137.318: The second level of support is 137.318, which corresponds to the 261.8% Fibonacci Extension drawn from the swing low of 143.44 to the swing high of 147.209.
134.876: The third level of support is 134.876, representing the weekly support (S3) calculated using the standard Pivot Points method.
131.193: An additional support is seen at 131.193, reflecting a 423.6% Fibonacci Extension drawn from the swing low of 143.44 to the swing high of 147.209.
Fundamentals
According to Bloomberg, Bank of Japan board member Junko Nakagawa signaled that the central bank might adjust its monetary policy if Japan's economy and inflation follow current projections. Her comments boosted the yen to its highest level this year, though volatility tempered gains. Despite Nakagawa's remarks, economists expect the BOJ to hold interest rates steady for now, with potential hikes later if inflation and wage growth exceed targets. Nakagawa emphasized the importance of monitoring inflation risks and labor market pressures, suggesting room for future rate increases if economic conditions align with forecasts.
Conclusion
In conclusion, this week’s key economic events are expected to significantly impact global markets, with crucial data releases from the UK, US, and Europe. Technical analysis of the USDJPY pair suggests a bearish outlook with potential downside targets, although positive divergences hint at a possible upward correction. The Bank of Japan’s cautious approach to monetary policy adjustments, driven by inflation and wage growth, adds another layer of complexity to market movements. Traders should closely monitor these events and market signals for potential opportunities.