Risk-off Sentiment on Monday

Latest news

• Investors concern that the economic recovery may be hampered by the fast-spreading delta virus variant.
• The latest China retail sales and industrial output reports revealed economic activity in China slowed more than forecasted.
• A fall in US consumer sentiment to a record low in almost ten years added to the overall risk-off sentiment.
• Japan’s GDP growth came out greater than analysts expected: 0.3% vs 0.1%. As a result, the JPY surged despite the extended restrictions in Japan.
• Traders will await the Fed’s meeting minutes (the detailed record of the latest meeting) this week and a speech by Fed Chair Jerome Powell. The markets want to get more clues about when the US central bank start tapering.
• Crude oil has been falling for the third day in a row as the resurgence of the delta variant can press down the crude oil demand. The Canadian dollar was among the worst performers, as crude oil prices edged lower.
• Earnings season is almost over. Don’t miss the latest reports. Walmart will reveal its earnings results on August 17, Nvidia – August 18.

Technical outlook

USD/JPY is moving inside the ascending channel. The pair is getting closer to the lower trend line at 109.00, which it will struggle to cross. Thus, we might expect a reverse up from the support zone of 108.80-109.00. On the way up, the pair may meet the resistance levels at the 100- and 50- day moving averages of 109.60 and 110.00.

Let’s look at gold. It has broken through the 23.6% Fibonacci retracement level of $1770 but retraced to it. It should be just a natural sell-off after the breakout. Gold may rally up further to the 100-day moving average of $1805 and the next Fibo level of $1825.

EUR/USD has reversed down from the resistance level of 1.1800. If it drops below the late July lows of 1.1750,  the pair may fall to the low of August 11 at 1.1700. On the flip side, if the pair manages to break 1.1800, the pair may jump to the 50-day moving average of 1.1870.

TRADE NOW

FBS Analyst Team

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