The Fundamental law of investing, is the uncertainty of the future
The Single currency dropped to $1.1793 following investor sentiment in Germany, the euro zone's biggest economy, fell sharply in July, the ZEW economic research institute reported.
The Cable slipped to $1.3785 after minutes of the Federal Reserve's June policy meeting confirmed the world's biggest central bank is moving toward tapering its asset purchases as soon as this year.
The Japanese yen fell to 110.34 against the U.S dollar after Japanese Economy Minister Yasutoshi Nishimura said that the government is set to declare a state of emergency for the Tokyo area through August 22 amid a new wave of infections.
The Aussie dollar lost ground to $0.7461 following Reserve Bank of Australia Governor Philip Lowe reiterated that the unemployment rate would need to fall further and hold in the low 4% levels to lift inflation, an outcome not expected until 2024.
The Loonie trickled to 1.2522 per U.S dollar despite strong Canadian Ivey PMI Data.
South Africa's rand steadied at 14.34 against the dollar on hawkish Fed minutes.
The dollar-rupee extended gains by 5cents to 43.35(selling) on the local market.
15:30 - EUR - ECB Monetary Policy Statement
16:30 - USD - Initial Jobless Claims
19:00 - USD - Crude Oil Inventories
“ Its not that I am so smart. Its just that I observe the market longer. Patience is key to success.” - Anonymous
Policy statement from the US Federal Reserve certainly helped fuel a spike upwards in the USDJPY which topped exactly in the 110.80-111.00 resistance zone ( Based on our previous forecast on 28.05.21) before trimming most of its post Fed gains. What next?
The Bank of Japan kept its policy unchanged today and held its negative interest rate firm while also holding steady to its quantitative easing program in contrast with the FED. The special COVID program is also extended till March 2022. The lag in economic recovery has put institutions under stress , with BOJ responding that they will announce new loan measures in the near term.
The sudden burst of volatility and uncertainty will continue to prevail in the market in the coming sessions. The forex pair , hovering near critical values of 110.80-111.00, remains a key pivot in the near term. 110.80 marks a complete A-B-C corrections as per Elliott wave principle which coincides also with 100% Fibo Extension. A strong break and close above these levels could signal medium term buying in the USD amid breach of stop losses.
Shorts in USDJPY can be initiated in the region of 110.50-110.80 with a stop above 111 with targets towards 109 and 108 levels.