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The weekly forex forecast will be on GBPUSD, GBPJYP, USDCAD and AUDUSD
Federal Reserve Chair Powell’s speech at the Jackson Hole Symposium was characterized by a notably neutral stance, which differed from the more hawkish tone of the previous year. Despite this neutrality, financial markets have reacted by giving a modest boost to the US dollar as we head into the weekend. Powell emphasized the continued importance of “price stability,” while also stating that the Federal Reserve would exercise careful consideration when deciding on potential future monetary policy tightening measures.
Recent economic and political news from the United Kingdom also has put the GBP under bearish pressure.
On a weekly analysis, a significant push occurred as GBPUSD broke below the pivotal support level of 1.31740. Transitioning to the daily timeframe, we observed a bearish channel dominating the price action until August 16, 2023, when a breakout occurred. Unfortunately, buyers lacked the staying power necessary to sustain the rally, resulting in a resurgence of bearish sentiment, culminating in the breach of the critical support zone at 1.25950.
Post-breakout from the bearish channel, multiple attempts by the bulls to breach the 50-day Moving Average proved futile, eventually leading to a reentry into the channel. It is of paramount importance to closely monitor the support level at 1.24908. A successful defense of this level could attract bullish interest, potentially propelling the price towards the previous support, now turned resistance, at 1.25950. Notably, the 200-day Moving Average is converging towards this region, which adds weight to its potential role as a supportive zone.
The most recent set of global Purchasing Managers’ Indexes (PMIs) revealed challenges across several G7 economies, and the United Kingdom was no exception to this trend. There’s a prevailing perspective now that the Bank of England might have to take a more cautious approach to future interest rate increases in order to provide the economy with the necessary breathing space for growth. This cautious stance is being considered despite the fact that inflation continues to significantly exceed the central bank’s target.
The Bank of Japan has persisted in maintaining an excessively loose and accommodative monetary policy, even as the Yen approaches multi-year lows against various currencies. Despite a minor sell-off in GBP/JPY, the impact is expected to be limited, partly due to the support provided by both the 20- and 50-day simple moving averages. Furthermore, the Commodity Channel Index (CCI) indicator suggests that the pair is neither overbought nor oversold at the moment.
Looking ahead, the fate of this currency pair largely hinges on the decisions and actions of the Bank of Japan, as their monetary policy stance will continue to play a pivotal role in shaping the dynamics of the GBP/JPY exchange rate.
The British Pound is encountering a somewhat analogous situation in its relationship with the Japanese Yen. GBP/JPY managed to surpass the June high of 184.01, but its ascent was limited, leading to the formation of a new resistance level at 186.76. Subsequently, the pair retraced lower, revisiting levels reminiscent of those seen in June. This suggests that GBP/JPY is currently navigating a challenging price range, with both support and resistance levels playing significant roles in its movements.
On the daily time frame, the most significant areas to watch will be the 181 and 180 areas at which buyers might come in and send the price higher. A break of the 181 t0 180 area means GBPJPY price will reach the next support level of 176.421 area
The rally of USD/CAD from the level of 1.3091 persisted last week, despite a temporary pullback. The current outlook leans towards further upside movement this week, with an initial focus on the resistance at 1.3653. A clear and decisive breakthrough of this resistance level would validate that the correction phase starting from 1.3976 has concluded, and the pair may aim to retest this previous high at 1.4546
Conversely, if there is a rejection of the support at 1.3509 or 1.3976, it would suggest a potential short-term peak and shift the bias to the downside, possibly indicating a correction before any further upward movement.
Influencing AUD/USD, as with other USD currency pairs, was the pivotal speech by Fed Chair Jerome Powell last Friday. His remarks prompted a reassessment of the Federal Reserve’s interest rate trajectory. Currently, interest rate markets are assigning a somewhat higher probability of a policy tightening move occurring at the November Federal Open Market Committee (FOMC) meeting, estimated to be around 60%. Powell’s speech has spurred this shift in market expectations regarding the Fed’s future actions.
The situation in China’s real estate market remains challenging, with the government recently unveiling measures aimed at assisting first-home buyers in acquiring property. While these measures have been viewed by the market as insufficient to fully address the real estate sector’s woes, they are seen as a positive step in the right direction. Consequently, there is growing optimism that further stimulus measures could be on the horizon to bolster the struggling Chinese real estate market.
After making a 10-month low a fortnight ago, AUDUSD has consolidated but it remains in a descending trend channel.
On the downside, support may lie at the breakpoints and previous lows of 0.6386, 0.6365, 0.6272, and 0.6170. If the price is unable to hold these supports, the AUDUSD price might deep down toward the 0.5730 area before retracement.
Any break and retest of the channel should set a tone on the direct for AUDUSD this week
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