Market insight 8 Sep
EUR/USD
With the euro zone economy almost at standstill, next week meeting will be the European Central Bank last chance to raise interest rates. Euro zone economic growth was just 0.1% in the second quarter as falling exports and rising prices squeezed household spending. On the other hand, wage growth is fast, which may cause ECB could raise rates 25 pips at September conference. Owing to GDP may contract this quarter, any suspension would likely mean the end of interest rate increase cycle.
We can see EUR/USD has found support around 1.0700 and may form bottom divergence on H4 chart. On the other hand, price is crossing 12 hours moving average, which is sign of potential rebound. In addition, MACD negative histogram bar and double line is constituting golden cross, so the buying strategy could be employed in short term and stop loss must be compulsory.
USD/JPY
Japanese Finance official said that if speculation continues, Japanese authorities will not rule out taking any options on currency issues. It is important that currency movements reflect economic fundamentals. Officials are watching the market with sense of urgency. The yen has weakened against G10 currencies this year since the Bank of Japan persists in its dovish policy and other central banks have raised interest rates.
The Bank of Japan may not intervene in currency markets until the USD/JPY approaching 150, and even then, it will not prevent further long-term weakness in the yen. If USD/JPY reaches the 150 level in future, the ten years US Treasury yield may rise above 4.50%. We can see price is oscillating around 147.00, so the buy limit could be set between 146.00 to 146.50.
