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Current Fundamentals: Consolidation Continues After Material Roundup

The range and closing price for the week of August 4 (Bid rate of Manext Trader FX)

・USD/JPY: 146.616 yen - 148.088 yen 147.747 yen

• Euro/USD: $1.15275 - $1.16984 $1.16412

• Euro/Yen: 169.817 yen ~ 172.337 yen 172.010 yen

The US Dollar/Yen was flat with a narrow trading range for the week of August 4.

The week of August 4th, following the U.S. employment statistics that were significantly revised downward and the occurrence of important events up until the week of July 28th, there were no major factors that would greatly impact the yen exchange rate. As a result, the weekly range was 1 yen and 47 sen, which is quite a narrow fluctuation for the USD/JPY.

On August 7, it was decided that Milan, the Chairman of the CEA, would fill the vacancy left by the resignation of Governor Coogler from the Federal Reserve Board until the end of January, with the appointment of the next Federal Reserve Chair to follow later. Additionally, the modification of the tariff negotiations between Japan and the United States was tentatively assured as an agreement was reached on the U.S. side early on the morning of August 8 in Tokyo. Furthermore, regarding the reduction of automobile tariffs, the U.S. side cited the example of the UK, stating that it would take effect about 50 days after the agreement, indicating that full realization of the agreement will still take some time.

On August 8, the possibility of advancing the Liberal Democratic Party's presidential election was seen as a factor contributing to the depreciation of the yen. However, there has been persistent selling on rebounds in the 147 yen range, and the week ends with a flow waiting for the next material. The next material is expected to be the U.S. CPI, but for the time being, it can be said that developments are likely to continue while watching U.S. interest rates.

Euro/US Dollar for the week of August 4: A week of adjustment following last week's decline.

Last week (the week of August 4), the Euro/USD adjusted against the significant drop from the previous week and continued a gradual upward trend until mid-week. On August 7, it reached a high of 1.16984 dollars, but there were also euro selling orders above 1.17 dollars, so it continued to fluctuate in the mid-1.16 dollar range until the weekend.

The weekly range for Euro/USD was 171 pips, which moved more than USD/JPY, but it ended with the impression of a generally sluggish week. The same goes for Euro/JPY, which has returned to the low 172 yen range due to a buyback adjustment against last week's decline.

USD/JPY Chart (Weekly), Short-term Consolidation Phase Amidst Strong USD

We will make long-term judgments based on the weekly chart, so please first take a look at the weekly chart.

[Chart 1] USD/JPY (Weekly) Source: Money Exchange Trader FX [How to Read the Weekly Chart] The long-term trend is determined by the position of the 20-week moving average relative to the weekly closing price.

・Uptrend = Weekly closing price is above the moving average line

・Downtrend = Weekly closing price is below the moving average line

To judge a trend reversal and eliminate false signals, we look for the moving average to be exceeded or fall below for two consecutive weeks to consider the trend has reversed. In the weekly chart, the trend of a stronger US dollar remains unchanged, but during the week of July 21, it attempted to test lower levels and then retraced, while in the week of July 28, it attempted to test higher levels but faced resistance, failing to break out of the range for two consecutive weeks. Last week ended in a narrow range consolidation (see Chart 1). However, as pointed out last week, a hammer candlestick (with a long upper wick and a short body) appeared in the high price area, indicating a slightly stronger sense of caution towards the upside.

Please refer to the daily chart for the short term.

USD/JPY Chart (Daily), Dead Cross on August 1 and Golden Cross on August 8

Short-term judgments are made on a daily chart.

[Figure 2] USD/JPY (Daily) Source: Manex Trader FX [How to Read Daily Charts] Short-term trading signals are determined by the golden cross (GC) and death cross (DC) of the 5-day closing price moving average (blue) and the 5-day opening price moving average (red).

・Buy signal = Closing price moving average crosses above the opening price moving average from below (GC)

• Sell Signal = The closing price moving average line crosses below the opening price moving average line. During a short-term upward trend, the closing price moving average stays above the opening price moving average, while during a short-term downward trend, the closing price moving average stays below the opening price moving average. In the case of the usual two moving averages, it is easier to understand if we consider the closing price as the short-term line and the opening price as the long-term line. *In Manex Trader FX, you can select the opening price in the moving average settings screen. The USD/JPY became heavy after a dead cross on August 1, but on August 8, it turned into a golden cross with the rise (see Chart 2). When the weekly chart indicates a buy and the daily chart shows a golden cross, it is generally considered an excellent buying opportunity; however, since last week's range has been narrow and choppy, there is also a possibility of quickly reverting to a dead cross. Currently, we are in an adjustment phase between the yellow resistance line and the blue support line, and it is difficult to determine the direction until we break clearly either way.

Euro/US Dollar continues to be in a buying trend, but the upside is also heavy.

Let's take a look at the Euro/US Dollar chart.

[Chart 3] Euro/USD (Weekly) Long-term Trend = Continued Euro Buying Source: Manex Trader FX

[Chart 4] Euro/US Dollar (Daily) Short-term trend = Transition to GC in 5 days Source: Manex Trader FX The weekly chart (Figure 3) maintains a position above the moving average and continues a gradual upward trend within the ascending wedge since March.

In the daily chart (Figure 4), the shift to a golden cross on August 5 indicates that the current trend is a continuation of short-term Euro buying. The selling of the Euro at $1.17 is capping the upside, but even if this level is surpassed, there is a resistance line (in blue) from the year-to-date high. This week, the Euro has been declining from the mid to early $1.17 range, so the potential for upside from here can be considered limited. When the price range is narrow, it is advisable to immediately follow the trend when a cross occurs.

The weekly chart of Euro/Yen has turned bullish after a bearish candle for the first time in 10 weeks.

Last week, it felt like the Euro/Yen was the most volatile.

[Chart 5] Euro/Yen (Weekly) Long-term Trend = Euro Buying Source: Manex Trader FX In the weekly chart for Euro/Yen, after the bearish candle on the week of July 28, buying pressure has strengthened again, and last week it returned to a bullish candle (Chart 5). The larger adjustment that occurred once has created a market condition that is more conducive to returning to the previous buying trend.

[Figure 6] Euro/Yen (Daily) Short-term Trend = Euro Buying (Golden Cross Transition on August 5) Source: Manex Trader FX In the daily chart (Figure 6), a golden cross re-emerged on August 5, following the dead cross on July 29, indicating that the Euro/Yen has returned to a buying trend. The US Dollar/Yen is in a sideways movement, but the Euro/US Dollar continues to show a slightly firm trend, making it easier for the Euro/Yen to attract dip buying. Fibonacci retracement has been drawn between the recent highs and lows, and so far, it has been capped at the 61.8% retracement level of 172.299 yen. It is likely that it will break through this level at least once, aiming for the next target of the 76.4% retracement at 172.907 yen.

Well then, have good trades this week!