DEMAND FOR THE YEN REMAINS STRONG
The focus of the market remains on the political situation in the US where Donald Trump recently fired his political strategist Steve Bannon hoping to improve the political situation. The American president is losing support amongst both business circles and Congress due to the lack of reforms which have been promised during elections. Another issue that traders are keeping a close eye on is the geopolitical tension between the USA and North Korea. Recent military drills by South Korea and the US may provoke the North Korean leader to new actions that traditionally sends investors into risk-off mode.
The euro today is growing after a confident statement from the German central bank, according to which economic growth remains strong at 2.5% on an annual basis on the background of rising exports. Investors are waiting for the statement by the Fed’s chairwoman, Janet Yellen, at the economic symposium in Jackson Hole on Friday. This event is one the most important economic forums in the world – at previous sympsosiums central banks have made key announcements regarding monetary policies.
The GBP/USD keeps consolidating on the background of a weaker US dollar and negotiations on the Brexit terms with European Union. The increase of the pair was also restrained by the fall of the Rightmove house price index in the UK that declined by 0.9% in August after an increase of 0.1% in July.
The Japanese yen is still in demand as a safe haven asset due to uncertainty stemming from the political crisis surrounding Trump and the potential conflict between North Korea and the US. However, we do not exclude a price correction soon. All industries activity index in Japan increased by 0.4% in July after declining by 0.8% in the previous month.
The EUR/USD is soaring and may reach the upper limit of the descending channel and resistance at 1.1800. Overcoming of these levels may become a strong stimulus for bulls to accelerate purchases. In this case the target levels will be 1.1900 and 1.1200. Optimism about growth prospects will be restrained by the RSI being in the overbought zone on the 15-minute chart. The closest targets if the pair changes direction are 1.1700 and 1.1620.
The GBP/USD has left the limits of the local descending channel and keeps moving around 1.2890. If we see a switch to a positive trend, potential targets could go up to 1.3050 and 1.3250, but first the quotes will need to overcome the closest resistance at 1.2950. On the other side, the descending movement will be restrained by the support line at 1.2800.
The USD/JPY is moving along the sloping resistance line. Fixing below the support at 108.85 may become the trigger for continued bearish dynamics with potential drops to 108.00 and 106.60. The RSI on the 15-minute chart is close to the oversold zone and this points to a possible rebound. Growth is likely if the price manages to gain a foothold above 109.60. The first goals in this case will be at 110.30 and 111.00.