Japanese Yen Strengthens, U.S. Dollar Weakening: A Shift in Forex Market Dynamics
11 July 2023
The week started on a fascinating note with several significant technical movements across many trading instruments. Let's start by examining the indices where a bullish reversal was in the spotlight. For instance, S&P 500 was seen crafting a hammer candle, a classic reversal pattern hinting towards a potential price rally.
Simultaneously, Dow Jones demonstrated resilience by bouncing off the upper line of a symmetric triangle pattern. This bounce-back suggests the buyers are gaining momentum, and the pattern's upper line could act as a critical support area in the near term.
Over in Europe, DAX is making strides to reclaim the 15,700 points level. This level is the critical neckline of a head-and-shoulders pattern and a crucial resistance point. The effort to cross above this point indicates a strong resolve among buyers despite a challenging start to July.
Moving onto the Forex market, the Japanese Yen is currently ruling the roost. Most Yen instruments are on their fifth consecutive bearish candle, indicating a strong run for the Yen in July. This strength comes after months of negative sentiment and could potentially signal a shift in market dynamics.
The US Dollar, however, has been on the back foot. The EURUSD pair is climbing to its highest level since early May, signaling a weakening dollar. In the USDJPY pair, the twin forces of a strengthening yen and a weakening dollar are pushing the price lower, triggering a long-term sell signal.
In the world of commodities, Gold is putting up a staunch defense of the $1,900 per ounce support level. Despite the constant pressure, the bulls are holding their ground. On lower time frames, gold prices are forming an inverse head and shoulders pattern, signaling a potential upward breakout.
Oil, too, is progressing positively. The pivotal battle is unfolding on Brent, which is endeavoring to safeguard the $77.6 per barrel mark. As long as prices stay above this level, the sentiment remains bullish for oil.
As for today's calendar, it is relatively light on economic data. The day will kick off with the UK's Claimant Count Change number, expected at 20.5K. Other key figures include the Average Earnings Index, expected to rise to 6.8%, and the German ZEW Economic Sentiment, predicted to drop to -10.7. All these factors will certainly shape the trading environment in the upcoming days.