Weekly technical outlook [Video]

• USD/JPY consolidates gains after touching important resistance

• EUR/USD begins to recover, but threats remain

• Will gold’s bull run take a breather after record high?

Core PCE inflation –> USDJPY

The Bank of Japan’s decision to exit negative interest rates did not provide a helping hand to the yen. Neither did the Fed’s unchanged projections of three rate cuts in 2024 weigh harshly on the US dollar, with USD/JPY barely losing ground within the 151.00 territory after marking a new high near the 2022-2023 ceiling of 151.93.

The holiday-shortened week might trigger a new round of volatility as investors await a couple of key Fed speakers including Jerome Powell (Friday). Friday’s core PCE inflation figure, which the central bank closely monitors, might be another vital piece of information as policymakers are not convinced the fight against inflation has been won. Forecasts point to a steady growth of 2.4% y/y and a slightly stronger monthly spending of 0.5% in February.

Despite the strength of USD/JPY, the technical outlook indicates a potential slowdown or stabilization in the last week of March, as overbought conditions have been identified. A clear close below the previous high of 150.87 could create new selling pressures, prompting a fast decline towards the rising 20- and 50-day simple moving averages (SMAs) currently around the 149.40 region. Alternatively, buyers will be looking for a sustainable move above 151.93 to access the 153.50-153.80 constraining zone.

Moreover, considering the latest currency comments by Japan’s finance minister and the upcoming market closures, it will be interesting to see if there will any FX intervention by Japanese authorities.

US Treasury yields –>Gold 

Trading in commodities will be paused on Friday too, though following gold’s pullback from last week’s record high of 2,222, investors might wait for new direction, especially if the Fed commentary and some of the US data releases such as weekly initial jobless claims and the Michigan consumer sentiment index affect Treasury yields.

The precious metal edged up earlier today to challenge last week’s resistance of 2,186. The bulls will have to clear that border to shift the attention back to the 2,222 peak. If the impressive uptrend continues higher, the next challenge could occur within the 2,250-2,270 region.Alternatively, a slide below 2,144 and beneath the 20-day SMA could make traders engage in new selling activities.

Dollar volatility –>  EURUSD

Meanwhile in the eurozone, there are no major data releases to adjust rate cut expectations. Investors are stubbornly anticipating a rate cut in June, with ECB policymaker Madis Muller reiterating on Tuesday that the central bank is approaching the point at which it can start reducing borrowing costs.

Hence, EUR/USD is expected to be driven by US factors in the coming sessions, but the technical signals might be worthy to pay attention after Monday’s upside reversal. The pair is currently trying to regain some lost ground above its 50- and 200-day SMAs, though traders may not increase their exposure in the market unless the price crawls above the 1.0916-1.0945 barrier. On the downside, a decisive step below the 1.0800 floor could cause a sharp decline towards February’s low of 1.0694 unless the 1.0760 area pauses selling forces beforehand.