After the US Fed cut interest rates by 25 basis points as expected, the US Dollar increased against major currencies. This move was caused as Fed Chief Powell stated this was not the start of an interest rate cut cycle. Yesterday’s Chicago PMI slumped deep into contractionary territory, but forex traders ignored the negative economic news as well as the interest rate cut. How long can this disconnect last and is now the time to short the USDJPY? Which impact will today’s ISM Manufacturing Index have on the US Dollar? Follow the PaxForex Daily Fundamental Analysis and take the profitable side of this trade!
Here are the key factors to keep in mind today for US Dollar trades:
- US Initial Jobless Claims and Continuing Claims: US Initial Jobless Claims for the week of July 27th are predicted at 212K and US Continuing Claims for the week of July 20th are predicted at 1,678K. Forex traders can compare this to US Initial Jobless Claims for the week of July 20th which were reported at 206K and to US Continuing Claims for the week of July 13th which were reported at 1,676K.
- US Markit Manufacturing PMI: The Final US Markit Manufacturing PMI for July is predicted at 50.0. Forex traders can compare this to the previous US Markit Manufacturing PMI for July which was reported at 50.0.
- US ISM Manufacturing Index: The US ISM Manufacturing Index for July is predicted at 52.0. Forex traders can compare this to the US ISM Manufacturing Index for June which was reported at 51.7. ISM Prices Paid for July are predicted at 49.1. Forex traders can compare this to ISM Prices Paid for June which were reported at 47.9. ISM Employment for July is predicted at 53.4. Forex traders can compare this to ISM Employment for June which were reported at 54.5.
- US Construction Spending: US Construction Spending for June is predicted to increase by 0.4% monthly. Forex traders can compare this to US Construction Spending for May which decreased by 0.8% monthly.
The final reading for the July Nikkei Manufacturing PMI showed a downward revision as the Japanese economy is cooling off further. The trade war with South Korea is also adding to downside pressures and the Japanese Yen came under selling pressure. Given the global economic slowdown, will forex traders flock to the Japanese Yen as a safe haven asset? How will this impact price action in the USDJPY? Today’s fundamental analysis will take a look at the downside potential for this currency pair and evaluate possibilities to the upside.
Here are the key factors to keep in mind today for Japanese Yen trades:
- Japanese Buying Foreign Bonds and Japanese Buying Foreign Stocks/Foreign Buying Japanese Bonds and Foreigners Buying Japanese Stocks: Japanese Buying Foreign Bonds for the period ending July 26th was reported at -¥162.2B and Japanese Buying Foreign Stocks was reported at ¥100.6B. Forex traders can compare this to Japanese Buying Foreign Bonds for the period ending July 19th which was reported at ¥1,029.0B and to Japanese Buying Foreign Stocks which was reported at -¥76.8B. Foreign Buying Japanese Bonds for the period ending July 26th was reported at ¥607.6B and Foreigners Buying Japanese Stocks was reported at ¥37.5B. Forex traders can compare this to Foreign Buying Japanese Bonds for the period ending July 19th which was reported at ¥132.9B and to Foreigners Buying Japanese Stocks which was reported at -¥109.9B.
- Japanese Nikkei Manufacturing PMI: The Final Japanese Nikkei Manufacturing PMI for July was reported at 49.4. Forex traders can compare this to the previous Japanese Nikkei Manufacturing PMI July which was reported at 49.6.
- Japanese Vehicle Sales: Japanese Vehicle Sales for July increased by 6.7% annualized. Forex traders can compare this to Japanese Vehicle Sales for June which decreased by 0.9% annualized.
Should price action for the USDJPY remain inside the or breakdown below the 108.950 to 109.600 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 109.150
- Take Profit Zone: 106.750 – 107.150
- Stop Loss Level: 109.900
Should price action for the USDJPY breakout above 109.600 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 109.900
- Take Profit Zone: 110.650 – 111.000
- Stop Loss Level: 109.600
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