USD/JPY has been caught within the inside bar range for nearly 6 straight days and is indicative of a strong breakout in the making. With traders preparing for Friday's speech by Janet Yellen, it could very well be the catalyst needed for USD/JPY. Meanwhile, EUR/USD continues to drift lower as we maintain the downside bias for a test to 1.1200 heading into Friday's big event.
EUR/USD Daily Analysis
EUR/USD (1.1270): EUR/USD closed bearish yesterday with the breakout from the inside bar's low of 1.1284 confirming the downside. Support at 1.1200 is now in sight. Any pullbacks could be limited to the inside bar's low of 1.1284 through 1.1300. On the 4-hour chart, we can see the Stochastics currently in the oversold area following the downside breakout below 1.1300 which confirms the view that EUR/USD could see a short-term/intraday bounce to the upside. Support is seen at 1.12400 on the smaller time frame while 1.1200 remains the main support of interest.
USD/JPY Daily Analysis
USD/JPY (100.47): USD/JPY continues to remain muted with price seen trading strongly inside the range of 101.16 - 100.038, set on 17 August. We maintain the view that 100.50 - 101.00 needs to be cleared in order for USD/JPY to see any hopes of a test to 102.00 - 103.00 region. To the downside, support at 100.00 seems to hold prices for now.
GBP/USD Daily Analysis
GBP/USD (1.3225): GBP/USD extended the gains to 1.3200 but the daily chart shows a potential hidden bearish divergence near this level. This could mean that GBP/USD could post a minor correction back to 1.3000 to establish support provided GBP/USD can break down below 1.3200 - 1.31700 level which is now likely to hold prices. On the 4-hour chart there are no clear indications just as yet, but watch for a possible bearish divergence on the Stochastics to confirm this view.
Gold Daily Analysis
XAU/USD (1326.00): Gold prices closed at 1324.16 yesterday with price currently at the minor support of 1327.50. In the near term, we can expect gold prices to post a modest bounce to the upside, back to the 1332 - 1335 region. However, the bias remains to the downside for a test to 1300. The bearish view changes only if gold prices manage to post a bullish close above 1332 - 1335, in which case a retest back to 1350 cannot be ruled out.