Major Rate Predictions for USD, JPY, EUR

This week will be very divisive for the future of USD, JPY, EUR. The central banks pertaining to these currencies are going to shape the path going forward. One thing is for sure, the markets will be volatile, and there are a handful of factors to consider as we start this week off.

EdgeFinder Analysis

This pair has been up among the top buys on the EdgeFinder for months now. The trend clearly reflects that, and retail is poised to attempt a downside play that has simply not come yet. The crowd is now over 80% while COT tells a different story. The yen saw another decline in the number of long positions going into this week.

This Thursday, the BOJ will announce a pivotal decision regarding the strength of the yen. Forecasts say the bank will keep rates unchanged at below 0%. Because of their history of keeping an ultra dovish policy, that might continue regardless of the rising inflation in Japan.

Gold still sits at a +4 buy from the EdgeFinder readings. The recent downtrend and AUD and CAD funds rate decisions have put pressure on the metal for the time being. However, all of that may change this coming Wednesday when the Federal Reserve makes their move on the dollar. Expectations call for a pause which could prove bullish to the metal if fulfilled.

On the 1D timeframe, this pair has come down to test support on a long term trend line which price has held. Several attempts have tried to push the metal lower, but it continues to stick to the demand zone. COT also showed continued interest to the upside mostly from the decrease in overall short positions on the pair.

Another currency looks promising against the yen. EURJPY is sitting at a +4 buy as one of the most shorted pairs on the retail side while most bought by smart money. Both countries are dealing with their own issues with inflation. The ECB is the only one of the two banks that is doing something about it, however.

This Thursday will be an eventful day for the pair as both banks will announce their new interest rate on that day. If we get what was expected, the EUR will continue to be hawkish while JPY will remain the least wanted currency on the market.

Retail Spotlight

Here's an overview of crowd sentiment surrounding the majors, indices and commodities. Now it looks like most retail traders are long USD, mixed gold and bearish stocks. Very interesting positioning as USD is expecting to witness some dovish sentiment going in to the Fed meeting this Wednesday.

Smart Money Spotlight

Meanwhile smart money is increasing their bullish sentiment on the stock markets, keeping a bullish outlook on gold, looking dollar mixed, euro bearish and desecrating the yen. The chart at the bottom shows an increase in the net long bias on gold which is now the most bullish sentiment we have seen from smart money since May 1.

Fundamental Spotlight

Here are the European forecasts of short term interest rates on the left and inflation forecasts on the right. Investors are expecting one more rate hike this Thursday to take EUR to 4% before hanging there for a while. At the same time, inflation is expecting to come down a good bit from the 6% range and near 2% by Q4 of next year.

So, investors are expecting a more hawkish euro while a less hawkish dollar and a dovish yen.