US equities extended their record run overnight with the seventh straight day of gains.

Round-up

US equities extended their record run overnight with the seventh straight day of gains, seemingly with some confidence that the upcoming US inflation data will be supportive of upcoming Federal Reserve (Fed)’s policy easing. Strength in tech has once again been a significant contributor of the gains, while the risk-on sentiments have been more broadly spread across the other sectors as well.

The second day of testimony by Fed Chair Jerome Powell probably brought less surprise than before. After previously acknowledging that the US economy is coming into better balance, he still refused to commit to a timeline for rate cut, which should be expected given the upcoming US inflation data release ahead.

Any surprise resurgence in inflation will be a key risk to markets, given that markets have been firm of a September rate cut (70% probability priced) and a lack of inflation progress may likely throw the dovish view into disarray.

USD/JPY back at recent high

Despite some indecision around the US dollar ahead of the upcoming US inflation release, the USD/JPY has soldiered on to stand just 0.3% away from its recent high at the 161.95 level. The bounce follows after a recent retracement, which found support at a 23.6% Fibonacci retracement at around the 160.20 level. The upward bias may remain intact for now, with its four-hour moving average convergence/divergence (MACD) turning higher as a sign of upward momentum, but much will revolve around the upcoming US inflation data to determine if a break of its 161.95 resistance level may materialise.

Failure to move above the 161.95 level may see the pair potentially retrace towards the 160.20 level once more, which may leave a minor double-top formation on watch. On the other hand, a move above the 161.95 level could leave the 164.00 level on watch next.