• The Euro rallied a bit during the early part of the trading session on Tuesday but has seen a little bit of pushback as the market continues to focus on a lot of headline risk coming out of the Middle East.

• Keep in mind that the situation in the Middle East has a lot of people worried about energy inflation and that in and of itself could cause a bit of a problem for many countries, not the least of which would be Germany, which is a major driver of where the Euro’s going to go.

• After all, the German industrial base is a major driver of European strength.

And if we continue to have issues, that will continue to plague the Euro. Furthermore, we continue to see economic numbers in the United States come out hotter than anticipated and that has a major influence on US dollar strength, at least in the short term.

Ultimately, I think this is a market that is doing everything it can to try to determine whether or not we will stay in the same range that we have been in for the better part of the year.

Long-Term Range and Core Levels

Overall, the 1.14 level continues to be a massive support level for the EUR/USD pair, while the 1.1850 level above continues to be a massive resistance level.

We are closer to the bottom, so some value hunting may occur here, and I think that’s what we’ve seen over the last couple of days.

However, most things favor the US dollar right now, not the least of which would be the uncertainty out there. So, I do think that rolling over makes sense, but if we could break above the 200-day EMA, that could change the overall attitude.

Ready to trade our EUR/USD daily forecast? Here’s a list of some of the top forex brokers in Europe to check out.

Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

The GBPJPY pair returned to settle near 214.50 level, affected by the attempt of providing bullish momentum by the main indicators, to delay the bearish corrective attempts temporarily, facing positive momentum will ease the mission of breaching the current barrier, to begin targeting some bullish stations by its rally towards the resistance at 215.50.

While the failure of the breach and holding below 214.50 will increase the chances of activating the corrective attempts, to target 213.50 level initially, attempting to break the barrier at 212.80 to find an exit for resuming the negative trend in the near and medium period trading.

The expected trading range for today is between 214.00 and 215.20

Trend forecast: Bullish

This currency pair had been ranging over more than two weeks when it finally moved sharply lower on risk-off, strong USD sentiment following surprisingly high US jobs data at the end of last week. US Dollar strength continued initially as the new week got underway, perhaps given an additional tailwind by the brief resumption in fighting between Iran and Israel.

Now markets have got past the jobs data, and the fighting is over between Iran and Israel for the time being, we see the US Dollar start to weaken and the price move higher. The question is whether the greenback will reassert itself and drive a technically significant breakdown, or will the dominant consolidation pattern of the last few weeks reassert itself?

US CPI Data Tomorrow May be Key Driver

Tomorrow will see the release of US CPI (inflation) data, which can be said to be the major driver of the Forex market over the past few years. This is why the question of the Dollar’s direction is timely. US inflation is the number one consideration the Federal Reserve has when it decides on its interest rate every few weeks, and interest rates are a key driver in Forex.

The rate of annualized inflation is expected to increase, but the rate of increase month-on-month is expected to slow down. Last year, inflation had begun to look like it had been conquered anew, but the oil price shock since March this year has generated a wave of inflation feeding through the global economy, so inflation data is again being scrutinized very closely.

If the inflation data is higher than expected, it will be very likely to send the price of this currency pair lower, and vice versa.

GBP/USD Technical Analysis

Despite the recent dip lower, a look at the price chart below shows ranging behaviour. The price is showing light short-term bullish momentum and is returning into the middle of its zone of comfort. There are not many key support or resistance levels which can be confidently drawn. However, there is quite likely to be new resistance at $1.3388 or $1.3409 with the latter level looking as if it will be stronger, so traders should beware when the price action approaches these levels.

The dominant consolidation suggests that the price will remain between $1.3409 and $1.3307 until the US CPI data is released tomorrow.

If the price breaks down today below $1.3300, it probably won’t last, but it is a bearish sign that markets are expecting higher inflation data. If the price breaks above $1.3409, it might not go much further but that will be a bullish sign.

The line of least resistance is downwards.

My Take on GBP/USD

I think the best approach here will be to take the area between $1.3409 and $1.3307 as today’s range, and be prepared to trade a reversal from a bounce rejecting one of the extreme points. If the bearish bounce happens at $1.3388 that is also OK, but I have more faith in $1.3409.

I doubt we will see a breakout until the US CPI data release which will happen during tomorrow’s New York session.

Review, Support & Resistance Levels

My previous GBP/USD signal on 4th June was not triggered.

Long Trade Idea

• Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.3307.

• Put the stop loss 1 pip below the local swing low.

• Adjust the stop loss to break even once the trade is 25 pips in profit.

• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

Short Trade Ideas

• Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.3388 or $1.3409.

• Put the stop loss 1 pip above the local swing high.

• Adjust the stop loss to break even once the trade is 25 pips in profit.

• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

There is nothing of high importance scheduled today concerning either the British Pound or the US Dollar.

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The US Dollar to Yen (USD/JPY) exchange rate remains close to multi-decade highs and is trading around 160.20 after repeatedly testing the 160 level over recent weeks.

Citi expects USD/JPY to remain elevated in the short term but continues to forecast a move lower towards 155 by the end of the year. The bank believes the 160 area should act as an effective ceiling for the currency pair.

According to Citi, the recent resilience of USD/JPY is surprising given that long-term interest-rate differentials between the US and Japan have narrowed significantly, a development that would normally support Yen appreciation.

The bank argues that strong hedging-related Yen selling linked to record-high Japanese equity holdings has become a key factor supporting USD/JPY and offsetting the impact of narrower yield spreads.

Citi’s proprietary valuation models suggest that current USD/JPY levels remain broadly justified by market fundamentals and international capital flows. The bank’s analysis indicates there is no major mispricing in the pair at present.

The bank identifies Japanese equities and the broader US Dollar trend as the two most important drivers of USD/JPY, with interest-rate spreads still playing a significant role in determining direction.

While Citi remains constructive on the Yen over the medium term, it believes that any meaningful short-term decline in USD/JPY would likely require further Bank of Japan policy normalisation and additional currency support measures from Japanese authorities.

For now, Citi expects USD/JPY to remain close to current levels, but continues to forecast a gradual correction lower towards 155 as monetary policy normalisation and a moderation in Yen-selling flows begin to support the Japanese currency.

• The Euro has been somewhat resilient during the trading session on Monday after initially gapping lower.

• The 1.15 level is a bit of a support level that I think a lot of people will watch from the psychology standpoint, but I also recognize that the interest rate differential will continue to favor the United States dollar, and the 200-day EMA sits just above the 1.16 level.

The 1.16 level will continue to be important, not only from the 200-day EMA showing up, but it’s also a significant barrier. Ultimately, this is a market that I have no interest in buying, and I do think that any signs of exhaustion will end up being an opportunity to get short again.

Consolidation Range and Market Drivers

The 1.14 level below would be my target overall, as it is the market being stuck in a larger consolidation range. The 1.1850 level above is your ceiling in this pair. The 1.14 level, of course, will be important, and if we were to break down below there, then we could see the EUR/USD market go much lower.

Ultimately, I think this is a market where you continue to see the US 10-year yield be the main driver. And it is worth noting that eventually it fell after spiking higher right around the New York open, but we’ve seen it turn right back around.

Ultimately, I think Europe has major problems, and that will also be perhaps driven by the idea of energy inflation or, worse yet, a lack of energy for the German industrial sector. The United States continues to see inflows, and I think that is your main story here.

Ready to trade our EUR/USD daily forecast? Here’s a list of some of the top forex brokers in Europe to check out.

Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire