The 1.1850 level is an area that, over time, I think will continue to be of interest. I think if we get anywhere near it, there should be sellers willing to come in. The question is, can we break above there, because if we can, then the 1.1950 level gets targeted, followed by the 1.20 level. Short-term pullbacks could be buying opportunities, but if we break down below the 1.17 level, we’ll see that there is the 50-day EMA.

GBP/USD Technical Analysis

• The US dollar bounced from the crucial 156-yen level during trading on Thursday as we continue to see a lot of noise in the US dollar against the Japanese yen.

• Recently we’ve seen the Bank of Japan come out and intervene, although they don’t openly admit it, and as a result there has been some weakness.

• Furthermore, we had interest rates drop in the United States and that brought in some weakness as well as the interest rate differential shrank a bit.

That being said, there are rumblings coming out of Iran and out of Washington DC that they are still not necessarily agreeing on the facts or reality. While there were hopes of peace breaking out, and there still could be in theory, the Iranians and the Americans seem to not agree on whether or not uranium is coming out of that country. That is a huge deal and ostensibly is the whole reason the Americans had attacked Iran.

Geopolitical Rumblings and Economic Data

As long as we continue to see these games being played through the media and Twitter and social media, it is going to be a very noisy world to trade in. That being said, you do get paid to hold the US dollar against the Japanese yen and I think that is going to be the main driver here.

Friday has the non-farm payroll announcement coming out and that is a market that really can move this pair. If the number coming out of the United States is hotter than anticipated, that could cause a bit of trouble for the Japanese yen because it will push the idea that the Federal Reserve will have to stay tighter for longer. In other words, the interest rate differential will remain quite large.

The expected number of jobs added in the previous month is 65,000 and if we blow the doors off of that like we did last month, I would anticipate that we probably see a bit of a jump in this pair. Ultimately, this is a market that I think will try to make its way back to the 158 yen level, it’s just going to be a grind more than anything else.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

• The Euro has been a little bit positive in the early part of the trading session here on Thursday, but we continue to see a little bit of hesitation between the 1.18 level and the 1.1850 level.

• There are a lot of things going on, not the least of which will be the war of course in the Middle East, but the market has seen quite a bit of volatility based on positive news flow coming out of the Middle East and then eventually negative.

It’s also worth noting that the non-farm payroll announcement comes out on Friday, so you have to be a little cautious with this, recognizing that we have a situation where there will be a lot of volatility during the session on Thursday going into Friday and as a result, caution is the better part of valor.

The Impact of Non-Farm Payrolls and Fed Policy

I do think that there is going to be a very immense amount of pressure above that could cause quite a few headaches for traders who are trying to get long. 1.1850 being broken to the upside would obviously be a very bullish turn of events; it could show the EUR/USD market as ready to break higher, perhaps the 1.20 level and beyond.

That being said, what you need is a reason for the Federal Reserve to look like they are not going to stay tighter for longer. In this environment, there is a lot of positivity out there based on some comments coming out of Tehran and Washington DC, but the jobs market, if it’s still really hot, that could kill some of that US dollar weakness as it will make the Federal Reserve have to sit on its hands even longer.

If we do fall from here, I expect the 50-day EMA near the 1.1685 level to offer support. I think we’re just stuck in this compression pattern at the moment.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.