The Euro has been very choppy against the Japanese yen on Thursday, continuing the overall sideways action that we have seen for weeks. The interest rate differential continues to be an issue that moves the market as well.

EUR/JPY

The Euro has been very quiet against the Japanese Yen during trading here on Thursday as we are reaching the top of the overall consolidation area that we’ve been in for basically 6 weeks. That being said, we now have a situation where traders are trying to sort out whether or not we can finally break above the 186.50 Yen level. If we can break above there, then I think that is a very good sign, and it could have this market streaming towards the 188 Yen level given enough time.

Technical Breakout Potentials and Yen Weakness

Short-term pullbacks, I think, continue to look at the 50-day EMA and the 185 Yen level. Both offer quite a bit of support. Ultimately, this is a market that I don’t have any interest in shorting because, quite frankly, the interest rate differential favors the Euro over the Japanese Yen. And of course, the Japanese Yen simply cannot seem to get a break in general. This seems to be a situation that the Bank of Japan cannot ignore.

While we are at the top of a range and I fully recognize that it is possible traders will look at this as a potential barrier, if we do break out, then I think we get a bigger move again to the 188 Yen level, possibly the 190 Yen level. I like the idea of buying short-term dips, and I recognize that the Japanese Yen in general is in trouble against multiple currencies, not just this one. So, I think this is more of an indictment of the Yen itself.

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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

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James Fuller

STORY LINK Pound to Dollar Forecast: GBP Tests 1.34 as Mixed US Economic Data Clouds Fed Outlook

The Pound to Dollar exchange rate (GBP/USD) rebounded towards the 1.3400 level after a mixed batch of US economic data failed to extend the US Dollar’s recent gains.

Headline US retail sales rose 0.2% in June, matching expectations, while the closely watched control group increased a stronger-than-expected 0.5%, pointing to resilient underlying consumer demand. However, core retail sales excluding autos unexpectedly fell 0.2%, tempering enthusiasm for the Dollar despite a further decline in weekly jobless claims that reinforced the strength of the US labour market.

Investors continue to weigh evidence of resilient US economic activity against signs that consumer spending is becoming more selective, while expectations for Federal Reserve policy and developments in the Middle East remain key drivers of Dollar sentiment.

GBP/USD Forecasts: Unable to Make Headway

The Pound to Dollar (GBP/USD) exchange rate has continued to trade around 1.3400 and is currently trading just below this level with no attempt to break key resistance.

Scotiabank noted; “the GBP’s recovery from its June 24 low (~1.3150) looks to have stalled over the past week or so, with apparent resistance above 1.3400.”

It added; “We see dense resistance ahead of 1.3500, and we look to a near-term range bound between 1.3350 and 1.3450.”

ING has a 3-month GBP/USD target of 1.31 as the dollar makes headway.

Following today’s retail sales report, markets remain divided over whether resilient consumer demand will be enough to keep the Federal Reserve on a hawkish path, particularly after softer CPI and PPI inflation data earlier this week.

ING commented; “While soft US CPI data has taken the sting out of the dollar’s upside, it is probably too early to look for a much lower dollar just yet.”

According to MUFG; “Despite the muted FX reaction, the scale of weakness in the CPI report certainly helps weaken the key pillar of support for the dollar – the prospect of a near-term hike. That can open up scope for further dollar depreciation. However, it is difficult to trade with conviction given the re-escalation in the conflict in the Middle East and the 13% surge in crude oil prices this week.”

In testimony to the House Financial Services Committee on Tuesday, new Fed Chair Warsh maintained a generally hawkish stance.

He stated that the central bank has “no tolerance” for persistently elevated inflation, and vowed to “do my job” if challenged by U.S. President Donald Trump.

He also stated that he is committed to the dual mandate of 2% inflation and maximum employment.

MUFG commented; “The testimony from Fed Chair Warsh looks to have curtailed the move weaker for the dollar. Just like following his first FOMC meeting, Warsh spoke with conviction in relation to the Fed achieving its 2% inflation goal. The CPI print was not “mission accomplished” and he wasn’t going to “cherry pick” data.

The bank added; “We don’t really view this as “hawkish” given he is merely promising to focus on what is the legal mandate of the Federal Reserve. However, he again is emphasising his inflation fighting credentials.”

According to Scotiabank; “We remain of the view that Fed tightening risks this year are mispriced and soft CPI data this morning (plus the soft NFP report for June) may act to curb some of the market’s enthusiasm for rate hikes.”

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TAGS: Pound Dollar Forecasts

U.S. Dollar Index gains ground as traders react to the Retail Sales report. The report indicated that Retail Sales increased by +0.2% month-over-month in June, in line with analyst estimates. Retail Sales Ex Autos declined by -0.2%, compared to analyst forecast of -0.1%.

Today, traders also had a chance to take a look at the Initial Jobless Claims report. The report indicated that 208,000 Americans filed for unemployment benefits in a week, compared to analyst consensus of 217.000. The report showed that labor market remained in decent shape, which was bullish for the U.S. dollar.

The Euro to Dollar exchange rate is trading close to 1.1460 after gaining around 0.5% in July, although Rabobank expects choppy conditions to dominate over the coming months.

The bank notes that the US Dollar has been the strongest G10 currency since the start of the Iran war, initially benefiting from safe-haven demand and short-covering before receiving a second boost from more hawkish Federal Reserve expectations.

Rabobank believes investors may still have room to increase long-Dollar positions, but recent price action suggests that the rally is losing momentum.

The bank highlights that the Dollar has failed to respond meaningfully to renewed speculation over a possible Federal Reserve rate increase, despite concerns about sticky core inflation, tariff pressures and AI-related demand.

According to Rabobank, this “supports the view that the market is already long USDs and currently has little appetite to build these up further.”

The bank does not share the market’s hawkish outlook for the Fed, but it also sees limited scope for investors to rebuild large bullish positions in the Euro.

Optimism surrounding Germany’s fiscal expansion has faded, while higher energy costs and weaker Eurozone growth have undermined sentiment. Expectations for another European Central Bank rate increase are also largely reflected in current pricing.

Rabobank expects “choppy range trading around the EUR/USD1.14 level on a 1-to-3-month view”, with similarly uneven trading likely to persist into the autumn.

Copper price continued forming bullish trading, as the negative pressure repeated at $6.3000, attempting to find a chance for recording extra gains in the near period, and the price needs to provide a new close above the current barrier, to reinforce the chances of forming a new bullish rally, to expect reaching $6.4800 followed by $6.5400.

Note that the main indicators will support the bullish scenario in the current trading, to keep waiting for recording the previously suggested expected gains, while the risk of the price return to the bearish corrective trend requires a sharp decline, to settle below $5.9500 level.

The expected trading range for today is between $6.2500 and $4.4800

Trend forecast: Bullish