If you think this week’s calm in will last, think again. With the US labour market and inflation in focus, history suggests volatility is just around the corner.

USD/JPY Payrolls Primer

USD/JPY has been rangebound this week heading into a period laden with major risk events, as flagged in the released last weekend. Given the historical precedent around this time of the month, the flaky price action seen recently may soon give way to something more meaningful, with U.S. and set to shake things up.

These reports could act as catalysts to either reignite the broader bearish trend or trigger a sharp bullish reversal, especially given how pessimistic sentiment towards the U.S. outlook is among investors right now.

Major Volatility Events Near

While USD/JPY has been especially volatile over the past year, driven by divergent monetary policy settings, new political leadership in both nations, heightened geopolitical tensions, and another U.S.-initiated trade war—payrolls and CPI reports have consistently packed a punch.

Source: LSEG, David Scutt

Over the past 12 months, USD/JPY’s average daily trading range has been 160 pips, or 1.07% of the prior close. On payrolls days, that climbs to 198 pips (1.32%), and on CPI days it’s even higher at 205 pips (1.35%).

Granted, these are just averages—and a data release alone doesn’t guarantee fireworks. But when a surprise hits, the moves can be big. Of the last 12 payrolls reports, the largest reaction was 2.25%, with the smallest at 0.66%. For CPI, the range was even wider—2.68% at the top and 0.76% at the bottom.

Unemployment Key Figure

Source: TradingView (U.S. EDT Shown)

Even if Friday’s payrolls release produces an average-sized move, the modest range we’ve seen this week could easily be broken, depending on the details in both the establishment and household surveys. Initially, markets tend to respond to whether payrolls beat or miss expectations, often brushing aside significant revisions to prior reports.

But if the payrolls figure sends a conflicting signal to the , don’t be surprised if the latter drives direction once initial volatility fades. After all, when officials release economic projections, they forecast unemployment, not payrolls. And given the mechanics of the household survey, the labour force participation rate arguably carries just as much weight for the Fed given the implications for unemployment and wage pressures.

USD/JPY Range May Come Under Threat

Source: TradingView

USD/JPY trades in the lower half of its recent range heading into the payrolls report. Each day this week, the price has tested and failed at 144, reinforcing its importance. On the downside, 142.42 was tagged once and bounced, adding to five prior failed attempts to close below the level since early May. That gives traders a well-defined range to work with ahead of the release.

With RSI (14) sitting marginally below 50 and trending lower, and MACD beneath the signal line in negative territory, momentum tilts to the downside—suggesting selling rallies may offer better risk-reward than buying dips in the current environment.

Beneath 142.42, the May 27 low of 142.12 is the next level of interest. A break there could put sub-142 levels back in play. While minor support is located at 141.65, recent dips below 142 have tended to reverse quickly—outside of periods of extreme market stress. That makes price action below 142 especially important, if it trades there. A clean break of 141.65 would increase the likelihood of a retest of the April swing low at 139.88.

Above 144, Wednesday’s high of 144.40 is the next level to watch. A break above could trigger a squeeze toward the 50-day moving average or resistance at 146, depending on the payrolls details and how risk assets respond.

Lately, stronger economic data has been met with a positive response across risk assets, even as it reduces the likelihood of near-term Fed cuts—suggesting that for now, good news is still good news.

Original Post

• GBP/USD holds above 1.3550 in the European session on Wednesday.
• The pair clings to a bullish bias in the near term.
• Technical buyers could take action with a break above 1.3590-1.3600.

GBP/USD holds its ground and trades above 1.3550 in the European session on Thursday after posting small gains on Wednesday. In case the pair manages to break above the 1.3590-1.3600 resistance area, it could continue to stretch higher in the near term.

The renewed selling pressure surrounding the US Dollar (USD) helped GBP/USD gain traction on Wednesday.

Ahead of Friday’s highly-anticipated Nonfarm Payrolls data, the disappointing private sector employment reading, which showed an increase of 37,000 in May, weighed on the USD on Wednesday. Moreover, the Institute for Supply Management (ISM) reported that the Services Purchasing Managers Index (PMI) fell into the contraction territory at 49.9 in May from 51.6 in April. This reading came in below the market expectation of 52.

In the second half of the day, weekly Initial Jobless Claims data from the US will be watched closely by market participants. Investors expect the number of first-time applications for unemployment benefits to edge lower to 235,000 in the last week of May from 240,000. In case there is a noticeable decline in this data, with a reading below 220,000, the USD could stay resilient against its rivals and limit GBP/USD’s upside. Conversely, a disappointing print at or above 240,000 could open the door for another leg higher in the pair.

Investors will also pay attention to the European Central Bank’s (ECB) policy announcements. A dovish ECB tone could trigger capital outflows out of the Euro into Pound Sterling. In this scenario, GBP/USD could push higher even if the data releases from the US seem USD-positive at first.

GBP/USD Technical Analysis

GBP/USD trades above the ascending trend line and the Relative Strength Index (RSI) indicator on the 4-hour chart stays near 60, suggesting that the bullish bias remains intact.

On the upside, 1.3590-1.3600 (static level, round level) aligns as the first resistance area. A daily close above this region could attract technical buyers and pave the way for an extended uptrend toward 1.3700 (round level, static level) and 1.3760 (upper limit of the ascending regression channel).

Looking south, support levels could be seen at 1.3540 (mid-point of the ascending channel, ascending trend line), 1.3500 (static level, round level) and 1.3450 (100-period SMA).

June 5, 2025 – Written by Frank Davies

STORY LINK EUR/USD Forecast: Euro Price Above 1.1450 on Dollar Vulnerability

The Euro to Dollar exchange rate (EUR/USD) was resilient after the ECB rate cut and it tested resistance above 1.1450 to trade around 1.1465 in choppy trading with traders eying 1.1500.

The dollar secured a limited boost following news that President Trump and Chinese President Xi had held a phone call, but the currency failed to gain sustained support.

According to Scotiabank the overall trend remains bullish; “the latest resistance has been observed in the mid-1.14s. A break of the local high would shift the focus to the April 21 high in the upper 1.15s.”

ING sees the risk of a decline to at least 1.1350, but added; “we would expect more buying to emerge there ahead of what could be dollar bearish NFP release tomorrow.”

Overall confidence in the US economy remains notably fragile.

US initial jobless claims increased to 247,000 in the latest week from a revised 239,000 previously. This was above consensus forecasts of 236,000 and the second-highest reading since July 2023.

Continuing claims edged lower to 1.90mn from 1.91mn the previous week.

Challenger reported that layoffs had increased 47% over the year.

The data maintained concerns over the labour market heading into Friday’s monthly jobs report.

Consensus forecasts are for an increase in non-farm payrolls of around 125,000 with the unemployment rate expected to remain at 4.2%.

Scotiabank commented; “Market expectation appear to be adjusting in anticipation of a soft NFP report Friday but a weak number will undercut the USD further.”

Scotiabank also expressed reservations surrounding the wider US fundamentals; “Beyond the data, news of tariff negotiation progress remains scant and signs of friction in the Republican part around President Trump’s tax cut bill adds to the unhelpful uncertainty around the outlook.”

It added; “We think the DXY could lose as much as another 5-10% in the next few months.”

The ECB cut interest rates by 25 basis points following the latest council meeting which was in line with strong consensus forecasts.

According to the central bank the decision was based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.

The bank is confident that inflation will settle close to the 2% target while increased government investment and military spending will help underpin the growth outlook.

The statement provided little in the way of guidance while bank President Lagarde called the inflation outlook more uncertain than usual.

Schroders Eurozone Economist Irene Lauro commented; “While the ECB delivered a widely expected rate cut today, we would not count on a follow-up next month. Inflation was lower than expected in May, with services inflation falling sharply. Yet, with no signs trade tariffs are weakening growth, we expect the ECB is likely to pause from today.

She added; “With rates now at the midpoint of their estimated neutral range, the bar for further cuts has risen. Having already eased by 1.75% in this cycle, the ECB can afford to shift from urgency to patience.”

ING, however, expects a further rate cut; “Even if the eurozone economy has shown some unexpected resilience and trade tensions could still fade, the risk of inflation undershooting target has become pressing enough for the ECB to cut rates once again.”

The Euro-Zone continues to run a substantial current account surplus which will provide important Euro protection.

Rabobank commented; “This year has brought periods when US equities, treasuries and the USD have all dropped at the same time illustrating that ‘sell America’ is the dominant theme. Creditor countries have been the beneficiaries.”

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June 5, 2025 – Written by Ben Hughes

STORY LINK Pound sterling to Dollar Forecast: “USD Remains Skewed to Downside”

The Pound to Dollar exchange rate (GBP/USD) advanced to 1.3585 in Europe on Thursday, just below the 39-month high recorded last month.

The dollar has lost ground amid further reservations over the economy and increased pressure on the Federal Reserve to cut interest rates.

Resistance levels may be tough to break down unless US data over the remainder of this week is notably weaker than expected or US-China relations deteriorate further.

According to UoB, “currently, GBP does not appear to have enough momentum to break clearly above 1.3600.”

US data released on Wednesday was weaker than expected, with the ADP private payrolls increase held to 37,000 for May from 60,000 in April and the lowest increase since February 2022.

The ISM services-sector index also dipped to an 11-month low of 49.9 for May from 51.6 the previous month.

There was mixed evidence in the latest Federal Reserve Beige Book on US economic conditions.

According to the survey, “All Districts reported elevated levels of economic and policy uncertainty, leading to a cautious approach.”

It added, “Tariff uncertainty continues to complicate business planning, with firms hesitant to commit capital or increase hiring.”

There will be ongoing concerns that uncertainty will damage the economic outlook.

Danske Bank maintains a cautious stance on the dollar; “Overall, the balance of risks for the USD remains skewed to the downside amid renewed trade policy volatility, weakening domestic data momentum, and persistent uncertainty premia embedded in USD assets.”

As far as trade policy is concerned, Danske commented, “Our view remains that broad-based, US-centric tariffs are inherently more negative for the USD than for its trading partners. The US is more exposed on the import side, and rising trade-related uncertainty is likely to weigh on capital expenditure and hiring decisions – particularly if the Fed remains constrained by inflation credibility concerns.”

In response to weaker data, there have been further calls from President Trump that interest rates should be cut immediately with another round of attacks on Fed Chair Powell.

ING commented, “We’re also looking out for whether political pressure on the Fed to cut rates increases the term or risk premium in Treasuries. That would be a dollar negative. This also serves as a reminder that the end of Fed Chair Powell’s tenure in May next year could be a difficult time for both bond markets and the dollar.”

Rabobank added, “Markets might shrug, but we get a new Fed Chair in under a year.”

Forthcoming data will be potentially crucial.

According to MUFG, “The decline in US yields indicates that market participants are putting more weight on loosening labour market conditions than higher inflation from tariff hikes when determining the outlook for Fed policy.”

In this context, Friday’s employment report will inevitably be a key element for markets.

Mansoor Mohi-uddin, chief economist at Bank of Singapore, commented, “May’s payrolls data tomorrow will be important to see if investor concerns are valid or overdone. A soft labour market report is likely to result in outsize falls in the U.S. dollar.”

Consensus forecasts are for an increase in non-farm payrolls of around 125,000 for May from 177,000 the previous month with the unemployment rate holding at 4.2%.

The dollar will have scope for at least a limited and temporary recovery if there is stronger-than-expected data, while a weak release would trigger renewed selling pressure.

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