Created on March 18, 2025

• The US dollar has been rather bullish during the trading session on Monday against the Japanese yen as we continue to see plenty of noise.
• But I also recognize that at this juncture, we are starting to see a little bit of a recovery, and this does make sense because both of these central banks have interest rate decisions this week.
• And the last thing somebody wants to do is get caught ahead of that with the wrong position.

Short Covering?

So, I think you are starting to see a little bit of short covering. It does make quite a bit of sense. And I think that ultimately, we could make a run towards the 150 yen level. Whether or not we can break above there, that might be a different question altogether, but I do recognize that this is a scenario where traders are most certainly going to be looking at this through the prism of the differential between statements from Japan and the United States.

If this USD/JPY pair can break above the 50 day EMA, then it’s very likely that what we will then see is a significant run towards the 155 yen level. I don’t expect that to happen easily because quite frankly, most things are working against the US dollar at the moment. And of course, you never know what’s going to happen with the FOMC.

That being said, a short-term pullback at this point in time does make a certain amount of sense as well. And I think we’re supported all the way down to about 147 yen. Anything below there has his pair running to the145 yen. level, but it must be stated that the session on Monday was rather impressive in favor of the US dollar. But again, I think a lot of what you’re seeing here is short covering.

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Created on March 17, 2025

• During the Friday session we have seen the British pound rallied against the Japanese yen, touching the 200 Day EMA before pulling back a bit.
• This is a market that has been going sideways for a while, and there doesn’t seem to be much changing at the moment.
• This does make a certain amount of sense, because despite the fact that the Japanese yen has been relatively strong against most currencies as of late, the reality is that the interest rate differential between these 2 economies is massive, despite the fact that Japan might actually raise rates later this year.

Technical Analysis

We are currently trading right around the 50 Day EMA as well as the 200 Day EMA indicator. These are flat, and it suggests that the market is probably going to continue to be somewhat range bound, which I think makes a certain amount of sense. I would pay close attention to the candlestick from the Wednesday session, because if we can break above there, it’s likely that we could go looking to the ¥195 level.

If we were to break down below the bottom of the candlestick from the Thursday session, then we will almost certainly test the ¥190 level, which of course is a large, round, psychologically significant figure that will attract a lot of attention in and of itself. Anything below there opens up the possibility of a move to the ¥188 level, which has served as a bit of a floor in the market over the last several weeks.

I do think at this point in time we are more likely than not going to see a return of the average “carry trader” as the interest rate differential is just too big to ignore. After all, nobody likes paying swap at the end of the day to get short of currency pair, and this is especially true when you are talking about larger positions which can add up quite drastically while holding.

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March 18, 2025 – Written by James Fuller

STORY LINK Pound Sterling Forecast vs Euro Ranges: Strong Support on Dips to 1.177

On Tuesday, the German parliament (Bundestag) approved the constitutional change to exempt defence and security spending from the debt brake. The huge German spending commitment is in stark contrast to UK pressure to tighten policy.

The Euro had priced in the approval, limiting scope for further buying, but did secure limited further support following the vote and the Pound to Euro (GBP/EUR) exchange rate settled around 1.1880.

Risk appetite took another dip lower which also limited wider Pound support.

Rabobank expects the Pound will be resilient close to current levels with strong GBP/EUR support on any dips to 1.1770.

ING also expects GBP/EUR support at 1.1765.

The Bundestag secured 512 votes in favour of the change, above the two-thirds majority of 489 needed.

As well as increased defence spending, there was also approval for a EUR500bn infrastructure fund.

The Bundesrat upper house will vote on Friday to approve the legislation formally.

According to Rabobank; “This should allow for greater spending on defence in addition to setting the stage for a EUR500 bln debt-financed infrastructure fund and allowing the German states to run modest budget deficits.”

The German ZEW investor confidence index strengthened sharply to 51.6 for March from 26.0 previously and above consensus forecasts of 48.0.

The current conditions index, however, improved only slightly to -87.6 from -88.5 in February and compared with expectations of -80.5, illustrating that there are still very important concerns over the outlook.

Attention will move towards UK fiscal policy with the budget statement on the 26th. The government announced welfare reform plans on Tuesday amid pressure to control spending.

According to the Resolution Foundation, Chancellor Reeves has a £4.4bn shortfall in meeting the fiscal rules compared with a £10bn surplus in October.

The OECD lowered its forecast for British growth this year to 1.4% from its December forecast of 1.7% ahead of the budget update, illustrating structural concerns.

According to Credit Agricole; “the UK Chancellor could be forced to unleash spending cuts in order to meet her own long-term budget rules. That contrasts quite starkly with the recent spending plans announced by the EU to in particular boost defence spending, which could then put the UK macro outlook at risk of falling behind most of Europe in the coming years.”

It added; “While more details and confirmation still awaits, the GBP may then only rely on its carry advantage and reduced geopolitical/tariff threats to eventually fare better than the EUR.”

Rabobank does consider that the Pound will need stronger growth to make any headway; “Hopes for a better growth outlook in the Eurozone have altered the dynamic for EUR/GBP. Our year end forecast of EUR/GBP0.83 assumes that UK growth can recover during the course of the year and most recent UK GDP indications have not been encouraging.”

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TAGS: Currency Predictions Pound Euro Forecasts

Created on March 18, 2025

• The British pound has rallied rather significantly during the trading session on Monday, as we continue to see this market threaten the 1.30 level.
• The 1.30 level is a large, round, psychologically significant figure that a lot of people will be paying close attention to, so it does warrant a certain amount of attention from traders on both sides of the equation.

You can make an argument that the 1.30 level is difficult to get above, and I certainly think that there is a certain amount of psychology here, but I also recognize that we have been in a strong uptrend for a while, and therefore it’s difficult to fight its without some type of fundamental shift. We could potentially get that fundamental shift this week, as the Federal Reserve has an interest rate decision and press conference coming out, but until that comes, you are just simply speculating that something bad could happen at this point.

Sideways Grind?

You could make an argument for a bit of a sideways grind at this point, perhaps trying to work off some of the excess froth that we had seen in this market. Underneath the current trading, we have the 1.29 level offering support. If we break down below there, then the 1.2750 level is an area that a lot of people would be paying attention to, as it has been important multiple times in the past, and of course we have the 200 Day EMA, as well as the 50 Day EMA heading toward that area.

Speaking of the moving averages, we are getting fairly close to the idea of forming a “golden cross”, when the 50 Day EMA breaks above the 200 Day EMA, which is a signal that a lot of the longer-term traders tend to like. This could kick off some algorithmic trading, although I’m the first to say that it is normally a very late signal indeed.

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