Created on February 10, 2025

• Recent trades were generally bullish for the Japanese yen against other major currencies, most notably the decline of the US dollar against the Japanese yen pair USD/JPY towards the support level of 150.93.
• This was the lowest for the currency pair in more than two months, and closed the week’s trading stable around the level of 151.38 after investors reacted to the announcement of US employment figures, which affects the future of the US Federal Reserve’s policy.

Why has the Japanese Yen strengthened recently?

According to recent trades on reliable trading platforms, the Japanese Yen has gained strength against other major currencies with growing expectations that the Bank of Japan will continue to raise interest rates this year. On Thursday last week, Bank of Japan board member Naoki Tamura stated that the central bank should raise the interest rate to at least 1% in the latter part of the 2025 fiscal year. Recent economic data also revealed a 2.7% year-on-year increase in household spending in Japan, which represents the first growth in five months and significantly exceeds the expected 0.2% gain.

In addition, data earlier this week showed that real wages rose for a second straight month in December, with nominal wage growth hitting its highest level in nearly three decades, largely driven by higher winter bonuses. Now, financial markets are speculating that Japan’s annual spring wage negotiations could yield another 5% increase this year.

Trading Tips:

We recommend buying the USD/JPY from any downward level but without taking excessive risk.

US Stock Markets Under Selling Pressure

At the end of last week’s trading, US stock markets were under selling pressure, as concerns about tariffs and inflation escalated again in Wall Street markets. According to stock trading platforms, the Standard & Poor’s 500 index fell by 0.9%, giving up the week’s gains. This is one of the worst declines for the index so far in the new year, but it remains close to the record it set two weeks ago.

According to trading, the Dow Jones Industrial Average fell by 444 points, the most prominent of which was a sharp decline in Amazon shares after its latest earnings report, which led to the Nasdaq Composite Index losing a market-leading 1.4%.

Conversely, US Treasury yields rose following a disappointing report on Friday morning that indicated a significant deterioration in sentiment among US consumers. The preliminary report from the University of Michigan showed that US consumers expect inflation to reach 4.3% in the coming year, the highest forecast since 2023. This was a full percentage point higher than what consumers expected a month ago, marking the second consecutive unusually large increase. Economists pointed to the possibility of imposing US tariffs on a wide range of imported products, as suggested by President Donald Trump, which could ultimately lead to higher prices for US consumers.

For his part, Trump said at a White House news conference on Friday that he would likely make an announcement on Monday or Tuesday about “reciprocal tariffs, where one country pays a lot or we pay a lot, and we do the same.”

The U.S. consumer sentiment data followed a mixed update on the labour market, often the most widely anticipated economic report each month. The data showed that U.S. hiring last month was less than half the rate in December, but it also included encouraging signs for workers: The unemployment rate fell, and workers saw bigger gains in average wages than economists had expected. Overall, all the data combined could keep the Fed on hold when it comes to US interest rates. The Fed began cutting its key interest rate in September to ease pressure on the economy and labour market, but warned at the end of the year that it may cut less frequently in 2025 than previously expected given concerns about stubbornly high inflation.

USD/JPY Technical Analysis and Expectations Today:

In recent trades, the USD/JPY currency pair has been trading below the 100-hour moving average. The pair rebounded to avoid reaching oversold levels on the 14-hour Relative Strength Index. In the near term, bears will aim to continue the current decline towards support levels of 151.20 or lower to the psychological level of 150.00. Conversely, bulls will aim to take advantage of rebounds to around 152.00 or higher at the resistance of 153.20.

In the long term, based on the daily chart, USD/JPY is also trading in a descending channel formation. Technically, the 14-day RSI continues to support the bearish bias as it approaches oversold levels. Therefore, bears will target long-term declines around 148.85 or lower at 145.00 support. Conversely, on the same time frame, bulls will look to capitalize on a bounce higher for gains around 155.30 or higher at 158.00 resistance.

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Created on February 10, 2025

• The British pound has been all over the place against the Japanese yen during trading on Friday as risk appetite is pretty much all over the place.
• There is an interesting fundamental dichotomy between these two countries at the moment in the sense that the Bank of Japan is fighting inflation and likely to tighten monetary policy.
• Although we don’t really know what that looks like working from a very low base to begin with.

But at the same time, we had the Bank of England on Thursday cut rates by 50 basis points, and there were several members, I think two out of the nine or three out of the nine were looking to cut even deeper. So that being said, it looks like the Bank of England is probably on a rate cutting cycle, and that will continue to work against the British pound in general.

However, if the Japanese yen starts to lose strength, what I think is that the British pound with its higher interest rate swap is going to continue to attract inflows. And therefore, I would expect some type of recovery if we did in fact see the Japanese yen fail against other currencies.

What Could Get Me Bullish

In this pair, I think a daily close above the 190 yen level would get the market in an upward move probably towards the 50 day EMA, presently sitting around the 193 yen level. If we break down below the lows of the candlestick for Friday, then 185 yen is your next support level. And I think that would of course be tested. In general, I would expect a lot of noisy trading in this area as the market will continue to have to try to gauge where both of these central banks are currently heading.

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Forex pairs & markets covered in this week’s weekly forex forecast & forex analysis: 

Forex pairs & markets covered in this week’s Weekly Forex Forecast & Forex Analysis:

USD (DXY), EUR, GBP, CHF, JPY, CAD, AUD & NZD.

Crude Oil, EUR/USD, GBP/NZD, GBP/CAD, EUR/GBP, NZD/JPY, AUD/JPY, EUR/JPY, NZD/CAD, AUD/CAD, EUR/CAD.

Gold analysis – XAU/USD and Silver analysis – XAG/USD.

Created on February 10, 2025

• Over the last two trading sessions, the GBP/USD currency pair relinquished most of its upward rebound gains, reaching the resistance level of 1.2550.
• Thus, experienced selling pressure that pushed it down to the support level of 1.2376, where it closed the trading week.
• The pair’s recent performance has been influenced by the Bank of England’s announcement, the US jobs data, and investor sentiment regarding the US administration’s imposition of tariffs on major global economies.

Bank of England Cuts Rates and Growth Outlook

In a significant event last week, the Bank of England cut its forecast for UK economic growth this year by half and lowered its benchmark interest rate by 25 basis points to 4.5%, its lowest level since mid-2023.

Obviously, this decision was widely expected in financial markets. the bank now expects the UK economy to grow by just 0.75% this year, down from its previous forecast of 1.5% just three months ago. If this turns out to be remotely accurate, it would be deeply disappointing news for Britain’s new Labour government, which has made growth its top priority as it boosts living standards and generates funds for cash-strapped public services. With growth proving difficult to achieve, the party’s popularity has fallen sharply since its election victory in July.

Financial markets remain uncertain about how many more cuts will be made this year, with the Bank also forecasting higher-than-expected inflation over the next few months – it expects inflation to hit 3.7% sometime in the first half of the year, before drifting back towards its 2% target. Against this backdrop of growth and inflation, Bank Governor Andrew Bailey said the outlook for the UK economy remains uncertain, and uncertainty could increase if US President Donald Trump follows through on his tariff threats.

Trading Tips:

Keep in mind that sterling is a risk currency, and its gains will not improve without a return to confidence in the future of global growth and the performance of the new British government.

Expectations for the Bank of England’s Policy in 2025

In this regard, according to Deutsche Bank. The Bank of England is likely to cut interest rates five times in 2025. For his part, according to Sanjay Raja, chief economist at Deutsche Bank, the Bank of England is ready to implement multiple rate cuts throughout 2025. In its latest research note, Deutsche Bank now expects five rate cuts this year, up from its previous forecast of four.

Last week, the Bank of England’s Monetary Policy Committee cut interest rates by 25 basis points to 4.5% as part of its easing cycle and lowered its economic growth forecasts while raising its inflation forecasts. Despite inflation expected to reach 3.7% this year, the analyst said, “the door remains wide open for further rate cuts” given the prevailing economic conditions and mixed inflation outlook. The minutes of the latest Monetary Policy Committee meeting revealed divisions within the committee, with seven members supporting a quarter-point cut and two members calling for a more aggressive 50 basis point cut.

Surprisingly, Catherine Mann joined Swati Dhingra in voting for a faster pace of rate cuts of 50 basis points. The analyst noted that “weaker activity and lower demand for labour are likely to reduce wage pressures as well as firms’ pricing power.”

Given the economic conditions, Deutsche Bank expects the Bank of England to deliver another rate cut in May, a shift from its previous forecast of no rate cuts in the second quarter of 2025. This would be followed by three more cuts in the second half of the year, likely in August, November and December, bringing the total number of cuts in 2025 to five.

Technical Analysis for the GBP/USD pair today:

The performance on the daily chart above still strongly confirms the extent of bears’ control over the direction of the GBP/USD pair. The technical indicators, led by the RSI and MACD, are still down and have more room before moving towards strong oversold levels. Accordingly, the bears may have the opportunity to move towards the support levels of 1.2290 and 1.2170 respectively, and from the last level, the strongest move for the bears is the next psychological support 1.2000. On the other hand, and in the same time frame, there will be no break of the downtrend without first moving towards the resistance levels of 1.2600 and 1.2740 respectively.

The GBP/USD will remain under pressure until the reaction to the announcement of the US inflation figures and the testimony of the US Federal Reserve Governor Jerome Powell.

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