• EUR/USD fluctuates near 1.0850 after closing virtually unchanged on Thursday.
• The pair manages to hold above key support area for now.
• US economic docket will feature PCE inflation data for June on Friday.

After recovering to 1.0870 early Thursday, EUR/USD lost its momentum and closed the day virtually unchanged slightly below 1.0850 as the US Dollar (USD) benefited from upbeat data releases. Although the risk mood seems to be improving early Friday, the Euro is having a difficult time attracting buyers.

The US Bureau of Economic Analysis (BEA) reported on Thursday the United States’ Gross Domestic Product (GDP) expanded at an annual rate of 2.8% in the second quarter, according to its first estimate. This print followed the 1.4% growth recorded in the first quarter and surpassed the market forecast of 2% by a wide margin.

The stronger-than-expected GDP reading and the mixed action seen in Wall Street helped the USD stay resilient against its major rivals during the American trading hours, limiting EUR/USD’s upside.

Later in the day, the BEA will release the Personal Consumption Expenditures (PCE) Price Index data for June. The GDP report showed that the core Personal Consumption Expenditures Price Index rose 2.9% on a quarterly basis, below the 3.7% increase registered in the first quarter but above analysts’ estimate of 2.7%. Since the quarterly PCE inflation data takes June’s PCE Price Index into account, the market reaction to the monthly reading is likely to remain muted.

Nevertheless, changes in risk perception ahead of the weekend could drive EUR/USD’s action. In the European session, US stock index futures trade marginally higher on the day. In case risk flows take control of markets following a bullish opening in Wall Street, the USD could struggle to gather strength and allow EUR/USD to hold its ground.

EUR/USD Technical Analysis

EUR/USD failed to reclaim the 100-period Simple Moving Average (SMA) for the second straight day on Thursday and the Relative Strength Index (RSI) indicator on the 4-hour chart edged lower after touching 50, reflecting a lack of buyer interest.

On the downside, the 100-day and the 200-day SMAs form strong support area at 1.0800-1.0790 ahead of 1.0740 (Fibonacci 78.6% retracement of the latest uptrend) and 1.0700 (psychological level, static level). Resistances could be seen at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).

 

EUR/USD Current price: 1.0853

• Eurozone PMI data came in worse-than-anticipated, indicating stagnation.
• Stock markets turned south amid disappointing earning reports.
• EUR/USD bounced from fresh weekly lows, bullish potential limited.

The EUR/USD pair extended its slide to 1.0824 on Wednesday, finally finding buyers in the area. The pair bounced towards the current 1.0850 price zone as the US Dollar came under modest selling pressure. Still, the Euro’s recovery has been limited by softer-than-anticipated local data.

“Provisional PMI survey data signalled a near-stagnation of the eurozone private sector during July as the currency bloc’s,” according to the Hamburg Commercial Bank (HCOB). The Eurozone Manufacturing Purchasing Manager Index (PMI) resulted at 45.6 in July, down from the previous 45.8. The services Index eased to 51.9, while the Composite PMI barely held in expansionary territory, easing from 50.9 in June to 50.1.

Meanwhile, stock markets turned south amid weaker-than-anticipated earning reports spurring concerns about economic progress. Wall Street is poised to open in the red as another batch of big names prepares to announce results.

Data-wise, the United States (US) just published MBA Mortgages Applications for the week ended July 19, which declined by 2.2%. Also, June Wholesale Inventories stood at 0.2% in June, according to preliminary estimates, better than anticipated, while the Goods Trade Balance for the same month posted a deficit of $96.8 billion. Coming up next, the US will release June New Home Sales, while S&P Global will publish the preliminary estimates of the July PMIs.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it trimmed most of its early losses, although it still trades in the red. Technical indicators maintain their downward slopes just above their midlines, suggesting bearish pressure continues. At the same time, a bullish 20 Simple Moving Average (SMA) provided intraday support while extending its advance beyond the 100 and 200 SMAs, somehow limiting the odds for a steeper slide.

In the near term, and according to the 4-hour chart, EUR/USD is correcting oversold conditions but far from suggesting another leg north. The pair is battling to overcome a still bullish 100 SMA, while a bearish 20 SMA heads firmly south at around 1.0870. Finally, the Momentum indicator turned higher, but remains below its 100 line, while the RSI bounced sharply from extreme readings, but stands at around 38.

Support levels: 1.0820 1.0770 1.0725

Resistance levels: 1.0870 1.0910 1.0945  

 

NOTE: This article was corrected on July 24 at 13:30 GMT to correct “while a bearish 20 SMA heads firmly north,” to the correct version: “while a bearish 20 SMA heads firmly south.” 

 

EUR/USD Current price: 1.0853

• Eurozone PMI data came in worse-than-anticipated, indicating stagnation.
• Stock markets turned south amid disappointing earning reports.
• EUR/USD bounced from fresh weekly lows, bullish potential limited.

The EUR/USD pair extended its slide to 1.0824 on Wednesday, finally finding buyers in the area. The pair bounced towards the current 1.0850 price zone as the US Dollar came under modest selling pressure. Still, the Euro’s recovery has been limited by softer-than-anticipated local data.

“Provisional PMI survey data signalled a near-stagnation of the eurozone private sector during July as the currency bloc’s,” according to the Hamburg Commercial Bank (HCOB). The Eurozone Manufacturing Purchasing Manager Index (PMI) resulted at 45.6 in July, down from the previous 45.8. The services Index eased to 51.9, while the Composite PMI barely held in expansionary territory, easing from 50.9 in June to 50.1.

Meanwhile, stock markets turned south amid weaker-than-anticipated earning reports spurring concerns about economic progress. Wall Street is poised to open in the red as another batch of big names prepares to announce results.

Data-wise, the United States (US) just published MBA Mortgages Applications for the week ended July 19, which declined by 2.2%. Also, June Wholesale Inventories stood at 0.2% in June, according to preliminary estimates, better than anticipated, while the Goods Trade Balance for the same month posted a deficit of $96.8 billion. Coming up next, the US will release June New Home Sales, while S&P Global will publish the preliminary estimates of the July PMIs.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it trimmed most of its early losses, although it still trades in the red. Technical indicators maintain their downward slopes just above their midlines, suggesting bearish pressure continues. At the same time, a bullish 20 Simple Moving Average (SMA) provided intraday support while extending its advance beyond the 100 and 200 SMAs, somehow limiting the odds for a steeper slide.

In the near term, and according to the 4-hour chart, EUR/USD is correcting oversold conditions but far from suggesting another leg north. The pair is battling to overcome a still bullish 100 SMA, while a bearish 20 SMA heads firmly south at around 1.0870. Finally, the Momentum indicator turned higher, but remains below its 100 line, while the RSI bounced sharply from extreme readings, but stands at around 38.

Support levels: 1.0820 1.0770 1.0725

Resistance levels: 1.0870 1.0910 1.0945  

 

NOTE: This article was corrected on July 24 at 13:30 GMT to correct “while a bearish 20 SMA heads firmly north,” to the correct version: “while a bearish 20 SMA heads firmly south.” 

 

Potential signal:

• I am a buyer of this pair if we get anywhere near the 200 yen level. 
• The stop loss would have to be at the 199 yen level.
• I would aim for the 206 yen area.

The pound has fallen a bit against the Japanese yen, as we have seen a bit of a risk off type of attitude around the world. With that being said, it is worth noting that we are currently threatening the 50 day EMA. But underneath there we have an even more important area in the form of the ¥200 level. This area is one that I find very important at this point in time.

The ¥200 level, of course, will have a lot of psychology attached to it, and therefore I think it will attract a lot of inflows. The ¥200 level was where the Bank of Japan had intervened in the market previously, and therefore, one would think that a lot of people will be interested in seeing how that plays out. Either way, this is a situation where I’m looking to buy dips in as the market continues to pay you for hanging on to the British pound against the Japanese yen.

The Interest Rate Differential Continues to Influence the Long-Term

The interest rate differential between the two currencies remains very wide, and the Bank of Japan is essentially stuck with the problem of massive debt that Japan simply cannot finance at higher levels of interest. With that being the case, it should remain a scenario where traders look at this through the prism of trying to get paid at the end of every day via the swap. The swap is something that a lot of traders make the mistake of ignoring over the longer term.

Ultimately, I do think that’s how we approach this market in the longer term. And with that being said, I do think that this will offer an opportunity for people to take advantage of cheap pounds. This environment is one that prefers a little bit of value hunting. We had shot straight up in the air. We have pulled back a little bit. All of this is natural. I don’t think anything has changed.

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• GBP/USD stays on the back foot despite upbeat UK PMI data.
• The risk-averse market atmosphere helps the US Dollar hold its ground.
• Investors await S&P Global PMI data from the US.

After closing in negative territory on Tuesday, GBP/USD continued to edge lower and touched its lowest level since July 11 below 1.2880. Although the pair managed to edge higher in the European session, it seems to be having a difficult time gathering recovery momentum.

The data from the UK showed that the S&P Global/CIPS Composite PMI improved to 52.7 in July’s flash estimate from 52.3 in June, highlighting an ongoing expansion in the private sector’s business activity at an accelerating pace. 

Assessing the survey’s findings, “policymakers will likely take a cautious approach to loosening policy amid signs of inflationary pressures pivoting away from services towards manufacturing, where Red Sea shipping delays and higher freight prices are adding to costs again,” said Chris Williamson Chief Business Economist at S&P Global Market Intelligence. “The renewed hiring trend could also add to pay pressures, sustaining some stickiness of inflation in the coming months.”

Despite the upbeat UK PMI data, the risk-averse market atmosphere doesn’t allow GBP/USD to regain its traction. At the time of press, UK’s FTSE 100 Index was down nearly 0.5% on the day and US stock index futures were losing between 0.5% and 0.9%.

Later in the day, S&P Global will release July PMI data for the US. Unless either of the Manufacturing or the Services PMI unexpectedly falls below 50, the US Dollar could preserve its strength and continue to cap the pair’s upside, given the negative shift seen in risk mood.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 30, reflecting a buildup of bearish momentum. On the downside, 1.2875-1.2870 (100-period Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest uptrend) aligns as immediate support before 1.2830 (Fibonacci 50% retracement) and 1.2800 (psychological level, static level).

1.2900 (psychological level, static level) could be seen as first resistance before 1.2940-1.2950 (Fibonacci 23.6% retracement, 50-period SMA). 

 

• GBP/USD stays on the back foot despite upbeat UK PMI data.
• The risk-averse market atmosphere helps the US Dollar hold its ground.
• Investors await S&P Global PMI data from the US.

After closing in negative territory on Tuesday, GBP/USD continued to edge lower and touched its lowest level since July 11 below 1.2880. Although the pair managed to edge higher in the European session, it seems to be having a difficult time gathering recovery momentum.

The data from the UK showed that the S&P Global/CIPS Composite PMI improved to 52.7 in July’s flash estimate from 52.3 in June, highlighting an ongoing expansion in the private sector’s business activity at an accelerating pace. 

Assessing the survey’s findings, “policymakers will likely take a cautious approach to loosening policy amid signs of inflationary pressures pivoting away from services towards manufacturing, where Red Sea shipping delays and higher freight prices are adding to costs again,” said Chris Williamson Chief Business Economist at S&P Global Market Intelligence. “The renewed hiring trend could also add to pay pressures, sustaining some stickiness of inflation in the coming months.”

Despite the upbeat UK PMI data, the risk-averse market atmosphere doesn’t allow GBP/USD to regain its traction. At the time of press, UK’s FTSE 100 Index was down nearly 0.5% on the day and US stock index futures were losing between 0.5% and 0.9%.

Later in the day, S&P Global will release July PMI data for the US. Unless either of the Manufacturing or the Services PMI unexpectedly falls below 50, the US Dollar could preserve its strength and continue to cap the pair’s upside, given the negative shift seen in risk mood.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 30, reflecting a buildup of bearish momentum. On the downside, 1.2875-1.2870 (100-period Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest uptrend) aligns as immediate support before 1.2830 (Fibonacci 50% retracement) and 1.2800 (psychological level, static level).

1.2900 (psychological level, static level) could be seen as first resistance before 1.2940-1.2950 (Fibonacci 23.6% retracement, 50-period SMA). 

 

• We have seen a significant amount of selling pressure in the US dollar against the Japanese yen.
• At this point in time, we are watching the ¥155 level very closely as it is a large, round, psychologically significant figure, but it is also an area where we have seen a lot of support previously.
• In other words, I think that a lot of people will be interested in this pair near this region. With this, I suspect we are trying to set up some kind of trade in the near future.

With that being said, I do think at this point in time, buyers will continue to jump in and try to take advantage of cheap US dollars. A breakdown below the ¥155 level could open up further selling, perhaps pushing this pair down to the ¥152 level, an area that has been important from both a support and a resistance barrier multiple times in the past. It also features the 200 day EMA. So that, of course, is an indicator that a lot of people will pay attention to them. Ultimately, I think this is still a market looking to buy dips, and due to the interest rate differential between the United States and Japan, which shows no real hint of shrinking significantly, as the two economies are in totally different places.

You Get Paid Over the Long Run

In other words, you will continue to get paid to hang on to this USD/JPY pair at this point. If we were to turn around and break above the 50 day EMA, which is just above the last couple of daily candlesticks, then we could open up the possibility of a move to the ¥160 level.

It has been a significant pullback over the last couple of weeks, but the reality is that we are still very much in an uptrend, and therefore, I think we’ve got a situation where buyers continue to jump in and take advantage of the cheap greenback. Every time we see a little selling.

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(MENAFN– Daily Forex)

At the start of this week’s trading, the GBP/USD exchange rate rebounded above 1.2920 after reaching a one-year high of over 1.30 last week.

The US dollar weakened amid President Joe Biden’s decision to withdraw from the 2024 elections.

Last week’s economic calendar showed that UK retail sales fell by 1.2% in June, more than the expected 0.4% decline, increasing the likelihood of a rate cut in August.

This decline follows slower wage growth and inflation reaching the bank of England’s (BoE) target of 2%. Investors are now focused on upcoming PMI figures, which are expected to show faster expansion in manufacturing and services for July. Additionally, the CBI factory orders measure is expected to reach its highest level in a year.In the United States, there are growing expectations that the Federal Reserve will cut interest rates in September.According to electronic trading platforms, the yield on the British 10-year government bond was little changed at a one-week high. According to trading, the yield on the British 10-year government bond reached its highest level in one week at 4.13%, affected by the expectations of the monetary policy of central banks and the news that US President Joe Biden will not run for re-election, and instead endorses Vice President Kamala Harris.Last week, British retail sales fell by 1.2% in June, more than the expected 0.4% decline, increasing the chances of an interest rate cut in August. This decline in retail sales comes on the heels of slowing wage growth and inflation reaching the Bank of England’s 2% target. Now, investors are looking forward to the purchasing managers’ indices (PMI), which are expected to show a faster expansion in manufacturing and services for July, and the CBI factory orders gauge is expected to reach a one-year high.In the United States, there are growing expectations that the Federal Reserve will cut US interest rates in September.According to Forex trading, the pound reached a high above 1.30 against the US dollar last week, but a pullback in equity markets has halted the rally. This week we will be watching the market’s reaction to US political developments for guidance. According to trading, the GBP/USD exchange rate peaked at the 1.3044 resistance level but has since retreated to 1.2912 and appears to be still under short-term pressure.In last week’s forecast, we mentioned that the GBP/USD seemed overbought and needed correction. This has occurred, and the exchange rate appears more balanced as of Monday. Despite the recent pullback, the GBP remains expensive against the USD according to average forecasts from over 30 investment banks, trading above their targets for September and year-end.Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Technical forecasts for the GBP/USD pair today:According to the performance on the daily chart attached and according to recent trades, the GBP/USD price is in a neutral position. As we mentioned before, the psychological resistance of 1.3000 will remain the most important for the bulls’ control over the trend. On the other hand, and for the same time period, the support level of 1.2820 will remain a threat to the rebound path to the latter. Technically, the GBP/USD price will remain subject to the policy directions of global central banks and investor sentiment towards risk appetite or not. Finally, we still prefer to sell GBP/USD from every upward level.Want to start trading the daily GBP/USD forecasts? Get our top Forex brokers in the UK here.MENAFN23072024000131011023ID1108475329

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Previously, Bank of Japan Deputy Governor Ryozo Himino highlighted the weak Yen’s impact on the economy, stating,

“Exchange-rate fluctuations affect economic activity in various ways. It also affects inflation in a broad-based and sustained way, beyond the direct impact on import prices.”

Expert Views

Economists also highlighted the effects of the weak Yen. S&P Global Market Intelligence Associate Director Jinyi Pan recently observed the impact of the weak Yen on the private sector, saying,

“More concerning, however, is the pressure on margins for Japanese firms. Average input costs rose at the fastest pace in over a year while output price inflation softened in June, particularly in the service sector. Anecdotal evidence suggested that the effects of a weak Yen and rising labor costs brought up cost inflation.”

Some economists believe reducing JGB purchases would address the Yen’s weakness more sustainably.

Nataxis Asia Pacific Chief Economist Alicia Garcia Herrero recently commented on JGB purchases, stating,

“Bank of Japan to start quantitative tightening, which could support the Yen more than intervention.”

Speculation about a July BoJ rate hike and JGB purchases cut could signal a USD/JPY drop toward 150.

US Economic Indicators: Services PMI

On Wednesday, the US Services PMI will also draw investor interest.

Economists forecast the S&P Global Services PMI to fall from 55.3 in June to 54.4 in July.

A lower-than-expected services PMI could raise expectations of multiple 2024 Fed rate cuts. The services sector contributes over 70% to the US economy and is the main source of inflation.

Slower service sector activity may impact employment trends and wage growth. Lower wages could reduce disposable income and consumer spending. A pullback in consumer spending may dampen demand-driven inflation.

Investors should consider the sub-components, including input prices and employment. Input prices reflect the effects of wage growth on inflation.

Rising bets on multiple 2024 Fed rate cuts could signal a USD/JPY move toward 150.

Short-term Forecast: Bearish

USD/JPY trends hinge on the July services PMIs, Tokyo inflation (Fri), and the US Personal Income and Outlays Report (Fri). Higher-than-expected Services PMI and inflation numbers from Japan could drive bets on a July BoJ rate hike and a cut to JGB purchases.

Conversely, weaker US Services PMI and inflation numbers could raise expectations of September and December Fed rate cuts.

Narrower interest rate differentials, stemming from monetary policy divergence, could support a USD/JPY drop below 150.

Investors should remain alert. Monitor real-time data, central bank commentary, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY remained below the 50-day EMA while holding comfortably above the 200-day EMA. The EMAs affirmed the bearish near-term but bullish longer-term price signals.

A USD/JPY return to 156 could support a move toward the 50-day EMA. A breakout from the 50-day EMA could give the bulls a run at 160.

Services PMIs and Bank of Japan commentary require consideration on Wednesday.

Conversely, a drop below the 155 handle could bring the 200-day EMA and the 151.685 support level into play.

The 14-day RSI at 34.91 suggests a USD/JPY break below 155 before entering oversold territory.

• EUR/USD dropped to multi-day lows near 1.0840.
• The Dollar regained upside traction despite lower yields.
• The ECB’s de Guindos opened the door to a rate cut in September.

The US Dollar (USD) edged modestly higher on turnaround Tuesday, lifting the USD Index (DXY) to the mid-104.00s in spite of a corrective decline in US and German yields.

That said, EUR/USD resumed its downtrend, quickly leaving behind Monday’s small gains and instead exposing further losses well south of the 1.0900 barrier in a context of dominant risk-off sentiment.

Around the Fed, a September interest rate cut appears fully anticipated, with investors also expecting another reduction in December. Against that, market participants could now start shifting their attention to the US political arena, particularly after current Vice President K. Harris gathers more than enough support to face Republican candidate D. Trump at the November 5 elections.

Closer to home, the ECB’s Vice President Luis de Guindos suggested a possible interest rate cut in September, noting that the ECB’s new projections would be the “most important” factor in determining whether inflation is returning to target.

Furthermore, the Eurozone’s economic recovery prospects and signs of cooling in key US economic indicators may lessen the current monetary policy gap between the Fed and the ECB, occasionally supporting EUR/USD. This view has gained support amid increasing expectations of Fed rate cuts.

Looking ahead, key US GDP figures, advanced PMIs globally, and US PCE data are expected to shape market sentiment in the coming days.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to face the next downward stop at the key 200-day SMA of 1.0815 before sliding to its June low of 1.0666 (June 26). The loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

On the other hand, the initial up-barrier emerges at the July top of 1.0948 (July 17), followed by the March peak of 1.0981 (March 8) and the key 1.1000 milestone.

Looking at the larger picture, the constructive bias should remain in play if the pair maintains its position above the critical 200-day SMA.

So far, the four-hour chart shows that the downtrend has picked up pace. That said, the initial resistance is 1.0948, which precedes 1.0981 and 1.1000. On the opposite side, 1.0843 comes first, seconded by the 200-SMA at 1.0793 and lastly 1.0709. The relative strength index (RSI) dropped to about 33.

• EUR/USD dropped to multi-day lows near 1.0840.
• The Dollar regained upside traction despite lower yields.
• The ECB’s de Guindos opened the door to a rate cut in September.

The US Dollar (USD) edged modestly higher on turnaround Tuesday, lifting the USD Index (DXY) to the mid-104.00s in spite of a corrective decline in US and German yields.

That said, EUR/USD resumed its downtrend, quickly leaving behind Monday’s small gains and instead exposing further losses well south of the 1.0900 barrier in a context of dominant risk-off sentiment.

Around the Fed, a September interest rate cut appears fully anticipated, with investors also expecting another reduction in December. Against that, market participants could now start shifting their attention to the US political arena, particularly after current Vice President K. Harris gathers more than enough support to face Republican candidate D. Trump at the November 5 elections.

Closer to home, the ECB’s Vice President Luis de Guindos suggested a possible interest rate cut in September, noting that the ECB’s new projections would be the “most important” factor in determining whether inflation is returning to target.

Furthermore, the Eurozone’s economic recovery prospects and signs of cooling in key US economic indicators may lessen the current monetary policy gap between the Fed and the ECB, occasionally supporting EUR/USD. This view has gained support amid increasing expectations of Fed rate cuts.

Looking ahead, key US GDP figures, advanced PMIs globally, and US PCE data are expected to shape market sentiment in the coming days.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to face the next downward stop at the key 200-day SMA of 1.0815 before sliding to its June low of 1.0666 (June 26). The loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

On the other hand, the initial up-barrier emerges at the July top of 1.0948 (July 17), followed by the March peak of 1.0981 (March 8) and the key 1.1000 milestone.

Looking at the larger picture, the constructive bias should remain in play if the pair maintains its position above the critical 200-day SMA.

So far, the four-hour chart shows that the downtrend has picked up pace. That said, the initial resistance is 1.0948, which precedes 1.0981 and 1.1000. On the opposite side, 1.0843 comes first, seconded by the 200-SMA at 1.0793 and lastly 1.0709. The relative strength index (RSI) dropped to about 33.