• EUR/USD met a decent resistance near 1.0860 so far.
• The decent recovery in the Dollar kept the pair under pressure.
• Chief Powell’s testimony fell on the cautious side.

The US Dollar (USD) regained further upside impulse on Tuesday, prompting the USD Index (DXY) to trespass the 105.00 hurdle amid a generalized risk-off sentiment in the FX world.

This recovery in the Greenback triggered extra selling pressure on EUR/USD, pushing it back to the 1.0800 neighbourhood as market participants digested the first semi-annual testimony by Chief Jerome Powell before Congress, where he once again reiterated that the Committee needs to see further progress on inflation heading towards the Federal Reserve’s (Fed) 2% goal before starting to reduce its interest rates. That said, Powell gave no indication whatsoever of the potential timing of an interest rate reduction.

Following Powell’s testimony, the macroeconomic environment remained relatively stable on both sides of the Atlantic.

The European Central Bank (ECB) is considering further rate cuts beyond the summer, with market expectations pointing to two additional cuts by the end of the year. Conversely, there is still debate among investors about whether the Fed will implement one or two rate cuts this year, despite the bank’s current projection of a single cut, likely in December.

According to the CME Group’s FedWatch Tool, there is about a 74% chance of interest rate cuts in September, rising to nearly 96% by December.

The ECB’s rate cut in June, combined with the Fed’s decision to maintain rates, has increased the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term.

However, the prospects of economic recovery in the Euroland, coupled with the perceived cooling of some key US fundamentals, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, the second testimony by Chair Jerome Powell, Fed speakers, and the release of US inflation figures measured by the CPI are expected to be key drivers for the pair’s price action in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to target the July peak of 1.0845 (July 8), followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, seconded by the weekly high of 1.0998 (January 11) and the psychological 1.1000 barrier.

If bears regain control, spot may confront the 200-day SMA at 1.0798 prior to its June low of 1.0666 (June 26). Down from here emerges the May low of 1.0649 (May 1), and ultimately to the 2024 bottom of 1.0601 (April 16).

Looking at the larger picture, more gains appear to be on the horizon if the critical 200-day SMA (1.0797) is routinely surpassed.

So far, the 4-hour chart indicates the resumption of the downward bias. The initial support comes at the 200-SMA at 1.0783 ahead of the 55-SMA of 1.0767 and then 1.0709. On the upside, initial hurdle aligns at 1.0845 closely followed by 1.0852 and the 1. 0902.The Relative Strength Index (RSI) has dropped to around 51.

• EUR/USD met a decent resistance near 1.0860 so far.
• The decent recovery in the Dollar kept the pair under pressure.
• Chief Powell’s testimony fell on the cautious side.

The US Dollar (USD) regained further upside impulse on Tuesday, prompting the USD Index (DXY) to trespass the 105.00 hurdle amid a generalized risk-off sentiment in the FX world.

This recovery in the Greenback triggered extra selling pressure on EUR/USD, pushing it back to the 1.0800 neighbourhood as market participants digested the first semi-annual testimony by Chief Jerome Powell before Congress, where he once again reiterated that the Committee needs to see further progress on inflation heading towards the Federal Reserve’s (Fed) 2% goal before starting to reduce its interest rates. That said, Powell gave no indication whatsoever of the potential timing of an interest rate reduction.

Following Powell’s testimony, the macroeconomic environment remained relatively stable on both sides of the Atlantic.

The European Central Bank (ECB) is considering further rate cuts beyond the summer, with market expectations pointing to two additional cuts by the end of the year. Conversely, there is still debate among investors about whether the Fed will implement one or two rate cuts this year, despite the bank’s current projection of a single cut, likely in December.

According to the CME Group’s FedWatch Tool, there is about a 74% chance of interest rate cuts in September, rising to nearly 96% by December.

The ECB’s rate cut in June, combined with the Fed’s decision to maintain rates, has increased the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term.

However, the prospects of economic recovery in the Euroland, coupled with the perceived cooling of some key US fundamentals, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, the second testimony by Chair Jerome Powell, Fed speakers, and the release of US inflation figures measured by the CPI are expected to be key drivers for the pair’s price action in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to target the July peak of 1.0845 (July 8), followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, seconded by the weekly high of 1.0998 (January 11) and the psychological 1.1000 barrier.

If bears regain control, spot may confront the 200-day SMA at 1.0798 prior to its June low of 1.0666 (June 26). Down from here emerges the May low of 1.0649 (May 1), and ultimately to the 2024 bottom of 1.0601 (April 16).

Looking at the larger picture, more gains appear to be on the horizon if the critical 200-day SMA (1.0797) is routinely surpassed.

So far, the 4-hour chart indicates the resumption of the downward bias. The initial support comes at the 200-SMA at 1.0783 ahead of the 55-SMA of 1.0767 and then 1.0709. On the upside, initial hurdle aligns at 1.0845 closely followed by 1.0852 and the 1. 0902.The Relative Strength Index (RSI) has dropped to around 51.

• For four consecutive trading sessions, the US dollar against the Japanese yen (USD/JPY) has been subjected to selling operations that pushed it towards the support level of 160.26.
• It is stable around it at the time of writing the analysis, rebounding from the resistance level of 161.95, the lowest level for the Japanese yen in 38 years.
• Its record gains came considering the clear divergence between the hawkish policy of the US Federal Reserve and the Bank of Japan, as well as the divergence in economic performance between them.

On the stock trading platforms front, US stock futures settled on Monday, with the three major averages oscillating around the flat line, after strong gains in the previous week that pushed the S&P 500 and Nasdaq to record closes. Now, traders are preparing for the key Consumer Price Index (CPI) and Producer Price Index (PPI) data due this week and the start of the earnings season.

Also, Federal Reserve Chairman Jerome Powell is set to testify before Congress, as traders look for any further insights into the Fed’s plans for the rest of the year. In addition, the results of the French elections, which saw no party secure a majority, have eased concerns about hawkish fiscal policies.

According to trading platforms, Megacap shares were mixed in pre-market trading, with Apple (0.7%), Nvidia (0.7%) and Meta (0.4%) up while Microsoft and Amazon were around the flatline, and Alphabet was down 0.7%. Also, Boeing shares rose 0.9% before the opening bell after the company agreed to plead guilty to criminal fraud charges.

According to the economic calendar results, Japanese services sentiment is higher than expected.

According to the announcement, the Japan Services PMI rose to 47.0 in June 2024 from a one-and-a-half-year low of 45.7 in May, beating market estimates of 46.3. Noteworthy, this was the first increase in four months, with the household budget trends gauge advancing due to the rise in retail and other related indicators. Also, the employment gauge was higher. Meanwhile, the business trends gauge fell due to a decline in non-manufacturing manufacturing. Furthermore, the economic expectations gauge rose to 47.9 from 46.3 in April, marking its first increase in four months and coming off its lowest level since November 2022, supported by optimism that the economy will continue to recover.

 USD/JPY Technical Analysis and Expectations Today

Based on the daily chart attached, USD/JPY is trying to form a downward channel. Meanwhile, those attempts failed without the currency pair moving towards the support levels of 159.20 and 157.80 respectively. Currently, the currency pair may remain range-bound pending the reaction to the US inflation figures and the content of the testimony of US Federal Reserve Chairman Jerome Powell. In contrast, the bulls are returning towards the resistance level of 161.80, ending the ongoing downward channel attempts.

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• EUR/USD continues to move sideways slightly above 1.0800 on Tuesday.
• The technical outlook points to a loss of bullish momentum.
• Fed Chairman Powell will present the Semi-Annual Monetary Policy Report.

EUR/USD failed to make a decisive move in either direction on Monday and closed the day virtually unchanged. The pair holds steady slightly above 1.0800 early Tuesday as investors stay on the sidelines while waiting for Federal Reserve (Fed) Chairman Jerome Powell’s testimony before the Senate Banking Committee.

In its Semi-Annual Monetary Policy Report published on Friday, the Fed noted that there was further progress on inflation this year but added that they still need greater confidence before moving to rate cuts. Fed Chairman Powell will present this report and respond to questions later in the day.

According to the CME FedWatch Tool, markets currently price in a nearly 23% probability of the Fed leaving the policy rate unchanged in September. In case Powell acknowledges loosening conditions in the labor market, as reflected by the June jobs report, and sticks to an optimistic tone on the inflation outlook, investors could see that as a sign of a confirmation of a September rate cut. In this scenario, the US Dollar (USD) could lose interest and help EUR/USD regain its traction.

On the other hand, the USD could gather strength if Powell refrains from hinting at a September rate reduction by reiterating the data-dependent approach to policy.

EUR/USD Technical Analysis

Monday’s action confirmed 1.0840 (Fibonacci 23.6% retracement of the latest uptrend) as immediate resistance for EUR/USD. If the pair manages to clear that level and starts using it as support, 1.0900 (psychological level, static level) could be seen as the next bullish target.

On the downside, the 100-day and the 200-day Simple Moving Averages form strong support at 1.0800. A daily close below this level could discourage the buyers and open the door for an extended correction toward 1.0760 (Fibonacci 50% retracement).

• EUR/USD continues to move sideways slightly above 1.0800 on Tuesday.
• The technical outlook points to a loss of bullish momentum.
• Fed Chairman Powell will present the Semi-Annual Monetary Policy Report.

EUR/USD failed to make a decisive move in either direction on Monday and closed the day virtually unchanged. The pair holds steady slightly above 1.0800 early Tuesday as investors stay on the sidelines while waiting for Federal Reserve (Fed) Chairman Jerome Powell’s testimony before the Senate Banking Committee.

In its Semi-Annual Monetary Policy Report published on Friday, the Fed noted that there was further progress on inflation this year but added that they still need greater confidence before moving to rate cuts. Fed Chairman Powell will present this report and respond to questions later in the day.

According to the CME FedWatch Tool, markets currently price in a nearly 23% probability of the Fed leaving the policy rate unchanged in September. In case Powell acknowledges loosening conditions in the labor market, as reflected by the June jobs report, and sticks to an optimistic tone on the inflation outlook, investors could see that as a sign of a confirmation of a September rate cut. In this scenario, the US Dollar (USD) could lose interest and help EUR/USD regain its traction.

On the other hand, the USD could gather strength if Powell refrains from hinting at a September rate reduction by reiterating the data-dependent approach to policy.

EUR/USD Technical Analysis

Monday’s action confirmed 1.0840 (Fibonacci 23.6% retracement of the latest uptrend) as immediate resistance for EUR/USD. If the pair manages to clear that level and starts using it as support, 1.0900 (psychological level, static level) could be seen as the next bullish target.

On the downside, the 100-day and the 200-day Simple Moving Averages form strong support at 1.0800. A daily close below this level could discourage the buyers and open the door for an extended correction toward 1.0760 (Fibonacci 50% retracement).

The Bank of Japan may not hike interest rates this month but may begin to pare back its bond-buying program

• The BoJ looks set to reduce its bond-buying efforts at the end of this month.
• USD/JPY struggling to break higher ahead of Fed chair Powell’s Testimony.

Download our brand new Q3 Japanese Yen Technical and Fundamental forecasts for free:

The Bank of Japan’s most recent summary of market opinions, released earlier today, has highlighted a growing consensus among bond market participants: the need to curtail the central bank’s bond-purchasing program. While the BoJ currently acquires bonds worth about 6 trillion yen each month, market experts are proposing a significant reduction, recommending monthly purchases be downsized to between 2 and 4 trillion yen instead. A reduced bond-buying program would allow Japan interest rates to move higher, aiding the central bank as it looks to start the process of tightening monetary policy.

According to the latest money market forecasts, there is around a 60% chance that the BoJ will raise interest rates by 10 basis points at the July 31st meeting. If the BoJ stands pat, then interest rates are fully expected to be hiked at the September 20th meeting with a second rate increase seen on December 19th.

USD/JPY is currently treading water just below multi-decade-high levels. While the Japanese Yen remains weak, recent USD/JPY price action has also been driven by the US dollar. The dollar index, DXY, continues to print a pattern of higher lows since the end of last year and press higher, although the recent failure to print a new higher high may temper further upside. Fed chair Jerome Powell is set to testify before Congress today and tomorrow, and lawmakers are likely to quiz Powell on the central bank’s current policy of keeping rates at elevated levels.

USD/JPY remains capped at just below 162.00 with short-term support seen at 160.20. USD/JPY volatility remains low but traders should remain alert to any official intervention by Japanese authorities if USD/JPY breaks higher.

USD/JPY Daily Price Chart

All price charts using TradingView

Retail trader data show 21.98% of traders are net-long with the ratio of traders short to long at 3.55 to 1.The number of traders net-long is 10.10% higher than yesterday and 18.24% higher than last week, while the number of traders net-short is 0.08% lower than yesterday and 9.90% lower than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.

What is your view on the Japanese Yen– bullish or bearish?? You can let us know via the form at the end of this piece or contact the author via Twitter @nickcawley1.

• In my daily analysis of the dollar against the Japanese yen, it’s become increasingly obvious that there are plenty of buyers underneath just waiting to happen and take this market on.
• The 160 yen level is an area that’s been important multiple times and I just don’t see how it’s not again.
• And in fact, we’ve already seen buyers come in and defend that level.

With that being the case, I think you’ve got a situation where you continue to buy the dips and that does make a lot of sense. After all the interest rate differential was wide enough to drive a truck through. As long as that’s the case, there’s no point in trying to short this pair. There have been some larger institutions that thought the Bank of Japan would turn things around and they have gotten broken. If we break down below the 160 yen level, then it’s possible that we could go to the 158 yen level underneath which is also not only backed up by the 50-day EMA but an area we’ve seen a lot of noise at previously.

We Should Go Higher

In general, this is a market that I think given enough time does go higher, perhaps an attempt to get to 165 yen is a very real possibility. You get paid to hang on to this USD/JPY pair and that’s the biggest takeaway here. I continue to do so myself and anytime we dip, I’m more than willing to add to that position, not take away from it. The Bank of Japan can’t do anything with interest rates.

The debt is just simply far too heavy in Japan to think of cutting rates with at least any significance. While the Federal Reserve, even if they do cut between now and the end of the year, it’s only going to be for 25 basis points, which of course is hardly enough to make a huge difference.

Want to start trading the US Dollar to Japanese Yen pair? Check out our top recommended Forex brokers for beginners here.

• EUR/USD met some initial resistance near 1.0850
• The slight recovery in the Dollar weighed on the pair.
• Markets’ focus now shifts to Powell’s testimony and US CPI.

The US Dollar (USD) managed to regain some composure on Monday, sparking some reaction in the USD Index (DXY) back towards the 105.00 region amidst a broad-based retracement in US yields across different maturity periods.

The pick-up in the Greenback reignited some selling pressure on EUR/USD, dragging it back to the 1.0830 zone amidst some easing political concerns after the French second round of elections on Sunday.

The macroeconomic landscape remained relatively stable on both sides of the Atlantic. The ECB is considering further rate cuts beyond the summer, with market expectations leaning towards two additional cuts by the end of the year. Conversely, market participants are speculating whether the Fed will implement one or two rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

The latest Nonfarm Payrolls data (+206K jobs), however, lent extra belief to the idea that the Fed might start its easing cycle as soon as September.

According to the CME Group’s FedWatch Tool, there is approximately a 77% chance of interest rate cuts in September, increasing to nearly 97% by December.

The ECB’s rate cut in June, combined with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term. However, the prospects of economic recovery in the Eurozone, along with perceived weaknesses in US economic fundamentals, may mitigate this disparity and provide occasional support to the currency pair in the near future.

Looking ahead, the upcoming testimonies by Chair Jerome Powell and the release of US inflation figures tracked by the CPI are expected to be the key drivers for the pair’s price action, at least in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further upside should put EUR/USD en route to test the July peak of 1.0845 (July 8), closely followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, ahead of the weekly high of 1.0998 (January 11) and the psychological 1.1000 level.

If bears take control, spot may fall to its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

Looking at the big picture, more gains look to be on the way if the crucial 200-day SMA (1.0797) is consistently surpassed.

So far, the 4-hour chart suggests a continuation of the bullish impulse. The initial barrier level is 1.0845, then 1.0852. The nearest support is at 1.0784, then 1.0709, and lastly 1.0666. The Relative Strength Index (RSI) deflated below 63.

• EUR/USD met some initial resistance near 1.0850
• The slight recovery in the Dollar weighed on the pair.
• Markets’ focus now shifts to Powell’s testimony and US CPI.

The US Dollar (USD) managed to regain some composure on Monday, sparking some reaction in the USD Index (DXY) back towards the 105.00 region amidst a broad-based retracement in US yields across different maturity periods.

The pick-up in the Greenback reignited some selling pressure on EUR/USD, dragging it back to the 1.0830 zone amidst some easing political concerns after the French second round of elections on Sunday.

The macroeconomic landscape remained relatively stable on both sides of the Atlantic. The ECB is considering further rate cuts beyond the summer, with market expectations leaning towards two additional cuts by the end of the year. Conversely, market participants are speculating whether the Fed will implement one or two rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

The latest Nonfarm Payrolls data (+206K jobs), however, lent extra belief to the idea that the Fed might start its easing cycle as soon as September.

According to the CME Group’s FedWatch Tool, there is approximately a 77% chance of interest rate cuts in September, increasing to nearly 97% by December.

The ECB’s rate cut in June, combined with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term. However, the prospects of economic recovery in the Eurozone, along with perceived weaknesses in US economic fundamentals, may mitigate this disparity and provide occasional support to the currency pair in the near future.

Looking ahead, the upcoming testimonies by Chair Jerome Powell and the release of US inflation figures tracked by the CPI are expected to be the key drivers for the pair’s price action, at least in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further upside should put EUR/USD en route to test the July peak of 1.0845 (July 8), closely followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, ahead of the weekly high of 1.0998 (January 11) and the psychological 1.1000 level.

If bears take control, spot may fall to its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

Looking at the big picture, more gains look to be on the way if the crucial 200-day SMA (1.0797) is consistently surpassed.

So far, the 4-hour chart suggests a continuation of the bullish impulse. The initial barrier level is 1.0845, then 1.0852. The nearest support is at 1.0784, then 1.0709, and lastly 1.0666. The Relative Strength Index (RSI) deflated below 63.