• Investors eagerly await the US nonfarm payrolls report.

• For the first time in over a month, the yen is gaining against the dollar.

• The yen has lost 12% of its value since the beginning of the year.

The USD/JPY price analysis leans south as the yen pulls away from its 38-year low, strengthening for the second session. On the other hand, the dollar was fragile as investors eagerly awaited the US nonfarm payrolls report.

–Are you interested in learning more about forex conventions? Check our detailed guide-

For the first time in over a month, the yen is gaining against the dollar. However, the risk of intervention remains high. The currency has lost 12% of its value since the beginning of the year. Traders sold the yen and bought the dollar due to the wide gap in rates between the US and Japan. 

Although the BoJ has started its rate-hiking cycle, the future remains bleak. Consumption in Japan remains weak, and a fragile economy complicates the outlook for a rate hike. Therefore, investors have continued selling the yen. This pushed the BoJ to intervene in the market twice. However, the impact was only temporary, as the decline later continued. 

Japan’s Finance Minister repeated his usual warning on Friday, saying Japan will keep a close eye on financial markets.

Meanwhile, after a week of downbeat economic data, the dollar was bruised on Friday. The US economy is slowing down, and employment and business activity data confirmed this. Consequently, markets have raised the likelihood of a September Fed rate cut to 73%. However, this might change with the upcoming monthly employment figures. If the US adds fewer jobs than expected, rate cut expectations will rise. The reverse is also true.

USD/JPY key events today

• US average hourly earnings m/m
• US nonfarm payrolls
• US unemployment rate

USD/JPY technical price analysis: Bears take the lead after bearish RSI divergence

On the technical side, the USD/JPY price has broken below the 30-SMA for the time in many weeks. The break indicates a shift in sentiment from bullish to bearish. At the same time, the RSI has dipped into bearish territory below 50, suggesting strong downside momentum. 

–Are you interested in learning more about Ethereum price prediction? Check our detailed guide-

Bulls got exhausted as the price approached the 162.01 key level. Notably, the RSI made a bearish divergence, highlighting weaker bullish momentum. This allowed bears to take charge by pushing the price below the 30-SMA. The path is now clear for the price to revisit support levels like 160.00 and 158.00.

Looking to trade forex now? Invest at eToro!

68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

• EUR/USD holds above 1.0800 in the European session on Friday.
• Nonfarm Payrolls data from the US could impact the US Dollar’s valuation.
• The technical outlook points to overbought conditions in the near term.

EUR/USD edged slightly higher and closed in positive territory above 1.0800 on Thursday. The pair holds its ground early Friday as market focus shifts to June labor market data from the US.

Following the Independence Day holiday in the US, the US Dollar (USD) stays on the back foot and helps EUR/USD hold its ground. 

Nonfarm Payrolls in the US are forecast to rise 190,000 in June following the impressive 272,000 increase recorded in May, while the Unemployment Rate is seen staying unchanged at 4%.

The steady increase in the weekly Initial Jobless Claims data throughout June and disappointing ISM Manufacturing and Services PMI reports, which showed a contraction in these sectors’ payrolls in June, pointed to loosening conditions in the labor market. 

In case the NFP arrives at around 150,000 or lower, the US Dollar could stay under selling pressure heading into the weekend and allow EUR/USD to extend its weekly rally. According to the CME FedWatch Tool, markets are currently pricing in a 25% probability of the Federal Reserve leaving the policy rate unchanged in September. Hence, the market positioning suggests that the USD has more room on the downside in case investors continue to price in a September rate cut on a weak jobs report.

On the other hand, a strong increase in NFP, more than 220,000, could cause investors to reassess the timing of the Fed’s policy pivot and trigger a downward correction in EUR/USD in the American session.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rose above 70 on Friday. Although this development suggests that EUR/USD is technically overbought, buyers could look to dominate the action as long as 1.0800 (100-day Simple Moving Average (SMA), 200-day SMA) stays intact as support. On the upside, 1.0840 (Fibonacci 23.6% retracement of the latest uptrend) could be seen as interim resistance before 1.0900 (psychological level, static level).

If EUR/USD drops below 1.0800 and fails to reclaim this level, supports could be seen at 1.0760 (Fibonacci 50% retracement) and 1.0730-1.0740 (Fibonacci 61.8% retracement, 20-day SMA).

• EUR/USD holds above 1.0800 in the European session on Friday.
• Nonfarm Payrolls data from the US could impact the US Dollar’s valuation.
• The technical outlook points to overbought conditions in the near term.

EUR/USD edged slightly higher and closed in positive territory above 1.0800 on Thursday. The pair holds its ground early Friday as market focus shifts to June labor market data from the US.

Following the Independence Day holiday in the US, the US Dollar (USD) stays on the back foot and helps EUR/USD hold its ground. 

Nonfarm Payrolls in the US are forecast to rise 190,000 in June following the impressive 272,000 increase recorded in May, while the Unemployment Rate is seen staying unchanged at 4%.

The steady increase in the weekly Initial Jobless Claims data throughout June and disappointing ISM Manufacturing and Services PMI reports, which showed a contraction in these sectors’ payrolls in June, pointed to loosening conditions in the labor market. 

In case the NFP arrives at around 150,000 or lower, the US Dollar could stay under selling pressure heading into the weekend and allow EUR/USD to extend its weekly rally. According to the CME FedWatch Tool, markets are currently pricing in a 25% probability of the Federal Reserve leaving the policy rate unchanged in September. Hence, the market positioning suggests that the USD has more room on the downside in case investors continue to price in a September rate cut on a weak jobs report.

On the other hand, a strong increase in NFP, more than 220,000, could cause investors to reassess the timing of the Fed’s policy pivot and trigger a downward correction in EUR/USD in the American session.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rose above 70 on Friday. Although this development suggests that EUR/USD is technically overbought, buyers could look to dominate the action as long as 1.0800 (100-day Simple Moving Average (SMA), 200-day SMA) stays intact as support. On the upside, 1.0840 (Fibonacci 23.6% retracement of the latest uptrend) could be seen as interim resistance before 1.0900 (psychological level, static level).

If EUR/USD drops below 1.0800 and fails to reclaim this level, supports could be seen at 1.0760 (Fibonacci 50% retracement) and 1.0730-1.0740 (Fibonacci 61.8% retracement, 20-day SMA).

• GBP/USD trades at three-week highs above 1.2750 on Friday.
• Labour Party won parliamentary majority in general election as expected.
• Nonfarm Payrolls in the US are forecast to rise 190,000 in June.

Following Thursday’s subdued action, GBP/USD regained its traction and reached its highest level in three weeks near 1.2780 on Friday. 1.2800 aligns as next immediate resistance for the pair as investors gear up for the key data releases from the US.

The Labour Party won a parliamentary majority in the UK general election, securing 411 seats in the 650-seat House of Commons and paving the way for Labour leader Keir Starmer to become the next prime minister. As this outcome was largely expected, it had little to no impact on Pound Sterling’s valuation.

In the second half of the day, the US Bureau of Labor Statistics will release the June jobs report. Following the impressive 272,000 increase recorded in May, Nonfarm Payrolls are forecast to rise 190,000 in June. The Unemployment Rate is seen holding steady at 4% and the annual wage inflation, as measured by the change in the Average Hourly Earnings, is expected to decline to 3.9% from 4.1%.

Earlier in the week, the Manufacturing and the Services PMI reports published by the ISM pointed to a decline in these sectors’ payrolls. Additionally, ADP Employment Change came in at 150,000 to miss the market expectation of 160,000, while the weekly Initial Jobless Claims edged higher to 238,000 in the week ending June 29, up from 234,000 in the previous week. 

The selling pressure surrounding the US Dollar (USD) seen this week suggests that markets might have already priced in a disappointing NFP reading. The market positioning, however, shows that there is more room for further USD weakness in case the jobs report feed into expectations for a Federal Reserve (Fed) rate cut in September. According to the CME FedWatch Tool, there is still a 25% probability that the Fed leave the policy rate unchanged in September.

Hence, the immediate reaction to an NFP reading of 150,000, or lower, could fuel another leg higher in GBP/USD. On the flip side, a positive surprise could support the USD and limit the pair’s upside heading into the weekend.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 70 and points to overbought conditions. Nevertheless, investors are likely to ignore this technical development in case the US data triggers a USD selloff. 1.2800 (psychological level, static level) could be seen as next resistance before 1.2860 (Jun 12 high) and 1.2900 (psychological level, static level).

On the downside, supports could be seen at 1.2700 (20-day Simple Moving Average (SMA)), 1.2670 (50-day SMA) and 1.2650 (100-day SMA).

• GBP/USD trades at three-week highs above 1.2750 on Friday.
• Labour Party won parliamentary majority in general election as expected.
• Nonfarm Payrolls in the US are forecast to rise 190,000 in June.

Following Thursday’s subdued action, GBP/USD regained its traction and reached its highest level in three weeks near 1.2780 on Friday. 1.2800 aligns as next immediate resistance for the pair as investors gear up for the key data releases from the US.

The Labour Party won a parliamentary majority in the UK general election, securing 411 seats in the 650-seat House of Commons and paving the way for Labour leader Keir Starmer to become the next prime minister. As this outcome was largely expected, it had little to no impact on Pound Sterling’s valuation.

In the second half of the day, the US Bureau of Labor Statistics will release the June jobs report. Following the impressive 272,000 increase recorded in May, Nonfarm Payrolls are forecast to rise 190,000 in June. The Unemployment Rate is seen holding steady at 4% and the annual wage inflation, as measured by the change in the Average Hourly Earnings, is expected to decline to 3.9% from 4.1%.

Earlier in the week, the Manufacturing and the Services PMI reports published by the ISM pointed to a decline in these sectors’ payrolls. Additionally, ADP Employment Change came in at 150,000 to miss the market expectation of 160,000, while the weekly Initial Jobless Claims edged higher to 238,000 in the week ending June 29, up from 234,000 in the previous week. 

The selling pressure surrounding the US Dollar (USD) seen this week suggests that markets might have already priced in a disappointing NFP reading. The market positioning, however, shows that there is more room for further USD weakness in case the jobs report feed into expectations for a Federal Reserve (Fed) rate cut in September. According to the CME FedWatch Tool, there is still a 25% probability that the Fed leave the policy rate unchanged in September.

Hence, the immediate reaction to an NFP reading of 150,000, or lower, could fuel another leg higher in GBP/USD. On the flip side, a positive surprise could support the USD and limit the pair’s upside heading into the weekend.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 70 and points to overbought conditions. Nevertheless, investors are likely to ignore this technical development in case the US data triggers a USD selloff. 1.2800 (psychological level, static level) could be seen as next resistance before 1.2860 (Jun 12 high) and 1.2900 (psychological level, static level).

On the downside, supports could be seen at 1.2700 (20-day Simple Moving Average (SMA)), 1.2670 (50-day SMA) and 1.2650 (100-day SMA).

A Bank of Japan Rate Hike Could Bolster the Yen

The Bank of Japan could tighten monetary policy to bolster the Japanese Yen.

BoJ Deputy Governor Ryozo Himino recently addressed the effects of a weaker Yen on the economy, saying,

“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.”

With the Japanese government holding back from intervening for the second time in as many months, the onus may be on the BoJ to target the weaker Yen.

What Do the Experts Think?

In June, Bruegel Senior Fellow Alicia Garcia Herrero saw quantitative tightening as more effective than interventions, saying:

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

I asked her if the BoJ would risk cutting JGB purchases back more aggressively if US inflation numbers did not sink expectations of a September Fed rate cut, to which she replied,

“No choice, Yen beyond 160.”

US inflation numbers didn’t sink expectations of a September Fed rate cut, nor did they fuel expectations, leaving the USD/JPY at 161.

Considering interest rate differentials and carry trade appetite, numbers from Japan must improve. If all else fails, an aggressive cut to JGB purchases may do the job, but at what cost?

Meanwhile, the US Jobs Report will warrant investor attention later in the session on Friday.

Can the Jobs Report give the BoJ some breathing room?

Will US Wage Growth Satisfy Fed Chair Powell?

Fed Chair Powell spoke favorably about inflation progress toward the 2% target on Tuesday, July 2. However, the Fed Chair left investors with a focal point going into the Friday session. Powell highlighted that wage growth remained elevated.

Higher wages could increase disposable income and fuel consumer spending and demand-driven inflation.

The US Jobs Report could alleviate concerns about wage growth if average hourly earnings soften by more than expected.

Economists forecast average hourly earnings to increase 3.9% year-on-year in June after rising 4.1% in May.

For perspective, average hourly earnings rose 4.4% in January and trended lower to 4.0% in April before an uptick to 4.1% in May. A drop below 4.0% may not be enough to cement a September Fed rate hike. Both a rise in unemployment and a decline in the participation rate may be necessary to suggest a sustainable downward trend in wage growth.

Economists expect the US unemployment rate to remain steady at 4.0% in June.

• EUR/USD maintained its upside bias above 1.0800.
• There was no activity in the US due to the Independence Day holiday.
• Investors’ now look at Friday’s US Payrolls.

The US Dollar (USD) experienced another bearish performance, motivating the USD Index (DXY) to revisit the vicinity of the 105.00 region amidst the dominating appetite for risk-related assets and marginal trading conditions due to the US Independence Day holiday.

The downturn in the Greenback kept the upward pressure intact on EUR/USD, pushing it back above the key 1.0800 yardstick. The pressure on the Greenback intensified following discouraging results from the US economic calendar in the previous session, particularly concerning the labour market, which revived expectations of Federal Reserve (Fed) interest rate cuts as early as September.

Closer to home, the ECB published its Accounts of its June 6 meeting, where it trimmed rates by 25 bps, as widely anticipated. In the Accounts, policymakers showed concern about inflation after cutting interest rates last month, fearing further delay could be costly and complicate future efforts to anchor inflation expectations. The bank’s officials also noted that the final phase of disinflation, known as “the last mile,” is the most challenging.

Meanwhile, the macroeconomic landscape remained relatively stable on both sides of the Atlantic. The ECB is contemplating further rate reductions beyond the summer, with market expectations leaning towards two additional cuts by year-end. Conversely, speculation among market participants surrounds 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.

Based on the CME Group’s FedWatch Tool, there is approximately a 73% likelihood of interest rate cuts in September, contrasting with nearly a 95% probability by the December meeting.

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

Looking forward, the next pivotal event for the currency pair will be the release of the highly influential Nonfarm Payrolls report for June on Friday, preceding the second round of French snap elections scheduled for July 7. Regarding the elections, Le Pen’s NR party is anticipated to capture between 210 and 250 seats out of the 289 seats required for a majority in the National Assembly.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further higher may see EUR/USD revisit the July peak of 1.0816 (July 3), 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 region, it might put the March peak of 1.0981 (March 8) back on the radar, ahead of the weekly high of 1.0998 (January 11) and the psychological 1.1000 mark.

If bears regain the upper hand, spot may fall to its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and ultimately the 2024 bottom of 1.0601 (April 16).

Looking at the broader picture, extra gains appear on the cards on a sustainable surpass of the key 200-day SMA (1.0794).

So far, the 4-hour chart shows the continuation of the bullish impulse. The initial resistance level is 1.0816, followed by 1.0852. The nearest support is at 1.0666, ahead of 1.0649 and finally 1.0601. The Relative Strength Index (RSI) climbed to about 69

• EUR/USD maintained its upside bias above 1.0800.
• There was no activity in the US due to the Independence Day holiday.
• Investors’ now look at Friday’s US Payrolls.

The US Dollar (USD) experienced another bearish performance, motivating the USD Index (DXY) to revisit the vicinity of the 105.00 region amidst the dominating appetite for risk-related assets and marginal trading conditions due to the US Independence Day holiday.

The downturn in the Greenback kept the upward pressure intact on EUR/USD, pushing it back above the key 1.0800 yardstick. The pressure on the Greenback intensified following discouraging results from the US economic calendar in the previous session, particularly concerning the labour market, which revived expectations of Federal Reserve (Fed) interest rate cuts as early as September.

Closer to home, the ECB published its Accounts of its June 6 meeting, where it trimmed rates by 25 bps, as widely anticipated. In the Accounts, policymakers showed concern about inflation after cutting interest rates last month, fearing further delay could be costly and complicate future efforts to anchor inflation expectations. The bank’s officials also noted that the final phase of disinflation, known as “the last mile,” is the most challenging.

Meanwhile, the macroeconomic landscape remained relatively stable on both sides of the Atlantic. The ECB is contemplating further rate reductions beyond the summer, with market expectations leaning towards two additional cuts by year-end. Conversely, speculation among market participants surrounds 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.

Based on the CME Group’s FedWatch Tool, there is approximately a 73% likelihood of interest rate cuts in September, contrasting with nearly a 95% probability by the December meeting.

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

Looking forward, the next pivotal event for the currency pair will be the release of the highly influential Nonfarm Payrolls report for June on Friday, preceding the second round of French snap elections scheduled for July 7. Regarding the elections, Le Pen’s NR party is anticipated to capture between 210 and 250 seats out of the 289 seats required for a majority in the National Assembly.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further higher may see EUR/USD revisit the July peak of 1.0816 (July 3), 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 region, it might put the March peak of 1.0981 (March 8) back on the radar, ahead of the weekly high of 1.0998 (January 11) and the psychological 1.1000 mark.

If bears regain the upper hand, spot may fall to its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and ultimately the 2024 bottom of 1.0601 (April 16).

Looking at the broader picture, extra gains appear on the cards on a sustainable surpass of the key 200-day SMA (1.0794).

So far, the 4-hour chart shows the continuation of the bullish impulse. The initial resistance level is 1.0816, followed by 1.0852. The nearest support is at 1.0666, ahead of 1.0649 and finally 1.0601. The Relative Strength Index (RSI) climbed to about 69