US Dollar vs Japanese Yen Technical Analysis

The U.S. Dollar initially pulled back just a bit against the Japanese Yen in the early hours of Thursday, but it continues to climb higher as we are extraordinarily bullish. Keep in mind that the interest rate differential between the United States and Japan continues to be wide enough to drive a truck through, and as long as that’s going to be the case, it makes a lot of sense that the US dollar continues to climb. The short-term pullback, when it does come, typically offers a buying opportunity that people are willing to jump on because they get paid at the end of every day and quite significantly to hold this pair.

The Federal Reserve is nowhere near cutting interest rates and now there’s even thoughts that maybe they won’t at all this year. And if that’s going to be the case, then we will just continue to see this market go higher. The Bank of Japan did intervene just above current levels, but really at this point, it looks like it’s a foregone conclusion that we will eventually reach the 160 yen level and then take that barrier out.

This is a market that over the longer term will continue to be very noisy. Um, but I think there’s so much in the way of support underneath. You just simply cannot go in the other direction. The 50 day EMA sits right around the 155.50 level with the 155 level underneath the hard floor. If you squint, you can see an ascending triangle. And I think we go much higher.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

More From FXEMPIRE:

• EUR/USD came under renewed downward pressure.
• The marked rebound in the US Dollar weighed on the pair.
• Fed-ECB policy divergence remains at centre stage.

The resumption of the positive trend in the US Dollar (USD) motivated the USD Index (DXY) to reverse part of the recent weakness while putting the risk-linked galaxy under noticeable pressure and sending EUR/USD back to the proximity of the 1.0700 neighbourhood on Thursday.

On another front, the pair’s decent drop came despite further easing of political concerns on the old continent, particularly in France, ahead of the first round of the snap elections scheduled for June 30.

Still in the region, the European Central Bank’s (ECB) Klaas Knot supported market expectations for one or two more interest rate cuts this year, noting that inflation appeared to be moving towards the 2% target.

On this, money markets see around 42 bps of easing by year-end, while market consensus expects the ECB to maintain its policy rate unchanged at its July 18 gathering.

Regarding the Fed, Minneapolis Fed President Neel Kashkari suggested early in the session that it could take one or two years for US inflation to reach the Fed’s target.

Additionally, the CME Group’s FedWatch Tool now indicates nearly a 66% probability of lower interest rates in September.

In the short term, the European Central Bank’s (ECB) recent rate cut, contrasting with the Fed’s decision to maintain rates, has widened the policy gap between the two central banks, potentially exposing EUR/USD to further weakness.

Looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to mitigate this disparity, providing some support for the pair in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

If EUR/USD rebound gains traction, the 200-day SMA at 1.0788 looms as the next objective, ahead of the weekly peak of 1.0852 (June 12) and the June high of 1.0916 (June 4). The breakout of this level reveals the March top of 1.0981 (March 8), followed by the weekly peak of 1.0998 (January 11), and the critical 1.1000 yardstick.

If bears take control, the pair may revisit the June low of 1.0667 (June 14), seconded by the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

The 4-hour chart as far shows some signs of renewed weakness. Initial resistance comes at 1.0761 ahead of 1.0808 and 1.0852, 1. The earliest support appears at 1.0667, followed by 1.0649 and 1.0601. The Relative Strength Index (RSI) has stabilized around 37.

• EUR/USD came under renewed downward pressure.
• The marked rebound in the US Dollar weighed on the pair.
• Fed-ECB policy divergence remains at centre stage.

The resumption of the positive trend in the US Dollar (USD) motivated the USD Index (DXY) to reverse part of the recent weakness while putting the risk-linked galaxy under noticeable pressure and sending EUR/USD back to the proximity of the 1.0700 neighbourhood on Thursday.

On another front, the pair’s decent drop came despite further easing of political concerns on the old continent, particularly in France, ahead of the first round of the snap elections scheduled for June 30.

Still in the region, the European Central Bank’s (ECB) Klaas Knot supported market expectations for one or two more interest rate cuts this year, noting that inflation appeared to be moving towards the 2% target.

On this, money markets see around 42 bps of easing by year-end, while market consensus expects the ECB to maintain its policy rate unchanged at its July 18 gathering.

Regarding the Fed, Minneapolis Fed President Neel Kashkari suggested early in the session that it could take one or two years for US inflation to reach the Fed’s target.

Additionally, the CME Group’s FedWatch Tool now indicates nearly a 66% probability of lower interest rates in September.

In the short term, the European Central Bank’s (ECB) recent rate cut, contrasting with the Fed’s decision to maintain rates, has widened the policy gap between the two central banks, potentially exposing EUR/USD to further weakness.

Looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to mitigate this disparity, providing some support for the pair in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

If EUR/USD rebound gains traction, the 200-day SMA at 1.0788 looms as the next objective, ahead of the weekly peak of 1.0852 (June 12) and the June high of 1.0916 (June 4). The breakout of this level reveals the March top of 1.0981 (March 8), followed by the weekly peak of 1.0998 (January 11), and the critical 1.1000 yardstick.

If bears take control, the pair may revisit the June low of 1.0667 (June 14), seconded by the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

The 4-hour chart as far shows some signs of renewed weakness. Initial resistance comes at 1.0761 ahead of 1.0808 and 1.0852, 1. The earliest support appears at 1.0667, followed by 1.0649 and 1.0601. The Relative Strength Index (RSI) has stabilized around 37.

• GBP/USD edges down 0.30%, following the Bank of England’s rate decision.
• Technical outlook shows neutral to upward bias, with critical support at 1.2643/38.
• Resistance levels to watch: 1.2700, 1.2739, and 1.2800. Support levels include 1.2619, 1.2600, and 200-DMA at 1.2551.

The Pound Sterling collapsed during the North American session, below the 1.2700 figure after the Bank of England (BoE) decided to keep rates unchanged but hinted at a possible cut in the summer. The GBP/USD trades at 1.2677, down 0.30%.

GBP/USD Price Analysis: Technical outlook

From a technical perspective, the GBP/USD is neutral to upward biased, but as it approaches the confluence of the 100-day moving average (DMA) and the May 3 high turned support at around 1.2643/38, a pierce underneath that zone, would accelerate the downtrend, change the pair bias and challenge the 50-DMA at 1.2619. Further losses are seen underneath the atter at 1.2600, ahead of testing the 200-DMA at 1.2551.

On the other hand, if buyers lift the exchange rate above 1.2700, the GBP/USD might get to the current week’s high of 1.2739. Once cleared, the next stop would be the already tested 1.2800 mark.

GBP/USD Price Action – Daily Chart

EUR/USD Current price: 1.0721

• ECB policymaker Klass Knot hinted at more rate cuts before year end.
• Dismal United States data limits US Dollar strength ahead of Wall Street’s opening.
• The EUR/USD pair is in retreat mode after failing to overcome the 1.0750 price zone.

After failing to extend gains beyond the 1.0750 region, the EUR/USD pair eased on Thursday, falling to an intraday low of 1.0712 posted during European trading hours. Nevertheless, financial markets seem to be in a good mood, limiting US Dollar strength. Asian and European indexes trade in the green, underpinning Wall Street ahead of the opening.

Meanwhile,  European Central Bank (ECB) policymaker Klaas Knot hit the wires and said that the “just under three” cuts priced in by financial markets for 2024 were “broadly in line” with the optimal policy path as priced into ECB projections. He then added that there’s a strong case for the ECB to decide quarterly based on the outlook.

Data-wise, the Eurozone did not release relevant macroeconomic data, while the United States (US) published multiple figures ahead of the session opening. Initial Jobless Claims for the week ended June 14 were up by 238K, worse than the 235K expected. At the same time, Building Permits fell by 3.8% MoM in May, while Housing Starts declined by 5.5%. Finally, the Philadelphia Fed Manufacturing Survey printed at 1.3 in June, down from the previous 4.5 and worse than the 5 anticipated. Later in the session, the European Commission will release the preliminary estimate of the June Consumer Confidence index.

EUR/USD short-term technical outlook

From a technical point of view, EUR/USD has room to extend its slide. The daily chart shows that the pair is trading near its intraday low and below all its moving averages, with the 20 Simple Moving Average (SMA) about to extend its slide below the flat 100 and 200 SMAs. At the same time, technical indicators gain downward momentum within negative levels, reflecting increased selling interest.

In the near term, EUR/USD is neutral-to-bearish. The 100 SMA has crossed below the 200 SMA, maintaining its bearish slope, while the pair is currently developing below a flat 20 SMA. Technical indicators, in the meantime, tick marginally higher, although within negative levels. The pair would need to run past 1.0760 to confirm a bullish continuation, an unlikely scenario at this point.

 Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0760 1.0810 1.0840

EUR/USD Current price: 1.0721

• ECB policymaker Klass Knot hinted at more rate cuts before year end.
• Dismal United States data limits US Dollar strength ahead of Wall Street’s opening.
• The EUR/USD pair is in retreat mode after failing to overcome the 1.0750 price zone.

After failing to extend gains beyond the 1.0750 region, the EUR/USD pair eased on Thursday, falling to an intraday low of 1.0712 posted during European trading hours. Nevertheless, financial markets seem to be in a good mood, limiting US Dollar strength. Asian and European indexes trade in the green, underpinning Wall Street ahead of the opening.

Meanwhile,  European Central Bank (ECB) policymaker Klaas Knot hit the wires and said that the “just under three” cuts priced in by financial markets for 2024 were “broadly in line” with the optimal policy path as priced into ECB projections. He then added that there’s a strong case for the ECB to decide quarterly based on the outlook.

Data-wise, the Eurozone did not release relevant macroeconomic data, while the United States (US) published multiple figures ahead of the session opening. Initial Jobless Claims for the week ended June 14 were up by 238K, worse than the 235K expected. At the same time, Building Permits fell by 3.8% MoM in May, while Housing Starts declined by 5.5%. Finally, the Philadelphia Fed Manufacturing Survey printed at 1.3 in June, down from the previous 4.5 and worse than the 5 anticipated. Later in the session, the European Commission will release the preliminary estimate of the June Consumer Confidence index.

EUR/USD short-term technical outlook

From a technical point of view, EUR/USD has room to extend its slide. The daily chart shows that the pair is trading near its intraday low and below all its moving averages, with the 20 Simple Moving Average (SMA) about to extend its slide below the flat 100 and 200 SMAs. At the same time, technical indicators gain downward momentum within negative levels, reflecting increased selling interest.

In the near term, EUR/USD is neutral-to-bearish. The 100 SMA has crossed below the 200 SMA, maintaining its bearish slope, while the pair is currently developing below a flat 20 SMA. Technical indicators, in the meantime, tick marginally higher, although within negative levels. The pair would need to run past 1.0760 to confirm a bullish continuation, an unlikely scenario at this point.

 Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0760 1.0810 1.0840

• The British pound initially pulled back just a bit during the course of the early hours on Wednesday only to turn around and show signs of life again.
• Ultimately, I think this is a market that will eventually try to break well above the recent high and given enough time I think we also go looking to the 205 yen level.
• This is an area that I think will be interesting to watch, but there if nothing inherent about it that means it should be the “final ceiling.”

Underneath we have the 200 yen level that I think offers quite a bit of support. And if we were to break down below there, it’s likely that we could go down to the 198 yen level where I think a lot of people will be very interesting. And the 50 day EMA is starting to race towards that area as well.

Keep in mind that the British pound pays much more in the way of interest than the Japanese yen does, but with this being the case, the Bank of England meeting on Thursday will have a major influence on where we go next. With that being the situation, I would expect volatility, but any type of knee-jerk reaction will more likely than not open up the possibility of finding cheap pounds.

Bank of Japan Helpless

The Bank of Japan is nowhere near tightening monetary policy. So, I think you’ve got a situation where market participants will continue to see this on the prism of it being very noisy. And with that being the case, you need to be somewhat cautious with your position sizing. Nonetheless, the trend in this pair is dead obvious and there’s no reason to fight it. I think given enough time; traders will continue to push this pair higher as the Bank of Japan just simply has far too much debt with the Japanese government to start tightening monetary policy. I think the Japanese yen will lose much more value before it’s all said and done.

Ready to trade our daily Forex analysis? Check out the best forex trading company in UK worth using. 

• The Euro initially pulled back just a bit during the trading session on Wednesday against the Japanese Yen.
• It looks like the 169.40 yen level continues to offer at least a little bit of support and therefore we have turned around to show signs of life.
• All things being equal, this is a market that I think continues to see a lot of noise and it does look like we are trying to build up enough pressure to go higher.

The 50 day EMA underneath is near the 168 yen level, and I think that is a bit of a short term floor in the market. I like the idea of buying dips mainly due to the fact that I don’t like the yen at all. It’s not even that I like the euro, it’s just that I think the yen is in that much trouble.

Value Hunters Will Be Present

Short-term pullbacks continue to find value hunters jumping into the market, and then of course, you have to keep in mind that you get paid to hang on to this pair, just like you do almost anything else denominated in yen. With this being the case, there’s no real need to fight this, and if the euro does in fact bounce against the dollar a little bit, and it looks like it might, that should help this pair as well.

If we can break above the 171 yen level, then I think we could make a serious run towards the 175 yen level over the longer term. I don’t know that we have the massive and pulse of up days that we used to, but I do think that we have more of a grind to the upside that will continue to attract inflows. As far as selling is concerned, I wouldn’t even consider it until we broke below the 165 yen level. And really at this point, I just don’t see that happening very easily, and therefore I am currently “long only” in this pair.

Ready to trade our daily forex forecast? Here are the best forex brokers in Japan to choose from.