Created on November 19, 2024

• During my daily analysis of the USD/JPY pair, the first thing I notice is that we did recover about half of the losses from the previous session, which of course is a very bullish turn of events.
• Furthermore, it’s probably worth noting that a lot of people were worried about the idea of the Governor of the Bank of Japan suggesting that the interest rate policy in Japan was about to get tighter.
• He chose not to say anything about this, and therefore it makes a lot of sense that we have seen things turn right back around.

Carry Trade

Do not forget the carry trade. This of course has a major influence on what happens next, and it’s probably worth noting that most traders are very well aware of the fact that they get paid at the end of every day when they hold this pair. In fact, I think that will continue to be the story here, despite the fact that the Federal Reserve has tried to do everything it can to bring down the rates. Quite frankly, traders in the bond market don’t want to hear about it, and it has made interest rates rise. If that’s going to be the case, then the US dollar will be much more preferable than the Japanese yen going forward, which of course is settled by extraordinarily loose monetary policy.

Further bolstering the carry trade will be the technical analysis, which of course is very bullish. The 50 Day EMA has recently broken above the 200 Day EMA, kicking off the so-called “golden cross.” Furthermore, I think that the ¥153 level is an area that people will be paying close attention to, as it is a large, round, psychologically significant figure. This area should offer support, and I think that if we were to drop below it, it could change a lot of things but right now it just doesn’t look very likely to happen. Yes, we did get a massive bearish engulfing candlestick for the Friday session, but I think in the big scheme of things it won’t really matter.

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Created on November 20, 2024

• The euro tumbled against the Japanese yen on Tuesday, driven by heightened market anxiety over reports of Russia easing nuclear weapon restrictions following Ukraine’s launch of six NATO-provided missiles into Russian territory. 
• Because of this, there was a rush to safety and Europe wasn’t exactly the place people wanted to run to.
• So, it all sets up for an obvious trade here.

That being said, it looks like cooler heads have prevailed and the 161.50 yen level has offered enough support to turn things around and form a bit of a hammer. The 163.50 level is an area that’s been like a bit of a magnet for price and previously it had been major resistance. So, the fact that we’re there again does make me very interested in this EUR/JPY pair, as this could be some kind of signal on where we go overall.

If We Can Break Higher

If we can turn around and break above the highs of the trading session on Monday, then we may have the juice to go looking to the 165 yen level, possibly even the 166.50 yen level. Longer term, I still think this pair goes higher, mainly due to the fact that the Japanese have absolutely no way whatsoever to tighten monetary policy in any meaningful manner otherwise, they will trash the Japanese economy.

If there is a run to safety for whatever reason, if we break down below the 161 yen level, then I think the bottom in this pair falls apart. And you probably then start to see Japanese yen strength against pretty much everything. All things being equal though, the Japanese are somewhat stuck. And I think that even the lowly euro will continue to find buyers against it although it might be a choppy road on the way higher.

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Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the British Pound.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

• Putin warned the US of a lower threshold for a nuclear strike.

• Economists expect UK inflation to increase by 2.2% in October.

• The dollar remained steady after gaining over 1.6% last week.

The GBP/USD price analysis indicates a sudden rush to safe-haven assets that weakened the pound against the dollar. Meanwhile, the Trump trade kept the dollar near recent peaks as markets awaited economic data for clues on Fed rate cuts.

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There was some panic in the markets on Tuesday after Russian President Vladimir Putin warned the US of a lower threshold for a nuclear strike. This news came in response to Ukraine’s recent attack on Russia with US missiles. If Russia starts using nuclear power, it could escalate the war in Ukraine and impact the global economy. 

After Putin’s warning, investors dumped risky assets like the pound and bought the yen and the dollar. Meanwhile, market participants awaited the UK inflation report due on Wednesday, which might give clues on future BoE policy moves. Economists expect inflation to increase by 2.2% after a 1.7% increase in the previous month.

Meanwhile, service inflation might ease further to 4.3%. Lower service inflation might rekindle bets for a rate cut at the December meeting. On the other hand, if inflation is higher than expected, the pound will rally as rate-cut bets drop.

Meanwhile, the dollar remained steady after gaining over 1.6% last week amid the Trump trade. The looming policy changes in the US have shifted the outlook for Fed rate cuts. At the same time, policymakers have assumed a more hawkish tone, boosting the greenback. There is an increasing likelihood that the Fed will pause in December. 

GBP/USD key events today

There will be no key reports from the US or the UK. Therefore, traders will monitor developments in the Ukraine war.

GBP/USD technical price analysis: Downtrend continues after SMA retest 

On the technical side, the GBP/USD price has bounced lower after retesting the 30-SMA resistance. After consolidation, bears took charge by breaching the 1.2850 key support level. Moreover, the price made a sharp swing below the SMA, indicating a steep downtrend. 

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At the same time, the RSI entered the oversold region, suggesting solid bearish momentum. However, it has made a bullish divergence that could lead to a deeper pullback or a reversal. On the other hand, if bearish momentum surges, the price will break below 1.2600.

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• USD/JPY falls to a six-day low, breaking through key support levels amidst heightened risk aversion.
• Technical indicators suggest potential further declines, with next targets set at Kijun-sen and 200-day SMA at 151.88.
• Immediate resistance for USD/JPY is located at the 154.00 level, with significant upper resistance at the recent peak of 156.75.

The Japanese Yen registered solid gains versus the US Dollar in early trading on Tuesday, exchanging hands at 153.83 at the time of writing. Risk aversion sponsored by the escalation of the Ukraine-Russia conflict keeps traders seeking the safety of haven currencies, like the Yen and the Swiss Franc.

USD/JPY Price Forecast: Technical outlook

The USD/JPY cleared support at the November 7 high at 154.71, opening the door for further losses. The pair achieved a lower low, falling to a six-day bottom of 153.28, which could pave the way to testing the 200-day Simple Moving Average (SMA) at 151.88.

On its way to the 200-day SMA, the USD/JPY must clear the Kijun-sen at 152.80, followed by the 152.00 mark. If cleared up, next would be the 200-day SMA, followed by the 100-day SMA at 151.94.

On the other hand, the USD/JPY first resistance would be the 154.00 figure. Once cleared, the next resistance would be the November 15 peak at 156.75.

USD/JPY Price Chart – Daily

• EUR/USD edges lower after closing in positive territory on Monday.
• Technical buyers could show interest once the pair stabilizes above 1.0600.
• Risk perception could impact the pair’s action in the absence of high-tier data releases.

EUR/USD started the week on a firm footing and climbed above 1.0600 on Monday. In the European morning on Tuesday, the pair struggles to preserve its recovery momentum and trades below this level.

The US Dollar (USD) came under selling pressure in the American trading hours on Monday and helped EUR/USD push higher. Falling US Treasury bond yields seemingly weighed on the USD, while the cautious market mood helped the currency limit its losses, capping the pair’s upside.

In the meantime, European Central Bank (ECB) Governing Council member and Central Bank of Ireland Governor Gabriel Makhlouf said on Monday that overwhelming evidence would be needed to consider a 50 basis points rate cut in December. “I believe in a cautious and prudent approach, believe the policy is working,” he added, further supporting the Euro.

Early Tuesday, US stock index futures trade marginally higher on the day. A bullish opening in Wall Street could make it difficult for the USD to find demand and open the door for an extended recovery in EUR/USD later in the day.

Eurostat will publish revisions to the October Harmonized Index of Consumer Prices (HICP) inflation data in the European session. The US economic calendar will offer Housing Starts and Building Permits figures for October. These data are unlikely to trigger a noticeable market reaction, allowing the risk perception to continue to influence EUR/USD’s action.

EUR/USD Technical Analysis

The upper limit of the descending regression channel and the Fibonacci 23.6% retracement of the two-week-old downtrend form important resistance at 1.0600. In case EUR/USD rises above this level and starts using it as support, the 20-period Simple Moving Average (SMA) on the 4-hour chart could act as interim resistance at 1.0630 ahead of 1.0670 (Fibonacci 38.2% retracement) and 1.0720 (Fibonacci 50% retracement).

On the downside, 1.0550 (20-period SMA) aligns as immediate support before 1.0500 (mid-point of the descending channel) and 1.0430 (lower limit of the descending channel).

Created on November 19, 2024

• The British pound has bounced quite nicely from the 1.26 level on Monday morning as it looks like we are finally getting a little bit of a reprieve here from the oversold conditions.
• That being said, the US dollar is most certainly overbought at the moment, and I think this move makes sense.
• We are starting to see it across against the dollar, but also other ones such as the Australian dollar against the US dollar, the New Zealand dollar against the US dollar, etc.

The Dollar Got Far Too Overbought

So, with all that being said, I think what we’re seeing here is a little bit of calming down of the dollar bullishness. That does not mean that we are looking at some type of major trend change. I don’t expect that to be the case. I think we get a little bit of a move here, perhaps even most of the week, until we start seeing seller pressure again.

Seller pressure will come in right around the 1.28 level, I suspect, or perhaps just above there at the 200 day EMA. We do get PMI numbers from both manufacturing and services from multiple economies around the world on Friday. So, between now and then, you might have a little bit of profit taking in the greenback.

But I would also say that if we were to break down below the 1.26 level, that could open up the floodgates for another 200 pips. All things being equal, I think you’ve got a couple of days of a relief rally just waiting to get stepped on again. The Federal Reserve, although somewhat dovish, there are questions as to whether or not they can cut in December, and that’s part of what we’ve seen over the last week or so, as the markets are trying to sort out what Jerome Powell and company do next.

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• USD/JPY outlook weakens as the likelihood of a BoJ rate hike in December increased to 54%.

• The Fed’s policy outlook has changed significantly since Trump won.

• A BoJ rate hike might give the yen temporary support.

The USD/JPY outlook shows a stronger yen as Ueda’s hawkish remarks increase the likelihood of a December BoJ rate cut. Meanwhile, the dollar remained steady as markets priced a more gradual pace for Fed rate cuts.

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Bank of Japan governor Kazuo Ueda, in his speech on Monday, noted that Japan’s economy was on the right path. Therefore, the central bank would need to hike rates in the near future. His remarks increased the likelihood of a rate hike in December to 54%, boosting the yen. However, Ueda failed to give clear guidance on the possible timing for the next rate hike. 

The outlook for Japan’s currency had improved slightly when the Bank of Japan started increasing interest rates and the Fed began cutting. However, the Fed’s policy outlook has changed significantly since Trump won the election. The US central bank might not cut rates as much as previously expected since Trump’s policies might increase inflation. 

Consequently, the rate differential between Japan and the US will likely remain wide, weighing on the yen. At the same time, Fed policymakers sounded more hawkish, with Powell stating there was no rush to lower borrowing costs. On the other hand, top officials in Japan are getting worried about a weak yen. Therefore, they are piling pressure on the Bank of Japan to hike rates. 

A BoJ rate hike might give the yen temporary support. However, as long as demand and inflation go up with Trump’s administration, the dollar will remain strong, putting pressure on the yen. 

USD/JPY key events today

Market participants do not expect any key reports from Japan or the US. Therefore, they might continue with the Trump trade.

USD/JPY technical outlook: Bears break up-channel

On the technical side, the USD/JPY price has broken out of its bullish channel, with bears leading the way. The decline started at the 156.51 resistance level. Price action changed to show strong bearish candles, which broke below the 30-SMA. 

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Initially, the price paused at the channel support. However, bears made another attempt at the level and broke below. The price is now facing the 154.00 support level. A break below will allow USD/JPY to reach the 151.74 level.

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Created on November 18, 2024

Potential signal:

I would be a buyer of this pair if we can recapture the ¥164 level. If we get above there, I would put a stop loss at the ¥163 level and aim for the ¥167 level.

• Dear my daily analysis of the yen related pairs, it’s worth noting that the euro initially did try to rally, but then it plunged.
• Because of this, we are now testing the 200 Day EMA, which of course is an important indicator that a lot of people will pay attention to for the longer-term, and therefore think you get a situation where if the buyers are going to return, it’s probably going to be fairly soon.
• All things being equal, this is a fairly ugly candlestick, so it’ll be interesting to see if we can get some of that “mojo back” from the previous move higher.

All things being equal, this is a pair that continues to favor interest rate differentials for the euro, with this being the case, the market is likely to continue to see a lot of people getting involved, as they can get paid at the end of every day to hang on to this pair. Quite frankly, even though the euro itself isn’t necessarily a currency that I liked, it is going to probably fare better than the Japanese yen going forward.

Technical Analysis

The technical analysis for the EUR/JPY currency pair of course suggests that there is a lot of support in this area, as the ¥163 level is an area that we’ve seen a lot of action at previously. That being said, the market is likely to continue to see the area between they are in the ¥162 level as a major “squishy support level.” By doing so, the market is likely to continue to see a lot of value hunters out there trying to get involved, and therefore I think you’ve got a scenario where people will look for a value play to get long again.

If we were to break down below the ¥161 level, then it’s likely that the pair could drop down to the ¥158.50 level, which is an area that we have seen a lot of support at previously. That would be a target for short sellers, but at this point in time I think they will probably be repudiated long before we get to that area.

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• EUR/GBP crosses key 0.8350 threshold but faces resistance near 0.8400, with current trading influenced by UK GDP concerns.
• Potential upside could see the cross target the 100-day SMA at 0.8413, with further resistance at the 200-day SMA at 0.8475.
• Downside risks remain if the pair retreats, with support levels at recent lows of 0.8306 and 0.8260.

The Euro recovered some ground versus the British Pound on Monday as traders digested the latest UK Gross Domestic Product (GDP) report, which hinted the economy is slowing down. The EUR/GBP trades at 0.8359, up by 0.11%.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP extended its gains past the psychological 0.8350 area, though buyers remain unable to crack 0.8400. Additionally, sellers leaning to the 50-day Simple Moving Average (SMA) at 0.8360 keep the cross pair from reaching 0.84 despite printing a daily peak of 0.8373.

If bulls clear 0.8373 and 0.84, the next stop would be the 100-day SMA at 0.8413. A breach of the latter will expose the 200-DMA at 0.8475.

Conversely, if EUR/GBP retreats below 0.8350, the first support would be the November 14 low of 0.8306. Once surpassed, the next floor would be the November 11 swing low of 0.8260.

Oscillators such as the Relative Strength Index (RSI) suggest bulls are gathering momentu, as the RSI cleared its neutral line, turning bullish.

EUR/GBP Price Chart – Daily