• EUR/USD holds steady above 1.0800 after posting losses on Monday.
• June Consumer Price Index data from Germany will be watched closely by investors.
• The pair faces key support area at 1.0800-1.0810.

EUR/USD came under renewed bearish pressure on Monday and fell to its weakest level in three weeks near 1.0800. Although the pair managed to erase a small portion of its losses, it is having a tough time gathering recovery momentum ahead of Tuesday’s key macroeconomic data releases.

The cautious mood at the beginning of the week helped the US Dollar (USD) stay resilient against its major rivals. In the second half of the day, the mixed action seen in Wall Street allowed the USD to preserve its strength and limited EUR/USD’s rebound.

Early Tuesday, the data from Germany showed that the Gross Domestic Product contracted at an annual rate of 0.1% in the second quarter. This reading, however, failed to trigger a noticeable market reaction.

Germany’s Destatis will release Consumer Price Index (CPI) data for July later in the session. Investors expect the CPI to rise 0.2% on a monthly basis following the 0.1% increase recorded in June. A stronger-than-forecast monthly CPI reading could help the Euro find demand with the immediate reaction. Nevertheless, investors could refrain from taking large positions based on this data alone, especially ahead of the Federal Reserve’s monetary policy announcements on Wednesday.

On Tuesday, the US economic docket will feature Conference Board’s Consumer Confidence data for July and JOLTS Job Openings for June. If there is a significant increase in job openings, the USD could hold its ground and weigh on EUR/USD. 

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays well below 50 despite edging slightly higher in the European morning on Tuesday.

EUR/USD holds above the 1.0800-1.0810 support area, where the 100-day and the 200-day SMAs are located. If this support fails, 1.0740 (Fibonacci 78.6% retracement of the latest uptrend) could be seen as next bearish target before 1.0700 (psychological level, static level).

On the upside, first resistance aligns at 1.0840 (Fibonacci 38.2% retracement) ahead of 1.0860 (100-period SMA) and 1.0880 (Fibonacci 23.6% retracement).

• EUR/USD holds steady above 1.0800 after posting losses on Monday.
• June Consumer Price Index data from Germany will be watched closely by investors.
• The pair faces key support area at 1.0800-1.0810.

EUR/USD came under renewed bearish pressure on Monday and fell to its weakest level in three weeks near 1.0800. Although the pair managed to erase a small portion of its losses, it is having a tough time gathering recovery momentum ahead of Tuesday’s key macroeconomic data releases.

The cautious mood at the beginning of the week helped the US Dollar (USD) stay resilient against its major rivals. In the second half of the day, the mixed action seen in Wall Street allowed the USD to preserve its strength and limited EUR/USD’s rebound.

Early Tuesday, the data from Germany showed that the Gross Domestic Product contracted at an annual rate of 0.1% in the second quarter. This reading, however, failed to trigger a noticeable market reaction.

Germany’s Destatis will release Consumer Price Index (CPI) data for July later in the session. Investors expect the CPI to rise 0.2% on a monthly basis following the 0.1% increase recorded in June. A stronger-than-forecast monthly CPI reading could help the Euro find demand with the immediate reaction. Nevertheless, investors could refrain from taking large positions based on this data alone, especially ahead of the Federal Reserve’s monetary policy announcements on Wednesday.

On Tuesday, the US economic docket will feature Conference Board’s Consumer Confidence data for July and JOLTS Job Openings for June. If there is a significant increase in job openings, the USD could hold its ground and weigh on EUR/USD. 

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays well below 50 despite edging slightly higher in the European morning on Tuesday.

EUR/USD holds above the 1.0800-1.0810 support area, where the 100-day and the 200-day SMAs are located. If this support fails, 1.0740 (Fibonacci 78.6% retracement of the latest uptrend) could be seen as next bearish target before 1.0700 (psychological level, static level).

On the upside, first resistance aligns at 1.0840 (Fibonacci 38.2% retracement) ahead of 1.0860 (100-period SMA) and 1.0880 (Fibonacci 23.6% retracement).

• The British pound initially has shown a lot of volatility during the trading session on Monday, but it looks as if it is going to settle on some kind of sideways action.
• With this being the case, it’s worth noting that we are near the 1.2850 level.
• That is an area that previously had been significant resistance.
• The area previously had been very difficult to get above. And now that we have done that, we have pulled back to test that area again. 

Noisy Week for this Market

I think we’ve got a situation where if we can break above the top of the candlestick, we could go looking to the 1.30 level. In general, I do think that this is a pair that probably looks to the upside, but this is a market that has a lot to pay attention to this week, especially as we have central bank meetings coming up from the Federal Reserve, several others, including the Bank of England.

So, GBP/USD is a pair that I think continues to be very volatile, but right now looks as if it is trying to do everything it can to continue the overall uptrend. Because of that, if we break down below the bottom of the candlestick for the day, perhaps breaking below the 1.28 level, it’s really not until we get underneath air that I start to think about shorting, but even then, I’d have to see what was going on.

After all, then you have to start to ask questions about whether or not the US dollar is strengthening due to something going on in America, or if it is a concern about risk appetite in general. Furthermore, the Bank of England could say or do something to throw the markets into disarray. As things stand right now, it looks like we are trying to grind higher, and the phrase “grind”  might be the best way to describe what’s going on period.

Ready to trade our Forex daily analysis and predictions? Here are the top UK forex trading platforms to choose from. 

US Consumer Confidence and Recession Warnings

The CB Consumer Confidence Index will draw investor interest on Tuesday, July 30. Economists forecast the Index to fall from 100.4 in June to 99.9 in July.

Downward trends in consumer confidence could affect consumer spending, dampening demand-driven inflation. Softer inflation may enable the Fed to cut interest rates more often than expected to deliver price stability.

Beyond the headline number, the Expectations Index also requires consideration. The Index considers consumers’ outlook for income, business, and labor market conditions. Concerns about the economy and labor market conditions may impact consumer confidence further.

The Expectations Index fell from 74.9 in May to 73.0 in June. According to The Conference Board, the Index has been below 80 for five months. An Index below 80 is usually a recession warning, supporting a USD/JPY fall toward 150.

Private consumption contributes about 70% to the US economy. The US economy could falter if consumers tighten their purse strings.

However, investors should also consider labor market data.

US JOLTs Job Openings Impact

Economists predict JOLTs Job Openings will drop from 8.14 million in May to 8.05 million in June. A fall below 8.00 million could fuel speculation about multiple 2024 Fed rate cuts.

A deteriorating labor market may also impact wage growth and lower disposable income.

A marked deterioration in US labor market conditions could support a USD/JPY drop below 150.

• EUR/USD put the 1.0800 region to the test on Monday.
• The Dollar kicked off the week on a positive note.
• The next salient release will be Germany’s flash CPI.

EUR/USD succumbed to the firm start to the week by the Greenback, reversing two daily gains in a row and flirting with three-day lows near the 1.0800 region on Monday.

Conversely, the US Dollar (USD) managed to come roaring and advance to multi-day tops near 104.80, reclaiming at the same time the area beyond the critical 200-day SMA (104.33).

In addition, daily gains in the pair came pari passu with further weakness in US and German yields, at a time when investors expect both the Federal Reserve (Fed) and the European Central Bank (ECB) to cut their rates after the summer break.

In terms of monetary policy, the Fed is largely expected to maintain its rates at its July 31 meeting, while investors anticipate the central bank setting the stage for the start of the easing cycle in September.

An interest rate cut by the ECB in September has also been suggested by recent comments from Vice President Luis de Guindos.

The policy divergence between the Fed and the ECB should remain nearly unchanged, with both central banks forecast to cut rates in the next couple of months. However, the expectation of a soft landing in the US economy contrasts with some loss of momentum in the Eurozone’s economic recovery, potentially leading to further weakness in European currency in the medium-term horizon.

Moving forward, market participants will closely follow the release of the preliminary Q2 GDP Growth Rate in both Germany and the euro bloc, as well as the advanced Inflation Rate in Germany, all due on July 30.

EUR/USD daily chart

EUR/USD short-term technical outlook

The weekly low of 1.0802 (July 29) is next on the downside for EUR/USD ahead of. The provisional 100-day SMA at 1.0796. Down from here comes the June low of 1.0666 (on June 26), ahead of the May low of 1.0649 (May 1).

On the other hand, early resistance is indicated at the July high of 1.0948 (July 17), followed by the March top of 1.0981 (March 8) and the important 1.1000 milestone.

Looking at the big picture, the negative bias should return to the pair if it stays below the crucial 200-day SMA (1.0820).

So far, the four-hour chart indicates some acceleration of the downward bias. Nonetheless, the 55-SMA at 1.0875 serves as early resistance, followed by 1.0948, 1.0981, and ultimately 1.1000. On the other hand, 1.0802 is first, followed by the 200-SMA at 1.0800 and then 1.0709. The relative strength index (RSI) bounced to around 38.

• EUR/USD put the 1.0800 region to the test on Monday.
• The Dollar kicked off the week on a positive note.
• The next salient release will be Germany’s flash CPI.

EUR/USD succumbed to the firm start to the week by the Greenback, reversing two daily gains in a row and flirting with three-day lows near the 1.0800 region on Monday.

Conversely, the US Dollar (USD) managed to come roaring and advance to multi-day tops near 104.80, reclaiming at the same time the area beyond the critical 200-day SMA (104.33).

In addition, daily gains in the pair came pari passu with further weakness in US and German yields, at a time when investors expect both the Federal Reserve (Fed) and the European Central Bank (ECB) to cut their rates after the summer break.

In terms of monetary policy, the Fed is largely expected to maintain its rates at its July 31 meeting, while investors anticipate the central bank setting the stage for the start of the easing cycle in September.

An interest rate cut by the ECB in September has also been suggested by recent comments from Vice President Luis de Guindos.

The policy divergence between the Fed and the ECB should remain nearly unchanged, with both central banks forecast to cut rates in the next couple of months. However, the expectation of a soft landing in the US economy contrasts with some loss of momentum in the Eurozone’s economic recovery, potentially leading to further weakness in European currency in the medium-term horizon.

Moving forward, market participants will closely follow the release of the preliminary Q2 GDP Growth Rate in both Germany and the euro bloc, as well as the advanced Inflation Rate in Germany, all due on July 30.

EUR/USD daily chart

EUR/USD short-term technical outlook

The weekly low of 1.0802 (July 29) is next on the downside for EUR/USD ahead of. The provisional 100-day SMA at 1.0796. Down from here comes the June low of 1.0666 (on June 26), ahead of the May low of 1.0649 (May 1).

On the other hand, early resistance is indicated at the July high of 1.0948 (July 17), followed by the March top of 1.0981 (March 8) and the important 1.1000 milestone.

Looking at the big picture, the negative bias should return to the pair if it stays below the crucial 200-day SMA (1.0820).

So far, the four-hour chart indicates some acceleration of the downward bias. Nonetheless, the 55-SMA at 1.0875 serves as early resistance, followed by 1.0948, 1.0981, and ultimately 1.1000. On the other hand, 1.0802 is first, followed by the 200-SMA at 1.0800 and then 1.0709. The relative strength index (RSI) bounced to around 38.

EUR/USD Current price: 1.0817

• Central banks and earnings reports take centre stage this week.
• The US Dollar is firmly up despite an optimistic market mood.
• EUR/USD gains bearish momentum and aims to pierce the 1.0800 mark.

The US Dollar started the week with a firm footing, posting gains against most major rivals. The EUR/USD pair accelerated its slide ahead of Wall Street’s opening, trading at its lowest in three weeks near the 1.0800 mark.

The pair held rangebound through Asian trading hours despite the market mood being mostly optimistic. Local stock markets rallied following clues from American indexes last week and as investors bet on interest rates’ normalization. The United States (US) Federal Reserve (Fed), the Bank of Japan (BoJ) and the Bank of England (BoE) will announce their decisions on monetary policy in the upcoming days, while multiple tech-related companies will announce quarterly results. Other than that, the US will publish employment-related figures, ending on Friday with the release of the July Nonfarm Payrolls (NFP) report.

Data-wise, the Eurozone did not release relevant figures on Monday, although Germany and the EU will publish the preliminary estimates of the Q2 Gross Domestic Product (GDP) on Tuesday. Growth in the three months to June is expected to have been tepid, not actually a surprise. Meanwhile, the upcoming American session will bring the July Dallas Fed Manufacturing Index.

EUR/USD short-term technical outlook

According to technical readings in the daily chart, the risk of a bearish extension has increased. The EUR/USD pair failed to retain early gains above a bullish 20 Simple Moving Average (SMA) and currently pressures a flat 200 SMA, providing support at 1.0815. The 100 SMA, in the meantime, heads lower below the current level. At the same time, technical indicators have turned lower, suggesting increased selling interest, albeit still within neutral levels.

The 4-hour chart, on the other hand, shows a strong bearish momentum. EUR/USD edged sharply lower, now trading below the 20 and 100 SMAs. Technical indicators, in the meantime, gained downward traction within negative levels, maintaining their bearish slopes and in line with another leg lower.

Support levels: 1.0815 1.0770 1.0725

Resistance levels: 1.0870 1.0910 1.0945  

EUR/USD Current price: 1.0817

• Central banks and earnings reports take centre stage this week.
• The US Dollar is firmly up despite an optimistic market mood.
• EUR/USD gains bearish momentum and aims to pierce the 1.0800 mark.

The US Dollar started the week with a firm footing, posting gains against most major rivals. The EUR/USD pair accelerated its slide ahead of Wall Street’s opening, trading at its lowest in three weeks near the 1.0800 mark.

The pair held rangebound through Asian trading hours despite the market mood being mostly optimistic. Local stock markets rallied following clues from American indexes last week and as investors bet on interest rates’ normalization. The United States (US) Federal Reserve (Fed), the Bank of Japan (BoJ) and the Bank of England (BoE) will announce their decisions on monetary policy in the upcoming days, while multiple tech-related companies will announce quarterly results. Other than that, the US will publish employment-related figures, ending on Friday with the release of the July Nonfarm Payrolls (NFP) report.

Data-wise, the Eurozone did not release relevant figures on Monday, although Germany and the EU will publish the preliminary estimates of the Q2 Gross Domestic Product (GDP) on Tuesday. Growth in the three months to June is expected to have been tepid, not actually a surprise. Meanwhile, the upcoming American session will bring the July Dallas Fed Manufacturing Index.

EUR/USD short-term technical outlook

According to technical readings in the daily chart, the risk of a bearish extension has increased. The EUR/USD pair failed to retain early gains above a bullish 20 Simple Moving Average (SMA) and currently pressures a flat 200 SMA, providing support at 1.0815. The 100 SMA, in the meantime, heads lower below the current level. At the same time, technical indicators have turned lower, suggesting increased selling interest, albeit still within neutral levels.

The 4-hour chart, on the other hand, shows a strong bearish momentum. EUR/USD edged sharply lower, now trading below the 20 and 100 SMAs. Technical indicators, in the meantime, gained downward traction within negative levels, maintaining their bearish slopes and in line with another leg lower.

Support levels: 1.0815 1.0770 1.0725

Resistance levels: 1.0870 1.0910 1.0945  

• At the end of last week’s trading, the GBP/USD price tried to rebound higher, but its gains did not exceed the 1.2877 level and closed the week’s trading stable around the 1.2863 level.
• Moreover, its losses extended in the same week to the 1.2847 support level, its lowest in two weeks.
• Amid this performance, financial markets have set a 45% probability for the Bank of England’s first interest rate cut in more than four years, as inflation has returned to the Bank of England’s 2% target.

Other important economic data to watch include the Eurozone business survey and unemployment rate, German unemployment data, and the Bank of England monetary indicators in the United Kingdom. 

Also, this week in the US, the Federal Reserve is expected to keep the federal funds rate steady at 5.25%-5.50% for the eighth consecutive meeting, but all eyes will be on any indication of the US central bank’s plans for September, with a rate cut fully in mind. The US economy is likely to have added 185,000 jobs this month, down from 206,000 in June, while the unemployment rate is likely to remain at a 2021 high of 4.1% and wage growth at 0.3%. 

According to Forex trading, Credit Agricole commented; “The pound is starting to look expensive against both the euro and the US dollar when compared to short-term fair value estimates based on the relative attractiveness of the pound among other drivers. Accordingly, the pound also remains one of the largest long positions in the G10 forex market. In turn, this justifies some caution regarding the near-term outlook for the currency.” 

HSBC added, “With markets currently holding a very large net long position in sterling (IMM data), the risks are skewed to the downside.” 

This week, markets will focus on the Bank of England’s policy meeting. 

Bank of America commented; “We are sticking with our August call for now, largely because we have the impression that the Bank of England really wants to cut. Furthermore, this may mean that they will emphasize the (slow) decline in wage growth and the volatile services accommodation component in the services inflation surprise.” However, the bank’s conviction is waning. From a medium-term perspective, the bank commented; “If the central bank moves early when the data is not yet there, this also creates a risk not only of a shallower cutting cycle, but also shorter than we assume.” 

According to the performance on the daily chart below, the GBP/USD price is moving within a downward channel that will increase in strength with the break of the support levels 1.2800 and 1.2720 respectively. On the other hand, and for the same time period, the psychological resistance 1.3000 will remain the most important for the bulls’ control over the trend. In general, the trend this week will be determined by the policy path of both the Bank of England and the US Federal Reserve, then the announcement of the US jobs numbers. 

Want to begin trading the GBP/USD daily analysis? Get our most recommended brokers in the UK here.

• Major events this week include the Fed policy meeting and NFP.

• The likelihood of a Fed cut this week is below 5%.

• ECB’s Schnabel said Eurozone service price growth remains a significant problem.

The EUR/USD outlook points south, with the dollar firming ahead of Wednesday’s Federal Reserve policy meeting. Meanwhile, ECB policymakers have created a mixed picture of the outlook for European Central Bank rate cuts. 

–Are you interested in learning more about Forex robots? Check our detailed guide-

Markets are preparing for several major events this week, including the Fed policy meeting and US nonfarm payrolls. Meanwhile, the Eurozone will release key inflation data shaping the outlook for ECB rate cuts. On Friday, data revealed that US inflation increased slightly, aligning with expectations. As a result, markets are still expecting the first cut in September. Meanwhile, the likelihood of a cut this week is below 5%. 

At the Fed policy meeting, officials might highlight the progress in inflation towards the 2% target. However, there might be caution regarding the US economy’s resilience. The continued strength gives the Fed more room to wait for inflation to drop. Still, investors are confident policymakers will call for a rate cut in September.

Meanwhile, inflation is at 2.5% in the Eurozone, nearing the ECB’s 2% target. However, the central bank held rates in July due to high service inflation. On Friday, ECB’s Isabel Schnabel noted that the central bank has a challenging task ahead to lower inflation. According to her, service price growth remains a significant problem.

However, other policymakers are ready to cut in September. Meanwhile, ECB President Christine Lagarde said that September remains wide open, meaning anything could happen, depending on incoming data.

EUR/USD key events today

Neither the US nor the Eurozone will report high-impact economic data today. Therefore, the pair might consolidate.

EUR/USD technical outlook: Solid support at 1.0825

On the technical side, the EUR/USD decline has paused at the 1.0825 support level. Recently, the price was in a corrective move that retested the 30-SMA resistance. Since the SMA held firm, the price bounced lower with an impulsive candle. However, bears must break below 1.0825 to make a lower low and confirm a downtrend. 

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

Notably, the RSI is showing weaker bearish momentum near 1.0825. If bears fail to break below, the trend might reverse, with the price breaking above the SMA. However, if bearish momentum increases, the downtrend will continue with the target of 1.0750.

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 fluctuates at around 1.0850 to begin the week.
• 1.0800 aligns as key support area for the pair.
• Investors could refrain from taking large positions ahead of this week’s critical events.

EUR/USD moves sideways near 1.0850 in the European morning on Monday after closing the previous week in negative territory. Ahead of this week’s key macroeconomic events, which include the Federal Reserve’s (Fed) monetary policy decisions, Eurozone inflation data and US labor market report, the pair could stay in a consolidation phase.

The risk-averse market atmosphere made it difficult for EUR/USD to gather bullish momentum last week, even though mixed macroeconomic data releases from the US limited the US Dollar’s (USD) gains.

The economic calendar will not feature any high-tier data releases on Monday. Meanwhile, US stock index futures gain between 0.25% and 0.5% in the European session, pointing to an improving risk mood.

In case risk flows dominate the financial markets in the second half of the day, the USD could stay on the back foot and allow EUR/USD to hold its ground. Nevertheless, the pair’s action is likely to remain subdued in the near term.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator continues to move sideways at around 50, highlighting a lack of directional momentum.

On the downside, EUR/USD faces immediate support at 1.0840, where the Fibonacci 38.2% retracement of the latest uptrend is located. Below this level, 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).

Resistances align at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).

• EUR/USD fluctuates at around 1.0850 to begin the week.
• 1.0800 aligns as key support area for the pair.
• Investors could refrain from taking large positions ahead of this week’s critical events.

EUR/USD moves sideways near 1.0850 in the European morning on Monday after closing the previous week in negative territory. Ahead of this week’s key macroeconomic events, which include the Federal Reserve’s (Fed) monetary policy decisions, Eurozone inflation data and US labor market report, the pair could stay in a consolidation phase.

The risk-averse market atmosphere made it difficult for EUR/USD to gather bullish momentum last week, even though mixed macroeconomic data releases from the US limited the US Dollar’s (USD) gains.

The economic calendar will not feature any high-tier data releases on Monday. Meanwhile, US stock index futures gain between 0.25% and 0.5% in the European session, pointing to an improving risk mood.

In case risk flows dominate the financial markets in the second half of the day, the USD could stay on the back foot and allow EUR/USD to hold its ground. Nevertheless, the pair’s action is likely to remain subdued in the near term.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator continues to move sideways at around 50, highlighting a lack of directional momentum.

On the downside, EUR/USD faces immediate support at 1.0840, where the Fibonacci 38.2% retracement of the latest uptrend is located. Below this level, 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).

Resistances align at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).

• The British pound has rallied a bit during the early hours on Friday as it looks like the 1.2850 level is going to continue to offer market memory.
• After all, this is an area that previously had been resistance and the fact that we bounced directly from that level tells me there is a lot of interest here.
• Whether or not we can take out the top of the candlestick during the Thursday session is going to be the question.

If we could break above there, then it’s likely that we could go looking to the 1.30 level. This is a market that has been extraordinarily bullish for some time. And now that we’ve had this little bit of a pullback, I do think that a lot of people are willing to jump in and try to take advantage of cheap pounds.

Where We Could Go…

From the latest swing high, we dropped down to almost the 50% Fibonacci retracement level or from the even bigger swing, we dropped down to the 23.6% Fibonacci retracement level. Perhaps traders are looking at that, but ultimately, I think what we are seeing here is that they believe the Federal Reserve is going to cut rates. And as long as that’s going to be the case, it does work against the value of the greenback in general. With this, I think taking out the Thursday candlestick is the clue that you’re looking for that the momentum has clearly returned. For what it’s worth, there has been more of a risk on attitude in the markets over the last 24 hours. So that of course helps the British pound against the greenback GBP/USD which is the world’s safety currency.

With this being said, a lot of people will be paying close attention to the Bank of England over the next week or two, as it has to make several decisions. The Federal Reserve is expected to cut rates once or twice between now and the end of the year, so that of course will be priced on the market already.

Ready to trade our GBP/USD Forex forecast? Here’s some of the best forex broker UK reviews to check out

Quantitative Tightening and Interest Rate Differentials

Some economists believe quantitative tightening (QT) could strengthen the Yen more sustainably. The BoJ plans to announce cuts to JGB purchases (QT) in July.

Aggressively cutting JGB purchases would narrow interest rate differentials with the US dollar, bolstering the Yen.

Conversely, a modest rate hike would have a limited impact on rate differentials.

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

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

Aggressive cuts to JGB purchases could drop the USD/JPY below 150. BoJ support for multiple rate hikes and aggressive cuts to JGB purchases could send the USD/JPY toward 140 through Q4 2024.

Key Economic Indicators to Watch

On Tuesday, labor market data from Japan will require consideration. Tighter labor market conditions may support wage growth and increase disposable income. Higher disposable income could fuel consumer spending and demand-driven inflation.

Economists forecast Japan’s unemployment rate (Tues) to remain at 2.6% in June. An unexpected rise could allow the BoJ to leave interest rates at 0.1%.

However, retail sales numbers may also draw the BoJ’s interest on Wednesday, July 31. A marked increase in retail sales could allow the BoJ to signal rate hikes over the remainder of 2024.

Economists forecast retail sales to increase by 0.4% in June after rising by 1.7% in May.

US Economic Indicators: Dallas Fed Manufacturing Index

On Monday, July 29, the Dallas Fed Manufacturing Index will be in focus.

Economists expect the Dallas Fed Manufacturing Index to increase from -15.1 in June to -12.0 in July.

Higher-than-expected figures could support expectations of a soft US landing and the USD/JPY at current levels. However, recent US inflation data suggest the numbers will unlikely influence the Fed interest rate trajectory. Prices for goods declined in June.

Charles Schwab Senior Investment Strategist Kevin Gordon commented on the June Report, stating,

“Dallas Fed Manufacturing Index 6-month outlook for new orders rose in June to highest since March 2022 … employment outlook went the other way and fell to lowest since December 2023.”