Economists predict the ISM Services PMI will increase from 51.5 in August to 51.6 in September. A larger-than-expected increase would signal a robust US economy as the services sector accounts for nearly 80% of GDP. Conversely, a drop below 50 could reignite fears of a hard US landing, possibly pushing the USD/JPY below 145.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on the Services PMI from Japan and the US. Upbeat figures from Japan and a weaker ISM Services PMI could fuel expectations of monetary policy divergence favoring the Yen. This combination may send the USD/JPY below 145.

Traders should stay vigilant as this week’s data will impact trading USD/JPY strategies. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY hovers above the 50-day EMA while remaining below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.

A USD/JPY return to 147.5 could bring the 148.529 resistance level into play. Furthermore, a break above the 148.529 resistance level may signal a move toward the 200-day EMA.

The US and Japan’s Services PMIs and central bank commentary require consideration.

Conversely, a break below the 50-day EMA and the 145.891 support level could give the bears a run at the 143.495 support level.

The 14-day RSI at 58.20 suggests a USD/JPY climb to the 200-day EMA before entering overbought territory.

• USD/JPY surges over 2%, rallying from a low of 143.42 following comments from Japan’s Prime Minister Ishiba.
• The pair breaks significant resistance, including the 50-DMA at 145.53, now trading near 146.47.
• For a bearish reversal, USD/JPY needs to drop below the 50-DMA, with 145.00 as the subsequent key support.

The Greenback recovered against the Japanese Yen on Wednesday, rallying over 2% after Japanese Prime Minister Ishiba commented the economic environment is not ready for additional rate hikes. Hence, the USD/JPY jumped off daily lows of around 143.42 and soared sharply toward current exchange rates. At the time of writing, the pair trades at 146.47.

USD/JPY Price Forecast: Technical outlook

The USD/JPY has broken key resistance levels and is descending toward the bottom of the Ichimoku Cloud (Kumo).

Firstly, it broke a resistance trendline drawn from around August 15 highs, which passed at around 144.00/10. Once this was cleared, it opened the door for further upside.

After that, the USD/JPY climbed above the October 1 high of 144.53, followed by the 145.00 figure. Once surpassed, there was not in the bull’s path as they exceeded the 50-day moving average (DMA) at 145.53, on its way toward the current exchange rates.

For a bearish resumption, the USD/JPY must clear the 50-DMA on the downside, which will expose the 145.00 mark.

USD/JPY Price Action – Daily Chart

Created on October 02, 2024

• The EUR/USD exchange rate is poised to decline for the third consecutive day, driven by a decline in September’s Eurozone inflation figures and diverging communications between global central banks.
• The EUR/USD pair has lost ground, reaching the nearest support level of 1.1045, threatening to break below the crucial 1.1000 level.
• The pair had previously surrendered its strong gains at the end of last month, reaching a resistance level of 1.1214, at which point we recommended selling the pair, a recommendation that proved highly successful.

According to the results of the economic calendar, the inflation rate in the Eurozone reached 1.8% year-on-year in September, down from 2.2% in August, and is now comfortably below the European Central Bank’s target of 2.0%. Core inflation, which is a major concern for the ECB, fell to 2.7% from 2.8%. furthermore, the decline in September’s inflation figures increases the likelihood of an October rate cut by the European Central Bank and a large 50bp move in either October or December.

Commenting on the performance and influencing factors, Joe Touky, Head of Forex Analysis at Argentus, stated that annual inflation at 1.8% was in line with expectations and did nothing to change the current cautious outlook for European monetary policy. The EUR/USD pair remains weaker, capped by strong technical resistance at 1.12, and is heading towards technical chart support at 1.1015.

In an appearance before European lawmakers on Monday, ECB President Christine Lagarde indicated that an October rate cut was on the table because she was comfortable with the idea that inflation was now clearly on the downside and that upside risks were fading. Last week, the ECB was expected to cut rates again in December, opting to continue with a quarterly pace of rate cuts. Nevertheless, those expectations were undermined by the release of weak French and Spanish inflation data on Friday, which suggested today’s figure would surprise to the downside.

Francesco Pesole, a forex analyst at ING Bank, said that the swap rate continued to widen in favor of the US dollar, now at around -110 basis points, about 25 basis points below mid-September levels of -85 basis points. He added, “The idea that an inflation-concerned ECB will move more cautiously than the Fed on easing is falling apart. It seems increasingly likely that keeping rates on hold in October could mean a 50-basis point cut in December, which explains the market’s pricing of -52 basis points by year-end, with 22 basis points priced in for this month.”

While ECB President Lagarde was encouraging financial markets to bet on a faster pace of rate cuts, her counterpart at the Fed indicated a rejection of expectations for another 50-basis point cut in 2024. Jerome Powell was clear that he believed two more 25 basis point moves were sufficient, which is less than the 70 basis points currently expected by the market.

EUR/USD Technical analysis and forecast:

According to the analyst, the large moves in short-term interest rate differentials between the EUR and the USD are pointing to weakness in the EUR/USD pair now. Consequently, we believe that the EUR/USD pair could trade again below the 1.110 level in the next couple of days, testing the 1.100 level if the US unemployment rate does not rise on Friday.

According to reliable trading platforms, the EUR/USD pair continues to face downward pressure as the US dollar (USD) rises, following lower expectations of a large rate cut by the US Federal Reserve (Fed) in November. The US Dollar Index (DXY), which tracks the US dollar against six major currencies, rose above 101.00. According to the CME FedWatch tool, the probability of a 50-basis point rate cut by the Fed in November has fallen to 35.3%, down from 58% just a week ago.

Recent statements by Federal Reserve Chair Jerome Powell at the National Association for Business Economics conference played a key role in calming market expectations for a significant rate cut. Powell indicated that the Fed is likely to cut US interest rates by 25 basis points in both of the remaining meetings this year, resulting in a cumulative cut of 50 basis points. Powell’s comments emphasized a cautious approach, balancing inflation control with economic stability. However, some Fed officials, such as Atlanta Fed President Raphael Bostic, still support a more aggressive 50 basis point cut if labor market data shows signs of weakness. This places more attention on upcoming US jobs reports, including the ADP employment change data and the September non-farm payrolls data, scheduled to be released on Wednesday and Friday, respectively.

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Created on October 02, 2024

• The US dollar is seeing increased demand at the start of the new month and quarter, buoyed by the latest guidance from Federal Reserve Chair Jerome Powell regarding US interest rates.
• Powell indicated on Monday that the Fed anticipates implementing two more interest rate cuts by the end of 2024, which is fewer than the market had previously expected.
• Consequently, this new guidance has exerted downward pressure on the GBP/USD currency pair, pushing it below its 2024 highs to 1.3242 at the time of writing on October 1st.

Commenting on the performance and influencing factors, Achilles Georgopoulos, investment analyst at XM.com, stated: “The US dollar has reacted positively to Powell’s comments and gained ground across the board.”

Prior to Powell’s statement, the market had been anticipating a more aggressive rate cut of up to 70 basis points for the remainder of the year. However, this new guidance from the Chair suggests that the financial markets should adjust their expectations to anticipate two additional 25 basis point moves. According to analysts at ING Bank, “Powell explicitly rejected a 50-basis point rate cut by the end of the year.”

Increasingly, financial markets have been bold in their thinking that the Fed will cut rates quickly now, which would boost the US economy, lower bond yields and pressure the US dollar. According to analysts, Powell said the base case was for two 25 basis points moves by year-end, an unusually specific guidance that suggests his displeasure with the market’s dovish pricing.

For their part, Goldman Sachs analysts say the US economy is still producing “relatively strong activity data” and “recent labor market news has been relatively encouraging.” Given this, Kamakshya Trivedi, Goldman Sachs FX analyst, says, “The recent trend of selling the US dollar on all sorts of news seems unsustainable.”

Nevertheless, Powell’s message is not entirely clear-cut, and it’s not unusual for markets to debate a 25-basis point rate cut given the broader evidence pointing to a larger interest rate cut in the coming months. Therefore, the comments do not represent a shift in the declining trend of the US dollar, and the path of least resistance for the GBP/USD remains higher, albeit likely at a slower pace with deeper pullbacks along the way.

Technical forecasts for the GPB/USD pair today:

Overall, the upcoming US jobs report on Friday will be crucial in this regard. A reading that exceeds consensus expectations could reinforce the notion that the Fed will need to proceed slowly with interest rate cuts. If this view becomes more entrenched, it could lead to a period of GBP/USD weakness. With the pair trading below the 1.3350 level, technical forecasts indicate a bearish bias in the near term, especially after failing to establish itself above the 1.3400 level. The 1.3145 support level will remain key to the bears’ dominance over the trend. In general, traders will be closely monitoring upcoming US data and Fed comments for potential shifts in sentiment. Decisively, the US dollar is likely to remain supported if the data confirms the Fed’s cautious but steady approach to monetary policy.

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Created on October 02, 2024

• The Japanese yen fell below 144 against the US dollar, falling for the second consecutive session, after US Federal Reserve Chairman Jerome Powell dismissed bets on further large cuts to US interest rates.
• Powell indicated that the Fed would opt for modest 25 basis point cuts in the remaining meetings this year, clarifying that they are “not on any predetermined path.”

Also, The Japanese yen came under pressure after former Defence Minister Shigeru Ishiba, who won the leadership of Japan’s ruling party last Friday, said that policy should remain accommodative due to current economic conditions. On the economic data front, Japan’s unemployment rate fell to 2.5% in August from 2.7% in July, which was better than market expectations of 2.6%. Also, the Bank of Japan’s quarterly Tankan survey showed that sentiment among major manufacturers remained at a two-year high in the third quarter.

According to stock trading company platforms, Japanese stocks rose as the yen weakened. The Nikkei 225 index jumped 1.93% to close at 38,652 points, while the broader TOPIX index rose 1.69% to close at 2691 points on Tuesday, recouping some of the losses that followed heavy selling in the previous session, as the weak yen raised expectations for export-oriented Japanese industries. On Monday, the Nikkei 225 fell by about 5% as the yen strengthened on Friday after monetary policy hawk Shigeru Ishiba won the leadership contest to become the country’s next prime minister. Likewise, Japanese stocks tracked gains made on Wall Street overnight as Federal Reserve Chairman Powell reaffirmed his plans for further cuts to US interest rates.

From the United States. U.S. stocks fell sharply on Tuesday after news of missile launches from Iran into Israel. The Dow Jones Industrial Average fell 238 points, or 0.4%, while the S&P 500 fell 1.1% and the NASDAQ Composite fell 1.9%. West Texas Intermediate crude oil rose after Iran fired missiles into Israel. The CBOE Volatility Index (VIX), often called Wall Street’s fear gauge, jumped above 20, reflecting growing concerns among traders.

The attack on Israel comes at a time when the global economy is already grappling with rising inflation and fears of an economic slowdown. Iran’s decision to fire the missiles followed Israel’s military incursion into southern Lebanon, which targeted Hezbollah, an Iranian-backed group. According to the Israel Defense Forces (IDF), the missiles were fired from Iran, prompting warnings for people to seek shelter immediately.

Furthermore, financial markets were quick to react, with the Dow down sharply by mid-morning. The S&P 500 fell 1.4%, and the Nasdaq followed suit, losing more than 2% as investors rushed to adjust their portfolios in response to geopolitical developments.

USD/JPY Technical analysis and Expectations Today:

Based on the daily chart, the overall trend for the USD/JPY pair remains bearish. As I mentioned before, approaching the psychological level of 140.00 will remain key to confirming the strength of the bears’ control over the trend. On the other hand. In the same time frame, bulls will not regain control of the general trend without moving towards the resistance levels of 147.95 and the psychological resistance of 150.00 respectively. Decisively, the USD/JPY price will remain stable around its current range until the reaction to the announcement of the US jobs numbers and the statements of the US Federal Reserve officials.

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Created on October 02, 2024

• The Euro initially did rally a bit during the course of the trading session on Tuesday, only to turn around and fall rather significantly.
• At this point in time, the Euro-yen continues to bounce around the bottom part of the overall consolidation area, and therefore, I think you need to look for signs of a bounce.
• Whether or not it comes remains to be seen, but quite frankly it certainly looks as if we are trying to do everything, we can to turn things around.

After all, the 158 yen level is an area that’s been important more than once. And I do think that you have to be very cautious with trying to short this market in this area. That being said, it’s difficult to get extraordinarily aggressive in this pair right now because of the fact that risk appetite is all over the place. Keep in mind that the European union released CPI numbers that were weaker than the 2% target during the session.

So, some people have been punishing risk appetite in general, but it seems like as the Europeans go home, the Americans are picking up risk appetite as I’m watching indices such as the NASDAQ 100 suddenly look a little perkier. If that does play out, then it’s very likely this market will try to recover and at least get back to the 50 day EMA, which is close to the 161.50 yen level. After that, we have the 200 EMA, which is right around the 163 yen level, and then the resistance bearer at the 164 yen level. In general, I don’t like shorting this market. I do think it is a market that also has to keep in mind that the Bank of Japan recently sat still with its interest rate scenario. So, I think people continue to look for that interest rate swap at the end of every day.

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• Iran attacked Israel with missiles, increasing the conflict in the Middle East.

• Data from the US on job openings revealed better-than-expected demand for labor.

• UK data revealed a decline in factory activity that weighed on the pound.

The GBP/USD forecast points south as the US dollar finds its shine amid escalating Middle East tensions. At the same time, the pound fell after weaker-than-expected UK manufacturing data raised the likelihood of a BoE rate cut.

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On Tuesday, Iran attacked Israel with missiles, increasing the conflict in the Middle East. For weeks, Israel has fought Hezbollah in Lebanon. Market participants worried about a wider war that could impact the global economy. As a result, risk appetite fell, and the dollar rose on safe-haven demand.

Furthermore, data from the US on job openings revealed better than expected demand for labor. Notably, vacancies rose to 8.04 million, beating forecasts of 7.64 million. A resilient labor market will allow the Fed to achieve a soft landing, with inflation reaching 2% and growth remaining steady.

More support for the dollar came from Powell’s speech on Monday. The Fed Chair said the central bank would likely cut twice more this year by a total of 50-bps. Therefore, he pushed back expectations for a massive November rate cut. 

Meanwhile, in the UK, data revealed a decline in factory activity that weighed on the pound. The manufacturing PMI fell to 51.5 in September but stayed in expansion territory. Meanwhile, traders continued to speculate on the upcoming October 30 budget. The new finance minister will announce new tax measures and spending plans that might impact the UK economy and the outlook for monetary policy. Consequently, it might cause a lot of volatility in the GBP/USD pair.

GBP/USD key events today

• US ADP Non-Farm Employment Change

GBP/USD technical forecast: 1.3400 resistance triggers trend reversal

On the technical side, the GBP/USD price is steeply declining after breaking below the 30-SMA and its bullish channel. The previous bullish trend failed to continue beyond the 1.3400 resistance level, where bears took control. Moreover, the RSI made a strong bearish divergence, indicating fading bullish momentum. 

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The price recently breached the 1.3301 support and has paused to retest the level. It trades well below the 30-SMA, and the RSI is nearer the oversold region. Consequently, the bearish bias is strong and could lead to a retest of the 1.3200 support level. 

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Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on consumer confidence and Services PMI data from Japan and US labor market trends.

Improving consumer confidence and service sector activity could bolster bets on a Q4 2024 BoJ rate hike, supporting Yen demand. However, upbeat US labor market data may signal a less dovish Fed rate path, leaving a wider-than-expected interest rate differential between the US and Japan. A less dovish Fed rate path could push the USD/JPY toward 145.

Traders should stay vigilant as this week’s data will impact trading USD/JPY strategies. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY remains well below the 50-day and 200-day EMAs, affirming bearish price signals.

A USD/JPY climb to the 144.5 level could signal a move toward the 145.891 resistance level. Furthermore, a break above the 145.891 resistance level may give the bulls a run at the 147.5 level.

The US and Japan’s economic data and central bank commentary require consideration.

Conversely, a fall through the 143.495 support level could bring the 141.032 support level into play.

The 14-day RSI at 47.53 suggests a USD/JPY drop toward the 141.032 support level before entering oversold territory.

Created on October 01, 2024

• The Pound Sterling is consolidating around $1.3380 at the start of Tuesday’s trading session, down from yesterday’s peak of 1.3422, hovering near its highest levels since March 2022, as traders assess economic and monetary expectations.
• The UK economy grew by 0.5% on a quarterly basis in the second quarter of 2024, slightly below the initial estimate of 0.6%, and expanded by 0.7% in the first quarter.
• Also, Inflation reached 2.2% in August. Meanwhile, the Bank of England kept interest rates steady at 5% in its September 2024 meeting, in line with expectations, and said that a gradual approach to removing policy constraints remains appropriate.

The central bank cut interest rates by a quarter point in August, and another cut in November remains possible. According to Forex Market Trading, the British pound continues to benefit from the general weakness in the US dollar as traders expect faster monetary easing from the Federal Reserve compared to other major central banks, including the Bank of England. During September, the pound rose by 1.9%.

GBP/USD Forecast for this week: All signs are green

The GBP/USD exchange rate could continue to advance in the coming days according to this week’s pattern. The Fed’s statements and US payrolls are the main risks to the positive setup. According to Forex Market Trading, the pound has risen for three consecutive months against the US dollar and maintains positive upward momentum that could extend in the coming days.

Technical forecasts for the GBP/USD pair today:

The GBP/USD exchange rate peaked at 1.3433 last week and has since declined to 1.3385, the level where we find it at the time of writing. Technically, the rally appears to be consolidating around these levels ahead of an eventful week. This consolidation is essential, as the exchange rate rose into overbought territory last week, with the Relative Strength Index (RSI) breaking above 70, which indicates overbought conditions, requiring a pullback or consolidation to recover.

The RSI has since fallen to 63.69, confirming that GBP/USD is no longer overbought on the daily timeframe. Our set of technical indicators are flashing green and calling for gains. For now, any weakness is likely to be temporary. The next upside target is around 1.3510, a set of support and resistance dating back to January 2022.

Commenting on the pair’s performance, Shaun Osborne, analyst at Scotiabank, said: “The broader pattern and chart tone remain bullish for GBP, amid steady GBP gains and strong upside momentum on short-, medium- and long-term oscillators.” he added,  “GBP declines are expected to remain relatively shallow,”

Moving on to event risks over the coming days, the week will be quiet in the UK, but the US will provide important data and speeches from the Fed’s rate-setters. Sterling tends to rise when stock markets are rising, which could continue as long as markets believe the Fed will continue to cut rates.

However, any strong data from the US could signal a slowdown in the pace of rate cuts, which could cause a setback for markets. With this in mind, watch the US PMI survey data on Tuesday and speeches from FOMC members Cook, Collins, Barkin and Bostic. Bowman and Barkin will speak on Wednesday. There are more US PMI numbers on Thursday (covering the services sector), which should keep markets entertained ahead of the week’s highlight, the non-farm payrolls release on Friday.

Here, US jobs are expected to come in at 144,000. The rule of thumb is that anything slightly below that would signal the need for further Fed cuts and maintain a supportive mood for global risks and the pound. Nevertheless, a big drop could backfire as it could signal that the economy may be slipping into recession. If the numbers surprise positively, markets are sure to fall as investors rush to bet that the Fed will slow the pace of cuts. That could deal a blow to the pound and spur a recovery in the US dollar.

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Created on October 01, 2024

• I have been paying attention to the supportive area that we are sitting on, and in this particular market looks as if the ¥160 level continues to be a major region of importance.
• It’s worth noting that yen related pairs across the board all bounced a bit, and it suggests that perhaps the idea of the Japanese yen strengthening wildly is probably a bit overdone.

Technical Analysis

The 200 Day EMA sits just above, and that of course is an area that we need to pay close attention to. Furthermore, it’s also right around the ¥170 level, and of course we have the 50 Day EMA sitting just above there. All things being equal, looks like we are trying to get close to forming a so-called “death cross”, but I don’t see that as being very likely to influence the market, unless of course we have seen a complete shift in attitude.

Because of this, the market is likely to continue to see a lot of volatility and choppiness, but I also recognize that this is a scenario where you are looking at 2 safety currencies, so therefore this could give you an idea as to how to play the so-called “carry trade”, which is when you short a currency with very little in the way of interest rates backing it and buying one that is stronger. For example, the AUD/JPY pair favors the Australian dollar with all things being equal, because you get paid at the end of every day to own it. You can say the same thing about the AUD/CHF pair, so the CHF/JPY pair essentially becomes a signal as to which one of the 2 currencies you are looking to short against higher yielding ones under most circumstances.

Obviously, we have seen a lot of Swiss franc strength, but it pales in comparison to what the Japanese yen has done until recently. The question now is whether or not the “short Japanese yen trade” is coming back into the picture. This chart could be one of the first places that you get an answer to that question.

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