• In my daily Euro/US dollar analysis, it’s hard not to notice that we are essentially sitting still.
• It looks like the 1.08 level will continue to be a bit of a magnet for price.
• And it’s worth noting that if you go back two years, you can see that most of the action is centered around large round figures.

So, for example, the fact that we are at the 1.08 level and bouncing around should not be a huge surprise. We’ve previously seen the 1.07 level and the 1.09 level both be rather important. So, I think we’re just killing time. This does make a certain amount of sense considering that it’s summer and this is typically a low liquidity or at least low volatility time of year and really there’s nothing to do.

Moving Average Suggest Nothingness

Looking at the 50 day EMA and the 200 day EMA indicators, you can see they are essentially flat and lost. So, with this, I think we remain very range bound, and it would not surprise me at all to see this EUR/USD market end up right about where we are by the end of the week. There are a couple of announcements that we will have to pay attention to in the form of the consumer price index and the producer’s price index in America at the end of the week.

That could cause some noise, but really, I don’t see this market moving more than about 100 pips on both of those announcements combined, because it seems like there’s always a narrative to bring things back the other way. The federal reserve is nowhere near cutting interest rates. At least not from what I see, but they are at least acknowledging that they will have to someday and that might be enough to get people excited, but at the same time, the ECB has already cut raids once and are more likely than not going to do so again rather soon. In other words, this is a very ambivalent and neutral pair.

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• In my daily GBP/JPY analysis, the British pound has shown itself to be very strong yet again against the Japanese yen as we continue to see upward trajectory, mainly based on the interest rate differential.
• It does make a lot of sense that we would see this.
• After all, the market is going to continue to be a situation where people take advantage of cheap pounds anytime they get the opportunity.

You also have to keep in mind that the GBP/JPY market is going to see this as a situation where traders look at this as being a little extended to the upside, but over the longer term, I do believe that the interest rate differential will continue to push this market higher over the longer term and it would just be too much for traders to ignore.

A pullback at this point in time would be looking toward the 205 yen level as potential support. On the other hand, if we break down below there then we could be looking at a move down to the 200 yen level which would be an excellent value opportunity from what I see. If for some reason we do drop to the 200 level, I think a lot of people will jump into the market right away on the first signs of strength.

Noisy, But Bullish Overall

All things being equal, this is a market that will continue to be very noisy. But really at this point in time, you have to keep in mind that the bank of Japan has no real recourse due to the fact that they simply cannot do anything about interest rates. The debt in the country of Japan is so overdone at this point in time that any type of interest rate hike is off the table. They have shown proclivity to intervene from time to time, and that is a possibility. But right now, I think any intervention will only be met by more buying on the dip. So therefore, I remain long and strong.

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A note from RBC on the Bank of England and sterling, says that apart from the BoE outlook the currency could drop on fiscal risks regardless. In summary:

• BOE could cut by 50 basis points in both 2024 and 2025, leaving GBP with still one of the highest rates in the G10

But risk for GBP comes from government fiscal policy:

• the constrained fiscal backdrop not leaving much space for flexibility
• any deterioration in fiscal policy credibility would leave sterling vulnerable
• GBP faces more “asymmetric risk to the downside than to the upside”

Forecasts EUR/GBP to 0.91 by Q4 of 2025

• EUR/USD met a decent resistance near 1.0860 so far.
• The decent recovery in the Dollar kept the pair under pressure.
• Chief Powell’s testimony fell on the cautious side.

The US Dollar (USD) regained further upside impulse on Tuesday, prompting the USD Index (DXY) to trespass the 105.00 hurdle amid a generalized risk-off sentiment in the FX world.

This recovery in the Greenback triggered extra selling pressure on EUR/USD, pushing it back to the 1.0800 neighbourhood as market participants digested the first semi-annual testimony by Chief Jerome Powell before Congress, where he once again reiterated that the Committee needs to see further progress on inflation heading towards the Federal Reserve’s (Fed) 2% goal before starting to reduce its interest rates. That said, Powell gave no indication whatsoever of the potential timing of an interest rate reduction.

Following Powell’s testimony, the macroeconomic environment remained relatively stable on both sides of the Atlantic.

The European Central Bank (ECB) is considering further rate cuts beyond the summer, with market expectations pointing to two additional cuts by the end of the year. Conversely, there is still debate among investors about whether the Fed will implement one or two rate cuts this year, despite the bank’s current projection of a single cut, likely in December.

According to the CME Group’s FedWatch Tool, there is about a 74% chance of interest rate cuts in September, rising to nearly 96% by December.

The ECB’s rate cut in June, combined with the Fed’s decision to maintain rates, has increased the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term.

However, the prospects of economic recovery in the Euroland, coupled with the perceived cooling of some key US fundamentals, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, the second testimony by Chair Jerome Powell, Fed speakers, and the release of US inflation figures measured by the CPI are expected to be key drivers for the pair’s price action in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to target the July peak of 1.0845 (July 8), followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, seconded by the weekly high of 1.0998 (January 11) and the psychological 1.1000 barrier.

If bears regain control, spot may confront the 200-day SMA at 1.0798 prior to its June low of 1.0666 (June 26). Down from here emerges the May low of 1.0649 (May 1), and ultimately to the 2024 bottom of 1.0601 (April 16).

Looking at the larger picture, more gains appear to be on the horizon if the critical 200-day SMA (1.0797) is routinely surpassed.

So far, the 4-hour chart indicates the resumption of the downward bias. The initial support comes at the 200-SMA at 1.0783 ahead of the 55-SMA of 1.0767 and then 1.0709. On the upside, initial hurdle aligns at 1.0845 closely followed by 1.0852 and the 1. 0902.The Relative Strength Index (RSI) has dropped to around 51.

• I can see that the GBP/JPY pair is going to continue to be positive, which of course makes a lot of sense considering that you’ve seen a lot of interest rate differential come into play, and it looks like the bulk of traders out there willing to hang on to this pair.
• I know I certainly am and will continue to hold the British pound over the Japanese yen, because of the massive interest rate differential.

Short-term pullbacks at this point in time should be a nice buying opportunity, as it gives us an opportunity to pick up “cheap pounds”, and of course continue to collect that swap at the end of every day. With this being said, it’s also worth noting that the interest rate differential is quite large, and I suspect that there is no real argument to make for it changing anytime soon. Quite frankly, even if the Bank of England did cut rates, the interest rate is still wide enough to drive a truck through, and as long as that’s going to be the case, you get paid at the end of every day to hang on to this pair.

I have no interest in shorting this market because I am not willing to pay to do so. I believe that there are several areas of support underneath, not the least of which would be the ¥205 level, and then again at the ¥200 level. The ¥200 level is also backed up by the 50-Day EMA, which of course is a technical indicator that a lot of people will be paying attention to.

One way trade

I believe that unless something changes quite drastically, this will continue to be a “one-way trade”, as the market has been so bullish that even if we were to pull back, you would have to assume that sooner or later the buyers would come in and try to pick up any type of value that presents itself. As things stand right now, I don’t even have a scenario where I am going to short the GBP/JPY pair.

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• EUR/USD met a decent resistance near 1.0860 so far.
• The decent recovery in the Dollar kept the pair under pressure.
• Chief Powell’s testimony fell on the cautious side.

The US Dollar (USD) regained further upside impulse on Tuesday, prompting the USD Index (DXY) to trespass the 105.00 hurdle amid a generalized risk-off sentiment in the FX world.

This recovery in the Greenback triggered extra selling pressure on EUR/USD, pushing it back to the 1.0800 neighbourhood as market participants digested the first semi-annual testimony by Chief Jerome Powell before Congress, where he once again reiterated that the Committee needs to see further progress on inflation heading towards the Federal Reserve’s (Fed) 2% goal before starting to reduce its interest rates. That said, Powell gave no indication whatsoever of the potential timing of an interest rate reduction.

Following Powell’s testimony, the macroeconomic environment remained relatively stable on both sides of the Atlantic.

The European Central Bank (ECB) is considering further rate cuts beyond the summer, with market expectations pointing to two additional cuts by the end of the year. Conversely, there is still debate among investors about whether the Fed will implement one or two rate cuts this year, despite the bank’s current projection of a single cut, likely in December.

According to the CME Group’s FedWatch Tool, there is about a 74% chance of interest rate cuts in September, rising to nearly 96% by December.

The ECB’s rate cut in June, combined with the Fed’s decision to maintain rates, has increased the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term.

However, the prospects of economic recovery in the Euroland, coupled with the perceived cooling of some key US fundamentals, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, the second testimony by Chair Jerome Powell, Fed speakers, and the release of US inflation figures measured by the CPI are expected to be key drivers for the pair’s price action in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to target the July peak of 1.0845 (July 8), followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, seconded by the weekly high of 1.0998 (January 11) and the psychological 1.1000 barrier.

If bears regain control, spot may confront the 200-day SMA at 1.0798 prior to its June low of 1.0666 (June 26). Down from here emerges the May low of 1.0649 (May 1), and ultimately to the 2024 bottom of 1.0601 (April 16).

Looking at the larger picture, more gains appear to be on the horizon if the critical 200-day SMA (1.0797) is routinely surpassed.

So far, the 4-hour chart indicates the resumption of the downward bias. The initial support comes at the 200-SMA at 1.0783 ahead of the 55-SMA of 1.0767 and then 1.0709. On the upside, initial hurdle aligns at 1.0845 closely followed by 1.0852 and the 1. 0902.The Relative Strength Index (RSI) has dropped to around 51.

• EUR/USD met a decent resistance near 1.0860 so far.
• The decent recovery in the Dollar kept the pair under pressure.
• Chief Powell’s testimony fell on the cautious side.

The US Dollar (USD) regained further upside impulse on Tuesday, prompting the USD Index (DXY) to trespass the 105.00 hurdle amid a generalized risk-off sentiment in the FX world.

This recovery in the Greenback triggered extra selling pressure on EUR/USD, pushing it back to the 1.0800 neighbourhood as market participants digested the first semi-annual testimony by Chief Jerome Powell before Congress, where he once again reiterated that the Committee needs to see further progress on inflation heading towards the Federal Reserve’s (Fed) 2% goal before starting to reduce its interest rates. That said, Powell gave no indication whatsoever of the potential timing of an interest rate reduction.

Following Powell’s testimony, the macroeconomic environment remained relatively stable on both sides of the Atlantic.

The European Central Bank (ECB) is considering further rate cuts beyond the summer, with market expectations pointing to two additional cuts by the end of the year. Conversely, there is still debate among investors about whether the Fed will implement one or two rate cuts this year, despite the bank’s current projection of a single cut, likely in December.

According to the CME Group’s FedWatch Tool, there is about a 74% chance of interest rate cuts in September, rising to nearly 96% by December.

The ECB’s rate cut in June, combined with the Fed’s decision to maintain rates, has increased the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term.

However, the prospects of economic recovery in the Euroland, coupled with the perceived cooling of some key US fundamentals, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, the second testimony by Chair Jerome Powell, Fed speakers, and the release of US inflation figures measured by the CPI are expected to be key drivers for the pair’s price action in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to target the July peak of 1.0845 (July 8), followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, seconded by the weekly high of 1.0998 (January 11) and the psychological 1.1000 barrier.

If bears regain control, spot may confront the 200-day SMA at 1.0798 prior to its June low of 1.0666 (June 26). Down from here emerges the May low of 1.0649 (May 1), and ultimately to the 2024 bottom of 1.0601 (April 16).

Looking at the larger picture, more gains appear to be on the horizon if the critical 200-day SMA (1.0797) is routinely surpassed.

So far, the 4-hour chart indicates the resumption of the downward bias. The initial support comes at the 200-SMA at 1.0783 ahead of the 55-SMA of 1.0767 and then 1.0709. On the upside, initial hurdle aligns at 1.0845 closely followed by 1.0852 and the 1. 0902.The Relative Strength Index (RSI) has dropped to around 51.

• For four consecutive trading sessions, the US dollar against the Japanese yen (USD/JPY) has been subjected to selling operations that pushed it towards the support level of 160.26.
• It is stable around it at the time of writing the analysis, rebounding from the resistance level of 161.95, the lowest level for the Japanese yen in 38 years.
• Its record gains came considering the clear divergence between the hawkish policy of the US Federal Reserve and the Bank of Japan, as well as the divergence in economic performance between them.

On the stock trading platforms front, US stock futures settled on Monday, with the three major averages oscillating around the flat line, after strong gains in the previous week that pushed the S&P 500 and Nasdaq to record closes. Now, traders are preparing for the key Consumer Price Index (CPI) and Producer Price Index (PPI) data due this week and the start of the earnings season.

Also, Federal Reserve Chairman Jerome Powell is set to testify before Congress, as traders look for any further insights into the Fed’s plans for the rest of the year. In addition, the results of the French elections, which saw no party secure a majority, have eased concerns about hawkish fiscal policies.

According to trading platforms, Megacap shares were mixed in pre-market trading, with Apple (0.7%), Nvidia (0.7%) and Meta (0.4%) up while Microsoft and Amazon were around the flatline, and Alphabet was down 0.7%. Also, Boeing shares rose 0.9% before the opening bell after the company agreed to plead guilty to criminal fraud charges.

According to the economic calendar results, Japanese services sentiment is higher than expected.

According to the announcement, the Japan Services PMI rose to 47.0 in June 2024 from a one-and-a-half-year low of 45.7 in May, beating market estimates of 46.3. Noteworthy, this was the first increase in four months, with the household budget trends gauge advancing due to the rise in retail and other related indicators. Also, the employment gauge was higher. Meanwhile, the business trends gauge fell due to a decline in non-manufacturing manufacturing. Furthermore, the economic expectations gauge rose to 47.9 from 46.3 in April, marking its first increase in four months and coming off its lowest level since November 2022, supported by optimism that the economy will continue to recover.

 USD/JPY Technical Analysis and Expectations Today

Based on the daily chart attached, USD/JPY is trying to form a downward channel. Meanwhile, those attempts failed without the currency pair moving towards the support levels of 159.20 and 157.80 respectively. Currently, the currency pair may remain range-bound pending the reaction to the US inflation figures and the content of the testimony of US Federal Reserve Chairman Jerome Powell. In contrast, the bulls are returning towards the resistance level of 161.80, ending the ongoing downward channel attempts.

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• EUR/USD continues to move sideways slightly above 1.0800 on Tuesday.
• The technical outlook points to a loss of bullish momentum.
• Fed Chairman Powell will present the Semi-Annual Monetary Policy Report.

EUR/USD failed to make a decisive move in either direction on Monday and closed the day virtually unchanged. The pair holds steady slightly above 1.0800 early Tuesday as investors stay on the sidelines while waiting for Federal Reserve (Fed) Chairman Jerome Powell’s testimony before the Senate Banking Committee.

In its Semi-Annual Monetary Policy Report published on Friday, the Fed noted that there was further progress on inflation this year but added that they still need greater confidence before moving to rate cuts. Fed Chairman Powell will present this report and respond to questions later in the day.

According to the CME FedWatch Tool, markets currently price in a nearly 23% probability of the Fed leaving the policy rate unchanged in September. In case Powell acknowledges loosening conditions in the labor market, as reflected by the June jobs report, and sticks to an optimistic tone on the inflation outlook, investors could see that as a sign of a confirmation of a September rate cut. In this scenario, the US Dollar (USD) could lose interest and help EUR/USD regain its traction.

On the other hand, the USD could gather strength if Powell refrains from hinting at a September rate reduction by reiterating the data-dependent approach to policy.

EUR/USD Technical Analysis

Monday’s action confirmed 1.0840 (Fibonacci 23.6% retracement of the latest uptrend) as immediate resistance for EUR/USD. If the pair manages to clear that level and starts using it as support, 1.0900 (psychological level, static level) could be seen as the next bullish target.

On the downside, the 100-day and the 200-day Simple Moving Averages form strong support at 1.0800. A daily close below this level could discourage the buyers and open the door for an extended correction toward 1.0760 (Fibonacci 50% retracement).

• EUR/USD continues to move sideways slightly above 1.0800 on Tuesday.
• The technical outlook points to a loss of bullish momentum.
• Fed Chairman Powell will present the Semi-Annual Monetary Policy Report.

EUR/USD failed to make a decisive move in either direction on Monday and closed the day virtually unchanged. The pair holds steady slightly above 1.0800 early Tuesday as investors stay on the sidelines while waiting for Federal Reserve (Fed) Chairman Jerome Powell’s testimony before the Senate Banking Committee.

In its Semi-Annual Monetary Policy Report published on Friday, the Fed noted that there was further progress on inflation this year but added that they still need greater confidence before moving to rate cuts. Fed Chairman Powell will present this report and respond to questions later in the day.

According to the CME FedWatch Tool, markets currently price in a nearly 23% probability of the Fed leaving the policy rate unchanged in September. In case Powell acknowledges loosening conditions in the labor market, as reflected by the June jobs report, and sticks to an optimistic tone on the inflation outlook, investors could see that as a sign of a confirmation of a September rate cut. In this scenario, the US Dollar (USD) could lose interest and help EUR/USD regain its traction.

On the other hand, the USD could gather strength if Powell refrains from hinting at a September rate reduction by reiterating the data-dependent approach to policy.

EUR/USD Technical Analysis

Monday’s action confirmed 1.0840 (Fibonacci 23.6% retracement of the latest uptrend) as immediate resistance for EUR/USD. If the pair manages to clear that level and starts using it as support, 1.0900 (psychological level, static level) could be seen as the next bullish target.

On the downside, the 100-day and the 200-day Simple Moving Averages form strong support at 1.0800. A daily close below this level could discourage the buyers and open the door for an extended correction toward 1.0760 (Fibonacci 50% retracement).