1. Long of the USD/JPY currency pair. This produced a gain of 0.67%.
2. Long of the AUD/JPY currency cross. This produced a gain of 1.13%.
3. Long of the NZD/JPY currency cross following a daily close above ¥97.79. This did not set up.
4. Short of the USD/ZAR currency pair following a rejection of the resistance area at 18.18 to 18.25, targeting 17.60. This trade produced a loss.
5. Long of the NASDAQ 100 Index following a daily close above 20,000. This did not set up.
6. Long of the S&P 500 Index following a daily close above 5,500. This did not set up.

The overall result was a net gain of 1.80%, minus whatever was risked on the USD/ZAR trade.

Last week’s key takeaways were:

1. US Core PCE Price Index data increased by 0.1% month-on-month, per market expectations. This is the Fed’s favourite inflation indicator, so it is closely watched. The increase was lower than the previous month’s.
2. Australian and Canadian CPI data came in higher than expected. Australia’s annualized rate increased from 3.6% to 4.0% when a rate of only 3.8% was expected. Canadian CPI saw a month-on-month increase of 0.6% when an increase of only 0.3% was expected. The data may have contributed to a sense that global inflation is not declining as hoped for.
3. US Final GDP data confirmed that the US economy is growing at an annualized rate of 1.4%, as expected.

Another key event is the strong showing by far-right parties in polls concerning the general election in France following the far-right’s victory in the European Parliament elections. The final opinion poll before today’s vote shows the National Rally party taking 37% of the vote, which could even give the party a Parliamentary majority after the second round of voting next week.

Other important data releases last week were:

1. US Pending Home Sales – this came in well below expectations, suggesting slower demand for housing, which in turn suggests a slowing economy.
2. US CB Consumer Confidence – this came in almost exactly as expected.
3. US New Home Sales – came in just slightly below expectations.
4. US Unemployment Claims – as expected.
5. Canadian GDP showed a 0.3% month-on-month increase, exactly as expected.

The most important items over this coming week will be:

1. US FOMC Meeting Minutes.
2. US Non-Farm Payrolls / Average Hourly Earnings.
3. Eurozone CPI Flash Estimate.
4. German Preliminary CPI.
5. Swiss CPI.
6. French Parliamentary Elections, first round. The far right’s weaker-than-expected showing might boost the Euro.
7. UK Parliamentary Elections. A Labour landslide is a forgone conclusion.

Other major data releases due this week are:

1. Chinese Manufacturing PMI
2. US ISM Manufacturing PMI
3. US ISM Services PMI
4. US Unemployment Claims
5. Canadian Unemployment Rate

Thursday will be a public holiday in the USA.

I made no monthly forecast last month.

This month, I forecast that the USD/JPY currency pair will increase in value.

Last week, I made no weekly forecast, as there were no unusually large swings in any Forex currency crosses, which is the basis of my weekly trading strategy. Again, I have no weekly forecast, as this situation is unchanged.

Directional volatility in the Forex market fell last week, with only 11% of the most important currency pairs fluctuating by more than 1%.

Last week, the Australian Dollar showed relative strength, while the Japanese Yen showed relative weakness.

You can trade these forecasts in a real or demo Forex brokerage account.

The US Dollar Index printed a doji candlestick last week, which closed just above the previous week’s high. A doji candlestick at a swing high or low, such as this one, suggests indecision. This analysis is reinforced by the fact that the price action was contained just below the descending trend line above, the horizontal resistance level at 105.80, and the round number at 106.00. This suggests that the price is trying to make a bullish breakout beyond this area, which would be technically significant, but is failing to achieve it so far.

There is a bullish long-term trend as the price is above its levels from 3 months ago and its price of 6 months ago. This trend is now looking more solid. However, bulls need to generate a sustained breakout beyond 106.00 before we will see truly strong technical bullishness here.

It may make sense to trade the US Dollar long now, but I will feel much more comfortable doing that once we get daily closes of this Index above 105.80, a bit below 106.00. I see the Dollar as a bit of a sideshow, with the Forex market currently driven by weakness in the Japanese Yen and strength in the Australian Dollar.

The USD/JPY currency pair printed a bullish candlestick last week, again making a record-high weekly close, closing not far from the high of its weekly range. The closing price was only about 35 pips below the multi-decade high price earlier in the week.

The Japanese Yen has been showing a real long-term weakness as the Bank of Japan continues to stall in really changing its ultra-loose monetary policy.

The US Dollar has become a better currency to use on the long side to exploit the Yen’s weakness, as it is moving within a long-term bullish trend. However, there are other Yen crosses that it may be better to be long of over the coming week, as the Dollar Index seems somewhat stuck below key resistance.

Long trades may work out well here over the coming week. However, bulls need to beware of potential sudden intervention by the Bank of Japan or profit-taking when key psychological levels such as ¥162.00 or the high of ¥161.23 are reached.

As a trend trader, I am very happy to be long of this currency pair. 

I expected that the AUD/JPY currency cross rose strongly last week, continuing its long-term bullish trend as it reaches new long-term high prices. It is worth noting that the Australian Dollar was the strongest major currency last week and has consistently gained over the past year against other currencies, so it is showing a bullish long-term trend and is in focus.

On the other side of this currency cross, the Japanese yen is weak, which is the major defining feature of the Forex market right now.

These are good reasons to be long of this currency cross – both the short-term momentum, best of momentum, and the long-term trends in the market all support taking this position. I see this cross as a buy.

The EUR/JPY currency cross rose firmly during the week, continuing its strong long-term bullish trend as it reached new long-term high prices. Interestingly, the Euro performed quite well last week when France seems set to elect a government that will cause a political earthquake at the heart of the Eurozone. If the result is not as favourable to the far right as polls suggest, we could see a stronger bullish move in the Euro tomorrow.

The Japanese yen is weak, which is the major defining feature of the Forex market right now. This is a good reason to be short of the Japanese Yen. As the Euro is showing some momentum, this cross may be a good one to use to try to exploit that, but it makes sense to watch for the exit polls from France first before entering any new trade here at the start of this week.

The CAD/JPY currency cross rose firmly last week, continuing its long-term bullish trend as it reached new long-term high prices. The Canadian Dollar performed quite well last week after Canadian CPI data showed inflation is running a bit hotter than expected, which caused a small hawkish tilt on rates, boosting the relative value of the Loonie.

The Japanese yen is weak, which is the major defining feature of the Forex market right now. This is a good reason to be short of the Japanese Yen. As the Canadian Dollar is showing some momentum supported by data, this cross may be a good one to exploit over the coming week.

The EUR/USD currency pair hardly moved much last week. However, the coming week could be much more interesting, with the markets expecting a strong showing by the far right in today’s French Parliamentary election. If their performance is even stronger than expected, we could see the Euro take a hit. If significantly worse, the Euro could get a bounce.

The US Dollar is in a bullish long-term trend which could reassert itself with short-term momentum soon, and if the Euro is also being sold, this could produce a strong move here.

It is worth keeping an eye on the EUR/USD this week. The biggest opportunity is likely to be a short trade below $1.0686.

I expected the AUD/USD currency pair to have potential support at $0.6631.

The H1 price chart below shows how an inside bar, marked by the up arrow in the price chart below, rejected this support level near the start of last Monday’s Tokyo session, signaling the timing of this bullish rejection.

This trade was nicely profitable, giving a maximum reward-to-risk ratio of approximately 3 to 1.

Although the Australian Dollar is strong and in a long-term bullish trend, the action here is likely to stay quite choppy, as the US Dollar is also relatively strong and moving within a long-term bullish trend.

The NASDAQ 100 Index reached a new all-time high two weeks ago above the huge round number of 20,000. However, although the price briefly traded above the huge round number at 20,000 last week, the price quickly fell back to end the week as an indecisive doji candlestick.

The price action suggests there continues to be strong profit-taking above 20,000. However, the bearish price movements we see are not large drops, and the price remains relatively close to the high made earlier in the week.

It makes sense to be bullish on this major stock market index when it has recently made a new record high. Historical precedent shows this tends to produce further gains quickly. However, it will be prudent to wait for a daily close above 20,000 to prove that bulls truly seem to be in control.

I, therefore, see the NASDAQ 100 Index as a buy following a daily close above 20,000.

I see the best trading opportunities this week as follows:

1. Long of the USD/JPY currency pair.
2. Long of the AUD/JPY currency cross.
3. Long of the CAD/JPY currency cross.
4. Long of the NASDAQ 100 Index following a daily close above 20,000.

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USD/JPY Forecast Video for 14.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has shown a bit of negativity during the trading session on Monday, as we continue to see a lot of back and forth in the US dollar/Japanese Yen pair. Ultimately, this is a market that continues to see a lot of external pressures, not the least of which of course would be the Bank of Japan. After all, the Bank of Japan is going to continue to fight interest rates rising in the 10 year yield, so that of course puts negative pressure on the Japanese yen over the longer term as they have to print more currency.

The 50-Day EMA and the 200-Day EMA both are sitting right around the middle of the candlestick, but at this point in time they are both relatively flat, so I don’t know how much that is going to mean. The market will continue to see a lot of noisy behavior, but ultimately, I still think you have to keep an eye on the interest rate market, especially as the 50 basis points level was so vehemently defended. If you pay close attention to the 10 year yield in Japan, anytime we get closer to the 50 basis points, then it means that the Japanese Yen should start to sell off yet again. On the other hand, if interest rates continue to drop off like it did during the day on Monday, then we will continue to see the Japanese yen pick up a little bit of strength.

You also have to pay attention to the Federal Reserve, and whether or not it sounds like it is going to continue to be very tight and squash speculation. The market then could see US dollar strength in that case. That being said, the market did gap lower to kick off the session, so that suggest that we do have plenty of negativity. Ultimately, the market could drop down toward the ¥130 level, assuming that we continue to see interest rates fall around the world. On the other hand, if interest rates start to pick back up, then it means that the US dollar should continue to go higher.

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

This article was originally posted on FX Empire

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GBP/JPY Forecast Video for 15.05.23

British Pound vs Japanese Yen Weekly Technical Analysis

The British pound has pulled back a bit against the Japanese yen during the course of the week, as the ¥172 level has been an area of selling pressure. If we can break above there, obviously, it would be a very bullish sign, but right now it looks like we have some work to do. Ultimately, this is a market that I think you have a situation where it remains a “buy on the dips” type of scenario. Because of this, I don’t have any interest in shorting this market, at least not until we break down below the ¥165 level, something that I don’t see happening anytime soon.

Alternatively, if we can break above the ¥172.50 level, then I think the British pound could open up the market for a much bigger move, reaching the ¥175 level and beyond at that point. It makes a certain sense as the Bank of Japan continues to see yield curve control as a necessity, and therefore the Japanese yen will be soft in general. By contrast, the Bank of England continues to fight inflation, and the rate hike this week will only make the differential between the 2 currencies even stronger. That being said, the market did give back some of the gains after the interest rate hike announcement, but that’s not that uncommon as perhaps traders were willing to take a profit.

At this point, I don’t have any interest in shorting. Therefore, I remain very bullish on the spare, but I also recognize that there is a lot of volatility out there and there is a certain amount of risk appetite that goes along with this pair as well. In other words, be careful and don’t get oversized in your position at any one time.

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

This article was originally posted on FX Empire

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• In my daily dollar yen analysis, I see a market that is very bullish.
• Despite the fact that we did pull back a bit during the early hours of Thursday, it looks like this continues to be a buy on the dip market.
• The U S dollar pulling back to the 160 yen level is rather interesting due to the fact that it is a large round psychologically significant figure, but it’s also where the Bank of Japan stepped in and intervened previously.

With the Friday announcement of the Core PCE Price Index numbers in America, that could have a major influence on what happens with Federal Reserve monetary policy. After all, it’s one of their favorite inflation indicators, so of course the market pays close attention.

160 JPY Matters

If we were to break down below the 160 yen level, I do think that there are multiple support levels worth paying attention to. The 158 yen level is an area that I’d be interested in. After that, then the 50 day EMA in even as low as 155 yen. This of course is assuming that it is not Bank of Japan intervention that pushes us back down because we’re already starting to hear little bits and pieces of that possibly in the marketplace.

So, at this point I remain very bullish. I would love to see the Bank of Japan intervene so I could buy the dollar three or four handles lower, but at this point it’ll be difficult to simply wait for that. You have to trade the market in front of you. I do think that the Friday announcement of the Core PCE Price Index is going to be the big story here. So, if we get something kind of in line, then maybe a little bit of a pullback occurs, and we buy that. If it’s a little bit under, maybe a little bit of a pullback occurs and then we do jump into the USD/JPY market eventually as well. The one thing that could cause the Bank of Japan to get involved is if the Core PC Price Index numbers come out much hotter than anticipated.

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GBP/JPY Forecast Video for 07.08.23

British Pound vs Japanese Yen Technical Analysis

The British pound has gone back and forth during the course of the trading session on Friday, as we continue to look underneath at the ¥180 level as a major floor in the market. With that being the case, it’s likely that we continue to see a lot of buyers on dips, if for no other reason than the massive amount of interest rate differential that you collect by holding this market.

Underneath, the ¥180 level also is being backed up by the 50-Day EMA, and therefore I think you have a lot of technical support in that area. All things being equal, this is a situation where there will be plenty of value hunters. If we break above the top of the candlestick, then it is likely that we go looking to the ¥183.50 level, possibly even the ¥184 level. After that, it’s likely that we test the ¥185 level, which opens up the door for a much bigger move, perhaps all the way to the ¥200 level, which is my longer-term target as things stand currently.

If we were to turn around and break down below the 50-Day EMA, I’m not necessarily going to be selling this market. I think it’s probably only a matter of time before we would see quite a bit of support where we have the bottom of the couple of candlesticks after the recent selloff, and then of course the ¥175 level. The ¥175 level is an area we broke out of, and now should have a lot of “market memory” attached to it.

As long as we can stay above there, it looks to me like the market is going to continue to find buyers, and of course we are in a major uptrend that has been in contact for quite some time. Ultimately, I have no interest in buying the Japanese yen as long as the Bank of Japan continues to see its monetary policy needing to be ultra loose, and there is no sign they are going to change their attitude anytime soon, and it’s probably worth noting that the British just raised interest rates yet again.

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

This article was originally posted on FX Empire

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GBP/JPY Forecast Video for 14.04.23

British Pound vs Japanese Yen Technical Analysis

The British pound has rallied a bit during the trading session on Thursday to show signs of strength again, but it looks like there is still a significant amount of resistance just above that could cause some issues, and therefore it’s worth noting that the market will continue to be difficult to overcome in that area. However, I think we also have a situation where the noise above is without a doubt a major contributor to a lot of the confusion, and quite frankly hesitation that we will continue to see in the market.

The ¥166 level has been important multiple times, therefore it’s not a huge surprise to think that it’s an epicenter of trading as we formed a hammer leading up to it, but then saw the level pull price right back to it to show it itself as a bit of a magnet. Ultimately, I think you’ve got a scenario where the market will continue to be a situation where we will see plenty of questions asked about this region, and I think a pullback at this point in time would make a certain amount of sense. That being said, I also believe that a pullback at this point could very well end up being a value proposition as we’ve seen so much strength in the British pound.

At this point, the market is trying to break out and I think it’s probably only a matter of time before does, simply based on British pound strength. What the Japanese yen does probably remains to be seen, but it should be noted that the Bank of Japan continues its yield curve control policy, but as time goes on, a lot of this is starting to go by the wayside, as yields have dropped. In other words, it appears that the market is probably starting to pay attention to other concerns. With this, I think we’ve got a situation where we will pull back, but there will be plenty of buyers underneath to take advantage of potential value in a market that clearly has a lot of momentum over the last couple of weeks to the upside.

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

This article was originally posted on FX Empire

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GBP/JPY Forecast Video for 22.03.23

British Pound vs Japanese Yen Technical Analysis

The British pound has rallied a bit against the Japanese yen during the trading session on Tuesday, showing signs of life as we are testing the 50-Day EMA and the 200-Day EMA indicators. Ultimately, this is a situation where I think you’ve got a lot of questions to ask, but it certainly looks to me as if the British pound is trying to find its footing against the Japanese yen, or more explicitly, the Japanese yen is struggling against the British pound, and many other currencies around the world.

Pay close attention to the bond market because higher interest rates around the world will put pressure on the Japanese yen as the Bank of Japan continues to implement yield curve control. They have a hard limit of 50 basis points on the 10 year note, but at this point in time it’s not overly threatened. However, as rates rise, people will start to predict that the Japanese will have to print more currency in order to buy those bonds. This is exactly what happened last year, so there is a certain amount of recency bias to that as well.

Underneath, the ¥160 level is an area where we have seen support multiple days in a row, and have not been available to close below, despite the fact that it had attempted to do so for most of the last week. In other words, it does make quite a bit of sense that the market will continue to look at the ¥160 level as a significant barrier, and as long as we can stay above there one would have to think that there are buyers willing to get involved. Just above, we have the ¥162.50 level, an area that is of interest due to market memory coming into the picture, but it’s likely that we could then go to the ¥165 level. The ¥165 level has been a significant barrier previously, so one would have to assume that it is still very much intact. If we can break above there, obviously it would be very bullish but I don’t see that happening in the next day or so.

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

This article was originally posted on FX Empire

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GBP/JPY Forecast Video for 23.06.23

British Pound vs Japanese Yen Technical Analysis

The British pound initially shot higher during the trading session on Thursday, as we have seen a lot of upward pressure over the last several weeks. Ultimately, the market did give back some of the gains, showing signs of hesitation after the Bank of England raised interest rates by 50 basis points instead of the expected 25. That being said, there are some questions as to whether or not they just fired all of their shots in one go, meaning that there may not be as much to get excited about. However, at the same time we have the Bank of Japan with its loose monetary policy, and it suggests that we could see this pair eventually go higher, due to the fact that the Japanese have reiterated their desire to continue the quantitative easing.

Underneath, we have the ¥180 level, which of course is a large, round, psychologically significant figure, and an area where you would expect to see a lot of psychological importance placed on that number. If you break down below there, then it’s likely that we could go lower, perhaps reaching down to the ¥177.50 level. The market will continue to see a lot of upward momentum, but in reality, we still see plenty of traders out there that would be looking to get into this obviously bullish trade. Furthermore, even if we were to continue falling, the market would continue to see the ¥175 level offer support. Beyond that, we also have a 50-Day EMA racing toward that figure as well.

As things stand right now, I think short-term pullbacks continue to be buying opportunities, and that the market is trying to find its way to ¥185. In fact, it’s possible that we could go as high as ¥200 over the longer term, and therefore I think we’ve got a situation where longer-term traders are going to continue to hang on to this pair, but it’s obvious that the market will continue to see volatility as it typically does in this pair.

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

This article was originally posted on FX Empire

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• The Pound Sterling hit six-week lows near 1.2600 against the US Dollar.
• GBP/USD’s fate hinges on the UK election results and US Nonfarm Payrolls data.
• Any Pound Sterling recovery is set to be limited so long as the daily RSI stays below 50.

The Pound Sterling (GBP) continued to weaken against the US Dollar (USD) for the fourth week in a row, dragging the GBP/USD pair to a six-week low just above 1.2600. All eyes turn to the much-awaited UK general elections on July 4 and the US Nonfarm Payrolls data on July 5 for a fresh directional impetus to GBP/USD.

Pound Sterling extended its losing streak

The US Dollar extended its previous week’s strength and exacerbated GBP/USD’s pain. Greenback buyers flexed their muscles on fresh pushback by US Federal Reserve (Fed) policymakers against interest rate cuts this year, especially after the S&P Global preliminary US business activity jumped to a 26-month high on Friday. Data indicated fresh signs of US economic resilience, suggesting that the Fed could hold rates higher for longer.

Moreover, Fed Governor Michele Bowman’s hawkish commentary on Tuesday backed the US Dollar upside. Bowman said, “we are still not yet at the point where it is appropriate to lower the policy rate.” Governor Lisa Cook argued that the timing of the rate cut is unclear even though “Inflation has slowed, and the labor market tightness has eased.”

Renewed hawkish Fed expectations boosted the US Treasury bond yields, fuelling a fresh US Dollar advance at the expense of the Pound Sterling. Markets’ pricing of a 25 basis points (bps) Fed rate cut in September stayed almost unchanged at 57% during the week, according to CME FedWatch Tool. 

The US Dollar also found demand from the half-year-end flows, as traders adjusted their positions heading into a likely first interest rate cut by the Fed this year. Further, the continued decline in the Japanese Yen to a 38-year low, propelled USD/JPY beyond 161.00, providing extra legs to the buck’s upsurge to two-month highs against its major currency rivals. This mainly contributed to the ongoing downtrend in the GBP/USD pair, as it touched its lowest since May 15 at 1.2613.

Meanwhile, Thursday’s mixed US final Gross Domestic Product (GDP) estimate, Durable Goods Orders and Pending Home Sales data briefly caused a retreat in the US Dollar, in part due to profit-taking ahead of Friday’s US Personal Consumption Expenditures (PCE) inflation data. The first US presidential election debate between President Joe Biden and Republican Presidential Nominee Donald Trump failed to have any meaningful market impact.

The Pound Sterling’s recovery attempts got sold into the market’s anxiety ahead of next week’s UK general elections, in the face of limited market-moving events from the UK. Data showed on Friday, the UK economy grew 0.7% QoQ in the first quarter of 2024, revised upward from the preliminary reading of 0.6%. 

On the last trading day of the second quarter, the data from the US showed that the PCE Price Index remained unchanged on a monthly basis in May. The core PCE Price Index, the Fed’s preferred gauge of inflation, rose 2.6% on a yearly basis. This reading followed the 2.8% increase recorded in April and came in line with the market expectation. As the USD struggled to gather strength after this data, GBP/USD held comfortably above 1.2600 heading into the weekend.

UK election and US Nonfarm Payrolls in the spotlight

GBP/USD traders witnessed a calm before the upcoming week’s storm, with a raft of high-impact events from both sides of the Atlantic lined up.

Monday kicks off with risk sentiment likely to be driven by Sunday’s French Parliamentary elections and China’s official Manufacturing and Services PMI data.

Later that day, the US docket will feature the ISM Manufacturing PMI report. On Tuesday, the US Job Openings survey will be published. However, the main focus will be on Fed Chair Jerome Powell’s words, as he participates in a policy panel at the annual European Central Bank’s  (ECB) Forum on Central Banking in Sintra, Portugal.

GBP/USD’s reaction to Powell’s remarks could be temporary, as it is ahead of Wednesday’s Automatic Data Processing (ADP) Employment Change report, ISM Services PMI, and Minutes of the Fed’s June meeting.

The UK election will grab the eyeballs on Thursday, as Labour holds a 23-point lead over the Conservatives, according to the second and penultimate Ipsos voting intention poll of the election campaign. But, Rishi Sunak emerged as the most unpopular Prime Minister with Ipsos ever at this stage of the campaign. The outcome of the UK election is likely to have a significant impact on the Bank of England’s policy actions and the Pound Sterling’s medium-term outlook.

It’s a US market holiday on Thursday, and therefore, thin trading could exaggerate the UK election-led moves in the pair.

The US labor market report, including the Nonfarm Payrolls and Average Hourly Earnings, will be published on Friday alongside the weekly Jobless Claims data, drawing an end to an eventful week.

Traders will closely scrutinize speeches from the Fed policymakers for fresh insights on the rate-cut timing, affecting the value of the US Dollar and the performance of the major.

GBP/USD: Technical Outlook

Pound Sterling extended its bearish momentum, following a downside break of the rising trendline support two weeks ago.

The 14-day Relative Strength Index (RSI) points south below 50, currently near 42, adding credence to further downside moves.

Further, the pair has also breached the key support at 1.2645, the confluence of the 50-day Simple Moving Average (SMA) and the 100-day SMA, in another bearish signal.  

However, a fresh bullish crossover, represented by the 50-day SMA crossing above the 100-day SMA on Thursday, warrants caution for sellers.

GBP/USD needs a decisive break below the May 15 low of 1.2584 for the downtrend to regain traction.

The 200-day SMA at 1.2564 will be the next line of defense for Pound Sterling buyers, below which a fresh decline toward the May 9 low of 1.2446 will be on the cards.

On the flip side, buyers must yield a weekly candlestick close above the aforesaid key confluence support-turned-resistance at 1.2645. The next upside target is aligned at the 21-day SMA at 1.2715.

Acceptance above the latter would open the door for a test of the 1.2800 static resistance, followed by the March 8 high of 1.2894.