• The EUR/USD exchange rate is in an undeniably bullish trend, and while it looks overbought, it would take a brave bet to bet against further gains this week.
• At the same time, we would caution against any volatility at the end of the month.
• The EUR/USD gains have stabilized around the 1.1200 resistance level, the highest level for the currency pair in more than a year. 

EUR/USD Technical analysis and forecast: 

Overall, the EUR/USD pair rally makes it overbought according to the Relative Strength Index (RSI), which is now at 70. Technically, the exchange rate was certainly overbought last week. Also, the relatively flat trading in the EUR/USD pair on Monday and into Tuesday allowed some overbought conditions to ease. 

Consequently, this serves as a reminder that the RSI can reverse from overbought at a stable exchange rate and does not necessarily signal a pullback. The overarching theme we’re looking for at the end of the month is a more subdued EUR/USD price action, with recent highs likely to be out of reach for now. 

Commenting on the performance of the most traded pair in the forex market, analyst Sean Osborne at Scotia Bank sees another technical signal indicating near-term exhaustion. Although his thesis is that the near-term weakness will prove limited. The analyst said, “Short-term trading patterns suggest that the euro price may have peaked in overnight trading after forming a bearish ‘evening star’ pattern on the 6-hour charts. Minor losses through quiet European trading tend to confirm this development. But losses are likely to remain limited in the near term at least.” 

According to reliable trading platforms, the Euro rose sharply against the US Dollar on Friday after Federal Reserve Chairman Jerome Powell effectively gave the green light to cut US interest rates in September: Powell said in a speech at the Jackson Hole symposium, “The time has come to adjust policy.” 

The speech was a surprise because it repeatedly pointed to concerns that the Labor market was at risk of deterioration, suggesting that the Fed needed to cut US interest rates to protect jobs. Furthermore, Financial markets had raised expectations that the Fed could start the US rate-cutting cycle with a large 50 basis point cut. 

Overall, the US dollar’s ​​trading this week will be determined by the evolution of expectations for a 50-basis point rate cut: if expectations increase, the euro could rise against the US dollar (EUR/USD). If expectations fade, the exchange rate could fall again. The highlight of the economic data will be the release of the personal consumption expenditures deflator on Friday, a measure of inflation that affects consumers. The US Federal Reserve tends to watch it closely, but we think there is limited opportunity for some kind of surprise that could change the broader narrative. 

In his speech at Jackson Hole, Jerome Powell added that he is confident that US inflation will not return suddenly and that it is now more focused on the Labor market. Obviously, this suggests that the release of the US Non-Farm Payrolls report in early September will be the next major event for the US dollar. 

The next major data release in the US will be the US jobs report on Friday. However, be aware that we are also approaching the end of the month. This can lead to some unusual non-news Forex market movements, and we will not see any unusual moves as a sign that current trends are changing. 

On the stock exchanges front, European stocks were generally higher on Tuesday, recovering from yesterday’s subdued session as financial markets continued to assess the latest economic data and gauge potential responses from major central banks. According to trading, the euro zone’s STOXX 50 index rose 0.2% to more than 4,900, while the pan-European STOXX 600 index added 0.3% to approach the 520 thresholds, its highest level in more than a month. Recently, it has been supported by major mining stocks in the broader index as the London Stock Exchange reopened after a longer weekend. 

According to an economic announcement, German consumer confidence as measured by GfK unexpectedly fell to its lowest level since May, underscoring the weak sentiment in the currency bloc’s largest economy after yesterday’s poor Ifo results. However, financial stocks rebounded with Santander, BNP Paribas, Munich Re and Allianz adding between 1.3% and 0.5%. Automakers also rose, led by Stellantis, BMW and Mercedes. Elsewhere, technology stocks continued to fall, with ASML down 0.5% ahead of Nvidia earnings today. 

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• Market focus is squarely on the rate cut outlook in the US and the UK.

• The UK economy is doing better than expected, boosting the pound.

• The US will release GDP and PCE data this week. 

The GBP/USD forecast shows a slight pullback in a bullish trend, with the pound near a two-year high hit in the previous session. The rally to this peak came as markets bet on more rate cuts by the Fed than the Bank of England. Meanwhile, markets awaited US GDP and inflation data.

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Sterling eased slightly on Wednesday after reaching a new peak. Market focus is squarely on the rate cut outlook in the US and the UK. According to bets, the Fed might implement 100 bps in cuts this year. Meanwhile, the Bank of England might cut by 40 bps after a 25 bps cut in August. At the same time, the UK economy is doing better than expected, boosting the pound.

On Friday, the BoE Governor and Fed Chair spoke about rate cuts. Powell indicated it was time for the Fed to start lowering borrowing costs because the labor market had shown weakness. As a result, bets for a September cut rose, sinking the dollar. 

On the other hand, Andrew Bailey cautioned against rushing to cut rates. He noted that it was too early to know if the fight to tame inflation was done. Consequently, rate cut expectations fell, and the pound rose. 

However, incoming data might shift the outlook for UK and US policy. The US will release GDP and PCE data this week, which might alter expectations. 

GBP/USD key events today

Trading will likely remain this as neither Britain nor the US will release major reports. 

GBP/USD technical forecast: Bears take over as bulls show exhaustion

On the technical side, the GBP/USD price is retreating after making a higher high. Nevertheless, the bias remains bullish, with the price above the 30-SMA and the RSI over 50. Bulls have maintained a steep price trend above the SMA. It recently broke above the 1.3150 resistance level and was heading for the 1.3301 critical level. However, the journey to the 1.3150 level was difficult.

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The RSI showed a slight bearish divergence, indicating exhaustion. As a result, bears have taken over. However, the bullish trend will continue if the price stays above the SMA.

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• Market focus is squarely on the rate cut outlook in the US and the UK.

• The UK economy is doing better than expected, boosting the pound.

• The US will release GDP and PCE data this week. 

The GBP/USD forecast shows a slight pullback in a bullish trend, with the pound near a two-year high hit in the previous session. The rally to this peak came as markets bet on more rate cuts by the Fed than the Bank of England. Meanwhile, markets awaited US GDP and inflation data.

-Are you interested in learning about forex live calendar? Click here for details-

Sterling eased slightly on Wednesday after reaching a new peak. Market focus is squarely on the rate cut outlook in the US and the UK. According to bets, the Fed might implement 100 bps in cuts this year. Meanwhile, the Bank of England might cut by 40 bps after a 25 bps cut in August. At the same time, the UK economy is doing better than expected, boosting the pound.

On Friday, the BoE Governor and Fed Chair spoke about rate cuts. Powell indicated it was time for the Fed to start lowering borrowing costs because the labor market had shown weakness. As a result, bets for a September cut rose, sinking the dollar. 

On the other hand, Andrew Bailey cautioned against rushing to cut rates. He noted that it was too early to know if the fight to tame inflation was done. Consequently, rate cut expectations fell, and the pound rose. 

However, incoming data might shift the outlook for UK and US policy. The US will release GDP and PCE data this week, which might alter expectations. 

GBP/USD key events today

Trading will likely remain this as neither Britain nor the US will release major reports. 

GBP/USD technical forecast: Bears take over as bulls show exhaustion

On the technical side, the GBP/USD price is retreating after making a higher high. Nevertheless, the bias remains bullish, with the price above the 30-SMA and the RSI over 50. Bulls have maintained a steep price trend above the SMA. It recently broke above the 1.3150 resistance level and was heading for the 1.3301 critical level. However, the journey to the 1.3150 level was difficult.

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The RSI showed a slight bearish divergence, indicating exhaustion. As a result, bears have taken over. However, the bullish trend will continue if the price stays above the SMA.

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• The USD/JPY currency pair failed to rebound upwards during yesterday’s trading, failing to exceed the 145.17 level.
• Also, the Japanese Yen soon resumed its gains, stabilizing around the 143.95 level at the beginning of today’s Wednesday session.
• Furthermore, the pair’s movements came despite geopolitical risks in the Middle East driving demand for safe-haven assets for both currencies.
• Likewise, the Japanese yen continued to receive support from the divergent monetary policies between Japan and the United States.

Last week, Bank of Japan Governor Kazuo Ueda told parliament that the Japanese central bank may adjust monetary policy if its economic forecasts prove correct, indicating its readiness to raise interest rates again. On the other hand, US Federal Reserve Chairman Jerome Powell said in his speech in Jackson Hole that it is time to adjust policy amid increasing risks to the Labor market, while expressing confidence that inflation will return to the US central bank’s 2% target.

According to economic analysts, investors are now looking to July industrial production, retail sales, and unemployment figures, as well as August Tokyo inflation figures to guide economic and interest rate expectations in Japan.

On the stock trading front, Japanese stocks rose in a broad-based advance. According to trading, the Nikkei 225 index of Japanese stocks rose by 0.47% to close at 38,289 points. Meanwhile the broader TOPIX index rose by 0.73% to close at 2,681 points on Tuesday, erasing losses incurred earlier in the session, with all sectors participating in the advance. In general, the decline in the yen helped Japanese stocks as investors continued to assess the divergent monetary policies between the Bank of Japan and the Federal Reserve.

Also, hopes that Nvidia’s earnings this week will boost AI helped. Index heavyweights such as Mitsubishi Heavy Industries (4%), Mitsui E&S (8.7%), Seven & I Holdings (4.1%), Toyota Motor (1.8%) and Sony Group (2.8%) were strong performers. Meanwhile, technology stocks were mostly lower including LaserTech (-4.3%), Disco Corp (-2.1%) and Tokyo Electron (-0.9%).

USD/JPY Technical analysis and Expectations Today

Based on the daily chart, the USD/JPY exchange rate is still in its broader downtrend and the next support levels will be 141.65 and 140.00 respectively which will move the technical indicators towards strong oversold levels. On the other hand, and for the same time frame, the psychological resistance of 150.00 will remain the most important for bulls to regain control of the trend. Obviously, the USD/JPY rate will continue to be influenced by the path of global central bank policies as well as investors’ appetite for risk or lack thereof.

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EUR/USD Current price: 1.1112

• Upcoming first-tier data and earnings results exacerbate caution on Wednesday.
• The US Dollar found demand after reaching a fresh YTD low at 100.52.
• EUR/USD could extend its slide in the near term, but buyers will likely return at lower levels.

The EUR/USD pair is in retreat mode on Wednesday, as the US Dollar finally found some near-term demand, approaching the 1.1100 threshold ahead of Wall Street’s opening. The USD advance seems to be the result of some profit-taking after the Dollar Index (DYX) neared the 100 level for the first time in over a year.

Market players are turning more cautious ahead of first-tier data and upcoming earnings reports. Both the Eurozone and the United States (US) will release inflation updates by the end of the week, while NVIDIA, the AI giant, will unveil its results after the closing bell.

Meanwhile, the macroeconomic calendar had nothing relevant to offer. The EU released M3 Money Supply figures, which rose 2.3% YoY in July, missing the 2.7% expected. Across the pond, the US published MBA Mortgage Applications for the week ended August 23, up 0.5% after declining 10.1% in the previous week.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for EUR/USD shows the bearish momentum is building up, although given that the pair has already lost roughly 100 pips, the odds for additional slides seem limited. Technical indicators head firmly south within positive levels, retreating from overbought readings but still above their midlines, supporting a downward extension but far from indicating the pair has set an interim top. Finally, EUR/USD keeps developing far above a bullish 20 Simple Moving Average (SMA), while the 100 and 200 SMAs offer modest upward slopes well below the shorter one, suggesting bulls are still dominating the wider perspective.

In the near term, and according to the 4-hour chart, the risk skews to the downside. Technical indicators have pierced their midlines with strength and are currently approaching oversold readings. At the same time, the pair has broken below a flat 20 SMA, while the longer ones are losing their upward momentum far below the current level.  A clear break below the 1.1100 mark could spur additional selling, although it is possible bulls will take their chances around the level.

Support levels:   1.1100 1.1065 1.1020

Resistance levels: 1.1150 1.1190 1.1240

• The euro initially did rally against the yen during the trading session on Tuesday but has been completely wiped out at this point.
• Late in the day in New York, we are trading near the 161 yen level, and I am watching the 160 yen level because a breach of that to the downside could end up being a very negative turn of events.
• In that environment, I imagine the Japanese Yen is probably picking up strength against most things.

On the other hand, if we turn around and break above the 164 Yen level then we would not only clear the most recent consolidation, but we would also clear the 200 day EMA both of which would capture a lot of attention. Keep in mind that this is more or less about the Japanese Yen.

With that being the case, I think you’ve got a situation where you need to watch other pairs such as the US dollar against the Japanese yen or the New Zealand dollar against the Japanese yen. Granted, I think the euro’s overbought against several currencies right now. So, it may not be the big mover when it comes to a reverse the Japanese yen’s fortunes. But really, at this point, it should move in the same direction.

Back and Forth is the Norm?

All things being equal, this is a market that I think continues to see a lot of back and forth and choppiness and this 400 point range. Keep in mind we recently sold a massive number of positions in the market. So, I think it makes a lot of sense that we have to stabilize and probably see a lot of trouble between now and any type of recovery as far as hanging on to a position. This is a very noisy thing to go through. That being said, if we break down below the 160 yen level, then it’s likely that we go to the 155 yen level underneath.

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• The Pound Sterling is maintaining positive momentum thanks to constructive market sentiment and contrasting speeches delivered by global central bank governors, particularly Andrew Bailey and Jerome Powell last Friday.
• However, we believe that further outperformance will be more subdued in the near term.
• GBP/USD gains have reached the resistance level of 1.3265, the pair’s highest level in two years, and is stabilizing around it at the beginning of trading today, Wednesday. 

According to reliable trading companies’ platforms, the pound received help from the Governor of the Bank of England, Andrew Bailey, who said that it is “too early to declare victory” over inflation, confirming market bets that the bank will ignore another interest rate cut in September. In general, both the European Central Bank and the US Federal Reserve are expected to cut interest rates in September, with more cuts likely from both before the end of the year. In contrast, the Bank of England appears set to deliver just one more cut before the end of the year. This suggests a slower path for cuts from the BoE, providing a key source of support for the pound against both the euro and the US dollar. 

Technical forecasts for the GPB/USD pair today: 

Overall, the constructive global market sentiment remains the other main driver behind the Pound Sterling’s recent outperformance. The jump in equity markets on Friday pushed the British currency to new highs against the dollar while also boosting its recovery against the euro. According to forex trading, the GBP/EUR exchange rate rose above 1.18, while the GBP/USD pair reached above the resistance of 1.32. When examined over a one-week period, the Pound Sterling is the best-performing currency among G10 currencies and remains the best performer for 2024. 

Certainly, financial markets gave up some of the recent gains on Monday, weakening the Pound Sterling’s advance, especially against the US dollar. Losses were concentrated in the US technology sector, which showed tension ahead of the mid-week Nvidia results announcement. Much depends on the performance of the leading artificial intelligence company, and any disappointments could lead to a broader decline in the technology sector. Therefore, disappointment here could strengthen the US dollar from its recent levels, but we do not see this significantly affecting Pound Sterling prices. Furthermore, declines in the GBP/USD pair are likely to be superficial as long as the markets believe that the Federal Reserve is ready to deliver several US interest rate cuts in the coming months. 

Fed Chairman Jerome Powell said in a speech at Jackson Hole, “It is time to adjust policy… Downside risks to employment have increased… We do not seek or welcome further easing in labor market conditions,” . 

Obviously, this showed that the president is now less concerned about inflation and his focus is shifting to the labor market, where he fears a slowdown in the economy could lead to higher unemployment. This would require a US rate cut and raise market expectations for a 50bp rate hike by the Fed in September, although the odds of this receded somewhat on Monday, helping the US dollar recover somewhat. 

San Francisco Fed President Mary Daly reiterated the message on Monday, saying: “It is time to adjust policy.” 

Looking ahead, we expect sterling to be more subdued, with GBP/USD likely to be capped at 1.32 resistance in the near term. Also, we note that the exchange rate has become overbought in the near term and some pullback is necessary. The losses in GBP/USD on Monday, linked to the US tech sector sell-off, suggest that the broader market pullback will only temporarily weigh on the British currency. 

Concurrently, GBP/EUR is advancing for a fifth consecutive day, which is unusual for this exchange rate. The GBP/EUR pair is moving slowly with a tendency to return to the mean, and the pair could also decline if global markets face a setback. In general, we will be watching the inflation data from the Eurozone this week (Germany on Thursday and the whole Eurozone on Friday). Any decline in these data could strengthen expectations of a rate cut by the European Central Bank, which in turn could weigh on the Euro. 

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US Dollar vs Japanese Yen Technical Analysis

The US dollar has been very noisy during the early hours on Tuesday against the Japanese yen. As we continue to see the market test this uptrend line, all things being equal, the market is likely to continue to question where we’re going next. All things being equal, if we could break to the upside, then the market could go looking to the 148.50 yen level. This is an area that has been important previously and should continue to attract attention if we revisit it again.

It is that in that area, we would be the top of the consolidation area. And then if we can break above there, we would challenge the 150 yen level. On the other hand, if we were to break down below the 143 yen level, then underneath there could be a bit of a trap door, and we could see a bigger move lower. In general, I think this is a situation where you have a market that is trying to decide whether or not the carry trade can return.

I think there are a lot of questions out there, but it is worth noting that the so-called death cross is going on as the 50-day EMA just crossed below the 200-day EMA, but that’s generally a very late indicator anyway. So, I think you’re going to see more sideways and choppiness at least until the Friday session where we get the core PCE Index figures, as it gives the Fed a solid look at the overall inflation situation.

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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• It’s obvious that the euro is a little overextended at the moment, and I think it makes quite a bit of sense that we would continue to see a little bit of hesitation.
• After all, the 1.12 level above is an area that’s been an important resistance more than once, and I think it makes a certain amount of sense that we will continue to pay close attention to it.

Furthermore, you need to keep in mind that the European Central Bank is also loose with its monetary policy, so even if the Federal Reserve does start cutting rates, which most people think that they will in September, the reality is that we still have a couple of central banks that are both soft and weak. If that is going to be the case, then you’ve got a scenario where this is a market that will more likely than not be looking for some type of range to trade in.

Technical Analysis

Do not get me wrong, the technical analysis for the EUR/USD pair at the moment is rather bullish. We have had the “golden cross” when the 50-Day EMA crosses above the 200-Day EMA indicator, and that of course has longer-term traders excited. However, the reality is that there is a ton of resistance between the 1.12 level in the 1.1250 level above. Furthermore, we are about 6 country miles from the 50-Day EMA, so we are most certainly overstretched by applying the “eye test.”

If we do pull back from here, I would anticipate that there will probably be a certain amount of value hunters out there looking to pick up “cheap euros.” However, I still have to question how much more upside we have in this type of environment, due to the fact that we have gotten so far in such a short amount of time. Ultimately, I think this is a scenario where the markets are going to try to find their “equilibrium”, and I don’t think we have found it quite yet.

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• The British Pound reached its highest levels in two years at the end of last week, supported by the Federal Reserve’s commitment to cutting US interest rates in September.
• However, the rise seems excessive.
• Jerome Powell, the chairman of the Federal Reserve, couldn’t have been more “dovish” in his comments that the time has come to cut US interest rates and that the Fed will do what is necessary to protect jobs.
• The GBP/USD currency pair gains reached the resistance level of 1.3230, the highest in two years, and is stabilizing around the 1.3180 level, awaiting any new developments.

This has signaled a decisive shift from targeting inflation to reducing economic weakness, which would mean lowering interest rates. Now, the question for financial markets is whether the US Federal Reserve will go ahead with a decisive 50bp increase in September or start with a 25bp move.

According to reliable trading platforms, the increased likelihood of a strong 50 basis point hike has led to a decline in the US dollar and the GBP/USD exchange rate has risen to a two-year high. Furthermore, this exchange rate is certainly in a technical uptrend and the most obvious way forward in the coming weeks is higher. However, fatigue is growing, and we are seeing signs of overbought conditions on the charts. In particular, the RSI is at 76 and is significantly extended, increasing the likelihood of a pullback this week. There will be no major data from the UK in the next five days, and we believe that the strength of the action will depend largely on how global markets behave.

With that in mind, it is difficult to be anything other than optimistic now that the Fed has given the green light to cut US interest rates with Powell’s speech sounding so “dovish” that he called for a decisive 50 basis point cut in September.

Technical forecasts for the GPB/USD pair today:

We can expect some overall declines in the markets – and therefore the GBP – in the coming days but ultimately it will be difficult and risky to justify standing in the way of this train. We expect the US dollar to retreat if this week’s data beats expectations and casts doubt on the likelihood of a 50-basis point interest rate hike in September. The highlight will be the release of the US personal consumption expenditures deflator on Friday, a measure of consumer inflation. The Fed tends to watch it closely, but we think there is little chance of a surprise that could change the broader narrative.

For his part, Jerome Powell said in his Jackson Hole speech that he is confident that inflation will not return suddenly and that it is now more focused on the labor market. This suggests that the release of the US non-farm payrolls report in early September will be the next major event for the US dollar.

On the stock trading front, US stock indices faced a volatile session on Monday, with mixed performance across major indexes as investors anticipated upcoming interest rate cuts and focused on Nvidia’s long-awaited earnings report. The Dow Jones closed at a record high while the S&P 500 and Nasdaq 100 fell 0.3% and 1%, respectively, weighed down by losses in technology stocks, especially Nvidia (2.3%) and Tesla (3.2%).

The broader market showed signs of rotating out of technology stocks, with the S&P 500’s energy sector up more than 1%, while technology stocks fell sharply. The shift comes as investors digested a strong signal from Federal Reserve Chairman Jerome Powell that U.S. interest rate cuts are imminent, a move that is expected to impact various sectors differently. Also, investors are looking ahead to earnings reports from Dell, Salesforce, Dollar General and Gap, as well as personal consumption spending data for July on Friday. Meanwhile, the data showed that durable goods orders jumped 9.9% in July, easily reversing a 6.9% decline in June.

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