• During last week’s trading, the USD/JPY currency pair attempted to rally but its gains did not exceed the resistance level of 149.38 before closing the week around the 147.60 level.
• This was due to investor disappointment in the results of some US economic data and in anticipation of important statements from US Federal Reserve Chairman Jerome Powell this week.
• According to reliable trading platforms, the US dollar has risen significantly during the trading week, colliding with the previous downward trendline, showing signs of resistance.

The psychological resistance level of 150 yen seems to be a major resistance, especially since the 50-week moving average is located in the same area. If the currency pair can break above this level, then the US dollar may continue to rise.

With pressure on the US dollar returning, Goldman Sachs Group Inc economists have cut the probability of a US recession next year to 20% from 25%, citing retail sales and jobless claims data last week. In this regard, Goldman Sachs economists led by Jan Hatzius said in a report to clients on Saturday, “if the US August jobs report due on September 6 “looks reasonably good, we may lower the probability of a recession to 15%, where it has been for about a year” before the revision on August 2.

Meanwhile, a series of data showing the resilience of the US economy has pushed stock indexes to their best week this year, with buyers entering after the recent rout. According to the results of the economic calendar, retail sales in July rose by the most since early 2023. Also, separate government figures showed the lowest number of unemployment claims last week since early July.

Also, Goldman Sachs economists said they are “more confident” that the Fed will cut US interest rates by 25 basis points at its September policy meeting. Added, “although another negative surprise in jobs on September 6 could trigger a 50-basis point move.”

In Japan, preliminary GDP for the second quarter grew by 0.8%, beating the expected 0.5% growth rate. The preliminary annualized GDP for the quarter also beat expectations at 2.1% with a change of 3.1%, and the preliminary GDP deflator (year-on-year) beat expectations at 2.6% with a change of 3%.

USD/JPY Technical Analysis and Expectations Today

USD/JPY continues to trade slightly above its 100-hour moving average. Friday’s decline pushed the currency pair closer to oversold levels on the 14-hour Relative Strength Index. In the short term, based on the hourly chart, the USD/JPY pair is trading in a descending channel formation. The 14-hour RSI has also declined to approach oversold conditions. Technically, bears will target extended declines around 147.50 or lower to the 147.10 support. Moreover, bulls will look to pounce on potential rebounds around 148.78 or higher at the 149.35 resistance.

In the long term, based on the daily chart, the USD/JPY pair is trading in a sharply rising channel formation. Also, the 14-day RSI has rebounded to recover from oversold levels. Furthermore, bulls will look to extend the current rebounds towards 149.96 or higher to the 151.62 resistance. On the other hand, bears will look to pounce on profits around 146.41 or lower at the 144.00 support.

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EUR/USD Current price: 1.1036

• Dovish words from Federal Reserve’s Neel Kashkari put pressure on the US Dollar.
• The Jackson Hole Symposium by the end of the week could shed light on monetary policies.
• EUR/USD maintains a positive tone, although bulls turned cautious.

The EUR/USD pair extended its advance to a fresh 2024 high of 1.1049 on Monday and trades nearby amid persistent risk appetite. Markets turned optimistic last week, as easing inflationary pressures in the United States (US) somehow confirmed an upcoming Federal Reserve (Fed) interest rate cut in September, while US data showed the local economy remains resilient, and concerns about a recession somewhat receded.

The absence of relevant macroeconomic data and upcoming first-tier events by the end of the week, however, limits the EUR/USD intraday range. The European calendar remained empty, while the US has nothing relevant to offer. Still, and ahead of Wall Street’s opening, Fed Bank of Minneapolis President Neel Kashkari noted that inflation is making progress, although the labor market is showing some concerning signs. “The balance of risks has shifted more towards labor market and away from the inflation side of our dual mandate,” Kashkari said.

Fed Board member Christopher Waller will be on the wires early in the American session and could make some comments on monetary policy. Other than that, the focus will be on the Purchasing Managers Indexes (PMIs) to be released on Thursday and the Jackson Hole Symposium starting Friday.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows bulls retain control but with a cautious approach. Technical indicators have turned flat near overbought readings, far from suggesting upward exhaustion. At the same time, the pair keeps developing well above all its moving averages, with the 20 Simple Moving Average (SMA) gaining bullish traction above the longer ones at around 1.0900.

The near-term picture is quite alike. In the 4-hour chart, technical indicators turned flat, although the Relative Strength Index (RSI) indicator stands near overbought readings while the Momentum indicator holds within neutral levels. At the same time, all moving averages aim higher below the current level, reflecting bulls’ dominance around EUR/USD.

Support levels: 1.0985 1.0950 1.0900  

Resistance levels: 1.1045 1.1090 1.1120

• The first thing that I recognize is that we are now below the 200-Day EMA, and therefore it’s likely that we will continue to see a little bit of negativity.
• That being said, I do recognize that the 0.85 level underneath is significant support as it is a large, round, psychologically significant figure, and it is of course an area that we have seen a lot of noise in previously.
• Underneath, we also have the 50-Day EMA which of course is a very bullish technical indicator.

This point in time, if we can break above the 200-Day EMA, then it’s likely that the market could go looking to the 0.86 level, which is an area that is a massive amount of resistance just waiting to happen, so I think ultimately if we turn around and show signs of life, the market is likely to continue to see traders take advantage of any momentum. After all, we are in a situation where the market is at extreme low levels, and it’s probably only a matter of time before we see value hunters coming into the market to take advantage of it.

Volatility Should Continue

The euro of course is all over the place against the British pound (EUR/GBP currency pair), and you should also have to keep in mind that these 2 economies are highly intertwined, despite the fact that there has been Brexit. That being said, the market is likely to see a lot of volatility and noisy behavior, and therefore I think you’ve got a situation where the position sizing should be crucial, and therefore I think it’s a significant issue to pay attention to as far as a risk management is concerned. That being said, the market is at the extreme lows, I think it’s only a matter of time before people will get aggressive at this point in time, and therefore send the market much higher.

The alternate scenario of course is if we break down below the 0.84 level, then the market could really start to fall apart. In that environment, I anticipate that you would see the euro falling against almost everything.

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• The GBP/USD exchange rate climbed to new highs during last week’s trading, overcoming several key levels along the way, refocusing on the longer-term recovery trend on the charts.
• The upward rebound of the GBP/USD pair reached the resistance level of 1.2945, the highest for the currency pair in a month and is closer to testing the psychological resistance of 1.3000, which supports the strength of the bulls’ control.

According to reliable trading platforms, the broad losses in the US dollar helped the pound ignore the mixed UK retail sales figures for July that were released earlier in the European morning, as the rise led the GBP/USD pair to regain key levels on the charts. Technically, GBP/USD rose above its 200-week moving average at 1.2845 before rising above the 61.8% Fibonacci retracement level of its July low at 1.2901 as the greenback weakened against all major currencies.

The US dollar was broadly weaker in Asia, Europe and North America, helping GBP/USD extend its previous recovery from early August lows, creating scope for further gains ahead.

Commenting on the performance of the currency pair, Sean Osborne, chief FX analyst at ScotiaBank, said: “GBP gains have picked up again after the spot price broke higher from yesterday’s consolidation range.” The analyst added, “Fresh short-term highs for the cable above 1.29 target additional gains towards 1.2950/1.30.”

Technical forecasts for the GBP/USD pair today:

According to trading, the GBP/USD pair has risen strongly since Tuesday when UK jobs figures came in better than expected and US producer price data indicated that further deflation may be in the making, boosting the pound and weighing on the dollar. Furthermore, a negative surprise for UK inflation had caused a setback for the pound on Wednesday, even as the US dollar weakened after another decline in US inflation, prompting markets to become more confident in a tangible cut in US interest rates from September.

However, data indicating a resilient second quarter for the UK economy helped the GBP/USD pair regain more lost ground last Thursday, even as the US dollar rose following the US retail sales report for July. Overall, the GBP/USD gains on Friday now bring a 78.6% retracement of the late July decline to 1.2965 into focus, which is the last defense of the year’s high so far around 1.3047. Obviously, that will be happened ahead of public statements from Bank of England Governor Andrew Bailey and Federal Reserve Chairman Jerome Powell at the Jackson Hole symposium this week.

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• The likelihood of a 50 bps Fed rate cut in September fell amid better-than-expected data.

• This week, traders will watch the Jackson Hole symposium.

• Bank of Japan governor Kazuo Ueda will speak on Friday.

The USD/JPY forecast points to solid bearish momentum as the yen rallies on divergence in policy outlook for the Bank of Japan and the Fed. Fed policymakers will likely assume a dovish tone and support expectations for a rate cut in September. On the other hand, BoJ policymakers have taken a hawkish tone, which could indicate that more rate hikes will come. 

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The yen has rallied since Friday as Fed rate cut expectations rose. At the same time, investors took profits on the recent dollar rally, weakening the greenback. Last week, the likelihood of a 50 bps Fed rate cut in September fell amid better-than-expected data. However, that of a smaller cut increased. Markets are currently fully pricing a 25 bps rate cut in September. Although the rate-cutting cycle might be gradual, it will likely start next month. Consequently, the dollar might remain fragile. 

This week, traders will watch the Jackson Hole symposium, during which Powell might drop hints on the Fed’s policy path. Experts believe the Fed Chair might signal the start of rate cuts in September. At the same time, the FOMC policy meeting minutes will show what went into the last decision to hold interest rates.

Meanwhile, in Japan, the central bank has started hiking interest rates and could do so again. Bank of Japan governor Kazuo Ueda will speak on Friday. A hawkish tone will further highlight the divergence in policy outlooks between Japan and the US. 

USD/JPY key events today

Traders do not expect high-impact economic data from the US or Japan. Consequently, the pair might extend last week’s move. 

USD/JPY technical forecast: Bearish turn puts 142.56 in bears’ sights

On the technical side, the USD/JPY price has broken below the 30-SMA, indicating a bearish sentiment shift. At the same time, the price has fallen below its bullish trendline and the 0.382 Fib level. In the previous move, bulls had set their sights on the 150.03 resistance level and the 0.618 Fib. However, before the price got there, there was a whiplash move that saw bears taking over.

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The RSI now trades below 50, supporting bearish momentum. Therefore, the price might continue falling to the 142.56 support level.

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• The daily analysis of the GBP/JPY shows that we have had a major break out to the upside, as we have cleared the crucial ¥190 level.
• This is an area that I think continues to attract a lot of attention due to the fact that it is a large round psychologically significant figure, and it had previously offered resistance for several days in a row.

One of the things it seems to have kicked off the carry trade again as the idea that the US economy is not slowing down as drastically as people had hoped, and therefore the interest rate differential between the Japanese yen and almost everything else should continue to remain quite wide. After all, the Bank of Japan cannot necessarily tighten monetary policy for a significant amount of time, at least not without wrecking the Japanese economy itself.

Interest Rate Differential

The interest rate differential between the British pound and the Japanese yen is essentially a mile wide, and as long as that’s going to be the case, it makes a lot of sense that traders will be hanging onto this pair as you get paid to do so. With that being the case, I like the idea of buying short-term pullbacks, with perhaps the area right around the ¥190 level as a short-term support level. On the other hand, if we break above the 200-Day EMA, then the market could go looking to the ¥195 level next, which has seen a bit of action in the past.

The size of the candlestick is of course very bullish, and that does suggest that we have more momentum in this market to burn off, meaning that we could go much higher. However, if we were to turn around a breakdown below the ¥188 level, that could send this market crashing back toward the ¥183 level underneath which has been an area of significant noise in the recent past. Ultimately, that’s the least likely of scenarios but it is something that you need to keep in the back of your head just in case.

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“They won’t be able to hike again, at least for the rest of the year. It’s a toss-up whether they can do one hike by next March.”

US Economic Calendar

Later in the session on Monday, the US Leading Economic Index (LEI) may influence US dollar demand.

Economists forecast the LEI to fall by 0.3% in July after a 0.2% decline in June. A larger-than-expected fall may rekindle fears of a hard landing, supporting a USD/JPY move toward 145. The LEI offers insights into the US economic outlook, affecting sentiment toward the Fed rate path.

Beyond the economic data, FOMC member commentary also needs consideration. Voting member Christopher Waller will speak on Monday. In July, Waller stated that favorable CPI Reports could support a rate cut soon. A shift in stance regarding interest rate cuts could affect US dollar demand amid speculation about multiple 2024 Fed rate cuts.

Expert Views on the Fed Rate Path

Arch Capital Global Chief Economist Parker Ross remarked on the US CPI Report and the Fed rate path, stating,

“Core services inflation (0.31% m/m) – the sticky component the Fed has been worried about – bounced back in July from its weakest monthly reading since 2021.”

Short-term Forecast: Bearish

USD/JPY trends will depend on the US LEI, central bank forward guidance, and Services PMI numbers. Support for a Q4 2024 BoJ rate hike could pull the USD/JPY toward 145.  Weak stats from the US and a more dovish FOMC may also signal a drop toward 145.

Investors should remain alert. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

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

A USD/JPY break above the 148.529 resistance level and the top trend line would support a return to 150. Furthermore, a breakout from 150 could give the bulls a run at the 200-day EMA and the 151.685 resistance level. Selling pressure may intensify at the 151.685 resistance level as the 200-day EMA is confluent with the resistance level.

Economic indicators from the US and central bank commentary require consideration on Monday.

Conversely, a fall through 147.500 could signal a fall toward the 145.891 support level. A break below the 145.891 support level may bring the 143.495 support level into play.

The 14-day RSI at 39.06 indicates a USD/JPY drop below 147 before entering oversold territory.

USD weakness in the medium term

“We have changed our EUR/USD forecast. As regular readers know, we believe that a good part of the USD strength seen so far was based on the impression of a structural US growth advantage and a particularly active US monetary policy. Since we now have to assume that this impression will be eroded by actual developments in the coming quarters, we now have to assume USD weakness in the medium term.”

“And because at the same time the EUR-negative argument of high eurozone inflation rates and a fairly relaxed ECB monetary policy is at least significantly weakened in view of our more moderate eurozone inflation forecast, some of the EUR-negative arguments also fall away. Both together mean that we now have to assume that EUR/USD will rise significantly. We consider levels around 1.14 to be possible by mid-2025.”

“In the second half of 2025, the picture could change again. If – as we expect – the US economy picks up again, the impression may arise that the Fed at least no longer has any scope for interest rate cuts, and perhaps even fantasies of interest rate hikes will make themselves felt again. And perhaps it will then be time again for the market to take a more skeptical view of the ECB’s monetary policy.”