• GBP/USD has been gaining ground against the US dollar since the start of trading this week, with markets cautiously awaiting US jobs data at the end of the week.
• Sterling/dollar tests the 1.2817 resistance level, its highest in over two months.
• What is the GBP/USD forecast for this week’s trading?

We expect GBP/USD to test the $1.28 level on the back of strong technical momentum and potential weakness in the all-important US jobs report. According to forex trading platforms, GBP/USD is in a short-term uptrend and could test 1.28 and above in the coming days. Moreover, momentum is strong with the RSI at 63 and signaling higher again, while the exchange rate remains above its key moving averages.

1.28 level is the prize for dollar bulls but if this week’s data moves in favor of the US dollar, the key support level to watch is 1.2685. Recently, buying has been persistent over the past two weeks and we see this as the level that needs to be broken if we want to see the exchange rate fall.

According to the economic calendar, there is nothing major out of the UK this week, which in itself is a supportive development for sterling, which tends to perform better when it is not being disturbed by data and policymakers at the Bank of England who seem keen to cut interest rates at the earliest possible opportunity. The Monday PMI reading is likely to attract some attention, although we would not place much weight on any market moves ahead of the all-important jobs report on Friday. Last month, US nonfarm payrolls came in below 200,000 for the first time since Q4 2023. All eyes are on this month’s release to gauge whether this was just a one-off or whether new hiring is indeed slowing. This is of paramount importance to the US.

The market is looking forward to a key US non-farm payrolls reading of 180k and an unemployment rate of 3.9%. Average hourly earnings are expected to rise 3.9% year-on-year. If US labor market data is weak, markets could increase the likelihood of a first rate cut in July, which would further weaken the US dollar.

The US central bank is in no rush to cut rates, leaving markets pricing in a full rate cut by December, though September would be 50/50, according to analysts at City Index. Furthermore, the jobs report and wage data should provide further evidence on this front. In recent weeks, we have seen bond yields rise, as investors grow increasingly concerned about the prospect of higher interest rates for longer. If this sentiment changes, for example due to a series of weaker-than-expected US data, the US dollar could finally break out more decisively and start a clean breakout. However, if the data remains too hot, this could, paradoxically, weigh on risk sentiment as rate cut expectations are pushed further.

• 

Technical forecasts for the GBP/USD pair today:

As we mentioned before and according to the performance on the daily chart, the bulls’ success in pushing the GBP/USD price above the resistance levels of 1.2775 and 1.2830 will motivate the bulls to head towards the psychological resistance of 1.3000, which confirms the strength of the bulls’ control over the general trend. Obviously, this may happen quickly if the US jobs numbers come in below all expectations. On the other hand, the support level of 1.2600 will remain the most important for the strength of the downward trend again.

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• The Japanese yen rose to around 155.80 yen against the US dollar, hovering near its strongest level in two weeks as the US dollar weakened on the back of weak US manufacturing data that supported expectations of rate cuts by the Federal Reserve.
• Domestically, investors are looking to Japanese wage and household spending data this week, which could affect expectations for local monetary policy.
• Last week, Bank of Japan board member Seiji Adachi said the central bank could raise interest rates if a sharp decline in the yen’s value leads to further inflation.

For his part, BOJ Deputy Governor Shinichi Uchida also said that the end of the battle against deflation is in sight, adding that wages are likely to continue to rise. The latest data showed that Tokyo’s core inflation rate accelerated to 1.9% in May from 1.6% in April, but remained below the BOJ’s 2% target.

Future of Japanese Intervention in Forex Markets:

Japan’s finance minister defended the government’s record intervention in the forex market in the first acknowledgment of the move. “We have intervened in the market to counter excessive movements in the foreign exchange market, which were driven by speculation,” Finance Minister Shunichi Suzuki told reporters on Tuesday. “From that standpoint, we believe it had a certain effect.” Suzuki’s remarks were the first by any official after his ministry disclosed figures on Friday showing it spent ¥9.8 trillion ($62.7 billion) supporting the yen between April 26 and May 29. Furthermore, the Japanese currency is still stronger than it was when the interventions are believed to have occurred, with its weakest point at 160.17 to the dollar, compared to around 156.40 in Tokyo afternoon trading on Tuesday. Officials have remained tight-lipped about the exact timing.

After briefly falling above 160 per dollar for the first time in more than 30 years, the yen rose more than five yen to the dollar on April 29. Moreover, this was followed by a jump in the yen from around 157.52 to 153.04 in New York trading on May 1. “It is not known whether the yen will stop falling at 160 yen to the dollar without intervention, so it has to be said that it was effective,” said Yukio Ishizuki, senior currency analyst at Daiwa Securities.

In general, Japanese officials tend to remain tight-lipped about whether they entered the market immediately after a major move as part of their strategy to keep market participants guessing, which may make traders more cautious about pushing currencies beyond key thresholds.

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USD/JPY Technical Analysis and Expectations Today

Based on the performance on the daily chart attached, despite recent selloffs, the overall trend for the USD/JPY exchange rate remains upward. Technically, a preliminary break in the general trend will not occur without the pair moving towards the support levels of 154.20 and 153.00, respectively. Moreover, the divergence between the future policies of the U.S. Federal Reserve and the Bank of Japan will continue to support the bulls’ control until a Japanese intervention in the currency markets occurs to halt the yen’s depreciation.

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True, we did break above 1.09 momentarily, but that was turned right back around. It looks as if we are heading towards the middle of this consolidation area again, which tells me we just don’t have anywhere to be. Summertime can be somewhat slow in the markets, and that might be what we’re setting up for, just a very slow, choppy, sideways, tight range summer. This is actually quite normal for the currency markets.

Both the ECB and the Bank of Canada are expected to cut this week, and the Federal Reserve is still a bit of a mixed picture, although recently economic numbers have suggested that perhaps they will have to be cutting sooner rather than later. But at this point, they still remain data-dependent, at least according to what they say. With this, I’m very neutral in this pair.

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

• The dollar has rallied again against the Japanese yen and what would have been a very, very choppy market.
• We had a couple of negative economic numbers coming out of the United States, which of course had all of the machines freaking out.
• But eventually the adults came back and realized that these are just a couple of data points. It’s not the end of the world.
• However, for a minute there during the day you would’ve thought the whole world was coming undone.

Ultimately, this is a market that I think will try to go higher over the longer term as the interest rate differential continues to favor the United States dollar over the Japanese yen hand over fist. The 158 yen level is an area that’s a bit of a barrier due to the previous central bank intervention so therefore I think you will have to watch that closely as well.

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Short term pullbacks continue to be buying opportunities that I think you will be taking advantage of, and therefore, I look at this from the prism of a market that is doing everything it can to offer plenty of opportunities to get long. But I also recognize that we are in the midst of trying to build up the amount of pressure necessary to finally break out. The 160 yen level being captured and broken through would be a huge victory for the bulls. That could send this market much higher.

Support Below at Several Areas

Underneath the 155 yen level and the 50 day EMA both come into the picture around the same area and could be a short-term floor. Anything below there could have a deeper correction but right now I still think that the US dollar is a buy against the Japanese yen and pullbacks like we’ve seen over the last couple of days just end up being opportunities. After all, you continue to get paid to hang on to this USD/JPY pair, and that’s something that institutional traders will pay close attention to.

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• The euro shot higher in the early hours against the British pound on Monday, but just as we had seen on Friday, it looks like there is still a lot of selling pressure.
• This could be due to the fact that the euro is having to come to terms with the ECB cutting rates in Europe.
• That being said, we are at a major support level that a lot of people will be paying close attention to from a longer term standpoint, and therefore this to me is still a market that you could be a buyer of.

At least it has the area underneath that has held up in the form of the 0.85 level multiple times. Whether or not it actually holds up longer term, we’ll have to wait and see, but right now this is an area where you would expect a bit of a bounce sooner or later.

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Breakdown? Then What?

That being said, if we were to break down below the 0.84 level, then the bottom could fall out in this EUR/GBP pair, and we could see the British pound spike against the euro. Typically speaking, this is a very choppy and noisy market that doesn’t have anywhere to be most of the time. And if that’s going to be the case, you have to be very patient.

This is not a market that I think you are going to get huge moves all of the sudden. And I do think that the 50 day EMA just above continues to offer a bit of resistance as well. If we can break that, then we can go look to the 200 day EMA, which of course is an indicator that a lot of people pay attention to. And it just so happens to look like it’s right at the 0.86 level, an area that in and of itself would probably cause a certain amount of interest. Ultimately, this is just a reversion to the mean type of setup from what I see, as we had been in that massive consolidation area for so long.

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• The British pound initially pulled back a bit against the US dollar in the early hours on Monday but has since really started to take off to the upside.
• As we are writing, we are threatening the 1.28 level, an area that I do think is rather important in this pair and extends possibly all the way to the 1.29 level as far as resistance is concerned.
• A lot of this was kicked off to the idea that PMI manufacturing a miss and actually showing a contraction, but it’s worth noting that was the ISM numbers while the S&P Global Manufacturing PMI numbers came out better than anticipated.

So, I don’t know how much momentum we’re going to have here, at least based on that alone. Either way, Wall Street loves the idea of rate cuts under any circumstances, so that will probably get New York to sell the dollar.

Will the rest of the world follow suit?

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The question will be the follow through and whether or not the rest of the world goes right along with this with the 1.29 level being very likely to be a bit of a barrier. Underneath we have the 1.27 level that offers support and that is probably something worth paying close attention to.

Short-term pullbacks will almost certainly attract a certain amount of attention. And then after that, we have the 50-day EMA coming into the picture near the 1.2650 level offering support. So even though I’m not necessarily too excited about selling the US dollar, I do think this is more or less a buy on the dips type market. And the question now is whether or not GBP/USD can actually break out.

We could just chop back and forth. We’ve seen a lot of that in other major currency pairs, but that will remain to be seen. This has been the case in a few other ones that I watch, especially the AUD/USD, but at this point in time it certainly looks like everybody is trying to do everything they can to turn the market around and go positive in a risk sentiment type of move.

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GBP/JPY Forecast Video for 03.03.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially fallen against the Japanese yen during the trading session on Thursday, as we continue to see a lot of noisy behavior in this market. We had recently seen the British pound spike well above the ¥165 level, only to sell off quite drastically. That being said, the reality is that the British pound is not the major force in this market. The big driver of where everything is going is more likely than not going to remain the Japanese yen as the Bank of Japan continues its yield curve control policy. Remember, the Japanese are trying to keep the 10 year yield at 50 basis points or lower, meaning that they are printing yen in order to buy those bonds.

The Bank of Japan continues to be one of the few central banks around the world with loose monetary policy, and therefore a lot of traders will continue to beat up on the Japanese yen. The shooting star that formed on Tuesday should be thought of as major resistance, but it certainly looks as if this pair is going to do everything it can to test that area. It’s not a huge surprise we sold off from where we did, because we touched the top of the huge wipeout candlestick from last year.

If we do pull back from here, I believe that the 200-Day EMA which currently sits near the ¥162 EMA, should end up being a nice area of support. Anything below there gets interesting, but at this point it does not look like the Japanese yen is suddenly going to strengthen, and it would almost certainly would need to see yields drop around the world in order for that to happen. Remember, as those yields continue to rise in other markets, it puts more bearish pressure on Japanese bonds, driving yields higher, which means that the central bank has to step in and start buying yet again. It’s a bit of a vicious feedback loop that the Japanese find themselves in at the moment. Because of this, I remain bullish of the market.

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

This article was originally posted on FX Empire

More From FXEMPIRE:

EUR/USD Current price: 1.0848

• The European Central Bank decision and United States employment-related figures take centre stage.
• Updates on manufacturing output in the US and the EU are driving currencies in the near term.
• EUR/USD is mildly bullish in the near term, caution likely to limit advances.

The EUR/USD pair trades around 1.0850 ahead of the United States (US) opening, recovering from an intraday low of 1.0827, pretty much unchanged for the day. The pair seesawed between gains and losses throughout the first half of the day as investors gear up for upcoming first-tier events. Following the US inflation update on Friday, the focus shifts to growth and employment-related figures this week, alongside the European Central Bank (ECB) monetary policy meeting.

So far, the Hamburg Commercial Bank (HCOB) has released the final estimates of the Eurozone Manufacturing PMIs, with the German figure confirmed at 45.4. However, the EU index suffered a downward revision from 47.4 to 47.3 in May. S&P Global will publish the US estimate after Wall Street’s opening, while the official ISM Manufacturing PMI will be out afterwards.

Nevertheless, market players will likely wait for upcoming events before lifting directional bets. The US will publish JOLTS Job Openings, the ADP survey on private job creation, and the usual weekly unemployment data in the upcoming days, ahead of the Nonfarm Payrolls (NFP) report, which will be out next Friday. Also, the ECB is widely anticipated to trim interest rates by 25 basis points (bps) next Thursday, and it is yet to be seen how the market will react to the fact.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it met buyers just ahead of 1.0824, the 23.6% Fibonacci retracement of the rally from 1.0600 to 1.0894. The risk skews to the upside, although the momentum is missing. EUR/USD develops above all its moving averages, with a bullish 20 Simple Moving Average (SMA) converging with the mentioned Fibonacci support level while advancing above the longer ones. Technical indicators, in the meantime, stand within positive levels but without directional strength.

In the near term, and according to the 4-hour chart, it’s clear bears remain side-lined. The pair briefly fell below its 20 and 100 SMAs, but quickly recovered, while the 200 SMA aims higher, far below the current level. Finally, technical indicators turned modestly higher within positive levels, although without enough strength to confirm another leg north.

Support levels: 1.0820 1.0780 1.0740

Resistance levels: 1.0910 1.0960 1.1000

EUR/USD Current price: 1.0848

• The European Central Bank decision and United States employment-related figures take centre stage.
• Updates on manufacturing output in the US and the EU are driving currencies in the near term.
• EUR/USD is mildly bullish in the near term, caution likely to limit advances.

The EUR/USD pair trades around 1.0850 ahead of the United States (US) opening, recovering from an intraday low of 1.0827, pretty much unchanged for the day. The pair seesawed between gains and losses throughout the first half of the day as investors gear up for upcoming first-tier events. Following the US inflation update on Friday, the focus shifts to growth and employment-related figures this week, alongside the European Central Bank (ECB) monetary policy meeting.

So far, the Hamburg Commercial Bank (HCOB) has released the final estimates of the Eurozone Manufacturing PMIs, with the German figure confirmed at 45.4. However, the EU index suffered a downward revision from 47.4 to 47.3 in May. S&P Global will publish the US estimate after Wall Street’s opening, while the official ISM Manufacturing PMI will be out afterwards.

Nevertheless, market players will likely wait for upcoming events before lifting directional bets. The US will publish JOLTS Job Openings, the ADP survey on private job creation, and the usual weekly unemployment data in the upcoming days, ahead of the Nonfarm Payrolls (NFP) report, which will be out next Friday. Also, the ECB is widely anticipated to trim interest rates by 25 basis points (bps) next Thursday, and it is yet to be seen how the market will react to the fact.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it met buyers just ahead of 1.0824, the 23.6% Fibonacci retracement of the rally from 1.0600 to 1.0894. The risk skews to the upside, although the momentum is missing. EUR/USD develops above all its moving averages, with a bullish 20 Simple Moving Average (SMA) converging with the mentioned Fibonacci support level while advancing above the longer ones. Technical indicators, in the meantime, stand within positive levels but without directional strength.

In the near term, and according to the 4-hour chart, it’s clear bears remain side-lined. The pair briefly fell below its 20 and 100 SMAs, but quickly recovered, while the 200 SMA aims higher, far below the current level. Finally, technical indicators turned modestly higher within positive levels, although without enough strength to confirm another leg north.

Support levels: 1.0820 1.0780 1.0740

Resistance levels: 1.0910 1.0960 1.1000

Weaker-than-expected labor market data could fuel investor expectations of a September Fed rate cut. Deteriorating labor market conditions may affect wage growth, consumer confidence, and disposable income. Consumers could curb spending, dampening demand-driven inflation.

A softer inflation outlook would support a less hawkish Fed rate path.

Furthermore, investors should consider the job quit numbers. Economists expect job quits to decline from 3.329 million to 3.200 million. Employees are less likely to quit their jobs in a deteriorating labor market environment.

Other stats include factory orders. However, these will likely play second fiddle to the labor market data. The manufacturing sector accounts for less than 30% of the US economy. Nevertheless, higher-than-expected numbers could ease concerns about a hard economic landing.

Economists forecast factory orders to increase by 0.6% in April after rising by 1.6% in March.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on service sector PMI, household spending numbers from Japan, and the US Jobs Report. A jump in US service sector activity and tighter US labor market conditions could tilt monetary policy divergence toward the US dollar.

USD/JPY Price Action

Daily Chart

The USD/JPY sat above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY break above the 156.5 handle could give the bulls a run at the 158 handle. Furthermore, a USD/JPY return to the 158 handle could signal a rise to the April 29 high of 160.209.

Bank of Japan commentary and US labor market data need investor consideration.

Conversely, a USD/JPY break below the 155.5 handle could give the bears a run at the 50-day EMA.

The 14-day RSI at 51.15 suggests a USD/JPY move to the April 29 high of 160.209 before entering overbought territory.

• EUR/USD flirted with monthly highs around 1.0890.
• The Greenback lost further impetus along with US yields.
• The US ISM Manufacturing PMI disappointed expectations in May.

The US Dollar (USD) traded defensively at the beginning of the week, providing extra wings to the risk-associated universe and encouraging EUR/USD to add to its ongoing recovery and approach the key 1.0900 barrier.

The pair rebounded and advanced for the third straight day due to an accelerating downward trend in the Greenback and an equally marked drop in US yields across the spectrum.

Meanwhile, speculation that the Federal Reserve (Fed) might maintain its restrictive stance longer than expected continued to rise, supported by recent hawkish comments from Fed officials. However, Monday’s pale prints of the US ISM Manufacturing seem to have tilted the scales to a probable reduction of rates in November.

Indeed, according to the CME Group’s FedWatch Tool, there is a nearly 73% probability of lower interest rates by the November 7 meeting.

Regarding the European Central Bank (ECB), a rate cut at the imminent June 6 meeting is vox populi, despite May’s higher inflation figures in Germany and the broader euro area. Doubts persist, however, when it comes to factor in potential cuts beyond the summer.

Looking ahead, the incipient recovery in some economic fundamentals in the Eurozone, coupled with the loss of momentum of the US economy, reinforce the narrowing of the gap between the Fed and the ECB monetary policy, therefore favouring the rebound in EUR/USD.

However, in the longer run, given the rising likelihood of the ECB reducing rates before the Fed, the potential for further weakness in EUR/USD should be considered in the next few months.

EUR/USD daily chart

EUR/USD short-term technical outlook

If bulls maintain control, EUR/USD may confront the May high of 1.0894 (May 16), followed by the March top of 1.0981 (March 8) and the weekly peak of 1.0998 (January 11), all before hitting the critical 1.1000 level.

The resumption of the bearish tone, on the other hand, may send the pair to the weekly low of 1.0788 (May 30), an area underpinned by the 200-day SMA. The loss of this region could drag spot to the May low of 1.0649 (May 1), prior to the 2024 bottom of 1.0601 (April 16) and the November 2023 low of 1.0516 (November 1). Once this zone is breached, the pair may go for the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the 1.0400 round milestone.

So far, the 4-hour chart indicates a strong return. The 55-SMA at 1.0845 is the next upward obstacle, followed by 1.0894 and 1.0942. Looking south, 1.0788 is first, followed by 1.0766 and the 200-SMA at 1.0760. The relative strength index (RSI) rose over 50.

• EUR/USD flirted with monthly highs around 1.0890.
• The Greenback lost further impetus along with US yields.
• The US ISM Manufacturing PMI disappointed expectations in May.

The US Dollar (USD) traded defensively at the beginning of the week, providing extra wings to the risk-associated universe and encouraging EUR/USD to add to its ongoing recovery and approach the key 1.0900 barrier.

The pair rebounded and advanced for the third straight day due to an accelerating downward trend in the Greenback and an equally marked drop in US yields across the spectrum.

Meanwhile, speculation that the Federal Reserve (Fed) might maintain its restrictive stance longer than expected continued to rise, supported by recent hawkish comments from Fed officials. However, Monday’s pale prints of the US ISM Manufacturing seem to have tilted the scales to a probable reduction of rates in November.

Indeed, according to the CME Group’s FedWatch Tool, there is a nearly 73% probability of lower interest rates by the November 7 meeting.

Regarding the European Central Bank (ECB), a rate cut at the imminent June 6 meeting is vox populi, despite May’s higher inflation figures in Germany and the broader euro area. Doubts persist, however, when it comes to factor in potential cuts beyond the summer.

Looking ahead, the incipient recovery in some economic fundamentals in the Eurozone, coupled with the loss of momentum of the US economy, reinforce the narrowing of the gap between the Fed and the ECB monetary policy, therefore favouring the rebound in EUR/USD.

However, in the longer run, given the rising likelihood of the ECB reducing rates before the Fed, the potential for further weakness in EUR/USD should be considered in the next few months.

EUR/USD daily chart

EUR/USD short-term technical outlook

If bulls maintain control, EUR/USD may confront the May high of 1.0894 (May 16), followed by the March top of 1.0981 (March 8) and the weekly peak of 1.0998 (January 11), all before hitting the critical 1.1000 level.

The resumption of the bearish tone, on the other hand, may send the pair to the weekly low of 1.0788 (May 30), an area underpinned by the 200-day SMA. The loss of this region could drag spot to the May low of 1.0649 (May 1), prior to the 2024 bottom of 1.0601 (April 16) and the November 2023 low of 1.0516 (November 1). Once this zone is breached, the pair may go for the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the 1.0400 round milestone.

So far, the 4-hour chart indicates a strong return. The 55-SMA at 1.0845 is the next upward obstacle, followed by 1.0894 and 1.0942. Looking south, 1.0788 is first, followed by 1.0766 and the 200-SMA at 1.0760. The relative strength index (RSI) rose over 50.