GBP/JPY Forecast Video for 13.02.23

British Pound vs Japanese Yen Weekly Technical Analysis

The British pound has shown itself to be somewhat negative during the course of the week as we struggle for clarity. We are trading in a range and have been for several weeks now. The 50-Week EMA sits right around the ¥161 level, and I think is going to continue to offer a bit of resistance. If we can break above all of that, then it’s likely that we could go to the ¥165 level above. On the other hand, if we turn around and break down below the crucial ¥155 level, then I think the bottom falls out this market. That being said, it’s worth noting that we have a long wick from several months ago where we have broken down below the ¥155 level. The 200-Week EMA is sitting right around the ¥152.50 level.

At this point, I think it’s more or less going to be a situation where we go back and forth, trying to figure out where we are heading for a bigger move. Ultimately, this is a scenario where I think you are probably stuck with short-term trading and back and forth momentum. Because of this, longer-term traders will probably shun this pair, but it is worth noting that we have a couple of obvious levels to pay attention to, so in that scenario you have to think about this through the prism of whether or not we have any real reason to take off in one direction or the other. Keep in mind that the Bank of Japan continues its bond yield curve control program.

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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US Dollar Weekly Forecast: Bullish

US Dollar May Prove Hard to Breakdown Ahead of PCE, the Major Catalyst

Risk events for the coming week are skewed towards the middle and latter stages of the week. On Wednesday inflation data out of Germany is likely to inform what the broader EU data is likely to serve up on Friday as inflation in the eurozone appears to be moving in the right direction. Just this week ECB president Christine Lagarde confirmed as much stating that she is ‘very confident’ that inflation in the eurozone is headed towards the 2% target.

Ben on Thursday we get the second look at US GDP for the first quarter, anticipating a slight decline in what was already a disappointing figure. However, the main event of the week is US PCE inflation data. Inflation in the US has been stubbornly high throughout the first quarter, and only last month have we seen a reprieve in the data – which will place a large focus on whether the PCE data tells the same story.

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EUR/USD Drivers Remain Scarce as Markets Likely to Take its Cue from PCE Data

In the week just gone, the lack of high-profile US data led to lower volatility that favoured the dollar and treasury yields. During periods of lower volatility markets tend to follow the path of least resistance, more specifically, the FX market tends to favor higher yielding currencies over lower yielding currencies. With US PCE data only due at the end of the week, we could see a similar trading environment whereby the dollar continues to build on marginal gains until the big data point at the end of the week.

Better than expected survey data out of the University of Michigan consumer sentiment report on Friday revealed a step back in inflation expectations which spurred on temporary dollar weakness and a move higher for EUR/USD. The late partial recovery in EUR/USD provides a potential launchpad for EUR/USD bears at the start of the coming week.

Should inflation within the eurozone continue to weaken, starting with figures out of Germany, the euro may come under some pressure midweek. The pair may continue to ease into the June ECB meeting as a strong majority of ECB officials have communicated a preference for a 25 basis point cut next month. In contrast, the FOMC minutes from the May Fed meeting communicated a more hawkish approach and lack of confidence that inflation will move swiftly to the Feds 2% target – prolonging the ‘higher for longer’ narrative which naturally supports a stronger US dollar and US yields.

Lower German an EU inflation next week could see the pair trade lower, something that may be amplified by an underwhelming PCE print (stubborn inflation). Failure to make a new swing high at the start of the week opens up the rest of the week for a bearish move should the data comply. 1.0800 is the tripwire for a sell-off and the recent high of 1,0895 would need to be overcome on a daily closing basis to suggest a bullish continuation.

EUR/USD Daily Chart

Source: TradingView, prepared by Richard Snow

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USD/JPY Uptrend Remains Intact after Weaker Japanese Inflation Data

During a week with fewer high-profile US economic data releases, the dollar was widely anticipated to recover, catering to the market’s inclination towards higher-yielding currencies in periods of reduced volatility.

USD/JPY Weekly Chart

Source: TradingView, prepared by Richard Snow

Less than a month since Japanese officials were believed to have intervened in the foreign exchange market, the USD/JPY exchange rate has once again approached the 160 level, which initially triggered their response. However, the upward movement has been more gradual this time, lacking the volatility that prompted Japanese officials to take action.

The USD/JPY pair is currently trading above 157.00, having rebounded strongly off the 50-day simple moving average (SMA) in early May and subsequently surpassing the 155.00 level. The issue of Japanese yen weakness is likely to persist as long as the significant interest rate differential between the United States and Japan remains intact. The carry trade continues to exhibit strength.

USD/JPY Daily Chart

Source: TradingView, prepared by Richard Snow

Learn the ins and outs of trading USD/JPY – a pair crucial to international trade and a well-known facilitator of the carry trade

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1. Long of the S&P 500 Index. This produced a loss of 0.01%.
2. Long of the NASDAQ 100 Index following a daily close above 18613. This set up on Monday and produced a win of 0.72%.
3. Long of Gold. This produced a loss of 3.34%.
4. Long of Silver. This produced a loss of 3.61%.

The overall result was a net loss of 6.24%, resulting in a loss of 1.56% per asset.

Last week’s key takeaway was the more hawkish rhetoric on the fight against inflation from the US Federal Reserve’s recent meeting minutes, which triggered a minor boost to the greenback, but sent many commodities tumbling, notable precious metals such as Gold and Silver which ended the week well off their recent highs. However, according to the CME FedWatch tool, a majority still expect the first rate cut to happen at the Fed’s September meeting.

Another major event was the policy release by the Reserve Bank of New Zealand, which held its Official Cash Rate at 5.50% as widely expected, but its Rate Statement delivered a minor hawkish surprise in its language on rates and inflation, boosting the Kiwi somewhat.

The other two most important data releases were UK and Canadian CPI (inflation). Canadian inflation came in exactly as expected, but UK inflation has fallen more slowly than the market expected to see, which helped boost the Pound.

Other important data releases last week were:

1. US Revised UoM Consumer Sentiment – just a little higher than expected.
2. UK Retail Sales – this was much worse than expected, showing a month on month decline of 2.3%, suggesting consumer spending is in trouble.
3. Flash Services / Manufacturing PMI in USA, Germany, UK, and France – mostly slightly better than expected.
4. US Unemployment Claims – came in slightly better than expected.

The most important items over this coming week will be the release of US Core CPI Price Index data, which is expected to show a month-on-month increase of only 0.2%, followed by US Preliminary GDP data, which is expected to show annualized GDP growth in the USA has fallen to 1.3%. Apart from that, there are several other important releases scheduled, listed in order of likely importance:

1. Australian CPI
2. German Preliminary CPI
3. US CB Consumer Confidence
4. The Governor of the Bank of Japan will be giving a minor speech.
5. Canadian GDP
6. US Unemployment Claims
7. US Pending Home Sales
8. Chinese Manufacturing PMI

As May got underway, the long-term trend in the US Dollar was still unclear, so I made no monthly forecast.

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.

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

Last week, the British Pound showed relative strength, while the Japanese Yen showed relative weakness.

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The US Dollar Index printed a weakly bullish inside bar last week which closed within the lower half of its range. The support level at 104.00 held and produced a small bullish bounce, as did the steeply ascending trend line shown in the price below which was supportive. This is an inner trend line within the dominant consolidating triangle chart pattern. There is also a bullish long-term trend as the price is now above its levels from 3 months ago and its price of 6 months ago.

The weekly price chart below shows that the dollar has been swinging but has been in a consolidation pattern for quite a while, and although the price faces a lot of closely packed resistance just above its current levels, it is not very far from making a significant bullish breakout.

It may make sense to trade the US Dollar long now, but I will feel much more comfortable doing that once we start getting daily closes of this Index above 105.80.

I expected that the GBP/USD currency pair would have potential resistance at $1.2759.

The H1 price chart below shows how this support level was rejected right at the start of last Wednesday’s London session by an inside bar, marked by the down arrow in the price chart below, signaling the timing of this bearish rejection. This can be an excellent time of day to enter a trade in a currency pair involving the British Pound such as this one.

This trade has been profitable so far, giving a maximum reward to risk ratio of approximately 2 to 1.

The USD/JPY currency pair rose firmly during the week, in an orderly way, printing higher support levels which held well. The price ended the week quite near its high, which is a bullish sign.

There is weakness in the Japanese Yen which, apart from the stronger US Dollar, is the major defining feature of the Forex market right now. This is a good reason to be short of the Japanese Yen, although certain Yen crosses may be better vehicles than this currency pair to exploit that.

I prefer to wait for a daily close above ¥158.28 before entering any new long trades here, as the price will again be closing at long-term high closing prices if that happens.

The GBP/JPY currency cross rose strongly during the week, in an orderly way, printing higher support levels which held well. The price ended the week quite near its high, which is a bullish sign.

There is weakness in the Japanese Yen which, apart from the stronger US Dollar, is the major defining feature of the Forex market right now. This is a good reason to be short of the Japanese Yen, and the British Pound is one of the strongest major currencies. This suggests that this currency cross could be a great vehicle to use to take advantage of any Yen weakness over the coming week.

When trading this cross, it helps to check support and resistance levels in the USD/JPY and GBP/USD currency pairs to be sure the price can rise or fall relatively easier.

I think a long trade at either a firm breakout beyond last week’s high would be the best signal for a long trade entry.

The EUR/JPY currency cross rose firmly during the week. The price ended the week quite near its high, which is a bullish sign, as is the fact that it closed at a multi-year high. The price chart below shows that there is a powerful and seemingly durable bullish trend which has been running since before 2024 began.

There is long-term weakness in the Japanese Yen which is the major defining feature of the Forex market right now. The Euro is one of the stronger major currencies, although the British Pound is even stronger.

When trading this cross, it helps to check support and resistance levels in the USD/JPY and EUR/USD currency pairs to be sure the price can rise or fall relatively easier.

I think a long trade after a bullish bounce following a retracement to ¥170.19, could be a good signal for a long trade entry.

The price of Silver topped at the major quarter-number of $32.50 last week, before falling more sharply. The other major precious metal Gold also took a hit. I argue that Silver, technically, looks more bullish than Gold, or at least has a better chance than Gold of recovering soon to make new highs again. This is because the price got a bit of a bullish bounce just above the big round number at $30.00.

Just below $30, there is a key support level at $29.85. I think this will very likely be next week’s pivotal point, so a bullish bounce which rejects both $30.00 and $29.85 could be an excellent entry signal for a new long trade.

For the fifth week in a row, the NASDAQ 100 Index rose again last week. For the second week in a row, it closed at a new all-time high. These are bullish signs.

Bulls should note that there is a meaningful upper wick, but the price ended the week advancing after an earlier dip, so the most recent price action was showing short-term bullish momentum. It is also notable that this tech index is outperforming the broader S&P 500 Index.

It makes sense to be bullish on this major stock market index when it is rising firmly to make new record highs. Historic precedent shows this tends to produce further gains quickly.

I therefore see the NASDAQ 100 Index as a buy.

I see the best trading opportunities this week as follows:

1. Long of the NASDAQ 100 Index.
2. Long of Silver following a bullish bounce rejecting $30.00 and $29.85.
3. Long of the GBP/JPY currency cross following sustained bullish price action above last week’s high price at ¥200.06.

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Foreign exchange analysts at Credit Agricole consider that economic recovery will be crucial in triggering positive sentiment towards the Pound.

From 1.27 at present, dollar strength will hold the Pound to Dollar (GBP/USD) exchange rate to 1.25 at the end of 2024 before an advance to 1.35 at the end of 2025.

GBP/EUR is forecast at 1.2050 at the end of 2025.

According to Credit Agricole, investors are starting to look at the Pound more favourably with optimism over an economic recovery as inflation pressures ease.

Markets also expect political stability after the election, although the poll was expected in Autumn rather than July.

The bank notes that a more positive stance on the Pound would be a notable change after persistent bearishness over the past few years.

As far as the economy is concerned, the bank expects that the economy will respond more positively than other major economies to interest rate cuts.

This reflects the large number of short-dated mortgages and stickiness in wage increases which will boost real incomes.

The bank also considers that the Pound can gain support from on-going interest in carry trades if the Bank of England is cautious in cutting interest rates.

Credit Agricole sees scope for unhedged capital flows into equities, especially as the UK market is notably cheap in global terms.

Key Quotes:

“We continue to expect the GBP to outperform the EUR this year.”
“We target a move towards 0.84 in Q424.”

“We expect GBP/USD to finish the year closer to 1.25, with the impact of any domestic positives likely to be more than offset by the negative effects of growing US political risks and global geopolitical risks in H224.”

“In 2025, we expect EUR/GBP to remain under pressure while GBP/USD could participate in the broad USD-downtrend that we forecast in the long term.”

“We continue to see EUR/GBP and GBP/USD at 0.83 and 1.35 respectively in Q425.”

GBP/JPY Forecast Video for 03.10.23

British Pound vs Japanese Yen Technical Analysis

The British pound initially tried to rally during the day on Monday but has given back gains rather quickly as we continue to see a lot of noisy behavior around the British pound. The 50-Day EMA is sitting right around the top of the candlestick on Monday, and then of course we have the Friday candlestick that was also a shooting star, so it looks like we are trying to break down toward the ¥180 level. The ¥180 level underneath could offer a certain amount of support, as it previously had been. That being said, I do think there are plenty of buyers in that area and it’s probably only a matter of time before we see that area offer significant support.

On the other hand, if we were to turn around and break above the top of the last couple of candlesticks, it could kick off a move back to the ¥185 level, which is an area that previously has been important. With that being the case, I think it does make a good target but it’s obvious the market is ready to go back and forth in the short term more than anything else, so I think you have to be cautious about your position sizing and recognize that the market has a lot of decisions to make in this general vicinity.

While I don’t like the Japanese yen, the reality is that the British pound has been very soft as of late, and I think that probably continues. Short-term rallies that show signs of exhaustion are opportunities to get short again and therefore that’s how I will approach this market. On the other hand, if we break above the top of those 2 candlesticks from Friday and Monday, then I may switch my position. In general, I believe in buying yen related pairs, but this is my least favorite one.

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 25.04.23

British Pound vs Japanese Yen Technical Analysis

The British pound has rallied a bit during the trading session on Monday, as we broke above the top of the hammer from the Friday session. At this point, it looks like the British pound is threatening the ¥168 level, and then possibly even the ¥169 level. If we can get past all of that, it becomes more or less a “buy-and-hold signal” in this pair, as it would be a major breach of resistance.

In the meantime, short-term pullbacks should be buying opportunities, and therefore it’s likely that we continue to see a lot of value hunting on these short-term moves. On the other hand, if we were to break down below the hammer from the trading session on Friday, then it opens up the possibility of a move down to the 50-Day EMA, near the ¥164 level. That being said, I think a lot of this comes down to the interest rate differential, especially as the Bank of Japan has continued its quantitative easing policy, keeping the 10 year JGB down to 50 basis points or less. At the same time, the Bank of England has been tightening rates.

Ultimately, this is a market that’s been in an uptrend for quite some time, and we have taken out the losses from the day that the Bank of Japan allowed the 10 year yield to rise from 25 basis points to 50, and as a result this “round-trip” move shows just how strong the British pound is, or perhaps in this case – just how weak the Japanese yen is. Either way, the upward momentum is very strong, and you cannot fight it. I do believe that we will get the occasional short-term pullback, but this should be looked at as potential buying opportunities and value in the British pound.

I have no interest in buying the Japanese yen, at least not against this currency, and in general I do think that the Japanese yen has peaked a couple of months ago, and now we are in the process of going back to the original trend as the Bank of Japan can either keep interest rates low by printing currency, or deal with the consequences of high interest rates and defend the value of the currency, but cannot do both.

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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US Dollar vs Japanese Yen Weekly Technical Analysis

The US dollar has rallied pretty significantly during the course of the trading week against the Japanese yen. We formed a hammer during the weekly candlestick of the previous week, so now it looks like it’s just simply a continuation play. After that intervention and a couple of weeks ago, the Bank of Japan may have intervened.

But quite frankly, you have to wonder whether or not they didn’t learn their lesson. They can’t have an ultra-loose monetary policy and a strong currency at the same time. The market will just simply overwhelm them, and that’s essentially what’s going on right now. I suspect it’s probably only a matter of time before we start looking to the ¥160 level above, which is my target.

Short term pullbacks, I think, continue to see plenty of buyers, especially near the ¥155 level. If we break down below there then the ¥152 level would be potential support. But I think at this point you can only be looking in one direction, which of course makes quite a bit of sense considering that you get paid to hang on to this pair at the end of every day.

Ultimately, I just don’t see a scenario where you’re a seller and wouldn’t even contemplate doing so until we broke down below the ¥150 level, at the very least. And even then, I’d have to take a look at the fundamentals. So, this is a pair that is steady as she goes. You just hang on to your position. You get paid at the end of every day via swap and also appreciate price appreciation.

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 19.07.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially tried to rally during the trading session on Tuesday, but gave back gains almost immediately to slam into the ¥180 level. However, the market has turned around to show signs of support yet again, and now it seems like we are just slamming around. With this being the case, it will be interesting to see how this plays out, but I do think that we have the potential for some type of explosive move. Keep in mind that the Bank of Japan is the most dovish central bank out of all of the major powers, so that does continue to put a lot of negativity into the Japanese yen.

Furthermore, we are in a massive bullish run, and I think that continues to be a situation where you cannot fight the momentum. All things being equal, this is a market that I think continues to see a lot of noisy behavior, but I would be a buyer of dips as they offer value. Another thing that helps the market rally at this point is the fact that the British pound has been very strong for a while, and inflation in the United Kingdom continues to see a lot of pressure, therefore it looks like the Bank of England will continue to be very hawkish.

All things being equal, I think this continues to be a “buy on the dips” scenario, and the situation continues to be one that you will have to be cautious. After all, the volatility will be a major issue that you will have to deal with, with the ¥184 level as an area that has been massive resistance, and then the ¥185 level would be the next target. All things being equal, I do think that we see a lot of noise, so therefore keep your position size reasonable but I still favor the overall upside, as the market will continue to see plenty of upward pressure, due to the fact that the situation continues to be one that the buyers certainly have control over the longer-term, but it also continues to be more noise than anything else.

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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• Japan’s core CPI rose 2.2%, a smaller increase than the 2.6% reported in March.

• The BoJ might not be ready to hike interest rates in June or July.

• The dollar surged on Thursday after data showed robust business activity in May.

The USD/JPY price analysis shows more upside potential for the pair as Japan’s soft inflation figures lower the chances of a BoJ rate hike. Meanwhile, the dollar was heading for its most significant weekly gain in over two months after data showed strong business activity in May.

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Japan’s core inflation slowed further in April, challenging the Bank of Japan’s outlook for rate hikes. The core CPI rose by 2.2%, a smaller increase than the 2.6% reported in March. As a result, the BoJ might not be ready to hike interest rates in June or July. Policymakers have been waiting for more sustainable domestic consumption, with inflation well above the central bank’s target. However, most economic indicators point to weak consumption.

Notably, Japan’s economy shrank by 2% in the first quarter due to poor demand. If consumption remains fragile, the BoJ will hesitate to hike interest rates, and the gap in rates between the US and Japan will remain wide. This could mean further weakness for the yen. 

Meanwhile, the dollar surged Thursday after data showed robust business activity in May, lowering Fed rate cut expectations. The US Composite PMI rose from 51.3 to 54.4 in May, indicating a resilient economy despite high interest rates. As a result, there was uncertainty about the outlook for rate cuts in the US.

USD/JPY key events today

• Revised UoM Consumer Sentiment

USD/JPY technical price analysis: Bulls weakening below 157.00

On the technical side, the USD/JPY price is trading in a thin range after breaking above the 156.50 key resistance level. Nevertheless, the bias is bullish because the price sits above the 30-SMA, and the RSI trades slightly below the overbought level.

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However, bulls are exhausted, as seen in the shallow slope of the current move. Moreover, the price is sticking close to the 30-SMA, a sign that bulls are not committing to significant swings. If this shallow trend continues, the price will retest the 158.01 resistance. However, if it reverses, the price will break below the SMA and the 156.50 level.

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Euro vs US Dollar Technical Analysis

The Euro rallied a bit during the course of the trading session on Friday, as we bounced from the 1.08 level. The 1.08 level is an area that previously has been both support and resistance. And therefore, I think it makes quite a bit of sense that we could see a little bit of a push higher, but ultimately the market has been bouncing around between the 1.08 and the 1.09 level for a while now. And at this point in time, I think you have to assume more of the same happens. The interest rates in America did spike a little bit during the day on Thursday, but we are starting to see that abate a bit and therefore the euro has a little bit of breathing room.

If we were to break back down below the 1.08 level, then it could open up a move down to the 1.0750 level. That’s an area that I think is a minor support, but it could be a target. If we can break above the 1.0850 level, then it has the market continue to go to the 1.09 level. In general, this is a market that I think continues to be very noisy, and as you can see on the four hour chart, it literally goes from one major large handle to another, and it has been very predictive in that manner, at least. With this, I think you need to be cautious, but perhaps stick to short-term trading only in this market.