• The British pound has gone back and forth during the course of the trading session on Friday, showing a little bit of hesitation, which of course is not a huge surprise considering that the market has been so noisy.
• All things being equal, the market had recently sold off quite drastically as there was a major risk off type of scenario from the 180 yen level.
• For what it is worth, the weekly candlestick looks as if it is going to be a hammer. So that does suggest that we are ready to go higher.

That being said though, if we can break above the 190 yen level, that could be a very bullish sign. At that point, we could go look into the 200 day EMA, perhaps even towards the previous uptrend line.

The other scenario

On the other hand, if the market were to fall from here, I think we could go looking to the 182 yen level. This is all about risk appetite and that will continue to be the case going forward. Looking at the chart, it’s obvious that volatility has been a major factor in this market, and I think we also have to keep an eye on whether or not the Bank of Japan has to give up its idea of doing everything it can to tighten monetary policy and save the end in the short term they’ve done a really good job but the question then becomes how long can they continue to tighten monetary policy without damaging their own economy which is essentially a bug looking for a windshield I do think eventually we get a bounce but in the meantime I expect to see a lot of noisy behavior

Ultimately, this is a market that is highly sensitive to risk parameters of the interest rate markets, and as a result, I think you will have to watch multiple markets at the same time, as the global markets continue to show a lot of concerns in general.

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“June producer price inflation was a bit stronger than expected, but most of the strength came from a jump in trade services prices (i.e., wholesaler margins). Still not likely enough for a Fed rate cut in a couple weeks, but it certainly should be enough to get the Fed to start setting the stage at the July FOMC meeting for the first rate cut of this cycle in Sept.”

Producer prices were up 0.2% in June after stalling in May.

Short-term Forecast: Bearish

USD/JPY trends will hinge on the producer price data from Japan and the US. Diverging trends favoring the Yen could signal a USD/JPY drop toward 145. However, central bank comments may influence the USD/JPY pairing more. The USD/JPY may fall toward the August 5 low of 141.648 if support increases for multiple Fed rate cuts or recession fears intensify.

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 hovered below the 50-day and 200-day EMAs, confirming the bearish price trends.

A USD/JPY breakout from the 148.529 resistance level and the top trend line could signal a move toward 150. Furthermore, a break above 150 could bring the 151.685 resistance level into play.

Producer prices and central bank commentary require consideration on Tuesday.

Conversely, a drop below 147 could give the bears a run at the 145.891 support level. A fall through the 145.891 support level may bring the 143.495 support level into play.

The 14-day RSI at 31.37 indicates a USD/JPY drop below 147 before entering oversold territory.

EUR/USD Current price: 1.0923

• Financial markets looking stable at the beginning of a new week as concerns recede.
• The United States will publish the July Consumer Price Index next Wednesday.
• EUR/USD is technically neutral in the near term, but bulls hold the grip.

The EUR/USD pair trades uneventfully around the 1.0920 level on Monday, unable to attract investors one way or the other. Financial markets started the week with a calmer mood, as solid gains among US equities on Friday partially offset concerns about the United States´s (US) economic health. A batch of tepid US data fueled speculation about an upcoming recession and triggered bets about larger and sooner interest rate cuts from the Federal Reserve (Fed).

Speculative interest, however, stepped back ahead of key macroeconomic data to be released this week, as the US will publish an update on the Consumer Price Index (CPI) on Wednesday. According to the market forecast, the CPI is forecasted to be 2.9% YoY in July, while the core annual figure is expected to be 3.2% for the same month, both ticking marginally lower from June’s readings. On the same day, the Eurozone will release the second estimate of the Q2 Gross Domestic Product (GDP), estimated at 0.3% QoQ.

Meanwhile, the macroeconomic calendar has little to offer. Germany released the July Wholesale Price Index, which rose 0.3% MoM, improving from -0.3% the previous month. The American session will not bring relevant macroeconomic figures, which means sentiment will likely continue to lead markets’ movements.

EUR/USD short-term technical outlook

From a technical perspective, the EUR/USD pair seems poised to extend its latest cautious advance. In the daily chart, the pair develops above all its moving averages, with the 20 Simple Moving Average (SMA) grinding higher above the longer ones. At the same time, technical indicators hold within positive levels, with modest upward strength. EUR/USD needs to extend gains past 1.0950 to gain bullish traction and retest its recent highs in the 1.1000 region.

EUR/USD is neutral in the near term. In the 4-hour chart, the pair hovers around a flat 20 SMA, while the longer moving averages provide support far below the current level. Finally, technical indicators head nowhere around their midlines, reflecting the absence of speculative interest.

 Support levels: 1.0890 1.0845 1.0800

Resistance levels: 1.0950 1.1005 1.1045

Australian Dollar vs US Dollar Technical Analysis

The Australian dollar gapped lower to kick off the trading session on Monday, but then turned around the show signs of life again, as we have rallied quite significantly. We have slammed into the 200 day EMA, which of course is an indicator that a lot of people pay attention to, so it’ll be interesting to see if this holds as resistance again. If we do break above here, then the 0.6650 level is the most likely target that we will be looking for in the short term. On the other hand, if we do pull back, then the 0.6550 level is support. Anything below there opens up a move down to the 0.65 level.

Keep in mind that there are a lot of questions about what the Federal Reserve is going to do and with that being the case, it’ll be interesting to see how the greenback affects this pair. Furthermore, you have to keep in mind that the Australian dollar is highly sensitive to the commodities markets and that of course in and of itself will cause a lot of volatility as commodities are all over the place right now.

With all of that being said, we are basically in the middle of a consolidation phase. And because of this, I don’t know that anybody has a huge advantage. Any advantage probably comes externally, maybe based on some type of economic announcement in the United States or something. But right now, I think we’re just meandering around this area yet again.

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

This article was originally posted on FX Empire

More From FXEMPIRE:

• The USD/JPY currency pair has stabilized modestly in recent days as some traders continued to buy the dip.
• According to reliable trading platforms, the dollar/yen reached its lowest level at 141.77 last Monday and pared some losses, moving to a high of 147.
• However, the pair remains well below its last month’s high of 161.87.

Trading the Japanese Yen

The USD/JPY exchange rate has suffered a sharp reversal as investors focused on the actions of the Bank of Japan and the US Federal Reserve. For a long time, interest rates between the US and Japan were vastly divergent. Recently, US interest rates were 5.50% while in Japan they were at -0.10%. This gap created an exciting carry trade opportunity as many investors borrowed heavily to invest in other countries, especially the US. Now, the pendulum has swung, and the Bank of Japan has moved out of negative interest rates and raised interest rates to 25 basis points. It has done so in an attempt to combat inflation, which has remained above 2% for the past few months.

US Federal Reserve Rate Cuts

On the other hand, the US Federal Reserve has hinted that it will start cutting US interest rates, joining other central banks such as the Bank of England (BoE), the European Central Bank (ECB), and the Swiss National Bank (SNB). Overall, the chances of the US cutting interest rates have increased in recent weeks after the US released mixed economic data. According to the Bureau of Labor Statistics (BLS), inflation in the country has declined for the past three consecutive months. According to the economic calendar, the headline Consumer Price Index (CPI) rose to 3.0% while the Personal Consumption Expenditure (PCE) inflation figure fell to 2.5%. Meanwhile, these numbers are higher than the Fed’s 2% target, they are moving in the right direction.

The Labor market, the other part of the Fed’s dual mandate, is weakening, with the unemployment rate rising to 4.3%. Historically, the economy has entered a recession whenever the unemployment rate has risen for five consecutive months. Other economic figures related to Labor productivity, manufacturing output, and industrial production were also weaker than expected.

Therefore, the US Federal Reserve is in an unpredictable position. Failure to cut interest rates now could push the US economy into a deep recession. On the other hand, aggressively cutting interest rates would fuel inflation. Overall, analysts have mixed views on what to expect when the Fed meets in September and when Jerome Powell speaks at the Jackson Hole symposium. Some analysts expect the bank to deliver a hefty 0.50% hike at this meeting followed by smaller 0.25% cuts. On the other hand, other analysts believe that the cut should start at 0.25% to prevent inflation risks.

The Unwinding of the Yen Trade is Not Over

Therefore, the continuous rise of the USD/JPY pair has led some analysts to expect that the unwinding of the Japanese yen trade is over. However, we believe that this trade is still entrenched in the market and that it will take time and cause more damage for a while. Furthermore, the size of the Japanese yen trade remains unclear. Analysts at Deutsche Bank believe it could be worth over $20 trillion, a figure equal to about 505% of Japan’s GDP and even larger than China’s GDP. Ultimately, we believe this view is grossly exaggerated.

Taking a look at the Bank for International Settlements (BIS) data estimates the Japanese yen trade to be worth around $1 trillion while other figures suggest it is 3.4 trillion yen. These figures mean that the yen trade is huge, and it will take some time to unwind.

USD/JPY Technical Analysis and Expectations Today

The daily chart shows that the USD/JPY exchange rate peaked at 161.87 in July and has collapsed sharply in the past few weeks. Clearly, this decline occurred when the Bank of Japan started raising interest rates and intervening in the Forex market. According to the trades, the pair has fallen below the 50-day and 200-day EMAs, and the pair is about to make a bearish crossover. In most cases, this pattern is one of the most bearish patterns in the market.

After the sharp decline on Bloody Monday, the pair rebounded from 141 to 147. This rebound occurred after the pair formed a hammer candle, which is a sign of a bullish reversal.

The pair retested the 38.2% Fibonacci retracement point. At the same time, the Relative Strength Index (RSI) and Stochastic have indicated a rise and have exited the oversold level. Therefore, we believe that the USD/JPY pair is going through an unexpected rebound period and will resume the downtrend in the near term. If this happens, the next point to watch will be at 141.77, its low this week. A break below this level will take the pair to 140.

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• As of this writing, the GBP/USD currency pair was trading at $1.2756.
• Last Friday, it attempted to rebound upwards, but its gains did not exceed the resistance level of 1.2773.
• It had recovered previously from significant losses during the same week, reaching a low of 1.2662, its lowest level in over a month.
• Furthermore, the recent attempts at upward rebound have stalled as the US dollar regained some of its recent losses on Thursday following the release of better-than-expected jobs data.

While the range of the US dollar’s ​​rise remained largely limited, the “US dollar” received support from a larger-than-expected decline in the latest initial jobless claims report. According to the results of the economic calendar, the number of Americans filing for unemployment benefits fell to 233,000 for the week ended August 3, missing market expectations of 240,000 and down from an upwardly revised 250,000 the week before. Coming on the heels of last week’s bleak US employment data, signs that the US labor market may be stronger than expected helped keep the US dollar afloat on Thursday afternoon.

Commenting on the US jobs data, Joe Brusuelas, chief economist at RSM US LLP, commented on the X online platform: “A big drop in US initial jobless claims to 233,000. Anything in that range tends to indicate a fairly healthy labor market. Furthermore, non-seasonally adjusted to 203,000. Also, a big drop in Texas to 7,000. This tends to point to doubts that weather played a role in the July jobs report, particularly around those who are not working – whether full-time or part-time – which is justified”

After undergoing significant selling earlier in the week amid fears of a US economic recession that gripped global markets, the US dollar appeared to end the week quietly. However, strong expectations that the Federal Reserve will begin an aggressive monetary tightening cycle next month put additional pressure on US dollar exchange rates, preventing a strong rebound for the greenback.

The Pound Sterling (GBP) Under Pressure Amidst Data Slumps

Conversely, the Pound Sterling (GBP) was largely subdued on Thursday as the UK calendar remained light. In the absence of new UK data, investors remained hesitant to place any aggressive bets on the pound sterling as continued civil unrest continued to dampen sterling sentiment. Right-wing extremist riots across British cities throughout the week have undermined hopes for renewed political stability under a new Labor government, thus deterring investor interest in the pound sterling.

Somewhere else, growing bets on a Bank of England rate cut have added to the pressure on the pound. After fears of a global recession rattled markets earlier in the week, markets are now expecting two more rate cuts by the central bank this year.

Looking ahead, a data-free weekend in both the UK and the US could leave the GBP/USD exchange rate trading sideways. With the lack of data, global risk dynamics could continue to drive movement in the currency pair. Meanwhile, cheerful trading conditions could provide support for the increasingly risk-sensitive pound against its safer rivals. Alternatively, a return to nervous trading could see the US dollar take priority.

Elsewhere, the easing of interest rate cut speculation could weigh on currency movement. As markets continue to price in multiple rate cuts from the Fed and the Bank of England in the coming months, each currency may face additional pressure amid a lack of supportive data.

Technical forecasts for the GBP/USD pair today:

This week, GBP/USD may react heavily to the release of US and UK inflation figures, along with investor sentiment towards risk appetite and the future of global central bank policies. Meanwhile, the overall outlook for GBP/USD is bearish and will strengthen if it moves back towards the support levels of 1.2645 and 1.2580 respectively. On the other hand, the psychological resistance of 1.3000 will remain the most important for the general trend to turn to the upside.

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• US unemployment claims data on Thursday showed a bigger-than-expected drop.

• Investors expect the Fed to lower borrowing costs by 100 bps this year.

• Economists expect US inflation to hold steady at 3.0% in July.

The USD/JPY forecast leans bullish as dollar gains continue after last week’s stronger-than-expected employment figures. Meanwhile, the yen remained vulnerable due to uncertainty about a near-term Bank of Japan rate hike. 

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The dollar edged higher as Fed rate cut expectations eased. This shift comes after unemployment claims data on Thursday showed a bigger-than-expected drop. The US labor market has been the reason behind recent market volatility. The last monthly report raised fears that the economy was experiencing a rapid slowdown. As a result, markets raised the chances of a 50 bps cut in September. 

However, as last week ended, recession fears eased as jobless claims data showed continued strength in the sector. Nevertheless, investors expect the Fed to lower borrowing costs by 100 bps this year. At the same time, policymakers have acknowledged recent signs of weakness by assuming a more dovish stance.

This week, the focus will be on the US Consumer Price Index report. Economists expect inflation to hold steady at 3.0% in July. Meanwhile, the monthly rate might increase by 0.2%. If the figures meet expectations, rate-cut bets will remain intact. On the other hand, lower or higher figures could cause a lot of volatility.

Meanwhile, the yen fell on Monday after policymaker comments last week reduced the likelihood of a near-term BoJ hike. A slower-than-expected hiking cycle might hurt the yen by keeping the US-Japan rate gap wide. 

USD/JPY key events today

It will be a slow start to the week as investors await US inflation data on Tuesday and Wednesday.

USD/JPY technical forecast: Bulls lack enthusiasm above the 30-SMA

On the technical side, the USD/JPY price trades above the 30-SMA after a recent reversal. At the same time, the RSI trades above 50, supporting bullish momentum. Bulls took charge at the 142.56 key level. However, they are yet to find their feet above the SMA. 

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Price action shows small-bodied candles, a sign of weak enthusiasm. Moreover, the price stays close to the SMA in a shallow move. If bulls regain momentum, USD/JPY will retest the 150.03 key level; otherwise, bears will trigger a decline in support to 142.56.

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• EUR/USD extends sideways grind above 1.0900 to start the new week.
• Investors keep a close eye on headlines surrounding Iran-Israel conflict.
• The economic calendar will not feature any high-tier data releases on Monday.

EUR/USD continues to move up and down in a narrow range above 1.0900 after closing the previous week virtually unchanged. The pair’s technical outlook does not offer any directional clues as investors remain on the sidelines while keeping a close eye on geopolitical headlines.

Markets turn cautious at the beginning of the week on growing fears over the Iran-Israel conflict turning into a deepening crisis in the Middle East. Although Euro Stoxx 50 Index is modestly higher in the first trading session of the week, US stock index futures struggle to gain traction.

The economic calendar will not offer any high-impact macroeconomic data releases on Monday. On Wednesday, the US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data for July. 

In case geopolitical tensions escalate further in the second half of the day, major equity indexes in the US could turn south. In this scenario, the US Dollar (USD) could hold its ground against its major rivals and make it difficult for EUR/USD to gain traction. On the other hand, the pair could stretch higher if risk flows return to markets following Wall Street’s opening bell.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart continues to move sideways near 50, reflecting EUR/USD’s indecisiveness. 

First support could be seen at 1.0900 (psychological level, static level) ahead of 1.0880-1.0870, where the 100-period and the 20-day Simple Moving Averages (SMA) are located, and 1.0845 (200-period SMA).

In case the pair breaks above 1.0940 (static level), it could encounter next resistance levels at 1.0960 (static level) and 1.1000 (psychological level, static level).

• The British pound has risen slightly against the US dollar during Friday trading as we continue to see a lot of noisy behavior.
• That being said, the market is likely to continue to see a lot of volatility.
• It’s probably worth noting that the market has been bouncing around between the 200 day EMA and the 50 day EMA indicators, which of course causes a lot of chaos for technical traders sometimes.

If we can break above the 50 day EMA, then it’s likely that this market will continue to go much higher, perhaps reaching the 1.2850 level.

Anything above there then really gets things going. But what I would point out is that the 200 day EMA has held as support. And from a technical analysis standpoint, that’s a very bullish and positive turn of events. The candlestick size itself during the trading session on Friday isn’t necessarily anything special, but the candlestick on Thursday most certainly was. It looks as if we are ready to continue to grind higher and that might be the main feature here. The fact that we are grinding and not necessarily shooting straight up in the air. That does make a certain amount of sense.

Dips Could Bring in Buyers

So, I think ultimately, you’ve got a scenario where traders will continue to look at dips as potential buying opportunities, at least until we break down below the 200 day EMA, which ostensibly means the 1.2650 level below. I do expect a lot of choppy volatility, but that’s not necessarily an indictment on this pair. It’s just the way things have been in most financial markets. I don’t know that much will change as far as the way we are seeing more caution in a lot of markets. GBP/USD is a pair that favors the US Dollar on safety concerns, but the British Pound certainly won’t be as susceptible to few selling as many of the other currencies that I cover.

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1. EUR/JPY – a win of 0.13%.
2. EUR/CHF – a win of 0.93%.
3. GBP/JPY – a loss of 0.30%.
4. CAD/JPY – a win of 1.13%.
5. CHF/JPY – a loss of 0.75%.
6. AUD/JPY – a win of 1.02%.
7. GBP/CHF – a win of 0.60%.
8. NZD/JPY – a win of 0.77%.
9. CAD/CHF – a win of 2.04%.

These trades gave a total win of 5.57%, averaging a win of 0.62% per asset.

Last week’s key takeaways were:

1. Last week saw a wild ride in financial markets, but the excessive swings up and down did not seem to be driven by any fundamental data. It looked to be more of a case of trends unwinding and causing a large spike in volatility, as often happens at the end of a trend. One of the most dramatic shocks was seen in the Japanese stock market, with the Nikkei 225 Index falling by more than 10% one day and then rising by more than 10% the next! The Japanese Yen also saw a huge swing higher, followed by a swing back as the Yen began to be sold again. The market started in a kind of risk-off swing before swinging back into risk-on as the week advanced, ending on a risk-on note. However, it seems that the volatility shock is over by now, so we will likely not see wild swings over the coming week. However, any US CPI (inflation) data surprises could trigger substantial market movements.
2. US ISM Services PMI came in more or less as expected, so there was no surprise regarding the US economy.
3. Reserve Bank of Australia Cash Rate, Rate Statement, and Monetary Policy Rate. The RBA maintained its Cash Rate at 4.35%, as was widely expected. However, the Bank did state that rates would not be cut for at least six months and that a rate hike had been considered. This boosted the AUD over the remainder of the week after it had sold off massively.
4. New Zealand Inflation Expectations were slightly lower than expected, suggesting declining inflationary pressures.
5. The Canadian and New Zealand Unemployment Rates were slightly lower than expected, suggesting more buoyant economic conditions.

It will be a busier week ahead in terms of data, with the most important items this coming week expected to be:

1. US CPI
2. US PPI
3. US Retail Sales
4. UK CPI
5. UK Retail Sales
6. UK GDP
7. Australian Wage Price Index
8. NZD Official Cash Rate, Rate Statement, and Monetary Policy Statement
9. US Unemployment Claims
10. UK Claimant Count Change
11. Australian Unemployment Rate

I forecast that the EUR/USD currency pair will rise in value for August. The performance of my forecast so far is as follows:

Last week, I forecasted that the following currency crosses would rise in value:

• EUR/JPY
• EUR/CHF
• GBP/JPY
• CAD/JPY
• CHF/JPY
• AUD/JPY
• GBP/CHF
• NZD/JPY
• CAD/CHF

This was a good, profitable forecast.

This week, I gave no weekly forecast, as only one major currency pair or cross fluctuated in value by more than 2%. The odds of profitable reversals are better when several crosses have abnormally large price movements.

Directional volatility in the Forex market fell dramatically last week following a very volatile period. Only 30% of the most important currency pairs and crosses fluctuated by more than 1%.

Last week, the Canadian Dollar was the strongest major currency, while the Swiss Franc was the weakest.

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

The US Dollar Index printed a weakly bullish pin bar last week, rejecting both the lower ascending trend line of the consolidating triangle chart pattern, which has been holding the Dollar for almost two years, and the horizontal support level at 102.25. These are bullish signs, although the bounce was not particularly strong. On the other hand, the price is below its levels three months ago and six months ago, indicating a long-term bearish trend in the greenback.

The US Dollar was not the main factor in the markets last week, with several other assets seeing much more dramatic swings, such as the Japanese Yen and Australian Dollar. However, that could probably change this week, as we will get the release of US CPI, which can cause big moves if it is surprising.

This week, I am cautiously bearish on the US Dollar due to the bearish trend. However, it is likely much will depend upon the US CPI data release to determine where the greenback ends this coming week.

I expected the EUR/USD currency pair to have potential resistance at $1.0998.

The H1 price chart below shows how the price action rejected this resistance level with a large bearish inside bar, marked by the down arrow within the price chart below, rejecting this resistance level shortly after the start of last Monday’s London / New York session overlap, signalling the timing of this bearish rejection.

This trade could still be open, but it has been nicely profitable so far, with a maximum reward-to-risk ratio of slightly more than 2 to 1.

Despite this bearish play setting up, I am bullish on this currency pair. It has recently made a new long-term high without making an overly deep bearish retracement, suggesting a valid long-term trend exists. That is why I hold a long position open here right now. I cannot say I am very optimistic about this trade, though, so maybe a smaller position is suitable.

I expected the USD/CHF currency pair to have potential support at $0.8435.

The H1 price chart below shows how the price action rejected this support level with a large bullish engulfing candlestick, marked by the up arrow within the price chart below, rejecting this support level shortly after the start of last Monday’s London / New York session overlap, signalling the timing of this bearish rejection.

This trade could still be open, but it has been nicely profitable so far, giving a maximum reward-to-risk ratio of more than 3 to 1.

The Swiss Franc made a very strong advance over the previous week, and the price bounced back this week.

Gold fell slightly in US Dollar terms last week. It initially dropped during the large risk-off swing early in the week before making a strong recovery. The precious metal ended the week not far from a new record all-time high closing price, which would be a bullish entry signal for trend or breakout traders.

I do not think Gold is looking bullish enough to justify a new long trade entry, but it threatens to make a technically significant bullish breakout, so it is worth watching.

The US Dollar is in a long-term bearish trend, which may help the price of Gold advance.

Bulls will look for a daily close above $2,470 or, even better, the big quarter-number at $2,500 before entering a new long trade here.

However, price action is choppy, with many recent deep retracements within the long, slow, bullish movement we have seen in Gold over recent months.

The S&P 500 Index, like several other risky assets, fell sharply at the start of the week before rebounding strongly enough to close higher, printing quite a large bullish pin bar,

This was the first bullish weekly candlestick we have seen after three consecutive weeks of declines, suggesting that this may be a significant bullish reversal candlestick.

The long-term trend remains bullish, although the decline from the recent record high made only a few weeks ago was deep enough to know out most trend traders.

Over the past few weeks, the S&P 500 Index has begun to outperform the NASDAQ 100 index.

Anyone who sees this as an important supportive bounce in stock markets might prove their conviction with a long trade entry upon a break of last week’s high. I personally prefer to wait for a new all-time high, as we only recently had one a few weeks ago, before entering a new long trade here.

I see the best trading opportunities this week as:

• Long of the EUR/USD currency pair.
• Long of Gold in USD terms following a daily close at $2,471 or higher.

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