• In my daily analysis of the British pound against the Japanese yen, I find the price action somewhat interesting.
• The Bank of England cut rates during the session and while the British pound did fall, as you would expect, the reality is that perhaps we’ve seen the worst of it.
• We started to turn things around later in the day as the interest rate differential still heavily favors Great Britain.

After all, the Japanese barely offer any interest in, even with the interest rate cut coming out of the Bank of England, the market will still see the overnight rate at 5%. So, you’re earning well over 4.5% to simply hang on to this pair, and traders will be paying close attention to that. And of course, the pair is oversold.

Its Been Due for a Few Days

So, I think it’s probably due to bounce anyway. If we can recapture the 200 day EMA, I think a lot of traders will jump in based on FOMO and we’ll have to see how things work out from there. The other side of the equation of course is that we break down below the crucial 190 yen level. And I think at that point in time, you probably have a scenario where you end up just completely retracing the entire move, basically from Christmas of last year. The 190 yen level is also the 61.8% Fibonacci retracement level, so that comes into play as well, as a lot of traders will look at that as some type of guidepost.

Another factor that you need to pay close attention to is risk appetite. After all, the interest rate differential does favor more of a “risk on move”, as traders try to look for stable currency markets to pay swap at the end of each day. After all, even if you do get a little bit of a swap and at the same time the currency moves 300 pips against you, that doesn’t do much good. Stabilization will begin more buying before it is all said and done.

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1. Long of the AUD/JPY currency cross. This produced a loss of 5.25%.
2. Long of the CAD/JPY currency cross. This produced a loss of 4.96%.
3. Long of the EUR/JPY currency cross. This produced a loss of 4.24%.
4. Long of the GBP/JPY currency cross. This produced a loss of 5.18%.
5. Long of the NZD/JPY currency cross. This produced a loss of 3.55%.

These trades gave a total loss of 23.18%, averaging a loss of 4.64% per asset.

Last week’s key takeaways were:

1. Possibly the most important event was the US Federal Reserve’s policy meeting. There was an overwhelming expectation that interest rates would be left unchanged despite evidence of declining inflationary pressures and a slowing economy. This was proven correct, but it was the Statement and comments from Fed officials that moved markets and created a more dovish tilt on the US Dollar policy outlook. Fed President Jerome Powell made clear that rate cuts are about to begin as there is a risk of the labour market. Markets were already strongly expecting a rate cut at the September Fed meeting, but these comments had an immediate dovish effect, and sent the US Dollar lower, while US treasury yields fell very sharply very quickly. Both the 2-year and 10-year yields are trading well below 4%, with the 2-year yield falling by more than 0.50% in just 3 days.  The dovish outlook on the Dollar and rates was reinforced Friday with lower-than-expected average hourly earnings and non-farm payrolls data.
2. The Japanese Yen made extremely strong gains again last week, as the Bank of Japan hiked rates by 0.15% to 0.25% and announcing a halving of its bond purchases. Traders pushed the Yen higher by close to 5% over the past week alone, which is an enormous advance in a very short time for a major currency which can act as a safe haven for investors. The Yen is now trading at long-term highs against some major currencies after trading at record lows just a few short weeks ago.
3. The Bank of England cuts its interest rate by 0.25% to 5%. The vote was slightly less convincing than was expected, but the cut was widely expected to happen.
4. Global equity markets generally fell significantly last week, especially technology stocks, continuing a recent trend. However, it is far from clear that the bull market in stocks in over.
5. Inflation data released last week from a few countries gave the following results:
   1. Eurozone CPI Flash Estimate came in just a fraction higher than expected.
   2. German Preliminary CPI – as expected.
   3. Swiss CPI – as expected.
   4. Australia CPI – as expected.
6. Canadian GDP data showed very slightly stronger economic growth than expected.

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

1. US ISM Services PMI.
2. Reserve Bank of Australia Cash Rate, Rate Statement, and Monetary Policy Rate.
3. New Zealand Inflation Expectations.
4. Canada Unemployment Rate.
5. New Zealand Unemployment Rate.

Last month, I forecasted that the USD/JPY currency pair would increase in value. The performance of this forecast is as follows:

For the month of August, I forecast that the EUR/USD currency pair will rise in value.

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

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

I was wrong, as all decreased in value.

This week, I forecast that the following currency crosses will rise in value:

Directional volatility in the Forex market rose again last week, with 67% of the most important currency pairs and crosses fluctuating by more than 1%.

Last week, the Japanese Yen was again the strongest major currency, and the Australian Dollar was again the weakest.

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The US Dollar Index printed a large bearish engulfing candlestick last week, which closed right near its low, at the lowest price seen in almost 5 months. The price is now below its levels of both 3 months ago and 6 months ago, indicating a new long-term bearish trend in the greenback. These are all bearish signs.

The technical slip matches the dovish change in fundamentals, with the Federal Reserve making clear that it will soon begin cutting interest rates, and with US treasury yields falling very quickly and sharply after the Fed’s meeting last week. There was also economic data released Friday which clearly indicated that the US economy is slowing significantly.

I am bearish on the US Dollar this week. However, it is worth noting that technically, the price is not very far from both a horizontal support level, and an ascending trend line marking the lower edge of the narrowing triangle chart pattern that has contained the US Dollar for about the past year.

The EUR/USD currency pair rose strongly last week to print a fairly large engulfing candlestick which closed near its high. This is the highest weekly close seen in this currency pair in almost 5 months. These are bullish signs, but bulls should not that according to the price chart below, the price action over the past several months has been rather consolidative.

The Euro tends to trend quite reliably, but often does so slowly, with deep retracements. Nevertheless, I see the current technical situation as justifying entering a new long trade, it just might well take a long time to pay off.

A long position here is supported by the bearish picture both technically and fundamentally in the US Dollar, it is more the Euro which needs to start moving.

I expected the USD/CHF currency pair to have potential resistance at $0.8875.

The H1 price chart below shows how the price action rejected this resistance level with a large bearish engulfing candlestick, marked by the down arrow within the price chart below, rejecting this resistance level during last Tuesday’s London session, signaling the timing of this bearish rejection.

This trade could still be open, but it has been extremely profitable so far, giving a maximum reward-to-risk ratio of approximately 14 to 1.

Along with the Japanese Yen, the Swiss Franc is a very strong currency, gaining firmly in value over the past week.

The AUD/JPY currency cross fell extremely strongly last week for the second consecutive week to close lower by more than 4%. In fact, the week’s decline was greater than 5%. This is an unusually large price movement that has not been seen for years. It was a very bearish weekly candle, with the price closing right on its low.

Although the Australian Dollar traded significantly lower last week on declining risk appetite, the Japanese Yen remains the real story. It enjoyed yet another week of dramatic strengthening but by even more than the previous week’s strong advance. This was driven by the Bank of Japan’s divergent rate hike, and tighter monetary policy of halving its bond purchase program.

The Yen and Aussie are the two biggest movers in the Forex market, putting this currency cross in focus.

Technically, the drop shown in the price chart is fascinating – the move looks like a knife cutting through hot butter, as it overcomes months of grinding, advancing price action. This is a sign of fundamental change.

Although we can say that there is strong bearish momentum, I expect that with the price so oversold and trading near a cluster of key support levels, and with so many currency crosses having outsized movements last week, the price of this currency cross will advance over the coming week, at least by a little.

Therefore, I expect this currency pair’s price to rise over the coming week, along with several other Yen crosses.

Gold rose last week to print a normally sized bullish candlestick which made the highest ever weekly close. However, it must be noted that the candlestick has a large upper wick which has rejected two key resistance levels, and the price action last week did not make a new record high.

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

The US Dollar is looking bearish, which may help the price of Gold to advance.

Bulls will be looking for a daily close above $2,466 or, even better, the big quarter-number at $2,500.

The S&P 500 Index fell again last week, after the previous two weeks when the major stock market index posted its biggest loss in months.

The move down was reasonably strong, but nothing out of the ordinary. Most trend traders won’t be in a long trade here any longer despite the recent strong bullish run, as the price has retraced by more than three times the long-term daily average true range.

Technology stock indices like the NASDAQ 100 have performed even more bearishly over the past week, suggesting that the stock market has made a rotational shift. Broader market investments now look likely to outperform leading technology stocks.

Despite the recent bearishness, it cannot yet be said that the bull market is over here. The price area that stands out as most likely to be pivotal is the big quarter-number at 5,250. If we see a strong daily or weekly close below that level, we will likely be in for an even deeper retracement, and maybe also a technical end to the bull market that comes when the price is more than 20% off its peak.

US Treasury Yields fell very dramatically and strongly last week. The weekly drop was the largest seen in over one year. Treasury yields had already been falling in recent days, but the Fed meeting which resulted in a dovish tilt really sent the yields tumbling. It is notable that both the 2-year and the 10-year yields tumbled and ended up well below 4%, suggesting a major shift in the market’s expectation towards a deeper path of rate cuts going forward.

It may be a bit too late to enter a new short trade here, however. Nevertheless, traders should remember that US Treasury Yields have an excellent record of trending reliably, the problem is whether you have access to futures and the differential of that price which can make it difficult to find a way to profit.

US Treasury Yields fell very dramatically and strongly last week. The weekly drop was the largest seen in years. Treasury yields had already been falling in recent days, but the Fed meeting which resulted in a dovish tilt really sent the yields tumbling. It is notable that both the 2-year and the 10-year yields tumbled and ended up well below 4%, suggesting a major shift in the market’s expectation towards a deeper path of rate cuts going forward.

It may be a bit too late to enter a new short trade here, however. Nevertheless, traders should remember that US Treasury Yields have an excellent record of trending reliably, the problem is whether you have access to futures and the differential of that price which can make it difficult to find a way to profit.

I see the best trading opportunities this week as long of the following currency crosses.

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

I also think a long trade in the EUR/USD currency pair could work out well.

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EUR/GBP exchange continues to firm following BoE rate cut

The euro pound (EUR/GBP) exchange rate is continuing on its upward trajectory this morning following the Bank of England’s (BoE) latest interest rate decision yesterday afternoon.

At the time of writing, the EUR/GBP exchange rate is trading at around €0.8496, up roughly 0.2% from this morning’s opening rate.

Pound (GBP) undermined by BoE rate cut

The pound (GBP) has remained on the back foot against the majority of its peers this morning following the BoE’s decision to cut interest rates yesterday afternoon.

The central bank voted to loosen monetary policy from its 16-year high of 5.25%, with five of the nine monetary policy members voting for a 25-basis point cut.

BoE Governor Andrew Bailey, who was one of the five MPC members who voted for the cut, commented:

‘Inflationary pressures have eased enough that we’ve been able to cut interest rates today, but we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much.’

Following the release, Sterling experienced a sharp selloff, with the currency reaching some of its lowest levels this morning.

Also applying pressure onto GBP exchange rates is this morning’s risk-off mood. As an increasingly risk-sensitive currency, the pound is further stymied by the downbeat market mood.

Euro (EUR) flat amid lull in data

The euro (EUR) is trading in a narrow range against the majority of its peers this morning amid an absence of macroeconomic data releases from within the Eurozone, leaving the common currency largely directionless.  

However, the euro has managed to recoup some of its losses from yesterday, following a duo of disappointing data releases.

The Eurozone’s finalised manufacturing index for July printed at 45.8, remaining in the contraction zone (a reading below 50), while the bloc’s latest unemployment rate unexpectedly rose from its historic lows of 6.4%.  

EUR/GBP forecast: BoE speech to drive movement?

Looking ahead, the primary catalyst of movement for the EUR/GBP exchange rate for the remainder of the day will likely be a speech from BoE official Huw Pill.

As Pill was one of the four policymakers who voted to hold interest rates at 5.25%, could any hawkish comments from the rate-setter see the pound claw back some of its losses?

Turning to the euro, a continued absence of market moving data will likely see EUR exchange rates remain trading without a clear trajectory.

However, as a safe-haven currency, should markets remain cautious, the euro could close the week firming against its peers.

Australian Dollar vs US Dollar Technical Analysis

The Australian dollar has gone back and forth during the last couple of days and as we currently stand, it looks like the 0.6550 level remains a bit of a magnet for price. Quite frankly, the market is taking a break after a severe beating over the last couple of trading sessions, going back really about two and a half weeks where we plunged from the 0.6790 region. At this point, we have to question whether or not the market is able to continue this type of downward pressure, or will we get a relief rally?

As things stand right now, it looks like we’re just content to go sideways. We could be forming a little bit of a basing pattern, but we would need to see the 0.6575 level taken to the upside to even start to think about that. Furthermore, we have a Federal Reserve meeting on Wednesday, which will probably be the catalyst, regardless of which direction we go.

Once we get a read on the Federal Reserve monetary policy, that will affect the dollar, and of course the Australian dollar will react in kind against that greenback. So, we’ll just have to wait and see. I suspect we probably have another 24 hours or so of this sideways action. After that, I would hope that things become much clearer. This is a market that also has a lot of input from risk appetite, so make sure you understand that as well.

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 EUR/USD exchange rate is expected to remain under moderate pressure in the coming days, with focus on Eurozone inflation figures ahead of the Fed decision and US wage figures.
• According to reliable trading platforms, the EUR/USD rate has retreated from its July highs of 1.0948 and has now recorded three consecutive weeks of declines, consistent with a soft tone.
• Weakness is likely to be limited, with selling interspersed with upside days.

As for the outlook for the currency pair, we look for a gentle pullback to the 50-day moving average at 1.0811 in the coming days. Also, note that this is the approximate location of the 38.2% Fibonacci retracement from the 2024 high to low. Technically, a break of the EUR/USD support level of 1.0780 would reinforce the bears’ position of control over the trend.

We expect potential volatility in the euro exchange rate from Tuesday when the eurozone CPI inflation figures start to come in, with the initial focus on the German figure. According to the economic calendar, the state-level figures are released from 7am German time, which could give early guidance for the full German figure due later in the day. This, along with the Spanish CPI release, could give some direction for how the eurozone inflation figure will turn out mid-week. The eurozone is expected to post a 2.3% year-on-year figure, which is consistent with an ongoing process of deflation. The European Central Bank is expected to cut interest rates again in September, meaning it would take a big surprise in the data to have a lasting impact on the euro. Instead, it is the US dollar side of the equation that will provide the volatility this week. The Federal Reserve is due to release its policy decision on Wednesday. Moreover, there will be no change in US interest rates. We expect dovish guidance in line with expectations for the first interest rate in September. Now, the market is “fully priced in” for such an outcome, meaning the US dollar will rally if the Fed casts any doubt on the shot at starting its rate-cutting cycle in September. Furthermore, we expect the Fed to continue its new strategy of highlighting concerns that keeping interest rates unchanged for too long could negatively impact the labor market.

Concurrently, this is consistent with the Fed saying it believes it can afford to cut US interest rates before inflation falls to its 2.0% target. On Friday, the most important event for the US dollar comes when the US jobs report is released. If the data comes in below expectations, the market will price in more policy easing from the US Federal Reserve in the coming months, which will weigh on the dollar.

The US non-farm payrolls data for July is expected to show an increase of +178K jobs, with the unemployment rate remaining at 4.1%. This comes after a stronger-than-expected reading of +206K jobs in June.

EUR/USD Technical analysis and forecast:

There is no change in my technical view of the performance of the Euro against the US Dollar EUR/USD as the general trend will remain bearish and breaking the support 1.0800 is possible and will strengthen the bears’ control of the trend and thus prepare for stronger losses. Furthermore, the technical indicators will move towards strong oversold levels on the daily chart if the Euro Dollar price moves towards the support levels 1.0735 and 1.0600 respectively. On the other hand, and for the same time period, the psychological resistance 1.1000 will remain the most important for the upward shift of the general trend.

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• The GBP/USD exchange rate may remain under pressure amid a potential UK interest rate cut and Friday’s US jobs report.
• Ahead of these important and influential events, the GBP/USD rate is holding around 1.2810 at the time of writing, its lowest in over two weeks.

According to the economic calendar, the Bank of England decision this week will be the main focus for the pound, and the market is currently split 50/50 on whether the bank will go ahead with a rate cut. The heightened uncertainty means that markets will be sensitive to the outcome, and as such, we could see some high volatility this week.

Our general outlook for this week is for weakness in the near term as traders position themselves for potential volatility. Thus, this caution could reflect GBP/USD weakness, and a pullback towards 1.28 cannot be ruled out in the near term. A pullback to this level is likely to be more likely if global equity markets continue to struggle; last week we saw the pound come under pressure amid a broad sell-off in equity markets, a reminder that the exchange rate is sensitive to broader sentiment.

Currently, financial markets are pricing in just over a 50% chance of a rate cut on Thursday. Sterling’s weakness last week certainly reflects a rebuilding of this expectation, with the odds of a cut now closer to 40%. Also, the market has built up a record long position in sterling over recent weeks as investors look for further outperformance. Meanwhile, the risk is that this crowded positioning will be eroded by any disappointment, exposing sterling to a deeper pullback. Even in the case of a hawkish cut, we tend to think that markets will continue to sell sterling on a cut as positions are pared back, a “hawkish cut” being when the Bank cuts interest rates but signals to the markets that further cuts are not guaranteed and are dependent on upcoming economic data.

But what if the Bank does not cut rates?

This could provide some upward relief for the GBP, which could rebound towards the end of the week, especially if the US jobs report on Friday falls short of expectations. However, the rise in GBP/USD is likely to be limited as the bank will surely “pave the way” for a rate cut in September. According to analysts at Oxford Economics, “the conditions are ripe for the MPC to cut, but we think it will wait until September to avoid surprising the markets.” A strong commitment to a rate cut in September would make this a “dovish hold,” which does not entirely align with a GBP recovery.

Beyond short-term weakness prospects, Bank of America sees the structural backdrop still supportive for the GBP: “Excluding event risks and with the new government in a hurry to announce policy, we look for further GBP appreciation in the coming months. Asset investment remains supportive, but near-term positioning is crowded.”

Furthermore, this fits into the broader theme of near-term weakness before a resumption of the rally sometime in the coming weeks.

A big week for the US Federal Reserve

Turning to the US dollar, the Federal Reserve is expected to release its policy decision on Wednesday. No change in US interest rates will be made. Instead, we expect a dovish tone in line with expectations for the first rate cut in September. Concurrently, the market is now “fully priced in” for such an outcome, meaning the US dollar will rally if the Fed casts any doubt on the launch of a rate-cutting cycle in September. Moreover, we expect the Fed to continue its new strategy of highlighting concerns that keeping rates on hold for too long could be detrimental to the labor market.

This aligns with the Fed’s statement that it believes it can afford to cut interest rates before inflation falls back to its 2.0% target. Decisively, the most important event for the US dollar comes on Friday when the US jobs report is released. If the data comes in below expectations, the market will price in further policy easing from the Fed in the coming months, which will weigh on the dollar.

Technical forecasts for the GBP/USD pair today:

We believe that any weakness in the GBP/USD from here could lead to a decline in the exchange rate back to the 1.2760 area. Technically, this aligns with the 38.2% Fibonacci retracement of the April to July rise and considers the 50-day moving average (DMA) at 1.2780. The 50-day moving average halted the decline in June, where the uptrend was confirmed again.

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• Last week, the yen gained over 2% against the US dollar.

• The BoJ might hike rates by 10bps.

• The Fed will likely keep rates unchanged.

The USD/JPY outlook shows a mild bullish move as the pair recovers ahead of monetary policy meetings in Japan and the US. Investors are eyeing a potential rate hike from the Bank of Japan on Wednesday. Meanwhile, expectations suggest the Fed will maintain its current rates.

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Last week, the yen gained over 2% against the US dollar amid increased expectations for a BoJ rate hike. Investors have gained confidence in a hike because of increased pressure to support the weak yen. As a result, there is a 63% chance that Japan’s central bank will announce a 10bps rate hike tomorrow. 

However, experts have warned that there is a risk the central bank might disappoint. The BoJ has surprised markets many times before. If there is no rate hike tomorrow, it might be a dark day for the yen. 

Meanwhile, traders also anticipate the BoJ’s announcement of plans to reduce its bond purchases. Such an outcome would show confidence that Japan’s economy is on steadier ground, which could propel the yen higher.

On the Fed’s side, investors will focus on economic projections and Powell’s message. At the last meeting, the Fed projected one rate cut in December, which led to a decline in September’s rate cut expectations. If policymakers maintain this outlook, rate-cut bets will fall again, boosting the dollar. However, market participants expect a more dovish outlook given the recent cooler inflation. Notably, policymakers could signal the first cut in September.

USD/JPY key events today

• US CB consumer confidence
• US JOLTS Job Openings

USD/JPY technical outlook: Morning Star pattern ignites buyers

On the technical side, the USD/JPY price has broken above the 30-SMA, indicating a shift in control from bears to bulls. The RSI also shows a shift in sentiment, having broken above 50. This new move comes after the downtrend paused at the 152.01 support level. 

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At this point, the price made a Morning Star candlestick pattern, signaling a looming bullish reversal. Since then, bulls have taken charge and broken above the 30-SMA. However, they face a solid barrier at the 154.80 key level. A break above would clear the path to the next resistance at 158.02.

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• EUR/USD holds steady above 1.0800 after posting losses on Monday.
• June Consumer Price Index data from Germany will be watched closely by investors.
• The pair faces key support area at 1.0800-1.0810.

EUR/USD came under renewed bearish pressure on Monday and fell to its weakest level in three weeks near 1.0800. Although the pair managed to erase a small portion of its losses, it is having a tough time gathering recovery momentum ahead of Tuesday’s key macroeconomic data releases.

The cautious mood at the beginning of the week helped the US Dollar (USD) stay resilient against its major rivals. In the second half of the day, the mixed action seen in Wall Street allowed the USD to preserve its strength and limited EUR/USD’s rebound.

Early Tuesday, the data from Germany showed that the Gross Domestic Product contracted at an annual rate of 0.1% in the second quarter. This reading, however, failed to trigger a noticeable market reaction.

Germany’s Destatis will release Consumer Price Index (CPI) data for July later in the session. Investors expect the CPI to rise 0.2% on a monthly basis following the 0.1% increase recorded in June. A stronger-than-forecast monthly CPI reading could help the Euro find demand with the immediate reaction. Nevertheless, investors could refrain from taking large positions based on this data alone, especially ahead of the Federal Reserve’s monetary policy announcements on Wednesday.

On Tuesday, the US economic docket will feature Conference Board’s Consumer Confidence data for July and JOLTS Job Openings for June. If there is a significant increase in job openings, the USD could hold its ground and weigh on EUR/USD. 

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays well below 50 despite edging slightly higher in the European morning on Tuesday.

EUR/USD holds above the 1.0800-1.0810 support area, where the 100-day and the 200-day SMAs are located. If this support fails, 1.0740 (Fibonacci 78.6% retracement of the latest uptrend) could be seen as next bearish target before 1.0700 (psychological level, static level).

On the upside, first resistance aligns at 1.0840 (Fibonacci 38.2% retracement) ahead of 1.0860 (100-period SMA) and 1.0880 (Fibonacci 23.6% retracement).

• EUR/USD holds steady above 1.0800 after posting losses on Monday.
• June Consumer Price Index data from Germany will be watched closely by investors.
• The pair faces key support area at 1.0800-1.0810.

EUR/USD came under renewed bearish pressure on Monday and fell to its weakest level in three weeks near 1.0800. Although the pair managed to erase a small portion of its losses, it is having a tough time gathering recovery momentum ahead of Tuesday’s key macroeconomic data releases.

The cautious mood at the beginning of the week helped the US Dollar (USD) stay resilient against its major rivals. In the second half of the day, the mixed action seen in Wall Street allowed the USD to preserve its strength and limited EUR/USD’s rebound.

Early Tuesday, the data from Germany showed that the Gross Domestic Product contracted at an annual rate of 0.1% in the second quarter. This reading, however, failed to trigger a noticeable market reaction.

Germany’s Destatis will release Consumer Price Index (CPI) data for July later in the session. Investors expect the CPI to rise 0.2% on a monthly basis following the 0.1% increase recorded in June. A stronger-than-forecast monthly CPI reading could help the Euro find demand with the immediate reaction. Nevertheless, investors could refrain from taking large positions based on this data alone, especially ahead of the Federal Reserve’s monetary policy announcements on Wednesday.

On Tuesday, the US economic docket will feature Conference Board’s Consumer Confidence data for July and JOLTS Job Openings for June. If there is a significant increase in job openings, the USD could hold its ground and weigh on EUR/USD. 

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays well below 50 despite edging slightly higher in the European morning on Tuesday.

EUR/USD holds above the 1.0800-1.0810 support area, where the 100-day and the 200-day SMAs are located. If this support fails, 1.0740 (Fibonacci 78.6% retracement of the latest uptrend) could be seen as next bearish target before 1.0700 (psychological level, static level).

On the upside, first resistance aligns at 1.0840 (Fibonacci 38.2% retracement) ahead of 1.0860 (100-period SMA) and 1.0880 (Fibonacci 23.6% retracement).

• The British pound initially has shown a lot of volatility during the trading session on Monday, but it looks as if it is going to settle on some kind of sideways action.
• With this being the case, it’s worth noting that we are near the 1.2850 level.
• That is an area that previously had been significant resistance.
• The area previously had been very difficult to get above. And now that we have done that, we have pulled back to test that area again. 

Noisy Week for this Market

I think we’ve got a situation where if we can break above the top of the candlestick, we could go looking to the 1.30 level. In general, I do think that this is a pair that probably looks to the upside, but this is a market that has a lot to pay attention to this week, especially as we have central bank meetings coming up from the Federal Reserve, several others, including the Bank of England.

So, GBP/USD is a pair that I think continues to be very volatile, but right now looks as if it is trying to do everything it can to continue the overall uptrend. Because of that, if we break down below the bottom of the candlestick for the day, perhaps breaking below the 1.28 level, it’s really not until we get underneath air that I start to think about shorting, but even then, I’d have to see what was going on.

After all, then you have to start to ask questions about whether or not the US dollar is strengthening due to something going on in America, or if it is a concern about risk appetite in general. Furthermore, the Bank of England could say or do something to throw the markets into disarray. As things stand right now, it looks like we are trying to grind higher, and the phrase “grind”  might be the best way to describe what’s going on period.

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US Consumer Confidence and Recession Warnings

The CB Consumer Confidence Index will draw investor interest on Tuesday, July 30. Economists forecast the Index to fall from 100.4 in June to 99.9 in July.

Downward trends in consumer confidence could affect consumer spending, dampening demand-driven inflation. Softer inflation may enable the Fed to cut interest rates more often than expected to deliver price stability.

Beyond the headline number, the Expectations Index also requires consideration. The Index considers consumers’ outlook for income, business, and labor market conditions. Concerns about the economy and labor market conditions may impact consumer confidence further.

The Expectations Index fell from 74.9 in May to 73.0 in June. According to The Conference Board, the Index has been below 80 for five months. An Index below 80 is usually a recession warning, supporting a USD/JPY fall toward 150.

Private consumption contributes about 70% to the US economy. The US economy could falter if consumers tighten their purse strings.

However, investors should also consider labor market data.

US JOLTs Job Openings Impact

Economists predict JOLTs Job Openings will drop from 8.14 million in May to 8.05 million in June. A fall below 8.00 million could fuel speculation about multiple 2024 Fed rate cuts.

A deteriorating labor market may also impact wage growth and lower disposable income.

A marked deterioration in US labor market conditions could support a USD/JPY drop below 150.