• EUR/USD put the 1.0800 region to the test on Monday.
• The Dollar kicked off the week on a positive note.
• The next salient release will be Germany’s flash CPI.

EUR/USD succumbed to the firm start to the week by the Greenback, reversing two daily gains in a row and flirting with three-day lows near the 1.0800 region on Monday.

Conversely, the US Dollar (USD) managed to come roaring and advance to multi-day tops near 104.80, reclaiming at the same time the area beyond the critical 200-day SMA (104.33).

In addition, daily gains in the pair came pari passu with further weakness in US and German yields, at a time when investors expect both the Federal Reserve (Fed) and the European Central Bank (ECB) to cut their rates after the summer break.

In terms of monetary policy, the Fed is largely expected to maintain its rates at its July 31 meeting, while investors anticipate the central bank setting the stage for the start of the easing cycle in September.

An interest rate cut by the ECB in September has also been suggested by recent comments from Vice President Luis de Guindos.

The policy divergence between the Fed and the ECB should remain nearly unchanged, with both central banks forecast to cut rates in the next couple of months. However, the expectation of a soft landing in the US economy contrasts with some loss of momentum in the Eurozone’s economic recovery, potentially leading to further weakness in European currency in the medium-term horizon.

Moving forward, market participants will closely follow the release of the preliminary Q2 GDP Growth Rate in both Germany and the euro bloc, as well as the advanced Inflation Rate in Germany, all due on July 30.

EUR/USD daily chart

EUR/USD short-term technical outlook

The weekly low of 1.0802 (July 29) is next on the downside for EUR/USD ahead of. The provisional 100-day SMA at 1.0796. Down from here comes the June low of 1.0666 (on June 26), ahead of the May low of 1.0649 (May 1).

On the other hand, early resistance is indicated at the July high of 1.0948 (July 17), followed by the March top of 1.0981 (March 8) and the important 1.1000 milestone.

Looking at the big picture, the negative bias should return to the pair if it stays below the crucial 200-day SMA (1.0820).

So far, the four-hour chart indicates some acceleration of the downward bias. Nonetheless, the 55-SMA at 1.0875 serves as early resistance, followed by 1.0948, 1.0981, and ultimately 1.1000. On the other hand, 1.0802 is first, followed by the 200-SMA at 1.0800 and then 1.0709. The relative strength index (RSI) bounced to around 38.

• EUR/USD put the 1.0800 region to the test on Monday.
• The Dollar kicked off the week on a positive note.
• The next salient release will be Germany’s flash CPI.

EUR/USD succumbed to the firm start to the week by the Greenback, reversing two daily gains in a row and flirting with three-day lows near the 1.0800 region on Monday.

Conversely, the US Dollar (USD) managed to come roaring and advance to multi-day tops near 104.80, reclaiming at the same time the area beyond the critical 200-day SMA (104.33).

In addition, daily gains in the pair came pari passu with further weakness in US and German yields, at a time when investors expect both the Federal Reserve (Fed) and the European Central Bank (ECB) to cut their rates after the summer break.

In terms of monetary policy, the Fed is largely expected to maintain its rates at its July 31 meeting, while investors anticipate the central bank setting the stage for the start of the easing cycle in September.

An interest rate cut by the ECB in September has also been suggested by recent comments from Vice President Luis de Guindos.

The policy divergence between the Fed and the ECB should remain nearly unchanged, with both central banks forecast to cut rates in the next couple of months. However, the expectation of a soft landing in the US economy contrasts with some loss of momentum in the Eurozone’s economic recovery, potentially leading to further weakness in European currency in the medium-term horizon.

Moving forward, market participants will closely follow the release of the preliminary Q2 GDP Growth Rate in both Germany and the euro bloc, as well as the advanced Inflation Rate in Germany, all due on July 30.

EUR/USD daily chart

EUR/USD short-term technical outlook

The weekly low of 1.0802 (July 29) is next on the downside for EUR/USD ahead of. The provisional 100-day SMA at 1.0796. Down from here comes the June low of 1.0666 (on June 26), ahead of the May low of 1.0649 (May 1).

On the other hand, early resistance is indicated at the July high of 1.0948 (July 17), followed by the March top of 1.0981 (March 8) and the important 1.1000 milestone.

Looking at the big picture, the negative bias should return to the pair if it stays below the crucial 200-day SMA (1.0820).

So far, the four-hour chart indicates some acceleration of the downward bias. Nonetheless, the 55-SMA at 1.0875 serves as early resistance, followed by 1.0948, 1.0981, and ultimately 1.1000. On the other hand, 1.0802 is first, followed by the 200-SMA at 1.0800 and then 1.0709. The relative strength index (RSI) bounced to around 38.

EUR/USD Current price: 1.0817

• Central banks and earnings reports take centre stage this week.
• The US Dollar is firmly up despite an optimistic market mood.
• EUR/USD gains bearish momentum and aims to pierce the 1.0800 mark.

The US Dollar started the week with a firm footing, posting gains against most major rivals. The EUR/USD pair accelerated its slide ahead of Wall Street’s opening, trading at its lowest in three weeks near the 1.0800 mark.

The pair held rangebound through Asian trading hours despite the market mood being mostly optimistic. Local stock markets rallied following clues from American indexes last week and as investors bet on interest rates’ normalization. The United States (US) Federal Reserve (Fed), the Bank of Japan (BoJ) and the Bank of England (BoE) will announce their decisions on monetary policy in the upcoming days, while multiple tech-related companies will announce quarterly results. Other than that, the US will publish employment-related figures, ending on Friday with the release of the July Nonfarm Payrolls (NFP) report.

Data-wise, the Eurozone did not release relevant figures on Monday, although Germany and the EU will publish the preliminary estimates of the Q2 Gross Domestic Product (GDP) on Tuesday. Growth in the three months to June is expected to have been tepid, not actually a surprise. Meanwhile, the upcoming American session will bring the July Dallas Fed Manufacturing Index.

EUR/USD short-term technical outlook

According to technical readings in the daily chart, the risk of a bearish extension has increased. The EUR/USD pair failed to retain early gains above a bullish 20 Simple Moving Average (SMA) and currently pressures a flat 200 SMA, providing support at 1.0815. The 100 SMA, in the meantime, heads lower below the current level. At the same time, technical indicators have turned lower, suggesting increased selling interest, albeit still within neutral levels.

The 4-hour chart, on the other hand, shows a strong bearish momentum. EUR/USD edged sharply lower, now trading below the 20 and 100 SMAs. Technical indicators, in the meantime, gained downward traction within negative levels, maintaining their bearish slopes and in line with another leg lower.

Support levels: 1.0815 1.0770 1.0725

Resistance levels: 1.0870 1.0910 1.0945  

EUR/USD Current price: 1.0817

• Central banks and earnings reports take centre stage this week.
• The US Dollar is firmly up despite an optimistic market mood.
• EUR/USD gains bearish momentum and aims to pierce the 1.0800 mark.

The US Dollar started the week with a firm footing, posting gains against most major rivals. The EUR/USD pair accelerated its slide ahead of Wall Street’s opening, trading at its lowest in three weeks near the 1.0800 mark.

The pair held rangebound through Asian trading hours despite the market mood being mostly optimistic. Local stock markets rallied following clues from American indexes last week and as investors bet on interest rates’ normalization. The United States (US) Federal Reserve (Fed), the Bank of Japan (BoJ) and the Bank of England (BoE) will announce their decisions on monetary policy in the upcoming days, while multiple tech-related companies will announce quarterly results. Other than that, the US will publish employment-related figures, ending on Friday with the release of the July Nonfarm Payrolls (NFP) report.

Data-wise, the Eurozone did not release relevant figures on Monday, although Germany and the EU will publish the preliminary estimates of the Q2 Gross Domestic Product (GDP) on Tuesday. Growth in the three months to June is expected to have been tepid, not actually a surprise. Meanwhile, the upcoming American session will bring the July Dallas Fed Manufacturing Index.

EUR/USD short-term technical outlook

According to technical readings in the daily chart, the risk of a bearish extension has increased. The EUR/USD pair failed to retain early gains above a bullish 20 Simple Moving Average (SMA) and currently pressures a flat 200 SMA, providing support at 1.0815. The 100 SMA, in the meantime, heads lower below the current level. At the same time, technical indicators have turned lower, suggesting increased selling interest, albeit still within neutral levels.

The 4-hour chart, on the other hand, shows a strong bearish momentum. EUR/USD edged sharply lower, now trading below the 20 and 100 SMAs. Technical indicators, in the meantime, gained downward traction within negative levels, maintaining their bearish slopes and in line with another leg lower.

Support levels: 1.0815 1.0770 1.0725

Resistance levels: 1.0870 1.0910 1.0945  

• At the end of last week’s trading, the GBP/USD price tried to rebound higher, but its gains did not exceed the 1.2877 level and closed the week’s trading stable around the 1.2863 level.
• Moreover, its losses extended in the same week to the 1.2847 support level, its lowest in two weeks.
• Amid this performance, financial markets have set a 45% probability for the Bank of England’s first interest rate cut in more than four years, as inflation has returned to the Bank of England’s 2% target.

Other important economic data to watch include the Eurozone business survey and unemployment rate, German unemployment data, and the Bank of England monetary indicators in the United Kingdom. 

Also, this week in the US, the Federal Reserve is expected to keep the federal funds rate steady at 5.25%-5.50% for the eighth consecutive meeting, but all eyes will be on any indication of the US central bank’s plans for September, with a rate cut fully in mind. The US economy is likely to have added 185,000 jobs this month, down from 206,000 in June, while the unemployment rate is likely to remain at a 2021 high of 4.1% and wage growth at 0.3%. 

According to Forex trading, Credit Agricole commented; “The pound is starting to look expensive against both the euro and the US dollar when compared to short-term fair value estimates based on the relative attractiveness of the pound among other drivers. Accordingly, the pound also remains one of the largest long positions in the G10 forex market. In turn, this justifies some caution regarding the near-term outlook for the currency.” 

HSBC added, “With markets currently holding a very large net long position in sterling (IMM data), the risks are skewed to the downside.” 

This week, markets will focus on the Bank of England’s policy meeting. 

Bank of America commented; “We are sticking with our August call for now, largely because we have the impression that the Bank of England really wants to cut. Furthermore, this may mean that they will emphasize the (slow) decline in wage growth and the volatile services accommodation component in the services inflation surprise.” However, the bank’s conviction is waning. From a medium-term perspective, the bank commented; “If the central bank moves early when the data is not yet there, this also creates a risk not only of a shallower cutting cycle, but also shorter than we assume.” 

According to the performance on the daily chart below, the GBP/USD price is moving within a downward channel that will increase in strength with the break of the support levels 1.2800 and 1.2720 respectively. On the other hand, and for the same time period, the psychological resistance 1.3000 will remain the most important for the bulls’ control over the trend. In general, the trend this week will be determined by the policy path of both the Bank of England and the US Federal Reserve, then the announcement of the US jobs numbers. 

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• Major events this week include the Fed policy meeting and NFP.

• The likelihood of a Fed cut this week is below 5%.

• ECB’s Schnabel said Eurozone service price growth remains a significant problem.

The EUR/USD outlook points south, with the dollar firming ahead of Wednesday’s Federal Reserve policy meeting. Meanwhile, ECB policymakers have created a mixed picture of the outlook for European Central Bank rate cuts. 

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Markets are preparing for several major events this week, including the Fed policy meeting and US nonfarm payrolls. Meanwhile, the Eurozone will release key inflation data shaping the outlook for ECB rate cuts. On Friday, data revealed that US inflation increased slightly, aligning with expectations. As a result, markets are still expecting the first cut in September. Meanwhile, the likelihood of a cut this week is below 5%. 

At the Fed policy meeting, officials might highlight the progress in inflation towards the 2% target. However, there might be caution regarding the US economy’s resilience. The continued strength gives the Fed more room to wait for inflation to drop. Still, investors are confident policymakers will call for a rate cut in September.

Meanwhile, inflation is at 2.5% in the Eurozone, nearing the ECB’s 2% target. However, the central bank held rates in July due to high service inflation. On Friday, ECB’s Isabel Schnabel noted that the central bank has a challenging task ahead to lower inflation. According to her, service price growth remains a significant problem.

However, other policymakers are ready to cut in September. Meanwhile, ECB President Christine Lagarde said that September remains wide open, meaning anything could happen, depending on incoming data.

EUR/USD key events today

Neither the US nor the Eurozone will report high-impact economic data today. Therefore, the pair might consolidate.

EUR/USD technical outlook: Solid support at 1.0825

On the technical side, the EUR/USD decline has paused at the 1.0825 support level. Recently, the price was in a corrective move that retested the 30-SMA resistance. Since the SMA held firm, the price bounced lower with an impulsive candle. However, bears must break below 1.0825 to make a lower low and confirm a downtrend. 

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Notably, the RSI is showing weaker bearish momentum near 1.0825. If bears fail to break below, the trend might reverse, with the price breaking above the SMA. However, if bearish momentum increases, the downtrend will continue with the target of 1.0750.

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• EUR/USD fluctuates at around 1.0850 to begin the week.
• 1.0800 aligns as key support area for the pair.
• Investors could refrain from taking large positions ahead of this week’s critical events.

EUR/USD moves sideways near 1.0850 in the European morning on Monday after closing the previous week in negative territory. Ahead of this week’s key macroeconomic events, which include the Federal Reserve’s (Fed) monetary policy decisions, Eurozone inflation data and US labor market report, the pair could stay in a consolidation phase.

The risk-averse market atmosphere made it difficult for EUR/USD to gather bullish momentum last week, even though mixed macroeconomic data releases from the US limited the US Dollar’s (USD) gains.

The economic calendar will not feature any high-tier data releases on Monday. Meanwhile, US stock index futures gain between 0.25% and 0.5% in the European session, pointing to an improving risk mood.

In case risk flows dominate the financial markets in the second half of the day, the USD could stay on the back foot and allow EUR/USD to hold its ground. Nevertheless, the pair’s action is likely to remain subdued in the near term.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator continues to move sideways at around 50, highlighting a lack of directional momentum.

On the downside, EUR/USD faces immediate support at 1.0840, where the Fibonacci 38.2% retracement of the latest uptrend is located. Below this level, the 100-day and the 200-day SMAs form strong support area at 1.0800-1.0790 ahead of 1.0740 (Fibonacci 78.6% retracement of the latest uptrend).

Resistances align at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).

• EUR/USD fluctuates at around 1.0850 to begin the week.
• 1.0800 aligns as key support area for the pair.
• Investors could refrain from taking large positions ahead of this week’s critical events.

EUR/USD moves sideways near 1.0850 in the European morning on Monday after closing the previous week in negative territory. Ahead of this week’s key macroeconomic events, which include the Federal Reserve’s (Fed) monetary policy decisions, Eurozone inflation data and US labor market report, the pair could stay in a consolidation phase.

The risk-averse market atmosphere made it difficult for EUR/USD to gather bullish momentum last week, even though mixed macroeconomic data releases from the US limited the US Dollar’s (USD) gains.

The economic calendar will not feature any high-tier data releases on Monday. Meanwhile, US stock index futures gain between 0.25% and 0.5% in the European session, pointing to an improving risk mood.

In case risk flows dominate the financial markets in the second half of the day, the USD could stay on the back foot and allow EUR/USD to hold its ground. Nevertheless, the pair’s action is likely to remain subdued in the near term.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator continues to move sideways at around 50, highlighting a lack of directional momentum.

On the downside, EUR/USD faces immediate support at 1.0840, where the Fibonacci 38.2% retracement of the latest uptrend is located. Below this level, the 100-day and the 200-day SMAs form strong support area at 1.0800-1.0790 ahead of 1.0740 (Fibonacci 78.6% retracement of the latest uptrend).

Resistances align at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).

• The British pound has rallied a bit during the early hours on Friday as it looks like the 1.2850 level is going to continue to offer market memory.
• After all, this is an area that previously had been resistance and the fact that we bounced directly from that level tells me there is a lot of interest here.
• Whether or not we can take out the top of the candlestick during the Thursday session is going to be the question.

If we could break above there, then it’s likely that we could go looking to the 1.30 level. This is a market that has been extraordinarily bullish for some time. And now that we’ve had this little bit of a pullback, I do think that a lot of people are willing to jump in and try to take advantage of cheap pounds.

Where We Could Go…

From the latest swing high, we dropped down to almost the 50% Fibonacci retracement level or from the even bigger swing, we dropped down to the 23.6% Fibonacci retracement level. Perhaps traders are looking at that, but ultimately, I think what we are seeing here is that they believe the Federal Reserve is going to cut rates. And as long as that’s going to be the case, it does work against the value of the greenback in general. With this, I think taking out the Thursday candlestick is the clue that you’re looking for that the momentum has clearly returned. For what it’s worth, there has been more of a risk on attitude in the markets over the last 24 hours. So that of course helps the British pound against the greenback GBP/USD which is the world’s safety currency.

With this being said, a lot of people will be paying close attention to the Bank of England over the next week or two, as it has to make several decisions. The Federal Reserve is expected to cut rates once or twice between now and the end of the year, so that of course will be priced on the market already.

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Quantitative Tightening and Interest Rate Differentials

Some economists believe quantitative tightening (QT) could strengthen the Yen more sustainably. The BoJ plans to announce cuts to JGB purchases (QT) in July.

Aggressively cutting JGB purchases would narrow interest rate differentials with the US dollar, bolstering the Yen.

Conversely, a modest rate hike would have a limited impact on rate differentials.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on JGB purchases, stating,

“Bank of Japan to start quantitative tightening, which could support the Yen more than intervention.”

Aggressive cuts to JGB purchases could drop the USD/JPY below 150. BoJ support for multiple rate hikes and aggressive cuts to JGB purchases could send the USD/JPY toward 140 through Q4 2024.

Key Economic Indicators to Watch

On Tuesday, labor market data from Japan will require consideration. Tighter labor market conditions may support wage growth and increase disposable income. Higher disposable income could fuel consumer spending and demand-driven inflation.

Economists forecast Japan’s unemployment rate (Tues) to remain at 2.6% in June. An unexpected rise could allow the BoJ to leave interest rates at 0.1%.

However, retail sales numbers may also draw the BoJ’s interest on Wednesday, July 31. A marked increase in retail sales could allow the BoJ to signal rate hikes over the remainder of 2024.

Economists forecast retail sales to increase by 0.4% in June after rising by 1.7% in May.

US Economic Indicators: Dallas Fed Manufacturing Index

On Monday, July 29, the Dallas Fed Manufacturing Index will be in focus.

Economists expect the Dallas Fed Manufacturing Index to increase from -15.1 in June to -12.0 in July.

Higher-than-expected figures could support expectations of a soft US landing and the USD/JPY at current levels. However, recent US inflation data suggest the numbers will unlikely influence the Fed interest rate trajectory. Prices for goods declined in June.

Charles Schwab Senior Investment Strategist Kevin Gordon commented on the June Report, stating,

“Dallas Fed Manufacturing Index 6-month outlook for new orders rose in June to highest since March 2022 … employment outlook went the other way and fell to lowest since December 2023.”

• The first thing that I notice is that we are stabilizing.
• This is exactly what we needed to see. And while Friday was a somewhat neutral candlestick, what I’m really paying close attention to is the way we behaved on Thursday.
• We broke down to the 200-day EMA and then shot straight up in the air again to show signs of life as we ended up forming a hammer.

The Friday candlestick suggests that we are not quite ready to take off yet, but that makes sense. I would actually prefer to see this market go sideways, mainly due to the fact that it shows more time being spent at this price. Recognizing them, the market accepts this price. If we can recapture the 155 yen level, then I think we could see the market much higher, perhaps racing towards the 50 day EMA, which is at the 157.50 yen level. Breaking above that level then opens up the possibility of a move all the way to the 160 yen level, which I think is very realistic. We do have a major interest rate differential between the US dollar and the Japanese yen. And as a result, I think you’ve got a scenario where you get paid at the end of every session and it does make sense to be involved.

If We Fail at Here…

That being said, if we were to turn around and break down below the 152 yen level, then we may have to look at the 150 yen level as potential support. Anything below there could be a significantly negative bias to really have people shorting this pair. But right now, the Bank of Japan is essentially stuck with its ultra-loose monetary policy while the Federal Reserve is still somewhat in the air as to how many cuts they are going to do in the next few months, if any at all.

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1. Long of the EUR/USD currency pair following a daily close above $1.0939.
2. Long of XAU/USD (Gold) following a daily close above $2,469.
3. Long of the S&P 500 Index following a daily close above 5,668.

None of these trades set up.

Last week’s key takeaways were:

1. The week began with President Biden withdrawing from the 2024 Presidential election. This was not a complete surprise following weeks of speculation following the President’s stumbling performance in his debate with former President Trump. His Vice President, Kamala Harris, quickly secured the pledges of a majority of conference delegates and the backing of almost every major Democrat. She is polling better than Biden was against Trump, taking a small lead in many polls. However, betting markets still suggest former President Trump is the likely winner in November, with a 62% chance of victory.
2. The Japanese Yen made extremely strong gains last week, with unusually large price movements that are rarely seen in the Forex market. This is partly due to risk-off flows as stock markets see heavy profit-taking, with money moving into the Yen as a safe haven, and partly due to an increasing feeling that the Bank of Japan can now begin to move towards a more hawkish monetary policy, including a possible rate hike this week. Technically, the Japanese Yen is likely to see a fall in value over the coming week.
3. The Bank of Canada cut its Overnight Rate by 0.25% for the second consecutive meeting, arguably contributing to the relative weakness in the Canadian Dollar.
4. US Advance GDP came in higher than expected, suggesting more growth in the US economy than previously thought.
5. US Core PCE Price Index data came in exactly as expected, showing a month-on-month increase of 0.2%.

There were a few other events last week which were of lower significance:

1. US, German, UK, French Flash Services & Manufacturing PMI– mixed, giving no clear indication.
2. US Unemployment Claims – almost exactly as expected.

The most important items over this coming week will be:

1. US Federal Funds Rate and Statement.
2. US Average Hourly Earnings.
3. US Non-Farm Employment Change.
4. US JOLTS Job Openings.
5. US Unemployment Rate.
6. Eurozone CPI Flash Estimate.
7. German Preliminary CPI.
8. Bank of Japan Policy Rate and Monetary Policy Statement.
9. Bank of England Official Bank Rate and Monetary Policy Statement.
10. Swiss CPI.
11. Australia CPI.
12. US ISM Manufacturing PMI.
13. US CB Consumer Confidence.
14. Canadian GDP.
15. US Unemployment Claims.
16. US Employment Cost Index.
17. Chinese Manufacturing PMI.

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

Last week, I made no weekly forecast, although the NZD/JPY currency cross experienced an unusually large directional price movement. I did not have faith that the price would revert over the week, so I made no weekly forecast.

This was a great call, as the NZD/JPY currency cross fell again.

Last week, all the Japanese Yen crosses (except CHF/JPY) experienced unusually large directional price movement. I, therefore, think next week we are likely to see rebounds in all these crosses, which suggests that next week will see good long trade opportunities and price advances in:

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

Directional volatility in the Forex market rose last week, with 52% of the most important currency pairs fluctuating by more than 1%.

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

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The US Dollar Index printed an indecisive doji candlestick last week, with almost all the price action occurring between the new support level at 103.71 and the older resistance level at 104.15. This is a sign of indecision, as although the latest support is bullish, the fact that the price has been unable to escape to above 104.15 is a sign that this zone of resistance is still holding.

The greenback has no long-term trend: it is above its price of 3 months ago but below its price of 6 months ago, showing mixed trends. This adds to the picture of indecision and choppiness here.

If the US Dollar can establish itself above 104.15 over the coming days, that will be a bullish sign and likely a signal to stop trading the Dollar short. On the other hand, if it establishes itself below 103.71, that will be a bearish sign.

The Dollar will probably come to life later in the week when the Fed’s policy meeting is held, but in the meantime, the Forex action will likely focus on the volatile Japanese Yen.

The EUR/USD currency pair came off a 3-month high price it made two weeks ago and closed lower at the end of last week. However, the bearish retracement has not yet been deep enough to knock long-term trend traders out of this trade.

The price seems to have found support at $1.0833 but has not risen above the resistance level at $1.0870. The past few days have seen the price consolidate weakly between these levels.

The Euro, the Swiss Franc, and the British Pound have held their value relatively well against a very strong Japanese Yen and a firm US Dollar, but there is not much to say about the Euro right now.

The policy meeting of the US Federal Reserve will probably most strongly influence this currency pair this week.

I will enter a long trade if we get a daily close this week above $1.0939. However, the bullish outlook here is quite weak and unconvincing.

I expected the USD/CHF currency pair to have potential resistance at $0.8923.

The H1 price chart below shows how the price doubled inside bars, marked by the down arrow within the price chart below, rejecting this resistance level just before last Tuesday’s London close, signalling 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.

The AUD/JPY currency cross fell extremely strongly last week to close lower by more than 4%. This is an unusually large price movement that has not been seen for months, possibly even years. It was a very bearish weekly candle, although there was a significantly lower wick, which suggests that the price may have found some support towards the end of the week.

Although the Australian Dollar traded significantly lower last week on declining risk appetite, the Japanese Yen remains the real story. It enjoyed another week of dramatic strengthening but by even more than the previous week’s strong advance. This is driven by anticipation that, at last, economic data is showing inflation sustained firmly above the 2% target, making a rate hike by the Bank of Japan this week extremely likely.

Later this week, the Bank of Japan’s policy meeting injects a major element of uncertainty regarding the Yen. The Bank may hike its interest rate.

Although the price action can be seen as a bearish development, it is worth noting that such strong weekly directional movements in currency crosses tend to bounce back the next week. We already saw the price stop falling, and we may have found support towards the end of last week. Furthermore, almost all the Yen crosses had similar outsized moves.

Therefore, I expect this currency pair’s price to rise over the coming week.

The S&P 500 Index fell again last week, after the previous week when the major stock market index posted a weekly loss for the first time in seven weeks.

The move down was reasonably strong, but nothing out of the ordinary. Most trend traders won’t be long 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. Some major tech companies, such as NVIDIA, have seen massive drops over recent days.

I think the best approach to stocks right now is to stand on the sidelines and wait to see if the bullish trend resumes, whether we see a deeper bearish retracement or just a consolidation.

I see the best trading opportunities this week as follows:

1. Long of the AUD/JPY currency cross.
2. Long of the CAD/JPY currency cross.
3. Long of the EUR/JPY currency cross.
4. Long of the GBP/JPY currency cross.
5. Long of the NZD/JPY currency cross.

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• Investors are fully expecting two rate cuts from the BoE by December.

• Data on US and UK business activity showed further expansion in June.

• Investors will pay close attention to monetary policy meetings in the US and the UK.

The GBP/USD weekly forecast is trending south as markets shift towards a more dovish outlook for the Bank of England.

Ups and downs of GBP/USD

The GBP/USD price fell last week as Bank of England rate cut expectations increased. At the same time, the dollar firmed as data showed economic resilience and easing inflation. Investors are fully expecting two rate cuts from the BoE by December. However, the timing remains unclear. Rate cut bets went up as bets for a September Fed cut rose. 

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Meanwhile, data on business activity from the US and the UK showed further expansion in June. Therefore, both economies are doing well despite high rates. Additional US data revealed bigger-than-expected economic growth in Q2 and a drop in unemployment claims. The week ended with inflation figures coming in as expected at 0.2%.

Next week’s key events for GBP/USD

Next week, investors will pay close attention to monetary policy meetings in the US and the UK. The Fed will meet on Wednesday and likely keep interest rates unchanged at 5.50%. Meanwhile, the Bank of England will meet on Thursday, and there is a 50% chance policymakers will vote to lower borrowing costs. 

Additionally, markets will focus on the all-important US monthly employment report. The last report showed slower job growth and an increase in the unemployment rate. If this trend continues, policymakers might assume a more dovish tone. At the same time, the dollar would fall, allowing GBP/USD to rally.

GBP/USD weekly technical forecast: Bears challenge bullish trend at the 22-SMA

On the technical side, the GBP/USD price has fallen back to the 22-SMA after reaching new highs. However, the bullish bias remains intact, with the price above the SMA and the RSI slightly above 50. The bullish trend continued when the price broke above the 1.2800 key resistance level. 

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Bears prompted a pullback before the price reached the 1.3050 key level. If the bullish trend remains in play, the price will bounce off the 22-SMA to revisit the 1.3050 resistance. However, if bears take over, it might break below the SMA and the 1.2800 support.

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