• The British pound initially fell during the trading session on Thursday against the Japanese yen but has since turned around despite the fact that there are members at the Bank of England that have voted to cut rates.
• Ultimately, there were to members on the Monetary Policy Committee that voted for cutting rates.
• This would be the first signs of the Bank of England think about cutting rates, but ultimately the interest rate differential between the United Kingdom and Japan is massive, and therefore I think you get a situation where traders continue to hang on to this pair.

• 

The technical analysis for the GBP/JPY pair is fairly straightforward in the sense that we have been in a massive uptrend for months, and of course we have seen the 50-Day EMA act as a trend line quite perfectly since the beginning of the year. In other words, every time we pull back, I’ll be looking to get into this pair is closer the 50-Day EMA is possible. This of course assumes that we are going to pull back, and quite frankly the only reason we did pull back to begin with from the recent swing high as that the Bank of Japan got involved. Regardless though, central bank intervention rarely sticks for the long term, and it certainly doesn’t look like it’s going to here. Remember, the Bank of Japan cannot raise rates too much, or it will absolutely destroy the Japanese economy.

Underneath, I believe that the trend is defined by the ¥190 level, and as long as we can stay above there the trend is very much intact. This does not mean that we go straight up in the air or that it’s easy to get to the ¥200 level, but I think ultimately that’s the target. I will be looking to buy every dip as a potential value plays, as it offers “cheap British pounds” when it comes to the measurement against the feckless Japanese currency. I have no interest whatsoever in trying to short this pair, or anything else denominated in Japanese yen.

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GBP/JPY Forecast Video for 18.09.23

British Pound vs Japanese Yen Weekly Technical Analysis

The British pound has gone back and forth against the Japanese yen during the course of the week, and therefore I think we’ve got a scenario where I think eventually, we will find buyers. The ¥180 level underneath is a significant support level from what I can tell, and therefore I would be surprised to see the market breakdown below there. In fact, I think any move toward that area more likely than not will invite plenty of value hunting.

On the other hand, if we turn around a break above the ¥185 level on a weekly close, that would be a sign that we are ready to go much higher. I think in the meantime we are more likely than not going to continue to consolidate overall, so therefore this is more of a “buy on the dips” type of market, but perhaps from the shorter time frames instead of a weekly chart.

All things being equal, this is a situation where the market has been very noisy and is currently trying to work off some of the excess energy from the move higher. Markets do not go straight up in the air forever; therefore, I think the choppiness that we are seeing now is simply the normal phenomenon that you see from time to time in the markets. That being said, I have no interest whatsoever in trying to sell this market, because I do not believe that the Bank of Japan is ready to change its monetary policy.

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

This article was originally posted on FX Empire

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Most Read: EUR/USD, USD/JPY, GBP/USD – Technical Analysis and Price Outlook

The U.S. dollar asserted its strength on Friday, riding on higher U.S. Treasury yields in anticipation of next week’s highly awaited U.S. consumer price index data. Investors are closely watching the CPI figures, as they could guide the Fed’s next step in terms of monetary policy. That said, a hot CPI report could spark a hawkish repricing of interest rate expectations, further boosting the greenback. Conversely, softer-than-anticipated numbers could dampen the dollar’s strength by rekindling hopes for early rate cuts.

Putting fundamentals aside now, the next section of this article will focus on analyzing the technical outlook for three U.S. dollar pairs: EUR/USD, USD/JPY and GBP/USD. Here we will take an in-depth look at important price thresholds that can serve as support or resistance in the coming days. These levels can not only provide valuable information for risk management, but also play a crucial role in strategic decision making when establishing positions in the currency market.

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EUR/USD FORECAST – TECHNICAL ANALYSIS

EUR/USD declined on Friday following an unsuccessful attempt to surpass its 50-day and 200-day simple moving averages at 1.0790, a robust technical barrier, causing the exchange rate to dip towards 1.0750. If the pullback gathers traction in the coming days, support awaits at 1.0725, followed by 1.0695. Further downside movement could lead to a retreat towards 1.0645.

In the scenario of a bullish reversal, the first hurdle on the upward journey emerges at 1.0790. Breaching this ceiling might pose a challenge, yet upon a successful breakout, the pair could potentially rally towards trendline resistance at 1.0810. Upside progress beyond this region could open the door to move towards a key Fibonacci level at 1.0865.

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USD/JPY FORECAST – TECHNICAL ANALYSIS

USD/JPY rose on Friday, tentatively approaching the 156.00 mark. If gains continue in the coming trading sessions, resistance looms at 158.00, followed by 160.00. Traders need to approach any upward movement towards these levels cautiously, refraining from blinding riding with momentum, given the risk of Tokyo intervening in the FX space to prop up the yen, which could quickly send the pair tumbling.

Conversely, if sellers return and prices start heading lower, the first support to monitor materializes at 154.65, followed by 153.15. Additional losses below this point may boost bearish impetus, creating the perfect environment for a drop towards trendline support and the 50-day simple moving located slightly above the 152.00 handle.

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Change in	Longs	Shorts	OI
Daily	-3%	4%	0%
Weekly	17%	3%	11%

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GBP/USD FORECAST – TECHNICAL ANALYSIS

GBP/USD dipped slightly on Friday but held firm above the 1.2500 mark. Bulls must vigorously defend this technical floor; any failure to do so might precipitate a decline toward 1.2430. Although prices could stabilize around this region before a potential rebound, a breakdown could pave the way for a descent toward April’s low at 1.2300.

On the other hand, if buyers mount a comeback and propel prices above the 200-day SMA, confluence resistance spans from 1.2600 to 1.2630, an area that marks the convergence of the 50-day simple moving average with two significant trendlines. Taking out this barrier could inject optimism into the market, fueling further gains for the pound and potentially leading to a move towards 1.2720.

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• EUR/USD navigates an inconclusive range near 1.0780.
• The Dollar picks up a mild pace ahead of data, Fedspeak.
• Investors continue to assess the policy divergence ahead of US CPI.

EUR/USD struggles to regain impetus after Thursday’s marked advance, while a test of the key resistance area around 1.080 still remains elusive. In the meantime, spot is expected to maintain a cautious trade ahead of the key publication of the flash Michigan Consumer Sentiment for the month of May and speeches by Fed’s Bowman, Barr and Goolsbee.

Around the Federal Reserve, San Francisco Fed President Mary Daly commented on Thursday on the persisting policy restrictiveness, noting the potential need for additional time to bring inflation down to the Fed’s target level. Earlier on Friday, Atlanta Fed President Raphael Bostic hinted at a possible economic slowdown, although the timing for rate cuts remains uncertain.

Still around the Fed, FOMC Governor Michelle Bowman, Chicago Fed President Austan Goolsbee and FOMC Governor Michael Barr are all due to speak.

Meanwhile, the narrative surrounding the monetary policy divergence between the Fed and the rest of its G10 peers continues to dominate the macro scenario in the FX universe.

On this, the FedWatch Tool tracked by CME Group sees the probability of a Fed’s rate reduction in September nearly 70%.

EUR/USD technical outlook

On the upside, EUR/USD is likely to face first resistance at the May high of 1.0812 (May 3), which comes before the intermediate 100-day SMA of 1.0829 and the April top of 1.0885 (April 9). North of here is the March peak of 1.0981 (March 8), which precedes the weekly high of 1.0998 (January 11), all before the psychological threshold of 1.1000.

Looking south, a break of the 2024 bottom of 1.0601 (April 16) might mean a return to the November 2023 low of 1.0516 (November 1). Once this zone is cleared, spot may test the weekly low of 1.0495 (October 13, 2023), which is ahead of the 2023 low of 1.0448 (October 3) and the round level of 1.0400.

 

• EUR/USD navigates an inconclusive range near 1.0780.
• The Dollar picks up a mild pace ahead of data, Fedspeak.
• Investors continue to assess the policy divergence ahead of US CPI.

EUR/USD struggles to regain impetus after Thursday’s marked advance, while a test of the key resistance area around 1.080 still remains elusive. In the meantime, spot is expected to maintain a cautious trade ahead of the key publication of the flash Michigan Consumer Sentiment for the month of May and speeches by Fed’s Bowman, Barr and Goolsbee.

Around the Federal Reserve, San Francisco Fed President Mary Daly commented on Thursday on the persisting policy restrictiveness, noting the potential need for additional time to bring inflation down to the Fed’s target level. Earlier on Friday, Atlanta Fed President Raphael Bostic hinted at a possible economic slowdown, although the timing for rate cuts remains uncertain.

Still around the Fed, FOMC Governor Michelle Bowman, Chicago Fed President Austan Goolsbee and FOMC Governor Michael Barr are all due to speak.

Meanwhile, the narrative surrounding the monetary policy divergence between the Fed and the rest of its G10 peers continues to dominate the macro scenario in the FX universe.

On this, the FedWatch Tool tracked by CME Group sees the probability of a Fed’s rate reduction in September nearly 70%.

EUR/USD technical outlook

On the upside, EUR/USD is likely to face first resistance at the May high of 1.0812 (May 3), which comes before the intermediate 100-day SMA of 1.0829 and the April top of 1.0885 (April 9). North of here is the March peak of 1.0981 (March 8), which precedes the weekly high of 1.0998 (January 11), all before the psychological threshold of 1.1000.

Looking south, a break of the 2024 bottom of 1.0601 (April 16) might mean a return to the November 2023 low of 1.0516 (November 1). Once this zone is cleared, spot may test the weekly low of 1.0495 (October 13, 2023), which is ahead of the 2023 low of 1.0448 (October 3) and the round level of 1.0400.

 

• The UK economy expanded by the most in almost three years in Q1.
• US data revealed a significant jump in initial jobless claims to an 8-month high.
• One more BoE policymaker voted for a rate cut.

The GBP/USD outlook shows a surge in bullish momentum as the pound strengthens after better-than-expected GDP data. At the same time, the dollar was weak after another poor employment report. 

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Data on Friday showed that the UK economy expanded the most in almost three years in Q1. This ends the shallow recession experienced in the second half of 2023. The GDP expanded by 0.6% in the first quarter of 2024.

Meanwhile, data on Thursday from the US revealed a significant jump in initial jobless claims to an 8-month high. This confirmed the recent view that the labor market was cooling, leading to a sharp decline in the dollar. Moreover, the unemployment claims report came after poor nonfarm payrolls figures, revealing a bigger-than-expected drop in employment in April. Furthermore, other data showed that US jobless claims fell to a 3-year low in March. 

All these reports have raised confidence in the market that the US labor market is easing. As a result, there will be less inflationary pressure, allowing the Fed to cut interest rates. For this reason, investors are back to pricing in two Fed rate cuts in 2024.

Elsewhere, the pound fell after the Bank of England policy meeting, where the central bank held rates at 5.25%, as expected. One more policymaker voted for a rate cut, indicating growing confidence that inflation will reach the central bank’s target. Moreover, Governor Bailey said he was optimistic that things were moving in the right direction. 

GBP/USD key events today

• US consumer sentiment report

GBP/USD technical outlook: Bullish momentum cracks 30-SMA

On the technical side, the GBP/USD price is on the brink of breaking above the 30-SMA. Meanwhile, the RSI has crossed above 50, showing a shift in sentiment to bullish. This comes after the price failed to break below the 0.5 Fib retracement level. 

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Bulls reversed the move with a bullish engulfing candle. If the price closes above the SMA, it will confirm a bullish takeover. Moreover, it would allow the price to target and retest the 1.2600 key resistance level. A break above this level would make a higher high and strengthen the bullish bias.

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• Consumer spending in Japan declined for the 13th month in March.

• Economists in a Reuters poll expect Japan’s economy to shrink in Q1.

• There was an unexpected increase in US initial unemployment claims last week.

The latest USD/JPY price analysis indicates a bullish trend as the yen weakens following a drop in Japan’s consumer spending for March. The disappointing report has clouded the outlook for potential rate hikes by the Bank of Japan. 

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Data on Friday showed that consumer spending in Japan declined for the 13th month in March. Weak spending could be a sign that consumers are not earning as much. Therefore, prices will remain low, challenging the Bank of Japan’s outlook for rate hikes. In the previous session, data revealed that real wages in Japan fell two years in a row, another challenge for the Bank of Japan. 

Meanwhile, economists in a Reuters poll expect Japan’s economy to shrink in the first quarter of 2024 due to weak demand. These are all bearish for the yen which is struggling at a weak position against the dollar.

Notably, most major currencies gained against the dollar overnight after poor US employment data. However, the yen remained weak, which raised concerns that Japanese authorities might intervene again to support their currency. 

Data on Thursday revealed an unexpected increase in US initial unemployment claims, raising hopes for policymakers that the labor market is finally cracking. Recent labor market data has all surprised to the downside and increased bets that the Fed will cut rates in September. Moreover, there is a higher chance that the central bank will implement two rate hikes in 2024. 

USD/JPY key events today

• US UoM consumer sentiment

USD/JPY technical price analysis: Bulls rest after a strong move to the 156.00 level

On the technical side, the USD/JPY price has paused below the 156.00 resistance level. However, the bullish bias is strong because it trades above the 30-SMA with the RSI in the bullish region above 50. This pause comes after an impulsive move that saw the price break out of its bearish channel. 

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Bulls have paused to rest as the 30-SMA catches up with the price. When it does, USD/JPY will likely break above 156.00 to retest the 158.00 resistance level. The bullish bias will remain if the price stays above the 30-SMA.

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GBP/JPY Forecast Video for 06.02.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially fallen during the Friday session, but then turned around to show signs of life again as we are near the bottom of a major consolidation area. At this point, it’s obvious that the market is trying to recover its overly negative behavior as of late, and I think at this point it’s likely that this bounce could continue as interest rates are rising around the world. This of course works against the Bank of Japan and everything that it’s trying to accomplish. Because of this, it’s likely to be a situation where the higher interest rates will continue to work against the value of the yen as they continue to throw money at the bond market. In other words, they are printing yen.

Nonetheless, I think this is a situation where you have to look at this through the prism of back-and-forth choppy range bound behavior, with the top of it being near the ¥161.50 level, and of course the moving averages in that same neighborhood. With that being the case, I think we’ve got a situation where the traders out there will continue to look at this as a back-and-forth market, until we get some type of definitive action.

Expect more volatility, not less, as the traders around the world continue to see a lot of questions when it comes to growth, and of course monetary policy in general. I expect to see more of this nasty volatility for the foreseeable future, and therefore you need to be cautious with your position size. With that being said, I expect a lot of bouncing around in this same rectangle in the near term.

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

This article was originally posted on FX Empire

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Australian Dollar vs US Dollar Technical Analysis

The Australian dollar rallies after jobs report the unemployment claims in the United States came in a little bit more negative than anticipated, and that has people pushing the US dollar down a bit. That being said, the Australian dollar has also bounced from the 200-day EMA so it does make quite a bit of sense that we get a little bit of momentum here. That being said, the 0.6650 level above will continue to be significant resistance as it is at the top of the overall consolidation range. If we were to break above the 0.6650 level, it opens up the possibility of a move to the 0.68 level, possibly even the 0.69 level.

I’m not holding my breath for this move, but it is worth noting that we are at least trying to build up the necessary momentum to make that happen. If we were to turn around and break down below the 200 day EMA, then I think we just continue the overall consolidation that could send this pair down to the 0.6450 level. Keep in mind that the Australian dollar needs more of a risk on type of attitude around there to get things moving.

And therefore, you have a situation where market participants will continue to look at this through the prism of whether or not we can stay or break out of this big box of trading that we have been in since the beginning of the year. As things stands right now, I wouldn’t necessarily chase the Aussie dollar to the upside and I still think that signs of exhaustion just above are probably shorting opportunities.

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

This article was originally posted on FX Empire

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