• EUR/USD stays under bearish pressure and trades below 1.0700.
• PMI data from the Euro area highlight a loss of growth momentum in early June.
• The pair could extend its slide if 1.0670 support fails.

EUR/USD struggles to hold its ground early Friday and trades below 1.0700 after closing in negative territory on Thursday. The pair could continue to stretch lower in case 1.0670 support fails.

The risk-averse market atmosphere helped the US Dollar (USD) gather strength on Thursday, forcing EUR/USD to stay on the back foot.

Early Friday, disappointing PMI data from Germany and the Eurozone make it difficult for the Euro to find demand. HCOB Composite PMI in Germany declined to 50.6 in June’s flash estimate from 52.4 in May and HCOC Composite PMI for the Eurozone declined to 50.8 from 52.2. Both of these readings came in below analysts’ estimates and showed that the private sector’s business activity continued to expand at a softening pace.

Assessing PMI surveys’ findings, “the HCOB PMI do not provide ammunition for another rate cut in July by the ECB,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “This is because, for the biggest Eurozone economy, Germany, service providers increased their selling prices at a sharper pace than in May.”

In the second half of the day, S&P Global will release preliminary Manufacturing and Services PMI data for the US. In case the US PMI data come in better than expected, the USD could preserve its strength heading into the weekend and cause EUR/USD to stretch lower. On the other hand, a noticeable decline in either the Manufacturing or the Services PMI reading could limit the USD’s gains.

EUR/USD Technical Analysis

The Fibonacci 78.6% retracement of the latest uptrend aligns as key support at 1.0670. If EUR/USD falls below that level and starts using it as resistance, technical sellers could remain interested. In this scenario, 1.0600 (static level) could be set as the next bearish target.

On the upside, 1.0700 (psychological level, static level) could be seen as interim resistance before 1.0730-1.0740 (Fibonacci 61.8% retracement, 50-period Simple Moving Average) and 1.0760 (Fibonacci 50% retracement).

• EUR/USD stays under bearish pressure and trades below 1.0700.
• PMI data from the Euro area highlight a loss of growth momentum in early June.
• The pair could extend its slide if 1.0670 support fails.

EUR/USD struggles to hold its ground early Friday and trades below 1.0700 after closing in negative territory on Thursday. The pair could continue to stretch lower in case 1.0670 support fails.

The risk-averse market atmosphere helped the US Dollar (USD) gather strength on Thursday, forcing EUR/USD to stay on the back foot.

Early Friday, disappointing PMI data from Germany and the Eurozone make it difficult for the Euro to find demand. HCOB Composite PMI in Germany declined to 50.6 in June’s flash estimate from 52.4 in May and HCOC Composite PMI for the Eurozone declined to 50.8 from 52.2. Both of these readings came in below analysts’ estimates and showed that the private sector’s business activity continued to expand at a softening pace.

Assessing PMI surveys’ findings, “the HCOB PMI do not provide ammunition for another rate cut in July by the ECB,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “This is because, for the biggest Eurozone economy, Germany, service providers increased their selling prices at a sharper pace than in May.”

In the second half of the day, S&P Global will release preliminary Manufacturing and Services PMI data for the US. In case the US PMI data come in better than expected, the USD could preserve its strength heading into the weekend and cause EUR/USD to stretch lower. On the other hand, a noticeable decline in either the Manufacturing or the Services PMI reading could limit the USD’s gains.

EUR/USD Technical Analysis

The Fibonacci 78.6% retracement of the latest uptrend aligns as key support at 1.0670. If EUR/USD falls below that level and starts using it as resistance, technical sellers could remain interested. In this scenario, 1.0600 (static level) could be set as the next bearish target.

On the upside, 1.0700 (psychological level, static level) could be seen as interim resistance before 1.0730-1.0740 (Fibonacci 61.8% retracement, 50-period Simple Moving Average) and 1.0760 (Fibonacci 50% retracement).

• The kiwi dollar has rallied during the early hours on Thursday to break above the ¥97 level against the Japanese yen, which is also essentially the recent highs.
• With that being the case, the market looks as if it is trying to do everything it can to break out to the upside and I think that it is probably only a matter of time.
• That’s not to say that I believe that the New Zealand dollar is a currency that you need to have a lot of in your portfolio, rather it is to say that the Japanese yen is that week and feckless at the moment.

Keep in mind that the Japanese have absolutely no way of raising rates for any significant amount of time. This is because it will cause a massive recession in Japan. The Japanese government has borrowed so much money that it has absolutely no shot at raising rates for any length of time. Therefore they have come down to one of 2 choices: they can either continue to live with a fairly loose monetary policy, meaning that the currency will continue to drop over the longer term, or they can start to tighten interest rates to save the currency. At the same time watch the domestic economy implode. Remember, Japan has one of the highest debt loads among modern economies in the world.

Buying Each and Every Dip

The technical analysis for almost all Japanese yen denominated currency pairs is the same. Just simply buying dips every time they occur, and I do think that you have to look at them through the prism of whether or not they offer value. The ¥95.50 level is an area that recently has been supported, and then after that we have the 50-Day EMA coming into the picture right around ¥95. I think it would take serious work to break down below there, and at that point in time it could open up a move down to the ¥93.50 level, where it’s even more support.

On the upside, the NZD/JPY market breaking above the recent high, just a few pips from here, then opens up the possibility of a move to the ¥98 level, and by extension we should finally go looking toward the ¥100 level over the longer term.

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• GBP/USD struggles to rebound from the monthly low it set on Friday.
• The near-term technical outlook suggests that the bearish bias stays intact.
• The US economic calendar will feature S&P Global PMI data.

GBP/USD lost 0.5% on Thursday and continued to push lower in the early European session on Friday. After touching its lowest level since mid-May at 1.2630, GBP/USD edged higher to the 1.2650 area but the technical outlook doesn’t highlight a buildup of recovery momentum.

The Bank of England (BoE) announced on Thursday that it left the monetary policy settings unchanged. “June decision was finely balanced as higher-than-expected services inflation reflected factors that would not push up medium-term inflation,” the BoE said in its press release. The BoE’s optimistic tone on inflation outlook caused Pound Sterling to weaken against its major rivals. 

Analysts ING think that the BoE is likely to lower the policy rate in August. “The probability of an August rate cut has inched up from 40% to 60% in the minutes since,” they said. “The fact that there wasn’t a larger repricing is probably because the Bank didn’t change its forward guidance. And for us, August rate cut is our base case.”

Early Friday, the UK’s Office for National Statistics reported that Retail Sales rose 2.9% on a monthly basis in May. This reading surpassed the market expectation for an increase of 1.5% and helped Pound Sterling show some resilience. Other data from the UK showed that the S&P Global/CIPS Composite PMI declined to 51.7 in June’s flash estimate from 53 in May, limiting GBP/USD’s rebound.

Ahead of the weekend, S&P Global PMI data from the US will be looked upon for fresh impetus. In case PMI surveys point to an ongoing expansion in the private sector at a healthy pace, with a Composite PMI reading of 52.0 or higher, the USD could gather strength heading into the weekend and weigh on GBP/USD.

GBP/USD Technical Analysis

GBP/USD dropped below the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the daily chart fell below 40, reflecting the bearish tilt in the short-term outlook.

On the downside, 1.2640 (100-day Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest uptrend) aligns as key support level. If GBP/USD falls below that level and starts using it as resistance, an extended slide toward 1.2600 (psychological level, static level) and 1.2580 (Fibonacci 50% retracement) could be seen.

The 200-period SMA and the lower limit of the ascending channel forms stiff resistance at 1.2700 before 1.2740 (100-period SMA), 1.2800 (psychological level, static level).

• GBP/USD struggles to rebound from the monthly low it set on Friday.
• The near-term technical outlook suggests that the bearish bias stays intact.
• The US economic calendar will feature S&P Global PMI data.

GBP/USD lost 0.5% on Thursday and continued to push lower in the early European session on Friday. After touching its lowest level since mid-May at 1.2630, GBP/USD edged higher to the 1.2650 area but the technical outlook doesn’t highlight a buildup of recovery momentum.

The Bank of England (BoE) announced on Thursday that it left the monetary policy settings unchanged. “June decision was finely balanced as higher-than-expected services inflation reflected factors that would not push up medium-term inflation,” the BoE said in its press release. The BoE’s optimistic tone on inflation outlook caused Pound Sterling to weaken against its major rivals. 

Analysts ING think that the BoE is likely to lower the policy rate in August. “The probability of an August rate cut has inched up from 40% to 60% in the minutes since,” they said. “The fact that there wasn’t a larger repricing is probably because the Bank didn’t change its forward guidance. And for us, August rate cut is our base case.”

Early Friday, the UK’s Office for National Statistics reported that Retail Sales rose 2.9% on a monthly basis in May. This reading surpassed the market expectation for an increase of 1.5% and helped Pound Sterling show some resilience. Other data from the UK showed that the S&P Global/CIPS Composite PMI declined to 51.7 in June’s flash estimate from 53 in May, limiting GBP/USD’s rebound.

Ahead of the weekend, S&P Global PMI data from the US will be looked upon for fresh impetus. In case PMI surveys point to an ongoing expansion in the private sector at a healthy pace, with a Composite PMI reading of 52.0 or higher, the USD could gather strength heading into the weekend and weigh on GBP/USD.

GBP/USD Technical Analysis

GBP/USD dropped below the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the daily chart fell below 40, reflecting the bearish tilt in the short-term outlook.

On the downside, 1.2640 (100-day Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest uptrend) aligns as key support level. If GBP/USD falls below that level and starts using it as resistance, an extended slide toward 1.2600 (psychological level, static level) and 1.2580 (Fibonacci 50% retracement) could be seen.

The 200-period SMA and the lower limit of the ascending channel forms stiff resistance at 1.2700 before 1.2740 (100-period SMA), 1.2800 (psychological level, static level).

• EUR/USD stays under bearish pressure and trades below 1.0700.
• PMI data from the Euro area highlight a loss of growth momentum in early June.
• The pair could extend its slide if 1.0670 support fails.

EUR/USD struggles to hold its ground early Friday and trades below 1.0700 after closing in negative territory on Thursday. The pair could continue to stretch lower in case 1.0670 support fails.

The risk-averse market atmosphere helped the US Dollar (USD) gather strength on Thursday, forcing EUR/USD to stay on the back foot.

Early Friday, disappointing PMI data from Germany and the Eurozone make it difficult for the Euro to find demand. HCOB Composite PMI in Germany declined to 50.6 in June’s flash estimate from 52.4 in May and HCOC Composite PMI for the Eurozone declined to 50.8 from 52.2. Both of these readings came in below analysts’ estimates and showed that the private sector’s business activity continued to expand at a softening pace.

Assessing PMI surveys’ findings, “the HCOB PMI do not provide ammunition for another rate cut in July by the ECB,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “This is because, for the biggest Eurozone economy, Germany, service providers increased their selling prices at a sharper pace than in May.”

In the second half of the day, S&P Global will release preliminary Manufacturing and Services PMI data for the US. In case the US PMI data come in better than expected, the USD could preserve its strength heading into the weekend and cause EUR/USD to stretch lower. On the other hand, a noticeable decline in either the Manufacturing or the Services PMI reading could limit the USD’s gains.

EUR/USD Technical Analysis

The Fibonacci 78.6% retracement of the latest uptrend aligns as key support at 1.0670. If EUR/USD falls below that level and starts using it as resistance, technical sellers could remain interested. In this scenario, 1.0600 (static level) could be set as the next bearish target.

On the upside, 1.0700 (psychological level, static level) could be seen as interim resistance before 1.0730-1.0740 (Fibonacci 61.8% retracement, 50-period Simple Moving Average) and 1.0760 (Fibonacci 50% retracement).

GBP/JPY Forecast Video for 23.05.23

British Pound vs Japanese Yen Technical Analysis

The British pound initially pulled back just a bit during the trading session on Monday but then turned around to rally quite significantly as the market looks like it is still trying to break out above the resistance barrier. The ¥172.50 level continues to loom large in this market, and if we could break above it, that obviously could be construed as a bit of a bullish event.

Short-term pullbacks at this point should continue to see buyers enter the marketplace, as we have been in such a massive uptrend lately. The Japanese yen will continue to struggle due to the fact that the Bank of Japan is in the midst of quantitative easing, as they practice yield curve control in the 10-year JGB. Remember, Tokyo will continue to fight higher interest rates, with a ceiling of 50 basis points in that bond. In other words, they will step into the market and buy bonds to keep rates down. The only way they can do that is to print more yen, flooding the market with that currency.

On the other side of the equation, you have the Bank of England, which remains extraordinarily tight, and is fighting inflation. This sets up a bit of a perfect trade, as it is not only so momentum driven, but there is also a huge interest rate differential between the 2 currencies. Essentially, this is the old styled “carry trade,” perhaps on steroids. With this, I think that plenty of people will continue to step into this market and buy it every time it dips. If we can break above the ¥172.50 level, that is very likely that the market will go looking toward the ¥175 level over the longer term. Underneath, the ¥170 level should continue to offer plenty of support and would be thought of as the short term floor in the market. Because of this, a continued “buy on the dips” strategy will probably tend to work out better than anything else at this point. I would expect a lot of noise but at the end of the day, this is a bullish market for reason.

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:

• According to recent trading, the pound has strengthened against its US dollar counterpart after inflation returned to the Bank of England’s target for the first time in nearly three years.
• Accordingly, the pound has been trading steadily against the US dollar this year, and the GBP/USD price is stable around 1.2720 at the time of writing.
• However, experts warn that the currency could come under pressure if the Bank of England starts cutting interest rates now that price stability has been restored. 

According to the economic calendar and data from the Office for National Statistics (ONS), annual inflation fell to 2% in May, down from 2.3% in April. Clearly, this was in line with market expectations. On a monthly basis, inflation rose at a slower-than-expected pace of 0.3%, unchanged from April. Core inflation, which excludes volatile food and energy components, slowed to 3.5% last month, down from 3.9% the previous month. Also, it rose 0.5% in May. Input prices, which measure the prices that businesses pay for goods and services, were unchanged in May. Output prices fell 0.1%. 

Finally, the UK retail price index rose 0.4%, down from 0.5%. On an annual basis, the index fell to 3% last month, down from 3.3%. obviously, that was slightly below economists’ expectations of 3.1%. With inflation back at the Bank of England’s 2% target, does that mean policymakers will start cutting interest rates? Market watchers say not yet. 

According to analysts at Pepperstone, “despite today’s numbers, the has three reasons to keep policy on hold: the hotter-than-expected inflation numbers in April/May cast some doubt on the pace of inflation’s decline; profit growth is still running high, close to 6% year-on-year; and perhaps most importantly, the June meeting is two weeks ahead of polling day, with policymakers providing no new guidance since campaigning began last month.” 

However, experts say the central bank is likely to cut rates before the end of the year. 

On the global central bank policy front, The BoE is expected to keep its key interest rate at a sixteen-year high of 5.25% at its June 2024 meeting, but investors will be looking for clues about the central bank’s future plans, as no policymakers spoke due to the election campaign. In May, UK inflation hit its 2% target for the first time in nearly three years, but services inflation, a key focus for the central bank, beat expectations. Moreover, analysts will be closely watching the split vote to gauge the likelihood of future monetary easing. Back in May, two members of the committee favored a 25bp rate cut, compared to just one member at the March meeting. 

A major policy shift is not expected until August, with one rate cut expected before November. However, uncertainty looms over the possibility of a second cut. 

Technical forecasts for the GBP/USD pair today: 

For four consecutive trading sessions, the GBP/USD price has been trying to bounce higher to avoid further losses and this could succeed if the currency pair moves towards the resistance levels of 1.2775 and 1.2830 respectively. Obviously, the strength of the US dollar in the forex market ensures that the recent downward shift remains, and this will depend on the decisions of the Bank of England today and the results of the US data led by the weekly jobless claims number. In contrast, according to the performance on the daily chart above, the 1.2600 support level will remain the most important for the strength of the bears’ control over the trend. 

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US Dollar vs Japanese Yen Technical Analysis

The U.S. Dollar initially pulled back just a bit against the Japanese Yen in the early hours of Thursday, but it continues to climb higher as we are extraordinarily bullish. Keep in mind that the interest rate differential between the United States and Japan continues to be wide enough to drive a truck through, and as long as that’s going to be the case, it makes a lot of sense that the US dollar continues to climb. The short-term pullback, when it does come, typically offers a buying opportunity that people are willing to jump on because they get paid at the end of every day and quite significantly to hold this pair.

The Federal Reserve is nowhere near cutting interest rates and now there’s even thoughts that maybe they won’t at all this year. And if that’s going to be the case, then we will just continue to see this market go higher. The Bank of Japan did intervene just above current levels, but really at this point, it looks like it’s a foregone conclusion that we will eventually reach the 160 yen level and then take that barrier out.

This is a market that over the longer term will continue to be very noisy. Um, but I think there’s so much in the way of support underneath. You just simply cannot go in the other direction. The 50 day EMA sits right around the 155.50 level with the 155 level underneath the hard floor. If you squint, you can see an ascending triangle. And I think we go much higher.

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:

• EUR/USD came under renewed downward pressure.
• The marked rebound in the US Dollar weighed on the pair.
• Fed-ECB policy divergence remains at centre stage.

The resumption of the positive trend in the US Dollar (USD) motivated the USD Index (DXY) to reverse part of the recent weakness while putting the risk-linked galaxy under noticeable pressure and sending EUR/USD back to the proximity of the 1.0700 neighbourhood on Thursday.

On another front, the pair’s decent drop came despite further easing of political concerns on the old continent, particularly in France, ahead of the first round of the snap elections scheduled for June 30.

Still in the region, the European Central Bank’s (ECB) Klaas Knot supported market expectations for one or two more interest rate cuts this year, noting that inflation appeared to be moving towards the 2% target.

On this, money markets see around 42 bps of easing by year-end, while market consensus expects the ECB to maintain its policy rate unchanged at its July 18 gathering.

Regarding the Fed, Minneapolis Fed President Neel Kashkari suggested early in the session that it could take one or two years for US inflation to reach the Fed’s target.

Additionally, the CME Group’s FedWatch Tool now indicates nearly a 66% probability of lower interest rates in September.

In the short term, the European Central Bank’s (ECB) recent rate cut, contrasting with the Fed’s decision to maintain rates, has widened the policy gap between the two central banks, potentially exposing EUR/USD to further weakness.

Looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to mitigate this disparity, providing some support for the pair in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

If EUR/USD rebound gains traction, the 200-day SMA at 1.0788 looms as the next objective, ahead of the weekly peak of 1.0852 (June 12) and the June high of 1.0916 (June 4). The breakout of this level reveals the March top of 1.0981 (March 8), followed by the weekly peak of 1.0998 (January 11), and the critical 1.1000 yardstick.

If bears take control, the pair may revisit the June low of 1.0667 (June 14), seconded by the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

The 4-hour chart as far shows some signs of renewed weakness. Initial resistance comes at 1.0761 ahead of 1.0808 and 1.0852, 1. The earliest support appears at 1.0667, followed by 1.0649 and 1.0601. The Relative Strength Index (RSI) has stabilized around 37.

• EUR/USD came under renewed downward pressure.
• The marked rebound in the US Dollar weighed on the pair.
• Fed-ECB policy divergence remains at centre stage.

The resumption of the positive trend in the US Dollar (USD) motivated the USD Index (DXY) to reverse part of the recent weakness while putting the risk-linked galaxy under noticeable pressure and sending EUR/USD back to the proximity of the 1.0700 neighbourhood on Thursday.

On another front, the pair’s decent drop came despite further easing of political concerns on the old continent, particularly in France, ahead of the first round of the snap elections scheduled for June 30.

Still in the region, the European Central Bank’s (ECB) Klaas Knot supported market expectations for one or two more interest rate cuts this year, noting that inflation appeared to be moving towards the 2% target.

On this, money markets see around 42 bps of easing by year-end, while market consensus expects the ECB to maintain its policy rate unchanged at its July 18 gathering.

Regarding the Fed, Minneapolis Fed President Neel Kashkari suggested early in the session that it could take one or two years for US inflation to reach the Fed’s target.

Additionally, the CME Group’s FedWatch Tool now indicates nearly a 66% probability of lower interest rates in September.

In the short term, the European Central Bank’s (ECB) recent rate cut, contrasting with the Fed’s decision to maintain rates, has widened the policy gap between the two central banks, potentially exposing EUR/USD to further weakness.

Looking ahead, the Eurozone’s emerging economic recovery and perceived slowdowns in the US economy are expected to mitigate this disparity, providing some support for the pair in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

If EUR/USD rebound gains traction, the 200-day SMA at 1.0788 looms as the next objective, ahead of the weekly peak of 1.0852 (June 12) and the June high of 1.0916 (June 4). The breakout of this level reveals the March top of 1.0981 (March 8), followed by the weekly peak of 1.0998 (January 11), and the critical 1.1000 yardstick.

If bears take control, the pair may revisit the June low of 1.0667 (June 14), seconded by the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

The 4-hour chart as far shows some signs of renewed weakness. Initial resistance comes at 1.0761 ahead of 1.0808 and 1.0852, 1. The earliest support appears at 1.0667, followed by 1.0649 and 1.0601. The Relative Strength Index (RSI) has stabilized around 37.

• GBP/USD edges down 0.30%, following the Bank of England’s rate decision.
• Technical outlook shows neutral to upward bias, with critical support at 1.2643/38.
• Resistance levels to watch: 1.2700, 1.2739, and 1.2800. Support levels include 1.2619, 1.2600, and 200-DMA at 1.2551.

The Pound Sterling collapsed during the North American session, below the 1.2700 figure after the Bank of England (BoE) decided to keep rates unchanged but hinted at a possible cut in the summer. The GBP/USD trades at 1.2677, down 0.30%.

GBP/USD Price Analysis: Technical outlook

From a technical perspective, the GBP/USD is neutral to upward biased, but as it approaches the confluence of the 100-day moving average (DMA) and the May 3 high turned support at around 1.2643/38, a pierce underneath that zone, would accelerate the downtrend, change the pair bias and challenge the 50-DMA at 1.2619. Further losses are seen underneath the atter at 1.2600, ahead of testing the 200-DMA at 1.2551.

On the other hand, if buyers lift the exchange rate above 1.2700, the GBP/USD might get to the current week’s high of 1.2739. Once cleared, the next stop would be the already tested 1.2800 mark.

GBP/USD Price Action – Daily Chart