US Dollar vs Japanese Yen Weekly Technical Analysis

The US dollar initially tried to rally a bit during the course of the week, but then broke down rather significantly to reach the ¥152 level. That being said, this is a market that is now retesting the previous resistance barrier. And from a technical analysis standpoint, this is a perfect entry point.

We will have to see whether or not the market holds burnt. I think we may have a situation where those who look at the bigger picture realize that the Bank of Japan can only do so much, and it is possible that this is just simply the beginning of the next leg higher. On the contrary, if we were to break down below the ¥150 level, then that would obviously be a very negative turn of events.

But we are literally at the top of a previous ascending triangle that measures for a move of about 20 handles. I mean, we’re talking a long term structural move to somewhere around ¥175. In general, this is going to continue to be a market that pays you via swap. And quite frankly, the Bank of Japan would have to raise its rates and the Federal Reserve would have to collapse rates, not cut them, but collapse them to change that attitude and that fact.

So with that being said, this is still a market that I’m bullish on. I just want to let the market lead the way, and I will simply jump in at that point in time. However, I prefer to “scale into the position” whenever I can, as the volatility is going to continue to be a headache overall.

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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GBP/JPY Forecast Video for 17.03.23

British Pound vs Japanese Yen Technical Analysis

The British pound initially tried to rally during the trading session on Thursday but seems to be running into trouble yet again as we now find the market below the ¥160 level. By breaking below that level again, it does suggest that we have further to go to the downside. After all, we had seen a major plunge during the Wednesday session, and now we are trying to continue that overall move.

If we continue to go lower and perhaps break down below the ¥159 level, it could open up a move down to the ¥157.50 level, an area that has been important couple of times in the somewhat recent past. I would anticipate seeing a bit of support in this general vicinity, so I don’t expect the market to simply sliced through it. However, if interest rates continue to crash around the world, it will make the Japanese yen more desirable, due to the fact that the Bank of Japan will have to print less yen to keep their yield curve control policy intact.

On the other hand, if we do start to see interest rates rise again, then it will certainly be bad for the Japanese yen, as the Bank of Japan has determined that its 10 year yield in that country should be 50 basis points or less. In order to make that happen, they will occasionally have to step in and buy bonds. In order to buy bonds, they have to print yen. By doing so, they flood the market with the currency and that is exactly what you had seen last year.

However, as participants around the world are worried about financial contagion, there is the possibility that the Bank of Japan may be getting help from unforeseen circumstances around the world. If that’s going to be the case, then I would anticipate that the Japanese yen has the ability to be one of the better performing currencies for the year, as it had been so oversold during the previous year. That could send this pair much lower, due to the fact that the British pound itself seems to be having major issues.

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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USD/JPY Forecast Video for 08.06.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar initially attempted to decline against the Japanese yen during Wednesday’s trading session but eventually reversed its course, displaying signs of renewed strength. As a result, the market exhibited a prevailing “buy on the dip” mentality, propelling it towards the ¥141 level, which had served as a point of retreat a few weeks ago. A breakthrough above this level would create the potential for a more significant upward movement. Consequently, I anticipate that such a breakthrough will occur, reaffirming the recent pullback as a test of the upper boundary of the long-standing ascending triangle, a crucial formation in this market. With a longer-term perspective, I maintain a bullish outlook on this currency pair.

This sentiment will be particularly reinforced if the Federal Reserve decides to raise interest rates again or adopts a generally hawkish stance next week. Such actions could drive the market even higher. In the event of a successful breach above the ¥141 level, I believe the market will transform into a “buy-and-hold” scenario. Subsequently, our target would shift towards the ¥148 level, which represents the measured move of the ascending triangle formation.

Conversely, should the market experience a breakdown below the ¥130 level, a test of the 50-Day EMA becomes a possibility. The 50-Day EMA is a widely monitored technical indicator that could provide a level of support. However, descending below this threshold would undoubtedly carry a negative connotation. Nevertheless, I find it highly unlikely that such a scenario would unfold unless the Federal Reserve’s interest rate statement or future outlook yields unexpected surprises. In such an event, anything could transpire. Nonetheless, at present, it appears that we are more likely to witness a period of choppy behavior rather than any significant developments.

Ultimately, the US dollar initially encountered resistance against the Japanese yen on Wednesday but subsequently rebounded, showcasing renewed strength. This “buy on the dip” sentiment prevailed, propelling the market towards the ¥141 level, previously identified as a significant retreat point. A successful breakthrough above this level would lay the groundwork for further upward momentum, validating the recent pullback as a test of the ascending triangle formation’s upper boundary, which has long held prominence in this market. Considering the potential for the Federal Reserve to raise interest rates or adopt a hawkish stance in the coming week, the market could experience even greater upward movement.

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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• The Pound Sterling reached a three-week top against the Greenback.
• GBP/USD closed its second consecutive week of gains.
• Investors’ attention now shifts to the BoE gathering and the preliminary UK GBP data for the first quarter.

The British Pound (GBP) extended its march north against the US Dollar (USD) throughout the week, motivating GBP/USD to break above the 1.2600 figure for the first time since mid-April.

Meanwhile, the Pound Sterling experienced continued buying pressure against the US Dollar following an auspicious start to the week. This renewed upside bias coincided with diminished demand for the US Dollar, which was exacerbated in response to the dovish tilt (or at least not as hawkish as expected) by the Federal Reserve (Fed) at its meeting on Wednesday as well as by Chairman Jerome Powell at his subsequent press conference.

Absent important data releases in the UK economic calendar this week, the focal point of the past five days was the above-mentioned Fed’s event and Nonfarm Payrolls (NFP) on Friday, which showed the US economy added fewer jobs than previously anticipated (+175K) during April.

Also adding to the dominating appetite for the risk-linked galaxy, and hence, underpinning the bullish momentum around the British pound and its peers, geopolitical concerns, mainly in the Middle East, appeared to have entered a wait-and-see mode amidst some gradual progress towards a potential ceasefire between the conflicting parties.

Moving forward, the BoE and key UK GDP data

The upcoming week should be quite an interesting one for the quid, as the BoE meets on Thursday, and it is widely expected that the central bank will keep interest rate unchanged. Speculation among investors anticipates the first rate cut by the “Old Lady” in August or September, while another rate reduction appears fully priced in for December. On Friday, UK the Gross Domestic Product (GDP) release for the first quarter will also be on the traders’ radar, as it could show that the UK economy overcame the shallow recession it sank into during the second half of 2023. 

GBP/USD: Technical Outlook

The so-far May top at 1.2634 (May 3) is the upcoming resistance level for GBP/USD. A breakthrough above this level could prompt a revisit of the April peak at 1.2709 (April 9), likely followed by the weekly high of 1.2803 (March 21), and even extend to the 2024 top at 1.2893 (March 8). Further up, the pair could meet the weekly peak of 1.2995 (July 27, 2023), just below the psychological 1.3000 yardstick.

Conversely, initial support is found at the 2024 low of 1.2299 (April 22), followed by the weekly low of 1.2187 (November 10), and preceding the October 2023 bottom of 1.2037, and the crucial contention zone of 1.2000. Observing the daily chart, the Relative Strength Index (RSI) climbed beyond the 55 level.

• The Pound Sterling reached a three-week top against the Greenback.
• GBP/USD closed its second consecutive week of gains.
• Investors’ attention now shifts to the BoE gathering and the preliminary UK GBP data for the first quarter.

The British Pound (GBP) extended its march north against the US Dollar (USD) throughout the week, motivating GBP/USD to break above the 1.2600 figure for the first time since mid-April.

Meanwhile, the Pound Sterling experienced continued buying pressure against the US Dollar following an auspicious start to the week. This renewed upside bias coincided with diminished demand for the US Dollar, which was exacerbated in response to the dovish tilt (or at least not as hawkish as expected) by the Federal Reserve (Fed) at its meeting on Wednesday as well as by Chairman Jerome Powell at his subsequent press conference.

Absent important data releases in the UK economic calendar this week, the focal point of the past five days was the above-mentioned Fed’s event and Nonfarm Payrolls (NFP) on Friday, which showed the US economy added fewer jobs than previously anticipated (+175K) during April.

Also adding to the dominating appetite for the risk-linked galaxy, and hence, underpinning the bullish momentum around the British pound and its peers, geopolitical concerns, mainly in the Middle East, appeared to have entered a wait-and-see mode amidst some gradual progress towards a potential ceasefire between the conflicting parties.

Moving forward, the BoE and key UK GDP data

The upcoming week should be quite an interesting one for the quid, as the BoE meets on Thursday, and it is widely expected that the central bank will keep interest rate unchanged. Speculation among investors anticipates the first rate cut by the “Old Lady” in August or September, while another rate reduction appears fully priced in for December. On Friday, UK the Gross Domestic Product (GDP) release for the first quarter will also be on the traders’ radar, as it could show that the UK economy overcame the shallow recession it sank into during the second half of 2023. 

GBP/USD: Technical Outlook

The so-far May top at 1.2634 (May 3) is the upcoming resistance level for GBP/USD. A breakthrough above this level could prompt a revisit of the April peak at 1.2709 (April 9), likely followed by the weekly high of 1.2803 (March 21), and even extend to the 2024 top at 1.2893 (March 8). Further up, the pair could meet the weekly peak of 1.2995 (July 27, 2023), just below the psychological 1.3000 yardstick.

Conversely, initial support is found at the 2024 low of 1.2299 (April 22), followed by the weekly low of 1.2187 (November 10), and preceding the October 2023 bottom of 1.2037, and the crucial contention zone of 1.2000. Observing the daily chart, the Relative Strength Index (RSI) climbed beyond the 55 level.

Foreign exchange analysts at CIBC have recalibrated its dollar forecasts and expect that the Euro to Dollar (EUR/USD) exchange rate will weaken to 1.05 in the short term. It expects a gradual recovery to 1.07 at the end of the year with a further advance to 1.11 at the end of 2025.

Given recent data releases, CIBC expects that the US economy will be resilient while inflation data has been stronger than expected, undermining the case for interest rate cuts.

With a high number of fixed-rate mortgages, the bank also expects that consumer spending will hold firm, lessening the restrictive effect of higher interest rates.

In this context, it expects that the overall narrative will higher Fed interest rates for longer, supporting the dollar.

On the Euro side of the equation, CIBC is confident that the ECB will cut interest rates in June.

The bank does not expect that dovish members will be able to convince the council to act again in July, but still expects that the central bank will cut rates more aggressively than the Fed which will maintain downside Euro risks.

It does expect the Euro-Zone economy will secure a gradual improvement which will strengthen the case for Euro resilience at lower levels.

Key Quotes:

“Although the Eurozone economic surprise index has moderated from early March highs, the flash composite PMI has gained almost 5 points since troughing at 46.5 in November.”

“Both business (Ifo) and investor (ZEW) expectations continued to advance into the start of Q2.”
“Forward-looking investor sentiment reached extremes last witnessed in February 2022.”

“The EUR broad downdraft in the year to date is commensurate with aggregated speculative EUR long positions, (leveraged + real money) capitulating from near three-year highs into the start of the year.”

“Investors moved net short of the EUR into early Q2, for the first time since the end of Q2 2022.”

“Despite not wishing to pre-commit to policy action that is exactly what ECB President Lagarde has done.”

“We do not expect the ECB doves to be able to pressure the Governing Council into considering back-to-back rate cuts (June/July) into the summer recess.”

“Such a scenario points towards an extension of the negative positioning skew and additional EUR downside, towards 1.05 before finding a durable base and graduated recovery narrative into 2025.”

• GBP/USD edges higher in the European session on Friday.
• April jobs report from the US could drive the pair’s action ahead of the weekend.
• A weekly close above 1.2550 could bring in additional technical buyers.

Following the bearish action seen in the first half of the day on Thursday, GBP/USD turned north and registered small daily gains. The pair preserves its recovery momentum early Friday and trades in positive territory slightly above 1.2550.

Wall Street’s main indexes opened in the green and continued to push higher on Thursday. The US Dollar (USD) continued to lose interest in the risk-averse market atmosphere and helped GBP/USD gain traction.

Later in the session, the US Bureau of Labor Statistics will release the April jobs report. Nonfarm Payrolls (NFP) are forecast to rise 238,000 after the 303,000 increase registered in March. The immediate market reaction could be straightforward, with a strong reading above 250,000 providing a boost to the USD and a disappointing reading at or below 150,000 triggering another USD selloff. 

If the NFP arrives near the market consensus, markets could react to revisions. In case revisions are not significant enough, the wage inflation component could drive the USD’s valuation.

Average Hourly Earnings are forecast to rise 0.3% on a monthly basis in April. A print at or above 0.5% could revive fears over wage inflation feeding into consumer inflation and help the USD rebound heading into the weekend.

GBP/USD Technical Analysis

GBP/USD was last seen trading slightly above 1.2550, where the 200-day Simple Moving Average (SMA) is located. If the pair manages to end the week above this key level, 1.2600-1.2610 (Fibonacci 50% retracement of the latest downtrend, 50-day SMA) could be seen as next resistance before 1.2650 (100-day SMA).

On the downside, supports are located at 1.2530 (Fibonacci 38.2% retracement), 1.2500 (static level) and 1.2470 (100-period SMA on the 4-hour chart).

• GBP/USD edges higher in the European session on Friday.
• April jobs report from the US could drive the pair’s action ahead of the weekend.
• A weekly close above 1.2550 could bring in additional technical buyers.

Following the bearish action seen in the first half of the day on Thursday, GBP/USD turned north and registered small daily gains. The pair preserves its recovery momentum early Friday and trades in positive territory slightly above 1.2550.

Wall Street’s main indexes opened in the green and continued to push higher on Thursday. The US Dollar (USD) continued to lose interest in the risk-averse market atmosphere and helped GBP/USD gain traction.

Later in the session, the US Bureau of Labor Statistics will release the April jobs report. Nonfarm Payrolls (NFP) are forecast to rise 238,000 after the 303,000 increase registered in March. The immediate market reaction could be straightforward, with a strong reading above 250,000 providing a boost to the USD and a disappointing reading at or below 150,000 triggering another USD selloff. 

If the NFP arrives near the market consensus, markets could react to revisions. In case revisions are not significant enough, the wage inflation component could drive the USD’s valuation.

Average Hourly Earnings are forecast to rise 0.3% on a monthly basis in April. A print at or above 0.5% could revive fears over wage inflation feeding into consumer inflation and help the USD rebound heading into the weekend.

GBP/USD Technical Analysis

GBP/USD was last seen trading slightly above 1.2550, where the 200-day Simple Moving Average (SMA) is located. If the pair manages to end the week above this key level, 1.2600-1.2610 (Fibonacci 50% retracement of the latest downtrend, 50-day SMA) could be seen as next resistance before 1.2650 (100-day SMA).

On the downside, supports are located at 1.2530 (Fibonacci 38.2% retracement), 1.2500 (static level) and 1.2470 (100-period SMA on the 4-hour chart).

• EUR/USD holds steady above 1.0700 after closing in the green on Thursday.
• April jobs data from the US could trigger the next big action ahead of the weekend.
• The pair could face stiff resistance at 1.0750-1.0755.

EUR/USD gained traction in the second half of the day on Thursday and closed in positive territory. The pair stays in a consolidation phase above 1.0700 early Friday as investors gear up for the last high-impact data release of the week, April jobs report from the US. 

The positive shift seen in risk mood caused the US Dollar to come under bearish pressure in the American session on Thursday and helped EUR/USD turn north following the pullback seen in the European session.

Nonfarm Payrolls (NFP) in the US are forecast to rise 238,000 in April following the 303,000 increase recorded in March. In case NFP comes in above the market expectation, the initial reaction could trigger a USD rebound and weigh on the pair. A disappointing reading, close to 150,000, could force the USD to continue to weaken ahead of the weekend and open the door for another leg higher in the pair.

Investors will also pay close attention to revisions and the wage inflation component. Even if the headline NFP comes in better than forecast, a significant downward revision to the previous prints could still make it difficult for the USD to find demand. Average Hourly Earnings are anticipated to rise 4% on a yearly basis. In case the NFP arrives close to the market consensus, a soft wage inflation figure could hurt the USD.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 50 and EUR/USD holds comfortably above the 100, 50 and 20-period Simple Moving Averages (SMA), suggesting that the bullish bias stays intact.

Immediate resistance is located at 1.0750 – 1.0755 (Fibonacci 38.2% retracement of the latest downtrend, 200-period SMA). If EUR/USD stabilizes above that region, 1.0790 – 1.0800 (Fibonacci 50% retracement, static level) and 1.0830 (Fibonacci 61.8% retracement) could be seen as next bullish targets.

On the downside, 1.0700 (Fibonacci 23.6% retracement, 50-period SMA) aligns as first before 1.0680 (100-period SMA) and 1.0650 (static level).

• EUR/USD holds steady above 1.0700 after closing in the green on Thursday.
• April jobs data from the US could trigger the next big action ahead of the weekend.
• The pair could face stiff resistance at 1.0750-1.0755.

EUR/USD gained traction in the second half of the day on Thursday and closed in positive territory. The pair stays in a consolidation phase above 1.0700 early Friday as investors gear up for the last high-impact data release of the week, April jobs report from the US. 

The positive shift seen in risk mood caused the US Dollar to come under bearish pressure in the American session on Thursday and helped EUR/USD turn north following the pullback seen in the European session.

Nonfarm Payrolls (NFP) in the US are forecast to rise 238,000 in April following the 303,000 increase recorded in March. In case NFP comes in above the market expectation, the initial reaction could trigger a USD rebound and weigh on the pair. A disappointing reading, close to 150,000, could force the USD to continue to weaken ahead of the weekend and open the door for another leg higher in the pair.

Investors will also pay close attention to revisions and the wage inflation component. Even if the headline NFP comes in better than forecast, a significant downward revision to the previous prints could still make it difficult for the USD to find demand. Average Hourly Earnings are anticipated to rise 4% on a yearly basis. In case the NFP arrives close to the market consensus, a soft wage inflation figure could hurt the USD.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 50 and EUR/USD holds comfortably above the 100, 50 and 20-period Simple Moving Averages (SMA), suggesting that the bullish bias stays intact.

Immediate resistance is located at 1.0750 – 1.0755 (Fibonacci 38.2% retracement of the latest downtrend, 200-period SMA). If EUR/USD stabilizes above that region, 1.0790 – 1.0800 (Fibonacci 50% retracement, static level) and 1.0830 (Fibonacci 61.8% retracement) could be seen as next bullish targets.

On the downside, 1.0700 (Fibonacci 23.6% retracement, 50-period SMA) aligns as first before 1.0680 (100-period SMA) and 1.0650 (static level).

GBP/JPY Forecast Video for 27.01.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially pulled back a bit during the trading session to show signs of hesitation against the Japanese yen, but then turned around to show signs of real strength as we gained enough momentum to break back above the ¥161 level. The initial pullback dropped all the way down to the ¥160 level, so it should not be a huge surprise that traders are looking at these big figures for guidance again. At this point, we are now threatening moving averages, specifically the 50-Day EMA which sits just above the recent highs. Ultimately, it’s going to take some effort to get above that, but I do think that given enough time we should be able to do that.

Keep in mind that interest rates have a lot to do with where we are going next, as the Bank of Japan continues to fight rising yields in its 10 year note. Right now, they have a “ceiling” of 50 basis points that they are looking at, and if we were to dip below there, then it’s likely that we see a lot of relief for the Japanese yen, allowing this pair to drop. However, if you’ll start to rise again, that means they will have to print yen in order to fight that. I think at this point the only thing you can count on is a lot of choppy noise, but if we break above the ¥162.50 level, I do believe that we have a much bigger move ahead of us, for at least 250 pips.

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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• If we can break above the 50-Day EMA, the market is likely to go looking to the 200-Day EMA above, which is sitting near the 0.86 level.
• Ultimately, this is a market that is currently testing a major support level from the longer-term standpoint, and I think that is something that should not be ignored.

The market will more likely than not remain somewhat sideways in the time being, and it certainly looks as if we are trying to turn the entire turned around. This is normally something that takes some time to accomplish, and therefore everything that I see in this chart makes perfect sense. Underneath, we have the 0.85 level which has offered massive support on longer-term charts for ages, so I do think this is a particularly interesting value play at the moment.

Ultimately, this is a market that moves at the pace of eternal, so you have to be very patient. When you trade the EUR/GBP pair, you are typically thinking along the lines of weeks, if not months. I do think that given enough time we will go higher, perhaps trying to reach the 0.8750 level, but it is going to take a lot of effort to get there. In the meantime, we would have to break above not only the 200-Day EMA, but also the 0.8650 level to truly open up an attempt to make that happen.

As I stated earlier, patience will be key with this market, as it is not something that moves very quickly. That’s mainly because of the size of the contract, the value of which of course the picked value is much higher than it is in other markets so quite frankly, you don’t need it to move as far. Make sure that you have the proper position size when you trade in this market, because I know a lot of retail traders don’t bother with this pair. That being said, we are in an area that has been important multiple times in the past and therefore it is worth paying attention to.

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USD/JPY Forecast Video for 03.03.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has rallied a bit during the trading session on Thursday, as we are threatening to reach the ¥137.50 level sometime soon. This is an area that has been important resistance previously, as well as important support, so it should not be a huge surprise that we would be attracted to it. The 50-Day EMA sits well below the market but looks as if it’s ready to cross the 200-Day EMA which would trigger the “golden cross indicator” that a lot of longer-term traders pay so much attention to.

Pullbacks at this point in time should continue to see support near the ¥135 level, as well as the 200-Day EMA, so any pullback at this point in time will more likely than not be short-lived in nature and thought of as a potential buying opportunity. It looks as if the trend has turned higher again, and it is probably worth noting that we formed a bit of a double bottom down at the 50% Fibonacci level from the big move higher.

That doesn’t mean that it’s going to be easy to break higher, and occasionally we will see a lot of noisy behavior. In fact, I think that we are in one of those phases, but it’s worth noting that the Friday candlestick was a massive shot higher, and we haven’t even broke down below the bottom of it.

In other words, there are a lot of people looking to get involved here, so I think I look at this through the prism of a “buy on the dip” type of market, and I think that continues to be the case going forward as there are so many reasons to believe that the Japanese yen will continue to get hammered. In fact, it’s not until we break down below the ¥132.50 level that I would consider the upward move starting the short the pair. Ultimately, this is a market that should end up going much higher over the longer term, but it does not necessarily mean that it’s going to be easy to get the higher prices.

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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