•  EUR/USD managed to bounce off five-month lows near 1.0600.
• Fed-ECB policy divergence continues to be at the centre of the debate.
• The ECB is expected to cut its interest rates in June.

EUR/USD managed to counter a poor start of the week and reverse course despite the European currency slipping back to the 1.0600 key support against the US Dollar (USD), or five-month lows.

Central banks’ policy divergence remains a key driver

Indeed, investors spent another week predominantly speculating about the timing of the onset of the easing cycle by both the Federal Reserve (Fed) and the European Central Bank (ECB).

Regarding the Fed, the prevailing hawkish remarks from policymakers, coupled with the consistently strong domestic fundamentals, initially indicate that the prospect of a “soft landing” is anything but diminished. In this scenario, and having in mind sticky inflation, the probability of an interest rate cut in the latter part of the year continued to increase significantly.

On the latter, Atlanta Fed President Raphael Bostic predicts US inflation to reach 2% more gradually than previously anticipated, but does not rush to cut rates. New York Fed President John Williams believes the Fed’s decisions are based on positive data and the strength of the economy, adding that there are no predetermined hikes and that if data indicates higher rates, the Fed may adjust accordingly. By the same token, Fed Governor Michelle Bowman argues that efforts to reduce inflation may have hit a wall, leaving uncertainty about interest rates.

Meanwhile, the CME Group’s FedWatch Tool continues to see a rate cut at the September 18 gathering of nearly 65%. Further away, the odds of a rate cut stand at 85% for the December 18 event. Both gauges are significantly higher than readings seen a month ago.

In Europe, ECB’s rate setters accentuated their conviction that a rate cut at some point in the summer (June?) should be appropriate. In fact, the ECB board member Robert Holzmann warned against premature speculation on potential rate cuts in 2024, citing differing inflation dynamics between Europe and the US. The ECB’s Executive Board Member Piero Cipollone expressed expectations for a return to the 2% path next year and achieving the target by mid-2025. If data from June and July confirms this, easing restrictive measures in 2024 may be considered.

In addition, ECB President Christine Lagarde argued this week that the bank intends to lower rates in the near future, unless there are significant unexpected developments. She also suggested that it was premature for the ECB to reconsider its 2% inflation target, as its efforts to control price increases were ongoing. Lagarde noted that inflation in the Eurozone is anticipated to decrease further, and the ECB may reduce interest rates if its longstanding criteria for price growth are met.

All in all, the comparatively muted economic fundamentals in the Euroland against the robustness of the US economy strengthen the anticipation of a stronger Dollar in the near to medium term. This is especially true given the likelihood of the ECB cutting rates before the Fed. In such a situation, EUR/USD is anticipated to experience a more significant decline in the short term.

EUR/USD technical outlook

The breach of the 2024 low of 1.0601 (April 16) may signal a return to the November 2023 low of 1.0516 (November 1), prior to the weekly low of 1.0495 (October 13), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.

On the upside, EUR/USD is projected to find first resistance at the crucial 200-day Simple Moving Average (SMA) at 1.0817, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the peak of 1.0998 (January 11), all before hitting the psychological barrier of 1.1000. 

Looking at the bigger picture, while below the key 200-day SMA, the downside pressure is expected to prevail.

•  EUR/USD managed to bounce off five-month lows near 1.0600.
• Fed-ECB policy divergence continues to be at the centre of the debate.
• The ECB is expected to cut its interest rates in June.

EUR/USD managed to counter a poor start of the week and reverse course despite the European currency slipping back to the 1.0600 key support against the US Dollar (USD), or five-month lows.

Central banks’ policy divergence remains a key driver

Indeed, investors spent another week predominantly speculating about the timing of the onset of the easing cycle by both the Federal Reserve (Fed) and the European Central Bank (ECB).

Regarding the Fed, the prevailing hawkish remarks from policymakers, coupled with the consistently strong domestic fundamentals, initially indicate that the prospect of a “soft landing” is anything but diminished. In this scenario, and having in mind sticky inflation, the probability of an interest rate cut in the latter part of the year continued to increase significantly.

On the latter, Atlanta Fed President Raphael Bostic predicts US inflation to reach 2% more gradually than previously anticipated, but does not rush to cut rates. New York Fed President John Williams believes the Fed’s decisions are based on positive data and the strength of the economy, adding that there are no predetermined hikes and that if data indicates higher rates, the Fed may adjust accordingly. By the same token, Fed Governor Michelle Bowman argues that efforts to reduce inflation may have hit a wall, leaving uncertainty about interest rates.

Meanwhile, the CME Group’s FedWatch Tool continues to see a rate cut at the September 18 gathering of nearly 65%. Further away, the odds of a rate cut stand at 85% for the December 18 event. Both gauges are significantly higher than readings seen a month ago.

In Europe, ECB’s rate setters accentuated their conviction that a rate cut at some point in the summer (June?) should be appropriate. In fact, the ECB board member Robert Holzmann warned against premature speculation on potential rate cuts in 2024, citing differing inflation dynamics between Europe and the US. The ECB’s Executive Board Member Piero Cipollone expressed expectations for a return to the 2% path next year and achieving the target by mid-2025. If data from June and July confirms this, easing restrictive measures in 2024 may be considered.

In addition, ECB President Christine Lagarde argued this week that the bank intends to lower rates in the near future, unless there are significant unexpected developments. She also suggested that it was premature for the ECB to reconsider its 2% inflation target, as its efforts to control price increases were ongoing. Lagarde noted that inflation in the Eurozone is anticipated to decrease further, and the ECB may reduce interest rates if its longstanding criteria for price growth are met.

All in all, the comparatively muted economic fundamentals in the Euroland against the robustness of the US economy strengthen the anticipation of a stronger Dollar in the near to medium term. This is especially true given the likelihood of the ECB cutting rates before the Fed. In such a situation, EUR/USD is anticipated to experience a more significant decline in the short term.

EUR/USD technical outlook

The breach of the 2024 low of 1.0601 (April 16) may signal a return to the November 2023 low of 1.0516 (November 1), prior to the weekly low of 1.0495 (October 13), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.

On the upside, EUR/USD is projected to find first resistance at the crucial 200-day Simple Moving Average (SMA) at 1.0817, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the peak of 1.0998 (January 11), all before hitting the psychological barrier of 1.1000. 

Looking at the bigger picture, while below the key 200-day SMA, the downside pressure is expected to prevail.

GBP/USD analysis and signals

In recent developments, the British pound has exhibited resilience against the US dollar, showcasing an uptrend trajectory. Breaking through the resistance zone at approximately 1.2760, the pound has surged to the 1.2809 level, signaling potential for further upside momentum. 

Analysts anticipate a probable test of substantial resistance levels between 1.2830 to 1.2850, where a bearish reversal could occur; however, breaching this resistance could propel the pair towards the 1.2900 mark. Conversely, a failure to maintain support at 1.2760 may trigger a retreat towards 1.2700, marking a shift in the current bullish sentiment.

Indicator-based GBP/USD signals

Traders Union provides GBP/USD analysis and signals, enabling traders to make informed decisions aligned with market trends and dynamics. It offers a wide range of indicator-based GBP/USD signals, examined through technical analysis of moving averages and indicators across various timeframes. Researched to meet the diverse needs of traders, these signals provide valuable guidance for short-term transactions as well as longer-term strategic endeavors. 

From 5-minute intervals to weekly outlooks, traders can leverage GBP/USD signal to align their trading strategies with prevailing market conditions effectively. Additionally, Traders Union offers insights into frequently asked questions (FAQs) regarding GBP/USD trading, providing clarity on trends, market sentiment, and strategic approaches. 

Furthermore, TU pushes for the wise selection of indicators, emphasizing the importance of using a diverse range, including trend-following, oscillators, and price action tools, to optimize trading decisions effectively.

Recommendations and historical insights

Analysts from Traders Union provide recommendations for trading GBP to USD across different time frames. While short-term outlooks may reflect neutrality, the long-term forecast leans towards a strong buy sentiment. 

Historical trends reveal the pair’s strengths through various economic crises, with movements influenced by geopolitical factors, economic policies, and market sentiments. From the dot-com crisis to the energy challenges of 2022, GBP to USD has weathered turbulent times, offering traders both opportunities and challenges.

Forecasting and signals

TU experts offer comprehensive GBP to USD forecasts tailored to short and long-term trading strategies. These forecasts, derived from technical analysis indicators, empower traders with insights into potential price movements across different timeframes. Whether users seek to capitalize on short-term fluctuations or position themselves for long-term trends, Traders Union equips them with the tools needed to make informed decisions.

The Pound to Dollar forecast 30 days shows that the exchange rate is set to experience fluctuations influenced by different kinds of factors, including economic data releases, central bank policies, geopolitical developments, and market sentiment. With this, traders must remain vigilant, adapting their strategies dynamically in response to evolving market conditions.

While historical trends and technical indicators may offer some insights into potential price trajectories, traders must also consider the broader economic landscape and geopolitical events shaping currency movements. 

Long-term price forecast 

The long-term price forecast for GBP to USD hinges on several critical factors, including the economic conditions of both the UK and the US, monetary policies of central banks, and geopolitical developments. 

While the UK boasts a stable economy, the US holds favorable positions in terms of currency reserves and raw materials. The policies of the Federal Reserve System and the Bank of England, alongside geopolitical conflicts, exert significant influence on the pair’s dynamics.

Economic realities and policy impacts

The UK economy is facing some tough times. Inflation is rising, energy prices are high, and there’s a chance the country might even slip into recession. This is partly due to the global economic crisis, which has made things worse for everyone. As a result, the exchange rate between the euro and the pound is likely to be volatile. This is because the value of a currency reflects how well a country’s economy is doing.

The European Central Bank (ECB) and the Bank of England (BoE) are important players here. Their decisions about interest rates and other policies can affect the value of the euro and the pound. Traders and central banks must also pay close attention to economic reports that are released during European trading hours. These reports give signals about how healthy the economies are. Finally, the UK leaving the European Union (Brexit) created a lot of uncertainty, which also weakened the pound.

Forecasting Pound to Dollar dynamics

Traders Union acknowledges the dynamic nature of forecasting the Pound to Dollar (GBP/USD) exchange rate, recognizing the potential for fluctuations and directional shifts based on evolving market conditions. Depending on the forecast, analysts anticipate scenarios where the pound to dollar exchange rate may exhibit upward momentum, signaling potential appreciation of the pound against the dollar.

An article, built upon TU’s insights, was published by The Daily Business Post. Based to this article, various factors contribute to the forecasted rise in the pound to dollar exchange rate, including hawkish bets by the US Federal Reserve, safe-haven flows, and shifts in market sentiment.  Should the Federal Reserve adopt a more aggressive stance on interest rate hikes or unveil robust economic indicators, the dollar may weaken relative to the pound, driving the exchange rate higher.

Opportunities and challenges ahead

As traders navigate the Forex market, vigilance and adaptability are one of the most important things to practice. While forecasts hint at potential recoveries in GBP/USD this week, uncertainties surrounding inflation data and monetary policy decisions cast a shadow over future movements. 

The US dollar’s multi-month rally presents both opportunities and challenges, requiring traders to remain agile in response to evolving market dynamics.

Conclusion

In conclusion, Traders Union’s comprehensive analysis offers a roadmap for traders, blending economic insights, technical indicators, and market sentiment to navigate the intricacies of trading pounds and dollars.

From recent up trends in the British pound to indicator-based signals guiding strategic decisions, Traders Union equips users with the tools needed to thrive in the Forex market. The forecasts provided serve as helpful guides, offering insights into potential price movements and strategic opportunities over varying time frames. The author of the article, Richard Best, has written extensively on a wide range of finance, investment and wealth management topics.

The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

The latest research by Rabobank analysts suggests the Euro US Dollar (EUR/USD) exchange rate is set to fall in the near-term outlook.

What is Rabobank’s near-term forecast for EUR/USD and why?

Rabobank forecasts EUR/USD will reach 1.05 within three months, citing the strong safe-haven demand for the US Dollar and the favourable interest rate differentials between the U.S. and Eurozone as critical factors. As of today, the Euro to Dollar exchange rate (EUR/USD) is trading at 1.06593 (+0.16%).

How do the ECB’s anticipated rate cuts compare with the Fed’s actions, and what impact might this have on EURUSD?

Rabobank anticipates three rate cuts from the ECB this year, versus two from the Fed. This more aggressive easing by the ECB is likely to weaken the Euro against the US Dollar due to the broader rate differential.

Why does the US Dollar maintain its strength despite fluctuating U.S. economic indicators?

The USD’s strength is bolstered by its role as a dominant reserve currency used in global invoicing, making it fundamentally robust irrespective of short-term U.S. economic shifts.

What effect could escalating Middle East tensions have on the USD’s value?

In the event of escalating tensions in the Middle East, the USD is likely to strengthen further as investors flock to it as a safe haven amidst global uncertainty.

How has the Euro performed against other major currencies this year?

Despite global economic pressures, the Euro (EUR) has shown notable resilience this year, performing better than many other major currencies like the Japanese Yen (JPY) and Australian Dolar (AUD), which have seen sharper declines.

Key Quotes:
“We retain a target of EUR/USD1.05.”

“The ECB may be understandably wary about triggering a sharp drop in the value of EUR if its policy decisions move too far out of kilter with the Fed.”

“A period of a stable but soft EUR could be welcomed in the Eurozone.”

“The relative resilience of the EUR has been surprising.”

“Rate differentials and safe-haven demand are both likely lending support.”

“It is likely that the desire to avoid excessive FX volatility and the risk to the EUR/USD exchange rate by too big a divergence in policy settings vis a vis the Fed, may have some impact on how far and fast ECB rates come down this cycle.”

“On any escalation of the Middle East crisis, we would expect the USD to benefit from safe-haven flows.”

“Coupled with higher for longer Fed interest rate risks, this suggests the USD can remain stronger for longer.”

STORY LINK Euro to Pound Forecast: EUR/GBP at 0.8540 “Likely to Drift Higher” say SocGen

Pound Sterling Sinks after Dovish Bank of England Bailey Comments, GBP/EUR Exchange Rate Retreats to Below 1.1700

Overall interest rate expectations continue to drive major currencies.

The bias on Thursday has been greater confidence in early Bank of England rate cuts, allied with some doubts whether the ECB will be as aggressive.

In this context, the Pound to Euro (GBP/EUR) exchange rate failed to hold 1-month highs above 1.1700 on Wednesday and retreated to 1-week lows near 1.1670 before settling around 1.1680.

According to ING; “Our bias now for EUR/GBP is to 0.86 and above.” (1.1630 and below for GBP/EUR).

Although the latest UK inflation data was slightly higher than expected, Bank of England (BoE) Governor Bailey was more optimistic that UK inflation was on track to decline to the 2% target level.

There has also been a slight adjustment in ECB interest rate expectations with some doubts whether substantial interest rate cuts will be achievable given a still tight labour market.

In comments on Wednesday, Bailey stated that there would be a notable decline in the inflation next month, especially with a very favourable base effect given strong price increases last year.

Bailey is confident that the disinflation process is continuing and added that; “Our judgement with interest rates is ‘how much do we need to see now to be confident of the (disinflation) process.” Bailey also commented that there are notably different inflation trends across major economies.

According to Bailey; “The dynamics for inflation are rather different now, between Europe and the U.S. I think there’s more demand-led inflation in the U.S. than we’re seeing.

ING noted that the IMF made a similar point with the UK running a negative output gap while there is a positive one in the US.

This would imply that the UK need for a restrictive monetary policy is much less than in the US.

ING added; “This begs the question of why the market is pricing the same amount of easing this year – 45bp – for both the Fed and the BoE. We can see those expectations shifting over the coming months as more BoE easing is priced. This will be negative for sterling.”

Danske Bank expects that the latest wages data will stop a rate cut in May and expects a first BoE rate cut in June.

It, therefore, expects that the BoE will not cut rates later than the ECB and noted; “Additionally, we expect the UK economy to perform relatively worse than the euro area and expect relative growth outlooks and broad central bank pricing to weigh on GBP.”

Nordea commented; “With more or less no growth in economic activity in 2023, it’s a bit harder to think of the Euro-area economy as more resilient than expected, but markets are nonetheless pricing out ECB rate cuts too and lifting the end-point of the easing cycle.”

A higher ECB rate profile would tend to underpin the Euro.

The Euro-Zone also recorded a current account surplus of EUR29.5bn for February.

ING noted; “The eurozone enjoyed a near EUR40bn current account surplus in January – a reminder that conditions are very different from when EUR/USD was trading below parity in late 2022 and the Eurozone was running a EUR30bn current account deficit on the back of surging oil and gas prices.”

SocGen is negative on UK fundamentals amid very weak productivity. It adds; “Rate cuts are coming, because without either productivity or employment growth, GDP is doomed to stagnation, but the cutting will start slowly as the MPC frets about wages.”

Socgen added; “EUR/GBP, at 0.8540, is near the bottom of its trading range and likely to drift higher.” (Net losses for GBP/EUR from 1.1710)

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TAGS: Euro Pound Forecasts

Foreign exchange analysts at Danske see scope for the Pound to Dollar exchange rate (GBP/USD) to hold steady in the very short term, but expects superior US fundamentals will take a toll over the medium term with a slide to 1.16 on a 12-month view.

GBP/USD dipped to 5-month lows just above 1.2400 this week as dollar strength dominated before a recovery to 1.2460 following the recent UK inflation data.

On a near-term view, Danske Bank considers that the US economy is liable to deteriorate, and it still sees scope for the Federal Reserve to cut interest rates in June.

It also sees scope for three interest rate cuts for 2024 as a whole.

Over the longer term, Danske still expects that the US economy will out-perform, especially with stronger underlying growth dynamics.

Danske also expects global financial conditions will tend to tighten which will tend to underpin the dollar and also hamper the Pound in global markets.

Danske also expects three interest rate cuts during 2024 with the May signalling a cut at the May meeting and pulling the trigger in June.

The bank still has a lack of confidence in the overall UK fundamentals and notes that it has a substantial current account deficit which maintains underlying vulnerability.

Key Quotes:

“US economic activity data continues to surprise to the upside with solid job growth.”
“Cyclical factors point to a slowdown in the strong US figures ahead.”

“In the euro area, growth momentum remains stagnant, and inflation is declining.”

“Recent signs of a rebound in the global manufacturing sector have slightly receded.”

“Persistent cyclical tailwinds pose risks to our long-term forecast.”

“We believe that the recent repricing of Fed rate cut expectations has been excessively aggressive.”

“Substantial weakness in the US economy also presents a risk to our forecast.”

“Significant improvement in the euro area economy could be supported by a rebound in the global manufacturing sector.”

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Euro vs US Dollar Technical Analysis

You can see we’ve been all over the place during the trading session on Friday and that does make sense as there was a lot of fear out there as Israel hit Iran in the latest tit-for-tat escalation. That being said, it appears that it was very minor and somewhat well calculated just a face saving exercise more than anything else. And it appears that the markets have calmed down as a result. So, at the end of the day, we have found ourselves basically where we started. And quite frankly, that may not be a bad thing. After all, we have to go into the weekend and of course, nobody really knows what happens while we cannot react in our portfolios.

The Iranians may strike back, and we may get chaos again. From a technical analysis perspective, it’s obvious that the 1.07 level above is important. It was once support, so it should now be resistance. Underneath, the 1.06 level offers support. So I think at this point in time, we will probably stay in this 100 point range until we get some type of momentum building fundamental announcement, some type of event, anything to get the markets moving. In the short term, it’s a lot of back and forth, reversing to the mean type of action. In other words, you will be trading short-term and small as far as I can see in the near term.

• The dollar has recovered after initially falling down a bit against the Japanese yen during trading on Thursday as we continue to see the buy on the dip mentality come into the picture.
• Ultimately, I think this is a market that if we can get above the 155 yen level, then we can truly take off to the upside.
• At that point in time, I would expect to see a lot of momentum in the market.

Breaking above 155 yen would probably bring in the next leg of FOMO trading, and it would make a lot of sense considering that the Bank of Japan is nowhere near being able to cut interest rates. With that being the case, it does make a lot of sense that the Federal Reserve, which is more likely than not going to have to wait to cut rates, continues to push the dollar higher inadvertently. After all, the Federal Reserve has shown itself to be feckless when it comes to doing its job, while I think at this point in time the markets are finally starting to accept the fact that this is a situation that central banks simply cannot do much to influence the market other than to keep rates higher.

Remember the Swap

You get paid to hang on to this trade and the swap of course is something that greatly influences how the USD/JPY market trades. So don’t forget that. A move above 155 perhaps opens up a move to 157.50 over the longer term. We will just have to wait and see whether or not that actually plays out. But right now, this looks very much like a market that I think you buy each and every dip on with the 152 yen level underneath being a massive support level, which is especially true now that the 50-day EMA is racing towards that area as well. Getting paid at the end of every day is something that a lot of institutional traders like and that’s why there’s so much upward momentum.

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• EUR/USD recovered toward 1.0650 in the European session on Friday.
• Investors could stay away from risk-sensitive assets ahead of the weekend.
• Geopolitical headlines could continue to drive the action in financial markets.

EUR/USD declined toward 1.0600 in the early Asian session on Friday but managed to recover to the 1.0650 area. In the absence of high-tier data releases, investors will keep a close eye on headlines surrounding the Iran-Israel conflict.

Reports of Israeli missiles striking Iran triggered a flight to safety in the early trading hours of the Asian session on Friday. In turn, the US Dollar (USD) benefited from safe-haven flows and forced EUR/USD to turn south.

Israel has not yet officially confirmed that they carried out a retaliatory attack against Iran, but several news outlets reported that US officials said that Israel was behind the strikes.

According to the CNN, a regional intelligence source said that direct state-to-state strikes between Israel and Iran were over. These latest headlines seem to be allowing markets to breathe a sigh of relief. Reflecting the improvement in risk mood, S&P 500 futures, which were over 1.5% earlier in the day, retraced a large portion of its daily losses.

Nevertheless, the geopolitical uncertainty in the region could cause investors to seek refuge ahead of the weekend. At the least, they could refrain from making risky bets even if geopolitical tensions don’t escalate any further.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart recovered toward 50, reflecting a loss of bearish momentum. On the upside, 1.0700 (50-period Simple Moving Average (SMA), static level) aligns as first resistance before 1.0730 (static level) and 1.0750 (100-period SMA).

Supports are located at 1.0600 (psychological level, static level) before 1.0530 (static level from November).

• EUR/USD recovered toward 1.0650 in the European session on Friday.
• Investors could stay away from risk-sensitive assets ahead of the weekend.
• Geopolitical headlines could continue to drive the action in financial markets.

EUR/USD declined toward 1.0600 in the early Asian session on Friday but managed to recover to the 1.0650 area. In the absence of high-tier data releases, investors will keep a close eye on headlines surrounding the Iran-Israel conflict.

Reports of Israeli missiles striking Iran triggered a flight to safety in the early trading hours of the Asian session on Friday. In turn, the US Dollar (USD) benefited from safe-haven flows and forced EUR/USD to turn south.

Israel has not yet officially confirmed that they carried out a retaliatory attack against Iran, but several news outlets reported that US officials said that Israel was behind the strikes.

According to the CNN, a regional intelligence source said that direct state-to-state strikes between Israel and Iran were over. These latest headlines seem to be allowing markets to breathe a sigh of relief. Reflecting the improvement in risk mood, S&P 500 futures, which were over 1.5% earlier in the day, retraced a large portion of its daily losses.

Nevertheless, the geopolitical uncertainty in the region could cause investors to seek refuge ahead of the weekend. At the least, they could refrain from making risky bets even if geopolitical tensions don’t escalate any further.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart recovered toward 50, reflecting a loss of bearish momentum. On the upside, 1.0700 (50-period Simple Moving Average (SMA), static level) aligns as first resistance before 1.0730 (static level) and 1.0750 (100-period SMA).

Supports are located at 1.0600 (psychological level, static level) before 1.0530 (static level from November).

• The euro initially found during trading on Thursday, but then turned around to show signs of strength again as we continue to threaten the ¥165 level.
• There is a significant amount of noise just above, and if we can break out to a fresh, new high, then it’s likely that the euro will continue to go much higher.
• All things being equal, the market is likely to continue to see a lot of value hunting, at least every time we pull back.

Bank of Japan

Keep in mind that the Bank of Japan is likely to continue to see a lot of reasons to keep the monetary policy rather loose, and despite the fact that the European Central Bank is likely to cut rates in the future doesn’t seem to be deterring traders from hanging onto this pair, because you get paid at the end of every day. The Japanese have far too much in the way of debt to try to cut rates anytime soon, therefore I think you get a situation where the Japanese yen continues to get eviscerated against almost anything and everything.

Underneath, the 50-Day EMA is sitting near the ¥163 level, and that is probably the short-term floor in the market. It’s probably worth noting that the candlestick for the day looks a bit like a hammer, and therefore it looks like we are going to continue to try to squeeze higher. That being said, I think it all comes down to the USD/JPY pair, which if it breaks above the crucial ¥155 level, we will probably see you all again related pairs continue to go much higher.

In the meantime, any type of short-term pullback is more likely than not going to end up being a buying opportunity, and I think most traders continue to see that as the case. It’s also worth noting that the market is going to continue to see plenty of resiliency, as long as the Japanese are in the same situation they happen to be in right now. In fact, things can get quite ugly for the Japanese yen and if we do pull back, I’m more than willing to buy this pair yet again.

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