• Pound Sterling edges lower after posting small gains on Wednesday.
• The Bank of England is forecast to maintain bank rate at 5.25%.
• Vote split could trigger a reaction in Pound Sterling.

GBP/USD stays relatively quiet and fluctuates in a tight channel above 1.2700 in the European morning on Thursday. The Bank of England’s (BoE) monetary policy announcements could trigger the next big action later in the session.

The BoE is widely expected to leave the policy rate unchanged at 5.25% following the June policy meeting. Because there won’t be a post-meeting press conference, investors will scrutinize the policy statement and the vote split.

In case more than two policymakers vote in favor of a rate cut, the initial market reaction could cause Pound Sterling to weaken against its rivals. On the other hand, GBP/USD could stay in range if the BoE refrains from making any noticeable changes to its policy statement and the vote split remains the same, with seven officials voting for a hold. 

In the second half of the day, the US economic docket will feature weekly Initial Jobless Claims, alongside Housing Starts and Building Permits data for May.

If there is a sharp decline in the number of first-time application for unemployment benefits, with a reading at or below 220,000, following the previous week’s big increase, the USD could gather strength against its rivals in the second half of the day.

Investors will also continue to pay close attention to comments from central bank officials during the American trading hours.

GBP/USD Technical Analysis

GBP/USD trades within a touching distance of the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50, reflecting a lack of directional momentum.

GBP/USD faces key support at 1.2700 (200-period Simple Moving Average (SMA), lower limit of the ascending channel). If the pair drops below this level and starts using it as resistance, 1.2640 (100-day SMA) could be seen as next support before 1.2600 (psychological level, static level).

On the upside, resistances are located at 1.2740 (100-period SMA), 1.2800 (psychological level, static level) and 1.2850 (end-point of the latest uptrend).

 

• Pound Sterling edges lower after posting small gains on Wednesday.
• The Bank of England is forecast to maintain bank rate at 5.25%.
• Vote split could trigger a reaction in Pound Sterling.

GBP/USD stays relatively quiet and fluctuates in a tight channel above 1.2700 in the European morning on Thursday. The Bank of England’s (BoE) monetary policy announcements could trigger the next big action later in the session.

The BoE is widely expected to leave the policy rate unchanged at 5.25% following the June policy meeting. Because there won’t be a post-meeting press conference, investors will scrutinize the policy statement and the vote split.

In case more than two policymakers vote in favor of a rate cut, the initial market reaction could cause Pound Sterling to weaken against its rivals. On the other hand, GBP/USD could stay in range if the BoE refrains from making any noticeable changes to its policy statement and the vote split remains the same, with seven officials voting for a hold. 

In the second half of the day, the US economic docket will feature weekly Initial Jobless Claims, alongside Housing Starts and Building Permits data for May.

If there is a sharp decline in the number of first-time application for unemployment benefits, with a reading at or below 220,000, following the previous week’s big increase, the USD could gather strength against its rivals in the second half of the day.

Investors will also continue to pay close attention to comments from central bank officials during the American trading hours.

GBP/USD Technical Analysis

GBP/USD trades within a touching distance of the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50, reflecting a lack of directional momentum.

GBP/USD faces key support at 1.2700 (200-period Simple Moving Average (SMA), lower limit of the ascending channel). If the pair drops below this level and starts using it as resistance, 1.2640 (100-day SMA) could be seen as next support before 1.2600 (psychological level, static level).

On the upside, resistances are located at 1.2740 (100-period SMA), 1.2800 (psychological level, static level) and 1.2850 (end-point of the latest uptrend).

 

Economists forecast the Philly Fed Manufacturing Index to remain steady at 4.5. An unexpected slide in the Index could raise concerns about a US hard landing. However, the numbers may not materially influence the Fed rate path. The manufacturing sector contributes less than 30% to the US economy.

On the other hand, US jobless claims data could influence investor expectations of a September Fed rate cut.

Economists forecast initial jobless claims to fall from 242k to 235k in the week ending June 15.

Lower-than-expected numbers could temper investor expectations of a Fed rate cut. Tighter labor market conditions may support wage growth and increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation.

A higher-for-longer Fed rate path may reduce borrowing costs, reduce disposable income, and curb consumer spending.

Other stats include housing sector-related data. However, the stats will likely play second fiddle to the labor market numbers.

With the US labor market in focus, investors should track FOMC member speeches. FOMC Member Thomas Barkin is on the calendar to speak. Views on inflation and the timing of a Fed rate cut could influence buyer demand for the US dollar.

The Richmond Fed President spoke on Tuesday, saying more progress on inflation would be needed to cut interest rates.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on BoJ chatter, inflation numbers from Japan, and Services PMIs from Japan and the US. An increase in service sector activity in Japan and inflation figures exceeding expectations could prompt the BoJ to consider initiating rate hike discussions.

A more hawkish stance from the BoJ could shift the divergence in monetary policies toward the Yen, especially as the Fed contemplates an interest rate cut.

USD/JPY Price Action

Daily Chart

The USD/JPY remained well above the 50-day and 200-day EMAs, confirming the bullish price trends.

A USD/JPY return to the 158 handle could give the bulls a run at the 160 handle and the April 29 high of 160.209.

Central bank chatter and US labor market data require investor attention.

Conversely, a USD/JPY fall through the 157.5 handle could signal a drop to the 50-day EMA. A break below the 50-day EMA could bring the 151.685 support level into play.

The 14-day RSI at 60.43 indicates a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.

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• EUR/USD maintained its constructive stance so far this week.
• Trading conditions remained thin and volatility was absent on the US holiday.
• Political concerns in Europe appear to have dwindled somewhat.

The US Dollar (USD) traded in a vacillating fashion in the low-105.00s when tracked by the USD Index (DXY) on Wednesday, providing humble support to risk sentiment and encouraging EUR/USD to extend its upside impulse for the third session in a row near the 1.0750 zone.

The pair’s marginal upward movement was also bolstered by easing political concerns in France, while speculation about potential Federal Reserve (Fed) interest rate cuts this year also accompanied the pair’s price action.

Regarding the Fed, the recent cautious stance from Fed officials appeared to limit the Greenback’s downside after they reiterated their prudent approach regarding the commencement of the Fed’s easing cycle.

On the latter, the CME Group’s FedWatch Tool now indicates a nearly 65% probability of lower interest rates by the September 18 meeting.

In the short term, the ECB’s 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.

On this, it is worth noting that ECB Vice President Luis de Guindos emphasized on Tuesday that rate decisions will align with the release of the bank’s updated macroeconomic projections in September.

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 on the short-term horizon.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the rebound in EUR/USD gathers impetus, the 200-day SMA at 1.0788 emerges as the immediate target, ahead of the weekly high of 1.0852 (June 12), and the June top of 1.0916 (June 4). The breakout of this level exposes the March peak of 1.0981 (March 8), seconded by the weekly high of 1.0998 (January 11) and the key 1.1000 threshold.

In case bears regain the upper hand, the pair may retest the June low of 1.0667 (June 14), prior to the May low of 1.0649 (May 1), and lastly the 2024 bottom of 1.0601 (April 16).

The 4-hour chart thus far shows some indications of gradual recovery. Bulls should aim for 1.0810 first, followed by 1.0852, 1.0916, and ultimately 1.0942. The initial support, instead, turns up at 1.0667, seconded by 1.0649 and 1.0601. The Relative Strength Index (RSI) has decreased to about 51.

• EUR/USD maintained its constructive stance so far this week.
• Trading conditions remained thin and volatility was absent on the US holiday.
• Political concerns in Europe appear to have dwindled somewhat.

The US Dollar (USD) traded in a vacillating fashion in the low-105.00s when tracked by the USD Index (DXY) on Wednesday, providing humble support to risk sentiment and encouraging EUR/USD to extend its upside impulse for the third session in a row near the 1.0750 zone.

The pair’s marginal upward movement was also bolstered by easing political concerns in France, while speculation about potential Federal Reserve (Fed) interest rate cuts this year also accompanied the pair’s price action.

Regarding the Fed, the recent cautious stance from Fed officials appeared to limit the Greenback’s downside after they reiterated their prudent approach regarding the commencement of the Fed’s easing cycle.

On the latter, the CME Group’s FedWatch Tool now indicates a nearly 65% probability of lower interest rates by the September 18 meeting.

In the short term, the ECB’s 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.

On this, it is worth noting that ECB Vice President Luis de Guindos emphasized on Tuesday that rate decisions will align with the release of the bank’s updated macroeconomic projections in September.

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 on the short-term horizon.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the rebound in EUR/USD gathers impetus, the 200-day SMA at 1.0788 emerges as the immediate target, ahead of the weekly high of 1.0852 (June 12), and the June top of 1.0916 (June 4). The breakout of this level exposes the March peak of 1.0981 (March 8), seconded by the weekly high of 1.0998 (January 11) and the key 1.1000 threshold.

In case bears regain the upper hand, the pair may retest the June low of 1.0667 (June 14), prior to the May low of 1.0649 (May 1), and lastly the 2024 bottom of 1.0601 (April 16).

The 4-hour chart thus far shows some indications of gradual recovery. Bulls should aim for 1.0810 first, followed by 1.0852, 1.0916, and ultimately 1.0942. The initial support, instead, turns up at 1.0667, seconded by 1.0649 and 1.0601. The Relative Strength Index (RSI) has decreased to about 51.

• For the third day in a row, the price of the pound sterling against the US dollar GBP/USD is trying to rebound higher with gains at the level of 1.2732.
• It is recovering from strong recent selling operations, which led to it moving towards the support level of 1.2656, its lowest in a month.
• During today’s session, Wednesday, the price of the pound sterling rose slightly after inflation in Britain fell to the Central Bank’s target of 2% in May, as expected.

According to the results of the economic calendar, British core inflation also fell to 3.5% from 3.9%, in line with expectations, and service inflation fell to 5.7% from 5.9%. Despite this, the Bank of England recently said that reaching the target inflation alone will not lead to a cut in interest rates. Moreover, the Bank of England is expected to keep its key interest rate at a 16-year high of 5.25% when it decides on monetary policy tomorrow, but most economists expect two rate cuts this year, with the first likely in August.

On the political front, recent polls show the Labor Party leading the upcoming July 4 election, while the Conservatives led by British Prime Minister Rishi Sunak are in second place.

According to reliable forex trading platforms, GBP/USD will rise if Dave Ramsden votes against a rate cut on Thursday, as this would significantly reduce the chances of a rate cut in August. The Bank of England is expected to keep interest rates at current levels on Thursday and indicate that any decision to cut rates will depend on upcoming data. Meanwhile, the consensus expects a 7-2 vote to keep rates unchanged. Overall, this would be a neutral outcome for the pound.

However, any shift in the voting structure could strongly suggest a shift in the MPC. The market is currently pricing in a 50-50 chance of a rate cut in August, and if those odds fall, sterling will rally.

With that in mind, any changes in the voting structure would provide a strong early signal that would affect the outlook for August.

Ultimately, the chance of a 6-3 vote for a rate cut is low, as this would suggest that another MPC member has looked at the strong inflation and survey data and believes it indicates a need for rate cuts. This would be very unusual. However, there is a higher chance that the MPC will revert to an 8-1 vote to keep rates on hold, with Dave Ramsden changing his vote in light of the stronger-than-expected inflation reading in April.

• 

Technical forecasts for the GBP/USD pair today:

According to the performance on the daily chart the bulls’ confidence in controlling the trend is back. Technically, the GBP/USD price is moving above the resistance of 1.2775, which supports the bullish outlook again. Furthermore, the stronger and more continuous control of the trend will be by moving towards the psychological resistance level of 1.3000. In contrast, and over the same period of time, the support of 1.2600 will be important for the strength of the downward shift. clearly, this will depend on the Bank of England’s decisions tomorrow and the future of British policy, in addition to the policy of global central banks.

Today, we expect the GBP/USD price to remain in narrow ranges in light of the American holiday.

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• At the start of trading today, Wednesday, USD/JPY is hovering bullishly around the 157.92 resistance level.
• The yen had gained some support from data showing stronger-than-expected Japanese export growth in May amid a weak yen and strong external demand.

Bank of Japan Governor Kazuo Ueda told the Japanese parliament earlier this week that they may raise interest rates again at the July meeting depending on upcoming economic data. Also, he warned that higher import costs caused by a weaker yen could weigh on household spending, but added that higher wages could boost consumption.

Last week, the Bank of Japan kept interest rates unchanged as widely expected, and said it would release a plan to reduce its bond-buying program at its next policy meeting in July. The yen fell sharply and approached three-decade lows after the decision, before paring those losses as market participants shifted their focus to the expected reduction in bond purchases and the possibility of more currency intervention.

According to the economic calendar, the Bank of Japan unanimously kept its key short-term interest rate at around 0% to 0.1% at its June meeting, as widely expected, after raising rates for the first time since 2007 and ending eight years of negative interest rates in March. At the same time, the governing board indicated that it may consider how to start reducing bond purchases at its July meeting. Clearly, the move was approved by an 8-1 vote, with board member Nakamura Toyoaki opposing, with the aim of allowing longer-term interest rates to move more freely.

In general, the Bank of Japan is currently buying around 6 trillion yen of bonds per month. The Friday statement said the Japanese economy had recovered moderately despite some areas of fragility. Private consumption had been resilient amid improving corporate profits and business spending. However, exports remained flat, as did public investment. On the inflation front, annual figures were in the 2 to 2.5% range, with inflation expectations rising modestly. Meanwhile, the core consumer price index is expected to rise gradually.

• 

USD/JPY Technical Analysis and Expectations Today

The general trend for USD/JPY remains bullish and may remain so until Japan intervenes in the forex markets to prevent further collapse of the currency exchange rate. Now, all eyes are on the psychological resistance level of 160.00 in case bulls move the currency pair towards the resistance levels of 158.30 and 159.00 respectively. According to the performance on the daily chart, breaking the current channel requires moving below the 155.00 level. Today is a US holiday, so the currency pair is expected to move in narrow ranges while maintaining the current upward trend.

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EUR/USD Current price: 1.0744

• ECB member Mario Centeno delivered yet another hawkish message.
•  The United States celebrates the Juneteenth holiday, local markets will remain closed.
• EUR/USD bullish in the near term, resistance at 1.0760, the weekly high.

The US Dollar is under mild selling pressure in a quiet Wednesday, helping EUR/USD advance towards the 1.0750 price zone. Stock markets trade mixed, confined to tight ranges around their opening levels, suggesting speculative interest lacks directional motivation.

The Euro found support in comments from European Central Bank (ECB) Governing Council member Mario Centeno. Centeno said that interest rates will be cut further if inflation slows, maintaining the hawkish bias set in the June ECB meeting.

Other than that, the Eurozone released the April Current Account, which posted a seasonally adjusted surplus of €38.6 billion, improving from the €35.8 billion posted in March and beating expectations. Construction Output in the same month contracted by 0.2%, better than the 0.5% loss from the previous month.

 The United States (US) published MBA Mortgage Applications for the week ended June 14, which rose 0.9%. It is worth reminding that the country celebrates the Juneteenth holiday, and local markets will remain closed, limiting FX activity throughout the American afternoon.

EUR/USD short-term technical outlook

The EUR/USD pair is up for a third consecutive day, although gains are modest. EUR/USD posted a weekly high at 1.0760 on Tuesday, the level to surpass to gain additional upward traction. Technically, however, the risk skews to the downside. The daily chart shows EUR/USD develops far below all its moving averages, with the 20 Simple Moving Average (SMA) heading modestly lower above flat 100 and 200 SMAs. The Momentum indicator aims marginally lower below its 100 level, while the Relative Strength Index (RSI) indicator consolidates at around 44, suggesting buyers remain sidelined.

According to the 4-hour chart, near-term advances seem likely. The EUR/USD pair is finding support around a now flat 20 SMA, although the 100 SMA crosses below the 200 SMA, limiting the upside in the 1.0810 price zone. Finally, technical indicators extend their advances above their midlines, in line with the latest bounce, although not enough to confirm a steady advance ahead.

Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0760 1.0810 1.0840

EUR/USD Current price: 1.0744

• ECB member Mario Centeno delivered yet another hawkish message.
•  The United States celebrates the Juneteenth holiday, local markets will remain closed.
• EUR/USD bullish in the near term, resistance at 1.0760, the weekly high.

The US Dollar is under mild selling pressure in a quiet Wednesday, helping EUR/USD advance towards the 1.0750 price zone. Stock markets trade mixed, confined to tight ranges around their opening levels, suggesting speculative interest lacks directional motivation.

The Euro found support in comments from European Central Bank (ECB) Governing Council member Mario Centeno. Centeno said that interest rates will be cut further if inflation slows, maintaining the hawkish bias set in the June ECB meeting.

Other than that, the Eurozone released the April Current Account, which posted a seasonally adjusted surplus of €38.6 billion, improving from the €35.8 billion posted in March and beating expectations. Construction Output in the same month contracted by 0.2%, better than the 0.5% loss from the previous month.

 The United States (US) published MBA Mortgage Applications for the week ended June 14, which rose 0.9%. It is worth reminding that the country celebrates the Juneteenth holiday, and local markets will remain closed, limiting FX activity throughout the American afternoon.

EUR/USD short-term technical outlook

The EUR/USD pair is up for a third consecutive day, although gains are modest. EUR/USD posted a weekly high at 1.0760 on Tuesday, the level to surpass to gain additional upward traction. Technically, however, the risk skews to the downside. The daily chart shows EUR/USD develops far below all its moving averages, with the 20 Simple Moving Average (SMA) heading modestly lower above flat 100 and 200 SMAs. The Momentum indicator aims marginally lower below its 100 level, while the Relative Strength Index (RSI) indicator consolidates at around 44, suggesting buyers remain sidelined.

According to the 4-hour chart, near-term advances seem likely. The EUR/USD pair is finding support around a now flat 20 SMA, although the 100 SMA crosses below the 200 SMA, limiting the upside in the 1.0810 price zone. Finally, technical indicators extend their advances above their midlines, in line with the latest bounce, although not enough to confirm a steady advance ahead.

Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0760 1.0810 1.0840

• UK inflation fell to the 2% BoE target for the first time in almost three years.
• UK services price inflation increased by 5.7%, more significant than the forecast 5.5%.
• US data on Tuesday showed soft retail sales in May.

The GBP/USD forecast shows a surge in bullish momentum after data from the UK showed that underlying inflation remains strong. Meanwhile, data in the previous session revealed a smaller-than-expected increase in US retail sales. 

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Data on Wednesday showed that UK inflation fell to the 2% BoE target for the first time in almost three years. However, underlying price pressures remained strong, with service price inflation increasing by 5.7%, which was more significant than the forecast of 5.5%. Consequently, the Bank of England might hesitate to lower borrowing costs.

While economists expect the BoE to start cutting rates in August, markets have lowered the likelihood of such an outcome from 50% before the report to 30%. At the same time, they now expect 44 basis points of cuts this year, down from 50. The shift to a less dovish outlook helped boost the pound on Wednesday.

Meanwhile, the dollar was on the back foot after US data on Tuesday showed soft retail sales in May. Economists had expected a more significant increase in sales for the month. The miss indicated weaker consumer spending and demand. 

As the US consumer reduces spending, the economy suffers, and inflation declines. As a result, investors believe the Fed has more reading to cut borrowing costs. For this reason, there is a 67% chance that the central bank will cut rates in September.

GBP/USD key events today

Investors will keep digesting inflation data as they await tomorrow’s Bank of England policy meeting.

GBP/USD technical forecast: Rebound meets strong SMA and Fib resistance

On the technical side, the GBP/USD price moved sharply from the 1.2700 key level to the 30-SMA resistance. However, the bias has yet to shift from bearish to bullish since the price is still testing the SMA resistance and the 0.382 Fib level. Nevertheless, bulls have gained momentum, as seen in the RSI, which has reached above 50. 

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Therefore, they may breach the SMA to retest the 1.2850 resistance level. However, there is a higher chance the SMA and the Fib level will hold firm, allowing bears to return and target the 1.2600 level. 

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• EUR/USD fluctuates in a tight channel above 1.0700 on Wednesday.
• Near-term technical highlights the lack of directional momentum.
• US markets will remain closed in observance of the Juneteenth Holiday.

EUR/USD struggles to find direction and fluctuates in a narrow band slightly below 1.0750 on Wednesday. The pair’s action could remain subdued as financial markets in the US will remain closed on in observance of the Juneteenth Holiday.

The US Dollar (USD) came under modest bearish pressure and EUR/USD edged higher in the early American session on Wednesday following the weaker-than-forecast Retail Sales data. Later in the session, comments from Federal Reserve (Fed) officials and the cautious market mood helped the USD find a foothold and limited EUR/USD’s upside. 

Alberto Musalem, incoming President of the St. Louis Fed, said on Tuesday that he would be willing to tighten policy further if inflation figures were to become stuck above the Fed’s 2% target. In the meantime, Dallas Fed President Lorie Logan remarked that the recent data indicating a slowdown in inflation is “encouraging,” but emphasized that the Fed must remain cautious and patient regarding interest-rate policy.

On Thursday, the US economic calendar will feature weekly Initial Jobless Claims and Building Permits data for May. Market participants will also continue to pay close attention to comments from central bank officials in the second half of the week.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat near 50, reflecting the pair’s indecisiveness. In case the pair manages to hold above 1.0730, where the Fibonacci 61.8% retracement of the latest uptrend is located, 1.0760 (Fibonacci 50% retracement) and 1.0800 (Fibonacci 38.2% retracement) could be seen as next resistance levels.

On the downside, 1.0700 (psychological level, static level) could be seen as interim support before 1.0670 (Fibonacci 78.6% retracement) and 1.0600 (beginning point of the uptrend).

 

• EUR/USD fluctuates in a tight channel above 1.0700 on Wednesday.
• Near-term technical highlights the lack of directional momentum.
• US markets will remain closed in observance of the Juneteenth Holiday.

EUR/USD struggles to find direction and fluctuates in a narrow band slightly below 1.0750 on Wednesday. The pair’s action could remain subdued as financial markets in the US will remain closed on in observance of the Juneteenth Holiday.

The US Dollar (USD) came under modest bearish pressure and EUR/USD edged higher in the early American session on Wednesday following the weaker-than-forecast Retail Sales data. Later in the session, comments from Federal Reserve (Fed) officials and the cautious market mood helped the USD find a foothold and limited EUR/USD’s upside. 

Alberto Musalem, incoming President of the St. Louis Fed, said on Tuesday that he would be willing to tighten policy further if inflation figures were to become stuck above the Fed’s 2% target. In the meantime, Dallas Fed President Lorie Logan remarked that the recent data indicating a slowdown in inflation is “encouraging,” but emphasized that the Fed must remain cautious and patient regarding interest-rate policy.

On Thursday, the US economic calendar will feature weekly Initial Jobless Claims and Building Permits data for May. Market participants will also continue to pay close attention to comments from central bank officials in the second half of the week.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat near 50, reflecting the pair’s indecisiveness. In case the pair manages to hold above 1.0730, where the Fibonacci 61.8% retracement of the latest uptrend is located, 1.0760 (Fibonacci 50% retracement) and 1.0800 (Fibonacci 38.2% retracement) could be seen as next resistance levels.

On the downside, 1.0700 (psychological level, static level) could be seen as interim support before 1.0670 (Fibonacci 78.6% retracement) and 1.0600 (beginning point of the uptrend).

 

Considering the comments from BoJ Governor Ueda, upbeat figures could fuel buyer demand for the Yen. Notably, upward import trends may ease BoJ concerns about the effects of a weak Yen on the Japanese economy.

After contracting in Q1 2024, an improving macroeconomic backdrop would fuel buyer demand for the Yen.

Nevertheless, inflation and Services PMI numbers will likely influence buyer appetite for the Yen more. The BoJ wants the services sector and household spending to fuel demand-driven inflation before raising interest rates.

While investors consider trade data from Japan, US economic indicators will draw investor attention amidst shifting sentiment toward a September Fed rate cut. The potential for a BoJ rate hike and Fed rate cut put the USD/JPY pairing and sub-150 in the spotlight.

US Economic Calendar: Housing Market Data and the Fed

Later in the session on Wednesday, the US housing sector will be in focus.

Economists forecast the NAHB Housing Market Index to remain steady at 45 in June.

Stronger-than-expected numbers could boost demand for the USD/JPY. Economists consider the housing sector a barometer of the US economy. An uptick in the Housing Market Index could bolster consumer confidence and spending. Tighter housing market conditions could push rents higher.

The services sector continues contributing to headline inflation, with the housing services sector a focal point for the Fed. Increasing rent trends and tight labor market conditions could keep the Fed from making any immediate policy changes, supporting demand for the US dollar.

In April, FOMC Member Austan Goolsbee highlighted the impact of rent trends on inflation, stating,

“I have been expecting it to come down more quickly than it has. If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.”

Investors will focus on US economic indicators alongside shifting sentiment regarding a possible Fed rate cut in September.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on central bank chatter, inflation numbers from Japan, and Services PMIs. Will these factors align to propel the Yen forward, or will uncertainties keep it anchored?

USD/JPY Price Action

Daily Chart

The USD/JPY hovered comfortably above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY move to the 159 handle could signal a climb toward the April 29 high of 160.209.

Central bank chatter, trade data from Japan, and US housing sector data require investor attention.

Conversely, a USD/JPY drop below the 157.5 handle could bring the 50-day EMA into play. A fall through the 50-day EMA could give the bears a run at the 151.685 support level.

The 14-day RSI at 60.20 suggests a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.