• The EUR/USD went into this weekend near the 1.07023 level. On Wednesday of this past week the EUR/USD was trading near the 1.08510 mark.
• On Monday the 10^th of June the EUR/USD fell to a low around the 1.07320 level.
• The EUR/USD endured two significant selloffs on the 7^th and 10^th of June.
• The EUR/USD reestablished its higher price range then in the middle of this week, only to once again produce a strong move downwards.

European Parliament election results, the call for a French vote later this month, and even the upcoming U.K election in early July have had impacts on behavioral sentiment. Also in the middle of this past week the U.S Federal Reserve announced its FOMC Statement, sounding rather cautious regarding interest rates and sticking to its reactive mindset. Speculators who have survived the turmoil of EUR/USD trading the past six days will likely enter this coming week’s Forex market rather cautiously.

Current Lows in the EUR/USD and Mid-Term Support

The ability of the EUR/USD to suffer what have been three rather strong selloffs in the past six days certainly should have traders nervous. Mid-term support levels are back within sight and the low this past Friday when the 1.06700 level was penetrated downwards was a violent moment. While a reversal upwards did occur and the 1.07000 ratio was again seen, this is not entirely a positive signal.

Tomorrow’s opening in the EUR/USD will be must watch news for global Forex traders, this as they try to gauge existing behavioral sentiment. The EUR/USD selling didn’t correlate to the broader Forex market regarding the depth of the currency pair’s volatility seen the past six days of trading. While other major currencies have stumbled against the USD certainly, they have not seen the same amount of violent reactions. Behavioral sentiment is a key for the EUR/USD and financial institutions appear to be rather shaken regarding potential shakeups to existing power within European governments. However, some may suspect the selling has been overdone.

EUR/USD Short-Term Traders vs. Mid-Term Outlooks

Short-term trading in the EUR/USD could stay particularly violent. U.S economic data was mostly weaker than anticipated last week, this should have helped the EUR/USD gain, but it certainly did not accomplish an upwards trajectory. Mid-term outlooks for the EUR/USD are likely much more optimistic for the currency pair among some financial institutions, but the level of rollercoaster movements in the EUR/USD were more akin to an emerging market currency pair, instead of one of the world most established measurements for global commerce.

• If the EUR/USD falls through the 1.07000 level and sustains values below early this week it will be a sign behavioral sentiment continues to be nervous.
• The current price of the EUR/USD is testing values last seen in early May, and rather close to lows seen in late April when the 1.06200 levels were tested until producing some buying upwards.

• 

EUR/USD Weekly Outlook:

Speculative price range for EUR/USD is 1.06525 to 1.08100

The past handful of days in the EUR/USD is a good lesson that the price of the market is the correct value even if experienced traders are betting against the short-term volatile trends. Speculators will need to be cautious and monitor the trading of the EUR/USD on Monday and Tuesday of this week carefully. If the EUR/USD can start to deliver upwards momentum this may be a positive sign, but short-term nervousness appears to remain rather influential for the currency pair.

Conservative bullish traders may want to see sustained momentum above the 1.07250 level before they venture buying positions. However, the results from the past week of trading in the EUR/USD highlight the amount of fragile sentiment within the currency pair. Traders need to remember that outlooks for the EUR/USD for the short-term and mid-term may be quite different for the moment. Speculators looking for quick hitting moves in the EUR/USD need to be careful. While the downside may look limited, price action the past week has proven this notion wrong and costly for those wagering on reversals higher.

Ready to trade our EUR/USD weekly Forex forecast? Here’s a list of some of the top forex brokers in Europe to check out. 

June 16, 2024 – Written by John Cameron

STORY LINK Pound to Euro Exchange Rate Forecast For Week Ahead: 1.1365-1.1905

Foreign exchange analysts at Bank of America forecast that the Pound to Euro exchange rate (GBP/EUR) gains will extend to 1.1905. Credit Agricole sees scope for a near-term correction before a medium-term move to 1.1905.

Danske Bank expects a decline to 1.1365 on a 6-12-month view, but notes that French political uncertainty and Bank of England policy could jeopardise this forecast.

The Euro posted sharp losses after the weekend European elections with the main attention on France where President Macron’s centrist Party was defeated by the right-wing National Rally.

In response, Macron called early parliamentary elections with the first round on June 30th.

The Pound broke above key resistance at 1.1765 and extended gains during the week as the Euro remained under pressure with 22-month highs just above 1.19 before settling around 1.1860.

ING commented; “We’re not French political experts, but it looks like the euro is taking another leg lower on news that the French parties of the Left are getting their act together to form a coalition and only run one candidate per district between them. This rare cooperation of the Left stands to suck support from President Macron’s party further.”

According to Danske; “EUR/GBP continues to be weighed down by the French President Macron’s decision to call snap parliamentary elections, which has sparked political uncertainty. We acknowledge that we see risks to both growth and inflation as tilted to the topside, leaving a more challenging backdrop for an impending BoE cutting cycle. By extension, this also acts as a downside risk to our EUR/GBP forecast.”

HSBC commented; “Heavy defeats for the parties of French President Macron and Germany’s Chancellor Scholz point to possible big shifts in the political landscape in core Europe. Macron’s unexpected decision to call a snap legislative election will test whether the European results are echoed at a national level.” It added; “The EUR is justifiably lower across G10 FX as the market reprices its political risk premium.”

UK data had limited impact during the week with no change in GDP for April. The unemployment rate increased to 4.4% in the three months to April from 4.3% previously and the highest rate since September 2021. The inactivity rate increased to the highest level for close to 10 years.

Wage pressures were still elevated with underlying wages growth remaining at 5.9% and compared with expectations of 5.7%.

Credit Agricole targets an EUR/GBP decline to 0.84, but added; “We see a risk that the updated MPC policy statement and the incoming UK data next week could encourage investors to bring forward their rate cut expectations.”

Bank of England decision will be crucial over the medium term.

It added; “Given that the GBP is already looking somewhat overbought and EUR/GBP in particular is trading well below its short-term fair value, the GBP could be vulnerable especially if UK data releases and the BoE meeting trigger profit taking on stretched long market positions.”

According to NatWest; “With only 40bp of BoE easing now priced for end-24 against the view of NatWest economists for 75bp, there remains scope for Sterling to soften against the EUR in coming months.”

As far as the General Election is concerned opinion polls pointed to a further erosion of Coservative Party support with expectations of a very substantial Labour majority.

HSBC commented; “Some may believe the election will be GBP positive. A Labour Party victory is the most likely outcome as per latest polls, which points to the possibility of warmer UK-EU ties and a stronger fiscal impulse, thus strengthening the outlook for the GBP.”

It added; “However, we think this is not so straightforward. GBP is still likely to be driven more by the BoE’s monetary policy outlook versus other central banks rather than the immediate aftermath of the coming election. The pound remains beholden to rates and, in our view, appears to be too strong against both the USD and EUR, based on respective rate differentials.”

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Pound Euro Forecasts

June 16, 2024 – Written by Tim Boyer

STORY LINK Euro to Dollar Forecast for Week Ahead: Euro-Zone Political Fears Return

Foreign exchange analysts at MUFG sees the risk of the Euro to Dollar exchange rate (EUR/USD) sliding to 1.05 amid Euro-Zone political concerns.

Scotiabank considers that EUR/USD will struggle in the short term before gains to 1.15 at the end of 2025.

During the week, the Euro came under pressure after the European elections as President Macron called for early parliamentary elections after losing to the right-wing National Rally in the European vote.

In particular, there was strong selling in French bonds with a widening in the French bonds (OATS) and German Bonds (Bunds) yield spreads and EUR/USD retreated to 6-week lows close to 1.0670.

MUFG commented; “The wide on the spread in 2017 was 76bps (closing rate basis) which coincided with EUR/USD falling to around the 1.0600-level. That’s certainly very achievable and if risks increase notably we could certainly see EUR/USD test the 1.0500-level in the coming weeks.”

According to HSBC; “Concerns are growing over France’s budget deficit in the context of possible legislative control by the far-right National Rally party, with Finance Minister Bruno Le Maire warning that France could be pushed into a debt crisis if the National Rally were to pursue its economic program.”

It added; “For the EUR, political concerns look likely to persist and there is little sense of any market appetite to fade the move. We retain our open trade idea to sell EUR-USD, with a target of 1.0550.”

ING does not expect near-term relief; “It looks as though European politics is going to be the dominant driver of FX markets for this month. This suggests international investors will need a lot of convincing not to hold dollars.” It added; “it seems clear that given French political risk, EUR/USD will not lead in any further dollar data-driven decline.”

Credit Agricole considered that political uncertainty could undermine the economy and trigger fresh concerns over the potential for Euro-Zone fiscal and financial integration.

The Federal Reserve held interest rates at 5.50% at the latest policy meeting, in line with consensus forecasts.

Chair Powell continued to warn that interest rates could not be cut until there was more convincing evidence that inflation was moving to the 2% target.

The inflation data was more favourable with the core annual rate for consumer prices declining to 3.4% from 3.6% and below expectations of 3.5%.

Danske commented; “The Fed is still biased towards easing and Powell underscored the need to remain conscious about downside economic risks as well. We remain happy with our call for two 25bp rate cuts this year, followed by four more in 2025.”

It added; “We think EUR/USD will range trade around the 1.08 level in the near term, but in the longer term, we believe the structural case for stronger US growth dynamics will take the cross lower towards 1.05/1.03 on a 6/12M horizon.”

JP Morgan expects some Euro resilience; “for a larger sell-off towards 1.03 would require US/EMU inflation trajectories to diverge further or EMU growth momentum to be disrupted once again.”

Berenberg commented; “For the summer, we expect the EUR/USD to continue to move within this trading range with low volatility and no movement outside the trend channel is expected. Should the EUR/USD break out in one direction, the next support lies at 1.0450 (12-month low) and the next resistance at 1.1140 (6-month high).”

It added; “In the long term (around five years), the risk of high US government debt and possible problems in refinancing the debt must also be kept in mind. A significantly weaker US dollar then appears possible.”

The bank expects that the Euro-Zone economy will strengthen gradually, but pointed to the international dimension.

In this context, it added; “geopolitical risks such as the tensions between China and the US regarding Taiwan could resurface at any time and are always present. In uncertain times, investors seek safe havens such as the US dollar. Coupled with higher interest rates for longer, however, we believe a significant weakening of the US dollar above 1.1000 by the end of 2024 is unrealistic.”

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Euro Dollar Forecasts

GBP/JPY Forecast Video for 03.07.23

British Pound vs Japanese Yen Weekly Technical Analysis

The British pound has rallied a bit during the course of the trading week, as we continue to see a lot of upward pressure due to the Bank of Japan and its ultra-loose monetary policy. With that being said, I think you’ve got a situation where the market is eventually going to continue going higher, and that every time we pull back it should be thought of as a potential buying opportunity. The ¥180 level is an area that will offer a significant amount of support, and therefore I think we have the possibility of a “buy on the dip” move rather soon. If we can break above the ¥185 level, then the market is likely to go much higher, perhaps reaching the ¥200 level by the end of the year.

That being said, we are a little bit overdone at this point, so a short-term pullback makes more sense than anything else. That doesn’t mean we have to pull back, just that it does make a certain amount of sense as we have a pullback in order to offer a bit of value. This is especially true if we can get near the ¥180 level, as it has been so important recently. After the most recent shot higher, the market looks like it is a little overstretched at this point, so we need to be very cognizant of the fact that it is probably only a matter of time. Nonetheless, I have no interest in shorting this market, it is far too bullish for me to try to fight. Looking for value will continue to be the way I trade this market going forward.

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

This article was originally posted on FX Empire

More From FXEMPIRE:

• UK data revealed a significant jump in monthly unemployment claims.

• US data revealed a smaller-than-expected figure for consumer inflation in May.

• Fed forecasts at the FOMC meeting showed only one rate cut in December.

The GBP/USD weekly forecast shows more downside potential as Fed forecasts for rate cuts overshadow the recent cooler inflation figures.

Ups and downs of GBP/USD

The pound had a bearish week amid a range of economic reports from the US and the UK. At the start of the week, UK data revealed a significant jump in monthly unemployment claims, showing a decline in the labor market that weighed on the pound. 

–Are you interested in learning more about Bitcoin price prediction? Check our detailed guide-

However, the move later reversed when US data revealed a smaller-than-expected figure for consumer inflation in May. Investors raised bets for a Fed rate cut in September, pushing the dollar lower. Unfortunately, Fed forecasts at the FOMC meeting showed only one rate cut in December, which helped the dollar recover as the week ended. This recovery continued despite softer-than-expected wholesale inflation data.

Next week’s key events for GBP/USD

Next week, the UK will release several major reports, including the CPI, retail sales, and manufacturing PMI. At the same time, investors will pay attention to Thursday’s Bank of England policy meeting. Meanwhile, the US will only release its retail sales report. 

The UK consumer inflation report will significantly shape the outlook for interest rates. Inflation in the country has been on a downtrend and is currently at 2.3%, near the central bank’s target. However, in the last report, economists had expected it to reach 2.1%. Another bigger-than-expected figure would lower bets for a cut in August.

Meanwhile, the Bank of England will likely maintain rates at its policy meeting.

GBP/USD weekly technical forecast: Break below 22-SMA triggers shift in sentiment 

On the technical side, the GBP/USD price has broken below the 22-SMA after failing to breach the 1.2800 critical resistance level. At the same time, the RSI has broken below 50, signaling a shift in sentiment to bearish. 

–Are you interested in learning more about forex basics? Check our detailed guide- 

The previous bullish move paused at 1.2800, and bears started showing strength with large candles. The shift in sentiment will allow them to revisit the 1.2600 support level. If bears can break below this level to start making lower highs and lows, they will confirm a new downtrend. Moreover, the decline might continue to the 1.2400 key level.

Looking to trade forex now? Invest at eToro!

68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

• GBP/USD stays on the back foot and tests 1.2700 on Friday.
• The near-term technical outlook points to a bearish tilt.
• The USD could continue to benefit from the souring market mood.

GBP/USD closed in negative territory on Thursday and snapped a three-day winning streak. The pair struggles to hold its ground early Friday and tests 1.2700.

The US Dollar erased a portion of Wednesday losses in the European session on Thursday. Although the soft producer inflation data limited the USD’s rebound in the early American session, the souring risk mood helped the currency regather its strength later in the day.

Early Friday, safe-haven flows continue to dominate the financial markets, helping the USD continue to outperform its rivals. Additionally, the USD seems to be capturing capital outflows out of the Euro, which struggles to find demand amid political jitters, and the Japanese Yen, which stays under selling pressure following the Bank of Japan’s decision to hold policy settings unchanged.

The University of Michigan’s (UoM) Consumer Sentiment Survey will be featured in the US economic calendar on Friday. Investors, however, could continue to react to changes in risk perception heading into the weekend.

As of writing, US stock index futures were down between 0.65% and 0.1%. A bearish opening in Wall Street, followed by an extended slide, could further boost the USD and weigh on GBP/USD. 

GBP/USD Technical Analysis

GBP/USD dropped below the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart fell below 40, reflecting the bearish tilt in the short term outlook.

On the downside, the 200-period Simple Moving Average (SMA) aligns as first support at 1.2670 before 1.2640 (Fibonacci 38.2% retracement) and 1.2600 (psychological level, static level).

If GBP/USD returns within the ascending channel by rising above 1.2730, sellers could be discouraged. In this case, 1.2750 (100-period SMA) could act as interim resistance before 1.2800 (psychological level, static level).

 

• GBP/USD stays on the back foot and tests 1.2700 on Friday.
• The near-term technical outlook points to a bearish tilt.
• The USD could continue to benefit from the souring market mood.

GBP/USD closed in negative territory on Thursday and snapped a three-day winning streak. The pair struggles to hold its ground early Friday and tests 1.2700.

The US Dollar erased a portion of Wednesday losses in the European session on Thursday. Although the soft producer inflation data limited the USD’s rebound in the early American session, the souring risk mood helped the currency regather its strength later in the day.

Early Friday, safe-haven flows continue to dominate the financial markets, helping the USD continue to outperform its rivals. Additionally, the USD seems to be capturing capital outflows out of the Euro, which struggles to find demand amid political jitters, and the Japanese Yen, which stays under selling pressure following the Bank of Japan’s decision to hold policy settings unchanged.

The University of Michigan’s (UoM) Consumer Sentiment Survey will be featured in the US economic calendar on Friday. Investors, however, could continue to react to changes in risk perception heading into the weekend.

As of writing, US stock index futures were down between 0.65% and 0.1%. A bearish opening in Wall Street, followed by an extended slide, could further boost the USD and weigh on GBP/USD. 

GBP/USD Technical Analysis

GBP/USD dropped below the lower limit of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart fell below 40, reflecting the bearish tilt in the short term outlook.

On the downside, the 200-period Simple Moving Average (SMA) aligns as first support at 1.2670 before 1.2640 (Fibonacci 38.2% retracement) and 1.2600 (psychological level, static level).

If GBP/USD returns within the ascending channel by rising above 1.2730, sellers could be discouraged. In this case, 1.2750 (100-period SMA) could act as interim resistance before 1.2800 (psychological level, static level).

 

US Dollar vs Japanese Yen Weekly Technical Analysis

The US dollar has been fairly noisy during the week against the Japanese yen, but that’s to be expected. We had both an FOMC meeting and a Bank of Japan meeting, so there was always going to be a bit of concern when it comes to potential fundamental noise.

That being said, it looks like we are recovering, and it looks like we are just basically working off some froth trying to determine whether or not we can get above the 158 yen level, an area that’s been significant resistance. And then again, we also need to pay close attention to the 160 yen level, an area that seems to be a trip wire for the Bank of Japan as they intervened near that level in the past.

With that being the case, the market certainly looks as if it remains a buy on the dip scenario, with the 155 yen level underneath being massive potential support. So with this, I like the idea of buying these dips and not necessarily worrying about trying to get too cute with this. You get paid at the end of every day. So it is worth recognizing that it is a positive swap and therefore you can’t short it. I think a lot of institutional traders are looking at this through the same prism as well. So as long as that’s going to be the case, I just don’t see a situation where we can do anything other than buy any signs of weakness that give us an opportunity to pick up cheap greenbacks.

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

This article was originally posted on FX Empire

More From FXEMPIRE:

• EUR/USD stays under bearish pressure in the European session on Friday.
• The technical outlook suggests that there is more room on the downside before the pair turns oversold.
• The US Dollar could preserve its strength in case safe-haven flows dominate the action.

Following Wednesday’s upsurge, EUR/USD turned south and registered large losses on Thursday. The pair stays under pressure on Friday and trades at its lowest level since early May slightly below 1.0700.

The negative shift seen in risk mood helped the US Dollar (USD) gather strength during the American trading hours on Thursday. Additionally, the negative impact of soft inflation data on the USD started to fade away as investors reassessed the Federal Reserve’s policy outlook amid the hawkish revisions to the Summary of Economic Projections.

Meanwhile, investors’ focus shifts back to political jitters in the Eurozone following the key macroeconomic events in the US, making it difficult for the Euro to find demand. 

In the second half of the day, the US economic docket will feature the University of Michigan’s preliminary Consumer Sentiment Survey for June. Nevertheless, market participants are likely to ignore this report and stay focused on the risk perception.

At the time of press, Dow Futures were down 0.5% while S&P 500 Futures were losing 0.2%. On the other hand, Nasdaq Futures were last seen posting small daily gains. In case Wall Street’s main indexes push lower heading into the weekend, the USD is likely to continue to outperform its rivals.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly above 30, suggesting that the pair has some more room on the downside before it turns technically oversold. 1.0670 (Fibonacci 78.6% retracement of the latest uptrend) aligns as next support before 1.0600 (psychological level, static level).

In case EUR/USD manages to stabilize above 1.0700 (psychological level, static level), sellers could look to book profits ahead of the weekend and allow the pair to correct higher. In this scenario, 1.0760 (Fibonacci 50% retracement) could be seen as next resistance before 1.0790-1.0800, where the 100-day and the 200-day Simple Moving Averages are located.

 

• The Pound Sterling faced rejection once again above 1.2800 against the US Dollar.
• GBP/USD buyers look to UK inflation and BoE policy decision for fresh impetus.
• The Pound Sterling yearns for a weekly close above 1.2800 to refuel the uptrend.

The Pound Sterling (GBP) rebounded firmly against the US Dollar (USD) this week, propelling GBP/USD to a new three-month top, but sellers once again lurked above the 1.2800 mark.

Pound Sterling struggled to stay resilient against US Dollar

Following a bullish start to the week, GBP/USD turned south in the second half of the week after failing to recapture the 1.2800 level. 

The pair extended its previous week’s decline at the start of the week on Monday, as the US Dollar stretched its robust Nonfarm Payrolls data-inspired uptrend. Further, the Greenback also capitalized on the EUR/USD sell-off, as the Euro was undermined by the Euro area political jitters after French President Emmanuel Macron announced snap elections on Sunday, dissolving parliament after exit polls showed his alliance suffered a heavy defeat in European elections to Marine Le Pen’s far-right National Rally (RN) party.

In lieu of this, GBP/USD touched a weekly low at 1.2688 on Monday. Thereafter, the Pound Sterling staged a comeback and extended the renewed upside into early Wednesday, as the US Dollar paused its uptrend ahead of the critical US Consumer Price Index (CPI) data.

The US CPI data came in softer than expected and bolstered expectations of Federal Reserve (Fed) interest rate cuts this year. Increased dovish Fed bets smashed the US Dollar alongside the US Treasury bond yields across the curve, driving GBP/USD to the highest level in three months at 1.2861.

The headline CPI was flat over the month in May, below expectations for a 0.1% gain. Core CPI rose 0.2%, which is below estimates for a 0.3% increase. The annual figures also came in softer than the market consensus.

However, the pair failed to sustain at higher levels, as sellers quickly jumped back into the game on the Fed policy announcements. Fed held policy rates steady in the range of 5.25%-5.50%, following the June policy meeting. The revised Summary of Economic Projections, the so-called dot-plot, indicated the policymakers expect to cut rates only once in 2024, against a projection of three rate cuts in the March forecasts and down from two rate cuts widely anticipated.

Fed Chair Jerome Powell delivered hawkish comments during his post-policy meeting press conference, further allowing the US Dollar buyers to recover lost ground. GBP/USD reversed sharply in the Fed aftermath and gave up the 1.2800 threshold once again.

The Fed’s signal that it is eyeing only one rate cut this year continued to fuel the US Dollar recovery momentum, exerting additional downside pressure on the Pound Sterling in the second half of the week and dragging GBP/USD to multi-week lows below 1.2700 on Friday. Markets are now pricing in about a 58% chance of a 25 basis points (bps) Fed rate cut in September, compared to a 47% probability of such a reduction seen a week ago, CME Group’s FedWatch tool showed.

Meanwhile, the UK employment data released on Tuesday failed to have any significant impact on the Pound Sterling. With all the public appearances from the Bank of England (BoE) policymakers canceled ahead of the July 4 general elections in the UK, the pair remained at the mercy of the US Dollar dynamics.

Week ahead: UK inflation and BoE decision on tap

With the US CPI data and Fed policy announcements out of the way, the focus now shifts toward the inflation report from the UK and the Bank of England (BoE) interest rate decision in the week ahead.

There are no relevant economic statistics due from both sides of the Atlantic on Monday, but China’s activity numbers could keep traders entertained.

Tuesday will feature the US Retail Sales report, followed by Industrial Production and other minor data. The UK CPI data for May will be published on Wednesday, ahead of the BoE policy verdict on Thursday. The US weekly Jobless Claims and Building Permits data will be released the same day.

On Friday, the UK Retail Sales data will drop, followed by the S&P Global Preliminary Manufacturing and Services PMI reports from the UK and the US.

Speeches from the Fed policymakers will be closely scrutinized during the week for fresh insights on the Fed’s interest rate path.

GBP/USD: Technical Outlook

As observed on the daily chart, GBP/USD continued to face rejection above the 1.2800 threshold.

Therefore, buyers yearn for a weekly candlestick close above that level for the Pound Sterling to accelerate the uptrend.

Acceptance above the latter would open the door for a test of the March 8 high of 1.2894. The next relevant resistance is seen at the 1.2950 psychological level.

The 14-day Relative Strength Index (RSI) dropped below 50 for the first time since early May, suggesting a buildup of bearish pressure. Additionally, GBP/USD made a daily close below the 21-day Simple Moving Average (SMA), currently located at 1.2744, for the first time since April 30 and dropped below the rising trendline support at 1.2725.

If GBP/USD fails to reclaim the above-mentioned levels, sell-off could be extended toward the confluence zone of the 100-day SMA and the 50-day SMA at around 1.2630.

The 200-day SMA at 1.2551 will be the last line of defense for Pound Sterling buyers.

 

The pound-to-Japanese Yen forecast is an indication of where technical and fundamental analysts think the GBPJPY price may be in the future. You can use these exchange rate forecasts to help you decide if now is the right time to buy Japanese Yen, or if you should wait until the price improves further.

Highlights

• Bank of Japan struggles to overturn Japanese Yen’s persistent weakness
• GBPJPY testing psychological 200; an upside breakout (GBP stronger) looms
• Use GBP strength to buy more Yen

How has the Pound performed against the Japanese Yen recently?

The Japanese Yen has been stuck in a negative trend for the past few years.

One main reason the Bank of Japan’s negative interest rate policy persistently pulls JPY’s value down is that it was only in March this year that the Japanese central bank overturned its extremely accommodative monetary policy. Inflation, not deflation, was BoJ’s ultimate objective. But even this simple objective is hard to attain.

In 2022, for example, tight international crude supplies and soaring natural gas prices sent the Japanese inflation rate to a 40-year high. The peak inflation rate? Just 4.3 percent. And as soon as energy prices came down from the peak, inflation promptly dropped below 3 percent again. That’s how difficult it is to engineer sustained inflation in Japan. Until the inflation objective is reached, the BoJ simply refuses to tighten.

Source: Financial Times (paywall) 

In contrast, the Bank of England hiked the Base Rate multiple times in 2022 and 2023. Currently, the UK Base Rate is at 5.25 percent. In contrast, the Japanese policy is zero. And in the past 25 years, the highest Japanese policy rate was a meagre 0.5 percent. More importantly, the BoJ is still buying Japanese government bonds (JGBs) at the tune of $38 billion per month (6 trillion yen). That’s QE.

This monetary policy divergence is promptly reflected in the GBPJPY exchange rate. From 140 at the start of 2021, the rate gained sixty points to reach the 200 milestone. This level surpasses the 2015/6 peak (see below). With no resistance above until the 2008 peak, the path is clear for a further rally, albeit with overbought momentum.

Is it a good time to buy Japanese Yen in pounds?

Sterling has been strengthening against the Japanese Yen for some time.

Based on this ongoing long-term trend, it is perhaps not out of the norm to predict further gains for GBP.

Therefore, I would not buy all my Yen in one transaction. Perhaps a better strategy is to buy some on further JPY weakness and when the rate touches major round number levels, like 210, 220 etc.

Of course, while the outlook is negative on JPY, Yen bulls will highlight that the FX rate’s rally is near-term overbought and due for a correction. True, although a fall below 190 is needed to signal that the multi-year uptrend has paused for now.

Will the pound get stronger against the JPY in the second half of 2024?

The Japanese Yen has weakened dramatically over the past 2-3 years. But is this trend set to continue?

If we take a 6-month view on the rate, there are a few factors worth watching. The first is that UK monetary policy may no longer be as restrictive as before. One or two rate cuts may be in the pipeline given other G7 central banks have started the easing process. This may narrow the monetary divergence between the two countries.

The second factor is that the Japanese monetary policy may no longer be that loose. No doubt, the BoJ wishes to foster a higher-inflation environment, but this stance comes at an increasing cost. In particular, the propensity for the JPY to weaken has started to unease some policymakers. The downtrend for JPY is becoming too frantic and violent.

In May, for example, the Japanese central bank acted to limit the downside. Specifically, as soon as USDJPY hit 160 – the highest level in decades – the bank bought up to $60 billion worth JPY in a matter of days to prevent a ‘one-way’ bet on the Yen.

Against this backdrop, it is possible that GBPJPY may still weaken, although the outlook is not as clear as before.

But the bottom line is this: until the BoJ starts to become more hawkish, traders generally assume the JPY will only weaken in the months ahead despite the multiple currency intervention.

What is the GBPJPY forecast in weeks, months, and years?

In light of the above-mentioned economic trends, the market consensus is that GBPJPY will stay where it is now for the time being.

A pullback is envisaged given GBPJPY’s overbought momentum. Many expect the rate to return near 190 in the next few weeks (see below).

However, these are just expectations, which can change quickly given a new set of economic data. Therefore GBPJPY may range in between 200-190 for the time being.

Source: fxstreet.com (June 2024)