• The euro has fallen rather significantly during the trading session on Tuesday, breaking down drastically against the Japanese yen.
• We have seen the Japanese yen strengthen against most other currencies around the world so this should not be a huge surprise.
• That being said, this candlestick is rather large, and it could begin to show signs of extreme negativity, but I think at this point in time you are essentially “jumping the gun” trying to jump in and short this market right here.

Risk Appetite

Keep in mind this pair will be heavily influenced by risk appetite, meaning that the pair will rally as traders believe that it is an environment worth taking risks in. Of course, the exact opposite is true and that’s what we have seen on Tuesday as people are running for the exits. That being said, we have seen negative candlesticks like this before that have simply been turned right back around, and therefore I’m not overly worried at the moment.

That being said, be cautious about your position sizing, because we have a lot of noise out there that could come into the picture in cause problems. The market had previously paid close attention to the ¥169.40 level above, for short-term support, but at this point we have broken through that so cleanly that I think it will eventually disappear from market memory. The 50-Day EMA sits near the ¥167 level and is rising so I think it’s a very real possibility that we use that for a bit of a springboard.

If we can break to the upside, clear the ¥170 level would be a huge victory for the euro, and I think it would also be seen in other Japanese yen related pairs, as it would be a major sign of Japanese yen weakness. That’s been the case for some time, and I suspect that it’s probably only a matter of time before that reenters the psyche of most traders as you continue to get paid at the end of the session via the swap.

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• The Euro rallied significantly during the trading session on Wednesday, as we continue to try to attempt a recovery and after the massive selloff at the open of the week.
• Yes, the world still has to figure out what to do with the information when it comes to the European Union Parliament votes shifting to the “right”, but at the end of the day it’s very possible that this will have been for not.

After all, the GBP/USD market is currently in the extremely oversold area on the monthly chart, so I do think it makes a certain amount of sense that we return to a bit of stability. The 0.85 level above could very well be the target, because not only is it a large, round, psychologically significant figure, but it is also the top of the gap from the Monday open, or at least within a few pips of it. Ultimately, this is a market that has found itself extremely oversold, and all it would take is a little bit of euro strength, or perhaps signs that the United Kingdom economy is starting to cool off a bit to send this market right back around.

EUR/GBP Technical Analysis

When I look at this Forex trading chart, I do think that we are in an oversold position and the 0.85 level as my short-term target. If we can break above there, the 50-Day exponential moving average can be found at the 0.8540 level and breaking that of course would be a very bullish sign. In that environment, the market could very well go looking to the 200-Day EMA, which is near the 0.8580 level. Anything above there could really start to get this market bullish, but I don’t necessarily think that will be easy.

Remember, the average attitude of the EUR/GBP currency pair is essentially sideways and choppy, so it would not be surprising at all to see this market essentially bounce around in this overall region. However, if we were to continue to sell off, the 0.84 level should be a significant support level. Anything below that could really start to send the market into some type of tailspin, although it doesn’t look like that will easily be accomplished.

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The US Dollar dipped sharply after weaker-than-expected US inflation data while the Pound was underpinned by a boost to risk appetite and gains in equities.

The Pound to Dollar (GBP/USD) exchange rate jumped to 3-month highs at 1.2845 before settling around 1.2830.

US consumer prices were unchanged for May compared with consensus forecasts of a 0.1% increase with the year-on-year rate edging lower to 3.3% compared with expectations of an unchanged rate of 3.4%.

Energy prices declined 2.0% for the month, although there was still a 3.7% annual increase.

Core prices increased 0.2% on the month compared with forecasts of a 0.3% increase with a larger-than-expected decline in the annual rate to 3.4% from 3.6% previously.

New vehicles, apparel and transport services prices all posted a monthly decline which helped curb the increase in core prices.

The data provided a significant element of relief surrounding US inflation trends, especially after a run of generally unfavourable data.

Although the data will not affect the Federal Reserve forecasts released later in the day, it could have an impact on Fed Chair Powell’s press conference.

Treasuries rallied strongly on the data with the 10-year yield dipping to below 4.30% while equities rallied, both factors undermining the dollar.

Furthermore, economists expect producer prices to rise by 0.1% in May after an increase of 0.5% in April. Additionally, economists predict core producer prices to advance by 0.3% after a rise of 0.5% in April.

Producer prices are a leading indicator of consumer price inflation. Producers may reduce prices in a weakening demand environment, lowering consumer prices. Downward trends in producer prices may also raise investor expectations of a September Fed rate cut.

Beyond the numbers, investors should monitor FOMC member chatter. Fed Vice Chair John Williams is on the calendar to speak. Comments regarding inflation and the interest rate trajectory need consideration.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on US labor market data, US producer prices, and the Bank of Japan interest rate decision. Weaker-than-expected US data and a hawkish BoJ could tilt monetary divergence toward the Yen and signal a move toward 150.

USD/JPY Price Action

Daily Chart

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

A USD/JPY return to 157 could give the bulls a run at the 159 handle. A break above 159 could signal a move toward the April 29 high of 160.209.

Bank of Japan commentary, US producer prices, US jobless claims, and Fed speeches need consideration.

Conversely, a USD/JPY drop below the 156 handle could give the bears a run at the 50-day EMA. A fall through the 50-day EMA could bring the 151.685 support level into view.

The 14-day RSI at 54.29 indicates a USD/JPY move to the April 29 high of 160.209 before entering overbought territory.

US Dollar vs Japanese Yen Technical Analysis

The U.S. Dollar continues to climb against the Japanese Yen as we head towards the FOMC meeting and the CPI numbers in America. At this point in time, the market is going to continue to be very noisy. And I do think that eventually we could break out to the upside. But right now, it looks like the 158 yen level is about as good as it gets. Obviously, after this session, we could see a complete change in attitude if the right combination of things happened. But right now, I think we’ve got a situation where any pullback has to be looked at as a potential buying opportunity.

This is especially true near the 155 yen level where the area had seen buyers previously and of course we have the 50-day EMA rapidly approaching. If we can break above the 158 yen level, then we could make a challenge for the 160 yen level which is where the Bank of Japan defended. Keep in mind that once we get through the FOMC meeting we do have a Bank of Japan meeting and press conference on Friday that could also throw more noise into this market.

Regardless, there is almost no scenario that makes sense to start shorting this pair. The Japanese are stuck with a massive debt load and will not be able to absorb anything close to a realistic interest rate to finance the spending of the last several decades. This pair is a one-way trade overall.

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

This article was originally posted on FX Empire

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• EUR/USD reversed the recent downtrend and regained 1.0800.
• The US Dollar came under pressure after the US CPI surprised to the downside.
• The Federal Reserve kept its rates unchanged, as broadly expected.

The US Dollar (USD) continued its strong retracement on Wednesday, this time on the back of disheartening US inflation figures tracked by the CPI in May, lending fresh legs to EUR/USD beyond the key 1.0800 barrier, or three-day highs.

It was all about the US CPI and the FOMC event on Wednesday, as EUR/USD seems to have temporarily set aside fresh political concerns on the old continent, particularly those reignited following the European parliamentary elections over the weekend.

Meanwhile, ECB Vice President de Guindos argued on Wednesday that the bank should proceed “very slowly” with reducing interest rates due to considerable uncertainty surrounding the inflation outlook.

In what was the salient event of the day, the Federal Reserve maintained interest rates steady and suggested that rate cuts may not begin until December. They projected a single quarter-percentage-point reduction for the year, reflecting rising inflation estimates. The end-of-year inflation projection has been revised to 2.6%, up from the previous 2.4%. Discussions suggest that the neutral interest rate may be higher than previously estimated, placing it more than a quarter of a percentage point above its level at the end of 2023.

Furthermore, Chair Powell argued at his press conference that a single quarter-percentage-point rate cut would not significantly impact the US economy, emphasizing that the overall policy trajectory is more crucial.

The CME Group’s FedWatch Tool now indicates nearly a 95% probability of lower interest rates by the December 18 gathering.

In the short term, the ECB’s recent rate cut vs. the Fed’s on-hold stance has widened the policy gap between both central banks, potentially exposing EUR/USD to further weakness. However, in the longer term, the emerging economic recovery in the Eurozone, combined with perceived slowdowns in the US economy, should help mitigate this disparity, offering some support to the pair.

In the meantime, US inflation is expected to remain in the limelight ahead of the release of Producer Prices on June 13.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the bearish tone continues, EUR/USD may first hit the June low of 1.0719 (June 11), followed by the May low of 1.0649 (May 1) and the 2024 low of 1.0601 (April 16).

If bulls reclaim the lead, there is an immediate up-barrier at the weekly high of 1.0852 (June 12) ahead of the June top of 1.0916 (June 4) and the March peak of 1.0981 (March 8). Further north, the weekly high of 1.0998 (January 11) appears before the important 1.1000 threshold.

So far, the 4-hour chart shows an important bounce. That said, initial hurdle comes at 1.0852 prior to 1.0916 and 1.0942. Southwards, there is immediate contention at 1.0719 ahead of 1.0649 and 1.0516. The relative strength index (RSI) retreated below 55.

• EUR/USD reversed the recent downtrend and regained 1.0800.
• The US Dollar came under pressure after the US CPI surprised to the downside.
• The Federal Reserve kept its rates unchanged, as broadly expected.

The US Dollar (USD) continued its strong retracement on Wednesday, this time on the back of disheartening US inflation figures tracked by the CPI in May, lending fresh legs to EUR/USD beyond the key 1.0800 barrier, or three-day highs.

It was all about the US CPI and the FOMC event on Wednesday, as EUR/USD seems to have temporarily set aside fresh political concerns on the old continent, particularly those reignited following the European parliamentary elections over the weekend.

Meanwhile, ECB Vice President de Guindos argued on Wednesday that the bank should proceed “very slowly” with reducing interest rates due to considerable uncertainty surrounding the inflation outlook.

In what was the salient event of the day, the Federal Reserve maintained interest rates steady and suggested that rate cuts may not begin until December. They projected a single quarter-percentage-point reduction for the year, reflecting rising inflation estimates. The end-of-year inflation projection has been revised to 2.6%, up from the previous 2.4%. Discussions suggest that the neutral interest rate may be higher than previously estimated, placing it more than a quarter of a percentage point above its level at the end of 2023.

Furthermore, Chair Powell argued at his press conference that a single quarter-percentage-point rate cut would not significantly impact the US economy, emphasizing that the overall policy trajectory is more crucial.

The CME Group’s FedWatch Tool now indicates nearly a 95% probability of lower interest rates by the December 18 gathering.

In the short term, the ECB’s recent rate cut vs. the Fed’s on-hold stance has widened the policy gap between both central banks, potentially exposing EUR/USD to further weakness. However, in the longer term, the emerging economic recovery in the Eurozone, combined with perceived slowdowns in the US economy, should help mitigate this disparity, offering some support to the pair.

In the meantime, US inflation is expected to remain in the limelight ahead of the release of Producer Prices on June 13.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the bearish tone continues, EUR/USD may first hit the June low of 1.0719 (June 11), followed by the May low of 1.0649 (May 1) and the 2024 low of 1.0601 (April 16).

If bulls reclaim the lead, there is an immediate up-barrier at the weekly high of 1.0852 (June 12) ahead of the June top of 1.0916 (June 4) and the March peak of 1.0981 (March 8). Further north, the weekly high of 1.0998 (January 11) appears before the important 1.1000 threshold.

So far, the 4-hour chart shows an important bounce. That said, initial hurdle comes at 1.0852 prior to 1.0916 and 1.0942. Southwards, there is immediate contention at 1.0719 ahead of 1.0649 and 1.0516. The relative strength index (RSI) retreated below 55.

USD/JPY Forecast Video for 23.06.23

US Dollar vs Japanese Yen Technical Analysis

The market is steadily approaching the ¥142.50 level, a previous swing high, indicating efforts to gather enough momentum for a significant move. Notably, the recent breakout of a bullish flag pattern and an ascending triangle pattern further reinforce the optimistic sentiment, hinting at the potential for the USD/JPY pair to reach or exceed the ¥148 level.

Upon analyzing the chart, it becomes apparent that the ¥138 level poses significant resistance. This level, having served as a strong resistance in the past, carries substantial importance due to “market memory.” Intriguingly, it aligns with the bottom of the bullish flag pattern, further emphasizing its potential as a crucial support level. If the market were to break below this level, it would likely trigger considerable selling. Adding to its technical significance is the presence of the 50-Day EMA in the vicinity.

Considering the broader market context, there is a favorable setup for further upside potential, making buying dips an attractive strategy. The longer-term perspective also suggests the possibility of a significant move, particularly with the potential target of ¥148 based on the bullish flag pattern. Moreover, the Bank of Japan’s commitment to maintaining loose monetary policies aligns with this bullish outlook. Even if the Federal Reserve decides not to raise interest rates in the upcoming meeting, the substantial interest rate differential between the US dollar and the yen remains advantageous, serving as a strong driving force for this market.

In the end, the rally of the US dollar against the yen continues, with the market steadily approaching the ¥142.50 level. The breakout of the bullish flag pattern and the presence of an ascending triangle pattern further solidify the positive outlook. Notably, the ¥138 level holds significance as a resistance-turned-support level due to “market memory.” A substantial amount of selling could ensue if this level fails to provide support.

Looking at the bigger picture, the longer-term perspective indicates further upside potential, supporting a strategy of buying dips. The Bank of Japan’s commitment to ultra-loose monetary policies adds momentum to the trade. Regardless of the Federal Reserve’s upcoming interest rate decision, the substantial interest rate differential between the US dollar and the yen remains a significant driver in this market. Traders are advised to remain attentive to potential buying opportunities, especially on dips and the ongoing bullish momentum in the USD/JPY pair.

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

This article was originally posted on FX Empire

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EUR/USD Current price: 1.0816

• The US Consumer Price Index rose by less than expected in May.
• Financial markets turned optimistic ahead of the Federal Reserve’s announcement.
• EUR/USD turned bullish in the near term, faces immediate resistance at around 1.0840.

The EUR/USD pair trades well above the 1.0800 threshold, filling the weekly opening gap and bullish following the release of United States (US) data. The Bureau of Labor Statistics (BLS) reported that the  Consumer Price Index (CPI) rose 3.3% YoY in May after hitting 3.4% in April. The CPI remained stable on a monthly basis, easing from the previous 0.3%. The core readings, which exclude volatile food and energy prices, were also below forecast and eased from the April readings.

Easing price pressures in the world’s largest economy prompted optimism on financial boards. Stocks turned firmly north, pushing high-yielding currencies higher, while the US Dollar entered a sell-off spiral.

The rally stalled as speculative interest faces another challenge in a few hours. The Federal Reserve (Fed) will announce its decision on monetary policy in a few hours. The Fed is widely expected to keep rates on hold, with the focus on whether policymakers maintain the hawkish stance from the previous meeting or not.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart shows EUR/USD recovered above directionless 100 and 200 Simple Moving Averages (SMAs), while a bearish 20 SMA provides dynamic resistance at around 1.0840. At the same time, technical indicators picked up bullish strength but are currently struggling to overcome their midlines, which is not enough to anticipate another leg north.

According to the 4-hour chart, EUR/USD is bullish in the near term. Technical indicators aim north vertically, having surpassed their midlines. At the same time, the pair overcame the 20 and 200 SMAs but faces near-term resistance from a mildly bearish 100 SMA at around 1.0840. Overall, it seems investors will hold additional fire until after the Fed.

Support levels: 1.0790 1.0750 1.0710

Resistance levels: 1.0840 1.0885 1.0920

EUR/USD Current price: 1.0816

• The US Consumer Price Index rose by less than expected in May.
• Financial markets turned optimistic ahead of the Federal Reserve’s announcement.
• EUR/USD turned bullish in the near term, faces immediate resistance at around 1.0840.

The EUR/USD pair trades well above the 1.0800 threshold, filling the weekly opening gap and bullish following the release of United States (US) data. The Bureau of Labor Statistics (BLS) reported that the  Consumer Price Index (CPI) rose 3.3% YoY in May after hitting 3.4% in April. The CPI remained stable on a monthly basis, easing from the previous 0.3%. The core readings, which exclude volatile food and energy prices, were also below forecast and eased from the April readings.

Easing price pressures in the world’s largest economy prompted optimism on financial boards. Stocks turned firmly north, pushing high-yielding currencies higher, while the US Dollar entered a sell-off spiral.

The rally stalled as speculative interest faces another challenge in a few hours. The Federal Reserve (Fed) will announce its decision on monetary policy in a few hours. The Fed is widely expected to keep rates on hold, with the focus on whether policymakers maintain the hawkish stance from the previous meeting or not.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart shows EUR/USD recovered above directionless 100 and 200 Simple Moving Averages (SMAs), while a bearish 20 SMA provides dynamic resistance at around 1.0840. At the same time, technical indicators picked up bullish strength but are currently struggling to overcome their midlines, which is not enough to anticipate another leg north.

According to the 4-hour chart, EUR/USD is bullish in the near term. Technical indicators aim north vertically, having surpassed their midlines. At the same time, the pair overcame the 20 and 200 SMAs but faces near-term resistance from a mildly bearish 100 SMA at around 1.0840. Overall, it seems investors will hold additional fire until after the Fed.

Support levels: 1.0790 1.0750 1.0710

Resistance levels: 1.0840 1.0885 1.0920

• The British pound initially rallied during the trading session on Tuesday to break above the crucial ¥200 level, but it has also given back some of those gains as it shows that we are going to have quite a bit of noise in this market.

That being said, I think this is a situation where market participants continue to push to the upside, and I look at dips as buying opportunities.

After all, the interest rate differential is wide enough to drive a truck through and I think ultimately this is a market that will try to break to a fresh new high, perhaps overcoming the ¥201 level.

In the meantime, we may get a short term pullback, but I think that is something that you should take advantage of. The latest swing high, shows that the market is trying to do everything it can to get beyond the Bank of Japan intervention. But the latest swing low down at the ¥197.50 level is an area that previously had been resistant, so it’s already proven to have people willing to jump into it.

Remember, you get paid at the end of every day to hang on to this position, and that’s something that does matter to institutional traders and therefore the so-called big money. I believe that the 50 day EMA near the 196.25 level will continue to be supportive as well. So, I see so many support levels underneath that. I think it’s probably only a matter of time before value hunters jump in.

Keep in mind that Friday is a Bank of Japan meeting, but really, there’s only so much they can do because quite frankly, Japan has far too much debt to finance it at higher levels. Because of this, I remain bullish for the longer-term, and I do believe that it is only a matter of time before we break through the recent high and continue to go even higher. I have no interest in selling this pair, and I believe that ultimately the British pound will continue to pummel the Japanese yen, although the “easy money” has already been made.

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• GBP/USD edges slightly higher after posting small gains on Monday and Tuesday.
• The technical outlook highlights sellers’ hesitancy in the near term.
• May inflation data from the US and the Fed policy announcements could drive the pair’s action later.

GBP/USD edged higher and closed the second consecutive day in positive territory on Tuesday. Despite the US Dollar’s resilience, the pair managed to hold its ground as the sharp decline seen in EUR/GBP showed that Pound Sterling captured capital outflows out of the Euro. 

GBP/USD continues to stretch higher and trades at around 1.2750 as market attention shifts to key macroeconomic events from the US.

Annual inflation in the US, as measured by the change in the Consumer price Index (CPI), is forecast to hold steady at 3.4% in May. On a monthly basis, the CPI is expected to increase 0.1%, while the core CPI, which excludes volatile food and energy prices, is seen rising 0.3%.

Investors are likely to react to the monthly core CPI print because it’s not distorted by the base effect. If this data comes in below the market expectation, the initial reaction could trigger a US Dollar (USD) selloff and help GBP/USD push higher, at least until the Federal Reserve (Fed) announces monetary policy decisions later in the American session.

The Fed is widely anticipated to hold the policy rate steady at 5.25%-5.5% following the June policy meeting. Alongside the policy statement, the Fed will also release the revised Summary of Economic Projections (SEP), the so-called dot plot. Investors could react to the interest rate projections in the SEP. If the publication shows that policymakers expect a single rate cut this year, the US Treasury bond yields could surge higher and provide a boost to the USD. On the flip side, if the dot plot points to two 25 basis points rate cuts this year, investors could price in a September rate cut and hurt the USD. According to the CME FedWatch Tool, markets still see a nearly 50% probability of a no change in policy rate in September.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rose above 50, reflecting the sellers’ hesitancy. On the upside, 1.2800 (mid-point of the ascending channel, psychological level, static level) aligns as next resistance before 1.2880 (static level from March).

The lower limit of the ascending channel forms first support at 1.2730 before 1.2700 (psychological level, static level) and 1.2650 (200-period Simple Moving Average on the 4-hour chart).