At the time of writing GBP/EUR was trading at around €1.1742. Virtually unchanged from last week’s opening levels, but down from a high of €1.1766.

The Euro (EUR) got off to a poor start last week, following the publication of the Eurozone’s latest manufacturing PMI.

While May’s index reported the factory sector saw its best month since March 2023, it still undermined the single currency as it confirmed the manufacturing sector remained in contraction.

Adding to the pressure on the Euro in the first half of the week was the release of Germany’s latest jobs report.

While Germany’s unemployment rate held steady in April, the total number of people out of work rose to its highest level since March 2021 – raising fresh concerns over the recovery in the Eurozone’s largest economy.

EUR exchange rates remained on the back foot in the middle of the week as growth in the Eurozone’s services sector was revised lower in May’s finalised services PMI.

However, the single currency was then able to mount a recovery in the second half of the week, as the European Central Bank (ECB) delivered its latest interest rate decision.

Following the conclusion of its first policy meeting of the summer, the ECB announced a widely expected 25bps rate cut.

However, as the rate cut had been widely priced in by markets the resulting movement in the Euro was driven primarily by the bank’s forward guidance.

This saw EUR exchange rates firm as the bank raised its inflation forecasts for 2024 and 2025 and was coy regarding the possibility of further rate cuts. A move which seemly reduced the odds of a follow up cut in July.

Mark Wall, chief European economist at Deutsche Bank, commented: ‘As expected, the ECB cut rates 25bp. But the statement arguably gave less guidance than might have been expected on what comes next.
‘In that sense, the immediate tone is a “hawkish cut”. This is not a central bank in a rush to ease policy.’

Pound (GBP) Buoyed by Positive Risk Flows

The Pound (GBP) initially firmed this week, with the currency being supported by confirmation that growth in the UK’s manufacturing sector struck a two-year high last month.

An optimistic market mood then helped the increasingly risk-sensitive Sterling to maintain a positive trajectory through the first half of the week.

GBP exchange rates then began to falter in the second half of the session following a survey from the Bank of England (BoE), which pointed to a likely fall in inflation over the coming year as UK businesses expected to deliver lower wage increases over the next 12 months.

GBP/EUR Exchange Rate Forecast: Signs of a Slowing UK Labour Market to Weigh on Sterling?

Looking ahead, the UK’s latest jobs report is likely to act as a key catalyst of movement for the Pound Euro exchange rate this week.

This could lead to a pullback in Sterling if further signs of a cooling labour market and slowing wage growth stoke BoE rate cut bets. On the other hand, the Pound may firm if April’s figures outpace expectations.

Also potentially influencing GBP exchange rates will be UK election jitters, on the assumption that the main political parties will soon release their manifestos.

For EUR investors the only Eurozone data of note next week will be the bloc’s latest industrial production figures. Will a forecast rise in Eurozone factory output help to lift the single currency?

On Friday (June 7), the US Jobs Report came in hotter than expected, sending the USD/JPY back toward 157. The US CPI Report could force the BoJ to hold more meaningful discussions on ways to bolster the Japanese Yen.

US Economic Calendar: US CPI Report and the FOMC Projections Loom

Investors should consider the looming US CPI Report. After better-than-expected labor market data on Friday, sticky inflation figures could give the FOMC hawks a stronger case to keep interest rates steady in 2024.

Average hourly earnings increased 4.1% year-on-year in May after rising 3.9% in April. Higher wages could increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation.

A higher-for-longer Fed rate path could raise borrowing costs and reduce disposable income.

Economists expect the Fed to leave interest rates at 5.50% on Wednesday. However, hopes of a September Fed rate hike remain despite the US Jobs Report.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the US CPI Report, the Fed, and the Bank of Japan. More hawkish FOMC economic projections could tilt monetary policy divergence toward the US dollar. However, a USD/JPY move toward 160 could incentivize the BoJ to start rate hike discussions.

USD/JPY Price Action

Daily Chart

The USD/JPY held above the 50-day and 200-day EMAs, sending bullish price trends.

A USD/JPY return to 157 could give the bulls a run at the 158 level. If the USD/JPY returns to the 158 handle, the April 29 high of 160.209 would come into play.

Bank of Japan commentary needs consideration after the Q1 2024 GDP Report.

Conversely, a USD/JPY fall through the 50-day EMA could signal a drop toward the 151.685 support level.

The 14-day RSI at 55.31 suggests a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.

GBP/JPY Forecast Video for 26.05.23

British Pound vs Japanese Yen Technical Analysis

The British pound has fallen initially against the Japanese yen during the trading session on Thursday, and it looks as if we are going to continue to see pressure to the upside and it looks like if we can break above the area here at the ¥172.50 level, it’s likely that we go looking for the ¥175 level after that. The ¥175 level of course is a large, round, psychologically significant figure, and therefore one would assume that there is going to be a certain amount of reaction to that region.

On the downside, I believe that the ¥170 level offers a lot of support, as it is a large, round, psychologically significant figure and an area that we see some action at in the past. For the short term trading situation, I believe that the ¥170 level underneath is a significant short-term “floor in the market.” The market will continue to see more of this “buy on the dip” mentality, therefore I think we’ve got a situation where you can only be long of this market, and shorting it is all but impossible.

Keep in mind that the interest rate differential between the 2 currencies is rather drastic, and that of course will drive a lot of money toward the British pound for the “carry trade” that is now back in vogue. It’s worth noting that we broke through the top of the most recent significant pullback, so now we are just simply building up the pressure to go to the outside.

Expect a lot of volatility, but that’s nothing new for this pair. The pair does tend to be very noisy and therefore you have to be cautious with your position sizing and recognize that you may have to ride out a significant amount of volatility. Nonetheless, I do think that we get to the ¥175 level sooner rather than later, therefore I look at this market as a lot like a beach ball being held under water, in the sense that once it breaks above the resistance, it will pop straight up in the air.

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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June 9, 2024 – Written by Frank Davies

STORY LINK EUR/USD Forecast, News: US Data Derails the Euro Exchange Rates

MUFG forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.12 by March 2025.

Barclays, however, is still expecting a retreat to the 1.05-1.06 area this year.

EUR/USD was resilient after the ECB rate cut, but posted sharp losses after stronger than expected US employment data with a slide to near 1.08 from 1.09.

US non-farm payrolls increased 272,000 for May, much higher than consensus forecasts of around 180,000 with a small downward revision for April to 165,000 from 175,000.

The household survey was weaker as the unemployment rate increased to a 2-year high of 4.0% compared with expectations of no change at 3.9%.

The survey also reported a decline in employment of over 400,000 for the month.

Average earnings increased 0.4% compared with forecasts of 0.3% with a year-on-year increase of 4.1%, above expectations of 3.9%.

The wages and payrolls data sparked renewed inflation fears and fresh doubts over Federal Reserve rate cuts. According to markets, the chances of September cut dipped to near 50%.

Jane Foley, head of FX strategy at Rabobank sees limited scope for dollar losses; “We think U.S. inflation could be picking up again by the middle of the year and the Fed easing cycle could be really very short, almost irrespective of when it does commence.”

She added; “That means even though the dollar will give back some ground, when the Fed starts to cut, the dollar is likely to remain relatively firm. It’s not going to give back an awful lot of this year’s gains and it’s going to remain overvalued.”

MUFG is still sceptical over the US currency; “In recent months we have highlighted the scope for a period of decline in EUR/USD but we are now becoming more confident that window may have closed and see increasing upside risks for EUR/USD. Macro conditions are more favourable, the euro-zone external position has improved and we do not see scope for divergence and continue to see a similar trajectory for monetary policy for the ECB & the Fed.”

According to BNP, the dollar will maintain pole position; “For the USD to weaken, we believe we would need to see a significant deterioration in the US labour market, eurozone data surprising to the upside or Joe Biden gaining a substantial lead in the polls ahead of the US election.”

BNP commented; “while PMIs indicate that momentum in the eurozone is positive, the absolute growth differential against the US remains wide.”

CIBC added; “Although we are revising down our USD forecast slightly for some pairs on domestic stories, we continue to see USD dips as buying opportunities into the next quarter.”

The bank does expect that the dynamic will shift eventually; “over the medium term, this dynamic should flip, as highly rate sensitive economies process higher rates more quickly and rate cuts are realized. At this point, US data may begin to underperform relative to the other G10s, and the USD should come off as a result. We’re expecting this dynamic to be a story for 2025.”

Barclays looks at the global dimension; “the news and data flow from China is not living up to bulled-up expectations, as evidenced in May’s official PMIs across Manufacturing and Construction. Along with lingering geopolitical and US election risks, this points to further underperformance for EURUSD.”

The ECB cut all interest rates by 25 basis points at the latest meeting with the refi rate lowered to 4.25% from 4.50%.

The ECB was still relatively cautious over the inflation outlook with the 2025 forecast above the 2.0% target and suggested that there would not be another near-term cut, although it did not provide clear guidance on the outlook.

According to MUFG; “We see nothing in today’s announcement to alter our view of an easing cycle aligned with cuts taking place at each forecast meeting and hence expect the next cut to come at the meeting on 12th September.”

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• The NFP report showed bigger-than-expected job growth in May.

• Traders scaled back rate cut expectations, leading to a rally in the dollar.

• Economists expect the headline CPI to hold steady at 3.4%.

The USD/JPY weekly forecast shows renewed bullish momentum as the US labor market’s resilience clouds the outlook for Fed rate cuts.

Ups and downs of USD/JPY

USD/JPY closed well above its lows as the dollar rallied after better-than-expected economic data. This week, the yen was mainly at the mercy of the dollar, as Japan had no high-impact events. Meanwhile, the US released several reports at the start of the week that gave the impression that the economy was deteriorating amid high borrowing costs. Consequently, investors raised the chances of a Fed rate cut in September to 69%. 

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However, this reversed on Friday when the NFP report showed bigger-than-expected job growth. The US added 272,000 jobs in May, well above expectations of 182,000. As a result, traders scaled back rate cut expectations, leading to a rally in the dollar.

Next week’s key events for USD/JPY

Next week will be packed with high-impact economic events from the US and Japan, which will likely cause a lot of volatility. The US will release consumer and wholesale inflation data, shaping the Fed’s rate-cut outlook. Economists expect the headline CPI to hold steady at 3.4%. A higher number would indicate persistent inflation and lower the chances of a rate cut in September. On the other hand, a lower number would strengthen the case for a rate cut.

Moreover, investors will focus on the FOMC policy meeting for clues on whether policymakers are gaining confidence in the fight against inflation. The messaging during and after the meeting will carry much weight, especially after the CPI report.

Meanwhile, the Bank of Japan will also hold its policy meeting, which will likely keep rates unchanged. 

USD/JPY weekly technical forecast: Price rebounds after solid support trendline

 

On the technical side, the USD/JPY price is bouncing higher after retesting a solid support trendline. Moreover, it is on the verge of breaking back above the 22-SMA to confirm a bullish sentiment shift. Meanwhile, the RSI trades slightly above 50, supporting bullish momentum. 

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Therefore, in the coming week, bulls will likely challenge the 158.01 key resistance level. A break above this level would confirm a continuation of the bullish trend, allowing the price to go beyond the 160.00 level to 162.51.

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US Dollar vs Japanese Yen Weekly Technical Analysis

The US dollar initially fell significantly during the course of the trading week to reach the 155 yen level before bouncing quite drastically. It’s probably worth noting that Friday had a jobs number that was much stronger than anticipated. And therefore, people will continue to look at it through the prism of interest rate differential and the fact that the Federal Reserve is very unlikely to loosen monetary policy anytime soon. I think at this point, any short-term pullback is a nice buying opportunity.

And if we break down below the bottom of the candlestick, then the 152 yen level is an area that previously had been resistance. So market memory should come back into the picture. In general, I think this is a market that every time it falls, you look for value, the interest rate differential gets you paid at the end of every day and institutional traders will continue to pay close attention to it.

I would not be interested in shorting this pair anytime soon and the market would have to break down below at least 150 yen for me to get involved to the downside and even then, you have to be somewhat cautious due to the fact that you have to pay the swap at the end of the day. So with this I remain bullish. I think eventually we break above the 158 yen level and then go towards the 160 yen level where there’s a huge battleground just waiting to happen.

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

This article was originally posted on FX Empire

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• GBP/USD continues to move sideways near 1.2800 early Friday. 
• May jobs report from the US could drive the pair’s action heading into the weekend.
• Pound Sterling needs to flip 1.2800 into support to attract buyers.

GBP/USD failed to make a decisive move in either direction and closed the day virtually unchanged on Thursday. The pair continues to fluctuate in a narrow channel slightly below 1.2800 early Friday as investors stay on the sidelines while waiting for the May jobs report from the US.

The US Dollar (USD) struggled to find demand on Thursday but the cautious market stance helped it limit its losses, not allowing GBP/USD to gather bullish momentum. Early Friday, US stock index futures trade little changed, reflecting a neutral risk mood.

The US Bureau of Labor Statistics will publish labor market data for May later in the day. Nonfarm Payrolls (NFP) are forecast to rise 185,000 following April’s disappointing 175,000 increase. Following this week’s mixed macroeconomic data releases from the US, the probability of the Federal Reserve leaving its policy rate unchanged in September declined to 32% from 45%.

A weak NFP print of 150,000, or lower, could point to loosening conditions in the labor market and weigh on the USD, helping GBP/USD gain traction in the American session. On the flip side, an upbeat NFP reading of above-200,000 could provide a boost to the USD and force the pair to stretch lower.

GBP/USD Technical Analysis

The mid-point of the ascending regression channel aligns as key resistance at around 1.2800. In case the pair rises above that level and starts using it as support, technical buyers could show interest. In this scenario, 1.2850 (static level) could act as interim resistance before 1.2900 (upper limit of the ascending channel).

On the downside, the 50-period Simple Moving Average (SMA) on the 4-hour chart could be seen as first support before 1.2730 (lower limit of the ascending channel, 100-period SMA) and 1.2700 (static level, psychological level). 

 

• GBP/USD continues to move sideways near 1.2800 early Friday. 
• May jobs report from the US could drive the pair’s action heading into the weekend.
• Pound Sterling needs to flip 1.2800 into support to attract buyers.

GBP/USD failed to make a decisive move in either direction and closed the day virtually unchanged on Thursday. The pair continues to fluctuate in a narrow channel slightly below 1.2800 early Friday as investors stay on the sidelines while waiting for the May jobs report from the US.

The US Dollar (USD) struggled to find demand on Thursday but the cautious market stance helped it limit its losses, not allowing GBP/USD to gather bullish momentum. Early Friday, US stock index futures trade little changed, reflecting a neutral risk mood.

The US Bureau of Labor Statistics will publish labor market data for May later in the day. Nonfarm Payrolls (NFP) are forecast to rise 185,000 following April’s disappointing 175,000 increase. Following this week’s mixed macroeconomic data releases from the US, the probability of the Federal Reserve leaving its policy rate unchanged in September declined to 32% from 45%.

A weak NFP print of 150,000, or lower, could point to loosening conditions in the labor market and weigh on the USD, helping GBP/USD gain traction in the American session. On the flip side, an upbeat NFP reading of above-200,000 could provide a boost to the USD and force the pair to stretch lower.

GBP/USD Technical Analysis

The mid-point of the ascending regression channel aligns as key resistance at around 1.2800. In case the pair rises above that level and starts using it as support, technical buyers could show interest. In this scenario, 1.2850 (static level) could act as interim resistance before 1.2900 (upper limit of the ascending channel).

On the downside, the 50-period Simple Moving Average (SMA) on the 4-hour chart could be seen as first support before 1.2730 (lower limit of the ascending channel, 100-period SMA) and 1.2700 (static level, psychological level). 

 

• The US dollar initially fell a bit during the trading session on Thursday but has turned around to show signs of strength yet again.
• Ultimately, this is a market that I think continues to look at the ¥155 level as a major support level, especially now that we have the 50-Day EMA in that general vicinity.
• We ended up forming something akin to a hammer, but at this point it looks like if we can break above the ¥156.50 level, the market is likely to go chasing the 158 you level above.

Bank of Japan and Non-Farm Payrolls

The Bank of Japan defended the ¥158 level quite aggressively, and that’s an area that I think will be a bit difficult to get above. However, if and when we can get above there, the USD/JPY analysis is likely to go looking to the ¥160 level. This is an area that I think being broken could bring in a flood of buying orders, therefore kicking off a bit of “FOMO.” Keep in mind that the Bank of Japan simply cannot do anything too aggressive, because the debt that Japan owes would absolutely crushed the treasury.

• 

The Friday session of course features the Non-Farm Payroll announcement, which of course is going to cause a lot of volatility as per usual. Keep in mind that a lot of traders around the world are trying to pay close attention to the idea of whether or not the Federal Reserve will be cutting rates, and that of course will have a major influence on how they view the US dollar overall.

The interest rate differential continues to favor the US dollar against the Japanaese Yen pair, so I do think that this is a market that will continue to be very noisy, but ultimately, I do think that you will continue to see a lot of people sit on the interest rate differential in order to build up their account. I have no interest in shorting the market, but if we did break down below the ¥150 level, then I would have to rethink a lot of things in this market.

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• EUR/USD holds steady at around 1.0900 in the European morning.
• The ECB raised key rates by 25 basis points as expected.
• Nonfarm Payrolls in the US are forecast to rise 185K in May.

EUR/USD registered small gains on Thursday and stabilized at around 1.0900 in the early European session on Friday. May labor market data from the US could ramp up the market volatility heading into the weekend.

The European Central Bank (ECB) announced on Thursday that it raised its key rates by 25 basis points following the June policy meeting, as expected. In the post-meeting press conference, ECB President Christine Lagarde refrained from confirming additional rate cuts and reiterated the data-dependent approach moving forward. 

Early Friday, several ECB policymakers adopted a cautious tone on further easing but voiced their optimism about the inflation outlook, making it difficult for the Euro to find direction.

ECB policymakers Kazaks and Muller warrant caution on further rate cuts.

ECB’s Nagel: ECB isn’t on autopilot on interest-rate cuts.

ECB’s de Guindos: Inflation is to be around 2% next year.

In the second half of the day, the US Bureau of Labor Statistics will release the jobs report for May. Nonfarm Payrolls (NFP) are expected to rise 185,000 following the weaker-than-forecast 175,000 increase recorded in April. Ahead of next week’s Federal Reserve policy meeting, the market reaction to labor market data could be straightforward but remain short-lived. 

In case NFP surprises to the upside with an increase of more than 200,000, the US Dollar (USD) could hold its ground ahead of the weekend and make it difficult for EUR/USD to stretch higher. On the other hand, a disappointing print, at or below 150,000, could trigger a fresh leg of USD selloff and provide a boost to the pair. If the data arrives near analysts’ estimates, revisions to previous reading and the wage inflation figures could drive the USD’s valuation. On a yearly basis, Average Hourly Earnings are forecast to rise 3.9%.

EUR/USD Technical Analysis

EUR/USD faces immediate resistance at 1.0900, where the mid-point of the ascending regression channel is located. If the pair rises above this level and starts using it as support, it could target 1.0950 (static level) and 1.0980 (upper limit of the ascending channel) next.

On the downside, 1.0860-1.0850 (50-period Simple Moving Average (SMA) on the 4-hour chart, 100-period SMA, lower limit of the ascending channel) aligns as key support before 1.0800 (200-period SMA, static level).

 

• EUR/USD holds steady at around 1.0900 in the European morning.
• The ECB raised key rates by 25 basis points as expected.
• Nonfarm Payrolls in the US are forecast to rise 185K in May.

EUR/USD registered small gains on Thursday and stabilized at around 1.0900 in the early European session on Friday. May labor market data from the US could ramp up the market volatility heading into the weekend.

The European Central Bank (ECB) announced on Thursday that it raised its key rates by 25 basis points following the June policy meeting, as expected. In the post-meeting press conference, ECB President Christine Lagarde refrained from confirming additional rate cuts and reiterated the data-dependent approach moving forward. 

Early Friday, several ECB policymakers adopted a cautious tone on further easing but voiced their optimism about the inflation outlook, making it difficult for the Euro to find direction.

ECB policymakers Kazaks and Muller warrant caution on further rate cuts.

ECB’s Nagel: ECB isn’t on autopilot on interest-rate cuts.

ECB’s de Guindos: Inflation is to be around 2% next year.

In the second half of the day, the US Bureau of Labor Statistics will release the jobs report for May. Nonfarm Payrolls (NFP) are expected to rise 185,000 following the weaker-than-forecast 175,000 increase recorded in April. Ahead of next week’s Federal Reserve policy meeting, the market reaction to labor market data could be straightforward but remain short-lived. 

In case NFP surprises to the upside with an increase of more than 200,000, the US Dollar (USD) could hold its ground ahead of the weekend and make it difficult for EUR/USD to stretch higher. On the other hand, a disappointing print, at or below 150,000, could trigger a fresh leg of USD selloff and provide a boost to the pair. If the data arrives near analysts’ estimates, revisions to previous reading and the wage inflation figures could drive the USD’s valuation. On a yearly basis, Average Hourly Earnings are forecast to rise 3.9%.

EUR/USD Technical Analysis

EUR/USD faces immediate resistance at 1.0900, where the mid-point of the ascending regression channel is located. If the pair rises above this level and starts using it as support, it could target 1.0950 (static level) and 1.0980 (upper limit of the ascending channel) next.

On the downside, 1.0860-1.0850 (50-period Simple Moving Average (SMA) on the 4-hour chart, 100-period SMA, lower limit of the ascending channel) aligns as key support before 1.0800 (200-period SMA, static level).

 

• The euro has rallied a bit against the British pound as we continue to see the 0.85 level offer support.
• This is an area that goes back quite some time as far as market memory is concerned, and therefore I have been buying this pair in little bits and pieces.
• This is a pair that is very choppy, so you don’t want to go “all in” right away regardless. The only thing you can think about is taking quick profits.

Whether or not this support holds remains to be seen, but we have gotten through the ECB and its rate cut and have held firm. That’s a generally good sign. So, it’ll be interesting to see how this plays out. Above us we have the 50 day EMA, which is close to the 0.85.50 level. And if we can break above there, then the market could go looking to the 0.86 level.

• 

The Latest Swing Low Is Crucial

If we were to break down below the latest swing low somewhere near 0.8480, then I think the pair finds itself in significant trouble, probably aiming for the 0.84 level before it is all said and done. I do expect a lot of noise and volatility, so really choppy behavior is what I am looking at as a very real possibility.

Ultimately, this is a market that you will have to be somewhat cautious with, but I think it definitely favors the upside in the short term. Whether or not we can get a sustained move to the upside remains to be seen. But right now, it certainly looks like buyers are willing to step in and defend this crucial 0.85 level.

As long as that’s the case, then it does make sense to have short-term long positions in this market, as it has been fairly reliable around the 0.85 level. Whether or not that changes anytime soon remains to be seen but we will have to wait and see.

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