• The Swiss franc against the Japanese yen is a very interesting pair.
• It is a measure of extreme weakness with both currencies.
• They’re both what are known as funding currencies, meaning that carry traders who take advantage of swap at the end of the day.
• The differential than bond yields prefer to short these markets or sell these currencies in order to make profit in other currencies, such as the British pound, the Canadian dollar, and the U S dollar.

This is always an interesting chart for me to watch because it tells me which currency I want to start shorting against other ones. It’s not even necessarily an idea of trading this particular market. However, it’s not to say that you can’t.

• 

Remember the Swap

It’s not to say that you don’t get paid at the end of every day to hold Swiss francs over Japanese yens. At this point, the market pulling back at this juncture could see a significant amount of support at the 171.50 yen level, where the 50-day EMA is starting to race toward. I think at this juncture, we have more of a buy on the dip attitude if you’re going to play this CHF/JPY market.

But this chart also tells us that you want to be short the Japanese yen against most other currencies. You could of course short the Swiss franc as well, but really at this point, it looks like you’re going to get more bang for your buck shorting the Japanese yen from what this chart is telling us. If we can break above the 175.50 yen level, then it becomes more of a buy and hold market going forward. This has been the way for quite some time, and it’s worth noting that taking out that level would wipe out the intervention candle that the Bank of Japan formed in the markets.

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• The British pound has rallied significantly during the trading session on Wednesday as we continue to see the Japanese yen get hammered.
• The market continues to see a line of upward pressure, and the Japanese yen and its low interest rate will continue to be sold off over the longer term.

The massive sell off that we had seen during the previous session on Tuesday suggests that there was some fear coming into the market, but we have seen the market turn back around. At this point, the ¥200 level is obviously in focus, and I think the ¥200 level has a lot of psychology attached to it. Whether or not it is going to be the be all, end all of resistance remains to be seen.

• 

I don’t think that’s the case. And I also recognize that the Bank of Japan can only do so much. The interest rates have to stay low in that country because of the massive debt. They are in a debt spiral and have been for years. So, with that being said, I do think the dips continue to be bought into.

Upside Continues to Be the Right Side

And I do think eventually we break out to the upside. Breaking out to the upside opens up the possibility of a much longer move to the upside, perhaps to the ¥205 level and beyond. Because I think this is a structural trend we would need to see some type of complete turnaround by the British to change the attitude of this market. Or this is a much less likely a complete turnaround by the Japanese. Because of this, I remain bullish, and I also recognize that you can hang on to this trade and get paid at the end of the day.

Ultimately, GBP/JPY is a pair that I have no interest in trying to short, because I don’t want to pay for the privilege of trying to “swim upstream.” With this, I remain a buyer of dips and I continue to hold a core position in this pair.

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Deutsche Bank with a EUR/USD forecast:

• We maintain our view that the EUR/USD range will look similar to last year’s with a break below 1.05 more likely than a sustained move above 1.10

Deutsche Bank cite, on the USD:

• high yield for the US
• dollar benefits from an environment of subdued FX volatility
• risks towards far greater divergence favouring the Fed
• the dollar as a hedge to geopolitical deterioration is strong
• both sides of US politics emphasising tariffs rather than a weak dollar policy on approach to the election

And on the euro side:

• European growth improvement already anticipated by market consensus
• ECB earlier easing vs. to the Fed
• subdued global growth recovery
• German structural challenges, ongoing fiscal policy tightening

Subdued volatility is right.

There are no stats from Japan to consider on Thursday, as investors await household spending numbers for April (Fri).

US Economic Calendar: US Labor Market in the Spotlight

Later in the session on Thursday, US labor market data will warrant investor attention.

Economists forecast initial jobless claims to increase from 219k to 220k in the week ending June 1. According to preliminary numbers, unit labor costs and nonfarm productivity rose by 4.9% and 0.1% in Q1 2024.

An unexpected spike in jobless claims could raise investor bets on a September Fed rate cut. Weaker labor market conditions could affect wage growth and reduce disposable income. Downward trends in disposable income could impact consumer spending, dampening demand-driven inflation. The net effect could be a less hawkish Fed interest rate trajectory.

Unless there are marked revisions to the preliminary unit labor cost and nonfarm productivity figures, the jobless claims will likely impact the USD/JPY more.

On Wednesday (June 5), the US ISM Services PMI beat forecasts, surging from 49.4 to 53.8 in May. However, the ISM Services Employment Index rose from 45.9 to 47.1, signaling a continued contraction, albeit at a less marked rate. Additionally, the ADP reported a softer-than-expected increase in private payrolls. The reports suggested a weakening US labor market environment.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on household spending numbers from Japan and the US Jobs Report. A jump in household spending and weaker-than-expected US wage growth figures would likely impact buyer demand for the USD/JPY. Nevertheless, interest rate differentials firmly favor the US dollar.

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 break above the 156.500 level could give the bulls a run at the 158 level. Furthermore, a USD/JPY return to the 158 level would support a move toward the April 29 high of 160.209.

Investors should consider Bank of Japan commentary and US labor market data.

Conversely, a USD/JPY fall through the 155 handle would bring the 50-day EMA into play. A drop below the 50-day EMA could signal a fall toward the 151.685 support level.

The 14-day RSI at 50.67 suggests a USD/JPY return to 160 before entering overbought territory.

• GBP/USD reached a 12-week high in recent trading, extending gains to the 1.2817 resistance level before settling around 1.2775 at the time of writing.
• Clearly, the gains came amid renewed US dollar weakness, with analysts seeing potential for further advances if upcoming US jobs data disappoints.
• Overall, the dollar has been sold off on the back of weak domestic data, while the sharp decline in crude oil prices has also weighed on it.

According to analysts at UniCredit Bank, news that the ISM manufacturing survey fell below 49 in May has increased pressure on the US currency across the board, leading the US Dollar Index (DXY) to return to the 104 level. Consequently, the EUR/USD and GBP/USD pairs have accelerated their recovery back above 1.09. and 1.28 respectively.

According to the results of the economic calendar, US ISM manufacturing PMI fell to a reading of 48.7 in May from 49.2, missing expectations of 49.6. Moreover, the price paid in component of the report came in at 57, down from 60.9 and below estimates of 60. Overall, the US ISM manufacturing report was weak, echoing the message from last week’s weak US personal consumption expenditure report and the Chicago PMI, and painting a contrasting picture from the Markit manufacturing PMI for May.

On the US labor market front, US job openings fell by 296,000 from the previous month to 8.059 million in April 2024, the lowest since February 2021 and missing the market consensus of 8.34 million. During the month, job openings in health care and social assistance (-204,000) and government education (-59,000) fell, but increased in private education (+50,000). In terms of regional distribution, job openings fell sharply in the Midwest (-224,000), the Northeast (-97,000) and the West (-67,000), while they rose in the South (+93,000).

Looking ahead for GBP gains, Morgan Stanley expects total return differentials to support GBP. “While we expect the Bank of England to cut rates by 200 basis points by the end of 2025, it still retains the highest rates in Europe, which also provides it with some carry support. This allows EUR/GBP to retest the 2022 low of 0.82.”

According to Bank of America, “The June rate cut has been largely a done deal so far, but the wrangling over subsequent cuts has begun”. Remember our base case, three quarterly cuts this year, the next in September, then five more in 2025 at a 2% Depo rate.

In terms of UK data, Lloyd’s business confidence data posted a strong May advance to an 8-year high. Nationwide also reported a 0.4% increase in house prices for May, with an annual increase of 1.6%. However, there was a slight dip in mortgage approvals to 61,100 in April from a revised 61,300 the previous month. Overall, the data continued to support expectations of a gradual recovery in the UK economy, although the overall impact was limited. Eventually, the Bank of England’s outlook will remain key over the medium term, although the short-term outlook has been overshadowed by the general election campaign.

• 

Technical forecasts for the GBP/USD pair today:

The overall trend for the GBP/USD exchange rate may remain bullish until the markets react to the announcement of US employment figures, which will have a strong and direct impact on the future policy of the US Federal Reserve. Technical expectations for a move toward the psychological resistance level of 1.3000 will increase if the bulls push toward the resistance levels of 1.2830 and 1.2920, respectively. Obviously, this may happen if the US employment figures are disappointing. Conversely, over the same time period, the support levels of 1.2675 and 1.2600 will be the most significant for the bears, and current upward attempts will collapse if these levels are breached.

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• EUR/USD resumed the decline and approached 1.0850.
• The US Dollar extended its rebound on robust data.
• The US ADP report came in below expectations in May.

The US Dollar (USD) traded with decent gains on Wednesday, keeping the downside pressure on the risk-related sector well and sound and forcing EUR/USD to retreat further and revisit the area near 1.0850, or two-day lows.

In fact, the pair added to Tuesday’s retracement on the back of the Greenback’s fresh upward trend despite a continued decline in US yields across different maturity periods.

Despite we are transiting the Fed’s “blackout” period, it is worth recalling that recent hawkish remarks from Fed officials have sparked speculation that the Federal Reserve (Fed) may maintain its tight monetary policy stance longer than previously expected. However, disappointing US JOLTs Job Openings data in April published on Tuesday, and disheartening prints from the ADP Employment Change in May seem to have reignited speculation of a potential rate cut in November and December.

The CME Group’s FedWatch Tool indicates a nearly 80% chance of lower interest rates by the November 7 meeting.

Despite stronger inflation estimates in Germany and the whole of the eurozone in May, the European Central Bank (ECB) is expected to cut interest rates at its next meeting on June 6. However, doubts persist about further rate reductions after the summer.

Looking ahead, the Eurozone’s nascent economic recovery, coupled with a slowdown in the US economy, suggests a narrowing of the monetary policy gap between the Fed and the ECB, which should in turn limit the downside in EUR/USD.

Nevertheless, in the long term, given the increasing likelihood that the ECB will cut rates before the Fed, further EUR/USD depreciation should be anticipated in the coming months.

EUR/USD daily chart

EUR/USD short-term technical outlook

If bulls maintain control, EUR/USD may test the June high of 1.0916 (June 4), then the March top of 1.0981 (March 8) and the weekly peak of 1.0998 (January 11), all before reaching the important 1.1000 level.

If the bearish tone returns, the pair may initially retest the weekly low of 1.0788 (May 30), which is supported by the 200-day SMA. A drop below this area may push spot to the May low of 1.0649 (May 1), ahead of the 2024 bottom of 1.0601 (April 16).

So far, the 4-hour chart reveals some consolidative development in the near term. The next downward obstacle is the 55-SMA (1.0851), followed by 1.0788 and 1.0766. On the positive side, 1.0916 comes out ahead of 1.0942. The relative strength index (RSI) dropped to about 50.

• EUR/USD resumed the decline and approached 1.0850.
• The US Dollar extended its rebound on robust data.
• The US ADP report came in below expectations in May.

The US Dollar (USD) traded with decent gains on Wednesday, keeping the downside pressure on the risk-related sector well and sound and forcing EUR/USD to retreat further and revisit the area near 1.0850, or two-day lows.

In fact, the pair added to Tuesday’s retracement on the back of the Greenback’s fresh upward trend despite a continued decline in US yields across different maturity periods.

Despite we are transiting the Fed’s “blackout” period, it is worth recalling that recent hawkish remarks from Fed officials have sparked speculation that the Federal Reserve (Fed) may maintain its tight monetary policy stance longer than previously expected. However, disappointing US JOLTs Job Openings data in April published on Tuesday, and disheartening prints from the ADP Employment Change in May seem to have reignited speculation of a potential rate cut in November and December.

The CME Group’s FedWatch Tool indicates a nearly 80% chance of lower interest rates by the November 7 meeting.

Despite stronger inflation estimates in Germany and the whole of the eurozone in May, the European Central Bank (ECB) is expected to cut interest rates at its next meeting on June 6. However, doubts persist about further rate reductions after the summer.

Looking ahead, the Eurozone’s nascent economic recovery, coupled with a slowdown in the US economy, suggests a narrowing of the monetary policy gap between the Fed and the ECB, which should in turn limit the downside in EUR/USD.

Nevertheless, in the long term, given the increasing likelihood that the ECB will cut rates before the Fed, further EUR/USD depreciation should be anticipated in the coming months.

EUR/USD daily chart

EUR/USD short-term technical outlook

If bulls maintain control, EUR/USD may test the June high of 1.0916 (June 4), then the March top of 1.0981 (March 8) and the weekly peak of 1.0998 (January 11), all before reaching the important 1.1000 level.

If the bearish tone returns, the pair may initially retest the weekly low of 1.0788 (May 30), which is supported by the 200-day SMA. A drop below this area may push spot to the May low of 1.0649 (May 1), ahead of the 2024 bottom of 1.0601 (April 16).

So far, the 4-hour chart reveals some consolidative development in the near term. The next downward obstacle is the 55-SMA (1.0851), followed by 1.0788 and 1.0766. On the positive side, 1.0916 comes out ahead of 1.0942. The relative strength index (RSI) dropped to about 50.

GBP/JPY Forecast Video for 26.06.23

British Pound vs Japanese Yen Weekly Technical Analysis

The British pound fell initially against the Japanese yen during the week, to test the ¥180 level. At this point, the market then turned around to show signs of strength again, as the Bank of Japan continues its very loose monetary policy. Furthermore, we have the Bank of England surprising the market with a 50 basis point rate hike during the week, and therefore it makes quite a bit of sense that we would see more upward pressure. Quite frankly, we are reaching an overbought condition, but at this point it looks like as long as the Bank of Japan continues to see reasons to keep monetary policy loose, things are going to continue to be in a one direction type of situation.

If we turned around and break down below the ¥180 level, then we could get a deeper correction, but right now there seems to be a lot of momentum in this market, and therefore it’s going to be very difficult to imagine that happening in the short term. Quite frankly, you should be looking at pullbacks as an opportunity to take advantage of value, as interest-rate differential will continue to get you paid at the end of every session. I have no scenario in which I’m willing to sell this market, because quite frankly it just continues to get more fundamental reasons to continue going higher. Ultimately, this is a situation where you need to be cautious, but you should also pay close attention to the idea of looking at any pullback as an opportunity to “buying cheap British pounds and get paid.”

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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The pound-to-euro forecast is an indication of where technical and fundamental analysts think the GBPEUR 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 Euros, or if you should wait until the price improves.

GBPEUR Forecast Highlights

• ECB is eyeing to cut policy rate ahead of the Bank of England
• GBPEUR rebounds to the top of trading range on modest GBP strength
• Range trading is expected for now; an upside breakout at 1.18 is not to be ruled out

How has the Pound performed against the Euro recently?

Until recently, GBPEUR traded in a tight range. Watching the rate is like watching paint dry.

Fortunately, UK politics shook things up and injected a dose of excitement in the market. The Prime Minister, after some deliberation, pencilled in a date in July for a General Election. Sterling firmed up in anticipation of this momentous event.

Against the Euro, the rate bounced up and down the 1.16-1.17 range before settling above 1.170. In fact, the exchange rate edged up (intraday) to its highest level since late 2022 (see below). This is interesting. Is the market expecting some disequilibrium factors between the UK and EU?

The European Central Bank (ECB) is meeting this week (6 June) to decide on the broad monetary policy. According to market expectations, the Eurozone governing council is set to cut interest rate for the first time in years. Riksbank, the central bank of Sweden, already slashed interest rate in May. So ECB’s cut is following the lead of fellow European banks. The ECB policy rate, currently at 4.5 percent, is expected to fall by about 25 basis points.

Two critical reasons are pushing the central bank to drop rates. One is falling inflation rates. The other is sluggish growth. The Eurozone suffered from a technical recession in the seance half of 2023.

The question is how far the ECB will drop the borrowing cost? For now, market participants are expecting no more than the 3 times in 2024. After all, we are already at half-way mark in 2024 and inflation rates are not really plunging into zones that inflation hawks feel comfortable.

Moreover, asset prices are generally holding up. The German DAX Index, for example, is trading near its all-time highs. As is the CAC 40. This signals to policymakers that the Eurozone economic conditions are not as bad as feared. At this point, there is no need for aggressive action in either direction.

As ECB is turning dovish first, GBPEUR may edge above the 1.175 range high.

Source: Morningstar.co.uk

Is it a good time to buy Euros with Pounds?

Based on the above analysis, it is a good time to buy Euros now?

Summer is starting and if you’re in need of some Euros for holidays in the continent, now may not be a bad time to secure these Euros with a currency forward. The fx rate GBPEUR is pretty stable and trades near the upper side of the range.

Of course, you may wish to wait further – betting on further GBP strength. This only works if you can afford to delay buying the Euros. The risk is that Sterling may weaken due to underperforming GBP day-to-day macro dataflow or concerning political trend. Buying on the spot when you need the Euros always carries some risks.

Will the pound get stronger against the Euro in 2024?

Earlier this year, Sterling got off to a good start and outperformed 90 percent of all other currencies in the first quarter.

This heady sentiment subsided somewhat in spring. Only in recent days did GBPEUR staged a modest rebound. But will this new-found Sterling strength persist for the rest of the year?

Two factors need to keep in mind. The first is politics. While Labour is set to win the general election, its economic policy is yet to be determined fully. Shocks and surprises may still hit (or boost) the currency later this year.

The second factor is the GBP-EUR interest rate differential. If a rate cut did materialise in Europe in the coming days, the ECB is widening the rate differential between the UK and the Euro. This may boost the GBP temporarily – until the Bank of England also start to cut interest rates. Remember, economic synchronicity between UK and Europe is high.

In sum, GBP may continue to exhibit strength against the Euro, but this strength could be fleeting. Unless, of course, Britain generates a string of GBP positive newsflow, like a sudden improvement in consumer spending, exports, et cetera. At this point, do not expect a massive disequilibrium trade in the GBPEUR.

 

Source: Yardeni.com (June 2024)

What is the GBPEUR forecast in weeks, months, years?

GBPEUR is slowly trading in the upper side side of horizontal range (1.15-1.17). Despite Sterling’s recent strength, the market is still feeling slightly downbeat on the GBP.

If we look at the aggregate forecasts for the rate, GPBEUR, the consensus is that we may see a modest decline of the exchange rate int 1.15 later this year. The projection chart below is taken from Exchangerateforecast.org.uk.

This shows that most analysts are not convinced that Sterling will continue to show strength from here. There is too much economic synchronicity between the two trading partners. Even monetary policies are quite similar these days.

But these exchange rate predictions should be viewed with some scepticism given how dynamic the macro situations are right now. If, for instance, the economic performance deteriorates more than expected in Europe, that may alter the expected path of the policy rate and the GBPEUR rates.

Chartwise, GBPEUR is ranging at the band 1.150-1.180.

Source: Exchangerates.org.uk (June 2024)

• GBP/USD moves sideways below 1.2800 in the European session on Wednesday.
• US ISM Services PMI data could impact the US Dollar’s valuation.
• 1.2800 aligns as strong near-term resistance for the pair.

GBP/USD lost 0.3% on Tuesday and snapped a three-day winning streak. The pair moves sideways in a narrow range below 1.2800 in the European session as market focus shifts to key data releases from the US.

Although the US Dollar (USD) struggled to gather strength after the disappointing job openings data on Tuesday, the cautious market mood made it difficult for GBP/USD to gather bullish momentum. The US Bureau of Labor Statistics reported that the number of Job Openings on the last business day of April stood at 8.059 million. This reading came in below the market expectation of 8.34 million.

Early Wednesday, the marginal improvement seen in market mood helps GBP/USD holds its ground. At the time of press, US stock index futures were up between 0.15% and 0.35%.

Later in the session, the ADP Employment Change and the ISM Services PMI data from the US will be looked upon for fresh impetus. Unless there is a significant divergence in the ADP Employment Change data from the market consensus of 173,000, investors are likely to ignore it ahead of Friday’s May jobs report.

The ISM Services PMI is forecast to edge higher to 50.5 from 49.4. A better-than-expected PMI print could support the USD and weigh on GBP/USD. On the other hand, the USD could start weakening against its rivals if the PMI data comes in weaker than April’s 49.4 to show an ongoing contraction in the sector’s activity at an accelerating pace.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart moves sideways slightly above 50, reflecting a lack of bullish momentum. 1.2750, where the 20-period and the 50-period Simple Moving Averages (SMA) are located, aligns as immediate support for GBP/USD ahead of 1.2710-1.2700 (, 100-period SMA, lower limit of the ascending channel) and 1.2680 (20-day SMA).

On the upside, resistances could be seen at 1.2800 (mid-point of the ascending channel), 1.2850 (static level) and 1.2890 (upper limit of the ascending channel).

 

• GBP/USD moves sideways below 1.2800 in the European session on Wednesday.
• US ISM Services PMI data could impact the US Dollar’s valuation.
• 1.2800 aligns as strong near-term resistance for the pair.

GBP/USD lost 0.3% on Tuesday and snapped a three-day winning streak. The pair moves sideways in a narrow range below 1.2800 in the European session as market focus shifts to key data releases from the US.

Although the US Dollar (USD) struggled to gather strength after the disappointing job openings data on Tuesday, the cautious market mood made it difficult for GBP/USD to gather bullish momentum. The US Bureau of Labor Statistics reported that the number of Job Openings on the last business day of April stood at 8.059 million. This reading came in below the market expectation of 8.34 million.

Early Wednesday, the marginal improvement seen in market mood helps GBP/USD holds its ground. At the time of press, US stock index futures were up between 0.15% and 0.35%.

Later in the session, the ADP Employment Change and the ISM Services PMI data from the US will be looked upon for fresh impetus. Unless there is a significant divergence in the ADP Employment Change data from the market consensus of 173,000, investors are likely to ignore it ahead of Friday’s May jobs report.

The ISM Services PMI is forecast to edge higher to 50.5 from 49.4. A better-than-expected PMI print could support the USD and weigh on GBP/USD. On the other hand, the USD could start weakening against its rivals if the PMI data comes in weaker than April’s 49.4 to show an ongoing contraction in the sector’s activity at an accelerating pace.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart moves sideways slightly above 50, reflecting a lack of bullish momentum. 1.2750, where the 20-period and the 50-period Simple Moving Averages (SMA) are located, aligns as immediate support for GBP/USD ahead of 1.2710-1.2700 (, 100-period SMA, lower limit of the ascending channel) and 1.2680 (20-day SMA).

On the upside, resistances could be seen at 1.2800 (mid-point of the ascending channel), 1.2850 (static level) and 1.2890 (upper limit of the ascending channel).