• EUR/USD fluctuates in a tight range below 1.0900 on Wednesday.
• ISM Services PMI and ADP Employment Change from the US will be watched closely by investors.
• Near-term technical outlook points to a lack of bullish momentum.

After reaching its highest level since late March above 1.0900 on Tuesday, EUR/USD lost its traction and closed the day in negative territory. The pair’s near-term technical picture points to a lack of bullish momentum as market focus shifts to macroeconomic data releases from the US.

The US Bureau of Labor Statistics reported on Tuesday 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 and made it difficult for the US Dollar (USD) to gather strength. The cautious market stance, however, didn’t allow EUR/USD to gain traction.

Early Wednesday, US stock index futures trade modestly higher on the day and helps EUR/USD hold its ground.

Later in the day, ADP Employment Change and ISM Services PMI data for May will be featured in the US economic docket. Investors expect the employment in the private sector to rise 173,000 in May and see the ISM Services PMI recovering back above 50 from 49.4 in April.

Earlier in the week, the disappointing ISM Manufacturing PMI triggered a USD selloff. In case the ISM Services PMI disappoints and shows an ongoing contraction in the service sector’s activity, the USD could come under a renewed selling pressure and open the door for a rebound in EUR/USD. On the other hand, an upbeat ISM Services PMI could support the USD and limit the pair’s upside.

EUR/USD Technical Analysis

EUR/USD remains within the ascending regression channel but the Relative Strength Index (RSI) indicator stays near 50, suggesting that the pair is having a difficult time gathering bullish momentum.

On the downside, 1.0850-1.0840 (100-period Simple Moving Average (SMA), lower limit of the ascending channel) aligns as first support before 1.0800 (psychological level, static level) and 1.0780 (200-period SMA).

Resistances could be seen at 1.0900 (mid-point of the ascending channel, static level) ahead of 1.0950 (upper limit of the ascending channel).

 

• EUR/USD fluctuates in a tight range below 1.0900 on Wednesday.
• ISM Services PMI and ADP Employment Change from the US will be watched closely by investors.
• Near-term technical outlook points to a lack of bullish momentum.

After reaching its highest level since late March above 1.0900 on Tuesday, EUR/USD lost its traction and closed the day in negative territory. The pair’s near-term technical picture points to a lack of bullish momentum as market focus shifts to macroeconomic data releases from the US.

The US Bureau of Labor Statistics reported on Tuesday 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 and made it difficult for the US Dollar (USD) to gather strength. The cautious market stance, however, didn’t allow EUR/USD to gain traction.

Early Wednesday, US stock index futures trade modestly higher on the day and helps EUR/USD hold its ground.

Later in the day, ADP Employment Change and ISM Services PMI data for May will be featured in the US economic docket. Investors expect the employment in the private sector to rise 173,000 in May and see the ISM Services PMI recovering back above 50 from 49.4 in April.

Earlier in the week, the disappointing ISM Manufacturing PMI triggered a USD selloff. In case the ISM Services PMI disappoints and shows an ongoing contraction in the service sector’s activity, the USD could come under a renewed selling pressure and open the door for a rebound in EUR/USD. On the other hand, an upbeat ISM Services PMI could support the USD and limit the pair’s upside.

EUR/USD Technical Analysis

EUR/USD remains within the ascending regression channel but the Relative Strength Index (RSI) indicator stays near 50, suggesting that the pair is having a difficult time gathering bullish momentum.

On the downside, 1.0850-1.0840 (100-period Simple Moving Average (SMA), lower limit of the ascending channel) aligns as first support before 1.0800 (psychological level, static level) and 1.0780 (200-period SMA).

Resistances could be seen at 1.0900 (mid-point of the ascending channel, static level) ahead of 1.0950 (upper limit of the ascending channel).

 

• The British pound has fallen rather significantly to kick off the trading session on Tuesday but has turned around to show signs of life as we now are trying to recapture the 1.28 level.
• If we can break above the 1.28 level on a sustainable type of mood, it’s likely that the British pound could go looking to the 1.29 level, followed by the 1.31 level which is an area that we had seen a lot of resistance at previously.

Keep in mind that this pair continues to try to rally, and this is mainly predicated upon by the idea that US economic figures have been getting worse as of late. Underneath, the 1.2675 level is an area that we see support multiple times, and it is worth noting that we have bounce from there in the last couple of days.

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Expect Choppy Behavior

I think at this point in time it’s probably obvious that you can expect quite a bit of choppy behavior, but that’s typical for the British pound against the US dollar, due to the fact that we are trying to sort out where we are going next, as the US dollar is considered to be a “safety currency”, while the British pound is considered to be a currency that you will take on risk using. Ultimately, if we can continue to rally it makes quite a bit of sense that the market will continue to see people chasing momentum. If we pull back from here, and we break down below the 1.2675 level, then it’s possible that we could threaten the 50-Day EMA. After that, we then have the 200-Day EMA coming into the picture.

Make sure your position size is correct, because quite frankly this is a market that right along with the rest of all the other ones, will probably remain very noisy in the next several sessions, as we try to sort out what’s going on with the global economy. As there is so much uncertainty, we will continue to see volatility.

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Softer-than-expected figures could increase investor bets on a September Fed rate cut. Weaker labor market conditions could impact consumer confidence, wages, and disposable income. The net effect could be a pullback in consumer spending, dampening demand-driven inflation.

However, investors should also consider the ISM Services PMI. Economists forecast the ISM Services PMI to increase from 49.4 to 50.5. Hotter-than-expected numbers could affect the Fed rate path. The services sector contributes over 70% to the US economy and influences inflation trends.

Beyond the headline figure, investors should consider the subcomponents, including prices and employment.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the Services PMIs, US labor market data, and household spending numbers from Japan. Tighter US labor market conditions and a pickup in US services sector activity could tilt monetary policy divergence toward the US dollar.

USD/JPY Price Action

Daily Chart

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

A USD/JPY breakout from the 156 handle would support a move toward the 158 handle. Furthermore, a USD/JPY move to the 158 handle could give the bulls a run at the April 29 high of 160.209.

Service sector PMIs and US labor market data need investor consideration.

Conversely, a USD/JPY break below the 50-day EMA would give the bears a run at the 151.685 support level.

The 14-day RSI at 45.55 indicates a USD/JPY fall to the 151.685 support level before entering oversold territory.

US Dollar vs Japanese Yen Technical Analysis

The US dollar has fallen rather hard against the Japanese yen in early trading on Tuesday to test the crucial 155 yen level, an area that I’ve mentioned more than once. This is a very interesting area for the market to find itself in, and we could see value hunters coming back into the picture, trying to take advantage of this value. The 50-day EMA was touched, and now it looks like we are trying to turn things around. The market may have gotten a little ahead of itself, and we have had a few ugly economic numbers coming out of the United States, but really at the end of the day, we are light years away from the Federal Reserve cutting.

And even if they did, the interest rate difference between the US dollar and the Japanese yen still gets you paid quite handsomely at the end of every session. So not much has changed really. A little bit of panic selling, I suppose, had some people nervous, but right now I’m just looking for an opportunity to get long. 158 yen above could be the target. If we can break above there, then we could be looking at the 160 yen level. Breaking down below the 50 day EMA.

It just has me looking for potentially an entry at 152 yen below. This is a pair, like I said, you get paid at the end of every day and institutional traders love that. So, it makes quite a bit of sense that we should continue to see traders jump in and take advantage of this dip.

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 rose further and surpassed the 1.0900 barrier.
• The Greenback regained the smile and advanced slightly.
• The German labour market came in mixed in May.

The US Dollar (USD) traded marginally on the upside on Tuesday, putting the risk-related sector under some mild downside pressure and motivating EUR/USD to recede from earlier tops north of 1.0900 the figure, or multi-week tops.

The pair reversed three consecutive daily advances following the Greenback’s fresh upward trend and the continuation of the decline in US yields across the board.

Meanwhile, recent hawkish statements from Fed officials have fueled speculation that the Federal Reserve (Fed) may retain its tight posture for a longer period of time than predicted. However, disheartening US JOLTs Job Opening prints appear to have underpinned an interest rate reduction in November.

Indeed, the CME Group’s FedWatch Tool predicts a roughly 80% chance of lower interest rates by the November 7 meeting.

Despite stronger inflation estimates in Germany and the rest of the eurozone in May, the European Central Bank (ECB) is expected to decrease interest rates at its next meeting on June 6. Doubts remain, however, when it comes to considering prospective cutbacks after the summer.

Looking ahead, the Eurozone’s incipient recovery in some economic fundamentals, together with the US economy’s loss of momentum, reinforces the shrinking of the monetary policy difference between the Fed and the ECB, supporting a comeback in EUR/USD.

However, in the long run, given the increasing possibility that the ECB would cut rates before the Fed, additional EUR/USD depreciation should be expected in the coming months.

EUR/USD daily chart

EUR/USD short-term technical outlook

If bulls retain 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.

The resumption of the bearish tone, on the other hand, might push the pair below the weekly low of 1.0788 (May 30), which is supported by the 200-day SMA. The fall below this area might push the spot to the May low of 1.0649 (May 1), ahead of the 2024 bottom of 1.0601 (April 16) and the November 2023 low of 1.0516 (November 1). Once this zone is breached, the pair may head for the weekly low of 1.0495 (October 13, 2023) or the 2023 bottom of 1.0448 (October

So far, the 4-hour chart shows a small knee-jerk amidst the current upward bias. The 55-SMA at 1.0847 is the next downward barrier, followed by 1.0788 and 1.0781. On the upside, 1.0916 comes first ahead of 1.0942. The relative strength index (RSI) surged to around 56.

• EUR/USD rose further and surpassed the 1.0900 barrier.
• The Greenback regained the smile and advanced slightly.
• The German labour market came in mixed in May.

The US Dollar (USD) traded marginally on the upside on Tuesday, putting the risk-related sector under some mild downside pressure and motivating EUR/USD to recede from earlier tops north of 1.0900 the figure, or multi-week tops.

The pair reversed three consecutive daily advances following the Greenback’s fresh upward trend and the continuation of the decline in US yields across the board.

Meanwhile, recent hawkish statements from Fed officials have fueled speculation that the Federal Reserve (Fed) may retain its tight posture for a longer period of time than predicted. However, disheartening US JOLTs Job Opening prints appear to have underpinned an interest rate reduction in November.

Indeed, the CME Group’s FedWatch Tool predicts a roughly 80% chance of lower interest rates by the November 7 meeting.

Despite stronger inflation estimates in Germany and the rest of the eurozone in May, the European Central Bank (ECB) is expected to decrease interest rates at its next meeting on June 6. Doubts remain, however, when it comes to considering prospective cutbacks after the summer.

Looking ahead, the Eurozone’s incipient recovery in some economic fundamentals, together with the US economy’s loss of momentum, reinforces the shrinking of the monetary policy difference between the Fed and the ECB, supporting a comeback in EUR/USD.

However, in the long run, given the increasing possibility that the ECB would cut rates before the Fed, additional EUR/USD depreciation should be expected in the coming months.

EUR/USD daily chart

EUR/USD short-term technical outlook

If bulls retain 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.

The resumption of the bearish tone, on the other hand, might push the pair below the weekly low of 1.0788 (May 30), which is supported by the 200-day SMA. The fall below this area might push the spot to the May low of 1.0649 (May 1), ahead of the 2024 bottom of 1.0601 (April 16) and the November 2023 low of 1.0516 (November 1). Once this zone is breached, the pair may head for the weekly low of 1.0495 (October 13, 2023) or the 2023 bottom of 1.0448 (October

So far, the 4-hour chart shows a small knee-jerk amidst the current upward bias. The 55-SMA at 1.0847 is the next downward barrier, followed by 1.0788 and 1.0781. On the upside, 1.0916 comes first ahead of 1.0942. The relative strength index (RSI) surged to around 56.

• GBP/USD has been gaining ground against the US dollar since the start of trading this week, with markets cautiously awaiting US jobs data at the end of the week.
• Sterling/dollar tests the 1.2817 resistance level, its highest in over two months.
• What is the GBP/USD forecast for this week’s trading?

We expect GBP/USD to test the $1.28 level on the back of strong technical momentum and potential weakness in the all-important US jobs report. According to forex trading platforms, GBP/USD is in a short-term uptrend and could test 1.28 and above in the coming days. Moreover, momentum is strong with the RSI at 63 and signaling higher again, while the exchange rate remains above its key moving averages.

1.28 level is the prize for dollar bulls but if this week’s data moves in favor of the US dollar, the key support level to watch is 1.2685. Recently, buying has been persistent over the past two weeks and we see this as the level that needs to be broken if we want to see the exchange rate fall.

According to the economic calendar, there is nothing major out of the UK this week, which in itself is a supportive development for sterling, which tends to perform better when it is not being disturbed by data and policymakers at the Bank of England who seem keen to cut interest rates at the earliest possible opportunity. The Monday PMI reading is likely to attract some attention, although we would not place much weight on any market moves ahead of the all-important jobs report on Friday. Last month, US nonfarm payrolls came in below 200,000 for the first time since Q4 2023. All eyes are on this month’s release to gauge whether this was just a one-off or whether new hiring is indeed slowing. This is of paramount importance to the US.

The market is looking forward to a key US non-farm payrolls reading of 180k and an unemployment rate of 3.9%. Average hourly earnings are expected to rise 3.9% year-on-year. If US labor market data is weak, markets could increase the likelihood of a first rate cut in July, which would further weaken the US dollar.

The US central bank is in no rush to cut rates, leaving markets pricing in a full rate cut by December, though September would be 50/50, according to analysts at City Index. Furthermore, the jobs report and wage data should provide further evidence on this front. In recent weeks, we have seen bond yields rise, as investors grow increasingly concerned about the prospect of higher interest rates for longer. If this sentiment changes, for example due to a series of weaker-than-expected US data, the US dollar could finally break out more decisively and start a clean breakout. However, if the data remains too hot, this could, paradoxically, weigh on risk sentiment as rate cut expectations are pushed further.

• 

Technical forecasts for the GBP/USD pair today:

As we mentioned before and according to the performance on the daily chart, the bulls’ success in pushing the GBP/USD price above the resistance levels of 1.2775 and 1.2830 will motivate the bulls to head towards the psychological resistance of 1.3000, which confirms the strength of the bulls’ control over the general trend. Obviously, this may happen quickly if the US jobs numbers come in below all expectations. On the other hand, the support level of 1.2600 will remain the most important for the strength of the downward trend again.

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• The Japanese yen rose to around 155.80 yen against the US dollar, hovering near its strongest level in two weeks as the US dollar weakened on the back of weak US manufacturing data that supported expectations of rate cuts by the Federal Reserve.
• Domestically, investors are looking to Japanese wage and household spending data this week, which could affect expectations for local monetary policy.
• Last week, Bank of Japan board member Seiji Adachi said the central bank could raise interest rates if a sharp decline in the yen’s value leads to further inflation.

For his part, BOJ Deputy Governor Shinichi Uchida also said that the end of the battle against deflation is in sight, adding that wages are likely to continue to rise. The latest data showed that Tokyo’s core inflation rate accelerated to 1.9% in May from 1.6% in April, but remained below the BOJ’s 2% target.

Future of Japanese Intervention in Forex Markets:

Japan’s finance minister defended the government’s record intervention in the forex market in the first acknowledgment of the move. “We have intervened in the market to counter excessive movements in the foreign exchange market, which were driven by speculation,” Finance Minister Shunichi Suzuki told reporters on Tuesday. “From that standpoint, we believe it had a certain effect.” Suzuki’s remarks were the first by any official after his ministry disclosed figures on Friday showing it spent ¥9.8 trillion ($62.7 billion) supporting the yen between April 26 and May 29. Furthermore, the Japanese currency is still stronger than it was when the interventions are believed to have occurred, with its weakest point at 160.17 to the dollar, compared to around 156.40 in Tokyo afternoon trading on Tuesday. Officials have remained tight-lipped about the exact timing.

After briefly falling above 160 per dollar for the first time in more than 30 years, the yen rose more than five yen to the dollar on April 29. Moreover, this was followed by a jump in the yen from around 157.52 to 153.04 in New York trading on May 1. “It is not known whether the yen will stop falling at 160 yen to the dollar without intervention, so it has to be said that it was effective,” said Yukio Ishizuki, senior currency analyst at Daiwa Securities.

In general, Japanese officials tend to remain tight-lipped about whether they entered the market immediately after a major move as part of their strategy to keep market participants guessing, which may make traders more cautious about pushing currencies beyond key thresholds.

• 

USD/JPY Technical Analysis and Expectations Today

Based on the performance on the daily chart attached, despite recent selloffs, the overall trend for the USD/JPY exchange rate remains upward. Technically, a preliminary break in the general trend will not occur without the pair moving towards the support levels of 154.20 and 153.00, respectively. Moreover, the divergence between the future policies of the U.S. Federal Reserve and the Bank of Japan will continue to support the bulls’ control until a Japanese intervention in the currency markets occurs to halt the yen’s depreciation.

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True, we did break above 1.09 momentarily, but that was turned right back around. It looks as if we are heading towards the middle of this consolidation area again, which tells me we just don’t have anywhere to be. Summertime can be somewhat slow in the markets, and that might be what we’re setting up for, just a very slow, choppy, sideways, tight range summer. This is actually quite normal for the currency markets.

Both the ECB and the Bank of Canada are expected to cut this week, and the Federal Reserve is still a bit of a mixed picture, although recently economic numbers have suggested that perhaps they will have to be cutting sooner rather than later. But at this point, they still remain data-dependent, at least according to what they say. With this, I’m very neutral in this pair.

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

• The dollar has rallied again against the Japanese yen and what would have been a very, very choppy market.
• We had a couple of negative economic numbers coming out of the United States, which of course had all of the machines freaking out.
• But eventually the adults came back and realized that these are just a couple of data points. It’s not the end of the world.
• However, for a minute there during the day you would’ve thought the whole world was coming undone.

Ultimately, this is a market that I think will try to go higher over the longer term as the interest rate differential continues to favor the United States dollar over the Japanese yen hand over fist. The 158 yen level is an area that’s a bit of a barrier due to the previous central bank intervention so therefore I think you will have to watch that closely as well.

• 

Short term pullbacks continue to be buying opportunities that I think you will be taking advantage of, and therefore, I look at this from the prism of a market that is doing everything it can to offer plenty of opportunities to get long. But I also recognize that we are in the midst of trying to build up the amount of pressure necessary to finally break out. The 160 yen level being captured and broken through would be a huge victory for the bulls. That could send this market much higher.

Support Below at Several Areas

Underneath the 155 yen level and the 50 day EMA both come into the picture around the same area and could be a short-term floor. Anything below there could have a deeper correction but right now I still think that the US dollar is a buy against the Japanese yen and pullbacks like we’ve seen over the last couple of days just end up being opportunities. After all, you continue to get paid to hang on to this USD/JPY pair, and that’s something that institutional traders will pay close attention to.

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• The euro shot higher in the early hours against the British pound on Monday, but just as we had seen on Friday, it looks like there is still a lot of selling pressure.
• This could be due to the fact that the euro is having to come to terms with the ECB cutting rates in Europe.
• That being said, we are at a major support level that a lot of people will be paying close attention to from a longer term standpoint, and therefore this to me is still a market that you could be a buyer of.

At least it has the area underneath that has held up in the form of the 0.85 level multiple times. Whether or not it actually holds up longer term, we’ll have to wait and see, but right now this is an area where you would expect a bit of a bounce sooner or later.

• 

Breakdown? Then What?

That being said, if we were to break down below the 0.84 level, then the bottom could fall out in this EUR/GBP pair, and we could see the British pound spike against the euro. Typically speaking, this is a very choppy and noisy market that doesn’t have anywhere to be most of the time. And if that’s going to be the case, you have to be very patient.

This is not a market that I think you are going to get huge moves all of the sudden. And I do think that the 50 day EMA just above continues to offer a bit of resistance as well. If we can break that, then we can go look to the 200 day EMA, which of course is an indicator that a lot of people pay attention to. And it just so happens to look like it’s right at the 0.86 level, an area that in and of itself would probably cause a certain amount of interest. Ultimately, this is just a reversion to the mean type of setup from what I see, as we had been in that massive consolidation area for so long.

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