• The Japanese yen has failed to maintain momentum despite intervention by authorities to stem its weakness.
• The yen has fallen sharply, and policymakers have repeatedly indicated that they are prepared to intervene to support the currency.
• But is it too little, or too late?  

According to data compiled by Bloomberg News, Tokyo is likely to enter the forex markets for a second day in a row on Friday, pumping in about $13.5 billion. Clearly, this comes after Japanese officials may have intervened with close to $20 billion. According to forex trading, the US dollar against the Japanese yen USD/JPY stabilized around the 158.80 level, recovering from recent selling that pushed it towards the 157.15 support level. 

Commenting on the performance of the Japanese yen, Hirofumi Suzuki, Chief Forex Analyst at Sumitomo Mitsui Banking Corporation, said in an interview with a business news network, “This indicates that an intervention in the range of 2 trillion yen is very likely.” He added, “I believe the strategy aimed to prevent market participants from anticipating the move.” 

If this step is accurate, the latest intervention comes a month after currency regulators intervened in the forex markets with a $36 billion move. Experts claim that Tokyo leaders are using these measures simultaneously with the release of U.S. data and foreign speculators. However, market observers suggest that these actions signal to traders that the moves are too small, with observers calling for more substantial funds to support the yen. 

Obviously, this was evident in the weakness of the Japanese yen at the start of the trading week. The yen is down 12% year-to-date against the US dollar. 

However, U.S. officials have warned against excessive intervention, even though U.S. Treasury Secretary Janet Yellen and her counterparts in Europe and Asia have given the green light for intervention. What’s next? Japanese Chief Cabinet Secretary Yoshimasa Hayashi told reporters on Tuesday that the Japanese government is prepared to take all possible measures to prevent further deterioration of the yen. According to Reuters, he stated, “It is important for forex rates to move stably, reflecting fundamentals. Excessive volatility is undesirable. We will closely monitor exchange rate developments and stand ready to take all possible measures.” 

USD/JPY Technical analysis and Expectations Today 

Based on the daily chart attached, the USD/JPY is in a neutral position with a bearish bias if it moves further below the 158.00 level. On the other hand, and over the same time frame, the 160.00 psychological resistance level will remain the most important for bulls to regain control of the trend again. Technically, the Japanese yen price will continue to move according to whether Japan intervenes in the forex markets or not. Ultimately, The US dollar price is dependent on the future of the Federal Reserve’s policy and the reaction to the results of US data. 

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• The EUR/USD price halted its gains at the 1.0922 resistance level and has returned to move down, settling around the 1.0875 level at the time of writing.
• Despite Powell’s dovish appearance, the EUR/USD is unable to benefit. US Federal Reserve Chairman Jerome Powell made a “dovish” mark in his recent interview.
• However, the EUR/USD price has failed to capitalize on these comments. 

The EUR/USD exchange rate is stuck below the 1.0900 resistance level, unable to rise even after Powell, the U.S. Federal Reserve Chair, made dovish comments, noting that the inflation outlook in the United States is improving amid a more balanced labor market. 

Powell was interviewed by the Economic Club in Washington DC, where he was able to reflect on last week’s weaker-than-expected US inflation figures. “Powell sounded dovish,” said Sam Hill, head of market insights at Lloyds Bank. Added, “The improvement in the data trajectory that the Fed has seen over the second quarter, particularly the last three inflation prints, has been reflected.” 

According to reliable trading platforms, the dollar fell after US inflation came in at -0.1% on a monthly basis in June, down from 0% in May and below expectations for a 0.1% increase. Powell believes that this data has added “somewhat” confidence that inflation is on its way back to target. Combined with a cooler labor market, this means that the US Federal Reserve will “consider both mandates” when setting policy. 

According to reliable trading platforms, the dollar weakened after U.S. inflation dropped to -0.1% month-on-month in June, down from 0% in May and below the expected increase of 0.1%. Powell believes this data has somewhat boosted confidence that inflation is on its way back to the target. Alongside a cooler labor market, this means the Fed will consider both mandates when determining policy. 

Powell added, “We want to get that right,”. The dollar has proven less sensitive to such statements, dropping notably after Powell told the ECB Forum on Central Banking on July 3rd that significant progress on inflation had been made and that the process of reducing inflation was back on track. He stated in Sintra, Portugal, that if the labor market becomes “unexpectedly weak… this will also prompt us to respond.” Powell also reiterated his view that the neutral rate of interest might be higher than previously thought but repeated that policy remains restrictive. Analysts noted, “Market prices continued to shift towards more cuts this year after he spoke, with the easing cycle starting in September and delivering at least two cuts over the year, with about a 60% chance of three cuts.” 

According to forex trading, the euro against the US dollar (EUR/USD) exchange rate rose amid greater confidence that the Federal Reserve will cut US interest rates in September. However, the failure to break above the 1.09 level on a sustained basis suggests that a cut may already be “in price.” This could mean that the dollar is consolidating around current levels and those who want a stronger euro may have to wait for further catalysts. 

Overall, all eyes will be on the European Central Bank (ECB) tomorrow, Thursday, when it announces its next interest rate decision. Interest rates are expected to remain unchanged, but markets will be looking for hints of further rate cuts. A September rate cut by the ECB is almost fully priced in by the market, indicating that this might not significantly change the EUR/USD, potentially keeping the exchange rate stable below 1.09 and ready for a new breakout. 

EUR/USD Technical analysis and forecast: 

Based on the performance on the daily chart attached, the bulls are still in strong control of the EUR/USD price trend, with the need to break the psychological resistance at 1.1000 to confirm the general trend turning to the upside. Failure to do so could re-establish a head and shoulders pattern in that time frame, meaning selling pressures could return and a break of the support at 1.0790 could threaten the recent upward correction. The EUR/USD will remain in tight ranges until the reaction to the ECB decisions tomorrow, Thursday. 

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• GBP/USD touched a new 2024-high above 1.3000 in the European morning.
• Annual inflation in the UK held steady at 2% as expected in June.
• Markets see a diminishing chance of a Bank of England rate cut in August.

Following Tuesday’s indecisive action, GBP/USD gained traction in the European morning and touched its highest level in a year above 1.3000. The pair could extend its uptrend once it confirms this level as support.

The data published by the UK’s Office for National Statistics showed early Wednesday that annual inflation, as measured by the change in the Consumer Price Index (CPI), remained unchanged at 2% in June as expected. In the same period, the core CPI rose 3.5%, matching analysts’ estimate and May’s increase. Services prices, which have been the sticky part of inflation, rose 5.7% on a yearly basis following the 5.6% increase recorded in May.

According to Reuters, UK interest rate futures are now pricing a roughly 33% probability of the Bank of England (BoE) lowering the policy rate by 25 basis points in August, down from nearly 50% before the data release. This change in market positioning supports Pound Sterling.

In the second half of the day, the US economic docket will feature Housing Starts, Building Permits and Industrial Production data for June. With markets already fully pricing in a September Federal Reserve rate cut, these data releases are unlikely to have a noticeable impact on the US Dollar’s (USD) valuation.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart climbed back above 70 in the European morning on Wednesday, suggesting GBP/USD is technically overbought. In case the pair goes into a consolidation phase and starts using 1.3000 as support, the upper limit of the channel could act as next resistance at 1.3020 ahead of 1.3040 (static level from July 2023) and 1.3100 (psychological level, static level).

On the downside, supports could be seen at 1.2950 (static level) and 1.2900 (psychological level, static level), if 1.3000 fails to hold as support.

• GBP/USD touched a new 2024-high above 1.3000 in the European morning.
• Annual inflation in the UK held steady at 2% as expected in June.
• Markets see a diminishing chance of a Bank of England rate cut in August.

Following Tuesday’s indecisive action, GBP/USD gained traction in the European morning and touched its highest level in a year above 1.3000. The pair could extend its uptrend once it confirms this level as support.

The data published by the UK’s Office for National Statistics showed early Wednesday that annual inflation, as measured by the change in the Consumer Price Index (CPI), remained unchanged at 2% in June as expected. In the same period, the core CPI rose 3.5%, matching analysts’ estimate and May’s increase. Services prices, which have been the sticky part of inflation, rose 5.7% on a yearly basis following the 5.6% increase recorded in May.

According to Reuters, UK interest rate futures are now pricing a roughly 33% probability of the Bank of England (BoE) lowering the policy rate by 25 basis points in August, down from nearly 50% before the data release. This change in market positioning supports Pound Sterling.

In the second half of the day, the US economic docket will feature Housing Starts, Building Permits and Industrial Production data for June. With markets already fully pricing in a September Federal Reserve rate cut, these data releases are unlikely to have a noticeable impact on the US Dollar’s (USD) valuation.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart climbed back above 70 in the European morning on Wednesday, suggesting GBP/USD is technically overbought. In case the pair goes into a consolidation phase and starts using 1.3000 as support, the upper limit of the channel could act as next resistance at 1.3020 ahead of 1.3040 (static level from July 2023) and 1.3100 (psychological level, static level).

On the downside, supports could be seen at 1.2950 (static level) and 1.2900 (psychological level, static level), if 1.3000 fails to hold as support.

Nevertheless, housing supply trends may influence the Fed rate path. Tight inventories have pushed house prices higher. Affordability issues have driven demand for rentals. Higher rents contribute to housing services and headline inflation.

A pullback in rents through increased housing supply may ease housing services inflation and support multiple 2024 Fed rate cuts. A more dovish Fed could impact buyer demand for the USD/JPY.

Interest Rates and Housing Starts

Peachtree Creek Investments founder Conor Sen recently commented on Q2 housing start numbers, stating,

“In Q2, multi-family housing starts were at their lowest level since Q1 2011, and a dozen of the US’s 50 largest metros saw zero new multi-family starts.”

He also affirmed that the interest rate environment impacted housing starts.

While housing sector data needs consideration, investors should track FOMC Member speeches.

FOMC Member Speakers

FOMC voting Members Thomas Barkin and Christopher Waller are on the calendar to deliver speeches. Their reactions to recent inflation numbers, retail sales figures, and views on the timing of a Fed rate cut could move the dial.

Short-term Forecast: Bearish

USD/JPY trends depend on US labor market data (Thurs) and inflation numbers from Japan (Fri). Weaker US labor market conditions could raise expectations of multiple 2024 Fed rate cuts. Conversely, higher inflation figures from Japan could greenlight a July BoJ rate hike. The BoJ could also cut JGB purchases more aggressively.

Narrower interest rate differentials could support a USD/JPY drop toward 150.

Investors should remain alert as crucial economic indicators loom. Monitor real-time data, central bank commentary, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

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

A USD/JPY return to 160 would support a move to the July 3 high of 161.951.

Intervention warnings, economic data, and central bank commentary require consideration.

Conversely, a drop below the 50-day EMA could give the bears a run at the 155 handle.

The 14-day RSI at 44.55 suggests a USD/JPY drop to 155 before entering oversold territory.

• EUR/USD alternated gains with losses around 1.0900.
• The US Dollar ended Tuesday’s session barely changed.
• The Economic Sentiment in Germany worsened in July.

The US Dollar (USD) regained some balance after stronger-than-expected Retail Sales, although that initial upside impetus ran out of steam as the NA session drew to a close on Tuesday.

Against that backdrop, the USD Index hovered around the low-104.00s, while EUR/USD managed to regain composure and reclaimed the 1.0900 neighbourhood following an earlier drop to the area below that round level.

The inconclusive price action around spot came amidst further demand for the fixed-income space on both sides of the ocean, resulting in the acceleration of the downtrend in US and German yields across various timeframes.

Meanwhile, the macroeconomic landscape remained stable. Investors generally expect the European Central Bank (ECB) to keep its policy rate unchanged at its July 18 meeting, though markets still anticipate two additional cuts by the end of the year.

Conversely, there is ongoing debate among investors about whether the Fed will implement one, two, or three rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

Furthermore, the CME Group’s FedWatch Tool fully priced in lower rates at the September 18 meeting.

The ECB’s rate cut in June, coupled with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks, potentially leading to further weakening of EUR/USD in the short term.

However, economic recovery prospects in the Eurozone, along with signs of cooling in key US economic indicators, may mitigate this disparity and occasionally support the pair in the near future, a view that appears to have regained poise on the back of rising expectations of rate cuts by the Fed.

Looking ahead, upcoming US data coupled with Fedspeak and the ECB event should remain the key drivers of the pair’s price action in the short-term horizon at least.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to meet the next upward hurdle at 1.0922 (July 15), followed by the March peak of 1.0981 (March 8) and the psychological 1.1000 barrier.

If bears seize control, spot may touch the 200-day SMA of 1.0806 before sliding to the June low of 1.0666 (June 26). From here, the loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

Looking at the broader picture, it looks that more gains are in the works if the crucial 200-day SMA is continuously breached.

So far, the 4-hour chart indicates that some consolidative fashion might have kicked in. The initial resistance level is 1.0922, which comes ahead of 1.0981. On the other hand, the 55-SMA at 1.0847 comes first, followed by the 200-SMA at 1.0788, and lastly 1.0709. The RSI (relative strength index) rose to around 60.

• EUR/USD alternated gains with losses around 1.0900.
• The US Dollar ended Tuesday’s session barely changed.
• The Economic Sentiment in Germany worsened in July.

The US Dollar (USD) regained some balance after stronger-than-expected Retail Sales, although that initial upside impetus ran out of steam as the NA session drew to a close on Tuesday.

Against that backdrop, the USD Index hovered around the low-104.00s, while EUR/USD managed to regain composure and reclaimed the 1.0900 neighbourhood following an earlier drop to the area below that round level.

The inconclusive price action around spot came amidst further demand for the fixed-income space on both sides of the ocean, resulting in the acceleration of the downtrend in US and German yields across various timeframes.

Meanwhile, the macroeconomic landscape remained stable. Investors generally expect the European Central Bank (ECB) to keep its policy rate unchanged at its July 18 meeting, though markets still anticipate two additional cuts by the end of the year.

Conversely, there is ongoing debate among investors about whether the Fed will implement one, two, or three rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

Furthermore, the CME Group’s FedWatch Tool fully priced in lower rates at the September 18 meeting.

The ECB’s rate cut in June, coupled with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks, potentially leading to further weakening of EUR/USD in the short term.

However, economic recovery prospects in the Eurozone, along with signs of cooling in key US economic indicators, may mitigate this disparity and occasionally support the pair in the near future, a view that appears to have regained poise on the back of rising expectations of rate cuts by the Fed.

Looking ahead, upcoming US data coupled with Fedspeak and the ECB event should remain the key drivers of the pair’s price action in the short-term horizon at least.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to meet the next upward hurdle at 1.0922 (July 15), followed by the March peak of 1.0981 (March 8) and the psychological 1.1000 barrier.

If bears seize control, spot may touch the 200-day SMA of 1.0806 before sliding to the June low of 1.0666 (June 26). From here, the loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

Looking at the broader picture, it looks that more gains are in the works if the crucial 200-day SMA is continuously breached.

So far, the 4-hour chart indicates that some consolidative fashion might have kicked in. The initial resistance level is 1.0922, which comes ahead of 1.0981. On the other hand, the 55-SMA at 1.0847 comes first, followed by the 200-SMA at 1.0788, and lastly 1.0709. The RSI (relative strength index) rose to around 60.

• At the beginning of this week’s trading, the USD/JPY exchange rate settled around 158.00, stabilizing amid strong selling pressure it faced since last week, which caused it to plummet from the resistance level of 161.90, the lowest price for the yen in 38 years, extending losses to the support level of 157.37.
• Thus, the USD/JPY is expected to remain on its current downward trajectory pending the reaction to the announcement of US inflation figures. 

According to reputable trading platforms, the Japanese yen stabilized at 158 yen per dollar in light trading, with traders remaining on high alert after the currency rose about 2% last week due to suspected intervention by Japanese authorities. Last week, the yen rose to 157.36 yen per dollar following lower-than-expected US inflation figures and Bank of Japan data indicating that the government may have spent up to 3.57 trillion yen on Thursday to support its currency. Analysts warned that Monday’s holiday might lead to another round of yen buying by Japanese authorities to take advantage of weak liquidity, like what they did in late April. 

On the monetary policy front, investors are looking ahead to the Bank of Japan’s policy meeting in late July where it is expected to announce plans to scale back bond purchases and possibly raise interest rates again. Externally, the yen has been pressured by a stronger dollar that has benefited from safe-haven bids after the assassination attempt on former U.S. President Trump. 

Regarding stock trading platforms, US stock futures rose on Monday, with S&P 500 futures up 0.5%, the Dow Jones up 230 points, and the Nasdaq up 0.5%. This performance came as traders digested the assassination attempt on Donald Trump, which allegedly increased his chances of winning the US presidential election. 

According to trading, shares of the Trump media and technology conglomerate jumped more than 48% in pre-market trading. Meanwhile, earnings season is in full swing this week, with Goldman Sachs adding nearly 0.7% before the opening bell after beating earnings and revenue. Also, BlackRock rose 1.1% after reporting an 11% increase in second-quarter earnings. Among the major companies, Apple (2%), Nvidia (1.3%) and Amazon (0.1%) were in the green, while Tesla rose more than 3%. In contrast, Microsoft stock fell (-0.2%) while Meta and Alphabet traded around the flat line. 

USD/JPY Technical analysis and Expectations Today 

Based on the performance on the daily chart attached, USD/JPY trading pair is still on its downward path. Technically, breaking the support of 158.00 will increase the bears’ control over the trend and will confirm the bearish shift over that period if the currency pair moves towards the support levels of 155.70 and 153.00 respectively. Decisively, this requires Japanese intervention in the forex market in addition to the continued weakness of the dollar price following the announcement of lower-than-expected US retail sales this week. In contrast, and over the same period, the psychological resistance of 160.00 will remain the most important for the bulls to regain control over the trend. 

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• GBP/USD fluctuates above 1.2950 after posting small losses on Monday.
• Inflation data from the UK on Wednesday could trigger the next big action in the pair.
• US Retail Sales in June are expected to remain unchanged.

GBP/USD lost its traction after coming in within a touching distance of 1.3000 on Monday and closed the day modestly lower. The pair holds steady slightly above 1.2950 in the European session on Tuesday.

The cautious market mood helped the US Dollar (USD) find a foothold at the beginning of the week, causing GBP/USD to correct lower from the highest level it touched in nearly a year.

During the American trading hours, Federal Reserve (Fed) Chairman Jerome Powell said that inflation readings in the second quarter represented further progress but repeated that he is not going to send any signals on any particular meeting. With markets already fully pricing in a Fed rate cut in September, according to the CME FedWatch Tool, these comments had little to no impact on the USD’s performance against its rivals. 

The US Census Bureau will release Retail Sales data for June later in the day. Markets expect a no change following the marginal 0.1% increase recorded in May. Although a positive surprise could support the USD, investors are unlikely to take large positions, or change their minds about the Fed rate outlook, based on this data alone. Hence, the market reaction could remain short-lived.

On Wednesday, the UK’s Office for National Statistics will publish Consumer Price Index (CPI) figures for June, which could influence the market expectations regarding the timing of the Bank of England’s (BoE) rate reduction. Ahead of this data, GBP/USD’s action could remain subdued.

GBP/USD Technical Analysis

GBP/USD was last seen trading slightly above 1.2950 (20-period Simple Moving Average (SMA), static level). If the pair falls below that level and fails to reclaim it, 1.2900 (psychological level, static level) could be seen as next support before 1.2850 (mid-point of the ascending regression channel coming from late April).

On the upside, 1.3000 (upper limit of the ascending channel, psychological level) aligns as strong resistance ahead of 1.3040 (static level from July 2023) and 1.3100 (psychological level, static level).

• GBP/USD fluctuates above 1.2950 after posting small losses on Monday.
• Inflation data from the UK on Wednesday could trigger the next big action in the pair.
• US Retail Sales in June are expected to remain unchanged.

GBP/USD lost its traction after coming in within a touching distance of 1.3000 on Monday and closed the day modestly lower. The pair holds steady slightly above 1.2950 in the European session on Tuesday.

The cautious market mood helped the US Dollar (USD) find a foothold at the beginning of the week, causing GBP/USD to correct lower from the highest level it touched in nearly a year.

During the American trading hours, Federal Reserve (Fed) Chairman Jerome Powell said that inflation readings in the second quarter represented further progress but repeated that he is not going to send any signals on any particular meeting. With markets already fully pricing in a Fed rate cut in September, according to the CME FedWatch Tool, these comments had little to no impact on the USD’s performance against its rivals. 

The US Census Bureau will release Retail Sales data for June later in the day. Markets expect a no change following the marginal 0.1% increase recorded in May. Although a positive surprise could support the USD, investors are unlikely to take large positions, or change their minds about the Fed rate outlook, based on this data alone. Hence, the market reaction could remain short-lived.

On Wednesday, the UK’s Office for National Statistics will publish Consumer Price Index (CPI) figures for June, which could influence the market expectations regarding the timing of the Bank of England’s (BoE) rate reduction. Ahead of this data, GBP/USD’s action could remain subdued.

GBP/USD Technical Analysis

GBP/USD was last seen trading slightly above 1.2950 (20-period Simple Moving Average (SMA), static level). If the pair falls below that level and fails to reclaim it, 1.2900 (psychological level, static level) could be seen as next support before 1.2850 (mid-point of the ascending regression channel coming from late April).

On the upside, 1.3000 (upper limit of the ascending channel, psychological level) aligns as strong resistance ahead of 1.3040 (static level from July 2023) and 1.3100 (psychological level, static level).

The Dollar Index (DXY) is currently trading at $104.328, up 0.07%. On the 4-hour chart, the pivot point is $104.238. Immediate resistance levels are $104.432, $104.530, and $104.663.

Support levels are $104.050, $103.909, and $103.782. The 50-day EMA stands at $104.472, while the 200-day EMA is $104.998. A bullish outlook is maintained above the pivot point of $104.238, with potential upward movement toward the resistance levels.

Conversely, a break below $104.238 could initiate a significant selling trend.

EUR/USD Technical Forecast

The EUR/USD is trading at $1.08922, down 0.02%. The 4-hour chart shows a pivot point at $1.08968. Immediate resistance levels are $1.09114, $1.09274, and $1.09431. Support levels are at $1.08807, $1.08623, and $1.08443.

The 50-day EMA is $1.08736, and the 200-day EMA is $1.08121. A bearish outlook prevails below the pivot point of $1.08968, suggesting further declines if the level is breached.

Conversely, a break above this pivot point could shift sentiment towards a bullish bias.

GBP/USD Technical Forecast