Goldman Sachs has revised its forecasts for GBP/USD downwards, indicating a less optimistic outlook for Sterling in the context of Thursday’s Bank of England meeting and recent market trends.

Key Points:

• Bearish Sentiment: Recent remarks from Deputy Governor Ramsden suggesting that inflation risks are tilted to the downside have contributed to a more bearish sentiment among clients.
• Revised Forecasts: Goldman now expects GBP/USD to be at 1.24 in the short (3 months) and medium term (6 months), adjusting downwards from previous forecasts. The 12-month forecast has also been adjusted to 1.28 from 1.35.
• Pro-Cyclical Backdrop: Changes in hawkish policy repricing in markets have made the pro-cyclical backdrop less supportive for GBP, placing Sterling in a challenging position.

Conclusion:

Goldman Sachs’ updated forecasts reflect a cautious stance on GBP/USD, driven by evolving risks to inflation and recent shifts in market dynamics

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• According to today’s Wednesday trading, the value of the Japanese yen has fallen to over 155 yen against the US dollar, giving up about half of the gains it made last week even as Japanese authorities continue to warn markets against extreme currency moves.
• The USD/JPY exchange rate is hovering around the 155.35 resistance level at the time of writing this analysis. 

Commenting on the performance of the Forex currency market, Japanese Finance Minister Shunichi Suzuki repeated a warning that the authorities are ready to respond to excessive fluctuations in foreign exchange rates. Meanwhile, the Bank of Japan Governor Kazuo Ueda said that they will study the impact of the Japanese yen’s movements on inflation to guide policy decisions. Last week, the Japanese yen rose as much as 5.2% from low to high due to suspected government intervention, with Bank of Japan data indicating it spent nearly $60 billion defending the currency. 

At the same time, analysts said that the interventions would only buy the authorities for some time, given the stark differences in interest rates between Japan and the United States. For her part, US Treasury Secretary Janet Yellen also said over the weekend that interventions should be rare, and consultations should be held, indicating a lack of coordination between Japan and the United States on foreign exchange policy. In this regard, Marito Ueda, head of the market research department at SBI Liquidity Market, explained to Bloomberg News that it may be more difficult for Japan to intervene compared to the last time it did in 2022. He added, “At that time there was speculation that a rise in US interest rates would “It is over, and monetary policy expectations have never been as clear as now.” 

• 

In general, since the start of trading this week, the price of the Japanese yen has declined against the US dollar, with investors continuing to doubt that the Tokyo authorities will intervene in the foreign exchange market to support the currency. Although officials warned of possible market interference, traders ignored these reports. Masato Kanda, the Japanese government’s top currency diplomat, has reportedly reinforced the authorities’ willingness to intervene and support the fragile yen. However, he noted that the government would not have to intervene in foreign exchange markets if exchange rates reflected fundamentals. 

USD/JPY Technical analysis and Expectations Today: 

Recently, The Japanese yen flowed to 160.00, its lowest level against the US dollar since April 1990. Since the beginning of the year until now, the yen has decreased by 9.5% against the US dollar. Over the past 12 months, the yen has fallen by more than 14% against the dollar. As mentioned before, the upward trend of the US dollar against the Japanese yen “USD/JPY” may continue if the contrast persists between the policies of the US Federal Reserve and the Bank of Japan, alongside the economic performance disparity between the two countries. Currently, the nearest resistance levels for the currency pair are 156.30 and 157.40, respectively. 

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• The euro initially fell a little bit during the trading session on Tuesday, but then turned around to rally towards the 200 day EMA.
• We are still below the top of the massive Friday candlestick that had formed and then pulled back.
• So, with that being said, I think you’ve got a situation where it makes a lot of sense that we would see signs of exhaustion right around this 200 day EMA.

That being said, I think you also have to pay attention to the fact that this is a market that is moving almost solely on the U.S. bond markets as the interest rate differential between the two economies will be paid close attention to, quite closely by the market. Furthermore, you also have to keep in mind that the ECB is likely to cut rates much quicker than the Federal Reserve.

• 

There are still sellers above

So, I still think you have a situation where there are going to be sellers above. And if that’s the case, we could drive the EUR/USD market down to the 1.07 level. Breaking above the top of the candlestick from the Friday session does open up a move to the 1.0875 level, but I think that is more or less like climbing uphill at this point.

If the U.S. yields continue to rise, that will put pressure on this pair, and it’ll go lower. This will literally move lockstep with the bond market. That’s what it’s been doing for a while now. So, make sure to pay attention to the yields in real time, as it can give you a bit of a heads up as to where you want to be in general.

You also have to keep in mind that geopolitical risks out there could have people running towards the US dollar as well, despite the fact that the United States is borrowing $1 trillion every 90 days at this point. This of course isn’t a strong point to the greenback, but at the same time, it seems like a lot of people are looking for the idea of “interest rates.”

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• GBP/USD fell nearly 0.5% and snapped a four-day winning streak on Tuesday.
• The near-term technical outlook points to a buildup of bearish momentum.
• Investors could refrain from betting on a Pound Sterling recovery ahead of the BoE’s policy announcements.

GBP/USD came under heavy bearish pressure and lost nearly 0.5% on Tuesday. The pair continues to edge lower early Wednesday and was last seen trading below 1.2500.

The US Dollar (USD) benefited from the cautious market mood on Tuesday and weighed on GBP/USD. Additionally, hawkish comments from Minneapolis Federal Reserve President Neel Kashkari helped the USD edge higher and caused the pair to extend its slide.

Kashkari noted that the housing market was proving more resilient to tight monetary policy than it has been in the past and said that inflation moving sideways was raising questions about how restrictive the policy was. Regarding the rate outlook, he acknowledged that the most likely scenario was for rates to remain unchanged for an extended period of time but did not rule out further tightening if inflation were to become embedded.

The US economic docket will not feature any high-tier data releases but Federal Reserve (Fed) Vice Chair of the Board of Governors Phillip Jefferson, Boston Fed President Susan Collins and Governor Lisa Cook will be delivering speeches later in the American session.

Markets are currently seeing a 35% chance that the Fed will leave the policy rate unchanged. In case Fed policymakers adopt a hawkish tone and dismiss the softness seen in the April jobs report, the USD could gather strength.

On Thursday, the Bank of England (BoE) will announce monetary policy decisions. Even if the USD struggles to build on Tuesday’s gains, GBP/USD could have a hard time staging a decisive rebound, with investors refraining from taking large positions ahead of the BoE event.

GBP/USD Technical Analysis

GBP/USD closed well below the 200-day Simple Moving Average (SMA), which is currently located at 1.2550, after failing to clear this level earlier in the week. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart dropped below 40, reflecting the bearish tilt in the near-term technical outlook.

On the downside, the 200-period SMA on the 4-hour chart aligns as immediate resistance at 1.2480 before 1.2450 (Fibonacci 23.6% retracement of the latest downtrend) and 1.2400 (static level, psychological level).

Immediate resistance is located at 1.2500 (static level, psychological level) before 1.2530 (Fibonacci 38.2% retracement) and 1.2550 (200-day SMA).

 

• GBP/USD fell nearly 0.5% and snapped a four-day winning streak on Tuesday.
• The near-term technical outlook points to a buildup of bearish momentum.
• Investors could refrain from betting on a Pound Sterling recovery ahead of the BoE’s policy announcements.

GBP/USD came under heavy bearish pressure and lost nearly 0.5% on Tuesday. The pair continues to edge lower early Wednesday and was last seen trading below 1.2500.

The US Dollar (USD) benefited from the cautious market mood on Tuesday and weighed on GBP/USD. Additionally, hawkish comments from Minneapolis Federal Reserve President Neel Kashkari helped the USD edge higher and caused the pair to extend its slide.

Kashkari noted that the housing market was proving more resilient to tight monetary policy than it has been in the past and said that inflation moving sideways was raising questions about how restrictive the policy was. Regarding the rate outlook, he acknowledged that the most likely scenario was for rates to remain unchanged for an extended period of time but did not rule out further tightening if inflation were to become embedded.

The US economic docket will not feature any high-tier data releases but Federal Reserve (Fed) Vice Chair of the Board of Governors Phillip Jefferson, Boston Fed President Susan Collins and Governor Lisa Cook will be delivering speeches later in the American session.

Markets are currently seeing a 35% chance that the Fed will leave the policy rate unchanged. In case Fed policymakers adopt a hawkish tone and dismiss the softness seen in the April jobs report, the USD could gather strength.

On Thursday, the Bank of England (BoE) will announce monetary policy decisions. Even if the USD struggles to build on Tuesday’s gains, GBP/USD could have a hard time staging a decisive rebound, with investors refraining from taking large positions ahead of the BoE event.

GBP/USD Technical Analysis

GBP/USD closed well below the 200-day Simple Moving Average (SMA), which is currently located at 1.2550, after failing to clear this level earlier in the week. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart dropped below 40, reflecting the bearish tilt in the near-term technical outlook.

On the downside, the 200-period SMA on the 4-hour chart aligns as immediate resistance at 1.2480 before 1.2450 (Fibonacci 23.6% retracement of the latest downtrend) and 1.2400 (static level, psychological level).

Immediate resistance is located at 1.2500 (static level, psychological level) before 1.2530 (Fibonacci 38.2% retracement) and 1.2550 (200-day SMA).

 

With the USD/JPY currently at 154.784, intervention risks are resurfacing. On Tuesday, Masato Kanda issued a warning, saying that the government would intervene in case of any speculative or disorderly moves in the foreign exchange markets. After the sharp pullback from 160, warnings could intensify far sooner.

On Wednesday, foreign investments into bonds and stocks will draw investor interest. However, the numbers will unlikely influence the Bank of Japan rate path. Wage growth numbers and the Bank of Japan Summary of Opinions will impact the Yen more on Thursday (May 9).

The Bank of Japan hopes wage growth and services inflation will fuel demand-driven inflation.

While services sector activity picked up in April, forecasts for wage growth are less convincing. Economists expect average cash earnings to increase 1.5% year-on-year in March after rising 1.8% in February. Weaker-than-expected wage growth figures could impact consumer price trends and hopes of a BoJ rate hike.

US Economic Calendar: FOMC Member Speeches in Focus

Later in the Wednesday session, the Fed will be in the spotlight. FOMC members Susan Collins, Lisa Cook, and Philip Jefferson are on the calendar to speak.

Investors should consider views on inflation, the labor market, and the Fed rate path. Recent Fed speeches have fueled uncertainty about a September Fed rate cut. While wage growth slowed in April, inflation remains sticky, forcing members to reconsider their projections.

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GBP/JPY Forecast Video for 20.03.23

British Pound vs Japanese Yen Weekly Technical Analysis

The British pound initially felt during the course of the week and spent a couple of days trying to chip away at the ¥160 level. By doing so, it looks as if there are buyers underneath and we could continue to be in a situation where we could see a lot of support near the ¥160 area. If you look at the chart, you can see that we have been bouncing after a major selloff, and now it looks like we are ready to have a go at the ¥162.50 level, especially if interest rates continue to drop.

Keep in mind that the market participants continue to look at the bond markets more than anything else, as the Bank of Japan will almost certainly have to keep dealing with yield curve control. If rates around the world drop, that’s good for the Japanese yen, and that’s part of what we have been seeing this week. On the other hand, if rates start to spike again, that will put a beating on the Japanese yen as they will have to print more of that currency to go out and buy bonds.

The 50-Week EMA is currently sitting right around the middle of the candlesticks, and I think we’ve got a situation where the technicals will continue to be very noisy, therefore we would have a lot of back and forth. When you look at the daily chart, that certainly looks to be the case. Ultimately, the market could make a bigger move next week as the Federal Reserve will make its interest rate decision, because that could give us a heads up as to what bonds in general are going to do.

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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GOLD PRICE TECHNICAL ANALYSIS

Gold (XAU/USD) took a step back on Tuesday following Monday’s solid performance, slipping by around 0.4% to settle near $2,315. Despite recent fluctuations to the upside and downside, the precious metal has not really gone anywhere in the past two weeks, with volatility shrinking over the period in question in a possible sign of consolidation and traders waiting for new catalysts before reengaging.

The market consolidation is not likely to end until prices either push past resistance at $2,355 or breach support at $2,280. Should resistance be overcome, the focus will turn to $2,415. Additional gains from this point forward may lead to renewed interest in the all-time high. Meanwhile, a break of support could trigger a fall towards a key Fibonacci floor at $2,260. Below this area, the spotlight will be on $2,225.

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EUR/USD FORECAST – TECHNICAL ANALYSIS

EUR/USD dipped slightly on Tuesday after a third failed attempt to break above its 50-day and 200-day simple moving averages at 1.0790, an area of strong resistance. Prices subsequently edged towards support at 1.0750. Maintaining this technical floor is essential to prevent a deeper retracement; failure to do so might lead to a move towards 1.0725 and possibly even 1.0695.

In the event of a bullish turnaround, the first ceiling to keep an eye on looms near 1.0790, followed by 1.0820, which corresponds to a medium-term downtrend line extended from the December 2023 highs. On further strength, bulls may feel emboldened to initiate an attack on the 50% Fibonacci retracement of the 2023 slump, located around 1.0865.

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GBP/USD FORECAST – TECHNICAL ANALYSIS

GBP/USD also fell on Tuesday, nearly breaching the 1.2500 handle. A decisive drop below this threshold in the upcoming days could amplify bearish pressure, potentially prompting a retest of technical support near 1.2430. While prices might find stability around these levels during a pullback before a rebound, a breakdown could pave the way for a retrenchment toward the psychological 1.2300 mark.

On the flip side, if buyers stage a comeback and propel cable above its 200-day simple moving average, confluence resistance stretches from 1.2600 to 1.2630, where the 50-day simple moving average intersects with two important trendlines. Upside clearance of this barrier could inject optimism into the market and boost the pound further, creating the right environment for a rally towards 1.2720.

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USD/JPY Forecast Video for 06.02.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has shot straight up in the air after the jobs number came out of the United States at an addition of 517,000. This was much stronger than the anticipated number, somewhere near 188,000, and therefore there has been a huge shock in the market. The size of the candlestick is significant, and it does suggest that we are trying to do everything we can to break out to the upside. There is an inverted hammer from a couple of weeks ago, and if we can break above there it’s likely that this pair goes much higher. The US dollar is getting a boost by the expected inflationary environment, and of course what’s going on in the bond market.

Underneath, I see the ¥127 level as a major support level, and I think it’s probably only a matter of time before that area brings in more buyers. Breaking down below that level, then it’s likely that we could see this market fall apart, and therefore open up the massive air pocket underneath which I think could send this pair down to the ¥115 level. I see that as being very unlikely, but if that were to happen, we would see the Japanese yen overtake most currencies.

That being said, there is a lot of noise just above, so I think the next 50 pips or so are going to be a bit of a choppy affair. Having said that, if we do break above the top of that inverted hammer, this market could really start to take off to the upside.

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Australian Dollar vs US Dollar Technical Analysis

The Australian dollar has been all over the place during the trading session on Tuesday after the RBA decided to do nothing. Ultimately, the 0.6650 level above continues to offer significant resistance. The fact that we did pull back from there does suggest that perhaps we are ready to go back and forth in the larger consolidation area.

The 0.6450 level underneath would be a significant support level and with that being said I think this is a situation where the market is going to continue to simply look for some type of longer term directionality. After all, the Australian dollar is highly levered to growth but it’s also highly levered to commodities. It’s also attached to the Chinese economy as well, so all of these things moving around at the same time will have a major influence on how we trade.

On the other side of the equation, you have the US dollar which of course is highly influenced by the interest rates in America which have been stubbornly strong. With that being the case, I think you’ve got a situation where we are more likely than not going to be very noisy and just continue to see a lot of erratic behavior, but I think at this point that we are going to continue to see this area up here as a pretty significant barrier.

And it’s possible that we just end up going back and forth and trade in the overall area that we’ve been in. As a matter of fact, I think that most major pairs are going to be somewhat sideways in general and as we’re at the top of the range, it’s very possible that we could see some exhaustion.

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