• The British Pound did initially show signs of strength during the trading session, and while we are still positive, it is obvious to me that we are looking at a pretty significant barrier above that we will have to deal with in the form of 216 Yen.

This will be influenced by the Dollar against the Yen as well, as the US Dollar has recently seen intervention near the 160 Yen level. We are getting close to these major areas that the Bank of Japan, and where it is trying to keep the Japanese Yen somewhat viable. This is a situation where they have to defend, but only can to a point at this juncture.

Analyzing Interest Rate Differentials and Support Levels

But recently we’ve gotten inflation numbers coming out of Japan that show interest, intervening may be slipping a bit, mainly due to the fact that it looks like the inflation numbers in Japan are starting to come down, and that of course helped.

That being said, the British Pound I do prefer over the Japanese Yen due to the wide interest rate differential. I do think that the 214 Yen level is an area that will continue to be supportive, especially with the 50-day EMA sitting just below there.

I’ve got no interest whatsoever in trying to short this pair. I do not pay the swap, and ultimately, I think this is a market that, given enough time, we will have buyers coming in to take advantage of cheap British Pounds anytime they occur in this market, as the Yen is so toxic at this point.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

The Indicators feature provides value and direction analysis for various instruments under a selection of technical indicators, together with a technical summary.

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Please note that technical analysis is only part of investment reference, and there is no absolute standard for using numerical values to assess direction. The results are for reference only, and we are not responsible for the accuracy of the indicator calculations and summaries.

• The British pound rallied slightly during the trading session on Tuesday as we continue to threaten the 1.35 level.

• The 1.35 level is a large, round, psychologically significant figure that a lot of people will be watching very closely, and if we can break above there, it would be a very bullish sign of momentum.

• If we break out above that level, then I believe the 1.36 level is your next target.

The GBP/USD market continues to be one where you look at short-term pullbacks for buying opportunities, especially near the 200-day EMA. The 200-day EMA at the 1.34 level is a floor in the market, and I think, all things being equal, this is a market that I think remains very noisy.

Market Choppiness and Interest Rates

But I also recognize that the choppiness makes a certain amount of sense considering that the markets are looking very much like one that still favors the British pound despite the fact that the US dollar is relatively strong. After all, you have the United Kingdom interest rates slightly higher than the United States, so this could open up a possibility of the markets just trying to grind a little bit higher.

I don’t think this is a big move waiting to happen, but short-term dips remain buying opportunities from what I can see. I have no scenario in which I am using this market for shorting opportunities. Quite frankly, if the US dollar starts to strengthen, I will probably buy it against other currencies, not the British pound at this point in time. The range has held, and will continue to at this point.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

The US Dollar to Yen (USD/JPY) exchange rate remains close to multi-decade highs and is trading around 159.90 after repeatedly testing the 160 level over recent weeks.

Rabobank expects the Japanese Yen to regain some ground over the medium term and has adjusted its six-month USD/JPY forecast to 155.00, although it stresses that any recovery depends on further hawkish signals from the Bank of Japan.

The US Dollar strengthened against most major currencies during May as markets increased expectations that the Federal Reserve could keep interest rates higher for longer.

Despite speculation over a June Bank of Japan rate hike and substantial intervention by Japan’s Ministry of Finance, the Yen remained one of the weakest G10 currencies.

Rabobank notes that support for tighter policy within the BoJ is growing. Several policymakers have expressed concern about inflation pressures, while Governor Ueda has suggested that temporary price shocks could become more persistent through their impact on wages and inflation expectations.

The bank also points to stronger-than-expected retail sales, labour market data and industrial production figures as evidence that the economy could withstand higher interest rates.

However, expectations of a June rate increase have done little to push USD/JPY away from 160, suggesting that policymakers may need to deliver a much stronger hawkish message if they want to support the currency.

Rabobank also highlights that Japan spent an estimated JPY11.7 trillion intervening in currency markets during May, underlining the scale of the challenge facing authorities.

While the bank expects USD/JPY to move lower over the next six months, it believes that a sustained Yen recovery will require continued Bank of Japan tightening and a reduction in the appeal of Yen-funded carry trades.

The Euro to Dollar (EUR/USD) exchange rate has struggled to make further headway in recent weeks and is trading near 1.1630 after retreating from May highs close to 1.1800.

Lloyds Bank nevertheless maintains a constructive medium-term outlook for the single currency and expects EUR/USD appreciation to continue, although the pace of gains could be slower than previously anticipated.

The bank acknowledges that the Eurozone economy has lost momentum in recent months as higher oil prices have weighed on confidence and business activity.

According to Lloyds, the rise in energy prices has triggered a stronger behavioural response in Europe than in other major economies. Although the latest oil shock is modest compared with the energy crisis seen in 2022, households and businesses remain sensitive to rising energy costs.

This slowdown in activity has prompted a shift in European Central Bank policy expectations, with the ECB moving back towards a tightening bias in response to renewed inflation concerns.

Lloyds believes there is a risk that policymakers may be overreacting if energy prices stabilise or if anticipated supply disruptions prove less severe than currently feared.

The bank notes, however, that inflation was relatively subdued before the latest oil-price surge and that monetary policy is broadly neutral. In this context, any additional ECB tightening should be limited and manageable for the wider economy.

As a result, Lloyds expects the current slowdown to moderate the recovery rather than derail it completely. The bank still sees underlying support for Eurozone growth once energy market concerns begin to ease.

Lloyds also considers that the Euro continues to benefit from longer-term structural factors. The Eurozone offers investors a high degree of institutional stability and policy predictability at a time when global political and economic uncertainty remains elevated.

Efforts to strengthen the region’s economic resilience through investment and fiscal initiatives should also support investor confidence over time, particularly if external challenges encourage policymakers to accelerate reforms.

While Lloyds accepts that EUR/USD gains may be more gradual in the near term, it believes the broader appreciation trend remains intact. According to the bank, it would take a decline below 1.1392 to seriously undermine the constructive medium-term outlook for the Euro against the US Dollar.

– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: Strong US Manufacturing Data Lifts the US Dollar

The Pound US Dollar (GBP/USD) exchange rate fell on Monday as escalating tensions in the Middle East and stronger-than-expected US data lifted the safe-haven ‘Greenback’.

At the time of writing, GBP/USD was trading at $1.3421, down more than 0.2% on the day.

The safe-haven US Dollar (USD) strengthened on Monday as a deterioration in market sentiment drove investors towards safer assets.

The latest bout of risk aversion followed an exchange of strikes between the US and Iran over the weekend. Iran subsequently accused the US and Israel of breaching the ceasefire agreement and stated that it would withdraw from peace talks until Israel halted its attacks on Lebanon.

Meanwhile, the currency also drew support from upbeat US economic data. The latest ISM manufacturing PMI showed that factory activity accelerated more sharply than expected in May, with the index rising from 52.7 to 54, beating forecasts of 53.

Meanwhile, the increasingly risk-sensitive Pound (GBP) weakened against its safer peers as the market mood soured.

Sterling had initially edged higher in the morning after the UK’s latest manufacturing PMI showed activity climbing to a four-year high in May. The survey also reported rising input price inflation, which fuelled expectations for further Bank of England (BoE) interest rate hikes.

While this may have helped to limit the Pound’s losses, domestic political uncertainty may have dented GBP. On Monday, the government published documents relating to the controversial appointment of Peter Mandelson as ambassador to the US, with the UK’s febrile political atmosphere potentially unnerving investors.

Near-Term GBP/USD Forecast: Could BoE Comments Boost Sterling?

Looking ahead, UK economic data is limited on Tuesday. However, BoE policymaker Megan Greene is due to speak in the afternoon. As Greene is considered one of the more hawkish members of the Monetary Policy Committee, Sterling could strengthen if she argues in favour of higher interest rates.

Tuesday will also see the publication of the latest US Job Openings and Labor Turnover Survey (JOLTS). The data is expected to show a marginal decline in job openings in April, which may have only a muted impact on the US Dollar. However, any surprises could spark sharper movement.

Elsewhere, developments in the Middle East could inject volatility into GBP/USD by influencing risk appetite. Hopes of peace may lift market sentiment and potentially support the Pound, while a fresh escalation in tensions would likely sour the mood and bolster the safe-haven US Dollar.

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The US dollar continues to grind higher against the Japanese yen but be aware that the 160-yen level is an area that the Bank of Japan intervened at previously and it could cause a little bit of the same type of action. We’ll just have to wait and see. So far, the Japanese have been fairly quiet. So only time will tell.

That being said, if we do get some type of pullback, I am willing to buy dips on the right-hand side of the V to make sure that I am following momentum re-entering the market. I have no interest in selling this pair. The interest rate differential, despite the fact that the interest rates fell in America, continue to favor the US dollar by quite a wide margin.

EUR/USD Analysis Summary Today

EUR/USD Trading Signals:

Technical Analysis of EUR/USD Today

The Euro against the US Dollar (EUR/USD) pair is attempting to maintain its positive momentum after rebounding from recent lows. However, the European currency’s gains are still colliding with an important technical barrier that prevents buyers from establishing full control over the trend.

Despite improved risk appetite in global markets and a reduction in selling pressure on the Euro, the pair’s movements in the coming days will likely be determined primarily by the results of US economic data and European inflation figures, placing traders ahead of a week that could be decisive in shaping the next directional move.

Technical Outlook for EUR/USD

Technically, the pair has successfully defended the key support level near 1.1600, a level that has proven significant on several occasions in recent weeks. The stability of trading above the short-term moving averages reflects continued recovery efforts, but it is not yet sufficient to confirm a complete shift to an upward trend.

The price is currently trading within a clear sideways range between 1.1600 and 1.1800, reflecting the prevailing market anticipation ahead of the release of key economic data.

Morever, buyers need a sustained break above 1.1800 to confirm the resumption of the uptrend and target 1.1850 and then 1.1920. Failure to break through this resistance could lead to renewed selling pressure and push the pair back towards 1.1650 and then 1.1600.

Dollar Awaits Crucial Tests

Investors are focusing this week on a batch of US indicators capable of reshaping the Federal Reserve’s monetary policy expectations.

The upcoming data includes manufacturing and services indices, job openings data, and private sector employment reports, before all eyes turn to the US Non-Farm Payrolls (NFP) report, which remains the most influential indicator for interest rate expectations and dollar movements.

Any results that exceed market expectations could strengthen the US currency by reducing bets on an interest rate cut, while weak data could give the euro an additional opportunity to continue its recovery.

European Inflation in the Spotlight

Meanwhile, investors are awaiting Eurozone inflation figures for new clues about the future direction of European monetary policy. In recent weeks, expectations have grown that the European Central Bank (ECB) will maintain its relatively hawkish stance to combat inflationary pressures, particularly given the continued impact of rising energy costs on prices.

Any higher-than-expected inflation reading would support bets on continued European monetary policy tightening, which could provide an extra boost to the Euro against major currencies, led by the Dollar.

Conclusion

As long as the Euro/Dollar pair maintains its stability above the 1.1600 level, the potential for a continued recovery will remain intact, with the 1.1800 level remaining the most critical technical obstacle for buyers. However, breaking below the 1.1600 support level and closing under it could alter the short-term technical picture and open the door for a deeper corrective wave targeting new support levels.

Overall, the short-term trend leans toward a cautious positivity, but the confirmation of any bullish or bearish breakout will remain dependent on the upcoming economic data results and their impact on interest rate expectations in both the United States and the Eurozone.

Trading Tips

Dear TradersUp trader, some traders prefer to follow a strategy of selling the Euro against the Dollar, emphasizing the absolute necessity of strict adherence to capital management and setting stop-loss levels to mitigate risk.

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The GBPJPY pair ended yesterday’s trading by providing positive close above 214.50 barrier, announcing its readiness to readiness to renew the bullish attempts by reaching 215.00 level, providing positive momentum by stochastic will keep our bullish scenario, which might target 215.30 level, surpassing it will make the next target at 215.75 in he current trading.

While the attempt of activating the bearish corrective trend requires forming several negative waves, to settle below the extra support at 213.30.

The expected trading range for today is between 214.40 and 215.75

Trend forecast: Bullish