The EURJPY pair managed to confirm breaching the barrier at 184.90, reinforcing the bullish trend, to notice recording the suggested targets in the previous report by reaching 186.00 level.
The price might be forced to provide some sideways trading due to stochastic attempt to exit the overbought levels, however, it will not affect the main bullish trend that depends on the stability of the main support at 193.15, while breaching 186.00 level will provide a chance for recording extra gains that might begin at 186.55.
The expected trading range for today is between 185.20 and 186.25
Trend forecast: Fluctuated within the bullish trend
The EURGBP formed several bullish corrective waves, taking advantage of its stability above 0.8533 level, which represents a new extra support level, to notice recording some gains by reaching 0.5858 level.
Note that the stability within the main bearish channel’s levels that appears in the above image besides the strong barrier at 0.8610 level make us keep the main bearish scenario, to expect gathering the negative momentum, which allows it to put pressure at 0.8533 support, where surpassing it will extend the trading towards the negative stations at 0.8500 and 0.8480.
The expected trading range for today is between 0.8530 and 0.8580
USD/JPY rebounds as traders focus on rising Treasury yields. The yield of 2-year Treasuries climbed towards the 4.20% level, while the yield of 10-year Treasrueis settled above 4.70%. Treasury yields are moving higher despite Bessent’s efforts to push them lower as bond traders remain worried about long-term rate outlook.
If USD/JPY climbs above the 50 MA at 159.18, it will move towards the nearest resistance level at 159.50 – 160.00. A move above 160.00 will push USD/JPY towards the 162.00 level. It remains to be seen whether BoJ is ready to intervene in case USD/JPY climbs above the psychologically important 160.00 level.
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The Pound to Dollar exchange rate (GBP/USD) has surged to fresh three-month highs above 1.3630 as the US Dollar came under sustained pressure following Treasury action to calm the bond market.
A sharp initial retreat in long-term US yields undermined Dollar demand and propelled Sterling through 1.36, putting the May high around 1.3660 firmly within reach.
GBP/USD Forecasts: Three-Month Highs
The Dollar came under sustained pressure after the US Treasury moved to calm the bond market, allowing the Pound to Dollar (GBP/USD) exchange rate to surge to fresh three-month highs above 1.3630.
GBP/USD traded around 1.3632 on Thursday afternoon, extending Wednesday’s sharp advance and moving closer to the May highs around 1.3660.
Scotiabank commented; “Underlying trend signals remain constructive and keep the focus on a retest of the mid-1.36s.”
There was no significant Sterling reaction to the latest UK inflation data, with global bond-market developments continuing to dominate currency moves.
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The Dollar suffered a sharp setback after the US Treasury announced that it would double the size of liquidity buyback operations for longer-dated government securities.
Buybacks for 10- to 30-year Treasury debt will increase from $2bn to at least $4bn per operation, in a move aimed at improving market liquidity after the surge in long-term borrowing costs.
The announcement triggered a sharp drop in yields, with the 10-year Treasury yield falling below 4.65% on Wednesday.
Lower US yields undermined Dollar demand and encouraged a broad recovery across major currencies.
CIBC head of G10 FX strategy Jeremy Stretch commented; “What we’ve seen in the course of recent days is that the long end of the bond market has obviously been selling off and potentially becoming somewhat problematic for the play through to other asset classes.”
He added; “Clearly, the Treasury Secretary has to be mindful of those risks and has made adjustments.”
Rene Albrecht, senior analyst at DZ Bank, also highlighted the political and economic implications of elevated borrowing costs; “I think they fear the pain of 5% or higher yields on the long-end, not only because it raises the interest rate costs for the government but also for the private sector.”
US economic data will remain important as markets assess underlying inflation pressures and the outlook for both bond yields and Federal Reserve policy.
ING commented; “Another batch of CPI and jobs data, plus the end-of-month Jackson Hole symposium, will have a bigger say in whether the Federal Reserve hikes in September.”
The bank’s base case remains that the Fed will leave rates unchanged and that the Dollar will weaken modestly.
The minutes from the Federal Reserve’s July meeting showed that policymakers had become increasingly concerned about inflation.
Several officials indicated that they would be prepared to support another rate increase if inflation failed to moderate, reinforcing the view that a September move has not been completely ruled out.
Markets nevertheless continue to see a hold as the more likely outcome, particularly after softer US inflation, retail sales and employment data during recent weeks.
The headline UK inflation rate increased to 2.9% in July from 2.6%, in line with consensus forecasts, while the core rate held at 2.6%.
Markets continue to price at least some risk of another Bank of England rate increase this year, although many investment banks remain unconvinced that further tightening will ultimately be required.
HSBC UK economist Elizabeth Martins commented; “A big rebound in energy prices would certainly change things. But the real game changer for the MPC, I think, is around second-round effects.”
GBP/USD has now cleared the 1.3600 resistance area and reached fresh three-month highs above 1.3630.
Scotiabank’s mid-1.36s objective is therefore coming into focus, with the May high around 1.3660 representing the next important technical barrier.
A sustained break above 1.3660 would strengthen the bullish short-term trend and expose 1.3700, followed by the January trading range above that level.
Initial support is now located around 1.3600, with a deeper correction potentially bringing 1.3550 back into focus.
The US Dollar outlook remains highly sensitive to the US bond market.
Wednesday’s Treasury intervention produced a substantial initial decline in long-term yields, but that relief has already begun to fade, with Treasury yields moving higher again on Thursday as investors questioned whether larger buybacks can address the underlying fiscal and inflation concerns.
Further increases in long-term yields could therefore restore some Dollar support.
On the other hand, renewed declines in US yields, combined with softer economic data and fading expectations of a September Fed hike, would leave GBP/USD well placed for another test of the 1.3660 area.
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The US dollar fell after the US Treasury market announced they are issuing more debt in the long end of the curve.
USD/JPY
The US dollar has fallen pretty significantly against the yen, about twice what it has during most of the sessions over the last week or so, as the US Treasury Department has stated that it is basically doubling the nominal amount of debt in the long end of the curve next month. And with that being said, there are a lot of questions about whether or not it’s quantitative easing. Rates drop by about 9 basis points at one point, and that does drive down the value of the US dollar.
But the question then becomes, why are they doing that? Is it liquidity measures? If it’s liquidity measures, where are the problems? And therein lies the bigger problem. The market reacted as you would expect initially, but it has bounced a bit. And I also point out that stock markets have kind of been all over the place, because they’re trying to figure out what to do.
If there is, in fact, a bigger issue out there, then eventually the US dollar becomes a popular currency to own. Whether or not it’ll be against the Japanese yen remains to be seen, because there is, despite the fact there was a little bit of a pullback during the day, an uptrend here, and a major interest rate differential. The dips continue to find buyers, and we’re kind of seeing that late in the session. We’ll see what the Americans do with it, as I watch the 200-day EMA.
I’ve been long for several months. There’s nothing on this chart that tells me I should get out of my position. Now, whether or not I would add might be a different conversation, at least at this point.
Key Technical Levels and Carry Trade Dynamics
Over the longer term, we will have a lot of questions. The first one will be the technical analysis level of 160 yen. 160 yen sits just below the 50-day EMA, and it appears to be a bit of a barrier regardless. It’s also worth noting that the yen is slipping a bit against multiple other currencies, despite the fact that the yen strengthened everywhere initially. We are seeing, for example, the Australian dollar turn things around against it.
So, what we might have is a continuation, but it might be painfully slow here. And then, it just becomes the carry trade again. So it’s almost like a circle at this point.
If we break down below somewhere around 156 yen, then I’d probably exit my longer-term position and then just walk away, looking for another bounce. Longer term, the interest rate differential will still be a problem. If the Federal Reserve doesn’t start cutting rapidly, then that won’t change.
Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on:Pairs Of Aces Podcast,The Trader Guy, FXEmpire
We have reached a milestone in the GBP/USD currency pair – possibly a decisive one – following the strong, long-term bullish breakout yesterday. While the price action remains well within its longer-term range, the bullish case may finally be becoming increasingly convincing for several solid reasons, both fundamental and technical.
Of course, it is worth noting that the price hasn’t gone anywhere that it wasn’t just a few months ago, and that there are arguments that a very long-term range is holding. Yet these arguments are certainly becoming weaker by the day.
GBP/USD Breakout Gains Fundamental Support
A breakout in a Forex currency pair such as the GBP/USD doesn’t necessarily mean much at all, but when there is a lot going on to support it, it is worth paying closer attention. We arguably are in such a situation now.
Yesterday saw a new factor which supported this bullish case. Firstly, yesterday saw the US Treasury step in to support the long end of its bond market, and this hammered the US Dollar. The US Dollar Index is now trading near its three-month low after falling sharply yesterday, continuing the dominant bearish trend in the greenback.
GBP/USD Technical Analysis: 1.3600 Holds as 1.3658 Nears
Yesterday saw the price make a strong bullish breakout to reach a new three month high above 1.3630. The price has retreated a little but was still trading above the round number at 1.3600 late in the Asian session. These are bullish price actions. The six month high at 1.3658 is within sight and could easily be reached or even exceeded today.
The breakout was accompanied by two key bullish technical developments: the simultaneous breakout from the ascending bullish price channel, indicated within the price chart below by the linear regression analysis study which had held for almost three weeks; and the flipping of the key long-term resistance level at 1.3553 to become new obvious support, evidenced by the price basing at that level early in yesterday’s London session.
What a Break Above 1.3658 Could Mean
The price has been consolidating, mostly above the round number at 1.3600, since yesterday’s New York session. This kind of price action after a strong advance often signifies a further move higher is imminent. The nearest overhead resistance level is 1.3653 and just a few pips above that lies the six-month high price. A break beyond that would effectively see the price trading in blue sky which could mean an unusually rapid rise.
GBP/USD H1 Price Chart
GBP/USD Downside Risks: Fed Hawks and a 1.3552 Retest
While there are compelling reasons to see a bullish outlook, there are fundamental, sentimental, and even technical factors that could work against that which are worth considering.
Last night’s release of the minutes of the most recent FOMC (Federal Reserve) meeting showed that the three dissenting votes in favour of a rate hike were a bloc vote, meaning that there is now clearly a hawkish bloc pushing for a more hawkish interest rate. More importantly, the minutes indicated that there is some agreement with other members who may be prepared to join them soon. If more members begin making public comments more supportive of a rate hike, this will tip the odds in favour of a sooner rate hike, which would likely strengthen the US Dollar, and put bearish pressure on the rate of the GBP/USD.
Let’s not forget the British Pound, which is supported by a relatively high interest rate and inflation rate. If any cracks arise in that picture, we could also see bearish pressure.
Finally, there is a general tendency in the Forex market for prices to revert to a mean which might work against a further quick advance.
Instead of the price continuing to rise and test or even break out beyond the six-month high, we might see a pullback to the new support level at 1.3552. It is also possible that the current area of price action supported just below the round number at 1.3600 might hold, although if that happens, it will suggest higher prices. Finally, we might see the price break down below 1.3552 or even the round number at 1.3500. The former scenario would be somewhat bearish, but a sustained break below 1.3500 could really turn the picture around from a long-term bullish breakout with traders jumping on the bandwagon, to a quick flop back into the long-term range.
Key GBP/USD Levels to Watch Today
There are some pivotal levels I outlined above which are likely to be psychological “lines in the sand” worth watching, which will indicate sentiment. These could be potential buying points, or even selling points, depending upon the price action. It is worth remembering that a traditionally volatile Forex pair like this one tends to be driven by short-term momentum, which can turn very easily, and the early part of the London session has historically tended to also provide some clues about the day’s direction. How the price behaves today might reveal whether we are really in new territory or not.
The EURJPY pair provided some corrective trading yesterday by reaching 183.90 level, holding positively above the main support at 183.15, renewing the main bullish attempts by surpassing the barrier at 184.90.
Providing a positive close above the current barrier is important for reinforcing the chances of recording new gains by its rally towards 185.45 initially, reaching the next target at 185.95.
The expected trading range for today is between 184.60 and 85.45
The Euro and the pound continue to lock horns in a relatively fairly matched battle near the 0.8550 level.
EUR/GBP
The Euro and the pound continue to lock horns in a relatively fairly matched battle near the 0.8550 level. I’m watching this market because we had recently dropped pretty significantly, bounced to test the 50% Fibonacci retracement level and the 50-day EMA as a result.
And ultimately, I think this means that you have a scenario where technical traders may have entered the fray. The question is now: do we get any type of follow-through? This market is still asking questions about interest rates, but also the energy supply that may or may not be coming to the UK and the EU. As I record, missiles are flying in the Gulf again.
If we do, then you have the possibility of the market really taking off to the downside, perhaps to the 0.85 level, maybe even revisiting the 0.8450 level where we had bounced from.
Technical Resistance and Yield Differentials
Rallies at this point in time will have to contend with the 50-day EMA, which of course will cause some technical resistance. But breaking above there would be a very bullish sign and could open up the door to 0.86. This would be a reversal of the overall sentiment at the moment and therefore be difficult to achieve.
This is a market that’s been bearish for a while. Interest rates do favor the British pound, so that in and of itself might be a reason to think about it. This is a form of the carry trade, but in slow motion. The stability here, though, could be a bonus for those worried about intervention in the yen-denominated markets.
I like the idea of taking advantage of the yield differential in a situation where, quite frankly, I just don’t see a good argument for the market taking off to the upside. But you always have to be open to the other possibilities.
Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on:Pairs Of Aces Podcast,The Trader Guy, FXEmpire
USD/CAD pulled back as traders reacted to the strong rally in precious metals markets. Gold climbed towards the $4500 level, while silver moved towards $66.00. Other commodity-related currencies have also gained upside momentum in today’s trading session.
Currently, USD/CAD is trying to settle below the support level at 1.3825 – 1.3840. In case USD/CAD manages to settle below the 1.3825 level, it will head towards the next support, which is located in the 1.3735 – 1.3750 range. RSI has recently moved into oversold territory, but there is enough room to gain momentum in case the right catalysts emerge.
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