USD/JPY Forecast: Offering Value Against Yen While Waiting for Non-Farm Payrolls

At the end of the day, the US dollar experienced initial attempts at rallying during Thursday’s trading session but faced resistance, edging towards the ¥142.50 level. 

  • The USD/JPY made an initial attempt at a rally during Thursday’s trading session, but later reversed course and approached the ¥142.50 level.
  • As we head into Friday’s jobs report, the market is expected to experience considerable noise and volatility.
  • Despite these short-term fluctuations, the overall interest-rate differential is seen favoring the US dollar, suggesting a continuing uptrend with significant potential for growth.

Traders are advised to closely monitor the upcoming Non-Farm Payroll announcement, which is likely to fuel further volatility until its release. Amidst these fluctuations, an attractive buying opportunity may emerge if a substantial pullback occurs. The 50-Day Exponential Moving Average, currently around the ¥140.55 level, is rising, and it is anticipated to offer dynamic support to the market. Such a scenario would provide investors with the chance to acquire “cheap US dollars.”

Traders Should Stay Attentive

Meanwhile, the Bank of Japan has recently exhibited a lenient approach to its monetary policy, despite their attempts last week to lower the market through verbal interventions. Their immediate response this week of purchasing bonds indicates an inclination towards quantitative easing going forward. Given Japan’s substantial debt burden, the authorities are cautious about letting interest rates spike too much, as it could adversely impact the economy. Consequently, the Japanese yen is likely to continue depreciating. While the cheap yen benefits the export-dependent Japanese economy, occasional lip service is paid to protect the currency. This mirrors the Federal Reserve’s “strong dollar policy,” which market participants recognize as more of a rhetorical stance rather than an actual policy.

At the end of the day, the US dollar experienced initial attempts at rallying during Thursday’s trading session but faced resistance, edging towards the ¥142.50 level. The market is bracing for upcoming volatility as the Non-Farm Payroll report approaches. Despite these short-term fluctuations, the US dollar is perceived as having a favorable interest-rate differential, supporting a potentially prolonged uptrend. Traders are advised to remain vigilant for potential buying opportunities in the event of significant pullbacks, with the 50-Day EMA providing dynamic support. The Bank of Japan’s loose monetary policy is likely to contribute to a weaker yen over time. As the Japanese economy relies on exports, the depreciation of the currency is not necessarily a negative factor, albeit occasional rhetoric about currency protection. Traders should stay attentive to market movements and the impact of economic announcements to navigate through the uncertainty and seize profitable opportunities.


GBP/JPY Forecast: Pulls Back Against the Yen Despite Rate Hike

The presence of the 50-Day Exponential Moving Average just below the ¥180 level adds further appeal for potential buyers. 


The British pound experienced a significant decline during Thursday’s trading session, amidst a period of volatile and noisy behavior in the market. However, market analysts believe that a turnaround may be on the horizon.

In particular, the GBP/JPY currency pair saw a sharp plunge, with the pound reaching the crucial ¥180 level. This price point has historically attracted considerable interest, leading to a belief that value hunters may soon step in to take advantage of potential buying opportunities. The repeated significance of the ¥180 level in the past suggests that traders may consider historical market memory when making their decisions. As a result, many investors are viewing this situation through the lens of value hunting, with a willingness to buy the pair around this level.

While the market remains uncertain about whether a significant upward move will materialize, it is clear that this currency pair offers numerous opportunities for traders. However, traders should remain cautious, as the release of the US jobs report could potentially increase market volatility in the next 24 hours.

The presence of the 50-Day Exponential Moving Average just below the ¥180 level adds further appeal for potential buyers. The Japanese yen is generally expected to remain weak due to the substantial interest rate differential between Japan and other major economies. While the Bank of Japan has attempted to mitigate the effects on its currency, its recent decision to engage in quantitative easing by purchasing bonds further suggests a continuation of this trend.

The Pair May Attract  Value Hunters

  • On the other hand, the Bank of England’s recent interest rate hike by 25 basis points indicates a relatively positive outlook for the pound.
  • Consequently, market participants anticipate that the pound may attract buyers on dips, given the supportive interest rate environment.

Despite the potential for value-hunting opportunities, traders should remain cautious due to the possibility of increased market noise in the short term. Factors such as global equity market trends may also influence the GBP/JPY pair, particularly if there is a “risk on rally” in equities, prompting buyers to enter the market.

In the end, the British pound faced a considerable decline on Thursday, but analysts anticipate a potential market turnaround. The GBP/JPY pair, in particular, may attract value hunters around the crucial ¥180 level. Traders should exercise caution given the upcoming US jobs report and the possibility of increased market volatility. The interest rate differential between the Japanese yen and other major currencies suggests a continued weakness for the yen, while the Bank of England’s recent rate hike indicates potential support for the pound. As such, traders may seek opportunities to buy the pound on dips but should be prepared for potentially turbulent trading conditions in the short term.


How will the EUR/USD react to this week’s monetary policy meetings?

Between July 6th and July 17th, the EUR/USD showed a remarkable upward trend, soaring from 1.08536 to 1.12484.

Yet, the tides have shifted since then, as the pair embarked on a correction phase, experiencing a decline of around 1%.

As forex traders gear up for what promises to be a busy week ahead, the EUR/USD is currently trading at 1.11221, leaving market participants eagerly awaiting new developments from the Fed and the ECB.

Daily EUR/USD Chart - Source: ActivTrader’s data on TradingView 

Daily EUR/USD Chart

A crucial week for the EUR/USD

The week ahead promises to be a significant one for economic and financial news all across the globe.

In the midst of a whole host of major companies posting their second-quarter earnings, some of the largest central banks, including the European Central Bank and the Federal Reserve, are also set to meet on the direction of their country’s interest rates.

After a prolonged period in which the US dollar gained ground against other major currencies resulting from faster monetary tightening in the US than elsewhere, the dollar has been steadily declining.

After the most recent inflation report, it reached its lowest level in more than 15 months.

Daily US Dollar Index Chart - Source: TradingView 

Daily US Dollar Index Chart 

This underscores optimism that the Fed’s monetary tightening is possibly nearing its end, even while it continues in Europe and other places. This in turn translates into stronger international profits for US businesses, less debtor pressure in emerging markets, and higher local currency earnings for countries that export raw materials.

Below we’ll cover what to expect from the ECB and Fed meetings based on some of the latest data, and what impact it may have on the direction of the EUR/USD.

Fed Monetary Policy Meeting

Wednesday, July 26th. Decision at 6:00 PM GMT

After holding interest rates stable for the first time in 15 months in June, officials on the FOMC don’t seem to want to wait too long to resume the tightening cycle. Expectations are for the committee to raise rates again this week, marking the eleventh overall hike since March 2022.

The debate amongst economists and investors at current is whether or not more rate rises are really required to guarantee that inflation drops low enough to remain stable, or whether or not doing more may cause undue harm to the economy if it were implemented.

The annual inflation rate in the US fell a decent amount from 4% to 3% in June, the lowest since March 2021. The core rate also fell to 4.8%, its lowest level since October 2021.

Also in May, the US personal consumption expenditure price index grew 3.8% year on year, the lowest figure since April 2021, compared to a downwardly revised 4.3% growth in April. Progress like this might leave some to wonder if it will continue to improve on its own without further intervention.

Whether or not the Fed will continue to tighten policy is heavily dependent on the reaction of the labor market too. Americans’ ability to keep spending thanks to the robust employment market is bolstered by their optimism about the economy’s long-term prospects, which in turn encourages them to keep spending and further pushes up demand and prices.

All 106 economists recently surveyed by Reuters expect the Federal Reserve to raise its benchmark overnight interest rate by 25 basis points to the range of 5.25%-5.50% this week, with the majority also predicting that this would be the final hike of the current tightening cycle.

ECB Monetary Policy Meeting

Thursday, July 27th. Decision at 12:15 PM GMT

After eight consecutive rate increases totaling 400 basis points since July 2022, investors and experts alike are engaged in a hot debate as to how many more rate hikes are required and how long rates must remain high to force inflation back to the 2% objective set by the ECB.

The Eurozone’s consumer price inflation rate was confirmed at 5.5% in June, the lowest level since January 2022, owing primarily to a drop in energy prices.

However, the core rate, which includes volatile goods such as food and energy, rose to 5.5% from 5.3% the month prior and exceeded forecasts.

This all but confirms for many the notion that ECB policymakers will continue to raise rates this month, and potentially again in September.

ECB President, Christine Lagarde, speaking recently at the ECB Forum on Central Banking in Sintra, Portugal, suggested that the concern lies in the fact that what was originally considered a transient inflation caused by energy shocks, has now permeated the wider economy and may persist.

According to minutes from the European Central Bank’s (ECB) June policy meeting, central bank officials generally agreed that the ECB would consider raising interest rates beyond July out of concern for prolonged high inflation, which raised doubts about achieving the inflation target any time soon. The ECB has stated that it will take a meeting-by-meeting approach in the face of a volatile economy and rising interest rates.

Economists recently polled by Reuters were unanimous that the ECB will raise interest rates by 25 basis points to 4.25% on July 27th, and most also anticipate a further increase at the September meeting.

FX Play of the Day: GBP/JPY’s Potential Pullback Levels


Here are levels you should watch out for if you’re trading on more losses for the pound and more gains for the yen:

GBP/JPY: 15-min

GBP/JPY 15-min Forex

GBP/JPY 15-min

In case you were too busy plotting your start-of-month trading goals, you should know that credit ratings agency Fitch just downgraded the U.S.’ sovereign credit grade from AAA to AA+.

While this won’t give “DEFAULT!!!” vibes, it may limit the demand for U.S. assets and USD.

Of course, the news that the world’s largest economy has been downgraded isn’t sitting well with risk takers so far today.

GBP/JPY, which has been trading inside a range since earlier this week, has broken its range and has dipped to the S2 (182.23) Pivot Point levels.

The 100 and 200 SMAs on the 15-minute charts have also turned lower and could soon turn bearish with a crossover.

If the risk averse trading environment continues, or if traders stay away from GBP-related assets ahead of this week’s BOE decision, then GBP/JPY could maintain its bearish momentum.

GBP/JPY could break below its current consolidation at S2 (182.23) and head for the 181.90 previous area of interest.

A bit of intraday profit-taking, however, could also push GBP/JPY to revisiting the S1 (182.64) Pivot Point and broken range areas before more bears step in.

Watch how GBP/JPY interacts with the Pivot Point levels and the broken range support and resistance zones to get clues on the pair’s next direction!