Tag: Crosses

  • GBP/JPY remains weak near 195.50 after UK employment data

    GBP/JPY remains weak near 195.50 after UK employment data


    • GBP/JPY loses ground to around 195.65 in Tuesday’s early European session.
    • UK Unemployment Rate rose to 4.6% in three months to April; Claimant Count Change came in at 33.1K in May.
    • Hawkish BoJ expectations support the Japanese Yen and act as a headwind for the cross. 

    The GBP/JPY cross weakens to near 195.65 during the early European session on Tuesday. The Pound Sterling (GBP) remains weak against the Japanese Yen (JPY) after the UK employment data. Traders will keep an eye on the monthly UK Gross Domestic Product (GDP) data for April, which is due on Thursday. 

    Data released by the UK Office for National Statistics on Tuesday showed that the country’s ILO Unemployment Rate ticked higher to 4.6% in the three months to April versus 4.5% prior. This figure came in line with the expectations of 4.6% during the reported period. 

    Meanwhile, the Claimant Count Change increased by 33.1K in May versus -21.2K prior (revised from 5.2K), below the consensus of 9.5K. The GBP attracts some sellers in an immediate reaction to the weaker UK employment report.  

    Japan’s GDP shrank at an annual rate of 0.2% in Q1, compared to the initial estimate of a 0.7% fall, Japan’s Cabinet Office showed on Monday. An upward revision of Japan’s Q1 GDP has reaffirmed the Bank of Japan (BoJ) rate hike bets and could underpin the JPY.

    BoJ Governor Kazuo Ueda said on Tuesday that the central bank will raise interest rates if it has enough confidence that the underlying inflation is near or moves around 2%. The Japanese central bank is set to hold a two-day policy meeting next week.

    Employment FAQs

    Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

    The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

    The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.



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  • Bullish tone remains in play above 163.00

    Bullish tone remains in play above 163.00


    • EUR/JPY trades in negative territory near 163.25 in Friday’s early European session. 
    • The positive view of the cross prevails above the key 100-day EMA, but the RSI indicator suggests neutral momentum.
    • The first upside barrier is seen at 164.26; the initial support level is located at 162.10.

    The EUR/JPY cross attracts some sellers to around 163.25 during the early European session on Thursday. The Japanese Yen (JPY) strengthens against the Euro (EUR) amid rising expectations that the Bank of Japan (BoJ) will continue raising interest rates this year. Furthermore, the persistent trade-related uncertainties boost the safe-haven flows, benefitting the JPY. 

    Technically, the bullish outlook of EUR/JPY remains intact on the daily chart, with the price holding above the key 100-day Exponential Moving Average (EMA). However, further consolidation cannot be ruled out as the Relative Strength Index (RSI) hovers around the midline. This suggests a neutral momentum in the near term. 

    The immediate resistance level emerges at 164.26, the high of May 29. Further north, the next hurdle is seen at 164.75, the upper boundary of the Bollinger Band. A decisive break above this level could pave the way to 165.21, the high of May 13. 

    On the flip side, the first downside target to watch is 162.10, the 100-day EMA. Extended losses could see a drop to 161.60, the lower limit of the Bollinger Band. The crucial support level for EUR/JPY is seen at 160.00, the psychological level and the low of April 8. 

    EUR/JPY daily chart

    Japanese Yen FAQs

    The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

    One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

    Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

    The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.



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  • EUR/GBP flat lines below 0.8400 ahead of Eurozone Consumer Confidence release

    EUR/GBP flat lines below 0.8400 ahead of Eurozone Consumer Confidence release


    • EUR/GBP trades flat around 0.8390 in Tuesday’s early European session. 
    • Optimism surrounding the EU-US trade deal could support the Euro in the near term. 
    • Stronger-than-expected UK CPI and Retail Sales have raised the prospect of a BoE rate cut delay. 

    The EUR/GBP cross holds steady near 0.8390 during the early European session on Tuesday. Traders will take more cues from Consumer Confidence in the Eurozone. The attention will shift to the German Retail Sales data, which is due later on Friday. 

    The rising hopes of a potential EU-US trade deal after US President Donald Trump delayed the imposition of 50% tariffs on Europe could lift the Euro (EUR) against the Pound Sterling (GBP) in the near term. Traders will closely monitor the progress of US trade policy as July 9 is the end of the 90-day pause on Trump’s April 2 “Liberation Day” levies on the EU. Any signs of escalating trade tension could weigh on the shared currency.

    On the GBP’s front, traders push back Bank of England (BoE) rate cut bets after the release of the stronger-than-expected growth in the UK Consumer Price Index (CPI) and Retail Sales data for April. This, in turn, might boost the Pound Sterling and create a headwind for the cross. The possibility of a BoE rate cut in August was reduced to 40% by investors, down from 60% before the inflation data. However, interest rate futures pricing suggested investors saw about 37 basis points (bps) of BoE rate reductions by the end of 2025.

    Pound Sterling FAQs

    The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
    Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

    The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
    When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
    When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

    Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
    A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

    Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
    If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.



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  • Cross struggles to hold gains amid mixed signals

    Cross struggles to hold gains amid mixed signals


    • AUD/NZD trades near the 1.0900 zone with minor losses on Friday.
    • The pair maintains a bullish outlook despite mixed short-term signals.
    • Key support is clustered below 1.0880, with resistance near 1.0920.

    The AUD/NZD pair is experiencing mild selling pressure on Friday, hovering near the 1.0900 zone as the market approaches the Asian session. Despite the minor losses, the broader technical outlook remains constructive, with several key indicators aligning to support the pair’s upward trajectory. However, conflicting short-term signals suggest that further gains may face headwinds, as traders navigate a mix of buy and sell pressures.

    AUD/NZD maintains a generally bullish structure, supported by the alignment of short-term moving averages. The 20-day Simple Moving Average (SMA) indicates a buy signal, reflecting the pair’s recent strength, while both the 10-day Exponential Moving Average (EMA) and the 10-day SMA similarly point to upward momentum. However, the broader trend picture remains mixed, as the longer-term 100-day and 200-day SMAs still favor selling, highlighting the potential for deeper pullbacks if bullish momentum falters.

    Momentum indicators provide a similarly divided outlook. The Relative Strength Index (RSI) hovers around the 50 level, indicating neutral conditions that align with the current price consolidation. Meanwhile, the Moving Average Convergence Divergence (MACD) signals buy momentum, reinforcing the broader bullish view. In contrast, the Stochastic %K, trading in the 80s, and the Stochastic RSI Fast, positioned in the 90s, both suggest overbought conditions, indicating the potential for near-term corrective moves. The Bull Bear Power, sitting near neutral, further highlights this lack of a decisive trend.

    For now, immediate support is expected around 1.0871, with additional levels near 1.0867 and 1.0864. On the upside, resistance is likely to emerge around 1.0914, followed closely by 1.0923 and 1.0945, potentially capping any recovery attempts as the pair struggles to maintain its recent gains.

    Daily Chart



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  • Euro pulls back near 163.00 but bullish trend remains intact

    Euro pulls back near 163.00 but bullish trend remains intact


    • EUR/JPY was seen around the 163.00 zone after retreating during Monday’s session.
    • Broader bias stays bullish, with downside limited by upward-trending averages.
    • Price holds above key supports, while resistance aligns with short-term recovery targets.

    The EUR/JPY pair slipped lower on Monday, falling toward the 163.00 zone as the session closed and ahead of the Asian open. Despite the day’s decline, the broader setup remains constructive, with the pair still holding above critical trendline supports. Momentum readings appear neutral, but the underlying structure is sustained by bullish signals from longer-term indicators.

    Technically, the pair maintains its bullish posture. The Moving Average Convergence Divergence signals continued buying interest, while the Relative Strength Index remains neutral near the midline around 53. Other tools such as the Awesome Oscillator and Bull Bear Power also print neutral readings, reflecting a short-term consolidation rather than a shift in directional momentum.

    What reinforces the positive tone is the alignment of key moving averages. The 20-day, 100-day, and 200-day Simple Moving Averages are all rising and lie beneath current prices, providing a strong technical floor. The 30-day Exponential and Simple Moving Averages offer further dynamic support in the 162.10–162.15 area, helping contain deeper pullbacks.

    Support levels are seen at 162.40, 162.26, and 162.14. Resistance is marked at 162.67, 162.76, and 163.60. A sustained bounce from current levels could see EUR/JPY test the upper end of its recent range, while a break below support would challenge the bullish case in the near term.

    Daily Chart



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  • Bullish momentum, buyers don’t give up

    Bullish momentum, buyers don’t give up


    • AUD/NZD was seen around the upper end of its daily range on Friday.
    • The pair maintains a bullish outlook supported by short-term trend signals.
    • Technicals show mixed bias across indicators, with resistance seen above and long-term averages still pressuring.

    AUD/NZD is displaying upward momentum ahead on Friday’s session, trading near the top of its daily range and not far from the 1.0800 zone. The pair has gained on the day, extending its bullish push while short-term indicators strengthen this outlook. A buy signal from the MACD and support from short-term moving averages help confirm the bias, although some indicators like the RSI and Stochastic remain neutral. Traders should be mindful that longer-term SMAs continue to show downside risk.

    AUD/NZD maintains a bullish tone as price action presses higher. The Moving Average Convergence Divergence (MACD) has turned positive, suggesting momentum is shifting in favor of buyers. Meanwhile, the 10-day Exponential Moving Average and the 10-day Simple Moving Average have both turned supportive, aligning below current prices. The 20-day SMA also leans bullish, helping sustain short-term upside momentum.

    However, the Relative Strength Index (RSI) hovers near the neutral 50 mark, while the Bull Bear Power and Stochastic Oscillator also offer limited directional bias. This mixed signal set may keep some traders cautious. Notably, the 100-day and 200-day SMAs remain positioned above current price levels, signaling that broader trends have yet to confirm the recent strength.

    Immediate resistance lies at 1.0874, followed by stronger zones at 1.0908 and 1.0936. On the downside, initial support is found at 1.0842, with subsequent levels at 1.0833 and 1.0830. A break above resistance would signal continuation of the bullish trend, but failure to clear those zones may invite short-term pullbacks.

    Daily chart



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  • EUR/GBP hovers near 0.8500 as soft Eurozone inflation, dovish BoE shape outlook

    EUR/GBP hovers near 0.8500 as soft Eurozone inflation, dovish BoE shape outlook


    • EUR/GBP may depreciate due to weaker-than-expected preliminary April HICP data from the Eurozone’s largest economies.
    • Markets have largely priced in a 25 basis point rate cut by the ECB at its June meeting.
    • The Pound Sterling weakens as markets are now anticipating a BoE 25 basis point rate cut in May.

    EUR/GBP holds ground for a second consecutive session, trading around the 0.8500 mark during the Asian session on Thursday. However, the upside of the EUR/GBP cross may be capped as the Euro (EUR) trades cautiously following weaker-than-expected preliminary April Harmonized Index of Consumer Prices (HICP) data from Germany and France, along with steady readings from Italy and Spain.

    These figures suggest moderate inflationary pressures across the Eurozone’s largest economies, reinforcing market expectations for further monetary easing by the European Central Bank (ECB). A 25 basis point rate cut is now almost fully priced in for the ECB’s June meeting, as policymakers anticipate further declines in inflation and economic activity amid the impact of new US tariffs on its trading partners.

    Despite potential headwinds for the Euro, the EUR/GBP cross may find support from a weakening Pound Sterling (GBP) against its peers, as sentiment turns increasingly dovish toward the Bank of England (BoE). Markets are now anticipating a 25 basis point rate cut at the BoE’s upcoming policy decision on May 8. These expectations have intensified on concerns that the US’s new tariff measures could reduce global inflation and weigh on UK economic growth.

    BoE policymaker Megan Greene added to the dovish tone, stating in a speech at the Atlantic Council on Friday that the potential trade conflict would have a “net disinflationary” effect on the UK economy. Greene also flagged labor market risks, citing the recent increase in employers’ national insurance contributions from 13.8% to 15%, which took effect this month.

    Central banks FAQs

    Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

    A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

    A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

    Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.



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  • Bullish Momentum Holds Despite Minor Dip Before Asia

    Bullish Momentum Holds Despite Minor Dip Before Asia


    • EUR/JPY was observed trading around the 162.00 region, experiencing a slight pullback on the day.
    • The overall technical analysis points towards a prevailing bullish sentiment for the currency pair.
    • Key Simple Moving Averages indicate buying interest, while the Relative Strength Index is neutral, and the Moving Average Convergence Divergence suggests selling pressure.

    In the lead-up to Tuesday’s Asian trading session, EUR/JPY has seen a minor decline, trading near the 162.00 mark. Despite a sell signal from one momentum indicator, the broader technical landscape suggests underlying bullish strength, supported by several key moving averages.

    The EUR/JPY pair currently displays a bullish technical outlook. While the Moving Average Convergence Divergence indicator is showing a sell signal, potentially indicating some short-term downward pressure, the longer-term trend appears positive. The Relative Strength Index resides in neutral territory around the 52 level, not providing a strong directional cue. However, the 20-day, 100-day, and 200-day Simple Moving Averages are all signaling buy opportunities, underscoring sustained bullish momentum across various time horizons. Similarly, the 30-day Exponential Moving Average and Simple Moving Average also support this upward trajectory. The Stochastic %K and Stochastic RSI Fast are both currently neutral.

    Considering potential trading levels, immediate support is identified at 162.01, followed by 161.97 and then a lower level at 161.92. On the resistance side, the first barrier is at 162.17, with subsequent resistance levels at 162.22 and 162.68.

    Daily Chart



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  • Bearish bias holds despite intraday gains

    Bearish bias holds despite intraday gains


    • AUD/JPY trades near the 91.00 zone after bouncing within Wednesday’s range.
    • The broader trend remains bearish amid pressure from longer-term moving averages.
    • Key resistance is seen near the 91.20–91.80 zone, with support near 90.70.

    The AUD/JPY pair was seen around the 91.00 zone in Wednesday’s session, staging a modest intraday advance ahead of the Asian session. Despite the bounce from earlier lows, the pair retains a bearish overall tone, capped by key moving averages and a sluggish momentum backdrop. Technical indicators are mixed, with the Relative Strength Index hovering around neutral territory, the MACD suggesting upside potential, and moving averages still tilting south. Price action remains confined to the middle of today’s daily range, which points to indecision in the near term.

    From a technical perspective, the pair is gaining some ground but lacks the strength to break decisively higher. The RSI is neutral around the 47 mark, while the Stochastic %K and Commodity Channel Index also print neutral readings, reinforcing the lack of clear direction in short-term momentum. The MACD, however, offers a mild bullish signal, hinting at the possibility of further upside attempts.

    Despite this, the broader outlook remains tilted to the downside. The 20-day, 100-day, and 200-day Simple Moving Averages all slope downward, exerting resistance from above. Notably, the 30-day EMA and SMA, seen near the 91.80–92.20 region, act as dynamic barriers capping recent gains and validating the bearish bias.

    Immediate support lies in the 90.70–90.60 range, which has held earlier dips. Should sellers regain control, a break below this zone could expose deeper losses. On the upside, resistance clusters around 91.20, 91.25, and 91.85 — levels that coincide with key averages and recent swing highs.

    Overall, while AUD/JPY managed to claw back some ground during Wednesday’s trade, the prevailing trend remains bearish unless a firm break above the 91.80 zone materializes. Traders should watch for confirmation in the coming sessions as the pair continues to oscillate within a narrowing range.

    Daily chart



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  • Drops toward 94.20 area as bearish pressure mounts

    Drops toward 94.20 area as bearish pressure mounts


    • AUD/JPY was seen near the 94.30 zone on Friday ahead of the Asian session, retreating toward the lower end of its daily range.
    • Despite mixed signals from oscillators, moving averages tilt the broader technical bias to the downside.
    • Support lies near 94.00 and 93.88, while resistance is seen just above 94.40; indicators remain conflicted with bearish lean.

    The AUD/JPY pair extended its decline on Friday, hovering near the 94.30 zone after the European session and slipping closer to the lower end of its intraday range. The pair is down notably on the day, reflecting an increase in selling interest. While some momentum indicators remain neutral or even slightly constructive, broader technical signals continue to favor a bearish bias for the near term.

    Looking at the indicators, the Relative Strength Index (RSI) fell below 50, yet neutral in tone, while the MACD posts a slight buy signal , hinting at possible short-term correction. However, the Bull Bear Power stands at 0.641, reinforcing the underlying selling pressure, and the Williams Percent Range remains neutral, failing to offer a clear reversal signal.

    Moving averages present a split picture. The short-term 20-day Simple Moving Average (SMA) at 94.02 continues to signal a buy, offering dynamic support. However, the 10-day EMA (94.45) and SMA (94.58), along with the 100-day (96.85) and 200-day (98.70) SMAs, all lean bearish, suggesting that upside potential remains capped unless a structural shift occurs.

    In terms of levels, immediate support emerges at 94.16, followed by 94.02 and 93.88. On the flip side, resistance is seen around 94.35, 94.42, and 94.45—just ahead of key short-term moving averages that could act as selling zones if bulls attempt to regain control.

    AUD/JPY daily chart

     

     



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  • Drops toward 94.20 area as bearish pressure mounts

    Aussie dips slightly as 20-day SMA offers support


    • AUD/JPY was seen trading around the 93.70 zone, recording its third consecutive day of mild losses.
    • Despite the negative streak, the pair continues to hold above the 20-day SMA, suggesting downside may be limited.
    • Momentum indicators remain soft; RSI stays in negative territory while MACD shows flat green bars.

    On Friday’s session the AUD/JPY edged slightly lower and was seen trading in the 93.70 area. The pair has now posted three straight sessions of mild declines, though it remains above a key support level. Price action shows some hesitation from sellers, as bulls attempt to defend the 20-day Simple Moving Average, hinting at a potential pause in downside pressure.

    The Relative Strength Index (RSI) is currently positioned in negative territory, mildly declining near the mid-40s, which reflects limited bearish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) remains in positive territory, but its histogram shows flat green bars, signaling a lack of strong directional conviction.

    From a trend perspective, holding above the 20-day SMA, currently near the 93.50 region, keeps the short-term outlook slightly tilted to the upside. A break below this level could shift sentiment and open the door toward 93.00 or even the 92.50 area. On the flip side, resistance lies around 94.20, followed by the psychological 95.00 mark.

    AUD/JPY daily chart

     



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  • Bullish tone remains in play above 163.00

    EUR/JPY extends upside above 161.00 ahead of ECB rate decision


    • UR/JPY gains momentum to near 161.15 in Thursday’s early European session.
    • The concerns over tariff risks on Japan might contribute to the JPY.
    • The ECB is anticipated to cut interest rates at the March meeting on Thursday.

    The EUR/JPY cross extends the rally to around 161.15 during the early European session. The Japanese Yen (JPY) weakens against the Euro (EUR) amid the risk-on mood after US President Donald Trump will delay Canada and Mexico tariffs on autos for one month.

    The White House announced a one-month delay for US automakers to comply with the US-Mexico-Canada Agreement from the tariffs imposed on Mexico and Canada. White House spokesperson Karoline Leavitt also said that Trump was “open” to extra tariff exemptions beyond the pause on auto levies. This, in turn, boost investors’ appetite for riskier assets and drags the safe-haven currency like the Japanese Yen lower.

    The growing concerns over tariff risks in Japan might contribute to the JPY’s downside. US President Donald Trump said that Japan and China are keeping their currencies down, signaling that he may impose fresh tariffs on imports if this does not stop.

    However, the upside for the cross might be limited amid rising speculation of further hike from the Bank of Japan (BoJ). The BoJ is widely anticipated to continue hiking this year, supported by improving economic conditions, rising prices, and stronger wage growth, which align with the Japanese central bank’s policy normalization efforts.

    On the Euro front, the European Central Bank (ECB) is expected to cut interest rates for the second time this year at its March meeting on Thursday. The markets are now fully priced in a quarter-point rate cut for the March meeting, taking the ECB’s key rate to 2.5% . A further reduction to 2% by the end of the year was also priced in.

    ECB FAQs

    The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

    In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

    Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

     

     



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  • EUR/GBP remains capped below 0.8300 after hotter UK CPI data

    EUR/GBP remains capped below 0.8300 after hotter UK CPI data


    • EUR/GBP softens to around 0.8285 in Wednesday’s early European session. 
    • UK CPI inflation rose to 3.0% YoY in January vs. 2.8% expected.
    • The dovish stance from the ECB might drag the Euro lower.

    The EUR/GBP cross weakens to near 0.8285 during the early European trading hours on Wednesday. The Pound Sterling (GBP) edges higher against the Euro (EUR) after the hotter-than-expected UK Consumer Price Index (CPI) inflation data for January. Later on Wednesday, the Eurozone Current Account will be released. 

    Data released by the United Kingdom’s Office for National Statistics on Wednesday showed that the country’s headline CPI rose 3.0% YoY in January, compared to a 2.5% increase in December. This reading came in hotter than the 2.8% expected. The Core CPI, which excludes the volatile prices of food and energy, climbed 3.7% YoY in January versus 3.2% prior, in line with the market consensus of 3.7%. 

    Meanwhile, the monthly UK CPI inflation fell to -0.1% in January from +0.3% in December. Markets projected a -0.3% reading. The Pound Sterling holds steady in an immediate reaction to the upbeat UK CPI inflation data.

    Slower growth in the Eurozone triggered the expectations of further interest rate reductions from the European Central Bank (ECB), which might weigh on the shared currency. Analysts expect the European Central Bank (ECB) to deliver quarter-point cuts at every meeting until mid-2025. That would bring the deposit rate to 2.0%

    Inflation FAQs

    Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

    The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

    Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

    Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

     



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  • EUR/JPY falls to near 159.00 following robust Japan’s GDP data

    EUR/JPY falls to near 159.00 following robust Japan’s GDP data


    • EUR/JPY declined following the release of Japan’s Gross Domestic Product report on Monday.
    • Japan’s GDP rose by 0.7% QoQ in Q4, marking the third straight quarter of growth.
    • The Euro may gain if a ceasefire in Ukraine is agreed upon and gas supplies resume.

    EUR/JPY gives up gains from the previous session, trading around 159.10 during the Asian hours on Monday. This decline is linked to a stronger Japanese Yen (JPY), driven by a robust Japan’s Gross Domestic Product (GDP) report that exceeded expectations, reinforcing market speculation that the Bank of Japan (BoJ) will continue to raise interest rates.

    Japan’s economy grew by 0.7% in the fourth quarter, compared to the revised 0.4% increase in the previous quarter. This marks the third consecutive quarter of growth, fueled by a strong rebound in business investment. Yearly growth accelerated from a revised 1.7% in Q3 to 2.8%, supporting the BoJ’s stance on further rate hikes amid signs of broadening inflation.

    Japanese Chief Cabinet Secretary Yoshimasa Hayashi remarked on Monday that Japan faces significant risks if its companies become targets due to US President Donald Trump’s policies, and the government will respond cautiously to potential impacts.

    The Euro could strengthen against its peers if a ceasefire in Ukraine is reached and gas supplies resume. Reports suggest that Trump and Russian President Vladimir Putin have agreed to start negotiations to end the conflict. BBC sources indicate that Trump administration officials are set to meet with Russian counterparts in Saudi Arabia on Tuesday to discuss a potential peace agreement.

    However, any upside for the Euro may be capped as several European Central Bank (ECB) officials remain comfortable with expectations that the central bank will lower its Deposit Facility rate three more times this year. The ECB already reduced interest rates by 25 basis points (bps) to 2.75% last month.

    Economic Indicator

    Gross Domestic Product (QoQ)

    The Gross Domestic Product (GDP), released by Japan’s Cabinet Office on a quarterly basis, is a measure of the total value of all goods and services produced in Japan during a given period. The GDP is considered as the main measure of Japan’s economic activity. The QoQ reading compares economic activity in the reference quarter to the previous quarter. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

    Read more.

    Last release: Sun Feb 16, 2025 23:50 (Prel)

    Frequency: Quarterly

    Actual: 0.7%

    Consensus: 0.3%

    Previous: 0.3%

    Source: Japanese Cabinet Office

     



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  • NZD/JPY Price Analysis: Fresh decline heightens downside risk



    The NZD/JPY cross entered deeper negative territory on Wednesday, giving back 0.77% as it settled around 87.80.



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