Monthly Forex Market Forecast; Dollar, Euro, Pound, Yen

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Monthly Forex Market Forecast; Dollar, Euro, Pound, Yen

The FOMC Is On Tap

The FOMC is going to be a mega-market mover next week when it decides to cut rates, or not. The market has a lot of expectations built into the meeting and one of them is aggressive rate cuts, as many as three by the end of the year. In my opinion this is far too many, one may be enough and even it may be too many. The U.S. data is still strong, the cause for concern is the trade war and right now its impact is not as bad as feared. The only reason I can see for a cut is slowing and sluggish inflation but even that isn’t a huuuge problem. Lower prices are good for investment and may end up stimulating the economy on their own.

What does this means for the dollar? Over the next week volatility, and then next week more volatility but probably in a single direction. I think that direction will be up for the DXY because I just don’t believe the FOMC is going to be as dovish as the market thinks. The EUR/USD is consolidating near a long-term low. The indicative factor is that the pair is consolidating below the 150 day EMA and a support target, now a resistance line. A fall from this level driven by USD strength/the FOMC would confirm a down trend that began last year. If so, my target for the EUR/USD would be 1.040 over the next 6-8 months. The risks are the ECB and what they do, the ECB is on a path to tighten but their data is equally iffy in that regard.

The GBP/USD is likewise consolidating at a significant low. This low is concurrent with a low set earlier in the year, if broken it would signify a major breakdown in the pound market. The indicators are inconclusive at this time, they might be set up to fire a bearish signal, they might be set up to show a bound from support, it just depends on the FOMC. Also, the new PM is expected any day now, whomever it is they choose to replace May will also have an affect on the pound. Later, the BOE is set to meet in the first week of August and may themselves surprise the market. The UK economy is wobbly and may need some shoring up, if so the GBP/USD is sure to fall through support to 1.200.

GBP/JPY, EUR/JPY Breakout Levels -Euro & British Pound vs Yen Price Forecast

EUR /JPY and GBP/JPY Technical Outlook

  • Euro and British pound against Japanese Yen analysis
  • EUR/JPY and GBP/JPY price charts

GBP/JPY, EURJPY – Price Action

Last week, both Euro and British pound rallied against Japanese Yen. On Friday, EUR/JPY closed the weekly candlestick in the green with a 0.9% gain, meanwhile GBP/JPY closed with a 1.1% gain.

This week, the Relative Strength Index (RSI) remained flat above 50 on both pairs highlighting a paused uptrend momentum.

EUR/JPY Daily PRice CHART (Jun 25, 2020 – JAn 15, 2020) Zoomed Out

EUR/JPY Daily Price CHART (Sep 25 – JAn 15, 2020) Zoomed in

Looking at the daily chart, we notice since Jan 3 sellers has shown signs of hesitation to lead the price. This opened the door for buyers to come back. On Jan 8, the pair closed above 50-Day average providing another bullish signal.

Yesterday, EUR/JPY rallied to 122.76- its highest level in over six months. However, the price declined after to a lower trading zone 121.48 – 122.40 as some buyers took profit.

A close above the high end of the zone could persuade buyers to push towards 123.06. Further close above this level opens the door for GBP/JPY to rally towards 123.86. Nevertheless, the weekly resistance levels underlined on the chart (zoomed in) should be considered.

On the flip-side, another close below the high end of the zone could convince more buyers to exit the market. This could send the price towards the low end. Further close below the low end might pave the way for sellers to take charge and lead the price towards 120.00 handle. Yet, the daily support levels marked on the chart should be watched along the way.

GBP/JPY Daily PRice CHART (Aug 20, 2020 – JAn 15, 2020) Zoomed Out

GBP/JPY Daily PRice CHART (April 25 – JAn 15, 2020) Zoomed In

From the daily chart, we notice in Dec last year GBP/JPY rebounded twice from 50-Day average then rallied signaling seller’s failure to lead the price. On Jan 7, the pair rebounded nearby the high end of current trading zone 141.85 – 143.25. Since then, the price failed in multiple occasions in rallying to a higher trading zone reflecting buyer’s hesitation at this stage.

A close above the high end may end this hesitation and encourage buyers to push towards 146.94 contingent on clearing the weekly resistance levels underlined on the chart. Further close above 147.95 could cause more bullishness towards 153.41. Special attention should be paid at the weekly resistance levels as some traders may exit/join the market nearby these points.

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That said, a close below the low end could open the door again for sellers to press towards 137.54. Although, the weekly support areas and level marked on the chart should be kept in focus.

Please feel free to contact me on Twitter: @Malkudsi

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Japanese Yen Technical Forecast: EUR/JPY, AUD/JPY, GBP/JPY, USD/JPY

Yen, EURJPY, AUDJPY, GBPJPY, USDJPY Technical Forecast

  • USD/JPY has rallied by more than 1,000 pips from last week’s low.
  • AUD/JPY and EUR/JPY carry breakdown potential after digestion of recent short-side moves.
  • GBP/JPY remains on slipper ground; but a hold of resistance around the 130.00 level may make the short-side scenario attractive again.

Markets in Turmoil, Yen on the Run

Yen-weakness continued to show against many major currencies this week; now tallying a move of move than 1,000 pips in USD/JPY as a startling turn-around has taken place. While the two-week-outlay didn’t start this way, Yen-weakness has taken over in a number of major pairs as markets expect the Bank of Japan to remain very busy. The BoJ has been at the source of the move as the bank has continued to step-up bond buys; and many market analysts are looking for that to continue as the BoJ looks

It was a week of weakness for most currencies not named the US Dollar, and the Japanese Yen continued its remarkable run against the USD as USD/JPY has now rallied by more than 1,000 pips from last week’s low. To be sure, a large portion of this drive has come from an outsized rally in the Greenback, but JPY-weakness has hung around as well with markets anticipating even more stimulus from the Bank of Japan in the days, weeks and months ahead.

USD/JPY

Last week started with a huge rush of Yen-strength against the US Dollar, with USD/JPY purging down to the 101.19 level that had marked the low on the night of the 2020 Presidential Election. But that’s when US Dollar bulls kicked in, starting a rally that would run by more than 1,000 pips over the next couple of weeks.

Price action in the pair has put in a v-shaped recovery after setting a fresh three-year-low after last week’s open. USD/JPY is now testing the February swing-high, which is very near the 2020 swing high of 112.40. Given the momentum in both US Dollar strength and Japanese Yen weakness, the forecast for USD/JPY will be set to bullish for the week ahead.

USD/JPY Technical Forecast: Bullish

USD/JPY Monthly Price Chart

EUR/JPY

Similarly, EUR/JPY started last week with Yen-strength as the pair dipped-down to a fresh six-month-low before finding a bit of support; and a Friday rally helped the pair close last week in the green. Since then, however, buyers haven’t been able to fire much of a rally in the pair and without that extra element of USD-strength as looked at above, EUR/JPY has moved into a pattern of digestion. The bulk of this week’s price action saw the pair coil into a tighter and tighter range, indicating that breakout potential may be soon nearing.

EUR/JPY Four-Hour Price Chart

A longer-term area of support lurks underneath current price action around the 117.00 level; and given this week’s coiling price action that rebuffed last week’s net move of EUR/JPY strength, bearish potential remains and the forecast for next week will be set as such.

EUR/JPY Technical Forecast: Bearish

EUR/JPY Weekly Price Chart

Chart prepared by James Stanley ; EUR/JPY on Tradingview

AUD/JPY

AUD/JPY continued to break down this week, with the pair pushing down to the 60.00 level for the first time in 11 years. After this low was set on Thursday, a sizable pullback developed as a meltdown in Aussie saw what appear to be short-cover flows; but sellers were on standby to defend the 65.00 area, highlighting the potential for continuation into next week. The forecast for AUD/JPY will be set to bearish for the week ahead.

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