The foreign exchange markets are in the midst of extreme volatility as major currencies get pushed through important technical barriers. The GBP/USD currency pair is trapped in a symmetrical triangle pattern. It is caught in-between increasing technical support and a rolling over 50-day Exponential Moving Average (EMA) around the 1.3470 level. This technical battleground represents the latest flare up in the historic struggle between currency buyers and sellers.
GBP buyers are now very much dependent on the ongoing support of Greenback sellers to push the pair higher. How this relationship develops will be key to figuring out the GBP/USD’s short-term direction. The USD/JPY currency pair recently made headlines by pushing above the important 200-day EMA which sits at the 148.00 level. This is the first time that it has crossed this key short-term moving average since February. This change of fortune for the yen may be signaling a change of tide. Traders are watching this closely unfolding situation.
Inflation gauges have become a litmus test for market players. Unfortunately, recent data stoked fresh fears over tariffs. Other gauges of inflation, imported goods aside, have helped soothe investor jitters. This contrast of anti-inflation signals creates a challenging environment for central banks as well as traders.
In a more technical move, GBP/USD recovered. Specifically, it hit an ascending trend line which had been drawn from the multi-year bottoms made in January. Even more remarkable, this rebound is part of a larger reversal across the board in nearly all currency pairs. The AUD/USD has made a technical bounce after having risen off the 50-day EMA, seen just below the 0.6500 figure. Together, these movements indicate that traders are continuing to actively seek opportunities for trading amid the structural volatility.
Yen traders are on high alert. They’re desperately searching for clues that the BOJ will accelerate its interest rate increases. The BOJ is in fact fighting back from demands for a more hawkish monetary tightening stance. This is occurring even as inflation statistics continue to print well above their target. This ongoing reluctance from the monetary authority only serves to increase the uncertainty surrounding the yen’s performance.
EUR/USD bulls on the other side of the Atlantic have done a good job of stanching their losses. The Euro continues a powerful technical bounce off the 1.1600 big figure support. The Euro finished Friday’s trading session right back close to where the week started from, just above the 1.1650 level. Market focus now turns to the next round of economic indicators, particularly Friday’s non-farm payroll data. The European Central Bank’s Bank Lending Survey is due on Tuesday. Additionally, on Thursday, we’ll get the pan-European Purchasing Managers’ Index (PMI) figures. Coupled with the ECB’s recent rate hike, these developments would definitely change market sentiment for the better.
Next Friday, all eyes will be on the Tokyo Consumer Price Index inflation figures – ideally, that is. Until now, these numbers were leading year-over-year increases of 3.1%. For investors who have been diligently monitoring Japan’s inflation path, this data point is especially noteworthy. It would have significant impact on future BOJ policy.
As these developments unfold, currency traders remain attentive to technical indicators and economic data releases that could shape their strategies in an increasingly complex market environment.