EUR/USD Battles Channel Resistance while USD/JPY Stays Put

EUR/USD FORECAST – TECHNICAL ANALYSIS

EUR/USD rebounded on Thursday after a subdued performance during the previous trading session, but gains were capped by soaring U.S. Treasury rates, a hostile market environment that appears to have prevented the pair from clearing technical resistance around the 1.0600 handle.

With U.S. yields on a bullish tear and geopolitical tensions in the Middle East on the rise, the euro will struggle to maintain a sustained upward course. This means that the direction of travel is likely to be lower for the exchange rate.

In terms of technical analysis, if EUR/USD fails to push higher and resumes its decline, we could see a move towards trendline support at 1.0500. This floor could provide stability and ease the selling pressure, but if it caves in, prices could be on their way to the 2023 lows at 1.0448. On further weakness, the focus shifts to 1.0350.

Conversely, if sentiment shifts in favor of the bulls and EUR/USD takes out overhead resistance at 1.0600/1.0625, buyers may regain control of price action, paving the way for a rally towards 1.0765, the 38.2% Fibonacci retracement of the July/October slump.

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EUR/USD TECHNICAL CHART

EUR/USD Chart Created Using TradingView

USD/JPY FORECAST – TECHNICAL ANALYSIS

USD/JPY lacked directional conviction on Thursday, despite the surge in U.S. rates. While rising U.S. Treasury yields offered support to the U.S. dollar, the yen experienced heightened demand due to escalating geopolitical tensions in the Middle East. This juxtaposition created a neutral trading environment for the exchange rate. Although both the yen and the U.S. dollar are commonly perceived as safe-haven assets, the yen tends to be favored during periods of elevated market uncertainty.

From a technical analysis perspective, USD/JPY remains firmly entrenched in a robust uptrend, although it appears to be undergoing a phase of consolidation at the moment. In any case, caution is warranted given the pair’s proximity to the critical 150.00 level. In 2022 and 2023, the Japanese government took steps to defend the country’s currency against further depreciation when this threshold was breached.

In the event that Tokyo decides not to intervene for now and USD/JPY breaks above 150.00 decisively, upward momentum could gather pace, setting the stage for a rally towards the 2022 highs at 151.95. On further strength, the bulls may muster the impetus to challenge channel resistance near 152.30.

On the other hand, if prices get rejected lower and initiate a pullback, initial support is found within the range of 149.25 to 148.90. Clearing this floor might attract fresh sellers to the market, creating favorable conditions for a potential descent toward 147.30, followed by 146.00.

For a thorough analysis of the Japanese yen’s fundamental and technical prospects, download the Q4 trading forecast today.

USD/JPY TECHNICAL CHART

USD/JPY Chart Created Using TradingView