**Forex Market Analysis: GBP/USD Rises, USD/JPY Below 152, AUD/USD Climbs**
*Adapted from Markets.com, original article by Neil Wilson.*
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## Introduction
The foreign exchange (forex) market entered the week with notable momentum as major currency pairs responded to changing economic data, shifting sentiment around central bank policy, and evolving global events. Sterling edged higher against the US dollar, the yen found favor as USD/JPY slipped below a key level, and the Australian dollar gathered strength. Market attention remains heavily focused on central bank signals, upcoming economic releases, and the ongoing interplay between inflation and growth concerns across the largest advanced economies.
## GBP/USD: Sterling Extends Gains
The British pound pushed higher against the US dollar to start the week, reaching its highest levels since mid-March. This move followed last week’s solid economic data from the UK and shifting sentiment around the Bank of England’s (BoE) policy outlook.
**Key factors supporting GBP/USD:**
– **UK GDP Growth:** Recent data highlighted that the UK economy grew by 0.6 percent quarter-on-quarter in Q1 2024, signaling that the shallow recession in late 2023 had ended. This exceeded consensus forecasts and indicated a rebound in activity.
– **Labour Market Resilience:** Unemployment remains subdued, though wage pressures are softening. The average earnings index released last week posted a smaller-than-expected rise, easing BoE fears over sticky wage-driven inflation.
– **Bank of England Rate Expectations:** Markets have pared back bets on early BoE rate cuts. Traders now see the first cut as more likely in August or September, rather than June, reflecting authorities’ caution about declaring victory over inflation.
– **US Dollar Weakness:** The dollar softened somewhat after a mixed US jobs report and signs of cooling inflation pressures, supporting risk appetite and boosting sterling.
**Technical outlook:**
– The GBP/USD pair broke through a key resistance near 1.2600, rallying as high as 1.2720, its best level since March 14.
– The next upside target is 1.2800, while a move back below 1.2620–1.2600 could signal a loss of bullish momentum.
## USD/JPY: Yen Strengthens Below 152
The yen has been in focus as USD/JPY dropped below the significant 152 mark, a level widely seen as a line in the sand by Japanese authorities. The pair’s move renewed speculation around possible intervention by the Bank of Japan (BoJ) and the Ministry of Finance to prop up the yen.
**Drivers behind recent USD/JPY moves:**
– **JPY Intervention Watch:** Traders sharpened their vigilance amid speculation that Japanese authorities would not tolerate a sharp and sustained weakening of their currency beyond 152. Recent comments from BoJ officials and Japan’s finance ministry reinforced the likelihood of direct intervention if needed.
– **US Rate Cut Expectations:** The downward drift in US Treasury yields, amid signs the Federal Reserve may lower rates later in the year, reduced the yield gap between US and Japanese government bonds. This narrowed differential provided some relief for the yen.
– **Japanese Economic Data:** Data releases suggested Japan’s economic recovery remained tenuous, limiting expectations for stronger BoJ tightening. However, sensitivity remains high, and further yen declines could eventually trigger action.
**Technical outlook:**
– USD/JPY slipped to lows near 151.85 before stabilizing. Below 152, the pair faces further downside risk with support at 151.00, then 150.50.
– Key resistance remains at 152.20–152.50. A sustained break above these levels could trigger speculation about intervention.
## AUD/USD: Aussie Dollar Climbs
The Australian dollar extended its rally versus the greenback, buoyed by encouraging domestic data and a cautiously optimistic Reserve Bank of Australia (RBA). Adding to AUD’s gains was a broad improvement in risk sentiment
Read more on GBP/USD trading.