USD/JPY in Downward Spiral as Yields Tank, GBP/USD Soars to Fresh 2023 Highs

Future outlook for the USD/JPY and GBP/USD:

• US dollar / Japanese yen Its decline deepened as US Treasury bond prices extended their downward correction
• Lighter than expected in the US CPI Producer price index data weigh on bond yields
• while, GBP/USD It is rising higher, rising to its best level since April 2022

Most read: Gold finds a spark in weak US inflation data, EUR/USD rises to a new 2023 peak

USD/JPY extended losses on Thursday, weighed down by lower US Treasury bond prices. Since Monday, the 10-year yield has fallen nearly 30 basis points to the edge of 3.8%, erasing all gains from the previous week, with the slowdown accelerating over the past two sessions after lower US consumer and wholesale costs came in. weaker than expected. economic inflation.

While the market outlook remains in flux, rapidly declining price pressures in the economy may prompt the Fed to end its tightening campaign sooner than expected. This means that the whole quarter-point rally of the July FOMC meeting could be the last round before a long pause, a situation that could undermine the US dollar in the forex space.

Moving on to the price action analysis, USD/JPY has fallen sharply in recent days after breaking below the 50-day simple moving average and extending the trend line from the March lows. After this decline, the pair reached an important support area: the 38.2% Fibonacci retracement of the January-June rally. If this floor clears, we could see a move towards the 200-day SMA, followed by 134.00.

On the other hand, if the USD/JPY establishes a base from the current levels and resumes its rise, the initial resistance appears at 139.25 and 140.00 after that. Removing these two technical barriers could trigger buying operations and restore the bullish momentum, paving the way for a rush towards the psychological level of 141.00.

Technical chart of the USD/JPY pair

USD/JPY chart created with TradingView

Technical analysis of the GBP/USD pair

The GBP/USD pair broke an important technical resistance at 1.3000 on Thursday, reaching its best level since April 2022 and easily surpassing the 1.3100 handle. After this strong advance, the pair is approaching a major ceiling near 1.3150, as shown on the daily chart below. Buyers may struggle to overcome this hurdle given the extended markets and overbought conditions, but a break-up is still possible, and if confirmed, could pave the way for a move towards 1.3290.

In contrast, if the bullish momentum starts to wane and prices reverse lower, initial support lies at the psychological level of 1.3000, but more losses could be in store on a push below this area, with the next target for the downside located at 1.2840, followed by 1.2680.

Technical chart of the GBP/USD pair

GBP/USD chart set up with TradingView