Economic Divergence between the UK and Japan Favors Its Alternating Upward Movements

Forex

Economic

Summary:

The UK's May Composite PMI saw a modest expansion, rebounding due to easing tariff concerns. Japan's final Composite PMI registered at 50.2, indicating a weakening growth momentum. The GBPJPY's decline remained contained, attracting buying interest for a second consecutive day.

BUY GBPJPY

Close Time

CLOSED

194.349

Entry Price

198.560

190.600

207.506 +0.406 +0.20%

69.3

Pips

Profit

190.600

195.042

Exit Price

194.349

Entry Price

198.560

Fundamentals

The UK services sector saw a modest rebound in May, with the final PMI Services Index reaching 50.9, up from a 27-month low of 49.0 in April. The Composite PMI also expanded slightly, rising to 50.3 from 48.5.

MARKET WATCH: This recovery was supported by easing concerns over U.S. tariffs, stronger global markets, and improved client confidence. Business confidence for the year ahead climbed to a seven-month high, driven by investment plans and improved sales expectations.

However, the underlying employment market remains weak. Employment in the sector has declined for eight consecutive months, the longest non-COVID-related downturn since the global financial crisis.

Encouragingly, input cost inflation eased from its April peak, while competitive pricing pressures led to the smallest increase in service charges since October.

Japan's private sector exhibited weakness in May, with the final services PMI declining to 51.0 from April's 52.4; the composite PMI fell to 50.2 from 51.2. The data indicates marginal overall economic expansion, a slowdown in services sector growth, and a slight deterioration in manufacturing output.

MARKET WATCH: The growth in new orders "has nearly stalled" due to the slowest services sales growth in six months and persistent declines in factory demand. This deceleration suggests that a near-term rebound in Japan's private sector may be challenging.

Potential concerns are linked to external and structural factors, including an uncertain global demand outlook, persistent labor shortages, and escalating cost pressures.

Economic Divergence between the UK and Japan Favors Its Alternating Upward Movements_1

Technical Analysis

The GBPJPY extended its robust rebound from the 192.75-193.95 range on Wednesday, maintaining positive momentum for a second consecutive day during the Asian session. This bullish sentiment propelled spot prices to fresh intraday highs during the European session, with bulls now eyeing a sustained break above the 196.00 psychological level to initiate further long positions.

From a technical perspective, the GBPJPY's intraday bias remains neutral. Further upside potential is anticipated as long as the 191.86 support level holds. A firm break above 196.38 would signal a resumption of the broader uptrend from 184.35. Conversely, a breach and sustained trading below 191.86 would suggest a near-term reversal, shifting the bias to the downside.

Trading Recommendations

Trading Direction: Buy

Entry Price: 194.30

Target Price: 198.56

Stop Loss: 190.60

Valid Until: June 19, 2025 23:55:00

Support: 194.31, 193.73, 192.72

Resistance: 195.98, 196.30, 196.51

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

USD/CAD trades in a narrow range near its lowest levels since October 2024 as investors brace for the Bank of Canada’s policy announcement.

SELL USDCAD

Close Time

CLOSED

1.37000

Entry Price

1.36000

1.37600

1.38497 +0.00350 +0.25%

45.2

Pips

Profit

1.36000

1.36548

Exit Price

1.37000

Entry Price

1.37600

The USD/CAD pair is treading water near the 1.3715–1.3720 zone as the North American session looms, marking a continued phase of consolidation that reflects traders’ reluctance to place significant directional bets ahead of a key event. The Canadian Dollar has remained steady, holding recent gains after the pair touched its lowest level since October 2024 earlier this week. With the Bank of Canada (BoC) set to announce its latest policy decision today, market participants appear content to remain on the sidelines until they receive more clarity on the path ahead for Canadian monetary policy.

While the BoC is broadly anticipated to maintain its benchmark interest rate at 2.75%, the real market-moving potential lies in the accompanying policy statement and the remarks from Governor Tiff Macklem during the post-meeting press conference. The BoC finds itself navigating a delicate balancing act. On one hand, inflationary pressures in Canada have eased, with recent data showing moderation across both headline and core readings. On the other, signs of economic softness — particularly in consumer spending and business investment — have intensified expectations that a pivot toward rate cuts is not too far off.

A dovish tone from the central bank could open the door for further Canadian Dollar weakness, offering a window for a short-term rebound in USD/CAD. However, should policymakers strike a more balanced or cautious tone — emphasizing data dependency and a need for patience — the Loonie could retain its strength and drive the currency pair even lower.

Complicating the picture further is the parallel narrative developing in the United States, where the Federal Reserve’s future rate trajectory continues to dominate FX sentiment. Although the Fed has kept a tight lid on rate-cut speculation in public commentary, financial markets are becoming increasingly confident that a series of rate reductions will materialize in 2025. This growing conviction has applied sustained downward pressure on the U.S. Dollar, particularly against currencies with more hawkish or neutral central banks.

Today’s U.S. economic calendar offers two key data points — the ADP employment report and the ISM Services PMI — both of which could shape short-term direction for the greenback. A disappointing readout on private-sector jobs or signs of cooling services-sector activity would reinforce expectations for Fed policy easing, potentially undermining USD strength further. Conversely, a surprise on the upside may provide a fleeting reprieve, though the broader downtrend in dollar sentiment suggests any rallies are likely to be capped.

Another structural headwind facing the U.S. Dollar stems from mounting concerns about America’s deteriorating fiscal position. The Congressional Budget Office has flagged persistent deficits and rising debt-servicing costs as long-term risks. While fiscal issues rarely move markets on a day-to-day basis, the sheer scale of the imbalance is beginning to cast a shadow over the dollar’s long-term appeal. These fiscal anxieties, coupled with softer economic data and dovish Fed expectations, form a potent mix that keeps the U.S. Dollar on the defensive.

In Canada, the commodity backdrop also plays a role. The Canadian Dollar, closely tied to crude oil due to the country’s status as a major exporter, has seen limited downside pressure as oil prices retreat modestly. Brent and WTI benchmarks slipped in recent sessions, driven by renewed global demand concerns and the uncertain outlook for China’s post-COVID recovery. However, the weakness in oil has not been dramatic enough to trigger a strong CAD selloff, suggesting that traders are prioritizing monetary policy signals over commodity flows for now.

Technical Analysis

Technically, the USD/CAD chart paints a clearly bearish picture. The pair has broken down from a previously rising channel, confirming a shift in structure. Price action remains decisively below the 50-day exponential moving average, a key indicator that suggests bearish momentum is gaining traction.

The Relative Strength Index (RSI) has also turned south, having recently exited overbought territory without triggering a meaningful bounce — a classic sign of trend continuation rather than reversal. Price appears to be gravitating toward the 1.3690 region, a key support level that has now been breached intraday.

Should this level fail to hold on a daily closing basis, the pair would likely drift toward deeper downside targets in the 1.3660–1.3600 area, zones that were previously flagged by bearish chart formations.

TRADE RECOMMENDATION

SELL USDCAD

ENTRY PRICE: 1.3700

STOP LOSS: 1.3900

TAKE PROFIT: 1.3600

Risk Warnings and Disclaimers

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Alan

Commodity

Summary:

OPEC+ will increase production in July, and the market supply pressure will continue to rise. Meanwhile, the demand side has been hit hard by both tariffs and the industrial sector, with the demand for oil plummeting.

SELL WTI

Close Time

CLOSED

63.039

Entry Price

51.500

64.800

58.880 -0.929 -1.55%

176.1

Pips

Loss

51.500

64.801

Exit Price

63.039

Entry Price

64.800