Failed Head and Shoulders Pattern Signals Renewed Upside Potential

Economic

Summary:

The UK's economic data released on Friday exhibited a lackluster performance, prompting a corrective rebound in GBPJPY. The UK's GDP contracted by 0.1% MoM in May, undershooting the market's expected growth of 0.1% MoM. Meanwhile, escalating trade tensions have heightened the uncertainty surrounding Japan's economic outlook, exerting downward pressure on the Japanese yen.

BUY GBPJPY

Close Time

CLOSED

198.776

Entry Price

204.140

196.000

207.069 -0.031 -0.01%

26.9

Pips

Profit

196.000

199.045

Exit Price

198.776

Entry Price

204.140

Fundamentals

GBPJPY steadied after a modest decline on Friday, oscillating in the positive territory near the 199.20 level during the Asian session. Data revealed that the UK's GDP declined by 0.1% MoM in May, following a 0.3% contraction in April, significantly underperforming the market's expectation of a 0.1% expansion. This underscores the fragile recovery of the UK economy.

In the services sector, output rose by 0.4% MoM in May, down from 0.6% in April. Industrial production and manufacturing output both fell more sharply, declining by 0.9% and 1.0% respectively in May, both below market estimates. These weak data have raised concerns about the UK's economic outlook and weighed on the pound.

Additionally, the Bank of England's Financial Policy Committee (FPC) warned in its mid-year report on Wednesday that financial markets are facing multiple systemic risks. The FPC noted that "the prices of risky assets could see a significant correction, asset allocation could change abruptly, and the risk of a breakdown in historical correlations remains significant." The report emphasized that geopolitical tensions, the fragmentation of the global trading and financial system, and sovereign debt pressures are the main challenges to the UK's financial stability at present.

Nevertheless, the yen's weakness has provided some support to GBPJPY. As trade tensions intensify, Japan's economy faces increased downside risks. This is especially true in the context of the US-Japan trade negotiations, where a deadlock over market access for Japanese rice has led to the possibility of a 25% punitive tariff on Japanese exports to the US.

On the other hand, Japan's Producer Price Index (PPI) for May indicated that inflation may be receding, which could further diminish the likelihood of the Bank of Japan raising interest rates this year. Overall, the yen's outlook remains under pressure, providing some cushion for the pound against the yen.

Failed Head and Shoulders Pattern Signals Renewed Upside Potential_1

Technical Analysis

From a technical perspective, GBPJPY's intraday trend appears neutral, consolidating below the 199.80 level. Earlier today, the daily GBPJPY bulls broke through the right shoulder on the one-hour chart, leading to the failure of the head and shoulders pattern. This suggests that the bulls may resume their upward push. As long as the key support level at 196.00 holds, the market anticipates that the exchange rate could rebound further in the future.

Should the exchange rate break above the resistance level at 199.80, it could potentially restart the upward trend within the range of 184.35 to 199.79, aiming for a final target of 204.14.

Overall, given the interplay of multiple fundamental and technical factors, the short-term trajectory of GBPJPY remains closely monitored by investors. Future policy developments and the evolution of trade tensions are also expected to have a profound impact on the foreign exchange market.

Trading Recommendations

Trading Direction: Buy

Entry Price: 198.50

Target Price: 204.14

Stop Loss: 196.00

Deadline: July 26, 2025, 23:55:00

Support: 198.49/198.22/197.92

Resistance: 199.47/199.89/200.53

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

Gold prices surged above $3,340 on Friday after U.S. President Donald Trump slapped a 35% tariff on all Canadian imports, igniting fears of a broader global trade war.

BUY XAUUSD

Close Time

CLOSED

3349.67

Entry Price

3400.00

3310.00

4209.68 +11.77 +0.28%

119.4

Pips

Profit

3310.00

3361.61

Exit Price

3349.67

Entry Price

3400.00

Gold (XAU/USD) roared higher on Friday, breaching the $3,340 mark and extending its bullish streak as escalating trade tensions overshadowed the impact of rising U.S. Treasury yields. The surge in demand for the yellow metal was triggered by a dramatic escalation in protectionist rhetoric from former U.S. President Donald Trump, who announced sweeping tariffs on Canadian goods—a move that sent shockwaves through global financial markets and rekindled fears of a 2018-style global trade war.

In an unexpected and aggressive policy shift, Trump declared that all Canadian imports to the United States would be subject to a 35% tariff effective August 1. The announcement stunned markets given the deeply integrated nature of the U.S.-Canada trade relationship. According to Statistics Canada, over 76% of Canadian exports in 2024 have been destined for the U.S. economy. The magnitude and scope of the tariff raise the stakes dramatically for both economies and the global trade system at large.

Trump’s comments didn’t stop with Canada. In a statement that left analysts scrambling to assess the geopolitical fallout, he hinted that similar tariffs could be extended to other nations: “We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%. We’ll work that out now.”

That vague but threatening language stoked fresh volatility, with investors rushing into traditional safe-haven assets like gold, the Swiss franc, and U.S. Treasuries. The prospect of a domino effect in global tariff escalation reintroduced a strong geopolitical risk premium to the market — an environment in which gold typically thrives.

Notably, this move from Trump comes at a time when central banks globally have already been walking a monetary tightrope, attempting to tame inflation without derailing growth. The threat of a major trade disruption complicates that calculus, particularly for the Federal Reserve, which has been battling sticky inflation while weighing the risks of overtightening.

Ordinarily, a rise in U.S. Treasury yields would act as a headwind for gold, a non-yielding asset. However, Friday's market reaction underscored how risk aversion can override traditional rate dynamics. The benchmark U.S. 10-year yield climbed toward 4.40%, yet gold’s upward momentum remained intact, underpinned by a rush to preserve capital in the face of uncertain global trade policy.

“The move is reminiscent of the 2018 trade war episode,” said a senior FX strategist at Saxo Markets. “Back then, gold rallied despite a strong dollar and climbing yields. Right now, we’re seeing a similar flight to safety. The bigger the uncertainty, the more attractive gold becomes.”

Technical Analysis

From a technical standpoint, gold’s intraday surge was further validated by a clean break above a short-term bearish correctional trendline, reinforcing the underlying bullish structure. The move was bolstered by the commodity’s positioning above the 50-period Exponential Moving Average (EMA50), a dynamic support zone that has acted as a launchpad for recent upward thrusts.

Additionally, momentum indicators such as the Relative Strength Index (RSI) have flipped back into positive territory, suggesting that buyers remain in control and that there’s room for further gains before the metal enters overbought conditions.

Initial resistance is eyed near $3,360, with a successful breach potentially opening the path to test the psychologically significant $3,400 barrier. On the downside, $3,300 now becomes a critical support level, with the EMA50 reinforcing that zone as a pivot.

TRADE RECOMMENDATION

BUY GOLD

ENTRY PRICE: 3350

STOP LOSS: 3310

TAKE PROFIT: 3400

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

The 100-period and 200-period moving averages on the daily chart are located at 1.1219 and 1.0885, respectively, providing ample room for a more significant retracement.

SELL EURUSD

Close Time

CLOSED

1.16700

Entry Price

1.15000

1.18200

1.16533 +0.00107 +0.09%

50.0

Pips

Profit

1.15000

1.16200

Exit Price

1.16700

Entry Price

1.18200

In the week ending July 6, initial jobless claims in the United States decreased by 5,000 to 227,000, defying market expectations for an increase to 235,000. This marks the fourth consecutive weekly decline and the lowest reading in nearly two months, providing further evidence that the U.S. labor market remains resilient despite ongoing concerns over high interest rates and trade-related uncertainties.

Federal Reserve Chairman Jerome Powell recently commented on the job market’s fragility, warning that any increase in layoffs could quickly drive the unemployment rate higher. This highlights the Fed's cautious approach as they continue to assess the impact of inflation and employment data, delaying any major policy actions for now.

Meanwhile, St. Louis Fed President Alberto Musalem expressed optimism about the economy, noting that the labor market is nearly at full employment. However, he also cautioned that inflation risks remain tilted to the upside, particularly due to the ongoing effects of tariffs, which have yet to fully manifest. A weaker U.S. dollar could exacerbate these inflationary pressures in the coming months.

Looking ahead, the economic calendar will feature remarks from key Fed officials, including Governor Christopher Waller and San Francisco Fed President Mary Daly. Across the Atlantic, UK market participants will focus on GDP and industrial production data, as well as manufacturing figures, which could significantly influence market sentiment.

On the trade front, with reciprocal tariffs delayed until August 1, investors are betting that the Trump administration may delay or suspend both the tariff packages initially announced in April and new tariffs targeting specific countries and sectors. Many market participants remain hopeful that the majority of Trump’s tariff threats will not materialize, and trader confidence is building as inflationary pressures from these tariffs remain subdued.

The U.S. and the European Union are reportedly moving closer to an agreement, with a potential framework deal set to be finalized before the August 1 deadline. European Trade Commissioner Maroš Šefčovič indicated that significant progress had been made, with a deal possibly including a base tariff of around 10% but with exceptions for key products such as Airbus aircraft. Although the U.S. has postponed its initial deadline, President Trump has warned that there will be no further delays and has begun sending formal tariff notices to other countries, increasing pressure on EU negotiators.

Meanwhile, European Commission President Ursula von der Leyen reiterated the EU’s "unwavering" efforts to secure an "in-principle" agreement that would provide stability to businesses, acknowledging that tariffs are a "lose-lose" scenario. However, divisions within the EU persist, with Germany pushing for a quick agreement to protect its automobile exports, while countries like France, Spain, Italy, and Denmark prefer a more comprehensive and balanced trade framework.

On the monetary policy front, the European Central Bank (ECB) is expected to leave interest rates unchanged at its July meeting. However, market participants still believe the ECB may cut rates at least once more before the end of the year, as inflation remains close to target and economic growth across the Eurozone continues to show signs of fragility. Overbought Conditions Suggest Deeper Correction for EURUSD_1

Overbought Conditions Suggest Deeper Correction for EURUSD_1

Technical Analysis

EUR/USD is currently experiencing a strong bullish momentum and has recently formed a rising wedge pattern, peaking at a local high of 1.1838 on July 1. Since then, the price has rejected these levels, printing strong bearish candles and closing below the 9-period moving average. This could confirm the onset of a deeper correction toward the 1.1500 level. The 100-period and 200-period moving averages on the daily chart are located at 1.1219 and 1.0885, respectively, providing ample room for a more significant retracement.

The RSI reached a high of 75.9, entering well into overbought territory, signaling that bullish momentum may be losing steam. This could lead EUR/USD to correct toward the lower boundary of the rising wedge. If the price breaks below this level with strength, the correction could extend further. However, if the price manages to break the recent local high and close above it decisively, the bullish trend could resume.

Trading Recommendations

Trading direction: Sell

Entry price: 1.1672

Target price: 1.1500

Stop loss: 1.1820

Validity: Jul 22, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

This area has previously acted as a support level, serving as a springboard for upward momentum.

BUY GBPUSD

Close Time

CLOSED

1.35200

Entry Price

1.37500

1.34500

1.33217 -0.00095 -0.07%

70.0

Pips

Loss

1.34500

1.34499

Exit Price

1.35200

Entry Price

1.37500

Federal Reserve Chairman Jerome Powell recently commented on the current state of the U.S. job market, indicating that any uptick in layoffs could quickly push the unemployment rate higher, suggesting a more fragile labor market than some had anticipated. This underlines the Fed’s cautious stance as they continue to assess inflation and employment data, holding off on any major policy decisions for the time being.

Meanwhile, St. Louis Fed President Alberto Musalem expressed more optimism about the U.S. economy, noting that the labor market is near full employment. However, he also warned that inflation risks are tilted to the upside, particularly due to the lingering effects of tariffs, which have yet to fully materialize. A weaker U.S. dollar could contribute to these inflationary pressures in the months ahead.

Looking ahead, the economic agenda will feature remarks from key Fed officials, including Governor Christopher Waller and San Francisco Fed President Mary Daly. In the UK, market participants will be closely monitoring GDP and industrial production data, as well as manufacturing figures, which could impact market sentiment.

On the trade front, with reciprocal tariffs delayed until August 1, investors are betting that the Trump administration may delay or further suspend both the tariff packages announced earlier in April and new tariffs targeting specific countries and sectors. Markets remain hopeful that many of Trump’s tariff threats will not come to fruition, and traders’ confidence is growing as inflationary pressures from these tariffs have been relatively muted.

UK GDP data for May is expected to show a weak recovery, with limited impact on market sentiment, as the numbers are forecast to remain below expectations. The Office for Budget Responsibility (OBR) has raised concerns about the long-term sustainability of UK public finances, citing rising state pension costs and growing climate-related demands.

The Bank of England (BoE) recently highlighted the challenges facing global financial stability, noting geopolitical tensions, fragmented trade flows, and rising sovereign debt pressures. While UK banks remain well-capitalized, the BoE warned that global financial conditions are becoming more challenging, with asset valuations remaining elevated and susceptible to sharp corrections. Trendline Support Could Spark a New Bullish Surge in GBPUSD_1

Trendline Support Could Spark a New Bullish Surge in GBPUSD_1

Technical Analysis

GBP/USD recently underwent a bearish pullback after a strong bullish move that peaked at 1.3790 on July 1. Since then, the price has retraced to a local low of 1.3527, near the 200-period moving average on the 4-hour chart. This area has previously acted as a support level, serving as a springboard for upward momentum. If this pattern repeats itself, we could see a new bullish move unfold. Should the price reject this zone, another leg higher could follow, targeting previous highs.

Additionally, the 100-period and 200-period moving averages have closely followed the upward trendline, making this area a key support region. As the price approaches these levels once again, it may attract buyers looking for a potential reversal. The RSI has recently dipped to 38, nearing oversold territory, suggesting that downward pressure may be waning. While a further pullback to the trendline is possible, this could lead to a bullish rejection, making long positions favorable from this zone.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3520

Target price: 1.3750

Stop loss: 1.3450

Validity: Jul 22, 2025 15:00:00

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Summary:

The British Pound weakened to near 1.3575 against the U.S. Dollar on Thursday as the Bank of England flagged intensifying risks to the UK economy in its mid-year Financial Policy Committee report.

SELL GBPUSD

Close Time

CLOSED

1.35500

Entry Price

1.34000

1.36500

1.33217 -0.00095 -0.07%

40.5

Pips

Profit

1.34000

1.35095

Exit Price

1.35500

Entry Price

1.36500

The British Pound drifted lower against the U.S. Dollar on Thursday, extending its recent decline to trade near 1.3575 as markets digested a series of unsettling developments ranging from fresh warnings by the Bank of England to rising geopolitical and trade tensions. Investors remained cautious ahead of the UK’s latest GDP and manufacturing output figures, expected Friday, while growing fiscal risks and external policy shocks contributed to Sterling’s vulnerability.

The latest move in the Pound came in the wake of the Bank of England’s semi-annual Financial Stability Report, which painted a far more cautious picture of the UK economy than in previous updates. The Financial Policy Committee warned that the risk of sudden asset price declines, market fragmentation, and rising sovereign debt pressures had grown significantly. In particular, the report cited heightened geopolitical tensions, the growing fragmentation of global trade and financial systems, and the UK's own debt trajectory as key concerns. It noted that historical relationships between assets—such as the traditional correlation between bonds and equities—could break down further, raising the risk of instability in financial markets.

What stood out in the report was not just the tone, but the underlying worry about the UK’s fiscal and investment climate. Business sentiment, already fragile amid political transitions and tax uncertainty, was flagged as a key downside risk. The Bank pointed to a pronounced hesitancy among UK businesses to commit to new investments, a trend that threatens to undermine labor market gains and stall productivity improvements. In an economy already experiencing anaemic growth, this is a red flag.

Further clouding the domestic picture are mounting concerns about the UK’s fiscal discipline. Just last week, Chancellor of the Exchequer Rachel Reeves announced a significant expansion in Universal Credit—a move that, while aimed at easing household pressures, also risks undermining the government’s commitment to restoring fiscal balance. The announcement raised eyebrows across the economic and political spectrum, with critics questioning whether such large-scale spending initiatives are prudent at a time when the UK’s sovereign debt remains elevated and interest costs are high. In the aftermath, yields on UK government bonds moved higher, reflecting increased investor concern over future borrowing needs.

Internationally, another curveball came from Washington, where President Donald Trump announced a sweeping package of new tariffs targeting 21 nations. The tariffs, which are set to go into effect on August 1, mark a dramatic escalation in the U.S. administration’s trade policy and have injected fresh uncertainty into an already jittery global economy. While the list of targeted countries has yet to be fully disclosed, fears are mounting that the UK—already grappling with its post-Brexit trade realignment—could find itself indirectly affected through supply chain disruptions or retaliatory measures from its trading partners.

The Pound's weakness reflects not only the domestic fragilities outlined by the Bank of England but also broader concerns about where the global economy is headed next. With a fresh wave of trade protectionism from the United States threatening to upend market equilibrium and the UK’s own political and fiscal credibility in question, investors are showing a clear preference for the safety of the U.S. Dollar.

Technical Analysis

From a technical perspective, GBP/USD continues to trade within a descending channel on the short-term charts. Price action has repeatedly tested the neckline of this pattern after a period of corrective consolidation, indicating potential for renewed downside pressure. The 100-period Simple Moving Average hovers well above the price, confirming the prevailing bearish structure. Momentum indicators such as the MACD suggest a weakening of bullish momentum, adding weight to the bearish case.

The price is now consolidating just above key support, with traders watching for a confirmed breakdown below the neckline to validate a continuation of the bearish trend. Should this occur, the pair could slide toward the next significant support level near 1.3400, which aligns with the intersection of the descending wedge’s lower boundary and the long-term ascending trendline. Failure to hold this level would invite deeper losses, possibly extending the decline toward the 1.3300 zone in the coming weeks.

TRADE RECOMMENDATION

SELL GBPUSD

ENTRY PRICE: 1.3550

STOP LOSS: 1.3650

TAKE PROFIT: 1.3400

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Summary:

USD/JPY rose toward 146.30 on Thursday amid ongoing U.S.-Japan trade tensions and a stable dollar following the Fed’s June minutes.

BUY USDJPY

Close Time

CLOSED

146.600

Entry Price

148.000

145.300

155.436 +0.091 +0.06%

24.3

Pips

Profit

145.300

146.843

Exit Price

146.600

Entry Price

148.000

The U.S. Dollar extended its strength against the Japanese Yen on Thursday, with the USD/JPY pair edging toward 146.30 during the European session, as investors parsed through conflicting trade headlines and a cautiously hawkish Federal Reserve. The pair’s movement reflects a market caught between rising geopolitical trade uncertainty and steady signals from the U.S. central bank that suggest policy will remain on hold for now.

The recent rally in USD/JPY, while modest, comes amid intensifying scrutiny of the evolving economic relationship between Washington and Tokyo. Earlier in the week, President Donald Trump imposed 25% tariffs on Japanese imports—set to take effect on August 1—citing what he called Japan’s "stiff" stance on agriculture and a persistent imbalance in automotive trade. While the tariff rate was ultimately softer than Trump’s earlier suggestion of as high as 35%, it nonetheless reignited concerns about a potential breakdown in bilateral trade negotiations.

“They're very tough. You have to understand—they're very spoiled,” Trump said during a press event, casting doubt on whether a comprehensive trade deal can be reached. He warned that further tariff hikes, possibly to the 30%-35% range, remained on the table if progress stalls. The remarks marked a sharp rhetorical shift that temporarily weighed on risk sentiment, though markets have since stabilized in anticipation of resumed talks.

In response, Japanese Prime Minister Shigeru Ishiba struck a more diplomatic tone, telling reporters on Tuesday that Japan remains committed to a constructive dialogue with the United States. “We aim to find a trade deal that benefits both nations,” he said, per Reuters, underscoring Tokyo’s preference for cooperation over escalation.

The outcome of the upcoming rounds of negotiations will be closely watched by currency traders, as the imposition of tariffs could affect Japan’s export-driven economy and, by extension, pressure the Bank of Japan to maintain ultra-accommodative monetary policy longer than anticipated.

For now, however, the Yen remains under modest pressure, especially with U.S. interest rates still significantly above those in Japan. This yield differential continues to favor the Greenback, particularly in an environment where the Fed appears in no rush to pivot toward easing.

Minutes from the Federal Reserve’s June 17–18 policy meeting released late Wednesday reinforced the narrative that the central bank is likely to hold rates steady in the near term, unless there’s a material change in inflation or economic activity. While several members acknowledged risks from rising tariffs and slower global growth, most agreed that the recent inflation pickup is “modest” and likely transitory, thereby reducing urgency for immediate action.

The U.S. Dollar Index (DXY), which tracks the Greenback’s performance against a basket of major currencies, remained calm around 97.40. Traders interpreted the Fed’s language as slightly hawkish, with no clear sign of a near-term rate cut, lending support to the dollar across the board, including versus the Yen.

This policy contrast—between a steady Fed and a still ultra-loose BoJ—continues to be a core pillar of the USD/JPY bullish bias. Unless the Bank of Japan shifts toward normalization or the Fed unexpectedly turns dovish, the pair may retain upward pressure in the coming sessions.

Technical Analysis

From a technical standpoint, USD/JPY is navigating a short-term bullish correctional trend. The pair recently pulled back slightly from intraday highs, but this decline appears to be a technical pause rather than a trend reversal. Price action is respecting the upward bias line, and the pair continues to trade above the 50-period Exponential Moving Average (EMA), reinforcing the broader bullish setup.

Additionally, Relative Strength Index (RSI) readings are approaching oversold levels, suggesting a possible exhaustion of the pullback and the emergence of a positive divergence. This setup, combined with early signs of bullish overlapping momentum, points to a potential upward breakout if macro conditions remain supportive.

Traders are now eyeing immediate resistance at 147.14, which represents the next psychological and technical hurdle. A clean break above that level would likely embolden bulls to target higher ranges, particularly if U.S.-Japan trade headlines take a more constructive turn or if risk sentiment continues to stabilize.

On the downside, initial support lies near 145.50, and a break below this zone could trigger a more sustained consolidation phase, especially if trade negotiations falter or Fed rhetoric shifts unexpectedly dovish.

TRADE RECOMMENDATION

BUY USDJPY

ENTRY PRICE: 146.60

STOP LOSS: 145.30

TAKE PROFIT: 148.00

Risk Warnings and Disclaimers

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Gerik

Forex

Summary:

On July 10, 2025, USD/CHF hovered around 0.7950, showing signs of stabilization after sustained weakness. A mix of safe‑haven Swiss franc strength due to trade concerns and looming U.S. tariff headlines pressured the pair. However, a bearish pennant and oversold technical signals (RSI, trendline break) suggest potential for a rebound toward 0.8000–0.8050....

BUY USDCHF

Close Time

CLOSED

0.79699

Entry Price

0.80000

0.79300

0.80405 -0.00050 -0.06%

8.5

Pips

Loss

0.79300

0.79614

Exit Price

0.79699

Entry Price

0.80000

Market Overview

The Swiss franc has rallied in Q1–Q2, gaining 14% vs USD as traders shifted into safe haven assets amid geopolitical and trade uncertainty. Meanwhile USD/CHF is trading below parity, around 0.7950, buoyed by U.S. Treasury strength and dovish Fed minutes showing support for eventual rate cuts. The SNB recently cut rates to 0%, maintaining the option of further intervention. So, while CHF is strong, USD has some support from bond demand and central bank divergence.

Market Sentiment

Sentiment is cautious: the USD is under pressure from fiscal and tariff uncertainties, while CHF remains supported by risk-aversion. Tariff headlines keep markets on edge, but recent stabilization suggests potential short-term relief.